Funny Munny

No, not that... anything but that! Not another PERSONAL FINANCE BLOG! Oh the humanity!!!

31 January 2006

I've Got Gas ... Bills That Are High

After reading about horrible gas bills being sent to fellow personal finance bloggers, I was fearing the worst when that monthly mailing from Washington Gas reared its ugly letterhead yesterday. I closed my eyes, ripped the envelope, pulled out the paper, and opened my eyes, ready for the shock of my life...

Then I flipped the paper over because it was in the envelope backwards.

Oh rabbits! $55.07! Chaos in the streets!

Okay, so I can still pay the monthly gas bill with money I find trapped in my belly button, but I was rather surprised because this was how much I paid for gas last month. As anyone living in the northern suburbs of Washington, D.C. can tell you, it's been a lovely spring this winter. The average temperature has hovered in the 50s most days, and yesterday it hit 65! Our gas usage reflected this--a little more than half the usage in January compared to December. So then why is the bill about the same? Because the rates went up about 60%! Oh no they di'n't!

So with the thermostat set just above chill, the windows reinforced with plastic and two inches of titanium, and the fire in the living room burning bright every night even though we don't have a fireplace, where the heck else are a couple of warm-blooded homo sapiens supposed to save on home heating costs? I've come up with a few ideas, though I'm a little hesitant to try some of them...

Last Resorts For Beating Your Heating Bill

  • Forget the heat. Turn on the A/C! Why give in to the high cost of natural gas or heating oil when electricity is cheaper? Just crank the A/C dial to 35 and you'll quickly find that the winter weather is nothing to complain about.

  • Gas company bills you? Bill them back! What nerve those jerks at the local gas company must have that they expect you to pay more just because gas is costing them more. So when it comes time to pay that ridiculous travesty of justice they call a bill, send a bill of your own right back to the gas company. Let's see, $10 Being A Meanie Surcharge, $25 Ripping Me Off Service Fee, and $100 multiplied by the 31 days they didn't call me last month to make sure I hadn't frozen to death. Of course, don't forget the $50 Funny Munny Tax; you can just send that directly to me. It helps keep the less fortunate warm ... in my deluxe hot tub!

  • Switch to hydrogen for your energy needs. Hydrogen may not be a viable consumer energy source for a few years, but you can take advantage of this cheap, clean powerhouse today. All you need is a tank of hydrogen gas and a lighter. Bam! Instant whole-house heating solution!

  • Change your name. No, I'm not suggesting you dodge your gas bill and flee the country. Instead, change your name to something extremely long--say, 100 million characters long. This way, when the gas company sends you its bill or a credit card issuer mails you a pre-approved offer, they'll need a good 10,000+ pages in their letters just to greet you. Simply plug that paper into your fireplace and you'll never need a drop of heating fuel ever again!

  • Spontaneously combust. Hey, it's been known to happen, so why can't it happen to you? I'm sure you can find some instructions on doing this somewhere on the internet, and once you do, you'll have an infinite supply of warmth, and all your friends will gather around you to tell ghost stories and toast s'mores.

On what I can assure you is a completely unrelated issue, I've added a short disclaimer to my profile. To summarize it, if you take any of the advice in Funny Munny--as awesome as that advice is--you're on your own if it causes you to go bankrupt, melt, fly off the face of the planet, or experience some other form of unpleasantness. Should you have a pleasant experience because you took my advice, you're asked to send me a check for TEN BAJILLION DOLLARS. Yes, that's a one followed by however many zeros you can fit on the check. Or just send it to the gas company in my name.

30 January 2006

Finance Carnivals for January 30, 2006

Funny Munny is featured in two personal finance carnivals this week! That's two more than last week! If my math is right, that's a 50,000% increase!

Fat Pitch Financials hosts the 33rd Carnival of Personal Finance and includes my recent discussion on Frugality Frustration from which I am happy to say I have fully recovered.

Canadian Capitalist brings the 7th Carnival of Investing to Canadialand and features my award-winning series of articles on employee stocks. Yes, I did give that award to myself, but I was asleep at the time, so it's all good.


26 January 2006

Personal Update: [30] Days Without A Financial Meltdown

I've been so busy offering up some of the best financial content ever to grace the intrawebs that I've neglected to share our personal pocketbook progress. Let's rectify that. Rectify!

I've updated our net worth data to include the latest figures fresh from the bucket of receipts and deposit slips on my desk. Somehow we went from $30,341 to $32,288 in one month. Where'd that $1900 increase come from? Well...

  • Savings up about $900. Between my paycheck and Tegan's, we managed to sock away a bit of cash into our EmigrantDirect savings account. ED just bumped up their interest rate to 4.25% APY, so our money's staying put for now. I considered transferring everything into our ING Direct account which has a 4.75% promotional rate on new money until mid-April, but since I don't have the two accounts directly linked, the money would have a short stay in Bank of America Land (motto: "We thank you for your free money"). We might've ended up making a few dollars more rate-chasing, but I'm just not yet comfortable constantly moving around $20k like it's a decorative vase. That said, I'll probably put the next month's worth of extra cash into ING for a bit.

  • 40l(k) up around $500. The automatic 8% payroll deductions and 50% employer match continues. As for my investments' performance--up 1.35% since January 1st even with that rather nasty market bump last week. This doesn't include the performance for today which was likely pretty spectacular thanks to some awesome 4th quarter earnings being reported by my employer. Yay for my ESPP!

  • Car loan down another $500. I don't like this stupid loan. I'm tempted to just pay it off right now, but my money will make more being invested than it will avoiding the relatively low interest payments on the car. Still, I can't wait until that "Debts" column goes to zero ... and then I'll want it to go higher again to reflect our eventual mortgage on our eventual house.

Despite suffering from Frugality Frustration, we've found a few new ways to save some more money or increase our quality of life at little or no cost.

  • Smarter grocery shopping. I've been taking my own advice to help cut costs around the house, especially in the food department. We've been planning out the week's dinners on Sundays and then shopping only for what we know we'll need. I was hoping to also plan breakfast and lunch, but we usually just stick with a few options for those meals, so I didn't see as big of an opportunity planning those meals. As a result, our fridge isn't quite so full of stuff that might expire before we get to it.

  • Smarter eating. Along with planning meals, we're also wising up about our nutritional choices. We've dropped our meat-eating from six or seven days a week to four or five, and hopefully that will go down to three or four soon. The money we've saved on meat has been going to things that are better for us: delicious salads and soups, and even a few powerfully tasty yet inexpensive recipes.

  • Finally used our vision insurance. I've been paying a few cents a week for it for nearly two years now, so I figured it was time to put that vision insurance to use. Our provider gave us a nice variety of places around here where exams would be fully covered. We opted for the local LensCrafters and its "independent doctor of optometry." The doctor was very pleasant and she told me I had 20-15 vision. Apparently I can see through walls my vision is so good--and this despite a decade of ridiculous computer use. Tegan, who wore glasses as a child but not since I've known her, was given a prescription for corrective lenses to be used as needed. It's not a strong prescription at all, but we got it filled while we were there. We only paid a few bucks out of pocket for the part of the eyeglass frame that insurance didn't cover, and Tegan reports a big improvement (especially in her videogame scores). As an added bonus, our bedroom life is better than ever now that she sometimes plays the role of the "sexy librarian." Too much information? You bet!

I also have some goals for February ready to go...

  • Eye those grocery prices a little closer. I plan to put together a grocery price book to help track prices for our common purchases. Thanks to The Frugal Homemaker for this idea.

  • Plan our in-house food production. This mild winter already has us thinking about planting some porch produce in a couple of months. Jane Dough has me considering a miniature lemon tree or maybe a more practical lime or orange plant. Really, I'd love to ask our apartment management to consider opening this one patch of land on the property for a community garden, but who knows if that'll ever happen. If you're passing through the area this summer, you should be able to spot our apartment; it'll be the one with the jungle on the balcony.

  • Don't overspend, but still have a good time. Valentine's Day is right around the corner, and while I hope to make it a special one for my wife, I'm going to do so without spending an insane amount of money on flowers that die in a week. I think she'd be perfectly happy if I just got her a ten-pound block of chocolate, but I'll figure out something a little more romantic and less artery-clogging. The other big event for February is our annual trip to Katuscon, a Japanese anime convention in Washington, D.C. While we're close enough to commute daily, we'd rather just stay in the hotel where the convention is being held for convenience and to spend more time with friends. We've got a few of those friends to room with us, so the room price will be fairly reasonable for a couple of nights. The real place we need to watch our wallets is in the convention itself with its vast vending rooms full of the latest anime products. We'll probably also load up on food to take with us so that we only need to eat out for dinner. All in all, it'll be a nice three-day vacation for just a few hundred dollars.

Uh-oh. Here comes the sexy librarian. I've gotta go ... check out some books. Goodnight!

25 January 2006

The Wonderful World of Employee Stocks, Part 4: Stock Options, And Why Thinking About Them Makes Me Squeal Like a Schoolgirl

Squeee! Stock options! Squeee!

I'm okay. I'm okay. And if you happen to be a Google employee with a bunch of company stock options, you're probably much more than okay right now. That's because, with a few magic words from your employer and some lucky market timing, these little things called "options" can make millionaires out of anyone fortunate enough to be entitled to them. Now chances are if you have time enough to spend reading my lowly blog that you're probably not swimming in stock options, so this will be more of a "what if" for you. But maybe one day you'll come up with an idea that makes your company billions and they'll thank you with a handful of stock options. Then you'll come back to this blog on its 30th anniversary to read up on what stock options are, and you might just invite me to visit you on the private island you'll purchase with the money you make from selling your options.

Stock Options. Yup, That's What This Is About. What, Are You Waiting For Me To Say Something Funny Here? Okay, Fine. Ummm ... Cheese Doodles! Now Read The Article Already!

The basic theory behind stock options is pretty simple. When your employer gives you stock options, it is not really giving you stock. Instead, it's your employer's way of saying you will have the ability during some period in the future to exercise your option to purchase stock. The trick to stock options is that your employer sets the price at which you can purchase the stock, and if you choose to use your options to purchase the stock, you're guaranteed to pay that price and no higher.

There are a few things to keep in mind if you ever find yourself with some options. First, your options are only valid for a limited time. If you don't exercise them by the time they expire, you gain nothing, but you also lose nothing because you didn't buy any stock. Second, unlike ESPPs with their built-in discounts, options do not automatically mean free money for you. It's quite possible that the stock's price will drop or stay below the purchase price your employer sets during the option period. Fortunately, as long as you know basic math, you won't lose money if this happens; you'll just have worthless options. Third, you might not be entitled to use all of your options when you first receive them. They may be gradually vested, meaning that you might be able to use some of them one year, some the next, and so on.

The stock shares you buy with options, unless they're restricted (we'll talk about this in a moment), entitle you to all the rights of being a regular shareholder for as long as you hold the stock. Vote in big decisions, check your stock's price compulsively, or just brag to your friends that you own stock and are therefore so much cooler than they are.

Case Study: Exercising Your Options ... In My Pants!

Let's look at an example involving a sadly imaginary business. Say I own The Butt-Hugging White Pants Company and I've just hired you on to head our Shiny Gold Zipper Design Department. You're the best in the field of shiny gold zipper design, so I want you to stick around for a good long time designing shiny gold zippers for us. So I pay you well and give you 800 stock options in the company. Those options are 25% vested each year for the next four years and each option entitles you to purchase one share of NYSE:BUTT for $10. The options are good for four years from the start of the first year of vesting. Good so far? Not really since you haven't actually made any money yet. But hold on to your pants 'cause it's about to get windy!

Year One of your four-year option period comes around. BUTT starts the year trading at $15 a share. You could exercise 25% of your 800 options to buy 200 shares for $2,000 ($10 x 200 shares) and then immediately sell them on the open market for $15 a share. You'll make $1,000 if you do it this way, but you decide to hold on to your options. The third-quarter earnings go through the roof thanks to the discovery of a new shade of white denim that sells millions of pairs of pants in under a month. The stock price jumps to $30 a share and you decide to exercise those 200 vested options. You spend $2,000 to buy the stock and sell it for $6,000. You're $4,000 richer, and after a week's vacation in Hawaii, you come back to work and crank out the best darn shiny gold zippers ever made.

Unfortunately that new shade of white denim turned out to be poisonous and your company's stock plummets in Year Two of your option period to about $12 a share. You could still exercise your newly vested 200 options and make $400, but you decide to hang on to your options going into Year Three.

Now equipped with your fantastic new shiny gold zippers, Butt-Hugging White Pants start selling fairly well again in Year Three. The stock price rises to $20 and you sell the 200 options left over from last year plus your 200 new options from Year Three. The 400 options at ten bucks a pop costs you $4,000, but you sell them for $8,000. You're another $4,000 richer.

Year Four begins and you've got your final 200 options. The weather's nice outside ... a little too nice. Turns out that white denim was not only poisonous but it was also punching a big hole in the ozone layer. The entire country sees record highs, and while the only thing on people's minds is looking good, the only things on their thighs are shorts and skirts. Our company sells pants only, so we have a slow sales year. The stock price sinks to around $5.25 a share heading to the end of Year Four.

At this point, you have a couple of options (and I'm not just talking about the 200 stock options you have left). On the one hand, you can do nothing with your options and they'll expire at the end of the year. No money gained, but none lost. On the other hand, you can exercise your options and immediately sell your shares. You'll only make $50 ($.25 x 200 shares), but at least you'll be able to pay your bar tab at the end of the night. On the third hand (you three-handed freak!), you can exercise your options and hang on to the stocks for however long you like. While the options might expire at the end of the option period, you can use them and keep the stock indefinitely. Hopefully the weather will cool off next year and pants will begin selling again.

Sadly, you don't get to choose from any of these options. Instead, you resign in shame after the President of the United States has a highly publicized painful zipper accident while traveling through Europe. You guessed it; he was wearing Butt-Hugging White Pants with your latest shiny gold zipper design. In this case, since you quit willingly, you forfeit your remaining options. But that's okay, because the company never recovers from that incident and I'm soon fleeing the country when the SEC begins poking its nose into our, ahem, pants.

Other Fun Things To Know About Your Options

If you make so much as a penny with your options--surprise, you'll pay taxes on your profits. Taxes on options can be worse than those on ESPPs because, under certain conditions, you may have to pay taxes twice on options you exercise. The first time will be when you originally use the options to buy stock. If the price your employer sets for your options is lower than the market price for the stock, you'll typically pay regular compensation taxes on the difference. Once you sell your stock (if you decide to hold on to it), you'll pay taxes again if the stock price went up since you bought it. Also, depending on the type of stock option, you may only have to pay long-term capital gains taxes if you hold the stock for a period of time.

Another tax note about options: these babies could throw you clear into Alternative Minimum Tax (AMT) Land. If you exercise a ton of options in a single year or the gap between the purchase price and sale price is fairly large, you might trigger the AMT. You can read more on the AMT and stock options in this article from The National Center For Employee Ownership.

One nasty trap to be on the lookout for is options that only allow you to purchase restricted stock. As the name suggests, there are restrictions on stock purchased with these options that could prevent you from selling your stock immediately or force you into selling it back to the company (possibly at a loss!) should you leave the company. Be very careful when playing with restricted stock options.

Finally, another event that might take place during your option period is known as repricing. If your company's stock takes a tumble, it may reprice your options lower. Your options to buy shares at $10 a piece might allow you to buy stock for $5 a share if your company reprices the options. Companies sometimes do this so that a big employee incentive doesn't become worthless and employees don't start generating tons of resumes on the office copier. As simple as this might sound, there are rules restricting businesses from doing this whenever they feel like it.

Summary of Stock Options

Oh come on! Don't tell me you skipped down to here again. But that means you missed a great story about pants and stock options! Okay, on with the summary.

  • Stock options let you buy stock later at a price decided earlier. When you exercise your options, you can buy stock for a price your employer sets ahead of time. Generally you'll wait until the market price is higher than your purchase price, and then you'll sell for a tidy profit. In the meantime, while you hold the stock, you have all the powers of a normal shareholder.

  • Options expire and can be vested over time. If you don't exercise your options after a limited amount of time, you lose them but your wallet is left untouched. You might not be allowed to use all of your options right away; you could have to stay employed with your company for a while to get access to all of them.

  • When you make money, you pay taxes. Yup, same third bullet from the ESPP discussion. Be extra careful with options since they can be taxed at option exercise and stock sale time, and you might even trigger the dreaded AMT.

  • Watch out for restrictions and repricing. Restricted stock options can limit your ability to turn a quick profit with your options. In times of financial woe, your company may reprice your options so that they retain some of their value.

And that, ladies and gentlemen, is just about everything I know regarding employee stocks. Be sure to check out the other parts in this series if you missed them...

Part 1: Getting Started on Owning One Billionth of Your Company
Part 2: Getting Soppy Over ESOPs
Part 3: Don't Poo-Poo Your ESPP

...and look for more delightfully informative series from Funny Munny soon.

23 January 2006

The Wonderful World of Employee Stocks, Part 3: Don't Poo-Poo Your ESPP

Oh how I wish my employer offered us an Employee Stock Purchase Plan (ESPP). I mean, an ESOP is better than nothing, but there are absolutely magical things about ESPPs that make me jiggle like a bucket of Jell-O just thinking about them. Today we'll take a look at a few of the magical, jiggle-inspiring facets of ESPPs along with a few jiggle-stopping pitfalls to watch out for in your own ESPPs.

How ESPPs Differ From ESOPs

Comparing ESOPs to ESPPs is a bit like comparing apples to apples full of free money. We'll get more into the free money side of ESPPs in a bit, but suffice it to say that ESOPs and ESPPs have a few basic characteristics in common. To start, any money you may have in either will grow or shrink depending on the success of your company, so employers hope that participating in either plan will encourage their workers to strive for peak productivity. So if you work hard enough to compensate for the other thousand slackers around you, your company's stock will skyrocket, and you will hit it big. Right? Right. Moving on.

ESPPs involve more direct interaction with your company's stock than ESOPs provide. Shares are typically purchased using money right out of your paycheck at the start of a plan period. Plan periods typically last a period of six months, but this doesn't mean you have to actually own the stock for six months or that you have to sell it after the period is over. Instead of being a part of a big trust like an ESOP, you take direct ownership of the stock yourself in an ESPP. While the company will hang on to the stock for you, you are a shareholder with all the rights and privileges that come with that title. So feel free to vote your goldfish into the board of directors or start labeling company office supplies that you now "own."

FREE MONEY! Now That I Have Your Attention...

...I'd like to talk to you about ... free money! How much free money am I talking about? Well, it sorta depends on how you look at things. How does a 15%+ return on your investment sound? How about a 60%+ return? You technically get both of them depending on how your ESPP works, and here's how.

Many ESPPs allow employees to purchase company stock at a discounted rate. While some companies have been dropping this discount lately, a 15% discount is not uncommon. The actual price you pay for the stock when you purchase it is not as simple as looking at your favorite newspaper's stocks page on the first day of the plan period. A lot of companies will let you purchase the stock at its price (minus any discounts) on either the first day or last day of the period, whichever is cheaper. A few employers throw in some oddball modifications to this rule; if you're lucky, you might only pay the lowest price on any Friday during the plan period or maybe even the lowest price a year or two into the future!

The real fun with ESPPs comes in when you do something that you're really not supposed to when participating in an ESPP: selling your shares as soon as you purchase them. If you just bought a share of The Baggy Black Pants Company that sells on the open market for $20 and you get a 15% discount on your purchase, you spent $17 to buy something that is immediately worth $3 more. If you sell that share right away for $20, you just made 17.6% on your $17 investment.

Where does the 60%+ return come in to the picture? It depends on how your ESPP paycheck deductions work and how long your money is really tied up in the plan. If your plan period lasts six months and you contribute to it in weekly paycheck deductions, your money is really only tied up for an average of three months. Assuming you sell right away, and putting your discount into the equation, you stand to make 15% or more for a three-month investment; that's a 60% annualized return on your money! If you take into account more complex Internal Rate of Return calculations, you might even be looking at a 93% return on investment. The best part: because of that 15% discount, that return is guaranteed and doesn't depend the tiniest bit on the stock's performance.

You can also play with ESPPs the way they were meant to be played with: hold on to the stock for some period of time longer than six seconds. Obviously this entails more risk, but some people see their discount as a sort of buffer that helps protect against a big loss.

Traps and Taxes

Earlier I hinted at the fact that immediately selling ESPP shares to cash in on the discount goes against the rules of ESPPs. While most companies don't have regulations on how long you must hold on to your ESPP shares, flipping shares is supposedly not in the "spirit" of an ESPP. ESPPs are really designed to be vehicles of long-term growth that encourage employees to hold stock in their company. Despite this, there are plenty of people out there who continue to flip their shares for an immediate, guaranteed profit and they'll keep doing so...

...Until the company gets tired of it. More and more, businesses are adding caveats to their ESPPs to discourage employees from immediately selling their purchased shares. RS of the Young Professionals Financial Blog shared some comments about IBM's ESPP clause that kicks its employees out of the plan for the rest of the six-month period if they sell their shares immediately. Couple that fact with IBM's less than thrilling 5% discount on its ESPP shares and you have a much less attractive plan. Still, taking into consideration the annualized return, even a 5% discount can return 20% or more per year.

As with the rest of the money we make in life, the federal government will always be there waiting (hopefully not right outside your office door) for its chunk. The tax implications for individuals participating in ESPPs can be a bit tricky, so I'll leave the details to this very thorough article on the TurboTax website. To summarize, the money you make from the share price discount is generally considered additional compensation and you'll pay taxes on it like regular income. If you hang on to your shares for a while and make a profit because the stock's value increased, you may get away with paying just long-term capital gains taxes on those profits depending on how long you hold the stock. For many people, long-term capital gains are taxed at a lower rate than your boring old paycheck.

There are a couple other things to consider before running through your hallways at work shouting "Free money! Free money!" The first is that you may have to pay a commission on your stock sale. It's probably going to be a flat rate, and if you've been putting enough out of your paycheck into the ESPP, it won't be much compared to your net return. But if you think you're going to make money getting a dollar taken out of your pay each week for six months, even a 15% discount can evaporate in the face of a $10 commission.

You should also watch out if your company messes around with the traditional rules of an ESPP. Especially in times of financial trouble, a company can pull some nasty tricks on you that will cheat you out of your discount and possibly part of your original investment. For example, while most ESPPs will issue the stock right away, some might take up to a couple weeks to do so. Sometimes a company will apply black-out dates preventing employees from immediately selling. In the meantime, the stock price drops and you're out not only the free money but some of your own money, too. As advised in this article on ESPPs from Ask Tog, be sure that your ESPP issues stocks on the payout date and that there aren't any rules that absolutely prohibit you from immediately selling them.

Summary of ESPPs

If you skipped down to hear without reading the rest of the article, you're cheating! Go sit in the corner and think about what you've done. Then come back and read this summary anyway.

  • If you're in an ESPP, then you own stock. None of this wussy fake-owning like in an ESOP. The stock is in your name, but your company will likely hold on to it for you until you're ready to sell it.

  • ESPPs generally mean free money. Assuming you don't have a really awful ESPP that gives its employees no discount on purchased shares, you make risk-free money just by buying and immediately selling. If your company has a plan like this and you're not participating, you're just silly.
  • When you make money, you pay taxes. This unofficial slogan of the IRS is just as true for your ESPP winnings. While the amount you pay can vary, you generally pay regular income tax on any money you make from the price discount and long-term capital gains tax if you hold on to your stock for a while.

  • Read the fine print of your ESPP. Some companies will temporarily throw you out of the ESPP if you immediately flip your shares after purchase. Other, shadier companies might pull tricks that could cost you your return on investment and then some! Be sure to know the rules of your ESPP before participating.

The series on employee stock plans comes to a close next time when the topic will be stock options. Be sure to exercise your option to check it out!

20 January 2006

Yummy Munny: Chicken Kiev and Carrot & Apple Casserole

Chicken Kiev and Carrot & Apple Casserole
Why does mine look different than the cookbook pictures???

While my lovely wife Tegan does most of the everyday cooking, I like to hunt for new and exciting recipes, make them, and see how badly I screw them up. Tegan says I'm too hard on myself and that my cooking always turns out pretty well, but she has to say that because she's my wife and if she doesn't I might stop feeding her. (Just kidding, sweetie! Please don't wash your pink socks with my white shirts!)

Tonight I volunteered to cook a couple of dishes I found in the latest addition to our cooking library: Gregg R. Gillespie's 4-Ingredient Recipes. See, I have the culinary equivalent of Attention Deficit Disorder, so I usually pass on a recipe if it's over a hundred words and has more than four or five ingredients. This book is perfect for me because every recipe fits on a tiny page and even comes with a full-color picture.

Today, two pretty pictures caught my attention and I managed to read the recipes long enough to realize we had the ingredients to make these dishes! So without further ado, I present the stuff that happened when I threw food around the kitchen...

Chicken Kiev

2 boneless, skinless chicken breasts
1/2 c. bread crumbs
1 egg
5 tsp. vegetable oil
1/2 stick butter or margarine

Lightly grease a baking sheet and put it in an oven preheated to 400 degrees F.

Beat the egg in a bowl. Beat it good. Cut the butter stick up into small chunks. Place half the chunks on each of the chicken breasts. Roll each breast up and pin them closed with a toothpick. Roll each breast in the bread crumbs, dip them in the egg, and then roll in the bread crumbs again.

Heat the oil in a deep fryer to 350 degrees F. Fry the breasts in the oven for 10 minutes or until they're all brown and yummy looking.

Put the breasts on the baking sheet and bake them in the oven for 5 more minutes or until even yummier looking.

Serves two for about $4.00.

Carrot and Apple Casserole

2 c. baby carrots
1/2 c. water
1 1/2 c. sliced apples (I like to leave the peels on, but you don't have to)
1/8 tsp. nutmeg
2 T. butter or margarine
2 T. honey

Preheat the oven to 350 degrees F. Lightly grease a baking dish (and make sure you have a cover for this dish unlike stupid me who didn't read the recipe in full first).

Combine the carrots and water in a saucepan and cook on low heat for about 12 minutes. Drain the carrots and then combine them in the baking dish with the apples and honey. Slice up the butter and throw it on top. Cover the dish and bake for 30-35 minutes. Take it out of the oven and sprinkle the nutmeg on top.

Serves three for about $2.50.

Yeah, the book cheats a little bit and doesn't really count things like butter or water as "ingredients."

I'll share some more great recipes from this and other places as I work up the courage to try them, but you can always get this book and check it out for yourself.


19 January 2006

The Wonderful World of Employee Stock, Part 2: Getting Soppy Over ESOPs

A couple days ago, we started talking about some of the different ways you can dabble in your own company's stock. Actually, it wasn't "we" doing the talking; it was just me, but you did a very good job listening. In fact, as a reward for being such good listeners, today you get to listen to me talk in excruciating detail about the most common way that people like you can invest in the success (or disastrous, wallet-annihilating failure) of your company--Employee Stock Ownership Plans (ESOPs).

How ESOPs Work (Or At Least the Parts You'll Care About)

The internal workings of an ESOP can be relatively complicated and, while I'll spare you the grittiest details, it is worth mentioning that they even have their own governing laws covered by the Employee Retirement Income Security Act (ERISA). A lot more goes on in the background of ESOPs than many of the employees who participate in them realize. To start, while one of the primary purposes of ESOPs is to provide an incentive for employees to work hard for the success of their company, they actually yield huge benefits to the company and its primary owners. The company's biggest benefit comes into play when the trust it establishes in connection with an ESOP borrows money that is used to buy stock for the ESOP. When the company goes to pay that money back, it can claim a hefty tax deduction. The company can also directly contribute shares of its stock to an ESOP, and those contributions are also tax deductible. A company's biggest shareholders also heavily benefit from ESOPs because ESOPs serve as a market for the shareholders to sell their stock.

What you should care about when it comes to ESOPs is how you get a hold on your share (or at least the cash value) of an ESOP. When a company establishes an ESOP, it also sets up individual accounts for each of its employees who are qualified to participate--generally any full-time employee over the age of 21. The company then contributes to your account however it sees fit--most often through matching a portion of employees' contributions to a 401(k) or through some other formula that takes relative pay or length of employment into account. In many companies, you don't immediately have a right to the shares put into your account; rather, you gain more rights to your shares the longer you remain with the company. That's what is referred to by the term vesting. ERISA rules dictate that employees be 100% vested in their ESOP accounts within five to seven years--possibly sooner, depending on how your ESOP is put together.

Eventually you'll leave your company, either for another job or to retire (or maybe they'll find your computer's "hidden" porn folder and give you the boot). When you do leave, your company must buy your ESOP shares from you for whatever they're worth. If you're not at retirement age, you'll probably want to roll that money over into an IRA. Otherwise, you might find yourself hit with capital gains and excise taxes.

ESOPs and 401(k)s

Many companies (including the one that employs me) make contributions to its workers' 401(k) retirement plans with ESOP shares. Since these contributions typically come in the form of matches to an employee's contributions to other 401(k) funds, it's rare that an employee will put his or her own money into an ESOP. Instead, the ESOP will sit alongside your S&P Index Funds and Stable Value Funds and the like.

The important thing to realize about ESOPs, especially if they're a part of your retirement portfolio, is that participating in one is akin to owning stock in your company. If a company does well, the value of your ESOP will rise. If a company does not so well, the value might go down. If a company goes bankrupt, your ESOP money goes bye-bye. So just like you wouldn't invest all or most of your money in a single stock, you don't want your ESOP to take up a disproportionately large chunk of your retirement plan.

That said, there are many employees out there with 33% of their 401(k)s made up of ESOP contributions--essentially, a third of their retirement money is riding on the success of their own companies. Now maybe these people are big fans of their companies and have complete faith in their continuing success, but I'm willing to bet that an awful lot of people simply take an hour to set up their 401(k) contributions and assume they'll have lots of money waiting for them in 40 years.

The problem with taking a set-it-and-forget-it approach to 401(k)s when your company's matching comes in the form of ESOP contributions is that, left untouched, you'll have two-thirds of your retirement account in assorted funds (they are assorted, right?) made up of your personal contributions and one-third in an ESOP (since a lot of people get 50 cents put into an ESOP for every dollar they contribute to other parts of their 401(k)). If you're in this situation and your company pulls an Enron, you could lose a third or more of your retirement savings.

Unfortunately for you, the rules for diversifying (in this case, moving your money from the ESOP to other funds in your retirement account) aren't in your favor. With some exceptions, until you turn 55 and have been participating in the ESOP for at least 10 years, it is solely at your company's discretion whether or not to permit you to diversify some or all of your ESOP. After that point, your company must give you the option of diversifying 25% of your ESOP balance or pay that 25% out to you. That figure goes up to 50% at age 60. But if you're still a whippersnapper, you may have no choice but to let that ESOP stay a big chunk of your retirement portfolio.

In my case, my employer matches 50% of my 401(k) contributions with ESOP dollars. Before this year, we weren't allowed to diversify our ESOPs until age 55, but my company changed that rule drastically this year to allow immediate diversification of ESOP contributions. Now if I had absolutely zero faith in my company's future existence, I could theoretically log into my retirement account every week and move those ESOP contributions to other funds (though in practice, I can't because we're only allowed a limited number of changes to our plans each year). Instead, I try to keep the value of my ESOP around 10-15% of my total 401(k). I closely monitor my 401(k) and whenever my ESOP hits 15% of the total balance, I usually transfer enough to other funds to knock the ESOP's worth down to 10%. I could diversify all of those ESOP contributions, but I'm pretty sure my company will still be around for a while.

"I Nominate My Goldfish For Chairman of the Board"

I've already briefly touched on the idea that ESOPs vary in several ways from direct stock ownership. If you go out and buy 100 shares of The Sexy Green Pants Company, you'll be entitled to 100 votes when it comes time to make big decisions about the company like merging with The Saucy Red Pants Company or selling out to The Sensible Black Pants Company as well as other important corporate issues like electing the board of directors.

Participating in an ESOP does not empower you as much as purchasing the stock yourself. In publically traded companies, employees participating in ESOPs must have some sort of voting power on all the issues that a regular shareholder can vote on. In private companies, ESOP participants only need to have a say in those major, company-altering events like selling or closing the business. This sounds pretty good considering you're probably not even spending your own money on company stock, right?

In reality, voting rights for ESOP participants aren't truly voting rights. If you have the equivalent of 50 shares in your ESOP, you don't get 50 votes. You don't even get one vote! Instead, it's the trustees of the ESOP who have the voting power granted by the shares in the ESOP. These trustees are free to do as they please and can even make decisions without consideration to anyone else. Most often, though, the trustee will vote the ESOP shares either according to the wishes of the committee that administers the ESOP or, if you're lucky, to those of you lowly employees.

There are plenty of other rules governing ESOP voting, many of which allow companies to restrict an individual employee's ability to have any real influence in big corporate decisions. So if you're looking to wield some real power, you might want to look into more direct forms of stock ownership than an ESOP provides.

Summary of ESOPs

What, you thought I was going to talk for ten hours and not give you a CliffsNotes version? I'm a nice guy!

  • ESOPs are investments in your company. Performance of your ESOP money is directly tied to the performance of your company. Employers expect that ESOP participants will work harder for the good of the company. You'll do that, right? Of course you will!

  • Your employer dictates when you are vested in your ESOP shares, though the law requires 100% vesting within seven years, sometimes sooner.

  • 40l(k)s and ESOPs are a great combination. The pairing of ESOPs and 401(k) retirement accounts is becoming more and more common. In most cases, employers will match part or all of employee 401(k) contributions with ESOP shares...

  • ...but don't let your retirement portfolio get too ESOPpy. If left undiversified, you could end up with one-third or more of your retirement money riding on the success of your company. If your company allows diversification of your ESOP funds before the government-mandated age of 55, it might be a good idea to spread some of your ESOP balance to other funds.

  • ESOP voting powers are often limited. Because of the way ESOPs are structured, your ability to use ESOP shares in important company decisions can vary. Typically you won't have anywhere near the same voting rights as normal shareholders.

Of course, ESOPs can come in all sorts of sizes and shapes and have special caveats that require you to milk the CEO's baby goat three times a year. So if you have an ESOP at work and you'd like to learn even more about them, aim your web browsing device at these babies:

An Interactive Introduction to ESOPs
Wikipedia - Employee-owned corporations

In part three of this series, we'll look at ESPPs and why a one-letter difference from ESOPs can mean a whole lot of difference for you and your money.

17 January 2006

The Wonderful World of Employee Stock, Part 1: Getting Started on Owning One Billionth of Your Company

Look out! He's writing a SERIES!!! Head for the hills!

That's right, the first multi-part adventure finally begins here at Funny Munny. Over the course of the next 82 months (or maybe a few days if I cover everything sooner), we'll be looking at all the different ways that you and the stock of your employer can interact. You might think it's as simple as owning or not owning your company's stock, but it's far, far more complicated than that. Actually, it isn't, but if I say it's easy you'd go read about it somewhere else. So it's extremely, mindnumbingly difficult and without my help you'll lose all your money and the SEC will search through your underwear drawer if you even say the word "stock" while at work.

Now that I have your terror-induced attention, we can start talking about all the different ways you can get your hands on a chunk of your company's stock. First off we--

So what are my options for purchasing stock in my company?

Whoa! Where'd that big bold question come from? No matter, it sets up my first topic very nicely.

There are three common ways for an employee to play with company stock: an Employee Stock Ownership Plan (ESOP), an Employee Stock Purchase Plan (ESPP), or a stock option plan. At first, they sound like the same thing--plans for acquiring stocks. And that's entirely kinda sorta true not at all. There are some major differences between the three that--

What's an Employee Stock Ownership Plan (ESOP)?

Okay, Mr. Bold Question Man, if we're gonna do things like this, you need to wait until I finish answering a question before asking another one.

Sorry. I'm just excited about Employee Stock Ownership Plans!

That's okay, we're all just as excited. Anyway, an Employee Stock Ownership Plan is the most common of the three options. Despite having the word "ownership" in its name, ESOPs don't actually let you own any stock. Instead, an ESOP is a big trust that invests solely in stock contributed by your company to the plan. You still get most of the benefits of stock ownership; if your company does well, your contributions earn more. In return, your employer gets some nice tax savings and maintains control of the business. Contributions you make to an ESOP can be done on a before-tax basis, so they are often combined with a 40l(k) plan. In some cases, your employer will match some of your 40l(k) contributions in part or completely with ESOP contributions.

So then what's an Employee Stock Purchase Plan? (ESPP)

Unlike an ESOP, the money you contribute to an ESPP is used to directly purchase stock for you. You make contributions to an ESPP over a certain period of time, and at the end of that period, your employer purchases the stock for you. The price you pay for each share is typically either the price at the beginning or end of the period, whichever is lower. As an added bonus, you might even get a discount on the purchase price of the stock--sometimes up to 15%. These discounts often mean that you make a decent chunk of money on your contributions right away since they're worth the full price of the stock. As such, some people will sell their newly acquired stock immediately for a nice profit. If you hold on to the stocks, you'll own a tiny part of your company and can vote in certain important business decisions such as board elections and what your boss is having for dinner tonight. Of course, you'll probably only have a few hundred shares of your company stock compared to the millions that exist, so you won't want to tap dance naked on your manager's desk.

And stock option plans? How are those different from ESOPs and ESPPs?

Stock option plans have three important components: a number of options, an option price and a time period during which you can exercise your options. For example, if your company gives you a one-year option to buy a share of stock for $50, and during that year the stock's price goes up to $80, you can exercise your option at that time to buy a share for $50 and (if you decide not to keep it) immediately sell it on the open market for $80--a $30 profit per share. While you don't get the voting rights that come with being a regular shareholder or participating in an ESPP, you are protected from losing any money since you wouldn't normally spend a dime until you exercise your options for a profit.

Of stock option plans, ESOPs, and ESPPs, which one is the best for me and my money?

Usually your best option is the one available to you since it's rare for a company to offer more than one to all of its employees. If you do have a choice between the three, then your decision depends on your reasons for dabbling in your company's stock. If you just want to make some money with no risk, stock options will help you do just that. ESOPs are geared more toward long-term investment. ESPPs fall somewhere in between since you can often sell your purchased stock immediately for a profit when you consider any discounts you may receive, or you can hold on to your stocks and possess the same rights (and risks) as other shareholders.

Next time, we'll get into juicy detail about ESOPs--how they work, things to watch out for, and tips for making the most out of your ESOP experience.

16 January 2006

The Prodigal Get Frugal and the Frugal Get Frustrated

As my ever-growing bank account can tell you, being frugal really has its rewards. Of course, being a spendthrift also has its rewards and those rewards are generally much more immediate and short-lived than those experienced by those who choose to save instead of squander. A youth full of charging up credit cards can be loads of fun ... until the credit card bills come due.

And yet, more and more every day, those who have been loose with their wallets are being saved thanks to the advice of the frugal--those chosen few who have seen the light and decided to turn it off to save money on their electricity bills. The wave of frugality soon spreads across the land, and in the end we're all saving so much money that the average retirement age drops to 35.

It goes without saying that this'll never happen. The lure of "free money" that credit can provide is too strong for many people. And while I certainly don't condone this sort of spending behavior, I can understand why the concept of saving money would not be attractive to someone more interested in living it up today than planning for tomorrow.

I'm fortunate that I never became one of those people drawn in by the lure of an easy life now at the expense of endless money troubles later. I've always practiced the basics of frugality--eating in, keeping energy costs down, and only spending money that I actually have and only when I really need something. The results: I'm out of college with no student loans or credit card bills, and I'm already saving for retirement. Now while I'm thrilled with all I've accomplished in my personal financial life, I'm a little dismayed that there aren't any major steps I can take to become even more frugal without experiencing unnecessary hardships.

Yes, folks, I'm suffering from Frugality Frustration.

It's easy enough to self-diagnose Frugality Frustration: symptoms include bank accounts full of money, credit cards with no balances or transactions for $300 shoes, bills that are paid on time, and countless measures taken to save money on groceries and utilities. Alas, you've seemingly reached your peak savings rate, and there's nowhere else you can scrimp a few pennies without freezing your butt off in winter or eating bugs for breakfast.

This can be a turning point for a person following the path of frugality. Finding new ways of saving--arguably one of the best rewards of being frugal--becomes harder and harder the more you do it. And when that reward doesn't keep coming, it becomes easier to slip back into a more prodigal life. Frugality Frustration, if not recognized and dealt with, can ultimately undo all the accomplishments you've worked so hard to achieve.

Lucky for you, there are ways to combat Frugality Frustration, and they all focus on helping you to more fully experience the rewards that come with a frugal life.

Five Ways of Fighting Frugality Frustration

  • Can't find new ways to save? Get creative! So you've got your thermostat at the bare minimum, you're eating out once a decade, and the clerks at the supermarket give you dirty looks when you pay six bucks for a cart full of groceries. Is this the true limit of your frugality? Probably not. While it might be true that it's not worth it to chip at your budget any further because all you'll get is a penny or two saved here and there, this doesn't mean you should stop. Frugality isn't just about saving money; it's about having fun finding ways to save. The opportunities may not be as numerous once you've been at it for years, but when the chances come, it's up to you to spot them. For example, now that energy-saving fluorescent light bulbs are relatively cheap, it might be time to go on a bulb-changing spree through your house. Or if you want to shave a few cents off your food bill, consider starting your own hydroponic garden. The point is that there's always another way to save, and it's not until you reach Frugality Frustration that some of the most creative ways make themselves apparent.

  • Remember how far you've come. If you've made it this far, then you've probably saved yourself thousands of dollars living a frugal lifestyle. While you might not have an Olympic swimming pool in your backyard or a French maid in your kitchen, you probably don't have massive bad debt or bills you can't afford to pay. It's important to realize the difference between the frugal you and the you that could have destroyed your financial future. Look back at all you've achieved and give yourself a pat on the back. And while you're at it, because you know you want to, feel free to snicker at your frugally-challenged friends who, while I'm sure they're very nice people, will probably be working for the rest of their natural lives to pay for their extravagant lifestyles.

  • Consider the ultimate goals of your frugality. You're saving money left and right, and you know you must keep saving or else some great calamity will befall you from the heavens! DON'T STOP SAVING OR YOU WILL BE EATEN BY WOLVES!!! I'm exaggerating a little (the wolves will merely nibble on you), and while frugality requires that you stick to it, it's important to keep in mind why you're doing it. Each person's reasons for living a frugal lifestyle is a little different, but many people do so with an eye toward an early, comfortable retirement or some other lofty future goal. Saving lots of money takes years or even decades, so it can be easy to lose sight of that ultimate goal which seems so far off. When you're sitting down to go over your finances, don't forget what those dollar signs in your savings and retirement accounts mean. For you, they could mean that you can quit your back-breaking day job in ten or twenty years and work part time at your dream job where money is a secondary objective. Or they could mean making some improvements to your home in a few years like putting in that sauna or game room or time machine you've always wanted. Or they could mean that your children will have the secure financial upbringing you might not have had; they'll always have a full tummy, nice clothes, toys to play with, and a good education. Whatever your reason for saving money, never ever forget it.

  • Don't let yourself get burned out. If you've taken every measure you can think of to become more frugal and if keeping your ultimate goal in mind doesn't cure your Frugality Frustration, it's quite possible you may be burned out. You might be trying too hard to squeeze every penny out of your costs and into your savings, and it could be doing you more harm than good. The easiest place to spot this is in your pantry. If your cupboards are full of processed foods and bulk this 'n' thats just because you got them on special, you're probably putting your wallet before your health. Eating right is not something you can fool around with just to trim a few bucks from your budget. In the end, it'll end up costing you more in doctor's bills than, say, making sure you eat a good amount of fresh fruits and veggies. And while you think keeping the thermostat at 52 degrees in the middle of a blizzard will save you lots on your utility bill, people are not built to live in those kind of temperatures. The whole point of living a frugal lifestyle is to save money without hardship to yourself or your family. You must take care of yourself today so that you'll be able to enjoy the benefits of a frugal lifestyle tomorrow. Examine all of the steps you've taken on the path to frugality and see if there's anything you're doing that might hurt you more than help. Remember, a few bucks saved at the expense of your health is a few bucks you won't be around to spend later.

  • Spread what you have learned to others. I was only joking earlier about laughing at your friends for their lack of frugality. Instead of mocking your buddy for his 600-channel cable setup that gets 472 channels of Swedish soap operas, show him how he can save $50 a month with a smaller package of his favorite channels. Or instead of leaving copies of your high-yield savings account statement on your neighbor's doorstep with the APY circled and the words "Ha ha, I'm saving more than you!" written on it, help your neighbor set up her own account with ING Direct, Emigrant Direct, or HSBC. There's plenty of frugality to go around, so there's no point in keeping your tactics for saving money a secret. At the very least, instead of having a bunch of friends always trying to bum money off of you, you'll have a bunch of friends trying to coax more money-saving tips out of you.

Now if you'll excuse me, I need to break into my neighbors' apartments and replace all their lights with fluorescent light bulbs. Good-bye, Frugality Frustration!

12 January 2006

Your Opinion Counts ... As Much As Those of 20 Million Other Bloggers

"The blogosphere is overflowing with brutally honest opinion," says Howard Kaushansky, Umbria's 47-year-old CEO. "Our goal is to track those opinions down."

My daily voyage through the cornfields of the internet brought me to a fascinating article written last month by Fortune Small Business. Apparently many companies will pay another company to find out what I think about their products. I guess that's nothing new since consumer surveys have been around since prehistoric times. But when I saw the line "Meet an entrepreneur who can survey 20 million consumers in two minutes," I figured this was either someone who can talk and write really fast or someone with a website that gets, oh, ten bazillion hits a day. Nope and nope. It turns out that Umbria is one of many companies that searches blogs like yours and mine for our opinions on products and services. So for Coca-Cola to find out what people think about Vanilla Coke, they just needed to fork over about $60,000 to Umbria, and Umbria would have come back a few minutes later to let Coca-Cola know that X percent of bloggers think it's inconsistent, flat, or just plain terrible.

The real fun comes in with how Umbria distinguishes between 12-year-old boys talking about sports cars they can't afford to drive and 30-year-old married women talking about minivans they need to buy to carry around their seven children...

Elongated spellings ("soooooooo"), multiple exclamation marks (!!!) suggest a teenage female. The blogger is probably a teenage boy if a posting is rife with hip-hop terminology such as "aight" (translation: "all right") and "true dat" ("I agree!").

Okay, I can believe that. The next part is a little scarier...

Male baby-boomers, on the other hand, tend to favor stale hip-hop-isms such as "jiggy" and "bling." They also pepper their blogs with terms such as "prostate" and "IRA."

Wait, I have a point! The lesson to learn here is that our blogs are being "read" by big-time companies who want to know what we think about their products and services. If you think that complaining about something in your blog--for example, Dell's technical assistance or a missing ten-by-two pink brick in your latest Lego batch--won't get noticed ... you're probably right. But if you and ten thousand other bloggers all agree that, again for example, Mountain Dew should only be green, then you might not see red, orange, and blue Dew on your next trip to the grocery store.

Okay, Umbria, let's see you work your magic on this honest-to-goodness opinion of a white male between the ages of 18 and 25: Kellogg's needs to bring back their watermelon Pop Tart. I repeat, give me back those scrumptious watermelon Pop Tarts. And I obviously have lots of money to buy them with seeing as I got too jiggy and now there's bling in my prostate.

11 January 2006

Cough Syrup Doesn't Work? Time to Switch Back to Booze!

I'm getting over some sort of cold as I type, so the timeliness of this article is ... timely.

Looks like I won't be picking up that truckload of cough syrup after all. Thanks to BloggingBaby for letting us know that over-the-counter cough syrup is a sham. I probably should've figured this out on my own ... and so should all of you! For shame!

Okay, so we had no real way of knowing, though you have to wonder what sort of studies the cough syrup makers conducted that led them to believe their products worked. Does this mean we'll see a bunch of false advertising lawsuits filed against the manufacturer of Robitussin? Probably (Nick's Rule of Starting a Business #1: If you build it, they will sue you.), but our over-medicated society won't let these remedies disappear from drugstore shelves. I doubt even a big label reading "WARNING: THIS DOES NOT WORK" attached to cough syrup would discourage people from buying it.

Now if you're open to alternative medicines, I highly recommend chocolate to help relieve coughs, increase sexual appetite, and spark world peace.


09 January 2006

The Business Landscape of the Future: General Antimatter, Clones 'R' Us, and Intergalactic Business Machines

While I've got the old financial crystal ball out, I figured it would be fun to envision some of the new business opportunities that will be awaiting us in 40 or 50 years. Easier said than blogged since I can't imagine anyone 50 years ago thought we'd be using a network of millions of magical boxes to purchase ferret hammocks and robotic vacuum cleaners. At the current pace of technological advancements, in half a century we may be living on the moon and commuting to work via demolecularizing teleportation. Well, maybe things aren't moving that fast, but there's no doubt in my mind that the economic landscape will be drastically different by 2050. Just what sort of businesses will be setting up shop on your street corner by the mid-21st century? I've used my magic, alcohol-activated powers of divination to peer into our future, so make sure to save a few hundred million dollars (inflation, duh!) to invest in these light-speed ventures.

It's 2050! Are these industries in your portfolio?

  • Robot repair. The present-day equivalent of this industry-to-be is computer repair, and plenty of peope make an absolute killing at helping the technologically uneducated install anti-virus protection and wireless home networks. Still, for the most part, computer repair is relatively inexpensive when compared to, say, space station repair. By 2050, there will likely be a robot in most middle-class homes to aid in everyday household tasks like cooking, cleaning, and perhaps even contract killing. But once that robot burns the pot roast, forgets to dust before vacuuming, or assassinates the wrong foreign diplomat, we'll be needing robot repairmen by the starship-load. Now consider the complexity of a robot: hardware more advanced than that found on a nuclear submarine, algorithms more complicated than this one, and batteries you can't just replace with a quick trip to the drugstore. And since complicated household robots could cost as much as a car, throwing one away and buying another whenever it breaks down might not be an option. Imagine today's world with only 1% of its current automobile repair specialist population; that's the crisis awaiting tomorrow's robot-run world. Become a certified robot fixer-upper (better yet, start a training school with multi-million dollar tuition) and you will be making more than an eight-armed lawyer ... in fifty years or so.

  • LoooOOOooong-distance telecommunications. Forget 35 cents a minute for a call from Pittsburgh to Pakistan; your phone bill in 2050 may include two-hour subspace transmissions with loved ones on the Moon or Mars. The fact that my cell phone won't get a signal in the bathroom makes me wonder if we'll have a cheap way of providing common folks like you and me with instantaneous, interstellar communication lines. While I'd love to see us run a few million miles of Cat-5 cable from Earth to Earth: The Sequel, it'll probably be less expensive to develop and implement something a little more advanced. Come on, Verizon, open our hailing frequencies already!

  • Universal translation. No, I'm not talking about human-to-Klingon translations. By mid-century, the concept of "national languages" may be defunct as people of different cultural origins spread all over the planet. Nowhere else will this be more true than the United States where the present minority is expected to become the majority. I doubt the average person will want to learn multiple languages, but being able to understand them may prove vital to large international businesses or small, culturally-diverse neighborhoods. Research and development of tools to aid us in understanding those around us will be critical to all facets of life in the future.

  • Alternative fuel. Forget oil, coal, or electricity. There might not be enough of any of these by 2050 to help power man's lofty endeavors while still keeping the lights on in your garage. You probably can't go to the store or service station to pick up a gallon of the fuels we'll most likely be using in the future: fusion, hydrogen, solar power, and even everyone's favorite fictional-but-not energy form: antimatter. Whatever its form, the power of the future will need specialists to help harvest it, contain it, and dispense it. The real question: do you trust your local gas station attendant to pump your car full of a fuel that could vaporize the entire planet in seconds?

  • Nanotechnology. While most of the world will be thinking big, some scientists are working as we speak to make sure we'll all soon have little machines floating around our bodies keeping our organs working optimally. You can actually find plenty of nanotechnology investment opportunities now, though most of them are research-oriented. In fifty years, getting your yearly shot of microbots will be as commonplace as getting a flu shot is today.

  • Leisure, mid-21st-century style. Hopefully the year 2050 will bring entertainment options more exciting than drinking moon beer from a rocket keg. Whether it's honeymooning on the International Space Station, spending the day at the local holographic recreational center, or taking the kids to Epcot Center (which will be converted to an antique museum), people will need a place to unwind after a grueling 140-hour work week. Having fun five decades from now may be more expensive, and operating those high-tech entertainment venues may not be within the skill range of any high school drop-out satisfied with making minimum wage.

  • Super-duper internet. I'm hoping that will be the official name for it, but whatever you call it, our world will be so full of information in fifty years that you'll be able to feel it in the air. Who knows what form the information super-highway of the future may take? Will we have vast fields of servers as big as Rhode Island? Or will data just exist in a virtual aether all around us? I'm sure if you can come up with the answer to these questions (before a certain other company does), you may very well own the world of the future ... or at least all of its information.

Of course, these are just my guesses. Sorry, but I was just kidding about my alcohol-induced fortune-telling abilities. Drinking will not improve your economic forecasting skills, so please keep your imbibing to a minimum ... at least until they come out with a robotic liver.


06 January 2006

Destined to Disappear: What Businesses Might Not Be Around in Ten Years?

Even at the age of 23, I've already seen my fair share of big companies go bankrupt, merge with other companies, or otherwise disappear from the landscape of my life. When I was 14, the F.W. Woolworth store at the local shopping mall closed. I missed it so much. Much of my childhood toy and videogame collection came from its five-and-dimey goodness, and its disappearance marked the beginning of a mass exodus of all the best stores in the mall.

It was an even darker day when Montgomery Ward went belly up. Half my childhood clothes and my Nintendo Entertainment System came from there. And who could forget Monkey Ward's Electric Avenue??? It was an avenue ... of electric stuff! There's a Wal-Mart in its former location.

Chuck Saletta over at The Motley Fool wrote an article discussing the inevitable mortality of most businesses along with some he predicts won't be around a decade from today. His two predictions for companies that may soon buy the farm: the behind-the-times Cincinnati Bell and Blockbuster Video. While both companies are struggling to keep up with advancements in their industries, Blockbuster is losing major ground in the DVD rental world to Netflix, and Cincinnati Bell seems to have just discovered the touch-tone telephone.

Around here, Bell Atlantic evaporated into Verizon a while ago, so there's no equivalent company in my state. Blockbuster, on the other hand, has a store next to every other Starbucks, so I can definitely see a lot of them closing up shop in the next few years (gotta put more Starbucks somewhere, ya know?). I've got a few predictions of my own for companies that won't be joining us in the year 2016. Just remember, these are wild speculations; please don't go dumping your stock in them or running up to their employees just to laugh and point at them.

Are these companies heading for that great stock ticker in the sky?

  • Krispy Kreme Doughnuts (NYSE: KKD) You know a company is in trouble when its own franchisees start to sue it. Sure, it's coming out of a major restructuring, and it's made some smart decisions by closing a bunch of those extra stores from the big "Doughnut Boom" a few years ago. And yes, I'm betting against the company that currently employs my very own wife. But if people's changing diets and unending lawsuits don't deflate these doughnuts, then the federal investigations just might.

  • Martha Stewart Living Omnimedia (NYSE: MSO) Who knows; ten years from now, maybe most companies will be founded by, named after, and operated by convicted felons. Prisons will all be equipped with executive conference rooms from which inmates can operate their businesses. Maybe orange jumpsuits will replace shirts and ties as the standard office outfit. While it seems most people have "forgiven" Martha Stewart for her horrible crimes against humanity, Wall Street is still seeing red. But wait, they've got a plan to restore the company to its former glory! Apparently Martha Stewart Omnimedia will be riding the scrapbooking wave to financial prosperity. I wish I could make $962,000 a year to come up with ideas like that.

  • Best Buy (NYSE: BBY) Yeah, this one's a stretch, and it could very well outlive all of us. I mean, Best Buy's not in any financial trouble or anything, and they're coming off a strong holiday sales season. So what earned Best Buy a spot on my death watch? Quite simply, they're about as greedy and evil as a company can get. Some of you may recall Best Buy's revelation from 2004 that some of its customers are devils who only show up in store for loss leader and rebate-bearing items. Most recently, Best Buy was forced into apologizing for bundling many of its already expensive Xbox 360s with even more expensive extras. Some may call this a smart business tactic, but the day will come when nobody has been untouched by Best Buy's excessive avarice. So yes, I hereby predict the demise of Best Buy solely based on the fact that it's operated by meanie poopie heads.

  • Kmart, and probably Sears (NYSE: SHLD), too. What's that? No fair picking on companies that just emerged from bankruptcy? My apologies, but Kmart's troubles seem to be far from over. As Wal-Mart's steamrolling across America continues with no end in sight, Kmart has decided that the key to its future success is to emulate its biggest competitor as closely as possible. Maybe this strategy will buy Kmart a few years, but in a fight between Wal-Mart and Kmart (heck, between Wal-Mart and anything), the odds just don't look good for the Big K. As for Sears (which exists under the same holding company as Kmart following last year's acquisition), I just can't help but get the Montgomery Ward vibe every time I set foot in one of its stores.

  • Yahoo! (NASDAQ: YHOO) I sure hope nothing happens to these guys because then I'll have a bunch of broken links in this article! And I'm sure Yahoo! won't just curl up and die as long as the internet is still around. Rather, I think Yahoo! will end the second decade of the 21st century with something like "Time Warner" or "Microsoft" prefixed to its name. It's a strong company, no doubt, but all the exclamation points in the world won't help Yahoo! survive alone in the battle with Google. Someone with a few billion dollars to spare will snatch this one up and then the real fight for the internet will begin.

  • (NYSE: WTF?) Why is such an awesome business on this list? While I could easily stand on my own for a good five hundred years, I predict that Google will buy me out for one BILLION dollars by the end of the year. If not, then maybe Martha Stewart will slip me ten bucks to take her company off this list.

I asked Tegan what company she thinks won't be around in a decade. She said Wendy's because it doesn't have Dave Thomas to do its commercials anymore. Hey, her guess is as good as any of ours!


05 January 2006

Flexible Spending Accounts Strategies... Other Than Buying Tylenol and Cough Syrup By the Truckload

The United States is a great place to live. We've got foot-long hot dogs, demolition derbies, twenty-lane interstate highways, and more ways to gyp the government out of income taxes than I could ever write about. While I'm still young and haven't yet had the chance to experience the full range of tax credits, deductions, and incentives, there's one option currently available to me that's looking more and more appealing every day: the Flexible Spending Account (FSA).

For those people reading that are fresh out of the womb and don't know what an FSA is, here is a simple explanation. FSA is a magical land where you can send some of your before-tax paycheck dollars. Once in the magical land of FSA, that untaxed money can then be withdrawn to cover certain expenses. Sounds fantastic, right? Time to start shoveling every penny into FSA Land, right? Well, the government's not that dumb; there are some limitations that prevent you from using that money to buy, say, 100 Ferraris with untaxed income. For starters, FSA money can only be spent on two main categories of expenses: medical and dependent care. Eligible medical expenses include things you might expect--doctor bills, copays, prescriptions, and many other common health care expenses that might not be covered by your insurance--along with a bunch of items that might not immediately occur to you are qualified medical expenses--over-the-counter drugs, medical hypnosis, and weight loss programs to name a few. Eligible dependent care expenses are a bit harder to list, but they generally cover assorted costs associated with caring for a child younger than 13 or an elderly relative or disabled child of any age. Whereas health care spending accounts have a pretty well-defined list of qualifying expenses, dependent care FSAs seem to take more of a "not these items" approach.

The other big gotcha of Flexible Spending Accounts is their "use it or lose it" clause. Any money you put into FSA Land during a particular year must be used before the end of that year or else it disappears into another magical land: The Land of Ha Ha, Your Money's Gone and You Ain't Gettin' It Back. Starting in 2006, employers now have the option of extending the deadline to use FSA funds to the middle of March the following year.

Deciding whether or not to use an FSA and how much of your paycheck to set aside can either be really simple or somewhat difficult. If you know you're going to spend $5,000 a year on, say, your child's day care, just max out your dependent care spending account since the IRS says $5,000 is the maximum anyone can put into a dependent care FSA per year. Of course, if you don't have kids or other qualifying dependents, it's an easy choice to leave the dependent care FSA empty. Except for unexpected situations that I hope no one ever experiences, dependent care expenses are easy enough to estimate a year in advance, so some careful planning and smart calculations should help everyone make the most of this flavor of FSA without ending up wasting those wonderful pre-tax dollars.

Medical FSAs, in my opinion, are much harder to use "perfectly." Unless you're going to use the maximum allowable annual benefit (which is set by individual employers, not the IRS, though many companies I've seen stick with the $5,000 value), you're either going to lose the leftover money in your FSA at the end of the year or you'll have more expenses than you have pre-tax dollars set aside to cover. The second outcome seems more difficult to avoid since planning for big, uninsured medical expenses from year to year is much harder than anticipating dependent care expenses. Avoiding wasted FSA dollars can also be tricky, and it's the main reason I haven't put a dime into one since I started working. Apparently three percent of FSA dollars are wasted each year, but your employer thanks you since they can use that money to cover the costs of operating FSAs. Since my wife and I are generally healthy and have insurance, our FSA-eligible medical expenses per year come down to a couple of doctor copays and maybe some Tylenol and cough syrup. In a good year, we'll spend under $100 on eligible medical costs, and my employer won't let us put any less than $100 in an FSA annually. Now if you consider the tax savings on $100, we'd actually break even as long as we spent at least $75 of that money.

I think I'll be able to talk myself into going with a health care spending account either this year or next, even if it's just at the minimum amount. If you're in a similar situation, or you already have an FSA and need to find ways to spend your FSA balance before year end (or March 15th of the following year if your employer allows), consider the items below on which you can spend those precious before-tax funds.

Some Items Covered By Medical Flexible Spending Accounts

  • Over-the-counter drugs. Thank you, IRS, for deciding back in 2003 that allergy medicine, pain relievers, antacids, and a host of other medical goods available without a prescription are eligible for FSA spending. If your FSA year is coming to a close, check the dates on everything in your medicine cabinet and make a trip to the drug store to replace the expired ones. Also, anti-fungal creams make great Christmas gifts for the entire family, so stock up! Unfortunately. there's one item that's "missing" from the list of covered medications: vitamins. That said...

  • Vitamins ... if your doctor says so. We've been told for years that a multi-vitamin as part of a balanced diet is good for us, and so millions of us take those vitamins without so much as a suggestion from a physician to do so. Instead, talk about vitamins with your doctor and convince him to give you a letter of medical necessity that will make those vitamins eligible for FSA coverage.

  • Baby factories. If you're trying to crank out the kids and you find that you might need a little help from modern medicine, these expenses can be covered by your FSA. All the bases from extraction to injection are eligible: embryo and sperm storage, in-vitro fertilization, and even sperm washing! (I don't think I want to know what that last one is.) Of course, if you've got all the children you want, or you're happy keeping the kid count at zero, there's also...

  • Condoms. While being a good Catholic boy keeps these out of my medicine cabinet, condoms and various other birth control implements are just screaming for your FSA dollars. Heck, I know a few people who could hit their employer's FSA maximum every year with just this category! You can even get more permanent methods of birth control performed with FSA money.

  • Contact lenses and eyeglasses. Tired of running into walls and the wrong bathroom at work? It might be time for a new pair of prescription glasses or some contact lenses. They're fully eligible, and they can even be used to start fires if you're ever stranded on a desert island. Me, I'd like to be stranded on a dessert island, so I might need the next item when I make it back to civilization...

  • Weight loss programs. If your doctor tells you it's time to lose that extra 600 pounds, you may be eligible to put FSA money toward the various costs associated with doing so.

  • Counseling. Depressed? Insane? Underperforming in the bedroom? Many types of licensed counselors are FSA-eligible and waiting to talk to you about your childhood or your obsession with sniffing women's shoes.

  • Dancing lessons. Some doctors think dancing will help you recover from injuries faster, and they'll sometimes even prescribe it! If they do, you're in luck because you can use your FSA to pay for the lessons. Just please, don't break a leg on purpose so you can learn to tango.

  • Flu shots. The best tax-free dollars you'll ever spend on your health.

  • Laser eye surgery. I really wish this meant that you could get attachments to make lasers shoot out of your eyes, but being able to see better is nice, too. This can be pretty pricey and many insurance companies won't foot the bill for it. Using your pre-tax FSA dollars is like a 10-30% discount for expensive elective procedures like this one.

  • Transferring medical records. Sometimes you'll have to pay a small fee to have your old doctor send medical records to your new one. It's probably just a few bucks, but why not use your FSA dollars instead of the ones in your wallet?

  • Orthodontia. If you've got four kids with crooked teeth and a big chunk of your weekly paycheck is going to paying for their braces or other orthodontia, use FSA dollars that might be forfeited at the end of the year on any such items you may have on an installment payment plan. Or just use FSA cash to pay for them in full at the time of purchase.

  • Alcohol treatment. Give the gift that keeps on giving: send your drunken spouse to a rehab clinic, and pay for it with his or her FSA dollars.

  • Swimming pool/spa. Remember how vitamins are eligible if your doctor gives you a note? So are swimming pools and spas! If you can convince your doctor (or your doctor convinces you) that a swimming pool or spa would be of benefit to your health, your FSA dollars can be used to pay for its installation and maintenance. I don't think there's a person alive who wouldn't experience some health benefits from a swimming pool... well, maybe people with hydrophobia. Unfortunately, any "The government helped me pay for this pool" signs will have to come out of your own after-tax pocket.

There are many other eligible costs not on this list. And before you start calling your local ballroom dancing school or spa supplier, please talk to your doctor and human resources department to make sure that you will receive reimbursement for these expenses.

One bonus tip: if your annual FSA is funded by payroll deductions over the course of the year, you can "borrow" against money you have not yet made using your FSA. Say you put $100 a week into your FSA. Untouched, your FSA will have about $5,200 in it by the end of December. But then your doctor says, "Sorry, Bob, but you medically need that Olympic-sized swimming pool right now," and it's only April! You can take out all of the $5,200 you pledged to put into you FSA at any time during the year, even if you haven't had the full amount deducted from your paychecks yet.

Wikipedia,, USA TODAY

04 January 2006

Wallet-Friendly Entertainment Options: Don't Be Bored Out of Your Gourd When There's Fun You Can Afford

They say that the best things in life are free, right? I don't know about you, but I can think of some really great things that cost a helluva lot of money. Once ocean cruises, fast cars, and big houses cost zero dollars, then maybe we'll believe what "they" have to say. (Or maybe they were talking in a metaphorical sense about love, family, friendship, and the feeling of happiness within oneself. If so, awww.)

There seems to be a general understanding in today's society that having fun goes hand in hand with spending money. Trip to the ballpark? That's fifty bucks a person right there. A movie and popcorn? Eight hundred dollars! Not ending this with a corny MasterCard reference? Priceless. Er, wait...

Just because it can cost a hundred bucks or more for four hours of entertainment doesn't mean it has to. My wife and I have found plenty of ways to have fun for little or no money. Now before you go getting your head in the gutter over that last statement, here are a few things we enjoy doing that don't cost much and can even be enjoyed with friends...

Have fun for free or cheap

  • Board games do not necessarily mean "bored" games. You can find all of the classics--Monopoly, Scrabble, Twister, and countless others--for cheap in most toy stores and online. If you're worried about the games getting old quickly, or if you've already exhausted your massive game closet, try some of the new variations on older games like Triopoly and Super Scrabble or try any of the dozens of excellent games geared toward gatherings of friends. Some games can be a little pricey, but they're something you can hang on to and play again and again for years to come, so the cost quickly amortizes.

  • Good movies at public libraries. They might not have the mind-boggling selection of your local Blockbuster, but your nearby public library may carry new release videos for a small fee or possibly even free. Many libraries also lend the latest music CDs. While you're there, you can even pick up some books to read. Remember books? Those things that we used for information before the internet? They're not just for kindling!

  • Look for free things to do in your town. Chances are your taxes are paying for them already, so get out there and enjoy them! Just down the road from here in Washington, D.C., there are tons of free places to visit.

  • Go to the mall, but leave your wallet at home. Tegan and I love doing this since there are several large malls in the area. The bad thing about shopping malls is that they're concentrated money-suckers. It can be extremely difficult for someone (like, say, a husband who loves seeing his wife wear cute outfits) to keep a closed wallet when there are so many shiny things leaping out at you saying "Buy me! I'll make your body look gorgeous or your room look psychedelic." If you make the trip without the cash or credit cards in your wallet, you can feel free to try on adorable clothes (bring a camera and take shots of you and your friends in thousand-dollar outfits!), picture that seven-foot flamingo statue in your living room, or gawk at a thirty-carat diamond necklace without having to worry about busting your bank account.

  • A walk in the park or any of the other million things you can do with a wide-open space. Grab a ball, frisbee, or gigantic tub of water balloons and spend the day with friends at a park. Chase the kids off the playground and relive your childhood monkey bar and sand castle memories. Bring a picnic basket full of food you put together yourself and avoid the high prices of eating out. Or take your special someone on a private walk and ... get to know each other better. Just be sure you're really alone if things get exciting. Yes, I'm talking to you, crazy couple from that park a decade ago who didn't realize I was fifty feet away hiding in the jungle gym.

  • Volunteer your time. While this one is probably obvious, there are many people out there who are willing to volunteer their time, but they associate volunteering with work and no fun, or they don't really know how to go about volunteering in the first place. Sure, if you volunteer for something that you have no interest in, it can be tedious and scare you away from volunteering in the future. I highly recommend the free online volunteer opportunity matching service VolunteerMatch. You can locate a variety of service opportunities in your area, and you can even select from different categories that will help you find a volunteer position you'll actually enjoy. Volunteering is a great thing and helps make this country a wonderful place, but why shouldn't volunteers actually like what they're giving their time to do?

  • Read this blog! Okay, so maybe the best thing in life is free since it doesn't cost you anything to partake of my wisdom and wit. How lucky you are!

These are just a few of the ways you can keep the entertainment in your life while omitting the wallet-sucking action. If you still don't believe me that spending and having fun can be mutually exclusive, just lock your pocket book in a safe for a few days and try out some of the items on this list. Better yet, send your money to me and I'll hold on to it for you!