Category Archives: Personal Finance

Is It Time To Ditch Your Bank?

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The banking industry has never been as competitive as it is at this current time. This competitiveness creates an advantageous service and financial environment for consumers.

When a customer encounters a situation in which they believe that their bank is not providing them with the type of service or products they desire, they have the option to switch to a bank that offers products and services that are more in line with their expectations.

According to J.D. Power and Associates, approximately 9.6 percent of banking customers have switched banks over the past 12 months. This figure is on the rise, being significantly higher than the 8.7 percent from last year.

While the reasons that customers give for leaving their bank differ, there are certain indicators that are clear signs that it is time to leave your bank. Additionally, this move should be made expeditiously.

There are two key elements that are at the core of determining if it is time to ditch your bank, and they are the security associated with your money, and the level of satisfaction you are consistently experiencing.

Financial Strength

The financial strength of a bank is extremely important in providing security for the funds that are deposited by their customers.

Although the FDIC insures up to the first $250,000 per account holder who is a part of an FDIC-insured bank, no one wants to have to go through the process of filing a claim for their money. This is why customers should check the financial strength of their bank periodically.

This can be done by checking the Federal Deposit Insurance Corp’s website. This will allow you to confirm if the bank is maintaining its FDIC insurance.

If your bank is not maintaining its FDIC insurance, this should send up an immediate red flag. This means that if your bank should go under, you could lose all of the cash and certificates that you have deposited with the bank.

Excessive Fees

Currently, there is a push by larger banks to increase revenue by raising fees. These fee increases are an attempt to offset losses that have been incurred as a result of a loss in credit card fee revenue, which is a direct result of some significant regulatory changes.

This means that customers from some of the major banks will more than likely begin to see some changes in fees on checking accounts, ATM usage, debit cards, online banking and more.

All banks will vary in the fees that are charged for these services, however, traditionally, local banks have lower fee costs, and they may actually waive some of the traditional fees charged by larger banks.

Lifestyle Changes

Another important element that impacts customer satisfaction is convenience.

Maybe you are in a situation in which your bank no longer fits your lifestyle. Initially, your bank was ideal, providing operating hours and locations that effectively serviced your needs and preferences; however, certain changes in your life has created a number of conflicts that make your bank less attractive.

An example would be switching to a job that require you to travel substantially. If you are banking with a local bank with limited locations, this could present a problem. Finding a national bank might be more beneficial to your new lifestyle.

The same is applicable to banking hours. If you have a situation in which you are consistently leaving your office at 6:30 p.m. or later, the chances are that your bank’s branch office will be closed.

This is an instance where switching to a bank that can better accommodate your schedule might be in order.

Photo: Bryan Rosengrant / CC 2.0

How I Made $30,000 in One Day by Mistake

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It was the go-go 90s and the stock market was on fire. In those days it was easy to make money in the market. It was a great time for momentum stocks and if you could get your hands on some shares of an IPO you had a chance to make a big score. From amateur investors to the most sophisticated traders on Wall Street, everyone was caught up in the exciting world of IPOs and short-term trading. I wanted to be part of that world!

TIP: Short-term trading carries higher risk than long-term investing. Traders can make a lot of money and also lose a lot of money.

Before I go any further let me just say that I have gone through different investment phases over the different stages of my life. Out of college, I preferred mutual funds and had my money invested with Fidelity, T.Rowe Price and Vanguard. In my early 30s I built my own portfolio of stocks. I invested some money in gold and silver bullion and I kept my retirement money in mutual funds. For a few short years, roughly from 1995-2000, I became a more aggressive investor. These were the years I got into day trading. They were also the years when I made the best investment of my life.

TIP: Base your investment strategy on your stage of life, tolerance for risk, and investment goals.

Online discount brokerage firms were in their infancy during the last decade of the twentieth century. Stock trading software was not nearly as sophisticated as it is today. However, it made it possible for people to trade frequently because you could buy or sell a stock for less than $10 per trade (a full service broker might charge $100 for the same trade). I opened a discount brokerage account and learned how to place market and limit orders. I eventually opened a margin account and it was nothing to buy or sell $10,000 worth of stock three or four times per week.

TIP: Open an online discount brokerage account and make your own trades. You’ll save on transaction costs, have a universe of stocks, bonds, ETFs and mutual funds, be able to view live quotes, do research, and track performance.. 

I am not going to lie and say I always made money on my trades, but I did make more good trades than bad ones. Most of the time I would make $200 – $300 on a stock I bought on one day and sold several days later. Sometimes the stock would go down and result in a loss. One thing I quickly learned was that you have to recognize when you made a wrong pick. I swallowed my pride, sold the loser, and went on to another stock.

TIP: Don’t ride a bad stock all the way down. Even Warren Buffet makes an occasional bad stock pick. When he does, he accepts a small loss (relatively speaking) and moves on. Limit your losses!

My best day ever in the stock market was the day I decided to buy into the IPO of a new stock called Books-a-Million (BAMM). The new issue was in great demand and I knew that it would immediately surge when the day’s trading session began. I got to my computer, proceeded to my online discount brokerage account, and placed an order for 2,000 shares at the market price (I wanted to make sure I was not shut out by a limit order).

TIP: Be ready when a great opportunity comes up. An IPO or a promising quarterly report can result in a rapidly rising stock price. Don’t be 100 percent invested. Have some cash on hand to take advantage of “special” situations.

For some reason, I thought that the market order had not been transmitted so I re-entered it. As you know, once you place a market order it is almost impossible to cancel it. A few minutes later I checked my account to see if my 2,000 share order had been executed. It had, and a second 2,000 share order also was executed. The IPO was priced at $12 and my two orders were filled at $17 and $20 as millions of shares traded in the first five minutes after trading began. It was not long before BAMM got very close to $30 and I was ecstatic. Then, reality set in and the stock sold off. I sold 2,000 shares at $27 and the remaining 2,000 shares at $25, netting me a one-day gain of $30,000. Although I did not sell at the very top I was still thrilled about being 30,000 richer!

TIP: Sometimes lucky is better than smart. If you buy a stock and it takes off, don’t be too greedy. Take some profits while it is going up and maybe hold on to some shares in case the stock continues to rise.

I would hardly call myself a brilliant investor, but I have been fairly successful over the last 30 years. Getting lucky is not an investment strategy. Sticking with some proven investment principles has helped me profit over the years.  

  • Define your investment goals.
  • Know your investment time horizon.
  • Never buy on impulse.
  • Always do your research before investing.
  • Create a risk-adjusted portfolio
  • Periodically review, adjust, and rebalance your portfolio.
  • Be diversified. 
  • Don’t invest under pressure. 

 

Celebrating Summer’s Imminent Arrival With Checkworks

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Paying bills is never fun. CheckWorks, however, has some really fun check designs that can make the experience more enjoyable.

Enjoy the bold colors of summer and escape to a tropical paradise by the sea. Check out some of the great designs for summer (links are in the headings).

Woodies Checks

Go back in time to the beach parties and sock hops of the 1950s and 1960s with four popular paintings by Scott Westmoreland. Each design features a scene with a classic Woodie. Imagine driving the Woodie to the beach and parking it in the sand next to a row of surfboards.

Step out onto the sand and join the surfers watching the waves come to shore. Drive your Woodie to a quiet spot along the water to relax, and enjoy coming home to man’s best friend waiting in the driveway.

Escape to the Seas Checks

Escape to the sea for a few minutes with these four sepia photographs of beach scenes. The first photo features a quiet view of a beach dune with a wooden fence weathered by the salty winds.

Next, a lone motorcycle is parked at the beach with the sea shining in the background. Then, there is a collection of beautiful shells and starfish. The final scene captures the power of a large wave crashing down against the beach.

Dancing Butterflies Checks

Imagine sipping a glass of lemonade in the summer sun while watching the butterflies flitter in the sky. These checks showcase the beauty of butterflies in the bright colors of summer.

Each design highlights the gorgeous colors and swirling patterns of the butterfly wings against backgrounds of green, pink, purple, and yellow.

Bahama Breeze Checks

Take a journey to the Bahamas with four iconic prints from the islands. Of course, there are crystal blue waters, palm trees, and coconuts.

There are also pineapples, tropical flowers, and a perfectly woven straw basket. Bring your own fruity drink topped with a paper umbrella.

Sunny Side Up Checks

Pack up and get ready for a day of fun in the sun.

First, grab your bathing suit. You’ve got yellow polka dots, tropical blue floral, and bikinis from which to choose. You’ll need a bag to carry all of your supplies. Square or round? Big or small? Pink, yellow, or blue?

The sun is bright. Don’t forget to pack a hat and sunglasses. Straw hat, bucket hat, big hat, or floppy hat?

You are almost ready to go. Slip on a pair of flip-flops and you are out the door. It doesn’t matter if you choose the stripes, the wedges, or the flip-flops with the flowers. You are ready for your day in the sun.

Tropical Paradise Checks

Welcome to Paradise! Gaze at these tropical scenes for long enough and you might actually start to smell the salty air.

In this tropical paradise you will find palm trees on white sand beaches next to a crystalline turquoise sea. Brightly colored surfboards are lined up in front of crashing blue waves.

Rocky coastlines give way to soft, sand beaches and the rolling tides. A quiet pier leads you to relax next to the glassy green waters. Paradise awaits.

Photo: Nick Morozov / CC 2.0

Start Them Early: Teaching Kids Financial Responsibility

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6551534889_9c8ae52997_zrTeaching your children about financial responsibility isn’t one of the easiest parts of parenting, but with the right tools and strategies, it can be done.

Financial irresponsibility often leads to future credit and money problems, and it can even prevent your children from developing a savings plan for the later years in life.

These are unique ways you can help your children learn to use money wisely and responsibly.

1. Enlist the help of your children when managing bills. The Pennsylvania Association of Community Bankers suggests allowing your children to handle small aspects of the money flow in your home.

For example, you might consider letting them balance the family checkbook after all major bills have been paid. This helps children get a good look at how finances are affected once expenses have been paid.

2. Set up a matching goal. Depending on how old your children are, they may have already started talking about getting that prized first car once they turn 16.

Abby Hayes of AFCPE notes that one great method for encouraging kids to save their money is to propose a matching goal. This means that however much they save for a particular purchase, you promise to match a certain percentage of their savings.

This is often a great motivator for kids to begin saving and working hard for the things that they want.

3. Define needs and wants. One mistake that many parents often make is merely assuming that their children understand the difference between financial needs and wants.

Children don’t understand that a video game is a financial want, while making a mortgage payment is a financial need. Jacqueline Curtis of Money Crashers explains that it’s your responsibility to distinguish the two.

Start by noting expenses that are required for survival, such as the electric bill, your car payment, or groceries.

Next, list things that aren’t vital to survival, such as going out to eat or toys. Compare the priority levels of expenses to help your children understand the differences between essential and nonessential purchases.

4. Explain how bank accounts and ATMs work. It’s easy for children to underestimate the importance of money when they see their parents swiping their debit/credit cards or taking seemingly free money from an ATM slot.

Jason Alderman, Vice President of Visa Inc. tells parents that it’s important to teach their children that money isn’t free.

Help your children understand that the money you spend from a credit card or receive from an ATM isn’t conjured from thin air. It’s real, and it must be accounted for.

This is also a good time to explain what happens when too much money is withdrawn from an ATM, or too much money is spent using a debit/credit card.

5. Lastly, don’t stop at one piggy bank. You’ve probably already considered getting a piggy bank for your child.

However, Meadows Urquhart from Meadows Urquhart Acree & Cook LLP explains that you can teach your child an even more valuable life lesson by getting them multiple piggy banks.

This gives children a chance to break their money up into spending, savings, or item-specific goal accounts. This provides children with wonderful preparation for real bank accounts.

Photo: familytreasures / CC 2.0

Five Critical Financial Tips For Newlyweds

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Getting married is one of the most exciting of life’s milestones.

However, it can be easy for some of the important details about married life to get lost in the rush of the getting married. This is especially true of the financial considerations of getting married.

There are many financial aspects that you must consider when you get married. To help you out, here are some financial tips for newlyweds that will make your life easier.

Sit Down and Have a Frank Financial Discussion

Ideally, this should be done before you tie the knot, but it is never too late to sit down with your spouse to have a frank discussion about your finances.

This should be a no-holds-barred discussion where you are completely honest about every aspect of your financial situation.

Talk about your debts. Talk about whether you are a paycheck-to-paycheck type of individual or a saver. Talk about how you would handle a sudden windfall of cash.

The key is to learn all you can about how each of you approach your finances. This will allow you to avoid surprises later on, and it will also help you plan how to be a financially successful couple.

Set Financial Goals

One of the most important parts of being a financial success is setting goals. When you are a couple, setting financial goals together will help to bring your closer.

There are all sorts of things that couples need for their lives together, and you can set savings goals for all of them. Think about saving for things like a down payment on a home, a vacation and furniture.

You should both be saving at least 10 percent of your paychecks towards your savings goals, but setting a higher goal of 20 percent savings is ideal.

Create a Budget

Setting aside your 10 to 20 percent savings is the first part of creating a monthly budget.

To create your budget, you first need to tally up your remaining income after you have set aside your monthly savings. You then need to subtract all of your regular monthly expenses like groceries, utilities, rent, car payments and student loan payments.

The remainder of your money should be split unto categories of discretionary spending like entertainment, eating out and shopping.

It is very important to stick to the budget. If for some reason you need to go over your budget, it is important that you discuss it with your spouse before you spend money to go over. That way, you can decide together if you really should go over your budget.

Creating and sticking to a budget is the best way to avoid financial problems and arguments when you are married.

Decide How to Set up Your Bank Accounts

When you are married, it is best to have multiple checking and savings accounts.

You should have a joint-savings account that you use for your savings goals. You should also have a joint-checking account that you can both access to pay for bills and things that are a part of your budget.

You also may want to each have separate checking accounts if you so desire.

Tax Considerations

One of the things you may not have considered is that getting married can affect your tax situation.

You can either file jointly as a married couple or file individually under the category of married filing separately.

Most couples choose to file a joint tax return because of the tax benefits. It is also simpler to file jointly.

However, you if your finances are complicated, you may wish to sit down with an accountant or tax attorney to decide which filing status will benefit you the most.

Photo: Sean Davis / CC 2.0

Three Tips For Getting Your First Auto Loan

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2592570286_b213acd1de_z3Getting your first car is an exciting experience. It gives you a great sense of independence, maturity, and self sufficiency.

What’s not so great, however, is the inevitable auto loan that comes with that experience. It can often seem that understanding and comparing car loans is nearly impossible.

Here are three great tips you can put into use to help you get the best terms on your automotive loan.

Get a Newer Car

When banks and credit agencies consider your application for a loan, they are considering not just you and your credit history, but the vehicle you are purchasing as well.

As a general rule, banks will be much more willing to make a loan on a newer car than on an older one. This is largely because, in the event of repossession, a newer car will be much easier for that bank to get its money back out of.

To make borrowers more likely to consider this, it is common practice for financial institutions to offer high incentives for loans taken out toward the purchase of a car made within the last few model years.

One of the most common incentives is a longer term loan offered for newer cars. Newer cars are often given four, five, or even six year loan terms, whereas older cars are usually restricted at two or three.

These policies vary by institution, but a general rule of thumb is that the longer term loans will be offered on vehicles five years old or newer.

Compare Many Different Lending Agencies

Not all lending agencies will offer you the same terms and interest rates.

As such, it is often beneficial to apply for loans from several different institutions, and then compare the offer each one makes to you. You may very well find that one particular bank is willing to offer you an interest rate that is significantly lower that their competitors.

On a car loan that is likely to range well into the thousands of dollars, even the slightest break on interest rates can represent a substantial savings.

If you have a local credit union, you will want to pay especially close attention to the loan offer you receive from it, as credit unions often have slightly lower rates than traditional banks.

Get a Cosigner, Even if You Don’t Need One

If you have limited credit history, getting a cosigner is one of the best ways to lower your interest rate on your first auto loan.

Even if you have the ability to take the loan out yourself, it very likely that your interest rates will be higher on your own than they would be with a cosigner who has a well established credit history. Finding a friend or family member willing to cosign your loan will help you save a great deal of money on interest payments down the road.

Keep in mind, this is not a one sided proposition. If you do opt to get a cosigner, you are all the more responsible for ensuring that your payments are timely and complete, as another person’s credit is now on the line with yours.

Following these three tips will help you to secure the best possible terms on your first auto loan. To get more information on the exact details of a possible loan, you can contact the credit manager at the financial institution you intend to take your loan out from.

You can also try online peer to peer lending platforms as an alternative to traditional banks and credit unions, as these platforms often offer lower rates.

Six Personal Finance Mistakes That Could Have Serious Consequences

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Finance is difficult even for trained professionals. Here are some serious personal finance mistakes that you should avoid making at all costs.

Not Setting Aside Money for an Emergency Fund

Yes, the first thing you should do when money is tight is to save more money. If you set aside a certain amount to pay yourself like it is a bill, you will not have to worry about any unexpected expenses.

The emergency fund is set up to keep you out of debt if something unexpected happens so that you will not have to pay late fees and penalties on top of any debt that you may have incurred.

Not Choosing a Plan to Pay Off Debt

There are two major ways in which you can pay off debt – the Snowball and the Avalanche.

The Snowball method of paying down debt involves throwing all of your resources at the smallest bill until it is paid off. This will give you a psychological lift for the next smallest bill, and so on and so forth.

The Avalanche method means that you pay off the bill with the highest interest rate first. This will save you money over the long term.

Not Buying Staples in Bulk

Certain items like bread, rice, bottled water, underwear and socks can be purchased in bulk from a warehouse.

This will leave you more money to put in your emergency fund or to pay down debt without having to diminish your lifestyle.

Not Giving Yourself a Grocery List

A great deal of the money that you spend in a month goes down the drain without you ever knowing where it went. This money goes towards impulse buys when you take trips to the store or the laundromat.

If you give yourself a definite list before you go out, you will be much less likely to spend these pennies on the impulse products that will quickly add up to substantial amounts of money.

Instead, put this money to work for you by paying down debt or by putting it into your emergency fund.

Not Cutting Out the Fat in the Budget

Much of the money that you spend is on convenience, not on products and services.

Case in point: You will spend almost 20% more money each month to go out to eat rather than staying home. When you go to the grocery store, purchase healthy foods that you can cook.

One specific way that you can lower your budget each month is to stay away from the convenience aisles in the grocery store. Fresh, raw fruits and vegetables cost much less than TV dinners, believe it or not.

Not Investing

This term can mean different things to different people. For one person, it can mean buying a coffee maker rather than going to a convenience coffee shop every day.

For another person, it can mean investing in stocks. Either way, having some accounts going up in value is a psychological lift that will help you to pay down your debt.

It will be even more of a stretch to set aside money to invest, but this goes along with the strategy of paying yourself first when money is tight anyway.

Four Financially Responsible Suggestions For Your Tax Refund

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13368794943_809d50b420_zFew people find the tax season pleasant or enjoyable. However, getting a return on your taxes can go a long way towards improving it.

There are many things on which to spend a tax return and most people have no trouble coming up with ideas for it.

However, it’s rarely wise to run out and spend that money immediately. That windfall needn’t be an opportunity to splurge.

Instead, why not turn it into a buffer between you and the world?

There are many fiscally responsible ways to use that tax return. Money isn’t easy to come by, so here are a few ways to use the extra cash to help you through the tough times to come.

Put it in your savings account

Put your tax return into a savings account and leave it there. Many experts recommend having a cash reservoir to tap into when you’re in trouble.

The specifics vary, but most agree that a thousand dollars should be your minimum for this emergency fund.

Putting your tax return into an emergency fund is the financial equivalent of buckling your seat-belt.

Invest it

If you want to use it now, consider investing it.

Remember, investing doesn’t just mean buying stocks. It can also mean investing in yourself by taking classes at the local college.

It can mean buying that new piece of equipment that will take your side-business to the next level.

It can mean repairing your house, your car, or otherwise improving your property. Investing that tax return in something that will create yet another return is just good business savvy.

Spend it on your family or your friends

Yes, that money is yours, but you never expected to see it again. Why not share your good fortune with others?

Even loaning it to someone who is hard up, free of interest, is a good use of that money.

Friendship and good will are always more valuable than any amount of cash.

Invest in precious metals.

Investing extra money in silver or gold is a good way to ensure that your money will keep its value. Buy when the costs are low and don’t sell it until you have to.

Precious metal prices have risen drastically in the last thirty years and all those investors who bought when silver was a few dollars an ounce have had the last laugh.

Even if you’re not planning three decades ahead, investments like this can help keep your money from losing its value to inflation.

Photo: eFile989 / CC 2.0

Five Myths About Tax Audits That You Should Forget Immediately

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2592570286_b213acd1de_zGetting a letter in the mail from the Internal Revenue Service is never a good day for anybody. After all, this is an organization that is set up specifically to take money from you.

However, there are many myths about tax audits that are created out of thin air, most of which encourage more fear than is truly necessary.

Myth: All tax audits are a matter of life and death

The truth about most tax audits is that they are a discrepancy of records. In many cases, the IRS is simply stating that its records do not show the same thing that you reported on your tax forms.

If it is a case of a mistake on their side, you send in the information, and you never even have to come in to see an agent.

Myth: 10% or more of people are audited in any given year

The truth is that less than 1% of people in any given year are audited. The IRS does not keep a tally on the percentage of people that it audits in any given year.

If there are more people who do not keep appropriate records, the more people will be audited that year. If there are less people that do this, then less people will be audited.

There is no such thing as an “audit quota.”

Myth: Having a professional file your taxes for you makes you completely audit proof

The truth of the matter is that you are responsible for all records that have your name on them no matter who files them.

Your professional filer may offer some sort of insurance for help with your representation if you get audited, but the final responsibility falls on you to correct any discrepancies in the records between you and the IRS.

Myth: If you keep your income below at certain threshold, you will not get audited

The IRS has been hiring more people to conduct more audits because of the discrepancy that it is found with records in the past.

However, many people believe that most of these agents are looking for people above a certain income threshold. This is not the case.

Additional audits are being conducted across the board, and just because you do not burn above a certain arbitrary threshold does not mean that you cannot be audited by the IRS.

Myth: If you file for certain deductions, you stand a better chance of being audited

Many people do not take deductions to which they are absolutely entitled because they believe that taking them will raise some sort of “red flag” with the IRS.

The truth is that any deduction that is in conjunction with the law is a deduction that you should take. IRS agents do not determine an audit simply based on the name of a certain deduction.

If you understand the true nature of what IRS audits are meant to do, you will realize that they are nothing to be scared of. Make sure that you keep all of your records as thorough as possible and report according to the law as closely as you can.

If this is your method of filing taxes with the IRS, then you will certainly be able to handle any queries that they may have about your records even if you do get audited at some point in the future.

Photo: James Morris / CC 2.0

Five Tax Myths That No One Should Ever Believe

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5856708903_294549a95a_zFebruary is here. And with tax season in full swing, you have probably started to hear those annual rumors about what’s acceptable and unacceptable when it comes to filing your taxes.

Around this time of the year, you can run into a lot of bad advice, so here’s a list of some of the most common tax myths that you should avoid:

Myth #1: Filing Taxes is Voluntary

Although this myth may seem counterintuitive, it’s surprising how many people are actually under the impression that filing taxes is completely voluntary because Form 1040 in the instruction book describes the tax system as “voluntary”.

However, Uncle Sam requires everyone to file taxes, even if you haven’t had any income all year.

Myth #2: Animals can Be Claimed as Dependents

Many people are under the impression that anything that’s alive and in your care can be claimed as a dependent, but that’s not the case.

No matter how you love your pet, you aren’t allowed to claim them as dependents.

And while it may be true that pets receive more than half of their financial support from their owners, they’re still not human, and you still can’t file taxes on an animal.

Myth #3: Illegal Activity is Not Taxable

Although it may not make much sense, criminal activity is taxable.

Regardless of whether you are a bank robber, drug dealer or con artist, the government still wants their cut of your income.

No matter how good you are at hiding your illicit activities, the government will eventually find out about it, and tax you on it. Al Capone is a prime example.

Myth #4: Money Made On the Internet is Tax Free

Since many people doing business online don’t report taxes for their income made online, it’s not hard to see how this rumor got started.

However, regardless of whether you generate money online or at a traditional job, the IRS still requires you to declare that income if it’s over 400 dollars per year.

Myth #5: I Don’t Make Enough Money to be Audited

The amount of money you make doesn’t have as much to do with being audited than you may think. There are many more factors that could possibly send up red flags when it comes to a tax audit.

And while it’s true that individuals who make more than 100,000 dollars per year get audited about twice as much as those who make less than that, those who make under 100,000 dollars per year still have a one percent chance of being audited, which is the national average.

To stay safe, it’s best to save any relevant receipts of anything that could be considered questionable income for three years.