Tag Archives: p2p lending

Loans Between Friends – Not Always a Good Idea

Have you ever lent money to a friend or relative? In times of economic hardship, more and more often our friends come to us with a request to borrow funds. Or maybe we are at a loss and need a few bucks to get by for the month, and we ask a friends to spot us the dough.

The New York Times reports that it’s best to stop and think before lending money to anyone, even a good friend. The article highlights a professional financial planner who ended up lending her manicurist(!!!) $3000. Her manicurist needed the money to avoid eviction, and tugged on the emotions of a woman who would otherwise advise clients not to lend money to personal acquaintances.

For me, I like to lend money to people in need, but not to my close friends. Instead, I use Prosper’s P2P lending system. At least I can do a credit check on the person before deciding to lend them money, and I can earn a decent amount of interest back in return. (Then again, it looks like it will be a while before I can lend on Prosper due to some legal trouble they’re in.) If I were every to lend money to a close friend, I’d have to think of it as a gift when I part with the funds. If I get it back, all the better.

Q & you A:

What’s the most you’ve ever lent a friend? Did you get that money back, or did it ruin your friendship?

Should I Hire an Accountant To Do My Tax Returns?

Read the Her Every Cent Counts Taxes Series

Since tax season is right around the corner, I’m trying to figure out if I should hire an accountant to prepare my tax returns, which one to hire, and how much it should cost me. I’ve pretty much decided I need to hire someone to handle my taxes for me this year, as I’m going to be taxed heavily as an independent contractor and need help finding all the deductions I can take.

Then again, it looks like hiring a tax accountant will cost me $350 – $450. Ouch. That’s a lot of money. I’m sure the work they do is worth that, but it feels like I should be able to do all the work myself. An online tax software would cost me $100, so even if I missed out on $300 in deductions I’d still end up breaking even. And how much money in deductions am I really going to get? I can’t take a housing deduction, I’ve never lived in a space big enough to qualify for that. My “business” expenses are minimal – maybe I could deduct hosting costs for my promotional website, and mileage for the route to and from the office. Other than that, I don’t know what I can deduct.

The complicated parts of my return are going to be from my various investment incomes. God, that’s going to be a nightmare. I’m not sure how to handle Prosper (luckily I only have 10 investments out… but it sounds like the earnings on each one will have to be taxed), and then there’s Sharebuilder and those pesky dividends that count as income even though they’re long gone now, and my Vanguard dividends (most are in my Roth but I also have a small regular brokerage account through them, which is supposed to be my grad school or house money), and then there’s my CD from bank of america and various other places I’ve earned income throughout the year. Yea, that’s where it gets complicated.

But I worry that because it does get complicated a tax accountant will have to take longer than his minimum 2 hours to complete my returns. They’ll end up costing more like $500 or something, which is a pretty big chunk of my income considering so much of it’s going to taxes (15% self employment tax on top of everything else, yuck.)

I’ve reached out to 3 local CPAs, and found that their rates range from about $300 for a return (the cheapest) to $400/$500. I wonder if the more expensive ones will save me more money, or if it ultimately doesn’t matter because any extra money they’d save would be eaten up in their fees.

Here are my 3 options thus far:

  • CPA #1 My fees for income tax preparation fees are at $175 per hour. Most returns I prepare are in the $400 to $600 range. The tax preparation fee is all inclusive as it includes meetings and follow up questions and other assistance you may need. Also, I don’t charge any additional fees for questions during the year. Of course, if you need assistance that involves significant time, it will involve additional fees, and I will let you know this in advance.

  • CPA #2 I charge $160 per hour plus out-of-pocket costs and there is a two hour minimum for tax preparation. 2-hours covers a basic return for an itemizer typical family. I can get you an appointment. (I followed up and inquired what out-of-pocket costs would be…) Tax software license access fee, copies & supplies, postage & misc. runs around $65 per individual tax return.

  • CPA #3 I’d be happy to help you with your 2008 taxes. It would cost around 300 for a schedule C. That includes preparation & the initial meeting. We should meet before the year end to maximize deductions.

If any of you are 1099 out there, or have been in the past, do you use an accountant to do your taxes? How much income merits hiring a tax accountant to deal with your returns?

Prosper Update

As the stock market continues to take a nose dive to the depths of despair, making a short term profit in the markets (unless you’re brilliant at shorting) seems near impossible. Meanwhile, getting a loan is getting increasingly difficult now that banks have finally figured out that high-risk lending doesn’t work out so well for anyone in the end (unless the government bails you out with $700 billion, but anyway).

So I’m not surprised that P2P lending is getting a lot of press these days. Just last night, I was listening to CNN and they were touting Propser as an option for a place to invest.

Now, Prosper is a dangerous place to invest too, but it seems a little less risky than the markets for short-term investing, if you’re smart about it. Here’s why…

On Prosper, you can invest just $50 per loan, and that goes into a giant pot of loans from lots of different people. So even if one person fucks you over and you lose $50, you’re still getting a good rate on the other loans. If you’re lucky, and smart, you can come out making a profit in the end.

Right now, I have 10 active loans. 9 are current and one fucked me over. Fair enough. I wasn’t smart about that loan. I learned not to bid on anything that looks like “Help Me Study Abroad ** Relist #2**” — that’s the one that got me into trouble.

I’m not that pained about it, that was a learning experience. I’ve also been fortunate enough to make $50 from Prosper through its referral program (you get $25 a person if someone signs up through you and lends money on the site), which at least helped me break even despite my stupidity.

Don’t get me wrong, I’m nervous about my other 9 investments. With the economy tanking and unemployment rates rising, it won’t be long before someone else may not be able to pay me back. But maybe that won’t be the case. 8 of my 9 remaining loans are to people with good credit ratings (B or higher) who wanted a lower rate on repaying credit cards. If they can pay me at a rate of 18% versus paying their credit card companies 27%+, then it’s a win-win for both of us. As long as they pay. And so far, all of them have paid up.

I think I’ve made about $23 on my loans so far, after canceling out the $50 loss and the $50 I made for referrals. Which, on a $450 investment, isn’t so bad. Especially considering everything I’ve invested in the stock market is losing hundreds of dollars. So Prosper may not be a safe bet, but these days it seems like the better bet. Just be smart about it and you can come out ahead.

Late on Prosper

So right now I have 8 active loans on Prosper.com, for $50 each. Up until this month, each borrower has paid on time, which had me starting to believe in the power and potential of PSP lending.

Then, one of my borrowers went late. She’s still less than 15 days late, so it hasn’t even got to a collection agency yet, but I’m a little worried.

The good news is that I made $25 in a Prosper referral and between that and the interest I’m making on the other loans (as long as they don’t default too, knock on wood) means that I’ll end up making back the $50. But that kind of defeats the purpose of investing, if I end up barely back where I started.

Maybe this listing just had too many warning signs. The woman had to relist 3 times in order to get her listing funded. The debt-to-income ratio was way too high for the measly 13% interest rate it got funded at.

well, I’ll remain hopeful that this woman is just having a bad month and she’ll pay me back. But I’ve learned my Prosper lesson – only lend to people who are employed (students are not good investments, even if you want to help them study abroad!) — The people who really should be getting funded on prosper are those who have full time jobs, make more than they spend, and are trying to pay off high-interest credit cards. Then you’re really both helping each other out right now.

The Economy is in The Pooper

Driving home after I picked up lunch late this morning, I was listening to right-wing talk radio, which I do often these days, and the host was bitching about how we need to use our own resources for oil since our avoidance of this is causing lots of commercial establishments to go out of business.

Here’s the big news about 36 retail stores closing their doors…

“Information technology related companies that are closing stores include CompUSA going out of business, Sprint Nextel closing 125 locations, Movie Gallery closing 560 movie rental outlets, and bankrupt Sharper Image shutting down 90 to 180 stores.

Other retailers shutting down shops are: Ann Taylor, 117 stores; Eddie Bauer, 29 stores; Cache, 20 to 23 stores; Lane Bryant, 150 stores; Talbots, 100 stores; Gap, 85 stores; Foot Locker, 140 stores; Wickes going out of business; Levitz going out of business; Zales, 105 stores; Disney, 98 stores; Home Depot, 15 stores; Macy’s, 9 stores; Pep Boys, 33 stores; Ethan Allen, 12 stores; Wilsons, 158 stores; Pacific Sunwear, 228 stores; Bombay Company, 384 stores; KB Toys, 356 stores; and Dillards, six stores.” — http://www.theinquirer.net/gb/inquirer/news/2008/06/24/retailers-close-hundreds-stores


Yikes!!!

Guess those rebate checks didn’t work. Big surprise. I finally cashed mine. It’s going to pay off what I spent in Israel. Sorry Bushie.

The economy is really f’d up right now. I’m sure you’ve figured that out for yourself. I don’t know enough about economics to determine if this is a normal downswing in the cyclical pattern of the markets, or if we’re kind of screwed ala 1929.

What I do know is that my Sharebuilder and Vanguard accounts are suffering. I know now is really a good time to get in on investing because the economy is in the dumps, but it’s still hard to watch the little money I have turn into even less money!

I’ve been tracking my investment accounts separate from my liquid cash for about a year now. That includes all accounts my money lives where some risk of losing that money is involved, plus my CDs because I’m at some point going to move them into my Roth IRA or some other investment account.

The problem in really figuring out what the numbers mean is that I’ve added money to my investment account throughout the year, and while I could go back and calculate just how much I’ve added I really don’t have the time to figure that out. What’s more telling is my individual ETF and stock investments, and even more so my Vanguard funds where I pretty much know how much I’ve invested.

So a year ago on 6/21/2007 my total investment account was worth $21,014.57.
I liquidated about $5200 of a CD and moved that into my cash accounts, so that brought the account down to $22531.18 after it had increased to $27552.65 (not because it was performing well, but because i had been investing more aggresively than in the past and actually saving some money).

At the moment, my total investment account is worht $22,511, but I have some debt in my cash account because I spent like a mad woman on vacation. Luckily all should balance out next month when I’m paying just $550 for rent & storage in between moving and finding a new place to live.

So my investments are pretty much staying at the same base point. That’s mostly because the CDs and prosper account and monthly deposits have kept that stable. I’m sure I’ve actually lost more money in those accounts than what it looks like at first glance.

This is maybe more telling…

My Roth IRA account that I started, like, two years ago, was at $4019.73 on 6/21/07
I did not add or subtract any money from that specific acccount since then.
That account, the Vanguard Retirement 2050 account, is at $3759.84 at the moment.
I’m pretty sure I invested $4000 in that account, so it’s down, and it will likely keep going down as the economy flushes down the toliet.

Looking at my Sharebuilder funds, I can see that they’re all doing shitty. I was updating my spreadsheet a few times a week previously, but since I was gone for a month I had not updated it at all. I also did not invest anything more in that month.

Here is the value of each fund on 5/19 versus 6/15…

COMV: $56.48 / $52.24
EWZ: $308.16 / $273.94
KOL: $149.1 / $164.4
MCD: $206.55 / $196.1
PBD: $298.85 / $384.11 * ($100 was invested automatically in this account when I was gone)
GLD: $518.94 / $507.80
WFMI: $89.08 / $78.86
EPI: $183.74 / $144.81

As you can see, only my Coal ETF is making me any money. But it’s not enough to balance out all the other losses. I really don’t have a great deal of money invested in Sharebuilder because I’m starting small, it’s my Vanguard accounts that have the most of my money. And they are performing better, albeit not much better, than my individual ETF and stock picks.

I’m just going to leave the money in my sharebuilder account. I plan on investing slower, about $50 a month, in the clean energy ETF and the coal ETF, back and forth, because i figure either we’re going to get the energy we need from coal or cleantech, or both, but in the long run they’re probably pretty good bets. My Brazil and India funds are suffering, but if I ever get a raise I’d like to push more money into those while the economy is sucking. My coal ETF gives me enough exposure to Asia, though, as does my clean energy ETF. I’m a little confused as to Gold’s performance right now, as it had been going up before when the looming recession/depression was its own media gold, but now the ETF is kind of sitting there. I’m curious what will happen to it 20 or 30 years down the road. It just sucks that it’s going to be taxed as a collector’s item. I really need to get some of the gold ETF in my Roth so I don’t have to deal with that crappola.

Back from Israel, How’d the Bank Account Fare?

In short, I spent too much money in Israel, but I might be able to balance the books due to a variety of upcoming life changes that will involve spending less money and taking in, hopefully, the same amount of income (as long as my company still wants me to work there!)

As I wrote previously, the trip to Israel was, in itself, free. The flight was free and for the first two weeks, the housing and most of the food was free. So spending on other things seemed to make more sense… I mean, when is the next time I’ll be back in Israel?

My big purchase – my Canon DSLR Xsi – was the best purchase I’ve made in my life. I took over 4000 pictures and they’re my favorite souvenirs from the trip. Meanwhile, on the trip I bought extra food, some clothes, jewelery, gifts, etc. It all added up. To quite a bit of money.

But… even in the last week of the trip, I barely spent any money on room and board. I stayed with family most of the time and while I didn’t expect them to feed me, they did… they fed me a lot. And I got them gifts for their kindness, but having to pay for my own food and housing would have cost a lot more. I stayed in hostels for only two nights of the trip, and i didn’t have to, but I wanted to have that freedom. So each night in the hostel cost me about $20-$30. Otherwise, I had all free housing. It was a good deal. And my family was awesome and so nice to me. Even family I never knew I had. All second cousins and such, but they took me in like I was their own daughter. It was awesome.

I know, at the moment, my spending far surpasses my normal budget. And I only worked one week out of this past month, so I haven’t been taking in any money either. That’s the bad news.

The good news is that in a week I move into my friend’s house for, probably, a month, while trying to find a new place to live. I’ll offer to pay her something for my time there, but it will not be anywhere near the price of my current rent (of $1050 a month). And I’ll be starting back to work again on Monday, so I’ll be taking in money and spending very little for housing. When I do find a new place to live, I’m trying to find something that’s even less than what I’m paying now. It might not be an ideal living situation, but it’s not like my current place is perfect. The studio thing was awesome – I love, love, love living alone… but other than that, it was just a waste of money. Utilities were included, which was good, but I still had to pay my internet and cable bill all on my own. Living with even one other person and splitting that bill will lower my costs a lot.

So I’m pretty much looking for a shared living situation, at $600-$1000 a month. My rational side keeps telling me to get a tiny cheapo room with or without access to cooking and to just save my money. I’ve been thinking how much I want to get my teeth fixed, and how if I live super cheaply for a year and save I can afford to fix my teeth in about a year. That alone makes living in a tiny room worth it. Besides, even though I work from home a lot now, there’s no reason I can’t make a habit of going into the office more often. I want to do that anyway, and if they keep liking me, eventually take on a full time position with my current company (fingers crossed.)

It was kind of weird being away for a month and not focusing on money as much as I normally do. I haven’t been obsessively tracking my stocks, or checking to see if anyone of my borrowers defaulted on their Prosper loans. It’s been kind of nice. As soon as I get all the bills paid off and my old paychecks cashed, I’m going to tally up just how much I spent in Israel and how much I have to make back. I’m a little scared, but not too scared, as I know I can make it back within a few months if I’m smart about it.

Just remind me to be smart about it. 🙂

Care to Prosper? P2P Lending Update

I’m rather risk adverse when it comes to my finances, but the idea of person-to-person lending has enough reward behind the risk for me to take some chance on the newly-minted credit market.

My Prosper plan is to handpick one listing per month to fund. I transfer $50 from my paycheck to Prosper and decide on a listing that I think is worthy. Most often I chose folks in the A or AA category (though I recently went as low as C) and I pick people who are trying to get a lower rate on their credit debt or who need smaller amounts of money for important things like house repairs, doctors bills, etc. I try to stay away from business loans.

Here’s an update on how my Prosper accounts are doing (none have defaulted yet, knock on wood.)

Total Account Value: $357.43
Amount Invested: $350

Average Interest Rate: 14.76%

[[6 loans out, $50 each]]

Loan Title $ Interest
Rate
Credit
Grade
Principal
balance
Paying off/ Consolidating Credit Cards $50.00 16.00% C $0.00 Current
Let me pay you instead $50.00 17.00% B $1.06 Current
Termites have destroyed my home, $50.00 15.55% A $2.21 Current
Paying off Adoption Credit Debt $50.00 19.33% B $2.11 Current
Help Me Study Abroad ** Relist #2** $50.00 13.00% B $4.66 Current
Emergency Home Repairs – Winter $50.00 7.00% AA $5.06 Current

Business & Personal Loans. Great Rates. Prosper.

May Spending Report, May 9

This month I am making a few purchases for my “free” trip to Israel, so my budget is a little off. I will make up for this by being really frugal with my budget and trying to underspend it once I get back from my trip.

Next month is going to be difficult because I am missing two to three weeks of work for my trip, and that’s unpaid time off. Which is fine, I just need to be careful to be really frugal next month. Luckily, my parents will probably feed me while I’m home, and while in Israel the trip provides some meals. So if I can get away with just paying my fixed costs in June, I can afford to take the trip. Granted, the trip is free, so this is a frugal vacation by proxy. Can’t complain about that!

————————-
FIXED COSTS: $1420
BEAUTY: $20
ENTERTAINMENT: $37
FOOD: $40
TRANSPORT: $82
SHOPPING: $201
INVESTMENT: $250
————————–
$2050 / [$2400 budget for month]

(($350 left for May))

Still need to…

*go food shopping (approx $80)
*get water shoes for trip ($60?)
*haircut ($70)
*get bathing suit? ($90)
——————————
Still to spend: $300 (put any extra in vacation fund!)

—————————
FIXED COSTS: $1420
Rent: $1050
Phone: $55
Cable: $72
Health Insurance: $129
Gym: $27
Car Insurance: $87
—————————-

Beauty
$20 (eyebrow wax)

Entertainment /Hobbies
$15 (camera fix)
$22 (theater ticket)

Food [*still have to do food shopping for May]
$23.99 (dinner for two)
$10.24 (dinner)
$6 (dinner)

Transportation
$5 (Bart fare)
$66.21 (Gas)
$3 (bart Fare)
$5 (bart fare)
$2.25 (caltrain)

Shopping
$148 (dress for trip)
$53 (shirt)

Roth IRA [investments]
$200

Prosper [Investments]
$50

Introducing The Wealth, Money & Life Network (WML-Net)

I’m thrilled to announce the debut of The Wealth, Money & Life Network (WML-Net). Composed of a select group of kick-ass personal finance bloggers, The Wealth, Money & Life Network will provide information on saving, smart spending, and how major finance topics effect different locations and age groups.

The WML-Net is made up of a diverse group of individuals. Our ages span across the 20s, 30s and into the 40s (I’m the youngest at 24!). We are located in different parts of the U.S.; ranging from the east coast to the west coast, from the midwest to the southwest to the deep-south. Our backgrounds are varied and include careers, education, income streams and lifestyles. Some of us have debt, while others do not. There are those who are married, with and without children, while others are single. Some of us have a college degree, some us are prospering without one.

We are excited about this opportunity to share with you what we have to offer. Realizing that no two situations are alike, our diverse group will provide multiple perspectives and insights which will allow you to identify the one that most closely aligns to your circumstances.

Each month we will present a topic and approach it based on our own unique experiences. This month, we are going to discuss Emergency Funds. I certainly look forward to hearing about each member’s approach to establishing and maintaining an emergency fund. If you would like to share your thoughts on an emergency fund, feel free to contact any of us to add it to the network post at The Wealth, Money & Life Network site.

Be sure to pay a visit the other The Wealth, Money & Life Network member sites and subscribe to their feed, and my feed, if you haven’t done so already. The links below will get you there quickly!

Also, be sure to visit The Wealth, Money & Life Network site. If you would like to participate in our first Carnival of Wealth, Money and Life, click here.

We look forward to sharing our financial and life experiences with you in the future!