Counting My Pennies » savings

Catching Up

Megan — Tue, 13 Jul 2010 13:22:19 +0000

I was out of town this weekend and came back completely swamped with stuff to do. My apartment is magically a disaster again, my inboxes at work and at home are completely full, and I have to do laundry or else. But it was nice to get away and relax a little bit, even if it means coming back to a lot of stress.

One thing I did while back in my hometown was close my old bank account. I’m not sure why it was still open, to be honest. When I moved, I left my local bank for a larger, national bank. I loved the services of the local bank, but I wanted to have ATM access in the city where I lived. That account sat open and unused for three years. Sadly, I had cleared out all but the minimum required to keep the accounts free, so there wasn’t a ton of interest earned – plus I’ve been checking in on the account every month when doing my Net Worth update, so there were no fun surprises. That’s the downside to keeping a close eye on your money – you aren’t pleasantly surprised when things have grown more than you thought. On the other hand, there are no negative surprises either, so I guess it’s worth it.

I just noticed that Mint.com now has an Android application, so one of the things I want to do today (once I get everything else checked off my list) is check that out. Anyone using that?

Great Financial Advisors

Megan — Thu, 03 Jun 2010 14:30:18 +0000

Yesterday, I was speaking with my financial advisor, who I have known since childhood. I have money invested through his company, and have always been happy with the advice he gives me. Even though he’s got some personal interest, I have always felt like he’s got my best interests in mind as well.

He was looking at my accounts, noticed that I had some money from a CD sitting in my money market account. Since I didn’t want to put it into another CD right now (working on re-creating my CD ladder), he suggested that I pull the money out from that account and put it into a high interest account at another institution.

That’s right, he told me to take money away from his company. The interest rate I was earning was ridiculously low, and I could easily be earning more with a high yield savings account at one of many other banks. I, of course, knew that, but had just left the money there for ease. After all, in a few months, I will be putting it back into a CD. Then he said that he would look for CD rates for me through his company, but that I should also look at online banks I trust, if that’s something I’m comfortable with (I am) because I might find something better.

All in all, great advice, and something I was very surprised to hear. It’s nice when you get information that indicates to you that maybe your advisors really are looking out for you.

Mental spending

Megan — Wed, 14 Oct 2009 10:00:24 +0000

A few days ago, I was talking to a friend who was excitedly discussing her holiday bonus. Amazingly, she works in an industry that’s doing quite well, and her (privately owned) company is paying out bonuses this year. They don’t know how much they’re getting, but she got an estimated figure from someone allegedly in the know, and it sounds like they will get around $4000 before taxes.

This friend has been scrimping and saving in order to take her dream vacation next fall, and she’s so excited at the prospect of this money, because it will fund the rest of her vacation and then some. Of course she plans to save a chunk of it, but it’s nice to be able to actually plan her vacation and not have to put off planning until she’s sure she can afford it.

As I walked home that afternoon, I started mentally spending her bonus, pretending it was mine. “Okay, so after taxes… well, let’s just make this math easy. Let’s say I take home 50% (knowing it would be higher – better to be pleasantly surprised than disappointed). Take half of that and put it directly into savings. That leaves $1000! That’s so much money!”

And off I went, mentally earmarking all of this hypothetical money for things I wanted, various budget categories that needed a bit of padding, weekend trips I wanted to take. I have to admit, it was a fun exercise. In reality, I would probably be more logical. I would probably bank half and “spend” half, but much of that extra half would go into an emergency fund or set aside for the summer, when I always find things to spend money on and not enough money to go around. Okay, and I would probably buy a new pair of shoes too. Gotta have a little fun!

Do you ever do any mental spending? It’s easy to say “If I were rich, I would buy that house,” but what about if you received a holiday bonus? $400 or $4000, it doesn’t matter. How would you spend that extra money?

How much money do I really bring in?

Megan — Mon, 11 May 2009 10:00:10 +0000

As much as I love spreadsheets and tracking my finances, I realized recently that one thing I don’t know is how much money I bring in every month.

Sure, I know what my paycheck is and if I have any alternative income that month (blog checks, Ebates cash back, etc), that gets tracked in detail, but I don’t ever think about my gross salary or interest on investments and savings accounts. I think this is because I try to not think about my savings accounts too much. I put away a set amount of money each month and let it grow. Sure, when I update my net worth spreadsheet, I can see these increases, but I’ve never sat down and figured it all out.

I started thinking about it while reading about Roth IRAs and the difference between AGI and MAGI, and realized that I don’t have any sort of idea what my AGI is. It’s my gross salary, plus all those extras, minus a few things. I should at least have some clue of these numbers, right?

So I sat down and put together a spreadsheet. It’s very simple and tracks my gross salary, what I contribute to my pre-tax retirement account, health insurance payment, how much tax I’m paying, and how much I’m earning through blogging and investments (including interest on savings).

I was pleasantly surprised by many of the numbers, and distraught by others (such as the amount of tax I pay). I think tracking this will be helpful as I start to look at my 2009 taxes, plus I think it’s just good to be aware of what money is coming in and where it’s coming from. Just because my investments are “set it and forget it” doesn’t mean I shouldn’t still be aware of them, especially in non-retirement accounts where I’m responsible for paying taxes on any gains!

I’m sure some of you hate spreadsheets and are cringing at this idea. But it only took me a few minutes to track everything from the beginning of the year and I am very pleased with the results.

Do you know exactly how much money you bring in every month, or do you focus more on your paycheck and your spending money?

Some Useful Saving Info

Megan — Fri, 01 May 2009 10:00:20 +0000

I just had a CD mature, so I’ve been scoping out rates at banks I know and trust. I put together a table and as I was looking at it, I thought, “Hey, the blog readers might like this as well.” So here you go.

	ING Direct	HSBC Direct	FNBO Direct
6 month	1.25%	1.75%	1.25%
9 month	1.50%	2.05%	1.25%
12 month	1.50%	2.30%	1.50%
18 month	1.50%	2.35%	1.75%
24 month	1.50%	2.05%	2.25%

There are other banks out there that may have better rates – these are just banks where I have accounts and therefore, feel a bit more comfortable opening a CD there. Sadly, my old standby, ING Direct isn’t doing so well in this area, so I might be checking out CDs elsewhere. Right now, I’m eyeing the 2.3% at HSBC Direct.

Borrowing from yourself

Megan — Wed, 18 Mar 2009 10:00:58 +0000

As anyone who reads this blog knows, I’ve been using YNAB for over a year now, and I love it. I use the spreadsheet version because I’m kind of a spreadsheet geek. I’m always recommending the program to people who are working on getting their finances in order, but I find there’s always one big sticking point.

“I have to live on last month’s income? But I’ve already spent last month’s income!”

For those of you unfamiliar with YNAB, their site explains it in much greater detail, but in short, one of the basic “rules” of YNAB is to live on last month’s income. This means that on March 1, you know exactly how much money you have to spend in March. It prevents living paycheck to paycheck and you no longer have to wait for a paycheck to clear to be able to pay your bills. It’s really a great idea, but as many have pointed out, most people don’t just have an extra month’s worth of expenses sitting around.

The plan is designed so that you can use it while working to build up your buffer of an extra month’s worth of expenses. (Note that you don’t need to save up an entire month’s worth of income, just the money you will need that month. So if you manage to save up enough money to cover all of April’s expenses, then all the paychecks you earn in April will be your spending money for May (a.k.a. last month’s income).) You are encouraged to scrimp and save as much as possible so you can get to that point, and let me tell you, it’s a very freeing feeling.

One friend brought up an interesting question though. He had enough in reserve to pay for about half of his expenses for the month. Could he just pull the other half out of his savings so he could start following the “last month’s income” rule for YNAB the next month. His plan was to then work to repay himself so that he would never notice the loss in savings.

I wasn’t sure how to respond to this. Of course, he could do this. It’s his money after all, and he can do with it whatever he wants. It felt a little bit like robbing Peter to pay Paul though. Personally, I don’t like the idea of pulling from your savings unless you absolutely have to. Sure, he had the right idea in mind by planning to pay himself back. But why start anything at a loss? And how motivated would he really be to save up that much money?

He seemed very eager to start living on last month’s income, so I had a feeling he would be a much more savvy saver if he was working towards that goal rather than just jumping to the front of the line and then having to work to pay himself back. I don’t know about you, but if I have a debt to pay with no penalty, it’s probably not going to be my top priority, especially if it’s a debt to myself.

I’m not sure what he decided to do (and given that I suggested he not pull from his savings, I have a feeling that even if he does, he won’t tell me), but I think that overall, borrowing from your savings isn’t a good idea. It’s one thing to borrow from your vacation fund or your fun fund, but borrowing from basic savings seems like a loan that you’ll struggle to pay back.

Becoming immune

Megan — Thu, 18 Dec 2008 10:00:05 +0000

The Frugal Duchess hosted this week’s Carnival of Personal Finance, and highlighted one of my posts! Check it out. It’s been a while since I’ve submitted to a Carnival of any sort, so it’s great to be a part of this one.

So this week, the Fed cut rates again. Honestly, I think I’m becoming a bit immune to it. When it first started, I found the dropping interest rates on my savings accounts incredibly frustrating. Now I just sort of shrug. As I’m writing this, my rate at ING Direct hasn’t yet dropped, though their CD rates have dropped. Seeing as the 6 month CD is at 2.5% and the savings account is at 2.75%, I’d say that savings account interest rate is very likely to drop soon. Otherwise, what would the incentive be to put money into a CD at all?

I have a CD that will come due in January and just got a message about that from ING Direct. In previous months, they had been offering a .1% bump in the interest rate if you rolled the CD into a new CD. That offer was not made this go around.

Like I said, in previous months, this would be frustrating me, but instead I just sort of shrug my shoulders and keep saving. Earning any interest is better than no interest at all.

One Year and Counting

Megan — Tue, 18 Nov 2008 10:00:14 +0000

Since yesterday was the one year anniversary of my first post on this blog (in its initial incarnation, anyway), I’ve decided to take a few days this week to post about things that have happened over the past year.

Reading other PF blogs and writing my own has been a very educational experience. Even though my net worth might not reflect all I’ve learned, thanks to the recent fun in the stock market, but I feel much more confident about my money management than I did a year ago.

I’m using a budget, with great success. I’ve got a nice little cushion in my day to day account. I’m planning ahead for expenses, so I’m not so worried about the months when the insurance bill shows up. As part of this, I’m also tracking my expenses and seeing some surprising trends that I didn’t realize existed. I’m already making plans for next year’s budget so that I can continue to improve my money management.

Thanks in part to the budget, I’m saving a lot more than I was. My savings account has grown by leaps and bounds. Okay, so they’re small leaps and bounds, but it’s growing.

I have also opened a number of sub accounts in ING Direct to help me reach my savings goals. That was something that I learned entirely from the PF blogosphere, and it has been a big help. Along those lines, I’ve put money from some of those accounts into various CD ladders. Might as well make my money work for me as much as it can, right?

I have experimented with a number of different budgeting resources, from my old standby, Microsoft Money, to online programs like Mint, and ended up finding YNAB and realizing that I’m an old school spreadsheet girl at heart. I have also learned that budgeting is not a one size fits all sort of thing, so it’s great that there are so many options out there. You just have to be patient and experiment until you find one that you like.

I moved my blog from a free site to my own host, and have even earned money by blogging! Okay, so it’s not much, and the blog is almost, but not quite paying for itself, but it sure felt like a milestone. I’ve also been able to give a bit more to charity thanks to the blog income (again, not much, but every penny helps).

Perhaps most importantly, I have met a number of amazing people online, through other blogs and comments here. I’ve learned so much from all of you, and I hope you’ve gotten something out of this blog as I stumble through the world of personal finance. It’s nice to know that we’re not all going it alone out there.

How I saved myself 42 cents

Megan — Thu, 13 Nov 2008 10:00:48 +0000

I have had a dentist bill staring at me for a few days now. I had budgeted the money to pay it, and I knew it was coming, but I still hadn’t paid it. Why?

I have run out of stamps.

Now, I don’t work all that far from the post office, but I just hate going to the post office. At my old bank, I could buy stamps from the ATM. I have yet to find a place where I can do that here. I hate having to go and wait in line just to buy stamps. Yes, I know there are usually vending machines at the post office, but my luck, they’re out of order or out of the stamps I need or I don’t have proper change so I either end up with way too many stamps or a whole lot of dollar coins. Neither of which I particularly need.

I also know that I can order stamps online for a $1 service fee. But it feels funny to buy less than $10 worth of stamps and pay an extra $1 when I could just walk to the post office.

So instead, I called the dentist. ”Can I pay this bill over the phone?” ”You sure can!”

Bam! 42 cents saved.

(Of course, I have a letter to respond to and a thank you note to mail, so I will have to hit the post office soon anyway. But not today!)

Rate cuts hurt savers, but not as much as we think?

Megan — Fri, 31 Oct 2008 10:00:48 +0000

After the Fed’s most recent rate cut, I’ve been checking rates at ING Direct, waiting to see if the interest rates are going to fall on my savings accounts (I expect they will) and where CD rates will end up. I’ve got a number of CDs right now, many more than I normally would have, simply because I’m working to get the best rate on my savings.

But I didn’t realize that CD rates are actually higher than they would normally be, given the current Fed rates.

A number of factors are combining to keep CD rates higher than they’d normally be at a time of such low Fed rates.

“In typical times CD yields are highly correlated with the Fed rate. But these are not typical times,” said Greg McBride of Bankrate.com. Because banks are still scrambling to shore up balance sheets, they are doing all they can to attract bank deposits, and competition has helped prop up rates.

Banks want your money, and they’re doing everything they can to get it. Locking it up in a CD means that there’s a pretty solid chance that the bank won’t have to give you your money for a set period of time. Sure, you can always redeem early, but that’s not the norm.

A key point in this article is to not simply let your bank roll over your maturing CDs for you. Naturally, the bank isn’t going to get you the best rate out there, because they’re looking out for themselves. Of course, if you’re reading this blog, you probably already pay close attention to things like CD rates and maturation dates, but it never hurts to spread the word.

I do miss the days of the 5%+ interest rates on my savings accounts, and it will be nice to get back to that point someday, but I have to remember that it’s nice to earn any interest at all.

Anyone dressing up as the economy tonight? Seems like a scary costume to me. Have a great and safe holiday.