Skip to main content

Monthly Archives: September 2006

Older posts

Emotional Financing

Posted on by

I’d like to address one of those annoying realities of dealing with personal finance. That is, we are far too often driven by our emotions when makes decisions that impact our bottom line.
I’ve been reminded of this recently due to several issues that we’ve been faced with:

1) Fixing my wedding ring. We bought a beautiful 1940s diamond and platinum ring for our wedding back in June. When we found it, everything lined up. It was beautiful, within our budget, fit like a glove, and that was that. Lately one of the side baguette diamonds fell out and it came to our attention that the whole mounting is pretty shoddy condition. Had we not been so emotionally wrapped up in the joys of buying a wedding ring, we might have been able to look at this more objectively.

2) Buying a home. When we started the process of shopping for our current place, we did the right thing and created a budget of what our maximum monthly housing expenses. Anyone who knows the DC market, wouldn’t be surprised to hear that many of the places that fit what we wanted were not within our range. We stretched it a bit and were willing to take the bite out of our budgets. At the time we didn’t consider two factors that have since impacted or finances. First, that the adjustable ARM has killed us with the constant increasing payments. Second, at that point we could have predicted that with both of us expecting to go back to school, our income would be impacted by this. Alas, we went ahead and bought our fabulous place. If one was making those choices with less emotional attachment, we might have opted to wait and save more to afford more, or some other rational choice.

3) Investment Properties. I’ll try to tread lightly on this one, as James is emotionally tied to our current investment property. At the same time, given that there is little to no profitability on a month to month basis, it might be better to sell and have that money work for us in other ways.

While it feels unbecoming to point out our shortfall in financial decision making, I hope that readers find this to be a refreshing reminder that no matter how central financing is in you life, there is still a threat that emotions can run the show. These tend to be examples of high price financial choices, but this also extends to daily choices. People can far too often convince themselves of the need for this or that, without looking at it from an objective perspective.

We wish our readers luck in reigning in the emotional side of spending, and hope to keep this lesson in mind.

Best,

Miel

Best of the PF Net

Posted on by

Hi All,

I’m busy taking care of business, but I wanted to highlight a couple interesting links for you.

First, you might want check out an academic article on saving and retirement by Steven Venti and David Wise. The writing isn’t that stellar, but their paper has some powerful insight. What Venti and Wise did was scientifically show that wealth at retirement is caused by how much money one saves. I like it because its hard science, not just internet folklore. Click here to go to the NBER page for the article.

Second, most people are always interested in good deals. For a great one-stop shopping site for used government property, real estate, financial instruments or tax lien sales, you should go to firstgov.gov. I’ve spent many hours drooling over IRS and US customs auctions there and I’m confident you’ll find some good deals if you look hard enough.

Have fun and happy surfing!

Best,

James

Putting $70,000 into Prosper.com

Posted on by 4

Sometimes pressing problems require radical solutions. If you’ve been reading our blog, you’ll have gathered that my wife and I are running a monthly deficit of $1,800. This is a LOT of money and if the situation continues, it will put us in dire financial straits. As part of the solution, we’re doing the following:

1) Putting the bulk of our investment capitol in Prosper.com. If you don’t know what this is, prosper is a person to person money lending service with an ebay style format. In order to generate the 18% required to replace our income, we’ll need to lend to persons who have bad credit.

Is this risky? Yes, we will incur two types of risk. First, we risk not having our money repaid. Second, we risk loosing all or most of our money if prosper goes out of business.

Non-repayment risk can be manged via loan diversification and collection agents. So frankly, I’m more concerned about prosper going out of business. Why? The company is still raising money from venture capitalists and won’t disclose the amount of transactions or amount of loans under management. This tells me they aren’t currently cash flow positive. I’ve got a call and email in to the company’s senior to staff to get more information about this.

2) Second, we’re planning on investing in high yielding income stocks. Some of the Canadian Energy Trusts are paying upwards of 10 to 18% percent. It may be possible to secure some preferred shares in some of these companies. The main idea behind preferreds is to get a higher yield while managing our risk.

That’s about it.

We’ll keep you updated as things pan out.

Bring on the Money!

Posted on by

Okay readers, just for laughs, I had to post this! I received this from a friend today and figured that posting it on our blog I’d be certain to reach the most people and be rich immediately!

The same goes for you! Send people to our blog and they’ll be rich! At least they might get more tips than a waving dollar can give! ;-)

We all stand in need of a blessing!

If anyone thinks I would delete this one, they are crazy…..I will pass on any angel that comes my way.

Money Angel



This is a money angel

Pass it to 6 of your good friends, or family
and be rich in 4 Days.

Pass it to 12 of your good friends. or family
and be rich in 2 Days.


I am not joking. You will find an unexpected windfall.
If you delete it, you will beg.
Trust me!!!

School Funding Action Plan

Posted on by

As our regular readers know, we are continually working on ways to maximize our revenues and minimize our expenditures. It turns out that education is an expensive habit to feed. With both of us in graduate school, and only one of us working, that leaves us with considerable challenges to making ends meet.

We got together this evening and discussed the challenges and our various opinions, laid out possible solutions, and developed an action plan oriented towards achieving two main goals by the end of the year. We realize that these actions won’t entirely make up for the education deficit (or is it a surplus), but it is a step in the right direction.

Goal: Convert all incidental sources of funding, i.e. funds that are available for conversion, and convert them into high yield sources of monthly income.

Action Item

Due Date

1) Miel will return final gift cards, and write check for joint account.

10/15/06

2) Miel will get the credit from Banana Republic dresses.

12/1/06

3) Miel will give James a check for tax return & expense report money.

10/15/06

4) James will cash out matured savings bonds.

10/15/06

5) James will follow up on the closure of available DRIP accounts.

11/15/06

6) James will consolidate all available funds in our joint stock account.

12/15/06

7) Purchase high yielding stock, at 10% or more; jointly select.

12/25/06

Action Item

Due Date

1) James will economize by $50 monthly towards the purchase of high yield stock.

1/1/07

2) Miel will economize by $50 monthly towards the purchase of high yield stock.

1/1/07

3) James will move stock money into prosper.com; expected yield of 18% after defaults, or an annual yield of $12,000/year.

10/25/06

4) James & Miel will develop a prosper lending plan, to determine set parameters to for lending.

10/15/06

5) James will no longer talk about buying worthless land in Texas.

Effective immediately.

 

All tasks to be finished by January 1, 2007

Stay tuned for updates.

Miel&James

Our budget is $1,800 in the red

Posted on by

When Miel and I did our monthly budgets back in May, we failed to fully consider the impact that grad school would have on our income. This is starting to hurt us. On reevaluation it turns out that our budget, which we initially thought was balanced, is actually $1,800 in the red.

Yep, that’s right, we are currently spending $1,800 per month more than we earn.

The figure of $1,800 is derived from approximately $800.00 of educational expenses on Miel’s part and approximately $1,000 of mortgage expense on James’s part. Both of these somehow did not get properly accounted for when we did the initial calculations.

Since spending more than you earn is one way ticket to the poor house, our financial health depends on meeting this challenge head on. Fortunately, we do have a relatively high net worth, so we do have have options other than borrowing. We are considering:

1) Person to person money lending at very high interest rates.

2) Pairing down on a number of living and travel expenses.

Folks, real life tends to get in the way of financial health. In this case, both of us going to school has hit our budgets harder than we first thought. That said, I’m confident that we’ll work out a good answer. So, stay tuned for our solution!

Best,

James

An Interesting Idea

Posted on by

Last week, we blogged about inexpensive land in West Texas. Even though the land is basically economically worthless, an interesting business idea did occur to me.

The main idea would be to purchase a block of desert land, subdivide it into small blocks (say 1/4 acre) and market the small plots as a novelty or specialty gift. Just for fun, I did some back of the envelope calculations to see how a likely return would pan out.

Assume you could locate 100 acres for $20,000. (This can be done, according to a couple of the websites I visited). Next, I assume that you could subdivide each of the acres into quarter acres (100*4=400). Provided that each 1/4 acre could be sold for $300, this could yield approximately $120,000 before taxes, expenses, marketing, etc. Assuming costs for expenses (40k), taxes (30k) and the cost basis of the land (20k), you’d walk away with $30,000 post everything.

That’s a 50% return on your initial investment of 20k.

Of course, this is just back of the envelope. To make the idea work, you’d need to convince people that economically worthless land is actually worth buying, as well as set up the necessary marketing and legal infrastructure. It could be fun, but being a full time grad student, I think I’ll explore options that are perhaps more local or less time consuming.

Best,

James

Paying for Graduate School

Posted on by

…is not easy. If you’re a frequent reader of DINKS finance you’ve probably known by now that my wife and I are both full time students. Miel is working on an MA in management and I’m a doctoral student.

Graduate school, when done properly, is a full time effort. However, the cost going to school can be quite significant. For example, I’m going the University of Maryland, and the cost of tuition alone is $16,000 per year. Once you add the cost of living, rent, and other expenses, and the price tag of being a student can easily top $30,000 per year.

The key question is how to come up with the money. Other than borrowing it, there at least four strategies you could consider.

1) Employer Help: My wife’s work pays for approximately $5,000 of educational expenses per year. She’s been able to apply these funds to her tuition bill as well. If you’re going to school and are working full time, you should definitely look into this.

2) Assistantships: A lot of on-campus jobs for grad students cover chunks of tuition and pay a small monthly stipend. For example, I’ve got one of these and it pays about $6,000 worth of tuition a semester and $600 a month salary.

3) Selling Assets: If you have any assets, you might consider selling them. The decisions making logic is as follows. If your investments are growing at a rate less than your cost of borrowing money, you might want to sell of your assets rather than borrowing money. For example, it would cost me about 8.5% for a federal loan this semester. However, my stock investments are yielding less than 8.5% percent currently, so for me its cheaper to pay the bill, rather than borrowing to pay it. In fact, I sold about $2,000 worth of stock to pay the balance of my tuition bill this semester.

4) Scholarships: Scholarships: We haven’t landed one of these yet (its not for lack of trying), but if you can get them they can often help with the cost of books or other incidentals. Plus getting scholarships is a good resume builder.
If all else fails, you might have to go after some money from the Federal Financial Assistance program. This program offers aid for students in the form of loans and grants from the federal government. You will start by filling out a Free Application for Federal Student Aid, or FAFSA. From there, the government will determine your need for assistance based on your income and family situation. It might be a good idea to set up a meeting with your school’s admissions office beforehand, as a representative will walk you through the process and might be able to track down some additional sources of aid directly through the university.

Hope this helps!

Best,

James

Land for $200.00 an acre?

Posted on by

In my never ending search for good deals on the internet, I was messing around on Ebay last night. Lo and Behold, I found some super deals on land in West Texas! For example, some realtors are asking $1,400 for 5 acres of land and $6,000 for 20 acres. Thats really cheap!

To be quite frank, the idea of owning a lot of land appeals to my ego, so I was considering the idea seriously until I researched the area a bit. West Texas is HOT and DRY. There isn’t much water to speak of, and no people at all. The reason why the land is so cheap is because it is economically worthless.

That said, if you’re savvy you might be able to find some good deals on line. So, to check out the cheap land, click here.

Best,

James

Older posts

Boost Your Brand – Advertise with Us!

Advertise With Us

You cannot copy content of this page