Now that I’m getting a little older, I realize that the next time I get an AARP offer will probably be about the time I actually qualify for one.  That’s a little disturbing, to tell yout the truth.

And “disturbing” is a good segue to a discussion of our current healthcare problem in America.  The cost of medical care is mind-boggling and I think that even the most conservative and liberal folks around can agree that we have a real problem.  There are too many people without insurance or who are under-insured.

I’d like to think that we’d all like to see people carrying adequate insurance to protect their financial interests and to guarantee necessary medical treatment.  That should be true whether you’re head over heels in love with a single payer system or if you’re a laissez faire buff who’s ready to see the government walk away in favor of market solutions.

The AARP seems to have a strong interest in a better system, too.  They’re always lobbying for reforms they believe will better serve their membership base.  They’ve been actively involved in Medicare issues for years and have become a formidable lobbying force.

The AARP also offers insurance policies to its members.  There really isn’t such a thing as “AARP health insurance” in a strict sense, though.  The organization has actually forged relationships with insurance companies like UnitedHealth Gruop and offers their policies to the membership.  So, while people are actually buying a policy through a different provider, it’s still often referred to as “AARP health insurance“.  These sales constitute somewhere between 25% and 35% of AARP’s revenues.

All of this seems perfectly reasonable on its face.  The AARP sticks up for the interests of its members in terms of legilsative reform AND offers them what the organization believes to be quality insurance projects.

When you consider things a bit more closely, however, this arrangement may very well represent a conflict of interest.

In 2006, for instance, critics accused AARP of softening its support for drug reimportation reform that would make it easier for Americans to purchase prescription medications in Canada in order to save money.  Some argued that the AARP’s seemingly modified stand on the issue stemmed from a recognition that its own financial interests would be ill-served by great re-importation.  As one observer questioned, “Is it a major conflict of interest for AARP to claim to be a benevolent spokesperson for older consumers, when the “issues” are extremely important to their financial well-being?”

Many feel that the AARP has failed to support the right kinds of Medicare reform over the years.  The alleged reason?  A significant percentage of AARP health insurance sales involve products designed to “fill the gaps” in Medicare coverage.  If Medicare were properly repaird, critics argue, AARP would stand to a lose a lot of business.

It’s not hard to see the potential for conflict of interests, even if you don’t believe the AARP has yet failed to support its members best interests.  There’s a natural potential tension between marketing insurance products and lobbying the government for reform of the healthcare systems.

An NPR story pointed out just how tricky the situation can be when discussing 2007 efforts to deal with the health care crisis:

“And its new contracts are making AARP’s politics even more awkward. As part of its deal with United Healthcare, AARP will become the largest single sponsor of private Medicare health plans under a program called “Medicare Advantage.” Yet the group is lobbying to reduce payments to those Medicare plans, which analysts say are being overpaid by the government.”

I’m not ready to echo the sentiments of long-time AARP foe and former Senator Alan Simpson.  Simpson was quoted as saying, “If there was a sublime definition of conflict of interest, it would be AARP from morning to night.”  I’m not at that point,  but his words do remind us to look closely at what the AARP does and why they might do it.  It may not always be a matter of benovolence for its membership.

So, what’s the magic number?  I still don’t know.  I have a pretty good idea, though.

First, it was interesting to find that I wasn’t the only person wondering about this.  Yahoo and answers and other Q&A sites are littered with people asking the same thing.  Unfortunately, they rarely get answers. Well, they get answers, they just don’t get an answer to the question.  Respondents tend to state what they spend on groceries, which really doesn’t give us any idea of the average.

Still, the answers were fascinating–primarily because the range from low to high is pretty extreme.   While some college students are paying less than $200 per month for groceries, you can find a commenter at FreeMoneyFinance who spends $400 for herself over the same period of time.  The average cost of groceries per person certainly isn’t represented by either extreme.

You’d think it would be easy to get a more definitive statistic on how much we spend to keep the cupboards from being empty, considering how concerned people are about the issue.  I mean you have people making their own instant oatmeal packages to save a few cents and bloggers have often asked people how much they drop at the supermarket in hopes of developing an understanding of our eating habits.

Finally I tired of wading through anecdotal evidence culled from the very non-representative samples of Internet users interested in frugality.  I decided to look to Washington DC for an answer.  Surely the Department of Agriculture did a survey and figured this whol average grocery expenditure thing ut once and for all.

As it turns out, they didn’t.  But they came fairly close.  There are a few problems with the numbers, though.  First, they’re old.  The USDA released “Food Spending by American Households - 2003 and 2004” in 2007.  That’s right, by the time the document hit the press, it was already relatively old news.  Second, the USDA doesn’t supply information about the average person or average family.  Their information gathering was limited to urban families.

Those numbers are still interesting, though.  And they probably give us a pretty good idea of what the average person spends, although you should consider major economic shifts and 5 years worth of inflation when you look at the data.

So, what is the average cost of groceries per person, according to “Food Spendng by American Households…”?  $1,347.oo, or $112.25 per month.

As one’s household size increases, the per capita spending on food decreases.  The numbers are nearly the same for singles and 2-person households, but by the time you’re talking about six people or more under one roof, the expenditure drops to $937.

As you’d expect from a big gnarly government report (the tables alone constitute 90+ pages), Uncle Sam’s employees at the USDA break it all down by just about every demographic you can imagine.  They also told us how much folks spent on food away from the home (average:  $860 per year, per person in 2004).

So, there you have it.  A not-quite-definitive answer to a very popular question.  I know that the Lampsen household exceeds the average 2007 number, but not by much.  If I was willing to compromise on a few more things here and there, I think we could get slightly under the average line.

Are you blowing that number away or are you fairly close to the mark?  How much are you spending on grocers per month?

I went to the local bookstore the other day hoping to find a good read for a quiet Sunday afternoon, and even then couldn’t escape the coffee giant. Their disposable cups with the cardboard sleeve were in the hands of every other customer sitting down browsing through their books while deciding which were intriguing enough to be worth going over the monthly book-buying budget.

I wondered how these avid readers could even afford a coffee addiction when they intend on buying a stack of books as high as three Venti Caramel Macchiatos. Starting at almost $4 for a fancy-named cup of milk and espresso, this one addiction that explains why half of America is broke.

However, as I sat down reading my own selections of “maybe I’ll buy this today,” I noticed several customers using a Starbuck’s gift card to pay for their two-gallons-of-gas worth of sugar and cream. I decided to look into it, thinking maybe there was some rewards program or other incentive that was keeping customers’ addiction to caffeine a priority above their addiction to money.

Apparently, from what I gathered, eBay is good for more than baseball cards and used books. Why I wasn’t browsing their site for my reading material that day has more to do with the time frame between seeing something I want and actually receiving it, rather than the quality of goods I find at auction.

So anyway, when doing a little research into why consumers prefer to pay with these plastic cards, I found a link to a Starbuck’s gift card on eBay for $29.99. Now right off the bat I’m thinking that $30 won’t get a Frappuccino addict further than a week’s worth of highs. I’m feeling a little sorry for the sucker who needs his coffee enough to buy an auctioned off fix. Then I read the fine print.

The card, at $29.99 plus free shipping–and no sales tax because it’s being offered in one of those states where the government hasn’t stepped in yet–is actually valued at almost $40. Thirty-eight dollars and seventy-one cents, to be exact. For those of you math challenged folks out there, that means on eBay you can buy a Starbuck’s gift card for only 77% of the face value.

A savings of 23% on a legal drug isn’t bad, I decided. Not bad at all and in fact quite good. Unfortunately for those of you switching over to eBay right now hoping to scoop up a few of these good deals, most auctions don’t offer these high of savings. I’d say the average is between 5-15%, though if you are one who knows where every Starbuck’s is located between your front door and your grandmother’s house in Minnesota–you are looking to save a good chunk of change with even a 5% savings each year.

With the average Venti “anything” costing about $4.55 plus tax, considering the average consumption of 6 per week–that’s about $1550 worth of frilly caramel and milk per year. A mere 5% savings would save your typical addict over $75/year, but a generous 15% would save more than $150. Consider the savings if every Starbuck’s gift card you found was offered 77% of face value. It’s enough to pay for a year at the gym where you can work off your high calorie addiction–or more than $350 to be more specific.

Hi Everyone,

Here are some Blog Carnivals that we participated in over the last week.  Enjoy!

- Carnival of Personal Finance #210 (Punch Out Edition) was hosted by Suburban Dollar and you can find our post entitled Unemployment up. Recession continues. Waiting for the Stimulus to Stimulate… listed there.

- Carnival of Debt Reduction (Four Pillars Edition) was hosted by Four Pillars and you can find our post entitled How to Reduce Your Debt Significantly Without Tightening Your Belt listed there.

- Money Hacks Carnival #70 (The Banking Edition) was hosted by Blogging Banks and you can find our post entitled Tax Day Discounts: Celebrating the Un-Celebratable listed there.

- Festival of Frugality #183 (The Honeymoon Destination Edition) was hosted by Financial Highway and you can find our post entitled Saving Some Green on Fresh Greens at the Farmers Market listed there.

- Carnival of Money Stories #6 was hosted by Not The Jet Set and you can find our post entitled It’s the Grocery Game… And I’m Actually Interested listed there. ]]> http://www.personalfinanceanalyst.com/personal-finance-carnival-round-up-30/feed/ http://www.personalfinanceanalyst.com/personal-finance-carnival-round-up-30/ http://feedproxy.google.com/~r/personalfinanceanalyst/zrPD/~3/FzyvDLoRIoQ/ http://www.personalfinanceanalyst.com/ponzi-schemes-before-ponzi/#comments Fri, 03 Jul 2009 09:22:37 +0000 David R. Lampsen http://www.personalfinanceanalyst.com/?p=2073 Bernie Madoff may have pulled off the biggest of all Ponzi schemes in recorded history, but it’s not like he came up with the idea.  That honor belongs to Charles Ponzi, right?

Wrong.

We had Ponzi schemes before we had Ponzi.

Charles Ponzi reigns as the namesake for pyramid schemes these days, but he didn’t invent them.  They’ve been around for quite some time and it’s not hard to imagine that they predate Peter and Paul (as in “robbing Peter to pay Paul”, which was the expression generally utilized for such acts of malfeasance before Ponzi did his thin).

Take for instance, Ms. Sarah Howe.  She was pulling a Ponzi in 1880, long before Charlie P. figured out how to bilk people out of their money.  Howe as actually a double-dipper.  She wasn’t just doing the pyramid, she was going it by going after people who’d tend to trust her the most at the time–other women.  That makes Howe a Ponzi-ist and an affinity scammer (sort of like Bernie Madoff).  Apparently, she set up a women-only program, promising an 8% return on everybody’s cash.

The only way that could happen, though, is if she kept getting more women to dump money into the scheme. Obviously, her luck ran out.  There’s not a lot of information online about Howe, but the Wikipedia entry that mentions her pre-Ponzi scheme references a book that might be of interest to those who’d like to learn more about her–and Mr. Ponzi.

She wasn’t the only person “robbing Peter to pay Paul” to beat Pozi to the punch, though.

Nineteen years after Howe, but still 21 years prior to Ponzi in 1899, a guy working for a little tea company near Wall Street came up with a plan.  William F. Miller started telling people, including his bible students, that he could produce a 10% per week return on their investments because he had picked up some golden information by being so close to Wall Street.

He grabbed the cash with both hands while he could, keeping the deal afloat by paying old investors with the money from the new ones.  When it was all said and done, he was sentenced to prison.  He didn’t get his sentence as a rich man, though.  In one of those great ironies, Miller was cheated out of his money by a couple of con artists who were apparently better at playing the grift than Mr. “520%” Miller.

He ended up skirting most of his sentence, receiving a commutation from the Governor.  Apparently, that decision was less about mercy than it was about convincng t Miller to testify against other bad guys.

The interesting thing about these pre-Ponzi schemes is that they bear such a striking resemblance to Bernie Madoff’s swindle.  The names and the centuries change, but the song remains the same.

Give me your money.  I’ll invest it and give you a great return.  In reality, I’ll use your money to pay off the other people I’ve suckered.  You’ll get your money after I find a new mark or two. Eventually, someone figures it out and it all goes down the tubes.

It’s amazing how history repeats itself, isn’t it?  You can draw a pretty straight line through the gutter to connect Sarah Howe, W.F. Miller, Bernie Madoff and a slew of people who who plied their dastardly trade during the intervening years–including the guy who had this great investment opportunity involving postal coupons, the one and only Charles Ponzi.

Americans are bobbing in a pool of debt so deep that it’s tickling their earlobes.

If we don’t get a handle on the total U.S. consumer debt, we’re doomed.

Those aren’t tough messages to understand.  Too much debt is bad.  We have too much debt.  We need to start acting like responsible adults by paying it all down.  It’s time to embrace the concepts of savings and delayed gratification.

Well, maybe.

A lot of folks will say that the total U.S. consumer debt level, which is around $2.56 trillion, needs to go down.  Not everyone sees it that way, though.

There’s another school of thought, and I hear from its professors on a daily basis, too.

They argue that we don’t have a debt crisis and that consumer spending is the only thing driving our economy.  If we want to get out of this recession, they’ll argue, we need people to buy more stuff on credit.

There’s some support for that perspective, too.  A recent article I found via the Houston Chronicle.  It’s author, Erik Tyson, maintains that we don’t really have a big problem with credit and that things seem to be cruising right along just fine and dandy in that department.

“The recession has supposedly led to increases in family savings, major efforts by families to reduce debt and other belt-tightening measures, so the figures given in the Fed consumer-finance survey probably even exaggerate the extent of the current credit problem,” Vlasenko said.

In summary, Vlasenko says: “As is often the case, the reality is often less extreme and dire than we are led to believe. Sure, some families and individuals are drowning in credit card debt. And some misuse their credit cards.

“But the vast majority of Americans appear to manage their credit wisely.”

Now, it’s not so hard to get a grip on the pro-debt mode of thinking, either.  We don’t have the production and manufacturing base in this country that we once did, so our spending is critical to business success.  This is the same logic that’s led to things like the clunker law–encouraing people to take on debt in order to save the auto industry.

You can pick either of those perspectives and come up with at least a few decent arguments for yourself.  The problem with all of this is that they don’t seem to fit together too well.  You can’t simultaneously encourage thrift and debt reduction while salivating over the prospect of people spending more money.

Now that big picture stuff is a little complicated (and very mutually exclusive, it would appear), but the “on the ground” happenings are just as confusing.

Some people seem pretty happy that we’re putting a dent in the total U.S. consumer debt total.  This recession has led to some belt-tightening and some serious debt reduction, you see.  Apparently, we’re paying down billions and billions in consumer debt every month for the past half year.

If you’re in the “debt bad” group, that’s good news.  Or is it?

You see, a lot of that debt reduction seems to be coming from write-offs and settlements.  The lending banks realize they can’t squeeze green blood from the turnips suffering through this recession, so they’re taking the bad debt off the books.  We’re not really paying down all of the debt.  Some of the reduction is stemming from our simple inability to repay it.

That, as you’d guess, has a nasty impact on credit scores.  Thus, people aren’t getting as much credit.  Less credit extension means it’s harder to boost that total debt number.  Maybe we’re “paying it down” only because we’re not getting more of it.

And that’s scary news if you’re part of the “we need more consumer spending” crowd.  It’s hard to imagine consumers buying their way out of a recession when they can’t pay their bills and no one’s interested in giving them more access to credit.  Banks are slashing credit lines.

Personally, I’m still trying to make sense of it all.  At the risk of not doing my part to help the economy, however, I’m approaching my own life on the basis of what’s best for me.  I love the fine folks at GM, but I’m not buying a new car.  I’m sure that the people running those businesses in the shopping mall are real sweethearts and I know that they can’t employee people if we’re not in there sliding plastic so fast it melts, but I’m opting out.  The Lampsen plan involves reasonable spending, working with cash, and taking care of the future.

If I’m accidentally contributing to a long-term recession, I apologize.  Part of me wonders, though.  If the only way out of this mess is to either bottom out or to get even messier, maybe it’s just time to bottom out.

Hi Everyone,

Here are some Blog Carnivals that we participated in over the last week.  Enjoy!

- Carnival of Personal Finance #209 was hosted by Living Almost Large and you can find our post entitled It’s the Grocery Game… And I’m Actually Interested listed there.

- Carnival of Money Stories #6 was hosted by Not The Jet Set and you can find our post entitled It’s the Grocery Game… And I’m Actually Interested listed there.

- Festival of Frugality #182 (The Revenge of the Fallen Edition) was hosted by Stupid Cents and you can find our post entitled Better Late than Never: Looking at the Recovery Rebate Credit listed there.

- Money Hacks Carnival #69 (The Dollar Bill Edition) was hosted by Own The Dollar and you can find our post entitled Raiding the Roth: Using a Roth IRA as Your Emergency Fund listed there. ]]> http://www.personalfinanceanalyst.com/personal-finance-carnival-round-up-29/feed/ http://www.personalfinanceanalyst.com/personal-finance-carnival-round-up-29/ http://feedproxy.google.com/~r/personalfinanceanalyst/zrPD/~3/WKtkP00BB_E/ http://www.personalfinanceanalyst.com/5-wacky-scholarships/#comments Fri, 26 Jun 2009 19:11:54 +0000 David R. Lampsen http://www.personalfinanceanalyst.com/?p=2059 With the academic year approaching, many students and families are searching high and low for ways to keep the tuition bills under control. All that hard work can be a grueling, humorless process. I thought we should take a few minutes to inject a few laughs into the process by noting some really bizarre scholarship opportunities.

Here are 5 of my favorites…

DUCT TAPE PROM: If you and your date are willing to attend your prom wearing nothing but duct tape, you can document your questionable fashion taste and qualify to pursue two $3,000 scholarhsips from the makers of Duck Tap brand duct tape. Back in my day, we rented the cheapest tuxes we could, because we had to pay that one creepy guy with the Camaro a lot of cash to buy our booze. Oh, how times have changed…

JUST LIKE IN THE MOVIES: You’ve seen Caddyshack, right? Of course you have. Be the ball. The gopher. The Baby Ruth in the pool. And, of course, the scholarship competition. The Evans Scholars Foundation hands out schoool money for those who thanklessly tote the bags of duffers. I can hear the Kenny Loggins music already. Apparently, this is serious scholarship and is very highly-regarded. At least that’s what Ted Knight told me.

COMPLETELY UNNECESSARY: We all know that those sci-fi geeks from high school go on to get free rides in the engineering departments of the very best colleges. It’s their revenge for all the crap with which they have to put up. That and the fact that geekiness is sort of becoming cool these days. In any case, it seems wholly unnecessary to give anyone who self-identifies as a “Starfleet member” extra money for school. But it happens. The Star Trek super fans can qualify for $500 scholarships. Live long and prosper.

SOUTHPAW PAYOFF: We wrote about this one a few days back, but it’s so good that it warrants inclusion on this list, too. Juniata College allows students who’ve been there for a year and who are left-handed to apply for a $1,000 scholarship. Not just any lefty will get the money. You need to be a good student and all that jazz. However, this is the one and only scholarship for the left handed!

KNITTING YOUR WAY TO COLLEGE: The American Sheep Industry Association wants to encourage folks to produce the best-looking wool garments possible. And they’re willing to dole out scholarship money for those who knit them. My granny would’ve had three PhD’s if she had known about this one–and I have the scarves to prove it.

These are only the tip of the iceberg. There are scholarships reserved exclusively for those with certain surnames. Every interest group from the NRA to Tall Club International is interested in funding the higher education of its members and their children. There are scholarships for out of the ordinary hobbies like duck calling and alternative lifestyles like nudism.

They’re all good for a laugh, but these wacky scholarships can also be a reminder that there may be more money out there for you to fund your college education than you realize. Hey, if someone is ready to give you school money for creating a gown out of duct tape or because your mom is a member of the Michigan Llama Association, there’s a good chance that you qualify for one or more scholarships that might not be as obvious as those based on athletic prowess or high SAT scores.

We’re two weeks into the Grocery Game. That really isn’t enough time to assess its overall value, as coupon accumulation can take awhile, etc. Remember, one of its tenets is using the right coupons at the right time, which means it may take awhile for that perfect moment to emerge.

So far, I’m still optimistic about the whole thing.

As I researched it, however, I learned about its #1 challenger, Coupon Mom.

It seems like the two services are often mentioned in the same breath, so I decided I should probably take a look at Coupon Mom.

I love the fact that Coupon Mom is free. Free is good. And joining was a quick process. However, I was forced to click through (and decline) a series of “special offers” as part of the sign up procedure. These ran the gamut from getting auto insurance quotes to “reading emails for cash”. I can’t begin to explain how much I dislike the whole “read emails for cash” industry, so that was a turn off. Nonetheless, Coupon Mom has to make money somehow, so I didn’t let it drag down my opinion of the site.

I will say this. Saving $5 over Grocery Game is nice, but it isn’t a huge deal for me. I’m interested in the bottom line. Thus, if Grocery Game is worth $6 more than Coupon Mom, the “free” thing is essentially meaningless to me. Still, it’s nice.

I took a look at what Coupon Mom had to offer in terms of savings information for my area. Unfortunately, they only cover one store in my immediate vicinity. Grocery Game covers all three of my local chain grocery stores.

The list of bargains itself is presented intuitively and the “free” stuff his highlighted for quick discovery. It’s not quite on par with Grocery Game’s color-coding system, but that’s not a big deal. It’s usable.

I pulled the Grocery Game list for the same store and compared it to Coupon Mom’s. Much of the data was, of course, on both reports. The differences in calculations, etc. were generally negligible. I did find a few coupon-driven savings opportunities on the Grocery Game list that didn’t make the Coupon Mom version, however.

Coupon Mom does have one thing really going for it, though, if you plan on being a hardcore saver. Their forums are active and seemingly filled with very helpful people who are serious about saving money on groceries. If you’re interested in really becoming “involved” with the process and uncovering savings opportunities you might otherwise miss, this is a huge mark in CM’s favor.

After looking at both options, I’m coming down on the side of Grocery Game, but not be a wide margin. The price difference between $5 and free is negligible and in my case, GG covers my area better. If Coupon Mom was on top of my other local chain stores, I might break in the other direction. As it is, though, I’m going to end up more than $5 ahead with GG.

Overall, I’m impressed with Coupon Mom. For those in the right places who don’t mind working just a little harder to get things done–or those who are ready to get serious about saving and will use the forums, it’s a great choice, too.

Sort of funny, huh? Those PC evangelists of the late 80s obviously didn’t count on “adult images”, World of Warcraft, Second Life, Twitter, MySpace, or videos of dancing hamsters.

Occasionally, however, you really can use your computer to do something valuable and serious.

A loan amortization table may not be as funny as trying to figure out what happened to Ellen Fleiss, but it can actually provide you with some actionable data.

If you want to make a loan amortization table in Excel, you’ll need only a few things.

1. Excel
2. A little time
3. A good set of instruction

If you’re looking for a shortcut, you can download a loan amortization calculator template for Excel free of charge.

You can get one here. Or here. There are several other versions of the template floating around out there. If you want to make a loan amortization table in Excel, just click the link and download the file.

That being said, many people who are interested in playing with their loan numbers aren’t going to do that. As Frank the Financially Savvy Atheist notes, there are reasons why people won’t use the freely available amortization calculators on the web, and those reasons probably apply just as well to creating a table in Excel:

1. You can customize your table to suit your needs. See what is your current loan balance. You could even enter in some home appreciation assumptions to see how your equity builds up. This would be important if you are trying to see when you can get rid of PMI payments.
2. Like everything else in life, some people are DIY’ers. For me in particular, I like having amortization tables for all my loans, so I can see where I am each month. It gives me a sense of control, whether it’s a false sense or not.
3. It’s easy! Trust me.

While Frank does provide a tutorial to help you in your quest to make that Excel table (and provides some good analysis about why you’d want one in the first place and what you could do with it), I believe in getting my instructions directly from the horse’s mouth. That’s true even when the horse in question wears glasses and goes by the name of Bill Gates.

Excel is a Microsoft product, so why not start by getting instructions straight from Microsoft? Despite the fact that MS can annoy in a million and one ways, it does offer some pretty decent online documentation for this particular task. It’s a pretty straightforward ten-step process. I know, ten steps seems a little heavy. Don’t worry, some of them barely qualify as “steps” on their own.

Oh, and if you have Microsoft grudges and would prefer to use Open Office to create and use your amortization schedule, the info is still solid. It works with the open source option.

Personally, though, I’ve found that the best tutorial covering how to make a loan amortization table in Excel is probably the one at TVMCalcs. This site, related to the time value of money and financial calculator tutorials, provides a nice illustrated post that will march you right through the process of creating an amortization table.

Joseph Rubin’s Excel tip site provides some extra instruction for those who want to really play with the numbers. If you want to make grace periods and random payments part of your evaluations, you’ll want to look into Rubin’s tips.

There you have it. You can use your computer for something productive today!