I’ve been in touch with Ramit Sethi since not long after he began writing on his blog, I Will Teach You to Be Rich, almost five years ago. It is no surprise to me that Ramit, after enhancing his writing with years of practice on his rapidly-growing website, has published I Will Teach You to Be Rich, which is right now the number one book on Amazon.com under personal finance and number three on Amazon.com overall. This is not simply a republication of the blog like some books presented by other bloggers-turned-authors. I would consider the book, released yesterday, to be one of the best books about money management for twenty-somethings. I’ll explain why in this review.

I’m not praising this book because I’ve known Ramit (through the internet) for several years. In fact, when I first discovered his blog, I was skeptical of the kid right out of college promising to teach people how to be rich. He wasn’t rich as far as I could tell; how can someone with no real experience make such a claim? I found out quickly that Ramit is a great teacher who can connect with his audience, and in all honesty, personal finance isn’t difficult conceptually. The biggest problem is cutting through the noise and misinformation, and Ramit’s background with psychology provides some insight on the barriers between conceptual knowledge and behavior.

Ramit’s book and his blog are not for everyone. The author’s style can be harsh; yet, on a scale of one to Suze Orman in abrasiveness he would only score a seven. He manages to mix insults with jokes, judging ever so slightly the stupid mistakes not of his readers, but of his readers’ friends. The book is built upon a framework of a six-week program — what self-help book would be complete without a reducible metaphor — designed to take a personal finance newcomer from freshman status to savvy long-term investor. Ramit claims readers will succeed even if pursuing only 85% of what is written in the book.

I Will Teach You to Be Rich contains actionable suggestions in the book, and 85% of the tips within would keep a money management novice busy. Many of these tips are refreshing. It is clear that Ramit is not a fan of obsessive frugality, a view that I share. Ramit also claims to be unsatisfied with the concept of budgeting, but offers a “Conscious Spending Plan:” essentially a budget with more syllables and a trademarkable name, recommends the envelope system of managing expenses, and offers two models for dividing income into buckets for planning expenses.

The elements of the six-week program illustrate the most important concepts in Ramit’s plan to helping readers work to attain the status of “rich:”

• Optimizing credit cards: using credit cards as a tool for expense maintenance, protection, and building credit
• Optimizing savings: finding high-interest savings accounts with no fees while not wasting time chasing rates
• Opening investment accounts: taking advantage of tax-advantaged retirement accounts with brokers friendly to new investors
• Managing expenses: using the aforementioned Conscious Spending Plan to decide where your money should be going
• Automating the system: removing human intervention from the financial machine to allow more of your money to work for you
• Investing to earn more: foregoing products designed to make money for the financial industry rather than for you

Many books we are accustomed to seeing in this genre are written by financial advisers, professional money managers, or those formerly or currently closely tied to that industry. Thankfully, Ramit breaks away from their traditional advice by advocating low-cost index funds and target retirement funds, stressing the lack of necessity of a professional financial planner for most individuals. Thankfully, Ramit shares the data to support his claims. Yes, it’s true that Ramit missed a calculation, but you’ll find that the concept of the benefit of compound interest is still sound.

Actionable tips are scattered throughout the book. In one section, Ramit includes a script for convincing a credit card customer service representative to drop a late fee. In another, he presents a detailed account of how he made twenty car dealerships compete for his business. In yet another, Ramit offered concrete advice for negotiating a pay raise with management. Many of the chapters include short essays provided by other bloggers, such as Nickel from Five Cent Nickel, JLP from All Financial Matters, J.D. from Get Rich Slowly, Jim from Bargaineering, Gina formerly from Lifehacker, Trent from The Simple Dollar, and myself.

While most readers of Consumerism Commentary may find the advice within the book to be simplistic and basic, I Will Teach You to Be Rich should be at the top of the list for most recent or soon-to-be college graduates. Ramit Sethi’s style of writing isn’t for everyone, but it doesn’t take long to get past the attitude. This book is a worthy competitor among other recent money management books for the age group like Suze Orman’s The Money Book for the Young, Fabulous and Broke, and Ramit’s immediate connection with the target audience makes his book more likely than others to be read, enjoyed, and followed.

I spoke with Ramit several days ago to record a conversation in which we answered several questions from Consumerism Commentary readers, sharing our thoughts and picking fights over our disagreements. I haven’t decided whether to publish the recording on Consumerism Commentary, but Ramit insists that I offer the MP3 of us answering your questions to anyone who buys the book from Amazon.com and forwards the receipt to me at flexo@iwillteachyoutoberich.com within the next 48 hours. You’ll receive an hour-long recording (if Ramit edits it down from about 90 minutes, but it’s all good stuff) of the two of us answering questions about the best accounts, saving, investing, and automating your money. It was a fun conversation, although as I’ve admitted to other people, Ramit outclassed me at every turn.

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Review: I Will Teach You to Be Rich by Ramit Sethi

Last night, Ramit Sethi from I Will Teach You to Be Rich got together over Skype to chat about money. We spent about 90 minutes answering the questions provided by Consumerism Commentary readers last week. Ramit came up with this idea to coincide with the release of his new book, aptly named, I Will Teach You to Be Rich. This book will be released on Tuesday, and at that time I will share my review of the book and explain how you can acquire an MP3 of my conversation with Ramit.

Here are the topics we discussed in the call:

• One piece of financial advice for someone just starting out on their financial journey.
• What America can do to ensure future generations are adequately prepared to handle their finances.
• Our ideas about frugal dating.
• Sacrificing happiness in the present by saving too much for the future.
• One financial move we each made that we now most regret.
• A personal finance topic in which we don’t practice what we preach.
• Putting together a real, workable budget.
• The role of values in relation to spending.
• How one knows when he or she is rich.
• Whether a recent graduate with significant student loan debt should paying it off faster or begin saving for a house.
• Whether someone close to retirement should pay off a mortgage faster or save more for retirement.
• Credit card rewards programs, 0% balance transfers, and chasing rates to “make” extra money.
• Limiting the subconscious effects of marketing.
• Personal ethics in investment decisions.

You will be surprised at some of our answers, and I would say that Ramit outclassed me at every turn. If this sounds interesting to you, when I review the new book, I’ll explain how to download the MP3.

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Chatted With Ramit from I Will Teach You to Be Rich

Ramit Sethi from I Will Teach You to Be Rich is currently putting the final touches on his first published book, aptly named, I Will Teach You to Be Rich. He’s probably tweaking the final paragraphs as I write this. Ramit’s new book, which will be released on March 23, includes a few pages I’ve contributed focusing on smart ways to get out of debt. As long-time readers might guess, my contribution focuses on what I’ve been calling the Debt Avalanche, but doesn’t stop there. There is so much more in this book, and I’m planning to write a full review. But the two of us have more plans, including something we think is going to be fun.

Ramit and I are setting up a one-hour call to answer reader’s questions about absolutely anything, no holds barred. Of course, the call will focus on personal finance, including saving, investing, debt, budgeting, just about anything you can name if it’s related to what people need to know about money. I’m looking forward to this chat, I imagine the two of us on the phone are going to be quite entertaining.

We’ll be making a recording of this phone call available as an MP3 to certain readers, and details concerning how to receive the recording will be forthcoming in the next two weeks. Until then, Ramit and I want to get started on planning the discussion so we need your questions. You can ask more than one, and feel free to be creative. Either leave your questions here as a comment below this post, or, if you’d rather not share just yet, email your questions directly to me (flexo at this domain name).

Ask your questions now and listen to Ramit and I discussing the answers in a few weeks.

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Ask Any Question and Ramit and I Will Discuss the Answers

Suze Orman, the guru of personal finance gurus, is offering her latest book, 2009 Action Plan: Keeping Your Money Safe & Sound, for free. Through January 15, you can download this 209-page book without paying a cent.

Here is the download link for the free PDF version of this book.

The book tackles credit, retirement investing, saving, spending, paying for college, emergency funds and insurance. Suze’s approach is forward, demanding and aggressive, but that may be what some individuals need to experience.

This book is available as a free download through January 15 only. You can also download this book in Spanish.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Free Download: Suze Orman’s 2009 Action Plan: Keeping Your Money Safe & Sound

Last week, I received an official-looking notice in the mail. You know the type: the envelope requires you to tear the perforated edges in a specific order and contains security ink so the contents cannot be seen until opened. There is a return address on the envelope but no business name.

In my experience, the more the envelope looks official, the more likely it is to be junk mail. So I ignored the mail, as I often do, and left it in my incoming “file.” Yesterday, I went through the “file” to make sure I wasn’t missing anything important, and opened this particular envelope.

The notice informed me that Citi was kind enough to increase the credit limit on my primary credit card by a few thousand dollars. I have never approached my credit limit, so I wasn’t sure why they were suddently this generous.

A credit limit increase, if not used, is a good thing for two reasons.

If you spend the same amount with a higher credit limit, your credit utilization ratio decreases. A lower credit utilization ratio could have a positive effect on your credit score. A higher credit score can lead to all sorts of advantages, such as qualifying for a lower mortgage rate.

More credit is available to use in case of emergency. Using a credit card to help you through an emergency is rarely a good suggestion, but having credit available can be part of your overall emergency fund plan. If you need to pay a medical expenese immediately or rent a car in an emergency, credit cards can come in handy. A higher limit provides more flexibility. The goal is to pay as little interest as possible, so credit usage is healthier if you can pay off the balance every month.

Credit cards companies increase limits because they want people to spend more. In today’s economic climate, they don’t want everyone to spend more, only those who they deem to be low-risk consumers. I guess I am part of this group. People like me will help cover the risk the issuers take on by offering credit to more risky individuals.

Unfortunately for the credit card companies, this limit increase won’t encourage me to spend any more than I do currently.

Photo: JCKole

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Citi Raised My Credit Limit

Costco and American Express are offering a $25 bonus in the form of a statement credit for new customers who make their first purchase using their TrueEarnings® Card.

The TrueEarnings® Card from Costco and American Express also offers significant cash back awards on most purchases, including 3% on gasoline and restaurants, 2% for travel, and 1% everywhere else. This cash back is unlimited, so you don’t have to worry about an annual cap. You’ll even earn cash back when shopping at Costco, which from what I understand already has low prices.

There is no annual fee for current members of Costco, but that’s the catch. You have to be a member of Costco to be approved for this card.

Also consider the equivalent card for businesses, the TrueEarnings® Business Card from Costco and American Express. This is a very similar card, but it does not offer the $25 statement credit with your first purchase. This card does, however, offer 5% cash back on gasoline rather than 3%. Therefore, if you plan on spending more than $1,250 on gas and if you don’t need $25 right away, the business card may be the better choice.

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Get a $25 Bonus With the Amex True Earnings Card

I recently explained my history of having no money and as promised, will now come clean with the mistakes I’m still making:

I’m driving the wrong car

I’ve never owned a car long enough to get it inspected. The first Jeep Cherokee was a lease, and I foolishly let them talk me into not converting the lease into a purchase. Then I couldn’t afford the new Jeep Cherokee, so I took it back and they gave me a Dodge Neon with a loan amount equal to the price of the Neon plus about $6,000. Then I crashed the Neon. That was actually okay, but only because I had Gap Insurance. Always get Gap Insurance, friends. It literally saved me from being homeless.

Years later I got a Scion xB. That thing was delicious, but I grew ever more jealous of my wife’s Prius, so I traded up and got one of my own. Sometimes I wish I hadn’t done that, because I now have a $595 monthly car payment. I know it doesn’t equal out, but it sure feels good to fill the tank only once every two weeks. I’m taking care of the Prius the way I forgot to with the Scion, and I fully intend to drive it until it won’t drive anymore. I think it’s due for inspection sometime this summer.

I love shiny electronics, and they love me

Like most geeks, I have a rapport with computers that is difficult to establish with other humans, and I tend to hoard sources of entertainment. Gadgets are an expensive hobby. It never seems that way to read about them, because the journalists get them for free. I have to remind myself of that. As an Interaction Designer, I’m always looking for a more elegant solution, for more ways to automate my life, and I can rationalize any purchase by telling myself that exposure to these things will help me in my career.

That’s how I managed to “buy” an iPhone. But as you’ve guessed, I put it on a credit card. Nearly everything I own that is worth something was put on a credit card. But I’m committed to stopping that. As of this writing, I have just over $7,000 in credit card debt, which I expect to have paid off within the next 16 months.

So, I have to keep telling myself that I don’t literally need an Apple TV, or a 1 Terabyte external hard drive. When I force myself to think about it, there’s nothing in the entertainment compartment of my lifestyle that is actually broken. It’s just not perfectly elegant, and for right now, because other things are broken, that’ll have to do.

I don’t sell enough of my stuff

When I upgraded my iBook to a new MacBook last May (see previous problem with shiny electronics), only about $1,000 of the purchase went on a credit card, ’cause I managed to sell the iBook on eBay for about $600. I’ve got a boatload of unused electronics that I could be selling, but it seems like such an effort to even bother writing descriptions for them. If you have any advice for doing this more easily, I’m happy to hear it.

The interest rates are too high

On both our cars and the house, our interest rates are higher than they could be. At the time, of course, it was the best we could do. I should mention at this point that my wife’s credit history is slightly worse than mine, and until we started making mortgage payments, my FICO score was on the positive end of “Fair”. Naturally, the FICO isn’t the only thing that creditors look at, but mine has increased roughly 70 points in the last year. One of these days, I should really look into refinancing at least one of the cars.

It’s somewhat painful to admit mistakes, especially when they’re ongoing and not likely to change anytime soon. But if you don’t acknowledge there’s a problem, the likelihood of it being fixed goes down to zero. So, it’s a start.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Why I Still Have No Money

Near the end of my college career there was a sort of “Psychic Fair” on campus. As I recall, nobody charged us anything, so I got a reading from a Numerologist.

She basically had me fill out a form with some information about myself. I remember “full name” and “birthdate”, for example. Multiple calculations later, the right side of the form had four numbers filled into boxes with labels like “Destiny” and “Soul Urge”. The Numerologist slowly removed her glasses and looked at me quizically before telling me that all four of these core numbers were the same: 8.

To summarize:

“The number 8 Destiny suggests that the direction of growth in your lifetime will be a move up the ladder of attainment in the material world, to achieve financial security, and status amongst your peers.” source: http://www.astrology-numerology.com/num-expression.html

She explained that apparently, the only reason I was here on Earth was to learn how to attain and manage wealth. So, more than ten years later, why do I still have a negative Net Worth? Even putting metaphysics aside, it’s still a valid question.

I think there are a few primary reasons:

Upbringing

Though I considered myself an independent thinker at a very young age, you can’t decide to disagree with something if it’s never presented to you. My parents didn’t take the time to teach me how to save money, though they always told the story of how my oldest sister learned to be stingy by age seven. We definitely had classes called “Home Economics” in school, but economy never came up. It was all cooking and sewing… very progressive, I know.

Not paying attention

I’ve been diagnosed with Attention Deficit Disorder. For those that don’t have it: imagine that you’re watching TV, and the show gets less interesting. The channels automatically start changing, but you don’t notice the change until you end up back on the original program again. That’s what A.D.D. is like for me. The problem is that I didn’t know it was a treatable disorder until I was more than 30 years old.

I’m sure there were times in my life when someone was giving out some good advice about managing money, and I was happily daydreaming.

Funny story: the first four checks I wrote out to various utilities when I graduated from college all came back because I didn’t sign my name. It’d be funnier if they didn’t all charge me extra for the inconvenience.

Lack of ambition

I never had anything resembling a “career” until after I got engaged. As soon as I was responsible for someone other than myself, I suddenly felt a drive to improve myself, my brain, my prospects, etc.

So, now that I understand all of this, what am I going to do about it? Well, the ambition part has mostly taken care of itself. As for paying attention, I’ve turned money management into kind of a video game. Because everything is digital now (at least, it is for me, or I would probably lose it somewhere), I’ve got our Google Spreadsheet budget, and the bank Web site that I can have harmless obsessions over. In order to stay accountable to my goals, I’ve got you guys.

As for fixing my upbringing… well, I can’t. And since my wife and I don’t plan on having children, I can’t teach them the things I was denied. All I can do is urge you, gentle reader: if you have kids, set a good example and explain to them why you do what you do with the money.

So that covers my past. Next time I write I’ll explain all the things I’m still doing incorrectly. Here’s a hint: $595 car payment.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Why I Have No Money

I’m a fan of paper money less than I am of coins, but I still like to take notice whenever any currency is redesigned. The $5 bill is the latest to get a make-over to thwart counterfeiters and to keep things interesting. Apparently counterfeiters prefer to bleach current $5 and reprint images of $100 bills on the paper for a tidy profit. The new watermarks on the $5 bill should prevent this.

Here is the new design.

These colorful bills entered circulation last Thursday, but I have not seen one just yet. Personally, I’d like to see more artistic designs — on bills as well as coins. I’d also like to see elimination of the one-cent piece and the one dollar bill. I’ll go out on a limb and even consider revaluation of the US dollar in such a way that today’s $1 becomes the “new $0.10″ and today’s $10 becomes the “new $1″ and so forth. It sounds crazy, but I’d like to see this before it costs $100 to see a movie in a theater.

U.S. unveils new $5 bill to thwart counterfeiters [Reuters]

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New $5 Bill Now in Circulation: Is it Time to Revalue the Dollar?

Has anyone been watching the HBO miniseries, John Adams? Although colonial America is not my favorite period of history, I’ve been enjoying the first episodes that have aired. However, during the slower sections of the program, you may want to take the time reading articles from Consumerism Commentary’s history.

From the first half of March 2007

By This Time You are a Seasoned Executive
What I Did With My Bonus
Problems With TIAA-Cref Continue: One Reader’s Issue
How to Withdraw Money From Upromise
Soylent Synvisc: It’s Birds!
Best Cars of 2007: Consumer Reports vs. Car and Driver
How Easy is it to Beat the Market?
February Heating Cost Way Up
Closing an Old Capital One Account
Shopping at Kohl’s and Being Granted Discounts
More Than $50 Wasted
The Cost of Buying a Home Over 30 Years

From the first half of March 2006

New $10 Bill Circulates Today
Saving Another $10 on Cable Internet (and Follow-Up)
Prices for Healthcare in Retirement Up
The Future is Grim: Ben Stein
Move Where the Cost of Living is Low
Your House: Asset or Liability?

From the first half of March 2005

For New Yorkers
Web-Based Financial Planning
No Money? Buy a Home!
Suze Orman: Young, Fabulous, and Decidedly Not Broke
Trying Out Emigrant Direct
Federal Reserve Cover-Up

Consumerism Commentary is one of the longest-running “personal finance blogs” in existence on the internet. Consider subscribing to the RSS feed to read new articles in the format and method of your choice.

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

The Cost of Buying a Home, Low Cost of Living, and Fed Cover-Up

The value of the dollar in comparison to other countries around the world is falling. Meanwhile, my net worth is increasing, so naturally I began thinking. Is it possible that although I’m earning income, saving, and investing, I’m not actually gaining ground from a global perspective? Furthermore, does a global perspective matter to me? I haven’t been outside the country in years.

From January 31, 2007 to January 31, 2008, my net worth increased from $75,121 to $125,770, an increase of of 67%. During that time, the dollar has decreased in value compared to other currencies and commodities. I ran some calculations.

I would have done better if I had been earning my salary in euros. With a strict currency conversion using rates from OANDA, my net worth was valued at EUR 57,964 at the beginning of the period and EUR 85,083 at the end. My former 67% increase in dollars translates to a less impressive 47%.

What about gold? I’ve heard people claim that the economy would be better if we never left the “gold standard.” I’m not quite sure it would make a difference. All value is arbitrary, whether it’s a metal or paper. Anyhow, converting my net worth in dollars to ounces of gold would result in a starting point of 114.61 ounces ending with 135.92 ounces. Thanks to the dollar’s decline and gold’s rise, my value in gold increased only 18% in the last year.

Does any of this matter? I don’t use either euros or gold for the exchange of goods and services. Yet, I still can’t overcome the feeling that I’m not getting ahead as much as the USD numbers claim.

New Day, New Low for Dollar [AP]

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My Wealth in USD is Increasing, But the Dollar is Falling

If you’re new to Consumerism Commentary, these articles from the archives will be new to you.

From the Second Half of February 2007

The Case Against a Life Without Debt
Tips for Purchasing a Musical Instrument for the Non-Professional
How Much Do You Pay in Taxes?
Survey Says: More Money Leads to Better Sex
Advice Needed: Newly Found Debt and Debt Collectors
12 Steps for the Paycheck Type to Become a Millionaire
Extreme Frugality: Living Out of Your Car
Is This a Buying Opportunity?
New Jersey Property Tax Rebate Increasing for Renters

From the Second Half of February 2006

Seven Tax Mistakes You Might Make, Part 1 and Part 2
A Look at The Automatic Millionaire Homeowner by David Bach
Tax Bill or Tax Refund: Which is Better?
Ben Stein Protects America
We Don’t Need No Steenkin’ $1,000,000 for Retirement
Bank Robbers Steal Worthless EUR 50m
Retire to the Road
Worrisome Market
How to Deal With Winning the Lottery
Women Earn More Than Men

From the Second Half of February 2005

Affluent Shop at Discount Stores
Sweet Credit Card Deals
Luxuries You Can Live Without
What My Future May Hold

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This Month in the Archives: Life Without Debt, Better Sex, and Bank Robbers

I took a vacation from work this past week to coincide with my girlfriend’s winter break (she’s a teacher). We traveled to Washington, D.C. to see the sights and meet up with some friends. Thanks to the snow, the exhibits were not very crowded. Unfortunately, the weather had a negative effect on our health, and the one day was the limit to our outdoor exposure. Highlights for us included the Stephen Colbert portrait in the National Portrait Gallery, Treasures of American History at the National Air and Space Museum, a quick run through the United States Holocaust Memorial Museum, and, of course, dinner with friends. The coin exhibit I would have liked to see at the Smithsonian closed about a week ago, and by the time we made it to the Bureau of Engraving and Printing (my girlfriend’s choice), they had already given their last public tour for the day.

There is more than enough to do the next time we visit, which will likely be around the National Cherry Blossom Festival when the city will be warmer and more crowded.

I hope you enjoyed the guest posts while I was away. Here are some more recent articles from the web, worthy of attention.

When is Debt Real Debt? JLP from AllFinancialMatters asks whether taking advantage a 0% offer is the same as incurring debt. In my opinion, yes, it’s technically debt, even if you can pay it off at any time. That’s a strictly technical definition, but for all practical purposes other than financial reporting, I would say that anything you pay off within a month doesn’t need to be considered bad debt. Therefore, “debt-free living” can involve using credit cards if you either (a) pay off the balance each month or (b) take advantage of favorable interest rates as long as you can pay off the balance at any time if needed.

Is the Cost of Living Increasing Faster Than Inflation Estimates? Nickel asks this question and from my personal viewpoint, the answer is, “absolutely.” Even taking out lifestyle creep, in which I’m spending money for better products every year, the baseline cost of everything I need to survive as a commuter/resident in New Jersey increases beyond the 3% to 4% the government cites as the inflation rate.

Yikes! People Can Create Checks from Your Account and Pay Themselves! Free Money Finance issues this warning. “You authorize a payment by phone, or a telemarketer falsely claims that you authorized a payment by phone, from your checking account. Step Two: The person you authorized, or the person who is out to steal from you, makes up a check on your account and sends it through the banking system.”

Dumb Money: The Movie Theater. Kevin from No Debt Plan writes about the cost of going to the movie theater. It had been a while since I paid full price for a movie, usually going to matinées if at all. Last night, my girlfriend and I went to see the latest romantic comedy, and I was surprised to see that ticket prices in the suburban township have climbed to $10. (If we ordered the tickets online in advance, we would have had to pay an additional $1 for each ticket, as well.)

Mighty Bargain Hunter clears up confusion by writing about seven pairs of easily-confused money terms. MBH describes the difference between multi-level marketing and pyramid schemes. One is legal, one is not, and this post explains why.

Paying for Three Kids to Go to College is Going to Be Expensive. No Credit Needed lays out his plan for saving $2,000 each year for each of his three children.

Wise Bread offers six horrible financial products you should avoid. The first on this list is the 401(k) debit card. “Early withdrawls carry a 10% penalty plus tax expenses so $10 withdrawn from a 401k becomes $6 to $7. In the past it took at least a few forms to do an early withdraw from a 401k, and it is not worth the effort to fill out a form for every $5. However, a debit card just makes the process of withdrawing small amounts so easy…”

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

Back From D.C. (and Blog Roundup)

Welcome readers from Yahoo, CBS 8 San Diego, Consumerist, and various message forums from around the internet. Please take a moment a subscribe to the Consumerism Commentary RSS feed. If you’re new here, perhaps you’d like to take a look at articles from Februaries past.

From the First Half of February 2007

Americans Aren’t Saving, Little Splurges Add Up
Bad Job-Hunting Tips You Must Avoid, Part 2
Study: Money Makes People Mean
Review: You Call the Shots by Cameron Johnson
Financial Ratios for Personal Evaluation: Debt to Income Ratio
Renting is Expensive in These Cities
A Quick 40%+ Profit?
5 Tips for a Frugal Valentine’s Day
Quicken Hack: How to Track Airline Miles or Points

From the First Half of February 2006

Roth 401(k) Not for Everyone
First Impression: The Automatic Millionaire Homeowner by David Bach
Is It Time To Leave Your Job?
Changes to Online Job Hunting
Stupid Investment of the Week: Teach Me to Trade
My Money Mistake #1: Not Knowing My Net Worth
Where Should Teens Stash Their Cash
Financial Responsibility More Important Than Hot Sex
Don’t Buy Stuff You Cannot Afford

From the First Half of February 2005

Don’t Buy More Home Than You Can Afford
401(k) Asset Allocation
Another Option for Your 401(k)
Financial or Marital Bliss
Lose Your Job Over Blogging

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

This Month in the Archives: Mean People, Quicken Hack, and Marital Bliss

I don’t know much about sports betting, but I wouldn’t be surprised if there are some people — other than those affiliated with the team who will receive big bonuses — who are significantly richer thanks to the New York Giants winning the Superbowl. I’m not a big football fan, but I managed to catch the Giants’ first touchdown take the lead in the fourth quarter and everything that ensued afterwards. It was an exciting fourth quarter.

I’m just looking forward to the new episode of House.

While I’m waiting for the post-game show to end, here are some articles from around the web that I’ve enjoyed lately:

Free Money Finance asks how much it would take to give up health insurance. For me, this amount would be very high. That’s the purpose of insurance: to mitigate a risk. Throughout the rest of my life, I may need to spend hundreds of thousands of dollars on health care if I had to pay for all of it myself. Then again, I may not need more than $100,000. My buying insurance, I can ensure that most of the expense will be taken care of for a predictable fee.

Wise Bread is the newest addition to the Money Blog Network. Paul from Wise Bread noted that UK banks are blocking customers from using their credit cards. The bank in question is actually owned by the American bank Citi; they are controlling their risk of customer default by blocking access to issued credit cards. Should banks have this power? Citi obviously has its business reasons for doing so, but it can put customers who are relying on credit (for whatever reason) in a tough position.

Upset by falling interest rates on your bank accounts? Get Rich Slowly suggests using certificates of deposit (CDs) to achieve a better return. CDs are less liquid than savings accounts, and therefore serve a different financial purpose. In many cases, withdrawing your CD investment before it matures will result in a forfeiture of a portion of your interest, usually enough to reduce your return to less than it would have earned in a high-yield savings account. Additionally, CD rates are dropping as well; bank expect interest rates to be lower and have already priced CDs to take that into account. You do have the benefit of locking in your interest rate at the beginning of your investment, so if general interest rates fall further than expected, you could end up ahead.

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Giants Win Superbowl (and Blog Roundup)

If you’ve joined Consumerism Commentary within the past year, you might have missed out on what was published here previously. Here are a few articles from January in past years to catch up. Stay current with the articles here by subscribing to the RSS feed.

From the Second Half of January 2007

Suze Orman Teams Up with TD Ameritrade
Netflix: It Might Be Time to Dump It
Review: The Maui Millionaires by David Finkel and Diane Kennedy
Investing: Real Estate vs. Stock Market
Chicago Fed: Could the Penny Be Worth Five Cents?
Yet Another TIAA-CREF Problem With My SEP IRA
My MBA at the University of Phoenix Online, Part 4: Curriculum
Financial Ratios for Personal Evaluation: Working Capital Ratio

From the Second Half of January 2006

Getting in (Physical) Shape
Five Signs You Have Too Much Money
Motivation for Generation X
Wage Inequality
How to Become as Rich as Bill Gates
New Emigrant Direct Credit Card
Introducing the MoneyBlogNetwork
Home Prices More Overvalued
Money Transferred to Debt
What to Do When Your Bank is Merging
Saving is Anti-American
Income Disparity By State
Overspending vs. Underearning
A Look at Blink By Malcolm Gladwell

From the Second Half of January 2005

Fear of a Housing Bubble?
Join the Army, Get Rich
Olsen Twins Buy Out Their CEO
2004 Investment Performance

From the Second Half of January 2004

If I Were Suddenly a Rich Man
Millionaires Revisited
The Power of Residual Value

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This Month in the Archives: Financial Ratios, Wage Inequality, and a Housing Bubble

Last weekend, I decided to open up a checking account at Commerce Bank. My girlfriend has been a customer for a few months, and she is very happy with their service. You can’t beat their hours, either. The branch a couple of blocks from my apartment open late tonight and all Thursdays — to 8:00 pm. They have long hours on Saturday and the branch is even open on Sunday.

I chose the simplest checking account offered. The free checking account has a low balance requirement of $100 (waived for the first year, probably forever) and doesn’t offer interest on the balance. I plan to keep only a small amount of funds here, accessible via ATM if I can’t find one for my primary checking account.

When I opened the account this weekend, the account manager was friendly and helpful. The process was very quick, and I was able to leave with my programmed ATM card and starting checks in hand. Before leaving, I mentioned that I was an amateur coin collector. They have machines there that customers can use to sort and count coins for free, but as I suspected, the bags of coins are shipped offsite immediately.

The account manager offered to take my phone number and let the tellers know that I would be interested in taking a look at any old or “different” coins they might receive.

I fully expected to never hear from the bank. Well, I was certainly surprised when I received a phone call today during lunch, less than a week after opening the account, from the account manager who helped me last weekend. It seems someone brought in $100 worth (face value) of large dollar coins. I’m willing to bet that this is the result of “cherrypicking” the best for their own collection and bringing the rejects to the bank. The sorting machine likely can’t handle large dollar coins, so the collection was brought to a teller.

The manager didn’t mention anything about the designs being “different,” so I’m willing to bet that these are all coins minted between 1971 and 1978, the “Eisenhower Dollars,” probably not worth more than $1 apiece.

Without hesitation, I responded that I was interested, and that I would try to stop by tonight to pick up the coins.

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Unexpected Call From Commerce Bank

If you’ve joined Consumerism Commentary within the past year, you might have missed out on what was published here previously. Here are a few articles from January in past years to catch up.

From the First Half of January 2007

Do I Have to Declare Goals?
10 Things Your Gym Won’t Tell You
Don’t Feel Bad if You Have a Messy Desk
Do I Need to Report This Income? Part 1 and Part 2
Beginning Employee Stock Purchase Plan
Replacing the Alternative Minimum Tax (AMT)
Ben Stein: Invest in 2007 or You’ll Regret It
What’s a Decent Rate of Return?
Forget About the Latte Factor

From the First Half of January 2006

Rebate Scams
Stocks are for Suckers?
Supersize My House
Merrill Lynch Broker Allegedly Steals $320,000
Financial Courses in High School
Problems With TIAA-Cref
Quick Guide to Asset Allocation
Buying a House vs. Renting a House

From the First Half of January 2005

Having a Six-Figure Salary Doesn’t Hurt
A Better ING Direct Deal
Investing While in Debt
The Millionaire Myth

From the First Half of January 2004

Holiday Debt
Having a Good Plan
If I Were Suddenly a Rich Man

Thanks to the readers who have been following along for the last few years!

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This Month in the Archives: Goals, Messy Desks, and Asset Allocation

I recently wrote about some changes coming to the presidential dollar series released into circulation by the U.S. Mint. Jeremy asked:

My wife and I received two fancy rolls of uncirculated coins of a 2007 series in a plastic display case as a gift this Christmas. For now they are just going to sit in the safe deposit box at the bank, but I wonder if they will ever have some sort of added value. Flexo, do you think these will ever have any sort of collector’s value (baring mistakes, die errors, etc)?

Collecting coins is fun, if you’re into that sort of thing, as I am once in a while. I don’t do it for the money, though. In most cases, trying to make money with a coin collection is speculation worse than day trading. Think about when you used to collect baseball cards. Chances are that if you did, you were doing so at the same time I was, in the late 1980s. Everyone was collecting cards at that point, or so it seemed. Supply was through the roof, and then when baseball started losing favor with Americans, demand dropped. So much for the value of late 1980s baseball cards.

Coins are similar. To answer Jeremy’s question, you’d have to take into account four main considerations that go into the “value” of a coin at any moment. If you want to see what the market is supporting, check recent successful eBay sales. But why is a 1955 cent worth more than $47,000 while an 1815 quarter dollar only $95?

Factor 1: Condition

There are two major components of condition, and the first is pre-circulation. Everything that happens to the coin while at the mint, including the way the design is struck on the planchet and marks left by other coins during transportation, plays a part in determining the condition of the coin. If the coin is circulated, then wear and tear plays a roll.

Several companies take the guesswork out of rating the condition of the coin, for a fee. They will grade the coin on a scale of 1 to 70, with 70 being practically perfect, and place the graded coin in a display holder that will hopefully prevent any future damage. The better the condition, the higher the value.

Factor 2: Rarity

Most modern coins will never be rare. These days, there are many collectors and the mint produces many items of each type of coin being produced every year. If you’re collecting coins for investment potential, modern coins are not good bets, unless you have a true rarity such as an error coin. That being said, a coin’s old age doesn’t correlate to rarity. Some older coins are more common that recent pieces. The higher a coin’s rarity, the higher the value.

Factor 3: Bullion value

Coins are generally composed of at least one type of metal, and that metal has a market value. For example, silver is currently $15.35 an ounce and copper is currently $3.1608 a pound as I write this article. A 1960 quarter dollar was composed of 90% silver and 10% copper. Multiply the price by the weight of each metal in the quarter, and you’ll find that the bullion or melt value of a 1960 quarter is $2.7804. For the most part, you should be able to sell a coin for at least the bullion value. Coinflation will tell you the metal content of U.S. coins and give you bullion values based on the latest market prices for the composition metals.

Factor 4: Demand

Ah, demand. Without demand, coins would fetch only their face value. That same 1960 quarter could only be used in financial transactions and would be worth no more than $0.25. Demand for various coins ebbs and flows as tastes change.

I can’t predict whether any particular coin will be in demand in the future. It’s likely that most modern coins won’t be hot among collectors thanks to their overabundance. But the coming changes to the edge of the coin may make the earlier series more desirable. Unfortunately, many of the early presidential dollar coins didn’t leave the Mint without unattractive damage. (See the first consideration of “condition.”)

The coins that Jeremy has are uncirculated, which means they may be in better condition than average. The best bet might be proof coins, which go through a special process to ensure that they remain in excellent condition throughout the minting and packaging process. Proof coins look much different — shinier and stronger — than circulated (”business strike”) and other uncirculated coins. If any coins have the ability to increase in value, it’s the rarer proof versions of these coins.

On the other hand, proof coins are hoarded among collectors. Secondary demand (after the initial demand during production, when collectors can buy directly from the Mint) will remain low for a while.

Rather than worrying about these factors, it’s much more enjoyable to collect for fun. If you want to put a value on your collection, check out from a library the 2008 Guide Book of United States Coins, also known as the “Red Book.” Another good source of coin values for those who prefer to do their research online rather than the library is the PCGS Price Guide.

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Four Factors That Determine the Value of a Coin

There’s some news about the relatively unpopular “presidential” golden dollar coins. I’ve been using these coins almost every day, but I have not run into anyone else doing so. Most people I know haven’t even seen the coins. If you want to pick them up from the bank, pay attention to the release schedule:

February 14: James Monroe
May 15: John Quincy Adams
August 14: Andrew Jackson
November 13: Martin Van Buren

Here’s a chance to look at the four obverse designs representing U.S. presidents five through eight.

Currently, the “In God We Trust” motto appears on the edge of the dollar coins. This is an interesting idea, but I can’t say I am a fan. The edge lettering just doesn’t seem as solid as lettering on the obverse or reverse. Other people apparently had their own problems with the relocation of the motto. I’ve received forwarded junk email stating incorrectly that the “In God We Trust” motto was missing from all dollar coins as the result of some (non-existent) political God-elimination scheme. That rumor as we know is completely untrue, but a small amount of error coins struck without the lettering surfaced. Some individuals have vandalized coins to make “fake errors,” as well, but there was no underground governmental desire to remove “In God We Trust” from the coins.

Now, here is the news. The motto will be moving to the obverse of the dollar coins in 2009, while the date and mint mark will remain on the edge. This change could possibly increase the demand for earlier dollar coins from 2007 and 2008, at least among collectors, due to what will eventually be the “rarer” configuration with the motto on the edge.

Speaking of design changes, I hope that at the conclusion of the presidential dollar series, all presidential portraiture designs are retired. When designing the original American coinage, the founders wanted to stay away from honoring political leaders — it reminded them too much of the kingdom from which they were trying to separate. Let’s get back to having attractive and artistic representations of Liberty on our coinage rather than dead people.

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Presidential Dollar Coins: New Designs in 2008 and Future Changes

If you visit Rockefeller Center in New York before the end of the year, you’ll see an “art installation” consisting of $1,000,000 in one-cent coins.

Silda Wall Spitzer, the wife of Gov. Eliot Spitzer, joined more than 300 elementary and middle school students from New York to unveil the “Penny Harvest Field,” an exhibition featuring an estimated 100 million pennies, most of them collected by children, between Oct. 22 and Thanksgiving.

Here’s a better look, courtesy of Common Cents, an organization that helps young people become philanthropists.

A serious coin collector wouldn’t mind spending hours sifting through these coins for the chance to come upon a rarity. Instead, the cents will go back to the students and teachers who contributed them. They will choose the charities to be recipients of the funds, presumably in the form of checks rather than bags of cents.

Making Cents, for Children, at Rockefeller Center [New York Times]

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$1,000,000 in Pennies in New York City

New to Consumerism Commentary? Make up for lost time by taking a look through articles posted here in prior years. From the first half of December 2006:

* Sometimes Financial Decisions Must Consider More Than Just Money
* Whining About the Lack of Interest in Their House?
* Baby Boomers Plan to Work in Retirement
* Get Free Money: Comparing Cash Back (Rebate) Credit Cards
* Quicken 2007 Revisited: A Little Better But Far From Perfect
* The Bank Deposits $1,000,000 Into Your Savings Account…
* How to Be the CFO of Your Own Life
* Purchased a New Notebook Computer: Customized Dell Inspiron E1705
* Wealthiest in the World: I’m in the Top 10%

From the first half of December 2005:

* Bank of America’s Keep The Change
* The Most Indebted Generation
* Getting Rich Is Simple
* Backfired Bankruptcy Bill
* New Jersey Nest Eggs Incubating
* Open an Account at Every Bank
* No Need To Panic About Flex Spending Accounts

From December 2004:

* Residual Value
* Another Young Millionaire

From December 2003:

* Do You Want to Earn More Money?
* Stealth Inflation
* Thinking Ahead

The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

This Month in the Archives: Whining, CFO of Your Own Life, and Flex Accounts

For a taste of old-time Consumerism Commentary, peruse these articles from the second half of November in prior years. From November 2006:

* Extreme Savers Greg and Tara: We Have Some Things in Common
* FreeCreditReport.com is a Scam!
* Money-Saving Tips for Shopping Online
* Wesabe, Web 2.0 Tool for Tracking Finances: Useful or Useless?
* There’s No Way to Sugarcoat This: I Spent Too Much This Weekend
* Young and in Debt: Five Twenty-Somethings Share Stories
* Money Gifts Better Than Cash, Better Than Things
* U.S. Mint Will Try Dollar Coins Again
* Did You Miss National Retirement Planning Week?
* Today was “Cyber Monday.� Did You Spend?
* Make Your Kids Rich: 5 Fun Gifts
* Saving for a Wedding Next Year
* Estimating Asset Values and Asset Depreciation

Here are some from the second half of November 2005:

* Don’t Stress About Investing
* Are You Pursuing Your Passion?
* Questions to Ask About Gift Cards
* HOWTO Excessively Spol Your Kids, Part 2
* Dinged Rental Cars, Dinged Wallet
* Gift Giving Among a Circle of Friends
* Microsoft’s Xbox 360 Strategies
* Will China Make Americans Better or Worse Off?
* Ten Percent of Income Over One Hundred Thousand Dollars
* Review of The Number by Lee Eisenberg, Part 1
* Taking a Pay Cut Sometimes Pays Off
* Bat-Mitzvah For The Rich And Not Really Famous
* Diversification is for Amateurs

From November 2004:

* More Millionaires This Year
* Top 30 ZIPs With Six-Figure Salaries
* ‘Tis The Season For Giving

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The Consumerism Commentary Podcast is in full swing with new episodes every Sunday. Listen and subscribe now!

This Month in the Archives: Money Gifts, Cyber Monday, and the Season for Giving

Here’s a hypothetical situation. Let’s say you’re a single mother with two children to support. Let’s also say, for the sake of argument, that thanks to royalties and such you earn $737,000. That is $737,000 a month. Even if you’re a big spender, surely close to $9,000,000 a year, and the income generated from investments of that money, will allow for a solid future for yourself and your kids.

Not if you’re Britney Spears, according to court papers reviewed by CNN. The former pop princess doesn’t save or invest any of her income. Is she financially reckless? Or does she simply believe that this income will always be present?

Britney’s spending habits certainly paint a picture.

Spears’ monthly expenses include $49,267 in mortgage for two houses, $16,000 for clothes and $102,000 on entertainment, gifts and vacation, according to her financial declaration… Spears declares she spends about $4,758 per month dining out. Meanwhile, she spends zero on education, savings and investments and gives $500 a month in charitable contributions, the documents said. She has to pay her ex-husband $15,000 per month in child support and $20,000 in spousal support.

It seems to me, and it’s no surprise, Spears has income to spare. Think of the possibilities of a $9 million income, a good portion of which possibly guaranteed for the rest of one’s life, for someone who handles their finances with sanity. I dream of starting a foundation. I could do that and have a nice house and provide every conceivable opportunity for my theoretical future children for the amount of money this particular has-been wastes every month.

Thanks to Advanced Personal Finance for pointing out the article.

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Britney Spears: Doing Nothing With a Six-Figure Monthly Income

If you’re new to Consumerism Commentary or just nostalgic, here are some articles from the first half of November in prior years. From November 2006:

* Is a Wal-Mart Sale CNN-Newsworthy?
* Secrets and Myths About Salary Your Employer Doesn’t Want You to Know
* Solved an Algebra Equation at Work
* Bond Issued to Fund Vaccinations for 500 Million Children
* My Company’s Stock Purchase Plan, Take 2
* Car Almost Done With Repairs: What Do I Need to Look For?
* Where Do Hedge Fund Professional Spend Their Money?
* What’s in House Speaker Nancy Pelosi’s Investment Accounts?
* Review: The Smartest Investment Book You’ll Ever Read by Daniel R. Solin
* 7 Ways to Save Money While Maintaining Your Extravagant Lifestyle
* My Company’s Stock Purchase Plan, Take 3
* What is Your Biggest Weakness?

From November 2005:

* Three Worst House Buying Excuses
* Reasonable and Customary
* Your Credit Report Affects Your Cards
* redit Card Solicitation to the Extreme
* Fewer Women in Hedge Funds
* The Rich Can Teach Us a Thing or Two
* Gift Cards Denote Laziness?

From the first half of November 2004:

* Better Than the Bare Minimum
* Win Ben Stein’s Advice

And from the first half of November 2003:

* Live Cheap, Look Rich
* Buy and Hold Cold Cuts

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This Month in the Archives: Wal-Mart Sales, Algebra, and Extravagance