I asked a friend of mine to give me some feedback on the Why and how to track living expenses post. She’s been working on implementing her own budget, and it’s been working really well for her, so I thought she might have some insights for aspiring budgeters.

Start Simple

She said it can be overwhelming and discouraging if you try to tackle the whole thing at once, so start simple. Maybe focus on one or two areas at a time until you build up to a full-blown, tracking-every-expense, system.

I would suggest picking one of the monthly variable expenses, like your car gas, home gas, electricity, or a particular habit, like Starbucks coffees, and just track that for a few months.

This will let you see how the spending varies from month to month and how much you’re really spending on that one thing. You may be surprised how little it really is, and find out that it’s other expenses that are flying under the radar and blowing the budget.

Also, once you are tracking that one expense, you can see how any changes you make to your habits affect the spending. For example, you might try turning up the thermostat a degree to see if it shaves any off the electric bill. It may be surprising to find out what is and is not worth worrying about.

Cash Is King

For her own budget, my friend has gone with a simple cash budget. She puts a given amount of cash in her purse for the month, and when it’s gone, she’s done spending for the month.

I imagine seeing and feeling how many dollars are left for the month can really put the spending in perspective.

It also hurts to use cash. We know it’s real money, whereas with a credit card, it’s just a swipe. The same swipe that buys a candy bar, also buys a big screen TV. Paying cash for a big screen TV hurts a lot.

Look For Savings

She also suggested to save more money by watching for coupons and sales. Utilize them…but only for purchases you would make regardless. In other words, don’t buy something just because it’s a good deal.

And check your receipts. It’s surprising to me how many times I find errors – usually double charging (scanning an item twice) or wrong pricing (not honoring a sale price, for example).

Why To Budget

Lastly she said

I think the “Why” really boils down to happiness. For me it’s security, knowing I can provide for myself and my future.

And that’s really the key. Tracking and budgeting our expenses lets us know where we are, and where we’re going, so we can feel happy about both.

I’ve discussed or mentioned standard of living, budgets, and expenses in past posts, but I’ve never really gone into the specifics on why or how to track this stuff. I have a few friends who have asked me at various times how I do this, so this post will be my answer to that question in the future.

The Why

I track my living expenses so I know how much it costs me to live per month. This allows me to know:

• If I need to be earning more income to pay for my expenses.
• If I can make a large purchase like a house or car.
• If I can add a new monthly service/expense.
• Or how long I can go without an income if I quit or get fired.

These are questions that lead to a lot of worry and stress if I don’t have answers to them. That kind of stress reduces my happiness to less than it could be.

A less obvious point is that tracking my living expenses allows me to know how much of my income I do not need.

So, for example, I realized not too long ago that I needed less than 60% of the income I was earning. So I recently reduced my work schedule at my regular salaried job to 3 days a week.

I am voluntarily passing up 40% (2 days out of 5 days) of my potential income to enjoy those 2 days with my family. That’s a 3 day workweek, and a 4 day weekend, every week. It is an awesome schedule.

Just so no one gets confused or discouraged, Dividendium makes a teeny tiny amount of income, and I don’t spend any of it on my living expenses. I also don’t spend any of the income from my investments.

All of the income I spend on living expenses comes from my employer and my 3 day a week paycheck. All of my ability to work only 3 days a week is due to tracking my monthly living expenses.

The How

Fixed Monthly Expenses

First, make up a list of all your fixed monthly expenses and their amounts.

These are payments that are basically the same each month. Some examples would be:

• mortgages
• charity donations
• medical insurance
• internet service
• cell phone service
• Dividendium subscriptions : )
• school loan payments
• Netflix subscription fee
• cable
• monitored home alarm
• daycare
• and so on…

Annual Expenses

Second, make up a list of all your annual expenses and their amounts.

These are expenses that you pay less often than monthly, like once a year, semi-annually, or quarterly. These are usually the ones that are forgotten when totaling monthly expenses. Some examples would be:

• life insurance
• car insurance
• homeowner’s insurance
• property taxes
• income taxes
• car registration
• car inspection
• annual medical or dental exams
• annual IRA deposits
• Christmas, birthday, and anniversary gifts
• and so on…

Many of these are expenses that could be paid monthly, but that often get a discount for being paid annually.

Christmas gifts is almost always forgotten about until the January credit card bill hits. This will help plan ahead for that surprise, so the money is already sitting there waiting to be spent.

Variable Monthly Expenses

Third, make up a list of all your variable monthly expenses.

These are expenses or types of spending that you have that go up and down depending on the time of year, or how much you used the service that month. Some examples would be:

• electric/water/trash bill
• home gas bill
• car gas expenses
• groceries
• pet expenses
• baby expenses
• and so on…

The amounts of these will vary throughout the year usually. For example, the electric bill for my house can range from $100 to $200 per month over the year.

Discretionary Expenses

Fourth, make up a list of all the things you like to spend money on that didn’t get listed above. These are things like:

• clothing shopping
• vacations
• home furnishings
• movies
• concerts
• eating out
• coffee
• and so on…

All expenses are discretionary really, but these are the ones that are obviously just something you chose to buy or pay for.

My wife and I budget $50/month each for spending on whatever we want. We also pay for each other’s Christmas, birthday, anniversary, and other gifts out of this amount.

Totaling Expenses

Add up all of the Fixed Monthly Expenses. This sum is the smallest your monthly bills could be each month.

Add up all of the Annual Expenses, and divide by 12. This gives you the amount of money you should set aside each month so you’ll be ready to pay the expense when it comes due during the year.

Add up all the Variable Monthly Expenses from the past year, and divide by 12. This again is the amount of money you should set aside each month to cover these expenses throughout the year.

Add up all the Discretionary Expenses for the year, and divide by 12.

Now, add all 4 of those numbers together. That sum is your Expected Monthly Expenses.

If that amount is higher than your current monthly paycheck, or the monthly paycheck you’d like to be able to live on, then it’s time to drop some expenses.

Unexpected Expenses

The above only accounts for expected expenses, expenses you know are coming at a specific time. Unexpected expenses are expenses you will probably have at some point, but you don’t know when and don’t really know how much either. These are things like:

• home repairs
• surgery
• car repairs
• fines or tickets
• and so on…

Although you don’t know how much these will cost or when they will happen, you can still get an idea of how much you need to cover if any one expense happens. Generally they don’t all happen at the same time.

For example, the most you’ll have to pay in a given year due to an illness is the amount of your medical insurance deductible. Or the most you’ll have to pay for a home repair is your homeowner’s deductible. So I would take the larger of those, divide by 12 and add that on to your monthly expenses number from above. For me, this amount is an extra $500/month over my Expected Monthly Expenses.

This way, when you do have to make one of these unexpected expenses, you’ll either be able to pay it off in a year or less, or you’ll already have saved the money up to pay off the expense.

This gives a huge peace of mind benefit, since you don’t have to worry about how the problem will be paid for. I mentioned in a previous post how Taleb uses this kind of planning to avoid having little annoyances wreck his day.

The Rest

If after going through the list above, you still have extra income, the rest of your income can be used for investing, or you could choose to forgo the income like I did and enjoy your time instead.

Expenses Inch Up

The amounts for the annual expenses and the variable monthly expenses will generally go up each year. For example, our insurance premiums and our property taxes almost always go up some small amount each year.

So it may be that you haven’t set exactly enough aside for that particular expense by the time it comes due. This is fine. Pay the new amount by taking a little out of your Unexpected Expenses, and then recalculate your monthly expenses with the new amount.

Trip Ups Starting Out

Since we divide the variable monthly expenses by 12, we’re taking an average of the monthly expenses over the entire year. It’s possible when you just start out doing this, that the average expense amount will not cover the monthly expense amount, and you won’t have any savings built up yet to pay the excess.

For example, my monthly electric/water/trash bill ranges from $100 to $200 per month, but averages at $150. So if I started this in June, when my bill is $200, I’d find myself short $50. Next year though, I would have saved up the $50 during the spring months when the AC isn’t so necessary, and so would be able to pay those high AC bills without breaking a sweat. Ha.

Again, this can be covered by the Unexpected Expenses amount.

Swimming in Cash

Since you’re setting aside 1/12 of the money for some of the expenses and your Unexpected Expenses amount each month, you can end up with a gob of cash sitting in your bank account. For example, at some point during the year, I will have almost all of the $3000 in property taxes that I need to pay that year sitting in my bank account.

Don’t spend that money! It will look like it’s just waiting for a place to be spent or invested, but it’s not. It’s already got a place waiting for it. You’re effectively self-escrowing for all your annual expenses, just like the bank does for the property taxes on some mortgages.

One thing to do that might help keep it separate in your head is to move that money to a separate account. Most banks will let you setup a separate account where you can transfer money between your main account and this new account. Each month you could transfer the 1/12 expense to that account. And then withdraw the full amount from that account when it’s time to pay.

I use an internet bank account for this since they get a slightly higher interest rate. But it takes a while to transfer the funds back and forth, so it might be a better idea to use a separate account at your existing bank, since transfers on those are immediate.

Debt Payments

I would make any debt payments, like piled up credit card bills, part of my Fixed Monthly Expenses. You could put your Unexpected Expenses amount towards paying down debt, but I really don’t recommend that.

The reason is that when those Unexpected Expenses show up, you’ll already be stressed because of what they usually are. Either a medical issue, or a home repair, or car repair, or some other issue that’s probably already creating stress in your life just from what it is, and how much time you have to take off from work to deal with it, as opposed to how you’re going to pay for it.

Having that Unexpected Expenses cash just sitting there waiting to pay off the issue is often more comforting than knowing that you can borrow the money to pay for the unexpected expense.

Bi-weekly Paycheck

If you get paid every two weeks, as opposed to twice a month, you’ll always get at least 2 paychecks per month. But some months, you’ll get a third paycheck.

I would view those 2 paychecks as my income when considering if I can pay my expenses, or if I need to trim a few. And ignore the 3rd paycheck. When I get it, I’d just stick it in the Unexpected Expenses account, put it towards something else I wanted to splurge on like a vacation, or tell the boss I’m taking off another 2 weeks this year unpaid.

By doing this, I’m making sure that I can pay my expenses every month without issue.

You Created a Budget

Now you have a plan for what you think is how you spend your money. This is effectively a budget. Nice job setting that up!

Now we just need to make sure that it’s actually reflecting reality, and that you can actually follow it.

Analyzing and Tracking the Spending

The way I do this is to keep a spreadsheet of my budget, what I expected to spend. And on the same spreadsheet I record monthly what I actually did spend.

I do this by keeping my receipts for the entire month, and then sit down for an hour or so at the end of the month to total it all up, and add it to the spreadsheet.

The first month you do this, it’s immediately helpful to tell you if you missed any Fixed Monthly Expenses, or grossly misestimated how much you do or don’t spend on a particular expense each month.

And after a few months, you can see if you’re on track or if you need to make some adjustments.

And then after the first year, you have a really tight view of what your expenses are and where your money goes.

Feedback

Let me know if any of this doesn’t make sense. It’s a really confusing and complicated topic, and most people would rather ignore it until it goes away. But it doesn’t.

I try to pay attention to user feedback.

I really appreciate the praise feedback like this recent note from a subscriber:

…the work you are doing is very useful, so keep it coming.

(Side Note: If you employ programmers, figure out a way for them to receive specific regular feedback from the users, especially positive feedback from the people actually using the software or benefiting from the software that they write. Most programmers won’t admit it if asked, but this kind of thing is worth more than money to us. We want to know that people are finding what we do useful.)

I also really appreciate the negative feedback like this recent note from a subscriber:

you have nerve trying to charge for your crap

But, I need more to go on if I’m going to improve. I replied back asking for suggestions for improvement, but I haven’t heard back yet. I really hope I do. If you happen to feel this way as well, please send me any suggestions you have for improvements at contact@dividendium.com or leave a note in the comments.

I even seek out negative feedback.

I noticed recently that some subscribers were signing up for the free trials multiple times in a row with slightly different email addresses. So these are users who like the service and want to keep using it, but they are prevented from paying for it for some reason. When I like a product, and the makers of the product put a fair price on it, I’m more than happy to pay. I know if I don’t pay, then that product might disappear, and if I do pay, then the product will continue to get better. So the fact that these users are being prevented from paying is my fault. I need to fix whatever is holding them back.

In an effort to do this, I emailed two of these users. So far I have only heard back from one, but his feedback was excellent.

First, he said the product cost $14.95/month and that he was only maybe willing to pay $5/month for it. But, he was signing up for Predicted Dividends, which actually is only $4.95/month. This meant I was doing a bad job of telling the free trial subscribers how much a particular service costs when they signed up. I’ve since added the price of the service in bold near the free trial signup. I also changed the daily emails to always show the price of the service during the free trial.

Second, he mentioned that he didn’t like the recent removal of the full company name from the dividend listings, so I put that back.

And third, he asked if there was a way to search by day in the Ex Dividend Calendar so he could avoid paging through the many 1 cent dividend payers. So I made some changes and the ex dividend calendar now pages by day. And the “Previous Day” and “Next Day” paging is at the top of the calendar, so you can quickly click through the days seeing only the highest dividends at the top of the list to see if you want to look any further down.

If anyone has any other suggestions for improvements, I’d greatly appreciate hearing them.

Hope you like using the site.

As I mentioned in the last post, I use No Lose Stocks (NLS) exclusively for my investing. Here is the setup that I’m currently using.

Traditional IRA at Fidelity

I keep the bulk of my investable funds in a Traditional IRA at Fidelity. I invest that in FDIC insured CDs to earn interest. Using a Traditional IRA has two benefits in this situation.

The first is that it’s a tax deductible deposit, which means I am earning interest with my CDs on money that I normally would have had to pay to the tax man.

The second is that it’s tax deferred, so I don’t have the headache of filing taxes annually on these transactions.

One thing to note here is that the balance of the Traditional IRA never goes down. It’s always at least what it was the last time I looked at it. I can’t really overstate how much of personal happiness benefit this is. It eliminates all of the stress of seeing the balance jump up and down. Looking at this balance is always a fun thing to do.

Roth IRA at ChoiceTrade

I keep a Roth IRA account at ChoiceTrade where I deposit just the amount earned in interest on the Traditional IRA each month. I use money that I would have deposited in the Traditional IRA for this, rather than transferring money from the Traditional IRA to the Roth IRA to avoid having to file a transaction like that on my taxes.

ChoiceTrade has free options trades each month during option expiration week, so that’s when I place my NLS trades each month.

Note that I was told by ChoiceTrade that there is a $30 annual fee for a ChoiceTrade Roth IRA. However I haven’t actually had that fee deducted from my account yet, so I don’t really know if that’s true.

No Lose Stocks Call Options

The original strategy for NLS called for buying a dividend stock and using the expected dividends to purchase a put option that would protect all of the capital used to buy the stock. The problem with this is that the dividends may not get paid. Here’s a recent example of an NLS trade that could have been very painful for me.

On 2009-01-07, I purchased 100 shares of GCI for $863.00 and 1 put contract with a strike price of $10.00 that expired in January of 2011 for $451.00, for a total outlay of $1,314.00. Over the time before the put expired, I expected to collect $320.00 in dividends based on GCI’s dividend paying history to that point.

As it turns out the dividend was cut, and I only collected $32.00 in dividends, a $288.00 shortfall from what I expected. However, by January of 2011 GCI had risen in price to more than $14.00, and I sold my shares for $1,457.12. The put with a strike price of $10.00 expired worthless.

So I paid out $1,314.00, received $32.00 in dividends, and got back $1,457.12. In total, I netted $175.12. Since I invested $1,314.00, that’s a return of 13.3% in 745 days, or 6.5% annualized.

However if the dividend had been cut 100%, and the stock never went above the strike of the put, $10.00, I would have sold the stock for $1,000.00 and netted -$314.00, which would have been a loss of 23.9%. Risking 23.9% for a gain of 13.3% is a bad trade in my opinion. This trade was equivalent to me running across the road blindfolded. Yeah, I made it across alive, but it was stupid to do it in the first place and I’d be stupid to do it again.

To avoid this, I now only buy the call options at the same strike price as the put. The NLS spreadsheets have a column listing the call option, and how much of an interest rate you need to be earning to pay for the call option with interest earned over the life of the call option. Just a reminder, watch out for stocks that are buyout situations. These are easy to spot, since they look like the stock just jumped way up and has been flat-lining.

Note this also means that I don’t pay any commissions on my trades, since I’m only trading during options expiration week, and only purchasing call options (rather than buy 100 shares of stock and a put option).

Email Calendar

I setup an email calendar alert to email me when options expiration week is coming up. I set it up as a recurring event that occurs every month on the third Friday of the month. I then have it send me a reminder 1 week before the event. So the Friday before options expiration week, I get an email alerting me that it’s time to start looking at the NLS listings and placing my trades. I generally place the trades over the weekend, and let them execute on the open Monday. I could probably save a few cents/dollars by placing the trades on Monday, but the loss of my time is not worth it to me.

Price Alerts

Not all of my trades will get executed, as occasionally the price of the stock’s call option will be above my limit price. If that happens, then I just let the trade go and don’t worry about it. But if the trade gets executed, then I enter a Price Alert for that stock at the call’s strike price in my Fidelity account. This way I don’t even have to watch the stock now. Fidelity will email me if and when that stock gets to the price where I would be making a profit. Before that point, looking at the stock will only show me that it’s not a gain yet. This is again a defense against letting my investing control my emotional state. And it works very well.

Engineered for Happiness

Notice that no where in the above do I check the news, or check the market averages, or really do anything more each month than place a few trades and enter a few price alerts. So I pretty much spend only 20 minutes or less per month on my investing. Leaving the rest of my free time to use as I like. The only time that I might spend more time or pay more attention is when I get a Price Alert email from Fidelity stating that I have a profit in one of my trades. And in that case I don’t mind spending a little time, since seeing a profit is fun.

All of this is setup to allow me to invest without risking what I’m investing for…to be happy. If I’m always worried about losing money, or always checking the market, or always checking my stocks to see if I need to do anything, I’m not really enjoying my life.

“Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”
– Antoine de Saint-Exuper

I recently trimmed Dividendium to make the site easier to use for the majority of the users, and to make the better services more obvious. Here’s a rundown of what has changed.

Removed Inflatable Dividends and Long Shot Options

I removed both the Inflatable Dividends and Long Shot Options services from the public face of Dividendium.

I’ve mentioned a few times that I don’t use the Inflatable Dividends service because it’s too risky. And after my post on the historical results of NLS and LSO, my use of LSO just fizzled out, since it requires being consistent in a fairly large number of options trades, and didn’t show an obvious profit.

Current paying and free trial subscribers to those services can still get to the data via the daily emails, but I have closed off new free trial subscriptions, and removed links from the main site to those pages. As long as there are paying or free trial subscribers, I’ll keep these services running in the background.

Removed Other Dividend Lists

I removed the public links to the Highest Paying Dividend Stocks, Dividend Stocks with Options, and the 80% Payout Ratio Dividend Stocks lists.

Most of the people coming to the site are looking for an Ex Dividend Calendar. These other lists still exist on the site at the links above, so you can get to them if you want them. But the idea is to make the site more usable for the majority of the users.

Removed Google Ads

I removed the Google Ads from the Ex Dividend Calendar and from the blog posts.

These may come back eventually as they were a significant source of income for Dividendium, but for now I’m trying out not having them on the site. I fear they made Dividendium look spammy.

Moved Menus, Changed Service Ad

On the main site, I moved the side menus to the right side to match the blog. And I changed the main service ad to the service that I personally use for my own investing, No Lose Stocks. I’ll be writing a post soon about exactly how I use NLS for my own investing.

Feedback

There is more trimming that needs to be done to make Dividendium even more usable, so this is just a start. If you have any comments, suggestions, or requests, feel free to send them to me at contact@dividendium.com.

I was recently reading a blog post called Bread And Circuses. The post is mainly a rant on how most of the recent (tech) startups (Twitter, Facebook, Hulu, etc.) are websites that are only providing entertainment and not solving real problems. Actually she goes further to say that if a product’s purpose is to distract or entertain a user, then it’s not only keeping the creator from working on a real problem, it’s also keeping the user from working on a real problem.

The irony that the message was delivered via a blog post…a nefarious time sink for many nowadays…and that I’m perpetuating it with another post…is not lost on me.

Nonetheless, this particular viewpoint resonates with me. We should be trying to solve real problems, and not just ones that feed the appetite for “bread and circuses”.

So I’m looking for a real problem to solve, or a solution to a real problem that I can implement.

The blog post mentions a few problems as “real problems”, specifically homelessness, affordable education, and affordable healthcare. But I think we have to be careful of working to fix a symptom, instead of working to fix the underlying problem. If we just fix the symptom, then the problem will usually just cause a different symptom later on.

Homelessness

I can’t get on board with homelessness as a problem. I’m pretty sure that’s a choice that the homeless person is intentionally making…or the result of a mental illness, which is a different issue entirely. This guy tried out being homeless for a bit and found that most of the people in the homeless system are chronically homeless by choice and have no intention of “getting back on their feet”.

Affordable Education

I’m not sure this is the actual problem. Why does a person need a formal education? In this day and age, the answer would be to get a job. But if everyone had an education, would that mean they all would get jobs?

My guess is no. It used to be that you needed a high school diploma or a GED to get a job. But now you need a college degree. What happens when we make education affordable and everyone has a college degree? Are you going to need a master’s degree to get a job?

So my guess is that what’s really going on is employers are using education level as a way to keep the number of job applicants down to a manageable level. They can’t interview everyone, so they need a way to filter out most of the applicants.

The problem from the employer’s perspective is how to figure out who would be best for a given job without spending lots of time interviewing every available applicant. And even with interviews, I get the feeling that most employers still aren’t sure if someone will work out or not.

And the problem from the potential employee’s perspective is how to be able to get a job when jobs for that employee’s skills are scarce.

Maybe the real solution here is to change the mindset of potential employees from that of “how do I get a job” to “how can I provide a service”? To get them to think of themselves as a business and to hire themselves out, rather than waiting for someone to give them a job. Then businesses could buy the services provided and not need to interview each person.

Affordable Healthcare

This one I can agree with, but I think it’s a problem of an inefficient system and restrictive legislation (meant to be protective).

If you know the antibiotic you need to take for a given illness, can you just get it at the store? Or do you have to go see a doctor, wait in the waiting room with other sick people, possibly catch something else, pay a co-pay, have the insurance company process the claim for the visit, go to the pharmacy, stand in line with still more sick people, possibly catch something else again, pay another co-pay, have the insurance company process that claim, and if you don’t get better, go through it all again?

I used to work for an Electronic Medical Records (EMR) company, so I’m familiar with the games that are played by insurance, doctors, and patients. The emphasis in the system is on making an income, not on getting people healthy, and unfortunately with the way the system is setup, those two goals are at odds. I’ve been thinking about this one in particular for a while, and I do have some ideas, but I haven’t done anything with them yet.

I’m Listening

So, back to my original statement, I’m looking for a problem to solve. If you know of a symptom of a problem (like the ones above), a real problem itself, or even have an idea for a solution to a problem, let me know what it is. Leave a comment or email me. Maybe I can actually do something about it. If the problem is something that you struggle with personally or at work, even better, since you’ll know it intimately and can point out the issues someone else might not see.

In a similar vein, although not solving a “real” problem, I recently added a new feature to Dividendium that was requested by a user in a recent comment.

Know About Dividends Before They Are Declared

Predicted Dividends is a new service I just added to Dividendium. It looks at a stock’s dividend history and projects forward over the next 3 months to guess when the next dividend’s ex-dividend date will be.

If you are a subscriber (and are signed in with your email address), the projected dates are included in the downloadable spreadsheets, as well as in the regular dividend calendar.

There is a 60 day free trial, after which, if you decide to subscribe, it’s $4.95/month.

Choice Trade has a new promotion going on. They are offering zero-commission option trading during options expiration week. For one week every month during options expiration week, you can trade up to 500 total contracts for $0 commission.

Note this does not include option exercise fees, which are $25. Also note that the 500 is both buys and sells. So if you bought 250 contracts on Monday, and then sold those 250 contracts on Friday, that would be the maximum you could do for free. After that it would cost you $5 + $0.55 per contract.

Here’s the details on the Choice Trade Zero Commission Options promotion.

So if your trading strategy just requires buying and selling options, this might be right up your alley.

Inflatable Dividends

You could use this with Inflatable Dividends as a way to generate income from your existing stock holdings.

Even if you have your stocks in a different account, you could sell your call options in a Choice Trade account, and then buy them back before the week is up if they go in the money or let them expire if they don’t. Choice Trade would consider this selling a naked option so you would need a margin account, but since you actually own the stock in another account, it wouldn’t actually be a naked option.

DISCLAIMER: I don’t personally use Inflatable Dividends. Inflatable Dividends doesn’t meet my risk-averse requirements for an investing strategy.

No Lose Stocks

The standard way to use No Lose Stocks is to buy the stock and then buy the put with the dividends that the stock should pay out. This ties up quite a bit of money since you have to buy 100 shares, and then 1 put contract as well. If the stock is a $50 stock and it needs to go to $65 for the position to make a profit, that’s probably going to be a $6500 investment.

An alternative way to use the strategy, and the way that I’ve started using it almost exclusively, is to just buy the call option that is at the same strike price as the put option. I keep the $6500 I would have invested in a money market, and then use the interest from that to buy the call option.

On the No Lose Stocks spreadsheets in the daily email (and found at the Historical Data link on the No Lose Stocks Listings), one of the last columns tells what interest rate the money market needs to be earning to have the interest pay for the call option over the life of the call option.

So this promotion will allow me to put on my trades (at least during option expiration week) for free and then wait to see if they pay off.

Long Shot Options

This strategy will work pretty much the same as the No Lose Stocks strategy above. I can buy the options during that week and then just hold them until they pay off or expire.

Personalized Portfolio Ex Dividend Calendar

I recently added a new feature to Dividendium, the Portfolio Calendar.

It allows you to enter a list of your stock symbols, and then it will produce a calendar of your upcoming ex dividend dates.  After you enter your stock symbols and get your calendar, you can bookmark the page.  Then whenever you go to that bookmark, the calendar will update with the latest ex dividend data.

This feature was added due to a request made in one of the comments on the Where Can I Find Ex-Dividend Calendars post.  So if you have other features that you’d like to see on Dividendium, just let me know, and I’ll see what I can do to add them.  I’m still working on the other request in the comments on that same post for a predicted ex dividend calendar.

With savings rates so low, it might be time to look at an internet savings account as a way to boost the interest earnings on your savings.

How The Accounts Work

An internet savings account is linked to your existing checking account when you setup the new account.  This means that you will be able to transfer money between the online savings account and your existing checking account.

The transfers are made by logging on to the internet savings account’s website and entering how much you want to transfer.

Some online accounts also offer a regularly scheduled transfer, so you can schedule to have a specific amount moved from your online savings account to your existing checking account, or the other way around, weekly or monthly.

Benefits

These accounts generally pay higher interest rates than a traditional savings account, since the online accounts don’t have to maintain a brick and mortar building, or pay tellers to process your transactions.  It’s all done by a computer.

Generally the accounts have no monthly fees, no deposit fee, no withdrawal fee, and no minimums.  And the deposits are FDIC insured.

The current FDIC limit is $250,000 per depositor.  So if you and your spouse are both on the account, it’s insured for $500,000.  Meaning, if the bank goes out of business, the FDIC will reimburse you up to $500,000.

Limitations

The limitations are due to how the accounts work.  You need to have a checking account to set them up.  You generally can’t make a payment directly out of the internet savings account, so you will have to transfer the money to your checking account first before making the payment.

Transfers to your existing checking account can take 2-3 business days.  So if the transfer goes over a weekend or a bank holiday, you’re transfer could take as many as 5 days to complete.

Providers

ING Direct – Currently offering 1.10%

ING does a good job with their internet saving accounts.  They have a interest counter that tells you daily how much interest you have earned.  It’s quite fun to watch.

They also have the option of setting up a checking account with them so that you can instantly transfer money from your internet savings account to the checking account.  This would allow you to avoid the 2-3 business day limitation mentioned above.

HSBC Advance (formerly HSBC Direct)- Currently offering 1.10%

HSBC is one of the best internet saving account options, and is the one I am currently using.  They have generally maintained the highest interest rates of all the offerings, and I have never had a problem with their customer service.

And, although I have never used it, they also have the option of getting a debit card attached to the account, and being able to make ATM withdrawals from the account.  As I understand it, this would also be a way to get around the 2-3 day business day limitation mentioned above.

Emigrant Direct – Currently offering 1.00%

Emigrant Direct is one I have used in the past, but do not recommend.

I moved most of my money from them to get a higher rate at a different bank (HSBC), but left $0.01 in the account in order to collect that month’s interest.  They closed the account and initially refused to give me that month’s interest.  After calling and talking to a manager, I was able to get that months interest paid out.  It all worked out in the end, but it left a bad taste in my mouth for this particular bank.

Cautions

Some banks are trying to compare themselves with an internet savings account, but are instead a money market account.

The difference between a money market account and an internet savings account is that money market accounts have federally set limitations on withdrawals.  For example, you can only make 6 withdrawals per month.  This may not be a limitation for your situation and so a money market might work for you and you might be able to get an even higher rate, but the above internet savings accounts do not have this limitation.

The intent of the No Lose Stocks (NLS) and Long Shot Options (LSO) strategies is to:

1) Protect my core capital, and yet
2) Still expose me to unlimited upside gains

Over the past few years we have experienced a large drop in overall market value and then a subsequent large gain in market value.

In October of 2007, the Dow Jones Industrial Average (DJIA) hit a high of about 14,000.

Roughly 17 months later, in March of 2009, the DJIA hit a low of about 6,600, a drop in value of roughly 53%.

Then roughly 13 months later, in April of 2010, the DJIA hit a high of about 11,200, a rise in value of roughly 69%.

These large moves are the kind of thing that these strategies were designed to capture, so I did some analyzing of the historical data to see whether or not the strategies actually did what they were intended to do.

Was core capital protected?

Happily, the answer to this is yes.
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