I came across this article about real estate negotiation (primarily with examples from Manhattan). It has some interesting points, of which I find the most intriguing the idea that you shouldn't (as a buyer) tell your broker what your upper limit is. The article points out that both the buyer's and seller's realtor have a vested interest in a higher selling price.
There are a lot of anecdotes in the article which give it an interesting perspective. Check it out and let me know what you think.
(The article requires free registration with The New York Times)
Thursday, August 24, 2006
More Money Saving Tips
Another great article from Bankrate that has 10 tips for saving money, each worth $500 or more a year for a total of $5,000 savings a year if you follow them all. This article had a lot of great ideas and that's why I'm posting it here, so I'll have access to it in the future.
So which one do I like best, but am not currently using? Buying more generic household products like toilet paper, paper towels, plastic cups, etc. The hard part about implementing this one will be trying to convince my wife that the generic toilet paper is the same as the name brand (or at least more economical). Wish me luck!
So which one do I like best, but am not currently using? Buying more generic household products like toilet paper, paper towels, plastic cups, etc. The hard part about implementing this one will be trying to convince my wife that the generic toilet paper is the same as the name brand (or at least more economical). Wish me luck!
Saving Money on Energy and Groceries
If you've read Cashtalk for some time, you know that I'm always on the lookout for good deals. I came across two different articles from different sources today about ways to save money. The first is how to get the most for your dollar at the grocery store. I like the introduction because it says that the very fact that you're buying your dinners at the store, rather than eating out results in financial savings. The article goes further with tips on maximizing your dollars at the store by interviewing different chefs, caterers and cookbook authors on ways they save money when picking up supplies.
The second article was at CNET.com and focuses on ways to eliminate wasteful uses of energy and hopefully decrease your monthly energy bill. According to the article, 10 percent of our energy bills are made up of electronics "invisibly" sucking up energy in standby mode or when we think they aren't "on." However, the bulk of our energy bill is to keep our house at a certain temperature. Going through the audit on this site might help you identify ways to cut that bill a little.
The second article was at CNET.com and focuses on ways to eliminate wasteful uses of energy and hopefully decrease your monthly energy bill. According to the article, 10 percent of our energy bills are made up of electronics "invisibly" sucking up energy in standby mode or when we think they aren't "on." However, the bulk of our energy bill is to keep our house at a certain temperature. Going through the audit on this site might help you identify ways to cut that bill a little.
Does More Money Make You Happier?
I've been spending a lot of time at the Bankrate site because of the possibility of me buying a house. I want to stay on top of interest rates to know what they will most likely be when I decide on a house to purchase.
Anyway, I came across this article about whether or not more money can make you happy. One observation from the article says that going from shear poverty to the middle class can significantly increase happiness, but if you are increasing your yearly income from $100,000 to $100 million a year, the benefits concerning happiness are negligible.
More telling as to whether you are happy with your income or not, is how your neighbors live. The amount of happiness tied to the amount you make is relative to how much the people around you make. If you make more than the people you know, then you will probably be happy, even if you're poor by definition. If you live in Beverly Hills and you are the one making the least, you will most likely be unhappy, even if your income is in the millions.
So when is enough enough? When you reach a point where you realize that making more won't make you happier. If you already the highest earner in your peer group, nothing more will make you happy.
Other interesting observations cited in the article (actually from a Pew Research study) are: Republicans are happier than Democrats, Married people are happier than Unmarried, Churchgoers are happier than non-Churchgoers, and "Sunbelt" residents are happier than people living elsewhere. Contrary findings: Retirees are no happier than workers, and pet owners are no happier than non-pet owners.
So what does "happy" mean? In the Pew study, the respondents could define it however they saw fit. An interesting technique and one that allows a more accurate reading. It recognizes that happiness can be relative, but our own perception of that happiness (and whether we achieve it) is what is compared in the study.
So what is more important than money? According to Bruce Weinstein, after basic needs are met, money and material goods are not what make us happy. Being loved and having meaningful friends and having someone to love are what make people have happy lives.
One important point recognized in the article, too, is that it is not important to be happy all the time. We strive for that, but actually happiness is guided by emotions more than anything. People who try and suppress certain emotions might find it unhealthy. Emotions can guide us and give us appropriate reactions to our environment. If we were happy all the time, then we may miss something that our brain is trying to tell us.
Enough rambling. Check out the article and let me know if you're happy!
Anyway, I came across this article about whether or not more money can make you happy. One observation from the article says that going from shear poverty to the middle class can significantly increase happiness, but if you are increasing your yearly income from $100,000 to $100 million a year, the benefits concerning happiness are negligible.
More telling as to whether you are happy with your income or not, is how your neighbors live. The amount of happiness tied to the amount you make is relative to how much the people around you make. If you make more than the people you know, then you will probably be happy, even if you're poor by definition. If you live in Beverly Hills and you are the one making the least, you will most likely be unhappy, even if your income is in the millions.
So when is enough enough? When you reach a point where you realize that making more won't make you happier. If you already the highest earner in your peer group, nothing more will make you happy.
Other interesting observations cited in the article (actually from a Pew Research study) are: Republicans are happier than Democrats, Married people are happier than Unmarried, Churchgoers are happier than non-Churchgoers, and "Sunbelt" residents are happier than people living elsewhere. Contrary findings: Retirees are no happier than workers, and pet owners are no happier than non-pet owners.
So what does "happy" mean? In the Pew study, the respondents could define it however they saw fit. An interesting technique and one that allows a more accurate reading. It recognizes that happiness can be relative, but our own perception of that happiness (and whether we achieve it) is what is compared in the study.
So what is more important than money? According to Bruce Weinstein, after basic needs are met, money and material goods are not what make us happy. Being loved and having meaningful friends and having someone to love are what make people have happy lives.
One important point recognized in the article, too, is that it is not important to be happy all the time. We strive for that, but actually happiness is guided by emotions more than anything. People who try and suppress certain emotions might find it unhealthy. Emotions can guide us and give us appropriate reactions to our environment. If we were happy all the time, then we may miss something that our brain is trying to tell us.
Enough rambling. Check out the article and let me know if you're happy!
Thursday, August 17, 2006
Buying a Home
It has been more than a month since my last post to Cashtalk. I've started a new job in marketing and have begun looking for a new home. I've never bought a home before and have had to learn what most of you probably already know. What type of mortgage to get? Which bank can give me the best deal? What to look for in a house? Will it be easy to "fix up"? Will there be any problems when I try to resell (in which case, I probably shouldn't buy it in the first place)?
I've looked at probably about 20 houses in this area and before that, I pre-established a limit that I do not (or cannot) want to spend more than. It is certainly a buyer's market. Homes that have been on the market for a few months have reduced their price. Almost every realtor I talk to at open houses always ends the conversation with, "The sellers are motivated. They might be willing to talk about the price or closing costs."
I guess that's great for us, but I don't want to just buy a house because it's a good price. I want to live in a neighborhood that's quiet and has easy access to the amenities that I've grown accustomed to (going downtown, close to a grocery store, being able to go to a park, and close to the local pool for swimming). I don't want a house that is right next to the freeway. I'm not excited about houses that are mirror images of those around them (even though inside they are really, really nice). These tend to be newer houses, which don't often hold their value really well.
So, how did you buy your house? What was important to you when deciding to make an offer? Did you know it was the one when you did buy it? Were you happy with your decision, or did you discover something wrong after you'd already closed? I'd love to hear your stories and learn from them.
I've looked at probably about 20 houses in this area and before that, I pre-established a limit that I do not (or cannot) want to spend more than. It is certainly a buyer's market. Homes that have been on the market for a few months have reduced their price. Almost every realtor I talk to at open houses always ends the conversation with, "The sellers are motivated. They might be willing to talk about the price or closing costs."
I guess that's great for us, but I don't want to just buy a house because it's a good price. I want to live in a neighborhood that's quiet and has easy access to the amenities that I've grown accustomed to (going downtown, close to a grocery store, being able to go to a park, and close to the local pool for swimming). I don't want a house that is right next to the freeway. I'm not excited about houses that are mirror images of those around them (even though inside they are really, really nice). These tend to be newer houses, which don't often hold their value really well.
So, how did you buy your house? What was important to you when deciding to make an offer? Did you know it was the one when you did buy it? Were you happy with your decision, or did you discover something wrong after you'd already closed? I'd love to hear your stories and learn from them.
New Tax Changes: Some Good, Some Bad
Bankrate.com has an article about new tax laws that will mostly take effect in 2007.
I'm most impressed with extending the contribution limits to Roth IRAs. Previously, these limits would have expired in 2010. Now, in 2008, if you qualify, you'll be able to contribute up to $5,000 a year to a Roth IRA. After that, the limits will be adjusted for inflation. That's great news for savers who want to build up a retirement fund from which they won't have to pay taxes when they withdraw (after 59 1/2 of course).
Another provision extended the tax-free distributions from 529 savings accounts (you know, the education funds). This tool was expected to expire in 2010, too, but Congress made them permanent. So if you have children and expect them to attend college, this would be a great way to invest some money and try to keep on top of tuition inflation (currently around 7% a year).
There are 10 distinct changes to the tax code that the bill from Congress addressed. Read the article to see how these could effect you.
I'm most impressed with extending the contribution limits to Roth IRAs. Previously, these limits would have expired in 2010. Now, in 2008, if you qualify, you'll be able to contribute up to $5,000 a year to a Roth IRA. After that, the limits will be adjusted for inflation. That's great news for savers who want to build up a retirement fund from which they won't have to pay taxes when they withdraw (after 59 1/2 of course).
Another provision extended the tax-free distributions from 529 savings accounts (you know, the education funds). This tool was expected to expire in 2010, too, but Congress made them permanent. So if you have children and expect them to attend college, this would be a great way to invest some money and try to keep on top of tuition inflation (currently around 7% a year).
There are 10 distinct changes to the tax code that the bill from Congress addressed. Read the article to see how these could effect you.
Company Social Events: Don't Get Drunk!
I came across this article at Monster.com about how to act during a company social event (you know, parties, Christmas celebrations, dinner at the boss' house, etc.).
One of the most important is: Socialize Outside your Group. Get to know others. Put yourself out there, don't just hang out with the people you work with or feel comfortable with. Who knows, in the future when you apply for a job, they might just remember you being friendly and that could help!
One of the most important is: Socialize Outside your Group. Get to know others. Put yourself out there, don't just hang out with the people you work with or feel comfortable with. Who knows, in the future when you apply for a job, they might just remember you being friendly and that could help!
Housing Sales Decline in 28 States
It looks like the real estate market is beginning to be saturated with homes. This article identifies a number of states where housing sales have declined over a previous period. That doesn't mean houses aren't being sold, however. Alaska, Vermont, North Carolina and Texas have all had sales increases.
The writer speculates that booming areas a year ago are slowing, while previously stagnant areas are doing well.
While it most certainly is a buyers market now, some people are estimating the slowdown is through the worst already. What do you think?
The writer speculates that booming areas a year ago are slowing, while previously stagnant areas are doing well.
While it most certainly is a buyers market now, some people are estimating the slowdown is through the worst already. What do you think?
Wednesday, July 26, 2006
Home Appraising Inflation
It has been awhile since I've posted. I've been enjoying the summer and dealing with some personal events. But during this time, I have not stopped thinking about how to educate people about dealing with money in an intelligent manner.
I've also begun to consider whether I should by a home here in Iowa. I've come across a lot of information and I'd like to share it with you over the next few days.
The first thing I'd like to post here is this article from the Arizona Central. The article covers a problem occurring around the nation with inflated home appraisals. It points out a conflict of interest between the buyer and the mortgage lender. The lender wants to have a high home value, so that they can have you approved for the loan. This, of course, allows the borrower to borrow more. When the house is re-appraised, it can be disastrous to find that your home is worth less than you thought.
How do you remedy something like this? I would suggest having a different appraisal in addition to the bank's appraisal. If the values are close, then there probably isn't a problem. If there is a wide discrepancy, then something is wrong.
I've also begun to consider whether I should by a home here in Iowa. I've come across a lot of information and I'd like to share it with you over the next few days.
The first thing I'd like to post here is this article from the Arizona Central. The article covers a problem occurring around the nation with inflated home appraisals. It points out a conflict of interest between the buyer and the mortgage lender. The lender wants to have a high home value, so that they can have you approved for the loan. This, of course, allows the borrower to borrow more. When the house is re-appraised, it can be disastrous to find that your home is worth less than you thought.
How do you remedy something like this? I would suggest having a different appraisal in addition to the bank's appraisal. If the values are close, then there probably isn't a problem. If there is a wide discrepancy, then something is wrong.
Quote of the Month
“A tax cut is really one of the anecdotes [sic] to coming out of an economic illness.”
--George W. Bush
Tuesday, June 27, 2006
Government Repeals Tax on Long Distance Telephone Usage
My mom sent me this article about the IRS rescinding a more than 100-year old tax on "telegraphs and telephones." People will no longer have to pay a long distance tax and they can apply for a refund of all taxes paid since February 2003.
I'm guessing if you use Turbo Tax or Taxcut, this will be built in. The article can be found in the comments section.
I'm guessing if you use Turbo Tax or Taxcut, this will be built in. The article can be found in the comments section.
Tuesday, June 20, 2006
More Millionaires Now than Ever
According to this article, there are now close to 9 million millionaires in the world. More interesting (but not surprising if you know about millionaires) is that they are investing aggressively in emerging markets around the world.
The ultra-rich (more than $30 million net worth) topped 85,700 around the world and grew at a faster pace than the overall number. The article points out that the fastest growing area is the Middle East and the leader is Dubai. Why? Low barriers to entry, no unions, cheap startup costs and no taxes.
The ultra-rich (more than $30 million net worth) topped 85,700 around the world and grew at a faster pace than the overall number. The article points out that the fastest growing area is the Middle East and the leader is Dubai. Why? Low barriers to entry, no unions, cheap startup costs and no taxes.
Friday, June 16, 2006
Thursday, May 25, 2006
Economy Update
5.3% (Q1) annual growth for the United States economy. The fastest growth in more than 2 years. Inflation holds steady at under 3%. Exports are also rising and have grown at 14.7% (annual). Housing spending is also up (3.1% instead of the estimated 2.4%). Looks like things are going good!
Monday, May 22, 2006
Don't Put Much Faith in the "Experts"
John Stossel wrote an article about his Princeton economics teacher, Burton Malkiel. I have been reading, Mr. Malkiel's book and am almost finished. I'm quite impressed with his numbers concerning stock investment and his index-fund based investment strategy. I'll post more about the book when I'm finished with it.
Stossel talks about things I've already learned in the course of earning my MBA. Most experts cannot consistently pick stocks for a portfolio that beats the S&P 500. Sure every year there are lucky ones, but too many factors over the long run reduce even the most highly educated and savvy fund manager to scampering to beat the almighty S&P.
If you've been reading Cashtalk for awhile now, you already know this. Brett has posted an article about his own foray into the market (Brett would hardly call himself a savvy investor, but at least he tried!) and his recommendations for a stock market strategy here. And our stock market simulation game also proved that because of all the brokerage fees, picking and holding a stock would do just as well as buying and selling on a daily basis (or did it?).
So when you're deciding which fund to buy or which basket of stocks to hold, remember that odds are, buying the S&P 500 index fund will get you better or equivalent returns over the long run, with the bonus of having lower commissions and fees.
Stossel talks about things I've already learned in the course of earning my MBA. Most experts cannot consistently pick stocks for a portfolio that beats the S&P 500. Sure every year there are lucky ones, but too many factors over the long run reduce even the most highly educated and savvy fund manager to scampering to beat the almighty S&P.
If you've been reading Cashtalk for awhile now, you already know this. Brett has posted an article about his own foray into the market (Brett would hardly call himself a savvy investor, but at least he tried!) and his recommendations for a stock market strategy here. And our stock market simulation game also proved that because of all the brokerage fees, picking and holding a stock would do just as well as buying and selling on a daily basis (or did it?).
So when you're deciding which fund to buy or which basket of stocks to hold, remember that odds are, buying the S&P 500 index fund will get you better or equivalent returns over the long run, with the bonus of having lower commissions and fees.
Stocks; Gold Fall in India: On Suicide Alert
Wow. The Mumbai exchange in India has lost almost 22% of its more than $600 billion value last week and beginning today. The Indian police are watching canals and rivers for brokers wishing to commit suicide.
No matter how bad you do in life with money, it certainly is never worth more than your life. Getting your priorities straight should prevent people from jumping out of buildings or tying a boulder to their leg and jumping off a bridge. Your family and values are way more important in life than money. Your dreams may be put on hold, but a short delay isn't worth the price of death.
Gold and other commodities are falling, too. Very strange. Some are recalling similarities to this crash and the 1987 "Black Monday" Wall-Street crash, citing fears about inflation and a sharp run-up of stock prices and weakness of bonds.
I'll keep you posted.
No matter how bad you do in life with money, it certainly is never worth more than your life. Getting your priorities straight should prevent people from jumping out of buildings or tying a boulder to their leg and jumping off a bridge. Your family and values are way more important in life than money. Your dreams may be put on hold, but a short delay isn't worth the price of death.
Gold and other commodities are falling, too. Very strange. Some are recalling similarities to this crash and the 1987 "Black Monday" Wall-Street crash, citing fears about inflation and a sharp run-up of stock prices and weakness of bonds.
I'll keep you posted.
Monday, May 15, 2006
Time Value of Money: Buying a Car
I thought I would review the Time Value of Money after a friend of mine sent me a problem to solve.
Let's say you want to buy a new car valued at $25,000. Wait a minute! What are you doing? A new car loses almost a fifth of its value as soon as you drive it off the lot! Never buy a new car!
Okay...Let's say two guys with trench coats kidnap you at gunpoint and bring you to a new car dealership. They bring you to the smirking salesman and he says, "You have two deals: You can buy the $25,000 car for no interest and payments for 60 months or you can get a $4000 rebate today and pay 7% (yearly) interest on the balance for 48 months." Which is the better deal?
Your eyes dart across the street to the used car lot. You glance down at the "used car" section in the classifieds. Then you hear a "click" as the thug pulls back the hammer of his revolver. "Enough stalling! What's your decision!?"
First, let's figure out the payments. The first option (no interest 100% financing) would have a payment of $416.67 for 60 months. What's $416.67 x 60? $25,000.20.
The second option has payments of $502.87 for 48 months. That comes to $24,137.76. Seems a little cheaper, but remember that this includes a $4,000 rebate, so the number should be $21,000. The 3,137.76 is interest on the financing of the $21,000.
My friend suggested that I use the Present Value of money to solve the problem. Is this the correct approach? On the first option, the future value of his payments would be $25,000.20 after 60 months. The Present Value could be discounted at an alternative use of the money, say a CD at 5%. We can set up an algebra equation that looks like this:
PV(1st Option) = ($-416.67/0.004167)*[1 - 1/(1.004167)^60]
Notice how I've divided the 5% interest by 12 to get the monthly interest of 0.004167? This will give us a more accurate number.
If we solve for the first option's Present Value, we get $22,079.42.
PV(2nd Option) = ($-502.87/0.004167)*[1-1/(1.004167)^48]
PV(2nd Option) = $21,835.93
What does this tell us? Do we really care what an alternative investment would make? We want a car, darn it! Especially to appease these goons and their revolver pointed at your head. The answer is yes. This tells us that for 7%, 48 month financing option, plus rebate , if I invested $21,835.93 at 5%, I'd have the equivalent future value. If I invested $22,079.42 today at 5%, I'd have the future value of the 1st option.
So which one is better? The lower PV gets me the same car at "less"money. And since these guys are pointing a gun at your head, you should just take the 2nd option: the $4,000 rebate and 7% interest. You'll save $243.54.
There you have it. Easy peasy!
Let's say you want to buy a new car valued at $25,000. Wait a minute! What are you doing? A new car loses almost a fifth of its value as soon as you drive it off the lot! Never buy a new car!
Okay...Let's say two guys with trench coats kidnap you at gunpoint and bring you to a new car dealership. They bring you to the smirking salesman and he says, "You have two deals: You can buy the $25,000 car for no interest and payments for 60 months or you can get a $4000 rebate today and pay 7% (yearly) interest on the balance for 48 months." Which is the better deal?
Your eyes dart across the street to the used car lot. You glance down at the "used car" section in the classifieds. Then you hear a "click" as the thug pulls back the hammer of his revolver. "Enough stalling! What's your decision!?"
First, let's figure out the payments. The first option (no interest 100% financing) would have a payment of $416.67 for 60 months. What's $416.67 x 60? $25,000.20.
The second option has payments of $502.87 for 48 months. That comes to $24,137.76. Seems a little cheaper, but remember that this includes a $4,000 rebate, so the number should be $21,000. The 3,137.76 is interest on the financing of the $21,000.
My friend suggested that I use the Present Value of money to solve the problem. Is this the correct approach? On the first option, the future value of his payments would be $25,000.20 after 60 months. The Present Value could be discounted at an alternative use of the money, say a CD at 5%. We can set up an algebra equation that looks like this:
PV(1st Option) = ($-416.67/0.004167)*[1 - 1/(1.004167)^60]
Notice how I've divided the 5% interest by 12 to get the monthly interest of 0.004167? This will give us a more accurate number.
If we solve for the first option's Present Value, we get $22,079.42.
PV(2nd Option) = ($-502.87/0.004167)*[1-1/(1.004167)^48]
PV(2nd Option) = $21,835.93
What does this tell us? Do we really care what an alternative investment would make? We want a car, darn it! Especially to appease these goons and their revolver pointed at your head. The answer is yes. This tells us that for 7%, 48 month financing option, plus rebate , if I invested $21,835.93 at 5%, I'd have the equivalent future value. If I invested $22,079.42 today at 5%, I'd have the future value of the 1st option.
So which one is better? The lower PV gets me the same car at "less"money. And since these guys are pointing a gun at your head, you should just take the 2nd option: the $4,000 rebate and 7% interest. You'll save $243.54.
There you have it. Easy peasy!
Thursday, May 11, 2006
The Smell of Money
When I was in China, I would often try to stay current with world news by either reading the Economist or Newsweek (International Edition). In one issue of Newsweek, there was a "perpective" article written by a former resident of a town in Iowa with a lot of pig farms around. The person recalls how her father and her would drive into town and the locals would sniff the air and smell the horrible odor of pig manure. Her father would take a particularly big whiff and then say, "Do you smell that? That's the smell of money."
Not all jobs are highly desirable, but after beginning the "Millionaire Mind" by Thomas J. Stanley, it seems that many millionaires tend to gravitate toward low competition, undesirable businesses with high profit margins. That's something you should keep in mind when choosing your own career path. Pigs, while stinky, often pay well.
But I digress. I was reminded of that article when I read this article today. Apparently scientists at the University of Illinois have found a way to convert pig manure into crude oil. That's right. Millions of tons of pig manure could potentially be transformed into oil and used in vehicles or other applications. Ain't technology great? I guess in the future, there will be one more way for that smell to be the "smell of money."
Not all jobs are highly desirable, but after beginning the "Millionaire Mind" by Thomas J. Stanley, it seems that many millionaires tend to gravitate toward low competition, undesirable businesses with high profit margins. That's something you should keep in mind when choosing your own career path. Pigs, while stinky, often pay well.
But I digress. I was reminded of that article when I read this article today. Apparently scientists at the University of Illinois have found a way to convert pig manure into crude oil. That's right. Millions of tons of pig manure could potentially be transformed into oil and used in vehicles or other applications. Ain't technology great? I guess in the future, there will be one more way for that smell to be the "smell of money."
Tuesday, May 09, 2006
Investing for Education
Two guys from SmithBarney in Houston, TX (actually they're Vice Presidents) wrote this article about investing for their children's education. They are adamantly against the 529 plans and any of the state educational savings accounts. Why? They claim that recent laws in Congress open the door for states to tax other states' plans. Not good.
They also correctly point out that in 2010, the 401(k), Roth IRA, and 529 plans tax laws will expire. They may or may not be renewed by Congress. I can't imagine any Congress would remove the tax sheltered properties of the 401(k) or other savings devices, but it is a risk, I suppose.
Their strategy is composed of putting half of an investment into a municipal bond and the other half into a few, dividend-paying, high return stocks (if only they had pointed out a few examples!). Their ideas intrigue me, but I'm a bit skeptical. I'd like to hear your thoughts.
They also correctly point out that in 2010, the 401(k), Roth IRA, and 529 plans tax laws will expire. They may or may not be renewed by Congress. I can't imagine any Congress would remove the tax sheltered properties of the 401(k) or other savings devices, but it is a risk, I suppose.
Their strategy is composed of putting half of an investment into a municipal bond and the other half into a few, dividend-paying, high return stocks (if only they had pointed out a few examples!). Their ideas intrigue me, but I'm a bit skeptical. I'd like to hear your thoughts.
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