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Monthly Archives: October 2006

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Those Crazy Russians

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Like most denizens of the personal finance blogsphere, I’m always on the lookout for news that fresh and unique. Well, if you get a chance you might want to cruse on over to the New York Times, and check out their story on the consumption habits of Russia’s new rich.

According to the article, the oligarchical class is nuts about conspicuous consumption, and enjoy buying race horses, furs and other status symbols. Click here for the story.

My first reaction was to dismiss such spendthriftyness out of hand. Most millionaires on the US got their money by saving, investing and being successful in business. But, when I think about it again, it may be that Russia’s problems with immature capitol markets and lack of government transparency may change that country’s wealth dynamic. Its possible that, in Russia conspicuous consumption is needed to ensure ones place in society. Whereas here, spending money on consumer goods usually hurts you economically.

Now…if Russia could just do something about their national problems with rampant alcoholism and worldwide arms trafficking..

Best,

James

A New Sharebuilder Code!

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We DINKS subscribe to the entertainment card. For those of you who don’t know what this is, its a coupon book containing discounts for restaurants, travel and entertainment. Use the book a couple of times and it pays for itself.

Much to our glee, we opened the packaging on the 2007 entertainment card guide and out popped a flyer for, of all companies…Sharebuilder! Written in the small print on the flyer was a new Sharebuilder code, this one giving you a fifty dollar bonus. The codes is:

50ENT

In order to take advantage of this you’ll have to login to Sharebuilder using the following URL:

www.sharebuilder.com/50ent

After that you’ll need to go through the sign up process and fund your account. The $50 bonus should come about 4 to 5 weeks after your first trade executes. Old Sharebuilder hands should know how this process works, if you’re new, you can call the company at (800) 747-2537. You know that this offer is only good until the end of 2006.

Hope this helps!

Best,

James

P.S. To let our readers know where we stand. First off, Sharebuilder is a fine company, but I’m planning on transferring my Sharebuilder accounts over to Schwab after our $50 signup bonus credits to the account. We are doing this for several reasons. First, consolidating our accounts in a centralized location is easier from a management standpoint. Also, Sharebuilders interface is still a bit clunky and given our investment strategy, the pricing is favorable at schwab. But hey, 50 bucks is 50 bucks!

Procrastination Vs. Maintainance

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Some of our posts talk about stocks, some give recommendations on saving money, some of our posts rant and rave, this post is a rant!

A while ago, the diverter in our bathtub went out. The diverter is the piece of hardware that channels the bath water between the shower head and the tub. For whatever reason, only the shower works. At the moment, we’ve been reluctant to call the plumber because the estimate we got was for nearly $200.00, and given that we are both on essentially on one income, the extra cost really isn’t that welcome right now.

In addition, its been raining cats and dogs in DC, and last night we had a lovely drip in our kitchen. Miel said it reminded her of her her days in the Peace Corps. It just made James grimace.

Lest this post turn into a complaint ridden diatribe, there were a couple of useful points the situation has illustrated.

1) Establish a relationship with a good handyman. This way, when something like our sink issue comes up, you’ll be able to call someone to fix the situation. Otherwise, you run the risk of getting someone out of the book.

2) Maintain your real estate in good repair. The kitchen drip is undoubtedly because of the rain. This means that the roof hasn’t been adequately attended to. If the roof had been attended to, then we, and our upstairs neighbors, would not have to deal with the drip.

Here is a picture of the drip location in our kitchen ceiling. We hope that this sort of thing doesn’t happen to you!

James&Miel

Ignorance Is Bliss

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On the road to financial success, there are many pitfalls. Some are worse that others, for example having a spendthrift spouse, becoming a gambling addict or experiencing a prolonged health crisis can put you in a financial bind.

A problem I’ve had in the past was daytrading. I’ve always enjoyed stocks and my wife and I had some initial success trading the Hansens Natural Corporation (HANS). But, after our initial success with HANS I became overconfident and began to daytrade. After a while it got to the point where I was making trades that weren’t all that smart.

The solution ended up being cancelling my subscription to Investors Business Daily. IBD is a wonderful paper and offers a number of good investing ideas. However, I’d read the paper on my commute to the university, and as a result I’d think about stocks all day. After I cancelled my subscription, I haven’t been as focused on trading. As a result, have been trading less and more importantly, have been loosing less.

Best,

James

DINKS Rights

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As I devote my evening to caffeine and my policy paper on same-sex marriage, I wanted to note the ruling by the New Jersey Supreme Court today to open the door to same-sex marriage. How might this impact your bottomline? A few things to conisider.

The pocket books of gay DINKS are affected in a number of ways:

  • Higher premiums on health and car insurance;
  • Lack of access to partner’s insurance benefits;
  • Potential loss of inheritance in the event of their partner’s death;
  • Benefits of filing taxes jointly;
  • Social Security and Medicare benefits;
  • Higher legal fees to ensure the establishment of a will and so forth, and much more.

The catch is, all unmarried DINKS are at risk of loosing such rights in the conservative push to project traditional family values. Virginia’s ‘same-sex’ marriage amendment currently on the ballot not only reinforces the ban that already exists according to VA law, but restricts all unmarried couples from any benefits.

In the case of James & I, we enjoyed health care benefits for James on my insurance after a year of living together. This not only reduced our monthly expenses and provided James with better coverage, but we it also enabled James to make the switch to full time grad school without considering a lapse in coverage. (Yes, the organization I work for is progressive enough to have equal access for insurance and other benefits for all couples that have lived together for a year or more.)

Food for thought for all DINKS out there in blogland.

Time for bed!

Miel

Saying goodbye…to our ARM

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The great news from the DINKS is that we’ve finally completed our much discussed refinance! After three months of discussions, planning, calculating, researching and shopping, we finally closed on the deal this morning!

My wife and I got up at the crack of dawn, dragged ourselves to the metro and made it promptly to the closing attorney. After an hour signing papers and asking questions, we wrapped everything up around 10:30.

The good news is that we converted our ARM from a variable to a fixed rate, and should now be able to pay down the principle of our loan without fear that the bank will raise rates! Our payments will remain roughly the same, and given that we paid about $2,070 to make the deal happen, it was a pretty cheap closing!

Happy Wednesday and enjoy your surfing!

Best,

James

Less is More

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Having less available money can result in spending less.

Obviously this isn’t a definite, but it does contribute to less expenditures. I learned this lesson back when I was paying off my credit cards in 2004, but have been reminded of this lately.

As our readers know, James & I are both working to reduce our monthly expenditures by at least $50 each. I’ve found that if I just put that extra $50 away, then I’m more likely to save even beyond the initial goal. Part of it is psychological, but when you have limited available cash in your checking account or pocket, you are less likely to spend like you would if it felt like there was more. Here are a couple of specific examples:

  • When planning to go out with friends, bring a specific amount of cash to cover your bill. Everyone knows that it is easier to spilt the bill if you’ve got change, so plan ahead to save hassle & money. Often times you have a pretty good idea of what range the restaurant is, so price it out beforehand. Plus, if you know how much you have in your pocket, minus how much it will take to get home (walking is best), then you can limit your menu selection and/or how much you drink/eat, by what’s in your pocket.
  • Most of us get paid in two week cycles. We all know how great pay day is. At the same time, my tip is to squeeze yourself before the next pay day. On Sunday night before pay day, sit down and look at your account balance. Determine what your schedule is in the next week, and what bills or expenses you might have. If you have excess of what you are expecting to spend, stash any savings away before you are tempted. Plus, it makes the next payday that much better!

In the end it is mostly a mind game, but it seems to work from my experience. Try it, you might like it!

Happy Saving!
Miel

Housing Bubble: To Burst or Not to Burst

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We know our readers love a good finance debate. Given the market these days, we think it’s about time to air our thoughts on housing market crashes. We don’t exactly see eye to eye on this matter, and would love to having our readers weigh in on who’s argument they side with.

The debate begins!

Miel: Given that we currently have $605k in real estate assets, I think we are better off seeing a leveling off of real estate than an all out burst of the bubble. We are likely to only hold on to these properties for another five years. I think we’d be better off maintaining the value our properties currently have than to put more money into the declining market and have more ‘greater’ assets are a declined rate.

James: Even though so much of our money is tied up in real estate, I’d love to find some good cheap real estate to purchase while the market is down. Ultimately the market will go up, and we’ll be better off. I could be talked into purchasing some REITs (Real Estate Investment Trusts) which would give us exposure to the real estate market but without the hassle.

Of course we both question having the time and energy to both with another invest place, but that’s another debate.

Miel&James

Prosper.com is losing money

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Many of our readers know, we’ve been working on ways to improve our return on equity to pay for graduate school. We were considering putting a chuck of cash into prosper.com, but decided against it for a number of reasons.

Having a bit of money in the site, we still spend a fair amount of time dealing with prosper related business, including writing about the company, managing our loans, and corresponding with other bloggers about prosper.

Most recently I heard back from Prosper’s corporate staff, and based on my correspondence with them, I’ve concluded the company is NOT currently profitable.

My reasoning is as a follows:

Income: From what I’ve been told, Prosper has brokered about 19 million worth of loans. Now, I assume that Prosper’s primary income stream from loan origination, brokering fees and miscellaneous (Click here for their fee info), is about 2.00%. On a basis of 19 million, their total before tax income would be $380,000.

Expenses: Now, Prosper has 7 management staff, probably a techie or two, and is looking to hire another tech. Also, they have a call center in India. Plus, the company has to cover over head and office space. All of this costs money.

Assume that each of these seven management staff earn a salary of 50,000 annually (that’s a LOW estimate for San Francisco) and that the call center contract is probably an additional $40,000, they you have a rough total of $540,000 in staff salaries (10 staff at 50k, plus 40k for call center). If you assume that leases and overhead is an additional $20,000 annually, then prospers total expenses, minimum, are: $560,000 (extremely conservative considering start up costs).

Expenses greater than income: Last time I checked $560,000 was more than $380,000. In other words, It looks to me like proper is cash flow negative, e.g. they are LOOSING money. From our estimates, which are conservative, Prosper would be starting to make a profit once they reach the $30M mark in loans.

This is not unexpected, after all, they are a start up. However, it does indicate that Prosper’s long term viability is questionable. For those of you who are considering putting a large sum of money into the service, you might consider taking a more limited position, or waiting until the figures become somewhat more favorable.

Best of luck and have a great day!

-James and Miel

Priceline Rules!

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When I first heard about priceline, I wondered if it was too good to be true. Being a savvy traveler, I had to check it out myself. Now I’m officially hooked, and use priceline whenever I can. Here are a few tips for making out big time:

  • If you don’t know anything about priceline, the basics are that you give the price you’d like to pay for travel (car rental, hotels, flights, etc), and then if someone takes your bid, you pay that price. If you bid too low, you have to make some adjustment to your bid or wait 24hrs.
  • Start in advance if possible. Priceline makes you change your bid or wait, but if you bid early this works to your advantage. I’ve still found great last minute deals, it’s not a sure thing.
  • Know the market. Depending on what it is you are looking for, know what price you’d like to be paying.
  • Make sure to go to the Name Your Own Price section, otherwise you can be suckered into their standard offers.
  • Car rentals are the no brainer, since one brand is comparable to others. I’ve gotten as low as $14/day on week long rentals, and $50 for a weekend trip.
  • Hotels are a bit trickier. This is done by location and rating level. Depending on the city and how they break out the zones, this can work for or against you. For instance in say the Dupont Circle area of DC, it would be a safe bet to bid on a three or four star hotel and know you would come up with something fine, since you can look at the list and make sure there aren’t any sketchy options. However in Portland, Oregon they include the whole city in one zone. Bidding on a three stars wouldn’t be certain to get a sweet spot in downtown. Whereas bidding on a four star hotel it was guaranteed to be one of three hotels. We were able to get one of the best hotels in Portland, the Benson, for $100 and then we were upgraded for our honeymoon. My vote is to go for a better hotel and bid lower.
  • Flights, I haven’t tried these. My vote would be that it isn’t worth it unless you have the flexibility.

All and all it is a pretty good way to save money while traveling! Enjoy bidding!

Miel

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