Today's money saving tip is:
Get a free checking account. Many interest bearing checking accounts are loaded up with additional fees. While most free checking accounts do not earn interest, the amount that you save in fees with a free checking account may be worth not earning interest on your deposits.
Best,
James
The debate between business and the environment is often characterized by knee jerk politics and rhetorical conflict. Business hate environmental regulation. Environmentalists think business has a natural tendency to harm the environment and feel it should be heavily regulated. Its sad, but few people try to navigate a middle path between these extreme views.
An exception to this rancor is a collaborative work by Paul Hawkins, Amory Lovins and Hunter Lovins titled: Natural Capitalism. For those of you interested in both the environment and honest profit Natural Capitalism is the book for you. The piece takes a hard look at classical economics and shows that many of the core concepts of capitalism are compatible with a green vision of the economy.
The main idea has to do with capital. Classical economics argues that capital and labor are what ultimately determine value. Typically capital is divided into two elements, financial (cash and financial instruments) and infrastructure (machines, tools, etc.). Under classical economics labor is applied to capital to create saleable commodities. The authors take these three elements; financial & infrastructure capital and labor, but argue that a third type of capital- natural capital should play a role in the wealth equation. Natural capital is defined as natural resources such as living systems, oxygen and clean water - in short, the environment around us.
Having defined the environment as a form of capital, the authors say several interesting effects occur.
First, the increasing cost of waste will drive efficiency. Hawkins and Lovins say the increased cost of waste will force economic systems to innovate to eliminate the costs of inefficiency. For example, if a dollar value is fixed to industrial pollutants, power, coal and automotive companies would find ways to reduce costs by eliminating waste.
Second, resource constraints will pump up innovation and job growth. It is generally accepted that one reason for the industrial revolution in England was a shortage of timber. Lack of timber increased use of coal, which drove increases in production. This processes ultimately lead to the fantastic increases in efficiency and job growth under industrialization. Hawkins and Lovins argue the same processes will occur once the environment is conceptualized as a form of capital with its accompanying natural scarcities.
Third, the environment is preserved. Once the environment is viewed as capital - e.g. a fundamental unit of value, then the natural tendency is safeguard and preserve that value. For example, if carbon emissions have a dollar cost then people will actively seek to reduce them.
In summary, Natural Capitalism argues that if you conceptualize the environment as a form of capital and inject this conceptualization into the costs of doing business it's possible to have real economic growth and employment without the associated degradation that is occurring today.
My take on this: Hawkins and Lovins have created an elegant and hard hitting idea. They are correct in their main point: reconceptualizing economic processes will ultimately impact environmental resource usage. From the standpoint of a person who strongly advocates for a limited role of government, the emphasis on market based economic processes instead of short sighted government programs is especially appealing.
So, to wrap up - definitely check this book out.
More info is available at:
www.natcap.org
Tom Butler-Bowdin's 50 Prosperity Classics.
Today's Money Saving Tip is:
Order water. When you go to a restaurant, consider ordering tap water instead of soda or beer. Sodas can cost at least $1.90 and in some places beers are more than $4.00. The charge could go even higher if you have to pay sales or restaurant tax! On the other hand, if you order water, you won't be charged a thing.
Best,
James
Savvy credit card use generally takes making some mistakes to really know what you are doing. Here are a couple of tips if you are just starting out, or what to improve your use of credit cards. Below are the basic rules as I see them.
* If you can't use credit cards responsibly, then don't use them.
* Never carry a balance. Just don't do it. The only exception would be in an arbitrage situation when using a zero interest credit card with very good management of it.
* If you are going to use credit cards, then find one with a very good rewards system and stick with one card. Using multiple cards just makes your financial management that much harder and makes it so your rewards don't go as far when spread around.
* Ditch the store credit cards. They just aren't worth it. Shopping only during sale times will save you any discount you might get from a card and not add one more item to your financial management.
* Call to request a lower interest rate. You might as well have this for a safe guard if you do happen to slip up.
* While putting everything on auto pilot can be tempting, don't let this be an excuse for lax monitoring.
* If you have an automatic payment for the full balance, then make sure that the funds are where you need them when the due date comes around.
* It's also good to put your payment date on your calendar or some system like that.
* Take a look at least once a month for any charges that might not be yours. Fraud can be a tricky thing to get rid of, so it's best to catch it early.
* Cancel unused cards. While your FICO score is based on a variety of different factors, keeping a bunch of unused cards (especially store merchants) does you no good. Keep in mind that if you are planning to take out a mortgage in the immediate future it isn't wise to close a bunch of accounts at the same time in hopes of boosting your score, as it will do the opposite. Start with closing your newest accounts, as these look the least favorable on your credit rating.
* Check your credit report annually, it's free! Take the time then to cancel anything you aren't actively using.
We'd love to hear from our readers if they have additional tips!
Best,
Miel
Today's Money Saving Tip is:
Use cash instead of plastic. How people think about money is very different depending on whether you use cash or plastic. Studies show it is much harder to part with cash than it is to put down a credit card. If you use cash instead of plastic you will likely spend less, thus saving you money in the long run.
Best,
James
When I first got started investing, I had no idea how to read a stock quote. So that you can avoid this problem this posting gives you a brief run down on how to read a stock quote. I'll use an example from yahoo, because everybody uses yahoo finance and I'm familiar with it. Most of the metrics are the same in other platforms as well.
So, what do you have here? Specifically, it is the stock quote for common shares in the Southern Copper Corporation. More generally, its a bunch of numbers in two columns. Lets illustrate several of the most important elements here.
Ticker Symbol: Each stock you look at will have a three letter symbol showing the stocks short hand indicator for trading purposes. This is known as the "ticker symbol". In this case it shows the market where the symbol is traded and the symbol itself (NYSE: PCU).
Last Trade: This is the current market value of one share of the stock you're interested in. The value of stocks are determined in an open market by buyers and sellers usually via an electronic exchange. The last trade is therefore the most up to date dollar value of your investment. This is why it is very easy to determine the value of publicly traded stocks, - you just look at the last trade value to see how much it costs.
The next three most relevant things to look for when cruising a stock are the P/E ratio, earnings per share or EPS and the dividend & yield (Div & Yield).
The P/E ratio is the price to earnings ratio. It is an indicator of how expensive the stock is relative to its earnings per share. Many schools of securities valuation such as Warren Buffet's value investing philosophy, use this metric as a fundamental way to determine if the stock is "too expensive" or "cheap", or "undervalued" or "overvalued". When people make these kinds of statements they are generally talking about a comparison between a specific stock's P/E ratio and that industry's overall P/E ratio.
Earnings per share or EPS. Earnings are essentially the amount of profit the company generates on a per share basis. They are calculated on a per share basis so its standardized. Right - if you didn't standardize, it would be more difficult to tell company A's earnings from company B's earnings. This is because the sizes of companies earnings power differs greatly. Earnings per share or EPS takes care of that pesky problem for by expressing profits over the number of shares outstanding: essentially earnings = profitability/size. Thus, you can tell if a company is more profitable than another by directly comparing their earnings per share. PCU has earnings of $7.57.
Dividend and Yield. In the quote above this is called Div & Yield. This tells you how many dollars the company is currently paying to the owners of each share of stock, the dividend. If the dividend is 2 bucks, then every share of stock you own should make a payment to you of 2 bucks over a 12 month period. The yield is the amount paid in dividends expressed as a percentage over the current market prices. In the case of the Southern Copper Corporation the dividend is $6.80 and the yield is 6%.
Here is a hint for you: dividends are a GREAT indicator of a company's bottom line. Companies can lie about earnings numbers, but there is no substitute for a consistent dividend payment in your pocket.
There are several other metrics, but looking at these five should give you a quick sense of the most important aspects of a stock quote.
Best,
James
A couple of months ago, I was in St Louis airport and picked up a copy of Robert Kiyosaki's Guide to Investing: What the Rich Invest In, that the Poor and Middle Class Do Not. Initially it didn't appear that appealing, as Kiyosaki's other books often seem overly simplistic and punctuated with bombastic statements that border on ridiculous.
However, I was pleasantly surprised by Kiyosaki's Guide to Investing. Whats interesting about the book is not the actual technical recommendations that Kiyosaki makes - much of this you can get from his other books; invest in assets, not liabilities, educate yourself, etc. Whats interesting about the book is how Kiyosaki's perspective has evolved relative to his earlier work, Rich Dad Poor Dad.
Specifically, Kiyosaki seems to have elaborated more on his theme of thinking like a rich person. This comes across in his discussion of the "90/10 riddle" - referring to the fact that 10% of the people own 90% of the nations wealth. Rich people become rich, Kiyosaki argues, by maintaining a positive affirming mental attitude, by focusing on building profitable businesses and by efficiently allocating their time to high return projects. On the other hand, the focus of the earlier Rich Dad Poor Dad is devoted to addressing common misconceptions regarding wealth - such as the false belief that owning a house is an asset, not a liability.
The changing emphasis seems to parallel developments in Kiyosaki's own personal life. In the final chapters of the Guide To Investing, Kiyosaki professes his goal to be billionaire and outlines his efforts to learn to take start up companies public. Interestingly, Kiyosaki has recently been engaging in high end promotion deals with Donald Trump and Steve Forbes, which suggest his goals and focus on start ups rings true. In short, Kiyosaki seems to have graduated from his multilevel marketing roots to the big leagues, and it shows both in the content of his book and in his recent business dealings.
If you already have the personal finance basics nailed down, you might consider picking up a used copy of Guide to Investing. Its more advanced focus and easy reading style might help keep you motivated after you've done the obvious moves to improve your finances.
You can get it used for under five bucks on Amazon.com.
Best,
James
Today we have a feature money saving tip from one of our readers who offered the following comments:
My money saving tip is a small one. Yes, clothes hangers are cheap but not the kind that often offer a way for women to hang things that are strappy, that hang low on the shoulder, etc. I personally just ask to keep the hangers when I’m at a department store buying my (on sale!) clothing. Usually a “I need them to not be wrinkled for later” is succinct enough for the cashier bagging the clothing. Some stores do not give the hangers away however my experience has been that they’ll often give you MORE hangers if you want them. If they break, oh well! Please recycle the plastic!
I have to admit, since switching from the standard triangular plastic hangers that can be purchased for $3-$4 for 10 at my local Target, to the free and versatile department store hangers my closet (and clothes) are much happier, as am I. My pants are all hung with the hangers with clips and what’s cooler is that you can pair the pants hangers with the shirt hangers often times by linking them together by the little hook on the shirt hanger. It’s perfect for those who like to plan their outfits and, if traveling, you only have to carry ONE hanger per outfit to the car, not two.
In my book anything that saves you time and money, while making you happy at the same time, is the best of all worlds! If you have the closet space this might also save you from having to have a dresser!
Thanks for this tip reader!
Miel
When I say coupons, you might have a picture of your granny with curlers in her hair at the kitchen table. Let me tell you, coupons are not a thing of the past. The age of internet coupons is alive and well, and here to stay. You might have to cut and paste rather than clip it out of the newspaper, but the savings are there to be had.
Personally I don't do any shopping online without searching for a coupon. Generally this will get me free shipping, $10 bucks off, you name it. In my book it is worth a 5% - 20% discount on everything I buy online to do a quick google search.
Here are some principles and tips to keep in mind when shopping for coupons:
he site. For example, use the name of the company as well as the same terminology they do, i.e. web code, key code, coupon code, discount code, promotion code. If you use the same terminology that they do it is easier to find the right discounts.
e I got free shipping, which was valued at $15. So, by finding something on sale for $20 I was able to find get this for just $5. This was also something I needed and wanted, and was originally closer to $50, so it was worth spending five bucks more and overall a win-win situation.Hello All,
As you know, many couples experience a degree of separation during their marital career. This is especially the case for many people who are serving with the armed forces. So, if you are married or have long term partner and think you'll experience a period of separation, here some pointers you might consider.
1) Get separate accounts. Or at least get an account that you each primarily manage. Distance and erratic travel schedules make it harder to stay integrated when you're together but living apart. Separate accounts help keep you flexible when managing your money. For example, one of you may receive a check, but might be unable to hand it over to your significant other because of the physical distance involved. Or if your partners schedule is erratic, you might have to take over paying a bill or so.
BTW, the accounts don't have to be separate, they can just have "primary management" - e.g. you primarily use one account, but your partner can also get access to it. This takes no extra time and gives you lots of options in case something goes wrong.
2) Get your accounts linked on online. Managing your money is a lot easier if you can move it around. Miel and I are constantly transferring money to each other for a ton of crazy reasons. The best way to facilitate this processes is just to have your banks linked to each other via on-line money transfer. Most retail accounts will let you do this for free. Definitely look into this.
3) Get power of attorney. There are tons of different kinds of power of attorney, but you should at least be able to take charge of financial matters if your loved one gets hurt or lost. This involves going to a lawyer and plunking down like $50 - 100 to draw up the paperwork. Do it.
4) Make a master account spreadsheet. We have an excel sheet that's got all of our accounts, log in information and passwords - everything is one place. That way if push comes to shove either partner can access the accounts to take care of business.
When you are finished compiling all your accounts, password protect the heck out of this sheet and keep in a separate part of your computer that is password protected also. Excel lets password protect worksheets. Also consider getting cryptainer, which lets you partition your harddrive with some really powerful free encryption. The security issue should not be taken lightly. A nigerian hacker broke into my neighbors email account last week you so want to be super careful with this info - no kidding.
5) Talk for Free: The internet is your friend. Being apart is a drag, but its even harder to maintain your relationship if you have to pay an arm and a leg to talk. If both of you have access to a computer and a good internet connection you really don't have to pay at all. Get an internet telephony service that allows you to talk for free. We recommend skype. Invest in a set of headphones and a webcam. With a good connection its like speaking with someone in the same room.
Also, if your schedule permits it, block out some time for each other. Your marriage is as important as your work or recreational activities so make the time to be with each other. We have biweekly video conference meetings and email nearly every day.
Hope some of this helps.
Best,
James
Last night I ran across an interesting article in one of the local Saigon rags at the restaurant I was having dinner at. Luckily the article was actually snagged from Forbes, so it had enough reliability for me to take note and pass on some interesting tidbits to our readers.
Apparently last October Warren Buffet, currently the world's wealthiest man, challenged Forbes 400 richest Americans in a bit of a wager. He said that he would give 1 Million to charity, if they collectively (or at least the majority of them) would admit to paying less tax than their secretaries.
Buffet went on to speak to Congress the following week as an advocate to keep the estate tax.
Buffet says that, "Dynasty wealth, the enemy of meritocracy, is on the rise."
Warren gives 5% of his wealth to charity every July. Considering that his fortune is worth 62 Billion, but 10 Billion from last year, this is no small chunk of change. Interestingly enough, a good majority of this he actually gives to the Bill and Melinda Gates Foundation. This is good to know in looking at the Gates Foundation's philanthropic numbers, as Warren pads their figures significantly.
Enjoy,
Miel
Todays Money Saving Tip is:
Buy generic instead of name brand. Generic products like groceries, prescription medication, etc. are often of the same quality as name brand products. More importantly, generic products are usually significantly cheaper than name brand.
Best,
James
Sometimes we don't appreciate what we have until we explore our options. This would certainly be the case with my recent experiences with PNC Bank.
I initially came into the world of online banking with Washington Mutual. While regularly readers will know that we've faced a myriad of issues with WaMu's Home Loans, I had a relatively excellent experience when looking strictly at online banking.
I was stubborn and kept my WaMu account for my first couple of years in DC, holding on to a piece of the Pacific Northwest. I finally converted after looking at all the options in DC very carefully: Chevy Chase, Bank of America, Riggs. I ended up going with Riggs since James was already on their accounts and the whole point was to simplify. I switched over and nearly fell over with how completely inept their online banking was. I couldn't hack it for more than a couple of months and ended up switching everything back to WaMu again. The lesser of evils at the time.
When ING came out with their Orange Electric Checking I jumped at the opportunity and love nearly everything about their online banking. Oh let me count the ways...
Anyway, Riggs was converted a couple of years ago to PNC. Just as I was moving to Afghanistan I went in to close an account under my old name, one of the last hold outs, and got lured in. They had several account perks because of my employer, including no international transaction fees. I asked about the online banking, telling them that I hate hated the Riggs platform, and they had assured me of how excellent PNC's was. Considering that this would be a gain of 1% international transaction fee on all of my overseas spending, and that James still keeps his accounts there, I thought it would be worth having an account there. I also figured that giving James an account with a local branch might make it easier for him to help with managing my accounts.
Since then it has been nothing but a headache. I've been charged international bank fees, as I was not supposed to, and I even got charged to have a wire from my employer deposited. The whole point was that they were giving me special perks because of my employer.
Anyway, I was finally fed up with it all a couple of months ago and decided to start shutting down my account. I canceled the automatic deposit I had going into the account from my employer, and that went well enough.
Then I tried to cancel my automatic payments that had been going to our second mortgage. I canceled the online payment and it worked for one payment and then came back another two weeks later. I canceled it again, and the same. Finally I canceled the whole bill pay system, and it still deducted again - this time causing an over draft. It failed to tell me that a check had already been cut the day before I canceled everything (even though it didn't show that the payment was going out until another week), and thus the payment went through even though everything was canceled from every indication online.
I had to call six times today, with dropped calls and all, to sort out the issue. Now this means that I have to wait for a payment to come over from ING before I can close out the account. Additionally this has meant that $1,600 has gone towards our first mortgage when we would have rather had it goes towards our goal of paying off the second.
I will be so happy to say goodbye to PNC for good.
Lessons of the day: If you have a system that works. Stay with it. If you have a system that doesn't work, demand more. Lastly, simplification is your friend.
Miel
Yesterday afternoon I was jogging through Malcolm X Park here in DC. The park is a wonderful example of neoclassical architecture with a fantastic layout reminiscent of a French palatial garden. Despite its wonderful layout, the place is a total dump.
On my jog through I counted four homeless people hanging out. In the past I've also seen sketchy guys looking for man on man sex, discarded drug paraphernalia, broken beer bottles and the occasional used condom. Not only that, the grass has been in the processes of being reseeded...for nine months. Much of the cement work is crumbling and the fountains are decrepit. In short, its in bad shape.
This illustrates a classic problem with public spaces: the tragedy of the commons. The tragedy of the commons is an economic phenomenon whereby everyone benefits from the use of the common space, but nobody has an incentive to take care of it, thus causing long term degradation. Often times, governments are supposed to manage common spaces. However in the case of DC's parks the municipal government has historically not done a good job with the city's greenspaces (1).
The more I think about it, the more it seems like the best solution is privatization. Since the park is a common resource it would seem sensible to turn it over to a particular individual or organization who will have an economic incentive to properly care for the park. While privatization is no panacea, in this case the model could work well. A private organization would be able to charge a modest admission, thus providing a basis for maintaining the park and keeping it free of crime and unsightly litter. Finally also the maintenance would likely generate modest job growth and admissions fees might provide some tax benefit. In short, with privatization, everybody wins.
If you want to think more about this, click here and here.
Best,
James
P.s. my wife Miel disagrees with me entirely on this point.
Todays money saving tip is:
Buy a home video game console or games for your PC. Why? Over the long run, your investment will pay off in fun nights at home rather than expensive evenings out on the town.
Best,
James
We all know that consumer purchases aren't the way to build wealth. At the same time, they are part of life. My opinion is that you get the most out of your money by shopping wisely. One way to do this is to be conscious of the return policies at the places you shop, and don't be afraid to use this when you need to.
This week has been one of running errands, as I'm about to depart on an overseas business trip. Here are a few examples of places I've saved money by using the the return policies:
Hello All,
This posting is a bit of departure from our usual fare of interviews and pithy quotes. As frequent readers of our blog know, we DINKs have an investment apartment. Since 2003 its value has appreciated substantially and we now have $75,000 in equity. However, since the market has slowed, we are now challenged with the problem of making this money grow.
So far, our options look like the following:
1) Borrow and Invest in Income Stocks. For this one, the numbers do not look too appealing. According to bankrate.com, we could probably borrow $30,000 at 6% while maintaining the 80% loan to value ratio required by many lenders. On those numbers, the most we would get on a monthly basis after paying Uncle Sam and the bank would be about $90. That's not so hot, but we could keep the apartment.
2) Sell and Reinvest the Equity. After paying taxes and transaction costs, the investable equity would likely be $48,720. Assuming we could find a stock yielding 12%, the monthly payout for this option would be $389.76 - a lot more than the first choice. We would get more money on a monthly basis, but would have to sacrifice owning the property.
3) Do nothing. Sometimes this is the best option. However the return on equity on the apartment is something like 1%, not very good at all.
So, if you have any experience with tapping equity and investing it profitably for current income please feel free to email us. We would love to hear from you.
Thanks,
James
No matter how good you are with managing your credit cards, you've likely been charged aggressive fees at least once by your lender. Even if you are good at managing them now, chances are that you've learned your lesson the hard way some time in the past.
Here are some tips of tricks that credit card companies like to play. Of course not all companies have the same policies, but these are some to be aware of:
* They are allowed to move your due date without notice. Right, so every once in a while they might move your due date up by a couple of days to try to trick you up. If you are used to having your bill due on the 10th for a long time and then suddenly it is due on the 8th this can mess up the most organized of money managers.
* Sometimes they will cancel your auto-payment if they have received an additional payment in the same month. They say that this is to "protect" you, assuming that you wouldn't want to pay more than once a month. In my opinion this is just to make sure you aren't paying off as fast.
* They will also not allow you to make consecutive payments; making you wait 5-14 days between payments. This adds to their bottom line and makes it more difficult to manage payments.
* They make it hard to set up auto-pay, in hopes that you will not be able to manage it yourself.
* They hike up the rate at any opportunity (late payment, bounced payment, just for the heck of it!)
* Setting bill due times at noon, so even if you pay on your due day you are already late. For this reason it is a better practice to schedule payments for the day before the bill says that it is due. Also make sure that if the due date falls on the weekend, pay on Friday instead of Monday to be on the safe side.
* Applying payments to the lowest interest first. So, if you were to take out a cash advance on a card that already had a balance, you'd have to pay the full balance before funds would be applied to the cash advance funds.
* Making cash advance interest effect from the day you borrow. Thats right folks, no grace period. Be careful about this!
Readers: If you have additional tricks of the trade that you'd like to help folks avoid, please leave us a comment.
Cheers,
Miel
"The secret point of money and power in America is neither the things that money can buy nor power for power's sake but absolute personal freedom, mobility, privacy."
-Joan Didion
