As featured in The Wall Street Journal, Money Magazine, and more!

July 2006

Finding Extra Money

This article was written by in Investing, Saving, Tips. 2 comments.

Money Magazine has a feature this month about finding extra money or “hidden assets” as they call it. I’m not going to do a whole series on these suggestions, but I will simply summarize and add a few thoughts.

1. Cash in old savings bonds. If they’ve matured, you have money that’s not earning any interest. Cash them in and put the money in a high-yield internet savings account or something more risky if you’re so inclined. Search treasurydirect.com because you may not know that you have bonds in your name… yes, it is possible.

2. Boost your savings rate. I often talk, like I did one paragraph earlier, about getting out of low-paying brick-and-mortar bank accounts and into the world of online banks where you can earn significantly more on your cash. Money talks more about making the most out of your brokerage’s sweep accounts, where uninvested cash sits. Most brokerage have higher-performing, low-risk money market funds that provide a much better alternative for a sweep account.

3. Stop paying for unneeded life insurance. Money Magazine suggests arranging for your premium to come out of your dividends. This may be practical for some whose insurance needs are lower than they once were. Also, avoid sales pitches when you go to talk to your insurer.

4. Consolidate your retirement accounts. Too many accounts can be confusing and expensive. Simplify!

5. Prune your credit cards. Simplify! Get rid of unused cards. Consolidate cards. Close accounts (but leave your oldest credit card open for evidence of credit history).

6. Unload unused gift cards. Money suggests using CardAvenue for swapping an unneeded gift card for one more useful. Beware, many gift cards lose value over time or even expire.

7. Finally sell that lousy investment. It’s easy to get emotionally attached. “Take a look at every dud investment you own and ask yourself why you still own it. You are not allowed to factor the purchase price and the long-ago value into your answer.” If you take a loss when you sell, you can deduct it from your tax return to a point.

That’s what Money Magazine had to offer, but there are many other places to “find” money. Here are two I can think of off the top of my head.

8. You can “find” money just by creating an automatic withdrawal from your checking account to an obscure checking account immediately after your paycheck is deposited. You’ll never know the money’s not available like normal, and down the road, you’ll find you have a sizable chunk of extra cash.

9. Check your state’s unclaimed funds website. Here is New Jersey’s. I searched for my last name and determined the state has some money due to my father, which was likely sent to an old address. I keep forgetting to let him know…

Feel free to add any suggestions!

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At the end of last year, I put together a list of the “Best of 2005,” just a collection of posts here at Consumerism Commentary that might stand out. There was no rhyme or reason to my selection. Needless to say, I’m very lenient with my definition of “best.”

We’re more than halfway through 2006, so I’ve compiled a similar list for January through June. Continue readining for a look back at 2006 so far.

[click to continue…]

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I’m still enjoying Money Magazine’s “Last 401(k) Guide You’ll Ever Need.” So far, I’ve addressed the first three tips offered by the magainze, save early and often, spread your money around, and limit company stock. Here’s the fourth tip for maintaining a strong retirement investinment portfolio.

Check in Once a Year

Take a date you’ll remember every year, perhaps your birthday as the magazine suggests, and evaluate your portfolio. Look at your contribution instructions to make sure you are allocating your money in a way that makes sense for your situation, looking at risk profiles. If you’re invested in a target retirement fund, this risk adjustment is done for you, but you should make sure this is still what you want.

If certain investments have performed well, consider rebalancing — selling (tax-free) part of the investments that have done well and buying investments that have performed poorly. It sounds strange to buy poor-performing funds, but you’re selling “high” and buying “low,” and that’s good for long term investing.

Benefits consultant Hewitt Associates found that in 2005 many 401(k) investors loaded up on emerging markets funds, which had been delivering double-digit returns. But in May of this year, foreign markets tanked, and panicked investors found themselves selling with 20% losses.

I’ve experienced this. In 2005, people everywhere were talking about emerging market funds because they had performed so well up to that point. My international equity fund is balanced more towards established markets, but it hasn’t performed well lately. I’m fine with that; in the buying stage, as the fund goes down a little, I’m getting a better price that will hopefully pay off for me well into the future.

The article suggests looking at asset allocation and risk profile once a year to make adjustments. This is what I do now, but I used to do this once every quarter. In fact, my 401(k) was configured to automatically rebalance once a quarter so it was no effort on my part. Since there are no tax consequences to moving funds around within a 401(k), and I would think transaction fees would be very rare, I think it’s safe to do this every quarter if you desire. I’m more comfortable with a yearly rebalancing.

Here’s a question for those who have managed to read this far into the article. Do you rebalance your portfolio? If so, how often, and is it an automatic process? Leave a comment if you like.

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Money Magazine is presenting five tips for building a great 401(k) account. Their first suggestion was to save early and save often by diverting as much as possible directly from your salary to your retirement account. Here’s the next tip.

Spread Your Money Around

What you must do, though, is choose a suitable combination of stock funds, bond funds and other investments. The idea is to create a blend of assets that’s aggressive enough to improve your odds of earning the returns you need, but not so risky that you’ll panic during market downturns and bail out.

The Money article talks about allocation between investment types: stock funds, bond funds, and other investments, without much discussion of various types of each. The authors suggest funds that target a retirement date. That’s not always the best solution, as the fees for “funds of funds” multiply behind the scenes.

First, determine how much risk you’re willing to accept. You could accept the level of risk provided for you by “target” funds, but that’s removing a level of responsibility from the investor. If you want your money to last even in cool markets, take on as much risk as you can handle without making rash decisions if your portfolio decreases.

CNN has an asset allocator tool that can help you determine your ideal portfolio. I’m not happy with the results, however. With my options, a 10+ year horizon, a high tolerance to risk, and a positive attitude about bear markets, it was suggested I invest 20% in bonds, 20% in foreign stocks, 20% in small-cap stocks, and 40% in large-cap stocks. I’d like to consider myself “still young” and investing almost all of my portfolio in stock funds seems more likely to provide me a return higher than inflation.

(Don’t believe the tame 3% inflation numbers people toss around. It’s not widely known that the formula to calculate inflation has changed.)

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Emigrant Direct’s New Website is Up!

by Luke Landes

I arrived home a little earlier, and while writing my first paper for my last class before obtaining my master’s degree, I decided to check out Emigrant Direct’s new website. There has been a lot of talk over on an earlier entry about how many have not been able to access the website and have […]

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The Top 25 Money Tips of All Time, Part 5

by Luke Landes

I’m finally delivering the last installment of MoneySense’s top 25 money tips of all time. This follows parts 1, 2, 3 and 4. Now, without further ado, are the final five money tips, as decided by Canadian financial experts.

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Mail Check: Some “Goodies” Arrived for Me

by Luke Landes

I’ve been away from my apartment for almost a week, so I had a few goodies waiting for me upon my arrival home yesterday. I received a letter from Emigrant Direct with my activation code for their new website to be launched next Monday. Also, they included a notice that they will be raising their […]

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The Carnivals are Up!

by Luke Landes

I’m on vacation at the moment. Instead of going on a trip, I’m staying close to home and enjoying the week off. There won’t be many updates from me, but I do want to let you know that a few Carnivals are up for your personal finance reading pleasure. The Carnival of Personal Finance is […]

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Old Promotion, New Trick: Free $75 With ShareBuilder

by Luke Landes

June 24 update: The promotional code listed below is no longer available. You can now earn a $25 bonus using the promotional code 25WO10 rather than the $50 bonus previously mentioned here. It’s actually $71 after expenses, as you’ll see below. ShareBuilder is still running the $50 promotion, but now there’s a way to get […]

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Flexo’s “Get Away From BlogSpot” Project

by Luke Landes

I have a deal for my personal finance blogging friends. Blogger was a great piece of software several years ago, bringing “pushbutton publishing to the people.” When they added BlogSpot, it only enhanced the value of the software. But let’s face it, BlogSpot is not that stable despite being hosted by Google, and many people […]

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