Scott On Money: October 2006 Archives

Find a Dollar

Making extra payments is a powerful way to get out from under a mountain of debt. Even small amounts pay off dramatically.

Search hard to find one dollar a day to set aside for paying down your debts. Drink water at a restaurant instead of having a drink. Clip coupons. Work overtime one night a month. Whatever you want to do.

If you paid thirty extra dollars a month on a five thousand dollar balance at eighteen percent interest you would pay it down four times faster, paying of the debt twenty years earlier. Twenty years.

Find that dollar!

Canceling is a Breeze with Marriott Residence Inn

I had a reservation with a local Marriott for some weekend guests. Plans changed and so I called to cancel the reservation. The clerk was cheerful and helpful. Within half a minute she had cancelled the reservation and given me a confirmation numbers. No up selling, no trying to talk me out of canceling or asking to help with alternate plans.

That is excellent service. Great job Marriott. I’ll remember this, thank you.

I Have to Use Credit Cards

I have to use credit cards. I am not a spendaholic. I don’t pile up tons of credit card debt. But I have to use the plastic.

Why?

I keep my money longer. I earn money on the money that I keep. I have more flexibility if my life hits a rough spot.

I get protection from merchants. Some merchants don’t care about their customers. When I use my credit card I have an 800 pound gorilla on my team. When I call attention to the fact that a credit card company is on my team businesses become far more cooperative.

I get protection from criminals. If someone commits fraud with my checking account I have to duke it out with my bank to keep from being held responsible for the fraud. With my credit card I simply let the credit card company security department take care of it.

I get perks. Rental car protection, flight insurance, cash rebates and so on. My checking account and the Federal Reserve don’t offer these deals.

Don’t pile up credit card debt. Don’t spend money you don’t have. Do use your credit cards wisely.

New Prosper Features

Prosper just sent out a newsletter with some new features that they’ve been running with for a while. If you want to know a bit more you can check out their site or my previous articles on starting, saving time and cancellations.

One key feature is the group rating. It attempts to provide a summary of the success of the group at avoiding the delinquency. So far I haven’t found groups very useful in deciding when to lend or not. The only time I’ve found them useful is when they save me the legwork of validating documents for risky loans. Unfortunately it seems like most group leaders are doing minimal vetting. I’ll be keeping an eye on this feature and I think it will serve as indicator of the group’s meaningfulness. Presumably an average group is not doing much vetting. A below average group is doing a bad job of vetting and an above average group is doing a good job of vetting. I can defiantly see this helping me make a call for or against a loan in a close case.

Another promising feature is the new account statements. It seems like both the detail and readability of the statements has improved.

Prosper has a lot of room for improvement but I must say I’m encouraged to see that there is a fairly frequent stream of improvements.

Experian Triple Advantage Hassle

I was disillusioned by the service Experian provided after the trial of their Triple Advantage product. I must admit I loathe companies that are ever willing to take your credit card and start a service online but not allow online cancellation.

Experian is one of these companies.

Their service seems to provide no value at this point as they don’t seem to be reflecting updates that are occurring to my credit. To avoid their never ending stream of charges I had to call them. Once I got on the line with a person things got bad. Their people are not customer service but merely mindless robots that read from a sales script. I grew ever more frustrated as they would read their sales script and I would say I just want to cancel. They read point after point about how I need them. I don’t.

Not only do I not need them I’ll think twice before ever doing business with them again because they didn’t try to satisfy me as a customer, they just tried to prevent me from leaving.

I’m trying myFICO for now. We’ll see if their service is more useful.

Belated Frugality Thanks

Please check out the last week’s Festival of Frugality over at Free Money Finance. A lot of work goes into producing the carnivals and I was slacking a bit last week as my brother was back from Iraq.

Enjoy!

Yellow Lamborghini at Denny’s

I was out getting dinner the other night and I noticed a yellow Lamborghini parked at Denny’s. I thought about the person that owns that car and where they were eating. For those of you that may not know the car likely cost over one hundred thousand dollars. For those of you that don’t know eating at Denny’s will cost you eight to ten dollars.

I think about cause and effect. Did this person live a frugal life and set aside money to fulfill their dreams? Did this person as a kid have a yellow Lamborghini on their wall? Did this person decide to eat at Denny’s instead of pricier dinner options to save to make their dreams come true? Could be.

Did this person go into massive debt to buy a Lamborghini on impulse? Are they forced to eat at places they don’t like just to stay above water and pay off their debt? Will they be able to keep up with the bills if they lose a job or have health problems? Could be.

I present two completely different speculative, lives. Which would you choose?

Get Out of Debt with $10

Ten dollars a month is all it take to pay of your credit card debt a lot faster if you are paying the minimum. How much is a lot faster?

If you have a five thousand dollar balance at an 18% interest rate and paid the minimum it would take about 26 year to pay it off. If you add an extra ten dollars over the minimum each month you’ll pay off the card in less than eight years.

You heard right, paid off in eight years, 18 years faster than the minimum payment.

Never pay the minimum. Always pay more. Stretch, scrimp and save get at least ten dollars a month to knock out your debt. Every dollar counts. Every dollar you pay off today counts way more than the dollars you pay in 5 or 10 years.

Good Luck!

Gas Down to $2.29 in San Diego

I noticed gas at the local Arco hit $2.29. Still moving in the right direction.

Cancellations at Prosper.com

As you may know if you read this blog regularly I’ve been putting some of my capital to work at Prosper, a person to person lending site.

I’ve pointed out some of the risks of Prosper before.

I thought I’d share with you another risk that hadn’t occurred to me at first, that of cancellations. With the loans I’ve bid on over the past month or so two have ended up being canceled due to Prosper being "unable to verify certain information relating to the listing'. The downside to this in both cases my money was tied up from the time I bid through the time left on the loan and then through to the time that Prosper decides the loan can’t be funded due to bogus, fraudulent or unverifiable information.

I am happy that Prosper carefully vets the loans before funding. This helps me as a lender avoid borrowers that may skip or be less than forthcoming with there information.

But Prosper; please make the money in our accounts interest bearing! This will definitely help me feel better about having money sitting around not in a loan. Keep in mind that I want to deploy this money to loans. I just don’t want to do so foolishly.

For more on Prosper read about saving time on Prosper.com.

Insurance Claim Rental Car Foolishness

I got my car back this week after 14 days in the shop. The insurance company's insistence on attempting a repair that the shop believed was not possible. The insurance company thought they would save about $250 if they could repair instead of replace the bumper cover.

The grand total for the rental car came to $392. Oops. The insurance company managed to blow about three hundred dollars on unneeded rental days. All I can say is I’m glad I’m not a shareholder.

You can read my previous entries on this insurance fiasco and my initial shock.

Festival of Frugality

Thanks to My Open Wallet for hosting this week’s Festival of Frugality. Take a moment to peruse the whole festival. Of course I am biased towards my article on year end tax savings via your 401k.

Make Your Next Car Rental Cheaper

Car rentals can be expensive. If your car is in the shop or you are on vacation you can pay an outrageous amount of money to rent a car. I’ll point on some ways you can save on your next car rental.

1- Check the weekly rate. Most car rental companies offer discounts for renting weekly. If you are renting for 5 or 6 days the discount could be enough to make it cheaper to hold on to the car for an extra day or two.

2- Ask what discounts they have. For example AAA members can get discounts with Hertz.

3- Check with your company to see if they have a corporate rate and if your allowed to use it for personal rentals. Be careful with this one though, in my experience many companies negotiate deals that are worse than what you can get on your own.

4- Always fill the gas back to the level recorded on the contract. My recent rental agreement listed $4.25 a gallon for gas if it wasn’t brought back to the right level. Make sure you don’t overfill, if the contract says 3/4ths of a tank then fill it up 3/4 full. If you overfill you are overpaying too.

5- Check with your insurance company beforehand on your coverage in a rental car. The damage waiver, personal accident insurance, and supplemental liability are outrageously priced. For my recent rental which would have been $28 a day at retail these three items added up to $24 extra a day. This adds up to $7800 a year. If your insurance covers you then you don’t have to double pay.

6- Check web site availability for last minute rentals. I’ve seen instances were car rental companies often lie about vehicle availability to boost local sales. I had to get a rental in a pinch a few years back. At the counter they were insistent that all they had were full sized vehicles even though their lot was full. This was not impossible so after asking several times I gave in and paid for the full size. When I got back to a computer I checked the company website and it listed a wide array of sub-compact through intermediate rentals available at that location. I got a refund for the difference. Check availability on the website and keep the rental car companies honest.

I hope you enjoy the hundreds of dollars you can save on your car rentals by doing a few simple things.

Carnival of Personal Finance

This week's Carnival of Personal Finance is up.

My article on end of year tax planning with your 401k was included.

Check out the many great articles that were included.

Goals Article in Carnival of Debt Reduction

Check out the Carnival of Debt Reduction over at Frugal Duchess. You can take look at my article on setting financial goals.

I also enjoyed Getting Out of Debt's Article on different ways of generating passive income even though I don't really think of these as passive activities.

Savings – Do It, Do It Now

Getting started building your savings is a matter of action. Take a look at what you have now, right now. Figure out what you can set aside be it one hundred dollars or one. Set that money aside today.

Mark this day of the month on your calendar in every month. Every time this day rolls around set aside more money than you did the last time.

This will launch you off on your path to saving.

Good Luck!

No Swipe RFID Credit Card

No Swipe RFID Credit Card
Bankrate has an article on new no swipe credit cards. The new cards, which use RFID technology to transmit your credit information, certainly present security risks, although I think the industry will work those out with time.

I was shocked by the quote that these cards cut transaction times by 25% but if it works great.

As an aside who uses checks any more? Unless I must I don’t.

October, Better for your 401K than Christmas

In recent days I’ve been seeing Christmas items appear in stores. I think it is too early to do my Christmas shopping, but not to reduce my biggest annual expense, taxes.

Since taxes are probably your biggest expense too I’d suggest making sure you are maxing out your 401k or other retirement plan before the end of the year. Your retirement contributions generally give you an instant 15-35% boost because of their pre-tax status.

If you haven’t been contributing you may not be able to reach the IRS annual maximums by the end of the year. Ask your plan administrator if you can over contribute to the plan for the last few months to make up the difference. Not every plan allows this but I had one lucky year were I was cash strapped for the first half of the year but was doing well in the second half. I talked to the hr department and they let me contribute double their monthly maximum so I could hit the yearly IRS maximum.

Go ahead, maximize your retirement investment and give yourself a great Christmas present in October.

EmigrantDirect Ads Still Show 5.15% vs. 5.05% actual

I’ve been using Emigrant Direct for a while now to stash cash on its way to being invested, for my 0% cash back plan and my emergency fund.

On Sept 30th I was checking on my account and noticed the 5.05% rate on the home page. That weekend I noticed an ad on another personal finance blog for the 5.15% rate but I figured it was just a simple delay.

Today I was reading another blog and saw the same 5.15% ad. I think it is maybe time that EmigrantDirect change their ads. I don’t think the interest difference is huge for most people. The page you click through to for the ad clearly shows the 5.05% rate. Still, a week later they shouldn’t be advertising the old rate.

I dropped them a line, we’ll see what they do. If you have any sightings of the old or new ad please let me know.

Incidentally, I’m not mentioning the blogger as I’m sure he has nothing to do with it, the ads are automated.

The Importance of Setting and Remembering Financial Goals

It is easy to read blogs, magazines and books on how to save, how to invest and how to earn more. This education and knowledge is wonderful way to improve your financial situation.

I personally find that what to do is not nearly as difficult as the motivation to act and the discipline to keep acting. Eliminate credit card debt. Check. Save more money. Check. Eat out less. Check….

Many of us know what to do but are not acting to our full potential.

It reminds me of a quote from Star Wars sage Yoda – “Try not, do or do not, there is no try”.

We need something to help us do the things we know we must do. We need vivid reminders of why we are doing it.

We need goals that constantly give us the motivation to keep doing the right things for our financial future.

I keep my top five goals on a piece of paper taped to my monitor. I’ve written them on the mirror with erasable markers in the past. I even put them on my screensaver (In Windows use the #D text screensaver).

Remember the reason you are saving, eliminating debt or working hard. It will make the path to financial success so much easier.

More Car Repair Woes

I spoke with the repair shop again today. The dealer keeps slipping when they can deliver the part. At this point I'll be in the rental car for 10 to 13 days for a total rental cost of $280 to $364. This wipes out the difference between the repair and replace options of only about $250.

The repair shop and my insurance company were both pretty adamant that (1) a repair would be needed and (2) that they wanted to order the parts before taking the car apart to avoid the unpredictable wait. But the other insurance company, the one that is paying, insisted on trying to fix it.

They are paying a steep price for this mistake.

Trying to save money is good. Trying to save money without thinking it through is bad.

You can read more about this car repair mini saga here.

Saving Time on Prosper.com

One way to save time on prosper is to ignore listings that have more than two or three days left. These three to ten day listings can waste a lot of time for many reasons including:
-The rates often have not been bid down meaning that you may end up bidding on listings that ultimately you will be uninterested in.
-Borrowers often withdraw requests for varied reason including changing group affiliation and noticing that they are not getting attractive bids.

During this time your bid money is locked up, not earning interest and not available for other, more interesting offers.

So what until the last few days before placing your bid, you’ll get to spend more time analyzing fewer listings.

Why Your Interest Rate is so Important

How hard should you work to get a slightly better interest rate on your investment? Should I really spend a lot of time research investments to boost my rates a few percent?

It turns out that getting a good rate is one of the most important things you can do to achieve your financial goals.

This chart assumes that you start working at age 18, that you put away 10% of your income a year and that your salary grows at 6% a year. It then shows the impact of different interest rates.

If you look at the right side of the chart you see the dramatic result. As time goes on minor differences in your rate of return make major difference in your net worth. At 70 years old the investor that landed lifelong returns of 4% has 976 thousand dollars. While this is much better than your average investor it is far less than the 1.5 million dollars earned by the investor with a 6% rate, the 2.6 million of the investor that worked hard to achieve a 8% interest rate and it is pocket change to the investor that managed to set aside 8.9 million dollars.

Even at age 35 the 6% investor beats the 4% investor by 17%.

The interest rate you achieve with your investments has a huge impact on the amount of money you have to achieve your goals. Look for ways to increase your return like reducing mutual fund fees, finding better money market and CD rates and finding good interest checking accounts. Be careful to move your money between accounts to maximize your overall return.

Good luck!

October's First Carnivals

Punny Money lives up to his name with this week's Carnival of Personal Finance set in 1868. Take a moment to read my contribution on a car insurance company run amok.

Don’t Mess with Taxes hosts the latest Tax Carnival. You may want to check out my submission for a simple way to save on taxes.

Scott On Money

October 29, 2006

Find a Dollar

October 26, 2006

Canceling is a Breeze with Marriott Residence Inn

I Have to Use Credit Cards

October 24, 2006

New Prosper Features

Experian Triple Advantage Hassle

October 23, 2006

Belated Frugality Thanks

October 20, 2006

Yellow Lamborghini at Denny’s

October 12, 2006

Get Out of Debt with $10

Gas Down to $2.29 in San Diego

October 11, 2006

Cancellations at Prosper.com

Insurance Claim Rental Car Foolishness

October 10, 2006

Festival of Frugality

Make Your Next Car Rental Cheaper

October 09, 2006

Carnival of Personal Finance

Goals Article in Carnival of Debt Reduction

Savings – Do It, Do It Now

October 06, 2006

No Swipe RFID Credit Card

October 05, 2006