Money Saving Experiment Gone Way Too far!

I'm not sure this is so much a personal finance post about being frugal or perhaps the admission on a really absent minded routine that I shouldn't even admit to!

It started out around last Thanksgiving, (I forget if it was before or after) My wife Cheryl and I were talking about disposable razors....but to be more specific, I was complaining that I went to get a new razor out of the drawer only to find not a single one left.

I had bought a 10 pack (or is it 8 pack) about 2 weeks earlier, and since I used them up at a rate of about one per week, I figured that given there were 2 of us, they would last about 5 weeks.

She told me they were disposable and that she used one a day.....to which I replied that I used one a week, and that I thought she was wasting them. (Look, I can be a real pain in the butt at times...I mean I pay $1 for 8 to 10 of these.....so it really was a silly petty point....but to me it was still waste)

So I told Cheryl that I bet I could use one of these for a month before throwing it out....and that it would NOT cut up my face. (which is what she told me happens if she used it twice)

So I went off to run my experiment....to shave with the same 10 cent disposable razor for a month.

I would learn to really care for it....cleaning and drying it in order to maintain the sharpness of te blade. It became part of my morning routine!

It became such a part of it that I shaved with it until this morning! That's right....like about 3 months with the same cheap disposable razor....and I never cut up my face.

In fact, I ultimately stopped using it because it was getting very dull and requires about 3 passes over an area to get close enough.....but it was still a decent shave. (nothing like new though)
So I suppose I tool the experiment a bit too far....but I did so almost by mistake. But I stand by my position that these are dam decent razors! (I had tried others at the Dollar store, and none were as sharp or kept their edge as these do)

Debt is Slavery - Book and Interview of Author on MONEYBLOGGER Podcast

I was listening to the MONEYBLOGGER Podcast this morning on the way to work, and the interview was one that I found very interesting.

It was an interview of Michael Mihalik, author of a book titled "Debt is Slavery"....and this is a title that I totally appreciate.

I appreciate it not so much because of my own troubles with debt, but some of the people I know (in my own family too) who have found themselves working every hour of their existance just to pay the minimum payments on credit purchases for things they don't even own any more!

The book is apparently 10 short chapters that outline 10 "rules" for handling money. Mr. Mihalik talks about a talk he had with his nieces, and the 10 points he outlined to her. It changed her life, and so he felt it might be useful for others too.

During the Podcast he discussed 2 of the 10, and he did so in a way that brought them home and easy to understand. His nieces comment to him was that she had wished her mother or father had explained money to her in such a clear way.

I love the idea, and I might just buy the book to read and pass along.

Check it out yourself....it is coming available on February 28th and is currently available for pre-order at Amazon.com as well as the Publisher's website. It costs only $14.95, and looks like a simple yet useful read.

BTW: Here is a review of this book by another personal finance blogger, www.mymoneyforest.com.

Also...here are two articles by Mr. Mahalik:
1) Debt–The New American Slavery (about his book)
2) What is Financial Security?

Great Money Discussions In The Least Expected Places

This afternoon I had to bring my van to get inspected and I brought it to a local mechanic that my family has been using here in Hudson since 1993. (When he opened)

He is a good mechanic, and honest guy, and I have had some good conversations with him in the past. (He used to be a Volvo Mechanic but opened his own shop...and I had a Volvo back then, but I now bring him anything from Jeeps to Honda Civics...but I digress)

So tonight when he sat down with me to get the inspection paperwork squared away, we started talking about the economy and I was surprised at all the ground we covered. Not that I didn't think he knew as much as he does, but in the more than 13 years I have known him, we have never talked about politics or money.

He is apparently a fairly liberal fellow, and I a conservative...and we actually agree on quite a few things. (which doesn't surprise me since some of my other liberal friends also have violent agreements with me too.)

Anyways, we started off by talking about some of our friends who were unemployed....the state of the economy, outsourcing, the housing bubble, the stock market melt-down in 2001, the current negative savings rate, medical outsourcing to India (which he had not heard of, but could see coming once I mentioned it).....

I admit to often being a "glass half-empty" person.....the Engineer in me is always looking for possible failure modes and looking for all possible recovery scenarios. He seems like a glass half-full guy, but he wasn't too positive about the trajectory our country is taking. (in his words, ever since Reagan)

Well, it is funny he picks that time-frame for his start of our countries woes, because it was about that time that our national savings rate began to take a nose dive from about 8%-10% to the current negative 1% savings rate. (he picked the date before I told him this statistic)

Anyways.....we sort of agreed that things would probably continue in the manner that they currently are.....in my words, like a frog sitting in a pan of water on the stove set at low...the water is getting so hot so slowly that the frog does not even notice that he is soon going to be dead from boiling water....the change is so slow he never sees it coming until it is too late.
(I think that this is what the world means when they talk about our having a "soft landing"....a soft crash landing)

We also agreed on two things.....those with money would probably fare better in the long run (so saving was important), and that slow and steady wins the race. The race for a fast buck puts you even more at risk should a downturn strike while you are exposed. (I have a brother in-law who can attest to that...and he owes so much I can't even fathom EVER being loaned that much....it absolutely shocked me!)

Feedback for American Express....Card Theft Security Suggestion

I recently called American Express about a charge that their account security department questioned. It turned out to be a good charge and simply one I made on a quick trip to NYC this past weekend.

But after that discussion was done, I mentioned something to the card security person I was speaking to, and their response sort of surprised me.

I noted that I thought that AMEX having their card verification number on the front of their card was NOT as secure as say Visa or Mastercard with theirs on the back. I told the security representative that I understood why the number was printed rather than embossed (to keep it off imprint machines) but being on the front with your name, the main card number and the expiration date made all the cards vital information easy pickings for being photographed.....say with a camera phone. (NOTE: For the geeks out there, apparently the security number itself is not all that difficult to generate, with the algorithm listed on this Wiki page)

This could be done fairly easily by the person handling your card at the checkout, but almost as easily by a person standing next to you in the check-out line! Having some of the important information on the back makes it perhaps at least a little more difficult (or obvious) when someone goes to photograph it.

The AMEX person on the phone thought my idea was an excellent one, and they said it was one they had never heard before, and they were eager to pass them onto people in the security department .....YIKES!

Well, I think my thoughts are sort of "obvious", and I would be surprised if no one at AMEX has thought of this issue....but what if they haven't?!

I wasn't going to bother posting anything about this, but a friend of mine suggested it was "blogworthy".....and I guess it instantly struck my that it just might be indeed.

So I might just take the bull by the horns and put a small piece of tape over my four digit security code to keep any roaming eyes (and camera) away from it. The tape can always be peeled back to read it, but that would be one of those "obvious" moves you would probably recognize someone doing.

Income Limits when using Savings Bonds for Education

My mother bought our daughters Savings Bonds so that they could be used for their education. The EE bonds were marketed as giving tax free interest if used for education.

Well, I went out to look at turning in some of our bonds, and I came across the limits needed to qualify for this tax free status.

Yup....it is a means test of income, and now that my wife has passed away, I am considered single and my means test level goes way down! (from $124,700 to $78,100)

Well....that pretty much makes my savings bonds 100% taxable.....not the savings my mother was hoping they would be. (I have included the verbiage on this taxable income limits from the SavingsBond.gov site below)

Luckily some of the bonds are in my daughters names, so I will look into turning some of those in. Each of them also have an I-Bond which is not getting very high interest, and after next month will be over 5 years old and this will allow it's sale without interest penalty. (and tax savings on interest when used for education)

Since they are both over 18 years old, the income limits are their own, and not that of their parents. At least we have a bit of tax savings out of these things.....otherwise, I am very disappointed. (I would be better off quitting my job for the next two years and taking advantage of all these tax situations as well as the FAFSA benefits of a low-income family.....but that would ruin my long-term retirement savings trajectory)

_______________________________________

Tax Year 2006 Income Limits

For single taxpayers, the tax exclusion begins to be reduced with a $63,100 modified adjusted gross income and is eliminated for adjusted gross incomes of $78,100 and above. For married taxpayers filing jointly, the tax exclusion begins to be reduced with a $94,700 modified adjusted gross income and is eliminated for adjusted gross incomes of $124,700 and above. Married couples must file jointly to be eligible for the exclusion.

Hey...Online Billpay is Handy and Cool

Hey...maybe I am still a dinasour, but I just used online Bill Pay for the first time tonight. I paid one bill.....my electric bill.

The thing I like about it is something that I never realized was a feature. I was able to schedule the payment for March 1st, and today is only February 15th!

I had already written the check, and I like to dispatch bills as soon as they come in...so I don't forget them. Well, the problem is that the check is cashed and out of my account perhaps 2 weeks earlier than it really needs to be!

But with online bill payments, I am able to schedule the actual payment, and still dispatch the bill when it comes in.

Ok....so maybe my overlooking this feature was a very basic oversight....but still something I a excited to discover.

The other big plus is that all my bank transactions are accounted for on the online register...with the name of the check payee. (unlike when I write them and keep track of things manually in my check register.)

Will wonders never cease!

Planning for disaster....no one wants to do it, but I suggest you do.

While in the shower this morning I began thinking about how my wife Cheryl and I planned for the future. My thoughts of course began with my thinking sadly of some of the plans we would never accomplish together.

But not wanting to be depressed, I quickly shifted gears over to all the things we had actually accomplished. I thought about all those right up to the events of December 21st when Cheryl left my world.

But this triggered even more thoughts, and that was of how over the years we had actually talked fairly regularly about worst case situations and recovery scenarios. Most of these thoughts centered around not out own comfort, but rather how we would continue to manage the responsibilities we had taken on in our life. (and trying to not overly burden whoever survived and had to take over those responsibilities)

The most obvious responsibility we understood we had was our kids. We had plans for them, or at least plans for ourselves and how we would support them as they grew up and into self-sufficiency.

Yea, I know, that sounds kind of like how and Engineer and an Accountant might look at things.....but then that's what a great deal of Cheryl and my education came from!

Before you go off and say "Hey, what were you two paranoid of?" It had nothing to do with being paranoid, and everything to do with understanding that we had to take responsibility for ourselves, and all the things we chose to do in life. We also were thinking about each other. Should one of us pass on, we wanted to make sure the other could continue the work we had started without too much extra strain.

When you take on the responsibility to have kids, or even pets, you need to think about it as a life-long calling. If you don't do that, you are shirking your responsibility and someone will surely call you on it later in life. (and you will not like it if it is your kids who do)

I'm not trying to me mean, or even suggest we were better than anyone....we made our mistakes, and we dropped the ball numerous times. But most of those were unintentional. I can honestly say that I believe we always tried to do the right thing. (and I hope I can continue to try)


SAVING WAS BASE: (but family and charity were in there too!)
We made frugal living and lack of debt the base of our plan. We tried to not be cheap, and wanted to support our family and community as best we could. We certainly saved, but should the school or one of the other charitable groups we volunteered with need something, we kicked in the time and often the money to get the item done.

But we tried to never go into debt, and we tried to make our savings goals a real target...like sending the kids to school.


CALCULATING OUR BUDGET:
Chery and I were always calculating a cash flow budget for the long and short term. We had goals for savings every year, and we never blew the money if we topped our goal. We knew we had to save for a rainy day.


INSURANCE FOR THE BAD TIMES:
We never dwelled on it, but we did discuss the possibility that bad things might happen. Both of us had cousins or uncles who had been in accidents, and we saw first hand what the lack of planning had done.

We tried to have just enough insurance to get us over the rough spot.


OUR THOUGHT ON LIFE INSURANCE:
We decided to pick-up life insurance in about 2002. (If I recall) I think it was based on the fact that the girls were about ready to go to school, and the job market was rocky. (I didn't get laid off until about early 2004, but the economy was rough)

I had insurance through work, but what happened if I lost my job. We would be instantly uninsured, and at a time when we were least capable of paying for it.

So the concern for my passing was the enough money to not only pay for the arrangements, but to pay off the house and get the girls through school. With those things paid off, Cheryl would have lower cash flow needs, and would be able to make ends meet on her salary.

My situation was a bit different. I had the bigger income, and would be able to afford the school costs.....but had to get the non-discretionary spending down a bit....so I think we decided on a much smaller amount because my income was much healthier.

The key was that we had a plan, and we tried to make it a good plan end-to-end. (with our day to day approach to spending to our purchase of life insurance)

My planning is not over......our family is far from wealthy, and I still have the goals for my daughters education and my own retirement. But I'm glad we took the steps needed to plan and set ourselves up for all contingencies.

No one wants to see the worst come, but who wants to think of leaving the world and leaving your dependents alone AND unable to tread water financially.


PLAN!
Do it for your spouse....do it for your kids.

Not all Credit Unions are Equal.....

I have been on a sort of quest....I think it might be simply to keep myself busy, I am not sure.

But I have had two things that have been occupying my mind as of late.....getting rid of two of my four cars (auto consolidation) and making a few changes to my financial infrastructure. (does that even sound like it makes sense?)

The auto consolidation is simple enough to GROK, but the tinkering with my money accounts and payment systems deserves a little explanation.

First, I have to get rid of my current CitiBank Mastercard. The CitiBank customer service rep. treated me like an idiot, and if ot were not for my asking a simple innocent question, he would have let me lose almost $1000 in rewards without so much as mentioning it. (and his reason was that I should be intimately aware of my contract.....to which I asked, what part of your job title..customer service....did they forget to explain to him in his training!)

Then mt second quest is to find a safe place to put some money for a short time, that will still earn a bit of interest.

I was also thinking of trying to get all my banking under the same online area...so that I could make all the payments and transfers online from the same account. (I currently have an AMEX card, a Mastercard and a Citizen Bank account....all online, but nothing is linked.)

So initially I was letting the credit card search sort of drive the other things, but I just found out tonight that I might want to let the rate of return on my CD be the driver instead.

It turns out that CD yields are not equal. I already belong to the USAlliance Credit Union at work. I joined because they gave me $10 to open the account. I opened it with something like $10 bucks, so I doubled my money that one say.

But it turns out USAlliance has a couple of nice things going for them.....a very low rate Visa Gold Credit card (7.99%) and a pretty high interest rate 15 month CD (5.34% APY).

As of last night I was thinking of opening a DCU account, but I might just go to USAlliance and drop the money in there for now.

I guess it pays to shop around. (duh.... :-)

Why do people BLOG about money?

I suppose people BLOG about money for the same reasons people BLOG about other things.

Some want to pass on a particular talent they have to others. Some want to further focus their own goals and aims...so if they force themselves to BLOG about it, they will tend to keep their eyes on the ball better.

Writing a BLOG can also create a sense of peer pressure as well, and this can keep people on the straight and narrow.

Over a year ago I found a Podcast that is quite simple in nature. It is called the Money Blogger Podcast, and it is a very simple format......a very simple interview format.

I love it, and I love it because it basically askes very similar questions to a number of Persoanal Finance BLOGGERS and finance authors. I love it because while we can read explanations of these same questions on most of these people's BLOGs, being an audio format, this Podcast adds all the audio inflection you get when you get people talking about things that they have a passion for.

Many of the BLOGGERS interviewed are a part of the PFBLOG list of money Bloggers.

Some Personal Finance Bloggers focus on simplicity, some on reducing debt, and others about how to invest or even very specialized topics like currency trading.

Not all people are alike....and neither are Personal Finance BLOGGERS.

Back to long-term money thinking.....

I have started to come back around and think about the long term investment outlook a bit. I was talking to my financial advisor and he made a comment that perked my ears up.

He noted that the market was still going up. It initially perked my ears up because I had just decided to go from a 70%-30% equity to bond portfolio to a 50%-50% mix.

I perked up because I thought I was making a mistake, and I guess I looked worried to him because he instantly shot back and said "This is when I start to get worried about the market. When everyone in the world thinks it's hot is when I start to worry that it is at some sort of a top." (which made me feel better)

But let me not give you the wrong impression....I am not a market timer. At least not with the majority of our money. (I have a very small amount that I had initially had in Vonage stock that I have since moved into two Chinese telecom stocks....but even that money has been sitting there inactive.....and I have no idea how that is doing!)

I am certainly more of a buy-and-hold person. I think I made one rebalance in the portfolio in the past year....and I went from about 60%-40% up to the 70%-30% I mentioned above......and just a couple of weeks ago down.

I guess I have been a bit pessimistic for the past year, but the markets seem to continue to be fairly strong. (except the housing market that is)

So I'm starting to get re-energized about thinking long term again.

Here are a few online calculators to help you think about the long term affects of interest and money growth.

First, this one I find interesting because it lets me easily calculate what a million bucks in 1980 (when I graduated College and dreamed of such things) is today. (how much I need to have to have the buying power of a millinaire in 1980)

Then this Yahoo calculator lets me type in my current financial situation, play with projected interest and load rates, and calculate my worth in future years. (in net and constant value dollars) That is a lot of fun because it gets me charged about about saving and long term growth.

Of course, being the visual person that I am, I love to look at this online graphing program that lets me watch money growth of particular situations. You pick all ins and outs of your investment and expense money flow and it graphs the growth....albeit with a static year to year model. (such is life....no model is perfect)

So I guess I suggest that you start playing with these tools and put yourself in a mindset of Rip Van Winkle awakening from a nap in 10 or 20 years.....then put your investment on autopilot until then. (doing an analysis and perhaps rebalancing every 6 to 12 months)

Low savings rate for 2nd year......should we worry.....should we save?

I read an article in my local paper (here it is in another) that reports that in 2006, the personal savings rate was again negative. It was over twice as negative as it was in 2005......-1% vs -0.4%.

This is also only the second time there have been two years in a row of negative savings....can you believe it! Only the second.....but the worrysome thing is that the first time was back in 1932/1933....that's right, back in the great depression when there was a 25% unemployment rate.

What does all this mean? Should those of us who save worry? Should we stop savings for fear that money will ultimately become worthless, or should we instead make sure we have at least some of our investments in a place where they are at least inflation protected?

I like the latter case because I think that there will eventually be a time when the American Dollar might fall off it's high horse and we will have to have some sort of hedge against that.

Where should we hedge? You've got me....right now a dollar crash would affect everything.....so it would seem there would be very few places to hide....but as the dollar continues to soften, there will be places that become naturally strong.

Some thing the Euro will be it....who knows. Perhaps some other small currency we don't have our eyes on.

I'm going to continue to try and save....but not in my mattress, that's all!

My Finance Tracking System

After thinking about how I would track things, talking with my mother in-law and trying out a few finance tracking program demos, I decided that a semi-manual approach was the best for me.

First of all, I have 12 separate envelope folders marked January through December. I have a monthly budget worked out on spreadsheet, and I print one out and glue it to the front of each envelope.

The budget form has the projected budget and space to the right to list the actual expenses. As bills come in, I pay them, mark their date and payment amount on the spreadsheet and file the receipt in the folder.

At the end of the month I access my credit card and bank statements online, print print them and pull other assorted items out of them putting them down in the expense side of the paper. I then file those statements in the folder.

When the month is over I will take the envelope to the computer and input my expenses into my spreadsheet and this way I will have everything calculated and ready for trend analysis and an end of the year roll-up.

The various budget or money tracking software I tried were more than a bit cumbersome to use, and they sort of required me to enter the transactions into the computer as they occurred. (otherwise they it would be very hard to do it later)

This way, I get to write out checks while I eat at night, take simple notes on the front page summary and enter them into the spreadsheet all at once...when I have the time. The hand-written page still gives me a sort of "snapshot" of my activity during the month as I go along....so there is no worry about losing sight of my spending.

I have only done this for a month...and only a couple of weeks in reality. I like it so far...and everything will be in one place at years end.

So far...so good.