No BS Finance

We bought our house at about the top of the housing market. Since I was being transferred from work, I didn’t have a whole lot of choice in the timing. We’ve been wondering how much our house is really worth today, since it is the main asset we have to our names.

I finally got around to checking out Zillow’s estimate, and I’m not a happy camper. Their estimate is a full 10% less than what we paid for it. The good news is a probably have another 2-3 years before I transfer for work again and our relocation program includes reimbursement for loss on sale, but still…

I also checked out Trulia to compare our house against those on the market in the area. The only recently sold comps are 5 months old, but are for 10% <em>higher</em> than we paid for our house. But, the houses on the market today that are reasonable comps are even a hair worse than Zillow estimates.

I’m still going to stubborn and not change the home’s value in Quicken, but unless we stay here through a good reboundit doesn’t look good that we’ll get back out of it what we put in.

I consider myself tech-friendly and -knowledgeable. However, I can’t picture being comfortable with putting my finances online for tracking.

There are three major online applications doing this (Quicken Online, Mint, and Wesabe) . Mint promises “bank-level data security”, which doesn’t comfort me much as I was affected by this Wells Fargo data breach. Granted, it wasn’t a system hack, but it still puts a chill on. Wesabe promises security as good or better than your bank. Quicken Online likens themselves to Fort Knox.

Security aside, what is the main need being solved? Is there really a market for having access to all your information from anywhere at any time? I already have access to my bank account and credit cards for truly up-to-date information if I need to know ASAP. Obviously a single website to visit is a convenience, but not a convincing one for me.

I guess I’m just not in the target market segment for these products.

A.G. Edwards:

we developed the Nest Egg Score Estimator to help individuals assess their personal financial picture and to provide practical tips for building and caring for nest eggs.

The average U.S. household scores 631 on their scale (from 450-850) as of June 2006. By answering 14 quick questions, you can get your score.

We stack up with a 757 (excellent).  Their suggestions for us:

1. Continue to manage debt.
2. Maximize your retirement conributions.
3. Consider your other financial goals.
4. Review your investment mix.
5. Create or review your estate plan.

The suggestions turn out exactly the same as Flexo, who was ranked as “Good”, so don’t expect anything tailored to your exact situtation.

Find out your score.

I just learned today that Morningstar, best known to me as rater of mutual funds, has an investing education center. A large number of mini-tutorials or short courses are available - 172, by my count, all free. Besides being a good basic education on stocks, funds, portfolios, and bonds, taking the courses and taking a 5-question quiz at the end of each, earns points towards various Morningstar products.

I’ve taken a couple of the courses - I’m impressed as to how well they cover the basics.

Cost: free registration

Going to buy a car can be fun. It can also be a huge headache with the various incentives out there - which ones make the most sense?

When we bought a minivan a few months ago, we had three choices for paying:

• cash
• get 1.9% financing
• get an extra $1,000 for financing at the “normal” rate - 7.9%

My first thought was to take the $1,000, finance at the high rate, then pay it off the first month since we had the cash available. Unfortunately Chrysler had already thought about this, it seems. The minimum loan amount was $10,000 and it could not be paid in less than 5 months.

Now I wasn’t sure which way was best. The 1.9% was tempting since we save at a higher rate than that at ING. Quick calculations in my head told me that taking the discount was still worthwhile, even having to spread out payments over 5 months. At least I had eliminated paying cash as the best option.

We chose to take the discount combined with the higher rate. Was it the “right” choice?

I ran the various scenarios in Excel to see which really was best. Both loan examples were figured out at the minimum term (5 months) and the maximum (60 months). I made additional assumptions, such as taking the longer-term loan meant you didn’t have the money saved up to pay it off quicker, hence no additional savings benefit. Conversely, if you took the 5-month loan, you do get the benefit of saving. I also simplified by assuming no additional savings were made after the car was paid off in the 5-month scenarios.
It turns out that the best way was to take the $1,000 and pay the loan off in 5 months. Interestingly, the second best choice was a 60-month loan at 1.9%, then the 5-month loan at 1.9%, then cash, and finally the 60-month loan at 7.9%.

If additional savings were allowed from month 6 to month 60, the 1.9% loans would flip in the order. That’s probably a more realistic assumption - you don’t end up saving enough to pay cash for a vehicle by just making ends meet every month.

In any case, here is the spreadsheet with my examples.