Restaurant.com

Restaurant.com offers discounts on dining.  They could do this on a very straightforward basis, but my experience was that they don't.  When I logged on recently (circa 2010) I found an offer for a restaurant we were going to visit that evening. It was a $50 certificate for $25. That would be a 50% discount which was right up my alley. After paying for it (and not paying attention as closely as I should have) I checked the actual certificate and found it required a $100 purchase. This is not the type of restaurant where it is easy to spend $100, so that really wasn't workable. I called and a nice young lady offered to make an adjustment for me, which she did. I then went back online and attempted to purchase a $25 certificate. This was not available using the "code" I was given for the refund. I could only purchase this item as a "new" customer - not with this code. Then I started doing the math (and this is why you need to learn math in school, boys and girls). The $25 certificate requires a $50 purchase. That means I would pay $17.50 to Restaurant.com for essentially a $7.50 "discount." Since I'm required to make a $50 purchase that means the actual $7.50 "discount" works out to a whopping 15%. Needless to say, I won't be a Restaurant.com customer in the future.

Concise Financial Plan

The Shortest Financial Plan in The World

Or
____________________________________________________

Everything You Need to Know About Personal Investing

By Scott Adams

Make a will.

Pay off your credit card balance.

Get term life insurance if you have a family to support.

Fund your company 401k to the maximum.

Fund your IRA to the maximum.

Buy a house if you want to live in a house and can afford it.

Put six months’ of expenses in a money market account.

Take whatever money is left over and invest 70 percent in a stock index fund and 30 percent in a bond fund through any discount brokerage company and never touch it until retirement.

If any of this confuses you, or you have something special going on (retirement, college planning, tax issue), hire a fee-based financial planner, not one who charges you a percentage of your portfolio.
_______________________________________________________

Scott Adams is the creator of the Dilbert cartoons and heaven forbid I upset him and end up being targeted by Dilbert but, I just have to add my two cents worth.

While the items above were not numbered in his book Dilbert And The Way Of The Weasel it is implied that this is the order in which to approach them. My preference would be to change the order a little so that instead of paying off your credit card balance to the exclusion of everything else, you start building your six months (or twelve months) emergency fund as you pay off credit cards. Maybe at a 50/50 ratio or something like that.

Getting term life insurance will work, but don’t forget the other insurance you need to carry on your car, home, health, etc.

Obviously there is much more to be done for a full financial plan but Scott did his homework and intentionally stripped this down for efficiency. That said, one thing you may notice about financial planning is that almost every planner will have a little different take on what you should do. I would suggest, however, that you never abdicate completely. Stay engaged and make sure any plan fits you personally.

I’m thinking maybe 65/35 or 75/25 on those investments but then that’s just me…

Bonded and Fully Insured

Nothing will save you money like making informed decisions. You can’t do that if you accept everything at face value. Case in point, the phrase “Bonded and Fully Insured.”

This wording can be seen in advertisements and on vehicles. What does it mean to you? Probably peace of mind that you have nothing to worry about if these people do work in or on your home. That’s what it implies but let’s dig a little deeper.

Bonded could simply mean they have acquired the necessary license and permit bond to do business. This doesn’t do anything for you. They may also have an employee dishonesty bond but this protects them, not you. There are bonds available that will protect you and an example is a Janitorial Bond which some cleaning companies purchase. If an employee steals your money while cleaning then there may be coverage for your loss. Some bonds require that the suspect be convicted of the theft before they will pay. So you have to make the accusation (if there are five people cleaning your house at the same time I don’t know how you sort this out) and the person must be prosecuted and convicted.

So the next time you see “Bonded” in an advertisement you might wonder exactly what they are saying.

Fully Insured is even worse. No one I know in the insurance business can agree on what this means. If they can’t, how is it a local contractor can slap that on the side of their truck and use it as advertising (easy, they just do it).

Here’s a short list of things that can go wrong. First, they may not have all the policies they need. Generally a business needs a liability policy, an auto policy and workers compensation (I’m oversimplifying for purposes of this example.) Also, there are different types of coverage available on a general liability policy and there are different limits. Let’s say the contractor has a coverage limit of $300,000 on his liability policy but burns down your $500,000 house. We’d probably agree he was not “Fully” insured at that point. Since you probably won’t read his insurance policies, you won’t know the breadth of coverage he carries so there could be a loss which is not covered at all.

When I have work done by certain companies at our house I request a Certificate of Insurance from them. This lists the policies they currently have and indicates that as of the date of the certificate, coverage is in force. But, if a payment is due the next day and it's not paid, their policies can cancel and they’ll be on your property doing work without insurance coverage. Obviously they are not fully insured at that point.

Besides requesting the Certificate, I usually call the agent the day before and verify that coverage is in force. I don’t, for example, like having people on my roof who are not insured for workers compensation. If something happens I want to make sure the worker is taken care of and I’m not on the hook.

So, the next time someone says they are “Bonded and Fully Insured” ask them exactly what that means. You might even get a blank stare and that, of course, is not a good thing.

With special thanks to Doug Kinney, Ernie Lee and Gene Stuart for insight and information.

Lakefront Property

We received an offer in the mail recently to buy "Dockable Lakefronts" with a "New 2,500 sq. ft. Log Home Package!*" You no doubt noticed the asterisk right away. Oh, it was a "One Day Only Sale!" and it is "convenient" to where we live. Just minutes from the I-57 and I-24 interchange.

Interestingly, they don't give specific directions on how to get there. You call an 800 number first. I guess they want to check you out before you check them out.

Now to the asterisk. In very small print at the bottom of the page it indicates: "Log Home Package consists of land and building materials. Construction is buyers responsibility. Log home will differ from home shown. Some restrictions apply."

I was disappointed I apparently was not getting a brand new, beautiful 2,500 sq. ft. home on a dockable lake lot for only $49,900. Life just isn't fair.

There are paved roads and underground utilities including water, so that's good, but what extra expenses could possibly be added to this dream purchase? What does it cost to put a 2,500 sq. ft. log home "kit" together? And does it include plumbing? Heating & air conditioning? Appliances? Furniture? (Probably not) So, what is your guess the final cost of this convenient weekend getaway would be? As long as we're at it, let's figure in taxes, utilities and maintenance. Oh, did I mention it seems to be located about 162 miles from where we live?

I did a search on the Internet which indicates for some log homes the rough final cost is $150 to $200 per sq. ft. If you take 2,500 x $150 that would be $375,000. I'm not sure how the land figures into that and you could do some of the assembly work yourself or maybe just the interior. But a fairly reasonable wild guess would put the cost of this project at around $200,000 to $250,000. That's a far cry from "$49,000!" (Their exclamation point, not mine)

I'm not saying you should never buy a nice second home conveniently located to wherever you live. What I am saying is, do the math. Ask all the questions and get good answers. Then figure out how much more than the advertised price you're actually going to pay.

Oh, I forgot to add in the cost of having a dock built and buying a boat to use. It's so easy to overlook certain minor points when you're chasing a hot bargain. Did I also forget the insurance on the house, the dock and the boat? Boy, these things sure add up.

And another thing, if someone has already gone to all the expense of having one of these log homes built but they want to sell (maybe they forgot to add up all the expenses and can't afford it?) then you may have an opportunity to buy it at a better price. These things do happen.

If you've never moved into a newly construction home, visit with someone who has. They can probably tell you interesting stories about the additional expenses they had not anticipated.

Did I mention this area is probably "unprotected" for fire department services which means the insurance would generally be much more expensive? I wonder if the driveway off the road would need to be paved?

Again, I'm not saying never buy something like this, just make sure you do the math first.

Supplemental I: We recently received another "One Day Only" offer from this same operation for "Phase II". If I'm reading the promo correctly, the dockable lakefronts now start at only $39,900. (I guess waiting a few months for Phase II makes the 20% price drop worthwhile) But wait, there is now a special offer of a "Lakefront Estate & A New 2,500 Sq. Ft. Log Home Package!* (See note on asterisk above) Only $79,900." The $49,900 log home in the original ad is no longer listed separately. And, since there is probably a difference between a "Lakefront Estate" and a "Dockable Lakefront" it's hard to break the price down for a true comparison. But, this is Phase II so obviously things are selling.

Supplemental II: Another One Day Only offer arrived for Beautiful Wooded Estates with Direct Lake Access From Only $9,900! It seems amazing to me that an "Estate" can be purchased for so little money but that's what obviously makes it a bargain. They are offering 100% financing too. Oh, and "Unlimited Outdoor Activities" which is undefined but it does conjure up an exciting image in my mind.

Supplemental III: Another offer arrived indicating they are holding a Liquidation Sale on 8/27/11. Again they have 100% financing available. Prices "From Only $24,900! Comparable Lakefronts have Sold For Up to $130,000" (Sure glad we waited for the bargain pricing.) This is "Bank Ordered Pricing" whatever that is. They also quote CNN Money, July 2011,"A bright spot for bargain hunters: REAL ESTATE... making now a compelling time to acquire a second address." And SmartMoney, January 2011, "Smart people are buying REAL ESTATE." (For some reason I don't think SmartMoney capitalized real estate, but it works better for their advertising literature.) Again, no specific location information. You call and they'll let you know where they are.

Your Credit Score

Your credit score has become a very, very important number. It determines whether you’ll get a loan, the interest rate you’ll pay (the lower your score the more you’ll pay), how much you are charged for certain insurance policies and sometimes whether you get a job or not.

I mentioned in a prior post that Warren Buffett’s credit score was 718. This was due to 23 missed payments on a $294 loan. Turns out there were erroneous entries on his credit report. (I happen to know Buffett would never borrow more than $100) If he can have errors on his credit report, you can too.

It is critical that you keep track of this number. Complete books have been written on this subject and I recommend Your Credit Score, Your Money & What's at Stake (Updated Edition): How to Improve the 3-Digit Number that Shapes Your Financial Future by Liz Pulliam Weston.

Your credit “report" and your credit “score” are two separate things:

1. Your credit report contains information on the various credit card accounts, car loans and home mortgages you have and the balances and payment history of each account.

2. Companies then analyze that information and use it to create your credit score. Several companies do this and they will each have a different number and “range” (showing how good or bad your score is.) FICO is generally recognized as the most prominent credit scoring company.

There have been sites on the Internet which offer to provide you with a “free” credit report, but many of those sites required you to start a subscription service which you end up paying for.

The legitimate Web site I’m familiar with is www.AnnualCreditReport.com where you can order your totally free (with no strings attached) credit reports. You can order them all at once or stagger them at 4 month intervals so you’ll have an ongoing way to see the activity on your report. However, not every business reports to all three of the credit agencies so there may be some information on one which is not on the other.

Some credit report companies that end up charging for reports have paid to have their information listed on certain internet search sites so they will show up when a search is done for “free credit report.” Just be aware.

Ben Stein is a noted multipurpose talent who has written several financial books. He may be better known as the economics teacher in the movie Ferris Bueller's Day Off. He has been on an ad promoting a free (FreeScore.com) credit score service. The actual name, which includes “Free,” would seem to imply you can get a free credit score at this site but it appears you need to give them a credit card number and accept a $1 charge on your card. After seven days of “free trial” you’ll be a member at $29.95 a month. I’m sure this is all very legit and aboveboard and with Ben Stein endorsing it I’m sure he checked it out to make sure his fans would not be taken advantage of, but you won’t know a lot of this stuff before you sign up. I checked the FAQs and it doesn’t ever seem to lay out the exact process involved.

The function of marketing is to reel you in so a sale can be made. There is nothing inherently wrong with this process. It’s basic free enterprise. It gets a little dicey though when you get right to the point of purchase and THEN the full details are disclosed. Of course, it’s even worse if the details are not actually ever disclosed.

Borrowing sensibly and making every single payment by its due date will go a long way toward keeping your credit score in the higher range. Interestingly, when you do this your interest rates will generally be lower which makes it easier to make the payments. Conversely, if you skip payments your interest rate will probably increase which makes it even harder to make your payments. Either way, it can be a self-fulfilling prophecy.

There are a lot of errors on credit reports. One source indicates 25% have errors and a government site reports up to 70% may have errors. Whatever the number is, it just makes good sense to check your information regularly to see that it is error free. It’s usually easier to dispute errors from the last year than it is to work on something from five years ago. Also, if someone has your credit information and is creating accounts or stealing your identity, the sooner you find out about it the better.

Supplemental: The recent CARD Act of 2009 put the kibosh on many of the practices used by companies to entice people to sign up for free credit reports and scores and then begin charging them. To avoid the process of weeding through various offers and conditions, just stick with www.AnnualCreditReport.com

Lunch With Warren Buffett - Part 2

Each year a lunch with Warren Buffett is auctioned online by the Glide Foundation as a fund raiser. In 2007 it went for $650,100, in 2008 for $2.1 million and in 2009 the winning bid was $1.7 million. In 2006 my wife, Shelly, and I had lunch with Warren for free (and he bought). We felt like we were getting a good deal at the time but felt even better when the auction amounts went so high.

I began corresponding with Warren in 1994. It turned out that one of his earliest investments was in The Western Insurance Companies which were based in my hometown of Fort Scott, Kansas, about 80 miles south of Kansas City. Warren said he put 50% of his net worth in stock of The Western and “It did very, very well.”

When we arrived, Shelly and I were invited into the Berkshire Hathaway offices for a short visit. There is no fancy lobby, no expensive wood paneling and only 19 people work at world headquarters. They oversee more than 60 companies which have 200,000+ employees. In 2009 revenues for the entire company were over $100 billion. There is probably not a more efficiently run main office, for the size of the overall company, in the country.

During our visit Buffett went through the process of finding and analyzing The Western which included contacting the Nebraska Department of Insurance as well as Independent Insurance Agents who represented The Western and agents who competed against the company. Then Buffett went to Kansas City and met with then CEO Ray Duboc. This was intriguing to me because he did the same thing at GEICO, with Lorimer Davidson. Buffett was 21 years old at the time. How many 21 year olds walk in and get access to company CEOs? In a letter after our lunch Buffett wrote, "Western, in a major way, contributed to the financial success I had. I owe a lot to Ray Duboc, the Western and Fort Scott, Kansas."

During lunch we discussed reinsurance and the New Madrid fault catastrophe exposure. Berkshire Hathaway writes insurance for insurance companies, which is called reinsurance. Those companies in turn write the actual polices we purchase to cover our homes, automobiles and businesses. He mentioned a $1.5 billion fire-following earthquake reinsurance contract Berkshire Hathaway writes for a major insurance company. One of his responsibilities in running the company is to manage the amount of exposure the company has to any one catastrophe which can occur, which is why he keeps an eye on the New Madrid situation.

We talked about the best deal on credit cards. He showed me his American Express Green card and I showed him my American Express Platinum card. We compared annual fees and mine was lower. When I told him it was a Costco American Express card he smiled and said they are a good company and the vice chairman of Berkshire Hathaway, Charlie Munger, is on the board of directors there. Buffett is notoriously frugal so being able to "one-up" him on the credit card fee was a bit of a coup.

When I mentioned a free meal we had received during our trip to Omaha, Warren pulled out his billfold and showed us complementary dining cards he has from a few restaurants where he can eat for free. You wouldn't think the richest man in the world would even keep cards like that, but he is a known bargain hunter. I won't mention any names, but one was an establishment that guys really like because the servers are all cute girls in somewhat skimpy outfits.

One of my goals during the visit was to ask Buffett a question he could not answer. I accomplished this by asking, "Do you know what your credit score is?" He said he did not. I guessed he had not experienced any problems obtaining credit along the way. In the March 31, 2008 issue of Fortune Magazine I read where he did check his credit score. It was 718, which is slightly below the U.S. median. He quipped, "I've been telling my family for years my credit was sort of shaky." Turns out there were some incorrect entries on his credit report.

Specific investments were not discussed, except for one company in Kansas City. It was a smaller company and one he had not heard of. Berkshire Hathaway has grown in size to the point where investing in or buying smaller companies won't have enough impact on the results to make it worthwhile.

When you're really good at something it looks very easy. Buffett started his career with $10,000 and turned it into $60+ billion. In 2010 he was the 3rd richest man in the world, per Forbes Magazine. All he did was look for good companies to invest in or buy outright and then he hung on over a long period of time. It sounds simple and it is, but it's very difficult to implement.

Learn The Secrets To Getting Free Money

Two very attractive young ladies flash (a figure of speech) on the TV screen in a program titled Learn The Secrets To Getting Free Money. Obviously this is important information so I pay close attention.

One of the young ladies is Denise Pernula who is a Playboy Bunny (and Entertainment Correspondent) which are two things I had never put together but the fit, upon reflection, is obvious. The other young lady is Sara Underwood who was Playmate of The Year in 2007. It’s quickly obvious to me I am going to be exposed to some powerful financial information.

They introduce the segment Free Money by Kevin Trudeau. He is a #1 New York Times Best Selling Author and, much more importantly, a consumer advocate. So here we have the holy grail of financial success. Cute girls, an author and consumer advocate. I can hardly wait.

His stated goal is to provide us with access to billions in free money from the government. From the onset I’m thinking this will be really great information as long as we don’t all try to access these billions at the same time. If we did, of course, we would end up swapping billions among ourselves (since we are, technically, the government).

The two young ladies look enthralled to be learning this information, my guess being that the Playmate and Bunny positions do not pay all that much, which is why they probably wanted to be on this program and as close to the source, Mr. Trudeau, as they could get.

Wikipedia.org has an interesting recap of Mr. Trudeau’s activities since 1990. Along the way there were charges of fraud and, well, I’ll let you read the details online when you have a chance. A search for “Kevin Trudeau Fraud” (with or without the parenthesis) will turn up some interesting information.

He is also the author of Natural Cures “They” Don’t Want You To Know About, The Weight Loss Cure "They" Don't Want You To Know About as well as Debt Cures "They" Don't Want You To Know About. Apparently “They” don’t want you to know much of anything. In addition, although it does not involve “They,” he has promoted Advanced Mega Memory and Mega Memory audio tapes. This could be how he remembered the phone numbers of the two young ladies so he could invite them to be on the show.

But wait, there’s more! Another book titled Lose 30 Pounds in 30 Days! The Weight Loss Secrets "They" Don't Want You to Know About (There “They” are again!)

Lose weight, access billions, develop a great memory? How can one guy take care of all these great societal challenges all by himself?

Oh, the title of the book he sells is Free Money “They” Don’t Want You To Know About. But wait, it gets better. If you order online you’ll receive as a Free Bonus, “Debt Cures” (you only pay an additional $11.95 for postage and handling). How can they give that book away for FREE? You, being a savvy consumer, have already figured that one out, haven’t you?

When I Grow Up

In 1999, Monster.com ran an ad on TV that featured kids saying the following things about their future career aspirations:

• When I grow up, I want to file all day.
• I want to claw my way up to middle management.
• Be replaced on a whim.
• I want to have a brown nose.
• I want to be a yes man.
• Yes woman.
• Yes, sir. Coming, sir.
• Anything for a raise, sir.
• I want to be underappreciated.
• Be paid less for doing the same job.
• I want to be forced into early retirement.

Now, with that background from the Monster.com commercial I’d like to propose a financial planning version which goes like this:

• When I grow up I want to do a poor job of managing my financial resources.
• I want to buy things I won’t use or don’t really have a need for.
• See how much I can charge on my credit cards before they finally cut me off.
• Buy a house just to impress people, even if I can’t really afford to pay for it.
• Drive a new car every year and eat that expensive depreciation for breakfast, lunch and dinner.
• Ignore the fact my family is counting on me and avoid any kind of estate planning which might provide for and take care of them.
• Buy stocks on a hunch, hot tip or whim.
• Spend money I don’t have, on things I don’t need, to impress people I don’t even know or like.
• Hope for the best. As Alfred E. Neuman would say, “What! Me worry?”

Lunch With Warren Buffett

My wife and I had lunch with Warren Buffett on December 1, 2006. He was the richest man in the world at the time and I told him about the richest man in my hometown of Fort Scott, Kansas, who had a one car garage. Warren smiled and said, “Well Rick, I have a two car garage!”

What does this have to do with managing your money? It’s about what you consider to be important. Obviously a really big house and garage are not that important to Buffett. While he could afford any house he wants now, he just doesn’t want a newer, bigger or fancier house. He’s happy with what he has. A lot of people never quite figure this out.

The happiest people I know also seem to have their finances under control. They sleep better, have a more positive outlook on life and they have the opportunity to make financial decisions while playing offense, instead of playing from a defensive position. Some of these people were just intuitive about money. They took to managing it like some people pick up a golf club and have a natural swing. Earl Nightingale said there are two kinds of successful people in life. River People and Goal People. River People are born with some natural abilities and instincts which drive them a certain way. Goal People can be successful too, they just have to work a little harder to get there. But one way or the other, you need to get your money life organized and under control. Buffett, in case you are wondering, is a River Person.