A New Round Of Foreclosures On Subprime Mortgages
December 21st, 2006
This isn’t going to be good for a lot of people – the foreclosure rates on “subprime” loans (those for people with less than perfect credit histories) have an increasing number of foreclosures in recent months. Part of the problem is that people got into loans they really shouldn’t have – in recent years, that’s been easier to do both because banks have been more willing to extend credit and because financial instruments such as ARM’s have become more and more complicated for consumer loans, offering low initial rates that can get jacked up later on. The other part is that real estate markets have cooled off in a lot of places, making it very hard for people to sell their house for enough to pay off the loan if they bought recently.
The lesson out of this should be that it’s not ALWAYS a good idea to buy a house. In many situations it is – but if you’re borrowing so much that small financial problems can keep you from making the payments, you should put it off until you can make a bigger downpayment. If you can’t afford the 5% that has been generally considered the minimum in the past, you probably shouldn’t buy. A bigger down payment is better because you get more wiggle room, but doing a zero-down home loan is risky on its own if there’s a chance you might have to sell later on. It’s very easy to get “upside down” if prices drop (where you owe more than your house is worth). A lot of people have been using little tricks like this for the past few years to get houses that are a stretch for them to buy. Now it’s coming back to bite them.
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Tips On Buying A Gym Membership
December 19th, 2006
There’s a good article in Smart Money that you might want to take a look at if you’re thinking of making a New Year’s resolution to lose a few pounds or get in better shape. It’s on the things a fitness club won’t tell you – the various downsides to buying a membership. They sell a big chunk of their memberships around this time of year, often for a year or more – and 30-40% of those people end up not coming, but still paying. Here’s a couple of tips in addition to the pitfalls the article mentions:
1) Start a work-out schedule at least a month before you’re going to go to the gym. Why do most people end up paying for a membership they don’t need? Because after a little while they lose the will to keep showing up, or their schedule gets more hectic, and they stop making that time to exercise. So don’t just jump into the gym – go take walks or jog for whatever workout schedule you plan to do at the gym. Do this for a month or two, and if you’ve managed to keep it up, your odds are a lot better that you’ll get your money’s worth out of the gym.
2) Try to find free or cheap access. Most schools and universities have at least the basic equipment, so if you’ve got any association with one see if you can use it. Also try your local YMCA – memberships there can often be cheaper.
3) Stick to a monthly membership at first. Three months at $75 is better than six months at $50 if you are only using three months anyway. This is another good way to make sure you’re not one of the suckers paying for months you don’t use.
4) Remember that it’s a negotiation. That means being willing to walk out if you can’t get a deal you like. Lowball them – and if they won’t take it, come back later with a little higher offer or go try someplace else until you figure out how much you can squeeze out of them.
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Delusions of Poverty: Faux Frugality On A Six Figure Income
December 15th, 2006
I usually like the “example budget” articles run by CNN, USAToday, and others where they walk you through a real household’s budgeting problems. They’re often very instructive about both what you can do and what you need to avoid. But I thought this one from CNN about a family “just scraping by” in Nebraska on $150,000 a year – more than three times the average household income in a very low cost state – was a little absurd. The article plays up the idea that anyone can be living from paycheck to paycheck regardless of income, and all the little frugal steps the family has taken to eliminate unnecessary luxuries.
The problem is that it becomes apparent later on that the gourmet coffee, cable, and a weekly date they cut back on weren’t the problem. It turns out they’ve got much bigger expenses that they haven’t even touched: for one, they’ve got two rental properties which they own, are paying mortgages on, and have failed to find tenants for. For another, they just got a horse – which they are paying the equivalent of a car payment to maintain. They made room for that by cutting down on the several hundred dollars a month they were spending on gymnastics and ballet lessons.
The problem here is that if you focus obsessively on cutting down expenses like the $3 a month you pay to get an unlisted phone number, you are wasting your time if you haven’t already cut out the bigger chunks of fat from your budget, such as extra houses and ponies. If you’re having spending problems on $150,000 a year in Nebraska, cutting coupons is not going to help you. People who make $25,000 a year are the ones who benefit from that, because a lot of little savings can add up to a big chunk of their budgets. People who make six figures aren’t going to right the ship by cutting out the small things alone, because as a percentage of their paycheck saving a hundred bucks a month is not as big a deal. In this case, I think they’re using frugality as a crutch. The article states that the family used to make $250,000, until the husband recently lost his job. You’ve got a lot more room to waste money on a $250,000 income – that extra money is gravy in the sense that you’ve probably already paid for your house, cars, and basic costs of living. Any money above that isn’t really committed to any “need,” and $100,000 will buy you a lot of “wants.” The problem is that losing that money means you lose a lot of your ability to spend recklessly on stuff you want but don’t need. I don’t think this family has adjusted their mindset in the aftermath. They got the horse and the renthouses when they could afford it, and now they can’t. But they don’t want to give them up – and they’re using the excuse of being frugal about the little stuff as a way to justify keeping all the bigger toys.
This is one of those rare instances where I think being frugal can actually be a bad thing. It’s masking the real problems – true frugality would involve making a hard choice and giving up the stuff they don’t need, not making little savings here and there that aren’t going to add up to enough to solve their problems.
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How To Buy A Christmas Tree
December 12th, 2006
It’s that season again, and for many people that means you’ve got to deal with the annual decorating chores (if you’re the type of person who leaves your lights up until February) or fun (if you collect ornaments like they’re stamps). Either way, a lot of you are going to be buying Christmas Trees. So here are some tips on the whole process:
1) Should I buy a real tree or a plastic one? From a cost perspective, fake is the way to go. Looking around online I found them ranging from $60 or so to around $500 (on Amazon), and my bet is your local stores will fall within the same range depending on size and quality. What about the real thing? This web site will sell you a real one for about $80 for a six foot tree. If you go out to the lots or tree farms where they sell them locally, you’ll likely see a range depending on size and quality. But the ultimate point is that you’ll be using the real one a single time – whereas you can store the plastic tree in the attic and bring it out again every Christmas. The advantages for a real tree, other than that: it smells real, it is real, and it looks better to most people. On the other hand, it will probably have bugs and other critters on it, it will shed more needles everywhere, and they often aren’t perfectly symetrical. I’d go with plastic, but there are some reasons you might not want to.
2) When should I buy? This is the big question. Cost-wise, obviously waiting is the best idea. You can get the real trees at a big discount if you wait. But on the other hand, you don’t get as much use out of them, because you can’t keep them up as long. If you’re going to buy a plastic one, you will get the best deal if you buy it AFTER Christmas. That might make you a Scrooge – but all the ornaments, trees, lights, and tinsel will be slashed in price the day after Christmas. That’s the best time to stock up on all your Christmas decorations. If you’re short on money, it might be best to do it then – and comfort the kids by keeping it up for a few more weeks after Christmas on purpose. Then you’ve got all the stuff that should last you for many more seasons to come.
3) Make sure your measurements are accurate. This is a BIG factor. If you don’t measure your living room before hand, or if you get it wrong, you could end up wasting all your money, especially on a real tree (where you probably can’t get a return). Know exactly how tall your ceiling is, but ALSO how wide an area you have. Give yourself some leeway, and don’t try to cram in a tree with only a few inches to spare.
4) Think about getting a smaller one. Again, this is a good way to save money. Your tree doesn’t have to be 7 feet tall. It’s just as fun to decorate a 3-4 foot tree in a corner of your house. That also means you need fewer ornaments, which is another way to save some money.
5) Where can I get real ones? First of all, you should see these at many grocery stores if you live out in the ‘burbs. They usually have real ones out front, even if there aren’t that many. You’ll also find them in vacant lots near major roads where the vendors rent the place seasonally. You can also find them pretty easily on the Internet by searching for “christmas tree farms” as well as your state or city. I also found this site that gives you a list if you click on your state.
6) If you get a real one, go read the Christmas Tree Guide. This is something Reader’s Digest put out that is online here. It’s just the basic tips, along with some information on each type of tree – but I also liked the safety section. If you’re getting a tree for the first time, it’s something to read over – for example, you want to avoid putting it near a heat source (look around for heating ducts or vents) and you don’t want to burn the branches in your fireplace.
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Can Your Boss Steal Your Identity?
December 10th, 2006
This sounds almost too weird to be true, but it’s actually happened a number of times. Mainly it’s a problem of smaller businesses with no controls on what management does with your personal information. But employers have pretty much every piece of information on you that there is. And that makes it extremely easy for an unscrupulous boss to commit identity theft:
ID-stealing bosses are the exception, but they are out there, says Linda Foley, executive director of the Identity Theft Resource Center, a leading nonprofit that provides information and support for fraud victims.
In fact, Foley started the center in 1999 after her boss used information on Foley’s tax forms to apply for credit cards and a cell phone. And earlier this year a judge in upstate New York sentenced a computer entrepreneur to seven years in jail for tax fraud and stealing the IDs of employees and friends.
That’s just one more thing to worry about, and there’s not much you can do because no one is going to even be able to employ you without a lot of personal information to deal with the IRS. I’d rely on services that give you constant updates on your credit reports if you’re worried about this one. It’s a good idea for anyone, and it’s only about $50 a year. Just be aware that if you see a request for a credit card or a loan on your report, even if it has something to do with your company, you should still adhere to the rule that if you didn’t request it, something is wrong.
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Should You Get Both An MBA And A Law Degree?
December 6th, 2006
USAToday’s “Young and In Debt” series has an update for this week here, focusing on a young woman who is struggling with her student loan debt at the same time that she is getting her MBA. It wasn’t a particularly illuminating article, but I did notice that it mentioned in passing her career plan, which struck me as an awful idea:
Now, she’s working full time at a health services company, but she’s returned to school to get an MBA from Lakeland College in Sheboygan. And in three or four years, she’d like to get a law degree, too.
Don’t get me wrong. A JD or an MBA is a great degree to have – it’s a big bump salary-wise for most people. The problem is that at best there is a marginal benefit to having both – and in her case, this idea would be a big drag on her career. Yet a lot of people go this path. How could it possibly be a bad idea to get two good degrees at once? There’s a few reasons:
1) Her timing is poorly planned. What she wants to do is get her MBA, work for three or four more years, then take another three years off to get a JD. Think about what happens in the interim: she is working for three or four years climbing the ladder on a career track that she doesn’t intend to stay in. If you get a JD, you’re not just going to go back to the same job you had before. In fact, that can be extremely difficult to do even if you want to, because many companies fear they’ll have to pay you a salary premium for the extra education – and they’d rather hire someone less educated and cheaper. So she’ll spend that three years getting experience in a field that won’t have much resemblance to the practice of law, in what she has turned into a dead-end job.
2) The MBA is not all that helpful to a career in law, or vice versa. It’s good to understand the basics of business if you want to do corporate or transactional legal work. But you can pick that up by reading the Wall Street Journal. No one is going to ask you to calculate the rate of return on an investment decision or do anything you learned in a quantitative analysis class. And it’s not that useful from a hiring perspective, because for the most part the high-paying legal jobs aren’t given out based on your experience in another field, or your other degrees, or anything else you’ve done. The biggest factor in whether you get a job out of law school is your first year grades. There are a few degrees where this statement isn’t as true (intellectual property law is a glaring exception, because having a technical degree of some kind is considered very important). But an MBA isn’t one of them – it won’t give you much benefit over all the other attorneys who don’t have one. As for jobs outside the legal sector, many of them will be reluctant to hire a lawyer – both because of the presumed pay premium and because a law degree isn’t all that useful if you’re not practicing law. A consulting job might be an exception – but on balance, if she wants to stay in the same line of health care work, she’d be better off spending three years getting experience on the job than getting the JD.
3) It sounds like she just doesn’t want to live in the real world. I’ve met a lot of “professional students” who keep racking up degrees until well into their thirties. Often they’re useless or overlapping. A communications undergraduate degree, then a communications masters degree, then a communications PhD. I can think of more than one person I know who has gone this exact route – and all it ends up being is a way to delay having to go in and be the corporate drone you don’t want to be. The problem is that like the woman in this article, you’re just adding on debt and delaying your eventual escape. You have to make money to be financially independent – and going to school for multiple, redundant degrees is sucking money away from you. You can only do it for so long, and only borrow so much.
One final point: I do know of one situation where it might be a good idea to get dual degrees: some schools will allow you to do a joint program, where you go for four years and get both diplomas. That’s not as bad a deal. You aren’t jumping in and out of the workforce, you’re there for one block of time. You don’t spend as much time to get the extra degree. And your studies are coordinated, so it’s a lot easier to focus on an aspect of business where you want to practice law. Her plan, however, is not something I’d recommend.
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Job Interview Question: What’s Your Biggest Weakness?
December 6th, 2006
This question is one of the most common ones people are asked in interviews – and it’s one of the biggest pains in your rear. There are a lot of ways you can make yourself look horrible answering this question, and not many that you can stand out. Yet you’re going to confront it again and again when you interview for jobs, so if you don’t have a good answer ready, you’re asking for a screw up. With this one I’m going to start with what you shouldn’t do, because that’s most important:
1) Don’t list a strength instead of a weakness. “I’m such a workaholic that I’d probably be at your office working 5 hours of unpaid overtime a day.” “I’m a perfectionist and always do everything right. I just can’t bring myself to make mistakes.” “I tend to get too interested in learning new things and trying to find ways to be efficient on the job.” “I like my bosses too much.” The interviewer will have heard this tack over and over again. It’s an EXTREMELY common kind of answer to this question, and you’re basically refusing to answer the question. You won’t score points by repeating the same canned garbage everyone else does. Plus, what if they call you on it? What are you going to do if they say, “That’s not a weakness, list another.” You’ll sit there and stammer – and it won’t look good.
2) Don’t tell them a major weakness that might actually cost you the job. “I have a drinking problem, and I don’t come to work on time.” “I don’t like working with other people. I spend my days plotting against coworkers.” “I’m a screamer.” If the weakness is one that they aren’t going to want in an employee – honesty is not the best policy. Don’t come out and tell them all your major faults. Everyone has them, but you can’t go blabbing about them in your job interview just because they ask. People who do that don’t get jobs.
3) Don’t claim you don’t have any weaknesses. Are you Superman? Kryptonite. Everyone has something wrong with them. Again, you are just refusing to answer the question – and that doesn’t win you any points and might get you called on it.
What should you do instead? Here are some better approaches to the question:
1) List a weakness you’ve already overcome. The point with this is to show that you’ve got the character to get around your problems and deal with them. One answer I’ve used personally is a fear of public speaking. I don’t have big problems with this and am actually very good at it (with various related stuff on my resume) – but I didn’t start out that way. Doing speech and debate events in school started out being terrifying, and I got nervous to the point of vomiting a few times. So I just worked up an answer about how I kept at it, didn’t do well at first but kept trying until I did, and by practicing a bunch without anyone there eventually got to the point where it wasn’t as big a deal. I pointed out that I still get feel nervous, but it doesn’t interfere with doing it anymore. This answer went over really well, and you may have to think through your background and past to find something like that – but surely you’ve overcome something. Everyone has had some kind of difficulty in life they had to deal with. Try to pick something inherent to you or related to where your resume shines – if you’ve overcome some obstacle on the way to success, point it out. Also try to pick something where you continue working at it, but you’ve basically solved the problem. That way you can at least say it’s a present weakness, just not one that will affect your job.
2) List a weakness that can be eliminated. If you can’t think of a weakness you’ve already dealt with, at a minimum list something that you’ll be able to deal with in the future – and make sure you tell the interviewer a list of steps you’re taking and will take to solve that weakness. If your weakness is that you prefer to work alone rather than on teams – maybe point to instances where you’ve voluntarily tried to be a member of a team to solve that. Talk about how you tried to cultivate working relationships with your coworkers or came together with another person to work on something even when you would have preferred to do it on your own. Your message has to be that you understand your weakness, you minimize it, and it won’t be a problem. Here’s one of mine: I’m unorganized. What do I do about it? Actually, nothing, because I sort of pile papers around my office and know where they are and what I need to do. But I could think of a lot of ways I COULD work on that – maybe point to a computer program I use to enter tasks and have it notify me when to do them. Our work e-mail has that option. Maybe start writing “to-do” lists for each day. It’s a weakness, but if you have that particular weakness as well, you can point out a lot of things that let you get by without being a type-A.
3) Admit something minor that doesn’t really affect your job. This isn’t as good an answer as the first two. But if you can’t think of anything good to say, at the very least you want the question to go away without hurting you. So confess to something that won’t scare them off. You should be able to think of something that you can fix, however, and if you can’t – spend some more time thinking.
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Homemade Flea Traps
November 30th, 2006
Here’s a little tip that will save you some money if you’ve got pets. Anyone that does knows that getting a flea infestation can be a complete hassle, not to mention expensive – most of the pills and medicines run you anywhere from $50 to $100. There are, however, cheaper ways to deal with the problem. One kind of neat thing I’ve seen are what is called a flea trap – which is basically just a warm lightbulb attached to a glue trap. You can see ones for sale online here. They’re pretty cheap, but you can go even cheaper because the concept is so simple. The basic idea is that fleas are attracted to warmth – that’s how they find your pet so they can bite them. They’ll jump to anything that generates heat. So all you need is a lamp or other lightbulb that generates a noticeable amount of heat – set it up over a small, broad dish or pan filled with soapy water. The fleas think they’re jumping on your dog or cat – and they end up stuck in the water instead. It’s not perfect, but it’s nearly free.
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Escaping the Sandbox
November 30th, 2006
I previously have made several posts here and here about the phenomenon called the “Google Sandbox” – something that many people who launch brand new websites see. In essence, Google blocks new sites from getting any visitors through its search engine until enough various elements of the site show that it can be trusted. A lot of people have a lot of various theories on it, but one of mine is that there is a flat, 90-day “holding cell” period for a new site, after which you can be released to start ranking on commerce related searches targeted by spammers. When I last posted on it in October, I made this prediction:
I think that these filters applied by Google are lifted in 30 day increments. So if you do something to trip a filter, it gets removed after some period of time has passed. I’ve noticed on many sites that this clocks in at exactly the three month mark, or 90 days. My prediction is that by the end of November, this site will have a sudden jump in traffic as the Sandbox, or part of it, gets lifted. It was founded in late July – meaning 90 days after that is late October. But I’m also factoring in the time it took for Google to find the site and the fact that in my experience, it can take a few weeks for Google to reflect the freshest information. Maybe I’ll be wrong – but if it happens, for me it’s pretty good evidence of the Sandbox.
It’s the end of November, so was I right? I think so – generally the site had been getting about 30 Google searches per day, give or take 10 or so. But since Sunday, November 26th, it’s been averaging around 100. Lots of things can cause traffic jumps – but the better indicator is what I also posted about previously, the search phrases that where unique to this site and yet completely unranked. In my last post I pointed to this search, where this site couldn’t be found in the top 200 results – even though it was the only web site on the Internet to use that phrase. As of today, the search showed Free the Drones ranking #1 for that term – exactly where it makes sense for it to be. I also posted this guess from my past experience about what words actually trigger the sandbox, because it is clear that it does not apply to every search phrase:
My guess is that it’s the word “forums” that triggered the filter – something about it is considered competitive or commercial, and the site wasn’t allowed to rank for it because it was new and “untrusted.”
I’m even more sure of it now, because starting on Sunday, the forum part of this site started getting searches for various phrases such as “financial forums” – that it had never gotten before since the site was started.
What does all this mean for people who run websites for their businesses? It means you need to start your website about 4 months in advance from when you want to people to be using it, for one. If you want your site to get searches right of the bat, you’re better off putting something up on an older site – starting a new one will have that 4 month delay. I also think a lot of people have an incorrect view about what they need to do to get their blog or site ranked in Google. I’ve seen a lot of people complaining that it took them six months to a year to get out of the “Sandbox” – and I think if you’re still not ranked at that point and think you’re going to just wait it out, you are wasting your time. Something else is at work – there are a lot of other penalties that can apply to your site regardless of its age, and you might have to make more fundamental changes to the site if you still have ranking problems after the “90 day probation + crawl/update time” period. If you don’t see the same jump I did four months or so after starting your site – I think Google is lowering your rank for reasons other than the Sandbox. Getting better links, fixing duplicate content, and getting rid of any violations of the Webmaster Guidelines are what you should focus on.
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How Much Does A Chiropractor Make? Not Enough
November 28th, 2006
USAToday has an interesting series on young people who have gotten themselves into unmanageable levels of debt. It looks like it’s going to be a good set of articles, and should give a lot of guidance for twenty-somethings who haven’t yet started to run up the big debts that lead to problems in your thirties. The first one is on a 29 year old woman in California who is $165,000 in debt from going to chiropractic school. That sounds insane, until you realize that it usually takes seven to eight years. The only problem? She doesn’t make much money! The end result of all that work was a combined salary from two jobs as a chiropractor and a personal trainer of $44,000. That’s on the low end of chiropractor salaries, which range from about $45,000 at the 25th percentile to $120,000 at the 75th percentile. But it’s to be expected that you’ll come out of school and make something on the lower end, unless you performed spectacularly.
The only problem? $44,000 is nowhere near enough to pay back that debt – especially in California, with its extremely high cost of living. The result is that even though she hasn’t started paying her $680 a month debt payment because of deferment, she already uses up 58% of her monthly income on rent and credit card debts. That extra $680 is going to be a budget breaker.
The suggestions to her for what to do now aren’t all that great, but really there’s not much to do at that point other than wait until she’s older and can make more money because of experience. The lesson anyone else should learn is this: just because you’re getting a professional degree doesn’t mean you’re going to make a lot of money. You shouldn’t go $150,000 in debt to get a graduate degree unless you’re sure that you’ll make enough to pay it off – and with many professions that’s not a sure thing. There are a lot of lawyers and MBA’s who pay $200,000 to get a degree at schools where the bottom part of the class just isn’t going to get those six figure jobs. Scholarships or going to a state school will often solve this – or the alternative of paying about the same at a really prestigious school where nearly everyone does well. But you can’t just assume that you’ll be able to pay off your diploma. There’s another very good article here that goes through a lot of examples of people who have run into this problem – including a pair of married acupuncturists who are $350,000 in debt. I’d take away these lessons if you’re thinking about a graduate degree:
1) Not everyone in your class will get the salary your school touts to you. Some people will do poorly and earn less – only 10% of your class can be in the top 10%.
2) You probably won’t earn the average salary in your field until you have more experience, so don’t expect to be able to pay off your student loans that way. Again, there are lots of exceptions (based on school, class performance, and profession) – but the reality is that a lot of people get degrees when they aren’t going to be at the top of their field starting out. Yet they get loans assuming they’ll be making those high salaries right out of the gate, and it often doesn’t work out that way.
3) Not every degree is worth getting. The non-profit leadership degree for $110,000 in that story is a good example – I’m sorry, but you won’t make enough working for non-profits to pay that off for some time. If you want to get a degree in social work, you shouldn’t do it unless it’s cheap.
4) Just because you’re a doctor or a lawyer doesn’t mean you’ll be rich. Sad but true – every average has people who run far below it, and salaries in these professions are no different.
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