AskDong

I was fascinated by the discussion that took place recently at The Simple Dollar around suggestion that Trent made about “trust.” which was actually in response to one his answers from his mailbag. Trent in his original advice suggested a way to hide money from the financial aid office by “giving” it to an uncle. Trent to his credit admitted that his original suggestion was a not so good, and removed the offending answer (though again to his credit left it in the comments for posterity stake). Commententators fell into three general camps.

1. Thought Trent’s advice was great.
2. Thought Trent’s advice was unethical even if it were legal.  I fell into this camp
3. Were to busy fawning over Trent’s talk on Trust and failed to realize that Trent pulled a fast one on them in essentially confusing the topic. While it’s not my place as a blogger with nary a subscriber to criticize The Simple Dollar, one the best and most popular PF blogs there is, I have noticed this is not the first time Trent has engaged in Jedi mind tricks on touchy topics as he did when he responded to an accusation that he made things up.

The topic of financial aid is one that is dotted with many unmarked ethical landmines. I generally think well of people. I think most people are good, decent, ethical people.  I also believe that most people are far from perfect, and have ethical lapses - the only exception would probably be my previous roommate, but he was an Eagle Scout, literally and figuratively. I’ve certainly made my fair share of bad calls in life.

So why is Financial Aid such a hot topic for me? In my own experience in College, I witnessed first hand families that gamed the system better than others by employing tactics such as the one mentioned by Trent: Hiding money with different family members, holding onto cash, deferring income ahead of financial aid awards, the list goes on. On the other hand, most of the people who have gamed the system are far from being wealthy. Most of these families could use the extra help - good people who worked hard.  The problem I find with gaming the system is that financial aid comes from a limited pot of dollars.  A dollar that goes to one family is a dollar that won’t go to another potentially more needy family - a family that might just be little more honest or one that may not know how to best game the system.

While I might be quick to pass judgement on act of potentially sheltering funds, I also realize it’s a slippery slope to be too judgemental.  Is it unethical for family to be spendthrift? A spendthrift family will get more money in the financial aid process when compared to frugal family that has squirreled away savings for college. The problem with Financial Aid, and many other things in life the right decision is not necessarily clear cut, and certainly not easy. There are plenty of legal, and some would even perfectly valid techniques to get the most financial aid possible. Many argue that it’s your duty to maximize every single opportunity that exists because of loopholes.  Where as many people do disagree if it’s really ethical for instance to shelter money from the auspices of financial aid, most people would unlikely have succh problem exploiting a tax loophole.

As avid readers of AskDong know, I’m a great fan of Dodge & Cox. The single largest investment I have is Dodge & Cox International.  I was excited to learn that Dodge & Cox recently reopened it’s flagship Dodge & Cox Stock Fund to new investors.  The fund company has stated it’s reason to reopen it’s fund to better balance withdrawals.  A pparently alot of people are making withdrawals.  Given the age of the fund, I imagine it’s probable that many shareholder are well into their retirement.

What they didn’t mention however is that the fund has been lagging the S&P 500 for the last few year. This rather mediocre performance is probably leading to withdrawals as well. Many investors are apt to chase recent returns. I’m not this type of investor. When it comes to mutual funds, I’m primarily an index fund investor (Vanguard specifically). However, I certainly don’t buy the efficient market hypothesis, hook line and sinker. I think the market can be beat and that’s why I do more individual stock picking than I should.  I also believe there are well run mutual funds that can consistently beat the market over a long time horizon.

Knowing which funds are market beaters is really the question.  I know enough to know that don’t know enough to know.  However, everything I’ve read about Dodge & Cox, leads me to think that they don’t doa bad job.  I like their approach. They have a team of managers rather than single manager.  I think a team can both lead to more ideas and better vetting of ideas.

Today’s Post is from Heather Johnson who is contributor at contributor for Credit Card Lowdown

This is, without a doubt, a difficult time to try and sell your home. With so many recent foreclosures, your house will be competing with a lot of other houses. Also, there are far fewer people being approved for a home loan. Are you sure you want to do this? Some of you may have no other choice. Perhaps you are transferring for work or are in danger of foreclosing yourself.

If you really want to brave a home sale in this slumping market, please arm yourself with the following five tips:

1. Use a Realtor – Many of you may be tempted to sell a home yourself, as you feel you can make more money and/or price the house more competitively. While it’s true that you can save some money by going this route, here are some sobering statistics about For Sale by Owner (FSBO) homes:
   • 70 percent of all FSBO sellers eventually hire a realtor
   • The typical FSBO house sold for $145K, as opposed to $175K with a realtor
   • In a slow market, the price of advertising could be same as a professional realtor’s commission
2. Use the Right Realtor – Don’t go with the first realtor you speak with and don’t use a “family friend.” You need a hardened professional who will hustle for you. Speak with several realtors and get a home value estimate. If one of them is pricing the home much higher than the other two, cross him/her off your list immediately. You need someone who will not only actively market your home, but also reasonably price it.
3. Create Curb Appeal – You really need the competitive edge here, so make sure your house looks great as soon as people arrive. In fact, many potential buyers may discover your home by seeing the “For Sale” sign in the yard, rather than through any other advertisement. Keeping your yard trimmed and watered and planting some flowers can help tremendously.
4. Focus on the Kitchen – Do you have some money to invest in updates? Sprucing up the kitchen can be the most cost-effective way to make your home more attractive to buyers. A new backsplash, new countertops and new sink fixtures are just a few ways to add some substantial value to the home.
5. Stage the Home for Showing – You need to make your house look as open and inviting as possible. Make yourself unseen if you are using a realtor, take your pets out of the home if you can, and use proper lighting. You should also add a nice fragrance, such as a softly scented candle. Naturally, the home should be kept clean at all times while it is on the market.

Is it impossible to sell a home right now? No, nothing is impossible and spring is definitely the best time of year for both buyers and sellers. However, you need to conduct some careful research and make sure you do everything within your means to make your home as attractive as possible to buyers. Naturally, you want to sell for as close to your asking price as possible, so don’t settle out of desperation. The market may be slow, but you need to be savvy with what is probably your greatest personal investment.

Heather P. Johnson is a freelance writer, as well as a contributor for Credit Card Lowdown, a site for finding credit card reviews. Heather invites your comments and freelancing job opportunities at her email address: heatherjohnson2323@gmail.com.

The current state of the dollar has made international vacations much more difficult. 4 years ago, I went to London for vacation. I thought it was outrageously expensive then. 4 years ago the dollar was worth .56 British Pounds. Today the Dollar is worth .5 British pounds, a decline of 11 percent. Against the Euro the Dollar has declined from .8 to .63 Euros or nearly 21 percent. For that reason I’ve got no trips to Europe planned.

So where should I be planning my trips if buying power is my concern? Iceland, South Africa, and Hong Kong - according to this excellent currency exchange table tool. The U.S. dollar has gained against those three currencies. Against the other 18 currencies listed, it’s depreciated significantly. The Polish Zloty along with other currencies from Central Europe have shown the greatest appreciation. I noticed this first hand between my two trips to Hungary in 2000 and most recently in 2006. Central Europe was even cheaper 10 years previous right after the collapse of the Soviet Union. The appreciating currencies of central Europe is testament to the strong economic growth and greater ties to western Europe of the last 20 years.

As useful as the chart from tokyoahead might be, it ignores many relevant currencies at least from a U.S. vacation perspective. Most notably the Argentinean Peso. Argentina suffered a disastrous economic meltdown between 1999-2002. In 2002, Argentina was forced to drop it’s 1:1 exchange rate with the U.S. Dollar. Today the U.S. Dollar is worth 3.15Argentinean Pesos which is up from 2.975 in 2004. In Argentina, the dollar still goes far. Argentina is not the only country where the Dollar still has some buying power. Many of the island nations of the Caribbean peg their local currencies to the U.S. dollar and as result Americans can still manage to do OK on vacation.

I filed my taxes the other day. I actually had most of my taxes already done almost a month ago, and just finished up some details. The Feds owe me about $350, and I owe the State about $600. These are numbers I can live with. Last year I had a rather large tax bill, and had to pay estimated taxes this past year. For whatever reason my company does not properly deduct taxes on my bonus, and as a result I am annually short on my taxes. How short I am varies quite a bit year to year depending on my bonus.

Ideally, I would rather just pay what I owe in taxes when I file my taxes. However, the IRS is not so willing to extend me or anyone else a free loan. Basically if you expect to owe more than $1000 in taxes then you’re required to pay estimated taxes. If you don’t pay estimated taxes then the IRS effectively penalizes you by charging interest on the amount that will be owed. The interest rate charged is based on the prevailing treasury bill rates.

So how do you estimate your taxes when you don’t know how much you’ll actually make for the next year?

1. Make a best guess
2. Pay 110% of the previous year’s taxes
3. Pay 90% of the current year’s taxes

The IRS does not charge a penalty if you pay at least 10% more in taxes than the previous year (option 2), and many people including myself use that metric to estimate what the quarterly payments should be. I know that very likely that I will have to pay more in taxes this year (2008) than I did in 2007. However by paying at least 110% of my taxes for 2007, I’m good in the eyes of the IRS. Of course, it’s quite likely someone owes estimated taxes because of a large one time items such as stock sales. Using the 110% rule is always safe, but would result in extra taxes being paid during the course of the year (which would eventually be refunded). The 110% rule is ideal for those who actually expect to owe more in taxes in the coming year. For those who expect to owe less they can get away with just paying 90% of what they actually think they’ll owe. When it comes to taxes it’s all about paying as little as you have to as late as you can.