2015-04-07

Guest Lecture: Personal Finance 101

This morning I had the opportunity to give a forty-minute presentation about personal finance basics to a Penn State freshman seminar class.  One of my (many) long-term goals is to fix the lack of personal finance education at the high school and college level, so I jumped at the chance and dragged myself out of bed at 3AM to prepare a presentation.

I gave and recorded the presentation using Google Hangouts On Air:



The presentation is here and the spreadsheets referenced in the video are available here.

Unfortunately the audio on the other end wasn't working, so I was not able to do the question-and-answer session that I had planned.  In lieu of that, I'll follow up with the students using a Google Form to collect their questions and I'll post the answers here.

I have been subscribing to a lot more YouTube content lately, and I like the concept of preparing a series of short personal finance videos to add at the top of my posts here.  These videos could give the tl;dr version for people who prefer the sound of my voice to my writing style (what a choice!).

My public speaking needs work, but to be fair this was 6AM my time...

2015-04-04

Save Your IRS Tax Transcripts

Have your taxes from previous years?  Archive them!  Collect all of your forms for each year, digitize them, and make sure they're backed up to the cloud—Google Drive, Dropbox, whatever.  The IRS can audit three to six years into the past and you can file a corrected return up to three years back, so make it a habit to keep this information organized.

Pieter Brueghel the Younger's The Tax Collector's Office, 1640.  I bet the IRS looks like this too.
If you're missing a year, or if you'd like to see what information the IRS has on your earnings for this or previous years, you can download tax account, income, and tax return transcripts online.  Just head over to the IRS transcript website and make an account!  Transcripts are free and can be downloaded immediately.  When you're doing your taxes for this year, this is an easy way to verify that you have all of the W-2s and 1099s that the IRS does.

2015-03-22

Save Money on Electricity with Alternative Pricing Plans

Knowledge is Power


If you know how electricity prices vary over time, you may be able to use this to save money.


The Theory


The electrical utility system is designed with a certain base output power that is sufficient to meet the demand for electricity almost all of the time.  On hot and humid August afternoons when everyone is blasting the AC on high, electricity demand may spike above what the base capacity can supply.  The utility company then has a couple options:

0) Do nothing.  The grid line voltage will drop, a state called a 'brownout'.  This may successfully reduce power consumption, but it could also cause some types of equipment to malfunction or sustain damage.

1) Manage demand with rolling blackouts.  Demand is pruned by cutting off power to some areas of the grid; which parts are shut down is 'rolled' on a schedule, announced ahead of time if possible.

2) Supplement the base supply with additional power by activating 'peaking plants'.  These power plants may use designs that are less efficient and cost-effective than the base supply plants, but they can be quickly switched on and throttled, like a jet engine, to match fluctuating demand.

And last, but not least:

3) Manage demand with good old economics.  If the utility company can collect time-of-use data with a smart meter and consumers are informed ahead of time that the price of electricity will be higher on certain days ('critical peak pricing') or at certain times of day ('time-of-use pricing'), they may adjust their behavior and temper peak demand.


In Practice, with Pacific Gas & Electric


If you are one of Pacific Gas & Electric's 5 million+ electricity customers, you can take advantage of two peak demand reduction programs: the SmartRate Add-On and the Time-of-Use Base Plan.  I started taking advantage of these last year and it saved me 30% on my summer power generation costs.

SmartRate is a 'critical peak pricing program' for reducing electricity demand during peak demand periods. You receive a 23% discount on your May to October electricity rate in exchange for accepting a 320% rate increase on hot summer days (9-15 days per year) that are predicted to seriously stress the grid's capabilities. These peak demand 'Smart Days' are announced ahead of time and you can be notified by text or email, so you can plan to curtail consumption as much as possible.

What if you switch and you end up paying more?  Your first year comes with free bill protection, so you'll only owe the lower amount.

On the Time-of-Use base plan, the price of energy changes depending on the time and the season:

From November to April, you receive an 18% discount on weekends and weekdays
except from 5-8PM on weekdays, when you receive a discount of 6%.

From May to October, you receive an 18% discount on weekends and weekdays
except from 10:00-21:00, when the price increases by 24%
and 13:00-19:00 when it increases by 85%.

If your schedule means that most of your electricity usage happens off-peak, you can save a lot of money with this plan!  You can even stack the Time-of-Use base plan with the SmartRate add-on for even more savings.  Everyone wins: you save money on electricity and the utility company saves money on expensive peak power generation and storage systems.

If you don't have PG&E, call your utility company and ask them if they offer alternative pricing plans for their residential customers.  These plans require the utility company to collect time-of-use data with a smart meter, which have only been rolled out in certain markets.

2015-03-13

Complete Expense Tracking with Mint and OneReceipt

It's been almost exactly two years since I waxed poetically about Mint (mint.com) for expense tracking.  Mint connects to your credit card, bank, and investment accounts and automatically pulls in and—with decent accuracy—categorizes your transactions.  I still use Mint on a weekly basis and recommend it without reservation.

Expense Aggregation with Mint is Awesome


The Mint team has also added billpay, a free credit score, and budgeting tools, but the transaction aggregation is the killer application for me.  With a glance at the site or the Mint app (Android, iOS), I can check the cash in my checking account and verify it covers the total charges sitting on my credit cards.  I can skim my recent transactions for unexpected fees, errors, and easy-to-forget repeating subscription charges.  I can even download my entire transaction history, all the way back to January 2012 when I started using Mint, as a .csv file for further analysis in a spreadsheet or Python script.

Travel Back In Time


Mint keeps track of your account balances on the last day of each month and this data is also exportable as a .csv file, so it's easy to look back in time and generate a net worth graph:
Mint usage automatically makes you more aware of what's happening with your money, and this increased awareness inspired a reformation of my spending habits... and the transformation of this site into a full-fledged finance blog. 

OneReceipt Makes Mint Even Better


The one piece of information that Mint doesn't capture is what you actually bought in a given transaction.  This is sufficiently annoying to me that I anticipated it would annoy enough other people to rapidly precipitate a solution, so I've been sealing each month's receipts in a plastic bag and tossing them in a shoe box under my desk.

All of my receipts.  Since August 2011.

FINALLY, a startup called OneReceipt has solved this problem.  According to the timeline on the bottom of their homepage, they too have been thinking about this since 2005.

∴ I am not crazy.

OneReceipt roots through your inbox and scrapes electronic receipts, and their iOS app takes photos of paper receipts and uploads them to a server for optical character recognition (OCR) and processing.

Turn THIS...




































...into THIS



It got all of the items right!  It sees discounts and tax!  It can even get the timestamp!

It gets better.  Install the OneReceipt Chrome Extension, fire up Mint, and:




And of course, since this is obviously my early birthday present, you can export all of your receipt information as a .pdf or .csv.

Oh hell yes.

Thanks OneReceipt!

Follow the team on Twitter or Facebook or Google+ or whatever.

2015-03-04

Petition Your Employer for a Better 401(k)

It's apparently 401(k) season over here at AHS, which is interesting considering:
  1.  I don't personally have access to a 401(k) (Berkeley offers a 403(b) and a 457(b) instead, the latter of which I'm contributing to), and
  2. I haven't written a comprehensive article on 401(k) plans.
But wait! That's not entirely true.  The AHS Wiki has a very large page on 401(k)s.  It's not super-organized or 100% comprehensive, but it will probably answer your questions.


As a general note, the AHS Wiki has a lot of information on topics that I haven't yet published articles on.  I use it as a low-pressure drafting space to make my research immediately accessible to other people.  Some pages are just a link collection, while others are in an advanced state of development.  Feel free to create an account and contribute!

A Bad Plan Can Cost You A Lot

 Lately I've written about how states like CA and PA are divesting from overpriced, underperforming actively-managed mutual funds in their state pensions.  As I've repeated endlessly (and upon which John Bogle has written many books), index mutual funds are the best way to keep your fees down and get your fair share of financial market returns.

A 2014 study by Bloomberg classified some of the best and worst 401(k)s in the business, but they primarily focused on company matching, not cost.  Investment cost—the annual fee, or 'expense ratio', that you pay to hold a stock, plus any other management fees—is extremely important too: a high-priced 401(k) plan could cost you $100,000 over your lifetime.

What if your company only offers high-priced garbage?

Maybe your company isn't big enough to attract Jerry Schlichter's attention to start a lawsuit.  How can you talk to your boss about improving the retirement plan?


Campaigning For Improvement


The Bogleheads, an online forum for investing enthusiasts, have prepared an article addressing this topic.  The punchline is that, under the Employee Retirement Income Security Act (ERISA), your company has a legal obligation (called "fiduciary duty") to make retirement account decisions that benefit employees.  This duty includes "paying only reasonable expenses of administering the plan and investing its assets" and "diversifying plan investments".  If your plan lacks low-cost index fund options, it fails both of these criteria!

So: carefully document this noncompliance, draft a friendly letter to your company's fiduciary (listed in your 401(k) Summary Plan Document), express your concerns for employee welfare and the potential for corporate liability under ERISA (Mr. Schlichter...), quote some Warren Buffett, and you have a shot!

Have you or anyone you know ever tried this?  Were they successful?  I'd love to hear about it!