November 29, 2013

Best of Blogs for Week of November 29th

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

Barry Ritholtz says you should Ignore the Black Friday Hype

PlanetMoney says Here's Who Earns The Minimum Wage, In 3 Graphs
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November 28, 2013

November 26, 2013

Value of Cost of Living Increase in an Annuity

Fixed immediate annuities are often quoted without any kind of cost of living increase.  However it might be a good idea to buy one with a increase built in to account for inflation in the long term.  I usually use the immediateannuities.com  website to get quick quotes on fixed immediate annuities but they don't have any options for inflation/COLA increase options on the annuities.

Fidelity has an estimator for fixed immediate annuity payouts.  One nice feature of their estimator is that it also gives an option to get a 2% annual increase for the payments.   I used their calculator and plugged in different ages and tested for single versus joint and with or without the 2% annual increase.

Here are the monthly payouts for an investment of $100,000 comparing different ages for 65, 55 and 45 years old as well as single versus 100% joint survivor and with or without the 2% annual increases :



65 55 45
single $594 $485 $423
single+2% $484 $371 $310
joint  $495 $427 $386
joint + 2% $390 $319 $273

That gives differences in payouts of :



65 55 45
single 19% 24% 27%
joint 21% 25% 29%

A 2% annual increase is worth around 20-30% difference in thee value of the annuity.    A higher cost of living increase would be worth more.


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November 25, 2013

FREE - 25 4x6 prints at Walgreens

You can get 25 4"x6" prints at Walgreens using promo code : NOV25FREE

I couldn't find details of the deal directly from Walgreens but the promocode is reported widely on various sites.   One site I found said the code is only good today.

I heard about this one at Fatwallet
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November 24, 2013

Most Popular Forms of Payment - Are Checks Dead?

I saw someone comment recently to ask 'who still writes checks?'     I don't write many checks any more but there are still certain services that don't take credit that we write checks for.   Otherwise our spending is mostly via credit cards so that we can get cash rewards.  I'd say about 90% of our spending is via credit card and the other 10% a mix of cash, ACH and checks.   


I got the data from 3 different Federal Reserve papers : The 2010 Federal Reserve Payments Study  and The 200 9 Survey of Consumer Payment Choice Discussion Paper  and the How Consumers Pay : Adoption and Use of Payments  All three are using the  Survey of Consumer Payment Choice.  Its only got the numbers up to 2009 so its not really that recent.  

 First the average number of transactions per consumer in 2009 :


You can see that payment methods are pretty mixed.    Cash, Debit and Credit are most of them and the top 3 choices.   Checks come in at #4 with an average of 8.2 checks per consumer each month. 

Payment choice differs based on demographics.   Younger people use different options than older people and low income differs from high income.   Here's those comparisons for the extremes :


Younger people use a lot more cash and debit and older people use checks and credit a lot more.



Low income people use cash and debit a lot more.  Higher income folks use credit a lot more.

If we compare 2006 and 2009 then we can see the trend there.  I'd assume that trend has continued with fewer checks being written, less credit card use and more debit, prepaid and ACH.



The one thing I'm a bit surprised is how much prepaid is used.  I wouldn't have guest it is that much.   5% isn't a ton but its more use than I'd have thought.



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November 22, 2013

Best of Blogs for Week of November 22nd

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

Barry Ritholtz spots  The Bubble in Bubbles
and I soooo agree with the observation.

Planet Money has an interesting observation that China's Going To Get Old Before It Gets Rich

Joe at RetireBy40 shares a list of 10 Easy Ways to Sabotage Your Finances
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November 21, 2013

My FICO Credit Score is 816

I have a credit card from Barclay and they just added free FICO score to my account.

I'm pleasantly surprised to find that my FICO is 816.


Its nice to have a score above 800.   That will help to get me the best rates on any loans.

You might notice that the image above has two notes at the bottom with factors affecting my score.  Those are the negatives in my history that keep my score from being higher.   Sometimes I've seen such comments and worried about them as if I'm doing something wrong.  But given that my score is now over 800 and I"m still getting comments like that I'm not worried.  Maybe they just have to give some reason why the score isn't perfect or what areas there are for you to improve on.

Various factors have resulted in my high score:

I've had and used credit for about 25 years.   My mother got me a store credit card when I was in high school in order to get me a head start on building credit.   I then got a pile of credit cards which I proceeded to abuse in college.

I haven't been late on a bill payment for... um... about 18-20 years maybe?   I'm honestly not sure when I was last failed to pay a bill on time.

I pay my credit cards off every month.  

I haven't had a car loan for about 15 years.

The only outstanding debt I have are mortgages.
I haven't applied for any new credit for over a year.

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November 19, 2013

I Should Have Bought a Tivo

Its now been over 5.5 years since I wrote about Why spending $700 on a HD TIVO is a good idea 
At the time I could have bought a HD Tivo with lifetime subscription for $700 total.   My Comcast DVR was running me $12 a month.   I figured the break even point would be 3.5 years.   That was about 5.5 years ago.

Then a couple years ago I wrote $449 for a Tivo with Lifetime service and Why I should have bought one 4 Years ago  My Comcast DVR was running $16 a month.   I figured I"d break even in 3 years if I bought the Tivo.   At that time you couldn't get on-demand content via the Tivo so that was one legitimate way the Comcast DVR would be better.  

If I'd bought a Tivo in 2008 I would have spent $700 and I could probably resell it for $100 today.  So that would be $600 total out of pocket cost.   In that time I've spent something around $800 to $900 on fees for my comcast DVR.   (I'll have to estimate it cause I"m not going to go try and find all the past bills and and it up even if I could.)   I would have saved myself $200-$300 total if I'd bought a Tivo in 2008.

Then the last time I looked at it 2 years ago I'd have spent $449 for one and could also resell it for $100 today.  So that would be only $349 for the past 2 years.   I've easily spent that much in Comcast fees in that 2 year period.   So my estimate of 3 years to break even was high and its only been about 2 years.

Should I buy a Tivo today?   Well of course I should.

The current Tivo Roamio box is $200 plus $500 for lifetime subscription so its once again about $700 to buy the box.   The Tivo will also record 4 shows which is better than our Comcast box.  Plus you can now get on demand content from Comcast with a Tivo.   So its the same $700 outlay for a Tivo versus now about $20 a month for my DVR and the Tivo is even better than it was 5.5 years ago.  


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November 17, 2013

How Much Are Peoples Homes Worth? (Deja Vu Version)

Funny story*.    I just had a good idea for an article :   I'd look at the values of homes in the USA and break it down into some nice charts.    I pulled up the numbers from the 2009 data from the American Housing Survey (AHS).

Then I made the 3 charts below to illustrate the distribution in home values across the country.  

THEN... I thought to myself... "hmm, have I written about this before?" and looked through my old posts.    Yes.  Yes I've written this same topic already just over 1.5 year ago.   See my article from April 2012 :  How Much Are Peoples Homes Worth? it even uses the same AHS data from 2009 since no newer info has been released.    The first charts in that old article is even identical in nature to one of the charts I just made today so I won't bother reproducing that.

So this is the Deja Vu version of that article.    Go back and read the How Much Are Peoples Homes Worth? version if you're interested.  It has the table with all the numbers and a couple charts I made.


Any way here are two new charts on the topic mixed from the same old AHS 2009 data.


and I like this one :


* ok so you're not laughing, guess you had to be there.
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November 15, 2013

Best of Blogs for Week of November 15th

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

Bargaineering asks Is renters insurance worth it?  (spoiler : the answer is yes)

DoughRoller lists 6 Key Retirement Planning Assumptions and How to Make Them



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November 14, 2013

Why You Shouldn't Use a % of Purchase Price to Estimate Home Maintenance Expenses

"A general rule of thumb is that home maintenance will cost you 1% of the homes purchase price."

Have you ever heard this rule or something similar?   It seems kind of common.   Some people might make it a broader estimate like 1-3% or whatever, but you get the idea.     When I wrote the article What does home maintenance really cost? several years ago I had cited such rules as one opinion on the matter.

But theres a big problem with those fixed % of cost rules:    The cost of the land.     

The biggest difference in housing costs in the US are based on the value of the land.   Land in San Francsico is at a very steep premium compared to someplace like say Bismark, North Dakota.  If you had the exact same house in S.F. city limits versus Bismark it would likely cost over half a million dollars more in S.F. based on the difference in the value of the land. 

OK so lets illustrate the problem here.   Lets compare two identical houses.   One is in San Francisco and costs $750,000 and the other is in Bismark and will run you $150,000.    The house itself is only worth $125,000 and the rest is the value of the land.   The little lot in S.F. is worth $625,000 and the Bismark lot is only $25,000.   All right... so lets use the 1% rule to decide our home maintenance costs.   That 1% rule would dictate we spend $7,500 a year to maintain our house in S.F. but only $1,500 in Bismark.   Clearly it doesn't cost 5 x as much to replace carpet, paint, fix appliances and maintain the roof for your house in S.F. as it does in Bismark, ND.   But using the 1% rule would make us believe so.     

Lets make the example even worse:  Lets compare a 2 bedroom condo in S.F versus a McMansion in Texas.   The Smith family buys a 1,200 sq. ft condo with 2 bedrooms in S.F. and spend $500,000.    The Jones family buys a 3,600 sq. ft. house with 4 bedrooms in Lubbock, TX for $370,000.    Following the 1% rule we'd get a maintenance budget of $5000 for that condo and $3,700 for  the  McMansion.   The 1% rule would have us believe that a 2 bedroom condo would cost about 1/3 more to maintain than a 4 bedroom McMansion 3 times the size.   Clearly thats not the case.

(note: my examples are ignoring different costs for labor and materials in different cities.  That matters but not in a way that validates the 1% rule.)

The 1% rule or similar rules based on proportion of the purchase costs of a home are skewed by the differences in land values across the nation.

The size of the house, the age of the house and its features are going to matter a lot more than the purchase price of the property.

Most houses in the USA are in the $100,000 to $300,000 range.    You can probably estimate just as well by figuring a rough $1000 to $3000 maintenance budget and do just as well as any 1% or 2% rule would give you.

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November 13, 2013

Free Shoprunner for Amex

Not too long ago I got an email from American Express offering a Free ShopRunner account.    If you have an Amex card then you may have gotten the same email.   As a benefit of Amex they are giving free Shoprunner.

If you have an Amex card then You can sign up here.

Shoprunner offers free 2 day shipping on a variety of online stores

I don't see any strings attached and it doesn't appear to be a limited trial or but an indefinite benefit for Amex members.

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November 12, 2013

Shopping Around for Cheap Gas - Don't Forget Your Time

The other day I was running out of gas and had to stop to fill up.  I usually try to find the cheap option for gas so I had a decision to make.   I know in general which stations are cheap in my area and I stick to those as much as possible.  I had two cheap options in mind.  I could either swing into the grocery store and use their gas station or I could drive a little further and go to Costco.   Usually the Costco is a little cheaper so I figured I could save some money going to Costco.   But the Costco was a bit further out of my way.   The grocery store however was really right on my way and was only a quick stop off the normal track.

I decided to go ahead and just stop at the grocery store.    I figured yes maybe Costco was a little cheaper but driving out of my way might very well cost me more in gas just to make the side trip.  

Was I right?

After the fact I calculated the actual distance I'd have to drive for both trips.  

Driving out of my way to swing by Costco would have taken an extra 2 miles.    My car averages about 22MPG so that 2 miles would have been 1 / 11 of a gallon or 0.09 gallon.    At Costco gas was running $3.10.   So driving those extra 2 miles to Costco would have used 28.2¢ more worth of gas to get there.


Gas at the Costco was running 4¢ per gallon cheaper than my grocery store station.   I filled up with 14.6 gallons so I spent $0.58 more at my grocery store station than I'd have spent at Costco. 

If I had driven to Costco I would have spent 28¢ worth of gas to drive the extra 2 miles but I would have saved 58¢ to fill up there.   That would have been a net difference of 30¢ cheaper at Costco.

Net cost difference : Costco would have been 30¢ less.

No I wasn't correct.  Driving out of the way to Costco would have saved me money even after figuring in the cost of gas to drive the extra 2 miles.

But what about my TIME? ...

When I made the decision to just stop at the grocery store I didn't consciously figure in the waste of time to drive down to Costco.    I didn't stop and think "my time is worth more than that".   My decision was just about "this gas is more expensive, but I'd waste gas to get to the cheaper option".    But I really should have considered the amount of time taken in the equation too.


Driving out of my way down to Costco would have also taken 5 minutes longer.  

 Is 5 minutes worth 30¢ to me?     I'd say yes.  That figures to just $3.60 per hour.   I have a lot better things I could be doing with my time than saving $3.60 an hour.   Even if you figure in taxes thats still below minimum wage level.

Now can I simply cash in 5 minutes of time and get 30¢?    Not really.   5 minute increments of time are hard to cash in.   But if you do this stuff often enough it adds up.   Don't think of it as just 5 minutes that would have been wasted otherwise.   Little bits of time like 5 minutes add up and if you save enough time you get an hour and then with an hour you can really put it to a better use.   Better uses for your time dont' necessarily mean working an extra hour at your job and getting paid an extra hours worth of wages.   I might instead use that hour towards some other money saving frugal tactics.

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November 8, 2013

Best of Blogs for Week of November 8th

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

Bargaineering compiled The big list of restaurant birthday freebies

Fatwallet post has a list of Amazon Subscribe and Save *filler items*
which is useful for Maximizing Amazon Subscribe and Save with 15% Discount on 5 or More Items

MyMoneyBlog discusses the new Healthcare Flexible Spending Accounts $500 Carryover

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New Amazon Mom Members Get $25 Credit For Diapers

Amazon is having a promotion right now for new members in the Amazon Mom program.

The $25 offer is a free credit for diapers.


Amazon Mom $25 diaper promotion

Note that you do not have to be a 'Mom' literally to sign up.   Dads, grandparents and caretakers are eligible as well.

If you join now you get 3 months free membership in Amazon Mom.    Benefits for the free 3 month period are :

  • 20% off diapers and wipes subscriptions with Subscribe & Save (exclusive to Amazon Mom)
  • 20% off other family essential subscriptions when 5 or more Subscribe & Save items arrive on your monthly delivery day (exclusive to Amazon Mom)
  • FREE Two-Day Shipping on millions of items with Amazon Prime
 
See the Amazon site to read more about Amazon Mom



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

November 6, 2013

Most American Homes Have 3+ Bedrooms and 2+ Bathrooms

If you've been wondering to yourself how many bedrooms and bathrooms a typical American home has then today is your lucky day.

The American Housing Survey for 2009 has a lot of information on American homes.  Buried in their data in Table 1-3 is information on the number of bedrooms and bathrooms in homes. 

I pulled the numbers and here is the information presented in pie charts :



and



So over 60% of homes have 3 or more bedrooms and half of homes have 2 or more bathrooms. 

OK OK ...you caught me.     I'm probably technically wrong to say that most homes have 3+ beds AND 2+ bathrooms since that isn't really captured in the data and we don't have 100% overlap between the 2+ bathroom homes and the 3+ bedroom homes.  But close enough.

Now you know.

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November 3, 2013

The Probability of Becoming a Pro Athlete

Most people probably know that very few people end up with professional sports contracts.   Most people play sports as kids and very very few people end up as pro athletes.    But what are the actual probabilities? 

NCAA website has a page on it breaking down the total number of people who play sports in high school, in college and then in pro leagues.   The % of people who start in high school sports and then end up in pro sports are as follows :


Mens Basketball 0.03%
Womens Basketball 0.02%
Football 0.08%
Baseball 0.51%
Mens Ice Hockey 0.10%
Mens Soccer 0.03%


I'm actually surprised that baseball is that high.  But there are a lot of minor league teams and those jobs pay almost nothing.  So getting into 'pro' baseball via a minor league may not mean all that much.     Ice hockey is higher than most but there are not many kids who actually play ice hockey at the high school level since the facilities aren't as wide spread.   I think football is higher than basketball or soccer probably because the NFL teams have so many players on their rosters.

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November 1, 2013

Best of Blogs for Week of November 1st

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 Vanguard Managed Payout Fund–A Simplified Strategy for Retirement Income

Planet Money shares a health insurance quiz Confused About Health Insurance? Take Our Quiz!
I got all 5 questions right.   Apparently less than 14% of people can answer them all correctly.

Also see the more detailed study report from the academics who created the question
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