Wednesday, February 29, 2012

Am I a Personal Finance Blogger or Aren't I?

I hear behind these doors, there
are hallowed halls.
I received some great news late last week.  Some big, life-changing, kick-you-in-the-mouth sort of news.

I was accepted into the PhD program to which I applied.  In 4-5 years, I should be a doctor (not a helpful sort of doctor, but, still, a doctor nonetheless).

This is a dream on many of levels.  I'll get to do advanced study in a field that I love, for one.  After I get the degree, I will be qualified for a career (teaching) I've always wanted, for two, and that doesn't even take into account the practical theatre work that I will continue to be a part of in the future.  Even in simply getting accepted, there is a sense of validation for my life choices thus far, for three.  I should be excited out the wazoo, right?

And yet...

A few days ago at Grumpy Rumbling of the Untenured, there was a thoughtful article and series of comments concerning spouses and careers, with particular emphasis placed on the perils of one spouse paying the bills while the other worked towards his or her dream career through higher education.  This post brought me pause for several reasons, not the least of which being the horror stories from women whose relationships with their husbands had degenerated when they were in similar situations.

So, right from the get-go, an immediate, extra-scholastic concern is for my marriage, and my immediate thought is that I should not do things that could cause a rift.  I know that I'm maybe going a little "butterfly effect" right now in placing so much emphasis on things that "might happen if," but the sanctity of my marriage is of paramount importance to me.  I do my best not to do things that will hurt my wife, and she does the same.  I think that by looking out for your spouse's best interests, a marriage will work, and we've been blessed by the fact that neither of us has so severely violated the other's interests that our relationship has become irreparable.

However, apart from the very real marriage concern (and more to the point of the title of this post), I am concerned about the financial ramifications of the choice to go back to school.

To put it bluntly, between our two incomes, my wife and I make what I consider to be a stupid amount of money.  We're not rich by any means, but we are very comfortable, and, if we both stayed at our current jobs through retirement, I have no doubt that we would easily be millionaires.  Just from our 401(k) contributions alone (since the company we work for matches contributions 100% dollar for dollar), if the market averages 8%, we could be in the 7 figure territory by the end of the decade.

I don't know about you, but that amazes me.  As both of our families are pretty solidly middle class, it's safe to say that should my wife and I simply stay the course we're on today, we will live our Baby Boomer parents' dream for us: we will have had it better in life than they did.

On the other hand, if I join the PhD program, things will obviously change.  In the email note that told me I had been accepted into the program, the professor also acknowledged that funding was still up in the air.  If there is funding that is at least equal to the first two years tuition (as tends to be the case, from what I've heard), then the decision is perhaps a little easier.  But what if that isn't the case?

I would like to keep on at my current job while attending the program, but I am unsure if that will actually be a viable option.  If I am unable (for scheduling or other reasons) to keep my job, am I really willing to give up a half-decade's worth of earnings and retirement savings, likely get into at least some student loan debt, and potentially destroy my marriage, all for the sake of following a dream and MAYBE getting a job that I THINK I'll like, while the earnings for which job will be less than what I currently make?

As a personal finance blogger, I know what my decision should be.  I should stay at my job which I am good at and for which I am well compensated.  I should keep maxing out my 401(k) and my Roth.  I should not go to school if there is any potential that I'll need loans.  If I'm going back to school at all, I should choose a more lucrative and/or in-demand field such as finance or science.  I need to maximize my earnings early in life so that I can take advantage of the lowly investor's best friend, compound interest.

I know all that, and yet...

There has to be something said for making a change with your life and doing what you want.

It occurs to me that maybe I'm not a personal finance blogger at all.

I guess it's safe to say that I'm still undecided about this, so I ask you, unknowable voids of the internet: what do you think I should do?

Photo by jjorogen.

Friday, February 24, 2012

Does Lending Club Advocate the Martingale System?

Gambling's not all neon and brick walls, you know.
There was a time in my life when I was spent a lot of time reading about gambling strategies (and I'm not talking about penny stock tips).  As you might have suspected, that time in my life ended pretty poorly (no pun intended).

However, as I was looking at my account with Lending Club, I realized that they appear to be advocating a similar strategy that some gamblers do.

This strategy is known as the Martingale System, and here's how it works.

The Martingale 

Let's say you're playing blackjack.  You wager $5, and the dealer has 19 to your 18, so you lose the hand.  Now, you double your bet to $10.  Sadly, the dealer hits a blackjack, and you lose again.  The Martingale System says that since it is improbable that the dealer will win infinite hands, every time you lose, you should continue doubling your last bet until you eventually win a hand.  When you do win, you will win back both your original bet as well as a small profit equal to your original bet.

It's a slam dunk, right?  There's no way to lose!  Let's all go to Vegas and get rich!

Unfortunately, for the Martingale to work, you need both a ridiculously high risk tolerance and an infinite amount of money (though, if you had infinite money, why are you gambling in the first place?).  Let's look at why.

Monday, February 20, 2012

Overvaluing Intangibles, Part 1

If you're anything like me, you watch Pawn Stars (because you're interested in historical items) and you watch Hardcore Pawn (because you're a horrible person).  One of the defining moments in both shows occurs when people walk into the pawn shops wanting to either sell or pawn items, and they inevitably think that their item is worth a ridiculous sum of money.
"So, all you'll give me for my seal is a
swift kick in the pants?
I guess I can do that."
Sometimes the object is worth as much as the people expect, but most of the time it isn't.  Even if it is worth money, because the pawn shop needs to make money when they resell it, the pawn shop gives the seller a necessarily lowball offer to ensure that money can be made.

In the first place, in this age of eBay and Amazon, why on earth do people still insist on selling to pawn shops?  If you have something of value that you want to sell, SELL IT YOURSELF TO MAKE MORE MONEY.  This is called the American Way.

In the second place, when something isn't as valuable, why do people assume that it is?  The answer to this lies in an object's intangibles.  This can also be known as sentimental value that we tend to place in items that is above and beyond what those items are actually worth.

As a point of comparison, consider Tim Tebow.  The guy is not your normal quarterback in that he can't throw two consecutive good passes to save his life.  Still, he was a first round pick in the NFL draft because scouts really talked up his intangibles.  He isn't a partyer.  He is a natural leader.  He says his prayers, minds his manners, and chews with his mouth closed.  Because of these things, certain coaches in the NFL ate him up and drafted him (arguably) much higher than he should have been.  He began starting as a quarterback last season, and he lead the Broncos into the playoffs even though nearly every person who comments on football considers the guy a sub-par quarterback.

Will Tebow's intangibles eventually translate to a Broncos Superbowl victory?  Only time will tell, but in my opinion, you'd be better off engaging in a land war in Asia or going against a Sicilian when death is on the line than betting the Tebow will lead the Broncos to a Superbowl.
Not Pictured: Wallace Shawn.
In a similar way, we overvalue objects that we've had with us our whole lives.  Sure, you've had that clock that your great-aunt Mildred passed down to you all your life (so it's worth a lot to you), but the truth is that it's not as much of a clock as it is a piece of plywood with (most of) the numbers between one and twelve painted on it.  Even though you may value this item intensely, from an objective standpoint, it's not worth a whole lot.

Make sure to come back later this week to see how this mindset costs you money (even if you're not a pawn shop regular).

Photo 1 from Thomas Shahan 3.
Photo 2 from Jerf Kern.

This post was featured in the Carnival of Personal Finance #350.

Friday, February 17, 2012

9 Fees to Watch Out For

My paycheck this week coincided with the first pay period in which I was able to put money into my 401(k).  I am hugely excited about this because of my company's very generous matching policy.  Due to my excitement, I logged into the 401(k) website to make sure everything was running smoothly.  For the most part, it was, until I checked my preferences.

The site had my default settings set to me paying a fee to receive monthly/quarterly updates on my investments through the mail.  Being the frugal dude that you all have come to know and Love (capital L, things are getting serious between us, I know), I immediately switched my preferences so that I will now only receive free electronic account updates.

I really despise fees, hidden or otherwise, so, in the spirit of being helpful, I've compiled a list of nine fees that I do my best to not pay.

  1. ATM Fees - This one is one of the more obvious choices, but it bears repeating.  If you get money from an ATM that is not affiliated with your bank, you stand to pay $2-$5 for that convenience.  Additionally, your own bank may ding you with an extra fee for taking money out as well.
  2. Overdraft Fees - Again, super obvious, but if you pull money out of your checking account, whether at an ATM or by writing a check, and you don't have the funds to back it up, your bank will likely pay the money out, but it will charge you a premium for doing so (probably between $20-$30).  There are times when I've been broke, and I bought fast food under the mistaken assumption I had money in my account to pay for it.  Let me tell you, I've yet to taste a cheeseburger that's worth it's own cost plus an overdraft fee.  Six dollar burger meet Thirty-six dollar burger.
  3. Bank Statements - Just like how the company that manages my 401(k) tried to do to do to me, some banks charge you to receive paper statements.  If you can opt out of this, it's a good idea to do so (Guess what?  If you're reading these words, you have internet access!  You can therefore check your balances online!).
  4. Fees for Having a Debit or Credit Card - It caused an uproar in the personal finance community when Suze Orman released a debit card that charged a monthly fee.  Look, you should not have to pay money for the privilege of accessing your own money.  Similarly, many rewards credit cards charge an annual fee for you to be their customer.  As there are many rewards credit cards that give you cash back without an annual fee, it's usually the acme of foolishness to stick with a credit card with a fee.
  5. Talking with Customer Service - While we're singling out Suze Orman (though I know this is also a policy at some banks), it's worth noting that, while the first monthly conversation with a customer service agent is free, each additional conversation will cost you $2.
  6. Purchasing Investments - If you have an investment account, (with Sharebuilder for example), you will pay up to $9.95 each time you order stocks, bonds, ETFs, or (most) mutual funds.  While $9.95 may be cheaper than going through other investment brokers, this can be a big percentage if you're not investing very much money at a time.  In general, I suggest making it a point to not pay more than 2% in fees for each investment purchase, otherwise you'll find yourself eating to much into your profits.
  7. Dining In vs. Taking Out - Some local restaurants in San Diego charge me an extra fee if I say I'm eating there instead of taking it to go.   The nefarious thing is that these restaurants do not automatically state that there's a fee one way or the other.  I make it a point to always ask if there's a fee either way, and then stating that I'd prefer the way without the fee (who wouldn't?).  
  8. Credit vs. Debit vs. Paying Cash - Some places (particularly gas stations) will charge you different prices depending on which of these three methods of payment you're using.  I do my best to only shop at places do not discriminate on this basis.
  9. Financial Advisers - This one is a little different than the others, but hear me out.  Financial advisers generally get paid by you in one of two ways (not to mention getting paid by investment companies if they recommend their products).  The first way is by getting an upfront fee from you for the time they spend with you.  The second is by getting a percentage of whatever they encourage you to invest in.  I bring this up not to suggest that financial advisers should not get paid for their work, but instead to remind you that they are getting paid one way or the other.
I hope this list raises awareness of some of the fees that you might not realize you're paying.  I realize that in some instances, paying a fee is a matter of convenience (sometimes your closest bank ATM is 100 miles away and you need some cash right now), and that it might occasionally make more sense to pay a fee than not to.  Still, if we can be aware of the fees we might be exposed to, it'll help us all save some money in the end.

What do you think?  Are there any fees that I missed that you find absolutely deplorable?  Let me know in the comments.

Photo by paul nine-o.

This post was featured in the Yakezie Carnival of February 26, 2012.

Monday, February 13, 2012

3 Frugal Lessons to Learn from St. Valentine

Pictured: love.
Well, another Valentine's Day is here, which means that, come tomorrow, there will be mounds of chocolate in heart-shaped boxes on sale at your local Safeway.  Such is love.

As I was thinking about what to write today, I thought I'd take a look at the alleged source* of this holiday in order to see if we could learn anything from him.  Turns out, there is!  Huzzah!  Unfortunately, these lessons aren't exactly happy ones.  You'll see what I mean.

1)  It Doesn't Pay to Help the Downtrodden - St. Valentine was a priest who was marrying Christian couples in Rome.  Unfortunately, Claudius II (emperor of Rome and all-around crank) had decreed that it was a crime to aid or abet members of this new, fringe religious group.  This put our friend, St. Valentine, into figurative hot water.

How This Applies to You - Do you remember that time your down-on-his-luck friend needed $100 because he needed to pay rent?  Do you also remember how he emphatically promised to pay you back "as soon as he could?"  Do you remember how you still, six and a half years later, have a $100 shaped emptiness in your wallet?  Yeah, you're sort of like Valentine doing a good deed and getting bupkiss for it.

Friday, February 10, 2012

The Best Budget Travel Tip I've Ever Learned - Compare Everything

This post was written by Elle over at Odd Cents as a part of Yakezie blog swap #17.

I love to travel. The excitement of going to another country is a feeling that never gets old. But for some reason, that excitement is the climax of an exercise that may or may not be filled with good, memorable experiences which characterize the trip planning process. For me, the best budget travel tip that I could ever give anyone is to compare any and everything. From choosing your the destination right back to deciding what type of transportation that you will be using, comparisons certainly go a long way and can save you a lot of money. Sites like Expedia and Orbitz are extremely useful when comparing airlines and accommodation and even offer honest reviews by other travelers.

Compare Destinations

 Let’s imagine that you’re you’ve made up in your mind that you want to go on vacation, but you’re on a tight budget. The first thing to do is to decide where you want to visit. Comparing destinations islands is not hard, thanks to the internet and honest traveller reviews. What specific experience are you looking for? What activities would interest you? These are some of the questions that you can ask yourself to narrow down your list of possible vacation spots. You should make a note of some of the important details which would make your vacation perfect.

Compare Airlines, Airfares and Accessibility 

One factor that has significant bearing on where you’d like to go is the airfare. Airfares can fluctuate based on a variety of factors, and unfortunately the airfare to the more popular destinations will undoubtedly be higher. When choosing your destination, bear in mind the days of the week that you prefer to travel and whether or not the airline that you’ve chosen flies on that particular day. When I was planning a trip to New York, I checked the two airlines that operated daily flights and I chose the cheaper one – both of them were departing at the same time on the same day.

Compare Hotels and Accommodation 

After you’ve chosen your airline and specific days to travel, you have to compare hotels. If you’re working with a budget, this is easy because many hotels list their rates up front. You should also use maps where possible to see what interesting spots are in close proximity to the hotel. Like I said earlier, Expedia and Orbitz are useful and can be put to use for this comparison. A couple years ago, when I was going to Grenada, I set a figure that I was willing to pay and searched for hotels in that price range. What separated them were the amenities, breakfast and location.

Compare Modes of Transportation 

The next step is to compare modes of transportation. This can be impacted by the location of the hotel. If your hotel is close to public transportation, then you might not need a car. However, if you’re in a more rural area, then a rental car might your best bet. Taxis can be pricey, so make sure that your budget can handle it. When comparing the costs, bear in mind the places that you want to go and how close they are to your hotel.

Comparisons can definitely help you to save some money when planning your vacation. Make a list of the things that are important and jot down the possibilities that suit you. Tackle each category (destination, airlines and airfares, accommodation and transportation) in the specific order listed. Be honest with your comparisons and make sure that your needs are met.

Photo by Elle.

Monday, February 6, 2012

Some Further Thoughts on Fiverr (I've Gotten to Know Her a Little Better)

Breaking News: Shakespeare is dead.
If you've been following my work for a while (and who hasn't? I'm basically fascinating), you know that a few months ago I wrote a post over at Budgets Are Sexy (which I titled, "Fiverr? I Hardly Know Her!") wherein I wrote about my experience with offering a service over at (a website that facilitates people offering goods or services for $5 a pop).  In general, I wrote that Fiverr was a good way to make a couple bucks so long as you didn't mind essentially working for sub-minimum wages.

To give you an idea of the riches you can earn, you should know that the service that I offer over at Fiverr is the writing of sonnets.  For the most part, nowadays it takes me between half an hour to an hour to write one of these poems, which means that I'm earning a cool $4 to $8 an hour.  For those who are curious about why I'm not earning $5 to $10, remember that Fiverr takes a 20% cut out of each seller's profits (not to mention the fees that Paypal takes out for the privilege of accessing your money).

While a 20% take may elicit (justified) comparisons to extortion by the mafia*, I don't have a lot of options.  It's not like the purchasing of sonnets is in high demand.  Were I to build my own website in which that was the only service I offered, I suspect I would have many fewer customers.  I suppose that if I charged a high enough price, the lowered number of customers might be a trade off, but for the time being I plan on sticking with a high quantity of customers.

So just how much have I made on Fiverr, you ask?  Since September of 2011, I have made $132, which means that I've been paid for 33 sonnets.  To put it mildly, this isn't exactly life-changing money.

So why do I keep on doing this, you may ask?  To be honest, I told myself that once I earned $100 that I would take my posting down.  But then Fiverr did something curious; they added seller levels (the higher the level you reach, the more add-ons you can add to your listing).  I assume that they knew that I was going to bail from the site, and so they made it more like a video game.

I am only a lowly level 1 right now, but I dream of the day when I can become a level 2.  Really.

"He's think about leaving us?  ADD LEVELS! STAT!"
Adding to my desire to level up is the fact that I am not really viewing my sonnet-writing as money-making anymore.  Instead, I view it more as a puzzle for which I receive a small reward if I can finish on time.  This also makes it more like a game to me, and it is usually something that is fun rather than something that is a pain.  Writing sonnets forces me to use the creative parts of my brain in a specific, tangible way.

How about you?  Have you ever offered a service on Fiverr or a similar website?  Let me know in the comments.

*My favorite mafia joke?  Why doesn't the mafia like Jehovah's Witnesses?  The mafia doesn't like *any* witnesses.

Photo one by Blimy24.
Photo two by illustir.

Friday, February 3, 2012

Friday Links

Andrea at So Over Debt posted today about how if you don't like your bank, it might be your own fault.  I guess I shouldn't be surprised anymore, but I'm amazed at how cavalier people are in regards to banking fees.

Shopping Detox questioned whether cats, dogs, or babies are the best frugal choice.  What she listed concerning possible cost saving for babies is pretty funny (in that children may provide a return on investment by growing up and providing for you in your old age).

Thousandaire reminded us to claim our earned charitable tax deductions.  As much as I love to pay extra taxes, I think I might just take his advice this year.

Nelson, beloved internet contrarian at Financial Uproar, suggested that our society needs to rethink weddings.  From a financial standpoint, his arguments are pretty sound.  From a, you know, sentimental standpoint, well ... the jury is out.

Prairie Eco-Thrifter listed some ways to create passive income.  And here, I thought the only was to create "pass"-ive income was to be either an NFL quarterback or wide receiver.  Zing!

Saving Advice had a list of 67 free or cheap hobbies.  My favorite one was "saving money," although I suspect that might get expensive in the long run (it's a real money pit, as far as I'm concerned).

Finally, Daily Money Shot cheekily (!) provided a porn star's guide to managing money.  My favorite out-of-context quote?  "It’s not profitable for anyone for these men and women to join a movie only to find out later on that they won’t do that."

Wednesday, February 1, 2012

My Challenges for February

Behold! The Encroachment of Knowledge!
Last month, I decided to challenge myself by stating that I would only purchase two t-shirts a month.  I only bought one t-shirt last month (so I'm letting that extra one roll over to February -- boom, lawyered).

Somewhat obviously, participating in this exercise helped me evaluate my buying habits.  In prior months, I would buy a t-shirt within minutes of seeing it online.  The t-shirt sites that I check daily update a couple hours before midnight here on the west coast, and so what my challenge has forced me to do is to essentially sleep on my choices.

If I love a design when I see it just before bed time, I force myself to re-evaluate my purchase the next morning.  Perhaps not so oddly, much of the compulsion to buy the shirt goes away after a good night's sleep.

Due to how happy I am at how this challenge has played out, I'm going to add to it two challenges that are February specific:

  1. Sell or otherwise get rid of 25 items from my condo.*
  2. Limit myself to the purchase of up to two books and five ebooks (unless I can sell my beautiful bride on why I need another book).  This excludes free ebook downloads.