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

Alrighty, we are back from vacation and my wife and I are exhausted. Had a lot of fun, have a bunch of stuff to blog about, but not right now. Hope nothing happened while I was gone, besides the market imploding all around :P

We're going to be going to PA next week for some well needed R&R and quality time with my wife's family. You can find us in the HUGE mall they have there as well. Then, while we're there we'll be going to Hershey, PA to visit the chocolate factory among other things. I'm really looking forward to the time off and reconnecting with the family. So until then, here's a relevant youtube clip for you to enjoy:

I was over at the Consumerist taking a quick gander at the Reading the Bible Will Make you Rich. Ben stirred up a bit of controversy there and people quickly got off topic. One particularly funny comment: "Wouldn't anything old testament be from the Torah? Doesn't that just justify and perpetuate the stereo type of Jewish money management?" That person was kidding, but I found that hilarious.

However, I wanted to go to the primary source of the controversy which was over at GRS. It was actually a guest post from FMF which made more sense. So I read through the post to see what was so controversial about it.

...

I found nothing! I mean it was basic stuff. Live below your means, give to charity/church, help the poor. Sure it had some bible verses and I felt that FMF was strectching the interpretation a tad bit to tie it in to personal finance, but hey, that was the point of the post. Plus, FMF even tried to be somewhat ecumenical about it even mentioning other faiths in there. Seriously people, it was simplistic financial advice interpersed with some bible verses. I mean, an atheist like me might say, why do you even need the bible verses anyway? You can get the same advice from your favorite pf book/guru/blog. Heck, even I've talked about giving to charity.

Sheesh, got me all riled up for hardly anything. Oh well, maybe next time there will be more fire and brimstone to rail against :P.

Catholic church settles sex-abuse claims for $660 million.

Words simple fail me.

Now you can see what I look like, kind of. Here is what I would look like if I was a Simpson's character.

See here to do the same.

[Update] Added the wife. Don't we look perfect together! ^_^

First, I just wanted to say thanks for all the congrats on my surprising salary increase. I really feel fortunate to be in a position like this where I can take care of my family and gives us some breathing room in our budget.

My wife and I had a long conversation last night about our budget and what we want to accomplish and how we were feeling in general. I'll try to summarize how we thought about this unexpectedly large increase in inflow:

• We came to the realization that all this extra money is great, but it won't solve all of our problems. There are still issues that we're going to have to work through as a couple. There is also still the question of how to help our eldest son and his potential disorder. Certainly having more money will increase our options and make it easier to get professional help for him and possible for us if warranted. However, without each other's commitment and love, this extra money won't help. Those thoughts helped get us in a more sober/realistic mindset


• We revisted our budget and made some changes. We increased the amount we're going to be spending on groceries to include the purchase of more organics. This is something my wife has wanted for some time now. We also increased the projected amount we're going to be spending on gas in anticipation of my wife's commute time to school.


• Took a look at our tax situation. We're going to be right at the cusp of not qualifying for certain credits and we've gotten much closer to no longer qualifying for a Roth as well. We won't have to worry about phase-outs and such right now, but once my wife starts working, we might have to start worrying about that. No idea on whether we'll be dinged by the AMT either, but I want to research that some more. Also, one minor annoyance is the treatment of my bonus. Every year they take out the max amount and I end up with only ~50% of my bonus in the bank. As a result, I overpay my taxes in December and get a refund. Until then I don't pay any FICA taxes, but somehow I don't think the IRS likes that, even though I overpay them. Any thoughts on the matter from the great hive mind? (besides consult a tax professional :P)


• After giving ourselves some more breathing room in our budget, we took the rest and have already set up an automatic transfer to emigrant direct. Included in the transfer are all the "lumpy" things we need to pay for at once, i.e. home insurance, music lessons, etc. So now we can comfortably live within my base salary and when I receive my bonus from work, it's extra money that we can use to fund our Roth IRA (soon to be Traditional IRA) contributions, 529 contributions, and emergency fund replenishing. Once we've built up 6 months worth of expenses, we'll begin saving in a brokerage account.


• We do plan on having some fun too! I bought my wife a flower yesterday (which was nice since she was talking to one of our female neighbor when I surprised her, so that's even more brownie points for me ^_^). To celebrate we plan to see the new Harry Potter movie together on a night that will include dinner and me tripping over my wife's feet...also know as ballroom dancing. Besides that, we're going to try our best to keep our fiscal discipline and save that extra money coming in now. Revisiting our budget and setting up the automatic transfer should help.

Realism tempered with cautious optimism is how I would describe our outlook for the future. We're very optimistic about our financial future, don't get me wrong, but we are more than our finances and we're concentrating on ensuring that we have a future together first, financial or otherwise.

Our Net Worth stands at ($4,357), still negative but only $34 less than last month. Here's the breakdown.

Assets
Assets ticked down a total of 632 bps (6.32%) as we unwound much of our 0% balance transfer arbitrage. The rest will be unwound this month. 401(k) balance was up less than usual due to trying times in the market, while our Roth IRA balance increased some more.

Liabilities
Liabilities were down 620 bps (6.20%) as credit card balances where paid off and monthly payments were made on our mortgage and student loans.

Next month looks like we'll have some car repairs and other miscellaneous bills to pay. We will also start consolidating some of our existing credit cards to have higher balance cards. Unfortunately, it doesn't look like we'll be playing the 0% arb game anytime soon, but consolidating the cards make it more convenient for us to manage.

Anya Kamenetz now has her own Yahoo column. Looks like this is going to be another contentious author, but then again the comments aren't really that "deep" for example:

This article is just an overview of the type of stuff her column will be about. Its not supposed to have anything groundbreaking, its an introduction for ****'s sake. Give her a chance. At least shes hot.

With friends like those, who needs enemies. :)

I got a raise today and the FSA family are now officially part of the select few in the US that make six-figure incomes. Wow, I was truly stunned when my manager told me my compensation increase. It amounted to an almost 55% increase from my previous salary (base+bonus). Let this be a lesson to you in the corporate world, in order to get ahead, just tell them that you are going to be leaving for another company that is going to grossly over-pay you for what you do, then have a co-worker leave before you do which increases your market value tremendously and then your company will capitulate with a much higher salary.

Seriously though, I'm not sure how much of it is because I'm doing "a heckuva job" v.s. "we need to pay Frank more or he's going to leave for a hedge fund". It could be 50/50, it could be 70/30 or 30/70. In either case it was unexpected and now the hard part becomes what do we do with all this "extra" money. Details to follow hence, but once again, we'll try not to party like it's 1999.

Turn on any financial news station and you are inundated with news about huge subprime lenders imploding, borrowers defaulting, and regulators howling. But if you look at the stock market, it's mostly shrugged off the subprime noise, and unless you were invested in New Century (from $20/share down to < $1.00, ouch), your mostly diversified portfolio has regain some if not all of the earlier losses (although recently, there has been some more jitters).

But for me, I'm still worried about the subprime mess. Why? Because I know for a fact that my neighbor is a subprime borrower.

My living situation is essentially a two unit condo. I rely on my neighbor to pay his portion of the insurance costs, mow the lawn every now and then, and various other duties. All in all, it's been a relatively stress-free coexistance, and we've mostly kept to ourselves. Now though, I'm worried about how the housing downturn and also the tightening of credit standards will affect him and ultimately my family.

Here's the situation. He bought his house almost two years ago, for 0% down (got this information from the the original owner who was a bit uncomfortable with my current neighbor's mortgage). He was recently divorced at the time and mentioned that his credit score was bad due to some debt left on his report by his wife. I would guess he's in the low 600s. The purchase price was $215,000. I would also guess that his interest rate is ~8.00%. So that translate's into a monthly payment for P&I of $1,577.59. If you add on escrow payments for taxes, then that's easily in the $1,700 range.

But here's the kicker, most subprime mortgages are fixed for 2 years at a 'teaser rate' (8% is a teaser rate, sheesh) and then float after that every 6 months or every year. With the large run-up in interest rates, he's probably going to reset to 9% if not 10% depending on what the maximum his mortgage is allowed to reset at any given time.

If he's made all 24 payments on time, he's sitting on a loan balance of ~$205,000. If his loan resets at 9%, then his payment goes up to $1,840.08 (including taxes) and if he resets to 10%, then his payments go up to almost $2,000. But it doesn't end there, his payments could keep going up after that, potentially every six months!

How could this turn out, here are some potential scenarios:
1. His credit score still sucks due to whatever adverse items on his report, so he would need to refi into another subprime mortgage. However, I don't think his house, which is substantially similar to mine, would be appraised close to $215,00. So now he would need to take out a loan at 100% LTV again, which should be next to impossible given the current lending environment. He'd most likely end up in foreclosure given his inability to make his mortgage payment.

2. He has improved his credit score substantially which allows him to get not only a better rate, but also improves the chance that he can refinance into a higher LTV type loan. Maybe he can even do an 80/20 type of loan, but I feel this would depend on the lender's valuation of his house.

3. He knows his loan is going to reset and he knows he can't afford it, so he calls his lender and tells them flat-out that he can't afford it. He might point out that he's made all his payments on time and that he could continue to make payments at his current interest rate. His lenders having come under intense scrutiny from Congress decide that it would be in their best interest to let him keep his current interest rate and also keep his house. He continues making his aforementioned monthly payment of $1,700 and keeps humming along until he refinances or gets hit with another payment shock.

4. Speaking of Congressional scrutiny, here's another scenario. Let's say that Congress decides to pass and fund a massive bailout to help all those subprime lenders stay in their home. They call it some cheesy "Save American Families Act" (or some such nonsense) and say that every subprime borrower who is in default/foreclosure or is immenently facing default/foreclosure will qualify for special government financing at 6% up to 100% of their homes current value. Since it's an election year, all the major presidential candidates are backing this bill and before you know it, it gets pushed through both houses and the president signs it into law to once again Help Families. Talk about creating a Moral Hazard. Now, my neighbor would have a heck of an incentive to just default on his loan. By purposely defaulting, he would then qualify for a lower rate than he's currently paying even though he was successfully making those payments already. Not only that, it penalizes those Americans who can and have made their mortgage payments on time, whether subprime or not. In short, this would be one of the dumbest regulations to be passed in our legislative branch, and I wouldn't put it above them.

The point of this exercise isn't to try and place blame for the subprime mess on any particular injuction. In fact, I explicitly tried to avoid that because I don't find that useful. I was trying to see how my neighbor, who's situation is a microcosm for the subprime market in general might be affected (effected?) by this turn of events. In truth, I haven't spoken to him in some time, and I don't know what his exact plans are. Also, I don't know what Congress or other regulators are planning. I've seen some stories about new standards for lending, but that strikes me as a little too late akin to closing the barn door after etc, etc.

No matter how this mess gets sorted out, I worry that those of us who are making financially responsible decisions and paying our bills on time, might get tagged with the bill somehow. Perhaps in the form of a legislative bailout but at the very least with lower home prices that ding out net worth.
[Update] fixed some typos and spelling errors.

I wanted to start a new feature called "Sunday's Youtube" but forgot, so for the inaugural post in the series will be called Yesterday's Youtube.

When I was a freshman in college I really got into J-Pop and then all kinds of Asian pop music. This was an outgrowth of my interest in anime. That didn't last too long though and I haven't listened to that stuff in a while. Recently, I was talking to a friend online and he mentioned how I use to listen to that music all the time. That got me reminiscing and I was able to find two of my favorite music videos on youtube.

The first is Park Ji Yoon's "Sunginshik" which translate to Adult Ceremony. It's essentially a coming of age tune (from what I recall) similar to what Britney Spears tried to do with her "I'm a Slave" single. Telling the world that she's no longer a little girl.


The second piece is from Utada Hikaru entitled "Can you keep a secret". I like this song more than Park Ji Yoon's now. It's funny, because at the time, I would have said that I liked Park Ji Yoon more than Utada, but now Utada appeals to me more. Partially because she's not bone-thin but also because she feels less fake...if that makes any sense.



That's my brief trip down memory lane. I'm hoping to make this a weekly feature going forward. Expect more than just music videos as I comb the internet for interesting videos.