Category: Personal Finance

Tales from my 20 years as a landlord: One former tenant phoned months after disappearing into the night -- and leaving a horrific mess -- to berate me for letting the city junk the broken-down car he'd abandoned out front.

Another tenant called to have me referee a dispute with a plumber. I could hear his wife and the plumber screaming so viciously in the background that I thought about calling 911.

And, of course, I had tenants who fell behind in the rent, racked up huge, unnecessary repair bills, clogged the toilet with latex objects, set up meth labs in the basement and used the disposal to get rid of dead bodies.

Okay, those last two weren't real -- just the stuff of my nightmares. Every single night.

Ever hear of the Rule of 72? How about the Rule of 300?

They are easy ways to get a rough idea of whether your investments will grow big enough for your retirement.

When I say "rough," I mean very rough. But there's no perfectly precise alternative, because all projections rely on guesswork about investment return, inflation and the number of years you'll be retired.

When my son Dash was eight or nine, my wife and I took him to Puerto Rico for a winter vacation and we invented coffee eggs.

We were staying in a resort that charged about $35 for three breakfasts that were nothing to brag about. On the second day we bought eggs at a little grocery and boiled them in the coffee maker in our room, saving a couple of hundred dollars over the rest of the trip and missing nothing we cared about.

On another vacation we invented the Whopper Test. Was the $40 restaurant dinner 10 times better than a $4 Burger King Whopper? If the answer was "no," the Whopper was the better value. We apply the Whopper Test to everything.

Authored by Stephanie May, NBR Summer 2009 Intern

"Live it up!" "Stay in college as long as you can!" I cannot even count how many times I heard those phrases last weekend as Colorado grads returned for homecoming. Everyone seemed so glad to be back in beautiful Boulder and the post-grad report was all the same... "The real world is tough... live it up while you can." Now that may all be true, and I don't blame the recent grads for missing the years when a 10 am class is brutally early. But as my mind becomes more and more muddled with my impending graduation, the doom and gloom of the real world is the LAST thing I want to hear about.

We've discussed the post grad panic before, but at the time that I was writing, there was a part of me that was secretly gloating about being one of the cool and confident bunch. As the girl who had her college plans figured out in middle school, I have never worried about my future. I've only looked forward to its arrival, so certain that my exiting plans would come true. It has taken a lot of hard work, and just a little bit of luck, but I have usually been able to carry them out.

Come January, millions of Americans will be allowed to open tax-free Roth retirement accounts, due to repeal of a longstanding rule that prevented "Roth conversions" by taxpayers earning more than $100,000 a year.

Shifting money from a traditional IRA, 401(k) or similar plan to a Roth can be a profitable move for many, but a money-loser for many others. It's worth thinking about now because you may need to scrape up quite a bit of cash to pay tax on a conversion if you conclude that's the right move.

First, a quick refresher: Roths are a form of individual retirement account that has been around since 1998. There is no tax deduction on contributions, but all withdrawals are tax free, including investment gains. Also, you're not required to start taking money out after turning 70 ½, as with traditional IRAs and 401(k)s. (More details. Also see IRS Publication 590.)

Charles Schwab, the discount brokerage, made a bit of news this week by offering eight new exchange-traded funds, or ETFs. That wasn't such a big deal in itself, since the ETF business is booming with new offerings from just about every mutual fund firm and brokerage. But Schwab has upped the ante by allowing its customers to trade the house-brand ETFs for free - without paying the $12.95 brokerage commission for trading other types of stocks.

Now that's interesting. Commissions have been one of the few drawbacks to ETFs, because they can chew up accounts of investors who want to add modest sums frequently. That $12.95 is 6.5 percent of a $200 purchase, for example. You wouldn't want to pay that every month. With an ordinary mutual fund, as opposed to an ETF, you can buy and sell with no fee if you deal directly with the fund company.

You don't mind paying 1 or 2 percent in annual mutual fund fees? Okay, how would you feel about 10, 15 or 20 percent? Maybe even 30 percent?

Numbers like that would get most investors' attention - if they were real. In fact, they are. I'll get back to that in a moment.

What brings this up is news of a U.S. Supreme Court case involving investors' complaints about high fees. They are unhappy that the Oakmark family of mutual funds charges individuals twice what it does institutions like insurance companies and pension funds.

Authored by Stephanie May, NBR Summer 2009 Intern

Over the summer we dove into the idea that if you spend less during the week, you can make up for times when spending gets a bit more out of control (e.g. the weekend). But now I'm really starting to question that theory.

October was a semi-normal month for me until this last week. Boulder, Colorado puts on a Halloween celebration that rivals the best of them. It's not just one night up here. It's a whole week affair. And forget costume repetition. Creative, elaborate, and different costumes are a must. As you can imagine, this can get extremely expensive. Halloween wiped out my bank account, leaving me with a grand total of 6 dollars. Would I trade the fun I had for a bigger bank balance? Absolutely not. But, when I saw what I spent, I did wonder, "When will this get easier?"

If someone made me America's personal-finance dictator, I'd scrap the 401(k). These workplace retirement plans are inequitable, as some companies offer good ones, some bad ones and others none at all. Fees are often too high. And even the better plans often don't provide enough investment options.

Instead, I'd like to see the Roth IRA opened up to allow 401(k)-sized contributions - $16,500 a year instead of $5,000. (Or $22,000 and $6,000 for people 50 and over.) And I'd like to see the Roth's income limits lifted, so anyone could have one.

Roth's don't offer tax deductions on contributions, as 401(k)s do, but Roth withdrawals are tax free, while money taken out of 401(k)s is taxed as income, at rates as high as 35 percent. Most importantly, with a Roth you can invest in just about anything you want, not just a set of funds picked by the boss.

But since I'm not running things, the best I can do is suggest ways to make the traditional 401(k) work best.

Authored by Stephanie May, NBR Summer 2009 Intern

After weeks of financial musings and bringing you (my wonderful readers) along on my journey of financial self-discovery, I feel it is time to return to our money makeover roots for a quick visit.

I am so appreciative of the comments I receive from you all. I love to hear what you have to say. One recent comment from reader "dmd" really made me think...

Stephanie, ...For your sake, I hope the job will be a well paying one or that the Bank of Mom doesn't run out of capital. Otherwise you may have to stop blowing an extra $2,000 a month, or not be able to afford $115 shades or weekend trips to Las Vegas. Let's see if you still take 15 minute showers when you're paying the water and electric bills.

Stephanie, it's time to leave Fantasyland and move into the real world... most of us, including those of us who are fortunate enough to have well-paying, are still struggling with many aspects of today's financial climate. The last thing I need to read about is some college kid's out-of-control spending habits.