The scam is this: you purchase the kit for the cost of shipping, then if you don’t return it within 14 days; you start getting billed for large monthly charges.

The scammers count on their victims to not read the disclosure in the fine print of these monthly charges.

While the government does give grants, information about legitimate programs can be found on official websites which end in .gov.

It is very unfortunate that advertisers are taking advantage of people that may have fallen on desperate times.

Originally posted on pfhacks.com: Watch Out For Economic Stimulus Scams

Jonathan Schultz, an 18 year old senior at St. Mary High School in Dell Rapids, South Dakota, won a $3,000 prize for a series of essays he wrote for a financial literacy contest.

Contestants were required to write essays that involved creating financial independence by understanding investing principles.

Shultz’s teacher received a $300 prize of her own.

—

I think this kind of contest is a great idea. We never covered any aspects of personal finance when I was in school, and while I did pretty well through self-education, a number of my classmates soon found themselves in financial difficulty.  I hope other schools will begin using these types of contests to promote personal financial education.

Congratulations Jonathan.

Originally posted on pfhacks.com: Writing Personal Finance Essays Earns Student $3,000!

WT|Direct (the online division of Wilmington Trust) is offering a “winter bonus” of up to $250.

Here are the average balance bonus tiers:

• $50,000 = $250 bonus
• $40,000 = $200 bonus
• $30,000 = $150 bonus
• $20,000 = $100 bonus
• $10,000 = $50 bonus

Here are the terms:

• Open a new account — use promotion code “WTG3DNC”

• Link an existing bank account to your new WTDirect account during the application process.

• Fund your new WTDirect account by initiating an online transfer by 12/31/08.

• Earn your bonus — calculated by determining the average balance from 1/1/09 – 2/28/09.  During that time, you will have 100% access to your funds.

• RECEIVE your cash bonus in mid-March. It will be deposited directly to your WTDirect account.

The website does not indicate how long the offer will last; only a “limited time.”

Here is a direct link to the offer with the necessary coupon code already applied:

WT|Direct Winter Bonus

Originally posted on pfhacks.com: WT|Direct Offers $250 “Winter Bonus” On Savings Account

Portable saw mill.  (via Cool Tools)

Originally posted on pfhacks.com: Saw Your Own Lumber

What a week!

We a truly living in interesting (financial) times.

The US Treasury and The Federal Reserve Bank took massive actions this week in order to stabilize the US financial system. Congress is expected to pass a bill next week which would allow for further, more radical intervention.

Interestingly enough, this is not without precedent. In today’s Wall Street Journal, there is an article titled: Government Bailouts: A U.S. Tradition Dating to Hamilton, which discusses various interventions the US government has taken over the years to end financial panics.

Two stand out as being especially relevant to our current situation:

First in 1792, Alexander Hamilton engineered the first financial bailout in US history. It started when the federal government assumed the revolutionary war debts of several individual states. This was part of a deal the eventually made Washington the capital. In order to assume the debt, the federal government issued 6% bonds, known as Sixes. Financial speculators attempted to corner the market in Sixes, and also to weaken the Bank of New York in order to take it over. The plot ran the price of the Sixes up for a time, but then crashed 25% in two weeks. In order to stop a wider panic, Hamilton did something extraordinary:

Working without a historical blueprint, Hamilton engineered an innovative response. The Treasury borrowed money from the banks and used it to buy government bonds, lifting the market price. He also told banks to accept bonds as collateral for loans to securities brokers, with the government guaranteeing the collateral.

The financial system stabilized, and no banks failed until 1809.

Another government bailout which I think has significance to the current situation occurred in 1933, during The Great Depression. By that time, 1,000 Americans per day were losing their homes to foreclosure. President Roosevelt and Congress created the Home Owners’ Loan Corp., which bought defaulted mortgages from banks and then refinanced them at a lower rate.

Ultimately, the agency issued mortgages, averaging $3,039 apiece, to some one million homeowners. About one in 10 Americans with nonfarm, owner-occupied dwellings secured aid from the agency, according to a 1951 paper by C. Lowell Harriss of Columbia University.

The current mortgage crisis involves securities backed by subprime home loans. But during the 1930s, there was no secondary market for securitized mortgages. So the agency had to hold the mortgages for the full terms. It finally closed up shop in 1951, with about 80% of borrowers having paid their loans off on time or early.

The agency earned the government a small profit.

Did you get that? They saved 80% of the people from foreclosure and earned a profit!

I find this second example to be very interesting, and hope that the folks designing our most current bailout look to it as a model.

Originally posted on pfhacks.com: Bailouts by the Federal Government Have a Long Precedent

This is according to an article in today’s Wall Street Journal titled: “Think You’re A Trader? IRS May Disagree.”

It details a Florida couple who formed a trading company and performed over 660 trades over a two year period. They formed a separate company to perform transactions, and claimed losses in both years as well as other company related expenses.

Traders, as defined by the IRS, have different tax rights than individual investors. Income they earn on their trading activities cannot be treated as capital gains and is therefore taxed as normal income at higher rates. However, traders using the mark to market method of accounting are allowed to treat any losses they suffer as ordinary losses instead of capital losses. Normal investors are allowed to offset capital losses with capital gains on a dollar-for-dollar basis. In cases where losses exceed gains, the investor is only allowed to deduct $3,000 per year ($1,500 if married filing separately) with the remainder carried forward into future years.

In order to be considered a trader by the IRS one must meet two criteria: (1) trading activity has to be substantial, and (2) traders must be attempting to profit from daily swings in the market. (For further information see: IRS Tax Topic 429)

In the case of the Florida couple, the judge found that they did not meet either of these criteria, and therefore, were not eligible to deduct the full amount of their losses. The judge in the case also disallowed other deductions the couple had claimed.

This should underscore the ramifications that can occur when you step outside the normal bounds of taxable activities. Be sure to seek professional advice, and always try to err on the side of caution.

The full decision can be read here.

Originally posted on pfhacks.com: Think You Are A Trader? IRS Says Think Again.

Colleges across the country are experiencing shortages in on campus housing, according to this article on insidehighered.com. Large numbers of upperclassmen – who would traditionally seek off campus housing – are attempting to find an on campus residence, at the same time as “larger-than-average freshman classes” are entering school.

Administrators see this trend as an attempt by students to save money in response to the slowing economy. Some universities are having to resort to novel approaches to deal with on campus housing shortages:

Some colleges have even gone as far as offering financial incentives to freshmen who choose, for example, to live three to a double-occupancy room. This may be represented in an overall discount on annual room and board expenses. Additionally, others have had to convert previously common or storage areas into livable space.

This is an interesting “ripple effect” of the dramatic increase in the price of food and energy in the last year

Originally posted on pfhacks.com: Colleges Can’t Keep Up With Demand For On Campus Housing

How much is this going to cost? Although, I haven’t checked my mileage in a while, I think 22 miles per gallon is a conservative estimate. 400/22 = 18.18 400 miles divided by 22 miles per gallon, means I will need to purchase an additional 18 gallons of gasoline per week. At $3.50 per gallon, that will cost an additional $63 per week, or $252 per month. Ouch!

Luckily, I should be able to cut that in half, because I have a friend attending the same program, with whom I will be able to carpool. That will save me $126 per month! This figure does not include wear and tear on my car.

It’s easy to see the benefits of carpooling, but what about the downside? I have been friends with my car pooling partner for over ten years, so I think we will get along fine for the three years we will be making the commute. However, there may be other people that live in the area joining the carpool. How am I going to get along with them? Are there some rules that can ride share work?

Here’s what I’m thinking so far:

• If you don’t like the drivers choice of radio station, get an ipod and listen to some music or an audiobook.
• If you are going to be late, or cannot make the trip, be sure to notify to the your fellow carpooler’s as soon as possible.
• Have a schedule of who’s driving and when. This will eliminate confusion and hard feelings.
• Food in the car ma be OK with you, but your fellow ride share partners. Ask before you eat.
• Keep the speed reasonable. This will help your gas mileage, and possibly save your co-commuters some nervous moments.

Originally posted on pfhacks.com: Carpooling Tips

It’s that time of year again, when the the super bowl “football squares” sheet begins to be passed around the office.  While I don’t think participating is a good financial decision, it is interesting to know optimal strategy.

In case you are not familiar with the typical office football pool, here is a brief introduction from southofboston.com:

Betting “squares” are probably the most common form of Super Bowl pool. It requires no knowledge of the game, just some luck.

To set up the pool, the organizer draws up a 10-by-10 grid. The grid’s length is designated for one team and the width for the other. For a price, bettors choose or are assigned “squares” within the grid.

After the squares are filled, a number between zero and 9 is assigned to each row and column, giving each square holder a number for each team. If the number in the bettor’s square match the last digit in the score at the end of each quarter, that bettor wins.

For example, a bettor could draw the 7-3 square, 7 for the Patriots and 3 for the Eagles. If, at the end of the first quarter, the Patriots were ahead 17-3 the 7-3 square would be a winner. Smaller prizes are usually awarded to the winners of each quarter and a grand prize goes to the person whose square reflects the game’s final score.

With 100 squares available, prize totals are 100 times the cost of each square. So charging $50 a square will yield a $5,000 pot.

At any rate, which squares give you the best chance of winning?

Doug Drinen, performed an analysis on Sabernomics.com in a post titled “Squares for squares“.  He looked at all regular season NFL games from 1994 (when the two point conversion rule was implemented) through 2005.  According to his analysis, these are the best squares to have:

1. 7-0/0-7   Ending score 3.80% of the time.
2. 7-4/4-7   Ending score 3.71% of the time.
3. 0-3/3-0   Ending score 3.21% of the time.
4. 4-1/1-4   Ending score 2.23% of the time.
5. 0-4/4-0   Ending score 2.04% of the time.

A little explanation is required. In the games analyzed, one team had a score ending in 7, while the other team had a score ending in 0, 7.60% of the time. Because there are two 7-0 squares on the board, the 7.60% is divided in half, hence the 3.80% probability of winning.

By the way, the worst possible square is 2-2, this was the ending score only .04% of the games analyzed.

Please checkout Doug’s full article, to see the probabilities of all squares.

Originally posted on pfhacks.com: Best Super Bowl Pool Squares