Monthly Archives: August 2009

Songs About Money – Top Ten List

Posted on by  at  6:00 am
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I’m a big fan of talk radio, particularly any radio program around the subject of money. One of the things that has drastically improved over the years is bumper music – the music you hear as the host takes the audience in and out of breaks. Imagining I had my own radio show, I wondered what my top ten songs about money would be to make up sort of a “Frugal Dad” soundtrack. Here’s a few candidates:

1. “For The Love of Money” by The O’Jays

Some people do bad things with it, but in general money lets you do a lot of good things.

2. “Money Talks” by AC/DC

Money does talk, especially cash money. Flash a little cash at car dealers, furniture stores and yard sales and expect good deals to follow.

3. “I Wanna Be Rich” by Calloway

Who doesn’t want lots and lots of money for a little love, peace and happiness?

4. “The Power of Love” by Huey Lewis & The News

I recognize this song isn’t really about money, but for the lyrics, “You don’t need money. Don’t take fame. Don’t need no credit card to ride this train” I simply had to include it.

5. “Take the Money and Run” by The Steve Miller Band

Sometimes it’s tempting to just take the money and run, but remember, you can’t hide forever.

6. “Money” by Pink Floyd

“Money, it’s a crime. Share it fairly but don’t take a slice of my pie.” Too bad this isn’t on Tim Geithner’s playlist, too.

7. “The Gambler” by Kenny Rogers

Knowing when to fold ‘em is a great lesson for investors. If you’ve lost a ton of money on an investment, and continue to hold ‘em, you might just lose more.

8. “Mo’ Money Mo’ Problems” by Notorious B.I.G. featuring Puff Daddy & Mase

It is true; the more money we come across the more problems we see. Just ask any recent lottery winner!

9. “Can’t Always Get What You Want” by Rolling Stones

No, you can’t always get what you want. Which is why it is important to separate needs from wants.

10. “Can’t Buy Me Love” by The Beatles

The Beatles had it right, money can buy a lot of things, but it can’t buy love, or happiness.

Do you have a favorite money song? Of the ten listed above, which one would you select for a “Frugal Dad” radio show intro? I’m thinking that AC/DC tune would get people pumped up about money.

Lending Club $50 Bonus To New Investors

Posted on by  at  2:00 pm
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I’ve posted a couple Lending Club reviews here before, along with the occasional progress report. The last thing I want to do is bombard you with updates on my Lending Club portfolio, but since an opportunity came along to help you earn $50 just for signing up, I thought I should mention it!

Between now and August 15th, those who sign up to invest with Lending Club and use the referral code “FrugalDad” will receive $50 to add to their portfolio. You must use the referral code to receive the $50 bonus.

My own small portfolio of loans is still moving along nicely, with a net annualized return of 11.21% (try beating that in this market!). In fact, as of August 7th, 2009, the average net annualized return for Lending Club lenders if 9.61%, so I guess that puts me a little above average.

I know from previous reviews of Lending Club that a number of you are interested in their service, but weren’t quite ready to take the leap to invest. I understand, as that’s how I felt for a long time. However, as my frustration with traditional banking and investing grew, the market volatility continued, and my overall desire to diversify investments increased, I became more and more attracted to a service like Lending Club.

Here’s a few advantages of investing with Lending Club:

  • Since June 2007, Lending Club investors have earned an average net annualized return of over 9%.
  • Lending Club approves only creditworthy borrowers as members.
  • Simple investing process:  Open an account, deposit money, select loans, collect principle repayments and interest.

I invite you to check out the features at Lending Club. Take advantage of this limited-time $50 bonus offer by signing up before August 15th, 2009, and be sure to enter the referral code “FrugalDad” during registration.

Disclaimer:  My previous mentions of Lending Club have included affiliate links, but this one does not. If you do choose to invest, I won’t make anything from your sign up, and you’ll get $50. I will earn a referral if you decide to sign up as a borrower, and once you are a member, you will have the same opportunity to refer others.

The Proper Rate Of Savings

Posted on by  at  6:00 am
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Fortunately for savers, banks and brokerages have made it much easier to put savings on auto-pilot than it used to be. Before the days of online savings accounts and ACH transfers people actually had to sit down and write a check to savings, or deposit cash into their savings accounts. Sounds archaic, I know, but it did separate the disciplined savers from the free-spirited spenders.

Today we have a variety of ways to save for retirement, rainy days and big goals. But deciding just how much to save is the tough part. Financial gurus all have their own numbers – 15% for retirement, 10% of your overall income, half of your income – I could go on forever. However, deciding how much to save is a personal decision that looks more like a balancing act than a hard, fast rule. After all, there are many competing priorities for our money.

The 10% rule

One of the more established ideas is to simply save 10% of your income. If you earn $50,000 a year, under this plan you should be putting away about $5,000 a year into a variety of investments and cash savings accounts. 10% should not be enough to break your budget, but it doesn’t cause you to stretch very far either. I prefer to aim higher with my rate of savings, but how much higher?

Dave Says 15% For Retirement

Dave Ramsey, the popular radio and television talk show host, advocates putting aside 15% of your income towards retirement. Using our last example, that would be $7,500 a year on a $50,000 income, or $625 a month. Dropping $625 a month across your 401(k) and maybe a Roth IRA seems like a good idea, but it will be hard to pull off if you have an over-sized mortgage, credit card debt, or a couple car loans. That’s why Ramsey advises listeners to get out of debt and save a cash emergency fund first.

The 50% Plan

If I could go back in time and talk to my 20 year-old self, I would tell him to save 50% of his income from the first day on the job. For every year you save half your paycheck, and live on the other half, you buy one year of freedom from earning an income. Sure, saving half your income now seems ludicrous, but that’s because we’ve allocated our income to paying for our expensive possessions, like our house, our car and our hobbies. If we lived on half our income from the beginning, it would have forced us into a smaller home, a cheaper car and more frugal hobbies (and tastes).

What Percentage of My Income Is Going To Savings?

About 20%. That number should increase as we continue to pay off debt, but for now I’m content with an 80/20 split of paying off debt and slowly building our emergency fund. When the emergency fund is maxed, I’ll redirect the money going there to a Roth IRA. When that’s maxed I’ll begin investing in taxable investments and social lending at Lending Club to hopefully fund my early retirement. Somewhere in there I also have two kids’ college savings plans to fund. Like I said earlier, lots of competing priorities!

How about you? How much are you currently socking away in savings?

Weekly Roundup – Hands Off My Clunker Edition

Posted on by  at  6:00 am
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Videos are now beginning to surface showing the destruction of perfectly good automobiles thanks to the cash for clunkers program. I fail to see the stimulative effects of disabling the engine of a car with thousands of useful miles in it for it to be scrapped and piled in an already overcrowded junkyard or landfill.

It is is especially troubling considering the number of people out there struggling to hold a job, or find work because of a lack of transportation. In fact, there are probably hundreds of uses for these cars. Why not donate them to shelters, churches, and high school shop classes or trade schools to train new mechanics? What’s next; the leveling of perfectly good homes if people agree to buy a new, slightly smaller one and accept $10k in taxpayer money to do it?

As for me, I’m keeping my 19 year-old clunker.

Check out the government-mandated destruction of a perfectly good Volvo, and then read on for the weekly roundup.


Video – Volvo Cash for Clunkers Engine Disabling

The Frugal Roundup

Debt Reduction – Emergency Fund Savings – The Balanced 75/25 Method. I’ve struggled finding a balance between debt repayment and building our emergency fund. The 75/25 method makes a lot of sense. (@Debt Free Adventure)

What Yoda Taught Me About Money Mastery. Points to Neal for working Star Wars into a personal finance post. I enjoyed the points made in the post. It is true that without teaching there is no learn (hey, I made a Yoda-ism!).(@Wealth Pilgrim)

Stuff Isn’t Always the Enemy. A nice perspective on the accumulation of stuff. Nothing wrong with a healthy collection. It’s when it becomes an unhealthy hoarding habit that it becomes a problem. (@On Simplicity)

What To Do With Your Money Just In Case Trends Forecaster Gerald Celente Is Right. I don’t subscribe to most doomsday theories, and this is no exception. However, I do think it is prudent to make basic preparations for unforeseen emergencies, natural or otherwise. (@Get Money Energy)

Are You Planning Your Life Around Money? The exercise described here as “begin with the ending in mind” works wonders for helping one form the proper financial priorities. (@Money Smart Life)

I Am Getting Fired: Looking At the Bright Side of a Bad Situation. While I was sorry to hear about Jeff’s situation, I was inspired by his response. He’s right, sometimes getting fired is just the “kick in the pants” we need. (@My Super-Charged Life)

32 Thought-Provoking Life Stories.  I read through each one of these stories, and each of them really “made me think.” (@Marc and Angel Hack Life)

Best of the Rest

Credit Card Skip-A-Payment Offer Does You No Favors

Posted on by  at  2:00 pm
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We are in the home stretch of paying off credit card debt balances. As a reward for the extra large payments we’ve been sending our credit card issuer, they have graciously offered us the opportunity to skip a payment this month. Thanks, but no thanks.

When It Might Make Sense To Skip a Payment

Several months ago when we were just starting our plan we received a similar offer from a different credit card (they’ve since been paid off and closed). At the time we had very little in savings, and the balance was comprised of a low-interest balance transfer offer. Since we were not being gouged with an awfully high interest rate, we decided to save the minimum payment to help build our beginning emergency fund.

It might also make sense to to take advantage of a skip a payment offer from your credit card issuer if you are in the middle of a crisis – medical disability, recently laid off, etc. In these cases, cash in your pocket to pay basic bills is more important than a relatively small reduction of debt made by a minimum payment.

Why I Don’t Like Skip A Payment Offers

Assuming you have the money to make your payment, and you are not in the middle of a real emergency, I recommend not taking advantage of a skip a payment offer from your credit card issuer. Here’s why. The credit card company offering to let you slide without a payment does not suspend the charging of interest that particular month. Since interest is calculated on the outstanding average daily balance on your account, not making a payment means you will pay a little more in interest.

There is also a psychological risk associated with not making a payment. This risk is similar to the one associated with conducting a balance transfer, or debt consolidation. You think you’ve made progress, but you haven’t, you’ve simply shifted your money around. In the case of skipping a payment you are taking the $50 you were going to pay towards debt and tossing it in savings, or spending it, two activities than will not likely improve your situation that dramatically.

However, using that same $50 to pay down debt means a permanent $50 reduction in the amount you owe (minus a little interest accumulation, and assuming you don’t run credit card balances back up). If you owed $700 on a credit card that would look like a 7% reduction in the amount you owe. Not bad, especially considering that money tucked away in savings would probably be earning less than 2% interest a year.

The bottom line is to keep the right perspective with any offer from your credit card company: skepticism. Credit card issuers are in business to make money. It’s certainly not illegal, or immoral to turn a profit, but remember that every offer, every decision they make, has been run through numerous profitibality models, and risk assessments. They are not extending an offer to skip a payment, or increase your credit line, to help you.