Six Questions on Finances

Six Questions to Help Determine Your Financial Health

Excerpt:

1. How confident are you that you could come up with $2,000 if an unexpected need arose within the next month?
2. Have you ever tried to figure out how much you need to save for retirement?
3. On a scale from 1 to 7 (where 1 = strongly disagree and 7= strongly agree), how strongly do you agree or disagree with the following statement: I have too much debt right now.
4. Suppose you had $100 in a savings account and the interest rate was 2% per year. After five years, how much do you think you would have in the account if you left the money to grow?
5. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, with the money in this account, would you be able to buy…
6. Do you think the following statement is true or false? Buying a single company stock usually provides a safer return than a stock mutual fund.

Comment: This week we had to replace a motor-mount on our Buick. Another question: If someone gave you $ 10,000 what would you do with the money?

Image source

Investopedia

Forbes Investopedia

Comment: Investopedia is a helpful site for investment terms and topics. Unfamiliar with this acronym: CDO? Or "ad valorem"? Investopedia has the answers. (Eg. The $ 500 car article has the term "ad valorem")

Mint: One look at multiple accounts

www.mint.com

Mint: Lifehacker Screenshot Tour

Mint: Photo gallery

Comment: I tried this today and connected with 2 bank accounts and 2 credit card accounts. Pretty impressive!

Moneydance

Moneydance

I installed Moneydance on the MacBook tonight. I've been using this personal financial manager for 2 years on my Suse 9.2 desktop. I had an earlier version and took advantage of this opportunity (new computer) to upgrade and import the files from Linux.

It was straightforward:

1. I exported 2 years of finances to a QIF file
   
2. I emailed said file to self and shut down the Linux box
   
3. I downloaded Moneydance to the Mac and registered the product
   
4. I imported the QIF file
   
5. And set up the on-line banking (Wells Fargo)
   
6. It went smoothly and all is well.
   

Moneydance is a cross platform financial product: Windows / Linux / Mac. I like it because it performs faster than Quicken. It does not have all of the functionality of Quicken but has more than I need. Moneydance uses the OFX (Open Financial Exchange) format for financial institution connectivity. Pretty slick .... check it out! Here's a nice comparison of financial packages

Imagine a butcher making sausages

The American Dream unravels for poor and rich alike

Comment: If the subprime mess finds you confused, don't be surprised. I was (yes it was a long time ago!) an economics and finance major (University of Cincinnati, 1971) and I find it confusing. What's a collateralised debt obligation (CDO)? This article explains - it's like butcher making sausages!

Excerpt:

Their broker urged them to get on the property ladder before it was too late, assuring them that soaring house values would soon provide a tidy profit long before the initially low interest rate of the subprime mortgage he'd arranged for them took a significant hike upwards.

Comment: There is a lot of presumption in the above: soaring home prices, tidy profits, etc. This article is not about butchers or sausages!

Prosper.com - More

I'm still interested in micro-lending and peer to peer leading. A book about.

Cars: Buying Used Versus New

Buying Used Versus New

Conclusion:

The cost of owning and operating a used car will be fifty percent less than that of a new car, primarily because the tremendous depreciation that occurs in the first year of ownership is no longer an issue. Also, the overall cost is much less because there are no financing fees, and operating expenses, often even repair costs and insurance rates are lower. Indeed, price is the primary reason most people consider buying used cars. At the same time, with the increased quality of cars in general, the excellent well-maintained cars coming off leases, and dealer used-car certifications, pre-owned cars are becoming a great value.

Charles Schwab on "democratic capitalism"

Talking to Chuck

Excerpt:

When Mr. Schwab, or "Chuck," as nearly everyone calls him, opened his first brokerage office in 1971, the stock market was pretty much the exclusive sandbox of the richest 5-10% of Americans. Today, thanks in no small part to his company's financial market innovations, investing has been thoroughly "democratized," as he puts it, with more than half of working class adults now owners of stock.

----
Mr. Schwab describes the Bush administration's capital gains and dividend tax cuts as exactly the right prescription for the ailing stock market after the dot-com crash in 2000-2001. Those tax cuts, of course, are under constant assault by Democratic presidential hopefuls and the Democratic majorities in Congress.
What would be the stock market response to repealing them? "Oh, I think it would probably cost the market 5% to 10%," he predicts. "That may not happen on a single day. But it will certainly suppress prices. And the market is already anticipating these higher tax rates," he assures me, which means stock prices are already being suppressed by tax uncertainty.

------
Mr. Schwab believes that Americans now live in an underappreciated era of prosperity. "Just drive into any Wal-Mart parking lot and it's just loaded with people, and they're just delving into all of these products that are so cheap. I went yesterday to Best Buy to get a CD player, I looked at the price, and I looked at this thing, and I said, how could it be any good at 29 bucks? I mean, there must be a catch here. I've got to try this thing. Twenty-nine dollars for this incredible CD [player], with earphones and all the things I love to listen to."

-----
"The wealth creation potential of this country is unbelievable; and it's going global," he says excitedly. He insists that one of the best policy changes in Washington in recent years was the Pension Protection Act of 2006, which provided for the automatic enrollment of workers into 401(k) plans. This is going to turn a generation of 20-25 year olds into investors, he says. And he predicts that workers at firms with 401(k)s will become acculturated to saving, and this will vastly expand the investor class in America.



Comments: Read the full article. I found his comments on Sarbanes-Oxley interesting. In sum: hurts small companies! Charles Schwab Investments.

Financing a new car

From the Motley Fool:

Financing That New Car, Part 1

Financing That New Car, Part 2

Two good articles. I add this advice:

1. Arrange financing before the sale. A good strategy is to put $ 100 to hold that car of your dreams, and walk away and arrange the financing. Dealers will normally hold a car for a couple of days with just a fully refundable $ 100 check!
   
2. LendingTree.com is a great way to get a car loan. We've used this service in the past. My one time with LendingTree.com ... we walked into a car dealership to buy a new car. The dealer offered me a certain rate. When I told the dealer I had a lower rate from LendingTree, the dealer bettered the LendingTree rate. We also used LendingTree.com for our last home refinance!
   
3. Open an account at a local credit union. Here in the Twin Cities we have The Postal Credit Union. Open the account well before you want a loan. You'll get a good rate on deposits and build a relationship that will enable a reasonable car loan.
   

Costly "free" credit reports

Costly "free" credit reports are everywhere

Comment: Watch out for the pseudo & spurious "free" credit reports. There is one really free one (a featured link on this blog!) and here it is: www.annualcreditreport.com!

Excerpt:

After nearly a decade of bickering, Congress in 2003 finally granted every American the right to a free peek at their credit report each year. Now dozens of Web sites – many of them either owned by or affiliated with the major credit bureaus -- are hard at work tricking people into paying for that free report.

Search for "free credit report" on the Web and you will find pages and pages of Web sites offering free credit reports. All but one, however, charge for those “free” reports and place all sorts of conditions on purchases. One site, for instance, requires enrollment in pricey credit monitoring service, which can only be canceled online after precisely 23 days. Another automatically enrolls users in a discount travel service. And some hint that the real free credit report site established by Congress -- AnnualCreditReport.com -- isn’t all it’s cracked up to be.

Additional comments: Its a good thing to check one's credit on at least an annual basis. K and I use a pay service - www.myfico.com - that has quarterly reporting and fraud detection. Helpful How Stuff Works - Credit Report article!

Which card - debit or credit?

The 15-minute tip: debit or credit?

Comment: We never use a debit card for most of the reasons stated in this tip.

Financial advice for Graduates

More Advice Graduates Don’t Want to Hear

Your Money
More Advice Graduates Don’t Want to Hear
By DAMON DARLIN
Published: June 2, 2007
Divert 10 percent of your income to savings; ignore raises and put them into savings, too; learn to cook; and skip the lattes.

Good advice on marriage:

Fine feedback, indeed, and my wife’s counsel reminds me that I should have added one other bit of advice: find a partner and stay together. Study after study show that two can live more cheaply together than each alone and that divorce is the great destroyer of wealth.

Comments: Save early, skip non-essentials, etc. See his comments about lattes. My wife was telling a co-worker about our relatively expensive coffee maker (see earlier posting about the Bunn A10), and this co-worker confessed that she bought three lattes a day! She decided to purchase a $ 1,200 Italian coffee maker and fund it by skipping the thrice daily lattes!

Selling a car

I'm selling my Saturn to my daughter in July and I'm trying to figure out the necessary steps.

I think (but don't know) that I should have a "Bill of Sale" or some kind of purchase agreement. Has anyone been through this process before that could provide advice?

I've been looking at these websites that provide legal agreements:

1. www.carcontracts.net
   
2. www.uslegalforms.com
   

The first looks a little simpler, you complete the form on line and print it out; the second is a Word document that you download.

Questions: Is it this easy?

1. Bill of Sale or Purchase Agreement
   
2. Payment
   
3. I sign title and provide it to my daughter
   

Do I need a notary? Answer="no".

Any thoughts or advice would be appreciated.

---

New information:

Transfer of Ownership - Minnesota Titled Vehicles

Car Registration & Titling

A Sea of Debt

Image from: http://www.adamwilson.info/seaofdebt.htm

A Sea of Debt, BY TONY ALLISON

Excerpts:

Outwardly, the global economy has never been stronger. Historically however, economic excesses are praised and welcomed as the bubbles expand. Everything is just wonderful until one day it isn’t. But then it is one day too late. The tipping point is unknowable of course, but when it arrives, the markets just might react too quickly for an investor to calmly ponder his or her next move. Debt of this magnitude is like a tattoo; fun to have at first, but one day you realize it’s all a huge mistake. And tattoo removal, while painful and expensive, may be much easier than eradicating a debt burden that is on an exponential growth curve.

The solution is not to go the ostrich route and ignore the problem, but to take prudent action while you go on about your life. The drill should be familiar. While Uncle Sam can’t get out of debt, the average citizen would be well advised to do so, or at least lower one’s debt profile. Next would be to invest in areas that will mitigate against rising inflationary trends, such as the natural resource sectors and other tangible assets. Thoughtful, ongoing preparation is the key. It’s somewhat analogous to getting punched in the mid-section. If you know its coming and prepare yourself, the punch may hurt a bit, but it’s manageable. If you are totally blind-sided, you end up writhing on the ground, gasping helplessly for oxygen. If you believe inflation will be a major issue in the years ahead, now is a good time to get started on protecting yourself.

Noting the aforementioned wisdom of Warren Buffett, when the great global tide of liquidity finally ebbs into reverse, make sure you are one of the forward-looking swimmers dressed for the occasion.

“No generation has a right to contract debts greater than can be paid off during the course of its own existence.” George Washington to James Madison, 1789.

U.S. NATIONAL DEBT CLOCK

Excerpt:

The estimated population of the United States is 301,889,062
so each citizen's share of this debt is $29,219.27.

The National Debt has continued to increase an average of
$1.38 billion per day since September 29, 2006!

Comment: As one trained in Economics and Finance, the national debt concerns me. Our politicians do not care about this!

Will your career pay for your student loan?

‘Top Chef’ Dreams Crushed by Student Loan Debt

Excerpt:

But would-be top chefs face a challenge that most lawyers, engineers or nurses do not: few jobs in their chosen field pay enough for them to retire their student loans. As a result, as many as 11 percent of graduates at some culinary schools are defaulting on federal student loans. The national average for all students last year was roughly half that, at 5.1 percent.

Although the restaurant industry is expected to create two million new jobs in the next decade, the Department of Labor reports that in 2005, the latest year for which data were available, the average hourly wage for a restaurant cook was $9.86.

Comment: The article is really about "Chefs' Schools". Of interest to me because: we have visited such a school with one of our children, one of Kathee's co-workers went to Chef school (and now works in Information Technology), and a friend of one of our kids is a Chef. But the article highlights one of the dangers of student loans: will one's career enable the retirement of the student loan debt? So I file this under Economics.

New Century, Biggest Subprime Casualty, Goes Bankrupt

New Century, Biggest Subprime Casualty, Goes Bankrupt

Excerpt:

April 2 (Bloomberg) -- New Century Financial Corp., overwhelmed by rising defaults from borrowers with poor credit records, became the largest subprime mortgage lender ever to fail as it filed for bankruptcy today.

New Century plans to sell most of its assets within 45 days, said the Chapter 11 filing in federal court in Wilmington, Delaware. About 3,200 people, more than half the workforce at the Irvine, California-based company, will be fired. New Century said it already agreed to sell its mortgage billing and collections unit to Carrington Capital Management LLC for $139 million.

Minnesota's subprime past

Minnesota's subprime past includes booms and busts

Excerpt: Minnesota has had its share of subprime lenders go from boom to bust.

The story of

1. GREEN TREE FINANCIAL
   
2. OLYMPIC FINANCIAL
   
3. METRIS COMPANIES
   

Snagged on the bottom

Excerpt:

The subprime allure has been at work inside Wells Fargo since 1982. What was then Norwest bought Des Moines-based Dial Finance Corp., one of the first major banks to wade into subprime lending. At the time, most lenders who took on risky borrowers were small, family-owned operations that could service only a limited number of applicants. With $1.1 billion in assets, Dial was one of the country's largest consumer-finance companies to specialize in subprime loans.

"Dial had an incredible reputation," Campbell recalled. The company "knew how to underwrite and manage that segment of the credit market."

Dial later became Norwest Financial and now Wells Fargo Financial. It also became a profit machine for Norwest at a time when the bank was struggling to overcome bad commercial real estate loans in the 1980s.

http://www.prosper.com/ is the ultimate subprime!

Prosper: The eBay of Loans?

Electronic Giving Options

Plastic and the pulpit

Lead:

A change in the way churches collect money is on its way. Dropping money into the collection basket on Sunday may be giving way to automatic deductions from bank accounts or paying by credit card.

Comment: I do not advocate giving by credit card because it costs the receiving organization a fee. But ACH would easily pay for itself in saved labor. We give to our church through online bill pay.


Christianity Today article: Is EFT Right for Me?

A sample product: Electronic Giving Solutions

Putting a human face on debt

Book review: 'Maxed Out'

Excerpt:

When Wesley Wannemacher, an Ohio resident, testified at a congressional hearing earlier this month, his story of debt and hopelessness was a familiar one.

Wannemacher had maxed out his $3,000 Chase bank card to pay for his wedding and fell behind in his payments. Over six years, Wannemacher ended up owing $7,500 in interest fees, late-payment fees and over-the-limit fees on an original debt of $3,200. Even after making payments totaling $6,300, he still owed $4,400 in fees.

Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders

Subprime problems contained?

Fed's Moskow: Subprime problems isolated

Excerpt:

Problems in subprime mortgages are not spilling over to the rest of the U.S. housing market, which is in the process of stabilizing, Chicago Federal Reserve President Michael Moskow said Monday.

Speaking to students at Tsinghua University in Beijing, Moskow said that after an outright drop in U.S. housing spending - new construction and renovation - of 12.7 percent in 2006, the Federal Reserve judges that the sector is leveling off

"Our best estimate is that it is in the process of stabilizing and that by the second half of the year, housing will start to pick up again," he said.

Moskow said a critical question was whether problems in subprime mortgages spill over to the broader home lending market, leading to defaults that would dampen consumer spending and, with it, the overall economy.

"I don't see that happening. There's no evidence of that happening so far. I think it's a very low-probability scenario," he said.

Comment: I hope he's right!