Offer is back! Person-to-person loan site Prosper.com is having a another one-day promotion for borrowers who submit their loan listing on Friday, February 17th where they will actually make your entire 2nd loan payment (principal and interest) for you, up to $300.

Getting a rate quote is free, as their “soft pull” will not affect your credit score. If your loan does not find enough lenders to fund, then you can walk away with no obligation. If you do end up taking out a loan, then it will show up on your credit report. There are several ways you can use this offer.

The quick loan for profit. If you have an excellent credit score, you can get the AA loan rate of 5.65% for 1 year. Even if you don’t need it, take out a loan for about $3,500, and you would end up with a monthly payment of around $300. Your closing fee would be 0.5%, or $17.50. Your interest for a month at 5.65% would be less than $20. There is no pre-payment penalty, and your second payment is covered at $300. Just pay back the money they lent you after two months, and you’d be looking at over $250 in profit. You don’t need to risk any capital, just pay back the money they lend you and keep the profit. Decide quickly! Get your own rate quote at Prosper here.

Investor opportunity. As a result of the math above, there will be a mysterious surge in listings from AA borrowers for $3,500 loans today. If you like, you can invest in these notes today and tomorrow and earn some decent 4-5% interest for at least a couple months. Yes, there is still risk involved but my view is that people with AA credit scores are unlikely to default over only $3,500. I did this last time around, but didn’t have much money in my Prosper account. Sadly, still true this time. Just don’t be surprised if all your loans end up being paid off early!

Lowering your effective interest rate. If you don’t have an AA loan rating, you can use the free payment to lower your effective interest rate, especially if you pay off the loan early. For a $3,500 loan I got an A rating which meant either a 1-year loan at 6.08% or a 3-year loan at 9.99%. Your closing fee is 3.95% for A & B loans, which for a $3,500 loan that’s $138.25. So the free 2nd payment of up to $300 can knock that out completely and you can use the rest of the money to cover most of the first year’s interest.

(I went ahead and also got a free rate quote from LendingClub – their main competitor – but there all loans from $1,000 to $11,975 are only available with a 3-year term. With the loan rebate, I think Prosper would have had been the best 1-year rate anyway. However, my rate for the 3-year loan was only 6.78% APR (their highest A1 grade), which is much less than the Prosper APR. So it can pay to shop around.)

Bonus credit score. After getting the free rate quote, I was actually sent my credit score of 776 based on my Experian credit report. Prosper uses the Experian ScoreX Plus credit score, which has a range of 300 to 900. FICO range is 300 to 850. I assume this is due to new consumer laws that require them to send me my score if I’m not given the absolute best rate available. Not a bad side perk.

Find more in Deals & Offers, Debt | 2/17 | 30 Comments »

I recently started subscribing to Consumer Reports magazine again, and the February 2012 issue included an article about the major financial brokerage companies (subscription required, press release). The first part was an investigation about the big firms (ex. Citibank, Fidelity, Schwab, T. Rowe Price) and their pre-packaged investment plan advice, and the second part was a survey on the quality of service from discount brokerage firms (ex. E-Trade, Ameritrade, Scottrade).

Consumer Reports is always unique because they don’t take any advertisement money at all, and so they sent in their own staffers anonymously (by this I mean they didn’t disclose they were writing this article) and then had the resulting advice analyzed by independent financial planners. Here were my takeaway notes:

I think fiduciary duty is a big deal, as I see no point in paying even a penny for financial advice if they won’t even promise it is in your best interest. Just seems like common sense to me. I don’t think I would bother to take them up on this free advice unless they were fiduciaries.

Self-Service Brokerage Firm Reviews

The Consumer Reports survey revealed that readers were “very satisfied” with 10 of 13 major brokerages, but it also left out a lot of the cheaper guys like OptionsHouse ($3.95) and TradeKing ($4.95). They seem to run this survey every few years, so here are the publicly-available May 2009 ratings:

One new change was that they separated out the “full-service” brokerage firms like Ameriprise, Edward Jones, and Morgan Stanley. In comparing the remaining “discount/online” brokerage firms, it’s noteworthy that the top 4 stayed the same for both 2009 and 2012, although the order changed slightly:

Find more in Investing, Retirement | 2/16 | 17 Comments »

When dealing with other people, it’s always easier when you know what makes them tick. What motivates them? This led to some introspection. What did I really want out of life? I realized that I was probably much different than others. The following characteristics aren’t mutually-exclusive, there is no wrong or right really, as everyone may have a little of each but you may realize one is prominent.

Don’t take the Lego characters too seriously either, eh? I just went to a Lego-themed birthday party and watched Star Wars again.

Prestige

“I seek the admiration and respect of others.”
 

Power

“I like being the boss and giving orders.”
 

Duty / Honor

“I find a higher calling in serving my religion/country/world.”
 

Passion

“I love my job.”
 

Family

“I want be a good wife/husband/mother/father.”
 

Personal Freedom

“I don’t take orders from anyone.”
 

Path of Least Resistance

“I don’t question the status quo and like to follow others.”
 

I would say that my top preferences from highest to lowest would be personal freedom, family, and duty. I’m still working on starting a family and how to best help higher causes. Low on my list is power and prestige. I don’t enjoy managing others (having people below me in the ranks) or being told what to do (having people above me). I feel this hurts me in the areas of leadership and probably makes me a bad employee. This make me think I should just work for myself. How about you?

Find more in Goals | 2/15 | 9 Comments »

Mrs. MMB and I both contributed $5,000 each to a non-deductible Traditional IRA again for the 2012 tax year this week, with the intention of converting it into a Roth IRA in the future. Are you eligible to do this as well? Of course, we had to wade through a ton of IRS fine print to try and achieve a bit of tax savings.

First, can we just contribute directly to a Roth IRA? Per this IRS flowchart, because we are married filing jointly and will most likely have a modified adjusted gross income (MAGI) over $183,000, we are unable to contribute to a Roth IRA. How many people know what their MAGI is? It’s not impossible to figure out, but if I was closer I’d rather wait and have TurboTax figure it out for me when I filed my 2012 taxes.

Can I contribute to a Traditional IRA, even if I have a work retirement plan? Yes, it doesn’t matter if you have a 401k or 403b or whatever. The question is whether it is tax-deductible. Remember, when money is withdrawn from a Traditional IRA, it is taxed again at ordinary income rates.

Well, is the contribution tax-deductible? From this other IRS flowchart, because we are married filing jointly, covered by a retirement plan at work, and have an MAGI of over $112,000 or more, I see out that our contribution is not tax-deductible. Finally, you should remember to note the non-deductible (post-tax) contributions on IRS Form 8606 at tax time.

Can I convert my non-deductible IRA to a Roth IRA? In 2010, the previous $100,000 income limit for Roth IRA conversions was removed. It was initially thought to be a temporary thing, but it has not been addressed since. There is some speculation that the government is quietly (and happily) collecting taxes right now on all the rollover money, as opposed to later. Thus for 2012, there is again no income limit on the conversion from a Traditional IRA to Roth IRA. Even so, there are still some catches if you have both deductible and non-deductible (pre-tax vs. post-tax) IRA balances available to be converted. We have already converted all our pre-tax IRAs a while back, so it will be a simple “same trustee transfer” at Vanguard for us.

Okay, so we successfully navigated all these IRS rules and legally minimized our tax liability. But how many people won’t? Even for tax benefits for low to moderate-income earners like the Earned Income Tax Credit, the Government Accountability Office (GAO) found that between 15% and 25% of households who are entitled to the EITC do not claim their credit, or between 3.5 million and 7 million households. I mean, just look at how long the Wiki page that supposedly summarizes the credit is. It shouldn’t be this complicated.

Find more in Investing, Retirement, Taxes | 2/14 | 16 Comments »

Speaking of internal frugality, I’d say one of the most basic ways to save on rent or mortgage payments is to… live in a smaller place. No, wait, really. Let’s think about it.

Even though it’s now easy to make fun of 10,000 square feet McMansions, they are only a side effect of an overall trend towards larger houses. According to this 2006 NPR article, the size of new houses has more than doubled since the 1950s. The average new home sold in 2007 was a whopping 2,629 square feet.

I know we’re getting fatter and need a bit more space to move around, but not by that much! In fact, the average family size has actually been decreasing over time. Here are some stats I pulled from the U.S. Census:

Source: U.S. Census Bureau

From 1970 to 2004, the average household shrunk by 27%, but the average square footage grew by 66%. Using median numbers gave similar results.

There are several theories as to why this is happening. For starters, we may simply want a higher standard of living. (Sharing bathrooms? That’s for people in 3rd-world countries!) Perhaps it’s from us continually one-upping our neighbors. Maybe builders are pushing bigger homes through marketing. Or it may be a result of the breaking up of the American family, and how we don’t like spending time together anymore.

Most importantly, we don’t need the extra space. If a family of four could live well in 1,500 square feet back in 1950, there is no real reason they can’t do so today. It’s just a choice like any other, and we have to examine whether it is really worth the price. In cities like New York, Tokyo, or Hong Kong where space is at a great premium, families have long adapted to much smaller living spaces.

Finally, the extra costs don’t stop with the bigger sticker price. There’s the higher property taxes and insurance rates. A bigger home costs more to heat, cool, maintain, and repair. More rooms means more furniture, more wall decorations, more room for clothes, and just more stuff in general. More appliances mean more electricity used. The list goes on and on.

In my opinion, many people don’t even notice that they are stretching to buy homes that just keep getting bigger and bigger. They just follow the crowd. It’s hard to be different. This unconscious choice may partially explain why many of us feel so much more stressed financially than our parents.

Update: After the housing bust, there has been a growing counter-culture celebrating living well in smaller places. There is even the extreme end of buying tiny houses and the small house movement. We may not need to all live in 300 sf houses, but it’s good to explore our options.

This post has been added to my Expense Reduction Guide: Housing.

Find more in Frugal Living, Real Estate | 2/13 | 60 Comments »

Where are the best places to consider relocating to? I knew that almost every major financial media outlet had their own “best places to live” list, and my plan was to see which cities popped up most amongst them. Well, that was a bust as every list seemed to be so different; The top city on one list might not even be on the next list at all. Why? There is no one best place to live, it all depends on what criteria is important to you.

Instead, I’m just going to give you the direct links to all the major Top 10 lists (alphabetical-ish), and let you peruse at your leisure over the weekend. I listed the top city pick for each one – all in different spots across America!

Let me know if I missed one, but be careful since many other smaller lists are actually based on those above. In the end, choosing where to live is just one factor in your life, and you may already be happiest where you are right now. But why not make sure it’s a conscious decision? A good place for additional research is BestPlaces.net which I believe used to work with CNN Money on their list.

This post is part of my Expense Reduction Guide: Housing.

Find more in Frugal Living, Real Estate | 2/10 | 15 Comments »

Have you moved for financial reasons?

Where did you move to? Where did you move from? How did you decide?

Larger income? Better job for similar income? Lower housing costs? Something else?

Share your story in the comments below!

I don’t think there will be as many as the 358 replies to my six-figure salary stories request, but I’m sure reading your case studies would be very interesting.

Find more in Frugal Living | 2/8 | 26 Comments »

This post has been revised with new info and added to my Expense Reduction Guide: Housing.

Although it takes considerable effort, nearly 40 million Americans move every year. Now, the reasons for all these moves are not all financial, but you can improve your financial situation drastically by moving. You might increase your income, decrease your housing costs, or decrease your tax bill.

Where are people moving to? This Forbes article analyzed address data from IRS tax filings, and found that a trend that households are moving to warmer climates with lower taxes and property values. The majority of the top ten counties are in Texas and Florida, where there is no state income tax.

They also compiled an interactive map which shows relative inflows and outflows for each county. (Previous year’s version here). It’s pretty fun to click around to where you live, and where you might consider moving to.

Below is the map for Travis County, TX, where Austin is the major population center. A blue line between two counties mean that more people migrated to Austin than left, and a red line means that more people left Austin for that county than came in.

Where are people leaving? Places with high tax rates.

Personal case study. My sister used to live in San Francisco, California. She recently moved to Austin, Texas where her income increased and her housing costs decreased at the same time. Texas has no state income tax but relatively high property taxes. But since she rents in both places, the lack of state income tax becomes yet another boost to her bottom line. I should note that we both lived there for a while as children, so there is some familiarity, but she left in elementary school. From the looks of it, she wasn’t alone!

Find more in Frugal Living, Taxes | 2/8 | 34 Comments »

Can you finally get the iPhone 4 and iPhone 4S on a cheap prepaid plan without hacking your phone? Straight Talk, a prepaid MVNO that is a joint venture between Tracfone and Wal-mart, is now offering the ability to buy Straight Talk SIM cards that you can pop into any AT&T-compatible, T-Mobile-compatible, or unlocked phone. They even offer a micro SIM card that are compatible with Apple iPhone 4 and 4S, for a one-time cost of only $14.99 with free ground shipping currently:

The plan is cheap too. For $45 a month you get unlimited minutes, unlimited text, and unlimited data with no contracts and no credit checks. So you can bring over any AT&T iPhone 4 that is no longer in a contract, and you’ll still be using the AT&T or T-Mobile network with 3G data (for better or worse). You’ll need the $45 a month plan card to activate the SIM. I read some rumors about slow data speeds but others say it’s fine. I do doubt it’s really “unlimited” if you are an especially heavy data user. But for casual users, this would look to supplant the Sprint Employee EPRP plan as the cheapest iPhone plan with unlimited text and data available.

Find more in Deals & Offers, Frugal Living | 2/8 | 17 Comments »

It looks like TDA is following the trend of combining checking account features with their traditional brokerage accounts. If you have a TD Ameritrade account, this looks like a pretty easy $200 bonus score.

Visit this promotion page to sign up for Online Cash Services and if you (1) sign up for a Visa debit card and make 4 purchases of $10+ by 3/31/12, and (2) enroll in BillPay and pay 4 bills totaling $100 between 1/15/12 and 3/31/12, you will get $100 each = $200 total. Both the debit card and online BillPay are free services.

Many of you many have old, inactive TDA accounts that are still open and you can fund them to take advantage of this promo. Offer not valid for existing debit card holders or bill pay users (boo). Via reader Michael via FW.

Find more in Deals & Offers | 2/8 | 10 Comments »

New, improved offer! The Slate Card from Chase is now available with 0% APR on both balance transfers and purchases for 15 months, and the best part: NO balance transfer fee! There are different flavors of this card, but you should see it mentioned right at the top of this specific offer link. You can literally borrow money for free and pay it back in 15 months with no interest (keeping in mind you’ll still need to satisfy the minimum payment each month until then). No annual fee.

This is a limited time offer, and very rare these days to find a no balance transfer fee 0% APR offer that is available to all (as opposed to being targeted only to specific customers). You can verify in the Pricing & Terms section of the application, down in the Fees box:

Make sure you initiate that balance transfer within the first 30 days.

Lower your interest on balances!
This is a great opportunity for those people with good to excellent credit but are still working hard to lower their debt payments with no fees at all, as now you can have all your money applied directly into cutting down your principal instead of having it go towards interest. That way, your balance owed will go down that much faster.

Chase Blueprint is a free feature on select cards that lets you break down your balances into things that you want to pay in full each month and bigger purchases that you wish to pay off over time.

Earn interest with the money?
It’s been a while since I did any sort of credit card arbitrage, but you can still get some pretty high rates with certain rewards checking accounts. For example, Consumer’s Credit Union has their Free Rewards Checking account paying 4.09% APY interest on balances up to $10,000 if you make 12 debit card purchases + one billpay per month. The rate is even guaranteed at least through June 30, 2012. You can join with a $5 one-time fee, even integrated into their online application:

Another good option is U.S. Savings Bonds. Series I bonds bought right now will earn 3.06% for the first six months, and then an unknown rate based on ongoing inflation after that. Even with zero inflation, it will still earn more than any 1-year bank CD… and I really don’t see zero inflation.

If you wish to get cash from this balance transfer offer without it being classified as a “cash advanceâ€, one idea is to ask for the balance transfer as a check or electronically transferred to your bank account. You may need to call them for this. Another option is to request money to be transferred to other non-Chase credit cards that you have, ideally already with a balance on them. This will create a negative balance, after which you request a refund check be sent to you. I know that Citibank had a feature on their site to request a credit balance refund, which only showed up when you have a negative balance.

Slate Card from Chase with No Balance Transfer Fee application link

Find more in Credit Cards, Deals & Offers | 2/6 | 15 Comments »

One of my overall goals for 2012 is to make this site more of a permanent resource for information. As part of this, I want to create an “Expense Reduction Guide” that will provide an organized way to find ways to maximize personal value and make your spending efficient.

I would like this to be similar to my Favorite Posts on Investing page and Our First-Time Homebuying Experience guides (which also need to be cleaned up…).

Expense #1 – Housing

I am going to go through all the major categories, but let’s start with the biggest expense – housing. I’m keeping this part to ways to reduce either rent or mortgage PITI (principal, interest, taxes, and insurance). Things like reducing heating bills or furniture costs will be kept separate for later.

Move to a different city/state/location
- Ideas for relocation: Roundup of Top 10 Lists
- What cities are people actually moving to?
- international living (working or retired)

Renting
- Rent comparison sites
- rent vs buy calculators
- buying a house for psychological benefit vs. financial

Move to a different house
- live in a smaller house
- neighborhood, location
- shared living, multigenerational living
- multiple units

Buying a house
- Getting a mortgage loan
- Credit scores, income, points, etc

Refinancing mortgages
- Rate comparison
- Mortgage types (fixed, ARM, length)
- Maximizing home appraisal

Homeowners Insurance
- Shopping for homeowner’s insurance
- Deductibles, options
- Renter’s insurance

Property Taxes
- Appealing assessment value
- Special rules in certain states

I’m just starting out and I know I’ll need to write several new posts to fill in the gaps. However, I want to make this an open brainstorming post so that you the reader can make sure I don’t forget anything. Got something to add? Please leave a comment with a tip, a link, or an idea to explore further.

Find more in Budgeting, Frugal Living, Real Estate | 2/6 | 19 Comments »