Category Archives: Saving - Page 2

GMAC Bank

gmac.jpgToday I just opened up a Money Market Savings account with GMAC Bank. It’s great because it’s just like a checkings account with a super high interest rate. I mean why not make some interest while my money sits in my checkings account right? So my plan is to make this new account my primary checkings account and also as well as my savings account.

Here are some Benefits of the account:

  • The interest rate for this money market account is currently going for 5.30 %, which is fairly high.
  • The minimum opening deposit is only $50.00
  • FDIC-insured up to $100,000
  • I get my atm fees reimbursed up to $6.00.
  • Just like a checkings account, I get a check card and a check book.
  • No monthly fee as long as the monthly average balance is over $500.00.
  • Interests are compounded daily.

Some of the negatives:

  • It’s an online banking firm so that means I can’t go into a physical branch for assistance.
  • I’m limited to only 6 electronic transactions per statement cycle (ATM withdraws and electronic transfers.
  • Along with many other money market accounts, the interest rates are not fixed.

Those are the main negatives I can think of at the top of my head. If you know of any other, please feel free to comment.

So I’m really excited about this account. It’s neat to think that I can move all my money from my checkings account and savings account and now make interest on it. My old savings account was going for something like %1 – %2 percent so its an upgrade from it. For my first deposit amount, I tranfered $1,000 from my savings account to this account and eventually I will move all my money from checkings and savings to here. I’m hoping to have $5,000 – $6,000 in this account by the end of the summer.

10 Reasons why I Love to Budget

piggybank.jpgSo whats the big deal with budgeting and why is it so important? Let me tell you why I love to budget, I have ten reasons and maybe you might see for your self the reason for its importance. Here they are:

  1. Big Awareness. Through budgeting, it keeps me aware of how much I spend on the daily basis.
  2. Saves me money. By knowing whats coming ahead and being able to plan, it helps me to spend less and less every month.
  3. Smart planning. Knowing how much money I have allocated, daily budgeting keeps me financially aware of my situation.
  4. Puts me in the right direction. Helps me to reach my financial goals.
  5. Helps me Prioritize. By keeping a nice balanced budget, I don’t have room to always buy things that I want. Instead, I need to make sure that I am able to buy the things that I need first before being able to buy anything else.
  6. It just feels good. The satisfaction of spending within my allocated funds is a great feeling and an accomplishment.
  7. Helps reduce debt. Financial planning and strict budgeting is a great way to help reduce debt.
  8. Keeps me in a positive financial mind set. When I’m consistently around numbers and percentages, I’m always being reminded to keep going.
  9. I love numbers. I love to calculate and to see how I’m improving from month to month.
  10. Organized. Being able to plan my budget has definitely helped me to be more of an organized person.
  11. (Extra)I’m ready for those emergencies. Life is unpredictable and you never know what’s heading your way. Being on a budget prepares me for those emergency times when I need those extra few bucks.

Budgeting is a very nice way to keep track of all your expenses and it also helps you stay organized. The best thing is it only takes about 20 minutes per week. I recomend using this program called pear budget. Its an excel spreadsheet that keeps track of how much you spend on the daily casis. If you want to give it a try, you can download it for free here.

[Photo Credit]

CD’s or Money Market?

money-market.jpgScenario: So you’ve got a nice stash of cash just laying around and you want them to be put to work. You also figured that you didn’t want to be too aggressive buy investing directly in stocks and at the same time you don’t want to invest in long term either so that rules out mutual/index funds.

So then you ask, “should I put my money in a CD or a Money Market”?

Good question. In order to make the right decision, you have to define your goals and needs. Getting it wrong the first time is all it takes for it to cost you the big bucks so you want to make sure that you do your homework first.

For those who do not know, Certificate of Deposit or simply CD, are debt instruments issued by banks and other financial institutions to investors. In exchange for lending the institution money for a predetermined length of time, the investor is paid a set rate of interest.

While on the other hand, Money Market offers many of the same benefits as CD’s but with the added features of a checking account. As far as the interest rates go, they are fairly close. Last I checked, CD’s were running at 4.90% and Money Market at 4.80%.

Here are a short Pros and Cons of Money Market and CD’s.

Money Market:

Pros: Depositing money in a money market is as easy as depositing cash into a savings or checking account. Cash is immediately available for alternative investments so you’re a lot more flexible with Money Market.

Cons: Money Market’s interest rate is not fixed. The rate of interest is directly proportional to the investor’s level of deposited assets, not to maturity as is the case with certificates of deposit. Hence, money markets are disproportionately beneficial to wealthier investors.

Certificate of Deposit (CD):

Pros: The investor can calculate his expected earnings at the outset of the investment since the interest rate is fixed. Certificates of deposited are FDIC insured for up to $100,000 and offer an easy solution for the elderly who desire only to maintain their capital for the remainder of their life.

Cons: Not as flexible as Money Market and will be penalized for withdrawing before it reaches maturity. If the investor opts for a longer maturity and, thus, higher rate of interest, he will lose access to his funds and forgo alternative uses of his capital.

Final Analysis: So if you are absolutely certain that you will not be needing that $10,000 for the next year or so, then I say go for the CD, but if you are not sure, then Money Market is the way to go.

[photo credit]

Are you a Traditional or a Roth?

retirement.gifAs many of you know, the importance of investing is crucial. Since investment is tied with time, it’s also obvious that the sooner you start your investment portfolio, the better and bigger your outcome.

Today we’re going to look at the individual retirement account, or also known as the IRA. In short,  IRA is an personal, tax-advantaged retirement plan. An employed person can contribute earned income into an IRA account up to $4,000 per year if you’re younger than the age of 50 and $5,000 if you’re over. In 2008 this amount will increase by a thousand dollars. If you need some more information on IRA accounts, you can get more details here.

Although there are more than just two types of IRA accounts, I want to just pick on Traditional and Roth today.

So how do you know what account is best for you?

If you compare a Traditional IRA with a Roth IRA, a Traditional IRA may be a better move for you than a Roth IRA if you:

  • Don’t qualify for a Roth because of your income level but still want the tax deferral on earnings in a Traditional IRA.
  • Believe that income tax will decrease in the future.
  • Expect to be in a lower tax bracket during retirement.
  • Qualify for a tax-deductible IRA contribution.

Now, if you compare a Roth IRA with a Traditional IRA, a Roth IRA may be a better choice than Traditional if you:

  • Anticipate remaining in your current tax bracket after your retirement.
  • Believe that income tax will increase in the future.
  • Expect that when you retire, you will be in a higher tax bracket.
  • Have income below the MAGI limit for a Roth IRA, but still too high to qualify for a deductible Traditional IRA.

Even though you may have an idea on what kind of account you’re interested in, its always a good idea to ask your personal finance advisor and seek their opinion. From personal experience, they always seem to have some useful information.

Saving Money Update

Recently I have been so busy with school preparing for these final exams and projects it’s been quite difficult to keep up with my site. I know that I have to set my priorities straight and school is definitely on the top of the list. Aside from the obvious reason why school should be placed as top priority, let me list some other reasons why keeping up with school helps me save more money(or even make money).

  1. I’m on a full scholarship which pays for tuition and fees, room and board and even as far as all my school supplies including my books. In order to keep this I need to maintain a semester and cumulative G.P.A of 3.6.
  2. Aside from the full scholarship, which is provided from the school, I also receive some scholarships and grants from the government. This extra money is then turned into a refund check and I get to pocket all of it, each semester! I usually get somewhere between 1,250 to 1,750.
  3. If for some reason I don’t graduate on time, I would have to pay for whatever credits I need in order to graduate because my scholarship only covers for 4 years.

So for the next two weeks (until exams are over), I still may not be able to post as frequently as I like to due to crazy hours spent at the library. Believe me when I say, I’m ready for summer and looking forward to full time blogging.

Good News: last week I was able to pay off a little over a thousand dollars off of my credit card. Woot! Right now it’s at an even three thousand dollars. Looking at my current funds, I may be able to pay off some more next week. I’ll keep try to keep you updated and post my total credit card debt sometime next week.

Frugal vs. Cheap

Many people are confused with the difference between frugal and cheap. Being frugal means making smart spending choices or getting the most for your money. Cheap while on the other hand, is looked more upon as selfish and stingy. When I looked up the synonyms for frugal, I got thrifty, chary, provident, careful and economical. Synonyms for cheap resulted in stingy, shoddiness, inferiority, showy imitation, complete unworthiness.

Living well for less money is frugality. Leeching off of people to get by is cheap.

For example, I want to get a book for my brother for his birthday. Say I saw a nice book in new condition at a garage sale and I only spend $1.00 opposed to the $24.99 price at Barnes and Noble. Some people would see this as being cheap, only spending a dollar for a gift, however if this is something that my brother would like, it doesn’t really matter how much I spend. There is no point in spending more for the gift if I could get something the person would like just as much for a lot less. Now this kind of giving is just good money management, it’s not being cheap.

Some more example of frugal vs cheap:

  • Frugal - Going to a buffet and eating enough to get full and satisfied.
  • Cheap - Getting full and satisfied, then filling your pockets and bags before leaving
  • Frugal - In a group, a person with 10 dollars would order at a restaurant taking in consideration of tip and tax.
  • Cheap - In a group, a person with 10 dollars would order 10 dollars worth of food and intentionally leave the tip and tax for others to pay.
  • Frugal - Satisfied with only spending a dollar on a kids meal for your child.
  • Cheap - Ordering an extra kids meal for your self to avoid the regular price.
  • Frugal - Deciding not to go out to eat because you don’t have enough for the food + tips, instead you go to buy something to make at home.
  • Cheap - Intentionally going out to eat when knowing you don’t have enough to tip.

Important note: frugality is not just for those who are on low income. Take Warren Buffet for example. Big Warren, with a net worth of more than 42 billion dollars still live in the house he bought more than 40 years ago at $31,500. He also prefers a burger and a coke over an expensive lunch at his desk.

5 Basic Concepts To Teach Kids About Money

piggy2.gifOne of the most important life lessons you can teach your kids is to develop successful money management habits  and  a sense of financial responsibility. When it comes to teaching your kids about money, the sooner they learn the better.

  1. Help your child understand the value of saving money.  Here is where you start showing them the importance and the  benefits of saving money. This can be done with a simple but balanced form of an allowance. While they are young, giving them small amount of money will help them prepare for the future when the amount becomes larger.
  2. Discuss the privileges and pitfalls of owning a credit card.  Show that credit cards can be a very powerful tool which could help you dramatically with your finances and also in return, how you could misuse a credit card and how much that could affect your life.
  3. Give your teen ‘real world’ experience with money and budgeting. Instead of buying their yearly school clothes yourself, give them a set amount and let them decide what they need and what they don’t need. Emphasis that that is all they are getting so chose wisely.
  4. Teach your child how to track spending. Get them in the habit of tracking their spending by either getting a notebook or a creating a simple excel spreadsheet on your computer.
  5. Cover the basics of investing. It’s never too early to start explaining the general overviews of investing. The earlier you start, the better they’re equipped when it’s actually time for them to start investing.

10 Tips On How To Master Your Saving Skills

save-money.jpgGetting tired of trying to save and not seeing any results? Well follow these simple steps and watch your savings account grow.

  1. Set a goal or a target. Write down the amount you want to save and also a date in which you want to accomplish this goal. Get a general idea on how much you have to save per week or month to meet your goal.
  2. Don’t let your money stay idle. Keep idle cash in an account that pays interest.
  3. Keep your checking account low. Have enough money in your account to pay bills and move the rest to somewhere else to gain some interests.
  4. Put savings account on Auto-Pilot. Set up an automatic monthly or weekly transfer to your savings account from each check.
  5. Shop around for the best interest rates. There are many places that offer more than 4%, places like gmac bank. Their money market savings account which also serves as a checking account are current running at 5.10%!
  6. Fees are bad. Find checking/saving accounts with low minimum balances and little to no fees.
  7. Avoid ATM fees. Find banks who can reimburse you on those annoying ATM fees.
  8. Take advantage of banks that show transactions online. This way, you don’t have to wait for that monthly account statement to come in the mail and you can balance your account when it’s best convenient for you.
  9. Overdraft protection. We all make mistakes – avoid those overdraft fees by having overdraft protection for your savings and checking accounts.
  10. Learn to reason. The rule is simple, if you don’t need, you don’t get. Learn to differentiate between your needs and your wants. It’s good to treat ourselves every now and then but let’s not make that a habit.

How to save on grocery

costco.gifLets face it, we’ve all at some point tried to find ways to save money when going out for some grocery. I’ve come to this simple conclusion on how to save money. Buy everything in bulk. You can save so much money this way. Forget spending your Sunday mornings cutting out coupons, just get everything from a wholesale store. I have been buying things from wholesale stores off and on but it didn’t strike me until recently when I went to Costco and realized how much I actually saved.

Here are the things that I bought that saved me some money:

  1. A case of bottled water (36 bottles) $4.56
  2. A case of eggs (36 total) $3.29
  3. 24 variety pack of Gatorade (20 oz.) $10.79
  4. A huge box of Honey Bunches of Oats(46 servings) $5.67
  5. A case of 12 cartons of Soy Milk (4 servings ea.) 10.79
  6. A box of 32 Yahoo $6.29

The total came to  $41.39 but if I would have bought these at Safeway or Giant, I would have spent well over $50.  I know in Costco there is a one time membership fee of 50 dollars but it’s well worth it. You can split this in half with someone else to reduce the cost and you both can get a Costco membership card :) There are plenty of wholesale store. Some of the ones I know of includes Costco, Sam’s Club, and BJ’s. There’s probably a lot more out there so do your research and find the wholesale store near you!

Debt management

debt-reduction.jpgDid you know that the average American household with at least one credit card has nearly $9,200 in credit card debt? That’s quite amazing isn’t it? Looking at the number, it is a little hard to believe that the average is so high, but when you realize that our nation is built on credit, it becomes a little more easier to gulp down.

There’s the good and the bad:

When I look at debt, I see it as two kinds of debt. There’s the good debt and the bad debt.

You accumulate good debt when you’re borrowing money for a student loan or for a home. You just have to make sure that you don’t borrow more than you can pay back.

Bad debt is using your credit card to buy things like food, clothes, DVD, etc. This is the easiest way to fall in debt. When you get in the habit of buying things with your credit card, in return you also want to get in the habit of paying it off in full that month.

The general rule is that you don’t want to get in a habit of using your card unless you plan on paying every back that month, this is the fastest way of falling in debt. Here I have gathered 3 general debt management tips.

Debt management tips:

  1. Make a budget journal. Most people spend thousand of dollars without too much though as to what they’re buying and that’s why people are surprised at how high they’re credit card is. Get a nice journal and start writing down everything you spend. At the end of the month you’ll know not only how much you spent but also what you bought. This way, you will know what you can cut back on and how much less you want to spend the following month.
  2. Pay off your highest-rate debts first. On average, most people have more than one credit card. The key to getting out of debt is to first pay down the balances on credit cards that charge the most interest rate while paying at least the minimum due on all your other debt. Once you finished paying off the highest rate, then start tackling the one next highest.
  3. Expect the unexpected. You want to expect the worse can happen at any given time, so start making an emergency account. You want to have enough saved to last you 3 – 6 months of living expenses in case of those emergencies. If you don’t have an emergency fund, a trip to the hospital or damaged car can seriously upset your finances.

If you end up with more debt than you can manage, then you should get some help whether it’s from a professional or someone you know before it’s too late. It may be embarrassing to ask a relative for some help but that’s alot better than ending up with bad credit.