- Bad. My 3yr old knows how the Nationwide commercial ends…including the agent's name. Too much TV. #
- RT @MoneyCrashers: Money Crashers 2010 New Year Giveaway Bash – $9,100 in Cash and Amazing Prizes http://bt.io/DZMa #
- Watching the horrible offspring of Rube Goldberg and the Grim Reaper: The Final Destination. #
- Here's hoping the franchise is dead: #TheFinalDestination #
- Wow. Win7 has the ability to auto-hibernate in the middle of installing updates. So much for doing that when I leave for the day. #
- This is horribly true: Spending Other People's Money by @thefinancebuff http://is.gd/75Xv2 #
- RT @hughdeburgh: "You can end half your troubles immediately by no longer permitting people to tell you what you want." ~ Vernon Howard #
- RT @BSimple: The most important thing about goals is having one. Geoffry F. Abert #
- RT @fcn: "You have enemies? Good. That means you've stood up for something, sometime in your life." — Winston Churchill #
- RT @FrugalYankee: FRUGAL TIP: Who knew? Cold water & salt will get rid of onion smell on hands. More @ http://bit.ly/WkZsm #
- Please take a moment and vote for me. (4 Ways to Flog the Inner Impulse Shopper) http://su.pr/2flOLY #
- RT @mymoneyshrugged: #SOTU 2011 budget freeze "like announcing a diet after winning a pie-eating contest" (Michael Steel). (via @LesLafave) #
- RT @FrugalBonVivant: $2 – $25 gift certificates from Restaurant.com (promo code BONUS) http://bit.ly/9mMjLR #
- A fully-skilled clone would be helpful this week. #
- @krystalatwork What do you value more, the groom's friendship or the bride's lack of it?Her feelings won't change if you stay home.His might in reply to krystalatwork #
- I ♥ RetailMeNot.com – simply retweet for the chance to win an Apple iPad from @retailmenot – http://bit.ly/retailmenot #
- Did a baseline test for February's 30 Day Project: 20 pushups in a set. Not great, but not terrible. Only need to add 80 to that nxt month #
Evil Interest
Everybody with a savings account or almost any form of debt has at least a passing familiarity with interest. How many of you actually know what it is, or even how much you are actually paying?
First, some definitions.
Principal is the term used for the amount of money you have borrowed.
Interest is the rent you pay to have that money. Interest is money-rent, expressed as a percentage of the principal. If you borrow $100 at 10%, you pay approximately $10 in interest. I say “approximately” because it’s just not that simple.
There are two kinds of interest: simple and compound.
Simple interest is called that because it is just that: simple. It’s easy to understand and it’s what most people mistakenly assume they are paying. With simple interest, the interest rate is only applied to the principal, never to the accumulated, or accrued, interest.
For example, if you have borrowed $100 at 10% annual interest, this is what your balance will look like:
- At the time of borrowing the money, you owe $100.
- After 1 year, you owe 10% of the $100, in addition to the original $100: $110.
- After 2 years, you owe 10% of the $100, in addition to the original $100 and year one’s interest: $120.
- After 10 years, you will owe a total of $200.
That’s simple.
On the other hand, in addition to five more fingers, you have compound interest. Compound interest complicates things considerably. With compound interest, interest is applied to the entire balance of what you owe; both the principal and the accrued interest are included in the calculation.
For example, with $100 at 10% compounded annually:
- Year 1: You will owe $100 + 10% of the original $100, or $110
- Year 2: You will owe $110 + 10% of the $110, or $121
- Year 3: You will owe $121 + 10% of the $110, or $133.10
- Year 4: You will owe $131.10 + 10% of the $110, or $144.41
- Year 5: You will owe $144.41 + 10% of the $110, or $158.85
- Year 6: You will owe $158.85+ 10% of the $110, or $174.74
- Year 7: You will owe $174.74 + 10% of the $110, or $192.21
- Year 8: You will owe $192.21 + 10% of the $110, or $211.43
- Year 9: You will owe $211.43 + 10% of the $110, or $232.57
- Year 10: You will owe $232.57 + 10% of the $110, or $255.83
That is a total of $155.83 in interest paid over 10 years, or $15.58 per year, for an effective interest rate of 15.583%.
To throw another twist into the mix, interest is rarely compounded annually. Monthly, or even daily, is much more common. With monthly compounded interest, the annual rate, or APR, is divided by 12 and recalculated every month.
For example, using the same $100 at 10% APR, compounded monthly:
Since the interest rate is compounded monthly, we will be using the monthly periodic rate, which is 10% / 12, or .83%
- Month 1: $100 + .83% of $100 = $100.83
- Month 2: $100.83 + .83% = $101.67
- Month 3: $101.67 + .83% = $102.51
- Month 4: $102.51 + .83% = $103.36
- Month 5: $103.36 + .83% = $104.22
- Month 6: $104.22 + .83% = $105.08
- Month 7: $105.08 + .83% = $105.95
- Month 8: $105.95 + .83% = $106.83
- Month 9: $106.83 + .83% = $107.72
- Month 10: $107.72 + .83% = $108.61
- Month 11: $108.61 + .83% = $109.51
- Month 12: $109.51 + .83% = $110.42
That’s $0.42 more interest paid the first year, and that number will continue to climb each year the interest is compounded.
It gets worse if interest is compounded daily, like most credit cards. If you see “Daily Periodic Rate” anywhere in your agreement, you are getting compounded daily. This same loan, compounded daily instead of monthly will yield $110.51 owed the first year. That $0.51 might not seem like much, but imagine it on a $10,000 credit card, or a $100,000 house! And that’s just the first year. Every year after, the disparity gets bigger.
Edit: The formula for calculating compounding interest is Principal x (1 + rate as a decimal / compounding term)compounding term. So, for $100 at 10% compounded monthly, the formula is 100 x (1 + 0.1 / 12)12
That’s the downside to compounding interest. There is an upside, if you have investments or interest-bearing accounts. If that’s the case, compounding interest is working in your favor.
If you save $100 per week, and manage to get a 10% return on your investment, you will have $331,911 after 20 years(with $104,000 contributed) and $2,784,424 after 40(with $208,000 contributed). That mean you will have tripled your money in 20 years, or vingtupled* it in 40 years.
That’s how you get rich. $100 per week for the rest of your life will leave you with a comfortable retirement, without missing out on life now.
—
* Yes, it’s a real word**. It means a twenty-fold increase.
** No, I did not know that yesterday.
Budgeting Sucks
Budgeting kind of sucks.
Filling out a budgeting spreadsheet, putting in all of your expenses, listing all of your income, tracking all of your spending. Yuck.
Balancing the fact that you may have $200 to spare, but if your gas bill is a bit lower one month then you have a some more money, but if your electric bill’s a little bit high, then you have a little bit less. It’s too much work.
Here’s the new plan:
I just opened up a new credit card. This credit card’s got a fairly high limit, not that I care since I’m never going to come close to the limit. It’s got an okay interest rate, not that I care–it’s going to be paid off every month. It also has a good travel rewards plan, so our family vacations can, to a large extent, be paid for.
Now, with this card, I’m taking all of my regular bills, and setting them up to be automatically paid by the credit card. It’ll get automatically charged every month. I won’t have to think about it. Once a month, I’ll just log on and pay off the card. All I have to do is make sure the balance stays under my monthly budgeted amount. I already know what I have to be paying each month, so, no problem.
This will make it easier to budget and track my actual spending. It’ll even make it easier to balance my checkbook, since right now, I’m logging into my bank account a couple of times a month to compare it to Quicken. Any budget helper is nice.
After this plan takes effect, my bank account will only have any ATM withdrawals that I need to make–which shouldn’t happen more than once or twice a month–and my checks to day care. There should be just six manual transactions every month plus all of my miscellaneous transfers to and from INGDirect, which should also be minimal– there should only be two of those each month.
This will simplify everything while at the same time giving me the maximum amount of travel rewards I’ve been able to find. Hopefully, it will work as well as I think it will.
My New Windfall
Tax season is over.
This year, TurboTax and Amazon teamed up to offer me a 10% on up to $1200 of my refund if I took it as an Amazon gift card.
$120 free if I spend that money with a company I’m going to spend money with anyway?
Yes, please.
I spend lots of money with Amazon. I subscribe to many of my household items there, because I use them and I don’t want to have to think about buying them. I get my soap, shampoo, toilet paper, paper towels, and garbage bags automatically delivered. There’s a bunch of other stuff, too, but that’s what I remember off the top of my head. If I have 5 items in a monthly delivery, I get 20% off.
Free money, free shipping, and none of the hassles of shopping?
Yes, please.
So now I have a $1320 credit with the company I use for most of my non-grocery shopping.
I also have 962 items on my wishlist with Amazon.
To recap: $1320 burning a hole in my metaphorical pocket and 962 items that I have wanted at some time in the past, begging me to bring them home.
That’s a dilemma.
The smart answer is, of course, to let that money hide in Amazon’s system and slowly drain out to pay for the things I actually need.
The fun answer is to stock up on games and books and toys and gadgets and cameras and, and, and….
Some days, it’s hard being a responsible adult.
I think I’m going to compromise with myself. I’ll leave the vast majority of the money where it is, but I’ll spend a little bit of it on fun stuff, and a little bit more on stuff I don’t quite need, but would be useful, but not so useful that I’ve already bought it.
A new alarm clock to replace the one next to my bed that automatically adjusts for daylight savings time but was purchased before they changed the day daylight savings time hit so I have to adjust the time 4 times per year instead of never. That’s on the list of not-quite-needs.
The volume 2 book of paracord knots is on the list of wants that can’t possibly be considered a need, but it’s going to come home, anyway.
I figure, if I spend a couple of hundred dollars on things I really, really want, I’ll scratch that itch and leave most of the money alone.
What would you do with a $1300 gift card at a store you shop at every week that sells every conceivable thing? Spend it right away, or stretch it out, or something else?
ROI for Life
How often do you examine the return on your investment of time and money? A dear friend once spent 3 hours in the waiting room of an auto shop to save $15 on an oil change. When I asked, she refused to sit quietly in the corner for an hour in exchange for $5. That’s an inefficient exchange of time for money.
Last week, a close relative spent $2000 repairing a car that’s worth about $500…after buying the replacement car. That’s a poor exchange of money for value.
Why do people make decisions like that? They seldom take a look at the values being traded. My friend knew she would have to work to replace the money she wouldn’t have saved, but didn’t think about the time she could never get back. My relative was emotionally fixated on the sunk costs of the repairs she had already put into the older car and couldn’t bear the thought of losing that “investment”. Neither was an example of rational decision-making, but rather a case of allowing emotions to rule. [Read more…] about ROI for Life
Peter Capaldi: The New Dr. Who’s Filmography
If you’re new to Dr. Who, one of the odder concepts in the program is that The Doctor periodically regenerates. This is a lampshade on the reality that the actors playing the lead character don’t want to be saddled with the role
for the entirety of their careers, and it allows an “in-universe” canonical way for the writers and show-runners to allow this change to happen. In fan circles, Matt Smith, the outgoing doctor, was “The Eleventh Doctor” (because he’s the eleventh actor to take on the role) and is going to be replaced, when the series comes on again, with Peter Capaldi, a Scots veteran of several BBC productions.
Capaldi returns to one of the traditions of the program – in casting an actor who’s a bit older — 55 as of 2013 – to play a 900-year-old time traveling alien. His acting career stretches back to 1983, with a role as Danny Oldsen in Local Hero. His early acting career included bit parts in the British underworld-themed dramaedy Minder, and the horror film The Lair of the White Worm, starring Hugh Grant and Amanda Donohoe.His ambitions with film include work behind the camera – he won an Oscar for Live Action Short Film Subjects with Franz Kafka’s It’s A Wonderful Life in 1995, becoming the only actor to play The Doctor to have an Oscar on his mantel. He has also written films, including Soft Top, Hard Shoulder.Back in front of the camera, his first starring role was as Luke Wakefield, in Mr. Wakefield’s Crusade, where a closeted gay man thinks he’s witnessed a crime. When that series ran its course, he did rolls as a mad mathematician (Psychos), and an angel in the film adaptation of Neil Gaiman’s Neverwhere.
2005 saw Capaldi’s most famous role, before assuming the mantle of a Time Lord: That of spin doctor Malcolm Tucker in the BBC series “The Thick of It,” a role he inhabited through 2012. In that role, he plays a profoundly profane director of communications for the British Government, charged with public relations, cleaning up political gaffes, and ensuring that any dirt about an opposition party member is aired at the most politically advantageous moment. His role was noted for bringing nuance and complexity to a character described as a rabid political hatchetman who didn’t carry grudges – he had them stuffed and mounted on the wall.
Capaldi has previously appeared in Dr. Who as Caecilius in the episode “The Fires of Pompeii,’ which marked the first appearance of Karen Gillan, who went on to play the Doctor’s companion, Amy Pond. Later, he returned to Dr. Who spinoff Torchwood: Children of Earth as John Frobisher, who had a particularly dark turn, killing his own family rather than letting the 456 aliens use them as a human sacrifice.
In the press event where he was announced has having landed the role, Capaldi admitted to having been a fan of the series ever since he was a small boy. For fans of the long running franchise, this promises to be a very enthusiastic incarnation of the Doctor.
