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Sun, 29 May 2011

How Much Credit Card Rewards Cost the Poor

In a Your Money column earlier this year, .The Damage of Card Rewards,. my colleague Ron Lieber hypothesized that the poor are actually the ones subsidizing the credit card rewards of the affluent.

How could this be? Well, in response to consumers who aggressively pursue credit card rewards by using their cards everywhere, stores raise their prices for everyone to cover the cards. costs. As a result, the poor . those least likely to have credit cards and earn rewards . end up paying more without getting any of the benefits.

Now, a new study from the Federal Reserve Bank of Boston appears to confirm and quantify this .reverse Robin Hood problem. theory.
Read more @ http://bucks.blogs.nytimes.com/2010/07/26/how-much-credit-card-rewards-cost-the-poor/

posted at: 08:06 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

Sun, 08 May 2011

Brokerage CD's

Brokerage CD's are nothing but regular CD's which can be bought in the market just like stocks/bonds etc.There are some nuances like callable etc but don't get intimidated by it.Once you understand 3-5 terminologies of Brokerage CD's you will realize how similar they are.
I particulary like Brokerage CD's because , then Im not stuck to one bank and the market competes for my dollars.I can buy CD's from any bank i.e. whoever pays me highest interest wihtout having to open a checking/saving account with them.
There is another advantage of Brokerage CD's.Say if you wanted to have CD's in your 401k , in that case obviously it will not be possible to link your personal bank's CD's with the 401k.
However with Brokerage CD's you can buy CD's in your 401k, if you have setup a brokerage link with your 401k(also called Self Directed 401k).See the other post for advantages of Self-Directed 401k
There is one more advantage over the FDIC limit.With Brokerage CD's you can buy as many CD's as you want , and since you will be dealing with so many banks you don't have to worry about the 100K FDIC limits , unless you buy 100K CD's from one bank only.
I personally believe that Brokerage CD's are going to become more and more popular because of the reasons outlined above.
As with all things there are some disadvantages of brokered CD's ,check out the link buying CD from Vanguard
You can take a look at various Brokerage CD's offered at places like Fidelity.

posted at: 16:41 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

Thu, 05 May 2011

Vanguards corporate structure

After reading that Vanguard has some kind of a special structure which is that the Company is owned by the fund itself.I still could not understand what it meant and whether more importantly it is favorable for the consumers.
For me I always believe in voting with my dollars with the businesses/organizations I deal with.Bulk of my investments and accounts are with Fidelity and was wanting to see if i can move it to any other better company.
So I found a few posts about this but still cant figure out if Vanguard has a truly different structure which will favor the consumer.
The following link might shed more light
http://www.bogleheads.org/forum/viewtopic.php?t=66226&postdays=0&postorder=asc&start=50
http://www.bogleheads.org/forum/viewtopic.php?t=16305
http://www.bogleheads.org/forum/viewtopic.php?p=112030

posted at: 05:18 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

Sat, 16 Apr 2011

Investing in US Treasurys "I Savings Bonds "

So after reading a few articles on the benefits of Ibonds I have decided to invest some money in I Bonds for both ourselves and my kid.I believe the timing is right as interest rates cannot be so low forever and when interest rates go up , I Bonds are a very rare breed of bonds which go up(Typically bonds go in opposite direction to interest rates).
Here are the links which helped me made the decision to invest in I Bonds.


We already had an account with treasurydirect.gov .It is a little painful if you have to open the account for first time as you have to go to a bank or credit union to get verified etc due to security.

For kids you need to associate your treasury direct account to your kids or they call it link accounts.More details on linking accounts @ http://www.savings-bond-advisor.com/minor-accounts-in-treasury-direct/

It makes a perfect gift for kids as redemption is tax free if used for qualified education expenses.
I would highly recommend parents to look into this for their kids.

posted at: 05:46 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

Sat, 02 Apr 2011

The Dangers of Avoiding Credit

"My 25-year-old coworker thought she had done everything right when it came to protecting her credit. She paid off her student loans early. When she does use a credit card, she pays it off in full each month. And she's never been late on a monthly bill. Her credit score was over 750, which is considered excellent.

Despite that stellar record, multiple lenders turned her down for a mortgage earlier this year. The reason, they told her, was that her credit record was simply too light. Since she had paid off her student loans and didn't use much credit elsewhere, they had no way of knowing whether or not she would be responsible with a mortgage. In other words, she was being penalized for living a relatively debt-free life. To make matters worse, one of the lenders told her that because she was shopping around so much for a loan, the multiple inquires into her credit report were starting to negatively impact her score."

Read more @ http://finance.yahoo.com/banking-budgeting/article/112152/dangers-of-avoiding-credit?mod=series-m-article-c
We really live in an inverted world , where being responsible and living debt-free has a penalty.I personally still continue to believe "In living Debt free".

posted at: 22:42 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

Sun, 27 Mar 2011

S&P 500 versus Portfolio of Hedge funds

So there is a bet between Warren Buffett & Protege Partners.The bet goes like this
"Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S & P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses."

I have always been a believer in low cost Index funds(like S&P500) and it would be good to see if that theory works versus active management by hedge funds.

Read more @ http://www.longbets.org/362

posted at: 02:17 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

Thu, 30 Dec 2010

Ebillme - another alternative to credit cards for online payments

I'm always on the lookout for various ways to do online payments so that as a consumer I don't get locked up into the monopolies of VISA/Mastercard etc and recently I came across eBillme and since there was a $15 rebate if you purchase gift cards I jumped on the deal.
Check it out @ http://www.ebillme.com/

posted at: 18:59 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

Sat, 03 Apr 2010

401k Loans  for buying a house a good idea ??

So I was researching a little to see when I buy a house should I first tap into my 401k for loans or should I just get mortgage from the open market.

Some of the considerations for 401k Loans

Pros
  • Easy to get upto $50,000
  • Credit scores not checked 
  • Paying yourself the interest
  • Predicatable interest rate(typically Prime rate + 1%)
  • Upto 5 years for general loan and upto 30 years for buying residence
Cons
  • Tied to the employer.If you leave you have to  pay quickly(0-90 days based on your company rules)
  • Money doesn't grow during that time(debateable as you are earning interest , you are paying yourself)
  • Need to do carefully otherwise can be considered early withdrawals
  • No refinancing if mortgage rates go down
  • No interest deduction for the interest you pay like mortgage deduction .Don't know if it matters for High income earners  due to AMT
Unknowns(I will update once i find out more)
  • Still checking laws around  early prepayment.
  • whether can contribute to the 401k after taking a loan , atleast to ensure that we get the company matching portion.
Calculator for getting a loan from 401k or outside  :  https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementPlanLoanCalc.jsf

Related Good Articles

Overall I think I need to do more research on this topic to see if  some of the portions of the mortgage can be substituted using 401k Loans.
Does mortgage interest deduction phase out after 150,000 AGI?

posted at: 22:33 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

Wed, 11 Feb 2009

A 10-Year Stretch That.s Worse Than It Looks fo S&P500

Traditional wisdom and wall street marketing machine wants us to believe in the mythical 10% of  growth if you buy and hold stocks.
Check out this article which debunks that myth.Here is the punchline from the article
"Taking inflation and dividends into account, an investor who put money into the market any time after the end of 1996, and held on, now has less value than when he or she started."
Read the full article @  http://nytimes.com/2009/02/07/business/07charts.html?_r=1

posted at: 04:10 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

Sat, 07 Feb 2009

Health Savings Account

For my health coverage I finally took the plunge into the new medical plan called Health Savings Account.Unlike FSA , you don't lose money if you have balance at the end of the year.You carry forward your money just like a 401k.The contributions are tax deductible, the growth in it is not taxed and future withdrawals are also tax-free as long as they are for qualified medical expenses(defined by IRS).
You can also invest the money in mutual funds etc, though not every HSA accounts allow you to do it.
The other advantage is for individual  who are in the high income bracket can continue to contribute tax-free and not use the money during the current year, instead they can use the money from their regular accounts etc so that they can get the benefit of taxes in the current year and at the same time let their money grow tax-free and withdraw it in the future tax-free.
You can read more about HSA accounts @ http://en.wikipedia.org/wiki/Health_savings_account
Updated
I recently found out that for California HSA contributions are not tax deductible for state taxes.Read more @ http://www.aapsonline.org/msas/hsas.pdf

posted at: 15:02 | category: /personalfinance | permanent link to this entry | Donate via Bitcoin

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