Year: 2009

Categories
Business Ideas

Ramen Profitable

I was talking to a friend recently and used the term “ramen profitable”, which she found incredibly amusing.  I realized that I had never used the term on the blog or posted about it, even though it’s a very useful perspective on starting a business.

The term was coined by Paul Graham, and he discusses it in the context of technology startups and fundraising (venture capital, not professional begging).  It basically refers to a business that makes enough to cover all its costs, plus provide a meager lifestyle for its founders / operators.

When a company is spending more than it makes, the monthly deficit is sometimes known as the burn rate.  By dividing the company’s working capital by its monthly burn rate, it can be determined how long until the company will go out of business (unless it can raise more money or something changes).  This is clearly a very stressful situation to be in, and investors will be delighted to take unconscionable terms from the founders if they realize the company desperately needs the cash to stay alive.

It’s standard for companies to have their highest burn rate at the beginning.  Imagine a professional opening an office (perhaps a lawyer, accountant, dentist or therapist).  She has to pay: rent on the office space, liability insurance, salaries (for receptionists or assistants), advertising, furniture, decorations, office supplies and all the other necessary expenses before she earns a dime from a customer.  In such a situation, it would be hard to imagine that there WOULDN’T be a high burn rate for the first few months as the company grows towards profitability.  The reason why people start businesses that are losing money on the first day is they expect it to grow to the point where it becomes profitable (then hopefully earn them more per hour of labour than they would have made working for someone else).

Some companies intentionally accept a large burn rate in order to dominate their industry.  Webvan tried to do this and went out of business when they ran out of money before they became profitable (apparently they were too ambitious and analysts have speculated they might have survived if they’d expanded a little slower).  Amazon.com lost money every year from 1995 to 2001.  These years of losses were part of their original business plan, a strategy that they have effective executed.

There are a number of benefits, for people starting a company, from focusing on becoming ramen profitable as soon as possible:

  • Most founders aren’t pursuing a “billion dollar company or bust” strategy.  They’re happy to earn a comfortable living running a successful business and don’t need to take the extra risk necessary for explosive growth.
  • It gives a clear and attainable first milestone for the company to reach.  By constantly tracking the company burn rate (and working to get it to zero), it keep a young enterprise’s priorities straight:  increase revenue while keeping expenses low to become profitable.
  • There are all sorts of risks that can kill a business, but becoming ramen profitable decreases the chance of one big one (running out of money, which technically is probably always the official cause of death).

Thicken My Wallet has written a number of excellent posts on entrepreneurship.  One of the running themes in his posts is the importance of keeping costs down when starting a company.  This is clearly 1/2 the equation of getting to ramen profitability (the other half is getting people to pay you for your product or service).

Ramen profitability isn’t an ends to itself.  If someone is working hard for a student lifestyle, they’d be better off going to get a job instead of taking all the risks of running a company.  However, reaching this stage gives you breathing room to figure out how to grow your business to a level where it is more lucrative than working a 9-5 job.

Categories
Personal Finance

Sony A350 DLSR Camera Review – Why A DLSR Camera?

Sony-DLSR-Camera-A350

As I discussed previously on a post about our Canon 200sx camera, our only camera up until about a year ago was an aging Canon PowerShot – a great camera in the day but now it was very slow and took very average shots unless the lighting was really good.  Three years ago, our first child was born which meant a huge increase in camera use.  At first the camera worked fine for us because he wasn’t mobile, but as my son started to crawl, walk and eventually run – the camera became somewhat useless because my son would not stay in one place for the several required seconds for indoor shots.  Outdoors (no flash) the camera performed better but it was still too slow.

Our solution was to buy a Sony A350 dlsr camera.  One of the big benefits of a dlsr camera over the regular point and shoot is the speed.  The dlsr is much, much faster.  If you aren’t using a flash then the difference isn’t huge since the point and shoot will probably operate with a reasonable speed but the dlsr is still noticeably faster.  Indoor shots however is a different story – our old camera would take forever and a day to take the shot whereas the dlsr still works at lightning speed.
As we found out after buying a new point and shoot – a good portion of the speed difference was because of the age of the old camera rather than the fact that it wasn’t dlsr.  However the dlsr is still significantly faster than our point and shoot (Canon 200sx).

While speed may have been our main motivator – another great feature of the dlsr is the ability to interchange lenses.  My wife has a pretty good Minolta lense from an old film camera that works great on our new DLSR.

Photography as a hobby

The dlsr we bought can be set to “automatic” which is how I like it.  It can also be set manually – my wife is a bit of a shutterbug and would like to learn more about photography so having a more advanced camera is a good tool for that.  This camera has room for expansion since you can buy different lenses and flashes for different purposes.

Picture quality

When comparing shots from our Canon and the Sony – for a lot of situations, the DLSR is definitely superior.  Inside shots in particular are almost always better with the DLSR.  The point and shoot gives a good challenge with outside shots with good lighting but the Soney (dlsr) still wins out.  The image stabilization feature is quite excellent.

Which DLSR camera to choose?

Since I’m not a camera expert, I can’t really comment on this other than to say that I really like our Sony A350.  It’s easy to use and takes great pictures.  For some better discussion on the differences between various DLSR cameras you should check out Consumer Reports.

Summary

We’re quite happy with our Sony A350 dlsr camera.  I will say however that for most situations we tend to use our smaller Canon 200sx.  We would like to use it more but with two young kids it’s hard to justify another piece of luggage when we go out somewhere.
If you have an older point and shoot and you want to upgrade but keep the same portability, I would strongly suggest just buying a new point and shoot rather than going to the DLSR since the DLSR is much bigger and a lot more expensive.  You will probably be very happy with the newer point and shoot.
If you want to really upgrade and take the best photos you can and are willing to cart around a much larger camera then the DLSR is a good choice.
If speed is a consideration then although the newer point and shoots are fast – the DLSR will be significantly faster.

Categories
Personal Finance

Movie Review: Sunshine Cleaning

200px-Sunshine_cleaningOver the weekend I watched, and enjoyed, “Sunshine Cleaning“.  It’s a new movie by the producers of “Little Miss Sunshine” (and also staring Alan Arkin, the heroin snorting grandfather from “Little Miss”).  It touches on a number of personal finances issues, such as entrepreneurship, career satisfaction and the impact of money within a family.

Like “Little Miss Sunshine”, the film examines failure from within a family (where each member has failed).  Two sisters, Rose and Norah, have been unable to get their lives on track (and gone through a series of unengaging jobs).  Their father views himself as a “businessman” but moves from one hairbrained scheme to the next, losing money as quickly as he makes it (and promises his family more than he is capable of delivering).  One of the sisters has a son, Oscar, who is incapable of functioning in public school (going through a series of misbehaviours, culminating with licking objects around the classroom and his teacher’s leg).

On the advice of a married man Rose is having an affair with, the two sisters start a company cleaning up “biohazardous waste” (that is, messy dead bodies).  In spite of the unconventional nature of the enterprise, it engages the entire family and each is able to finally transcend their failures and enact change within their lives.

Throughout the movie Rose repeats self-help mantras to herself  “You are strong. You are powerful. You can do anything. You are a winner.”  In spite of her forced positive attitude, her life is clearly not what she expected it to be graduating from high school as the head cheerleader.  Finally at the end of one of these pump herself up sessions, she looks in the mirror and admits “I’m a fucking loser”.  She gives up on the “magic of positive thought” and finally takes responsibility for changing her own life.

My generation has a complex relationship with work.  While my father was content with a steady paycheck and keeping food on the table for his family (and was willing to trudge off to the factory every day to provide that), my generation *tries* to get fulfillment, esteem and self-actualization from our work (we’re higher up on Maslow’s Hierarchy of Needs).  We’re not always successful, but we try.

An easy critism of this approach to life is that we can’t all go off and be painters and novelists.  Someone has to keep the water running if society is going to continue to function.  I think Rose’s journey in this movie is an excellent example of someone who finds work that is personally fullfilling, while is still being a service to her community.  At a baby shower friends she was embarrased to see during her previous careers ask her apprehensively if she likes cleaning up bodies.  As Rose discusses how fulfilling it is for her, she becomes noticably prouder and more confident about herself.  She leaves half-way through the shower when she realizes that she doesn’t have anything to prove to her friends: she’s proven everything that matters to herself.

From a purely narrative perspective, I found elements of this movie frustrating.  A number of storylines ended without resolution, but perhaps this was intentional:  this isn’t a neat easy drama, it’s messy like life.  The themes are fresh and interesting, the acting and characters are engaging and the story is compelling.

If you can handle a bit of colourful language and dark humour, I recommend grabbing “Sunshine Cleaning” on your next trip to the video store.

Categories
Announcements

Monday, August 31 LinkStuff – End of Summer?

First up – Rob Carrick wrote a post in the Globe and Mail where he talks about 7 good deals in investing and lo and behold – Questrade discount brokerage is one of them.  I couldn’t agree more – cheap trades are cheap trades.  If you are paying any more for trades then you are throwing money away…. As I mentioned recently if you are a former Questrade customer and want to return without paying transfer fees then check out my post – Heading home to Questrade to find out the details.  Check out the article for yourself to find out what else Rob recommends (I agree with all of them) along the best recommendations of Canadian Capitalist, Million Dollar Journey and Larry MacDonald.

On with the top links

Million Dollar Journey had a post called “flipping houses for profit“.  I would have thought the proper title would be “flipping houses for FUN and profit”. 🙂   Flipping houses is tough if you aren’t in a rising real estate market.  In fact I think it’s pretty close to impossible to make a decent return on your money by doing this.

Preet is giving away a pretty good book.   Check out the contest page to find out the details.

Moolanomy had a pretty good post on how to sell your house fast.  Some great advice here.

Canadian Capitalist wrote about the Fraser Institute and the “average family”.  I’ve often wondered about Fraser Institute – they don’t seem to be very unbiased.

The rest of the links

ABCs of Investing wrote about investment real return.

BMM just bought a HUGE tv and has some advice about saving money when buy electronics or other high priced items.

The Financial Blogger reveals 10 professions that are still in demand.

Personal Finance by the Book compares traditional IRA or Roth IRA – which is better?

Cash Money Life tells all in Cash For Clunkers Appliances – rebates for appliances.

Good Financial Cents explains how to become a certified financial planner.

Carnivals

Festival of Frugality

Carnival of Road to Financial Independence

Money Hacks Carnival

Carnival of Pecuniary Delights

Carnival of Financial Planning

Festival of Stocks

Carnival of 20 Something Finances

Economy and your Finances Carnival

Categories
Money

Cash For Appliances Program – Upgrade Your Clunker of a Fridge, Washing Machine, Dishwasher

Fresh off the huge success of the Cash for Clunker old car trade-in program, the government is now planning a similar rebate plan for your old appliances.  Simply put – there will be cash rebates ($50 to $200) available which can be applied if you buy new appliances with an Energy Star seal.  The main difference with this program is that unlike the Cash for Clunker program you don’t have to trade in your old appliance to get the rebate.  So if you want to move your grandfather’s old 1950’s fridge out to the garage then this program won’t interfere with those plans.

The program is part of Obamas economic stimulus package for 2009 which provided money for various parts of the economy and is now going to stimulate the appliance industry.  $300 million dollars has been allocated so far.  Considering how quickly the original Cash for Clunkers funding was increased from $1 billion dollars to $3 billion dollars after it’s quick success, I don’t think it’s much of a stretch to imagine that the Cash for Appliances program could get increased funding if demand is high enough.

[edit Sept 27 – Cash for Appliances – List of Eligible Appliances]

[edit Dec 9 – Cash for Remodeling]

When does the Cash for Appliances program start?

The program is very much still in the planning stages.  It will be run by each individual state so make sure whatever information you get is applicable to your state or the state where you are going to buy the appliances in.  The government’s Energy department has set a deadline of Oct. 15 for states to file formal applications.   These formal applications will outline the exact details of how much the rebates are, who will be eligible and how the plans will be administered.  The Energy Dept. expects the bulk of the $300 million to be awarded by the end of November.  This is just a guess – it’s very possible that it could get used up much quicker or much slower than anticipated.  I would assume that the programs will start either on October 15 or by November 1 by the latest.

The amount budgeted for this program should cover approximately 2 million appliances.  This may sound like a lot but if you consider that the Cash for Clunker program applied to 750,000 cars and was done in 2 weeks, it’s very possible that the cash for appliances funding could easily be used up in a week.  Since the original amount ($300 million) is relatively small ( it’s less than a third of the original amount allocated to the Cash for Clunkers program ) so the Cash for Appliances program could get extended several times if necessary.

What kind of appliances are eligible for the Cash for Appliances rebates?

The Cash for Appliances rebates will be awarded for the purchase of appliances which have the Energy Star seal.

Here is a list of the eligible appliances:

  • Refrigerators
  • Air conditioners
  • Washing machines
  • Freezers
  • Central and window air conditioners
  • Dishwashers
  • Furnaces
  • Water heaters
  • Heat pumps

How much will the Cash for Appliances rebates be?

This information has not been determined yet.  So far the plan is that the rebates will be at least $50 and not more than $200 per appliance.  I would assume that the larger rebates will be given for appliances that are more efficient.  For example all the refrigerators that have an Energy Star seal will have different efficiencies – it’s likely that the fridges that are more efficient within that group will get the largest rebates.

Energy savings by the consumer is also a great reason to use this program.  If you can save $100 per year on a new fridge then that’s a good deal even without the rebates.

Old refrigerators and freezers are some of the biggest energy users in homes, and getting old ones out for energy-efficient models will save customers anywhere from $50 to $150 a year on electricity bills, says Steven Rosenstock, manager for energy solutions at the Edison Electric Institute, which represents 70% of the investor-owned utilities in the United States.

Will existing state rebates still apply?

Yes, any existing rebates for energy-efficient appliances will still apply so you can “piggy back” the different rebates to get a fairly cheap appliance.  It’s important to do your research on this topic since there are different existing rebates in various states and the Cash for Appliance program will unfortunately have different rules and rebates for each state.

Why is the government doing this?

The government is funding the program in the hope that the appliance industry will get some stimulus money.  The home appliance industry has been in a big slump with sales in 2009 down about 15% from last year.

“These rebates will help families make the transition to more efficient appliances, making purchases that will directly stimulate the economy,” Energy Secretary Steven Chu said in a statement announcing the plan. Only appliances covered by the Energy Star seal will qualify. In 2008, about 55% of newly produced major household appliances met those standards, which are set by the Energy Dept. and Environmental Protection Agency.

What should I with my old refrigerator (or other appliance)?

If your old appliance is an old clunker that can’t be sold then try to find out if your local utility will pick it up for free.  Some utilities will not only pick up the old appliance but will also pay you some money for it.

Meanwhile, utilities in many states offer to pick up and recycle old refrigerators and freezers and give the customer a rebate ranging from $25 to $50. Such programs began on the West Coast in the last decade but more recently have been moving east.

In five years, NV Energy in Nevada has picked up 50,000 refrigerators, giving $30 to customers in Nevada and California who have turned in their working, but old appliances. The company hopes to boost the program to 20,000 appliances a year and help the utility reach its goal of producing a state-ordered 25% of its electricity through renewable or energy-efficiency sources by 2025, Hargrove says.

In Michigan, where 2008 energy legislation required utilities to cut electricity production by 5% a year, the program is exceeding expectations.

DTE Energy, parent company of Detroit Edison which serves 2.2 million electric customers in Detroit and its suburbs, collected more than 3,300 appliances since starting the recycling program at the end of June. It offers $50 per refrigerator or freezer and $20 for old window air-conditioner units.

More information on the Cash for Appliances program

Cash for Clunker Appliances coming soon

Cash for Appliances – Government will give money for old appliances

Categories
Personal Finance

Carnival of Financial Planning – Edition #104 – August 28, 2009

Welcome to the August 28, 2009 Edition #104 of the Carnival of Financial Planning.

The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security.

This edition is arranged by subject heading, so that you can browse efficiently.

Budgeting

oneadvice presents Credit Crunch: Luxuries We Won’t Say No To… posted at One Advice, saying, “Credit Crunch = Doom & gloom for frivolous spending. But there are those little luxuries which we refuse to say no to, even when money is tight…”

Dorian Wales presents The Personal Financier: Personal Finance Management: Budget vs. Net Worth posted at The Personal Financier, saying, “While it may be recommended to manage both a budget and net-worth sometimes focus leads to better results.”

Wise_Bread presents Beyond Budgeting Pocketsmith Helps You Forecast posted at Wisebread.

Susan Savering presents Personal Living Expenses posted at Family Financial Planners, saying, “When you don’t understand how much you spend and how much you save and invest, you do not have a financial plan. This dramatically increases your family’s long-term financial risk.”

KCLau presents Thoughtless Spending posted at KCLau’s Money Tips, saying, “I was surfing the web recently and an article in Yahoo finance caught my attention. The article emphasizes the need to curb spending on the miscellaneous things in daily life.”

Economics

Banker Saver presents TARP Bailout Funds: How Have Banks Used Taxpayers’ Money? posted at Banker Saver, saying, “On TARP funds and the bailout program for banks.”

Curt presents Bernanke is Crazy to Think That the Economy is on the Verge of Recovery posted at PennyJobs.com.

Super Saver presents Expecting Another Bubble posted at My Wealth Builder, saying, “Low interest rates are bound to create another bubble. Hopefully, by expecting one, I can protect our savings better that during the housing and financial crash.”

Roshawn Watson presents The Rich Get Poorer posted at Watson Inc, saying, “The implications of this recent recession have been far-reaching enough to put a big dent in American and world wealth. Both the magnitude of wealth and the number of millionaires decreased profoundly in 2008.”

Dorian Wales presents On Causality and Correlation in Economics posted at The Personal Financier, saying, “Causality is perhaps the most fundamental element of empirical evidence available to economists. However, it is also the source of many misconceptions due to its elusive nature.”

Estate Planning

Jeff Rose presents Taking Care of an Elderly Parent posted at Jeff Rose, saying, “Find of what you need to do when you have to become the parent of your parents.”

Financial Planning

Big Larry presents Is Your Attitude Impacting Your Finances? posted at Out of Debt Christian, saying, “Has the daily dose of bad economic news, political rancor and untimely celebrity deaths gotten you down? Be careful — your bad mood can translate to some poor financial decisions too.”

Dividend Tree presents Building Core Competency for Long Term Survival posted at Dividend Tree, saying, “whether it is running a business or individuals’ investment portfolio, it is important to build a core competency for long term sustainability. In my case, I focus on good quality companies that consistently pay or have potential to pay growing dividends over time.”

Patrick @ Cash Money Life presents Beyond The Latte Factor posted at Cash Money Life, saying, “5 small changes anyone can do that will have a large affect on their financial situation.”

The Smarter Wallet presents How To Build Good Credit and Clean Up Bad Credit posted at The Smarter Wallet, saying, “Here’s how to work on cleaning up your bad credit.”

Patrick @ Military Money presents Money Management Tips for the New Recruits and Recent Graduates posted at Military Finance Network, saying, “Basic money management tips for people going out into the “real world” for the first time. This article applies to new military recruits and recent college graduates.”

Bellar presents Start Your Step to Implement Personal Finances posted at Personal Finance Management & Financial Services — MyFinancialCorner.com.

The Smarter Wallet presents Credit Monitoring Services To Check Your Credit Report posted at The Smarter Wallet, saying, “What you need to know about monitoring your credit.”

Four Pillars presents Make Home Affordable Refinance Program Changes Eligibility Requirements For Easier Refinancing posted at Quest For Four Pillars, saying, “Making Home Affordable refinance program eases requirements.”

KCLau presents I achieved financial freedom at 38 posted at KCLau’s Money Tips, saying, “This post is contributed by WaiYin, a reader whom I admire very much because she achieved financial freedom at age 38! Here, she shares how she did it.”

Patrick @ Military Money presents How Much Life Insurance Do Military Members Need? posted at Military Finance Network, saying, “Military members may have different life insurance needs than civilians. Here is information regarding how much life insurance military members should buy, and some resources for finding the best life insurance deals.”

Susan Savering presents Personal Investment Strategy posted at Family Financial Planner, saying, “When pursuing optimal financial planning and investing strategies and controlling your costs and capital gains taxes, you also need to establish a time-efficient system to monitor, adjust, and adhere to your financial plan.”

Big Cajun Man presents Mid-Year Personal Finance Check Up posted at Canadian Personal Finance Blog, saying, “Mid year is a good time to go over your plan for the year to see how well you are doing, so do it now!”

Financing a Home

Doug Boude presents Buying a New Home is EASY! posted at Doug Boude (rhymes with ‘loud’), saying, “My wife and I will be completing the process of purchasing a new home tomorrow. I summarized our experience, with tips and ideas, to help encourage others to invest in their own home as well.”

Tallahassee Real Estate presents Consider Paying Home Mortgage Discount Points posted at Tallahassee Real Estate Blog, saying, “When it comes to comparing interest rates for a mortgage loan, home buyers often have the option of choosing a loan with a lower interest rate by paying discount points. Simply put, discount points are fees charged by the lender to reduce (discount) the interest rate charged to the borrower. Paying points may seem attractive, because a lower interest rate means smaller monthly payments. But is paying points always a good idea?”

Alex Fotopoulos presents When is it Smart to Refinance a Mortgage? posted at My Trader’s Journal, saying, “Some key points to consider when refinancing your home.”

Financing Education

Buck Weber presents Does a Financial Education Matter? posted at The Buck List, saying, “With so many opportunities to learn how to get it right, why do so many of us screw up our finances so badly?”

Praveen presents Students Beware! Colleges, Tuition, Loans, and Debt – Will Education Follow the Housing Bust? posted at My Simple Trading System, saying, “Tips for students to avoid excessive loans and debt”

Income

nissim ziv presents Finding a Job: How to find a job Online posted at Job Interview Guide, saying, “This article provides a beginner guide for finding a job and the basic information on how to find a job online using social media sites, online job search engines and other job portals.”

Tyler Tervooren presents Create Your Own Green Collar Career posted at Frugally Green, saying, “Sick of your daily grind? Looking to start something new? It doesn’t matter if you’re an entrepreneur or an employee. Take the skills you already have, mix in your passion for the environment, add a little creativity and you’ve got a leg up on your new pursuit.”

FMF presents Outsourcing Chores Could Be a Good Investment posted at Free Money Finance, saying, “Time equals money. Sometimes it’s a good deal to spend money to gain time.”

Praveen presents Easy Ways to Generate Cash posted at My Simple Trading System, saying, “Easy ways to generate extra cash”

Investing

Dividend Growth Investor presents 13 dividend stocks to enter on dips posted at Dividend Growth Investor.

Dan at Everydayfinance presents Option Hedge Strategy: 2 by 1 Put Spread is Cheap and Effective posted at Everyday Finance, saying, “This article provides a low-cost way to hedge the recent rapid runup in the stock market by using a ratio spread, which can return over 2000% with a nominal cash outlay.”

Praveen presents India Fund (IFN) Trade Example posted at My Simple Trading System, saying, “An example of how having a trading system gives you an edge, and let’s you take advantage of market moves outside of your control.”

Dividend Tree presents What is your preference – Aristocrats or Achievers? | Dividend Tree posted at Dividend Tree, saying, “The key question here is; are we willing to invest in companies that have still not completed 25 years of dividend growth? All dividend aristocrats were at that stage at some point in time.”

The Skilled Investor presents Personal Investing posted at Personal Investment Manager, saying, “Investors more easily understand investment costs that are directly measurable, such as fees deducted on investment statements. However, many investors ignore or are unaware of the opportunity costs of their sub-optimal investment behaviors. Opportunity costs are usually much more difficult to measure directly, but these investment costs can be even higher than more visible investment fees.”

Jae Jun presents Warren Buffett Stock Pick Portfolio | Old School Value posted at Old School Value, saying, “A look at the intrinsic value and stock holdings of Berkshire Hathaway run by Warren Buffett. Graphs and fair value estimates included.”

Silicon Valley Blogger presents Online Discount Brokers: SmartMoney Broker Survey posted at The Digerati Life, saying, “I list some great online discount brokers for your investment needs. The list is based on Smart Money’s broker survey.”

Investing Toolkit presents Why Should I Start Investing? posted at Investing Toolkit, saying, “Why we should start investing as soon as we can.”

20smoney presents Could You Retire Off Investing In China? posted at 20s Money, saying, “A look at why we should definitely consider investing in China as a long term investment.”

Jimmy Atkinson presents Talking ETFs, China, and Intellectual Property With Claymore’s Christian Magoon posted at ETF Database.

Zach Scheidt presents Lululemon Athletica – Alarming Trends posted at ZachStocks, saying, “Lululemon Athletica (LULU) has rebounded nicely from the March low. While the niche apparel company has a strong product line and has expanded the number of stores, its same store sales figures along with inventory levels raise concern.”

Aussie Investor presents Shares To Buy Now And For The Long Term posted at Australian Investing, saying, “With investors the world over having suffered through the global financial crisis, some are now wondering how best to restore the health of their share portfolios. This article discusses some of the factors I consider when looking for the best shares to invest in. By maintaining this disciplined approach investors should end up with a portfolio of good investments to see them through these troubled financial times.”

Retirement Savior presents The Best Long Term ETFs and Mutual Funds posted at Retirement Savior, saying, “The high-growth days of the US are over. Look overseas and to other continents for your investment gains.”

Dividends4Life presents Two Dividend Stocks Rewarding Patient Investors posted at Dividends Value, saying, “Life isn’t linear and neither is investing. There are always bumps in the road and before we reach the next level sometimes we must toil longer than we like at the current level. Case in point, 2 companies’ investors have waited six quarters for a dividend increase and this past week their patience was rewarded.”

Zach Scheidt presents FDIC Backs off Slightly – PE Firms to Buy Troubled Banks posted at ZachStocks, saying, “The FDIC approved guidelines for private equity firms to purchase failed banks. While the proposal was controversial when issued last month, the balance appears to be in place to offer PE firms an opportunity for profit, while still encouraging a more stable financial environment”

Frank Vertin presents Best Index Fund posted at Best Index Fund, saying, “Buying an S&P 500 index fund through an investment counselor can substantially increase your initial purchasing costs and and drive up your annual management expense fees. Unfortunately, the vast majority of individual investors buy mutual funds and ETFs through brokers and investment advisers. Rarely do financial advisors recommend that you buy index funds with low fees. This is because low cost, no load mutual funds do not pay them as well as loaded, high fee mutual funds.”

Investing School presents What the Heck is an Asset? posted at Investing School, saying, “We always use the term but what is it really? Here’s a brief explanation.”

Tomas Escent presents Quant Finance posted at Nerds on Wall Street, saying, “Think of this book as sort of a Hitchhiker’s Guide to Wired Markets. There are no robots parking cars for six million years, but there are robots trading millions of shares in six milliseconds, so maybe that’s close enough.”ABC presents Different Types of Stock Market Indexes posted at ABCs of Investing, saying, “How different types of stock market indexes work.”

Tushar Mathur presents Can’t Control the Markets? Try controlling the Costs posted at Everything Finance, saying, “As 2008 proved, the financial markets are prone to unpredictable periods of turbulence. That can make investing feel a bit like a roller-coaster ride. The disappointing results that many mutual funds posted in 2008 and at the outset of 2009 may have left you feeling concerned over your financial future. You’re not alone.”ABC presents Investment Real Return posted at ABCs of Investing, saying, “A simple explanation of investment real return.”

Larry Russell presents Best No Load Mutual Fund posted at No Load Mutual Funds, saying, “Taken as a whole, the vast body of investment research studies show that there really are better approaches to buying and owning mutual funds and ETFs. You do not need to frantically chase fund performance. Performance chasing simply does not work.”

Managing Debt

Ray @ Financial Highway presents Dealing with Collection Agencies- Tips on Handling Collection Agencies posted at Financial Highway, saying, “Sometimes bad things happen to good people and find ourselves fighting with collection agencies. Here are some tips on how to deal with Collection Agencies.”

CreditCardAssist presents Credit Card Reform – How It Will Help You posted at Credit Card Assist, saying, “How the new reform legislation will benefit consumers and use of their credit cards after the new law takes effect.”

MoneyNing presents AnnualCreditReport.com For Free Credit Reports posted at Money Ning, saying, “AnnualCreditReport.com should be the only way to get a free credit report.”

Master Your Card presents Getting Your (Actually) Free Credit Report from SmartCredit.com posted at Master Your Card, saying, “A handy method for getting a free credit report once you’ve used up your three free reports from the government.”

The Dough Roller presents List of Low Interest Credit Cards posted at The Dough Roller, saying, “while credit card companies have a reputation of charging exorbitant interest rates, the truth is that many cards come with modest, single-digit APRs.”

Roshawn Watson presents Outrageous Law Transfers Parents’ Debt To YOU posted at Watson Inc, saying, “With few exceptions, such as a divorce decree, you are not legally liable for debts you have not personally signed for or agreed to pay. There is an inherent sense of fairness to this principle: your finances cannot be obligated to pay for something without your consent (except perhaps to the taxman or to your dependents). However, an archaic law in Pennsylvania is being enforced to make adult children to pay for their parents’ debts.”

Miscellaneous

MoneyNing presents How to Get Out of a Rut and Out of a Slump posted at Money Ning, saying, “Ever in a rut? Here’s how to get out.”

Four Pillars presents 2009 Cash For Clunkers Program – Trade In Your Old Junker For Money posted at Quest For Four Pillars, saying, “A comprehensive look at the new Cash for Clunkers trade-in program.”

No Load Bonds presents Bond Index Funds posted at Bond Index Fund, saying, “Simply put, if you pay higher bond mutual fund fees, then these bond management expenses tend just to be a deadweight loss to you. The best bond fund buying strategy is to pick only very low-cost no load bond funds.”

Retirement Planning

PT presents 403(b) Rollover to a Traditional IRA posted at Prime Time Money, saying, “My 403b Rollover”

Jeff Rose presents Can You Rollover Your 401k to a Roth IRA? posted at Jeff Rose.

Top Stock Index Funds presents Stock Index Funds posted at Top 10 Index Fund, saying, “Buy these top 10 very low cost no load S&P 500 index mutual funds directly. You do not have to pay the heavy added expenses of buying through a stock broker, financial adviser, investment adviser, or investment counselor.”

Barry presents Retirement Planning: Can You Make Do With Less? posted at Associate Money.

Lisa Moren Bromma presents Reinvent Your IRA posted at Wise Women Investor, saying, “Reinvent your IRA and learn to take control of your financial future by learning about the benefits of a self-directed retirement plan.”

Jeff Rose presents Using a Roth IRA to Maximize Your Wealth posted at Jeff Rose.

Super Saver presents A Gift of Retirement Funds posted at My Wealth Builder, saying, “A relatively small lump sum investment of $10,000 can lead to a significant sized nest egg at retirement.”

Risk Management and Insurance

Patrick @ Military Money presents COBRA Benefits Subsidy in the 2009 Economic Stimulus Recovery Act posted at Military Finance Network, saying, “The 2009 Economic Stimulus Plan includes additional COBRA and unemployment benefits.”

Savings

jim presents Wachovia Bank CD Rates posted at Blueprint for Financial Prosperity.

Tom Drake presents How Much Do You Need To Retire? The Rule Of 20 | MapleMoney posted at MapleMoney, saying, “While the 4% rule has become a standard quick calculation for retirement planning, there is a new rule that is similar, The Rule of 20.”

FMF presents Do You Shop Less to Save Money? posted at Free Money Finance, saying, “A simple way to potentially save a bundle.”

Taxes

Jeff Rose presents IRS is My Hero: The Heroes Earnings Assistance and Relief Tax Act (the HEART or Heroes Act) posted at Jeff Rose.

That concludes this edition. Submit your blog article to the next edition of Carnival of Financial Planning using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: , .

Categories
Money

Cash For Clunkers – Tax Rules

The popular Cash for Clunker car trade-in program has just ended after handing out $3 billion dollars of cash for consumers to upgrade their older cars and get a brand spankin’ new ride which hopefully gets better gas mileage than the old one.

This program – officially knows as the Car Allowance Rebate System (CARS) was created earlier in the year as part of President Obama’s stimulus package for 2009.  This program was primarily designed to help stimulate the big car companies which have been enduring poor sales.  The other intention is to help the environment by burning less gasoline in more fuel-efficient cars.

[edit Sept 27 – Cash for Appliances – List of Eligible Appliances]

[edit Dec 9 – Cash for Caulkers

One very common question which has come up recently has been the taxation of any Cash for Clunker voucher money received by a person using the program. Some websites have been reporting that the entire amount of the credit is taxable income and will be added to your taxable income for the year.   This is not true – the government Cash for Clunker website specifically addresses this issue and says:

Is the credit subject to being taxed as income to the consumers that participate in the program?
NO. The CARS Act expressly provides that the credit is not income for the consumer.

Tax treatment of Cash for Clunker payments

If you are concerned about having any tax issues as a result of trading in your old clunker and getting a voucher or credit for a new car then put your mind at ease.  The discount you received off the new car purchase price is not considered taxable income so no taxes will have to be paid on it.

The taxation of this plan is the same as if you had just traded in your car or even if you had sold the old car separately.  The cash for clunker voucher amount or the sale proceeds from a used car sales are generally not taxable since they are probably less than the amount paid for the car originally.  You can’t claim the loss on your car since government law doesn’t allow capital gain losses to be claimed on depreciating assets.

The voucher or credit amount for your clunker is not “income” or any kind of bonus money.  It’s simply a payment for your old car which is not taxable.  In effect you are basically selling your old junker to the government for either $3500 or $4500.

How the Cash for Clunker program works

The main concept behind the Cash for Clunkers program is that you can trade in your old gas guzzler car for a new car which has better mileage.  The government will pay you either $3500 or $4500 for your trade in.  Obviously this is only worth doing if your current older car is worth less than the potential rebate amount.  If your car is worth more than the voucher amount then you are better off just doing a normal trade-in or selling it privately.

Rules of the 2009 Cash For Clunkers program

  • Car must be less than 25 years old (built in 1984 or later).  This applies to the date of trade-in relative to the manufactured date of the car.  See section below for more info.
  • Can only be used for trade-in on a new 2008,2009 or 2010 car.  Outright purchase or lease.  Used car purchases are not eligible.
  • Trade-in car must get 18 mpg or less (city/highway combined).  See this website to find out the mileage for your car or this site to find your car.
  • This program has ended so no more trade-ins.   Trade-in must occur on July 1, 2009 or later.
  • The new car must have a purchase price of $45,000 or less.
  • Credit will be either $3500 or $4500.  If the new car gas mileage is between 4 and 10 mpg more than the old car then the credit is $3500.  If the difference is at least 10 mpg then the credit is $4500.
  • Applies to new cars of any country – domestic and foreign cars are all eligible.
  • The new car must have a combined fuel economy of at least 22 mpg.  See this website to find out the mileage for your car or this site to find your car.
  • The credit will be applied to the purchase of the new car.
  • The car buyer doesn’t have to file anything – the car dealer will handle the documentation.
  • The credit will not be considered as income for the car purchaser.
  • All the normal credits and rebates for the new car will still apply in addition to the ‘cash for clunker’ credit.
  • The trade-in car must have been owned by you and insured for the past year (ie 365 days).  You must provide documentation for this.
  • Car must be driveable!!

More articles on this issue

[edit Aug 30 – Cash for Appliances program announced – Get rebates for new fridge or other appliances.

Cash for Clunkers – Tax Rules

Is there a Cash for Clunkers tax?

Cash for Clunkers taxable income?

Cash for Clunkers taxable?

Cash for Clunkers Tax Rules

Who benefited from the Cash for Clunkers program?

Does Cash for Clunkers affect your taxes?

Cash for Clunkers tax rules

Cash for Clunkers tax rules – the Truth!

Tax rules and consequences of the Cash for Clunkers program

Cash for Clunkers Taxable Income Issue Resolved

Categories
Personal Finance

Back To School Cell Phone Deals

7-Eleven SpeakOut Wireless is one of the best pay as you go deals available in Canada. You pay $100 + tax and it is 20 cents a minute and 4 cents a text message incoming and outgoing. The airtime expires in 365 days. Here is the catch: they charge you 79 cent a month for 911 fees. The number of regular minutes that you have is slight lower than officially advertised. Here is how you would calculate the effective minutes: (125 – 12*.99)/.25 = 452 minutes a year. So it is slightly less than advertised 500 minutes a year. SpeakOut Wireless has one of the cheaper Canadian and US long distance rate of 16 cents a minute for this plan.

SpeakOut Wireless’ definition of long distance is different than other Canadian wireless carriers. If you are outside of your local calling area, all outgoing and incoming calls are considered long distance. However, SpeakOut Wireless’ local calling area is much larger than most Canadian wireless carriers. All numbers covered with the same area code is considered in the same local calling area. The entire southern Ontario with the area code of 519, 226, 416, 647, 905, and 289 is considered as one local calling area. SpeakOut Wireless’ local calling area and long distance policies are superior to its competitors in most cases. The local calling chart is available here.  Canadian area code map can be found here.

7-Eleven SpeakOut Wireless’ Back to School promotion is 50% off any SpeakOut Wireless phone. 7-Eleven SpeakOut Wireless recently released the Nokia 5130 XpressMusic for $139.99. With the 50% discount, Nokia 5130 XpressMusic would cost $70, a decent deal for a mp3 phone with a basic camera. Rogers sells the same phone for $99.99. The bad part is that 7-Eleven SpeakOut Wireless’ Nokia 5130 XpressMusic is locked, which means you cannot use this phone in US, Europe, or Asia with a local SIM card. It might be eventually possible to unlock this phone in the future. An unlocked Nokia 5130 XpressMusic in Hong Kong costs $164.99 CAD (1180 HKD). So the Nokia 5130 XpressMusic seems to be competitively priced from 7-Eleven SpeakOut Wireless.

The first year cost of this solution is ($100 + 70$) * 1.13 = $192.10 (5% GST, 8% PST)

Medium Usage without Contract

Virgin Mobile Canada has a monthly prepaid plan that is pretty good with no contract. You pay $20 a month for 200 minutes and 10% bonus credit with automatic topup by credit card.  So basically it is 10 cents a minute with an extra credit for add-ons.  Prepaid monthly plans come with call display, voicemail, minutes tracker, and no contracts.

Virgin Mobile’s Back to School promotion is a $50 dollar activation credit for Prepaid Phones. The activation credit can be used for the add-ons in combination with 10% bonus top up credit. There are some basic mp3 phones from Virgin Mobile like Samsung R610 for $79.99, Samsung Link for $99.99, and LG Rumour2 for $129.99.

In the first year, there should be a total of $74 of additional credit on the account from $50 activation credit and $2 a month top up bonus credit. Additional credit on Virgin Mobile prepaid account can be used for add-ons. Add-ons can be found here.

The biggest downside to Virgin Mobile prepaid is that 30 cents a minute is charged for Canadian and US long distance.

The first year cost of this solution with the purchase of Samsung R610 is ($79.99 +$20*12)*1.13 = $361.59. (5% GST, 8% PST).

Medium to Heavy Usage with Contract

If you need a regular monthly plan that is more comprehensive, you should get a 2 year or 3 contract with one of the big names. When searching for a plan and a phone, ask if any promotional or epp plan is available. It is usually around $45 a month after add-ons and taxes.  After a year or a year and half, you can call customer retention department and ask for a retention or loyalty plan, which offers two to three times the value of a regular plan at a slightly lower price for $30 to $35 including tax.

Bell, Rogers, and Telus have released their back to school student plans. Even though, these plans are better than retail plans, they are not as good as the retention plans or some epp plans.

$25 Plan Comparison

[table id=8 /]

$35 Plan Comparison

[table id=9 /]

$50 Smartphone Comparison

[table id=10 /]


These student plans are very expensive and are not ideal unless the cost of a part of the plan can be waived. One way of saving money on retail plan is to only get the Call Display without Voicemail. Fido, Koodo, Virgin Mobile and Solo Mobile are slightly more competitively priced if some of the features listed above are not needed.

Some basic examples:

The annual cost of a $30 retention plan is $30*12*1.13 = $406.80.

The annual cost of a $55 smartphone retention plan is $55*12*1.13 = $745.80.

The annual cost of a $40 retail plan is $40*12*1.13 = $542.40.

The annual cost of a $75 smartphone retail plan is $75*12*1.13 = $1017.

These costs are estimations and do not include the subsidized cost of a phone or contract break up fees. In conclusion, cell phone contracts can be very expensive, but if landline fees (approximately $25 a month) can be saved, the real cost of cell phone portability is not as high as it seems. Cell phones plan need to be customized to the individual’s needs and circumstances. Last, but not not least, you should always ask if there are any promotions since the salespeople are instructed not to tell their customers about some of the special promotions unless asked.

Going Over the Border to the US

US roaming minutes from Canadian providers can be really expensive. Customer retention departments at Bell and Telus have been known to give out some decent US roaming solutions. Rogers and Fido do have some US roaming plans and there is a possibility that customer service or retentions can give a discount off the retail price.

Tmobile pay as you go is the best in the US if more minutes are needed. Tmobile uses GSM so it is compatible with unlocked GSM phones by using a Tmobile SIM card. Unfortunately, Rogers and Fido lock most of their phones. For Tmobile pay as you go, the airtime is $100 US + tax upfront and there are 1000 minutes a year. This is equivalent to $8.34 US + tax a month for 83 minutes a month. Your usage is very flexible and instead of minutes, you can use it on text messages. In the US, pay as you go does not charge long distance on top of regular minutes. So feel free to call from one state to another. The only limitation with Tmobile pay as you go is the  $0.60 a minute to call from US to Canada.

Phone Cards

The most popular and reliable phone card in Canada is CiCi. There are no connecting fees and customer service can be reached if needed. It comes in denominations as low as $5. It expires in 6 months.

The phone card I use is called Link Calling Card. It comes in $5 and $10 denominations. The exact cost per minute is not specified and customer service cannot be reached from personal experience. However, I find that Link Calling Card provides at least twice as many minutes as a CiCi card if not more in some cases. Link Calling Card expires in 8 weeks. For people who use their phone cards often, I recommend trying $5 Link Calling Card if possible. Link Calling Card is available at many convenience stores.

Conclusion

The Canadian cell phone costs are higher than most developed countries. 7 Eleven SpeakOut Wireless is a decent solution for people with light usage and Virgin Mobile Monthly Prepaid is a decent solution for people with medium usage. Retention plans are the ultimate goal for people with high usage or data needs. Find the plan that fits your needs and read the contract carefully before signing anything.