It was fun to relish that second and roar in merriment last night

“5, 4, 3, 2, 1 …. 1…. Happy New Year!”

With financial scandals cascading through Wall Street and the economy, is 2009 destined to be just as wacky?

=^..^=

(because we do the thinking for you.)

Love,

Ben Bernanke, Federal Reserve Chairman of a Central Bank

Henry Paulson, US Treasury Secretary and former Chairman and Chief Executive of Goldman Sachs

=^..^=

Concerns Mount About FDIC Deposit Fund
Global Financial Newswires
July 18, 2008

NYU Economics Professor Nouriel Roubini predicts that Congress will have to intervene in order to bail out the FDIC deposit fund.

“They’re going to run out of money, with certainty,” he predicted. “Congress is going to have to recapitalize the FDIC, those $50 billion plus is not going to be enough, by no means.”

Indeed, on Friday afternoon FDIC Chairman Sheila Bair said in an interview on C-SPAN television that banks holding brokered deposits may be charged higher premiums in order to bring back the reserve to an acceptable size.

This means higher premiums for FDIC insured banks, analyst Ely noted, further complicating an already tenuous situation for the U.S. banking system. Banks will most likely pass the increased costs onto their customers, he said.

“Banks are going to pass it through to their customers through higher interest rates on loans, lower interest on deposit,” Ely predicted.

The FDIC has around $53 billion set aside to back up bank deposits up to $100,000 per depositor, one of the ways the organization is designed to ensure confidence in the banking industry. However, according to Ely, that $53 billion is “not really available.”

“The deposit insurance fund is as real as the social security trust fund,” Ely said, noting that only a “small fraction” of the $53 billion is actually available and “any losses beyond that will be assessed on the banks.”

Ouch, ouch, ouch. All around painful stuff.

I explored the topic of FDIC Banking Insurance in Is Your Money Safe In The Bank? and there is simply no comforting news coming from the sundry financial sectors as of late.  How many more banks will prove to be fallible as giant financial oligarchies struggle to deleverage themselves on borrowed time?

James Grant from The Wall Street Journal shares a blistering yet spirited debate as he questions why folks aren’t displaying more antagonism and widespread condemnation toward such a crass financial crisis. A crisis, he admonishes, where the brunt of burden will be laid upon honest hard working taxpayers to bail out unscrupulous lenders, even as the Federal Reserve continues to shower gluttonous financial support toward the people who would seem to need it least.  

A malign doctrine, Grant argues, that has sacrificed the quality of the Federal Reserve’s own balance sheet while simultaneously allowing the average American’s hard-earned dollars to suffer.

Yet the populace victims have been amazingly tolerant and protest ever so softly.

Why No Outrage?
The Wall Street Journal
July 19, 2008

… the Wall Street of the Morgans and the Astors and the bloated bondholders is today an institution of the mixed economy. It is hand-in-glove with the government, while the government is, of course — in theory — by and for the people. But that does not quite explain the lack of popular anger at the well-paid people who seem not to be very good at their jobs.

Since the credit crisis burst out into the open in June 2007, inflation has risen and economic growth has faltered. The dollar exchange rate has weakened, the unemployment rate has increased and commodity prices have soared. The gold price, that running straw poll of the world’s confidence in paper money, has jumped. House prices have dropped, mortgage foreclosures spiked and share prices of America’s biggest financial institutions tumbled.

Now began one of the wildest chapters in the history of lending and borrowing. In flush times, our financiers seemingly compete to do the craziest deal. They borrow to the eyes and pay themselves lordly bonuses. Naturally — eventually — they drive themselves, and the economy, into a crisis.

And to the scene of this inevitable accident rush the government’s first responders — the Fed, the Treasury or the government-sponsored enterprises — bearing the people’s money. One might suppose that such a recurrent chain of blunders would gall a politically potent segment of the population. That it has evidently failed to do so in 2008 may be the only important unreported fact of this otherwise compulsively documented election season.

Have We the People unwittingly tarried by neglecting to decry our fragile emplacement – indeed becoming too complacent – even in the midst of being plundered by such saucy financial debauchery?

It’s always good to remain critical, and these debates certainly serve as prudent motivational reminders to continue developing a sharp awareness of where our money is going and how it’s being utilized.

~¤~¤~

Sayings of the Wise

If the American people ever allow private banks to control the issue of their  currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of  all property until their children wake-up homeless on the continent their fathers conquered … The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson

Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety. – Benjamin Franklin

[On leaving Independence Hall at the end of the Constitutional Convention in 1787, Benjamin Franklin was asked "Well, Doctor, what have we got -- a Republic or a Monarchy?"] According to Dr. James McHenry, a Maryland delegate, Franklin replied, “A Republic, if you can keep it.”

=^..^=

I pulled the bulk of my money out of my savings account months ago when interest rates started plummeting. My goal right now is actually two-fold; to preserve my current savings through diversification (such as foreign currency and commodity investments), and to aggressively pay down my debt. There is simply no incentive for me to continue putting money away in a bank account with current deflated interest rates and rampant inflation. I don’t know about others, but I prefer to maintain the purchasing power of my hard earned savings. Sigh. At least this tremulous financial climate gives me an excellent incentive to focus on paying off my debt this year in its entirety – and to stay out of debt forever.

And at least I’m faring better than the average IndyMac customer, who was blindsided last week when their bank pooped out, and where some had a rather rude awakening upon realizing their assumption that all deposits were insured was terribly misguided.

Is money safe in the bank? Generally, yes it is. There however exist federal guidelines to help shelter bank deposits from unnecessary risk. I’m rather astonished folks with such large balances of savings weren’t aware of this.

FDIC insurance –

Even though this information can be found with a tiny bit of research, I’ll try to provide the general gist here. The Federal Deposit Insurance Corporation (FDIC) fully insures individual bank accounts up to $100,000 per depositor, and up to $250,000 for certain retirement accounts, such as an Individual Retirement Account (IRA). It does not, however, cover investments in bonds, stocks, mutual funds, annuities, life-insurance policies or municipal securities.

Since each account is insured separately, coverage beyond the $100,000 threshold can be increased by opening an account at a separate bank – (it has to be a different bank though and not another branch of the same bank, obviously.) Assets can sometimes be spread out between different account types at the same branch as well so if you’re unsure, it’s always best to consult your financial institution for strategies to ensure maximum insurance coverage.

You can also use this form to verify if your banking institution is currently FDIC insured: FDIC Bank Find

(Recommended Reading: FDIC Website)

Indymac bank failure

As a flux of IndyMac customers are now unfortunately discovering, exposure to risk is greatly increased when an account exceeds $100,000 and the bank flops. The FDIC will immediately step in to liquidate and disseminate the bank’s remaining assets, but you may have the unpleasant experience of receiving but a mite of your balance again.

My heart really goes out to the hapless people in this video clip as they waited outside IndyMac this week to withdraw funds.

(Oops, I had to remove the embedded video due to a coding issue with FireFox web browser. To view a clip of the video, click the link below)

IndyMac Bank Run Confrontation in California

One man ‘couldn’t find his balance’ since the machines weren’t operating; he had no idea what his current bank balance might be or how to withdraw money for his pending bills. My local news showed a distraught customer who claimed to have over $320,000 in a savings account and was mendaciously led to believe the entire balance was insured due to three names being on the account.

This only reinforces my antipathy for blindly entrusting others with hard earned savings, and why it’s prudent to understand all the nitty gritty details involved in any type of investment. Banks are usually safe havens, but even anchorable banks can fail.

I’m shocked that people weren’t more cognizant of the FDIC guidelines and hopefully this IndyMac incident will bring awareness to help others avoid similar blunders.

~†~ Baby Steps Are Key  ~†~ No one will care about your hard earned money as much as you do. That’s why it’s imperative to always have a solid understanding of the details on your investments and all the risks involved.

=^..^=

 † †

Featured Resources

Compare prices and read helpful product reviews to make smart buying easy through Ciao! – Price Comparison and Product Reviews for the savvy shopper.

New Threat: The ‘Obama’ Market
The Sun
June 30, 2008

Mr. Allmon has been in the stock market for over fifty years and currently manages over $200 million in assets – and has outperformed this year’s rocky market with modest gains of between 1% and 2%.

Mr. Allmon says, “Senator Obama is leading a children’s brigade, but the problem is children shouldn’t be leading this country.”

Further, the veteran adviser, who publishes a 46-year-old monthly investment newsletter, the Growth Stock Outlook, out of Bethesda, Md., made a marvelous market call last July with the Dow Jones Industrials hovering around 14,000 and bullish sentiment rampant. In an ominous warning to subscribers, he urged extreme caution, predicting the Dow was on its way to 8,500 to 9,000, which he noted was a forecast that “could be on the high side.”
With the index having plummeted more than 2,500 points since then, his crystal-ball gazing talent is not to be taken lightly.

At the time of his forecast, Mr. Allmon recalls, some subscribers rang him up and told him, “You’re nuts.” But now, he says, “They’re beginning to recognize something is really wrong in this country, and an 8,500 to 9,000 Dow is very possible.” Thursday and Friday’s wicked two-day Dow decline of 465 points, or nearly 4%, he says, may be a prelude to that drop.

Mr. Allmon’s parting words: “We’re in a bear market that’s got more to go; don’t get sucked in.”

A financial update. Oh baby, how far we’ve come

While rummaging through some older posts here on Broke-Ass, I stumbled across a lot of stuff I’d forgotten about. A post from last year showed how I’d gone from $0 in savings in January 2007 to $1,000 in savings four months later (see Surviving Paycheck to Paycheck? You Can Still Start Saving).

It was a huge milestone for me. For someone who had never adequately been able to hold onto money for very long, I began to realize I could achieve anything I really put my mind to. This included learning habits that would aid my search in finding that elusive concept known as financial freedom.

Yesterday I decided once again to review my progress. I tend to have a ‘do it and forget it’ approach, meaning every time I receive money, at least 20% is manually deducted and siphoned away into some form of savings. (And, well, basically forgotten.)  A little over a year since my last financial update post, I have hit another milestone. Actually I was quite shocked when I added everything together and realized …

… I now have approximately $6,000 stashed away in some form of savings.

I’d also managed to clear a sizable chunk off my debt as well. In fact, if I remain aggressive on paying off debt as a main priority, I’m now on course to being debt-free within twelve months at the very latest. And the thought of no debt lingering over my head is exhilarating!

So what’s next on the financial agenda?

Preserving wealth amidst inflation

Preserving wealth right now means uncovering creative ways to keep the inflation beast at bay and preventing this rabid little monster from devouring portions of savings.

If my savings account isn’t keeping pace with inflation, purchasing power is being diminished and I’m unfortunately becoming a financial loser. But isn’t putting a safety cushion of money into a savings account supposedly one of the ‘Golden Rules’ touted by financial advisors ad naseam for smart beginner investing?

Surprisingly I know many people who openly scoff at the interest rates attached to most savings accounts.  “But Jennifer,” they ask. “Why put money into the bank when I’m receiving such a pitiful return? With a tiny bit of effort, I can do so much better myself.”

So how are they doing it?

These folks say they recognize the importance of preserving their current wealth by always keeping a sharp eye out for opportunities. They’ve become experts in finding little niches that will help them keep pace with inflation (and possibly even net a profit in the process!) When federal interest rates start dropping is also when it’s crucial for savers to get their inventive juices flowing.

When the going gets tough, the tough get … creative!

Just to throw some quick questions at you – do you have a certain hobby that can be capitalized upon? Can current interests or skills be used as an asset for opening your own business? Do you enjoy collecting antiques or other collectibles or are you an avid coin collector and a fan of numismatics? Have you ever considered visiting estate or garage sales in your area for underpriced (unrealized) items?

The goal, they explain, is to invest your money in something that will inherently keep its value and thus (hopefully) rise with inflation. It also needs to be an area you’re knowledgeable about and feel comfortable enough to park money into it. For example, many investors enjoy precious metals, such as gold and silver, as a hedge against inflation. Once you dabble your toe into a certain area, you can even try accumulating a bit of ’interest’ in the process.

Here’s another example. I know quite a few who frequent both estate and garage sales and continually make a killing by arriving early and recognizing hidden treasures nestled among other junk. These treasure hunters are aware of the real value attached to many antiquities. They make handsome returns by buying low and selling high and have a lot of fun in the process. Consider becoming educated in a hobby or area of interest and you too may develop a niche and one day be a whiz in this type of ’horse trading’.

If I’ve learned anything from these pros, it’s this tidbit of advice. Start small and always keep cash on hand. You never know when an opportunity might present itself and you’ll want to be prepared to immediately pounce if it does.

Unfortunately the sobering fact is, it doesn’t matter how much I’ve saved if inflation continues chomping away on my hard-earned dollars. So now it’s time to get innovative and try to prod this irksome inflation beast back to its insidious lair.

~†~ Baby Steps Are Key  ~†~ When interest rates are down, savers truly suffer. Use the internet (which allows access to a potential worldwide customer base) and other skills to your advantage to discover your own creative ways to both accumulate and preserve wealth. 

~¤~¤~

Also check out the Carnival of Personal Finance for many great submissions on financial topics. A huge thank you to Mrs. Micah for hosting this week’s edition.

=^..^=

In The Current Turbulent Economy and Financial Sectors, What Gives?

I’ve become somewhat of a CNBC junkie lately, which has resulted in some pretty bizarre sleeping patterns. It’s not unusual to catch me propped up on my pillows at 4am, munching on some Cheerios and sneaking in an hour or two of ”Worldwide Exchange”. Month after month I’ve held my breath and cringed as the Federal Reserve continues to slash key interest rates. The suspense! The horror! And most gut wrenching of all - the sheer anticipation as the world frantically wonders what card Bennie Bernanke will extract from his magical hat of endless financial illusions next.

Inflation is becoming a growing whisper of concern even among the stoutest of mainstream media. Some professionals insist official data has been skewed and inflation is rapidly approaching the 5% mark or greater. Amidst economists bickering back and forth about the particularities of what constitutes a ‘global slowdown’, a ‘recession’, a ‘stagflation’ or a zesty myriad of other terms, one thought continues to become astoundingly clear.

Prices are going up. And at current interest rates, my savings are getting royally screwed.

The Demise of Debt?

As a novice in the financial arena witnessing it all as I lay wrapped snug in my blankie (yes, I still have a blankie!), it’s been a hell of a ride so far. Certain financial markets are roaring to life while others cool themselves into near oblivion.  In these daunting financial waters, investors scramble to find their potential life rafts. Will history continue repeating itself? Is our mounting national debt and insatiable consumerist desires about to nip us in the rear as we struggle to deleverage ourselves?

Well, I do know one thing. If everyone stepped out of debt today, it would certainly cause a catastrophic economic collapse.  Our entire currency is based off debt, meaning that every dollar you hold in your hand entails someone else needing to be in even greater debt for that dollar amount you’ve just stuffed into your wallet to even exist. If everyone simultaneously paid off their loans and refused to take out new ones, the entire financial system as we know it would come to a grinding halt. Quite a pickle to be in, don’t you think?

Statistically it would be impossible for everyone to pay off their debts all at once anyway. When loans are made, the principle is zipped away to the wide expanse of the money pool (or total money supply). But we all know we’re not merely paying the principle amount back when we repay a loan - who can forget the exorbitant interest rates we shell out for the privilege of buying the latest shiny trinket with money we don’t have yet. So where does the interest money come from anyway? Well, it all comes from the same money pool - the one containing everyone’s initial principle. The one containing only the principle amount.

It’s a continuous game of musical chairs, folks, and this time the subprime mortgage borrowers didn’t grab a chair quick enough before the music stopped playing.

Those poor sods.

Debt Still Isn’t Kosher

With interest rates so low right now, it unfortunately doesn’t do me a lick of good stashing too much into a savings account. The wisest route will be to focus on aggressively tackling my debts. Unfortunately even if I didn’t have ANY debt, putting money into a savings account would be a losing proposition. So all remains quiet here and for the moment you can find me tucked into the wee hours watching the financial news and enjoying an early morning snack.

Just don’t expect me to peer underneath my bed. There may just be a big scary inflation monster peeking back at me.

~†~ Baby Steps Are Key ~†~  Money used to represent value. Now money represents debt – and debt is enslavement.

~¤~¤~

Sayings of the Wise

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. -John Maynard Keynes

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. -Alan Greenspan

=^..^=

Lillian Snow makes her debut

Early this morning, an itty bitty pink ball of mucous was lifted from her sheltered pod and let out an enormous squall. Lillian Snow scrunched open her eyes for the first time, as an exhausted Daddy stared in disbelief at his new glistening daughter.

After more than 18 hours of arduous labor, my brother’s baby girl had finally popped into the world.

What an amazing feeling it was to cradle that infant burping beauty and know I’m an Auntie now. And what would Momma Kat and Daddy Joe think if I passed along information on compound interest to my little niece?

From Wealth in a Decade by Brett Machtig:

Compound interest is truly amazing. If you were given $1.00 at birth and were able to double that dollar every year:

• At age 15, you’d have enough to buy a mid-priced car

• At age 18, you’d be able to buy a home valued at $130,000

• At age 22, you’d be earning $200,000 in interest from your investments if they were invested at 10 percent

• At age 30, you could own a $1 million home in over 500 cities worldwide

• At just over 43 years of age, you would be able to pay off the national debt of approximately $5 trillion

• Just in time for retirement at age 65, you would have amassed the tidy sum of $18,000,000,000,000,000,000. I really have no idea what the name is for that amount of money. Suffice it to say that you could give about $72 billion to every man, woman, and child in the United States (assuming a population of 25 million).

Not too shabby for some early investing.

=^..^=

A Great Start to April!

I was thrilled to discover yesterday that I’ve reached one of my first financial goals earlier than expected (see My 2007 Goals for Financial Prosperity.) Thanks to diligently socking away between 10-15% of my paycheck and through receiving a portion of my tax refund, (thanks to a free tax prep courtesy of Turbo Tax I managed to get), I’ve finally managed to accumulate a nifty safety buffer of $1,000 in an online savings account.

Since I had absolutely -no- (zero, zip, nada) savings in January, this brings huge relief and a great psychological boost. A $1,000 savings over the span of three months definitely feels empowering!

But consider this sobering fact; the nation’s savings rate was at a negative 1 percent last year. The savings rate has fallen to the lowest level since the Great Depression. Ouch.

So why aren’t more people motivated to save?

You don’t need to be filthy rich to begin building wealth

Many people are under the assumption that saving a little isn’t worthwhile in the long term. But putting a bit of money away now can actually go a long way in preparing for those pesky unexpected expenses and emergencies, buying a home, or even funding a comfy retirement.

The key is learning how to most effectively make your money work for you.

By getting into the healthy habit now of nurturing and respecting every dollar that passes through your fingers, you’ll soon be reaping the wonderful fruits of your labor. Saving a mere $5 a day can dramatically change your life over time.

Consider putting $5 per day in an account yielding a 10-percent annual return. After 40 years, that $150 a month (roughly) can transform into an enormous $940,000.

So in what ways have I been saving money without feeling as if I’m sacrificing too much?

• I always pay myself first. I transfer between 10-15% of my paycheck into savings as soon as I receive it, instead of waiting at the end of the month when it may have all dwindled away. This has become so habitual that I never notice the difference.

• By bringing my own snacks and lunch to work, I easily save up to $3 per day. I also eat enough to feel satiated and try to avoid over binging on food. This also helps alleviate that gross “I’m stuffed” feeling after completely pigging out on a meal.

• At the end of each day, I throw all of my change into a jar in my room. By the end of the month, that change easily morphs into an unexpected $30-$40.

• I love walking and hiking and can easily absorb myself in nature for hours at a time. All I need to bring on my journey is a thermos filled with water, some small healthy snacks for endurance, and my favorite book from the library for stretching out for a bit in the sun. Long walks are both physically and spiritually healthy, and they don’t cost a thing!

Do you have your own favorite saving tips and activities? I’d love to hear them!

~†~ Baby Steps are Key ~†~

If you learn how to nurture and take care of your money now, down the road your money will, in turn, take care of you.

=^..^=

† †

Featured Resources

Compare prices and read helpful product reviews to make smart buying easy through Ciao! – Price Comparison and Product Reviews for the savvy shopper.

iGObanking 5.30% APY ($1 to open, no minimum, no fees, FDIC insured, compounded daily)

Grandyielddirect 5.27% APY ($1 to open, no minimum fees, FDIC insured, compounded daily)

E*Trade 5.05% APY ($1 to open, no minimum, no fees, FDIC insured, compounded daily)

EmigrantDirect 5.05% APY ($1 to open, no minimum, no fees, FDIC insured, compounded daily)

HSBC Direct 5.05% APY ($1 to open, no minimum, no fees, FDIC insured, compounded monthly)

ING Direct 4.50 % APY ($1 to open, no minimum, no fees, FDIC insured, compounded monthly)

In the frenzied competition of online savings accounts, HSBC Direct is throwing a phenomenal limited time offer on savings accounts.  6.00% APY is now being offered to new customers on new money through April 30, 2007. Check out HSBC Direct.com for complete details.

***

Another iGObanking Customer Service Experience

An opportunity once again presented itself for me to utilize iGObanking’s customer service.

I had transferred a small sliver of money from my checking account into my iGObanking savings account a week and a half ago. The transaction took around three business days to reach my iGObanking account. However when I logged into my account, it showed two different dollar amounts; my account balance and my available balance.

My account balance was much higher than the available balance and included the transferred funds. I couldn’t access the newly transferred funds yet though.

After a week had passed and the separate numbers persisted, I wondered how long it officially takes for newly transferred money to clear and completely merge into the available balance.

I set out to discover an answer and called iGObanking on Wednesday around 11:30ish in the afternoon. After roughly six minutes on hold, a female customer service representative answered. She had a thick accent and was a bit hard to understand at moments. I had to ask “Pardon?” and “Could you repeat that please?” a few times in order to make sure I understood all the information correctly.

She patiently and slowly explained that money transfers take roughly three to five business days to reach my savings account from an outside source. Once the transfer has arrived in my iGObanking savings account, interest begins to compound on the entire amount immediately.

However, it takes an additional three to five business days for the new amount to clear before it may technically be used.

If you’re looking to swap money around quickly from one source to another, be aware that it may take up to ten business days total for funds to become available – up to five business days for transfer completion and up to an additional five business days for the amount to properly clear once it reaches your iGObanking savings account.

I personally have no problem with this added time cushion on incoming funds since the intention of my savings account is for nest egg and emergency purposes only. The less liquid the funds, the less tempation I’ll have dipping into it for unnecessary expenses.

If you’re interested in additional information, you can nip around in my archives for all my past experiences with iGObanking. Simply click on a specific post title to bring up the entire article.

By automatically taking out at least 10% of my paycheck, so far my current savings have reached $350 (with the end goal being $1,000).

Slowly but surely getting there!

~†~ Baby Steps are Key ~†~

=^..^=

Strategic Planning and Foresight Can Go A Long Way

Although I’m currently burdened with car and student loans, this year I’ve decided to juggle my income between paying off my debts, saving for myself and investing toward the future. Therefore my financial goals for 2007 are to establish a small emergency savings and begin funding a Roth, all while paying down my debts.

Here is how I plan to accomplish all of this.

• Baby Step #1 – Stop incurring more debt. I’ve stopped the habit of borrowing to pay for things with money I don’t have. Now I’ll only use a credit card with cash currently in the bank. This will ensure my ablity to pay off credit card balances in full each month to avoid interest penalties.

Now I can begin focusing on completely eradicating the debt I owe.

• Baby Step #2 – Always pay yourself first. I’ve been involved in the workforce for ten years now and it saddens me that I don’t have a penny to show for it in savings. Even if I had put a mere $1 of each paycheck aside in savings these past ten years, I’d be in a more secure financial situation than I am now.

I’ve become wiser and now automatically deduct 15% of my paycheck to shuffle into savings each week. From today forward, I will always pay myself first before I pay anyone else. This includes paying into others’ hands for debts I owe, splurging trips to the mall, eating out, anything.

If money is particularly tight, everyone should strive to set aside at least 10% of their earnings for savings. If you choose not to, financial comfort may always elude you.

Once out of debt, I will bump it closer to 20% and establish the habit now as I continue on through my adult life.

• Baby Step #3 – Fund a Roth IRA. Since my company offers no match incentive for a 403(b), instead I’ve chosen to open a Roth IRA to begin funding for retirement.

Although I still have debt to pay off, my decision for this is rather simple. I can always make more money to pay off debt, but I will never have the benefit of time again.

1. Through paying myself first, I will use 15% of each paycheck to establish a small emergency savings of at least $1,000.
2. Then I will use half of that 15% to slowly continue building a nest egg savings of at least six months worth of expenses. The other half will go into funding my Roth IRA.
3. Eventually I’ll have a brimming nest egg established and can thus concentrate exclusively on funding my Roth to the max each year.
4. Any unexpected gift of cash I come into during the year (such as a raise or a tax refund) will go exclusively toward the above goals.

How To Make Your Nest Egg Flourish

I love the simplistic egg basket illustration used in “The Richest Man in Babylon” by George S. Clason.

If you put ten eggs into a basket each morning and take out nine each evening, what will eventually happen to your egg basket? It will in time become overflowing because you’re putting more eggs into your basket each day than you’re taking out.

Use this simple analogy to help build your own financial blueprint for wealth. Don’t foolishly labor for others without paying yourself at least 10% of your income first. As Clason states,

… for every ten coins placed in your purse take out for use all but nine, and your purse shall begin to fatten immediately

Always remember that a portion of what you earn is yours to keep, no less than 10%, no matter how much you earn. Pay yourself first.

~†~ Baby Steps Are Key  ~†~

What are some of your financial goals for this year?

=^..^=

** If you’re uncertain about the imperativeness of funding a retirement now while you’re young, I strongly recommend taking time to browse through these articles by Ramit Sethi, The World’s Easiest Guide to Understanding Retirement Accounts and why It Never Gets Easier Than Now.

****

Ack, and if anyone can help me restore my sidebar from the bottom of the page, it would be appreciated. This post seems to have made it drop down in IE.  

*desperately tries to coax it back up from the abyss*

(Update – thanks to Adam and Dwane for your help in resolving the issue. We used surgical pliers and went in and restored the damage. All should be intact now.)

iGObanking    5.30% APY ($1 to open, no minimum, no fees, FDIC insured, compounded daily)

Grandyielddirect 5.27% APY ($1 to open, no minimum fees, FDIC insured, compounded daily)

E*Trade    5.05% APY ($1 to open, no minimum, no fees, FDIC insured, compounded daily)

EmigrantDirect    5.05% APY ($1 to open, no minimum, no fees, FDIC insured, compounded daily)

HSBC Direct    5.05% APY ($1 to open, no minimum, no fees, FDIC insured, compounded monthly)

ING Direct    4.50 % APY ($1 to open, no minimum, no fees, FDIC insured, compounded monthly)

iGObanking Customer Service and Added Security Measures

Since opening an online savings account with iGObanking roughly a month ago, I have been very satisfied with their customer service. Last week I transferred a small amount from my local checking account into my iGObanking savings account. The transaction took approximately four business days, and I received two complimentary emails during the process to reassure me of the status on my pending transaction.

iGObanking automatically logs your IP while signing up. It asks if you’d like to set that particular computer as your ‘default’. This means if you log on from a different computer, the iGObanking online system will recognize the foreign IP and take security precautions by asking additional questions upon login.

I know many people who still feel wary of using online banking in general. I feel, therefore, this is actually a benefit for additional peace of mind.

Uhh, until I found myself locked out of the system – and my account.

I logged onto the iGObanking site from my work computer a few days ago. The system didn’t recognize the computer I was trying to access my account from. It prompted me to answer security questions I had been asked during the initial signup process (three in total). Except, bugger me if I couldn’t remember the answer of the last one. One time, failed, twice, three times … bam! I received a message that, after four unsuccessful login attempts, my account was now locked. I would need to contact a customer service representative to remedy the situation.

Grumbling, I tried to log in again from my home computer later in the day. After receiving the same message, I shrugged and figured it would be an ideal opportunity to test the quality of iGObanking’s customer service. I called the toll-free number on their website and patiently awaited the next available CR.

I was placed on hold for five minutes before receiving a very pleasant middle-aged woman, who allowed me to explain the entire situation. After I sheepishly told her I was locked out of my account after logging in from a work computer, but had forgotten one of my security questions, she chuckled and said it wasn’t an uncommon occurrence. She reassured me it would be easy as pie to fix. After asking my basic info (name, address, ss #, telephone) for verification purposes, my account was promptly unlocked. She gave me a new password and instructed me to wait five minutes, log in again, and reset my security questions.

A few minutes later, I had three new questions (with the answers committed firmly to memory this time!), and I was happily cruising through my online account again. Very simple, and very well-handled. The whole ordeal took less than ten minutes to fix, and I am extremely pleased with the quality of iGObanking’s courteous and efficient customer service.

iGObanking Customer Service Hours

If you experience problems or have questions with your iGObanking online savings account, a customer representative can be reached during regular business hours (Monday – Friday – 9:00 a.m. to 5:00 p.m. EST) at 1-888-432-5890. 

Read my experience on the process of opening an account with iGObanking.

Still unsure? Check out the advantages and disadvantages of online bank savings accounts.

~†~ Baby Steps are Key ~†~

=^..^=

Acquiring Wealth

I dug up a wonderfully informative but compact two-page article about beginner wealth from young Joshua Kennon over at About.com. I regularly devour anything on financing I can get my little paws on, and this was a delectable read.

To learn how to accumulate wealth by shifting mentality and through careful strategic maneuvers, take a peek at Josh’s How to Become Wealthy: Investing for Beginners guide. It may permanently change your outlook on your finances.

Some interesting quotes;

“When you realize that every morning your assets wake up and have the same potential to work as you do, you unlock a powerful key in your life. Each dollar you save is like an employee. Over the course of time, the goal is to make your employees work hard, and eventually, they will make enough money to hire more workers (cash).”

“The biggest mistake most people make is that they think they have to start with an entire Napoleon-like army … What these people don’t realize is that entire armies are built one soldier at a time; so too is their financial arsenal.”

“A friend of mine once knew a woman who worked as a dishwasher and made her purses out of used liquid detergent bottles. This woman invested and saved everything she had despite it never being more than a few dollars at a time. Now, her portfolio is worth millions upon millions of dollars, all of which was built upon small investments.”

“If you have any source of income, it is possible for you to start building wealth today.”

This sort of knowledge should be mandatory education for every young adult. I never even seriously considered my personal finances until late last year, a few months before I started blogging. Perhaps if everyone was better equipped with financial awareness, there wouldn’t be so many broke-asses like me running around. * cough *

The key to wealth is not as elusive as one might imagine. Begin building your own personal fortune today by wisely utilizing your (seemingly limited) income stream.

~†~ Baby Steps are Key ~†~

Take action now, a dollar at a time, and watch your dreams be brought to full fruition.

=^..^=

A new year descends upon us with a fresh and invigorating beginning, and we all know we keep meaning to do better with our finances. It’s one of those things which constantly seem to be placed on the backburner as life continually whisks us from one unforeseen circumstance to another.

Thus we continue to obtain enormous amounts of information and financial wisdom from different resources, such as blogs, books, or forums. But, unfortunately, until we take action for the sake of our own money growth, we are accomplishing very little while simultaneously wasting valuable time.

Make this a daily mantra to ask yourself; what baby steps am I doing now, today, to aid my progression to a better financial future? What can I achieve right now to help me reach my goals?

Here are some small but effective methods to help improve personal finances.

Live below your means. A very simple concept – spend less than you earn. Respect and value every cent you make and learn not to surround yourself with needless material possessions that only add clutter and distraction to your life. Plan wisely for the things which are important for you and which contribute to your well-being and happiness.

Change your mentality towards finances. Stop paying for expenses with future earnings to avoid falling into the credit card trap. Refuse to indulge the national ‘buy now, pay later’ consumerism philosophy. Companies make billions off this mentality every year. Get angry and stop letting others profit from your hard earned salary.

Learn to spend only what you have in the bank. Use credit cards to your advantage and get in the habit of paying the entire balance off each month to avoid finance charges.

Make it a priority to establish an emergency fund. A solid emergency fund is generally saving two to six months worth of expenses. It’s really frightening how few households have this safety cushion for themselves. This will help break the ‘living from paycheck to paycheck’ cycle and bring peace of mind for unexpected circumstances. You’ll then be prepared to face unexpected situations in a pinch.

Save an emergency fund or pay off debt first? This is my current predicament. If you’re also questioning whether to begin your emergency fund or pay off debt first, check the interest rates on your credit cards and loans to decide. If you’re paying 18% on a credit card and only earning 5% in a savings account, you’ll be losing out on 13%, with the 5% interest on your savings being taxable as well. Therefore, it’s wisest and most beneficial to use savings to aggressively eliminate the debt first. Remember to first save a small amount for emergency situations that may crop up – roughly $500 to $1,000. Once debt is eliminated, you can concentrate on establishing a more complete emergency fund. And once you have a tidy emergency fund, you’ll have incredible peace of mind and can start investing wisely for the future to watch your money grow.

Make your savings work for you. On average, the American economy is battling approximately 3% inflation every year. It’s imperative to take this into consideration when setting up any type of investment. Short-term financial goals, categorized as any goal within the next fives years, such as saving for a car or a down payment on a house, should be placed in a fairly liquid and safe type of savings. This could be online savings accounts, certificate of deposits, or money market mutual funds. Invest for long term goals (up to and more than a decade, preferably two or three decades), by reallocating investments into more aggressive growth opportunities in the stock market. Remember, time is your greatest asset. The sooner you get started, the more you’ll benefit in the future.

Try eliminating a bad habit this year and watch your savings accumulate. Whether your vice is excessive fast food or smoking cigarettes, cutting back or quitting an unhealthy addiction will not only benefit your piggy bank, but will also dramatically improve your overall well-being.

Stop receiving a tax refund. I have no idea why, but some people psychologically get a thrill from receiving a huge tax refund each year. I don’t think they realize they’re essentially duping themselves. The federal government has been using your money for free. If you pay what you owe to begin with, all that extra money could be sitting in a high yield account earning some fabulous interest for yourself during the course of the year. It’s much better to break even or owe a small amount to the IRS at tax time. Stop giving Uncle Sam an interest-free loan!

• #1 – Stop incurring more debt
• #2 – Start a ‘beginner’ emergency fund, a small savings of $500-$1,000
• #3 – Eliminate all high interest debt as quickly and aggressively as possible
• #4 – Establish an emergency fund of two to six months worth of expenses
• #5 – Time is on your side; build your wealth through long-term investments for the future

The most important step of all is, TAKE ACTION. Even the smallest of steps will bring you closer to your financial goals and, ultimately, to greater peace of mind.

~†~ Baby Steps are Key ~†~

=^..^=

iGObanking    5.30% APY ($1 to open, no minimum, no fees, FDIC insured)

E*Trade    5.05% APY ($1 to open, no minimum, no fees, FDIC insured, compounded daily)

EmigrantDirect    5.05% APY ($1 to open, no minimum, no fees, FDIC insured, compounded daily)

HSBC Direct    5.05% APY ($1 to open, no minimum, no fees, FDIC insured, compounded monthly)

ING Direct    4.50 % APY ($1 to open, no minimum, no fees, FDIC insured, compounded monthly)

I highly recommend putting money you want to remain relatively liquid in an online savings account if you haven’t done so all ready. A huge incentive of online savings accounts are the competitive APY rates offered, as opposed to traditional savings accounts at physical banks. This equals a yummy, much higher interest rate for the customer. If you’re still feeling a bit reluctant or need further information, be sure to check out the advantages and disadvantages of having an online savings account.

My experience with iGObanking

iGObanking currently has one of the highest rates for online savings accounts with a low minimum of $1 to open. I initially signed up with iGObanking on December 18th. The application process was relatively quick and painless, and took roughly ten minutes to complete. If you’re interested in learning more about iGObanking, here is a quick rundown of what you’ll need to open an account with them.

• A social security or tax ID number

• Driver’s license or ID card issued by a state DMV

• Information on any loans or mortgages you currently have (they will ask a few random questions about these to help confirm your identity during the sign-up process)

• Your current bank account number and routing number for funding purposes

• For a joint account, the other individual’s personal information (Secondary Applicant’s name, social security or ID number, and their date of birth)

Once your application has been approved, you’ll have the option to immediately transfer funds from your current bank account(s) into your new iGObanking online savings account. However, I’d recommend only transfering a small portion (even if only the initial $1 minimum to open) because you won’t be able to access your account until they mail a password to your home. The letter arrived approximately a week after I completed the application process. I had put $50 in my account to start with, but it admittedly made me a little nervous when I realized I wasn’t able to access my account yet. Therefore, if you’re a neurotic worrier like me, it might be wiser just tossing $1-$5 into the account and waiting until the letter arrives with your password before transferring over the rest.

Once you receive your letter, you’ll be able to log into your online savings account and will be prompted to change both your user name and password to your own preference. Once you obtain full access to your new online savings account, you can then continue transferring the remainder of your funds into it.

Congratulations on opening your brand new online bank savings account! You’ve taken a wonderful first baby step in helping your money grow and work properly for you. If you haven’t all ready, acquaint yourself with the beauty of compound interest. Now you can focus on building a comfy nest egg for yourself while funneling your savings into your new high APY online savings account.

A good rule of thumb is to count up your total bills and expenses for one month, and then concentrate on saving at least four to six months worth of expenses in case of an emergency. If you’re heavily in debt or a broke-ass student like me, try to save at least $500 to $1,000 in an online savings account for yourself before focusing on aggressively tackling your debt.

So, no more excuses! Today is the day to get started, as in, right now. Welcome to taking a simple yet positive approach towards building a brighter financial future.

~†~ Baby Steps are Key ~†~

=^..^=