Back then I knew absolutely nothing about blogging. I was new to everything, including WordPress, html, php, seo and everything else blog related. Just to give you an idea, check out 30 Things I Learned in My First 30 Days of Blogging.

To celebrate the second anniversary, I initially planned to talk about the most popular articles published here at the Dough Roller. Upon reflection, however, I thought it best to say thank you to the blogs and websites that have helped me along the way.

First, however, let me give a big thank you to the regular readers of the Dough Roller. Without you, this site would be the proverbial tree falling in the woods.

With that, here are some of the blogs and websites to whom I owe a big thank you:

• 2million's Personal Finance Blog: 2million was the first personal finance blog I remember reading, and the inspiration behind the Dough Roller. I spent a month reading 2million before launching this site.
• MSN's Smart Spending Blog: I owe much of the success of this site to Karen and Donna at MSN. They invited me to became a partner blog with them, and as a result, the Dough Roller has a far broader reach than it ever would on its own. On top of that, Karen is an incredible writer and editor. A typical email from Karen as she reviews one of my articles goes something like this:
  

  Yo, Dough! Did you really mean to say [fill in something stupid I wrote in one of my articles]?

  The simple truth is that working with Karen has made be a better writer, and I am eternally grateful.

• M-Network: The M-Network currently is comprised of eight terrific personal finance blogs: Plonkee Money, Mrs. Micah, Cash Money Life, Gather Little By Little, My Two Dollars, Moolanomy, I've Paid For This Twice Already..., and Being Frugal. While the Dough Roller is no longer a member of the M-Network, my work with the M-Network improved the Dough Roller in countless ways. They truly represent a fine group of blogs and bloggers.
• Get Rich Slowly: JD, the blogger behind Get Rich Slowly, played a big role in the development of this site, and he may not even realize it. Back in December 2007, when I was still trying to figure this blogging thing out, JD picked a Dough Roller article as an editor's choice in the Carnival of Personal Finance. The article was called The ultimate guide to traditional and Roth 401(k) and IRA accounts, and as a result of JD's pick, the article ended up on LifeHacker as Retirement Savings 101. Before I'd finished my morning cup of joe, the site had received about 10,000 visitors.

The Future of the Dough Roller

So where do we go from here? My goal for the remainder of 2009 and beyond is to have one word best describe this site--useful. Before I hit the publish button on an article, the question I'll ask is whether the article will help you make more, spend less, or invest the rest. If the article won't prove useful, it won't get published.

And if you're like me, you're wondering just how useful this article is. Fair enough. So to make this article useful, here's a site that helps you develop good habits of any kind, financial or otherwise--www.stickk.com.

Stickk is a free website developed by Yale University economists that allows you to set up any goals you want. You can put money on the line if you fail to reach your goal and determine who the money will go to if you fail. So, for example, if you are a Democrat, you could have the money go to Rush Limbaugh in the event of failure. Now that would be motivation (even for many Republicans)! You can also involve a referee (like a friend or family member) to monitor your progress. And you can enlist the help of supporters to cheer you on.

So if you're having trouble sticking to your budget, saving an emergency fund, or any other aspect of your finances, you should check out Stickk.

Cheers!

Economic Stimulus Payment and Check

Q. What is President Obama's economic stimulus package called?

A. The stimulus package is called the American Recover and Reinvestment Act of 2009, and it was signed into law on February 17, 2009. You can read the full version of the Act here, but be warned that it's more than 700 pages long, which is why we've developed this Q&A.

Q. Does the plan include an economic stimulus payment?

A. This is probably the most important question on everybody's mind. The stimulus plan provides for what is called the Making Work Pay Tax Credit. The credit pays up to $400 to working individuals and $800 to married taxpayers who file joint returns.

Q. Do I qualify for the Making Work Pay Tax Credit?

A. The tax credit will begin to phase out (be reduced) for individual taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly. The credit is eliminated altogether when an individual taxpayers adjusted gross income reaches $100,000, or $200,000 for married couples filing jointly.

Q. How is the Making Work Pay Tax Credit calculated?

A. The stimulus payment is actually what is called a refundable tax credit. This means that taxpayers can receive the stimulus payment even if they do not owe any taxes. The refundable credit is calculated by multiplying earned income by 6.2%.

Q. How big will my stimulus payment be?

A. The amount of the stimulus payment depends entirely on your earned income. For individual tax filers, earned income must be at least $6,452 to receive the full $400. Married couples filing joint returns would need earned income of at least twice that amount to receive the full $800 stimulus payment.

Q. Will I receive an economic stimulus check?

A. No. Unlike the 2008 stimulus plan under President Bush, this 2009 economic stimulus package distributes the payments by reducing the tax withholdings your employer takes from your check.

Q. What if my employer does not withhold taxes from my check?

A. According to the IRS, for those who are not subject to income tax withholding, they can claim the credit when they file their 2009 income tax returns.

Q. When will I receive my economic stimulus payment?

A. June 2009. Under current plans, the reduced income tax withholdings are set to begin in June.

Q. How long will the stimulus payments last?

A. The stimulus payments are for 2009 and 2010. So in effect, there are two stimulus payments under the package.

Q. How much more money will I see in my paycheck?

A. Assuming you qualify for a $400 stimulus payment, you will see your monthly take home pay increase by about $15 per week in 2009 and about $7.70 in 2010. For those qualifying for a $800 tax credit, double these amounts.

Q. Do retirees who do not work receive a stimulus payment?

A. Yes. Because the payroll tax credit only goes to employees and the self-employed, the bill includes a one-time payment of $250 to recipients of Social Security benefits, Railroad Retirement benefits, Supplemental Security Income payments, and pension and disability benefits from the Veterans Administration.

Government retirees who don’t get Social Security will also get a one-time refundable tax credit of $250 in 2009.

For additional information, you can visit the IRS Making Work Pay Tax Credit page.

More than Economic Stimulus Checks

The American Recovery and Reinvestment Act provides for numerous tax breaks beyond direct stimulus payments. Here's a list of the key provisions that affect individuals and small businesses.

Enhanced Child Tax Credit: The Child Tax Credit will cover more low-income earners. In 2008, the credit was refundable to the extent of 15 percent of an individual’s earned income in excess of $8,500. For 2009 and 2010, that floor drops to $3,000.

First-time Homebuyer's Credit: The stimulus package increases the $7,500 first-time homebuyer credit to $8,000 for primary residences purchased between January 1, 2009 and November 30, 2009. And so long as the home isn't sold within three years, the plan eliminates the requirement that the credit be repaid.

The Obama Administration also has implemented the Making Home Affordable Refinance and Modification Program for those struggling to make payments on an existing home.

New car sales tax deduction: Buyers of new cars, light trucks, SUVs, motorcycles and motor homes during 2009 can deduct the state sales or excise tax they pay, even if they don’t itemize their deductions. This break starts phasing out for single taxpayers with Adjusted Gross Income over $125,000 and couples with AGI over $250,000. Note that if you already itemize and choose to deduct state and local income tax, this deduction won't help you.

Extended energy-saving credits: The 10 percent tax credit for energy-saving home improvements is increased to 30 percent and is extended through 2010. Improvements that qualify for the credit include energy-efficient skylights, windows and outer doors, along with energy-saving water heaters, central air conditioners and biomass stoves.

One-year "patch" on the Alternative Minimum Tax: To keep millions of middle-income taxpayers from being forced to pay the Alternative Minimum Tax (AMT) for 2009, the measure increases the minimum tax exemptions to $70,950 for couples filing jointly and $46,700 for single filers.

Bonus depreciation: A special 50 percent, first-year bonus depreciation is revived for assets bought and placed in service during 2009.

Loss carrybacks: Businesses that averaged $15 million or less in gross receipts over the past three years will be allowed to carry back losses for five years instead of two. The easing applies only to 2008 losses.

Reduced taxes on unemployment income: Normally, people receiving unemployment benefits must report them as income and can be taxed on them. The new bill makes the first $2,400 of unemployment income nontaxable.

Expanded Hope Credit: The Hope Credit for college costs is increased to $2,500 for 2009 and 2010, covering 100 percent of the first $2,000 of tuition and related expenses per year and 25 percent of the next $2,000. The credit is available for all four years of college, up from only two years, and covers the cost of books. It is 40 percent refundable, and begins to phase out at $80,000 of Adjusted Gross Income for singles and $160,000 of Adjusted Gross Income for married couples. The bill also allows tax-free distributions from Section 529 College Savings Plans to cover computer purchases.

Facts and Figures of the 2009 Economic Stimulus Plan

Q. How much does the stimulus plan cost?

A. The stated cost of the stimulus bill is $787 billion. That price tag is a bit misleading, however, because many of the programs in the plan will likely be extended beyond what the bill provides. According to the CBO, the 10-year cost of the package, including interest on the debt necessary to pay for the plan, tops out at $3.27 trillion.

Q. Will the American Recovery Plan help or hurt our economy?

A. As you might imagine, there is much debate and disagreement on this question. According to the CBO, however, in the long run, the stimulus program will hurt economic growth. By 2019, CBO estimates that the plan will reduce GDP by 0.1 to 0.3 percent.

Q. How is the stimulus money being spent?

A. The $787 billion package is divided into two parts. About $499 billion goes toward spending, and about $288 billion goes to tax relief. The spending portion will get distributed to federal agencies and state governments to be spent on projects and programs specified in the stimulus package. Here's a high level breakdown of the spending:

• State and Local Fiscal Relief: $144 billion
• Infrastructure and Science: $111 billion
• Protecting the Vulnerable (e.g., food stamps): $81 billion
• Health Care: $59 billion
• Education and Training: $53 billion
• Energy: $43 billion
• Other: $8 billion

If you have questions about The American Recovery and Reinvestment Act of 2009 that are not answered here, please leave a comment and we'll add your question and an answer to this page.

What is an economic recession?

The most widely used definition of a recession is the reduction in a country's gross domestic product over two consecutive quarters. Under this definition, we don't know we are in a recession until we've been in one for six months or more. In the United States, the National Bureau of Economic Research determines whether and when the country has entered a recession. The National Bureau defines a recession as "a significant decline in [the] economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales." According to the NBER, the U.S. entered its current recession in December 2007. Thus, we are currently in month 14 of the recession.

How is a recession different from a depression?

Some often use the words recession and depression interchangeable, but they really have two different but related meanings. While there is no "official" definition of depression, most definitions proposed by economists relate to a severe receission, either in terms of contraction, duration, or both. For example, some have defined a depression as a "sustained recessionary period in which the population is forced to dispose of tangible assets to fund every day living, as was seen in the US and in Germany in the 1930s." Others define a depression as a "fall in GDP of 10 per cent or more before a recession would be referred to as a depression." And I've heard others define a depression as simply a recession last 2 or more years.

But perhaps the best definitions of a recession versus a depression come down to this--a recession is when it hurts; a depression is when it hurts real bad.

When will the recession end?

Since 1948 there have been ten periods (not including the current one) of negative economic growth over two fiscal quarter or more:

As you can see from the table, the longest recession has been 17 months, occurring twice. If the current recession lasts as long, we have three months to go. But that's a big "if."

There are several reasons some argue this recession will last longer. From 1991 to 2000, the U.S. enjoyed the longest period of economic expansion on record. Add to that the U.S. debt, loss of manufacturing jobs, a horrible real estate market, and an unprecedented credit crisis, and there you have the arguments for a longer recession bordering even on a depression.

in contrast, others point to the historically low interest rates (compare to 1981's double-digit rates), and low inflation. Add in the stimulus package, and they believe we'll come out of the recession this year.

While to me the stimulus bill reflects the government's inability to control spending, it will stimulate the economy in the short term. The fact is that if history is any guide, we are nearing the end of this recession. I'm not one to make predictions, but if there is any good news here, it's that we have already weathered 14 months of this economic storm. If the credit crunch improves and real estate prices stabilize, I would expect the recession to end in the next three to six months.

But I'm no expert. Speaking of experts, here's what they have to say on the subject.

The Fed uses the spread between the 10-year treasuries and 3-month treasures to predict future economic activity over the next 12 months. Using this model, the Fed has accurately predicted the last seven recessions dating back to 1960. So what does their crystal ball say now? The recession will end mid-2009. You can read the details here.

Not everybody is so sanguine, however. Nouriel Roubini (Chariman of RGE Monitor), aka "Dr. Doom," predicts a two year recession:

The U.S. recession will last two full years, with gross domestic product falling a cumulative 5%, said Nouriel Roubini, ... For 2009, Roubini predicts GDP will fall 3.4%, with declines in every quarter of the year. The unemployment rate should peak at about 9% in early 2010.

All of this reminds me of a description of economists I once heard that seems very accurate. An economist is like a person standing next to a pool who, as you're about to jump in whispers, "There's no water in the pool." After you land with a thud, the person with a grin on their face shouts at the top of their lungs, "I told you there was no water in the pool!"

DR: How does Lending Club work?

RG: The concept is quite simple. Lending Club’s community is made up of borrower and lender members. Borrowers are good credit folks who need a personal loan for a variety of reasons. Lenders fund those loans and in return receive payments in principal and interest from the borrowers. It’s a win-win situation for all members because rates are typically lower than those paid by borrowers on their credit cards, but higher than those received by lenders for comparable investment opportunities.

DR: How do lenders fund loans? Is it done by auction or some other way?

RG: All borrowers who pass our strict credit policy are assigned an interest rate based on their credit and risk profile, varying from 7.37% to 20.11%. We then present notes associated to the loan to prospective lenders. Lenders review the “inventory” of notes and pick which ones they’ll like to invest in. Alternatively, lenders can run LendingMatch to automatically generate a portfolio with tens or hundreds of loans at a specified average interest rate. There is no bidding involved.

DR: When a lender wants to sell a loan how is this accomplished? Does he or she just set a price?

RG: A Note Trading platform operated by Foliofn is available to lender members, who just need to complete a short trading member application with Foliofn. Once that is completed, they can put their notes up for sale at a price they set for up to 30 days. Other trading members browse notes for sale and decide which notes are attractive to them based on the information available about the loan (payment history, FICO score trend, and collections log if any), and decide to buy these notes. The seller receives the purchase price minus a 1% trading fee.

DR: What kind of growth do you see ahead for Lending Club and the industry?

RG: Peer lending, and Lending Club specifically, will continue to grow rapidly and become increasingly mainstream. We have demonstrated over the last 18 months that the economics work: borrowers get more affordable access to credit and lenders earn very attractive returns. We have been gaining acceptance from the blogging community, and increasingly from mainstream press, with Lending Club being featured in CBS Evening News, NPR’s Morning Edition and WSJ in just the last few weeks. As a result, we have been growing fast in Q4 and will continue along the same trend.

DR: How is Lending Club different from other p2p lending sites?

RG: There are two key differences. First, our notes are the first and only registered with the SEC. Second, our product focuses on high quality borrowers, with a minimum FICO of 660 and an average of 708. There are other operational differences such as smaller investment amount (starting at $25 per note), an interest rate set based on credit risks (no auction model), and an effective collection process.

DR: Do you think peer to peer lending will become more popular as the public gets used to the concept?

RG: Most definitely. We have started seeing more acceptance of the concept, and it is slowly moving from the “new and interesting” category to the “part of the solution” category. As people get used to the concept, more success stories are shared, and a longer track record becomes available, mainstream will catch up on it.

DR: What are some of the features planned for Lending Club in the near future?

RG: We are focusing on 2 areas: 1) Make it simpler for Lenders to invest and keep their proceeds re-invested in the type of notes they care for, and 2) Empower borrowers to manage their loan applications and repayment process. In fact, we just pusblished some new features a few days back. You’ll see more features aimed at addressing these 2 areas being released within the next few months.

DR: Do you have any advice for beginning lenders or borrowers?

RG: To borrowers, I recommend they understand their current financial situation and are able to explain it clearly and in simple terms. Know why they are borrowing and convey how you plan to repay it.

When I speak to new Lenders, I typically recommend spreading their risk as much as possible (diversification) and understanding how to read borrowers’ credit profiles to aid them in making decisions on which notes to invest.

DR: With credit tightening will this be an opportunity for peer to peer lenders to increase the quality of the loans they fund?

RG: Absolutely. We recently increased our minimum FICO score from 640 to 660 and continue to conduct very strict credit review to ensure the community is fair to all members (borrowers and lenders).

DR: LendingClub recently added additional criteria to its interest rate calculation which in most cases will cause interest rates to go up. Can you explain what caused LC to do this? Did it conclude that its original interest rate formula did not adequately account for default risk, and if so, why?

RG: We are committed to a continuous evolution of our pricing algorithm to ensure both borrowers and lenders get a fair deal. As our portfolio gets older, we have more data to work with to identify predictors of performance unique to our members. Our pricing algorithm also reflects changes in the economic environment.

DR: Last year Prosper filed an S-1 ahead of LC, but did not suspend its lender program. It recently re-filed its S-1 and, following LC's lead, suspended its lender program while its S-1 is pending. Do you know what happened at Prosper and why LC was able to leapfrog it with its trading platform?

RG: We cannot comment on Prosper’s regulatory situation.

DR: There have been a number of p2p companies started in the last year. Do you anticipate any consolidation in the industry in the next 12 to 24 months, and if so, what is LC's strategy in that regard?

RG: Not really. It is quite early in this industry to predict any consolidations. I think there will be at least 3 or 4 very successful, public companies, and a handful or smaller players.

DR: LC currently offers borrowers a 3-year fixed rate loan. Do you have plans to offer loans on any other terms? Have you considered an LC credit card?

RG: We do have a product roadmap that considers new product extensions and additions. I’ll be able to share more details as we get closer to introducing those new products.

DR: Does LC intend to offer lenders guidance on how to value a note for sale on LC's trading platform?

RG: No, Lending Club is the issuer of the notes and as such is not involved in the way the trading platform operates. We do, however, provide very detailed information to lenders about the borrower’s FICO score trend, loan’s payment history and any collections activity, so that the selling lender member can decide how to price their notes.

For a detailed description of LendingClub's Note Trading Platform and insight on valuing loans, check out my LendingClub Note Trading Platform Review.

DR: To sign up for LC's trading platform, one must identify the name and address of their employer. You also must indicate how much you make and your net worth. Can you explain why.

RG: Foliofn is a registered broker dealer, member of FINRA and member of SIPC (Securities Investor Protection Corporation). As such, they have certain information they need to request of all their customers.

DR: Will data about loans and borrowers on the trading platform be made available to developers through an API or otherwise?

RG: Yes, that’s on the roadmap.

DR: Any last comment?

RG: Thanks for the opportunity to present Lending Club to your readers. I encourage them to try us out and send me any comments at feedback@lendingclub.com

If you'd like to give LendingClub a try as a borrower, lender or both, you can check it out here.

The rules cover both credit card practices and disclosures. Here is a rundown of the new regulations related to credit card practices and the impact they may have on your credit cards.

Fed Rules Prohibiting Certain Credit Card Practices

The Federal reserve adopted regulations prohibiting several common credit card practices:

• Time to Make Payments: The final rule prohibits banks from treating a payment
  as late unless the bank provides a reasonable amount of time for the consumer to make that payment. The rule provides what is called a "safe harbor" for banks that send credit card statements at least 21 days before the payment due date. This means that banks will be deemed to have complied with this regulation if they send out statements at least 21 days before they are due. It does not mean, however, that a bank has necessarily violated this rule if it gives consumers less than 21 days. Nevertheless, most banks are likely to take advantage of the safe harbor provision.
• Allocation of Payments: When different annual percentage rates (APRs) apply to different balances on a credit card account (e.g., purchases, balance transfers, cash advances), the final rule requires banks to allocate payments exceeding the minimum payment to the balance with the highest rate first or pro rata among all of the balances.

  For example, assume that a consumer had a $10,000 balance on a credit card, $5,000 from a balance transfer offer at 0%, and $5,000 from purchases at 12.99%. Today, most credit card companies would allocate 100% of payments exceeding the minimum required payment to the 0% balance transfer, resulting in the highest possible interest rate charge to the consumer.

  Under the new rule, any payments exceeding the minimum payment would have to be allocated either entirely to the high interest balance first, or allocated in equal parts to both the high interest and low interest balances. Until your credit cards comply with this rule, it is important to keep balance transfer credit cards separate from the cards you use day to day.

• Increasing Interest Rates: The rules require banks to disclose when the credit card is first obtained all interest rates that will apply to the account. The rule further prohibits increases in those rates, except in certain circumstances:
  1. If a rate disclosed at account opening expires after a specified period of time, banks may apply an increased rate that was also disclosed at account opening. This would apply, for example, with 0% introductory rates on balance transfers or purchases.
  2. Banks may increase a rate due to the operation of an index where the rate charged is variable. Note that while there are fixed rate credit cards, most use variable rates.
  3. After the first year, banks may increase a rate for new transactions, but only after giving you 45-day advance notice.
  4. Banks may increase a rate if the minimum payment is received more than 30 days after the due date.
• Two-Cycle Billing: The rules prohibit credit card issuers from calculating interest using a method referred to as �two-cycle billing.� Under this method, when a consumer pays the entire account balance one month, but does not do so the following month, the bank calculates interest for the second month using the account balance for days in the previous billing cycle as well as the current cycle. In other words, two-cycle billing can result in you paying interest on money you already paid back to the credit card company. It is a confusing, unfair and ridiculous way to calculate interest.
• Financing of Security Deposits and Fees: This part of the rule is aimed at "bad credit" credit cards, or subprime credit cards. Banks would be prohibited from financing security deposits and fees for credit availability (such as account-opening fees or membership fees) if charges assessed during the first 12 months would exceed 50 percent of the initial credit limit. The rule also limits the security deposits and fees charged at account opening to 25 percent of the initial credit limit and requires any additional amounts (up to 50 percent) to be spread evenly over at least the next five billing cycles.

  These credit cards are worse than payday loans. In some instances, a consumer is given a card with say $300 in credit, but then charged fees that take up 75% of the available credit or more. The Fed is putting an end to that practice.

On balance, these regulations seem quite sensible. But we should recognize that there will be some potentially negative consequences for consumers because of these regulations, too. For example, they will likely prevent some consumers from obtaining credit, and they may very well increase the cost of credit for others. One of the Fed's Board members recognized this impact in a statement released yesterday:

As in most rulemakings, it is important that we try to strike the appropriate balance between competing points of view to achieve our objectives while minimizing the risk of unintended consequences. Unfair practices can impose significant costs on consumers. Likewise, the new rules will have a cost, too. In addition to extensive changes in disclosures, financial institutions will be required to make changes to their business models and alter certain practices. Although consumers might see some costs decline as new business models emerge, consumers might see other costs increase. Creditors may need to strengthen upfront underwriting efforts in the process. Over the long term, however, we expect the costs of making the required changes will be outweighed by the benefit of creating significantly clearer credit card pricing. In sum, our intent is to increase transparency and fairness in how credit card and deposit accounts operate, thereby enhancing competition and empowering consumers to better manage their accounts and avoid unnecessary costs.

Currently pending in Congress are two credit card reform statutes that could add further consumer protections if enacted.

I lost a good friend yesterday. Dean Barnett was just 41 when he died of complications from Cystic Fibrosis. Dean and I first met in 1989 at Boston University School of Law. We were both incarcerated in Section B, which included contracts with the distinguished and extremely tough Professor Clark Byse. Dean and I helped each other survive that year. It was Dean's infectious laugh (more of a squinty-eyed snicker of the Machiavellian type) that pulled me through.

We had lunch together most days in law school. Burger King on Commonwealth Avenue. We would marvel at how Dean would order the 6 piece chicken tenders, but most days find 7 or even 8 pieces when he opened the box. True, it didn't take much to excite us back then. But remember that we were both poor law students. An extra chicken tender or two went a long way.

I can still remember Dean taking a tiny pill before each meal, a small reminder of the physical battle he waged all his life. He said very little about Cystic Fibrosis. In nearly 20 years, he never complained or asked why, at least not to me. In fact, it rarely came up, and when it did, Dean's wit wasn't far behind.

After law school, Dean worked as a headhunter, placing partners and associates in Boston law firms. An independent soul, Dean would have never found himself working at a large law firm. He enjoyed his independence, and besides, he made more as a headhunter than any '92 grad of BU Law has made practicing law.

He found his way to the blogosphere a few years ago, and it proved to be an excellent venue for his intellect and insight. He blogged for Hugh Hewitt, and more recently, the Weekly Standard.

Last fall I had a chance to spend some time with Dean in Boston. We played golf. He won. He always won. In law school, even with Cystic Fibrosis, when we played racquetball he beat me like a rented mule. Somehow I didn't mind losing to Dean, not like I had a choice in the matter.

While he was beating me at golf last fall, we spoke of blogging, politics, the Red Sox (of course), and his wife. While I have never had the pleasure of meeting her, as seen through Dean's eyes, she was a real catch.

To give you some insight into the character and perspective of Dean Barnett, here he is talking about his disease in 2006:

At one point during my interview, the questioner asked me if I expected to see a cure to CF in my lifetime. I answered no, but that it doesn�t really matter. When you see death up close, a couple of things become clear. One is that we all die, and that death is just part of the deal. The other is that life is such a blessing, that�s it just so great, even though you know the inevitable might be near you still want as many bites of the apple as possible.

None of us know what the future of the salt water treatment might be. My health will maintain its current state indefinitely in the truest sense of the term. The good times could continue for years, or it could all crash tomorrow.

But regardless, this treatment has given me time - time to spend with my wife and family and friends. Time to hit golf balls (usually sideways, but even that�s alright). Time to chase my dogs around the house. Time that frankly I didn�t expect to have. There could be no greater gift, and it�s a miracle in so many ways.

Throughout his life, Dean repeatedly and courageously took the road less traveled. And that made all the difference.

Rest in peace my friend. . .

P.S. The banner of Dean at the start of this post was "borrowed" from the Weekly Standard. I hope they don't mind. Besides, Dean would have appreciated my ingenuity.

Here are some other articles about Dean's life:

• What a Man
• Remembering Dean Barnett
• Horrendous: Dean Barnett passes away
• Dean Barnett RIP

Retroactive Interest Rate Increases and Universal Default Limits

One of the biggest complaints leveled against the credit card industry is the practice of raising interest rates significantly due to a late payment or other default, or sometimes for no reason at all. The Credit Cardholder's Bill of Rights would limit a card issuer's ability to raise interest rates. Specifically, a credit card company could not (with some exceptions) raise interest rates on existing balances. Furthermore, if the interest rate on future balances was raised, the credit card issuer would be limited in how quickly it could insist that the old balance subject to the lower interest rate is paid off.

Here are some other interest rate hike protections the Act would provide:

• If a cardholder loses the benefit of an introductory rate, the new rate cannot exceed what the interest rate would have been at the expiration of the introductory period.
• A consumer must be given a 45 day written notice before higher interest rates take effect.

Pro Rata Payment Allocation

The Act's provisions related to pro rata payment allocation are absolutely critical to balance transfer credit cards. Here's the problem. Suppose you have a $5,000 credit card balance at 0% from a balance transfer offer. Let's also assume that you've charged $500 worth of purchases that are subject to a interest rate of 10%. If you pay $500 at the end of the month, which balance does it go towards?

Under most credit card agreements today, the payment would go to the 0% balance first. Only once that was paid off would you begin to make a dent in the $500 balance subject to 10% interest. That's why I never use my balance transfer cards for purchases. Under the statute, however, credit card companies would be required to allocate your payments across both the interest free balance and the balance subject to a higher interest rate.

Double Cycle Billing

The statute would also attack a practice that has long been criticized by consumer advocacy groups, double cycle billing. Also called two cycle billing, under this practice, some credit card issuers go back two billing cycles, not just one, to calculate a cardholder's average daily balance. The result can mean that you will pay interest on balances you paid off the previous month. This chart from a GAO report does a nice job of describing this practice (click image to enlarge):

Statements Must be Sent 25 Days before they are Due

The Credit Cardholder's Bill of Rights would require credit card companies to send out your bill at least 25 days before it is due. The intent is to give consumers ample notice and an opportunity to pay the bill before interest charges accrue.

Over the Limit Transactions

This is where common sense and sunshine break through the dark clouds of consumer credit. Today credit card companies charge a fee if you go over your credit limit. The problem is that they let you go over the limit! Rather than rejecting a transaction that would cause you to exceed your available credit, the credit card companies approve the transaction, and than whack you with a fee.

Now one could argue that consumers should know their current balance and their credit limit, and not make purchases that send them over their limit. True enough. But there is something a bit twisted with the current scheme. The Act would allow consumers to elect to have their credit card company reject any transactions that would send them over their limit.

Subprime or Fee Harvaster Cards

This covers the truly dark side of the credit card industry. There are a variety of "bad credit" credit cards aimed at those with poor credit. The terms of the cards make payday loans look like a good deal. For example, check out the terms of the Tribute Gold Mastercard:

• Credit Limit: $300
• Annual Fee: $150
• Account Maintenance Fee: $119.40 (billed monthly at $9.95)
• APR for Purchases: 24.50%

Here's how all the above adds up, according to the credit card issuer:

Available Credit Limitations: If you are approved for the $300 Card, your credit line will be $300 and your Annual Fee of $150 will appear on your first statement. Your initial minimum payment of $30 must be received, cleared and posted on your credit card account before you can activate your card and use your credit card account. Your initial available credit will be $180. You will be billed an Account Maintenance Fee of $9.95 per month (total of $119.40 per year), beginning after you make your first purchase or cash advance.

The bill does not put a stop to these type of predatory lending practices, but it tries. What the bill provides is that if annual fees the first year exceed 25% of the available credit, the fees cannot be charged to the card. So in the case of the Tribute card, the consumer would have to shell out the $150 fee and annual account maintenance fees rather than having them "conveniently" added to the card.

Impact on Credit Card Offers

As you might imagine, the credit card industry is not in favor of the statute. Like any consumer protection law, there would be some unintended consequences. For example, some credit card issuers have already started to raise interest rates on some cardholders in anticipation of this type of credit card reform becoming law. In addition, there is the potential for this Act to have a negative impact on balance transfer offers, cash back rewards, travel rewards, and other lucrative credit card offers.

If you'd like to read the statute in its entirety, you can check it out at GovTrack, a great site to track federal legislation.

There are steps we can take now to better prepare us for potentially difficult financial times ahead. There is no silver bullet that can insulate us from any financial crisis, of course. But there are some basic things we can do to make sure we are as ready as we can be to weather the coming financial storm. My family and I are implementing many of these suggestions, which I'll share with you now. I've organized these suggestions into three categories: (1) Income, (2) Expenses, and (3) Savings and Investing. But before we get to these categories, there is one overarching reality we must come to terms with--

Don't Panic: I am simply amazed at the panic selling on Wall Street that we have seen in the last week or so. We read book after book that tells us that selling out of fear is the worst thing one can do, but we do it anyway. People are afraid. I'm not immune to fear myself. But you can be afraid without panicking. If there was ever a time for clear, rationale decision making, it's now.

Protect Your Income During a Recession

1. Protect Your Job: In a recession, for most people keeping your job should be the number one priority. This may mean putting in a few extra hours, working a little harder, and improving your skill set. Those that stay employed during a recession generally weather the storm just fine. While the unemployment rate is still relatively low, it is very likely to go up. And the last thing you want is to be looking for a job with an unemployment rate of 8%, 10% or even higher.

2. Be Ready For Layoffs: While we should do everything we can to keep our jobs, some number layoffs are inevitable. And they may happen to me; they may happen to you. No matter how secure you think your job is, be ready for the unthinkable. This means having your resume updated, knowing what friends and colleagues you'd contact for job opportunities, and knowing where you would apply for a job. Some time ago I published an article with some tips and online resources on what to do if you lose your job. It's worth checking out.

3. Earn Extra Money: I've long preached the benefits of earning a second income. I make extra money blogging, but that's just one of many, many ways. The beauty of extra income is that it goes right to the bottom line. If you need $5,000 a month to live on, even $1,000 a month in extra income extends your emergency fund by 20%. It can make a huge difference if you ever lose your job. Here are some ways you can earn extra money.

Reduce Your Expenses During a Recession

1. Evaluate Your Mortgage: One of the positive elements of our current financial crisis is that interest rates are low. I'm old enough to remember the late 70's and early 80's when we had double-digit inflation and interest rates. Today, interest rates are still at historic lows. If you have an adjustable rate mortgage, it's time to see if you can refinance to a fixed rate loan. Notwithstanding what we all hear on TV or read in the papers, those with good credit can still get mortgages. I know this won't apply to everybody, but if you can lock in a low, fixed rate mortgage, you eliminate the risk of rising interest rates.

2. Refinance high interest credit cards: If you are paying high interest rates on credit cards, consider moving the balances over to a 0% APR balance transfer card or a low interest credit card. When considering this option, keep in mind three things:

• The interest rate after the introductory offer: Zero percent introductory rates do not last forever, so make sure you know what the interest rate will be once the 0% expires. You don't want to end up in a worse situation than when you started.
• Balance transfer fees: Today, virtually all balance transfer credit card offers charge a fee for the transfer. Typical is 3% of the amount transferred, but many offers cap the fee at either $75 or $90. Make sure to avoid unlimited fees if at all possible.
• Don't use the card for anything else: One of the big gotchas of credit card balance transfers is that if you use the card for purchases in addition to the balance transfer, your purchases usually get charged interest. The problem is that any extra payment you may make will go to your 0% balance first, not the portion that is being hit with interest. Currently pending credit card reform legislation would change this practice. But for now, don't use your balance transfer cards for any other purchases if at all possible.

3. Reduce Spending: This is obvious, but it is important to recognize that there are many ways to cut spending. Did you know that most internet services come with different internet speed options? I switched to a slower speed, saved $10 a month, and have not noticed the change. There are literally thousands of ways to save money. Pick those that work for you, and start saving now. As part of this, seriously consider a cash back credit card. If you pay off your balance every month, these cards are a great way to reduce your expenses by getting as much as 5% or more back on your purchases. One of my favorite cash back cards is the Discover More Card, a Consumer Reports pick.

Saving and Investing During a Recession

1. Don't stop saving for retirement: I have not changed one thing about my investments during the market decline. I've not sold any of my investments. I've not reduced the amount of my 401(k) contributions. As Warren Buffett would say, I'm trying to be "greedy when others are fearful." I won't kid you; it ain't easy keeping my money in the market during a free fall. But I am convinced that what we do with our investments now and in the immediate future will dictate more than anything else how much we have at retirement. Of course, I have 25 years before retirement. Your situation may be different. But selling out of fear is a sure way to lose buckets of money. Whether you invest in a 401k or IRA, or even an SEP IRA, keep investing.

2. Rethink your emergency fund: It is more important now than every to have an emergency fund. How much is always the question. I think 6 months is reasonable, but it depends on many factors. If you are married, do you both work? If so, you might get by with 3 to 4 months. Do you have assets you can sell if you had to? We have two cars paid off and could sell one if necessary. Whatever your situation, building up your emergency fund is critical, and I would keep it in a high yield FDIC insured online savings account.

3. Don't rely on a home equity line of credit: This point is critical. You may have available credit on your home equity, but did you know the bank can eliminate that credit? Go find your home equity line agreement, and you will see that if the value of your home falls or your financial situation changes, the bank can reduce the amount of your available credit.

In the end, our motto should be this, hope for the best, but prepare for the worst. A-men.

If you have any other suggestions for preparing for the worst, please leave a comment.

Bailout Plan's Key Provisions

The purpose of the Emergency Economic Stabilization Act is to "to immediately provide authority and facilities that the Secretary of the Treasury can use to restore liquidity and stability to the financial system of the United States." Specifically, the bailout authorizes the Secretary of the Treasury, through a newly created Office of Financial Stability, to purchase commercial and residential mortgages and any securities related to such mortgages.

In addition, the Act permits the Secretary to buy, subject to certain notice provisions, any other financial instrument if the Secretary determines it is necessary to promote financial market stability. This authority that extends beyond mortgages is important, and likely means that the Secretary will purchase some level of credit card and education loan related financial instruments, among others.

The Bailout plan also would establish the Financial Stability Oversight Board (Sec. 104). The FSOB would be tasked with reviewing the exercise of authority under the Act, that is, keeping an eye on how the Secretary of the Treasury spends the taxpayers' money. The FSOB will be comprised of the Chairman of the Federal Reserve, the Secretary of the Treasury, the Director of the Federal Home Finance Agency, the Chairman of the Securities and Exchange Committee, and the Secretary of Housing and Urban Development.

How much will the Bailout cost?

Much has been said about the $700 billion price tag of the bailout. While it is difficult to predict the ultimate cost to the taxpayers, one thing is clear, it will cost a lot LESS than $700 billion. Here's why.

The Bailout plan does provide that the Secretary, subject to certain approvals, can have access to up to $700 billion to purchase troubled assets. According to current Section 115, the Secretary would be given immediate access to $250 billion, have easy access to another $100 billion, and have access to another $350 billion subject to Congressional denial.

It is important to understand that the Secretary is authorized not just to buy troubled assets, but also to sell the assets that are bought. That means, among other things, that the Secretary cannot hold more than $700 billion in purchased assets. If he buys and then sells certain assets, however, he can use the proceeds of the sale to purchase additional assets, subject always to the $700 billion limit.

Ultimately, how much the taxpayers pay for the bailout depends on how much the Secretary pays for the troubled assets and what his successor eventually sells them for. It is likely, in my opinion, that the Secretary will overpay (or pay at the high end of a reasonable pricing range) for the troubled assets. Why? To inject liquidity into the market. Here's how Warren Buffett suggests the Secretary goes about determining the value of these assets:

[If] they do [the bailout] right, I think they'll make a lot of money.... They shouldn't buy these debt instruments at what the institutions paid. They shouldn't buy them at what they're carrying, what the carrying value is, necessarily. They should buy them at the kind of prices that are available in the market. People who are buying these instruments in the market are expecting to make 15 to 20 percent on those instruments. If the government makes anything over its cost of borrowing, this deal will come out with a profit. And I would bet it will come out with a profit, actually...

You can be pretty fanciful in marking positions in Wall Street, particularly when things aren't trading. The one thing you want to make sure, when the Treasury is buying things, is the marks they have don't make any difference. Like I said, it wouldn't be a bad idea, if you're buying ten billion of a security and you're the Treasury, to have them sell five-hundred million, or something like that into the market, so you find out what the real market price is and then buy the other 9-1/2 billion at that price. I really think, I really think the Treasury will make -- I think they'll pay back the 700 billion and make a considerable amount of money, if they approach it in that manner.

In the final analysis, only time will tell just how much this bailout will cost. In an interview today, Representative Barney Frank pegged the cost at around $100 billion. A lot of money, to be sure, but not $700 billion.

Will the bailout work?

That's the $700 billion question. Part of the difficulty in answering it is defining exactly what the bailout is intended to fix. It will bring some level of certainty, stability and liquidity to the financial markets, which they desperately need. Hopefully, the bailout will help to stabilize real estate prices. But the bailout will not fix what really threatens the economic future of our country.

From consumers to government, we have become a society of over-consumption. The federal government over-consumes and will continue to do so under either an Obama or McCain administration. State and local governments over-consume, many running substantial deficits. And individuals over-consume. We have gotten away with this insatiable consumption due to the massive wealth of our country, built up over decades of American ingenuity and hard work. But the party can only last so long.

Now we face mounting competition from countries like China and India. While we are busy consuming, they are busy investing and developing. So will the bailout work? It will be a very expensive and embarrassing band aid on a financial wound that could have caused massive disruption in our economy. To that end, I believe it will work. But what it does not address is the financial cancer that has been growing in our country since the 1980s. And with the political pandering to the middle class that we call presidential politics, I expect the financial cancer to metastasize, if it hasn't already.

Homeowner Assistance

In addition to the core aspects of the bill, the emergency legislation has some other interesting provisions. For example, section 110 provides for certain modifications to some residential mortgages, including lowering interest rates and reduction of loan principal. Mortgages that would be eligible for such assistance include those held by HFA, which now controls Freddie Mac and Fannie Mae.

You can read the full text of the proposed bailout plan here: Emergency Economic Stabilization Act of 2008.

Microsoft announced yesterday that it has made a $44.6 billion unsolicited offer to buy Yahoo! The bid consists of Microsoft stock and cash, and represents a 62% premium over the closing price of Yahoo!'s stock on Thursday. While the transaction will be scrutinized by the Federal Trade Commission, the Department of Justice, and European regulators for its anti-trust implications, the transaction will be approved assuming the deal goes forward. Simply put, a Microsoft -- Yahoo! combination increases competition in the online search and advertising markets. Now let's get to what this means for you and me.

Why does Microsoft want to acquire Yahoo!? The answer is simple--online advertising. In the words of Steve Ballmer in an internal email to Microsoft employees:

This year, online advertising is a $40 billion business. It will grow to $80 billion by 2010 and will continue to increase in the years beyond. This market provides a significant growth opportunity for Microsoft�our ability to provide the best search and online experiences for consumers, and the best ad platform for publishers and advertisers, is the key to unlocking this opportunity.

Source: Read the entire email at TechCrunch

What a successful Microsoft -- Yahoo! merger means to the online advertising and search engine market is more competition. Some will argue that even with the Yahoo! acquisition, Microsoft will fail to present a serious challenge to Google. The merger will certainly be the biggest challenge Microsoft has ever faced (perhaps aside from the federal government's anti-trust lawsuit a few years back), and Microsoft has proven that it is not the most nimble of companies when it comes to embracing the Internet. But I believe Microsoft will rise to the occasion for two simple reasons: (1) it has plenty of cash to throw at online advertising and search engine technology; and (2) the future growth of the company is riding on this merger (see Ballmer's email above). So what would real competition in the online advertising and search engine technology markets look like for you and me.

A Microsoft -- Yahoo! merger is good for bloggers

Google dominates the online advertising market. The business model is simple: Through Google's Adwords program, advertisers place ads on Google search result pages and on blogs and other websites that choose to run Google ads. Advertisers pay Google usually based on the number of times their ads are clicked, and Google in turn pays a portion of this revenue to the blogger or website owner running the ad. It's in Google's interest to receive the highest prices it can from advertisers and to pay the smallest portion of this revenue on to the blogger or website owner. Enter Microsoft and Yahoo!

Microsoft wants more of the online advertising business. To get it, it will do two things. First, it will undercut the prices that Google charges advertisers in an effort to pull ad revenue away from Google. Second, it will increase the portion of that revenue it pays on to bloggers and website owners. Why? Attracting advertisers won't do Microsoft any good if it doesn't have websites on which to place the ads. And we have a simple gauge to determine whether this strategy is working--Google. If and when Google follows suit with lower prices to advertisers and higher revenue sharing to publishers, than we know Google views Microsoft as a legitimate threat. By the way, Google's 8.5% drop in the market yesterday suggests that investors see the Microsoft -- Yahoo! merger as a real threat to Google.

A Microsoft -- Yahoo! merger is good for the Internet

Lower prices are not enough to challenge Google. Microsoft must challenge Google's dominance in search engine technology. When we use Google or other search tools, we want to find what we're looking for quickly and easily. And advertisers only want to see there ads on search engine results pages and websites that make sense for what they are selling. Imagine trying to accomplish all that based on a few words typed into a search box. If Microsoft wants to present a serious challenge to Google, it must innovate in the search engine technology space.

When most of use think of innovation, we think of Google, not Microsoft. In fact, this quote from an interview with Bill Gates in 2005 discussing Firefox is a perfect example of Microsoft's inability to move at Internet speed:

Well, there's competition in every place that we're in. The browser space that we are in we have about 90 percent. Sure Firefox has come along and the press love the idea of that. Our commitment is to keep our browser that competes with Firefox to be the best browser -- best in security, best in features. In fact, we just announced that we'll have a new version of the browser so we're innovating very rapidly there and it's our commitment to have the best.

Firefox continues to eat away at Explorer's market share. But if Microsoft can rise to the challenge, the competition will move search engine and related technology forward at a faster clip, which would be good news for all of us.

A Microsoft -- Yahoo! merger is good for Google

How will Google respond to the merger announcement? Are executives working around the clock this weekend to assess the implications of the proposed merger and to chart the future course of Google if a meaningful competitor rises up from the Microsoft -- Yahoo! shotgun wedding? I suspect they are, but I'm confident of this--Google will respond. And in the process, Google and the products and services it offers will become better and cheaper. Competition always has this effect on companies and the products and services they offer.

Nearly three years ago Google's CEO, Eric Schmidt, had this to say about Microsoft as a competitor:

It looks to me like this space [search engine technology] is so large that there will be multiple winners. There's plenty of room for all the players.

He then went on to identify Yahoo! as Google's major competitor, saying it has "emerged as the major, major competitor in this space." Then referring to Microsoft's then newly launched MSN, he observed that Microsoft is "just getting going."

I wonder what he's saying now.

Reader question: Will a Microsoft -- Yahoo! merger effectively compete against the Google juggernaut?