Beating Broke

My eBook/eReader Conversion

September 2, 2011 By Shane Ede 14 Comments

After Andrea’s wonderful post on Go Green Method to Save Money: eBooks, and the ensuing conversation that started in the comments, I though it might be nice to share my story in regards to ebooks and ereaders.

Where it begins.

I’ve been a reader for as long as I can remember. Some of my earliest memories of reading are of reading the Chronicles of Narnia series and the Hardy Boys series. All through my school years, I read voraciously. I made my way from shorter books up through goliath undertakings like just about anything by James Michener. Sadly, when I moved to college, I drifted away from reading. Most of my reading time was taken up by schoolwork and socialization. Later, while taking a break from college to pursue more nefarious things, I had a job which usually entailed a whole lot of doing nothing. To pass the time, I began reading again. The spark was back. Heck, I even read the 5th Harry Potter book in a day.

I eventually got a real job, finished my degree, and then got married and started having children. And, as I was pretty busy doing those things, my reading habits slipped off again. It wasn’t until we cancelled cable shortly after our first born came along that I got back into it. And, even then, it was not nearly with the same pace as I had before. Throughout all of this, I’ve carted around my books. Each time I wanted to read something new, I bought it rather than borrow it. Why? Call it OCD collecting. I’ve always fantasized about having this huge library in my house with wall-to-wall books. In short, I had an infatuation with books.

But, here’s the thing. Of all the hundreds of books I had (have), I’ve only reread less than 10 of them. So, I came to the realization that I was carting around all these books that I would never (probably) read again. Moreover, they were slowly taking over every bookshelf in the house, and even some of the floor space. When I came to this realization, I went through them all, and posed a large majority of them on PaperBackSwap. But, all that did, really, was to swap the clutter of books I had read with a clutter of books I hadn’t read. I’ve currently got well over 50 books on my “to read” shelf. For reference sake, I only read about 35-40 books a year. So, I’ve got close to a year and a half worth of books sitting, waiting to be read.

Through all of this, my desire to have less clutter in my space has led me to try to remove as much of it as possible. I had downloaded the kindle reader app for my blackberry phone, but I found it absolutely terrible to try and read anything on the little, itty-bitty screen. At that point, I decided that ereading just wasn’t for me. At the time, I would rather have the physical book in my hands than try and read on a little screen. Then, I upgraded my phone.

I traded in my blackberry for a new android based phone. It’s got a screen that’s roughly twice the size as the old blackberry had. A couple of books that I wanted to read were available only as ebooks. So, I gave the cell phone reading another try. On the larger screen, not only was it bearable, but I found that I liked it. And, now, several ebooks later, I’m a convert. An ereader has rocketed to the top of my wish list, although I haven’t decided whether it will be a kindle or a nook, or something else entirely.
photo credit: anieto2k

Evaluate the True Price of Dining Out to Save Money

August 31, 2011 By MelissaB 14 Comments

Our culture seems to be one that is centered around dining out. When you are younger, you meet friends at a restaurant for a night out and to chat. As you get older and have a family, you may go out to eat because time is short between working, raising a family, helping with homework, and doing housework, among other things. Some people are extreme and eat out for every meal because they do not like to cook or have not learned to cook. This is so commonplace in the American culture, that we don’t often question these expenses. Instead of just assuming that going out to eat or grabbing take out is a necessity, evaluate the cost of your restaurant purchase.

It has been a stressful day, and you would like nothing more than a night off from the kitchen. You decide to buy take out for your family of 4 and spend $25. True, you did buy yourself a night out of the kitchen by avoiding cooking and washing the dishes that you would use. Yet, ask yourself, would you have paid $25 to hire someone to come to your kitchen for an hour that night, make a meal and do the few dishes that you used? No? Well, that is essentially what you did by picking up take out.

I use this way of thinking frequently now to save myself from spending money eating out. My family ate out by habit until I started evaluating the true cost. I recently quit my job and have been doing freelance work from home. Several of my smaller jobs each pay $20 a month. Recently, I wanted to go out for sushi, which is a weakness not only of mine, but of my husband and kids. When our family of 5 goes out for sushi, it typically runs us $55 to $60. I asked myself if one meal of sushi was worth doing 3 additional small jobs to recoup the $60? Although the jobs do not take much time weekly, I would have to do the three jobs for a month to recoup the money spent on sushi. Was it worth it? No. We did not go out that night.

The idea of evaluating life energy for consumption is not new. It was the subject of the book, Your Money or Your Life by Joe Dominguez and Vicki Robins. The overall principal is to look at the amount of time and money it would take to recoup an expense. I try to use this in my life normally, but I find it especially effective when considering the often inflated price of dining out. Take the sushi dinner for $60—my family’s weekly grocery budget is $100. Is that one meal worth half a week’s groceries? Definitely not.

I am not saying we shouldn’t go out. My family still enjoys going out, but I am suggesting we should stop thinking of dining out as something routine and to be done daily or several times a week. Instead, think of dining out as a treat and something to be planned and enjoyed.

photo credit: dslrninja

Selecting Lending Club Investments – How I do it

August 24, 2011 By Shane Ede 22 Comments

As I mentioned in my previous post on finding a Real Rate of Return for My Lending Club Portfolio, I am unable to invest directly into the loans on Lending Club. There’s some regulatory issue between Lending Club and my state that makes it that way. So, I have to purchase my investments through their note trading system called foliofn. Not a huge deal, but it makes it a bit more interesting.

Using the Lending Club foliofn Search

First, I have to search for available investments. They’ve got a decent search, but it’s missing a few key things that really would make it top notch. Here’s what you’ve got as far as filters for the search, and, also how I usually set it up when I do a search.

I don’t like seeing anything that’s been late, or is currently late. Late payments don’t show any intention of improving your situation, so I’m not going to take a risk on you if you don’t take it seriously enough to pay on time. You’ll notice that I also change the remaining payments to 56. The max is 60, but it’s hard to eliminate those who have been late if they haven’t had the chance to be late, so this makes it so that a few payments have to have been made. Of course, there are shorter term loans available in Lending Club, so you’ve got to keep an eye out for those. I don’t really limit the rates at all. I’ll explain why in a moment. Here’ s a sample of the results you’ll see when you do a search (click to see bigger).

Selecting Lending Club Investments

As you can see you get a really basic overview of the available loans. They’re all sortable. I usually sort by Asking Price because I usually have a set amount of available funds in my account and I want to purchase investments that will come as close as possible to exhausting those funds. There are three things that I pay very close attention to when I’m shopping for investments here. The first is the Credit Score Change. This is a visual indicator of whether the borrower’s credit score has gone down, up, or stayed the same since the loan was issued. I only buy loans where the credit score has gone up. It’s indicated by a green arrow that points up and to the right. Again, this is a personal preference, but I want borrowers who are want to improve their situation. It’s what this site is about, and something that I feel strongly about. I like to think of it as ethical investing.

The second thing that I look closely at to compare the term of the loan with the remaining payments. This goes back to the late/never late thing. I’m able to eliminate loans that have been late through the search if the term of the loan is 60 months, but not if it’s anything shorter than that. I’m looking for loans that have made at least 2-3 payments. Finally, and most importantly, I look at the Yield to Maturity field. If I could change one thing about the search on foliofn, it would be to add a way to filter by this field. Here’s why. Because foliofn is a secondary market for these investments, you aren’t necessarily paying the price of the remaining principle. The seller is able to set his own price for the investment. So, the interest rate on the loan isn’t necessarily what you will earn on the loan. The Yield to Maturity field shows what the yield on the loan will be when it is paid off. This field will vary. That’s also why I don’t limit the interest rate in the search, although you could if you were looking for a certain credit level of loan to invest in. If you look at the example above again, you’ll see that the investments shown would be very, very bad choices. Where you draw the line for the yield will vary based on your personal preferences, but I usually won’t buy any of them unless they are at least 5%.

Further Thoughts and My Results

My goal is to maintain a higher interest rate than any savings account, while maintaining a medium-high risk level. This means that my portfolio is weighted towards the C-D range loans. I still keep it diversified amongst the different rate levels, but it’s heavier in that area. You’ll notice that the results don’t show what range the loan is. For that reason, it’s handy to know, generally, what the interest rate ranges are for each of the loan credit ranges. Using the interest rate (not the yield to maturity) field, you can guess where the loan lies.

So, all that goes into it. I look for an investment that has a upward trending credit score, that hasn’t been late and has made at least 2-3 payments, and that has a Yield to Maturity of greater than 5%. My portfolio is still rather small, so I try to keep individual investments to a $20-$40 range. I just don’t want to put too much of the portfolio in one loan and then get caught with my pants down if it defaults. As the portfolio grows, I’ll likely increase the upper end of this range. So far, I have had 4 of the investments paid off. Two of them have been paid off early. I have had no defaults. That’s a screen grab of my real return on the left. Adjusted for inflation, using the formula in my previous post, it’s still above 10%. Try and get that anywhere right now. My 401(k) is at -0.85% YTD, and my local bank pays 0.25% on savings accounts. Sure, it’s riskier, but I feel the increased return outweighs the increased risk, and I think it will keep it’s place as part of my investment strategy.

I feel that I should make a disclaimer here. I’m not an investing professional. None of this should be taken as advice, but merely an amateur sharing information on my portfolio. See an investing professional if you’re looking for advice. Otherwise, feel free to share your stories in the comments! And, as always, if you liked the post, please take a moment to share it using the bar on the left hand side, or at the bottom of the post.

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