');} ');} ');} ');} ');} ');} ');} ');} ');} ');} ');} ');} ');} ');} ');} ');}

Archive for June, 2008

Gas prices – is the dollar weak, or is oil too high?

Wednesday, June 25th, 2008

Before we talk about anything else remember this one thing: price of crude oil is directly related to price of gas.  So from now on when I talk about the price of crude oil, you know exactly what it means to you.

A few months back there was a big whoopee about the first person to trade oil at over $100/barrel.  As the price of a barrel of crude oil continues to rise unrelentingly past $135 a barrel, one begins to wonder, Is the price of oil primarily rising due to the strong global demand for oil, or due to the U.S. Dollar (USD) falling so much in value?

One way to solve this riddle is to travel back in time to the 20th Century when after World War II the USD was considered ‘as good as gold’ because the exchange rate between the USD and gold was fixed by U.S. federal law at 1 USD = 1/35th of an ounce of gold; that is, until President Richard M. Nixon shocked the world by unexpectedly yanking the USD off the gold standard on August 15, 1971. Or, travel even further back to a time centuries ago when men and women the world over used gold as a medium of exchange, a store of value, and a unit of account. Back then, prices of almost all goods and services were quoted in units of gold. Looking at the price of oil from this historical perspective, a new question arises: Would the price of crude oil be rising so much if the world were paying for a barrel of oil with ounces of gold instead of the currently ‘goldless’ USD?

Thankfully, we can use readily available historical data on gold, oil, and the U.S. Dollar to answer that question. The key is to transform the data — and our thinking — such that one ounce of gold becomes the currency (or, unit of exchange) that anyone could use to buy and sell a barrel of crude oil or to buy and sell the currently ‘goldless’ U.S. Dollar. Applying this data transformation and then using 1991 as a normalized index point (January 1, 1991 = 100) for both oil and the USD, there is a hidden truth: starting in late 2001 — around the time of the September 11 terrorist attacks on the U.S. — anyone could use one ounce of gold to buy an ever-increasing number of U.S. Dollars, or anyone could use one ounce of gold to buy an ever-decreasing number of barrels of crude oil.

An American today is having to spend 3 times the number of U.S. Dollars he had to spend back in 1991 to buy a single ounce of gold (May 7, 2008 = 242). This is confirmed by comparing the USD prices of one ounce of gold in 1991 and today: $362 and $1000+, respectively.

Anyone today using an ounce of gold as a currency can buy only half as much crude oil per ounce of gold as he could in 1991 (May 7, 2008 = 50). In other words, anyone must now use twice as much gold as he could in 1991 to buy one barrel of oil.

So, a barrel of oil has doubled in price in terms of gold ounces since 1991 and, at the same time, an ounce of gold has more than doubled in price in terms of ‘goldless’ U.S. Dollars. Thus, gold solves the riddle: the price of crude oil is high and rising primarily due to the ‘goldless’ USD losing its purchasing power, and secondarily due to the strong global demand for oil. As the U.S. Dollar in his pocket becomes increasingly worthless, the average American is forced to cough up more ‘goldless’ U.S. Dollars to convince a seller of a barrel of oil to make a fair trade. Who can blame the oil seller if she believes “fair” requires ever more increasingly worthless U.S. Dollars to complete the sale of an increasingly demanded barrel of oil?

Perhaps the riddle that the average American should be trying to solve has less to do with the price of oil going up and more to do with the purchasing power of the USD going down. Perhaps the real questions that Americans should be asking are:

* Why is the USD losing so much purchasing power?

* Why are our elected representatives in Washington, D.C. failing so badly in their constitutional mandate to provide We the People with a stable currency — a currency ‘as good as gold’, or at least a currency actively managed by the Fed to within a tight range of gold prices?

* Why do We the People continue to elect representatives who think nothing of devaluing our currency through profligate printing and spending, rendering us all poorer and poorer as time goes by?

* When will We the People say ‘enough is enough’ and finally elect representatives who will honor their constitutional mandate to provide all Americans with a stable U.S. Dollar?

Until We the People take action and demand real change in our federal government — especially its monetary policy (stable dollar) and fiscal policy (balanced budget, lower debt) — we will continue to watch  in dismay as the price of oil climbs higher and higher on the world market.

Own a piece of me (literally) and get a great return

Monday, June 23rd, 2008

I have posted a loan application on prosper for a 16% rate:  pretty sure bet considering I am putting it up on my blog as a matter of insurance for people.  Long story short the debt I collected while unemployed has been transferred around to 0% interest credit cards and opening accounts + revolving credit + inquiries (to do transfers) has hurt my credit score…down to about 700 plus score, and 678 on the lender scale.  So I need all of you guys help to get my credit score up by transferring that revolving to a fixed loan .  Sign up with the link on the left and then go here:

http://www.prosper.com/lend/listing.aspx?listingID=327147

and fund my loan.  You get free $25 just for signing up there so you get to lend me money AND get free money.   Ive got some great posts coming this week, just need the time to finish them off and post them.    Thanks for the help guys, and drop me an email if you decide to do it, Id love to see who all out there is helping!

Eating Healthy on a budget and time constrained schedule

Wednesday, June 18th, 2008

With the new house in the works and everything going on Ive been trying to really crack down on spending habits while still eating healthy….and I have very little time each day to put towards preparing and eating.  This kind of leaves me in a rough situation at times.  Its easy to get two out of the three but the third piece is always the hardest.

-A5 B12 in the vending machine doesn’t count as healthy

-Packing a complicated lunch at home is great, but a lot of times I just don’t have the time

-Getting quick healthy food is pretty expensive and hard to find

Ive come up with a program to keep myself as satiated as possible while still taking very little time and remaining in budget.

1. Eat Breakfast
This solves way more problems than you would think.  Not only does it reduce cravings for bad food later in the day, it keeps you more full so you have less to eat later on.  I can eat a bowl of kashi in like 4 minutes and let me tell you, thats a filling bit of cereal right there.

2.  Stock up your desk
Get some healthy snacks and put them in your desk.
-Nuts
-Crackers
-Canned Tuna
-Protein Bars

3.  Stock up your fridge and freezer at work
My personal favorite is lean cuisines.  They are cheap, fast, and healthy.  Plus there are all different flavors so you don’t really get bored of eating the same things.  Buy some fruit for the week and toss that in there too.  If you don’t have a fridge at work, get a mini fridge and put it in your office or cube.  When I worked at HP I had one in my cube and I never once had anyone complain about it.  Infact, people always wanted to borrow some space – my manager included.

4) Meal shakes
I personally drink protein shakes, but you can go even further and drink entire meal replacement shakes.  They tend to be inexpensive and can be bought (and stored) in bulk.

5) Drink a lot of water

As Americans we consume way more daily calories than we need and so it wouldn’t hurt to eat a little less throughout the day.  We tend to mistake hunger sometimes for slight dehydration.  Plus drinking water is free and good for you.

6) Forget everything you know about 3 meals a day

Its wrong and unhealthy.  Most people are surprised to know that snacking and mini meals throughout the day is healthier and will make you feel better.  Bulk healthy snacks and meals also tend to be cheaper than going out for some huge meal at lunch…not to mention it takes up much less time.

PMI, the nasty little blood sucking leech thats hard to get rid of

Tuesday, June 17th, 2008

Every once in a while I decide to go and have a little look at the status of my house and check what my mortgage balance looks like.  I don’t look at it that much because, hey, Ive got 25 years left on the loan and nothing has changed much but as I look through transaction after transaction I can’t help but cringe every time I look at the !@#$ PMI payment.  It sort of reminds me of leach.  It sucks a very small amount of blood on any given day, but man is it annoying and over the course of a lifetime really leaks a lot of blood.

Whoa whoa Jesse, what the hell is PMI?

It stands for private mortgage insurance.

It’s what most lenders make you have if you don’t have 20% down payment on your house. What makes 20% the end all be all of lending? Well,mortgage companies have found that if you have less than 20% equity you are are more likely to default on the mortgage. So the good news is that PMI allows you to get into a house sooner such as in my case where I was in college and had a good paying job but not much saved up.  The bad news is that it is money going down the drain.

As it is I pay roughly $70/month in PMI and I have 15% equity in my home.  I would need an extra 15k as of right now to get to 20% equity.  At my current rate that will happen in 2012.  I did some calculations and three years of an extra $70/month would cut off an extra year, an extra $200/month would make it 2 years of paying to cut off the next two.  Thats assuming no house appreciation but at this point who knows with the housing market.  As it stands that additional money would be much better spent on other things, like high interest student loan and getting ready for the new house.  Not to mention my renters (article coming soon) pay the entire mortgage so its just plain easy to let things be.

So in my case guess the leach gets to keep on suckin.

Yes, sucks to be you Jesse, but how about if I do pass the 20% mark?

In that case then yes, you can drop your PMI.  Call your lender to find out who you need to talk to that can get it done.  A lot of times the mortgage company will not drop your PMI on its own, you have to be proactive.  Not only that, but they may try and delay you and/or tell you no.  If it comes to it there was a law passed  a while ago that says that you must be given a written statement as to when you’ll be allowed to cancel your PMI AND the lender must allow you to cancel PMI when your equity is 22% or higher.  So get out there if you’re to that point and save yourself some money!

PMI

Long Layoff but Im back: The key to fighting stress: exercise. Trust me.

Monday, June 16th, 2008

To say that work is stressful for most people is sort of like talking about the weather. Its way overdone. Well, in my case unfortunately when my day job gets stressful and resumes its ridiculous hours The Penny Saved suffers, my health suffers, and Im moodier than Don Rickles delivering a monologue. Luckily I have a cure for all three. For #s 2 and 3, I have to exercise, its the only thing that can really effectively improve both. As for the first thing, my temporary solution for today is to write about 2 and 3.

The biggest problem with exercising during stressful times is staying motivated. So here are 10 tips that I came up with to stay motivated that I use religiously

1) Buy a bunch of protein
The first thing I do when I decide to start lifting and running again is to buy a bunch of protein powder. Not only is it great for building muscle but protein shakes WILL help you lose fat.

2) Get a portable MP3 player (if you dont have one)
How often do you see people running along the road without one? Not very often huh? Yeah, thats cause music is a motivator. It works.

3) Do a fat pinch
On your midsection, pinch between your belly button and your waistline. Thats all fat. That is enough to keep me running.

4) Join an organized sport
It gets you doing exercise without thinking of it as exercise.

5) Join a message board
There are a few that I liked. The ones I like are more geared toward weight lifting but there are message boards out there for just about every flavor of exercise. Seeing other people talk about fitness, and participating in those discussions can really motivate you. And hey, if you are reading this, you can read a message board, right?

6) Take pictures of yourself
I have historically yo-yoed a lot in my life. I have some terrible before pictures, and every time I have taken before pictures and then every month taken a new one I have stayed on course until I had great after pictures.

7) If you are dreading some workout, do another one
Why kill your motivation to do anything at all? If its not working, do something else. Running boring? Play some basketball or go swimming. You get the picture.

8) Plan out workout times in advance
Obviously if work is stressing you out and you are super busy, you need to schedule time. The problem is, if you are already crunched, the exercising will slip if you don’t explicitly schedule it in.

Turn things around, take control

Monday, June 9th, 2008

Its been a while since we’ve gotten back to basics here so I thought I would go over something really fundemental to anyone starting down the financial journey.  In order to turn things around you have to save money and you have to pay down debt.  I know it sounds like an overwhelming task for the uninitiated but it’s not.  I promise you can do it.  If you have been ignoring the problem, guess what?  Its not going to get better on its own.  Take control.

Pay Down Debt and then avoid it

• If you use credit cards, pay off the balances every month. If you don’t, you’re paying interest—often 20 percent or more a year—on everything you purchased.  If you already have balances pay more than the minimum payment.  Pay as much as you possibly can.
• Limit the number of credit cards you have. Use your lowest-interest credit card, and then only for emergencies.

• Set a monthly limit on charging, and keep a written record so you don’t exceed that amount.

• Pay bills on time to avoid late charges.

• Avoid using blank checks you receive from financial services. These checks are cash advances that may carry a higher interest rate than typical charges.

• Pay cash.

Monthly Steps to Saving Money

Most Americans do not have much in savings, and lets face it, unforeseen circumstances happen. To help you prepare for them, you should have at least three to six months of living expenses stashed in your rainy day savings account. You can take steps today to build an emergency fund, save for a home, save for an education, or save for retirement.  Heres a little chart I found and added to:

Finding Money to Save Every Month

Save $.50 a day in loose change $15
Cut soda/pop consumption by 1 liter a week $6
Drink coffee from work, not starbucks $40
Bring lunch to work (saving estimated $5/day) $100
Eat out 2 fewer times a month $60
Borrow, rather than buying, one book a month $10
Buy generic brands $37
Bike to work or the store one day a week $20
TOTAL SAVINGS per MONTH $288

Can you list at least five more things to do to save money?
Manage Loans to Save Money

Remember that loans are a liability that reduce your wealth, so choose yours carefully. By shopping for and negotiating the lowest interest rate, you can build wealth by investing what you saved on interest payments.

$15,000 Car Loan for 5 Years

 

Interest Rate

Total Interest

Lender A

6.5%

$2,609.53

Lender B

7.5%

$3,034.15

Lender C

8.75%

$3,573.51

How much money would you save if you chose Lender A vs Lender C?

You can also save interest expense by increasing your monthly payments or choosing a shorter payment term on your loan.

$15,000 Car Loan at 10 Percent Interest

3-Year

4-Year

5-Year

Number of Payments

36

48

60

Payment

$   484

$   380

$   318

Total Paid

$17,424

$18,261

$19,122

Interest Saved

$  1,698

$   861

  —–

You can choose a shorter payment term with higher payments. By budgeting enough money each month to make the higher payments, you will reduce the amount of interest you ultimately pay, which means – even more savings!

By making wise choices, you can develop strategies and take immediate steps to control debt and build a nest egg for yourself and your family.

Nothing changes in one day

Remember it is the little steps that eventually make the biggest difference.  Rome was not built in a day, and your financial situation will not change in one day so don’t despair and don’t give up.  With time anything can be fixed so get to it!

Why gas costs so !@#$ much

Wednesday, June 4th, 2008

Of course, that is the question that people ask me every day.  “Why does gas cost so much?”  Its second only to “whats the fastest way to double my money?”  The answer to number #2 is of course “put it all on red.”  (Also a good way to lose 100% of your money the quickest).   The answer to the gas question is a little more complicated so lets dive in.

Ok so its not really that complicated on the surface:

Crude Oil + Taxes + Refining Costs + Distribution = Gas Price

so the culprit can be summed up in one major chunk: crude oil.  As you may have heard the prices of crude oil are at an all time high.

Ok thats nice and all but why is it so dang expensive!?

Simple: supply and demand.  Here is the basic definition of supply and demand:

Strictly speaking, the model of supply and demand applies to a type of market called perfect competition in which no single buyer or seller has much effect on prices, and prices are known. The quantity of a product supplied by the producer and the quantity demanded by the consumer are dependent on the market price of the product. The law of supply states that quantity supplied is related to price. It is often depicted as directly proportional to price: the higher the price of the product, the more the producer will supply, ceteris paribus (“all other things being equal”). The law of demand is normally depicted as an inverse relation of quantity demanded and price: the higher the price of the product, the less the consumer will demand, ceteris paribus. The respective relations are called the supply curve and demand curve, or supply and demand for short.

As of right now, supply is flat and demand is increasing.  They are not pumping any more gas then they were in the past few years, but demand has grown worldwide by large amounts.  China’s oil consumption has grown by roughly 7% per year.  Other places such as India are also demanding more oil.

US dollar inflation + low supply(and high demand) = high crude oil costs

Thats your culprit at the pump, not greedy oil companies (though, I do not disupute that they are profitable…but thats my entire goal too so I cant fault them for that).  Now lets all ride our bikes.

bike gas

Some things you might not know about dealing with insurance companies

Monday, June 2nd, 2008

Before I get into anything I should put a small caveat on this:  laws vary from state to state.   That being said it has been quite the ordeal dealing with this whole car-is-now-expensive-1ton-paperweight thing.

1) If you are not at fault they need to give you a rental car equal or similar to your car
If you drive an SUV and they try to give you a tiny compact car (though right now gas costs you might prefer a tiny compact) push back on them.

2) They will lie to you
Esurance told me I HAD to take my car to one of their preferred shops.  This is a flat out lie.   Colorado, like most states, allows you to pick where you want your car taken to.   The shop then told me I couldn’t take it to another shop, which is akin to my car being taken hostage (and is very illegal) so I had a wrecking company get a flatbed, pick it up, and move it.

3) They will try to screw you – behind your back
Once I had my car moved, I gave the new repair shop all of the insurance information and called and left a message for the insurance agent that I had moved my car to the new shop.  I was out of town on business and missed one call from the insurance agent.  He called Enterprise (where my rental was with) and told them to cancel my rental because I wasn’t responding to him.  Luckily Enterprise called me and left me a message saying what the insurance agent was pulling and so I was able to call both of them and make sure that didnt happen.  Sleezy.

Ok so you probably knew those things already, but let me pound it into your head: beware when dealing with them, they have one thing in mind and surprise: its not your best interest.