Taxes 
9
comments

Win A USB Key With TaxCut Software

The contest has ended and the winners have been notified.

One of the PR firms representing H&R Block sent me three USB keys loaded with their TaxCut software and I’m going to give you all a chance to win them. I know April 15th is coming upon us soon, less than a month away, so this contest will only be running until this Friday. Some quick requirements if you want one:

  • Please don’t enter if you already did your taxes or you can do them for free.
  • Please live in the US (I know it’s obvious but sometimes people don’t realize it, this is for tax prep in the US!)
  • Then, please leave a comment with your favorite Laffy Taffy joke ever, and/or,
  • Sign up to receive these posts via email from Feedburner.

To sign up to receive the posts on Blueprint for Financial Prosperity via email, enter your email address below. All you will get are emails from Feedburner (and then one from me when I select a winner for this contest and potentially future contests), otherwise you will receive no other emails.

On Friday I will select the funniest joke, one email subscriber, and then one at random from both lists; email them, and hopefully mail out the keys on Saturday.

Good luck!


 Cars 
24
comments

Top 10 Highest Mileage Cars in 2008

With the price of a barrel of oil around $100 and the price of a gallon of gasoline inching towards $4, you’ve probably got fuel on the brain this year. If you also have a new (or new to you) car on the brain as well, you might want to know the top 10 fuel efficient MPG cars of 2008 right? Well, if you scour the EPA fueleconomy.gov website, you’d get the following list of top 10 (with ties) cars.

But, before we hit the actual list, here are some interesting, but not surprising, points worth noting:

  • All vehicles have 4 cylinder engines.
  • All mileages are based on the new EPA MPG testing guidelines.
  • The average is a weighted average based on 55% city driving, 45% highway driving.
  • A lot of Toyota’s and Honda’s on the list but there are some American cars on the list like the Ford Escape Hybrid and Mercury Mariner.
  • The first seven cars on the list are hybrids, three of those are SUVs!
  • All of the cars are capable of going over 30 MPG.
  • The number #1 vehicle, the Toyota Prius, has a starting MSRP of $21,200 (but you have to get on a waiting list!).
  • The number #10 vehicle, the Honda Fit, has a starting MSRP of around $13,950 – very reasonable for a 30.2 MPG (if that truly is important to you).
Rank Vehicle Vehicle Type City MPG Highway MPG Avg. MPG
1 Toyota Prius, 1.5L, Auto (CVT), HEV Sedan 48 45 46.7
2 Honda Civic Hybrid, 1.3L, Auto (CVT), HEV Small Car 40 45 42.3
3 Nissan Altima Hybrid, 2.5L, Auto (CVT), HEV Sedan 35 33 34.1
4 Toyota Camry Hybrid, 2.4L, Auto (CVT), HEV Sedan 33 34 33.5
5 Mercury Mariner Hybrid FWD, 2.3L, Auto (CVT) SUV 34 30 32.2
5 Mazda Tribute Hybrid 2WD, 2.3L, Auto (CVT) SUV 34 30 32.2
5 Ford Escape Hybrid FWD, 2.3L, Auto (CVT) SUV 34 30 32.2
6 Toyota Yaris, 1.5L, Man(5) Small Car, Hatchback 29 36 32.2
7 Toyota Corolla, 1.8L, Man(5) Small Car 28 37 32.1
8 Toyota Yaris, 1.5 L, Auto(4) Small Car, Hatchback 29 35 31.7
9 Honda Fit, 1.5L, Man(5) Small Car, Hatchback 28 34 30.7
10 Honda Fit, 1.5L, Auto(5) Small Car, Hatchback 27 34 30.2

Curious about what #11 was? Not too exciting, it is the Automatic transmission version of the #7 car, the Toyota Corolla.


 Credit 
7
comments

How We Got A $1608.43 Cash Back Rebate Check

Citi CashReturns(SM) MasterCard® That’s right, we recently received a $1,075.98 check from Citi to go with our $532.45 check last month, all part of the greatest cashback plan in the world. Okay okay, I’m only kidding, it’s probably not the greatest cashback plan in the world but the Citi CashReturns card but it certainly softened the blow of paying for a wedding and honeymoon. Citi recently cut the promotion on this card so it fell off my list of the best cash back credit cards but it was hot while it lasted!

For those of you keeping score at home, and motivated enough to divide 1608.43 by .05, the cash back rebate included not only our wedding and honeymoon but almost all the spending of the last three months as well… but weddings are pricey.

So, how do you leverage a 3 month 5% cashback program as best as possible? Don’t apply for it unless you know you have a large capital expenditure in the next three months! This is perfect for big family vacations, weddings, home improvement projects, or anything else that’s expensive. I think that if you’re thinking about spending $10,000 or more ($500 cashback), then applying for this card is a smart move. If you don’t have anything on that scale, don’t apply! You want to save it for when you will have a big expenditure.

One other great thing about this card is that they automatically send you the rebate check, you don’t have to request it. I think it’s ridiculous that all cards don’t do this.


 Personal Finance 
3
comments

All About Rates: Fed Rate, Prime Rate, LIBOR and COFI

The Fed did what everyone expected this past week, cutting the federal funds rate by 75 basis points to 2.25%, a little less than what the market wanted (they wanted a full 100 basis point cut down to 2%). The federal funds rate has gotten a lot of press lately and many people have started to understand how the Fed Rate personally affects them. Some have been confused between the federal funds rate and the federal discount rate, which I tried to explain in the past, and wanted to learn why the fed rate affected the stock market, but overall I think it’s relatively well understood. The other popular rates that aren’t as well understood are the Prime Rate, the London Interbank Offered Rate (LIBOR), and the 11th District Cost of Funds Index (COFI).

Prime Rate

What is it? The prime rate is a generic term but in the US it primarily refers to the the Wall Street Journal Prime Rate. It is “the base rate on corporate loans posted by at least 75% of the nation’s 30 largest banks.” [Source: Wikipedia] Usually you can expect the rate to be about 3% higher than the Federal Funds rate so when the Fed drops its rates, you can expect the Prime Rate to fall as well (but not always). WSJ prints this rate about once a month.
Why does it matter? The Prime Rate is often the rate you see associated with credit cards, car notes, and all other types of consumer debt. For example, a card may have their variable purchase and balance transfer APR pegged to the Prime Rate plus 4.99%, so that rate will be the Federal Funds rate plus around 8.99%. Since the Fed cut the rate by 75 basis points, you should expect a similar fall in your interest rates. The Prime Rate is published by WSJ so it will lag the Fed by a little bit, so you might not see the lower rate for a little while.

London Interbank Offered Rate (LIBOR)

What is it? The LIBOR is “a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market).” [Source: Wikipedia] In other words, it’s the Fed funds rate in London. Some other notable differences are that it’s a daily rate, announced after 11 AM by the British Bankers Association, and is an average of rates on inter-bank loans of up to 1 year with contributor banks. It’s a lot like taking a snapshot of the crowd at a sporting event, you get close but it’s obviously a continually moving target. Another difference between the two rates is that with the Fed funds rate you’re talking about the target that the Fed is trying to hit by adding liquidity. With the LIBOR, it’s the actual rate being charged and not a target. While it is an academic difference, it’s a difference nonetheless.
Why does it matter? Some adjustable rate mortgages are actually linked to the LIBOR, such as LIBOR + 2.75% or LIBOR + 2.0%; so when the LIBOR moves around, it can affect what your ARM is adjusted to.

11th District Cost of Funds Index (COFI)

What is it? Last but not least, we have the 11th District Cost of Funds Index (COFI), an index I never heard of before researching this article. The COFI is a little more complicated and is “computed from the actual interest expenses reported for a given month by the Arizona, California, and Nevada savings institution members of the Federal Home Loan Bank of San Francisco (Bank) that satisfy the Bank’s criteria for inclusion in the COFI (COFI Reporting Members).” [Source: FHLBank San Francisco] Like the Prime Rate, this rate is reported on a monthly basis but two months behind (so the January value is reported in March).
Why does it matter? Again, it’s an index used to adjust mortgages and other loans and it’s popular because it lags the market and is a stable measure. This means that it’s good when the rates are increasing, since it lags, but not as good when the rates are falling, since it lags. The reason why its stable is because it includes more factors such as loans from savings and checking accounts, CDs, etc.

Hope that clarifies things just a little bit more…


 Investing 
3
comments

Don’t Buy (or Sell) Stocks On Emotionally-Charged News

Late last year, when there was blood in the streets, a well known discount broker (Company A) was said to be on the verge of bankruptcy and the stock tanked 50% in one day. Not only did it tank 50% but the prognosis on the street, at least perpetuated by mainstream media, was that company was hosed and that they were going under. They didn’t have a rich history of being able to fight off adversity, they were relatively new in the financial business and lots of people figured they’d collapse. SIPC insurance would have to be initiated to save accounts and it was going to be yet another one of the casualties of the sub-prime mess. Would you have sensed that the market had panicked and bought shares? Or would you have joined the bandwagon and watched the shares fall into oblivion?

Now consider this scenario. Several months later, an 85 year old investment firm (Company B), well known throughout the world, looked to be royally screwed as traders were concerned that the firm wouldn’t be able to fund future transactions. Their lifeblood, capital, appeared to be bleeding out as investors were pulling out their funds in the firm. Until their last quarter, they had never posted a loss. That’s 85 years worth of straight profits. On a Friday, their shares fell 10% to a five year low of around $57. By Monday, they closed at $30 on those same credit concerns. Did you see this as the market offering a huge discount on a valuable commodity? Or did you see it as the end of pretty good eight-five year old run?

Well, if you guessed, based on the setup, that Company A recovered and that Company B didn’t… you’d be quite astute. You’d be more astute if you made those determinations as the events were unfolding, rather than right now. Company A was E*Trade, which was the impetus for a topic focused on what would happen if your brokerage went bankrupt. Company B was Bear Stearns. JP Morgan Chase recently announced that they’d buy the firm for $2.30 a share, with funding from the Federal Reserve. While the ink isn’t dry yet on that deal, it was announced this past weekend in conjunction with a weekend 25 basis point cut by the Federal Reserve (an event almost as rare as Halley’s Comet, the last weekend rate cut announcement was October 6th, 1979).

The moral of this story is that you shouldn’t even buy individual stocks based on (emotionally-charged) news. The broader corollary to that moral is that you shouldn’t buy individual stocks without careful inspection of its fundamentals, but avoiding emotionally-charged news is always a great first step.

For the record, I thought E*Trade was going under and Bear Stearns would be fine. I didn’t buy shares of either because I’ve been burned (and rewarded) in the past about ignorantly buying on bad news (now I stick to index funds like a good boy!). In the past, I bought Enron because I thought people were over-reacting but one can never underestimate the pervasiveness and severity of outright fraud. I was rewarded when I bought shares of Xerox in 2000 when it was in single digits because I figured a firm with that storied a history probably was going to make it (or at least be acquired). Though it’s like they say, tell your kid that the stove is hot won’t sear in the message quite like actually touching it.


 Cars, Frugal Living 
5
comments

Save $200 a Year By Driving Slower

After spending two and a half weeks in Hawaii, I’ve to appreciate driving slower. The first week was spent on the island of Kauai, an island that, to my knowledge, doesn’t have a road wider than two lanes on each side. The next four days was spent on the Big Island of Hawaii, which to my knowledge doesn’t have a road wider than three lanes. It wasn’t until reaching Oahu did we finally encounter what would be considered a highway (and it was a doozy, HI-1 is four lanes each way, sometimes more I think). On each of the other islands, I think I peaked at 55 MPH and that was only briefly. Part of the reason was because we were on vacation and took scenic routes – there’s no sense flying by at 70 MPH on a scenic drive; part of the reason was that you simply couldn’t drive 70 MPH on many of the winding roads. So that got me thinking, what do you really get out of driving 70 MPH? The answer is – wasted gas and not much time savings.

According to the US Census Bureau, in 2006 the average time to commute from home to work ranges between 15 and 31 minutes. New York had the longest with 31 minutes and North Dakotans won with a mere 15.5 minute commute. The average was 25 miles.

The time you save between driving 55 MPH for the entire 25 miles, unlikely, and driving 75 MPH is seven minutes. It will take you about 27.3 minutes to travel 25 miles going at 55 MPH. At 75 MPH, you finish the trip in 20 minutes – a total savings of seven minutes. If you drive 65 MPH, you save only 4 minutes. So all that speeding, weaving, bobbing, and cutting off that you may do, in order to maintain that 75 MPH cruise, saves you a mere seven minutes. If the minimal time savings isn’t a deterrent (7 minutes out of 27 minutes is over 25%, so it’s relatively large), let us take into account some other factors.

Speeding Ticket

In 2002, the average cost of a speeding ticket was $150 according to CNN Money. Assuming inflation of 4% each year, the average cost can probably be extrapolated to be closer to $190. The time it takes for a ticket to be issued probably takes around 20 minutes, based on nothing but guesstimation. Let us assume that the probability you get a ticket is 0.1%, or one every three years, again also based on guesstimation. That means that the “cost” for speeding is 20 cents and 1.2 seconds each trip. The annual cost, if you assume 50 weeks of weekday travel, is $50 and five minutes. While not substantial, who wouldn’t want an additional $50 in their pocket? (This doesn’t take into account the cost of losing 20 minutes of billable working time, which would take into account your salary, so it’s a little more than $50 a year)

Accidents

I won’t, because it’s too complex a problem that cannot be simplified enough to be of significant value, go into the financial and time cost of accidents the same way I did with speeding tickets. Suffice it to say, accident severity greatly increases when the speed of the vehicles is higher. I don’t know enough about traffic statistics to conclude that accident probability increases with speed but I wouldn’t be surprised if that was the case. Even if those could be quantified, I’m not going to try to research how much a life is worth, which is a pivotal calculation for insurance companies, so I’ll leave it up to the experts. Either way, by driving fast, you are risking accidents and accidents cost time and money immediately and in over the long run (increased insurance costs).

Gasoline Consumption

It is generally understood that driving the speed limit is the most fuel efficient speed. According to the US Department of Energy, for each 5 MPH you drive over 55 MPH, you lose 6% of efficiency. That’s a whopping 24% if you drive 75 MPH, as in our earlier example. So, if your gasoline costs you $3.23 per gallon, you’re really paying closer to $4.00 per gallon. To drive this home, let’s compare the fuel cost of your trip to work with the 55 MPH speed versus the 75 MPH speed.

If your car gets you 30 MPG, a very generous assumption, then your 25 mile commute at 55 MPH will cost you 0.83 gallons of gasoline which is $2.69. In other words, it costs you $2.69 to drive to work. If you drove it at 75 MPH, your fuel efficiency drops such that the cost per effective “gallon” increases to $4. Now your trip costs $3.32, or 63 cents more. If you make this trip 250 times, that’s $157.50 extra each year on gasoline just for getting there 7 minutes sooner. (The math here is a little fuzzy in the sense that we’re just increasing the cost of the gasoline rather than keeping that constant and affecting the MPG, the reason for this is just to keep things easier. Ultimately the math isn’t ever going to be this clean so I think it’s a liberty that’s fair to take.)

Summary

By taking into account just gasoline and the potential costs of a speeding ticket, we’ve seen that $200 a year can be cut out of your expenditures just by driving a little bit slower (that’s $200 based on $3.23/gal. for gasoline, it’s ever increasing!). So, if you’re feeling the pinch of fuel prices, consider something as simple as driving slower. If you’re concerned about those seven minutes, just leave home seven minutes earlier!


 Government, Taxes 
217
comments

How To Get Your 2008 Stimulus Rebate Check Faster

Have you been awaiting word on when you expect your stimulus package? First, check the stimulus calculator located near the end of my original 2008 Stimulus Package Explained article. If you are eligible for a check, when you can expect it will depend on the last two digits of your social security number.

If they have your direct deposit information available on file, then you follow this schedule:

  • 00 – 20: May 2
  • 21 – 75: May 9
  • 76 – 99: May 16

If they do not have your direct deposit information, then this is your schedule:

  • 00 – 09: May 16
  • 10 – 18: May 23
  • 19 – 25: May 30
  • 26 – 38: June 6
  • 39 – 51: June 13
  • 52 – 63: June 20
  • 64 – 75: June 27
  • 76 – 87: July 4
  • 88 – 99: July 11

So if your social security number is 000-00-0034 then you will receive the stimulus package amount on May 9th if you have direct deposit and you will receive the stimulus package check on June 6th. As you can see, you get the money nearly a month earlier if they have your direct deposit information.

How do you give them your direct deposit information? You give it to them when you file your return. Be sure to input your direct deposit information on your 1040 on line 74 (a-d). Once they have it there, you can get your check considerably sooner. Don’t be a fool, direct deposit. :)

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 Personal Finance 
12
comments

How Online Bill Payment Adds Months To Your Life

Back in the days of personal checks and monthly bills, “doing the bills” was an arduous task that took hours and hours. Back in the days of check registers and balancing a checkbook, “doing the bills” was like accounting-lite. With the advent of online checking and electronic bill payment systems, there isn’t any logical reason why you should be spending an hour or two each month dealing with bills. By setting up your bill payment details and conducting your transactions entirely online, you can add months to your life.

Thank about this… imagine you spend three hours a month dealing with bills. Three hours a month equates to a day and a half a year. That’s basically one weekend a year (unless you do your bills at work!) you lose because you are “doing the bills.” Now consider that you’ll be doing bills for most of your adult life. If you figure you live past 75, you’re talking about over a year’s worth of weekends lost just to “do the bills.” I think that when you put it in those terms, it’s quite easy to make the jump and trust online bill payment as a means to recapture your weekends.

Personally, I auto-pay as much as I can. My cell phone bill and my cable/internet bill are charged to a credit card while my mortgage and my water bill are all automatically debited from my checking account. I’m implicitly trust those entities because they’re established organizations (Sprint, Verizon, BB&T and my county government) that I would trust my banking information to. If I didn’t, sending them a check would be just as dangerous as giving them the electronic account details (I lose nothing privacy-wise by giving that information to them versus a personal check).

If I could auto-pay the balance of my credit cards, I would. I can’t do that because the credit card company doesn’t offer it because that would mean I’d never miss a payment. I’d never miss a payment and I’d always pay off in full, something I do anyway but at least this way there’s a probability I’ll miss it (and I have in the past, I’ve missed one payment but had the fee waived).


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