Sunday, November 15, 2009

Next Year’s Roth IRA Loophole: Get In If You Fit In?

We’ll start with a question: when you retire, do you think you’ll be in a higher tax bracket or a lower tax bracket when you quit your job? Let me explain why this question is important. If you have and regularly contribute to a 401(k) or IRA, you are storing money away pre-tax—which means you get to store away some savings from your gross pay, and then Uncle Sam comes and gets his cut. So you’re earning interest on untaxed money. Then at retirement, whichever tax bracket you ended up in is where you will be taxed as you make withdrawals from your account.

In a Roth IRA/401(k), the government gets his cut first, and then you get to save off of the remainder. But at retirement, you get to take out as much money as you want as often as you want without the money being taxed. So generally, if you expect to be in a higher tax bracket in your last few years of work, the Roth IRA is for you.

The problem, however, is that Roth IRAs are subject a several limits. From Reuters:


Only taxpayers who earn less than $105,000 ($166,000 for joint filers) in 2009 can contribute the maximum amount ($5,000 per person, with a $1,000 additional catch up contribution for folks 50 or older) to a Roth IRA. And only people earning less than $100,000, single or married filing jointly, can convert their traditional IRAs to Roths.


That would probably qualify all but a few of you. However, for you unlucky few who are in the upper echelon, that income limit will disappear next year...for one year. You will have to pay taxes on the rollover however, and depending on the size of the nest egg you’re rolling over, you’ll need a pretty significant cash reserve to cover it. For instance, if you have $40,000 in an IRA and fall in the 25% tax bracket, you’d owe $10,000 to the government to switching. So if you can afford it, go for it!

I won’t spoil anymore for the article (and besides, I’m not there yet). But I think you should give the whole article a read. They include other factors to consider if you think about making the switch.

Wednesday, November 04, 2009

Mutual Fund Fee Lawsuit Heads toward Supreme Court

Here’s a story that caught my attention as an investor:

Nov. 2 (Bloomberg) -- John Bogle helped create a mutual-fund industry that has grown to $10 trillion in assets. Now the Vanguard Group Inc. founder is backing investors asking the U.S. Supreme Court to limit the fees charged by fund managers…
The dispute pits the fund industry against trial lawyers, consumer-rights groups and Bogle, an industry pioneer who started Vanguard in 1974. Bogle, who filed a brief supporting the Oakmark investors, says mutual fund shareholders are being overcharged with fees that seem low when expressed as percentages yet add up to a multibillion-dollar windfall for advisers.

Emphasis on the last sentence mine. So let’s unpack this. It’s no secret that the mutual fund companies charge high fees for managing their funds. Called an expensive ratio, it’s the management fee the company charges for “taking care of your money.” The article is right that these companies take up to 1.5%, some more, of your returns (or lack of returns) as a fee.

This demands a closer look. Let’s say the S&P 500 returns 5% this year. If a mutual fund company gains you 6%, (1% above the market from your investment over last year) they will deduct 1.5% of it leaving you with and effective 4.5% return. If they LOSE 6%, they STILL deduct 1.5%, leaving you with a 7.5% loss. And don’t forget that “stellar” track record that actively managed mutual funds have. But “what difference does 1% or so make over the long term?” you may ask. After all, you get to keep the other 99%, right? Well:
Assume that you are an employee with 35 years until retirement and a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7 percent and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to your account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.



This is what the plaintiffs are fighting against. I’m a bit unsure of what they want to happen (certainly they don’t want the feds setting profit rates). I think there is still a large enough amount of mutual fund companies out there where consumers can shop around for a balance of cost and service.

Sunday, November 01, 2009

The “No Sugar-Tax” Ad Shows We’re Not Pure Libertarians

Have you seen it? It’s the series of ads with the “average mom” walking into a home concerned that raising the price of sugary foods will break the family budget. If you haven’t seen it yet, check it out below:






The ad is run by the Americans Against Food Taxes, with a mother agonizing against taxes on sodas and juice drinks, as if it’s the only beverages available at the store. (Full disclosure—AAFT is a consortium of mostly large convenience stores and fast food places that depend on sugar for revenue.) If times are tough, maybe it will require us to cut back on the sugar, you know? I’m pretty agnostic on the issue—if the taxes go up on soda from 1.50 to 1.75, dah well.

I see why the government has decided to propose “mini-taxes” here and there. I’ve never really been anti-tax, but the taxes have to be sensible. If you’re simply raising my taxes to build a monument in your district, then no dice. However, if we’re trying to come up with a way to keep me from paying far higher taxes down the road, then I’ll listen to you.

We as a society don’t fully subscribe to the “live and let live” mantra politicians put forth. We’ve decided that we’re not going to let people die in the street if they didn’t save enough for retirement, or if they are strung out on drugs, or if they don’t keep themselves healthy. Most of us have a rugged individualist streak, but when things go wrong, we turn to others to bail us out of bad lifestyle choices. And now that the economy has gone sour, people are looking to the government, which means they (read: WE) will foot the bill for expensive health-related problems, and entitlement programs like Social Security and Medicare. It’s a choice that we’ve implicitly made.

Such choices have to be paid for—and people are living longer (but not necessarily healthier), which taxes the entitlement systems which is growing to include near-universal health care. We can talk all day about prevention and education on the dangers of consumption of unhealthy foods and drinks in excess, but as the folks over at the Radical Rationalist say:

For some reason, logical arguments based on medical facts do not convince Americans to curtail economically disruptive, physically harmful or just plain stupid activities. What works? Money.


Pretty much.

Tuesday, October 27, 2009

Discuss: Putting Too Big to Fail..out to Pasture..

The more I learn about the too big to fail mentality in our culture, the more I get confused about what to do. Both arguments for and against this concept can be are summarized below and are both quite compelling. Maybe you readers can help me get a grip.

Many Americans subscribe to down with Too Big to Fail (TBTF) and use a straightforward, populist argument. The free market is designed to weed out companies that are inefficient. They believe that the Obama Administration and the last one went too far in using taxpayer funds to bailout banks, car companies, insurance companies, etc. deemed TBTF by the government.

Then, there are others who take the I know, but… approach with TBTF. Their reasoning? Many of the companies bailed out were so large and had their reach ingrained into the economy so far that to turn a blind eye would affect more than the direct company. Take the US Automakers, for instance. Letting GM and Chrysler fail would not only affect those who work for the company, but your local GM and Chrysler car dealerships would disappear. So would those who supply them. Auto part stores would be severely threatened with the decrease.

A similar fate would affect the troubled banks, but it’s scarier because most people don’t know who is managing their 401(k) plan. Generally, unless you work for a financial-services firm, your company outsources the managing of your 401(k) funds to an external company (which is a good sign too, because it means your company is focusing its resources on what they do best.) Could you imagine turning on the news one day and finding out some obscure financial management company is on the fritz only to find out that they've been gambling with your money that you've dutifully saved paycheck after paycheck, year after year?

I think the best way to eliminate TBTF is to keep companies from getting too big to begin with. I realize the dangers of this though—what’s too big, and who decides? As a believer in market capitalism, I’d like to say we can let the companies police themselves, but let’s be honest—they won’t until they get caught. And in my recent foray into competition (anti-trust) law, companies collude all the time without the government knowing at all until it’s too late. Everybody is against bailouts of course until it’s their future at stake. Then they want to government to “act up(!!)” So breaking up banks and spinning off car companies into smaller units is the idea. And I’ll leave how they do that up to the experts—but what do you guys think?

Saturday, September 19, 2009

Where I've Been

Wealth Weekly Readers,

As you can see, we haven't had a post since June 25th. I've had some surgery this summer and was away from computers and this site for quite a while. Let me tell you--there's nothing like the irony of laying in a hospital bed for nearly a month watching people yell talk about health care. I'm hoping to get back into the groove very soon and get back to posting regularly again now that I'm sitting at the computer again. Thanks for reading in the past and I hope to see you in the future.

Thursday, June 25, 2009

Oh, How Quickly We Forget

One of the biggest contributors to the downfall of the housing market was the fact that there were too many houses on the market--we were saturated we people who bought houses that they weren't ready to afford yet. Then, when they vacated those homes, property values fell..for almost everyone.

That led to people leaving houses that they could pay for but chose not to because they were upside down on it. (In other words, if they took out a 200,000 mortgage and the value of the house fell to 125,000 they would still owe the 200,000 but would instead balk on the deal, even if they could afford the monthly payments.) This would cause a larger inventory of empty homes, and prices would fall further.

Well, one lesson we definitely learned from that was to tighten up lending standards so that people that bought property were really going to be able to handle the responsibility. We learned that, right? Clearly, Washington lawmakers won't do something crazy like convince two of the biggest lenders in the country to relax the rules again, right?

Uhhh...

(Reuters) - Two U.S. Democratic lawmakers want Fannie Mae and Freddie Mac to relax recently tightened standards for mortgages on new condominiums, saying they could threaten the viability of some developments and slow the housing-market recovery, the Wall Street Journal said.

In March, Fannie Mae (FNM.N)(FNM.P) said it would no longer guarantee mortgages on condos in buildings where fewer than 70 percent of the units have been sold, up from 51 percent, the paper said. Freddie Mac (FRE.P)(FRE.N) is due to implement similar policies next month, the paper said.

In a letter to the CEO's of both companies, Representatives Barney Frank, the chairman of the House Financial Services Committee, and Anthony Weiner warned that a 70 percent sales threshold "may be too onerous" and could lead condo buyers to shun new developments, according to the paper.

The legislators asked the companies to "make appropriate adjustments" to their underwriting standards for condos, the paper added.

OK, any takers seeing something good come out of this? I give it 3-5 years before we start seeing craziness happen again. What say you?

Monday, June 08, 2009

Anyikire: Just Keeping Up

My fellow colleague Chikaod Anyikire shows his Ramsey Roots in the excellent guest post below. I hope to get him to write for us more in the future.

===

The American culture has in recent years evolved around accumulating debt. One of the reasons many people have gained so much is because of the age old adage “Just Keeping Up with the Joneses”. Now, it has become more common to file for bankruptcy and depend on credit cards to maintain a financial lifestyle. Now, after a year of bailouts and stimulus packages there is a small group of people who are saying “I just want to Keep Up”. There are many ways to get your life back on track and gaining financial peace. There are so many spokesmen and women, books, and internet sites that provide information about digging ourselves out of the hole we created.

An effective way is to become conservative when it comes to handling financial decisions. A radio host, Dave Ramsey teaches that aggressively paying off your debt, tearing up your credit cards and never using them, and “Living like no one else, so you can live like no one else” are just a few things he teaches through his books and programs. This means making some tough decisions by sitting down and creating a budget, living off of ramen noodles or rice and beans until you pay off your debt, then taking steps to saving up for retirement, education for our kids, and charities. This financial philosophy creates the foundation to live a life full of financial peace where a person has not to worry about debt collectors, garnishing of wages, and liens against where your family sleeps, your home. The benefits outweigh the future stress that would develop without taking steps to paying off your debt.

Let’s hope that this culture of paying off debt and leaving under our financial means thrives in our culture like a once wealthy Babylon, so that we all can achieve financial peace.

More information about Dave Ramsey … www.daveramsey.com

Monday, June 01, 2009

GM, Citigroup Bow Out of Dow

The Dow has dropped these "dead-weight" companies from the DJIA and "inexplicably" sees the market rise nearly 200 pts as of 10:30 this morning. GM filed for bankruptcy protection, Citigroup did not (as far as I know). Citigroup has not gotten the negative coverage GM has. I wonder why.

Wednesday, May 20, 2009

"Good" Credit Card Holders – They’re Headed for You Next…

First, they came for the late-payers, but you always paid on time and had nothing to worry about. Well, time to start worrying:



Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.

Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.


Emphasis mine. If companies are moving to implement the above as policy, then you’d best be careful if you own a credit card and call yourself a “responsible user,” because soon it won’t matter. Can you imagine being charged 9-15% interest on a credit card even if you immediately go home and pay off your balance? Once these regulations are signed into law, that may become a reality. At the least, an annual fee will probably be levied if you don't pay one already.

You can find a more extensive list of the coming changes to the credit card companies here. Don't get me wrong, some of the changes I think are very good, like banning credit cards for those under 18 (unless parents supplement their income) and limiting credit cards to 1 per college student (more allowed if credit amount doesn't exceed 30% of college income). These are common-sense measures. Just be aware that the Credit Card Mafia Industry will still work to retain profits, even if it means going after the balance-paid-off-every-month crowd.

People tell me all the time that the reason they own a credit card is so that they can take advantage of the frequent flyer miles and rewards programs. With things like instant interest, those days may soon be coming to an end.

Sunday, May 03, 2009

Experts Lament Over 'Paradox of Thrift,' ; "Yeah, And?" Says Americans..

Welcome back readers. I've been seeing a lot of talk lately on the paradox of thrift, which states that when a group of people save their money instead of spending it (to stimulate the economy), it's a bad thing because that's money NOT going into the economy. Not too long ago, the savings rate in America was near zero, and for a brief while--negative. In other words, Americans were spending every dollar when it came in, and then when there was no money left, started living of of loans and debt. Now, since the economy has tanked, Americans have started saving their money and paying off debt--which is what we do when our futures are uncertain. The experts tell us this is a bad thing when the economy is in a downturn. From the AJC:

If U.S. households are saving more, they are spending less and this change in behavior is hurting small businesses, the major source of job creation in the American economy.

A dollar saved is not a dollar spent. Given that consumer spending accounts for more than 70 percent of our gross domestic product, today’s new-found thrift fueled to a large extent by fear, seriously impairs the odds of a prompt economic recovery. If consumer spending does not pick up, the economy will continue to suffer.

Facing decreased demand for their products and services, the more than 27.2 million small businesses that account for more than 50 percent of U.S. workers on payroll, continue to lay off workers, put on hold expansion plans and reduce capital expenditures —- a confluence of decisions that in the aggregate make things worse for the economy.

This sequence of events contributes to a vicious circle where economic uncertainty creates fear and reinforces the need for increased savings, which leads to reductions in spending and so goes the cycle.



Dah well. We'll get over it.

Honestly, if I were asked, I don't see much wrong with a little savings to shore up your savings. Perhaps bubble-based economics aren't what we need.When housing prices fell in the 1980s, stocks and bonds were up (and so was consumer savings) . When the dot-com bubble burst 9 years ago, housing was stable. Today, both housing and the stock market are way off their previous highs, and I think we need to move away from a culture of debt for everything because it puts us at the mercy of the Credit Card mafiaand loan companies, who, if you've been following the news can turn off the lending spigots even while receiving bailout money or raise their rates to exorbitant highs even if you've been a prompt payer. So when I see the lamenting of expertsabout Americans gaining a bit more control of their spending habits, I urge them patience.

Wednesday, April 15, 2009

Hot Links: Out of Town

Happy Tax Day, folks. I've been traveling quite a bit and have been unable to make too many posts, but I think it would be good to check these out..

In there best cracked.com impression, Yahoo lists 7 Myths about Marriage and retirement. In response, all I have to say is to warn you behold the power regressing to the mean.

Bankrate has an idea that many of us overlook--taking advantage of the perks and discounts offered by your alma mater.

I thought this was funny--dolphins are helping fight the pirates near the African seas.

and if you're laid off, check out some of these freebies that can hold you over until you're employed again.

Saturday, March 28, 2009

Online Budgeting Tools: Stepping Up Their Game

We’ve been pre-occupied with all the bailouts so I wanted to go back to basics this week. I’ve found some excellent planned-spending tools that are both online and free! My problem with many of the budgeting tools I’ve seen in the past is that it is only good for tracking and not planning. So you can always see what you spent, but there weren’t many user friendly tools out there to allow you to plan your spending ahead of time and then monitor how you manage your expenses against a set budget. for most, it's pretty pointless to monitor spending that's already gone. You can see that at your typical online bank.

So what I’ve been doing is managing my budget in Excel. It can get a little tedious, plus I have to manually link my accounts in real time to my excel sheet (meaning going online to each account, finding the balances and entering them), and that’s quite taxing. Then this week I came across three nice little secure online spend monitoring programs that do this for you: Buxfer, Mint, and Quicken. Take a look at each one and you can decide which is right for you. All are very user-friendly, they just are tailored to different crowds.

Quicken
You’ve probably heard of Intuit’s Quicken, but now they offer their online service free of charge. Quicken Online is the only one of the three that has an established brick-and-mortar equivalent out there. It probably has the most bells and whistles. Not only can it follow your expenses, it alerts you of upcoming expenses (bills due, etc.) Quicken will also project your “real” balance up to a month or so in advance (by deducting upcoming bills from upcoming paychecks).

Buxfer

Buxfer is probably best designed for the organization/college crowd (those living with roommates, groups of people sharing expenses). Not only can it link all your bank accounts into one viewing location, but it also has an option where it can track group spending and can break it down to each individual. So for instance, if you’re out with a group It also lets users pay each other in a way similar to PayPal. It also allows mobile alerts when user-set spending thresholds are violated.

Mint
I have an account with Mint, which has a nice user interface (but is a bit simplistic). Mint seems to do a better drop categorizing your expenses. Similar the Buxfer, Mint allows mobile alerts and will alert you when you go over pre-set budget amounts. The power of Mint comes in when you start the analysis though. It monitors your spending and determines where you can trim spending and compares your spending (graphically) to those in the US. You can even see average monthly spending data down to the vendor. However, Mint maintains data on their servers, so there is some risk of having your data out there.

My favorite right now is Mint, because it has the cleanest interface and loads faster than Quicken. Quicken is probably the most “powerful” of the three, especially if you own a home and have property to manage. All three are very good online budgeting tools and can help keep your spending in check.

Tuesday, March 17, 2009

What's Gangsta?

You hear all this talk about how "gangsta" rappers are. But let me tell you what's really gangsta:

- Gathering so large a foothold in the US Economy that you can convince the American government that your if your business fails, the US fails. That would be the Notorious AIG.

- Asking the US government for 85 Billion dollars for just your company. Then ask for about 40 billion more. Then spend out 90 billion of that with no real results. Meanwhile, throw a party out West. Then ask for (and get) 30 billion more this quarter, no questions asked. That's gangsta.

- Losing 61.7 BILLION DOLLARS (!) over the last three months of 2008, and kicking back 165 million in retention bonus money to over 60 of your boys in the company, prompting Republican Senator Chuck D, er, Grassley to say "Kill Yo'self!"

When asked, tell the government you did it so they won't leave the company. Then let it leak that you gave some of that retention bonus to 11 folks who already left. That's Gangsta.

Acting ignorant (or being punked) by a broke company who seeks to get more money after all this. Not gangsta.

Thursday, March 12, 2009

WW Plus: School Reform Ideas - Part 1

This week’s Wealth Weekly Plus focuses on school reform. While there will be partisans on both sides on the school reform issue, there is less disagreement that we have a problem to solve. Personally, I support public magnet and public charter schools. We'll get to that some other time. But here’s where I think we can start:

Teacher Accountability and Performance
President Barack Obama spoke in broad terms when talking about teacher accountability. It was a smart move on his part because both sides of the school reform issue felt he was taking their side. However, I’d like to dive right in. Listening to both sides of the accountability issue I’ve heard teachers say that the measures of accountability are too narrow, leading them to “teach to the test” because the primary measurement of performance is standardized tests.

So let’s add in other measures and weight them. Standardized test do need to be a part of the weighted system because grading is not the same across the country. From the New York Times:


The nation has a patchwork of standards that vary widely from state to state and a system under which he said “fourth-grade readers in Mississippi are scoring nearly 70 points lower than students in Wyoming — and they’re getting the same grade.” In addition, Mr. Obama said, several states have standards so low that students could end up on par with the bottom 40 percent of students around the globe.


This does not stem from a lack of money, but a lack of discipline. Standardized testing can identify what teaching methods are ineffective, but it shouldn’t be the primary focus of the teacher. The student should know how to think through unfamiliar, unconventional problems by using the knowledge they learned in their basic secondary school coursework. If they are taught about circumference and circle properties and cylinders, they should be able to find the volume of an tire inner tube given the right parameters.

So how do we reward our teachers? I'll try to cover that in the next post on this topic.

Thursday, March 05, 2009

FDIC: Can We Hit You Back Next Year?

I came across a pretty scary story this morning regarding the Federal Deposit Insurance Corporation (FDIC). From Bloomberg:


March 4 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

“Without these assessments, the deposit insurance fund could become insolvent this year,” Bair wrote in a March 2 letter to the industry. U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

“A large number” of bank failures may occur through 2010 because of “rapidly deteriorating economic conditions,” Bair said in the letter. “Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative.”


So, in everyday speak: “Uh, look. We promised you that the money you have your bank would be insured up to 250,000 if the bank goes under. Will you be cool if we went back on that promise?”

This is not trivial. Remember how the FDIC works. Say you have a bank account with $120,000 in it. (First of all, if you are in this situation, what are you doing?!) The FDIC will (currently) insure all of this. So if your bank fails (like IndyMac did last year); the government (usually) steps in, takes over the bank, and tries to sell the bank after writing down the losses. If the FDIC goes insolvent however, they won’t be able to pay these obligations. So your entire balance will be uninsured.

And What is the FDIC doing to meet this shortfall?


The FDIC last week approved a one-time “emergency” fee and other assessment increases on the industry to rebuild a fund to repay customers for deposits of as much as $250,000 when a bank fails. The fees, opposed by the industry, may generate $27 billion this year after the fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the previous period, the FDIC said.

The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund.



Any takers that this won’t be a “one-time” thing?

What should YOU do?

I don’t have all the answers, but what I’m doing is making sure that funds are spread across several banks. If you have a very large amount of money in one big bank, it’s best to spread it around. Even if you have a small amount of cash, stay informed about your bank's operations, especially if it's a big bank.

(Cross-posted at Swords Crossed, Facebook, and Wealth Weekly).

Saturday, February 28, 2009

Just a Thought: Chartered Success

My other passion other than personal financial empowerment is education reform. Here and Harlem, public charter schools and public magnet schools have a niche, although currently they have to share resources (buildings) with other public schools. Leaders are working to help charter schools move into their own buildings to prevent divisiveness in the student body. However, some areas, like the community of Watts in Los Angeles, have bigger struggles. The following is a clip from Reason.TV: (Facebookers, you'll have to click through to the main site)...




I think that public charter and magnet schools could help improve a community in innovative ways. When people move into a community, one of the biggest factors is the quality of schools. Parents will often look over a neighborhood if they don't like the caliber of schools offered. Often, lower-income communities have lower-quality schools that will have a very difficult time improving because of a reduced tax base. By introducing charter/magnet options into a community parents from a wider range of incomes will move into communities, adding to the tax base. This could theoretically funnel resources into all the schools in the neighborhood/zone and can encourage info-sharing between schools so that they can all improve.

Friday, February 20, 2009

What Does "Credit Freeze" mean?

Good afternoon readers!

What follows below is perhaps the best explanation of the credit freeze (and what caused) I've seen to date. It's very balanced, explaining how some Wall-street exuberance and some Main-Street irresponsibilty all played a part in this economic decline we're experiencing. Check it out, and shoot some questions/comments my way. Have a terrific weekend.




The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Sunday, February 15, 2009

A Few Thoughts, Week Ending February 14th..

So Microsoft is considering opening it's own stores. Let me make a prediction what's going to happen: at the store opening, people will be in awe of how pretty it looks, the excellent product placement, and consumer-friendly features, and when they go to check out, the registers won't be able to make change. There will be an immediate issue of a ChangeMaker.Sys patch. Once installed, you get correct change, but then you won't be able to get out of the store because the exit doors won't open, forcing people to go out of the entrance doors, slowing traffic flow. But people will live with it rather than going to deal with the pretentious folks at the Apple Store down the street.

Friday the 13th and Valentine's Day (in my mind) are approaching the same point in my life--arbitrary days on the calendar. Not that I don't like celebrating V-Day, it just feels weird picking a special day to do something for a special someone.


As I progress through this whole wedding-planing thing, we're admittedly a little worried about getting everything together--especially the cost. Before you think you have to go into the red 20,000 for your special day, check out this article from Bankrate. Our most contentious point? Definately #2.

If you have a cold, this report says blowing your nose improperly can really make things worse.

OK, so if the Recession Monster swallowed your job (or will), you may be enticed to look at those "Work at Home" ads more intensely. Know what you're getting into.These guys are at their best when they can take advantge of your emotions.

I'll have something else up later this week.

Monday, February 09, 2009

Will Executive Pay Caps Work?

I think it will, and here's why.

As a reminder, the Obama Administration has proposed a new approach to the companies seeking bailouts: Top executives at these companies must cut their pay to $500,000 (excluding stock) The average reader may think "That's a nice piece of change!" until you realize that these cuts are very, very deep. However, extraordinary circumstances warran extraordinary ideas. Obama's plan is creating, at least on the surface, even conservative political allies on this idea:



"In ordinary situations where the taxpayers' money is not involved, we shouldn't set executive pay," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee.

"But where you've got federal money involved, taxpayers' money involved, TARP money involved, and the way they have spent it, with no accountability, is getting close to being criminal." Source


Supporters of his move on executive pay included the leader of the Republicans in the U.S. House of Representatives, John Boehner. Many Republicans in the Democrat-controlled Congress have been resistant to government bailouts, even when fellow Republican Bush was president.


"I think if anybody is looking to the taxpayer to help bail their company out, these kind of executive compensation limits are appropriate," Boehner said.

Republican Representative Mike Pence, who said he had opposed the finance sector bailout to begin with, said, "maybe it is going to wake up American business -- that there is a cost when you invite the 800 pound gorilla of government into your boardroom." Source


I think executive pay restrictions is a good way to make the private industry think twice before heading to the feds for public funds. But there's more--as I mentioned above, the 500,000 cap excludes stock. The Obama Administration wants to allow companies to pay their top executives past the 500,000, but it has to be in frozen stock. By frozen, I mean they cannot cash out that stock until they pay the government back, then all caps (including the salary) will be lifted. How is this "good"? Well, if the executives has enough strategy to turn around a company, the stock price will most likely rebound, and the CEO is rewarded for..let's say it together now...PERFORMANCE!

Wednesday, February 04, 2009

A Few Thoughts

(cross-posted at Wealth Weekly and Swords Crossed)

8,000 more job cuts were announced as of today. Coupled with Macy's 7,000 cuts yesterday we're up to 15,000 and it's only the third day of February.

- In a not-too-unrelated story, the American savings rate is up to 2.9% of income. Read this article entitled "Americans Saving More, Spending Less" and watch in horror as they tell you why this is a bad thing.

- Dear DC Elites: Pay. Your. #$@%Taxes....and don't wait until you get caught to do so. Signed, The American People.

- And finally, let's try a hypothetical. Imagine that you work for GM or Chrysler, paid hourly on the line. Now when you get home, you check the mail and discover that the Company offers you a $20,000 and BRAND NEW CAR!!! Oh, and you have to quit your job. In this economy. You call your co-workers and discover all the hourlies have been extended the same offer. Would you do it? Ok, now stop imagining and read this.

Tuesday, February 03, 2009

Pilot: Wealth Weekly Plus

So I'm thinking of adding a new dimension to the site. In keeping with my theme, I would still like to put in at least one article every week to improve your knowledge of the personal finance world. But to drive more interest, I want to add other topics to the site this year and I'll probably add shorter, but more frequent posts. Some of the other topics include articles of interest, education reform,and stronger topics on economic-related ideas.

In addition, we will be cross-posting on a site I frequent very often--Swords Crossed. so consider the next few posts over the next few weeks as our pilot in expanding the scope of the site. If you've been a long time reader, let me know if you think.

Friday, January 23, 2009

Circuit City Liquidates--What to Know before You Go

So after 60 years, Circuit City is going out of business. It will lay off 30,000 of its 34,000 workforce (the Canadian business will remain). And it is liquidating. To those who were Circuit City associates, I hope you are able to find work soon.

When a company liquidates, it simply does whatever it can to eliminate all of its in-store and warehouse inventory off its books in exchange for cash. Not only does it do this by reducing prices* for customers and bringing in outside help (liquidators) to develop inventory, placement, and exit-pricing strategies, but other wholesalers come in and try to buy up whatever they can.


*However, just because a store is under liquidation doesn't mean that you're about to get great pricing.

As a matter of fact, I stopped by CC last weekend (on the 16th) and went over to the gaming section to be bombarded with an almost sarcastically large amount of Guitar Hero III game packs priced at a 39.99 clearance price with an additional 10% off markdown at register. Guitar controllers sold for 19.99. I waited. Today (the 22nd) 6 days later, I was a bit shocked to find the prices jacked back up--on the same inventory--to $55, with a 20% markdown. So even liquidators find ways to be slick.

So if you plan to drop in, CNN Money has a few tips you should watch for when entering the store:





First of all, you may find better prices online or at other retailers. Keep in mind that liquidators can raise prices that the original retailer already set. They can also get rid of any of any previously scheduled sales.

In fact, since ads that scream "going out of business" just attract consumers who assume they're getting a good deal, there is little incentive to actually give those big discounts…(Emphasis mine)


Yes, a going out of business sale where prices are actually raised. So generally these sales go on over the course of a few months, so you'll have some time to compare the "liquidation price" online. And don't bother going to the circuit city website. It's gone. You should (as I do with most electronics, games, books, etc.) consider looking at http://froogle.google.com and Amazon and comparison shop.

You may also want to give it some time. Circuit City's liquidation will continue through the next few weeks, and the longer it takes to empty the store, the cheaper the products will become. It may allow you the perfect opportunity to get some good stuff for a decent price.

Friday, January 09, 2009

Really?!

I hope this is just a blip on the screen:


After nearly a year of flagging sales, low gas prices and fat incentives are reigniting America's taste for big vehicles.

Trucks and SUVs will outsell cars in December, according to researchers at the automotive Website Edmunds.com, something that hasn't happened since February.

Meanwhile, the forecast finds that sales of hybrid vehicles are expected to be way down.


You know, I have no qualms about people's buying decisions; but when prices go back up again by say, oh..this summer, people will be screaming again. Let's hope for the average American consumer budget's sake that we still have the fortitude to make tough decisions. We're going have to make tough decisions in the 2009. Gas is cheap(er), but perhaps its not the time to pick up old habits again?