If you’ve suddenly come upon $1,000 you didn’t have the day before, you may get the urge to celebrate. $1,000 doesn’t open many new opportunities to you these days, but there are a number of options. Kiplinger has published a special with 37 ways to invest $1,000, but I have a few suggestions of my own.

Savings Options

1. Start or increase your emergency fund. Am emergency fund is there to help you cover expenses when some unplanned event interrupts your income stream, and the best emergency fund is tiered.

2. Open a high-yield savings account. Set aside the $1,000 for a future spending goal, like a vacation or a new car. Keeping this money investing as much as possible while still “liquid” will allow you to access the cash when the time is right.

Debt reduction options

3. Send $1,000 directly to your credit card with the highest interest rate. If you have credit card debt, sending an extra payment of $1,000 will save you lots of interest down the road. This isn’t a very exciting option, because it’s hard to “feel” the benefit of saved expenses over time, but it is worthwhile.

4. Pay off your mortgage faster. If you own a home, it’s likely you also have a mortgage. If your lender doesn’t penalize you, consider sending $1,000 as an extra payment. Many people have goals to be debt-free. A mortgage is debt, so any debt reduction plan must consider the mortgage.

5. Reduce your student loan debt. This month, I again increased my monthly payment to my student loan debt. This student loan is currently the only debt I have, and I no longer qualify for a tax reduction for paying student loan interest. It is in my best interest to get rid of this debt as soon as possible. An extra $1,000 can make a significant dent in my student loan, and it might for you, as well.

Investing options

6. Invest in a Roth IRA. If your income doesn’t disqualify you, you can invest up to $5,000 in a Roth IRA. This type of account allows you to take advantage of low tax rates today. The earnings on the money invested will grow tax-free, and you’ll be able to withdraw your earnings without penalty after you’re 59.5 years old.

7. Invest in the total stock market. Whether or not you have investments, the Vanguard Total Stock Market Index (VTSMX) is a good option for long-term investing. This low-cost index fund tracks the stock market index, which is one of the best possible investments over time. Many people try to beat the performance of this index and most fail. In order to qualify for the investment, you will need to invest a minimum of $3,000, so you may need to use your new $1,000 to help save for your initial investment.

8. Invest in your children’s education. If you have children and you want as many educational opportunities available to them as possible, you may want to consider a 529 college savings plan. 529 plans are run by states and offer some tax incentives when the investments are used for education-related expenses.

Charitable giving

9. Give the $1,000 to a cause with importance and meaning to you. Tax deductions should only be considered an ancillary benefit rather than the primary driver for contributing to a non-profit organization. Finding an unexpected $1,000 creates a perfect opportunity for sharing your good fortune with those who need it more than you.

Treat yourself

10. If you’re in a good shape from a financial perspective, don’t neglect yourself and your family. While buying things might not affect your long-term happiness, deprivation of things that make you happy in the short-term can increase long-term frustration.

The above ten options are probably some of the most popular choices for taking advantage of unexpected income. The above is my list. Kiplinger’s list, which I mentioned above, contains 21 suggestions, many for savvier investors. Here is the magazine’s full set of suggestions, although I can’t agree with every tip. Read the rest of this article »

While staying in Queens, New York a week ago, I discovered on Sunday that my car had been broken into. Some time between Friday night and Sunday morning, someone broke the front passenger side window and pulled out my car radio and a few other items I had left hidden in the car. In addition to the radio, they grabbed my iPod, GPS, and cell phone chargers. After several years of visiting Queens, I had become fairly lackadaisical about leaving items in the car, even hidden. Nevertheless, the suction imprint on the windshield, the out-of-state plates, and the fact that the car hadn’t moved since Friday night most likely signaled to the thief that my car would be a good mark.

I filed a police report and worked with the insurance company. They weren’t able to find a glass company that could come to replace the window until Tuesday; I found one that would come sooner, so the insurance company worked directly with them. There was no out-of-pocket cost for me to replace the window, but the stolen items were not covered.

This past weekend I replaced just about everything that had been stolen. In the process, I’ve learned or reinforced a few things.

People were amazed that I didn’t get upset about the ordeal. Stuff is just stuff. Nothing stolen was irreplaceable. At least no one I know was hurt. There’s a possibility, however, that the thief was hurt during the theft. There appeared to be a small drop of blood on the inside of the door under the broken window. We cleaned that right away.

Consider renter’s insurance or homeowners insurance. If I had renter’s insurance, the items stolen may have been covered. I should have researched this years ago. I’m not beating myself up about it because I had enough income in September to replace the items without dipping into savings, but that may not always be the case.

Don’t leave valuables in your car. I’m glad I didn’t have anything more valuable in my car. I don’t normally leave my laptop or camera, but those would have been significant losses for me. I switched to a larger laptop and I am getting into the habit of taking everything with me all the time.

This may not apply to everyone, but I plan on being more selective about where I park. My girlfriend lives in a decent neighborhood, but by the time I arrived at her house on that Friday night, the only parking spot I could find was close to one of the major streets through Queens and Long Island, in front of a business. It’s frustrating to have to drive around for a half an hour or more to find a decent parking spot, but I’ll have to wait until something in front of a residence opens up.

I’ve decided not to replace the GPS for now. While I had the device I didn’t use it as often as I thought I would. The cell phone I bought this year has basic GPS capabilities. As long as the cell phone has service, if necessary I should be able to use it to download a map of my location.

As I mentioned earlier, Consumer Reports makes it sound easy for the average family to find $500 a month in saved expenses. Scott Burns calls this the “power of attentive spending.” Pay attention to the little details and you can end the year with $6,000 more in your pocket than you would have otherwise.

The $6,000 in “found money” is tax-free. By reclaiming money you’ve earned but might have spent, you’ve basically increased your income without adding any extra tax expense. It’s not technically correct, but it’s an interesting way of looking at saving money. Think of what else you could do to increase your after-tax income by $6,000.

You could get a raise or a promotion, but usually these things have to be deserved. Working harder at your day job may inspire your boss to reward you with a bonus, raise, or promotion, but to make that $6,000 increase in your pocket, you may need a $10,000 increase in your paycheck. Scott Burns points out that a $6,000 increase represents six years of typical annual increases for the average employee.

It will be just as difficult for many people to generate that same additional annual $6,000 through investments.

Suppose, for instance, you have the good fortune to live in a no-income-tax state and want to get all your return from a portfolio of common stocks. At a 15% tax rate on dividends, you’d have to collect gross dividends of $7,059 to net $6,000 a year. With the S&P 500 Index yielding 2.29%, you’d need to have $308,246 in your portfolio.

You might fare better in interest-bearing savings accounts. In the 33% tax bracket, you would need to earn $8,955 before taxes in interest income. Earning an annual 3.5% which is possible right now in a few high-yield savings accounts, you would need a starting balance of $255,864 to end up with $6,000 in taxes. That would be an additional $255,864 above what you have saved now.

Looking at these numbers, finding possible savings within expenses looks like a good option.

Save $6,000 by paying attention, Scott Burns, MSN Money, August 13, 2008

A recent Nielsen study revealed that almost two-thirds of consumers in the United States, many more than those surveyed just one year ago, have cut back their expenses, specifically due to escalating gas prices.

According to the study, which queried about 50,000 consumers during the first week of June, when regular gas averaged $3.98 per gallon, 78% of consumers are combining shopping trips, 52% are eating out less and 51% are staying at home more. Consumers are also clipping more coupons, doing more shopping at supercenters and buying less expensive brands, the survey found.

Over the past eight years, eerily coinciding with the time that those in the White House were individuals with very strong ties to oil companies and the energy industry, I’ve seen prices at the pump climb 300%. But unlike the majority surveyed, I can’t say that I’ve changed my spending pattern due to this incredible increase in price. I have changed a few habits to save money, like switching to generic brands for certain items, but I find I am spending significantly more in just about every category compared to my expenses in 2000.

I’ve never been much a coupon clipper. If a coupon happens to find its way to my line of sight, and it’s something I might need in the foreseeable future, I will clip it to my refrigerator door and I may remember to bring it with me on my next shopping trip. This hasn’t been changed by gas prices. I am not traveling less, either.

Have you changed any of your habits due to the increase in gas prices?

Gas prices have consumers cutting back – study, Associated Press, July 17, 2008.

In January 2006, thousands of TIAA-CREF customers experienced service problems with the financial services firm when attempting to transfer funds, withdraw funds, or receive distributions.

The company publicly blamed its problems on a tough transition from one computer system to another. This was the reason for my missing contribution that occurred during this period.

Since then, TIAA-CREF recycled their executive team and brought in new leadership, but technical problems persisted. One year passed, and visitors to Consumerism Community continued reporting their woes. On May 31, 2007 (almost a year and a half after the first major reporting of the issue), Joann wrote:

TIAA CREF has serious customer service problems and the problems detailed on this page are quite typical. Their call center operators are completely ill-equipped to deal with most customer problems. They have been going through a major system conversion for the last several years, and almost all problems are blamed on technical glitches beyond their control. It’s frustrating for those of us who have depended on TIAA CREF and don’t have other options.

A supposed former TIAA-CREF employee of eight years added this commentary in July 2007:

Forty-two percent of the employees have been there two years or less. Morale is extremely poor. It is no wonder that service is poor. Don’t blame the employees. When the current CEO came on board several years ago, there was a need for change and improvement. He seemingly had a plan. However, the execution has been dreadful… Both individual and institutional customers are pulling out their assets. Those of us who can’t are very worried about the future. It is astounding that the Boards of Trustees have let this continue.

The Chief Technology Officer (perhaps the individual responsible for computer system transition problems) was forced out of the company by August 2007, but apparently computer issues are still to blame.

Today, Red wrote in to say the following:

About two years ago, TIAA-CREF failed to deposit my monthly withdrawals for two months. I was told they were transitioning to a new computer system and having trouble. Evidently, they are still using this very lame excuse, because when my monthly withdrawal and directs deposit didn’t happen for July, I called and was told TC is “transitioning to a new computer system.”

In the back of my mind, I wonder just how fast TC wants to get my (and other’s) retirement disbursement out. I mean, is it not to TC’s advantage to hold onto our money just as long as possible (due to computer glitches, of course)?

In January 2006, my contribution to TIAA-CREF was missing. I asked for my contribution to be on a certain date and for the funds to purchase shares in a mutual fund. The date came and went, and no purchase was recorded. It was several weeks before they were able to record my transaction. Since the original date, the price of the mutual fund had increased. When TIAA-CREF eventually recorded the transaction, it was backdated to ensure I received the agreed-upon price for the mutual fund shares.

But I wonder if the same holds true for distributions. If they do not sell an investment as instructed due to a “computer glitch,” are they earning interest or keeping a profit on the funds held by the broker until they finally release the funds to the customer?

Regardless, I am not surprised that customer service representatives are still using the “computer system transition” excuse. How many transitions should a company experience over two and a half years?

I’ve come across a number of interesting websites thanks to the Wall Street Journal podcast, the Tech News Briefing, including the E-Report with Tom Dziubek and and Paul Herrmann. (Note: Tom has interviewed me three times for the E-Report.) Most recently, the podcast informed me about RepairPal, a website that helps you find a local mechanic including reviews, get your car questions answered by other community members (or by experts for a fee), and keep track of your own car’s service records.

The tool I find most interesting is a survey of the actual costs paid to have maintenance performed on any make and model. For example, I wanted to compare my recent oil and filter change for a Honda Civic with the prices paid by those living near me. I paid $25 after rebate.

Here are the results. The prices paid for an oil change range from $22 to $40 in my area, with the low end of this range paid at independent shops and the high end paid at dealerships.

The search results also include links to location information, phone numbers, and reviews for local shops. If the site can attract enough people to write reviews, this will be a handy resource. As of now, the site is new, so the list of shops is use but not as good as word of mouth for recommendations.

For techies, particularly those who like Apple products, the new iPhone 3G is starting to look nice. The current iPhone already has a mess of cool features, but Apple’s adding speed, GPS, support for Exchange, and many other features to attract new consumers, particularly business consumers.

Most importantly, the price for the entry level iPhone will be lower than less sophisticated devices, only $199.

This price is highly subsidized by AT&T, the only carrier that will officially support the iPhone. For every customer purchase, AT&T provides $300 to $400 to Apple to receive the device. This subsidy comes at a great cost to AT&T, but they’re confident that it will take only two years to recover these costs. Why? iPhone users spend more.

The average phone bill of an iPhone user is $95, almost twice the average of all other customers. If you’re an average iPhone user, you are spending $540 more per year, or $1,080 over the life of the two-year contract, for the privilege of buying an iPhone for only $199. I think AT&T is recovering quite nicely.

Would you buy the iPhone at $199? It sounds like an attractive price at first glance. But what if you had to pay your total $1,279 up front? You’d get to keep your $50 monthly plan with this option.

The good news is this lower price might mean more competitive phone prices across all cellular carriers. The bad news is the higher subsidies may be covered by higher monthly rates.

Information on iPhone subsidy from AT&T Starts Subsidy War, Scott Moritz, Fortune, June 10, 2008.

For those of you still concerned about receiving your economic stimulus payment, don’t give up hope. Last week, I received a letter from the United States Treasury informing me my wait would soon be over. The letter indicated that I can expect my payment of $600 (which was accurately predicted by the stimulus payment calculator) by May 23. I also knew that I would be receiving a check rather than a direct deposit because I had tax due when filing my return earlier this year.

May 23 came and went. I didn’t receive the check in the mail. While the government did send 1,500 payments to the wrong accounts via direct deposit, I maintained hope that my check would arrive safely, if a little late.

When I arrived home today, my payment was waiting for me in the mailbox. Here is the proof.

Now I need to decide what to do with the money. Paying down my student loan debt is probably the most prudent option, but I have been eying a new telephoto zoom lens. This check would get me halfway there.

Has anyone put their stimulus payment to good use yet?