Finance Gourmet Blog

Every so often I get an email from somewhere offering me a trial membership to myFICO or something like it.  And, every so often, I have to get a client to cancel the subscription.  myFICO and the others are NOT worth it.

$90 per year

The myFICO service that allows you to check your credit score daily costs approximately $90 per year.  Just do some quick math.  I see people transfer their money all over the place to pick up an extra 0.5% on their savings or money market account.  Instead of transferring your money and setting up direct deposit and whatever other gymnastics are required, you might want to consider how you could end up with the same net worth.  That $90 per year adds up to the same amount as the total extra interest you would earn in an entire year on $18,000 in savings by getting a interest rate that is 0.5% better.

Easy Way to Get A Free Credit Score

First, see if your financial institution will tell you your credit score for free.  Some forward thinking customer focused banks and credit unions are actively reporting their customer’s FICO score on statements or on your online banking.  Typically, these scores are updated quarterly.  Even if your bank doesn’t print your score out somewhere, that doesn’t mean that they won’t tell you if you ask.  Call the regular customer service number and ask if they have a recent credit score for you on file.  Chances are they do.  Many financial institutions update your credit score on a quarterly or semi-annual basis so that they can target you with the right kinds of services.  After all, a customer with a 780 credit score is someone you don’t have to worry about bouncing a lot of checks or or over-running a credit-line.  When you talk to them, get your score and the date it was from.  There you go, free credit score.

If your bank won’t tell you your credit score, frankly, I’d start looking for another bank.  Even saying the words, “Oh, well, that’s unfortunate because a friend of mine can always ask his bank.  Maybe I should switch,” might get you bumped up to a different level of service, and your file noted so that you can get your score next quarter.

How to Manage Your Credit Score

Knowing your credit score number is not as important as what you are doing to it.  Think about it this way, if a highly calibrated NASA scale says you weigh 197 lbs. does it really matter that your home scale says 194 lbs?  What matters is whether the number is going up or down.  While it is true that the exact number may determine your lending rate, you don’t know what those numbers will be.  Some lenders will give you the best rate with a 715, others may require a 730.  So, while it helps to know about what your credit score is, don’t obsess over the exact number.

So, how do you make sure your credit score keeps going up?  Pay every bill, every month, on time.  That’s it!

The only other time you even have to worry about it, is when you get different credit than you already have.  That is, if you get a new credit card or refinance your house, or trade in your car for another.  Then, it’s time to call the bank again and find out what your score it.  You’ll need to wait a month or two before the change takes affect, but it doesn’t hurt to call right away.  Then, you can ask if they know when it will be updated by their system again. 

There you go.  Absolutely FREE CREDIT SCORE management, no strings attached.

These days, medical expenses are a big burden to many family’s budgets. Unfortunately, it isn’t always easy to figure out just how and when you can save money without endangering your health. However, here are some tips that could save you plenty of money on your prescriptions.

Costco, Sam’s Club, and Other Warehouse Clubs

It is no secret that places like Costco and Sam’s Club have pharmacies, and yes, they have good prices on prescriptions as well. Not a member? No problem. Most states have laws requiring any business establishment to permit public access to the pharmacy. In other words, you can march right into Sam’s Club without a membership and have your prescription filled. Just tell the person at the door that you are having a prescription filled in the pharmacy and they’ll let you right in. These places tend to train their people pretty well on this rule so they don’t get into trouble.

The one catch is that both Costco and Sam’s Club have restrictive payment options so make sure you have the right kind of credit card or are prepared to pay by check. For more expensive prescriptions this may not be a very palatable option, so if you are going to go this route a lot, look into a no annual fee version of the right credit card.

Wal-Mart and $4 Prescriptions

Unless you’ve been living under a rock, you no doubt have heard about Wal-mart introducing $4 prescriptions for certain medications. Keep in mind that this is only for certain GENERIC prescriptions. You can’t get a generic version of a drug that is still under patent protection. However, if you are getting a prescription for an “extended release” or other “all day” type prescription and are responsible enough to take more than one dose per day, see if there is a non-extended version availible and discuss having your doctor re-write your prescription to it. A sneaky trick that a lot of pharmaceutical companies use is to sell a “regular” release formula for the full length of the patent. Then, just as the patent is about to expire they come out with a “new” extended release version and get a few more years of patent protection to sell that one. The regular version is just as good, only you’ll have to take it more than once a day. If it’s generic it might be on the $4 list. If not, it will still be a lot cheaper than the brand name extended formula is.

Other stores are following Wal-mart’s move. Target offers a list of $4 prescriptions as well. Here in Colorado, Safeway offers a list. One thing to keep an eye out for is stores that will match other prices. That means you could be getting your prescription for $4, but only if you ask!

Insurance

Obviously, the best scenario is to have good insurance. But, even if you do, chances are you pay a smaller co-pay for generic drugs. Also, there is a good chance that you can get a discount if you buy certain “maintenance” drugs via mail. With this system, you get a 90-day supply for a 60-day price or something along those lines. This can save you a lot if you have multiple prescriptions. Make sure it is worth it to you though. Someone with asthma getting a generic inhaler once a month probably isn’t going to save enough to make it worth the hassle.

Shop Around

The price difference between pharmacies can be huge! In general, the big box stores like Target and Wal-mart will have cheaper prices than stand alone pharmacies. Walgreens can be one of the most expensive, so you might want to check. Most places don’t list prices on the Internet, but they’ll be willing to tell you if you call, especially if you say you are thinking about transferring a prescription. Call up Target, or whoever, and say, “I’m thinking about switching my whatever prescription over to you. Can you tell me what it would cost? Have your bottle ready because they’ll probably ask you questions you don’t know the answer to. “Is that the diffused formula or the titrated formula?” It probably says on the bottle.

So, here is something interesting. Capital One has a “credit card lab” on their website. Basically, the way it works is, you get a screen with several options available to you. As you choose the options you want, some of the other options get grayed out because you can’t choose them any more. For example, this is the screen if you choose “Excellent Credit”

You can choose all kinds of things like how many points you earn per dollar charged, and even “Additional Rewards” like a 25% Annual Bonus, or 0% APR on Balance Transfers.

What makes this so interesting is you can see exactly how your choices impact the remainder of your card features.

Credit Cards and Free Lunch

It is often said that there is no such thing as a free lunch. With the Capital One Credit Card Lab, you can see exactly that. Choosing 2 points per $1 spent for example, eliminates your ability to get the lowest interest rate, all “additional rewards” and even requires you to select an annual fee of $39.

By playing around with the various options you can see two things. One, what kind of card could you build if you wanted to? And, two, how much certain features are worth.

How to Use Credit Card Builder

So, how do you take maximum advantage of this tool?

1. Select $0 Annual Fee first — Nothing on that screen is worth paying an annual fee for unless you have a HUGE balance. Then, the 7.9% APR might be worth it, but make sure you do the math first.
2. Set A Specific Use - Decide on what you want to use this card for. For example, if you used this card exclusively to purchase all your gas and groceries, you could select 1% cash back and 2x Rewards on all Gas & Groceries.
3. Ignore Intro Rates - If you aren’t going to be transferring any balances to your new card, don’t bother wasting features on the transfer features. Instead choose the lowest interest rate.
4. Lowest Interest Rate - It goes without saying that you want the lowest interest rate, but if you pay off your cards every month does it really matter what the interest rate is? Get all the features you want and take the higher rate. Just make sure to use a different card if you ever have to carry a balance.
5. Comparison Shop - One of the hardest things to do is compare rewards credit cards. Now, you have a good tool to do so. When you see an offer that looks interesting, get all the details and then come to the Credit Card Lab. Try and match the features. If the offer you have comes up better than what you can get here, then it might be a good deal. If you can beat it with the Credit Card Lab, then keep shopping.

Monitor Your Credit Score

Before making any changes to your credit lineup, it is a good idea to get your credit score, and then monitor its reaction to your new card. Sign up for a 90-day (or more) free trial offer with a temporary credit card number that expires before the 90-day period is up (so it can’t automatically renew) and make sure to cancel before your free trial period is up.

Get your credit score before you apply. Then apply and check your score for as long as you can during the trial period to see the affect. If you need to monitor for longer, sign up for a different trial offer until you know how this new credit line will affect you.

For More Credit Card Information

The U.S. Supreme Court in a 7-2 decision upheld the central tenant of most state’s municipal bond tax policy, specifically that a state can exempt it’s own muni bonds from taxes while taxing the interest on other state’s muni bonds. So, nothing changes from before. If you live in California, the only way to avoid state tax on bond interest is to buy California Municipal Bonds. If you buy bonds from Texas, they can tax that interest.

Taxes and Bonds

Because interest on bonds is taxed as ordinary income, avoiding taxes on that interest is more important to investors than avoiding taxes on dividends paid by stocks. Most corporate bonds are taxed at both the federal and state level which reduces the real rate of return to the investor. Municipal bonds issued by states are exempt from federal income tax because one branch of the government cannot tax another branch. Whether or not the state municipal bonds are exempt from state income tax is determined by the laws of the states they are issued in. Most states make their own bonds tax-free as a way to make them more attractive for purchase. This tax-free status, plus the relative safety of most municipal bonds can make them an attractive investment for those in higher tax brackets.

However, these same benefits mean that muni bonds generally pay lower rates than other bonds. For federal taxes, if you are in a low tax bracket, the lower rate can actually mean a lessor overall return than if you invested in corporate bonds. The break even point is often somewhere around the 25% tax-bracket or above.

For state taxes, the analysis depends on the state you reside in. In Colorado, state income taxes are a flat 4.63% while in California, they go up with income like federal taxes. So, an investor in Colorado below the 25% income tax bracket may not reap any benefit from the tax-free nature of municipal bonds, while an investor in a higher bracket in California may come out way ahead by investing in California municipal bonds.

Higher Yield Muni Bonds

Some states do not have an income tax. (They usually have much higher sales taxes or property taxes than those that do.) For those states, municipal bonds can carry a higher interest rate. Texas, for example, does not have an income tax. Therefore, there is no advantage to Texans to buy Texas issued municipal bonds over those issued by other states. As a result, similarly rated Texas Municipal Bonds often end up paying a higher interest rate in order to attract investors. If you are looking to invest in municipal bonds but don’t need the state income tax deduction for your planning purposes (if you live in a low income tax state) then when investing always make sure to check out the non-tax state’s municipal bonds as well as your home state.

Technorati Tags: tax, muni bonds, tax-free, income tax, investing

Great Stock Fund Re-Opened

One of my favorite mutual funds is the Dodge & Cox Stock Fund (DODGX).  It’s performance is virtually flawless for its purpose (large cap stock).  This isn’t some flashy hey-look-at-me mutual fund.  In fact, this is exactly the kind of fund that people started questioning during the Internet bubble, and that is a good thing.  Notice how it did not get caught up in the Internet bubble like many other stock funds.  Its returns of just 5.4% and 20.21% in 1998 and 1999 respectively earned it a lot of scorn when Janus Funds were near 100% returns, but the proof of greatest isn’t riding along with crowd hysteria.  The proof of greatness comes in 2000 and 2001.  When other funds were getting crushed, DODGX was making money!  In 2002, it managed to drop just 10.5%, almost half of what others were losing.

The real proof of greatness is that it did not achieve these results by hiding and investing in “safer” places.  In 2003, when the market turned back up, they were right there.  This is what a great fund looks like.

Limited Time Offer?

For the last several years, the Dodge & Cox Stock Fund has been closed to new investors, so I couldn’t recommend it to my clients.  If they had it available in their 401(k) plans, it was my only large-cap recommendation.  If the clients were savvy enough, we’d load up on one spouse’s plan and the achieve diversification with the other spouse’s plan (or even with IRAs assuming there was enough money in them.)  Now, the fund is back open for new investors.  My advice is to get in there, even if you just send in the minimum.  Last time they closed the fund, they still let existing shareholders add funds.  So, get your investment open now.  They’ll probably close the fund again sooner or later.

Evaluate Good Mutual Funds

To evaluate a mutual fund, ignore the 1, 3 and 5-year averages.  There are too many ways to hide flaws in averages.  For example, the 5-year average no longer includes the popping of the Internet Bubble.  So, that fund that claims the great 5-Start Morningstar rating  on the 1, 3 and 5-year could be hiding a brutal pounding in 2000, 2001, 2002 when it cratered and took investor money with it.

Instead, always look at the individual Annual Returns.  There is no way to hide then.  Look at the returns for DODGX.  This is exactly what you want to see in a value-oriented large cap stock fund.  It lags in 1998, 1999 when things were crazy, but it survives beautifully in 2000, 2001, 2002.  Just as important, it does not get caught by surprise in 2003 and posts solid returns.

There are few no-brainers in the investing world.  The Dodge & Cox Stock Fund is one of them.  Whatever you have, I’ll bet it isn’t as good.  This is your large cap growth fund.

The Fidelity Investment Rewards Visa Signature Credit Card is a little different than most rewards credit cards. Sure, it has the same $1 = 1 point structure of other credit cards. But, what makes it so interesting is its other reward offer.

Cash Back Rewards & Points Rewards

With the Fidelity Investment Rewards card, you can also redeem 5,000 points for a $75 deposit into an eligible Fidelity Account. That rate breaks down to $1.50 cash back for every $100 spent or a 1.5% return on your spending. The standard rate of return for cash or statement credits is $1.00 for every $100 spent, so this is a 50% improvement over those other cards. Eligible accounts are basically the standard individual or joint account, and traditional IRA and Roth IRA. Any rewards made to IRA accounts count toward your annual contribution limit, and of course, you must be eligible for those accounts according to IRS rules.

An eligible Fidelity account can include a regular brokerage account which can have both check writing and debit card access attached, which means that this card is just like any other cash back card with easy access to your rewarded cash. As an added bonus, the 5,000 reward point level is half the normal 10,000 point minimum reward level meaning you can get your cash back even sooner using the Fidelity Investment Rewards Card.

Interest Rate & Fees

The offer I examined has a 14.99% APR. That certainly doesn’t qualify for the super-low category, but is close to average. The grace period is at least 20 days from statement closing date. Most importantly, there is no annual fee. The card allows for unlimited points to be earned, which has become a critical feature among cash back cards that tend to limit the amount of points or cash that can be earned on an annual basis.

For traditional point rewards, the Fidelity card uses the WorldPoints rewards system. Points expire after 5 years, but since they can be redeemed for cash at any time, the only way you’ll lose out is if you aren’t paying attention as the 5 year limit approaches.

Also availible is free access to “MyConcierge” service, although I have no information on that.

The card is issued through FIA Card Services.

Fidelity Investment Rewards Credit Card Review

All and all, I’d have to give this card a Thumbs Up rating. With a 1.5% cash back schedule and no big gotchas, I can’t see the downside. In fact, I’ll be signing up for this card here very soon and then monitor my credit score with a free trial offer over the next 60 to 90 days to make sure it doesn’t affect my credit score number.

Recently, a client explained to me how he thought gold was a good investment and protection against inflation. I’m not going to talk today about if he is right or wrong. Instead, I’ll mention that his fabulous do it yourself investment solution was Fidelity’s Gold Fund. Good call? Well, it came as quite a shock to him that actual Gold is only the sixth biggest investment in the fund. Five bigger investments are in companies that have something to do with the gold industry. Granted, those company’s stock prices will be heavily influenced by the price of gold, but certainly not on a one-for-one basis, and it is very possible for gold companies to have problems (and thus lower stock prices) unrelated to gold prices. Gold companies are very susceptible to environmental lawsuits and regulations. Not to mention, gold happens to be mined in some very unstable countries throughout the world. A military uprising could drive the price of gold higher as it takes out some of the world’s supply, while at the same time sending a gold mining company’s stock plummeting because that same supply interruption that boosted prices also interrupts that company’s revenue.

Gold Investing or Gold Industry Investing

Taking some comfort in straight gold being the sixth biggest holding? Guess how much that is overall in the fund.

The point is, you have to understand ALL the aspects of what you are investing in. Being right about gold being a good investment is not helpful if the investment you buy isn’t really in gold, but in gold companies. Gold companies CAN be a good way to invest in the gold arena, but it is important to understand the difference between investing in raw gold (bullion) and in gold companies (stock of businesses).

Don’t make this same mistake. If you thing something is a good idea, research everything, or run it by someone who is a professional. Either way, you’ll make sure the investment you get is the investment you want.

Technorati Tags: gold, Gold Fund, investment