May 31, 2013

Best of Blogs for Week of May 31st

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

DQYDJ covers Personal Finance 101

The Big Picture shares TrendSpotting: Rentaling vs Owning 
which has a very interesting graph showing the increase of renters / owners over the past 6 years


May 30, 2013

College Enrollment versus Labor Force Participation for Age 18 to 24

I've been discussing labor force participation lately.   My first look at the recent trends in labor force participation was only for ages 25 to 54.  I excluded people age 18 to 24 with the belief that people in that age range are going to college more which skews their labor force participation rates.

I got figures for college enrollment by age at the Census site.  The census has data by decade going back to 1980 and the latest numbers are from 2009 so I'll look at dates for 1980, 1990, 2000 and 2009.      I used a BLS database lookup to find the total population and the labor force size.   Add it all up and I get the charts below:

First lets look at men age 18 to 24.

Those lines seem to slope in the opposite directions at about the same rate.    In fact from 1980 to 2009 the percent of population in college was up 14% and the labor force rate was down 12%.  

Now the women age 18 to 24.

Women went to college at a faster rate.   They went from 24% to 45% an in crease of 21% of the population.   At the same time their labor force rate waffled and dropped and is down 3% net.    The trend here is a little different than for men as the college enrollment rate is up a lot but the labor force is less changed.

You might have noticed in the two charts above that if you add the college attendance rate and the labor force participation rates that you get more than 100%.    We can assume that is due to overlap with a certain group that both attends college and works.

If we add the percent in college and the percent in the labor force per gender then we get the following trends:

As you can see there, the total percent of the population working and/or in college has just recently about hit parity between the sexes.

For men I would conclude that the increased college attendance and decreased labor force are equal and opposite.    More men are going to college than joining the workforce.    On the other hand for women I'd say that rather than joining the workforce at a higher rate as is the general trend for women, more young women are instead going to college at even higher rates than their male peers.


May 28, 2013

Stay At Home Parents and the Labor Force

I recently looked at the overall trends for labor force participation for men and women for the past few decades.   That data was narrowed down to 25-54 year old group to set aside people in college and boomers nearing retirement or going into disability.    The 25-54 group should normally be the peak of labor force participation.    The trend for the past few years has been a decrease in labor force participation.   Why is that happening?

One theory I came up with is that there may be more people staying home to raise their kids instead of working.   As more and more women work full time, I've heard that theres been somewhat of a reverse in trends with more women deciding to stay at home to raise their children instead of working.   I've seen this called the 'opt out revolution'.    At the same time with more women working there is also more men who are becoming stay at home Dads.   

I decided to check out this theory and see if there has been a change in the number of stay at home parents and what impact that might have on the labor force participation rate.

More Stay-at-home Dads

A Boston College study 'The New Dad : Right at Home' from 2012 talks
The BC study also said specifically that "This translates to an increase of at-home dads from 81,000 in 2001 to 176,000 in 2011"    Thats a NET increase in SAHDs of +95,000.     From '01 to '11 the population increased from 59.5M to 61.5M.   Therefore the % of SAHD went from just 0.13% to 0.28%. 

Thats an increase of 0.15% of the male population opting to be SAHDs.

 More Stay-at-home Moms

The Census report Historical Changes in Stay-at-Home Mothers : 1969 to 2009 has data on the number of SAHM over the decades.   Table 1 on page 24 shows the total number of SAHM and other mothers over the decades.    In 1999 there were 5.2M SAHM's and by 2009 the number had increased  to 5.7M.   Thats an increase of 500k SAHMs.      During that period from '99 to '09 the population of women age 24-54 went from 60.1M to 63.4M.   Therefore the % of SAHM went from 8.65% to 8.99%.

That gives us an increase of just about 0.34% SAHMs.

Is 'opt out revolution' real?

A slight side note here.   I mentioned the 'opt out revolution' which is the idea that more women have decided to not work and instead be SAHM's.    The Census report I found the SAHM questions that idea.   They say that the phenomenon may be over reported or overstated by the media.   Also they point out that a higher % of SAHM's are Hispanic or foreign born.   It may be then that the increase in SAHM's from 1999 to 2009 is simply a demographic shift due to a larger Hispanic or foreign population.

Total Impact to Labor Force

Unfortunately the date ranges I have for the data for men and women are off by 2 years with '01 to '11 for men and '99 to '09 for women.    So I can't get an exact total number, but I'll just ignore that and figure it out as if the years did match and we'll pretend its close enough.   At the start of the decade we had 81k SAHD and 5,200k SAHM.   The total population was 59.5M men and 60.1M women.  That gives a combined stay at home parent % of 4.4%.    Then at the end of the decade there were 176k and 5,700k SAH's and 54.6M +| 63.4M population.   That results in 4.7% population.    

The total increase in stay at home parents over the decade was about +0.3%.

Now if you look at the same period roughly 2000 to 2010 then the overall labor force participation rate dropped from 84.4% to 82.4%.    Thats a 2% decline in the population thats in the labor force.

We could conclude then that about 15% of the people who left the labor force are now staying at home with their kids.    That doesn't account for much of the population that is no longer in the labor force but its a factor.

What Caused it?  Was it choice or not?

The data shows that there are in deed more stay at home parents and that number has grown faster than the population.   However we don't know what caused what.    Its possible that individuals decided that they did not want to work, quit their jobs and dropped out of the labor force to stay home with their children.   Its also possible that individuals lost their jobs due to the poor economy, struggled to find work for 1-2 years, finally gave up and are now staying at home with the kids.   Or maybe its just shifting demographics like the Census report pointed do more Hispanic and foreign born mothers.    The statistics don't tell us the "why" of the change.   


May 26, 2013

Considering Energy Use When Shopping for a TV

While browsing at Costco I notice that most of the TVs now seem to show their energy usage guide.   The numbers don't seem very high and are usually around $25 a year ballpark.   It seems like a pretty small figure compared to spending $500-$1000 on a TV.    However the amount of electricity used by TVs should not be ignored when comparing models.   If you add up the electricity cost over a 5 year lifespan the differences between models can be significant. 

To illustrate the point I grabbed the retail prices and electricity costs for a few TV models off the BestBuy website.   I then figured the NPV (Net Present Value) of purchasing the TV at the advertised price and the energy consumption over a 5 year period.   I used an arbitrary 4% discount rate for NPV.

Here is a selection of 55" TVs :

Brand Tech Retail Energy NPV
Insignia LCD $600 $47 ($786)
Haier LED $649 $24 ($731)
TCL LED $700 $15.5 ($742)
Vizio LED $800 $16 ($840)

The LCD based Insignia model is the cheapest to buy at just $600.   However if you figure in 5 years worth of electricity costs then the LED based Haier model is cheaper in the long run.   Another detail to notice is that between 3 different m manufacturers we see a fairly significant spread of energy costs among the LED models.   The costs ranged from $15.5 to $24 per year for the same size and technology.   You can see a pretty large difference in energy use between brands.  

And here are some 50" TVs:

Brand Tech Retail Energy NPV
Panasonic Plasma $500 $26 ($597)
TCL LED $530 $10 ($554)
Insignia LCD $550 $39.00 ($702)

In this case again an LED model has the lowest NPV but not the lowest Retail price.    The plasma from Panasonic is cheaper to buy but has higher electric use.

In both examples I looked at buying the cheapest TV would result in higher overall costs once you figure in the cost of electricity.

Keep in mind these are just examples to illustrate the point.   You may do better overall with a bargain sale price on a Plasma model.   But the point is to look at both the initial purchase price cost of buying the  TV as well as considering the long term energy usage costs.

It should be pointed out that the energy guide figures are based on 11¢ kWh electricity rates and 5 hours of daily usage.   Your electricity cost and viewing habits are likely to vary so you should probably adjust the figures to match.

Bottom Line:   Don't ignore the energy consumption for large screen TVs.   Paying a little more for a more energy efficient model can save you in the long run.

May 24, 2013

Best of Blogs for week of May 24th

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 asks Can You Really Make Money Taking Online Surveys?


May 22, 2013

Recent Labor Participation Trends for Men and Women aged 25-54

Recently the Planet Money blog wrote asking Millions Of Americans Are Leaving The Workforce. Why? its a good question.   If you read their article you can see they split out the workforce by age groups.    First they break out the people over 55 years old.   Labor force participation for older Americans is actually increasing and its up since the recession.  Lets presume baby boomers failed to save adequately for retirement or lost a large % of their retirement savings and are 'forced' to work longer.    At the other end, they look at the younger group from ages 16 to 24.   That group is working less but they chalk that up to more and more and more of us going to college and not joining the workforce right away.  That sounds credible.   Then they end with the rest of the labor focusing on the group ages 25-54.   Lets look at that group...

Take a look at the following two graphs:


Both of those are taken from the site.   Look at the overall trend for both of them.   First in the top graph you can see that the numbers basically flattened out around 1999 and have been in a slightly downward trend since then.     In the second graphic you can see a pretty steep descent the entire time with some marginal bouncing around.

Lets plot the graphics again and show a trend line over time.


The trend line on the first group is pretty obvious there.  The blue line deviates some from the long term trend but not too much.    What the red line is doing in the second graphic is a bit less clear.  The overall trend is upwards but it looks like it may have peaked around 1999 and may be trending downwards since then.  Lets look again at the red line with a polynomial trend line:

This shows more 'hill' where the peak has been passed.    The red line is on a downward trend from 1999 onwards.   In fact for the past decade or so the red line has been in a similar trajectory to the blue line.

Lastly lets compare both lines from the period from 1999 to 2013:

Well there you go.   Now looking at the past 14 years we can see that both lines are quite similar in the trend.   They are both down about 3 points over the period and they flow roughly the same fluctuating pattern.

If you haven't figured it out yet, the red line is for women and the blue line is for men.  

I'm showing just ages 25-54 to filter out the impact from young people in college and older people transitioning into retirement.    I'd call ages 25-54 the 'prime' labor years.     

Looking at the longer period from 1984 to 2013 we can see that the labor participation rate for men is down about 5% and the rate for women is up about 6%.  

If we break it into different periods before and after 1999 we see different trends.   From 1984 to 1999 the labor rates of men and women were going in opposite directions.   We had more women working and fewer men.     Then starting in 1999 the labor participation rate of both men and women started to decline at a similar rate.     Or looking at it another way you could say that women joined men in leaving the workforce.


May 21, 2013

My Family's Track Record with College

My generation is the first generation in my family to really go to college.  We've had mixed levels of success.

In my parents generation only one person went to college.  My mother got a two year degree from a bible college.  My mother was mostly a stay at home mom but she did work later when my sister and I left the nest.  I'm not sure if that degree helped my mom in her jobs or not.  Nobody on my fathers side went to college at all so my mother was the lone exception.

In my generation myself and four others went to college.  Here's our history with college success or non-success (I won't label them with names, but just refer to them by numbers) :

#1. Did not do well in high school and did not go to college.   = high school diploma
#2. Went to college on a merit scholarship for maybe a year but she did not apply herself and then dropped out. = maybe 1/2 to 1 year of college

#3. Went to college full or part time over one or three years and eventually dropped out to work full time and get married. = probably 2-3 years of college
#4. Obtained a professional degree in the health care field and has had a good job ever since then = professional degree

#5.  Got a bachelors in a very competitive field and then realized there were zero job opportunities out there and then later got a masters. She is marginally self employed in her field. = graduate degree

#6 Then for myself, I have two bachelors degrees in STEM majors and I'm employed with a good job. = bachelors degree

5 out of 6 of us went to college.
Among the 5 who did go to college : 
2 out of 5 who went to college dropped out
2 out of 5 of us who went to college benefited with good paying jobs
1 out of 5 went to grad school but hasn't substantially benefited financially from college

Thats not a very good track record.

HALF of my generation in my family made a financial mistake in going to college and either dropping out or picking a major with far too much competition and too few jobs.

Of course this is just a very small group of six people and its entirely anecdotal.  However I think the experience of my family is relatively common.

What lessons are there here?

First for #5 they did not pick a good major.   They ended up in college for around 6 years total and are not making a great income after the fact.  Overall college has not helped them financially and they'd have been better off picking a career that didn't require college or a trade that only requires a two year degree.

The #2 example was someone who simply screwed around too much and did not apply themselves.   I'm not sure what the lesson to learn from there is other than don't screw around too much in college.

For #3, I'm not sure what the solution there was either.   I think the solution may have been not to go to college in the first place.   It was not however that they weren't qualified, but it just didn't work out for them due to a combination of factors.   Sometimes things just don't work out as you planned them.  

Of course anecdotal data like this doesn't really mean all that much.   But I think theres good examples of how college may be a poor choice.  Whether you're not mature enough to work hard, or if you pick a bad major choice or if life simply takes you another direction.    WE also have examples of where college has been a great choice for myself and one other.  WE obtained high demand degrees and have had gainful employment with good incomes ever since.


May 19, 2013

How A Highway Spending Act Magically Made Private Pensions Healthier

My wife has a pension from a previous employer. Its not much of a benefit because the length of employment wasn't very long and she's many years away from retirement age.  But because she is vested in this small pension benefit she gets the pension plans annual funding notice.    The notice came in the mail recently.   In 2011 the plan was only funded about 80% and then in 2012 the funding went up to 100%.  

You'd think thats awesome right?   I assumed that the company must have done a great job with the plan assets or added funding to the plan to beef up its funding level.   Its now 'fully funded' and can pay its liabilities.  Great job.   Wait a second.   Reading past the funding liability table I see the statement said something about law changes and implementing changes from something called 'MAP-21'... yadda yadda... todays low interest rates... blah blah... allows the plan to use average interest rates over the past 25 year period... etc.    Hmmmm...   So whats that all mean?

First, what is MAP-21?

MAP-21 is the short hand name for the 'Moving Ahead for Progress in 21st Century Act'.   And that name really tells us nothing.  At least it beat out the marginally less popular 'Moving Back to the 18th Century Act'    The MAP-21 act is a transportation spending bill.   So whats that got to do with our pensions?    Well to pay for the highway bill they had to balance the books so they threw in a couple pension changes that actually raise tax revenues.  Bear with me...    The changes made it so that employers would have to put less money into their pensions and because the pension contributions are tax deductible that would result in higher tax revenues.   So naturally your pension is now better funded... If you aren't confused yet then you may have a career ahead of you in the D.C. area.  

OK So WHY is the Pension BETTER Funded?

The key provision in MAP-21 related to pension funding was a rule change that allows pension plans to use an average interest rate over the past 25 years instead of using current interest rates.

Todays interest rates are really really really low.  (If you hadn't noticed).    Pension plans have to figure out their future liability based on various assumptions and several variables and one of the major variables is the prevailing interest rate.     Say for example that you want to go buy an annuity from an insurance company today.   It will cost you more because interest rates are low.   For the same reason liabilities from pensions are higher when interest is lower.   (at least thats one way to explain it.)    In low interest rate environment the pensions look like they have higher liabilities because of the impact that interest has on the projections.   When interest rates are low the liabilities are higher and when interest rates are higher the liabilities are lower.  

Up until the MAP-21 rule change pensions were having to use todays very low prevailing interest rates (2 year average) and that made their projections worse.   With the MAP21 rule change they can now use an average interest rate from the past 25 years which is a higher interest rate.  Because the rule change makes liabilities lower the funding level goes up based on the same starting asset value.   Plugging in a higher interest rate into the actuary calculations for the pensions can result in the pension having a much higher funding level.

And don't forget that the federal government makes more money in taxes.   Its a win for everyone!  Your pension is better funded, the business has to put less money into the pension and the government makes more tax money.  Yay!  

Cynicism aside, I don't think this is a bad thing really.   In fact I think the change is pretty reasonable and makes more sense.   Its a little silly to base pension projections on the most recent 2 year average interest rate to begin with.  Pension liabilities last 20-30 years into the future and clearly the variables involve will fluctuate over 2-3 decades.  It makes a lot more sense to plan for a number that is a 25 year average if you're planning for a 25 year time horizon.

The Pension Rights Center covers the topic with their discussion of Pension Provisions in H.R. 4348 – Moving Ahead for Progress in the 21st Century (MAP-21) Act

The Society for Human Resource Management also explains it in their President Signs Pension Funding Relief Measure


May 17, 2013

Best of Blogs for Week of May 17th

The Big Picture discusses the impact that 'to big to fail' has on the credit ratings for the big banks with Advantage: TBTF

MyMoneyBlog lists the Top 10 Frugal Fruits: Which Fruits Offer the Most Nutritional Value Per Dollar?


May 16, 2013

Free Giveaway Contest Ends Tomorrow

Just wanted to remind folks that I'm giving away some free macaroons courtesy of Sucré.

If you haven't entered yet the please do.   The contest will end Friday afternoon.


How Much Gold Is There in the World?

This is a topic more of curiosity than any real practical use.   Recently I saw someone quite a figure in the Trillions of dollars to describe the total value of the gold in the world.   The number they cited seemed awfully high but I wasn't sure so I wanted to find the actual figure and confirm or deny it.

The article How Much Gold Is There in The World? at CoinWeek asks and answers the question by saying theres 5 billion ounces (or 158,000 tons).   But lets find more sources:   This article from DNAIndia says the total inventory is 5 billion ounces so they agree.   However a page at GalMarley says its 120,000 to 140,000 tons  (3.8 to 4.4 B oz) above ground.    The last source looks a little dated and I'm more willing to trust the 2 other sources that say its 5 billion oz.  While none of these sources are really what I'd call the authority on the question I at least have a couple sources that are citing figures that agree.  So I guess I'll just trust that.

Did you know the US Mint makes
gold coins of First Spouses?

Best estimate based on reports is that there is about 5 billion ounces of mined gold in the world.

Today we can see at Kitco that gold is trading around $1,470 per ounce.    That means that in total the value of the gold in the world would be about $7.35 trillion dollars based on current spot.   Of course that figure will range up and down on a daily basis based on the volatility of the market.     Just this year the spot price of gold has ranged from $1380 to $1693.   That would give the total value a range between around $6.9T and $8.4T. 

We could roughly say that based on recent gold prices the total value of the worlds gold is around $7-8T.

A lot of the worlds gold is owned by governments and their central banks.    The USA treasury holds over 8000 tons of gold.    The Treasury site publishes their current gold inventory.   Over half of the total or 4600 tons of the nations gold is in Fort Knox.   The US gold holdings are about 5% of the total in the world.   Other nations reserves hold at least 20-25% of the total gold inventories.   The GalMarley site claimed that 70-80k tons of the worlds gold (over half the total) is in the form of gold jewelry.   I can believe that.   The remaining 20% or so of the worlds gold would be in the form of gold coinage or privately held bullion.   I'm sure theres also some amount of gold in industrial purposes somewhere in the world but I'd have no estimate on that.   Industrial uses are probably a small % of the total since gold is so expensive.

 Photo from


May 14, 2013

Credit Scores by State : Lend to Minnesota but Not Nevada

I was looking for information on credit scores and found a page on Cardhub that has the average credit score by state.  Cardhub indicated that the source was Experian but I followed the link and I don't see the state averages on Experian currently but they might have removed them.

The Experian site does have a full list of average credit scores by major cities for 2012  and 2011 numbers which are also interesting if you wanna look at individual cities.    

Note the numbers are Experians credit score called Vantage Score and not the FICO number.   The Experian numbers range from 500 to 990 so the cap is much higher than the FICO.    Oh and before Nevada residents take offense I'm just joking with that article title. 

In any case here are the average numbers per state for 2011:

Average Credit Score By State:

State Average Credit Score
Alabama 680
Alaska 691
Arizona 680
Arkansas 683
California 690
Colorado 695
Connecticut 711
Delaware 694
Florida 683
Georgia 677
Hawaii 707
Idaho 705
Illinois 699
Indiana 695
Iowa 714
Kansas 702
Kentucky 688
Louisiana 674
Maine 708
Maryland 695
Massachusetts 713
Michigan 695
Minnesota 721
Mississippi 672
Missouri 694
Montana 714
Nebraska 712
Nevada 668
New Hampshire 714
New Jersey 705
New Mexico 677
New York 699
North Carolina 682
North Dakota 719
Ohio 696
Oklahoma 685
Oregon 704
Pennsylvania 705
Rhode Island 704
South Carolina 674
South Dakota 719
Tennessee 687
Texas 670
Utah 699
Vermont 716
Virginia 699
Washington 707
Washington, D.C. 682
West Virginia 686
Wisconsin 713
Wyoming 703
US National 692

The variation there is pretty wide really.    The lowest average is in Nevada at 668 while the highest is Minnesota at 721.   Thats about +/- 30 points from the national average or roughly 5% give or take.   A 50 point swing between the best and worst is actually a pretty wide jump really.

I don't know why we'd see such large differences in scores but I bet that demographics has a lot to do with it.   For example younger people have lower scores on average so a state that has more young people will have a lower state wide average.  A high rate of delinquencies, foreclosures and short sales from the housing bust could also really hurt places like Nevada.


May 13, 2013

Giveaway Contest - Free Macaroons from Sucré

Anyone want some delicious macaroons?  

One lucky reader will win a box of macaroons courtesy of Sucré.

The winner will get a free  8 piece Signature Macaroon Collection

This doesn't have anything to do with personal finance, but who cares... free macaroons!

Contest rules :

  •  To enter please reply to this post and enter a comment.   (one entry per person please)   
  • Contest closes Friday at 3PM Pacific US 
  •  On Friday I'll pick a random number and select a winner among the commenters
  •  You'll need to provide your shipping address so Sucre can send you the macaroons.
  • Contest is open to residents of the continental U.S. only.
  • The prize is offered by Sucré 

Follow this link to leave a comment 

p.s. I'm not getting any compensation or even free food from this.   Just wanted to pass along a freebie for my readers. 

May 12, 2013

Business Survival Rates

You've probably heard someone cite a statistic like "X% of small businesses fail in the first Y year[s]".    It seems that every time I hear someone cite that 'fact' the numbers vary.   I've talked about these varying and potentially misleading numbers before.

A while back Joe over at Retireby40 cited such a statistic and I asked him if he had a source.   Turns out he did and he pointed me to the data from the BLS :

Survival rates of establishments, by year started and number of years since starting, 1994–2010, in percent

That site has a chart showing the % of businesses which survived between certain years.    The rates vary depending.   For example 80% of businesses started in 2000 were alive 2 years later, but only 74.4% of the businesses started in 2008 lasted 2 years.   I assume that shift is related to the rough economy during the recession.

While the numbers vary from year to year we can draw some general observations from the data:

About 50% of businesses last 5 years.
Roughly 1/3 of businesses last 10 years.

Those aren't exact but close enough.    In fact the 5 year survival rate ranged from 49% to 55% and the 10 year rate varied from 34 to 37%.

I'm not really sure what the BLS does to measure survival of a business.    If a business doesn't survive that doesn't necessarily mean it failed.    If I retire and sell the business does it survive?  I wouldn't think so.  What if I move out of state?    What if my business is bought by another business?   

May 10, 2013

Best of Blogs for Week of May 10th

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

The Big Picture shares State of the US Labor Market (in one big chart)
which gives an interesting view of how the labor market shifts around in a given month.

TBP also shares an interesting video showing What Happens During 1 Second of HFT?
Someone should turn that into a video game.

MyMoneyBlog wraps up his experiment Live Below The Line Challenge: $1.50/Day Lessons


May 9, 2013

How Much Does it Cost to Build a House?

A few years ago a friend of my dad had a house built for about $150,000.  He originally got a pretty wide variation in estimates and if I recall right other builders quoted him $200,000 or more.  Say you were to buy a piece of land like he did and hire someone to build a house for you -  How much would it cost?    Of course the quality of materials and the design of the house will impact the costs a lot.  

The price of home building is going to be so variable that its

not possible to set an accurate amount that would be useful across all situations.   There are too many factors that would impact the cost significantly.   Size of the house, local labor costs, local home building market, local laws, quality of materials chosen, etc.   All of these variables will impact the costs substantially. 

The National Association of Home Builders (NAHB) cited average costs for 2011.   They say the average construction costs for new homes in 2011 were $184,125 for a 2311 sq ft house.   That gives us a general rough average figure.  The numbers will vary a lot depending on where you live and the nature of the house. 

So how can you find out the cost of building a house in your area?  Again, there are too many variables to get a solid number but you could use some basic estimating tools to find a broad range of costs.   Below are 3 tools you can use to estimate home building costs.   You can then use those 3 tools to give you an estimate of the range of prices for your area.

Method #1 has a calculator that you can use to estimate home construction costs.   They will let you pick a lot of detail about the size of the house, the design, the features the quality of construction and then specify the metro area that the house is in.  Then they give all the final results of the cost broken down including the materials, labor, and contractor markup.   I first chose the middle level quality of '3' and their figures for a typical 2300 house in my area came out to $391,000 which is very high.   New construction 2400 sq ft houses in our area are selling for closer to $300,000 already built.   I ran it again and chose quality level of '5' and it came out with a more realistic figure of $217,000 which is closer to reality.

Method #2
Buildingjournal has a simple calculator that estimates costs.   They only ask metro area, exterior finish, number of stores, basement, construction grade and the sq ft size.   They say a 2300 sq ft house in my area costs about $187,000.

Method #3
One way to figure out the cost of new construction in your area is to look at what new houses sell for.   You'll then have to deduct the cost of land.   That may be a little harder to figure but you can usually find vacant lots for sale in your city and figure out the land values from that.   So for example if a new 2400 sq ft house is selling for $300,000 in my area and a similar size vacant lot here sells for $50,000 then I could estimate the local construction cost to be closer to $250,000.   Of course thats not really exact either.   A builder may have a higher profit margin or they could even be taking a loss.  

Estimating a range of costs
Given the 3 estimating methods above I get figures of $217,000, $187,000 and $250,000.    Thats just about $217,000+/- 15%.   I could also say the range is $81-$109 / sq ft.   I expect this is in the right 'ball park' for the local home building costs.

Photo by

May 7, 2013

How Much Do Bond Holders Get Back in a Bankruptcy? (on average)

When a company goes bankrupt the bond holders stand a good chance of getting back some of their principal investment.   Bonds are a form of debt and when the company goes into bankruptcy they are supposed to repay their debts as much as possible.   Stock holders on the other hand are considered owners of the company and are generally last in line to get any money and therefore usually get nothing or next to nothing.

But how much do bond holders usually get back?

I found the answer in this Standard and Poors report : U.S. Recovery Study: Recent Post-Bankruptcy Recovery Levels Disappoint Senior Unsecured Bondholders

They say : "Recoveries averaged 33% in 2010 and 2012 (through May)--significantly lower than the long-term average of 43%" 

Of course those are just the broad averages so it varies considerably.  But this gives us a general idea of the typical loses for bond holders in the case of bankruptcy.


May 6, 2013

Save1 : Save Money and Feed Children

There are a lot of sites out there that share coupon codes and promo codes for  online merchants.   If I'm making a large purchase on the internet I will often try and find a promo code or coupon.   Usually those sites are just freely sharing information and I assume they either get a commission kickback from me following their link and/or they make money of ad revenue.

A new site named has a dual purpose of both giving you a coupon so you save money and helping to feed children.   Every time you use a coupon off Save1 they provide a meal to a child in need.

Usually I just randomly find coupons online and I haven't had any preference for one website over the other.   If you're going to use sites like that then why not use one that has a charity function as well.  You get a coupon and a child gets a meal.   Good deal right?

Save1 is pretty straight forward and easy to use.   You just go to the site, search for the merchant you are interested in and applicable coupons will come up.   You then click on the 'use this offer' link for the coupon in question and thats it.  Easy.   For example, I went to Save1, searched for 'sears' and a bunch of coupons like $5 off $50 and others came up.    If theres a promo code then you may have to enter that in checkout.

For more information they have a Children Feeding FAQ and a Coupons/Offers FAQ    You can also read their Getting Started eGuide online.    Save1 is a for profit enterprise so they are trying to make an income off the site too.  Thats OK with me.    You can either pick a website that keeps all the money or you can chose to use Save1 and they'll feed a child. 

Note : This is not a paid endorsement.   However when I told Save1 that I was going to write an article about them they said they would send 100 more meals to children. 


May 5, 2013

Experiences Aren't Necessarily Better than Things

One of the commonly reoccurring themes in personal finance blogs that I've seen is the idea that 'experiences' are more beneficial purchases than 'things'.   The argument is along the lines that you will get more memorable and lasting impact from spending money on an experience than you will get from purchasing a thing.  There seem to be a few studies on this topic and various blog articles about it.  For example theres Happiness for Sale: Do Experiential Purchases Make Consumers Happier than Material Purchases? and  Happiness: No Purchase Necessary, Says Study

I can understand the idea in general that experiences can be better use of money than things if you look at the lasting happiness of the experience or thing versus the cost.   A fun vacation once a year makes me a lot more happy than making my car payment.     But experiences aren't universally better than things and you shouldn't try and look at it as some sort of universal rule.   I was going to title this post "Experiences Are Better than Things (unless you do the experiences too much or the experiences aren't fun or you really like the things)" but that was too long.

Familiarity waters down the value of things in our minds

CNN discusses one of the studies on the topic : Study: Experiences make us happier than possessions
and they point out that experiences seem better " in part because the initial joy of acquiring a new object, such as a new car, fades over time as people become accustomed to seeing it every day, experts said".   I agree with this.

When I was a kid the VHS and Beta VCR's first came out.   My family couldn't afford to buy a VCR (or likely my parents just didn't want to spend the money ).   However the video rental places would rent out VCRs.   So sometimes we would rent a VCR and a couple movies for a weekend.  I remember at the time when I was a child that when we rented a VCR it was a special occasion that made me happy.   The reason it was so exciting was that we didn't own a VCR so renting one to watch movies was special.   Later we bought a VCR (a Betamax of course) and then owning a VCR became our normal state and renting a movie was a routine thing that was no longer special.   As soon as we owned the VCR it wasn't special and we were familiar with it. 

If I took $100 and went and rented a convertible car for a weekend I'd remember the experience.   Driving around in the convertible car would be fun.   I'd look back on it and feel I really got my $100 out of the experience.  But if you spent $400 a month to lease a new convertible then drove it day in an day out for 3 years then you wouldn't have a memorable experience every single weekend you drove it.   The car would be "normal" to you and "nothing special".   You'd become familiar with it to the point of taking it for granted and not getting any special incremental enjoyment for the 87th weekend you drove it compared to the 86th or 85th.

We don't value what we take for granted

I grew in a home with a beautiful view of rolling fields and a snow capped mountain.   Because of that I don't have much appreciation for beautiful snow capped mountain views.   I distinctly remember someone pointing out how beautiful the view was from my home and me thinking at the time that it was "no big deal".   I'm sure other people would love to buy that same property and live there with the beautiful view but I spent the first 18 years of my life looking at it and so I didn't appreciate it.

You become familiar with the stuff you buy gradually over time.  They are not new and unique but are instead parts of your routine life.

Unique Experiences are Better than Repeat ones

People don't usually go on a vacation to Hawaii every day.    Many of us might only go to Hawaii once in our  lives if we go at all.   So if you look back at your life and think about all the things you did then that single vacation to Hawaii may stick out as a very memorable "once in a lifetime" experience.   On the other hand if you live in Hawaii, then a vacation to Hawaii is called "going home" and its not so unique or memorable.   

I've been to Las Vegas at least a dozen times.   I've lost count of exactly how many times I've been there but I'm sure its over a dozen.   When I go to Vegas its not new to me and each additional experience is not very memorable.   I've spent in the range of $1,000 to $2,000 on each vacation to Vegas.    I don't even remember some of those individual vacations and therefore didn't get much value out of them.   I've become so familiar with Vegas as a vacation destination that going there has less and less value.   The first trip to Vegas was very memorable and fun experience initially.   If I had gone once and not returned then I'd likely remember that one vacation very fondly and it would have a much higher value to me as an experience.   But now that I've been there enough times that all the trips blend together and are not very memorable.   I can hardly remember my first Vegas vacation and its value as an experience has declined considerably.   Now don't get me wrong I still enjoy a vacation in Vegas and don't think my time and money spent there is wasted, but it doesn't stick out in my mind as a particularly memorable experience.

 If you live in the city and take a nice drive in the country then this might be a fun and memorable experience to you.   People who live in a rural area may take that exact same drive every day of the week and see nothing special about it at all.   What you consider "a lovely drive in the country" they might consider their commute to work.

If your experiences are things you do frequently then they are not especially enjoyable or memorable and are not of high value to you.  

Some Experiences Suck

I can't say that I've ever had a horrible vacation story, but there are many vacation horror stories out there.   The closest I recall having a bad vacation was when a friend and I stayed overnight in another city to watch our football team lose miserably to a crappy team while it rained on us.   I probably spent a couple hundred dollars on that experience.   I could have stayed at home and watched my team get beat in the rain-free warmth of my home for free and had a much better experience.   I could have taken that couple hundred bucks and bought a football video game, an official team jersey, watched my team lose on TV sitting on my comfy couch and been tons happier.   OK now I'm just depressing myself. 

Of course people don't set out to pay money for experiences that suck.    You only find out that an experience sucks after the fact.  But there is always a risk that if you put your money into experiences that you'll end up with an unsatisfactory experience.   If we assume that experiences are better than things this really only holds true for the experiences that actually turn out as positive and fun experiences as we hoped they would.   An unhappy experience can stick in our memory as well as a happy experience.  You don't hear a lot of personal finance bloggers talking about their awful vacations when they were sick in bed half the trip, and it rained the whole time, and then they got stuck overnight at the airport during a blizzard, and their sullen teenager was mad the whole trip for no reason etc. when they're saying how much better experiences are than stuff.

Some of Us Like Certain Things a Lot

I have certain things in my life that I get a very good happiness / cost return on.  

Spending $2000 on a set of fancy rims for your SUV may bring you little long term joy.    Unless of course you really appreciate and enjoy having fancy rims on your vehicle.    I don't have any interest in fancy rims for my car.   But some people seem to really enjoy that kind of thing.   If spending $2000 on fancy rims brings them significant enjoyment then more power to them.   To each their own.   Each of us has our own stuff that we enjoy whether its a collection of comic books, some nice clothes, a motorcycle, what have you.

I do agree with the idea that experiences can be a better use of money than buying more stuff.   I'd rather go to Italy for the first time than buy a slightly newer car at this point or have a giant collection of DVD movies that I never watch.   On the other hand stuff isn't all bad and its certainly not generally worse than any experiences.   I wouldn't trade my big screen TV for another trip to Vegas.

I'm not sure what the goal of the message is

When people say that experiences are better than stuff, I'm not entirely sure what they expect us to do.   Do they want me to sell my car and use the money to go on vacation?  

Is the message simply that you should get rid of some of your junk?   Americans generally do have too much stuff and I think most of us can benefit by getting rid of some of our stuff.   But mostly what I'm talking about is junk and clutter.   My closet may have a bunch of old shirts that I don't wear anymore and that I ought to donate to the charity.   But that doesn't mean that I shouldn't buy any new clothes or that the experience of going out to the movies is better than a new pair of pants.

I expect the idea is that people ought to change their spending behavior and stop buying so much stuff.    I think that message can stand on its own without trying to justify it by claiming experiences are better.   There are many things in life better than excessive materialism.

To be clear I'm not saying you ought to go out and buy a whole pile of 'stuff'.    I just don't really agree with the whole 'experiences are better than stuff' thesis.


May 3, 2013

Best of Blogs for Week of May 3rd

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 talks about Homebuying Programs for Low-Income Families

DQYDJ created a Crude Oil Price Return Calculator – Brent and West Texas Intermediate
So now you can finally figure the inflation adjusted compound growth rate of those barrels of West Texas crude oil you bought back in the 90's.

DQYDJ also asks Why Don’t You Buy That Used?

The Big Pictures shares the Cheapest ETFs for Any Investment Objective

AP article via Yahoo reports that about 20% of Vegas cabbies ripped off customers Audit: Vegas Taxis Overcharged $15M to Airport


May 2, 2013

Better Planning on Driving Can Save Lots of Gas Money

This past weekend my wife and I took a trip to a store to buy an item that was on sale.  This trip ended up being 11 miles each way for a total of 22 miles round trip.   Thats about 1 gallon of gas for my car.    In total the trip cost us roughly $3.50 worth of gas at todays prices.  The store in question is on my way to work from our house.   If I had instead stopped there on my way home from work on Monday then it would have been just 0.6 miles out of my way.  That would have cost me about 10¢ in gas.   This extra trip cost us about $3.40 in gas.    It wasn't that big of a deal, it was just one trip and my wife was anxious to buy get the sale item in question before they sold out.   The sale was $50 off of an item that rarely goes on sale so theoretically getting there soon may have saved us $50. 

But what if we engaged in such trips routinely?    If we failed to plan our trips to the store like that and went there just once a month we'd be wasting $42 a year at todays gas prices.

There are two stores I often go to for groceries.   If I go to both in one trip then the total trip from home to store A to store B to home is 12.3 miles.   If I were to make two separate trips then I'd spend 9.1 miles to go to store A and 10.6 miles to go to store B.   Thats 19.7 miles total.   By combining the stores into one trip I save 7.4 miles.   That costs about $1.17 in gasoline for my car.   If I did that once a week for the weekly grocery trips then that would add up to over $60 a year.

Now lets say that my wife and I got home from that trip to the store and later decided to go out to eat for dinner.   If we didn't plan it well and went to the store in the afternoon then made a separate trip to eat out in the evening then we would have wasted more gas.  It is 6.7 miles round trip to the restaurant from our house.   Add that to the 22 miles round trip to the store and you've got 28.7 miles total.     If we'd instead gone to the store first and then the restaurant then the total would be 20.6 miles.   Thats a difference of 8.1 miles or about $1.28 in gas.   

Some of this may seem like common sense to most of us.   Of course you'll save money and time if you combine trips.   But on the other hand maybe its not so obvious how much you can save.  Its also not as easy to plan in advance unless you're really thinking about it.   Say my wife and I had gone out to dinner after that trip to the store, combining those trips isn't something I'd necessarily think ahead to do on a random Saturday afternoon.  But if you're aware of the fact that any given trip might cost you $2 or $3 extra in gasoline then you may be more likely to think ahead and combine all your trips as much as possible.


May 1, 2013

BP Prudhoe Bay Royalty Trust (BPT) Annual Report for 2012

I still own some BP Prudhoe Bay Royalty Trust (BPT) shares in my Roth IRA.   I've been trying to decide when I should sell them.

I recently got the BPT annual report for 2012 in the mail.  I like to read the annual report of a company (or trust ) to get some more details on them.

Production :   Page 16 has a history of production for 2008 to 2012.   As of 2012 the working interests of the trust were ouputting 79.7 thousand barrels per day of Oil and 5.8 of Condensate.   That works out to 29M barrels of oil a year and 2.1M of condensate.

Reserves : Page 18 says: "BP Alaska has estimated that the net remaining proved reserves allocated to the Trust as of December 31, 2012 were 75.517 million barrels of oil and condensate,"

and they say:

"Based on the 2012 twelve-month average WTI Price of $94.71 per barrel, ... BP Alaska calculated that as of December 31, 2012 production of oil and condensate from the proved reserves allocated to the 1989 Working Interests will result in estimated future net revenues to the Trust of $2,176.0 million, with a present value of $1,314.9 million."

Page 22 says : "Royalty payments to the Trust are projected to cease after 2027"

I must be misunderstanding a detail in the report because as I figure it their current production rate and reserves would mean they only have about 3 years or oil left.  


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