Wise Bread (Catherine Shaffer)

Ten Great Charities that Deserve Your Dollars This Year

Catherine Shaffer — Wed, 25 Mar 2009 16:44:13 +0000

These are difficult economic times, but I'm getting tired of being told to spend my money on stuff, as if my personal saving habits are somehow ruining the economy. I'm no economist, and maybe I'm full of crap, but it seems to me that when I save money by putting it in a bank account or investing it in stocks via my retirement plan, I am directly addressing the core problem of the economy right now--liquidity--in a much more direct way than if I were to go to the dollar store and stock up on easter decorations that I don't want anyway. I have a different proposition. Instead of throwing money at retailers, let's throw it at people who really need it--the poor and disenfranchised who are most at risk in an economic downturn. Here are my top ten charity picks. I'd love to know what your favorites are, and will post a followup in a week or so with an updated list of recommended charities. [Update: and now there are ten!]

1. The Carter Center

This is an amazing organization founded by Jimmy and Rosalynn Carter with a unique mission. Many of us are ardent supporters of disease foundations that seek to find a cure for a devastating disease such as cancer. The Carter Foundation seeks to bring known cures for terrible diseases to third world nations that cannot afford them. The Carter foundation is currently campaigning to eradicate guinea worm, a painful and dangerous parasitic infection, from the world. Guinea worm is easily prevented by filtering drinking water. However, many countries in Africa have been too poor to distribute simple coffee filters so that people can remove the worm larvae from their drinking water. The Carter foundation has made an amazing difference in saving millions of people from guinea worm at a cost of pennies per person. This is a very powerful use of your dollars, and if you have just a few dollars to donate, this is the charity that will stretch those dollars the most. The Carter Center has a five star rating on Charity Navigator, with a high percentage of donation going to actual program expenses.

2. Christian Foundation for Children and Aging

This is a child sponsorship charity with which I've had an amazingly good experience. For $30 a month, I sponsor a child to receive assistance through the foundation. Assistance includes education and basic needs. I am able to correspond with the child, and we have exchanged many letters and photos. CCFA gives you the option to choose a young child, an older child, or an elderly person to receive assistance, or you can choose the person most in need. I took the last option, and I promptly received a packet describing a child named Luis in Guatamala. I really wish I could publish the series of three pictures I received from the foundation, but that would not be considerate of his privacy. Luis was about 12, and in the first picture he looked very small for his age, was wearing ill-fitting clothes, and looked thoroughly miserable. A year later, I had a picture of a very handsome young man with a bright smile. Luis sends me wonderful letters which he always illustrates with colored pencil drawings. I am very proud of him, and I hope to one day take advantage of the CCFA travel program, which provides very reasonable accommodations for a visit with your sponsored child. Because of the differential in cost of living between the US and Guatamala, I am able to make a huge difference in one child's life while making a small sacrifice in my own. In fact, it's kind of embarassing, the gratitude that he has expressed, considering that $30 is an amount I can easily spend on nothing. CCFA also gets five stars on Charity Navigator.

3. American Red Cross

The Red Cross gets only two stars from charity navigator, indicating they need improvement in efficiency. Still, there's no other organization with the scope and vision of the Red Cross, and they are the only place you can donate blood instead of money. If you are able, consider giving at least a pint of blood to the red cross. The Red Cross does a great deal of disaster relief work. When my family was on vacation in Michigan's upper peninsula, in 2007, a major forest fire started within a few miles of our campground. We were not affected, but as it turned out, the Red Cross set up a tent with relief supplies near the firefighter's headquarters. Maybe they aren't the most efficienty charity working in this space, but I didn't see any other charities showing up at Four Corners crossings in da UP to offer relief to people who may be injured or displaced. I believe in this organization and will continue to support it. Some day, if my life calms down enough, I hope to become a trained Red Cross disaster volunteer in my community. (I looked at the training courses recently and sadly am not able to attend.)

4. International Committee of the Red Cross

This organization is doing critical relief work around the world. Right now, as we speak, there is a horrifying situation in Sri Lanka with tens of thousands of people trapped in a very small area, caught in cross fire between the Sri Lankan government and the Tamil Tiger rebels. the ICRC is the only aid organization with any access at all to this region, so if youw ant to help, this is the place to send your dollars. This is a terrible situation. News media have not been allowed in, but there are reports that people are using sheets of plastic for shelter and that bombs are falling among the crowds. These are people who are going to need immediate and comprehensive assistance as soon as they can be extracted from the situation.

5. Habitat for Humanity

What can you say about Habitat? Great charity, doing great work. They don't just give away houses, they make people work their butts off for them. This is a charity that strengthens communities, puts people in homes, and doesn't wreck the economy while doing it. They deserve your support.

6. Doernbecher Children's Hospital Foundation

I was going to recommend St. Jude Children's Hospital, but when I did some research, they seemed to have an unacceptably high overhead as opposed to the amount of donations that actually go to research and helping people. Instead, consider Doernbecher, which has a similar mission, and a five star rating on charity navigator.

7. American Near East Refugee Aid

This is an organization helping another trapped group of people--civilians in Gaza. I have a solicitation from them right here in my incoming mail box, and after looking them up online, I feel very comfortable sending a contribution.

8. Your local church, department of human services, or animal shelter

There are some needs that are best addressed locally. Consider contributions to your church or your local animal shelter. (Do not contribute to the HSUS until you have researched the organization. You may not agree with their goals or tactics, and they are not normally affiliated with the "humane society" in your town.) Also check with your state government or county human services department about organizations that help foster children. Foster children are some of the most needy, most disenfranchised people in our society. Often there are not enough beds in foster homes for them, so they live in unstable, crowded conditions. Children who have not been abused when they enter care often end up being abused by the time they leave care, and due to frequent moves between homes, they have a hard time holding onto possessions. Many small charities collect money to purchase simple things like suitcases and Christmas presents for foster children. Children aging out of the foster system need a lot of help getting started in life, as well, and in this economy, it's not as easy for them to find jobs, much less go to college. You might also consider becoming a foster parent. It's not for everyone, but there is such a great need, and most people find it very rewarding.

9. Sanford Health, South Dakota

This isn't actually a recommendation for a place to donate your money, since they don't seem to be actively soliciting donations. Instead, I want to share with you this story of Denny Sanford's $400 million gift to Sioux Falls Health System. Unlike many philanthropists, Sanford did not dictate the research mission of the hospital when he made the gift. Instead, he solicited proposals from scientists for a project that would completely cure a disease within his remaining life span. He's kind of old, so it's going to be a horse race! The process was judged by scientists, and the winner was type I diabetes. Research at Sanford Health will focus on curing Type I diabetes through beta cell regeneration, as quickly as possible. I mention it here in case anyone has a significant gift or bequest and may be interested in joining Sanford in this mission, or perhaps using Sanford's process to start their own research institution or foundation! This is philanthropy done right. [Update: You CAN contribute to Sanford Health. Go to www.sanfordproject.com and click on "Make a Gift Online."]

10. Doctors without Borders

Thanks to the commentors, I can now complete my list of ten, which I started and got stuck at number nine. (Math and blogging don't mix for me.) This is another charity that introduces itself. Nobel-prize winning, courageous, important. I am a supporter and I hope you will be, too.

Now, go! Make a leap of faith. Give your money away, and it will return to you tenfold, or so the saying goes. With an ROI like that, we can have 1000% growth in our economy in no time. What are your favorite charities? What are the best? The worst?

Permalink | 24 comments | Catherine Shaffer's blog | Channel: Personal Finance, Budgeting

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Avoid Big Dental Bills with Safe and Inexpensive Products

Catherine Shaffer — Wed, 11 Mar 2009 20:01:45 +0000

By Catherine Shaffer

Dental care is one of those big expenses that hits us in the pocketbook when we least expect it. Most people pay at least some of their dental bills out-of-pocket. Some people go in for a routine cleaning and come out with a schedule of appointments for thousands of dollars worth of restorative work. Traditional dentistry focuses on repairing the damage done by plaque-causing bacteria, but does little to address the underlying cause of decay and gum disease. A new trend called minimally invasive dentistry views these bacteria not as normal and unavoidable body flora, but as an aggressive bacterial infection that can be eliminated using a rational cleaning regimen.

Ellie Phillips is a Rochester, New York dentist and author of the dental advice blog Ask Dr. Ellie. In her blog (and in a forthcoming book), Dr. Ellie describes how she first became interested in minimally invasive dentistry (as it's now called). Her husband owned a restaurant, and the restaurant employees could not afford dental care. Out of a desire to provide some kind of inexpensive tools for preventive dental care, they installed a candy dispenser at the restaurant that contained xylitol candies. Xylitol is a natural sugar derived from birch trees. (If that sounds strange, think about how much maple syrup you've consumed. Same thing, except birch.)

It turns out that the bad bacteria attempt to metabolize xylitol, but get “stuck” in mid-process and starve to death. Xylitol is, in effect, a mild, selective antibiotic that eliminates plaque-forming bacteria and encourages the growth of harmless probiotic strains (which we all need for good health). The bad bacteria form clumps and strings on teeth. This is what the dentist scrapes off at those biannual cleanings. The good bacteria form an invisible slippery film on the teeth.

What Dr. Ellie found was that when the employees started eating a hand full of xylitol mints each day, their teeth and gums became naturally healthier. (The scientific literature backs up her observations.) Given time, and freedom from harmful bacteria, says Dr. Ellie, your body can even repair small cavities. This is called remineralization.

Since that time, Dr. Ellie has developed an oral hygiene system that encourages good bacteria and eliminates bad bacteria. The system (“Clean White Teeth”) involves eating a minimum dose of xylitol each day, brushing with a scrupulously clean toothbrush, and using four specific products : Closys rinse, Listerine, ACT fluoride rinse, and plain Crest toothpaste. She has many testimonials from happy patients and blog readers whose dental problems have been completely reversed by this regimen. Dr. Ellie is very clear that she does not receive any payment from Johnson and Johnson, Pfizer, or any other corporation for endorsing these products.

The xylitol candies and all of the mouth rinses are not cheap. They cost more than the average person's oral hygeine routine. However, they are much cheaper than root canals, gingival surgery, and tooth implants.

In fact, I decided to try this system myself. First I have to give you some background. I never had a cavity in my life, but as of about three years ago, I did have some gingivitis, with a few periodontal pockets that my dentist was watching. We had many conversations about flossing. The problem: I was flossing regularly and doing everything recommended by the dentist, but my gums were not improving. My dentist, whom I do like very much, didn't have any new recommendations to offer, except to continue flossing.

Some time later, I decided to begin taking fish oil supplements, because I had been impressed by new research showing the benefits of omega-3 fatty acids for your overall health. Within about a month, I noticed my gums were a strange color. They were light pink! This is the color of healthy gums. Sure enough, when I went to the dentist, they couldn't get over what an improvement there had been in my gums. So that's my personal recommendation. The science on this is somewhat fuzzy (omega-3's are known to be beneficial for cardiovascular health, and cardio and gingival health have been shown to be linked). It's worth a try.

So when I started using Dr. Ellie's system, I already had pretty good teeth and gums. But like most everyone, I would have some sensitivity and bleeding during cleanings, and the hygienist spent some time scraping tartar. I usually got a lecture about flossing more.

I was eager to see if there would be any difference after I started the system. To my surprise, the hygienist found almost no tartar to scrape, and my gums had zero bleeding, except in one place where I had suffered bone loss from previous decades of simmering gingivitis. Again, they were very happy and impressed with my progress. I believe my largest periodontal pocket even measured a millimeter smaller.

So that's my personal testimonial. I am very happy to share this resource with Wise Bread readers. I would encourage you to go read through the Dr. Ellie blog archives. It's well worth the investment of time. She gives advice for many situations, including young children, cancer patients, and more. Medical science is just beginning to really explore the impact that microflora has on human health. So much is unknown. But after more than thirty years of being blamed for my own poor oral health, I am very happy to know that I just had an infection and was able to cure it naturally.

Permalink | 21 comments | Catherine Shaffer's blog | Channel: Frugal Living, Life Hacks, General Tips, Health and Beauty, Lifestyle

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Looking at Your Expenses with New Eyes

Catherine Shaffer — Wed, 18 Feb 2009 15:41:18 +0000

By Catherine Shaffer

A lot of people think that banks have high security, but the most fortified brick-and-mortar institution in my town is the local Comcast office. This is where you have to go to drop off broken cable boxes or pay your bill if it's late and you don't want your service turned off. The clerks work behind a thick shield of bullet-proof glass, and there are two-sided, bullet-proof boxes at every station for transferring equipment. Surveillance cameras are placed in the corners of the room, and a large poster by the door makes it easy to estimate your height as you leave the building with that bag of loot.

One day, after a couple of visits, I finally asked why there was so much security. I was told that the office takes in ridiculous amounts of cash each day. Enough to make it a more attractive target than many gas stations and convenience stores. Why so much? Well, to understand that, you have to spend some time waiting in line. If you watch carefully, at least fifty percent of the people in line ahead of you will be there for two purposes. One, to pay their overdue cable bill in cash, and two, to argue with the clerk about some aspect of the bill that they find unfair. For this reason, it's a good idea to go to there when you're in the mood for people-watching, as opposed to running late for something important.

Cable television isn't a life necessity. There's no bullet proof glass (as far as I know) at the local supermarket where you can pay your heating bill in cash at the last minute. But apparently people are willing to spend their last dollar on cable. As a case in point, last time I was at the Comcast office, dropping off a spare second cable box that no one was using anymore, a gentleman in front of me in line went to the window and offered to pay $150 in cash on his past due account, which was $495. That brought his balance down to $345. He then asked what his charges would be for his next bill. “You have $345 outstanding,” the clerk said.

“No, I just want to know what the new charges will be on the next bill,” he answered

“One hundred ninety-five,” she told him. He nodded, put away his receipt, and left.

This seems incredible to me. Obviously he can't afford $195/month for cable, or he wouldn't be so far behind on his charges. What kind of service even costs that much? Is there a cable package that cleans your house and polishes your silver while you watch? And he couldn't even pay the equivalent of one month's charges after running up a $500 tab. He paid just enough to keep the cable turned on for another month, but anyone with eyes could see this was a terrible financial choice he was making.

I'm not real comfortable making judgments on other people when I don't know the whole story, so I got to thinking. What are my blind spots? What do I maybe spend $200/month on that others would consider excessive? Chances are my overall family budget is greater than his, and includes luxuries that he would find excessive. Maybe he would think my pets are a waste of money. Maybe he would disapprove of my habit of driving decent cars and eating organic foods. Maybe he would frown on my SUV. (A lot of people would, but you try taking two mastiffs on vacation in a Toyota hatchback.) The truth is, if someone were standing behind me, watching me make all of my purchases, I would probably squirm a bit.

So, for me, there are two take-home lessons here. One is that entertainment in the form of cable television is very important to some people, to the point that they will take the last of their grocery money to the local Comcast office at the end of the month, instead of using it on groceries. We should all respect a force of nature this powerful. Second, that managing your money is always subject to personal priorities, and those priorities vary between individuals. Maybe the mythical $4 latte is really worth $4 to someone who really treasures that Starbucks run each morning. Maybe it is the one thing keeping him sane. The real question is do we know what our priorities are and how much they are costing us? What would our choices look like if they were examined with fresh eyes?

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Please Pass the October Surprise

Catherine Shaffer — Sat, 11 Oct 2008 13:49:49 +0000

By Catherine Shaffer

I've always believed that mastery of vocabulary is at least halfway to mastery of the subject. Words are power--the kind of power commonly wielded by eggheads with pocket protectors, but power nonetheless. In the past weeks and months, I've seen a lot of new vocabulary thrown around in the media, and most of us are too busy ducking and diving out of the way to ask what all these crazy words mean. So let's demystify the language of the new economics, right here, right now. Here's a list of common terms you might encounter in your newspaper, on television, or even in a blog.

Commercial paper: This is an IOU, good for maybe a month or two. Unlike a regular IOU, it's written for very large amounts, and companies accept them from each other pretty much without question. Apparently, commercial paper is the way that many companies meet payroll and buy inventory. I always thought they used money. Who knew?

Credit default swap: Halfway between an insurance policy and a racetrack wager, this is a way that mortgage lenders made themselves feel safe giving loans to people about whom they otherwise knew nothing. No job? No documentation? No problem. We have a credit default swap.

Subprime debacle: The inevitable outcome of widespread use of credit default swaps to back sketchy loans. The word 'debacle' has somewhat of a Victorian ring to my ear. It sounds like something that might happen in “The Importance of Being Earnest.” This is how the whole mess was described earlier this year, when we were all in an enviable state of denial. Notably, a 'debacle' is nothing that ever happens to oneself. It always happens to other people. Like the time our neighbors, a husband and wife, met each other driving separate cars in opposite directions on our street, and proceeded to have a very loud argument between the two cars. Boy, was that ever a debacle. So glad I wasn't involved!

Liquidity crisis: Until recently, I would have told you that a liquidity crisis is what happened when my sixty-pound puppy wasn't put outside often enough. But apparently, 'liquidity crisis' is actually what happens when you can't borrow enough money to keep going. Next time your buddy asks you for $100, just until next payday, you'll know he's having a liquidity crisis. Let's just hope that his employer is not relying on commercial paper to make payroll, or his liquidity crisis will become yours. Which, when I think about it, is the essential circular nature of this whole mess.

Tranch: This is a silly, made-up word that big investor types use to explain why they can't look closely at the history of individual mortgages bought and sold by their companies. See, it's in a “tranch.” It's meant to evoke bundles, or “bunches,” which are sort of shrink-wrapped so you can't open them up and look in side. Someone once suggested calling them “faggots,” but that idea was quickly shouted down.

Toxic assets: Imagine that pirates Larry and Lunt from Jonah, the Veggie Tales movie, had successfully invested their prize money from the Mr. Twisty's Twisted Cheese Curls Sweepstakes in cheese curls, as they wished to do. And suppose that after they bought those cheese curls, but before they had a chance to resell them at a profit, they learned that the cheese curls had been manufactured in China (not Nineveh), and that they had high levels of melamine...

Mortgage meltdown: This is the same as subprime debacle, but a bit later in history, when everyone is feeling that it is not so funny anymore. It's like those neighbors shouting in the street are suddenly in your living room, and their car is parked in your driveway, and their trunk is full of those toxic cheese curls, and it turns out they are radioactive, not toxic, and they are going into nuclear meltdown!

Irrational despair: This is one half of a very small set of emotions which Wall Street stock traders are capable of (the other being irrational exuberance). Their severely limited emotional range literally controls our economy, while regulators feebly scold them from afar.

Economic collapse: In physics, there is conservation of matter and energy. Sadly, there is no law of conservation of money in economics. Money can simply disappear, and if enough of it does so, you have economic collapse.

Iceland: A small country in the extreme north populated by the descendants of Vikings which has recently experienced economic collapse (see above). If not rescued by other nations of the world, Iceland will have no choice but to replenish its coffers by raiding the coastlines of Europe and America. Guys with names like Sven and Eric Ericson, with Swedish Chef accents, will be burning our houses and raping our women. Also, they will be sending millions of emails that read, “Dear Friend, We would like to offer you a unique business opportunity...” (with Swedish Chef accents).

October surprise: As if having toilet paper in your trees and rotten pumpkins smashed in your driveway were not enough of a surprise, the October surprise is lore believed by stockbrokers and other Wall Street types (see 'Irrational despair,' above). Apparently, people who work in the New York Stock Exchange are among the most superstitious people on Earth. To a man, they take vacations each year in Ireland to hunt leprechauns, and can be found any time clutching rabbits feet, voodoo charms, saints medallions, and all manner of good luck items. Apparently, these denizens of the trading floor believe bad things happen in October, and in the way of many such prophecies, it happens to frequently be self-fulfilling.

So that, in a nutshell, is the lingo. Know it, understand it, use it wisely. And yet, one thing is still missing. We still don't have a comprehensive phrase to describe the whole phenomenon. I submitted my entry, “The Great Economic Shitstorm of 2008,” to Ben Bernanke, but I haven't received a response from him yet.

Permalink | 11 comments | Catherine Shaffer's blog | Channel: Personal Finance, Consumer Affairs

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Financial Peace in Hard Times

Catherine Shaffer — Tue, 30 Sep 2008 15:08:02 +0000

By Catherine Shaffer

Six months ago, I had plans. Lots of them. Career plans. Vacation plans. Financial plans. Then everything fell apart. My mother became ill. She had already been ill, having been diagnosed with cancer in 2005. However, her general health deteriorated drastically in March, and there followed five weeks of hospitalization, followed by a major life change. She moved in with me, and I became her primary caregiver.

One crisis followed another. When we thought we had her other health problems resolved, we learned the cancer was back. For a long time it seemed everything was getting worse, and suddenly we were spending more time in the Emergency Room than some of the people who actually worked there (or so it seemed). I started to feel like I was friends with the security guard who printed out my badge each time. Unlike on television, you tend not to meet the same doctors and nurses on repeat visits—in fact, over the course of maybe a dozen emergency trips, we never saw the same medical staff twice. Only my friend the security guard. In the middle of all of Mom's health problems, my husband fell ill, and also made a couple of trips to the hospital.

I am pretty sure there was a whole month where we had a doctor's appointment or a hospital stay every single day. One day, after a long and stressful summer, I decided that, for once, I was going to take my son to the pool with friends and relax. And so I did. I sat there in a pool lounger, knotted up with tension from my scalp to the soles of my feet, and things seemed slightly better. I told my friend, “I think I am starting to relax.” Then I got home and my neighbor told me that an ambulance had arrived to take Mom away. That's how my summer went.

Where am I going with this? Well, all my plans were dashed to matchsticks. The career plans got put on hold. The vacation plans went down the toilet. Everything was postponed, canceled, or ruined. Except for those financial plans. See, last year, my husband and I got serious about paying off all of our consumer debt, and getting on a robust budget that included savings for many of life's little surprises. I began keeping track of every penny we spent, and aggressively paying off our creditors. I used much of Dave Ramsey's program, and established a $1000 emergency fund. At first, it was difficult. With the increased credit payments, we were barely breaking even every month. Twice within the first six months, I had to dip into the $1000 emergency fund and then repay the fund.

Sooner than I thought, we sent in our last credit card payment, and shortly after that, our last car payment. All of a sudden we were debt free except for the mortgage. That was in March.

And you know what happened in March. So here's the thing. All of that planning and work carried us straight through to today. We've had a couple of automobile breakdowns, a couple of budget overruns, some ups and downs in income, and one very strange pet accident. We've eaten far more restaurant meals than any budget-conscious family should. Gas prices have gone up. Groceries have gone up. But we're okay. I was able to pay in cash for every unforeseen emergency, and focus on what mattered most—my family and my health. All of the sacrifices we made to get on top of our consumer debt were absolutely worth it.

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DVDs Freer than Free--No, Really, Really Free

Catherine Shaffer — Sun, 06 Apr 2008 03:00:38 +0000

By Catherine Shaffer

I noticed Paul's interesting article (NEVER Pay for a Redbox DVD Rental Again ) about using Redbox codes to rent movies for free, and in theory, I am all for it. But we don't have Redbox nearby, and I would never manage to return a movie in 24 hours with my crazy life. Fortunately, I have a diabolical method of getting movies for free. Even free-er than Redbox free! Nowadays, I laugh as I drive by Hollywood video. Why did I ever pay $4 to rent a movie? Why, God, why?

Here's the secret. I use the library. I know that's not really a secret. It was even mentioned in the comments to Paul's post, but then quickly dismissed and/or ignored. I think the idea deserves to be revisited. See, most people assumed that you can't get the videos you want at the library, especially new releases. But I've been getting just about any DVD I could ask for from the library using the computerized request system. I combine this with my reading wish list, enter my requests, and a few days later, I get an email saying my DVDs are waiting for me. I even put in electronic requests for materials that are not on loan, because I am too darn lazy to go to the shelf and look them up alphabetically. I just walk up to the hold shelf, grab the materials with my name on it, zap them through the self checkout, and walk out without paying a dime.

The library has a full selection of new releases, and also popular television shows. We do maintain a netflix subscription, because there are some things we haven't found in the library. However, lately I have been experimenting with interlibrary loan for books. If the book is not found in the library catalog, you get the option to "search other libraries" and the system will look for your selection in the interlibrary lending system. I wasn't sure if this option existed for DVD's, so just now I went to my local library web page and searched for a DVD I was pretty sure they didn't have. Sure enough, I found it in a library in a neighboring town, and was offered the opportunity to request it.

Since I've been using the library pretty heavily, I've noticed something interesting. A lot of other people are, too! I have one book on request in which I started out as the 135th request. It may seem like, with a month-long loan period, I would never get the book, but when I looked at the record, my library owned 45 copies, and was in the process of acquiring dozens more. That means that the library is not as much of a free ride as we thought. They are a major purchaser of books, DVDs, CDs, and other media, using taxpayer dollars, and there's no need to feel guilty about using it. They seem to keep enough books in stock so that the hold queue is about three deep. So for a book with 140 holds, they owned 50 copies. That seems completely reasonable to me.

As it turns out, the hot books, movies, and cds are perpetually loaned out, and your only chance of getting them is to use the request system. (I always figured that mostly if I couldn't find it on the shelf, I couldn't get it from the library.) Waiting for things really hasn't been a problem, since new requests are coming up for me every few days. My biggest challenge has been keeping up with all the material I have requested. In fact, my Netflix queue has gone rather stale since we got a big batch of DVDs from the library. There is no limit on the number of items you can take out. You can keep DVDs for a week, and if no one has requested them, you can renew them nearly indefinitely. My library sends me an email a few days before materials are due, and I have made it part of my daily routine to pop in to the library web page and check my list of checked out items (up to 35 items right now!). If something is due that day, I try to renew it, or put it on the shelf next to the door to drop off on my daily errands. Often, at the same time, I swipe my holds from the hold shelf. (You do need a good home organization system for library materials if you are going to have a lot of them. I try to keep the DVDs near the TV, or on a shelf by the door.)

I don't know if I've talked you into using your public library more. I may have talked myself in to canceling my Netflix subscription! We already canceled our cable subscription and are frankly not missing it between DVD rentals and the odd iTunes purchase for very new TV shows. To ease the transition, at first we bought some current TV shows on iTunes for our son, but very quickly we weaned him onto older stuff we could get from the library. He is enjoying Looney Tunes now every bit as much as I did in my childhood, and we get them FREE from the library.

But if you're still with me after all of this, here is an extra bonus for Michigan residents. Libraries in Southeast Michigan are loaning out free tickets to area museums now through October. Tickets are available in twos or fours for a long list of museums both big and small, including the DIA and other major attractions.

Now, I expect the next installment in the Wise Bread DVD rental category will be about how to get someone to pay you to rent them. Anyone?

(Life has been pretty busy lately, but I'll be back soon with more entries in my real estate rental series soon.)

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So You Want to be a Landlord? Part II: How Do You Actually Make Money?

Catherine Shaffer — Thu, 13 Mar 2008 23:31:35 +0000

By Catherine Shaffer

I know we're not completely done talking about risk in this series (see the first post here ), but Paid Twice, from I've Paid Twice For This Already asks an excellent question with regard to the rent vs. buy debate. Namely, if you can save more money by renting a house than buying, then what is your landlord doing?

So I ask my readers - how does this work? Anyone know how renting can be so much less expensive than buying, yet the home’s actual owners don’t lose piles of money?

You can read the whole post over at Someone Had to Buy the House You Rent.

The truth is that rents sometimes do not cover the monthly costs of owning the rental home, so how is it that these real estate gurus make their money? A lot of people think that it must involve unfair tactics, such as buying investment property at below-market rates from gullible elderly people, but there can't possibly be enough gullible elderly people to keep the whole industry going. Others think it must be because all of the property is fully paid for, or that it was financed for better terms than today's rates. However, economically speaking, rental rates in today's dollars have to somehow make sense with today's property values and interest rates. And remember that not all rental property is residential. There are a lot of investors out there buying office and industrial space to rent out. How does it all work?

What we need here is a calculator and the back of an envelope. The first thing we need to do is identify the two different sources of income from investment property. The first is equity appreciation. This is a primary strategy for some real estate investors, who target undervalued real estate, or real estate in areas likely to increase in value, and then buy and hold until they decide to sell. There are many types of rental property, and even in a down market like today's (or especially in a down market) you can make money this way.

The second income stream is rents. A lot of landlords buy up properties and hold onto them indefinitely, living off the rents, which will increase proportionate to the finance expenses of the property the longer you hold it. Although some landlords may focus on one strategy or the other, the truth is that both are in play for any given property.

Getting out the envelope, let's make some assumptions (and remember the back of our envelope is small, so we are not going to to be excessively detailed about this).

We are buying an investment property today for $200,000, with a $60,000 down payment (30%) and financing it for 6.75% for thirty years. The going rate for a mortgage on your primary residence today is 6.13%, so 6.75% should be about right for an investment property.

First, the monthly expenses.

Monthly mortgage payment (principle and interest): $908.04
Taxes and insurance (50 mills): $483.33
Water utilities (typically renters don't pay for this themselves): $50
Maintenance (sinking fund*): $166
Total: $1607.37

The rent you can charge is determined both by market demand and costs. This particular house is a two bedroom, one bathroom starter home, and $1100/month is all you can get for it.

Your monthly cash flow for the house is -$507.37. Ouch!

Why would anyone do this? Well, let's look at things a different way, by checking out your profits.

First, there's your equity appreciation. Let's go with the doomsayers for now and assume you can barely keep up with inflation on your investment, so it's going to appreciate at a modest 5% per year. (Feel free to play around with different numbers on your own time.)

Market value up 5%: $10,000
Rent collected: $13,200
Interest Payments: -$9450
Property taxes and insurance: -$5800
Maintenance: -$2000
Net profit: $5950

That's a 9.9% annual return on your investment of a $60,000 down payment. Not bad!

Now, this doesn't "feel" like a profit to the landlord because much of it is tied up in unrealized capital gain, and the monthly payment includes principle, so some of the monthly "cost" is money he's paying toward his debt liability. In other words, the small principle payment ($1492.05 the first year) is not really "cost." That is money paid back to himself.

There are also income taxes on the $13,200 in rents to be considered. However, the IRS gives you a lot of deductions for owning rental property, including the ability to depreciate the entire property (the structure of the building, that is, not the land) and appliances or equipment you use for your rental business. For that reason, the effect on your bottom line at tax time could actually be to reduce your tax liability. (I am deliberately avoiding a full discussion of taxes here. That's another post.)

Although we could decrease that 9.9% annual return further by taking into account income tax, when looking at comparable investments, such as the stock market, it is customary not to deduct what you expect to pay in income or capital gains tax and so we won't do that here, but simply note that a 9.9% annual return compares quite nicely to what you can expect from stock market investments and mutual funds. Most people should be glad to get around 10% per year on any investment, before taxes, brokerage fees, and inflation.

And this is why landlords lord lands. It doesn't require dishonesty, just a healthy tolerance for risk (which we'll talk about next time) and occasional conflict. Oh, and about $60,000 cash.

*This assumes you are replacing your roof, furnace, and exterior paint or siding and windows every thirty years, and you are doing some miscellaneous repairs each year.

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So You Want to be a Landlord? Part I

Catherine Shaffer — Mon, 10 Mar 2008 16:50:24 +0000

By Catherine Shaffer

With dropping home prices, a long term investment in real estate is looking pretty attractive. Whether you want to buy rental property outright, or renting is your plan B when your house doesn't sell, the most important thing you need to think about before you become a landlord or landlady is risk. The concept of risk in renting property tends to draw blank stares. After all, you have insurance on the property. You have a lease. What's the problem?

Understanding the answer to that requires a shift in your thinking. Most of us are renters at some point in our lives, whether in college, or while we are working that first job, saving up for a down payment, or in a transitional period in life. When you are renting, it seems like the landlord has all of the power. He chooses the the paint color on the inside of the house, what trees or shrubs you have in your yard, when your lawn gets mowed or your driveway cleared of snow. When your toilet breaks or your roof leaks, a repairman shows up, paid for by your landlord. When your rent is late, even a teeny tiny bit, that landlord is on your butt like white on rice. And when your lease is up for renewal, the rent goes up as inexorably as the rising sun.

And yet, when you trade places, and suddenly you are the landlord, as in a horror movie, you realize the tenant has all of the power. The tenant physically occupies your property. They can damage the structure or the appliances. Their pets pee on the carpet and chew up the woodwork. If they sell drugs, the police could literally seize your property. And the tenant controls that ultimate item of power, the rent check, which you desperately need--on time--in order to pay the mortgage each month. In fact, unless you are very lucky, the rent check probably won't cover the mortgage. Worst of all, if your tenant suddenly turns deadbeat, it can take months to evict them from the house, and all the while that mortgage payment has to be made, on time, every month, or you could lose the house to foreclosure. A myriad of laws and advocacy organizations protect the rights of the tenant, but as a landlord or landlady, you are always the bad guy, and if things get ugly, you will be pretty much on your own.

Are you scared yet? You should be. If you decide to go ahead and become a landlord or landlady for the first time, here are some tips for controlling that risk.

1. Screen your tenants. You will be tempted to rent to the first non-scary person or couple that puts in an application, but be choosy. Make sure that you do a credit check and check references on your prospective tenant. If those thing don't check out, don't rent to them! This is no time to be "nice." Don't rent to the person who deserves the house. Rent to the person who can pay for it. Find out what their income is and do the math.

2. Don't rent to section eight tenants. This is not a rule for life, just for your first experience as a landlord. When you have dozens of units, and enough cash reserves to carry you through some unexpected vacancies, then you have my blessing to take on section eight tenants. In fact, please do. But your first time out, you should turn down section eight applications.

3. Get help from a lawyer. Spend a few bucks to get your lease written up by a well-qualified attorney.

4. Avoid situations that seem strange or "funny" to you. Use your spidey sense to weed out applications that seem weird, strange, off, or otherwise not right.

5. Obey the fair housing laws. You are not allowed to discriminate on the basis of race, color, national origin, religion, sex, familial status or handicap. Obey this law scrupulously to reduce your legal risk.

6. Have proper insurance. Don't skimp on insurance for this very valuable asset.

7. Rent to people with pets. Although pets can do a lot of damage to the house, that effect is balanced by the fact that pet owners tend toward "family" values. If you have a Mom, a Dad, a kid, and a dog, you're probably going to get a rent check every month. As a bonus, your pool of applicants will be larger, because most landlords don't allow pets. Think of it this way. Would you rather replace a carpet for $500, or evict someone who was growing pot in the basement? If you've got an applicant with good references, good credit, a steady job, a family, and a pet, take it as a good sign. Obviously, it goes without saying that you should not rent to shady-looking people just because they have pets.

8. Maintain good relations with your tenants. Respect their space. Respond promptly to maintenance calls. Be understanding of the occasional rent check that arrives late. Don't sweat the small stuff, because a bad tenant is so much worse than you can possibly imagine. Remember that they are more afraid of you than you are of them.

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Longtime Mac Users Punished for Loyalty

Catherine Shaffer — Mon, 18 Feb 2008 14:53:24 +0000

By Catherine Shaffer

I'm an unapologetic Mac-junkie. I've got an old, dead Mac laptop that I can't bear to part with from 1996. Our iMac is still up and running, having recently been put out to pasture after a disk drive malfunction. I eagerly bought one of the early iPods, and still use it all the time. And I'm writing to you now from my G4 Cube, which was a gift from a friend years ago. I've watched other Mac lovers fall away from the True Faith, one-by-one, but I never thought it would happen to me. However, yesterday when we brought home the newest addition to our Mac family, an 80 Gb iPod Classic, it would be my turn to be disillusioned. After you pay the hefty $249 price tag, plus an extra $30 for a wall charger (they used to bundle those in for free), plus $55 for the composite AV cable for your TV, plus any other little extras you may need, there is a hidden cost that blows up in your face when you get it home.

In short, the new iPods are not compatible with any operating system before OS 10.4.8. There's a good discussion of the problem here. Basically, if you don't have a newer operating system, you have to buy it before you can use your iPod. If you can't run the newest OS, Leopard, you need to call Apple tech support and they'll graciously sell you the outdated and obsolete Tiger for $129. You can imagine what I said to this gracious offer, after plunking down $350 for the device.

In a way, I should have seen it coming. I had recently spent several hours trying to get my brother-in-law's two new iPods (shuffle and nano) to sync with his PC. But I assumed that it was a Mac/PC thing, and that it could never happen to me. And yet it did. My computer stubbornly refused to recognize the device.

Now, I've seen the criticism that some of those True Believers have directed at those of us disillusioned ones, left behind by the shiny new OS's. We should have read the system requirements on the box.. I admit it. I didn't. There are two reasons for that. One is that after so many years of being able to count on my computer to handle a variety of devices without complaint, it simply never occurred to me. The iPod is a standalone device. All I need my computer to do is exchange data with it. And since my computer has no problem running the newest versions of iTunes and Quicktime, I never expected that there would be any compatibility issues. Moreover, it's become standard and expected for all of these handheld devices to connect to any computer via USB cable. I would never think to check for system requirements for my digital camera or my cell phone.

The other reason is more practical. I never got my hands on the box until I paid for it. We had extensive conversations with the salespeople, in which compatibility never came up, then they unlocked a cabinet, took a box out, and carried it to a cash register. I don't blame them for this. I think they were under the influence of the Mac "it just works" mind-control field as much as I was. Neither do I blame them for not handing me the box and letting me wander around the store with it.

Ultimately, Apple has failed to provide a technical justification for this. The technical support representative made it sound like it was a law of nature or something. "You can't make a device be compatible with an older computer," she said. Sort of like you can't make a zebra be friends with a crocodile? Huh? Wtf? This is obviously just an old-fashioned wallet grab. I can see the marketing execs, in their board room, poring over numbers representing people who were still using older versions of Macs and operating systems. "What if we could force them to buy a new operating system with their iPod? Better yet, maybe they'll decide after all that trouble to buy a new computer. What a slam dunk!"

In fact, I suspect not merely a failure to support the older OS, but some kind of deliberate cloaking of the device, forcing it to be invisible to the older OS. Why else would the computer not even be able to see that there is something plugged into its USB port? And if that's the case, perchance this nasty little easter egg is also turning on accidentally with certain other computers and operating systems, which might explain why my brother-in-law's children were unable to use the iPods they received for Christmas on their PC.

What all of this comes down to, for me, is that I am tired of the platform wars. Enough is enough already. I'm tired of manufacturers trying to force me to buy equipment I don't want and need, or pointless "upgrades" (I shudder to think of my old cube trying to run a bloated newer operating system), just so that I can listen to a song, or download TV shows from iTunes (which, by the way, I was planning to do extensively). I'm tired of trying to exchange text files with people who have some subtly different document format, and seeing all of my formatting turned into gibberish. I'm tired of declaring loyalty to one manufacturer or another just because I bought their product.

When I take my car in for repairs, the mechanic never tells me that my older model car is "no longer supported," or that my new tires are incompatible with my older chassis. I am not forced to stop using my refrigerator because my new food is suddenly incompatible with it. And while I'm on the subject, I don't understand why I need a desktop or a laptop computer at all to use my iPod or my other smart devices. Has no one ever thought of making an ethernet or wireless adapter so that we can download our tunes directly from the internet? Of course not! Because then people might decide they don't need a $2000 laptop just so they can listen to music in the car. Slam dunk!

We ended up connecting the new iPod to a truly ancient PC that we have in the basement, then transferred the video files through our home network so that my son could finally watch his favorite cartoon on it. But we are not pleased.

This is a message to all of you entrepreneurial geeky types out there. I want a smart, hand held device that "just works--really." I want it to be platform agnostic, so that I can use any file type with it. I want it be robust, long-lasting, and durable. I want it to do a lot of jobs for me, but be ridiculously simple-minded to use. I want it to come with a decent warranty and be totally independent so that I never have to connect it to my computer unless I want to. You give me this, and you've got a customer for life. And I have a feeling there are a lot of other folks out there who feel the same way.

Permalink | 47 comments | Catherine Shaffer's blog | Channel: Personal Finance, Shopping, Technology

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Do You Need Health Insurance for Your Pets?

Catherine Shaffer — Sat, 16 Feb 2008 00:14:00 +0000

By Catherine Shaffer

In my previous post about the hardships of life on a six figure income (queue strings), I mentioned in passing that we had a $4000 veterinary bill for our dog. A couple of people mentioned veterinary health insurance. Nala was actually too old to have qualified for insurance at the time she died. We would have had to have signed her up when she was younger. After Nala died, I checked out veterinary health insurance plans, hoping to save ourselves the same ordeal with our new puppy, Chewie. When I studied details of several plans, I concluded that these insurance programs are not a good deal for pet owners.

Nala died of idiosyncratic liver toxicity from a drug called metacam that we were giving her for arthritis. Dogs and cats instinctively conceal injury and sickness, so we had only vague clues that anything was wrong with her the day before I left for a cross-country business trip. She was an elderly dog, and we weren't sure we wanted an elaborate medical care for her if she was sick (how ironic). The day after I arrived, my husband called with terrible news. Nala had vomited up half her blood volume all over the living room floor. She was a one hundred pound dog, so you can imagine how dramatic and upsetting this was. It was the middle of the night, so my husband had to drag our child out of bed, carry the dog down a flight of stairs, and throw both in the car to go to the emergency clinic. By the time the vet returned with a possible diagnosis and recommendations, the bill was already over $1000.

Let's stop a minute here to talk about veterinary expenses. I used to work for a veterinarian, and I could not believe what an attitude people had when it came to paying for health care for their pets. They seemed to think that it should all be dirt cheap, or that the doctors should provide care out of the goodness of their hearts. So when I say that the initial workup cost $1000, I can pretty much predict someone is out there, already writing a comment, probably without even finishing the article, to complain that $1000 is too much. Well, I'm here to say that for one thing, that is much less than the real cost of the same care in a human emergency room, and for another that veterinarians are highly educated professionals who deserve to get paid well. If you feel that the right way to deal with that situation was to dig a hole in the back yard while she finished bleeding out, then this post about the cost of veterinary care for your pets is probably not the best use of your time.

So we are already $1000 underwater, and in order to get Nala through until the next day and figure out what is really wrong with her and whether she can be saved or not, she needs two units of blood. That's another $800. And we are trying to make this decision over the phone, with me sitting in a hotel room San Francisco, crying hysterically. (In fact, I need to take a little break as I write this, the memory is so intense.) We go with the blood transfusion, and I try to change my flight to come right back home. This is where I learned that if you book through Expedia, you can't change your return flight once you have already departed. (I will never book anything with Expedia again.) The next day, Nala was slightly improved, and so we decided that I would finish my trip.

The next couple of days were a roller coaster. We knew her liver was failing, but the veterinarian (a brilliant, triple-board-certified expert in everything) could not give us any clear answers. At times, she seemed to be improving. She was in intensive care, getting medicines all day long, daily blood draws. The bills were racking up. Would she pull through, or not? And the whole time, I was in California. I finally got home, after a nightmare flight that left me stranded overnight in Denver, and got to see my dog and say goodbye. Six hours later, she took a clear turn for the worst, and we put her to sleep together, as a family. Our final bill was $4000. Of that, the drug company eventually reimbursed us about $1100, for the diagnostics which they were glad to have as part of their post-market monitoring program for adverse events. We put the rest on a credit card.

The most heartbreaking aspect of this, for me, is that in her post-mortem exam, evidence was found of liver regeneration. If we had kept her going longer, maybe she would have made it. But how long? The size of the bill was a part of our decision-making process. As we watched the charges mount up every day, we hoped against hope that the bleeding would stop (for us all), and we would be able to take her home. But it didn't. The bill was like a waitress, pouring your coffee, inviting you to say "when." We reached our limit and had to pull the plug. I'll never know what would have happened if we had been able to afford more care. Then again, she was clearly suffering, and ...and...well, we did what we did, and there's no going back.

Could veterinary insurance have helped in this situation? Many people think it would have. If I had enrolled Nala in one of the more popular plans, VPI, at a younger age, I would have paid about $35/month for the "Superior Plan." However, when I looked at the schedule of benefits, I found that drug toxicity is reimbursed at a rate of $258 per incident. Kind of inadequate, huh? Possibly we could have gotten an extra $236 for "stomach ulcer" as a secondary diagnosis, and maybe $150 for her ultrasound, although that test was included in the drug company reimbursement.

Ultimately, this seemed to me like chump change. To start Nala at birth and pay $35 premiums until she died would have cost $4650, and we'd still have been out $2256 for that incident alone. And that's not taking into account the time she got pancreatitis and nearly died from eating half a bag of kitten food. I see VPI's reimbursement for pancreatitis is $388. That's not even close to how much it really cost. Going back even further, Nala had heartworms when we first got her. I don't remember how much the treatment cost, but it involved a week of hospitalization. Parasites are excluded outright from VPI's plan. So we would have been out of luck, there.

There are a couple of things going on here. One is that the reimbursement schedule doesn't seem realistic compared to what the medical bills actually cost. Another is that there is progress in veterinary medicine parallel to human medicine, and that many more treatments, tests, and procedures are available now than in the past. Back in my veterinary assistant days, nobody got an ultrasound for their dog (unless maybe they went to the big veterinary college down the road), and I never heard of a dog being in intensive care. That made end-of-life decision-making somewhat simpler. Nowadays, they have chemotherapy for pets, and joint replacement surgery and MRI's and lots of other high tech treatments. The next step in Nala's care, if we had not euthanized her, would have been total parenteral nutrition (nutrition via IV drip), because her digestive system was not working. That would have been obscenely expensive. Health insurance is the reasonable and logical way to deal with the risk of being faced with these huge costs. Unfortunately, the major pet health insurers are themselves not prepared to pay those costs. Until that changes, at our house, we will be paying our veterinary costs out-of-pocket. Eventually, I would like to create a fund for pet health care, and put money into it regularly so we don't get steamrolled the next time this happens. And it will happen.

Permalink | 27 comments | Catherine Shaffer's blog | Channel: Personal Finance, Budgeting, Lifestyle

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