Uncommon Cents

Welcome to your Link Payday for May 20, 2008. After a really rough 10 day stretch of work, I now have a few days off to try to get ahead on the blog. Let’s take a quick look around and see what the best of the Internet has to offer us in the way of personal finance:

While not from a personal finance blog, RankingsAndReviews.com discussed hybrid payoff time–how long someone needs to own a hybrid car vs. an equivalent gasoline only car before the increase in gas milage outweighs the increased cost. Obviously, this is highly dependent on the cost of gas.

Do clotheslines make people think poverty? Given that my family has used clotheslines forever (and about never uses the dryer), that thought has never crossed my mind, but Trent over at The Simple Dollar teaches us how frugality may give the impression of poverty and the social pressures that may prevent the choice of the frugal option.

JD over at Get Rich Slowly features a reader email that asks the readers what to do when I’m doing well financially but my family is not. This is a fascinating piece that makes readers consider their personal values around money and family as well as what it really means to help people.

Be careful when buying something that says, “no interest for twelve months,” wisely warns My Two Dollars, because No Interest For 12 Months Does Not Mean No Interest At All. The best way to buy something like this is to have the cash available when you want to buy it, then put it in an insured certificate of deposit until it’s time to pay it off!

Moolanomy explains what an annuity is. I am not a fan of them, but this is a much more impartial view of this financial vehicle (and I’m still not a fan!).

And there’s your link payday for May 20, 2008!

With tax time in a few days for the feds (and for those of us in the Aloha State, a few more days for Hawai’i), I’m wondering how many of you actually have your taxes wrapped up.

As for me, I went over both the state and federal returns with a fine toothed comb last week, and have photocopied the finals. The checks are written, the envelopes are sealed, and they’re both just waiting until it’s the day to send them (I often say that there are two things it’s against my religion to do: pay a bill early and turn down free food).

In contrast, I had a boss who, for every year I worked for her, took the 14th and 15th of April off to finish her taxes. I was always astonished; how can you plan your budget without knowing how much you’re going to owe, and the earlier you know, the better! Still, if there is anything I’ve learned from being a social worker, it’s that not everyone thinks or acts like you do, no matter how rational and reasonable it is.

How about you? Have you finished your taxes yet?

We’re talking taxes here, of course. When I was a part time worker and full time student, I looked forward to April 15, since I got a refund on some (but not all) of my paid taxes.

Things have changed in some ways, but not others. I haven’t received a refund in years; this year I need to make payments to the state and the feds of close to $600. While more money out of my pocket never thrills me, I also realize that if I get a big refund, it’s like I lent that money to the government interest free. If I end up paying, it’s like the government lent the money to me interest free–as long as I don’t wind up paying a penalty.

So, on logical if not emotional reasons, I prefer when I owe on April 15 (and for those of us in Hawai’i, April 20) rather than being owed on those same dates.

How about you?

Much has been made of the economic stimulus package and the expected $600 per person (with a lot of catches dependent on income) tax rebate coming from the federal government this year. The idea behind this part of the stimulus package is, well, to stimulate the economy. For the most part, that means the government wants you to do one thing with it: spend it.

While spending that money may be the best thing to do for the nation’s economy, it may not be the best thing to do for your personal economy. Here’s a few other things to consider doing with $600.

1) Pay off debt. This good old fashioned personal finance staple is never out of style. If you’ve got debt, particularly high interest revolving unsecured debt (this mostly exists in the form of credit card debt), consider paying it down or outright eliminating it.

2) Save it. Maybe your emergency fund is a little low (or non-existent). Maybe you found a great deal on a CD somewhere (in these tough times, if you have, let all of us know where!) and want to put a bit of money away for a few months or a year. Maybe you’ve paid off all of your debt (congratulations!) and aren’t sure what to do with the stimulus rebate yet, so you’re considering parking it in a money market account. Nothing wrong with any of these either.

3) Invest it. If you’re following a pre-established plan for investing, keep following it with this “extra” $600, or maybe buy a fund, ETF, or stock you’ve had your eye on. If you’re not following a pre-established plan for investing, maybe it’s time to start! If you’re somewhat risk averse, consider going with a high quality bond fund rather than something in the stock market. It’ll be too late for the 2007 IRA contribution, but 2008 is front and center. Keep it socked away for the long term.

4) Diversify. Not in the typical sense; just do a little of each of these, or split the difference between just a couple.

For myself, I’ll be saving my rebate, because my personal savings account tends to take a bit of a hit with tax time for a month or two, so this will help to replenish those.

What are you planning for your tax rebate?

As established previously, one of the few places I’ll spend money to spend less later is Costco. Costco is a big box warehouse membership store where a yearly fee is paid and items tend to be sold in bulk. Occasionally (not every month, but many of them) they send out coupon books; I got my coupon book in the mail this week and just went through it.

Because of the quantity of the items purchased, I’ve always believed that the best items to purchase at Costco were non-perishables that you indeed use (if they’re things you don’t use, then they’re not a great buy even for a penny). So, with all of that said, here’s what I think are the best coupons in this Costco offering:

$2 off Charmin Ultra Bath Tissue
$2 off Bounty Roll Towels
$3.50 off Kleenex Ultra Soft Facial Tissue Uprights 12 boxes
$2.50 off Gain Detergent
$2 off Diet Pepsi 36 pack
$2 off Irish Spring Bar Soap 20 pack
$3 off Dial Antibacterial Liquid Soap 1 gallon
$8 off Mobil 1 Synthetic Motor Oil 6 quarts

Now, the one thing that this really does not take into account is what the base price of the item is; I believe that Costco does their coupon books this way because the base price fluctuates quite a bit from location to location. For instance, here in Honolulu, the base price of a 36 pack of Diet Pepsi is $8.99; I’m not sure how much it is at your closest Costco. That said, I have used Costco coupons (and my membership card) at Costcos all around the nation, so at least you’re not glued to one or two stores.

What are your best coupons from Costco?

It’s a holiday here in the islands: Kuhio Day in honor of, well, yeah, Prince Jonah Kuhio. And yes, last week Friday (Good Friday) was also a state holiday. For me, the big difference is I get to take this day off from work but I didn’t get to take last week’s “holiday”.

I thought I would use today’s little break for some administrative posting here at Uncommon Cents. Like usual, I’m really pleased with how things have been going, and like usual, that’s thanks to readers like you. By my estimation, we’re ahead of where I hoped the blog would be at this point by a couple of months! That’s terrific.

I’m also trying to work into more of a regular schedule here; some folks have probably already noticed that I’m trying to have every day of the week be pretty much the same thing; Mondays, for instance, are Working Backwards days where I take a common financial term and try to define it and give examples of its use.

One other thing that comes to mind: I’ve noticed recently that at least three personal finance bloggers (the operators of Get Rich Slowly, Blogging Away Debt, and No Credit Needed) also have fitness blogs (Get Fit Slowly, Blogging Away Fat, and No Calories Needed). Since I’ve also done the fitness thing as well as the personal finance thing (and lost close to 90 pounds at this point, done a couple of century–100 mile–bike rides, and am training for another one of those as well as the Honolulu Marathon later this year) and I’m a diabetic, I’m considering starting a fitness blog for diabetics (I also have a friend and coworker whose a diabetic and fitness guy as well). Any ideas or comments on that?

Oh, and again… I still have Virtual Bank and ING Direct referral links for bonus money for me and you! Use the contact form if interested…

American Express is a charge and credit card issuer that I’ve used for a few years. I only got a card from them due to my Costco membership, since they won’t accept other cards. I originally had an American Express Blue card, but I found their customer service unacceptable, which surprised many of my friends; most of them found AmEx customer service far better than the norm. My primary issue is that I had a 0% balance transfer that they charged me interest on. It took about ten phone calls and three letters, including one with copies of every statement I had from them, to get them to correct the situation.

I eventually canceled that card because I was so annoyed with them.

I now have an American Express Costco Rewards card that gives me a reward in the form of a once a year Costco rebate coupon. I receive a 3% reward on gasoline or eating out, 2% on travel, and 1% on everything else (including shopping at Costco). There is no fee, but the yearly Costco membership (approximately $50) is charged to the card.

I’ve mostly had positive experiences with AmEx this time around, although I have rarely had to deal with their customer service. The one time I had to (when a restaurant added on a tip to my charge even though I totaled it with no tip and left cash), they handled the situation immediately (and quite well, considering how furious I was with the restaurant). Recently, however, I had another unusual dealing with them (the Costco rebate coupon was supposed to arrive with my statement last month, but didn’t–when I called they said it would come this month, so I hope it does). So my impressions of them haven’t been of the sterling customer service others speak of.

What are your experiences with American Express?

Netbank got shut down and taken over by ING Direct not long ago. I was a Netbank customer and liked their checking account. ING Direct is not horrible (although their Web site drives me nuts) but they don’t think much of paper checks, which I still use all the time. They recently stopped processing checks from Netbank. I had one check outstanding that I gave at a friend’s wedding, so I told the bride to expedite the deposit. When I told her what happened, she and another coworker had never even conceived of using an Internet bank.

“Ever thought about using Central Pacific Bank or First Hawaiian?”

I do use one local bank, largely because my mother is a retiree. But considering that same bank pays 0.25% interest and even after the recent interest rate drops, online banks still pay over 3.5% in most cases, I just don’t want to put the majority of my money in accounts that pay less than 1/10th the interest. I am not thrilled about the fact that ING Direct isn’t really hot on paper checks (although they do allow you to have them issued by them and sent without charge via U.S. mail–I had to have one issued to myself via mail that took most of a week to show up to balance out some expenses), but I can mostly live with that. In addition to ING, I also have money market accounts with Virtual Bank, iGoBanking, and Capital One Direct; my investment accounts are with Vanguard, Firstrade, Treasury Direct, and Sharebuilder (which was recently taken over by ING Direct as well); while not all of these are actually Internet only, there certainly are no local offices for any of them, and this does not count the credit cards I have which are almost all without local branches and get paid by mail or online.

How many of the rest of you use Internet banks? Does the idea still seem novel to you or your friends and family?

I first learned about Prosper.com through Tricia over at Blogging Away Debt. Prosper is an online community that’s focused on peer to peer loaning and borrowing of money. In some ways it’s similar to eBay; borrowers create listings that lenders “bid” on to fund.

Given how low interest rates on money market or other “high yield” savings accounts have gotten and the current volatility in the stock market, I wonder if it wouldn’t be at least an interesting experiment to put some of my money into a Prosper loan, although with the way that, for instance, the Vanguard GNMA Fund has been performing, I’m not sure that might not be a better idea.

Interest rates for borrowers on Prosper are fixed, there are no pre-payment penalties, and, according to Prosper, no hidden fees. Borrowers pay Prosper a closing fee of between 1-3% depending on their credit rating; borrowers must be U.S. citizens with minimum credit scores of 520 and a bank account. Borrowers are screened in an identity verification and anti-fraud process. Lenders face similar scrutiny; all participants in the loan process can remain anonymous with Prosper serving as the middle man for both sides.

Prosper loans are all unsecured for terms of three years and a total of up to $25,000. If a borrower defaults or pays late on a loan, they have the same types of consequences that a borrower from a bank faces: a late fee and potentially a lower credit score and a negative item on their credit report.

The advantage of being a lender on Prosper vs., say, my iGoBanking account is the possibility of a higher rate of interest. The disadvantage is, of course, increased risk. I would never recommend to anyone to put their emergency fund or other “chicken money”–money you must act like a chicken with, because you can’t afford to lose it–at risk; however, if I had money that wasn’t quite that much of a “no lose”, I’d consider some of the lending opportunities on Prosper. It appears some borrowers on Prosper have tried traditional banks and credit unions and not been successful, so there is obviously risk involved for the lenders; the upside is a higher potential return.

Have any of you used Prosper? What are your experiences like?

Here’s some of my favorite posts as of late in the personal finance blogosphere:

The Simple Dollar is right on the money (no pun intended) on investing in yourself. This post discusses exercise; I don’t talk about it much on this blog, but in 2002 I weighed (according to my doctor’s scale) 272 pounds; today I’m right around 180, so I do believe that this is something that can seriously pay off!

Lynnae over at BeingFrugal.net talks about something I preach to parents regularly: read to your kids! Talk about investing in your family; this is something I believe pays off big. Nothing is equal to the amount of time you spend reading to your kids.

Debt Free looks at reasons why most people can but few people will get rich. I’ve long believed that it’s certainly possible for the working class/middle class person to save enough and invest enough wisely enough spending very little time and energy to do well, if not “get rich” (I guess it depends on the true definition of “rich” today).

I’ve Paid For This Twice Already again discusses the art of snowflaking, which I’ve discussed here and many other personal finance bloggers have discussed over and over again. Snowflaking pays off, trust me!

Making Money Journal has a similar interest to me: photography. This week they look at making a zero cost macro lightbox. I’m going to work on making one myself when I get a few minutes!

Finally, Mrs. Micah asks a question that many may be afraid to ask: who do your financial decisions reflect on?