Monthly Archives: August 2012

Should You Buy or Lease a Car?

The decision on whether to buy or to lease a car is influenced by two major aspects of an individual: the financial position or priorities he or she has as well as his or her personal references in terms of what ownership of a car would mean to them.
buying a car
The financials, we would hope, take top spot in this one, one would hope, though of course human decision making is as subjective with purchases as it is with everything else. If you can afford to buy a new car, then this may be the preferred option. You are able to recoup most of the money if you get one whose market re-sale value is high and if your insurance and maintenance are up to scratch.

Also, if you are employed, it is easy for you to get a loan that can help with financing your preferred dream car. The significant increase in low-interest financing and cash-back offers makes loan financing an attractive option and thus means more and more people prefer buying to leasing a car.

In fact, in the current global economy, with fuel prices rising and lease payments almost equivalent to car-financing payments, leasing is increasingly a less financially viable option.

Leasing has always had the a number of traditional advantages, which include the ability to upgrade quickly to another model and enjoy new technological and safety benefits from newer models. It also helps the person leasing the vehicle to actually enjoy a comprehensive test-drive period of sorts before deciding on whether he should purchase the vehicle while at the same time removing that old albatross that comes with car-purchasing: you have an asset that has a depreciating value.

But these advantages can be eaten into by a number of considerations, including the fact that maintenance is a prime condition of the leasing process, and the constant payments (which, unlike financing, do not result in ownership of the vehicle) can be moral sapping.

Comprehensive insurance for a purchased vehicle, which is also a definite on one which has been financed means the burden of servicing and maintenance is not carried by the person purchasing the vehicle, as opposed to someone leasing.

And with cars built to last longer and upgrades to them made easier over the years, the benefits of new technology can be added without necessarily changing cars, which is a significant advantage that leasing may have had in the past.

Against a backdrop of paperwork and red-tape involved in the leasing process as well as the fact that it only really makes financial sense if you want to write it off as a business expense (for a firm) or if you are dealing in a market with rising interest rates (this making car financing more costly), leasing rarely holds the edge over actual car ownership.
And besides, for the individual, there is always the satisfaction of knowing that the car in your garage or parked in your drive way is your car.

Ten Ways to Save at College!

Every college kid knows that college is expensive–and that doesn’t even include the fun parts! While education itself costs a pretty penny, it’s important to think about extra curricular costs when planning and budgeting. Going to school in a city can be particularly challenging, since almost nothing is free. Here are the top 10 helpful hints to getting by in college while still having fun:

Saving at college

1. On-campus Jobs:

Don’t under estimate the benefits of an on-campus job. They are held solely for students, tend to pay above minimum wage, and are conveniently located. Whether you work in the financial aid office or in a dining hall, you can make connections with students, faculty, and staff that will surely benefit you down the line. It may not be your dream career, but on-campus jobs are great for a little spending cash.

2. Use the dining plan to your advantage:

It’s surprising what you can smuggle out of a dining hall. If you are willing to invest in plastic bags or reusable Tupperware, there is no limit to the possibilities of kleptomania that lurk in a dining hall. From apples to zucchini, there is no food (raw, cooked, warm, or chilled) that can’t be snuck out. If you grab a sandwich at dinner and keep it for a late night snack, that’ll prevent you from spending those 5 dollars for the Subway foot long across the street.

3. Thrift store:

There is nothing you can’t find at a Good Will. Whether you’re looking for a set of plates for under $10, or an electronic robot for endless hours of amusement, a local thrift store is sure to not disappoint. A wide range of useful apparel can be mixed in with your high-class Anthropologie dresses for the bo-ho chic look so prevalent amongst trendy college girls.

4. Gifts:

It’s easy to get stuck in the endless-string-of-Birthday’s-breaking-the-bank rut. Don’t let it happen to you. Your new found college friends deserve the best-the best home made gifts! There are countless great gift ideas online that can be made out of supplies in a dorm room. From melting records into bowls, to a clever fortune teller, gifts should be creative and meaningful, not expensive! By saving on the gift, it might be a little less painful to splurge on your third dinner at The Cheese Cake Factory for someone’s birthday.

5. Get a Bike:

If you’re in a city, public transportation can be expensive and unreliable. Craig’s list constantly sells bikes for give-away prices, and it’s most definitely worth investing in to save money in the long term. Plus, you won’t have to worry about the freshman 15 if you’re biking to dinner.

6. Drink before going out to a bar:

Keeping an inexpensive bottle of wine or a cheap six pack around is never a bad idea. Sure it’s okay to have one drink at a bar, but who wants to throw down $20 for a few drinks? Start the buzz before you head out (if you’re not driving, of course).

7. Text book tactics:

Text books are expensive, but colleges at making it easier and easier to afford them. From renting to e-books to selling used books, you should never be paying full price for a book. Look on sites like Amazon and Half.com for great deals on text books. When it comes time to sell the book back, don’t go through a third party. Post them directly onto a website where you get to set the asking price.

8. Free Housing:

There are opportunities on many college campuses that allow for free housing. Frequently, a position such as resident assistant comes with room and board, and occasionally, a stipend.

9. Funding:

Colleges have money. If there is something you really want to do, like put on a show or go sky diving, there is probably an organization on campus that could fund it. Students are often in charge of allocating funds, and it’s up to you to make your ideas known. By being part of an already existing organization, or by starting one on your own, your chances of getting funds for something fun is very high.

10. Quickie jobs:

If you’re not willing to make a time commitment to a part time job on or off campus, many colleges post one time jobs available around the community. These can be great if you’re looking for some fast cash, and depending on the job, you may get more than just one time employment for it.

How to Find Low Cost Banking

Nowadays, our credit defines us. Our credit is often what determines whether we get a checking account free of charge, for a nominal fee, or for an outrageous charge. So many banks are making us pay more to get less. If you want to get the best checking account for the absolute ideal amount of money – you know, the best bang for your buck – check out these tips:
Low cost banking

1. Better prices may be found in smaller places – While large branches will have more branches and ATM’s, they offer convenience, which means higher prices. However, smaller banks will have less branches and ATM’s so the convenience won’t be there, but they price is much more affordable. So, if convenience isn’t an issue for you, then you can find low cost banking easily at smaller branches in your area.

2. Always maintain the required minimum balance – A number of banks will require that you maintain a certain minimum balance in order to have free checking. For example, so long as you don’t dip your account balance under $500.00, your checking account is free; otherwise, you have to pay, say, $10.00 per month for the account services. If your bank requires a minimum balance, find out if it an average balance over a certain period of time or if it is a daily minimum balance, so that you can make sure you are up to code.

3. Get overdraft protection, but don’t bounce checks – As difficult as it may be to not write that check to buy that hip new shirt at the local clothing store, it will save you money in the long run not to write it. Sure, you may have overdraft protection, but writing that check and having it accepted is going to cost you a decent chunk of change. In fact, banks are constantly raising their prices on how much a returned check costs. Then, just think if you have exceeded your overdraft protection limit, you are going to be out even more. Not only will you be paying for the returned check fee at your bank, but you will pay for the same fee at the store that you wrote the check. As a general rule, this is a $30+ charge each time, at each location.

4. Purchase your own checks – Believe it or not, you can save a ton of money by buying your own checks from a third-party source rather than from the bank itself. Sometimes, you can save as much as 50 percent! And, more than likely, you’ll have a much wider selection of excellent check designs than you would have at your financial institution.

The above-mentioned four tips will help you ensure that you get more of what you want and need out of a checking account from a low cost bank for an affordable price that won’t break the bank!

$100 Invested in a Direct Purchase Plan

Forever Stamps Investment
($100 invested in Kelloggs direct purchase plan)
 

Investment Idea: $100 invested in 1.962 shares of Kelloggs stock using a Direct Purchase Plan.

Total Investment: $100

Total Time Cost: 00:20:00

Extra Costs: $0

Total Time Spent on Investment: Ten minutes researching about what a Direct Purchase Plan is, and ten minutes signing up and crediting a new ShareOwner.com account.

Research and Preparation:
A lot of my investments (being at the $100 price level) end up having fees and extra costs that cause the investment to almost never end up being profitable. When buying stock I am paying $9.99 per a trade at TDAmeritrade, and given some places offer trades for as low as $5, it would still be another $5, or in my case $9.99, charged when I sold the stock too. This means that all the current stock investments I have would need to earn over $20 just for me to break even!

Luckily there is another way people buy stocks and build a portfolio: a DPP, or a Direct Purchase Plan. DPP’s exist for a lot of the largest companies in America including Heinz, General Mills, CBS, and Kelloggs. I decided to choose Kelloggs as the company I wanted to purchase, because I gotta have my pops.



(I gotta have my pops)
There are couple of ways to buy direct purchase plan shares. The easiest is ShareOwner.com. It is run by WellsFargo and has access to a lot of different companies, so with one account you can buy shares in multiple companies, and help create a diverse and robust portfolio, a key to good investing. On ShareOwner, you can see a sortable list of all DPP companies. DPP’s often come with minimum investments, which were shown in the ShareOwner table. This limited which company’s I could choose from, but then I saw Kelloggs which did not have a minimum and is a company I feel pretty confident about.

As well as having a minimum investment, some companies also force you to already be an owner of that company’s stock before participating in the plan. Kelloggs was not one of these so it made it an even better option.

After finishing signing up for my ShareOwner account, I was given the option to fund my account. Either I could do it by mail or electronically. If you select the electronic option it then prompts you telling you you will need to pay a $15 electronic investment fee.

Electronic Investment Fee BSt
($15 Electronic fee BS)
Nowhere during the whole process did it mention this fee until the last page of the sign up. It gave a couple of options: either you can pay electronically or select pay by mail. When you select this option it does not mention any fee, but it seems like more hassle. Of course I did not want to spend an extra $15, so I chose pay by mail. Only after fully signing up did this fund by mail option also inform me I would need to pay a $15. Talk about hidden fees.

However through some glitch if you select pay by mail it creates your account and you can just fund the account electronically right away. I went ahead and did this and I still have never mailed in my $15 account funding fee. I assume one day they will get mad about it, but until then I saved myself $15.

A week or two later I received an email saying that the account was funded and I now owned 1.962 shares of Kelloggs stock. One of the main problems with buying it via the direct purchase plan was that I had no control over exact timing of my stock purchase. For all I know the moment I bought the stock it could have hit historic highs and I would be stuck buying it at the highend, meanwhile when I use TDAmeritrade I can choose an exact action to trigger when I buy the stock, and guarantee I am purchasing it at a price I want.

Two of the benefits of the DPP are that it allowed me to purchase exactly $100 worth of stock, making it very easy to stick to my $100 investment strategy. Also, the investment is on autopilot now since it is set to have all of its dividends the shares accrue to be reinvested into the buy, allowing my stock to grow.

A similar investment to a DPP is DRIP, or a Dividend Reinvestment Plan, another investment I can make through ShareOwner and another investment I will add to my portfolio very soon.

Reason for Investment:
Tired of being burned by the fees I got from each trade I made on TDAmeritrade ($9.99!) I decided to try out a Direct Purchase Plan, which allows me to buy the shares directly and not have to pay brokerage fees. However it is some what of a hassle and seems to come with hidden fees of its own ($15!). As for the company to invest in, I chose Kelloggs since I believe it is a strong well positioned blue chip company which can help balance out my portfolio. Simply put, I gotta have my pops.

Returns:
The return from a DRIP is based on the continuing growth of the shares and of the reinvestment of any dividend the shares produce put back into the investment. This investment is currently valued at the share price of Kelloggs times 1.962 (The number of Kelloggs shares I own).

To find an up to the minute price of my Kelloggs Direct Purchase Plan investment and my other investments click here!

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$100 Invested in a Series EE Savings Bond

Series EE Savings Bond
($100 invested in a Series EE Savings Bond.)
 

Investment Idea: $100 invested in a US government Series EE Savings Bond.

Total Investment: $100

Total Time Cost: 00:40:00

Extra Costs: $.44 (One forever stamp) and one envelope, to mail in a form.

Total Time Spent on Investment: 15 minutes signing up for a Treasury Direct account. 15 minutes spent at a bank getting a bank seal. 10 minutes spent finishing up signing up for the Treasury Direct Account and buying the Series EE Bond.

Research and Preparation:
The world of investing in bonds is a little bit tricky and it is hard to find easy to understand financial information on how and where to buy them. I normally refer to InvestingEd.com when I need financial help, but for this investment and my other bond investments to follow I needed to find a better source.

After Googling around for terms like “Bonds,” and “how to invest in bonds” I found an interesting piece via Reuters.com on a petition to restore old-fashioned paper U.S. bonds.

The petition was being led by Marc Prosser, founder of LearnBonds.com.

Marc’s biggest pet peeve was the fact of how the simple and lowly US Savings bond had served as an introduction as an idea to saving money and earning interest for many millions of Americans including himself. By doing away with the physical nature of them, millions more kids would never grow up with the joy of learning about investments at such a young age. A real shame.

I really liked what Marc had to say so I checked out LearnBonds.com and was rewarded with a massive amount of information on any possible questions you could have on investing in bonds.

After reading a couple of articles I decided to email Marc directly and ask him some more in-depth and specific questions on bonds, and recommendations he might have for me.

Marc quickly replied and was happy to talk to me so we set up some phone time and chatted away.

Marc’s background had been in ForEx trading, but after noticing a giant number of ForEx websites and very few bond informational sites he got together with his business partner and founded LearnBonds.

I wanted to learn from Marc what were the best bond investments and what he recommended most. Of course his first statement was definitely don’t invest in bonds for one year. Also, an investment of just $100 was somewhat of a handicap. However using TreasuryDirect, anyone can buy Treasury Bonds for as little as $25.

For the short term the better option is clearly the I Bond, which currently has a set rate of 2.2%. In the long run the EE Savings Bond could be the better option, since it comes with a guarantee that it will double in value over the course of its lifetime. This means that even though its federally set rate is .60% currently, over the next twenty years it should still manage to double in value giving it a real rate of return of closer to 3.0% over the lifetime of the bond, which is higher than the current rate of 2.2% that I Bonds come with.

So in my case $100 invested in Series EE Savings bonds should give me a return of .60% for the current year, which is worse than my CD earning 1.02%. But the series EE’s guarantee that it doubles in value means twenty years from now that same savings bond should be worth $200, giving me a 100% return, whereas on the CD there is no guarantee that it will earn anywhere near that over the course of it’s life.

So I opened a TreasuryDirect account which you can read about here. This process was a little annoying and took two weeks, but once the account was opened the funding process was a quick and easy bank transfer, and before I knew it I had bought my first Series EE Savings Bond.

Treasury Direct Order Screen
(TreasuryDirect order and home screen.)
Treasury Direct Order Set
(Typed in my order and with one click it was done.)
Series EE Savings Bond Order Confirmation
(Series EE Bonds all ordered.)
Reason for Investment:

When investing you should always have as diverse a portfolio as possible. You should have some risky investments, as well as some safe investments, and then you should have some investments that return so little and are considered so safe you don’t even know if it should be called an investment. A Series EE Bond is one of those investments.

In general, Marc recommended bonds for people who aren’t rich but at the same time don’t need money right away. So really any one who is in the middle.

When I asked Marc what had been his best investment in his life he told me it would have actually been one of the paper savings bonds he had received as a kid which had a face value of $50 but had paid out over $350 over the years. I guess he has a really big reason for wanting to bring back those same paper bonds all these years later. I hope my investment in Series EE Bonds does as well for me as it did for Marc.

Returns:

Series EE Bonds accrue interest at a current rate of .60% a year, which is rather low but also is not taxed. There is a penalty for withdrawing a Series EE Bond early, but when buying them you should really be buying them for the long run (twenty years) so they maximize their return.

To find an up to the minute price of my Series EE Bonds and my other investments click here!

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The Options for the Uninsured are Growing

Everyone gets sick at one time or another and oftentimes there is too little time to be prepared; especially if you find yourself between jobs, unable to afford the premiums for health insurance coverage or are disqualified because of pre-existing conditions.

There are several options you may pursue:

The Feds Do Care

1. The US Department of Health and Human Services operates many health centers nationwide that provides care for you and your family. This professional care is offered on a pay-what-you-can-afford basis and is often linked to your income. Services include general checkups in cases where there are obvious changes to your health. Treatment is available when there is a positive diagnosis of illness. Mothers-to-be will also receive full care for pregnancy including any special emergency and unusual procedures that might be required. Children will receive their immunizations as well as their routine check-ups to maintain their health. Dental care is also provided for the entire family as well as assistance with prescription drugs. Many families also find themselves in a position requiring mental care or counseling for substance abuse and this is provided by many of the federally-funded health centers. These services are accessible online with the only requirement being to visit the US Department of Health website and type in your zip code to find the nearest health center to you. You will find that centers are both in cities and rural towns and are strategically placed to ensure wide assess to people who need their services.

Not Sure If You Are Sick?

2. There are also many websites online that provide free medical advice if you’re not sure whether you’re in need of medical care. Whilst, one should be wary about depending on information provided online because of physical limitations, meaningful research can save time and unnecessary financial headaches. Many online services offer background information on visible symptoms to help you understand the possible causes of certain illnesses.

Use a Payment Plan…Pay Directly

3. In cases where there might be some resources available, you may want to visit a doctor and pay directly for medical services received. Many hospitals may consider putting you on a payment plan where you can pay a monthly amount over a period time to cover expenses. It is useful to investigate prior to a medical emergency, those services, offices and hospitals that allow a payment plan for those patients without insurance. Plan ahead for medical emergencies.

Walk Into a Clinic

4. There are low cost clinics available that will offer the best “bang for your buck” located in pharmacies, drug stores and convenient stores. These clinics offer affordable family packages that are designed as an alternative to full-service medical centers. Do the required research, because there are many customized services popping up all over the country to cater to the uninsured patient.

$100 Invested in 100 $1 Lottery Tickets

$100 in lotto tickets
($100 of $1 lottery tickets)
 

Investment Idea: $100 invested in 100 $1 lottery tickets.

Total Investment: $100

Total Time Cost: 00:30:00

Extra Costs: None

Total Time Spent on Investment: 10 minutes spent online finding lottery ticket with the best odds. 5 minutes spent buying lottery tickets. 15 minutes spent scratching off all the tickets.

Research and Preparation: Gambling and the lottery have always held an enticing allure for a lot of people: the idea that you could spend just $1 and be rewarded in prizes that are worth exponentially more, and all it would take is a little bit of luck and all your problems would be over. I knew I wanted to try my luck on $1 lottery tickets because I thought it would be cool to buy 100 of them. I also knew that I could find the odds of winning online at http://nylottery.ny.gov/.

After comparing all of the odds for the $1 scratch off tickets I came to a couple of conclusions:

– There are twelve different $1 scratch off tickets available in New York

– The odds of winning ranges from a best of 1:4.64 (Instant Take 5)

– To a worst ratio of 1:5.09 (Happy Birthday Cupcakes)

Happy Birthday Cupcakes Scratch off Ticket
(Never buy birthday themed tickets)
– The average odds of winning on a $1 scratch off ticket was 1:4.88

– The NY lottery website never refers to odds of winning, but instead calls it “Chances of Winning”

– The $1 scratch off ticket with the worst odds is the “Happy Birthday Cupcakes” ticket (1:5.09), ticket (1:5.09). Also, the other birthday themed ticket “Happy Birthday Presents”, with odds of 1:4.99, has the third worst odds of the batch. If you value your friends and give them lottery tickets for their birthdays please don’t buy them birthday themed tickets to help them increase their odds.

Happy Birthday Presents Scratch off Ticket
(Don’t buy these tickets either)
– The $1 scratch off ticket with the second worst odds is the Gold Rush, 1:5.02. I assume it has such bad odds since the allure of gold suckers people in.

How I chose which lottery ticket to buy?
After seeing the spread of the odds and the possible prizes I decided to choose the $500 A Week For Life ticket. It’s overall odds of 1:4.84 wasn’t the best, but it put it in the better half. Also, its namesake price of $500 a week for life was the best possible grand prize out of all the $1 scratch off tickets. Winning $500 a week for life would have provided the greatest possible return for my $100 I can think of. Of course the odds of winning 1:7,938,000 but, “hey you never know.”

Some of the other odds for the $500 A Week For Life ticket:

Prize Odds of Winning Expected Winning Tickets Total Winning Amount
$1 1 in: 10.00 10 $10
$2 1 in: 15.15 6 $12
$4 1 in: 62.50 1 $6
$5 1 in: 125.00 0 $0
$10 1 in: 100.00 1 $10
Total 1 in: 4.84 18 $38

To make the above table I took the total number of tickets (100) and divided by the odds. This left me with “Expected Winning Tickets”. If this number had a remainder, I rounded down since you can’t buy or win a partial ticket. Also, everyone loses when they gamble, so I wasn’t going to give myself the benefit of the doubt.

So it looks like I should have anywhere from 18 to 21 winning tickets, and win a prize amount of about $38 to $40, for a return of at least -60%.

With my ticket chosen and my research done I headed to my local bodega and asked if they had 100 of the $500 a Week For Life lottery tickets, just to check before I bought some. They did.

Counting 100 Lottery Tickets
(Counting 100 lottery tickets)
Counting 100 Lottery Tickets
(Checking all of the tickets)
As soon as I had paid for the tickets with my five twenty dollar bills I couldn’t wait to get home. (Side note: something annoying about lottery ticket buying is it is cash only, so no credit card rewards points here.)

Stack of Lotto Tickets
(Stack of lotto tickets)
All of the tickets were stacked and ready to scratch! Was I about to be the proud recipient of $500 a week for the rest of my life? Or had I just thrown $100 down the drain?

Piles of lotto tickets
(Guess which pile is filled with winning tickets?)
If you said the one on the right then you are correct. After fifteen minutes of furious scratching I came away with twenty two winning tickets and a total prize amount of $41. I had lost $59 on this investment in a matter of twenty minutes, and I had actually slightly beaten the odds that I had found and reproduced above.

Reason for Investment:

Everyday, millions of people in America play the lottery and hope for the best, but more often then not it is just them throwing their money away. But wouldn’t it be great if you could just on a whim plop down $1 and buy a ticket that changed your life? I decided it was worth it to try it a hundred times over and invest $100 in $1 lottery tickets.

Returns: $41. I actually came out ahead of what I had expected on this investment, but even that meant a massive loss of $59.
My Total Winnings Table:

Prize Amount Number of Winning Tickets Total Winnings
$1
13
$13
$2
7
$14
$4
1
$4
$10
1
$10
Total
22
$41

As you can see the predictions from my research were almost spot on.

Big ticket winner
(The big ticket winner was just $10)
The thrill and rush of possibly winning started to wear off after about the twentieth losing ticket. Each card had a couple of “Life” symbols on them, and every time you got a second you just dreamed of seeing the third one under the remaining graphite. However it never appeared and never will and it just kind of turned depressing. How could people put themselves through this humiliation and teasing every day of their lives? This is definitely an investment that is not rigged in your favor and can never really bring you positive returns.

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