Wednesday, October 18, 2017

When Stocks Keep Giving After You Have Sold Them

Over a year ago, I wrote this piece about how to go paperless. As a small aside in the post, I said:

(I have been involved in some class action lawsuits regarding stock purchases made years ago, so I felt I should keep all my old brokerage statements.) 
Class action lawsuits against companies are somewhat controversial. On the one hand, they do serve a valid purpose of holding companies accountable when they wrong a large number of people for damages that would be too small for any one individual to sue for. On the other hand, there are a lot of questionable lawyers that abuse the process and use class action suits as a way to generate income for their law firms.

No matter your position on them, they are here to stay and when one comes my way, I will take advantage of it.

Today, I reaped the benefits of my paperless lifestyle. I received notification of a class action lawsuit against THQ (who was actually an old employer of mine). To receive a claim from the lawsuit, you need to submit proof that you bought or sold THQ stock within a certain time period. That proof needed to be in the form of brokerage statements.

If I did not have electronic records, I wouldn't even bother tracking this information down. The time frame in question was between May, 2011 and February, 2012. I've got a lot of brokerage accounts. It probably would take me a couple of hours to go through paper copies looking for transactions involving THQ stock.

eStatements to the rescue!

Because I have gone paperless, all my statements are stored in .PDF files. Furthermore, Windows can read .PDF files and can index the contents. So I just navigated to my brokerage statements folder on my computer, typed "THQ" in the Search bar, and bam! I got a list of all my statements that contained THQ. Because I use a naming convention based on the date, I was able to easily find the three brokerage statements I needed for the class action suit.

I Was Just Paid $600 An Hour!

I printed them out, filled out the claim form, and mailed it in. Total time spent: about 30 minutes. Based on the claim form instructions, I should receive about $301 from the lawsuit. Not bad! And it's even better when you realize that I just made more money from stocks I sold over 5 years ago!

If you want to go all out with the class action lawsuits, you can visit for a list of hundreds of class actions lawsuits you might be a party to.

Wednesday, October 11, 2017

Pie-Based Investing with M1 Finance

Pies are delicious and with the holidays approaching, I'm looking forward to the cornucopia of pies that my family seems to produce this time of year. Those pies do a great job expanding my waistline, but they don't do so well when it comes to expanding my financial accounts.

Financial Pies

 Enter M1 Finance. This innovative new way to invest combines the automation of robo-brokers with the flexibility and control of a traditional brokerage account.

The concept is simple. You define a pie chart showing how you want your investments allocated - say 20% in conservative investments, 20% in stock of one company, and 60% in a mutual fund - and M1 does the rest! Each time you make a deposit, which can be scheduled to occur on a regular basis, M1 will purchase equities in the proportion your pie directs. M1 even purchases fractional shares, so your money is always invested as quickly as possible. No waiting around until you accumulate enough to purchase a full share!

Don't know what your pie should look like? M1 offers professionally created and managed pies for a variety of investments styles and objectives.

Over time, some assets will outperform others and your pie may get out of balance. A simple click of  a button will rebalance your investments. If you are using a pre-defined pie, this is done automatically for you each quarter.

Of course, all this can be done on your phone or tablet with their easy to use app.

How Much Does It Cost?

M1's pricing structure beats a traditional brokerage any day. Rather than pay a commission on each trade, M1 charges a low flat fee based on how much money you have invested with them. Your first $1,000 is free. For balances between $1,000 and $100,000, the fee is only 0.25% per year. Accounts large than that get a lower fee of just 0.15%. Keep in mind this is for unlimited trades. Rebalance every day if you want.

Regular Investing Is The Key

Studies have shown that the best way to build wealth in the stock market is to make regular investments. M1's combination of regular, periodic deposits and fractional share purchases ensure that you are able to get invested quickly and often. Furthermore, regular, periodic investing is the basis of dollar cost averaging, another proven technique to help manage risk.

There are no setup fees and accounts under $1,000 are free, so you have nothing to lose by trying them out! Click here to open an account.

Note: From time to time, I may recommend products or services. I may receive some form of compensation. See my disclosure page for full details.

Wednesday, October 4, 2017

Goal Update: End of September 2017

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of September, 2017
Current value: $34,964
Change from last month: +$1,099
Percent of Goal:  32.15%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

I saw an increase of almost $1,100 this month. Net income from my online courses was $94.89. Income from my ebooks was $1.16. I also received $7.72 from a class action lawsuit settlement.

My cash-backed naked puts of Realty Income expired out of the money and I was able to keep the $266.70 premium I collected last month. I've got a limit order in to try selling some again for another 8% ROI and I need the price of the stock to drop a little bit before that order gets filled.

This month I also published my online SQL Servers courses at a new site:! Their revenue model is a bit different from Udemy's model. At Udemy's, students purchase individual classes and the instructor gets a portion of the purchase price. At SkillShare, students can subscribe for as little as $8.25 per month and they get unlimited access to ALL the courses on the site - so far that's over 17,000 courses. Instructors are paid based on how many minutes of their courses have been viewed. It will be interesting to see how my income numbers compare between the two sites.

If you are interested in learning about many different topics, SkillShare looks to be a very cost-attractive way to go. They do offer free courses that do not require a monthly subscription, but if you would like to join, please use this link and I'll get a small kickback that will help me get my Tesla a little bit faster. (You don't have to take the class that link points to. Just use it to sign up and take any class you want, even if it's not one of mine.) My courses can be found at

Relocation Update

Escrow closed on our new house last week. We're waiting for new paint and carpet to be installed and then we will move in. Unfortunately, it looks like that won't be until near the end of October.

Net Worth Update 

Our net worth rebounded from last month, showing a gain of $20,880.That's pretty much exactly what our earnest money deposit was. If you recall, last month we paid it, but we didn't technically own the house yet, so it looked like a big debit to Mint. Now that we actually own the house, that amount is showing up as equity in the property.

Mint still can't access my 401(k) provider's website, so Mint is showing my 401(k) about $4,000 lower than it really is.

August 2017September 2017

Our cash took a huge drop as we paid our down payment for the house. Our credit card total shot up because we've been charged for our new carpet. We've got money in the bank to cover that. I'm just waiting until I get my bill to pay it.

And yeah... We've got a half a million dollar mortgage. Welcome to Washington!

If you have any questions or suggestions for topics, please drop me a line in the comments section!

Wednesday, September 20, 2017

The Crazy Seattle Housing Market

I just bet $20,000 that a house has nothing seriously wrong with it, based on nothing more than a 10 minute walk-though by myself and my wife. Although I enjoy going to Las Vegas, I’m not usually one to make such large bets. Seattle forced me to.

This Market Is So F-ing Crazy!

Housing markets vary across the country. In Arizona, when we sold our house a month ago, the market was fairly depressed. Prices had rebounded some from their all-time lows, but it was still considered a buyer’s market. There were more people looking to sell their homes than people wanting to buy one. This put downward pressure on prices, as any student of supply and demand can explain.

The Seattle area, on the other hand, is completely the opposite. Partly due to the many large tech companies headquartered here offering high paying jobs, many people are moving here and housing is scarce. There is not much un-developed land to build new houses on and what contractors are doing is buying up blocks of 5 to 10 existing houses, tearing them down, and building new ones in their place. Even existing homes are sold usually with a week. They could be sold in days, but most sellers wait for a week to get all offers and then choose the highest one. Basically, every home on the market is sold at a silent auction.

The New Home Process Turned Us Off

When my family first moved here, we were looked at buying a newly built home. New developments usually consisted of 10-20 homes or fewer. The builder would release the homes for sale one at time, usually at the rate of one every two or three weeks. If you wanted one of these houses, you needed to jump through a bunch of hoops. First, you had to apply for a loan using the builder’s lender. You didn’t have to end up using them, but you had to go through the whole pre-approval process with them, presumably so the builder knew you could afford to buy the house. Then, you had to get on an email list and be prepared to make an offer at a moment’s notice.  This is how the process works:

When a new home goes up for sale, people on the mailing list receive notice of the sale at 5 PM the day before. You then had to reply to the email with your offer before 9 AM the following day, telling the builder how much you will pay. The builder picks the highest offer.

Yes, the selling price is only a suggestion. The market is so crazy here, people are paying MORE than the asking price, even for new construction.

Did I mention most of these new houses don’t even have models built? You’re buying based on drawings.

If your offer was not accepted, you get to wait for the builder to release the next house. You can bet the next asking price will be $50,000 or more higher than the one for the last house you bid on, and that’s not counting how much people will bid over the asking price.

Used home sales are even crazier

If you want to buy a used home, you have the same general auction-like process. Most homes go up for sale and there is an open house the first weekend it is listed. The agent then collects all the offers for one week and, at the end of the week, the buyer selects the one they like the best. But for existing homes, there are some added twists.

In a normal market, a bid for a home usually includes a clause stating that you can get a home inspection and if the inspection turns up something wrong with the property that the seller refuses to correct, you can cancel the contract and get your deposit back. Not here. In order for your offer to be considered, you have to waive your right to cancel based on the inspection results. Or rather, you waive your right to get your earnest money deposit back if you cancel.

In a normal market, a bid for a home usually includes a clause stating that if you can’t obtain financing, you can cancel the contract and get your earnest money back. Not here. Don’t even bother considering to submit a bid unless you are pre-approved. Not pre-qualified. Pre-approved.

In a normal market, if the appraisal comes back lower than the sales price and your bank refuses to loan you more than the appraised price, you can cancel your contract. Not here. In order for your offer to be considered, you have to waive your right to cancel based on the appraisal. This means if your appraisal comes back $50,000 less than the sales price and your lender won’t let you borrow that extra $50,000, you have to come up with that $50,000 yourself. Or cancel the contract and forfeit your earnest money deposit.

In a normal market, an earnest money deposit is normally $1,000. It’s typically just a token, yet somewhat substantial, amount to indicate you are serious. When I sold my house in Arizona, the buyer put up $10,000 in earnest money, which I thought was a huge amount.  Up here, the typical earnest money deposit is $20,000 or more. Non-refundable upon contract acceptance. If the sellers accept your offer and you cancel for any reason, kiss that money goodbye.

Oh, and another thing. Your earnest money isn’t held until the sale is complete and escrow closes. For your offer to even be considered, you need to not only make the earnest money non-refundable, but also specify that it can be released to the seller within 5 days of contract acceptance.

And finally, your offer better include an escalation clause, or in layman’s terms, your silent auction clause. This clause says something to the effect of “we’re offering x dollars for your home, but we’ll actually pay up to y dollars if someone bids more than us and we will beat the other higher offer by z dollars.” Might was well shop for a house on eBay.

In this ultra-seller’s market, you basically give up all your rights to a refund of your sizeable earnest money deposit. And then you hope someone else doesn’t come in with an all-cash offer.

Our experience

When we heard about the crazy way new homes were being sold, we decided to ignore new homes altogether. The whole process just reeked of those Black Friday Christmas sales that start at 4 PM on Thanksgiving where people get trampled to death. The fact that each new home was priced at least $50,000 more than the last also turned us off.

So we turned to used homes. We found one we liked priced at $600,000 that had just come on the market. We made an offer with all the “must-haves:”

  • A $15,000, non-refundable earnest money deposit. 
  • The money would be released to the sellers 5 days after escrow opened.
  • We offered $625,000 and stated we would beat any higher offers by $5,000 up to a maximum price of $685,000.
  • We waived our rights to an inspection and waived the financing contingency.
  • We also offered to let the sellers live in the house up to 3 months after closing, rent free, while their new house was finished being built.
  • At the advice of our agent, we also included a personal letter saying how much we loved the house and hoped to live there. Tugging at the ol’ heartstrings can’t hurt.

We thought that was a pretty solid offer. Nope.  We did not get the house. There were 19 offers total (after only being on the market 1 week).  Final sales price: $750,000

Yes, the house sold for $150,000 MORE than the asking price.


This market is unsustainable. A crash has to be coming.

The Part Where We Prevail

We were quite depressed after losing out on our first offer. Things looked bleak and I wasn’t sure how we were ever going to buy a place. A week or two later, another property came on the market that we liked. It was an older home, priced at $595,000 and smaller than the other homes we looked at.

We put in an offer and were hopeful for a variety of reasons. There were not a ton of people at the open house. The house also did not have some of the features most people seemed to look for in a house these days: The two guest bedrooms were a bit on the small side, so I figured it might not suit the needs of many people. Because our daughter will be heading off to college in 5 years, we felt we could make do with the smaller rooms. The master bathroom and closet were small. If we got the house, we were planning on remodeling those areas in time, so we’d live with it until then.

On the positive side, the kitchen was newly remodeled and pretty nice. The backyard was also very nice. It wasn’t huge, but it was tiered with nice gardens.

Our offer was:
  •  $620,000 and we’d beat higher offers by $5,000 up to a max of $663,000
  • We waive all the financing and inspections again. 
  • Our earnest money deposit was $20,000, non-refundable and available to the sellers after 5 days.
  • We also included another letter saying how much we loved the house.

The seller was accepting offers until Monday at 10 AM, when they would make a decision. My agent kept pestering the selling agent to gauge what the interest was. The Friday before offers were due, there had been none received. Wow. Our hopes rose.

We submitted our offer on Sunday and, at that point, there were still no other offers. This was looking good, although now I was starting to wonder if there was some fatal flaw others had seen that I had missed.

Ten AM Monday came and went without a word. At noon, my agent called theirs and was told there were a total of three offers and their agent was on her way to meet the sellers now to go over them. Their agent confided that she thought ours was the best offer.

Wow. Only three offers. I liked those odds.

Hours more went by, still with no word. It was not until around 5 PM that we finally heard back. We got the house! And at our initial offering price of $620,000! Their agent did say that the sellers liked our little note about the house. They were a couple in their 70s and I think they wanted to know their house would be going to a family that appreciated it.

As of this writing, we’re still in escrow and all is looking well. Once we own the house, we’ll get an inspection to see what all needs to be fixed. We’ll also re-carpet and paint and then move in.

It's Not Impossible. You Just Have To Be Different Than Everyone Else.

So there you have it. Even though this is a really tough market to buy a house in, we managed to get our second offer accepted. I think the secret was to be willing to accept a slightly non-typical house and try to make a personal connection to the seller. We still had to pay $30,000 over the asking price, but in the current environment, I’m fine with that.

Wednesday, September 6, 2017

Goal Update: End of August 2017

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of August, 2017
Current value: $33,865
Change from last month: +$1,583
Percent of Goal:  31.14%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

I saw an increase of just over $1,500 this month. Net income from my online courses was $113.03. No new income from my ebooks, but I will have some next month.

Apart from my regular savings contributions, the only income in August came from my selling cash-backed naked puts, as I talked about two weeks ago. This trade is looking like it will turn out to be a good one. I sold 5 put contracts on Realty Income at 55, expiring Sept. 15. With less than 2 weeks before expiration, the stock is currently trading at 58. Assuming it stays over 55, it looks like I will be able to keep the premium I collected ($266.70) and repeat this process next month.

Relocation Update

My family and I are now officially Washington residents! My house in AZ sold and we are living in the Evergreen State. Last week, despite the crazy real estate market here, we found a house we liked and managed to get our offer accepted. This was no small feat! More details on that in an upcoming post. Suffice it to say that it is such a seller's market here, I had to do things I never would do in any other type of market.

We close escrow on our new house at the end of the month!

Net Worth Update 

Our net worth took a dive this month, at least according to We show a drop of $48,440! Yikes! But all is not doom and gloom. We put a $20,000 earnest money deposit on our new house. Because we don't actually own it yet, that property does not show up in the net worth calculations, but the drop in cash does. So we're really only down $28,440. Gee. I feel so much better.

Some of the rest of the drop can be explained by a couple of things. My 401(k) provider changed their website, so Mint can't yet get current data from it. It's about $2,000 below what it really is.

We also paid for half of our moving expenses in August. As I mentioned back in the February 2017 update, my wife got a relocation bonus and we're using that to pay for our move. Our net worth has been artificially inflated the past couple of months as we held on to that money. Now it's time to spend it, so our net worth will be dropping. We'll pay the second half of the moving costs after we get into our new house and the movers deliver our stuff. That should be sometime in October, if all goes as planned.

July 2017August 2017
Note: categorizes our HELOC as a credit card debt, not a loan, hence the apparently high credit card balance. No more HELOC so I can finally get rid of this note!

Take a good look at that Loans figure - ZERO DOLLARS! It won't be that for another 30 years! Cash is also at an all time high due to the money we received from selling our Arizona house.

If you have any questions or suggestions for topics, please drop me a line in the comments section!

Wednesday, August 23, 2017

Option Writing For Passive Income

As I've written about in the past, my real estate partner doesn't have enough deals to invest in, so I've been looking for alternate places to put my funds to work. I was toying with the idea of investing in RealtyShares. I think this is a viable option for the future, but right now I need my funds to be a little bit more liquid. I'm looking to buy a house after our move to Washington. The funds I am investing are technically my Tesla funds, but the housing market is so crazy here, I may need to borrow from them, so I don't want to lock them up for an extended amount of time. (More on this is a later post.)

Enter Option Investing

I have already traded options for passive income in the past. What I did then was sell covered calls. When you sell a call, you are giving someone the right to buy the stock from you at a certain price within a certain amount of time. It's called covered because you already own the shares you have promised to sell. (If you didn't own them, it would be called a naked call.)

Selling Covered Calls

Covered call selling is about the safest way to use options to generate additional income from a stock. In return for agreeing to sell the stock to someone at a certain price, that someone pays you a fee, called the option premium. If the expiration date arrives and the stock is trading above the price you agreed to sell it at, the option buyer makes money because you have agreed to sell them the stock at a price below the current market value. You lose out on any additional gains above what you agreed to sell for. If the stock is trading below the agreed on option price, you get to keep the money the option buyer paid you and your stock (since it would be cheaper for the option buyer to buy the stock on the open market then from your agreed upon higher price).

Here's an example of a trade I actually made back in 2007 and wrote about on my old blog:

I sold 5 March 17 calls with a strike price of 55 for $1.25 per share per contract. One contract is good to buy 100 shares of stock, so I've sold someone the right to buy 500 shares of SFI from me at $55 per share on or before March 17. For this right, they paid me $625, or $1.25 per share times 500 shares. If the stock price on March 17 is below $55 per share, their contract is worthless (since they can buy the shares on the open market for less). If it is above $55, then they can exercise their contract and I must sell them the shares at $55 per share. But because they have already paid me $1.25 per share for the option, I actually make $56.25 per share.

Obviously, I hope the price on March 17 is below $55, but even if it isn't, I'm not worried. It can go up to $56.25 and I still won't be losing money.

In that case, the options expired out of the money (meaning at the option expiration date, the stock was under $55/share) and I was able to keep the premium I collected and did not have to sell the stock.

 Selling Naked Puts

A few months ago, I read a couple of posts over at Early Retirement Now where they talked about another strategy - selling naked puts. (I recommend you read their posts, as they go into much more detail than I will.)

In a nutshell, when you sell a put, you are agreeing to buy stock from someone at a specified price, even if the price on the open market is lower. For the person buying the put, this represents insurance against price drops. Even if the price drops to zero, they have a contract to sell it to someone at a higher price.

But for the person selling the put, i.e., the person guaranteeing to buy the stock at a certain price, this represents a potential loss. If the stock price does drop, they would have to buy the stock at the higher price. Why would you want this?

Well, as the folks over at Early Retirement Now point out, many mutual fund managers are highly risk averse and don't want to take any losses, so there is a big market for puts. If you can get a good price, the risk vs. reward ratio can be good enough to make this an attractive offer for the put seller.

There are some things the put seller can do to minimize the risk. Most importantly, keep the length of the option contract as short as possible. The folks at ERN trade futures options with an expiration date one week out. I don't have the funds required to do that, so I'm trading options on common stock with a one month expiration date. I'm also only selling puts on stocks I am willing to own and hold. In my case, this means Realty Income, my favorite REIT.

By the way, if you want to sell puts and you have the cash to cover any purchase you might be forced to make, you should ask for your brokerage account to be approved for cash-backed naked put selling. This is one of the option trading levels available at most brokerages.

My Trade

I made a spreadsheet to make the calculations easier. Here's a screenshot:

Click to enlarge

What I am really trying to do is get a certain rate of return. In most investments, you calculate the rate of return by taking the income or profit received divided by the amount of money you invested, then converting that percentage to a yearly percentage figure. But when you sell a naked put, this formula can't be used.

Why? Because I really haven't invested any money! I simply received money in exchange for promising to buy stock from someone at a certain price. I have incurred no out of pocket expense. You can't divide by zero, so how do you calculate the rate of return in this case?

I did some research and there are a couple different methods people use, but the one I settled on is this: you treat the money you would be forced to spend to buy the stock at the specified price as your investment.

So, looking at the spreadsheet above, the cells highlighted in green indicate the cash I would need to spend if my puts were called (i.e., if I was forced to buy the stock at the option strike price).

With that definition out of the way, we can go over the rest of the spreadsheet. The first couple of cells show the date of the trade, the expiration date of the option contract, and how far away that is in days and years. I also enter the current stock price, the total amount of cash I have in my account, and how many option contracts I want to sell. (One contract controls 100 shares of stock.)

The cells in the next column contain commission data and the dividend data of the underlying stock, used in calculations later.

The bottom rows of cells is where the calculations are performed. I enter two strike prices and the price those puts are selling for. The next column, net stock cost if called, gives me the net price per share I would pay, taking into account the option premium I receive. In the case of the 55 put, I was paid a $0.55 per share premium, so if my put was called and I had to buy, I would actually only be paying $54.45 per share ($55 - $0.55).

The Net Income cell shows my how much cash I get from selling the number of contracts specified above (5) minus the various commissions and fees.

The two yield columns tell me what my rate of return is. This is calculated using the cash needed if called figures (green cells) and the time until expiration fields. One value is straight percentage and the other is an annualized return (per annum, or p.a.).

The two fields for stock dividend yield don't play much of a role in my decision to sell a put, but are more for informational purposes. They calculate the dividend yield of the stock at the strike price and at the strike price taking into account the premium I received from selling the put. As I said, I'm only doing this with stocks I would be happy to own, so I like to see what my dividend yield would be if my option is called and I had to buy the stock.

My Criteria

In order for me to sell a put, I'm looking for an annualized return of at least 8%. As you can see above, the 55 put meets this criteria. In fact, this spreadsheet shows an actual trade I made.

As long as Realty Income stock is trading above $55 on September 15, I get to keep the $266.70 I received for selling the put and I don't have to buy any stock. Then I can sell another put the following month.

I'll keep you posted on how this turns out.

Wednesday, August 9, 2017

Credit Cards For People With Bad Credit

I'm not one who plays close attention to credit card offers or constantly applies for new cards to get the sign up bonuses. I tend to find a few cards that provide good rewards for my needs and stick with those. There are many websites devoted to tracking credit card offers and rate and promos. NerdWallet in particular does a yearly roundup of such deals.

The cards with the best offers or bonus tend to be mainly for people with good credit. What do you do if your credit is not so good or even outright bad? For those people, finding a credit card is less about finding one that provides good perks, but more about finding one at all or one without a crazy high interest rate.

A Great Credit Card Guide

U.S. News & World Report has recently published what is the most comprehensive guide for credit cards for people with poor credit that I have seen. You can check it out here. It's a lengthy read, but full of good information, especially if you have poor credit and are looking for advice on how to improve it.

The article starts at the beginning, defining what a credit score is, how to get yours, and how to improve it. It then moves on to specific credit cards to look at and compare. What I really like is the article also lists what credit cards to avoid.

If you have poor credit and are looking for ways to change that, this article is well worth the time it takes to read and study.

New Credit Card Offer

Despite having started this post saying I don't follow credit card offers too closely, I will say I received an announcement for one that made me sit up and take notice. USAA has come out with a new card that offers either 1.5% cash back on all purchases or 2.5% cash back on all purchases. This caught my eye because most cash back card will give you 2% back on all purchases, sometime up to 5% from specific stores that change each quarter. That extra 0.5% could add up! (Note: The higher return requires a checking account with direct deposit at USAA.)

Not everyone will qualify for this. Besides the regular credit card approval process, you also have to be eligible to join USAA. This generally means you or someone in your family must have been in the military at some point. Full eligibility details can be found here.

I use USAA for insurance and some banking. They are a great company with fantastic customer service. *


So what do you think? Do you have poor credit? If so, what are you doing, if anything, to improve it?

* Although I have not received any compensation for anything mentioned in this post, please see my disclosure statement for full details.

Wednesday, August 2, 2017

Goal Update: End Of July 2017

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of July, 2017
Current value: $32,282
Change from last month: +$621
Percent of Goal:  30.26%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

I saw an increase of $621 this month. Net income from my online courses was $117.68. No news on the hard money front. My partner still has more money than he has deals to invest in. Last month, I mentioned I was thinking about investing in RealtyShares. I haven't pulled the trigger on that, mainly because I've been busy moving to Washington and selling my house. I haven't had much time for research.

I'm also looking at generating income from selling cash-backed puts. This means someone pays me for the right to buy their shares of stock at a certain price. The folks at Early Retirement Now have done a good job writing about this strategy here. Check it out for more info. Right now, I'm testing the waters by just trading on paper and seeing how things work out.

I don't have enough funds to invest in both RealtyShares and cash-backed puts, so I've got to make a decision on which I want to do.

Relocation Update

My house closes escrow on Thursday. At this point, all appears to be going well. The house inspection is over and we worked out a deal where I credit the buyer with about $750 instead of me making some repairs he wanted. Then, because the buyer is getting a VA loan, there was another requirement from the VA that I re-paint the stem wall, which had some paint that was peeling off. The quote for this was $275 and the buyer didn't want to pay it, which I felt was ridiculous. It's his lender demanding the repair. He was ok with it not being painted because he didn't ask for it after his inspection. But whatever. He agreed to split the cost with me, so I'm ending up only crediting him with $612.50 instead of $750.

Last week, I packed up my daughter, dog, and a bunch of our stuff and made the three day drive to Washington. Our Prius was pretty full!

My dog wonders what's going on.

Net Worth Update 

After dropping, $7,788 last month, our net worth rose in July by $7,618, so we're pretty much back where we started two months ago.

June 2017July 2017
Note: categorizes our HELOC as a credit card debt, not a loan, hence the apparently high credit card balance.

If you have any questions or suggestions for topics, please drop me a line in the comments section!

Wednesday, July 26, 2017

It's Moving Week!

No post this week. We're moving to Washington!

Wednesday, July 19, 2017

Two News Stories That Illustrate How Stupid People Can Be With Money

Look, I know not everyone is a financial genius. I'm certainly not. But I would like to think that most people have some basic level of knowledge, some grasp of rudimentary concepts of what constitutes a good or bad financial decision. A financial equivalent, if you will, of common sense. Like "poking yourself in the eye is bad."

Sadly, the astoundingly high levels of credit card debt the average American carries (over $8,000!) seems to indicate otherwise.

The First Story

Take this story, published, appropriately enough, on the Fourth Of July:

The average length of an auto loan reached 69.3 months in June. That's over five and three-quarters years! For a car loan!

Let me put this another way: That's an almost six year loan to pay for something that has a crazy high depreciation rate! Someone who takes an auto loan for this amount of time will be underwater on the loan immediately and will continue to be underwater for probably 3.5 years, minimum. Yay, America!

I know not everyone can pay cash for a car. I get that it's tough to save money. But come on! If you have to take out a six year car loan in order to get the monthly payments to be something you can afford, then guess what? YOU CAN'T AFFORD THE CAR!

The Second Story

This one is even worse. Actually, there are a couple headlines, but they all say the same thing:

Sweet mother of god!

Are you serious?

People are actually putting their retirement savings into a virtual currency? Into.. nothing?! Why don't you just invest your life savings in tulips?

I have no words. When you start seeing headlines like these, you know we are in a bubble.

Please please please. PLEASE. Do NOT invest your retirement savings in cryptocurrency!

I'm not saying cryptocurrencies won't last or won't take off. In the interest of full disclosure, I recently purchased a bit of one cryptocurrency - Etherium. But I bought a small amount using money I could afford to lose. I bought it with gambling money, not my retirement savings!

Because that's what cryptocurrencies are right now - a gamble!

How'd you like to have your retirement savings invested in Etherium and wake up to this (actual) headline:

Come people. Start making smart financial decisions. Stop poking yourself in the eye.

Wednesday, July 12, 2017

The Model 3 Is Released! Prepare For The Negativity!

The Model 3 officially went on sale last Friday. Prepare yourself for a flood of negative press for the next couple of weeks or months.

I don't expect the car to be bad. In fact, quite the opposite. I expect the car will be very high quality. But I am expecting a lot of news stories about problems with the car. Furthermore, I'm betting almost all of these so-called "problems" will be driver-related.

When Model 3s start rolling out their new owners, there will be a flood of people who will be getting their first taste of electric vehicles. There will be a learning curve and many people will flounder around against that curve for a bit.

Here are the types of stories I expect to see:

Cost-Related Stories

First, expect stories about how the typical Model 3 costs closer to $50,000 than $35,000. These stories have already appeared and I expect more of them to crop up.

The gist of these stories will be "the car isn't really low cost. It's still more expensive than the typical Toyota / Nissan / GM car."

Well, no.

The price goes higher than $35,000 because, just like every other car on the market, you can upgrade the options it comes with.

The base price for a bare-bones Prius is $23,475. But if I trick it out and add a bunch of options, I can get the price up to $32,646. That's a 39% increase over the base price.

Based on pre-order data, the average Model 3 sales price is $50,000. The increase from the Model 3 base price of $35,000 to $50,000 is 43%, so the Model 3 upgrades are comparable to upgrades on other mass-market cars.

Range-Anxiety Stories

Current owners of Model S and Model X Teslas have had time to adjust to driving an all-electric car. They know taking long road trips takes a bit of extra planning. You can't just throw some suitcases into the back and set out on a three day road trip. Tesla's network of Supercharger stations is large and growing larger every week, but they still aren't as ubiquitous as gas stations.

New drivers will face a learning curve. Instead of miles per gallon, they will have to learn about kilowatt-hours and power regeneration. They will see the car's displayed "miles until empty" counter vary based on speed and elevation changes much more so than in a gasoline powered car.

Expect lots of stranded motorist stories. This isn't a problem with the car. It's a problem with the driver not understanding that driving an electric vehicle will be a little different.

Keep in mind, the vast majority of driving is done locally and range anxiety will not be an issue at all.

Crash-Related Stories

This has happened already with the Model S, so there might not be as many of these. But the Model 3 includes the Autopilot functionality and many people will try it out and push it to its limits. The name is somewhat unfortunate because it's not yet a truly driver-less system and the driver still needs to pay attention to the road.

However, as with anything that goes mass-market, there will be those users that don't follow directions or read the manual. Those people will cause crashes. Again, it won't be the fault of the car. It will be driver error.

It's-Not-As-Green-As-You-Think Stories

There will be a bunch of stories about how the Model 3, and electric cars in general, are not as great for the environment as you might think. There will be analyses showing just how horrible the batteries are for the environment and how long it will take to recoup the costs, etc. These stories have already appeared and seem to pop up every 1 or 2 years.

They are almost always false and written by people with a vested interest against seeing electric vehicles (or Tesla specifically) succeed. A common tactic is to include all the environmental costs incurred in the creation of batteries in the environmental impact of the car, but neglect to include all the environmental costs incurred in drilling, pumping, refining, and transporting gasoline in the environmental costs of a gasoline car.  Whenever you see these types of articles, read them critically and make sure the authors are comparing apples to apples.

The Union Of Concerned Scientists did an in-depth study (warning: PDF link) comparing the environmental impact of electric vehicles to gasoline vehicles. They concluded (emphasis mine):
"From cradle to grave, BEVs (battery-electric vehicles) are cleaner. On average, BEVs representative of those sold today produce less than half the global warming emissions of comparable gasoline-powered vehicles, even when the higher emissions associated with BEV manufacturing are taken into consideration."

So Stay Positive

Despite what I expect to be a deluge to negative-slanted stories, the overall benefits of electric vehicles, and the Model 3 in particular, are enormous.

What types of Model 3 stories are you seeing or expecting to see?

Wednesday, July 5, 2017

Goal Update: End of June 2017

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of June, 2017
Current value: $32,282
Change from last month: +$697
Percent of Goal:  29.69%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

I saw an increase of $697 this month. Net income from my online courses was $100.50. My hard money loan generated $177.17 in income, which is a bit more than normal. See below for details. I received a check for $8.51 from a class action lawsuit settlement. I received $50 in gifts and I turned in a bunch of change for $58.45.

My hard money load was paid off, which means I got my principal back, plus some partial month interest for June. Normally, I would just leave this money with my partner and he would roll it into another loan. However, our biggest borrower has semi-retired, so we don't have as many requests for loans these days. My partner, who also works with other investors, has about $1.5 million in cash waiting to be loaned out and, as a result, he opted to return people's principal when this loan closed because he has no use for it right now. Business has shifted from lots of little loans on properties in not-so-great areas (the ones our biggest borrower specialized in) to fewer but larger loans on properties in nicer neighborhoods.

So now I'm looking for a place to deploy my funds. I still like the money lending business and I am looking at RealtyShares as a possible alternative. A couple of other bloggers I follow, Financial Samurai and Financially Alert, have invested with them. Their initial reports were positive, but I emailed them asking for a follow up to see if their opinions have changed.

One of the things I am concerned about is preservation of capital. If an investment goes south, I'm OK with getting a zero percent overall return as long as all my principal is returned. My hard money lending partner is also very concerned about this and the loans he makes are always at 75% loan-to-value or lower, so if the borrower does stop paying, we can foreclose, sell the property, and still get all our original investment back. I've got a 15 year track record with him. Investing with someone else brings a new set of risks and unknowns. How confident am I with their borrower screening process? With their property valuation methods?

Relocation Update

My house has finally sold! The official close of escrow is August 3rd. The contract was just accepted, so we still have to get through the home inspection. My buyer is pretty solid, so I'm not worried about him not getting a loan. He's pre-qualified for a $250,000 VA loan, but he's making a large down payment and will only need a loan of about $100,000. He put up $10,000 in earnest money, which is a large amount. His offer is also not contingent upon him selling another property. So basically, once we get through the home inspection and come to terms with whatever it finds, the sale should be pretty much a sure thing.

Net Worth Update 

For June, our net worth dropped by $7,788. This is the first time it has dropped since October 2016 and only the second time it has dropped since I've been tracking it.

May 2017June 2017
Note: categorizes our HELOC as a credit card debt, not a loan, hence the apparently high credit card balance.

It's hard to determine where the drop occurred from just these numbers because I'm in the process of moving money around. Because my hard money loan ended and my principal was returned, that money moved from the Property category to the Cash category. From my examination, it looks like the drop has mainly come from a decrease in the value of my house.

My net worth is going to jump around a lot the next couple of months. I'll be selling my current house, which will cause it to jump way up. Then, a little bit later, we'll be buying a new house in Washington, which will cause it to drop quite a bit as we take on a much larger mortgage. It's going to be a bumpy ride!

If you have any questions or suggestions for topics, please drop me a line in the comments section!

Wednesday, June 28, 2017

Coinstar: Get Rid Of Your Spare Change

Photo credit

Coins seem to be the one form of money nobody wants. They're heavy and not worth much. Many people have a jar or a piggy bank or some sort of container they throw spare change in each day. I use an old acrylic fish tank I got back when I was in college, like this one:

For years, every day, when I got home, I would throw all my change into it. I never managed to fill it, which was probably a good thing. The fullest I ever got it was about 25% and that sucker was heavy! I could barely lift it with that many coins in it. If I ever managed to fill it completely, I never would have been able to get it out of the house!

A Penny Here, A Penny There...

The great thing about doing this is that all that change adds up. When the tank was about a quarter full, those coins would be worth somewhere around $250 to $350! And it was like free money! I just threw in a few coins here and there that I never missed each day. After a couple of months, BAM!! Jackpot!

In fact, when I was newly married, my wife and I routinely used our coin fund for gambling money when we went to Vegas.

It takes a lot longer for me to save up change these days because I rarely pay with cash. Instead, I charge everything so I can earn cash back rewards on my credit cards.

Even Banks Don't Seem To Want Coins

There have been a lot of other changes that make saving coins a bit more of a hassle than it used to be. Many banks no longer accept coins unless you have sorted and rolled them yourself before bringing them in. Few banks have coin counting machines these days and, if you bring in a bunch that are not rolled, they may have to ship them elsewhere to get counted. And, of course, they will likely charge you a coin counting fee.

Back when I worked for a credit union, we had a branch that had a coin counting machine in the lobby that our members could use for free. Eventually, that was done away with because it didn't get much use and the maintenance on the machine was too much.

Enter Coinstar

But there are still a lot of coin-hoarders out there and where there is a need, there is a business opportunity. Coinstar saw that need and filled it.

I'm sure you've seen their machines in grocery stores - big green kiosks with a touchscreen and a metal tray to pour your coins into. It's self-service, which I like, and grocery stores are open for more hours than banks are, so it's easier to find time to cash in your change.

When you use a Coinstar machine, you have three options on what to do with your money: you can get cash, get an e-gift card for one of many online retailers, or donate the money to one of several charities.

Option 1: Cash

Getting cash is the most expensive option. Coinstar charges 11.9% to exchange your coins for dollar bills. Probably some of this goes to the hosting grocery store, because the machine doesn't actually dispense cash. You get a receipt, which you then have to take to a checkout register or service desk at the store to redeem for cash. This is a pricey option and I never use it. I would suggest you avoid it as well.

Option 2: eGift Cards

The e-gift card is the option I always choose. If you go this route, there is no service charge and you get 100% of the value of your coins converted into a gift card for one of many online stores. I always choose Amazon because I buy a lot of stuff from them in my day-to-day life. (Is there anyone who doesn't?)

Option 3: Donate To Charity

I have never used the charity option, but Coinstar does provide you with a receipt and your donation is tax deductible. I do not know if there is a service charge if you choose to donate your funds.

Today, I cashed in the small amount of change I had accumulated. It was only $58.45 and that was after close to a year of saving. (I told you I don't use cash much anymore!) I converted that to an Amazon gift card to avoid the service fee, saving me about $7. I then transferred that same amount from my bank to my Tesla fund.

Coinstar And Its Like Are Affecting The U.S. Mint!

There is a ton of money just sitting out there in jars and couches. In fact, Coinstar has been so successful in getting people to turn in their piles of coins and get them back into circulation, that the Government Accounting Office has determined that the U.S. Mint has been able to reduce the number of coins it produces!

Coin recycling machines found in grocery stores, retail stores, and some depository institutions have made it easier now than it was in the past for the public to trade in coins for currency or some form of credit, such as a gift card. In some districts, coin recycling has returned large volumes of coins to circulation.

In fact, that same report says the number of coins returned to circulation from services like Coinstar increased from $1 billion in 2000 to $2.6 billion in 2006.

$2.6 billion!!! That's a lot of coins!

What do you do with your spare change?

Wednesday, June 21, 2017

Watch Out For These Two Sneaky Tricks When Moving!

There are two things I really, really hate – painting and moving. I will happily fork over piles of cash for someone else to do those jobs for me. So in preparation for our move to Washington, I called up a couple moving companies to get quotes for the move. I asked for the works – not only moving our stuff, but packing everything up as well. We were able to afford this little extravagance because my wife’s job offer included a rather generous relocation allowance. When you relocate for a job, moving expenses are tax deductible, so this this means we can pay for the move with tax-free money that was basically given to us from my wife’s new employer.

Trick Number One

I’ve heard all kinds of horror stories about moving companies. People’s stuff gets lost or damaged. Or the movers show up at the new house and demand thousands of dollars more before unloading your stuff.

It’s that last thing I want to talk about. It happens because people unknowingly agree to it.

How Your Cost Is Determined

Moving prices are based on two factors – distance moved and weight of items moved. The distance is fairly straightforward and easy to determine. Weight, however, is a different story. When the movers send someone out to your house to give you a quote, that person walks through the house, looking at all your stuff. He or she makes an estimate of how much all that stuff weighs and that is used to come up with a price. But you need to be careful.

Not All Estimates Are Equal

See, there are two types of estimates movers can give you: binding and non-binding. As the names imply, a binding estimate is one that the mover must adhere too. They may charge you less, but they cannot charge you more. A non-binding estimate is exactly that – a general amount that may not end up anywhere close to what you will eventually be asked to pay. Unless you specify which type of estimate you want, guess which one you’re likely to get?

My Experiment

Because I write a personal finance blog, I thought this would be a good opportunity to run a little experiment. When I got my two quotes, I asked one company (Company A) for a binding estimate. When I spoke with the other company (Company B), I played dumb and did not specify which type I wanted. Company B did not tell me I had two options for the estimate. Both companies sent someone out to look at my house in person. They came on the same day, about 4 hours apart, so the contents of my house were definitely the same for both estimates.

Company A’s quote, the binding estimate, came in at about $15,000. Company B’s quote came in at $10,000. Wow! Company B is 33% cheaper! I should go with them, right?

Wrong. Look at the small print in the estimate:

Click to enlarge

If that’s too small for your to read, here’s the important bit: “The Non-Binding Estimate shows the estimated cost… The total cannot be determined until all of the packing and origin services have been performed, … the van loaded and the actual weight of the shipment has been determined.”

You might as well just hand them your wallet. That paragraph gives them a license to steal. It’d would be so easy for them to claim that the person giving the quote did not correctly estimate the weight of the shipment or the amount of work it would take to pack everything up. It’s so easy to fib here and there to come up with a low-ball quote to get your business, then sock you with a huge bill when they deliver all your stuff. And if they did that, there would be nothing you could do about it. Their estimate says they can do that.

Compare that to the language of the binding estimate:

Click to enlarge

No wiggle room there. You will pay the estimated amount or less. (I seriously doubt anyone ever will pay less…)

Trick Number Two

Another little trick they use to come up with a lower quote is with insurance. When you pack and move stuff, things sometimes break. It happens. To provide some protection, all movers offer some sort of insurance. There are typically two types – full replacement value, which will reimburse you for the amount it takes to replace something that’s broken, and flat rate, per pound coverage. The former is more expensive. The latter is cheap. So cheap, in fact, it’s usually offered for free. You know why? Because they typically reimburse you at 60 cents per pound!

Think about that. Your brand new, $1,500 washing machine gets damaged? Well, those typically weigh between 150 and 200 pounds, so the most the mover will have to pay you if that gets damaged is $120. Your collection of rare stamps got damaged? Sorry, Those are pretty light, so you’ll probably be lucky to get $5.00.

Again, unless you specifically ask, guess which one will be included in your quote?

Look again at the language of the binding estimate. When you get a binding estimate, that default insurance coverage jumps from $0.60 per pound to $6.00 per pound. That still might not be enough to cover the full replacement cost, but it’s better than 60 cents per pound! About 10 times better, I’d say.

Be Sure You Are Comparing Like Estimates

I wanted to make sure I was comparing apples to apples with these estimates, so I called up Company B again and asked for a binding quote with a specified amount of insurance coverage. When I got that quote back, their price went up to around $15,000, just like the other company.

Think about that. Their estimate increased by 50% when they knew they would be forced to abide by it! If that doesn’t tell you the first estimate was a bait-and-switch, I don’t know what would.  Is it any wonder people get mad at moving companies?

So get educated and know your options and your rights. Read the fine print. Save yourself from nasty surprises!

Have any of you used movers recently? What was your experience like?