August Net Worth Update

The 1st falls on a weekend so I am giving my Net Worth update today.

My net worth as of today is (-34,860.48). This is an increase of $12,880.74 from last month. The large increase is due to me buying a house well under it's value. The stock market also had a good month so my investments increased as well.

Alternative income this month:

Youdata.com: $0.30
Rebates: $15

iPhone: Is it worth the money?

A lot of people have asked me about having the iPhone. Is it worth the expense of the rate plans from AT&T? Is it really as cool as people say it is?

My answer: Yes and Yes!

I have had the iPhone since it first came out. I now have the iPhone 3G. It has been great for work with e-mail, web browsing, etc. I was a bit hesitant with a $90/month rate plan but soon found it was worth it. The iPhone has saved me money in many ways and tends to at least pay for itself.

Here are some ways the iPhone has saved me money:

• GPS: The GPS has saved me from being lost and finding my way. It has also saved me a lot of time which is worth more than money.
• Google: If I am out shopping and see something I need/want I can google for the best price right on the spot.
  
• Alarms and Calendar Reminders: I use it for my alarm clock and have reminders on a Calendar for bills. I save in late fees and lost hours at work.
• Pandora - Free radio anywhere streaming. No need for XM radio (I HATE commercials!)
• Maps: Traffic conditions. I can see where the bad spots are and go around them. This saves gas and time!
• WiFi Finder: If I need wifi I can use the finder app to find free wifi nearby. No need to pay for wifi somewhere!
• Quicken Online: I can check my account balances through Quicken Online on my phone. No NSF fees or over limit fees.
  
• Free Entertainment: Games, YouTube, Camera. If I am bored I can surf the net, listen to music, play games, watch youtube, take pictures. Why spend money?
• Retaurant Finders: Urbanspoon, Yelp, etc. I can find good places to eat nearby and specify a price level. No need to drag out a laptop and find wifi.
• Public Tranport: the Maps app can take you somewhere on public transport. No need for a cab. This saves hundreds in New York City!

I could go on forever about how the iPhone has saved me money. I limited the list to things that would apply to most people. With the iPhone now as low as $99 it is definitely worth the price tag. The rate plans are higher than standard phones but for the features you get it is well worth it. I constantly think to myself: "How did I live before this!"

If you have been on the fence about getting one I hope this post will help you decide.

Retirement Account Strategy: Priority List

The average person can be easily overwhelmed with all of the different retirement account choices. The rules can be complex and some wonder where they should put their money to be sure they are getting the best deal. Taxes and investment choices have to be considered.

I have come up with a prioritized list of how to invest your retirement money. You should do number 1 first, number 2 second, and so on. I also explain why each one is important.

1. Company 401(k) or similar plan - Do this only until you have maxed out the amount the will match. If the company offers no matching contribution skip to step 2.
2. Roth IRA - If you qualify contribute until you max out this one. Currently $5000 per year or $6000 if over 50. If you earn too much to qualify then do this in a Traditional IRA which everyone can have.
   
3. Company 401(k) or similar plan - once you max out the 2 above you can contribute over and above the matching limit to save on taxes. If your company plan has poor choices for investment then I suggest skipping to the next step. The tax benefit would be outweighed by poor returns.
   
4. Taxable Brokerage Account - If you max out all of the above (which is unlikely for most of us) you should continue to invest in a taxable brokerage account.

All of the accounts mentioned here comprise your total retirement assets. If you are investing some in a taxable account I would suggest having the bonds/cash portion in this account. They have historically lower returns and therefore less tax burden for you. You should not comprimise your asset allocation, though. If you max out the bond/cash portion in the taxable account continue to invest in stocks in the taxable account. Big picture is very important here.

This is a good general guide for everyone to use. Employer match is free money that should not be left on the table. The Roth IRA is tax free withdrawals in retirement and can save you thousands later. Following the above plan will ensure that you get the most for your money in the long run no matter how you invest.

Building Credit? Use a CD Secured Loan!

I found a great tool for building up your credit history and score. Some banks and credit unions offer a loan where you put money, say $1,000, into a CD. The term of the CD matches the term of the loan and the loan is secured with that CD. You make payments (on time, obviously) and they report the good credit activity to the credit bureaus.

The best deal I found is that a local credit union will charge you 3% above the interest rate on the CD. This is not a bad deal for building credit. You simply make the payments on time and you get the money back from your CD plus interest. 3% of a loan for $1000 for 1 year is $30. You are essentially paying them to give you a good credit history.

This is a great way to start to build credit history if you have none or to rebuild credit history after a rough patch. I personally suggest doing it one loan at a time with different institutions so you will have multiple on file. You can go back to these lenders later since you have a history with them if you need an actual loan that is not secured.

This is a better solution that credit cards since it is an installment loan. Credit cards are also good for providing history but they can be more difficult to get for some people. The lender has nothing to lose since it is secured with real money. It is a win-win for both parties.

2009 First Time Home Buyer Tax Credit

I personally was not sure exactly how this credit works so I did some digging and summarized it here for us in simple terms. Digging through tax law is rarely fun but in this case certainly worth the financial reward.

Here are my findings:

• Amount of credit: 10% of the purchase price up to $8,000
• It does not have to be repaid!!
  
• Types of homes: Single family, condo/townhouse, mobile, and houseboats
• Income cutoff: $75,000 single, $150,000 married (phases out starting at these levels)
• Refundable: Yes. If the credit exceeds the tax you owe you get a check for the difference!
• Purchase timeline: Between Jan 1, 2009 and Dec 1, 2009. Must be closed by this date!!
• Only for new home buyers: Neither you or spouse can have bought a home in the last 3 years.
• You must keep the home for 3 years after purchase in order to no have to pay it back
• You can get a loan for the credit now to pay closing costs and FHA 3.5% down payment.
• You can apply the tax credit toward your 2008 return if you so choose.
• You can base the credit on your 2008 income if you are subjected to above phase out.

You have to file IRS form 5405 to claim the credit on your tax return. This is also where you calculate the amount of credit you will receive.

As always consult a tax advisor to calculate your credit and if any of the above rules would help you get more money.

I am now a homeowner!

Today I closed on my first house. I bought a foreclosed home in Decatur, GA, an inner suburb of Atlanta, for a really low price. I estimate that my equity after the remodel will be around $30,000.

I used an FHA loan to purchase the house and it was quite a process with inspections, HUD rules, insurance, escrows, etc. It took me nearly 4 months from looking at the house to purchase but I am finally done with it and am happy that it worked out.

This weekend I will begin construction and try to get as much as I can done with my Dad in town. It is going to be a lot of work but a major payoff in the end.

New Vending Side Business up and running!

Lately I have been focused on boosting my alternative income and I am doing this by running a gumball/candy machine in my office building. It is great as I do not pay rent and it is an all cash business. I don't mind rolling quarters once a month!

I had a machine there for a couple of months before it was stolen. Our office is not in the best neighborhood and their was a rash of thievery in the building and they stole anything not bolted down. I was forced to replace the machine and chain it down in order to secure it.

At this point with my current money invested I am in the hole for $500. This includes the cost of 2 machines, candy, and items used to secure it. I was bringing in about $50 a month so I estimate it will break even in one year. I feel this is a good investment.

I would love to find more locations and will actively seek more once time permits. I have a membership at Sam's Club so I can get the supplies I need to keep the machine full at a low cost.

My Apologies

I know I am behind on posting and I do apologize. Trying to get my house ready for closing this week as well as working full time is monopolizing the majority of my free time. I will get caught up soon!

Heads up! SIMPLE IRA is not simple!

My employer provides a SIMPLE (Savings Incentive Match Plan for Employees) IRA retirement plan and I am starting to learn a lot about the rules and regulations. It got the name "SIMPLE" because it is easy for an employer to administer. However, it can be a bit complicated for the owner of the account as I have found.

Here are some major differences between a SIMPLE and Traditional IRA Accout:

• Contribution limits. You can put up to $11,500 (age 49 & under) in tax year 2009 versus only $5,000 (age 49 & under) in a Traditional IRA.
• Time: 2 years is the magic number for a SIMPLE IRA. If you take an early withdrawal (that is not qualified) within the first 2 years of having the account you get nailed with a 25% penalty PLUS normal income taxes. Ouch! Traditional IRA is 10% penalty no matter how old the account is.
• You get employer matching in a SIMPLE IRA account much like a 401(k) plan. There is no vesting period so the money is yours on Day 1. The matching is mandatory under IRS rules.

Most everything else is essentially the same as a Traditional IRA. The contributions are from before tax dollars. You can invest in anything the broker holdling the account offers. After the 2 year period is over you can convert to a Roth IRA if you wish. This is good for younger people as the tax payoff over the long term can be huge.

Buying a house? New PMI Rules!

This is another personal experience that I will share for those of you looking to buy a house in the near future. With the recent rash of foreclosures and bad deals the entire industry is buttoning down. It is a LOT harder than it was a couple years ago.

A little background on my scenario:

I am buying a 3 bedroom, 1.5 bath town home here in the Atlanta area. It is a foreclosure that needs work. I can put up to 5% down on the property with my savings. This puts me in the situation that I would need PMI or Private Mortgage Insurance.

I was informed that my credit score was not high enough to be able to obtain PMI. As it turns out the insurers are really getting hit hard now and they raised their minimum credit score to get PMI. I was blind-sided by this and had to change to an FHA loan last minute.

If you are unable to qualify for PMI and you don't have 20% to put down you are left no choice except to get a government sponsored (read: insured) loan. You still pay "mortgage insurance" but instead of private it is provided by the US Government. I am personally using an FHA loan with 3.5% down since I am a first time home buyer. My interest rate ended up being lower too!

This came as a complete surprise to me so I thought I should share my experience here. I will soon be rid of the insurance as once I get the house, do the repairs and upgrade, and get a new appraisal I will have more than 20% equity. This is a temporary headache (I hope!).

Since I am buying the house through a normal FHA loan I have to pass a HUD inspection. This put me in the unique situation where I have to do repairs on a house I do not yet own. The only reason I am doing this is that once the work is done on the home I should have close to $50,000 in equity. Worth the risk in my opinion.

If you are in the market for a home and will need PMI keep this information in mind. It would be heartbreaking to find a place you like to only find out 2 weeks away from closing that you cannot get it and have the whole deal fall through.

YouData.com - Earn Real Money for just minutes!

I have signed up for YouData.com which is a website where you literally get paid to click links (ads). You have to fill in profiles and they give you links to click that are targeted to you. They pay weekly every Friday by paypal.com.

So far I have earned about $2 from them in a month. It may not sound like much but it only took a few seconds to do. You simply log in and see if you have any ads available. If you do then you can click them and get paid. It is that easy!

I check it once a week to see if I have any waiting and do them. It takes me less than two minutes to complete.

If you want to sign up or learn more about YouData.com please click here!

LogMeIn, Inc. IPO

Disclaimer: This is NOT investment advice.

I have been a long time user of the free LogMeIn service that allows you to connect to any computer connected to the internet and control it remotely. We use it at work for some stuff and I also use it for my personal computers.

They also have a very nice iPhone app that I can control my computers from my phone. This is a company with a solid product and great support. I have not used too many of their other products but I suspect they are just as good.

They recently had their IPO and trade under the symbol LOGM. I am contemplating buying the stock as a long term hold. Being a smaller company with a good product I can't rule out the possibility of them being bought out by a larger firm some time down the road. This could mean good profits for stockholders!

Regardless of if they get bought or not I would be happy owning a few shares. I like to have a few shares of companies with good products as I feel they will do well in the long term. It would represent a very small portion of my portfolio, of course.

If you have never heard of LogMeIn you can view their website here. I highly recommend this for anyone who needs remote access to any computer anywhere!

Prosper.com back up for bidding (sort of)!

I got an email from prosper.com and it looks like that they have gotten approval from the SEC to resume business. I am happy as I can start reinvesting my money into more notes and earn a potentially higher return.

I must reiterate that prosper investing is not for everyone. You need to be skilled in financial analysis and lending. It is great as a small hobby or alternative asset to stocks but should not be a major portion of your savings.

They have made many changes for the better including:

• $25 minimum bid versus the old $50 minimum
  
• You can see the borrower's credit score range and Prosper's rating
  
• You see the actual yield after Prosper takes their cut of the interest
  
• Many website enhancements over the old one (too many to list!)
  

Now that lending and borrowing has resumed I will start giving monthly updates on how I am doing. Here is a stat shot of how I am doing as of today:

Outstanding Loans: 40
Late: 1 (< 15 days)
Current: 39
Charged Off: 1
Paid Off: 3

Open Bids: 1 ($25)

Total currently invested: $1543.62 (Principal Value)

Great Arby's Coupon!

I have found this coupon for Arby's online and have used it multiple times. You get a free RoastBurger sandwich of your choice with any drink purchase. Total cost is $1.59 plus local sales tax and is a good deal. The sandwiches are pretty good!

The coupon expires on July 16, 2009 but seems to keep changing expiration dates every few days. I am not sure how long this will last so get it while you can!

On a side note they also currently have freebie Wednesdays where they offer some sort of free item with purchase (usually a drink) and it changes every Wednesday. This is a great way to have a quick cheap eat on the go. For example, this week's freebie is a regular roast beef with drink purchase.

Enjoy!

Vacation Weekend: Las Vegas

I am spending today and the rest of the weekend in Las Vegas, NV. I am not a gambler but a friend of mine has a time share on the strip and I am using Skymiles for my ticket. This means a free vacation except for food, drinks, and entertainment. I jumped at the chance!

It was also her birthday so we will celebrate that as well. Even you are paying Vegas has a lot of great deals right now since the economy is down and few are traveling. I have seen really cheap rooms on the strip for weeks now. Of course free is always better.

If you are interested in reading more about my trip to Vegas once I am back then please have a look at my travel blog.

Fun times ahead!

Prosper.com Lending: Good, but not for everyone!

I have been a lender on prosper.com for some time now. I got in before the SEC silent period and have had good results. I belong to a group on Prosper and we have our own message boards to discuss all things finance.

A lot of people lending on prosper have had mixed results. A lot of my fellow lenders in my group have had a lot of loans default on them. Fortunately for me I have had only 1 go bad and that one was picked by a "portfolio" system that I found out was a very bad idea.

I like the idea of prosper and people lending to each other without using a bank. It can be a great way to earn money on your money IF you know what you are doing. You need skills in financial analysis and credit analysis as well. I am fairly strong in these areas and feel I have made sound lending decisions.

The down side is that you get people who lie. No amount of numbers, filters, or re-reading can protect you from that. It comes down to a personal judgment call which will not always be right. You can get carried away by the high rates that people will accept and not see that one small detail that is a red flag. Some people are truly skilled at spinning information and cheating people.

When I was lending and bidding on loans I was quite selective and so far that has paid off. I am reaching the 1 year mark with some of my loans and to only have 1 default and 3 pay in full out of 43 is pretty good. I am also a borrower on prosper for a small loan to help build my credit and reinvest the money at a higher rate (not recommended for everyone!).

I am looking forward to the ability to trade my loans on a secondary market so I can dump some that are paying but do not fit my "mold" of a good borrower. I mainly wish to sell the ones that my portfolio plan picked for me and I do not like but luckily have not been late yet.

If you do decide to venture into social lending please do your homework first. Learning the hard way is NOT the way to learn about finance and investing. It hurts your bottom line and cause much undue stress in your life. I only suggest it using a little of your investment money and be conservative.

Check your credit and check it often!

I recently had an experience with American Express that stresses the important of checking your credit report 1 time per year (free once per year for all 3 bureaus at annualcreditreport.com) and make sure everything is in order. I will use my true life story to make the point:

American Express recently started slashing people's credit lines in order to reduce risk. This makes sense as defaults are up, the economy is down, and unemployment is at near depression levels. Personally, my credit lines were slashed too low and I need a higher limit for work related business expenses. What a pain!

To make a long story short American Express claimed they saw a serious delinquency on my credit report. Turns out that a dispute with another creditor of mine that they cashed the check for my payment but did not post it drug on for nearly 4 months. On paper, my account was VERY past due. AMEX saw this and dropped my limits.

After getting transferred around and many mixed answers I was told to fax them a copy of my Trans Union credit report. I had pulled my report and saved it back in April of this year and they said that would be fine. I immediately faxed it over.

Today when I logged into my accounts and I notice that my spending limits were back up to reasonable levels. I am happy to have this sorted out and back to normal. It took 2 weeks of fighting with them over the phone to get to this point.

The moral of the story: Be SURE that everything on your credit report is 100% accurate. If I had not caught this issue I could have been denied credit for other things such as an auto loan, another credit card, or even a mortgage. It is free and takes only minutes so their is no reason not to do it.

A lot of people who have not checked their credit in a while see some unpaid utility bill or other small item that puts a big dent in their credit score. This can cost you potentially thousands in interest rates and other fees due to your "higher risk" as a borrower. A little time now can save a lot of headache, money, and paperwork later.

Checking your credit report annually also helps prevent and stop identity theft. If someone opens accounts under your name you will no as they will not look familiar to you on your report. The sooner you catch it the sooner you can start getting it corrected so you can get you financial life back to normal. This is another reason to SHRED or BURN EVERYTHING.

Be sure to give your credit an annual checkup. I do mine in the spring as part of my financial "spring cleaning" where I check my credit, re-evaluate my portfolio asset allocation, and adjust any long term goals as needed. Taking this simple step will make your financial life a lot easier in the long run!

Credit Cards: Adding authorized users creates liability!

I am sure some of you, as I have, get offers from the credit card companies to add a second (or even more) users to your account to earn more rewards with the card. This creates some problems:

• Trust - you are trusting another person with your account AND your credit history. This can be bad for relationships and your financial health too. You have to be very selective!
• Liability - By adding an "authorized user" you are actually adding them as a joint owner of the account. The account appears on their credit report too. If they don't pay for their purchases the creditor can come after you and vice versa.
• Risk Reduction - The creditor wants you to add users so they have someone else to go after if you do not pay. Since the account is listed on every user's credit report as a joint account they can feel the negative effects of being late. This, in effect, reduces the risk of default to the creditor.

Those are the negative parts of adding an authorized user. Their also are some positives that can come from this situation if done correctly:

• Extra Rewards - This part of their advertising is true. You do earn rewards on their purchases as well as your own. This can add up big over time and is worth it if they are responsible.
• Establishing/Maintaining Credit Score and History - Parents can use this to help establish credit for their kids. This requires a high level of responsibility on the part of the parents and the child but can be beneficial for both in the long term for their credit score. A popular choice is to do this when a child goes to college. Be very clear on the rules!
  
• Limits - Some companies allow you to set a spending limit for each authorized user. This can limit your risk in the event they do not pay. Businesses do this all the time when they give employees a company credit card.

Sharing a credit card account with someone else is a more complicated decision than it seems. Using the guidelines above you can make an educated choice on whether or not to do it. I always recommend they try to get an account of their own first and do this as a last resort.

Tired of your bank? Join a credit union!

With the recent bank failures, mortgage crisis, and general bad economy all around people are looking for a safe place to put their money. Bad times for banks can lead to higher fees, more stringent requirements for loans, and lower interest rates (on savings). My answer to this is to join a credit union.

I have done some research and found a great article about credits here on MSN. It gives a comparison of typical rates on a wide range of products and the credit unions were better in all of the categories. I was also speaking to a friend the other day and was informed that since credit unions are non-profit the members get a check every year if the credit union makes a profit!

You will never see this from a bank! I was a bit shocked to hear this. Not only do you get better interest rates on savings AND loans but you could also get a check at the end of the year for your share of the credit union's profits? Wow. I am sold!

If you are looking for a credit union nearby then go to joinacu.org and do a search. A lot of credit unions have open membership and is well worth the small fee, if any, to join. I, like others, was concerned about ATM access but you can use any other credit union's ATM's since they are all in agreement with each other to provide this access. This makes the switch a no brainer!

July 2009 Net Worth Update

My net worth as of today is (47,741.22). It has increased $145.42. The low increase is due to my stock portfolio losing value. It has also been only 2 weeks since my initial update.

Other events that will help my numbers for next month:

• I got a 5% raise at work that starts next pay period
  
• I am getting a bonus that will pay down some debts
• I am buying a house that will add a lot of equity to my assets

Alternative Income for this month:

• Youdata.com: $1.90
• Found $5 on the ground
• $0 rebates
  

Unemployment: Things to do to make extra money

I was unemployed 2 years ago and am thankful to have a job now. The job market is bad at the moment and I have decided to share some advice on how to make extra cash while jobless. Some is obvious and some not. Feel free to comment with something I may have missed!

• First make sure to apply for unemployment. Even if you think you do not qualify you can still try. It costs nothing to apply at the local office.
• Sign up for focus groups. If you are in a major city their are companies that hold focus groups on products of all kinds and pay well. Average pay here in Atlanta is about $50/hour and up. I did several of these while unemployed and that got me an extra $250 in 2 months.
• Become a mystery shopper. Lots of online companies pay you to go shop local businesses and you usually get something free out of the deal AND money. Most do not pay a lot but every little bit helps when unemployed.
• Sell stuff on ebay and books on amazon.com. Now is the time to unload on stuff that is not absolutely necessary to have. Would you rather have 100 books or pay the power bill this month?
• Have a yard sale. Anything too big or not popular on ebay can be sold in a yard sale. Quick cash and easy to do. A friend did this once and gave out free bottled water to those who showed up. Most of them bought something and usually more than the cost of the water.
• Collect scrap metal and sell to the local scrap yard. This is not for everyone and you most certainly cannot live off it. If you have a truck you can drive around and pick up scrap metal. Good items are old appliances, sheet metal, fencing, etc. Be sure to separate aluminum and copper as they are worth a lot more. You need A LOT to make it worth while but a full, heavy load of metal can bring you about $40-50 here in GA.

As always the best solution is to have an emergency fund. The above items can help pay the bills and reduce the need to use as much of your fund. You will be surprised how far an extra $100 can take you when you are not working!

10 Simple Little Changes that can save money

Everyone likes to save money. I have come up with 10 smalls things that you can do in order to help stay under budget or reach a small (< $100) goal. Doing this can save you between $5 - $20 and that adds up!

1. Have a "veggie" day. Basically you decide for 1 day you won't eat any meat. I personally love to eat meat but can handle a veggie day once in a while. I normally do this once a week. I find that my meal cost is cut in half whether that be at home or eating out. It is always cheaper. Beans are always a good filler.
2. Cancel a magazine subscription. Have magazines piling up that your don't read any more? Go ahead and recycle/donate them and cancel the subscription. This can be an easy $20 saved by not being lazy!
3. Plan a day of things to do at home or walk/use transit. Not driving your car saves on wear and tear and more importantly gas. I am sure there are plenty of things around the house to do that you have been putting off. Also be sure to combine errand trips to save on gas in the long run!
4. Be sure to read the grocery store flyers! They have some good coupons and good specials. Be sure to take advantage when something you use regularly goes on special. Make room and stock up!
5. Sell your books on amazon.com. This works well as you can see the lowest priced used book and undercut by 50 cents. I find that most of them get bought up pretty fast if they are a more popular title. Also get any future books at the library!
6. Go through your closet and try to get rid of at least one third of your clothes. Take any name brand or high end stuff to a consignment shop and donate the rest. Tax write off too for donations!
7. If you buy items with a rebate put the rebate checks directly into your savings. Chances are you won't even miss the money by the time it arrives!
8. If you eat out lunch often like myself then it is best to stock drinks at work or even drink water and skip the drink. They are often pricey and add a lot to the cost of lunch (or dinner)!
9. Keep an eye on coupons and get the local Sunday paper. I especially focus on groceries, home improvement/maintenance items, and auto maintenance. This adds up fast!
10. When shopping for cleaning supplies, cosmetics, or toiletries make sure to look for the largest size containers. You almost always save money in the long run by purchasing the largest available as it lasts longer and costs less per unit (ie ounce or pound). Don't forget to check out the store brands of the same item too!

I know that all of the above may not be practical for everyone but even doing a few of them will make a difference. Give it a try and see how much money you can save!