The Financial Student » Saving

Nice Savings Account, Bro

Ryan — Thu, 07 Jul 2011 09:00:27 +0000

Last week I was nerding out and reading the business section of MSNBC.com. One story was crazier than all the others – a Wall Street executive found an ATM receipt showing a savings account balance of $99,864,731.94. That balance was after the account owner withdrew $400 and paid Capital One $2.75 for the privilege.

The MSNBC article says that the account is earning almost nothing in interest. I’m not great at math, but I know even half a percent of 99 million dollars is $495,000. That’s not “nothing” in my book – considering there’s no real risk with a savings account. But yeah, he/she could be making a lot more if they didn’t have all that cash sitting in savings.

Now I’m thinking about what I consider a “normal” amount to keep in a checking/savings account. For checking, I try to keep at least a $500 buffer most of the time and $1,000 when I can. If I was out on my own with real bills and everything, I’d probably aim for 10 or 20 percent over my monthly expenses. Safety net against overdraft and/or any possible minimum balance requirements = good thing.

For savings, the sky’s the limit! I don’t see what’s so bad about having lots of money in savings as long as you’re also investing/saving for retirement/paying off debt/reaching your goals. Money in savings is liquid – you can access it almost anywhere in the world with an ATM card and that’s awesome. It also provides that warm fuzzy feeling – knowing you have X amount money and nothing bad is going to happen to it. An investment account could lose 20% of its value in one day – not good if you’re a worrier.

What do you think of keeping a ton of money in savings? How much do you personally keep in your everyday accounts?

Should I Give All My Refund Back?

Ryan — Thu, 14 Apr 2011 09:00:09 +0000

A few weeks ago, I received my last student loan refund for the school year. A fat $3,500 check was sent my way and I quickly put it away in savings. I don’t need that much money sitting around – costing 7.9% - but I gotta admit – it feels good to see an account balance of almost $8,000. Even when the money isn’t really yours.

I sent some back even though I didn’t want to. First just a $1,000. Then I got real and sent another $2,000 back. That brings my total student loan refund account to $2,200. Now I’m debating whether or not to send some/all of the rest back.

Without it, I’ll still have almost $2,500 in personal checking/savings plus an additional $3,000 in business accounts I could tap if ~~the world ended~~ something crazy happened. Yet, it provides an odd sense of security since I try to pretend the business accounts don’t exist.

I know I have two major expenses coming up: international airfare and a $800 study abroad deposit. Airfare needs to be purchased soon – by the end of May most likely. That ticket is likely to cost $800-$1,200. The deposit isn’t due until June 1st, so I have 3 or 4 more paychecks coming before that date.

I think the best solution right now is to send in all but $1,000 of it. That would cut the interest I pay while providing some security in case in my budget is about to tear apart after paying for airfare and the deposit. I’ve also considered opening a new credit card with a 0% promo offer for 6 or so months so I could pay over time without paying extra. Gotta work the system when possible…

How much do you think I should I send back?

Emergency Fund to the Rescue!

Ryan — Mon, 11 Oct 2010 12:00:33 +0000

Last Wednesday, I drove home from school just like I do everyday. No problems at all. Car seemed to be running just fine. Flash forward to a few hours after dinner. I go out to the garage and find a huge puddle of liquid under my car. Awesome.

Turns out I needed a new water pump!

There goes $288. I’m not gonna lie, I’m not happy at all to pay for this repair. I’d much rather spend that money on something much cooler. Like a new cell phone when my contract expires. Maybe a Kindle or iPad. Or maybe even college tuition. School is pretty cool, after all.

But I didn’t panic, wondering how in the world I would ever pay for the repair. Luckily, I had $1,200 sitting in a savings account to use for emergencies just like this. Actually, luck didn’t have much to do with it at all. I made the conscious choice to save that money. Then I made the choice to not touch it. Because shit like this happens!

And that’s the most important thing to remember. No matter how good things are going right now, something bad will happen. In fact, an emergency will probably happen when you least expect it. Some might say that this it’s pessimistic to think something bad is going to happen. But I think it’s more realistic than living you life like everything is going to go according to plan every single day.

About That Student Loan Refund Check…

Ryan — Fri, 17 Sep 2010 12:00:42 +0000

I received my loan refund check! Did you?

For me, that money is going to serve as my “allowance” for the quarter. Here’s a list of what I expect to spend on various things:

Gas – commuting means using gas up like crazy! $180/month
Books – $500/quarter (except this one! Thanks Dad!)
Meal plan – $300 quarter/ish

Since I’m not spending all of it at once, that money will be chilling in a ING Direct account earning a tiny amount of interest. While I’m not excited to spend this kind of cash, I know that it’s all part of a larger game plan. My degree will increase my earnings potential by 1000% (67% of all statistics are made up on the spot) so it’s well worth it to spend the money now.

Remember though, that this money is not “free” in any sense. It’s part of your student loans. So whatever you spend will have to be repaid – with interest.

If you’d like, you can return part or all of your refund. To do this, go to school’s financial aid office and they’ll help you out. If your loans are subsidized and Uncle Sam is paying the interest for you, there’s really no reason why you should return the money so quickly. Throw it in savings for an unexpected expense.

ING Direct: Awesome Deals for Independence Day!

Ryan — Fri, 02 Jul 2010 12:00:33 +0000

I praise ING Direct all the time. With their great online savings and checking accounts, easy to use interface, and decent interest rate, it’s not hard to see why.

But I also like ING Direct because they’re always having kickass promotions. As part of the 4th of July festivities, ING Direct is pulling out all the stops with some great offers. What are the deals? Read on:

Opening an Electric Orange checking account will net you a $76 bonus. This is an even better deal than when I opened mine and received $50.
Need a mortagage? Receive $776 off closing costs!
Want to start investing? Get started with a free $76 when you open a Sharebuilder account!
Last but not least, receive $25 when you open an Orange Savings account and deposit at least $250. I’ll receive $17.76 for referring you. Use the text links below to open this account:

ING Direct Orange Savings Account!

ING Direct Orange Savings Account!

If you receive a message that says the link has already been used, send me a message using the this “Contact” link and I’ll get a link to you ASAP.

For the all the other offers, use this link: ING Direct Indepedence

Happy Saving!

Operation Emergency Fund is Complete!

Ryan — Fri, 18 Jun 2010 12:00:44 +0000

Finally, after a few months of saving, my initial emergency fund is complete. I decided on an amount of $1000 – a number that I felt was achievable in a short period of time but also large enough to actually be useful in case something unexpected happens.

I feel awesome about this achievement. For the first time, I really feel like I honestly have my finances under control and I’ve accomplished something I’ve wanted to do for a while now. In one word: relief. If I need a new part for my car, I won’t panic. If I need to buy a new Xbox game, I know I can. Just kidding about that last one.

I’m still going to contribute a bit from every paycheck to the emergency fund. I won’t ever consider the e-fund “done”. Can anyone honestly say they only want $1,000, $5,000, $10,000 or even $50,000 in their emergency fund? Bigger is always better. Or so I’ve heard…

But I’ve even more excited about having some cash freed up to save for other goals: upcoming college expenses, study abroad in a couple of years, new car someday, etc. And, of course, I have no problems letting myself spend a bit from each paycheck on fun stuff. Xbox games actually don’t grow on trees, ya know?

Take home lesson: Start that emergency fund. Fund it like it’s your job. Sleep easy.

How Should Irregular and Temporary Income Be Handled?

Ryan — Fri, 11 Jun 2010 12:00:48 +0000

I hope I haven’t mentioned it too much, but I started working for the Census Bureau in April. The job is definitely temporary – I could be out of work in as little as 3 weeks. Or I might still be working until the end of August. There’s really no way to know for sure and it’s very much a week-to-week type thing.

That leaves the question of how should I mange this temporary and irregular income?

I get paid every week, which is great. But there’s no telling when those checks are going to come to a stop. Plus, I work hourly so my checks aren’t always the same amount. Example: Some weeks I get paid $300.67 while others are $277.49, depending on if I needed to leave a few hours early or something.

Right now, I have 3 primary savings goals: The problem is that the amounts I save are all completely arbitrary. I didn’t decide one day to save 50% of my paycheck for emergencies. I never even realized that $30 a week for Christmas gifts is 10% of my pay. I have no idea if $50 per paycheck for my future laptop is too little, too much, or just right. I just picked numbers out of my head that I thought sounded good and were reasonable based on the goal and time line. Example: $150 for the emergency fund to get it to $1000 really quick. $30 for Christmas because it’s so far away and I only have a few people to buy for. (Special perk of being so young!)

To complicate matters even further, I’ve made some random money from this blog. So far, I’ve received a lump sum of around $500. I’m planning to use about half, maybe more, to pay someone to redesign this website. But once that’s done, what do I do with the leftover money?

Put it in the e-fund for an extra boost? Buy myself something shiny with it? Take an underwater basket weaving class?

Then there’s the whole issue of college. Since college, along with dorm life, is a pretty drastic lifestyle change, I’m positive that I’ll be spending more than usual for the first month or two. So far, I’ve thought about just letting more of my paycheck pile up in my checking account. But I don’t really like my money just sitting somewhere without a purpose. I’m OCD like that…

So what do I do? Do I need to come up with a concrete percentage of my income that I’m going to save (for each specific goal)? Should I just choose overall amounts that I’m comfortable with (until my job is over)?

I’m counting on you, Internets!

10 Lies We’re Told About Money

Ryan — Wed, 19 May 2010 12:00:04 +0000

There’s a lot of misinformation out there about money. The following are statements or attitudes that I hear quite often. They’re all false. Or at least they should be!

1 – You’ll always have a car payment

I’ve heard this exact statement from an older adult. I was really surprised, because it seems to defy common sense. You’re only ALWAYS going to have a car payment if you upgrade to a new car every few years. The interesting thing is that people seem to forget that their first car didn’t require a payment. Think about it – when a typical 16 year old buys a car, it’s usually paid for in cash. No payments or interest required. If you can own a car at 16 free and clear, then it’s logical that you should be able to own a car free and clear at the age of 35.

2 – Everybody has credit card debt, so it’s not a big deal

Actually, not everyone has credit card debt. In fact, most people don’t. The reason why the number quoted when discussing average debt is so high is because those with extreme debt – like a mind blowing $60,000 scattered around 8 cards – drive up the average significantly. Even if everybody did have lots of debt, that doesn’t mean it’s a good thing. You’re still, essentially, paying “the Man”.

3 – Owning a home is always better than renting

All I need to mention is the housing bubble and you’ll see what I mean. I’m going to go ahead and assume (and probably make an a$$ out of myself) that MANY people who bought homes in the early 2000s grossly OVERPAID and would have been much better off RENTING. Even without the housing mess and recession, I caution everybody (especially recent college grads) to think long and hard about buying a house. It’s a gigantic purchase and there are lots of hidden expenses – and not all of them are financial.

4 – Stuff will make you happy

There’s no doubt that we all need certain things – shelter and clothes for example. There are also some luxuries that can make our lives easier and more convenient – like an iPod or microwave. But don’t let material objects run your life. How big of a house do we really need? How many DVDs are we really going to watch more than once?

5 – Online bank accounts are scams, unsafe, or inconvenient

No, they aren’t. All the ones I use and have heard of are FDIC insured, just like any other bank. Online banks encrypt your information and force you to make strong passwords. Finally, online banking is one of the most convenient things since sliced bread. Day or night, you can transfer money and it’ll be there either instantaneously or within 2 business days. ING Direct will even MAIL a check to someone for you!

6 – There will be time to save later, so go have fun now

This is simply an immature thing to say. You know what group of people want what they want right NOW? Children, that’s who. When exactly is “later”? After high school graduation? After college? After getting married? Life is always going to get in the way of better finances, so we need to stop making excuses and JUST FIX OUR PROBLEMS. I’m young and want to have fun, which requires money. I’m not against spending for fun, but I’m against sacrificing an awesome future for fun. Yes, I’m trying to have my cake AND eat it too. It’s going to be f’ing delicious.

7 – Having expensive and flashy stuff means you’re successful

It’s not too hard to create the appearance of having it all, without actually owning anything. At a nearby school (not mine), there is an Escalade in the parking lot every day of the school week. I’m assuming that it belongs to a teacher. Yet, when I see it, I don’t think “Wow, she must be doing well.” I think “Wow, she must have a huge loan. That sucks.” Granted, she could have budgeted it and can easily afford it. Or maybe her husband makes a good living and just bought it outright. But I don’t think either of those situations is likely.

8 – You can get rich quickly

No, you can’t. The amount of people who got incredible rich overnight is extremely slim. So slim that a diabetic has a better chance of being run over by a truck carrying insulin. Yes, I just made that up. But still, the majority of wealthy people got to where they are by working hard and not being dumb with their money. If you want to be like them, you need to make good decisions and read The Financial Student.

9 – Money is Evil

No, it’s not. You can do horrible things to get money or with money. But money itself is not the problem. Money can, and often does, enhance our lives. Don’t be afraid to become wealthy because money is “evil”.

10 – Money Does Buy Happiness

Yes, I’m sure all of the starving people in the world are thrilled they don’t have any money. They get by just fine as long they have what really matters in life: family and friends. Oh, and a dash of hopelessness. A certain amount of money is simply necessary to have our basic needs met. A certain amount more is “necessary” for luxuries. It is true however that after that point, more money isn’t going to increase the quality of your life much.

A Lesson In Why the Emergency Fund is Completely Kickass

Ryan — Wed, 12 May 2010 12:00:08 +0000

I’ve talked a few times about why an emergency fund is important. And I’ve talked about how awesome ING Direct is as a place to keep your emergency cash – and I swear it’s not because of the sweet bonuses they hand out. Honest.

However, I’ve never had the need to actually use the e-fund. In fact, I hadn’t really funded it that much. I know, outrageous. Here I am preaching and then not practicing it. But hear me out – I wasn’t working from February to April so I had an income of about zero. Now that I’m working for The Fed, I’m saving $150 from each and every weekly paycheck I receive.

The benefits of it have already showed up. I got my oil changed the other day. During the courtesy check, the mechanic noticed that my passenger side sway link bar is toast – it’s not attached to my vehicle. At all.

The repair isn’t very expensive – about $60 bucks for parts and labor, so I’m planning to get it done it done within the next few days. Even better, I have the cash sitting in my emergency fund. Then when I get paid, I’m going to refill the account with $210 – $150 for the normal contribution and $60 to replace what was spent.

Even though the repair was inexpensive this time and I can easily cover it with my regular paycheck, it feels good knowing that my emergency fund is in place for things like this. Next time, which hopefully isn’t for a long long time, the expense could be larger.

Still hustlin’ along to reach $1000 in emergency savings…

ING Direct: What’s Up With Yo’ iPhone App?

Ryan — Mon, 03 May 2010 12:00:32 +0000

I, as basically every other personal finance blogger, use ING Direct as my primary bank for savings. They have a decent, although not great interest rate, a clean and usable website, and great customer support. One of my favorite things about ING Direct though is that they’re one of the original online banks. They started out way back in 2000 and know what they’re doing. That’s why I was disappointed when I went to search for an ING Direct iPhone app.

I wasn’t even sure if they had one, but what I found was actually worse than them not having an app.

The “app” isn’t really an app. All it does is launch the iPhone’s own browser to ING Direct’s mobile site. It doesn’t do anything else – other than take up space on my screen.

In ING Direct’s defense, their mobile site (designed for devices with small screens) is pretty good. The only part I had a problem with was entering my PIN. With ING, you can’t actually type in your number. You have to click on a virtual phone-style numeric keypad. On my iPhone, this wasn’t super easy because my finger covers up about three numbers at the same time.

But still, it’s puzzling why a completely online bank would put out a half-assed “app” to their mostly technologically proficient customers. The Apple App Store has been in business for almost two years now – that’s plenty of time for an Internet focused bank to create a decent application. Even more interesting is that ING Direct knows that it’s crappy. They put a little message in the bottom of the screen that reads “We’ll be launching a new, full app soon.”

What are your thoughts about ING’s useless app? Am I being too hard on the company?