One of my favorite saving techniques is the use of targeted accounts. If I want to save for something big — like a Mini Cooper, for example — I'll open a new savings account specifically for this purpose. I first learned about this method from Robert Pagliarini's The Six-Day Financial Makeover:
Traditionally, most people invested for various vague goals and lumped all of their savings together in a single investment account. That's pretty boring. It's not very inspiring or effective. Purpose-Driven Investing satisfies our need for a purpose and our need for instant gratification by thinking of each of our goals as a separate “basket”. Each of our baskets represents a single goal with a clear purpose that we can see and grow.
What does this mean in the real world? It means that we have a single investment account for every goal. For example, if one of your goals is to take the family on a European vacation, create a separate savings account called “Family European Vacation Fund”. This account or basket contains all of your savings toward that one goal. Every penny in the account is for the European vacation — not for retirement, a new car, your emergency fund, your kids' college tuition, or any other goal.Continue reading...
Last fall, I discovered my Quicken data file from the mid-1990s. It contains all my transactions from 01 January 1995 until 06 April 1998. There are many fascinating insights to be gleaned from my crazy spending a decade ago, but as I was looking through my checkbook register, one thing in particular stood out.
Before nearly every paycheck, my bank balance would dwindle to $12.33 or $7.14 or something similar. When I was paid, the balance would shoot up for a day or two, only to be spent right away. Sometimes, in fact, I overspent. During these 3-1/2 years, I racked up a couple hundred dollars in overdraft fees.
On one particularly bad day, my bank socked me with three overdraft charges at once. When the notice came in the mail, my stomach sank. How could I be so stupid? Speaking as one who's been there, overdraft fees are an indication that you're not tracking your finances as closely as you think you are. Tracking finances only through receipts, or only through your bank's web site is inadequate. You need to keep a separate ledger (perhaps a checkbook register) or use a piece of software (such as Quicken) in order to track every expense.
I'm a recent convert to the world of online high-yield savings accounts. Now that I have my debt paid off, I can finally afford to save some money. It was difficult for me to choose an account: Should I go with the highest interest rate? Or should I opt for the best customer service?
I'm not a rate-chaser, so I chose ING Direct. Their current 4.10% rate is lower than most places, but I've heard nothing but praise for the company's service and ease-of-use. I have a few hundred dollars stashed there as the start of my emergency fund, though I plan to add more in the coming year.
But GRS reader Chris F. recently pointed me to Advantis Credit Union, a Portland-area institution offering 6.25% interest. That's far enough above the 4.10% I'm earning at ING Direct that I'm willing to switch. Plus I'd be doing business with a local company!
"Poverty does not belong in a civilized human society. Its proper place is in a museum," writes Muhammad Yunus near the end of Banker to the Poor: Micro-Lending and the Battle Against World Poverty. "I want to see a world free from poverty."
If anyone else made such a pronouncement, you might be justified in dismissing it as idle fantasy. But after reading 250 pages describing Yunus' thirty-year micro-lending project, the reader knows that he is not dreaming — he's deadly serious. What's more, he just might achieve his goal.
Muhammad Yunus, who won the Nobel Peace Prize for 2006, is a Bangladeshi banker and economist. Born and raised in Chittagong, he came to the United States during the 1960s to study economics. He returned to Bangladesh to teach at Chittagong University in the early 1970s, but found the poverty around him at odds with the material he taught in class. Continue reading...
I was an account-holder with US Bank for eighteen years. I paid an $8 "service charge" every month, as well as many other fees. Worst of all, I had to put up with truly awful customer service. Many people have similar experiences with US Bank. Yesterday, The Consumerist posted a story of one man's encounter with US Bank customer service ineptitude. It's typical of stories I hear.
I finally switched my accounts to a local credit union last May. I delayed making the switch for years because I thought I had too many automatic transactions that interacted with my US Bank account. Here's how I finally made the switch:
- I withdrew several hundred dollars from US Bank and used this money to open an account at the credit union.
- One-by-one I transferred any automatic transactions to the new account.
- When I was sure that everything was working as intended, I went in and spoke to a banker. I took all my money in cash and then immediately deposited it into my credit union account.
The process was easy.