I discovered this detailed real estate blog called Matrix and this incredible set of mortgage-related heatmaps used by Bernanke in his last speech. Heatmaps are the quickest way to get a “snapshot” of a situation and these go through so many permutations that you can get a really good sense of what’s going on (and there are so many maps!). I had no idea unemployment concentrations were dispersed the way they are and how badly hit the Michigan area has been lately given the major auto manufacturer’s financial woes.

My last employer recently offered a Roth 401(k), which is essentially a tax-free version of the tax-deferred 401(k), though employer contributions are tax-deferred. It’s an interesting concept that has been around for a few years but hasn’t been adopted too widely, probably because of the paperwork. If I had a choice, I’d split my contributions evenly between the two and give myself some diversification.

Trent has received numerous complaints that he writes about the same stuff over and over again and that it’s getting old. Unfortunately for all you excitement hounds, personal finance is repetitive, it is conceptually easy, and “slow and steady” does win the race. It’s the chase of excitement, having that fancy car so you can drive it fast, throwing some money at a high flying potential stock, or that huge flat panel television - that’s the stuff that derails your trek to your personal finance goal. Spend less than you earn, contribute to your 401(k) and save for retirement, ensure you have proper and adequate insurance, blah blah blah - it’s repetitive but it works. Michael Jordan once said he shot a thousand free throws a day. How’s that for repetitive?

Nickel wrote a bit about his asset allocation this week and it’s something I am hoping to review sometime next week. I’ve input all the data I have into Vanguard’s Portfolio Watch and now I just have to figure out what my goals are so I can set things up correctly once and for all.

Housing doesn’t always go up. Sometimes it comes down. Hard. (scroll down to the story of the house that sold for $505k in 2006 and is now on the market for $177,495 - ouch)

Lastly, if you like heatmaps and those first dozen weren’t enough, here’s a cool one about all the pieces of inflation on the New York Times, my new BFF, courtesy of Consumerist (who got it from Nathan). Not surprisingly, that big red area is gas.

Have a great weekend!

Earlier this week Nickel sent me this awesome video about someone building a ridiculously posh treehouse in their backyard. The video’s background music is If I Had A Million Dollars done by the Barenaked Ladies Bluegrass Tribute (I think!) and so I thought to ask a few personal finance bloggers what they’d do if they had a million dollars. Would they build a treehouse in their yard?

Surprisingly none of them wanted to build a treehouse in their yard. In fact, the vast majority did exactly what responsible pfbloggers always advise people to do, pay off debt, save for the future, and then spend a little of the rest on yourself. Here’s what they said:

Flexo said:

Start a foundation promoting arts education, a million is just enough to get it started.

Paid Twice said:

I’d get out of debt, buy my parents a house where we live, pay taxes, give 10% away, and whatever is left, put into retirement and college savings for the kids.

Nickel said:

If a million dollars suddenly fell into my lap, I’d invest the vast majority of it. The concept of “financial freedom” is very attractive to me, so I’d focus on building up that nest egg. I’m not saying that I’ll necessarily quit my job when we reach that magical crossover point, but it’s hard to put a price on being in a position to make that decision.

JD said:

I would leave it in the bank. I’m old and boring.That’s not quite true. I’d put it in index funds until it reached $2-$4 million, then go all Suze Orman and shit, putting it into bonds and living off the proceeds.

Lynnae said:

[I double posted one quote and managed to lose Lynnaes....]

MrsMicah said:

Get out of debt, buy a house, help out our parents, give some to church/charity, and invest the rest.

MoneyWatch said:

Pay off mortgage (approx $300k) save $300k invest $300k and spend the rest - holiday, car etc.

NCN said:

I would purchase a nice home on a few acres, and put the remainder in savings. Over time, I would use the savings to pay for kids college and future ‘major purchases”. And, I have one or two close friends / family members that I would like to help.
I might upgrade a few things in our house, but the last thing I need is more ’stuff’. I’d use it as a major-league security blanket. We’re homebodies, but we might be inclined to take an extra vacation or two a year, if we had that kind of money in the bank.

Trent said:

Put it in something that earned a very secure 4-5% in perpetuity - t-bills or something - and then basically stop worrying about the day-to-day crunch of my life.

Cap said:

If I’d ever win the lottery or receive some large windfall, I’d love to be able say some grand things such as I’ll properly invest it and make it grow so that I can help notable foundations or charities. But when I really think about it, I think realistically I’d take care of my immediate loved ones first. It’s a bit strange… when I was much younger; I would most likely dream of the wild things I can acquire from winning the lottery. These days, as long as my family and loved ones are happy and content with their life, I’ll feel pretty rich — regardless of our material possession. This may sound like a cheesy canned response, but it’s the cheesy truth!

What would I do with a million dollars? I’d replace the roof to our house, buy my lovely wife a Prius, then invest the rest in a good mix of income generating stock market investments and subsidize our current income with the earnings. A million bucks is a nice chunk of change and makes for a good “life subsidy.”

What would you do with a million?

If you visit the E*Trade homepage, you’ll see a big yellow star that names E*Trade the #1 premium broker of 2007 by Smart Money magazine and “Best of the Breed” in Money Magazine in August 2007. If you visit the Scottrade homepage, you see a blurb about a J.D. Power and Associates Award for “Highest in Investor Satisfaction with Online Services” award. And if you visit Zecco homepage, they don’t have any awards posted. Does that mean E*Trade is better than Scottrade and Scottrade is better than Zecco? Maybe, maybe not! So I wanted to match up all the awards and ratings and come up with my own ranking of the best online discount broker.

The List: I started with all the Premium and Discount brokers from Smart Money 2007 Brokerage Ratings page and then removed anyone with commissions greater than $10. That left me with E*Trade, Banc of America, TD Ameritrade, WellsTrade, Scottrade, Firstrade, WallStreet*E, SogoInvest, TradeKing and then I added Zecco, simply because they offer $0 trades, and Sharebuilder, because they offer a unique discount purchasing program. I removed Banc of America, WellsTrade, and TD Ameritrade because they’re affiliated with larger banks, I wanted standalone brokers.

TradeKing

TradeKing was named #1 Discount Broker by Smart Money magazine in 2006 and 2007. Barron’s gave it four stars in its rating system. At $4.95 a trade plus a very competitive money market sweep account and low options fees ($4.95 a trade and 65 cents a contract), there are good reasons to list TradeKing first. When it comes to discount brokers, TradeKing appears to be the one with both cheap prices and enough performance clout (see the awards) to give me confidence that the low prices don’t mean poor service.

E*Trade

E*Trade, one of the priciest of the online discount brokers, with a $9.99 trade commission, has won several awards in its own right. #1 premium broker of 2007 by Smart Money magazine and “Best of the Breed” in Money Magazine in August 2007. One startling ranking was one for Kiplinger’s in 2006, where E*Trade was rated 9th (the only other online discount broker on the list was Firstrade at #4 - #1 was optionsXpress but their trades cost $14.95).

Scottrade

Scottrade was rated the highest in investor satisfaction by JD Power & Associates and beat out all other comers on the list, including E*Trade and TD Ameritrade, which is amazing considering trades cost a mere $7. While the scoring for this was for satisfaction and not scope of offering (though it does include information resources and trade execution), which many other awards are based on, it still speaks volumes about the happiness of Scottrade customers.

SogoTrade

SogoTrade, once known as SogoInvest, is as bare bones as you can get, running the caboose of the discount broker train according to Smart Money magazine. To be honest, you can’t expect much at $3 a trade and you don’t get more than the ability to trade. I looked for awards but there were none to be found.

Zecco

If SogoInvest is the caboose, where does that leave Zecco and it’s zero cost commissions? Not a single award to go on, Zecco does offer ten free trades a month if you have a balance over $2,500 but there have been rumblings about problems with Zecco.

Sharebuilder

Sharebuilder isn’t really a discount broker in the traditional sense because you pay $4 a trade but it has to be done on a schedule, meaning the following Tuesday. So in a sense you can buy stock at a cheap price but you have less control over it. Sharebuilder was recently acquired by ING Direct and they’re also, currently, the only broker to offer promotion codes for free money.

The Awards Sites

Below are links to the award pages I could find:

Smart Money 2007 Brokerage Ratings - The rankings from 2007 listed TradeKing as the number one discount broker, their second in a row. The full ratings, in order from best to worst, were Scottrade, Firstrade, OptionsXpress, Muriel Siebert, WallStreet*E, SogoInvest.

2006 Kiplingers Ratings - For a $50,000 account, the rankings were: optionsXpress, Muriel Siebert, Wells Fargo, Firstrade, Fidelity, Vanguard, TradeKing, Schwab, E*Trade, Scottrade, and TD Ameritrade.

For JD Power & Associates, I invite you to search on their site.

In the two and a half weeks we spent in the island of Hawai’i, we stayed at a timeshare, two bed & breakfasts, and a resort hotel. We did it in that order because, as more avid hikers than beach loungers, we figured we’d tire ourselves out in the first ten days and then lounge around at a Marriott for the last five. The two bed and breakfasts we stayed at were on the Big Island, the Shipman House in Hilo and then the Hale Maluhia Country Inn in Kailua-Kona.

Bed & Breakfasts often have better rates, significantly more personal service, but their variance in quality is much greater. If better rates and more personal service appeal to you, the variance in quality might be the only sticking point in the whole deal. The appeal of a major brand, whether it’s a Marriott or a Hilton or a MacDonalds, is that you expect consistency regardless of location. A Marriott in one city should give the same level of service as a Marriott in another. There might be small differences but the quality should be above a certain level. You also know that if you don’t get the quality you feel you’ve paid for, there’s a big megacorporation you can complain to. With a bed and breakfast, you’re often dealing with the owner-operator and the best they can do is say they’re sorry and refund you some of the money.

With many bed and breakfasts, you’re essentially renting a room in someone’s house, albeit a much nicer and probably more organized house. With the Shipman House and the Hale Maluhia, we really saw both ends of the spectrum when it comes to bed and breakfasts. The Shipman House was this elegant and refined Victorian building that had so much history and culture to explore. The Hale Maluhia was far more rustic and less refined but certainly had a “tree-house” type atmosphere that we also enjoyed. Both places served breakfast with a beautiful selection of locally grown fruits and incredible Kona coffee. The next time we go back we would certainly stay at the Shipman House (Hale Maluhia was okay too, but we probably wouldn’t go back, especially if the owner is trying to sell it).

Local Flavor & Personal Service

Bed and Breakfasts aren’t always cheaper but you can always depend on a more personal level of service and a better sense of local life. I like nice hotels as much as the next person, but you always pay a premium (even if it’s a discounted premium) and you always get a ’sanitized’ version. If that’s your preference, there’s absolutely nothing wrong with that. However, if you want a better taste of local living, you can’t go wrong with a bread and breakfast. At the Shipman House, the proprietor was so kind to us and told us where all the good places were.

Variance

As mentioned earlier with the variance between the Hale Maluhia and the Shipman House, it’s difficult to know if you’re going to get a good place, a great place, or a so-so place. I would categorize Hale Maluhia as a so-so place and the Shipman House as a great place (but you do pay a premium), but it’s hard to tell from the online reviews and testimonials. My advice is to read a lot (I’m now a huge fan of unbiased Hawaii blogs like GoVisitHawaii, I’m addicted to that particular one though) and try to find as many pictures as you can, pictures can lie but they’re better than nothing.

So, before you just book a room at the Marriott, consider a bed and breakfast; you might be pleasantly surprised!

A lot of young professionals hear this line all the time: “If you pay your dues, you will be rewarded by the company in the future.” Sometimes “paying your dues” refers to working your ass off for a few years, being a high performer, then getting rewarded with greater opportunities. That’s the good kind of “paying your dues.” The “paying your dues” I’m going to rail against today is the one where you basically work the grind, day in and day out, until you’ve been with a company long enough to be entrusted with more responsibility. That’s promotion based on tenure, not based on merit. That type of “paying your dues” is crap and here’s why you want to get out now.

As an aside, I always thought of my 20’s as the years where I was going to work myself as hard as possible in order to get as far ahead as possible, i.e. promotion based on merit. Then, in my 30’s and beyond, I could slow down at work and focus on my family and personal life (that mostly means kids). So, being stuck in a ‘promotion based on tenure’ company just wasn’t going to work for me in my 20’s, but was probably going to be ideal for my 30’s and beyond. There’s nothing wrong with coasting along, you aren’t any better or worse than those hard-charging workaholics, but you just have to get in the right place for it.

Anyway, here’s why you have to quickly identify where you’re at and why promotion by tenure is a joke.

Your Job Isn’t Prison

You know where else you get rewarded for biding your time, treading water, and not making waves trying to get ahead? Prison. Life is about setting your goals and taking the steps you need to in order to achieve them. Where in the Guidebook of Life does it say “pay your dues and wait for someone to give you your prize?” If you said “nowhere,” then you’re right, that’s not in the Guidebook of Life. Prison rewards good behavior and good behavior is keeping your mouth shut.

Work Hard, Get Rewarded

If you want to get ahead based on your merits and your ability, you need to find a place that will reward you for that. If the company you work for only offers opportunities based on time served, it’s best to identify that quickly and get out. There are plenty of companies that will reward you based on your performance, as many as those that will reward you based on tenure, so find the ones that match up with what you’re looking for. If you don’t, you’ll burn yourself out for nothing. You won’t even last long enough to be rewarded for just being a warm body!

You Won’t Be There Long Enough

If you’re a young professional, the probability you’ll be with any one company for more than ten years is remote. Five years, especially in this era, is difficult. At my first employer, I can count a dozen people who started with me who lasted fewer than three years (I was one of them). If you count the whole young professional/rotational program group, plus or minus a year in start time, that list, as of a year and a half ago, was around a hundred employees. A hundred new hires between 2002-2004 (I started in 2003), left the company. That’s not anything special, that’s just how things are. When hard work isn’t rewarded, hard workers find ways to reward themselves.

Opportunities Abound!

Chances are, within 3-5 years at any one company, you’ll want to put yourself out there on the market to see if you’re still being paid a fair rate. At that time, if your performance and ability are such that you can command a higher salary, you probably will be put into greater leadership positions. If your current company hasn’t already offered you those opportunities and you’re in one of your promotion by tenure companies, you can’t get them to match another offer and give you a promotion. Here’s why.

If you are at a company with a culture of promotion based on tenure, how will it be viewed by others if you are promoted above them and they’ve been there longer? I think you know where I’m going. If you’re a strong performer and that’s rewarded in the company, then people will recognize your performance and listen to what you have to say, even if they’ve been there longer.

Life Is Short

Life is too short to be wasting it “paying your dues.” Paying your dues is what someone says when they’re doing something they don’t like doing. Think about that one.

This marks the actual return of the monthly net worth reviews and the first time, in a long time, that my net worth actually fell and it fell by 12.1% in the month of April. Now, before well all jump on the “jim has no idea what he’s doing, let’s go read some other blog,” I have to warn you that the fall was expected and planned for.

The fall was due to the payment of income taxes for 2007. I paid a pittance in estimated taxes last year because income from this site (and other online ventures) was relatively small and so I wasn’t required to pay much in estimated taxes. However, on April 15th, the piper had arrived and was demanding his money so I wrote some of the largest checks of my life. I had to pay 2007 federal and state income taxes as well as first quarter 2008 estimated taxes to both the feds and Maryland. The end result was chopping off 12.1% of my net worth. However, since it was expected and planned for, it’s not a big deal. Here’s a case of where the numbers don’t tell the whole story and why commentary is always important.

What did I learn from this? Numbers don’t tell the whole story. It’s much like how the weight scale might not show a fall in your body weight but the mirror shows you putting on more muscle and adding definition. Numbers are good but only to a certain extent, so don’t let it get you too high or too low because they can be deceptive. -12.1% of unexplained net worth loss is crippling, but if you know the reason and it’s not indicative of a bigger underlying problem then you’re okay. In this particular case, -12.1% was good because I earned interest on those monies as they sat in a high yield online savings account!

Other notable actions of the month:

• Series I Savings Bonds: We purchased some Series I Savings Bonds near the end of April, $5k each for my wife and myself, in order to lock in the 1.2% fixed rate. Savings bonds don’t give crazy stock market type returns but it establishes a good base and one that is guaranteed. It locks our funds in for at least a year but the earnings are local and state tax free.
• Consolidation of Accounts: I finally rolled over my former employer’s 401(k) plan into my Vanguard account, a process that was both painless and fast. This didn’t net any financial benefits but it means there’s one less account I need to log into and review, so there’s a net time benefit in that one (I did miss out on a couple days of solid stock market increases while the funds were in transition though, boo!, but you can’t plan for those).

Looking to the future:

• Roof replacement: Our roof is leaking and has been leaking for some time now, so a full replacement will need to occur in the next month. This week I’ll contacting a few contractors to get quotes but I estimate the cost will be in the neighborhood of $4,000. It’s a problem we’ve been aware since before the wedding (in February) but there hasn’t been many heavy rains since then so we’ve been lucky.
• Water Heater: Replacing it is on the radar but it’s currently in great working condition, it’s just old, and we may opt to replace it with a tankless version simply for the energy savings. Since it hasn’t been a priority and since the tank is in the basement, it’s been an “out of sight, out of mind” type of situation.
• Diversification: I need to take a hard look at all of our investments and make sure we’ve properly diversified. It’s something that Nickel and I have talked about quite a bit lately. He told me about Vanguard’s Portfolio Watch, which looks like a great way to help facilitate this.

Please share your thoughts below!

You can delay the reaper but you can rarely totally avoid him and this past week Linens ‘n Things filed for Chapter 11 bankruptcy, a few weeks after they were originally predicted to have succumbed. If you read my post about how they were going under and how you shouldn’t hold onto gift cards, then you wouldn’t be one of the 400,000 customers stuck with $42M in worthless gift cards.

Mrs Micah talked a little about contributing to presidential campaigns and how the contributions amount to very speculative investing. It’s an interesting thought, especially after noting people contributing to “lost cause” campaigns like Huckabee’s, that definitely gets you thinking. I was never one for political campaign contributions, I think my money is better served going towards health/medical related charitable causes.

Lastly, JD has a fine post on high-yield savings accounts that lists rates and features of each bank. I’m quite partial to my own list of best online savings accounts but I’m a little biased.