Between November 12th and November 26th, the One Laptop Per Child is running a Buy One Get One program in the US and Canada. Buy one laptop at $399 (+$24.95 shipping) and not only will you get one of these slick little meanie greenies but you’ll also be sending one to a child in a developing nation. Of the $399, $200 will be tax-deductible so it’s really less than $399. To make the whole deal even sweeter, T-Mobile will give all U.S. donors a year’s complimentary access to their HotSpots (worth about $350/yr according to T-Mobile). [full terms & conditions of B1G1 program]

Let me back it up a little bit for those unfamiliar with the OLPC and the XO Laptop. Back in 2002, MIT professor Nicholas Negroponte went on a mission to produce the $100 laptop. The purpose was to provide cheap technology to the children of developing nations in an effort to raise them up. The XO laptop was created out of that vision and while not quite $100, it’s very close ($200!). For more about the OLPC, you can visit laptop.org.

The specs on this little laptop are pretty good for a $200 unit and I signed up to get one (and give one), if only to say I was involved in something that I think is very noble. While it’s not towards curing cancer or granting a wish, it’s certainly going to change people’s lives and I hope this thing explodes. Will you help?

Whether you’re freelance, are paid every two weeks, or simply have irregular commission-type income, it’s often difficult to budget when you aren’t sure how many dollars are coming in each month. This post was inspired by a friend of mine who was discussing coupled finances. Her husband was paid every two weeks, she was paid twice a month, once on the 15th and again on the 30th/31st.

(Click to continue reading…)

I am engaged but not yet married, I have no kids, and I don’t have a lot of assets, do I need a will? That’s the question I asked myself after reading the do-it-yourself wills and trusts article I posted yesterday morning. Right now, the answer is no. However, when I get married and definitely by the time we have children, we will want to have a will in place to outline where my assets will go in the event of my death.

What happens if I don’t have one and I die? Then I die intestate, which means the distribution of my assets will depend on the laws of the great state of Maryland and that distribution will likely take a long long time. The process is called administration and it’s governed by the probate court. So, having a will, especially if it can be prepared with a $40 piece of software, makes life a lot easier in a time that is likely going to be very rough.

It’s a little morbid talking about one’s own mortality but sometimes you have to get over that and get down to business. People die and it’s best that they be considerate when doing so!

E-Trade Financial took a huge hit to their stock price today (50% haircut!) on word that they will be taking huge write downs because of their investment in securities backed by home loans. In fact, a Citi Investment Research analyst covering E-Trade downgraded it to a “Sell” from a “Hold,” adding that there’s a 15% chance E-Trade would go bankrupt. So what happens and what can you do if your brokerage goes bankrupt?

First off, you only have any protection if your brokerage has SIPC insurance. SIPC stands for U.S. Securities Investor Protection Corporation and it’s a federally chartered private corporation insuring shareholders against a stock-broker going bankrupt. It’s similar (but not exactly like) to FDIC and NCUA insurance for deposit accounts but covers against bankruptcy and not issues like fraud. If your brokerage is a member of the National Association of Security Dealers (NASD) FINRA (Financial Industry Regulatory Authority), then you will have SIPC insurance because the FINRA requires it. I personally would never use a brokerage that wasn’t in the FINRA because there’s simply no reason for it. The SIPC will cover you for $100,000 cash and $500,000 total (stocks and bonds, not futures, options, currency, etc.) but the brokerage itself may have supplemental insurance that goes beyond that.

So, what do you do? If your brokerage is liquidated, the court-appointed trustee will send you a claim form to fill out and send back. The turn around time is estimated at one to three months according to the SIPC website and that’s if you qualify (most do, there are some exceptions on that) and do it within the deadlines. Lastly, make sure you have good records with your statements so you can get your stuff back in a timely fashion. It’s not unheard of for a brokerage to have bad records so having your own helps the process.

Now with ETrade specifically, they claim to have SIPC coverage and you can confirm this by searching for “E*TRADE Securities LLC” in the SIPC lookup database. The search is very fickle, you have to type the whole name or it won’t find it (Etrade, Etrade financial, etc. all give no result).

Unless I’m missing something, it sounds like those folks who have investments through ETrade are covered by the SIPC. Those investing in ETrade are a different matter… whew, 50% is hard to take.

I don’t have a will and I’ve done zero estate planning. That being said, it’s a situation I plan to remedy so this recent NY Times article about do-it-yourself wills and trusts was pretty timely. The one important thing I learned about wills and trusts were that they are considered private documents, which means they are valid in all fifty states even if you don’t hire a lawyer to draft them. From my interpretation, it sounds like it’s not an agreement but more a unilateral statement so it’s not necessary to have a lawyer draft it up (especially with how expensive they are).

(Click to continue reading…)

How about a $100 bagel at the Westin Hotel in Times Square? Or a $25,000 chocolate sundae called the Frrozen Haute Chocolate at Serendipity 3? Yeah… that’s pretty ridiculous huh? I guess if you would even consider getting a chocolate sundae worth as much as a good car, you probably don’t care about the price. It’s it amazing how much excess there is in the world?

(Click to continue reading…)

Personal finance is boring, but with a little work and preparation in the beginning and some time spent checking in, it can be put on autopilot. That’s right, just spend a little time setting up your personal finance strategy and then spend a little more time each year just to check in on it, and you can ensure that you’re ahead of the average for your age and live comfortably. While leaving anything on autopilot can be tricky, it’s better to participate and be on autopilot than to not participate because it’s too “hard.” Below is a discussion on the different parts of personal finance and how to put them on autopilot.

Retirement planning: 401(k), Roth IRA

401(k): If you’re starting a new job, it’s been mandated that your employer automatically enroll you into the 401(k) plan if it’s available and allocate your funds into some very basic and safe fund. All you need to do is log in, double check your contribution amount (make sure it’s over the level at which your employer will match your contributions), double check the funds you’re contributing to, and then log out. If you have been on the job for a while and aren’t participating, call up HR for the enrollment form immediately. After you submit it and they set it up, just follow the easy instructions above. Then, just once a year, check to make sure everything is okay and that your allocations are what you think they should be. Do this for 40 years and you’ll be way ahead of the game in terms of retirement funds.
Roth IRA: If you don’t have one, opening a Roth IRA takes literally ten minutes. Some brokerages will let you do auto-deposits every month so divide the annual limit (this year the limit is $4,000, in 2008 it’ll be $5,000) by twelve and set your contribution allocations as you would the Roth and don’t worry about it. You have until tax day to contribute to your Roth IRA for the previous year (you have until April 15th, 2008 to contribute for 2007) but make sure your payments indicate which year they apply to.

Budgeting

The envelope budgeting method is by far the easiest and requires the least amount of tracking and thinking. The premise is that you have different envelopes based on category of spending and that you put how much you can spend in each envelope for that month. As you spend, you pull the money out and when you run out, you no longer spend. It forces you to budget and establishes a simple framework to help remind you. First, open up an ING Direct checking account (email if you want a $25 bonus). I recommend ING because you can open up new accounts within the interface of your first account in minutes, it’ll take much longer at a regular bank. Open up as many accounts as you have “envelopes,” or categories of spending. Link up your local checking account to your ING accounts and have your paycheck direct deposited into your ING. Then, setup recurring transfers from your main account, where funds are direct deposited, to your envelope accounts, which govern spending in a particular category. As you spend money, withdraw the funds from your account and the balances will reflect how much you still have left in your envelope.

Investing

Investing is truly no different than 401(k) or Roth IRA autopilot, the difference is in which brokerage you choose. I have no recommendations other than to say that if you prefer a particular mutual fund (I prefer index funds), then go with one of the larger mutual fund companies like Fidelity or Vanguard. On index funds they simply cannot be beat on fees and that’s all you should care about with index funds. If you want to invest in stocks, you’re on your own because I don’t think you can really put that on autopilot. While I don’t believe in checking your stocks daily, unless its for entertainment value, you have to check in periodically to read news and keep up to date, so it doesn’t lend itself well to putting it on autopilot.

Saving

Finally, saving is again no different than investing or retirement planning because fundamentally all you’re doing is putting money into an account for an expressed purpose. In fact, you should have a goal, a reason to save, because it will help you remain diligent. Mechanically, automatic savings are easy. Many banks have automatic withdrawal features that will let you withdraw a set amount each month from a linked bank account. Simply establish a goal, figure out how long you have, and setup regular and automatic transfers into a high yield savings account to reach your goal. It’s that easy!

Bills

Many companies will let you link up a bank account or credit card so that your bills are automatically paid on time each month. There is one downside to setting this up, a company can then charge you on that method of payment for things you never realized you authorized (here’s an example of an unauthorized billing from a reputable company). The upside is that you’ll pay at the last minute and you won’t pay late, two pretty good reasons to set up auto-billpay. I have all my bills automatically paid this way from my cell phone to my mortgage to my electricity and water bills. The sheer convenience, and I save on stamps, can’t be beaten.

See how easy it is to set up your personal finances on autopilot? One thing to note is that while it may be easy to setup and convenient to simply let it run, you should check in periodically to ensure that everything is running properly.

You are a business and you should be thinking like a business. The idea that you’re a business isn’t new in the world of ideas. It, however, may be new to you and has the potential to change your approach towards life if you take it to heart.

Lesson 1: Accept that you are a business. You are a business because you are selling your time (and with it your skills, experiences, and opinions) and in return a company is paying you a wage. Whether you’re freelance or on payroll, you are still selling your time (it’s just clearer when you’re a freelancer). If you had all the money in the world and didn’t need to sell your time, what would you be doing instead? You’d probably be playing with your kids, or playing with your pet, or traveling the world, or pursuing any number of hobbies – other than working. You work because you want to earn money. You might enjoy the work more because it’s in line with what you see as your greater purpose in life but ultimately you work for the money and not something nobler (there’s nothing wrong with that).

(Click to continue reading…)

For some odd reason, my brain is programmed to think that when you’re giving a gift, you’re usually giving something finite. Whether it’s straight cash (think Chinese New Year red envelopes), a stupid gift card, or some sort of product or service, I generally think of a gift as something that happens “once” and then never again. When I rack my brain for gift ideas, I often think of these finite type things when you can give something that lasts a whole lot longer – a subscription. Whether it’s a magazine subscription (the more common one) or a service subscription (membership to some organization they really love), giving a gift that actually keeps on giving is something that I only recently though of and it’s a phenomenal idea.

I’ll use magazines as the example run with it…

Magazine subscriptions are dirt cheap. You can find basically any magazine off eBay for a fraction of what they cost directly and for a microscopic fraction of the newsstand price. Most of the eBay sellers are reputable but if you don’t trust them, you can always turn to reliable powerhouse Amazon.com or some of the other smaller magazine shops online like NetMagazines or Magazines.com.

Magazines come every month and every month your recipient gets reminded how you got them such an awesome gift. Sure, if you got a product as a gift you get reminded every time you use it (I remember getting a knife two years ago, I still use that knife today – thanks Mattybo!), but a subscription is recurring, regular, and lasts for at least a year.

Dollar for dollar, a magazine provides the most time per dollar… if you pick the right subscription. When I read a magazine, it usually takes a few days before I actually make it all the way through. In fact, some magazines will take weeks as I will often set it down, forget about it, and then pick it up later. Magazines are nice because the articles are so bite-sized, unlike an entire book, so you can really enjoy it in manageable chunks… for a long long time.

So, next time you’re thinking about getting a gift, consider a subscription!

I just discovered this post, one that I had written on February 11th, 2005 (that’s right, that’s like forty years ago) but never published, deep in the “Drafts” collection. That’s right, it ranks as one of the first few posts I’d ever written but strangely enough it never made it out of Drafts. Much of the information is outdated (mostly the contribution limits and income phaseouts) however the reasoning is still good and I wanted to preserve it for posterity so I didn’t edit a single word. (It was hard not to edit it!)

If you haven’t heard about a Roth IRA, you’ve been missing out on one of the best tax-free growth vehicles you can possibly take part in. The government caps it, so you know it must be good. We will discuss the Roth and compare it to the other retirement juggernaut (if you don’t count what Social Security, Medicaid and Medicare are supposed to do) called a 401K.

Let’s get to a little history and the basics and then move into why the Roth is so awesome. In the Taxpayer Relief Act of 1997, the Roth IRA was created and taxpayers rejoiced.

The Basics:

Based on a max-contribution schedule (that increases each year and is detailed below) and your annual income, each individual is able to contribute the lesser of 100% of their annual compensation or $4,000 (for 2005). Individuals over 50+ can contribute a little more to “catch-up.” Distributions from the Roth IRA are tax free. The funds in your Roth IRA can be used to purchase almost anything from stocks to bonds to CDs, etc.

The Schedule:

For 49 and under – $3,000 for 2002-2004 (You can still contribute to a 2004 up until April 15th); $4,000 for 2005-2007; and $5,000 for 2008. You can deposit it all at once or bits at a time.
For 50 and over – #3,500 for 2002-2004; $4,500 for 2005; $5,000 for 2006-2007; $6,000 for 2008. So the “catch-up” is from $500 to $1000 a year.

Now comes the analysis…

Roth or 401K?

This is a question that has been hotly debated for quite some time. My personal opinion is that you should contribute to the minimum required to receive an employer match, then maximize your Roth IRA for the year, and then max out your 401K for the year. I have no children so 529 and similar plans were never a consideration in my decision. Another assumption I have made is that by the time of my retirement, I will have an annual income greater than the one I have no and so my tax bracket rate will be higher. (If I didn’t assume that, it’d be like aiming for mediocrity don’t you think?)

Breaking down the decision:

• Minimum Matching Contribution to 401K – This is a no brainer, if they are giving me free money then I will take it. I doubt much discussion is necessary on this one.
• Roth IRA Maximum – If my tax rate is higher later than it is now, I want to put in my money at the lower rate and allow it to grow and then later paid out at a tax rate of 0%. If my tax rate is lower in the future, then I would reverse the 401K and the Roth contribution limits. Since I don’t trade stocks in my 401K and I purchase funds, the Roth let’s me “gamble.”
• 401K Maximum – I don’t max out my 401K because at $14k this year, I can’t afford to not have the free cash flow. Putting a suitable amount in there is nice because it’s money you can’t mess up (only your company can mess it up) and hopefully it’ll be there later. Plus because it’s pre-tax, you’re feeling less of the tax implications now.

Other Considerations:

Another assumption not mentioned in my message is that I have no credit card debt. There is no point in putting anything (except perhaps the 401K match because most people get fifty cents to the dollar, or 50%) in a retirement account if you are carrying credit card debt. With APR’s in the double digits, you are killing yourself if you don’t pay that off as soon as financially possible. In order for that investment to make sense (because you are borrowing the money you aren’t paying back to the card), you need to get a rate of return great than inflation and the interest rate of the card. If you know of a safe investment generating more than double digit rates, please let me know.

What did you all think!?