You Probably Should Get a State Bank

Right now, there are INSANE budget cut proposals happening here in Washington State.  Governor Chris Gregoire said, "I hate my budget," tearing up toward the end of her press conference Wednesday. "I hate it because in some places, I don't even think it's moral."


Wow.

A campaign is underfoot in Washington state to create a public state bank.  Only one such bank exists in the nation, The Bank of North Dakota, and it's been around 1919.  Basically, all tax money and fees collected goes to the state bank, and the bank then loans it out to self-fund capital projects, keep money local, subsidize student loans and provide new credit sources.  Check out this Mother Jones interview with the current president, Eric Hardmeyer.  Hardmeyer said, "We also provide a dividend back to the state. Probably this year we’ll make somewhere north of $60 million, and we will turn over about half of our profits back to the state general fund. And so over the last 10, 12 years, we’ve turned back a third of a billion dollars just to the general fund to offset taxes or to aid in funding public sector types of needs." And this from a state with a population of 600,000.


So what happens with your tax money now?  "The Office of the State Treasury uses tax monies now for short term investments in big banks, Federal treasury bonds, Fanny Mae etc." (JUSE). Creating a state bank wouldn't put private banks out of business.  There seems to be a lot of partnering between the Bank of North Dakota and private banks.

Ellen Brown offers an overview of the 7 states (Florida, Oregon, Illinois, California, Washington State, Vermont, and Idaho) with active campaigns to form state banks in her Mar 20 2010 article, The Growing Movement for State Owned Banks.

Below I'm posting the talking points for the Washington State bank campaign from Just Sustainable Economy Study Group, a Project of Western Washington Fellowship of Reconciliation.

10 reasons for a Bank of Washington State

1. During this 2011 legislative session a bill will be introduced in the Washington State Legislature
to charter a Public Bank, This is a Public, not for profit bank.

2. A Bank of WA would be modeled after the Bank of North Dakota. The Bank of North Dakota
(BND) has helped North Dakota prosper even during these recession times. The bank is
conservative and did not participate in risky behavior. North Dakota is the only state in the
Union that is not suffering a budget deficit and they have the lowest unemployment in the
nation 3.8% (October 2010). No local banks have failed. www.banknd.nd.gov/

3. Washington State is running huge deficits that cause public programs to be cut, negatively
impacting Washington’s citizens. We have an unemployment rate of 9.2% and 14 community banks
have failed. We need more available state funds.

4. When the state collects its taxes and fees it puts 70% of that money in local branches of the big
Wall Street banks. Any money not immediately spent goes into short term investments in those
banks, treasuries and small commercial banks. Currently, despite record low interest rates, Banks
are lending even less and big banks are instead speculating on world markets and handing
out massive bonuses to their executives.

5. A Bank of Washington State would have the ability to self-fund capital projects, keep money
local, make small business loans and provide new credit sources.

6. The Mission of the bank will be written into the law establishing the bank: Develop
agriculture, industry and commerce for benefit of the citizens of Washington State.

7. Like the BND the bank of Washington State would partner with community banks and
credit unions in their loan practices. The BND is well thought of by banks in that state and acts
as a “mini-Fed”. As small businesses and farmers can get credit, jobs will be created; this in turn
will increase the revenue tax base of the state.

8. There is a great deal of public outrage over bailouts and banker bonuses and banks on the
national level have not been adequately regulated to prevent future risky lending and investments.
This is not a good place to put taxpayer money. A public bank would eliminate the costs that the
state pays to these big banks for banking services.

9. All tax moneys and fees of Washington would be deposited in the state bank. The bank
would be a member of the Federal Reserve so that it could have access to the cheapest money
available through the Federal Reserve Discount Window.

10. The chartering of a public state bank will not solve all the problems of the recession. However,
there is a credit problem in Washington State at the present time and the bank will get credit
flowing to where it is needed. Profits not needed for the operation of the bank could be redirected
back into the state general fund.

What Can You Make?

What can you make?  The answer can't be money.  Can you make bread, or sew a rip in your pants, or build a book, or invent a game?  I think it's useful to take a little assessment of what tangible skills you have.  If the supermarket were closed all month, how would you eat?   If the internet and cable TV were out, how would you entertain yourself?  We've been in our new place for a month and don't have internet.  For the first few days, I would get home from work, settle in, and have an urge to get online, which I couldn't do.  Then I might start reading a book.  Or plunking out something on the piano-keyboard.  Or playing cards, or making some weird food, or calling a friend... Considering the fact that I have internet 8 hours a day at work, I'm not exactly disconnected, but I realized that I was disturbingly dependent on the internet as a source of time-filling entertainment.  Instead, we're filling that time with activities like music, art, reading, cooking, writing, etc.

Some rights reserved by ryochiji

In her article "Solving Unemployment through New Uses of Time," Julie Schor writes that
"declining [work] hours could re-balance the labor market and free up time for people to engage in low-impact, self-providing activities that reduce their dependence on the market. These include growing food, generating energy, building housing, and making small-scale manufactured goods, such as apparel and household items."  Some people are calling this reskilling.  Transition Town Totnes frames the need for reskilling pretty well: "we have lost many of the basic skills taken for granted by every previous generation – to grow, gather, preserve and cook local and seasonal food; to repair clothes and household goods; to make and mend rather than throw away; to work with local materials such as wood and clay for items of function as well as beauty."  I'm 10 pages into Radical Homemakers by Shannon Hayes, a book which I foresee will get me very jazzed about at least trying to make a sourdough starter.

Consider this angle.  What gives you feelings of accomplishment, what makes you feel satisfied?  At the end of the day, what was your favorite activity?  For me, the answer to these questions shows a pattern:  I feel most satisfied when I create instead of consume, ie making a little mosaic instead of watching Psych, even though Psych is funny.  And delightfully, being self-reliant and creative in meeting your needs is often very frugal.

 

Create or Consume?

4 Easy Ways to Flex Your Credit and Privacy Muscles

You're at your computer.  You have ten minutes.  Do something useful.

1. Get your free credit reports. 
Come on, do it.  Annualcreditreport.com, NOT freecreditreport.com.  Don't mess up.  You get one free report from each of the three bureaus (Equifax, Experian, and TransUnion) each year.  The year is not counted by the calendar year, but from the last time you pulled a report.  You might space out your reports - get Equifax in April, Experian in August, TransUnion in December- to keep track of your report throughout the year.  It is important to check your report because there are lots of ERRORS, and your credit report is looked at by employers, rental agencies, lenders, etc.  If there are inaccuracies, you can dispute them.  It's easy.  Do it.  These reports do NOT include a credit score.  Credit scores are not free; you would have to buy it from FICO for $16, and there's not much reason to do that.  If you want a free estimate of your score, use this bankrate.com calculator.

2. Stop receiving pre-approved credit cards in the mail. 
There's no reason to ever get one of these cards.  If you want a new credit card, comparison shop for the best deal.  The national credit bureaus offer a toll-free number that enables consumers to opt-out of all pre-approved credit offers.  1-888-5-OPTOUT (1-888-567-8688).  I don't get these offers because I move too much and they can't find me, but I called anyway.  This will last for 5 years.

3.  Stop receiving crap direct marketing mailings.
They waste paper and life.  Remove yourself from the redplum.com direct mailings here.  Remove yourself from Valpak (blue envelope) mailings here (note: I don't think you need to enter a real email).  If you receive other mailings, call them or get on their websites and find out out to remove yourself.

4. Of course, register your phone number on the National Do Not Call Registry.  This never expires.

For more information, check out this general Federal Trade Commission page about sharing or shielding your personal information.  If you are fascinated by data security issues in general, get yourself some Bruce Schneier.  I got me some Schneier when I took cryptography first year of college and I never looked back.

No, Seriously, Buy Local

A lovely visual, care of SRA, which illustrates the difference between spending $100 at a locally owned business vs a non-locally owned business.  This is good to consider when thinking about the cerazy deals at Best Buy this weekend. 

Click to enlarge!

source: LocalFirst.com

This image is from localfirst.com, an initiative to buy local in West Michigan.  Their campaign includes a local business directory and a buy local coupon book.  Bellingham (where I live) has a similar organization, called Sustainable Connections.  Local businesses produce more jobs, and more stable jobs, than non-local business.  Also, when I go to the local indie theater here in Bellingham and look at their sponsors board, it's all local businesses.  A robust local economy creates a resilient, inter-reliant community.  Best Buy doesn't.

WHAT'S HOT this Tax Season: Prepaid Cards

So I was on a "webinar" yesterday and I actually learned something new.  An IRS presenter said that for the first time, tax refunds can be deposited onto prepaid debit cards.  I said, uhhh that sounds like a really lame excuse for a bank account.  Now that I think of it, the first prepaid card I ever heard of was for teenagers- sort of a plastic training tool.  I did some research, and prepaid is actually not as lame as I thought.  In fact, it may even be sorta useful.  The hope is that when people receive a refund on a prepaid card, they will start to use that card as a financial tool for the rest of the year.

As we learned from our deep investigation into predatory lending, people who are unbanked or underbanked pay through the nose to manage their finances.  Prepaid cards could represent an intermediate step towards more traditional banking services.  The biggest reason I think they might be useful: you don't need as much ID to get one.  Also, you don't need a credit check.  For this reason, prepaid is already popular with immigrant populations - for some cards, you can even apply with foreign ID only.  This Dec. 2006 New York Times article explains in more detail how immigrants utilize this service.  Many of the users are relieved to be able to replace wads of cash under mattresses with this more secure format.  On many cards, the maximum liability for a cardholder if the card is lost or stolen is $50.  Additionally, a great number of people say they have a very good understanding of the fare structure.  Confusing fees are a prime reason people avoid banks.

Here's what I see as advantages to prepaid:

• less ID needed
• no credit check
• more secure than cash
• difficult to overdraft
• reduced cost compared to check cashing and payday lending
• immediate liquidity - funds added are available instantly
• fee structure is clear and easy to understand
• they look like credit/debit cards, socially accepted

Of course, there is a premium for this service.  Although direct deposit onto the cards is generally free, loading cash onto a card might be $4.50, an ATM withdrawal could be $2, there may be a $1 monthly fee.  They add up.  But they will likely be cheaper than relying on check cashing.  And I'm mostly interested in prepaid as a preliminary step towards traditional banking, which can be even cheaper.  These cards also don't offer much opportunity for credit building - the card company will only report automatic bill payments to the credit bureaus.

If you're really psyched on this, you can read this large pdf Nonprofit's Guide to Prepaid.  I did. Part I is worth it.

Shoo Jimmy Choo is the Worst Title For a Book. Ever.

Here is an interesting article about financial books targeting women. To summarize, it basically says that tons of books are written each year with inane titles (Does This Make My Assets Look Fat? and SHOO!, Jimmy Choo are really deplorable titles) teaching women about financial management, but comparable books are not written for men. However, examining the data, it's not clear that women are less good at managing money than are men. Ramit Sethi, a person-finance blogger, ran a survey and found that the major difference between the genders is actually a level of confidence related to money management.

Since I spent a lot of time right now thinking about research studies, media-framing, and causal direction, it lead me to ponder the following: are women less confident about money because this market exists and the media frames issues in such a way that women are convinced that they are less good with money, or does an innate lack of confidence lead to the market?  Man, chicken and egg problem. I'll be honest, I actually suspect it's the former, at this point, but I have absolutely no empirical evidence to back that up. I do wish that women were more confident with money, but, perhaps more importantly, I wish Does This Make My Assets Look Fat were not the 30th most popular book in the Women and Money Management category on Amazon. Preposterous.

How to Battle Advertisements

Ads make you want things.  When you see a lot of them, you may feel like getting those things will make your life better.  Consumer Reports says that the average American is exposed to 247 commercial messages a day.


See fewer ads, buy less useless crap.  Below is a brief list of strategies to defend yourself against the dark arts of advertising and marketing.


Ads on the internet:

• Use an adblocking plugin for your browser, such as Adblock for Firefox.  Sure, some ads sneak by the filter, but many are blocked.  Ad space will just show up as empty space.

Ads on the radio:

• Difficult to avoid.  Turn down the volume for a random period of time.
  

Ads on TV:

• Do not own a television, and definitely don't turn it on to "see what's on."  Commercials are on.
• Download torrents of your frequently watched TV shows instead of streaming them.  Vuze is a pretty user-friendly bittorrent client.
• If you do watch shows on TV or on hulu or something, mute the commercials.

Ads in magazines:

• You read magazines? On purpose?  Come on, people.  Internet.

Ads on apparel:

• If you don't buy clothing/bags/shoes/umbrellas with logos on them, you will spare yourself and the people around you from staring at ads.  Potential quandary: a free t shirt with a big logo on it.  Your options: forgo the t shirt (you seriously don't have enough t shirts?); spray paint something else over the logo; wear it to sleep.  We're not talking Run for Fun '97 t shirts, which are a great way to show other people your track record of fun, we're talking gratuitous corporate logoage.
• Express your distaste when other people flagrantly display logos.  Be rude about it; attack their self esteem.

Ads on billboards/bus stops/in the metro/on the bus:

• Yeah, these are tough.  Bring a book?  But not if you're driving.  Audiobook?  Distract the mind?  
• If an ad on the metro is made of paper, you can easily remove it and turn it over to the blank side.
• For billboards, I suggest utilizing paint cannons, brought to you by hipster science.  Or this quirky government-funded anti-billboard mere miles from where I live.

Ads on those fly-by-the-beach airplanes:

• Shoot 'em down.  Shoot 'em right on down.

Ads that are sneaky (product placement in tv shows, movies, that new Gap logo "hoopla"):

• For example, Vin Diesel drinking a Sobe in xXx.  Or hark - perhaps he is on the DIESEL industry payroll?  
• Check out this heartwarming article from, um, productplacement.biz, about the number of product placements on American Idol (4,349 placements during Season 6).
• How to defend against these when, by nature, they sneak up on you?  Avoid mainstream movies and tv shows that attract big advertisers, I guess.  I wanted to say, make sure you notice when there IS a product placement and not just let it slip subconsciously by, but then I'm telling you to pay special attention to an ad?  Web of lies.

These are some basic tactics.  Arm yourselves!

Hand in Hand in Hand in DOOM

Check out this fun doomweb from a wonderfully titled report, "The Predators' Creditors," which was published in September by National People's Action.  It outlines how big banks fund big payday lending and check cashing companies.

source: National People's Action

As you can see from the image, Wells Fargo is preeeeetty evil.  From their summary: "Wells Fargo is the biggest single enabler of payday lenders, the report finds, followed by Bank of America, JPMorgan Chase, US Bank, Banco Popular and Wachovia. Wells Fargo finances about one-third of this predatory industry based on SEC and other government filings from public companies only.

"Bank of America and Wells Fargo, specifically, played a crucial role in the rise of the largest payday lender, Advance America, which operates more than two times as many storefronts as its next closest competitor. Bank of America Wells Fargo and Wachovia provided $40-50 million in credit to Advance America before the company operated a single store. Both banks continue to finance Advance America."

Be a Tax Clinic Volunteer! WHEEEE

The best volunteer gig I have ever had was at a low income tax clinic in DC.  The Volunteer Income Tax Assistance (VITA) program trains volunteers to staff low income tax clinics nationwide.  Laura and I did this in DC through Capital Area Asset Builders and their DC EITC program.  Laura did several hours of IRS training to learn how to prepare taxes.  I promoted DC Saves, a savings account program, and did interpreting.  I started to get interested in financial education and all of these other issues when I was volunteering there.  We went once a week to the site (ours was in Adams Morgan) for a four hour shift leading up to TAX DAY.

Laura is already signed up to do it again this year in Philly.  It's a really rewarding gig because you're helping low income people get large sums of money.  Plus, learning how to do taxes will be pertinent to your life every year, and friends will bake you cookies in exchange for tax help.

If you are interested in being a VITA volunteer, "send an e-mail to the IRS at wi.taxprep.volunteer@irs.gov indicating the city and state where you want to become a volunteer. You’ll receive an acknowledgement e-mail from the IRS.  Your information along with your email address will be forwarded to sponsoring partners in your area for further contact." (taken from this IRS page)

source: kensgarbagecan.wordpress.com

Community Investing: Move on Up

I have something you will like, my little friend.   It is community investing! It is fun, easy, and delicious.  I just loaned The Reinvestment Fund, based in Philadelphia, some money for a term of 3 years at 2.50% interest.  My investment is basically a CD (certificate of deposit) and I can't get at it until the term is up without penalties.  What is my money doing during those 3 years? Increasing fresh food access in low income communities, building energy efficient affordable housing, and financing charter schools in the Greater Philadephia area.  It feels like I'm making a donation, but I'm getting it all back! Plus interest - a lot more interest than most savings accounts or CDs are getting nowadays.  You'll probably want to start listening to Move on Up immediately because it will last for 9 minutes.



More generally, community investing is "financing that creates resources and opportunities for economically disadvantaged people in the US and overseas who are underserved by traditional financial institutions. Community investors make it possible for local organizations in rural and urban areas to create jobs, provide financial services to low-income individuals, and supply to capital for businesses, affordable housing, and vital community services, such as education facilities."  This definition is from The Community Investing Center, an extremely useful website, really the only useful website about this.  When I searched their database, I wanted to find an institution in Greater Philadelphia, but there are lots of parameters you can select.

There are so many options! The Cooperative Fund of New England finances cooperative housing, worker-owned businesses, and community-oriented non profits in New England.  Owen's housing coop got a loan from them last year to finance maintenance on their coop house. Oikocredit requires a minimum investment of only $20 to invest online in global microfinance.  Pick a global one or a tiny local one.  Four Bands Community Fund loans only to the Cheyenne River Indian Reservation in South Dakota and offers investors interest rates of 0-4% for loans longer than 5 years with a minimum investment of $5,000.  I bet you will find something intriguing.

Minimum investments vary, but many I've seen are about $2,000.  Each fund also has a different investment term, sometimes one year, sometimes three.  Generally the investor can choose up her interest rate (up to a maximum), allowing investors to select less if they choose to be more generous.  This article by Timothy Freundlich (a Wes film major, surprisingly) offers a better primer on community investing than I have here.  I'm just here to get you psyched.  Look, from a pure investment standpoint, where else are you making a sure 3% right now?  Plus your money is being awesome when you make a community investment.  TO THE DATABASE!

How Should Transactions Use Money?

Below are two articles that look at non-credit card money systems.  The Wired article ends up talking mostly about PayPal and other digital currency, while the Yes! article examines local and regional currencies like BerkShares.  Some of the comments on the Wired article bring up interesting points about the potential inflation of digital currency and the difficulty of maintaining a stable value.  BerkShares offers the opposite of PayPal: physical currency that is only accepted in a limited region.  Between these two articles, questions arise about convenience of exchange, the role of money in society, and how to chip away at the credit card dynasties.

The Wired article includes a short history of the current credit card system: "Until the late 1950s, each card was usually tied to a single bank or merchant, limiting its usefulness and resulting in a walletload of unique cards. But when BankAmericard — later renamed Visa — offered to split its fees with other banks, those banks began to offer Visa cards to their customers, and merchants began accepting Visa as a way to drive sales." And so on.  You've probably used alternative currencies and systems - did you have a college ID card with declining balance points or meals on it?  That's just a checking account (that you can't withdraw from) and a debit card, and Visa is not involved.  Sure, it's a limited economy, but it is similar to pre-credit cards when each bank had its own card.  Anyway, check out the articles:

The Future of Money: It's Flexible, Fast, and (Almost) Free
by Daniel Roth, Wired Magazine March 2010

"An army of engineers and entrepreneurs is rushing in, hoping to do to the payment world what has already been done to the music, movie, and publishing businesses — unseat a legacy industry built on access and distribution, drive the costs to zero, undercut the traditional middlemen, and unleash a wave of innovation."

A Day in the Life of a Berkshare: How a Regional Currency Works
by Bill McKibben, Yes! Magazine Oct. 18 2010

"The currency is literally teaching people to think more carefully about how their habits build or erode community. It's about creating trust in a world where economists have taught us that we're self-interested individuals and nothing more."

Predatory Lending

People who don't have bank accounts (and even some who do) pay exorbitant premiums when they access their money through check cashing, payday loans, and cash advances.

Check cashing

Say you just did 10 hours of yardwork for someone and she gives you a $100 check. You don't have a bank account and you need the money now, so you bring it to a check-cashing place and pay a 5% fee to get cash. Basically, you spent 30 minutes working to earn the $5 that will give you access to the other $95.

Payday loans and cash advances

The Center for Responsible Lending has an excellent glossary, which explains that a payday loan is "marketed as a cash advance on the borrower's next paycheck. The terms are typically as follows: a loan amount of about $300, a two-week term, and a fee of at least $15 per $100 borrowed, which amounts to an annual percentage rate of about 400%. The borrower's personal check or debit authorization is held as collateral. Most payday borrowers get caught in a debt trap, unable to pay off the loan in the two-week term, and so are compelled to avoid default by paying repeated high fees for no new money."

(source: wikipedia)

According to DeNeen Brown (below), the DC government passed a law capping the annual percentage rates of these loans at 24%, so many of these establishments have closed or relocated.  Sure, predatory lender will find other ways, but this is a solid move in the right direction.  Check out your state's restrictions on payday loans.

Why don't people just get bank accounts? In short, because not having bank accounts gives them the feeling of more control over their money. People who have been slammed with minimum balance fees and overdraft fees at banks may feel like money in a bank is always disappearing. When they use check cashing, at least they know the exact fee that will be assessed. Perhaps language is a barrier, or lack of documentation. The Patriot Act requires proof of address, like a utility bill, which is hard to get if you're subletting or living in any other informal arrangement.

Below are two articles that explore how these predatory lending "services" work in practice.

"Living without a bank: Fees and confusion galore" Candace Choi, Oct. 3, 2010

A reporter in NYC abandons her credit and debit cards for a month to see how difficult it is to access her own money without banking services. She accumulates $93 in fees during the month by using prepaid cards, check cashing, and money orders.

"The High Cost of Poverty: Why the Poor Pay More" DeNeen L. Brown, May 18, 2009

"The poorer you are, the more things cost. More in money, time, hassle, exhaustion, menace." This article looks at high-priced food stores in low-income areas, check cashing and payday loan services, and substituting time for money.

My answer to this problem is to get people accounts at credit unions.   When we the Cheapions were volunteering at an Earned Income Tax Clinic in DC, people without bank accounts considered taking their tax refunds to check cashing places which could potentially eat up hundreds of dollars.  Generally, we told them to find a credit union and sign up for a basic, free checking account with no minimum balance.  Credit unions are not always secret clubs.  I use the NIH Federal Credit Union, which has limited eligibility, but Laura uses Philadelphia Federal Credit Union, which is open to anyone who lives, works, worships, or studies in Philadelphia.

Anyway, predatory lending is bad and traps people in a cycle of debt.  Credit unions are fabulous.

You CAN maybe Afford Pricey Grad Schools

This is a decent video that explains how the Public Loan Forgiveness Program (PSLF) and the Income-based Repayment Plan (IBR) can work in tandem to reduce your school loans.

In their example, Lee takes out $150,000 in loans to go to law school.  He graduates and gets a job making $40,000 a year in some nonprofit.  Without PSLF and income-based repayment plan, he'd pay $1,742 a month for 10 years, or 52% of his annual income.  But with PSLF/IBR, he'd pay $297 a month for 10 years, only 9% of his annual income, and when he makes 120 payments, he's done.  I hadn't realized in my previous post that income-based repayment would apply to a salary like $40,000.  Instead of paying back $150,000, he only pays back $35,640!  That's more than 75% off!  Let's ALL go to law school!  Because we can't find jobs.

If you don't work in public service but don't get paid much anyway, you pay into IBR for 20 or 25 years and then the rest is forgiven.  Much longer.

Again,"PSLF only works on federal "Direct" student loans. These are loans with the federal government as a lender. To participate in this program, you will need to consolidate your loans from Sallie Mae or other loan companies into Direct Loans. See http://loanconsolidation.ed.gov/ to learn more about Direct Loans. It doesn't work on Perkins or parent PLUS loans."

For more number crunching good times: finaid.org loan calculators.

Dumpster Diving FAQ

We've been receiving some feedback here at Cheapions HQ that readers are yearning for more nitty-gritty posts. So I thought we might explore dumpster diving for food, an activity that is both nitty and gritty. Turns out nitty is not a word on its own. Some FAQs about dumpster diving follow...

Q: Are you seriously so cheap that you will trashpick for food?

A: Personally, we don't dumpster dive because we're starving. We are not starving, or even hungry. You might think rooting around in dumpsters is disgusting. Sure, it can be gross. But you know what's more disgusting? Perfectly good food being thrown out and heaped on landfills when there are people who are starving. According to sources in this Culinate article by Jonathan Bloom, more than 40 percent of all food produced in America is not eaten and 25% of the food that enters our homes is not eaten. For me, dumpster diving is less about saving money and more about keeping edible, nutritious food from rotting in a landfill. Too many resources go into producing and transporting food in the first place for it to just get thrown away at the end.

Q: Isn't dumpster diving super sketchy?

A: Trying to reclaim some of the food that ends up in dumpsters is risky. It's illegal in many places. Find out what the law is where you are. You have to go after the store is closed or at least at a time when there's likely to be food in the dumpster, so it might be dark and creepy. The worst case scenario is that a store employee sees you and calls the police for trespassing, I guess. Store employees practice very varied levels of turning a blind eye. Mostly their problem is their liability for dumpster divers getting hurt in/around the dumpster or getting sick from bad food.

Q: Eh, so, where might one dumpster dive?

A: Grocery stores, supermarkets, specialty stores...you're gonna need open dumpsters, not locked trash compactors. A great place to go is a store that sounds like Schrader Moe's, because their over-packaged foodstuffs make it easy to reclaim items. In this post I'm focusing on food, but obviously there are many non-foods to be saved from dumpsters too.

Q: Isn't the food in dumpsters bad/expired/rotten?

A: Sure, sometimes. But expiration dates are just numbers that lawyers make up to cover their asses, and usually food is totally fine for a bit of time after that date. They can't legally sell it, but that doesn't mean it's not worth anything. With Schrader Moe's overpackaging, if one pepper out of four in a container is weird, they throw out the whole container.

Q: What treasures have you found in dumpsters?

A: Dumpstering is inconsistent. Sometimes you will be overwhelmed with how MUCH there is. And many times you will walk away with empty, dirty hands. Here is part of a good haul from Schrader Moe's:


Does that look like good food to you? Damn straight it does. We ate roasted red peppers for weeks.


Q: Can you give me any tips on how to dumpster dive?

A: Lots of people are much more experienced at this than I am. But my tips are: wear closed-toe shoes, bring a headlamp/flashlight, and don't make a mess. Do it discreetly and do it often.

Socially Responsible Investing

If you're a bold little saver, you're probably taking advantage of your employer's 401(k) or IRA plans. Yay saving and investing! But wait, a dark cloud looms. "Investors - if unconsciously - silently provide the fuel that keeps the world economy moving, unaware for the most part of the companies that use their savings" (Landier & Nair). Having a retirement fund like a 401(k) or IRA means you own shares in the stock market. Maybe you have an index fund. Here's a fun task: check out your fund's top ten holdings - the ten companies that your fund owns the most shares of.

Here are the top ten holdings for my Roth IRA, which holds shares of the Vanguard 500 index fund:

1		Exxon Mobil Corp.
2		Apple Inc.
3		Microsoft Corp.
4		Procter & Gamble Co.
5		General Electric Co.
6		International Business Machines Corp.
7		JPMorgan Chase & Co.
8		Johnson & Johnson
9		AT&T Inc.
10		Chevron Corp.

AHHHHHHH!! I am a tiny shareholder of ExxonMobil? This news was unacceptable to me, but I guess it shouldn't be surprising. I began to research options for "socially responsible" investing, or SRI. First I looked at Vanguard's Social Index fund, which "invests primarily in larger U.S. companies independently screened to meet stringent social and environmental criteria." these are its top ten holdings:

1		Apple Inc.
2		Procter & Gamble Co.
3		JPMorgan Chase & Co.
4		Wells Fargo & Co.
5		Bank of America Corp.
6		Cisco Systems Inc.
7		Oracle Corp.
8		Google Inc. Class A
9		Intel Corp.
10		McDonald's Corp.

Um, seriously? Trading big oil for big banks isn't exactly the kind of responsible I meant. Also, any hurdle set low enough for lardass McDonald's to jump over is not high enough for me. So from I started researching. I read some books. Amy Domini, who started Domini Investments, wrote Socially Responsible Investing: Making a Difference and Making Money in 2001. She outlines that "three basic aspects to socially responsible investing are screening portfolios, direct dialogue with corporations, and investments in community development financial institutions." Vanguard's Social Index Fund is a screened portfolio, meaning that it just takes out really "bad" companies like oil, weapons, tobacco, gambling, etc. Direct dialogue involves writing letters to Boards of Directors and trying to convince a companies to move towards more responsible choices. That is time consuming. Community investing is very cool and I will write about that in a separate post, but for now I want to focus on more mutual fundy things.

The best book I read on this subject was Investing for Change: Profit from Responsible Investment (Oxford University Press, 2008) by Augustin Landier and Vinay B. Nair. They posit that "acting as a shareholder might be faster and more effective than acting as a citizen." Their approach is pretty economic/academic - they're out to prove that SRI isn't just a whimsical hippie thing, and that it can be just as profitable as non-SRI. This counters the widely-held belief that in order to make ethical investments, you have to forgo big profits. Augustin and Vinay say that ain't true.

They also bring up some good questions. Is your investment helping a smaller, more responsible company compete? Is it showing big companies that they can be more profitable by being socially responsible? This is a good point because so many of the screened portfolios, like Vanguard, are full of companies that aren't ExxonMobil, but aren't impressive at all. And I've got to be impressed, dammit. So I started focusing on renewable energy funds, because I'm willing to gamble that small geothermal, wind, and solar companies will grow in the future. And now I'm entering a world of pain, full of 100-page prospectus PDFs and acronym glossaries as I compare the various funds and options. Coming soon: I will publish a post on what I've learned so far about evaluating mutual funds. The most useful research site for this is socialinvest.org. Anyway, the point is, be aware of where your money is and what you are supporting. Creepy closing fact from Augustin & Vinay: "in 2007, of the 100 largest economic entities in the world, 32 are companies, not countries."

I Just Read This Book: "Priceless: The Myth of Fair Value"

I just read Priceless: The Myth of Fair Value by William Poundstone.

This book is mostly useful as a lesson in how to be aware of sneaky marketing and advertising, or as I like to call it, Defense Against the Dark Arts. Like a Malcolm Gladwell book, you get the point in the first few chapters but keep reading because it's entertaining and a week after finishing it you can't remember anything about it.

The basic idea is that people are terrible at absolute value pricing and much more sensitive to relative pricing. Not shocking. For example, if I showed you a pristine-looking windshield and asked you what it was worth, you might throw out a guess like $500. If I showed you a windshield full of dents and scratches and told you it was worth $500 and asked you to re-price the nice windshield, you might say $1000, judging it to be worth twice as much as the nasty windshield.

Poundstone looks at examples of this phenomenon in jury awards, theater seats, phone bills, real estate, car sales, sitcom star salaries, restaurant menus, super bowl tickets, etc etc. And of course he surveys dozens of studies performed with hapless undergrads. One recurring scenario is called the ultimatum game. "You are given $10 to split with a stranger, and you get to propose how the money is divided-for example, $6 for me and $4 for the other guy. The twist is that the other person gets to decide whether to accept your split or reject it. Provided she accepts, the money is split exactly as you specified. Should she reject the split, neither of you gets a penny." Many studies performed versions of this game, and nearly every time the responders felt the offer to be unfair (ie $8 for proposer and $2 for responder), they rejected it because of the perceived unfairness, forgoing a free $2 for the sake of punishing the proposer.

The point is, money-related decisions and ideas of value are often based more on emotions and context than righteous objectivity, no matter how savvy you think you are. If you nerd out on game theory, you'll like this book. Poundstone spends a bit too much time chronicling and adoring the founders of behavioral economics, but I enjoyed it otherwise and would say that it's worth reading and/or skimming.

Poke through the book with this sweet google books embed:

Your College and Your Credit Card

I was delighted that the CARD act allows people 18-21 to get a credit card only with a cosigner over 21 because this will severely limit the amount of on-campus recruiting credit card companies can do. However, this is not the only type of shenanigans going down. In his recent article "Colorado Colleges Cash in Big on Credit Deals," David Migoya investigates several colleges and their arrangements with financial institutions. Here is his little chart:

click to enlarge

The benefits for the college can be immense - in this chart alone I see a $75 payout for each new account, 0.7% of all transactions made on the card, up to $550,000 paid in yearly "salary," and lots of vague additional marketing fees. I get it. People see it as some kind of win-win: I make purchases on my credit card and my alma mater gets 0.5% at no cost to me!

Here is the cost to you: choice. As a student, you might tend to trust your college. It's a nonprofit, it wants to educate you, it has your best interest at heart. False. Your college's first priority is your college. Your college is hungry for money, but you already knew that because you're paying tuition. Maybe your college can negotiate with the company to get you a card with a great APR, low fees, and no sneaky tricks. But maybe Visa just offers your college $4.1 million dollars over 7 years and your college accepts a compromise on your behalf. This is simple selling out: lending credit card companies the reputation of a college to hook its students into starting their cycle of debt with Visa, not Mastercard.

I recognize that it's hard for a university to forgo a "free" $550,000 a year. That's a new soccer field! Full ride scholarships for 2 and a half orphans! An endowment for a cotton candy machine to live in the library in perpetuity! I get it. But consider: if the deal looks lucrative for the university, imagine how much money the credit card company makes on the debts of thousands of students for years to come. Maybe Sally Sophomore would have gotten a card with a lower APR if she'd shopped around. But she just got the card in the mail with university logo on it, and she just called to activate it. So easy!

There is an interesting example out of the Colorado list: The University of Colorado, which offers a student ID card tie-in to ATM cards from Elevated Credit Union (formerly U of Colorado Credit Union). The university relations comment: ""For us it's not some bank out of Wilmington, Del., that's saying, 'Hey, get a credit card,' " Ken McConnellogue said." This is obviously a special partnership, since the credit union was originally formed by people affiliated with the university. It's a more closed system, and the money stays local. This is not a credit card at all - only ATM/debit. Anyway, interesting counter example, but overall I'm pretty uncomfortable with schools making product recommendations.

Financial Advice! from American Express...

That's right, American Express and your friendly conglomerate Federated Media are offering a "fun, fresh" personal finance website for young adults called Currency. 25 real personal finance writers will post articles. There are 6 online mini course modules offered "in conjunction with Wharton." You get "currency stars" for reading articles and taking courses, and once you get 100, you'll get a gold star! For serious.

This is akin to tobacco companies being forced to tell kids that smoking is baaad. A wonderful PR opportunity - see everybody, we're doin' our part! We samaritans at Amex just want to teach, lead, and inform. And gather data. Precious, precious data. Oh, and there's a tiny link at the bottom left of the site that says "Not a cardmember? Find out how you can become one."

There's also an iphone app for foursquare users: "Social Currency is the app that lets you shop with all your friends, whether they're down the street or across the country. Tell them what you're buying, where you're finding it, how much you're spending, and what you want. Even better-find out what your friends are buying, too."

And by friends they mean American Express and Federated Media. Hm. How about this FAQ:

Q: What’s a Want?
A: That's like a Purchase you haven’t bought: tell your friends what you're looking for and where.

Redefining a "want" as something you just haven't bought yet. And here I thought that Financial Education 101 is to figure out the difference between needs and wants so you stop buying lots of wants.

Also, many of the articles are very short (to account for Generation Y's frenetic attention span) and also inane. I uncovered important tips such as: "If you do own an espresso machine, dust it off and locate the manual." How very wise and thrifty. In a mini-article called "Secrets of Extreme Savers," it is revealed that you can automate your bill payments. (!gahjustblewmymind) "You don't have to be the queen of coupons (or the king of ramen noodles) to save." Thanks for that hilarious tidbit, Jeremy Vohwinkle (*I didn't make up that name). However I am beginning to envision that the king of ramen noodles would be a good, cheap Halloween costume, something like the flying spaghetti monster.

Ok enough. Obviously "Currency" enrages me. Getting your financial advice from a credit card company is like getting your high school health curriculum from Burger King. Even with a whole slew of financial writers signed on and this partnership with Wharton, this is still sponsored by American Express and you better believe they're slurping up all the data about your "wants" on foursquare. I am always angry when corporations pretend to lend you a kindly hand.

What are your favorite non-corporate personal finance websites and blogs? Leave em in the comments. There's gotta be something between Currency and the FDIC's fuddy-duddy Money Smart for Young Adults in which a woman called "Penny Cash" reads aloud how to use the menu buttons for 10 minutes. Look, we know how to use the internet, FDIC.

Student Loan Forgiveness Extravaganza

While some college grads enjoy a time of whimsical life exploration after graduation, others realize that they owe $100,000 in student loans. Like everybody else, you want to spend a year in the Amazon basin studying pink river dolphins, but you can't just pause payment on the loans because Sallie Mae will hunt you down and slay all of your dolphin friends.

So you are stuck trying to strike a balance between what is financially responsible (making a large income to pay off loans quickly) and what you actually want to spend your time doing (riding dolphins). Or maybe you just want to take a low-paying public service job.

You've probably heard about the Public Service Loan Forgiveness deal where after 10 years of public service the balance of your federal loans are forgiven. A standard loan repayment plan usually is on a 10-year schedule, so this loan forgiveness is only really pertinent if you are on a different repayment plan. You have to make 120 payments, but they don't have to be consecutive. There are exceptions for PeaceCorps and Americorps. If you are planning to request this loan forgiveness, make sure you are keeping documentation of your employment and loan payments. Check out these PDFs for more specific info: (Q&As) and fact sheet. Honestly this program is a lot less useful than I thought, considering most people are on track to pay off their loans in 10 years.

There are loan forgiveness programs for:

• teachers in low income schools
• nurses in non-profits
• healthcare practitioners who serve min. 2 years at underserved sites with the National Health Service Corps (aka be a dentist in Arkansas)
  
• people who serve in AmeriCorps ($4,725 after completing 1700 hours)
• PeaceCorps volunteers (repay 15% of a volunteer’s qualified student loans for each year of service until 70% of the starting balance is repaid)
• health/science researchers
  
• lawyers in public service: ABA (see menu at left) and Equal Justice Works
• veterinarians who work in shortage areas
• law enforcement officers, armed services
  

Just google your state/field of work. You probably know more than I do about your profession/training, I'm just here to say TRACK IT DOWN because it may be thousands of dollars. Talk to your HR department, maybe they've got some sneaky tricks. Just because it's too late for scholarships doesn't mean the free money has run out. And if you're applying to grad schools, compare your potential schools' public service loan forgiveness programs. Or pull a Laura and go for a PhD where they pay you instead of a master's where you pay the school. High five!

That nearby university + you = ??

I’ve been dropping the ball on Cheapion posting, but in an effort to procrastinate, it’s time for me to start back up. While I had originally intended to do a few early posts on moving to a new city, cost/benefit analysis on joining coops, etc., I will start with “Ways to get free things from your university,” in case any of you are also trying to mooch as much as you can from a school. This is an acceptable alternative even if you’re not a college/grad student, as you should be taking advantage of these free things if you live near one. I’m talking to you, Boston and Philly people—Philly apparently has 70 institutes of higher education in the greater area, and Boston has more. That’s crazy. That’s a lot of free lunch.

Now, here are some tips:

1)      Get onto every list serve there is. These list serves are like cash money—they advertise free lunches. For example, I am on the Annenberg one, the Political Science one, the Center for East Asian Studies, the Graduate Student Events, and I generally check the blogs related to the University. (Perhaps a future Cheapions post will be about finding the best city-related blogs...)

a.       Make sure you quickly figure out which ones simply serve pizza and which ones have tasty salad bars, brownie cups, etc. Just like in the last post—you have to be selective, kids.

b.      Like Heesa and Caitlin, I also don’t take responsibility if you get Type 2 Diabetes

2)      Investigate your free transportation options. For example, we can ride a free little shuttle bus, call Penn Transit (they’ll pick you up), or even have someone walk us home. I guess the last one isn’t that enticing until it’s really late at night, but hey, safety matters too, especially if that safety is free.

3)      Scope out where the free things are left

a.       Our grad student center, for example, offers free coffee and tea at all times. They don’t have milk, which is a problem, but a solvable one—there are cafes nearby that have free milk out near the coffee. Now that’s problem solving.

                                                               i.      There is a sign that basically says, “don’t be that d-bag who takes all of the tea”—so I’ve actually resisted my hoarding tendencies because I respect the foresight to put up the sign.

b.      Free condoms in the student health centers and the grad student center

4)      Get Amazon Student—it’s free two-day shipping for a year. That’s delightful, Amazon, thank you. For those of you thinking, “that’s almost enough to motivate me to go back to school!”—don’t fret, you still don’t have to. All you have to do is have a .edu email address. Thanks, Wes, for letting us keep those forever. I registered w/ that one long before I got the Penn email address.

5)      MOVE-OUT DAY. While Caitlin and Owen can speak even better to the bounty they got from Brown’s move out day in the spring, it’s important to begin your thought process about move-out days. For example, I’m not buying a bike yet since it’s 1) not a pressing need and 2) I’m thinking that May will be the time that people unload big purchases for little money, and I want to get in on that. So, while it’s a ways away, this is perhaps the best thing the universities in your town are offering to you, Cheapion follower.

You Don't Win Friends With Salad

Yesterday we went to an all-you-can-eat Chinese-Japanese weekend special seafood buffet. I saw some chump putting a big scoop of white rice on his plate. Are you kidding me, dude? After tax and tip you are paying upwards of $13 for this meal. Please. Get out of the way so I can access the crab legs with both arms. You disgust me.

I was going to write a post about "getting your money's worth" and "stretching a buck" but I realized all I wanted to talk about was all-you-can-eat buffets. Primarily, I need to share this:

The 2010 All-Inclusive All-You-Can-Eat Buffet Guide

This person, "Heesa Phadie," embodies the Cheapion ethos. Heesa Phadie recognizes the importance of strategy. Heesa Phadie is not responsible if you develop type 2 diabetes.

The article mentions that "many establishments will raise their level of air conditioning to make diners uncomfortable, making them want to leave earlier." The buffet yesterday employed this technique, but luckily I was equipped with many warming layers. Heesa Phadie echoes my own sentiment with gusto: "There is never a need to eat steamed rice (shrimp fried rice in small amounts is acceptable), dinner rolls or the like, this is completely unacceptable."

What I like about this reputable guide is that it's not just about money. It's about conniving. Just because you are paying money, doesn't mean you're the one getting huckstered.

Credit or Debit?

Another decision you make often is how to pay for things. Even when you use debit, you can choose to use a PIN or signature. "Retailers generally prefer that you use PIN transactions, while banks encourage you to sign for purchases by offering mileage points or other incentives for signature-based debit payments." ("The dark secrets of debt" from consumerreports.org). When you use a PIN, the amount is immediately withdrawn from your account. When you use a signature, the transaction takes a few days because it goes through the credit card network.

Consumer Reports adds: "Signature transactions are more profitable for banks. The interchange fees that banks get from merchants for processing signature payments is much higher than for PIN-based transactions. On a $100 purchase, for example, the bank that issued the card typically collects only about 20 cents in interchange fees when payment is made using a PIN. But it gets at least seven times more than that if the customer signs to authorize the purchase, says Avivah Litan, a senior analyst at Gartner, an information technology research company in Stamford, Conn."

So when I buy a sandwich for $7.00 with my visa debit card using a PIN, visa gets 43 cents from the merchant. Check out this FUN website, The true cost of credit, which calculates how much it costs the merchant to process your transaction based on what kind of credit card you have. You don't have to actually enter any numbers, just scroll down a bit and click on whatever brand you have. Of course, you eventually pay for the convenience of using a credit/debt card because the merchant raises prices to cover those fees. In a year, that sandwich shop may pay $10,000 to visa in transaction fees. If you're really trying to support a merchant, give em cash dollars, not plastic.