Investing Curiouscatblog

Category: Tips

  • Save Money on Printing

    Unfortunately some companies think the way to make money is to try and con their customers out of cash. Certain industries seem to prefer this tactic: credit cards, banks, printer companies… To avoid rewarding them for behaving badly read: Take That, Stupid Printer!

    It refused to print a thing until I replaced the cartridge. But I’m a toner miser…
    But my printer’s pages hadn’t been fading at all. Did it really need new toner – or was my printer lying to me?
    …
    To find out, I did what I normally do when I’m trying to save $60: I Googled. Eventually I came upon a note on FixYourOwnPrinter.com
    …
    covering the sensor with a small piece of dark electrical tape tricked the printer into thinking he’d installed a new cartridge. I followed his instructions, and my printer began to work. At least eight months have passed. I’ve printed hundreds of pages since, and the text still hasn’t begun to fade.
    …
    many Hewlett-Packard printers can be brought back to life by digging deep into their onboard menus and pressing certain combinations of buttons. (HP buries these commands in the darkest recesses of its instruction manuals

    You can believe what I am sure would be arguments by the companies for why breaking customers printers is helpful or you can save money and the environment by realizing that printer companies are notorious for trying to manipulate customers and use the internet to find ways to protect yourself and the earth from such abuse.

    Related: Price Discrimination in the Internet Age – $8,000 Per Gallon Ink – Kodak Debuts Printers With Inexpensive Cartridges – Zero Ink Printing – HP Poor Service – Industry Standard?

  • Can I Afford That?

    I figure it is pretty easy to figure out if I can afford something. Do I have cash available (my paycheck already has retirement funds etc. deducted before it shows up in my checking account)? I also have a separate saving account for medium term savings and a separate brokerage account for long term investing (and a Roth IRA). So the money in my checking account basically is how much I have to spend. If I have the money and want to spend it, I can afford it. If I don’t have the money, I can’t afford it. I can just save until I can.

    There is a nice post, How to find out if you can afford something, that explores when that simple concept isn’t quite enough.

    For example, when determining if you can buy a car or not you not only after factor in the cost or monthly payments, but also insurance, gas and maintenance costs. The same applies for a home.

    I made this mistake when I decided to start a saltwater aquarium. I found a great deal on the tank and some supplies on Craigslist, and went ahead and bought it. What I didn’t factor in was the costs of additional supplies, fish and ongoing maintenance. Turns out, saltwater aquariums are an expensive hobby. In hindsight, I wish I had done my homework a little more.

    Good Advice. Related: Americans are Drowning in Debt – Too Much Stuff – Add to Your Roth IRA – Teaching Children About Money Matters

  • Spending Guidelines in Retirement

    Retirement planning is a huge financial need and one of the areas where financial literacy can pay off very well. Understanding the incredible power of compound interest can be used to start your retirement savings early and provide you with a huge benefit. Understanding the risks of inflation can guide your investment decisions. The recent Business Week Retirement Guide is very good. In Spending Safely, they explore how to spend while preserving your capital in retirement.

    For more than a decade, financial advisers have warned retirees that draining over 4% of their nest eggs in their inaugural retirement year could ultimately lead to financial ruin.
    …
    Bengen now suggests that the 4% figure – actually 4.1% for a 60/40 portfolio of large caps and bonds and 4.5% if you toss in small caps – merely seems impressive when plugged into Excel (MSFT) spreadsheets. In practice, the strategy, which Bengen stopped using with his own clients about three years ago, is inflexible and unrealistic he says – and the formula is too stingy.
    …
    Flexibility is factored into Bengen’s revised approach, which permits withdrawals to fluctuate within guidelines. His “floor-and-ceiling strategy” suggests that an initial withdrawal rate of 5.16% would be appropriate if a retiree pares back subsequent withdrawals by as much as 10% of the initial withdrawal during hard times (the floor). On the other hand, a retiree could withdraw extra cash equaling up to 25% of the first-year withdrawal (the ceiling) when the market is strong.

    This adjusted thinking is correct I believe. People want simpler answers but some things just require a more complex understanding.

    Related: How Much Retirement Income? – Add to Your Roth IRA – Retirement Tips from TIAA CREF – Our Only Hope: Retiring Later

  • Many Retirees Face Prospect of Outliving Savings

    Many Retirees Face Prospect of Outliving Savings, Study Says

    Nearly three out of five middle-class retirees will probably run out of money if they maintain their pre-retirement lifestyles, a new study from Ernst & Young has concluded.
    …
    Middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to minimize their chances of outliving their financial assets, the study found. Workers seven years from retirement will have to cut their spending by even more — 37 percent.

    This is one more study pointing out how many people are failing to take the most basic steps to manage their finances. Saving for Retirement is not very complicated. The details can get a bit complex but some of it is really basic like saving at least 5-15% of your earnings each year (or more if you fall behind) in tax differed savings accounts (IRA, 401(k)…). Many people just choose to sacrifice their future to buy more toys today.

    There are different strategies but the minimum you should be doing (in the USA where social security will provide a portion of retirement savings) is saving, in a 401k, IRA or something similar: 5% in your 20s, 8% in 30s, 10% in your 40s, 11% in your 50s, 12% in your 60s. If you save more earlier you may be able to save less later. And if you fall behind you will have to save more. To retire earlier, than say 68 (today, or say 70 by 2020, and if you assume life expectancy rates will continue to increase you need to plan on working longer or saving more for a longer retirement), you should save more.
    (more…)

  • 2nd Largest Bank Failure in USA History

    I commented on, WaMu Free Checking: The High 3.3% APY May Be Worth A Look, yesterday:

    I agree it is worth considering. It has FDIC insurance. But the bank is not very stable. The stock price, for example, was above 40 in the last year. It is below 5 now. But as long as your entire deposit is covered by FDIC you are in safe (though if a bank goes under – not that likely – there can be a delay in getting your money). Normally a bank’s assets would be bought out by another bank.

    And today I read of the second largest bank failure in the history of the USA, IndyMac Bank seized by federal regulators:

    The Office of Thrift Supervision in Washington, the chief regulator of IndyMac, said it transferred control of the $32-billion bank to the Federal Deposit Insurance Corp. Branches will be closed over the weekend, but the FDIC will reopen the bank Monday as IndyMac Federal Bank, the OTS said.

    Regulators said depositors would have no access to banking services online and by telephone this weekend, but could continue to use ATMs, debit cards and checks. Online banking and phone banking services are to resume operations Monday.

    Federal authorities said based on a preliminary analysis, the takeover of IndyMac would cost the FDIC between $4 billion and $8 billion.

    It is important to make sure your deposits are FDIC insured (in the USA), and to know the limits of the coverage.

    FDIC Failed Bank Information Information for IndyMac Bank, F.S.B., Pasadena, CA

    Principal and interest on insured accounts, through July 11, 2008, are fully insured by the FDIC, up to the insurance limit of $100,000. You will receive full payment for your insured account. Certain entitlements and different types of accounts can be insured for more than the $100,000 limit. IRA funds are insured separately from other types of accounts, up to a $250,000 limit.

    IndyMac was a huge mortgage focused bank. Their stock price had fallen from a high of nearly $30 in the last year to below $5 in April, $2 in May and $1 in June. It is a very good thing we have the FDIC.

    Related: Credit Crisis (August 2007) – Credit Crisis Continues – Homes Entering Foreclosure at Record

  • Save Some of Each Raise

    Failing to save is a huge problem in the USA. Spending money you don’t have (taking on personal debt) and not even having emergency savings and retirement savings lead to failed financial futures. Even though those in the USA today are among the richest people ever to live many still seem to have trouble saving. Here is a simple tip to improve that result for yourself.

    Anytime you get a raise split the raise between savings, paying off debt (if you have any non-mortgage debt), and increasing the amount you have to spend. I think too many people think financial success is much more complicated than it is. Doing simple things like this (and some of the other things, mentioned in this blog) will help most people do much better than they have been doing.

    There are lots of ways to spend money. And many people find ways to spend all or more than all (credit card debt, personal loans…) they have which are sure ways to a failed financial future. So anytime you get a raise (a promotion, new job…) take a portion of that extra money and put it toward your financial future. The proportion can very but I would aim for at least 50% if you have any non-mortgage debt, don’t have a 6 month emergency fund, or are behind in saving for retirement, a house…

    Exactly how you calculate if you are behind, I will address in a future post (or you can look around for more information). By taking this fairly simple action you will be setting yourself up for a successful financial future instead of finding yourself falling behind, as so many do. And then when things go badly, as they most likely will sometime during your life, you will have built up a financial position to draw on. Instead of, as so many do now, find that you were living beyond your means when things were going well – which it doesn’t take a genius to see will lead to serious problems when things take a turn for the worse.

    So lets say you take a new job and get a raise of $4,000 a year. Instead of spending $4,000 more just put $2,000 away (pay off debt, add to your retirement savings, add to savings for a house, add to your emergency fund…). Then you get a promotion of another $3,000, increase your spending by $1,500 and save the rest. It is such a simple idea and just doing this you can find yourself in the top few percent of those making smart financial decisions. And if you get to the point that you are ahead in all your financial areas then you can take more of each raise you get (but most of the time you will have learned how valuable the extra saving are and figured out the extra toys really are not worth it). But if you want to, once you have created a successful financial life, you can choose to buy more toys.

    Related: Retirement Savings Survey Results – Earn more, spend more, want more

  • How to Protect Your Financial Health

    There are external risks to your financial health. Many people ruin their financial health even before any external risk can, but lets say you are being responsible then what risks should you seek to protect yourself from?

    Risk Strategy Also
    medical costs health insurance emergency fund, healthy lifestyle to reduce the likelihood of needing medical care
    property losses (house damaged, car stolen, property damage…) homeowners insurance, rental insurance
    job loss emergency fund, unemployment insurance (provided by the government and paid for by the company in most cases – in the USA) updating skills, maintain a career network, education, learning new skills
    disability (which both damages your earning potential and often has medical care costs) disability insurance, health insurance social security disability insurance – in the USA
    investment losses sound investment portfolio and strategy (diversification, appropriate investments, adjusting investment strategy over time) extra savings
    having to pay damages caused to others homeowners insurance often includes personal liability coverage (and car insurance often includes some coverage for damage you cause while driving). check and likely choose to pay for extra liability insurance – costs to add coverage is normally cheap.
    unexpected expenses emergency fund extra savings
    loss of income of someone you rely on (spouse) life insurance extra savings

    Another protection is to be financially literate. You can risk your financial health by being fooled in spending money you should save, borrowing too much for your house, failing to buy the right insurance, using too much leverage, investing too much in high risk investments…

    Related: credit card tips – personal finance tips – personal loan information

  • Where to Keep Your Emergency Funds?

    Poorer Than You posed the question: Where to Stash Your Rainy Day Fund?

    One of the most popular places for emergency funds right now, online savings accounts offer the sweet spot of liquidity and interest rate. The funds can be transferred to your checking account within 1-3 days. Recommended account: ING Direct’s Orange Savings.

    Pros: Interest rate usually meets or beats inflation, transfers to checking account, separation from checking decreases temptation to spend, no minimum balance requirement

    Cons: Slow transfers may hinder urgent emergencies, limited by federal law to 6 transfers out of the account per month
    …
    Personally, I’m using a credit card/online savings account combination right now. After I graduate from college and grow my emergency fund, I’ll move most of the fund to a money market savings account, and perhaps keep a couple hundred dollars in cash as well.

    Here are my thoughts:

    A money market fund is where I used to hold emergency funds, but things have changed. Money market funds are paying less than inflation (especially true inflation – which exceeds reported inflation). Right now high yield savings is where I have my emergency funds. You need to not only pick a good choice but pay attention to see if the marketplace shifts and certain options are not as appealing as before.

    I would use a credit card for immediate spending needs and then paying the balance in full with funds from high yield savings. But right now high yield savings accounts pay more than money market funds, so just stay with high yield savings. If money market funds pay more in the future then I would put the emergency funds there.

    Related: Personal Finance Basics: Health Insurance – personal finance tips

  • Buying Stuff to Feel Powerful

    New research confirms feeling powerless leads to expensive purchases. So in addition to learning about personal finance logically it can be important to build your self esteem in order to improve your financial position. For many people understanding human psychology helps them take more control of their own life. And can help when helping others.

    Feeling powerless can trigger strong desires to purchase products that convey high status, according to new research in the Journal of Consumer Research.

    In a study that may explain why so many Americans who are deeply in debt still spend beyond their means, authors Derek D. Rucker and Adam D. Galinsky (both Kellogg School of Management at Northwestern University) found that research subjects who were asked to recall times when someone else had power over them were willing to pay higher prices for status-symbol items.

    “This increased willingness to pay for status-related objects stems from the belief that obtaining such objects will indeed restore a lost sense of power,” write the authors.

    Instead of allowing yourself to submit to this impulse you will put yourself in a better position if you refrain from trying to buy a sense of power. Take a real look at your position and make changes that move your personal finances in the right direction.

    Related: Buy Less Stuff – Too Much Personal Debt – Financial Illiteracy Credit Trap – Curious Cat Investing Library: Personal Loans

  • Save Money on Food

    photo of wineberries

    With the drastic increases in food prices recently a home garden an attractive way to save some money. I have planted a garden for several years. Frankly the main reasons I did so had nothing to do with money. I find it cool to plant a seed or small plant and then just water it occasionally and then be able to eat. Plus it is great to just go grab some fresh food and eat it. It tastes great and is healthy.

    The increasing price of food it makes it more attractive. I plant a few tomato plants and some pepper and cucumber plants. And then some pea and beans from seed (and I did celery this year – though I didn’t realize I was suppose to start them inside 10 weeks early so we will see what happens). I think my total cost was under $30. I would guess all the water I use will be under $5. From that I will get 10+ weeks many tomatoes and green peppers, sweet peppers, hot peppers. The cucumbers and and peas don’t seem to produce as long (if I remember right from last year). I am trying to plant some peas from seeds every couple of weeks and see if that works to give me peas for a longer period this year.

    I also have a bunch of berries. I have wineberries that just grew themselves (which started as 1 plant 3 years ago and now covers maybe 20 square feet) which are the best thing of all from my garden, frankly (I have never been able to buy any berries nearly as good). And I bought a small blackberry plant 2 years ago which has grown to be quite productive. Last year I had birds eating so many berries I hardly got any. The previous 2 years I could get more than I could eat for several weeks and enough to eat for maybe 4 more weeks total. Any advice on how to keep birds away?

    Even while there are some financial benefits I really think the good healthy food and fun is more important.

    Related: Backyard Wildlife: Raptor – Food Price Inflation is Quite High – Backyard Wildlife: Fox – Backyard Wildlife: Turtle

    This post is included in the Carnival of Personal Finance #157: Third Anniversary Edition