Interest rates are constantly changing these days, and it is hard to keep track of the rates that I've been getting in my various money market accounts. I've decided to compile a list of the annual percentage yields (APYs) for institutions that I have accounts at, or have otherwise mentioned in the blog. These rates are sorted by APY.
4.00% Washington Mutual (WaMu) Online Savings
3.40% Countrywide SavingsLink
3.40% Umbrellabank Pot O'Gold Money Market
3.30% E*TRADE Complete Savings
3.25% HSBCDirect Online Savings
3.00% ING Direct Orange Savings
3.00% Citibank Ultimate Money
2.50% Guaranty Bank Gold Rewards Money Market
2.43% Western FCU Money Market
2.29% PayPal Money Market
1.63% TD Ameritrade Money Market
Rates are believed to be accurate as of 10/1/08. I did not include banks that had special, or introductory rates in the list because these are not ongoing interest rates. I am also not including non-liquid accounts such as CD's in the list.
*Note that the PayPal Money Market and the TD Ameritrade Money Market funds are not FDIC insured.
In times of uncertainty, I can offer two pieces of advice that I think few people would disagree with:
1) Never exceed the FDIC insurance limits.
2) Don't keep all of your money in one place.
DC
Thursday, October 2, 2008
Wednesday, September 3, 2008
Coinstar: The Big Lie
I am sure that most readers have seen Coinstar machines at their supermarket. The way it works is pretty simple, you deposit your change and the machine counts up your coins. It then spits out a voucher which you can redeem at the cashier. Typically, Coinstar charges you about 8.9% for the coins counted. You can also choose a gift card and avoid a counting fee.
Coinstar has a slogan "Turn your coins into cash," which I consider to be a big lie. The phrase "coins to cash" always rubbed me the wrong way. I've never been a fan of Coinstar, and I refuse to pay them 8.9% to count up my coins. However, their marketing is very effective because they've somehow gotten people into thinking that coins are no longer acceptable legal tender.
Let's back up a moment and think about the language here. Aren't "coins" considered to be "cash" by definition? Since when are coins not acceptable as legal tender, for all debts public and private? I've had half a mind to bring in a big jar of coins to pay for my groceries just to protest the Coinstar machine. If they refuse my money, I could claim discrimination...
Gift cards are not cash either. On eBay, gift cards often sell for 10% less than face value. In any case, when you compare this "counting fee" versus the amount of interest that you can get at the bank, that is nearly 3 years worth of interest that you are losing out on.
If Coinstar wishes to be truthful, they ought to change their slogan to "turn your cash into a voucher or gift card that is worth less than you put in".
DC
Coinstar has a slogan "Turn your coins into cash," which I consider to be a big lie. The phrase "coins to cash" always rubbed me the wrong way. I've never been a fan of Coinstar, and I refuse to pay them 8.9% to count up my coins. However, their marketing is very effective because they've somehow gotten people into thinking that coins are no longer acceptable legal tender.
Let's back up a moment and think about the language here. Aren't "coins" considered to be "cash" by definition? Since when are coins not acceptable as legal tender, for all debts public and private? I've had half a mind to bring in a big jar of coins to pay for my groceries just to protest the Coinstar machine. If they refuse my money, I could claim discrimination...
Gift cards are not cash either. On eBay, gift cards often sell for 10% less than face value. In any case, when you compare this "counting fee" versus the amount of interest that you can get at the bank, that is nearly 3 years worth of interest that you are losing out on.
If Coinstar wishes to be truthful, they ought to change their slogan to "turn your cash into a voucher or gift card that is worth less than you put in".
DC
Wednesday, August 20, 2008
Caution: FDIC Misinformation is Rampant
With the recent string of bank failures, there has been a renewed interest in people seeking information about FDIC (Federal Deposit Insurance Corporation) insurance limits. Unfortunately, I have found that there is rampant misinformation about FDIC insurance, even among usually reputable sources. Following this misinformation can and has cost depositors dearly -- some losing a significant portion of their savings when their bank failed.
Everyone knows that an individual bank account is insured to $100,000. However, probably the biggest misconception is that you can increase this limit by opening different accounts at the same financial institution -- for example, opening a savings, CD, and checking account at the same bank. This assertion is simply not correct. If the new accounts are in the same ownership category (i.e. individual accounts), the insurance FDIC limit is still $100,000 regardless of the number of accounts you have.
The $100,000 FDIC limit can, however, be bypassed by opening a joint account. Individual and joint accounts are considered different "ownership categories" by the FDIC, and are insured separately. In our personal situation, my wife has an individual account at a bank, and we have a joint account at the same institution (which I won't name here). To confirm my understanding, I called the bank's customer service number, and then Emailed them to ask what the FDIC limits are in our case. Surprisingly, I received two different, incorrect answers to my question. I then went to the branch office and talked to a teller whose response was something to the effect of "Duh, I don't know. Let me ask a supervisor."
Finally, I sat down down with a senior bank representative at the branch who gave me the correct answers: My wife's account is insured to $100,000 and our joint account is insured to $200,000 for a total of $300,000. I have confirmed this finding with the FDIC website as being correct.
Imagine my surprise when on the morning of July 27, I opened a copy of my local newspaper, the San Jose Mercury News (usually a reputable source), and read an article written by noted financial columnist Kathy Kristof depicting a nearly identical situation where she claimed that a portion of the wife's deposits would be uninsured. I leaped out of my seat and exclaimed, "That article is wrong!" I was about to write message to the author pointing out her error, but I did some research and found that the same article was published in the Los Angeles Times a week earlier. The Times subsequently published this correction to their article:
However, a version of the same article on the S.J. Mercury News website remains with the erroneous information. This is true, even though the L.A. Times published the correction several days before the Mercury reprinted this story.
Another ownership category recognized by the FDIC is called a revocable trust account. In general, these accounts are titled with the account owner's name, and either POD (payable-on-death) or ITF (in trust for) a qualifying named beneficiary. The FDIC has very specific rules on who can qualify as a beneficiary. For example, a grandchild, parent, or sibling can qualify. However, nieces, nephews, in-laws, or domestic partners would not qualify. I advise that readers should check with the FDIC for the specifics on who can be named as a beneficiary.
Revocable trust accounts (also called testamentary accounts) are insured separately from individual, or joint accounts. Each owner of a POD account is insured up to $100,000 for each qualifying beneficiary. For example, a couple with one child can establish a POD account for their child and it would be insured separately from the other ownership categories up to $200,000.
A fellow blogger referred me to an article published at the usually reputable site Bankrate.com which also talks about these types of accounts. In this article, Bankrate stated that "Couples can set up an in-trust or testamentary trust account for their children for a maximum of $600,000 in insurance coverage." Unfortunately this is an oversimplification, and after puzzling for a while, I figured out how Bankrate got it wrong. The FDIC publication Your Insured Deposits gives several examples of how a couple with three children can setup a POD account. In this case, the maximum insured amount is indeed $600,000. However, this is not the general case as it ONLY applies to two-parent families with three children. Depending the number of account owners and qualifying dependents, this limit may be higher or lower. For example, a couple with four children could setup an account with $800,000 in FDIC protection; a couple with two kids would be limited to $400,000 in a similar testamentary account.
Similarly, a household headed by a single parent, or by same-sex partners would have a different maximum FDIC limit. It is irresponsible for Bankrate to make such broad generalizations because everybody's personal situation is different. Clearly, Bankrate's information here is outdated (it was published in 1999), and I intend to contact them about their oversight.
So what is a high net worth depositor supposed to do about the FDIC limits? First of all, don't assume that any information you receive (even from your banker) is correct. I've read several anecdotal accounts of people who were burned in the recent IndyMac Bank failure. They claim that the bank said their accounts were covered by FDIC, but it turns out that they were not. I am starting to believe that they folks were indeed given wrong information from their bank. For the record, an FDIC press release stated that IndyMac had "about $1 billion of potentially uninsured deposits held by approximately 10,000 depositors." Or, about $100,000 of uninsured deposits on average.
Secondly, understand that financial writers and bloggers may not have similar finances to yourself, and any generalizations made may not be applicable to your particular situation. Many financial sites have a disclaimer that says something to the effect that what they publish shouldn't be construed as actual financial advice. This is with good reason: sometimes they get the facts wrong.
In an effort to be completely honest, I tell my readers this: DON'T EVEN TAKE MY WORD ON IT! Although everything in this post is believed to be is currently accurate (in August 2008), it is very possible that you are reading this blog post years later. FDIC rules and regulations are subject to change, and there can be no guaranty that anything you read will still be true in the future.
Lastly, and most importantly, the most accurate source of information about FDIC insurance is the FDIC website itself. For any readers with significant assets in bank accounts, I encourage them to carefully study the FDIC rules, and run your specific scenario through the FDIC's Electronic Deposit Insurance Estimator.
http://www.fdic.gov/edie/
This tool will help to determine and confirm your actual deposit insurance limits. Good luck to you.
DC
Everyone knows that an individual bank account is insured to $100,000. However, probably the biggest misconception is that you can increase this limit by opening different accounts at the same financial institution -- for example, opening a savings, CD, and checking account at the same bank. This assertion is simply not correct. If the new accounts are in the same ownership category (i.e. individual accounts), the insurance FDIC limit is still $100,000 regardless of the number of accounts you have.
The $100,000 FDIC limit can, however, be bypassed by opening a joint account. Individual and joint accounts are considered different "ownership categories" by the FDIC, and are insured separately. In our personal situation, my wife has an individual account at a bank, and we have a joint account at the same institution (which I won't name here). To confirm my understanding, I called the bank's customer service number, and then Emailed them to ask what the FDIC limits are in our case. Surprisingly, I received two different, incorrect answers to my question. I then went to the branch office and talked to a teller whose response was something to the effect of "Duh, I don't know. Let me ask a supervisor."
Finally, I sat down down with a senior bank representative at the branch who gave me the correct answers: My wife's account is insured to $100,000 and our joint account is insured to $200,000 for a total of $300,000. I have confirmed this finding with the FDIC website as being correct.
Imagine my surprise when on the morning of July 27, I opened a copy of my local newspaper, the San Jose Mercury News (usually a reputable source), and read an article written by noted financial columnist Kathy Kristof depicting a nearly identical situation where she claimed that a portion of the wife's deposits would be uninsured. I leaped out of my seat and exclaimed, "That article is wrong!" I was about to write message to the author pointing out her error, but I did some research and found that the same article was published in the Los Angeles Times a week earlier. The Times subsequently published this correction to their article:
"The Personal Finance column in Business on Sunday erred in how it described insurance of individual and joint accounts. It said that each person's interest in individual and joint accounts is added together to determine that individual's insurance coverage. In fact, individual and joint accounts are insured separately. Therefore, you could have an individual account worth $100,000 and a joint interest in a $100,000 joint account and all of your deposits would be fully insured."
However, a version of the same article on the S.J. Mercury News website remains with the erroneous information. This is true, even though the L.A. Times published the correction several days before the Mercury reprinted this story.
Another ownership category recognized by the FDIC is called a revocable trust account. In general, these accounts are titled with the account owner's name, and either POD (payable-on-death) or ITF (in trust for) a qualifying named beneficiary. The FDIC has very specific rules on who can qualify as a beneficiary. For example, a grandchild, parent, or sibling can qualify. However, nieces, nephews, in-laws, or domestic partners would not qualify. I advise that readers should check with the FDIC for the specifics on who can be named as a beneficiary.
Revocable trust accounts (also called testamentary accounts) are insured separately from individual, or joint accounts. Each owner of a POD account is insured up to $100,000 for each qualifying beneficiary. For example, a couple with one child can establish a POD account for their child and it would be insured separately from the other ownership categories up to $200,000.
A fellow blogger referred me to an article published at the usually reputable site Bankrate.com which also talks about these types of accounts. In this article, Bankrate stated that "Couples can set up an in-trust or testamentary trust account for their children for a maximum of $600,000 in insurance coverage." Unfortunately this is an oversimplification, and after puzzling for a while, I figured out how Bankrate got it wrong. The FDIC publication Your Insured Deposits gives several examples of how a couple with three children can setup a POD account. In this case, the maximum insured amount is indeed $600,000. However, this is not the general case as it ONLY applies to two-parent families with three children. Depending the number of account owners and qualifying dependents, this limit may be higher or lower. For example, a couple with four children could setup an account with $800,000 in FDIC protection; a couple with two kids would be limited to $400,000 in a similar testamentary account.
Similarly, a household headed by a single parent, or by same-sex partners would have a different maximum FDIC limit. It is irresponsible for Bankrate to make such broad generalizations because everybody's personal situation is different. Clearly, Bankrate's information here is outdated (it was published in 1999), and I intend to contact them about their oversight.
So what is a high net worth depositor supposed to do about the FDIC limits? First of all, don't assume that any information you receive (even from your banker) is correct. I've read several anecdotal accounts of people who were burned in the recent IndyMac Bank failure. They claim that the bank said their accounts were covered by FDIC, but it turns out that they were not. I am starting to believe that they folks were indeed given wrong information from their bank. For the record, an FDIC press release stated that IndyMac had "about $1 billion of potentially uninsured deposits held by approximately 10,000 depositors." Or, about $100,000 of uninsured deposits on average.
Secondly, understand that financial writers and bloggers may not have similar finances to yourself, and any generalizations made may not be applicable to your particular situation. Many financial sites have a disclaimer that says something to the effect that what they publish shouldn't be construed as actual financial advice. This is with good reason: sometimes they get the facts wrong.
In an effort to be completely honest, I tell my readers this: DON'T EVEN TAKE MY WORD ON IT! Although everything in this post is believed to be is currently accurate (in August 2008), it is very possible that you are reading this blog post years later. FDIC rules and regulations are subject to change, and there can be no guaranty that anything you read will still be true in the future.
Lastly, and most importantly, the most accurate source of information about FDIC insurance is the FDIC website itself. For any readers with significant assets in bank accounts, I encourage them to carefully study the FDIC rules, and run your specific scenario through the FDIC's Electronic Deposit Insurance Estimator.
http://www.fdic.gov/edie/
This tool will help to determine and confirm your actual deposit insurance limits. Good luck to you.
DC
Friday, August 1, 2008
Single Step Personal Finance Challenge
Andy from Saving to Invest, tagged me with the "Single Step Personal Finance Challenge" blog meme started by Mrs. Micah. The challenge is to "find one step you can take to make your financial system better or more organized."
Andy's single step was to open up a Roth IRA account. My only real commentary on this is that I typically contradict the common investment advice to contribute early to an IRA. I don't contribute to my Roth IRA until the end of the tax year so that I can know for sure that I qualify. A person's eligibility to contribute to a Roth is determined by their AGI in the contribution year. Since it is impossible to completely predict future income, there is always a possibility that one will exceed the Roth IRA income limit. If this happens, one must either withdraw the excess, or face an IRS penalty. In either case, this would involve some messy dealings with the IRA custodian.
Anyway, on to my single step... Readers who saw my post about Money Market Interest Rates are aware that I was considering closing one or more of my bank accounts that is paying me a lower interest rate. I've done just that. I closed my Guaranty Bank money market account, and moved the money to Washington Mutual. In one step, I am now earning 1% more interest on my money.
Although I agreed to humor Andy and Mrs. Micah with a response, I thought that this blog tag meme was a somewhat silly one, and have decided not to tag anybody else.
DC
Andy's single step was to open up a Roth IRA account. My only real commentary on this is that I typically contradict the common investment advice to contribute early to an IRA. I don't contribute to my Roth IRA until the end of the tax year so that I can know for sure that I qualify. A person's eligibility to contribute to a Roth is determined by their AGI in the contribution year. Since it is impossible to completely predict future income, there is always a possibility that one will exceed the Roth IRA income limit. If this happens, one must either withdraw the excess, or face an IRS penalty. In either case, this would involve some messy dealings with the IRA custodian.
Anyway, on to my single step... Readers who saw my post about Money Market Interest Rates are aware that I was considering closing one or more of my bank accounts that is paying me a lower interest rate. I've done just that. I closed my Guaranty Bank money market account, and moved the money to Washington Mutual. In one step, I am now earning 1% more interest on my money.
Although I agreed to humor Andy and Mrs. Micah with a response, I thought that this blog tag meme was a somewhat silly one, and have decided not to tag anybody else.
DC
Tuesday, July 22, 2008
Where do Dead Blogs go?
Where do dead blogs go? I have a few of them listed on my blogroll, and I'm not sure what I should do. Money, Matter, and More Musings (link might not work) written by golbguru, has pretty much ceased publishing. For a few months his postings have been sporadic, and increasingly negative in tone. Then in May, he posted what most would consider to be a rant about a need for internet income regulations reform (link might not work). Several commenters on his blog were openly concerned about what happened to golb. Personally, I tried sending a couple of Emails offering him some moral support, but he never responded. I am still scratching my head about what happened.
Retiring Early has been AWOL since last September, though this blog remains on my blogroll. He stopped writing at about the same time that he reached the $1 million mark on his net worth. When I contacted him, he seemed to indicate that he was busy, but would resume posting sometime soon. That was over half a year ago...
There are many other dead blogs in the PF blogosphere. The blog Million Dollar Count Down inspired me to write my post What happened to the exuberant PF bloggers? He has not been heard from for over a year.
And the list goes on. Some other blogs that I used to read include:
300 @ 30 who expects to live until 120, and is still waiting for 3 unspecified things to happen in his life before posting again.
Money 360, who after a few starts and stops, is in a permanent retooling phase.
My Money Path formerly authored by a young certified public accountant. Leave it to a CPA to explain how shelling out over $1200 for Dodgers playoff tickets doesn't affect his net worth unless the team actually makes the playoffs.
Clutter2Cash whose last post gave us a net worth update, just before she seemed to drop off the face of the Earth.
I did try to contact a few of these bloggers about their apparently dead blogs. In most cases, I didn't get any response. Of those that I did reach, they clearly seemed not to want to be contacted.
Sometimes dead blogs do come back to life. Penny Foolish was one of the blogs that originally inspired me to start my own blog. You can tell that I used the same color scheme as Kira did. Her blog was idle for a long stretch from September until June, but it looks like she is back. Let's hope that she'll keep up the posting.
Another blog, calgirlfinance, went on an 11 month hiatus before coming back. Actually that one was a bit of cliffhanger as the writer informed her readers in the last post before her wedding that she had not told her fiance (now husband) about the blog. Many readers assumed that things didn't go over too well when she finally let him know.
Note: I usually contact a blogger to let them know if I have written a post linking to their blog. However, since it is clear that many of these PF bloggers no longer wish to be contacted, I will not be doing that this time.
DC
Retiring Early has been AWOL since last September, though this blog remains on my blogroll. He stopped writing at about the same time that he reached the $1 million mark on his net worth. When I contacted him, he seemed to indicate that he was busy, but would resume posting sometime soon. That was over half a year ago...
There are many other dead blogs in the PF blogosphere. The blog Million Dollar Count Down inspired me to write my post What happened to the exuberant PF bloggers? He has not been heard from for over a year.
And the list goes on. Some other blogs that I used to read include:
300 @ 30 who expects to live until 120, and is still waiting for 3 unspecified things to happen in his life before posting again.
Money 360, who after a few starts and stops, is in a permanent retooling phase.
My Money Path formerly authored by a young certified public accountant. Leave it to a CPA to explain how shelling out over $1200 for Dodgers playoff tickets doesn't affect his net worth unless the team actually makes the playoffs.
Clutter2Cash whose last post gave us a net worth update, just before she seemed to drop off the face of the Earth.
I did try to contact a few of these bloggers about their apparently dead blogs. In most cases, I didn't get any response. Of those that I did reach, they clearly seemed not to want to be contacted.
Sometimes dead blogs do come back to life. Penny Foolish was one of the blogs that originally inspired me to start my own blog. You can tell that I used the same color scheme as Kira did. Her blog was idle for a long stretch from September until June, but it looks like she is back. Let's hope that she'll keep up the posting.
Another blog, calgirlfinance, went on an 11 month hiatus before coming back. Actually that one was a bit of cliffhanger as the writer informed her readers in the last post before her wedding that she had not told her fiance (now husband) about the blog. Many readers assumed that things didn't go over too well when she finally let him know.
Note: I usually contact a blogger to let them know if I have written a post linking to their blog. However, since it is clear that many of these PF bloggers no longer wish to be contacted, I will not be doing that this time.
DC
Wednesday, July 16, 2008
July Stock Pick
This month, Smarty of Growing Money is running another stock picking contest. I did beat the S&P 500 for June, but since my return was still a negative number, I didn't beat the "money-stuffed-in-a-mattress" portfolio.
Smarty is offering a book from his collection to the first and second place winners. Anyway, for the month of July, I have chosen Eastman Kodak (NYSE: EK) for the July 2008 Growing Money Stock Challenge.
To the other entrants in the stock picking contest, I wish you good luck too.
DC
Smarty is offering a book from his collection to the first and second place winners. Anyway, for the month of July, I have chosen Eastman Kodak (NYSE: EK) for the July 2008 Growing Money Stock Challenge.
To the other entrants in the stock picking contest, I wish you good luck too.
DC
Thursday, July 3, 2008
Money Market Interest Rates
Interest rates seem to be constantly changing these days. Since it is a constantly moving target, it is hard to keep track of the rates that I've been getting in my various money market accounts. I've decided to compile a list of the annual percentage yields (APYs) for institutions that I have accounts at, or have otherwise mentioned in the blog. These rates are sorted by APY.
3.65% Countrywide SavingsLink
3.50% HSBCDirect Online Savings
3.40% Umbrellabank Pot O'Gold Money Market
3.30% Washington Mutual (WaMu) Online Savings
3.15% E*TRADE Complete Savings
3.00% ING Direct Orange Savings
2.65% Citibank Ultimate Money
2.43% Western FCU Money Market
2.33% PayPal Money Market
2.30% Guaranty Bank Gold Rewards Money Market
1.65% TD Ameritrade Money Market
Rates are believed to be accurate as of 7/1/08. I did not include banks that had special, or introductory rates in the list because these are not ongoing interest rates. I am also not including non-liquid accounts such as CD's in the list.
My own assessment is that Countrywide has the best money market rate. For those people who are not comfortable with an online only account, I would recommend WaMu's Online Savings. Although that account has to be opened online, you can use a local branch for most transactions. I will probably close out one or more of the accounts that are paying me a lower interest rate.
Does anybody know of any money market rate better than Countrywide's 3.65% SavingsLink account. If so, I'll add it and update my list.
DC
3.65% Countrywide SavingsLink
3.50% HSBCDirect Online Savings
3.40% Umbrellabank Pot O'Gold Money Market
3.30% Washington Mutual (WaMu) Online Savings
3.15% E*TRADE Complete Savings
3.00% ING Direct Orange Savings
2.65% Citibank Ultimate Money
2.43% Western FCU Money Market
2.33% PayPal Money Market
2.30% Guaranty Bank Gold Rewards Money Market
1.65% TD Ameritrade Money Market
Rates are believed to be accurate as of 7/1/08. I did not include banks that had special, or introductory rates in the list because these are not ongoing interest rates. I am also not including non-liquid accounts such as CD's in the list.
My own assessment is that Countrywide has the best money market rate. For those people who are not comfortable with an online only account, I would recommend WaMu's Online Savings. Although that account has to be opened online, you can use a local branch for most transactions. I will probably close out one or more of the accounts that are paying me a lower interest rate.
Does anybody know of any money market rate better than Countrywide's 3.65% SavingsLink account. If so, I'll add it and update my list.
DC
Wednesday, July 2, 2008
A Note About Comments
As my blog has grown in popularity, I have seen an increasing number of people posting links to various commercial websites. For obvious reasons, PFStock's comment policy does not allow links to commercial websites (the only exception is for sponsors of PFStock where I have reviewed the link in question). Unauthorized comments to my blog will be deleted.
I hope that readers will adhere to this comment policy in the future. Note that this policy does not apply to links for bona fide PF blogs. However, I would prefer that PF bloggers contact me by Email (my address is in the sidebar) about a link exchange. If you qualify, you can have your blog listed for free.
DC
I hope that readers will adhere to this comment policy in the future. Note that this policy does not apply to links for bona fide PF blogs. However, I would prefer that PF bloggers contact me by Email (my address is in the sidebar) about a link exchange. If you qualify, you can have your blog listed for free.
DC
Monday, June 9, 2008
Stock Picking Contests
A couple of PF bloggers have been running stock picking contests for a few months now. Elias of FinancePuzzle is running one such stock picking contest. And Smarty of Growing Money is running another. Each of these bloggers is offering a prize to the winner -- typically a book or small cash prize. One peculiarity is that these contests are only open to bloggers, and not just regular readers. I suppose that this is an effort to generate more blog traffic through referrals from other blogs.
Anyway, for the month of June, I have chosen Pfizer (NYSE: PFE) for the
June 2008 FinancePuzzle Stock Picking Contest. For the June 2008 Growing Money Stock Challenge, I am picking Rackable Systems (Nasdaq: RACK).
Does anybody know of other PF bloggers that are running similar stock picking contests? To the other entrants in these stock picking contests, I wish you good luck too.
DC
Anyway, for the month of June, I have chosen Pfizer (NYSE: PFE) for the
June 2008 FinancePuzzle Stock Picking Contest. For the June 2008 Growing Money Stock Challenge, I am picking Rackable Systems (Nasdaq: RACK).
Does anybody know of other PF bloggers that are running similar stock picking contests? To the other entrants in these stock picking contests, I wish you good luck too.
DC
Tuesday, June 3, 2008
Net Worth Comparison
I have found that posts about net worth are very popular in the PF blogosphere. Perhaps it is people's natural curiosity -- wanting to assess how one is doing compared to others. When you read new blog, do you find yourself asking questions like: How old is this blogger? How much does this person make? Am I doing better than them?
One of the most popular posts at PFStock asks the question: Are You Wealthy? This post examines a formula from the book The Millionaire Next Door. For your reference, the formula is repeated here:
Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.
From this formula, I used the example of a 40 year old who makes $100,000 a year. In this case, the expected net worth of that person is $400,000.
In addition to this formula, I want to mention a couple of other websites to look at. CNN Money has a Net Worth Comparison Tool that asks you to enter your age and annual income. It then gives you the median net worth a particular age or income level. In the case of the 40 year old making $100,000 a year, the median net worth based on age is $44,875 and based on income is $363,125. You can see that although it is a realistic scenario, these median values are very different. The result is also much different from the Millionaire formula, and it does not tell you what your net worth should be. But, it does give you an idea of how you compare to others based on age and income.
Another website that I would like to mention is NetworthIQ. This site has compiled a set of Net Worth Statistics based on what its members have reported. In the case of a 40 year olds, the median net worth was $462,658. And for for those making $100,000 a year, the median net worth was $260,828. This data was current as of 1/26/2008. In addition to age and income you can compare net worth based on education, occupation, and state of residence.
Some would argue that the NetworthIQ data is not a good representation of the population as a whole. This is because the net worth people report is not audited, and you can see only what people choose to disclose. Arguably, there are those who may have overestimated the value of their home, cars, and personal property in order to inflate their net worth. But taken with a grain of salt, one can still find some usefulness in the numbers.
So there you have it: three ways that you can compare your net worth to others. Enjoy.
For updated data, see Net Worth Update.
DC
One of the most popular posts at PFStock asks the question: Are You Wealthy? This post examines a formula from the book The Millionaire Next Door
. For your reference, the formula is repeated here:Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.
From this formula, I used the example of a 40 year old who makes $100,000 a year. In this case, the expected net worth of that person is $400,000.
In addition to this formula, I want to mention a couple of other websites to look at. CNN Money has a Net Worth Comparison Tool that asks you to enter your age and annual income. It then gives you the median net worth a particular age or income level. In the case of the 40 year old making $100,000 a year, the median net worth based on age is $44,875 and based on income is $363,125. You can see that although it is a realistic scenario, these median values are very different. The result is also much different from the Millionaire formula, and it does not tell you what your net worth should be. But, it does give you an idea of how you compare to others based on age and income.
Another website that I would like to mention is NetworthIQ. This site has compiled a set of Net Worth Statistics based on what its members have reported. In the case of a 40 year olds, the median net worth was $462,658. And for for those making $100,000 a year, the median net worth was $260,828. This data was current as of 1/26/2008. In addition to age and income you can compare net worth based on education, occupation, and state of residence.
Some would argue that the NetworthIQ data is not a good representation of the population as a whole. This is because the net worth people report is not audited, and you can see only what people choose to disclose. Arguably, there are those who may have overestimated the value of their home, cars, and personal property in order to inflate their net worth. But taken with a grain of salt, one can still find some usefulness in the numbers.
So there you have it: three ways that you can compare your net worth to others. Enjoy.
For updated data, see Net Worth Update.
DC
Friday, May 23, 2008
PF Stock Welcomes Cruise Critic Readers
PFStock has recently been mentioned by the critically acclaimed cruise website Cruise Critic. An editor for Cruise Critic contacted me after reading my posts about Cruise Line Shareholder Benefits. He was interested in writing a news piece about the shareholder perks that were offered by Carnival and Royal Caribbean, and to get some background information from me.
I have actually been a reader of Cruise Critic for over 10 years, so I was pleased to have the opportunity to be profiled there. Welcome to my new readers; I hope that you will stick around to read some of my personal finance posts.
PF Stock
I have actually been a reader of Cruise Critic for over 10 years, so I was pleased to have the opportunity to be profiled there. Welcome to my new readers; I hope that you will stick around to read some of my personal finance posts.
PF Stock
Thursday, May 22, 2008
The Rule of 72
How long does it take for an investment to double? This is a question that is often asked, and there is a very simple formula that can be used to estimate the time it takes for your money to double. This formula is called "The Rule of 72". And the rule is:
Suppose that you were to deposit your money in the bank at an interest rate (APY) of 4%. Conceptually, you are giving the bank a loan on your money, and expect to be paid back your principle plus interest. In this example, you can expect your investment to double in 72/4 = 18 years. If you can find an interest rate of 6%, you would expect it to double in 72/6 = 12 years. The rule of 72 is also known as "the rule of 70". Using this rule, if you had an interest rate of 5%, the investment would double in 70/5 = 14 years.
At this point, I would typically go into a mathematical derivation (using such numerical concepts as natural logarithms) showing how this rule came into being. However, I will spare you the gory details this time.
One other thing is that I will mention is a similar "Rule of 115". This rule is used to estimate the time that it takes for an investment to triple in value. Similarly, the rule is:
Again using the 5% interest rate example, it takes 14 years for your money to double. However, it would take 115/5 = 23 years to triple in value. It's all just simple math. Any questions?
National Payday sponsors this post.
Years to double = 72 / Interest Rate
Suppose that you were to deposit your money in the bank at an interest rate (APY) of 4%. Conceptually, you are giving the bank a loan on your money, and expect to be paid back your principle plus interest. In this example, you can expect your investment to double in 72/4 = 18 years. If you can find an interest rate of 6%, you would expect it to double in 72/6 = 12 years. The rule of 72 is also known as "the rule of 70". Using this rule, if you had an interest rate of 5%, the investment would double in 70/5 = 14 years.
At this point, I would typically go into a mathematical derivation (using such numerical concepts as natural logarithms) showing how this rule came into being. However, I will spare you the gory details this time.
One other thing is that I will mention is a similar "Rule of 115". This rule is used to estimate the time that it takes for an investment to triple in value. Similarly, the rule is:
Years to triple = 115 / Interest Rate
Again using the 5% interest rate example, it takes 14 years for your money to double. However, it would take 115/5 = 23 years to triple in value. It's all just simple math. Any questions?
National Payday sponsors this post.
Monday, May 5, 2008
PayPal Money Market Fund
I mentioned that I opened a PayPal account in my post about my first eBay experience. As a result of various transactions, I now have a small balance at PayPal. This PayPal balance does not earn any interest unless it is put into the PayPal Money Market Fund. This sweep is not automatically set up. Currently, the fund pays a little less than 3% APY. While this is not spectacular, it is better than the 0% you get for doing nothing.
I have not yet setup the PayPal Money Market Fund. Deposits are not FDIC insured, so I have hesitated. Does anybody use the PayPal Money Market fund? I am interested in getting some feedback before I decide.
DC
I have not yet setup the PayPal Money Market Fund. Deposits are not FDIC insured, so I have hesitated. Does anybody use the PayPal Money Market fund? I am interested in getting some feedback before I decide.
DC
Thursday, May 1, 2008
Getting the Most from a Cruise Vacation
It may surprise you to consider taking a cruise as an economical way to go on vacation. But when compared to a land-based vacation, you can save a lot of money by taking advantage of the free amenities that a cruise ship has to offer. For example, relaxing on deck in the tropical sun is free as is the shipboard entertainment.
Also generally included in your cruise fare are onboard ship accommodations, ocean transportation, and of course, the food. In the case of dining, a common misconception is that a cruise is an all-you-can-eat buffet. Certainly, there is always a buffet available. However, I prefer to eat my meals in the dining room. On a cruise, the quality of food is about the same as dining in a fine restaurant. You can dine at a leisurely pace, and select from a varied menu. This is the one place where I can tell my wife that, if she doesn't like an entree that she orders, she can always try a different one. And I don't have to worry about paying the bill, which makes it a real bargain.
On the other hand, a cruise not the same as an all-inclusive resort. There are a few items that you will need to budget appropriately for. Generally not included in the cruise fare are alcoholic beverages, shore excursions, tips, and the casino. I once quipped that the Royal Caribbean ship Grandeur of the Seas has a design flaw; there was no easy way to get from my cabin to the dining room without going through the casino. That fact can be hazardous to your wealth.
The key to getting a good price on a cruise is flexibility. If you must travel at a specific time, your choices will be limited. It is wise to shop around and compare different cruise lines and dates. Sometimes, the difference of a week or two can result in large differences in price. Also, some cruise lines offer a "category guarantee". You may receive a discount if you allow the cruise line to assign you a stateroom at the time of sailing, rather than picking a cabin upfront. The last time we did that we paid for an outside cabin, but were upgraded to a nicely sized balcony stateroom for free.
If you are a stock holder in either Carnival (CCL) or Royal Caribbean (RCL) stock, you can take advantage of the shareholder benefit program that each line offers and receive a shipboard credit. Please see my recently updated post about Cruise Line Shareholder Benefits for more information.
Also generally included in your cruise fare are onboard ship accommodations, ocean transportation, and of course, the food. In the case of dining, a common misconception is that a cruise is an all-you-can-eat buffet. Certainly, there is always a buffet available. However, I prefer to eat my meals in the dining room. On a cruise, the quality of food is about the same as dining in a fine restaurant. You can dine at a leisurely pace, and select from a varied menu. This is the one place where I can tell my wife that, if she doesn't like an entree that she orders, she can always try a different one. And I don't have to worry about paying the bill, which makes it a real bargain.
On the other hand, a cruise not the same as an all-inclusive resort. There are a few items that you will need to budget appropriately for. Generally not included in the cruise fare are alcoholic beverages, shore excursions, tips, and the casino. I once quipped that the Royal Caribbean ship Grandeur of the Seas has a design flaw; there was no easy way to get from my cabin to the dining room without going through the casino. That fact can be hazardous to your wealth.
The key to getting a good price on a cruise is flexibility. If you must travel at a specific time, your choices will be limited. It is wise to shop around and compare different cruise lines and dates. Sometimes, the difference of a week or two can result in large differences in price. Also, some cruise lines offer a "category guarantee". You may receive a discount if you allow the cruise line to assign you a stateroom at the time of sailing, rather than picking a cabin upfront. The last time we did that we paid for an outside cabin, but were upgraded to a nicely sized balcony stateroom for free.
If you are a stock holder in either Carnival (CCL) or Royal Caribbean (RCL) stock, you can take advantage of the shareholder benefit program that each line offers and receive a shipboard credit. Please see my recently updated post about Cruise Line Shareholder Benefits for more information.
Thursday, April 17, 2008
I Changed My Mind about Yodlee
After I had written about giving up on Yodlee in my post, So Long Yodlee, I received a comment from an apparent Yodlee representative. I also received another message from Yodlee's senior VP Peter Hazlehurst. Together, their comments expounding the benefits of Yodlee made me think that we were talking about two different products. Their messages mentioned the features of their Yodlee 8.0 platform.
Taking a step backward, Yodlee is an account aggregation service that polls different websites where you have online accounts. These accounts can be aggregated so that you can get a "big picture" look at your financial data. As someone with more than 20 accounts at several different financial institutions, I understand how this type of service can be useful. I mentioned before that I was using two different sites that were "powered by Yodlee". Specifically, these sites were MSN Money and Smith Barney's "My Accounts" feature. Due to problems that I experienced with these websites, I decided to give up trying to make Yodlee's Account Aggregation service work with my finances.
As I mentioned, comments I received on my earlier post got me to reconsider using Yodlee. It turns out that these aggregation services (MSN and Smith Barney) are different from the services offered by Yodlee directly. Intrigued I decided to establish an account directly with the Yodlee MoneyCenter rather than using the other two sites. The differences are like night and day. Let me go over each point that I mentioned in my previous post:
1) Not all banks participate in Yodlee. Countrywide Bank is now available on Yodlee. About three or four of my accounts are still not supported, and I would need to add them manually if I wanted to use Yodlee. According to Peter Hazlehurst, some credit unions use a technology called "CAPTCHA" which shows "squiggly" letters, and Yodlee doesn't support them. The term CAPTCHA is an acronym that means "Completely Automated Public Turing test to tell Computers and Humans Apart". And, I have no idea what a Turing test is.
2) The security and "Secure Sign On" concerns are still there. This is a question of risk versus reward, and should be up to the individual user. How comfortable are you with storing your personal information online with Yodlee? While Yodlee's security is probably very good, if their security was ever compromised, fixing the problem would be a massive headache for its numerous users.
3) The duplicate account problems are taken care of with Yodlee Money Center. By contrast, if I use either MSN Money or Smith Barney, my duplicate accounts are double counted by Yodlee. As far as I know there is no way to eliminate this double counting in these third party applications. So, I have stopped using MSN Money and Smith Barney (Citigroup) for my account aggregation needs.
4) Similarly, extraneous accounts can be turned off in Yodlee MoneyCenter. But they cannot be turned off if I use MSN Money or Smith Barney. Before this change, I had a couple of accounts that I closed years ago, but are still associated with an existing bank login. These accounts would show up as extraneous zero balance accounts.
5) So things definitely work better with Yodlee 8.0 in MoneyCenter. However, I wouldn't consider all of my concerns to be fully resolved. To make a long story short, many of my issues were indeed corrected. But, there still are a few lingering problems. I think that one issue is how much effort one is willing to put in to make Yodlee work for a particular situation.
I will mention two features that I do find very useful in Yodlee are alerts and auto-login. The alerts feature allow you to set alerts if, for example, your account balance drops below a certain amount, or a very large transaction is processed. This feature can help in the early detection of fraud. The other feature I like is auto-login where Yodlee can automatically log you in to some (but not all) accounts with the click of a button. You don't need to remember or type your password. This, of course, makes it all the more important that you keep your Yodlee password secure.
Anyway, I now consider Yodlee to be satisfactory for my purposes. While I still use an Excel spreadsheet to periodically get a complete picture of my finances, Yodlee is a quick way to check on my account balances.
DC
Taking a step backward, Yodlee is an account aggregation service that polls different websites where you have online accounts. These accounts can be aggregated so that you can get a "big picture" look at your financial data. As someone with more than 20 accounts at several different financial institutions, I understand how this type of service can be useful. I mentioned before that I was using two different sites that were "powered by Yodlee". Specifically, these sites were MSN Money and Smith Barney's "My Accounts" feature. Due to problems that I experienced with these websites, I decided to give up trying to make Yodlee's Account Aggregation service work with my finances.
As I mentioned, comments I received on my earlier post got me to reconsider using Yodlee. It turns out that these aggregation services (MSN and Smith Barney) are different from the services offered by Yodlee directly. Intrigued I decided to establish an account directly with the Yodlee MoneyCenter rather than using the other two sites. The differences are like night and day. Let me go over each point that I mentioned in my previous post:
1) Not all banks participate in Yodlee. Countrywide Bank is now available on Yodlee. About three or four of my accounts are still not supported, and I would need to add them manually if I wanted to use Yodlee. According to Peter Hazlehurst, some credit unions use a technology called "CAPTCHA" which shows "squiggly" letters, and Yodlee doesn't support them. The term CAPTCHA is an acronym that means "Completely Automated Public Turing test to tell Computers and Humans Apart". And, I have no idea what a Turing test is.
2) The security and "Secure Sign On" concerns are still there. This is a question of risk versus reward, and should be up to the individual user. How comfortable are you with storing your personal information online with Yodlee? While Yodlee's security is probably very good, if their security was ever compromised, fixing the problem would be a massive headache for its numerous users.
3) The duplicate account problems are taken care of with Yodlee Money Center. By contrast, if I use either MSN Money or Smith Barney, my duplicate accounts are double counted by Yodlee. As far as I know there is no way to eliminate this double counting in these third party applications. So, I have stopped using MSN Money and Smith Barney (Citigroup) for my account aggregation needs.
4) Similarly, extraneous accounts can be turned off in Yodlee MoneyCenter. But they cannot be turned off if I use MSN Money or Smith Barney. Before this change, I had a couple of accounts that I closed years ago, but are still associated with an existing bank login. These accounts would show up as extraneous zero balance accounts.
5) So things definitely work better with Yodlee 8.0 in MoneyCenter. However, I wouldn't consider all of my concerns to be fully resolved. To make a long story short, many of my issues were indeed corrected. But, there still are a few lingering problems. I think that one issue is how much effort one is willing to put in to make Yodlee work for a particular situation.
I will mention two features that I do find very useful in Yodlee are alerts and auto-login. The alerts feature allow you to set alerts if, for example, your account balance drops below a certain amount, or a very large transaction is processed. This feature can help in the early detection of fraud. The other feature I like is auto-login where Yodlee can automatically log you in to some (but not all) accounts with the click of a button. You don't need to remember or type your password. This, of course, makes it all the more important that you keep your Yodlee password secure.
Anyway, I now consider Yodlee to be satisfactory for my purposes. While I still use an Excel spreadsheet to periodically get a complete picture of my finances, Yodlee is a quick way to check on my account balances.
DC
Thursday, April 3, 2008
Bank Error In Your Favor?
Has it happened to you, or anybody that you know? Do banks ever make a mistake in your favor? Many years ago, I opened a bank account and deposited $1000. A few days after I opened my new account, I noticed that I had significantly more than the $1000 that I put in. I didn't do anything, and a few days later, I noticed that the amount was corrected.
So, has something like this ever happened to you?
DC
So, has something like this ever happened to you?
DC
Wednesday, March 12, 2008
Are You Wealthy?
To answer the question of whether one is wealthy, I will take a quote from The Millionaire Next Door, by Thomas Stanley & William Danko, which I read several years ago. I consider this book to be a classic. Here, the authors discuss what one's expected net worth should be at any given point in life.
To give an example, suppose one is 40 years old and makes $100,000 per year. Then, by the above formula, one's expected net worth is $400,000. The authors then go on to describe the wealthy (prodigious accumulators of wealth, PAWs) as those who have at least double this expected net worth based on age and income. Conversely, one who has accumulated less than half of their expected net worth is known as an under accumulator of wealth, or UAW.
In any case, the suggestion by the two authors is a broad rule of thumb. I would caution one against putting too much weight into the usefulness of a rule of thumb. Nevertheless, armed with this knowledge, you can at least have a rough idea of where you stand with regard to what your savings should be at any point in time.
DC
Multiply your age times your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be.
To give an example, suppose one is 40 years old and makes $100,000 per year. Then, by the above formula, one's expected net worth is $400,000. The authors then go on to describe the wealthy (prodigious accumulators of wealth, PAWs) as those who have at least double this expected net worth based on age and income. Conversely, one who has accumulated less than half of their expected net worth is known as an under accumulator of wealth, or UAW.
In any case, the suggestion by the two authors is a broad rule of thumb. I would caution one against putting too much weight into the usefulness of a rule of thumb. Nevertheless, armed with this knowledge, you can at least have a rough idea of where you stand with regard to what your savings should be at any point in time.
DC
Saturday, March 1, 2008
Update on Cruise Line Shareholder Benefits
Probably the single most popular post on PFStock is my article about Cruise Line Shareholder Benefits. Literally thousands of readers have seen this post. These readers were searching for information about how to get the Shareholder Benefit offered to stock holders of Carnival Corporation (NYSE: CCL), Carnival plc (NYSE: CUK), or Royal Caribbean (NYSE: RCL). With such an overwhelming response, I am surprised that I haven't been contacted by travel agents seeking to capture some of this attention.
In any case, there have been a few changes in the benefit programs, and I think that now is a good time to post an update. I mentioned that each cruise company offers a similar $100 onboard credit for shareholders that book a 7 day cruise and own a minimum of 100 shares. However, I didn't post all of the details at the time.
As a service to my blog readers, I am publishing the details of the Carnival and Royal Caribbean Cruise Lines (RCCL) shareholder benefit programs. If you are considering going on a cruise in the near future, both RCL and CCL require that shareholders own a minimum of 100 shares of their stock. The associated stock symbols are RCL, CCL, and CUK depending on which cruise you are going on.
For Carnival Corporation (including Carnival Cruise Lines, Princess Cruises, Holland America Line, Seabourn, and Cunard Line in North America) the following benefit is offered:
Onboard credit per stateroom on sailings of 14 days or longer: US $250
Onboard credit per stateroom on sailings of 7 to 13 days: US $100
Onboard credit per stateroom on sailings of 6 days or less: US $ 50
Outside of North America, Carnival Corporation also operates P&O Cruises, Ocean Village, Costa Cruises, Aida Cruises, and P&O Cruises Australia. Note that on these ships, the shareholder benefit will be offered in British pounds, Euros, or Australian dollars depending on the currency used onboard the particular cruise ship. The update here is that Carnival no longer operates Windstar, and Swan Hellenic. Cruisers on these cruise lines won't be able take advantage of the shareholder benefit.
Here is the direct link to the Carnival Corporation Shareholder Benefit. It gives the address and telephone numbers for each of the cruise lines that offer this benefit.
For Royal Caribbean (RCCL), Celebrity Cruises, and Azamara Cruises the following benefit is offered:
$250 Onboard Credit per Stateroom on Sailings of 14 or more nights.
$200 Onboard Credit per Stateroom on Sailings of 9 to 13 nights.
$100 Onboard Credit per Stateroom on Sailings of 6 to 8 nights.
$50 Onboard Credit per Stateroom on Sailings of 5 nights or less.
The Shareholder Benefit excludes sailings on Celebrity Xpeditions.
Here is the direct link to the RCCL Shareholder Benefit. This is an FAQ for their program. And this is a PDF file of the information for Royal Carribean International (RCI). Azamara Cruises is a new addition to the RCCL shareholder benefit plan.
In general, you will need to mail or fax either a shareholder proxy card or a copy or your brokerage statement to the company (either RCCL or CCL). This is to prove that you own at least 100 shares of stock.
Personally, I have taken advantage of the CCL shareholder benefit twice. However, I have not (yet) used the RCL benefit. One question that I have been asked is if cruiselines will offer two credits, if two separate shareholders book and share the same stateroom. Unfortunately, the terms of the shareholder benefit state that they allow only one shareholder credit per stateroom (not per passenger).
The other major player in the North American cruise market is Norwegian Cruise Lines (NCL). I previously mentioned that NCL and NCL America were owned by the Genting Group of Malaysia (which also owns the Asian cruise line Star Cruises). NCL is now jointed owned by Star Cruises (Genting) and Apollo Management which recently made a large investment in NCL. Investors cannot buy their stock directly in the United States. Unfortunately, a shareholder shipboard credit is not offered for NCL or NCL America cruises.
And, I wanted to share a picture from our most recent cruise. Here is a photo of the NCL America ship, Pride of Hawaii, docked in Maui.
NCL America had some substantial losses in the recent past caused by downward pricing pressure in the Hawaii market. Although these discounts are good for cruisers, they are bad for cruise lines. For this reason, NCL decided to move the Pride of Hawaii to Europe and rename it the Norwegian Jade.
If you have general questions about the shareholder benefit, or just want to talk about cruising, I invite you to send me an Email. (Note my Email address is listed in the right side column of my blog). Also, the above links may change or go out of date. If you find that the information or links are out of date, please Email me so that I will know to update it.
I have a one final thought. At one time, I did own shares in both CCL and RCL. However, I have since sold off my shares. If you don't already own Carnival or RCCL stock, they are both dividend paying stocks that might be an appropriate part of a diversified investment portfolio. However, I do not recommend buying the stock just to get the shareholder benefit. Make your investment decisions to buy CCL or RCL based on your investment needs, and not on your vacation needs.
A Note from the Author:
Thousands of people have read this post, but neither Carnival nor Royal Caribbean compensate me for directing readers to their websites. A few readers have sent me a message of thanks for pointing out a benefit that they didn't know about, but the vast majority of people pass through without saying a thing. If you have read my posts and have benefited from the information, I want to ask you to consider doing a couple of things to support PFStock.
First of all, please share this information. You can Email this post to friends, or spread the word by Twitter or Facebook. If you participate in a forum, such as those on Cruise Critic, please mention this post or link to the PFStock home page. If your are a blogger, please consider linking to PFStock.
Secondly, consider shopping or purchasing items from PFStock sponsors such as Amazon
, or one of the other advertisers in the sidebar. If you are ready to book a cruise, please visit EasyClickTravel.com
to shop for a deal on your next cruise.
Thank you for your support and happy travels.
DC
In any case, there have been a few changes in the benefit programs, and I think that now is a good time to post an update. I mentioned that each cruise company offers a similar $100 onboard credit for shareholders that book a 7 day cruise and own a minimum of 100 shares. However, I didn't post all of the details at the time.
As a service to my blog readers, I am publishing the details of the Carnival and Royal Caribbean Cruise Lines (RCCL) shareholder benefit programs. If you are considering going on a cruise in the near future, both RCL and CCL require that shareholders own a minimum of 100 shares of their stock. The associated stock symbols are RCL, CCL, and CUK depending on which cruise you are going on.
For Carnival Corporation (including Carnival Cruise Lines, Princess Cruises, Holland America Line, Seabourn, and Cunard Line in North America) the following benefit is offered:
Onboard credit per stateroom on sailings of 14 days or longer: US $250
Onboard credit per stateroom on sailings of 7 to 13 days: US $100
Onboard credit per stateroom on sailings of 6 days or less: US $ 50
Outside of North America, Carnival Corporation also operates P&O Cruises, Ocean Village, Costa Cruises, Aida Cruises, and P&O Cruises Australia. Note that on these ships, the shareholder benefit will be offered in British pounds, Euros, or Australian dollars depending on the currency used onboard the particular cruise ship. The update here is that Carnival no longer operates Windstar, and Swan Hellenic. Cruisers on these cruise lines won't be able take advantage of the shareholder benefit.
Here is the direct link to the Carnival Corporation Shareholder Benefit. It gives the address and telephone numbers for each of the cruise lines that offer this benefit.
For Royal Caribbean (RCCL), Celebrity Cruises, and Azamara Cruises the following benefit is offered:
$250 Onboard Credit per Stateroom on Sailings of 14 or more nights.
$200 Onboard Credit per Stateroom on Sailings of 9 to 13 nights.
$100 Onboard Credit per Stateroom on Sailings of 6 to 8 nights.
$50 Onboard Credit per Stateroom on Sailings of 5 nights or less.
The Shareholder Benefit excludes sailings on Celebrity Xpeditions.
Here is the direct link to the RCCL Shareholder Benefit. This is an FAQ for their program. And this is a PDF file of the information for Royal Carribean International (RCI). Azamara Cruises is a new addition to the RCCL shareholder benefit plan.
In general, you will need to mail or fax either a shareholder proxy card or a copy or your brokerage statement to the company (either RCCL or CCL). This is to prove that you own at least 100 shares of stock.
Personally, I have taken advantage of the CCL shareholder benefit twice. However, I have not (yet) used the RCL benefit. One question that I have been asked is if cruiselines will offer two credits, if two separate shareholders book and share the same stateroom. Unfortunately, the terms of the shareholder benefit state that they allow only one shareholder credit per stateroom (not per passenger).
The other major player in the North American cruise market is Norwegian Cruise Lines (NCL). I previously mentioned that NCL and NCL America were owned by the Genting Group of Malaysia (which also owns the Asian cruise line Star Cruises). NCL is now jointed owned by Star Cruises (Genting) and Apollo Management which recently made a large investment in NCL. Investors cannot buy their stock directly in the United States. Unfortunately, a shareholder shipboard credit is not offered for NCL or NCL America cruises.
And, I wanted to share a picture from our most recent cruise. Here is a photo of the NCL America ship, Pride of Hawaii, docked in Maui.
NCL America had some substantial losses in the recent past caused by downward pricing pressure in the Hawaii market. Although these discounts are good for cruisers, they are bad for cruise lines. For this reason, NCL decided to move the Pride of Hawaii to Europe and rename it the Norwegian Jade.
If you have general questions about the shareholder benefit, or just want to talk about cruising, I invite you to send me an Email. (Note my Email address is listed in the right side column of my blog). Also, the above links may change or go out of date. If you find that the information or links are out of date, please Email me so that I will know to update it.
I have a one final thought. At one time, I did own shares in both CCL and RCL. However, I have since sold off my shares. If you don't already own Carnival or RCCL stock, they are both dividend paying stocks that might be an appropriate part of a diversified investment portfolio. However, I do not recommend buying the stock just to get the shareholder benefit. Make your investment decisions to buy CCL or RCL based on your investment needs, and not on your vacation needs.
A Note from the Author:
Thousands of people have read this post, but neither Carnival nor Royal Caribbean compensate me for directing readers to their websites. A few readers have sent me a message of thanks for pointing out a benefit that they didn't know about, but the vast majority of people pass through without saying a thing. If you have read my posts and have benefited from the information, I want to ask you to consider doing a couple of things to support PFStock.
First of all, please share this information. You can Email this post to friends, or spread the word by Twitter or Facebook. If you participate in a forum, such as those on Cruise Critic, please mention this post or link to the PFStock home page. If your are a blogger, please consider linking to PFStock.
Secondly, consider shopping or purchasing items from PFStock sponsors such as Amazon
, or one of the other advertisers in the sidebar. If you are ready to book a cruise, please visit EasyClickTravel.comThank you for your support and happy travels.
DC
Tuesday, February 19, 2008
I Got a 1099 for a Signup Bonus
Last year, I opened an interest-free checking account at Bank of America. To be honest, I only opened this "MyAccess Checking" account because they offered me a $75 bonus for signing up. The most ironic thing about this "checking" account was that although they include an ATM card and free online bill payments, they didn't actually include a checkbook with the account.
Getting to the point, I was recently surprised to receive a 1099-INT form from Bank of America. When I opened it up, I saw that the bank had listed my $75 "reward/gift" on line 1 as interest earned. That means that I need to pay tax on my signup bonus. Is this common? I've participated in similar offers in the past, but this is the first time that I've seen a 1099 list a bonus as being taxable. So, I dug up a copy of the original offer, and this is what the fine print said:
So, I guess that I was forewarned. A side note is that Bank of America allowed me to fund the account using a credit card. There was no cash advance fee. If you use a miles or points card to open a new account, you would earn points as if your initial deposit was a purchase.
What are other people's experiences with bank bonuses?
DC
Getting to the point, I was recently surprised to receive a 1099-INT form from Bank of America. When I opened it up, I saw that the bank had listed my $75 "reward/gift" on line 1 as interest earned. That means that I need to pay tax on my signup bonus. Is this common? I've participated in similar offers in the past, but this is the first time that I've seen a 1099 list a bonus as being taxable. So, I dug up a copy of the original offer, and this is what the fine print said:
We (Bank of America) may report the value of any premium to the IRS.
So, I guess that I was forewarned. A side note is that Bank of America allowed me to fund the account using a credit card. There was no cash advance fee. If you use a miles or points card to open a new account, you would earn points as if your initial deposit was a purchase.
What are other people's experiences with bank bonuses?
DC
Friday, February 8, 2008
The 1099 Waiting Game
By now, you should be receiving the last of your 1099 forms from banks and brokerages for tax year 2007. Together with these 1099s and my W-2 form, I have all the data that I need to prepare my tax returns. But, I am now waiting for my CORRECTED 1099 forms arrive. For several years, I have had to re-figure my taxes due to updated numbers on my tax forms.
For investors, the usual suspects are mutual funds (especially foreign funds), Exchange Traded Funds (ETFs), tax-free bonds, and dividend paying stocks. Starting last year, the Internal Revenue Service (IRS) added two new boxes on the 1099-INT form that report tax exempt interest, and the amount of tax exempt interest that is subject to the Alternative Minimum Tax (AMT). For mutual funds, there are four categories of distributions: long-term capital gains, short-term capital gains, dividends and non-qualified dividends. Mutual funds sometimes classify their distributions incorrectly and need to re-classify them properly. ETFs will sometimes declare a distribution in December, but not pay you until January. Unfortunately, you need to pay taxes on these funds in your prior year's taxes. Sometimes, foreign mutual funds need to calculate the foreign taxes paid by the fund. This calculation often takes a couple of months for the fund to figure out. Foreign taxes paid can be taken as a credit on your U.S. taxes. And, I've had instances where my brokerage put my tax-free interest in the wrong box, listing it as taxable interest. For dividend paying stocks, I've sometimes seen the dividends characterized incorrectly as non-qualified dividends when they were actually qualified dividends (which have preferential tax treatment).
The corrected 1099 forms are sometimes further corrected. In one case, I didn't get my last 1099 corrected until April! Some brokers have already informed their clients that corrected 1099 forms will be mailed until March. I can sometimes predict when one of my 1099 forms is incorrect, and expect to receive a correction. Issues with 1099 forms usually resolve themselves, but it often takes the brokerages and banks a while. For people who are expecting a tax refund, deciding when to file can be a hard call. You want to get your refund back quickly, but you wouldn't want to have to file an amended tax return later...
DC
For investors, the usual suspects are mutual funds (especially foreign funds), Exchange Traded Funds (ETFs), tax-free bonds, and dividend paying stocks. Starting last year, the Internal Revenue Service (IRS) added two new boxes on the 1099-INT form that report tax exempt interest, and the amount of tax exempt interest that is subject to the Alternative Minimum Tax (AMT). For mutual funds, there are four categories of distributions: long-term capital gains, short-term capital gains, dividends and non-qualified dividends. Mutual funds sometimes classify their distributions incorrectly and need to re-classify them properly. ETFs will sometimes declare a distribution in December, but not pay you until January. Unfortunately, you need to pay taxes on these funds in your prior year's taxes. Sometimes, foreign mutual funds need to calculate the foreign taxes paid by the fund. This calculation often takes a couple of months for the fund to figure out. Foreign taxes paid can be taken as a credit on your U.S. taxes. And, I've had instances where my brokerage put my tax-free interest in the wrong box, listing it as taxable interest. For dividend paying stocks, I've sometimes seen the dividends characterized incorrectly as non-qualified dividends when they were actually qualified dividends (which have preferential tax treatment).
The corrected 1099 forms are sometimes further corrected. In one case, I didn't get my last 1099 corrected until April! Some brokers have already informed their clients that corrected 1099 forms will be mailed until March. I can sometimes predict when one of my 1099 forms is incorrect, and expect to receive a correction. Issues with 1099 forms usually resolve themselves, but it often takes the brokerages and banks a while. For people who are expecting a tax refund, deciding when to file can be a hard call. You want to get your refund back quickly, but you wouldn't want to have to file an amended tax return later...
DC
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