Archive for the ‘Basics’ category

What’s your BillsIQ?

July 9th, 2008


I found an interesting site that aims to quantify your “BillsIQ”. What the heck does this mean? Well, the site basically presents you with a short financial quiz to help you assess where you are in terms of getting your financial house in order. The quiz has five sections: credit, debt, budget, wealth, and life plan. Each section has five simple yet insightful questions to help assess how you are doing in each area.

After I completed the quiz, the result said that my BillsIQ was 97% A. Where did I get dinged? Well, I lost some points because I don’t keep a detailed budget and only keep track of things in my head. I do a budget periodically for planning purposes but never really go back and track how I did against the budget. My theory is as long as you keep a frugal mindset keeping a detailed budget isn’t quite as important.

I also got dinged on the “life plan” section for two things. First, I do not regularly contribute to a 529 plan for my kids’ college. We do put money aside for it, but we haven’t gotten around to opening the accounts yet. Secondly, I got dinged for not having a will written, which I totally know I absolutely need to get done.

So what did I learn? Honestly, I didn’t really learn anything, but it did serve as a reminder of the things I need to do. It is a good straight forward assessment of where you are financially. It is certainly worth a few minutes of your time. Perhaps it will tell you that you need to Consolidate debt?

Get a life! Financially, that is…

June 18th, 2008

There was an interesting series of tips over on CNNMoney entitled Get a Financial Life. It lays out a series of tips to get your financial house in order in 7 short weeks, with one task per week. Here are their tips, and my thoughts on them.

  1. Talk about your goals with your partner. If you are married or otherwise attached, your finances are a team sport. You can’t get very far if you and your spouse are running towards different financial goal lines. So talk about what you want and make sure you are on the same page.
  2. Build an emergency fund. Another good tip. The recommendation is three months of living expenses in good times, six months in bad. Just remember that your living expenses do not necessarily equal your salary. Hopefully you are frugal and six months of living expenses is a much smaller number than six months of your earnings, but if you have trouble saying no this number may actually be higher than your earnings.
  3. Get life insurance, in the right amount. According to the article, you should have life insurance equal to 5 to 10 times your annual salary. The more dependents you have, the higher the number should be. However, if you are single and have no dependents remember that the purpose is mainly to replace income, and if no one else is going to need that income after you die you don’t really need life insurance. Just make sure to have enough to cover your funeral expenses so that your family doesn’t get stuck with a bill!
  4. Use online billpay and automatic payments. I’ve written before on the virtues of automatic payments on credit cards, and many other bills can be paid by automatic draft from your checking account or credit card as well. Just make sure you are reviewing those bills for unauthorized charges, and if the payments come from your checking account be sure to write them down in the check register and make sure you have sufficient funds to cover the payment.
  5. Simplify your 401k with target-date funds. OK, this one I will disagree with slightly. I find that target-date funds typically have slightly higher management expenses than the funds that make them up. If you are willing to keep up with it, I would recommend just buying the funds individually. This also allows you to adjust the riskiness of your portfolio to suit your individual tastes.
  6. Automate your investments. I completely agree. The biggest investment challenge for a lot of people is just doing something. Setting up automatic investments allows you to set it and forget it. If done in terms of dollars, you also get the benefit of dollar-cost averaging.
  7. Get down to a single credit card. OK, I will disagree on this one. If you use automatic payments as noted in #4 above, I really don’t see a point to limiting yourself to a single card. This is especially true if you have reward cards that give different percentages for different types of purchases. At one point I carried one card for gas (5% reward), one card for restaurants (3% reward), and one more for everything else. Now I am mostly down to just my Citi AMEX Platinum that gives 5% on some purchases (gas, groceries, drugstores) and 3% on everything else, and my Citi Dividend card with a 1% reward for use at places that don’t take AMEX.

Comprehensive Personal Finance Tutorials at PersonalFinance.BYU.edu

March 31st, 2008

Several years ago, I said that I wanted to write a book about personal finance. That idea never really got off the ground, but my vision was to develop a resource that would have individual chapters that would build on each other so a person could go from money dummy to financially savvy. Great vision, but I never did it.

Well, it looks like a professor out at BYU has done what I had envisioned, and best of all he has made all of his materials available for free. Dr. Bryan Sudweeks, CFA, is a professor of finance at BYU who has developed an online course in personal finance aimed at people of different experience and education levels, which can be found at personalfinance.byu.edu. The lessons are very logically laid out and are easy to follow. There is online text, PowerPoint presentations, and even PDF copies of the lessons in book form if you want to download everything at once. Best of all, it is free of charge and free of bias that you often see at other personal finance tutorial sites.

It is worth noting that BYU is a university sponsored by The Church of Jesus Christ of Latter-day Saints, which means that the material is written from a Mormon perspective and Mormons are the primary target audience. However, the material is based on sound financial principles, and readers of any religion could learn a great deal from the materials.

I am certainly very impressed with the material, so much so that I am adding a link to the site in the sidebar under Cool Sites. As I read through the lessons I will also likely share insights I have gained to highlight the great work that has been done with this.

I found out about the site from an article in LDS Church News. For a great discussion of the site, see the article here.

Inquiring minds want to know: “What’s in my wallet?”

February 6th, 2008

It looks like another blogger has called me out (among others) to disclose the contents of my wallet. PT over at Prime Time Money has issued this challenge in a post where he discloses the contents of his wallet, and I’m never one to back down from a challenge.

My wallet is not your traditional billfold. I had one of those through college and during my first couple of years working professionally, but as my finances grew more complicated I started to develop a George Costanza style wallet that was about 3 inches thick. I decided to do myself and my back a favor and switch to a money clip with a small credit card pouch attached and have never looked back. Anyway, as of this moment, here’s what I have in my wallet:

  • Citi Platinum AMEX Card (5x Everyday Purchases/3x Everything Else Thank You votes) – I use this for nearly everything.
  • Citi Dividend World Mastercard (1% cashback) – This is pretty much just for places that won’t take my AMEX.
  • Diners Club Corporate Card
  • Chase Check Card
  • Bank of America Check Card
  • Sam’s Club card
  • Texas drivers license
  • Kroger Plus shopper card
  • CVS Extra Card shopper card
  • 3 CVS gift cards (19.46, 3.22, and 3.31) – I may use them if I ever run out of Extra Care Bucks.
  • Aetna Medical insurance card
  • Aetna Dental insurance card
  • Blockbuster card – I’m not sure why this one is still in my wallet, since I haven’t rented a movie in about 6 months.
  • Houston Public Library card – Why buy the book when you can borrow it for free?
  • LDS (Mormon) Church Temple Recommend

Unlike PT, I do not keep my Texas CPA license in my wallet. I worked hard for it, but practically no one will ever ask me to produce it instantly. The only time anyone wants to see it is once a year when I am due for renewal when my firm wants to verify that I have kept the license current. I guess my thinking is I know I earned it and don’t need a piece of paper to remind me of it. Of course, this is from the same person who forgot to get his degree certificate after commencement and never bothered to go back and get it. Seven years later I still haven’t gone back to get it.

OK, anyone else want to share??? 

Tips for happily managing finances in marriage

January 24th, 2008

In one of the more interesting blog postings I’ve seen in a while, Brooke from DollarFrugal.com writes about ten ways to use personal finance to strengthen your marriage. There were some very good thoughts included, with my personal favorites being the following:

1. Having open lines of communication. This one is probably the most obvious and the most essential. Money should not be a taboo subject. Both parties should have a say in how the money of the family is handled.

2. Setting a check and balance limit. I think this is a good thought, although my wife and I don’t do this as formally as is suggested. We are lucky in that both of us have similar attitudes about money and we trust each other not to make large unnecessary purchases. Of course anything large we discuss, but we don’t have a set limit.

3. Attacking finances as a team. In this point, it is noted that the spouse who manages most of the financial matters (paying bills and such) should maintain a list of account information for the other spouse should something ever happen. I totally agree, although I still haven’t done this to the extent I would like.

The rest of the list can be found here. Studies often show that financial issues are one of the leading causes of divorce in married couples, which is another reason to make sure that your financial house is in order.

Picking up pennies? Do you do it?

December 23rd, 2007

So here is a question that has come into my mind recently: does anyone else pick pennies up off the ground anymore? I started wondering this as I was hitting CVS for free batteries and I was always finding at least one penny on the floor by the checkout if I bothered to look down. This made me wonder if I’m the only one left that picks them up.

From a practical standpoint, picking up pennies in itself probably does little for your financial health. If you were to find one penny each day and at the end of each year deposit it in an account earning 5% APY, in 30 years you would have $242.50. Sounds like a decent amount, except when you remember that is picking up a penny every day for 30 years! And considering inflation, will $242.50 really be worth very much? Your life probably won’t be changed forever because of those little pennies you picked up.

There may be a psychological benefit to picking up pennies. A lot of people believe that finding a penny heads up brings you luck if you pick it up. Of course you could take the attitude of my youngest brother-in-law, who as a young child said that you should pick up pennies that are tails up too because just finding money at all is lucky.

I think one of the most interesting takes on the question came from my wife, who said that it was bad karma not to pick up pennies. The thought is that if you make the conscious decision that a penny is not worth picking up, then where does it stop? If you don’t value the smallest amounts of money, eventually you fall into the state where you don’t value larger amounts of money. If you don’t value your money, you don’t deserve to have financial prosperity because you’ve already demonstrated that you didn’t appreciate the financial gifts you had been given, no matter how small.

Myself? I am a compulsive penny picker-upper. Heads up. Tails up. I don’t care. It’s all good. Money is money, and getting some of it for nothing is always lucky. That’s my two cents, which I found on the floor by the register at CVS. =)

11 Tricks stores use to fool consumers

October 8th, 2007

Here is a really good post over at SavingAdvice.com. They detail 11 tricks that stores will use to trick shoppers into thinking they are getting better deals than they really are. All of these are really good things to look out for.

  1. Putting the amount off in bold to hide the actual (crappy) price.
  2. “Sale” items that really aren’t.
  3. Handpicking comparisons to other stores.
  4. Buy one get one free, but you pay twice the price.
  5. “Specials” that aren’t due to price.
  6. Charging more per unit for buying in bulk.
  7. Using different units for comparison on similar items.
  8. Charging more for the store brand.
  9. Promoting lower prices when the package size is reduced.
  10. Using fine print to limit specials.
  11. The low-price guarantee that isn’t.

All of this is explained at SavingAdvice.com. Definitely a good read for anyone who wants to be a savvy shopper.

How to handle a financial windfall

August 26th, 2007

How often to do hear about the poor sucker who was just scraping by, wins the lottery, and a few years later is right back to the same financial position he was in before (if not worse) due to poor decisions? As someone with a background in accounting and finance, it is the story that really makes me bang my head against the wall and ask the question “Why?”.

Thankfully, this is not one of those stories – in fact, it is just the opposite. In the August 27 issue of The Sporting News, columnist Steve Greenberg writes about Philip Ozersky. Although you may not know his name, you would certainly know the source of his good fortune. On September 27, 1998, Ozersky caught Mark McGwire’s 70th home run ball, and 15 weeks later sold it at auction for a cool $3 million.

So did Ozersky go out and spend all the money on fast cars and other frivolous items? Nope! According to the article, his big expenditures from his windfall were:

  • A new house, across the street from his sister.
  • A vacation home in Florida. The two bedroom villa is mainly for use of his father who had a debilitating stroke years ago and likes to escape the Midwestern cold five months a year.
  • Frequent trips to Arizona to visit the in-laws.
  • Season tickets to the Rams and Cardinals.
  • About $250,000 in charitable donation.

No new fancy cars, women with plastic parts, drugs, or the other typical trappings of the “lucky” recipients of a large windfall. He still works at his old job in genetic research and drives the same 1994 Ford Probe he bought after he graduated from college.

It is nice to see good things happen to people with enough sense to make the most of it, even if he is a dirty Cardinals fan! GO CUBS! =)

Got My T. Rowe Price Family Records Organizer!

July 19th, 2007

I had a nice little surprise sitting in my mailbox today. A couple of weeks ago I wrote about a free CD-ROM that was available from T. Rowe Price that was to assist you in organizing your personal and financial information. The idea is that if anything were to ever happen to you, a loved one would be able to have a complete snapshot of your affairs and be able to more easily attend to the business of your estate.

I haven’t had time to really delve into the program, but at first glance it looks very well put together. Included are sections for investments, banking and credit cards, property and mortgages, other loans and debt, insurance, health, wills, and funeral arrangements. At some point I will give it a test drive to see how well it really works, but my initial impressions are very positive.

If you want to request a copy of the CD-ROM for your family, you can do so here.

Free Family Records Organizer CD-ROM from T. Rowe Price

July 2nd, 2007

Imagine you were to get hit by a bus or sat on by Rosie O’Donnell tomorrow? Would your loved ones be able to close out your affairs? Would they know every place you have squirreled away money? As someone who has had to piece together a financial life after a loved one’s untimely death, I can tell you it is not a fun task.

T. Rowe Price is offering a free family records organizer CD-ROM on their website, that they claim “offers a single place for you to capture important personal information about your investments, banking and credit cards, insurance, and more with the intent of passing this information along to your beneficiaries or keeping it in a safe place.” You can request a free copy of the CD-ROM on their website here.

I had planned on developing a tool like this myself, so I am curious to see how good this resource is. However, if it is as good as advertised it would be a great gift to your loved ones should you pass unexpectedly, and you can’t beat the price.