TFB's Stumbles: Week Ending 2008-02-29

I have thought about whether I should do weekly links to interesting articles on my blog. On one hand I'd like to share with you what I found. On the other hand, it's not easy to gather the links and compile them into a new post. That's until blogger JLP at AllFinancialMatters introduced me to StumbleUpon. StumbleUpon provides a web browser plugin that allows me to discover and rate web pages. When I see an interesting article, I put it into StumbleUpon and write down my thoughts right then and there. On Friday, I can go back to it and round up all the articles I noted during the week and put them into a blog post more easily.

If you also use StumbleUpon, I invite you to add me as a friend. My user name there is TheFinanceBuff. Whether you use StumbleUpon or not, if you'd like to read what I stumbled in a news reader, you can subscribe to a separate RSS feed TFB's Stumbles. Not all my stumbles will make to the posts on Fridays.

Now, here are some of the interesting articles and web sites I found this week:

Bank Lawyers Blog: HUD Stubs Toe On RESPA - Department of Housing and Urban Development allegedly offered illegal kickback to mortgage brokers, violating law HUD itself is supposed to enforce.

Life Insurance Part 2: Should I Buy Whole Life Insurance? at Moolanomy - Running some numbers on whole life insurance, which doesn't make sense for most people. Just remember to buy term life. I also wrote on the same subject in Life Insurance: What To Buy.

Second foreclosure crisis? - A good article from Cleveland area newspaper about how the new owners of previously foreclosed houses are likely to be foreclosed on again. All I can say is it's a free market. Everybody is free to buy and sell. I don't blame the bottom-fishing investment companies. They create a market. Nobody is forcing anyone to buy those houses in poor condition. If the new buyers default, the investment companies don't get the expected profit.

Everything You Need to Know About Credit Card Interchange Fees - A simple picture showing how the credit card interchange fees work. Cardholders ultimately pay more in interchange fees than what they receive back as rewards and rebates. Post says 45% of the interchange fees are paid back as rewards. Translation, the banks keep the other 55%.

Credit Card Companies Want to Eat You Alive! - Paying the credit card company too early can become a problem. The card company wants you to make a minimum payment in every statement period. Making two payments in one period is OK but you still have to make a payment in the next period. That's the deal. Make the minimum payment in every statement period.

Prosper Taxes - P2P lending brings about undue complexity at tax time. Totally not worth it.

The Winner's Curse and Bid-Rigging in Auction Rate Securities - Good analysis. I  read it several times but I'm still not sure I totally understand it. I will have to read it a few more times.

Wachovia's Way2Save: Deal or No Deal? (NetBanker) - Gimmicks banks play for marketing their savings account. Just give us good interest rate and quit playing games, will you?

You've Got Money: Invest It All or Dollar Cost Average? - Long post about lump sum, dollar averaging and value averaging. My thought on the same subject -- if you already have the desired assets, would you sell and re-buy them over time? If the answer is no, you should just buy the assets you want in a lump sum. See Buy Now Or Buy Gradually Over Time?

HSH Market Trends, 02/08/08: Fixed Mortgage Rates as Flat as Economy - HSH raised an interesting point on the expansion of conforming loan limit in the economic stimulus package. Just because the limit is raised doesn't mean the larger loans will automatically enjoy the lower rate. If we throw them into a single pool, the added risk will likely raise the mortgage interest rate for everybody, including those who borrow under the old $417k limit.

That's all. Have a good weekend!

Best Finance Blog for People Ready to Save or Invest

Marc Hedlund is the co-founder and Chief Product Officer of the popular Web 2.0 personal finance site Wesabe. He wrote the three personal finance writers you should read in 2008 on the Wesabe blog. My blog was selected as the Best Finance Blog for People Ready to Save or Invest. Here's what Marc had to say:

"Probably the least well-known of the personal finance blogs I admire, The Finance Buff deserves to be a lot better-known. I found myself linking to one of TFB’s posts every week for more than a month recently and thought I should spread the linklove around, but why? The posts are great, clear, and more advanced than most finance bloggers. ... ... What I like best about TFB posts is that they teach a great way of thinking about building your savings and investments -- not just a quick trick but a philosophy to understanding your options and costs. If you have money to save or invest and don’t know where to start, this is a great guide."

Thanks for the vote of confidence, Marc. That's great to start off my new year. I will do my best not to let Wesabeans down in 2008.

Most Popular Posts in 2007

2007 is my first full calendar year blogging. Thank you so much for your support. According to Google Analytics, these are the 5 most popular posts on my blog in 2007 (by "page views"):

1. Which Vanguard Money Market Fund?
2. What Happens When a Bank Goes Out of Business
3. Best Checking Account Which Is Not A Checking Account
4. Estimate Your Overall Personal Rate of Return
5. Personal Rate of Return: Dollar Weighted Or Time Weighted

It's hard to pick my own personal favorites. I will go with what the readers voted by their clicks. I hope my posts in 2008 will be as good as those in 2007. Happy New Year everybody!

Giveaway: Free 1-Year Subscription to Bon Appetit, Domino, or Gourmet Magazine

[Update on 12/17/2007: The giveaway is closed. The randomly selected recipient has been notified.]

Because of a recent purchase at Amazon.com, I'm eligible for a free one-year subscription to a choice of "Bon Appetit," "Domino," or "Gourmet" magazine. I'm not interested in any of them. If any of you is interested, please send me an e-mail. If I receive multiple e-mails in the next 3 days, I will choose a random recipient. Don't send me the delivery address yet. I will contact you when I need it.

Terms from Amazon:

If you're already a subscriber to the magazine you select, 12 months will be added on to your existing subscription. If you are a new subscriber, you'll receive your first issue in six to eight weeks. At the end of the subscription period, you'll have the option to renew your subscription or do nothing and allow your complimentary subscription to end.

Carnival of Personal Finance #127

The Carnival of Personal Finance #127 is up at Moolanomy this week. My entry was Opt Out of Credit Card Convenience Checks. Here are two articles I'd like to comment on:

5 Reasons You Should Buy A New Car at Gather Little by Little. It's actually 5 reasons you should NOT buy a new car. I have to disagree with the author there. The conventional wisdom of buying late model used cars just doesn't work any more for the cars many (most ?) people want, namely Toyota or Honda sedans. The prices on used Toyota Camry and Corolla and Honda Accord and Civic are bid up to a point which makes more sense to buy new and drive until they die. The car dealerships make much more money selling used cars than selling new cars because new cars have become a commodity, which makes comparison shopping easy.

Bank Transfers To Accounts Not in Your Name at 2million. The author is disturbed by the fact that anybody having the bank routing number and the account number can do an ACH pull from another person's bank account through Citi credit card. This is true. The originating financial institution which performs the transaction is supposed to obtain proper authorization. Some will use a prenote process which verifies the account ownership. Some will do a random deposit and ask you to come back and verify the amount. In 2million's case, Citi did nothing. As the account owner, if you see a debit in your account you don't recognize, you can go to your bank and tell them it's unauthorized. The ACH transaction will be reversed. You have 60 days from the date of the transaction to do it.

Back From Vacation, Catching Up

I'm back from my vacation. It was a good one. As you can imagine, after being gone for four weeks, there's a lot for catching up, both at work and at home. Blog posting will still be slower than usual.

The good news is that nothing finance-wise was screwed up. All my bills at home were paid, thanks to pre-scheduled online bill payments. There wasn't any problem with money outside the country either. My traveler's checks were gladly accepted. My Fidelity mySmart Cash ATM card worked overseas without any problem. It  got me a good exchange rate too. The stock market didn't move too much. The limit orders I set up before I left weren't executed. Too bad the Fed lowered interest rate again.

My vacation in one of the poorest countries in the world is an eye-opener for me. Many words acquired new meanings. I feel really lucky living in the United States. To people in a developing country, the stuff that we complain about all sound like whining. People over there get by with so little and they are still happy. We have so much and we still complain. For example, this young man carried 80-100 pounds of stuff for us up and down the mountains, wearing flip-flops. This is a high paying job for him although it pays less than $10 a day. Just to travel to his next job site and make himself available for the job, he's going to take a bus for 8 hours and then walk for 3 days.

Compared to what he's doing, my job is really easy and I'm paid many times more. He wasn't resentful at all. He was grateful for getting the job from us.

On Vacation, Back in November

I'm leaving for my vacation tonight. I will be back in November. Because I have no access to the Internet while I'm on vacation, this blog will not be updated again until I come back. I hope the flood of posts in the last two weeks made up for my absence.

I'm going to miss some exciting events while I'm gone. Or maybe not that exciting compared to my vacation. There will be two TIPS auctions in October. A 10-year issue will be announced on October 9, auctioned on October 11. A 5-year issue will be announced on October 18, auctioned on October 23. The current yield is 2.2-2.3%. Personally I won't buy again until the yield goes above 2.5%. If you are interested in buying though, you can monitor the yields with my TIPS yield curve RSS feed and estimate the final price with my TIPS pricing spreadsheet.

FOMC meets again at the end of October. The current options market implied probabilities are 55% for no change, 40% for a 1/4-point cut, and 5% for all other scenarios. It probably will go unchanged then.

Companies report their Q3 earnings in October. The stock market will react to them. In case there is a selloff while I'm gone, I've set up some limit buy orders.

For new readers, I'd also like to highlight a few old posts. Most people probably haven't read these because I had very few readers when I posted them.

Open Enrollment -  A 4-part series on my choices during annual employee benefits open enrollment. My company did it in November last year. Some companies have theirs in October.

Selling a Used Car - A 4-part series about my experience when I sold my used car last year.

Finance Charge in Insurance Payment Plans - A few dollars of "processing fee" is actually 19% APR finance charge.

Perhaps when I come back I will have some good stories to tell about how finances are done in a developing country.

Carnival of Personal Finance #121

Carnival of Personal Finance #121 is up at Ask Mr Credit Card.  

The host wove the posts into a cool presidential election debate. My entry in this week's carnival was Investments I Don't Have. Here are a few articles I'd like to comment on.

Property tax problems for customers of bankrupt lender at Don't Mess With Taxes. It never occurred to me this would be a problem because I always paid my homeowner's insurance and property tax on my own. This is one more reason you want to find a lender that does not require an escrow or impound account for insurance and tax. It makes things much simpler.

Selling and Sucking your Soul: Ethics and Finance at Mrs. Micah. "It’s like a guy who does child prostitution wanting you to do his taxes. Nope." Well said. I want no ***day loan ads on my blog. I have about 40 URLs on the blocked list in my AdSense settings.

Carnival of Personal Finance #120

Carnival of Personal Finance #120 is up at My Retirement Blog. My favorite blogger Shadox at Money and Such won the Editor's Choice with his article Rent is Not Waste which I commented on and totally agree with. Congratulations Shadox!

My entry in this week's carnival was Cascading Asset Allocation Method. I posted a follow-up today about Investments I Don't Have. There will be another follow-up on Wednesday about rebalancing.

This week's carnival didn't have as many articles as before. Perhaps the host exercised some editorial judgement. Here are a few articles I'd like to comment on.

There Are no Needs for an Emergency Fund at The Financial Blogger. The author said a (home equity?) line of credit can serve as an emergency fund. Yes, it can but only homeowners can have a HELOC. If you don't own a home, tough luck. Personal line of credit is pretty expensive. It's like saying your credit cards are your emergency funds. Also, depending on the amount of home equity you have, the line may not be enough.

It’s Hard to Eat Your House at Boulevard to Retirement. I know many house-rich, cash-poor people. You have no idea they are millionaires.

How much should you contribute to a Flexible Spending Account? at Chief Family Officer. This is very timely. Open enrollment is coming up in October or November. I've always been way too conservative in my estimates. I'm thinking of doubling my contributions for next year.

Home Mortgage Tax Deduction Snake Oil: Housing Myths Part 7 at Home Finance Freedom. Buy a house if you want to live in one, not because it's an investment, not because you get a tax deduction (not as much as most people think).

Reader Survey, Help Wanted

Since I started this blog last October, I wrote about 130 posts, not counting the carnival announcements. I aim to write original and informative content but I'm not sure how I'm doing toward that goal. According to Feedburner, I have a small audience of 250 subscribers. I'm sure some of them are bots. That still leaves me at least 100 human readers. I think my readers are special -- whoever can put up with my posts have to be special.

I'd like to take this chance to get feedback from the readership. The fact that you are reading my blog probably means there's something you like. I just don't know what it is. There's probably something you hate as well. I don't know what it is either. Please kindly take a few minutes and let me know what you think on this survey I created using SurveyMonkey. Just 6 multiple-choice questions plus 1 free form question. It shouldn't take long. I'd take the compliments but I'm also more interested in constructive criticism. Of course you are welcome to put your thoughts in the comments to this post as well. Thank you for your help in making this blog better.

Just a heads up. I'm going on vacation to a remote place for 4 weeks starting in the second week of October. I will have *no* access to newspaper, radio, TV, or the Internet during that time. It will be a true getaway. No blogging, but I won't forget about you. I will post more frequently than usual in the next week and half, to make up for the lack of posting when I'm gone. If you have something in mind you'd to see before I leave, please let me know in the comments. Thanks.

Carnival of Personal Finance #119

Carnival of Personal Finance #119 is up at Blunt Money. My entry was Best Checking Account Which Is Not a Checking Account. The host did a very interesting crossword puzzle. I skimmed through the articles. Here are some of the topics I'd like to comment on.

Loonie at Parity with the USD? at Million Dollar Journey. The Canadian Dollar already traded above 1.00 USD on some days. I asked on the Bogleheads forum whether it is unprecedented. It isn't, but the last time the Canadian dollar was worth more than the U.S. dollar was in 1976, more than 30 years ago. See the chart at the end of the article 'Strong currency, proud currency' from Canadian newspaper Globe and Mail.

Can You Resist a Bargain? at One Frugal Girl. It's hard to resist buying something if it's super cheap. I have a post written up on this exact topic, although from an investing angle. It will be posted tomorrow.

What Is Passive Income? Does It Really Exist? at My Money Blog. I agree with Jonathan. Dividends and rental income are not passive income. They are compensation for risk taking. I can hardly think of anything that is truly passive income.

Not All 401ks Are Created Equal at The Baglady. Of course not. Hardly all of anything are created equal. However I disagree with her implied message that you shouldn't participate if you have a bad one. Even if my 401k is the worst of them all I would still contribute to the maximum. Nobody is going to stay with their employer forever. A bad 401k will only drag you down for a few years. After you leave, you can roll it over to Vanguard.

A Review Of My Forex Trading at Neural Market Trends. Forget it. Foreign exchange trading is gambling, not investing. Even if it's only $100, it's not worth the time.

Understanding Indexed Annuities at Moment on Money. You don't have to understand equity indexed annuity. All you have to know is that it's not for you.

Options Extravaganza at The Amatureist Financial Journey. Some more knowledge you don't have to have. You can do well without knowing anything about calls, puts, straddles, collars, and their infinite number of variations.

WWYD: Buy or Read in the Store? at Queercents. If it's a good book, buy it. If you decide not to keep it, you can sell it on Amazon or half.com. It will only cost you a few dollars for the reading privilege. Or you can borrow it from the public library. I'm going to buy John Bogle on Investing: The First 50 Years simply for Mr. Bogle's 1951 Princeton senior thesis that started the index funds revolution.

Should Healthy People Pay Less for Health Insurance? at Money Smart Life. Yeah, why not? Safe drivers pay less for their auto insurance. Smokers pay more for life insurance. Employers pay less for their group health plan if they have lower claims from their employees. Home insurance cost more if the home is in hurricane or earthquake zone.

Carnival of Personal Finance #118

It's been a while since I last participated in the Carnival of Personal Finance, because I've been quite busy with work. This week's carnival, Carnival of Personal Finance #118 is hosted by Golbguru of Money, Matter, and More Musings. My entry was How To Buy Life Insurance. I'm a regular reader of Golbguru's blog. He always produces interesting charts. I want to know what tool he uses. As usual, the carnival is long. It'll take me all week to go through all the entries. At a quick glance, here are some of the topics which I'd like to comment on.

Sales Tactics Revealed - Win the War Over Your Paycheck at Money Smart Life. The start of a four-part series on sales tactics. Good info for the consumers. Sales and marketing is the heart of business. The economy needs spending consumers. If consumer spending is weak, the economy will be weak. We won't have good jobs. Our investments won't do well. We have to be careful what we wish for.

Open Letter to the Bank of America at An English Major's Money. This is about the $3 ATM fee charged to non-customers by Bank of America. Guess what, they are Bank of America's ATMs. They invested in those real estate for their branches and ATMs for their own customers. If you are not their customer, they get to charge whatever they want. The fee is disclosed up front before the withdrawal happens. If someone doesn't like the fee, they can back out and not use their ATM. For people who can't find their own bank's ATMs but see plenty of Bank of America ATMs, they will have to question their own bank why they didn't establish as many branches like Bank of America did.

FHA Mortgages - New Hope For Prospective Homeowners at Salt Lake Real Estate Blog. I don't quite understand FHA loans. If an FHA loan turns out to be significantly cheaper than the best available conventional loan, what does FHA know about the borrower that the market doesn't? If the FHA loan is cheaper because FHA isn't making a profit on its loans while the private lenders must make a profit, why won't everyone get an FHA loan then?

Do Not Confuse Houses with Housing: Housing Myths Part 5 at Home Finance Freedom. I agree with this article. Housing is consumption. Living in a house you own is consumption. Consumption isn't necessarily bad, but you have to call it what it is. I own a house. I never thought it was an investment. I'm consuming my purchase every day since I bought it.

Carnival of Personal Finance #114

Sorry about the late announcement and lack of posts this week. I've been busy with back to back business travel lately. While I was traveling, the stock market stabilized a bit after the Fed made a gesture. Countrywide got a lifeline, at least for now. We will see which shoes drop next.

Carnival of Personal Finance #114 is posted at The Simple Dollar this week. My submission was What Happens When Your Mortgage Lender Goes Out of Business. I also enjoyed the following articles in this carnival:

• GOYB Challenge: Help Your Husband Make More Money at SAHMmy Says. This must be every man's dream: Make sure your husband looks professional. Shine his shoes. Get up when his alarm goes off and make a simple breakfast while he's showering. I didn't know some people still get that kind of service? I had to look up what GOYB stands for.

• When your mutual fund speaks for you, what does it say? at Money and Values. It's tough to mix making money and social responsibility. Mutual funds have a lot of influence over business practices but they are not using that influence very much.

Carnival of Personal Finance #111

Carnival of Personal Finance #111 is up at Plonkee Money. My entry in the carnival is Personal Rate of Return: Dollar Weighted Or Time Weighted. After a quick glance, the following articles in this carnival are my favorites:

* Choosing a 529 Plan at Lazy Man and Money. The 529 plan field is insane. Every state has its own plan. Some states have multiple plans. Who can keep all these straight?

* Absolutes at Financial Security Quest. This is the first time I read something from this blogger in Canada, who also writes long posts. I subscribed to the feed.

* Improving Your Company’s 401(k) at Money and Such. Shadox keeps writing great posts.

Carnival of Personal Finance #110

Carnival of Personal Finance #110 is up at Fat Pitch Financials. My entry in the carnival is Out of the Market and Meaningless Stats. The following articles in this carnival stood out for me:

* Car-free Living Is the Path to Financial Independence by A Canadian and Her Money. Owning and operating a car is expensive. By my calculation it costs about 40 cents per mile if you include all vehicle operating costs.

* How Dumping TV Allowed Me to Quit My Job, Create an Online Business and Fund My Retirement Account by SavingAdvice.com. I didn't realize how much commercials take up in a typical TV hour until I watched TV in a hotel when I traveled on vacation. I cut my cable subscription 2 years ago and I never regretted it.

* How Much Is Your Privacy Worth by Chief Family Officer. I think this is the best article in this week's carnival. When you open accounts for the sole purpose of earning the signup bounty, you are basically selling your private information, social security number and everything. It's funny people say they value their privacy highly but they won't hesitate for a minute giving out everything when there's a signup bonus dangling in front of them or when a new bank offers 0.05% higher interest rate.

Carnival of Personal Finance #109

Carnival of Personal Finance #109 is up at Mint. My entry Canceled Oldest Credit Card was included as an Editor's Choice. Woohoo! It's great to see posts from both frequent contributors and many new bloggers. My only gripe for the carnival is that it's getting too long. If the quality of my entry isn't as good as others, I'd rather not see it included.

Carnival of Personal Finance #107

Carnival of Personal Finance #107 is up at Blogging Away Debt. My entry was  $10,000 Lesson On Variable Universal Life. The host Tricia listed the entries in reverse word count order. Although my post didn't make it to her favorites list, it's in the top 1/3 because I tend to write long posts. My favorites in this carnival are:

• Managing Your Career in Your 20s at Money and Such -- Shadox is one of my favorite bloggers. He's doing a great job on his blog. 
• Why Do I Still Work For My Employer? at One Frugal Girl -- A supportive employer is worth the loyalty.

Sorry About Broken External Links

I use MediaMax aka Streamload for storing pictures and Excel spreadsheets linked from this blog. It has been in perpetual "maintenance" in the last 3 weeks. As a result most of my image links are broken. Sorry about that. Because editing every old post is a big pain, I'm going to give them one more week. If it's still not up as they promised a number of times already, I will pull the plug on them and find a new service.

Carnival of Personal Finance #106

Carnival of Personal Finance #106 is up at The Digerati Life. My entry was a review of the new documentary about debt in America Maxed Out. My favorites in this carnival are:

• Japan Standard of Living - MoneyNing Style at MoneyNing -- It's great to see how things work in a different country.
• Rule #17: Numeracy at My Open Wallet -- You need to know some math for finance and investment. I just wrote something today about how a math law taught in 2nd grade applies to evaluating Traditional and Roth 401k.
• What Would You Do With "Found" Money? at Grad Money Matters -- "Found" money is every bit as valuable as earned money.

Enjoy!

Carnival of Personal Finance, 2nd Anniversary Edition

I haven't submitted my posts to the Carnival of Personal Finance for a while because I have been very busy with work lately. But I had to participate in the 2nd Anniversary Edition because it's so special. Bloggers were asked to submit their best articles in the last two years. As a result, this edition of the carnival is really the cream of the crop of personal finance blogging. The host JD at Get Rich Slowly did a fantastic job. It's worth bookmarking.

For this special edition, I submitted Employee Stock Purchase Plan (ESPP) Is A Fantastic Deal. I wrote it when I first started blogging last year. If the employees in my company are representative of the population, only 50% of employees who are eligible actually participate in the ESPP. It follows that even fewer employees maximize their contributions to the ESPP. I showed in my post that the return on ESPP purchase approaches 90% annualized even if the stock went down. Every employee should take full advantage of it if they are able to sell the shares right away.

Every post in this "greatest hits" carnival is a gem, except I'm not a fan of lists like "10 ways", "7 mistakes" etc. I'd rather read an article about one subject and dive really deep into that one subject. That's just me though. I particularly liked these posts:

• Spend Your Money On Doing Things Rather Than Owning Things by Accumulating Money
• The Relationship Between Love and Gifts by Mapgirl
• HSA, Broken: A Special Report by by InsureBlog

Enjoy!