FrugalJim

With my original purchase of AOL sitting at -17%, I can’t help but to be a little nervous about their recent purchase of The Huffington Post.  The $300 million purchase is essentially making an all-or-nothing bet that the CEO knows what he’s doing, and kills the possibility of many smaller acquisitions by the company.

So what am I doing?  I’m following the CEO’s move and buying more.  While he put around $10 million into his company, I think I’m going to go a little lighter than that.  I am however going to triple my current holdings at around $21 per share.  This will lower my average purchase price and also at the same time make it one of my biggest holdings.

In the future, I’m going to set a target at around $15 where I would consider buying more.  If it doesn’t get that low, then I will hang on to what I already own and see what happens.

In the meantime, I’m going to try and mentally prepare myself for another quarter or two of negative results.  The latest acquisition isn’t likely to show any serious impacts to the company’s revenue in the near term and this is mostly factored in at the current stock price.  On the other hand, if by some miracle, revenue and earnings show some serious improvements this stock could very well take off and I would have bought in at the bottom of the curve (this is a long shot though).

Only time will tell…

PS, I’ve fought the urge to leverage up and buy stock options for this one.

I’m at an interesting point right now in my personal philosophy towards spending and saving.  To give some background to my mental state, I guess I’d have to describe my personal finance upbringing.  Essentially, there was none.  I remember I was probably around 14 when my Dad sat down and discussed money and taxes with me.  Before that, I guess my family had the old school mentality of “it isn’t proper to discuss money”.

Fast forward to me graduating from college and getting my first job.  I was seriously in awe with how much I was getting paid to basically solve little problems on the computer, and I enjoyed what I was doing.  At the same time, my expenses were ridiculously low.  I think I was paying $500/month for rent, with utilities included.  Needless to say I saved some serious money.  I really didn’t spend money on anything either, besides buying a new truck (which I still have today… paid off).

Today, however, I’m add odds with how I feel about money.  On one hand, I think I should save any extra money I come across, but on the other hand, I have a nice little nest egg.  Should I spend money on material things that catch my eye and not feel guilty about it?

Tonight I’m probably going to go to the Apple store and drool over the new MacBook Air.  If I felt like it, I could throw down some plastic and not think twice.  I wouldn’t have to go into debt to get it, and I think it would be useful to have for blogging, working on websites, etc.  But something inside me feels like I shouldn’t buy it… like I would feel guilty for indulging and spending that much money on something that I don’t “need”.  Not to mention, I spent $550 there two weeks ago buying an iPad, which I still have mixed feeling about, but use pretty much every day.

I guess I have a little guy on one shoulder telling me life is too short to worry about things like this.  If there’s something shiny and new that I think would be cool to own, why not get it.  On the other shoulder is a little guy telling me that I don’t need those types of things and I would be wasting my hard earned money.

Sometimes I wish I was one of those care free types of people that don’t worry about money, except I wonder if they really do deep down.  Do they feel the same way, and maybe even more so, and put on a front of not caring to deal with it?  Not sure, but I’ll let you know what I think about the new shiny laptop that Apple has

As I mentioned in my last post, the wife is now attending Duke to get her MBA.  At the beginning of this term, she signed up for a class related to the medical industry called Health Sector Management, or HSM for short.  During that class she was exposed to a plethora of information about the health industry, mainly being exposed to the current problems and ideas to how we might solve them.  This was a great introduction to the industry, and even though it doesn’t look like she’s going to be trying to get a job in health care, we had some great discussions about it.

One of the main problems as everyone knows is the fact that health care costs are rising at a very high rate.  While there are many reasons for this, one of them is that the industry is treated like a free market, but there is one missing component: information.  Customers (patients) don’t have a clue what the actual price is for the medical treatments they’re receiving.

When I go to the doctor, I really just assume that either a) it will be covered by insurance or b) I will have to pay a small amount like a co-pay or co-insurance.  The true cost is never even exposed to me.  Behind the scenes, the doctors and insurance companies have negotiated ahead of time what they are going to charge and pay for certain services.  This price can even be different depending on what insurance company you have or what groups your doctor is a member of.  And to top it off, if you don’t have insurance, the doctor is going to charge you even more than they would the insurance company!

I thought about what could be a way to help lower these costs and shed some light on how this whole industry is operating, and I decided to do something about it.  I created a website to allow everyday people to share no only how much medical care they received cost, but also which doctor charged them that amount, and what insurance actually paid to the doctor.  If enough people start using this website, eventually we’d be able to come up with serious tools to help insured and uninsured patients lower their bills.

If an uninsured person wanted to go to the doctor, but they were worried about how much it would cost, they could look it up and find the cheapest doctor in their area.

On the other hand, if an insured person gets a new job, how do they know what insurance plan to pick of the 3 or 4 their company offers?  They could look up and compare the different plans according to their age/health and projected medical costs, and pick the one that would mean less money out of their pocket.

Does this sound good?  Check it out and help shed some light on how much medical procedures are really costing by posting your own information.  And if you have any comments or suggestions, post them on this blog and let me know.

The new website: www.ProceedYours.com

I’m calling the bottom of the housing market in September 2010.  When the article on the front page of Time Magazine targets a specific sector of the economy, it’s usually long past the turning point.  In fact, by the time the topic makes it to Time Magazine, it’s no longer “new”.

We’ll have to see how this plays out…

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.