I wrote about why I like ING here.

They’ve raised their rate from 4.15 to 4.25 percent. It’s not as competitive as a few online banks out there, but it’s within half a point.

So why would a dollarscrounger pass up on half a percentage point of interest? Here are a few reasons:

• Their account opening process is completely online
• They employ extremely high security measures
• Their user interface is the best in the business
• You can setup timed automatic withdrawals and deposits, monthly, every two weeks, next year on January 3rd one time, etc.
• You can open an unlimited amount of ’sub’ accounts that are absolutely perfect for Rainy Day funds (and it takes about 30 seconds to open each one - all online, no hassle)
• You can transfer money between your subaccounts with ease
• I have never once read a complaint online about ING regarding customer service, deposit times, withdrawal times, etc. The only negative people have to say is that their rate isn’t the highest.

In my opinion, I’m paying ING a half a point to get the absolute best online savings account servcie available.

Thus, my money’s staying with ING.

If you haven’t started your emergency fund yet, or are leaving too much money in accounts with too little interest, I suggest you sign up right now.

Currently we live in a place that still has relatively cheap gasoline. By ‘cheap’ I mean that we’re currently paying $2.89 a gallon. With our upcoming move now only two months away, the cost of gasoline has certainly been on my mind. And to be honest, I wouldn’t be surprised if we saw it hit $4.00 per gallon.

So I’ve been thinking of a few things we need to make sure we do to save where we can:

• Drive less
• Make sure the tire pressure is optimal
• Check the air filter (replace if necessary)
• Use cruise control (well, our car doesn’t have cruise control - a real pain when driving long distances - but yours might)
• Use a gas rewards credit card (obviously don’t carry a balance)
• Ues a gas gift card

Those are just a few off the top of my head. Feel free to leave any comments on some others I’ve missed. There are probably hundreds of ways to lower your gas bill. The best way is still to drive less

Read the whole article here

Please no.

Wayne is asking whether he and his wife should put their 7-year old son on their credit card account as an authorized user…

No…

Dr. Don (who has a slew of letters after his name) does get to the right answer, but does it in a very roundabout way.

The take-away from the answer is here:

The pervasive use of personal credit histories to make inferences on employment, renting and insurance decisions makes managing your credit score an important aspect of financial management, but it’s easy to get too wrapped up in managing your credit score

It’s tough that it can now determine so many things - so you want to make sure it’s solid - but what else could you maybe focus on? Are there things that just might pay higher dividends in the future (and are knowns verses the unknown aspect of ‘managing’ the answer to some equation to which you don’t have access)? These are in no particular order.

1. Budgeting (you had to expect that one, right?)
2. Furthering your education
3. Setting yourself apart at work as a hard-working, honest employee, business owner, etc.
4. Investing (your portfolio is properly allocated along the efficient frontier).
5. Paying off debt.
6. Funding “Junior’s” college.
7. Developing multiple streams of other income.
8. Finding places in the household finances to save money effortlessly.

That’s just a list off the top of my head. But let’s all admit it that it just doesn’t make sense to obsess over your credit score. Sure, get a free credit report every year to make sure everything’s okay, but don’t get too stressed about it. And certainly don’t worry about 7-year old Junior’s credit score.

Sheesh. How’s his t-ball team doing?

I just plowed through the third lecture of the Business Environment Concepts section of my CPA exam review. The material isn’t really all that bad when you 1) have no personality and 2) have gotten used to the stuff over the last 4+ years.

One of the things I was reading about today was how companies manage their liquidity-risk relationship. In preparing for the exam, you end up messing with a lot of problems that show you how much interest is lost or gained each year when companies actively manage (or mismanage) their cash.

It got me thinking to how I’m managing ours.

These last few days I’ve been talking quite a bit about credit cards. I mentioned the rules I have for anyone contemplating using a credit card. We use one for every transaction we possibly can - enjoying the 1% cashback.

Many people also say quite quickly that you get the advantage of the “float” with credit cards. Well, not really. Not unless you take some intentional steps in that direction. I just checked and the last interest payment I received on our checking account was just over one dollar. Some float!

As I mentioned above, we make all of our purchases (or as many as we can) with a credit card. Remember also that we’re living by Rule One - which means we budget and spend last month’s income this month. There are really two floats going on here: one from the fact that we don’t pay our credit card until the fifth of the month following the purchases (actually, it’s for purchases made before the 20th of the prior month, so there’s an even longer float in there really), and the other from Rule One.

I like having a large (relatively) and cushy checking account, so I didn’t want to do anything with the float from Rule One.

But the credit card float? There was definitely something to be done.

Based on our spending - which is really quite low for a family of two parents and two kids under the ages of two - the one percent cashback we enjoy from the credit card usage results in the equivalent of about one month’s worth of groceries each year. Prior to this evening, the “float” advantage was miniscule - meaning it could be counted using nickels and dimes.

Tonight I logged into ING and opened a new account (the beauty of ING, even though their 4.15% interest rate is no longer competitive, is their easy-to-use, lightning-fast interface. My account was opened in literally 15 seconds) entitled “Float”. I wanted to track the interest earned throughout the year separate from the other accounts we have in there (house downpayment fund, emergency fund, etc.).

Our credit card is with our bank as well, so we had a very easy time setting up an automatic payment on the credit card for the balance in full on the day it is due. That day happens to be the 5th of each month.

Knowing that money is due on the 5th, doesn’t it make sense to pull out our average monthly expenses (which we easily know, because we budget) and sock that amount into our ING float account? So I went into the ING interface and set up an automatic transfer to reoccur each month on the 5th for the amount of our average monthly expenses.

Now, with the money being due on the 5th, I also need to transfer the money back in time to pay the bill. I’m not sure exactly how long it will take to get the money from ING to my checking account, but I’m going to start with the 25th of the prior month - just to be sure. I’ll adjust it accordingly if the money arrives too early.

This gives me a float of 20 days (roughly) where money that normally would have been spent had I been paying in cash or a debit card, is making me money. The annual interest rate given this scenario is 2.7 percent. If our average monthly expenses are $1,800, that means it’s worth an extra $50 per year to do this.

$50 sure doesn’t seem like very much when you’re looking at an entire year - but can you think of any subscriptions or services you use that cost $50 per year? I’ll bet you can. And as little as $50 over a year is, the whole setup took me 10 minutes. That’s the equivalent of working at a job for $300 per hour. Not too shabby.

I’m sure those reading this probably already do something similar. It’s certainly not an original idea to play the float, but I thought I’d share anyway.

Read the entire article here

Just the title is enough to send shivers down your spine, eh? We’ve got credit card companies teaching kids about proper money management.

It’s like the fox in the chicken coop.

Rosetta Jones, VP of Visa USA said the following:

“Don’t ignore that your future is going to be full of decisions about money,’ Jones said. As adults, Jones said, students’ credit scores will be as important to them as their GPA is now. She told the teens that their ability to pay bills on time will determine whether they make the grade with creditors.”

Something kind of bugs me about that statement with the score being as important as the GPA (though I really don’t think GPAs are all that important).

My first run-in with “bad” credit was when I was shopping around for car insurance rates. My wife and I were just married and had bought our first car. We needed some car insurance. The rates came back sky high and every broker told me the same thing:

“You don’t have any credit. That’s just as bad as having bad credit”

Luckily Geico doesn’t yet seem to care about credit scores.

That event was the impetus for me to get my first credit card. My wife had an Old Navy card that she had literally never used. We closed that account and just kept our one card - each of us having a copy. It gets us 1% cashback, which is the equivalent of about a month’s worth of groceries for us each year - maybe more. We still don’t owe anyone a dime.

It still kind of bugs me that our credit scores seem to determine so much about us. Especially when the lack of a score doesn’t mean you’re doing great financially because you don’t owe anyone any money. It means they dont’ know about you so they assume the worst.

Bleh.

I’ll play along for now though. We put everything on our card and pay it off each month. While the credit card companies don’t make money directly off of us, they make it indirectly through transaction fees the merchants are required to pay. There’s something there that also kind of irks me as well. I’m still feeding the snake.

The article is brief and basically says that financial management needs to be taught in schools. I’d much rather see someone like Dave Ramsey teach it though. Wouldn’t you love to see him and Rosetta on Crossfire?

The smartest statement in the entire article was made by a high school senior, Joshua Leak:

“Being able to budget is what’s going to get me through four years [of college].”

Now that kid’s going places.

Read the entire article here (may require a WSJ membership)

The title of this article in the Wall Street Journal is extremely misleading. You have to love hearing from the creditors’ perspective though. Apparently, in the past when “interest rates crept up…fewer cardholders could afford to pay down balances.” Richard Srednicki, who runs the CC business at J.P. Morgan Chase & Co. had this to say (you’ll love this):

“It is a tougher business if payment rates continue to stay up and consumers continue to pay off more. It’s something we’ve got to understand and work at.” (emphasis added)

You’ve got to love that huh? Straight from the snakes mouth. They need to work on extracting more money from you.

Here’s the disconcerting part about the article though. Consumers aren’t really paying off their balances. They’re just shuffling them:

“Although consumers are using plastic for more of their daily purchases, they are giving card issuers fits by juggling their debts more shrewdly…and in recent years, as real-estate values soared and mortgage rates fell sharply, more consumers wiped out credit-card debts altogether by borrowing against their homes.”

Wonderful. Let’s all just cross our fingers, knock on wood, and pray that those who did consolidate credit card debt with home equity vowed they would never use credit cards irresponsibly again.

The Journal does redeem itself a bit further in the article to give us the real dismal picture of the American consumer’s situation:

“American consumers have not curbed their appetites for borrowing. During the fourth quarter, 13.86% of disposable personal income of Americans was consumed by debt payments of all kinds, up from 12.77% five years earlier.”

If you’ve read much over here at YouNeedABudget.com you’ve realized that I hate credit card debt. Do I hate credit cards? Those inanimate plastic things? No. Do I hate the marketing tactics used by the credit card companies? Yeah. Do I use a credit card? Yep. But only because I follow all five of these rules:

• The balance is paid in full each month.
• You have a fully-funded emergency fund at ING (or some other high-interest savings account).
• You don’t have any debt except your home.
• You are contributing at least 10% pre-tax to retirement.
• You’re actively budgeting your money each month.

So how does a snake cope with falling balances (falling profits)?

“[The Snakes] are trying to replace lost interest revenue by increasing late-payment fees and raising interest rates for customers unable to pay their bills in full.“

Now doesn’t that just make you feel all warm and fuzzy inside? If you’re a customer that’s maybe gotten in over your head, the Snakes are going to raise the interest rate they charge you to make up for the lost interest revenue experienced with other cardholders.

What’s in your wallet? A backstabbing snake.

Check out the full article here

Jane Bryant Quinn spoke to the graduates of the Niagara County Community College and gave a few nuggets of great advice (and one I totally disagree with).

The gist of her speech was to keep things simple.

“You can set [things] up and get on with your life, because who wants to think about money all the time? I don’t.”

She’s talking about automatic investments here. I couldn’t agree more. I find it funny that she says she doesn’t want to think about money all the time - being the financial columnist for the Washington Post.

I have to admit though that I do feel the same way. I’m not really big on spending a lot of time with my money. I guess that’s where the whole YNAB idea came from in the first place. The trick with money is to make your life easier, not more difficult!

Keeping it simple will also most likely save you money:

“I run my money very simply,” she said. “From experience, I’ve found complicated investments only benefit brokers, insurance agents and bankers.”

This is a great point. Many (good) financial advisors will offer the same advice. If you don’t understand the investment then it’s not a good investment for you. If you can’t explain the investment to your teenager and have them understand it pretty quickly, it might not be a good investment. Keep things simple!

A now I need to take issue with Ms. Quinn’s mockery of the budgeting process

“I don’t do a budget,” she said. “You’re budgeting in order to get something, and if that’s savings, then the automatic savings plan [does the same thing].”

Hardly! You’re not just budgeting to “get something” you’re also budgeting to not lose things through the normal process of money leakage that happens to even the best of us.

A budget is a plan for your money, a value compass - and that plan needs to be revised on a regular (I suggest monthly) basis. Ms. Quinn admits to having a plan - she just says to have it set up automatically. I think she’s leaving the graduates lacking something important. When you’re actively budgeting, you make your money work harder. Having a laissez-faire approach to what you’re doing with your money leaves room for money leakage.

Automatic savings addresses a large portion of this because you know those dollars are doing their job, but how do you know if your grocery bill isn’t becoming pretty exorbitant, or if you couldn’t possibly get a better deal on your car insurance? It’s good to be aware of these things so you can make sure you’re maximizing your dollars.

I know they’re out there. Perhaps you’re one of them. You enjoy managing your money. You feel a surge of adrenaline when there’s a discrepancy between your checkbook register and the bank (you’re always right, by the way). You monitor your net worth on a daily basis. You love the smell of check carbon copies.

You’re just a little bit eccentric.

Wierd even.

But that’s okay! I’m not going to be talking to you today, because you probably won’t like what I’m going to say. Instead, I want to focus my efforts on those people that don’t really enjoy planning their budget; personal finance to them is a personal nightmare. And when they hear “finance” they think about the leather couch they’re still paying off.

So you don’t really enjoy planning a budget? Is personal finance not necessarily your cup o’ tea?

Well, I have good news and bad news for you. Let’s start with the bad.

The bad news is that just because you may not have a hankering to do something, doesn’t mean you shouldn’t do it. Just because you don’t like (maybe you even hate!) planning a budget, doesn’t mean you shouldn’t do it. Frankly, in this day, you can’t afford not to budget. Sorry for sounding so cliché, but that’s the bare-bones truth.

Consider the person that doesn’t enjoy exercise. Does that mean they shouldn’t exercise? Heck no! It may mean they need to find some type of exercise that is doable for them over the long-term, on a consistent basis.

So it is with personal finance; and budget planning comes in there as the most important of anything you do regarding personal finance. It is the foundation. It is your rock. It is the tree from which all personal financial fruit blossoms and grows. It is vital.

To stick with our exercise analogy: if you want to get really lean, really buff, really trim, then you hit the gym and you exercise. You also really need to focus on your diet and the amount of rest you get. It’s a multi-pronged attack to get to an elite level of fitness.

So it is with personal finances. But you don’t necessarily need to be elite with your finances. (Although I would make a strong argument that “average” with your personal finances these days wouldn’t be such an achievement - most everyone’s not doing so hot!) You can choose to be “in great shape” financially.

Let’s say you decide to “get in shape.” Does that mean you’re going to have to use the multi-pronged approach (exercise, food, rest) of the elite athlete? Nah. But which one would you most certainly focus on of the three? It’d be the exercise. Granted, you’d see some results from addressing eating habits, or from getting better rest, but the highest return for the time spent would definitely be found with exercise.

So it is with planning your budget. Personal finance is indeed personal, so I’m going to talk to you a bit abou the “Good” news I mentioned earlier.

You don’t need to spend hours a day budgeting. You don’t need to even spend a half hour a day budgeting. I don’t want you even spending a few hours per week budgeting.

You’re not one of the weird ones, remember? You don’t like this stuff. So - like the person that prefers not to exercise, you’d prefer to do just about anything else when it comes to budget planning. The trick is to do it like a band-aid — fast.

Let me be very clear here that the YNAB System is a very simple, fast, effective system of budgeting - but it does not have an exclusive right to ‘ease of use’ when it comes to your personal finances (well, it probably doesn’t). Lots of systems can be adaptable to your needs. Being the type of person you are, you’ll want something bare bones - stripped of all the bells and whistles (that aren’t used too often anyway, even bey the wierdos) commonly seen in personal finance software.

You can budget quickly and efficiently if you just follow these few steps:

1. Right down what you spend consistently. Don’t wait more than three or four days between recording what you spend. It gets infinitely harder to be faster when you’ve waited a long time to record something. I can hear it now as you look online at your debit card transactions:

   You: “Wal-mart. Honey, what’d we buy at Wal-mart last week? The total comes to $84.52.”

   Spouse: “I have no idea. Oh wait, that was the day I went and bought stuff for the baby, groceries, some toiletries, and a few miscellaneous items.”

   You: “Okay…I’ll just uh, put it under miscellaneous…”

   This happened to me just the other day. We had a charge for $6.17 from the university and I could not for the life of me remember what I had bought on campus for six bucks. (It came to me about a week later - it was a T-shirt).

   Having long delays between entering transactions just makes it tougher and more time consuming. Do it consistently, not more than every three or four days.

2. Do your budget planning monthly. It doesn’t need to happen more often than this, but it certainly shouldn’t happen any less often. Treat the month as its own new “budget” in a sense. You just ask yourself, “Okay, I have X amount of money in Y category. How much do I need to add to it this month to get the balance that will be needed?” It’s as simple as that (so why Quicken and Money don’t offer this functionality is beyond me).

Do this! Your money will thank you.

My mother-in-law knows about this site. She knows about my passion. She knows about my conviction. She knows how strong I feel about personal budgeting.

The other night we were talking about her situation many, many years ago where she was a school teacher raising three kids on her own. She certainly had it harder than I’ve ever had it. We were talking about something a little bit unrelated (prioritizing what you spend your money on, not budgeting per se, but more on that later) when she said something I have to take issue with.

Oh, if I had done a budget plan we never would have made it. There just wasn’t enough back then.

I’m sorry - come again?

Planning your personal budget is not going to make you have more or less money. I’m guilty of claiming that when you get on a budget, it’ll be like you got a raise - but you don’t actually get the raise. It’s just a perception thing.

At the same time, once you plan your personal budget, you’re not going to have less money than you did before. You will be forced to face reality though - whether that’s a good thing or not is up to you to decide.

But do we really want to live our life from paycheck to paycheck? Always wondering whether we can afford what we’re buying, and feeling guilty about it once we do?

Or, perhaps you’re on the side of the equation that doesn’t have an income problem. Are you avoiding the whole idea of a personal budgt plan because you will make it up on the income side? Do you really want to always wonder whether you’re really maximizing the resources you’ve created from work, skill, talents, creativity, etc.?

Man - don’t we all just work a little bit too hard to not think just a bit more about our money? Show a little respect for yourself and your efforts! That money that comes into your life is not waltzing. If you’re anything like most anybody, you have to drag it into your bank account kicking, biting, and throwing a fit. Money doesn’t come easy to most of us.

So why the heck do we let it boss us around once it gets there?

My mother-in-law worked her tail off to make sure her two little girls could have dance lessons. It was a priority. She made it happen. She tells me that a personal budget would have not let her give the girls dance lessons. No, NO, NO, NO. That’s not what a budget does! You tell it what’s important to you - not the other way around. Heck, what am I even talking about - as if the budget has some hidden agenda - it um, doesn’t care.

I’m sure a lot of us are familiar with Stephen R. Covey’s “7 Habits of Highly Effective People” or the book “Time Power”, or the other bazillion books regarding time management, balance, success, etc.

A lot, 90%, of those books have a common thread. They tell you to prioritize your daily tasks. Covey tells you to try and stay as much as possible in the “Very Important” quadrants of your daily tasks.

Why is it that every one of these time consultants says the same thing? Why do they all tell us to prioritize our tasks? As if that’s supposed to somehow bring us fulfillment…

It does.

When you’re doing the things that are truly important to you - checking off your list each day - you are happier. It’s just a fact of life - a law of the universe.

So it is with a plan for your personal budget. Think about it! It’s the exact same principle. You prioritize what your money should be doing. My mother-in-law was doing that with the dance lessons (I can’t speak to any other portion of her expenses, but with the dance lessons, we can be sure). They were important to her. She couldn’t technically “afford” them - but they were important so she made it happen.

A personal budget would not have disallowed the dance lessons. It would have simply enabled her to be a bit more methodical - a bit more on purpose with her money. A personal budget is a plan for your money priorities and nothing less. Don’t make it out to be the bad guy. Don’t make it out to be the one who’s at fault when things aren’t going your way. If your husband is spending all of your money on a suped up car, then you can be sure that is where some of his priorities lie. If you’re spending $150 on a haircut each month - well, your priorities are tangled up in your hair.

And the guy that retired at 55, never making over $55,000 - with $2.3 million in the bank? He had other priorities.