Step3 Prophet

Aerogarden Tomato 20th week update

Twenty weeks is upon us now, and things are changing rapidly in the garden once again. Those soaring branches ripe with the promise of fruit have been dragged back down to earth by the harsh realities of a 9-5 job, I mean heavy cherry tomatoes. You can see two branches on the left side that grew too far, too fast and can't support their progenies weight. One branch still valiantly sticks up behind the light canopy, but it will also fall if it is too successful. Otherwise the tomatoes are doing fine. Since it's an even week, I'll give them their food rations. This is the last of the rations though, so in another two weeks the starvation begins. I've also observed an interesting phenomina where the branches that don't bear fruit tend to shrivel at the base, thereby constricting the whole branch and eventually causing it to fall off. I still can't understand why an other wise good sunlight gathering branch would be sacrificed like this, but I clean up their corpses none the less.

Check out more garden posts here.

Politics

I  was reading  an article on brip-blap about his current round of links when I casually mis-read something that caught my eye. I'm not very politically inclined, but the announcement of Joe Biden as Barrack Obama's running mate makes it an Obama-Biden ticket. Or maybe it's an OSAMA BIN LADEN ticket! The jokes abounded early in the campaign about Osama and Obama, but choosing Biden as a running mate? That's like those parents who name their children but don't consider all the harmful nicknames their child could be given by merciless classmates when they start the third grade. I mean come on! Its just 4 letters away, and all the syllables are in the right places. Okay, I'll go back to ignoring politics and just focus on the money now.

Laptop Sold!

I had some time off from work on Thursday and Friday, so I finally got around to doing some things I've been putting off. Specifically, after I got my EEE PC I said I would sell my old laptop to offset the cost of the new one. Mission complete!

Yesterday I moved all of my critical files off the laptop and deauthorized ITunes. I then deleted all the partitions and did a hard format of the disk. That way it will be difficult to recover any files if my buyer is maliciously inclined.  The format took a while, so I let it go overnight. When I woke up this morning I completed the install and made sure the basic devices all had drivers ( audio, video, and internet).

I put the ad on Craigslist at about 12:30 today, and by 5:00 pm I had at least 5 offers. That is somewhat unusal. Some things just sell more quickly than others. I try to fairly price all my items, but it's hard to gauge demand before I put it out there. The only other item I've had get that kind of interest in such a short time was my WACOM tablet. One of the buyers looked promising, since the area code of the phone number he gave me was local, so I called them up and we arranged to meet this evening.

At 8:00 pm a young man showed up at my door and I let him in to inspect the laptop. I could tell after a few minutes that he was sold. I continued to show him some of the features and the few defects that the laptop had, and then we completed the transaction. I do believe this is the fastest turn around I've ever had with CL.

I'm still waiting for my rebate from Asus. When that comes in my final price for the EEE PC will be $519 - $100 ( rebate) = $419 - $200 ( sale of old laptop) = $219! Not bad for a new PC.

Also, I found all of my camera accessories. I put my camera up for sale a few days ago, but no interest yet. If only old digital cameras were as functional as old laptops.

Current Financial State

I have a confession to make. I have no idea what my financial status is. A lot of other finance bloggers have a plan and are working toward specific goals with certain milestones. Right now I'm just kind of winging it. My one real goal so far has been to setup an emergency cash fund, and I just took a serious look at that last month. I know overall I'm in pretty good shape. I have no major debt, so my finances are better than many people out there. But I have a few questions that I need to answer: How much am I investing/saving every month? Will this be enough to retire early? How long until I can expect to have a million dollars at my current savings/investment rate? What should my asset allocation be?

In today's post I'll look at how I'm distributing my income each month. I have all the data I need from my Quicken accounts and my pay stub. Of course, things change from month to month, but I can look at some recent data and get an idea of where I stand.  This will also be useful to compare when I'm evaulating P2P loans on prosper, because people usually give a break down on their monthly expenses. People who state they only spend a $100/month on food and entrainment I find hard to believe.

Here are my averages for the past 12 months:

Item	Percent
Total Income	100.00%
Investments	18.71%
Taxes	15.79%
Rent	14.46%
Retirement	12.50%
Savings	10.21%
Food	9.02%
Auto	3.96%
Household	3.84%
Utilities	3.41%
Insurance	2.86%
Travel	2.55%
Entertainment	1.92%
Other	0.75%

So now I have some numbers on where my money goes each month. These are just averages of course. For instance, I haven't spent a dime on my cars (gas, repairs, oil changes, etc) for the past 2 months. My monthly savings is a healthy 41%. I knew it was significant, but this is higher than I expected. My biggest discretionary expense after savings/investments is food, which is pretty much what I expected.

Rent is 14.46%. This is pretty good. Even though right now I'm paying more than I ever have for housing (its a pretty good house) its not consuming a large portion of my budget. In general, you should be paying no more than 25% of your income toward housing. Housing is something that is difficult to change quickly if you find yourself in a tight spot with money. 

If I found myself in a tough financial situation, there is also lots of room to downsize. Cutting back on investments would not be my preferred method though. There is also room to downsize in the food budget. I'm pretty sure I could easily cut my food budget in half if I strongly desired to do so. (Spaghetti'O's and ramen are pretty cheap after all). If I had to, I could also sell some posessions and move to a smaller living arrangment.

This also shows that to maintain my current lifestyle, I need a replacement income of 60% of my current income. In other words, to retire and live off my investments, with nothing else changing, I would need to bring in significantly less than I'm making now. The usual figure quoted by retirement experts is 80% of your current income.

Now that I have an idea of where I am, in some future post I'll examine what it will take to meet my goals.

(photo by mang maning2000 via flickr)

Can I have an IRA?

I was talking about some random things with a friend of mine this weekend when the topic of IRA's came up. I asked him if he had one, and he told me that he didn't think he was eligible for one since he has a 401K at work. At the time I knew you can have both an IRA and a 401K  or other company sponsored retirement plan, and I was pretty sure(not 100% though) that he makes less than $100K. Therefore, I told him I was pretty sure he was wrong. A little research reveals that we we're both right.

From the IRS website:

Can an individual contribute to a traditional IRA if he or she has other retirement plans?

Yes, individuals can contribute to a traditional IRA whether or not they are covered by another retirement plan. However, they may not be able to deduct all of their contributions if they or their spouses are covered by an employer-sponsored retirement plan.

The details are in publication 590 (yeah baby!) To save you some time, here they are for 2008:

Your maximum tax deductible Traditional IRA contributions are $5000($6000 if 50 or older)

•     If you are single, your phase out begins at $53,000 (Yikes, that is smaller than I thought)
•     For married filing jointly the phase out occurs between $85,000-$105,000
•     Less than $10,000 for a married individual filing a separate return.

For Roth IRA's , its a different story.

•     If you are single you can contribute as long as your income is less than $101,000
•     If you are married and filing jointly, its $156,000.

And if you don't have an employer sponsored plan, then you can deduct the full amount no matter what your income is( if your spouse has a plan, then a $156,000 limit applies to joint filers)

Something I don't think many people realize is that you can contribute to a Traditional IRA even if you don't get the tax deduction benefit. You still get the benefit of tax deffered growth on your investments. Of course, if you exceed the Traditional IRA limits but not the Roth, then the Roth would be better for you than contributing nondeductible earnings to a Traditional IRA

If you exceed the income limits of a Roth IRA you can't contribute to one. If you over contribute, you will be subject to an excise tax of 6% unless you withdraw the extra amount before April 15.
(From wikipedia: An excise tax is a type of tax charged on goods produced within the country (as opposed to customs duties, charged on goods from outside the country).

Aerogarden Tomato 19th week update

More growth on the sides! And some under the light canopy as well. But this week I'm saddened to report the one of our dear friends didn't make it. The yellow tomato plant, which was always the runt of the litter, gasped its last two tomatoes and then I had to put it out of it's misery. I did it humanely with a quick snip at the feet, I mean base. I topped off the reservoir and cleared out some other dead growth. It amazes me that the plants go to all that trouble to grow branches and leaves and then hang them out to dry. The limbs shrivel and fall off. Maybe all plants do this and I've never noticed since I don't pay to much attention to the conidtion of wild growing things. Anyway, here's a juxtaposition of some new growth tomatoes on the side, with bonus flowers around it.

To see other garden updates, click on garden!

Active Duty Fraud Alert!

 Today I went to establish my credit fraud alert like I said I would yesterday. As I was looking over Experian's site, I couldn't help but notice something interesting. An Active Duty Alert. That caught my since I'm currently Active Duty in the military. It said it was good for one year, which is 4  times what a fraud alert would get me, so I decided to dig a little deeper.

I found this site from the FTC. Sure enough, to support military members who may not always be able to check up on their credit, the FTC instituted a military fraud alert. It's pretty much exactly the same as an initial fraud alert, but it last longer. Something else I didn't know was that when you place a fraud alert or military alert with one company, the must report it to the other bureaus for you.

So I went ahead and clicked on the link and filled out the form. They asked me a few questions like they would when you request a credit report. I love the trap questions. "Our records show that you took out such and such a lone on this date. Who is the loan with?" Since I didn't take out a loan on that date it's an easy none of the above.

After I finished I saw this screen:

As you requested, an Active Duty Alert has been added to your credit report. This alert will expire after one year. As an added precaution, we have removed your name from prescreened offer mailing lists for two years.

As a convenience to you, we will notify the other national credit reporting agencies, Equifax and TransUnion, of your request for an Active Duty Alert. You should receive confirmation from them directly.

If you suspect that your identification information has been or could be used fraudulently, you can also add an Initial Security Alert to your credit report.

Cool . 

Afterwards they let me view my credit report. I'm not sure if it counts as one of my free annual credit reports, or if it is because I placed the fraud alert. (Fraud also gets you a free credit report). I did end up disputing an old phone number of mine that I haven't had in years. 

I also saw some other interesting things. There have been no hard pulls on my credit report for years. A hard pull is when you apply for a loan or new credit card or mortgage and the creditor looks a your report. A large number of those will bring your credit score down.

I saw many soft pulls on my credit as well. My previous annual credit checks by myself showed there. Prosper shows up as well, but not Lending club. For some reason Equifax did a check on what Experian had on me.

Now I can sleep a little better at night.

(image by Newright via flickr)

Identity theft Protection

It's been a week now, and I said that I would make a decision on what I need to do with regard to protecting myself from Identity theft. The answer, as it turns out, is not to buy another service. But lets look at what I found first.

Credit monitoring

First did a search for credit monitoring services. There are a number out there, offered by the three credit bureaus as well as by third party vendors. Services run from $60-$180 a year and offer as frequent as daily monitoring of your credit report from 1 or more bureaus. While doing that search, I also came across this consumer reports article about credit monitoring. They were not kind to the credit monitors. CR brought up a few good points.
-Credit monitoring doesn't stop anything
-It could take 2 months for fraudulent transactions to appear on your credit report
-Credit monitoring won't even notice certain types of fraud, like Social Security number fraud

One thing I didn't know was that the Credit bureaus can't tie your SSN to you name. The only way for them to verify who belongs to which SSN is to ask the Social Security Administration, but the SSA won't give them that info. So instead they create fragment files for each time someone uses a new name, address, date of birth, or social security number and try to match these stub files to existing accounts. Some one who applies for credit with your SSN and their name would create such a stub, which won't be seen or affect your credit profile until it is matched at a later date. This could take years.

MIsconceptions

As for the type of credit fraud that got me thinking about ID theft protection: it would also fly under the radar because it's an existing account.The thieves stole names and credit card numbers of people with existing credit accounts.There is no way that credit monitoring services would notice anything amiss because your account isn't adding new credit, its just exercising existing credit.

The good news is that you are already protected from this type of fraud. I forgot this last week, but Credit card companies can only hold you liable for the first $50. The key here is to review you credit card statements frequently. 

How to be proactive

There are a few ways you can be proactive when it comes to stopping new credit accounts from being created with out your knowing. You can place a fraud alert on your account with each of the three credit bureaus( Experian, Transunion, and Equifax). This will make anyone who wants to look at your credit report, and who isn't already authorized to do so, call you to get permission first. A lender will not be very willing to extend credit to someone if they can't look at their credit report. A fraud alert is free, and it's good for 90 days. There are actually services that will do this for you. LifeLock is one that is gaining in popularity. For $10 a month they will place a fraud alert with all 3 credit bureaus every 90 days. They will also give you your free credit reports( which you can get from annualcreditreport.com) and help you get back your identity if you are a victim of identity theft. Another similar service is LoudSiren. These are all things you can do on your own for free( except for the their insurance policy which pays for expenses related to getting your identity back) if you want to take the time and effort. 

A better way to go might be to issue a credit freeze on all your accounts. Unless you have been the victim of identity theft already, this will cost you about $10 per credit bureau. A credit freeze stops anyone but existing creditors from looking at your account, and its good for 7 YEARS or longer. You must lift the freeze if you are going to apply for a loan, new credit, or some other things like new utility service or cell phone service. It's $10 to lift the freeze and then another 10 to reinstate it. Still, that means you would pay about $30 to set it up, and if you only apply for credit once a year it could be as little at $20 to maintain it while still having access to "new money". Considering you would pay $90-$110 annually for the same service from the above companies, that is quite a savings.

Another thing you can do is opt out of receiving junk mail credit offers. I did this quite successfully a few years ago. Since I was moving around quite a bit, I had all my mail sent to my parents house. The bulk of the mail that was received by my parents for me was credit offers. So to prevent them form storing boxes of junk mail offers for me, I called up the number on the credit offer and requested they no longer send me those offers! After about 3 months the stream of offers i received became a trickle and then practically non-existent. 

What am I going to do?

The credit freeze options sounds like a good idea. The only problem is that since I have engaged in a credit card arbitrage plan, it would make applying for new credit next year difficult. That combined with the fact that I don't know where I'll even be living next year, makes this a tricky proposition. I don't want to be caught paying interest on $15,000. So here is the plan for me:

-Continue to monitor my credit card usage monthly

-Continue to get my free credit reports from annualcreditreport.com 

-Place a fraud alert at all three credit bureaus. I'll let it expire and then apply for my next round of credit to further the arbitrage scheme. After that I may place a freeze.

-Use the junk mail opt out clause to reduce the number of credit offers I get. Since I've applied for credit at my current address, that put my name and new address back in the list and the number of credit offers I've recieved has been increasing. I've let this slide since I'm wait to see if something really good comes in, but now I think the risk out weighs the reward. 

Anyone else have any good proactive measures to take to prevent credit fraud?

(image by fpsurgeon via flickr)

Is it time to buy American?

A few weeks ago I posted my thoughts on the financial sector as part of an instructional guide on what I look for in buying an ETF. I actually ended up buying 4 shares of VFH(Vanguard Financial Sector ETF) for about $33 a share. It looks like I timed it to well for my own good, because it has gone up to $41 a share and now I don't want to buy it any more. So what next?

Well, I saw an article on Yahoo! Finance called "Will Ford and GM Run These Funds Off the Road?". The gist of it is that US Auto makers have taken a beating on the stock market recently, and funds that own them may also perform poorly. Poor performance! Thats just what I'm looking for!

Down on their luck

Looking for poor perfromance? I'm sure you think I'm crazy, but I'm a contrarian investor. That means I look for stocks or sectors that have been punished for no good reason ( or for temporary reasons) and whose stock value has been driven lower than it probably should be. That is the time to buy. The highs and lows of a stock are unpredictable, and choosing which startup company will be the next Starbucks or Google is pretty darn tough. But seeing that an otherwise good company is down on it's luck is not that difficult right?

Well, there are somethings to watch out for. No company it too big for bankruptcy. If bankruptcy is coming up or being talked about, don't buy! Stock holders have about as much claim in backruptcy court as obese teenagers suing Mcdonalds. But seriously, stock holders are pretty much last priority, and most likely the stock will be entirely reissued.

Also, it's impossible to call the bottom. I learned this with Moneygram International (MGI). I noticed their stock when it had lost about half it's value. I bought 6 shares at $15. Now the stock is about $1.70. I decided to keep buying on the way down. They were hit pretty hard due to the credit crisis, but I think they still have good prospects for the future. Because I buy in increments of $100, I now own over 300 shares with an average price of $2.13. I'm also a long term investor, so I can wait years for the company to recover its finacial footing.

Buying in small increments helps protect you from losing too much at any one time. Sometimes, you lose out on more of the upside like I did with VFH, but I sleep better knowing that I bought 6 really expensive shares of MGI, and a lot of cheaper ones. Of course, if the company is going down, the shares are expensive at any price.

Down, but not out

So back to American auto makers. They've had a bad quarter. Actually, looking at the charts, Ford's stock has been sinking since 2000, so they've had a bad decade, and this past quarter is just the iceing on the cake. So why an I optomistic.

I can see several senarios that work in my favor. First, gasoline prices. They were high, but now are coming down. This will have two effects. The auto companies got a shock when people stopped buying big SUV's and trucks. Therefore, they will work to make better small cars in the future to regain market share. Also, after a while people will forget about how high gas prices and start buying trucks and SUV's again.

Second, the losses this quarter shocked investors. This means people irrationally sold the stock without evaluating long term trends. Therefore, the stock should be undervalued. Value is difficult to determine when profits are negative, but I don't believe profits will be negative forever. Also, the losses this quarter include a number "special charges". I think the auto companies are taking their lumps all at once, and future quarters will not be so bad.

I'm still new to investing in individual stocks, so hoping that auto makers read the signs and shift gears may be in vain. However, I'm an optimist. That's why I'm going long on F and GM.

Aerogarden Tomato 18th week update

This week sees the middle plant and the right plant on the decline, while the left most plant zigs and zags with new growth. You can see from the pic that one of the branches has shot up above the light canopy. There are flowers at the top of it, as well as some more flowers under the canopy. This week I fed the plants. I only have 1 more packet of food remaining, so that means they should be good on food for another month. See more AG pics here in the garden index.