The perfect (credit) score

Posted by Matt

You've seen the ads with the annoyingly smug guy who asks, "Do you know your FICO score?" right?

So, do you? Most people probably have a general idea of whether they have a relatively good or bad credit rating, but knowing your score is even better. If you are applying for a car loan or mortgage, the lender will probably have to access the information and can let you know, or you can buy a report.

Even more important than getting that number, though, is understanding how it is determined and structuring your financial activities accordingly. The exact algorithm has long been a closely guarded secret, but I read an article in the local paper that describes the factors that influence scores.

• Payment history
• Amounts owed and relationship to credit limits
• How many years you have used credit
• How often you apply for credit and open new accounts
• Types of credit, such as a mortgage, auto loan, finance company accounts or retail accounts. Bank cards can help your score more than those from a department store or gas station. Some consumers try to help their score by closing unused accounts. But that can backfire because reducing credit lines and eliminating a long-term account can be seen as negatives.

The second point is the most interesting point to me. I remember that when I first started to make a little money, I got to the point where I could stop using the credit line at my bank. I think I had only been using it as a very poor type of emergency fund, transferring a little money to my checking account when it got low to avoid overdrafts. Once I built up a savings account, I closed the credit line. I didn't realize it at the time, but that action probably really hurt my credit score. That was the only credit I was using at the time, so what I should have done is kept the line open in order to keep my ratio of debt to available credit low. Live and learn; I just wish I had learned in time for the information to be more useful.

One last good quote from the article:

What's the profile of a person with a near-perfect credit score?
"If we're talking about predicted credit risk, the ideal consumer is a very conservative money manager...It's somebody who has two or three accounts that have been open as long as the U.S. has been a country, they have never, ever been late, they do use the credit occasionally, but they always pay it down to zero or to low balances."

Laid Off: Day 1

Posted By Paul

So did anyone out there read my article:

You've Been Laid Off Now What

Well I'm re-reading my own article because just yesterday my company laid off everyone in my department.

If you had told me a week ago (or heck two days ago) that I was going to be laid off I would have said you were crazy. It was THAT much of a surprise for me.

So I thought I might as well blog about the experience in the hope that my experiences might be of help to someone out there.

So here goes:

I was pretty shocked yesterday. I've been laid off before, but this one really was a big surprise to me. I was literally working right up until they told me (and my colleagues) that we didn't have jobs anymore. Most of us were in such a daze that we just wanted to clean out or desks and go home, so I did just that. I was home by 1PM. I had lunch with my wife and my friend Matt and then just sort of moped for a while.

By 3PM I was bored with moping so I decided to go back to work and drop off the last couple work-owned items that I needed to bring in and make sure I hadn't left anything behind in my desk. I then ran a couple of errands and came home.

My wife was gone that evening (she teaches at a community college) so I had the house to myself. It really gave me some time to process all this. I was certainly surprised but that wore off quickly. Of course there was also anxiety, but there was also a new feeling that it took me a while to identify.

It was guilt. Even though my wife works I still make most of the income for our household (or at least I did before I got laid off), and I was feeling guilty about the fact that I wasn't bringing home a paycheck anymore. The last time I got laid off I was single, so this feeling was new to me.

Now all of this guilt was just of my own creation. You couldn't ask for a more supportive spouse than my wife. She's been sympathetic, optimistic and encouraging, and not once did it even enter her mind that in a way I was letting her down.

I know this because I talked to her about it. I didn't think that my guilt had any basis, but it felt good to talk about it with her. I still feel bad that we're going to cancel a weekend trip to the coast and that our upcoming anniversary celebration probably won't be the fancy dinner out that we originally planned, but we both realize these are just some of the things you have to do try to save your pennies when household income is down.

So that said I've been facing forward and diving into the job hunt. I'm updating my resume, and I've already applied for unemployment. I plan on sending out resumes hopefully tomorrow.

I've also been keeping in contact with my colleagues who were laid off (we created a google group for "alumni" of our company). Not only has it been nice to have a sort of email support group, but we can all help each other network as we try to find jobs.

I've started a t0-do list so that I'll stay on top of things, and I am also planning on adding a few "personal improvement" items to the list as a way to make my time off not just all job hunting and anxiety. For example I plan on taking a CPR class (something I've always wanted to do but never had the time) and do a few projects around the house.

Okay, I'm off to work on my resume. Stay tuned for more updates as the days go by.

Energy audit and weatherization followup

Posted by Matt

Does anyone remember my post about energy audits? I can't believe that it has been three months already, but I finally have enough information to report out on the results of our audit and what we did about them. I anticipate this will be a long post, but I'm going to spell out the details of:

• how we went about getting the audit done


• what energy-saving measures we decided to implement


• how we got INCENTIVE CHECKS from the government


• and how much energy we are saving so far

...so I hope that the long read will be worthwhile.

Step 1: Set up the energy audit

The best place to start is probably your local gas and/or electric company. We contacted a local non-profit called Energy Trust and scheduled with them.

Step 2: The audit itself

On the morning of our scheduled audit day, I was surprised to see several huge electric utility trucks (with bucket cranes) pull up outside our house. It turned out that they were NOT part of the audit, but were just coincidentally there to work on some power lines. Whew. Our auditor showed up on time in her own car. She worked independently and it only took a few hours for her to go through the whole house. In addition to energy auditing, she also did some tests on our water system because Energy Trust has a partnership with our local water company. Before I tell you the results, I just want to point out again that there was NO charge for any of this.

The water audit:

• We received several new (free) sink faucet aerators to save water.
• The auditor found a leaky toilet tank flapper (using dye pellets) in our hall bathroom and replaced it.

The energy audit:

• The rooms that we reported the coldest were (surprise) the ones that had the least insulation above them in the attic.
• The crawlspace was completely uninsulated except for under the addition.
• At least one exterior wall at the front of the house lacked insulation.
• Some of the older heating ducts were not sealed at the joints and were not insulated. I learned that as much as 25 percent of the heat from a forced-air heating system may be lost through leaks in the ducts.
• Our laundry room is especially cold and we discovered that it is completely uninsulated, open to the crawlspace (via the washer pipe runs), and open to the outside via an open dryer vent.
• Our hall bathroom was being vented to the attic instead of the roof (which can lead to rotting wood from the moisture).
• We could save money by installing CFL bulbs and received 6 for free. They start off very dim unfortunately, but then get brighter the hotter they get. The bulbs in enclosed cans in the ceiling got especially bright, but we learned they would probably burn out more quickly as a result. The bad news is that we will have to take them to a local recycling center for recycling because of the enclosed mercury. I also asked about LED lights, and was told they are still a bit too expensive to be worthwhile. (Read my "In Search of the Frugal Bulb" post for my report on that.)

Step 3: Determine which recommendations to implement

Insulate crawlspace - This was the biggest no-brainer. It has one of the highest payback rates and we could expect a good gain considering that we didn't have any insulation under the floor. Also, most of our uninsulated plumbing was installed close enough to the flooring that it would be covered by the insulation, too.

The only bad part of this was that one of previous owners had left almost three hundred glass bottles of water in the crawlspace (don't ask me why) and we had to spend several hours hauling them out before the contractors would work down there.

Insulate attic - The areas of the attic above the additions were already fully insulated, but we had some other areas with only a little bit of insulation and some areas with none at all. We decided to bring it all up to an even level. Two separate contractors both told us that that they would have to route the bathroom vent to the roof to meet code requirements, so we threw that in also.

Air and Duct sealing - there are expensive tests that can be done that involve hooking a blower fan up to the house and the duct system to determine how much of your heated or cooled air they are allowing to escape, but we elected against having these done. The maximum rebates would not pay for the test itself and the insulation contractors were going to do all the patching work anyway (seal the penetrations in the floor and ceiling and seal the duct joints with mastic and tape).

The process of insulating the walls involves cutting a hole in the interior drywall between every pair of studs and blowing insulation in, so we elected NOT to have that done until we are ready to repaint.

I also thought we should invest in some heavy drapes, which the auditor said would reduce heat loss from our large windows, but my wife felt that the house would be too dark and depressing.

I did a few other easy jobs myself. I put some weatherstripping ($3) on the bottom of the door between the laundry and family rooms, which blocked the cold draft coming through. I also replaced the external dryer vent with one that has a valve to keep cold air from coming in that way ($8).

Step 4: Locate a contractor and have the work done

This was pretty easy. Energy Trust provided a "trusted ally" list, so we had a few come out to the house. Their estimates were close, so we picked the one that could get the work done the most quickly: All Weatherization. They had two teams come in (one in the attic, one under the house) and got the whole job done in a day. The total cost was just over $2500.

My only complaints were that their compressor kept tripping a breaker on the circuit that our router was plugged into and that their was a terrible smell after they left. I think it was from the mastic they used to seal the ducts. I'd recommend having this work done in the spring or fall, if possible, so that you can leave the doors and windows open.

Step 5: Submit incentive requests

Energy Trust offers several rebates and all we had to do was fill out and fax in a single form (Form 300A) along with a copy of our contractor's invoice within 120 days of installation. I spoke with an Energy Trust rep yesterday who gave me the breakdown of what we will actually receive.

• Duct insulation: $100 (50% of installation cost up to $100)
• Attic insulation: $375 ($.25 per square foot)
• Crawlspace insulation: $675 ($.45 per square foot)

Grand total: $1150 or about 45% of the total cost!

The check should arrive in mid-February, which works out to about 6 weeks from submission time and included a brief delay in getting our contractor to confirm that he had been (promptly) paid.

Note: We didn't apply for the duct sealing rebate because it required the expensive testing I mentioned above, but if you're interested, the incentive is $1 per CubicFeetMinute reduction (max $400).

Step 6: File for tax credits

Not surprisingly, figuring out the tax rules was one of the more complicated parts of the process. After several phones calls and visits to the IRS website, I determined that we could receive a federal tax credit for 10% of cost of materials ($140 for us) by submitting IRS Form 5695. I've added that in to the pile for our accountant to deal with.

There is an Oregon state tax credit (25 percent of the eligible cost, up to $250) available for duct sealing, also. The process is to submit an Oregon Department of Energy application form (provided by the contractor) and we then get a certificate that shows our credit amount. We claim that and just retain the certificate for audit documentation. Unfortunately, I didn't realize that the contractor had to be certified by the Oregon Department of Energy, so we won't claim this on our return.

Step 7: Monitor ongoing savings

Of course we are hoping that this project will pay off in the long run, so we're keeping an eye on the bills. I called the gas company and was able to convince them to at least tell me that the previous owners' highest bill in 2007 was $247.18 (184 gas units) in January. We just received the January 2008 bill and it was $184.27 for 129 gas units. We used almost 30% less gas than previous owners, so I hope that at least some of that was because of the insulation and not just because they ran the gas fireplace constantly or kept the thermostat at 72.

I'll have to check the electric bill in the summer also, to see how much we save on AC.

Step 8: Enjoy a cozier home

We were really hoping to make a big difference in this area, but unfortunately we still have a few cold rooms. We've since discovered that our relatively new furnace is undersized for size of the house. My only guess is that it was installed just prior to the remodel that added several hundred square feet, but I haven't confirmed that yet. We're still working on this one, so if you want to read a REALLY happy ending, let me refer you to Clark Howard's write-up of his weatherization project.

The final test is for me to ask myself "Am I glad I went through this process?" I would say yes, with the caveat that anyone else considering it should be willing to put in a fair bit of effort and really run the numbers to determine which weatherization measures make the most sense for their individual situation.

Hopefully this post will help you through the process.

Rate drop(s?)

Posted by Matt

If you haven't already heard, the Fed cut the rate significantly today, by 75 basis points. That in itself might be a cue for some people to start thinking about refinancing debt, but don't move too quickly. Another rate cut is likely on the way.

My wife and I may be shopping for a new improved mortgage soon!

Staying ahead of the game

Posted by Matt

Did you see my recent post about my disappointment with my savings account? Well, I just got more disappointed. I read an article last week that inflation was 4.1 percent last year, meaning my savings account is just barely keeping me ahead. At least it reminds me why I don't just keep my savings under the mattress.

I guess we all might need to be a little more aggressive about pay raises this year. I've had some in the past that were less than 4% (with reassurances from my manager that that was still above average), but didn't think about whether that worked out to an effective pay decrease for me.

You might also try to be particularly frugal with common expenditures like your grocery and gas bills as the article points out that these generally rose faster than inflation (e.g., gas went up 8.2% and eggs rose 29.2%!!)

Reconsider the second fridge

Posted by Matt

How many of you have a second refrigerator in your garage? If you do, have you given any thought to what that is costing you?

My wife started making a case for an additional refrigerator or freezer while we still lived in our last house, but after we moved she suggested that we get a new refrigerator and move the aging (but well-maintained and high quality) fridge left behind by the sellers into the garage.

Her thought is that we could save money on some of our groceries by buying more items in bulk (especially meats), if we only had more freezer space. Hard to argue with saving money, but I kind of liked the old fridge and didn't look forward to the expense of a new fridge on top of all the other things we've purchased for the new house already.

Well, the debate has finally been silenced and we have the electric company to thank. In their latest newsletter (yes, I actually read these top to bottom each month), I found an article that brought up an interesting new point on the topic and brought my wife and I into agreement.

Here's the gist of it: Second refrigerators are usually 1) older, less efficient models and 2) operating in uninsulated garages. The article indicates that the combination of these factors can really drive up the amount of energy used to run the refrigerator. Beyond the environmental negatives of this (which were what made the case for my wife), there is also the small matter of paying (according to the article) up to 200 dollars per year for that extra energy! Is it worth it? Can you save $200/year by buying that much more frozen food? We already save by stocking up on some frozen items from Costco; we just need to be more careful with our freezer capacity. And that's what we've decided to do. Thanks PGE!

One final note: having the fridge in an uninsulated garage probably won't contribute significantly to the cost factor in the winter months if you live somewhere that gets really cold, but if you do, why bother with a fridge anyway? Consider putting some of your frozen food outside! We've got a small cart that ended up on the (covered) back patio during the move and has become a convenient place to stash our extra drinks.

Time is all we have

Posted by Matt

You know what I hear a lot? "I don't have time."

Let's go with a finance-related example. Let's imagine that you are in the market for a new mortgage and you ask me for a suggestion. I'd probably suggest a basic plan something like this:

1. Gather your income and asset information.
2. Call several mortgage lenders and request written good faith estimates from each.
3. Put all of the GFE's next to each other in a spreadsheet or on a new sheet of paper in such a way that you can compare them line item by line item.
4. Determine your criteria (e.g., total out-of-pocket at closing, interest rate, monthly payment amount) and evaluate each lender against it.
5. Identify which lender has the best offer and then call the others to see if they can beat it.
6. Take the best deal.

Simple right? You definitely want step 6, but you realize that the process above will take many hours and possibly span multiple weeks, and that is when I hear the familiar refrain...."I don't have time for that!" (Lest I be called a hypocrite, let me be the first to admit that I've said the same thing far too many times to count.)

I've been conscientiously working to purge that terrible excuse from my brain. Whenever it pops in, I internally correct myself and try to verbally respond with "I haven't made that a high priority." This has helped me so far, and for more things than just working on my finances. When I think about the things that I haven't accomplished, I have to ask myself questions like "Did I prioritize TV today?" This has helped me hold myself accountable for things that need to be done.

Going back to the mortgage example above, you can ask yourself "are all the things that I want to do over the next few weeks more important than potentially saving tens of thousands of dollars?" Maybe they are. I will grant that there are people with VERY busy lives (most people that I know these days) and I'm not going to try to force my priorities on you. If your job keeps you busy all day and you want to spend time with your children or relax in front of the tube when you get home, by all means do so, but acknowledge that those things are your priorities. If you want results, there are no substitutes for informed decision making and putting in the legwork.

Now I've gotten a little preachy and I didn't mean to do that, so let me cut this short. The thing that I've learned and that I'm trying to share is "Time is ALL I have." It is my responsibility to allocate it according to my priorities.

If you like that, use it and pass it on.