Categories
Announcements

More Nice Weather – Linkstuff – May 4

Another great weekend – it’s so nice to be able to take the kids outside without having to burrow through a huge pile of snowpants, mittens etc.  Mr. Cheap dropped by on Saturday afternoon for a while so we took my son to a local park.  It started to rain a little bit so we went back to the house for a couple of beers.  Lots of fun for all!  🙂

On with the links

The Wealthy Boomer had an interesting piece on the original Freedom 55 proponent.

Cash Money Life asked what is a living wage? Pretty interesting.

Canadian Capitalist is taking any questions you might have for the personal finance clinic.

Financial Blogger has learned a lot from him MBA colleagues.

The Dividend Guy give his 5 steps to choosing the right ETF.

The Oblivious Investor wrote a book – go and check it out.

Money Ning has some good and bad uses for leveraged money.

Good Financial Cents has 11 more tips to go green and save.

The Intelligent Speculator has lost in regulation.  How much regulation do hedge funds need?

Investing School discusses the confessions of an active trader.  Looks like too much work for me.

ABCs of Investing explains what “transfer in kind” means when moving your investments from one broker to another.

Carnivals

The Carnival of Personal Finance was held at Fire Finance.

Categories
Business Ideas

House Resale Insurance

This idea is targetted primarily at real estate agents.  Like many other middle-men, the Internet is destroying a previously safe and lucrative market for agents.  Either property sales will shift to be predominantly for-sale-by-owner, or agents are going to have to start adding more value to their role in the process.  This is one way they could do so.

This would be an insurance product, that would guarantee the value of residential real estate.  Agents would use it (in part) to sell their services to customers as a guarantee that they would be able to re-sell the house they are buying for at least what they paid for it.  In order to claim this, they would have to list the house with the original agent, give her a reasonable period of time to sell it, at which point if it hadn’t sold the agent would buy it from them herself (less her commission).   In reality, it would be the insurance company who is purchasing the property (and probably the agent would lose out on her commission).

This is obviously reassuring to the buyer, as it’s a guarantee they won’t lose money on the purchase.  It’s good for the agent, as it guarantees them repeat business (previous clients will want to list with them in order to be protected by the guarantee, if the agents sells for MORE than it was originally bought at, it’s gravy for everyone).

In the current market I can see why people would think that either insurance companies would be crazy to offer policies along these lines, or that the premiums would be outrageously expensive, but I don’t think either would necessarily be the case.

Typically house prices go up or plateau (stay the same).  Sharp dives, like we’ve recently experienced, are fairly rare (leading to the now obviously debunked myth that real estate always goes up).  In normal environments, policy premiums will be pure profit, with few or no payouts from the insurance company.  From one perspective, each year the owners are in the property inflation decreases the insurance company’s liability (since the dollar value of the property is worth less in the future than it is today).  Even in the case of a sharp drop, there would be a number of properties that have increased enough in value that they wouldn’t drop back to their purchase price, and there would be owners who just don’t want to sell.  A market like we’re currently in, where interest would be highest in such an insurance product, would probably be the safest time to offer a product like this (how much further can values drop?).

It’s also important to remember, in the worst case they’re only going to cover the DIFFERENCE between the lower sale price and the original purchase price, not the full value of the house.  Also, there should also be exclusions for major changes to the property (such as it being burnt down in a fire) which would be covered by other insurance, not by this.

If agents (or brokerages) bought this as a blanket coverage for all transactions they’re engaged in, I suspect the insurance could be offered to them at a fraction of a percent of the purchase price (perhaps Riscario can comment on whether my intuition is correct on this).

For this post, or any other of the wacky business ideas I post, obviously I’m releasing any ownership claims I may have over these ideas. If you like something I post and feel like you can make money from it, please feel free to do so! Let me know when you’re opening and we’ll do a post on it to give you some free advertising.

Categories
Personal Finance

Asset Allocation – Include Future Contributions?

One of my favourite investment topics is asset allocation – trying to figure out what your division between stocks and bonds should be in your portfolio.   I read a comment on this idea recently written by the excellent blogger Michael James who writes an excellent financial blog.

Normally when you are trying to figure out your desired asset allocation you consider your existing portfolio.  If you have $100k then you might decide to go with 70% stocks and 30% bonds.  Within those major asset classes you would probably have more detailed asset classes such as Canadian equities, US equities etc.

This approach works quite well for investors who have a fairly significant portfolio assembled.  But what about someone who is just getting started?  They might be in the situation where their portfolio is quite small but they are making large contributions to it.  An example could be someone who has just paid off their mortgage and now has quite a bit of extra cash to contribute to their retirement savings.

Does asset allocation matter if your contributions are a significant percentage of the portfolio?

I would say no.  If an investor has a portfolio value of $5,000 on Jan 1 and is planning to contribute $1,000 per month then it’s not worth worrying about keeping his portfolio at the perfect allocation.  One of the main reasons for asset allocation is risk management – either you want to protect your assets or are willing to risk them for a greater future reward (or something in between).

If you are in this situation then I would still consider coming up with some sort of asset allocation model (ie 75% stocks, 25% bonds etc) although it’s not really necessary in the early stages.  If you are buying securities with transaction fees such as stocks or exchange traded funds then it might be cheaper to just buy a lot of one investment at a time.   Even if you are buying index funds or managed mutual funds which don’t have transaction costs then don’t worry too much about the allocation until you have enough money to assemble a proper portfolio.

At what point should the asset allocation matter?

Tough to say – I would suggest that rather than think of a dollar figure – a ratio of yearly contributions to portfolio size might be more meaningful.  From a risk point of view – someone with an investment portfolio of $10k and annual contributions of $20k probably isn’t that worried about the original $10k from either a safety standpoint or a performance standpoint.  It just doesn’t really matter much in the beginning.

On the other hand if an investor has $20,000 and is contributing $1500 per year then they should concern themselves with designing a proper portfolio since they are at a point where the contributions are a small percentage of the portfolio.

Another factor might be the normal variances of the portfolio – if you assume a possible range of -15% to +15% (in most years) for a mostly equity portfolio then if the 15% estimate is larger than your contributions then that might be another point where your asset allocation plays a bigger part of the risk management rather than your contributions.

Categories
Frugal

Book Review: Europe on 84¢ a day

My apologies again for anyone who tried to comment on the “Bedtime Stories” post.  Somehow I managed to turn off comments on it.

europe-on-84 A couple of times I’ve referred to a trip across Europe I took after my second year of my undergraduate degree.  I was originally inspired to take the trip after Gil White came to my university and gave a slide show about his various backpacking trips abroad, and articulated his vision of ulta-low cost student travel (and hawked his self-published “Europe on 84¢ a day”).

The 84 cents in the title of his book isn’t meant to be taken literally, as he admits that some days he spent far more than this (and others he spent nothing).  It was more meant to capture the reader’s imagination that there are other ways to travel instead of the pre-packaged (and expensive) tours or Euro-rail passes.

His philosophy of travel is built on the idea that most people are good, nice individuals who are interested in learning more about travellers (and telling them about their own lives and cultures).  He feels that travellers fears keep them isolated from the real countries they travel to, and much like in all-inclusive resorts, we end up paying top dollar to have a sanitized experience.

His major suggestion to save money is to hitchhike.  While everyone these days lives in terror of people they don’t know (“stranger danger”) he believes that hitchhiking is far safer than most people realize and has seldom had a bad experience.  My experience was the same, and after hitchhiking for most of 4 months I only had 2 experiences that could be classified as negative (and they weren’t THAT bad).

His recommendation is for men to hitchhike alone, and for women to hitchhike with one other person (either another woman or a man).  He says, rightfully, that two men will have a hard time getting picked up.  He also admits that its a double standard, and feels that hitchhiking is generally safe, however a woman on her own is at the threshold of acceptable danger and is better off with another person.  Having met a woman who was raped while hitchhiking alone, I wholeheartedly agree (feel free to call me sexist, I can take it).

He pushes this further, providing some ideas on how to get the people who pick you up to let you stay with them over-night.  He claims that many drivers are willing to host people they meet, but assume that you wouldn’t want to stay with them (and justifies trying to get them to let you sleep over as “letting them know you WOULD like to stay with them).  This goes beyond what I’m comfortable doing, and the two times this happened for me (once in Germany and once in Finland) they were AWESOME experiences, but I still felt like a bit of a mooch.

In this 1995 edition, he provides extensive information about most European countries, including maps and embassy contact info.  Like the “Let’s Go” travel series, this sort of information is obsolete before the book is published, and modern travellers are able to dig this up on-line.  I think in a current version this should all be chopped out and his book should focus on the core value offered:  his philosophy on travel.

I’ve searched for the book (and author) on-line, and he still seems to be visiting universities in Canada and the US, but I have no idea if the book is still available or in print.  In the 1995 version it has the contact address for the author as “R.R. #1, St. Anns, Ontario, L0R 1Y0 Canada”.  If anyone knows where this books can be purchased on-line (other than used copies at Amazon and E*Bay), please post the info in a comment below.  Thanks in advance!

Categories
Announcements

Nice Weather Edition of Linkstuff April 27

Some great weather this weekend – it is a bit rainy today but yesterday was just fantastic (until the hurricane at dinner time).  We went down the beach and hung out for a few hour – a great day.

Best post of the week

Kristy from Master Your Card works in a bank and she shares the two times that she was robbed – it’s a pretty good read!  Most of the blogosphere is filled with posts where the author doesn’t have any direct experience with the topic so it’s nice to read a first hand account of a relatively rare phenomenon.

Another great post

Hunter Nutall has a very interesting blog where he writes about a lot of different topics and his thoughts on them – this post on specialization (specialization is for insects) was quite fascinating (and not just because he linked to this blog).  If you like your blogs to have an element of intellectualism about them (in which case why are you here?) then I would suggest subscribing to his blog.

The rest of the links

Blunt Money inspired Mrs. Pillars to act on some long overdue tasks with ready or not, here I come.

Preet tells us about a dealership that doesn’t want to sell cars that badly.

Financial Blogger talks about how to start investing.

The Oblivious Investor discusses why to own bonds.

Money Ning shows us how to use a disciplined approach to evaluate our spending patterns.

Good Financial Cents shows us how to stretch an inherited IRA for our beneficiaries.

Million Dollar Journey asks do you plan to leave anything behind?

Canadian Capitalist alerts us to a little-known fact with beware of CRA’s defiinition of foreign property.

The Intelligent Speculator wonders if McDonald’s will deal a blow to Tim Hortons.

Investing School discusses credit rating agencies and credit rating.

ABCs of Investing wrote about the Transfer In Cash.

Carnivals

The Carnival of Personal Finance was hosted by the Mighty Bargain Hunter.

Categories
Personal Finance

Movie Review: Bedtime Stories

I recently saw Adam Sandler’s “Bedtime Stories”.  To get the obvious first question out of the way, yes, Mr. Cheap watches children’s movies.  And, no, I don’t have any kids.  I get a tear in my eye at the “When She Loved Me” sequence in Toy Story 2.  I watch “chick flicks” in addition to the manly genres of Science Fiction and Westerns.  Heck, I can’t think of a genre of movie I *won’t* watch.

Mr. Cheap is more complicated than you think, thank you very much!

On almost every level, Bedtime Stories was truly terrible.  That’s par for the course for Mr. Sandler, but in this outing he had Xena, Uncle Dursley and the delicious Keri Russell to work with, and he STILL made mess of it!

Setting aside that it’s a bad movie (and it is), the reason I thought it was worthwhile to post about is that it makes some strong assertions in topic areas we blog about.  Given that these are being made to children, and shaping their views on careers, money and economic issues, I think it’s worthwhile to consider.

At the beginning of the movie, Adam Sandler’s father sells his hotel to a British scoundrel because the father is running it into the ground.  We’re lead to believe that the father is virtuous for “caring about guests”, while the brit is scum for running profitable businesses.  The father wrangles a very half-hearted promise from the buyer that Adam Sandler will be considered to run the hotel when he gets older.

Fast forward a few decades and Adam Sandler is the virtuous custodian who pays for elderly drunks’ mini-bar tab  from the evil bureaucrat that insists customers pay for booze they’ve consumed.  The next hour and a half is Adam Sandler’s character whining that he’s worked hard as the custodian, so should now be made the boss of the entire massively-renovated far-larger hotel.  He demonstrates none of the skills to actually DO this job, and doesn’t seem to have any interest in gaining those skills (or working and taking a risk by starting his own hotel).  He just whines and whines, until he figures out his niece and nephew’s bedtime stories can alter reality, so he starts trying to use MAGIC to get what he wants.  I suspect he’d take right away to “Rich Dad, Poor Dad” or “The Secret” if he ever read either.

After using magic extensively (and finding it doesn’t work), at the end of the movie (sorry to spoil it for you), he’s suddenly magically running his OWN hotel!  So whine enough about how much you deserve something, trust in some kooky magic, and you’ll get what you want, or something awfully similar.

In the early part of the movie, he’s the custodian and is treated badly by the “higher ups” at the hotel.  At the end of the movie, he’s the higher up, and for some reason the former higher-ups are now working as his custodial staff while HE treats THEM badly.  Much as the ending of “Night at the Museum” teaches our children, the perfect punishment for villains is to make them janitors.  Of course, there’s no chance that it’s a necessary job, deserving its own dignity and respect.  Nope, let’s teach the kids that janitors are bad people, who deserve their “continuous suffering” because of past misdeeds (and it’s important that they’re treated poorly by those around them:  as long as the custodian isn’t Adam Sandler).

Don’t waste your time watching this, but more importantly, please don’t poison young minds by exposing them to it.  Unless, of course, you want to teach those young minds that all businesses are run by greedy, evil people, that you get what you want in life by wishing for it (instead of through planning, discipline or working hard), and it’s important to reach a status level in society that lets you feel better about yourself by treating other people badly.

Categories
Money

2009 Social Security Stimulus Check Will Be Arriving In May Or Early June

As a result of the 2009 federal stimulus package (otherwise known as the American Recovery and Reinvestment Act) there will be a $250 stimulus check paid out to all Social Security recipients in 2009. You might have already received a letter from the Social Security Administration telling you about this one-time payment.

The Social Security Administration is planning to send out these payments during the month of May so if you are eligible for this special payment then expect to get the $250 sometime in May or in the first week of June. Please don’t call the SSA unless you haven’t received your check by June 4.

The maximum amount per individual is $250 even if that person qualifies under different programs (SSI, veterans’ compensation, veterans pension payments or railroad retirement benefits). Couples can qualify to receive up to $500 ($250 each).

You will still get your regular Social Security payment as always.

Who is eligible for the $250 check?

To get the $250 you must meet the following criteria:

  • Currently receiving Social Security.
  • Must have been eligible for benefits at any time in November 2008, December 2008 or January 2009.
  • The person receiving the Social Security must have an address of record in one of the 50 states, the District of Columbia, American Samoa, Puerto Rico, the U.S. Virgin Islands, Guam or the Northern Mariana Islands.

What do I have to do to get my $250 Social Security payment?

Nothing – if you qualify then the check will be mailed or direct deposited to you automatically. If you haven’t received the payment by June 4 then call the SSA.

How will I get my $250 payment?

The extra $250 payment will be paid to you in the same method that is currently used to your Social Security or SSI benefit. If you currently receive your regular benefit by check, your one-time payment will be made by check. If you receive a monthly direct deposit or Direct Express® debit card payment, that is how you will receive your one-time payment.

Social Security information website

If you wish to look at the SSA (Social Security Administration) website then please go to

Social Security Stimulus Check 2010 – FAQ

Categories
Money

$250 SSI 2009 Stimulus Check Will Be Arriving In May Or Early June

As a result of the 2009 federal stimulus package (otherwise known as the American Recovery and Reinvestment Act) there will be a $250 stimulus check paid out to all recipients of SSI (Supplemental Security Income).

The Social Security Administration is planning to send out these payments during the month of May so if you are eligible for this payment then expect to get the $250 sometime in May or in the first week of June. Please don’t call the SSA unless you haven’t received your check by June 4.

The maximum amount per individual is $250 even if that person qualifies under different programs (Social Security, veterans’ compensation, veterans pension payments or railroad retirement benefits). Couples can qualify to receive up to $500 ($250 each).

To qualify for the SSI one time payment of $250 you must have been receiving SSI payments during the period of November, 2008 and January, 2009.

You will still get your regular SSI payment as always.

SSI information website

If you wish to look at the SSA (Social Security Administration) website then please go to

The following websites are not valid and should be avoided – www.ssi.gov and ssi.gov.

Info on Social Security Stimulus Check 2010 – FAQ