### Archives For February 2007

Hansen Natural – Symbol: HANS [Yahoo!Finance, Google Finance]

According to a special section in today’s WSJ, Hansen had an average annual return of 73.9% over the last 10 years!

Had you invested \$1,000 in Hansen 10 years ago, it would have been worth \$252,927 by the end of 2006!

The math:

FV = \$1,000 × 1.73910

FV = \$1,000 × 252.927

FV = \$252,927

And The WORST-Performing Stock Over the Last 10 Years was…

Foster Wheeler – Symbol: FWLT [Yahoo!Finance, Google Finance]

Foster Wheeler had an average annual return of -21.6% over the last 10 years. That’s a NEGATIVE 21.6% PER year!

Had you invested \$1,000 in Foster Wheeler 10 years ago, you would have had a WHOPPING \$87.73 by the end of 2006!

Again, the math:

FV = \$1,000 × .78410

FV = \$1,000 × .08773

FV = \$87.73

NOTE: Remember that the formula for future value (FV) is Beginning Value × (1 + ROR)n.

Interesting stuff.

Two words: VERY EXPENSIVE!

The typical payday loan is a two-week loan. The fee for such a loan is \$15 to \$25 per \$100 borrowed (that’s for TWO WEEKS).

An example…

Let’s say times are tough and Jack needs \$100 to fix his car. Jack goes down to the local payday loan company and they agree to give him a loan. So Jack writes a check for \$125 and gives it to the payday company and they give him \$100. Two weeks later, Jack gets paid and the payday loan company cashes Jack’s check, closing out the deal.

Now, take a wild guess as to how much the APR (Annual Percentage Rate) is on Jack’s loan…

Here’s how that’s figured:

APR = i × (365 ÷ n)

where…

i = periodic interest rate, which is 25% in this example (\$25 fee ÷ \$100 = .25 or 25%)
n = time period of the loan, in this case 14 days

Filling in the numbers, our formula looks like this:

APR = .25 × (365 ÷ 14)

APR = .25 × 26.0714

APR = 6.5179 or 651.79%

OUCH!

One thing I find kind of humorous is that the The Community Financial Services Association of America (CFSA), the trade group that represents most payday lenders, has a chart on their website comparing different APRs for various “alternatives” for payday customers. Things like:

ATM fees
Late fees on credit cards
NSF fees on checks (both at the bank and at the merchant)

They claim that when put an APR on these fees, a payday loan doesn’t look so bad. It’s almost laughable what they are trying to do. From the CFSA website:

In SOME CASES a payday loan MAY be the lesser of two evils particularly if it not getting a loan means missing a credit card payment or bouncing a check. However, if times are tough how are you going to be sure you can pay the payday loan back? If you can’t you will have to get another loan and will be charged another 25% on the amount borrowed. This is how people get into trouble with payday loans.

The best thing to do is build up a float in your savings account so that you don’t end up with a shortfall due to an unexpected expense. In a lot of cases a payday loan is only going to make matters worse.

Oh, and in case you haven’t seen it yet, the CFSA is trying to win over the hearts of Americans with this commercial.

I spent a good part of the day cleaning up my links (I’m still not quite done). Instead of the having a separate page for each type of link, I decided to make one page with all the links listed in a table. I think it looks nice and is a lot more organized. You can check it out here:

This link will be located in the right sidebar directly under the MoneyBlogNetwork information.

What do you do if your blog isn’t included in JLP’s Links?

I’m WAY behind on updating my links. So I have decided to do an “open link submission.” Here’s how it works:

1. Send me an email using the email address located in the top left-hand corner of this blog and let me know the name of your blog and the URL and the type of blog it is. PLEASE don’t create your own category.

2. I CAN’T PROMISE that I’ll link to your blog but if it is a legitimate blog, I’ll do my best.

Do you have to link to AllFinancialMatters?

No. You don’t have to but it would be LOVELY if you would as I love links just as much as the next guy. If you do decide to link to AllFinancialMatters, please use the (http://allfinancialmatters.com) URL.

That’s it! That’s all you have to do.

What do you get when you combine and English major with money?

Answer: An English Major’s Money, this week’s Blog of the Week. An English Major’s Money is a blog written by a 23-year-old ’06 college grad working an entry-level job in New York City. She’s trying to learn to manage her money to maximize both her fun and her future.

I love blogs like this because they prove that personal finance is important for EVERYONE! I also love the fact that although she is young, she is getting a grip on her finances now rather than waiting until she is older. Folks, starting young is the real key to success when it comes to personal finance.

One thing that bugs me is that I’m sure she cringes when she reads this blog since I’m not an English major! LOL!

I was sitting here watching college basketball when a commercial for Countrywide Home Loan came. They were advertsing a “Combo Loan.” From their website:

Get ready for fantastic savings with a Combo Loan from Countrywide.

Want to get cash and simplify your bills? Refinance with a Combo Loan from Countrywide. Consolidate your first mortgage, your second mortgage, your car loan and all your credit cards into one easy loan with one low monthly payment. Less than perfect credit okay.

Three things stand out to me:

1. What’s the definition of “savings?”

I think too many companies try to equate lower monthly payments with “savings” and ignore the long-term costs. These loans aren’t cheap once you factor in the closing costs that are involved anytime you refinance.

2. Do you really want to finance your car (or your credit card debt) for 30 years?

I realize you can refinance for a shorter term. However, a lot of people won’t. Rather, they will look at the monthly payment and make their decision based on how it will impact their cash flow. That can be a big mistake.

3. If you have less than perfect credit, you probably won’t get a very good interest rate.

Loan companies don’t give away money. If your credit isn’t that great, you’ll be penalized with a higher rate. The higher your rate, the less advantageous it is to refinance.

One advantage to going this route would be the tax-deductibility of mortgage interest (credit cards and auto loans are not tax deductible), which will lower the cost of the loan. However, I don’t think it is enough to offset the long-term costs of carrying short-term debt over the long-term.

MBH has a two-part review of Debt is Slavery (Part 1 and Part 2). Also, Scott interviews the author, Michael Mihalik.

FMF has an interesting post about how much money people are leaving on the table by not itemizing their deductions. – Don’t assume that you shouldn’t itemize your deductions.

Nickel on phone tax credit abuse.

According to Flexo, Wachovia is going to start charging for direct access into Quicken.

GASP!!!!! Jim has a plasma-screen TV!

The Digerati Life wants to know why aren’t you opening a 401(k)? – She lists eight reasons. Sadly, as lame as most of the excuses are, they are reasons that people give. Personally, I think most people don’t want to worry about it.

The Family CEO writes about running the family office. – This is an idea she got from Thomas Stanley’s The Millionaire Women Next Door. Good stuff!

Golburu tells us how he didn’t need Dave Ramsey to get out of debt. – I honestly think Dave Ramsey would say, “Good for you.”

Congratulations to Kira and her net worth of \$367!

Tired But Happy talks about the pains of blogging anonymously. – It’s almost like having two identities. I find that I have to watch what I say because me dad, father-in-law, other relatives, church friends, and other friends just might be reading.

A reader left the following comment on my Dave Ramsey vs. Suze Orman post:

If you are in debt, you haven’t been living life by the math, so you are unlikely to get out of debt that way. Dave’s plan harnesses the motivations you already have and aims them toward debt reduction.

Something about this thinking doesn’t make sense to me but I can’t quite put my finger on it.