It Pays to Fly on Tuesday or Wednesday

December 30, 2007

On the Southwest Airlines site, their Click n’ Save weekly specials has quite an enticing offer that will save airline passengers money if they’re willing to fly on a Wednesday or a Thursday. They are basically offering flights for $49-$99 each way as long as you meet the following requirements:

– travel on a Tuesday or a Wednesday

– book at least 14 days in advance before January 21, 2008

– travel between January 10 and May 8, 2008 (with applicable blackout days)

You can play this deal in a few ways:

a) Think ahead early about what you want to do during spring break and plan some nice cross country trips for only $99 each way. I just checked and you can buy tickets from San Diego to New York for $99 each way. If you were to drive the 2,800 miles to get from SD to NY in a car that provides 22 mpg at $3/gallon on average, you would end up spending over $380 each way plus endless hours of driving cross country. Why pay $740 round-trip driving when you can fly on Southwest Airlines and spend less than $200 and get there in less than 10 hours?

b) If you have previously booked Southwest Airline plane tickets in the past few months at higher prices, just go to the Southwest site to change your air reservation to the lower prices and get a credit for the difference to be applied to another flight. Be careful to use your credits before the expiration date. Credits will expire one year from the date of the original purchase.

c) Even if you don’t know if you will be able to make a flight for vacation or visiting family, it might be worth it to just buy it anyways, just in case. If you are able to go on the trip during a given weekend or week, then you’ll have a cheap flight to go. If you aren’t able to go, just sell the credit on Ebay and you can generally recoup 85-90% of your money. Or if you don’t want to lose any of the money spent on the ticket, just give the credit to a friend or family member.

With oil prices testing the $100 limit again, it is very nice to have the option of traveling across country for a mere $99. While I wouldn’t buy Southwest (LUV) stock, I wouldn’t hesitate to take advantage of cheap flights.

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2007 IRA Contribution: You Still Have Time!

December 27, 2007

For those of you familiar with traditional IRA or a roth IRA, you will probably contribute some amount into one or both of these type of IRA accounts depending if you want to put in pre tax or after tax income. Even though the end of 2007 is coming next week, don’t feel rushed if you haven’t already contributed to an IRA account. The 2007 IRA contribution date deadline is April 15, 2008 so plan accordingly the next 3.5 months.


Wells Fargo PMA Package for 100 Free Trades

December 24, 2007

I recently received a letter in the mail from Wells Fargo advertising the Wells Fargo PMA Package. The details of a PMA Package include free checks, $100 minimum opening deposit, no access fees for Wells Fargo ATM transactions, premium PMA prime checking rates (see below), and no monthly service fee that the monthly ending statement balance in PMA qualifying accounts equate to more than $25,000. If you don’t have sufficient funds in qualifying accounts, you will be charged a monthly $25 service fee.

Premium PMA Prime Checking rates  
Balance APY
$0 – $4,999.99

0.10%
$5,000 – $24,999.99

1.65%
$25,000 – $99,999.99

2.00%
$100,000 or more

4.00%

A bonus of 100 free trades per year is given to qualified PMA package customer with at least $25,000 in a combination of Wells Fargo investment accounts and Wells Fargo bank accounts (including checking, time accounts/CDs, & loans outstanding credit card). After using up 100 trades in a given year, subsequent trades will cost $5.95/trade.

Wells Fargo PMA Package Pros:
– Get better interest rates for money sitting in your Wells Fargo checking accounts

– Free trades up to 100 trades and only $5.95/trade afterward (Scottrade comparatively offers $7 trades)

Wells Fargo PMA Package Cons:
– In order to get free trades, you must have $25,000 in Wells Fargo applicable accounts. If I opened a $25,000 1 year CD in Hayward (California), I would get a 3.45% APY instead of putting into Wachovia’s 1 year CD at 4.25%. Therefore I would be losing $200/year in CD interest income by keeping the money in Wells Fargo. To make up for that $200 loss, I would need to make over 33 trades per year at Wells Fargo to make up for the difference.

– $25 monthly service fee if your qualified Wells Fargo investments drop below $25,000
I think that the cons outweigh the pros for me because I like the flexibility of not having to worry about that $25,000 minimum (with service fees and trading stipulations). For someone with much more than $25,000 to put into the Wells Fargo PMA Package, this might be a very ideal situation. Also people who trade very frequently would benefit from the plethora of trades and cheap trades after reaching the 100 trade milestone.

Final note: There is no termination fee for the PMA Package if you want to cancel at any time.


Retail Slowdown Not a Myth

December 17, 2007

There has been continued talk of a slowdown in consumer spending due to the spiraling housing prices and its effect on an overall US economic slowdown. Whether it means going to the mall or through online purchases, consumers will not be spending as much in 2008. If existing house prices are poised to drop 4.5% next year, then the average household net worth will be decreasing around $11,000-$32,000 depending on where you live in the US. With that kind of decrease (and it could be worse), people will be forced to cut their spending and the retail sector will be the first casualty.

When I was shopping at Horton Plaza yesterday in downtown San Diego, I went to buy something cheap at Longs Drugs to get my parking validated for three hours of free parking. After getting to the register, I was told that businesses no longer validate parking anymore since there are now kiosks in the mall that will allow anybody to validate parking for free. Therefore, shoppers do not have to spend a cent to get three free hours of parking. Upon further investigation, I found out that Horton Plaza was doing this in order to allow people to “window shop” without any ramifications of having to pay exorbitant parking prices. While I was pleasantly surprised to get three free hours of parking, I also realized:

a) consumer spending must really be slowing to a halt for this five-level shopping mall to give away parking to attract customers

b) the housing bubble seems to be affecting traffic at the local malls

c) coupled with higher gas prices, people are either deciding to shop more online or just stay home and not spend in general

The market has surely priced a lot of bad news into retail stocks within the last year. Many of them stand at yearly lows or far from their earlier peaks. I would wait for the holiday season to pass and get a clearer picture on the health of the retail sector and buy once prices to depress another 10%.
Some beaten down retailers include:

Company Current Price Yearly High
American Eagle (AEO) 20.27 34.80
Limited Brands (LTD) 18.69 31.30
Pacific Sunwear (PSUN) 14.44 23.11
Lowe’s Companies (LOW) 22.72 35.74
JC Penney (JCP) 42.52 87.18
Home Depot (HD) 26.63 42.01
Dillard’s (DDS) 19.53 40.56

The Gift Tax: Gifts Are Not Always Free

December 14, 2007

Since it is almost the end of the year, everyone should get their finances in order in addition to a little holiday shopping. One thing to remember is the limitations of gifting. If you give a person more than $12,000, you have to pay taxes on it. Gifts may not be solely monetary. If you give someone else something that has monetary value, while expecting nothing in return, then it is a gift.

There are a few exclusions on what is considered a gift. If you pay tuition for someone else, then it is excluded. The same goes for medical expenses. Your can give your spouse as much money as they want and it is not considered a gift. Finally, any gifts to political organizations are also excluded since law makers don’t want to hurt their own bottom line. Remember that freedom is not free in the monetary sense.

If you want to give your children money, you should do so before the year is over. You and your spouse combined can give each child $24,000 tax-free. Just remember to stay below this limit or the IRS will take a bite out.

For more information, you can check IRS Publication 950.


QuickBooks 2008

December 14, 2007

The 2008 version of QuickBooks is now free.  The restrictions of the starter version no longer encumber this version of Quickbooks since they have to compete with Microsoft Office Accounting Express 2007 now.  Give it a try and keep your books in order.


How to Define Wealth

December 6, 2007

On the National Public Radio website is a 30-minute segment from Talk of the Nation about how one defines wealth. While planning for the future, many Americans think (whether attainable or not) about college educations, 401(k) plans, IRAs, the stock market, owning property, savings, vehicles, lifestyles, and other materialistic needs. Everything just mentioned contributes toward “wealth.” While I recommend listening to the 30-minute segment yourself, listed below are some interesting points made:

– Net worth is what you own including the equity in your home (but which you don’t have until you sell your house)
– You have to spend below your means to truly feel wealthy
– Americans, no matter how much they make, consider themselves middle-class
– Median household income is $48,200/year
– When a household says they’re just getting by with making 100k-200k per year, they are lying because it means they can supply their basic needs but just can’t get all their needs and wants

Being rich means different things to different people and surely the definition is different to people living in Alabama compared to people living in Hollywood. I think there are two generalized definitions of wealth:

1) Wealth in terms of a dollar figure
Some people will say that having a net worth of a million dollars is considered wealthy. Another person might say having multiple houses (regardless of your savings) is considered being rich. There will be a group of people that will label themselves wealthy based on how much they have in material items or savings.

2) Wealth in terms of having enough to pay for the necessities and a sufficient amount afterward to be happy
This second definition can apply to people whether they make $100,000/year or $25,000/year. People that fit into this category will be happy that they are able to buy what they need, able to live in a decent house or apartment, can give their children the best education possible, and still able to save some money at the end of the day. Honestly, people don’t need 80GB Ipods, Coach purses, BMWs, clothes from Neiman Marcus, or $40 meals at fine dining restaurants. Those things just listed are all “wants” and people who are able to be happy with attaining their “needs” and being able to get some of their “wants” will be wealthy in this wealth definition.

I think that most people fit into the second definition because most Americans never really know how much they need “to be rich.” Even the wealthy want more. A lot of people don’t even consider retirement money or equity in your house as part of being rich or not because you don’t have that money in your pocket at the moment. Bottom line is that most people living the United States are wealthier and more well off than the rest of the world. Regardless of what class people are in, everyone does things for a reason and that reason is to become wealthier (and that term is loosely defined).