The 10 Best Times for People To…

by David@MoneyNing.com · 16 comments

One of my readers sent me this great piece on productivity. While most of these about general well being and therefore non-personal finance related, understand that without a healthy mind and body, money is unimportant.

  1. Best time to Study – When you wake up in the morning, you will probably feel tired and dizzy.  However, once you wash your fast, you will be energized and refreshed.  This is also the time where your mind is the clearest, so studying in early morning will help you remember everything much easier.
  2. Best Time to Exercise – It’s great to go out for a walk in the morning because air is the freshest during that time.  It can not only help clear your mind but is great for your body as well.
  3. Best Time to Eat Fruits – One hour before a meal is best.  This is because as fruits are mostly eaten cold, eating it first before your hot meal won’t cause your body to increase excessive white blood cell production.  This is good to protect your immune system.
  4. Best Time for Training – The best time for training is in late afternoon / early evening.  The reason is because this time is when your body is performing at the best.  In other times of the day, your blood pressure and heart beats are usually higher, so training during those times are harmful to your body.
  5. Best Time to Shower – Right before bedtime is usually the best time to shower, as it relaxes your joints and muscles to give you a better night’s sleep.
  6. Best Time to Sleep – For afternoon nap, it’s best to do it after 1pm because that’s the time when your body is the most sluggish.  At night, going to bed at 10 to 11pm is best.  This is due to the fact that a human’s deep sleep usually happens around 2-3am, and the fact that it takes a body approximately 1 and a half hours to get into deep sleep.
  7. Best Time to Brush Your Teeth – 3 minutes after every meal.  This is because acid will start to be broken down from the food, which start damaging your teeth.
  8. Best Time for Skin Care – Skin care is best done at night because that’s when your skin is in recovery mode.  (It is also the time when no one else other than your spouse are looking at you.)
  9. Best Time to Drink Tea – Definitely not within one hour after a meal, as drinking tea may block the absorption of non-heme iron.  Therefore, it is wise to wait one hour after your meal to allow the nutrition to be fully absorbed.
  10. Finally, Best Time to be Financially Responsible – All the time.  Period.

A Down the Trenches Look at Traditional IRA vs 401k

by David@MoneyNing.com · 19 comments

After weeks of waiting and calling everyone to do their part of the process, I finally got my 401k moved over this week. During this time, I realized a few important facts about the 401k offered by my employer.

  1. The employer match will not be fully vested until my 10th year of employment (it starts on my 5th year)
  2. Those high fees in my fund selection really added up over the last few years
  3. Speaking of fund selection, there weren’t much to choose from

When everyone collectively echos the same reasons, even wrong advice can become sage.  This made me wonder: Should I have contributed fully on my 401k or should I have invested in other forms of retirement plans (namely a Traditional IRA)?

Before I explore this further, note that I’m not wondering about this because of the recent market crash.  Whether the market goes up or down is irrelevant because even if I didn’t contribute to a 401k, the funds would be invested in stocks.

401k vs Traditional IRA

So is contributing to a 401k better than a traditional IRA?  Let’s find out as I’m eager to find out as well.

401k’s Case

In order to figure out whether Traditional IRA would be a better option, let’s look at the two main advantages of 401ks: dollars taken out during each paycheck pre-taxed and the company match.

  1. Pre-tax dollars – While a traditional IRA gave you the same pre-tax dollars benefit, you won’t get your money back until at least March or April of next year (when you file your tax return).  This means that for your first contribution of the year, you are giving the tax refund portion a 15 month loan by contributing to a Traditional IRA (and a 3 month loan for the last payment).  Averaging all of this, you are effectively giving out a 9-month loan on the tax portion of all your contributions.  Assuming that you are in the 25% bracket and that you will put these funds in a high yield savings account yielding 2.8%, you are giving up 0.7% of interests by contributing to a traditional IRA.

    Update: Reader Rick gave a creative way to get your money back earlier if you contribute to a Traditional IRA:

    All you have to do is submit a new W-4 form with your employer and claim 1 or 2 more allowances. You can claim 1 allowance for every $3500 you will be contributing in 2009 to the traditional IRA. If you are self employed, subtract your IRA contribution from your estimated income and then figure out your estimated tax to send in.

    Following this advice will means that less taxes are taken out of your paycheck each cycle (or if you are self employed, each estimated tax payment is smaller).

  2. Company Match – As I mentioned earlier, my employer contributed up to 2.5% of my salary.  I took full advantage, but failed to account for the fact that by staying only 5 years, I only got half of that.  Since I contributed 15% of my salary, 1.5% added 10% to my contributions.

Based on these two points, using 401k gave me a 10.7% (rough) advantage per year.

Traditional IRA’s Case

On a numbers perspective, traditional IRA’s only advantage seems to be a possibility of lower fees (due to more choices).

Fees – On my 401k, I have the funds broken down like this:

  • 40% – Blackrock S&P 500 Index Fund
  • 25% – Blackrock Large Cap Growth Fund
  • 10% – Goldman Sachs Midcap Value Fund
  • 25% – Thornburg International Value Fund

Average fees: 1.56% (when taken into fund allocations)

If I invested with a traditional IRA, many low fee funds (or ETFs) would’ve been very similar to the funds I picked. So conservatively speaking, I could save 1% in expense fees.

Another point to note is that while looking at my wife’s 401k fund selections, I noticed that the funds available to her had even higher fees across the board. For her, the advantage of contributing to a traditional IRA would be higher.

Conclusions

As it turns out, investing with my employer’s 401k was the right choice but looking at the details reveals some useful facts.

  1. Employer Match is King – As you can see, the employer match adds a significant advantage to contributing in a 401k.  However, contributing 5% (as opposed to 15%) would have yielded the same match.
  2. Employer Match Limits – If there is no employer match, the math clearly favors a traditional IRA (assuming you can find lower fee options).  Since the employer match is the same whether I contributed 5% or 15%, any contributions over 5% should be made to the traditional IRA instead.
  3. Many traditional IRAs have commission fees whenever you buy and sell securities which will increase the fees.  In order to eliminate that, you can either open a brokerage account with Wells Fargo or Bank of America (assuming you have $25,000 in combined assets with them) or consider options such as Zecco (where trading commissions are $0).
  4. The contribution limits to a IRA is lower than a 401k.  For 2008, the contribution limits for an IRA are $5,000 ($6,000 if you are over 50).  401k limits are at least $10,000 more per year.  Therefore, you should contribute in your 401k up to your employer match, then switch to a traditional IRA.  If you still have money left over at this point, then continue contributing to your 401k.
  5. The limit for IRA works for both traditional IRA or Roth IRA so you essentially need to make a choice.  Is Roth IRA a better option?  That’s a discussion for another time.

So can you find any flaws with my math and is the assessment correct?  If so, why do no one (except Jim Cramer) ever advise people to do this?  What’s wrong?

What to Do When You Lose a Credit Card (or Your Wallet)

by David@MoneyNing.com · 14 comments

Losing a credit card is never fun, but here are some pointers in case it ever happens to you.

  1. Call the credit card company – Most suggest saving all the phone numbers somewhere but how many of us do that and when is that location ever accessible when we find out that our cards are missing?  Instead, try asking your friend who have a similar card (it’s on the back of the card), go to the online accounts website or reading it off the monthly bill.
  2. Call immediately (most credit card companies have a 24 hour hot line) and try to remember when your last purchase was to verify whether there were fraudulent charges.  Forget about the advice of having your account number because trying to get that usually delays you calling.  Cancel that card right away to avoid being charged for purchases you did not make.
  3. Mail them a letter stating the lost even though you called.  This is to make sure that in the case the person over the phone doesn’t cancel everything correctly, you have proof that you already filed a claim.
  4. You are only liable for $50 of fraudulent charges if you report the lost of your credit card under federal law (Fair Credit Billing Act).  If charges are made after you reported your card stolen, you assume no liability.
  5. Call the credit report agencies (Equifax, Experian, and Trans Union) as well and report the theft.  Ask them to attach a fraudulent alert to your credit cards.
  6. Pay extra attention to your billing statements to make sure that charges are all valid.

Some More Tips to Prevent Losing Your Credit Cards

Of course, some adjustments can help reduce the chances that your credit cards get lost drastically.  Here are a few to consider:

  1. Only carry cards that you need with you.  You really don’t need your credit card army to march with you to the mall.
  2. Put them in a wallet or holder, don’t just use a rubber band or money clip as they are not as secure.
  3. Make sure your wallet is secure in your pocket (or purse).  What’s even worst than losing the credit card?  The whole wallet slipping out and losing it all.
  4. Don’t put your credit cards in an unattended place – You would think that this never happens, but those that play sports (or go to a gym) often leave their wallets and bags unattended.
  5. Bag Check – Don’t check your bag at the airport with your credit cards in it.
  6. If you have to do this, leave it in a bag that’s worn out and old (personal experience – the bag that’s the newest and most expensive looking always get stolen first).
  7. Never carry your wallet in your hand – the solution to a wallet being too big to fit in the purse or too uncomfortable to fit in your pocket is to get a smaller one.
  8. Periodic Check – check to make sure your wallet is still there every once in a while.  If you find it missing, there are fewer possible places where it can be.
  9. Never lend your credit card out – You may think this is crazy but I know many people who lend out their Costco membership card to their friends so they can buy something.  It is dangerous, not to mention probably against the rules if not downright illegal.
  10. Know how many credit cards you have (and are carrying with you).  It makes it easy to spot check whether you still have them or not.

Further Reading

Got a missing credit card story you want to share?  Do you have any tips and tricks about what to do when you lose your credit cards?  Leave a comment below.

Job Cuts or Reduce Your Pay?

by David@MoneyNing.com · 19 comments

If management gave you a choice right now, would you vote for job cuts at your company or for everyone to have a pay cut?

Obviously you cannot know ahead of time whether you will be one of those people getting laid off (if that route is picked), otherwise I don’t believe there will be many who are going to actually choose to get laid off.

Small Business are Affected

I was speaking with a small business owner who is stressed out about his business.  Her company enjoyed many profitable years and a down year would be devastating.  You see, unlike public companies where losing money is okay (they can almost always borrow more money, issue more shares etc), small businesses rely on the money it makes to survive.  Once it starts losing money, it can’t last for too long because the ability for the company to borrow money is limited, not to mention that it’s very stressful for the owner.  That’s why she (as well as many other business owners) is contemplating this exact question in an effort to cut cost.

Big Corporations are the Same

In a big corporation, decisions can be heartless and over generalized.  A mandate from up top can send managers cutting 10% of every department without regard to the actual output of each team.

In Taiwan, there’s actually a company that cut 30% of every manager’s salary.  On top of that, the company is asking many of its employees to take a non-paid six month leave.  Yes, not one week like Cisco.  6 months.  This is not the most amazing though, because many of those workers are actually still going to work (without pay) because they are afraid their job will be lost.

What Would I Choose

While part of me think that posing the question for all employees might be good tactic, it almost qualifies as inhumane.  However, if I had to chooose, I would say that job cuts are better than pay cuts.

On the business owner’s perspective, pay cuts are extremely demoralizing for employees.  They are the engine of the company and good employees should never be punished.

As an employee, I never want a pay cut because it adversely affects my path to a higher salary forever.  Think about it, most people get the biggest salary jump when they get promoted or go to another job.  So if my current salary is less, that becomes the basis for my next jump.

So, how about you?  Vote below.

[poll id=”21″]

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