Tuesday, November 28, 2017

How Good is Good Enough?

I'm sort of in the market for two things that make me wonder "How Good is Good Enough?".  My phone is a 5+ year old "Blackberry"-style dumb phone.  It makes and receives calls and texts and my bill from Tracfone averages about $10 per month.  It really does what I need it to do, at least most of the time. However, I realize that it isn't going to last forever, and every now and then I start thinking about getting a smart phone.  The question is how much to spend?  At what point am I buying power that I will never use (or at least will never miss if I never buy it in the first place) and at what point am I buying a piece of junk that will have to be replaced sooner rather than later after frustrating me it's entire life?

What Do I Want in a Phone?

I know it sounds silly, but I want something that will make and receive calls and texts.  I also want a decent camera, since another broken device here is my digital camera.  We are taking the Girl Scouts to New York this summer and I want to be able to take pictures, post them online and have the quality be good enough that I can print them if desired.  I want to be able to read my email and surf facebook, and it would be nice if the keyboard was easy to type on so I could reply, but for any substantial typing I prefer a real computer with a real keyboard. While I don't plan on using it for extensive web surfing, I do want searching the internet for something to work reasonably well.  I want it to run a few apps like Robinhood and I'd like one that can link to a Fit Bit or similar device. 

What Do I Not Need?

Obviously I don't NEED anything a smart phone does that mine doesn't.  I've lived without one this long, and I could continue to live without one for a long time.  However, as far as things I've seen or heard of people doing with their smart phones, these are some I don't see me doing:
  • Downloading a lot of music.  Music just isn't my thing.  I listen to some but I can almost guarantee you that no matter what phone I have, I won't be downloading lots of songs and arranging them into playlists.
  • Listening to podcasts:  Talk radio is annoying; amatures doing talk radio is even worse IMO.
  • Watching videos:  Not my thing to begin with, but if I was going to it, I'd use my Kindle Fire.
  • Reading books:  Love to read; that's why I have a Kindle Fire.  I may read on my phone if I'm desperate, but hopefully I won't be.

So, How Much Should I Spend?

I can afford to buy the latest I-Phone, if I wanted to.  However, I suspect that I wouldn't get my money's worth.  I have found that the easiest way to save money is to buy products that meet my needs/wants, rather than other people's.  So, how much should my new phone cost?  Are there any brands I should avoid?

Right now, Tracfone is selling smart phones for as low as $20.00 and as much as $530.00.  All are Android phones.  Will I be happy with a $20.00 phone?  How about the $80?  Anybody have any advice?

On to the Sewing Machine

The other thing I'm looking at is a sewing machine.  My current machine is an early-'80's White.  It sews straight stitches, zig-zag and a dozen decorative stitches I've never used.  Someone gave the machine to my father-in-law, who gave it to me.

I used that machine to make maternity clothes when I was pregnant with my now-25 year old, and to make the comforter, bumper pads and curtains for my nursery.  I've hemmed school uniforms, sewn on scout patches and done a little mending over the years.  A couple of weeks ago I was hemming a shower curtain to turn it into a window curtain and something went wrong.  I think the timing is off, but I don't know enough about sewing machines to know for sure. 

This machine is not used often nor do I do complicated things with it.  However, it is nice to have so I made a couple of calls about getting it fixed.  I'm basically looking at about $100.  With that in mind, I started looking at new machines and found they ranged in price from about $75 to several thousand dollars.  I'm not going to spend several thousand dollars, but how much should I spend?  How much is enough?

I posted on a couple of sub-Reddits, and the advice I got was to fix the old machine--that a $100 machine was junk.  Ok, that's what I'll probably do, but if I was in the market for a new one, how much is enough?  

Do You Get What You Pay For?

"You get what you pay for" is a favorite adage of those in sales.  The granite counter top will last much longer than the formica (but I've seen enough harvest gold formica to know that formica lasts longer than I am going to want the same counter tops).  The new car will be better than the old (but you can buy a lot of car repairs for the price of a car payment).  The clothes from Saks will last longer than the ones from Wal-Mart (but who wants to wear clothes more than a couple of years anyway?). 

My son needed a new mattress about a year ago.  We had paid good money for the one he was using but it did not hold up.  About that time I read this review on Frugalwoods and decided to give this mattress a try.  A year later when my daughter complained about her mattress, I ordered one for her.  Next time someone in my house needs a mattress, it will be delivered by Amazon as well.  I have no reason NOT to buy the cheap one from them.  At least at this point, I see no value added by a more expensive mattress.  

What Do You Think?

Any suggestions as to price range for phones?  Anybody want to chime in on fix the sewing machine vs buying a new one, or does anyone want to tell me the price range I should be considering for a sewing machine that is an occasionally used toy as opposed to a workhorse?  

Do you have any stories about picking an inexpensive model and finding out that you made the right choice, like I did with the mattresses?  What about a purchase you made where you could have afforded to pay more than you did--and after getting the product you wished you had?


After I wrote this post and before I published it Cyber Monday appeared and I bought a $92 phone that came with 1,000 minutes of talk, 1,000 texts, 1000 MB of data and six months of service.  It is the same phone my daughter bought a year ago for $200.00 and she says she likes it.  

Also last weekend I was wrapping gifts at Barnes & Noble with the Girl Scouts and one of our customers was a seamstress (I don't remember how we started talking about that) and so I asked her what she thought about sewing machines.  She said to fix the old one.  

*Part of Financially Savvy Saturdays on brokeGIRLrich.*

Friday, November 24, 2017

Personal Capital: A Place to Aggregate Your Financial Data

Today I am going to talk about Personal Capital, an online wealth management service available to rich and poor alike.  While my use of it to date has been to track investments, Personal Capital also allows you to track spending and Personal Capital makes it money by managing investments and providing financial planning services. If you use my link to sign up with Personal Capital and link one of your accounts, we both get $20.00

Using Personal Capital to Track Investments

I don't think my family is abnormal in having my 401(k) with one brokerage house, my husband's with another, and our IRAs in multiple accounts with yet another company.  Throw in a couple of accounts we have for my entertainment, and keeping track of how much we have overall and how it is distributed can be time-consuming.

Personal Capital allows you to link all your investment accounts.  Most can be set to automatically update both the number of shares and the price per share.  We can do this with our accounts at MFS, Motif, Vanguard, Lending Club,  and Prosper.  For these accounts, new purchases, dividends and exchanges are all automatically updated on Personal Capital.  Personal Capital knows that we have bond funds in my 401(k) and in my husband's Roth IRA. It knows that we have a REIT fund in my IRA.  

For my husband's 401(k) with AXA and our accounts at Stockpile and Robinhood, linking is not possible.  Since Stockpile and Robinhood sell stocks anyone can purchase at any licensed broker, all we have to update is the number of shares; Personal Capital looks up the price and updates it daily.  The funds sold by AXA are not trackable by a ticker symbol so we have to update everything manually. 

Personal Capital also allows you to enter the value of assets such as real estate, and liabilities, such as mortgages or other loans.  If you consider your Beanie Babies to be an asset, you can enter a value for them (I don't think it has a way to automatically value collectibles).    

Now that everything is in Personal Capital, I can run an "Investment Check-up" that analyzes our entire portfolio against their ideal allocation for someone who answers their profile questions the way I did.  I run a check-up when adding new money to the account, to see which investments to purchase and I run it quarterly to see if re-balancing is necessary.    Today's version of the results is below:

Personal Capital also has a Retirement Planner that takes information about my assets, my plans for future spending (like when we plan to buy a new car) and my saving plans, looks at my risk tolerance and estimates whether I will meet my retirement goals.  It is a basic Monte Carlo analysis that estimates what is likely to happen in the worst markets and the best and then predicts how likely it is that I will have enough money to meet my goals (90% chance right now).

Using Personal Capital to Track Expenses

Tracking investments,in my nerdy opinion, is fun, particularly in years like this when the market does well.  Tracking expenses, not so much so.  However, one of my financial goals next year is to sit down and link my credit card and bank accounts to Personal Capital to track my spending.  

According to things I've read, Personal Capital will import your spending information and then allow you to slice and dice the data.  How much did I really spend at Amazon.com last  year?  Is my coffee habit really hurting our plans?  Where is the low-hanging fruit for spending reduction?  

Cost of A Personal Capital Account

Setting up an account with Personal Capital is free, as is linking all your accounts to it.  They hope to make money by selling you advisor services.  As a matter of fact, right now, setting up an account is better than free:  if you use this link to Personal Capital, set up an account and link one of your accounts to it, then both you and I get $20.00.

Should you decide to use them as your financial advisor, they are fiduciaries, meaning they are obligated to act in your best interest.  For accounts under $1 million, they charge 0.89% per year of assets under management.

Using Personal Capital as a Financial Advisor

I have not used Personal Capital as a Financial Advisor, and honestly I doubt I'll ever hire anyone for that job again.  However, compared to my experience using an H.D. Vest advisor, at least according to their website, you get a lot more service for a lot less money.  

Personal Capital claims to take all your assets into consideration when planning your investments, which makes perfect sense.  I know over half our assets are in our 401(k) accounts, and the funds in which we can invest are limited.  If we want a balanced portfolio, those assets have to be considered.  Personal Capital says they offer 401(k) advise as part of their package.  

Another thing that aggravated me about our financial advisor is that all three accounts we had with him (two IRAs and a taxable account) were invested in the same funds in the same proportions.  to me, it made more sense to put funds that paid dividends regularly into tax-deferred accounts, and funds that had price appreciation as a goal in the taxable accounts, since tax would not be due until we sold.  Personal Capital claims to tax-optimize your accounts in the way assets are allocated. 

While you don't get quarterly sit-downs with your advisor, or invitations to sales dinners, you are able to contact an advisor via email or web chat. 

I have been adding data to my Personal Capital account for the last couple of months and I have found the insights on my investments to be valuable.  Why don't you use my link and give it a try, and we'll both get $20 out of the deal.  
*Part of Financially Savvy Saturdays on brokeGIRLrich.*

Friday, November 10, 2017

Why I Am Pulling My Money Out of Lending Club and Prosper

I suppose I should keep you in suspense and make you read to the bottom of the article to find out why I am pulling my money out of Lending Club and Prosper, but I'll break the rules and tell you up front:  I am pulling my money out of Lending Club and Prosper because I'm losing money.

What Are Prosper and Lending Club?

Prosper and Lending Club are "Marketplace Lenders" or "Peer-to-Peer Lenders". They are businesses that use the internet to connect people with money with people who want to borrow money.  Unlike banks which risk their own assets, marketplace lenders risk investors money.  Prosper and Lending Club make money via origination fees and monthly processing fees.  

Prosper, in its current form, began in 2009; Lending Club started in 2006, and pretty much took its current form in 2008.  Both specialize in unsecured personal loans.

What Risks Do Investors Bear with Lending Club and Prosper?

As with any debt instrument, investors in Lending Club and Prosper bear the risk of default--they have no guarantee that the loan will be repaid.  They also bear a limited amount of interest rate risk--the risk that interest rates will rise in the future, leaving them with an investment that pays less than market rates, which could cause the value of the notes on the secondary market (where those who own Lending Club notes can sell them to others). 

The credit risk, the risk of default, is what is getting me (and other investors) now.  As my brother the car salesman said "I can make money lending money to any group of people, I just have to price it right".  In the money lending business, interest rates have to be high enough so that those who do pay cover those who don't.  

Investors in both Prosper and Lending Club had minimal earnings during the financial meltdown that started in 2008.  Defaults were high compared to interest rates and lenders did not earn much.  However, as the economy improved, so did earnings.  Mr. Money Mustache started investing in Lending Club in September, 2012. Like most investors, his initial returns were very high because it takes time for loans to default.  By September, 2015, when the first notes he purchased were fully mature, his return had dropped to 11.99%.  A year later, it was 10.18%.  By October, 2017, MMM's lifetime returns had dropped to 7.72$ and his experience was similar to mine--his monthly interest was being consumed by defaults.

Clearly right now, the pricing on those notes is too low--the people who are paying are not paying enough interest to cover the defaults. Lending Club investors have become victims of the law of supply and demand.  Two years ago investors complained that they had too much cash in their accounts--there were not enough notes in which to invest. In order to attract more borrowers, Lending Club lowered interest rates, because they believed investor returns did not have to be that high to attract enough investors.  Now they are beginning to raise them again because defaults are too  high--and right now, unemployment is low and overall, the economy is doing well.  If things take a turn for the worse, these unsecured loans will be some of the first people quit paying.  

What Am I Doing With the Money?

Most of it is going into a diversified portfolio of Vanguard mutual funds.  That is a sensible, low-cost investment that has stood the test of time.  It may not garner me clicks on my blog, but year in and year out, it gives results.  

I'm going to play with a little bit of it and buy some individual stocks via Robinhood, a commission-free broker.

*Part of Financially Savvy Saturdays on brokeGIRLrich.*

Friday, November 3, 2017

Book Review: Money Confidence

About the Book:

When it comes to money, hope is not a strategy. Toughen up, take action, and keep what's yours!

Have you, like many women, put off organizing your financial life? You know you want independence, you know you want to save, and you know you want a solid retirement. But if you're overwhelmed at the thought of where and how to begin, you're not alone. You may have been raised to defer to others in matters of money, or you may feel you simply lack the understanding of how to take on financial matters. Without the confidence they need, it's easy for women to find themselves in a situation where the only action they feel they can take is hoping that everything will turn out all right in the end. But planning for the future doesn't have to be this way.

Money Confidence is Crystal Oculee's authoritative and engaging reality check and call to action for women of all ages to take--or regain--control of their financial lives. The author shows why hope is not a financial strategy, and how, with the tools and information she provides, women can attain the independence, savings, and secure retirement they want.

The author cleverly employs metaphors from familiar fairy tales to illuminate and accentuate the book's serious message: Women need to toughen up; and they can and need to identify and overcome myths and mind-sets that place them at a disadvantage when it comes to dealing with their money and finding and working with financial advisers.

Oculee shows women how to communicate, be strong, ask questions, and reject advisers who don't take them seriously. Real-life scenarios of various women's experiences with money and advisers prove how women can get the confidence they need once they know what is holding them back. The author presents informative, down-to-earth explanations of common financial situations and specific financial products along with useful worksheets in a conversational and friendly tone with a good dose of sass. Women will find her valuable and easy-to-follow advice rings true.

My Comments:

Ever read a book you thought was good, but to which you had a hard time relating?  In Money Confidence Crystal Oculee uses fairy tales to illustrate how women allow others to control the most important thing in their lives--their money.  Many are waiting for Prince Charming to rescue them rather than taking things into their own hands and making things go their way.

Investments and the stock market have always fascinated me and I've generally handled the investments at my house, or at least been a well-informed partner when my husband handled them.  On the other hand, my intelligent competent mother never fooled with any of that.  She didn't have to ask Dad for money--the checkbook was in her purse to use as desired, but she didn't do the taxes or make the investment decisions.  Before it became apparent that my mother was going to be the first to die, my dad showed me where all the investment information was and told me that we were going to have to take care of Mom after he was gone (and of course Mom's last words to me were to take care of my dad).  

In any case this book reminds us that financial advisers are rarely Prince Charming, and that if one is doing something you don't understand and won't answer your questions, he probably isn't working in your best interest.  Oculee suggests that you CAN do it yourself and as one who has fired a financial planner who made more from my account that I did, I agree.  Another thing she points out is that while men are generally able to compartmentalize relationships and treat business and professional relationships as straightforward barters, women tend to get emotional.  While, in general, men don't feel bad about firing someone who isn't performing, women do.  We tend to be more concerned that the needs of others are being met than our own (yup, that's me too), and will make excuses for those who don't perform.

Another chapter discussed 401(k)s and the mistakes people make with them--both men and women.  Unlike the old-fashioned pension that was handled by professionals, individuals need to be aware of the investments in their 401(k)s, the amounts of their contributions and what to do when they leave a job.  

Oculee works as a financial advisor and she gives tips on how to hire one--the most important being to decide what you want, at least in my opinion.  I think that was part of the problem we had with ours--we wanted advice about things that weren't his strengths and didn't need what he was selling.

Finally Oculee spends some time talking about risk and then looking at the major investment choices.

If you are a women who has never taken command of her finances, this book is for you.  It is interesting, easy to read and filled with useful information.  Grade: B+

Disease Called Debt