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Monthly Archives: April 2007

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Ukrainian Economy

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Greetings from Ukraine! I’m currently on travel for work in Lviv, a quaint city in Western Ukraine. As regular readers know, I travel pretty regularly, most often to areas that aren’t typically top tourist destinations. In my adventures I like to find tidbits that might be related to finance.

Before I get into more experience related posts, I thought that an overview of where Ukraine is economically would be helpful. From the impression that I’ve gotten, it seems that times aren’t too bad but people would like and expect change to happen more easily after the Orange Revolution.

From this index you can see that Ukraine enjoys more economic freedom than many places in the world but it still has some work to come to the rest of Europe.

It appears to me that it is a country that faces contrasts in being at the edge of the EU and yet still being a former part of the USSR. Being here you feel the pull from both sides. Considering that the economic conditions and mind frame are very different, it can be difficult to gain consensus as to how best to move forward.

In general it feels that Ukraine has a great deal of economic potential and will be one of those places that will see more prosperity come its way. I’ll keep you posted on more adventures in my next week here.

For more details on Ukrainian Econmic Freedom check out this link.

Best,

Miel

Yet More Calls for Wal-Mart Investigations

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If you’re a regular reader of our blog, you’ll know that we’ve recently written about ethical lapses at Wal-Mart Stores. In the past, I’ve been critical of the company for investigating its shareholders and its poor financial performance. Well, now seems that the Illinois State Board of Investment is calling for Wal-Mart’s board to open an investigation into potential surveillance activities by the retailer.

To be honest, I’m a little mystified by Wal-Mart’s management. In light of the numerous employee lawsuits (1)(2)(3), declining profits, and extreme negative publicity, one would think that H. Lee Scott and his cohorts would get a clue and make some changes. Or, at the least, one would assume that the Walton family would apply some pressure to improve the company’s image. Instead it seems that Wal-Mart’s management is going to keep their current policies. This seems dumb to me.

Best,

James

Why you shouldn’t buy extended warranties

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Folks,

We DINKs are pretty busy taking care of the parts of our lives that don’t involve blogging, so we wanted to quickly post this video from consumeraffairs.com. The video is quick informative piece on the reasons why you should NOT buy extended warranties. By and large we agree with their main point, which is that extended warranties are usually a rip off. Feel free to check it out, its short and sweet.

Best,

James

Book review: New ideas from dead CEOs

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This posting is a review of Todd Buchholz‘s New Ideas From From Dead CEOs. Buchholtz is a former white house advisor and hedge fund manager. He is now currently on the lecture and speaking circuit. He’s mostly know for his previous books and New Ideas from Dead Economists and Bringing the Jobs Home.

New Ideas From Dead CEOs is an elaboration of the histories of America’s most successful entrepreneurs. Buchholz outlines in rich detail the business practices of CEOs like A.P. Giannini, the founder of the Bank of America and Ray Croc, the driving force behind McDonalds. More importantly, Buchholz’s book talks about the practices these CEOs used to build their business. For example, Giannini provided banking services to immigrants when no one else would. Croc sold McDonald’s franchises, but instead of selfishly pocketing the profits, Croc developed a business model that made him and his partners rich.

While the book’s stories are by and large engaging, the work is flawed. First, critical readers of New Ideas from Dead CEOs may often wonder what audience it was written for. For small business owners, his detailed descriptions of how CEOs built their empires may be useful, but the book doesn’t address the day-to-day realities of building a business.

The book is equally unsatisfying for big picture thinkers. Buchholtz’s previous writing has raised important concerns about America’s strategic place in the changing global economy. In many ways, New Ideas from Dead CEOs seems to propose a solution to these concerns. However, the book fails to explicitly make his connection, leaving the reader with a feeling of enjoyable frustration, much like being at a high school dance with a date you don’t like.

My advice? I’d wait until after the May 8th release and pick up a used copy. Buchholz is a skilled writer, but its not worth the $26.95 Harper Collins is asking.

Best,

James

Thoughts on our tax refund

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So, according to our accountant, we DINKs are going to get a large tax return back when the IRS processes our paperwork. The question we’re trying to answer is what to do with the funds. We’re due back around $4,400 from the Federal government and about $450 from the DC government.

First off, we ideally shouldn’t get any money back at all. Getting a tax return back implies that you have been overpaying the Feds. Since you don’t get any interest on the over payments, it doesn’t make sense to get a return. Instead you should adjust your withholding so that you keep as much of your income as possible.

So why haven’t we do this? Our tax situation can fluctuate a great deal on a year by year basis. For example, when I went back to school, my income declined to nearly a 1/4th of what it was before school. Also, getting married has changed our tax situation as well. Since I don’t have a good sense of how these changes will impact our tax bill, my general response has been not to alter our withholding status.

Also I like getting a return back after the process of filing our taxes. Even as much as I love finance, its still a chore to assemble all our paperwork, send it to the accountant and deal with getting it filed. Getting a return back at the end of the process makes it more pleasant.

Best,

James

If you care about ethics, sell your Wal-Mart shares

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Like most people interested in personal finance, you’re probably focused on keeping tabs on your investments. If you own any shares in the Wal-Mart (WMT) corporation, either directly or indirectly, you should be keep yourself informed about your company’s conduct.

This posting is about the implications of the Wal-Mart spying scandal. If you have been following the story, Wal-Mart has been implicated in engaging in ongoing surveillance of its employees, its company officers, its suppliers, its critics, and its shareholders. While this is not the first time Wal-Mart has gotten in trouble because of surveillance, in recent years Wal-Mart’s security efforts have become more aggressive under the leadership of CEO H. Lee Scott and security chief Kenneth H. Senser.

The timing of these revelations is bad for Wal-Mart. Since Lee Scott took over the company’s mangement, there have been increasing concerns about declining profits and worries that Wal-Mart has been underperforming relative to its rival, Target Corp (TGT). The company has additionally been receiving negative publicity due to the ongoing tainted pet food scandal. In short, Wal-Mart has been implicated in big time spying, has been showing signs of slowing growth and is getting a bad rap in the media.

Make no mistake. The slowing growth is not Wal-Mart’s problem. Wal-Mart’s problem is disrespect of its shareholders. While it may be justifiable to survey one’s workers it is never acceptable to spy on shareholders. This shows a profound disregard for the fundamental basis of capitalism: provision of profits to owners. Not only has Wal-Mart’s management failed to provide adequate returns, their response to ownership complaints is investigation and character assassination.

Wal-Mart is not and never will be a part of my portfolio. If you care about ethics in the companies you own, you’ll vote with your feet also.

Best,

James Carl Hendrickson

The DINKs April Networth

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The first two weeks in April have been kind to the DINKs. Our wealth increased from about $311,537 last month to $329,451. This is a gain of nearly $18,000 in one month. As near as we can tell, this gain is partially due to the following:

1) Improved Employment Situations: Miel, the better half of us DINKs received a 6% percent raise from her job. Miel has socked all of her extra money into maxing out her retirement. She is making roughly twenty thousand more than she was three years ago but has the same take home salary. James, the starving student, nearly doubled his salary by getting a better assistantship at the University of Maryland. Both of these changes mean we not longer need to borrow to fund our lifestyle.

2) Dumped Our ARMS: We had adjustable rate mortgages on both our investment property and our primary residence. We spent about $10,000 to get out of these at the beginning of the year. This movement is now yielding dividends, as we’re starting to pay down the principle on our mortgages.

3) Stock Market Gains: Our TIAA-CREF, Schwab and ING accounts have seen healthy increases. More specifically, some of the pressure on the energy trust shares we hold has alleviated due to increasing oil prices. Our accounts have been further buoyed by the overall healthy performance of the S&P 500.

4) Sold Business Inventory: Miel sold the final part of her Mary Kay cosmetics inventory, converting roughly $2000 worth of make up and facial powder into cash. While we are sorry to see the business close, cosmetics in the closet don’t earn interest and can’t be reinvested. This didn’t improve the numbers of the networth but it did liquify those assest to be invested otherwise.

See below for the details of our networth!

James & Miel

Give me my money back!

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As part of the DINK’S mission to bring you the best personal finance info on the net, I wanted to let you know about a new website called givememymoneyback.com. Its a weblog started by a public interest attorney who has become fed up with fraudulent and nickle and dime billing.

Everyone is fed up with nickle and dime charges, but what makes this site interesting is that its author is actively soliciting reader feedback on what laws should be drafted to deal with fraudulent billing.

The concept is new and fresh, so feel free to check it out!

givememymoneyback.com

Best,

James

Deep Freeze Your Credit Cards To Stop Spending

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For those who aren’t regularly reading our blog, we talked a couple of days ago about ways to limit your use of your credit cards.

Er, more specifically we blogged about how making your cards inaccessible to you can be a good way to help you control your spending. Well, after talking to the idea over a bit, we decided to see if in fact, freezing your credit cards can work.

First off, we got an old card that Miel wasn’t using…

Its a debit card and I think the account linked to it isn’t working anymore, but we took the cards numbers out of the pictures anyways. I guess studying criminology has made me a bit paranoid.

After that we, filled up the mug and put the credit card in…

Its kinda hard to tell, but yes this mug is full of water!

Next, we popped the mug in the freezer.

Three hours later the mug came out like this…

Viola!!! The card was deep frozen.

So just to end this post on an upbeat note if you owe money on your cards, this could be of some assistance. By the time you thawed out your card, your urge to buy crap like teletubbies or legos or whatever will have passed and you’ll be one step closer to financial freedom!

Best,

James

Tips for Improving your FICO Score

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Credit scores are one of those little things in life that while they can have a significant impact on people’s financial bottom lines, many people don’t understand all of the ins and outs. Here are a few tips to improve or maintain a good credit rating. Keep in mind that a small improvement in a credit rating can impact the interest that you pay on mortgages and other loans. Here are a few handy reminders to help you improve your score

  1. Order a copy of your credit report. Review it carefully. Correct any significant errors. This can be done by sending in letters to all three of the credit bureaus.
  2. Pay your bills on time, every time.
  3. Don’t open a lot of new accounts over a short time period, especially if you have a short credit history.
  4. Shop for credit over a short period of time. FICO scores distinguish between searching for credit for a specific loan and searching for lots of different credit lines.
  5. Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix – it probably won’t raise your score.
  6. If you have a questionable credit history, open a few new credit accounts, use them responsibly, and pay them off on time. In general, having credit cards and installment loans (and paying timely payments) will raise your score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
  7. Don’t open credit accounts you don’t intend to use. Also, don’t open a number of new credit cards that you don’t need, just to increase your available credit.
    This approach could backfire and actually lower score. New accounts will lower your average account age, which will have a larger effect on your score if you don’t have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.
  8. A credit card or installment loan can raise your score as long as you don’t have too high a balance and you pay it off in a timely manner.
  9. Keep your balance low in relation to your available credit. If your credit limit is $10,000, keeping your balance below $2,500 (25%) will improve your score.
  10. Pay off credit card debt rather than move it around to lower rate cards. Moving balances to other credit cards and closing out the old account can hurt your score because it can change the ratio of your total credit card balances to your total available credit lines. The most effective way to improve your score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
  11. Don’t close unused credit cards as a short-term strategy to raise your score.

Keep in mind also that negative items affect your credit score much more quickly than positive items. Late payments can negatively affect your score in just a few months, whereas paying bills on time may take 6 to 12 months to generate a significant improvement in your score.

Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years.

Note that closing an account doesn’t make it go away.
A closed account will still show up on your credit report, and may be considered by the score.

The launch of AnnualCreditReport.com entitles every American consumer — about 200 million people — to a free copy of their credit report each year. Check yours to see how you stack up.

Best wishes in improving your FICO.

Miel

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