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My Money Blog:

Well, the CPI-U that I recently questioned went up 0.9% in March alone. I guess you can’t hide everything. So, is it time to buy some Series I bonds? First, refer back to this earlier post for a primer as well as some background information. You can ignore the predictions since we have the actual data now.

Calculating the Rates For Next 12 Months
If you buy by the end of April, the fixed rate portion of I-Bonds will be 1.2%. You will be guaranteed an variable interest rate of 3.08% for the next 6 months, for a total interest rate of 4.28%.

After that, the rate will adjust every 6 months based on the previous 6 month’s worth of inflation data. The next adjustment will be in May, based on September-March 2008 data. We can effectively predict this now using the prediction method explained here:

Sept 2007 CPI-U was 208.490. March 2008 CPI-U was 213.528. 213.528/208.490 = 1.02416, or a semi-annual increase of 2.416%.

Total rate = Unknown fixed rate + 2 x Semiannual inflation rate + (Semiannual inflation rate X Fixed rate)

If we assume a fixed rate of the current 1.2%, we get
Total rate = 0.012 + (2 x .02416) + (.012 x .02416)
Total rate = 1.2% + 4.86%
Total rate = 6.06%

Possibly Good Short-Term Investment?
A known “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month as if you bought it in the beginning of…

My Money Blog:

The strategy of Buy & Hold Investing has a lot of followers (including me), and one of it’s touted benefits is that it is a simple way to invest. In the case of passive investors, it primarily involves picking and maintaining an asset allocation plan for the next 10-50 years of your life. No need to monitor stock prices or decipher financial statements. However, “simple” and “easy to execute” aren’t the same thing. For example, “spend less than you earn” is simple. “Always save for a rainy day” is simple. But how many people actually do this?

So why don’t I think it will be easy?
The picture above is the cover of the August 1979 issue of BusinessWeek magazine. In case you can’t make it out, the picture is of a stock certificate folded into a paper airplane that has crashed, surrounded by many other crumpled airplanes. (No Photoshop back then…)

The title of the cover story is “The death of equities: How inflation is destroying the stock market.” I haven’t been able to find the full text of the article noted, but I did find some snippets at TheFiendBear. He notes that the article “was published at a time when the Dow was languishing at 875 and had been trading in a see-saw fashion ever since topping out 6 1/2 years earlier in January of 1973. Inflation was a persistent nag on the economy and the Federal Reserve and US fiscal policies were held in low regard.“

Sound familiar?…

WalletPop:

Filed under: Budgets, Saving, Recession

According to George Will, we’re not in a recession. Or at least we won’t be for another eight weeks. In his Sunday column he points out, “The 9.9% first-quarter decline of the Standard & Poor 500 barely ranks among the 40 worst quarterly losses in the index’s history.” So, chill everybody.

As the financial world — including housing, credit, energy and lattes — tosses and turns, there’s really nothing you can do. However, you can make a few moves to ensure a little security in coming years. AOL’s latest Top Five! covers smart money moves you can make right now. As in, now.

Before we begin, just remember one thing: This won’t be fun. Whenever these what-to-do-with-your-money lists come up, you always hope to see something that justifies your latest whim; like, “buy a new snowboard” or “splurge on an inflatable hot tub.” But, no. That never happens. So, brace yourself for practicality, frugality and savings. Yep, it’s that kind of year. And here we go:

1. Create a Budget: According to the Federal Reserve, nearly half of Americans spend more than what they earn every year. So, basically, stop it.

2. Build Up Savings: Financial planners recommend having three to six months’ worth of expenses socked away at any given time. Hey, we can always dream.

3. Tackle Credit Card Debt: Tackle it, for sure. But don’t do a victory dance or it’s a 10-yard penalty and a re-play of down.

4. Plan for Retirement: A 25-year-old worker who contributes $300 to…

WalletPop:

Filed under: Ask WalletPop, College, Debt

Isn’t it time you started reaping the benefits of your local congressman’s clout? Not yet ready to ask for a letter of recommendation for West Point? Have no fear because if you are the bearer of student loans and your loan company is shafting you, your congressman may be the key to a happy ending.

Getting some satisfaction with the help of your congressman or woman is so easy anybody can do it. Granted, like all problems and lending issues, it helps if you are in the right and have been paying your lender what the terms state. But this strategy may work even if you are close to being handed off to a collection agency.

As a little background: My wife had all of her student loans through Sallie Mae, affectionately referred to around our house as the devil. Several of these private loans which Ms. Mae was holding on to were pulling in 13.25% interest! We had included some of these loans in an initial federal consolidation which never worked out. Apparently the incoming fax line at Sallie Mae was hooked right up to a paper shredder because they never received our requests to consolidate. We tried again to consolidate my wife’s private loans with Wells Fargo, who, just like our federal consolidator, never received a response from Sallie Mae. Fed up with the problems we were having, I did what any rational person would, I called my local news stations call for…