Rickety

Mostly about Utah

How to Get a Life

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It was suggested by one of my children that I write a post that outlines my advice to the groom who is about to be married. Here is my counsel encapsulated into one sentence:

Provide physically and spiritually for your family.

I realize that most of you want a little more detail so I have prepared the following.

Get a Job

If you already have a job that’s great. A woman needs the security of a revenue stream. In college and elsewhere you may have heard people say “Work at a job you are interested in,” or “Be employed in an area that you have a passion for.” I have often thought this is like saying, “Never get sick,” or “Always be happy.” The reality is that your job will be hard, stressful, and dull. Walk around the office and see how many married men have a photograph of their family pinned up in front of them. That’s what keeps you going when all you really want to do is to pick up the computer monitor and chuck it through the window. That is, if you are lucky enough to have a window close to you.
Taking our own family photograph.

Get Religion

There is an undeniable spiritual dimension to life. You need to be exposed to the great teachings in the scriptures and to regularly attend church. There you will be reminded to be kind and generous, to work hard and to give service, to treasure your wife and to love your children. Of course the religion I recommend is my own. You will need to know what to teach your children about their Heavenly Father. You will be able to tune in to your spiritual nature to help you find answers for yourself and your family. Your wife will appreciate your sensitivity borne of your closeness to the spirit.

Get a Home

As soon as you are able you need to purchase a home. If you are still in college you should finish your studies first. Every crop of young home buyers envy the low home prices and interest rates available to the previous generation. Once you own a home with a fixed rate mortgage the ever present inflation now begins to work for you. Each year the fixed mortgage payment becomes relatively cheaper compared to your income. Surprisingly, you even get a tax deduction which seems a little ridiculous in my opinion.

You may not want to take on such a large financial responsibility but it is a necessary step in the evolution of your family. Your wife needs a home that is her own to beautify and to welcome relatives and neighbors to. It adds to her sense of stability.

Get out of Debt

With a home you have the mother of all debts that can take a lifetime to pay off. For a modest home it is considered a justifiable debt. As would be health care expenses and education. Keep away from all other debt and if you ever refinance your mortgage do not add any new money to it for home improvement. Also consider reading this post on debt.

Get Children

At an early point in your marriage introduce children into your family. You may think that you cannot possibly support children at this time. I thought the same too, as do almost all fathers. But it all works out and years from now as your hair is graying you will be eternally grateful that you were unselfish enough to allow children to share your life.

This verse sums up my attitude towards my children:

As arrows are in the hand of a mighty man; so are children of the youth. Happy is the man that hath his quiver full of them. (Psalms 127:4-5)

This is the most advice I have given in years and most of it I learned from listening to wise old men over the pulpit. And I have proven its validity over a lifetime of experience.

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Rickety Kiva Map

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Kiva Map showing Rickety micro finance loans over the globe
Kiva, back on July 23, announced Kiva Maps. To show you what it looks like, consider my own Rickety Kiva Map above. Each of the leaves represents one of my loans all emanating from Kaysville. Neat huh? It is just a Google map so you can zoom in for more detail. In Cambodia I have a number of loans as you can see in the detail map.
Kiva Map in detail showing Rickety Cambodia loans
Every day over 16,000 people all over the world are viewing Kiva. Kiva Maps also uses the Google Maps API on each Entrepreneur Profile page to show the geographic distribution of lenders to that Entrepreneur. Check it out by clicking “Map View” in the “Lenders to this Business” section.

Kiva did experience some problems shortly after going live with the feature. There were some Internet Explorer issues (as usual), and they also ran up against Google’s limit of 15,000 geocoding requests per day very quickly. Seeing Kiva laid out on a map will show how big this thing really is and encourage even more people to participate.

Below is the geographic distribution of lenders for one of my borrowers, pardon me, one of my entrepreneurs. Picks me right out in little old Kaysville.
Kiva Map showing Kiva entrepreneur linked to Rickety in Kaysville

Related Posts: Kiva

A Property Tax Alternative: The Home Consumption Tax

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Jake pursues Daniel across the lawn for non-payment of property taxes.

Big Tax Increases

Last year my property taxes increased from $740.06 to $938.13, an increase of 26.76%. This year my taxes were raised to $1,062.94, an increase of 14.22%. So over the last two years the increase is an enormous 44.8%. As a software developer you might think my pay increases would counter this raid on my bank account. Really? 2006 saw a 3.8% raise and 2007 delivered a 5% pay cut. Additionally, in 2007 my wife switched from full-time to part-time work. Before kind hearted soul you rushes to send me a check I hasten to add my finances are in very good shape.

Property Tax Defects

If my property taxes seem low I must point out dear reader that compared to other states they are indeed low but in Utah we have a lot of other taxes to pay. My property taxes are in line with what my neighbors pay. So rather than write a post that only complains, I would like to propose a solution. But first let us look at the defects in the current system:

  • Assessments are hard to kept current.
  • Large increases in property values bring government tax windfalls.
  • Property improvements without a permit escape taxation.
  • The burden is on the homeowner to prove false an over valuation.
  • You can lose your home if property taxes are not paid.
  • A bureaucracy is needed to run the program.

I am sure you can think of some more problems with the way property tax is administered.

No More Property Tax

I sound like a campaigning politician with my No More Property Tax mantra. But consider that the quickest way to reduce cost is to cut out the overhead and/or simplify the process. The taxes must be collected so the key is to use an existing system of collection. Now it would seem fair to tax on something related to the property. In addition the tax should fall a little heavier on those able to pay.

Home Consumption Tax

Any heading that has Tax in it is not a very pretty sight. Nevertheless, as a separate line item on your utilities will appear a Home Consumption Tax or HCT. These are the utilities that will have the HCT:

  • Electricity
  • Water (excluding secondary water)
  • Garbage
  • Natural Gas

I was tempted to add phones to the list but they are heavily taxed already, and VOIP phones would avoid the tax. Besides, phones consume very little resources. Each of the items in the list can have a different tax rate if desired. Also the option to exempt from HCT the first $20 of say, electricity and natural gas could be implemented, thus helping the poor.

Summary

  1. We have scrapped an inefficient system.
  2. Utilized an existing collection process to fund county government.
  3. Based our new HCT on consumables that are billed monthly instead of yearly.
  4. Significantly reduced the chances of home loss through non-payment of taxes.
  5. Eliminated huge tax windfalls.
  6. HCT assessments are automatic and accurate down to the last drop, amp, and BTU.

Well, my friends, pick holes in my proposal but don’t tax me too much with your contrary insights. I do believe my HCT would work rather well.

My Experience with Prosper

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Prosper Logo

Two months ago I funded my Prosper account with a few hundred dollars. Prosper connects those seeking a loan with lenders. Risk of default from rickety borrowers can be spread out by investing only $50 per loan. The interest rate is determined by lenders bidding the rate at which they are willing to loan.

When I am searching for loans to bid on I check off the homeowner box and select a B or higher Prosper credit rating. I allow any debt-to-income (DTI) ratio in the search. I then sort on hours left for bidding and select prospects with interest rates 10% or higher. I find the better the credit rating the lower the risk. The correlation is amazing.  I look for lower requested dollar amounts to be borrowed and those that need the money for credit card debt consolidation or for their business. Currently my lending is earning 17% but I am allowing for 7% of this to be defaults which will give be a net return of 10%. I shall not grieve though even if my net drops to 3%.

One can join a Prosper group and pick up tips on possible candidates for loans. I have loaned to a business borrower, based on a group tip, who had an E Prosper credit rating. I am rewarded with a return of 30% which bumps up my average return. I recommend you don’t have too many of these in your portfolio because of the risk of default.

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Rewards Checking

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Coulee Bank
This article will give readers new to Rewards Checking some idea of how it works. Be aware though that the interest rates are out of date.

Ever since my own internet bank dropped their interest rate from 5.2% to 2.5% I have been looking for a better place to park my spare cash. I saw a lot of banks advertising rewards checking at rates between 4% and 6%. I identified a few at 6% that were out of state. Several had very clunky Internet sign up procedures such that I was unable to sign up online. For example, at one bank my browser would crash. At another bank I was diverted to a PDF form with no instructions on what to do with it. Yet another bank had nowhere to start the sign up process.

Eventually I tried Coulee Bank that was offering 6.01% APY with their rewards checking account. They require 10 check card transactions a month, use of e-statements, and require 1 automatic payment a month, called an Automated Clearing House (ACH) transaction. Coulee Bank pays 6.01% on the first $25,000 and 1.01% on anything above that.

For me, Coulee Bank was out of state. The application process was straight-forward except I failed the online identity check. A friend joining the same bank also failed his identity check. I think they have a bug in their program because I’m sure I’m really me at the moment. I was invited to call the branch in Wisconsin and answered the identity questions correctly. Incidentally, the staff were very friendly and helpful, plus there was a bonus — I could understand what they said. Next a paper was sent in the mail for me to sign and return. A thoughtful touch was the stamp placed on the return envelope. Once that was done I received instructions via email to open the online account.

After a few days I received my checking card, complete with a picture of a steamboat. A really nice feature was a user name I could choose rather than have to remember the account number. The web account features were reasonable. There was no count of qualifying transactions but my monthly transaction count ended on the last day of the month making it easy to remember.

To transfer more money to my account I sent a message in the internal email of the account giving the routing number, account number, and amount. The first month you do not have to meet the requirements to obtain the 6.01%. Even so, I met the ACH requirement by having $50 a pay period (fortnightly) transfered from my pay.

The 10 credit transactions are easy to meet because every workday I eat out for lunch. Some rewards checking accounts can require as many as 15 transactions and also mandate at least one account access a month. Coulee Bank rewards checking is still free and pays a standard 0.30% APY if you don’t meet the requirements during the month.

A feature that I don’t use is the $20 to $25 a month reimbursal of ATM fees provided you met the transaction requirements. I don’t expect the 6.01% rate will last for long. Some other banks that started at 6.01% have dropped their rates to 5%. Just yesterday I received an email from Coulee Bank that said in part:

Rewards Checking has been an amazing success due to its incredible rate, ease-of-use, and environmentally friendly attributes. Due to rising costs to deliver this product however, it has been decided to limit the number of Rewards Checking accounts to one per Customer/Social Security Number.

I am going to have difficulty funding one account so this will not affect me. The rate I am earning is 24 times the amount I receive from my local credit union checking and even the standard 0.3% beats their 0.25%.

I hope this little narrative has been of interest to you.

Updates

26 Dec 2008 Recently the rewards checking rate dropped to 5% at Coulee Bank.
28 Mar 2009 See Bank Rewards Checking for banks still offering 5% 4% on their rewards checking.
2 Jul 2009 Coulee dropped their rate to 4%.
2010 Coulee’s rate has dropped below 4%.
7 Apr 2012 Changed have to having in the paragraph beginning “After a few days…”
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Debt

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Babson Boulder near Dogtown Square, Massachusetts
For some time I have wanted to express my opinion about debt. In 2006 I made the last payment on my mortgage and have been debt free since. So though you won’t get rich after reading what I have to say, you may be able to make some adjustments so that you can get out of debt faster. What I am writing here is really just a collection of what others have said and what I have done personally with my finances.

Plague

All I want you to do to begin with is to learn about plague. President J. Reuben Clark, Jr., advised:

“Let us avoid debt as we would avoid a plague; where we are now in debt let us get out of debt; if not today, then tomorrow. Let us straitly and strictly live within our incomes, and save a little.” (Conference Report, Apr. 1937, p. 26.)

After reading this I wondered what the plague was like. Knowing that would give me some measure of how bad debt can be. The Black Death struck in the fourteenth century killing an estimated 75-200 million people worldwide and killed 50% of the European population during a four-year period.

Triumph of Death by Pieter Bruegel the elder

The classic sign of bubonic plague was the appearance of buboes in the groin, the neck and armpits, which oozed pus and bled. These buboes were caused by internal bleeding. Victims underwent damage to the skin and underlying tissue, until they were covered in dark blotches. Most victims died within four to seven days after infection. There was mortality rates of thirty to seventy-five percent and symptoms including fever of 101-105 °F, headaches, painful aching joints, nausea and vomiting, and a general feeling of malaise. Of those who contracted the bubonic plague, 4 out of 5 died within eight days. New research suggests Black Death is lying dormant. (See Wikipedia, Black Death)

In summary, debt is worse than the bubonic plague.

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Kiva

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Lend to the poor all over the worldKiva is the world’s first person-to-person micro-lending website, empowering individuals to lend directly to unique entrepreneurs in the developing world. I started using Kiva last year.

When you browse entrepreneurs’ profiles on the site, choose someone to lend to, and then make a loan, you are helping a real person make great strides towards economic independence and improve life for themselves, their family, and their community. Throughout the course of the loan (usually 6-12 months), you can receive email journal updates and track repayments. Then, when you get your loan money back, you can relend to someone else in need.

Kiva partners with existing expert micro finance institutions. They are experts in choosing qualified entrepreneurs. That said, they are usually short on funds. Through Kiva, partners upload their entrepreneur profiles directly to the site so you can lend to them. The power of the internet is used to facilitate one-to-one connections that were previously prohibitively expensive. Kiva creates a interpersonal connection at much lower costs due to the instant, inexpensive nature of internet delivery.

You can personalize a web page on Kiva, here is mine.

Articles about micro finance:
The Six Lessons of Kiva
Fight Poverty With Online Microlending
Business Lessons from Kiva
eBay’s New Direction: Micro-Finance