Gems from Carnival of Personal Finance #85
The Carnival of Personal Finance #85 is hosted at FiveCentNickel this week. The host did a very good job in putting it together. My submission was Tax Software: Online or Desktop? These are the posts I liked the most in this carnival:
- A Historical Look at Tax Brackets by Jim at Blueprint for Financial Prosperity. Jim did great research for tax rates in the not so distant past.
- A Fool and His Money… by Lou Keeble at Stranger in a Strange Land about Motley Fools.
- Beware: 0% APR Game by Martin at Money Blog Site. Being smart gaming a 0% balance transfer can be shortsighted.
- Model Retirement/Investment Portfolios: A Comparison by Jonathan at My Money Blog. All the model portfolios are very good. Who needs a financial advisor?
And here's one post I liked that's not in the carnival:
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Prosper.com Or Junk Bond Fund?
I saw on several blogs people are lending on Prosper.com as way of earning extra cash over money market, CDs, or savings accounts, for example here, here, here, and here. I must admit I'm not very familiar with Prosper.com but I think I understand the concept. It's often referred to as eBay for lending and borrowing. Borrowers list their loan requests. Lenders bid on them. As more people bid, instead of price for an eBay item going up, the interest rate for a Proper listing goes down. Lenders can lend a small amount ($20, $50, $100) and borrowers get their loan funded from multiple lenders. Borrowers make one payment to Prosper and Prosper distributes the payment to lenders after taking its cut. As an lender, you get a loan portfolio of many small loans to many borrowers. So there's a level of diversification that reduces the risk of lending to a deadbeat.
Is Prosper.com a good avenue for investing though? I'm asking this question from a lender's perspective because I think most people reading personal finance blogs will be lenders, not borrowers.
A sustainable marketplace must be beneficial to both buyers and sellers. eBay is a good example. Sellers have items they no longer need and sell them on eBay for a better price than what they can get elsewhere (garage sale?). Buyers want them and buy them at a lower price than what they can get elsewhere (retail and online stores). As long as the price for an item is between the alternatives for sellers and buyers, garage sale and retail respectively, everybody is happy. That's why millions of items are sold on eBay every day. Collectively, all items on eBay must sell at prices below retail. If they don't, people will just buy from retail stores.
My Blockbuster Trial (vs Netflix)
This is a post about my recent experience with Blockbuster's Total Access DVD rental service.
Since I disconnected my cable TV over a year ago, I've been a Netflix subscriber. It lets me watch what I want, when I want, without commercials. But sometimes due to round trip mailing, I find myself wanting to watch something over the weekend but I won't have my next DVD until Monday. Recently Blockbuster offered a Total Access program, which ties its online rental service with its brick and mortar stores. You can exchange a DVD from the online service for a DVD from a physical store. The store will then return the DVD to the online service for you. This online and physical stores tie-in seems to be a smart move by Blockbuster because it has a unique advantage over Netflix on this front. Blockbuster has a large network of stores. Netflix has none. I signed up for the free trial thinking I will be able to watch more DVDs that way. Because it's a free trial, I kept my Netflix subscription for a comparison.
Sign up. I used a promotional 1-Month Free Trial link from American Express. The standard offer is 2-week free trial if you just go to Blockbuster's home page. Sign up was easy. Nothing special.
Selection. Blockbuster's online selection is not as deep as Netflix's. I can't find some DVDs I want to watch in Blockbuster but they are available in Netflix. I haven't yet found a reverse case, i.e. a DVD not available in Netflix but available in Blockbuster.
Tax Software: E-File or Mail?
This is part 3 of my posts about tax software. Other parts in this series:
Part III: E-File or Mail?
In previous years, both TurboTax and TaxCut included one free Federal e-file rebate in their deluxe edition and up. This year e-file costs extra. The IRS doesn't charge the vendors for e-file. So the e-file charge is just another revenue driver for the vendors.
Tax Software: TurboTax, TaxCut, Or TaxAct?
This is part 2 of my posts about tax software. Other parts in this series:
- Part 1: Tax Software: Online or Desktop?
- Part 3: Tax Software: E-File or Mail?
Part II: TurboTax, TaxCut, or TaxAct?
Which one do you choose among the 3 major tax software packages, TurboTax, TaxCut or TaxAct? It will depend on whether you used any of those before, and if you did, whether they can import the previous year's data from a competitor's file.
Carnival of Personal Finance #84
Carnival of Personal Finance #84 is up at Blueprint for Financial Prosperity. My entry was comments about a money makeover story in USA Today. It didn't make into the Editor's Choice. I will try to do a better job next time. These posts were selected by the host as the Editor's Choices:
- Big Cajun Man presents Your Financial Resume posted at Canadian Financial Stuff.
- Michelle Cramer presents Teaching Your Child About Money posted at The Small Business Buzz.
- Dan Melson presents Save For A Down Payment or Buy Now? (Part 1 of 2) posted at Searchlight Crusade.
- Tag presents An Emergency Fund is like the Ark posted at EveryDay Money.
- The Dividend Guy presents Good Books for New Investors.
And here are some of the posts I liked the most:
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Tax Software: Online or Desktop?
Year end tax forms started coming in now. It's time to think about tax filing. If you don't use an accountant (I don't), your best bet is using a tax preparation software. I will post my thoughts on choosing the best software in 3 parts. Other posts in this series:
Part I: Online or Desktop?
Book Review: Elliott Wave Principle
This is a review of the book Elliott Wave Principle: Key to Market Behavior by A. J. Frost and Robert R. Prechter, Jr. See my other book reviews on this list.
According to Wikipedia, Elliott Wave Principle is
A Baby Step for Simplifying My Finances
I closed my ING and HSBC online savings accounts at the end of 2006. Why? Because I want to simplify my finances, which is one of my goals for 2007. I want to simplify my finances so that I get to focus on the bigger picture rather than being bogged down by the nitty gritty of seeing the trees but not the forest. More on the simplification scheme later. Another reason for closing the two accounts is that I already have a competitive substitute, Vanguard money market fund.
I opened the ING account a few years ago when ING offered much higher yield than what money market funds were paying at that time. ING was the pioneer in online savings accounts. They probably gave up a lot of revenue they could've received when they offered above-market rates to their customers. However it didn't last long until the mainstream banks like Citibank, HSBC, and Washington Mutual, woke up and offered similar products. Another list of new players also entered the market, Emigrant, GMAC, MetLife, E-Loan, Capital One, Amboy, UFB Direct, iGo Banking, to name a few. ING decided not to compete on rates with these new players and their rates lagged what the new competitors offered. I guess they are trying to see how long these new players can stay in the game or they think most of their customers will stay with them due to familiarity and inertia.
When HSBC came out with its copycat online savings account service, I signed up because of slightly higher rates than ING's. That was before the enlightment of simplifying finances. I now realize I will do perfectly fine if I just stick with what I had for many years — a Vanguard money market mutual fund. The yield difference between it and an online savings account is trivial. Vanguard's Prime Money Market Fund currently yields 5.10%. HSBC pays 5.05%. ING pays 4.50%. A no-name iGo Banking offers 5.30% APY. On a $25,000 deposit, the difference between Vanguard Prime Money Market Fund and iGo Banking is $50 a year, before tax. I will not give my social security number to iGo Banking for a net after tax gain of $35 a year. Because I live in a high tax state, Vanguard's Treasury Money Market or Tax Exempt Money Market funds actually pay a higher after tax yield than the Prime Money Market fund. That brings down the yield difference to an even smaller number (maybe even negative).
More Risk, More Reward?
Perhaps inspired by home makeover reality shows, Trading Places, Extreme Home Makeover, etc., newspapers and magazines often run portfolio makeover articles. They typically feature a real family, tell us about their finances, their goals and their struggles. Then the newspaper or magazine brings in a financial planner who offers advice for them. I think people like them because it brings personal finance to the real world. When I was traveling for business last week, I read this article in USA Today (Jan. 8, 2007, page 6B):
Can they retire young and rich?
The article told a story about a young couple, Luke and Hannah Wickham, 30 and 28, saving aggressively toward a goal of retiring between 50 and 55 with $10 million. This couple did very well. They already accumulated $258,000 in stocks, mutual funds, bank account and private equity investments, their own home and 3 rental properties in Orlando, FL worth $529,000 net after mortgage obligation. That adds up to $787k in net worth. I don't know how many people in their late 20s can top that. Congratulations, Luke and Hannah!
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