The best times to use PTO and get Overtime

Although this might seem a little silly, your time just might be worth more to your employer depending on what month it is. That is, if you get paid salary on an hourly basis. Here is a breakdown of how it works for me:

Normal work period - 11 days - 88 hours.
Extended work period - 12 days - 92 hours.
Short work period - 10 days - 80 hours.

Hourly pay = Salary / 24 (paychecks per year) / hours in pay period

Therefore my hourly pay goes up for pay periods with fewer hours and vise-versa. It works out in your favor when you take paid time off (PTO) when you aren't worth as much per hour. It also works out, perhaps more noticeably so if I were to work an extra hour for a 10 day paycheck.

Current Prosper Rate of Return

Using excels XIRR function, as described over at Proproser says I've netted 15.63% ROI. Thats not too shabby, however my passion for finding good loans has disappeared as of late. Perhaps its because I spend too much time looking at charts such as these: Prosper Membership By Month (EricsCC.com). The membership is constantly growing, and there are more and more poachers. More eyes on the good loans. There are more loans, so perhaps its just my amazing ability to tire of a hobby.

Order of investments

I was eating lunch the other day and this topic came up. Actually this topic seems to come up about once or twice a year or so, probably around the time of paycheck contribution elections. When the topic first came up, I just listened and couldn't make heads or tails about why its smarter to go one route or another. Now I feel like I know exactly what to do, read on:

401k with employer matching should be first, this is 100% ROI plus an average of 10% annually or so. Not only is this tax deferred (meaning compounding works greatly in your favor) but it also lowers your taxable income. :)
Putting in more than your employer will match to should be further down the list.

Second is definitely an employee stock purchase plan. My company offers a 15% discount at the offering period, with two offering periods a year. Some companies make it even more worth your while with various options or the like. So if I can go without 10% of my salary for 6 months, I get 1.5% of my salary free two times a year. Since you can take the principle out at every enrollment, I can count this as a 30% APY on 10% of my salary. A $60,000 salary would net me $1,800 a year. Thats a nice Christmas bonus! If I let the first $900 ride on an average of 10% stock increase, its an extra $45. Of course the 15% is taxed as normal income, and I'd have to pay capitol gains tax on the $45 if I took it out before having it a year.

Third, if you plan on having a larger income when you retire than you do now, you should max out your Roth IRA before contributing more towards your 401k.

As an important disclaimer I'm not a math wiz nor do I claim to know all the tax implications. Please feel free to add to the comments if I make any mistakes!

Stop the Spending, Start the Budgeting!

Somethings got to budge(t)!

I haven't saved a single dollar in 4 months!

Pearbudget, MyMint, Quicken, NetworthIQ

Sheesh, when will MyMint come out?! I'm tired of all this hype and waiting!!!

Invest vs. Buy a motorcycle

Lets say that you have $3-10 thousand. You check out craigslist for motorcycles and see a clean Kawi 900cc. Then you head over to LazyManAndMoney and get jealous that he's already making more than $300 every month from passive income. $8000 in prosper (at 15% ROI) could get you around $100 in monthly passive income. Hard choice!

Here's what I would do:
Start investing into prosper, $8000 is going to take a while to win bids, especially if you're going for 15% risk adjusted. Use prosper or other cheap lending option to get the bike at say 8%. Woo-hoo! Now you're making 7% off of $8000 which is a cool $45 a month passive income. This is great. How come no one thought of this before? Well...there is one small gotcha: You have to pay taxes on the full 15%; inflation kills off another 2.5%; the risk is some what unknown on prosper; prosper charges 1% at the front of the loan; it'll easily cost you $45 a month in insurance for your new bike; it takes time and effort to find borrowers that you trust. Eek! Suddenly this is sounding like a bad idea.

8 ways to win at Prosper

Its too often I'm reading a blog of someone who mentions they know nothing about Prosper. In the beginning, I knew nothing as well and I funded an 'E' rated loan. I found the listing by browsing the forum boards and found out this guy was pretty active there. I figured that if he is active in the forums, he must be active in repaying his loan. Well that is a backwards way of thinking over at Prosper. Anyway, if you are trying to get into Prosper, here are some red flags I've come across while reading, looking at ericscc.com, and general experience with the site. I wish someone had given me this list as I was starting out.

• Never bid on HR, E, NC rated loans. Most of these people have this credit rating for a reason, and if you can figure out how to tell which ones legitimately have a chance of fixing their credit score then please tell me how!
• Don't bid on loans higher than 19,999. Prosper's maximum bid is $25k, so obviously they need as much money as they can get. This is probably a fishy deal. Look for reasons they need the money.
  
• Looks for signs of unemployment. Prosper will tell you the industry they are in and how much they make. Usually someone who makes less than $50,000 a year can't afford to make monthly payments of $1000.
• Don't bid on real estate loans. This is just a guess, because the housing market seems to be slowing down quite a bit nation wide. I bet now that the boom is busting, a lot of smart people got stuck with loans they can't afford and will end up losing money. You don't want the losing your money.
  
• Avoid business ventures. I think I read somewhere that 9/10 business startups fail. In my experience, people who start a business think they can pass the risk of a new business to the lender. I'm thinking this works well in the VC and angel investor world, but not so well for Prosper.
• Don't bid if they have ANY delinquencies. If you must bid on someone with current delinquencies, make sure they at least explain them. I would bet a lot of people don't understand that getting $10,000 to extend half of their debt isn't going to help them unless they, can afford the payments, can create a savings buffer, AND THEY CUT UP THEIR CARDS. The best consolidators to bid on are the ones that show you how much they owe on each payment, show you that they are better off with this new interest rate, and show you that by getting a prosper loan to pay off their cards, they are actually lowering their monthly expenses.
  
• Know when to walk away. Just like in poker its easy to get distracted by big winnings. Ignoring the odds in favor of getting a higher return is an easy mistake to make. I've bid on some loans that in hindsight make me want to cry. Not surprisingly, these are the ones that are now late.
• Poach. I'm really shooting myself in the foot here by telling you this, but I needed one more point to make a top ten list. Go to Ericscc and look at the Top Diversified Lenders by ROI you'll see a nice list of people who are already winning at Prosper. Pick a few of the top names on the list and view the bids that they put the most money on. At the time I'm writing this I'm number 99 on the list, but that's just the experian ROI. Ericscc and Lendingstats both compute their own ROI's and they list me higher than some of the guys at the top of the list. You might see me getting a 15% expected ROI and say to yourself, 'I'll be happy if I get 14%. Thats still better than the stock market historically and better than most do on Prosper! I'll let him do the work of scouting the loans and I'll reap the rewards! Heck, I might even spend a little time evaluating his loans and get an even higher ROI!!' So now here I am getting constantly underbid for the bids I make, especially the ones that I have the most confidence in!
  

The first thing I look for is no red flags, which seems to be getting harder to find nowadays(at an interesting rate). The second thing I look for is one or two red flags and an explanation of how they expect to get out of debt or pay off the loan.

About this blog

I've been reading lots of finance blogs lately. GetRichSlowly.com BinaryDollar.com RateLadder.com LazyManAndMoney.com etc. etc. They all seem to suggest about the same things. SAVE MONEY. INVEST YOUNG. LOOK! THERES A NICKEL ON THE GROUND. I might start talking about some of that stuff...but I'd like to think I can be different. Read on!