Investing Curiouscatblog

Category: Tips

  • Add to Your Roth IRA

    If you haven’t added money to your Roth Individual Retirement Account for this year yet – go ahead and do so now. Given the state of retirement planning for the vast majority of those in the USA there is a good chance your retirement is the area of your financial life that will most benefit from more resources. The other action that is likely worthwhile is to cut your spending but we will leave that for other posts.

    If your employer offers matching on your 401(k) or 403(b) that may well be an even higher priority. There is almost never a decent reason not to add at least 5% of your income to a retirement account matched by your employer. Make sure, as the amount grows above $100,000 that it is invested in a diversified manor (not all in the stock of your employer or…).

    For 2007 the most you can add to your Roth IRA or just IRA is $4,000 ($5,000 for those 50 years old or older). Next year that maximum increases to $5,000 ($6,000 for those 50 and up). If you have already added the maximum that is matched to your 401k and have added the maximum to your IRA for this year get ready to add the $5,000 to your IRA for 2008 in January (you do have to make sure you don’t earn too much to be eligible to add funds – pretty much you have to be over $100,000 in income, $150,000 on a joint return, before you have to worry but look up the details yourself). By adding the money to your IRA early in the year you will get another year or tax free growth (for the Roth or tax deferred growth from the regular IRA).

    For more details on the rules on IRAs see the links we provide on the Curious Cat Investment Dictionary IRA page.

    Related: Saving for Retirement – Roth IRAs a Smart bet for Younger Set – Our Only Hope: Retiring Later

  • Tips To Allow Retiring Sooner

    The Motely Fool is one of the best web sites for learning about investing (it is one of the sites included in our investing links – on the left column of this page). A recent article on the site is worth reading – Ways to Retire Sooner:

    Add cash… It takes a little more than $550 per month in savings earning a 7% return to get to $1 million over the course of a 35-year career. But if you can add just $100 per month to that — including what your employer puts in and your tax savings — you can cut more than two years off your wait.
    Embrace stocks Saving more is great, but there’s only so much you’ll be able to put aside. You have to make the most of what you have. People are often too conservative in their retirement investments. Despite the sometimes-violent ups and downs of the stock market, the long-term return on stocks far exceeds that of less risky investments like bonds and bank savings accounts.

    These are not exactly earth shattering recommendation but so many people fail to take even the most basic steps to assure a economically viable retirement the simple advice needs to be re-enforced. No one piece of advice can assure success but by educating yourself about investing and retirement planning and taking steps when you are in your 20s, 30s and 40s you can succeed. You can also succeed without doing anything in your 20s it just means you have to do more work later. Those that get started earlier get a huge advantage.

    Related: Saving for Retirement – Retirement Tips from TIAA CREF – Retiring Later, Out of Necessity – investment risks – IRA (Individual Retirement Accounts)

  • Pressure Rises Against Bottled Water

    Pressure rises against bottled water. This item is really more about just thinking than personal finance but since I get to decide what to write I decided to post it here. I could have posted in on the Curious Cat Science and Engineering Blog. But when I see so many silly people paying way more for water than the $85 a barrel oil I hope that it is just because they don’t think not that they can’t think. Plus I just posted: Bottled Water Waste a few months ago.

    Cities around the nation are joining influential restaurateurs and activists in a public campaign to be launched Wednesday to convince consumers to choose tap water over bottles.
    …
    Salt Lake City Mayor Ross Anderson said, “When I see people at the airport go over to a vending machine and waste their money buying bottled water at the vending when it’s standing right next to a water faucet, you really have to wonder at the utter stupidity and the responsibility sometimes of American consumers.”

    Wow, very blunt and very true. Related: Ignorance of Many Mortgage Holders – Too Much Stuff – Shop Around for Drugs

  • Credit Cards Ratings

    The best and worst credit cards:

    In a survey of more than 36,000 cardholders conducted by Consumer Reports, five of the largest MasterCard and Visa issuers, JPMorgan Chase (Charts, Fortune 500), Bank of America (Charts, Fortune 500), Citibank, Capital One (Charts, Fortune 500), and HSBC (Charts) — which together control about 80 percent of the market — earned mediocre rating scores.

    Consumer Report’s survey on the best and worst credit cards found that five of the largest MasterCard and Visa issuers earned so-so ratings. The card issuer USAA Federal Savings, which scored 95 points out of a possible 100, earned the highest rating. The Navy Federal Credit Union and other credit unions followed suit with high scores. The top three rated issuers charged interest rates between 9 percent and 11 percent.

    That’s much lower than the two lowest-rated issuers, Direct Merchants (scoring 67 points) and Washington Mutual’s Providian (earning 61 points), which both charge 17 percent. And there is good news for anyone shopping for a card. Until recently the USAA Federal Savings card has been limited to members of the military, retired military personnel and their families. It’s now opened up its membership policy so that almost anyone can join.

    Related: Credit Card Tips – Hidden Credit Card Fees – Customer Hostility from Discover Card (I got another “negative invoice” from Discover – still no check)

  • Credit Freeze Stops Identity Theft Cold

    Credit freeze stops identity theft cold (link broken, so it was removed):

    Every day, about 27,000 Americans are the victims of identity theft, according to the Federal Trade Commission. In about a third of those crimes, crooks use the information to open new accounts in their victims’ names.
    …
    But the landscape is improving with security freezes, a safeguard promoted by Consumers Union (the nonprofit publisher of Consumer Reports) and other consumer groups that has been adopted in 37 states, including California, and the District of Columbia.

    A freeze essentially locks up the information needed to conduct a credit check, and creditors won’t open new accounts without that check. An imposter will be foiled, but you can lift the freeze using a PIN if you want to open new accounts. A security freeze provides much stronger protection than the fraud alert currently available under federal law.
    …
    Credit bureaus also make big bucks from selling to consumers more expensive credit-monitoring services, which are unnecessary, especially when a security freeze is in place. Consumers Union has asked the Federal Trade Commission to help inform consumers about security freezes.

    See if your state has protected citizens or is not doing what it should: credit freeze status by state.

    Related: Real Free Credit Report – Credit Card Tips – links on identity theft

  • Too Much Stuff

    Buy less stuff. Save more. Not a complicated plan, along the lines of: Eat food. Not too much. Mostly plants. Paul Graham posts excellent essays online. His latest is another good one – Stuff:

    Companies that sell stuff have spent huge sums training us to think stuff is still valuable. But it would be closer to the truth to treat stuff as worthless. In fact, worse than worthless, because once you’ve accumulated a certain amount of stuff, it starts to own you rather than the other way around.
    …
    In industrialized countries the same thing happened with food in the middle of the twentieth century. As food got cheaper (or we got richer; they’re indistinguishable), eating too much started to be a bigger danger than eating too little. We’ve now reached that point with stuff. For most people, rich or poor, stuff has become a burden.

    Related: Saving for Retirement – Frugality Versus Better Returns – Real Free Credit Report – Our Policy is to Stick Our Heads in the Sand

  • Customer Hostility from Discover Card

    I am not even expecting good customer service but how about just the absence of customer hostility. The latest from Discover Card. I still have not received the money they said they would send (waiting more than a month now) – this is the amount they overcharged my bank (after they had already been told the charges were invalid. I guess it is acceptable to charge me for charges they knew were invalid?). But heck even accepting that, how about paying that money back as they said they would.

    Amazingly they did send me a “bill” [with a balance they owe me instead of me owing them so it is not really a bill in the sense of money I owe them] for the account they said didn’t exist which was the reason they claimed that they could not pay the cash back bonus they promised. If people didn’t expect credit card companies to provide outrageously bad customer service wouldn’t this be seen as shockingly bad – so much so that certainly no company would tolerate it if it was brought to their attention. Well, we have evidence that such a thought is not true when dealing with Discover Card.

    So according to Discover they don’t owe the money on the cash back bonus they promised because the account is closed. Yet they send me a bill (with a balance owed to me but it is exactly like the bill I would get from them each month including the cashback bonus section where instead of listing the amount they promised to pay me they list $0) that has an new account number on it. Paying what they promised in cash back bonus doesn’t seem like it would be hard (and frankly I can’t imagine not paying it in this circumstance can be acceptable according to the rules but who has the time to try and fight with them). And they don’t send the money that even they agree they owe, but instead just send a bill? What are they thinking?

    As I said in a previous post if Discover Card pays the money they owe I will add an equal amount of my own money and lend that amount through Kiva (a charity that arranges loans from individuals to those in need worldwide on the micro-lending model). And I will either continue to roll those loans over for at least 10 years or I will donate the entire amount to a micro-lending charity (if for example Kiva shuts down or I decide that they are not doing a good job or whatever).
    (more…)

  • $10 DSL

    AT&T $10 DSL Today

    We’ve confirmed with AT&T HQ that the company is offering $10 768kbps DSL starting today across their 22-state footprint (new customers only, one-year contract and bundled landline required). The $10 DSL was something they agreed to offer as a BellSouth merger condition, but unless they plan on issuing a Saturday press release later today, they apparently don’t intend to tell anyone (via website, press release, or via any other form) that they’re actually offering it.

    The merger condition required they offer the price point for 2.5 years. Unfortunately it appears it didn’t require that AT&T actually tell anyone about it.

    So you can get discount DSL, if you live in the service area, and can figure out how to get the company to allow you to get the price they proposed to the court to bolster their case for merger approval. It sure would be nice if you could deal with companies that didn’t seem to have teams of lawyers kept busy trying to figure out how to say one thing while tricking customers out of as much money as possible. It seems to me we are getting less and less ethical. We just accept that companies are going to try and trick customers into paying as much as possible. My belief that you should just provide an honest service or product at a fair price seems to be some quaint old idea 🙁 But since that seems to be the case you have to treat companies as though they are going to trick you in any way they can. Be careful out there.

    Related: Incredibly Bad Customer Service from Discover Card – Fake Checks That Make You Pay – Companies Claim to Value Customers

  • Frugality Versus Better Returns

    Very nice illustration in Personal Finance Success Comes More From Smart Budgeting Than Smart Investing:

    Let’s say Kevin and I both make $50,000 a year. Kevin spends his spare time chasing individual stocks; I spend my spare time looking for frugal living ideas. Kevin spends $45,000 in a year and is thus able to invest $5,000 a year, while I, through budgeting and frugal living, only spend $40,000 in a year and am thus able to invest $10,000 a year.

    Now, Kevin’s a smart investing cookie and is able to crank out a 16% return each year. I just take my money, dump it in a Vanguard 500, and move on with life, which means over the long haul I earn a 12% return. Who earns more in the long run?

    After five years of this same investing, Kevin has $34,385.68 in his investment account, while I have $63,528.47 in mine, a difference of $29,142.79 in the frugal guy’s favor. Even at the twenty five year mark, if the investments have continued for that long, Kevin has $1,246,070.12 in his account, while I have $1,333,338.70 in mine, a difference of $87,268.58.

    I would use lower returns (to better match what I think is reasonable to use in projections about the future) but by using higher returns it actually makes a stronger point (the compounding at 16% is extraordinary – I was actually surprised that at the 25 year mark that the results were the way they were). The lesson is powerful. Your personal finance situation is a factor of several things, but very close to the most important is just actually saving money, as the post illustrates.

    Related: Trying to Keep up with the Jones – Earn more, spend more, want more – Living on Less – Saving for Retirement – How much have people saved?

  • Financial Illiteracy Credit Trap

    The article is definitely worth reading, read the “related items” also – The Poverty Business from Business Week:

    “Having access to credit should be helping low-income individuals,” says Nouriel Roubini, an economics professor at New York University’s Stern School of Business. “But instead of becoming an opportunity for upward social and economic mobility, it becomes a debt trap for many trying to move up.”

    Why? Mainly due to financial illiteracy. Except in the most extreme circumstance (and then for a short time only) it does not make sense to borrow (given the current interest rates) at an interest rate above 15% (and other than large purchases – car, house… borrowing is normally unhealthy for your financial well being). If you want a new computer, new TV… “rent to own” effective interest rates are horrendous. Just save the money needed and then buy what you want. Borrowing worsens your financial position and since most making such bad financial choices already have a very weak financial position the impact is even more negative. One goal of this blog is to help people become financially literate, so they can improve their economic position by making intelligent financial choices.

    One very simple but powerful personal finance tip: save money to buy what you want, don’t borrow to buy what you want. And a related tip, save money to act as an emergency fund. If you don’t create an emergency fund it is far too easy to find yourself in need of emergency funds and then being forced to borrow and getting yourself trapped in a downward spiral.