Prosper is Now Easier To Use: Advanced Search Feature Introduced, New Loan Limits and Other Comments

Prosper has made major strides in improving its site. I discuss some of the improvements and provide recommendations on how Prosper can further improve the lending experience.

New advanced search options are now available. The advanced search includes ability/option for:

(1) Search by specific credit rating grade(s) and minimum interest rates you're willing to accept on loaned money.

(2) Setting lower and upper search values for debt-to-income ratios.

(3) Search by specific loan amounts For example, a search for loans greater than $1,000 but less than $10,001 (or other amounts) can be done.

(4) Search for only those loans that you've bid on.

(5) Setting lower and upper search boundaries for:
(a) no. of accounts now delinquent
(b) no. of delinquencies in last 7 yrs
(c) no. of public records in last 10 years
(d) no. of credit lines
(e) no. of credit inquiries in last 6 months
(f) credit history length

Don't want to fool w/ advanced search? Then you can now use the preset popular search tabs that include: loans ending soon, high-to-low interest rates, fully funded loans, high-to-low credit grades.

All of these advanced search options can also be applied to the creation of standing orders where Prosper will automatically bid for you.

Want better risk vs. reward options? Prosper has increased the interest rate caps. About 25% of the states now permit interest rates as high as 29%. Exact info can be found here.

Not sure how to manage your loan portfolio? Check out some of Prosper's webinars.

I think that Prosper.com has plenty of room for improvements:
(1) Add IRA account option. They already have an agreement with Wells Fargo, just extend it to include IRAs.

(2) Display lending groups current default rate on all loans sponsored. Default rate (%) = (number of loans in default/total no. loans sponsored)*100
- This way, lenders can better judge the quality of the vetting done by sponsoring groups.

(3) Display lending groups current percentage of loans that are > 15, 30, 60 days late in payment.

(4) ... More to follow... Getting back to bidding on some loans and watching some baseball.

Disclaimer: I'm not an employee of Prosper. Lending or borrowing on the Prosper site is at your own risk.

Our Updated Prosper Strategy & Four Loans We're Considering Bidding On

You can read my latest posting on prosper lending here... You can always come back to the below posting.

I have made several changes to our Prosper.com lending strategy (Prosper is a peer-2-peer lending site).

(1) We have now started to loan money to those with "E" credit ratings (10% historical default risk likelihood). Before doing so, we only bid on those with no current delinquencies and positive debt-to-income ratios. Doing this will hopefully decrease the likelihood of default to something closer to 5% or better.

(2) I'm now emailing some of the prospective borrowers. This is quite effective in that a lender can get a sense from the tone of the reply as to the sincerity of the lender. Sometimes, you'll also get bonus information that you didn't even ask for.

(3) Lenders don't necessarily need to develop a spreadsheet to track their loan portfolio performance, Prosper.com has an easy interface that does it for you.

(4) Generally, I like to fund those loans that have a funding date on or after the 1st or 15th of the month (see original strategy post for definition of funding date and reason why). I now waive this requirement if the person divulges that they get paid on a weekly basis and also pass my other forms of screening.

I've funded 3 loans so far and have an open bid on another. Our first two loan payments are due on 2nd and 3rd of Jun, others due shortly thereafter. Current effective yield on loans is 18.62% (credit ratings of B, E, and E). I've found that knowing the effective yield on your portfolio influences me in the loans that I subsequently bid on. I find that an ounce of greed is involved and influences me to bid only on those loans that improve the effective yield (increases it). I must keep this emotion in check and diversify our loan portfolio risk by adding a few more loans of B and C quality.

Here's a couple of the loans that I'm watching and considering bidding on. All loans close in greater than 4 days so those of you with Prosper accounts may have chance to transfer funds and bid on them.

Loan, Current Yield, Debt Rating, Bidding Ends (note: 4 loans originally listed, I deleted two of them as they expired or were pulled by lenders)

(a) 14587, 19.50%, "C," 29 May
(b) 14419, 22.00%, "E," 28 May

Disclaimer: I don't know anything more about the borrowers than what is already available on the Prosper website. Bid at your own risk.

A Ton of Finance-Investment Tid-Bits (I've Returned from Blogging Sabbatical)

I'm back! Items discussed: My podcast interview, Prosper.com, discussion of commodity/oil strategy and new job

Over the last two weeks we've been settling into our new house, and I've also been getting familiar with my new job. Here's a run down of what's been going on:

(1) Completed a personal finance interview (podcast) with the "Money Blogger Podcast." In this interview I stated our net worth at $217k (first time disclosing).

(2) Bid on two more Prosper.com loans (loan 12594 and 12002). Loan 12002 is still open for bidding. Loan 12594 has closed and is awaiting funding. Ignoring these loans, my current loan portfolio (2 loans) has an effective yield of 16.68%. Once these loans close, I'll have a net yield of about 17%. Between all 4 loans I've essentially bid on two "B" and two "E" rated loan requests.
My last round of bidding was a bit more difficult bids because it appears that the quality of applicants has gone down (at least in the short term).

(3) I've liquidated some of our commodity positions, basically because they were all at or new all time highs (sell into strength, buy in to weakness philosophy).
(a) Sold all of our Gold ETF (GLD) at $70/share. Price was getting a bit lofty, have a limit order set for buying at a lower price if it gets to $65/share.
(b) Sold 35% of our position in Rio Tinto (RTP) at $252.92/share. Position was up 60% from our fall entry price of $157.86/share. Have limit order set to buy more shares if it drops substantially to low $200s.
(c) Sold 45% of our total BHP Billiton position (BHP) at $48.58/share. Shares sold represent a short term position established in wife's IRA at $43.85 on the 27th of April and sold on the 8th of May (up 10% in less than two weeks). Remaining 55% bought last August at substantially lower price. Have limit order set to buy more shares at $43.85.

(4) Started new job as an analyst in a Human Resources/Manpower shop.

(5) Made trip out of town to visit Mom for Mother's Day (drove 800 miles, got 30.5 mpg in old 6 cylinder car)

Our investment philosophy (sectors) is shaping up for a change. We haven't fully decided on the new sectors. However, I'm considering cashing out of the oil stocks/commodity ETFs a little earlier than previously planned, perhaps when oil hits something closer to $75. I was previously thinking about selling out of our these stocks when oil hits around $80. Reasons for lowering cash-out price on oil stocks/etfs are:

(A) Oil is no longer moving significantly higher when terrorist acts occur in Nigeria or even when weapons grade Uranium is found in Iran (both have been happened recently).

(B) While the US dollar is weakening, the Wall Street Journal sites marginal increases in worldwide demand for oil (1.5% year-over-year)

(C) We are moving up quickly on an election year and politicians are going to do respond to complaints about oil prices. Even if their actions have no teeth, they will affect market sentiment.

(D) Ethanol is gaining to much steam as a viable alternative and will therefore diminish growth in future oil demand

Plugged-In-Finance's Top Nine Posts

My site is on its way to 100 unique posts (mid-nineties) now. Today, i'm presenting some of my best/most popular posts for your reading pleasure.

(1) Walmart's Disservice to Frugal America (My Trip to Walmart Today)

(2) Are You Wealthy Enough? Equation for Determining

(3) Free Money: My Opinion on 0% APR Credit Card Offers

(4) Getting Free Cable

(5) Our Household Savings Rate Taking a Hit
Since our move, our savings rate is roughly $1,000/month plus monthly equity gains in real estate. This is essentially a $4,000 cut from before our move. Reason, wife temporarily unemployed.

(6) Graphical Picture and Discussion of Our Household Investments
This graph is somewhat dated but still reasonably accurate

(7) Prosper Lending Strategy
We've done two loans so far, looking for a 3rd and 4th loan.

(8) Buying Real Estate: My Mortgage Lessons Learned

(9) Is an Education Worth the Expense

Enjoy!

Save $20 on Your Next Dell Order

I found a $20 Dell Coupon in an unmarked Life Cereal Box. The only thing on the outside was a curious George offer for his CD. The $20 coupon states:

A Special Offer From Dell. Take $20 off any Electronics and Accessories purchase of $150 or more!* at Dell.com. Enter coupon code QGM7T0C1C2TVVD at checkout.

*Pricing, specifications, availability and terms of offers may change without notice. Taxes, fees and shipping and handling charges are extra and vary. Offer does not apply to, and is not available with systems or items purchased through online systems configurator, refurbished or spare parts. Limit five same items per order. One coupon per customer. Dell cannot be responsible for pricing or other errors, and reserves the right to cancel orders arising from such errors.

Avian Flu: Summary of Stock Market Sectors That Stand to Gain or Lose

Here's a simple summary of those sectors that stand to gain or lose in the event an Avian Flu outbreak occurs:

POTENTIAL WINNERS
(1) Drug companies that make antiviral medicines
(2) Drug companies that make vaccines
(3) Hospital health care
(4) Cleansing product-makers
(5) Home entertainment providers
(6) Telecommunications
(7) Internet technology companies

POTENTIAL LOSERS
(1) Airlines
(2) Luxury goods
(3) Hotels
(4) Insurers
(5) Shopping malls
(6) Major oil firms
(7) Mining and metals
(8) Travel and hospitality
(9) Brewers

SOURCE: Citibank Report as Summarized in "Wall Street Placing Bets on Bird Flu Outcomes," Chicago Tribune, Bruce Japsen, April 30, 2006

Peer-2-Peer Lending: Changes I'd Like to See at PROSPER.COM

Bottom line: I make three recommendations as to what Prosper should do to improve the lending experience.

(1) Offer IRA option... It's increasingly important to offer pseudo real-return investment alternatives.

(2) Provide metrics to grade groups, such as:

(a) Red/green light indicator next to groups to indicate if group's portfolio of originated loans as a default rate below or above Prosper.com averages. This is important to identify whether those groups screen applicants sufficiently (Indicator lights recommended b/c they provide a quick indication. There are obviously other ways to accomplish the same goal).

(3) Improve "search loan" filter to include:

(a) Lender rates greater than or equal to (enter value)

(b) Specific borrower credit characteristics (now delinquent, number inquiries last 6 months, etc).

(c) Include only those loans with picture(s) and write-up, while this may not have a material impact, it has an impact on the screening process experience.

PROSPER.COM

Just Bid On My First Two Prosper Loans (Yesterday and Today)

I finished bidding one half of my monthly allotment for Prosper loans. I deviated a little bit from my entering strategy in that I chose to bid on one loan where the credit rating was "E" signifying that on average, people with this credit rating default 10.4% of the time on their loans. The loan would pay a 21.5% interest rate and appeared to be an acceptable risk vs. reward spread.

The other loan applicant had an "A" credit rating signifying that they had an approximate likelihood of default of less than 1%. The interest rate on the loan was 10%.

Again, I deviated a bit from my strategy in that I bid each loan in equal amounts of $50. I chose not to do risk-weighted bidding amounts because I was only starting with $100 and wanted to dip my feet in the lending waters as early as possible.

In the end, my gut feeling on the loans are as follows:

Loan #6654 (A credit rating): Loan will probably run for nearly full 3 year duration (gut feeling)
Listing #7958 (E credit rating): I personally feel that the borrower will pay of this loan within the next 11 months or sooner.

You may not be able to easily see one of these two loans without signing in. You can bypass signing up for an account by clicking the lend tab and navigating to find "#7958" or #6654."

The blended (average) interest rate will be approximately 15.75% between the two loans.

You can follow my bids under my Prosper handle "WellVersed."

Wife's IRA Transactions: Bought BHP Billiton Today

As mentioned in a prior post, we set a $43.88 limit order for shares of BHP. Today, the order was filled at $43.85. I'm happy about the fill, even in light of China's interest rate hike.

Do people really think that China's growth will slow materially between now and the Bejing Olympics?

Will continue to let our mining stocks run.

The Silver ETF is Here: Starts Trading Tomorrow

It's time has finally come, the silver ETF from Barclays Bank starts trading tomorrow. I'll have to do some more reading to figure out my entry point.

Here's the article. The silver ETF will trade under the "SLV" ticker symbol on the AMEX.

Just Starting to Use Prosper Lending: Here's Our Strategy

Bottom Line: The wife gave her blessing for starting Prosper lending. Our first deposit to Prosper will be credited tomorrow (4/27). I outline our initial strategy for originating loans.

Entering assumptions:

(1) The funding date is the monthly due date for loan repayment

(2) Prosper’s 120 day default definition is modified to my own default definition of 15 to 30 days for the purpose of loan portfolio management and forming blacklists of Prosper groups.

Our initial strategy:

(1) Originate loans with funding dates of roughly the 1^st, 2^nd, 3^rd or 15^th, 16^th, 17^th of the month (borrower’s payment due date just afterthe 1st or 15th, typical pay-days)

(2) $200/month cap (my way of dollar cost averaging)

(3) Loan to only group sponsored individuals (marginal benefit of screened applicants)

(4) Develop a blacklist (based on groups sponsoring people who are > 15 days delinquent)

(5) $50-$100 loans only ($50 for highest risk, $100 for lowest risk)

(6) Originate loans to achieve an 8.4% real return after taxes, inflation, defaults and zero interest limbo periods. I roughly estimate the required rate at 11.25% (with no defaults and above 15% with defaults).

(7) Cease using Prosper (or re-evaluate required rate of return) if I experience a default rate greater than 1 out of 25 loans. Realistically, default rate should be less than 1 out of 50; however, Prosper has shifted the lending paradigm

(8) Loan to those whose monthly payment is at or below what I perceive to be an equivalent monthly car note for them. Thus, i'll avoid many loans over $10k. (IMO, individuals with larger loans are more likely to refinance).

(9) I will likely focus on loans for people with credit ratings of B, C and D

(10) Focus on loans to people with positive debt to income ratios

I do not yet have any spreadsheets to track effective yields on the loan portfolio. I’ll develop one or find one later.

For those of you who are unaware about Prosper, this is a site for consumer-to-consumer loans. The site utilizes reverse Dutch auctions for borrowers and lenders to meet and originate loans. The site's mechanism is somewhat similar to Ebay, yet a bit different.

** We've Updated This Strategy on the 21st of May. Here's the updated strategy. Recommend reading comments below before cycling to updated strategy.

I-Bonds Headed For a Plunge In Yield

Bottom Line: Yield is going lower. I would not buy I-Bonds until the fixed yield reaches high 2s or low 3s. An article written by Jeff Brown is posted to my blog. This article appeared in "The Record" out of Hackensack, NJ on 18 Apr 2006.

"After extolling the benefits of inflation-indexed U.S. Savings Bonds for years, I'm doing an about-face: Stay away.

Because inflation has been tame in recent months, new I bonds going on sale May 1 are likely to yield as little as 1 percent to 1.4 percent, while you can easily make three times as much in a certificate of deposit at a bank.Even the I bonds that are available until the end of April are a bad deal: They currently pay a generous 6.73 percent, but they will drop after you own them for six months to the rate that will be set May 1. That means you'd probably make only about 4.1 percent over the next 12 months.

To make matters worse, you'd pay a penalty equal to the final three months' interest earnings if you redeemed the bond after a year, cutting your yield to 3.7 percent or so. Again, that's less than the 4.5 percent you could get on a 12-month CD that could be redeemed penalty-free.

To understand all this, you have to know that I-bond yields come in two parts. First is a fixed yield that, once set when a batch of bonds is first offered, stays the same for those bonds' 30-year life. Currently, it's 1 percent.

That is added to a variable yield, which is adjusted every six months to match the inflation rate. After a big run-up in oil prices last summer and fall, the variable rate was set at an unusually high 5.73 percent on Nov. 1.Together, the two parts give the 6.73 percent being earned on the Nov. 1 to April 30 I bonds. That's an annualized rate over six months, the bond owner gets half that. It is paid for the first six months you own the bond. Then the variable rate adjusts to the rate set on May 1 or Nov. 1, whichever was most recent.

The problem now is that inflation has been all but non-existent during the past five months, says savings bond expert Daniel J. Pederson, author of "Savings Bonds: When to Hold, When to Fold, and Everything In-Between."

There is one more month's inflation data to be included in the calculation for the May 1 rate. Nonetheless, the variable rate set May 1 could well be zero, he said.

"That means that if the government doesn't change the fixed rate, which is currently 1 percent, you could end up with an I-bond rate of 1 percent," he said.

Pederson estimates there is a 50 percent chance the government will raise the fixed rate to attract investors to I bonds, but he doesn't expect it to go any higher than 1.2 percent to 1.4 percent.

The other type of Savings bond, the EE bond, doesn't look like a very good investment either, Pederson says. It currently pays 3.2 percent, and he expects no change May 1. EE yields stay the same for 20 years.

Isn't the I bond useful for anyone?

Well, some long-term investors might give it a look. Though I bonds might be stingy in the short run, they do guarantee returns that will always beat inflation by a margin equal to the fixed portion of the yield. I bonds thus offer a good way to assure that your money retains today's buying power no matter how high prices go. And the government guarantees you'll never lose principal.

Pederson suggests that long-term I bond investors postpone purchases until May 1 on the chance the fixed rate will be raised. That would mean giving up the 6.73 percent rate you could get for six months on bonds bought before May 1. But over the long run, you'd come out ahead with a higher fixed rate.

Remember that I bonds are no good for people who need steady income, since you don't receive the interest earnings until you redeem the bond.

An I bond cannot be redeemed until you have owned it for 12 months. And if it is redeemed within five years of the purchase, the owner loses the final three months of interest earnings.

Savings bonds can be bought at many banks, or online at http://savingsbonds.gov. The maximum annual investment is $30,000 for bonds bought at a bank, plus $30,000 for those bought online."

Our Pre-Planned Oil Based Investing Strategy Going Forward (Market Timing Based)

The following investing strategy is based on the rising crude oil price trend and my own personal prediction that the average regular unleaded price will reach something close to $3.33/gallon.

This strategy will be re-evaluated if we start sending Tomahawk cruise missiles into IRAN or take other military actions against them.

(1) Once light-sweet-crude oil hits $79.71/barrel
(a) Take profits & sell 67% of oil based stocks and mutual funds
(b) Transfer these funds as follows: 1/3 into BEARX (bear market fund), 1/3 into PHO (water index), 1/3 into high yield money market

(2) If light-sweet-crude oil hits $83.47/barrel
(a) Take additional profits and sell off remainder of oil related stocks
(b) If we have not yet had a significant market correction yet, further increase position in BEARX. Otherwise, i'll reconsider... perhaps establish initial positions in 3a, 3b and 3c (below).

(3) If timing of BEARX purchase goes well (occurs prior to a 10-20% market correction), I'll liquidate my BEARX position and transfer funds three new positions. New positions based on international stock ETFs trading at the lowest average price-to-earnings-growth (PEG) ratios (a) Brazil ETF (EWZ): PEG = 0.61
(b) Taiwan ETF (EWT): PEG = 0.455
(c) Emerging Markets (VWO or EEM): PEG = 0.70

Yes, market timing is difficult to do. Yes, the emerging market ETF has some direct overlap with the Brazil ETF. One of the key underlying reasons for selling into the rally is that oil based inventories are continuining to rise and should eventually cause a price drop. We're not completely writing off the trends in oil; however, we want to see a dip in crude prices before we re-establish positions.

Assuming no significant changes in world economy, we plan on eventually shifting our oil based investments to water based investments. PHO will be the first water based investment position.

We'll let our mining stock/ETF positions in Rio Tinto (RTP), BHP Billiton (BHP) and Gold (GLD) continue to run until the velocity of their price appreciation plateaus or slows considerably. Once this occurs, will consider shifting these funds to financials, utilities and/or health care. I envy those who invested in the silver sector. We missed the silver run (so far)... We're keeping our eyes peeled for good deals on sterling silver in the mean time (garage sales, estate sales, etc.)

Disclaimer: I’m not a day trader or other chart interpreting specialist. I’m just going on hunches and my own interpretation of global macro-economic trends.

Opinions?

What We're Buying With My Wife's New IRA Funds (2005 Contribution)

We're establishing two new positions ($1k) in BEARX, a bear market mutual fund. The other new position is TC Pipelines LP (TCLP), a 6.8% dividend stock. All other transactions are building upon existing positions.

Here are the other transactions:
(1) Buy $250 in UMESX, Excelsior Energy and Natural Resources Fund
(2) Limit Order - 20 shares of BHP Billiton @ $43.88
(3) Limit Order - 40 shares of TC Pipelines LP (TCLP) @ $33.50
(4) Buy $250 in PCRDX, Pimco Commodity Real Return

Limit orders are set for 30-100 cents below current price. Thus, orders may or may not be filled.

Comments on above stocks:
(a) UMESX - I expect more record oil company earnings
(b) BHP Billiton - I expect the bull market in metals to out live the oil bull market
(c) TCLP - offers a 6.8% dividend, has record of increasing dividend at 3% average over last 5 years. Finally, Morningstar and the braniacs running the Yale endowment investment believe in it too.
(d) PCRDX - I feel that oil is going to at least $80/barrel by end of hurricane season, other commodity prices expected to remain reasonably strong. Be careful w/ this fund; the fund's method for investing is changing this summer because of an IRS ruling.

This will leave $275.40 left over (assuming limit orders processed) for later no-fee mutual fund transactions. Why so many commodity related stocks? Answer: The area is hot and overall we still have less than 10% of net worth in commodity related stocks and funds.

Investment decisions for 2006 ROTH IRA contributions are to-be-determined.

Wal-Mart's Disservice To Frugal America (My Trip to Wal-Mart Today)

Next time you walk into your local Wal-Mart with a small shopping list, look for one of the small carry baskets (instead of shopping cart). I bet you'll have a hard time finding one. I spent 15 minutes (not kidding) today looking for one at my local Wal-Mart during off-peak shopping hours. While, I could have done without one, it became a mission to get to the bottom of why they weren't available up front.

Here's what I did (i'm on vacation, so I have the time):
(1) I checked with the greeters at both the household and grocery sides
(2) I looked in the front of the store (outside)
(3) I walked by each register once
(4) I made a second trip to each express lane and self-check out lane and looked again
(5) I walked the outer perimeter of the store looking down the rows to see if anybody was using one
(6) I went to customer service to ask where I could find one (no luck). Their response, I think people may have stole them. The few that we might have are probably already in use.
(7) In my opinion, the response received was rather uninformed. I picked up a prepaid envelope at customer service titled "Tell Us How We're Doing." The envelope goes straight to Bentonville, AR. I figure that i'll transfer some of my thoughts to paper and mail them in.

In the end, I resisted the temptation of grabbing a shopping cart and picked up only those things on my shopping list. I was a bit disgruntled when I thought to myself that the store that touts "always low prices" isn't as friendly as it could be to frugal shoppers.

Don't get me wrong, I'm not naive. I know why Wal-Mart may be doing this. However, it's a bit unfair to those that only want to shop for a small amount of items and don't want to push the bulky carts around.

Throughout this entire ordeal, I did not see one single shopper carrying a basket. If my local Wal-Mart is an accurate barometer, one could infer that Wal-Mart might be on a mission to force people with small shopping lists to use shopping carts. The use of these larger than desired carts could be changing shopping habits at the door (while adding unnecessarily to aisle traffic problems). Whether people realize it or not, I feel that people showing up with small shopping lists may be changing the list at the door when they realize that the small carry baskets are not available and that they have sooo much extra space for purchases.

A Surprising Bevy of Info Under One CNNFN Article/Link

Look at this article if you: hate to pay taxes, interested in a new job, move frequently and/or like to follow real-estate. CNNFN's article "Tax Friendly Places in 2006" actually has 10 separate sub-articles.

Some of the articles may be repackaged from other sections of the site (not sure); however, they are simply wonderful.

The Articles:
(1) Live in Northeast, pay through the nose
(2) State-by-State rankings
(3) Big-city taxes
(4) Big tax breaks from around the country
(5) Tax freedom day comes later this year
(6) Think you pay a lot in taxes
(7) AMT 101
(8) Best jobs in America
(9) Best places to live
(10) Best companies to work for

Here's where to look

Integrating Your CD-Money Market Strategy: Recommend Using BankRate.com's Top Tier Awards

Time is money and it's great to see BankRate.com's quarterly top tier awards. These awards represent a concise one page listing of those banks that tended to have the best money market and certificates of deposit rates during the prior quarter. Rankings are provided based on investment periods.

While past rates aren't always representative of current and future rates, the rankings serve as a good starting point for an integrated CD-Money Market strategy.

Typically, you won't find this information consolidated onto one page. Recommend you take advantage of these rankings now to put into perspective future cash accounts and investments.

Top Tier Ranking

The Federal Government’s Attempt to Improve Financial Literacy: National Financial Literacy Website (“.GOV”)

Bottom Line: Mymoney.gov offers so much financial literacy content, that it cannot be summarized in one simple post… While it isn’t as flashy as cnnfn or yahoo finance, it’s just as useful, perhaps more in some cases.

The sole purpose of MyMoney.gov is to improve the financial literacy and education of persons in the United States. To reach the widest number of people, the site can be used in either English or Spanish formats; it also offers a toll-free number for requesting materials. The site provides educational materials from across the spectrum of federal agencies that deal with financial issues and markets. (Source: MyMoney About Us)

Website: www.MyMoney.gov

Summary of Results From Master’s Thesis on Perceived Financial Conditions (PFC)

I completed my MBA Master’s Thesis in March 2006. Basically, I took a subjectively defined variable called perceived financial condition and determined what demographic and attitudinal characteristics affect it. I constructed two models to represent married and single personnel. I utilized a survey data set from 1999. Yeah, it’s a bit dated; however, it was a good survey. Monetary values can be roughly adjusted for inflation by multiplying by 1.13.

Perceived financial condition (PFC), was constructed via measuring frequency of response to each of five choices: 1) in over your head; 2) tough to make ends meet; 3) occasionally have some difficulty making ends meet; 4) able to make ends meet without much difficulty; and 5) very comfortable and secure. Categories one and two were collapsed into a single “adverse” PFC tier. Categories four and five were collapsed into a single “best” PFC tier.

STATISTICALLY SIGNIFICANT BENEFICIAL VARIABLES

Single Model Variables (% Lower Likelihood of Being in Worst PFC Tier, Relative Base Case), Less Than 0.1 Significance Level

(a) Satisfied w/ Occupation (6.0)
(b) Black (4.1)
(c) Some College (3.7)
(d) Savings (3.6 per one unit increase)
(e) Other Race (3.4)
(f) Hispanic (3.4)
(g) Female (2.5)
(h) Income (0.8 per one unit increase)

Married Model Variables (% Lower Likelihood of Being in Worst PFC Tier, Relative Base Case), Less Than 0.1 Significance Level

(a) Hispanic (7.4)
(b) Spouse Employed (7.1)
(c) (4.6 per one unit increase)
(d) Satisfied w/ Occupation (3.5)
(e) Income (1.6 per one unit increase)

STATISTICALLY SIGNIFICANT ADVERSE VARIABLES

Single Model Variables (% Higher Likelihood of Being in Worst PFC Tier), Less Than 0.1 Significance Level

(a) Thirties Age Bracket (7.1)
(b) Twenties Age Bracket (7.1)
(c) Single w/ Dependents (4.6)
(d) Unsecured Debt (2.4 per one unit increase)

Married Model Variables (% Higher Likelihood of Being in Worst PFC Tier), Less Than 0.1 Significance Level

(a) Married w/ Dependents (8.7)
(b) Dissatisfied w/ Occupation (7.6)
(c) Own Primary Residence (3.2)
(d) Unsecured Debt (2.6 per one unit increase)

Principal differences between the “single” and “married” models included the effect of age and education. Single personnel in their thirties had a 7.1 percent higher likelihood of being in an adverse PFC tier. In contrast, Married personnel in their thirties had a 3.6 percent lower likelihood of being in an adverse PFC tier. Education was only significant in the single model.

There were many similarities between the married and single models. Single and married personnel who were satisfied with their occupation were 6.0 percent and 3.5 percent less likely to be in an adverse PFC tier, respectively. Single personnel of Hispanic, black, or other non-white race/ethnicity were between 3.4 percent and 4.1 percent less likely than whites to be in an adverse PFC tier. Married Hispanics were 7.4 percent less likely than whites to be in an adverse PFC tier. Finally, the pecuniary variables of savings, income and debt affected PFC similarly in the married and single models.

PERCUINARY VARIABLE TIERS

Household total gross income:
(a) $1-$2,000; (b) $2,001-$3,000;
(c) $3,001-$4,000; (d) $4,001-$5,000;
(e) $5,001-$6,000; (f) $6,001 and up
Net household savings:
(a) $0 - $5,000; (b) $5,001-$10,000
(c) $10,001-$20,000; (d) $20,001-$50,000
(e) $50,001 and up
Total unsecured debt
(a) None - $5,000; (b) $5,001-$10,000
(c) $10,001-$20,000; (d) $20,001 and up

BASE CASE (MARRIED/SINGLE)

Base case:
(a) White
(b) E7 to E9
(c) Male
(d) Neither satisfied nor dissatisfied
(e) High School Graduate
(f) Spouse High School Graduate
(g) Over 39 years old
(h) Owns primary residence
(I) No dependents
(j) No time away from homeport
(k) $2,000 or less gross monthly income
(l) $5,000 or less in savings
(m) $5,000 or less in unsecured debt

By the way, there were a few statistically significant military specific variables; however, these were omitted from my blog entry because they don’t related directly to this blog’s primary audience.

Summary of Results From Master’s Thesis on Perceived Financial Conditions (PFC)

I completed my MBA Master’s Thesis in March 2006. Basically, I took a subjectively defined variable called perceived financial condition and determined what demographic and attitudinal characteristics affect it. I constructed two models to represent married and single personnel. I utilized a survey data set from 1999. Yeah, it’s a bit dated; however, it was a good survey. Monetary values in Table 3 can be roughly adjusted for inflation by multiplying by 1.13.

Perceived financial condition (PFC), was constructed via measuring frequency of response to each of five choices: 1) in over your head; 2) tough to make ends meet; 3) occasionally have some difficulty making ends meet; 4) able to make ends meet without much difficulty; and 5) very comfortable and secure. Categories one and two were collapsed into a single “adverse” PFC tier. Categories four and five were collapsed into a single “best” PFC tier.

Tables 1 and 2 show the variables that have the most beneficial and adverse effects, respectively. Table 3 provides increments for savings, unsecured debt, and monthly gross income. Table 4 presents the base case. The base case is essentially what everything else is compared to. I omitted several significant military variables from Tables 1 and 2 they are outside the profile of my typical reader.

Table 1. Summary of Significant Variables Ranked by Level of Beneficial Partial Effect on PFC (<0.1>1999 DoD Survey of Active Duty Personnel).

Single Model Variables (% Lower Likelihood of Being in Worst PFC Tier, Relative Base Case)	Married Model Variables (% Lower Likelihood of Being in Worst PFC Tier, Relative Base Case)
Satisfied w/ Occupation (6.0)	Hispanic (7.4)
Black (4.1)	Spouse Employed (7.1)
Some College (3.7)	Savings (4.6 per one unit increase)
Savings (3.6 per one unit increase)	Thirties (3.6)
Other Race (3.4)	Satisfied w/ Occupation (3.5)
Hispanic (3.4)	Income (1.6 per one unit increase)
Female (2.5)	-
Income (0.8 per one unit increase)	-

Table 2. Summary of Significant Variables Ranked by Level of Adverse Partial Effect on PFC (<0.1>1999 DoD Survey of Active Duty Personnel).

Single Model Variables (% Higher Likelihood of Being in Worst PFC Tier, Relative to Base Case)	Married Model Variables (% Higher Likelihood of Being in Worst PFC Tier, Relative to Base Case)
Thirties Age Bracket (7.1)	Married w/ Dependents (8.7)
Twenties Age Bracket (7.1)	Dissatisfied w/ Occupation (7.6)
Single w/ Dependents (4.6)	Own Primary Residence (3.2)
Unsecured Debt (2.4 per one unit increase)	Unsecured Debt (2.6 per one unit increase)

Principal differences between the “single” and “married” models included the effect of age and education. Single personnel in their thirties had a 7.1 percent higher likelihood of being in an adverse PFC tier. In contrast, Married personnel in their thirties had a 3.6 percent lower likelihood of being in an adverse PFC tier. Education was only significant in the single model.

There were many similarities between the married and single models. Single and married personnel who were satisfied with their occupation were 6.0 percent and 3.5 percent less likely to be in an adverse PFC tier, respectively. Single personnel of Hispanic, black, or other non-white race/ethnicity were between 3.4 percent and 4.1 percent less likely than whites to be in an adverse PFC tier. Married Hispanics were 7.4 percent less likely than whites to be in an adverse PFC tier. Finally, the pecuniary variables of savings, income and debt affected PFC similarly in the married and single models.

Table 3. Pecuniary variable tiers

Income	Household total gross income: (a) $1-$2,000; (b) $2,001-$3,000; (c) $3,001-$4,000; (d) $4,001-$5,000; (e) $5,001-$6,000; (f) $6,001 and up
Savings	Net household savings: (a) $0 - $5,000; (b) $5,001-$10,000 (c) $10,001-$20,000; (d) $20,001-$50,000 (e) $50,001 and up
Unsecured_Debt	Total unsecured debt (a) None - $5,000; (b) $5,001-$10,000 (c) $10,001-$20,000; (d) $20,001 and up

Table 4. Base Case (Married and Single Model Variables Combined)

“Base Case”

Base case was: (a) White (b) E7 to E9 (c) Male (d) Neither satisfied nor dissatisfied (e) High School Graduate (f) Spouse High School Graduate (g) Over 39 years old (h) Owns primary residence (I) No dependents (j) No time away from homeport (k) $2,000 or less gross monthly income (l) $5,000 or less in savings (m) $5,000 or less in unsecured debt