As featured in The Wall Street Journal, Money Magazine, and more!

May 2007

I, for one, am looking forward to the good weather over this “long” weekend. Here are some personal finance nuggets from around the blogosphere to keep you busy over the weekend.

There are Almost 1 Million Accidental Millionaires. FMF points out an article describing the mass of individuals who have high net worth — mostly unusable — thanks to equity in their home. Another reason why net worth isn’t always the best measure your financial well-being.

One Man’s Trash: Free Televisions and Computers! Jim from pfBlueprint talks about his best hauls from other people’s piles. It’s classier than one might expect.

What the Heck’s Wrong With a Pre-Viewed DVD? Well, that would depend on what movie is on that DVD. Mighty Bargain Hunter has no problem with buying used DVDs. My problem with used DVDs is if you want to get them from a major store, they still cost almost as much as new DVDs.

Help Needed: Multiple Employers and the 415(c) Limit. Is there a tax expert in the house? Nickel is looking for some advice when it comes to his myriad retirement plans.

How High Do Gas Prices Have to Go to Justify Getting a New Car? AllFinancialMatters crunches the numbers as usual. In order to convince JLP to buy a Honda Civic, gas would have to reach $7.55 a gallon. Now the gasoline companies have a price target.

Why I Backslide and Spend Too Much. Sharon Harvey Rosenberg, the Frugal Duchess, admits she’s not perfect when it comes to spending money. She has three specific reasons, so check them out.

Switched to Vanguard E-Service to Eliminate Account Fees. Back in April, Vanguard announced they were changing their fee structure, but it wouldn’t be too difficult to avoid all fees. Sun has done so as well by opting out of paper statements.

Couples and Money Survey. Are you one member of a couple? Do you have thoughts about money? If the answers to both questions are “yes,” take a minute to fill out this completely anonymous survey from Personal Finance 101. The purpose of the survey is to provide information for a course that will be taught about money management and communication.

Why Talking About Myself Is Important When Writing About Personal Finance. Trent from The Simple Dollar explores a bit of his writing philosophy and the importance of being open with his own finances.

Enjoy the holiday weekend!

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Editor’s Note: Thank you for your interest, these offers have expired and are no longer available.

Updated: Here are 15 Credit Cards With the Best Rewards.

This month’s issue of Money Magazine contains an article with credit card recommendations for a variety of spending types. Here’s the run-down.

For big spenders: Blue Cash from American Express.

This card offers an introductory 0% APR on purchases for six months, but the best feature is the cash back reward program. The program offers 5% cash back on purchases made at supermarkets, drugstores and gas stations and 1.5% on everything else if you spend $6,500 within twelve months. That’s what makes this card good for people who can put a significant portion of their expenses on the credit card. Without spending $6,500, the cash back terms are only 1% and 0.5% respectively. One other good point is that there is no limit to the amount of cash back you can receive.

If you carry a balance: Discover More Card.

I don’t know. If you’re carrying a balance, you’re paying interest. The interest you pay would offset any rewards you could earn. That’s why Money Magazine suggests a card with an introductory APR of 0% for an entire year. The good thing about this card is while you’re taking time to pay off your purchases with what is in effect a free loan, you’re also earning 5% cash back. Here are five more cards offering 0% APR on purchases. Warning: use of leverage should be reserved for those who do not have problems managing their money.

If you are an active driver: Citi Driver’s Edge Platinum Select MasterCard. This card is no longer available; try the

This card offers 3% cash back on purchases at supermarkets, drug stores, and gas stations and 1% back on all other purchases. You also earn $1 for every 100 miles you drive, but the total rebate is capped at $1,000 a year. To make the most of rebates, this card can be used in conjunction with another cash back card.

If you are an active driver: Discover Open Road Card.

Here’s another option for drivers. After passing a $3,000 threshold, all purchases earn 1% cash back, except for gas and auto maintenance, which earn 5%. You also receive 5% cash back on purchases through Discover’s merchant network. I’m not a fan of having to pass a minimum spending amount first, but depending on your spending patterns, this card could pay off well.

If you are a traveler: Discover Miles Card.

This is not a cash back card. The Discover Miles Card rewards the credit card holder with one mile for every dollar you spend. Miles can be redeemed as gift card for merchant’s in Discover’s network in addition to the traditional airline tickets. The miles are accepted with any airline and there are no black-out dates. By the way, they’ll give you 12,000 bonus miles the first year.

The article also mentions Capital One No Hassle Mile Rewards Card, which earns you 1.25 miles for each dollar, but has a complicated redemption system. One might even say it’s a hassle to redeem the awards.

If you’re a “skinflint:” Chase Freedom Visa Card (no longer available).

This card doesn’t seem as impressive as some of the other cash back rewards cards. It does offer a 0% introductory APR for 6 months and 3% cash back on supermarkets, gas stations, and fast-food restaurants. I suppose therein lies the strength of this card. However, after you spend $600 during any monthly billing cycle, the reward drops back to the default for all purchases, 1%.

All in all, Money Magazine made some good recommendations. It’s getting more difficult to lock in great cash back rewards as credit card companies continue to cut back. But free money is still free money. These are companies that will pay you to use their money for free. Why do they do this? It’s not out of the goodness of their hearts. Companies offer these benefits for two very specific reasons. One: they think you will slip up and start paying interest fees. Two: the merchants pay the credit card company a small percentage of each transaction.

This translates to big bucks for the credit card companies. The least they can do is throw you some money as you help them make their annual profits goals.

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A step-by-step guide on how to calculate your net worth. The article also includes tools and templates to help you automate the process.

how to Calculate your net worth

Calculating your net worth can be a bit tricky. But it’s a worthwhile exercise, especially if you’re trying to meet certain financial goals.

Figuring out your net worth for the first time can be scary, especially if it’s a great big negative number. But it’s worth taking the time to track your net worth on a fairly regular basis. It helps you get a handle on where you are financially, and where you need to make changes.

Here, we’ll talk about why you should calculate your net worth and how to do it.

Why Should You Calculate Your Net Worth?

First, let’s talk about why you should calculate your net worth. That’s the point? Especially since this exercise might take you a couple of hours the first time you do it.

Actually, there are plenty of great reasons to put this number on paper. None of them has to do with comparing yourself to your neighbors. After all, you don’t really know their net worth, anyway. Maybe they drive fancy cars that are financed up to here. Or maybe they look broke because they spend no money, which means their savings accounts are flush.

Really, it’s none of your business.

With that out of the way, let’s talk about good reasons for calculating your net worth:

  • It’s an accurate measure of your financial health. It’s easy to think of wealth as a number on a savings or investment account. But if you have $1 million in savings and $750,000 in debts, are you really rich? Probably not. Calculating your net worth gives you a better picture of your overall financial standing.
  • It can motivate you to keep making progress. If you’re trying to get out of debt, seeing your debts get smaller each month is great. But seeing your net worth rise is even more motivating. And once you start tracking your net worth into positive numbers, it’s even better.
  • It shows you the real value of your assets and liabilities. It’s easy to get a skewed picture of the value of your assets and of the seriousness of your debts. When you have your net worth, you’ll have a total picture of how these items relate to each other. If you have $30,000 of debt and a -$25,000 net worth, you’re not in great shape. But that same $30,000 of debt looks a lot different if your net worth is $150,000.

These are just three reasons to calculate your net worth. You may have others. But these reasons are enough to get started.

But What Is Net Worth?

In essence, your net worth is the value of all your assets minus the value of all your liabilities. In simpler terms, the equation is this:

Assets – Debts = Net Worth

So if you decided to sell everything today, settle all your debts, and move to Aruba, what would you have to live on?

Sure, that’s not likely to happen. But as we discussed above, having a handle on your net worth is helpful for a variety of reasons.

Calculating net worth seems fairly straightforward. And, really, it is. But there are some caveats to consider, as well. Let’s talk about those now.

Caveats in the Calculation

The real reason to track your net worth is to track your progress towards your financial goals. So it’s not essential that you get the net worth calculation exactly “right,” whatever that means. But you do need to establish your calculation up front, and use that same calculation each month or year.

So what decisions do yo uhave to make up-front? Here are some to consider:

  • Your primary residence: Some people prefer to include their primary residence — both the mortgage balance and the value of the home — in their net worth. Others exclude the house from the equation. Either way is fine, as long as you’re consistent. If you’re trying to become mortgage-debt-free, you’ll probably want to add the mortgage and the value of the house to the equation.
  • Your personal belongings: You can include everything you own, down to the last teaspoon, in your net worth calculation. This gets tedious, but it can be done. However, this might give you an inflated sense of your net worth. Sure, your spoons and clothes and power tools are worth something. But what would you really get for them if you decided to liquidate all of your assets tomorrow? Probably not much.
  • Your vehicle: Again, you can choose to track your vehicle in this equation, or not. If you do, be sure to check out its current value each month when you’re running the numbers. You’ll probably be shocked at just how much the value drops from month to month!
  • Fees and penalties: Some people take things to the extreme by looking at what would happen if they even liquidated retirement accounts immediately. So they put a negative into the calculation for what they would owe the IRS if they cashed out a 401(k) or IRA early. This is a little nit-picky, but, again, it’s up to you.
  • How often you track: Finally, you’ll need to decide how often to track your net worth. It’s a good idea to do it at the same time of month or year. That way, your recent payments on debts and deposits into savings and investments are taken into account, and you have a more accurate picture of where you stand.

Again, the details are really up to you. The key is to be consistent in how you decide to run this calculation.

Now that you know what to include in your net worth calculation, here are some tools to help you actually get it done.

Tools for Calculating Net Worth

Of course, you could just do this the old-fashioned way. Get out two sheets of ruled paper. Label one “Assets” and one “Liabilities.” Then, start looking up account balances, property values, and all the other information you need. Add up all your assets and all your liabilities. Then, subtract your liabilities from your assets. The number left over is your net worth.

You could do it that way. But where’s the fun in that when the internet is full of great tools? Here are a few to check out:

  • Net Worth Calculator: This calculator gives you a huge list of assets and liabilities to fill in. It’s a great place to start if you’re worried you’ll forget something.
  • Net Worth Projection: This calculator lets you project your net worth over time if your assets and liabilities grow due to interest. The numbers may not hold true in real life, but it’s an interesting exercise, nonetheless.
  • Google Sheets Net Worth: There are actually several Google Sheets templates for net worth. But this one is nice because it lets you track year over year and month over month results. This is great if you’re working towards some specific goals.
  • Mint.com: Mint has long been one of my favorite money management tools. If you want to get a general overview of your net worth, it makes it easy. Just link up all your accounts and manually add balances to any that you don’t. You can also add property values for your home and car or other assets. It’ll track your net worth for your automatically.
  • Personal Capital: For a more in-depth net worth tracker that also tracks your investments, Personal Capital is an even better option than Mint. Again, you can link up your accounts but manually enter property values, etc. for better results.
  • Net Worth Comparison Calculator: Okay, so we said that calculating your net worth isn’t about comparing yourself to others. But if you’re trying to set financial goals, it helps to know where you stand in comparison to “average.” This calculator shows the median net worth for people of your age and income bracket. Don’t base all of your financial goals on this, but it’s interesting.

Figuring out how to calculate your net worth and then doing it is a great financial exercise. For those getting out of debt, it can be a painful one. But it’s always revealing. And it’s an excellent way to track your progress as you journey towards financial freedom.

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Whenever the US Mint comes up with a new concept for circulating coins, it inspires a new bunch of collectors and investors. That has certainly happened with the Presidential Dollar Series, which began earlier this year.

First impressions of the George Washington $1 coins were luke warm, but then collectors started discovering errors. In some coins mostly originating from northern Florida, the lettering on the edge was missing. Whether intentional or not, the Mint’s lack of quality control helped fuel a frenzy on eBay, in which people were selling error coins for well over face value. In the latest auction to close while writing this post, a certified error coin sold for over $164. Uncertified error coins are fetching over $50 a piece.

Even rolls in which there only *might* be error coins are selling for a slight premium, usually around $30 a roll when the face value is $25.

Ben from Money Smart Life wrote in with a question about the next coin in the Presidential Dollar Series, the John Adams $1 coin:

Being the opportunist I am, I just bought $150 of John Adams dollar coins today. Any suggestions on the best way to sell them on eBay? Should I try and sell all 6 rolls at once or one at a time? Should I sell them right away or hold onto them for a while? Is there any value in breaking apart the roll and selling them individually?

John Adams dollar coinI am still waiting to hear from my bank after putting myself on the waiting list for the John Adams coins, but I’m not expecting to make much money from them. There are a couple of issues that are working against the possibility of making money on John Adams $1s:

* General feeling among collectors seems to be the Adams coin has a nicer design than the Washington, which makes it more collectible. More people will be hoarding the coins, keeping the supply among collectors strong.
* The attention given to the Washington coins, whether about the series itself or about the errors, has inspired more interest among new collectors.
* The Mint has supposedly stepped up its quality control to reduce the number of errors, the main driver behind the frenzy over the Washington dollars.

Despite this, I’ve already started hearing about doubled edge lettering on the John Adams coins. This seems to be a less frequent error than the Washington smooth edge (no lettering), so this coin will probably be the best bet for those looking to make money. But since it is more rare, it’s unlikely that you have one.

I suggested to Ben that he open any rolls he’s not interested in collecting for himself and check for errors. (Here’s a list of known errors on John Adams $1s so far.)

If you do have one of these error coins and want to sell it rather than collect it, I would put it up on eBay as soon as possible for a guaranteed return, as fervor over errors is still strong. If you find more than one and want to make the most of your money, wait in between selling them to catch any short-term price increases that may crop up due to the unpredictable market.

Since the Washington error was so common, it will likely always be available for collectors, and it’s unlikely that there will be much upside to the prices they are fetching now. It’s still too early to see how common the doubled lettering Adams dollar will be.

While this isn’t particular to Adams dollars, if you go through your rolls and find a coin struck through grease at the mint, which is considered by some as an error, you may have some luck making a profit with it on eBay. One recent auction for this type of John Adams $1 sold for $41.

Without the errors, these coins would never be worth much more than face value thanks to the sheer volume of mintage and interest to collectors.

All this being said, you could probably make a small profit on each unopened uncirculated roll by selling them now on eBay, especially if you tend to overcharge for “shipping and handling” like most eBayers. For me, this small profit (maybe $5 a roll) wouldn’t be worth it, plus I would feel like I’m ripping someone off by selling them something they can easily get at their own bank for face value. (On the other hand, perhaps people who are on a waiting list, like me, may be willing to pay a little extra.)

Before getting into selling coins on eBay, it may be worthwhile to lurk the Collectors’ Universe Message Boards. These forums are run by the third party grading service PCGS, and you will quickly learn from some of the best collectors and dealers in the world the right and wrong ways to sell coins on eBay. Watch out for spam with forum members chiming in only to tout their auctions. Mostly, the regulars criticize misleading listings and other scam-like eBay tactics and give great advice to the increasing number of “newbies” who stop by every day.

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Where to Put an Unexpected $5,000, Part 3

by Luke Landes

If you’ve been lucky enough to come across $5,000 for which you haven’t been planning, you may be wondering what the best plan would be. Considering CNN has 43 suggestions for you, there are many options. I’ve had some thoughts on CNN’s list which I’ve shared so far here and here. Here is the next […]

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Where to Put an Unexpected $5,000, Part 2

by Luke Landes

CNN Money has 43 suggestions for those who come upon an unexpected $5,000 based on the market right now. I didn’t particularly agree with each suggestion I’ve looked at so far. Let’s see how CNN Money does with the next batch of suggestions. 8. Best reality check: Eight hours with a financial planner 9. Best […]

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Where to Put an Unexpected $5,000, Part 1

by Luke Landes

Unfortunately, I don’t have this particular “problem” at the moment. But if I had, CNN Money can provide some suggestions (43 of them) for dealing with the unexpected income. 1. Best return with no risk: Pay off your highest-interest credit card debt 2. Best 12-month return (risky): Vanguard Growth Index fund 3. Best 12-month return […]

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Roth IRA Phase-Out in 2007

by Luke Landes

This year, if you (as a single tax filer) earn more than $99,000 (modified adjusted gross income — MAGI), your eligibility for the tax-advantageous Roth IRA phases out until you don’t qualify at all at $114,000. Couples are at a little bit of a disadvantage compared to two single tax filers as eligibility starts to […]

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Comparing a Lump Sum With an Annuity

by Luke Landes

Every since I wrote about the variable annuity sold to an 86-year-old, I’ve been trying to come up with some sort of situation in which this makes sense. Actually, I haven’t been putting effort into this issue at all, but this article from Charles Schwab happened to appear at the right time. Inside is a […]

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Financial Lessons From Television Fiction: House

by Luke Landes

I have to admit there are are two or three television shows I enjoy watching each week. House is one of those shows. I’m drawn to this show for several reasons. I’m a fan of Hugh Laurie from his Blackadder days, and his American accent is usually very convincing. Also, the show takes place in […]

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