Money Experiences

Thursday, March 16, 2006

New Credit Score System

According to this article on Marketwatch, the three biggest credit bureaus – Equifax, Experian, and TransUnion - will roll out a system in the coming months that will calculate consumer credit scores more consistently across the firms than the current systems.

These bureaus currently mainly use the FICO system, but expect the new one, called VantageScore, to quickly gain popularity. What does this do for us? Well, I see a couple good things coming out of this:

More consistent results. When I was looking for homes, I got my credit scores to make sure that there wouldn’t be any surprises waiting for me when I applied for a loan. Though the data presented in all three were the same, I got different scores from each: not radically different, but enough so that I almost fell out of the tip-top range for one.

Easier corrections. Due to the more consistent results, I think that it will be much easier to pinpoint errors made on individual reports and have them corrected.

Something that I’m curious about, though, is the type of score that the bureaus will continue to give out for free about part of their requirements. Will it be the older FICO, or the newer VantageScore? This could make a big difference in the usefulness of this service, especially if one uses VantageScore and the other two continue using FICO!

Monday, March 13, 2006

More Personal Finance-centric Version of the Engagement Post

OK, so the last post didn't really talk about Personal Finance all that much until the ending. Since you're probably here to read about Personal Finance, and not my life, here's a quick repeat of my tips for making large purchases:

1. Ask around.
When looking for a big-ticket item, ask your friends/family/coworkers where they've made similar purchases, and how happy they were with the outcome. I really had no idea where I would buy the ring, and probably would not have considered buying online, but my coworker's recommendation of BlueNile was so enthusiastic that I decided to give it a chance.

2. Look through all your options to lower the price.
A little after I'd told my parents that I was going to pop the question, my dad mentioned that I should take a look at a link he had sent me over a year ago. I opened it up, and right on the main page was a link offering 10% off of the setting when you build your own jewelry at BlueNile. I was already seriously considering BlueNile at this point, so that offer was just icing on the cake! I normally have a spreadsheet listing different companies that offer money off if I use certain programs, but I'd never included jewelry in the list. Make sure you check out any available offers before making your final decision.

3. Choose quality.
OK, so this may be stretching a little bit. I wanted to get the best diamond that I could afford, and was willing to sacrifice quantity (the size) to get it. When it comes to large purchases, I'm a big believer in getting the best product for your money. That's why I asked for a subscription to Consumer Reports as a Christmas present!

Keep these tips in mind the next time you're thinking of spending a couple grand, or even a couple hundred!

An engaging post

Well, I realized that the name of this blog is Money Experiences, but I haven't really posted all that much about my own experiences! Let's start to change that.

Things are moving fairly quickly for me at this point in my life. In the past month and a half, I've committed to making the two largest purchases someone can make in life: a house and an engagement ring. I'll talk about the house a little later, but I'll go into the ring right now, since that's been on my mind more recently.

I've been dating my girlfriend for over 4 1/2 years now, and we'd obviously spoken of marriage before, so I figured that now was as good a time as any. I had a general idea for the type of ring that I wanted to get, but I really had no idea what they might cost. So I peeked into a store one day, and had to dramatically revise my budget!

I've only been out of school for about 10 months now. Luckily, I don't have any debt outside of month-to-month credit card payments (until the mortgage starts, but again, let's not get ahead of ourselves), so I've been able to put a decent amount of my money towards savings. Still, the "recommended" 2 months salary budget would have pretty much obliterated everything that I've saved up. I guarantee you that new graduates to not fit into that framework! I eventually decided that I would go ahead and spend one month, since it is a one-time purchase, and she will be wearing it every day! Even with that, I wasn't going to be able to buy as nice a ring as I wanted at a store like Jared's. So, taking a tip from a recently engaged co-worker, I took a look at an online dealer, Bluenile.com. Using this site, I was able to pick out a band and diamond that were MUCH nicer than what I could have gotten at a brick and mortar store. I was even able to use my dad's work benefits website to get 10% off the band! I placed the order, they said it would arrive in 4 business days, and what do you know, it did! It came with a certificate verifying that the diamond was rated as highly as the website claimed (I decided to go with quality [of cut, color, etc] over quantity [carats]). There was even a written appraisal that valued the ring at 50% higher than what I paid for it! I highly doubt that the ring is that much better than what I paid for, but it's still nice to have!

This last Sunday morning, the proposal came at sunrise looking over the Atlantic Ocean (best I could do), and the answer was yes. My fiancé (yep, kinda feels weird to write it) currently is in her hometown of Reading PA, and while she's there she'll take the ring to a jeweler her family uses to get it resized (the ring that I used to get her size was apparently a little big) and she'll also see if the appraisal is accurate.

How's this post related to personal finance? Well, I guess you'd really have to search to find a connection. But, I think that some of the tactics that I used in purchasing the ring can be applied to many other types of purchases:

1. Ask around.
When looking for a big-ticket item, ask your friends/family/coworkers where they've made similar purchases, and how happy they were with the outcome. I really had no idea where I would buy the ring, and probably would not have considered buying online, but my coworker's recommendation of BlueNile was so enthusiastic that I decided to give it a chance.

2. Look through all your options to lower the price.
A little after I'd told my parents that I was going to pop the question, my dad mentioned that I should take a look at a link he had sent me over a year ago. I opened it up, and right on the main page was a link offering 10% off of the setting when you build your own jewelry at BlueNile. I was already seriously considering BlueNile at this point, so that offer was just icing on the cake! I normally have a spreadsheet listing different companies that offer money off if I use certain programs, but I'd never included jewelry in the list. Make sure you check out any available offers before making your final decision.

3. Choose quality.
OK, so this may be stretching a little bit. I wanted to get the best diamond that I could afford, and was willing to sacrifice quantity (the size) to get it. When it comes to large purchases, I'm a big believer in getting the best product for your money. That's why I asked for a subscription to Consumer Reports as a Christmas present!

Enough rambling. That's enough for one post.

(Oh yeah, FYI. I wasn't paid at all by BlueNile. They were just that good.)

PF Blogs...good site

I'm sure that anyone who's found my blog at this point is well aware of this site, but in case you're not...well, you should change that by visiting PF Blogs.

In a nutshell, PF Blogs takes a feed of hundreds of Personal Finance Blogs and gives you the title and a brief intro (the first 20 words or so) of the most recently updated articles. If you're like me and you're constantly checking your favorite blogs to see if there's been an update in the last 5 minutes, then this will definitely be a time saver for you. I'm gonna be honest and tell you that I've only just found this site, but I think that we're going to quickly become good buddies.

Carnival time

A couple personal finance related Carnivals went up today:

The 26th Carnival of Debt Reduction is at NCN.
The 13th Carnival of Investing is at InvestorGeeks.
Last, but not least, PFAdvice has the 39th Carnival of Personal Finance, which includes my post on What Your House is Really Worth! (the posts are listed with newest blogs first, and though I've only been posting a week, I'm only the third newest one!)

Friday, March 10, 2006

Update on Hybrids

I read an article on CNN Money that discussed the hybrid article in Consumer Reports that I reviewed here.

The main thing that I was interested me in the article was that apparently CR's website had corrected the depreciation figures from it's magazine, and now the Prius and Civic hybrids do actually save you money over five years! I checked out the CR's, and it looks like they made one other change to their magazine's figures: after recalculating the depreciation figures, they didn't leave them as a seperate cost. Instead, they took the depreciation off of the purchase price, and then gave the resale value of the car. So, instead of the hybrids having a couple grand in depreciation dragging down their figures, they now have a number that helps their cause. How's that? Since the purchase price of a hybrid is already so much more than a gas model, even after taking more depreciation off, the hybrid still has a higher resale value.

Well, that does change a lot! Instead of being several thousand dollars in the hole as a result of buying a hybrid, it looks like you can now come out ahead! Being that this is the first article that I've seen to actually state that buying a hybrid can save you money even after the higher purchase price is taken into consideration, that's quite a boost for hybrids, IMHO. I'm happy to see that a solid financial case can be built for these cars.

Tuesday, March 07, 2006

What your house is really worth

I just read an interesting article on Bankrate that argues that Ballooning Equity Doesn't Mean You're Rich.

Even though your home value may be rising and rising, there's only a few ways to actually turn that into spending money:
1. Selling the home and moving to a less expensive one.
2. Refinance
3. Getting a reverse mortgage
4. Selling the home and moving to a less expensive area.

Rising home prices may cause your net worth to skyrocket, but it doesn't mean that you can afford to go out and splurge on that $10,000 big screen surround sound shake-the-room home theater system. In the end, the prime attraction of additional home equity is as a source of funding to act as protection against emergencies.

My thoughts:
This article is very Rich Dad-ish by making the same argument in valuating home equity as Kiyosaki does for valuating capital gains: until you actually have the cold hard cash in your hand (or bank, preferably), your disposable income hasn't changed. All you have is wealth on paper.

As far as the means that the article listed of tapping your equity to increase your spending money:

1. Definitely my favorite choice among the four, and especially good if you're retiring or you've become an empty nester, though it's not necessarily an option if your family is growing.
2. This is just another way of gaining debt, and we all know that that's a big no-no. I'd really only consider this for an emergency
3. Unless you're older, few companies would be willing to make this deal with you
4. Completely uprooting your life doesn't sound too cool to me. I'd think that unless you're (a) retiring or (b) moving due to work anyways, this could be a very complicated and risky way of earning money. Don't do this just for the equity.

I'm in the process of buying a new town home, and the seller called me the other day to say that they were jacking up the prices by $10,000, so I had $10,000 of instant equity. This article sort of ruins the high that I'd gotten off of that news, but at least it'll be good for an emergency, and I can be thankful that it hadn't gone up like that before I was locked in to the price!

Consumer Reports on Hybrids

Consumer Reports has a pretty thorough review of The Dollars and Sense of Hybrids.

In this article, they compare the relative 5-year cost of the most popular hybrid models with their gas counterparts, in categories ranging from the costs that you’d automatically think of like additional purchase price or fuel savings, and some others that don’t come as quickly to mind such as additional sales tax on the purchase price and quicker depreciation.

No hybrid actually had a lower cost than its similar gas model, even after taking gas savings into effect (CR even estimated gas prices rising to over $4 a gallon!) While this didn’t really come as a surprise to me (I’ve read enough articles already to know that you don’t buy a hybrid to save money), it may surprise some people as to how much you pay for these “green cars”. The lowest 5-year additional cost came with the Honda Civic Hybrid, coming in at only $3,700 more than a gas Civic, while the most expensive hybrid was the Toyota Highlander Hybrid, at $13,300 more than its gas model.

Essentially, what I gather from the article is that you should only buy a hybrid if you’re willing to shoulder the additional cost you pay in order to be “earth friendly”. However, CR offers a good quote from John DeCicco of Environmental Defense:

“Hybrids have been overhyped, and the focus on the hybrid has created this impression that if you want to be green, you have to get a hybrid. I think that’s a very damaging perception because there are a lot of other ways to save fuel.”

I agree with this assessment. You can buy a car with outstanding gas mileage that isn’t a hybrid. Carpooling and taking public transportation to work are great ways to both help the environment and save a couple bucks. Heck, if you live close enough, ride a bike! If you’re not living single, try to plan errands so that your cars aren’t pulling double duty.

If you’re bound and determined to buy a hybrid, though, CR offers a few last tips on how to keep from blowing your budget: take advantage of the federal tax credit and any state tax credits you can, check if your company offers incentives for buying these cars, shop for insurance to make sure that your insurer isn’t raising your premiums by too much, and look for some hybrid credentials when selecting your mechanic.

Sunday, March 05, 2006

The Taxman cometh

One of my goals this weekend was to get my taxes most of the way done. My dad used TurboTax for our family last year, so I went ahead and bought myself a copy on Amazon (and, after refunds, will get copies of Quicken and Norton Internet Security for free!) It's a very simple program, and unless you have some complicated tax situations, I'd recommend using it. The most complications that I had this year were earning money in two states and deducting moving expenses (My original home is in Pittsburgh, so that barely squeaks past the 50 mile threshold away from North Carolina to qualify), so it worked out all right for me.

Good news for me, I'll be getting a complete refund! Haha! Having graduated from college this past May, I was able to take the Lifelong Learning tax credit, which got most of my money back right there. That, combined with my state income taxes and moving expenses deductions gives me a nice little present coming up.

Of course, I wish that I hadn't given that money to the government for all this time. After all, way should I loan my money out at 0% interest when I could have been earning that in a savings account? Hopefully that won't happen again this year, since TurboTax helped me to create a new W4 that should help me to limit the automatic withholding.

I say that I wanted to get my taxes mostly done, because I'm not quite ready to file. I've become very unhappy with my current bank (more on that later), so I will be switching very soon. I would like to get my refund directly deposited into my bank account, so I'll just wait until the switch is complete.

Although...a thought just occurred to me. Could I get this deposited into my ING account? I need to look into this a little more. Wow, this blog is paying off already! Who knows if/when I would have thought of that without putting my thoughts down! Cool! If anyone is reading this yet, do you know if this can be done?

Friday, March 03, 2006

Hi

Umm...hi.

Well, let me start off by saying thanks for showing some interest in my blog. I'm kinda new at this whole thing, so I'm not really sure how to start.

How about I give a brief rundown of what I want to do with this site?

If you couldn't tell from the name, this blog will pretty much concentrate on the realm of Personal Finance. The first blogs that I started reading were about this topic, and it's one that I've always been interested in, so I thought that I'd give it a whirl. I'm not sure what new, original, and exciting ideas I can offer the topic, but you know what? I don't really care. I'm doing it anyways. So there.

The main blogs that I've read are the most popular finance blogs: Blueprint, FreeMoneyFinance, fivecentnickel, etc. So, if it seems that I'm stealing their ideas/topics/themes...it's probably because I am. (thanks in advance!)

My posts will probably be of two main types: descriptions of different choices/decisions/etc that I've recently faced, am facing, or will face relating to personal finance, and reviews of personal finance articles that I've read, complete with my incredibly insightful and valuable commentary.

So let's give this thing a whirl.

Oh yeah, just to warn you...I sometimes forget that I'm not funny, and try to make a joke every now and then. Your polite laughter is appreciated.