Should you invest in the Facebook IPO?

Very soon, some say as early as May 18, Facebook will be filing for its Initial Public Offering. Last Thursday, it was learned that the share price will be in the $28-$35 per share range. This could amount to the largest IPO in history and value the company at nearly $100 billion.

So what does it mean to say Facebook could be a $100 billion dollar company? It seems like a lot, so to help put it in perspective I looked at the value (Market Cap) of the 30 stocks that make up the Dow Jones Industrial Average stock market index.

As you can see from the list above, a $100 billion valuation would put Facebook somewhere in the middle of the list, on par with McDonald’s and CISCO, but well above such large, respected and profitable companies like Disney, Kraft, American Express and Cat.

Since Facebook is an internet only company, here is a comparison to other internet only companies.

Obviously, it will be one of the top three valued internet only companies, but the big question is will it last?

If you’ve been around the internet awhile you know things change fast. Of all the big dot.com’s only a handful have been relatively stable over the past 15 years or so.

All of these sites were, at one time, the reigning champ in their niche and would never have thought their demise was only a few years away.

• Myspace.com was bought in 2005 for $580 million by News corp and was the social network king until Facebook overtook it in 2008. Myspace was sold in 2011 for $35 million.

• Netscape had 90%+ browser market share in the 1990’s, by 2006 it was down to 1%.

• Altavista was one of the top sites in 1997, by 2010 it was shut down.

• Geocities was bought by Yahoo for $3.6 billion in 1999 and was closed 10 years later.

• The Infospace IPO in 1998 started at $5 per share, by 2000 it was at $1300 per share, today it trades at $11 per share.

So given the short, tumultuous life span of an internet company, are you going to invest in Facebook?

1. What is a 401k

The Social Security and Medicare retirement programs are burning through cash like never before, says a government report released today, and will go broke sooner than expected.

Every year the Trustees of the Social Security and Medicare trust funds report on the current and projected financial status of the two programs, and the actuarial deficits for both programs worsened in 2012.

Social Security expenditures exceeded non-interest income in 2010 and 2011, and the trustees estimate that expenditures will remain greater than non-interest income for at least the next 75 years!

Social Security – Put a dollar in get 75 cents out

This results in the complete exhaustion of funds by 2033. Thereafter, the income will only be sufficient to pay-out approximately 75% of the scheduled benefits for the next 53 years, or through 2086.

Hope you don’t get sick after 2024

The trustees project that Medicare will pay out more in hospital benefits and other expenditures than it receives in income in all future years, as it has since 2008. The medicare well will run dry in 2024.

Social Security and Medicare are the two largest federal programs, accounting for 36% of federal expenditures in fiscal year 2011. Both programs are out of control and are in dire need of drastic changes.

Heed the actuarial warning on the Social Security and Medicare programs and make adjustments to your retirement planning as needed.

1. What is a 401k
2. Flexible Spending Account
3. Pros and Cons of Self Employment

Earth Day is an annual event where one day each spring activities are planned around the world to bring attention and appreciate our Planet’s natural environment. The first Earth Day was observed on March 21, 1970 and is now celebrated in many countries each year.

Thousands of school kids and volunteers will plant trees and pick up litter, and for at least one day, make the world a little more clean and healthy.

In a world that idolizes possessions, status symbols, and everything shiny, frugalists take the contrarian view, and in essence, with their minimalist lifestyle, “live” Earth Day each and every day.

So does the frugal lifestyle turn everyone into long-haired, tree-hugging hippies? No of course not, it just means that their lean lifestyle saves them money by utilizing less of everything, which has a direct and positive impact on the natural environment due to their minimal energy requirements. Their cars are fuel-efficient and owned longer, their houses are smaller and well insulated, they don’t clutter their life with over-priced cheaply-made junk, and most importantly are not lazy and will put forth a little effort to save money, such as using a filtered water bottle and drinking tap water instead of buying two dollar water bottle from the vending machine every day.

And that is a very good thing because, according to a recent Forbes interview with Shell CEO (Peter Voser),

“We estimate that energy demands worldwide will double by 2050. Ninety percent of the new demand will come from non-OECD countries – and half of that from China. The numbers I’ve given you assume gains in energy efficiency. If we don’t have those gains, then energy demand will triple by 2050.”

Peter goes on to say…”as the world grows to 9 billion people and also grows more affluent, it’s not only the demand for energy that will double but also the demand for water and food.”

Peter offered some very insightful predictions, which if they hold true, will have a major impact on the price of everything.  Those not leading a frugal lifestyle now, may not have a choice in the future. Use this information to your advantage, for example, re-think the future energy cost of the house you are looking at, consider its location in proximity to water source, or evaluate companies that will benefit from this upcoming energy boom and consider an investment in them.

1. Stock? Is that like a type of wood?
2. Definition of Frugal
3. Best Energy Efficient House Upgrades

How To Not Spend Money

Is that money burning a hole in your wallet? Spend every dollar you make? Always broke? Can’t seem to save up for anything? Or maybe you find yourself earning thousands more than you did before, but there is not a dime more in your savings account. Then it’s time to plug up that leak in your wallet with our 9 water-tight tips on how to not spend money.

1. Auto save. This is a super simple and extremely effective method of saving money by not having the money to spend to begin with. Every month, without fail, money makes its way into an interest bearing or investment account. If your paycheck is direct-deposited into your checking account, many banks allow for a monthly auto transfer of funds from your checking account into a savings or money market account. Don’t touch it, it’s off limits. Or, if you’re willing to tolerate some financial risk, set up an automatic investment plan with a mutual fund. If these options aren’t available, then do this manually, be very religious about this and make it the first check you write each month.
2. Needs/Wants. Make a conscious decision before every purchase, and be honest with yourself, determine if it is a true need or merely a want. Once you start doing this, you’ll be amazed at how much money you blow on “wants.”
3. Value. Of those “wants” purchases, try to get as much value out of them. Do you really get a $100 value from an expensive meal? One hundred dollars can buy quite a bit at the grocery store. How about a $2,000 65-inch, 3-D, LED brand name flat screen TV? Wouldn’t a smaller, off-brand, LCD suffice for only $500? I wouldn’t shop off-brand for everything, but with customer reviews on nearly every website, it should be easy to spot troublesome brands.
4. Hours Worked. Another way to put a “want” into a value perspective is to calculate how many hours of working at your job it would take to “earn” the purchase. For example, say you want to buy a $1500 necklace. If your weekly take-home pay for 40 hours of work is $600, then your take-home hourly rate is $15/hour ($600/40). So this means it would take 100 hours of work to “earn” enough for your necklace.
5. Say NO. Kids want $20 for a movie or $50 bucks for gas to cruise around town every weekend? Maybe it’s time for them to get the talk, no, not that talk, but the uncomfortable needs versus wants conversation. Tell them Mom and Dad are on a financial diet and they are going to have to stay in this weekend and watch a movie on Netflix.
6. Stay Home. If your kids are home watching Netflix, they’ll soon be bored, and annoying you since Netflix has crappy movies. You’ll want to call the babysitter so you can go out, but say No to yourself and stay home. Going out, even if you don’t buy anything, still costs money. It burns fuel, causes wear and tear on your car, and once you’re at the store you’ll feel like you have to justify your trip by having to buy something. Resist the temptation and stay home.
7. High-Rollers. We have a couple of friends that have a lot of money. One inherited their money, the other owns their own business. Every time we go out with them, we know it’s gonna cost us, because they like to go to the posh restaurants, order the fancy drinks and attend the pricey attractions. Even going with the cheapest option at these places is still more expensive than we would normally want to spend. Obey your own commandments on how to not spend money, and say no, stay home, and invite them over for dinner and drinks instead.
8. No Cash. Carry only a limited amount of cash. I don’t know about you, but for me, it seems like whenever I have a wad of 20’s in my wallet I’m a little more free with the purchases. So with no cash, it’s less likely that you’ll make the smaller impulse purchases.
9. Cut ‘Em Up. If you have a serious spending problem and still can’t figure out how to not spend money after all these awesome tips, then maybe you need to cut up your credit cards and burn your ATM card. This seems a bit drastic, buy you may need to set up as many obstacles between you and your money as possible and set and keep some tough spending goals. Like don’t buy one more “want” until all the credit cards are completely paid off. After they are paid off, now would be a good time to set up the “auto-save” tip from above.

Our 9 how not to spend money tips will surely fatten your wallet so you don’t fall prey to the: more-you-make-the-more-you-spend, never-have-enough-money trap.

1. How to save Money ToysRUs edition
2. How to: Save Money on Groceries
3. Save money : Bring your Lunch

How Much Should I Save

How much should I save? Answer: As much as you can so you don’t become a statistic like the ones below!

Considering the numbers reported from a few recent survey’s, I would say most Americans are not saving nearly enough as they should.

If you want to know what the average American is doing, according to the US Bureau of Economic Analysis, the Personal Savings Rate from 1960 through the early eighties was around 8-10%. The rate then dramatically declined, bottoming out at less than 2% in 2006, then rebounding to the current 5-6%.

A few years ago, the Personal Savings Rate was being reported as a negative number, meaning Americans were spending more than they were making and not saving a dime. However, these numbers have since been revised, but regardless of how the government measures this statistic the fact is the rate has been in a downward trend for decades.

In another survey by the Employee Benefit Research Institute, they found these dismal results:

• Just 14 percent of American’s are very confident they will have enough money to live comfortably in retirement

• 56 percent report they have not tried to calculate how much they should save to retire comfortably

• 60 percent report savings and investments (excluding home value and pension plans) to be less than $25,000

So, how much should you save? Unfortunately, there is no “one-size-fits-all” answer in the personal finance world. Each answer needs to take into consideration the age, income, debt, net worth, employment status, dependents, goals, etc. of the individual.

If you have thousands and thousands of credit card debt, paying off credit cards should be the main priority, if you have six kids and a low-wage job, just saving a few percent and staying out of debt would be a major accomplishment.

Regardless of your situation, here are 6 simple saving “rules of thumb” you should know:

•  If you are currently not saving anything, start today. The earlier, the better.

• Take full advantage of your company 401k match. If they offer a 50% match on the first 6%, contribute the full 6%. If you make $50,000 per year, this equals $1,500 in free money (.5 x .06 x 50000 = 1500) every year! If a 401k is not available to you, contribute to an IRA.

• Automate. If you have to make a conscious decision to manually move money into a savings account or write a check to a mutual fund account, inevitably you will fail to do so. One good option for those without much cash is to start investing in a mutual fund with an automatic investment plan. Many mutual funds allow you to waive the initial minimum deposit as long as you sign up to contribute a certain amount automatically each month. Typically the minimum monthly amount varies from $25-$100. One good option for those without much cash is to start with an automatic investment plan. Many fund families will let you into their funds for little to nothing to start, provided you sign up to contribute a small amount each month automatically.

• Don’t put all your eggs in one basket. If you are just starting out, you won’t have the funds necessary for proper diversification by just buying individual stocks and bonds, so stick to buying mutual funds and ETF’s to lessen your overall risk.

• Remember the impact of inflation. Historically, inflation has averaged 2-3% per year. What costs $100 today will cost around $120 to $130 in ten years, $150 to $190 in 20 years, and $180 to $240 in 30 years if the 2-3% inflation continues. So if you think you will downsize houses when you retire in 20 years into something that currently sells for around $100,000, due to inflation, be prepared to fork out an amount closer to $150,00 to $190,000 for the same type of $100K house today.

• Adjust. Situations change, and obviously, you will have to adjust for your own personal circumstances. Nothing is set in stone and your situation is unique from everyone else. There will be times when you can’t save much and others when you can bank your entire paycheck, adjust accordingly.

There are a million different answers to the how much should I save dilemma; however, a disciplined, regular and committed approach will always be part of the answer.

1. What is a 401k
2. How You Diversify your Assets
3. The Time Value of Money

Medical Bills

Medical bills can be some of the largest that exist. A simple Emergency Room visit can cost you thousands, a few days in the hospital and your medical bill may be in the five figures, and an extended hospital stay can produce a hospital bill of $100,000+!

An August 2009 article published in the American Journal of Medicine cited that over 60% of all bankruptcies were caused by medical debt. This should come as no surprise because medical problems can be the most devastating that exist, not only do you get sick or hurt, but your illness or injury can cause you to lose income or even your job and to add insult to injury, you also lose any health insurance you might have had through your employer.

Fortunately, there are a number of options available that can help you lower your medical bill. But don’t delay, if you wait too long, legal troubles will arise, you may lose out on reducing your medical bill by thousands of dollars, and worst of all you may be forced into bankruptcy because of your medical debt!

Getting help with medical bills can be as easy as asking the hospital or doctor. Almost every medical professional and hospital has a charity policy to help those in financial need . Sometimes the policy will allow the entire medical bill to be eliminated!

There are several governmental programs that provide financial assistance for medical bills.
Qualifications vary from program to program and state to state, and coverage can be retroactive up to three months prior to the application date, so now you have another reason not to delay!

Most hospitals realize that those without medical insurance will have a hard time paying the full amount owed. Just simply calling and telling them you are going to have a hard time paying them may be all that it takes for getting a discount with a no-interest payment plan. Negotiating medical bills can significantly reduce your obligation, but once again you can’t wait too long. If the hospital gets no response from you, it will turn your medical bill over to a collection agency.

If you let your medical debt get turned over to a collection agency, you will no longer be dealing with the medical providers, but with aggressive collection agents. Your options have now been limited and your actions may have to be more drastic, debt settlement or medical bankruptcy may be your only choice.

Medical bills don’t have to be financially devastating, but if you do nothing your credit will be wrecked and you will be stuck dealing with aggressive collection companies.

1. Health Insurance Cost Lingo
2. Pros and Cons of Self Employment

A battle of the financial institutions…

Many people wonder what is the difference between a credit union vs a bank? In essence they both exist to accept deposits and then use those deposits for lending activities. Both banks and credit unions offer similar financial services, however, there are some important differences that you want to be aware of so that you can make an educated and informed decision. Keep reading to explore the characteristics of a credit union versus a bank so that you may determine which is the most appropriate for you.

What is a Credit Union?

A credit union is a member-owned, not-for-profit, financial cooperative. What does all that mean, you ask? Well, let’s break it down:

• Member Owned: Becoming a member of a credit union is easy. Usually, to join a credit union you must meet certain eligibility requirements. Typically this means you must live in a certain geographic location or a certain employer must employ you or your spouse. Easy stuff. Once you become a member and have an account at the credit union, you are a part owner of the credit union. It does not matter if you have a $100 account or a million dollar account; you get one vote just like all the other members. The vote is used for the election of the Board of Directors. The Board sets the policies and procedures of the credit union, like the savings rates.

• Not-for-Profit: This doesn’t mean a credit union is a charitable organization that requires donations – that’s a non-profit. A not-for-profit basically means the organization exists to accomplish its’ goals (i.e. serve the financial needs of its’ members). It needs to make some profit, for example, to upgrade equipment, re-pave parking lots, build new locations, etc., but any profit left over is used to offer members better rates, lower fees, etc. Also, non-for-profit means the Credit Union is exempt from many federal, state and local taxes, so this lets them pass on the savings to their members. Obviously, a bank exists to be as profitable as it can for its’ owners, and those profits are shared with the owners/shareholders, not the account holders.

• Financial Cooperative: This means it is a financial institution owned and operated by the members who pool their money together in order to provide loans and other financial services to the other members. Co-ops also strive to provide services intended to support community economic development.

Advantages of Credit Unions

So now that the – what is a credit union question has been answered, the next thing we need to do is analyze the advantages of a credit union vs a bank.

• Members are the owners. So you share in the profits instead of the company itself. This results in interest and loan rates that are more favorable than many bank rates. Also, the costs associated with processing fees, closing costs, etc, tend to be lower than banks.

• Credit Unions are not-for-profit. This means they are tax exempt. You know as well as I do, taxes aren’t cheap and since banks have to pay them and credit unions don’t, this provides a competitive advantage to credit unions that banks have complained about for years. The tax saving gets passed on to the members in the form of higher credit union interest rates, lower mortgage rates and cheaper fees.

• Financial services. Larger credit unions offer almost all of the same financial services as any large national bank. You will find they offer the basics like checking and savings accounts, also mortgage loans, personal loans, car loans, money market accounts, certificates of deposit and some business services. Most also provide online banking as well.

• Customer service. Time and time again, survey’s have shown credit union’s have a much higher customer service rating than banks. The purpose of the existence of a credit union is to improve the financial health of their members and assist in the economic development of the community. Banks, like all for-profit businesses, exist to make the most amount of profit possible for the owners/shareholders. This profit-first philosophy can sometimes lead to poor customer service.

• Community based. Credit Unions are smaller than many banks meaning a more personal service. Many credit unions are based in one geographic location, so the members and the workers all live in the same area. This allows the credit union to understand the distinctive economic situations that exists in your area. So, if you have a unique financial situation, it is much easier dealing with someone locally.

With our analysis of the advantages of a credit union vs a bank complete, lets take a look to see if credit unions are better than banks for your particular financial needs.

Are Credit Unions Better Than Banks?

For the average person in need of straight-forward financial services, in my opinion, yes, credit unions are better than banks. I wouldn’t consider it a huge advantage, but even if all things were equal, I still prefer to do business locally.

Disadvantages of a Credit Union vs a Bank

The main disadvantages of a credit union are that they do not offer the full spectrum of financial services like a bank does and they have limited locations. So for those that travel and frequently use ATM’s, transaction fees will have to be paid. If you are considering moving to a location outside of the area that your credit union serves, it will be a hassle closing your financial accounts and moving them to a different financial institution with a office closer to your new home.

Credit Union vs a Bank, which do you prefer?

1. Quick Banxodus to the Credit Unions!
2. Why you should leave Bank of America
3. How to get Free Notaries

3 ways my Flexible Spending Account saved me $1K for braces!

So I’m writing this blog post from the orthodontist office waiting area having just dropped $4,009 for braces for one of my kids. And that amount was after the $1,000 insurance adjustment and a $361 discount for paying in full in advance. Luckily I knew this was coming and maxed out my flexible savings account (FSA)or section 125 account ($3,500 for my employer). So the total amount of up front cash I really had to shell out was $509. That’s a much more tolerable amount than the full $4K all at once.

This scenario highlights the need for a personal budget and a basic understanding of financial planning. Had I not planned and budgeted for this, my lack of preparation and education would have cost me an extra $1,000 or more in stupid tax.

Some will argue that braces are a luxury item, or a cosmetic procedure and do not belong within a frugal lifestyle. However, the intent should not be to live like a miser, but to get the highest value for your money and to pay for those high-value items in the most cost effective manner available.

Flexible Spending Account

Back in November, when my employer requires employers to review and re-enroll in the various benefits offered, I already had a list of  the major unreimbursed medical expenses that I would have in the upcoming year. I had intended to use the Flexible Spending Account benefit(also known as Section 125) for as much as i could, and for my employer the max amount was $3,500.

In essence, an FSA is a interest free cash advance provided by your employer. The flexible spending account is funded through equal payroll deductions spread out over one year. In my case, I’m paid every two weeks, so this comes out to a deduction of $134 every paycheck ($3,500/ 26 = $134). But one of the great things about a flexible spending account is that the entire amount you have pledged for the year is available to you the first day of the plan year!

Even though I’ve only had five paychecks for a total deduction of $670, I can use the entire $3,500 now. I could have even used this entire amount on January 1. There are some caveats to be aware of, among them are the the medical expense must be incurred during the same plan year, coverage is for you and your dependents only, the expense must be for medically eligible services, and proof of the cost of services needs to be turned in to the flexible spending account administrator within a certain timeline.

With the availability of all the flexible spending account funds upfront, plus the $500 from my savings, not only was I able to receive a nearly 10% discount, but I was also able to avoid finance and interest charges from either charging the expense on a credit card or making use of an installment loan.

The third way a flexible spending account saves you money is by reducing your income taxes. Your contributions to your Flexible Spending Account are deducted from your wages before Federal, State, and Social Security Taxes are calculated and are never reported to the IRS. This results in a decrease in your taxable income and increase your spendable income.

So the end result of using the flexible spending account was I received a discount, paid no finance or interest charges, and reduced my taxable income.

1. Pros and Cons of Self Employment

Spring has sprung!

The trees are budding, the flowers are blooming, the birds are chirping and your lawn is waking up from its long winter nap. Now is the best time to weed and feed your lawn to ensure it gets off to a healthy start. Having a professional lawn care service apply lawn treatments is outrageously expensive. With a $25 fertilizer spreader and a little know-how, you can have a picture-perfect, green-grass lawn at a fraction of the price.

Now is the time to get the first lawn application applied, so I searched online and through the Sunday ads to find the best deals. This week, Menards has their Crabgrass Preventer on sale for $6.99 (after a $3.00 rebate) for a 5,000 square foot coverage bag, which was the best deal I could find. Compare that to Scott’s Crabgrass Preventer for $23.99 for the same 5,000 square foot coverage, that comes out to three times more expensive!

I’m no master gardener, but I seriously doubt I get three times the benefit by using a premium brand name, like Scott’s.

Given an average sized lot is about 80 x 130, that amounts to 10,400 square feet. Take off a few thousand square feet for the house, garage, driveway, decks, shed, pool, etc., and that leaves you with about 7,000 square feet. So now you are going to have to decide if it’s worth it to get the second bag of fertilizer or just try to stretch the one bag a little farther. For me, I don’t skimp on the first application, crabgrass can do some major damage to your lawn and will end up costing you more in the long run by having to seed the bare spots from where the crabgrass killed off the grass.

Most lawn care specialists will tell you to treat your lawn with a weed and feed application about 6-7 times per year. I have found this to be overkill, plus you’ll have to cut your grass much more often. I’ve experimented over the years with how the lawn looks with varying amounts of lawn treatments. Now, the amount of rain has the biggest impact on how the grass looks, but I’ve tested enough to know what to expect with zero, one, two, three and five applications per year. I was looking for the right balance of a healthy lawn, minimal weeds, and a 7-10 day mowing schedule.

Zero: Obviously, with no fertilizer/weed killer, the grass looks thin and brown, with many bare-dirt patches in the lawn. The only green color in the lawn is the weeds and they are the only thing that the lawn mower blade will hit, because your grass barely grows. Let me tell you, it’s very annoying spending your precious weekend time mowing nothing but weeds.

Two: I was actually surprised that with just a spring and mid-summer application that the lawn looked decent most of the year. If you like to live your life by the 80/20 rule, I would definitely say two lawn applications per year is the Pareto Principle sweet spot.

Three: With the three treatments, I added a late fall “winterizer” application, and honestly, I never noticed any difference.

Five: The best my yard ever looked was when I put down five lawn treatments for several years in a row. The grass was thick and lush, with a deep green grass color and since it was so healthy and full, weeds were very minimal. To make the application schedule easy to remember, I would apply the treatments on or around the major holidays: I started with Easter, then Memorial Day, 4th of July was next, followed by Labor Day, and then around Halloween was the winterizer application.

How do you save money on your lawn care, or do you even care about green grass?

Do you guys buy anything in bulk?

Just the other day I noticed an offer for toilet paper on the front page of Slickdeals.net, a site that aggregates the best deals of the day. (I can do a whole blog post on how much I love that site ).  I was pretty surprised that Slickdeals.net actually posted toilet paper as one of the best deals of the day. Keep in mind; the usual front page deals on Slickdeals.net are electronics and other big ticket items that go on heavy clearance.  What was the offer? 384 rolls of standard toilet paper for $90 shipped!

Wow, that is a butt load of toilet paper. I investigated further and found out that each roll was 500 sheets, and the average cost per roll came out to be 23 cents.  The cost savings could have been huge, if I jumped on the deal, but I did not. First, the quality of the toilet paper was poor – probably the same as the toilet paper in public restrooms. Second, I don’t have any room to store that much toilet paper. So if you don’t mind low quality toilet paper, and have enough room to store 384 rolls, that deal could have been golden for you.

Here is the link of the Slickdeals.net thread that contains the deal info. You might get a good laugh out of the comments. Also FYI, the toilet paper was sold by Staples, which gives you an indication of the quality of toilet paper being sold.

Do you guys buy anything in bulk?

1. Benefits of Buying a New Car
2. Renting versus Buying