Archive for the ‘Personal finance’ Category

Should I invest my down payment in the stock market?

Tuesday, August 18th, 2015

Question emailed to me: Let’s say my good friend has $100K. He has approximately one year to make this money grow until he has to buy a house. $20K of that is already in stocks, but doesn’t exactly know what he’s doing.

What would your advice be to make the most out of this one year given his current finances?

Answer: Does your friend want to put 20% down on a house? Does he/she have any other liquid assets? Lastly, do they know the price range of the house they want to buy?

With 100k and a decent-paying job they’d qualify for a 500k house, 100k (20%) for the down payment and a 400k mortgage.

If 500k is above or close to the range they’re looking for the house then no need to make a cent, protect the money and keep it in cash.

If they NEED more money for a down payment, then don’t invest to do it because mortgage lenders scrutinize
finances very thoroughly these days and need to be able to trace every cent you have to decide to give people a loan or not. They will not loan money to someone if they need to rely on unpredictable investment income to pay the mortgage (down payment might be less strict, but the source of the money needs to be trace-able – I just bought a house and or mortgage guy said “no mattress money” which is a problem if you are saving a lot of cash (literal
cash – not in a bank).

Now to answer the question as best I can without knowing all the details of your friend’s situation, for people with a chunk of cash that will be used in 12 months or fewer for a down payment on a home, put it in a high interest savings account. I pulled all my money out of stocks and investments 4 months before I bought my house. I missed out on 5-10% rate of return over those months, but you can’t predict the future, especially such a short window of time as 1 year in the stock market.

For all we know (and any “experts”) the stocks could crash 20% the day before he wants to take his money out. No one truly predicts the stock market with great accuracy, and if they did they would be ridiculously rich and not handing out advice here.

Also, if your friend invests now and sells within a year, they will be paying short term capital gains which is a much higher tax than holding for a 1+ years. So while you may make some extra cash, I can’t see it being enough to take that big of a risk.

What to do when debt collectors have the wrong person?

Wednesday, October 28th, 2009

Question: I’ve been getting calls from a debt collection agency based in NJ. They continue to call even after I’ve told them many times, I’m not the person they are looking for. I’m just baffled that someone has my home number and is asking for someone other than my wife and I.

They call 2-3 a week and never stop. What in the hell can I do to get them from calling here? I already blocked 2 numbers, but they continue to get through with different numbers. We are on the National Do Not Call list, but that doesn’t seem to make a difference.

Anyone have any experience with these goons?


First of all you should have received something in the mail stating there was an attempt to collect on a debt.

If you have not, this IS a scam.

Get a copy of your credit report [ free once a year ] from Equifax, Trans Union and Experian, Google it.

Debt is sold from one entity to another for pennies on the dollar so make sure you don’t owe anyone anything, even if you don’t recognize the debt collection company. But they have to notify you in writing in any case.

The next time they call tell them to send something in writing and get the company name and address.

Don’t bother reporting them to the No call list, nobody cares. Report them to their states Attorney General and the FTC and BBB [even though the BBB is a scam]. If they fail to agree to send you the debt collection attempt in writing, the threat of calling the Attorney General should end things.

If they agree to send you the information in writing, even better. Follow up by sending this letter, certified mail, return receipt requested.

Your Name
Your Address

Collector’s Name
Collector’s Address

Dear {insert name of collector or company},

I am writing in response to your (letter or phone call) dated {insert date}, (copy enclosed) because I do not believe I owe what you say I owe.

This is the first I’ve heard from you, or any other company on this matter therefore, in accordance with the Fair Debt Collection Practices Act, Section 809(b): Validating Debts:

(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

I respectfully request that you provide me with the following information:

* (1) the amount of the debt;
* (2) the name of the creditor to whom the debt is owed;
* (3) Provide a verification or copy of any judgment (if applicable);
* (4) Proof that you are licensed to collect debts in (insert name of your state)

Be advised that I am fully aware of my rights under the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. For instance, I know that:

* because I have disputed this debt in writing within 30 days of receipt of your dunning notice, you must obtain verification of the debt or a copy of the judgment against me and mail these items to me at your expense;
* you cannot add interest or fees except those allowed by the original contract or state law.
* you do not have to respond to this dispute but if you do, any attempt to collect this debt without validating it, violates the FDCPA;

Also be advised that I am keeping very accurate records of all correspondence from you and your company including recording all phone calls and I will not hesitate to report violations of the law to my State Attorney General, the Federal Trade Commission and the Better Business Bureau.

I have disputed this debt; therefore, until validated you know your information concerning this debt is inaccurate. Thus, if you have already reported this debt to any credit-reporting agency (CRA) or Credit Bureau (CB) then, you must immediately inform them of my dispute with this debt. Reporting information that you know to be inaccurate or failing to report information correctly violates the Fair Credit Reporting Act

Strategy to pay down credit card debt

Sunday, May 24th, 2009

Slowly but surely some friends worked the plastic the last year and low and behold ended up with a few thousand dollars on their card. Definitely caught up with them.

So they sat down and devised an interesting way to pay it down.

Basically anytime they use the card for something the cost is double – so if they uses the card for lunch and lunch is 15 dollars – the lunch will cost in their system 30 dollars.

When they get home they will add up their uses and send an online payment for double the amount to the credit card company.

this does a few things

1. It makes them stop using the card by doubling the cost They are now forced to really think if a charge is necessary now they aren’t blowing their money on small things that add up quickly like they used to –

2. By making multiple payments during the month instead of one payment at the end of the billing cycle they are slightly reducing their interest.and they are no longer shocked by large minimum payments when the bill comes ..

3. By double their payment they are of course paying down their credit card aggressively.. they said they really don’t notice the extra money going to the credit card because it is in small increments..

Of course the key is not cheating the system which they have been very good at.

Now this isn’t the best system. Obviously the best system is to pay your full bill at the end of each month, never paying interest. If you can’t then you stop using credit and budget the biggest payment you can each month. This system is for people who have tried the 2 better methods of paying down credit card debt and failed. After all, you can’t give up.

Economics of poverty

Thursday, May 21st, 2009

Interesting article here on the economics of poverty. Poor people pay more for banking, spend more time waiting for stuff, more on food, etc.

Vacation home sales are off but for how long?

Thursday, April 16th, 2009

This article talks about how vacation home sales are on the decline and how prices are coming down. But the conclusion is that retiring baby boomers will start buying vacation homes and retiring in them.

I know a few retiring baby boomers, and some bought a place near Disney that could be considered a vacation home by some but most of the ones I know prefer to stay near their friends / kids. So I’m not convinced that baby boomers will be driving the market in places like Costa Rica.

There’s also a personal finaince lesson here. One that I’ve mentioned about saving for unforseen medical expenses (because you can’t trust the insurance companies) and one that I shouldn’t have to mention about interest only mortgages:

But so far, no buyers. While she has dropped her price on the property, with its rambling five bedrooms and nearby rain forest, from $2.35 million to $1.5 million, she is experiencing firsthand just how dismal the market has become for vacation homes. She has enough money to pay her interest-only mortgage of $3,800 through July, but after that, there are no funds left.

She decided to sell the property because of unforeseen financial problems, such as medical expenses. “We’re about to lose it to the bank.”

Citi jacking up interest rates on their credit cards: what you can do to avoid paying 29%

Sunday, February 22nd, 2009

It should be illegal for credit card companies to raise the rate on an existing balance. Rate changes should only affect future purchases. What is going on now is just loan sharking.

One fellow with a Citi rewards card received a notice in the mail last month that the rate was going from 9.99% to 29.99% unless I opted out in 30 days. I couldn’t understand why they were doing this to me, because I’ve never missed or made a payment late.

He called up the company, and the rep explained that the reason for the rate increase was because “its becoming more expensive for them to borrow money”. I opted out on the phone, and paid the balance off last week.

Rather than opting out, you can try to make a deal over the phone. Another fellow with Citi went from 12.99 to 19.99% interest. He called and was able to negotiate 3.99 for the next 9 months.

Other credit card posts:
Travel rewards credit cards

Accepting checks can be dangerous: common scam

Wednesday, January 28th, 2009

A common craigslist scam is something like this: First off to clue you in I am selling this guy something for $100. He sent me an email that I posted about, inquiring for anyones opinion, in the thread I linked at the bottom. Here is the email he just sent me…

Hello KYLE,
Thanks for the trustworthiness on this purchase …..the payment will
be delivered any time from now so please once you do have it please
take that to your Bank and have it cashed. You will deduct the cost of
the purchase ….you will also have to send the rest of the
fund to my mover once you cashed the check so that she can come over
for the pick by noon tomorrow.Here is the Mover’s information to send the
money to via Western Union ….

Name : Kerrie Norberg
Address : Collinsville, IL 62234

I will need the details of the transfer once you have sent fund . . .

1.The MTCN number that is the 10 digits number on the Western Union receipt
2.Sender’s name and address used in sending
3.Actual amount sent.

Please pay off the western union charges from the remaining fund after
you must have deducted your money and the $100 that is to cover the
cost of your run around.**UPS # 1Z802T490196366093 ****For delivery
confirmation….you can reach ups at 800 (742-5877)**

I just received a $2,800 check in the mail also so the guy has gone this far…anyone have any clues??

I mean if I put this check in the bank and it clears and I get the cash for it then there’s nothing more to see here right?

I have a client (I am a lawyer) who deposited a check for $3,500 and waited about 8 days for it to clear. After it did, he sent the “overpayment” back to the purchaser. About a week later the check bounced and his bank took the $1,700 he had in his account and is suing him for the rest. I am fighting it, but he very possibly could lose.

He continues to sell thing on craig’s list and has about $50,000 in these fake checks getting about one a week.

So the answer is clearly no, when the check “clears” after a week it hasn’t really cleared. In a couple of weeks the bank will come after you to get the money back.

I might add that this is completely ridiculous. If the bank takes a bad check and gives you money, shouldn’t they blame themselves? Why does the bank tell you it’s cleared and give you the money if it hasn’t really cleared?

Don’t react emotionally to falling stock prices

Friday, September 26th, 2008

This article gives a nice overview of asset allocation and reminds us several times not to get too emotional. I especially like the ending:

Helping your money survive the current market

Wednesday, September 17th, 2008

Here is what one person I know is saying about investing in the current market:

I’ve moved the 401k to (about a month ago, after being more aggressive before hand and losing about 10% YTD):

45% Blue Chips (called disciplined equity)
50% Fixed Income
5% Intl Large Caps

Also a modest investment portfolio, not in an IRA, has a similar allocation.

My bigger problem is that I work for a mid-sized financial with a good deal of unvested stock. The stock is in the 21 range, down from 30 at the beginning of the year. This is my kids education, retirement, nest egg etc. so I’m concerned.

I know people at BSC, LEH, MER etc. have bigger concerns than I, and my heart goes out to them.

Cash, gold, shorts, and Berkshire Hathaway are also popular with people I know.

Dual monetary system: gold coins and Federal Reserve Notes

Sunday, April 20th, 2008

Here’s a kind of funny article on a guy who tried to beat the IRS and when the IRS came after him escaped relatively unscathed. Basically he paid his employees in gold coins that are supposed to be legal tender but are worth far more than face value.