photo credit: frankie_3011

When did we develop the memory abilities of a goldfish? Correct me if I’m wrong, but isn’t this type of stupidity what got us into a pretty serious mess in the first place?

I’m beginning to think it’s time to start saving in some other currencies, because Americans apparently remain too short-sighted to avoid a serious financial spanking.

photo credit: me and the sysop

As I mentioned back when we killed off our non-mortgage debt, our next basic step was funding a real emergency savings account. As I’ve seen suggested just about everywhere, somewhere in that mythical 3- to 6- to 12-month worth of emergency cash was the goal.

The first thing I needed to do was figure out what the typical month should be worth, so sat down with our last year worth of monthly budgets and began adding up all the must-have items. In other words, get rid of those things that we wouldn’t be doing if we found ourselves in an emergency setting. Think things like dining out. Or magazine subscriptions. Or vacation funding. That sort of thing. Tack on 5% — just to adjust for inflation — and multiply by the number of months wanted. In the end, six months sounded like a good middle ground, and we began funneling my side income and any extra cash previously going towards debt into our ING savings account.

And again, it is amazing what focus, hard work, and a little luck can do. Because four months later we have a fully funded emergency fund for those six months. Plus another twelve months+ on top of that. A certain portion of that will probably be set aside for next year’s taxes, but at this point we track it as a savings subcategory called ‘Wow! Funds‘. Because, wow, things are really changing for us right now.

Next money step? Think it’s time to see about getting our little five-year-old future education taken care of…

Not exactly breaking any news to those of you following the personal finance blog world, but HSBC has out of the blue decided to lop off a quarter percent on their HSBC Direct savings accounts. Mind you, the email I just received from them didn’t mention that fact, just that their summer high-rate promotion had come to an end (hmmm, I don’t recall a notice that their high-rate promotion had begun), but that the rate is still .2% above the rate they were offering before the promotion.

Oh, and that they were now offering the incredible rate of 3.75% on a CD…

Which just reminded me that I want out of HSBC-land. I only log into the account once or twice a month, either to deposit my monthly non-monthly bills money (ala something like 1/12th of our property taxes or 1/6th of our car insurance payment) or, if when it becomes time to pay one of those irregular bills, to withdraw what was set aside. And each and every time, I’m annoyed by their login process. On two occasions now, I’ve had to waste my time calling them up and plead to let me back into my account after screwing up the login a few times in a row.

If I truly value my time, just one call to restore my account after a login foul up will easily kills a few years in extra interest beyond what I can get elsewhere. It’s just not worth it to trade that five bucks or so a year extra my irregular bill fund earns at HSBC with the simplicity that is ING Direct (where I keep my side business money partitioned away from our ‘regular’ money).

So I just opened another sub account at ING, and in a few days, I can remove one more bank from my Financial Institutions I Have Accounts With list.

Back in March the ol’ home PC decided that it was time to give up the ghost. And, debt-or-no-debt, doing without wasn’t really an option. But I certainly didn’t want to empty a savings account or, worse yet, throw it on a credit card.

As I mentioned at least once before, I do a bit of computer tech work, so I was pretty comfortable deciding what was needed and what was not. Just in case you are in the same boat as I was, here’s a few money saving tips on buying that new PC:

• Never buy a top of the line computer. That is, unless you really enjoy paying double what the same system will set you back in six months.
• Most preconfigured systems come with marginally adequate amount of memory at best. There are ways to go cheap on a computer; this is not one of them. Memory is by far the cheapest bang for buck. Get at least one gigabyte of it.
• Unless you are a hardcore DVD or music pirate, a 300 gigabyte hard drive is overkill. Oh, and good luck backing that all up!
• If buying a Dell/Gateway/HP/Compaq/etc. pre-configured system, choose a “without antivirus” option if possible. You can get excellent antivirus protection with the free version of AVG. As a plus, you won’t have to suffer with the spectacular piece of junk that is Norton Antivirus.
• The big money saver? For most people, the bloat that is Microsoft Office just isn’t necessary. There are many, many alternatives that do the job of almost any MS app just as well, if not better, for the much more reasonable cost of zero.
  • For word processing and spreadsheets, OpenOffice is wonderful. As is Google Docs. Or for that matter, ThinkFree. Or WriteBoard. Or EditGrid. Or Zoho. Or… well, you get the point. Let’s just say, there’s a few options.
  • What about email? You’ll have to pry my Gmail account from my cold dead hands. (And if you feel like really integrating what Google offers, Google Apps is really pretty painless to set up.) Yahoo Mail. Or even Hotmail. On the other hand, if a desktop application is your thing, Thunderbird might be your thing.
  • Calendaring? Google Calendar. 30 Boxes. Remember The Milk. Kiko. Yahoo Calendar. Again, lots of options — and seemingly more every few days!
  • PowerPoint? Just say no. Ok, if you must: Empressr. Or Spresent. Or Zoho Show. But really, best yet:
    Just Say No! One more wasted hour sitting through another poorly thought out PowerPoint meeting (which is almost every one) that could have been taken care of more effectively with a simple handout and I may flip out…

Using those tidbits of knowledge, I easily knocked $200+ off an already ridiculously cheap system, and am happier with the end product to boot!

With this month’s mortgage bill, we also received an offer to join our lender’s Accelerated Mortgage Payment Plan. Using it, they claim we can settle our 30-year mortgage seven years early while saving a sizable amount in interest payments. And indeed it would, as we would be paying half our payment bi-weekly – instead of once monthly like now – which is 13 full payments a year (52 weeks bi-weekly equals 26 half payments equals 13 full payments) instead of the normal twelve. That one extra full principal payment does wonders, especially early on when almost everything you pay is eaten up by interest. A little pain up front yields incredible returns later. (That is, if you consider not having a mortgage payment incredible returns. I, for one, do even though I know there are those of you out there who do so love that mortgage interest deduction.)

So sign us up… Oh, wait, better check that fine print:

• Enrollment in the program: $49.99.
• $4.50 per bi-weekly payment – which averages out to $9.75 a month. Because, as you know, automatic payments are so expensive to set up, so they’re helping us out by spreading that cost over the life of the loan…
• Payment held in escrow until the standard payment is due – in other words, at the end of the month – instead of when the bi-weekly payment is actually submitted. Not that it would be an immense difference, but I’d certainly appreciate the few cents of interest being avoided if those mid-month payments were applied immediately rather than a little more interest going into the bank coffers. And, you can be sure the bank is doing something with those funds over the escrow period.

Is it still worth it? Well, by my calculations, for our little bitty house loan we’d save $8,800 in interest at a non-adjusted cost of $2,740 in program costs. Saves us $6,060 when everything’s paid off. So far so good.

Take those same program costs, and drop them in a very conservative investment like our HSBC savings account at 5.05%, and at the end of those 23 years we’d have future value of $5,244. Enrolling still saves us $3,556.

But, the kicker is, there’s absolutely no point in enrolling in their plan at all, especially the way they have it set up. Nothing at all is stopping us from applying an extra half payment twice a year. Same $8,800 savings, just without costing us that $5,244 in program costs. And then, if we’d instead apply that extra $9.50 a month we’d have paid for the program to the loan, we end up knocking off an additional two years, plus the already mentioned seven, on the term of the loan, and save an additional $3,100+ in interest payments.

I think we’re going to have to pass on this offer…

[tags]mortgage,payments,accelerated payments,interest[/tags]

I’m not sure how long this has been the case, as I check into my savings accounts very infrequently unless I happen to be transferring funds out, but I see that HSBC has joined in with their particular iteration of the pointless-hoops-to-jump-through login that has become so popular with online banking. Now instead of a single screen with two simple fields to fill – ID and password – I get the new-and-improved two page with three field, dual password one. And to top it off, one of the passwords must be entered by clicking on a ‘virtual keyboard’ with the mouse:

I can see how strong authentication is something to strive for, and with all the phishing attempts out there these steps are probably a decent safeguard for those less tech savvy than, quite honestly, myself. I just wish there was an option (even a hard to find one) that would let me go back to the very basic login. I’m comfortable with the risk I was apparently taking prior to this change, and these new steps are nothing but an annoyance.

[tags]HSBC,security,customer service,annoyances[/tags]

Apparently stuck on the extra-special super-extended hold line (when and how did customer service get so incredibly bad that 10 15 20+ minutes waiting on hold isn’t anything but outrageous anymore?) and thought I’d take a little initiative and get this done before a week of November has passed! How about taking a quick peek and see how that ol’ balance sheet did this month. Of course followed by a few notes if interest, to me at least…

a little random commentary

• Must say that a 4% gain on the retirement investments for the month was a pleasant surprise. A couple of our fund allocations are enough out of line to probably need a little rebalancing, but I’m going to continue our plan and wait until the beginning of next year to do so. (mental note to myself: our investment strategy might make a good post!)
• Well, I was enjoying seeing our assets increase and our liabilities decrease. At least until we hit that line of credit. No surprise at all, but I wouldn’t have complained if my mental calcalutions weren’t quite as accurate as the one on screen! And just going to get larger, I’m afraid. Ah, well, someday I’ll have to assess what our home value actually is and not feel so bad about taking on all of this extra debt…
• Not directly PF-related, but our migraine-inducing contractors (plumbers, if you were interested) did actually show up over an entire weekend – including a Sunday – following my warning and the parade of interested parties I mentioned earlier. We’re not done with them quite yet – they still have to attach a few faucets and other minutae after a bit of drywall work is done. No bill of any type from them yet, and I expect I’ll see a few charges on there that I’m going to refuse to pay – i.e. any non-regular working hours charges, seeing as the only reason they had to work those hours is because they blew our job off so long that I had to threaten to fire them. But the vast majority of their job is done and we will soon be rid of them forever.
• So, obviously we’re still renovating away, and progress on the total debt is still going the wrong way for the time being. But for the first time in a while, I’m seeing light at the end of the tunnel. Here’s hoping it’s not a train…

[tags]debt,renovations,report card,balance sheet,credit card,investments[/tags]

Want a really simple, painful way to save lots of money? Pick up a really nasty fall cold, and stick with it for ten days or so…

• Nothing stops you from wasting money on pointless purchases quite like feeling too ill to do anything but lie around and stare into space. Even normally dangerous places like a book store don’t appeal to me when I can’t concentrate.
• When you can’t really breath, nothing has a taste. So that filet mignon or lobster tail probably won’t be trying to make an appearance in your menu planning. As a positive side effect, if you’re trying to lose weight, not being able to taste will certainly help you along!
• A diet of cough drops and chicken noodle soup is dirt cheap.

[tags]cold,illness,blah,chicken noodle soup[/tags]

FMF at Free Money Finance recently asked this very question.

First off, I have to share his amusement with the comment that “a million just isn’t what it used to be!” Spoken generally by those who have substantially less than that million in the first place. Of course a million would change your life unless you happened to have several million already socked away. In which case, I’d imagine your average personal finance blog probably wouldn’t be where you’d be hanging out! It might not change your life to the point where you were, for instance, considering which port city you were going to be docking the yacht in this week. Still, that piddly one million bucks would certainly change it.

But since the game is $5 million, I’ll play it that way. I’m going to assume after-tax dollars because otherwise we’re talking about the $1 million range again… Here’s how my $5 million would be spent:

• First off, all of our debts would disappear. As would our sisters’/brothers’/parents’ – we’ve got a few farmers in the immediate family and, unfortunately, some hefty long-term debt often goes hand in hand with farming. I don’t know exactly what this amount would be (we’re Midwesterners – we don’t talk about our money, whether we have a lot or whether we owe a lot), but I’m going to guess substantially short of $500,000. For the sake of simple calculations, a half million it is…
• $250,000 invested in a few reasonably safe investments to take care of our two-year-old’s education. By reasonably safe, I’m talking along the lines of something like the Vanguard Target Retirement Fund 2025.
• I ascribe to no particular religious beliefs, so I won’t be tithing. But I would take $750,000 of it and set up a charitable foundation. I don’t want to commit myself to contributing it all in one shot, because you just never know what great advance or what great need will arrive tomorrow.
• $2 million would be socked away for retirement investing, allocated pretty much exactly as they are now, percentage-wise, just with bigger dollar amounts… Though I’d probably be on the lookout for a few more tax-advantaged investments as I deal with the capital gains taxes I can generally avoid today. Oh, and the date I’d consider myself retired may be much earlier than I assumed the day before I found this money…
• $1 million would used for much more aggressive investing. For instance, a prospectus for a very interesting new business in search of a few local angel investors recently crossed my desk. A client wanted me to look through it, just to see if their numbers passed the smell test. I really like the business idea. And the numbers, while likely a little optimistic – as all prospectuses tend to be – are definitely not out of line. The kicker: minimum investment of $100k. I certainly couldn’t do that today, and the potential risk is just too great for me to even consider borrowing that amount. But if I had it sitting in an account put aside for these opportunities when they arise, I wouldn’t hesitate to do a bit more researching today, followed by a little investing tomorrow. No, I wouldn’t throw the whole million at it – all my eggs in one basket and such – but I certainly would be considering a couple hundred thousand.
• The rest? Blow money. That $500,000 would last us through quite a lot of screwing around. We aren’t aggressive spenders, despite the fact that we had (and still have) a good chunk of credit card debt – it took us many years to build that up, and all on stupid little junk. We’d probably do a little more home renovation (but not a lot, because we already like our little house), replace our old cars with a couple new reasonable ones, do a bit of clothes shopping, grab several hundred books and CDs, do a little travelling, yada, yada, yada. I’d bet that blow money would actually last quite a few years.
• Would I quit my job? Doubt it – I like my job. Plus, it gives me easy access to those aggressive investing opportunities I mentioned above! Though I’d imagine a good long vacation may just have to be scheduled in there more often than they are today…

Hmmm, that all sounds pretty good. Now the question is, where exactly do you stumble upon a quick five mill?

[tags]dreaming,five million,angel investor,charitable foundation,retirement,blow money[/tags]

September has come and gone – as has a bit of October already – so you know what that means. That’s right, the ever thrilling rundown of our quasi-balance sheet. And of course, as always, followed up by a little commentary on some of the minutiae.

Again, just like last month and the month before that and, well, the month before that, we’re still neck deep in the haze of renovations. So, needless to say, traction as far as finances is hard to come by right now. (And as an aside, I’m really surprised I don’t read about a contractor or two being hunted down on a fairly regular basis – I know I’ve had my share of dark thoughts! Apparently, skill with tools and skill with time management don’t necessarily go hand in hand.)

A few things of note:

• I’ve taken the MBNA card off our balance sheet, as it’s never going to see any use outside of being a line on our credit report. Unless, say, I need bail money (see aside above)…
• That AMEX balance is, again, not yet reimbursed business expenses. Full disclosure. Blah blah blah…
• The Wife’s 457 has been rolled over into her IRA. Fairly painless process, just took a little longer than I thought it would. But I understand the paperwork shuffle that any financial transaction of sufficient size takes, so I really shouldn’t have been surprised.
• Most of our renovation expenses have been covered, but again this month a little more got tacked onto the line of credit. Expecting it to balloon when they finish everything. Do you think they’ll let me blow off paying them for 3+ month like they’ve made me wait when they’re done? I just might find out…

Outside that, nothing all that interesting as far as the balance sheet is concerned. Just waiting for the homestead to be completed so I can hit that debt as hard as I can.

[tags] debt, renovations, report card, balance sheet, credit card[/tags]