December 31, 2012

Happy New Years!

Happy New Years. 

I'm taking today and tomorrow off from posting.

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December 30, 2012

Teacher Pay versus Average wages, Per Capita & Median Incomes by State

Over two years ago I wrote an article discussing average teacher pay versus median household incomes per state.    That post seemed to generate some interest and discussion.   Some of the discussion was criticism based on the apples to oranges comparison between average pay and median household income.

I thought I'd both update the numbers and add some more information. 

I got teacher pay from the Teacher Portal site and they got the numbers from National Education Association (nea.org), National Center for Education Statistics (nces.ed.gov), 2011
The average wage numbers are from the May 2011 state cross industry estimates at the BLS site.

The per capita and median income are off of Wikipedia for 2010 which cites the Census. 

The point of this data is to put teacher pay in relation to general income levels per state.  Teacher pay varies considerably from state to state.   Income levels in general also vary considerably from state to state.   I'm just putting one column of numbers (teacher pay) along side another set of numbers showing state level averages and medians.

Here are the number...

First I'll start with just the average teacher  pay versus average annual wages for all occupations per state:



teacher pay average wages
Alabama $47,803  $39,180
Alaska $62,918  $51,590
Arizona $47,553  $43,670
Arkansas $46,500  $36,340
California $67,871  $51,910
Colorado $49,228  $47,510
Connecticut $69,165  $52,830
Delaware $57,934  $47,420
Florida $45,732  $40,750
Georgia $52,815  $42,590
Hawaii $55,063  $44,600
Idaho $47,416  $38,520
Illinois $64,509  $46,550
Indiana $50,801  $39,700
Iowa $49,844  $38,820
Kansas $46,598  $40,030
Kentucky $48,908  $38,640
Louisiana $49,006  $38,780
Maine $47,182  $40,190
Maryland $63,960  $51,860
Massachusetts $70,752  $54,740
Michigan $63,940  $43,700
Minnesota $53,680  $46,150
Mississippi $41,975  $34,770
Missouri $45,321  $40,500
Montana $47,132  $36,840
Nebraska $47,368  $39,140
Nevada $53,023  $41,860
New Hampshire $52,792  $45,220
New Jersey $66,612  $51,540
New Mexico $46,888  $40,790
New York $72,708  $52,810
North Carolina $46,605  $41,250
North Dakota $44,807  $38,870
Ohio $56,715  $41,590
Oklahoma $44,343  $38,190
Oregon $56,503  $44,290
Pennsylvania $60,760  $44,070
Rhode Island $60,923  $47,390
South Carolina $47,050  $38,560
South Dakota $39,850  $35,390
Tennessee $45,891  $39,130
Texas $48,638  $43,090
Utah $47,033  $40,950
Vermont $50,141  $43,080
Virginia $48,761  $48,870
Washington $52,926  $50,280
West Virginia $44,260  $36,220
Wisconsin $54,195  $41,420
Wyoming $56,100  $42,510

Teachers earn above average wages in every state except Virginia.   Now of course you do have to realize that average pay at the state level includes a lot of people working unskilled jobs with low educational requirements.    This is not an apples to apples comparison, its more of an apples to fruits comparison.   I think a better comparison would be to look at teacher pay versus the average wages for all people with college educations.  However I can't easily find those numbers.    Also note that this doesn't look at the value of benefits for a job and teachers have higher benefit levels than most jobs through their pensions and highly funded healthcare.


Now we'll compare teacher pay versus per capita pay and median income levels:



teacher
pay
per capita median household median family
Alabama $47,803 $22,984 $42,081 $52,863
Alaska $62,918 $30,726 $66,521 $77,886
Arizona $47,553 $25,680 $50,448 $59,840
Arkansas $46,500 $21,274 $39,267 $48,491
California $67,871 $29,188 $60,883 $69,322
Colorado $49,228 $30,151 $56,456 $70,046
Connecticut $69,165 $36,775 $67,740 $84,170
Delaware $57,934 $29,007 $57,599 $69,182
Florida $45,732 $26,551 $47,661 $57,204
Georgia $52,815 $25,134 $49,347 $58,790
Hawaii $55,063 $28,882 $66,420 $77,245
Idaho $47,416 $22,518 $46,423 $54,689
Illinois $64,509 $28,782 $55,735 $68,236
Indiana $50,801 $24,058 $47,697 $58,944
Iowa $49,844 $25,335 $48,872 $61,804
Kansas $46,598 $25,907 $49,424 $62,424
Kentucky $48,908 $22,515 $41,576 $52,046
Louisiana $49,006 $23,094 $43,445 $53,702
Maine $47,182 $25,385 $46,933 $58,185
Maryland $63,960 $34,849 $70,647 $85,098
Massachusetts $70,752 $33,966 $64,509 $81,165
Michigan $63,940 $25,135 $48,432 $60,341
Minnesota $53,680 $29,582 $57,243 $71,307
Mississippi $41,975 $19,977 $37,881 $47,031
Missouri $45,321 $24,724 $46,262 $57,661
Montana $47,132 $23,836 $43,872 $55,725
Nebraska $47,368 $25,229 $49,342 $61,888
Nevada $53,023 $27,589 $55,726 $64,418
New Hampshire $52,792 $31,422 $63,277 $76,446
New Jersey $66,612 $34,858 $69,811 $84,904
New Mexico $46,888 $22,966 $43,820 $52,565
New York $72,708 $30,948 $55,603 $67,405
North Carolina $46,605 $24,745 $45,570 $56,153
North Dakota $44,807 $25,803 $46,781 $62,920
Ohio $56,715 $25,113 $47,358 $59,680
Oklahoma $44,343 $23,094 $42,979 $53,607
Oregon $56,503 $26,171 $49,260 $60,402
Pennsylvania $60,760 $27,049 $50,398 $63,364
Rhode Island $60,923 $28,707 $54,902 $70,663
South Carolina $47,050 $23,443 $43,939 $54,223
South Dakota $39,850 $24,110 $46,369 $58,958
Tennessee $45,891 $23,722 $43,314 $53,246
Texas $48,638 $24,870 $49,646 $58,142
Utah $47,033 $23,139 $56,330 $64,013
Vermont $50,141 $27,478 $51,841 $64,135
Virginia $48,761 $32,145 $61,406 $73,514
Washington $52,926 $29,733 $57,244 $69,328
West Virginia $44,260 $21,232 $38,380 $48,896
Wisconsin $54,195 $26,624 $51,598 $64,869
Wyoming $56,100 $27,860 $53,802 $65,964

There are four columns of numbers there for each state.  First is the average pay for teachers.   This is an average figure and includes all teachers of varying experience levels.  It may be skewed one way or another if teachers in a given state have high or low average experience on the job.
Per capita income is the amount of wages averaged over a population so that includes people who don't work.  Median household income includes all households so its a mix of single people, single unmarried parents, retired couples and married couples with multiple children.   Family income only includes families and does not include single people.

None of these are perfect benchmarks for teacher pay versus other occupations nor does this say anything at all about whether or not teacher pay levels are 'fair' or the like.    I'm not saying teachers make too much nor too little.   We're just looking at the variation in pay for teachers from state to state and putting that into comparison with general wages per state.



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December 28, 2012

Best of Blogs for Week of December 28th

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 discusses What is the Saver’s Tax Credit?
This is a little discussed income tax credit available to a lot of people to help boost their retirement savings.

MyMoneyBlog tells about how you can Backup Your Music Library For Free Into Google’s Cloud Service

PlanetMoney tells us how Argentine Navy Defeats Hedge Fund  and little while back they explained Why Legos Are So Expensive — And So Popular

FMF asks Should Americans Be Forced to Save for Retirement?
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December 27, 2012

FREE - 25 4x6 photos from RiteAid

RiteAid is giving out 25 free 4"x6" photo prints on their website if you use the promo code EPRINT

You can order the prints online and pick them up free in the store.

Its probably a limited time offer but I am not sure when it expires.

I saw this one on Slickdeals
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December 20, 2012

What Percent of People file 1040, 1040A or 1040EZ?

When you think about filing income taxes you generally think about the 1040 form.   Thats the 'long form'.   There are also two shorter versions the 1040A and the very simplistic 1040EZ.     A large percent of the population doesn't do the 1040 form.   I got the numbers from the IRS 2010 tax stats.

With 142.8 million filers in 2010 the breakdown is as follows:



I was actually surprised that more people don't file 1040EZ.   For a lot of people taxes amount to a W2 for income and their standard deduction and exemption.


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December 18, 2012

How Much More Expensive is Organic Food?

Last week Retire By 40 questioned Are Organic Foods Worth The Premium?   While organic foods are still only around 4% of total food sales, a growing number of people buy organic.

But a side topic of that discussion is : what IS the actual premium cost for organic?   Or to put it another way:  how much more expensive is organic food?    I thought I'd answer that question with a example of various organic food prices compared to the typical non-organic options. 

Here's a sample of prices for regular foods versus organic food in several categories:



Reg Organic premium
Apple Juice 0.03 0.07 133%
Wheat bread 0.05 0.15 200%
Cheerios/Cascadian O's 0.26 0.44 69%
Black Bean - can 0.07 0.09 29%
Vegetable soup 0.13 0.22 69%
1% milk gallon 0.03 0.06 100%
Eggs AA dozen 2.09 4.49 115%
Angel hair pasta 0.08 0.39 388%
Chicken breast, lb 0.37 0.56 51%

The prices are the cost per ounce except for eggs which is the cost for a dozen.   I simply grabbed some prices from Safeway. Unfortunately Safeway didn't list the produce so I don't have prices for fruits or vegetables.     This is just a sample of prices and only meant as an example.   Of course these prices will change over time and vary from store to store. 

As you can see in the table the premium for the organic foods varies based on the kind of food.  Some organic options are only ~30% more while others are 3-4 times as expensive. 

It may make a little more sense to look at a grocery bag full of food.  If you went to the grocery store with the above list and bought everything in typical quantities then you'd spend a total of $24.30 for the regular foods and $44.06 on the organic versions.   Thats an 81% total premium for the organic grocery list.

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December 16, 2012

How Frequently do Employers make 401k Contributions

Recently IBM announced that they would switch to making their 401k matching contributions on an annual basis.   That saves them some money and probably helps retain some people to the end of the year.   According to a news report on the topic only 9% of employers make 401k matches on an annual basis.   My employer is one of those companies as our retirement contribution is made annually.   Its not a 401k match but instead a contribution to a separate retirement account

In the WSJ article Benefits Leader Reins In 401(k)s they have a graphic from Aon Hewitt showing the distribution of employer 401k matches.   I'm reproducing that graph here :

Source : Aon Hewitt, WSJ


As you can see the vast majority of employers simply make the matches along with your regular paycheck.   However a minority of employers like IBM and my company make matches at different periods.

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December 14, 2012

Best of Blogs for Week of December 14th

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

Apex continues the rental series at FMF with Real Estate 101: Taxes

Bargaineering says you should Never Buy Expensive HDMI Cables [SCIENCE!]
which is a point I made about 3 years ago when I said Don't Over Pay for HDMI Cables

PlanetMoney updates their article U.S. Jobs Lost (And Gained!), In Two Graphs
they also loon at a couple housing cost metrics with Are Houses Cheap Right Now?


FMF is running a FMF $25k Red Kettle Challenge
for The Salvation Army

RetireBy40 asks Are Organic Foods Worth The Premium?



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December 13, 2012

Household Income Distribution for Senior Citizens

Most senior citizens, aged 65 or older, have relatively low household incomes.    Median household income for people over 65 years is just $33,118 compared to a median of $50,054 for the entire population. 

I got 2011 data from the Census Current Population Survey Table HINC-02. Age of Householder--Households, by Total Money Income in 2011, Type of Household, Race and Hispanic Origin of Householder 

The census data breaks it down into chunks of $5,000 up to $200,000.  But I'll show it in fewer chunks to simplify.

 Here it is broken in a couple charts :


and


50% of senior households have income between $5,000 and $30,000.

18% of seniors make under $15,000 a year.   
11% of senior households have incomes of $100,000 or more.   
At the top, 2% of seniors take in $200,000 or more.

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December 12, 2012

Six Chances to win $2,500

Several personal finance blogs are currently having contests to win $2,500. The list of blogs with links are below.   To enter the contests you have to sign up for the blogs email feed and fill out a short survey.

  1. Wealth Pilgrim $2,500 cash giveaway
  2. DoughRoller.net $2,500 cash giveaway
  3. CashMoneyLife.com $2,500 cash giveaway
  4. CompareCards.com $2,500 cash giveaway
  5. PTMoney.com $2,500 cash giveaway
  6. My Money Blog $2,500 cash giveaway
Fairly good odds to win some money across all these contests.

Some good blogs there I regularly read #2 and #6 myself.

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December 10, 2012

1000 United miles and 500 AA miles

Couple articles from MyMoneyBlog have ways to get some free airline miles :

1000 Free United Airlines Miles from Bckstgr.com
You have to sign up for Bckstgr then link to Facebook, Twitter and Foursquare to get all 1000.   If you don't want to link to services then you can get 400 miles for simply signing up.

and
 
500 Free American Airlines Miles
Just like them on Facebook and do a survey.

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December 6, 2012

What Percent of Tax Filers Itemize their Deductions?

The other day someone on The Simple Dollar asked about cash donations to churches and Trent pointed out that most people do not itemize their deductions.   I'm not sure if thats common knowledge or not but most people do NOT itemize their taxes.    Whats that mean?   It means that they do not get any tax benefit from deductions like home mortgage interest, property taxes, charity deductions, medical expenses or the other misc. items that you can deduct as itemized deductions.    When we file our taxes we take either the standard deduction or the itemized deduction depending on which one is higher.  So if someone takes the standard deduction then they either don't have any itemized deductions to claim or they add up to less than the standard deduction.  

How common is it to take the itemized deductions?    In 2009 about 33% of tax filers claimed itemized deductions and the other 66% took the standard deduction.

 '09 is the most recent year that IRS has the full data.     I looked it up on IRS taxstats and specifically the 2009 figures for publication 1304 table 1.2

The rate that filers itemize deductions is going to be lower for lower income individuals as they are less likely to have high expenses.    Higher income people are more likely to itemize since they have a lot more expenses.

I broke down the trend to show how itemized vs standard deduction looks when you consider different income levels and here's a graphic:


Note, to make the graphic more clear I didn't include the approximately 2.5 million tax filers who had negative income levels.

Thats a pretty clear trend.   Of course there are always notable exceptions, but by and large the low income people take standard deductions and highest income earners file itemized deductions.


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December 4, 2012

You Don't Need A Lot of Horsepower

Imagine yourself driving a genuine vintage 1960's American muscle car with a big rumbling V8 engine.   When you push down the gas pedal you can feel it rumble as the the entire shudders.  The growl of the engine sounds like a caged monster.   You couldn't possibly need more power than that could you?   Now imagine yourself getting beat in a race with a Toyota Sienna minivan.   Because that could happen.   ( before anyone take me wrong, I'm not saying all minivans today can beat any muscle car from the 60's but a V6 Sienna could beat a 60's era muscle car with one of the smaller V8 engine options.)

Todays Minivan : Faster than a Muscle car
That was me driving the 1960's era car with a V8 when I was 17 years old.   At the time back in the 1980's I had one of the fastest cars in school.  I remember timing myself doing 0 to sixty at around 8 or 9 seconds.   But that Sienna minivan goes 0 to 60 in under 8 seconds.   At least according to the site Zero to 60 Times as well as Edmunds testing at 7.9s.

I like watching Motorweek on TV and I've been casually shopping around for my next car.   I'm struck how talk of performance and horse power has shifted over the years.   If a car has under 200 horsepower it seems as if its deemed lacking and going 0 to 60 over 9 seconds is considered poor performance.   Yet just 20 or 30 years ago these numbers would be considered good for a performance sports car.

Do we need more horsepower today than we did when I was in high school?   I don't think so.   In fact I can only recall twice in my life that I really felt I needed more horse power.   Once was driving a 1980s Dodge hatchback with a 1.7L Volkswagen engine that put out a whopping 75 horsepower.   I was trying to merge on the freeway after stopping on the shoulder and had trouble getting up to speed without getting run over.
75 horses just couldn't do it.     The other time was driving a 1996 Kia Sportage as a rental car up a hill on the freeway.   That Kia had 130 horses.     By comparison I drove a lighter Dodge Neon for many years with 132 horses and it was plenty fast and had more then enough power to sprint up that same hill at highway speeds.  My thoroughly average 2004 Toyota Camry has 157 horsepower and gets along just fine. 

That 60's muscle car had plenty of horses and in fact it felt at times like it had too much.  Yet todays modern cars are faster with more and more power.  

This report from the EPA titled Light-Duty Automotive Technology, Carbon Dioxide Emissions, and Fuel Economy Trends: 1975 Through 2011 points out that as of 2010 the average horsepower was 214.   And here's an illustration from the document of the longer term trends :
source: EPA.gov


As you can see cars have gotten more and more powerful and the performance has gone up at the same pace.   Todays supposedly  'sluggish' Toyota Prius would be far faster than the average car of the early 1980's in a 0 to 60 race.

Why do we need more power today?    Simply put : we don't.  People want more power but in general we do not need it. Sure its fun to drive around in a fast car with a big engine, I'm not denying that, but the idea that we 'need' more power is wrong.   Your typical subcompact or hybrid is actually plenty powerful for normal daily driving uses.


Now of course there are exceptions where more power is of real use such as heavy duty trucks for construction or towing a big boat or something like that.   But I'm thinking of the typical driver in a family sedan with over 200 horses like the 2013 Hyundai Sonata that boasts 274 horses.   Thats about 75% more power than my 2004 Camry, which is simply unnecessary.

Next time you're looking to buy a car don't get stuck in the idea that you 'need' a more powerful car.  Todays average cars have more than enough power and in fact the below average cars do too.

Personally I think the 155 hp in my Camry is just fine.    How much horse power do you think you need? 

Toyota Sienna photo by MSVG 
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December 2, 2012

Understand Your Spouses Financial Priorities

I think one common problem between a couple is that they may have quite different financial priorities and may not even realize this.    This can easily lead to tension and arguments because you both mistake how important some things are to the other.   Its important to have a clear idea of where your partners financial priorities are.    Their priorities may differ from your own priorities.   You may have an idea that your spouse considers some things more important than you but you may not have a clear idea of exactly how important they consider it.   Maybe you get into an argument about whether you should pay down a loan or put some money in the bank.  Its helpful to know if your spouse considers paying down debt to be their number one priority or if they think money in the bank should be the first goal.

Here is a simple way to get a clear picture of each others priorities : 

1. Each of you take a piece of paper and then write down your top 10 financial priorities in order of most important to least important.
2. After you've each created your lists then swap the lists and compare.

You may be surprised what your spouse considers higher priority.  Hopefully you're mostly on the same page as far as priorities but theres likely to be some notable differences.  After this exercise you should have a better understanding of your spouses reaction to some spending and saving decisions. 


I rarely delve into couples advice but I think this one is particularly useful.

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November 30, 2012

Best of Blogs for November 30th

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

PlanetMoney shares Household Debt In America, In 3 Graphs
they also point out that No, Switching To Dollar Coins Would Not Save The Government Money
I was skeptical about that statement at first.   $1 coins were supposed to be cheaper to make in the long run since they last longer.  But that benefiit as appearntly recently disappeared since the dollar bill production was improved and now bills last longer.  Still the government would benefit financially from $1 coins only due to putting out more coins than dollars and some resulting savings on the governments interest debt.  Its complicated.



I found this interesting article on How to Price Your Home For Sale – Critical Information!
by Amanda Duffy a Realtor in Georgia.   Theres a Youtube video.  

Apex continues the rental series at FMF with Real Estate 101: The Lease

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$650 in Dell Gift Cards for $450 Net

If you're thinking of a computer purchase from Dell here's one way to use your Amex card and Twitter to get $200 off..     Amex and Dell have a deal right now where you can get a $150 credit on your Amex if you spend $599 or more at Dell.com using your Amex card.   Theres also a 10% off coupon code you can use.


1. Synch your Amex card with the Dell deal via twitter and tweet the hashtag #AmexDellOffer following their instructions
2.   Buy a $500, $100 and $50 gift card and then apply the coupon code  VJ7$295NPV28MN to get 10% off the $500 card for a total cost of $600. 
3. You should get a $150 credit from Amex. 
4. Consolidate your gift cards online into one card if desired.

In the end you bought $650 of gift cards for $600 and got $150 back so the net cost is $450.   You can then turn around and use the $650 of gift cards to buy whatever you want at Dell.    Buying gift cards allows you to get $50 extra off via the coupon code. 

I saw this at Fatwallet and they have more details and discussion in the forum there.

I have not done this myself.   If you do it then I'd recommend you read up on all the details to make sure you're doing it right and not missing any details.
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November 28, 2012

Black Friday Violence is Statistically Likely

It seems like its developed into an annual tradition on Black Friday that we get to see some video footage of a violent stampede at Walmart during Black Friday.   The incidents of fighting or stampedes or other violence around Black Friday are held up as evidence for why Black Friday is bad.   There are articles like Black Friday Fights: Violence Plagues 2012 Shopping Day, Videos Surface Online   When such violence occurs the annual shopping day is blamed as the cause of the violence.   But in the larger picture one or two violent incidents during Black Friday are really not that bad, in fact I'd say if thats all that happened then its actually pretty good.   Let me explain...

According to the FBI crime report "In 2011, there were an estimated 751,131 aggravated assaults in the nation."   That means that on an average day in the US there were 2,057 assaults.  

The National Retail Federation reports that about 88 million people went shopping in stores or online on Black Friday.   They don't clearly break apart who shops in stores versus online, but it seems at about half or more the people shop in stores.   Lets estimate then that 40 million people are in the stores.   Thats about 12% or so of the US population.    If they only spent 1 hour in the store at least then thats about 6% of their waking hours spent shopping.

Based on the daily average of 2,057 assaults and a guesstimate of about 40 million people spending an hour in stores on Black Friday then if assaults are proportional to time across the population I'd expect we'd see about 15 assaults among Black Friday shoppers just based on statistical averages.   I'm sure people spend more than 1 hour shopping though so it would likely be higher.

I bet you that ever day in the country we have 10 times as many people assaulted in our nations bars and taverns.   But thats not news.  Yet one punch thrown in a Black Friday brawl is sure to be highlighted in the 11 o'clock news all around the country.   

Large groups of people in crowded conditions can be a risk factor for increased rates of violence.  Assaults at sporting venues are common place.   Anaheim stadium was bragging that it is safe and they only had 15 simple assaults last year during Angels games.   Attendance at Angles games for a season is about 3 million. (less than 10% of the Black Friday shoppers)  Sports stadiums can be a particularly bad place for violence particularly if you add alcohol which is often sold in stadiums.   But its not just drunk sports fans, any large group of people can see violence.   I can even find many instances of assault in churches. 

Get enough people together in crowds and unfortunately some amount of violence is almost inevitable.   Its unfortunate but it happens, whether its the shopping mall, your local bar, a rock concert or a mega church.  But none of its unusual to Black Friday.

Don't be afraid of Black Friday violence.    You're probably more likely to get punched at a baseball game.

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November 26, 2012

FREE - Christmas MP3s from Amazon

Amazon has a few free Christmas MP3s :

Follow the link : Free Must-Have Christmas Masterpieces

 Songs include Jingle Bells, Nutcracker Suite - Waltz of the flowers, Gloria in Excelsis deo and Silent Night, Holy Night.

No catch, just free music.   Probably expires soon.


I saw this one on Fatwallet

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

Entertainment books for $12.50 after Ebates

Right now Entertainment.com coupon books are on sale for $25 with free shipping.    Plus you can get 50% cashback via Ebates

The $25 price for Entertainment coupon books  expires 11/29.   The 50% cashback from Ebates may expire after today.  I'm not sure but that 50% rate may be a Cyber Monday special rate.

Make sure to check out the Entertainment website to make sure the coupons are really a good deal for your area and your shopping needs.  A lot of the coupons are buy-one-get-one-free type offers for restaurants I'm not interested in, but there can be some great deals mixed in.

Or you can wait until the summer and they'll run sales to drop down the price to $5 to $10.    I pointed this out before and then in 2012 the prices dropped steadily down to as low as 2 for $8.25
HOWEVER, one gotcha with waiting till the summer is that some coupons expire earlier.  It may be worth your while to pay $12.50 today.

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

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

November 23, 2012

Best of Blogs for Week of November 23rd

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.

edit : Oops... I was out after Thanksgiving and this mostly empty draft post got published by mistake.  -- Jim
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November 22, 2012

November 21, 2012

Harvard is Cheaper than University of California Davis (for many)

You'll often see people discussing the high cost of college and while doing so people seem to quote the most expensive colleges.   There are a lot of private schools that cost over $50,000 total for tuition, fees, room and board.    But thats just the sticker price.    When looking at colleges its important to look at the financial aid availability as well and take that into consideration.

Most students get financial aid at most schools.    Some schools have a lot more financial aid money available than others.    You should also look at the amount of aid that comes in the form of grants versus how much is in student loans.   Loans don't really reduce your cost they just help you finance the education.   You pay that money back in the end.    Its not really a great deal if a school facilitates you borrowing a lot of money to give to them.  Now this is not to say that I think student loans are a rotten deal, in fact I think they are often a good tool when used in moderation.  However when you're comparing school costs I'd focus on the free money.


To get a better sense of the true cost of  a university I'd instead look at the net cost by figuring :

Net cost = Total cost - average grant aid

So lets say you happen to live in Georgia and you're comparing Harvard with U.C. Davis.   I doubt many Georgia residents make this comparison but I picked Harvard since its representative of an expensive elite private school and I picked U.C. Davis since its just a 'typical' public university.  

Cost of attendance for Harvard is $54,496.

Lets look at the financial aid stats for Harvard from the College Prowler site

81% of students got average aid of $32,850
11% of students had loans of $4,656 average

For all Harvard students that amounts to $26,608 of aid which includes $512 in loan money.

On average Harvard students get $26,096 in free aid money.

The net amount out of pocket for Harvard students on average is $28,400

Cost of attendance for UC Davis is $54,077 for out of state students.

Financial aid stats for UC Davis

77% of students get aid averaging $12,574
47% of students had loans average of $5,259

Average total aid per student was $9,681 and $2,471 of that was loans, so net free aid per student was $7,210.

Net amount out of pocket for an out of state student with average aid amount would be $46,867


You might have figured that this is a contrived example cause I'm looking at the out of state cost for UC Davis which is a lot more than the resident tuition rate.   The out of pocket average cost for CA residents is $23,989.   Thats cheaper than Harvard, however its probably not much cheaper than most people would have guessed.    But I'm trying to make a point here and this example illustrates it.

Bottom Line:   Don't look at just the sticker price on colleges, make sure to also figure in the amount of financial aid grants available to students to find the real costs.



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November 20, 2012

FREE- 8x10 photo print at Walgreens

Currently theres a promo deal to get a free 8x10 single photo print at Walgreens.  (not valid for collage)



Order a print online and use free promo code FREE2THANK and then select in store pickup to avoid shipping.   Deal expires November 24th.   

I found the deal on Slickdeals
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November 18, 2012

Average Effective Income Tax Rate by Age Group

I saw an article on Yahoo recently where the author claimed that Uncle Sam was "taking 15 to 25 percent of the average retiree's income".   I knew that wasn't the case.   The author probably meant the marginal tax rates but the way they worded that it sounds like they think effective tax rates are 15-25%.    Thats certainly not the case.
 
So what are the effective tax rates for seniors?   What about other age groups?

Well I had to figure the numbers based on # of filers and their total incomes and total taxes paid per age group.

TaxFoundation has a page which gives all the data for 2009, they just got it off the IRS site.

Effective Income tax Rate per age group for 2009 : 

All returns 12%
   Under 18 8%
   18 under 26 5%
   26 under 35 9%
   35 under 45 12%
   45 under 55 14%
   55 under 65 15%
   65 and over 13%

This includes all filers in each age group.   Some people didn't have to file and its looking at the Adjusted Gross Income.

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November 16, 2012

Best of Blogs for Week of November 16th

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.

fivecentnickel points out you can now Get Amazon Prime on a Monthly Basis

Vanguard tells us about The 'noise' to avoid: A lesson from the muni non-crisis

Apex continues the series on rentals with Real Estate 101: Managing The Property

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November 14, 2012

Suze Orman is WRONG about 401k loan Double Taxation

In a recent episode of her show Suze Orman doubled down on her claim that 401k loans are subject to double taxation.  She said that many people had written to her to tell her she is wrong but she arrogantly brushed it off and declared that she's right and everyone else is wrong.   In her stubborn refusal to admit any wrong Suze even condescendingly assumes that anyone arguing against her is just trying to rationalize their own use of 401k loans.  

I'm here to tell you that  Suze is wrong about this pure and simple.   I do not have a 401k loan nor do I plan to take out a 401k loan.

You are not subject to additional taxes and your tax bill does not increase as the result of a 401k loan.

You are not subject to additional taxes and your tax bill does not increase as the result of a 401k loan.

I said that twice cause its important.

There are various explanations on the web about why Suze is wrong and there is no double taxation.  

Note : I'm not saying 401k loans are a good idea in general.  Usually you should avoid taking a 401k loan.    The point I'm making is simply that the 401k loan does not amount to double taxation.  


I think the best way to illustrate how there really isn't any double taxation is to compare the actual taxes paid on a 401k with and without a loan.   If you have double taxation from the 401k  loan then your taxes should be higher right?   It isn't.

Lets look at 2 scenarios:

4% loan rate and 8% investment growth

Let it sit -
I have $25000 in my 401k today.   I do nothing at all and let that money sit in my 401k for the next 25 years.  With annual compound growth of 8% the balance will grow to $171,211.   In 25 years lets say that my marginal tax rate is 20%.   I pay taxes of $34,242.

Take a loan-
 I have $25,000 in my 401k.  I decide to take out a loan for $10,000.   I pay 4% interest and pay back the principal in 1 year.  The other $15,000 sits in the 401k and makes 8% interest for that year.  At the end of the year I've got $15000 x 108% + $10,000 x 104% = $26,600.   After 24 more years of 8% compound annual growth my balance is now $168,675.   In 25 years my marginal rate is 20% so I pay taxes of $33,735.

If I let my money sit it grows at 8% and I end up with $171,211 and a tax bill of $34,242.   If I take out a loan my money grows slightly slower and I lose compound growth after that so I only get $168,675 and a tax bill of $33,735.   In this fairly realistic example I actually end up paying lower taxes in the end due to the 401k loan, simply because borrowing away from my retirement under cuts its growth.

4% loan rate and 4% investment growth

Lets look at another example and assume that the money grows at 4% so its equal to the 401k loan rate.

Lets say I've got $20,000 in my 401k and I'm 55 years old.   I let it sit and it grows at 4% a year.  In 10 years I retire and I've got $29,604.

Instead lets say I take out a $10,000 loan and pay it off at the 4% rate.   At the end of 1 year I pay off the whole loan and then end up with $20,800.   Then after 9 more years I have the same $29,604 balance.  

In both of these cases my actual tax bill is going to be the exact same amount since the 401k balance is exactly the same and will be subject to the same tax.

Why is Suze wrong?

Apparently Suze is just playing a stupid shell game with your dollars.   She claims that since you repay your 401k loan with after tax dollars and then have to pay tax on the 401k after you withdrawal the money that this amounts to double taxation.    But theres a couple big flaws with this logic.  
#1 you have to pay income tax on your income whether or not you have a 401k loan so that money is already taxed no matter.   401k loans don't cause income taxes.
#2 she appears to ignore or at least doesn't mention the loan withdrawal you receive from the 401k.  when you take out a loan you are handed money which has no taxes on it.   So if I borrow $10,000 then immediately turn around and repay that $10,000 then its all untaxed money.   The only out of pocket money here is the interest you pay.  

I'm not the first to write about this and I probably won't be the last as long as Suze stubbornly obstinately sticks to her claim.

Heres at least two other people pointing out how she's wrong: 

The financial buff wrote :  401k Loan Double Taxation Myth
MyMoneyBlog covers it with Double Taxation and the Real Reasons 401(k) Loans Are Bad
and Better Example Against Double-Taxation Of 401(k) Loans




Plus of course the numerous people who apparently wasted their time to send her emails to point out she's wrong.  


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November 13, 2012

Example $100 / month Grocery Budget for One

In a comment on an old post Surviving on Minimum Wage? : An Example Budget a reader Nightvid challenged me to come up with a $100 / month food budget.    A while ago I did an  Example $5 / day Grocery Budget for One  but that was $150/month.    $100 a month is a bit more of a challenge.   But its still feasible :



Here is an example weekly food shopping list that comes out to $100/month:

1.5 gallon of milk
1 box cereal
1 loaf bread
2 cheese
7 bananas
3 frozen dinner
1 12oz pasta
1 mac n cheese
1 ramen
1 hot dogs
1 hot dog buns
0.5 peanut butter
6 eggs

Total cost is = $98.56 / week

You can throw in another buck or two to buy some condiments once in a while.


This comes out to 2503 calories, 15.1% protein

The example list is heavy on pastas and pretty light on fruits, veges.  Someone could adjust to suit.   You'd want to mix things up as well as I'm sure people don't want to eat the same stuff every week.   I'm sure you can find fault with this shopping list, it isn't necessarily that healthy and I'm sure some people will object to the food choices.   The idea isn't to get the perfect menu, but just to show an example shopping budget for a relatively low cost diet.

The prices are just off Safeway retail prices.  I didn't shop around.  No coupons used.  I used generic store brands across the board.   If you shop around or use coupons or shop for sales you can undoubtedly get cheaper prices on average with some effort.

I'm not saying that you should want to limit your grocery spending to $100/month.  But if money is tight then you could do so.

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November 11, 2012

Visualizing the "Fiscal Cliff"

An actual cliff.
So we're hearing a lot in the news lately about the so called "fiscal cliff" that the USA is driving towards with the pedal* to the metal.   So what is this "fiscal cliff" all about?    Simply put its the tax changes that are due to take effect in 2013 if congress doesn't act.   The Bush tax cuts will end, the temporary reduction in payroll taxes of 2% of income will end, ATM patches will end (yet again) and some other changes will come as well.   Some of the impact will be in increased taxes and some will be in decreased spending.

How bad is this 'cliff'?    Is the USA going to grind to a halt as our nation plummets down an abyss and then bursts into a fireball when it hits the ground?   Thats how going over a cliff works right?

The Camber of Commerce site has what they call 'A visual Breakdown' of the Fiscal Cliff.   Not exactly the visual I was wanting, but its a start.  They list the different tax and spending changes that are set for 2013.    I count up $384B in tax increases.

How does that amount compare to the federal tax revenue over previous years?

Here is the cliff as I'd visualize it :



This cliff looks more like a weak speed bump to me.

Now I am only looking at the revenue side.  There is also some impact to spending side.   But I think thats even much less dramatic.  Cutting spending from expected $3.7 trillion to a mere $3.6 trillion doesn't seem like much of a big deal.


Photo By Elsie esq.

* edit, fixed a spelling error.  I knew that 'petal to the metal' didn't look right.
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November 9, 2012

Best of Blogs for Week of November 9th

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.


PlanetMoney points out that Foreclosures Are Falling In States Where It's Easy To Foreclose

PlanetMoney also has Old People Versus Babies, In One Graph
which has a widget that shows the demographic shifts for various countries over 100 years from 1960 projected to 2060

Moneybox says You Should Move to Minneapolis

MyMoneyBlog has a tip for Costco members who have Amex cards : American Express Facebook Promotion – $25 off $100 at Costco, More

Apex continues the rental discussion with Real Estate 101: Keeping Good Tenants




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