Our lives as DINKS

With one full month as a married couple, my wife and I are finally getting the benefit of DINK (Dual Income No Kids) lifestyle. With all the chaos in the market, we are keeping spending to a minimum and trying to live on my salary and bank most of hers.

64mpg Corolla – Carpooling

September is my first full month of married life. Looking at our first month/budget vs. actual spending, I noticed our gasoline expenses were significantly below my target. Why? Carpooling saved me more money than I expected. How? Our Carpool works like this: 2-3 times per week, I hitch a ride to/from work with my wife (about 10 miles each way). She continues on to her job. We always take her Toyota Corolla (32mpg) for this.

Lets say we go 64 miles per week in a carpool. She uses 2 gallons of gas for a total cost of approximately $8. Had I been driving, I would have used about 3.5 gallons and spent about $14 for the priviledge.

Over the course of a month, we save $55-60 in after tax dollars. While I am in her car, her effective mpg goes from 32mpg to 64mpg.

Failure: $13m for 18 days work

Ain't America great, Alan Fishman runs WaMu for 18 days and can make $13m for taking the company into receivership. While he didn't cause the problems that led to its failure, he didn't solve the problems either and should be ashamed.

90-Day of Drugs - $10 at Target

When I picked up my 90 day prescription at Target, I thought she charged me the wrong amount when my total bill including some other things was $17.22. According to the clerk, Target is running a special on generics.

If you need a common generic, now might be the time to stock up. I would call first to make sure your drug qualifies for the special offer.

Paid off the car

Not sure it was a good idea; however, I paid off my wife's car a year early. On the bright side, we are down to one car payment (and a reasonable one at that) allowing us to increase our monthly savings. On the downside, our savings (not large enough) took a big hit.

Note to self: must increase savings – do not pay off debt until the cash cushion is increased.

The “Rich” and Taxes?

If you don't believe the "rich" pay a large percentage of our taxes, check out this statistic from today's Hartford Courant: "Despite having only about 60,000 people, the town contributed nearly $600 million in state income taxes in 2006 — more than three times the income taxes paid by the combined populations of Hartford, Bridgeport, New Haven and Waterbury. With only 1.8 percent of tax filers, Greenwich provides nearly 13 percent of all state income tax, helping to pay for schools in West Hartford and road repairs in Rockville, not to mention every other cost related to running the state."

The story goes on to discuss the problems Connecticut may face in light of the problems with the stock market.

AIG Dividend Today – WTF?

Today, I received notice of an unexpected transaction in my IRA. When I investigated, I discovered AIG had paid me a dividend roughly equal to 10% of the current value of my holdings. In light of what happened to my investment, I would have preferred they held onto the cash and paid down that government loan.

Dumbest Bank Move -2008

All over the world, bankers have made poor decisions. Nevertheless, the NY Times has identified the dumbest banking move of 2008.

The Money Quote: "a government-owned German lender gave Lehman Brothers what might be called a parting shot in the arm, transferring 300 million euros to the investment bank on the same day it filed for bankruptcy." Source:

http://www.nytimes.com/2008/09/19/business/worldbusiness/19kfw.html?_r=1&adxnnl=1&oref=login&ref=business&adxnnlx=1221851290-iy+1BHW866974hcONMdeYA

Money Market Funds – Avoid Losses

For people with significant savings in money market accounts, I strongly recommend you make sure you know what your fund invests in. For very little upside (often a few basis points), your fund may be invested in things like Lehman paper. A few days ago, a prominent money market fund "broke the buck" subjecting its clients to losses. While they did not suffer major losses (about 1%), they did suffer losses. To avoid them, look for a money market fund at your brokerage that only invests in government securities. Alternatively, many brokerages have the ability to purchase federally insured CD's on your behalf.

AIG - RIP? Stupid Rating Agencies

Although my company competes with AIG, it is sad to see the state they are in. While they made their own bed, someone else lit the fire. Now, the ratings agencies are stoking the fire by creating a self-fulfilling prophesy.

Rating Agency: They will have trouble raising cash. We will reduce their ratings.

AIG: Because their ratings dropped, they need MORE money and it is hard to get.

Great system: Who designed it? Torquemada?    

Ratings Agencies Useless – See AIG

IMHO – rating agencies are just about worthless. In good times, they give the illusion of safety by telling the investing public what they want to hear. In bad times, they make bad things worse by identifying what everyone already knows.

For example, AIG has been the 900 pound gorilla of the insurance industry for years. With a gold plated balance sheet, they were a money making machine for shareholders. After being forced to replace its dynamic CEO, Hank Greenberg, AIG suffered a series of management miscues and losses in the credit markets. Nevertheless, it should not have been fatal, but the ratings agencies are making things worse.

After AIG stock plummeted (and I mean plummeted), S&P decided to notice that a low stock price might make it hard to raise capital and placed them on ratings watch. Their action, of course, caused AIG stocks to plummet even more and made it more difficult for them to raise capital. Basically, they are like a weatherman who only reports what has already occurred.

eBay Revenues – what to do?

Over the past few weeks, I sold some excess stuff on eBay and ended up with approximately $300.00 sitting in my paypal account. Originally, I planned to spend the money on myself; however, I have decided to drop it into savings.

What do my friends in the Blogosphere do with their eBay revenues?

 

Lehman Liquidation – Very Likely?

According to the WSJ, the Lehman bailout is in trouble. If so, it will be a long day tomorrow on Wall Street. Although the depressed prices might look like a buying opportunity, I don't think the time is right. Look to 2009 to move into stocks.

Cheapskate Biden - No Charity

According to news reports VP candidate Joe Biden's made a $2.2million in the past 10 years (source: tax records). Total charitable contributions: $3,690!!! While charitable giving has not been my strongsuit, even I managed to beat his total.

No financials are safe – Credit Freeze

IMHO – there is not a credit crunch. In many ways, large financials are subject to a credit freeze. If not, why would a company like AIG plummet again because it cannot access the capital markets.

Until this shakes out, no financials are safe.

The Lipstick Revolution – Palin’s Surge

Republican or Democrats, one has to notice the incredible impact Sarah Palin has had on the McCain campaign. Love her or hate her, the days of all-male presidential tickets appear over. As the drama over the "Lipstick on a Pig" comment illustrates, female voters are an enormous voting block and they appear unwilling to take abuse from male politicians anymore.

Obama’s Idiotic Fannie/Freddie Comments

According to news reports, Obama wants to prevent the ousted executives at Fannie/Freddie from collecting on their severance packages. Although they are likely to walk away with large packages per their contract, there doesn't appear to be evidence of illegal behavior by them. Absent such evidence, the government doesn't have the power to abrogate their employment contracts.

Having said that, I expect we will learn they are walking away with millions of dollars. While CEO pay is often obscene, it is not yet illegal and Obama knows it.

Winter Coat – When should I buy one?

Bottom line, I need a nice, wool winter coat. Should I buy early in the season when there are a lot of choices or late in the year when the retailers are struggling to move out ? Still relatively new to the northeast, not sure when the best time to buy is.

Avoid Annuities due to Insolvency Risk

Simply put, Annuities are Loans to Insurance companies by their customers. Right now, I think it is a mistake to purchase an annuity (variable or fixed) from any insurance company. When you purchase an annuity, you transfer funds to the carrier in return for a promise from the company to pay you in the future according to the terms of the contract.

Key Concepts about Your Loan to your Insurance Carrier:

1. Insurances Companies can and do go out of business. Like banks, car companies, or any other firm, they are susceptible to mistakes by management and financial realities. In the past few years, AIG, once the strongest insurance carrier on the planet, lost something like $50BILLION in market cap.
   
2. The longer it takes for you to "collect" on your annuity, the more risk you have.
   
3. Most Life Insurers invest a large portion of their assets in fixed income securities. Traditionally, this has been a sound, well thought out strategy. Unfortunately, the credit crunch and subprime crises means many of those "assets" could depreciate and leave the carrier unable to pay you. For example, a well run Insurer I have experience with states it has:
   

• $90+ Billion in Assets
  
• Asset Backed Securities: 9%
  
• Residential CMO/Mortgage Backed Securities: 4%
  
• Commercial Mortgages: 6%
  
• Commercial Mortgage Backed Securities: 15%
  

Although the insurer has a good reputation and solid rating from AM Best, it would have a significant problem if those assets became impaired.

While great ratings (AM Best, Fitch, and S&P) matter, they are not perfect. If you don't believe me, ask someone who bought AAA rated mortgage backed securities in 2006.

Christmas Trips Home – Fly on Christmas Day

Flying to see family for Christmas can be very expensive. While talking to my sister, she mentioned flying on Christmas day to save money. Since I was planning on using AA points (I want to use them up and stop using American Airlines forever), I wasn't paying that much attention. When I went to book my flight, I discovered AA doubled the number of airmiles needed to fly out on Christmas Eve Day compared to Christmas Day. Basically, they want people to pay first class prices for coach seats. As a result, I am flying home at 7am on Christmas Day with my lovely wife.

Thanks American Airlines. Each time I deal with you, you lose what little goodwill you may have left.

We plan on using the "saved" points for a trip to Florida in February.

British Universal Healthcare – Privatizing?

While there are certainly some issues with the United States health care system, the British "Universal" Health plan is not perfect. If it was, would they try this:

http://www.businessinsurance.com/cgi-bin/article.pl?articleId=25756

Health Insurance – am I naked?

According to my wife's employer, I was added to her plan effective 9/1/08. Nevertheless, the carrier doesn't have a record of the change; however, they say it normally will take a few weeks to get me an insurance card and it will be retroactive.

Since my employer is about to cancel my health insurance, I am nervous about the situation. Until I get the card in hand, I will worry about being "naked" with respect to health insurance. As I learned from emergency appendix surgery earlier this year, you never know when you might need it.

Marriott Responds – Poorly to our Complaint Letter

After we wrote a letter complaining about Marriot's abysmal service and condition on our wedding night, they thought it would be appropriate to send us a voucher for a free night at the exact same hotel. Since the Marriott in question is less than 1 mile from our house, the voucher is basically worthless. Who wants to stay in a hotel down the street? (Especially one with bad memories).

The only reason we had a room in the first place was because it was our wedding night. My wife and I have decided to send the voucher back with a cc to head of Marriott hotels.