I’m a usually a free market kind of guy, mostly because the free market, or at least our version of it, has been good to me and my family. That being said, I understand why people think check cashing stores are ripoffs and why they should be regulated more. I think they serve a purpose, giving those without bank accounts access to their funds, but their fees are extraordinary and deserve inspection.

So, who better to inspect them than the Internets Celebrities? This nine minute clip is worth every minute both in informational and entertainment value.

The Dow opened on January 2nd, 2008 at 13,261.82 and opened on July 1st, 2008 at 11,344.64 - for a spectacular fall of over 1,917 points. Don’t calculate the percentage, it’ll just make you throw up.


This week, a barrel of oil (NYMEX Sweet Crude) topped $145. A barrel of oil cost an average of $15.70 ten years ago (adjusted to 2007 dollars). I will be investing in a Flintstone-mobile. Here are the latest energy prices on Bloomberg. *sigh*


Can someone with better math, or better descriptive skills, explain why a 50% difference is only considered “slight?” We expected 40,000 fewer jobs in June, there are actually 62,000 fewer jobs… but it’s only slight. “Job losses in June were slightly worse than the 40,000 expected by economists surveyed…”


Starbucks to close 600 stores with 12,000 affected workers. Stockholders rejoice as SBUX jumped 4.6% and MBA professors sob as one of the most referenced marketing case studies gets a black eye. At least there’s always Southwest.



Royal Caribbean’s Project Genesis, a cruise ship yet to be named, will be the most expensive and largest cruise ship ever constructed and will cost a mere $1.24 billion dollars. It will carry 6,400 passengers, weight 220,000 gross registered tons, and displace more water than a Nimitz-class aircraft carrier. (it wasn’t announced this week, in fact it was announced over a year ago, but it was worth putting in this week just because!)

Have a great Fourth of July Weekend!

(I’m going to start doing Week in Numbers [WIN] every Friday afternoon, please let me know what you think!)

We’ll be spending this weekend enjoying the wonders of grilled meats!

(Photo by Mr. Magoo ICU)

A few years ago, the only high yield online savings account available was ING Direct. Their rates blew people’s minds. Until then, the only way to get that type of interest rate on an essentially 100% risk-free asset was to lock it up in a 60-month CD. Even today, check out the rates for CDs of your local bank and you’ll be hard pressed to find one under 60 months that comes close to beating the rates of high yield online savings accounts.

Now the landscape is slightly different (and more crowded). There are half a dozen reputable banks offering these high yield savings accounts and they differ by fractions of a percent. At the moment, HSBC Direct is offering a 3.50% APY good until at least August 15th. E*Trade isn’t far behind with a 3.30% APY, ING Direct sports a 3.00% and Washington Mutual boomerangs in with a 3.30% APY. You would do far better with your funds in any one of those banks than in the one you’re in now (probably).

On Interest Rates

Despite what you may think, interest rate isn’t everything when you’re trying to decide which online bank to put your deposits. It’s important, but there are many other features to consider. Even if you had the FDIC limit available to save in an account, the difference in interest earned between HSBC Direct’s 3.50% APY and ING Direct’s 3.00% APY is $500 before taxes. If you’re in the 25% tax bracket, that’s a take home difference of $375. You might say - that’s nearly $400, that’s a big difference! Remember that’s on a balance of $100,000… if you’re putting in $10,000, that’s only a difference of $37.50. If you’re talking $5,000, that’s a difference … you get the idea.

Interest rates change frequently. Between when I opened my E*Trade account and when I funded it, the rate fell from 3.50% APY to 3.15% APY (it’s now that 3.30%). Unlike CDs, there is no guarantee on the rates. You get whatever the bank feels like offering. So if you pick a bank based on rate alone, you could be making a mistake because those rates chance quickly.

Don’t decide on rate alone, it’s the features of the account that are important. Those features will help you in save more.

Feature Set

Linking High Yield Savings Accounts:
I was surprised when HSBC Direct let me link my HSBC Direct account with my ING Direct account. The ability to transfer from one high yield savings accounts to another is great, it cuts your transfer time in half (the alternative is to transfer to an intermediary checking account). I was surprised because many other accounts don’t let you do that. You can’t log into an ING Direct account and link it to the HSBC (or E*Trade or Emigrant Direct) account because they require a paper check. In fact, to my knowledge, only HSBC Direct (of the major banks) lets you link up to other online savings accounts (I could be wrong).

Corollary: Linking to Brokerage, Checking Accounts:
The one advantage E*Trade has over the competition is that you can link your savings account with a brokerage account. This allows you to transfer funds instantly between the two, so you’re earning the best possible rate on your cash. E*Trade also has a checking account and that can be linked to the savings account, maximizes the rate.

Washington Mutual, E*Trade, and ING Direct all offer a high yield checking account, in addition to the savings account. You can get checks, an ATM card, and access to your funds whenever you need them. WaMu has the added bonus of brick and mortar branches, if you have one nearby then that’s a definite plus.

Create Additional Accounts Easily:
ING Direct makes it absolutely painless to create sub-accounts. Each of these accounts have their own account number, but they are managed through one customer login. This is valuable because it helps you save more money. If you are able to create a new account for each of your savings goals, you’re more likely to actually save. Planning a cruise over the holidays this year? Open the Carnival Imagination 2008 account, schedule monthly transfers, and start packing your bags. You’re more likely to save because: 1) you’ve made it automatic with monthly transfers, 2) you can see the account grow, rather than seeing some master account grow and “remembering” some of it is earmarked for the trip (or your children’s education, or a new house, etc.)

ING isn’t the only bank that offers this, HSBC does too (Emigrant Direct does not), but they are definitely the easiest.

Promotions:
This is the least important “feature” about a bank. ING Direct has had a standing referral bonus of $25 for new accounts. Click a referral link, deposit more than $250, and you’ll receive $25. The referrer earns $10. HSBC used to run a $50 promotion that expired several months ago but, to my knowledge, no one else has ever run that type of promotion.

The Best Online Bank

The best online bank is the one that has the features you need. If you have savings goals and are having a difficult time achieving them, perhaps ING Direct is your best option. If you don’t need the help and want the highest rate, HSBC Direct has the highest rate.

If you want the flexibility of checking, ING just released their checking program while WaMu and E*Trade have had checking products for quite some time. If you have a checking account at the same bank you have the high yield savings, you can transfer between the two instantaneously (plus the interest rates on the checking accounts are far superior to standard rates).

So don’t pick a bank on interest rate alone, pick the one that offers the types of services that will help you reach your goals.

(Photo by Hummy)

Wow, June was a little rough. Net worth fell approximately 5.0% on account of two major reasons: quarterly estimated tax payments and retirement accounts. Outside of those two, which really consists of not much else, everything is progressing as expected. Neither income nor expenses, outside of the roof, had drastically changed. We don’t track our expenses as closely as we probably should but we have, at least qualitatively, gone out to eat less.

Eating Out

We’ve gone out to eat at restaurants less frequently for numerous reasons. First, gas prices have increased the cost of my wife’s commute, which is mitigated by my commute. Second, it’s far healthier to eat home on all accounts. You eat less and what you eat is healthier for you. Third, we need to learn how to cook better which only comes with practice. Eventually, whenever we have kids, eating out will no longer be an option (again, from the health and cost perspective) so it’s better to learn how to cook now than learn under the gun.

Estimated Taxes

Estimated taxes are paid quarterly, for the most part, and so the month in which those payments come due will be times when my net worth will see an “artificial” drop. Technically, that’s not accurate, it’s the other months that are artificially inflated, but you know what I mean. This is one of those cases where understanding the underlying cause explains away any concerns I might have, at least with this reason. Retirement is a totally different issue.

Retirement

Everyone knows that retirement accounts are long term. I know that when I log into my IRA’s, I can’t touch that money, unless I wish to pay a penalty, for another 40 years. However, it’s really difficult to look at the Dow drop 300+ points and not think about how one of our largest account balances is in an account pegged to that metric.

Retirement accounts took a 4.41% cut across the board, the largest single month change in my short adult life. I will do exactly nothing in response, though Todd Harrison, founder and CEO of Minyanville.com, who was a former trader at Galleon Group, Cramer Berkowitz, and Morgan Stanley, is in all cash. (there’s more to it but that’s the headline idea) A lot has happened in the last 10 years, there’s a lot more that will happen in the next 40.

The one thing I won’t be doing is adding to positions outside of the regularly scheduled retirement contributions. I think we already have enough invested in the stock market for our comfort level and unless we settle on our other long term investment goals (kids, college, home), we won’t be adding to our taxable brokerage account.

Actions from May

In May I listed three “action items,” I merely said it was looking towards the future, and I think it’s important to revisit them to see where we’re at. Think of it like my own little checklist of important things to do and where we’re at with them. I want to thank everyone who leaves comments with advice, suggestions, etc. because it definitely helps me out in many of these areas. I don’t have experience in a lot of these things and your insight, even if it’s what you did or what you’ve, is a tremendous help.

• Jewelry Insurance: A year after first discussing it and a few weeks after putting it into a monthly review, I finally got jewelry insurance for my wife’s engagement ring. If you read the article when it first was posted, I invite you to go back and read the comment Tim left as it covers many points I missed or misunderstood.
• Auto insurance: I mentioned earlier this week that being married doesn’t affect car insurance premiums and readers pointed out it was the multi-car discount, not the marriage aspect, that decreased premiums. The process will now be to get car insurance and register the car in Maryland, which includes paying the 5% tax. There may also be a penalty involved because you’re supposed to register a car within 60 days of moving to Maryland (you get a credit for taxes paid elsewhere), so we will see how that plays out.
  One interesting point, when I requested a quote, they lowered my six month premium from $282.60 to $203.30 even though it was a sample quote. This reflects something Dedicated said in a comment: “The discount comes from the wife expectance to drive a portion of the time on the mans vehicle. Thus, his rate goes down.” Cool! The addition of the new car only increased the six-month premium to $355.40. The insurance doesn’t include collision and comprehensive coverage.
• Water heater, Roof: The roof replacement is complete and the charge is sitting on our Citi CashReturns card, due next month. We opted for the 1.2% cash back over the six months 0% financing. 1.2% cashback is $53.40, 6 months 0% financing in a high yield savings account earning 3.50% is about $56 - not worth the effort. Water heater is still pending… the prospect of a tankless option is more and more attractive as energy prices increase.

Looking to the future:

• Further Consolidation: My wife and I still has some accounts floating around out there that have since outlived their usefulness. I made a big push to the last few months to consolidate as many accounts as I could, so we will have to keep plugging along. Consolidation sounds easy enough, they’re just activities that take longer than you expect.
• Getting A Pet: Every once and a while my wife and I watch my parents-in-law’s two Scotties. They’re adorable, lots of fun, and they poop everywhere (most of the time outside). My wife thinks I need more companionship during the day, the SAHMs at the gym don’t count, and so we’ve discussed getting a dog. Right now we’re leaning towards adoption from a local pound because there are so many there, it makes no sense to look elsewhere. An added benefit is that often those dogs have had their shots and are current on everything. Before pulling the trigger, we think it’s important to look at the finances just to be sure.
• Continuing Education: One of the longer term goals we have is for my wife to return to college and get her Masters or a Ph.D. Many programs offer tuition assistance or funding, but some don’t. Plan for the worst, hope for the best. This is one of those farther in the future type things, but one of the reasons why we bought those Series I bonds was because earnings are tax free when used for education. Just something to keep in the back of our minds.
• Kids: Ahhh just kidding, not yet.

My retirement is forty years away and I have a portion of my brokerage account invested in a 2050 Target Retirement fund at Vanguard. The Target Retirement fund makes an excellent choice for me because it handles all the asset allocation and rebalancing issues without my interference, all with a target withdrawal date in mind. That’s when I got to thinking, why not utilize target retirement funds for shorter goals?

Let’s say you have kids that are planning on going to college. The natural choice is to go with a 529 plan or some other educationally advantaged account. After you open the account, what are you going to invest in? You could figure a safe allocation, given when you expect your child to go to college, and handle the finances or you could, if your account offered it, just go with a target retirement account. Simply buy the year closest to your target date, rounding down so you’re on the conservative side, and forget about it. It’s time-wise more efficient than managing it yourself and, if you go with the right firm, the fees will be reasonable.

This plan does have drawbacks. You often don’t much international exposure, which you may or may not want given our current economic environment. Many emerging markets are growing at breakneck speeds but the dollar is weakening, there’s plenty of uncertainty. You might want international exposure and a fund like the Vanguard Target Retirement 2030 has only 17.2% invested outside the United States, of which the lion’s share, 9.2%, is in Europe. Another risk is that you don’t have exposure to the asset class that has been growing the most recently, commodities (oil and gold, anyone?). Of course, we could be in a bubble right now or we could be seeing the start to something bigger - no one can see the future.

Either way, it’s an option on the table and one that I wanted to bring up to see if you all had any thoughts on the subject. Good idea with potential? Or just buying into the marketing hype of these lifecycle funds?

A little over four months ago, I left a comfortable, well-paying job that I was quite competent in doing, for the unpredictable, self-employed route of professional blogger. Professional blogging is a lot like many professional sports, you have a handful of rockstar performers getting a ton of headlines, a ton of money and you have the rest squeaking by. Check out this Fortune piece, dated 1998, on #100 ranked tennis player Jack Waite. He’s the 100th best tennis player in the world and his take home page, after expenses and taxes, was less than three thousand dollars. That’s rough.

So, was I destined to be a rockstar or would I be content as one of the rest? I, of course, thought I was going to be a rockstar. As my wife says jokingly, and often, I probably would do well to sell off some of my self-confidence (she used another word) for my sake and hers. Despite the long odds, I left my job, and the predictability and the comfort, and haven’t looked back. When I left, I was scared. I was really really really scared.

To give you an idea of how scared, it was a lot like when I climbed up the two and a half story ladder to inspect our roof after it was replaced. In the case of the roof, I really had no choice. There’s no way in the world we were going to spend four grand on a roof and not inspect it with our own eyes (I did and the roof was as expected) but in climbing up that roof I learned one thing: things are never as bad as you think they are. As I climbed the ladder, I quickly realized that the most unstable point was about the middle. Once I got past the middle, the roof helped stabilize the ladder and it stopped bowing and shaking as much. Fear sharpened my senses, made me more cautious, but it didn’t change my decision. That’s what fear should do.

So, here I was leaving a job that I liked in order to do a job that I also liked, but one that lacked as much predictability and comfortability, if that’s a word (it’s not). I was so afraid of pulling the trigger, despite all the signs saying it could be possible, that I just put off thinking about leaving for at least six months. My wife and I talked about it off and on and she was supportive, but it took an epiphany before I could think about it rationally.

I realized I was more afraid of working the next forty years of my life and wondering “what if?” than I was of blogging full-time and failing. Then I used my fear of failure to hone in on a plan that would, at the very least, give me confidence that everything is progressing as it should be.

So how are things four months later? I love it but it’s still scary. There’s a certain bit of comfort in taking direction from someone else. If your boss tells you to do this and it’s the wrong thing (wrong as in bad decision, not ethically wrong), then the responsibility and the blame falls on your boss’ shoulders. If you are the boss, the burden is on you not to mention the burden of figuring out what it is you’re supposed to do. That freedom is very exciting but also very demanding.

I’d also like to thank all the folks who read this site regularly. It is because of you that I was even able to have a decision four months ago and you all keep me honest. Much thanks. Please continue to email me with comments, questions, sites you’ve found interesting, articles you thought I should check out, anything in the world, I’ll read it and try to get back to you.

So moral of the story, fear isn’t a reason not to do something or not to consider something. This blogging thing may not work out in the end but at least I’ll have tried, right?

E*Trade just sent out an email notifying us that the interest rate will be increasing from 3.15% APY to 3.30% APY, effective tomorrow, July 2nd. This takes their interest rate from 6x the national average to 8x the national average. This is a better rate than both ING Direct ($25 sign-up referral bonus) and Emigrant Direct but less than the 3.50% APY available from HSBC Direct, but that rate is only available through August 15th.

There’s no mention of how long this rate will be active but E*Trade is on an upward rate trend, as are other banks, and there’s no indication this is a promotional offer.