Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective

Archive for August, 2008

Free Beer

Creative Commons License photo figure credit: Timothy Lloyd

Last week ScrapperMom and I had an interview with a financial planner.  I have written before about using a financial planner and really didn’t think highly of the idea.  So how did we end up in this guy’s office? Let’s back up a bit:

A couple of years back we discovered a brew-your-own beer place about 45 minutes from our house called Deja Brew. You go in, pick a recipe out of a big book, assemble your ingredients, grind your barley, boil your wort, add your hops, cool things off, add your yeast, and put your soon-to-be-delicious-goodness in a storage container. The process takes about 2 hours, makes a half barrel worth (15.5 gallons), and you pay depending on the recipe (different amounts of different kinds of barleys cost more or less). Two weeks later you come back and bottle your beer. The whole process is not exactly cheaper than the local package store, but it’s a whole lot more fun.

Anyway, on the counter near the door was a fishbowl that said, “Drop in your business card, and you could win a free batch of beer.” So drop my card I did, and forgot all about it. About 6 months later, the phone rang saying that I had “won”. All I had to do to claim my beer was to assemble 6 to 10 friends to join me in brewing, and sit through a 10 minute presentation given by this financial planner. Assemble I did, and free beer did we get.

After the brewing session, the guy started calling me. Repeatedly. Caller ID came through for me and I avoided answering — for more than 2 months of approximately weekly calls. Finally, I broke down and answered the phone. At the conclusion of the call, I had agreed to meet him at his office to discuss our finances and what we would like to work on for improving them.  Salesmen can be persistent, and on some level I felt like we at least owed this guy a listen after he bought us a keg’s worth of beer.

So last Tuesday night, ScrapperMom, Daughter #1, and I sat down for a little over an hour with Mr. Financial Planner. We discussed a lot of topics. He quoted a lot of statistics and figures about what people should do versus what they actually do. He introduced a couple of concepts with which I was not previously familiar. I gave him the rundown on our whole financial situation, and discussed near and long term goals. At the end of the discussion the hammer fell: He asked for $500 to be my “Chief Financial Officer” (as he described it) for the next year. He would consider our goals and put together a plan that we could accept or reject. If we rejected he would make additional suggestions. We would talk monthly by phone and quarterly in person to assess progress. At the end of the year we would have a full review to decide if we want to do it again.

I have to admit to being tempted by the pitch and the offer. It would be a relief to have at least some of our financial planning burden lifted off of our shoulders. On the other hand, I’m not really sure if I can justify $500 in either return on investment or opportunity cost.  ScrapperMom and I are also engineers, and by nature we analyze EVERYTHING to the nth degree.  So I’m not even sure that having a FP would even save us any time, since whatever he recommended we’d want to go out and research ourselves anyway.  Ultimately the primary issue is one of trust: Do I trust a total stranger to do a better job of managing OUR money than we can do ourselves?  At this point, I don’t think so.

I did learn a few things that bear further exploration.  First, I learned that we should be trying to split our savings in a 30/40/30 ratio between money that can be taxed now (CDs, Money Market, other taxable investments), things that can be taxed in the future (401k, IRAs, etc.) and things that can never be taxed (Roth IRA, tax free bonds, etc.).  I also learned that, according to this FP, we are doing better than 90% of the people he deals with on a first meeting in terms of having our ducks in a row.  I also got another vote for slowing our paydown of low interest debts in favor of building up the 30/40/30 (which currently looks like 16/76/8) savings.  This is in line with what we had planned to do anyway, just not necessarily in the ratio suggested.

At this point, I think we have pretty much decided that we will stick to doing our own planning.  We’ll still use outside help in the form of books from the library and ideas bounced around on other Personal Finance Blogs and forums, as well as here at this site.  I think the toughest part will be trying to get this guy to stop calling.  And in case you’re wondering, YES, all of this was worth the free Chocolate Cream Stout!

If you ever end up sitting down with a financial planner, take a look at this site for some great questions to ask:

10 Questions to Ask When Choosing a Financial Planner

Do you have any experience with a financial planner?  Was it a good experience or a bad one?  Please share your thoughts in the Comments section below, or click here if you’re reading via email.

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Pregnant Silhouette

Creative Commons License photo figure credit: mahalie

ScrapperMom and I are happy to announce that we are expecting our second child in January.  We feel thrilled, scared, excited, and many other emotions all at once.  I wanted to bring this up in an official post on the subject since I plan to explore how this will affect our finances in some future posts.  The topic will likely also slip into a number of other posts, so I wanted to be very clear about this.  It’s actually been difficult not mentioning it all over the last few months. S/he will be just about two years behind big sister, and we’re not going to find out whether we’re having a boy or a girl, just like last time.

Now that we got that out of the way, I wanted to say a few words about the State of the Blog.

I started Don’t Feed the Alligators just over 6 months ago.  At the end of the first week, I had 17 subscribers and now am up to 74.  While I wish I had more, I am exceedingly thrilled that there are that many people out there interested in what I have to say on a semi-weekly basis.  I know my mother-in-law enjoys reading because as she puts it, “I learn more about the two of you by reading what (MITBeta) writes than any other way…”

Here are some more numbers:

  • ScrapperMom and I have combined to write a total of 71 articles
  • We have 10 articles pending in some stage of draft
  • We’ve created 34 different sorting categories
  • There are nearly 500 keywords
  • There have been 1,137 SPAM comments (blocked by Akismet)

In the last 30 days, the top referring domains have been (in order):

Thanks to all of my blogging peers for the traffic.  Be sure to check out those sites for some great articles.

The real question in all of this, however, is, “So what?”  The “So What” is you, the reader.  While there would certainly be some therapeutic value in writing what we do without an audience, there’s no way we would have kept it up for so long.  I recognize that I am here to provide you with information, entertainment, a new point of view, or whatever, and it is with this in mind that I once again ask the question:

How are we doing?

Are the posts too long or too short?  Are the articles too in-depth or not in-depth enough?  Am I glossing over too many of the basics or is the information here no different than what can be had elsewhere?  How’s the frequency of posting?  Are there specific topics you’d like to discuss or see addressed?

It’s easy to tell when a post is good, since it usually generates a lot of Comments, but most posts still go uncommented.  I like to have the feedback, good or bad, as well as any additions or counterpoints.  So let me know what kind of a job we’re doing here at Don’t Feed the Alligators, and if you really enjoy the content, don’t hesitate to share it with your friends, family, and coworkers.

This past weekend I attended a party given by friends of ours who are also subscribers and met a young woman who upon being introduced asked, “You’re the Alligators guy, right?”  “Yes,” I replied.  “I love reading your stuff,” she said (my emphasis added ;P).  I really didn’t know what to say at the time — I’ve never been good at receiving compliments.  But I know what to say now:

Thank you!

Without you and readers like you, this blog would long ago have been relegated to the cache archive at Google.

Hay is for Horses!

Creative Commons License photo figure credit: law_keven

It’s been a few weeks since I’ve had a chance to compile some of the best things I’ve read lately.  The list below is pretty long, so let’s jump right into it:

I participated in the Carnival of Financial Goals earlier this month with my post on declaring a Financial Independence Day.

NCN wrote about a major motivation for keeping his financial house in order.  As the parent of a young daughter myself, my perspectives on what really is important have changed a lot in the last 2 years, and I certainly can empathize.  It’s great that NCN is in a position that frees him up from having to worry about anything other than family at this time. I hope Baby Girl is doing well.

The Freak-est Links points us to a website run by the Maine State government on how to calculate the value of your public library.  I calculated a $260 annual value of our local library.  Not bad!

Living Almost Large writes about Dreading the Envelope — you know, the one that gets passed at work when someone has a baby or something like that?  This article really changed my perspective on this practice.  I work in a relatively small office (~20 people).  A few months back a co-worker’s house burned to the ground.  He lost everything.  This was the only time that the envelope has been passed in the 3 years I’ve worked in this office.  I was torn on if and how much to give.  On the one hand, I can’t even begin to understand how devastating a loss this must have been.  But on the other hand, we’re responsible and have insurance (and so did he), so why should we need to give any money at all?  In any event, this situation is a true need compared to a birthday or baby shower, and in that light I will not hesitate to give more should the occasion ever present itself again.

Glbl asks for reader input on whether money earmarked for college should be given in one lump sum or allocated over time.  Many argue that young adults are still too immature to handle large sums of money responsibly (ie not blow it all in Vegas instead of using it for tuition…).  My argument, however, was that most young adults are “too immature” because they haven’t had the proper training on how to handle money.  So use this opportunity as a chance to educate the recipient on how to be financially responsible, budget, etc.  Otherwise you’re putting the cart before the horse.

J.D. writes about how to support your favorite bloggers (cough, cough).  While I don’t have any ads on Don’t Feed the Alligators at this time, most of the suggestions are still apt:

  • Participate in the discussion — really, please do! You can do so anonymously, and I never share or reveal email addresses, even if I know who you are.
  • Tell your friends — word of mouth, or email both work great!
  • Click on ads that truly interest you — not applicable here, but works well elsewhere
  • Link to stories that you like — if you’ve got your own blog or website and see a story you like, how about a linkback?

Madison writes about how to earn free money using the US Mint.  While this scheme is not for everyone, it certainly piqued my interest.

A spirited discussion follow David’s post on the large percentage of American corporations that pay no federal income taxes.  The biggest point that I would like to make here is that if you’re going to argue with someone and cite a fact, you have to be able to back up the fact with something other than the equivalent of saying, “It’s true, look it up!”  I never took debate classes, but it seems to me that it is the arguer’s job to look it up, not the audience he is trying to convince.  At the very best case, it doesn’t make for a very compelling argument.

Lastly and just for fun, J.D. links to a video made by two average guys who “compete” in a number of Olympic events and compare their results to those of Olympic caliber athletes.  This really underscores how incredible Olympic athletes are.  Hats off to all competitors and especially to US Gold Medal winners!

Tune in next time for a very special blognouncement!


Creative Commons License photo figure credit: fazen

Unintentionally, my review of Nudge continues again here with a look at using nudges for non-paternalistic purposes.

A year and a half ago, ScrapperMom and I went to buy a new laptop computer.  We did the research, picked the model we wanted, checked online store inventories, and set out for the store.  At the store, we zeroed in on the model we wanted, having brought print-outs of the exact model number and specs.  After some time, we finally managed to flag down a salesperson who said he would have to go into the back to see if they had that model in stock.

The salesman returned after some time with a clipboard in his hand.  “Would you like the 3 year or 5 year warranty?” he asked.  “Which one comes with it?” I asked.  “Neither,” he said.  Then went on to explain that the laptop comes with a 1 year parts warranty only.  I told him that I didn’t want to buy anything extra.  An argument ensued centering on what would happen if the laptop broke.  I calmly tried to explain that I was willing to take that risk.  Eventually, I managed to persuade him to sell us the laptop without any extended warranty.

Fast forward to last week:  I was in a rental car office in Toronto while visiting on business.  I had booked my rental car through an online travel service a few days earlier, so I wasn’t paying much attention to the questions being asked.  “Do you want the premium insurance or the basic?” the desk clerk asked.  “Basic,” I said.  It wasn’t until I returned the car 6 hours later that I realized I should have said, “I don’t need any additional insurance.”  (The combination of my regular car insurance and the credit card I used for the rental cover all my insurance needs for rental cars.) This small inattention to detail doubled the cost of the rental.  I’m glad that I can pass this cost along to work, but the trick still irritates me.

What’s going on here?  As I learned in Nudge, choice architecture plays a huge role in what choice ultimately gets made.  In the cases above, the default options were arguably not in the best interest of the customer, and furthermore, the whole range of choices was not presented — in neither case was I presented with the option to do nothing, even though this was an option.

Insurance is, unfortunately, a necessary part of modern life. However, people tend to buy insurance in areas that are really not required, such as on consumer electronics, while forsaking it in areas that are important, such as disability insurance. Over the last several years, retailers have made huge profits by selling insurance on things like TVs, DVD players, and computers, and their salespeople have been incentivized to sell this insurance. But, insurance should be purchased for items that would represent true disasters if the insured item is damaged, lost, stolen, gets hurt, or dies. While it sure would be a bummer if your TV died, it wouldn’t be a disaster.

Have you experienced any “missing options” lately?

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Eiffel Tower

Creative Commons License photo figure credit: papalars

Congratulations to Catherine who is the winner of the Baby Signs, Inc. Potty Training Made Easy with the Baby Signs Program kit. Catherine: check your email for a message from me.

There were 15 entrants, and I added entrants to a Google Docs Spreadsheet in the order they were received.  Entrant 1 was in row 1, entrant 2 in row two, etc.  After the deadline passed on Friday night, I visited and used the random sequence generator to order the list randomly.  The winning number was 5, which represented the 5th entry in the list.

Thanks to everyone who participated, and welcome to many new readers.  I hope you find enough interesting articles and discussions here to stick around. Look for a new full post tomorrow.

PS: I highly encourage you to click on the photo credit on the left. There are some truly amazing, beautiful, gorgeous photos to be seen…