Years ago, I created this website with the tagline, "Making my money work, so I don't have to." I noticed that due to compound interest and living below my means, the choices I made in my early 20s had paid off handsomely by the time I turned 30. Those choices weren't anything special, just basic ones such as maxing out my Roth IRA and 401k.
This idea of working smarter instead of working harder that lead me to create the "Lazy Man and Money" website. I wanted to show people that you don't have to work hard to manage your money. If you do it right you can even retire early. What's so hard about writing those annual Roth IRA checks? It took me all of a few minutes. Setting up the 401k was even faster than that.
Nearly ten years of blogging later, I've come to realize that there is a finite number of items that fit this criteria. Nowadays I assume most readers have this basic information and are looking to dig deeper. Today, I've got something new that should change how people manage their money.
Before I get to that though, let me talk about one of the biggest problems of managing money the "Lazy" way. It's the old checking account/saving account conundrum. I need to write checks (even if they are automatic bill pay) via my bank account. The money in that account earns no interest. Alternatively, I can earn interest in my savings account, but I can't easily pay people from it.
Thus, I'm left doing a money shuffle. The idea is to keep as much money in the savings as possible to maximize interest, while keeping just enough money in the checking so that I don't bounce any checks.
Today, I learned that I don't have to do the money dance. I found out that Radius Bank's Hybrid Account acts as both a savings and checking account. It's one banking account to rule them all.
Here's how it works... You can use Radius Bank's Hybrid Account just like any checking account. You can pay people from it just as you'd expect. The big difference is that account balances over $2500 earn an interest rate that is extremely competitive with the top high-interest savings accounts. How competitive? Radius Bank's current 1% interest rate is actually better than Capitial One 360, Ally Bank, Everbank, and Bank of Internet.
So you get the best of both worlds... convenience of writing checks with an impressive interest rate.
If you are looking for gotchas, you are a smart consumer. I wish you luck, because I couldn't find any. There are no monthly fees or minimum balance (other than the initial $10 to open to open the account). In addition, ATM fees are rebated back to your account. (That is one of my favorite features of any bank.) And of course you get typical FDIC insurance.
I think this is a game changer. Once people get a taste of this, why would anyone go back? Who wants to shift money in separate savings and checking accounts?
[Editor's Note: The following is an article from my friend Julie. Many tried and true personal finance tips are summed up here... a good way to kick-start your savings goals for the new year.]
You know the funny thing about savings accounts? If you don’t have the available funds to deposit, essentially there’s nothing to save. As many of us struggle to make ends meet, the need to save often falls to the bottom of the list of priorities. Be that as it may, having a savings account is beneficial for various reasons. It provides a nest egg for personal emergencies or for larger priced purchases. The only trouble is finding the money to put in the savings. It seems like there’s never enough to go around.
So what does one do when they want to save, but can’t find the spare change to put in an account? Get creative… and disciplined. I know, I know, more discipline!? But it’s the most effective way to build your savings and for becoming financially stable. Below are a few methods for adding to your savings account each month:
1. Cut Back on Certain Expenses
Often the easiest way to find money to invest in your savings account is to evaluate your spending habits and find efficient ways to cut back. We often spend way beyond our means and in most cases it’s on things we want, but don’t necessarily need. Below are a few ways I chose to cut back:
· Bring Your Own Lunch – I love takeout just like the next person but when I checked my bank statements, I realized that eating out at even $5 per day was costing me a total of about $100 per month. So I decided to cut back on the eating out and now only treat myself to lunch on Fridays. This meant I was spending about $25-30 per month and could put the remaining money in savings.
· Downgrade Subscription Services – Do you have cable, data plans, or other accounts that require a monthly subscription or service fee? You’ll be surprised to see how they add up over the course of 30 days. I decided to remove all premium channels from my cable, downgrade my data plan, and even switch my Netflix services from streaming and DVDs to just streaming.
· Price Comparison Shopping – Lastly, I decided that for every purchase I made (whether its car insurance, hiring a contractor, or purchasing furniture) that I would compare prices. When I was able to find savings, I would put the difference in my account.
2. Start Small
Another way to grow your savings account is to start small. We often assume that if we don’t have hundreds of dollars to put away, it’s not worth saving. However, you’d be surprised to find out how far a few dollars (or pennies) can go over time – especially if your savings account has good interest rates. Start off with even a dollar per day $30 per month. In the course of a 12 month period, you’re looking at a savings totaling $360. The following year you can up it to two dollars per day and double your savings. As you free up more money in your budget, add it to your savings account.
3. Earn Extra Income
I know you’re thinking, “Not another job!” however, there are plenty of ways that you can earn money without ever leaving the house. In fact, according to Natalie Cooper of BankingSense.com , there are a lot of different ways you can earn money during your spare time. She included:
-Become a freelance writer -Sell crafts online
-Sell unwanted items
-Offer your services on the weekend (i.e. babysitting, lawn maintenance, etc.)
Cooper also added, "As you start earning money, be sure to put it all in the savings account. It can get quite tempting to begin dipping into the new earnings, but if you've lived this long without that extra money, you won't miss it in an account."
As you start earning money, be sure to put it all in the savings account. It can get quite tempting to begin dipping into the new earnings, but if you’ve lived this long without that extra money, you won’t miss it in an account.
You hear experts discussing how much money you should be saving, and it can become very intimidating. However, if you break the bigger picture down into concepts that you can easily follow it makes saving a lot easier to do. Some of the ideas above might require a bit of practice while others will come naturally. As long as you’re saving something, you’re doing a whole lot better than you were in previous months.
Most of us strive to try to keep a budget each month. Everyone has fixed costs that have to be covered, such as the rent or mortgage, insurance, and food. Some people call these a "monthly nut", but I'm not a squirrel. I like to call these "necessary expenses" and have tracked them over time. For many people keeping to a budget was easier years ago. Nowadays, are a ton of electronic payment methods available. Their convenience makes spending money we do not have that much more tempting. Impulse buying becomes easier - all you have to do is swipe either your debit card or your credit card.
This can result in a well-planned budget getting out of the water. Maybe I'm showing my age, but I remember when people would write checks at the grocery store. It slowed everything down. As one of those "quick swipe" credit card people I found this really annoying.
Looking back on it today, I have to respect it a bit. Those people actually spent time balancing a checkbook, so they knew exactly how much money they had. It was a great system for accountability reasons. With today's credit cards a lot of that accountability is gone.
I have to admit that I'm not very good friends with my checkbook nowadays. I thought about it for a bit and here are some of the reasons why:
I'm Lazy - I type thousands of words a day. It may sound crazy, but I barely know how to use a pen anymore. Adding an item to a grocery list is comical.
I Don't Need the Accountability - I spend more than enough time thinking about money by writing for this site. In return this website gives me accountability.
Checks can be Expensive - Last year I switched bank accounts. It's a long story, but since my tenants wouldn't get out when the lease was over, I had to stop accepting payment from them in order to evict them. However, they had the ability to automatic deposit money in my bank account, which allowed them to stay indefinitely... unless I switched bank account numbers.
So I switched, but that required getting all new checks. It was well over $25 for 120 checks of the very most basic design. That's almost half the cost of a stamp, simply to use my own money. I decided to go home and order cheap checks online. It was much, much cheaper. Not only that, but the bulk pricing was much better my bank's.
Sorry Mr. Checkbook, but for now we'll just have to be occasional acquaintances.
Yesterday, I wrote about how annuities can be confusing, especially with hidden fees. I was wondering if it was possible for me to create something that approaches an annuity without the complexity and hidden fees, using investment vehicles that I know and understand.
I'm going to start with two important disclosures before I dig in:
Annuities give you a guaranteed income stream. This is not going be guaranteed. The investment vehicles in some cases can lose value. The idea is that by diversifying amongst a few different option, you minimize that risk. And while annuities do give you guaranteed income, let's not forget the case yesterday of the annuity that charged more in fees than it paid out. I'd consider that a risk as well.
At age 37, I'm focused on growth not earning an income off my investments. For those reasons, I haven't fully researched all the options available. Please be kind and helpful in the comments, okay?
For sake of argument, let's assume that you had a million dollars burning a hole in your pocket. (Just your typical scenario, right?) You are thinking, "I'd really like to put this money to work to earn me $40,000 a year." (See what I did there with the Rule of 4%?) How am I going to get there?"
Well, I've got three options for you to think about. I would suggesting allocating your money amongst all three.
Laddered CDs - That link gives some CDs that are paying around 1.3% interest. If you put your whole million there, you'd only get $13,000 to live off of. That's not a lot, but at least it is guaranteed.
Dividend Paying Mutual Funds and ETFs - I honestly had a little trouble finding documentation of the yield on a lot of mutual funds and ETFs, but I found this ETF tracker that has the top 100 yielding ETFs. I'd stick with something relatively safe that I've heard of like Barclays SPDRs which seem to have some options in the 5-6% range. Obviously this is the farthest thing from guaranteed, but at least the ETFs are diversified.
Lending Club - I've written before that I'm getting a 7% interest rate at Lending Club and it seems like most people are doing better than me. Some people will say that Lending Club is too risky because it hasn't been around very long. You are relatively protected if they go out of business. Also a significant investment allows you to diversifying amongst thousands of loans, making it fairly protected (though if the entire economy goes Mad Max on us, they probably won't pay). Finally, there are institutional investors putting big money in Lending Club. It isn't as absurd as it sounds to do the same.
If you were to mix the three options equally, you could get around a 4.6% return. On that million dollars, you'd have $46,000 in income. As for fees, they are fairly transparent. Most CDs don't have fees unless you withdraw the money early. The ETF that you choose will have an expense ratio that will disclose the fee. Finally the Lending Club servicing fees are outlined on the website. You aren't going to get in a situation where some hidden fee is going to sap your million dollars.
Let me know what you think in the comments. What else should/could be included in here? Treasury bonds?
The other day when I was watching football, I saw a commercial that might make us both a little extra dough. The commercial was from Santander Bank, a bank that I've never heard of. They seem to be a fairly large European bank trying to move into the US. (And as luck would have it, it turns out that there's one within walking distance to me.) Update: My wife told me last night that they bought out Sovereign Bank and just started rolling out the name change. How embarrassed am I? This is the equivalent of me correcting her on a designer's name on Say Yes to the Dress.
The bank has an interesting checking account that I think some of you might interested in: this extra $20 account. It pays you $20 a month. In a world where interest rates are rock bottom and banks are increasing fees, it's refreshing to see a bank pay you money every month.
So how do you get your hands on that sweet, sweet $20 a month? You have to open a checking and savings account and set up a direct deposit of $1500 a month and pay two bills. Can't do both? You'll get $10 for the one you can do. Update: The company is making it complicated and making you do the direct deposit for $10 before you can qualify for the $10 to pay two bills. So you can't do either one. I know that $20 doesn't seem like much, but it would almost pay for Amazon Prime and Netflix (both a streaming and the DVD service). Overall, it adds up: $240/yr, $720/3yrs, $1200/5yrs (yes, I grabbed that straight from their website). And if you are a dual income household, you can double it up.
Are you going to read another article today that's going to put $2400 in your pocket over the next 5 years? I didn't think so.
Note: While this may seem like a sponsored post, I received no compensation from Santander Bank for writing this or if you sign up for their account. I simply thought the account was too good to keep to myself. Let me know what you think of this deal in the comments.
Have you heard of Bitcoins? They are a form of digital currency that have made the news here and there, but hasn't gone mainstream. However, that might be about to change.
If you aren't familiar with them, here's a brief introduction:
In June 2011, I wrote, Bitcoins: The Future of Money or End of the World? There's no question that there is a brilliant design behind Bitcoins. In fact, the design is so brilliant that despite a few obvious problems, (ahem, liquidity), I couldn't dismiss them. They truly could be the future of money.
If you read that article and bought some Bitcoins, you could sell them today for a nice profit. However, you would have gone on a roller-coaster ride watching about 80% of your investment disappear along the way. I like to judiciously speculate and even I can't convince myself to buy them. I tried to the other day, but after they nearly doubled in a few short days due to this Cypress mess, I couldn't pull the trigger. (Of course, I also like to buy things at a discount, so this sudden raise in rates made it the opposite of the "bargain" that I look for.)
I talked with CEO David Barrett of Expensify about their adoption of Bitcoin and why they've chosen to support it. If I was a real reporter, you'd probably see a quote here. Instead I'll just paraphrase how it went, using my own interpretation (not David's). Reimbursement via direct deposit is great because it only costs Expensify a few cents in transaction fees. Reimbursement to other accounts, such as Paypal are really tough, because Paypal fees eat up 3-5% of the reimbursement. As Expensify deals with more international clients, they have a need for a payment system that A) can meet their needs of servicing many countries and B) can keep the fees low. Bitcoin fits with exactly what Expensify is looking for.
I think many other companies will feel the same. That's one of the big benefits of Bitcoin. However, again the downside was support for Bitcoin. I asked Barrett about that and he was quick to point out that while Expensify is clearly an early adopter, the path for Bitcoin's legitimacy is already paved. Companies like CoinLab have been attracting venture capital funding in it's quest to provide support tools for Bitcoins. Silicon Valley Bank will be holding Bitcoins for CoinLab.
So now it's time for me to ask the readers? Is it time to start putting some of your money in this extremely speculative currency that may be where the future is going? Let me know if the comments.
[Final Thought that Maybe Only I Find Interesting: I didn't realize when I was talking with David Barrett that he was the CEO of Expensify. It wasn't until I read this this article on the Verge (which has the real quote from Barrett) that I learned it. Someone less professional than I would probably do Xander'simitation of theSnoopy Dance at getting the same level of access to the story as the Verge. Someone more professional than I would probably have not mentioned this...]
My boy is less than 4 months old, but if he was a different gender and maybe 13-14 years old, I'd be very concerned. There are no shortage of reasons that would make me want to Rapunzel her until she's at least 28. (Yes, I'm talking about you Sexy Baby documentary.) Perhaps it would be wise to get into the tower building business.
Combine that popularity with a prepaid debit card with tons of fees and parents have a potential problem. Yes, Justin Bieber is going to offer his own "SpentSmart" prepaid card through BillMyParents.com. My wife jokes that she's going to tell Little Man to go to IGotAJobToPayForIt.com or ICollectedCansAndSavedForIt.com when he gets older. She's not really joking though as "Bill My Parents" is just not going to fly here.
The card appears to be anything but "SpendSmart." Here's a list of the fees (rounding up the nickels):
$3.95 monthly fee to have the card... which is around $50 a year. If you are loading $1000 on the card, and I think that's extremely generous to give a kid that's a ~5% annual fee
Loading charges of ~$3 from a credit or debit card and $0.75 from a checking or savings account. This discourages loading the card often with money, but that's exactly what you'd want to do with a teen so that they don't have access to $1000 at one time.
Lost card replacement fee of ~$8. I don't know if I was a typical teenager, but I lost things fairly often, so I could see this adding up.
ATM charge of $1.50 to withdra the money, and 50 cents for a balance inquiry. So the card costs me money to carry with the annual fee, money to see how much I have there (at least at ATMs) and money to access the money (at ATMs). I'm sure this doesn't cover the fees of the company that owns the ATM itself, so that's a double hit.
An inactivity fee of $3 if the card isn't used for 90 days. So even if I'm paying to carry the card, if I don't use it, there's a fee.
If you were going to get this card for your teenager and put $1000 total throughout the year in small regular increments, I could see it adding up to about $75 in fees or about 7.5%. If that sounds terrible, you've got a keen ear.
In BillMyParents.com's defense they seem to build some good technology into the card that could actually help parents keep track of their child's spending. Also, let's be honest, Justin Bieber's branding isn't going to come cheap either.
If the title wasn't exactly clear, I'm changing my banks. This post is actually quite a bit overdue. I had been gradually doing it for a couple of years now. I would have written about it earlier, but I didn't realize it until recently. That's how gradual the change has been.
It's not that Bank of America has done anything in particular to lose me as a customer. I know many were upset by their announcement to charging fees on debit card purchases (though Bank of America changed its mind on the fees). I wouldn't have been affected by it since I rarely use my card as a debit card. It comes down to the fact that USAA is a better fit for me and my family.
What sets USAA Apart
The first thing that comes to mind is customer service. I know everyone has their favorite companies when it comes to customer service, but in almost every case it seems anecdotal. I could show you ten bloggers and each of them would have a favorite web hosting service - and a lot what they'd talk about would be the customer service. With USAA, it close to unanimous that their customer service is the best. What I like the most is that when I call I get the person's direct extension in case I need to call back or follow up.
The other thing that sets USAA apart is that they actually give you money back at the end of the year if they have any left over. I know that sounds odd. I don't have the full explanation unless it is this Wikipedia entry, but my wife has multiple times gotten a check back at the end of the year. (Since she is the sponsor of the account, more on this later, I don't have the full details of what they sent for the both of us. When it's money in my favor, I tend not to ask too many questions.)
It's taken me a little while to embrace USAA. When I first looked into it, I was curious about the brokerage accounts. I compared them to Zecco who had been offering free trades at the time. I didn't see their rates as being competitive. However, Zecco has since started to charge for most (if not all) trades now. The gap has closed to where the customer service and the ability to have my savings, checking, insurance, brokerage, and IRAs in one place far outweighs a couple of dollars a year I pay in putting my Roth IRA money to work in an ETF.
Recently, I was able to consolidate the 401ks from three old jobs into one Rollover IRA. I can't tell you how much simpler it is to be able to log into one web site and see it all.
Why I may keep Bank of America
While USAA is great for any number of reasons, I still see a need for my Bank of America account. It's not that I have any allegiance to Bank of America, but that I feel the need to have a bank in the real world - one with branches and people who I can talk to face-to-face. There are a couple times where this has come handy - usually when I need to have a certified check of some sort.
In some ways my banking has become a little microcosm of my business. It is 90% done through the Internet, but 10% done in the real world. I don't see that changing any time soon. USAA gives me a bank that has the online tools that match my business.
So Bank of America, this isn't really good bye like I said in the title. We can still be friends. I am just looking for more out of my banking relationship.
I got an email from my friend Kosmo at The Soap Boxers on Monday morning about Suze Orman creating a line of pre-paid debit cards. His exact words, "$36/year just to access your own money?" That was kind of rhetorical question. The point he was trying to make was clear - it's not the typical product that personal finance gurus typically endorse.
My first thought was that if it was something that helped with your credit, it might be a good idea like a secured credit card. It could, in theory, be used as a bridge to help someone build credit, improve their credit score, and get a bank that doesn't charge such outrageous fees to access your own money. However, that's not what is happening with Orman's card. As John Ulzheimer points out at around the 2:50 mark in this interview it doesn't help with your credit score.
... and it shouldn't. It is a debit card, not a credit card. Your credit is supposed to be measured by how you used credit, money that you don't have. If I buy milk with money I already have through a pre-paid debit card, it doesn't, and shouldn't, tell the credit bureaus anything useful about my ability to responsibly handle credit.
This hasn't stopped Suze Orman from heavily implying that it will help people with credit scores. In perhaps the biggest blogging sacrifice I've made for you, the reader, I subjected myself to watching The View this morning. (Okay much of it, I skipped due to the magic of DVR.) Throughout the show, I was thinking, "They couldn't have gotten Judge Judy to join in to complete the torture?" Though I will admit that Joy Behar's commentary was actually entertaining.
During The View, Suze Orman heavily implied that it would help with credit scores, but didn't actually say it. She had a two minute rant about how important FICO scores are in this economy and then introduced her card. Here are some quotes from her:
You use this instead of cash. It's a debit card... The main reason that I want you to use this is that sometime people don't use cash, they don't carry cash anymore, and there's no record of what they are doing. Overall, the big movement of this card, and the people-first movement, is I want debit cards to create FICO scores. Currently they do not.
If you pay on your debit... if you pay in cash you get penalized because you don't get any credit for that.
I'm trying to change America. Join me in my people-first movement.
Now if just watched The View and didn't have any background about this card, you would think that it helped build credit. However, if you watched the John Ulzheimer video above it doesn't currently work that way. Your transaction history can be reported to a credit bureau if you choose, but they don't use it their credit analysis. They just say, "Thanks for the free data about your life... Om, nom, nom, nom..."
This is the kind of marketing that is misleading to consumers. To talk about improving credit for 5-10 minutes and then present a card and talk about the issue as if the card is the solution to building credit. Orman is hoping that it will be the solution one day. Perhaps she expects TransUnion to use that transaction data and start applying it to their credit algorithm. However, she should be open and honest in her marketing that it doesn't help your credit as it is designed today.
In the end, I'm not that disappointed with the card itself. As John Ulzheimer said in the video above, it is the best option in a bad category ("the cream of the crap"). It is Orman's misleading marketing of the card and her refusal to enter into any kind of meaningful dialog with critics that I have a problem with. Due to that misleading marketing, I think this article has warranted the use of the word "Scam" in the title.
You may have noticed a new sponsor lately. Yep it's Visa. You might recognize them from such places as the logo on the cards in your wallet, and the signs on a door of a shop. In fact it's just about everywhere (you want to be) ;-). Anyway, I found myself with the opportunity to pass on a couple of nuggets of information about debit cards.
Q: What's the best way to earn rewards on a debit card?
Ask your debit card issuer if they offer a debit rewards program. Often, issuers will pair up with a partner like an airline or hotel to give you the ability to earn points on a debit card toward rewards you care about. Some financial institutions also offer the ability to earn points for qualified purchases that can be redeemed through an online catalog, for items like gift cards, airline vouchers and hotel accommodations. It's important to understand how you can earn points toward rewards "“ what purchases qualify, whether you earn points when you enter a PIN or sign for your purchases, etc. Make sure you ask these questions of your financial institution.
My take: I have to be honest, I didn't really expect them to say that you could earn rewards on a debit card. I get nothing from my Bank of America account. However maybe it's possible with these high interest 5%+ Interest checking accounts. That article is a few months old and 5% may be tougher to get now, but it seems like a good way to get some rewards.
Q: Is a debit card as safe to use as a credit card?
Despite the popularity of debit cards, consumers are often confused about the security features and consumer protections debit cards offer. As a matter of fact, many of the same features and protections provided by their credit card are also offered with debit cards. Protections which guard cardholders from fraudulent or unauthorized charges, like "Zero Liability" are typically in effect when a cardholder signs for their purchase or makes a purchase online. Consumers can also see timely replacement of funds from their financial institution, in the unlikely event of fraud, and also have the ability to dispute debit card charges should an issue arise with a merchant regarding your purchase "“ just as you would with a credit card.
It is important to continually monitor your monthly statement to identify any unauthorized transactions. If you notice fraudulent activity on your card, you should contact your financial institution as soon as possible and report it "“ this may help to reduce your liability.
I don't make a lot of debit card purchases, but when I do it seems like it's almost always with a PIN number, not a "Zero Liability" method like signing. For that matter, I'm surprised that purchases online qualify for zero liability. It brings up the interesting question of whether I need to be prompt in reporting fraudulent activity when "zero liability" protections are in effect. I'd love to "help to reduce my liability" from zero.
As suggested by FTC regulations, please note that we may have a financial relationship with the companies mentioned on this site. We frequently review products or services that we have been given access to for free. However, we do not accept compensation in any form in exchange for positive reviews, and the reviews found on this site represent the opinions of the author.