29 November, 2006

Dreaming of a Giant Nest Egg

*Copied and edited from TiredButHappy

How much money are you saving, and do you feel that it's enough? Do you ever daydream about being able to save more?I'm always thinking wistfully of how much money I'd LIKE to be saving.

Just for fun, I decided to create a wishlist of each savings category I'd like to have, and how much money I'd like to be saving in each category. Of course, over time, I'd like to save even more, but this is how much I wish I was saving right now. In most categories, I'm already working towards meeting my goal, but for the most part, I'm not even close. Most of the categories are to cover short-term expenses. I'm tired of scrambling to pay for things that I should be able to predict and save for ahead of time. Here's my list.

Category: Workplace retirement accounts
Short or long term: Long
Current savings level: $235/month
Monthly goal: $1000
Annual goal: $12000
Notes: I'm fairly satisfied with my current savings level here. Of course it would be nice to max out my accounts, but that would be almost half my gross income. It's not gonna happen for a long while, at least not until my income increases dramatically.

Category: Roth IRAs
Short or long term: Long
Current savings level: $60
Monthly goal: $650
Annual goal: $7800
Notes: Currently only making a small contribution to my Roth IRA. I am aware that current limits only allow us to put in $8000/year for the wife and I, but Elissa is using all of her income currently to pay down our credit card debt, and putting her savings money into high yield accounts that she can access immediately, rather than when she is 60. Still, it's better than nothing.

Category: College
Short or long term: Long (no children yet)
Current savings level: $0/month
Monthly goal: $100
Annual goal: $1200
Notes: Until I have some children that I have to put through college, this isn't really an issue. I'm counting Elissa's college degree as a bill NOW, rather than a savings plan that we have to put aside for someday in the future.

Category: Irregular bills
Short or long term: Short
Current savings level: $20.37/week
Monthly goal: $150/month
Annual goal: $1800
Notes: I just started doing this and I hope to keep it up. This is meant to cover irregular expenses like contact lenses, appliance replacements or other things that are usually budget busters.

Category: Travel fund
Short or long term: Short
Current savings level: $0
Monthly goal: $250
Annual goal: $3000
Notes: My wife's biggest wish is to travel all over the world learning languages and interacting with different cultures. I could care less, but I do enjoy a vacation every now and again, so I would like to start saving up for this kind of thing.

Category: Car fund
Short or long term: Long
Current savings level: $32
Monthly goal: $300
Annual goal: $3600
Notes: My car is a relatively new Ford Escape. It has 16Kmiles on it. Elissa's car is a '99 VW Cabrio with over 90K miles on it. Both will need to be replaced eventually, but I'm hoping to hold out until we hit at least 180K miles on a car before we replace it. That should give me enough time to save up the necessary funds to buy a new car...CASH. This fund should also (ideally) be able to cover insurance premiums and periodic maintenance (oil changes and such).

Category: Gifts
Short or long term: Short
Current savings level: $25
Monthly goal: $100
Annual goal: $1200
Notes: I am a cheap bastard when it comes to buying gifts for people...but I still end up spending entirely too much. It would be nice to have a clearly set aside amount that I could designate for gifts only. $600 on Xmas, $400 on birthdays throughout the year, and about $100 on things like mother's day and father's day.

Category: Donations
Short or long term: Short
Current savings level: $0
Monthly goal: $50
Annual goal: $600
Notes: This is such a pitifully small percentage of my income but it's a start. I currently don't donate to charity very often right now, because I don't recieve charity, and have only so many causes that I support. HOWEVER...in this fantasy scenario, where I have gobs of money available to save, I would definately want to support lukemia research, homeless shelters and various other causes that are important to me.

Total current saving (monthly): about $435
Total current saving (annually): about $5225
Goal short-term saving (monthly): $550
Goal short-term saving (annually): $6600
Goal long-term saving (monthly): $2050
Goal long-term saving (annually): $24600
Total goal saving (monthly): $2600
Total goal saving (annually): $31200

Given that my gross household income is about $45,800, or $3800/month, this would be a pretty high savings rate. Now, this was just a game. I obviously can't suddenly nearly quadruple my savings rate. More accurately, my family wouldn't be willing to let me quadruple our savings rate. But there are a few areas where the money is already accounted for in my budget. I'm just not saving for most of these expenses ahead of time, so I have to scramble when it's time to come up with the cash. Here are a few ideas for easy steps I could take toward making this happen.

1. When I pay off the loan on the car, I plan to take the $427.81 that I am currently sending off as a car payment and up my other savings amounts.
2. My spouse is paying off the credit cards. When she finishes with that, I imagine that some of her money will start going towards savings goals (like upping that Roth IRA contribution).
3. I am getting a couple pay raises in the next 12 months. Most of that money will automatically go towards increasing our workplace retirement contributions, but at least some of that could go to upping short term savings too.
4. That leaves donations, and travel. I really should donate and travel more, but the funds just aren't there yet....Anyway, it was an interesting exercise.

What's your savings wish list?

Note: I was trying to think like a team player here, so all numbers refer to joint finances, not just my own personal money.

28 November, 2006

Confidence is growing

So, as more time passes and Prosper releases more performance data, I am better able to tweak my screening criteria. I think I've finally got it narrowed down to where I feel confident I can take on a borrower role and make money off of the "spread" between the interest rate that I will get for my loan and the interest rate I will get lending to others.

Still, I don't want to risk too much just yet, or put myself into an untenable position...so I have requested just enough money so that my monthly payment will be approximately equal to what I was putting into Prosper on a monthly basis anyway. This commits me to a 3 year plan on Prosper...but I'm feeling pretty good about my choices so far. With the exception of the RIDICULOUS amount of lag-time that Prosper gives you...it's working out well. All of my borrowers have paid on time and I think that they will continue to do so.

:-)

If you want to bid on my loan you can copy and paste this link into your browser window:
https://www.prosper.com/public/lend/listing.aspx?listingID=67395

Or you can just click on the title of this post.

Have a great day!
~Scott

24 November, 2006

Another source of info on how to write a Prosper loan request.

For those that are looking for information on how to write a good loan request on Prosper, here is another link that may be useful, in addition to the information I have posted before.

http://www.prosperingloans.com/creatinglisting.html

21 November, 2006

First Prosper payments recieved

Well, the experiment is going well so far. 4 loans created, all current. I've even recieved 3 on-time payments. There is a LOT of lag time though in the payments posting to my account. I'm sure once I get this really up and running I won't care quite as much, but right now, I have to continue to gather funds in order to create a self-sustaining Prosper business, and every bit helps.

So, my screening criteria is working well so far. My average interest rate is up to 26.328%, thanks to a winning bid on my 5th loan. If I had more money to loan out, I might diversify more into other credit grades...but right now, it's pretty much just E's and HR's that I am bidding on.

Also, I've started a group! If you click on the title of this post, it will link you to my group page where you can join. I'm still building the page up a bit, but I'm not going to take too much time on it until I get some membership requests.

Also, I found this site today which had some VERY interesting stats on Prosper. Check it out!

~Scott

10 November, 2006

10 Tips on how to get funded at Prosper

1.) Begin typing up your loan request off-line. It will do you no good to start and then lose all of your progress after the 20 minute Prosper time limit expires.

2.) Introduce yourself and state why you are requesting a loan. If you have a sad story about why you desperately need this loan, BRIEFLY describe it, but do not beg or go into too much detail, as it will not set you appart from other borrowers who also have sob stories. Instead, take accountability for your situation and focus on how you intend to correct it, with or without this loan. Personal accountability and responsibility are the hallmarks of someone who is taking positive steps towards financial freedom.

3.) Be polite. Say please and thank you, when appropriate.

4.) Include in your listing a COMPLETE budget, with a description of where your monthly paycheck goes now, and how the loan will positively impact your monthly cash flow. Do not exaggerate your income or play down your costs. Lenders recognize when someone fails to include expenses like food, gas for their car, or insurance. List EVERYTHING that you spend money on in a month.

5.) Show the bottom line. There should be a closing statement after all of this where you say something along the lines of, "As you can see, my monthly net income is $2800, and my monthly expenses are $2700. This loan will free up $300 per month, which I can use to easily afford this Prosper payment!"

6.) Provide a way for lenders to contact you, if necessary. This does not have to be your normal email address, or your home phone number...but it must be a way that they can reach you quickly with questions.

7.) Only ask for the amount of money that you NEED. The lower the amount requested, the easier it is to get funded.

8.) Set the terms of the loan at a high enough interest rate to capture the attention and standing bids of lenders. This will vary by Prosper credit grade, but here are some guidelines:
AA=10% or higher, A=11% or higher, B >=13%, C >=15%, D >=18%, E >= 22%, HR >=24%, NC >=24%

9.) Set the loan to run for the longest term that you can, to allow more lenders the opportunity to bid your interest rate down. DO NOT REQUEST AUTOMATIC FUNDING. Yes, automatic funding can theoretically get you funded faster at a definate rate of interest. However, most lenders feel that people requesting automatic funding have higher rates of default than normal, and therefore are higher risk. We are attempting to show that you are in fact a very good credit risk and deserving of a loan, so anything that raises the risk factor in a lender's eyes is bad.

10.) Finally, advertise your loan on the Prosper discussion boards! It never hurt to self-publicize.