ymoyl news from 2005

here's the news from 2005:

ch-ch-ch-changes...

new in december 2005
12/26/2005	what the house has cost (so far) after calculating what the car cost over the life of our relationship, i decided to dig through my old cbb records, gnucash records, house settlement papers, and income tax returns, and figure out what the house has cost so far, and what the consequences would be if i sold it today. expenses as near as i can calculate it, in the 4.5 years that i've owned the house, it has cost: 1st mortgage settlement fees $3,224.00 2nd mortgage settlement fees $3,121.23 mortgage interest $21,655.21 property taxes $5,929.18 home improvements $1,150.00 homeowner's insurance $2,083.52     $37,163.14 these are just the expenses incurred by virtue of owning the house, not including things like utilities which would have to be paid whether i owned a place or rented one. softened by tax savings next comes the part that gives me a pounding headache, trying to figure out what home ownership has saved me in federal income taxes. i use turbotax to prepare my taxes, and it doesn't spell out how much is being saved by the various itemized deductions. endless googling has just led to endless confusion; the closest i've found to a clear formula is this: tax savings = (itemized deductions - standard deductions) * 15% what they call "standard deductions" seems to be not what the irs calls the standard deduction, but what the 1040 calls "exemptions" (one for each self, spouse, dependents, etc.). i have no idea whether this formula is correct, but i'm going with it; please let me know if you can tell me how to calculate this part correctly. going with it, i get: 2001 $11,365 - $2,900 = $8,465 * .15 = $1,269.75 2002 $13,503 - $3,000 = $10,503 * .15 = $1,575.45 2003 $11,682 - $3,050 = $8,632 * .15 = $1,294.80 2004 $7,492 - $3,100 = $4,392 * .15 = $658.80     $4,798.80 2004 is different because i stopped listing it as a primary residence that year and started listing it as a rental property. i was able to reduce my taxable income by a $2,637 rental business loss, 15% of which is $395.55, so i'm going to round the total income tax savings to $5,000, and reduce the house expenses to $32,163.14. combined with equity finally, we're back on surer footing. the purchase price was $108,000, and i still owe $63,201.02 on the mortgage. if i were to sell it for what i paid, i would have put $44,798.98 into equity. $44,798.98 in equity plus $32,163.14 in expenses comes to a total of $76,962.12 that i've put into the house. only a little more than half of what i've spent on the house could be recovered. i could say i'd lost 42% of my investment. softened by appreciation now, adding appreciation: common wisdom is that 3%/year is a reasonable rate of return to expect. (let's consider the office of federal housing enterprise oversight's current 5-year figure for baltimore-towson of 89.14% to be optimistic/aberrant/silly/etc. somewhere between the truth must lie, so let's take the most conservative case.) the compounding calculator closest to me says that after 4.5 years at 3%, the house would be worth $123,364.80. that would leave me with $60,163.78 after paying off the mortgage, or a 22% loss on the $76,962.12 i've paid. a little better. hardened by sale costs now let's take off sale costs. if i sold through a real estate agent, common wisdom is that i'd pay 6% of the sale costs, or $7,401.88, reducing my proceeds from the sale to $52,761.90. back up to a 31% loss. and softened again by rent, the bottom line finally, let's add the $14,100.00 rent i've earned since i started renting the house. if i consider that in addition to what i'd have after the mortgage and sale costs are paid, i'd end up with $66,861.90. i've spent $76,962.12, so i've lost 13%. it's good to do this kind of exhaustive accounting sometimes. if i looked at it too simplistically, as i'm afraid many people would do, i'd just say i bought the house for $108,000 and sold it for $123,364.80, so i made 12%, when in truth, i actually lost a little more than that. there are endless similar miscalculations that are often made, such as how much those $300/month car payments or minimum credit card payments actually cost over the years. keeping an eye on such things is a great way to avoid coming to a rainy day and finding that you had the money you now need, but it trickled away through unnecessary, unwatched finance charges. i'm not planning to sell the house at the moment, but my curiosity was piqued when my tenant started talking about perhaps moving on in the spring, and i thought the end of the year would be a good time to do my first summary of the house finances to date. it's good to know where i stand and what it would take to recoup the cash i've put into it. now that i have these numbers, i can update them every so often, and hopefully, if i sell in a few years, i'll have inched closer to breaking even or making a real (not just perceived) profit.
new in november 2005
11/04/2005	free money! and thoughts on online banks can't help passing this along: i've been a happy customer of virtualbank for two years. they now have a refer-a-friend program. if i refer you and you open a money market account with them with a minimum deposit of $100, we each get $20. it's a free (no fees) account which earns a good rate (currently 3.55% apy), but even if you decide to close it in a couple of months, it's hard to beat a 20% instant return on a $100 investment! if you're interested, send me your email address, and i'll send you a referral. while i'm on the topic, here are some more general thoughts on online banks and how i use them: i've been using online banks for a few years, and they've been a great place to store cash. i keep my (no charge) checking account at my local bank because my paychecks go there by direct deposit and all of my bills are withdrawn from it, and i like having a physical place i can go and talk to someone if there's a problem with my day-to-day transactions. but for cash i don't need immediately, online banks provide much better rates of return, since they don't have the overhead of brick-and-mortar ones. i've found two online banks to be especially useful: virtualbank their money market account rate is very competitive, though not quite as high as ufb's (currently 3.55% apy vs. 3.8%), but their website is much better, and it's much easier to transfer money in and out of a linked checking account at another bank. just tell the them the total you want transferred, which way you want it transferred, and on which date you want it transferred, and you're done. this makes them my choice for money i want to move in and out of the checking account at my local bank. for example, i sold my car, had a payout from my company's espp, and had a couple of cds mature this fall, leaving me with a stack of cash i wanted to move into my account at vanguard. i wanted to invest it gradually over the course of many months, and there's no reason to have it sitting in my checking account for all that time. i transferred it to virtualbank, where it all sits and earns $10-$15/month until i make small withdrawals every few weeks to cover the weekly vanguard investments. ufb ufb is much harder to use. their site is pretty atrocious and buggy (bad javascript). to put money in, i have to send them a check drawn on my local account. to get money out, i have to transfer it from my ufb money market to my ufb checking account, then write myself a check to deposit locally. but, in addition to consistently having the best interest rate i can find, they have two great features: they provide postage-paid envelopes for submitting check deposits, which makes banking a breeze. when i get paid by check for something, i just write "pay to union federal bank for deposit only", sign it and add my account number, stick it and a deposit slip in an envelope, and walk it to the mailbox. they provide an atm card which reimburses charges applied by other banks (up to $4.50/month), so you get free cash withdrawals at any atm. i generally use this to get cash, so i don't have to worry about taking too much from the local account used to pay bills. i take out enough to last for several weeks, and i don't have to worry about atm fees or other penalties (money market accounts allow six withdrawals each month without penalty). this combination has worked well for me. i have: a local checking account for automatically receiving my paychecks and paying bills, virtualbank to hold money i'll need in checking, but not for a few weeks or months, and ufb to provide a trivial way to deposit other checks i receive and to get cash from anywhere without atm charges (something i can only do at my local bank's atms with their card). for anyone wondering, i do have an account at the hugely over-promoted ing (they have a sign on every corner in baltimore these days). i joined them a year and half ago when they offered $25 for signing up. that was great, but i recently withdrew the small amount of money i was keeping there, just so i wouldn't have to bother keeping track of it. their website is fairly painful, they have a bad habit of regularly sending email to remind you how wonderful they think they are, and their interest rate is always a little under virtualbank's. there's nothing terribly wrong with them, but no compelling reason to use them. as a final word, in case you didn't know, bankrate is the place to go to get the latest facts and figures on bank accounts and cds (when i was looking last spring, bofi and netbank were coming out on top of the latter category). happy saving!
new in october 2005
10/22/2005	what the car cost i dug into my old cbb records, and by combining them with my gnucash ones, was able to compute the total amount spent on the car in the 3.5 years that i owned it. here are some figures for those who enjoy statistics. what the car cost purchase $8,794.00 aaa membership $171.00 auto loan interest $260.55 gasoline $1,267.81 insurance $3,503.25 mva fees $240.70 parking $4.75 repairs and maintenance $4,160.63 tolls $670.00 ebay selling fees $82.00 selling price -$3,500.00     $15,654.69 mileage: 24,607 miles total 7,030 miles per year 586 miles per month cost: $4,472.76 per year $372.73 per month $12.25 per day $0.64 per mile miscellaneous: repair and maintenance equaled almost half the purchase price. it cost almost three times as much to insure it as to buy gas for it (though i'd stopped buying before gas prices shot up). i sold it for 40% of what i paid for it; it depreciated at 17% a year. $3.50 gets me a day pass that takes me all over the area on the mta, from annapolis to hunt valley, but would take me less than 5.5 miles in $0.64 car miles. thoughts: 586 miles a month? where was i going? if i had put my money into a mutual fund which lost 17% year after year, how long would it have taken before i cut and ran? knowing i spent $372.73 each month i owned the car makes it seem not so bad to pay $300 to rent one for a few days when i really need it. if i had held onto the car longer, the cost of the initial purchase would have been spread across more time, but that would have been balanced by the lesser resale value when i eventually sold it, so i think this is a pretty good example of the cost of car ownership to someone who didn't even use a car very much. i'd hate to know what the cost is to someone with a daily commute.
10/05/2005	all aboard! my sister is hosting a family gathering at her home in north carolina over columbus day weekend. here's how the travel methods broke down this time: method cost (round trip) trip time (one-way) car $311.28 9.25 hours bus $98.00 11 hours plane $250.00 1.5 hours train $122.00 10.5 hours the cost of the trip by car was estimated using these figures: car rental with insurance: $221.28 (cheapest economy car from bwi) gas: 900 mile roundtrip / 30 mpg = 30 gallons * $3/gallon = $90 so, good news on the train front this time! it's hardly more than the bus, and even if i owned a car, it's only $32 more than the cost of gas and at least 32 times more pleasant than driving. not owning a car is leading me to more options and more pleasant options than owning one has. if i had a car, i would just drive down by default like i always have. not having one has made me research the options and find that, for roughly the same cost, i can have a much more pleasant trip, one on which i can see a lot more scenery, don't have the stress of driving, and can sleep or get up and walk around whenever i like. and bring my laptop and get a lot of work done on the trip, instead of working to catch up when i get back. looking forward to traveling for a change!
10/01/2005	zoooom! i've been looking forward to seeing the graph for the past month, with the drastically atypical income line caused by the sale of the car. :) more about that soon.
new in september 2005
09/21/2005	the cost of the car trip and alternatives ezpass sent me a list of the tolls i paid on my trip to massachusetts, so i'm able to get the total: date time agency plaza amount 7/21 10:23 mdta bht $2.00 7/21 11:29 mdta jfk $5.00 7/21 11:48 deldot d95 $1.25 7/21 14:16 njtp 18w $2.55 7/21 14:38 panynj gwu $4.00 7/21 15:07 nysta hr $1.13 7/28 16:28 mtab&t tbb $4.00 7/28 17:39 mtab&t vnb $8.00 7/28 19:37 njtp 1 $2.85 7/28 20:20 drba dr $3.00 7/28 20:30 deldot d95 $1.25 7/28 21:13 mdta bht $2.00 total: $37.03 on gas, i spent $65.64, so the total cost of the trip in tolls and gas was $102.67. the alternatives: bus (greyhound) $78 train (amtrak) $176 (to get only within 23 miles of sturbridge.) plane (southwest) $98.40 (to hartford.) greyhound from hartford to sturbridge and back is $28, for a total of $126.40. in other words, for $50 less than taking a train, i can take a plane and a bus and get 23 miles closer to my destination. the american rail system is so embarrassing. :( so the car cost 25% more than the bus even before you count the cost of wear & tear and depreciation on the car. but you can't discount the intangibles: anti-bus being able to stop whenever you like. well, not really. my experience this trip was one of long hours during which there's nowhere to get off the road, it's impossible to get off the road, or getting off the road will just dump you into a half hour of bumper-to-bumper city traffic, like my forced detour through queens. two transfers on the way and one on the way back. but still just eight hours each way, faster than some trips on which i've made a wrong turn or two. having the car once you're there. in the case of this trip, my car allowed me to take a more active part in helping with preparations for the retreat. without a car, there are some ways in which i'd have to be more guest than host. many hours of forced companionship. if you're traveling alone, you're at the mercy of the person who takes the seat next to you. on a local city bus, this could be a problem for twenty minutes. on greyhound, it could be eight hours of looking at someone's photo album or hearing every detail about his divorce. pro-bus being stuck in traffic. a lot of my trip was spent creeping forward a few inches at a time in stop-and-go traffic. better to be sitting and reading for twenty minutes instead of getting a backache from working the gas pedal and clutch. the stress of watching accidents. just outside new york, i watched a car burning in the middle of five lanes of traffic as the driver waved people around it. just into connecticut, a teenager came flying past me at about 100mph. he wove in and out of traffic across three lanes, then disappeared out of sight. after a minute or two, there was a loud boom and an explosion of dirt shooting in the air. by the time i came up to him, he was spun around in the opposite direction and the front half of his car was demolished. i think it's unfortunately not uncommon to witness two such incidents in one afternoon, and to wonder when your time is coming. it is possible, of course, for a bus to be in an accident, but: bus accidents are much less common than car accidents (6.3 million of the latter in 2003, only counting the ones reported by the police). you're much less likely to be injured, maimed, or killed. it's not likely to be your fault, and you're not going to pay anyone else's medical bills. you're not going to pay for the repairs to anyone else's car, nor to the bus. you're not going to be stuck in some far-away town for days waiting for your car to be fixed, or have to pay to have it towed three hundred miles (likewise if you break down without an accident). avoiding insane drivers. even if you don't get into a wreck, there are plenty of high-horsepower lunatics who want to play chicken, teach you a lesson because they think you cut them off, etc. but no road warrior is going to follow your bus off the interstate to get out and confront you when you're sitting in seat 7b. leaving the driving to them. it would be nice to leave behind all the worries of "boy, my leg's getting tired", "i'm getting sleepy; i wonder whether i should pull over", etc. there are more thoughts along these lines in my general comments about taking the bus locally. there are other options beyond bus, plane, and train, including trying to find someone else going there to carpool with, or renting a car if i really needed to have one while i was there. but the bus is intriguing enough that i'm tempted to give it a try.
09/06/2005	carfree (a repost of a message to carfree.) i just got back from taking the leap. my car's buyer dropped me off, i had the joy of my last look as it coasted down the street, and now i keep admiring the empty space in front of the house. for anyone looking for a hassle-lite way of selling, i can recommend ebay. i read several opinions about it and decided to give it a try. after a week's auction, my golf sold right at my reserve price of $3,500, much more satisfying than the $2,000 carmax quoted me. pursuing a private sale might have brought me closer to the $4,000 blue book value, but i'm willing to take the loss in exchange for avoiding an unknown number of weeks of uncertainty, test drivers, and haggling. do note, though, that you may sign up for an adventure. i thought the car would probably be bought by someone in my area, but the winning bidder turned out to be in... taiwan. he's an officer coming here for four months of training at aberdeen proving ground. i met him at bwi at 6:30 this morning after his first 20 hours of travel, and the apg representative who met us agreed to let us go about our business. we headed to denny's while waiting for the mva to open, then hopped around for hours to the mva, an insurance office, a bank, and lessons in how to use an american gas station and other acculturations. all told, it took nine hours from our first meeting, but i got a free breakfast and lunch out of it and learned a lot about taiwan, and a whole day spent in the service of the car made me even happier to watch it go. a great day today, and i get to look forward to putting the letter in the mail tomorrow to the insurance company canceling the policy! back to work with a spring in my step...
new in june 2005
06/10/2005	investing in the whole world since treasury securities continue at their dismal lows (though the 30-year bond seems to be on its way back), i spent some time this spring reading books and websites and researching alternative investments. i have so much stored in bonds and other guaranteed and liquidizable investments now that i feel comfortable about taking on more risk by investing in equities. i'm following all the common wisdom about limiting risk while having a reasonable expectation of reasonable returns: making a strategy and committing to it for the long term (i'd say at least fifteen years). making small, regular investments instead of single large ones, taking advantage of dollar cost averaging. regularly (annually) re-balancing the accounts to their original ratios (selling what went up to buy what went down). using no-load, low cost index mutual funds instead of individual stocks. diversifying broadly both across industries and across the globe. specifically, i'm dividing my money between vanguard's total stock market index (vtsmx, tracking all the u.s. markets) and total international stock index (vgtsx, tracking all the markets of the rest of the world). i'm using their tips fund (vipsx) for ballast and as a place to shift cash out of harm's way as i approach retirement. i also fully funded a roth ira (for last year, just before april 15th) in the same way, and will continue with it. it can't hurt to have a tax-free cash bump when i hit 59.5. i feel good about getting into the markets at this time. i think the u.s. has pretty well bottomed out for now, so it's a good time to be making the first investments. about the only thing that's going to drive it lower is another large-scale terrorist attack and subsequent war on whomever is chosen to pay for it, and that will provide us all with a lot more to worry about than the dow. and if al qaeda can sucker the u.s. into throwing all its money into a land war in asia, that's all the more reason to have money in the rest of the world. we may even see the day when those "safest investments in the world" are no more sacrosanct than social security. these aren't socially-screened funds like the domini fund in which i used to invest, but i feel comfortable about their holdings, and tend to think these days that direct political involvement is more likely to do good than sifting and filtering my equity portfolio. paying my taxes funds the american war machine far more than my investments ever will. i've changed the way i compute the investment income line one more time. it's now 4% of my total investments (except the roth ira), so it will swing up and down with the equity portion of my portfolio.
new in march 2005
03/01/2005	investment income back on the move i updated the graphs for the end of the month and decided to put the investment income line back on the move, just to make progress visible. for the last nine months, when i was mainly paying down my mortgage, i left it at the total i'm actually making on treasury notes. now, i'm adding what i would make if i bought treasury notes with my current safely-held investment money. by that, i mean money i've placed in a guaranteed investment (such as an fdic-insured certificate of deposit) which isn't part of my cushion against unemployment. this is money i will definitely be getting back at some point and which will then go toward long-term investing. at the moment, that's money i've put into cds. in other words, the investment income line now reflects: (cd holdings * 0.04) / 12 + current monthly interest from notes or, for this month: ($4002.93 * 0.04) / 12 + $88.54 = $101.88 (4% is where the 10-year notes are stuck.) this will let me see how i'm progressing and is realistic, unlike my old computation of "what if i could invest all the money i have right now?".