American Greed

Anyone ever watch this show on CNBC? It's on every Sunday and Wednesday night. I tuned in last night and found this one story outright ridiculous.

It follows 2 sisters that operate a business supplying bolts, nuts, and screws on machineries operated by our troops during the war in Afghanistan.

It's very important that these supplies get to the troops in a quick and fast manner. So the government usually pays a high shipping cost to have these delivered pronto!

These two hardworking sisters were able to accidentally stumble across a loophole with the way they can bill their buyers (US Government of Defense) extravagantly.

It started out innocently when they were shipping some supplies over to the buyer and mistakenly keyed in the wrong shipping cost. They realized that regardless of the shipping cost number billed, the automated system used to generate a check to reimburse them for the shipping would pay the amount billed.

For example, the government of defense orders $4 worth of supplies from them. They were able to bill the buyer $100,000 shipping charge on this transaction. Overtime, they realized they can enter in any amount for shipping and still get reimbursed by the automated bill payout machine.

They spent lavishly over this system glitch for years. They bought vacation homes, jetskis, traveled to New York for an expensive jewlery trip, gambled in Las Vegas, and opened a cookie business. They portrayed a very successful image.

Eventually, all "too good to be true" things must come to an end.

Greed was ultimately their downfall when the sisters inadvertently submitted an order twice in error. The order was for a $0.38 screw and they charged a whopping $998,000 as the shipping cost.

Up until now they were able to escape human detection until this machine declined their request due to a duplicate entry. This was when authorities were called in and they found the sisters had scammed them close to $21mm worth.

It wasn't long until the FBI knocked on their door. This was too much for one of the sister. She eventually took her own life while the other one was sent to jail.

Retirement Mistakes

Investing in your future especially in a retirment account takes time and discipline. You most likely won't see the money grow too fast anytime soon. Remember that slow and steady wins the race.

I've been contributing to my 401K since the age of 22. However, I made a costly mistake to cash it all out to use as a downpayment towards our first home. Since then, I've gotten back on track and is now contributing 15% of my paycheck towards my golden years.

Here are some other costly mistakes that people often make to detriment their retirement accounts. Are you one of these people?

1) Blowing retirement savings early
This happens when people switch jobs and are forced to decide on whether to roll their 401K into an IRA or cash it all out. And guess what the majority ends up doing?

2) Turning down free money
That's right, you heard me. The money is FREE and is waiting for you to collect it. But what do you do, you end up turning this free cash away. You do this by not participating in your company's 401K match.

I've seen this all too many times happening to friends and even current coworkers at my workplace. I ask them why not get a few hundreds to thousands of dollars for free each year. They reply with being lazy = lame.

3)Saving without a goal
Unfortunately, many of us get this magical retirement number wrong. We end up miscalculating the wrong retirment age and not meeting its goal by socking away the correct amount every month. Then when it comes time to retire, you just don't have enough to last you through.

4)Ignoring your investments
Your retirement assets require regular upkeep just like your house and your car. Ignore them and they could fall apart. Be sure to review and rebalance your investments at least once a year to make sure you're comfortable with the level of risk in your portfolio.

Getting a late start is just as bad. For proof, look at the following examples.

Let's say a 25 year-old begins saving $3,000 a year, but stops after only 10 years. Over the next 40 years, she could expect that $30,000 investment to grow to more than $472,000, assuming an 8% return.

If the same investor waited until age 35 to begin saving and stashed $3,000 a year for 30 years, she could only expect to have about $367,000, assuming the same 8% annual return.

By waiting 10 years to start saving, you lose out on the benefits of time and compounding returns, not to mention over $100,000!


How much money is enough?

If you happened to see the recent lists of 2009 compensation packages for CEOs or hedge fund managers, you may have found yourself trying to wrap your head around some staggering numbers.

Larry Ellison made an estimated $84.5 million last year while hedge fund alpha-dog David Tepper took in about $4 billion.

What do those numbers mean? Was Tepper 473 times more "successful" than Ellison in 2009? And how do they compare to you? Let's say you're a Bay Area resident with a median individual income of around $50,000.

Ellison's compensation was about 1690 times yours. Does that sound about right for the respective jobs you did last year?

Leaving aside the arguments about whether or not such ratios are logically or morally out of whack, let's consider the meaning of this money from another perspective: what does a $4 billion or an $84 million, or $50,000 income mean in terms of personal satisfaction?

In other words, if you were making $4 billion a year, would you be happier? If so, how much happier? What if you (you, median Bay Area person, with a $50,000 a year income) were making $100,000 a year? Would that be enough? What about $200,000? $2 million?

Is there a point of diminishing returns -- an income level after which happiness stops increasing along with income?

Marty Nemko, a Bay Area career coach and radio host says his clients put "too much" emphasis on money when considering their career choices.

"I just saw a client who makes $500,000 a year, and he's pissed off that his peers are making $700,000. Like it's going to affect his quality of life!

There are legitimate cases in which more money does make a real difference in well being, Nemko says if you can't afford health care, for example but too often, he says, he sees people pursuing careers they would "never in a million years have chosen" simply because those jobs feed a consumptive, "designer-label lifestyle."

Be conscious of what you're trading away in the quest for a higher salary, Nemko cautions. "Normally, the people who make big dollars are the people who are bringing in big dollars for some other entity," he says. "They're corporate lawyers, bond traders, or they sell insurance -- stuff that may or may not make the world much better, and that they don't even like that much."

If you're still convinced that an increased income will improve your well being, Nemko has another important caveat: "What counts is after-tax dollars. If you fight for an extra $20,000 a year but you're really only getting $12,000 after taxes, how much is that really going to change your lifestyle?" he says.

So is there a magic number that Nemko pegs as sufficient for getting by happily in the Bay Area? In a recent blog post he details a plan for living well on $20,000 a year, but Nemko says the income-satisfaction point will vary depending on one's choices of things like housing, cars, and whether or not one spouse stays at home.

"I can't give one number" for how much is enough, he says.


Jean Chatzky, the financial editor for NBC's "Today Show," did come up with such a number after conducting a survey of 1,500 Americans in 2003 for her book "The Ten Commandments of Financial Happiness."

Chatzky says the amount of money required to "live comfortably" varies by region, but her survey of Americans' attitudes suggested that "once you've got enough to put food on the table, gas in the car, go out to movies occasionally and go on the occasional vacation, more money doesn't make you happier."

She found the point of diminishing happiness returns was about $60,000 per household, annually. In other words, after $60,000, gains in income didn't bring corresponding increases in happiness.

Like Nemko, Chatzky emphasizes that making more money to meet basic needs can significantly affect well-being. "When you look at what has the ability to make people miserable, the leading factor is health. If your health is not good and you are so poor that you are struggling on a day-to-day basis ... that's an economic problem."

Beyond these basic needs, Chatzky says what makes people happier is "having greater control over whatever money they have." Her survey reflected higher happiness ratings from people who "set goals for themselves and benchmarked those goals; people who paid their bills as they came in instead of saving up their bills to pay all at once; and people who saved something."


Nemko's and Chatzky's conclusions may come as a relief: forget keeping up with the Joneses (or the Ellisons and Teppers). The sacrifices aren't worth it.

As Chatzky puts it, "Measuring up doesn't help anybody. If you can get yourself to a place where you are really focused inward instead of outward, you're going to be significantly happier."

That may have been the end of the story, had I not called Justin Wolfers, associate professor of business and public policy at the University of Pennsylvania's Wharton School of Business.

In 2008, Wolfers and his Wharton colleague Betsey Stevenson published a study rebutting the so-called Easterlin paradox (the finding, in a 1974 paper by economist Richard Easterlin, that, while rich people within a country are happier than poor people, increases in a country's GDP do not correlate to an increase in national happiness).

(You can find a link to Wolfers' and Stevenson's paper, along with a good explanation of its context and reactions to it -- here.)

"I'm biased, of course," Wolfers told me, "but my sense is that most economists have gone from believing in that Easterlin hypothesis to believing it looks like income and happiness are quite strongly related."

OK, so maybe more money creates more happiness, but only up to a point, right?

Well, maybe not.

Wolfers says he and Stevenson are halfway through a new research paper investigating precisely that hypothesis, and so far, they've found it to be false.

"If you look for evidence that there's some level above which money is unrelated to happiness," Wolfers says. "You simply can't find it. Using American data, [from sources such as Gallup polls], it's true that people earning $50,000 are happier than those earning $25,000, people earning $100,000 are happier than those earning $50,000, and people earning $200,000 are happier than those earning $100,000."

So can we conclude then, that Larry Ellison is 169 times happier than you?

Well, not exactly. But Wolfers and Stevenson have, in fact, quantified the relationship between income and subjective reports of well-being.

"It's what we call a linear log relationship," Wolfers says. Translation: "At any point in the income scale, a 10 percent rise in income buys the same rise in happiness."

And the Wharton professors have found this formula holds cross-nationally, too. "A 10 percent rise in income for someone in Burundi buys about the same change in happiness as a 10 percent rise for people in the U.S.," says Wolfers. "That's the sense in which we say there's no evidence of satiation. There's no evidence of it running out at income level whatsoever."

(Wolfers' analysis spans multiple studies, but he says one of the recent Gallup polls he analyzed listed ">$500,000" as the highest income category.)

The upshot is that hedge fund honcho David Tepper would, in theory, need to earn an extra $400 million to see a 10 percent increase happiness. You, Bay Area median income earner, just need to find $5,000 more per year to make the same jump in your sense of well-being.


mid month April Net Worth Review

I have to admit, I'm a bit lazy when it's time to report my net worth for the previous month. It is now almost mid-month and I'm just getting around to it. So it's fair to call this a mid month April Net Worth Review.

So let's see how I did from the end of February til today, April 13th, 2010. The magic number appears to be $448,129.83.


Savings/Checking - I'm surprised that we have a decrease in this category. Shame shame, have we not been saving? Actually we have because you can see a decrease to the Misc. Debt by about $7000. Because of this partial debt repayment, we have a slight decrease to our savings & checking this month.

Beehives' 401K - Did relatively well this month due steady contribution to our 401K and also because first quarter end dividends were paid into our accounts.

Mrs.Bee Luxmobile - Just a slight depreciation my car.

Mr.Bee Luxmobile - Mr. Bee no longer has his junkmobile. He traded it in for a new shiney, safe, and workable ride. I'm proud of him because it was causing damage to the environment and posing danger to his safety.

Primary/Rental - No changes here because we have not gotten an appraisal for months.


Credit Cards - Only $1200 in debt for the month.

Misc. Debt - This was debt money owe to a family member. This number now has been reduced by $7000. Horray. Hope to get the rest squared the away in a few months.

Mortgages - Just the usual monthly payment consisting of interest, principal, and extra principal payments.

Auto Loan - So now this is a new category added because we now have a car loan. We don't like loans other than mortgages but we feel that having cash on hand is more important than paying off the loan entirely at once. So here we are with a car loan. The life of the interest on this loan is around $600 which is not too bad.

Flexible Lives, Flexible Rules

Contributing to a 401(k), getting two weeks of vacation or creating a health savings account are standard practice for many working adults. But standard doesn't work for Anand Gan and Landon Westbrook.

The duo, married four years, have spent much of their lives working temp jobs as they tried to make it big in New York City -- Mr. Gan as a drummer, bassist and guitarist, Ms. Westbrook in musical theater. While Ms. Westbrook has held down a few staff positions over the years, Mr. Gan says he's had only one "real" job.

Mr. Gan, 37, splits his time between his communications consulting firm, DT Media New York, and a music production company, Flytrap Music Production, which he co-owns. Ms. Westbrook, 38, works full-time for DT Media, which Mr. Gan founded nearly five years ago.

Because they rely on unpredictable project assignments, Mr. Gan and Ms. Westbrook must set aside a part of each check for taxes and business expenses before paying themselves. What they do get, they save. "It's always in the back of my mind, 'What if I never work again?' I have to have the money there," says Ms. Westbrook.

Mr. Gan and Ms. Westbrook live a relatively modest life, sharing a rent-stabilized ($1,350 a month) three-bedroom apartment with their 22-month-old son, Harrison. Flexible work schedules allow them to keep child-care costs low. The couple's biggest indulgence, they say, is fine food.

Mr. Gan and Ms. Westbrook each have traditional IRAs, worth a combined total of about $39,000. While they try to contribute the annual maximum allowance, they admit it doesn't always happen. "For us, these things are a priority, but sometimes other things get in the way," says Ms. Westbrook. Harrison's birth and some health issues forced them to forgo some IRA contributions.

Because of their need for fast funds in case work dries up, Mr. Gan and Ms. Westbrook keep the vast majority of their money in cash. They have $160,000 in the bank, though they are looking at putting some of that money into retirement accounts.

In addition to a few individual stocks and a small 401(k) from an old job, Ms. Westbrook also owns a cheap fixer-upper in Savannah, Ga., where she's originally from. She used proceeds from the sale of her old New York apartment to buy the house. A renter had been covering most of the costs, but that lease is ending and the house may sit empty for a few months before a replacement moves in. Ms. Westbrook and Mr. Gan talk of using the property as a second home in the future.

With all the cash and investments added up, says Ms. Westbrook, "It doesn't seem like a bad chunk of change. But we also couldn't quit working on that kind of money. It's better than nothing, I guess."

The couple says their plans grew more focused once Harrison was born, as they bought life insurance and started contributing to a 529 college savings plan. But they recognize it will be easier for him to find loans for school than it will be for them to do the same during retirement, so they haven't put much into the account.

ADVICE FROM THE PRO: Annette Clearwaters , a fee-only certified financial planner and president of New York-based Clarity Investments + Planning LLC, is impressed with how the couple holds the line on expenses. "It seems like they're self-disciplined in the spending area," she says.

To avoid situations when life events "get in the way" of contributing to retirement accounts, Ms. Clearwaters recommends setting up automatic deposits. She says Mr. Gan and Ms. Westbrook could take a certain percentage of each check and put it into their IRAs, just as they do for business expenses and taxes. Any consistent schedule is better than a lump sum, Ms. Clearwaters says. "If you wait till the end of the year, I don't think you'll ever be as successful in putting money aside," she warns.

She also recommends the couple look into opening a SEP IRA because of the higher contribution limits and tax benefits.

Ms. Clearwaters commends the couple for having saved so much and keeping it liquid, explaining that they should have up to 12 months of expenses set aside because they're both self-employed. She says they could invest in index funds, spreading contributions throughout the year. Ms. Clearwaters recommends a conservative allocation of 60% stocks and 40% bonds, since this is where they would turn if their cash runs low and business dries up.

Ms. Clearwaters says Mr. Gan and Ms. Westbrook could afford to put some more money into the college fund because they're sitting on so much cash, even if it's "some nominal amount" like $50 a month.

Article by Finance Yahoo


Expensive weekend

And it's not like I went on a trip or anything either. Just a day around town with my friends and it ended up costing me $267.

Brunch - $17
Costco - $100
Shopping - $150

I've just used up 1/3 of my projected monthly budget and we're only near mid month.


Receipts with Discounts

The next time you purchase a meal at a restaurant or items at a clothing store, be sure to check the back of your receipt before throwing it away.

Businesses like to entice shoppers to come back and visit their stores by giving out discounts on their next purchase. These discounts can be found in the back of the receipt by way of participating in a survey.

I had dinner the other night at a local chain restaurant. After paying, the cashier pointed out to me the discount I could receive on my next visit. It was a simple phone survey to tell them how my experience was at the restaurant.

There is usually a code displayed for you to refer to in order to participate. All it took was a mere 2 minutes on the phone.

1.I dialed the number.
2.Followed instructions to enter the code found on the receipt.
3.Answer their survey.
4.Then a confirmation code was given back to me.

So the next time I eat at this restaurant, 25% will be taken off my total bill.

I think this is a good way for people to save money and for businesses to welcome back their customers. Don't you?

All it takes is a few minutes to save a few bucks.


Car Shopping

Alright, this will definitely be of some damage to our bank account.

However, we need to make this new car purchase because DH has over 220,000 miles on his junkmobile and it's been misbehaving such as sudden engine stoppage for no reason. 220,000!!! only if we were paid $1 to drive each miles. I'll be $220,000 richer. Kidding.

We've been eyeing Japanese cars in particular. At first we opted for European cars but it was out of our price range and since being used as a commuter's car raking in an average of 12,000-14,000 miles annually, it just doesn't make sense to spend so much on a nice european luxury car. Repair expense down the line will also be a headache.

Therefore, we've decided to go with the Japanese brand models.

We're looking into either an Acura or a Lexus. Both have very good reliability ratings and are pretty luxurious in its class. We're hoping to spend around $25K to no more than $35K for this car with an average of 25MPH on the highways.

In terms of payment, I think we're leaning towards financing with a reasonable down payment.