Free Books - Library Upgrades

An avid reader, my Barnes & Noble card has been burned up every year. This year, I started using my local library to reduce my cash outlays.

Not having used a library in years, I discovered my library has a couple of great services:
1. Free audiobooks online and on disk;
2. Internet Reservations - even if a book hasn't been purchased yet, I can put it on my list. When it becomes available, they send me an e-mail.
3. The computerized system can search most public libraries in the state. If my library doesn't have it, they can order it from other cities.

I am happy to find my taxes are going to something useful.

Variable Annities - Minimize Taxes the Dumb Way

If you want to minimize the taxes on your investments, minimize your investment returns with bad decisions.


If you want to minimize taxes the dumb way, I recommend the following:
1. Maximize Commissions
2. Maximize Management Fees in Mediocre Funds
3. Maximize Insurance Premiums
4. Maximize Transaction Complexity

Basically, you should invest all you money in Variable Annuities with all the Riders possible. By doing so, you can defer taxes on investment income. All you have to do is pay a huge commission, pay high management fees for sub-accounts, and pay high insurance premiums for the “coverage.” To execute the variable annuity strategy, you will get to sign a contract so complex it takes teams of actuaries years to design and lawyers months to draft.

Let’s put it this way, if VA’s are a good idea, why do you have to pay a surrender charge to get out of the deal?

Thanksgiving Dinner - Eat out and Save!!

Normally, eating out is not a recipe for frugality. Nevertheless, it can be a good idea when the gathering will be small.

A typical Thanksgiving feast would mean cooking:
1. An Entire Turkey
2. Making Stuffing'
3. Making Gravy
4. Green Beans with onion rings
5. Sweet Potatos
6. Asparagus
7. Olive Plate
8. Shrimp Cocktail
9. Fruit Salad
10. Pumpkin and Pecan Pie

With only four people at this year's dinner, it was a fiancially sound decision to go out for dinner. Each of us can have our favorites without forcing us to make enough for four.

Extended Warranty - Good Buy For Laptops

For the most part, I agree with the recent story in Consumer Reports with respect to extended warranties. I must say they have saved me thousands of dollars on two laptops.
1. In B-School, we were required to buy a laptop. Because the school recommended Dell's and we didn't know better, most of us purchased Dell's with an extended service plan. Frankly, the Dell was a lemon and the extended service plan came into play on two separate occassions. On a student budget, I would not have been able to pay for a replacement.

2. Due to my hatred of Dell, I purchased an Apple to replace the Dell. Because of the reliability issues with the Dell, I purchased an extended warranty from CompUSA. Unfortunately, the Apple needed 2 screens and 1 keyboard. While CompUSA service techs were slow, they did manage to fix the problems eventually. 4-5 years later, the Apple continues to work.

Combined with experiences with work laptops, I believe laptops are inherently unstable and likely to have problems. If the extended warranty is available at a decent price, it can be a lifesaver.

Easy Saving Vehicle - Public Library

An avid reader, my Barnes & Noble has been a nice way to save a few bucks. Nevertheless, I have begun to use my town's public library to further reduce my book spend.
1. I already pay for it through taxes;
2. It has most of the books I would like to read;
3. They have the ability to "order" just about any book from other libraries in the state.

While I will continue to buy books from my favorite author, I expect my book spend will go down by 50% or more in 2008.

My Bet on an HSA

Today, I made my employee benefits for 2008 and decided to bet on our new Health Savings Account for the first 8 months of the year. In August, I will get married and change to my wife's plan.

This is how I hope things will work out.
1. For 8 months, I save a decent amount on my premium;
2. My company will contribute $600 towards my deductible on January 1, 2008
3. I will make sure I make the maximum allowable contribution before the wedding
4. I expect to spend $60 on prescriptions during the 8 month period.
5. Otherwise, I am hoping to avoid any treatments. Using my current plan, I just had a complete physical for a $20 co-pay.
6. Hopefully, I will end up with over $2,000 sitting in a tax deferred account. With the savings on taxes and the company contribution, I hope to save about $1,000 in after tax dollars.

Wish me luck.

Mortgage Company Defense

Like almost every homeowner in the United States, I have had mortgages on my homes. As a first time homebuyer, Citibank gave me a great rate on my condo despite making a 5% downpayment. A few years later, Wells Fargo did the same thing for 10% down on my current house.

Today, the media makes all mortgage companies out to be crooks and with the "evil" of tobacco companies attached to them.

While there were certainly unconscionable abuses during the bubble, many people, like myself, benefitted from the liquidity Mortgage Backed Securities gave the market.

E-Trade Bank - Time to pull out

Although they deny it, there are rumors all over the financial press that they are facing bankrupcty. If you have less then $100K in an INSURED account, you are fine. Anyone with amounts over $100k should pull out ASAP. Unless you are getting paid a risk premium (and you are not), taking bankruptcy risk is foolish.

For brokerage customers, the decision to stay/go is complicated. Nevertheless, I find it likely their service will suffer while management deals with their subprime mess.
1. I would expect the company to deploy capital to defend their ratings, not to improve service.
2. I would expect their best executive talent to be deployed in other areas.

NOTE - I do not work for or have any relationship with E-Trade, Frankly, I hope they pull out of it because I firmly believe they are good for competition.

Round Up Bill Payments to save time

Although it might cost you "some" interest, I recommend rounding up all bill and loan payments to the nearest convenient amount. It makes it easier to balance a checkbook and simplifies budgeting. The lost interest is negligible.

Imagine hypothetical payments:
Mortgage $983.45
Credit Card: 231.43
Gas: 134.12
Electricity: 124.26
Landline: $23.12
DSL: 23.68
Cell: 62.97

To easy my workload, I would probably send actual payments of:
Mortgage: $1,000
Credit Card: 240
Gas: 135
Electricity: 125
Landline: 24
DSL: 24
Cell: 63

Loans as Percentage of Takehome?

Because I am getting married, I have been spending some time/effort trying to imagine our life as DINKS. While we hope God will bless us with children soon, we expect at least 1 year as DINKS.

After taxes, benefit costs, and 401k contributions, our loans will take up the following percentage of our takehome pay:
22% - Mortgage and Heloc
8% - Car Loans (hers will be paid off within 12 months, cutting our payments in half)
8% - Student Loans
0% - Credit Cards
38% doesn't seem so bad; however, we are going to take advantage of DINK status by "spending" what she will save on rent, utliities, etc as follows.

1. 50% will go towards saving for children.
2. 50% will go towards debt reduction with the following priorites.

a. Eliminate non-subsidized student loans within 12-24 months.
b. Increase payment towards HELOC to increase equity in our house.

Keeping Heating Costs in Check

With oil prices out of control, I have implemented a plan to reduce my oil bill.
1. Keep the thermostat at 64 degrees. With sweaters, long pants, and socks, it is quite comfortable.
2. During the weekend and evenings, I start a fire. With the insert in the fireplace, it keeps the downstairs warm enough to keep the boiler from firing off.
3. Insulation. Using materials from home depot, I have insulated the pipes in the basement.

Best Deal in Tax Software?

I am interested in finding the best deal for my software for the 2007 tax year. Typically, I use TurboTax; however, I am willing to consider other options. I will need a Federal and State Tax product. Although not incredibly complex, my return is not a 1040EZ form.

Of course, coupons will be appreciated.

ING Debit Card - Cash Back

Just got a nice note from ING. From Nov 15 through Dec 31, they are giving 1% cash back on signature based debit card purchases.

Thank you ING.

Benefits Election Package Arrived

Today, my company delivered the 2008 benefits selection package. Frankly, we were lucky and the costs did not change for most of the benefits.

Health Plan - The cheapest plan was replaced by an HSA. If we select the plan, the company will contribute up to $600 toward the deductible. The other options are a HMO and a PPO style plan. Complicating my situation is my marraige in August. After we are married, I am definitely switching to my fiance' plan. Although I am still running numbers, I am planning to select the HSA and contribute $1,000 towards savings. Hopefully, I can stay away from the doctor for 10 months.

Life Insurance: Together with my own cash balance plan, I have approximately 4x my salary in life insurance. Given my new responsibilities, I will probably increase my election slightly.

CEO Exit Package Idiocy

Another day, another Wall Street CEO gets the boot for poor performance. For most of us, getting fired means very limited severance. For these guys, $100 million dollar exit packages are the norm.

In their defense, a large percentage of the announced packages are amounts already earned. Typically, the amounts represent pensions, deferred comp, and options granted in prior periods. Since the amounts have already been "earned," they aren't really golden parachutes.

Nevertheless, the amounts "earned" are idiotic. The Board's should never allow CEO's to loot the companies for excessive pay.

Credit Score - Reaching 800

On a lark, I signed up for a free trial of MyFico.com. Ever the anal retentive type, I have a perverse desire to get my credit score over 800.

According to the guidance on MyFico, two things are holding me back:
1. Recent inquiries - I have been changing credit cards to maximize gas card rewards
2. Balanced used - although good, my score will probably go over 800 when I pay off the balance on the account I opened to do a Zero percent arbitrage.

$50 Discover Miles Savings Nice

I signed up for a Discover Miles Card as part of a zero percent balance transfer arbitrage plan. While the plan is working, I have found the reward (interest) is not worth the expense (time and effort). After I pay off the loan in a few months, I plan to stop using it.

One upside of the plan is the 2,000 bonus miles (provided I charge something each month) I earn. By charging something in the $20 range each month, I have accumulated 8,000 miles. After purchasing my Christmas plan tickets, I traded 5,000 miles for a $50 balance credit. Considering the amount of money "spent" on the Discover card, it has been a big winner.

Finally, I have to give them credit for good service and an easy to use website.

Getting Married and Health Insurance

For anyone, health insurance choices can be confusing and require a significant amount of thought. For people getting married, it is doubly so.

Last week, my company sent out its first package outlining parts of our 2008 benefits choices. As promised, we will have a HAS as an option. Although we won’t have the final details until next year, it looks like a “premium” insurance package will cost approximately $20 per month more than the HSA.
HSA Deductible: $1,000 with $500 funded by the employer
Premier Plan: Typical HMO style plan with lots of Co-Pays

For me, a key consideration is my impending marriage in August, 2008. Once that happens, my wife and I will have “life events” and will need to consider adopting one plan for both of us

1. If you change plans mid-year, you start over for deductibles;
2. Understand you family’s plan in the future. As a single, healthy male, the HSA looks like a no-brainer. With a pregnancy and children in our future, it doesn’t look like such a good idea.


What we will do:
1. I am reviewing her plan in detail. It looks like a typical PPO program with low co-pays and broad benefits. If I drop health insurance, my employer will give me a credit towards other benefits.
2. I will select the HSA for the first 8 months. The one “known” medical expense I have coming up is not covered under my plan. By using the HSA money to pay for it, I convert an uncovered expense to a covered one. In addition, I get a tax deduction for my contribution to the plan.