Money Health Club $$$

Don't expect an Apple dividend anytime soon

2012-01-25T13:28:00.000-08:00

Investors shouldn't be holding their breath waiting for an Apple dividend. Even with a near $100B cash pile, Apple is unlikely to pay a regular or even onetime dividend. Most of Apple's employees have stock options and if the company were to pay a dividend, say $50B of the pile the market value of the company would be significantly diminished. So an employee that holds options at $400 would see the market price drop to $350. Not good for the employee and, I'd suggest, not positive for the investor who really wants the employees fired up to do even more.

Few tech companies pay dividends and the above statement applies to nearly all of them.

Tired of junk mail?

2008-01-08T22:40:00.000-08:00

I've recently disposed of well over one hundred unsolicited catalogs and credit card offers. As it turns out, getting both items stopped is easy if you have the right information.

To stop catalogs and mass mailings visit:

DMAChoice

Stop unwanted credit card offers (they have a forever option!!):

OptOutPreScreen

And the more widely known Do Not Call registry:

DoNotCall.gov

If you believe that time is money, all three of these will add to your piggy bank!

Rethink the need for a new car

2007-09-09T15:18:00.000-07:00

The NADA (auto dealers association) estimates that the average car payment in the US is around $400 per month. With over 16 million NEW cars sold in the US every year, a great deal of the average number is spent on new cars.

Let me propose some alternate thinking that you should keep in mind the next time you go out to purchase a new car:

To make a $400 car payment (and I'm purposely excluding any down payments), an average worker would would need to have gross income of $670 per month, minus around $270 in federal, state, Social Security, and Medicare taxes.

What else could be done with that money? A large percentage of US citizens do not contribute the maximum to their 401k plans even when their employer offers them a pay raise in the form of a matching contribution. Remember that the same $670 in gross income is temporarily tax free and deductible in the current year. If an employer matches 50% of the employee contribution, the total is just over $1,000 per month.

Assuming simple stock index fund returns of around 10% on average, the individual who takes the 401k option will have around $75,000 in a retirement savings account. The person who bought the new car will be looking for another new car in five or six years and will repeat the pattern.

Saving $1,000 per month at just over 10% will generate a 401K of nearly one million dollars in twenty years due to the magic of compounding interest. New cars become used cars which become junk in very short order. Choose your 401K plan instead.

In case you are wondering, I have three cars: one is 18 years old and collectible, one is eight, and one is five -- used cars are just fine.

One penny per second

2007-09-02T16:40:00.000-07:00

Here's a different view on money: if you could find a way to earn just one penny every second, you'd be approaching the income of the top 1% of all Americans. Sound outlandish? The math is very simple:

$.01 X 60 seconds = $ 0.60 per minute
$.60 X 60 minutes = $ 36 per hour
$36 X 24 hours = $ 864 per day
$864 x 365 days = $ 315,360 annually

Of course, you simply can't work 24x7x365. But your money can. Compounding interest in the bank, money market fund, bond fund, and, at least on average, real estate, stocks and stock dividends are earned and collected around the clock!

Switch to fluorescent bulbs

2007-07-22T15:37:00.000-07:00

While fluorescent bulbs have been available for many years, the price and the color spectrum of the produced light make the latest generation bulbs useful in many applications. Fluorescent bulbs produce more light per watt than heat and can use one quarter of the power of a standard bulb!

Size the bulb appropriately for your needs. Amazon has some really good deals on these two models:

Globe 23-Watt Mini Compact Fluorescent Spiral Bulb (100-Watt Incandescent Equivalent), Cool White, 4-Pack #48426

Globe 13-Watt Ultra-Mini Compact Fluorescent Spiral Bulb (60-Watt Incandescent Equivalent), Cool White, 4-Pack #48412

Person to person (P2P) lending

2007-07-22T09:07:00.001-07:00

In early March, I entered into an experiment with a relatively new concept of person to person (P2P) lending. Of course, this type of lending has been available in various formats for hundreds of years including pawn shops, family members, and the more recent 'payday" loan operations. To cut to the chase, P2P loans cut out the bank and connect the borrower and lender via the Internet.

Risks of losses and fraud are real but some sites, such as Prosper or Lending Club provide financial details including credit reports (summaries for late payments or delinquencies). There is clearly a growing trend in this market as other sites are coming into play including Loanio and Zopa in the UK.

Since March, I have funded or participated in eleven loans to various individuals via Prosper. Here's the kicker: while I see credit information (and Prosper assures lenders of quality and fraud checks), I do not know the specific identity of who I'm lending too. Further, borrows that I'm lending money to do not know who I am. Prosper works as both a broker and a proxy. Please visit Prosper for more details.

To date, all loans are performing though I have had one late payer which went to collections (also fully automated). This loan has returned to current status.

Two items have struck me as interesting with the P2P process. One, too many people make very poor credit decisions such as either not or "forgetting" to make a payment -- more on that later. Second, borrowers and lenders (remember, this is person to person) can often fall into a emotional element of either looking for help (borrowers) or "helping" others (lenders).

Regarding credit decisions: With borrowers that I've chosen to lend to, I take one absolutely solid line: while they may be over their heads with payments, looking for credit card consolidation, etc, just so they have NEVER missed a payment and have had established credit for seven to ten years I'm probably interested in reviewing further. My rational is simple: these folks take their credit seriously and will find a way to make the payment. How that happens is not my problem. I'm the lender -- I simply want to be repaid every month without stories, late or missed payments.

The social network item of "helping" others scares me the most because emotional investing is really speculating. Borrowers on Prosper are able to post a story line about why they are looking for funding, how they will repay the loan, why they are creditable, etc. Too many loans are funded by lenders looking to "help" individuals who just had a baby or "need" a down payment for a house. If you are going to get involved in these activities, remember to separate yourself from your emotions when lending. Your ONLY concern should be getting your funds repaid and making a reasonable return. Save your dollars for "helping" for local credible charities.

Do you trust your business partners?

2007-07-22T08:58:00.000-07:00

Over the past two decades, I've had the privilege of investing with other individuals in small companies, real estate, and two aircraft partnerships. A friend mentioned to me years ago that at the end of the day, you must have full confidence and trust in those you invest or do significant business transactions with. If you invest with others, ask yourself these questions:

- Are you confident that on the toughest day of the partnership or deal that your partners will do the right thing for the partnership, even if they are personally impacted?

- If you were to become disabled or die, would your partners treat your heirs and estate with complete honesty and integrity?

If you can answer both of these questions with a resounding 'yes!' then consider yourself fortunate or well informed. If the answer is 'maybe' or 'no', you should consider exiting your current partnership or not engage in new activities that fail to pass these two simple tests.

Buying in bulk can be a good thing!

2007-07-06T19:34:00.000-07:00

I frequent a top notch car wash in northern California which offers customers several pre-paid options. During a recent visit, I renewed a card with 25 washes for $425. Note that this car wash also waxes, vacuums, and does windows on both sides. While purchasing the pre-paid card, the attendent, a young teenager, was clearly struck wondering why anyone would make this purchase. My take away was that he was focused on the pure cash flow -- $425 is a king's ransom to many teenagers. My focus was purely on cost: I visit this location at least twice per month and individual washes are $23.95. Buying in bulk saves me near $7 per wash or nearly 30%!

Now if I can just get my dry cleaner to offer similar discounts....

Avoid keeping cash in your checking account

2006-12-27T19:57:00.000-08:00

Checking accounts typically pay some of the lowest interest rates of any financial tool. With modern electronic transfer and the ability to link accounts, it's in your best interest to avoid extremely low (or zero) interest rates and move your funds to a money market account or a FDIC insured savings account. One or two day money movement between accounts will quickly pay for itself and is well worth the effort.

Fitness club membership: Use it or drop it!

2006-12-26T21:46:00.000-08:00

It may not surprise you that many gyms make a substantial about of their revenue from members who rarely or never show up to work out. This has been a bit of a secret to the industry and I learned this lesson quickly while I owned a significant investment in a gym in the Denver area.

Be honest with yourself and calculate a cost per use for your gym visits. Twice a month for a $30 gym is $15 per visit. Many gyms have a daily rate which you should make use of if the rate per use (times the number of visits) is lower than the monthly fee. Many members simply keep on paying because they constantly tell themselves, "well - maybe next week." Don't join them! Use the membership or cancel it -- it's just a senseable thing to do.

Increase your automobile insurance deductible

2006-12-25T12:22:00.001-08:00

Automobile insurance should only be used for significant or catastrophic loss and not for small loses that your insurance company treats as nuance. Examples include the $350 parking lot bumper car challenge, a minor quarter panel repair, or a dented door. Your money saving opportunity in this area is to increase your deductible on all parts of your policy.

While you have every right to collect a $350 claim if you have a $100 deductible, you create a track record for your insurance company that will be reviewed year after year. Further, you are creating handling and processing cost for the insurer that, for small claims, many times exceeds to cost of the claim itself. Ultimately, you will pay premium rates for this service that you really do not need.

You are better off carrying at least a $1,000 deductible and pay for small losses if they occur. You’ll get a break from your insurance company and you can use these savings year after year to fund your own deductible payment. In the long run, nearly everyone comes out ahead.

The discipline of having money (part 2)

2006-12-24T09:50:00.000-08:00

Note: Before reading this part of a two part series, please read part one and write down your perspective.

My experience with this exercise is that individuals fall into one of the following categories:

Spenders

Folks in this group usually note spending type activities such as buying a new car, going on a vacation (and taking family with them), acquiring a new HDTV and surround system with an Xbox 360 or the like, etc.

Debtors

Individuals in this area already have debt and they are using the unexpected funds to reduce or retire accumulated debt. Note that many, but not all, debtors arrived at this point because they are actually spenders.

Givers

Some folks are extremely charitable and would give a large part or all of the funds away to causes they are looking to help.

Savers or Investors

This group has noted how they will save or invest funds for future gain or income. In many cases, they can exhibit traits of the first three: they may spend a piece, could retire some debt, and might give some away to charities. The majority of the funds, however, are saved or invested for future return.

Here’s the root message in this thread and why I have titled it “The Discipline of Having Money.” Unless you fall into this final group of savers or investors, weeks or months after receiving the $50,000, it’s gone. Meaning you no longer have $50,000 or, in many cases, even a fraction of it. Money has burned a hole in most of these individuals’ pockets.

Let’s take the average American family making just over $45,000 who elects the first option. Sure, they have a shining new SUV in the driveway and a state of the art HDTV. Other than a couple of dinners out, the money is gone. But here is how their lives are actually worse off: now that they have the new Navigator, stepping back five or seven years later to a more affordable model (after the current one is worn out and worth less than a third of what they paid for it) won’t be comfortable so they’ll overextend and lease another luxury model. Further, during this ownership, they will have paid much higher registration fees, insurance, etc plus the extra $12 a month for HDTV service, etc. They are caught in an endless spiral where they consume, consume more, until they are so underwater they wonder what happened.

Now consider the saver or investor. This individual knows that, properly invested, he or she will earn income, technically the $50,000 will earn or labor for them, to the tune of $2,500 year, guaranteed by the Federal Government through T-Bills or insured Cds. Or, these individuals will use funds for long term stock market investments (closer to 10% annually or $5,000 per year), or leverage the funds as a down payment commercial or residential investment real estate which will provide future income and, most likely, significant future capital gain. This is the ONLY group that, in the end, still have $50,000 and, in fact, actually have more just six months later.

Having money requires discipline!

Choose a credit card that's right for you

2006-12-23T19:56:00.000-08:00

One size does not fit all when selecting a credit card. Consider the following during your selection:

If you carry a balance month to month, find a card with the lowest monthly interest rate. Do not be as concerned (though don’t ignore) the annual fees for the card. In calculating the cost of the card, calculate the interest you will spend annually and then add to that number the annual fee of the card. The card with the lowest total should be in your purse or wallet. If you are carrying a balance, have a good or excellent credit rating, and have been a solid and on time customer with the credit card company, call them and request a lower rate. If you are a valued client, and those that carry balances AND pay on time are the most valued - the credit card issurer will have every reason to keep you. If they will not lower your rate, shop around for the best deal and switch cards.

If you do NOT carry a balance, card fees and features become critical. Features such as cash rebates, airline miles, or car purchase reward points are available and everyone will have a different reason for using a particular card. My personal choice is a card that allows me to collect miles on United Airlines. This card costs more than I like ($140 per year) but allows me to rapidly build miles, pretty much insures that I remain an executive member with United’s Mileage Plus program, and places no limits on the total number of miles I can collect. Others will chose cards with cash back. This is a great option for cards that offer significant rebates on gas purchases or direct checks to you for using the card. Just insure you know what you are receiving for the fee paid.

Just 12 cents an hour...

2006-12-22T21:33:00.000-08:00

Earning a mere 12 cents per hour, every hour, every day of the year totals more than $1,000 per year. Twelve cents! Of course, you can't work every hour of every day so it's not possible to do this purely by the sweat of your labor. The wealthy are well aware that they make money nearly every hour of every day through the ownership of assets.

Here are some examples which use simple, non compounding math:

$25,000 CD at a bank earning earning 4.5% annually earns (actually works or labors!) for the holder for almost $.13 per hour

Stock dividend on a $15,000 holding paying 5.1% earns the shareholder $.09 an hour, every hour, every day

Rental real estate valued at $245,000 appreciating at 3.5% annually delivers $.98 per hour in price appreciation

The simple trick to all of the above examples is that an individual MUST own capital in order to receive the benefit. This is why the rich get richer -- constantly! Middle class laborers who have few assets but have credit card balances go the other way. Their net worth declines as the dollars and cents becomes the property of the bank through interest payments.

Ownership and control of capital is the backbone of a capitalistic society and is essential for building wealth.

Capital -- it's a good thing!!

Kick the lottery ticket habit

2006-12-21T22:35:00.000-08:00

Lottery players gamble against many thousands to many millions to one for a chance at winning. Many states set up lotteries as an alternative to help fund schools. Clearly, money for schools is a good cause but understand what you are giving up by buying these tickets.

If you have a $5 a week habit, putting that money into a simple interest bearing account at 5% instead of buying a ticket will compound to $3,270 in ten years. A $10 a week habit compounds to $11,871 in 10 years. And a $50 a week habit: an astounding $29,072 in 10 years. (These calculations do not even count the cost of the trip to 7-Eleven or the additional soda, magazine, or other expensive consumption items that you pick up simply because you are there to get your lottery ticket!)

Don't get lured into the drama. Yes, folks win. But almost everyone loses! Why join them? If you are buying tickets to help out schools, make a direct donation instead. You'll do better and so will the schools you are trying to help.

The discipline of having money (part 1)

2006-12-20T21:08:00.000-08:00

Before reading part 2 of this two part thread, take a few minutes and write down your answer to the following question.

If you were to suddenly receive an unexpected gift, capital gain, inheritance, etc, of $50,000, what would you do with the money?

Write down your answer with as much clarity as possible, just as if it really did happen. You are simply noting what you what you would do if it did. There is no right answer; there is only your answer.

Don't worry, I'll wait! Just be sure to answer this question before going on to part 2.

Fund your next vacation through eBay

2006-12-19T18:37:00.000-08:00

Chances are you have a bunch of stuff which still has some value but you never use, it may not be a heirloom item, but it's clogging your basement, closet, or garage.

Fund your next vacation by selling that unused camera, radar detector, laptop, or board game on eBay. Setting up an account, shipping, and getting paid is very easy.

Help those who are serving you

2006-12-18T21:04:00.000-08:00

In the US, service workers are some of the hardest working yet lowest paid employees. In many case, waiters, maids, cab drivers, etc earn a large part of their income from tips. I find that most of those that I travel with and socialize with adequately tip between 15-20% for wait staff and cabs, many tip hotel maids little or nothing at all. A simple and small tip of $2 to $5 per night, helps someone who is doing a service for you. If you are staying multiple nights, you'll probably notice a difference with an extra candy, refreshed soap and shampoo, and probably the best towels they have on the rack. Bottom line: your recognition of them is meaningful! If you are tipping a hotel maid, leave the tip on the pillow as many are instructed to leave everything else alone. When it's on the pillow, it's clear who the tip is for!

Invest in a shredder

2006-12-18T18:22:00.000-08:00

Acquiring a shredder is really an investment in your privacy. Make it a point to shred unnecessary credit card applications, old credit card or bank statements that you are throwing away, any payroll receipts that you are throwing away, as well as old tax documentation that you are not keeping.

While you are at it, be sure to shred or destroy any CDs or DVDs that you have burned personal information to so that others cannot collect personal information.

This is an inexpensive and easy opportunity to protect your identity from theft.

Idea for New Year's resolution

2006-12-17T16:49:00.000-08:00

An idea for a New Year's resolution is to give yourself a pay raise. If you are not already contributing the maximum to your 401(k) or 503(b) plan at work, either begin or increase your contribution to at least receive the maximum your employer will match. This is absolutely free money (no taxes now and it grows tax free!) and will provide additional income during retirement.

Detail your car at least once a year

2006-12-16T10:23:00.000-08:00

Many consumers replace cars and trucks earlier than necessary because the vehicle begins to look old and tired. Even though the car or truck might have a long life ahead, the owner growing tired of it is the real reason for replacement.

If you fall into this category, try these simple and inexpensive tips:

Interior:

- Once year, remove EVERYTHING from the car. Remove absolutely everything that is not bolted on or screwed down.
- Clean every inch of the inside of the windows, wipe off the dash and doors, and vacuum every french fry and bread crumb and collect the coins from under the seats.
- If the floor mats are wearing down, treat yourself to a new set. Don't go for the cheap copies at the discount store. Call your local dealer and order factory fitting and matched floor mats. Remember; in many cases folks replace their car at this point so a hundred bucks or so for new floor mats really equates to very significant savings!
- Place back in the car the owners manual, necessary power cables for your cell phone or iPod and the interior is complete.

Exterior:

- My take is to leave this to professionals who, in most markets, will wash and wax the exterior of your car for $35-75 depending on your location. If you do this yourself, insure that you fully wash and dry the car without letting spots form. Use a high quality polish or polish with wax and closely follow the directions on the label.
- After washing and waxing, spend some time wiping off the fine brake dust on the rims or wheels.
- Finally, apply a deep shine solution like Armour All, to all the exposed plastic or rubber on the car -- especially the tires!

This is at least a four-hour effort per car. Once done, step back and ask yourself if you really need to replace the car or truck. Friends that have done this tell me that this simple and inexpensive activity can add one or two years to the pride of ownership.

Consider a portable GPS navigation system

2006-12-15T21:25:00.000-08:00

GPS systems available as built in devices in modern automobiles become quickly outdated and are very expensive. Auto manufacturers charge thousands of dollars for such systems and many require DVD subsystems in the car and expensive update services to keep the device accurate. Much like a cassette tape option (or it's predecessor the 8-track tape!), these devices become more of a hassle than a benefit over time.

An easy answer, for newer as well as current vehicles, is portable GPS units. These units offer the benefit of be portable between multiple cars (do you really need a navigation system in every car?), have a much lower cost and, much like an iPod are easy to update and can be replaced as technology advances. My experience with Garmin has been fantastic and I have owned a Garmin Streetpilot GPS more than a year. I travel with it and find my GPS much easier than learning the systems in rental cars (as well as avoiding the extra charge for navigation systems that rental car companies are happy gain revenue! Current models such as the Garmin Nuvi 360 or Garmin Streetpilot C340 are very solid choices.

Tax refunds are not found money!

2006-12-13T23:14:00.000-08:00

If you receive a tax refund it is not found money! You earned it but your deductions were too high so you provided Uncle Sam with an interest free loan. Treat this money wisely -- you worked hard for it.

Avoid buying new cars

2006-12-13T21:09:00.000-08:00

Consumers are addicted to new cars and car manufactures feed the addiction though slick advertising, new gadgets, and updated designs. However, up to 20% of the cost of a car is lost immediately after leaving the dealer’s lot. The answer: purchase or lease a 'newly used' car or truck that is two or three years old. You'll receive 90% of the features, most cars are still under warranty, and you'll avoid paying the immediate depreciation of a new one. Further, because you are purchasing used, you'll avoid some sales tax and your insurance will typically be lower.