Kmart double coupons: Do the math first

My sales and deals reports are for the Monroe, Mich., area: The Kmart ad for Monroe, Mich., today has this announcement: “Double manufacturer coupon event, up to 99 cents.” I’ve learned to just stop by the Monroe store and check the signs posted at customer service when I get word of a double coupon deal [...]

Continue reading Kmart double coupons: Do the math first …

From Monroe on a Budget.

July 25, 2010 | Filed Under Frugal Living | Leave a Comment

Reader Mailbag: Dad’s Health Update

What’s inside? Many readers have written to me asking for me to summarize the questions in the mailbag right at the top so that they know what’s inside. So, I’m going to try this out for this mailbag and see how it goes. Here are summaries of the included questions in five words or less.

1. Ethics of item return strategy
2. Budgeting after debt freedom
3. Lesser pay for more sanity
4. SmartyPig changes
5. Debt counseling and rate changes
6. Getting started on debt repayment
7. Budgeting software needs
8. Life is too difficult
9. 529s and income taxes
10. How to protest BP

Also, many of you have written to me (or Tweeted at me or sent me a note on Facebook) asking about my father’s health. He’s doing fine. He was released from the hospital over the weekend, but he has to have daily treatments at the hospital for a while and will likely have to have some physical therapy on his hand, which is going to drive him crazy because he’s a “hands-on” kind of guy. I think, for the fourth time in his life (at least), he dodged a pretty big medical bullet.

A friend of mine uses a particular strategy to get big discounts on video games. He waits until one of the new releases goes on a big sale at a particular store – like, say, Super Mario Galaxy 2 is on sale for $29.99 at one store but is still $49.99 at the rest – then he buys the discounted new release, takes it to another store with a large selection, and asks at customer service if he can trade this title in for another title. Many stores, seeing the item is completely unopened and that the customer is simply asking to swap it, will simply allow him to do this. He then gets his choice of any of the new releases on sale at this store.

Is this ethical? I’m kind of stuck on this one. If it were a used item, I would find it wrong, but I’m not sure he’s doing anything wrong here.
- Kevin

Buying a game on sale is fine, as is exchanging a sealed game for another one. The issue comes in with the taking of an item from one store to another simply to trade it in.

In essence, this is strongly abusing the return policy of the second store. They have a strong return policy that’s intended to provide greater value to their customers, which is a great thing for customers. The problem comes in when people who aren’t regular customers exploit it. It costs the store because they have to deal with that returned game – even if they “break even” on the cost of the game they brought in and the game they gave out, they’re still in the hole because of the employee time spent dealing with the transactions.

That’s a cost that adds up, and that’s a cost that will eventually be returned to the customers either in terms of higher prices or in terms of worse service.

Your friend is basically exploiting a store’s great return policy. The people that wind up paying for that exploit are the other customers of the store. Make up your own mind whether that’s cool or not.

I am getting ready to switch over to an online checking account with a 3.5 % interest. It will be easy enough to make the 12 debit card transactions a month, just using it for gas for our 2 cars. The linked savings earns 2.5 %, but I wanted to use the checking primarily for my savings account. I track my funds for emergency, vacation, next car, etc. in a notebook, but all of those savings items would go into the high yielding account.

I plan to keep my local bank for the ATM and depositing a few checks I may need to cash in a month, as well as paying the usual bills and doing our usual budget.

I guess my dilema is that we are finally debt free and need to come up with a new budget. 2 major issues:

1. We are contributing 7% of hubby’s income to retirement, and the company matches with 3.5% of their stock. They had is in a fixed rate yielding 1%, which I just switched us out of. Now our choices for the 7% are diversified, not in company stock so we have a broader portfolio. If we put all 7% in their stock, they would give us 7%. I am just not comfortable having all our eggs in one basket. He is 50 this year, and we’ve only had this for a year. With the market instabilities, I’d feel better having any additional savings we do in the 3.5% bank account…. so I guess we need a plan for socking some extra away for retirement.

2. We have lived on a tight budget for 28 years, and since we are finally debt free, I’d like to have a little freedom to go out to dinner or buy something for the house, so we need to come up with a revised budget that lets us enjoy life, but isn’t wasteful. I have a good handle on our fixed monthly expenses, and insurance and taxes, and have started to save for our next car. We have an emergency fund. It’s just the surprise expenses, like birthday parties, broken microwaves and things that come up I don’t know how to plan for. Do I just inch up what’s going into savings, until I get to a good balance, or just leave it in checking, until we have a good amount of excess to transfer? I always keep a $400 cushion in the checking to avoid any risk of overdraft if something comes in earlier than planned.

So these are the issues I wanted to resolve before I switch to the new account, so I don’t accidentally miss getting my interest or submarine my savings by taking too much out with those 12 debit transactions. I just need a plan. (weekly savings now: $60 next car, $50 taxes, $50 insurance for cars and house). Any suggestions?
- Cheryl

With the first concern, the real question I would ask is how long you have to hold the company’s stock after it is issued by that match. If you have to hold it for years or until retirement, then you’re better off diversifying immediately. If you can trade it off immediately, then consider the 7% match, because you can then just trade it in on a diversified investment immediately.

As for the second part of your question, you should have a savings account strictly for such expenses. Transfer some amount into that account each month (or even each week) from your checking account and then when such an “unexpected” but known expense comes up, just take money out of that account (if you need to) to cover it. See if your bank will allow you to have a second savings account, or sign up for an online savings account.

You seem to be spending less than you earn right now, which is good. As long as you keep a reasonable gap between what you spend and what you earn, you should enjoy yourself. Don’t make yourself feel guilty about doing things you enjoy as long as you keep living within your means.

I’m 24 years old and have a steady job working for a bank. For my age, I’m told it’s a great job. 401K plan with great matching percentage, full health care, pre-tax savings accounts and health spending accounts, and they are reimbursing me for 50% of my tuition for me to finish a degree. I’m doing financially well with this job and just finished paying off all my debts, except student loans. I have a small emergency fund, but only about a month’s worth so far. The problem is the job is torture and I am absolutely miserable. With the economy, working for a bank is stressful and I am being yelled at on a daily basis by everyone; customers and management alike. I’d love to quit and work in the animal industry, at a dog daycare or as a dog trainer, but after a thorough search I realize that move would drop me into Financial Doom. The scant positions available are part time and minimum wage with zero benefits, 401k, or anything like what I have now. Even cutting back immensely my budget would be in the red each month and I know I’d be back in debt before I know it. Everyone says I’d be sure to grow in that industry and would be back to making what I am now in 5 or so years, but there’s no way to truly tell and I’m worried I’ll end up penniless and homeless all for trying to follow my dreams. I’m growing more and more miserable at my current job and not sure what to do. Do I take a lesser paying job to make myself happy or try to deal with it until the economy improves and perhaps something will appear?
- Erica

If you’re single and you’re the only person that relies on you, why not go for it?

My suggestion is simple. For the time being, don’t worry about the retirement and the other benefits so much. Quit, get the job that you want to be doing, and live a different lifestyle. Live without all of the stuff you’ve becomed accustomed to. Live in the cheapest housing you can find, possibly with a roommate or two. Get a second hourly job to supplement it, one where you’re not going to be berated by people. Ditch most of your stuff and live instead of accumulating. Make your own meals. Throw your heart and passion into what you want to do.

If you find that it didn’t work out a few years down the road, go back to your old career path and pick it up.

No pile of money is worth anything if it’s making you miserable and dragging you away from what you should be doing in life. That road leads to a wall of material stuff between your heart and your soul.

I think I first read about Smarty Pig from one of your blog writings. Could you please comment either through your blog or to me individually regarding your thoughts on their changing to BBVA compass as it’s bank? I’d like to know your thoughts, and I suspect that other readers TSD would as well.
- Shelley

I think it was the best solution for SmartyPig given where they were stuck. Over the last few years, they were one of the few success stories in the banking world and they (unsurprisingly) outgrew the smaller West Bank. West Bank wanted to remain a small regional bank and as the proportion of their bank that was SmartyPig kept growing, they eventually wanted out of the picture. I think there’s been growing pains for a while, as SmartyPig has been jammed into a shirt far too small for them.

Of course, this happened at a time where the national banking picture (remember 2008, the bank failures, the bailout, etc.) is pretty awful. Most of the really large banks simply aren’t very interested in taking on different projects right now, even if there appears to be growth potential. So SmartyPig found the best available partner.

It’s basically like having a growing child that just hit a growth spurt. You realize that the child’s pants aren’t fitting them any more. You head down to the store, only to find that there are only a few kinds of pants currently available there but there might be more in a few weeks. SmartyPig chose to buy the best pants available to them.

From a customer perspective, I think the eyeballs just need to be on what the SmartyPig service provides. Honestly, the bank behind them doesn’t make that much of a difference. What matters is what SmartyPig does. Are the account terms changing in ways you don’t like? If nothing changes from that end, then keep using SmartyPig (I am). If it does change, then walk.

I am getting serious about debt repayment. I looked closely at the statement for one of my credit cards (I admit, I don’t usually look at them because I just get online, make a payment, and log off.) and I noticed my interest rate was raised a year ago to 24%!!!! I called the company (Bank of America) and asked for an interest rate reduction. They said I didn’t qualify, but they suggested that I call a non-profit debt management organization for assistance. What are your thoughts on doing this?

The other option was to work with them “internally” – the account would be closed, and I would make some kind of repayment arrangements with them at a lower rate. If I went this route, would it negatively affect my credit?

I really want to get out of debt. I am motivated and exploring all options. I never really considered going to a non-profit debt management organization for help, and I never really see this discussed on any of the money blogs I read. Is it better to just go it alone?
- Kay

Non-profit debt management companies usually do exactly what they claim. They help you figure out your debt situation and come up with a plan for repaying it. The problem is that you have to pay them for the service (nonprofit doesn’t mean free).

The real reason most personal finance bloggers (including myself) don’t recommend them is that most of the services they provide are things that pretty much any competent person can do for themselves for free. Trust me, you can set up your own debt repayment plan.

Companies like BoA usually suggest such services because they don’t want to bother with this type of service themselves and they assume that if you can’t handle a credit card then you can’t handle getting control over your own finances. Usually, the issue isn’t knowing how to do it, the issue is learning control over your own impulses, and a nonprofit debt management organization can’t do that, either.

The key step there is up to you either way you go.

I have some friends who are in a difficult situation and they asked me for advice, so I’m wondering your opinion.

The husband and wife are 45 years old. They’ve accumulated $20,000 in credit card debt (avg. interest 17%), have only $18,000 saved for retirement in a 401k for both of them, and live paycheck to paycheck with no emergency fund.

The husband brings in $45,000 before taxes and the wife works part time for $5-10k per year. Including monthly bills and the minimums for their credit cards they are breaking even each month.

My question is, where would you start first to develop a plan for this couple to address those issues (debt, retirment, emergency fund). They would obviously benefit from the wife getting another job and cracking down on spending, but where do they go from there? Any help would be much appreciated.
- Jamie

The best solution, of course, involves more income. Would the wife in this situation consider working more hours? I don’t see any children mentioned, so I’d assume this is possible.

Regardless of the debt, if they’re at age 45 with only $18K saved for retirement, they need to seriously bump up their game. The 401(k) needs to be getting every possible drop of matching money from their employer and they should both have a Roth IRA that’s at least partially funded.

This couple has a history of living beyond their means. If they don’t make the active choice of living well below their income for a while, they’re going to wind up at retirement age with a huge pile of debt and nothing to show for it, and that’s not a fun place to be.

My wife and I have had a budget since we got married. We put together an Excel doc which takes our income (employment for both and self-employment for both) and splits it up according to the percentages we’ve setup. It’s complicated because of taxes being taken out of one (employment) but not the other (self-employment). And don’t forget tithe which we take out before taxes! This makes for a very variable income to say the least so it’s not like we can budget the same dollar amounts every month.

From there we have tabs within the Excel doc for each category of spending.

Our question for you is this, is there software available which will:
1) take income from multiple sources (read: pre-tax and post-tax monies);
2) allow us to split it up according our our percentages from within the program;
3) create our own categories of spending;
4) run reports on those categories (ie. food spending from month to month, year to year etc)
5) and lastly, is either free or under $100.

We’ve recently found youneedabudget.com ($60) but it doesn’t allow for #1 and #2 (to our knowledge). We’d have to continue breaking the money apart with Excel and then transfer those into YNAB.
- Jason

The obvious solution here is Quicken. I don’t know of another piece of software that simply does all of this stuff. As you mentioned, YNAB is fairly close as well, but Quicken simply does all of this stuff.

The challenge with Quicken, of course, is that it has a bit of a learning curve, though it does pay rewards if you’re diligent with it. If you go that route, be willing to spend the time to actually learn the software instead of just trying to jam stuff in and complaining that it doesn’t immediately do what you want it to do. Be patient and learn.

Honestly, I still use Excel for most things. It’s just the tool that works best for me.

My life is too difficult and I’m getting exhausted. Starting to wonder if the effort is worth the end results. Can you help set me straight?
- Mel

Usually, people making statements like Mel are either depressed (which means they need to seek a doctor) or they are living a life full of elements that bring them unhappiness that, if removed, would remove that sense of unhappiness.

First of all, what are the “end results” you’re seeking? The end results that are most worth seeking are ones that lead to genuine happiness – usually, they’re personal accomplishments. Very rarely is money alone something that is an “end result” that brings happiness – it often comes about as a result of chasing something that is more of a personal accomplishment that others happen to find value in.

Second, what do you spend your time doing that you hate? Is it your specific career path? If it is, try finding another job. Is it your personal life? If it is, seek out new friendships and different avenues for spending your personal time. Is it your health or personal appearance? Finding new people to associate with helps, as does taking control over your diet and your exercise (which also helps with the feelings of negativity).

Whatever it is that you don’t like in your life, change it. If you feel like you simply can’t change it, then you’re much more likely to be suffering from some form of depression and you should seek medical assistance (and you should start exercising more and eating lots of straight-up vegetables and fruits, too).

I recently opened a 529 college plan (not prepaid) for my grand-daughter. We live in Florida. My question is regarding income taxes. Am I able to deduct the monies I put into the 529 yearly, on my yearly income tax, as I do itemize each year. Thanks for your time.
- June

There is no immediate federal income tax benefit for 529 contributions (though, obviously, there are big benefits when the money in the account is used for educational purposes and the growth within the account is tax deferred). You happen to be living in Florida where there is no state income tax, either.

Many states offer a state income tax benefit for 529 contributors – Iowa is one of those states. Up to a certain cap, contributions to a 529 in those states can be deducted from your state income tax.

You’ve said many times that the best way to protest things you don’t like is with your dollar. Right now, I’m protesting BP by not using BP gas stations, but what else can I do beyond that to affect BP’s business?
- Olivia

Here’s the thing, though. Even if you boycott BP, you’re going to be giving your money to some sort of environmental or human rights violator wherever you buy gas. Plus, you’re not even hurting BP’s bottom line by driving on past a BP gas station because BP is no longer in the direct gasoline sales business – they sold all of their stations to local businesspeople with a stipulation that they had to use the BP name for a certain number of years. The only people you’re hurting are people in the local community.

So how can you vent your rage at BP and the rest of the oil companies? Don’t buy gas. Drive less. When you buy another vehicle, buy one that uses the least possible amount of fossil fuels. Buy an electric car, even.

Go even further and write a handwritten letter to your congressperson and the two senators from your state expressing your outrage at the environmental destruction and ask for legislation not merely to punish BP, but to wean us from fossil fuel use altogether. It’s an environmental issue, a national security issue, and an economic concern all rolled up into one tight package.

On the surface, it seems like the elimination of fossil fuel use would be something that people of all political stripes would be behind. It’s clearly an environmental issue. It’s clearly a national security issue. It’s clearly a trade issue. But why can’t Democrats and Republicans get together on it?

Oil company lobbyists. They’re the real enemy.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

Continue reading Reader Mailbag: Dad’s Health Update …

From The Simple Dollar.

June 14, 2010 | Filed Under Frugal Living | Leave a Comment

Reader Mailbag: Dad’s Health Update

Is this ethical? I’m kind of stuck on this one. If it were a used item, I would find it wrong, but I’m not sure he’s doing anything wrong here.
- Kevin

Buying a game on sale is fine, as is exchanging a sealed game for another one. The issue comes in with the taking of an item from one store to another simply to trade it in.

That’s a cost that adds up, and that’s a cost that will eventually be returned to the customers either in terms of higher prices or in terms of worse service.

If you’re single and you’re the only person that relies on you, why not go for it?

If you find that it didn’t work out a few years down the road, go back to your old career path and pick it up.

The key step there is up to you either way you go.

I have some friends who are in a difficult situation and they asked me for advice, so I’m wondering your opinion.

The best solution, of course, involves more income. Would the wife in this situation consider working more hours? I don’t see any children mentioned, so I’d assume this is possible.

Honestly, I still use Excel for most things. It’s just the tool that works best for me.

My life is too difficult and I’m getting exhausted. Starting to wonder if the effort is worth the end results. Can you help set me straight?
- Mel

Oil company lobbyists. They’re the real enemy.

Continue reading Reader Mailbag: Dad’s Health Update …

From The Simple Dollar.

June 14, 2010 | Filed Under Frugal Living | Leave a Comment

Reader Mailbag: Dad’s Health Update

Is this ethical? I’m kind of stuck on this one. If it were a used item, I would find it wrong, but I’m not sure he’s doing anything wrong here.
- Kevin

Buying a game on sale is fine, as is exchanging a sealed game for another one. The issue comes in with the taking of an item from one store to another simply to trade it in.

That’s a cost that adds up, and that’s a cost that will eventually be returned to the customers either in terms of higher prices or in terms of worse service.

If you’re single and you’re the only person that relies on you, why not go for it?

If you find that it didn’t work out a few years down the road, go back to your old career path and pick it up.

The key step there is up to you either way you go.

I have some friends who are in a difficult situation and they asked me for advice, so I’m wondering your opinion.

The best solution, of course, involves more income. Would the wife in this situation consider working more hours? I don’t see any children mentioned, so I’d assume this is possible.

Honestly, I still use Excel for most things. It’s just the tool that works best for me.

My life is too difficult and I’m getting exhausted. Starting to wonder if the effort is worth the end results. Can you help set me straight?
- Mel

Oil company lobbyists. They’re the real enemy.

Continue reading Reader Mailbag: Dad’s Health Update …

From The Simple Dollar.

June 14, 2010 | Filed Under Frugal Living | Leave a Comment

Getting the Best from Customer Service

Late last week, the New York Times published an article of reader-collected techniques for prevailing in customer service disputes. Here’s a sampling of a few of my favorites from the article:

USE YOUR CAMERA Suzanne Barchers of Stanford, Calif., always photographs any unpleasant surprises in hotel rooms, using her handy digital camera. Of a recent trip to Las Vegas hotel she writes, “When asked upon checkout how my stay was, I simply said, ‘Let me show you.’ ” The images included some dingy towels, broken shelves and a view that was less than promised and paid for. “My bill was cut in half without any prompting.”

ASK THIS SIMPLE QUESTION More than a few readers said that when stymied by phone reps, they simply ask, “What would you do if you were in my situation?” “Amazingly, they’ll often pass along an effective tip about how to get the desired result,” writes Frank Scalpone of Antioch, Calif.

BE PASSIVE AGGRESSIVE, PART 2 Several readers note that when you’re talking to a phone rep, time is on your side for two reasons. The first is that phone reps are often timed and expected to churn through a certain number of calls per hour. The second is that nearly all are prohibited from hanging up on you. So the longer you’re willing to stay on the phone and repeat that you are not satisfied, and do not want to end the call, the better your chances of getting what you want.

I have my own repertoire of tactics for getting the best from customer service beyond what’s mentioned in the article. Here are seven tactics I use to make sure I very rarely get awful service.

Do some research before you spend a dime If you’re traveling, check out reviews of the hotels and airlines in the area. If you’re buying a car, research the car. If you’re buying a gadget, research the gadget. Good reviews usually mean you never have to deal with customer service at all.

Have your complaint straight before you even call I usually write out my complaint before contacting customer service of any kind so that I don’t get flustered on the call. I also usually have the problematic product in front of me if possible so I can clearly and accurately describe the problem. It is very easy to get flustered and discredit yourself during a customer service call if you’re not prepared.

Don’t be afraid to be on hold – and use it to your advantage Whenever I get put on hold on a customer service call, I just set my phone to “speaker,” note the time, and get back to whatever I was doing. When someone finally gets on the line, I usually point out that “I’ve sat on hold for X minutes,” which usually raises some immediate sympathy from the person on the other end.

Don’t settle If you’re unhappy with the resolution, stay on the phone. Tell them you’re unhappy with the resolution and explain what you expect from the situation. Don’t be afraid to escalate the situation to their superior. The longer you stay on the phone, the less cost-effective it becomes to continue to try to give you their half-baked solution and the more cost-effective it becomes for them to just give you what you want as a solution. Of course, part of this is knowing what you expect from the call before you even call.

Don’t overuse it Only call customer service lines when you have a real customer service complaint. Many large companies share databases of people who frequently call customer service lines demanding replacement products. These people are (often correctly) identified as scammers and customer service people will often just terminate the call from such people. If you call such lines only when you have a real complaint, you’ll find much more success.

Go public If you have a concern with a company’s service, take it up with them first. If that doesn’t get you the service you expect, go public. Share your story on as many web sites as possible. Take the time to write your complaint in detail and write it calmly – don’t use angry language or name-calling or you discredit your point. Make sure you provide some way to contact you, and post the complaint on review websites. You’d be surprised how often a company will contact a person who makes such a public complaint.

Leverage competition Many businesses will alter their offers if you bring in offer sheets from competing businesses. If you’re making a major purchase, don’t be afraid to shop around for the lowest price, then take that lowest price offer to a retailer that offers good customer service.

Many of these tactics do take time, so I often don’t use them on inexpensive products. I save them for larger battles where there is real value in prevailing.

Good luck!

Continue reading Getting the Best from Customer Service …

From The Simple Dollar.

May 25, 2010 | Filed Under Frugal Living | Leave a Comment

Diapers.com

DO YOU REALLY THINK THAT DIAPERS.COM IS A BETTER DEAL THEN THE WHOLESALE BUYING CLUBS LIKE
SAM’S.??? I USED TO GET DIAPERS FOR 25 CENTS EA. 1.50 A DAY(BASED ON 6/DAY). I KEEP SEEING THE DIAPERS.COM COMMERCIAL ALL THE TIME, I HAVE NOT REALLY DONE THE MATH BUT IT SOUNDS TOO GOOD. I KNOW YOU COMMENTED SOME TIME BACK. ANY COMMENTS? THANKS LISA

Yes! Why? Because I can get Pampers for 26 cents each and Luvs for 20 cents each. That is without using any coupons which they take. (you just need to mail in the coupons) Also if you send in the rebate for diapers your first order it’s a steal of a deal!!

I have to also say that so far their customer service has been wonderful! Shipping is SUPER fast and I have to say for someone like me who despises going shopping it’s great to have diapers delivered to your door for the same price as Walmart! I have used them 3 or 4 times now and had nothing but good results.
Tawra

Continue reading Diapers.com …

From Living On A Dime Blog » Living On A Dime Blog.

April 29, 2010 | Filed Under Frugal Living | Leave a Comment

Diapers.com

DO YOU REALLY THINK THAT DIAPERS.COM IS A BETTER DEAL THEN THE WHOLESALE BUYING CLUBS LIKE
SAM’S.??? I USED TO GET DIAPERS FOR 25 CENTS EA. 1.50 A DAY(BASED ON 6/DAY). I KEEP SEEING THE DIAPERS.COM COMMERCIAL ALL THE TIME, I HAVE NOT REALLY DONE THE MATH BUT IT SOUNDS TOO GOOD. I KNOW YOU COMMENTED SOME TIME BACK. ANY COMMENTS? THANKS LISA

Continue reading Diapers.com …

From Living On A Dime Blog » Living On A Dime Blog.

April 29, 2010 | Filed Under Frugal Living | Leave a Comment

Personal Finance 101: An Online Banking Primer

Katie writes in:

I was wondering if you could do an article on how to set up an online savings account? I remember you mentioned using them and getting a high return on interest, and I think I’d like to switch my savings account over to one. What kind of benefits/penalties have you come across?

pf101 The first thing to look at is what the differences between a “normal” bank and an online bank are.

With a normal bank, you have your usual checking and savings accounts. They issue you a checkbook with which to write checks and (usually) an ATM card to access your account. When you need to deposit something into your account, withdraw some cash, or make another transaction, you usually visit a branch location, visit an ATM, or use the bank’s online banking services.

With an online bank, all of the above is (typically) true, except that there is no physical branch location to visit. You conduct all of your business with the account via an ATM or via the online banking service.

What do you get in return for a lack of a physical branch to visit? You usually get a better interest rate than you would at a brick-and-mortar bank. You also usually get a very good online banking system and online bill pay service. Most online-only banks usually have minimal fees – no maintenance fees or other things like that. Typically, you get top-notch phone-based and internet-based customer service, too.

For a lot of people, that’s a trade they’re happy to make. The loss of a physical bank can be a big change, but the other benefits of the account make up for that.

How to Distinguish Between Online Banks
There are several things I look at when considering whether to use an online bank.

First, are the rates offered at least reasonably competitive? Banks change their exact interest rates all the time, so I don’t view it as a requirement that an online bank have the best interest rate in the land on a certain given day. However, the rate should be within a percentage point of that. I usually use BankRate.com when researching banks.

Second, is it FDIC insured? I look for the FDIC logo when I visit the website. I usually also follow up at the FDIC website using their bank search to make sure that the bank is registered with the FDIC. The FDIC is essentially insurance for your savings and checking (and CDs) that guarantees up to $250,000 of your account in the event of a bank failure.

Third, is it well-reviewed? Search Google for online bank reviews, particularly reviews of the banks you’re interested in. Get a diversity of opinions; don’t just rely on the first one you see. I have a series of online bank reviews ready to go for The Simple Dollar and will begin posting them soon (once I have a minor legal issue resolved with regards to them).

Fourth, does it offer all of the services you need? Do you need to have a paper checkbook or will online bill pay and an ATM meet all your needs? Do you need a very wide ATM network? Do you need easy access from your cell phone? Do you need Quicken compatibility? Do you have any other particular needs with regards to the account? Know what exactly you need with regards to the account and keep those needs in mind as you look at a few banks.

Fifth, once you decide on a bank, open the new account, but don’t close the old account. Transition slowly in order to ensure that you didn’t forget about any automatic payments or anything else like that. You may even choose to leave the account at your old bank open, particularly if it does not have any annual fees or maintenance fees, because of the convenience of the local branch.

Funding your new account is done electronically. You simply request a transfer using your new bank’s online banking system and the money moves automatically.

Good luck!

Continue reading Personal Finance 101: An Online Banking Primer …

From The Simple Dollar.

March 26, 2010 | Filed Under Frugal Living | Leave a Comment

Reader Mailbag: Boycotts, Baseball, and New Beginnings

This is Reader Mailbag #100. With this mailbag, I’ve decided to start naming the mailbags based on an interesting question or two answered within the mailbags, making it easier to find such mailbags (in theory).

I refuse to buy gas from BP [due to various political reasons]. In my town, however, the BP station almost always has gas prices that are a nickel per gallon lower than the prices at other stations.

As a frugal person, I’m constantly torn about whether or not to go back on my stance and save a dollar or two on each of my fill-ups. At the same time, I really don’t want to buy gas from BP. Do you have any thoughts or guidance here?
- Shane

(I excised Shane’s political reasons because they’re not really germane to the discussion and they would cause a long political sidebar that doesn’t really need to be brought up.)

To put it simply, Shane, you’ve reached the very point where you’re putting your money where your mouth is when it comes to political beliefs. Are you directly willing to put your dollars on the table due to your political beliefs or do your more direct needs (saving money) supercede it?

This is pretty much entirely an internal issue. Do you believe in these political causes deeply enough to literally start putting your dollars on the table for it? I can’t answer that for you, but I can say that it’s never a cut and dried issue for anyone because everyone has different experiences, different values, and different ideas.

There are certain stores and businesses that I will not give my business to for various reasons, political and otherwise. Usually, the reasons have to do with atrocious customer service or poor products, but I can think of at least one case where I made the decision to stop using a particular company’s service because I didn’t like their overt sponsorship of certain political activities. I don’t really care whether or not it costs me a few dollars because it’s tied to a belief I hold quite dearly.

You need to ask yourself how deeply you truly hold these views – it’s not a question I can answer for you. I’ll just say that I think it’s perfectly reasonable to not spend your money at a business that engages in practices you don’t believe in.

What do you think of MMORPGs like World of Warcraft as a frugal gaming option?
- Emily

Games like these require a monthly fee to play – in the case of World of Warcraft, it’s between ten and fifteen dollars – which is a bad thing. However, the good aspect of such games is that the amount of gameplay available is enormous, plus such games also develop a strong social pull because of the interactions with real people.

If you assume that playing such a game slows a person’s other gaming purchases down significantly – from, say, a new $50 game a month to one per quarter – then it’s obviously a good way to save on a hobby that a person enjoys.

The danger with any such game, though, is overplaying. The social connection – the fact that you’re playing with friends and people you know – often adds a “keeping up with the Joneses” mentality, which means that people can often get absorbed into playing such games excessively. You play and play and play in order to socialize and also to one-up your friends with various in-game achievements.

If MMORPGs like World of Warcraft are played a reasonable amount and result in decreases in the overall entertainment budget of a person or a family, I say they’re a good thing. However, if they are overplayed and cause disruptive behaviors or simply beocme another bill tacked onto spending that isn’t cut in other ways, they’re a problem.

I’m a fifty four year old widow with four adult children. A year ago, my husband suddenly died in a vehicle accident. He left behind enough life insurance money to pay off everything and to give me some time to figure out what’s next in my life, which was a blessing. I decided to sell our house and move closer to my sisters and our children.

Now, though, it’s time for me to start over with things. I haven’t worked at all in thirty years and I simply don’t know how I’ll ever find a job in the working world without any experience at all. Do you have any suggestions?
- Lily

Your best approach as you re-enter the workplace is to be very clear and straightforward about your experience. Don’t hide it. When you’re asked to provide an employment history, tell your situation clearly. Don’t try to hide it or anything like that.

It sounds like your financial situation doesn’t require you to immediately work, but that you’re going to need to work in the coming years and you find yourself in a psychological position to be ready to go back to the workplace. What you choose to do likely depends both on your financial needs and also on what your interests and talents are.

If you’re seeking entry-level work to fill the hours, you likely already have everything you need to find work. If you’re seeking a position with higher financial rewards, however, you may need to go back to school in some regard.

The real question is what do you want to do? How would you ideally like to fill those working hours in the coming years? Spend some time thinking about it and come up with an answer that’s true to you and your skills and talents and interests. Once you know what that is, go for it – it certainly sounds like you have the resources you need to make what you want out of this situation.

One of my family members actually found herself in a very similar situation. She found an entry-level job and spends her spare time pursuing freelancing opportunities that relate to her hobby, which is a form of art. She’s absolutely happy with the way she fills her hours.

You sometimes review books that are pretty far from personal finance. How do you decide whether or not to review a book on here?
- Shawn

I mostly use my gut. If I see a lot of material in the book that I think is in some way connected to what I talk about on The Simple Dollar, I’ll consider reviewing the book, no matter what it is.

So, for example, I consider time management to be a very relevant area, because the more effective you are at managing your time, the more time you have to earn more money or to simply enjoy what life has to offer for you. I feel similarly about books on psychology issues, particularly common issues among the people I know. We all seek happiness, after all, and money is just one tool to help us get there (or keep us from it).

There are many books that I pick up and think, “There might be something in here relevant to The Simple Dollar.” When I read books like that, I usually consider them personal reading and don’t read them during my work times. I save my reading during that time for books I’m much more confident about in terms of their focus on personal finance and career issues.

Basically, if I find something interesting in a book or think it’s relevant in some way to the things I talk about on The Simple Dollar, I’m likely to at least consider reviewing it, no matter what the book is.

My brother believes strongly that the U.S. dollar is about to collapse. He is buying lots of gold coins and other such things. I bacially think the entire thing is ridiculous, but I’m curious as to how you would prepare if you believed the dollar was going to be worthless in a year.
- Ann

I wouldn’t buy gold, for starters. If the dollar suddenly enters hyperinflation or something, gold won’t suddenly become the currency du jour on the street.

What do I think will be the currency you need? Food and skills. I would focus my money and energy on stocking up on non-perishable food items as well as useful skills. I’d probably practice my home repair skills and carpentry skills by fixing my home up as well as I could.

I would also focus on as much self-sustainability as I could, setting up a backbone for it. I’d buy a generator – but that’s something I intend to buy for myself anyway. I’d probably buy a wind turbine, especially if I lived in a rural environment.

I’d start growing a lot of vegetables and items that were very easy to replicate and sustain on my own – potatoes immediately come to mind. I wouldn’t worry that much about non-hybridized seeds because, frankly, it takes a lot of skill to not have them go to waste.

In short, I’d make sure that my family had the things they needed to make it through rough years – food, shelter, water, clothing, and so on. Gold might help, but I tend to trust actually having the food on my shelf a lot more than I trust having an investment.

Of course, I already do a lot of these things. We have a lot of food in the pantry. I know how to garden and produce plenty of food. I have quite a few tradeable skills that would pop up in that situation.

Would The Simple Dollar ever endorse a candidate for political office?
- Willie

Unless Amy Dacyczyn decides to make a run for the Senate, no, I wouldn’t endorse a candidate.

Here’s the flat out truth: I don’t believe that either major political party actually has my interests at heart, nor the interests of most of you reading this. The current political climate doesn’t do much at all to reward people who are truly careful and thoughtful with their money.

A person who is debt free with a lot of cash on hand would want things that would be political suicide today. They would want the Federal Reserve to jack up interest rates – this would make the most secure investments, like CDs and treasury notes, return a lot more. Of course, that would also make all debts have a much higher interest rate, which would be devastating to people who spend money like water (and the businesses that rely on such spending). I’d want the elimination of the capital gains tax (which I guess would be more like the Republicans in theory) but I’d also want more security for my cash investments, like better FDIC insurance (which I guess would be more like the Democrats in theory).

In truth, neither party speaks to the financially responsible and frugal among us. If a candidate arose that truly spoke along those lines, it would be political suicide for them. However, that candidate might actually get an endorsement from me. Good luck with that, though – I don’t believe a lucrative Simple Dollar endorsement would really help against a wave of negative ads funded by big banks and large manufacturing companies.

What do you consider to be an excessive emergency fund? My husband and I have more than a year’s worth of living expenses in cash savings. We don’t have any children living at home with us any more. We have no debt and we both have solid jobs in careers that are at least somewhat in demand.
- Andrea

In your shoes, I would consider an emergency fund that large to be a bit of an overkill.

However, there’s another really important factor in play here. Does the emergency fund make you feel more secure? Does it help you or your husband to sleep better at night knowing your money is safe?

I don’t see any problem for risk-averse people to keep a lot of their money in cash. It might simply be that your husband is very risk averse and he does not relish the idea of putting the money at risk in the stock market or the real estate market. To me, that’s thoroughly understandable.

Sit down and talk about it. If it’s the risk that you’re worried about, consider putting some of the money into inflation-protected treasury notes from the U.S. Treasury Department or buying some CDs with some of that money. You maintain the security you have – owning things that are fully backed by the federal government – but you at least earn a bit more than you would in your typical savings account.

My brother makes amazing homemade wine in his basement. He’s won several tasting contests with his wines and I think he should get into the business of selling it and producing larger quantities of it. Every time I bring it up, though, he really doesn’t seem interested in it, but he’s obviously deeply passionate about the wine making. Do you have any suggestions on how I could convince him to turn this into what would be a surefire business?
- Donald

First of all, it may be that he simply doesn’t want to turn something that is a fun hobby for him into something that is his life’s work. Another issue might be that he has zero interest in the business side of winemaking – things like cataloguing inventory, selling the wine, paperwork, and so on.

Sit down with your brother and see if you can figure out what he wants to do with it. If he does have some interest in expanding but he’s held back by a lack of interest in handling the business side of things (something that many hobbyists feel), perhaps you could help him to find a business partner for the endeavor.

Work through what his concerns are before you do anything else. If he simply loves it as a hobby, let it be. If he does have true interest in making something happen but is held back by some specific fear or concern, do what you can to make that concern go away.

You obviously believe in this wine that your brother makes – if nothing else, just make that really clear to him, because even if the business doesn’t happen, such genuine care will really mean a lot.

My twenty seven year old son still lives at home. He was laid off from his job in early 2008 and moved back into our home for what was supposed to be a short period while he looked for work. He’s no longer bothering to even look for work. Most days, he just sits down in the basement in his pajamas, surfing the web. I don’t know what to do.
- Chloe

Obviously, something needs to change about the current situation or else it will continue for a very long time. That change might come from within him, but that could take a long time and is wholly unreliable. Most likely, you’re going to have to provide the change in the situation.

One common method is to simply lay down an ultimatum – make him move out. Many parents are loathe to do this because it would likely mean that their child would go through a very rough period, potentially even including homelessness. Alternately, you can allow him to stay provided he meets certain criteria – he looks for a job a certain number of hours a day, he sends out so many resumes a week, or he gets involved in something that pushes him toward career progress (perhaps going back to school or something along those lines).

This situation needs a wake-up call, but that wake-up call can take a lot of different forms. If you want something to change now, you’re going to have to be the one to provide the wake-up call. If you “can’t” do it because you’re too worried about the consequences of it, then you don’t truly want change now.

Really, the decision is up to you far more than it’s up to your child at this point.

Spring training in baseball is about to begin. What are your predictions for the coming season? Let’s see how good of a prognosticator you are.
- Jimmy

OK, here goes.

AL playoff teams: New York, Boston, Minnesota, Oakland
NL playoff temas: Philadelphia, Los Angeles, Saint Louis, Chicago
World Series champions: New York
NL MVP: Albert Pujols
AL MVP: Joe Maueer
NL Cy Young: Tim Lincecum
AL Cy Young: Ben Sheets (seriously)
Stories of the year: a big turnaround in Oakland thanks to Sheets’ veteran leadership of a bunch of talented young guys, Pujols chasing 61 home runs, and a current Hall of Famer confessing to steroid use (I have three possible names in mind)

Let’s make fun of these predictions in November, shall we?

Got any questions? Ask them in the comments and I may address them in a future reader mailbag.

Continue reading Reader Mailbag: Boycotts, Baseball, and New Beginnings …

From The Simple Dollar.

February 2, 2010 | Filed Under Frugal Living | Leave a Comment