Wednesday, October 28, 2009

Consider Subscribing!

If you enjoy Future Think Dollars consider clicking on the subscribe button. This let's you know everytime there is a new post.

I use Google Reader to keep track of sites/blogs I like to read. There are many other options out there as well, and you may find you like not having to type/click on seventeen different links to check the websites you like to check.

Give it a shot, it will probably save you time and sanity!

Thanks to reader Alix for educating me on Google Reader, I've been using it ever since!

Rent vs Buy Housing Calculator

Which is a better idea for your situation? Are you in a spot to take advantage of the lower home prices we have been seeing for some time now? Perhaps you are wondering if your cheap rent would be beaten by a home purchase in terms of long term costs.

The short answer is "yes" but how many years will it take to break even?

There are many things that factor into that calculation, and there are indeed sometimes when it makes less sense to buy a home. This calculator is very useful in doing some calculations of your own, with your situation. Try playing with the advanced settings for buying, renting, and general. Keep in mind that first time home buyers tend to underestimate maintenance and upkeep, as well as furnishings and increased utility bills.

The common sense knowledge passed on by nearly everyone is "buy a home as soon as you can." This is based on the housing market pre 2007-now. Buying a home for your family is a fantastic idea as long as you do not see it as an investment, but a place to raise a family. Unfortunately, too many saw their homes as ATM's (and took out Home Equity Line Of Credit loans, or HELOC) and many people are facing tough decisions right now. Many very intelligent people did not see anything wrong with home values, and had the mind that if they did not get in NOW they would never be able to buy.

My philosophy on this is a bit different. I rent a small apartment, in not the greatest area, but I am within walking distance to a lot of fun stuff. We could never afford to live in this area and still be able to take care of our priorities. My wife and I agree that we are in no rush to buy a home, and that we see our "need" for a home coinciding with having a child. We're just not there yet, and we figure, why rush it? Another reason that is not pointed out often is that there is no opportunity for compound interest in real estate. Compound interest is exactly what we are trying to go after at a younger age as opposed to later on in life because it is so much more powerful with even a few extra years to work. Contrarians, but it works pretty well for us, and that is the bottom line.

What's your view?

Tuesday, October 27, 2009

Energy Savings

There are some simple ways to save energy, without too much extra effort.

Powering off power strips, seldom used appliances, and turning off computers when not in use are all easy savings. When I was a teenager, I liked to leave my computer on at night while it was downloading stuff. I justified this by turning off the monitor, which was a CRT (old big one) and used a bunch of power! I no longer leave my computer on at night, and I have gotten in the habit of using the shut down function that entirely powers down the computer. I did a little research, and the sleep function (the one that lets your computer boot up quickly from where you left off) continues to drain power the entire time it is in that mode.

I have our entertainment center stuff wired into power strips. This makes it very easy to take an extra second when we are done using it to flip the power button to off. This prevents the constant drain that many electronic devices exert on your electricity. This was a painless change to make, and now is very easy to remember to do. It saves money, and is good for the environment too!

The wife and I picked up two packs of CFLs (compact flourescent lightbulbs) for two dollars and replaced some of the bulbs with those. They really do draw quite a bit less power than regular light bulbs.

We try to limit the use of air conditioning on those days when you could just open windows and be comfortable. We don't hesitate to use it when we want either. In San Diego's mild winter, we try to refrain from using the heater when we could put on more clothes and be just as comfortable, which is easy in this climate compared to others.

We have some gadgets around the house that use batteries, and decided to purchase rechargables. We now have a small collection of Eneloop batteries by Sanyo and we have had great success with them so far. The start up cost is definitely more than buying non rechargeables, but we no longer buy batteries. We bought our initial package at Costco, which comes with a charger, and have added to the collection as we see the need. I no longer pile my way through a pack of batteries when playing Xbox, and our remotes no longer eat batteries for three meals a day!

The wife enjoys candles around the house, and she mentioned she we save energy from using candles instead of Febreze/Renuzit/Etc. plug ins that would constantly drain power.

Through the use of these power saving/money saving ideas, we have reduced our monthly energy bill by almost thirty three percent! Try some of these, and see how much you save.

Monday, October 26, 2009

My asset allocation

Here is my asset allocation for both my Roth IRA, and for my 401k.


Total Return Bond 7.98%
Treasury Inflat Protected 13.24%
S&P 500 Index 34.30%
Small & Mid Cap Index 30.76%
Intl Index 13.72%


Individual Stocks 40.7%
Mutual Funds (non index) 21%
Money Market 38.3%

Today I am rebalancing (which means sticking to your set investment goals in percentages of what you invest in) and adding to my bond holdings in my Roth.

I intend to use the money market cash to invest in a bond index fund.

I plan on reducing my individual stock exposure incrementally, as many of those are stocks I experimented with when I started my first Roth a few years back. As I shift out of the individual stocks, I intend to add to my Treasury Inflation Protected Securities, which are intended to return more if inflation increases.

I also intend to rebalance some of the small and mid cap index, as that has grown to be a larger part of my allocation than originally intended.

My goals for allocation are:

Individual stocks <5%
Bonds/TIPS 35%
S&P Index 40%
Intl Index 10%
Small/Mid Index 10%

Ultimately, my goals is to be entirely invested in low cost index funds.

Saturday, October 24, 2009

Time of savings is important!

When thinking about investing, many people think that returns are the most important number involved. The thought process goes that if you save a little, but get a huge return on that money, you will be set. Unfortunately, while it is popular to expect a huge return, this unfounded optimism can lead you down a road with a less favorable result. The solution to this, while a simple one, may not be the most popular.

If you dedicate more of your income to savings, over a long period of time you will have a good outcome even with a lower return. This should be apparent with any compound interest calculator, as the amount put in as time goes on usually goes up. Many individuals are of the mindset that "I will start saving in ten years, when I have a family." "Ten years won't even make a difference, I've got more important things to do with my money." Obviously these statements vary from person to person, as does the time period, but the point of this is clear. If you start saving earlier, you will come out ahead. I have illustrated this in previous posts, but the concept of "lost opportunity cost" is a good one to mention again.

If you started a Roth IRA when you got your first job at sixteen (I wish!) and contributed $5,000 per year until you retired at age 65, you would end up with around 1.5 million dollars, at a rate of return of 6%. This example is meant to highlight the importance of starting early, but would hard to start at that amount, especially at sixteen. Here's an idea if you ever have the chance to pass this on, I offered to match my wife's little brother's Roth contributions when he gets his first job. He's not old enough yet, but his eyes still lit up!

Now if we bump the start age up to 26 and use the same numbers, minus the extra 10 years of compounding, we get a much different number. The power is in the extra years to compound, as you end up with $817,000 or so without the extra 10 years.

If you started earlier, even though it would have been difficult to do, you would have ended up with almost double the money.

This is obviously not what most people want to hear, and also where many people (including myself before I started learning more) go wrong! It is far easier to save a bit more money and get the market return through index funds instead of chasing returns in individual stocks or actively managed mutual funds. In fact, if you stop chasing returns and just stick to a basic plan for your investments, you will be much less stressed out too!

Thursday, October 22, 2009

Disposable Razors

Like many people in America, I use a disposable razor of some sort. I used to buy packs of cartridges for my Mach 3 Gillette razor at Costco without even a thought. Then I added up how much those were costing me per year. I used to change my blade more or less once a week, which was when the blade starting feeling dull. At Costco, I remember the 16 pack of blades being around $30, which works out to around $1.88/blade. Like everything, I'm sure these have gone up in price, but I have not purchased any in some time. Let's say I could not make it to Costco, so I decided to grab some at the drug store/grocery store while I was there. At the price for an eight pack of refill cartridges is $19.29 which is a little more than 50 cents per blade. No big deal with everything else going on in life, but I figured it was worth another look.

I started reading some anecdotal posts on about a way to make your blades last longer. I also learned a bit more about how much shaving cost have increased since the introduction of cartridge based razors like Mach 3, Fusion, Quattro, etc. I started realizing I could save some cash, and also not have to go to the store as much. I figured this was worth a shot, as some individuals were reporting using one blade for 6 months!

I was very, very skeptical, but figured I could save some money if it actually did work.

The basic idea is changing a few habits when you shave. When I used to shave, I would finish shaving and then put the razor pack in the swanky little Mach 3 tray without a second thought. This new idea involved tapping the razor a few times to get excess water off, and then taking another second to dry it off with a towel.

Many of you probably already do this, but I never got the memo.

There was one more part of this "new" method to try, and that was to put a drop of mineral oil (plain ol' baby oil) on the blade, and gently spread it over the blade surfaces. The thought behind both of these seems like common sense now that I have been doing it for a while. Another method is taking a tube of lip balm and using it only for this purpose (put it somewhere you won't try to use it, and/or label it or something) and this works pretty well, and is a quicker way. The baby oil, and the oils in the lip balm protect the blade from corrosion. The oils rinse off under hot or warm water, and are no different than the moisturizers in the indicator strip/shaving cream in that respect. It sounds funky, and does take a bit to get used to, but you may find you don't mind the extra ten seconds of effort.

Companies that sell razors make more money the more you change your blade. They even put indicator strips on them to remind you that your blade is "going bad". Well after using the methods above, I have not had to change my blade nearly as much. The indicator strip practically screams "change me!" but the razor still works like a charm! It turns out that a razor blades enemy is corrosion, the type of corrosion caused by leaving it wet. A razor blade does not become dull after a week of shaving human hair, as the razor companies would probably like you to believe by their marketing.

Armed with this new method, I did some quick math and realized I'm saving right around $100 this year just from taking an extra ten seconds to take care of my razor blades. I did the math, and ten seconds/day for an entire year is around sixty minutes, or an hour. With this method, you could make yourself $100 for an hour of "work". That's a pretty sweet rate of pay, even if it's not a huge amount, but I'd pick $100 up off the ground if I saw it in front of me!

More information on the evolution and commercialization of shaving from wikipedia.!

At the advice of a friend of mine, I purchased the internet address for

You can now access the site in either fashion, by or the shorter address.

Hopefully this will be easier to remember, and that way more people will check out the blog!

Tuesday, October 20, 2009

Save big $$$ on Audio/Visual/Computer cables

If you walk into any retail electronics store to buy any type of cable, I can almost guarantee you are paying too much.

If you go to, and search for any cable needs, and then compare the price to or, Best Buy loses the overwhelming percentage of the time.

I have personally used many times, and even recommend it by word of mouth to everyone I know when they mention needing any cable type item.

I have saved quite a bit of money by using these sites since 2006 for my personal use, and for friends and family. The difference has been quite dramatic in my experience $80 vs $5 even w/ shipping has been a common comparison.

I'm sure some of you are already aware of the huge retail markup on many cables, chargers, and adaptors. For those of you who habitually walked into Best Buy and bought your items, maybe you will like the other options.

Spending an extra $75 dollars on a brand name cable for a digital signal (like HDMI) is a big waste of money.

Put that in your Roth IRA instead!

Sunday, October 18, 2009

Risk profile.

A term you may or may not be familiar with is risk profile. This is based on a term called risk tolerance, which is a "more specific measure of the degree of uncertainty that an investor is willing to accept in respect of negative changes to its business or assets".

In short, this term means "how much money am I willing to lose before it really freaking bothers me!", and it should be considered before embarking on any investment.

Amassing any sort of "war chest" or savings is a very difficult goal, but one that is incredibly necessary for your financial health. If you are already saving, how much are you willing to lose? The answer I usually respond with is, "I don't want to lose anything! Duh!"

Oh, if it were that easy, then this blog post would not need to exist.

But it's not that easy, and people lose gobs of money everyday in the stock market. If you abhor/hate the idea of losing money on your investments, which by common wisdom are supposed to make you money, then stay with me for another minute.

Perhaps you are taking too much risk in your investments. If you had anything in stocks last year that was not "short", or betting against the market, then you probably had a relatively horrible year compared with some recent years of investing. If this bothered you in the least, I have an easy solution.

Take less risk. These three powerful words are unpopular ones to people who are chasing returns, but there is an easier way than chasing returns. It is easy to tout your respective stocks/mutual fund returns when the times are good, but it takes a lot to admit when you did not do so swell on your investments. I have no qualms about others learning from my mistakes, and I "lost" quite a percentage last year on my investments. This is in large part due to my love for stocks, and general disdain for bonds.

Let's just say this has changed. I was neglecting bonds previously, as I figured I had been doing pretty well with stocks the last five years.

What about you? Do you have any holdings besides stocks/mutual funds? If you do not, why? It may be worth it to you to check out this free "risk profile" from Finametrica. The only required information is an email address, I just used my initials for my first and last name.

My score was 70, what is yours?

What's your interest rate?

What to do with your savings? Set up an automatic 50/month into an account at which pays 1.7 percent right now. This is definitely not as great as a few go-go-go years ago when I was getting 3-5 percent on money market funds, but it will still help you start saving with interest on YOUR side!

I wish I had learned about these type of accounts earlier, as most bank accounts barely compensate you for the use of your money. Think of it in that manner, and you will be on the right track. The banks should pay you a premium for the privilege of using your money for their business.

That's right, the money sitting in your checking account (what's your balance?) is making your bank money and not you. What's the interest rate on that money? If you don't know, you may be annoyed to find out it is a paltry 0.25% or perhaps even less. Even the savings account interest rate may not be at all friendly to your savings.

Find a bank that respects your money enough to pay a decent rate. Otherwise, punch out, because there are much greener pastures out there. Minimum deposit rates may vary for the higher interest rates, but you can find a better rate no matter your situation! is a wealth of information on this subject, and more!

Friday, October 16, 2009

Health Insurance Rewards

Do you have health insurance?

If you do, when is the last time you took a look at your insurer's website?

I checked out mine last year and found out they offered a rewards type program for participating in an online educational program. I completed a "wellness" questionnaire, and then starting getting weekly reminders to log in to read about health topics. It does not take much time at all, as it is only once per week.

Here's the kicker, they give you a debit card for participating, and continue to load money onto the card as your participation continues.

My health insurance is through Blue Shield of California, but other insurers have similar programs.

I just used some of my "credits" that I earned through my participation, and used the card to buy $50 worth of groceries!

Maybe your insurer offers a similar program, and all you need to do is check the website!
A few years ago I picked up a book in the library by David Bach called The Automatic Millionaire. I picked it up because it sounded like a simple book. It was an enjoyable read for me, and didn't require a bunch of knowledge about financial stuff. The book tries to get you formulate a plan for yourself that requires very little thought after it is put into place. It made a lot of sense to me then, and still makes a lot of sense to me now, so I figured it could help others as well.

The basic premise is to pay yourself first. You prioritize your savings, making automatic deductions from your checking account into your savings. Preferably, you set it up so the other account is at a different place than your primary account so that you don't see the money every time you log in to your main account.

Even $50/month will add up! Once you get a bit saved up, you will be even more motivated to continue.

The numbers that get thrown around for emergency savings are 3-6 months worth of expenses. That's a pretty decent amount of cash to keep liquid, or available in your bank account, but it makes a lot of sense. If you had that much set aside, you could deal with most things life throws your way, without affecting your day to day finances.

Thursday, October 8, 2009

Simple Savings

Looking for ways to save a few extra bucks? Let's look at your household expenses. Do you have cable tv? The question you could ask yourself is, why? With a few resources you could entirely replace cable tv, and save money in the process.

Netflix lets you rent DVD's for a monthly fee. The plan I currently subscribe to is 1 DVD at a time for $8.99/month. We usually cycle through quite a few DVD's during a 30 day period, and we supplement our Netflix DVD's with Redbox ($1.09 per DVD/Day) when we don't get our next DVD soon enough. Between the two, we spend less than $15/month. etc.... Free television shows you can watch whenever you want. No DVR required, which means no evil extra monthly fee. The only thing you have to deal with is random commercials, which is actually...just like real TV. So no loss there. Did I mention it's free?

Remember that Netflix thing I mentioned?

If you have an XBOX360 or other Netflix enabled media player and a Netflix subscription, you have access to over 17,000 titles that can be instantly streamed to your TV. All that crazy TV action is included in your Netflix subscription, and you can watch as much streaming stuff per month as you want with that $8.99/month plan that I mentioned before.

Buy video games? I've got an answer for that too. offers a 1 game out at a time plan for 15.95/month. Yes, that's some cash, but considering that games cost $60/month, it's a deal if you like buying games. I've personally saved cash on games that I would have bought otherwise. I've realized there are not really that many games that I actually want to own, but there are quite a few I'm willing to rent.

Use your cell phone? Let's take a look at that one. Is there a cheaper plan you could use? Maybe you don't actually need 3,000,000,000 minutes per month plan. Do you even use unlimited internet on your phone? If you do, would it be that much of a change to downgrade? Maybe there is an employee discount/corporate discount/loyalty discount that you could get applied to your account. I did some research and got a 22% discount on my wireless bill through my occupation. Google it, and see what pops up!

Do you have a home phone? Why? If you cancelled that and your cable, and just kept your internet, would you really notice after a few weeks? Give it a shot, and add up the money you will save. The wife and I just have our cell phones, and it works pretty well for us.

While we are on the subject of internet service, do you need the whizbang fastest? We downgraded to the lower speed and have not really noticed, even with some online gaming. Try it, and see if you can save some money there too.

Remember that $75/month I threw out as a savings amount last post? If you add up some of the things just mentioned, you are there!

Or... you could build your own HDTV antenna. I couldn't resist.

Two important ideas to help you save.

How many people have a daily coffee, energy drink, or some other beverage "fix"? I know at work I drink my fair share of coffee, and I'm sure many others do the same on a daily basis. How many people put the same amount of money into a savings plan for retirement? The number of hands probably just plummeted. The line I hear a lot is "I don't make enough to save!"

The thought you have to get into your head is "I have to make myself save."

If you added up the cost of a daily coffee habit, or energy drink habit, or tobacco might quickly realize where your money is going. Check out this calculator and play with the numbers a bit. You may be surprised to see how much you spend on your daily fix.

Imagine if you instead put that toward a savings plan...

If you saved that $2.50 a day by drinking office/home brewed coffee, you could end up with $75,000 after 30 years.

This is based on a starting savings of $0 with the $2.50/day for 30 days in a month which is $75/month and at a rate of return of 6%, and never increasing your contributions. (You could increase your savings significantly if you rachet up your amount as you get raises/bonuses/part time jobs etc.)

At the end of the 30 years you would have "spent" $27,000 on your "coffee" to end up with 75,000. With this example, by just drinking the coffee and not saving, your opportunity cost (which means what you lost by not saving it instead) is $48,000.

That's an expensive $27,000 coffee!

Hopefully this sounds good to you so far...let's add one more level to it.

What if you made that savings automatic? What if you had your bank account setup to automatically withdraw $75 every month and put it into savings? It's much less likely you would even notice the money if you set it up this way. This is why credit card companies allow you to put stuff on "auto-pay", and now you can use the same concept for your own savings plan.

Even a small amount per month can add up to huge $$$ after 30 years! The keys are to start early, save more, and make sure you prioritize your savings before your spending!

Saturday, October 3, 2009

Why isn't personal finance taught in public schools?

This is a question I have asked myself many times since learning more about my own finances. I don't have the answer, but I do have some ideas.

If all young people started life much more knowledgeable about their own finances, what would the credit card companies do? Talk about a market loss! I look at all the mistakes I have made financially (and still do make!) as well as my peers and it baffles me. Many times credit cards were mentioned to me in an offhand way, without stressing responsible usage. Why couldn't there be some actual coverage in the education system? It seems it would be a perfectly good spot to make math "relevant" which I personally found myself struggling with when I was younger. Heck, I still don't like math that much, but I understand the power of compound interest now! The earlier someone can learn that lesson, the better.

Think about the thousands in interest payments that could be saved by just encouraging people to "live within their means." As a concept, that just means don't spend more than you earn. I definitely struggle with this concept, and I know many of my friends do as well. There is a pervasive "keep up with the Joneses" mentality in much of our culture in America, and this attitude should be questioned. Who really wants you to spend more money than you earn and keep yourself in debt? This is what the financial industry is fantastic at! The problem (as we have seen recently) is when people become so indebted that they can't even make their payments.

Is this what America is about?

Wouldn't the other side of it be a more productive road? What if more people took their own finances seriously, and made it a priority instead of an afterthought?

The bankers might not like that very much, but I think you would!

Alcohol and your wallet

Beer, I love beer.

The wife likes wine, and we both enjoy mixed drinks from time to time.

Groups of friends usually go out to bars/clubs and spend gobs of money on alcohol without really thinking about it. I'm guilty, but I've tried to grow more aware of how much money I'm actually spending on these "vice" items.

I found this calculator that I found enlightening on how much your alcohol consumption actually costs you. Try playing with the different numbers and see what numbers you come up with.

I realized sometime ago the benefit of "pre-partying" (having a beverage or two before going out) but this calculator really shows the benefit if you take a drink or two out of your weekly/biweekly/monthly social night.

Maybe you go out more than you realize and are literally drinking your dollars away!

Don't worry, this post is not meant to mean that you can't go out and have a good's just meant to bring up the cost of a night on the town, and also what those nights costs you over the year. It's up to you to decide if you have better things to spend your money on!