So you need a costume tonight...

Here's a bunch of cheap DIY ideas if you've put off getting a Halloween costume until this very moment! Enjoy and have a safe night trick-or-treating!

The next not-so-random years

I just finished A Random Walk Down Wall Street by Burton Malkiel and there was one part that captured my attention:

First was a table that read:
Era III- January 1982 - March 2000: the age of exuberance
S&P 500= 18.3%
Bonds 13.5%
Inflation rate= 3.3%

Then this quote:

“During our third era, the age of exuberance, the boomers matured, peace
reigned, and a non-inflationary prosperity set in. It was a golden age for
stockholders and bondholders. Never before had they earned such generous
returns.”

I’ve always been optimistic that small investments over time will produce good results for my husband and me. However, seeing this information, am I just a product of my upbringing?

Literally all the formative years of my life, my first eighteen years, are encapsulated during this age of exuberance.

This age of exuberance was preceded by two other ages: the first was good and the second was bad. Adding the third phase into the mix and we are due to have another 10-20 years of bad times. In other words, the fourth age isn’t going to be pretty.

Given this information, how does the idealist adolescent in me reconcile poor returns that will dominate the young adult years of my life?

it was an itsy-bitsy-teenie-weenie yellow pokka dot...

Fun money quote of the day:

“a firm’s income statement may be likened to a bikini- what it reveals is
interesting, but what it conceals is vital”

~ in A Random Walk Down Wall Street by Burton Malkiel

The chicken or the egg (or evolution)?

Yesterday I wrote about a phenomenon that pointed out “that investors who made written plans by the time they were 40 years of age wound up with 5 times as much money by age 65 as those who didn’t have written plans” (Fortune Magazine, 1999). However, I felt that this occurrence was due to another factor: A person’s own willingness to be actively involved in their finances.

This made me think about an article in Money magazine (August 26, 2008) that rubbed me the wrong way. It was an article highlighting Law professor Lauren Willis and her belief that you can’t teach financial literacy. Excerpt:

Question: What's so bad about financial education?

Answer: It doesn't work. Sellers of financial products spend billions drowning out
well-meaning messages to consumers from nonprofits or government
agencies.
Also, financial products are always changing - credit and insurance
products have changed dramatically in the past 20 years - making it hard for
educators to keep up.
…
Teaching them is a waste of money. Studies show that sending people to either high school personal-finance classes or adult retirement seminars does not result in better financial behavior.

Anyone else have the hair on their neck standing up? This article got a lot of bad press, and negative reactions all around.

I kinda dismissed this article thinking: look at me! I’m learning financial literacy! I can do it, and so can everyone else!

However, months later, it’s still (obviously) rumbling around in my head.

I have to wonder if this too has a chicken and egg conundrum. Perhaps financial literacy can’t be taught to those who have no interest in it, or shouldn’t be taught to those who want to learn get-rich-quick schemes. Financial literacy can be taught, but only to those who want to learn about the basics.

In Psychology, we call this a third-variable or latent variable problem. When a statement holds up as true, but not because of the statement itself, but rather because of some extraneous factor.
Let me give you an example: Shark attacks and ice cream sales go hand-in-hand. When shark attacks increase, so do ice cream sales. This is a true statement. However, it’s pretty apparent that shark attacks do not cause people to crave ice cream (help, help me! I’ve been bitten- and I need Ben and Jerry’s!).

No, instead it is the temperature of the weather that increases both attacks and sales. When the weather is hot more people are likely to go to the beach (and therefore increase their chances of being attacked by a shark) and more people desire a cold, frosty treat when the mercury rises.

(Another puzzle for you: violent crime and church attendance go hand-in-hand. When there is more crime, more people attend church. This is a true statement, but why?)

I bet what Law professor Lauren Willis said was true. In general, you can’t teach financial literacy. Increased knowledge about finances leads to worse financial behaviors. However, it’s not the knowledge itself that is the problem, instead it is the demographic: the general public. The general public may not have a true interest in the subject or possibly they only want to do the cool, over-hyped, get-rich-quick schemes.

There is a demographic that is the exception to this rule. This exception is the personal finance community, a group of people who have taken on just this task, and are probably a lot better at it than the general public. Which is, of course, Money magazine’s target demographic.

The chicken or the egg (or an almighty creator)?

I’ve been reading Live It Up Without Outliving Your Money! by Paul Merriman which was a great read! It nicely explains why asset allocation is so important and gives step-by-step explanations on how to increase your portfolio performance.

However, like in many books, I see supporting evidence such as this: a study in Fortune magazine found that “investors who made written plans by the time they were 40 years of age wound up with five times as much money by age 65 as those who didn’t have written plans.”

I know he’s trying to underscore the importance of having a written plan, but we seem to have a chicken and egg problem here. Does writing down a financial plan guarantee more returns? No, probably not. If a person does nothing with their finances beyond writing a financial plan they are not going to see an amazing gain in their portfolio.

Or is it that people who are likely to pay attention to their finances (and thus make a written plan) make more money than someone who doesn’t? Probably so.

feeling a bit better

Hey everyone! I’ve been knocked out by a nasty sinus infection, but I should be clear-headed by Monday. So, until then, have a nice weekend!

Carnival of Money Stories: Edition #81

Welcome to this week's edition of Carnival of Money Stories, I’m SoCal Savvy and I’m very excited to be hosting this event!

I am pleased to welcome all new readers to SoCal Savvy. I’m newly married and out-of-work. On one income I’m making our bucks stretch and still enjoying everything Southern California has to offer us. I want to save a buck, but also enjoy life as a twenty-something in the city. It’s a process, but I want to share what I’ve learned and get feedback from others!

If you like this carnival, please - help me, yourselves and the carnival by:

Subscribing to this feed
Submitting the carnival to sites like PF Buzz, Reddit, Digg, Stumble Upon, or Technorati
OR
Linking back to the carnival.

There were many submissions to the carnival this week, but many were not "money stories" or "money experiences" as specified by the carnival guidelines. (If you’ve never hosted a carnival you wouldn’t believe how many self-promoting ads and much spam there is!) Here are the submissions that made the cut:

Editor's Picks
Being creative pays off big time for The Personal Financier

Personal Finance Analyst provides five funny ideas on what to do with your gas guzzler. However: I’m not sure I’d want my mother-in-law to live in my driveway….

If you had revealed your deepest, darkest financial secret to Broke Grad Student you could have won a computer!

Credit
The Stylist Tycoon proves that you can reverse credit card fees.

Ask Mr. Credit Card poses a scenario where you are asked to help your son by co-signing the loan, and the possible bleak result.

Debt
Soon to be Debt Free writes what happens when you wrestle with inner demons- and lawn mowers.

Taxes
Ever wonder if those politicians really know what their talking about? The Wandering Tax Pro gives them an earful.

Market Crisis
Advice from an old classmate of Joe Manausa

Maintaining an even keel in a topsy-turvy market, simple advice from Uncommon Cents.

Investing
Which investor do you see yourself in? Money and Such reviews how three investor friends have responded to the roller coaster stock market.

Asset allocation can be a retirement saver in this fictional scenario put forth by No Debt Plan

A needless run on the bank as viewed by Cash Money Life.

The topic of risk is explored by Investing School.

A reminder that we could all learn from our mistakes was presented by Stock Market Investing For Beginners

The Investor’s Journal.Com takes a look back his first stock purchase… ahhh… the naïve days…

Wealth
Now if only I lived next door to Oprah… Actorlicious provides 10 tips to gaining wealth.

Real Estate
To List or Not To List? BeThisWay ponders the question.

Wow-weee, Not the Jet Set finds a good surprise on a mortgage statement.

The bleak reality of neighborhood foreclosures by Funny about Money

Hopefully not too many people are indulging in the unintended consequence described by Kirby on Finance.

Serendipity is brutally honest with what it is like to be in foreclosure.

Other
Don’t we all fear getting ripped off by the mechanic? Just this happens to Debt Prison and he’s steaming mad at them!

What would happen to your goals if your expected bonus didn’t come? Budgets are $exy reevaluates.

A good deal for the East Coast commuting contingency presented by BluePrint for Financial Prosperity.

Harvesting Dollars didn’t get the pink slip, but wonders about those who did.

The most magical mailbox belongs to Almost Frugal as she got over five hundred euro in checks and a 6% interest rate on her French ING account! (My own California mailbox is quite jealous!)

Constructive complaining can be lucrative as Two Pennies Earned shows.

Another pet peeve of mine- pressure driven sales! Living Almost Large has a bad experience with a rude HVAC serviceman.

Financial Wellness Project loses money on free books because it is so easy to do so.

Until Debt Do Us Part reminds us that we all must take care of ourselves when tackling tough issues.

Saving even $14 is a big deal for Free Money Finance

MoneyNing shows that money philosophies can be handed down from father to son.

Thanks to everyone for submitting such great work! Tune in next week to blog host The Financial Wellness Project for the 82nd Carnival of Money Stories.

~SoCal Savvy

localvations

By Friday I was itching to get out of this house!

After skimming the rates in Vegas, we decided it would still be wwwwaaaayyyy to expensive to go there. Instead, I got a call from a friend who lives near the beach and we were off to a localvation (local vacation) in Orange County.

We spent most of Saturday kayaking around Newport Harbor spotting not only sea lions and pelicans, but the houses of the rich and famous. After working up an appetite we stopped by a grocery store to get goodies for a matinee movie. Then it was time to pick up a pager for P.F. Changs and some shopping (I only got a pair of leggings to replace the pair I had ripped last winter). After a decadent dinner of asian steak, kung pow chicken, prawn lo mein, lettuce wraps, and Szechwan style asparagus, we knew it was time for Cold Stone! We made some quarts and were home in time to see Sarah Palin on SNL.

Sunday we spent ogling open houses and getting our butts whopped at tennis (no, literally, I took one high speed tennis ball to my left check and I still can’t sit properly!).

Over all, it was a good time in the fresh air. However, because we stayed with friends and our friends happen to be the majesty-of-coupon-uses we spent less than $90 for both of us to have a fabulous beach weekend.

Kayaking: $30
Cookies: $3
Matinee tickets: $14
Leggings: $11
P.F. Changs: $25 for dinner and drinks (love the buy-one-get-one-free)
Cold Stone: $6
----------------

Total: $89

How about you? What great localvations do you like to do?

Hosting the 81st Carnival of Money Stories

I’m hosting the 81st Carnival of Money Stories which will début on the 21st of October! It’s my first time hosting a carnival and I’m a) excited and b) not sure what to expect. Any advice?

I’m hoping that lots of people submit their blogs, and if you have a story you’d like to share please submit it at the Carnival of Money Stories site!

The Rewards of Charging $770B

Assuming that Paulson’s had to pull out the plastic instead of charging this financial rescue plan to taxpayers, what does $770 billion get you in rewards? Assuming Paulson has excellent credit, no annual fee, but wants some perks for giving them his business; here are some offers he could take:

Blue Cash AMEX
He has a whole year to party interest free before having to pony up (or to resign), but let’s say he wants some cold, hard, cash rewards. Since this is not an “everyday purchase” i.e. gas, supermarket, or the like, he will only get 1.5% cash back on his purchase. That is $11.55 billion in chump change to play around with. However, that reward is given as a credit on the AMEX bill; therefore Paulson owes only $758,450,000,000. At that point even if he paid $10 billion a month it would still take him over 10 years to pay it off.

Miles by Discover Card
Let’s say Paulson could care less about getting cash back. He doesn’t need a discount, heck- he needs a vacation after all this stress!

With this card he could get 1 mile for every dollar spent, and every 5,000 miles gets a $50 travel credit towards his travel purchases. Using Airtreks I made an amazing around the world trip (New York - San Francisco - Honolulu - Papeete (Tahiti) - Sydney - Bali (Denpasar) - Jakarta - Singapore - Bangkok - Hong Kong - Taipei - Hong Kong - Shanghai - Tokyo - Seoul - Beijing - Delhi - Bombay / Mumbai - Nairobi - Johannesburg - Cairo - Athens - Rome - Barcelona - Madrid - Paris - Budapest - Vienna - Frankfurt - London - Amsterdam - Paris - London - Reykjavik - New York - Montreal - Miami - Mexico City - San Jose - Caracas - Quito - Lima - Santiago - Buenos Aires - Sao Paulo - Rio de Janeiro - Lima - Los Angeles - Vancouver - Seattle - Chicago - New York) that costs about $17,542. Paulson and 438,946 of his closest friends could take this trip for free!

Or, if this isn’t exciting enough, he could mimic American space tourist Richard Garriott and dock with the International Space Station. For a cool $20 million he could only bring 384 friends along with his rewards bucks. However, he will have to start paying back the whole $770 billion after only six months and it would take him over 11 years to do so.

However, this is all assuming that $770 billion isn’t over his credit limit, if it is, he goes into the default rate- a whooping 30.99%. If he paid $20 billion a month it would take him almost 17 years to pay off.

Chase Free Cash Rewards Visa Card
Let’s say that Paulson’s a shopper. He could get 1 point for every eligible dollar purchase. If we assume these are eligible dollars, with this card he could get a $25 gift card to a leading national merchant for every $2,500 he spent. This sound like it could be enough gift cards to stuff every Christmas stocking in the US, but hold on there’s a catch! There’s a maximum point accumulation on net purchases which is 60,000 points per calendar year. That means he could only get $600 worth of gift cards per year.

So sad, but just what could he get? Why it’s a Compaq Presario CQ50-210US 15.4" Widescreen Notebook Computer With AMD Athlon™ X2 QL-62 Dual-Core Processor from Office Depot!

While the introductory offer period is a year, when it wears off Paulson will be hit with the standard 19.99% rate. Paying $13 billion a month it will take him over 21 years to make the balance hit $0.



While Paulson can’t really charge this debt, and the rewards of this financial rescue plan are different than those stated above; I have to wonder- will we as a nation have this debt paid off in 10, 11, 17, or 20 years?

Savvy or Foolhardy?

Poll outcomes:
I put a poll concerning the financial rescue plan up last week and here are the outcomes:

Are you happy that the House passed the financial bailout bill?
Yes- 50%
No- 25%
I don’t know yet- 25%

I have to wonder- if I reposted this poll in a year how will people feel about the financial rescue plan at that time? Will history books denote this as a savvy move or a foolhardy risk?

What is risky?

I’ve been reading Live It Up Without Outliving Your Money! by Paul Merriman and he had a handy little test for determining if you have taken on to much risk. Simply ask yourself the following questions: yes or no?

Have I lost sleep over my investments?
Do I feel compelled to watch the financial news?
Do I feel compelled to check fund prices daily?
Does financial new make me worry about my future?

If you answered "yes" to all of the above it's time to look at your investments!

On one hand I like this test because it is parsimonious. On the other hand, if a person doesn’t particularly understand finances and asked themselves these questions it might incite panic in times such as these. What do you think? How do you try to assess your own financial risk level?

Planet Money

Yesterday I was talking to a friend who was panicked about her money situation. Basically, all the talking heads had scared the be-gee-zzers out of her and she was wondering how to open a mattress. She was completely befuddled by my belief that this larger financial mess would change.

She then asked me, “How did this all start?”

My mind crazily flashed sound bites: mortgage mess, Fanny Mae, Freddie Mac, US trade balance imbalances, greed, too much leverage, loose credit, etc, etc.

However, the best answer I could form was: “People made stupid decisions and this mess is the repercussions of those choices.” Which, needless to say, was not very informative nor comforting for my friend.

So I wanted to find some point reference where the tangles of decisions were once wrapped smartly together to form a solid financial system. A time where all we saw was this sturdy fiscal rope which we thought was tied to a immoveable anchor holding our economy in place.

So I turned to NPR. (I know, I know, this paints a real picture of who the person is that types this blog, but I wanted a source that would give me more than sound bites and had discrete information that builds on itself over time.)

Enter Planet Money, NPR’s aptly timed new radio show about this financial crisis. Only about a month old, it started at a time where most reporters spent 15 seconds on the failing bank of the day before moving onto their human interest piece. These radio shows, which I’ve been listening to as podcasts, were explaining not only which bank was failing- but why.

After listening to about half the shows, I’m not sure I could come up with a better answer for my friend. I think that my new knowledge points to many reasons for this financial crisis. We were all looking at that same rope- except it wasn’t tether to an anchor, or anything else really. The rope was just out of sight, obscured by the water trailing shreds of rope that was slowly uncoiling as our economic yacht sailed on.

Whether you’re muddled up by conflicting advice or just scared about this financial crisis, Planet Money is a good way of grounding your fears with objective knowledge about our current situation.

Bye, bye FICO?

I was watching On The Money a couple of weeks ago and they had a segment on the new credit rating system- Vantage. VantageScore is created by Experian, Equifax and TransUnion whereas FICO is put out by Fair Isaac Corporation. While it claims to work similarly to FICO it uses a mixed number/letter scale and is suppose to be better for people who have little credit history.

While I understand that the credit agencies would like to make some money, the whole thing sounds rather complicated and redundant. Has anyone gotten their VantageScore? Was it an easy process and easy to understand your score? Did you the additional benefit as compared to your FICO?

For more information on VantageScore check out: the BankRate article, the official website, SoundMoney blog, and a Liz Pulliam Weston article.

An extra helping of credit

It’s been a rocky couple of weeks for the financial markets and I’ve seen tons of talking heads saying, “Credit Crunch” like hungry children demanding a breakfast cereal. Consequently, I’ve been watching my credit card limits to see if they would shrink like the pundits predicted.

So, I was fairly flabbergasted when both my husband and I got notices that our credit limits have been extended. Extended- as in they are giving us more credit.

These are on two separate individual credit cards by different companies. Now the cynical side of me thinks that these companies are hoping something bad is going to befall us and hope that we use their card.

However, on the brighter side, this is great for our credit scores since we pay off our balances every month.

Has this happened to anyone else? Has anyone else been offered more credit? Or happen to have a theory of why I have been?

LILA

Even as an out-of-work instructor I still like hearing about things that could be helpful for future students that I will be helping in the future. I was listening to a great story on Marketplace Money about adult education savings accounts called LILA. Has anyone actually heard of these before- or better yet- used them? If so, I’d love to hear how they worked out for you!

You can listen to the story here. Or go here to find out more information on The Council for Adult and Experiential Learning.

The Carnies are taking over!

Yes, I know another carnival! This time it was the 79th edition of the Carnival of Money Stories hosted by Living Almost Large. Featured was my story about saving money on car insurance- and I don’t suggest that you have to follow that talking gecko!

Also good were:

It’s a tear jerker- Do you appreciate what you have? posted at Gather Little by Little.

Ask for discounts, my hubby is good at this, and apparently so is A Good Money Day! posted at SimplyForties.

Haha.. everyone loves a limerick- Dear “Everyday Working Class” Sarah posted at Mad Kane’s Political Madness

A book I also love was reviewed at Actorlicious

Painfully relevant job seeking advice- Looking for a Job? Here are 4 Steps to Find a Great One posted at ProsperingServant.com.

A common scene and relatable experience: Credit Card Companies Peddling On My College Campus posted at Trees Full of Money.

173rd edition of Carnival of Personal Finance

It’s up: 173rd edition of Carnival of Personal Finance hosted by Girls Just Wanna Have Funds! I think this is the first time my blog has been mentioned in a real personal finance category. Yes, my blogs are normally relegated to the “Other” category (even if I select something different). However, this time I’m in the Economy section- whoo who! Check out my blog and some of my favorites from the Carnival!

LivingAlmostLarge presents what happens when people willingly want to Walk away from foreclosures

The Passive Dad presents Free Creative Ideas to Help Friends Facing Foreclosure or Bankruptcy

Orange Dealing with Money presents good basic advice on Women and Retirement.

The gold medal for explaining Mint goes to: Blueprint for Financial Prosperity: Mint.com Review: Beautiful Money Management Tool

As an educator I found this blog especially interesting: Free College Education Exists by Destroy Debt

Looking at the alternative costs of the fiscal rescue plan: Free From Broke presents New Economic Stimulus Package - The $700 Billion Bailout

Cute but real suggestions during past hard times: Miss Thrifty presents Make Do And Mend: ‘Vogue’ for the Credit Crunch Bunch

As a psychology major I also loved: Greener Pastures presents The Psychology of Money - Neuropsychologists Study Spending Patterns at Auctions

I’ve always wondered how to do this: Ask Mr Credit Card presents How To Dispute An Item On Your Credit Report

Something that was on my “to-blog list” but Beyond Paycheck to Paycheck got there first! “Does anybody really believe that financial education is harmful? Apparently.”

It passed!

Yes, the house bailout plan just passed!

I know not everyone is excited about this bill passing, but to me it just seems like the best thing we can do to prevent a disaster in the near future. When the first version of the bill didn’t pass the House my immediate thoughts were, “Come on people- work together! Stop being so selfish!”

However, I know not everyone feels this way, so I created a poll on the top left of my blog asking people whether they are happy about the bailout plan or not. What are your thoughts on this newly passed financial plan? Add your comment below and make sure to vote in my poll on this issue!

Sad September Slump

Well…. I knew I’d be starting October back in the four digit red, but it wasn’t fun seeing my lowest net worth yet: -$1,730. Basically my ROTH IRA portfolio has a grand one year return of: -25.9%.

Oouch!

However, I can’t control that, so I’m moving on to other brighter aspects of my financial picture. It was nice to see where things did progress, and I increased my savings in the following accounts:

2008 Roth IRA 3K went from 58.4% to 58.7%
15K New Car Fund went from 24.1% to 24.3%
14 K Emergency Fund went from 18.7% to 18.8%
100K Home DP Fund went from 11.6% to 11.7%

I also reduced my student loan balance by $30 even after accounting for the interest I paid. We were also fairly smart with money this month, and were generally under budget as a couple.

So I made progress in the areas of finance I directly control, I just need to remember that this slump is just a slump. The larger economy will turn around, but until then I think I better be ready for a few more months in the four digit red.

78th Carnival of Money Stories

My blog on Murphy was featured in 78th Carnival of Money Stories hosted by Funny About Money! I always love getting the little email that says you’ve been accepted and that I can read some of the best of the week’s postings all in one spot!

So here are my favorites of the favorite:

Proof that it can be done:
Dividends4Life figures out a way to make blog income grow.

Free Money Finance's movie theater manager jumps into The Great Debate over Sneaking Popcorn into Movie Theaters, and the readers’ debate grows hotter.

While I’m not in total agreement with her title, this well-written strong mama article is fun to read!

Who doesn’t love a cute family story?
The Life Less Traveled features a Family Downsizes Life to a Camper, the Open Road, and Adventures Rich in Simple Pleasures.

Short. Simple. Who doesn’t like a good limerick?
Madeleine Begun KaneMad Kane’s Humor Blog Wall Street Woes

I’ve got the "LALALA!" feeling and so does The Digerati LifeFinancial Crisis in the Media: Is the Economic Crisis Overhyped?

Another example of why big business isn’t always smart is exhibited by GraceGraceful Retirement Are We Sure Our Banks Know What They Are Doing?

Kelly at Almost Frugal highlights reality with Three Life Lessons Learned Last Week.