Advanced Personal Finance

Just a quick reminder for those who traveled outside the U.S. during the period February, 1996 through November, 2006 and used a major credit card to make purchases, you may file a claim to have some credit card fees reimbursed.

As part of a class-action settlement, Mastercard and Visa are refunding a minimum of $25 to people who used their cards on foreign travel during that time period.  See ccfsettlement.com for full details.

As I read it, you can either file to have your actual fees reimbursed (if you have the supporting documentation) or a flat minimum of $25.

Share This

Our family is going to be in the market for a new house soon. We’re also selling our current one; that can mean only one thing. Well, two things, really: a real estate agent and lots of fees. The thought process for why we’re using a realtor is for another post, but suffice it to say that’s the direction we’ve chosen.

Since we’re going to be giving the person who sells our house a great deal of money (in the form of commission), we want to be absolutely sure this is the right person to sell our house. Thus, we need to interview agents.

Our search for a good agent was greatly aided by a program offered through our bank, USAA. It’s called Mover’s Advantage (once again, I’m not being compensated by USAA - I just really like them). We used it to buy this house (our first).

Mover’s Advantage does three things, in practice:

1. Provides a USAA coordination person as kind of a project manager to smooth any difficulties
2. Provides a lead on a good realtor, both in your current geographic area (if selling) and your new area (if buying)
3. Gives you money back. They kick back a flat rate based on the sale/buy price of the houses

The Interview Questions

Once USAA got us hooked up with a local realtor, we (ok, my wife) set up an appointment for her to come over. In the meantime, I called her with some preliminary interview questions. Here’s what I asked.

1. How long have you been in the business? You don’t want someone who’s just starting out and has listed two houses so far.
2. Where are you ranked in your office or firm? How large is the office or firm? Obviously, you want someone who is at the top of the sellers list.
3. What’s your list to sales price ratio? The realtor should know this immediately.  It’s a measure of how accurately he or she prices houses, among other things.
4. When was the last house you sold? Again, goes to experience, especially in the current market.
5. How quickly did your last house sell in this (or similar) market? The longest? Gives you a feel for how aggressive the realtor is in moving the house.
6. What’s the commission/fee schedule? No matter what a realtor says, this is negotiable.  However, lower is not always better.  Consider that a home listed for full (7%) commission will attract more attention from buying agents.
7. How will you advertise the house? Especially important are online portals.  Also, will the ads have pictures or other graphic walk-throughs?  If so, who will do the photography?
8. Will you be at closing? The only acceptable answer is ‘yes.’
9. How do we contact each other? You need access to the realtor immediately, not through an answering service.
10. Can you show me local reporting data (especially schools data)? This should be readily available.
11. Give me two examples of a listing of yours that did not sell.
    
12. Can I have the names and numbers of the last three people who listed with you? If the realtor balks at this, keep looking.  You want to talk to people who have sold houses with this person to find out the bad and good.

We’ve used this list to interview just one realtor so far.  She passed the ‘phone interview,’ so an in-person meeting is next.  I’ll let you know what comes out of that.

Share This

I find it amazing what banks and credit card companies will put in advertisements.

The other day I saw a commercial for a credit card offered by a well-known bank. I forget which one or I’d say. Anyway, the gist of the ad was that, due to there undying benevolence, this bank wouldn’t charge a fee for going over your credit limit.

Excuse me, but what’s a credit limit for, anyway? It’s been a while since I had to concern myself with my credit limit (though don’t think I never have had to - I did) but what are these for if you can charge stuff in excess of the limit? I guess the honest answer is “they’re a method banks use to extract more cash from consumers.”

I just don’t get it.

I also have another observation. Have you ever noticed that credit cards are an extremely competitive business in that they’ll offer all kinds of incentives to get you to sign up for one, but no one competes on price (APR)? Aside from one of those incentives in the form of a short-term 0% balance transfer or 0% on purchases for a year, that is. Why, if competition is so fierce, do banks not compete this way?

The answer lies, once again, in economic behavior. See, when people consider whether or not to sign up for a credit card, they never see themselves carrying a balance. They believe they’ll pay off their statement every month. Except, for a sadly large percentage of people, they do carry a balance, at least occasionally.

Instead of considering the actual cost of that credit, people sign up for the free t-shirt or teddy bear. It’s proximity. The t-shirt is here, now. Finance charges are only a possible outcome; and anyway, that’s months from now.

Since people don’t shop for credit cards based on actual cost, banks don’t compete on it.

Those crafty credit card companies.

Share This

Something I just can’t figure out about some companies’ benefits - 401(k) waiting periods. Why in the world would a company limit how soon you can start participating in their 401(k) plan? It goes totally against the current movement toward automatic enrollment, yet some places it persists.

Why? The party line

I had occasion recently to take a look at the benefits package of a medium-size company that had a waiting period on their 401(k). When I did a little research, I could only find a couple of pretty weak reasons for a waiting period.

• 401(k) administration costs money, so a company wants to make sure you’ll stick around before incurring start-up costs. This doesn’t make sense to me for two reasons. First, these ‘administrative costs’ are tiny for each additional person in the plan. Second, how does waiting three months or six months overcome this objection?
• Means testing puts limits on contribution levels for participants if there are enough non-participants. I guess companies that have waiting periods figure you’ll start out as a non-participant and lower their means testing ceiling. Again, though, this doesn’t really make sense as the principal of inertia says people who have to take action to make a change tend not to do so. If you’re prevented from participating, even temporarily, in a 401(k) plan, your chances of never participating are much higher. By the time the six month waiting period expires, you’ve gotten used to your full paycheck and likely will have forgotten all about retirement savings. Dumb.

Regardless of the reason, 401(k) waiting periods exist at a shockingly high number of companies. The data I could find says a third of companies have a waiting period and a quarter have a one year waiting period! Simply amazing.

How to overcome a waiting period

If you do take a position at a company with a 401(k) waiting period, there are a couple of strategies you can employ so you don’t lose too much ground saving for retirement.

• Use an IRA as a substitute. You can use an IRA as a low-rent substitute for a 401(k) in a pinch. You have two choices - deductible (or ‘traditional IRA’) and Roth. In general, I think the Roth is the better deal, but it has no current-tax-reducing qualities, so if you’re looking to reduce your taxes this year, the traditional IRA might be for you.
• Save outside a traditional retirement plan. Once you’ve maxed your IRA for the year, you can start saving in a taxable investment account. This isn’t really such a bad idea, because you can use such an account for anything, not just retirement, so if something else comes up, the money’s there.
• Negotiate with the employer. This might seem far-fetched, but after a hiring manager knows he or she wants you, you have a bit of leverage. Traditionally, people just ask for more money. If the 401(k) is important enough to you, and you’re important enough to them, there may be room to move.
• Save outside the plan then save twice as much once you’re in the plan. Start saving in a savings account from day one of employment. Then once you’re eligible, make your contribution twice as much as you normally would and live off part of the savings account each month to fill in the gap in your monthly budget.
• Be more aggressive. Once you’re eligible to save in the 401(k), you can be a bit more aggressive with your asset allocation than you normally would, at least for a little while. This strategy isn’t without risk like the others are, though, so consider it carefully. Besides, being more aggressive is easy to say and hard to do sometimes.

Share This