Friday Gathering: First Snow Fall Edition

by Stew | Posted in Friday Gatherings | 3 Comments

mountain snow

Here is some reading that I found stimulating this week.

Borrow From None presented a challenging analysis of Proverbs 22:7, “The rich rule over the poor, and the borrower is servant to the lender.”

Plonkee wrote about shared finances for couples who are cohabitating. I’m old fashioned when it comes to those sorts of things – I think finances work better when marriage is the foundation. Beyond that, Plonkee’s characterization of certain approaches to handling money as capitalist, communist and socialist to cause thought.

Moolanomy staff writer, Craig Ford wrote one of the best articles in the last month called 21 financial lessons learned from the financial crisis of 2008-09. Really outstanding.

Patrick at Cash Money Life gives some advice regarding the top 10 consumer complaints and how to protect yourself.

Mighty Bargain Hunter wrote an article that resulted in a personal email from one of the VP’s at restaurants.com.

Did you know that each individual player who wins the World Series will get over $300,000? The losers only earn a bonus of around $200,000. Jim at Bargaineering has all the numbers.

Have a great weekend! Don’t just spend money, spend time with family. - Article by Stew

Photo by Tell Jeeves.

Carnival of Personal Finance

The Festival of Frugality

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What is Social Investment and How Does It Apply To You

by Mike | Posted in Investment Thursdsays | 6 Comments

social investmentIn this first of our new “Investment Thursdays”, I decided to tackle a subject important to me.

One of the major trends in the past decade or so has been individuals stepping up to do their part in improving the world. The green movement has been the most visible as groups and individuals around the world have put up efforts to give out information about the harm being done to their environment. The power, of course, resides in the masses. For one person to start recycling their paper or building heir own compost bin has little impact but when millions around the globe do their part, the impact becomes a game changer.

The green movement has gained momentum and importance in recent years as corporations become more socially aware and adopt pro-environment policies.  Initially, I was far from convinced but now believe that these actions will make a major difference in the lives of our children and grandchildren. Is the fight over? Far from it. But we do have the beginnings of a great start.

I think the next big step will be for individuals and corporations to be socially responsible in their investments. The same rules apply as it will be difficult for one investor to make a significant difference but as more investors join the movement; a major difference in our world awaits.

So what is socially responsible investing?

There are many different ways to define the concept.  Generally, it means investors either avoid investing in corporations with “doubtful” practices/products or for them to encourage good behaviors. Generally, the former is more important. Traditionally, this meant avoiding companies that provide “sin services” such as tobacco, alcohol, military pursuits, gambling, adult entertainment, etc. Several fund managers and independent organizations perform screening to help detect which corporations should be avoided and move their money towards more social investments.

Socially responsible investing (SRI) assets grew 639% between 1995 ($639 billion) and 2008 ($2.71 trillion)

I do believe that over time the criteria will become more complex as many other issues have gained attention. For example, Claymore has an ETF that promises to avoid any company that has dealings in Darfur. Others could want to avoid companies that use factories in poor countries (sweat shops) or that deal with the North Korean government for example.

How much will it cost me?

Honestly, when I first heard about this, I assumed that making socially responsible choices might be good for my conscience but might cost my portfolio.  Actually; many recent studies have shown that “socially responsible” portfolios perform well over time.

I even expect such funds to perform better over the long haul for two main reasons:

1- As a company gets flagged for irresponsible behavior, chances are that they will also generate lesser profit. This would not apply for all companies but for example when Nike got huge backlash for its treatment of children in Asian factories, it did have an impact on its sales and profit therby reducing the return of its stock.

2- Over time, as social investing gains popularity, I expect assets to flow more towards “responsible” companies resulting in better returns.

The best time to start is yesterday

Every time the New Year comes around, millions make new resolutions.  You can almost tell the same day who will end up sticking to their new promises and who will last only a few months, a few weeks or even just a few days. I think one of the keys is to take action immediately. It does not have to be a complete change of your portfolio. In my opinion, here are a few steps that you can follow to make your portfolio more socially responsible:

1- Determine the large concepts you will follow (are you avoiding specific companies or buying companies you believe in)
2- Determine a few “core values”, either industries you want to avoid (sin, etc), or those you’d like to support
3- Generally, you will not have enough time to look through individual companies so the best way to proceed is find an organization or fund that has the same core beliefs that you do, and invest through that channel.
4- As with any strategy, the trick is then to monitor and review your goals every year or so, to see if you’d like to add, change or delete some of the criteria you were using.

Will you be able to change the world instantly? Of course not. But with action and through talking about your investing principles, you can make a difference and the world can become a better place…

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More ways to get to work

by Stew | Posted in Money Saving Monday Tips | 4 Comments

scooters

On Monday, I wrote about some of the problems with mass transit and I thought that I would spend today on some of the other means of transportation.

When my wife and I were first married, we assumed that we needed two cars. Looking back, it was a little ludicrous. We both worked within two miles of our home. After we had children, Mrs. Stew quit her job to stay home, but we still continued to pay insurance, maintenance, and registration for two vehicles. About three years ago, I totalled my car and never replaced it. Ironicly, a car accident has actually saved us money in the long run . . . The point is, that we have met our responsibilities with one vehicle. We never thought it was possible, but with a little planning and a little self discipline, we are doing just fine. There are days when I have to take the car to work and Mrs. Stew has to be content to stay home or walk, but in the past two years, I have tried out several other ways to get to work.

Walking

My job has a “peak season” where I often work seven days and put in 70 to 80 hours in a week. During the off-peak season, I have the option of coming into work anytime between 9 am and 10 am. So last year, I walked the three miles to my office several times a week. It takes me about 50 minutes and I enjoy the exercise. I had to make sure that I had good shoes and proper clothing for the weather, but once those items are purchased, walking can be a really inexpensive way to get to work – if you have the time in your day. My wife often picked me up after work, so I did not have to walk both directions. You might be able to walk to work – try it once and see how you like it.

Cons: time, shoes, clothes, weather

Pros: good exercise, no registration, no insurance fees, no maintenance, low fuel costs (food)

Cycling

Before I started walking to work, I was riding my bike. This is my favorite way to get to work. A little exercise, not a whole lot of time lost and it does not wear out your shoes quite as much. I was also fortunate to have a pretty nice bike, because I had a friend who worked in a factory and used his discount to get it. I loved the bicycle . . . until it was stolen last summer. I have not found a way to replace it, although I plan to make an effort to find one at a second hand store or rummage sale this year.

I have a friend who bikes thirty-five miles one way to work every day when the whether is nice. You might be surprised how easy a bicycle commute could be.

Cons: bicycle expense, clothes, weather, flat tires

Pros: almost as fast as driving, good exercise, no registration fees, no insurance costs, little maintenance, no fuel costs

Scooter

My latest work transportation is a little scooter that someone at work had in storage. They gave it to me and said, “If you can get it running – it’s yours”. The tires were flat, but only needed new valves. It leaks oil, but I add a little every week. It has trouble starting – sometimes it takes 30 or 40 “kicks”, but overall it has been a nice little way to get to work. I have since found out that it was made in China and parts are extremely difficult to get, so if it dies, I probably will just junk it.

In the meantime, my state does not require scooters of this size to be licensed, so I can drive back and forth to work for about $2.50 a week. That is really my only cost for this little bike so far. The biggest issue is weather. Riding can be painful if the temperature is less than 70 or it is raining. My scooter is not cool at all – no bright colors, it is old and has some cosmetic damage, but it gets me from A to B. Scooter riders have to deal with interesting looks from other people. A scooter provides for way more eye contact than driving a car. It can be unnerving.

Cons: cannot give rides to my kids, weather, rude stares, helmet head

Pros: same time as a car, no license/registration fees, no insurance, little maintenance

So what is your favorite way to get to work? Have you thought about getting there the cheapest way possible? - Article by Stew

Photo by palindrome6996

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R1 Credit Rating: How to Keep it

by Mike | Posted in How to Get Your Finances Under Control | 5 Comments


r1 credit ratingYour credit rating is a very precious thing as is trust; it is hard to earn and easy to lose. So, if you are lucky enough to enjoy an R1 credit rating, you want to make sure to keep it. There are a few tricks to help you keep a stellar credit score. But before we start, here’s a quick definition of the different credit ratings (going from R1 to R9):

Credit Rating:

R1: This is revolving credit that has always been paid on time.

R2: A revolving credit account with a late payment of 30 days.

R3: A revolving credit account with a late payment of 60 days.

R4: A revolving credit account with a late payment of 90 days. You may also find credit accounts gone to collection agencies showing R4 rating. At that stage, chances are that the company sold your account to a collection agency for less than its actual value (what you owe).

R5, R6, R7, R8: It is an aggravation of an R4 rating. We rarely see them on the credit report. It usually jumps from R4 to R9.

R9: This is the worst credit rating an individual can have. This means that the account has been written off or closed by the grantor. However, the outstanding amount is still shown on the credit bureau.

Revolving credit includes credit cards and line of credits (it means that you can borrow on them without a new application). You may see the same rating but with a “I” in front instead of a “R”. This is for “instalment” and it is used for loans, leases or mortgages.

When you pull out your credit bureau, an R1 credit rating means that your “worst” credit mark is R1. This also means that if you have a single late payment of 30 days (i.e. R2), your credit rating at the top will be shown as R2. Unfortunately, it takes about 7 years to make an R2 disappear. As I told you, a credit rating is like trust ;-) .

How to keep an R1 credit rating

The very best trick I can give you is to set minimum payment transfers on all your debts from your bank account. This method is “stupid proof” as you can’t forget a credit card bill thinking you already paid it. While this won’t be much of a help to pay down your debt, setting automatic payments will at least preserve your R1 rating.

You can’t make a payment? Call!

If you can’t make a payment on a credit card, you don’t have many options to preserve your credit score. You can always try to transfer your card to a zero APR balance transfer credit card but this will only solve the problem temporarily. Your best bet is to call your credit card company and try to find a solution. If you call them up front instead of waiting until they come after you, they may show some compassion and try to find a payment solution. At least, you will keep your R1 for a few more weeks.

Writing NSF checks doesn’t affect your credit score

You will have fees and you may see access to your bank account reduced, but NSF checks are not reported on your credit bureau and as such, don’t affect your credit score.

Make sure your mail follows when you move

Another classic reason for a 30 day late payment is when an individual moves and forgets to advise his credit card company. There are services available that ensure your mail follows you to the new address for a small fee. This is a few bucks well invested!

Have a budget and track down your debt

By following a budget, you will know when your bills should hit your bank account. Therefore, it is easier to flag the missing payment only a few days after it’s due. If you are late less than 30 days, chances are that it will not be reported and you will keep your R1 credit rating. You can also use Google Calendar to set email alerts on the days your bills are due. This is probably a good alternative if you don’t have the assiduity to follow your budget.

As you can see, keeping an R1 credit rating is not that easy, you only need to forget once and your whole credit “reputation” will be tarnished. There are actually several advantages of maintaining a clean credit rating. But this will be for another post ;-)

Author: Mike.

Image source: ampamuka

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Money Saving Monday: the problem with mass transit

by Stew | Posted in Money Saving Monday Tips | 14 Comments

mass transit

Many people use mass transit to save money. I like mass transit. A couple of years ago, I visited Germany and fell in love with their rail system. Buses, trains, light rail, the subway, the elevated train all make sense as a way to reduce cost and congestion – but not in every circumstance. Make sure that you are actually saving money before making the switch to the bus or train.

Government cost

One of the problems with mass transit in the United States is the cost to our government (us). You might be able to ride the bus to work for only $2.50 a day, but the cost of the ticket does not come close to paying for the bus, bus driver, maintenance, bus stop and road wear. That money comes from taxes and you are taxed for that bus whether you use it or not. If you aren’t taxed for that bus, your employer is being taxed for it.

Many municipalities and states have put in light rail in an effort to curb congestion, but often spend far more in debt and upkeep costs than riders save. I love to ride the Chicago area Metra and Elevated Train, but I always remember that I do so at the expense of the Chicago area tax payer. Amtrak, the federally subsidized railway that serves most of the United States can be a fun and relaxing way to travel, but from a fiscal point of view, every ticket sold is subsidized an average of $100. A New York to Los Angeles ticket comes with a $1,000 taxpayer subsidy.

Density

Mass transit has been a success in Europe, as I mentioned. It has also been a relatively good success in the United States – as long as the area is heavily populated. New York, Chicago, Los Angeles are all cities with a dense population. The urban setting allows for enough ridership to support the rail or bus system.

Cities with smaller populations and a  geographic area that is spread out cannot fill rail cars or buses. Not enough people live close enough to the rail stations on one end or work close enough on the other to make riding the rail practical.

Comfort and Convenience

If you have a driveway at home and a place to park at work, driving is just better. There is more freedom to leave when you like and stop to pick up a carton of milk on the way home. Need other reasons to drive? How about comfortable seats, your own radio, temperature controls and a cupholder. Comfort and convenience need to be a part of the equation. Is it worth an extra $2 a day to avoid sitting at a bus stop when it is twenty-below?

Sanitation

In this age of SARS and swine flu (H1N1), you have to think about this. If you are worried about health costs, you might need to include sick days and doctor visits in the cost of your mass transit. Mass transit system might add to the spread of disease and sickness.

Although for some of us, our cars might be just as dirty as the subway or germy as the bus.

You still need a car

If I lived in Germany, I would not need a car – there are multiple trains every hour that go every place you might need to go and those trains make sense because they are always filled. However, you must remember that Germany has 85 million people in a country with 137,858 square miles or roughly half the size of Texas which has a population of 27 million. In Germany, the train put me within a reasonable walking distance of any place that I wanted to go.  The same could be said for large urban areas as I mentioned earlier.

Here is the bottom line when calculating the cost of mass transit versus driving your car: if mass transit allows you to divest yourself of a car, in other words, if mass transit in your area can make you “car free”, then it makes a lot of sense to use mass transit. However, if you need a car to get to the train station every day, you might be better off just making the drive. Once you pay for insurance, gas, maintenance and storage, you will probably not save much money or time by riding the bus.

We like to ride the train for fun – we enjoy riding into the city for a day, but that does not mean it is the most frugal way to get to work. - Article by Stew

Photo by williamedia

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