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2018-01-21T16:09:35.478Z
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Charles Munger is probably best known as the Vice Chairman of Berkshire Hathaway and partner of Warren Buffett. The University of Michigan Ross School of Business recently shared a hour-long talk with Munger on YouTube (embedded below). Munger has plenty of mentions on this site already, but my main takeaway from this talk was a more nuanced overview of his early years and how he personally achieved financial independence before really getting involved with Warren Buffett.

Here is a summary of my notes from the talk:

  • He was not born poor, but he was also not born into exceptional wealth. Munger wanted to go to Stanford for undergrad, but his father encouraged him to go to the University of Michigan as it was still an excellent school but more affordable. He ended up dropping out after only one year in 1943 to serve in the US Army Air Corps.
  • Military service, then law school. After World War II, he took college courses with the GI Bill and eventually went to Harvard Law School (getting accepted even though he never earned an undergraduate degree).
  • Successful law career. He practiced as a successful real estate lawyer until he achieved about $300,000 in assets. This was 10 years...

Connexus Credit Union has raised the rates on their 5-year Share Certificate to 3.00% APY with a 365-day early withdrawal penalty. They also have 1-year Share Certificate at 2.01% APY (90-day early withdrawal penalty). Both have a $5,000 minimum deposit. Anyone can join this credit union via partner organization Connexus Association for a one-time $5 fee.

It’s nice to see a 5-year CD hit 3% APY again, but the main drawbacks are that (2) rates may continue rising and (2) a year of lost interest is a significant early withdrawal penalty. To help illustrate this, I ran a comparison with the Ally Bank 5-year CD with a shorter 150-day early withdrawal penalty. The Ally CD is currently paying 2.30% APY with a $5,000 minimum deposit, so I will use that as the comparison rate. (You can also get 2.35% APY with $25,000+.)

As you can see, the penalty makes a big difference. Even if you make an early withdrawal at the last possible moment (59 months), you will never get anything higher than 2.39% APY.

If you do end up having to make an early withdrawal, the Ally CD with a smaller penalty will actually net you...

Here’s an interesting chart from Statista showing how landline telephones are slowly dying away and being replaced by cell phones only.

In 2004, more than 90 percent of households in the U.S. had an operational landline phone – now it’s (significantly) less than 50 percent.

We use our cell phones almost exclusively, but we technically have a home phone line (though not a landline). If you still want home phone service, consider purchasing an Obi200 VoIP box and use it with Google Voice to get free home phone service over your internet at the great price of $0 a month and no taxes. Setup takes under 15 minutes and you can use your existing landline phones.

We should be thankful that long distance phone calls no longer cost so much, as I still remember the days of calling cards and when 10 cents a minute was cheap. (I’m getting rather old…) Heck, we are only paying $6 a month for unlimited cell phone service this year.




The Fall of Landlines and Rise of Cell Phone-Only Households from My Money Blog.


© MyMoneyBlog.com, 2018.

Updated: Offer still available, my 6-month update. Sprint still has a pretty solid promotion that isn’t being advertised (TV, radio, newspaper, etc) and is only available online to new customers. If you bring over your own eligible smartphone and sign up at sprint.com/1yearfree, Sprint will give you a free year of unlimited talk, text, and data. You have to pay $3 a month in taxes and fees per line, but there is no requirement to continue service past that. Offer is valid for 1-5 lines. For example, if your household bill is currently $100 a month, this promotion is worth $1,200. If you pay $150 a month, that’s $1,800 value.

My experience.

  • Offer keeps getting extended. I signed up in June 2017, but they keep extending the offer each month. I guess they are still desperate to grab new customers. It could still end at any time.
  • Sprint will perform a hard credit check. They will check your credit, so be aware. It was worth it to me for the several hundred dollars in savings.
  • The total cost for two SIMs was $15.98 + sales tax ($2.99 each + $10 flat shipping). If you order by 2pm EST, they will send the SIM cards that same day by UPS Next Day Air....

It is well-known that the CEO of Berkshire Hathaway (BRK) is Warren Buffett, and that its long-term performance has crushed the S&P 500. This is usually illustrated with an impressive chart like this one from Business Insider:

I’m currently reading A Man for All Markets by Edward Thorp. Among his many impressive accomplishments, Thorp even managed to be an early investor in Berkshire Hathaway. However, an ongoing theme in the book is that edges don’t last forever. He includes a chart in his book about how the performance gap between BRK and the S&P 500 has narrowed over time (I added the pink highlighting):

The book states that the dates were chosen when “the price graphs suggested that they were natural divisions”. Now, even Warren Buffett and Charlie Munger have stated upfront that future returns for Berkshire will be much more modest than in the past. Their current asset size is simply too large. Of course, they still maintain they’ll do just fine, otherwise they’d just give up (or at least pay a dividend). It will be interesting how their edge holds up in the future.

Disclosure: My investment portfolio is predominantly invested in...

Links updated 2018. Here is the second part of my big list of free consumer reports from over 50 different reporting agencies. The first part included your credit, banking, and subprime lending-related information. This part includes your housing, insurance, and employment history. Request a free copy every 12 months of what these databases have stored about you and are telling prospective landlords, insurers, or employers.

Again, you may not need to check all of these, and many may not even have a file on you anyway. But for example if you are a renter then you’d want to make sure your rental history is clean and correct, because if I was a landlord I’d avoid anyone with previous blemishes on their record.

Rental History

Realpage Consumer Report. Provides tenant screening through their LeasingDesk product, including “the industry’s largest rental payment history database.”

CoreLogic SafeRent. SafeRent provides both tenant and employment screening data, including information regarding landlord tenant and criminal public court records. One free report every 12 months.

Experian RentBureau Rental History Report. “Every 24 hours, Experian RentBureau receives updated rental payment history data from property owners/managers, electronic rent payment services and collection companies and makes that information available immediately to the multifamily industry...

Sam’s Club is offering all of their members a free 3-month extension if you fill out the linked form by March 31, 2018. This is in response to their sudden closure of 63 Sam’s Club locations (about 10% of all stores).

Alternatively, you can cancel your membership and receive a full refund via electronic gift card within 7 days (I want to say you can use this at Wal-Mart, otherwise where would you spend it? Just pay the 5% surcharge?) or mailed check within 6 weeks. If you take the free extension, you can still decide to cancel with free refund later.




Sam’s Club: Free 3-Month Membership Extension (or Full Refund Upon Cancellation) from My Money Blog.


© MyMoneyBlog.com, 2018.

Here’s another stat to add to your knowledge. For roughly half of Americans, the stock market’s record highs don’t help at all, according to a recent Washington Post article. This chart shows that half of US household have no exposure to stocks, either directly or indirectly:

Direct vs. indirect. The academic paper by Dr. Wolff of NYU was a bit confusing with their terminology. From what I read, “direct” stock ownership means owning individual shares of stock. “Indirect” stock ownership includes “mutual funds, trusts, or various pension accounts”. Here, the term “pension accounts” include defined contribution accounts like IRAs, 401(k), and 403(b) plans. However, assets in defined benefit plans, which is the more traditional definition of the term “pensions”, are not included under “pension accounts”. Social Security is also excluded. Got that?

In theory, you don’t need to own stocks to have a comfortable retirement. You could have a mix of other resources like Social Security, private company pension plan, bank deposits, bonds, whole life insurance, commercial property, residential rental property, and so on. However, I’m willing to bet there is a healthy correlation between owning one and owning multiple forms of these productive assets.

Financial freedom means...

Links updated for 2018. Since these are available every 12 months, it is a good idea to check these near or around the same time each year. A lot of companies make their money by collecting and selling data – your personal data. In the past, it was often difficult if not impossible to see what they were telling prospective lenders, landlords, even employers about you. Under the FCRA and/or FACT Acts, many consumer reporting agencies (CRAs) are now legally required to send you a free copy of your report every 12 months, as well as provide a way to dispute incorrect information.

Some have an online request form, but some require snail mail with proof of identity. (Some are shady and really try to hide information about requesting reports.) You probably won’t want to bother checking all of them, but if you’ve experienced any sort of rejection or adverse reaction in these areas the cause might be found inside one of these databases. Keep in mind that you may not have a file with all of these places.

Credit-Related

Experian, Equifax, and TransUnion. The three major credit bureaus track your credit accounts, payment history, and other related information like bankrupts and liens. Free copy of each once every...

It would be great if you could invest in things with high and reliable returns, going up and up consistently like clockwork and without worry. Unfortunately, that’s usually the sign of a Ponzi scheme. The chart above illustrates what you have to deal with in the real world. It shows how the S&P 500 (1949-2016) has had both significant losing streaks and big winning streaks, often one right after the other.

The source is Ric Edelman and The Most Important Chart on Investing You’ll Ever See and it comes via Barry Ritholtz and Edelman’s Favorite Investing Chart. Here’s a selected quote from the Edelman site:

This chart clearly shows that when stock prices are rising, they rise a lot and for a long time.

When prices fall, they fall a little and for a short period.

[…]

When you notice that stock prices are declining, don’t be upset. Instead become excited about what lies ahead.

Barry Ritholtz adds:

The usual caveats apply — post Great Depression took 25 years to return to breakeven, and Japan circa 1989 still needs the Nikkei Dow to almost double to get back to the high from almost 30 years ago. If you were retiring during those periods you were pretty much hosed. Still, the cyclicality of markets is very worth noting.

In...

Instead of just looking at one year of returns, here’s an annual exercise that helps you look at the bigger picture. You may know the 10-year historical return of the S&P 500, but most of us didn’t just invest a big lump sum of money a decade ago, and most of us don’t just invest in the S&P 500.

Investment benchmark. There are many possible choices for an investment benchmark, but I chose the Vanguard Target Retirement 2045 Fund. This all-in-one fund is low-cost, highly-diversified, and available in many employer retirement plans as well open to anyone with an IRA. In the early accumulation phase, this fund is 90% stocks (both US and international) and 10% bonds (investment-grade domestic and international). I think it’s a solid default choice where you could easily do worse over the long run.

Investment amount. For the last decade, the maximum allowable contribution to a Traditional or Roth IRA has been roughly $5,000 per person. That means a couple could put away at least $10,000 a year in tax-advantaged accounts. If you have a household income of $67,000, then $10,000 is right at the 15% savings rate mark.

A decade of real-world savings. To create a simple-yet-realistic scenario, what would have happened if you put $10,000 a year into the Vanguard Target Retirement...

Short-term interest rates are rising. Megabanks make billions by pay you nothing for your idle cash. Here is my monthly roundup of the best safe rates available, roughly sorted from shortest to longest maturities. Check out my Ultimate Rate-Chaser Calculator to get an idea of how much additional interest you’d earn if you switched over. Rates listed are available to everyone nationwide. Rates checked as of 1/7/18.

High-yield savings accounts
While the huge brick-and-mortar banks rarely offer good yields, there are a number of online savings accounts offering much higher rates. Keep in mind that with savings accounts, the interest rates can change at any time.

  • DollarSavingsDirect at 1.60% APY, CIT Bank at 1.55% APY, both with no minimum balance requirement. SalemFiveDirect 1.50% APY, Synchrony Bank 1.45% APY, GS Bank 1.40% APY.
  • I currently keep my “hub” account at Ally Bank Savings + Checking combo due to their history of competitive rates, 1-day external bank transfers, and overall user experience. I then move money elsewhere if the rate is significantly higher (and preferably locked in via CD rate). The free overdraft transfers from savings allows to me to keep my checking balance at a minimum. Ally Savings is now...

Navy Federal Credit Union (NFCU) has a limited-time promotion where both new and existing NFCU credit cardholders can get 0% intro APR on balance transfers for 12 months. You must transfer a non-Navy Federal credit card balance before February 28, 2018. (All NavyFed cards now have no balance transfer fee, but the APR is usually much higher.)

Members With Existing Navy Federal Credit Cards – Sign in to your online account, select the “Transfers” tab and “Make Credit Card Balance Transfer” on the lower right side. Be sure to transfer your existing card balance before Feb. 28, 2018.

Members Without a Navy Federal Credit Card – Sign in to your online account, select the card you want to apply for, and choose the Balance Transfer option during the application process.

Membership eligibility for NavyFed is restricted primarily to military personnel including Army, Marine Corps, Navy and Air Force – including retirees and family members – but also includes some civilian employees in the Department of Defense. Some may have joined through a military-related association in the past, but that window is now closed. If you are not military and wish to join, your best bet may be to ask an affiliated family member to refer you. NavyFed offers a variety of solid financial products...

One of the most common New Year’s resolutions is to pay down debt. Rewards-earning credit cards may not be optimal for those carrying balances and thus more impacted by 18% interest rates than a relatively puny 2% back on purchases.

Our partner Citi offers the Citi Simplicity® Card, which is uniquely suited for those that want to transfer higher rate balances to a long 0% intro period while also offering some “accident forgiveness insurance”. The highlights:

  • The ONLY card with No Late Fees, No Penalty Rate, and No Annual Fee… EVER
  • 0% Intro APR on Balance Transfers and Purchases for 21 months. After that, the variable APR will be 15.24%-25.24% based on your creditworthiness*
  • There is a balance transfer fee of either $5 or 3% of the amount of each transfer, whichever is greater
  • The same great rate for all balances, after the introductory period
  • Save time when you call with fast, personal help, 24 hours a day – just say “representative”
  • Enjoy the convenience of setting up your own bill payment schedule on any available due date throughout the month

No late fees, no penalty rate details. On most other credit cards, if you make a late payment, you’ll first be charged a late payment fee of about $35. On top of that, your super-low...

I mentioned in my 2017 asset class roundup that the S&P 500 went up every single month in 2017 and how that was the first time that had ever happened. According to the WSJ Daily Shot, the S&P 500 is actually on a 14-month positive streak. Here’s a chart showing the monthly total returns of the S&P 500 from 1990 to 2017.

I wanted to save it for future reference, but I don’t have any good lessons from this chart. I suppose it is good to know that there are a few 10%+ drops within a month. Otherwise, I wouldn’t read too much into it.




S&P 500 Monthly Total Returns 1990-2017: First 14-Month Win Streak from My Money Blog.


© MyMoneyBlog.com, 2018.

In case you missed it, Apple disclosed that their operating system slows down the phone in some cases if the battery gets too old. As part of their official explanation and apology, Apple has reduced the price of a OEM battery replacement to $29, cheaper than even most third-party repair shops.

Apple is reducing the price of an out-of-warranty iPhone battery replacement by $50 — from $79 to $29 — for anyone with an iPhone 6 or later whose battery needs to be replaced, available worldwide through December 2018.

If you’re frugally nursing an older iPhone, this is a good opportunity to spend $30 and improve your daily performance and improve battery life. If you sell your phone later on, you might even note the battery replacement date and reclaim some of that cost. This offer should be most appropriate for 6/6 Plus, iPhone 6s/6s Plus, or iPhone SE users as they are most likely to be out of warranty and old enough to benefit from a new battery.

The announcement said availability would start late January 2018, but Techcrunch says this is available now, so go ahead and set up those Genius Bar appointments. I confirmed this online just now with our iPhone 6:

It’s that time of year, and since I eventually lost 50 pounds with the help of this and other weight-loss betting sites (and have kept it off since), and I wanted to share my experiences including both positive and negative aspects.

After reading academic studies which found that financial incentives were effective in helping people lose weight, I joined HealthyWage.com. You tell them how much weight you want to lose, your current body details, how much time you want, and and they’ll calculate what prize to offer you based on how much you want to bet on yourself.

My overall HealthyWage bet was to lose 10% of my body weight over 9 months. My offered bet was to put up $50 per month for 9 months for a potential win of $50. You may like the sound of “winning $500”, but most of it will be your own money:

Honestly, risking $450 to win $50 didn’t feel like a very good risk/reward ratio, but I wanted the extra motivation. Perhaps my goal was too easy and that was why the payout wasn’t as...

It’s that time of year, and since I eventually lost 50 pounds with the help of this and other weight-loss betting sites (and have kept it off since), and I wanted to share my experiences including both positive and negative aspects.

DietBet.com runs weight-loss challenges where I bet my own hard-earned cash that I could lose 10% of my body weight within 6 months. More specifically, a group of folks (strangers or friends) agreed on a weight loss goal, put money into a community pot, and the winners split the pot. Here’s a look back at how the process worked along with some helpful tips and detailed numbers.

Game basics. You pick from a list of available “games” that are starting soon. All of them have a goal of either losing 4% of your body weight in 4 weeks (Kickstarter), or 10% in 6 months (Transformer). I chose the 10% goal and picked the group with the most participants because Dietbet uses the poker rake model where the winners take money from the losers. This is smart because Dietbet doesn’t risk any of its own money (also doesn’t have any incentive for you to lose).

Happy New Year! As the markets have closed for the last time in 2017, it’s time for a year-end review. While I do rebalance my portfolio quarterly, I only dig into performance numbers once a year. That’s a big change from a decade ago, when I would calculate my net worth down to the dollar multiple times a week. Here are the trailing 1-year total returns for select asset classes as benchmarked by passive mutual funds and ETFs. Data via Morningstar as of 12/31/17.

Commentary. Most people who owned a diversified portfolio in 2017 had another year of solid returns. I hope you were on the ride. One of my “keep-it-simple” recommendations, the Vanguard Target Retirement 2045 fund (roughly 90% diversified stocks and 10% bonds) was up about 21.4% in 2017. For the curious, you can compare with 2016 asset class returns.

Our personal portfolio, a more conservative mix of 70% stocks/30% bonds as we are close to living off it, was up about 15.1% in 2017. ...

The new tax bill that takes effect in 2018 raises the standard deduction and caps certain itemized deductions. Therefore, if you will itemize your deduction in 2017, you may want to grab whatever you can this year to get the full value of those deductions. (This assumes you are not subject to AMT.) Here’s a brief summary of your options.

  • State and Local Income Taxes. You can’t prepay 2018 state taxes in 2017. However, you should pay all your 2017 taxes in 2017. Specifically, if you make estimated quarterly tax payments, you should makes your 4th Quarter state/local payment by December 31, 2017 rather than wait until the deadline which is usually close to the federal deadline of January 18, 2018.
  • Property Taxes. You can’t prepay 2018 property taxes in 2017. However, if you have property taxes based on 2017 assessments (partial or whole), you should make those payments by December 31, 2017. Basically, have you received a bill already? Pay it now. Some counties are actually trying to make things easier for you. See these NYT and WaPo articles for details. Things can get complicated if you usually pay via mortgage escrow.
  • Charitable contributions. On a related...