FrugalJim

When moving to a new city, state, or country, it’s pretty important to understand what you should expect as a salary.  For example, I might be a high roller here in Orlando making $50k but take that salary to Manhattan, and I’m gonna be slummin’ it.  I think some meals might even cost more than $50k up there.

The first thing to take a look at would be the cost of living adjustment itself.  I found an online calculator here that’s pretty good.  According to it, someone making $50k in Orlando needs to earn $110k in Manhattan, just to keep their living standards.  That’s crazy!  Though it looks like housing is the biggest factor, because you would have to spend 357% more on housing there than in Orlando.

The next thing would be the tax difference.  In Florida, there’s no State income tax, but you can bet most places will.  According to Wikipedia, 7 states do not have a state income tax, and 2 others only tax dividends and interest income.  It’s no wonder all the old people migrate to these states.

Anyways, how would you calculate the adjustment?  Lets say you make $50k in Florida with no income tax and are moving to North Carolina, where income tax is approximately 7%.  Would you just multiply $50k by .07 to see how much extra you need?

$50,000 X .07 = $3,500

So you would need to make $53,500?  Not so fast.  Let’s say you made $53,500 and you had 7% withheld for state income tax.

$53,500 X .07 = $3,745

Something doesn’t add up quite right…

In reality you need to take the current tax free income $50,000 and divide it by 1 minus the tax rate, or (1 – .07) = .93… So:

$50,000/.93 = $53,763

AND

$53,763 X .07 = $3,763

There we have it… So summing up:

(TAX FREE INCOME) / (1 – TAX RATE) = (EQUIVALENT TAXED INCOME)

Then take that and multiply it by the cost of living adjustment to get your total income requirement to keep your same income in a different State.

A few weeks back, I was doing a mental experiment on different methods to trade stocks.  It got a little too complicated and I wondered if there was an easy way to test the theories I was thinking about.

Many times, I’ve heard of people “paper trading” to test their skills in the stock market without actually putting any skin in the game, so I decided to look around to see if a site would allow me to do just that.  Unfortunately, I couldn’t find one that seemed too appealing.  Either the site was very unimpressive, or it seemed like they just wanted to get my information so they could bombard me with ads.

I gave up on the idea.

A few days later, I noticed an interesting article about a new startup investing website, kaChing.  This site allows you to set up a a virtual portfolio of $10 million and buy and sell stocks.  It includes a hint of social networking, since you can see other people’s portfolios and can share information.  While this pretty cool in and of itself, the real kicker is how the site actually makes money.

If you stick with the site and trade, they assign you an investor IQ, which is basically a automated rating of how good a trader you are.   If you meet some other restrictions, you can then become a “Genius” and people can choose to invest like you.  The customer then sends kaChing money to invest, and whenever you buy or sell in your virtual portfolio, kaChing does the same moves with the customer’s money.

As a Genius, you set your rate for managing money (say a %1 fee for people investing like you) and kaChing takes a cut.  The more money you “manage” the more you and kaChing can make.

Am I the only one who thinks this is really cool?  While I doubt I’ll ever become a Genius, the site is awesome for paper trading.  If you want to follow me, my investor ID is 76659.

Right now, kaChing has around $3 million in actual invested money.  If this idea takes off, those guys are going to make a killing.

What are stock futures and why should you care?

The other morning the wife asked me what stock futures were. That got me so pumped up just thinking about derivatives, I probably didn’t need a cup of coffee. I can be such a nerd

Anyways, I figured this would be a great topic to get back into the flow of blogging on FrugalJim, so let’s get going.

The reason this topic was brought up in the first place was because the talking heads on TV and/or the web articles written in the morning like to give a shout out to the stock futures.  They do this to try and give an indication for how the market is going to act once they open up for the day.

Digressing a little, stock futures are derivatives.  These aren’t actually a stock you can buy or sell, but are “derived” from actual stocks.  Just like stock options, they allow you to speculate whether a stock will go up or down at some point in the future.  Not only can you do this with less money than you would need if you wanted to buy the stocks outright, but you can do it outside the normal stock market hours.

The talking heads simply look at the futures to get an estimate of which way the market is moving and act like they know how the market will behave.  The ironic thing is they never go back and see if they were right or wrong.  Just because the market starts off strong, doesn’t mean it won’t tank in the afternoon.

This year has definitely been interesting. As you can tell by my lack of posts, it’s been a little busy. I’ve actually been thinking about getting back into the blogging mode, so we’ll see what happens.

Hopefully I’ll have my next post up by this weekend. See you then!

I’ve watched many of the stocks I own drop by unimaginable percentages – some of them around 75 to 80 percent.  The only upside is that I’ve learned a great deal.

I’ve learned that a CEO of a company can claim loudly that “The dividend is safe!” only to turn around the next week and cut the dividend by 68%.

I’ve learned the government (Senators) can make speeches about the stability of Freddie Mac and Fannie Mae, yet have to take over them to keep them from going bankrupt within that very month.

I’ve learned GM really had no chance of staying “a going concern” even though the executives said they were in the process of a turnaround.

I’ve learned executives at Merrill Lynch still got a bonus even though they lost billions of dollars before they were sold to Bank of America.  And speaking of Bank of America, it turns out they paid way way way too much for both Countrywide and Merrill Lynch and knew it at the time.

I guess the point of all this is that when people are out for themselves (whether trying to make money or save their reputation) you can pretty much take what they say with a grain of salt. 

…just another thing to try and keep in mind.