Thursday, May 28, 2009

Hot Diggity! My Cost of Living's Goin' Down!

I got two pieces of mail yesterday that brought some good news -- my cost of living is going down!

Good News #1
In February, my rent went up by $20/month and I'm currently paying $1,275/month on a 6 month lease. I predicted that my rent will probably go up again in August. But lo and behold, my apartment is offering a six or twelve month lease at a monthly rate of $1,175/month for a cool $100/month savings.

The dilemma I face here is whether to sign a 6 month lease or a 12 month lease. With my job situation uncertain, I'm leaning towards the 6 month lease. After all, my biggest asset in a job hunt is that I'm not tied down to a mortgage and I'm completely mobile.

I hate to admit this, but my first thought upon learning about the decreased rent was, "What can I buy with $100/month????" (*Slap myself*) My next thought was to pay off my debts more quickly. Hmmmm... but my EF is under-funded. Hmmmm...

Ultimately, I've decided to put the $100/month into my savings, but not into my EF. I will earmark it into my cost-of-living-adjustment (COLA) fund. As explained previously, my COLA fund was set up to pay for any unexpected or unanticipated increases in my monthly expenses (e.g., increased insurance rates, cell phote rates, etc. etc.) Money from my COLA fund will tide me over until I can re-adjust my budget to the new realities of life. Since my windfall is from an unexpected decrease in my cost of living, it only makes sense to use it to prepare for an unexpected increase, right?

Good News #2
Waaaaaay back when, I purchased an Accidental Death Coverage insurance policy that I've been paying about $7.95/month. It covers me for a cool $1M if I die accidentally as a "fare paying passenger" but only $100,000 as an auto/pedestrian and $50,000 for all other "accidents". I'm not sure why I never cancelled the policy other than I thought I would be "jinxing" myself. (Did I not tell you I'm insane?)

Anyhoo, the credit card that this policy's automatic payment system is linked to was cancelled due to a security breach. I just got word that this bogus policy will lapse unless I call to update my automatic payment to another credit card. Fat chance.

But blogger M is for Money's post titled, "Dying Isn't Cheap", gives me some pause for thought. Rather than banking the $7.95/month premium, perhaps I should instead apply it towards a legitimate term life insurance policy? After all, God forbid I should die accidentally or prematurely, I do not want to saddle my parents or my sister with the cost of cremation, etc.

I guess that will be my next research project - buy myself a cheap term life policy.

Wednesday, May 27, 2009

Out of Sync with Reality

If there's anything this recent economic crisis taught me, it's that when things are out-of-sync with or disconnected from reality, it's like being a red-uniformed, bit-character in Star Trek -- things aren't going to turn out well.

Case in point, when mortgagors and credit card companies stopped linking the borrowers' ability to re-pay to its lending standards, we got the financial system meltdown. Yesterday's market rally seems to be another serious disconnect. The S&P jumped 2.6% based on the highest increase in "consumer confidence" in 6 years. What the heck are consumers confident about? Housing hasn't bottomed out, credit card companies are chomping at the bit to screw-over responsible card users and GM is going to file BK. Oh yeah, and let's not forget the S&P may downgrade US debt.

If that weren't bad enough, looks like we're headed back to $3/gallon+ gas. I've been keeping track of my local Costco's prices since late July last year and I'm seeing an ominous trend.































































Most experts do not believe the recent oil price increase is demand driven. But paper demands have increased inexplicably. This leads me to believe there's some sort of market manipulation by oil companies, refiners, hedge funds and/or other institutional investors.

Even assuming a real economic recovery is underway, I think that surging gas prices will squelch this fragile rebound. I don't know about you, but $3/gallon gas will cause me hardship. I know if it's going to cause me heartburn, it's gonna hurt others as well.

In November, I decided to start donating to charity regularly because my gas expenses went down significantly. Unfortunately, when gas hits $3/gallon, I will have to suspend my charitable giving.

Do you think gas will hit $3/gallon? What are you doing to prepare?

Update: According to this LA Times article, "Retail gasoline prices jumped by more than a dime over the last week in California and nationwide as oil rose to a new high for the year. But analysts had some reassuring words: Gas prices should be nearing their peak for the year, and a repeat of 2008's record run-up isn't anticipated." Uh-huh. We'll see.

Tuesday, May 26, 2009

My Insane Accounting

I previously wrote about my 7 saving accounts and 3 checking accounts. I'm embarrassed to even write about my personal accounting system since it's inefficient, cumbersome and insane. But it's been working for me and until there's a drastic change in my life (i.e., I get laid off), I don't really have any impetus to change the way I do things.

Some of you commented how easily I can close down my inactive accounts. But that would mean I would need to re-jigger my current system and re-draw my crazy spreadsheet. I really don't want to have to go through that unless I really have to.

I also discovered that I'm irrational about money. I have this strange need to compartmentalize my money into different "buckets" for different purposes. For example, let's suppose I have $1,000 in my savings specifically earmarked for irregular expenses. And let's suppose I incur $100 in vet bills and $500 in car repairs this month. Most sane people would just pay $600 out of the $1,000 savings account and make plans to replenish the account.

Not me. Paying $600 out of $1,000 would drive me nuts. I would feel more comfortable if my $1,000 earmarked was categorized into a "pet fund", "car fund", etc. etc. I realize it's coming out of the same bucket of money, but categorizing and compartmentalizing has a calming effect on me. Go figure.

Anyhoo, here's my mental illness spelled out:

1. My Semi-Inactive Accounts (4 Accounts = Savings #1, 2, 3 and Checking #2)
My bricks-and-mortar savings at Wells Fargo (savings #1) and my credit union (savings #2) have approximately only $100 in each account. My BofA (savings #3) account has approximately $77 in it. Since they accrue piddly interest rates, I have no intention of increasing the amount in any of them. They are mostly kept open for convenience (i.e., in case I'm in a situation where I need to access some quick cash at an ATM).

I'm not exactly sure how much I have in my Credit Union checking #2 account. I only opened this account because it's the only true free checking account that doesn't require a monthly direct deposit from payroll in order to avoid monthly fees. If and when I get laid off from my current employer and if I have a significant lag time before I start my next job, I will probably designate checking #2 as my primary checking account.

2. Active Checking Accounts (2 Accounts = Checking #1 and 2)
I get direct deposit of $100 each pay period into my Wells Fargo checking #1 and the remainder of my paycheck goes into Bank of America checking #2.

As I previously wrote, checking #2 pays the bills. Checking #1 is supposed to be my "fun money", but I've regularly shifted 20% into my EF, 25% into my "mom and dad fund" and 20% into my car maintenance fund. But since checking #1 isn't linked to any of my online saving accounts, I have to write a check to myself to deposit into checking #2.

So let's summarize the inefficiency of this system: Payroll $100 -> checking #1 -> $65 into checking #2 -> $65 to savings #4. Insane, I know.

3. SmartyPig Account (1 Account: Savings #7)
Every month, my BofA checking #2 automatically transfers $25 into my BofA savings #3 to avoid monthly fees. (This means every month, I need to make sure that I set aside $25 to cover the transfer.) I've recently set up an automatic transfer of $25 from my BofA savings #3 into my SmartyPig savings #7, which is currently getting 3.05% APY. My SmartyPig Account is designated as a pure EF account.

So let me summarize the inefficiency of this current system: Payroll -> Checking #2 (set aside $25) -> $25 to Savings #3 -> $25 to Savings #7. Pretty silly, eh?

4. ING (1 Account: Savings #4)
My ING savings #4 account holds the majority of my "irregular expense" money that I don't need to tap right away. It takes approximately 2 to 3 business days to get money transferred in and out of this account so it's not the most convenient place to stash my emergency funds.

Currently, my ING savings #4 account is separated into the following categories:

a. I-Bond Fund

b. Mom and Dad Fund: To those of you new to my blog, my parents are not in the greatest financial shape. Knock on wood, they have not asked my sister or me to help them out financially in any significant way... yet. In the interim, I give each of them $100 in cash for mother/father's day, birthday and Christmas. This fund covers that expense.

c. Car Repair/Maintenance Fund

d. Pet Care Fund

e. Christmas Fund

f. Computer Fund

g. CD Ladder Fund

h. EF #1
Any money I have left over from my first paycheck of the month gets allocated into the above funds.

5. Dollar Savings Direct (1 Account: Savings #6)
Savings #6 holds some EF money, an earmark for 2009 taxes and my "arbitrage" fund. (My arbitrage fund holds money I intend to use to pay off my 0% credit card balance in October.) This fund has the highest APY (before I opened SmartyPig), so the majority of my EF is held in this account.

I transfer $931 of "arbitrage" money every month into this account.

6. Citibank Ultimate Savings Account (1 Account: Savings #5)
I allocate whatever money I have left over from paycheck#2 of the month into this account. Savings #5 holds the following funds:

a. Roth Fund: I try to deposit $50/month into my Roth account every month. But some months I'm short. I pay the shortfall out of this account;

b. COLA/Insurance: I've started paying my insurance premiums in one lump sum with a credit card rather than paying $3.50/installment fee to my insurance company. I pay $120/month into this account to cover my annual premiums. I also put extra money into this account to cover any unexpected cost of living increases. I tap this account until I can re-adjust my budget to cover the increased cost of living expense on a regular basis.

c. Vacation Fund

d. Extra Paycheck Fund: I get paid every other week and 2 months of the year, I get 3 paychecks. I wish I'm banking my 3rd paychecks, but I can't. I currently put the 3rd paycheck into this account and distribute it equally over the next 6 months to cover my living expenses. One of these days, I hope my livings expenses will go down enough so that I can just bank my 3rd paychecks.

e. EF

I keep this account open for liquidity purposes. Unlike ING, SmartyPig or DollarSavingsDirect, I can access money from this account immediately at a branch.

My once simple system has grown into a monster. But as they say, if it ain't broke, don't fix it. Oh, and here's another cliche: there's a method to my madness. Too bad only I can comprehend it!

Friday, May 22, 2009

Should You Keep Adding To A Fully Funded EF?

I know I said I was going to write about the insane accounting system I use to keep track of my multitude of savings accounts. But I went out last night with one of my vendors and I'm a bit hung over. Nothing like starting a 3-day weekend with an Excedrin headache and an upset stomach!

Anyhow, I digress.

Yesterday, I had an interesting conversation with the vendor. The vendor said he came into some sort of windfall that allowed him to fully fund a year's worth of expenses into his EF. He said something to the effect of, "Assuming I don't touch it, I won't have to worry about adding to it ever again!"

I countered, "Actually, you probably should continue adding to it since you'd probably want your EF to keep up with inflation."

The vendor looked at me as if I'd just farted.

I asked, "How much interest is your EF getting in whatever account it's in?"

Vendor: "I'm not sure."

Shtinky: "Well, my online savings accounts are getting anywhere between 1.5% to 3.05%. Let's just say your annual expenses are $50,000 and interest rate you're getting is 2%. And let's say the historical inflation rate is 4% per annum."

Vendor: "So what?"

Shtinky: "Adjusted for inflation, in 18 years, you'll need $100,000 to cover your annual expenses, assuming your expenses remain constant. But since you're only getting 2% APY on your EF, you'll probably be short by about $13,000 or so."

The vendor waved off my hypothesis. He indicated that he expects his expenses to decrease in 18 years, so adding to his EF is unnecessary. (Not sure how he expects his expenses to decrease, since his kids will be college age by then.) He also felt that the additional money that I suggest he keep adding to keep up with inflation would be better invested elsewhere.

What do you think folks? If you had a fully funded EF, do you intend to keep adding to it?

Anyhow, have a great Memorial Day weekend!

Thursday, May 21, 2009

Bank Account Madness

I have a confession. I have 7 savings account and 3 checking accounts. It wasn't always like this. Up until a couple of years ago, I was a one-bank woman. If banks were single men, I'd be a promiscuous 'ho.

lolcats and funny pictures

In the early '90s, I opened checking #1 and savings #1 at Wells Fargo while I was a Freshman in college. Wells Fargo really didn't give me great products or services, but I liked them enough. In Southern California, Wells Fargo is one of the easiest banks to do business with since they have ATMs and branches everywhere. But at some point, Wells Fargo started charging me $7.00/month for online bill pay. Little did I know I didn't have to put up with this lousy service!

In early 2005, I opened savings #2 at my local credit union. I opened the account under the naive thought that if I had a savings account, I would get better terms on my car loan. (I didn't.)

Then in October 2006, I received a letter from Bank of America offering me $125 if I opened up a new personal checking and savings account. I was told I wouldn't be charged a fee on my checking so long as I had direct deposit every month. I was also exempt from fees on my savings if I transferred $25 every month from my checking to my savings. I thought, "What the heck?" and opened checking #2 and savings #3. At this point, I started using my BofA checking account as my primary checking account to pay bills. My Wells Fargo became my secondary checking account for "fun money".

In January 2007, I received a promotional mailer from ING offering $25 if I opened an Orange Savings Account. As far as I could see, there was no catch and the bank offered a remarkable 4.41% APY. Wells Fargo and BofA was paying a laughable 0.01% APY, so how could I turn this offer down? I signed up for savings #4, got my $25 and I was introduced to the wonderful world of online savings accounts. I was hooked!

In April 2007, I learned about another promotional offer for $100 if I opened a Citibank Ultimate Savings Account online. Again, there didn't seem to be any catch and the APY was competitive with ING. I opened savings #5. (Ahhh. The good ol' days when Citibank was giving out money, not taking money.)

In November 2008, I learned about DollarSavingsDirect, who was offering 4% APY while other banks were paying approximately half. I enjoyed the thrill of rate-chasing, so I opened savings #6. Little did I know that the interest rates would plummet at all of the online banks in less than a year. But online banks still offer a much better rate than the bricks-and-mortar banks. I'm sticking with them.

Around the same time, I opened checking #3 with my local credit union. I was concerned that if I got laid off and didn't have additional direct deposits, I'd be charged monthly fees by Wells Fargo and BofA. The local credit union offered a true free checking account, so if and when I get laid off, I'm certain that I will close down checking #1 and checking #2 and start using checking #3 exclusively.

And finally, most recently, I opened savings #7 through Smarty Pig. This was partly due to my addiction to rate-chasing (currently 3.05% APY) and because I liked the whole Christmas Club-like plan it offered.

You're probably wondering, why don't I just close some of my accounts? I wondered about that too. And here's what I came up with:

  1. I'm lazy;

  2. I like having options, including ATM and branch accessibility;

  3. I'm lazy;

  4. In case any of my banks fail, I have the peace of mind that I have money accessible at other banks while I wait for FDIC or NCUA to make me whole;

  5. I'm lazy;

  6. I may be clinically insane;

  7. I have too much time on my hands;

  8. Did I mention I'm lazy?

I was planning to write the bizaare and complicated system I use to keep track of my money, but I realized it will take forever. Tomorrow, I'll write about my crazy system and my even crazier spreadsheet.

Wednesday, May 20, 2009

My FICO Score Improved...

...from 712 to 723. Dagnabbit! It's still a couple of points short of my goal of 725.

I purchased my score from myFICO. You can purchase a standard FICO score for $12.76 (usual price $15.95) before May 31st by using the promotion code: FICOMAY20.

Nothing new here. I already know about my past late payments on my student loans. Only time will resolve this issue.

But another issue that's dragging my score down is the fact that I'm currently using 18% of my credit limits right now. This too will be resolved in October when I plan to pay off my $11,000+ credit card debt. The credit card balance currently has a 0% APR until October so I'm in no hurry to pay it down before then.

The myFICO site has a pretty cool simulator that will estimate how certain actions taken can affect your score. I simulated a scenario where I paid off my credit card debt in 6 months. According to myFICO, my score should improve to about 723 - 763. If I can get beyond 760, that should get me into the top 2% of all credit scores. Cha-ching!

Additionally, in a couple of years, assuming I keep paying my bills on time, my delinquent record should fall off and my score should improve to 813 - 850 range. Awesome!

In another 6 months, I'm planning to purchase my FICO score from TransUnion. I've heard that TransUnion scores are a bit more lenient. If my CreditKarma score is any indication, I suspect that may be true. We'll see.

I'm not sure why I bother to check my FICO scores since I don't intend to make any new purchases. But I guess I do so because my FICO score is a report card on my financial progress. And my report card tells me I'm on my way.

Tuesday, May 19, 2009

My Future Without Social Security

I was cleaning off my desk this past weekend when I found my March 2009 Social Security Payment buried underneath piles of junk mail, old bills, magazines, etc. In looking at the Statement, couple of things really depressed me.

Depressing Thought #1
The only thing I find useful or remotely interesting in the Statement is a snapshot of my earnings history. I always took great pride and pleasure in seeing how my income always went up and up. I suspect that when I get laid off from my current job, this upward trend will break.

Years I Worked

My Taxed SS Earnings

My Taxed Medicare Earnings





























































But ironically, I think my happiest years were when I was earning the least (with the exception of when I was attending law school between 1995-1998). I may not have been earning enough to buy or do much, but I definitely had less stress then. I'm sure this is mainly because I didn't have the onerous debt back then that I have now. It never fails to amaze me the crushing effect debt can have on one's soul. Perhaps when I'm debt-free I wouldn't care how much I made.

Depressing Thought #2
I don't pay attention to the rest of my SS statement (particularly the estimated benefits section), since I truly believe that I won't be receiving any benefits from Social Security and/or Medicare when I retire. After all, the Trustees estimate that the SS trust fund will be depleted by 2037 and the Medicare trust will be exhausted by 2017.

I guess I'm really depressed about this since:
  • My tax payments have (and will continue to) subsidize others, but when it's my turn to retire, I may not see a lick of it.

  • My 401k administrator has implemented an "advice and planning" program. In this program, I'm asked whether I want to take into consideration my "estimated" SS benefits.

Here's the difference in my projected retirement income between receiving Social Security benefits and not receiving Social Security benefits:

Without Social Security Benefits

With Social Security Benefits

A marked difference, eh? I'm depressed at the thought that I'm contributing quite a bit towards my retirement now, but I may have to live at poverty-line in retirement.

For example, I contributed $19,993 into my 401k last year (including company match). I'm on track to contribute much more this year. I've also started purchasing I-bonds ($25/month) and I've started contributing $50/month into my Roth IRA.

Keep in mind that in 23 years, $1 is only worth about 40 cents today, assuming 4% annual inflation. So without Social Security benefits, I basically have a 70% chance of having a $44k/year lifestyle in 23 years which is the equivalent of living on approximately $18k/year now!

I never expected to live high on the hog in retirement, but I never thought I would have to scrape-by even with so much effort now. Am I the only one who is worried sick that she or he may not have enough to comfortably retire?

Monday, May 18, 2009

My Creeping Inferiority Complex

Do you ever talk with your friends and have this ugly monster called an inferiority complex creep in to your mind and soul? The past couple of weekends before last, I got together with some friends, all who seem to have a much, much better living standard than I.

All of my friends are responsible people and I assume none have the kind of debt I do (other than their mortage).

  • Friend A is single with no children, living in one of the duplexes owned by her parents on the westside of L.A. at below-market rent. Her home is nicely decorated and she's been on a spending spree lately, dropping over $1,000 within the span of a couple weekends on clothes and accessories at trunk sales. Friend A is also in the market to buy a big, flat screen TV. Friend A says she is debt free.

  • Friend B is married with two children, living in a 4 BR home she owns with her husband in the ex-burbs of Los Angeles (actually, Ventura County). She too has been on a spending spree, her latest purchase being her new toy, an iPhone. Her car recently blew past 200,000 miles and she casually commented that she wants a BMW.

  • Friend C is also married with one child and owns a home in the westside of Los Angeles. He is currently driving a BMW whose lease is coming due, but has already purchased a brand new car. He is talking about getting his car lowered, getting snazzy rims, etc. etc.

A lot of our discussions were centered around consumerism. Here's a random sampling of our topics of discussion:

    Flat Screen HDTV
    Friend A said she was going to buy a flat screen HDTV. Friend B and her husband insisted that there's no point in owning a flat screen TV that's smaller than 50 inches, since you don't get the full effect of HD programming with anything smaller. I said, "I'm too cheap to get HD programs on my cable subscription. So buying a 50 inch TV is wasted on me. As a matter of fact, I don't even have DVR."

    Hawaii Trip
    Friend A, B and C and I were talking about our favorite islands in Hawaii. Friend A is an event planner for a nationwide company and she often gets to travel to fun, exotic places on business. She also gets comp'd by companies in the hospitality industry who want her business. I mentioned that I stayed at the Hilton Waikoloa Village on the Big Island. She grimaced and thought it was a cheesy resort. I responded, "Well, that's all I could afford. I couldn't afford to stay at the Fairmont Orchid." I was *this close* to point out that she's never had to pay out-of-pocket to stay at the tony, five-star resorts, so she really has no basis to be so uppity.

    Friend B and I were talking about someone who quit her job out of frustration and is now a stay at home mother. The SAHM supposedly said, "I just want a $50,000/year, 9 to 5 job." Friend B said, "Why bother to go back to work for just $50k/year?" Really? Is $50k/year a mere pittance? It made me wonder.

I want to make clear, that none of this discussion made me want to run out on a spending binge to Keep Up with the Joneses. But there was a nagging sense within me that I'm pathetic. It's just depressing that at my age and salary, I still live in a 1 BR rented apartment furnished with hand-me-down, mismatched furniture. I don't have fancy-schmancy electronic devices. (For Pete's sake, I don't even have an iPod shuffle or a digital camera!) I also felt pathetic that I had to defend why I can't buy a 50-inch HDTV, a Wii, an iPhone, stay at 5-star $500/night hotels, etc.

I guess I should always remind myself of the Aesop's Fable of the Ant and the Grasshopper. I'm hoping that the sacrifices I make today will pay dividends in the future.

Monday, May 11, 2009

Shtinkykat At Band Camp This Week

I'll be attending an industry conference (the adult equivalent of band camp) this week so my blog will be dark in the interim.

Have a great week folks!

Friday, May 8, 2009

May Donation - Survivors of Suicide Loss

I previously wrote about an acquaintance who committed suicide over the New Year's holiday. My friend, through whom I met the deceased, has been attending Survivors of Suicide Loss (SOSL) group meetings with the decedant's fiancée.

From this recent incident, my friend and I were surprised to learn that we are both survivors of suicide. My friend's father took his life when she was just 16. My grandmother took her life in 1998.

In honor of my friend's father and my grandmother, this month's $20 donation will go to SOSL.

In the United States a person dies by suicide every 16 minutes, claiming over 30,000 lives each year. From 1995 to 2006, suicide took the lives of 3,959 San Diegans.

Among 15 to 24 year olds, suicide is the third leading cause of death.

Among 5 to 14 year olds, suicide is the fifth leading cause of death.

The fastest growing group completing suicide is children between the ages of 10-14. This rate has doubled in the last two decades.

Firearms are used in more suicides than homicides. From 1995 to 2004, suicides outnumbered homicides by 2.35 to 1 in San Diego.

90% of all people who die by suicide have a diagnosable psychiatric disorder at the time of their death.

60% of all people who die by suicide suffer from major depression - the most treatable of psychiatric illnesses.

Studies indicate that the best way to prevent suicide is through the early recognition and treatment of depression and other psychiatric illnesses.

About SOSL
Survivors of Suicide Loss, Inc., is a nonprofit, nonsectarian, self-help support group system for those who have lost a relative or friend through suicide. The Survivors of Suicide Loss volunteers are dedicated to providing information and support to assist in the grieving and healing process.

It is a support group of people who help one another through the stages of grieving. The support group members share feelings of guilt, anger frustration, emptiness, loneliness and disillusionment. For some, it is hard to identify or even to understand their feelings. Through others' expression of what they are feeling, the members begin to have a better awareness of what is going on inside us.

My friend and the decedant's fiancée both attest that the SOSL meetings have been very helpful. Hopefully, by donating to the organization, I can help save a life by helping raise suicide awareness.

Thursday, May 7, 2009

Jones New York Friends and Family Discounts

I have a friend who is a lot like an airport hub. She is so well connected and generous that I often reap the benefits. For example, I'll be catching a screening of the new Star Trek movie at Paramount Studios this weekend, complements of my bud.

Now, one of her friends has generously let her know that between 5/7 and Sunday 5/10, all friends and family members of the Jones New York brand line can get 30% off all regular-priced merchandise and 20% off sale merchandise online by using the following codes.

Jones New York

Anne Klein

Nine West


Easy Spirit

Live long and prosper, friends!

Wednesday, May 6, 2009

Opened a SmartyPig Account

This is a follow-up to my post yesterday -- I opened a SmartyPig account. SmartyPig itself is not a bank per se, but it partnered with the FDIC-insured WestBank, to form a "nationwide savings initiative".

Opening the SmartyPig account was straight forward and easy. The identity verification process went without a hitch. I was able to open an account and link my funding source (i.e., my bricks-and-mortar savings account) in less than 20 minutes.

Although I can set-up my SmartyPig account like any other online savings account, I decided to give the "savings goal" feature a whirl. I selected the day of the month I wanted to deposit money and the funding source. I could've added an additional funding source, but I stuck with my bricks-and-mortar savings account.

I was then informed that $25.00 would be immediately withdrawn from my funding source that would not count towards this month's savings goal.

I then set up a savings goal (e.g, $1,000) and the time frame I want to achieve the goal (e.g. June 2012). SmartyPig automatically calculated the monthly contribution amount of $25.

This was an arbitrary goal I input. I can always edit or stop my savings goal and I can also transfer my funds back to my funding source via ACH transfers with no penalty.

I decided not to make my SmartyPig account "public". A SmartyPig public savings goal is one where a customer chooses to let his or her friends and family members see his or her savings goals, and allow them to make contributions if they so choose. Although this is a very creative and clever feature, I would feel awkward asking my friends and family, "Please donate to my vacation fund!" But if anyone figures out a way to ask for money without being perceived as a moocher, please do let me know. I'll make my account public then.

I think the SmartyPig account will work out well for me. I currently have my bricks-and-mortar savings account linked to my checking account. In order to avoid the monthly service charge, I have $25 from my checking acount automatically transferred to my savings account. My bricks-and-mortar savings account is currently yielding only 0.1% in interest, but by transferring $25/month into SmartyPig, I'll now get 3.05% APY.

The only problem I see with this arrangement is that I've now opened my 7th savings account. *egads!* One of these days I will simplify my banking. One of these days...

Tuesday, May 5, 2009

The Christmas Club Reincarnated

When I was in my early 20's, I used to work for a company that used cavemen as their commercial pitchmen. One of the benefits the company offered was a Christmas Club savings account through its company credit union. The credit union took out $25 from every paycheck until November, and I had over $600 to spend on Christmas. Ahhhh, those were the days.

Just to get off the topic here a bit, after one year of contributing to the Christmas Club, my mom said to me, "Don't worry about nice gifts. You saved that money, you should buy yourself something nice." We were at a chi-chi mall and my mom suggested that I buy myself a Chanel suit with it. I was excited that I would buy a Chanel suit with cash! But my hopes were dashed when I looked at the price tag - over $1,500! Needless to say, I didn't buy the suit. And I still haven't. I don't know why I'm bringing this up other than that every time someone mentions "Christmas Club", I'm always reminded of how my lofty dream was once crushed by the cold tsunami of reality. Ha ha.

Anyhow, I digress.

I've been doing my own Christmas Club savings through ING and my nifty Excel spreadsheet. Although I call it my own Christmas Club, it just isn't the same.

I've since discovered Smarty Pig, which is an online partner of West Bank. Smarty Pig is a bank that offers accounts for people who want to save for a specific goal combined with the social networking ability (similar to that of Mint). Best of all, it's currently offering 3.05% APY and it's FDIC insured!

There's no minimum to open, but if you have a savings goal, you have to start with $25 and your goal must be at least $250. Additionally, if you have a savings goal (e.g., save $2,000 for vacation by 5/1/2011), SmartyPig will will suggest a monthly contribution that will be deducted from a designated funding source. You can make your goals "public" and invite others to help you reach your goal. (Okay, so this part is a bit tacky, but I have to admit, it's a creative twist.)

I often speculate for the highest APY so this looks promising. (I'm sure after a month or so, the rates will plummet, though.) But the best part of all, it reminds me of my good ol' Christmas Club of yore. I think I'll open an account. :-D

Monday, May 4, 2009

April '09 Progress Report

Why is it that time, in general, seems to pass so quickly, yet it takes an eternity to pay off debt?

Starting Debt (6/31/08)Last MonthThis MonthDifference
Private SL$49,528.99$46,508.30$46,141.85$(366.45)
Fed'l SL$55,852.68$54,732.28$54,594.91$(137.37)

Yawn. I'm on auto-pilot per my snowball plan. As my faithful readers know, I'm arbitraging my 0% credit card debt right now which means I'm only paying the minimum towards the debt and socking money away in my savings to pay it off when the promotional rate ends. I've so far squirreled away $3,382.08, so my credit card debt is really only (*cough*choke*) $8,314.00. And I guess another good news I can report is that I'm officially $2,371.16 ahead of schedule even if you don't take into account the arbitrage money.




Heh, heh. I saved a measly $60 this month. And ~$20 of that came from interest I accrued. I partially blame myself for getting nabbed by stupid late fees. But it's also that I've been a bit burnt-out about living on $10/day for food, incidentals and gas.

Fact of the matter is, I have over an additional $7,000 in my "earmarked" savings right now that don't count towards my savings reported above. I guess I'm now at a stage where I want some breathing room in my spending vs. feeling desperate to save money.


Looks like my net worth is back to where it was in September '08. Actually, it's better now, since I no longer include the value of my car in my net worth anymore.

Normally, most of the upswing in my net worth is due to reduced debt rather than from improvements in my investments. But April was a good month in the stock market and it's reflected in the 35.25% increase in my taxable stock account, 11.22% increase in my 401k and 8.79% increase in my Roth IRA.

I also accelerated my I-Bonds purchase in April to take advantage of interest rates before it changed to 0% in May. I won't be purchasing I-Bonds for the next 6 months.

As wonderful as the boost in my net worth is, I'm not really jumping for joy here. Call me a Negative-Nelly, but I'm NOT convinced that we've hit bottom in the market. I think this is just a bear-market rally. It's really hard to enjoy something when I fear that it can easily be taken away. *Sigh*

The breakdown of my net worth can be seen here.

Friday, May 1, 2009

Update re: Savings Bond Rates

[Warning: Boring geek talk about I-Bond rates ahead.]

I previously wrote about how my I-Series Savings Bonds' interest rates will change effective May 1. Since I'm new to purchasing I-Bonds, I wasn't quite sure how the rates re-set and I had couple of doubts.

The interest rate on I-Bonds are a bit confusing to calculate since it is a composite rate of a fixed rate + a variable rate. The variable rate based upon the CPI data for the past 6 months.

In an inflationary economy, the variable rate will be positive, so it would increase the composite rate. Conversely, in a deflationary economy, the variable rate will be negative, thereby reducing the composite rate below the fixed rate.

For those of you who are mathematically inclined, official formula is:

Composite Rate = Fixed Rate + (2 x Semiannual Rate) + (Fixed Rate x Semiannual Rate)

May Semiannual Rate= (CPI-U (current March) div. CPI-U (last Sept.)) - 1

November Semiannual Rate = (CPI-U (current Sept.) div. CPI-U (last March)) - 1

Update: Effective 5/1/09, the fixed rate is 0.1% and the semiannual rate is -2.78%.

My doubts included:
  1. Do the I-Bonds' rates re-set every 6 months on a rolling basis from the date of purchase? (It was my understanding that it did.)

  2. In a deflationary economy where the variable rate is significantly less than the fixed rate, will the I-Bond continue to accrue the fixed rate or will the composite interest rate be 0%? (Under such a scenario, it was my understanding that the rates would be 0%.)

I checked my TreasuryDirect account this morning and my questions were answered.

It appears that the I-Bonds' rates do re-set every 6 months on a rolling basis from the date of purchase. If you look at the chart below, the I-Bonds I purchased between November '08 and April '09 have the same fixed rate of 0.7% and are subject to the same variable rate.

If the I-Bonds re-set all at once, they should carry the same interest rate. However, the only rate that changed was the I-Bond that I purchased in November '08 (i.e., the I-Bond I purchased 6 months ago). So it appears that the I-Bond that I purchased in December '08 will re-set next month, so on and so forth.

Additionally, it appears that in a deflationary economy where the variable rate is significantly less than the fixed rate, the I-Bond will accrue 0%, not the fixed rate. (Bummer.)

I created a spreadsheet that helps me keep track of the past interest rates as well as to "predict" what the future interest rates will be.

I'm glad I purchased in April the I-Bonds I intended to purchase the next 6 months. Based upon my spreadsheet, the I-Bonds I purchased in April will accrue 5.64% for the next 6 months and 0% the following 6 months.

Had I purchased $25 every month starting in May per my original plan, I would've likely earned 0% for the next 12 months. For once, it appears I hedged correctly. Hurray!

Sorry for the boring discussion on a Friday. Hope you all have a great weekend!