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Federal Minimum Wage at $7.25/Hour – Chart of the Day

Sun — Fri, 24 Jul 2009 18:01:34 +0000

In case you forgot, today, July 24, 2009, the Federal minimum wage goes up to $7.25/hour from last year’s $6.55/hour.

Following is a plot of historical Federal minimum wages from 1939 to 2009 (the blue line). In 1939, the minimum wage was only 30 cents. The next adjustment didn’t come until 1945 when the minimum wage was increased to 40 cents. Since then the government has changed the minimum wage regularly, especially between 1968 and 1981, when the wage was increased almost annually. The longest gap was between 1997 and 2007. In 2007, the rate went up to $5.85/hour from $5.15/hour in 1997.

Also shown in the following plots are two inflation adjusted minimum wages (the inflation data is from Bureau of Labor Statistics): The red line is based the 1939 wage and the green line is based on the 1968 wage. As you can see, if the minimum wage is adjusted based the wage of 1939 (30 cents), then the actual wage is much higher than the inflation adjusted one (the wage would be $4.64 in 2009). However, if the wage is adjusted based on the 1968 wage ($1.15), then the inflation adjusted wage actually matches the real wage pretty well.

While the increase in Federal minimum wage will help millions of workers who earn minimum wages from their jobs, there are quite some debates on whether such an increase comes at the right time or not and whether it will help or hurt the economy. Supporters of the increase say that as many people are struggling to meet ends need in this deep recession, the increase will help millions to pay their bills and the wage raise will boost consumption thus help the economy. For people who say the increase comes at a really bad time, the argument is since many business owners have already been hit badly by the financial crisis and economic downturn, the increase in minimum wage can only put more burden on businesses which may reduce work hours or fire workers to lower cost, eventually hurting those people it intends to protect and the economy as well.

So what do you think? Does the increase in minimum wage come at a good time? Will it help or hurt the economy that has lost millions of jobs since the recession began?

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

*Data sources: Bureau of Labor Statistics and Wikipedia.

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Federal Minimum Wage at $7.25/Hour – Chart of the Day

Poll: Do You Save in 401(k) Without Company Match?

Sun — Tue, 19 Aug 2008 04:17:38 +0000

We paid a sizable tax bill last April. One of the reasons was that I only made partial contribution to my 401(k) account in 2007.

After changing my job middle of the year, I didn’t make any contribution to my retirement account because 1) there was a three-month delay preventing me from contributing immediately; 2) I was a little lazy and was hoping to make another quick job change, that of course didn’t happen. Though I eventually set up an account early this year and started to make regular contributions since then, I missed more than half of the allowed pre-tax money in my 401(k) last year. Did I regret skipping part of the contributions in 2007? Yes, not just because of the tax bill, but also the missed contributions that can never be made up.

Right now 20% of my paycheck goes into 401(k) and at that rate, I will be done by the end of this quarter. And I am doing the savings without a penny match from my employer! Sure, a match will be nice, but I am saving for my own retirement. If I can afford to set aside money now for my future, then I will, regardless of the match, because I know at the time when I retire, my own savings will be the main source of my income.

A few days ago, there was an article on MSN Money titled No 401(k) match? Save anyway, which offered what seems to be so obvious

You don’t need a company match to save for retirement.

After all, we are saving for ourselves, right? If the answer is Yes, then you should be saving in your 401(k) retirement account regardless a match. Is that what you are doing? Cast your vote here.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Poll: Do You Save in 401(k) Without Company Match?

Poll: Are You Concerned about Your Bank After the Collapse of IndyMac?

Sun — Thu, 17 Jul 2008 11:48:06 +0000

In the past few days, I heard a lot of news about the collapse of IndyMac bank and how anxious depositors arrived 4:00 am in the morning at the door of the bank’s branch offices in CA, hoping to get they hard earned money out as soon as possible. Though for most of the bank’s customers, their deposits are safe under the FDIC insurance (guaranteed for up to $100,000 of course), just having to go through this process is pretty stressful. At the same time, I also feel lucky that I don’t have this problem for now. My bank, Bank of America, looks pretty safe, even though it also suffered from billions of dollars of write down tied to bad loans and its stock has come down sharply.

Actually, since we only have a few thousands of dollars with BoA, the loss won’t be as severe even if the bank closes its door tomorrow. Most of savings are with online banks such as FNBO Direct and Capital One, which so far are not affected as bad as other banks are. But this doesn’t mean that I am not concerned about my banks. In this environment, you can’t be too careful about your money.

You should always look for signs that your bank may be in trouble, such as steep drop of stock prices or sudden raise of interest rate, etc. and ask why. Also the FDIC website has a lot of information about banks that you should check out in case you have questions about your bank’s soundness. And if you are not comfortable with your bank’s situation, maybe switching to a bank that you can feel confident isn’t such a bad idea. According to a NY Times report a couple of days ago, that “as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months.” That’s not a pretty picture.

So now, after all the turmoil in the banking sector, are you concerned about your bank?

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Poll: Are You Concerned about Your Bank After the Collapse of IndyMac?

Poll: Who’s Your Favorite Broker?

Sun — Fri, 13 Jun 2008 14:46:14 +0000

If you have read this blog long enough, you know that I have multiple brokerage accounts. If I have to count, then I have 1, 2, 3, 4, 5, 6, 7. Yes, a total of seven brokers. Of them, Firstrade, ShareBuilder and optionXpress have been idle for a long time after I moved money out of them last year, and E-Trade is only for a couple of Chinese stocks traded in Hong Kong.

The other three that I am actively using are Scottrade, TradeKing, and Zecco. Among the three, Scottrade is my favorite because of their excellent customer service and convenience. Though the the $7.00 commission for each equity transaction isn’t the cheapest, that’s not the problem because I usually use Scottrade to buy stocks that I want to hold for a long time (stocks such as China Life (LFC), Visa (V), and PGJ, just to name a few). The biggest piece that’s missing in Scottrade, from what I can see, is that they don’t have free dividend reinvestment, one service that everybody else seems offering, including Zecco. And that’s the reason I got Firstrade then later switched to TradeKing. On my favorite list, TradeKing comes at second because:

Low commission rate: $4.95 flat;
User friendly interface: lots of functions make trading and research easier;
Easy contact: via their Live Chat;
Refer a friend program: make $50 for every new customer I refer to them.

And, yes, they have free dividend reinvestment. Then I also have Zecco. Except the zero commission stock trading, I hardly can find anything else that attracts to me: from usability of their website to their customer service. That’s why I only have my play money with them. Like people usually say: “You get what you paid for.” That’s pretty much true for Zecco.

Late last month, Smart Money magazine published an annual survey of discount brokers. From the result, it seems that TD Ameritrade and TradeKing got quite high marks, and Zecco is seen as among the worst in multiple categories, which didn’t surprise me given my own experience. Now I want to conduct my own survey to see how ordinary people like you and me rate their brokers.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Poll: Who’s Your Favorite Broker?

Poll: Did You Do Better in 2007 than in 2006?

Sun — Tue, 15 Apr 2008 02:30:56 +0000

Bush and Cheney did.

According to the tax returns released to the public, Mr. and Mrs. Bush reported a total taxable income of $719,274 for the tax year 2007, an increase of $76,369, or 11.88%, than 2006. The vice president couple did much better last year than a year ago. Mr. and Mrs. Cheney’s 2007 total taxable income is $2,528,068, a gain of $913,206, or 56.55%, than what they made in the tax year 2006. (Source: CNN and Sun-Times News Group)

By now, you probably have already finished your 2007 tax returns.

I finally finished our taxes last night and our numbers actually show a mixed picture. Though our overall taxable income is up 11.66% in 2007, our total salaries are down a little bit (0.32%). This is mainly because there was about a month in the summer when I was unemployed. Though the new job pays a little more than my old one, the difference wasn’t enough to make up the lost salary. While our salaries dropped, our investment incomes (dividends, interests, and capital gains) are up 39.77% than a year ago. Another contributor to the overall increase is the side income generated from this blog last year, comparing to zero in 2006.

So what are your numbers telling you? Are you better off now than a year ago?

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Poll: Did You Do Better in 2007 than in 2006?

Poll: So, Did You Buy Visa?

Sun — Thu, 20 Mar 2008 01:48:48 +0000

I did. Did you?

I called my broker Scottrade this morning when the markets opened, but had to wait nearly 20 minutes before my called was transferred to Scottrade’s national service center instead being answered by brokers at my local office. I never had problem contacting them before.

When my call eventually went through, I was told by the broker who answered my phone that the bid prices were anywhere between $50 to $100, but the stock hasn’t come to secondary market yet. Then she asked me how much I am willing to buy and I told her $60. So I placed a limit order to buy 250 share of Visa (V) when it’s available. At 10:15 am, the order was executed and the price I paid was $59.50.

Well, I could have waited and got the stock at a little bit lower price, but I am not too concerned about the price I paid since I plan to hold this stock for a long, long time.

Two days ago, I ran a poll asking whether you will buy Visa and of the 371 respondents, 336 said they will buy the stock and among those who said Yes, 248 indicated that they will buy Visa today. So, did you actually buy the stock?

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Poll: So, Did You Buy Visa?

Poll: Visa is Coming this Week. Are You Buying?

Sun — Tue, 18 Mar 2008 02:22:07 +0000

Credit card network giant Visa Inc. is scheduled to go public on Wednesday, March 19th with its massive IPO, according to Marketwatch.com. The stock will be traded on NYSE under the symbol V. If Visa indeed goes ahead with its IPO in the middle of the current stock market turmoil, the offering will be the largest ever in US history, valued at $18 billion dollar.

The following is the historical price chart of Visa’s smaller rival MasterCard (MA) since its debut in May 2006. Despite the crisis in the financial market, MA is holding up very well, showing a minor year-to-date loss of 3%, but gaining more than 350% since its IPO.

If the success of MasterCard is any indication, then Visa can be expected to do well in the future. In fact, according to Renaissance Capital,

Visa appears to be coming to market at a sizeable discount to MasterCard based on (its) forward price-to-earnings ratio, which may be because the banks that are receiving most of the proceeds are strapped for cash and are pricing the deal to sell.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Poll: Visa is Coming this Week. Are You Buying?

Poll: What’s Your Top Concern in Case of a Recession?

Sun — Wed, 23 Jan 2008 16:07:27 +0000

Let’s face it, what we are seeing now are not pretty: turmoil in the financial market, slumping home value, slowing consumer spending, rising unemployment rate, and falling stock prices. The talks of a possible recession, if we are not already in it as some people have argued, are getting louder and louder these days as last summer’s subprime mortgage crisis spread to other areas of the economy. Since peaked on October 9, 2007, the S&P 500 index has dropped 16.3% already and the Dow has lost nearly 15.5%. Over the weekend, an article in The Wall Street Journal painted a gloomy picture of what Recession 2008 may look like: If Recession Comes, It Likely Will Hit Hard because the trouble in both the housing and financial markets appear to be unprecedented according to some economists.

So do you see a recession coming even after the Fed’s 0.75% emergency rate cut yesterday? If indeed a recession occurs in the coming months as many have predicted, what would be your top concern and are you preparing for it?

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Poll: What’s Your Top Concern in Case of a Recession?

Poll: What Concerns You the Most When Getting a Credit Card?

Sun — Wed, 05 Dec 2007 15:50:51 +0000

Credit card companies’ interest rate policy is the subject of a congressional hearing this week as executives from major credit card issuers went to Capital Hill to defend their actions on rising card member’s interest rates, even when they had good credit history. A USA Today story yesterday portraits a victim, Janet Hard, who paid more than the minimum required every month, but still saw the interest rate of her Discover card went up from 18% to 24.24% after Discover determined that “her other credit card balances and available credit on inactive accounts put the family at a higher risk of defaulting on their payments.” As a result, the Hards’ effort barely made a difference on their credit card balance:

Most stunning, $3,478.39 out of $5,618 in payments had gone to Discover for interest accrued over the previous two years, Hard told the panel. On a monthly level, about $176 out of her $200 payments went to finance charges. In the past year alone, Hard had paid $2,400 but reduced her debt by only about $350.

I am sure this is not a unique experience, otherwise there won’t be hearings and legislations to deal with the matter. In fact, credit card interest rate has been an issue for a long time. However, a card’s interest rate has never been a concern to me when applying for a new card. Since I got my first credit card 10 years ago, it has been my principle to use plastics only when I can pay off the entire balance when it’s due. I never had a credit card balance (except those from 0% balance transfers) and, therefore, I don’t care a lot how much interest the card will charge me if I am late in making payment (and I never late). To me, credit cards are friends rather than foes: I use credit cards to pay almost everything so I can earn some rewards back. So my focus when selecting and applying for a new card is how much I can get back for the charges I put on the card, not interest rate, not customer service.

What’s your top concern when getting a new credit card? Please give your answer with the following poll .

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

By the way, in that USA Today story, what really surprises me isn’t that fact the Hards’ debts seem never go away, but this:

To keep the family’s finances in balance, Hard said she paid more than the minimum payment on her Discover card every month, plus an $8.00 Internet fee.

Sorry, no sympathy from me to your situation if you have to pay an Internet fee every month when paying your bill. You got yourself to where you are!

*Photo from NY Times.

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Poll: What Concerns You the Most When Getting a Credit Card?

Poll: Passive or Active

Sun — Mon, 24 Sep 2007 15:54:13 +0000

Last week I posted an entry on what it means to be a better investor nowadays after reading an article from Jason Zweig. The main message Mr. Zweig is sending is that investors will gain more by reducing investment costs. For average Joe and Jane, the simplest way to achieve that is using index funds. The advice isn’t new. From John Bogel to Warrent Buffett, they all advocate investing in low cost index funds that give investors the broadest coverage of the markets. In reality, however, that’s hardly the case.

We aren’t satisfied with 8% return from an index fund. Instead, we want double-digit gain. So we bet our money on hot funds invested in hot sectors. Technology, precious metal, real estate, and now international (especially China) funds. It’s our nature that we always want to get the most out of our money. The advice of investing in index funds is ignored, sometimes.

When I started buying mutual funds in 2001/2002, the markets were still searching for bottom and major indexes have posted consecutive years of declines. Instead of going to index funds, I picked several small-cap funds, added gold fund, even invested in a bond fund. Return was one of the reasons for using actively managed funds. Low initial investment also played a key role in the decision making (when it comes index funds, Vanguard always comes first and most of their funds require at $3,000 to begin with). Since then, my portfolio has changed a lot, but I still don’t have any index fund in taxable accounts. On the other hand, 6 out of 9 funds in our IRA accounts are Vanguard index funds since I know we won’t touch the accounts in another 20 to 30 years and keeping the cost low is always desirable. For taxable accounts, I don’t have a clear time frame and most of the funds I own have expense ratio (a measure of fund cost) that’s below 1%.

Now, I am interested in your take on this passive/active issue when investing in mutual funds with this poll. Do you consider yourself passive (using mostly index funds) or active (using mostly actively managed funds), or both?

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Poll: Passive or Active

Poll: Investing and Paying Credit Card Debt

Sun — Mon, 27 Aug 2007 14:57:59 +0000

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

The reason I want to conduct this survey is to see whether the change of a person’s circumstance will alter his/her regular investment, though it’s only a small amount.

Last month, I wrote a piece on investing and paying credit card debt. The scenario that I created in that post may not be as good as I would like it to be for making my case: If the investment is for a long-term goal such as a comfortable retirement, it should not be delayed or interrupted, even when one is in a tough situation like battling credit card.

After the entry was published, I received some comments questioning the soundness of my argument, i.e., whether it makes financial sense to invest $100 a month to earn a 10% annual return while having a credit debt that costs 18% APR. Many suggested that the right course of action in this case is paying off the debt as soon as possible and making up the investment contributions after the debt is gone.

Now I want to continue the discussion, but from a different angle. Suppose that you have been investing a small amount of money, say $100, every month in a non-retirement account for retirement for years. Then, suddenly something unexpected happened and you incurred $10,000 credit card debt which charges 18% APR. While you are determined to get rid of the debt as soon as possible, will you continue to make the $100 monthly investment? Or you will wait till the debt is eliminated to restart it?

We have been in a similar situation before, though we weren’t really in debt. We started investing in 2001 with regular purchase of $50 or $100 of several mutual funds. In early 2002 there were a short period of time that both my wife and I lost our jobs in the telecom crush. At the time when our basic living was threatened, I didn’t totally abandon our investments. Instead, I scaled back the purchase from $100 to $50 for some funds while suspending automatic contributions to others because I knew I couldn’t afford to invest as usual when we were living on our savings. It was some tough time for us. One of the first things I did after we both reemployed was to resume the investments, which have never been interrupted since then.

What would you do in this case?

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Poll: Investing and Paying Credit Card Debt

Previous Poll Results

Sun — Tue, 29 May 2007 14:22:29 +0000

So far I have conducted three polls on this site, one about paying mortgage with credit cards is still ongoing and two were closed. The reason I like to run opinion polls is to get real life people’s opinions on issues that are closely related to personal finance, in addition to getting the news from the media.

The first poll was to see how the idea of having a will is received among young people (younger than 50 years old). The poll run from April 14, 2007 till the end of the month for about two weeks and received 130 responses. The result of the first poll is shown in the plot below.

As we can see that despite the urge from financial professionals about the importance on creating a will before it is too late, the idea hasn’t really struck young people yet as the percentage of people in their 20s and 30s having a will is very small. In fact, only 19% of the total respondents said they have a will. However, even with a small number of samples, the trend is quite clear. As we get older, a will becomes an increasingly important part of our financial planning. I don’t have a will and the reason is that I don’t feel it’s necessary at my age. There are a lot of other things for me to worry about and having a will isn’t on the radar yet. At some point later, I will have to consider it.

The second closed poll was on how much we should save for our emergency fund. The poll was created on April 26, 2007 after a group of bloggers discussed whether it’s possible that one could save too much on emergency fund. In less than four week, 302 people cast their ballots and the results are in the following picture.

For the second poll, the distribution is quite even, I am surprised to see that nearly a quarter of the respondents (23%) don’t have an emergency fund at all.

It’s unclear however what makes them choose not to set aside some money for unpredictable events. Is it because they are not aware of this issue or they don’t have enough fund to setup one? Another possibility could be that they have other means (other than the money that is earmarked for emergency) to cover their livings in any unexpected situation. It would be great if I also know the reason, not just the result. On the hand, the largest group of respondents (26%) indicate that they have more than 12 months’ worth in their emergency fund.

While a well-funded emergency account is crucial for financial stability, I personally feel it’s not necessary to have an emergency fund that covers our family for more than one year. The most likely instance of an emergency according to my definition is the lose of job. In this case, the emergency fund will be used to make up the a significant portion of the lost income and the size of fund depends on how long it will take me to find another job. I may not be able to find a new job tomorrow if I lose my job today, but it certainly won’t take me a year to find a replacement.

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Previous Poll Results

Poll: Will You Use Credit Card to Pay Mortgage?

Sun — Fri, 25 May 2007 15:39:16 +0000

A couple of days ago, American Express announced a program that will allow qualified cardmembers to pay mortgages with their AMEX credit cards. From comments left at my post, I can see opinions on this issue is as polarized as using credit cards itself: there are people like me who use credit cards all the time will like this idea to rack up rewards; there are people in the other camp think this will only make things worse as it looks like one can now *buy* a house on credit cards. For example, Moneymonk says

America has lost its mind. Why would you risk paying something you finance on credit ( a house) to finance it on another credit ( a credit card ) ? plus with the $395.00 fee. It is not worth the rewards. The cc company wins all the time.

and Debt Blitzkrieg agrees

I’m with moneymonk on this — it sounds like a dangerous plan. One tight month and the next thing you know you’re paying interest on your mortgage to your credit card company. Besides, I have to wonder how they must be jacking up regular rates to float all these rebate-type credit cards.

But NotAPoorRevolver thinks the program itself has nothing to be blamed for:

Moneymonk you must be crazy. Some people don’t carry a balance on their cards. In fact, the majority of AmEx customers don’t. Some people can afford to pay off all of the things that the charge every month, and for those who don’t…they should cut back their lifestyle….that simple.

Whether it’s a good idea or not, AMEX won’t make it available to just anyone with any credit score. As a CNNMoney article says

But American Express is limiting its venture to cardholders it pre-authorizes before enrolling them, and then checks on them every month thereafter before a mortgage payment is charged.

So it could prevent people already have trouble with their credit card payments from getting deeper in to debit. In the end, I think it all comes down personal responsibility. If you take care of your credit card bills every month with full payment, there shouldn’t be any problem because charging mortgage payments with plastics doesn’t add any extra burden to you. The only down side I can see is that if you are late, then you will punished twice, from both your mortgage company and AMEX. But even with that, you can still set up your account to pay the bill in full every month automatically.

To get an idea of how people perceive this new offering, I just created a new poll, Paying Mortgage with Credit Cards?, with four options:

you think it’s a good idea and will use it to pay for your mortgage;
you think it’s a good idea but won’t use it because of concerns regarding consequences of one late payment;
you consider it a bad idea in general, but will use it as it doesn’t concern you in particular;
you consider it a bad idea in general, therefore will definitely won’t use it at all.

Vote here or from the sidebar to express your opinion on this issue.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

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Poll: Will You Use Credit Card to Pay Mortgage?

Poll: Do You Have a Will?

Sun — Sat, 14 Apr 2007 17:40:57 +0000

Yesterday Flexo at Consumerism Commentary posted an article on what financial documents are necessary for young families. Top the must-have list is will. This isn’t the first time I saw recommendation of having a will as part of estate planning and there is little doubt on why everybody should have one. However, we never really seriously think about it. One of the main reasons is that we think we are still young and healthy, so it isn’t time for us to prepare for the worst. And our assets aren’t at the level that could trigger a dispute. I know a will isn’t really for me and has little to do with whether I am healthy or not, but rather for my family that I leave behind should anything unexpected happen to me. But I’m just not ready to open the topic yet and none of my friends has a will as far as I know.

I am wondering how many in their 30s have a will. For the purpose of having an idea on how popular it is among young people, I create this Do You Have A Will? poll for three different age groups (2os, 30s, and 40s). For people age 50 and above, they are likely to have one than not, so that age group is not included.

Note: There is a poll embedded within this post, please visit the site to participate in this post's poll.

Cast your ballot here and see what other think about a will.

(If you have problem voting from the post, please vote from the sidebar.)

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Poll: Do You Have a Will?