Category Archives: Experiment

My Upromise Experience and was It Worth It?

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I always try to plan for future expenses.  That why I opened a Upromise account right before my son was born.  Back then I had more expenses and any amount I could save counted!

For that time in my life, Upromise was a perfect vehicle for me to save for my son’s college without it hitting me hard in the wallet.  I’m always thinking about money and ways to make the pennies scream…  After a while those pennies add up!

a million pennies

I’ve had the Upromise account for the last 9 years, how has it treated me?  Overall, I’ve earned $951.48 (not too shabby).  If I was more aggressive with it, I could have made much more.  I use to buy the McDonald’s gift certificate booklets (with a credit card I had linked in Upromise so I got an extra 1%), then use them for my lunch.  Then once a week, I would enter the codes on the back of the booklets into the Upromise site.  Perhaps, I’ll buy a $5.00 booklet this Christmas for nostalgic reasons.  Note, It’s not worth doing the McDonald’s booklets now because they lowered the benefit they gave back to 1%, when I was doing it, it was 5%.

When my son was three, I had been promoted at work and was receiving more money, so I started putting my own money in a 529 plan.  Now, the 529 plan is where the bulk most of his money for college resides.

Back to the Upromise, do I think it was worth it?

Yes, not so much from the incredible amount of money we were able to save (blatant sarcasm).  The benefit came from keeping my son’s college education in the forefront of my mind.

If you participant in the Upromise program, you naturally think about saving for college more.  The more you think about it, the more clever you become in looking for ways to saving for it.  I hate to say it creates a “heightened awareness”, but that’s what it did for me.

With the 529 plan that I’m now in, it automatically take money from my savings account every month and buys the into fund that I signed him (and daughter) up for.

The key is to always think about the big cost in life that will hit farther down the road.  If you take actions now, the hit might not be a like a Mike Tyson hit…  if you perhaps properly, it’ll be more like a Hannah Montana hit, it will still sting but at least you’ll still be standing up. 😀

If you are thinking of going the Upromise route, please leave comment and I’ll provide additional information about my experience!

Don

Lunch Budget Experiment #2 – Buying the Stock

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In my previous post about my “Lunch Experiment“, I mentioned that I was looking at buying a type of dividend producing stock called a REIT (Real Estate Investemnt Trust).

Stock Hunting Adventure Ends

My Stock Hunting Adventure Ends

Well, this past Friday, I decided to jump in the market while it was low from the Dubai World credit crisis fallout.

Even though the market might move lower on Monday, I’m pretty confident that it isn’t going anywhere near the recent recessionary low that we experienced in March 2009.  “Sell high, buy low”, if possible (actually I prefer dollar-cost-averaging for my real investments).

So what did I buy?

First, let me say that I can afford to lose this money.  The stock was bought with money that I would have wasted on buying “out of the office” meals at work.  This is the reason that I call this an experiment, and the money involved truly is non-necessary money.

On to what I bought.  Drumroll… I bought AHN (Anworth Mortgage Asset Corporation)!  This REIT company does the following:

“…invests primarily in United States agency mortgage-backed securities issued or guaranteed by United States government sponsored entities, such as Fannie Mae or Freddie Mac, or an agency of the United States government, such as Ginnie Mae, including mortgage pass-through certificates, collateralized mortgage obligations, and other real estate securities, on a leveraged basis…” – from finance.yahoo.com

Why did I buy it?

I bought this stock for the 15.5% dividend yield.

How much did I buy?

I bought $2,000 dollars worth.  I decided to take an extra $1,000 from my regular brokerage account (that was sitting in cash) and put it extra towards the experiment.  So now I owe my regular account $1,000.

How much money will I get from the quarterly dividend?

If you consider taxes as part of the decision this is trickier than it sounds.  Not taking into account taxes (for example, if I put bought ANH  in a Roth IRA), I would receive ($2,000 x .155) = $310 dollar annually ($25 a month and about $6 a week).  Currently, I’m holding this in my regular stock account, but in January 2010 this is going into my Roth.  For more information about REITS, see this wiki article (especially the taxing info.)

Why did I put in extra money?

The extra $1,000 that I added will enable me to take 1 additional lunch as soon as the dividend is paid out, instead of waiting 25 24 additional weeks.  this will enable me to start enjoying the lunch out with friends in a few months, instead of waiting 1/2 a year (not to mention the current high dividend).  Though honestly, I could have waited…

Potential Pitfalls

The company may cut or reduce it’s dividend.  Yes, I’m taking more risk than is customary for me.   I’m willing to roll with the punches though.

Tell me what you think of my latest move?  What kind of strategy would you pursue?   Is my timing bad?

-MR

Related Posts:

Lunch Budget Experiment Update #3

Lunch Budget Experiment Update

Paying An Adult Allowance

Lunch Budget Experiment Update

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Hurray!Woo Hoo

This past friday, I’ve accumulated my first $1,000 by cutting back on my lunch expenses…

Now , I’m looking at stocks that will pay at least a 5% dividend (and preferable around 6 or 7%).  After the fourth quarter passes (I get my first dividend after the fourth quarter), I’ll be able to go out to lunch 1 extra day each month.   Then after 25 more days, I’ll have another $1,000.  After I have $2,000 dollars invested in dividend yielding stocks,  I’ll be able go out ever other week.  After another year passes, I’ll have enought money saved up to go out and entire extra day per week.  That’s all I need, going out 3 time a week is plenty.  If I keep the experiment up past 2 year, I’ll just keep saving the money in the lunch fund.

I’m kind of excited about this, I’ve always wanted to have a dividend fund like this since I was 19 years old.  Of course, I’m not considering taxes, but I’m hoping that if I get a 6% or 7%, that will make up for my lack of tracking the tax.

Lunch Savings to date:

Savings from int. rate: 5%
Lunch Budget
Amt Cumultive Yearly Monthly Weekly
6/5/2009 40 40 2.00 0.17 $0.04
6/12/2009 40 80 4.00 0.33 $0.08
6/19/2009 40 120 6.00 0.50 $0.12
6/26/2009 40 160 8.00 0.67 $0.15
7/3/2009 40 200 10.00 0.83 $0.19
7/10/2009 40 240 12.00 1.00 $0.23
7/17/2009 40 280 14.00 1.17 $0.27
7/24/2009 40 320 16.00 1.33 $0.31
7/31/2009 40 360 18.00 1.50 $0.35
8/7/2009 40 400 20.00 1.67 $0.38
8/14/2009 40 440 22.00 1.83 $0.42
8/21/2009 40 480 24.00 2.00 $0.46
8/28/2009 40 520 26.00 2.17 $0.50
9/4/2009 40 560 28.00 2.33 $0.54
9/11/2009 40 600 30.00 2.50 $0.58
9/18/2009 40 640 32.00 2.67 $0.62
9/25/2009 40 680 34.00 2.83 $0.65
10/2/2009 40 720 36.00 3.00 $0.69
10/9/2009 40 760 38.00 3.17 $0.73
10/16/2009 40 800 40.00 3.33 $0.77
10/23/2009 40 840 42.00 3.50 $0.81
10/30/2009 40 880 44.00 3.67 $0.85
11/6/2009 40 920 46.00 3.83 $0.88
11/13/2009 40 960 48.00 4.00 $0.92
11/22/2009 40 1000 50.00 4.17 $0.96

 

For those of you who might not have seen the earlier post about my Lunch Budget Experiment (I called it an Adult Allowance Experiment for the initial post), this is what I”m doing:

I’m cutting $40 out of my weekly lunch expenses by packing cheap (but still health) lunches.  Then after the savings amount hit over $1,000 dollars, I taking the money saved and investing it into a stock that pays a dividend.  I then use the dividend money to pay for the lunches I use to pay directly out of pocket.  IMHO, the beauty of this is I don’t actually carve extra money from my earned income to pay for lunch.  I’m just spend the dividend money I would have spent on lunch anyway.  So after the first 2 years, I get a free weekly lunch via the dividend payments.

The next dividend producing funds that I’ll try to start are:

  • Christmas fund.
  • Home Improvements fund.
  • Kids Allowance fund
  • Vacation fund (this will be a hybrid approach, because it would take too long).

I would like to include a Car fund, but I don’t think I can build up a dividend producing fund quick enough…

 

Tell me what you think, and do you have any suggestions?  Do you think I should stick to the experiment for 2 or  more years?

-MR

Related Posts:

Paying An Adult Allowance

Lunch Budget Experiment #2 – Buying the Stock

Spot Budgeting To Save Money For A Goal Fund

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First, let me say, that I’ve always admired people that create budgets and could follow them to the T.  I’ve actually tried to create a budget when I was in college, but it’s never worked out for me. There was always something that would pop up that I didn’t save the receipt for.

Surprisingly, while doing my Breakfast/Lunch experiment, I “out of the blue” realized that my experiment is really a form of budgeting.  I decided to call this type of budgeting “Spot Budgeting“.

Here’s how “Spot Budgeting” works for me:

  • First, every monday, I clip 5 sheets of paper I recycled together and use them as a log for things I do at work.
  • At the top, I add Breakfast and Lunch cost to these 5 sheets, 1 entry for breakfast and 1 for lunch on each sheet.
  • On Friday, I add up the total cost for breakfast and lunch, then I do the following calculation:
    • Is 60 – (weekly breakfasts + weekly lunches), greater than 40?
      • If 60 – (weekly breakfasts + weekly lunches) is greater that 40, then I pay myself the full $40 dollars for an allowance.
      • If 60 – (weekly breakfasts + weekly lunches) is less that 40, then I pay myself the amount that’s less than $40 dollars.
      • The following week I’ll make it up by not eating out for lunch as much.  Then I’ll pay myself the amount over $40 dollars that I didn’t spend.
  • Since I’m adjusting and tracking this weekly, I don’t do any monthly or yearly budgeting comparisons (this makes it simple).
  • Since it a weekly comparison, and it typically only involves 20 entries (only 2 a day) to log per week, it’s very simple and quick to do.
  • If I want to calculate my yearly savings, it’s just (40*52, which is $2080)
  • That’s it…  My budget is just for Breakfast/Lunch and during the typical workweek only.

Now my next stage is to take the money I save by budgeting and put it into a dividend yielding stock (etf, bond, mutual fund or whatever).  Then use the dividend paid by that investment to increase the amount of money I have for lunch.  See my attached spreadsheet table below:

So after 3 years of saving, I can afford to buy another cheap lunch per week, while I’m at lunch… so instead of 2 days out for lunch per week, I’ll added another lunch out with the guys after every 3 years of savings.

My view on the “Spot Budget” is that you are no longer paying for the lunch out of your earned money, but instead using the money from your investment dividends.  So after the 1st year of investing the money, this will effectively be my “Lunch Fund”.

To speed up the savings, I also add “Additional Savings” to my “Lunch Fund”.  The “Additional Savings” could come from bonuses, part of my tax refunds, etc.

Additional Main Adult Total Yearly Amount & Interest Monthly Weekly
Savings Savings Allowance Contributions Interest Interest Rate Earnings Earnings
2009 1000 2080 3080 3,080.00 $154 3,234.00 5.0% $12.83 $2.96
2010 2080 2080 5,160.00 $258 5,418.00 5.0% $21.50 $4.96
2011 2080 2080 7,240.00 $362 7,602.00 5.0% $30.17 $6.96
2012 2080 2080 9,320.00 $466 9,786.00 5.0% $38.83 $8.96
2013 2080 2080 11,400.00 $570 11,970.00 5.0% $47.50 $10.96
2014 2080 2080 13,480.00 $674 14,154.00 5.0% $56.17 $12.96
2015 2080 2080 15,560.00 $778 16,338.00 5.0% $64.83 $14.96
2016 2080 2080 17,640.00 $882 18,522.00 5.0% $73.50 $16.96
2017 2080 2080 19,720.00 $986 20,706.00 5.0% $82.17 $18.96
2018 2080 2080 21,800.00 $1,090 22,890.00 5.0% $90.83 $20.96
2019 2080 2080 23,880.00 $1,194 25,074.00 5.0% $99.50 $22.96
2020 2080 2080 25,960.00 $1,298 27,258.00 5.0% $108.17 $24.96
2021 2080 2080 28,040.00 $1,402 29,442.00 5.0% $116.83 $26.96
* The idea here is to pack food, which saves money and to pay my allowance out of that money

This is my first “Goal Fund”, eventually I plan on have other “Goal Funds” that will pay dividend for other goals, perhaps vacations, taxes, etc.

Well, this is my evolution of my lunch experiment into a Lunch “Goal Fund”.  I’m kind of excited to see this come to fruition!!

Goal Fund for lunch

Goal Fund for lunch

– D