August 31, 2014

4 Good Credit Card Sign Up Bonuses

The four credit cards linked to below are worth about $400 in rewards (or more) if you spend $3000 in the first 3 months.  

Chase Sapphire Preferred
Bonus of 40,000 miles after you spend $3,000 in the first 3 months
You can also get another 5,000 points by adding an authorized user.
Annual fee $0 the first year and $95 after
40,000 miles can get you $500 in travel
Plus you can transfer your miles to your airline mile accounts at a 1:1 ratio without fees.

Capital One Venture Rewards

Bonus of 40,000 miles after you spend $3,000 in the first 3 months.
Annual fee $0 the first year and $59 after
2 miles per dollar spend on purchases

40,000 miles can get you $400 in travel expenses

Barclaycard Arrival Plus World Elite

40,000 miles when you spend $3,000 in the first 3 months
Annual fee $0 for the first year and $89 after
2 miles per dollar spent
 Miles can be redeemed for travel plus you get a 10% credit in points when redeeming

Wells Fargo Propel World American Express Card

40,000 miles when you spend $3,000 in the first 3 months
Annual fee $0 for the first year and $175 after
3 miles for airlines, 2 miles for hotels and 1 miles for other
You can use miles for travel or other tings like a statement credit of 1¢ per mile.

Note that all 4 cards have annual fees that are waived in the first year but fairly pricey after that so if you do sign up for one of these its probably best to cancel after the first year to avoid the fees.  Assuming you don't value the card enough to warrant the fee, which might be possible.  But you might also be able to downgrade to a different card if you like the service.  Barclaycard has a no annual fee version of their Arrival World card.

I don't have any of these cards myself though I do have a Chase card and a couple Barclaycards now.   Note that the links above are not commission links.   These just seem like good deals.   Please be sure to read up on all the terms and conditions if you're interested in signing up for a card. 


August 29, 2014

Best of Blogs for Week of August 29th


MyMoneyBlog discusses the Effect of Student Loan Debt on Homeownership Rate

DQYDJ answers the question What is the Savings Rate in Other Countries?\

DQYDJ also presented Where Do Residents of the States Come From? A Demographic Study of 2012 Census Data   which lets you look up the number of people who migrated to states from various other states and nations based on age ranges. Which is kinda interesting.    In that same area, the NYT published this Where We Came From and Where We Went, State by State which has really neat charts showing state to state migration flows going back to 1900.    You can use these to see for example that the outflow of people from California may be exaggerated.   For example in 2000 a full 76% of the people born in CA still lived there and by 2012 it was down to just 75%.  Not a huge difference, and by comparison in Alaska the numbers were 53% in 2000 and 50% in 2012.  OK I'm writing too much...


August 28, 2014

How Often Are Renters Evicted?





It seems that this is probably a fairly accurate estimate then.

My conclusion :  About 0.5% of renters are evicted annually.


August 26, 2014

MOST Students Go To Universities Where Tuition is Under $12,000

It seems typical when a news report is talking about college costs they'll cite one of the most expensive universities in the nation where the full retail sticker price including tuition, fees and room and board is in the ballpark of $60,000.    Then they'll go on to talk about someone who graduated from the overpriced school with a basketweaving degree who has over $200,000 in student loans somehow.   THis clearly isn't the norm.  Its the exception to the norm.    I've already discussed before about how a very small fraction, 0.3%, of undergrads end up with over $100,000 of student loan debt.    But how many students go to those over priced private schools?   Very few.

The collegeboard has the data in a nice chart on their site showing the distribution of students who attend schools by the published tuition & fees rates :
Distribution of Full-Time Undergraduates by Tuition and Fees

Full time undergrads go to universities with a median published tuition & fee rate of $11,093.

Pubic schools median is $9,011 and private nonprofit is  $31,290.     Most students go to public schools so the overall median is much closer to the public school rate than the higher private school cost.

About 2/3 of students go to schools with rates below $18,000 and 81.9% are at schools charging under $30,000.

88% of public university students are at schools that cost UNDER $18,000.    84% of students are in private schools that cost OVER $18,000

The vast majority of public universities charge under $18,000 and the vast majority of private universities charge over $18,000.

Keep in mind that these are the published tuition and fee rates and that most students also receive financial aid of some form so the actual net cost to students is less.

 While the average tuition at public schools is $8,890 in  the '13-'14 school year the NET paid amount is just $3,120.    For profit schools the average was $30,090 and the net was $12,460.   You can find the net pricing in the college board trends in college pricing data.   Specifically see Fig. 10 and Fig. 11 in the XLS data.

In 2012 the average student aid in grants was about $7,200 and tax benefits averaged $1200.   See college board info on trends in student aid.
Of course this figure is an average while the other figure is a median.  And aid will be weighted at the lower income group.   So the two figures don't really match.


August 24, 2014

Amazon Subscribe & Save Filler Items Updated August 2014

I'd previously compiled a list of items that Amazon sells as Subscribe & Save products that cost under $2.  However that list is mostly now obsolete and most of the items are well over $2.   I think all but the Barilla pasta was over $2.

Here's an updated list of items under $2 picked as of August 2014:

Glade Plugins Scented Oil Warmers = $1.32

Suave Naturals 2 In 1 Almond Verbena Shampoo, 22.5 Ounce = $1.42

Barilla PLUS Spaghetti Pasta, 14.5 Ounce Box = $1.42
Bull's Eye Texas Style Regional Barbecue Sauce, 17.5 Ounce Bottle = $1.42

Pringles Fat Free Sour Cream and Onion Super Stack, 5.43 Ounce = $1.44

Kraft Shake N Bake Seasoned Coating Mix Box, Parmesan Crusted, 4.75 Ounce = $1.90

Orville Redenbacher's Gourmet Naturals Popcorn, Garlic Butter and Sea Salt, 76.3 Grams, 3 Count = $2.07

OK that last one is over $2 but hey I figured its popcorn and it would have pretty wide appeal.





August 22, 2014

Best of Blogs for Week of August 22nd


Linked from The Big Picture : If You Used Valuation, You Would Be Out of Stocks Since 1993

FMF discusses an article that concludes It Takes $130k to Live the American Dream


August 21, 2014

10 Times I Told People They Were Wrong






Money CAN Buy Happiness 








August 19, 2014

An Unpleasant Experience With Sears

My wife and I went shopping for a fridge.    We found the make/model we wanted and ended up buying one at Sears.   The fridge we got retails for about $2500 but it was on sale and we got a discount with our Sears card so it cost us around $1800 plus an extra $70 or so for delivery & install.   Bestbuy had the model in question for about $2100 at the time.   We've generally been happy shopping for appliances at Sears as they have a good selection and good prices.

The fridge was to be delivered on a Tuesday around 8:30 AM.   That morning about 7 AM or 7:30 AM they called my cell phone and left a couple messages.  One of the messages said they had discovered a dent in the side of the fridge but since they couldn't reach me they would just deliver it anyway but should be able to offer a discount.   I told my wife about this and she wasn't pleased about the dent since if we'd wanted a dented fridge we could have shopped at the Sears Outlet and gotten a steep discount.   My wife felt that we should be able to get 50% discount but I figured that would be on the high side and I told her I expected maybe 10-20% off.   We were both far too optimistic.

The delivery guys showed up around 9AM give or take.   They unboxed the fridge and showed me the dent.   It was a very noticeable dent and not a simple scuff or anything.   It was about the size of a quarter coin and maybe 1/16" deep.    BUT the dent was on the side and should be hidden when installed in our kitchen due to the way our cabinets are setup.   Of course that wouldn't be true for other customers, in my old house that dent would be totally visible since there aren't cabinets on that side.  I asked the delivery guy about the discount mentioned on the phone message and he wasn't aware of that so he called some sort of Sears customer support number and he gave me the phone.

I talked to the service person myself.   The service lady offered me a whopping $30 off OR a 10% coupon of some sort.   I turned that down flat and told her she had to do better than that.   She then replied that she could go all the way up to $50.   No I told her again thats not good enough.   I asked she talk to a supervisor.    She put me on hold and then came back to say the $50 was the best she could do or she could give me 10% off...   I cut her off there and told her I didn't want a coupon.   She said the 10% would be off this purchase which seemed to contradict what she told me before.   In any case the $50 or 10% off coupon was not nearly enough to compensate for taking damaged goods considering we expect a 30% discount in their outlet store.   I told the woman on the phone
"no thanks" and the guys packed up the fridge and drove off.   Neither the woman on the phone nor the delivery guys knew when they could get me another fridge.

I went home and told my wife the story and she was equally irritated and surprised that Sears would only offer $50 discount on a dented major appliance.    It doesn't make much financial sense from two perspectives.   First, Sears will probably spend $50 just to make a second delivery when you account for the hourly wages of two delivery guys plus the gas in their big gas guzzling truck.   Second, bigger reason is that they will give much steeper discounts on such dented fridges in their outlet store.  Now they have to turn around and sell that fridge in the outlet store for a steep discount.  If they'd simply given me that steep discount they could have made the sale right then and saved another trip.

After talking to my wife at home I was still annoyed by the whole thing and surprised that $50 was the best Sears would actually offer.   I decided to call them again and ask about it to see if this is really their policy.  I also needed to try and find out when they could deliver another (non-dented) fridge.

In my second call I first talked to a service person who gave me the same story and offered me the $50 discount.   They didn't know when the 2nd fridge could be delivered.   I asked to talk to a manager and they told me that their manager would just say the same thing.  I insisted.   That person put me on hold then transferred me.  When the call picked up I found I was talking to my local Sears store for some reason.  The first customer rep had just cold transferred me to the local store rather than get her manager on the phone as I'd asked.  I told the story to the person at the store again and they transferred me to another department.   The third person I talked to couldn't help much either but they did transfer me to a supervisor of some sort.   The supervisor was the fourth person I had to talk to and the fourth time I repeated the story.   I explained the situation to the supervisor and she offered me a whopping $100 discount.   No thanks.   At least the supervisor was able to tell me they could deliver the second fridge on Saturday so that was not too far away.

Now while I was waiting on the phone and being transferred between every Sears employee I had gotten on the net and looked up the Sears Outlet.   In the Outlet store I found the SAME model fridge in an 'open box' state with some sort of dent damage for about $1500.  The outlet store website show the exact damage but I at least know that you can get a substantial discount via their outlet on damaged merchandise.    Knowing that they'd have to cut $300 minimum off our already good sales price or $1000 of the full retail due to dents, I figured that them offering me $100 off wasn't very good.  

In the end the second fridge was delivered promptly on Saturday with no damage.  We got what we paid for, and it just took a little longer and subjected us to some inconvenience and several annoying phone discussions with unhelpful Sears employees.

There are a few things  I'm unhappy about with this whole experience.
1. The initial offer of $30 discount on a $2500 appliance was pretty insulting and the fact that they would only go up to $50 was really no help.
2. Sears wasted their own time and effort making two deliveries here and if they had instead given me a good discount on the dented fridge they would have completed the sale and saved a second delivery.
3. Now Sears has an unhappy customer ranting about it on the web and they still have that dented fridge they have to try and sell to someone else at a steep discount.
4. When I called Sears the customer support that I got was pretty poor.   I asked to talk to a manager and the service rep just dumped me on the local Sears store.   I was transferred between 4 people in that second call.
5. I don't recall anyone I talked to on the phone being particularly apologetic nor empathetic, (not counting them reading words on their scripts).

The only positives are that
1. the delivery guys were pretty nice about it and understanding.  
2. I didn't get any hassle or run around about getting a replacement new fridge.

One semi ironic detail:  I am now a VIP customer in their Shop Your Way Rewards program.   Let the exclusive VIP treatment begin!

An extra note :  This situation with the fridge actually happened quite a while ago and I'm only now gotten around to writing about it. 

- -

August 17, 2014

What Would it Take For Me to Retire Without Moving and/or Cutting Spending?

The other day I figured if I could retire  or not and how much income we'd have.   That plan depended on moving to a cheaper city and cutting our spending level a fair amount.  But what if we wanted to stay in our current house and didn't cut our spending?  How far away are we from being able to hit that target?

To retire yet not change our current standard of living would require a higher income target.  We'd have to pay off our house and have about $67,000 of income to cover our current spending levels.   That would cover health insurance and out of pocket costs of $10,000 since with that income level we wouldn't get a subsidy.  Our property tax and other expenses would be a lot higher if we stay where we are as well.   Plus right now we do spend a fair amount and this wouldn't include any cut backs in spending or additional frugality.  

Our current retirement funds would get us $12,000 towards the goal.   The rentals we own out of state generate about $6000 of profit.   That leaves us $49,000 short of the goal.

Our current rental properties don't have a great return on capital.   Profit after expenses is only about 4% of the total capital.     If we paid off our mortgages and bought more rentals in this area with similar return it would take roughly $1.1 M total more than what we've got now to get to the point that we could stay where we are and maintain our current spending level as well as pay for health insurance.

Don't move or cut spending = $1.1M short of target

Another option would be to move back to my home city yet keep our current level of spending.   This would be cheaper since housing, taxes and overall cost of living are cheaper there plus you can get better returns on rentals.     That route would probably cost around $670k more than what we've got now.   That would cover the cost of more expensive and nicer house as well as more rental properties to provide higher income level.

Move but don't cut spending = $670k short

One last way to go would be to stay where we are yet cut back on spending.   This option would require an income of about $43k and a bit cheaper paid off house.   TO hit that level I think we'd need about $300k more than we've got now.   The difference with this option is that I'd get a lower return on our rental properties in our current city since cost of real estate is higher here.

Cut spending but stay in current city= $300k short

These figures are all very rough estimates.


August 15, 2014

Best of Blogs for Week of August 15th


DoughRoller  discusses the 3 Key Changes Just Made to the FICO Credit Scoring Formula

August 14, 2014

Could I Retire Today?

This blog is about my eventual goal of retiring early at the age of 50.  I'm now 43 years old.  Every year I get closer and closer to being able to retire.  I figured it would be a good exercise to check in and do a rough estimate of my ability to retire right now.      My original stated goal for retirement was $50,000 income and a paid off house.   How close am I to maybe hitting that goal?

First off... when I say 'retire', I mean that I would quit my day job and then manage some rental properties.   I'd still be working on those rentals but I'd otherwise be retired in the true sense of not working for an employer.   Maybe you could call it semi-retired if you want.

We own rental properties and our own primary home.   I figure if we retired, then we'd sell some and keep others.   Some of the rentals are in my home city where I grew up and my family all still lives.   It would be financially better to move back to my home city since its cheaper to live there and the rental investment returns are better there too.   If we stayed here in my current town housing would cost more, taxes are higher and rentals would return less.    A very quick estimate in my head tells me we probably couldn't really afford to live in our current city with our current assets so I'm really only looking at moving to the cheaper home town.    Note that we're not planning to move and this really isn't a preferred option but this is just a 'what if' exercise to see how or if we might be able to retire now with our current asset level.

We jointly own two properties with my dad in my home city.  We would keep those properties. 
We could sell our properties here and generate around $300,000 total.   We could use that money along with most of our cash on hand to buy a home to live in and more rental investment properties.   Using 1031 exchanges we could also avoid paying taxes on the sale of our current property.  We've also got a lot of assets in retirement accounts right now and we could tap that using a 72t distribution.

New rental purchases : 

We could buy a couple single family homes and rent them out and net around $16,000 a year after expenses roughly.   We could probably get closer to $18,000 or $20,000 profit off of multi-units.    Thats pretty rough estimating on my part based on quick search of whats for sale now on Realtor, and skimming over current rent rates on Craigslist.   I'd also assume ~40% expense rate on multi-units and about 25% on single family.   Generally I'd say something in the $15,000 to $20,000 is a reasonable guess with margin built in.

Existing rentals in home town:

The rentals we currently own generate about $6000 a year in profit right now.  But if I were living there I could help my dad and we could renovate some units and increase that a lot actually.    I think it is realistic to expect that we could increase the profit from those properties up to $9,000 a year or maybe $10,000.

Retirement accounts :  $300,000

This amount would generate approximately $1000 a month in income using a 72t distribution.   I figured this with the 72t distribution calculator and a current 'reasonable interest rate' figure of 2.25% based on recent AFR  
In summary the retirement plan would be :
1. start taking ~3.7% distributions from retirement accounts via 72t
2. sell properties in our current city
3. buy a home to live in free and clear in my home town
4. buy a couple more SFH to use as rentals
5. keep rentals in home town

This would net us annual income of about :

Retirement = $12,000
Current rentals = $6000 to $10,000
New Rentals = $15,000 to $20,000

Total estimated income = $33,000 to $42,000

We would then own a home free and clear and have around $33,000 to $42,000 of income.      I have high confidence I could get it up to $36,000.    This is short of my original old retirement goal of a house and $50k.


To know if we can retire on that kind of income I have to have an idea of a rough budget.   I'm going to run down the various expense categories we'd have and then try to ballpark some estimates on what we'd spend.    The numbers I'm using here are very rough and this is not meant to be too precise.

Housing While we'd own the home outright we would of course have to pay property taxes, insurance and budget some money for repairs and maintenance.   I'd put this number around $3,500 a year.  Of course thats a rough guess and I might want to allocate more for future repairs to be safer.

Our taxes would be very low if not zero.   Given a relatively low income and deductions for the rentals our income tax rate would be close to zero if not zero.   We would not have to pay for SS/Medicare taxes since that isn't required on rental income.  I'm going to figure taxes as negligible.   Note this is a pretty big assumption on my part and of course it would be subject to change if tax rates went up in the future.    If I were doing this for real I'd probably build in some margin in the budget somewhere to account for potential future tax changes.

Healthcare would be a potentially high cost but with the new ACA law (Obamacare) we'd be capped at around 10% of our income in expenses so I could just assume spending roughly  10% of our income on health insurance.   I'd also want to allocate some money towards out of pocket costs since the insurance plans generally have high deductibles.   I could be conservative and figure 10% of income plus $4000 out of pocket annually.   Though I don't think we'd average $4k a year out of pocket.   I'm going to guess a total of $8,000 year assuming we get ACA subsidies.  

Utilities would cost us a fair amount for electricity, natural gas, water, garbage.   I'd estimate those to add up to something in the ballpark of $4000.   Could be more or less.

Food would be a large expense for us I'd guess.   We have always tended to spend more on food. I'm not analyzing this one much but I think a reasonable guess on a food budget would be around $5,000 a year.

Transportation.   We'd need car insurance, money for gasoline, repairs and maintenance.  Plus I'd want to set aside some more money to buy replacement cars down the road.    All in I think we'd be spending around $4,000 on cars per year assuming about half of that would go to a fund to buy new replacement cars.   This is also based on owning two cars so if we wanted we could easily cut this figure in half by owning just one car.   We could also cut the spending down by having one nicer car and one backup beater.   I could do that for closer to $3,000.

Other items I'm not listing.   There are other spending categories that I'm not listing as expenses as I figure them mostly in the discretionary / luxury pile.   Things like vacations, cable television, gifts, etc.   

Very rough estimate of basic expenses :

Home : $3500
Taxes : $0
Healthcare : $8000
Utilities : $4000
Food $5,000
Cars : $4000

The sum of these expenses are just shy of $25,000 at $24,500.   

Based on the income range of $33,000 to $42,000 we'd be left with somewhere between $700 and $1,450 a month to spend on other things like clothing and entertainment and travel.    We could also give us more room in the budget by being more frugal on the expenses I estimated above.    With the high confidence income level of $36,000 and expenses of $25,000 that would give us over $900 a month of margin or to spend on luxuries.

Comparing the expenses I'm figuring now versus what I budgeted for retirement 6 years ago there are some big differences.   Back then I had nearly $10,000 a year for food between groceries and eating out.   I also had nearly $10,000 for health insurance.   Between those two categories I've dropped my spending estimates by nearly $6000.   I also assume that I had some assumption of taxes costing me more previously.

If I retired now our assets could generate roughly $33,000 to $42,000 of income based on investing in rental properties and buying a home outright.    A rough guess at basic expenses would be in the neighborhood of $25,000.

There are a lot of unknowns not accounted for here and most of my numbers are very rough estimates so the figuring here is all pretty inexact. 

Bottom Line :   I feel that I could retire today and we could do pretty well.   If we were more frugal I don't think it would be bad at all to make ends meet.


August 12, 2014

The 1% Rental Investment Rule - Is it Still Valid?

The 1% rule for rental properties basically states that for a property to be a 'good' investment as a rental the rent should be at least 1% of the property cost.   For example if a property costs $100,000 then the rent should be $1,000 a month or more for the numbers to work in your favor.

I would have thought I would have written about this more than I have.   I mentioned it in a way in a post back in 2008 How to value rental property prices.   But then I referred to a 100 x rent price rule, rather than calling it the "1% rule".

I can't seem to find any detail on the origins of the 1% rule.  I don't know who came up with the rule of thumb or how they figured the 1% number.   When I search the net I see lots of references to the rule but nothing about its origins.   I remember the 1% rule being cited by my father decades ago.   That must have been in the 80's or 90's, so I know its been around a long time.  

One thing that has made me wonder if the 1% rule still holds as well is the interest rate changes over the years.   Mortgage interest rates have dropped considerably over the past couple decades.   Todays rates are significantly lower than they were just 10 or 20 years ago.    If the 1% rule was designed when typical interest on a mortgage was 7% then they assumed larger carrying costs than you'd have today.   For example if you're paying 7% interest on a $100,000 mortgage then that is $7000 a year but today you can get a rental mortgage at 4.5% so you'd pay $4,500.   Thats a $2,500 difference in cost to the owner.   With such an interest change, else equal, you could get the same end resulting profit out of a rental with 80% as much rent compared to paying that 7% rate.  

On the other hand I'm not sure if the 1% rule actually assumes you have a mortgage.  It might just be based on getting a return on capital without any consideration of carrying a mortgage.   Since I don't know the origin of the 1% rule I don't know what it assumes or how they came to the 1% figure.   Maybe they assumed you were buying the rental with cash and then just looked for a basic 8% return on your money and assumed 33% expenses.   That would end up with the 1% rule.    But they might have targeted an 8% return on the money based on relatively low appreciation of the property or maybe they thought 8% was good compared to 12% annual stock market returns.    I don't know.

Unfortunately since I can't find any detail on how the 1% rule was originally devised I can't tell if its assumptions hold up over time.   Its just a rule of thumb and should be treated as such.   As rules of thumb goes it works well enough.  What you really want to do is run all the numbers and decide if the investment is a good one or not based on the specifics.    You can't universally apply the 1% rule to all properties and expect to get the same results.


August 8, 2014

Best of Blogs for Week of August 8th


From Slate :This Map Shows You the Richest Person in Every State

ImmediateAnnuities answers the question Can I Cancel My Annuity?

FMF pointed to an article on Money Thinking About Becoming a Landlord? Avoid These 6 Rookie Mistakes

Vanguard concludes No bubble to burst: U.S. student debt is not housing

August 1, 2014

Best of Blogs for Week of August 1st


The Big Picture pointed to this nice interactive Degrees of Spending  from site Retale that has BLS spending data on various consumer categories for different education levels.

DoughRoller has a nice list of 22 of the Best Tools to Manage Your Money (most are totally FREE)

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