Narrow Bridge

Quicken Online Goes Offline, Users Move to Mint.com

Eric — Thu, 05 Nov 2009 19:15:16 +0000

It was recently announced that Intuit, owner of Quicken, purchased Mint.com for an undisclosed amount. The speculation was that Intuit would close down Mint and force users onto Quicken Online. However, the opposite has proven to be the case.

Intuit announced that current Quicken Online users will be migrated to Mint. In six to nine months, the Quicken service will be discontinued. Mint CEO Aaron Patser said that with the Quicken Online customers, two highly sought after features might migrate to Mint as well, item reconciliation and uncleared check entry.

This is good news for Mint.comlovers, like me, is that the site will definitely be sticking around and improving as time goes on. If you are not familiar with aggregators, you should probably read about the next generation of online banking. [Lifehacker]

Quicken Online Goes Offline, Users Move to Mint.com is a post from: Narrow Bridge

November 1st Net Worth Update

Eric — Mon, 02 Nov 2009 20:05:27 +0000

I made my entry this morning and had little significant change. (I did update the value of my car to the taxable value I received from the county last month). Cash is up a bit, so is the credit card debt. Every time I look at this, I start to think: geeze, school is expensive.

Expect a big hit next month when I have to begin furnishing my new apartment!

November 1st Net Worth Update is a post from: Narrow Bridge

Apartment Hunting

Eric — Wed, 28 Oct 2009 18:54:05 +0000

Yesterday I completed a multi-week process of searching for and picking a new place to live. I have been living in a house near my school for the last 15 months. In that 15 months, I have been very happy with the rent and location, but I decided it was time for me to go out and get a place on my own.

I started my search with an apartment book and the Internet. I found a free “Apartment Book” for the Denver area from the people behind Apartment Guide. I used that book to eliminate certain parts of town, limit down neighborhoods I would like to live in, and get an idea of what is out there and what costs might be.

From there, I used a combination of two websites to find and investigate apartments in those areas. I used a zip code map to help me search. Apartment Guide was useful for finding apartments within my rough guidelines for a one bedroom apartment within a certain area and price range. I also checked for things with Apartment Finder and Apartments.com. There are dozens of sites that help with this. Some charge, some are free. Based on everything I saw, the charge sites are a rip off. Why pay for what you can get for free?

The big things I was looking for were near my school, but not full of undergraduate students. That created a circumference to search within but eliminated a handful of apartments right near campus. I also wanted something that was one bedroom, not a studio, for about $600 per month. Again, this limited down the selection. There were also a bunch of “wants” that I could live without. Those included in unit washer/dryer, covered parking, and no pets. I also wanted to be in a safe, clean place. Those two are not negotiable.

Based on a few hours of searching on those websites, I came up with a list of about a dozen potential apartments. I searched for ratings on those apartments through two major methods. The first was a simple Google search. Using Google, you can find out a lot about an apartment, particularly a bad one. Second, I searched every single apartment on Apartment Ratings.

Apartment Ratings was one of the most useful tools in limiting the apartments I found. I looked back at a few places I have lived before and saw that most of the ratings were either very bad (most) or very good (a few). The ratings on these sites are user generated, like Wikipedia or Yelp, and have to be taken with a grain of salt. People are more likely to rate a place that is really bad than if they were just content. I also looked at a trend over time. More recent ratings are going to be more relevant to current management than older ones.

Using the ratings sites, I was able to eliminate apartments with apparent drug, violence, noise, break-in, and bug problems. That narrowed my list down to about six. I then did more reading into what people liked and didn’t like about certain areas. That limited it down to three.

Once I had my top three apartments in mind, I looked online at the websites, which offer only the most glowing reviews, and found that one of them had nothing available in my price range (not even within a few hundred a month!). And then there were two…

I did a drive by of both complexes to see what they looked like in person, how the neighborhood felt, and what was around. One of the two was in an area just off from a familiar busy road. The farther I got from the road, the less safe the area felt. And then there was one…

I toured the final apartment complex on my own once and setup a time to come back with my Mom to get a second look. No matter how old I am, it is always good to get a second opinion. I trust that my Mom would never let me do anything stupid, so I brought her along. Parents, significant others, and good friends are good options for when you are looking. I did it once without anyone helping and ended up in a bad situation that I had to pay to get out of.

I setup another visit to see the actual unit I would be moving into. I really liked it. I filled out the application and left a deposit. I should be moving around the middle of next month. I would love to tell you all where, but seriously, this is the Internet. There are lots of wackos out there!

What I Learned: Tips for Apartment Hunting Neophytes

Living around a university campus often puts you in a situation with a crappy landlord that will try to take advantage of you. Living farther out could mean better landlords, based on my experience.
The web has a plethora of information about safety and living in certain areas, but you have to see it in person and go with your gut.
Get a trusted second opinion before you pay any money or sign a lease, always.
Living is generally the most expensive part of your monthly living costs. However, it is also the place you spend most of your time. Pick a place that you will love. Don’t settle on being unhappy with your living situation. You can quit a job, you can sell a car, you are stuck in a contract when you sign a lease. If you are not confident, don’t sign it.

What advice do you have for a new apartment goer? A college student looking for fall housing? A 20-something going to a new city? Please fill in where I missed or left off in the comments.

Apartment Hunting is a post from: Narrow Bridge

Book Review: The 4 Hour Workweek

Eric — Thu, 22 Oct 2009 21:05:26 +0000

I just finished reading The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Richby Tim Ferriss. The book was fun and easy to read. Not only was it fun, it was a bit inspirational. I know I am behind the curve in this book, which made waves when it came out in 2007, but its words are just as relevant as they were in 2007.

The book is written in a logical progression giving steps to eliminate needless work, make what you are doing as efficient as possible, start your own super efficient business, eliminate your need for going to work, and finally leaving the 9-5 world. The ultimate goal presented by Tim is to have the freedom to travel or spend time with friends and family.

According to the book, there are a few tricks to making this whole system work. Making your life more efficient and eliminating time wasters is possible by eliminating voice mail, focusing on e-mail, and letting people deal with small problems themselves. Bring in an Indian virtual assistant and your life is on autopilot.

From there, the book suggests finding a “muse” product that you can sell for a nice markup. I have one in mind and have already had a couple of bids from Chinese companies. From there, it is possible to setup automated sales, distribution, and customer service that will ultimately take only 4 hours a week to maintain. The money just flows into your bank account.

What I Liked: I like the idea of the 4 hour workweek, but who wouldn’t? It seems like a great life plan. Eliminate the crap and focus on what is important. Use the 80/20 rule to ensure you are only focusing on what is important and yields results. And, for what is left, hire an Indian for $8 an hour to deal with, freeing you to do whatever you want on a decent income.

What I Didn’t Like: I had a bit of a feeling the entire way through that they guy is full of it. How easy can it really be to start a company that requires almost no time and effort? How well can someone in India really help me with my life that it is worth $5-$10 per hour for something that I can do myself? It is possible to really do what the book says, but it is important to bring yourself down from the cloud the book puts you on. Remember, if you follow the book, to make calculated decisions. Don’t throw everything away on a whim.

Overall:I like the book. I think it is a fun idea and I am giving it a go. Make sure you keep up on the blog to read about my progress. I recommend this book to anyone who wants to try a fun project to make a bit of extra cash. If it goes well, who knows, you might get rich on the way to a 4 hour workweek. That, according to the book, makes you part of the NR, the “new rich.”

If you decide to buy the book, please do so using my Amazon link to help support the costs of maintaining the site. If you want to buy the updated version of the book, available in December, you can order the expanded version through this link: The 4-Hour Workweek, Expanded and Updated: Expanded and Updated, With Over 100 New Pages of Cutting-Edge Content.

Book Review: The 4 Hour Workweek is a post from: Narrow Bridge

Who is on the Susan B. Anthony Dollar and What is it Worth? [Jaywalking]

Eric — Tue, 20 Oct 2009 18:21:40 +0000

I just watched a funny segment on how little people know about finance from the Jay Leno Show (hat tip to Fabulously Broke). I thought I had better pass this on to Narrow Bridge readers. Please don’t tell me in the comments if one of my readers is featured here. I hope I did better than this.

On a side note, thanks to the lovely Fabulously Broke for including Narrow Bridge in the Carnival of Personal Finance.

Who is on the Susan B. Anthony Dollar and What is it Worth? [Jaywalking] is a post from: Narrow Bridge

Housing and Population Trends

Eric — Fri, 16 Oct 2009 19:34:21 +0000

[SPONSORED POST]

It is nearing census season here in the United States. Every decade, the United States government puts together a report with details about every single person in the country. This includes citizens, legal residents, and illegal residents. The government then puts together population demographic and trending reports that tell you everything you could imagine about people living in the US. You can see these reports at census.gov.

Other countries have similar systems. In the UK, government projections show that the population in England will rise from about 51 million today to over 60 million in 2031. In the US, the population grew 8% between 2000 and 2008. That is over 22 million people. The 2010 census is projected to show continued population growth.

What does that mean to us? The average person will need a place to live. More people means more houses are needed. The simple “what it means” is that houses will have to be build, mortgages will be needed, and banks will make loans.

However, there is another segment where people stand to benefit. Not all people live in a single family house or a condo. Many Americans rent. In Minnesota, 75% of homes are owner occupied, leaving 25% as renters. In New York, on the other hand, only 55% of homes are owner occupied.

Jobless rates today are impacting those numbers. Many of the bad mortgages in the last year or so have been in owner occupied situations. People have to give up their home ownership and move into a rental. Property developers and investors have the opportunity to profit from this situation by owning rental properties with an increasing demand.

It is also important, though, to look at an often forgotten group of people. 3.5 million people in the United States, about 1% of the population, experiences homelessness at some point in any given year. Be sure to remember those in need even in tough times. If the economy is treating you bad, imagine how some people are doing. If you are able, support a local homelessness charity like the Colorado Coalition for the Homeless in my neck of the wood. Everyone deserves a home.

[SPONSORED POST]

Housing and Population Trends is a post from: Narrow Bridge

In The News Twice in a Week!

Eric — Thu, 15 Oct 2009 04:49:22 +0000

This time I was interviewed and featured in the story. For the first time ever, you can all see my last name. I was asked about parent’s investments for a story about the Dow breaking 10,000 on Denver’s Fox 31 News. See the video below. If you are reading this on RSS and can’t see the video, it is also available at Fox 31. My short part starts at about 1:57.

I guess I really am famous now. Two times on local news in a week is my personal record.

In The News Twice in a Week! is a post from: Narrow Bridge

I Am Kind of Famous

Eric — Wed, 14 Oct 2009 18:01:02 +0000

I was on the local Denver 9 News on Monday night in a story about young people investing. Sadly, they did not interview me or use my name. The reporter came to a class I am taking at the University of Denver and asked the professor and one of the senior students in the class a few questions. If they knew I had a blog, they probably would have done a whole feature story on me, right? (Us blogger have egos to keep up)

I am the one in the brown Israeli shirt near the speaker at the front of the room. You also get my hands typing a couple of times. Those hands type on that keyboard to bring you these great posts!

View the video at 9news.com.

I Am Kind of Famous is a post from: Narrow Bridge

How Corporate Bonds Work

Eric — Mon, 12 Oct 2009 18:55:14 +0000

This is what a (state issued) bond looks like

I have written posts about what a share of stock represents and how stock trades work, but I have never given a breakdown on how corporate bonds work.

Like stock, companies use bonds to raise funds for any number of reasons. When a company raises funds with stock, they are giving away ownership in the company in exchange for they cash. With bonds, the company is only making a promise to pay the funds back, with interest.

Lets say company X needs to raise $1 billion to build a new plant. X is privately held and has no stock ownership outside of the company founders. X is a large company that is worth $10 billion, as determined by a private auditor. The company’s cash flows are strong and the company has healthy sales and profit growth.

To build the company, X’s owners can issue stock for $1 billion, which would give away 10% control of the company. That $1 billion would not have to ever be paid back. Alternatively, they can borrow $1 billion from investors and pay them back with interest. Due to the company’s credit rating, they have a 4% risk premium over the risk free rate (the Federal Reserve long term t-bond rate). If the risk free rate is 4%, X would have to pay 8% interest to borrow.

They decide to go along with the bond issue and issue $1 billion in new debt. Through the assistance of lawyers, accounts, and investment bankers, the company issues 1,000,000 20 year 8% coupon bonds with a face value of $1000 each. That means an investor can buy one or more for $1,000 each with 8% interest paid semi-annually. The company keeps the $1,000 from each investor for the time being.

If you buy one of these bonds at the time it is issued at face value, you are now owed the $1,000 plus interest from the company. Twice per year, the company will pay you $40. Your $80 per year, or 8%, is called a coupon payment. Some bonds are called “no coupon bonds” and are sold at a discount to make up for the interest.

At the end of the 20 years, called the bond maturity, the bond holder is paid the final $40 payment in addition to the $1,000 principal. Now, you, the bond holder, have earned 8% interest have all of your money back.

The risk to you is that the company will go broke and not be able to pay you back. Some bonds are “secured bonds”, and have an asset that will be sold to pay back investors. Others are not secure, and are only guaranteed by the company’s good credit. The risk level of the company determines the interest rate paid. People demand a higher interest rate for risky bonds than for safe bonds.

What if you buy a 20 year bond for $1,000 and you decide you need your money back sooner? If the bond is traded on the secondary bond market, you can sell the bond for its current value. Assuming interest rates are still yielding 8% for that company’s bonds, you can sell the bond for $1,000 at any time as long as there is a buyer. That buyer will then receive the 8% coupon. Most stock brokerage firms give their customers access to buy new bonds and buy and sell bonds on the secondary bond market.

That sounds pretty simple, right? It is, assuming interest rates are always 8%. In real life, interest rates are constantly changing. When interest rates rise, the price of a bond goes down When interest rates fall, the price of a bond goes up. The price, that $1,000 if interest rates do not change, impacts the bond’s yield to maturity. People demand that a bond pays a yield that matches current market conditions. If someone gives you $900 for the $1,000 face value bond (a 10% discount), they are going to get a higher yield to maturity than someone paying $1,000. The calculator of YTM is very complicated, unless you have a fancy financial calculator (about $20) or a finance degree. Fortunately for you, I found this free YTM calculator online.

If you are thoroughly confused, have any questions, comments, or stories to share, please do so in the comments.

How Corporate Bonds Work is a post from: Narrow Bridge

How Insurance Companies Make Money

Eric — Thu, 08 Oct 2009 17:09:34 +0000

Back in the good old days of classes like Financial Institutions Management, I learned quite a bit about how banks and insurance companies make money. The way insurance companies drive their profits is not what you might expect.

Insurance companies have two sources of profits. The first, and most widely known source of profits, is bringing in higher revenue from insurance payments than is expended in claims. If you pay $150 per year for renters insurance and never make a claim, the company keeps all of that as profit. If you pay $800 per year for car insurance and the company has to pay out $900 per year in claims, they are not making money. This is how insurance companies get the reputation of being stingy. They try to limit what they payout, even if it hurts their customers. However, it is not quite that simple.

The second way insurance companies make money is through investments. I met with a manager at Pinnacol, the Colorado guaranteed workers compensation insurance provider. He was very up front in explaining that Pinnacol’s investments performed so well and the overhead was so low that even if Pinnacol paid out 100% of its income, it would still be profitable.

Insurance companies make most of their money through investments. To earn a profit, the insurance company must maximize the time between receiving a payment and making a payment. This spread is the investment period that the insurance company uses to make money. If you pay the company $100 on January 1st and they pay it out on July 1st, it had a six month investment period. If the company had an investment gain of an annualized 10% during that period, it made $5 in profit, before taxes and related expenses.

The scale comes with having many customers and extending the investment period and minimizing payouts. If the company has 1 million customers in the same situation, it makes $5 million. You can see how fast the scale can increase profitability, even if everything you pay in gets paid back out.

To extend the investment period, the company will delay claims processing. Some companies expedite claims for customer service reasons to bring in new clients, but some have waiting periods and processing periods that delay check writing.

The best way to increase profits for an insurance company is to increase investment return. As any educated investor knows, increased profits often come with increased risk. Insurance companies hire educated professionals to balance risk and return to ensure a well diversified investment portfolio.

AIG’s investment professionals did not appropriately manage the company’s risk. AIG invested into highly risky securities hoping for a very high return. It worked, for a little while. However, when the markets turned sour the company had record losses.

If any of the terms here were confusing, be sure to read this well written glossary of insurance terms. If you think I missed something or have any questions, please say so in the comments.

How Insurance Companies Make Money is a post from: Narrow Bridge