Len Penzo dot Com

The offbeat personal finance blog for responsible people.

My 2009 State of the Household Financial Report

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Our "household Constitution" requires the Honeybee, who is the family's household CFO, to deliver the family financial report every January to yours truly, the household CEO. For years, the Honeybee has painstakingly tracked and recorded our finances using a Microsoft Excel spreadsheet.   Last week she completed updating that spreadsheet for 2009. Having reviewed the latest numbers I am pleased to report that the state of the Penzo household is currently very good. This report is divided into three sections: 1. Net worth estimate as of December 31, 2009 2. Long term financial performance since 1999 3. 2009 Financial Performance The Big Picture As of 31 December 2009 the household net worth was just a notch under $700,000.   This represents a net increase of five percent from 2008. Overall, assets increased four percent while liabilities increased one percent. On the liabilities side, other than the mortgage, we have no loans, credit card debt or any other obligations.   That, ladies and gentlemen, is called financial freedom! The mortgage balance increased by one percent last year because I made two tactical decisions: 1)   refinance my 15-year fixed-rate mortgage to a 30-year fixed-rate mortgage, paying a little extra up front in order to lower the payments even further to help cushion the financial impact of a potential job layoff; and 2) Taking the money we have been allocating for over a decade towards extra mortgage principal payments and temporarily holding it in a separate savings account.   Back in June 2009 I explained my reasons for temporarily holding back the extra principal in this article. With respect to assets, I estimated our household personal property, which includes things like our two cars,   furnishings, jewelry, and collections. In January 2009 the house was officially appraised at $440,000; my local real estate blog noted that home prices in my community were essentially stagnant from the period from December 2008 to December 2009. Cash holdings decreased largely in part due to a drop in the value of some stock options I am currently holding. I track both our total net worth as well as net worth minus home equity.   I do this as a simple reminder to myself that our house is not to be considered a piggy bank that can be tapped whenever we have an urge to scratch an itch.   By this latter measuring stick, the household net worth is a much more modest $375,000 - although that represents an increase of 13 percent over the past year. Long Term Financial Performance 1999-2009 This long-term data reveals trends applicable to typical households with a genuine commitment to living within their means.   These long-term data allow us to glean additional insights regarding the advantages and benefits of sticking to a disciplined budget that just can't be seen over shorter periods of time. Keep in mind that, because the Honeybee is a hard-working but unpaid stay-at-home mom, our household has relied on only one income since our first child was born in 1997. For those of you in your twenties and thirties, not to mention those who may be questioning whether early scrimping and saving is really worth all the hassle, just take at look at the next chart.   It is a graphical representation of the Penzo family household expenditures between 1999 and 2009 as a percentage of my total take-home income, which excludes withheld taxes, paycheck deductions for health and other benefits, and contributions to my 401(k) plan. Let's analyze some key areas of this graph. Loans Worst Performance:   48.2% (!) of take-home pay   (1999) Best Performance:   8.9%   (2009) Current Impact: 8.9% Now, when looking at this summary chart of the household expenses over the past 11 years, the most glaring item is the red line on the chart.   This is the percentage of my take-home income dedicated to loans and, as you can see, in 1999 it was literally off the chart!   For the record, in 1999 exactly 48.2% of my take-home pay went to cover a car loan and the mortgage on my house. My original goal was to get this number down to 38%.   My assumption for this was the generally accepted 28% maximum for the home loan and an additional 10% for auto loans.   I realize conventional wisdom says the percentage of take home pay devoted to the car loan can be as much as 20%, but I prefer not to devote that much money to an auto. Generally, high debt-to-income ratios are usually the biggest hardship for those who are just starting out. The good news, however, is that over time those who hate to pay interest and choose to live within their means should expect to see less of their take-home income consumed by loans.   As the graph shows, this is clearly illustrated in my particular case. Look at how that red line plummets over time!   Each time that red line drops the choking vice-like grip of your debt eases until, before you know it, you no longer even notice it! For me, the first significant drop in loan expenses occurred in 2000 when we paid off our first car loan.     We bought another car in 2002 but the loan on that car was retired in 2005, resulting in the second significant drop in loan expenses. Key Takeaway: When you no longer are committed to servicing loan debt you suddenly find yourself with more money available to put towards... Savings Worst Performance: 1.9% (1999) Best Performance:   20.4%     (2006) Current Impact:   14.0% Next, we'll focus on the lime green line that represents my contributions to savings.   Keep in mind this is only cash savings extracted from my take home pay.   It excludes my contributions, for example, to my 401(k) retirement plan that are automatically deducted from my paycheck. Notice the impact that the loans had on our savings (not to mention all of the other expenses) in 1999.   That year we were only able to sock away a pitiful 1.9% into the emergency fund.   The irony, of course, is this is the very time when we were most vulnerable to defaulting on those pesky high loans that were eating up most of my take-home pay! As time passed, however, we were able to begin building a significant savings cushion. Key Takeaway: For those who can minimize their debt load, the ability to save increases over time. Utilities Worst Performance: 7.0% (1999) Best Performance:   5.5%     (2000, 2001, 2006) Current Impact:   6.9% Over time, our utility bills have thankfully managed to keep pace with my increasing take-home pay.   In 2009 equivalent dollar terms, our utility bills have increased over 30% over the period from 1999-2009.   I attribute a big part of that to the growing size of our household. In equivalent-dollar terms over the past decade, here is a breakdown of how much our utility bills have increased: Electricity: 4% increase Natural Gas:   4% decrease Telephone/Cellular:   54% increase Sewer/Water/Trash:   10% decrease Cable/Satellite:   175% increase (!) Key Takeaway: Technology costs money.   If you aren't careful, telephone and cable/satellite television bills can outpace the rate of inflation - and increases in your paycheck. Property Taxes Biggest Impact: 6.7% (1999) Current Impact:   4.4% I am extremely fortunate that our property taxes, represented by the white line on the graph, continue to drop as a percentage of take home pay thanks to California's Proposition 13.   I expect this number to continue to drop over the long run.   Before Proposition 13, property taxes were capable of doubling every couple of years, and putting significant numbers of people at risk of losing their homes to their inability to pay the outrageous taxes.   Hopefully, you live somewhere that has similar restrictions on property tax increases. Key Takeaway: Count your lucky stars if you live in a place with property tax restrictions. Groceries Worst Performance: 10.1% (2009) Best Performance:   6.9%     (1999) Current Impact:   10.1% The trend is gradual but unmistakable.   The brown line that represents our household grocery bill is slowly increasing.   Since 1999 it has more than doubled in real dollars and I expect it will probably nearly double again over the next 10 years as our 12-year-old son, Matthew-the-Bottomless-Pit, begins to enter his teen years.     Luckily my income has managed to keep up with the increase in the grocery bill over the last ten years, but I expect the slope depicted on the graph will begin to steepen just a bit over the next ten years or so. Key Takeaway: Paybacks are a bitch.   I know I cost my mom and dad a fortune in groceries when I was a teenager and soon Matthew-the-Bottomless-Pit (God love him!) will be doing the same to me. Bonus Tip: Yes our grocery bill is large, but did you know our food bill would be as much as 20 times higher if my family of four ate most every meal at a restaurant?     You can see the complete analysis here. House Expenses Worst Performance: 19.2% (2006) Best Performance:   1.6%     (2001) Current Impact:   16.5% This category includes everything we spend to improve the house, from this year's block wall, to our new energy efficient front doors.   From plumbing repairs to paint and home owners insurance.   We also include the exterminator visits, lawn care, remodeling expenses, and even the cost of the furniture and wall clocks.   As the house is getting older, a bigger percentage of the money is going toward maintenance and less is going to the other stuff. Key Takeaway: The cost of owning a home is expensive and goes way beyond the mortgage. As I mentioned in last year's report, the long-term graph clearly shows that for younger households that are just starting out, say with a new house and car, by the time the everyday expenses are taken care of, there is very little left to devote to discretionary income.   The lesson here hasn't changed: Serious household CEOs have to be extremely vigilant in ensuring that budgets are adhered to because the money here can be so tight that the temptation to pull out that credit card and run up a few charges that you can't cover at the end of the month will be great. Needless to say, the Honeybee and I really sacrificed in the first couple of years.   In fact, for the first couple of years, as you can see from the graph we did not even track entertainment as a separate expense because we spent so little on it.     At that time, our entertainment was basically tracked by our ATM withdrawals. But the same graph should inspire you, for it clearly proves that disciplined households that are committed to achieving financial freedom will begin to reap the fruits of their hard work in a relatively short amount of time. 2009 Financial Performance Finally, here is an illustrative breakdown of my “outflow”, or expenses, for the year in the form of a pie chart.     The money that makes up the pie chart comes entirely from my take-home pay, which excludes withheld taxes, paycheck deductions for health and other benefits such as additional life insurance, and contributions to my 401(k) plan. So, in essence, this represents how we chose to allocate our take-home pay for the year. As you can see, the chart is broken up into various categories.   Essentially, by looking at it you can see that three percent of my take home in 2009 went toward medical and dental expenses, while fully ten percent went to groceries. The chart to the right shows the changes in where the household income was allocated from the previous year. On the positive side, I am happy to see that, thanks to the home refinance we did last January, the household had seven percent more take-home income to allocate to other areas in 2009.   In fact, our only liability is the mortgage and it takes up a measly nine percent of my take home pay. The mortgage is low enough now that even if I did get laid off from my high-paying engineering position, we would be able to make our payments for probably years (barring a catastrophic health event or natural disaster) even if I was unable to ever find a similar job. The entertainment expenses were lower because last year we didn't go on a major family vacation, unlike in 2008 when we went to Maui for ten days. Thanks to the lower mortgage bill in 2009, we had more money to devote to our savings. On the down side, we spent more money last year on maintenance for our aging (but paid for!) automobiles, and our house which is now 12 years old and getting to that stage where things are starting to need replacing.     The biggest expense last year was our decision to spend almost $7000 to replace our dilapidated wood fence with a brand new block wall. Well, that's it for this year's report. In Conclusion... I can't impress upon you enough the power that keeping track of your finances gives you.   Another benefit of keeping detailed records like this is it instills an immediate sense of purpose toward improving your financial situation.   It also allows you to set goals. If you aren't already doing so, I hope this report encourages you to take control of your own finances. ...

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Buying Glasses? 3 Facts Your Eye Doctor Doesn’t Want You to Know.

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Oops, my bad. This is a guest post from some guy who wasn't who he said he was and was trying to make a few bucks off of an affiliate link.   Still, I can attest to the information  within this post as being accurate, as I too buy my glasses and contacts on-line - so I will keep this post up.   But I  have since removed the offending affiliate links from this post. As an added bonus, with the new information given to me by Patrick at Cash Money Life regarding this character, I thought it would be fun to add some editorial comments to this post. This past week I was reflecting on how I was able to save money in 2009 and I realized that one of the ways, purchasing eyewear online, wasn’t very well known by most people.   (Editor's note:   Actually, he was reflecting on how he could make money by duping dumb bloggers like me.) I first found this out when I read this article in the New York Times about do-it-yourself eyeglass shopping. At first I didn’t pursue this; I had become so used to going to the eye doctor every year and purchasing glasses there.   (Editor's note:   I'll bet this guy has 20/20 vision.) A few months ago though when I went to buy my new pair I was told it would cost me over $300 and I honestly didn’t have that much in my bank account. So I decided to go home and look online to find a less expensive alternative. That night when I looked online I found that the same lens I was looking at was half the price. I couldn’t believe these brick-and-mortar stores had such a high profit margin. How could this be?   (Editor's note: Why don't you tell us, "Jared?"   I assume he was watching a Subway Sandwich commercial when  he made up that moniker.   I'll bet this guy's real name is Ben Dover.) According to the New York Times, “a glasses frame that costs less than $25 to make in Italy can retail for at least $150 at an optical shop in the United States.” Unbeknownst to most people, these stores are making absurdly large profits.     (Editor's Note:   I've always had trouble with words that are singular but spelled plural.   For example, am I the only one that thinks "a glasses frame" sounds a bit off?   To me it sounds better, if it were "a glass frame."   Same thing with "scissors."   Why isn't it a "scissor?") The New York Times went on to say “If ever there was a market ripe for the intervention of the Internet, which allowed consumers to find discounts on best-selling novels, digital cameras or Hawaiian vacations, eyeglasses would be it.”     (Editor's Note: When it comes to ripe markets begging for intervention, the Times forgot peddling advertisements disguised as  "guest posts"  to clueless bloggers like yours truly.) I began digging into this more and I found that there are several well-known blogs dedicated to purchasing glasses on the Internet.   It was there that I found answers to all of the questions I had.   (Editor's Note: You mean you discovered there were ways to make a few bucks peddling eye-wear advertisements disguised as  "guest posts"  to clueless bloggers like yours truly.) In particular, I want to share with you three key points that I discovered that many eye doctors and brick-and-mortar eyewear shops probably don't want you to know: 1.   All I needed in order to buy glasses online was a prescription and a PD measurement from my eye doctor.   Doctors are required to give this to you.     (Editor's Note:   True.) 2. Customer service at some of those online stores is fantastic.   You can call them for help finding the best frames and lenses for yourself. (Editor's Note: That is true too.) 3. If you do need your glasses adjusted it is very easy to learn to do it yourself, or you can go to a local optical shop and they will do it for a very small fee.   (Editor's Note: Again, true.) I called my eye doctor for my prescription and the next day I purchased glasses online. I have bought two pairs now and both have turned out to be great.   (Editor's Note: Somehow I don't believe that.) To be honest, I believe the quality of the glasses is even higher than the glasses I bought in the store.   (Editor's Note: Higher, not likely.   The same, absolutely.) The process is not only easy, but it has also saved me a lot of time. (Editor's Note: Dat be true.) Now, I not only buy my glasses online, but I also shop for my contact lenses online too!   Each box of contacts that I purchase online saves me $20.   (Editor's Note: Imagine that!   Obviously, he is trying to score points with multiple affiliates in the same post.   Ah, the joys of capitalism!) Popular websites that sell contacts include...   (Editor's Note: You know what - if you're interested in buying contacts on-line, just go to Google and type in the words "contact lenses.") If your resolution this year is to save money, I strongly recommend you try shopping online for your eyewear.   (Editor's Note: My apologies to my readers.   I'll try and be more careful next time.) ...

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Talkin’ Turkey: Evaluating My Thanksgiving Dinner Scorecard

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This year Thanksgiving dinner is at my house. We'll be serving dinner for 16 people including my sister and her family, my mom and dad and the Honeybee's folks. You know, since he came out to visit a few weeks ago, my father-in-law Tony has taken over a lot of the chores around the house, including fixing the water heater (and saving me $400 in the process). It's not that I'm lazy, mind you.     It's just that Tony likes to keep busy, so who am I to stop him if he wants to tighten a few loose screws, paint a bedroom or two, and perhaps even do a major renovation to my bathroom and/or kitchen while he is vacationing here? Needless to say, that's why I made my go-getter father-in-law the executive chef in charge of preparing this year's Thanksgiving dinner. Hey, what kind of guy do you think I am?   I'm certainly not prepared to ruin Tony's Thanksgiving by telling him his only job is to sit down all day and do nothing but watch some lousy football games and stuff himself silly with turkey and mashed potatoes - Tony is a guest in my home, after all. Besides, I'm going to be Tony's trusty sous chef.   Before you laugh too hard, you need to know that I am normally the family cook - I can more than handle myself in the kitchen.   And although that didn't sound quite right, I trust you know what I mean. As for the menu, after much deliberation, Tony and I decided to keep things traditional and settled on the following menu: Turkey Herb stuffing Mashed potatoes Yams Green Beans Salad Dinner Rolls Dessert (Pumpkin, Apple, and Cherry Pie) Sparkling Apple Cider So with the menu in hand Tony and I made a grocery list and then set off to do some grocery shopping. We brought the Honeybee along with us too because we needed somebody to drive. Our first stop was at our local warehouse-type store, where we bought the turkey, a monster apple pie, and a couple of other items.   For the record, the turkeys at the warehouse-type store were not only fresh, as opposed to frozen, but they were also about ten cents per pound cheaper. After that, we went to our neighborhood supermarket, where we bought the rest of the stuff we'd need for the Thanksgiving feast. As you can see, off to the right I have included a breakdown of our grocery bill. Keep in mind that a couple of the items I bought at the warehouse store have been pro-rated to account for the fact that we only use a portion of what we buy for the actual dinner. So, for example, although we bought 48 ounces of canned olives in eight cans, I'm only counting two cans (12 oz.) on my Thanksgiving dinner scorecard. In total we spent just over one-hundred dollars for our Thanksgiving meal this year, which is very reasonable for 16 people.   We didn't make a conscious effort to make the meal as cheaply as possible - Thanksgiving dinner is a meal I prefer not to scrimp on.   However, if we did I am certain we could have shaved the total grocery bill by probably 20% by focusing on buying only store-brand items.     Then again, keep in mind that, as my name-brand vs. store-brand taste test experiment showed, you can't assume anything with respect to taste and quality - sometimes the name brand is better, and other times, the store brand label is actually better. A Few Observations... After looking at this scorecard, I couldn't help but notice a few interesting facts: 1. The biggest expense for the entire meal was NOT the turkey. "But, Len, how could that be?" Maybe it's because when it comes to Thanksgiving dinner, my family considers the meal's most important course to be dessert.   Sad, I know.   Anyway, after purchasing almost eight pounds of pie and the mandatory whipped cream, we spent a whopping $22.16.   Meanwhile, the 22-pound turkey we bought cost us less than twenty bucks.   I don't know what is more disturbing: The fact that we bought over $20 worth of dessert, or the little voice inside my head that keeps telling me eight pounds of pie might not be enough. 2. You can get some really awesome deals at your local grocery store. Did you notice the price we paid for those russet potatoes?   Ten cents per pound is an absolutely ridiculous deal to be offered by any grocery store not based in Idaho.   Especially when you compare that to the price we paid for the potato chips, which comes out to $2.79 per pound if you do the math. 3. It's always cheaper to eat at home. I dare you to find a restaurant that will put out an awesome Thanksgiving dinner with all the trimmings, plus appetizers, for 16 people in a family-friendly and comfortable atmosphere for just over $102.   And that's before the tip. On behalf of my entire family, we'd like to wish you all a very safe and Happy Thanksgiving!   :-) Oh, and if you find you happen to need a little extra pie on Thanksgiving Day, drop me a line - we've got plenty.     I think.   ;-) Hey! If you liked this article, please be sure to subscribe to my RSS feed! ...

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Flexible Spending Accounts Provide Free Money. Why Pass It Up?

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The relentless rise of health care costs can really put a strain on your household budget.   Even with an insurance plan, health care expenses can add up when you consider most people still have to pay deductibles, copayments and other items not covered by insurance. A great way to offset these rising costs is through the use of flexible spending accounts (or FSAs).   FSAs are employer-sponsored accounts that allow employees to make pre-tax contributions.   FSAs provide tax savings that help offset health care and dependent day care expenses. Any contributions you make to your FSA can be used to pay for out-of-pocket medical expenses that are not covered by your health insurance plan -  so by taking advantage of FSAs you are, in essence, allowing the government to subsidize a portion of your unreimbursed medical expenses. How FSAs Work Let's say after sitting down and thinking it over, you estimate all of your unreimbursed medical expenses for the coming year will be $1000.   At enrollment time, you instruct your employer that you wish to put $1000 in your FSA.    Your  employer will then deduct a portion of that amount from your paycheck each week (in this case, $19.23) before taxes. At anytime during the year, you can tap the money in your FSA to cover your qualifying unreimbursed medical expenses, even if your account isn't yet "fully funded."     In other words, if your FSA contribution for 2010 is $1000,   you can withdraw all $1000 to pay for qualifying unreimbursed expenses incurred during the first week of January, even though you've only contributed $19.23 into the account. How do you "tap" the money?   I pay the fees in advance and then submit the receipts to my plan administrator who then issues me a check.   But I also have the option of using a special FSA debit card as well that will make the payments in real time. The higher your marginal tax rate, and the more you put in your FSA, the more money you'll save.   Somebody that puts $3000 into an FSA and sits in a 25% tax bracket is essentially saving themselves $750 every year. That's $750 of free money - so why would anybody pass that up? Fear is a Lame Excuse for Leaving Free Money on the Table As this New York Times article shows, most people fail to take advantage of FSAs because employee contributions to an FSA are "use-it-or-lose-it.”     What that means is if you fail to spend the money in the account before the coverage period ends, any unused funds are lost. What a lame excuse. Actually, it's a pitiful excuse - but a lot of people use it anyway.   The Times article notes that although 85 percent of companies offer FSAs, only 22 percent of employees take advantage of them. How sad. I can understand being afraid of leaving free money on a table if it is being guarded by an angry rattlesnake.   But to throw away free money simply because you're afraid you might not meet some silly little requirement is really inexcusable - especially when you consider all it takes for most folks to avoid that scenario is 30 minutes of their time so they can plan out and estimate in advance their unreimbursed medical expenses for the following year. With two kids currently wearing dental braces, my unreimbursed orthodontia bills more than cover my $3000 annual FSA maximum limit imposed by my employer.   But even when the kids weren't in the midst of their current orthodontia program, we had little trouble covering the maximum.   When you consider eye glasses, contact lenses, saline solution, dentist and doctor copays, unreimbursed prescriptions, cold and other off-the-shelf medicines, band aids, and other qualifying expenses for a family of four, it didn't take much effort to get there. Coverage periods depend on your employer’s specific plan, although most plans follow the calendar year.   My company's plan even offers a very generous three-month grace period for filing claims. If you are still worried about losing money,  I would recommend you  start slowly and gradually increase your FSA limit each year until you feel more comfortable with the process. That's what I did. The first year I took advantage of an FSA I only signed up for $500.   That year I had reached $500 in unreimbursed expenses by June and I remember wishing I had signed-up to put more in my account.   The following year I upped my contribution to $1000.   By the third year, I doubled it again.   I am now contributing $3000 to my FSA and it is a very important benefit I count on every year to help me save money. Another benefit of the FSA is it acts as a quasi-savings device.   We usually compile all of our receipts in a special file and then request our entire reimbursement check all at once sometime in the latter-half of the year.   The $3000 check makes for a nice "windfall bonus" that we use to pay for big purchases. What Are Qualifying Expenses? Although there are exceptions, the list of qualifying expenses is usually big enough to drive an ambulance through.   For a complete list of deductible medical expenses, check out IRS Publication 502.   But, as cited in that Times article, here is an example of how varied the expenses are: - Over-the-counter medicines of all types - Cough drops - Calamine lotion - Mental health therapy - Lab tests - Dental braces - Lasik surgery - Aids to help you stop smoking Just keep in mind that, as of 2011, over-the-counter medications must accompany a note from your doctor to qualify as an allowable expense. Keep in Mind Your Employer Can Make Exceptions! It is important to know that employers are free to choose what their FSAs will cover.   The Times notes that while the vast majority of firms simply follow the IRS rules, some do make exclusions, so check with your employer's benefits department to see how your company varies from the IRS list of approved expenses. In Conclusion... FSAs are something to be embraced, not feared.   They not only reduce your tax liability, they also can act as a  de facto quasi-savings plan.   Yes, if you fail to plan, you may end up losing a portion of your contribution - but that is a poor excuse for passing up one of the more valuable benefits that your employer provides to you. All it takes is a small amount of planning on your part.   :-) Hey! If you liked this article, please be sure to subscribe to my RSS feed! ...

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It’s Time Unemployed People Start Working For Free

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Okay, not all unemployed people, but definitely some of them. Let me explain. Last month the U.S. House of Representatives passed another 13-week extension of unemployment benefits on top of the current California maximum of 79 weeks.   And just last week, Senate Majority Leader Harry Reid (Dâ€Nevada) introduced a proposal to extend unemployment insurance by up to 14 additional weeks for jobless workers in all 50 states.   The proposal would also extend benefits for an extra 6 weeks in high unemployment states. Assuming these provisions survive and eventually get signed into law by President Obama, it means qualifying individuals in California will be eligible to receive unemployment benefits for up to 99 weeks.   (UPDATE: In April 2010, President Obama signed the bill into law after the Democratic majority in Congress passed the legislation on what was essentially a party-line vote in both the House 289-112 and Senate 59-38.) The cost of this extension is estimated to be on the order of $70 billion.   Of course, U.S. lawmakers have not figured out whether or how to pay for that, so they'll just cover it in a manner that requires the least amount of political courage.   That is, they'll just print more money - damn the torpedoes and thank you very much. That being said, for now let's forget about the financial impacts and just focus on the magnitude of time, shall we? Ninety-nine weeks. If we're going to talk about the length of time that certain people should be getting paid unemployment benefits, I have to insist on raising a bit of a stink. Come on, that's almost two whole years. Hey, I have nothing against the number 99 per se. Ninety-nine is a terrific number if you're the greatest hockey player who ever lived.   Or a secret agent. But 99 is a ridiculous number when it comes to the number of weeks the government allots some people to find a job while enjoying the luxury of a safety net.   To be more specific, I have no doubt this is a big reason there are now a growing number of people who characterize themselves as being happily "funemployed." According to this expose by the Los Angeles Times, the funemployed are "usually single, in their 20s and 30s and find that life without work agrees with them." This story by CBS News asks, "If the economy is so dismal, why are victims of the recession smiling?" I'll tell you why: Because a lot of people are collecting $475 per week in California or $900 per week in Massachusetts for doing absolutely nothing! Most of those smiling people are single, under 35 and either have a low mortgage payment or are renting an apartment. One of my coworkers was telling me about a friend of his who fits that profile who absolutely refuses to look for a job until his jobless benefits run out.   He's having a blast and the Unemployment Office isn't paying enough attention to notice that he isn't really looking for work anyway. And who can blame the guy?   Why work for $10 bucks an hour stacking boxes when you earn $11.88 per hour sitting at the beach or skiing at Mammoth Mountain? If the government is going to continue to extend unemployment benefits, then the state unemployment offices need to do a better job policing those who are receiving them. I say that before anybody receives a single cent of extended unemployment benefits resulting from the Federal Emergency Unemployment Compensation program, they should have to prove they are making a good-faith effort at finding a job. After 52 weeks, and until they can show otherwise, people that have failed to meet such a modest requirement should be required to do community service for 20 hours per week in order to continue to receive further unemployment benefits. After 72 weeks, the community service requirement for failing to demonstrate a good-faith effort to find a job should increase to 40 hours per week. No community service, no check. If you want to stay "funemployed," be my guest, Skippy - just don't expect the taxpayers to subsidize you. Hey! If you liked this article, please be sure to subscribe to my RSS feed! ...

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Why Low-Cost or No-Fee Products May Not Be Such A Good Deal

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This is a guest post by Mr. Credit Card from www.askmrcreditcard.com.   Today, Mr Credit Card is going to talk about how getting into the cheap, lowest cost mentality may not be the best thing for every purchase that we make.   This is a slight departure from his usual credit card subject although he uses a couple of such examples below.   If you are looking for a credit card, check out his best credit cards recommendation section.     Thanks, Mr. Credit Card for filling in for me today! Firstly, I would like to thank Len for letting me guest post on this blog. I've been blogging since 2006 and I have noticed that personal finance bloggers mostly preach frugality.   You can see that in the number of coupon blogs that are written by moms and pf bloggers who recommend every thing that is "low cost." But I want to stress that "low cost" mentality can be taken too far and sometimes, that route may not be the best.   Today, I would like to highlight some instances where "low cost" may not necessarily be the best option for us individuals and in certain cases for society as a whole. Low Cost Online Brokers - There are many pf bloggers that recommend or review "discount brokers."   Because of the competitive nature of the industry, fees keep dropping. But are low-cost online brokers the best thing to happen? While low fees are great for the retail investor, what is probably lacking today is top-notch research. Yes, Wall Street messed up by not calling the market right in 2000. Yes, investment bankers paid the bills for the major brokerage. But since Elliot Spitzer prohibited investment bankers to pay for equity research, Wall Street has found no incentive to provide the great research. In fact, these days, Wall Street provides their best stock trading research to their own proprietary trading desk. The very best research analysts have gone to work for hedge funds. Where does that leave the so-called "retail investors" like us which the new rule was supposed to protect? Are we really getting the best deal from this arrangement? I'm not so sure. Well, we all do not want to be paying $75 for stock trades, but I'm not convinced paying just $4 per trade is the way to go either. What's the point of having low transaction fees when you cannot get access to the best research? You will then be confined to the garbage that CNBC throws at you! Low cost computers - Michael Dell did a great service by introducing low cost computers (at least on a relative basis). Computers have steadily declined in prices. But in my opinion it is so competitive that computer companies are cutting corners in certain areas. For example, most firms now outsource customer support to India because of lower costs.   I have absolutely nothing against customer service reps from India if they are cheaper, but the problem arises when computer customers here cannot understand folks from another country! If you buy any branded computers, you also do not have to pay the full price for Microsoft's Windows operating system. But along with that comes lots of pre-installed software that you do not need. This causes system bloat and slows down your computer. In addition, to get these programs removed, a retail store like Best Buy actually charges you money to get rid of these programs! These out of the box computers are mostly not upgradable. Hence, most folks change them after just three years because the costs of upgrading the operating system, memory and hard disk simply go up and your computer slows down! Perhaps if you are thinking of getting a new computer, a custom made computer like Puget Systems with its excellent customer service might be the better way to go even though it may cost slightly more. High Yield Savings Account - Lots of bloggers talk about high yield savings accounts. Due to the rise of the internet as a medium, many banks have been able to offer consumers high yield savings accounts, or at least rates "slightly higher" than banks with brick-and-mortar branches. Is that necessarily a good thing? Good for some folks. But bear in mind that if all we care about are good rates, we may be neglecting to consider other factors such as having a bank teller behind the desk that actually knows you in case you have any trouble with the account.   Or check transfers to foreign banks - an online bank may require you to go through an identification process, and if you fail it, things could get nasty! Are high rates and deals the only consideration? I think not. I prefer having a bricks-and-mortar branch rather than an online bank. Cheap Digital Cameras - From my experience, saving on digital cameras can be a huge mistake. Before I got my $700+ Canon Digital SLR, I had one of those sleek, pocket-sized $300+ digital cameras.   The problem with them was they took a long time to capture the screen shot (about a couple of seconds). Three years ago, Mrs. Credit Card put our three kids together for a camera shot to use for our Christmas card. Being kids, they just couldn't keep still. But what compounded the problem was that the camera took ages to capture the shot after you pressed the "shoot button."   So when the shot was perfect, two seconds later, it was not.   Mrs. Credit Card got really angry with the kids for not keeping still.   But what did she expect?   They were kids after all! So I took the plunge and got the digital SLR; I have absolutely no regrets.   Now, any family shot takes a few minutes. I can capture my kids sports in multi shot sports mode and I now get much higher quality pictures that will last me a lifetime. So I would advice anyone with a family to get a good digital SLR.   It costs more for sure.   But the benefits you get will outweigh the higher cost compared to cheap digital cameras. No annual fee credit cards - There's tons of debate about whether credit cards are good or evil. But everyone seems to agree that if you do get a credit card, it should be one with no annual fee. In fact, I've never seen a blog post recommending a card that charges an annual fee (perhaps with the exception of mine!!).   If not that, they would recommend getting cash rewards credit cards (with no annual fee off course) or do some balance transfer arbitrage where you get 0% financing from credit card companies and take the proceeds into a high yield savings accounts. I took a different path.   I use a charge card instead (although I do have other no-fee cards). Yes, I have to pay an annual fee (although I get rewards), and I have to pay in full every month (which everyone should do anyway). But more importantly, I have no preset spending limit and hence have not suffered any of the credit limit cuts that many folks have faced. While credit card companies have been cutting credit lines, raising interest rates, introducing annual fees and reducing the attractiveness of 0% teaser deals, they have not done much to folks who have charge cards and pay their bills in full (unless off course they have been late or something). Folks who have airline miles credit cards pay an annual fee. But because miles they earned are transferred to their frequent flier program, they will never risk losing the miles that they have earned if their credit card gets canceled by the issuer for any reason. And that is another downside to getting a "no annual fee" rewards card. If the credit card company decides to cancel your account, you can lose all the miles that you have earned! How to avoid the cheap-at-all-cost mentality One of the things that struck me when I read The Millionaire Next Door is that even though millionaires are frugal, they do not just buy "cheap stuff". One of the examples used is that they buy antique furniture that holds their value rather than cheap Ikea stuff! I think there is a lesson to be learned from them. Buying the cheapest stuff isn't always the way to go.   Here is a checklist to see if the cheapest or highest rate offers have a catch in them: Are the products skimping on customer service? - Well, you know the customer service of the big computer makers. Are you willing to compromise that for a lower price? If not, perhaps a custom made computer or an Apple Computer may be a better purchase even though it costs more. Are the products durable? - Many cheaper products simply do not last long.   I have bought many do-it-yourself Ikea products made of chipboard and they never lasted more than 18 months! Do cheaper products really serve your purpose? - The example of my digital camera experience should be an eye opener. We bought our first camera because we set a budget, but we did not do any research to see if we would be happy with it or not.   It wasn't that we could not afford a more expensive one.   It was just that we came up an arbitrary number like "we won't spend more than $350 on our camera."   We did not realize that the cheaper camera would not suit us at all. I could go on and on but, for every purchase that you make, price is obviously an important factor.   You also have to consider the value you get for the price that you are paying as well.   Otherwise, you could waste more money and/or end up not being satisfied with the product that you got. Hey! 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