Friday, January 05, 2007

Stupid Ways to Lose Money

Some forum posters on have been discussing stupid ways they lost money. I'd have to think long and hard to figure out my worst, but suffice it to say that over the course of my life I've lost five figures easy through really stupid stuff. Here are some examples that leap to mind:

- Countless times have I failed to send in rebates, or failed to return non-fitting articles of clothing within the return period. Being absent minded is costly.

- Losing receipts for work expenses is another of my favorite ways to blow money. Being disorganized is costly.

- My favorite: I went shopping for a new wallet with V-Train, and thought it would be a good idea to test containment ability by stuffing TWO HUNDRED DOLLARS cash into the wallet I was considering purchasing, then seeing how it felt. Eventually I decided not to purchase the wallet, and put it back. Hilarity did not ensue. Being retarded is costly.

I thought reading other people's stories would make me feel better, but it made me feel worse because my examples are dumber.

Wednesday, January 03, 2007

Manhattan Real Estate Still Bubbling

Real estate prices aren't going down everywhere. According to the Associated Press, median prices for Manhattan apartments have risen 9% in 2006, and the mean price is up 5% over the fourth quarter of '05. The median Manhattan apartment went for an astounding $760,000 in Q4 of '06, 4.27 times the median home price in Boise, and making me wish my real estate holdings were on the other coast.

On the Upper West Side, large apartments are up 48% over a year ago. Condos stayed flat, and Co-Ops went up 3%: impressive when most of the country is experiencing, if not a burst, at least a deflation.

There are no signs of slowing in '07.

Monday, January 01, 2007

Points Don't Pay

A new study coauthored by Penn State and Freddie Mac shows that an overwhelming majority of the time, homebuyers buy more points than they should. A point, or 1% of the cost of the mortgage, lowers your interest rate a specified amount. The cost-benefit analysis simply entails figuring out how many months you'd have to have a the lower interest rate (and lower payment) to make up for the money you spent on the point. Once you buy the points, if you hold the mortgage for less than that breakeven period, you lost money by buying the points. If you hold it longer, your points were positive ROI.

The study showed that only 1.4% of borrowers who bought points ended up holding the mortgage long enough to make the points ROI positive. Of the people who didn't buy points, only 1.5% of people would have been better off purchasing them.

This study shows a couple of things, I think (even assuming the results are skewed by decreasing interest rates that caused a lot of unexpected refinancing). One: people may overestimate how long they're going to keep their mortgages. But a second likely explanation is that people probably don't bother to do the math. For whatever reason, they may just think that lowering your interest rate is worth more than it really is. Important stuff to keep in mind for the next time you look at a home purchase.

PMI Now Tax Deductible!

Wish this had been in place 10 years ago. For mortgages originating in 2007 or later, Private Mortgage Insurance is now tax deductible! Oh, happy day. This effectively cuts the cost of PMI by a third to a half, dramatically changing the balance between accepting PMI, or taking out a 10% piggyback loan at a high interest rate.

I took the piggyback on my last mortgage, and am paying 8.5% interest (effectively 5% or so after tax deduction) on that piece, and that could go even higher since it's a variable rate. If this had been in effect, I'd probably have gone with the PMI.

Of course, you could avoid all of this with a 20% downpayment, but then you'd lose some of the wonderful power of leverage.

Getting Started on the Right Foot

CNN Money gives some sage advice about the right way to ingratiate yourself with your new colleagues when you start a new job...

- keep your good ideas to yourself for a bit, until your coworkers' guard comes down a bit
- be respectful and subdued, not their best friend
- learn the culture, but don't come off as nosy
- find a way to work with, and impress, influential people

The article gives much more detail on the whys and hows, and makes some very solid points.