Frank the Financially Savvy Atheist - The F.S.A.

I received a wide array of comments from my readers when I professed that I would be lending money to my mother. Specifically, my intention to charge my mother interest was a source of contention. Allow me to explain my rationale further.

When I was growing up, my mother always charged interest on loans to family and expected to be treated in the same manner. There came a time when she had to take all the money that she had been saving in a savings and checking account for my sister and I, and used it to pay some bills. Once things stabilized, she paid us back +5% interest. That's how things were, and it wasn't until I was older that I realized what she did was atypical.

My mother came to me seeking help on the order of a few thousand dollars. She promised to pay me back by the end of May and insisted that I charge her interest. I did, but it was below what I was earning in Emigrant Direct. She then insisted that I increase the interest rate to be equal to Emigrant Direct's 5.05%, but I pushed back and said that the lower interest rate more than sufficed. I was trying to balance her need to not feel like this was a handout and my need to be a "good" son. Plus, I wasn't trying to fleece her or anything.

I'm sure there will be disagreement about my decision, judging from the previous comments, but I stand by it.

On another note, anyone speak Korean? That specific post was picked up by a Korean blog and I tried using babelfish, but that was even more incoherent than the original Korean. Just a random aside, thanks.
Tags: personal finance

First of all, thank you for everyone who chimed in on my risk-adjusted bet post. The comments were all insightful and thought-provoking.

First, some more information. I found the job in question on a whim. My wife and I were discussing our future and where we wanted to be (location-wise) and we wanted to get a sense of the kind of jobs that are out there in those specific locations. I saw the hedge fund posting and thought to myself, I'd be perfect for this job. It seemed like the right mix of technical skills and business acumen. The shop has been around since the early 90s and have already weathered one financial crisis (Russian default and LTCM). They are a mortgage shop, investing in different types of mortgage securities and other asset classes. Assets under management of $5-6 billion, located in Greenwich, CT (along with 10,000 other hedge funds). CT would be an ideal place for our family. Good school system, close to my wife's family in PA (but not too close), and also close to NYC which would provide opportunities for additional employment should this shop blow-up. Not only that, but depending on where we live, cost-of-living could be substantially similar to NH. Added to that the additional compensation that more than offsets the cost-of-living adjustment, and it's looking good.

In short, it would be practically perfect in everyway...except. Except my wife just got accepted into Harvard Grad School and so CT would be a long commute, to say the least. Except my son has started bonding with his piano teacher and has been making strides with his lessons. Except we're finally becoming more settled into our home. Except, except, except.

I've already drafted a cover letter and updated the old resumé and sent it off. They got back to me and asked if I was interested in another position (that's a good sign right, they want to consider me for two different positions in the same firm?) but I pushed back and said I was not interested. I've still yet to hear back from them about the original position.

So right now, we're just going to wait and see. If they want to interview me, I will interview with them. If I get the job, then the discussion will begin in earnest between my wife and I. Your comments will help guide us and our thought process as we grapple with this issue, should we really need to, so thank you kind readers.
Tags: personal finance personal

In my day-to-day job, I'm responsible for making the 'right' risk-adjusted bet...more or less. In actuality, I do defer to a more senior individual to make the ultimate decision.

In my personal life, I'm at an interesting crossroads. An opportunity has presented itself for possible new employment. Without going into too much detail, it's substantially similar to what I'm doing now, in a better location for my family in certain important ways, and oh, I could potentially double my salary without doubling my cost of living, i.e. it's not in NYC for example.

Why is the salary so much higher? Because it's a hedge fund. Nothing is definite right now, but suffice it to say that depending on how this turns out, it will make things more complicated for my family.

I'm not sure if it would be the right thing to do, hence the title of this post. Hedge funds are risky endeavors, more so than my current stable employer. Perhaps, on a risk-adjusted basis, it's the right bet to make, but it could still lose. I mean Amaranth was a huge hedge fund with a fairly long history as hedge funds go, but it still imploded because of one rougue trader.

So I'm not sure. What do you think, oh great hive mind of the blogosphere?
Tags: personal finance personal

O Lord our Father, our young patriots, idols of our hearts, go forth to battle -- be Thou near them! With them -- in spirit -- we also go forth from the sweet peace of our beloved firesides to smite the foe. O Lord our God, help us to tear their soldiers to bloody shreds with our shells; help us to cover their smiling fields with the pale forms of their patriot dead; help us to drown the thunder of the guns with the shrieks of their wounded, writhing in pain; help us to lay waste their humble homes with a hurricane of fire; help us to wring the hearts of their unoffending widows with unavailing grief; help us to turn them out roofless with little children to wander unfriended the wastes of their desolated land in rags and hunger and thirst, sports of the sun flames of summer and the icy winds of winter, broken in spirit, worn with travail, imploring Thee for the refuge of the grave and denied it -- for our sakes who adore Thee, Lord, blast their hopes, blight their lives, protract their bitter pilgrimage, make heavy their steps, water their way with their tears, stain the white snow with the blood of their wounded feet! We ask it, in the spirit of love, of Him Who is the Source of Love, and Who is the ever-faithful refuge and friend of all that are sore beset and seek His aid with humble and contrite hearts. Amen.

From Mark Twain's the War Prayer

Tags: atheism

First, the good news. My wife just found out that she was accepted into a Harvard Graduate School! I am so proud of her and all her hard work and dedication. I keep telling her that if she could get through undergrad with a dolt of a husband like me and a few kids, that Harvard is sure to accept her. Somehow she didn't believe me :P.

In either case this will force us to make some tough decisions. I will go through our thought process (including an NPV calculation!) and discuss both the financial and the non-financial impact of our decision(s).

This is such exciting news, I can't wait to tell the rest of our families.

Tags: personal finance

Yes, I know you should only lend money to family where you're ok with losing both. Yes, it's fraught with peril. I am aware of the risks involved. To that extent, my decision wasn't completely rational. My mom is going through a minor patch right now and needed some money until May. So I drafted a quick document that details the amount she's going to borrow and how much interest I'm going to charge her and when I expect to repaid.

I'm not too worried since it's my mom. So what do you think?

Tags: personal finance

Allow me to geek out a bit here.

Has anyone seen this movie? I really want to see it. It's currently on top at the box office, which is somewhat surprising to me. I thought this was a fanboy kind of movie. There must be people being drawn in from the "From the Creator of Sin City" marketing. In either case, just wanted to geek out a little bit. Carry on now.

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Are you in debt? Trying to figure out what's the best method to use? Have you been checking out Dave Ramsey's snowball method and suze orman's other method? Well here is the only debt method that should matter. Plus I'm giving it away for free, no need to buy my book to get it :).

Assuming you have some credit card debt, here is what you do:
1. Get out your spreadsheet and put down all you credit card debt like this: CARD NAME, OUTSTANDING BALANCE, INTEREST RATE, % of Total (This is the outstanding balance on each card divided by the total amount of debt you have). In the example below I've listed 4 different cards.

2. Calculate your TRUE Interest Rate (aka weighted average interest rate). Take the sum of the % of Total * the Interest rate. You can do this by using the SumProduct function in excel. Here is a screenshot.

3. In our example, the True Interest Rate is 12%. This number needs to get to zero as fast as possible. That's all that matters. Don't pay attention to balances, just pay attention to decreasing that number as fast as you can. Let's say that you already made your minimum payments and now you have $1,000 extra to pay towards your debt. Which one will get your True Interest Rate lower faster? Let's take a look.

As you can see from the above, paying the AMEX2 card, brings your True Interest Rate down to 11.63%, which is lower than paying down any of the other cards first.
What's the secret? There is no secret. This is just another way of saying pay your high interest rate debt off first.

Plus, if you can refinance your interest rate to be lower, that's even better.

Now many will say that the power of Dave Ramsey's method is the psycological benefit of paying the smaller balance debt of first. Fine, point taken. But, if you can instead focus on what matters, and try to get that True Interest Rate to zero as quickly as possible, then get your psycological benefit from getting that number to zero. It will end up costing you less in the long run.

Tags: personal finance debt

I think I need to change my monikor from financially savvy atheist to financially retarded, or maybe financially naive atheist. Not sure which one. This is another ugly edition continuing the theme from last month. Here's the run down:
Assets

• Real Estate continues to suck ass. I wrote down the valuation of our house another $10,000. There are 4-5 houses for sale on my street and realistically speaking $200K reflects what I would be able to get for my house.


• 401(k) assets were up...mostly from contributions as market volatility has picked up in the past couple of weeks.


• Overall assets were down 5.80%.

Liabilities

• Liabilities were down 15 bps.

All told our net worth stands at -$13,180. F&@$*% real estate. Maybe I need to switch to accrual accounting.
Tags: personal finance

The Mega Millions jackpot was at $370 million, should you have bought a ticket yesterday?

First the mathematical answer: no. Assuming you are the only winner, assuming you take the immediate cash option, and assuming you pay 50% in federal taxes and 5% in state taxes, the expected value last night's mega millions lottery was $0.75¹. That's right, even with a record setting jackpot, it was still a negative expectation bet. You end up losing $0.25 on the dollar rather than the typical $0.50 on the dollar.

Now the 'other' answer: maybe. It's a payoff after taxes of almost $100 million. That's a lot of money. That's life changing money. Expected value doesn't mean anything if you actually hit it big that one time.

That being said, we didn't buy a ticket last night. In liu of doing so, I told my wife that if her numbers hit, I would quit my job and become a teacher so I could spend more time with her and the kids over the summer. If I win, I get to spend $1.

Looks like I'll be spending that $1 today :).

¹ Here's my calcuation of the expected value (EV):

Matching	# ways to match	Probability	Payoff	EV
match 5 + MB	1	0.0000006%	$99,495,000	$0.57
match 5	45	0.0000256%	$250,000	$0.06
match 4 + MB	255	0.000145%	$10,000	$0.01
match 4	11,475	0.006531%	$150	$0.01
match 3 + MB	12,750	0.007256%	$150	$0.01
match 2 + MB	208,250	0.118518%	$10	$0.01
match 3	573,750	0.326530%	$7	$0.02
match 1 + MB	1,249,500	0.711109%	$3	$0.02
match 0 + MB	2,349,060	1.336884%	$2	$0.03
match 2	9,371,250	5.333315%	$0	$0
match 1	56,227,500	31.999891%	$0	$0
match 0	105,707,700	60.159795%	$0	$0
TOTAL	175,711,536	100%	0	$0.75

Tags: personal finance mega millions

This is such a breathe of fresh air. At a time when news stories about Anna Nicole, and Britney and company dominate the media, it's nice to see a reputable organization like CNN talk about how it's messed up.

You have Nancy Pelosi the first woman Speaker, Drew Gilpin Faust Harvard's first woman president (even though Harvard sucks :P) and the amount of attention they get from the media pales in comparison to the attention given to "pretty girls in trouble".

Thank you CNN. As a father trying to raise a strong, independent woman now, it's nice to have some semblance of common sense out of the media.
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Article from Bloomberg

How sweet is that. Since I have all 7 of my balance transfer cards from citi, that means it one less thing to worry about :P. Thanks Congress, much appreciated.

Tags: personal finance