Cash is King Financial cents in a mixed up world….

ING Direct Banking Review

I have been an ING Direct customer since their Black Friday sale of 2009. You can find a review of our mortgage refinancing experience here, but I'd like to discuss our banking experience as well.

Prior to our refinancing, I opened an online interest checking account as a place to keep our emergency fund. Originally, I signed up to get the sign on bonus, but I have since enjoyed these aspects:

1. The Interface

I like the simple and useful interface ING has made. Now, my mortgage and savings are in the same spot, and I can easily transfer money, see how much interest I've earned, or even mail a check at ING's expense (I still haven't figured out how they do that). I've also tested ING and they play nice with Mint.com. The log in feature appears to be very touchy, which is something I like in my bank security. They also have several different mobile versions of their website, and have the power to transfer money and do much more than just check balances.

2. The rate (now, not so great)

When I started our ING account, the rate was a respectable 1.75% and has since dropped to 0.8%. Although they advertise that rate is well above the national average, I find the "national average" to be largely irrelevant, as you can pretty much open an account anywhere these days. There are still much higher rates that can be found at Checking Finder, which will give you local results for high interest checking (and often savings). Although I wish for the days when you could get 5% on a savings account, I am not as concerned with making a huge amount of money on my emergency fund. The primary goal is to keep it safe and ready in the event that we need it.

3. The "Hidden Money" aspect

If you boil down the entire savings-sphere, there are perhaps two people. Those disciplined savers who can save no matter what, and those who need to protect their money from themselves. If I can use a Bible reference, it's almost like the early Jewish Christians, who were very devout and religious and have much in common with the disciplined savers. The not-so-disciplined saver is like the sinner/Gentile Christian, who is just happy to have just learned the Good News! They don't have a history of discipline, and need to be cautious about not slipping back into their old life.

I think I am more like the second group. I like to keep my savings a little further than arms length so as to not tempt me to mess with it. Although when we started our ING Direct checking account, our current bank was offering 3.5% interest versus the 1.75 or so at ING (at the time). Although I can earn double the interest at our local bank, I know myself enough that the difference in interest would be swept away if I made one impulse purchase. In addition, I think there is something psychological about keeping your emergency fund and savings in a separate place than the place you pay your bills. It's related to the concept Dave Ramsey talks about that managing money is more about behavior than being smart. Yes, I would earn a little more money by keeping my money in my checking, but I don't want to access it too easily, and accidentally buy a new iPad.....

4. Others

It's also great to set up their Automatic feature, where you can switch your savings to cruise control. They have a referral program that can make you some money, but I haven't thought it quite worth my time. Supposedly they are going to add some new check depositing feature, but I just transfer money to and from our local bank.

Hope this helps you, and if you think your online bank is better, let me know!

Thanks,

CIK

When you feel that spending itch…..

Do you get this every now and again? Sometimes you've been doing well, sticking to your budget, bringing leftovers for lunch, socking away savings, and then it hits you - the urge to spend. My wife and I have both discussed this, sometimes we just feel like spending money. I have been through this enough times to know when it's coming. Perhaps I spend a little too much time in the online Apple store, or perhaps browsing for cars on Craigslist. Perhaps I have an inclination to move money around, throw some into retirement or buy some extra stocks. This all can be harmless enough, but it can also be unhealthy. I have several examples for your enjoyment.

I have history of impulse buying that goes back some time. I remember spending my birthday money as a kid to buy a Super Nintendo (maybe harmless enough). I worked hard in high school before and after class to earn money, but spent all of it on music, recording equipment, and an iMac. All of which I ended up not using a great deal and selling them for a fraction of the price. In college I purchased a Macbook on a whim. I told my wife I was going to do it about a year before I did, and she said "sure" because she didn't think I would actually do it. When I turned up with a brand new last-generation Macbook (what I'm writing on now), she was not impressed, and didn't remember our discussion a year ago. Come to think of it, neither do I, but that shiny white plastic lured me in....

The last time I made an impulsive money move was less about buying something and more about the poor management of money. My wife and I developed a plan for our money several years back. We had a budget and several savings goals to hit in a year or so. After 2 or 3 months, I got anxious, or bored, and moved money out of our checking and into an online savings account. Seems harmless, but this was against the plan we had established. The plan was to save x amount of dollars each month - slow and steady. My thinking was we had plenty of money in our checking account, and we would boost our savings and speed up the whole process. What happened then was our usual bills came out, including some larger end-of-the-year bills (Christmas, taxes, insurance, etc). I remember I bought my wife an expensive cook book for around $100 as her Christmas gift (it was a large chef reference book). I went to check our balance the day after Christmas, and we had $13! There aren't any zeros missing, we had $13 in our account. I had irresponsibly managed our money, and even though we had thousands in savings, we didn't have enough to cover a fast food run! My wife knows me well, and obviously sensed something when I said "better not used the debit card". I was ashamed that I had so poorly managed our money, and even though I had good intentions of trying to save, I didn't stick to the plan and got us into a mess.

To get out of that mess, I immediately transferred money from our savings account, which took 3 days to go through. Needless to say, that was a stressful 3 days. We actually had to return my wife's cookbook to the bookstore to make sure we didn't have an overdraft on some bill that might clear. Very embarrassing.

So, that was 3 years ago. Yes, I have many experiences of being irresponsible with money, but out of those mistakes I know my weaknesses, and one of those is when I feel the urge to spend or "mess" with our money, I know it's not worth it. Steady as she goes and sticking to the plan might not make you feel like you've won the day, but it will absolutely make you wealthy. It has been very rewarding to stick to a plan for an extended amount of time, which has allowed us to hit some of our goals. As someone who has bought items on a whim, I can honestly say that the reward of accomplishing a goal in our overall plan is much more rewarding than buying something on a whim. Now, my wife and I discuss our finances at the end of every month, and adjust our plan accordingly for the upcoming month. Keeping each other in the loop also holds me accountable to her and the plan.

One last thing about impulse buying - every budget should have a little wiggle room. We have cash each month for my wife and I that can be spent on anything we want. This is important because it's unrealistic for most of us to be Spartans, and having that expectation sets us up for failure. If you have a more ridiculous story of an impulse buy - I'd love to hear it!

Update

There is no getting around it, I have dropped the ball in posting for this blog. I wanted to give a brief summary on what's been going on recently:

- It's a New Year of course, but if you're like me, the end and beginning of any year means more than usual expenses. We typically have Christmas shopping, property taxes for our house and vehicles, car insurance in January, additional traveling expenses, additional entertaining expenses, additional charity givings, higher energy bills, and our family has some birthdays that land around this time. Plus, if you add in that sometimes there are additional days off which might result in lower income, we really have to be careful all of December and into January. Thankfully, we've made it through just fine, and even got a little bonus money.

- Since we are coming out of the "spending" season, my wife and I are really trying to hunker down and save for the next couple of months. We have a specific goal we'd like our emergency fund to get to which will take a couple more months, then we'd like to throw that savings temporarily towards a vacation.

- We have now been using YNAB (You Need a Budget) for over 6 months, and I have been liking it. Sometime soon I'll be doing a full review of YNAB, but if your looking for a budget program, this is a great one. It's not free, and it's not completely automated like some other programs, but that is what actually makes it better - it forces you to know what's going on in your finances. Check out their free trial in the mean time.

- One of our kids is potty training, so hopefully we'll have less diapers to buy soon! Woo-hoo! Of course, this expense will quickly be commandeered for other expenses, but it might feel like we get a $50 raise each month for a couple months.

- We are scheduling our tax appointment soon. I am usually pretty excited about this, because we've received a return every year. We've had another child this year, so that will be another credit. Not that that is a good reason alone to have kids, but hey, we'll take it! If you are familiar with Dave Ramsey at all, you probably know he thinks tax returns are stupid, and you should adjust your with holdings so you don't get anything back. That's fine, but with the payroll tax seemingly changing a lot lately and a new baby, it's hard to estimate what that will be. Plus, I know it's my money, but it feels great to get that check. Last year, we purchased some furniture for our bedroom. This year, I am wanting to put it towards savings, and my wife wants to hire some work done (on the house, not on her). I guess we have some more conversation to go, but I think if she knows after we meet our savings goal we can go on vacation, I think I can win her over.

- In terms of financial resolutions, I'd like to see my job become more stable. Whether that means a different one, or my current one improving remains to be certain. I'd also like to meet our savings goals. At the ends of the year, I don't care if I look back and we didn't spend exactly what our budget said on groceries, who cares. I do want to see that we had a savings goal, we met it, and now we can move and do more with our money. Also, I'd love to post more on this blog. My goals for that are simple - 100 posts this year. That's once every 3.65 days, or about twice a week. I also have some work on the house I'd like to complete, and some exams for my profession that I can hopefully knock out.

That's all for now.

Cash out Retirement?

Greetings all! I had an interesting experience tonight - one of my sisters-in-law called me for financial advice! Here is the scoop:

She recently changed jobs before being  vested in her employers' retirement plan. That means she wasn't there long enough (5 years in her case) to keep the matched money that her employer contributed to retirement account on her behalf. She had been putting in 5% of her pay into retirement, and the employer matched that money. However, she only stayed two years, and they required 5. That means she gets to keep the money she put in, but not the non-vested amount her employer contributed. If that's not making sense yet, check out Investopedia's info on vesting.

What she called me about was what to do with that money she had put into her former retirement account. What she wanted to do was cash out the retirement and pay off a fairly small student loan (under $3,000) with an 11% interest rate. She basically viewed this as "free money", but here is what I told her. If she cashes out a retirement plan prior to your eligibility age, you have to pay a 10% penalty. Now, you might be thinking a 10% penalty isn't as bad as an 11% interest rate, but she would also have to pay her going tax rate as well, which she believed was around 23%. That means she would take money at 33% to pay off an 11% load. Does that make sense? In addition to that, you're taking money out of the market, which historically has gained around 10% every year since the Great Depression. She used the phrase "paying it back" later once her student loads were paid off. You can never really pay back retirement, because it's hard to catch up. Your much better off with a little contribution early than trying to catch up later. She would have missed out on market gains and dividends, plus your limited on how much you can contribute yearly. As always, you never know what will happen in the future, and how your circumstances might change.

It was not hard for her to understand the math at this point, but as many of you know, managing money is more about behavior than math skills. The retirement money felt like "free money", because she never really thought about it much and didn't have access to it. The student loan on the other hand was very real, and she had to pay principal and interest every month. She did say that she's been on an aggressive student loan prepayment program, and it sounded like she just wanted to knock one out once and for all.

What do you think - would you have given different advice?

Ask and you shall receive….

Whether you're a Christian or not, I believe there are universal truths that can be learned from the Bible. I believe the Bible full of truth, and truth is applicable in every environment, whether your in a church or shopping for a used car. For instance, the golden rule seems to get rehashed ( or re-branded) into some business or how-to-deal-with-people book. Many of the stories in the Bible are about the relationships between people, both personal and professional. The Book of Proverbs is perhaps the best known book of wisdom in the world, and a  brief consultation with it will make you feel instantly wiser (and a little more buyer-savvy).

However, there is one truth from the Bible in particular I'd like to discuss today. It's represented several times in the Bible, and we'll focus on Matthew 7:7 (see also Luke 11:9, and Matthew 21:22). It goes like this:

"Ask, and it will be given to you; seek, and you will find; knock, and it will be opened to you." NASB

Now, I am no preacher, I am the writer of this personal finance blog, so I will look at this verse in the light of that. Again, I believe that a truth is true no matter what, and can be applied to your finances. In this case, I am saying that if you want something for you and your family, especially regarding your finances, you need to ask for it. Do you want a discount? Do you want something thrown in for free? Do you want a better rate? Ask for it.

I have somewhat of a reputation at work for being "cheap". Now, I totally disagree with that - for me, being "cheap" is wasting money on the lowest price item, and being frugal is saving money on what doesn't matter so you have more to spend on what matters. That aside, I have received this title because they often hear me negotiating over lunch with somebody. I have called and chatted with our cell phone provider multiple times to see about getting minute or text overages taken off. Every time without exception, they take the charges off, and thank me for being such a loyal customer. Again with our cell phone provider, our 2 year contract was up and I inquired as to what they could do. On top of the standard deal of 2 free phones, they gave me two months of service for free!  When we had our first child, I called up several of the places we received bills from and negotiated them down. I said if I pay in full today, can you knock off 20%? Half of them said yes. Every 6 months when our car insurance is due, I call and ask what can you do for me, and I've learned of discounts I never new about.

Some people are shy about negotiating, they see it as rude or are inexperienced with it. However, in many of these cases I'm not negotiating or haggling over price, I am simply asking, just once, what can be done about the price. I was recently in a large outdoors retailer with a friend who was buying a $700 kayak. They were getting pretty close to buying the thing, and I was surprised they didn't at least ask for a discount or a free paddle or something. So I asked if that was the best they could do, and the worker said yes. I asked if we bought this right now, they couldn't throw in a free paddle? They said no. Then I asked if they could at least get us 2 free cheeseburgers at the restaurant in the store, and they said no, they didn't have the authority to do that. So I was rejected several times, and my friend bought the kayak anyway. No big deal.

So if you ask and receive, there is a good chance you might get what you want. If you don't ask though, you can be sure you won't. If you don't at least knock, then no one is going to answer.

Steve Jobs – 1955-2011

A sad day.

If you've managed to dredge the internet and find this blog, it's likely you've long since heard the news - Steve Jobs, the co-founder and visionary behind Apple who helped shape the way we interact with technology, has past away.

It's hard to even estimate what he has done. You certainly can't limit it to computers. Perhaps it's hard to estimate because he had a hand in inventing so many aspects of personal computing, then completely reshaped it with the Mac and iMac, then was there to hold our hand through the change from the personal computer to the era of the mobile device and cloud computing. For crying out loud, Apple more or less invented the personal computer, the mouse, the graphical user interface.  The music industry was forever changed with the iPod and iTunes, and then the revolutionary iPhone and iPad. Outside of Apple, he helped start Pixar and the great movies like Toy Story and The Incredibles.

There is something tragic about the way he died, and that it was too soon. On the other hand, there is something inspiring about it, that he's been battling what ultimately caused his death for sometime, and yet it did not stop him from living life and contributing to our world.

He is certainly someone worth reading about. Here is a brief history primer on Steve. It's also just interesting to read a bunch of his various quotes over the years, as they span beyond technology into life, just as his inventions did. I think it's also important to see which year he said these things, some of them are well beyond their time.  There will also be a biography coming out in November which will surely contain a great amount of detail. I've got it in my shopping cart.

From a personal finance blog perspective, there are several things to note about Steve. Firstly, if you read very much about him, you'll know that he was very adamant that money is not a good reason to do anything. He was famous for his $1 a year salary for Apple, and yet became a reluctant billionaire anyway. Additionally, Apple under his direction was and is a debt free company. They have absolutely no long term debt, and at one point had more cash than the U.S. Government. If money isn't the most important thing, than it's certainly not worth going into debt over.

Thanks Steve, you will be remembered and missed.

Networked Blu-Ray w/ Netflix

Just so you know, I debated between finishing this post or watching Escape from New York on streaming Netflix. I hope I made the right choice! I want to discuss our current television setup.

There have been some major changes at our house recently regarding how we watch TV. We've been without cable for years at our house, and actually haven't had a TV for about 2 years. So how do we watch TV without one? With our computer. We've been watching all our TV on a 13" Macbook . We primarily used Netflix and Hulu to get our television and movie fix. We had become accustomed to and even enjoyed the experience over our old cable and TV setup.

That's all changed now that we received a 32" LCD HDTV for Christmas. Now we had a TV, but nothing to watch! We used some Amazon gift cards and purchased an LG BD550 Networked Blu-Ray player for $88 (+ shipping) and couldn't be happier. I realize now that we got a pretty good deal right after Christmas, because it's more expensive now. It streams Netflix - our primary reason for getting this device. Additionally, it has Pandora, which we love, and the Blu-Ray capability is amazing as well. Blu-Ray's are $1.50 per day at Redbox, which is pretty reasonable (if you return the movie on time). It has Vudu, a pay-per-view movie service where you can rent or buy movies. They range from $2-6, depending upon new releases and quality. I doubt we'll use these too much, but the free movie that came with the device - Toy Story III in 1080p looked really good streaming over the internet. Aside from the occasionally buffering, it did really well.

When we first switched from cable to internet TV, I only knew one person who had done this. Now, it's becoming more common and I hear others trying it or wanting to try it. For the internet savvy and those who can get used to it, it's a great way to save money, and in some cases a lot of money over by cancelling your old cable or satellite bill. Most of us have high-speed internet already, so all you need is a way to watch TV. The most common devices are either a computer or a networked device, like our LG Networked Blu-Ray device I discussed above. We have both. We'll generally watch a show or two before bed on the Macbook. We have an antenna on the TV so we can watch our local ABC station in HD, or we can pop in a movie, or stream Netflix through the Blu-Ray player. Another bonus is the Pandora Radio feature. You log in and it has all your stations synced, and I have an old pair of computer speakers with a sub woofer, and it works great playing music throughout our whole house.

Overall, we don't really have any interest in getting cable again. My wife and I both feel like aside from the money aspect, that way of watching TV has a tendency to be a "time suck". If you already have a high-speed internet connection and a computer, why not give it a try? Trust me, your cable company will always have you back!

Quote – Winston Churchill

“We are masters of the unsaid words, but slaves of those we let slip out”

- Winston Churchill

What does this quote have to do with personal finance? Two things immediately come to mind:

1. Talking about money with your spouse. Yes, communication is clear, you have to express your feelings in order to be on the same page, that's all true. However, even though my wife and I are on the same page, we have the same goals, our conversations about money can be some of the more heated ones. Why? I will often say (at least) one more thing than I should. We had a good conversation, but I said something without thinking, and it starts a fight.

2. Negotiation. Perhaps the smartest and most effective thing you can do during negotiation is say nothing. People do NOT like the uncomfortable pause, especially when you seem indifferent to it. State your simple case, and then shut up. Let them do the talking, and they'll negotiate with themselves. Everything you say during negotiation is another foothold the party across the table has. For instance, when shopping for a car, the more the salesman knows about you, the more they pry. "Where do you work?", "How big a monthly payment are you looking for?"

3 Best things about Internet TV

I kicked my cable provider out of my home over three years ago and never looked back. This is a topic I'm pretty passionate about,  and I hope to discuss it more over time, but these are the top three reason I love it. By all means, if you have other ideas out there, post them, I'd love you hear your thoughts.

I don't know about you, but my wife and I really like watching TV (and movies). We enjoy unwinding and laughing, and have a number of shows we like to watch weekly (30 Rock, The Office, Modern Family, among many others). I say this because I don't want you to get the impression that you can't switch off your cable because your a true television connoisseur. We really do enjoy TV. We used to have cable because we were adults and that's what grownups with jobs do, they have cable. I remember thinking it was sort of like electricity, it's just another bill you pay. Also, we both really didn't cable as kids. It was something neither of our parents got until we were older and in high school. So when we had jobs and our own money, it felt like we were "making it" because we had something even our parents couldn't afford. We'll, of course our parents could afford it, but we are still slowly catching up with their wisdom!

1. The price.

Hands down - you'll save money by watching TV over the internet. In some cases, LOTS of money. Chances are, you already have a computer pay for broadband internet. Every dime your paying on cable could be saved, and after a short while of saving money and becoming accustom to your new TV habits, you'll wonder why you ever had cable to being with. Broadband internet is a must for streaming video. If you have dial-up or 1 M/bit per second connection, it's probably not going to work. I personally have used an 8mb/sec connection, and now we are up to 15 mb/sec. Even then, there can be some glitches, less due to the speed but the quality of the connection and other factors.

What you pay now for cable or satellite varies greatly. I had a basic cable package once, and it was $13 a month. This included the major networks and that was about it. Where we live now, our cable was $55 a month just prior to us cancelling it, and that's about 70 channels, without any premium or movie channels. Some satellite plans are $30 a month, but that's usually tied to a 2-year subscription, where the 2nd year price jumps up. I know plenty of people that have movie channels, sport packages, DVR, and other features that pushes their bill well over $100 a month! In addition, they pay for broadband internet, typically have smart phones with data, and subscribe to Netflix with 3 DVD's at a time. To me, some of these things are redundant.

If that's their priority (or yours), and you feel as though you get your money's worth, then by all means, enjoy your massively expensive cable package. My family personally has been enjoying NOT paying this bill for years now, and feel all the better for it. As a personal finance blog, I would be remiss to mention if you're struggling with debt or making ends meet, then maybe this is an area where you can cut. Even if your tied to a contract with a penalty for leaving, if you could save $100 a month, then it would still probably pay for itself.

Since we've cancelled our cable, we have $1,980 extra in the bank. Do some quick math, and add up EVERYTHING you spend on digital entertainment (cable, satellite, Netflix, movie rental, internet, streaming, HD packages, etc), and see how much you'd save a year. Now, if you have kids, imagine saving this amount for 18 years, and add 10% compound interest, as if you were saving for their college. Again, using the $55 for my area, and a calculator from Money Chimp, that would put me around $33,105, and that's money I would have spent on something I've never missed. I mean, in that 3 years, that's a pretty decent all expenses paid vacation we've saved for. $2,000 would fix about any problem that goes wrong with our car. $2,000 maybe doesn't seem like a lot of money to you, but we've saved it on something we don't even want.

2. The options

Watching TV online gives you 2 main options: what to watch, and when to watch it. It's not very often I watch live TV, but that's no problem, because anything I want to watch waits for a time that's convenient for me. I won't lie, it takes a little getting used to this, but I now view this as a positive aspect. There are a couple shows I'd say I watch regularly, and want to see the new episodes as they come out. For example, as I said earlier, we like The Office. The show airs one night, and is available the next day on Hulu or NBC's website.  I watch it anytime I want after that.

You also have options with commercials. In the case of Netflix, there simply are none. There is no advertising on their website, and no commercials on their content. If you've ever watched Hulu, they currently have short commercials throughout the program, much like normal television. When I first started watching, they had a few, 15-30 second commercials. Currently, there are more commercials, sometimes several in a row, and they are getting longer. Still, it's nothing like your standard TV experience from cable which sometimes feels like half of what you watch are commercials. In some streaming situations, you have the option to have one longer commercial at the beginning and no interruptions throughout, or several commercials throughout the program - something you don't have with cable.

You can also watch it on your computer or your TV. We will often watch a show on our laptop before bed, or we can take it anywhere in the house. For Christmas we purchased a networked Blu-Ray player that connects to the internet and streams Netflix and many other services.

Also something to consider is the content option. On cable, you don't pick what's on the channels. Networks and syndicates choose the shows that will get the most viewers so they can sell the most advertisements. With internet TV like streaming Netflix, you don't have to worry about that. If you are passionate about documentaries for instance, there are tons of those on Netflix that would never make it to TV because only 10 people would watch it. There is so much content available that you would never discover because it won't sell advertisements. It's the same thing if you enjoy a lot of music that doesn't make it on the radio. Is radio music really all that's out there? No way! Some of the most talented artists aren't radio friendly, and some of the greatest movies and TV shows don't make it on the network channels.

3. The life (it leaves you).

We've all done it. After getting sucked into a TV coma for hours, you only break out of the trance because you hand reaches the bottom of your Doritos bag. It's too late though, and you've spent the last 6 hours watching a reality TV marathon while flipping between action movies on TBS during commercial break. Where did time go?

You're the victim of TV, and one benefit of getting your TV kick from your internet connection is it changes the way you watch TV. It's hard to explain unless you do it, but I don't get "sucked" into TV like I used to when we had cable. My best theory is this: with cable, you have channels you flip through until you "settle" on something. You may not really even want to watch it, but you will because that's the best (or least worst) that's on. That doesn't happen with internet TV - I only watch something I actually want to watch, otherwise I don't click on it. Don't get me wrong, we watch plenty of TV, and still follow all the shows we did before, but we don't waste hours channel surfing, because we don't have channels to surf!

So there you go, three great reasons why you should switch to internet TV. You'll save a bundle, you may find you have more options of what to watch and when, and you might find you have more time as well. By all means, dispute my claims or add to them, I welcome your thoughts.

Thanks,

CIK