M is for Money

Hi, I’m Miss M, and I’m an internet addict. Surrounded by technology, parked in front of a computer all day long, the symptoms are not obvious. But take away the drug, even for a minute, and suddenly I realize just how addicted I am. This morning, the internet stopped working!

I tried all the usual tricks - restarted the computer, the modem, the router. I tried unplugging and reconnecting all the cables. I gave it time to warm up, I tried reasoning with it. Finally, I broke down and called tech support. For forty five long minutes I stumbled through their instructions, the Indian lady was very kind and patient but her accented English was also very hard to comprehend. There was a lot of “can you repeat that” on my end. Quite clearly she was simply reading from a script and having an equally hard time understanding me! We went through all the steps, including the ones I already tried. Then we got to the more advance stuff, they reset and reprogrammed the modem remotely. We tried fixing the connection settings, but nothing worked. Finally she had to put me on hold while she spoke with the “techy” tech support. She was going to create a ticket and the technicians would take a look, most likely there was a problem in the line that they would be able to fix. The worst case scenario, two days until a technician could come to the house. But they would call within an hour with an update.

I felt lost, unsure of what to do with myself. Should I try to work around the house or head to a starbucks for some wifi? I decided I should at least stay home for an hour, in case the techs needed me to do something on our end. And miracle of miracles, before the hour was up I noticed the light on the modem shining brightly. The internet was back, hallelujah.

This weeks carnivals:

-The Money Hacks Carnival at the Financial Blogger: The Freelancers Union
-Carnival of Money Stories hosted by Christian PF: You are the Company you Keep
-The Carnival of Personal Finance at the Centsible Life: What You Lose When You Cash Out a 401k

I overheard some interesting conversation at a housewarming party earlier this week. An old friend “L” just moved into a new apartment and had a few girls over to see the new place. L has a long history of living beyond her means with the mountains of debt to prove it. She is one of the few people I know to turn to debt consolidation, which helped pull her out of the hole. Unfortunately it sounds like she has fallen back in again. But what struck me most was her, and some of her guest’s,current attitude towards financial responsibility.

Somehow the subject of debt was brought up and L remarked that debt has been a continual force in our lives since our college days. I proudly told her that I had finally kicked the habit and paid off over $20,000 in credit card debt in a year. “Whatever”, she said, “I’ve paid off at least $30,000 in the last three years”. I got the impression that was only a portion of the debt she is carrying (truly frightening when you consider I make 2-3 times her income). But she is no longer scared about her poor credit or being in debt. In her mind, the recession has put everyone in a similar place and only one small emergency away from financial ruin. It’s the new normal and she is just the average American. Besides, if she loses her job she will just declare bankruptcy. No big deal, everyone is doing it.

Then there was her friend R, who is going through the mortgage modification process. She asked if I had done mine yet and when I told her that I don’t qualify for any of the programs, she insisted that I was wrong. Apparently she doesn’t qualify either, but is forging the paperwork to make it appear that she does. She has no guilt about it, not in a world where corporate responsibility has gone out the window. Her basic mindset was, the banks got their bailout, why shouldn’t I? It’s hard to argue with the sentiment, but that doesn’t make it right. I got the impression that she can’t afford the house, loan modification or not. She is creating a fake business to make her income appear high enough to qualify for the program. I have the opposite problem, too much income and too many assets. It does make one wonder why they chose the responsible path.

This recession and resulting corporate rescues have taught Americans a bad lesson, that financial responsibility is pointless. First you have people like L, who see the financial ruin of others as a rubber stamp for their own bad decisions. Then you have people like R, who see corporate bailouts as a license to cheat the system. Both types are learning that financial responsibility is for suckers, those not creative enough to work the system.

So what is your take? Have Americans lost all sense of financial responsibility and is the government bailout of irresponsible banks to blame?


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It’s been several months since I started investing with Lending Club and there have been some interesting developments recently. Do you want the good news first or the bad news? As the eternal optimist, I’ll start with the good.

One loan has been paid in full – early. I don’t know the circumstances behind the early payoff, perhaps the borrower landed a windfall or just needed the loan to cover a temporary shortfall. They made only 3 payments in the life of the loan, the last one to pay off the balance. I didn’t receive much interest as a result, but it does allow me to relend the money immediately. This was a “B” grade loan, meaning the borrower had pretty good credit. I hope he (or she) is enjoying that new airplane!

Now for the bad news, one borrower is officially late. They have apparently engaged the services of a debt consolidator and are working on a payment plan. They only made a partial payment for October, which is still considered a late payment. Based on the notes in the file, a payment plan has been worked out and it appears they are expected to make the same monthly payments as before. I have a feeling this loan will never be fully repaid since it was taken out in July and already the borrower is in trouble. I should have known better, this is one of the few low grade investments I made. While most of my investments are in the upper credit tiers, B’s on average, this loan was to an “E” credit borrower. As one would expect, poor credit means a poor likelihood of being paid in full. The payments made so far only represent 8% of the total loaned, hopefully they will get closer to 100% before totally defaulting.

Loan defaults are a fact of life for lenders. The higher risk of lending to people with poor credit is offset by charging them higher interest rates, my B grade borrower had a rate of 12.2% compared to 16% for the E credit borrower. Obviously in this circumstance, the rate spread should have been higher! The 30% interest charged by the credit card companies doesn’t seem so steep in light of borrowers who default almost immediately. All I can do is hope for enough “good” loans to offset this one bad investment.


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Some a-hole hit my car the other day. It was Monday evening, the end of the working day, when I walked to the garage to hop in my car and head home. Parking at my building is ridiculously expensive so I pay $150 a month to park a few blocks down the road. I’ve been parking there for years with no more damage than the common door ding. Even in the dim light of the garage I immediately noticed a problem, bright yellow streaks on the passenger side of my car. Someone had hit the side of my car and taken off without leaving a note! The rear passenger door and fender are bent, along with the damage to the paint and the flashy new yellow stripes on the side of my car. Sigh.

I asked the garage attendant if he had heard or seen anything - no. Do they have any cameras or records of who comes in and out - no. Unfortunately there is no way of knowing who hit my car. I know it’s not a regular because I’ve never seen a yellow car in my remote corner of the garage before. So I called up my insurance and reported the incident, given the extent of the damage I believe the repairs will be more than my deductible. I’m worried that insurance will hold the claim against me, but why am I paying $250 a month for auto insurance if I’m not going to use it? A-holes like the guy who hit my car are a major reason why insurance rates are so high here.

I know it’s not easy confessing to our crimes. I once tagged a neighbor’s car while trying to park, I immediately manned up and left a note on his car. Once he got an estimate I paid for the repairs out of pocket. If only everyone were so honest, we’d all benefit in the form of lower insurance rates. Meanwhile I’m paying for someone else’s mistake, both in the cost of insurance and the cost to repair my car.


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New I Bond Rate (Nov 2009 – May 2010): 3.36%

The latest I Bond rates were just announced and the news is slightly better than what we got back in May of this year. Starting November 1, 2009, I Bonds will earn a 0.3% fixed rate of return (up from 0.1% earlier in the year). Inflation has returned to the picture as well. The semi-annual inflation rate for all I bonds is 1.53%, way above the nearly negative 3% rate used back in May. I Bonds earn a composite rate consisting of the fixed rate plus an annual inflation rate. For I Bonds issued between November 1, 2009 and April 30, 2010, the compound rate of return will be 3.36%.

Keep in mind that the rate on I Bonds will fluctuate every six months, but you will always receive the fixed rate of return on top of current inflation. For example, bonds purchased in the previous six month period will earn 3.16% (the 0.1% fixed rate plus the annual inflation). Previously these bonds earned nothing due to the negative inflation rate. I Bonds are a quick and easy way to get some inflation protection without taking on much risk.


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Net worth updates aren’t so fun anymore. The predicted market pullback started at the end of the month, eating up both prior gains and some of my new investments. Our net worth increased, but by less than what we save each month. It was a spendy month, nothing special just higher than normal spending for our daily expenses. October was a special month – 3 paycheck month! I used the extra check to set aside some money for Christmas and to refuel some of our spending accounts. I wished I could have saved some more…

Savings - I’m still replacing the money I used to pay the car insurance up front. We still have the bulk of our money in a FNBO savings account.

Bonds – After a hiatus of a few months, we are once again contributing to our snowflake bonds. A little here, a little there.

Sharebuilder – No trades.

T Rowe Price – We may invest $500 a month, but the balance only went up $50. There goes that sucking sound again.

Lending Club – We have a small amount invested with Lending Club and are adding more as part of our retirement plans. There have been some interesting developments lately.

Fidelity 401k – from a former job, I no longer contribute

Wells Fargo 401k – I save 8% of my salary and plan to increase that as soon as the Care Credit balance is paid off towards the end of the year.

Company ESOP – our company stock is structured as a retirement plan

Roth IRA – I finally opened my Roth IRA at Vanguard

Savings Accounts – this is where we set aside money for future expenses. Since I know we will spend this money eventually I do not include it in the net worth

Property Taxes – In the interest of big goals, I’ve dropped our monthly self escrow to $400 as a result of our property tax reduction.

Dog Fund – To cover our 3 boston terrier’s care and expenses, it’s been hovering near zero for much of the year. Once I’ve paid off the last of their medical debt I’ll be able to build this fund back up.

Misc Fund – used for irregular or unexpected expenses

House Fund – It’s time to get serious about fixing up the house so I’ve started saving money for repairs. We’re hoping to do the plumbing and electrical later this fall

3 Month Fund – this fund is part of my plan to smooth out Mr. M’s irregular income. I will try to rebuild this fund in the coming months.

Mr. M Tax Fund – we’re setting money aside to pay taxes on Mr M’s independent contractor earnings. Most of his recent jobs have been W-2 employment so I haven’t needed to set much aside.

Wedding Fund – planning for August or September of 2010

Christmas Fund – I set aside money to cover the cost of the holidays, presents, decorations and more

Care Credit – This will be paid off in November

At least the month ended in positive territory. Unfortunately the increase in our net worth was less than what we save and invest each month, such is the life of an investor. Hopefully this short term pain will mean long term gains.


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I may have found our wedding venue. Saturday my mom and I visited a relatively unknown property in Pasadena that would perfectly suit my daytime garden wedding dreams. Unfortunately, it is quickly becoming popular and there was quite a crowd for the tour and information session. It is one of the cheapest and most liberal places in town, you get the grounds for 18 hours and can use whatever vendors you like. But there are some definite drawbacks. They are currently changing management and possibly changing ownership. The property is on the market, but at an asking price of $35 million and with the many constraints on the property as a historical landmark, a sale is not certain. Also many of my preferred dates have been taken already and with the management changeover they are currently not booking anything! They were taking names though, you could put yourself down for a certain garden and a particular date. The new management will start calling in a few weeks to make the bookings. I chose an open date at the end of August to save myself a spot. In the meanwhile I’ll keep looking at other venues.

Afterwards my mom and I went to a little teahouse for lunch. While the place was a tad on the snooty side, the food was absolutely delicious and not a bad value. For $10 I got a sandwich, oversized side salad and some potato side dish. Stop by the Scarlett Tea Room in Pasadena some time, reservations are recommended.

This week’s carnivals:

-The Festival of Frugality at Gather Little by Little: Pet First Aid
-Carnival of Personal Finance at Money Crashers: Group Legal a New Workplace Benefit