Common Sense Financial Wisdom From My Wife

Techie Diva presents the HP Magic Giveaway

noreply@blogger.com (The hubby) — Fri, 12 Dec 2008 00:44:00 +0000

Techie Diva is giving away $6000 worth of electronics. Hurry now, today is the last day to enter. Here's a snippet from her blog posts.

As we mentioned in our teaser post, Techie Diva has teamed up with HP and Microsoft to offer our readers the chance to win $6,000 worth of electronics. The HP Magic Giveaway is all about sharing the magic, and ONE lucky winner will win the entire package on December 12, 2008 right here on Techie Diva. We wish we could divide the bundle and have several winners instead, but we can’t. The good news is several other sites are holding a similar contest on different dates, so you still have a chance to win until December 22, 2008. We’ve teased you enough about this giveaway, so keep reading below for the rules, the prize, and how you can enter to win the HP Magic Giveaway here on Techie Diva.
WHAT YOU’LL WIN
HP TouchSmart IQ816 PC
HP HDX 18 series Premium Notebook PC
HP MediaSmart Connect
HP Pavilion dv4 series Entertainment Notebook PC (with Windows Live)
HP Mini 1000 (with XP)
HP Photosmart C6380 Wireless AIO (printer)
Microsoft Windows Vista Ultimate/Home Premium or Microsoft Windows XP pre-installed on all units (Mini 1000 runs XP)
Microsoft Office Home and Student Edition 2007 (Student-Teacher Edition) – 1 DVD with 3 licenses
Microsoft Windows Live
Corel VideoStudio X2
HP 564 Photo Value Pak
Kung Fu Panda (1 widescreen DVD; 1 widescreen Blu-ray disc)

For more information, visit her blog post: Techie Diva presents the HP Magic Giveaway at Techie Diva.

If I were to win this contest I would be a scrooge and hog it all for myself. Just kidding. I would give it to my wife for her business, of course. And I deserve to win because I'm a slumlord.

Common Sense Personal Finance

All This Volatility Is Driving Me Nuts

noreply@blogger.com (The hubby) — Tue, 07 Aug 2007 07:25:00 +0000

Common Sense Personal Finance

All this volatility in the market is really crazy, so I decided to change my strategy. I think that value stocks are more stable during these volatile times. After all value stocks are great value because they are generally underpriced, and therefore they are already below market value. When the stock market moves down, the value stocks generally don't move down as much as the rest of the market, and so they are generally more stable.

The best way of buying value stock is by buying Warren Buffet's Berkshire Hathaway stock. He is, after all, the third richest man in the world. Anyways, I set a limit order to buy BRK.B at 3600, but, alas, I only put in an order for 2 shares.

When The Volatility Dies Down

noreply@blogger.com (The hubby) — Fri, 27 Jul 2007 16:33:00 +0000

Common Sense Personal Finance

When the volatility from the market crash yesterday dies down, I think I'm going to invest in some mutual funds. I like emerging markets. I was thinking of investing in DFA Emerging Markets Small Cap (DEMSX), which has an YTD return of 28.44%. The total expense ratio is only 0.81%, and there is no front or back end load. The other option might be to go with an emerging market ETF. I was looking at Vanguard Emerging Markets Stock ETF (VWO), which has a YTD return of 17.96%.

I like to diversify my portfolio a little by investing in worldwide funds or total stock market indexes or total international stock market indexes. I am looking at Nationwide Worldwide Leaders (GWLRX). The other ones I'm looking at are the Vanguard Total Stock Market Index (VTSMX) and Vanguard Total International Stock Index (VGTSX).

Then I looked at some balanced funds. These are mutual funds that invest part of the money in stocks and part of the money in conservative assets like bonds. I was looking at Dodge and Cox Balanced Fund (DODBX). It has a YTD return of 5.35%. Hopefully it is more stable than having money completetly in stocks. I fund that has slightly better returns is the Fidelity Balanced Fund (FBALX), which has a YTD return of 8.46%. I was also looking at Vanguard Target Retirement 2050(VFIFX), which has a YTD return of 7.63%.

For growth, I was looking at Powershares Golden Dragon Halter USX China ETF (PGJ). It's basically a China ETF. China ETFs have been going down since mid-July, and so when it stabilizes, I might start buying this fund.

Before You Do A Balance Transfer Make Sure You Pay Off Your Balance

noreply@blogger.com (The hubby) — Tue, 24 Jul 2007 06:21:00 +0000

Common Sense Personal Finance

I almost fell for this one. I have a credit card with 10k balance at 3.99% for the life of the balance. The credit card company sends me another balance transfer check for 0.99% for six months. Should I go for the 0.99% for six months?

NO!

Here's how they will get you. If I do an additional balance transfer at 0.99% without paying off my 10k balance transfer at 3.99%, then when I pay my bill, the credit card company will apply that bill to the balance with the higher rate, which is the 10k at 3.99% until the 3.99% balance is paid off. The monthly payment I pay will never go towards the balance at 0.99%. The promotional rate for the 0.99% will expire, and it will jump back up to 21%. Once the 0.99% balance jumps back up to 21%, then the bill starts getting paid against the 21% balance. They always pay the bill with the higher rate first. And it is only then that I can pay off the balance at 21%. But still they were able to force me into paying finance charges at 21%, which is something that I normally would not do. Those sneaky little devils. Thought you almost had me there, didn't you?

It's a variation of the shell game mentioned here regardig Home Depot, except that in my case the payments are applied toward the balances with the highest rates instead of the lowest rates. But generally, if you specify how your payment should be applied when you send in a payment, they will apply it according to your instructions. In my case I want the payment to be applied toward the 0.99% balance because that promotional period would end more quickly than the 3.99% balance. The 3.99% balance is good for the life of the loan until the loan is paid off, and so it is worthwhile for me to maintain the balance with the 3.99% rate. Whereas in the Home Depot case, it was beneficial for the consumer to pay the higher interest rate balances first because those balances were at 21%.

I Have A New Stupid Idea

noreply@blogger.com (The hubby) — Sun, 22 Jul 2007 17:50:00 +0000

Common Sense Personal Finance

Let's say you need to borrow 80k. And let's say you can borrow 100k or 80k, and they will both be at the same rate. Assuming there is no prepayment penalty and assuming that both loans are at fixed rates, say 6%, for example. Should you borrow the 80k or the 100k?

I would borrow 100k and then immediately pay off 20k, so essentially I would still have a loan of 80k. Why would I do that? Isn't this the same as borrowing 80k to begin with?

No it isn't.

I loan of 100k with a prepayment of 20k is more advantageous than a 80k loan. There's a few reasons for this:

With a 100k loan, your payments are fixed at a higher monthly payment. The extra that you pay every month goes into the paying off the principal. The interest that you pay in both plans are the same because the remaining principal is 80k in both plans. You have essentially raised the amount you pay toward the principal in relationship to the amount of interest. You end up paying off your loan faster, and you pay less interest overall.

A loan for 100k for 30 years at 6% is 599.55 per month. If you pay off 20k initially, you would pay off the loan in approximately 18.5 years, with a total interest cost of around 52k. A loan for 80k for 30 years at 6% is 479.64 per month. If you do that then you will pay around $92,670 in interest.

You save around 40k, and you shave off 11 years from your loan, by borrowing 100k and then paying back 20k immediately.

Opportunity Cost -- What Does It Mean?

noreply@blogger.com (The hubby) — Thu, 19 Jul 2007 15:52:00 +0000

Common Sense Personal Finance

Another reader mentioned opportunity cost in the comments.

Opportunity cost is the difference in return in choosing one action over another action.

For example, if I choose to put money into something that returns 2% versus something that returns 6%, then I would have lost an opportunity to make 4% more. That 4% is the opportunity cost.

Negative Arbitrage-- What Does It Mean?

noreply@blogger.com (The hubby) — Thu, 19 Jul 2007 15:32:00 +0000

Common Sense Personal Finance

One of my reader left a comment about not being able to make money from negative arbitrage. What does that mean?

Negative arbitrage is the opportunity lost when the issuer of a bond takes the proceeds of a debt and invest that money into an investment vehichle that returns a lower rate than the rate at which the bond is paid out to the debt holder.

In other words if I borrow at 7.75% but then I put that into a CD that only pays 5%, then that's 2.75% negative arbitrage that I have incurred.

Borrowing Money To Fund A House -- How Stupid Can I Get?

noreply@blogger.com (The hubby) — Tue, 17 Jul 2007 14:52:00 +0000

Common Sense Personal Finance

The other day I saw a house that I really like for 500,000. I had no money for a down payment, so I financed the whole thing at 6% interest rate for thirty years. The house has consistently appreciated at a rate of 6%. Everybody thought I was nuts. Even my wife said I was stupid. She said, "Look if you borrow at 6% and then the house appreciate at 6%, then you break even. How can you make money doing this?"

But I can make money doing this. In thirty years, I'll be laughing my way to the bank. 500k compounded annually for 30 years at 6% = 2.8 million dollars. That's how much the house will be worth in 30 years. The loan will cost me $3000 per month for 360 months or a total of 1 million.

That's a net profit of 1.8 million. Whoever said that a 6% loan and 6% appreciation is the same thing?

You can make even more money if you don't take out a loan and you take that 3000 per month and you pay yourself that 3000 and grow it at 6% for thirty years. Then you would have a nest egg of approximately 3 million dollars (see table below). But that's not really my point. The point I'm trying to illustrate is that a loan of 6% is not equivalent to an appreciation of 6%. The point is that I can make money if I borrow money and invest it at the same rate.

			0
3000	0.005	1.005	3015
6015	0.005	1.005	6045.075
9045.075	0.005	1.005	9090.3
12090.3	0.005	1.005	12150.75
15150.75	0.005	1.005	15226.51
18226.51	0.005	1.005	18317.64
21317.64	0.005	1.005	21424.23
24424.23	0.005	1.005	24546.35
27546.35	0.005	1.005	27684.08
30684.08	0.005	1.005	30837.5
33837.5	0.005	1.005	34006.69
37006.69	0.005	1.005	37191.72
40191.72	0.005	1.005	40392.68
43392.68	0.005	1.005	43609.64
46609.64	0.005	1.005	46842.69
49842.69	0.005	1.005	50091.9
53091.9	0.005	1.005	53357.36
56357.36	0.005	1.005	56639.15
59639.15	0.005	1.005	59937.35
62937.35	0.005	1.005	63252.03
66252.03	0.005	1.005	66583.29
69583.29	0.005	1.005	69931.21
72931.21	0.005	1.005	73295.87
76295.87	0.005	1.005	76677.35
79677.35	0.005	1.005	80075.73
83075.73	0.005	1.005	83491.11
86491.11	0.005	1.005	86923.57
89923.57	0.005	1.005	90373.18
93373.18	0.005	1.005	93840.05
96840.05	0.005	1.005	97324.25
100324.2	0.005	1.005	100825.9
103825.9	0.005	1.005	104345
107345	0.005	1.005	107881.7
110881.7	0.005	1.005	111436.1
114436.1	0.005	1.005	115008.3
118008.3	0.005	1.005	118598.4
121598.4	0.005	1.005	122206.3
125206.3	0.005	1.005	125832.4
128832.4	0.005	1.005	129476.5
132476.5	0.005	1.005	133138.9
136138.9	0.005	1.005	136819.6
139819.6	0.005	1.005	140518.7
143518.7	0.005	1.005	144236.3
147236.3	0.005	1.005	147972.5
150972.5	0.005	1.005	151727.4
154727.4	0.005	1.005	155501
158501	0.005	1.005	159293.5
162293.5	0.005	1.005	163105
166105	0.005	1.005	166935.5
169935.5	0.005	1.005	170785.2
173785.2	0.005	1.005	174654.1
177654.1	0.005	1.005	178542.4
181542.4	0.005	1.005	182450.1
185450.1	0.005	1.005	186377.3
189377.3	0.005	1.005	190324.2
193324.2	0.005	1.005	194290.8
197290.8	0.005	1.005	198277.3
201277.3	0.005	1.005	202283.7
205283.7	0.005	1.005	206310.1
209310.1	0.005	1.005	210356.6
213356.6	0.005	1.005	214423.4
217423.4	0.005	1.005	218510.5
221510.5	0.005	1.005	222618.1
225618.1	0.005	1.005	226746.2
229746.2	0.005	1.005	230894.9
233894.9	0.005	1.005	235064.4
238064.4	0.005	1.005	239254.7
242254.7	0.005	1.005	243466
246466	0.005	1.005	247698.3
250698.3	0.005	1.005	251951.8
254951.8	0.005	1.005	256226.6
259226.6	0.005	1.005	260522.7
263522.7	0.005	1.005	264840.3
267840.3	0.005	1.005	269179.5
272179.5	0.005	1.005	273540.4
276540.4	0.005	1.005	277923.1
280923.1	0.005	1.005	282327.7
285327.7	0.005	1.005	286754.4
289754.4	0.005	1.005	291203.1
294203.1	0.005	1.005	295674.2
298674.2	0.005	1.005	300167.5
303167.5	0.005	1.005	304683.4
307683.4	0.005	1.005	309221.8
312221.8	0.005	1.005	313782.9
316782.9	0.005	1.005	318366.8
321366.8	0.005	1.005	322973.6
325973.6	0.005	1.005	327603.5
330603.5	0.005	1.005	332256.5
335256.5	0.005	1.005	336932.8
339932.8	0.005	1.005	341632.5
344632.5	0.005	1.005	346355.6
349355.6	0.005	1.005	351102.4
354102.4	0.005	1.005	355872.9
358872.9	0.005	1.005	360667.3
363667.3	0.005	1.005	365485.6
368485.6	0.005	1.005	370328.1
373328.1	0.005	1.005	375194.7
378194.7	0.005	1.005	380085.7
383085.7	0.005	1.005	385001.1
388001.1	0.005	1.005	389941.1
392941.1	0.005	1.005	394905.8
397905.8	0.005	1.005	399895.3
402895.3	0.005	1.005	404909.8
407909.8	0.005	1.005	409949.4
412949.4	0.005	1.005	415014.1
418014.1	0.005	1.005	420104.2
423104.2	0.005	1.005	425219.7
428219.7	0.005	1.005	430360.8
433360.8	0.005	1.005	435527.6
438527.6	0.005	1.005	440720.2
443720.2	0.005	1.005	445938.8
448938.8	0.005	1.005	451183.5
454183.5	0.005	1.005	456454.5
459454.5	0.005	1.005	461751.7
464751.7	0.005	1.005	467075.5
470075.5	0.005	1.005	472425.9
475425.9	0.005	1.005	477803
480803	0.005	1.005	483207
486207	0.005	1.005	488638
491638	0.005	1.005	494096.2
497096.2	0.005	1.005	499581.7
502581.7	0.005	1.005	505094.6
508094.6	0.005	1.005	510635.1
513635.1	0.005	1.005	516203.3
519203.3	0.005	1.005	521799.3
524799.3	0.005	1.005	527423.3
530423.3	0.005	1.005	533075.4
536075.4	0.005	1.005	538755.8
541755.8	0.005	1.005	544464.6
547464.6	0.005	1.005	550201.9
553201.9	0.005	1.005	555967.9
558967.9	0.005	1.005	561762.7
564762.7	0.005	1.005	567586.5
570586.5	0.005	1.005	573439.5
576439.5	0.005	1.005	579321.7
582321.7	0.005	1.005	585233.3
588233.3	0.005	1.005	591174.4
594174.4	0.005	1.005	597145.3
600145.3	0.005	1.005	603146
606146	0.005	1.005	609176.8
612176.8	0.005	1.005	615237.7
618237.7	0.005	1.005	621328.8
624328.8	0.005	1.005	627450.5
630450.5	0.005	1.005	633602.7
636602.7	0.005	1.005	639785.8
642785.8	0.005	1.005	645999.7
648999.7	0.005	1.005	652244.7
655244.7	0.005	1.005	658520.9
661520.9	0.005	1.005	664828.5
667828.5	0.005	1.005	671167.7
674167.7	0.005	1.005	677538.5
680538.5	0.005	1.005	683941.2
686941.2	0.005	1.005	690375.9
693375.9	0.005	1.005	696842.8
699842.8	0.005	1.005	703342
706342	0.005	1.005	709873.7
712873.7	0.005	1.005	716438.1
719438.1	0.005	1.005	723035.3
726035.3	0.005	1.005	729665.4
732665.4	0.005	1.005	736328.8
739328.8	0.005	1.005	743025.4
746025.4	0.005	1.005	749755.5
752755.5	0.005	1.005	756519.3
759519.3	0.005	1.005	763316.9
766316.9	0.005	1.005	770148.5
773148.5	0.005	1.005	777014.2
780014.2	0.005	1.005	783914.3
786914.3	0.005	1.005	790848.9
793848.9	0.005	1.005	797818.1
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807822.2	0.005	1.005	811861.3
814861.3	0.005	1.005	818935.6
821935.6	0.005	1.005	826045.3
829045.3	0.005	1.005	833190.5
836190.5	0.005	1.005	840371.5
843371.5	0.005	1.005	847588.3
850588.3	0.005	1.005	854841.3
857841.3	0.005	1.005	862130.5
865130.5	0.005	1.005	869456.1
872456.1	0.005	1.005	876818.4
879818.4	0.005	1.005	884217.5
887217.5	0.005	1.005	891653.6
894653.6	0.005	1.005	899126.9
902126.9	0.005	1.005	906637.5
909637.5	0.005	1.005	914185.7
917185.7	0.005	1.005	921771.6
924771.6	0.005	1.005	929395.5
932395.5	0.005	1.005	937057.5
940057.5	0.005	1.005	944757.7
947757.7	0.005	1.005	952496.5
955496.5	0.005	1.005	960274
963274	0.005	1.005	968090.4
971090.4	0.005	1.005	975945.8
978945.8	0.005	1.005	983840.6
986840.6	0.005	1.005	991774.8
994774.8	0.005	1.005	999748.6
1002749	0.005	1.005	1007762
1010762	0.005	1.005	1015816
1018816	0.005	1.005	1023910
1026910	0.005	1.005	1032045
1035045	0.005	1.005	1040220
1043220	0.005	1.005	1048436
1051436	0.005	1.005	1056693
1059693	0.005	1.005	1064992
1067992	0.005	1.005	1073332
1076332	0.005	1.005	1081713
1084713	0.005	1.005	1090137
1093137	0.005	1.005	1098603
1101603	0.005	1.005	1107111
1110111	0.005	1.005	1115661
1118661	0.005	1.005	1124255
1127255	0.005	1.005	1132891
1135891	0.005	1.005	1141570
1144570	0.005	1.005	1150293
1153293	0.005	1.005	1159060
1162060	0.005	1.005	1167870
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1197566	0.005	1.005	1203554
1206554	0.005	1.005	1212587
1215587	0.005	1.005	1221664
1224664	0.005	1.005	1230788
1233788	0.005	1.005	1239957
1242957	0.005	1.005	1249172
1252172	0.005	1.005	1258432
1261432	0.005	1.005	1267740
1270740	0.005	1.005	1277093
1280093	0.005	1.005	1286494
1289494	0.005	1.005	1295941
1298941	0.005	1.005	1305436
1308436	0.005	1.005	1314978
1317978	0.005	1.005	1324568
1327568	0.005	1.005	1334206
1337206	0.005	1.005	1343892
1346892	0.005	1.005	1353626
1356626	0.005	1.005	1363409
1366409	0.005	1.005	1373241
1376241	0.005	1.005	1383123
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1396053	0.005	1.005	1403034
1406034	0.005	1.005	1413064
1416064	0.005	1.005	1423144
1426144	0.005	1.005	1433275
1436275	0.005	1.005	1443456
1446456	0.005	1.005	1453688
1456688	0.005	1.005	1463972
1466972	0.005	1.005	1474307
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1487693	0.005	1.005	1495132
1498132	0.005	1.005	1505622
1508622	0.005	1.005	1516165
1519165	0.005	1.005	1526761
1529761	0.005	1.005	1537410
1540410	0.005	1.005	1548112
1551112	0.005	1.005	1558868
1561868	0.005	1.005	1569677
1572677	0.005	1.005	1580540
1583540	0.005	1.005	1591458
1594458	0.005	1.005	1602430
1605430	0.005	1.005	1613458
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1627540	0.005	1.005	1635678
1638678	0.005	1.005	1646871
1649871	0.005	1.005	1658120
1661120	0.005	1.005	1669426
1672426	0.005	1.005	1680788
1683788	0.005	1.005	1692207
1695207	0.005	1.005	1703683
1706683	0.005	1.005	1715216
1718216	0.005	1.005	1726808
1729808	0.005	1.005	1738457
1741457	0.005	1.005	1750164
1753164	0.005	1.005	1761930
1764930	0.005	1.005	1773754
1776754	0.005	1.005	1785638
1788638	0.005	1.005	1797581
1800581	0.005	1.005	1809584
1812584	0.005	1.005	1821647
1824647	0.005	1.005	1833770
1836770	0.005	1.005	1845954
1848954	0.005	1.005	1858199
1861199	0.005	1.005	1870505
1873505	0.005	1.005	1882873
1885873	0.005	1.005	1895302
1898302	0.005	1.005	1907793
1910793	0.005	1.005	1920347
1923347	0.005	1.005	1932964
1935964	0.005	1.005	1945644
1948644	0.005	1.005	1958387
1961387	0.005	1.005	1971194
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Borrowing Money To Fund My Savings -- How Stupid Can I Get?

noreply@blogger.com (The hubby) — Sun, 15 Jul 2007 17:19:00 +0000

Common Sense Personal Finance

You know what I just did? I borrowed 30k from my home equity line at 7.75%, and I put that into a savings account paying only 5%. I know that everybody is laughing at me and thinking I'm nuts. Even my wife thinks that I have gone off the deep end. She goes, "Don't borrow money to put into savings, you lose more money because the loan is at a higher rate. Are you stupid or something?"

Actually, borrowing money to put into my savings is really a no brainer for me. It is so genius that people think it is stupid. According to the bankrate loan calculator, if I borrow 30,000 at 7.75% for 30 years, my total interest is $47,372.52. You add that to the 30,000 for the principal, and my total payment for the loan is $77,372.52. If I put that 30k in a savings earning 5% for thirty years, compounded 12 times per year, that account would be worth $134,032.33, according to the compound interest calculator in money chimp. My net profit from this crazy move is 134,032.33-77372.52 = 56659.81. Whose the dummy, now? Now all I need to do is not spend that money for thirty years, that's the hard part. But then again, why would I spend it. That money was sitting in my home equity line doing nothing, so when the money is in my savings, I wouldn't spend it either, just like I'm not spending my home equity line.

I can even make more money by paying off that home equity line in 10 years instead of 30 years. According to bank rate loan calculator, if I pay off the loan in 10 years, the interest is only $13,203.83. If you add 30k principal to that, I would have only payed 43k. If I keep that 30k in my savings for 30 years at 5% and I pay off my loan in ten years, then my net profit from this move is 134,032.33-43,203.83 = 90828.50 over thirty years. That's roughly average out to be 3,000 profit per year. Who wouldn't want an extra 3000 per year?

I Will Teach You How To Haggle

noreply@blogger.com (The hubby) — Wed, 11 Jul 2007 19:20:00 +0000

Common Sense Personal Finance

My wife was shopping for some book cases off of Craig's list. She came across a set of book cases for $150, and we scheduled to meet with the lady.

When we first met her, she said, "You'll have to excuse the way I look. I don't normally look like this," as if we judged how well kept the bookcases are by how meticuluous she looked.

Anyways, she looked kind of scruffy looking, so maybe unconsciously her appearance did cause us to have a negative bias.

Then she showed us the bookcases. She said that she made a mistake with the prices of the bookcases and that she wanted $150 each for a total of $300. She was thinking of selling each one separately. We already knew that she wasn't getting any takers on those bookcases. If it was a hot price, the bookcases would have been gone just like that, and we would see people looking at the bookcases at the same time that we were looking at it. Why would the owner waste multiple trips showing this to potential buyers?

She had mentioned previously that she is not willing to part with them for nothing less than $200 for both. We already knew the lowest price that she is willing to go. When negotiating, never reveal that to the other party. Anyways, she revealed it.

When she asks us what are we willing to pay for them. Of course my wife starts with a low ball offer. My wife honestly told her that she was thinking of something less than $150. The seller was shocked, to say the least. The seller said that she was thinking along the lines of $250 for both. She started explaining to us that she paid over $300 for each.

We were unphased.

I reminded her that she said $200 for both.

My wife starts talking about the color looking different from the pictures on Craig's list. That's her subtle hint that these book cases are not exactly what we expected.

The seller started saying that it looks different because of her daughter's digital camera.

The seller started talking about how the bookcases have lights.

My wife then started plugging it into the outlet to make sure the lights work. If the lights don't work, then we can talk the price down.

My wife started asking whether it is real hardwood. One of the shelves look like it is not real hardwood, but the drawers do look like hardwood.

The seller kind of sense that we are not interested and replied that she doesn't want to argue with us. She said that she would rather store them then to part with them at a low price. However, she had told us previously that she really wanted to get rid of them.

We remained stoic.

Then the seller started to say that she would meet us halfway at $175.

My wife started saying that she would need to see whether she can borrow a truck or get a U-haul or something. Then my wife pretends to try to measure these book cases.

The seller started to suggest that maybe she can deliver them, but then she says that she would have to charge $200 for the book cases. That's $25 for deliver, which I think is a really good price.

Then we just ended the conversation with us either trying to find a truck or the seller trying to find someone who would deliver it. We just left it like that. The seller knew that we didn't want it. Saying we need to find a truck is just my wife's way of saying "We'll call you," which really means we're not interested.

Well, it's not our fault that the seller is not willing to go lower.

I Like To Struggle Now Rather Than Later

noreply@blogger.com (The hubby) — Fri, 06 Jul 2007 15:07:00 +0000

Common Sense Personal Finance

I started saving when I was young. Even when I was going to college and I was flat broke, I would sock money away into a savings account. I maxed out my IRA every year even though I feared that I don't have enough money to cover my monthly expenses. I bought real estate at age 24 even though I was barely making enough to cover the mortgage. When I got a job that had a 401k, I maxed out my 401k contributions every year. Even with the 401k maxed out, I maxed out my IRA on top of that. On top of that, I dumped money into stocks and investments. No matter how hard it was to save, I forced myself to do all those things, because I understood the fundamental rule of money. It is time that will grow your money.

If you start young, when you retire you don't have to work so hard to make your money grow. Money will automatically compound and work for you. No matter what, I vowed to max out every possible saving plan that I was aware of: IRA, 401k, pension, real estate investing, and whatever else I can think of. When I'm 65 and old, I don't want to work. If I don't have a huge nest egg then, then it's already too late. That's why I tell you that it is better to struggle now than to struggle later.

Sock away your money when you are young. The younger you are, the more risks you can take with your money, because when you are young, you can work. When you are old and you can no longer work, then what are you going to do?

If you can get 10% return on investments, the money will double every 7 years. If your parents put 10k into an investment that returns 10% when you were born, then by age 21, you would have 80k. If you take that 80k at age 21 and keep it in your account that returns 10% and you wait another 21 years, at age 42, you would have 640k in your account. And that's without contributing anything except that 10k from your parents when you were born. By age 63, that 640k will become 5.12 million.

If you start with 10k at age 42, by the time you are 63, you will only have 80k.

In both situation, only 10k was invested. But one person invested the money when he/she was a baby. (The parents did it for him/her.) The other person invested 10k at age 42. There's a huge difference in the results. 5.12 million versus 80k at age 63.

Start early. Put money into savings even if you have to struggle now. It will pay off in the end.

How to Provide Value To Your Tenants

noreply@blogger.com (The hubby) — Fri, 29 Jun 2007 01:18:00 +0000

Common Sense Personal Finance

First thing about renting your place is that your place needs to be presentable. Repair all the minor thing that detracts from the value of the property, like leaks, broken fence boards, broken bulbs, marks on walls, holes in walls, broken door knobs, broken faucets, and whatever else.

Not many landlord allow pets and children, but if you are willing to allow the tenants to have children and pets, it is definitely a plus.

Tell the tenants that you will take care of the backyard for them. Tenants hate to do the work themselves.

Clean the place before showing the place. The tenants like to feel like they can move right in without doing much work.

Provide the tenants with a security system. The tenants will have peace of mind, which is worth something. If the tenants feel secure they are more likely to stay longer.

Setup security lights and ample lighting. Tenants like to feel safe.

Choose rental property accessible to transportation. Some tenants don't drive.

If you have a garage. That is also a plus. If tenants has a hard time parking, then they aren't going to like your place.

Let your tenants move in early without charging them extra. They feel that they are getting a better deal.

Allow your tenants to have more people live in the house. For example, if four tenants can all live in one place, then they don't have to rent two places.

Offer your tenants a discount if they sign a lease.

Provide a garbage disposal, washer, and dryer on the premise.

Make improvements to the property. Let your tenants know that you will fix things.

Stage the property before renting it out so the tenants have an idea of how things should be layed out.

Provide enough storage space.

Reduce the amount of deposit. Make the entry fee low. Make the process of renting from you very easy.

Recommend places to eat around the area, and recommend things to do in the area.

Help the tenant with their cable or DSL setup.

Pay for some of the utilities.

Just follow these tips, and you will have your place rented out in no time.

First Thing You Need To Do Is To Establish Credit

noreply@blogger.com (The hubby) — Wed, 20 Jun 2007 15:28:00 +0000

Common Sense Personal Finance

I'm screening tenants for my rental unit. The thing that strikes me is that most of the applicants don't have credit history. And I'm thinking, "What? How could you not have credit history?"

Here's the steps you need to do to establish credit history.

Add your name to loans on your parents account.

Start up a credit card and buy stuff with it. Then about once a year, don't pay off the balance in full. Paying off your credit card every time actually hurt your credit because credit card companies need to know that you can handle a little bit of debt.

Raise your credit limit. The only way to do that is to use your credit card so that you come close to maxing out your credit limit.

Buy big ticket items. If you buy a house, you have instant credit. Buy a car with your credit card, or at least fund a portion of it with your credit card.

Do take advantage of the promotional balance transfer rate. Just don't over do it.

Don't think that paying rent will improve your credit score. It doesn't.

Open department stores account.

Don't close credit card accounts. Keep the credit card accounts opened for a long time.

Setup cable and cell phone accounts. Cables and cell phone companies do a credit check on you.

The best way to establish credit is just use the credit like how the credit company expect you to use it. Finance a little here and there. Pay it off most of the time. Pretty soon, you'll have perfect credit.

Consumer complaints and reviews on Maytag Corporation - Product quality

noreply@blogger.com (The hubby) — Sun, 17 Jun 2007 16:13:00 +0000

More Maytag complaints: Consumer complaints and reviews on Maytag Corporation - Product quality.

I have a Maytag Legacy washer for about three years, and now it is leaking. I have to replace it because this unit is a rental. My dad looked at it, and he said that it is leaking from the center, and not from the hose. I wouldn't be surpised if other parts are failing on it too. Don't buy Maytag. It sucks.

My Company Is Giving Us A Roth 401k Benefit

noreply@blogger.com (The hubby) — Fri, 15 Jun 2007 15:32:00 +0000

Common Sense Personal Finance

My company just annouced yesterday that employees will have the ability to put money into a Roth 401k or a regular 401k. My coworker asks me, what is the benefit of a Roth 401k?

In a regular 401k, the amount that you contribute gives you a tax deduction. Every year, if you contribute 15,500 to your 401k, you subtract that from your income, so your income is less. If you pay 1/3 of your income in taxes, then roughly, you save about 5000 each year in taxes because 15500 goes into your 401k and is not included in your income.

But with a Roth 401k, you don't get a deduction when you contribute because the money is after tax money, but the gains are tax free. So far my gains have been 12% per year in my 401k. I still have thirty years of work before I retire. Even if I start contributing to the Roth 401k starting now, I would have a total 401k portfolio of $5.3 million dollars, according to Bloomberg.com: 401k Calculator. And all that money would be tax free. If this was in a regualar 401k, over the course of 30 years, I would save about 150k (5k per year for 30 years), but then I would have to pay about 725k in taxes on the gain. I take the total portfolio minus the amount I contribute, and multiply that difference by 15%.

So over the course of thirty years, it's a tradeoff of saving 150k and paying 725k in taxes later or paying the 150k in taxes and saving the 725k in taxes later. It's really a no brainer. I would rather pay the 150k in taxes over the course of 30 years and not pay the 725k in capital gain taxes (Roth 401k).

The Parking Cop Is An Idiot? Or Did He Give Me A Break?

noreply@blogger.com (The hubby) — Fri, 15 Jun 2007 14:41:00 +0000

Common Sense Personal Finance

Yesterday, I awoke to find a parking ticket on my car. In San Francisco, the city have street cleanings on different days for different streets. Even if you are a resident, you can not park your car on the street when the street cleaners come around. Anyways, Wednesday, I came home late, and there was very little street parking left. I found a spot, and I thought I had lucked out. It didn't occur to me that people weren't parking there because there was street cleaning the following day on Thursday.

When I went to my car on Thursday, I saw the ticket. Man, was my wife going to be pissed. Anyways, I tucked the ticket away, and didn't look at it it till later. It was then that I realized that he got the license plate wrong. It was off by one letter. If the license plate is wrong, then that's not my car that got the ticket. They are just going to look up that license plate number and send the ticket to Joe Schmoe out there with a license plate that is one off from mine. Joe Schmoe will send a response back contesting the ticket. And I would get off Scott Free.

But what if the the partking police did a cross reference search against my vehicle ID number on ticket? Wouldn't they be able to find my car? In San Francisco, in order to get a parking permit, you have to basically register your car with the Department of Parking and Traffic. They don't call it an registry. They just call it a parking permit application, but we all know they use that to keep track of all the cars in San Francisco by license plate numbers and vehicle ID numbers. You're not required to get a parking permit, but if you want to park in the street, you should get a parking permit to avoid gettting tickets. Most streets in San Francisco have these 2 hours parking limitations unless you have a parkign permit. Many people in San Francisco have these parking permits, and so the Department of Parking and Traffic have a registry of vehicle ID, license plate, and owners.

In other words, they can look up my car with the vehicle ID number on the ticket and find me. I was thinking that parking cop was such an idiot because he got my license plate wrong. And I was thinking, maybe I should just pay the ticket because they can track me down with my vehicle ID number. It was then that I looked at my parking ticket and I see that for the vehicle ID number, he had put "Can Not Be Read." And I knew at that moment, that he let me go with a wink and a nod. My vehicle ID number was clearly readable, but because he purposefully left out the vehicle ID number and purposefully mistyped the license plate number, the owner of the vehicle (me) is not traceable.

What does the parking cop cares anyways? He still gets in his daily quota of tickets. And he just says that it was an honest mistake. No one is the wiser.

How I Screwed My Uncle

noreply@blogger.com (The hubby) — Wed, 13 Jun 2007 14:35:00 +0000

Common Sense Personal Finance
As you may have already known, my wife wants to install hardwood floors in our property. As it turns out, my uncle specializes in installing hardwood floors. In order to decide who we are going to choose for the installation, we got three bids from three different installer. One of them being my uncle.

First of all, my uncle gave me significant discounts, but even with the discount, his price was very close to the price that I got from another installer. It was a hard decision choosing between my uncle and the other installer. On the one hand, my uncle is family, I should get him to do the work. However, ultimately, the decision should be based upon whom we think will do the best job. I feel guilty about this, but I thought the other installer probably would do a better job.

Anyways, needless to say, we didn't hire my uncle. We asked my uncle whether he be interested in just doing the tiles in the bathrooms for us, but that is a really small job compared to the installation of the hard wood floors. The tile coverage is only about 1/6 the square footage of the hardwood floors. My wife told him that the hardwood floor hasn't arrived yet, and whether he would be willing to start on the tiling first. She didn't want to tell him that we are not hiring him for the hardwood floors because no contractor would be willing to take a small tiling job like ours. The tiling job, I estimate to cost us $1320, whereas, the hardwood floor installation would cost us $7100.

My uncle didn't seem too thrilled to hear us wanting him to do tiling first. The other installers don't do tiling, so what can we do? I feel guilty for not trusting my uncle to do a good job. I also feel guilty for wasting his time seeking a bid from him, and not going with him for the job.

The person we chose was very responsive. We told him that we'll hire him, and the next day, he met us and started the job. He knew the material because he's the only installer for the company that manufactures the material. His cost was extremely low. The cost was comparable to my uncle's prices, even though my uncle had given me huge discounts.

What do you think? Did we make the right decisions?

Consumer complaints about Maytag Washers & Dryers

noreply@blogger.com (The hubby) — Sun, 10 Jun 2007 20:26:00 +0000

Have you heard about Maytag washers having a bad design. Recently, my maytag washer sprung a leak, so I started searching on the internet, and I found this article. I don't have the Neptune. I just have the Legacy Washer. With so many washers sold, there is bound to be people who have problems. Anybody know whether Maytag washers are more prone to breakdown more so than other brands?

Consumer complaints about Maytag Washers & Dryers

I Will Teach You How To Haggle

noreply@blogger.com (The hubby) — Sun, 10 Jun 2007 06:34:00 +0000

Common Sense Personal Finance
All women seem to be born with an innate ability to haggle. It just amazes me how many people fall for it too. For example, I was trying to rent out one of my property, my neighbor introduced me to his friend who was possibly interested in renting from me. So this person walks into the building, and after a few minutes of looking around, she starts a side conversation with my neighbor.

"I was saw this place in San Bruno for $1190. Nowadays, they stage everything and made it look really nice. It was all fixed up."

This is of course her initial attempt to gauge how desperate I am to rent and to let me know the I am not offering the best deal out there.

I had to counter her move by putting on the poker face, which basically says, "Ok, if you got a better deal somewhere else, go ahead and take it. I will find someone else. I am not desperate."

Then she walks around the place and pretends to not even see the second bedroom.
I didn't hesitate to point it out to her. She then goes, "Oh, this is the second bedroom. It's a little small."

They always do that. Point out flaws so that I would knock the price down.

"Ok, it's true. It is small. Take it or leave it," I was thinking. I can't counter facts.

My neighbor asks whether the washer and dryer stay. I told them yes, but then I had to disclose to them that the washer has a small leak, and I told them I can replace or fix it before I rent it out. If my wife was there, my wife would tell me to keep my mouth shut.

Anyways, the potential tenant goes, "It's better that you replace it. I had disputes with landlords about leaks before. It'll damage your floors and seep into the floors, and you'll have mold and stuff. You don't want that."

It's her subtle way of saying, "Look, if you are charging me this much rent, you better make sure everything is in good working order." Who wouldn't want a new washer out of this? She really knows how to play the game because no landlord wants to take the risk of liability.

She saw some mouse traps around, and she asks whether I have mice in the walls, "She said that one place she had rented from had mice in the walls, and it kept her awake at nights."

That was a gauge of my character. She already knows the truth. Yes there are mice, but she wants to see whether I would tell the truth. If I'm a deceitful person, I would lie and try to hide the fact that there are mice. In any kind of business transaction, don't deal with a person who is deceitful. They are greedy and they are slimeballs, and they will try to cheat you any way they can. How I answer that question will determine my character. I, therefore, told her the truth. "Yeah, there are mice in this house." If she asks, I will tell her the truth, because I know that she would only ask if she already knows the answer.

The next part of the game is to pretend to be not interested and walk away. She sees the clutter around, and she says, "You still got a lot of stuff. You're not ready move out yet. When are you moving out? In a month or two?"

I just agreed with her, "Yeah, I still have a lot of stuff to move. Why don't I call you in a month or so and see whether you are still interested?" She plays her bluff. I play mine. She pretends to be not interested. I pretend to be not interested. And we both walk away from the deal. No one wants to be desperate, and so we go our separate ways.

She reminds me that I, being the landlord, have more to lose. I asked her how soon is she looking to move. She goes, "I'm staying with my sister, so how long I stay there is really not an issue. I can stay there as long as I want." I, on the other hand, have to pay the mortgage bills, and the longer I leave it vacant, the more money that I lose. She knows that, and she plays the game by subtly saying that she can wait it out longer than I can.

It's a staring contest, whoever gives in first, loses, so she reminds me that she can hold out longer than I can, and the longer I wait, the more desperate I will become, and I will call her. Then she will really put the negotiating pressure on.

Everyone of my tenant has played that game. Some have said the place needs cleaning. They have tried to knock down the price.

Here's what I do, I just say, "I'll have to check with my wife, and get back to you." And never call them back. And I'll look for someone who's not going to play games with me. Why would I want a tenant that play games, anyways? Last time the tenant tried to play games with me, I refunded her deposit, and I said forget it. I don't want to rent to you anymore. Go haggle with another sucker.

Buying Preconstruction House

noreply@blogger.com (The hubby) — Thu, 07 Jun 2007 02:32:00 +0000

Common Sense Personal Finance
My friend wanted to buy a townhouse in San Jose. She already has one house. This second house that she wants to buy is a preconstruction house. Currently, the builder is in the second release, and the builder is going to have more than 10+ releases. The way it works is that with each release, the price goes up. The longer time it takes for the construction, the more time you have for appreciation. Also, you don't pay mortgage until the construction is complete. The problem is you still have to sell it at some point in order to make your profit. So you still have to see whether the house is worth buying or not.

Is the house in a good location?

What is the final price of the house?

Does it have a view?

Is it in a good school system?

There might be restrictions on what you can do with the property.

Can you rent it out during the first few years?

Can you sell it during the first few years?

Can you sell it with a realtor? Can you sell it prior to completion of construction?

Can you back out of the deal if you change your mind?

Will you lose your deposit if you back out?

You should also think about what will happen if you can't sell it.

How much is your mortgage payments, insurance, property tax, dues?

What if the housing market crash?

How much money would you lose if the value goes down?

How fast is your burn rate if you can't sell it?

If you do sell it, there are other things to worry about.

Will this be counted as short term capital gains?

How much tax will you have to pay?

How much commission would you have to pay?

My advice is to treat this preconstructon house as if you are going to keep it. That way you will force yourself to look at it from a buyer's point of view. Is this a desirable place for people to live? After the construction is done, if you had money would you buy a place like this? If the answer is no, then why do you think someone else will buy it?

Offsetting Loss - Huh?

noreply@blogger.com (The hubby) — Fri, 01 Jun 2007 15:10:00 +0000

Common Sense Personal Finance

Everyone has heard of offsetting gains, but have you heard of offsetting loss? Offsetting gains is where if you have a gain, you liquidate some badly performing assets, and you offset that gain with the loss.

Well, offsetting loss is just the opposite. It is when you already have a loss, and you liquidate some of your better performing assets to compensate for the loss or you produce more income to offset the loss.

I'll give you an example. Let's say you have a stock A that was dropping badly, and you hit the sell button. By the time you liquidated that stock A, you suffered a loss of $10,000. You have another stock B that has a gain of $10,000. And you think to yourself, "That's a lot of money. What should I do?"

Quit playing the stock market.
Try to recoup your loss by earning more money.
Sell stock B, and buy it back.
Try to recoup your loss by playing the stock market

Let's pretend that you don't have stock B with the gain of $10,000. The worse thing you could do is to quit playing the stock market because you want to offset that capital loss with capital gains, but if you stop playing the stock market, you won't get any capital gains.

The best thing to do is to offset that loss with capital gains. Of course, some smart aleck out in the crowd shouts out, "If you got captial gains, don't you pay more taxes? If you sell stock B, don't you have to pay taxes on that gain of $10,000 from selling stock B?"

"No, I don't have to pay more taxes if I were to sell stock B," I told him. If I sold stock B and got a capital gain of $10,000. That capital gain offsets my capital loss of $10,000, and my overall gain is zero. So tax on zero dollars is zero.

Can you offset that loss with income? Yes, but only three thousand dollars per year. The remainder amount gets carried over to the following years until that loss is recouped. But that is not as effective as offsetting the loss with your capital gains.

So what I would do is to try to recoup that money with capital gains as best as I can.

It's a 10k free pass. That's 10k of capital gains that I don't have to pay taxes on because I already have a loss of 10k. Any gains up to 10k just reduces my loss.

The smart aleck in the room goes, "Isn't there some sort of rule where if you sell stock B, and you buy it back, then that sale don't count because you bought it back?"

"No, that's only if you sell at a loss. Stock B has capital gains. If I sell stock B with gains, and I buy it back. That sale still counts. It doesn't change the amount of stock that I have. It's just that I don't have to pay taxes on that 10,000 gain from selling stock B because that gain offsets that 10,000 loss."

And that's how to offset your loss.

How Much Money Do You Need For Retirement

noreply@blogger.com (The hubby) — Thu, 31 May 2007 06:36:00 +0000

Common Sense Personal Finance

I found a nifty tool for doing retirement planning on MSN Money. One of the things that people always ask me is how much I would need for retirement. Well, this tool will tell you. It also tells you also what savings rate and what returns on your investments rate are needed.

For example, if you are 40 years old, and you decided to save for retirement, how much should you save?

So I plug in some values.

Retirement calculator Your results
About you:
Your age today: 40
Your age at retirement: 65
Your life expectancy: 86

About your money:
Your annual income today: 50,000
Percentage of income you save for retirement each year: 14%

Your retirement savings today: 5,000
Average return on your investments before retirement: 9.0%

Anticipated return on your investments after retirement: 6.0%

About your retirement income:
How much you'll need annually: 40000

With this set of inputs, you can see that you will run out of money at 86. But that's ok because your life expectancy is 86. You would need to save about 14% of your income before retirement. The 14% that you save each year must grow at 9% in order for you to just barely have enough to last you until your death at 86. When you retire at 65, you will have $426k saved up. And you can see that you really don't need a million to be able to retire at 65.

On the bottom of this calculator, there is also a field for other retirement income, like passive activity income. If you take in rent at 20k a year. You'll see that with the same inputs, you never run out of money. However, f you want to die broke, and you have rental income of 20k, it shows that you only need 100k at 65 in order to retire at 65 until you die at 86. And you only need to save 3% in order to save up that 100k by the time you are 65. Without that rental income you would need 426k at age 65. With the rental income you are definitely better off.

Use these values as input:

Retirement calculator Your results
About you:
Your age today: 40
Your age at retirement: 65
Your life expectancy: 86

About your money:
Your annual income today: 50,000
Percentage of income you save for retirement each year: 3%

Your retirement savings today: 5,000
Average return on your investments before retirement: 9.0%

Anticipated return on your investments after retirement: 6.0%

About your retirement income:
How much you'll need annually: 40000
Other retirement income: 20000

If you expect to live longer, then you would need a higher percentage of your income being saved. For example, if you expect to live to 123, then you would need to save 25% of your income, with the following inputs:

Retirement calculator Your results
About you:
Your age today: 40
Your age at retirement: 65
Your life expectancy: 123

About your money:
Your annual income today: 50,000
Percentage of income you save for retirement each year: 25%

Your retirement savings today: 5,000
Average return on your investments before retirement: 9.0%

Anticipated return on your investments after retirement: 6.0%

About your retirement income:
How much you'll need annually: 40000

You can also use the calculator to calculate how much you need to save in order to never run out of money even if you live forever.

For example, if you can save up to 900k by age 65, and if you only use 40k annually, then the growth on your investment will easily compensate for the amount of money that you are spending each year:

Use these numbers for input. You'll see that you will not run out.

Retirement calculator Your results
About you:
Your age today: 40
Your age at retirement: 65
Your life expectancy: 86

About your money:
Your annual income today: 50,000
Percentage of income you save for retirement each year: 31%

Your retirement savings today: 5,000
Average return on your investments before retirement: 9.0%

Anticipated return on your investments after retirement: 6.0%

About your retirement income:
How much you'll need annually: 40000

Depending on what your goals are, you can adjust the values accordingly. Maybe you want to retire early. Maybe you want to see what effect changing the rate of return has on your retirement. What effect does changing your savings rate has? If I want to die broke, what should my savings rate and return on investments be? If I want to never run out of money, what should I adjust to accomplish that? What if I have other income, how will the other income affect my retirement plans?

You Should Create A Balance Sheet To Analyze Your Personal Finance

noreply@blogger.com (The hubby) — Wed, 30 May 2007 15:50:00 +0000

Common Sense Personal Finance

You should occasionally do a balance sheet for your personal finance in order to keep track of your money. Here's are the things you need to do:

1. Split your assets into five different categories

cash and equivalents
short term investments
long term investments
equity (money you have but can't touch until you sell)
other property (these have values, but they are not liquid)

2. Figure out your liabilities (debts) and divide that into three different categories

short term debt
long term debt
future debt

From the assets and liabilities, you can calculate your net worth, which is assets minus liabilities. The first thing to look for is whether your total assets is higher than your liabilities. The higher your assets relative to your liabilities the better. If your assets is about equal to your liabilities, then that's not very good because your net worth is essentially zero. I personally like to have my liabilities to be 1/3 to 1/2 of my total assets. In other words, the assets should be 2 or 3 times more than your liabilities.

The other thing that I look at is whether my short term assets can cover my short term debts. The stuff that are held in long term accounts can't be liquidated quickly enough to cover my short term debts. For example, if I know that I need to pay a bill of 20k. I make sure that I have enough short term assets that I can liquidate to cover the 20k debt. If there is not enough short term assets, then I shift money from the long term assets into short term assets.

The assets that are tied up in equity and in property are useless money. It's good to know what the values are, but in terms of normal operational money, those money don't come into play.

The next thing to do is to look at your cash flow. This is your income and expenditures. For income, it is important to look at future income. If your future income is going to go up, then of course that is good news, but your future income can also decrease. It is important that you evaluate those future income accurately to reflect your situation. For your expenditures, you can also divide that into short term expenditures and long term expenditures. Long term expenditures are spread out for many years like a mortgage.

Generally, what you want to do is to shift more of your expenditures to long term expenditures. You should have a low percentage of short term expenses. These are generally the impulse buys and necessities. Overall, the income should be higher than your expenses. Housing expenses should be no more than 1/3 of your income. Your overall expenses should be 2/3 of your income. That will give you a 33% savings rate. For many people, however, the expense/income ratio is very high, which push the savings rate to practically zero. That's not very healthy. You should try to reduce the expenses in that case in order to try to bring down your expense/income ratio.

Creating a balance sheet should be your first step in taking back control of your finances.

Chinese Shares Plunge on Tax: Financial News - Yahoo! Finance

noreply@blogger.com (The hubby) — Wed, 30 May 2007 14:41:00 +0000

There's squeezing in the China's market. China's Finance Ministry tripled the stamp tax from 0.1 percent to 0.3 percent.

Chinese Shares Plunge on Tax: Financial News - Yahoo! Finance

Will the other markets be affected? Watch the video.

The Game That Credit Card Companies Play

noreply@blogger.com (The hubby) — Sat, 26 May 2007 15:27:00 +0000

Common Sense Personal Finance
As you all know, I rack up a huge amount of debt in just a short amount of time, and I'm floating some of it with credit card balance transfers. I also have a home equity line of credit so I can pay off these credit card balance transfers at any time. Credit card companies are trying to get my business because I have been ignoring them for many years now. They would send me balance transfers offers with really good rate, but I just ignore them. And now all of a sudden, after accumulating a lot of debt in my home equity line of credit, I have shifted some of that balance to credit cards, which offers better promotional rate. I still pay my bills on time, and I pay the balance in full when the promotional period ends. I set up the lump sum payment in my online banking when the promotional period ends, so they will never catch me forgetting the end date of the promotional period. When I pay off the balance on one card, another balance transfer offer comes in, and I roll my home equity line balance into that new balance transfers. And credit card companies raise my limit each time I get a new promotion. Before credit card companies were making nothing from me, now they know that I can play the game, then are finding ways to entice me. They are asking the question, "How can they get me to transfer some of my home equity line of credit balances to their cards?" In the past, I pay my cards in full, so there is no finance charge, but now I'm financing it, so at least they are making some money from me.

But you know what is stupid? My home equity line and my credit card line are from the same bank. So the bank is still losing money from me. I aggressively decreased the balance on the home equity line. That's at 8%, so they are earning less interest from me from that account. And the credit cards from that bank has lower promotional rates, so I'm paying that particular bank less interest overall because the balance has moved to the lower interest rates via the promotional credit card balance transfers. Ironically, that same bank gives me the means to schedule the payments when the promotion rate is over. So I really don't see how that bank can make money off of me.

But here's the catch. The banks don't care that I'm taking advantage of them. They know I'm doing it. Like I said, the bank that has my credit card lines also has my home equity line. They know what rate I'm getting and where the money is flowing. They know I'm aggressively shifting money from the home equity line into the credit card lines. So what is their game? They are secretly hoping that I would run out of money and I won't have the money to pay off the balance when the credit card promotion ends. That way, my balance on my credit card will adjust to 21%. The only way that will happen is if I max out my home equity credit line.

But that is not going to happen because I aggressively pay down my home equity credit line. But then there is another catch, there is a draw expiration on the home equity line of credit. In other words, when I hit that draw date expiration, I can no longer borrow money from my home equity line. That's when I can no longer shift the debt back to my home equity credit line, and then my balance would be stuck on the credit card. See, they are not so stupid after all. But of course, I can always close up my home equity credit line and open up a new home equity line. Oh well, I guess they won't be making much money from me, then.

But there is a real danger. The danger is that I will spend more because borrowing money is so cheap. When I can't afford the minimum payment each month, that's when they will get me. I keep on spending because I think that I have a good deal with these low rates. Maybe I'll buy a car because they offer me 0% rate. Maybe I'll buy furniture because they gives me 0% rate for twelve months. Maybe I'll do some renovations to my house because I get 0% for twelve months. And these things are items I would not normally get when financing is hard to get. They lure me into the dragon's lair with gold, and then they are going to eat me up. That is their game.