This week’s “Ask the Readers” is a little different. After reading Trent’s weekly “mailbags” at The Simple Dollar for the past year, it occurred to me that a similar format might work for Get Rich Slowly, allowing me to answer more of the reader questions I receive. This is a test of the concept.

What I’d actually like to do is keep the regular “Ask the Readers” for Friday mornings, but add a reader mailbag for Friday afternoons. What do you think? Would you like to see a new mailbag feature? Mailbag only? “Ask the Readers” only?

My goal is to be able to help as many people as possible, and to get you, the readers, to offer your input, too. Here, then, are the four questions and one success story I selected for this week:

Online IRA brokers
Gavin wants to open an online brokerage account:

I have an employer 401(k) that I have to rollover to an IRA or Roth IRA. I’m looking at online brokers like Fidelity, Vanguard, Wells Fargo, Schwab, etc. Any advice on which is the best? I’m mostly concerned about a broker that has no fees, and I can sit my money in an account that I won’t have to pay attention to all that much.

This is a fantastic opportunity for reader input. Which online brokerage do you use, and are you happy with it? I’m not sure there’s any one best answer. My Roth IRA used to be with Sharebuilder, but I’m in the process of moving it (and all of my other accounts) to Fidelity. I’m not a raving fan of Fidelity, but they have been helpful, have a good interface, offer some low-cost index funds, and most importantly (to me), they have a nearby office I can visit if I want help.

I’m curious to see what GRS readers recommend for online brokerage accounts.

Ally Bank and rate-chasing
David asks:

I’ve been reading your blog for some time now and I’m a big fan. Like you, I use ING Direct as my bank and am completely happy with it. However, I started noticing that Ally Bank has a significantly higher yield with a similar banking philosophy. I was wondering what your thoughts were on this bank and if it was worth switching.

Ally Bank is the re-named GMAC bank. The company is struggling now, and in order to stabilize is trying to obtain additional deposits. The increased financial resources will help them fund their needs, but some analysts believe the company will need another government bailout.

That said, Ally Bank is FDIC-insured and offers a great rate. If your deposits are under the current FDIC insurance limits, it might make sense for you to move there. I’ve not used Ally Bank myself, so I cannot comment on its web interface or customer service. You can probably find user experiences on the GRS savings account page.

Is rate chasing a good idea? That’s tough to answer. For some people, it can make sense. For others, it’s not worth the time and effort. For people just opening a high-yield savings account, I generally recommend going with a bank that earns high marks for customer satisfaction and offers high interest rates. For those with existing accounts, it’s a judgment call. I’m content with ING Direct. You may not be.

Paying down multiple loans with the same interest rate
Here’s Kelly’s situation:

I have been struggling with the best way to pay off four loans with the same interest rate. I want to pay these off in whatever order will have the least interest paid overall. Here are the loan amounts:

  • Loan A: $6,006.34
  • Loan B:$8,162.38
  • Loan C:$10,924.89
  • Loan D: $19,156.14

Current Interest rate on ALL four: 6.75%
Number of payments left: 197

I’d like to pay an additional $300 per month, but don’t know if I should apply this extra money “strategically” across the four loans or only to one.  Does it make sense to pay the highest loan first so that I can tackle the interest portion of each payment earlier rather then later? How should I best apply this extra $300 each month so that I pay the LEAST amount in interest over the life of all these loans? I don’t care about the psychological aspect of paying these loans off — I care about paying the least amount of interest over time.

The answer to Kelly’s question is simple: It doesn’t make any difference how she pays these off. They all have the same interest rate. Assuming she pays an extra $300 every month, it doesn’t matter how that money is applied. In February’s post about using spreadsheets, I demonstrated the math on a similar problem related to interest earned on multiple bank accounts with identical rates:

This same math applies to debt repayment. My advice is to pay down the smallest loan first. It doesn’t affect the total interest paid, but it gets rid of a debt, which can provide a bit of breathing room, if needed.

Books and blogs about the next stage of money management?
Leslie writes:

I have been reading your blog for a number of months now and am a big fan. My personal situation however is perhaps a step or two beyond frugality, debt repayment, and beginner investing (which I find to be the most covered topics on most PF blogs) and I am wondering if you have come across any books or blogs you would recommend for people at the next stage of financial growth. (Call it ‘wealth management’ if you like…I don’t!)

I am looking for information on overall asset allocation (real estate, private business ownership and financial instruments), when it makes sense to stop contributing to registered plans, the best way to manage charitable contributions, etc. If you could point me in a general direction, I would certainly appreciate it!

To be honest, I can’t think of any blogs that cover this area of personal finance. I’m sure they’re out there, but I just haven’t found them yet. I would love to hear recommendations from readers. Also, please note that Get Rich Slowly will begin to cover more of this material in the future as my own financial situation improves. But it’s a slow transition.

As for books, I think there are a number of options, most of them a little dry. I’m currently reading The Quiet Millionaire from Brett Wilder, and while it has great advice, there’s no real “life” to it. Still, I think it meets Leslie’s requirements. Other books to read include:

The latter is one of my favorites. And although it’s not about asset allocation and the like, George Kinder’s The Seven Stages of Money Maturity is also an excellent “advanced” book on personal finance.

Success stories
If the money mailbag does become a regular feature, I’d like to share reader success stories and/or follow-ups to past reader questions. I think both of these can be fun and interesting reads.

Here’s a recent message from April, for example, that’s both a success story and an update on her “Ask the Readers” about whether to buy a car or pay off debt:

One huge benefit of getting our finances in shape is that I no longer HAVE to have my job. We can now pay the bills on one salary (though we’d have to suspend our saving), so as frustrating as office politics can be, I know I could quit if it was just unbearable, and that gives me a lot of peace. Right now I’d rather deal with it, keep increasing our savings, and look for something to transition into. But the point is that I don’t feel enslaved by my job anymore, all thanks to our efforts this past year.

By the way, you featured my question last year about going from two cars to one, and I thought you should know we did go to one car, used the insurance money from the other to start our emergency fund and pay off some debt, and we have yet to buy a second vehicle. It’s actually low on the priority list (building house, then vacation, then second car). I’m glad we didn’t listen to friends and family members who thought it was a bad idea.

That, my friends, is the first edition of the Get Rich Slowly mailbag. Would you like to see further installments? I’ll probably have to be more ruthless about editing messages and my responses, but this is roughly the form it would take. Let me know if you prefer this to “Ask the Readers”, if you’d like to see both, or if you’d rather have “Ask the Readers” only.

And, of course, please offer your advice to the people who submitted questions!

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