At the end of 2008, the editors of Kiplinger’s Personal Finance magazine selected FNBO Direct as their favorite savings account. Since that time, the banking landscape has changed. From the ashes of GMAC Bank rose Ally Bank offering competitive interest rates, currently APY. Kiplinger’s chose Ally Bank as the best savings account of 2009.
You can read my review here.
Kiplinger’s editors list their favorite features Ally Bank Online Savings Account: no minimum deposit to open the account, no monthly fees, and no minimum balance. The magazine also mentions Ally’s no-penalty certificate of deposit (CD). With these strong products, Kiplinger’s rates Ally Bank at the top.
The magazine selects additional favorites. Their choice for best checking account is most notable. Schwab Bank High-Yield Investor Checking has taken this award for the second year in a row.
With savings and checking accounts offering low interest rates compared to the rates offered a few years ago, Kiplinger’s also presents two suggestions for bonds. These are a little riskier but will most likely present a better return for investors than savings accounts. The favorite candidates are Vanguard Limited Term Exempt and Fidelity Floating High Income.
Since GMAC Bank became Ally Bank last year, many readers have offered feedback about the result of the transformation, both positive and negative, about the full customer experience. Ally Bank customers, please share your thoughts here. Do you like the bank? Is Kiplinger’s choice justifiable?
In a few days you will have a chance to vote for your favorite bank and savings account by participating in the Plutus Awards.
Related: Best online savings accounts.
In a perfect word, I wouldn’t spread my money among more than one or two savings accounts. There is value in simplifying personal finances and I try to take that approach where possible. Forces are working against me, however, keeping my finances more complicated than they would be otherwise.
Occasionally I review and evaluate banking products for the benefit of Consumerism Commentary readers. For some examples, see my reviews of the Ally Bank Savings Account, FNBO Direct Savings Account, and EverBank Money Market Account. In order to evaluate these products I use my own money to open new accounts. This has left me with a long list of banks where I keep not much more than the minimum allowed balance.
Without Consumerism Commentary, I expect I’d leave most of my cash in a savings account that offers consistently high interest (not teaser rates) and exceptional customer service. Yesterday, a visitor asked me to explain where my cash is held, so I put together this chart, based on my account balances at the end of January 2010, not including money market funds within investment accounts.
The visitor also asked why I keep so much in savings accounts when the money could be earning more in the stock market. Besides the risk, I expect I’ll need most of this cash within the next year or two for buying a house.
The chart below, designed with Microsoft Excel 2010 Beta with data from Quicken Home & Business, further breaks down my cash by identifying savings accounts and checking accounts at the above banks.
| Bank | Amount | Int Rate as of
Feb. 8, 2010 |
|---|
| ING Direct Business Savings | 43.52% | 1.05% APY |
| ING Direct Orange Savings | 28.93% | 1.20% APY |
| EverBank High Yield Money Market | 6.66% | 1.51% APY |
| ING Direct Electric Orange | 4.40% | 0.25% APY |
| Wachovia Business Money Market | 4.40% | 0.05% APY |
| FNBO Direct Online Savings | 3.15% | 1.40% APY |
| TD Bank Checking Account | 2.48% | 0.00% APY |
| Wachovia Business Checking | 1.74% | 0.05% APY |
| E*TRADE Bank Complete Savings | 1.55% | 0.50% APY |
| Wachovia Crown Banking Checking | 1.28% | 0.05% APY |
| HSBC Advance Online Savings | 1.00% | 1.35% APY |
| Ally Bank Online Savings | 0.53% | 1.49% APY |
| Wachovia Personal Savings | 0.36% | 0.05% APY |
This table shows that there is a lot of room for optimization. I could move money around to take better advantage of the highest of low interest rates. According to a quick calculation, moving all of my money at ING Direct to Ally Bank would only provide an additional $40 per year, at most in interest. That’s hardly a financial incentive at this point, so the only incentive to consolidate accounts would be for simplicity.
Where do you keep your cash? Do you prefer simplification or diversification for your savings?
Today we talk with Jeff Bartlett, Autos Deputy Editor at Consumer Reports about the recent Toyota recalls. For updated information on Toyota recalls, see Consumer Reports’ unintended acceleration guide.
Also in today’s episode, Flexo discusses money saving tips for Valentine’s Day.
Production Number: S02E16
Segment Numbers: 60, 57
To listen, use the player above (Adobe Flash required), download the podcast here, subscribe to the podcast RSS feed, or use the iTunes link. Note: open links in a new window (Ctrl-click or Command-click) to avoid interrupting the podcast.
[00:00] Introduction from Tom Dziubek
[00:34] Interview with Jeff Bartlett
– [01:25] Two separate Toyota recalls
– [02:45] Lexus, Ford and Pontiac recalls
– [05:06] List of affected cars
– [07:10] Urgency of fixing a sticky accelerator
– [08:10] Shifting a car into neutral
– [09:49] Brake system failures and software malfunctions
– [13:25] Suspension of Consumer Reports recommendations
– [16:27] How Consumer Reports will handle future Toyota ratings
– [17:58] Toyota’s handling of the recalls
– [21:01] Challenges facing Toyota dealerships in handling the recalls
[24:21] Interview with Flexo
– [25:31] How people plan on spending money on Valentine’s Day
– [26:42] Making your own greeting card
– [29:39] Skipping the chocolate
– [30:49] Avoiding gifts of sensual clothing
– [32:18] Turning off the electrical appliances
– [33:39] Skipping the gourmet dinner
– [34:30] Spending time together
[36:14] End
We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.
This past weekend, a sculpture by Alberto Giacometti broke the previous record for most expensive piece of art sold at auction. An anonymous bidder purchased “L’Homme Qui Marche I” for $104.3 million, up to five times more than the expected price. This may be a good sign for the art world in need of a recovery from a bubble and crash. Only a few months ago, Lehman Brothers was selling off art within the company’s possession at any price possible in order to pay back their creditors.
The winner of the auction is remaining anonymous, and that’s probably a good idea. Many owners of high-priced art are investment banks. Consumers are still angry about taxpayer money used for bailouts and executive bonuses, so from a public relations perspective, no one would want to be seen spending this much money on one piece of art. In addition, storage, security, and insurance for this valuable sculpture is sure to be a significant expense, as well.
However, well-chosen art could provide to be an excellent investment. There are drawbacks. With the expenses mentioned, art as an investment is cash flow negative. Unless you are able to lend the works to a gallery, they will not produce income for the owner. The only chance to come out ahead is to sell the art for a higher price than the purchase price, and this is a very risky proposition. Art prices fluctuate and tastes change.
While small-time investors may be used to transaction fees no larger than $10 a trade, the art market isn’t as modest. Not only does the selling price need to be higher, but exorbitant transaction fees must be factored in. Even if you sell a work of art for 20% more than you paid for it, everyone involved in the sale, from the auction house to the banks that facilitate the purchase will find a way to eat into your profit margin.
From one perspective, $104.3 million seems to be a large amount to spend on a work of art when people are suffering throughout the world. The money could save lives. But art is an essential component of culture, and if this purchase broadens awareness and appreciation, the world may be better off.
Do you feel a work of art is a good choice for spending $104.3 million right now?
Imagine your income were sliced in half while your debts remained the same. How would you prioritize your payments? For those who have only credit cards, I’ve always suggested using, or at least understanding, the Debt Avalanche, but that doesn’t take into account other debts you might have such as personal loans and the mortgage.
Over the past couple of years, more consumers in precarious financial conditions due to unemployment or an otherwise lack of income have decided credit cards should be higher on the prioritization list than the mortgage. By the end of 2009, twice as many people were delinquent with their mortgage payments while current with credit card payments than were delinquent with credit card payments while current with mortgage payments. This is according to a study by the credit reporting bureau Trans Union, a company with millions of data points at its figurative fingertips.
Part of this might be due to the credit crunch and lower balances on credit cards in general, but it also may be due to the frequency of foreclosures and the general tendency for people to lose faith in the value of their homes as they watch the real estate market crumble. Many homeowners are giving up and walking away from houses with mortgages they can’t afford. If the only punishment is a tarnished credit report, there isn’t much of an incentive for people to keep paying money if they’re not building equity.
Also, families in financial trouble still need at least the basic necessities: food, water, and shelter. For those without a solid emergency fund, credit cards are the most typical financing strategy in times of need. You can even use a credit card to pay your mortgage.
I see the rationale for prioritizing these bills; if a credit card is revoked, someone may not be able to procure the necessities of life. A mortgage should be prioritized higher than credit cards, however, because the mortgage is secured debt. Your house is collateral. The bank that holds your mortgage can take away your house if you don’t pay. Even though some people are comfortable abandoning a house that has declined in value, it’s not a smart move. There’s a good chance real estate value will eventually return, so as long as you have a reasonable interest rate and have been paying down the principle of the loan, sitting tight will pay off.
Credit cards are unsecured loans. Knowing that this type of debt is a lower priority, credit cards will do whatever they can to get you to pay. They will call you, bother your neighbors, sell and even your debt to a collection agency who will do worse. The credit card issuers know that you won’t pay unless they make it seem like you’ll be in major trouble if you don’t send a check. Meanwhile, banks are ready to take your house if you don’t pay, even though most banks are struggling companies and don’t want to take on real estate that is performing poorly in the short term.
If you have to choose between making a mortgage payment and a credit card payment, choose the mortgage. Do you agree or disagree?
Entering the second month of the year, the new decade is officially underway. It’s time to peek into my bank accounts and investments to see how I’m doing so far. But first, I should take a quick look at the goals and resolutions I set for myself this year.
The first goal is to maintain a six-figure income outside of my day job. According to Quicken, I earned over $11,000 this month from various sources not including the work I do from 9:00 to 5:00 or so each day. This month’s income was likely higher than it will be on average for the rest of the year unless I make some significant changes to my life and some progress on new projects. For now, it looks like I’m on track to reach this goal.
My next goal is to maximize my 401(k) investment, and that hasn’t presented a problem so far this year. My non-financial goals are presenting a problem, however. I haven’t made much progress in my attempt to get into shape and I haven’t reached the point where my apartment is consistently in a presentable appearance.
Here is my net worth report. I post this every month to keep myself accountable. The bottom line is down this month, mostly due to estimated taxes paid and a lack of growth in my investments. Although I surpassed $300,000 at the end of 2009, I’m back below that mark for January.
Continue reading to see the numbers. [click to continue…]
Although my income has increased over the past few years, my spending has increased as well. After living the better part of the decade watching just about every dollar leaving my bank account, saving as much as possible, and living within my means, I’ve recently begun allowing myself to spend more freely.
I’m sure to spend only what I have available after accounting for all my bills and obligations and saving a significant portion of the remaining income. I’m currently investing in my 401(k) up to the government-mandated maximum as well as in my SEP IRA as much as possible each year. I’m allowing my bank accounts to grow, in order to have cash available for when I decide to buy a house within the next few years. None of this has changed, though increased spending means my savings are growing a little slower.
Here are some of the big outlays.
Photography equipment
Although I am far from a professional, I enjoy photography. I took one class last summer in order to sharpen my skills and my second class began in January. Photography can be an expensive hobby if you’re not satisfied with a cheap point-and-shoot digital camera. Two years ago this month, I purchased a Canon Digital Rebel XTi, a basic digital single-lens reflex (dSLR) camera. Since then I’ve been slowly accumulating various accessories like lenses. Last year was somewhat tame; I refrained from adding to my collection.
Here are the lenses currently in my arsenal.
The last lens was purchased in 2008, so last year ended without any new major photography purchase. I couldn’t let that continue, so this weekend I ordered the Canon EF 100mm f/2.8L IS USM 1-to-1 Macro Lens. This will be a better choice than the other lenses for portraits and the only choice among my current options for macro photography.
Coin collecting
I’ve enjoyed coin collecting since I was very young. I’m still dabbling in the hobby only rather than filling coin folders with pennies found in circulation, I’m looking for some nicer coins that have been professionally graded. At the moment, I’m focusing on a set of Lincoln cents, but my next project will likely be a 20th century type set.
Recently, I’ve been successful finding certified coins on eBay at a fraction of the current prices listed in widely-accepted guide books. I don’t intend on buying these coins as an investment, hoping they will increase in value so I can sell and make a profit. I’m more interested in building a collection that I would be proud to own and possibly pass along to a future generation. According to the price guides, I’ve already made a profit on paper.
I’m currently creating a system to track each coin as an investment in Quicken.
Hobbies are luxuries. I feel lucky that I have income I can spend on a few activities that interest me. I’m only able to spend this money after years of living quite frugally, including living with three roommates to share rent, eliminating cable, and finding ways to transport myself without a car. If I had credit card debt, I would not be doing this. If I had student loans to pay off, which I had until a few years ago, I would be dedicating the money spent on photography equipment and coin collecting to eliminating that debt.
For those who are more financially secure, how are you spending your money now? How are you treating yourself and your interests now that you have paid off debt and are still making your savings targets?
I could always do better for my future self by saving and investing even more of my income. But I strongly believe that, when it is practical, I should be doing whatever I can to enjoy my life.
4
