Back In Debt But It’s Different This Time

by

Well, I decided to break down and buy a new car (a 2010 Toyota Camry, not sexy but nice) for $15,500 so I’m back in debt but it’s different this time, really!

First let me say that I put down $5,500 on the car to make the amount that I’m in debt for equal to $10,000.  There are two reasons I wanted my debt to equal $10,000

  1. I honestly believe that I can make a better return in investments (even with a small increase in the amount that I might pay in taxes next year).
  2. I wanted a simple number for reporting on in this blog.  This was a minor factor, but still a factor all the same.

What you may or may not know is that I was debt free (including my mortgage) before buying this car.  And actually I think I blogged about how nice it would be to never be in debt again.

toyota camry 2010

So what changed my mind?

  1. With my excellent credit score (811 at the time of purchase), I was able to get an additional .5% of a percentage point off the interest rate for the loan.  I believe it made the rate something like 2.5% for the loan.
  2. I’m pretty sure with just a little effort, I can buy investments that can beat that 2.5% interest rate that I would have to pay on the loan.  With low-risk but optimistic investing and barring a market meltdown, I should be able to easily beat the 2.5% yield.
  3. I’m working on a strategy for three future car purchases spaced about 3 to 4 years apart.  This future purchases will include a replacement vehicle for my wife, and two cars for my kids.  Sounds like a lot, but most likely the two cars I buy for my kids will be used and the total of both will cost less than my wife’s replacement vehicle.
  4. If you are financially oriented (like me), sometimes taking on debt for other financial opportunities makes sense and can be the more prudent route.  This might sound a bit odd coming from a guy that paid off his house in about 11 years, but it’s all simple math.

Here’s the kicker, I could have bought my car outright from money that I had in my investments.  Actually, the money was even sitting in cash, so I wouldn’t have even had to incur any capital gains tax on any investments that would have been sold.

So if I had the 10k sitting around doing nothing… what am I going to do with it to make use of it instead of paying off my car?  Ah, that’s the question!  Currently, I’m leaning towards investing in a safe solid utility company that pays out a respectable dividend.  But in the mean time, it’s still sitting in cash.

After I find out the new tax rates on dividends, I’ll make a move at that point in time.  This entire process if evolving and will change dramatically in the next few months.  Stay tuned!

Bests,

Don

Using Paypal As A Simplified Bookkeeping System

by

As a personal finance blogger, my business transactions are at a minimum, but around tax periods, I agonize over the involved bookkeeping task. I looked into different financial management systems and found that there are varying degrees to which businesses need finance programs.  I would meticulously copy the transactions from PayPal, my Chase Freedom credit card and my bank into my custom excel business spreadsheet that I use to calculate my taxes.  Things have changed recently, now I’m using PayPal to create a simplified bookkeeping system for blogging.

My Old Record-keeping System

I created an excel spreadsheet that had 13 tabs. Twelve tabs for each month, and one tab that represented a year end summary sheet.  For each month I would copy the transactions from the various sources and paste them into each month’s tab.  The Year End page would automatically update with revenue, expenses, profit, etc.

Of course I had a template to make this process easier by enabling me to just make a copy of the blank template and rename it to the current year (ex. moneyreasons_BK2012.xls).  This was highly functional and much cheaper than paying for an excellent program like Quickbooks, especially since blogging transactions are very simple and repetitive in nature.  Quickbooks (while awesome) is overkill for my simplified book-keeping requirements.

PayPal

 

My New PayPal Simplified System

First, let me mention what enabled me to do this new (nearly automated) simplified bookkeeping system!  I applied for a new PayPal credit card!  Yep just that simple change has enabled me to drastically simplify my bookkeeping process.  You see, now I can now track both my revenue and expenses within PayPal.  I use my PayPal credit card (which is a rewards card by the way), to pay for all my expense that I can’t pay with my paypal account, then I pay the credit card balance with my PayPal account directly.  That way I don’t have to send any check for my previous credit card bill anymore via snail mail anymore.

Now all I do is export my data from PayPal into a one sheet spreadsheet.  Next, I add any non-PayPal transactions (which are few at this point in time),  and that’s it!  Since the revenue is positive, and the expense are negative, I don’t have to do any special formula, just a sum at the end!  I do purge and clean up some statement that I export from Paypal, but that’s a pretty quick and painless process.

I’m actually pretty excited about the process.  I love to automate things as much as possible, and this will cut my time working on bookkeeping by hours!

Bests,
Don

An iPad Mini For Christmas

by

I broke down and bought an iPad Mini for Christmas!

Oh, not for me, instead it’s for my eight (soon to be nine) year old daughter!

As a frugal personal finance blogger that works in technology field, how could I justify the $129 increase in the price of a product that might be considered inferior to the Google Nexus 7?  After all, the Google Nexus 7 only cost $199 and is a very beefy, fast system?

An my answer is… I can’t.  From a personal finance perspective, the Google Nexus 7 is the more logical smart device to purchase.  Shoot, if I were to buy a 7 inch tablet for myself for Christmas, the Google Nexus 7 is what I would buy.  The Apple iPad mini is actually 7.9 inches, but that alone doesn’t warrant the 129 dollar price increase.

So again, why in the world would I buy an iPad mini for Christmas to give to my daughter?

The Apple culture and experience!

iPad mini

 

Yep, I’m buying my daughter the iPad mini, because all of the cool kids (and many adults) love Apple iPad minis (or really any Apple product).  I guess it’s the same reason that I bought my son an iPod touch.  In fact, he had such a great experience with his iPod touch that it was a no brainer to buy my daughter the iPad mini.

Vanity?  Yes to a certain extent, but much, much more too.

Why not buy my daughter an iPod Touch instead, after all I bought one for my son?

Because I can get an iPad mini for just $29 more.  Oh sure, the version I’m buying only has a storage capacity of 16G, but the rest of the system is decent enough!  Quite honestly, I’m getting the iPad mini for Christmas instead of the iPod touch because it’s a better experience…

Another big reason that I’m buying the iPad mini for Christmas is because of bragging right and for nostalgic reasons.  I want both of my kids to look back some day with fond memories 10 or 20 years down the road when the next big thing has replaced Apple from being the dominate smart device supplier that it is today.  There are thing in life that if you miss out on by not having such things in an earlier time period, you may never have.  Since I want my kids to be future digerati, I want to give them the best exposure to technology.

As for me, I’ve missed the Apple boat a long time ago.  I’m an Android guy and that’s a win too!

While we went with an iPad mini, there are definitely other choices that are worth consideration!  Look around and compare!

Happy Holidays,

Don

Why Young Investors Should Not Shy Away From Investing in Stocks

by

For college graduates lucky enough to find work after they receive their diploma, the question as to whether or not they should invest and how they should do so is often a tricky one. With the market experiencing incredible high and lows in short periods of time, most young professionals are afraid to invest in stocks and are instead leaving their money in savings accounts.

Leaving money in a savings account is a great idea if you are saving up for a future large purchase such as a house or a car, but don’t underestimate how quickly you could be saving for retirement too. Keeping all your money in a savings account is very secure, but it also has incredibly low returns. Therefore, only emergency money and that being saved for a down payment or vacation should be kept in savings, as it allows you to have quick and easy access to the funds you need when you need it.

Otherwise, young investors should be looking towards stocks as they have their youth on their side.

Stocks offer the quickest and greatest returns which make them a great investment. However, because of their volatility, they are also not a wise investment for older investors who have a lot more to lose should their stocks not provide adequate returns. Because a younger investor has more time before retirement, they are able to more easily recover by further balancing their portfolio.

Because of the potential for great returns offered by stocks, young investors should not in any way, shape, or form be intimidated by them. In fact, most young investors should have approximately 70 to 75 percent of their savings in stocks and the other 25 to 30 percent in bonds. Not only will the right amount of diversity help them yield much higher returns, but it will also reduce the age at which they will retire. A good balance like the 70/ 30 ratio will also make investing a bit more stable and secure while still producing higher yielding results.

However, that doesn’t mean that young investors should just start blindly throwing money into the stock markets. There is a lot to learn about this topic, and taking tips from professionals like practiced professionals with a proven track record, like the Brian F. Prince Blog is a good place to start. While playing with small Forex markets or penny stocks can be a good investing lesson, those interested in establishing a firm financial future should contact a financial adviser to help them determine which stocks are worth investing in, as well as an appropriate amount of portfolio diversity.

This guest post was brought to you by Ryan