Wednesday, February 25, 2009

Avoiding the Near-Retiree Stock Market Crash Freak-Out

I'm seriously afraid of being one of the near-retirees who freak-out in a serious market downturn and pull out all of her money from the stock market. (Actually, I'm more worried of becoming one of those crazy, old, cat-ladies. But that's another post.) Is there anything I can do to prevent the "near-retiree-stock-market-crash-freak-out"?

Money Magazine's latest issue highlights a 61 year-old whose retirement account asset allocation before the 2008 market crash was 85% equities and 15% bond funds. (Egads! I'm half his age plus 6 and even I'm not that aggressive!) As you may have already guessed, his portfolio got slammed 40%. Ouch.

My current 401k asset allocation is primarily based upon using’s asset allocator. And I also compare my allocation against the conventional wisdom of subtracting my age from 110% and putting that amount in equity funds. This should work fine while I'm young or while the market's going up.

But asset allocation won't necessarily protect me when I’m 57 and my account drops 25%+ with a possibility that the market won't recover in the next 10 years. But at the same time, the money will probably need to last another 30+ years, so I can't panic and suddenly become too risk averse either.

This got me thinking about Jim Cramer's advice that money you need in the next 5 years need to be out of stocks, which is similar to Motley Fool's advice of :
  1. Any money you need in the next year should be in cash.
  2. Any money you need in the next two to five (or even seven to 10, depending on your risk tolerance) years should be in a safe fixed-income investment, such as certificates of deposit or bonds.
  3. Any money you don't need in the next five to 10 years is a candidate for the stock market.

Currently, retirement is decades away, so I can be as aggressive in my asset allocation as I'm comfortable of being. But, perhaps as I get older, maybe I need to stop looking at my 401k as a monolithic account and I need to think of it more like 5 different "buckets of assets" with different time frames and apply a different allocation to each bucket.

For example, suppose I'm 55 with a target retirement age at 60. (Let's also assume that I already have 8 months' emergency fund saved up and I'm also on track to saving 1 year's living expense in cash by the time I'm 60.)

In this scenario, bucket #1 will account for 20% of my total 401k asset that I'll be planning to tap between ages 60-66. I have a time frame of 5 years so the asset allocation in bucket #1 will have 30% equities and 70% bonds/stable fund. As I get closer to 60, bucket #1 will eventually be all stable fund.

Bucket #2 will have a longer horizon of 10-15 years, so the asset allocation in bucket #2 will be 75% stocks and 25% bonds/stable fund. Eventually, as bucket #1 gets depleted, the asset allocation in bucket #2 will move towards 30% equities and 70% bond/stable fund. So on and so forth.

Based upon a rudimentary number crunching I did over the weekend, this is what my asset allocation could potentially look like in my mid-50s:


    Equity Fund: 75%
    Bond/Stable Fund: 25%

    Consisting Of:
    Bucket #1 (20% of total funds): Equity 30%/Bond-Stable Fund: 70%
    Bucket #2 (20% of total funds): Equity 75%/Bond-Stable Fund: 25%
    Bucket #3 (20% of total funds): Equity 90%/Bond-Stable Fund: 10%
    Bucket #4 (20% of total funds): Equity 90%/Bond-Stable Fund: 10%
    Bucket #5 (20% of total funds): Equity 90%/Bond-Stable Fund: 10%


    Equity Fund: 57%
    Bond/Stable Fund: 43%

      Bucket #1 (20% of total funds): Equity 0%/Stable Fund: 100%
      Bucket #2 (20% of total funds): Equity 30%/Bond-Stable Fund: 70%
      Bucket #3 (20% of total funds): Equity 75%/Bond-Stable Fund: 25%
      Bucket #4 (20% of total funds): Equity 90%/Bond-Stable Fund: 10%
      Bucket #5 (20% of total funds): Equity 90%/Bond-Stable Fund: 10%


      Equity Fund: 31%
      Bond/Stable Fund: 69%

      Bucket #1 (0% of total funds): DEPLETED
      Bucket #2 (25% of total funds): Equity 0%/Stable Fund: 100%
      Bucket #3 (25% of total funds): Equity 30%/Bond-Stable Fund: 70%
      Bucket #4 (25% of total funds): Equity 75%/Bond-Stable Fund: 25%
      Bucket #5 (25% of total funds): Equity 90%/Bond-Stable Fund: 10%


      Equity Fund: 35%
      Bond/Stable Fund: 65%

      Bucket #1 (0% of total funds): DEPLETED
      Bucket #2 (0% of total funds): DEPLETED
      Bucket #3 (33.4% of total funds): Equity 0%/Stable Fund: 100%
      Bucket #4 (33.3% of total funds): Equity 30%/Bond-Stable Fund: 70%
      Bucket #5 (33.3% of total funds): Equity 75%/Bond-Stable Fund: 25%


      Equity Fund: 14%
      Bond/Stable Fund: 86%

      Bucket #1 (0% of total funds): DEPLETED
      Bucket #2 (0% of total funds): DEPLETED
      Bucket #3 (0% of total funds): DEPLETED
      Bucket #4 (50% of total funds): Equity 0%/Stable Fund: 100%
      Bucket #5 (50% of total funds): Equity 30%/Bond-Stable Fund: 70%


      Equity Fund: 0%
      Stable Fund: 100%

      Bucket #1 (0% of total funds): DEPLETED
      Bucket #2 (0% of total funds): DEPLETED
      Bucket #3 (0% of total funds): DEPLETED
      Bucket #4 (0% of total funds): DEPLETED
      Bucket #5 (100% of total funds): Equity 0%/Stable Fund: 100%

    I'm not sure if this type of mental planning will help me avoid the "near-retiree-market-crash-freak-out" I dread. If anything, perhaps I can take some solace from reading about another couple in Money Magazine:
    In 2000, a year after David McMickens retired from his 40-year job as a State Farm supervisor, he and his wife Judy lost half of the $500,000 portfolio when the tech bubble burst. It’s not hard to see how: At the time, they had 90% of their savings in stocks – a risky allocation for their age and retirement status.

    But the McMickens didn’t panic. Between their Social Security benefits, pensions and ample cash in the bank, they simply delayed tapping their nest egg, giving it time to bounce back. By 2005, it had, and they began working with financial planner Stephen Iaconis to create a more balanced portfolio, now 60% in stocks and 40% in bonds. Though they’ve lost 24% in the past year, their experience taught them not to worry; once again, they’re relying on pensions and Social Security ($80,000/year), plus a cash cushion ($75,000), to help them postpone tapping savings. Says David: “We can just sit tight and wait for our nest egg to grow again.” – Ismat Sarah Mangla for Money Magazine, March 2009 issue, Page 69

    What I can't take solace in, however, is that I won't have a pension and I may not get any Social Security.

    Now what?

    Tuesday, February 24, 2009

    Plunging APYs, the Soundness of My Banks and Other Musings About Savings

    Wow. It's only been 18 days since my last post about my shrinking savings interest yield and I now have to update again.

    • Dollar Savings Direct's APY went from 3.2% to now 2.65%
    • Citibank USA's APY went from 2.4% to now 2.3%
    • ING's recently decreased from 2.2% to 1.85%
    I guess the bright side is that all of my savings accounts are in line with each other in terms of APY yields. As we've learned with Madoff and the Stanford Financial Group, if your investment vehicles are yielding far above everyone else, you better start sniffing around for something fishy. I guess my banks all pass this initial "sniff" test.

    But I think it's also worth taking a gander at how financially safe my banks are. Here is my prior post which cites the excellent LA Times article on how to determine your bank's financial health.

    Here are the results:

    DollarSavingsDirect (Online Branch of Emigrant Bank)

      Bankrate.Com's Safe & Sound Rating: 1 Star
      Bankrate believes that, as of September 30, 2008, this thrift exhibited a significantly below average condition, characterized by substantially lower than normal overall, sustainable profitability, very questionable asset quality, below standard capitalization, and near normal liquidity.

      Bauer Financial's Star Rating: 2 Stars
      (Bauer charges $10 for its analysis report. No other commentary provided.)

    Citibank Ultimate Savings(Online Branch of Citibank, N.A.)

      Bankrate.Com's Safe & Sound Rating: 3 Stars (Definition: "Performing") - Sthinky's Comment: This shocks me to no end!
      Bankrate believes that, as of September 30, 2008, this bank exhibited a generally satisfactory condition, characterized by substantially lower than normal overall, sustainable profitability, satisfactory asset quality, mid-range capitalization and seemingly ample liquidity.

      Bauer Financial's Star Rating: 3 Stars
      No other commentary provided.

    ING Direct(Online Branch of ING Bank, FSB)
      Bankrate.Com's Safe & Sound Rating: 4 Stars (Definition: Sound)
      Bankrate believes that, as of September 30, 2008, this thrift exhibited a sound condition, characterized by approximately normal overall, sustainable profitability, good asset quality, mid-range capitalization, and lower than normal liquidity.

      Bauer Financial's Star Rating: 3½ Stars
      No other commentary provided.


    I guess it makes sense that the bank that's in the most shaky condition would offer the highest APY, since it wants to attract as many deposits as it can to stay afloat. The good news is that all of my banks are all FDIC members and I'm not in danger of losing any of my savings.

    The majority of my savings is currently with DollarSavingsDirect since it was the account with the highest APY. Although it's still higher than the rest, it no longer makes sense for me to keep most of eggs in that one basket. Perhaps I should consider distributing my savings more equally between all 3 accounts.

    I'm also considering creating a CD ladder. A CD ladder is the staggering of CDs at different interest rates and maturities. Similar to dollar cost averaging, I can smooth out the volatility of rising/decreasing interest rates over time by staggering.

    But I'll need to be cognizant of 3 types of risks with CDs, though:
      Default risk: There is very little chance of default on CD's IF the CDs are FDIC insured. So, if my bank is domiciled in Antigua and is giving me a 7% return with no FDIC insurance, I need to be wary! Oh, and I guess I need to make sure I don't exceed the FDIC limit at any one bank. (Ha ha.)

      Market risk: If I decide to liquidate my CD prior to maturity, I will be subject to whatever price the market will bear. This can be lower than my original investment depending primarily on interest rate movements since purchase date.

      Call Risk: Callable CD's will typically pay a higher interest rate compared to a non-callable CD with the same maturity. This is because the issuer retains the right to call back the CD at specified future dates. But even if I don't have a callable CD, my rates can can be slashed if my bank is taken over by another bank that is not obligated to continue honoring the rate. So... if I'm investing in a CD, I'm better off sticking with a more sound bank that's offering a slightly lower APY than a shaky bank offering a rocking APY. Got it!

    Since I need most of my money as liquid as possible, I'll probably start small ($500) and infrequently (once a year). Hopefully, as I pay off my debt and more money frees up, I'll up the amount and frequency of my CD ladder.

    Monday, February 23, 2009

    Confessions of Wasting Food

    A few weeks ago, I made a pot of arroz con pollo with the intent of eating it at lunch during the work week. While I was cooking, the heat on the pot was too strong, burning the rice and I over compensated by putting in too much chicken stock. As a result, I created a messy sludge that yielded much more than what would normally be expected from 2 cups of dry rice. I ended up creating what can only be called, “mushy-gruel con pollo”.

    That week, I took the rice and chicken for lunch. Unfortunately, even after 5 days of eating the rice, I still had ¾ pot of the rice sludge left. Not wanting to be wasteful, I froze the rice, hoping that frying the rice after defrosting would burn off some of the excess moisture. It did, but the rice was still a mushy mess.

    Last Monday and Tuesday, I ate the rice with some broiled chicken, salsa and pita for lunch. By the time I finished half the rice I brought on Tuesday, I made up mind - - I’m throwing away the remaining rice. It’s texturally too disgusting to eat.

    As I tossed the rice away, I was relieved of not having to eat the sludge anymore. But at the same time, I felt guilty.

    I remembered the following passage from a recent MSN Money-Smart Spending article:

    "The most vivid memory I have of food is that there was never enough. ... I remember one dinner where my mother, myself and my brothers and sister sat down to a meal. The meal consisted of three boiled potatoes and one slice of white bread which we divided up amongst us. I noticed my mother was not eating and I asked her why she was not eating. She answered that she was on a diet." -- Laura C. Rinfret

    Another post by Trent Hamm from the Simple Dollar described how he witnessed a 6-year old boy eating rotten french fries out of a dumpster.

    After whining in my last post about how I want to spend discretionary money from my now-extinguished car payments, I'm kind of ashamed and embarrassed about my petulance. (But this doesn't mean that I still won't whine!)

    The fact that I have the ability to throw away food that is still edible (if not enjoyable), is truly a luxury. As bad as things may seem right now, I always need to remember that I’m truly fortunate that I don’t know what true hunger is. Hopefully, I never will.

    Tuesday, February 17, 2009

    Dave Ramsey Is A Big Fat Liar

    Eh, I’m just joking, but not really. Based upon my own personal experience, Dave Ramsey's book, The Total Money Makeover, is premised upon a flawed concept that is common to all self-help books. Specifically, it bases its advice upon a generalized assumption of human behavior, when in fact, most individuals are complex and often irrational.

    As you all know, Dave advocates the debt snowball which requires you to pay off your debts in the order of smallest balance to highest, regardless of interest rates. The debt snowball is based upon the notion that paying off the little debts quickly gives you a “psychological boost” to tackle the next debt.

    Well, I just recently paid off my first debt (car loan) and I have to admit, I’m happy, but not AS happy, as I thought I would be. I’ve waited and dreamed over 3 years about the day I would pay off my car loan. I imagined handing my check to the credit union teller and jumping for joy and squealing when she hands me the zero balance receipt.

    Truth be told, I was excited that morning, but the whole event itself was disappointingly anti-climactic. Perhaps I was building the whole final payment event up in my mind to the point that I was setting myself up for disappointment.

    Worse yet, I expected to feel the way Dave Ramsey said I should, but haven’t. Dave virtually promises in his book that I would feel so great after paying off my first debt that I would be extra motivated to tackle my next debt!!

    Uhhhhh…. In reality, I am just relieved to have the $788/month obligation lifted from my shoulders. As a result, I’m now feeling a strong desire to give myself some “breathing” room in my monthly budget. And as I’ve previously mentioned, I’m battling spending demons as I write this.

    I’m getting tired of constantly monitoring my spending, deciding what’s a need vs. want, and choosing to forego relatively minor purchases like a $40 cordless phone. (Wah, wah, wah, whine, whine, whine, I know!)

    Perhaps I never had the “gazelle intesity” necessary to successfully follow-through with the debt snowball. Or, hopefully, as Abigail from I Pick Up Pennies suggests, maybe I’m just suffering from “frugal burnout” that waxes and wanes. Or, perhaps I’m feeling blue and I’m seeking retail therapy.

    I don’t know. But I feel like a recovering addict who is tempted to revert to old habits.

    So let this be a warning to all: the purported pyschological boost of the debt snowball is overrated. Instead, you will find yourself at a fork in the road after overcoming your first hurdle.

    Next month, I have the choice of either: 1.) saving the $788 car payment with the purpose of paying off my credit card debt in October as per my revised snowball plan, or, 2.) spending some or all of the car payment money on other stuff.

    I know which is the right road to take. I just don’t know if I have the emotional strength to do the right thing.

    Eating Healthy Is Making My Wallet Skinny (But Not My Waistline)

    I’ve been making a conscious effort to incorporate more vegetables and fruits in my diet lately. But I have noticed that it’s not cheap to eat healthy. For example, I bought the following during my most recent grocery shopping expedition:

    ½ gallon milk: $1.99
    4 grapefruits: $1.00
    2 mangos: $2.58
    1 lb strawberries: $1.50
    ½ pint blueberries: $1.50
    1 bunch fresh spinach: $.99
    1 broccoli crown: $1.15
    1 pack frozen corn on the cob: $2.50
    1 green onion: $.89
    2 V-8 bottles (on sale): $5.98
    1 yellow onion: $.28
    TOTAL: $20.36

    If you notice, there’s no protein (okay, except the milk) or carbs in this shopping list and this will probably only last me about a week. If I were to add protein and carbs, you can expect the cost to be closer to $30 to $34/week.

    On the other hand, I can eat value meals at fast-food establishments for about $2/day-$4/day and also enjoy the added “benefit” of not having to hassle with prepping and cooking.

    I’m embarrassed to admit, I considered eating fast-food value meals (99 cent cheeseburgers, anyone?) and compensating by taking a multivitamin. But I quickly rejected that idea when I read that a recent 8-year study concluded that multivitamin intake did not protect post-menopausal women from cancer, heart attacks or strokes.

    The study concluded what we’ve known all along – vitamins are better obtained through a healthy diet rather than through pill form. Healthy people who eat enough calories from a varied diet do not benefit from multivitamin supplements. However, multivitamins are probably necessary for individuals who are not getting an adequate diet for whatever reasons (poverty, disability, etc.) So basically, multivitamins are not a substitute for healthy eating but is more like an insurance policy in case your diet falls short.

    It’s just a darn shame that eating healthy costs more than eating junk. It’s no wonder that scientists are worried that the current recession could cause an obesity epidemic.

    And here’s another rant: Medicaid generally covers the cost of multivitamins but multivitamins are not reimbursable through FSA plans. Yet another inconsistency between our governmental agencies. It’s not like the $15.49 multivitamins I get from Costco will break my bank, but it would be nice if I can pay it with pre-tax money.

    Monday, February 16, 2009

    February Charity - American Red Cross

    Hope you all had a great Valentine's Day and are enjoying President's Day. This month's $20 donation is made to the American Red Cross Disaster Relief Fund. This Fund enables the Red Cross to provide shelter, food, counseling and other assistance to victims of disaster.

    The American Red Cross' Disaster Relief Fund was depleted as a result of an active year of disasters last year. Donation to the Fund allows the Red Cross to mobilize volunteers who provide food, shelter and counseling to people who need it, whenever and wherever disasters occur.

    As a Southern California resident, I have witnessed how the Red Cross volunteers tirelessly provide the basic necessities for those devastated by earthquakes and wild fires. The aftermath of such large scale disasters without the help and assistance of the Red Cross is unimaginable. It would be all too easy for our society to fall into chaos and anarchy without the volunteers of the Red Cross in our most urgent time of need.

    Please also know that you can also help the victims of countless crises around the world each year by making a financial gift to the American Red Cross International Response Fund, which will provide immediate relief and long-term support through supplies, technical assistance and other support to help those in need.

    The American Red Cross will honor the donor's intent. If you wish to designate your donation to a specific disaster (such as the Australian Victorian Bushfire of 2009), you can do so at the time of your donation by mailing your donation with the designation to the American Red Cross, P.O. Box 37243, Washington, D.C. 20013 or to your local American Red Cross chapter. Donations to the International Response Fund can be made by phone at 1-800-REDCROSS or 1-800-257-7575 (Spanish) or online at

    Friday, February 13, 2009

    Friday the 13th Is My Lucky Day – I Paid Off My Car Loan!!

    According to my original Snowball Debt Reduction Plan, I was planning to pay off my car loan in July. Instead, I decided to take money from my earmarked savings and my Emergency Fund to pay off my car loan early. Woo hoo!!

    MSN Money recently highlighted a post from Kristy at Master Your Card, that discussed whether using one’s EF to pay off a car loan is appropriate. (Blogger Kristy opined that an EF should not be used to pay off a car loan.)

    I felt a bit defensive, so I left a comment that one should do what one feels comfortable doing. I personally would not feel comfortable wiping out my EF or reducing it down to $1,000 to pay off a car loan, but I certainly felt comfortable spending $1,716 of my earmarked savings (bye-bye computer) plus an additional $2,219 of my EF to pay off my car loan. I still have $6,089 remaining in my EF and $1,908 remaining in my earmarked savings. Admittedly, it’s not much, but I still have something left.

    Additionally, my EF is currently only earning up to 3.05% APY in interest, but my credit union is charging 4.75% APR interest on my car loan. Paying off my car seemed like a no-brainer.

    Before I go on, here are some facts about my car loan:

    Date borrowed: 12/15/2005
    Total Purchase Price: $25,500 incl. tax, title and registration
    Amount borrowed: $25,000
    APR: 4.75%
    Term: 5 Years (But paid off in 3 years, 2 months.)
    Minimum Monthly Payment: $469.10 (Total of 60 Payments: $28,146)
    Total Paid: $27,336.24
    Interest Paid: $2,336.24
    Interest Saved From Early Pay-Off: $809.76

    Now that my car loan is paid off, I’m planning to use the car payments to pay off my credit card. Since my credit card debt is currently at 0% APR, I will put the car payments into a “high”-yield savings account until the promotional 0% interest-rate expires in October.

    I’ll also remove the Blue Book value of my car in my net worth calculation at the end of the month since my car is a depreciating asset and I have no intention of selling it any time soon. I might as well take the write down now, rather than later.

    I plan to keep my current car for another 10 – 12 years. If all goes to plan, (knock on wood), I’ll pay off all of my outstanding debts in 6 years. I can spend the final 4-6 years of my current car’s life to make “imaginary car payments” to myself to save up for a new car that I will buy with cash-ay. I vow NEVER to borrow money to buy a car again.

    Anyhow, hope you're having a great Friday the 13th. I certainly am! :-D Hope you have a Happy Valentine’s Day tomorrow too!

    Back In Business!

    There should be a new “golden rule” – Thou shalt be good friends with your IT guy since he can be a great ally at work. (For example, the IT Guy can let you know when your employer is monitoring your internet use at work.) Another case in point, my fabulous IT guy finagled a replacement laptop and I’m back in the blogging business! Woo hoo!

    Now that I have my laptop back, I'm eager to spend this weekend checking up on what I've missed around the blogosphere. :-D

    Fortunately, nothing much has been happening in my world other than the fact that I’ve been battling several financial Kryptonites this past week. I haven’t caved in yet, but it’s been difficult and I’m not sure I can withstand the temptations.

    Kryptonite #1: I Want a New Laptop
    My prior post referenced a “home” computer but it was actually my work laptop that I brought home everyday. I was worried that with the laptop going kaput, I would have to use a desktop at work and I would be left without a “home” computer. My problem is temporarily resolved for now, but I can’t rely on having my work laptop for my home computing forever. Eventually, I’ll have to get my own computer.

    As if on cue, Costco’s February coupon book arrived in my mail and there’s a $400 off coupon for select Dell Laptops. I’ve been eyeing the pink (yes, pink) Inspiron laptops that cost around $900. The same Costco coupon book also includes an $80 off coupon for a Toshiba laptop, for a discounted price of $549.99.

    I previously had $900 in my laptop fund that I’ve had to use to cover other… um… “emergencies” (read: poor planning). The laptop fund is now completely depleted.

    I purposely haven’t visited Costco’s website or its warehouse since I’m afraid I’ll be tempted to tap my EF. Worse yet, I'm tempted to buy on credit.

    Kryptonite #2: I Want a Digital Camera
    The same Costco coupon book has a $70 off coupon for a Panasonic Lumix TZ5 Digital Camera. I’ve been eyeing this camera since Christmas. I currently don’t have a digital camera other than the one built-into my cell phone. The Panasonic camera has 10x optical zoom, 9 megapixel with a 28MM wide angle lens, optical image stabilization and 3” LCD, bonus 1G SD card and case! And did I tell you it’s $70 off????

    Kryptonite #3: I Want To Go On Vacation
    My IT guy just came back from a project in Honolulu and mentioned that Hawaii’s tourist industry is suffering. I suddenly felt personally responsible to stimulate the Hawaiian economy.

    I built a make-believe itinerary that’s neither frugal nor prudent. It contemplates my entire family converging in Los Angeles for an overnight stay, 3 night stay in Maui, 3-night stay in Waikiki and another overnight stay in Los Angeles before everyone goes their merry way home.

    Long story short, the total airfare, hotel (which includes breakfast) in L.A. and Hawaii, plus car rental totaled $6,800. Split three-ways, my share would be approximately $2,300.

    Kryptonite #4: I Need (Want) A Cordless Phone
    The other night, while cooking and talking on my cordless/speaker phone, I accidentally spilled hot water over the phone. Well... now it's dead. A replacement phone costs about $45. I'm struggling with whether this is a need or a want.

    Arrrrgggghhhh!!! I thought I purged my spending demons. Why is it suddenly tempting me???

    On a brighter note, I'll have some good news to post later today. It hasn't happened yet, but I'll post it once it does. Stay tuned!

    Monday, February 9, 2009

    Home Computer Down For A While

    Arrrgh. My home computer went kaput over the weekend and I haven't been able to fix it myself. (My definition of "fixing" means a hard shut down and reboot. And boo - - It still doesn't work.)

    Anyhow, my blog will be dark until I either get my home computer fixed or I buy a new one. :-( (I'm posting this quick note from work, which I generally don't like to do because who knows if Big Brother's watching.)

    Hopefully the IT guy at work can cure my computer because I'm suffering from blog withdrawal. ... and I really don't want to pay for a new laptop now. :-(

    Saturday, February 7, 2009

    Chase, The Zombie Credit Card Company That Won't Die

    I am extremely frustrated because I am trying to wash Chase out of my hair completely and yet it won't go away like a stubborn blood sucking nit. (For those who are unfamiliar with my recent spat with Chase, my prior posts can be read here and here.)

    Anyhow, here's a brief summary of what transpired:
    1. Chase purportedly advised me back in November of the following change in terms of the credit card.

    2. I discover the $10 service charge and the 250% increase in my minimum payment in January 2009. I make the decision to transfer my balance to Bank of America's 0% offer.

    3. Because I know Chase is a bloodsucking bank, I sent an additional $30 to cover any interest charges accrued until the balance transfer takes place.

    4. I discover on February 5 that Chase will continue to charge me $10/month regardless of whether I carry a balance. Chase tries to blackmail me to do a balance transfer to 7.99% APR to avoid the $10/month service charge. I tell them to go pound sand and close my account.

    5. Chase closes my account and sends me a $20 refund (which I have not yet received).

    6. Chase is now billing me $13.76, when it could have just issued me a $6.24 refund instead of $20.

    Frustrated, I ranted at a poor customer service rep at Chase. He assured me that the $13.76 won't accrue any interest since it arose out of finance charges and only the principal balance accrues interest.

    How much do you want to bet he's full of cow patty and I'll get a bill for 5 cents interest next month? Chase is becoming a zombie company I can't get rid of!

    And to think Chase is one of our better financial institutions? I think I see why we're in the midst of the economic crisis we're in now.

    Please, Chase, just go away. I hate you.

    Friday, February 6, 2009

    My Incredible Shrinking Savings Interest Yields

    I've got three online "high" interest savings account with DollarSavingsDirect (the online branch of Emigrant Bank), ING and Citibank's Ultimate Savings Account (Citi's online branch). And all of their interest yields have been steadily diminishing.

    • Dollar Savings Direct's APY went from 4.0% to 3.5% to now 3.2%

    • ING's recently decreased from 2.4% to 2.2%

    • Citibank USA's APY is now at 2.4%.

    Hmmmm... as APYs go lower and lower, perhaps I will reach the point where potential returns of investment vehicles outweigh my need for security. But, with dividends getting slashed and Treasury bonds yielding virtually close to nothing, I'm out of ideas of where to put my money. Any ideas?

    Thursday, February 5, 2009

    Ohhh... This Is Going to Hurt...

    Okay folks. Do you remember the unilateral change that Chase made on my credit card? In case you don't remember, Chase purportedly slipped this notice in my November invoice:

    Anyhow, apparently, the $10 service charge applies even if I don't carry a balance on my credit card, since they charged me again on 1/30/09 even though I have a $30 credit on my account.

    According to the customer "service" rep, I have 2 options to avoid the $10 service charge: (a) opt out and cancel my card or (b) transfer a balance to 7.99% APR. It is irrelevant that I no longer carry a balance.

    Aghast, I told the Chase rep, "Just cancel my card."

    Chase is out of my life now. Forever. Good riddance.

    But I've now reduced my available credit limit by $18,500. Ouch. Ohhhhh... This is going to negatively hit my FICO score. But it's better than forking over $10/month to a bunch of crooks, right?

    Wednesday, February 4, 2009

    The Fortuity of My Stupidity

    Yesterday I ranted about my friend who rampantly speculated on real estate investments and is now seeking a bail out. I'm angry and self-righteous... and a big fat hypocrite since it could've easily been me.

    I found a spreadsheet that I created in 2006. It shows the loan principal at $400,000, 7% APR for term of 360 months, and estimated monthly payments of $2,604. The spreadsheet also indicates: "Total estimated tax deductions $770/month. Net mortgage payment $1,834. Difference from rent $600+. Can reduce 401k contributions 50%."

    When I created the spreadsheet, I thought that a $400,000 mortgage would be "affordable". This is proof-positive that I too was caught up in the real estate bubble euphoria.

    What stopped me from buying a $400,000 property, though, was my own financial irresponsible past. I never bothered to see whether I qualified for a mortgage since I (correctly) suspected my FICO score was bad. I also suffered from a negative cash-flow due to a $150k debt including student loans, credit cards and a car loan.

    I figured I would wait a few months until my financial picture improved. Well... Without a budget and a debt reduction plan, my financial picture never really improved, thereby depriving me of ANY realistic opportunity to buy a house during the market run up. As we all too painfully know, the housing market peaked in 2006 and the bottom fell out.

    In essence, my irresponsible past effectively prevented me from making a further calamitous financial decision. If I was even a wee bit more financially secure in 2006, I could be straddled with real estate that's seriously underwater right now.

    Saved by the fortuity of my stupidity. Go figure.

    I need to be kicked off my moral high horse in this economic crisis since I too clearly drank the Kool-Aid of easy credit. It was neither prudence nor thrift that allowed me to avoid the terrible real estate conundrum many are currently facing.

    There are no easy solutions in this economic crisis and I probably will never be a direct beneficiary of the bail-out plans contemplated. But I need to put away the thoughts of, "What's in it for me?" Hand wringing jealousy is counter-productive, divisive and corrosive. I need to remind myself that there is no "us vs. them" in this crisis. We all created this mess and we're all in it together.

    But... It's still hard not be a sour grape.

    Tuesday, February 3, 2009

    Losing My Humanity In the Economic Crisis

    "You don’t deserve a loan modification," I thought to myself as my friend confided to me that she is currently seeking loan modifications for two of her Vegas properties that are underwater.

    As I’m thinking this, I’m disgusted with myself. How can I wish ill upon someone and still call her a friend?


    Back in 2004, many of my friends and colleagues were gloating and bragging about the skyrocketing value of their properties. (The median home price at the time was $580,674. And this wasn't even the peak!)

    I listened enviously how their real estate investments were effortlessly doubling and tripling in value. Everyone seemed to own a goose that laid golden eggs. Everyone, but me.

    One co-worker advised me, "Shtinky, you need to buy yourself a property – ANY property. It may not be your ideal property but when the value goes up, just keep trading up."

    Shtinky: “I can’t afford it with my student loan payments.” (Note how I've conveniently omitted the fact that I was totally drowning in $38k+ credit card debt.)

    Co-Worker #1: “Yes you can! Just talk to my broker. He’s got so many amazing mortgages he can offer you. You can get a mortgage where your monthly payments will be around where your rent payments are! And besides, you’ll get tax deductions and you can pay off your student loans with your mortgage!!”

    Shtinky: “Thanks, but no thanks. I'm barely making ends meet.” (Actually, at the time, my expenditures exceeded my income.)

    Co-Worker #1: “Suit yourself. But just remember, the longer you wait, the more likely you’re gonna get priced out of the market forever.”

    Shtinky: “Story of my life.”

    The peer pressure was relentless.

    My friend, referenced earlier, bought couple of investment properties in Las Vegas during this period – a single family home and a 1 BR condo. My friend said, “Shtinky. The real estate boat is passing you by! You need to buy something ASAP!”

    Shtinky: “I know, I know. I just can’t afford it. Besides, I don’t have money for a down payment.”

    Friend: “You don’t need any! And if you do, just take money out of your 401k and use it as a down payment. That’s what I did and look at me! I’m buying my THIRD property and I have renters lined up. My investment is paying for itself! How cool is that?”

    Shtinky: “My 401k is my ONLY asset. I’m not going to tap it. I’m gonna guard it with my life.”

    Friend: “You’re never going to get anywhere renting. You have to take risks to make money, Shtinky.”


    And there's the rub. My friend was preaching to me about how I needed to take risks in real estate. But it's now abundantly clear that my friend had no clue as to what those risks were. As a matter of fact, it appears that the only "risks" my friend is willing to accept are the upside potentials. And that's not risk-taking.

    On the one hand, I find it galling that my friend would even think about asking for loan modifications on her investment properties. On the other hand, I hope everything works out for my friend. But I know I'll be livid if she gets her loans modified. Why should her investments be re-priced when my 401k assets remain decimated?

    I hate these conflicting thoughts that continuously churn in my gut during this financial crisis. It’s self-defeating and it’s ugly. I hate the fact that I'm stewing in sour grapes and my thoughts are turning against my own friends.

    I accept that fact that there are going to be winners and losers in this whole bail-out discussion. Fairness is going to take a backseat to stemming foreclosures and stabilizing the market.

    In the end, the game will be rigged and I'm losing faith in our market system. But worst of all, I fear I'm losing the most basic component of humanity -- compassion. And that's my biggest loss in this economic crisis.

    Monday, February 2, 2009

    January Progress Report and Net Worth Report

    Hmmm... 2009 hasn't been off to an auspicious start so far. First off, the market's down 8.57% (surprise!) and the Cardinals lost. :-(

    Secondly, I'm hung over from wine, beer, cheddar-wurst, chicken wings, garlic fries and cheddar pierogies. (In hindsight, it was totally bad karma to eat chicken wings while rooting for a team named after a bird.)

    Thirdly, my net worth, debt reduction and savings are all less than I'd like to see.

    But... The good news, though, is that my debt's still down, I'm still saving and my net worth is slightly up. (Which means that my net worth is back to where it was on Halloween 2008. Spooky!)

    And considering the carnage of 2008, I'll take any good news, no matter how small.

    Starting Debt (6/31/08)Last MonthThis MonthDifference
    Private SL$49,528.99$47,616.51$47,268.94$(347.57)
    Fed'l SL$55,852.68$55,110.34$54,982.25$(128.09)
    Car Loan$9,779.33$5,464.33$4,696.24$(768.09)

    Not to beat a dead horse here, but my credit card balance did not go down as much as it normally does due to the fact that I incurred a credit card balance transfer fee of $358.17 when I gave Chase the boot.

    Up until now, I've been stubbornly sticking to my debt reduction plan which contemplated paying off my car in July 2009 and my credit card in May/June 2010.

    But now that my credit card balance is subject to a 0% promotional rate that will expire in October, I've got to tweak my debt snowball to pay it off sooner than I'd originally planned.

    Every time I think I've settled on a new plan, I immediately change my mind. My deadline to create a new plan is 2/13/09 (aka Friday the 13th). Wish me luck that I'll come up with a plan -- any plan!

    Gotta slash that credit card balance!





    My goal is to increase my savings by $200 every month and I fell short this month again. Worse yet, I went over my food/incidental/misc. budget by about $26.22.

    The causes of my overspending were many: I paid for lunch with a friend ($28.39), I paid for breakfast with a friend who was visiting ($34.02), I bought a birthday gift for a friend ($26.94), I bought jewelry at a "party" hosted by a friend ($82.50), I bought opera tickets ($72.50) and I ended up spending $40 at a birthday luncheon to cover other people's shortfall. (Don't ask about the birthday luncheon. I keep forgetting why I hate organizing birthday lunches since some people seem to always pay less than their fair share of their meal and leave early. C'est la vie.)

    The only reason why I've been able to afford this without going further into debt is because I still budget as though gas prices are $4.50/gallon and I also have a slush fund set aside.

    But I REALLY need to tighten my belt in light of the fact that I have to speed up my cc pay off date. Additionally, starting February, my rent will increase by $20/month. And call me a pessimist, but I truly don't believe gas prices will remain low.

    I'll need to try my best not to let this increased cost of living affect my savings rate.



    I sold 4 shares of my company stock this month for a gain of 46.28%. After taking out trading fees and setting aside capital gains tax, I've put $1,079.07 into my high-yield (3.5%) savings account at DollarSavingsDirect.

    As Miss M wrote (and also suggested by ParanoidAsteroid), I'll be reverse arbitraging my money for the purposes of paying off my credit card. After all, I need to recoup some of the balance transfer fee I incurred, right?

    Anyhow, money that I'll "reverse arbitrage" will be added to a new category in my net worth spreadsheet. It'll be listed as an "other" asset. Since it's going to be used to pay down my debt (as opposed to a purchase), I'm okay with including this into my net worth calculation. It will all balance out in the end.

    The breakdown of my net worth can be seen here.

    Oh.... and the veggie/exercise swear jar update: Heh heh. $11.00 out of $22.00 (50%). Ummm.... no comment other than I'll try harder in February!