Remember CDOs? Of course, you do...although no one is trading these monsters anymore they continue to wreak havoc to the global economy.
We still teach about them on the CQF. Why? Maybe they'll come back one day, maybe with a different acronym, or if they don't then they are at least a fantastic teaching aid for showing how not to model and how not to risk manage.
Hang on a second. Have they really disappeared? I'm not so sure they have. What's that recent deal that the UK Treasury has just done with RBS? It looks scarily familiar...something to do with $325 billion of toxic assets (no doubt including a few CDOs and CDO^2s) and divvying up different levels of risk?
The balance sheet of RBS is £2.3 trillion. In return for £6.5 billion in some dodgy non-voting shares the UK Treasury is going to be insuring some of that £2.3 trillion. The first £19.5 billion is RBS's responsibility, after that the taxpayer takes care of 90% of the rest of the $325 billion.
Sound familiar? Yes, the UK Treasury has just got itself the mezzanine tranche of a CDO!
Observations:
1. This "Mother Of All CDOs" that the Treasury owns is mezzanine tranche, the hardest tranche to value and risk manage.
2. Assuming there are CDO^2s in the portfolio this is now officially a CDO^3.
3. Worst of all, the premium paid to the UK Taxpayer is £6.5 billion in RBS shares. Of course, if things go wrong, as they probably will, then that premium will plummet as the RBS share price plummets. Note to Lord Myners, Alistair Darling and Gordon Brown: When you buy insurance on company X, buy it from company Y, not company X itself.
4. A fall of a mere 8.2% in the value of the toxic assets will wipe out the £6.5 billion. And that's best-case scenario in which the RBS share price doesn't fall!
5. Finally, the shares are non voting so as to give the impression, albeit rather feebly, that RBS has not been nationalized. Look, the Taxpayer owns 90% of RBS, and can vote on 75% of the shares. Why keep up the charade? Nationalize all dangerous banks, across the globe, immediately. Guarantee the deposits of the man in the street. And clean up the mess in an atmosphere of relative stability.
The UK Treasury is being advised by a bunch of dodgy Sirs and Lords, none of whom have a clue about what is going on or what to do, none of whom have any qualifications in risk control. But I'm sure all of them are jolly good chaps to have a glass of port with in the clubs of St James's.
Saturday, February 21, 2009
Thursday, February 12, 2009
12 Steps to Financial Health
With all of the recent doom and gloom in the financial markets, it’s easy to get discouraged about your own financial situation. But here’s some good news for a change. While personal finance may seem complicated, it really boils down to 4 good habits that can make the difference between going broke or building up your net worth each month.
1. Save money
2. Avoid debt
3. Invest
4. Don’t lose it
Just as with achieving a balanced diet or maintaining a regular exercise regimen, getting your financial house in order is easier said than done. What’s that they say about the best laid plans? A 12 step program can get you on the road to financial recovery.
Save money
1. Know what you spend
The first step to growing your money is knowing your money. Just by seeing that you spent $432 one month dining out with your friends, or that you went to Starbucks 37 times, you’ll change your spending habits for the better.
2. Stick to a budget
Most of us really only have 1-2 “problem” areas. Maybe it’s shopping, maybe its electronics. Once you know how much you typically spend, set a budget 15-25% lower. If you try to cut too hard too fast, you’ll never be able to stick to it.
3. Find a checking account that pays interest
“Free” checking isn’t exactly free. Sure you get free checks and no account fees, but most checking accounts pay no interest - zero, nothing. Meanwhile, the banks are loaning your money out in the form of mortgages or business loans at 7-8% interest. That’s how banks work. If you don’t have a checking account that pays interest, you’re being ripped off. Consider switching your account to one of the many that allow your money to work for you such as an E*Trade Max-Rate Checking Account (2.9% APY on accounts over $5K) or an HSBC Online Payment Account (2.25% APY, open an account with as little as $1).
4. Find a savings account that pays 3%+ interest
The average US savings account only pays about 0.5% interest. With inflation at 2-3%, you’re actually losing purchasing power each year. Find a high-yield savings account, money market fund, or CD that pays more such as E*Trade Max-Rate Savings (3.3% APY, open with as little as $1).
Avoid debt
5. Know your credit score and correct your credit report
Your credit score determines the interest rate lenders will charge on your credit cards, mortgage, student loan, or car loan. That means any mistakes in your credit report can cost you tens of thousands of dollars over your lifetime. Unfortunately, 79% of all credit reports have an error, and 25% have an error serious enough to deny you access to credit. Take charge of your credit score at FreeCreditReport ($12.95/month for credit score and monitoring) or myFico (all three FICO scores and credit reports).
6. Eliminate late fees
About 35% of your credit score is determined by on-time payment. If you’re late on a credit card payment, it could cost you much, much more than the $29 late fee - if you let it go more than 60 days, it can affect your credit score and cost you thousands.
7. Don’t pay credit card finance charges
The average American carries $8,500 in credit card debt. At a minimum payment of $100 a month, it takes 6.7 years, and $4,257 in extra finance charges before you’re in the clear. If you carry a balance, one way to get some temporary relief is through a balance transfer. The best way out of this quagmire is to pay down your highest interest card first, or look for a balance transfer card such as the Citi® Diamond Preferred® Card (0% Balance Transfer APR for up to 12 months, no annual fee, 3% transfer fee) or the Chase Platinum Visa® Card (0% Balance Transfer APR for up to 12 months, no annual fee, 3% transfer fee but no more than $99).
8. Get a credit card that pays you
Visa and MasterCard typically charge retailers 2-3% of each purchase you make. As a consumer, you can get a cut of those fees in the form of cash back rewards. Don’t settle for a card that pays less than 1%. A typical household can get as much as $300 a year back just for buying what it was going to buy anyway. Examples of cash back cards include the Chase Freedom℠ Visa Signature® Card (3% cash back on gas and groceries) and Blue Cash® from American Express (up to 5% on gas, restaurants, and drugstores).
Invest
9. Contribute to an IRA or 401k
Invest $100 a month in a tax-deferred account like an IRA or 401k, and at a growth rate of 10%, in 30 years you’d have $380k. In a regular taxable account (assuming 20% annual taxes), you’d only have $229k. That’s a $151k difference. Companies such as Fidelity and E*Trade offer such accounts.
10. Start investing and keep investing
Two simple steps can put you ahead of 99% of your peers. First, have your employer automatically deduct $200-$300 a month from your paycheck to a brokerage or mutual fund account. Second, grow that money in an index fund like the S&P 500. By having the money automatically deducted, you won’t be as tempted to spend it. If $200 a month in the S&P behaves as it has in the past 20 years, two decades from now you would have around $170k in savings. Open a Scottrade Brokerage Account ($7.00 stock trades, $500 minimum deposit) or an E*Trade Financial Brokerage Account ($12.99 stock trades, $1,000 minimum deposit).
Don’t lose it
11. Create an Emergency Fund
An emergency fund helps protect you against all of life’s ups and downs, whether they be car repairs, job loss, or a leaky roof. If you’re young, single and have no mortgage, strive for about 3 months expenses, or ballpark around $10,000. If you have a house, kids, or both, strive for 6 months expenses, or around $20,000 - $30,000 for the average family. Be sure to keep your emergency fund in a high-yield savings account so that it continues to grow.
12. Protect yourself with insurance
The right insurance depends greatly on your age and whether you have a family. If you’re in your 20’s, you need renter’s insurance - it’s typically around $150 a year and covers theft and fire. If you have a family, you need life insurance, health insurance, and disability insurance.
1. Save money
2. Avoid debt
3. Invest
4. Don’t lose it
Just as with achieving a balanced diet or maintaining a regular exercise regimen, getting your financial house in order is easier said than done. What’s that they say about the best laid plans? A 12 step program can get you on the road to financial recovery.
Save money
1. Know what you spend
The first step to growing your money is knowing your money. Just by seeing that you spent $432 one month dining out with your friends, or that you went to Starbucks 37 times, you’ll change your spending habits for the better.
2. Stick to a budget
Most of us really only have 1-2 “problem” areas. Maybe it’s shopping, maybe its electronics. Once you know how much you typically spend, set a budget 15-25% lower. If you try to cut too hard too fast, you’ll never be able to stick to it.
3. Find a checking account that pays interest
“Free” checking isn’t exactly free. Sure you get free checks and no account fees, but most checking accounts pay no interest - zero, nothing. Meanwhile, the banks are loaning your money out in the form of mortgages or business loans at 7-8% interest. That’s how banks work. If you don’t have a checking account that pays interest, you’re being ripped off. Consider switching your account to one of the many that allow your money to work for you such as an E*Trade Max-Rate Checking Account (2.9% APY on accounts over $5K) or an HSBC Online Payment Account (2.25% APY, open an account with as little as $1).
4. Find a savings account that pays 3%+ interest
The average US savings account only pays about 0.5% interest. With inflation at 2-3%, you’re actually losing purchasing power each year. Find a high-yield savings account, money market fund, or CD that pays more such as E*Trade Max-Rate Savings (3.3% APY, open with as little as $1).
Avoid debt
5. Know your credit score and correct your credit report
Your credit score determines the interest rate lenders will charge on your credit cards, mortgage, student loan, or car loan. That means any mistakes in your credit report can cost you tens of thousands of dollars over your lifetime. Unfortunately, 79% of all credit reports have an error, and 25% have an error serious enough to deny you access to credit. Take charge of your credit score at FreeCreditReport ($12.95/month for credit score and monitoring) or myFico (all three FICO scores and credit reports).
6. Eliminate late fees
About 35% of your credit score is determined by on-time payment. If you’re late on a credit card payment, it could cost you much, much more than the $29 late fee - if you let it go more than 60 days, it can affect your credit score and cost you thousands.
7. Don’t pay credit card finance charges
The average American carries $8,500 in credit card debt. At a minimum payment of $100 a month, it takes 6.7 years, and $4,257 in extra finance charges before you’re in the clear. If you carry a balance, one way to get some temporary relief is through a balance transfer. The best way out of this quagmire is to pay down your highest interest card first, or look for a balance transfer card such as the Citi® Diamond Preferred® Card (0% Balance Transfer APR for up to 12 months, no annual fee, 3% transfer fee) or the Chase Platinum Visa® Card (0% Balance Transfer APR for up to 12 months, no annual fee, 3% transfer fee but no more than $99).
8. Get a credit card that pays you
Visa and MasterCard typically charge retailers 2-3% of each purchase you make. As a consumer, you can get a cut of those fees in the form of cash back rewards. Don’t settle for a card that pays less than 1%. A typical household can get as much as $300 a year back just for buying what it was going to buy anyway. Examples of cash back cards include the Chase Freedom℠ Visa Signature® Card (3% cash back on gas and groceries) and Blue Cash® from American Express (up to 5% on gas, restaurants, and drugstores).
Invest
9. Contribute to an IRA or 401k
Invest $100 a month in a tax-deferred account like an IRA or 401k, and at a growth rate of 10%, in 30 years you’d have $380k. In a regular taxable account (assuming 20% annual taxes), you’d only have $229k. That’s a $151k difference. Companies such as Fidelity and E*Trade offer such accounts.
10. Start investing and keep investing
Two simple steps can put you ahead of 99% of your peers. First, have your employer automatically deduct $200-$300 a month from your paycheck to a brokerage or mutual fund account. Second, grow that money in an index fund like the S&P 500. By having the money automatically deducted, you won’t be as tempted to spend it. If $200 a month in the S&P behaves as it has in the past 20 years, two decades from now you would have around $170k in savings. Open a Scottrade Brokerage Account ($7.00 stock trades, $500 minimum deposit) or an E*Trade Financial Brokerage Account ($12.99 stock trades, $1,000 minimum deposit).
Don’t lose it
11. Create an Emergency Fund
An emergency fund helps protect you against all of life’s ups and downs, whether they be car repairs, job loss, or a leaky roof. If you’re young, single and have no mortgage, strive for about 3 months expenses, or ballpark around $10,000. If you have a house, kids, or both, strive for 6 months expenses, or around $20,000 - $30,000 for the average family. Be sure to keep your emergency fund in a high-yield savings account so that it continues to grow.
12. Protect yourself with insurance
The right insurance depends greatly on your age and whether you have a family. If you’re in your 20’s, you need renter’s insurance - it’s typically around $150 a year and covers theft and fire. If you have a family, you need life insurance, health insurance, and disability insurance.
Tuesday, February 3, 2009
The Evaluation Procedures Before Buying Gold Coins
As recently as the early twentieth century, the primary form of currency in circulation around the world were gold coins.
There are various reasons why an individual would select to start purchasing gold coins. Some may acquire it because it is a good investment while others see the potential for their profits to increase as gold value increases. Even today coin collectors have high demand for hard to find coins.
People who chose to buy gold coins know that doing so is one of the safest ways to invest their money. Plainly because they know over time these coins are unlikely to lose any value rather they are in reality going to be gain in worth.
Before acquiring any coins you need to find a honest dealer. If you are able, engage one who is a member of the Professional Coin Grading Service PCGS), or the Numismatic Guaranty Corporation. A coin dealer who is not a member of these associations will often sell you bogus coins.
After finding your dealer you will then need to decide just how much gold it is you want to purchase. Knowing the price of gold, which fluctuates constantly, will help you to buy at the best cost.
Not only do you must to know how much you plan to invest in gold coins but you also need to determine what is available and which coins make the best investments. Presently gold coins fall into three assorted categories. Some that are considered uncommon, are looked upon as collectible, and there are ones that are graded as regular gold bullion.
Gold bullion coins are dealt only for the quantity of gold contained within them. The worth of scarce and collectible coins changes quite often, so when placing a value on them, several factors need to be taken into consideration. Gold content is not the only essential factor in determining price - the age and rarity can also affect it.
Also , when you are going to be buying gold coins it is important that you understand a little bit about the ranking and evaluation procedure. Understanding the uncommon coin market is a crucial skill in helping to spot a possible bargain.
There are various reasons why an individual would select to start purchasing gold coins. Some may acquire it because it is a good investment while others see the potential for their profits to increase as gold value increases. Even today coin collectors have high demand for hard to find coins.
People who chose to buy gold coins know that doing so is one of the safest ways to invest their money. Plainly because they know over time these coins are unlikely to lose any value rather they are in reality going to be gain in worth.
Before acquiring any coins you need to find a honest dealer. If you are able, engage one who is a member of the Professional Coin Grading Service PCGS), or the Numismatic Guaranty Corporation. A coin dealer who is not a member of these associations will often sell you bogus coins.
After finding your dealer you will then need to decide just how much gold it is you want to purchase. Knowing the price of gold, which fluctuates constantly, will help you to buy at the best cost.
Not only do you must to know how much you plan to invest in gold coins but you also need to determine what is available and which coins make the best investments. Presently gold coins fall into three assorted categories. Some that are considered uncommon, are looked upon as collectible, and there are ones that are graded as regular gold bullion.
Gold bullion coins are dealt only for the quantity of gold contained within them. The worth of scarce and collectible coins changes quite often, so when placing a value on them, several factors need to be taken into consideration. Gold content is not the only essential factor in determining price - the age and rarity can also affect it.
Also , when you are going to be buying gold coins it is important that you understand a little bit about the ranking and evaluation procedure. Understanding the uncommon coin market is a crucial skill in helping to spot a possible bargain.
Tuesday, January 27, 2009
Going from a manageable recession into a state of disorder
Disasters are usually marked by a number of incidents adding up and leading to the potentially worst outcome.
In this context, we just need to look what happens in the economy. We had a third bailout and unbelievable losses in the case of AIG, last week. This week Citigroup became a penny stock. GM is most likely nearing bankruptcy next week and already today its German subsidiary Opel is declared dead by the press. Then there is GE which might become the next victim. “It´s time for a break”, might be what distressed investors might think. The trend has becomes manifested over the last weeks, we are changing from bad times to worse.
Within the next six months we will be most likely to observe dramatic economic implosions and bankruptcies. The ticking economic time-bomb hidden in Credit Default Swaps might lead to bully-up companies and even countries. I confirm my earlier predictions that the events will turn out bad in Q2, and I had predicted this trend leading to a depression, back in 2007.
However, there are still some individuals who believe in recovery. Some Forex traders told me that I might be wrong and the recovery is in sight. I do not share their hope. The situation is too bleak. We have most likely passed the period of efficient preparation. Now, time runs out.
We are on our way to leave what I call phase-I. Phase-I allows us to prepare for what will happen in the crisis. It allows us to get some accessories, a survival kit, a swimming west and get into a boat. By April, the rescue boats will become scarce, and in case you have not managed to get one than most likely you will sink with the Titanic.
When this happens, governments will attempt to accesses your capital rights. This will happen in parallel to other distortions in the markets. While any kind of investment in the “economy” will be depleted, one will have to start worrying about governments actions. The rate of depletion has taken fascinating speed over the last weeks and is sheer impossible to keep up with the news, but I recommend you watch for signs of accessing your capital rights.
Let me give you some examples:
One of these things is nationalization, which we have seen now in many countries. They drive shareholders directly into losses. AIG´s former CEO Maurice Greenberg is a great example of someone losing a major amount of money. Another example for accessing your capital right is inflation. And inflation is building up. It is like a Tsunami. What you notice at this point of time is that the water pulls back, but you might want to watch out for the wave of freshly printed money. The next way is to tax you out by implementing new taxes. Last but not least there is something called quantitative easing and in my eyes it is the most advanced method of accessing the capital rights of people. By buying government debt or corporate bonds a central bank usually can control the monetary exchange rates. It is a monetary policy tool. Therefore it should not be used as a political tool to stimulate the economy at all. If someone decides to do so, he takes severe market distortions into account. At discretion bond and equity prices will move in one or the other direction. In a situation like this where market participants distrust it is like adding oil to the fire. It increases the level of uncertainty and cause even higher volatility. It´s economic suicide.
In this context, we just need to look what happens in the economy. We had a third bailout and unbelievable losses in the case of AIG, last week. This week Citigroup became a penny stock. GM is most likely nearing bankruptcy next week and already today its German subsidiary Opel is declared dead by the press. Then there is GE which might become the next victim. “It´s time for a break”, might be what distressed investors might think. The trend has becomes manifested over the last weeks, we are changing from bad times to worse.
Within the next six months we will be most likely to observe dramatic economic implosions and bankruptcies. The ticking economic time-bomb hidden in Credit Default Swaps might lead to bully-up companies and even countries. I confirm my earlier predictions that the events will turn out bad in Q2, and I had predicted this trend leading to a depression, back in 2007.
However, there are still some individuals who believe in recovery. Some Forex traders told me that I might be wrong and the recovery is in sight. I do not share their hope. The situation is too bleak. We have most likely passed the period of efficient preparation. Now, time runs out.
We are on our way to leave what I call phase-I. Phase-I allows us to prepare for what will happen in the crisis. It allows us to get some accessories, a survival kit, a swimming west and get into a boat. By April, the rescue boats will become scarce, and in case you have not managed to get one than most likely you will sink with the Titanic.
When this happens, governments will attempt to accesses your capital rights. This will happen in parallel to other distortions in the markets. While any kind of investment in the “economy” will be depleted, one will have to start worrying about governments actions. The rate of depletion has taken fascinating speed over the last weeks and is sheer impossible to keep up with the news, but I recommend you watch for signs of accessing your capital rights.
Let me give you some examples:
One of these things is nationalization, which we have seen now in many countries. They drive shareholders directly into losses. AIG´s former CEO Maurice Greenberg is a great example of someone losing a major amount of money. Another example for accessing your capital right is inflation. And inflation is building up. It is like a Tsunami. What you notice at this point of time is that the water pulls back, but you might want to watch out for the wave of freshly printed money. The next way is to tax you out by implementing new taxes. Last but not least there is something called quantitative easing and in my eyes it is the most advanced method of accessing the capital rights of people. By buying government debt or corporate bonds a central bank usually can control the monetary exchange rates. It is a monetary policy tool. Therefore it should not be used as a political tool to stimulate the economy at all. If someone decides to do so, he takes severe market distortions into account. At discretion bond and equity prices will move in one or the other direction. In a situation like this where market participants distrust it is like adding oil to the fire. It increases the level of uncertainty and cause even higher volatility. It´s economic suicide.
Tuesday, January 13, 2009
Endowment Turmoil
While employment by university endowments (and other nonprofit endowments) can be an attractive financial career option, jobs may be disappearing as universities are forced to retrench in the face of brutal investment losses over the past year or so. Undoubtedly you've received one or more communications from the presidents or deans of the institutions you attended, discussing their money crunches and trying (lots of luck!) to prise more donations out of alumni like you who themselves have been battered by the market crash.
The March 16 issue of Forbes magazine offers a case study in what went wrong at the biggest endowment of them all, that of Harvard University. After a lengthy run of impressive market-beating results, Harvard's portfolio has taken a nosedive recently. Various strategies that did well in up markets have now blown up. Perhaps most worrisome of all, one of these strategies was pushed by Lawrence Summers during his recent tenure as president of the university. Summers is, of course, a former Secretary of the Treasury under Bill Clinton, and now head of Barack Obama's National Economic Council. Hopefully, he'll give better advice to the President and the nation.
According to Forbes, Harvard has laid off 25% of the staff at its endowment (called the Harvard Management Company). Moreover, there is a game of musical chairs surrounding the top spot: five heads in the last four years. As Harvard goes, so probably do other institutions.
The March 16 issue of Forbes magazine offers a case study in what went wrong at the biggest endowment of them all, that of Harvard University. After a lengthy run of impressive market-beating results, Harvard's portfolio has taken a nosedive recently. Various strategies that did well in up markets have now blown up. Perhaps most worrisome of all, one of these strategies was pushed by Lawrence Summers during his recent tenure as president of the university. Summers is, of course, a former Secretary of the Treasury under Bill Clinton, and now head of Barack Obama's National Economic Council. Hopefully, he'll give better advice to the President and the nation.
According to Forbes, Harvard has laid off 25% of the staff at its endowment (called the Harvard Management Company). Moreover, there is a game of musical chairs surrounding the top spot: five heads in the last four years. As Harvard goes, so probably do other institutions.
Sunday, January 4, 2009
Buying Checks Online?
Many thanks to everyone who shared their thoughts on the best places to buy checks online , sounds like I was right to think that $20 for 50 checks was absurd! It appears that there are plenty of affordable options for buying checks and none of them come close to the 40 cents per check that Bank of America’s printers were asking for.
Buying Checks Online
Despite the votes of confidence for Checks Unlimited, the check printing company that is included in the ValuPak mailings, I wouldn’t order checks through the mail because the post office is not 100% secure. We can lock our mail boxes but I believe we are the exception to the rule; it’s simply too easy for a thief to drive by your mailbox and steal your mail when you’re at work. I avoid using the postal mail system for sensitive transactions for this very reason.
Do not order checks from a site that does not encrypt your sensitive information. You can see that a site is encrypted when you see https in the URL and a padlock somewhere on the browser’s status bar. You can click on the lock to find out who is certifying it. Costco, Wal-Mart, and 4checks are secured and verified by VeriSign, ChecksUnlimited is secured and verified by GlobalSign, always confirm that the Certification Authority is one that you trust.
Get the checks shipped to a secure location. Many of you lamented the fact that the post office just dropped the package of personal checks at your front door, where a thief could easily swipe it. If you can, get the checks shipped to you at work. If it’s possible, request a signature guarantee on the package (this may cost extra) so that the package will never be left unattended. If you don’t want to pay the difference or it’s not available, try to talk to your mail carrier beforehand and have him or her hide the package somewhere.
Enter a check number start other than 1. One of the most rudimentary check security features is the check number. Companies used to use the check number as a way of detecting fraud, especially in cases where the company was writing a lot of checks. If the bank knew to expect checks in a certain range, they could detect fraud if strange numbers started appearing. If you wonder why a brand new account starts with checks at 101 or 1001, rather than 1, this is why. I don’t know how important this is anymore but try to continue the check numbers from the last book you had, or start higher.
Double check the data you enter. Many check printers don’t validate the data you enter so make sure you get it right the first time! They are not responsible if you key in your account data incorrectly.
Best Check Vendor Options
The best options appear to be:
* Use Online Billpay: As long as there’s an address and no immediate need for a check, you can always send a check through online billpay. We pay several of our utility bills this way. With online billpay, the bank mails a check to the payee on your behalf, saving you a check and the postage stamp.
* Costco Check Printing - Costco also has a minimum order of 2 boxes. A box of singles has 200 checks, duplicates have 150 checks. Two boxes of singles cost $10.59, $8.47 if you’re an executive member, and duplicates cost $11.59, $9.27 for executives. Standard shipping is 7-14 days and is included in the price!
* Wal-Mart Checks - Wal-Mart’s Classic Blue Secure checks cost $5.96 for a box of singles, $150 checks, plus $2.85 for Standard (10-12 day) shipping. A box of duplicates is only $6.96. If you want one of their Disney designs, the price of singles is only $6.96 and duplicates are $7.96.
* Checks Unlimited - Checks Unlimited, the company that advertises in those blue Valupak mailings, is one of the biggest check printing companies out there. Their minimum order is for 2 boxes with singles costing $21.90 and duplicates costing $31.90, with a Standard (7-14 days) shipping charge of $5.50. The appeal of Checks Unlimited is in their introductory offers and the multitude of check designs.
* DIY - Several of you mentioned printing your own checks using check printing software, such as Versacheck. The prices seemed competitive but I don’t know how much I trust printing my own checks.
Final Thoughts
If you’re like me and you use checks infrequently, Wal-Mart is probably the best bet at $5.96+$2.85 S&H for a box of singles. At 150 checks, that’s a personal check about every two days. I go months without writing a check! If you can handle the two-box minimum or you want special designs, then it doesn’t really matter which of the three vendors you choose because they start getting to be about the same. The only downside of Costco is that you’ll need a membership to order checks (they ask you for your membership number as part of the checkout process), which you can get around by finding a friend who has a membership.
Did I miss a better option out there?
Buying Checks Online
Despite the votes of confidence for Checks Unlimited, the check printing company that is included in the ValuPak mailings, I wouldn’t order checks through the mail because the post office is not 100% secure. We can lock our mail boxes but I believe we are the exception to the rule; it’s simply too easy for a thief to drive by your mailbox and steal your mail when you’re at work. I avoid using the postal mail system for sensitive transactions for this very reason.
Do not order checks from a site that does not encrypt your sensitive information. You can see that a site is encrypted when you see https in the URL and a padlock somewhere on the browser’s status bar. You can click on the lock to find out who is certifying it. Costco, Wal-Mart, and 4checks are secured and verified by VeriSign, ChecksUnlimited is secured and verified by GlobalSign, always confirm that the Certification Authority is one that you trust.
Get the checks shipped to a secure location. Many of you lamented the fact that the post office just dropped the package of personal checks at your front door, where a thief could easily swipe it. If you can, get the checks shipped to you at work. If it’s possible, request a signature guarantee on the package (this may cost extra) so that the package will never be left unattended. If you don’t want to pay the difference or it’s not available, try to talk to your mail carrier beforehand and have him or her hide the package somewhere.
Enter a check number start other than 1. One of the most rudimentary check security features is the check number. Companies used to use the check number as a way of detecting fraud, especially in cases where the company was writing a lot of checks. If the bank knew to expect checks in a certain range, they could detect fraud if strange numbers started appearing. If you wonder why a brand new account starts with checks at 101 or 1001, rather than 1, this is why. I don’t know how important this is anymore but try to continue the check numbers from the last book you had, or start higher.
Double check the data you enter. Many check printers don’t validate the data you enter so make sure you get it right the first time! They are not responsible if you key in your account data incorrectly.
Best Check Vendor Options
The best options appear to be:
* Use Online Billpay: As long as there’s an address and no immediate need for a check, you can always send a check through online billpay. We pay several of our utility bills this way. With online billpay, the bank mails a check to the payee on your behalf, saving you a check and the postage stamp.
* Costco Check Printing - Costco also has a minimum order of 2 boxes. A box of singles has 200 checks, duplicates have 150 checks. Two boxes of singles cost $10.59, $8.47 if you’re an executive member, and duplicates cost $11.59, $9.27 for executives. Standard shipping is 7-14 days and is included in the price!
* Wal-Mart Checks - Wal-Mart’s Classic Blue Secure checks cost $5.96 for a box of singles, $150 checks, plus $2.85 for Standard (10-12 day) shipping. A box of duplicates is only $6.96. If you want one of their Disney designs, the price of singles is only $6.96 and duplicates are $7.96.
* Checks Unlimited - Checks Unlimited, the company that advertises in those blue Valupak mailings, is one of the biggest check printing companies out there. Their minimum order is for 2 boxes with singles costing $21.90 and duplicates costing $31.90, with a Standard (7-14 days) shipping charge of $5.50. The appeal of Checks Unlimited is in their introductory offers and the multitude of check designs.
* DIY - Several of you mentioned printing your own checks using check printing software, such as Versacheck. The prices seemed competitive but I don’t know how much I trust printing my own checks.
Final Thoughts
If you’re like me and you use checks infrequently, Wal-Mart is probably the best bet at $5.96+$2.85 S&H for a box of singles. At 150 checks, that’s a personal check about every two days. I go months without writing a check! If you can handle the two-box minimum or you want special designs, then it doesn’t really matter which of the three vendors you choose because they start getting to be about the same. The only downside of Costco is that you’ll need a membership to order checks (they ask you for your membership number as part of the checkout process), which you can get around by finding a friend who has a membership.
Did I miss a better option out there?
Monday, December 29, 2008
Time to Talk Taxes
Back when I was in 6th grade my teacher, Mr. Rast, asked me a question about money. He asked me if I would rather have $100,000 or a penny doubled every day for a month ($.01, .02, .04, .08, .16, .32, etc…). Well I was no dummy and I knew $100,000 was a whole lot of money. So of course, I went for the $100,000. Boy, was I wrong. The penny doubled for 30 days would have yielded $5,368,709.12. That’s $5 million plus. Of course, you made $2.5 million in the last day. Mr. Rast showed me a very important lesson about compounded interest. But, he neglected another very important factor…taxes.
If I had to pay taxes on the gain at the end of the 30 days, I would only have $4,026,531.84, over $1 million in taxes (assuming a 25% tax bracket). But here is the kicker, if I was required to pay 25% in taxes each day on the gain of doubling (result: .01, .0175, .0363, 0.05359, etc…) after 30 days I would only have $111,712.922 or forgone profits of $3.9 million. Let me say that again, almost $4 million in lost gains (the government didn’t get that much, it was never earned). So what to do?
To begin with, never make a decision on an investment merely to save taxes. However, with that said, tax efficiency (the idea of arranging you assets to minimize taxes) is worth considering.
You can keep the whole $5 million, in our example above, through tax free investments. You can do this by shielding the investment in a Roth IRA or Roth 401K (though to be honest, you would have needed $.0125 to start the program since you’d be investing after tax dollars). You’ll never pay taxes on those gains. You can also use tax free investments like municipal bonds.
You can put yourself in the $4 million after-tax example by using tax deferred investment accounts such as traditional IRAs, qualified retirement plans, 401Ks, TSP, and other quasi-qualified plans (SEPs, SIMPLE plans) as well as with annuities. You won’t pay any taxes along the way and just owe the taxes when you take the money out.
Finally, you can avoid the $111,000 scenario by considering tax efficiency as you allocate you investments. If you invest in deferred or Roth accounts and taxable accounts, look at where you put each investment. Securities that generate little to no taxable income should be held outside your tax deferred/Roth accounts. Some examples that are good fits for taxable accounts (in order of tax efficiency) are municipal bonds, growth stocks, Exchange Traded Funds (ETF), and index mutual funds. Candidates for sheltering in tax deferred and Roth accounts are corporate bonds, income stocks (those that pay high dividends) and actively managed mutual funds. By arranging your investments with tax efficiency in mind you can minimize the taxes along the way.
Again, it is important to remember that taxes rarely should be your primary consideration when selecting investments. But, it makes a lot of sense to look at how you hold your assets to minimize the tax bit.
If I had to pay taxes on the gain at the end of the 30 days, I would only have $4,026,531.84, over $1 million in taxes (assuming a 25% tax bracket). But here is the kicker, if I was required to pay 25% in taxes each day on the gain of doubling (result: .01, .0175, .0363, 0.05359, etc…) after 30 days I would only have $111,712.922 or forgone profits of $3.9 million. Let me say that again, almost $4 million in lost gains (the government didn’t get that much, it was never earned). So what to do?
To begin with, never make a decision on an investment merely to save taxes. However, with that said, tax efficiency (the idea of arranging you assets to minimize taxes) is worth considering.
You can keep the whole $5 million, in our example above, through tax free investments. You can do this by shielding the investment in a Roth IRA or Roth 401K (though to be honest, you would have needed $.0125 to start the program since you’d be investing after tax dollars). You’ll never pay taxes on those gains. You can also use tax free investments like municipal bonds.
You can put yourself in the $4 million after-tax example by using tax deferred investment accounts such as traditional IRAs, qualified retirement plans, 401Ks, TSP, and other quasi-qualified plans (SEPs, SIMPLE plans) as well as with annuities. You won’t pay any taxes along the way and just owe the taxes when you take the money out.
Finally, you can avoid the $111,000 scenario by considering tax efficiency as you allocate you investments. If you invest in deferred or Roth accounts and taxable accounts, look at where you put each investment. Securities that generate little to no taxable income should be held outside your tax deferred/Roth accounts. Some examples that are good fits for taxable accounts (in order of tax efficiency) are municipal bonds, growth stocks, Exchange Traded Funds (ETF), and index mutual funds. Candidates for sheltering in tax deferred and Roth accounts are corporate bonds, income stocks (those that pay high dividends) and actively managed mutual funds. By arranging your investments with tax efficiency in mind you can minimize the taxes along the way.
Again, it is important to remember that taxes rarely should be your primary consideration when selecting investments. But, it makes a lot of sense to look at how you hold your assets to minimize the tax bit.
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