Wednesday, May 30, 2007

Weekend Roundup - Reuse Old Computers and Plant A Garden!

The adventures this weekend started with a couple of seeds, but it really just shows that it was a pretty green weekend.

First there was the trip to the local home improvement store (shhh don't tell HD, but I didn't go there for my stuff, even though I own their stock yipe!).

Anyway, it was a pretty good trip and about 200 dollars later I had enough supplies to nicely redo the landscaping in front of the condo. It was a good feeling once it was all done, even though it was a lot of work. The total savings by doing it by hand over hiring someone was probably easily several hundred dollars.

In addition, planted some vegetable seeds and I'm hoping that they grow nicely. My neighbor is also going to plant some vegetables so we can swap back and forth. This will hopefully save some money on salads this summer/fall. We'll see. If things go really well this year, I will probably increase my efforts next year.

I also managed to get one of the old computers in my basement working again by installing linux for free. Linux is my choice of operating systems for old computers because windows 98 is now so old and no one is maintaining it that it just isn't worth the hassle. And I've found that Fedora handles pretty much everything I need so I'm pleased with it. So far I'm 2/4 on using it on old machines. The other two machines that didn't fare well is a result of old/bad hardware, I think.

But if you have an old computer, and usually run windows, you might consider trying to get it going again using a Linux operating system. You can likely still use it as an FTP server or a file server which will give you some more space for photos, videos, etc and save it from an untimely death and trip to the junk yard.

Friday, May 25, 2007

Crossing the Line: From Frugal and Fair to Tacky and Stingy

You have to read <a href="">This week's dear prudence</a> to the end to get this question, but I totally agree here. In general, where there is a concern about how to split up a cost in a marriage, a common theme is to divide the costs proportionally to income. Similarly, there are other common schemes to avoid issues of splitting the costs of vacations and dates.

This question crosses into new territory when a divorced couple has to manage the costs of splitting up a week at the beach and letting their kids stay the whole time, plus one step child from one of the couples.

One of the two insists on a prorated schedule, but the other thinks that the first is being nitpicky. I had to include this because I feel like it is the absolute epitome of people crossing the line from frugal or fair into the realm of cheap and tacky. So here is my personal rant to this mother:

In this case, the step daughter is a friend of the other two children. I wouldn't dare to charge extra for this child just because of the fact that she is "not yours". Now if you were taking about 3 or 4 more kids, then it might be a different story. But two of the three kids there are yours.

Putting it another way, when it is your kids that are going to stay there, if they brought a friend, would you have the friend's parents pay for it when your whole family was going there? Of course not. The marginal cost is nothing except food. This means that this extra child really doesn't cost anything and you're just being tacky and stingy.

One common theme when it comes to money is you know you are crossing the line when your level of frugality puts people in an akward position despite having the money to avoid it. And if the position is awkward and inconveniences other people, then it is just above and beyond what is considered fair in my book. In this case, would you deny that kid a chance to be at the beach a few more days with her friends because of a pro-rated 40$ bucks or something like that? No, of course not. This is when frugality crosses the line.

If you really didn't have the money and needed it, that would be one thing. But that is not true here. And honestly, if you were "that close" to the edge on money, should you really be doing the vacation in the first place?

Thursday, May 24, 2007

Prosper Comeback

Well, things have turned out ok on prosper. After doing some checking up recently, I found that my loan that was late has been paid back. That is a good feeling for me because I was starting to get a little concerned since I expect only about a 5% default rate on my loans; otherwise it just isn't worth it for me.

And now that my loan got paid, I made another small deposit into my account and I've bid on another loan. And I think that will bring the amount of money I will be investing in prosper to a close for a while. I will just continue to keep an eye on the money and if there is a significant sum, I might do another loan, but I think for the next few months my focus is going to be on paying down my personal debt.

Wednesday, May 23, 2007

Get More HD?

Well, last year I decided that I'd been investing long enough that I wanted to get some real understanding of how individual stocks worked when it came to investing. I had read Jim Cramer's Real Money which was fairly intriguing, but I didn't have the time in order to really give myself over to investing stocks like a day trader. I never really felt like I would have the kind of time that Jim described in his book to make it really worthwhile.

My resulting strategy was basic: buy stocks that seem pretty good over the long, long term. Expect that there could be significant losses along the way and that during those times, it might make sense to buy more.

Now here we are, several months later and Home Depot which I bought in the mid thirties has gone up to around 40 and come back down. We're not talking a ton of money here, just a couple hundred bucks. But, does it make sense to buy more?

Here's why I'm thinking it might:

1. HD continues to pay chunky dividends. (I'm not sure how long that will continue though since profits are down  .)

2. The housing market is going to come back, eventually. The growth of population creates demand for housing virtually ensures that.

3. Lowes is taking a beating as well, so it is not a competitive issue most likely.

4. HD has been quite high in the past during the go-go days where it was splitting. And I don't think that we've hit saturation yet. The need for home repairs is a renewable market and HD is a pretty big component of meeting that demand.

Again, this is all off-the-cuff thinking without any real analysis. But when you're dealing with small amounts and it is more of a game than serious investing. I still haven't decided whether or not to pull the trigger. Right now, it's watch and wait.

Tuesday, May 22, 2007

Carnival Of Personal Finance 101 is Up!

This go around, I submitted my recent post on moving back home to the carnival of personal finance:

But I was amazed at how many great articles and posts there were in this edition. My Two Dollars wrote a post on bundled phone/cable packages that hit me squarely in the face since I had the cable guy over yesterday to fix something and he was trying to give me the sales-pitch.

I also liked this introspective post over at my wealth builder; it seems to speak directly to all of those killjoys at yahoo finance that expect their finance gurus to strike gold with some amazing new idea in every column they write.

Let me know if there were any articles in this addition that you really liked.

Friday, May 18, 2007

There's No Shame in Moving Home

One of the major things that I notice that people deal with in our society is the whole concept of when to move out and start to assert their independence financially. The funny thing about this is that there are some seriously split opinions when it comes to this issue.

Some people feel like it is important for young people to assert themselves early by making themselves financially independent of mom and dad. I personally happen to be in this camp. I've worked since I was fourteen and since I was a freshmen in college, there has never been any extended (more than 2 weeks) period in my life that I haven't worked. And for about 90% of that time, I have worked two or more jobs concurrently. Of course, this all underlines a couple of key things about my personality. I have a good work ethic. I think that hard work is good for your self-esteem, your wallet and your soul. But on top of that, I have a sense of responsibility to myself and my family.

For me, many people who are not working are not working because they choose not to. Certainly there are circumstances where it doesn't make sense for people to work. Stay at home moms, students in college with a tough course load, or medical issues are all certainly reasonable explanations for someone not working, in my book.

I generally feel that once you are sixteen years old up until you retire or are financially secure, you should have some kind of regular income from working. Even if it is just working during the summer or school break, you should start to have some kind of income. And once you graduate High School, you are in the workforce. That means you should be working (unless you are in one of the categories I've described above).

How much is enough work? I think that is the key question when it comes right down to it. Personally, I think you need to look at the amount of money that you would generally consume if you lived on your own and aim to make at least 15% more than that. And therefore, do whatever it takes (not crime though, obviously) in order to make that much money.

For those who live at home, I don't think that there is any shame in that at all, as long as you are making that extra 15% more than you would spend living on your own. Lets do some envelope math so you can see what I mean, and why I think about it this way.

Lets assume you live on your own (but with a couple of roommates). You would spend something like the following:
600/month rent
125/month utilities
140/month groceries
300/month car
90/month car insurance
50/month misc taxes/registration/etc

For a grand total of 1305. Now, you might think that you can simply make 1305 and be all set. But the reality is that there are other unexpected expenses in life like weddings, birthdays, holidays, travel, and the like. Plus, you should want to be saving SOMETHING for the future. I know, I know. You're so young....its never going to happen. But even still, just the basic expenses require a good "buffer". That 15% gives you that. This gives you a total of 1500/month net that you need to make.

That extra 15% should be going into a savings account for emergencies, by the way.

But now, what about those that live at home? Since that was the title of this post, here's the point I'm making. Too many people live at home without accurately estimating how much they'd need in order to survive on their own. This means that they are spending way more on discretionary items than they should be.

For the example above, someone whose "real life" expenses are around 1500, might be getting away with only putting out say 600 per month by just paying for their car, cell phone, credit card, gas, and insurance. But real life is something entirely different and it is a lot more expensive. In this scenario, it might be a matter of not making enough money, or it might be a matter of spending too much of what you make. In either case though, it spells disaster; moving out will never really happen because it cannot be financed.

It is a tough reality check for parents/elders with people living at home and also for people that are living with their parents.

But for some people, living at home is a great thing. For example, if you can manage to make that 1500/month and only spend 600/month on expenses and make a nice, reasonable 5% return on your emergency fund, you can expect to tuck away over 10000 dollars per year or more. And if you get into that habit early, retirement saving will be a snap, even after a move out on your own.

So, as I say, there's no shame in moving back home. The only shame is being at home, but not doing the right things for yourself and your family while you are there.

Thursday, May 17, 2007

Budgets with Semi-Monthly Pay

I remember when I used to work at a job where I was paid bi-weekly instead of semi-monthly. For those of you who are not payroll nerds like I am, bi-weekly is when you are paid every other week. Semi-monthly means you are paid twice per month. People generally think of them the same way, but they aren't. The semi-monthly people are the ones who get the short end of the stick, in my opinion.

If you are paid semi monthly, most often it is on the (1st and 15th) or the (15th and last day of the month). This means that you need to make your money last for that period of fifteen days and cover all of the bills for the next period with that paycheck. Personally, I've found that the best way to do this is using excel.

Setup a spreadsheet in excel (or any other spreadsheet application) with a column for the title of your bill.
The next column will be for the date your bill is due each month.
The third column is how much the bill is for. Obviously, this is just an estimate since you are going to see different amounts on utility bills etc, but it gets the job done.

When the first comes and you get paid, just add up all of the bills that you need to pay before the fifteenth. Subtract that from your total, and write out the bills (assuming you are above zero!). Then what you have left is your extra.

If you find that you have too many bills due in the beginning or end of the month, call your creditors and ask for a change in due-date. They will usually oblige. Since your checks are coming in evenly, its usually best if your bills come in evenly as well.

Wednesday, May 16, 2007

Stretched Thin? Five Ways To Reduce Stress

There are certain things that you just can't put a price on. For me, one of those things is my health. I am one of the *those* people who stresses out and the result is that my health goes to pot.

Currently, I am juggling about 5 projects. Some things at work, some personal stuff, and also some side projects that I do in order to bring in extra money. I am not complaining, but simply writing this post to encourage those of you out there who are work-a-holics also, to give yourselves permission to say no.

This past week I got a call from my mother letting me know that one of her friends had a computer that needed to be fixed and I could fix it for some extra money. And after some consideration, I gave myself permission to say no. I just knew in that moment that I had way too many commitments already and this would just put me right over the top when it comes to stress.

Money isn't everything; Indeed, when you are sick as a result of stress, it isn't much at all. So I said no, comfortable that the small amount of money that I would get from that job is not worth the amount of free time and added stress that it would cause.

So, this brings me to 5 things I do to relieve stress which are helping me stay on my "work extra, pay off debt sooner" track:

1. Give yourself permission to vent. It might be a spouse, loved one, friend, co-worker. Whoever it is, allow yourself to vent during stressful periods. Its only complaining if you do it every day. Once in a while, everyone is entitled to a little venting.

2. Exercise. Do it. It forces you to spend time not doing something stressful and also is great for your body in terms of releasing toxins and endorphins :)

3. Clean up. If you're like me, the tendancy is to let clutter pile up and not clean for a while when life gets busy. But when the clutter becomes ridiculous, it can be a source of stress. Keep up on cleaning to keep your stress level low.

4. Give yourself a treat. Whether its food or a fun program or a small purchase as a splurge, if you are working a ton and making good progress, small splurges are a way to keep you motivated and not angry.

5. Take 1 day off per week. That means no work at all for an entire day. Obviously, this might be balanced if you work 7 days a week during the summer and then not at all in the winter.

But for me, yardwork/housework don't count here - but the idea is to give your mind/body a break. This will make you more productive during the other six days and hopefully make you happier while you are working. If you don't take this day off, this means you will be working for at least 13 days in a row. This will make small stress seem like huge stress. And for me, its not worth it.

Monday, May 14, 2007

Should I Be Worried?

Well, it appears that I have my first delinquent prosper loan. I am wondering if I should worry. It is less than 30 days late right now and this is a person who has been paying for a little while so far. However, now I realize that if this person should decide to not pay, basically all of the profit that I have made using prosper so far is gone.

I knew from the beginning that it was a risk, so I suppose that it is ok. But it makes me wonder if it wouldn't have been better to just put the money in an ING or some other FDIC insured account from the beginning.

Hopefully it works out; if not, file under, lessons learned.

Wednesday, May 09, 2007

Retirement Question from NCN

Since this question was asked over at No Credit Needed, I figured I'd take a crack at it. Please note, I am not a financial advisor and I don't play one on T.V. -- any advice/ideas that are presented here is solely the opinion of the author. Please do your own research/consult your own accountant/financial adviser before making any decisions based on this information.

NCN asks: "Should I invest my retirement funds in ETFs, Mutual Funds, Bonds, or Individual Stocks? Depending on your answer, what should the proper "mix" be?"

In general, I would rule out Individual Stocks for a retirement fund. Retirement funds in general are long-term. And most of the time, if you are getting a stock, it is because you are thinking it will go up over the short or medium term. So buying individual stocks seems a little wierd to me for retirement planning.

So, that limits it back to ETFs, Mutual Funds, and Bonds. Again, I would avoid individual bonds and instead focus on a bond fund or ETF that represents a basket of bonds for the sake of diversification.

When it comes to picking Mutual Funds or ETFs, it would depend on the retirement vehicle I was using and my investment style. If you do a 401k, 403b, it is likely that some sort of low cost mutual fund is the best option for you if you are concerned with growth with low fees. If you are investing in large chunks once or twice or three times per year, I'd go with a low cost ETF. Funds and ETFs are available for both stocks and bonds.

Picking the right mix is a question of how much money you have and how much you plan to invest in the future and how long you intend to leave the money alone before retiring.

If you are in your 20s or 30s, you likely have at least 30 years until retirement and you are probably going to want to do somewhere about 80% stocks and 20% bonds. In your forties and fifties, it might be more like 70/30 and then 60/40 when you are in your sixties. All of these numbers are rough and can be adjusted slightly depending on risk tolerance.

In addition to having the right mix of stocks/bonds, it might make sense to consider other types of diversification. Other investments like REITs or treasuries or metals might be nice investments for small portions of your portfolio (if you have a large retirement account). And don't forget to make sure that your investing is split up among different types of bonds and stocks.

You don't want to put 100% of your stock/mutual fund portion into a single mutual fund that invests in small cap, for example. This might make your retirement fund way too volitile and risky. Instead split it up somewhat between funds that handle small, mid, and large cap as well as international/emerging markets. If that sounds too confusing, you might consider an ETF or Fund like VTI by vanguard which is an ETF/Mutual fund that automatically diversifies the amount of money invested among the entire stock market. This doesn't deal with the emerging market/international issue much, but beats having to dissect the funds yourself if it is not your favorite thing to do.

Anyway, those are my off the cuff thoughts. Hope it helps.

Monday, May 07, 2007

Paypal Has Advantages

Not long ago I signed up for a paypal account. I've used the internet for years but I didn't usually buy stuff online so I didn't find using my credit card to be that inconvenient. Furthermore, I didn't really like the idea of someone else holding on to my money. It made me nervous because paypal is somewhat of an amorphous thing. But now with the advent of internet banking, I don't find it quite as concerning.

Paypal has decent interest rates so I feel comfortable leaving some of my money there instead of worrying about transferring it around to get a good interest rate elsewhere. And what's more, paypal offers equifax credit alerts for free. Since I have become more and more aware of identity theft, it was only natural that this sounded like a good service. Sure, its an opportunity for Equifax to monitor me a little better and market more products, but I don't really mind.

I mean, its not like they don't have my information already.

As I use the service more, I will talk about it further, but for now, I am just optimistic.

Saturday, May 05, 2007

Side Income For May - What Should I Do?

When I started this blog many months ago, like most personal finance bloggers, it was so that I could keep myself accountable and also provide myself with a lasting record of how the financial situation in my life changed over time. It is not an easy journey and I realized how frustrated I was with the amount of money I had. It wasn't that I didn't make enough money. That isn't to say I didn't want to make more, I mean, who doesn't? But it simply means that I found myself unable to really feel comfortable about where all of the money was going. It was at that point that there was a bit of a breakdown and things started to change.

Over the past six months, I have made between 300-500 dollars per month of side income. But I think that the key about this money is not that I have made it, but that I have not started counting on it.

So today I just cashed another check for about 160 bucks. This is good because my business money is in good shape and I've already put as much as I wanted to put in for my Roth IRA this year (which I fund using side income), although it is far from maxed out and now I am debating about what to do next. My options are as follows: Prosper, Paypal (interest savings), Stocks (long-term, non-retirement), or Debt.

Part of me wants to put even more money on my debt. Currently I have some high interest debt out there that is at about 8%. And although it is tempting to think that I could put more money into prosper or paypal and make interest, the reality is that paypal is a losing proposition when I have debt at 8%. Because after the taxes on the paypal money, I am making only about 4%. Putting it into prosper loans is more appealing, since I've averaged about 13% return, so far. However, there is the fact that the loans might default and the money is tied up for 3 years. Given those two factors, I think that I will probably start making debt-paydown my top priority for at least 50% of my side income for the rest of this year. The remainder I will likely divvy up between loans and expenses.

Wednesday, May 02, 2007

Net Worth Tops 50K

With the amazing work that the market has done - and thanks in large part to the retirement accounts, household net worth for this month tops 50k. It sounds crazy, I know, but I am quite pleased. There is a ton of work still to do and the debt just feels like an albatross around my neck, but I think that progress is going as well (if not better) than can be expected.

Another major boost comes from the fact that I had not updated the amount of debt that is outstanding on student loans and car loans. I cannot even begin to say how excited I am that these will be paid off soon. I think that my car will be paid off by the end of the year, so that is really exciting.

If you want to see all of the gory details, you can check it out here.