Narrow Bridge Home

These days, a lot of people in their twenties discuss “cutting the cord.”  That cord, of course, being the cable cord bringing in dozens, if not hundreds, of TV channels.  Reasons for cutting the cord have traditionally been either monetary or usage.  People did not want to spend the money or would not use it enough to make the expense worthwhile.  Nowadays, though, other options exist as a substitute.

One substitute to cable, that is totally free, is broadcast.  A handful of channels, such as ABC, NBC, CBS, and Fox, send their shows out for free in cities.  The recent nationwide upgrade to digital broadcasting gives a higher quality than ever before.  Most popular shows come in over network TV, and you can get local news from these channels as well.  If you have a TV and no cable, this is the default option.

However, if you need a fix of “The Hills” or weekly Monday Night RAW, you need cable or a dish.  Those pay channels only come in over cable.  I enjoy being able to watch Law and Order at any given time on one of a handful of channels that always have it on.  Beyond there, for true movie lovers, are the premium subscription channels like HBO, Stars, and Cinemax that give you 24-7 movies.

If you are a movie lover, there is a cheaper option.  For $8.99 per month, you can watch any movie that Netflix offers streaming through your computer, PS3, X-Box, or a Roku or internet Blue Ray player.  With high speed internet, the quality is great and $8.99 is much cheaper than HBO.  If the 20,000 or so Netflix movies don’t include the one you want, that $8.99 gives you unlimited exchanges for 1 movie at a time.  Up that to about $15 for 2.

If you are a TV show lover, most networks offer their shows online at their websites, or you can find most good shows on Hulu.com for free the day after the show airs live.  I use the Hulu queue to ensure I don’t miss new episodes of my favorite shows like Lost and The Office.

So, does Internet let us cut the cord?  Yes, potentially.  However, it depends on what you want.

I like being able to flip through the listings and find a show I want on 100 different channels.  I like being able to turn on a free movie or show on demand.  I like TV.  So, to me, it is worth the cost.  For others, Hulu and Netflix or Redbox might suffice.

It all comes down to what you think something is worth, and what else could you do with that money that would make you happier.  Yes, this is the good old economic concept of opportunity cost.  If you can’t get a better value, or utility, from something else with a similar price tag, cable or a dish is a good way to use your hard earned money.  If there is something you find more value in, do that instead.

Either way, it is good to periodically re-asses cable and other fix cost utilities.  What do you all do?  Cable or no cable?

Anyone who has ever had a loan has seen the statements that come updating you on your progress.  Early on, it is often disheartening to see that the bulk of your payment went to just the interest, and a small amount went to the outstanding loan balance.  If you ever wondered why and how it works, read on.  If not, read on anyway, you could still learn something.

When someone gets a new loan, there are several important factors that determine the amortization schedule, or schedule of payments including interest and principal reduction.  Those inputs are: loan length in years, number of payments per year, interest rate, beginning balance, and ending balance.  In most cases, the ending balance is zero and 12 payments are made per year.  Based on these factors, a loan amortization schedule can be created.

There are two ways to create a loan amortization schedule.  First is the nerdy finance academic way, which sucks.  I promise, I have done it before.  It is a stupid waste of time.  The second is with a computer, that way takes about five seconds.

Based on the inputs above, the loan amortization calculator will determine what monthly payment is needed for the loan to have the desired ending balance given the interest rate, starting balance, and terms of the loan.  The loan is broken up in such a way that you can see what interest is required and what principal balance remaining would be after each period.  An easy calculator that gives an annual amortization can be found here.  This is a sample amortization for a 30 year fixed mortgage on a $250,000 house at 6%.  Notice that in the first year, only $500 goes to the principal, while the rest goes to interest.  Because interest only accrues on outstanding principal, interest decreases every year.

Now is the good part.  If you pay extra into the loan in a period, that extra amount directly reduces the principal.  All of those times I have written about the benefits of early payments can be clearly seen when using an amortization schedule.  Fortunately, Microsoft Excel has a great loan template that allows you to include extra payments.

If you understand how loan amortization works, you understand about 90% of important financial concepts.  Bonds, loans, and anything with an interest rate uses the same set of formulas to calculate present and future values.  Did I confuse you?  Feel free to ask questions in the comments.

Just a quick thanks to M is for Money for including us in last week’s carnival of personal finance.  The name of that site makes me want a cookie all of a sudden…

I would like to take this opportunity to toot my own horn for a moment.  I got a promotion and a raise!  Yay!  More money, more to do.  Good times.

The question of what to do with a raise is often discussed in the personal finance world.  People can save more, they can raise their standard of living, they can do some combination of the two.  The answer for some is difficult.  While we all know that we should keep living just like we are and save our raise, we are not always that good.

I am a big fan of the percent contribution method of dealing with a raise.  If you make $40,000 per year and put 10% into retirement savings, you should stick with, at least, a 10% contribution if you get a raise to $45,000.  That way, your retirement contributions increase with your raise.  This is in contrast of putting in a fixed dollar amount, $4,000 per year at 10%, before and after the raise, because it would decrease to 8.8%.

Optimally, though, it might be even better to increase your contribution by a percent.  If you can get by living comfortably at $36,000 per year after retirement contributions before the raise, you can certainly continue to do so after the raise.  Why not split the difference?  Increase your contribution by half of your raise if you can, or something higher that what you are doing now.  It is easier to keep living the way you are today than to try to increase your contribution and adjust down later.

This time around, I am going to keep my retirement contributions the same by percentage, and will use the extra income to pay down student loans faster.  Hopefully I can put my next raise 50% to a house purchase fund and 50% to retirement.

That’s just my two cents.  What have you done with raises in the past?  Do you just keep it, keep contribution percentage the same and keep the difference, or raise your contribution?  Please say in the comments.

Ovrdraft Fees To Become Opt-InThanks to the good old boys at the Fed, banks are no longer going to be able to just pay out your checks and ATM withdrawals that take you below zero and charge you $40 for it.  Banks make billions from overdraft fees every year.  Like I have said in the past, if you overdraft it is your own fault, not your bank’s.  However, this change will be good for people who like to spend what they don’t have.

Here is the full release from the Federal Reserve:

The Federal Reserve Board on Thursday announced final rules that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.

Before opting in, the consumer must be provided a notice that explains the financial institution’s overdraft services, including the fees associated with the service, and the consumer’s choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.

“The final overdraft rules represent an important step forward in consumer protection,” said Federal Reserve Chairman Ben S. Bernanke. “Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service.”

The Board’s consumer testing shows that most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit card transactions unless they affirmatively consent, or opt in. At the same time, testing shows that most consumers want overdraft services to cover important bills, such as checks they use to pay rent, utilities, and telephone bills.

To ensure that consumers have a meaningful choice, the final rules prohibit financial institutions from discriminating against consumers who do not opt in. The final rules require institutions to provide consumers who do not opt in with the same account terms, conditions, and features (including pricing) that they provide to consumers who do opt in. For consumers who do not opt in, the institution would be prohibited from charging overdraft fees for any overdrafts it pays on ATM and one-time debit card transactions.

“Overdraft fees can be costly,” said Governor Elizabeth A. Duke, the chair of the Board’s Committee on Consumer and Community Affairs. “Our rule will help consumers better understand the terms and conditions of overdraft services and will give them an opportunity to avoid fees when these services do not meet their needs.”

The Federal Register notice is attached. The final rules are effective July 1, 2010.

Thanks to the Consumerist for helping me find this one.

Last week, I wrote about my recent apartment hunting.  Now that I have a new place picked out, I have to move.  I arranged an overlap of one week so I have time to move everything in my busy schedule of working during the day and going to classes at night.

So, I started by looking at moving trucks.  I went to the most obvious place first, U-Haul, and was surprised by the cost.  The rental fee, about $20, didn’t seem too bad.  However, the .80 per mile blew me away.  I have mapped out the route from the rental place to my needed stops and found that it is about 20 miles.  With tax and all, that puts the cost somewhere in the $40-$50 ballpark.  No thanks.

So, I decided to look at Enterprise to see about just getting a pickup for the afternoon.  $109!!!!!  No thanks.

I did a little more Google magic and ended up at the website for Budget Truck Rental.  With a fall coupon they have out, offering 25% off and only .50 per mile, I found a winner.  Estimated cost with tax: $29.99 including miles.

Next up, I had to figure out how I was going to get the furniture into the truck and into the new apartment.  Fortunately, I have helped friends move in the past, and would help those friends again in a heartbeat, and they offered to help me.  Cost: one dozen doughnuts and a six pack of beer. (We are moving in the morning-early afternoon time frame)

Next, though, I realized I would need Internet when I move in.  I have blogs to maintain after all.  Fortunately I work somewhere I can get a phone/Internet package discount, so I have set everything up for a good bargain.  TV is not as cheap as I expected.  The TV company got rid of “expanded basic” cable and now makes you get either crappy basic with about 20 channels for $15 per month or “digital starter” for $55 per month.  I hoped expanded basic would be somewhere in the middle, but it is dead.  So, considering that I do like watching my cable shows, I just bit the bullet.

With roommates, the cost of TV and Internet is split 3 ways, but now I am at it alone.  My power/heat bill, though, will go down significantly moving from an old house into an apartment.  Even losing sharing on the energy bill, I am saving (and I turn the lights off when I leave).

I guess I should stop rambling and get to the point.  Moving is not cheap and certainly not easy.  When you are considering doing so, remember that the cost is not just an increase (or decrease) in rent.  It is new couches and dishes if you are sharing with other people, and utilities are going to change as well in most cases.  Commute times may shift and insurance costs may change.  There are many pieces to the puzzle.

The most important thing to remember, above money, is your happiness.  If you are miserable where you live, it is probably worth the extra cash to get out to a new place.  If you think you can be happier elsewhere, spend the money.  What is the point of money if not to make us happier?

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]

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!