Friday, January 20, 2006

Yummy Munny: Chicken Kiev and Carrot & Apple Casserole

Author: Nick
Category: Money
Topics:

Chicken Kiev and Carrot & Apple Casserole
Why does mine look different than the cookbook pictures???

While my lovely wife Tegan does most of the everyday cooking, I like to hunt for new and exciting recipes, make them, and see how badly I screw them up. Tegan says I’m too hard on myself and that my cooking always turns out pretty well, but she has to say that because she’s my wife and if she doesn’t I might stop feeding her. (Just kidding, sweetie! Please don’t wash your pink socks with my white shirts!)

Tonight I volunteered to cook a couple of dishes I found in the latest addition to our cooking library: Gregg R. Gillespie’s 4-Ingredient Recipes. See, I have the culinary equivalent of Attention Deficit Disorder, so I usually pass on a recipe if it’s over a hundred words and has more than four or five ingredients. This book is perfect for me because every recipe fits on a tiny page and even comes with a full-color picture.

Today, two pretty pictures caught my attention and I managed to read the recipes long enough to realize we had the ingredients to make these dishes! So without further ado, I present the stuff that happened when I threw food around the kitchen…

Chicken Kiev

2 boneless, skinless chicken breasts
1/2 c. bread crumbs
1 egg
5 tsp. vegetable oil
1/2 stick butter or margarine

Lightly grease a baking sheet and put it in an oven preheated to 400 degrees F.

Beat the egg in a bowl. Beat it good. Cut the butter stick up into small chunks. Place half the chunks on each of the chicken breasts. Roll each breast up and pin them closed with a toothpick. Roll each breast in the bread crumbs, dip them in the egg, and then roll in the bread crumbs again.

Heat the oil in a deep fryer to 350 degrees F. Fry the breasts in the oven for 10 minutes or until they’re all brown and yummy looking.

Put the breasts on the baking sheet and bake them in the oven for 5 more minutes or until even yummier looking.

Serves two for about $4.00.

Carrot and Apple Casserole

2 c. baby carrots
1/2 c. water
1 1/2 c. sliced apples (I like to leave the peels on, but you don’t have to)
1/8 tsp. nutmeg
2 T. butter or margarine
2 T. honey

Preheat the oven to 350 degrees F. Lightly grease a baking dish (and make sure you have a cover for this dish unlike stupid me who didn’t read the recipe in full first).

Combine the carrots and water in a saucepan and cook on low heat for about 12 minutes. Drain the carrots and then combine them in the baking dish with the apples and honey. Slice up the butter and throw it on top. Cover the dish and bake for 30-35 minutes. Take it out of the oven and sprinkle the nutmeg on top.

Serves three for about $2.50.

Yeah, the book cheats a little bit and doesn’t really count things like butter or water as “ingredients.”

I’ll share some more great recipes from this and other places as I work up the courage to try them, but you can always get this book and check it out for yourself.

Thursday, January 19, 2006

The Wonderful World of Employee Stock, Part 2: Getting Soppy Over ESOPs

Author: Nick
Category: Money
Topics: ,

A couple days ago, we started talking about some of the different ways you can dabble in your own company’s stock. Actually, it wasn’t “we” doing the talking; it was just me, but you did a very good job listening. In fact, as a reward for being such good listeners, today you get to listen to me talk in excruciating detail about the most common way that people like you can invest in the success (or disastrous, wallet-annihilating failure) of your company–Employee Stock Ownership Plans (ESOPs).

How ESOPs Work (Or At Least the Parts You’ll Care About)

The internal workings of an ESOP can be relatively complicated and, while I’ll spare you the grittiest details, it is worth mentioning that they even have their own governing laws covered by the Employee Retirement Income Security Act (ERISA). A lot more goes on in the background of ESOPs than many of the employees who participate in them realize. To start, while one of the primary purposes of ESOPs is to provide an incentive for employees to work hard for the success of their company, they actually yield huge benefits to the company and its primary owners. The company’s biggest benefit comes into play when the trust it establishes in connection with an ESOP borrows money that is used to buy stock for the ESOP. When the company goes to pay that money back, it can claim a hefty tax deduction. The company can also directly contribute shares of its stock to an ESOP, and those contributions are also tax deductible. A company’s biggest shareholders also heavily benefit from ESOPs because ESOPs serve as a market for the shareholders to sell their stock.

What you should care about when it comes to ESOPs is how you get a hold on your share (or at least the cash value) of an ESOP. When a company establishes an ESOP, it also sets up individual accounts for each of its employees who are qualified to participate–generally any full-time employee over the age of 21. The company then contributes to your account however it sees fit–most often through matching a portion of employees’ contributions to a 401(k) or through some other formula that takes relative pay or length of employment into account. In many companies, you don’t immediately have a right to the shares put into your account; rather, you gain more rights to your shares the longer you remain with the company. That’s what is referred to by the term vesting. ERISA rules dictate that employees be 100% vested in their ESOP accounts within five to seven years–possibly sooner, depending on how your ESOP is put together.

Eventually you’ll leave your company, either for another job or to retire (or maybe they’ll find your computer’s “hidden” porn folder and give you the boot). When you do leave, your company must buy your ESOP shares from you for whatever they’re worth. If you’re not at retirement age, you’ll probably want to roll that money over into an IRA. Otherwise, you might find yourself hit with capital gains and excise taxes.

ESOPs and 401(k)s

Many companies (including the one that employs me) make contributions to its workers’ 401(k) retirement plans with ESOP shares. Since these contributions typically come in the form of matches to an employee’s contributions to other 401(k) funds, it’s rare that an employee will put his or her own money into an ESOP. Instead, the ESOP will sit alongside your S&P Index Funds and Stable Value Funds and the like.

The important thing to realize about ESOPs, especially if they’re a part of your retirement portfolio, is that participating in one is akin to owning stock in your company. If a company does well, the value of your ESOP will rise. If a company does not so well, the value might go down. If a company goes bankrupt, your ESOP money goes bye-bye. So just like you wouldn’t invest all or most of your money in a single stock, you don’t want your ESOP to take up a disproportionately large chunk of your retirement plan.

That said, there are many employees out there with 33% of their 401(k)s made up of ESOP contributions–essentially, a third of their retirement money is riding on the success of their own companies. Now maybe these people are big fans of their companies and have complete faith in their continuing success, but I’m willing to bet that an awful lot of people simply take an hour to set up their 401(k) contributions and assume they’ll have lots of money waiting for them in 40 years.

The problem with taking a set-it-and-forget-it approach to 401(k)s when your company’s matching comes in the form of ESOP contributions is that, left untouched, you’ll have two-thirds of your retirement account in assorted funds (they are assorted, right?) made up of your personal contributions and one-third in an ESOP (since a lot of people get 50 cents put into an ESOP for every dollar they contribute to other parts of their 401(k)). If you’re in this situation and your company pulls an Enron, you could lose a third or more of your retirement savings.

Unfortunately for you, the rules for diversifying (in this case, moving your money from the ESOP to other funds in your retirement account) aren’t in your favor. With some exceptions, until you turn 55 and have been participating in the ESOP for at least 10 years, it is solely at your company’s discretion whether or not to permit you to diversify some or all of your ESOP. After that point, your company must give you the option of diversifying 25% of your ESOP balance or pay that 25% out to you. That figure goes up to 50% at age 60. But if you’re still a whippersnapper, you may have no choice but to let that ESOP stay a big chunk of your retirement portfolio.

In my case, my employer matches 50% of my 401(k) contributions with ESOP dollars. Before this year, we weren’t allowed to diversify our ESOPs until age 55, but my company changed that rule drastically this year to allow immediate diversification of ESOP contributions. Now if I had absolutely zero faith in my company’s future existence, I could theoretically log into my retirement account every week and move those ESOP contributions to other funds (though in practice, I can’t because we’re only allowed a limited number of changes to our plans each year). Instead, I try to keep the value of my ESOP around 10-15% of my total 401(k). I closely monitor my 401(k) and whenever my ESOP hits 15% of the total balance, I usually transfer enough to other funds to knock the ESOP’s worth down to 10%. I could diversify all of those ESOP contributions, but I’m pretty sure my company will still be around for a while.

“I Nominate My Goldfish For Chairman of the Board”

I’ve already briefly touched on the idea that ESOPs vary in several ways from direct stock ownership. If you go out and buy 100 shares of The Sexy Green Pants Company, you’ll be entitled to 100 votes when it comes time to make big decisions about the company like merging with The Saucy Red Pants Company or selling out to The Sensible Black Pants Company as well as other important corporate issues like electing the board of directors.

Participating in an ESOP does not empower you as much as purchasing the stock yourself. In publically traded companies, employees participating in ESOPs must have some sort of voting power on all the issues that a regular shareholder can vote on. In private companies, ESOP participants only need to have a say in those major, company-altering events like selling or closing the business. This sounds pretty good considering you’re probably not even spending your own money on company stock, right?

In reality, voting rights for ESOP participants aren’t truly voting rights. If you have the equivalent of 50 shares in your ESOP, you don’t get 50 votes. You don’t even get one vote! Instead, it’s the trustees of the ESOP who have the voting power granted by the shares in the ESOP. These trustees are free to do as they please and can even make decisions without consideration to anyone else. Most often, though, the trustee will vote the ESOP shares either according to the wishes of the committee that administers the ESOP or, if you’re lucky, to those of you lowly employees.

There are plenty of other rules governing ESOP voting, many of which allow companies to restrict an individual employee’s ability to have any real influence in big corporate decisions. So if you’re looking to wield some real power, you might want to look into more direct forms of stock ownership than an ESOP provides.

Summary of ESOPs

What, you thought I was going to talk for ten hours and not give you a CliffsNotes version? I’m a nice guy!

  • ESOPs are investments in your company. Performance of your ESOP money is directly tied to the performance of your company. Employers expect that ESOP participants will work harder for the good of the company. You’ll do that, right? Of course you will!
  • Your employer dictates when you are vested in your ESOP shares, though the law requires 100% vesting within seven years, sometimes sooner.
  • 40l(k)s and ESOPs are a great combination. The pairing of ESOPs and 401(k) retirement accounts is becoming more and more common. In most cases, employers will match part or all of employee 401(k) contributions with ESOP shares…
  • …but don’t let your retirement portfolio get too ESOPpy. If left undiversified, you could end up with one-third or more of your retirement money riding on the success of your company. If your company allows diversification of your ESOP funds before the government-mandated age of 55, it might be a good idea to spread some of your ESOP balance to other funds.
  • ESOP voting powers are often limited. Because of the way ESOPs are structured, your ability to use ESOP shares in important company decisions can vary. Typically you won’t have anywhere near the same voting rights as normal shareholders.

Of course, ESOPs can come in all sorts of sizes and shapes and have special caveats that require you to milk the CEO’s baby goat three times a year. So if you have an ESOP at work and you’d like to learn even more about them, aim your web browsing device at these babies:

An Interactive Introduction to ESOPs
Wikipedia – Employee-owned corporations
SEC and ESOPs

In part three of this series, we’ll look at ESPPs and why a one-letter difference from ESOPs can mean a whole lot of difference for you and your money.

Tuesday, January 17, 2006

The Wonderful World of Employee Stock, Part 1: Getting Started on Owning One Billionth of Your Company

Author: Nick
Category: Money
Topics: ,

Look out! He’s writing a SERIES!!! Head for the hills!

That’s right, the first multi-part adventure finally begins here at Funny Munny. Over the course of the next 82 months (or maybe a few days if I cover everything sooner), we’ll be looking at all the different ways that you and the stock of your employer can interact. You might think it’s as simple as owning or not owning your company’s stock, but it’s far, far more complicated than that. Actually, it isn’t, but if I say it’s easy you’d go read about it somewhere else. So it’s extremely, mindnumbingly difficult and without my help you’ll lose all your money and the SEC will search through your underwear drawer if you even say the word “stock” while at work.

Now that I have your terror-induced attention, we can start talking about all the different ways you can get your hands on a chunk of your company’s stock. First off we–

So what are my options for purchasing stock in my company?

Whoa! Where’d that big bold question come from? No matter, it sets up my first topic very nicely.

There are three common ways for an employee to play with company stock: an Employee Stock Ownership Plan (ESOP), an Employee Stock Purchase Plan (ESPP), or a stock option plan. At first, they sound like the same thing–plans for acquiring stocks. And that’s entirely kinda sorta true not at all. There are some major differences between the three that–

What’s an Employee Stock Ownership Plan (ESOP)?

Okay, Mr. Bold Question Man, if we’re gonna do things like this, you need to wait until I finish answering a question before asking another one.

Sorry. I’m just excited about Employee Stock Ownership Plans!

That’s okay, we’re all just as excited. Anyway, an Employee Stock Ownership Plan is the most common of the three options. Despite having the word “ownership” in its name, ESOPs don’t actually let you own any stock. Instead, an ESOP is a big trust that invests solely in stock contributed by your company to the plan. You still get most of the benefits of stock ownership; if your company does well, your contributions earn more. In return, your employer gets some nice tax savings and maintains control of the business. Contributions you make to an ESOP can be done on a before-tax basis, so they are often combined with a 40l(k) plan. In some cases, your employer will match some of your 40l(k) contributions in part or completely with ESOP contributions.

So then what’s an Employee Stock Purchase Plan? (ESPP)

Unlike an ESOP, the money you contribute to an ESPP is used to directly purchase stock for you. You make contributions to an ESPP over a certain period of time, and at the end of that period, your employer purchases the stock for you. The price you pay for each share is typically either the price at the beginning or end of the period, whichever is lower. As an added bonus, you might even get a discount on the purchase price of the stock–sometimes up to 15%. These discounts often mean that you make a decent chunk of money on your contributions right away since they’re worth the full price of the stock. As such, some people will sell their newly acquired stock immediately for a nice profit. If you hold on to the stocks, you’ll own a tiny part of your company and can vote in certain important business decisions such as board elections and what your boss is having for dinner tonight. Of course, you’ll probably only have a few hundred shares of your company stock compared to the millions that exist, so you won’t want to tap dance naked on your manager’s desk.

And stock option plans? How are those different from ESOPs and ESPPs?

Stock option plans have three important components: a number of options, an option price and a time period during which you can exercise your options. For example, if your company gives you a one-year option to buy a share of stock for $50, and during that year the stock’s price goes up to $80, you can exercise your option at that time to buy a share for $50 and (if you decide not to keep it) immediately sell it on the open market for $80–a $30 profit per share. While you don’t get the voting rights that come with being a regular shareholder or participating in an ESPP, you are protected from losing any money since you wouldn’t normally spend a dime until you exercise your options for a profit.

Of stock option plans, ESOPs, and ESPPs, which one is the best for me and my money?

Usually your best option is the one available to you since it’s rare for a company to offer more than one to all of its employees. If you do have a choice between the three, then your decision depends on your reasons for dabbling in your company’s stock. If you just want to make some money with no risk, stock options will help you do just that. ESOPs are geared more toward long-term investment. ESPPs fall somewhere in between since you can often sell your purchased stock immediately for a profit when you consider any discounts you may receive, or you can hold on to your stocks and possess the same rights (and risks) as other shareholders.

Next time, we’ll get into juicy detail about ESOPs–how they work, things to watch out for, and tips for making the most out of your ESOP experience.

Monday, January 16, 2006

The Prodigal Get Frugal and the Frugal Get Frustrated

Author: Nick
Category: Money
Topics: ,

As my ever-growing bank account can tell you, being frugal really has its rewards. Of course, being a spendthrift also has its rewards and those rewards are generally much more immediate and short-lived than those experienced by those who choose to save instead of squander. A youth full of charging up credit cards can be loads of fun … until the credit card bills come due.

And yet, more and more every day, those who have been loose with their wallets are being saved thanks to the advice of the frugal–those chosen few who have seen the light and decided to turn it off to save money on their electricity bills. The wave of frugality soon spreads across the land, and in the end we’re all saving so much money that the average retirement age drops to 35.

It goes without saying that this’ll never happen. The lure of “free money” that credit can provide is too strong for many people. And while I certainly don’t condone this sort of spending behavior, I can understand why the concept of saving money would not be attractive to someone more interested in living it up today than planning for tomorrow.

I’m fortunate that I never became one of those people drawn in by the lure of an easy life now at the expense of endless money troubles later. I’ve always practiced the basics of frugality–eating in, keeping energy costs down, and only spending money that I actually have and only when I really need something. The results: I’m out of college with no student loans or credit card bills, and I’m already saving for retirement. Now while I’m thrilled with all I’ve accomplished in my personal financial life, I’m a little dismayed that there aren’t any major steps I can take to become even more frugal without experiencing unnecessary hardships.

Yes, folks, I’m suffering from Frugality Frustration.

It’s easy enough to self-diagnose Frugality Frustration: symptoms include bank accounts full of money, credit cards with no balances or transactions for $300 shoes, bills that are paid on time, and countless measures taken to save money on groceries and utilities. Alas, you’ve seemingly reached your peak savings rate, and there’s nowhere else you can scrimp a few pennies without freezing your butt off in winter or eating bugs for breakfast.

This can be a turning point for a person following the path of frugality. Finding new ways of saving–arguably one of the best rewards of being frugal–becomes harder and harder the more you do it. And when that reward doesn’t keep coming, it becomes easier to slip back into a more prodigal life. Frugality Frustration, if not recognized and dealt with, can ultimately undo all the accomplishments you’ve worked so hard to achieve.

Lucky for you, there are ways to combat Frugality Frustration, and they all focus on helping you to more fully experience the rewards that come with a frugal life.

Five Ways of Fighting Frugality Frustration

  • Can’t find new ways to save? Get creative! So you’ve got your thermostat at the bare minimum, you’re eating out once a decade, and the clerks at the supermarket give you dirty looks when you pay six bucks for a cart full of groceries. Is this the true limit of your frugality? Probably not. While it might be true that it’s not worth it to chip at your budget any further because all you’ll get is a penny or two saved here and there, this doesn’t mean you should stop. Frugality isn’t just about saving money; it’s about having fun finding ways to save. The opportunities may not be as numerous once you’ve been at it for years, but when the chances come, it’s up to you to spot them. For example, now that energy-saving fluorescent light bulbs are relatively cheap, it might be time to go on a bulb-changing spree through your house. Or if you want to shave a few cents off your food bill, consider starting your own hydroponic garden. The point is that there’s always another way to save, and it’s not until you reach Frugality Frustration that some of the most creative ways make themselves apparent.
  • Remember how far you’ve come. If you’ve made it this far, then you’ve probably saved yourself thousands of dollars living a frugal lifestyle. While you might not have an Olympic swimming pool in your backyard or a French maid in your kitchen, you probably don’t have massive bad debt or bills you can’t afford to pay. It’s important to realize the difference between the frugal you and the you that could have destroyed your financial future. Look back at all you’ve achieved and give yourself a pat on the back. And while you’re at it, because you know you want to, feel free to snicker at your frugally-challenged friends who, while I’m sure they’re very nice people, will probably be working for the rest of their natural lives to pay for their extravagant lifestyles.
  • Consider the ultimate goals of your frugality. You’re saving money left and right, and you know you must keep saving or else some great calamity will befall you from the heavens! DON’T STOP SAVING OR YOU WILL BE EATEN BY WOLVES!!! I’m exaggerating a little (the wolves will merely nibble on you), and while frugality requires that you stick to it, it’s important to keep in mind why you’re doing it. Each person’s reasons for living a frugal lifestyle is a little different, but many people do so with an eye toward an early, comfortable retirement or some other lofty future goal. Saving lots of money takes years or even decades, so it can be easy to lose sight of that ultimate goal which seems so far off. When you’re sitting down to go over your finances, don’t forget what those dollar signs in your savings and retirement accounts mean. For you, they could mean that you can quit your back-breaking day job in ten or twenty years and work part time at your dream job where money is a secondary objective. Or they could mean making some improvements to your home in a few years like putting in that sauna or game room or time machine you’ve always wanted. Or they could mean that your children will have the secure financial upbringing you might not have had; they’ll always have a full tummy, nice clothes, toys to play with, and a good education. Whatever your reason for saving money, never ever forget it.
  • Don’t let yourself get burned out. If you’ve taken every measure you can think of to become more frugal and if keeping your ultimate goal in mind doesn’t cure your Frugality Frustration, it’s quite possible you may be burned out. You might be trying too hard to squeeze every penny out of your costs and into your savings, and it could be doing you more harm than good. The easiest place to spot this is in your pantry. If your cupboards are full of processed foods and bulk this ‘n’ thats just because you got them on special, you’re probably putting your wallet before your health. Eating right is not something you can fool around with just to trim a few bucks from your budget. In the end, it’ll end up costing you more in doctor’s bills than, say, making sure you eat a good amount of fresh fruits and veggies. And while you think keeping the thermostat at 52 degrees in the middle of a blizzard will save you lots on your utility bill, people are not built to live in those kind of temperatures. The whole point of living a frugal lifestyle is to save money without hardship to yourself or your family. You must take care of yourself today so that you’ll be able to enjoy the benefits of a frugal lifestyle tomorrow. Examine all of the steps you’ve taken on the path to frugality and see if there’s anything you’re doing that might hurt you more than help. Remember, a few bucks saved at the expense of your health is a few bucks you won’t be around to spend later.
  • Spread what you have learned to others. I was only joking earlier about laughing at your friends for their lack of frugality. Instead of mocking your buddy for his 600-channel cable setup that gets 472 channels of Swedish soap operas, show him how he can save $50 a month with a smaller package of his favorite channels. Or instead of leaving copies of your high-yield savings account statement on your neighbor’s doorstep with the APY circled and the words “Ha ha, I’m saving more than you!” written on it, help your neighbor set up her own account with ING Direct, Emigrant Direct, or HSBC. There’s plenty of frugality to go around, so there’s no point in keeping your tactics for saving money a secret. At the very least, instead of having a bunch of friends always trying to bum money off of you, you’ll have a bunch of friends trying to coax more money-saving tips out of you.

Now if you’ll excuse me, I need to break into my neighbors’ apartments and replace all their lights with fluorescent light bulbs. Good-bye, Frugality Frustration!

Thursday, January 12, 2006

Your Opinion Counts … As Much As Those of 20 Million Other Bloggers

Author: Nick
Category: Money
Topics: ,

“The blogosphere is overflowing with brutally honest opinion,” says Howard Kaushansky, Umbria’s 47-year-old CEO. “Our goal is to track those opinions down.”

My daily voyage through the cornfields of the internet brought me to a fascinating article written last month by Fortune Small Business. Apparently many companies will pay another company to find out what I think about their products. I guess that’s nothing new since consumer surveys have been around since prehistoric times. But when I saw the line “Meet an entrepreneur who can survey 20 million consumers in two minutes,” I figured this was either someone who can talk and write really fast or someone with a website that gets, oh, ten bazillion hits a day. Nope and nope. It turns out that Umbria is one of many companies that searches blogs like yours and mine for our opinions on products and services. So for Coca-Cola to find out what people think about Vanilla Coke, they just needed to fork over about $60,000 to Umbria, and Umbria would have come back a few minutes later to let Coca-Cola know that X percent of bloggers think it’s inconsistent, flat, or just plain terrible.

The real fun comes in with how Umbria distinguishes between 12-year-old boys talking about sports cars they can’t afford to drive and 30-year-old married women talking about minivans they need to buy to carry around their seven children…

Elongated spellings (‘soooooooo’), multiple exclamation marks (!!!) suggest a teenage female. The blogger is probably a teenage boy if a posting is rife with hip-hop terminology such as ‘aight'(translation: ‘all right’) and “true dat” (‘I agree!’).

Okay, I can believe that. The next part is a little scarier…

Male baby-boomers, on the other hand, tend to favor stale hip-hop-isms such as ‘jiggy’ and ‘bling.’ They also pepper their blogs with terms such as ‘prostate’ and ‘IRA.’

Wait, I have a point! The lesson to learn here is that our blogs are being “read” by big-time companies who want to know what we think about their products and services. If you think that complaining about something in your blog–for example, Dell’s technical assistance or a missing ten-by-two pink brick in your latest Lego batch–won’t get noticed … you’re probably right. But if you and ten thousand other bloggers all agree that, again for example, Mountain Dew should only be green, then you might not see red, orange, and blue Dew on your next trip to the grocery store.

Okay, Umbria, let’s see you work your magic on this honest-to-goodness opinion of a white male between the ages of 18 and 25: Kellogg’s needs to bring back their watermelon Pop Tart. I repeat, give me back those scrumptious watermelon Pop Tarts. And I obviously have lots of money to buy them with seeing as I got too jiggy and now there’s bling in my prostate.