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July 2005

The State of the Web

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As blogging became more mainsteam — first in 2000 with Blogger, then after 2001 with all the political blogs that arose from seemingly nowhere — new business models developed. On one front, bloggers have convinced the corporate world that blogs should be an integral part of a company’s marketing and public relations plan. It’s a great way to reach the customers, etc. This way, individuals who enjoy online journaling have found a way to to make themselves marketable to companies.

Warning, this is a long one.
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How do you know when it’s time to quit your job? I’ve left jobs before, whether it was because it was time for me to do something else or because it was due to a “mutual agreement to move in separate directions.” But how do you know if you’ve stayed too long in a less-than-ideal situation?
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Hewitt Associates, the same company that processes my company’s accounts payable, has performed a survey regarding 401(k)s. They discovered that almost half of workers leaving their jobs convert their 401(k)s to cash.

This is despite the fact that in addition to income tax, there is a steep penalty (10%) for cashing out the tax-deferred retirement savings. Most of those who cashed out their 401(k) had balances of less than $10,000, so we’re not talking about a large sum of money.

If I leave this company and move to another, I will roll my almost $20,000 in my 401(k) over to one offered by my new company if the investment choices are decent. Otherwise, I will leave my 401(k) where it is. I am currently investing enough to take full advantage of my company’s 4 percent match.

In addition, I’m investing the full amount ($4,000 this year) in a Roth IRA. I invest this money in the TIAA-Cref index fund. There was no minimum to open the account (with an automatic systematic investment) and the fees are very low.

Next year, my company will likely have an option for the new Roth 401(k), depending on the fees. This new investment option is similar to the Roth IRA as the money invested has already been taxed and the funds can grow unencumbered by additional taxes.

What about 401(k) loans? Well, I’ve mentioned this before and generally think it’s a bad idea. Although there’s debate as to whether your funds will be “taxed twice” once you pay your loan back and later take distributions (you’re paying the loan back with after tax money and you pay income tax on those same funds when you take the distribution) there are still negative points to consider.

You’ll lose whatever compounding growth on the money you take out for the loan, the loan could become due immediately in some circumstances, and there can be penalty fees if you can’t pay the loan back for some reason.

The best solution is to just let your funds stay in the 401(k) unless something better becomes available after leaving the job.

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Wallet of Plastic

by Luke Landes

It’s widely believed that the more credit cards you have, the better your credit rating. MSN Money, with the help of some experts, debunks that common misconception and recommenhds having two to six credit cards, and using them wisely: Keep your debt ratio low. Don’t carry a balance higher than 30 percent of the credit limit. ... Continue reading this article…

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by Luke Landes

Welcome to all new readers coming from the Wall Street Journal Sunday Edition. [Alternative link to article.] You may be interested in an introduction to this website or a list of what may be the best of Consumerism Commentary. My latest balance sheet and expense report is here and you can browse entries by category ... Continue reading this article…

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Money Clubs?

by Luke Landes

Marshall Loeb mentions the popularity of money clubs, akin to the investment clubs of the 1990s. Much like other sorts of support groups, money clubs offer the unique opportunity of belonging to a group of people with similar desires, who can encourage, inform and brow-beat you as needed. (This sounds very much like the community ... Continue reading this article…

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Property Taxes

by Luke Landes

I am not a homeowner right now for many reasons. Here’s another reason to add to the list: sky-high property tax. Yes, I pay some property tax now, hidden within my rent bill. Landlords pass the cost of taxes onto tenants. Because of the high cost of buying and owning a home, finding money for ... Continue reading this article…

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Carnival of Personal Finance #4

by Luke Landes

This week’s Carnival of Personal Finance was masterfully hosted by Jon at Smart Money Daily. Take a look! Here are some highlights: * You Can Save a Bundle Without Having a Large Income. That’s what I’m striving for; although having a higher income would certainly help me. * Money Goes To Where It Is Needed ... Continue reading this article…

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Extreme Frugal Living and Farming vs. Hunting-Gathering

by Luke Landes

More accurately, it’s extreme poverty. That is the best way to describe living on one dollar a day in a pre-industrialized (farming) community. Now imagine this family, earning one dollar a day, has six children to support. Forget about television (much less cable) and internet. Forget about cell phones (or any phone, for that matter). ... Continue reading this article…

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Letting Terror Affect Your Investment Strategy

by Luke Landes

When terror strikes, it’s easy to think about September 11 and the poor performance of the stock market following the event. It may be better to wait this one out before running for the hills and cashing out. It’s better not to make hasty decisions based on world events. CNN Money offers that same advice. ... Continue reading this article…

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Can’t Buy Me Happiness

by Luke Landes

Here is some common sense from Jeanne Sahadi: If financial success is important to you, and you are not as successful as those around you, you are not going to be as happy as someone who doesn’t care as much about financial success. In fact, setting financial success as a goal can make some people ... Continue reading this article…

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Another Week, Another Carnival

by Luke Landes

Carnival of Personal Finance #3 is online at AllThingsFinancial. Some interesting posts to highlight: Alphabet Soup, a guide to the different professional designations in finance. Nickel warns people to think before writing a check in a world where there is a hot black market for personal banking information. On AllThingsFinancial, JLP teacher us how to ... Continue reading this article…

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