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  • When procrastination pays (or, thank goodness I hadn’t gotten around to creating a Lending Club account!)

    Update: I was waiting for DebtKid to weigh in on this issue, since he writes for LendingClub’s blog. He has a much more optimistic interpretation of LendingClub’s actions.

    I’ve mentioned previously that I’d like to get in on the P2P (person to person) lending scene. After reading posts from avid P2P lenders like Lazy Man and Money, The Dough Roller, and Moolanomy, and carefully reviewing both the Prosper and Lending Club sites, I decided to join Lending Club and make four $25 loans (using a $90 Sharebuilder bonus plus an extra $10).

    Except that I never really sat down and signed up. I intended to review the fine print one more time, but I never made time to do it. In this case, it turns out, procrastination was a very good thing.

    Earlier this week, The Dough Roller and Cash Money Life posted about this notice from Lending Club:

    Lending Club has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future. Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. We will continue to service all previously funded loans during this period, and lenders will be able to access their accounts, monitor their portfolios, and withdraw available funds without changes.

    The borrowing side of our site will remain generally unaffected by this registration process; borrowers can continue to apply for loans and new loans posted after April 7, 2008, will be funded and held only by Lending Club.

    Until the registration process is completed, the company will undergo a quiet period and will not be able to respond to press and other inquiries about Lending Club or the registration process during that time.

    It looks like if I’d already funded loans, they wouldn’t be affected, but this event simply shakes my confidence in Lending Club. I don’t know enough about lending laws to figure out what the problem is with Lending Club, but I do know that I’m happy I didn’t create that account with them. (LazyMan thinks Lending Club is dead.)

    I’m still interested in lending with Prosper, but I think I will wait a few weeks to make sure there’s no reaction to Lending Club’s actions first.

    Improving My Personal Finance Management: Learning about income-producing investments

    NCN of No Credit Needed has asked readers, What One Area Of Your Personal Finance Management Would You Like To Improve?. My answer came immediately: investments.

    I think we have a solid grasp on budgeting, spending, saving, and paying off debt. The one place where we could use a lot of improvement is investments. Mostly short and mid-term investments, or as I sometimes like to think of them, income-producing investments. Because we’re doing fine with retirement and even college savings, where the timeline is over 15 years (goodness, it is possible that our oldest will be heading off to college in “only” 15 years?!).

    So what I’d really like is an alternative income stream, something unrelated to our jobs that produces a fair amount of money each month. But my investing knowledge is mostly about short-term, liquid investments where the focus is on preserving capital (like CDs) and long-term investments (like index funds).

    I’m lacking knowledge in the intermediate range, however. I don’t think it should be too hard to learn about mutual funds that focus on generating income as well as growth, since I already know a fair amount about how mutual funds work. But I’d like to learn more about tax-exempt funds, as well as other instruments (like Treasury securities and TIPS). My learning process will probably be slow, just because of my schedule, but I’ll post updates when there’s something to share.

    Reconsidering Prosper – Thinking about Lending Club

    When I first started thinking about becoming a P2P (person to person) lender, the only place to do it was Prosper. Then Lending Club came along, but I figured the two would be much the same. And now that I’ve set aside the money I’m going to lend, I figured I’d just go with Prosper since I’m already an affiliate there.

    Then I read this post from The Dough Roller and realized that the two companies aren’t necessarily the same and that rates and fees can vary – sometimes significantly. Obviously, more comparison is warranted.

    Fortunately, I have a pretty good idea of type of borrower I want to lend to (I’ll be going with relatively low risk borrowers since I’ve read that default rates get pretty high with the higher risk borrowers – unsurprisingly). I’m going to use the info provided by DR to compare rates and fees on the type of loans I would be comfortable making before I decide which company to go with. I may even diversify my risk and lend with both companies.

    Good customer service from Sharebuilder

    I posted a few months ago about buying my first individual stock purchase – a tiny fraction of Berkshire Hathaway that I bought through Sharebuilder. At the time, Sharebuilder was offering a $90 bonus to Costco’s Executive level members, which we are. The bonus was actually my main motivation for buying the stock, since essentially the stock was free. The only problem was, we never got the bonus.

    Calling Sharebuilder about the bonus has been on my to-do list for a couple of weeks now, but today I finally realized I could use their online contact form so I sent them a quick email explaining the problem. Within a few hours, I had the following response:

    Thank you for contacting us about Costco cash card you never received. We have credited your account with $90, that you are free to use in any way you wish.

    I was close to writing off the $90 just because I didn’t want to deal with the hassle of contacting them, but it turned out to be painless and worth the effort. I’ve withdrawn the $90 and will be using the money to fund my first Prosper loan. Stay tuned!

    I’m staying the course by avoiding my account balances

    Intellectually, I completely agree with FMF, JLP and everyone who says the best way to invest in the market is to keep investing and not be scared off when the market is down. It’s easier said than done, though, when I see that not only have my gains from the past year been wiped out, but I’ve actually lost some of the principal that I invested.

    In the long run, it’s not going to matter much. I’m not planning on withdrawing money from any of my investment accounts for at least 15 years. And most of my investing is on automatic – withdrawals from our paychecks to our 401(k)s, automatic withdrawals from our bank account, and so on. It’s not too hard to forget about the automatic investments and just let them be.

    What is hard is logging into the various web sites and seeing the actual account balances. On some sites, it’s unavoidable because it’s the first thing that’s displayed when I log in. And some of the sites I can avoid but some of them I need to get into for reasons other than checking the account balance.

    When I see those low numbers, especially when I know that the number is less than what I’ve deposited into the account, it’s hard not to get depressed, or at least not feel a little bit down. That’s when I start wondering what else I could or should be doing. And if I don’t stop my mind from wandering off too far, I’ll end up driving myself crazy with “what if”s and “I wonder”s. What if I used our savings to pay off our debt? I wonder if we are diversified enough. What if I put the money that I was going to invest in the stock market into a CD? I wonder if I should change the allocation of our retirement contributions? And so on and so forth.

    The easiest way to maintain my sanity is to avoid seeing those low account balances in the first place. So I do what I can to minimize the number of times I have to log in on the various web sites. I take a quick glance at paper statements to make sure they look about right and then file them away. I try as hard as I can not to think about the money I’m losing, and to focus on the fact that my dollar-cost averaging will pay off in the end.

    Which isn’t to say I won’t be relieved when this plunging stock market ride is over.

    What about you? Are you staying the course, and if so, what are you doing to calm your fears?

    Image credit: Yahoo! Finance

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