The Best of Finance Blogosphere

Here are some great articles from around the Blogosphere for your weekend reading.

• Golbguru @ Money, Matter and More Musings has a detailed article on percentage traps. An interesting look at how percentages are used to con people. I found the example that explains arithmetic mean vs. geometric mean the most interesting! Check it out.



• SJean @ Stacking Pennies has a touching article about co-signing for an education loan for her sister. It is always very hard to refuse when your family asks you to co-sign a loan, but when the reason is something noble like a student loan, it makes it so much more harder. But how long can you keep the support? When and where do you draw the line? A very personal account of the situation.



• Plonkee @ Plonkee Money has a very thought provoking article on the point of money. I don’t think it is selfish at all if your goals are to first feed yourself and provide for yourself, before giving away in charity. Even after your basic needs are met, if you still do not contribute for charity, then that is selfish.



• Dividend Guy on the Dividend Guy Blog has a great article on how to involve family in investing. I wonder if trying to get 6 and 4 year olds interested in investing is a bit too ambitious, but I think the idea is great and will work well with slightly older kids.



• Little Miss Moneybags has an interesting article about social costs which continues the discussion started by Madam X at My Open Wallet. Which one saves you more money – being social or anti-social?



• Matthew Paulson @ Finance is Personal has some really good information on How to save money while adopting a child. I would suspect that most people will not need this information, but for the few that go through this process either voluntarily or due to circumstances, this is some really good information!



• Dawn @ One Woman’s Journey has a nice little primer on budgeting. It is a nice, balanced article with a lot of life experience thrown in. A great read even for those that already have a budget in place.



• SVB @ The Digerati Life takes a look at the harsh realities of the cost of living in the Bay Area. I love California, but there’s a reason why I prefer to live in Texas :)



• Sun @ The Sun’s Financial Diary takes a look at HSA accounts. My company started offering this last year and because of the high medical expenses that we expected this year, we turned it down. But we are not sure how to benefit from it in the future years. I will watch out for what Sun will decide about his wife’s HSA account. I think if there is some way to take advantage of a financial situation, Sun will find out, and as they say, you can see farther on the shoulders of a giant :)

That wraps it up for now. More great articles from the blogosphere next Sat/Sun.

Should Parents Try To Influence Their Children's College Applications?

It is college application time. While kids scamper to put the application packages together, parents fret and worry about the choice of degree and choice of colleges. While the kids are busy rating how "party" friendly the different schools are, parents are busy trying to figure out how "pocket" friendly they will be. A teenager's idea of a cool career is bound to be different from their parents' idea. Unsurprisingly, this could lead to a lot of flare ups when parents don't quite agree with their children's choice and the children don't want their parents to interfere.

Consider for example the case of my colleague. She wants to make sure that her daughter goes into a major that will lead to good career prospects. She wants her daughter to lead a worry-free life. My colleague is a brilliant engineer. As a first generation immigrant, she knows what it is like to struggle through life to get to a financially comfortable position. She wants to protect her daughter from having to go through what she considers "unnecessary pains" of making bad career choices. She feels that her children have a lot more opportunity and guidance than she did when she was younger and so they must be able to coast through life. She would prefer for her daughter to major in engineering. If her daughter must rebel she wishes it were to pursue a professional degree like law or medical school :)

He daughter on the other hand wants to pursue fine arts. She is an honor student with several advanced placement classes under her belt. But in her senior year in high school she was influenced by her peers into thinking that professional degrees are for dorks and losers. And now she wants to pursue a fine arts degree.

Which degree (or discipline in general) is better is only one of arguments that they have. Which college to send apps to is another huge point of contention. Some of the schools of choice for the daughter come at a hefty price tab of $40,000 per year. And they are known "party" schools. My colleague has the money stashed up, but it took a lot of blood and sweat to raise that money. She believes it is a complete waste to throw it away on an arts degree from an expensive party school.

I don't think there is anything very unique about my colleague’s situation. This drama is played out over and over every year in thousands of households across the country. Parents in their infinite wisdom want to protect their children from making stupid mistakes. They want to give their children the opportunities they perceive that they were not provided. They want to save their children from making some of the mistakes they did.

The children on the other hand are not really children anymore, but young adults. They believe that they know what they want. They want to stand for themselves and what they believe is their best option.

So, should the parents try to influence their children’s choices?

I believe that if the parents are paying for the education, they have every right to set some ground rules. Unless the parents inherited the money themselves, they must be able to have some influence over what and how their hard-earned money gets spent.

Now, if the parents can't afford to pay the children's college expenses and the child is actually taking out a loan, things get a bit dicey. Some of my friends believe that the parents don't really have a right to interfere in such a situation. I disagree. I think that it is a parent's responsibility to prevent the children from making what might be a choice that they will regret later in life. Just like a parent would never allow a child to walk into a busy street with a lot of traffic, they should also try to protect their children from burdening themselves with huge college debt for majors that can't provide for them in later life. The children may not listen, and they may fight back, but that didn't stop you from teaching them the right thing to do when they were younger and wanted to play with a knife!

It’s easier said than done. But there are ways in which this can be achieved. For instance, in my colleague’s case, they have established a truce of sorts now. My colleague has convinced her daughter to consider a degree in computer animation. Since a degree in computer animation requires her daughter to take some computer courses as pre-requisites, she feels comforted, that later in life if push comes to shove, her daughter can work as a software programmer. Her daughter has agreed to the option since a degree in animation will allow her to explore her creative side. As for the school they are still working it out :) The current offer on the table is that my colleague must allow her daughter to go to any school that the daughter can obtain at least 50% financial aid. In some schools (particularly the one that the daughter wants to go to), that is still a huge amount. But I am sure they will find a way to resolve it.

What would you do if your kids wanted to take up a major that you firmly believe will not prepare them for life in the real world? What if it involves taking our a huge student loan? How did your parents try to convince you?

In the mean time, if you are looking for some resources to share with your kids, here are some good starters –

• Is your degree worth $1 million -- or worthless?
  (A must-read if you are dealing with this situation!)


• ‘Top Chef’ Dreams Crushed by Student Loan Debt


• Is a Graduate Degree Worth the Debt?

*Image Credit: FranchisePick.Com

Medical Tourism: An Option for Keeping the Cost of Uninsured Medical Bills Down

Some day, if I ever get comfortable talking about it, I will write in detail about the reason for this post. For now though, let me just put some information out there for those of you who are fighting with medical conditions that are either not sufficiently covered through insurance or the wait time at your local medical facility is far too long.

What is medical tourism?
Simply put, it is a combination of tourism and medical treatment. In earlier days, people from developing countries (who could afford it) would travel to developed countries seeking state-of-the-art medical treatment. However, in more recent years, due to the increase in health care costs and the long wait for some specialized procedures in developed countries combined with the availability of sophisticated medical treatment in developing countries, the trend seems to have reversed. People now go from countries like USA, Canada, Japan, UK etc, to developing countries like India, Thailand, Singapore, Hong Kong, Columbia etc. where same level of medical attention can be obtained for a fraction of the cost. According to this article medical tourism is poised to be a multi-billion dollar industry and studies estimate that medical tourism could bring between $1 billion and $2 billion USD into India alone by 2012.

What are the medical conditions for which one may opt for medical tourism?
In general, medical tourism is an option to consider for elective procedures which may not be covered by insurance or requires a long wait in the native country. Examples include cardiac surgery, joint replacement, dental procedures, plastic/cosmetic surgery, infertility treatment, lasik eye surgery etc. In addition, medical tourism has attracted patients seeking alternative medicines when modern science fails and for recuperative medical spas.

Which countries offer medical tourism options?
Here is a map that was originally published in this article that shows the different countries that offer medical tourism options.


What are the advantages of seeking medical help abroad?
The first and foremost is of course the significantly reduced cost of treatment. According to Wikipedia, - "A heart-valve replacement that would cost US$200,000 or more in the U.S., for example, goes for $10,000 in the Philippines and India—and that includes round-trip airfare and a brief vacation package." Treatment for other medical conditions can also cost anywhere from 1/3rd to 1/10th the cost in US, UK or Canada offering significant savings.

In addition, many of the facilities in developed countries have long wait periods for surgeries that may not be life-threatening. Countries that cater to medical tourism offer patients quick treatment options thus helping prevent long painful waiting periods for treatment.

For those that like the exotic, medical tourism offers packaged travel deals with luxury accommodation and special attention while still keeping the cost less than that of just the surgery in the home country.

Contrary to common stereotype image of the developing countries, the facilities that offer medical tourism provide quality state-of-the-art medical treatment by professionals trained in the best medical facilities around the world and are leaders in their field.

What are the things to be aware of while considering medical help abroad?
One of the biggest concerns with medical tourism is that the countries that offer medical tourism may not have stringent malpractice laws as the US, UK or Canada. That means that if something were to go wrong, there will be little option for recourse.

Since you will likely return back to the home country within a few days/weeks after the medical procedure, there is very little scope for follow-up care and the patients must look to the local facilities in the native country if any post-procedure follow-up is required.

In some cases where the treatment stretches for months, it may be required to stay in the foreign country for long. While this may be viable financially, attention must be paid to emotional and psychological comfort of the person going through the difficult times in a foreign land.

Finally, there is the ethical question that many of the facilities ignore the local patients in their eagerness to please the patients from developed countries with fatter wallets.

Where can I find more information?
A simple Google search for the term “medical tourism” yields a lot of information. Here are some of resources I found helpful

• Wikipedia


• CBC News article


• Time.com article


• Medical Tourism 101, A complete Guide


• Medical tourism accreditation information


• JCI accredited organizations


• Article about nonprofit medical tourism accreditation service


• Medical tourism discussion forum

Cheaper Housing Options For The Mortgage-Battered

(This article is part of a weekly guest column by Claire Moylan*)

Housing used to be a solid investment, but it has become less so over the years. Now, we don’t know with any certainty when housing will recover enough to be worth looking at it as an investment again. Of course, the American Dream is all about owning your own home, and this has plenty of emotional payback, but if you want to just buy a home as an investment, you might want to compare several choices: renting an apartment or home, co-housing, and buying a smaller home.

How Housing Has Changed
There were red-hot areas in the United States that were seeing double digit appreciation on homes. Now, these same areas might be experiencing thousands of dollars in devaluation. Until the inventory in housing starts to lessen, the odds of getting a home that will retain or gain in value is an iffy proposition in some markets. Even if you find a home you want to buy, it has also become much more difficult to qualify for a mortgage because even lenders have gotten scared. Gone are the days of no down payment. Now, you will be expected to have at least 10% available for a down payment. Your credit score will also be very important. Your income will be scrutinized much more severely to make sure that you can make the payments on the home. If after all this, you qualify, you still might find your lender has collapsed and the deal has been canceled. If you do not qualify for the home, you still have an option to rent until the market changes or your financial situation improves.

Why Renting Can Be Good
Renting can be a positive experience, when compared to owning a home you can’t afford. You won’t be responsible for maintaining the structure of the apartment or home that you rent. In a market where the housing prices are dropping, people who own housing may try to meet their financial obligations by renting it out instead of selling it. This can lower the price of rentals. You can get all of the emotional benefits of being in a house without feeling the pain of having a mortgage over your head. You won’t get any tax write-offs, however.

If you don’t mind being in an apartment community, you can also wait for the housing prices to bottom out in a more luxurious setting. Apartment complexes do many things to attract renters, adding pools, clubhouses, and sometimes even on-site gyms. Any money you save when renting can be put aside for your down payment, when you see the housing prices start to recover slightly.

Co-Housing To Share Expenses
Some people get tired of buying a house with everything in it and instead opt for co-housing communities. These communities can offer a very neighborly feel and they share many resources too. You probably won’t save money on a price per square foot basis, but the homes are also built in these ecological-friendly communities to be smaller and more energy efficient than today’s standard McMansions. People who live in these communities are usually more involved in sustainable living and are apt to share anything from tools, to kid’s toys, and everything in between. Often, such communities have childcare options for the people living within the community that can be a substantial savings for family with children. Many offer community meals that can help save on food and preparation costs. The common areas are maintained and held in common ownership by all the members of the co-housing community. This means that you probably will have to give some of your time back to the community on a monthly basis.

Living Within Your Means
Sounds old-fashioned and boring, but it’s also the best way to have a sound financial footing when buying a home. It also means that if prices drop, your loss is less too. Most experts agree that drops in housing prices are temporary and if you plan on living in a home more than five years, you probably can ride out some if not all of the damage. In the meantime, you can get a smaller home that you can afford with your income. This will give you a tax write-off and the capacity to build some equity. This is good for people starting out buying their first home or for those who wish to downsize. By buying a smaller home, you save money on the mortgage, on the utilities, and on maintenance too. Plus, you won’t be tempted to buy a lot of extra stuff you don’t need to fill the house up. While it may not be the house of your dreams, it can be a very wise step towards your final goal of getting into another home that does meet the standard for being the home of your dreams.

About the author: Claire Moylan is a freelance writer specializing in ebooks and custom-tailored articles for niche websites. You can view her portfolio online or check out her constant content page for more information about her writing assignments.

*Image Credit: cumortgageservice.com

Some Thoughts on Debt Aversion and Employee Stock Purchase Plan

After several years of being debt-free (apart from the mortgage), we now have an auto loan. A rather huge one at that :( And it is driving us nuts. This is in spite of the fact that getting the auto loan is a well-thought out decision. Over the past year, we knew that our old car would die sometime soon and we needed to save to buy another car. And we did save quite diligently. But every time the cash reserve crossed $5K, we consciously made a choice to invest it, since in the long term a higher interest rate and the compounding of our savings account will yield far better fruits than the interest we have to pay for the car loan in the short term. The auto loan we have is at 5.25% and most of our investments (knock on wood) are doing better than that.

That said, a loan is a loan. And we hate it :(

So last week, I sold the stock I have purchased over the past year by participating in the employee stock purchase plan and applied it to the car loan. Here are some thoughts on the reasons for our decision and about debt aversion in general.

Most advice I have read, says not to own the stocks in the company you work for
In other words, don’t put all the eggs in one basket. If the company goes bust, you not only lose the job security but also a lot of your savings. Unless the company is doing very, very well and you know with a high level of certainty that you can make positive earnings on your stock, it is better not to put too much of your savings in the company stock. My company allows us to purchase stock worth 10% of the salary via the employee stock purchase plan and I have always participated to the maximum extent. That is a significant amount of money that I did not feel comfortable leaving in the company stock since the company has not been doing too well of late.

I got pretty good returns on my investment by selling when I did
The way they calculate the purchase price for the employee stock purchase plan is to take the lowest of the price on the starting date and the ending date of the purchase period and offer a discount of 15% on that price. The best way for me to take advantage of participating in the plan, since I don’t foresee a huge bump up in stock price any time soon, is to materialize the guaranteed 15% return. Also, fortunately for me, the day I sold the stock some industry news temporarily bumped up the price resulting in an overall return close to 25%!

Taxes suck :(
Even though the overall returns look good, we don’t really make that much since taxes take a huge bite out of it. If we had hung on to the stock for a year, it would have qualified for being taxed at the rate of capital gains. But because we sold early, it gets taxed as regular income. Boo.

Debt aversion can be a nasty thing
When we had the check for the money in hand, we had several options of what to do with it. We could reinvest it in diversified index funds or in real estate back in the home country that will most likely yield far better gains than the 5.25% we are paying for our auto loan. Or apply the amount to the emergency fund since we know for a fact that we will soon have some huge medical bills and there isn’t enough in our emergency fund to cover it. Or save it for travel expenses, since we plan on visiting our home country soon and the trip costs a lot! But the thought that is the foremost in our minds was the auto loan. So we decided to apply the whole check (with some additional amount that we added!) to bring the auto loan down by about 35%. I don’t know if it was the smartest thing to do, but boy it felt good to see the auto loan shrink :)

I just don’t understand why some people do not participate in the employee stock purchase plan!
Soon after the stocks for this period were granted, during lunch when we were all talking about it one of my colleagues revealed that he does not participate in the stock purchase plan! I was quite stunned. I am not very close to this person, and in my personal life, I tend to keep my mouth shut when it comes to other people’s finances, so I did not ask him why. But I can’t help but wonder. What motivates an otherwise perfectly smart person to make such a dumb decision? If the company allowed me to put more of my salary in the stock purchase plan, I would, even if it meant I would have to cut some corners due to a reduced take home salary. 15% of guaranteed returns (minus the taxes of course) is no joke. And still here was a perfectly sensible person saying no to that kind of returns. Why?

What do you do with the stock purchased through your employee stock purchase plan? If you don’t participate in the employee stock purchase plan in spite of you company offering one, will you please explain to me why not? And do any of you get so emotional about debt that you are willing to do anything to get rid of it? It can't just be us making some financially stupid choices! :)

*Image credit: Student Action Network

Personal Finance: Leave-it-to-Fate Vs Self-Discipline Approach

What could you do if you could earn 10% more? Think about it for a while. If you got a raise tomorrow with a 10% bump in your salary, what would you do? If you are a business owner and if your business income rose by 10% how would you spend it? Would you pay off your debt a little faster? Add more to your retirement account? Add more to your kids’ college education fund? Start a new car fund?

Now think about this, how much control do you actually have in making your earnings go up by 10%? Let me use my own example. I am a software engineer. Last year with less than one year at my new work place I qualified for a measly 3.33% raise. This year, since I have been in the company for over a year maybe I will qualify for a higher raise. “Qualify” does not necessarily mean that I will actually receive that raise. My manager gets allocated a certain percentage that he can give to the engineers as performance based raise and in order to justify me receiving a higher percentage, I need to work hard. So, if I managed to spend *much* more than 40 hours a week at work, and am careful not to screw up throughout the year, then may be I will qualify for a 7-9% raise. Add to that the potential “extra” money I can make through this blog and maybe, just maybe, I will be able to make my income go up by 10%. Note that none of this is really under my control, it is just something I can hope and work hard for.

Now let’s look at it from a different perspective. I am sure all of you have guessed by now where this is going :) What could you do if you can save 10% more? Potentially the same things as above, except that we have a much better control over the money now. How much we earn is not something that we can determine. But how much we spend, and hence can save, is a lot more in our control. We may not always exercise this control, but we do have it.

If you spend $50 per month on a cell phone and $50 per month on a land line, can you get rid of one of them to be able to pocket $50 per month? $50 may not sound like much, but we have been landline-free for over 4 years now and the savings over that period is $2400 (I don’t remember exactly how much we paid for land line, so I am using a rough estimate of $50 per month for the calculations here). That’s a hefty chunk of change to be thrown at the debt. Or into a retirement account – imagine how much compound interest it can generate over the next 30 years!

What about eating out? How often do you eat out? Can you reduce the number of times you eat out? Or find alternate places that are less expensive? Less expensive does not always mean unhealthy. When we started looking in this direction, we were surprised at how many places we found which serve relatively healthy food for under $10 per person – sometimes as low as $6 per person. Our favorite is a healthy Wok place that offers a Mongolian style wok dinner where you pick your own vegetables and meat and they stir fry it for you, but with little or no oil, so the food is very healthy. And the cost per person is $6 - $10 depending on whether it is a week day, weekend or when they have a sea food special (Sunday night only). It is a completely nondescript place in a strip mall in a residential area. Finding such places is not easy, but if you are willing to experiment a little and keep your eyes and ears open, they are not very hard to find either. We have a list of about 4 - 5 such places in our neighborhood ranging from soup/salad places to Chinese to Thai to Indian food, but all of them healthy and cost under $10 per person for dinner (much lesser for lunch).

There are many, many ways that you can trim the fat in almost any budget. If you cook at home all the time, then cooking from scratch can save a bundle compared to cooking from packaged food. If you have a coffee/cigarette addiction, then reducing the number of times you get coffee/cigarette or switching to a lower priced brand could save some money. Shopping for used items, using coupons, picking up some skills to manage DIY projects… I could go on and on, but you get the point. Almost any budget has some room for trimming. Apparently, Lee Iacocca, responsible for the turn around of Chrysler once wrote that you could trim 10% from any budget without going through too much personal hard ship. If he can do that for a corporate budget, shouldn’t we be able to do better on a personal budget?

The approach 1, where we wait for a raise or increase in income to be able to meet our goal is a perfect example of the “Leave-it-to-Fate” approach. The approach 2 where we trim the fat off our budget either by living frugally or cutting some corners is a perfect example of the “Self-Discipline” approach. Obviously, the “Best” approach would be to combine the two. Here is a visual that explains what I mean.

The Best of Finance Blogosphere

Here are the articles that caught my eye during the last week. There’s quite a few of them, so let’s get right to it.

• This first article is actually not from the “Finance” blogosphere. But it is so beautifully written that I thought you all might enjoy reading it. The article is titled The Truth About Debt and Dreams and is published on the blog I will change your life.


• ”Frugal Vs. Cheap” is a topic that keeps popping up on the Frugality blogs every so often. But once in a while, one of the articles is so well written that in spite of having read about this topic several times before, you still enjoy reading the new article! One such article popped up this week at Being Frugal. The article - Crossing the Line: When does frugal become cheap? - has a bunch of examples, and what makes it interesting is that, it first makes you think and then walks through the examples one at a time. Nicely done!


• And while we are on the topic of frugality, you might want to check out Cheap dates for college students @ Tips from a College Student. And don’t be fooled by the name – there is nothing “cheap” in the sense of “cheap vs. frugal” about these 15 odd tips, and no you don’t have to be a college student (or even on a date) to use these tips. It’s a really good list for anyone looking for frugal ways to have some fun.


• Nick at Punny Money has an awesome flowchart to help you never buy useless garbage ever again. It really works! I liked it so much that I thought of buying it in pdf form for $39.99, but when I used it to make the decision, it told me not to buy it. ;)


• Halloween is apparently the second most expensive holiday in the US, coming up right behind Christmas. If you want to keep the cost low, check out these great tips for a frugal Halloween by Kyle @ Rather Be Shopping.


• Frugal Pride writes about how expensive architecture school can be. When I was in school, the architecture students had the most expenses due to all the supplies they needed to buy for their projects, and ironically, the assistantships in the architecture department paid much less than other departments. Hang in there Olivz!


• Frank @ Finance and Fat write about small steps and accountability. After years of being debt free (apart from mortgage), we now have an auto loan, and boy, I can totally relate to what Frank writes. We can’t seem to get rid of it soon enough, but it is key to remember that it is not going to happen over night but if we keep taking small steps (and big strides when possible), we will eventually get back to being debt free.


• Nivek @ Money Clipped has a great find – a witty wise-crack spoof news clip from DNN the Debt News Network. It is an 8 minute clip, but if you have some time one your hands, definitely worth a watch!


• Sun @ The Sun’s Financial Diary has a great article about global REITs. He argues that the correlation between the US real estate market and that in other countries is quite weak resulting in good diversification if you invest in a global REIT.


• Patrick @ Cash Money Life has an interesting comparison between credit cards and guns. I think it is a fairly extreme comparison, but it does convey the point – credit cards are not inherently bad, unless they are in the hands of people who misuse them!


• Lazy Man @ Lazy Man and Money has some neat commercials to help you think about your future and money management.


• Pinyo @ Moolanomy has a great article about choosing the best investment option available for various savings goals.


• Dawn @ One Woman’s Journey has a short but inspiring post about Financial Goals vs. Financial Hiccups.


• Creative Investor wonders if the financial sector will rebound again.