August 31, 2011

Should You Pay for Nitrogen in Car Tires?

Some tire dealers and auto service centers will now fill your car tires with nitrogen instead of regular air.  Nitrogen is said to be more beneficial for your tires.   Sometimes the service is free.  Other times the shop will charge a fee such as $10 per tire. 

Is it worth it to pay extra to have your car tires filled with nitrogen?

No.  Its NOT worth paying extra money to have nitrogen pumped into your car tires rather than regular air.

It is a good idea to use nitrogen in your tires.   It helps

A Popular Mechanics article Nitrogen vs Air In Tires - Why Nitrogen in Tires - Popular Mechanics  discussed the topic.   They say:

"First is that nitrogen is less likely to migrate through tire rubber than is oxygen, which means that your tire pressures will remain more stable over the long term"   and  that " There will be less moisture inside your tires, meaning less corrosion on your wheels"   

These two things should both be beneficial to your tires.    However neither is beneficial enough to warrant paying extra money for.  The Strait Dope asks  Is it better to fill your tires with nitrogen instead of air?
and they doubt either is even noticeable difference for typical drivers.  They say :

"I found no scientific tests showing that nitrogen-filled tires stayed inflated longer than average under normal conditions."  and "Seriously rusted wheels are uncommon in typical steel-wheeled cars, and many high-performance cars have alloy wheels that don't rust at all."

Bottom Line : If its free then go ahead and get nitrogen in your tires.   But if you have to pay for it then save your money.

August 30, 2011

$13 in FREE Movie Rentals from Amazon and BlockBuster

You can get $5 free credit towards Video on Demand rentals from Amazon

  1. Click here
  2. Click on the "Tweet and Get $5" button
  3. You will be prompted to log in to connect your Twitter account
  4. Click on the "Allow" button
  5. You will receive the following message at the end: "We have successfully applied a $5 credit to your account, good for movies and TV shows at Amazon Video On Demand."Optional: Follow us on Twitter
When you do the above it will issue a Tweet from your Twitter account talking about the Amazon deal.

You can also get several free DVD rentals via BlockBuster Express kiosks using the promo codes listed below :

Expires October 9th : ROCKNROLL
Expires  Sept 2
 Expires Sept 3 :9HLG4X
Expires August 31 :GORACETRAC

The Blockbuster codes are only good for DVD rentals and not Blu-Ray.

I found the Amazon deal on and the Blockbuster codes on Fatwallet.

August 28, 2011

Percentage of Homes With Air Conditioning From 1973 to 2009

Our home does not have central air conditioning.  This year for the first time we bought a window air conditioner.  I was curious how many people actually have air conditioning.  

I got the data out of the American Housing Survey results from the previous years.   I had to pull up individual years and copy the figures for each year.    Note that I'm just looking at owner occupied homes so the data I show below does NOT include rentals.  I could have gotten numbers for all housing or for rentals separately but to make it easier I just grabbed the number for owner occupied units.

Here is a graph showing the % of owner-occupied homes with air conditioning either central AC or one or more window/room units.

Here are the numbers in table form :

AC central window
1973 52% 19% 33%
1974 55% 21% 33%
1975 55% 22% 32%
1976 57% 25% 32%
1977 58% 26% 32%
1978 58% 28% 30%
1979 59% 29% 30%
1980 62% 30% 32%
1981 61% 31% 30%
1983 63% 33% 30%
1985 66% 37% 29%
1987 69% 40% 29%
1989 73% 45% 28%
1991 75% 47% 27%
1993 75% 50% 26%
1995 79% 54% 25%
1997 80% 56% 24%
1999 83% 60% 23%
2001 85% 63% 21%
2003 86% 65% 21%
2005 88% 69% 19%
2007 89% 70% 18%
2009 89% 72% 18%

I'm a little surprised how many homes actually have air conditioning. I live in the Northwest where summers are pretty mild so its not as common out here.  But its clear that over the years more and more homes have gotten air conditioning.   Also the growth is all in central air conditioning systems.   Over the past 4 decades the % of homes with window air conditioning units has steadily dropped while the % with central air has steadily grown.

Part of the growth in AC is due to higher population growth in the Southern states.   The AHS has data for regions as well.  If you look at all housing units then per region the % of homes with some form of AC is as follows :

AC Central Window
Northeast 84% 32% 51%
Midwest 91% 70% 22%
South 98% 86% 12%
West 67% 52% 15%

As you can see the percent of homes with AC is a lot lower in the West and Northeast.   In the South 98% of homes have AC so its basically a given that a home will have some form of AC.   Window units are a lot more common in the Northeast. 

August 26, 2011

Best of blog posts for week of August 26th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week.

FMF says Now's the Time for Givers to Get the Chase Freedom Card because Chase is giving 5% cash rebate back for gifts to charity from October to December.

My Money Blog discusses Swensen Portfolio 10-Year Total Returns: Low-Cost Diversified ETF Portfolio Results

U.S.News gave us some  interesting tips on How to Make Home Appliances Last Longer

Check Your Email - might owe you $10.. give or take

Today I got an email with the subject "Notice of Settlement" from the email address    I didn't recognize that email address and at first glance the message was just some legal mumbo jumbo.    I might have ignored it and gone on with my day.  However I read the mail and found it was a notice that is setting a class action lawsuit and paying out $2.5 million to customers

Details on the lawsuit are here :  News of the settlement is also discussed in this independent site.    Apparently they had up to 60 million subscribers impacted by the class.   You did not have to have a paid account at Classmates to be in the pool of eligible customers.   The lawyers estimate that about 250,000 people will file a claim so that the $2.5 million would be split out to $10 per person.   That means that approximately 59,750,000 people would be leaving money on the table.   

I don't even recall for sure if I signing up for myself.   But I guess I did at some point in the past 15 years cause I have a very old email where I sent them a request to 'unsubscribe' from their messages. 

If you're are in one of the customers eligible for a share of the settlement then you should have received a similar email or should receive one shortly.  You have to get an email from them to file a claim since the email has a a couple unique number code's you'll need to file the claim online.  

Check your email to see if you have a message with subject "Notice of Settlement" from the email address   If you do then follow the process to file a claim online.  It takes a few minutes and is quite painless.  They don't want any super private information just your email (which they have) and your address.   You've got until November to file a claim, but no reason to wait if you can do it now.

I'm hoping that nobody else files a claim and I'm the sole person to get all $2.5 million.   Or I guess if you file a claim we'll split it $1.25 million each.  Deal?

August 25, 2011

Is a Solar Lease or Purchase Agreement a Good Deal?

I like the idea of solar power a lot.  Whats not to like about getting free electricity from the sun?

I first looked at solar panels a couple years ago.   I concluded then that time that my money was better spent on air sealing and insulation.   We've since done the air sealing and insulation and that proved to be a good investment.   I also looked at renting solar power from SolarCity two years ago.   At that time the figures I ran showed I'd be losing money on the lease deal.   I revisited the SolarCity site and it seems the numbers work out better now.  There are also other companies offering solar leases.  I decided to take another look at solar leases and see if they're a good deal or not.

SolarCityAdEnergy, Sungevity  are companies that offer leases where you can get the solar panel installed on your home with as little as zero up front money.   The lease deal lets you rent the panels at a defined rate for a long period and then you get to use the energy produced.  The solar company keeps ownership of the physical solar.   The panels are installed on your roof but they will maintain and own them.

SunRun has a purchase agreement plan.  This operates similarly to a lease in that you don't own the panels and theres little or no up front cost.  SunRun owns the solar hardware and is allowed to use your roof.  They then sell you power at a fixed rate that is competitive with your local utility.   You're basically just agreeing to buy some solar power from them and they park their panels on your roof.

Simple examples using fake numbers:

Lease : You rent panel for $25 /month for 15 years and the panels generate $40 worth of electricity on average so you're ahead $15/month.
Purchase Plan : You agree to buy electricity from the company at a reduced cost.  The panel generates $80 worth of electricity a month and you buy it at $65 /month saving $15 per month.

The companies operate in 10 states of Arizona, California, Colorado, Hawaii, Maryland, Massachusetts, New Jersey, New York, Oregon, Pennsylvania and D.C.    They don't all offer all their programs in each state however.   I didn't do an exhaustive search and I'm sure there are other companies out there and probably coverage in other states.  

I checked the calculator on SolarCity which offers estimates of the costs based on your actual home address.   They had three options for leases where you could put down $0, $1,624 and $3,249.   With the $0 down option I'd save a whopping $4 per month.    For the higher down payments I'd save $324 and $552 per year.   Saving $48 per year with no investment is hard to beat.    The higher downpayments are pretty good returns as well.   For those I'd have a break even point of around 5-6 years and a return rate of around 18-20% on the initial investment over the 15 year term of the leases.    Thats a pretty good deal all around as far as I'm concerned.

Negatives of Solar Leases

It can't all be good.  There are some downsides to leasing over buying.

You don't own the hardware.   With a lease you have a rental agreement for a defined period.  What happens after that is generally you'd either buy out the lease, resign to do another multi-year lease or they'd remove the solar panels.   If you own the hardware then you own it indefinitely and benefit from it long term.

Possible complications when selling the home.   If you sell your home then the solar lease could present a problem for you.  You may have to buy out the remaining lease to get out of it.  Someone buying your home may not think much of having solar panels leased out.   If the panels were owned then they would be a concrete benefit of buying the house.   But rented solar panels may not add much if any value to the home and some buyers may be wary or confused by the terms and benefits of the lease.   A buyer may be able to assume the lease from you but they'd have to qualify for the lease and also be willing to take over the lease.  

I found the website Solar Lease which has a lot of reasons why they think solar leases are an extremely bad and horrible idea.   They do seem a little biased though and its not super clear who wrote the site except at the end they link to a store that sells solar hardware.

On one hand I think a solar lease could be a sure win no-brainer for some situations.   But it may not be as great a deal as it first seems. Whether or not it is a good idea for you will depend on your situations, but I think it makes sense to consider them as an option if you're interested in solar power for your home.

Solar panel photo by joncallas

August 22, 2011

You Should Spend Extra Time When Setting Rent on a Rental

My dad recently rented a small 2 bedroom house.    He keeps his rents very low compared to market so the renter got a very nice deal.   I help my dad by posting his ads on Craigslist for him since he does not have a computer of his own.  I know his rents are low but its been a while since he rented out this house so I checked online to see what comparable rents were.   Rentometer and Zillow both give estimates for rents. 

Rentometer - $675 Median Zillow - $677

Rentometer shows the rental median at $675 for that area for 2 bedroom units.   They say that 20% of 2 bedroom rentals are below $584 and 20% are above $750.  

The listing for Zillow on the property address says that their rent estimate is $677.

My dad had decided to rent his place for $600.   Thats not super cheap compared to what Rentometer says is out there but its still $75 below the Rentometer median and below Zillows number.     If I were pricing a rental I might be inclined to stop there after 5-10 minutes it takes to loop up the values on Rentometer and Zillow and decide that I'd done enough market research.  However there  shortcomings and inaccuracies with using the broad average numbers from sites like Rentometer and Zillow.   Those sites are really only good enough to get you in the right ballpark.     Such sites do not know if you allow pets, they can't tell what condition your property is in or if its been remodeled, they don't know any of the extra amenities your property may have that other rentals lack and they don't even seem to differentiate between single family homes and large apartment complexes,

I checked Craigslist today and there were about 220 listings for 2 bedroom rentals.   I then sorted based on units that allowed dogs.    I further narrowed it down to units under $700.   Out of those I then looked through the remaining units and found the single family houses.

2 bedrooms in market = 220
2 bed under $700  =85
2 bed under $700 within 25 miles of town = 70
2 bed under $700, in 25 miles, that allow dogs  = 32
Single family 2 bedroom homes under $700 within 25 miles that allow dogs  = 3
Single family 2 bedroom homes under $700 within 25 miles that allow dogs and which are not isn't a single wide mobile home or an obvious scam posting = 1

That single rental was listed for $645.

I then looked at the ads for rentals over $700 and sorted for just those that allow dogs and are single family homes within 25 miles and I found three 2 bedrooms.   They were rented for $750, $750 and $795.  The 3 bedrooms started at $875 and went up from there

If you want to live in a house in town and you have a dog then you have 4 choices out of today's listings:
$645, $750, $750 and $795.   The median there is $750 and the average is $735.  The Rentometer and Zillow estimates for the rents are $675 and $677.    Those are about $75 lower or 10% less than the median rents I found by actually searching listings on Craigslist.     I figure that Zillow and Rentometer are about 10% low based on my research in the market.    If you used the Zillow and Rentometer figures then you'd be pricing your property 10% lower and losing 10% of your income.

Now its quite possible that you could have found the opposite result and determined that comps in the rental market are actually higher than Rentometer or Zillow claim.   That is also very good information to know.  If you try and rent your property for 10-20% higher than market rates then you will have difficulty renting it.   This could cause the unit to sit vacant while you search for a tenant.   A vacant rental costs you money.  You could easily spend over a month hunting for a tenant to pay extra and lose rent that time.  Now its true that if you can find someone willing to pay more then the higher rent rate will make up for the rent lost during the vacancy.   But its also quite likely that you'll never rent the unit at the higher rate and will lose rent for months only to have to drop your rent later to get tenants interested.
Of course not everyone wants to live in a single family house nor do all renters care if you allow dogs.   Many renters will be happy living outside of town if it means saving some money.   But your rental is not priced to compare to the lowest common denominator.   Your rental should be priced based on the features it has.  There are people who want a single family home.   There are renters who own dogs.   Most people would probably prefer to live within easy driving distance of town rather than having a long commute.   All of these things make your renter better than other properties which can't boast about these features.

Bottom Line :  You should not rely on websites like Rentometer or Zillow alone to set your rents.   Spending more time to do some in depth market research on rental rates is well worth your time.

August 21, 2011

Two Tricks to Keep United Miles from Expiring

A few weeks ago I got a letter in the mail from United saying that my miles would expire within a few months.   The mailer had an insert with a way to cash in some of my miles for magazine subscriptions.   I didn't want any magazines and I didn't want my miles to go to waste either.   I went to the United airlines site and looked through the options on redeeming miles but they didn't have anything I really wanted to use my miles for.  I found and used two ways to keep my United miles from expiring and both were fairly easy and low cost.

  I've talked about ways to keep miles from expiring before. These two tricks are a little more specific and unique to United miles.

Trick #1 ) Get a restaurant reservation.     In the United Miles Plus shopping* system you can reserve a table at a restaurant and get 60 miles for doing so.   They use the OpenTable reservation system to do the reservations.   Of  course I wouldn't go out to a fancy dinner only to keep my miles from expiring.   It just happened that I had plans to have dinner with a friend at a restaurant that was in the reservation system.  I would have eaten there anyway so making the reservation didn't cost me anything nor cause me to go spend money I wouldn't have.

Trick #2 ) Buy something for $1.     There are many shops on the United shopping site.   Some of the shops have free shipping and cheap items.   I arbitrarily chose since I'm familiar with them and I buy computer stuff there on occasion.    I searched Newegg and  I was able to find a roll of electric tape to buy with free shipping that was just 99¢.     Buying that item for 99¢ got me 1 mile which extended the expiration of my miles.    I don't really need electric tape so I'm kind of wasting a dollar on it but one dollar is worth spending to keep from losing 11,000 miles.     I don't see electric tape there anymore but someone is selling many Magic the Gathering cards for 99¢ with free shipping.   I was initially worried that only spending 99¢ wouldn't get me a mile, but they rounded it up and I got credit for one mile.

One thing to watch out for is that the miles earned through the shopping site might take several weeks to hit your account.   You need to do this well in advance of the expiration date for your miles to make sure it works.   The United website says that it can take several weeks for the miles to be credited to your account.   For me it took around 2-3 weeks to see the credits.

It would be best to plan to use these tricks in advance.  If you dine out at a restaurant in the OpenTable system with any regularity then simply remembering to use the United site to make your reservation 1-2 times a year would keep your miles from expiring.   Or if you do online shopping at any of the stores in the United shopping site then you can use their site to start your online shopping and get miles that way.   This way you can incorporate some free United miles in your normal activities and not cause any unnecessary or unplanned spending.

* Unfortunately as I write this today and yesterday I have not been able to get to United Plus shopping website.  It looks like the server is down.  I assume that is just a temporary problem and hopefully its fixed by the time you read this.

August 19, 2011

Best of blog posts for week of August 19th

Every Friday afternoon I share some of the more interesting or notable posts that I have seen in the personal finance blogs and other sources for the past week.

Doughroller tells us All About Credit Scores

How to Fix Social Security

Fixing Social Security is extremely easy.    All they have to do is increase taxes, cut benefits or some of both. 

I'd like to stop there and just have the two sentences above be the end of it but apparently thats not enough talkin for a real blog post.    

Its easy for me to point out that raising taxes and/or cutting benefits will fix Social Security but of course that is far easier to say than to get it done.  Nobody wants to pay more taxes and nobody wants their benefits cut.  We want to eat our cake and we want to keep it too and we don't want to pay the bill.   The hard part is getting people to agree with the fixes or at least finding fixes that people don't hate too much.  You may as well tell people that losing weight is as easy as eating less and exercising more. 

Theres actually a wide variety of ways you can change the Social Security system and improve its long term viability.

CBO report Social Security Policy Options from July 2010.    Wikipedia has a nice graphic showing the different options and how much monetary impact they'd have to the program.  You can read through the whole CBO report or take a quick look at the Wiki graphic to get an idea of how the various proposed changes would incrementally impact SS.    Overall SS is facing a shortfall of 0.6% of GDP over the 75 year timeframe.   The different changes to SS are listed along with the % of GDP that they would save the system.   For example if we were to increase the payroll tax by 1% in 2012 then that would make up 0.3% of GDP in the shortfall.   Or if we raised the full retirement age to 70 then that would make up another 0.3% of the shortfall.  Combined these two changes alone would address the entire 0.6% GDP shortfall.

The table is on the Wikipedia site really interesting to me since it shows you graphically what kind of impact various possible changes  to social security would actually have on its finances.  

For example if you look at the table one option is to raise the tax rate 3% over 60 years.   That will balance out SS for 75 years.  I know that a 3% tax rate sounds like a lot, but they are talking about spreading that over 60 years.   In the past 60 years the rate rose from 1.5% in 1951 to 6.2% today (not counting the temporary 2% cut this year).      That was a 4.7% increase.  Figuring on a 3% increase over the next 60 years seems easier to manage given we raised it 4.7% in the past 60 years.   Let me put it another way.  If they raise taxes about 2/3 as fast as they have been raising taxes so far then social security will be able to persist indefinitely.

Of course maybe we don't all want to end up paying 9% of our wages to social security and would instead prefer that the benefits be cut.   Theres many ways to keep social security alive forever by cutting benefits as well.

Two potential ways to help fix Social Security that I thought were fairly interesting were :

Raise the taxable maximum to 90% of earnings  - 0.2% GDP impact : Right now the taxable maximum is set value that increases based on wage inflation. So in 2011 the maximum is $106,800 and you don't owe tax above that.  The rate may go up in 2011 with inflation.   However peoples wages nationally change more than just inflation.   Back in 1983 SS taxed 91% of total earnings but by 2009 it only taxed 83% of total wages.   If you taxed 90% of earnings today then the limit would be about $156,000.  

Base COLA on chained CPI-U -   - 0.2% GDP impact : Currently the cost of living adjustment (COLA) for social security is based on the CPI-W which is the Consumer Price Index for Urban Wage Earners and Clerical Workers.  If instead they used the chained CPI-U then that would generally result in a little slower rate of inflation a lower COLA.   The chained CPI-U is a broader measure of all urban consumer so it is the measure for everyone and not just the subset of wage earners and clerical workers.  The chained CPI also links together different purchases so that it takes into account items we might substitute for one another, i.e. flank steak versus rib eye.   So it could be argued that chained CPI-U its a little more accurate measure of cost of living than CPI-W.   However you want to rationalize it the net result is slower COLA increases.

But these options still amount to a tax increase and a benefit cut, respectively.   No matter how you stack it up any of these proposed changes to social security boil down to either raising taxes or lowering benefits.  The first option raises taxes on people making over the current limit.   The second option lowers benefits.

August 18, 2011

Save 32% on a Diamond Engagement Ring at Costco.. only $1 million

On the front page of I saw a featured item that caught my eye.

They have a 6.2 carat diamond ring for sale for a mere $1,000,000.*  

Even though its Costco they don't come in a volume pack of 12.  There is only one ring available for purchase.  The ring has an appraised value of $1,496,255 so with a price of just $1,000,000 its over 32% off!    I'd like to say its 1/3 off but 32.88% isn't quite 33%.  

The description of the ring:

  • IGI Value: $ 1,496,255
  • GIA #: 2135241967
  • Metal:  900 Platinum 
  • Diamond Shape:  Round Brilliant  
  • Minimum Diamond Weight:  6.20 ct
  • Diamond Clarity:  Internally Flawless ( IF )
  • Diamond Color: Colorless ( D )
  • Diamond Cut: Excellent
  • Ring Size:  6.5 - Sizeable to any size  (Costco does not provide this service)
  • Item available for purchase via wire transfer only
I like how Costco will actually sell you a $1,000,000 ring but they're not willing to have the ring sized for you.   I envision someone buying this $1,000,000 ring along with the 36 roll pack of of toilet paper and the jumbo 2 gallon container of mayonnaise, waiting in line at check out, piling the stuff all in a used card board box that was originally for cartons of Camels and then standing in line at the exit door to have your receipt checked by their receipt checker person.

If you're about to marry a Kardashian second cousin (a sister would require a larger rock) and you're in the market for a $1,000,000 diamond ring then this may be a great buy.   I haven't done much shopping for $1,000,000 rings though so I'm not really sure if this is a great bargain or not.  If you are in the market for a million dollar ring then you probably have a staff of assistants that could help you shop around.  

I assume that you'd also get 2% cash back on your Costco gold card so thats a nice bonus.  I didn't research this so its possible theres fine print somewhere that says you can't.  

If you're NOT a billionaire then I'd instead recommend you check out my older article discussing How Much You Should Spend on an Engagement Ring for more practical idea on what to spend.

Costco may be a decent choice for a reasonably priced ring but from what I've seen they don't have a large selection.    Their diamond solataire rings that they currently have for sale online start over $3,000 and go up.  So if you're not looking to spend that much then they won't have anything for you.   I found a 0.72 carat with a platinum band at Costco for about $3800.   I priced a similar 0.72 carat round VS1 with platinum band on Bluenile and it would be about $4,100 there.   But thats assuming you want that same specs as the Costco diamond.  Bluenile also has a 0.7 carat that is VS2 for $2500 and paired with a white gold band that would be around $2800 total. 

$3800 for a 0.72 carat VS1 platinum band at  Costco is better than $4100 for a 0.72 carat VS1 platinum band at Bluenile.    But is $3800 for a 0.72 carat VS2 platinum band at  Costco better than a 0.70 carat VS2 white gold band for $2800 at Bluenile?   Maybe it is and you really want platinum and having VS1 over VS2 is really important to you but for most folks I doubt you'd care that much to warrant spending $1000 extra.

*  I wanted to put in a commission link so that if one of you billionaires out there bought the $1M ring then I'd get a 1-2% referral commission but I sadly don't have any commission deals with Costco.  

August 17, 2011

Life Insurance Product Wrongly Sold as Income Generator

 On a recent episode of the Suze Orman show she had a guest on who had bought a permanent life insurance as a retirement income investment.   The woman had bought an Eclipse indexed life insurance policy.  I'm generally not a fan of investing in life insurance bit this policy in question really doesn't seem like a bad policy as far as cash value life insurance goes.   In this case the real problem with the insurance was how it was sold by the salesperson.  The womans main goal was to have retirement income and that is not what the life insurance policy in question is designed for.   The salesperson sold her something they shouldn't have. 

Here are the basics of the policy that the salesman was going to sell her: 

Initial Investment : $125,000
Female Age 53
Death Benefit  : $600,000
Expected Annual Income in 10 years as claimed by salesperson: $18,000
Sales commission : $7000
Surrender charges : $25,000

If you could invest $125,000 at age 53 and then get $18,000 per year for life 10 years later then that would be a pretty good deal.     First of all you have to figure out how much $18,000 per year at age 63 would cost.  You can get that by buying an annuity. has rates for annuities.   A single life annuity paying $1500 per month ($18,000 per year) for a 63 year old woman would cost about $256,000 and change.    Therefore the $125,000 would have to about double in 10 years for the policy to be able to pay out that much for life guaranteed.    And thats not even taking account for the cost of the life insurance death benefit, the sales commission, other fees and the surrender charges.  Its hard to say how the salesman claimed she'd get $18,000 income since that return doesn't seem to match reality for such a plan.

The documentation for the plan was shown briefly on screen and I copied down some figures.  

If you assume that your investments grow 8% over time based on the performance of the indexed fund then you would see a cash value growth like the following:

8% return assumed
Year 1 = $3,771
Year 2 = $27,674
Year 3 = $53,354
Year 4 = $80,946
Year 5 = $110,596
Year 10 = $160,808

So in 10 years your $125,000 would potentially be worth over $160,000.   Thats equivalent to a 2.5% compounded annual growth rate. 

When the woman was sold the policy the salesman used the predicted or assumed earnings growth to forecast the future value of the investment portion of the insurance.  Insurance plans generally have a guaranteed return as well as higher potential return.   A mutual insurance company's plans may pay a certain fixed amount and then offer dividends in addition to the fixed guaranteed amount.   The dividends would not be guaranteed and would vary depending on how well the insurance company performed financially.  With this universal indexed plan the variable amount is based on the performance of stock market indexes.   For the plan in question it is indexed to one of three index choices.  Each index has a minimum return of 0% and a cap of 16%.    Its not really unreasonable to assume that such an indexed investment would return 8% annually.   In fact if you had such an investment fully invested with the S&P 500 index option over the past 40 years you'd have averaged around 9% annual returns.  BUT the problem is that there is no way to predict the return of the indexed investments in the future.   There is absolutely no guarantee that you'll get 8%.   In fact its purely a guess to assume 8%.   This is a key detail about cash value insurance that people need to understand.  If a projected rate of return is not based on guaranteed returns then it should be clear that you're just looking at possible growth based on guesswork.   

If you're buying an investment in an insurance policy and you want guaranteed safe returns then you should primarily look at the guaranteed growth rate for the investment.  

The Eclipse policy has a 3% guaranteed growth rate for a fixed investment.   If you go with that 3% guaranteed minimum then your cash value would grow as follows

3% guarantee
Year 1  : $1,266
Year 2 : $21,400
Year 3 : $41,914
Year 4 : $62,808
Year 5 : $84,076
Year 10 : $83,477

Thats not extremely good growth since your $125,000 ends up worth $83,477 over 10 years.   That works out to -4% compounded return.   Of course you would have a large death benefit for those 10 years so  we should figure the value of that in.   If you account for spending $1500 a year on a term policy for a woman the same age then you'd be looking at -3% growth of your investment value.

Long story short... The woman was sold insurance as a retirement plan.   The insurance product in question wasn't designed as a retirement income vehicle.   She was told by a salesperson that her $125,000 investment over 5 years would get her $18,000 of income after 10 years.  That growth was not guaranteed in anyway and appeared to be an overly optimistic return for the policy.    Suze Orman ended up talking to the insurance company that issues the policies and the company refunded the woman's money.   I'm not sure if the company would have done so if a major TV personality was involved or not.   Even so, the fact that the insurance company did refund the money without charging surrender fees seems to be an emission that there was wrong doing on the part of the salesman.

Bottom Line : If you're looking at a cash value insurance policy then make sure the rate of return you're looking at is a guaranteed rate and not just a "forecast" or "projected" rate of return.

August 15, 2011

100 4x6 Photos on Snapfish for $1 and 8¢ cashback

Right now Snapfish has a promotional deal to get 100 4x6 photo prints for just $1 using promocode WEDPRINT.    The deal is good through Tuesday August 16th. 

You can also get 8% cash back, or 8¢, by using Ebates.

I heard about this offer on Fatwallet.

Average Electircity Costs by State

The US Energy Information Administration (EIA) has data on rates for electricity usage.   I got the data from this page : Average Retail Price of Electricity to Ultimate Customers by End-Use Sector, by State 

I'm using just the residential prices and the data was from early in 2011.

Here are the average costs of electricity in cents per kiloWatt hour (kWh)  for each state:

U.S. 11.79
Alabama 11.05
Alaska 17.67
Arizona 10.97
Arkansas 9.01
California 14.6
Colorado 11.14
Connecticut 18.15
Delaware 13.95
District of Columbia 13.24
Florida 11.63
Georgia 10.84
Hawaii 32.89
Idaho 7.84
Illinois 11.9
Indiana 10.52
Iowa 10.56
Kansas 10.6
Kentucky 9.33
Louisiana 8.92
Maine 15.37
Maryland 14.01
Massachusetts 14.29
Michigan 12.61
Minnesota 10.98
Mississippi 10.76
Missouri 9.48
Montana 9.52
Nebraska 8.93
Nevada 12.08
New Hampshire 16.53
New Jersey 16.25
New Mexico 10.5
New York 17.52
North Carolina 10.39
North Dakota 8.29
Ohio 11.3
Oklahoma 10.07
Oregon 9.43
Pennsylvania 13.34
Rhode Island 16.32
South Carolina 11.32
South Dakota 8.9
Tennessee 9.95
Texas 11.45
Utah 8.46
Vermont 16.39
Virginia 10.5
Washington 8.14
West Virginia 9.44
Wisconsin 13.01
Wyoming 8.94

The median is 10.98¢.   The maximum is in Hawaii at 32.89¢.   The least expensive is Idaho at 7.84¢.   About 2/3 of the states are between 8.5¢ and 13.5¢.

Here's a map showing the rates split up with under 10¢ in green, 10-15¢ in yellow and over 15¢ in red:

Keep in mind that these are just averages at the state level.   Simply looking up your state on the table here won't give you an accurate number for the amount you'd pay yourself.   The cost varies from utility to utility within each state as well.   My father's utility charges 2¢ less than the average for his state and the largest utility in his state charges 2¢ more than the state average.  Individual utilities may also charge different kwh rates based on different times of the year or day.

August 14, 2011

Save 25% and Spend 88% More

Symantec Norton Ghost 15.0 (1 PC)Last week Ebates ran a Daily double for 25% cash back at Symantec.   When I saw the deal I was going to write up a quick post to tell people about the 25% cash back.  Thats a pretty good cash back rate. 25% back is a lot.. right?    It should be a good deal but its not a bargain if you end up paying a lot more in the end.

Symantec Norton has virus software as well as other computer utilities.   I would  generally recommend for virus protection that you get one of the free programs out there.   AVG is a good free virus scan.    On the other hand Symantec has some other good software like Norton Ghost which is an industry standard backup utility.     Symantec has Ghost 15.0 for $69.99.    When I saw the deal I figured at the time that there might be someone who wants to buy something like Ghost and 25% should be a good discount.   25% cash back would be $17.49.   That seemed like pretty nice savings.

But then I remembered that I'd bought a copy of Ghost years ago for dirt cheap on the internet.  At the time I think I bought a 1-2 year old version that worked fine for me but was considered obsolete.   I figured I should price compare Ghost.   Low and behold, you can buy Ghost 15 for $28.95 at   Amazon has Norton Ghost 15 for $27.95.   

So.. lets compare: 
25% off Bargain at Symantec = $69.99 cost - 25% cash back of $17.49 = $52.50
Amazon = $27.95

The price at Symantec after the 25% cash back discount is still about 88% higher than what Amazon has it for.

On top of that the version of Ghost at Symantec is a digital download and the version you can get at Amazon is a physical CD.   The download really should be cheaper than a CD since it costs much less to manufacture.

Its not like Symantec raised their price and then gave you a discount.   They didn't start at $30 then jack it up to $70 and then pretend like 25% off $70 is a good deal.    What we're seeing here is a full retail sticker price at Symantec.   Then they offer a 25% discount to their store.  Thats not unreasonable.  Some  chose to stick to high suggested retail  on their own store so they don't undercut the sales of their distributors.   Other companies like Apple stick to flat prices everywhere so if you buy it from Apple or Bestbuy or Target you're going to pay the same price.   I don't think there is anything really wrong with either way about doing it.   But in this case it really is important to know if the manufacturer has a high retail price for their own store or if the prices on their store are competitive with the prices elsewhere.

Of course there are other ways to save even more money.  You could buy Ghost 15.0 used on Amazon market for $14.95.    If Ghost 14.5 is good enough for you then you can get that used off Amazon market for $2.75.   Looks like Ghost 14 had some problems with Windows 7 for several users so if you're running Win7 you may want to go with the latest revision.    That doesn't really change the comparison of buying New via Symantec's own website versus buying new elsewhere.   But I wanted to mention it cause its yet another way to save a lot of money.

Bottom Line :  Make sure you price compare before you jump at a large sale price.

August 11, 2011

Backup Emergency Financial Plan 2.0

Over two years ago now I wrote an article Backup Financial plan in Case of a Job Loss in which I discussed my general plan for how to handle our finances in case I lost my job.   Since it has been a while I decided to update the plan a little bit.

My primary focus would be to find another job in my field.   At the same time I would want to make immediate changes in our finances as well as plan for other changes that we may need to take if I'm unable to find work in my field for an extended period of time.

The point of doing this kind of planning is not to be pessimistic or expect to lose a job.   The idea here is that I'll want to be reasonably prepared in case something bad happens.   I don't want to be surprised by a job loss and find myself without any kind of plan then plod along doing the same things.   Of course I could just cross that bridge when I come to it but  another point of doing this kind of plan is to make sure my finances are not setup poorly in the event of a job loss or other financial problem and so that we're prepared to weather any kind of financial emergencies that might arise as best as possible.   For example it might be very beneficial to have better cash flow in case of a a financial emergency and that may be a good reason to refinance some debt now.


Step #1. - Cut back our spending so our short term income will cover it.
For the past 12 months we've averaged approximately $4,000 a month in total spending.   That includes our home mortgage, utilities, food, entertainment, travel etc.   I am however excluding  a one time medical expense.

Home phone, cable, netflix, cell phones - All of these have extra charges that we could cut back on. We should be able to trim $100 off these bills pretty easily just by eliminating some of the extras.
Clothing, Travel & Gifts - I previously said we'd cut all these 100%.   I might loosen that some and not cut them 100%.  After all I wouldn't necessarily cancel Christmas and clothing does wear out so we might need to replace a few items.   I'd probably cut travel, clothing & gifts by say 90%.   We could probably cut around $300 off our budget in these areas.
Eating out  and groceries -  We continue to spend alot of money on food.  I'd still cut eating out by 90%.  We'd also want to trim our grocery budget as well.   We should be able to cut $500 in this category.
Entertainment, discretionary, misc - For entertainment and other misc. areas that we fritter away money we could cut 90%.  That would save us $150.

Total of cuts $1,050

Step #2 - Get health insurance

I'd probably sign up COBRA initially.  Our plan isn't super expensive.  Its not cheap but health insurance isn't usually.  I looked up our COBRA premiums and it would be about $770 a month.   However our plan has a high deductible and HSA.  We would also want to make sure we have some money in the HSA and/or bank to cover the deductibles.

We would want to shop around and see if getting our own health insurance would be better for us financially.   I just did a quick search on eHealthInsurance and it looks like we could get a similar high deductible HSA plan for about $200 less per month.   Of course I'd have to read all the fine print to make sure that plan isn't lacking stuff we'd need.   Also COBRA only lasts for 18 months maximum so after that we'd be forced to get our own coverage.

Step #3 - Look for other cuts and find alternative income

Other ways to cut spending:

  • We should be able to further cut our cell phone, home phone and cable bills. 
  • Sell one of our two cars which would cut our insurance costs and give us some cash. 
  • We could shop around and switch insurance companies.  Right now we're with Amica insurance which is a great insurance company.   J.D.Power has rated them #1 for 12 years in a row.
  • Trim grocery costs by using coupons more and shopping around better.

Find ways to make money:
  • We could have another garage sale to sell off our extra stuff.   That would give us a few bucks but it wouldn't give us any ongoing income.
  • I make some money off this blog but not a whole lot.  I haven't put a lot of effort into monetizing the blog.  I could look into ways to make more money here. I might hire Crystal to help.
  • My wife and myself could potentially do some work tutoring. 
  • I could put up a shingle and do computer work on my own.  

Step #4 - Sell or refinance real estate

Right now our cash flow from our rentals is not maximized.  If I were to consolidate and refinance debt I could cut our monthly payment.  I'm not sure if banks will refinance debts when you are unemployed however.   I might be able to get a loan from a relative with the properties as collateral.

Currently we own 3 rentals and our home with combined equity of roughly $450k.   We have mortgages on one rental and our home.   The balances on those mortgages are about $140k right now and our payments are about $2,300 per month with taxes and insurance.  If we refinanced that today then we could cut the monthly payments by $1000 or so.

Or we could sell 2 of the rentals and pay off both of the mortgages.   That would give us about the same cash flow change but without the mortgages.   However you can never tell how easily you can sell a property.   It might work best to refinance first to improve the monthly cash flow and then put the 2 rentals up for sale.  Then if we sell them eventually we could remove the liability of the mortgages.

Step #5 - Career change and/or move

This is the final stage of dealing with a financial emergency. If I'm unable to find a new job in my current field in my area then I'd have to consider either changing careers or moving.   I might want to do both at that point.   Moving back to my home town would definitely worth considering.  Housing is cheaper there and the rental real estate market is better as well.   We could feasibly sell our properties here and buy a house and rentals in my home town and end up with enough rental income to support ourselves.   However selling properties is easier said than done and it could take several months to sell.

Step #6 - Selling assets to feed ourselves

Selling properties off over the years may allow us to keep ourselves afloat for a long time.   If we start with a pile of cash, refinance our mortgages and limit our expenses then we can afford to live for around 10 years.   Then after 10 years we could sell our rental here to get some cash out of the equity.  Then we could sell our home and move to my home town giving us some more cash.   Finally we could sell off all our out of town rentals to get cash as well.   Of course selling the rentals would reduce our monthly income but it would give us a pile of cash to live off of for a while.   You don't want your financial plan to consist of selling off all your assets one by one until you're finally left with nothing as that won't make a good retirement.   However if worse came to worse we could feed ourselves for a while by selling off assets one by one.   Meanwhile our retirement accounts would all be untouched and growing in value over the years.  I could feasibly not work for the next 20 years and then retire following this method.   It would be a low income subsistence level lifestyle however.

August 10, 2011

Finding the Rough Dollar Value of Airline Miles

Right now you can get a United airlines mileage card that promises "up to" 40,000 free bonus United miles.   If you qualify and buy enough in the year then you can get 40,000 miles.   Thats a lot of miles.   In my mind I first though, "hmm that should be enough to fly to Europe and save like $1000".   So my first impression is that the bonus miles offered are worth roughly $1000 in airline tickets. 

But what are those miles really worth?   It depends on what the cost of the airline tickets are, where you fly and how many miles it costs to get the ticket in question.   I decided to do some quick searches to get a rough idea of the value of airline miles for a couple airlines.

I searched for flights from the West coast to Dublin.   One stop was about $927 whereas two stop flights was only $3 cheaper at $924.  Of course I'd pay an extra $3 to avoid a stop.  United flights only had options with 2 stops and the miles were 30,000 each way for 60,000 miles total.  This makes the exchange of United miles versus cash to 60,000 miles = $924 cash.  Therefore 1 mile = 1.54¢

Looking at a flight to Atlanta from the West coast next I find that  with a bit of flexibility on dates that 37,500 United miles can get me a flight.   If I'm not flexible then it would cost 50,000.   Buying a ticket would be about $375 and shopping around for dates would only save maybe $10 as far as I saw.   If I'm flexible with my dates then 37,500 United miles = $375 but if I'm not flexible then 50,000 miles = $375.   Therefore flexibility means 1 mile = 1¢ but inflexible causes 1 mile = 0.75¢.

I can find a flight to Vegas for 25,000 United miles without too much hunting.    On Orbitz the flights start around $160.    This exchange makes the miles = 0.64¢.

So from my quick sample of 3 cities I get rough value for the United miles  as follows:

United Miles 
International = 1.54¢
Cross Country = 0.75¢ or 1¢
Local = 0.64¢

I did similar searches for Alaska Air as well.  The miles were fairly similar for flights to Las Vegas or Atlanta.   The flight to Dublin was harder to find and cost much more for some flights.

Alaska Miles 
International = 1¢ to 1.54¢
Cross Country = 0.93¢ or 1¢
Local = 0.64¢

I picked United and Alaska to do my quick searches since I have the most miles with those airlines.   If you've got a lot of miles with a specific airline then you might want to do a couple quick searches to check out availability for flights to cities you commonly fly to or would like to fly to.  That will give you an idea what your miles are worth.   If you're ever considering signing up for an airline miles rewards credit card like the United card I mentioned at the start, then you should definitely figure out how much the miles are worth and how easy it is to get the flights you'd want.

Bottom Line : The dollar value of airline miles will vary and depend on where you fly.   For my quick searches I found values from 0.64¢ to 1.54¢ per mile.

August 9, 2011

Marriage and Divorce rate by State

You've probably heard that 50% of marriages end in divorce.  That number is a bit misleading.   For one it doesn't mean that any particular marriage has a 50/50 chance.   Many of those marriages ending in divorce are the 2nd, 3rd, 4th or later marriage for the individuals.  There are also a lot of other factors that go into the potential statistical survival rate of a marriage like demographics.    Marriage rates and divorce rates also vary from state to state. 

I got the marriage and divorce numbers from  Marriage and Divorce numbers from the CDC. and State populations from the Census The numbers are for the year 2009.

Note : I wouldn't read much into these numbers.   Higher divorce rate in a given state doesn't reflect on that state.  The differences could be due to demographics like different average ages or similar.

Here is the table giving the number of marriages and divorces per 1000 residents :

marriages divorces
Alabama 7.9 4.3
Alaska 7.9 4.8
Arizona 5.4 3.5
Arkansas 10.9 5.6
California 5.8 ?
Colorado 7.5 4.2
Connecticut 5.6 3.1
Delaware 5.8 3.9
District of Columbia 3.2 2.2
Florida 7.6 4.3
Georgia 6.5 ?
Hawaii 17.2 ?
Idaho 9.0 5.0
Illinois 5.6 2.5
Indiana 8.2 ?
Iowa 7.0 2.4
Kansas 6.6 3.7
Kentucky 7.7 4.6
Louisiana 6.4 ?
Maine 7.2 4.0
Maryland 5.7 2.7
Massachusetts 5.6 1.9
Michigan 5.3 3.3
Minnesota 5.4 ?
Mississippi 4.9 4.1
Missouri 6.6 3.9
Montana 7.3 4.0
Nebraska 6.9 3.0
Nevada 40.9 6.7
New Hampshire 6.4 3.7
New Jersey 5.3 2.8
New Mexico 5.1 4.0
New York 6.1 2.4
North Carolina 7.0 3.9
North Dakota 6.7 2.5
Ohio 5.6 3.2
Oklahoma 6.4 4.6
Oregon 6.2 3.5
Pennsylvania 5.1 2.3
Rhode Island 6.2 3.2
South Carolina 6.4 2.7
South Dakota 7.2 3.2
Tennessee 8.8 4.1
Texas 7.3 3.1
Utah 8.6 3.9
Vermont 7.6 3.4
Virginia 6.9 3.6
Washington 6.1 3.9
West Virginia 6.8 5.1
Wisconsin 5.4 3.1
Wyoming 8.7 5.2
Puerto Rico 4.7 3.8

August 8, 2011

Credit Card Usage Research Survey

A university graduate student contacted me asking to help spread the word about a research survey they are doing.   The survey is about finances and credit card usage.  Its anonymous and the questions they ask are just about how you use your cards and such.   If you're interested in helping out a student with a little of your time then the survey is at

Rent out Your Car

FreeMoneyFinance was discussing an article about some ways to make money and one of the ideas was to rent out your car.   Another article Need Cash? Rent out your car from Kiplinger discusses it a little more.   That sounded kinda interesting to me.  If your car sits idle then why not rent it out to someone and make some money?  

THe Kiplinger article talks about a couple companies that manage renting out your car.  They say that Spride is one such company that lets you rent your car.  But the Spride website has no information at all.  They work with City Carshare which is one of the companies lets people rent cars by the hour or day.    City Carshare operates in San Francisco only as far as I can tell.

RelayRides is another car sharing service and their website does talk more about how owners can rent out their cars.   They claim you can make up to $7,000 a year.    Average owners make more like $200 to $300 a month.   That service is only in Boston and San Francisco right now it seems.

I did some more searching on my own and found some other companies.   Getaround is also currently operating in San Francisco but there was mention of them expanding to Portland soon.    Whipcar appears to be in United Kingdom only.   There could be other services out there but I didn't find any.

Ok so quickly we see that the major draw back for this idea is that these services to rent your car seem to only exist in certain cities like San Francisco or Boston.   If you live in San Francisco or Boston then one of these car sharing deals might be a good way to make some spare money renting out your car.   For the other 99% of the country renting out your own car isn't an option unless you somehow manage the rental yourself and that doesn't seem very feasible.

If you do live in San Francisco or Boston then theres an obvious down sides to renting out your own car.   Chief among the cons is that you're allowing random strangers to drive your car and who knows how well they'll treat it.   You also have to deal with the hassle of scheduling when you do and don't use your own car and you have to do some work to manage it.    The services do handle insurance so you don't have to worry about insuring your car differently.

Bottom Line :  Renting your car is only handled by companies in a couple major cities so its not an option for the vast majority of Americans.

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