A Penny Saved

Maybe I missed this before, but Citibank seems to be giving a $100 sign-up bonus for signing up for a Citibank direct ultimate savings account.

There don’t seem to be any minimums on the account and there don’t seem to be any hidden fees.  The rate is currently at 4.65% APY.  I also don’t see any requirement for minimum opening balance or any requirements for how long the money has to stay in the account.  What I do see is that it’s a one time only sort of deal.  If you’ve ever had an account with them or already do have an account with them, you are not eligible.

It isn’t the greatest rate in the world, as I think there are several online savings’ that are paying well over 5%, but for the extra $100, it just might be worth the extra time put in.

Has anyone held an account with Citibank direct?  If anyone signs up under this deal, I’d love to hear any further details.

Technorati Tags: citibank, citibank direct, high yield, ultimate savings account

Thanks to J.D. of Get Rich Slowly for pointing out a contest that ING Direct is holding.  It’s a writing contest for the best children’s story with a financial/saving theme.

To support its commitment to financial education and reading, ING DIRECT has created the Adventures in Saving story-writing contest to allow people of all ages to try their hand at writing a fictional children’s story that teaches a basic financial lesson. Whether you’re a published writer or an elementary school student, we encourage you to apply! One grand prize winner in each category (children/teen/adult) will win $1,000 and get his/her story illustrated and published!

Sounds like a pretty good contest.  Not sure that I’m up to it, but I bet there are a few pfbloggers that have the capabilities to participate.  The adult category is for ages 20+. The deadline is midnight on June 30, 2007.

Technorati Tags: ING Direct, savings, pfbloggers, writing contest, writing

This is part 2 of 2 of 20 real answers to the 20 dumbest finance questions. The questions come from a post called the 20 dumbest personal finance questions at Punny Money. I covered the first 10 questions in the first post and we’ll tie up the last 10 in this one.

• Q: How much is my house worth?
  • A: The short answer is I don’t know. The long answer is that only an assessment can really tell. That or selling the house. Since I’ll assume you don’t want to sell right now, try visiting Zillow.com and see if it has any info for your neighborhood. If not, you’ll most likely have to order an assessment if you want to know the real value of the house. Expect to pay anywhere from $200 to $500 for an assessment.
• Q: Why can’t I get a loan when I don’t have a job?
  • A: One of the key factors in your lendability (think of it as lending risk) is your ability to repay the loan. If you don’t have a job, and can’t show some other form of income, you in effect are not showing any ability to repay. Nobody will loan money to what appears to be a automatic default.
• Q: Extended Warranty. How can I lose?
  • A: Let me share a story with you. My first car would have stayed in my possession about 2 years longer had I gotten an extended warranty. The transmission went and had I bought the extended warranty, it could have been fixed. As it was, I didn’t have the warranty and I had to trade it off because I couldn’t afford to pay the money for a transmission up front. The car I got on the trade, I purchased the Extended warranty. I paid nearly $2000 for the warranty. I used it once for repairs that would have cost me about $600. The car cost me an extra $1400 because of the warranty. The truth is that the extended warranty is a crap shoot. The odds are against it paying off and as a general rule, they really should be avoided. Use the money you would have spent on the warranty to build an emergency savings to pay for those repairs instead.
• Q: How much money should I spend on ____?
  • A: A concrete amount is impossible without an actual item, but the best way to find a fair price for an item is to comparison shop. Look the item up on eBay, Shopper.com,and a few other sites like Amazon or niche sites where it would appear. Doing so should net you an average price for the item. Be prepared to pay a little more if you’re buying the item from a physical location as you’ll pay for the convenience.
• Q: Can I avoid paying taxes on interest by stashing my money in a foreign bank account?
  • A: No. Most foreign countries have agreements with the U.S. to report those things. Even if they don’t, if you get caught (you will) you can be charged with tax evasion. It’s a pretty serious charge and can bring some pretty serious fines about.
• Q: If I don’t pay this bill, will anything bad happen to me?
  • A: If you’re asking if Bruno the bat boy will show up at your door, the answer is no. However, not paying a bill can have serious effects on your credit rating and your future. The delinquency can be turned over to a collection agent and your rating will plummet. You’ll have a hard time getting a loan and find yourself trying to use 25%+ credit cards for the smallest things. It’s a downward spiral. If you truly can’t pay a bill, contact the debtor, and ask if there is anything that can be done so that you’ll stay current.
• Q: Are there any jobs where I can work from home and make over $100,000?
  • A: There are. They are very few and very far between but they do exist. In most cases, you won’t be working from home so much as from a hotel as they usually have travel ratios of around 80%. They also usually require oodles of experience in a very specific field. (think “husbandry habits of the northeastern mole.” yes, that specific)
• Q: I read the economy is heading towards recession/depression/annihilation. Is that true?
  • A: The odds are that it isn’t. There are many safeties that are in place to try and prevent that from happening. I didn’t say it was impossible, just not likely.
• Q: How much money do I need before I can start investing?
  • A: Very little. Places like Sharebuilder.com let you invest in as little as $20 increments. The real question is when should I start investing. The answer to that is: when you have little to no debt.
• Q: Why do hookers cost so much?
  • A: Surprisingly, it does have a little to do with supply and demand. It also has something to do with the fact that the customers are people who don’t realize that they can walk down to the bar and get it for free. I’d charge those customers a lot too.

And there are the real answers to the other 10 dumbest personal finance questions. This was a pretty fun series to write and I hope it was slightly educational. If you find yourself asking any of the questions, remember that there are plenty of sources online that will give you the truth in somewhat easy to understand ways. Just know that you might have to put a little time in to do research and learn.

Technorati Tags: dumbest finance questions, saving, debt, loan, credit rating, fico

If Nick at Punny Money does one thing well, it’s creating humor where there sometimes isn’t. His recent post about the 20 dumbest personal finance questions had me laughing with it’s “here’s your sign” sort of answers. Then I got to thinking. Before I started seeking answers to my financial questions, I might have asked a couple of those questions a time or two. And rather than sarcasm, wouldn’t it be nice to have honest real answers to them? So, hopefully, I’ll do the questions as much justice for real answers as Nick did for humorous ones.

• Q: Why Can’t I ever seem to save any money?
  • A: If you can’t ever save any money, one of two things is happening. You are stretched too thin and have too many bills and debt to have any true extra. If that is the case, it’s time to take some serious steps to remedy the situation. The other possibility is that you have your priorities a little messed up. You most likely are waiting until the end of the month and “saving” whatever is left over. If that’s not working (and 99.99% of the time it won’t) try writing down all your bills and other expenditures and putting them in order of importance. Now add the money for savings to the list. Add other things that you’d like to save/spend on. When you get a check or other income, pay the first on the list and then move to the second. Continue until you run out of money or you run out of list. Whatever you do, make sure you’re planning for the savings rather than “seeing” if there is anything left over at the end of the month.
• Q: Why should I pay off my credit card each month when I can just pay the minimum payment?
  • A: Well, the most obvious answer to this question is that if you only pay the minimum payment, it will take you years to pay off the debt. You don’t want to pay on that for years, so pay it off each month if you can. The other reason is that 99.99% of credit cards have absolutely ridiculously high interest rates. I know bookies with better juice. Why would you want to pay the credit card company nearly 1/4 of the debt each year just because you don’t want to pay the full balance. Another option is that you can’t afford to pay the whole balance. If that is the case, go back to the first question, because you have more debt than you can afford and it’s time to get rid of it.
• Q: How should I invest my money?
  • A: You have two choices. Get a professional to guide your investments and probably pay a pretty good bit of fees to do so. Or, you could learn some of it for yourself. Get a subscription to a financial magazine. I suggest Money or Kiplingers. Learn about the different modes of investment. Educate yourself and then begin to test your own theories. One caution though. Don’t put all your eggs into one basket until you’re sure of yourself and your ability to invest.
• Q: I have two loans: One small one at 5% and one large one at 21%. Which one should I pay off first? The small one, right?
  • As a general rule, you should pay off the loan with the higher interest rate first. You’ll be saving yourself 16% if you get the 21% paid off and are still paying on the 5% loan. One exception to this rule is that if the smaller loan is so small that you can pay it off in 3 months or less, it can be very encouraging to pay it off first.
• Q: Why should I bother going to college?
  • A: The truth is that College isn’t for everyone. However, the college degree has become a nearly necessary asset for most well paying jobs. If you think you can make it through College, your lifetime salary could increase by 1/4 or more.
• Q: Will I have enough money to retire?
  • Honestly, I can’t say for certain. The easiest way to decide is to make a few calculations. You should estimate that you will need 70-80% of your current salary at retirement to survive in your retirement years. So, if you are making $100,000/year when you retire, you should expect to need $70,000 to $80,000 a year to continue your current lifestyle. There are plenty of calculators that will estimate how much you need to save and what you need to have in savings today to make that happen. Visit just about any finance website and you’ll be able to find one.
• Q: Somebody told me about an opportunity to make lots of money. Is it a scam?
  • Like my son’s good friend Cookie Monster is fond of saying, “smells like a cookie, looks like a cookie, tastes like a cookie, must be a cookie.” If it sounds too good to be true, it probably is a scam. There are exceptions to that. The recent Real Estate bubble for instance. They are few and far between though. Do your research on any “opportunity” before partaking.
• Q: Hey, can you lend me X dollars?
  • Sorry, I’m not much on lending, but you could try out Prosper.com and see if anyone there will help you out. It’s a great site that allows people like you or me to lend to people like you or me while still giving the lenders some protection from default. (besides Bruno the bat boy)
• Q: I’m really trying to impress my new girlfriend. Got any ides for a cheap date?
  • Don’t tell my wife or she might expect me to do it, but try a nice bottle of wine, some sandwiches and a picnic. It’s not the greatest in January, but sometime between April and October usually work out pretty good. If you wanna go really cheap, leave out the wine and go for her favorite beer.
• Q: How will ____ affect my credit score?
  • Everything that you do financially affects your credit score in some way either positively or negatively. As a general rule, Paying your debts on time and reducing them are the best things for your score.

That’s the first 10, come back tomorrow for the next 10!

Technorati Tags: dumbest finance questions, finance questions, debt, savings

Groceries can be one of your most extreme expenses.  Most people who are trying to save a little dough for retirement, their kid’s college fund, or just to help pay off some debt.

I know that my wife and I have tried to save as much as possible, whenever possible on our groceries.  We clip coupons (which isn’t that time consuming), compare prices, and go to two different supermarkets to buy our groceries.  Each Saturday, in the local paper, are the ads for the two local groceries stores.  Our grocery list comes out and things are added as we find the deals in the fliers.

Saving money on groceries has nearly become an obsession for us.  But when is too much too much?  Is it possible to save too much on groceries?  Sure, some of the name brands taste better than the generics, but is the better flavor worth an extra $0.78?  Perhaps.

But what really causes us to save too much on groceries is when we get carried away with sales items.  One of the best examples from our shopping endeavors is chicken breasts.  We eat a lot of chicken so we usually buy the frozen boneless chicken breasts in a bag.  My wife is a little picky so it has to be a certain brand.  Normally, these bags of chicken are $6.99 for 2lbs.  This week they were on sale for $4.99.  That’s a pretty good savings and it is also the only time they’ve been on sale in well over two months.

So, we saved some money on chicken.  But we also saved too much.  We fell victim to a savers malady.  We bought more than we needed.  Because of the great deal, we bought 5 bags of chicken.  It’ll take a little over a month to eat that much chicken and it will most likely blow our grocery budget for the month.

We saved too much.  We’ve done it before (we’ve got about 20 boxes of pasta-roni in our pantry) and we’ll likely do it again, but being aware of it is half the battle right?  Well, maybe.  The biggest problem with it is that rather than having a somewhat even budget for groceries, the spending fluctuates by a bit from month to month.  Makes it awfully hard to budget for groceries if you are off by $50 every other month.

Do you save too much?

Technorati Tags: groceries, saving, coupons, save, supermarket

According to the Mortgage Advice Bureau(via Guardian Unlimited) the number of mortgages for greater than 100% of the assessed value of the home is on the rise.

Mortgage Advice Bureau (MAB) said homebuyers opting for a 100% mortgage rose by 21% last year, while those opting to borrow more than the worth of their property grew by a half.

I don’t know about you, but that’s scary. Taking out a mortgage for greater than the value of your home is just asking for trouble.  While it may seem like a quick fix to a shortage of funds, it can mean a quick shortage in living arrangements if you’re not careful.

What contributes to this rise in >100% mortgages?

It said many first-time buyers find it impossible to save towards a deposit and that 100% mortgages were often the only way to get on the housing ladder.

Ouch.  The woe is me sets in.   “The world wants to keep me down and I can’t afford a down payment.”  Well, let me say that the reason that you can’t find the money for a down payment is one of two things.

Either you have horrible saving habits, or you are living beyond your means.  Of course there is the possibility that you are trying to buy more house than you can afford as well.  But mostly, it comes down to living beyond your means.  Stop trying to keep up with the Joneses!  Find yourself a nice house with a mortgage payment you can afford and a down payment that is do-able.

Your chances of defaulting on the loan increase many fold if you get above about 90% of the homes value.  Yes, the home may appreciate.  In fact it probably will appreciate.  But you can’t count on what it’ll be worth in the future.  What you can count on is extra added on to your payment for escrow, insurance, Private Mortgage Insurance, and maybe some points too.

And what happens when something breaks and needs repair?  Where are you going to get the money for that if you can’t come up with the money for a down payment?

Don’t be silly.  If you can’t afford the down payment, you can’t afford the house.

Technorati Tags: mortgage, house payment, down payment

What if you received a $100,000 gift?  What would you do with it?  What would you buy? What would you pay off?  These are the questions that Jade asked of me in a comment.

HI I wanted to see if any of you financially wise people could give me some advice.
My relatives have been talking about gifting me $100,000( I won’t hold my breath)If it happens I want to have a plan. what would you do with it?
Jade.

Well Jade, it’s a little difficult to give you exact advice without knowing your financial status, but here goes.  If you follow the following and just ignore steps that you already have completed you should do ok.  Follow it in order.

1. Put 3-6 months expenses aside in a high yield savings account like ING or HSBC.  For most people this amounts to somewhere between $7,000 and $15,000.
2. Put about $3000 aside for fun money.
3. Pay off everything.  Get rid of all debt.  Lose the Credit Cards, car payment, student loans, and mortgage.  Of course, you might not be able to get rid of it all, but do what you can.
4. If there is anything remaining, drop the max into a Roth IRA.
5. If there is still more and you have children, drop the max into either a 529 or ESA.
6. Whats left?  Anything?  Increase your savings to a full 6 months.  Open another savings and drop the rest into it.  This is your fun savings for future purchases.

Now, this is really a pretty generic list.  Your situation is most likely different from most and will need some tweaking.  Now, chances are that if your family is able to gift $100k, they can probably help you with the financial planning.  Don’t be afraid to ask them for help with it if need be.  If you follow the above list, you should end up with a pretty solid savings, little or no debt and be started on both your retirement and your children’s education.  From now on, you put as much as you can into your future purchases savings.  When you need a new(used) car, it comes from the cash in that account or you can’t afford it.

Your new goal is to have no debt for the rest of your life.  Think about how quickly you can build savings if nearly your entire paycheck is free to be added to it!  Got an extra $1000 a month?  Be a diligent saver and you’ll be able to pay for things with cash in a lot less time than it would take to pay it off any other way.  Plus you get the rush of knowing you owe nobody.

Now is where all the rest of the PFBloggers out there get to chip in.  If you have any other advice or different advice add it here and help Jade out.

Technorati Tags: gift, savings, retirement, education, debt, credit cards

It’s that time of year again.  Time to take a long hard look at your finances and your accounts and make  all the necessary changes to ensure a great new year.

Here’s what I plan on doing with my things.

First, I need to take a hard look at my budget.  We’ve had a few shortcomings in the last few months.  Our son has been to the doctor rather frequently with a myriad of fun stuff(pinkeye,shots, etc) and the meds ate through what little reserves we had(nearly none).  I don’t think that our budget really needs a revamping as much as we need to stick to it much better than before.  Or at all in some categories.

Secondly, my top financial goal this year is to actually build up a quasi emergency fund that can be used when we have more doctor bills or car repair or vet bills that we just didn’t see coming.  At the moment, we have little to no liquid savings.  I’d like to have 1-2 months built up by the end of the year, but a more realistic goal is about 1/2 month at this point.  That being said, my other goal is to have that account in a high yield savings that pays more than the current 0.25% at my Credit Union.

Third, I really need to take a close look at my 401(k) and check the allocations.  This is something that really should only be done once a year, no more, no less.  I also intend to increase my contributions as the match next year goes up to 30% of the first 10%.  I’m currently only sitting at 3% and would like to get up to about 5% if possible.  It will depend a lot on what my raise(hopefully) looks like this year.  I may be able to go a little bit more if it’s better than expected.

Fourth and lastly, I’d like to create a more formal debt reduction plan for us.  Currently we’re a little disheveled in our payments and budgeting and I think the addition of a more concrete debt reduction and payment plan would help us keep track of what we are doing and how we are doing on our goal.

I’m sure there will be other little things that I will try and do, but those are the biggies that I have planned.   Do you do a New Year Cleaning of your finances?  Spring Cleaning? What do you do annually with your finances?

Technorati Tags: finances, budget, 401(k), retirement, debt reduction, contributions, employer match

This one’s for all you super uber frugal people out there.  You and anyone else who wants to save a little money.  Ugenie is your next shopping site.

You’ve never seen a shopping site like it.  They specialize in bundling items together from different merchants to find your best price.  Currently, they search 35 merchants.  Consider that if you’re looking for a bundle of 2 items, that’s 35^2 different ways they could be bundled.  That’s 1225 different prices.

Then they pick the one that’s lowest, taking into account for taxes,shipping, and coupons(that they find) and gives you the best bundle.

The company just received $5 million in funding earlier this month and is looking like it’s going to be around for a while.  The founders are all deeply experienced with sites like Amazon, Yahoo, and A9.  Great resumes for a suggestive shopping site.

Did I mention that you can import your Amazon wish list?  Yep.  Great idea and a great site.

Technorati Tags: amazon, ugenie, shopping, comparison shopping, yahoo, a9

Passive income comes in many forms. Each and everyone of them has it’s own risks, methods, and rewards.

One such method, one that most people will be familiar with is Dividends. Usually coming in the form of stocks that pay dividends. While many stocks pay a dividend yield of 2-10%, there are some that pay up to 18%.

With only a minimal investment, you can create a income stream that matches or exceeds many of the High Yield savings accounts that many personal finance blogs tout. Obviously, the risk is higher that your money will disappear. But it has also been shown that stocks that pay dividends are less likely to drastically change.

If you don’t need the income directly and simply want your money to go to work for you, consider a DRIP account. A DRIP account takes that passive income in the form of dividends and re-invests them in the stock. Each time you reinvest, you end up with more shares of the stock. More shares of the stock mean more dividends.

As an example, let’s say you purchase $1000 of a $20 stock. You have 50 shares of the stock. The stock pays a 5% yield. Each year, the company pays you $1 per share. That’s $50 the first time the dividend is paid. Reinvested, you would get 2.5 more shares. Next time the dividend is paid, you receive dividends on 52.5 shares. You receive $52.5 dollars in dividends. You’ll purchase 2.625 shares. And so on. You can see how it would quickly compound and build.

Of course, fluctuations in the price of the stock can drastically change how many shares you buy at each reinvestment. But, over the long term, you’re also taking advantage of dollar cost averaging. Some times you’ll buy lower, and others you’ll buy higher. Overall, it averages out to a median price.

Whether you participate in a DRIP or not, you can see how investing in dividend paying stocks can create passive income. If you keep the stock for the long term, it really has little to no maintenance.

disclaimer:When investing in stock it is important to remember that there are risks associated with that investment.  Research any stock before purchasing.  I’m not a professional, you should consult one before investing in anything.

Technorati Tags: passive income, drip, dividend, invest, reinvest, yield, dividend yield