Archive for May, 2009

Subscriber Swap Saturday: No Debt Plan

By: Green Panda | Date posted: May 30, 2009 (7:00 am)

Instead on the usual Weekly Round-Up, I exchanged interviews with No Debt Plan. I’m excited to have a great blogger to introduce some of you readers to.

Plan subscribe to No Debt Plan

Plan subscribe to No Debt Plan

This interview is part of a new feature he’s developed called Subscriber Swap Saturday. The basic idea is to get the subscribers of one blog to subscribe to the other blog for at least a week, just to try it out. After a week if you don’t find that blogger’s content enticing, drop it. The hope is that over time you will find several writers that you weren’t familiar with who provide meaningful content to you. You can read more about Subscriber Swap Saturday at his get out of debt blog, as well as his interview with me.

Please share a little about yourself. How long have you been blogging and what has been the biggest surprise about blogging?

I’ve been blogging since January 2008. I started blogging to see if I could blog for an entire year — consistently. Turns out I did it and I’m still going strong. I would say the biggest surprise has been how difficult is has been to consistently grow the blog. I’ve been able to find something to write about on a daily basis (not that that is easy, either!), but growing the blog through promotion and networking with other bloggers could be a full-time job all in of itself.

Have you had a change of plan while on your no debt plan?

Well our plan has changed a lot, and at the same time changed not at all. We’ve maintained a consistent focus on investing for retirement and living debt free (except for our mortgage). But we’ve changed how much we are saving for various goals, and recently decided to really cut back on a few things to accelerate paying off our 2nd mortgage.  Plans have to be flexible while still remaining strong — sticking to principles of saving and investing while changing where and what for.

How do you personally budget?

Good old spreadsheets. I don’t use any automated programs and do everything “by hand” in a spreadsheet. This is by far my favorite way of doing it although it can be tedious. We don’t pay ourselves first — bills don’t pay themselves! The key is we keep our bills low so we can still save money as we intend to.

If you received a tax free $10,000 check, how would you spend/save it?

We would do what we do with all extra money:

  • Tithe 10% to our church,
  • Spend 10% on “fun” things (vacations, eating out, renting movies, etc.),
  • Save/pay down debt with the rest.

It sounds really boring, but until we are mortgage free all of our extra money goes toward that.

Looking at the No Debt Plan, which step do you think was the hardest for you?

I would say building up a solid emergency fund. That sounds funny for a personal finance blogger to say, no? But even I can say wow, it really sucks to have to set aside thousands of dollars for “just in case”. We, thankfully, haven’t had to tap our emergency fund. Once we do I’m sure I will appreciate it more… but for now I wish we could use the money to pay down our mortgage faster. However I would say most of the items came pretty easy for me — I love budgeting, I understand investing, and we don’t have any consumer debt.

What’s the most practical financial tip someone starting their first job out of school should remember?

The key to financial success in life is learning the habit… or fact! … of spending less than you earn. If you make $20,000 per year but can spend less than you earn, you’re ahead of the person earning $80,000 per year and spending $100,000. This habit can be — and should be — applied at any income level.

Which up and coming personal finance blogs have caught your attention in the last few months?

Well other than the person interviewing me! Man vs Debt has really impressed me with his relentless nature of growing his blog. Same thing for My Life ROI. But I don’t want to name too many — there are truly a ton of great blogs out there that are growing much faster than I ever did. Oh if I could go back in time and use what I’ve learned thus far…

No Debt Plan is about getting and staying out of debt with a plan. Kevin, the author, is passionate about budgeting, saving for the future, and using goals to reach financial freedom. You can subscribe to his blog by RSS or email.

UN-BROKE: What You Need To Know About Money

By: Green Panda | Date posted: May 29, 2009 (5:53 pm)

on TVTonight we’re watching ABC’s  UN-BROKE: What You Need To Know About Money at 9pm. 

ABC’s Unbroke will cover financial topics like:

  •  Will Smith, who gets down to basics with a boardroom full of corporate finance executives.
  • Samuel L. Jackson, who appears as a bestselling author of self-help books and who is “Broke as Hell and Not Going to Take it Anymore!”
  • The Jonas Brothers, who teach screaming teenage girls the mysteries of the stock market.
  • Seth Green, who explains the fundamentals of a smart mortgage from his “crib.”
  • Cedric the Entertainer, who talks back to credit cards.
  • Christian Slater and Rosario Dawson, who visit an office workplace to explain the importance of investing in a 401(k) retirement plan.
  • The E*Trade Babies, who meet Mellody for an online chat from their high chairs.

Tonight as I’m watching UN-BROKE, I’ll be on Twitter chatting with others during a commerical break. If you want to chat with me, just follow my profile. If you want to check on people’s comments, search the hashtag #unbroketv.

Are you curious to learn more about the special? Here are some other sites to check out:

»crosslinked«

How Much House You Can Afford?

By: Green Panda | Date posted: May 28, 2009 (6:25 pm)

As you know one of our financial goals is to build our house down payment fund. We would like to get a mortgage and have a small house or town house just outside the city.

I was reading a Scrooge Strategy tip on calculating on your savings plan. We’ve been setting aside some money, but we didn’t have an end goal. I wanted to get an idea of the size of the down payment we should be saving for.

I decided to check around the web and see what the personal finance calculator gave as ballpark figures. I got conflicting opinions on how much house we can afford. I thought it was interesting  to share with you how different the numbers can be if you only rely on web financial calculators.

How We Ran the House Down Payment Numbers on the Web

We used the median American income of $50,233.00 for this post’s numbers to give you an idea of what we found. We used a down payment of  $10,000. The mortgage rate was based on an approximate FICO score of 750 and Bankrate’s estimate of our locality’s rate of 5.1% for a 30 year mortgage.

For property tax and home insurance, we used the national average of $3,500 and $481.

What the Financial Calculators Told Us on How Much House We Could Afford

Bankrate’s Calculator had us enter a lot of information regarding gross monthly income and new house information such as insurance and real estate tax.

It also asked about our current debt payments, of which we have a student loan payment of $189/month. It gave us a home price limit of $191,639.27 and a monthly mortgage of $986.21.

CNN Money’s calculator asked about gross annual income, down payment, insurance, property tax, and monthly debts. The results were given from a conservative amount of $164,775.52 to an aggressive amount of $203,324.97.

The total monthly payments (mortgages, taxes, and insurance) would be $1,172.10 to $1,381.41.

Quicken’s Loans Calculator did it a bit different from the others. It asked us which state we were looking in (North Carolina)and  how much we wanted the mortgage payments to be.

I entered our current rent ($724) and it told us we could afford a mortgage of $88,983 to $93,028 , depending on the size of our down payment (estimated from $8,090 to $12,134).

There’s a big difference between the numbers.

Figuring Out a House Down Payment Goal For Ourselves

After comparing what was up on the web calculators, it looks like what we think we’d want for a mortgage is considered conservative. Our goal is to keep our housing costs (mortgage, taxes, and insurance) no higher than 25% of our monthly income.

That would mean our mortgage would be around 2.5x our annual income. Looking at that number, we’re setting a goal of 10% down (more would be better).

How did you plan your house down payment?

Cleaning Apartment Without Wasting Time

By: Green Panda | Date posted: May 27, 2009 (5:18 pm)

Do you hate doing a big clean up every week? I know I do.  I’m busy and I don’t have time to clean as well as I like. We get guests over and it can be a hassle to scramble before they come.

Tips for keeping your apartment looking clean, quickly

  • Make your bed after you showered and get dressed. It keeps the appearance neat and gives the bed a chance to air out. Remember to change your sheets once a week.
  • Have one basin filled with soapy water and put dishes in there to do later.This is a source of stress for many couples as one wants the dishes done right away and the other takes their time. A compromise is to have the dishes ‘soaking’ in one basin. That person can come back to it later. If dishes are in the second basin, then it’s time to do all the dishes.
  • Clean as you use in the bathroom. This room can get messy quick, so it’s best to wipe the sink off when your finished and clean around the toilet. When you wait a week to go back and clean, it’s usually disgusting and you put it off more.
  • Throw away excess paper around the front of the apartment. Throw the junk mail out as soon as you get it. By just doing that, it’ll make the apartment seems tidier and more organized.

There you go, just 4 quick things that will make your apartment seem cleaner without scrubbing or toiling a whole day. Little by little helps out more as well.

Personal Finance Interview with Wise Bread’s Philip

By: Green Panda | Date posted: May 26, 2009 (5:16 pm)
I’m doing two part interviews with bloggers on two of my personal sites. I’m excited to have Philip from Wise Bread answer a few of my questions on this new project.
The first part is here on Green Panda Treehouse. The second part is on Vega Baja Productions, where Philip taks a bit more on blogging.
If you’re a blogger and wouldn’t mind being interviewed, please feel free to contact me.

Philip, could you tell us a little about yourself?

These days, I think of myself as a writer.  My undergraduate degree is in Economics, and I worked for twenty-five years as a software engineer, but writing was what I wanted to do even then.  (Although I also enjoyed the software work, especially early on.  I’m old enough that I can remember when a computer was two or three refrigerator-sized boxes that no ordinary person could afford.  When I started my first job I remember thinking, “I hope they don’t figure out that I’d work for free, just to get access to the computer.”)
As I write this, I’m attending the annual convention the national Esperanto organization in the US.  I’ve gotten up early to answer your questions, as I found when I tried to write my answers yesterday I was thinking in Esperanto and having to translate back into English–which didn’t make me sound particularly articulate.

You’ve made the transition from being a programmer/writer to become a full fledged writer and blog about personal finance at Wise Bread. How did you prepare for the transition?

When I was doing it, I was thinking of it as preparing to retire early.  I wanted to spend my time writing, but didn’t expect that I’d earn enough money from the writing to make a significant contribution to my income.  So, for at least 20 years, I’d been saving an investing with an eye toward early retirement.  That was going along okay, although I was still a couple years away from having even a minimal retirement portfolio.  (And, given how the market actually performed over those couple of years, considerably farther than that.)
As it gradually became clear that I probably wasn’t going to be able stick to my job for that long, I started exploring other possibilities, and the idea that I might earn a modest amount of money from my writing as an attractive one.

Based on your personal experience, what advice would you give to bloggers who want to be full time writers?

It’s an old joke among writers that anyone can making a living as a full-time writer, if you include earnings from writing-related work such as teaching writing–or waiting tables.
On this topic in particular, I’m perpetually torn.  The path I took (work at a job that I gradually lost interest in until I saved up almost enough money to retire) worked for me, but I hesitate to recommend it.  Much better, I think, is to find work that that you love that earns enough money to support you (even if you can’t live as lavishly as before).
Either path, though, is enormously helped by frugal living.  If you can live cheaply enough, you can choose your work based on what you feel to be your true calling in life.  But, even if you take the other path (working at whatever pays the most), serious frugality lets you save a lot more money.  It also acts as a test as to whether you’ll be happy with the modest standard of living that being a full-time writer entails for all but a handful of wonderfully successful writers.

What are your favorite personal finance books?

I like Your Money or Your Life, particularly because it happened to appear at a point in my life where its message especially spoke to me.
Less important for me personally, simply because it didn’t come out early enough to have much influence on me when it really mattered, but perhaps the best book in terms of laying out the details of exactly the style of living that I’ve chosen, is Work Less, Live More.  As I said in my review of it, “It reads like the author started following me around a year ago, figured out exactly what questions I needed answered, then carefully and thoughtfully wrote a book to answer them.”

For the “investing” side of personal finance, The Only Investment Guide You’ll Ever Need covers the essential topics–including the less sexy but important ones like insurance–very well.  It has the added advantage of being pretty funny.

If you received a tax free $10,000 check, how would you spend/save it?

For me, receiving money and spending money are almost completely disconnected.  Spending is based on my budget and changes in income don’t affect my spending (expect when they suggest that my budget is unrealistic).  So, the short answer is that I’d treat it exactly like all my other money.
The slightly longer answer is that I’m holding rather more cash than I otherwise would, while I wait for the economic situation to sort itself out.  In particular, I can’t remember the last time I was so uncertain about the future course of inflation–something that will strongly influence the future course of interest rates and the economy in general.  I’m really interested in seeing how the actions of the Fed (and other central banks) during the past couple of years play out, and until I do I hesitate to commit much more money to stocks or bonds.

What topic do you notice your readers gravitate towards?

There’s a core group of readers who seem to appreciate my message of frugality as a means for ordinary people to achieve freedom.  They’re interested in both tactical ideas (how to spend less) and more strategic ideas (how to live a frugal life in the face of the wider consumer culture).
Another group of readers seem to be interested in what used to be called “political economy.”  There’s a broad cross section of political viewpoints there, with plenty of libertarians, but also plenty of progressives who advocate that the government weigh in to help people in trouble.  I hope they enjoy the discussions in the comments section of my posts as much as I do.  (I feel particularly lucky that my readers are uniformly polite and civil in those discussions.)
There are other groups–people interested in self-sufficiency, people interested in DIY, and so on.  I appreciate them all.

One of the most interesting things about blogging is the visibility I have into what my readers care about.  I suppose it was very different for people who wrote, let’s say, a syndicated newspaper column in the days before the internet.

What’s the most important/practical financial tip someone should remember?

Don’t assume that anything in your life is fixed and unchangeable.  Except for the decision to have a family, every decision that you’ve made can be made anew.  You can change jobs and even careers.  You can go back to school.  You can move to a new house–or new country.
If you’ve spent years following one path, it’s easy to assume that you’ve gone too far to choose another–and because of that, some people hesitate to take a big step like giving up a job that pays well for one that they’d love.  But I don’t think it’s true.  There is no point in your life when you can’t strike off in a new direction if you want to.
All you have to do is think deeply about what you really want, and then start to arrange your life so that you get more of what you want most, and less of everything else.

Please subscribe to Wise Bread and chat with Philip on Twitter.

How to Cope with Spending Addiction

By: Green Panda | Date posted: May 25, 2009 (6:00 am)

What Is Spending Addiction?

Indiana has a great resource on spending addiction. Here’s how they describe it:

People who “shop ’till they drop” and run their credit cards up to the limit often have a shopping addiction. They believe that if they shop they will feel better. Compulsive shopping and spending generally makes a person feel worse. It is similar to other addictive behaviors and has some of the same characteristics as as problem drinking (alcoholism), gambling and overeating addictions.

Compulsive shopping or spending can be a seasonal balm for the depression, anxiety and loneliness during the December holiday season. It also can occur when a person feels depressed, lonely and angry. Shopping and spending will not assure more love, bolster self-esteem, or heal the hurts, regrets, stress, and the problems of daily living. It generally makes these feelings worse because of the increased financial debt the person has obtained from compulsive shopping.

If you have a serious time keeping a budget, you may have an addiction.

TheSimple Dollar offers some steps to defeating an addiction to spending. 

I think that is the first step to fixing any problem: acknowledging its existence.

Where can I find help for a spending addiction?

If you or aloved one has a spending addiction, here are some resources to check out:

Real Life Stories of People Climbing out of Debt

Having a spending addiction can be overwhelming with all your debt. However it is possble to get out of debt. 

These are real people who made mistakes and are learning.

I’ve improved with my spending habits, but I have plenty to work on. This blog is a online diary of my journey to living a  debt free life. 

Has anyone dealt with this issue? How did you work through it?

If you’re a blogger and have a post about it, please email me and I’ll update my post with your story.

Credit Cardholders’ Bill of Rights Act of 2009

By: Green Panda | Date posted: May 22, 2009 (10:51 am)

Bill of Rights Act of 2009 is expected to be signed into law today and will take affect in approximately nine months.What is included in the bill? How can this effect you?

Boston Globe provided a huge list of changes from the bill that I’m using for this post. I wanted to highlight and organize a few of the changes they listed.

Credit Card Bill of Rights: Some Highlights

credit-card-applications

Existing Credit Card Balances and Payments

  • Creditors are required to send credit card statements at least 21 days before the due date of the outstanding balance.
  • With certain exceptions, credit card issuers are prohibited from charging a finance charge based on the double billing cycle method.

The 21 day rule can help some people to avoid late payments. If you’re really looking for an easy way to keep your payments in time, online bill pay is usally free with many banks and credit unions.

Double billing cycle is a horrible method of getting billed. Since this law does not go into effect immediately, if your card has a double billing cycle, then consider paying it off and/or switching credit cards as soon as you can.

Credit Card Interest Rates and Grace Periods

  • In the first 12 months of opening a new account, credit card companies can’t increase the annual percentage rate (APR).
  • Creditors are required to provide consumers with a 45-day advance notice of changes in rates and significant contract changes.
  • Interest rate promotions must be in effect for at least six months from the beginning date of that promotion.

I like that the law says credit card companies can not yank away a teaser rate without notification.

Credit Card Account Provisions

  • Creditors are prohibited from providing credit cards to consumers under age 18 (some exceptions).
  • Credit card companies are prohibited from opening a credit card account for any college student who does not have any verifiable annual gross income.
  • Creditors are prohibited from charging a fee to make telephone and web-based payments. However, a fee may be charged for expedited telephone payments made on the due date or the day before the due date.

I didn’t know underage teenagers were getting credit cards without an adult cosigning.

My first credit card company gave me $1,000 credit line (which quickly jumped up), when I wasn’t even making $700/month in college. I understand they want to get customers loyal as soon as possible, but no income customers are going to be bad customers.

I’m really happy about this due to personal experience with my first credit card. They had a habit of charging a $14.95 convenience fee for phone payments.

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The complete law can be found here: Credit Card Act of 2009. If you’re looking for more thoughts and prospective on the Credit Card Bill of Rights, here are some posts to examine and compare:

Photo Credit:  rubenerd

Funny Thing at the DMV Yesterday…

By: Green Panda | Date posted: May 20, 2009 (11:09 pm)

I went to the DMV yesterday to get a lien removed from the title. Since they only take cash or check (why?!), I brought my checkbook with me so I’d have the correct amount. Smart move.  I didn’t bring cash with me to DMV. Dumb move.

Planning your ATM trips can save you money in fees.

Planning your ATM trips can save you money in fees.

 

 

I waited in line until I was called.  After checking with her on the fee, I was told that I could write a check for $15 and then pay $5 in cash for the notary. She mentioned there was an ATM on the premises I could go to grab some cash and keep my place in line.

I wrote my check for $15; then went to the ATM at the DMV for the $5 notary fee. DMV ATM fees: $3. 

I think Wachovia will charge $2-3 on their side. By the way, I usually stop by the bank every other week or so to grab cash; just forgot to this week. So to pay a $5 fee in cash, I paid about $5 in bank fees.

My fault for not having cash, but I still don’t like the DMV setup. I don’t remember having a $5 cash notary fee in Virginia. Lesson learned: I’m going to carry some cash with me. 

Has something like this ever happened to you?

Photo Credit: Salim Virji

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