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June 2005

GM’s Employee Discount

This article was written by in Consumer. 6 comments.

You’ve heard of this deal on the television and on blogs. General Motors [GM] is advertising an “Employee Discount for Everyone” sale, in which they are offering their vehicles for the same price an employee would pay, “not a cent more.”

Is it really a good deal? If you participate, most likely you will be paying 3 to 4 percent lower than the dealer’s invoice price. Some of the prices were previously unreachable through negotiation, and people have been taking advantage of this sale, to the company’s benefit. But according to David Ellis, there is still room for negotiation, especially on models that aren’t selling quickly.

The sale has worked well for GM. Their market share was up 30 percent earlier this month, mostly taken from Chrysler. While the promotion is scheduled to end after Independence Day, many people predict the offer will be extended.

Can this deal be related to the announcement that GM plans to lay off 25,000 workers between 2005 and 2008? After all, that’s 25,000 people who can no longer officially claim the employee discount. Nevertheless, it’s easy to call this offer “insensitive.”

Here’s how GM has performed in the market during the incentive:

The “real” employee discount is likely a much better deal for the buyer than the discount being advertised to consumers. Dealership employees often pay dealer cost or below, but I don’t know what GM factory workers or corporate employees pay. Their discount is probably significant.

If you’re planning on buying a car, The Motley Fool has a complete guide which should be read thoroughly.

Two updates: It’s official, this offer has been extended through August 1. Also, this post has been featured on the Carnival of Personal Finance #3.

Let’s say you own a home, like many people in this country do. Let’s go further and say that you own the property completely. Maybe you had a mortgage, but it’s completely paid off. The property is yours.

Well… as Jon Stewart is fond of saying, not so much. If your state government decides that your property is in a location better suited for a road, park or school, it will try to buy your propoerty from you. That’s fine, of course, let them make an offer. However, if you do not wish to sell, the government can exercise eminent domain and seize your property.

(Let’s forget for a moment that many Americans live where they live only because many generations ago natives were forcefully uprooted when they migrated to this land, and many the natives believed that the land cannot be owned in the sense our culture understands. But the immigrants didn’t want “savages” to get in the way of life, liberty, and the pursuit of property.)

So the state government can take your property, but only if when doing so plan on creating something public, like a highway or school (like the Fifth Amendment of the U.S. Constitution says), right? Correct, until today.

The Supreme Court ruled [decision and dissention text and SCOTUSblog entry] that the government can exercise eminent domain in any situation where there is an economic benefit for the state. Some things that provide an economic benefit are hotels, casinos (if legal in the state), offices, and malls. The state simply transfers the power of eminent domain to a corporate entity.

This is what has already happened in New London, Connecticut.

If you’re interested in eminent domain issues, there’s a blog tracking news around the country: Eminent Domain Watch. And added later, here is CNN’s take on the decision. Also appended, Gothamist shows how this decision could affect New Yorkers.

Wednesday Reading

This article was written by in Career and Work. 8 comments.

Forbes takes a look at what the good life costs, with the “good life” being a nice house, good education for the kids, and a summer home. In the Northeast, my region of the country, it will cost at least $215,000 a year (after taxes and savings). That’s enough to make most families give up on the “American Dream.” View the slideshow for details.

Fast Company asks, Is Your Boss a Psychopath? “There’s evidence that the business climate has become even more hospitable to psychopaths in recent years.”

A quiz accompanies the story, to help workers determine if their supervisor is, in fact, a psychopath. The quiz features questions like “Is he a pathological liar?” and “Is he callous and lacking in empathy?”

I have to say that the latest installment of CNN’s “Millionaire in the Making” series, Denise Vincent, is less than inspiring. She has a good amount of savings built up, but most of her worth is in her home equity. Not to take anything away from Denise, who I am sure has worked hard, but it seems the only reason she’s “on her way” to the millionaire’s “club” is because of her home appreciation; she has only paid off $10,000 of her mortgage in ten years! (Meanwhile, she says, “People with lots of debt are unattractive to me.” I can only assume she meant “credit card debt” and not “mortgage debt.”)

Her spending habits aren’t laudable. She is pleased with her purchase of a new 2004 Mini Cooper for $24,000 without negotiating away from the retail price, and although she works out every day, $35 a month is a lot to spend on a gym membership. Of course, all that matters is her opinion, and she seems to be happy with her choices.

The Carnival of Personal Finance #1 was a success — get ready to submit your articles to Blueprint for next Monday’s edition.

0% Balance Transfers

This article was written by in Credit. 6 comments.

The 0% interest credit card balance transfer game is a popular one to play. I had first encountered the trend on the Motley Fool message boards a few years ago.

The credit card companies are making these quick-money ideas a little more difficult to navigate, with rules that differ among the many different offers.

According to an article on MSN Money, there are twelve questions for which you must find answers before leaping into accepting a balance in return for some interest.

Here are the twelve questions, with some thoughts:

1. How long does the rate last? If it a lifetime 0%, or will the rate be only available for 6 months? This will greatly affect how much money you can make.

2. What are the minimum requirements to keep the rate low? Some companies require you to make purchases every month. This can get dangerous as I describe later. It goes without saying that one late payment will nullify the 0% rate and in some case the company will charge you back interest.

3. What is the interest rate for new purchases? If you do a 0% balance transfer, do not use the card for anything else. In some cases the terms of service require that you make a small purchase every month. If that’s the case, don’t go with the offer. When you pay the minimum every month, you will be paying off your 0% balance first, leaving a balance on which interest will be charged. Keep in mind, you shouldn’t pay the minimum unless the balance transfer offer is a lifetime rate of 0%. Each month, you should pay the total amount of money transferred divided by the number of months in the promotion, or a little more just to be safe.

4. Is there a balance transfer fee? If there is, it will reduce or eliminate any benefit you will get by keeping the balance in an interest-bearing savings account. You could possibly end up owing money to the credit card.

5. How is the average balance on the account calculated? This is irrelevant unless you are getting charged interest.

6. What will the rate be when it finally changes. If you use the balance received from the credit card only to pay off the credit card and if you pay the entire credit card off before the 0% promotional rate has expired, this is irrelevant.

7. What’s the difference between a cash advance and a balance transfer? Make sure when you do the transfer that it will not be interpreted as a cash advance unless the terms of the advance are the same as the balance transfer.

8. What’s the best way to transfer a balance? This is where the credit card companies can get tricky. Sometimes there will be no fee for a transfer initiated via phone while there is a fee for a transfer that makes use of convenience checks. Double-check the terms.

9. How are convenience checks treated? Their use may be considered a balance transfer or a cash advance.

10. What about new purchases? Unlike Nike, just don’t do it.

11. Do you qualify for the lowest rate? Sometimes the 0% advertisements are teasers. Once you apply, they might not award you the 0% rate, yet they’ll perform the transfer anyway. Watch out.

12. How is your information protected? This is a good question for any credit card, whether they’re offering a 0% balance transfer or not. In the wake of credit card security breaches, it’s good to be aware of how your credit is protected from fraudulent charges.

My final advice is to know what you’re getting into. If you’re awarded a high credit limit, this is a quick way to make a lot of money for little work.

But it could end up costing you in the end. When you open a new credit card with a balance and transfer almost the entire balance out, you change your used to available credit ratio unfavorably. This is something that credit reporting agencies analyze when determining your credit score.

If your credit score is sufficiently lowered by your used to available credit ratio, you may not qualify for a good mortgage rate if you decide to buy a house. That will cost you much more in the long run. In some instances, the individual would have been better off by not messing around with his or her credit.

Time to Consolidate

by Luke Landes

I spent the last 45 minutes or so consolidating my student loans. I’m a graduate student, working on my Master of Business Administration degree from the University of Phoenix Online. Even though I have these loans, they get paid off as soon as I receive my reimbursement check from my company. However, when I first ... Continue reading this article…

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Carnival of Personal Finance #1

by Luke Landes

Welcome to Consumerism Commentary and the Carnival of Personal Finance! For an introduction to the Carnival, read this entry. For a schedule of upcoming Carnivals and their hosts, see this article. Below you will find the articles that have been submitted so far. The deadline was originally set for Sunday night at 10:00pm, but any ... Continue reading this article…

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Thursday Reading

by Luke Landes

So far, I’ve received one submission for Carnival of Personal Finance. Remember to send your submissions in before Sunday night. Here are the articles I’m reading today: Kids get more expensive for their parents as they get older, and this article enumerates the costs of a teen-ager. Sports or music, food, orthodontia, and a plethora ... Continue reading this article…

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Where Does My Money Go?

by Luke Landes

Eric asked me where I can cut back my expenses. I was actually working on this issue as he was posting this question. (It’s been a slow morning at work.) The chart below shows where my money from each paycheck is going and underneath there are some comments.

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Account Balances, May 2005

by Luke Landes

Below are my account balances for the end of May, 2005. The balances are displayed next to the two previous months as well as May, 2004 for comparison. I’m slowly making my way, despite May’s net worth being a little lower than April’s. Some notes: * There is a value listed for my 2004 Honda ... Continue reading this article…

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Income and Expenses, May 2005

by Luke Landes

There’s nothing special to report in regards to my income and expenses for May. I still need to curb my spending. I’ve been receiving some income from website design projects and from the Google Adsense ads on this and a few other sites. Keep reading this article to see this month’s income and expenses compared ... Continue reading this article…

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