Archive for the ‘Managing Finances’ Category
3 Random Things You May Have Missed
Posted by: Todd Metheny in Frugal Living, Green Living, Managing Finances, Reviews on October 21st, 2009
In case you missed it...
I’ve been working on a pretty interesting appellate brief at work. It’s interesting, challenging, and mentally stimulating. It’s the kind of work we always say we want. It’s also hard. Seth Godin refers to the time when things get hard as “The Dip” (and wrote a book by the same name). It’s a phrase I’ve liked since I first heard it, and I find myself trying to push through things sometimes by telling myself, “you’re just in the dip right now, Todd, push through this.” So I’m pushing through it.
The three things I decided to pimp in this post are all things that should make your life easier, in some small regard, either by organizing data for you (see number 3), saving you a couple bucks (see number 2), or by making it easier for you to make sure your stuff is put to good use when you’re done with it (see number 1). I’m calling it the 3 things you may have missed, because if you’re the kind of person that reads a lot of blogs (and maybe even if you aren’t), you’ve probably either used or heard of these tools. Or maybe I’m just suffering from the curse of knowledge, and assuming, as people subject to the curse do, that anything I’ve heard about you’ve heard about. Obviously that’s not always the case. Without further ado:
1. Freecylce.org – I’m including Freecycle because I just think it’s a pretty cool idea. That’s why I wrote about Pimp this Bum. The concept is simple, people form local groups in their area. When you have something you don’t want anymore, you post the group and let them know what you have to offer. If you see something posted that you’re interested in, you can let them know that you’d like to have it. ”It’s the whole, one man’s trash…” philosophy. It’s green, too. They don’t want you to throw your old stuff away, because someone else might still be able to get some use out of it. Of course, you could give your stuff away (or sell it) on Craigslist or a like site as well, but Freecycle seems to be more of a community thing. If you’ve ever used it, I’d love to hear about your experience with it. My community here in St. Louis has over 6000 members. I’m thinking about checking it out. I’ll have a better read on how much value it adds after I do.
2. Restaurant.com – I’ve written about this little number before, and I tell people about it every chance I get. So does my wife. Between the two of us, I think Restaurant.com owes us for all the word of mouth promotion we’ve offered to help tip their site. If you’re not familiar with it, Restaurant.com typically offers you the opportunity to buy a $25 gift card for just $10. There’s a caveat and a bonus. The caveat is, you’ve got to spend $35 at the restaurant. Some other restrictions may apply. I’ve seen some that can only be used during the week. Some restaurants won’t allow you to use the certificates on alcohol. For the most part, though, you can use them as you please. The other thing to keep in mind is that these are usually newer restaurants or places trying to get noticed. Your favorite place probably won’t be on there (but hey, try something new). Those are the caveats.
The bonus is, if you sign up for email updates from Restaurant.com, you never have to pay $10 for the $25 gift card. Every week, you’ll get a coupon code by email that gives you at least 50% off. About once every two months, the discount code will give you 80% off (just $2 for a $25 gift card!). The week of 9/9/09 it was 90% off, but that’s the only time I’ve seen that after using Restaurant.com for about 2 years. For what it’s worth, this week’s discount is 70% and the password this week is “pumpkin.”
3. Mint.com – The other day I was talking to a mother of four, and she said something to me to the effect of, “I don’t know where all the money goes. We live frugally. We drive old cars. My kids wear second hand clothes. We don’t do anything extravagant. And yet the money is never where we need it to be.”
Keeping and maintaining a budget is hard to do. I admire people that can do it. Mint.com isn’t necessarily a budget substitute, but it sure can help. It can definitely help you answer the question – “where does the money go?” Mint tracks your purchases and spending, and categorizes it for you and attempts to develop a budget. It will also send you alerts when your bills are due, and has several other handy tools.
The annoying thing about Mint is that at first you spend a lot of time re-categorizing expenses that were they haven’t categorized properly. Mint does get smarter if you stick with it. It ends up being something that requires almost no effort on your part. The best thing about Mint is that it’s free. So if you don’t like it, nothing has been lost.
Hopefully one, some or all of these things offered value to some of you. Thanks for reading.
3 Tips on Buying a Car
Posted by: Todd Metheny in Frugal Living, Managing Finances on July 27th, 2009
I really don’t know much about cars. I’m somewhat ashamed of this. My dad owned a construction company (and his dad before him), and they knew a lot about cars. They were the kind of guys that could fix anything. My dad used to buy the oldest, cheapest dump trucks available and then find a way to get them running for whatever upcoming job he needed them for. The company had its own in house mechanic, but my dad ended up doing his share of mechanic work in a pinch.
One thing I truly regret in life is not learning more of the things my dad knew. I don’t think I’m unique in this regard. I know lots of guys whose dads know a lot more about things like that than they do. In some ways, I didn’t try to learn enough about what he knew because I assumed that he’d be around to do those things.
There are some other things, besides working on cars, that I think I’m actually pretty good at. I’m a pretty decent consumer. I’m pretty good at not making impulse purchases, I’m good at trying to learn things from people now (having learned from my own early mistakes), and I believe I’m good with money.
So while I probably couldn’t fix your car if it were broke (besides a jump, tire change, or oil change), I think I can give you some decent advice about how to buy one. I also have the benefit of hindsight, having just bought a car last November. Here are some of the things I feel like I picked up along the way:
1. Financing – If you can help it, you should avoid ever borrowing money to buy a car. It’s just not something that makes financial sense. It’s important to know the difference between an asset and a liability. Cars are liabilities that depreciate quickly. Anytime you buy a car you’re buying something that’s going to be worth less than what you paid for it in the very near future. You’re paying interest on something that you’ll never see your money on.
So how to handle this dilemma? I think the best way, if you don’t have gobs of cash lying around, is to have a little foresight. Decide what your approximate price range is on a car you intend to buy, then calculate what your payment will be at market interest rates on consumer goods. Then pay yourself that payment each month (or more if you can) into an interest bearing account. Don’t buy the car until you’ve made the payments. Then, instead of paying interest on your purchase, you’ll be earning interest on the money you’re saving. Of course, if you’re car breaks down and you can’t wait, you might have to break this resolve. Still, if you start saving for your next car in a “car fund,” you shouldn’t have to use much (or any) credit on your next automobile purchase.
If you do have to use credit (if you have a car that runs, you don’t), it’s usually better not to finance with a dealership. Focus on getting the lowest interest rate possible. If you belong to a credit union start there. Take the time to shop around.
2. Research – One of the most important tools you have at your disposal is your ability to research. I would suggest Consumer Reports as a starting point. Use their reliability ratings to determine what the major or minor problems have been for a particular make, model and year of car. I love Consumer Reports in general, but the car reliability ranking is some of the best work they do.
A couple of other tools that wouldn’t hurt to consult are the Kelly Blue Book values (for an approximate value for what a car should sell for in a particular condition), and Carfax reports (or other vehicle history report), if you’re planning on buying a used car.
3. You don’t have to buy from a dealer. There are reasons to buy from a dealer. If it’s a relative or family friend, maybe that’s who you should buy from for relationship purposes. If it’s someone that regularly patronizes your business, maybe it’s important to reciprocate to preserve your business arrangement. Buying for a dealer can have some other advantages as well, such as warranties (which have value of their own).
If you are going to buy from a dealer, shop online first. These prices are often close to the lowest you can get from a dealer. This is because these are prices that are designed to get you into the door. I would print out the price and take it into the dealership. Make this the new starting point. Sales people will hate this, because it takes a lot of their rope away. When I was shopping for a car, my wife and I found a price a dealer had posted on eBay. We went to the dealership and negotiated a bit on price. They ended up giving us what they told us was their rock bottom price. We told them we thought we saw it for cheaper than that online, and they told us we were mistaken. We went home and checked and we were right. Their “rock bottom” price was about $900 than the internet price. We didn’t end up buying from a dealer, but if you’re going to visit a dealership, print that thing out and surprise them with it sometime during the negotiation.
All things being equal, you can probably get a better deal buying from an individual. The individual has much lower overhead – they don’t lease land for their dealership, don’t pay a commission to salespeople, a support staff, etc. On top of that, they might have another significant reason or motivation to sell. And on top of that, they might price their goods inefficiently. A private seller can still get more money selling it to you at a cheaper price than a dealer.
Those are my tips. We bought our car from a private seller we found on Craigslist. It was (still is) a 2004 Toyota Camry with one previous owner (two total) and just under 50,000 miles on it. The Bluebook value was listed at $14,800. We bought it for exactly $11,000. We found almost the same car at a dealership for a lot more. If you have tips on car buying or car buying experiences you’d like to share, please let me know by email or in the comments. Thanks for reading.
Having a New House
Posted by: Todd Metheny in Frugal Living, Managing Finances, Real Estate on July 22nd, 2009
Taken from our back deck, that pond has fish in it.
We went from about 800 square feet to about 1450 square feet not counting the basement. We lost half a bathroom in the process, somehow (we still have two toilets but now we only have one shower, in a bathroom half the size of the two bathrooms we had before). We gained another unit of about the same size and a couple new tenants.
We absolutely love the new place, but having it has made it harder to control our spending than before. For one, any time you move into a place that’s bigger than where you lived before, you have to fight the desire to fill it up with stuff. We’re not planning on buying new furniture, but our bedroom is pretty big and we’re talking about moving up to a king size bed.
We also have spent more money on consumer oriented goods recently. All of them have been for me, so I don’t have anyone to point at but myself. I’m typing on the most expensive of those purchases as we speak. We talked about just getting a desktop and a netbook, but I was seduced when the salesperson started showing me all the nifty stuff the mac could do.
On top of that, our new home is over 100 years old, and there are plenty of things we’d like to do with it. We have a brand new back deck that we’re going to buy patio furniture for. We’re probably going to buy a potted tree for the front one (the best place to sit and watch the world go by). We have a spot picked out for a home gym in the basement that will require buying several things (a good pair of running shoes is still the cheapest way to get in shape!), though I think it will get more use and save more money than a gym membership, so that should pay off. Read my friend Josh’s comments on the home gym. I’m finally in a place where I can take his advice on constructing my home gym.
Living so close to a park has also really made me want to get a bike. My wife already told me that if I get one, she gets one. Numerous other projects have popped up, including adding a shower to the bathroom that doesn’t have one. All of these things will cost money.
Making things more difficult is the fact that Rachel’s making money now. I think, in some ways, it’s given us a false sense of security. We need to revisit our budget and try to see where all the things we want to do fit in. It’s getting too easy to justify purchases lately. I think it’s good to have to wait for things for awhile. You avoid impulse spending and are less likely to experience buyer’s remorse.
My point is that it’s easy to spend a lot of money when you buy a new house. The thing is, you probably just spent a lot of money buying the house to begin with and should probably be focused on how you’re going to pay that back instead of how much stuff you can get to shove into it. Try to keep that in mind. We’ll try if you try. Thanks for reading.
On a totally unrelated note, I’ve been getting a tremendous amount of comment spam. It’s getting to the point that I’m afraid I might have to add one of those ‘are you human’ boxes to the site. I’m somewhat afraid that would discourage commenting. I know that I sometimes feel compelled to comment on something and then don’t if it ends up being too much trouble. If you read this blog (or others) and have an opinion, I’d love to hear from you by email or in the comments.
The New Hidden Costs of Flying
Posted by: Todd Metheny in Frugal Living, Managing Finances on June 8th, 2009
This weekend, we flew to Boston on a United Airlines flight. Kansas City doesn’t fly to Boston, directly. You have to stop somewhere (Chicago O’Hare for us). It’s a trip we’ve taken a couple of times now, since Rachel’s brother RJ has lived there for the last several years. Most airlines are still trying to find a way to operate profitable businesses. Without really delving into the numbers, Southwest Airlines, one of the only airlines with a reputation for profitability, is just barely profitable.
Because it’s a tough business to make money in, airlines are having to get more and more creative. If you raise fares and your competitors don’t, your volume is going to go down and you’ll be hurting even worse. Most people, including my wife and I, shop for airfare based on price. If you can get there in the same amount of time for fewer dollars, why would you do anything else?
One way many airlines are trying to make an extra buck is by charging you to check your bags. The first bag costs $15, the second costs $25. Obviously, this adds another way the airline can make money. If you’re going on a long trip, most people will pack a bag large enough bag that they’ll have to check at least one. This also offers an incentive for people to pack lighter. Less weight equals less fuel. I’d love to see a study on whether fuel consumption and weight have actually been impacted by the bag charge.
United also offered certain seats with additional leg room for an extra $39 per seat. These seats also happened to be closer to the front of the plane. We opted for the cheap seats. A lot of other people did, too. On our return flight, the plane was fairly full in the cheap seats, but the extra leg room seats were sparsely populated. A lady sitting near my wife and I asked if she could move up to one of those seats. The attendant told her no because those seats had an additional charge. I guess the airlines policy is to just leave those seats empty rather than accomodate their guests. I understand their thinking. If we let people move up into those seats, they won’t have an incentive to buy one next time. We want them to experience the pain that the smaller seats offer, so they’re not gambling for the better seat for free. On the other hand, I think it’s a little ridiculous to not let people move up once the plane is in the air. If you could make 15 people more comfortable at no additional cost, why not do it?
These extra costs are just a couple of ways the airlines are looking to save/make money. According to this article, some airlines are starting to charge for beverages as well. American Airlines and US Airways both charge for the first bag. I would not be surprised in the least to see this become the industry norm. Southwest, whose goal (according to their slogan and the book, Built to Last) is to be THE low cost airline has so far not implemented any of the upcharges mentioned. They don’t have assigned seating, don’t charge for your first two bags, and still give free drinks. You can’t buy leg room on a Southwest flight. They do have a program that enables frequent fliers to boarding group A status no matter when they check-in, but other than that they seat people on a first come, first serve basis. Still, with their peers looking for additional things to charge for, I can’t see them bucking what’s becoming the standard in the industry forever. Until they do, they’ll get the slightest premium from me whenever I fly. At the very least, I’ll remember to add $15-25 for checking bags to the price of any ticket I book that would involve me having to check a bag. Thanks for reading.
The Best Low-Cost Online Brokers
Posted by: Todd Metheny in Managing Finances, Value Investing on April 20th, 2009
My wife and I keep our retirement accounts with Vanguard. In those accounts, we have a mix of low cost index funds. We also have a small amount of money at Vanguard in taxable accounts, but we typically dump that money into our retirement accounts when they aren’t maxed out. That being said, we also hold some individual stocks. For those we use a low cost online broker. We originally wanted to keep this money at Vanguard as well, but they charged around $20 a trade, which is ridiculously uncompetitive. If Vanguard was anywhere close to what you can get from one of these low cost online brokers, our individual positions would have been with them as well. I think Vanguard is a great place to buy index funds and/or have an IRA, because they have amongst the lowest costs, and that’s what they do best. However, if you’re going to hold shares of individual companies, you might want to consider some of the following options. Like a baseball team, we’ll have a lineup of nine providers. In no particular order:
TD Ameritrade – Our leadoff hitter, TD Ameritrade, charges $9.99 per trade. If you sign up right now and fund your account with at least 25k, you get $100 and 30 days of free trades. I can’t speak as to their level of customer service. $9.99 per trade is a better deal than what I could have gotten if I had done all my trades at Vanguard.
Scottrade – Scottrade bats second in our lineup and starts the price war off by offering $7 trades. Unlike TD Ameritrade, they don’t seem to offer any special incentive to sign up for their service. I can’t speak to their level of customer service. Broker assisted trades cost $27.
E-trade – E-trade offers 100 commission free trades for signing up or a free Blackberry. Since their trades range from $7.99/trade to $9.99/trade, you’re getting a theoretical value of around $799-$999. Of course, if you read the fine print, you have to make the 100 trades in your first 30 days. If you have a value slant as an investor, I doubt you’ll be making 100 trades in your first 30 days of trading. Plus, they require you to pay for the trades up front and then reimburse you. To get the $7.99 rate they require that you make more than 150 trades per quarter (not me). To qualify for the $9.99 rate you need to have at least 50k in assets or make between 30-149 trades. Their standard rate per trade is $12.99/trade if you don’t meet the above criteria. I’m not sure why their pricing structure has to be this complicated. I really like the aesthetics of their site, but I wouldn’t even consider using them. Do you really want incentives that encourage you to trade more when you can undercut their best price somewhere else?
Sharebuilder – Sharebuilder allows you to set up an automatic investment plan to purchase stocks each month. They charge $9.95/month if you make real time trades, like you would with the services above. However, if you sign up for one of their investment plans, each month you pay just $4…but that’s $4 monthly (or weekly, or bi-monthly), per stock that you’re systematically investing in. See all of their prices here.
Zecco – You know all about Zecco. They used to have 10 free trades/month for anyone who had at least $2,500 worth of cash and securities in their account. They’ve upped the minimum to qualify for that deal to $25,000. All their trades above the ten, or all of their trades if you have less than 25k worth of assets, are $4.50/trade. The reason to go with Zecco was always their free trades. Their customer service has a less than stellar reputation. Still $4.50 per trade is very competitive.
Tradeking – Tradeking is what I personally use. Trades are $4.95 apiece. I’ve rarely needed customer service for anything, but my limited experience with them has been excellent. Very competitive price, too. There are lots of tools available here as well. I recommend them.
Wells Trade - Similar to Zecco’s offer, Wells Fargos trading arm offers 100 free trades if you have at least $25k in assets with them. One difference is you can count loan balances and deposits with Wells Fargo toward your $25k. Anything above and beyond the 100 trades per year will cost you $5.95 per trade.
Just2Trade – $2.50 per trade. I can’t find anything that gives a minimum to open an account and get that deal. I don’t know much about them, but I really like their site. Check them out if you’re looking for low cost. They market themselves as being for “serious” investors. If you’re a comedic investor, I guess they’d suggest you look elsewhere.
Sogotrade – $3 per trade. As an incentive to sign up, they offer 100 free trades for 30 days. After that it’s a very competitive $3 per day. Lots of these sites have a compare us to our competitors tab – but they’re very selective as to who they compare to. Obviously, no one compares to anyone with lower prices.
There are other online brokers that you can use, but these are some of the lowest cost options. It’s an industry that’s in a constant price war. Prices keep falling. I think eventually all of the broker’s will be comparable to those with the lowest prices. Competition is a great thing for the consumers, of course. If you know of other, better low-cost options, please let me know. Thanks for reading.
The Water in Your Basement
Posted by: Todd Metheny in Managing Finances, Real Estate on April 13th, 2009
I was reading a common sense article over at Get Rich Slowly about why their heating bill was higher than it should have been. A contractor spotted the problem and pointed it out to them. It reminded me of a somewhat similar occurrence that happened to me not that long ago.
Two summers ago, the rental property my wife and I own was collecting water in the basement. We’re “absentee landlords” that live about six hours away from the property. My grandmother manages it and we pay her $50 per month. I think it’s a good deal for everyone involved. When times are good, there’s not much to do other than collect the checks. Of course, when something goes wrong, you need someone on the other end of the phone that you trust to deal with the tenants in a polite and understanding matter. My grandma is great with people. Plus, of course, it’s someone who’s opinion and advice I can trust. When something goes wrong, I trust her assessment of the situation, and I rest easier knowing that things get done the way I end up deciding they should. She does an excellent job, and she’s due for a raise;)
When you have renters with water in the basement of the property they’re trying to live in, obviously you don’t have very happy renters. When I found out about the water in the basement, I followed conventional wisdom and told my grandma to get 3 estimates. The first estimate came back at around $1600 or so, if my memory serves me correctly, and it involved digging a narrow trench in part of the basement and “waterproofing” it, then refilling the narrow trench. My grandma said that the guy stayed no more than ten minutes, gave her the estimate, and left.
Around this same time, I did an internet search for “basement leak home repair” and got lots of hits – many of them alerts to the scams involved in this particular area of home repair. The sites I read online pointed out that water basement “specialists” often have no particular certifications or expertise. It also alerted me to the fact that many of these companies will advertise that they’ve been in business for a long time – 30 years or more in some cases. So I was cognizant of this possibility. At the same time, I wanted the problem with the water in the basement permanently fixed. I had personally applied a sealant to the basement and hadn’t had a problem in quite awhile. Having water in the basement of the place where you’re making your home is a miserable experience, though, and if $1600 would fix it, I was, of course, going to have it fixed.
$1600 was a lot of money to me two summers ago (to be honest, it still is). Having to pay $1600 made me sick to my stomach. Of course, according to the “scam alert” sites, often times the scammers would charge 5-10k for the basement repair. I don’t know this to be the case, but I bet they do it based on what they think you can afford to pay. They want to squeeze you, but not ask for something they can’t reasonably get. I was very conflicted as to what to do. I basically made up my mind that I would make my decision based on how the second estimate came in.
The second estimate came in at around $1900 if I remember correctly. Typically I would assume that both companies have equal competence to do the work, since I don’t really have an objective way of assessing them. Neither were based on recommendations of anyone I knew, which would have been ideal. Neither employed or were connected to anyone I knew. In that situation I would normally just go with the cheaper bid. Complicating things was the fact that my grandma was very impressed with the salesmanship of the man with the $1900 bid. He spent a lot of time with her, explaining why water chooses to gather in a particular area and how they could fix it. She was really taken with the fact that he spent so much time and was nice. She suggested going with them over the other company. I told her I would think about it and call her back.
At this point, I was conflicted about the entire thing. I was upset about having to spend the money and conflicted as to which company to go with. I was working out of town at the time, but wanted to make a decision that day. So I called my wife (who was then my fiancee) and voiced all the things I was thinking and what I was worried about, and how I wasn’t sure if the work legitimately needed to be done, and asking her whether she thought I should drive down and look at it myself. Luckily, my wife came through with a breath of logic – saying, “you always say that you should get three bids…so why not just put off making a decision and get a third bid.” So I called grandma back and asked her to get a third bid.
She called back with the story. The third bid was from a (mostly) retired fellow in his late 60s. He looked around for about 5 minutes, and pointed out that the water was coming in from a small hole in the all near a doorway. He suggested we get some quickcrete to patch it – and suggested that it should only cost about ten bucks and a few minutes to fix. He said he’d do it, but it really wasn’t worth his time. I was elated, and my grandma and I both had a good laugh over the whole situation.
I learned several things about how to approach problems from the water in the basement. For one, crowd source. Use the people you trust to talk about ideas. My wife doesn’t know anything about fixing basements, but she suggested something logical to do. Two, always get that third estimate to make sure it’s falling in to line. Talk to as many pros as you can and compare the information you’re getting. I may not know anything about fixing my basement, but I’m good at comparing information and finding inconsistencies. You can discern a lot of truth from doing that very thing. Three, hire good people that you can trust. Hire your grandma if you can. Whether it’s water in your basement, a heating problem, or any other kind of problem, do some research and approach the problem using a sound, logical approach. Hopefully you’ll find that the problem can be fixed cheaply and easily. Do you have similar stories? Share them by email or in the comments. Thanks for reading.
Alternatives to Having Cable
Posted by: Todd Metheny in Frugal Living, Managing Finances on April 6th, 2009
My wife and I started watching Lost after it was recommended to us by several friends. It’s one of those shows that really sucks you in – very addictive. We primarily watched the show through Blockbuster’s online service – we’d get the DVDs one at a time and watch them. By the time we got finished, the show was in the midst of its current season. We couldn’t watch the current episodes anymore, because abc.com only has the five most recent episodes available. The most current episode available at the time was episode 3 of season 5. We decided we’d wait until the end of the season and just watch all the episode back to back, the way we’ve been doing it all along. We waited a few weeks, and then our withdrawals kicked in and we decided we couldn’t wait to watch the show.
Of course, by this time, epidsode 7 was the most recent episode available at abc.com. At the end of the season, I believe all the episodes will be available at abc. We didn’t want to wait that long. We broke down and bought the first three episodes on itunes for $2.99 each (I know, not the most frugal move). They weren’t available on Hulu.com, which just directed us to abc’s site. They weren’t available anywhere else we looked either. We ended up skipping episodes 4-6 and just got caught up on abc.com last weekend. Desperate times call for…you know. We watched the episode shorts on abc and read the summaries, and we’ll probably rent the season when the time comes. My wife and I both recognize how ridiculous the measures we went to watch this tv show were/are. We’re dealing with that;)
I guess the point is, because of the prominence of the internet, and the ease and low cost of renting lots of movies, many people are questioning whether cable is really necessary anymore. I think that’s a valid question. The decision not to pay for cable is one that should be re-examined by every American family with the prominence of the internet.
First, we’ll consider the cost of cable. We get our cable and internet in a package that cost around $115/month. You can get this much cheaper during an introductory rate. This is one area of our finances that we’ve consistently neglected. We just pay the rate every month like good little sheep, when we should have instead been constantly challenging the company and exploring our options. It’s something we’ve vowed to do a better job at once we move and potentially enter into a new plan – if we opt for cable at all. Our bill is itemized, and it indicates that we would be paying around $45/month for internet alone – obviously a $70 difference/month. So, if we ignore other factors, if we can watch the television shows we’re interested in for less than $70/month, there’s no reason for us to have cable. These numbers are going to be different based on where you live, who your provider is and what cable package you have. I had some trouble pulling prices off of Time Warner online – which has to be one of the worst run businesses in America.
There are multiple places to find tv shows online, one of the most well known and prominent being Hulu.com. Hulu doesn’t cost you a thing, they make all of their money off of advertising. Like any online show, the advertising is brief and less invasive than the overt advertising provided on cable networks. I just got done watching an episode of Arrested Development on Hulu, to make sure this is the case (AD is an incredibly funny show if your humor runs that way). Of course, you can get a lot of the shows directly from the networks as well. If you want to watch current episodes of current shows, this is probably the way to do it. I don’t know how long this will last in its current state. The acting community is pretty upset about not getting a share of the revenue generated by the shows that they’ve been in that are now featured online. Tina Fey alluded to this when she was recently accepting an award for her work on 30 Rock. What other sources out there do people use to watch shows online?
Of course, you might want to couple your banishment of cable in favor of watching online tv shows with a subscription to one of the two online movie rental services, Netflix or Blockbuster. Or you might supplement your movie watching with Redbox, which seems to be increasing in popularity. I plan on doing a comparison of the rates from these three sources of movie rentals later in the week. This is really moot in terms of this analysis for me personally, because we currently have both a cable package and a subscription to blockbuster online.
If you decide to stick with cable after reading this, JD @ Get Rich Slowly has an excellent review of White Fence, a site that is supposed to help you find deals on utilities, phone, internet, television, natural gas and other home services. Be aware that a couple of JDs readers in the comments accused White Fence of being a vehicle serving the needs and desires of AT&T and other private companies. I don’t know. I’m definitely going to check out the resources there sometime before we make our move.
Though you would no doubt save money, there are some other considerations on deciding whether to start satisfying your tv fix with online television. One is the size of your family. If you watch certain things together consistently, you may not be able to crowd around the computer the same way you do with the television. Of course, if what you usually watch together is movies, this still wouldn’t be a problem. Another consideration would be the online accessibility of the things you like. If you’re a big sports fan, you’re not going to get the same amount of games without cable. There are online alternatives, such as MLB.tv, but this costs money as well. Another thing you might consider is the ability to get introductory rates on cable/internet combinations. It often isn’t much more expensive under the introductory rate to just go ahead and get both together.
Something else you might consider with regard to going without cable is how much more productive you’ll have the opportunity to be. It’s so easy to sit in front of the tv and do virtually nothing (that’s what Lost does to us). Some of that convenience is mitigated by the online tv shows. They’re there if you want them, but they’re there at your convenience, whenever you want to watch them. You aren’t locking yourself in to a Tuesday night (or whatever) ritual that you and your family partake in. If you instead use this time to connect with your family, take a class or read a book, you might feel like you’re living a more productive life. If you have other suggestions on this issue please email me or leave them in the comments. Thanks for reading.
Free and Cheap Legal Advice
Posted by: Todd Metheny in Frugal Living, Managing Finances on March 18th, 2009
Any attorney will tell you that from the moment you step on the grounds of your law school, your phone will start ringing with people asking you for legal advice on specific issues. Over the course of my brief career I’ve fielded questions regarding products liability, business formation, immigration, estate planning, family law (unfortunately), criminal matters (of course), various property and real estate issues, international issues, etc. You can pretty much name it and I’ve been asked about it. They do a good job of demonstrating this in the movie Rounders, with a conversation between Mike (the main character and a law student) and a store clerk on his delivery route that basically goes like this:
Store clerk: Does Steinbrenner have the legal authority to just move the Yankees? Can he just up and move them?
Mike: How the (heck) should I know?
Store Clerk: What, you didn’t learn that yet?
Mike: Nah, you get to Steinbrenner in the 3d year of law school.
Store Clerk: (nods affirmatively)
The truth is, I often don’t know the answers to the questions people ask me. It’s a great way to learn something, though. I honestly enjoy being one of those people that other people come to for advice. Maybe that sounds narcissistic. I like to help people, though. I like helping my friends, and I like learning new things – although I don’t necessarily like having to go digging for info if they happen to catch me when I’m busy. The law is very specialized, and there are lots of areas that I’ll likely never delve into, so it can be fun to take a look at different things/problems that people may have.
I got an interesting question earlier today, not necessarily about a specific legal question, but about good resources for taking care of legal issues you may have on your own, with little to no cost. I think there are a lot of issues that you can handle on your own. When possible, I think it’s a good idea to get an attorney, just so you can rest a little easier. I feel the same way about handling lots of things. If anything requires you to potentially appear in court, other than small claims court, you absolutely should hire an attorney. Many transactions and other things that require filing specific forms are best done with an attorney as well. This will also give you someone to blame if something gets messed up – like an insurance policy. If you mess up and lose yourself money on your own, there’s no one to blame but you.
I should say, first of all, that if your income is pretty low, you might check and see if you qualify for legal aid. Do a google search for legal aid and the name of your state. If you live in Kansas City, for instance, you could use this link to find out more about whether you qualify. Legal aid handles a variety of legal matters and will do a good job of handling whatever problem you might take to them.
A few of the sites that offer free legal forms are Nolo, Legalzoom and Free Legal Advice. Like anything else, use these sites with caution. There are some great resources here, but some of the forms may not meet the legal requirements of your jurisdiction. I have not personally used any of these sites. I have read (in Kiplinger’s) that Nolo is pretty good about telling you when you should hire a lawyer for your particular legal problem. I think a good rule of thumb might be this – if you’re sophisticated enough to assess how complex your problem is, and you’ve decided your problem isn’t too complex, and you’re familiar with the proper forms that will enable you to do what you need to do, then you might be able to handle a legal matter on your own. If you think it’s too complex for you to handle, it probably is. If you don’t think you can even assess the complexity of your problem, the answer is obvious – hire an attorney.
If you do reach the point where you feel you need to hire an attorney, make sure you get a copy of the fee agreement that outlines exactly what you’re paying for. When they bill you, request that they itemize your bill. If you challenge a particular charge, there’s a good chance you can get it reduced or taken off. The attorneys are going to want to get paid. Good luck. I hope this helps and thank you for reading.
Risk Tolerance
Posted by: Todd Metheny in Managing Finances on February 23rd, 2009
In the late 90s, I knew a couple of people that made the decision to try their hand at day trading. The swings of the market were such that a momentum strategy was making a lot of people money. You know what happened: the overall market had a mini crash, purging thousands of dot com companies with no discernable earnings, and taking most equity investors with it. If you were invested in equities, you probably learned something about your risk tolerance when this happened. If you didn’t then, perhaps you’re learning now. I know a couple of people currently experimenting with day trading now as well. Based on the limited amount of research I’ve seen, trying to game market trends is an approach that can beat the overall market in times of market volatility. I have personally never subscribed to the strategy. The premise behind momentum trading has little to do with the underlying fundamentals of a company and lots to do with crowd psychology. That’s why to me (and lots of other people), value investing is the approach that speaks to me with the most clarity.
Regardless of your approach, an underdiscussed topic tends to be risk tolerance. Knowing and understanding your own risk tolerance is a complex thing. The people that I knew that rushed into day trading during a period of volatile (but upward) movement, learned something about their risk tolerance when they started losing their money. It’s easy to believe that you have an unmatched appetite for risk when you’re making money. Of course, making money says nothing about your true appetite for risk. Only losing money does that.
Recent market conditions have forced many people to re-evaluate their tolerance for risk. People have rushed out of equities, forcing redemptions in hedge and mutual funds (which helped pull the market down even further). But what does risk tolerance really mean? I’ve heard people say more than once that you shouldn’t be in equities unless you can stomach seeing your portfolio down by 50% (many investors are there already). Most planners say that you shouldn’t have money in the market that you’ll need in the next five years (sound advice). But again, what does it mean? One thing it absolutely doesn’t mean is that you’re tolerant of losing money. Every investor should be loss averse. Loss is a negative outcome. If you’re saving and investing money only to lose it, you might as well put it under your mattress and let it slowly erode under the grip of inflation or, just spend it already. Risk aversion, to me, is simply a measure of how a particular person reacts to the volatility of an investment.
Defining it is the easy part. Understanding where you fit into the spectrum is another thing altogether. There isn’t a magic way of finding out. Sure, you can take one of the many risk tolerance tests online, such as this one. Of course, it’s still you answering the questions about what you’ll do. And these tests aren’t new. They’ve been around for years. The existence of tests didn’t stop people from liquidating investment accounts right and left.
I guess my advice to you is this, find an investment policy that you feel meets your risk tolerance and stick to it. If you can stand seeing your money seesaw up and down, I would advise you to put a larger amount of money into fixed income investments. That being said, I think almost all investors can benefit from some stock exposure. I think most people either over or under expose themselves to equities. They either love them or hate them. As long as that’s in line with your actual risk tolerance, I think that’s fine.
In the new (post recession) world, many people will scavenge for opportunities amidst the uncertainty and perhaps make money. Many others, having been burned, will stand on the sidelines, wary of equities for as long as their memories serve them correctly. I think the action you take during these times, assuming you can afford to do anything, tells you a lot about your tolerance for risk. Keep the current market conditions, complete with all the volatility and uncertainty, in your mind the next time you evaluate your investment plan – and then stick with it. That should be a fairly honest way to evaluate yourself. Thanks for reading.
For more on risk tolerance, check out this post.
Compound Interest
Posted by: Todd Metheny in Managing Finances, Retirement on February 18th, 2009
Anyone who has ever read a personal finance book (or blog!) is probably familiar with the concept of compound interest. It’s one of those basic fundamental principles that most people understand because they’ve heard or read about it. One of the challenges I face as a personal finance blogger is knowing how many of the basics I need to cover. I think it’s important to understand things like compounded interest and other basics. Those things, however, aren’t necessarily of the most interest to me. The good news is that there are only so many of them. I decided that I couldn’t have a personal finance blog without delving into compound interest at some point. Plus, in the future, I can reference this post instead of linking to someone else.
Albert Einstein is alleged to have said (though it’s been disputed by some):
The most powerful force in the universe is compound interest.
I can’t contribute to the argument regarding whether he said it or not, but if compound interest could impress a brilliant man like Einstein, we should probably pay attention to it as well. Compound interest is, quite simply, the idea that money will grow faster and faster as it is reinvested. In other words, if you invest $10 at a 10% annual interest rate, in one year you’ll have an extra dollar. The next year, however, you’ll be making 10% on $11 ($1.10) instead of $10. This assumes that interest is compounded once a year, for the purpose of simplicity. If interest were calculated more often, of course, your money would grow even faster.
Check out a compound annual growth rate calculator by clicking here: Financial Calculator. For instance, if you have 30 years until retirement, and can afford to invest just $2k/year ($167/month, or $41.75/week), at the end of 30 years you’ll have a tidy sum of almost $265k (assuming an 8% return). Up that contribution to $5k per year and you’ll have $662,042.62. Play with the calculator. It’s fun. My suggestion would be to set your contribution at a fixed amount of your income (say 10-20% – but the higher the better). That way, as your income rises, so does your contribution. Another way to do it would be to try to keep living off of the same amount of money as your income rises and divert the rest to savings. Just because you get a raise doesn’t mean your house has to get bigger – a lesson that many people wish they had learned before the housing crisis.
Compound interest is your best chance to fight inflation and retire comfortably. Keep that in mind in this market. You can’t change the fact that you just lost 30% + out of your retirement account, but you can control whether you keep investing in a down market. You can dollar cost average your way back into the game if you stay the course. That doesn’t mean you can just pick any investments, but if you can keep your costs low and use the tax advantages of the retirement vehicles at your disposal, you can still get there. Of course, depending on your age, you may have to work a little longer and save a little more, but what’s your alternative? Don’t wait for a personal bailout – your lobby isn’t strong enough. Any personal finance writer will tell you that personal finance can essentially be broken down into one rule: spend less than you earn. Do your best. You can find an article about compounded interest at whatever your favorite personal finance blog is, but if you want to read more and would like a suggestion, check out this one. Thanks for reading.
