Winging it.

I found a bunch of "unexpected" money last week. First, I had forgotten all about the cash back on our credit cards. Over 20 months I accumulated $281 and my wife accumulated $221 in cash back, I cashed out $450. Our cash back is 2% on groceries and gas and 1% on everything else. That's a lot of stuff we put on our credit cards.

Then I got a check for last year's overpaid escrow of $370, and lastly my SEV value of my house was adjusted down 17% (ok, so I don't know if that's a good thing), meaning my property taxes will be 17% lower, or about $700 lower. Now if only I can get my tax refund.

It was March 2009, and I looked at the markets and the S&P500 was at 700. It was insanity, the economy had shrunk by 50% in less than 6 months, at least according to the markets and I convinced myself that it couldn't be right. I did a lot of research and I bought big (into 3 stocks, 60% of my liquid assets), for the first time in my life. Then two months later, the S&P was at 950. The market rose by 35% in two months! I thought I had hit the jackpot, I got nervous, I sold everything and cashed out. Today, the S&P is at 1300.

I bought SOL at 2.86 and sold at 4.04 (+42%), today it's at 11.54 (+303%)

I bought TXT at 3.87 and sold at 7.07 (+83%), today it's at 27.15 (+603%)

I bought PMI at 0.67 and sold at 1.39 (+107%), today it's at 3.03 (+352%)

On a smaller scale

I bought JASO at 3.07 and I still own it at 7.35

I bought AAPL at 164.25 and I still own it at 348.16

I bought C at 2.70 and sold at 4.10 (+52%), today it's at 4.70 (+72%)

Like a coward, I sat out the second half of the rally (May 2009 - August 2010), and only started buying "conservative" large caps last September. I estimate I left $50K out there by selling early. I don't know if there is a moral to the story, or whether I did the principled thing, but there sure is some regret.

3 years ago, just before to economy took a huge $#@!, I decided to give Prosper "a try". I had enough emergency funds to allocate $2000 to the experiment. I had high hopes because I rationalized that borrowers borrowing from other people as opposed to banks would be more motivated to pay back the money. My allocation was 15% AA, 70% A, 20% B and 5% C credit ratings. In my view a very "safe" investment. My own credit rating is "A" and I tended to put myself "in their shoes" as a judgement of their ability to pay, a very naive approach. What I learned was this:

Trust people that admit their mistakes and put forth a rational plan to remedy them.

Do not trust people that allege they make X amount of money and only have Y amount of expenses and therefore have an incredible Z amount of monthly surplus to pay the loan. In the end it doesn't make sense

It really sucks when the economy takes a big ol' $^@!.

Collecting agencies are useless. They got me back exactly $0 of the charged-off balance.

People lie. A lot.

Women pay back loans more than couples and men (sample size = 40)


So, here are the results of the "Prosper Experiment"
My nominal yield: 12.9%
My actual yield: -4.2%
Charged-off notes: 25%
Fasted Delinquency: 4 mo
Money Invested:$1971.82
Payments Received: $1888.44

I'm making my last car payment this week. I can't believe I've had it for 3 years now. I will have an extra $330 to save each month. In the 3 years I haven't had to make any repairs on the car, I put 26,000 miles on it, got 7 oil changes (4 of them DIY; I don't do oil changes myself in the winter), and it has been rated one of the top

I've only owned the house for 4.5 years now, and I've already refi-ed twice. The house price has dropped by 17% so far.

My initial mortgage was 30 yr fixed rate @7.00%.

My last mortgage was 15 yr fixed rate @5.50%.

My current mortgage is 15 yr fixed rate @4.25%.

Total cost of financing this time around was about $1200. My payments will drop by $213/mo while extending the mortgage by 24 payments. Good deal or bad deal, what do you think?

Today I realized that Citi canceled my VISA and opened a MasterCard instead. I was a little annoyed by that to say the least, but after some searching online I realized that it's partly my fault for not reading all my Citi mail thoroughly. Apparently they sent me an opt-out notice a month ago.

I hate opt-out things. What's the point of opt-out anyway except for to scam you into doing something you don't want to do. Why can't banks just use opt-in instead.

2009 tax return was $2000 less than last year, and $4000 less than two years ago.

This is the first year I've taken the standard deduction because my interest and tax payments on my house were not high enough to warrant itemizing, all positive results of refinancing my mortgage at the right time.

My messing around in the stock market, made me enough money that I owed over $2,000 in unpaid taxes on profits.

The result is that I got almost no refund this year, but I'm not complaining.

Some may call it being blessed, I just call it lucky, or maybe a good upbringing.

It really helps when you start out without any debt. No CC debt, no student loans, no car loans. I started out with none of those. So here my advice to those who are starting out. Work, work, work. Don't spend more than you earn. Especially those who go through college, it is truly a great feeling being debt free coming out of college. And I recommend taking each summer off and working for 3 out of the 4 months. I'm sure others will disagree with me, and say academics come first when in college, but I found it a great change of pace to do something different for 3 months.

Ok, these days that's easier said than done with the current economic situation, and I don't envy those going through college right now.

Oh, also it helps to go to in-state public colleges, because it's impossible to pay for out of state or private colleges by working part time.

I sometimes like to convince myself that I have many years left to save for my retirement. I probably do -- 35 years or so at least. So, that's the excuse I give myself to just wing it when it comes to money; No penny pinching, no fiscal discipline, no keeping track of every single dollar I spent.

Yet, I have only 2 debts:
1) Mortgage (15 yr fixed rate at 4.5%)
2) Auto Loan (3 yr fixed rate at 5.0%)

I really don't consider my mortgage a real debt since I have about $40K equity in my home. But realistically I pay $400/mo in interest and $400/mo in taxes and insurance, which is really comparable to paying rent. So really I only have my car loan, which I hope to pay off in 12 months.

I do have a little bit of savings. I am still a bit skittish when it comes to stocks, so I never hold stocks very long, and so far, knock on wood, I haven't sold any stock at a loss, and only my mutual funds have lost money since I bought it but they're in my roth, so I won't sell those for a long time.
Cash: 51.7%
Stocks: 36.3%
Mutual Funds: 7.9%
CDs: 4.1%

Probably one of the best things I've ever done is to not get into CC debt. While a freshman in college, I regrettably signed up for some credit cards, but luckily I never used them. I was told that I needed to use them to build credit history, and maybe I should have. But I decided it was better to live on cash and an ATM card. Once it became fashionable to use "Electronic Automatic Payments" I started using my CC for just that, while also linking my checking to my CC account: pay my bills using CC, and my CC using my checking.

And then I discovered all the cool CCs with rewards and incentives and what not. That's when I began charging EVERYTHING on my CC. This could have been a disaster, and for a while I was hovering on the equality between revolving debt and checking account balance. (It didn't help either that we supported the both of us on just $1450/mo for a year). I do not regret the fact that I started using CCs for every purchase, and it taught me how to use CCs responsible by paying off the balance in full EVERY TIME. Besides, the "rewards" are a nice bonus, and I love how there's no fuss whenever I need to get a loan or to refinance one.

My to do list:
Spend less than you make - CHECK
Have no Credit Card debt - CHECK
Have a good Credit Score - CHECK
Save for retirement - 0 saved
Pay of car - 27 months to go
Pay of home - 178 months to go
Have a savings plan - Working on it...

Drive a more fuel efficient car. And it's better for the environment too! Let me give a personal example. I went from driving a 1996 Dodge Avenger to a 2008 Toyota Yaris.

1996 Avenger: 21 mpg (rated @ 24 mpg, but it's old)
2008 Toyota Yaris: 32 mpg

With gas at $3.50/gallon and driving 12K miles a year it would cost me:

1996 Avenger: $1750
2008 Yaris: $1312 (save $438/yr)

Let me give some comparisons:

2008 Toyota Prius: $903
2008 Ford Escape Hybrid SUV: $1312
2008 Dodge Grand Caravan: $2100
2008 Ford Taurus: $2100

If gas were at $4.00 then you would save relative to a Grand Caravan/Ford Taurus:

Prius: $1368/yr
Civic: $1230/yr
Escape Hybrid: $900/yr

**Here I am just giving fuel savings for a fixed price and driving behavior. This is not a "cost to drive" value. Cost to drive also depends on capital cost (vehicle purchase price), maintenance costs, depreciation and car financing. Here are the cost to drive numbers for my:

Avenger: $0.25 / mile (assuming $2.50 gas)
Avenger: $0.30 / mile (assuming $3.50 gas) Yaris (so far): $0.78 / mile (assuming $3.50 gas)
Yaris (12 yr): $0.26 / mile (assuming $3.50 gas)
Yaris (15 yr): $0.23 / mile (assuming $3.50 gas)

So this is what has happened since the last entry:

1. Refinance My Mortgage from 6.75% 30yr fixed to 5.5% 15yr fixed. Cost me $700 in fees. But will save me close to $80,000 in the long run. My payment went up $150, but I can afford that.

2. Bought a new car with almost $4000 down. As of today I have $10,400 on the loan with a monthly payment of a little over $300.

3. Got my new car rear-ended. $1800 in damage. Got my car fixed, looks brand new again. Cost me a whole lot of time and $50.

4. Bought a bike for $325. Will save me about $1 everytime I ride my bike to work. It will take me a few trips to earn it back.

February was a weird month. Here are some unusual numbers:

Car Down Payment: -$4,700
US tax refund: $3,700
Green card renewal: -$370
Net worth*: $39,979 (+$2,961)

Most our losses came from car sales tax and immediate depreciation (almost $1600). Numbers have been updated on the left.

I got a brand new Toyota Yaris Sedan sitting in the drive way. The money scale says I'm $15,500 lighter. I put $4500 down and got an $11,000 loan for 3 years at 5.55%. I'm looking to pay it off in 12 months with payments of about $1000 a month. On top of our refinance mortgage at $1700 a month, we'll need to tighten our belt a little bit. The other big hit is the extra $80/mo for insurance. Our take home pay is about $4600, so we still have $1800 for regular expenses, but it will be interesting to see how we'll manage.

BTW the Yaris is a nice little car. 35 mpg, so we'll save some on gas.

A: The car I am going to buy.

A combination of JD-Power ratings, test drives and price have led me to decide on the Yaris Sedan. I finally decided on it because it's built here in the U.S. apparently. I have been soliciting offers from about 10 dealers in the area. We're hoping on getting a deal in the low $15K, and we're planning to put about $5K down. We are going for a "cheaper" model, but with all the "basic options" like power locks, windows, cruise control etc. BTW, I despise car dealers...

So, I have heard people say that there's already a recession. But mind you, a recession actually has a technical definition: 2 consecutive quarters with negative GDP growth. Now, I concede, macroeconomics is a fairly difficult to understand subject, and I'm no expert at it. But I do think it's obvious, that, for some people, the economy has a worse impact than for others, and for that reason they're quick to use the 'R' word.

I just got my Tax refund, so I must say that I feel I have not been negatively affected by the economy. In fact, it allowed me to refi my mortgage at a great rate, and I feel like I'm better off that way. Now, don't get me started on the lower yield rates, but I don't think that has that much of an impact on me, you know maybe $5 or $10 a month, but nothing big.

But who needs money, when you have a wonderful wife?

We usually rack up at least $1800 (Usually more than $2000) on our credit cards during a month. It counts for about 75% of our non-mortgage spending (i.e. groceries, gas, bills, clothing, etc.). Almost three weeks into the month we're still under $800! Hopefully we can finish the month below $1200, but I'd be happy if it was under $1500.

This morning I couldn't get my car started. I know the problem: yesterday it was warm (well, relatively, 40F) and humid; a lot of water condensed on the parts inside the distributor; the temperature dropped to the mid twenties; the condensation on the distributor parts froze.

Anyway, I just used the brute force method and cranked the starter motor for a full half minute until all the ice came off the distributer and the engine finally turned over. A good thing I have a good battery. If I had a second car, I would replace the distributor in a heartbeat, but I feel uncomfortable messing with my only mode of transportation. Especially in the winter.

The last time I did a mundane job on my car; change my front brake pads and rotors; I snapped off the heads of a couple bolts, which I had to drill out and re-tap. This job that should take an hour at most, took me almost 6 hours instead. Now I'm very hesitant to work on this piece of junk car myself again (it is 12 years old by now...).

In any case, so I need another car. I'm looking in the $15K-$20K price range. This means I'm look at cars like the Corolla, Cobalt/Malibu, G5/G6, Civic etc. However, I wish it was so easy. When I go online to price cars, and I call the dealership, they have entirely different prices. Anyway, knowing myself, I know I won't get to buying an actual car for at least another couple months.

So I have been doing some more research on Prosper lending. Basically Prosper is the same lending as banks do, but your return is lower than the bank's return because:

A) Prosper takes a piece of the pie
B) Interest rates are slightly lower than the bank's for several reasons (one of them being that people wouldn't borrow on prosper if they can get lower rates somewhere else)

The net yield, however, may be on par or higher than the bank's because banks have big overhead costs, here Prosper takes care of the overhead.

Secondly, there's the question of default risk. I couldn't say whether the default occurrence at prosper is higher or lower than those seen by commercial lenders. Certainly, it might be argued that the credit verification process that commercial lenders do is more sophisticated, and therefore safer. But many are of the opinion that the difference is not much different. Certainly, if there were no default risks, one could yield almost 20% at prosper, but even after defaults, most people I've read about have made over 10% yield through diversification.

I'm still waiting for my funds to go through. Then I'll start dipping my toe in the Prosper pool.

Has anyone used prosper to lend money and get a higher return on their money? I've decided to check it out with a small amount ($1,000) of money, if my return stays above 5%, I might invest more. They say that the average return rate is close to 10% I'm just wondering why there are so few people using it.

I'm still waiting whether I can actually get the lifetime education credit of $1600, however I'm expecting not. I don't even know how it works 'cause I'm just click yes/no buttons on the tax software. Regardless, if I do get it, and I'm not supposed to, I'm still thinking I'd probably be audited, 'cause I have been each of the last 3 years. One time I owed money, one time they owed me money, one time neither owed anything.

I don't know what you have to do to become a real estate appraiser, but I know you don't have to do much once you become one. I had our house appraised today, and the guy was in our house for literally 5 minutes, and outside for 2 minutes. We pay $400 for the appraisal. Now; I know that they still have to plug in some numbers into the computer and so forth, but, seriously, how long can that take. Probably not more than 20 minutes. In any case it looks like our house value is going to drop to $165,000 while Zillow says $160,000. We'll probably be paying PMI for a year or so....oh well, such is the housing market.

We've had about 12" of snow over the last 24 hours. We have about a 80 ft double drive way. With less snow (1"-4") it usually takes me about 15 minutes. Yesterday it took me 45 minutes, so it made for good exercise. This morning I spent another 10 minutes on it because about 1.5" fell overnight. Although it's good exercise, I don't know how good it is for my back. I'm still paying $200 a year for a gym membership, but if it were snowing every day, I wouldn't need one.

My credit score just got bumped a little to 786 (Experian Plus Score out of 830). From experience I know that the fico scores are a little higher than that, so hopefully I have crossed the 800 barrier by now. I think it pretty good considering I only have 6 years worth of credit history. Hopefully I can keep it up this high for another 6 years.

My credit union 'under-charged' me for my escrow payments. We just got a 10% increase in property taxes. We were under charged $50/month, so our payments will increase by $100/month. $50 to make up for what we owe and $50 extra for the projected increase in property tax.

By the way, we pay $4,500 in property taxes each year on a property valued at $65,000 (for tax purposes). People tell me that is a lot. Is it?

Like they like to say on wall street. We finally got our spending a little bit under control. The balance statement reads as follows:

Income: $5,934
Expenses: $3,450
Balance: + $2,483

The goal, however, is to get the non-mortgage expenses under $1800. Now it's at $2200. February is the perfect month to reach that goal. So here are the goals for february:

Income: $4700
Expenses: $3100
Balance: + $1600

Here is where we will look to save money this month:
Utilities: From $377 to $250 save $127
Clothing: From $259 to $150 save $109
Groceries: From $599 to $400 save $299

That will save us $535. Enough to cover the $400 dollar savings goal.

Big government/small government, who cares?
This is just jargon politicians like to throw around. What we really need to do is to reduce our national debt. The national debt is not just a huge negative number. It's something that affects each tax payer every year. Whenever, around this time of the year, the white house publishes its discretionary budget there's a huge glaring piece of the pie in the expenses chart. It says *Interest on debt* and it's a greater than a Quarter Trillion dollar slice of pie. Ok, so that's a large number, but realistically, that's about $1000 per tax payer. So you'd probably think I'm p***ed that $1000 of my tax money goes into a black hole (technically not, but it might as well...). You're right, it's not something that makes me excited. However, the WORST part of it is that our national debt keeps on growing, that we do not feel the responsibility to reduce it to say... 2% of our GDP or something manageable like that. So, what would it take to reduce it to 2% of our GDP. Well, I'm no 'get out of debt' expert, but say we get a quarter trillion dollar surplus each year from now on, It would take close to 40 years to get out of debt, or maybe 35 years to make our debt more manageable. But a 250,000,000,000 surplus is a pipe dream. In reality, maybe 100 years is a more realistic goal. So in all reality, our children AND grand children WILL be paying for our irresponsible behavior. So, government, if you are listening, here are some suggestions on how to get a budget surplus:

Increase revenues, decrease spending (NO S***!)

Decrease DoD spending by 30% from $481.4B to $300B -> Save $161B!
Finish up this 'War on Terror' from $145B to $0 -> Save $145B!
Cut all other spending by 5% ->Save $100B
for a total spending cut of $406 Billion

Have Bill Gates donate 25% of his assets -> Receive $10B extra
Tax executive stock compensation at 50%
-> Receive $10B extra
Raise taxes by 1% -> Receive $12B extra
...Ok, so it seems really hard to increase income without radically increasing taxes. I'm not against increasing taxes for the super rich, for those with incomes higher than 500,000, but then again, I'm not super rich, so that's easy for me to say.

Anyway, with those suggestions, we'd have a difference of $440 billion, and it would give us a surplus of $200 billion.

Stop feeding the pigs!
So, I'd never heard of 'pork barrel spending' before. But, geez, it seems so wrong. In high school, I learned about a thing called 'federalism'. It's nice for states when it works one way (in that the federal government can't tell them what to do in certain situations) however, it does not make any sense that the federal government is paying for local projects. The only thing I can think of that the federal government should pay for are: federal lands (parks, military bases, etc.) and highway construction between states. Leave the state funding to the state governments...please...Ok, so I don't know what amount of money goes to these local spending projects, but regardless it should not be allowed.

Don't let them in, but let them stay
I'm talking about illegal immigrants. I, for one, do not feel 'threatened' by them. However, I think we should do more to stop them from coming into the US. However, for those already here, I think we should have them registered, get them working permits, HAVE THEM PAY TAXES, get them on a naturalization track of say 10 to 15 years, make them US citizens. But it's only natural to require them to learn to speak english. What language they speak at home, I don't care about, but we should not have to go out of our way to make this a bilingual society by printing everything in two languages, having customer service available in two languages, etc., etc. In the end, I believe that this policy will be good for the American economy. The more American consumers, the better!

Where is our money going?
Whether your believe the late Milton Friedman or not, it is a fact that money is flowing out of our country at the rate of about $800 Billion each year. Now, it has been argued that that money will eventually come back to us, or that the value of the money will eventually be returned. The problem, however, many argue , is that our trade deficit to other countries will be reinvested in the country of origin by those with a surplus. So in the end, who will the American government be owing money too? Probably the Chinese who have invested their surplus in American bonds. Only if we'd decide that we are unaffected by outside economies, and said we'd be trading with just a 'black hole' or something like that, it may be rightfully argued that our economy is unaffected, or even better off by the trade deficit. Because what's better than trading with a 'black hole'? You put in money, you get out goods, and the money never returns, which, locally increases the value of the currency. So you'll have more goods, and your currency is worth more. In any case, I personally believe the trade deficit might be bad for our economy. I, at least, perceive it as making it more vulnerable. The economy just gets so complicated these days!

Today I went to the mortgage lady, and I got my rate locked in at 5.5% for a 15 yr mortgage. As it stands I'm going from:

30yr 6.75% ---- $908/mo
to
15yr 5.50% ---- $1119/mo

Which means in 3 years I will be paying less interest than principal! I wasn't sure whether I should wait for rates to drop. But I decided that I wasn't going to risk the rates going up again. Besides, since I'm at a credit union they allow my to lock in a lower rate for 60 days for just $100. The best thing of all, the refinancing cost me only $700! I love credit unions! Here's to saving $160 a months. Cheers!

Most of us have been negatively affected by the recent 'downturn' in the economy. The result so far is there is less incentive than ever to save. I must admit I'm in no dire position at the moment, nevertheless I feel the need to vent a little:

Unscrupulous lenders or greedy borrowers?
I'm a big proponent of taking responsibility for one's actions. So who do I blame? Mostly the greedy borrowers. When I bought my house, I went to the local credit union for a mortgage. I was looking for the $150K to $200K range. What did the CU tell me? "Sir, you are eligible to borrow up to $350K." Say what? Tempting... But seriously, I'm not THAT stupid. My payments were going to be $2300/mo. We make $4200/mo, so it wasn't really out of the realm of possibilities. My point is, one should have a realistic view of what he or she can afford. Especially if you have other debts like student loans, credit cards or auto loans. The credit union didn't push any harder to get us a bigger loan, but it did *allow* us to get one. Note: I must, however, admit that I would not be considered *subprime*. So here's to less greedy and more realistic borrowers.

Companies that send jobs overseas or unions that demand too high wages.
I am from Michigan, so I know all about what damage unions can do to a local economy *cough* UAW *cough*. But do I really blame them? Yes and no. I blame them for *still* being so stubborn on compensation. $50/hour pay+benefits for a line worker!?!? Come on! That's twice as much as I make with a professional degree. No wonder jobs go overseas! I find it comforting to know that new hires can be employed for $16-$25/hour wages+benefits. This seems much more reasonable. You can't ship jobs overseas for that! Besides these pay ranges definitely do not make you poor.


Companies that send jobs overseas or people who do not buy *made in the (U.S.)* (or the country you are from)...
I am the first one to admit I don't even look if something is *made in the US* Unless it's a car or something *big*. I badly want to buy GM, Ford, Chrysler. But seriously, please give me some good options! I am willing to pay a premium if it is *made in the US* but it needs to be as well build as overseas brands (with that I mean Honda or Toyota).

What are you doing with that big credit card debt?
I understand,that is, if you work hard (say 60 hrs/week), and you make $10/hr or less, that things may become tight, financially wise, and you may run up some debt here or there. But I know plenty of people that don't work hard and still spend like they're millionaires. They say that there are no jobs, etc. excuses, etc. My goodness, Burger King has a big banner posting they are hiring. Ok, so you think you're too good for that job, that's fine, but stop spending like a millionaire then.

Who's going to pick up your garbage?
Everyone is getting college degrees these days...and less and less people are using them in their daily work life. What a waste of energy and time. People have to understand there is NOTHING WRONG with having no college degree. But there's a LOT WRONG with ignorance. We also need people that do the mundane things. People who clean, pick up garbage, deliver mail, answer the telephones, etc. etc. and they should be paid at least the same as those working at an assembly line.

Anyway, I just wanted to say I'm p***ed my yield rates are down.

We had a dinner party yesterday. Here's the bill...

Bill:

1 lbs of Sashimi grade Yellowfin (Ahi) Tuna - $20
1 lbs of Imitation crab - $6
4 Avocados - $7
2 Cucumbers - $3
2 Bunches of Asparagus - $5
5 lbs of sushi rice - $6
30 sheets of nori - $6
1 tube (20 servings) of Miso - $6
1 tub of firm tofu - $4
1 bunch of green onions - $1
------------------------------------
$64 or about $3.20 per person.

Other things you need
Mayonaise
Soy Sauce
Chili Sauce
Mixed greens/lettuce
Sugar
Rice Vinegar
Ginger Root
Garlic
Wasabi


Makes:
20 cups of Miso soup
10 California Rolls (Spicy optional)
10 Tuna Rolls (Spicy optional)
10 Veggie Rolls (Spicy optional)
12 pieces of Tuna Nigiri

* Mix 2 parts mayo with 1 part chili sauce for spicy mayo.
** We only had 14 people, and we ate about about 16 rolls.
*** Since I am not an expert at making sushi rolls, we ended up with relatively *thick* rolls with a lot of rice.
**** California rolls are the *safest* way to go for people who are not familiar with sushi.