Tuesday, May 30, 2006

Credit Monitoring

Well, as a continuation of my previous post, I went ahead with my 0% balance transfer plan. Just to recap, I've extended myself a $33000 line of credit from MBNA that will go straight to a GMAC savings account and earn interest until January 2007 at which point, I will pay off the entire balance as the 0% offer expires.

As part of a little experiment, I wanted to see how much doing this would affect my credit score. While obtaining a credit report is free from annualcreditreport.com, obtaining your FICO score is not and can run up to $45 to obtain all 3 scores.

So I signed up for a 30-day free trial credit monitoring service provided by Experian which also provides what they call a PLUS score which I had never heard of. According to Experian, it ranges from 330-830 so I thought it is a very similar scale to the FICO score. Now, I think paying a monthly fee for "credit monitoring" is a waste of money; if anything, credit card companies should provide this service for free since they will benefit most from it from not having to absorb any fraudulent disputed charges. Nonetheless, I plan on canceling my free trial but I did obtain my credit score pre-0% balance transfer... a score of 784.

It's amazing how many different credit accounts (many closed) that I have listed on my report. Just my student loans alone are something like 7-8 accounts although I long ago consolidated them into one. Back to the main point. The line of credit has shown up on my MBNA credit card statement but has yet to be transferred to my checking account.... I'll keep updating..
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Thursday, May 25, 2006

0% balance transfer

After pondering for several days, I finally decided to take advantage of a 0% balance transfer offered by one of my credit cards, MBNA. Now, I pay off my credit cards every month and never carry a balance, but have come across the notion of making money off balance transfers from other bloggers. It works like this... my credit card sent me a mailer with checks and a 0% balance tranfser promotion. The offer gives me the option for them to either pay off a pending balance or to make a direct deposit into my checking account. I have 0% APR on the balance transfer until January 2007.

The cost: $75 fee for the transfer. And a ding on my credit score because it will increase the percentage of credit I have outstanding relative to my overall credit amount. According to FICO, this will affect 30% of my credit score... how that translates numerically is unclear to me.

Now, I am planning on purchasing a car in the next 6 mos; however, I will likely have my wife apply for any financing that we might do as I likely lowered my score by these antics.

The payoff: I will transfer $33000 to GMAC bank which is currently paying 4.75%. I opened up a new account just for this balance transfer to keep it separate from my other money. This will translate to approximately $130/month or ~$900 in FREE interest for the next 7 mos. It will be slightly less than this as I have to pay 1% of the balance per month to maintain the 0% APR.

The fine print: Pay 1% of the balance on-time every month. Purchases do not qualify for 0% APR. If purchases are made, any payments will be applied to the LOWEST APR first.

What I really debated was whether doing so was worth a ding in my credit score. What I might do is obtain my credit score now pre-balance transfer and then after my balance-transfer to see what happens to my score. If it drops it to < 700 I'm going to be pissed off.
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Saturday, May 20, 2006

Need new car: Fighting the urge to keep up

Cell phones and (dumb) drivers just don't mix. While mostly everyone has been annoyed by another driver on a cell-phone, I was never affected directly... until last month. Some knucklehead crashed into my beloved 1994 Nissan Altima with 150k miles on it forcing my hand into needing to replace this car. Turns out, the guy was looking for his cell phone and didn't notice the red light, thus plowing into the side of my car and royally "effing" it up. Now, I love nice cars as much as the next person and this being the first real car that I will have to purchase... I was not nearly as p.o.'ed about losing my Altima as I should have been.

So what to buy? The first thought that came to my mind was a nice German-engineered car ... something like the BMW 3 or the Audi A4. Being in San Diego, I spend a lot of time on the freeways and thought that I should drive something enjoyable. Plus it has to look good right? But then, I decided to make a spreadsheet comparing the price/horsepower/enginesize/MPGs for various cars and to my complete disappointment, it seems that the best values (for my price range <$35k) are either a Toyota Camry, a Honda Accord, or a Honda Civic. But c'mon, I'm in my early 30s and a Camry is just not the car that I envision myself driving AND having fun doing so.

The urge to keep up with the jonezez and go for a nicer car versus pursuing the most "bang for my buck" are completely in conflict. Boring-ass Camry that will likely last 10-15 years versus nice-looking Audi/BMW/Lexus/Infiniti but pay an extra $5k-10K? Man... in the end.. all I really want is my Altima back!!! I still haven't gone for a test-drive but will keep posting how the car-buying process goes.
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Thursday, May 18, 2006

Fidelity Rollover IRA part 2

Well, I've initiated the rollover IRA process in my employee-sponsored account held at Fidelity. The transfer hasn't been done yet because my employer requires a notarized signature which I have yet to obtain.

My current allocation in my 403b is as follows:



While my preference overall is Vanguard, I've been pretty satisfied with Fidelity thus far and will keep the rollover with Fidelity.... for now. I'm predicting that completion of the transfer will take place over the course of 2 weeks.
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Monday, May 15, 2006

Fidelity Rollover IRA

When I changed jobs from Cleveland to San Diego, I "left behind" one very important thing... my 403b account. My old employer used Fidelity as the custodian and I basically had access to all Fidelity funds plus a sprinkling of others (some Janus and Pimco funds). When I started my new job in San Diego, the 403b account also uses Fidelity as the custodian. Because both employers used Fidelity, I never felt the need to do anything with my old 403b account. There were no extraneous fees or what I felt was limited access to sub-par mutual funds since I could access the entire Fidelity lineup.

Today, I called Fidelity asking about the pros/cons of rolling over my 403b into an IRA. It boiled down to the following: more flexibility and more favorable status for beneficiaries on the IRA. More flexibility meant that with a rollover IRA, I can access many more mutual fund companies and even ETFs. Apparently, Fidelity has agreements with some companies (Janus and Pimco for example, notably, NOT vanguard) where you can purchase their funds and not pay a transaction fee ($75). The other positive of a rollover IRA was if I happened to be so unfortunate as to die, the rollover IRA would continue to remain in a favorable tax status to my designated beneficiary (i.e. spouse) and not necessarily be cashed-out. If I died and my money was still in the 403b, the employer would most likely cash-out the money and pay out a lump sum to my beneficiary, thus losing tax-benefit status and also incurring a penalty to the IRS.

For these reasons, I have decided to change my 403b over to a rollover IRA (the final option is to not rollover and just cash-out... this was not an option for me). In addition, Fidelity provides portfolio advice!

Now, for those that have read my blog, you know that I am a much bigger Vanguard enthusiast and often criticize Fidelity. However, I have been pleased with my returns in my retirement account at Fidelity so for now, will keep the rollover with Fidelty. I will keep you posted on the whole rollover process. I wonder if during the advice session, Fidelity will encourage their own mutual funds?
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Thursday, May 11, 2006

Supreme overdiversification

Found a cool website that lists the investments of all judges. What does chief justice Roberts have in his portfolio? 46 common stocks and 31 mutual funds plus other miscellaneous investments. Granted, I have no doubt that being as busy as he is, he must have professionals managing his investments. While I give him props for owning several low-cost Vanguard funds, there is significant overlap in some of his holdings. For example, he owns Fidelity Contrafund, Magellan, and Scwhab S&P 500. Why own the more expensive Schwab index fund when you can just go with Vanguard 500 index? Just interesting to see that even professionals with professional help often don't get good advice.
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Tuesday, May 09, 2006

Dow near record high: BOO!

Ok...I must admit, although most "experts" state that once you invest money in the market, you shouldn't follow your investments on a day-to-day basis, I intently track the market on a daily basis. This advice from the experts stems mostly from behavioral economists that have shown we are our own worst enemies and tend to act irrationally when it comes to investing. We have the tendency to buy high and sell low as opposed to the other way around.

But come on, part of the fun is tracking your investments and I am guilty as charged. I find it hard to expect people to not follow their investments. The key is to not act on the day-to-day fluctuations of the market (unless you are a superstar investor). Bill Bernstein gives the analogy of walking your dog to the park. The dog will dart from side to side (day to day fluctuations) but the final destination is eventually the park.

Why am I booing as the DOW nears it's record high? Because I am relatively youngish and am buying into the market for eventual retirement. So I dollar-cost-average into my 403b and a Roth IRA every month. But the analogy of me buying into the current bull market is like buying a pair of jeans that are priced high. When we all go shopping, we look at the sale rack first and try to get those jeans cheap. This is equivalent to investing in a down market. It would be to my advantage if the market was actually tanking right now so that as I continue to invest, I am buying things on the cheap. For those that are near retirement age or are hoping to realize some of their gains, of course, it is to their advantage to have an upmarket so they can sell high.

So while the Dow continues to climb and I feel good about my investments, I really should be more disappointed as it is equivalent to buying those Diesel jeans at regular price rather than buying the Garanimal brand at Sears.
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Friday, May 05, 2006

Tax Refund

Most that have filed taxes for 2005 have already received refunds, especially if the choice is for direct deposit. The numbers are in for the amount of federal income-tax refunds and for 2006, it is $190.52 billion dollars!!!! The average refund was $2237.

Basically, this amounts to an interest free loan that taxpayers are providing to Uncle Sam interest-free. If you did get a large refund, consider changing your withholding (W-4) form to decrease the amount that is witheld from each paycheck and thus decreasing the amount that you are loaning to the government.

Consider a $2000 refund. If you leave this in an internet savings account such as ING direct or Emigrant direct with a 4.5% interest rate, this amounts to about $90 in interest over the course of the year. Not much right? Hey, but $90 can buy you a nice dinner for two, several movies, even a cheap wetsuit if it so interests you.

The only time I think it's OK to get a large refund is for those people that have trouble saving money. Then, having a large amount withheld is sort of a forced savings account. Just make sure that when that big refund check comes, the money should be saved or spent wisely.
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Wednesday, May 03, 2006

Roth IRA for the wealthy

There is a bill that is currently going through congress that would allow high-income taxpayers to convert traditional IRAs into Roth IRAs. Apparently, the current $100,000 income limit on such conversions will be suspended for 2 years (WSJ, 5.3.06) if the bill is approved. Now, while this legislation will not affect me as my income is below this ceiling and I already contribute to a Roth IRA, I totally support this type of tax legislation. I just don't agree with the message from tax policies that seem to penalize people with higher incomes by taxing them more and/or not giving them the same access to tax-benefits (for example, income limits on Roth IRAs). The message seems to be, "The higher the income that you earn, the more you will get taxed/penalized". Look at the alternative minimum tax.

So legislation like this that removes income ceilings seems and allows wealthier individuals to access the same tax-benefits as everyone else seems fair to me. Of course, the downside will be to figure out how the government will be able to make up for some of the lost tax-revenue that will result from any tax cuts. Unfortunately, given the current state of affairs with worsening deficits, low savings rate, foreign dependence on oil, weakening dollar, the rise of China and India, aging population and slow erosion of social security, we may be in for some serious sacrifices and more than likely, possibly higher tax rates. All the more reason to convert to a Roth IRA if you haven't already done so.
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Tuesday, May 02, 2006

Surfing San Diego

So much blogging about finance stuff, but still no posts on the surfing as I had originally intended. But choosing to surf has to do with finance... at least indirectly.

So as I enter my 30s, the body just doesn't hold up as well... pants start to get a little tighter, get the occasional sprouting of grey hairs, fatigue kicks in earlier. So I thought, I need to do something to keep physically fit... but preferably something inexpensive, hence the tie-in to my personal finances. Being in San Diego, how can you pass up on the surfing? plus, going to the beach is free and you need minimal equipment. But I'm starting to realize that surfing becomes very addictive, subsequently putting me into a positive feedback loop of more and more purchases.

Expenses thus far:
1)used surfboard $275
2)Oneil psycho 2 wetsuit $200 (hook-up, reg price is $395)
3)Quicksilver backup wetsuit $100
4)Yakima Surf rack set-up for my crappy car $375
5)Leash $25
6)Board shorts x 2 = $40
7)Boat-loads of sunscreen = $20
8)Surf hat to keep sun off = $20
9)Wax $10
10) now looking into another surfboard purchase to diversify ~$300-500

That's well over $1000 and pushing $1500 if I buy another surfboard. Not so cheap afterall... but the way I see it, it will keep me in shape, I enjoy doing it, and there's nothing like the gratification of being able to go at will without having to pay any type of fee (like a course fee or lift ticket, etc). Maybe I should invest more time and energy in learning to play poker well where there is a potential for positive returns.
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Monday, May 01, 2006

Nigerian Scam...In Japan

So some genius felt that it was best to try to scam someone by posting on the comments section of my blog. I can barely even understand what the heck they are trying to ask...of course, how does this relate to personal finance?

There is no such thing as having returns without risk (the closest thing perhaps are treasury bonds, money markets, FDIC savings accounts).

Check out the scam below:
"I need your help.
So I manage as anybody find only your benefit without your loss and risk.
If you can not trust me after you reed this, please teach me how I can trick you.

I want to buy a thing which I can not buy it in my country.
And I can not make a credit card.So I can not pay.
So please buy and send it to me.

In total, I pay you about US$ 2000.
It costs about US$ 450 - US$ 500.
I need two kinds of them. so US$1000 for one.
To trust each other, I send US$1000 whenever I get one of them.

I pay US$ 300 in advance for it and the other after I get it.
So no risk for you.Please send a reply.
Then I can write detail of the thing.

I pay total because I need your cooperation for my life.
I wish you do before it.

-Uh... thanks loser. can i call you so I can just GIVE you my credit card #, SSN, and/or bank information?
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