Go to Jeff Salisbury LWGate Home Page.From: persfin-digest <owner-persfin-digest@shore.net>
Subject: persfin-digest V4 #56
Date: Thu, 10 Jul 1997 21:30:43 -0400 (EDT)
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persfin-digest Thursday, July 10 1997 Volume 04 : Number 056
IN THIS ISSUE:
ADVERTISEMENT: MCI CONNECT FOR CC:MAIL [Oppenheimer Software <Connect-Sa]
College Employee Tuition Exemption Isn't The Only Loophole [bshore@ben.ed]
Re: Science and Engineering PhD break-even point [rpalma@msai.mea.com (Pe]
Debit Card Hype [Jeff Carpenter <jeffcarp@usa.net>]
Are Mutual Fund Expenses Important? [GeorgeS <pip@shore.net>]
Re: Advanta Changes [George Kolb <afn01634@afn.org>]
Reward Programs / Good Bank in San Jose? [Nikhil Subhash Sarpotdar <nikhi]
Why I Dumped Advanta ["Louis J. Schwarz, CFP, RFC" <sfc@clark.net>]
Best Foreign Exchange rates for English Pounds? [mabrams@santafe.cc.fl.us]
How Can I Get a Passport? [hartwig@gate.net (Bob Hartwig)]
Air Miles and Credit Cards [Brian Michalak <brianm@pdt-cav.com>]
Re: Affordable Health Insurance for Self Employed [Barry Beckham <beckham]
Re: Debit Card Problems [David Meyers <dmeyers@panix.com>]
Re: There's A Rash of Misinformation About Debit Cards [David Meyers <dme]
Re: Science and Engineering PhD break-even point [Francesca Pardo <fp10@c]
re: Misinformation About Debit Cards [Ken Stone <kstone@pantheon.YALE.EDU]
Re: I'm going to be Charged $20/... [Brian Peterson <pet429@whidbey.net>]
Debit and ATM cards abroad / Affordable Health Insurance [Sandi Rollins <]
breakeven point-high school vs. college [LYLEGM@goshen.edu]
Re: Science and Engineering PhD - Not An Economic Winning Proposition [Ga]
Looking for Affordable Health Insurance/reply [hic@world.std.com (Howard ]
Re: My credit card's rate increased without warning too. [Jim Beavens <jb]
Re: Cable Descramblers [hic@world.std.com (Howard I Cohen)]
Best Way to Buy Stocks? [Mike Morehouse <mikemore@rocketmail.com>]
Re: Re: Re: Life Insurance [John_Mahony@lamg.com (John Mahony)]
Is Dividend Yield on Stock Fixed? [Mike Morehouse <mikemore@rocketmail.co]
Banks Don't Want People To Pay Their Balances Every Month ["Ken Meinken" ]
Online Check Shopping [Jim & Sue Richmond <richmond@iname.com>]
Washington Mutual Fund? ["L & R Seely" <LJS_RTS@msn.com>]
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Date: Thu, 10 Jul 1997 20:50:50 -0400 (EDT)
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------------------------------
Date: Thu, 10 Jul 1997 20:52:47 -0400 (EDT)
From: bshore@ben.edu
Subject: College Employee Tuition Exemption Isn't The Only Loophole
Rich Carreiro writes
Employees of some colleges and universities, small private ones, allow
employees and their families to attend college with no tuition or
reduced tuition. This is a large benefit if they have children.
The Tax Bill that passed the House of Representatives contains a
provision that would treat the value of this benefit as income, added
to your W-2, and reported as income.
Question:
If one worked for non-academic employer and had this as an employee
benefit, would the tuition waiver be considered taxable income?
Answer:
If your courses pertain to your employment and your employer has a
policy to reimburse employees for tuition this IS NOT taxable income.
Several members of my family have obtained graduate degrees courtesy
of their employers.
He adds:
If the answer is "Yes", then I have to wholeheartedly agree with the
House's stand on this. People should not be getting special tax
treatment because of what employer they happen to be working for.
This is exactly the sort of thing the tax code should be completely
neutral on.
My comment:
Then I presume you would disallow discounts for retail employees and
what about free travel for air line employees? What about those who
receive free health benefits as part of their employment package. Or
what about auto salesmen who get a "free" car? I have a friend who
works for a CPA and has her taxes done for free - should that be
disallowed? Employees of colleges/universities are not the only ones
to receive perqs that are not taxable income.
The current tax bill in the House recommends extending the current
policy of not taxing tuition reimbursement for another year while the
Senate bill recommends making this exclusion permanent. Be aware that
this tax provision is for every American who's employer encourages
further education by reimbursing their employees for their tuition
expenses and is not limited to employees of colleges/universities.
Also the cost of books, lab fees and room/board are not included in
this provision.
Barbara Shore
------------------------------
Date: Thu, 10 Jul 1997 20:55:00 -0400 (EDT)
From: rpalma@msai.mea.com (Peter Palma)
Subject: Re: Science and Engineering PhD break-even point
Richard Alpert <rda@CS.Princeton.EDU> wrote:
>
>Francesca Pardo <fp10@cornell.edu> wrote:
>> . . . the increase in salary for holding a Ph.D. doesn't typically pay enough
>> to make up for the reduced salary during the years it takes to get a
>> Ph.D... I think the breakeven point is something like 40 years out.)
>
>Given a typical stipend of, say, $15,000, that would imply a prospective grad
>student would have to be making $122,000/yr BEFORE entering graduate school.
>
>According to the United States Census (whom you can choose not to believe), a
>PhD in Science or Engineering is worth $16,000 per year in increased salary
>over a Masters. If the break-even point were 40 years out, a PhD would cost a
>student $640,000 in lost wages. A 6-year stint as a PhD student would imply an
>almost $107,000 annual difference between lost salary and a graduate student
>stipend.
>
>Assume the earning potential of a science/engineering student (pre-PhD) is,
>say, $40,000, and she or he receives a stipend of $15,000 in a six-year
>program. The break-even point (assuming a $16K annual benefit) is nine
>years, four and a half months.
>
>Notwithstanding, Francesca's argument against taxing tuition benefits
>remains compelling.
>
> - Richard Alpert
The numbers above don't quite work because:
You have to compare the recent graduate who goes to work immediately and
eanrs 40K against the PhD candidate who gets a 15K stipend (which I'd
guess is above average; it's in the 12K range in North Carolina).
The next year, the graduate may have gotten a 5% yearly raise (plus
potential stock options and/or bonuses, 401K, etc). The grad student is
still getting his 15K.
The worker, after 6 years of on the job experience, may be making $55K
or more.
How does this compare to the recently graduated PhD? Is the PhD going to
be offered 16K+ (you didn't say how a PhD compared to a BS graduate) more
than his peer who has been working for 6 years or 16K+ more than a 22
year old that also just graduated?
Also, you're ignoring the time-stream value of money.
If the guy who starts working at age 22 invests his savings for the 6
years before the PhD starts earning money, I think you'll agree it takes
the PhD a long, long time to catch up in savings.
Pete
------------------------------
Date: Thu, 10 Jul 1997 20:56:36 -0400 (EDT)
From: Jeff Carpenter <jeffcarp@usa.net>
Subject: Debit Card Hype
>From: Ken Stone <kstone@pantheon.YALE.EDU>
>Subject: I'm Horrified By What I've Learned About Debit Cards. Thanks!
>Thanks to all the persfiners who educated the rest of us about this
issue. I am sitting here horrified at what I have learned:
A lot of the hype about debit cards is exactly that, HYPE. Unless you
read your agreement word for word, nobody else can tell you whether your
debit card is a good idea or not.
>I will soon purchase a house and a very large down payment is sitting
>in my checking account waiting for closing. I now realize that if my
>debit card is lost or stolen, then someone can charge thousands and
>thousands without any recourse for me (vs. $50 liability if a credit card
>were stolen). I am off to the bank today to get a simple ATM card.
How do you know this? My debit card agreement with Elan states very
plainly that I am liable for only $50 of unauthorized usage on my debit
card if I notify Elan within 24 hours after *I* discovered the loss of
my card. Very simple. You would have no more difficulty proving
unauthorized use of debit card than you would on a credit card. My
advice: actually READ your agreement instead of falling into the press
trap and taking advice from others (including me!)
------------------------------
Date: Thu, 10 Jul 1997 20:57:43 -0400 (EDT)
From: GeorgeS <pip@shore.net>
Subject: Are Mutual Fund Expenses Important?
..FWIIW, a modicum of perspective is needed, the differences between these
..funds is now 0.01%
.. Annual fee difference on $100,000 * 0.01% = $10
..(Editor's Comment - You should *always* care about expenses, especially
..periodic ones. It's not a one-time $10 fee, it's $10/year forever.)
No, you should not. You should rank order the effects and consider those
that have the greatest effect on the amount your earn.
For example, the index funds themselves do not match the S&P500 to 0.01%
1-Yr 3-Yr 5-Yr 10-Yr
Vanguard Fund 37.45% 15.18% 16.41% 14.58%
S&P 500 37.58% 15.34% 16.59% 14.86%
(reference http://www.fool.com step13)
Let's explicitly take into account the long term effect on net return over
10 years and compare it to the effect of not matching the index.
Vanguard return over 10 years at 0.01% _greater_ annual fee
{(1.1458+0.0001)^10-1}*100 = 290.36% total return
Vanguard return over 10 years
{(1.1458)^10-1}*100 = 290.02% total return
Vanguard return over 10 years at 0.01% _smaller_ annual fee
{(1.1458-0.0001)^10-1}*100 = 289.68% total return
or a net variation of 0.3 in a range of 290, ie, approximately a 1 in 1000
effect.
Index return over 10 years
{(1.1486)^10-1}*100 = 299.658% return
No one, absolutely no one, manages your money to an accuracy of 1 part in
1000 over a decade at these rates of return. The difference in 0.01% over 10
years pales in significance to the effect that missing the index has (9% of
290%, or 3 parts in 100).
This not-matching-the-index effect pales in comparison to the inherent
variability in the index itself. This, in turn, pales in comparison to the
basic choice to invest in the index, as opposed to squirreling your money
away under a mattress.
At the 1% level the yearly charges are significant. At the 0.01% level they
are not. Now, I am not picking on Vanguard, which is one of the best of the
bunch, or you Ira :), or even the original poster. I'm just pointing out
that you should pay attention to effects that matter.
------------------------------
Date: Thu, 10 Jul 1997 20:58:57 -0400 (EDT)
From: George Kolb <afn01634@afn.org>
Subject: Re: Advanta Changes
Louis,
I got the same letter and responded in kind as well. A month after I sent
my letter, I still had to call to get them to close the account anyway, but
there was no way I was going to keep the card given the changes in terms.
There was even a fee to close your account (I don't know if that was
something they would waive for regular, long-time customers or not), so
they've got you HOOKED. You must keep your card AND keep using your card
or else you'll get slapped with fees, possibly both ways.
I hope there are a lot of other (former) users who have voted with their
feet on this.
Regards,
George
------------------------------
Date: Thu, 10 Jul 1997 21:00:19 -0400 (EDT)
From: Nikhil Subhash Sarpotdar <nikhil@mozart.ee.umn.edu>
Subject: Reward Programs / Good Bank in San Jose?
Hi!!
Hope everybody is doing great. I would appreciate it if someone
could help me with the following two questions :-
1) Has anybody had any experiences about calling in reward programs of
Major Credit Cards ( eg :- True Rewards of AT&T, Membership Rewards of
AMEX etc) and asking them to waive the annual fee ($25 -$50 range). HOw
receptive are they to this request?
2) I am moving to Santa Jose, California in a few weeks. Could somebody
on the list from that area let me know about some good banks that they
deal with.
On an unrelated note :- check out http://www.consumerworld.org
Lots of info. online on lots of things.
Thanks and have a nice day.
Nikhil
------------------------------
Date: Thu, 10 Jul 1997 21:01:07 -0400 (EDT)
From: "Louis J. Schwarz, CFP, RFC" <sfc@clark.net>
Subject: Why I Dumped Advanta
> something they would waive for regular, long-time customers or not), so
> they've got you HOOKED. You must keep your card AND keep using your card
> or else you'll get slapped with fees, possibly both ways.
- --
That was why I had to respond to close my account before my face was
slapped with a fee for closing an inactive account by the deadline. What
a stinky Advanta!!! Now I am considering for a Citibank because I got
the mail offering lifetime no charge Gold card - but I have not read the
fine prints yet.
Louis J. Schwarz, CFP, RFC TTY 301-587-5996
Schwarz Financial Concepts FAX 301-587-5997
814 Thayer Avenue, Suite 301 Voice Relay 800-735-2258
Silver Spring, Maryland 20910-4500 Mailto:sfc@deafcfp.com
------------------------------
Date: Thu, 10 Jul 1997 21:01:56 -0400 (EDT)
From: mabrams@santafe.cc.fl.us
Subject: Best Foreign Exchange rates for English Pounds?
I will be going to England next week and want to get
the best exchange rate (dollars to pounds) both before
arriving and while traveling there. Any advice?
Marjorie Abrams
marjorie.abrams@santafe.cc.fl.us
------------------------------
Date: Thu, 10 Jul 1997 21:03:16 -0400 (EDT)
From: hartwig@gate.net (Bob Hartwig)
Subject: How Can I Get a Passport?
How does one obtain a passport and how much does it cost? It's my
understanding that it also takes quite a while to receive one.
Also, does a young child (4 - 5 years old) need one?
Thanks.
------------------------------
Date: Thu, 10 Jul 1997 21:03:58 -0400 (EDT)
From: Brian Michalak <brianm@pdt-cav.com>
Subject: Air Miles and Credit Cards
**2) Anyone know any bank/credit card that offers a choice (more than one)
**of airline mileage credit?
The Diner's Club Card gives you a credit of 1 air mile for every dollar
purchased. The miles can be used on virtually ANY airline. So if you
are the type of person that may need 2,000 more miles for a free ticket
on United and 1,500 more for a free ticket on American, you can divvy up
your miles this way and get BOTH with the same card. You just call and
tell them how many miles to credit to which airline account. Another
benefit is that you can keep the mileage "credit" on your card account
until you want to use it. Unlike other cards, where the miles get posted
to your account every month and then expire in 3 years, on Diner's Club
you can accumulate miles for say, 5 years, and then transfer them over
without having them had expire on the mileage account.
The drawbacks are that the Diner's Club card has an annual fee of $80,
but it has other "amenities", such as Rental Car Collision/Loss Damage,
etc. Also, not all retailers accept the Diner's Club. It is marketed as
a credit card for travelers and is mostly accepted at restaurants, gas
stations, hotels, airlines, etc. But a lot of retailing stores don't
accept it.
------------------------------
Date: Thu, 10 Jul 1997 21:05:00 -0400 (EDT)
From: Barry Beckham <beckham@erols.com>
Subject: Re: Affordable Health Insurance for Self Employed
Try National Assocation for the Self Employed which I have found to have
an excellent program with lots of extra benefits. Their member services
number is 800-523-6241.
Barry Beckham
------------------------------
Date: Thu, 10 Jul 1997 21:05:57 -0400 (EDT)
From: David Meyers <dmeyers@panix.com>
Subject: Re: Debit Card Problems
>From: "Ken Meinken" <kmeinken@one.net>
>> Personally, I'm more worried about losing my checkbook than my debit
>> card. It doesn't take a brilliant thief to know what stores he can go
>> into and not have to show id for writing a check. At least with plastic,
>> the cashier has the option of checking signatures.
The cashier is supposed to check signatures on a credit/debit
card, too. Just because they don't doesn't mean either you
or the store are off the hook. The trick is that with a credit
card, you can instruct the card company to not pay a charge
which you dispute. With a debit card, you have to ask the
retailer to give you your money _back_. Far far fewer
retailers that I know of will take a check without ID,
whereas almost all of them will take credit/debit cards
without it. In fact, this was one of the "advantages"
advertised by Visa about their debit cards - remember
the ad where Bob Dole was asked for ID to use a check
in his home town?
>I would think it would be easier to fight a forged check signature
>than something on a debit card.
Much easier. Also, you have the issue of phone-in mail
order fraud with credit/debit cards - again, if this
happens, much though you don't want it to, it is much
better for it to happen to a credit rather than a debit
card.
>> I'd also like to commend all of you who really pay off your credit
>> cards every month. You're certainly in the minority of plastic users.
>> However, I wouldn't want the temptation of using credit. If I use
>> my debit card, I know my purchase is coming right out of my checking
>> account, so I'll always think twice about making any purchase. Also,
>> how do you know you'll have the money to pay off the balance every
>> month? All it takes is one month to start the snowball down the hill
>> (yes, I'm from Minnesota). If you can't make the payment this month,
>> who's to say you'll be able to make it next month?
>One solution, which we used for severall years, was to deduct all
>credit card transactions immediately from our checking account (I use
>a 1-2-3 spreadsheet to track the checking account). So when the
>credit card bill comes due, the money was already there to pay it.
My preferred one is to enter every credit card transaction
into Quicken - just as you would enter your debit card
transaction into your check register. Then you _always_
know what to expect when the bill comes. And you will
also have an easier time reconciling the bill and be
much better prepared and more likely to find and dispute
fraudulent charges or mistaken ones if they appear.
- --D
------------------------------
Date: Thu, 10 Jul 1997 21:06:26 -0400 (EDT)
From: David Meyers <dmeyers@panix.com>
Subject: Re: There's A Rash of Misinformation About Debit Cards
>
>1) Debit cards are a replacement for checks, not Credit cards. There is
>no more risk in paying for something by a Debit card than there is by
>check.
>
>If someone steals my Debit card, they must match the signature that is
>written on the back. If someone steals my checkbook, there is no
>signature verification.
Checks are normally subject to far _more_ scrutiny at
the cash register than are credit/debit cards. The
only signature verification with the credit/debit card
_may_ be that the cashier looks at the back of the
card - even that is not done nearly often enough.
See my previous post, with respect to the thrust
of the advertising that visa put on debit cards
versus checks - that they _won't_ ask for ID.
>3) I take offense to the comments made about (paraphrased): "If you have
>any discipline at all, you'll use credit cards and pay them off every
>month." Get off your high horse. I guess I have no discipline at all
>because I choose to remove the temptation of overcharging my credit
>cards and pay everything by debit card, check, or Dead Presidents. If I
>don't have the cash, I don't buy it.
If you need to remove the temptation of overcharging,
then perhaps you also need to not go to stores. All
around you in the world, there is temptation. Having
the ability to overcharge, or waste money in other ways
and _succumbing_ to that temptation are different issues.
>> (Editor's Comment - In a curious twist of financial logic, banks see those
>> who pay off their credit card balance or don't use their credit cards as
>> "deadbeats" (i.e., they don't contribute their fair share to the bank's
>Not only is it a curious twist of financial logic for the banks, but
>here on the list as well. Probably a dozen posts supported using credit
>cards for all transactions, paying off the balance in full every month,
>and taking advantage of the 30-60 day float on purchaes. Yet isn't the
>temptation - or even the raw capacity NOT to pay the balance in full
>exist? --every time that bill comes due?
Nope. Never been tempted to send in less than the full
balance. Once or twice in the distant past, I did not have
cash on hand and had to float a balance. As soon as the next
bill came in, with _interest_ charges added, let me tell you
that I had a hell of an incentive to pay it off.
>Banks *love* creditors that pay their balance in full each month. Why?
>There's no risk. Payments received pose a 0% risk to the bank, right?
>And they *still* make money.
Nope. They hate folks who pay in full. They make most money
off the _interest_, not the transaction fee. Part of the
reason the interest rates are so high is to compensate
for the folks who default, but what they want are folks
who regularly carry a balance and pay them interest. Folks
who pay in full every month _cost_ them because of the free
float. They might compensate for the free float on those
folks through transaction fees, but often these days
much of the transaction fee goes to other things like
paying for frequent flier miles or other reward programs.
What they want is interest payments.
- --D
------------------------------
Date: Thu, 10 Jul 1997 21:07:46 -0400 (EDT)
From: Francesca Pardo <fp10@cornell.edu>
Subject: Re: Science and Engineering PhD break-even point
>According to the United States Census (whom you can choose not to
>believe), a PhD in Science or Engineering is worth $16,000 per year in
>increased salary over a Masters. If the break-even point were 40 years
>out, a PhD would cost a student $640,000 in lost wages. A 6-year stint
>as a PhD student would imply an almost $107,000 annual difference between
>lost salary and a graduate student stipend.
It's actually more like 3-4 years from a Masters to a Ph.D. degree (5-7 years
from a bachelors to a Ph.D.) so the numbers you've brought up are even more
detrimental to my argument.
I think in order to get that 40-year-out breakeven point you have assume you
would invest the difference between the grad student stipend and the working-
right-out-of-college salary. Large investments when you're in your early
20's can add up to a lot. Also, once the Ph.D. starts work the appropriate
comparison is with a Bachelors degree holder with 6 years of experience in
the field (or a Master's holder with 4 years' experience). I'm afraid I don't
know what assumptions about salary for a bachelors' degree or rate of salary
increase were made to get the 40-year figure. My guess is that 40-year figure
is indeed a bit high, but it's still quite apparent that Ph.D. students are
not in it for the money.
- -Francesca
------------------------------
Date: Thu, 10 Jul 1997 21:08:22 -0400 (EDT)
From: Ken Stone <kstone@pantheon.YALE.EDU>
Subject: re: Misinformation About Debit Cards
> 1) Debit cards are a replacement for checks, not Credit cards. There is
> no more risk in paying for something by a Debit card than there is by
> check.
This may be true from the perspective of those who are knowledgeable and
within the industry. For the average consumer, however, the credit card
analogy is more correct.
At the point of purchase, one can pay with a debit card, credit card or a
check. Most consumers consider the hassle factor of writing a check more
than they consider the subtleties of difference between the two pieces of
plastic.
Ken
------------------------------
Date: Thu, 10 Jul 1997 21:09:15 -0400 (EDT)
From: Brian Peterson <pet429@whidbey.net>
Subject: Re: I'm going to be Charged $20/...
I receive small solace in the knowledge that my disgust
with ADVANTA is shared by just about every one of their
customers. I had a longstanding relationship w/Colonial
National wherein I had negotiated a rate of 13.1% over the
years. When Advanta kicked it to 20.99, you can beat that
account was closed within hours. Like I told them in my
cancellation letter, my heart goes out to the many people
who couldn't buy their souls back from these bloodsuckers
before the new rates kicked in. Bless 'em all. Brian
------------------------------
Date: Thu, 10 Jul 1997 21:10:22 -0400 (EDT)
From: Sandi Rollins <srollins@econ.Berkeley.EDU>
Subject: Debit and ATM cards abroad / Affordable Health Insurance
> (Editor's Question - Anyone use travelers checks? Are they obsolete? -IK)
I just returned from a 4 week trip to Europe. We traveled to
Germany, the Czech Republic, Austria, Italy, Switzerland, and France.
We took cash in various currencies. We also brought $500 in AmEx
traveller's checks, and transferred $$ into an ATM account with Plus and
Cirrus access.
My recommendations:
1) Make sure that your $$ is in a CHECKING account before you go, as the
international ATMs do NOT give an option for checking vs. savings. Double
check to make sure that your ATM network is PLUS or Cirrus. (We found
Cirrus much more commonly than PLUS).
2) Make sure your PIN is no more than 4 digits; most European ATMs have 4
digits as the max.
3) Don't bother with the Traveler's Checks. Most places in downtown city
centers have ATMs that are usable with Plus/Cirrus, right next to the
money-changing stores. The exchange rate for ATM and Visa usage is very
good, better than you can get at the local money store. Add to the
equation that they typically give a lower exchange rate on Traveller's
Checks, IN ADDITION to charging an additional 2-5% commission (ask
carefully -- they may say NO FEE, but they MAY charge a "commission.")
TCs are quite simply a bad deal these days. IMO, an ATM card is more
convenient, offers a better exchange rate, and you have 24-hour access.
TC's limit your exchange opportunities, the hours you can exchange them,
and gives you a worse rate. Less convenient, AND more expensive? Not for
me.
4) Get a PIN for your VISA -- again, 4 digits. Some ATMs are for VISAs
only, not ATM cards. In a pinch, it's a good thing.
Generally though, we found that ATM access was fine, even in tiny towns
like Hallstatt, Austria; and Lerici, Italy. If you plan ahead, you can
get your $$ in the tourist areas before you head into the "boonies", and
use the Visa for hotel charges wherever you are.
> Subject: Looking for Affordable Health Insurance for Entrepreneurs
Lorraine, it would help if you said *where* you are. In California, Blue
Shield/Blue Cross allows individual HMO-type policies these days, as well
as more traditional PPO options. My fiance, who is self-employed, has
used them for more than a year now. For him, 33, single, non-smoker, no
deductible, $10 prescription co-pay and $25 Dr. visit co-pay, his premiums
are ~$110/month.
You should also contact your college alumni association, if you have one.
Previous to his BS/BC individual coverage, Dave was able to get "group"
rates as an Alumni Association member (albeit with a high deductible, and
limited coverage).
Good luck!
Sandi Rollins
srollins@econ.berkeley.edu
------------------------------
Date: Thu, 10 Jul 1997 21:11:34 -0400 (EDT)
From: LYLEGM@goshen.edu
Subject: breakeven point-high school vs. college
(Editor's Question - Let's put that to the test. A 4 year BA costs about
$50K at a public college and $100K-$120K at a private college. What's the
average salary of a high school graduate vs a college graduate? How long
will it take for a college graduate to catch up to the high school
graduate who didn't need to make that "investment"? -IK)
My first response to PersFin requires that I thank everyone for their
contributions to the list. Like others, I'm choosing to send in my 20
bucks at the point I find a tip applicable to my situation. Now that
I know about the deductibility of child care expenses, I'll be sending
a check.
On to my response. Last week while clearing out some files, I came
across some newspaper clippings relating to this question.
Unfortuneately, I threw them out, so I'm responding from memory.
As I recall from this article and others on the subject, the "breakeven
point" is often listed as late 20s. That seemed early, so I did some
crunching using figures that apply to our geographic area.
In our area, a 1997 high school graduate would get a job that averages
$8 an hour (starting at less than that, but getting raises). Through
age 28 (assuming 10 years of work), that brings in $166,400.
Quoted are prices of $50K for a public college BA and $100-$120K for a
private college BA. I beg to differ on two counts. One, the average cost of
tuition, room and board at private colleges this year is more on the
range of $17-$18,000. There are incidental costs, and tuition will increase
over the next few years, but I don't think those two factors will combine
to reach the $100-$120K range. Besides, some of those expenses are
legitimate living expenses that the aforementioned high school grad
will be paying anyway, so they're not really additional costs for the
college-educated person. But those figures are quibbling figures.
The second, and more significant point I'll differ on is that those
are the "sticker prices." Since we're using averages we must factor
in that the majority of people do not pay the sticker price,
thanks to financial aid. At the private college where I work, the
average gift aid (that is, grants and scholarship) for ALL students was
around $6,900 on a $14,780 tuition, room and board figure this year.
That's real costs of $7,880. Given that the majority of students still attend
public colleges, where the real costs will be even less, I don't think
it's out of line to use a figure of $28K as an average real cost
of education for four years. (Quite honestly, I'd bet it's lower.)
That means that the college educated person must make $166,400 plus
$28,000 while working just six years to break even by age 28. That's a
salary of $32,400. That might be a bit of a stretch for an average
first-six-years salary in our area, but not by much. At any rate, I do
find it easy to think that if the breakeven point isn't 28, it's
certainly in the early 30s given that salaries for college-educated
people tend to increase more quickly than for others.
Obviously your mileage may vary, and individual circumstances change
things, but I believe all studies I've read would consider college
a good investment for most people.
Lyle Miller
LyleGM@Goshen.edu
------------------------------
Date: Thu, 10 Jul 1997 21:13:57 -0400 (EDT)
From: Galen Gawboy <gawboy@vizdom.com>
Subject: Re: Science and Engineering PhD - Not An Economic Winning Proposition
Francesca Pardo <fp10@cornell.edu> wrote:
>>
>> [Statement that the breakeven point in getting a Phd is 40 years
deleted]
>>
* [Rebuttal showing the break even point in getting a PHD is
"only" 9.4 years elided]
Richard's rebuttal assumes that every PHD will get an industrial
job straight out of graduate school. That is not the case in the hard
sciences, where depending on the student's specialties, 1-3 post
doctoral stints paying around 25K/year may be required to land one of
those juicy positions. Since about 20% of recent PHD graduates are
under employed, that would have to be factored in also. But 9.4 years
is still a pretty long payoff period, especially when you start looking
at retirement planning. (Which is also hit pretty hard by going into
graduate school).
Actually getting a PHD in the hard sciences wasn't and never will
be a winning economic proposition. Anybody who does so for economic
reasons is misguided. Most people who pursue a terminal degree do so out
of a thirst for knowledge, I know I did. Incidentally when it came time
to find a job, I found I was worth 30K/year more as a software developer
than I was as an Industrial Chemist. Degree requirements for a software
developer are a BS. :->
- -galen
------------------------------
Date: Thu, 10 Jul 1997 21:15:13 -0400 (EDT)
From: hic@world.std.com (Howard I Cohen)
Subject: Looking for Affordable Health Insurance/reply
> I'm trying to locate various sources of Health Insurance (affordable!)
> for people who are self-employed.
Dear Lorraine:
Not knowing exactly what you need, let me offer some detail about my own
experience. Hopefully it will be useful to you.
There are some sensitivities now at both the federal and state level
due mostly to the Kennedy-Kasembaum legislation, things like prior
conditions and the like. Apparently the bill does some serious state-level
empowering and that can make a difference. And while you may be more
concerned about only getting a carrier, don't overlook K-K's impact, good or
bad.
That having been noted, let me recount what I have done for my wife. She
sells real estate (and hates computers.) I'm retired so I use Medicare and
have Supplemental (sometimes called Medigap) with Bankers Life and Casualty,
located in Chicago. Since I was already doing business with them, I took out
a policy for my wife through the local agent. In order to keep the payments
civilized, take a big deductable, hoping the resulting coverage was adequate
for the 'proverbial' calamity. Fortunately we've never had one.
Just recently I got an unsolicited call from a telemarketer peddling
insurance for National Association of Self - Employed (NASE). Said 'yes,' we
were interested. And three weeks later go a call from the local agent. We
met for lunch, his treat, and went over the issues, like deductables,
wording like 'Usual and Customary charges,' which, he points out is jargon
the Managed Care crowd goes bonkers over. And generally empowers them to
decide how much them are willing to give you. With that language you have no
comeback to their settlement. He talked about other problems and tried very
hard to suggest that his company was much more liberal in their benefits,
although the premium costs were higher. Don't misunderstand. I'm not pushing
either, only illustrating that it is apparently a very competitive business.
BTW - NASE uses THE MEGA LIFE AND HEALTH INSURANCE CO. 1-800-527-5504. Look
over their material and talk to their agent.
I now plan to get a quote from a third insurer, and compare the three. My
wife's primary care physician suggested getting a quote from Tufts Medical,
which will be our third bidder. Your primary care physician should have some
suggestions. I would guess that his/her administrator should have something
to say.
So, in summary, I note that there are several (probably many - Blue Cross,
Metpay, Mutual of Omaha, Hancock, etc.) insurers who would be happy to cover
you - assuming you're healthy, and stay that way. Other suggestions are to
look into the professianal organizations, like IEEE or ACM. I don't know
what they offer today, but are supposed to be pretty good. Also they often
have Group Life and other services as well.
BTW - I'm very curious about what percentage of your working life is spent
consulting vs selling RE. I'm a 'retired propeller-head.' Spent a life time
doing 'cold-war' computer engineering. Like the control computer for the
Minuteman Missile System, computers for navy shipboard use, big monsters for
Air Force Early Warning Systems and the like. Today I do a little
consulting, mostly fancy stuff like precision instrumentation; A to D
converters, OLE to a spreadsheet, and fancy graphics. Or circuit modeling
and integrated circuit design. What is your primary focus?
Hope this helps.
Sincerely,
Howard I. Cohen, Director
CAD - Special Interest Group
Boston Computer Society
<hic@tiac.net>
------------------------------
Date: Thu, 10 Jul 1997 21:15:53 -0400 (EDT)
From: Jim Beavens <jbeavens@ichips.intel.com>
Subject: Re: My credit card's rate increased without warning too.
Georgene Harkness said:
>My son used one of my cards (Advanta) for a while, and he is paying it
>off (but the bill comes to me). I noticed this time that the interest
>rate had jumped from an already-ridiculous 15.4 % to 19.6%, with no
>warning. There has never been a late payment and my son always pays
>more than the minimum. I called and asked what was going on and they
>said I had been notified by mail of the increase, and, in other words,
>"tough." I told them to cancel the card right then and there, and
>said in plain English: I will never use your credit card again, ever.
>They weren't impressed. Considering all the offers I get for 5.9%,
>I'm going to accept one of those and transfer the balance. Actually I
>should have done that a long time ago.
Ya know, this happened to me as well, and I still don't understand it.
I have (had) a First USA Visa Gold card with a fixed 14.99% interest rate,
until a couple months ago, when blammo!, up like a rocket it went to
20.6%(!!!). I called and politely told them there was a mistake on my
statement, but they said that this was correct, and I should have received
a notice in the mail (I didn't). The person mentioned something about
how interest rates went up, and all fixed rate cardholders were changed
over to a variable rate. I assume she meant the Fed rate increase back
in March? (which was only a 0.25% increase). Frankly I didn't spend a
whole lot of time finding out why it happened, since once I found out
they weren't going to change it back I promptly cancelled the card and
immedialely applied for another to transfer my balance.
Has this happened to anyone else?
Jim
------------------------------
Date: Thu, 10 Jul 1997 21:17:00 -0400 (EDT)
From: hic@world.std.com (Howard I Cohen)
Subject: Re: Cable Descramblers
>From: Don Apodaca <dapodaca@flash.net>
The internet is quite populated with various references to "free cable",
usually either buying or building your own descrambler. They all
universally say that this is now legal. So, I was wondering if anyone had
any relatable experience with cable descramblers.
Dear Don:
I've read the same ads and am also very curious. With the understanding that
it is now legal, I will send in my check for $7.00 and 'have a go at it.'
Incidentally, since I am retired EE I have a pretty good idea what the thing
has to do.
I'll keep you posted.
Sincerely,
Howard
------------------------------
Date: Thu, 10 Jul 1997 21:18:16 -0400 (EDT)
From: Mike Morehouse <mikemore@rocketmail.com>
Subject: Best Way to Buy Stocks?
This will be a real basic question. I have purchased and own a number
of no-load mutual funds which I buy direct from the fund house like
Vanguard, Dreyfus, Fidelity, etc. My question is what do your readers
recommend as the most cost efficient way to purchase individual
stocks. I may look at purchasing the stocks comprising the "Foolish
Four".
How actually does one purchase stock through a broker. Who might your
readers recommend?
I have heard of discount brokers. How are the commissions set. Does one
pay based on the $ value of stock purchased or the number of shares or by
the numbers of individual companies purchased?
Any advice?
Thanks,
Mike Morehouse
mikemore@rocketmail.com
Opelika, AL
_____________________________________________________________________
Sent by RocketMail. Get your free e-mail at http://www.rocketmail.com
------------------------------
Date: Thu, 10 Jul 1997 21:18:44 -0400 (EDT)
From: John_Mahony@lamg.com (John Mahony)
Subject: Re: Re: Re: Life Insurance
==========FOR THE LIFE INSURANCE QUESTION:
> ...Commissions are NOT paid out of current premiums on U/L & V/U/L.
> They are paid out of company reserves ( a big difference ). ALL of
> the premium not used for current COI and current expenses ( which
> vary from policy to policy) are placed in the Cash Value Account to
> either earn interest in U/L, or be INVESTED BY THE INSURED in V/U/L.
> None of it goes toward paying the commission.
And the portion of the premium that is allocated to "reserves" has to
be higher than it would have been if no commissions were going to be
deducted from the "reserves." Bottom line: the policyholders pay the
commissions. They have to. If they didn't, then the insurance company
would be unprofitable, and wouldn't qualify for A.M. Best's highest
ratings.
> ...as in most investments, there is a "back end load", if the policy
> is SURRENDERED within a certain time period.
As in most investments SOLD BY INSURANCE AGENTS. Most no-load mutual
funds do not have a "back-end load." Direct investments in common
stocks, preferred stocks, bonds, real estate, or almost anything else
do not have a "back-end load," either.
> ...you CAN buy an equivalent amount of term for less money FOR THIS
> YEAR. However ALL Term policies have an increasing premium due to the
> increasing risk each and every year. You can buy 5, 10 or even 20 year
> level premium term, but they cost more. You are still faced with the
> VASTLY increased premium at the end of THAT period, IF you still have
> a need for Insurance protection.
This is a VERY MISLEADING STATEMENT, based on a false comparison. The
insurance portion of a whole life (or VUL) policy DECREASES EACH YEAR,
as it is offset by the increasing cash value of that policy. The only
way the insured can access the cash value is by either borrowing
against it or surrendering the policy. The first option reduces the
eventual payout to the beneficiaries, while the second eliminates it
entirely. If the insured simply continues to pay the premiums, and
allows the insurance to remain in force, then the cash value is
eventually paid to the beneficiaries as PART OF THE INSURANCE
SETTLEMENT.
The proper comparison IS NOT between whole life (or VUL) and a LEVEL
Term insurance policy, but between whole life (or VUL) and a
DECREASING Term insurance policy. In that comparison, the decreasing
Term insurance policy will almost always cost less.
> ...Most U/L & V/U/L policies today have a GUARANTEED Interest of 4%
> or higher...
For WHAT LENGTH OF TIME is this "Interest of 4% or higher" GUARANTEED?
For one year? Five years? Ten years? When that period of "GUARANTEED
Interest" ends, the insurance companies often pay below-market rates,
AND THE POLICYHOLDER IS STUCK. If the policyholder surrenders his
policy to get a better rate elsewhere, he loses his insurance, and
may have to pay that "back end load" you mentioned, to boot!
> ...but in U/L, most are CURRENTLY paying 5 1/2 to 7 % INCOME TAX
> DEFERRED INTEREST.
And Vanguard's S&P 500 Index Fund is CURRENTLY* paying a total return
of 24.90%, most of which is INCOME TAX DEFERRED.
*YTD Total Return from 1/2/97 to 7/3/97
- -- John K. Mahony, M.B.A.
------------------------------
Date: Thu, 10 Jul 1997 21:22:50 -0400 (EDT)
From: Mike Morehouse <mikemore@rocketmail.com>
Subject: Is Dividend Yield on Stock Fixed?
I have a question about stock prices and yields. My understanding is
that the yield annual dividend/stock price. Is the dividend fixed for a
period of time?
For example, for Philip Morris (MO) the stock price from the PCQUOTE
website yesterday was 44 7/16 and the yield was 3.6. This would mean the
annual dividend was $1.59975 (44 7/16 * 3.6%). Today when I checked the
stock price was 43 7/16 and the yield was 3.5.
Would this not make the yield $1.52013125 (43 7/16 * 3.5%)? Does the
annual dividend change daily or am I missing something?
I'm trying to understand the concept of yield.
Thanks,
Mike Morehouse
mikemore@rocketmail.com
(Editor's Response - Companies are under no obligation to pay dividends,
and the stock price varies daily. So the yield is not guaranteed. If a
company stops paying dividends, the yield will be 0.
Don't buy stocks based solely on yield. Companies ready for bankruptcy
have been known to sell assets and increase their dividend, before going
under. Under those circumstances, your yield is 0/0, which is
mathematically whatever you want it to be. -IK)
------------------------------
Date: Thu, 10 Jul 1997 21:25:19 -0400 (EDT)
From: "Ken Meinken" <kmeinken@one.net>
Subject: Banks Don't Want People To Pay Their Balances Every Month
> From: "Russell J. Foster" <RFoster@specgrp.com>
> Banks *love* creditors that pay their balance in full each month. Why?
> There's no risk. Payments received pose a 0% risk to the bank, right?
> And they *still* make money.
>
> However, every month a transaction goes unpaid represents a greater risk
> to the bank-a risk that the payment will never come. Sure, the bank can
> charge interest, ruin a credit report, and threaten legal action, but it
> they don't have their money the bank still has to pay the vendor-it's
> simple a transfer of risk from the vendor, to the bank.
>
Russell,
statistically, banks are safe. A well managed credit card program
brings in 18+% interest fees. If a bank selects its customers well,
the default rate is only a few percent. They can write off a lot of
losses and still make a lot of profit with that 18% vs. being "safe"
and only making the 3% or so on the transaction fees.
I'm afraid that I strongly disagree with you. Banks WANT people to
maintain monthly balances, ideally large balances that just pay the
minimum each month.
A bank makes a lot more profit with charging 18% interest and writing
off 5% in bad loans than in charging no interest and having no loan
losses.
Ken
------------------------------
Date: Thu, 10 Jul 1997 21:26:00 -0400 (EDT)
From: Jim & Sue Richmond <richmond@iname.com>
Subject: Online Check Shopping
I've used Artistic Checks for years and the great thing
about the internet age is that now you can browse the
various check designs from your computer.
here are the URLs
http://www.artisticgreetings.com
http://www.checksinthemail.com
The checks in the mail URL is another cool case of the
"type in the name of the company for the url and it just might work"
syndrome. I can't say how many times AltaVista has drawn a blank on
a search and I just went for it by trying sensible URLs and hit on
what I was looking for. Sometimes you find other interesting stuff
even if it isn't what you're looking for.
------------------------------
Date: Thu, 10 Jul 1997 21:28:56 -0400 (EDT)
From: "L & R Seely" <LJS_RTS@msn.com>
Subject: Washington Mutual Fund?
Does anyone know much about Washington Mutual Fund group?
------------------------------
End of persfin-digest V4 #56
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