Where to Bank Online?

One of the main reasons we decided to start putting together a blog for people was because of the idea that you could make your money work harder for you, hence milking it. One of the best ways to do that obviously, is to put your money into a high interest bearing account so that the snowball effect of compound interest will, eventually, accumulate more than what you spend.

The easiest place to start something like this is online. NOTE: Any rates we discuss are active at or near the time of writing, please be mindful of the dates. Lets take a quick look at some of the major players:

ING Direct
They have a wonderful marketing campaign and very secure clean online banking interface. Their rates have dropped since the Fed has dropped rates across the board but what can you do to prevent that? Here are the rates for the different tiers they offer for an online checking account:

Balance....................................... APY*..

$0 - $49,999.99.......................... 2.25%

$49,999.99 - $50,000.00 .............3.75%

$100,000.00 + ............................4.00%
APY*

Now I am sure you are thinking, I will never have $100,000 in my checking account to get access to that percentage rate. Well you never know and you can still use it as a bench mark for other online banks. ING does not have a minimum to start an account, has a debit Card, free ATM access (32,000 select locations), free electric checks, automatic protection from overdraft, and is of course FDIC insured. ING has also recently merged with Sharebuilder but the accounts are not connected (yet?). There is also no real convenient way to deposit checks. Read more here.

Schwab Bank High Yield Investor Checking

Schwab has had some changes as of late. I found their online banking to have a huge interest rate and I was very tempted to try them out, but was left with a bad taste in my mouth as they required a $3,000 minimum to deposit. Now I see as I write this article, the minimum has gone away and the interest rate has dropped from a little over 5% to the now 3.01% for all sums in any account. The other features that are inherent with ING, are also shown here, for example, no ATM fees, free online checks/bill pay, etc. There is no way to deposit (like with ING) with them however unless you mail in a check or if you have direct deposit. So your paycheck is ok but if you get a check from someone else you'll be mailing it in. Read more here.

Bank of America Online Banking

BofA is known to be the largest bank in the US and it just might be. They have more locations that I know of and seem to doing very well for themselves, regardless of the financial crunch out there. I make this statement about BofA and not the first two because they are more of and esatablished brick and mortar, lending type of bank. Not to mention the huge bailout that they are attempting with Countrywide. That is another story however, we have quite a bit to say about that in a later post.

Over all, the online banking experience was a bit of a disappointment, with respect to interest rates in the other checking accounts. They have virtually none for checking accounts and for savings, if you maintain $300 or $25 deposit every month, theres no charge with an APY of 0.20%. Wow. That is compounded daily and paid monthly. They nickel and dime you for not maintaining minimums. They do comply with Check 21 (as do all financial institutions, effective October 28, 2004) where you can, supposedly, scan both sides of your check and send it in to be processed/deposited. BofA's website was lackluster in toting that as a feature however. Not sure if they are running into problems with that. Either way, they are just a regular bank and have virutally no interest rates on their checking platforms. Read more here.

That's about all for now, check back soon for another slew of online bank reviews. $

Five Things to Buy New and Five Things to Buy Used

In our quest for consumption, we can readily come up with a healthy list of things, given the cash flow, we could run out and buy right now. Let's imagine for a moment that’s possible. What would you buy? If you’re like us, that list spills over into electronics, home theater and sporting goods. When going through the process of shopping, some will simply see things they want and make impulsive purchases. I had this happen to me not even a week ago with a lob wedge that I had an eye on. I can barely call myself a hack so purchasing a $50 golf club was already a little out there. On top of that, it was on sale for $30! I had to go through the agony of making some perfect text book practice swings in the store, imagine it in my bag, visualize myself making a few beautiful pitches on to the imaginary greens, then put the club back on the shelf and walk away. Let me tell you, it’s a man's equivalent to giving birth. Maybe not, but still pretty difficult.

Impulsive purchases are probably single handily the cause of Americas credit card debt problems. Remember the two-week rule we mentioned in an earlier post? For those items that you know you will enjoy and get your money’s worth, perhaps your decision of purchasing will ease if you find the product used and cheaper. We have recommended five items that you may be better off buying used and five where buying used is not worth it. Now, let's take a look at what is best used and new.



USED

1. Golf clubs. You saw that coming didn't you? There are people out there that have their entire business built around reselling used golf clubs. A woman I work with was somewhat apprehensive about buying a used club, but ended up going to a manufactures' outlet site and got one that was "like new" and it was in pristine condition. This is an example of investigative research to save some pretty big bucks. Clubs are a lot like cars in that if you wait for the latest club to come out, the one before it get substantially reduced in price. Ebay is not a bad way to go about this. Just buy steel irons and be sure the drivers and woods show a picture.

2. Computer Monitors. I have a sick obsessive fascination with having as much desktop real estate as possible. If I could justify the cost, I would use two 30" monitors at every machine I have. Obviously, that’s an obscene amount of monitor, but still, it doesn't hurt to look! (Looking is free.) To have reasonable success with buying larger monitors, I go to the Dell Outlet page to find good deals on monitors of a larger persuasion. Don't be afraid of buying a monitor that has been refurbished! These monitors undergo an extensive quality check before they go out and the risk of getting a bad monitor is extremely low. The worst you can expect might be a bit of slight marring on the bezel, or frame. To me that's fine, if I can save $150-200 dollars. The technology these days for LCD is so run of the mill that consistency is near 100%. This outlet list changes often so check back regularly.

3. Books & DVDs. To be completely honest, a large part of my entertainment budget goes towards books. A few DVDs here and there, but not many due to Redbox and Blockbuster Online. However, for my book indulgence, I do a sneaky thing. I go to the big fun bookstores (Barnes and Noble, Books-a-Million, Borders, etc) and I buy absolutely nothing. Again, like the golf clubs in the sporting goods store (see above), this is extremely difficult to not give in to the instantaneous feeling of satisfaction. What I do is write down the ISBN number and go look on Amazon for it. I do this for two reasons: 1) I will get the same book, in nearly the same condition, which will be close to 50% off what it was in the store; and 2) It allows me to have a buffer of time to be sure that the book I am seeking is something I truly want/need. Waiting to purchase lends time to take in to account reader reviews and it's amazing these brick and mortars are staying in business.

4. Vehicles. This is somewhat a no-brainer for anyone with a sliver of frugality within them. It’s a widely known fact that a brand new car depreciates at least 3-5% as soon as you drive it off the lot. Then it loses 15-20% of its value every year after that. It’s not uncommon for people now to owe more on their car than it’s worth, don’t be one these. While some say that a car is an asset, it is also a depreciating asset. In fact, it is the only “asset” people willingly borrow money, at interest, while knowing it will depreciate. Get a vehicle that’s 2-3 years old and let someone else take that hit, just make sure that the car was well cared for. That new car scent can be bought easily. Taking care of your car will save you tons over the long run either way. Buying new does absolutely nothing but throw good money out the window at about $12 a day, in addition to gas, maintenance, etc, etc.

5. Wall Art. Hopefully you don't think we are suggesting that you are like the Amish, so by all means decorate! There is quite a bit of decent paintings, photographs that you can find out there at decent prices. I feel good about buying these used as there is only so much you can really purchase before your walls are full and your need goes down. Kept within your budget and at the right places, this can even be a rewarding hobby. Check The Wall Art Store or All Posters.

NEW

1. HD TV's. This is an interesting category as it could be easily argued either way. Some will say that it's just like computer monitors and the technology is so stable these days that you can’t go wrong. I disagree somewhat in that TV's have a great deal more going on under the plastic skin. You wouldn't think of it, but they actually have some pretty advanced chips in them that lend themselves to widening the spectrum of quality across the field. A higher quality, name brand, HD TV is going to look noticeably better than a lower end one. Without getting into a long post about the pros and cons of certain sets, there is still the argument that TV's are getting cheaper almost by the day. Find a TV you like at Best Buy, note the model number and then go home and look online for it. These prices will have dropped significantly online, then in one-month see if they have come down again at Best Buy. Again, Amazon has nice selection as does Costco. (Let us know if you find that 60" Vizio for less than $2k!)

2. Computers. I am a bit of a stickler for computers but I also do quite a bit of tweaking and know my way around pretty well. Having said that, there are two avenues to explore: DIY - Go to Pricewatch.com and get your parts. They do a really good job of giving you the power to select the parts you want in the price range that works best for you. You can also see price trends for more expensive items and see where the gouging drops off. NewEgg.com also has some pretty good deals for more everyday items.

Buy Whole - Of all the computer manufacturers out there, it is not easy to simply recommend one and have that answer all the needs of the average consumer. If you need just an eMachine, go to WalMart and be astounded by the savings. For an overall positive experience and a decent warranty, buy a Dell. You can snag some great deals from their Outlet Store, but new machines are a good buy as well.

3. Clothes & shoes. Just spend wisely here. Not many would buy used clothes and shoes given the choice. You don't have to buy everything from the most expensive trendiest store, outlet department stores should be ok no matter your dress code. I have to wear a shirt and tie to work everyday (excluding casual Fridays) and I rarely pay more than $10/shirt and $10/tie. I’m serious, I’m not wearing the worst of the worst either. Occasionally, check out the back of stores where the clearance sections are, you will be surprised. If you feel differently about this, please leave a comment and let us know.

4. Cell phones. Used cell phones are sold for three reasons: they don't work, they are awful quality, or they are stolen. Do the research to see what you like best and stick with it. Get a modest plan, and take advantage of a renewal deal. Verizon has a Two Year Renew plan and it’s pretty nice (however, for the consumers sake we would like to see these contracts be reduced to at least 1 year). I usually make a point of not looking at other phones for the 1st year, and then as the second year starts up, I begin looking around for what is nice. Just don't go over the top with features and be wary of rebates!!

5. Furniture. Much like clothes, you can't really feel good about buying a couch that someone has obviously made a large part of their life on (including their children). It's too difficult to bring it back to "like new" and the fabric will eventually go back to its engrained smell. Not to mention lots of furniture made these days is not of solid wood, but of particleboard, that doesn’t have the lifespan of wood. Spend the time to do research and know your budget limits. Set aside a certain amount of money to work with and stick to it. Don't feel like you need to furnish your entire house at once and PLEASE don't get suckered into a store credit card. Unless you can pay it off and keep it off, it will hit your credit report to continually opening new lines of credit. Buy a decent bed first and go slowly from there. The furniture will have more meaning to you and will last longer because of it. The only used furniture I could feel good about recommending would be hard wood antiques. Even then, I would need to do a great deal of research to justify it. Exception to all of this is college, beer taste just as good on a used couch.

Have other suggestions about what is best bought Used or New? Drop us a line or leave a comment! $

Wachovia's "Way2Save" and Bank of America's "Keep the Change" Saving Programs

The personal savings rate in the United States is around 1%, an embarrassing number for one of the richest countries in the world. Why aren't we following the saving generations that came before us? We can think of a few reasons: ARM mortgages, easy access to credit, ipods, 5+ year car loans, and rising college tuitions. As this troubling trend of insufficient savings continues, banks have created new ways to encourage saving, but should you enroll?

Wachovia's Way2Save
Wachovia will automatically transfers $1 from your checking account into a special savings account each time a purchase is made with a Wachovia check card, an online payment is made or an automatic draft takes place. Wachovia will contribute a 5 percent annual bonus in the first year and a 2 percent annual bonus each of the next two years, up to $300 annually.

Bank of America's Keep the Change
Each time you buy something with your Bank of America Check Card, they will round up your purchase to the nearest dollar amount and transfer the difference from your checking account to your savings account. Bank of American will match your savings for the first 3 months, to the penny. After that, they will continue matching 5% a year until a maximum of $250 per year is reached.

Deal or No Deal
Whenever a bank is offering free money, we tend to get a little leery, as is the case with these programs. While they are both are attractive on their face, we have have determined the possible problems outweigh the rewards for most people.

Problem 1) We mentioned in an earlier post the significance of creating and sticking to a monthly budget, both programs make this much more difficult to do. How are you supposed to stay within your created budget when money is constantly and sporadically leaving your checking account? Wachovia's program takes a $1 out for every purchase, I would be willing to bet the number of purchases most people make in a month is a higher number than the amount most people currently budget into their savings. Meaning, you can't save what you can't afford.

Problem 2) Overdraft fees are a pain and as I understand these programs, banks are going to cash in on us. Say you saved $100 this month using Bank of America's Keep the Change program. Congratulations, but hopefully there’s something left in your checking account when you go to make your next purchase. These programs make it nearly impossible to keep track of your accounts, unless you are checking them online daily. The last thing you want to do is pony up $30 in an overdraft fees because the money originally in your checking account is now nesting in your savings. If you choose to participate in these programs make sure if your account goes overdraft it then pulls from you savings at no charge (but if this happens, what's the point?).

Problem 3) These programs can give people a false sense of security. Just because you are enrolled in a savings program does not mean your financial planning is over. We fear people are going to have an "I'm saving more by spending more" attitude.

Conclusion
To really encourage savings, banks should make an effort to encourage people to shop wisely, stay within their budgets, and treat savings like a utility bill. Unless you are one that is very disciplined and can use these programs only to your advantage and not the banks, should you choose to enroll. $

Gassing Up

Everyone knows of a gas station in their area where they can save a couple cents on a gallon of gas. Have you ever wondered if it is worth going out of your way to fill up at these cheaper stations? We have determined it is not.

Idling
I live close to a Costco that offers its members reduced gas prices of about 5 cents per gallon of gas. Every time I drive by this particular Costco there are lines of cars waiting (idling) to fill up on these unbeatable prices. It’s counterproductive to sit in your car with the engine on for the sake of saving money on gas.

Mileage
I have no doubts that many of these same people waiting in lines at this particular Costco pumps, drove more than 5 miles out of their way just to fill up there. Remember that 5 miles out of your way in one direction means 5 more miles back. If you get around 25 miles/gallon and gas is at $3.00/gallon, you just spent $1.20 in order to save approximately 75 cents on your gas.

Wear and Tear
Cars do not last forever and as minimal as it sounds, every mile your are going out of your way to save on gas, you are in turn taking time off your cars lifespan. For each stoplight you hit, or turn you make, you are putting stress on your car. Have you ever heard the saying, "For every cigarette you smoke, you take a minute off your life?" Well, this is the same concept. The price tag placed on wear and tear maintenance on your car will by far out price the savings you hoped for when filling up.

Time
Time is valuable, and if your life is anything like ours, free time seems rare. Don’t waste your time in lines at the pumps or driving miles out of your way in traffic to get there. Find a station that is on your route and close to you.

Common Sense
Common sense says it's best to fill up at a gas station on your route. Stop worrying about saving a couple cents here or there, and do what is most convenient for you. I always fill up at the same station on my way home from work, try to get into a similar routine and find comfort that gas prices are high and there’s nothing you can do about it, so stop fighting it. Americans have this strange obsession with gas prices and will go to extreme lengths to save a few dollars. However, the value of their dollar fades when these same people are splurging on things like DVDs they won't watch or books they won’t read. A dollar is worth the same no matter what your spending or saving it on, the faster you understand this, the easier it will be to make wiser financial decisions in all areas of your life and not just on gas. $

Getting Ready to Get Started

As we begin this journey, there a few things to keep in mind. One is that gaining control of your financial situation is a constant endeavor. You shouldn't expect that you will be able to sit down and gather a bunch of numbers and lay them out and look at them once and have that be it. It's a constant, living breathing being. That said however, there are certain steps you can take to get started.

Eliminate debt: By far one of the most important things to do first. If this step is not taken care of as soon as possible, more of your hard work later will be for nothing. Take a look at your credit cards for example; which ones have the most aggressive interest rates? Not neccessarily the largest ones but the ones with the highest interest rates should be paid down before anything else. Set an automatic payment schedule on the other ones that are less aggressive and focus on the highest interest ones. If not, it will be like taking 3 steps forward, then 2 step back.

Analyze your expenditures: Get a good solid 3 months of transactions and organize them by month and then by type of expenditure. Notice anything? You should pretty quickly find a few purchases there that are frequent and glaring. What can you do to minimize this? We have quite a few suggestions that you will be able to take advantage of in a little while.

Saving strategies: Get some information on your employers retirement plan and put it in a safe place for now. If you already place your pre-tax dollars into an a fund, good! We will return to that topic shortly. Limit entertainment, even though you might be able to afford it. Try this for 1 month and see the advantages. There are about a billion little things to do to save here and there and over time, with discipline, they really add up. More on this later. $