Bank Laundering
Posted by moonimus on Feb 16, 2008
Even though I’ve been watching the last season of the Wire religiously in the last month, I’m not talking about cleaning dirty money. Clever Dude has inspired me to start cleaning up my bank accounts so I’ve closed my FNBO Direct savings account and my igobanking savings account. Both relatively painless process though I think FNBO was easier. I left very little money in each account and kept them open in case rates at those banks became favorable again. But in the current climate, rates for savings account continue to fall near inflation levels so I won’t be chasing rates any time soon. One United continues to offer an APY of 5.15% but I’ve read from other sources that their rate cuts will be more gradual as they only pay interest quarterly.
This leaves me with the One United savings account, 3 brick and mortar accounts with Chase, an Electric Orange checking account at ING and a rewards checking account with Toledo State Bank. I previously posted about my banking situation here. I’m still looking for suggestions…
Economic Stimulus Plan
Posted by moonimus on Feb 14, 2008
I just read a solid FAQ in the Wall Street Journal on the tax credit that we should expect in the spring. We would receive $1,500 since we are married filing jointly, we have one child and our AGI is nowhere near the $150,000 threshold for married filing jointly. There are phaseouts for single and married returns. Single filers with AGI of $87,000 are completed phased out of the credit and married filers with AGI of $175,000 would also be completely phased out.
On top of our surprising tax refund, this rebate will definitely be used to fund a Roth IRA. Too bad Taxcut has still yet to fix the problems on our state return.
Patient
Posted by moonimus on Feb 11, 2008
“bearing provocation, annoyance, misfortune, delay, hardship, pain, etc., with fortitude and calm and without complaint, anger, or the like.” - dictionary.com
“I cannot teach him. The boy has no patience.” - Yoda
I’ve blogged before about my motivation and how I usually burn out due to settling for quick bouts of progress. I was updating our financial data into Open Office and though it’s only been two months, I’m proud of the decision and progress we have made. I smiled from the fact that we have $1,000 in our emergency fund. For the first time, we are allocating money for other purposes such as a Christmas fund or other mini financial goals.
Sometimes, I wish I could complete all our financial goals with one mighty stroke. But I’m sure that it was this kind of “get rich quick” mentality that has probably gotten me into financial trouble. When I was younger, results seemed to be so concrete, so easily attained. But the world was also black and white then. Somehow with the passage of time, focus was lost and the shades of gray blended into a content mediocrity.
Now, I’m just trying to be patient with the process. This goes for my weight loss too. I need to take the thirty year view, not the thirty second one. I have to learn how to forgive myself for falling off the path. This post at 43 Folders taught me that forgiveness is a powerful, liberating force. Mistakes will be made, lessons will be learned and I just have to deal with myself and move forward. I should be happy in making any progress, no matter how small. Eventually when those small changes compound, I’ll probably notice how far we’ve come.
A good friend of mine once wrote that, “Genius is in the details.” I’m striving to learn that lesson everyday.
Are we starting to get it?
Posted by moonimus on Feb 10, 2008
Last week there were two articles, one in the New York Times and the other in the Wall Street Journal, that certain statistics suggest that the American consumers are changing their spending behavior.
Though the Times says this could be “a period of involuntary thrift,” and that the “nation…confront an unfamiliar imperative: more Americans must live within their means,” I’m hoping this trend is more permanent. I feel for the two families mentioned in the Times article. Changing your behavior at the midst of an economic recession must be very difficult. Ms. Barbaro’s situation is especially compelling because “her house demanded work” and her kids needed $25,000 worth of after school programs. It also mention medical bills but I assume the amount and reasons for those expenses were highly personal. With the exception of the medical bills, this is definitely a prime example of “keeping up with Joneses” and that is a great recipe to have your debt spiral out of control.
The Wall Street Journal article is slightly more alarming as it states that credit card delinquencies are increasing. In December, an average of 7.6% of credit-card loans were either at least 60 days delinquent or had gone into default, up from 6.4% a year earlier. The article also suggests that lenders are fairly skittish in lending out more money especially with the subprime mortgage meltdown earlier this year. A woman mentioned in the article has already reduced her Latte Factor and one man cut down his excess spending on DVDs and other electronic gadgets. I was most confused and alarmed when the article mentioned that some people will pay their credit cards first before their mortgage. Talk about getting your priorities straight!
I really do hope many people will learn from this situation and make sustainable, effective and permananet changes in their personal finances so that the next time an “economic crisis” occurs, they won’t need to make any drastic changes because they will be prepared and not rely on credit to get through the tough times. Everyone must remember the most imperative personal finance principle: Spend less than you earn.
Are we starting to get it?
I believe the same day the Wall Street Journal article was published, the President had proposed a budget that increased the national deficit. Anyone enjoy mixed messages?
Deposits
Posted by moonimus on Feb 8, 2008
There are some days where it seems as if going to the bank or an ATM to make a deposit seems like the biggest hassle in the world. I’m not sure why I feel this way but there have been days where I refuse to go or even worse I completely forget and that delays me access to my money. I just read this article in the New York Times about scanning checks and sending them to the bank electronically. For some reason, this seems a lot easier to me but I wonder if scanning checks would become the hassle that a physical deposit already represents in my mind. This would help the online banks like ING or the those rewards checking accounts that require the majority of your business to be done online. One thing’s for sure, if this catches on industry wide, I’m fairly certain that I would get rid of my Chase accounts and that would be a good thing.
Taxes Part 2
Posted by moonimus on Feb 7, 2008
I’ve nearly completed our taxes using Taxcut and we will receive a sizable refund from the IRS and NYS. Think low five digits. I didn’t realize the magnitude of having a baby and deducting a full year of interest would have on our taxes. I’m still waiting on a couple of 1099s which should have minimal effect. Every year, I want to file my returns as quickly as possible but it seems as if one lousy form takes forever to get to us.
I’ve also run into a glitch in the online Taxcut software. It will not deduct 529 contributions on our state return. This will definitely improve our NYS refund. When I asked the online technician how long this would take to resolve, I was told four business days! That’s way too long to get back to me about a problem with your software. I’m thinking about switching to TurboTax next year. Of course, I will try and leverage this inconvenience into some kind of compensation from Taxcut.
I’m trying to decide what to do with this unexpected windfall. Of course, I will pay off my personal debt and any credit card balances that are charging interest. I will earmark the 0% credit card balances and put that money into a savings account until the interest free period is over. After that, I should have more than half the refund left. My first instinct is to throw half of it into the Emergency Fund and the other half to be used for investment purposes. Or put it all into the Emergency Fund and save enough money until we can pay the Student Loan. But I’m still torn on this.
I read in a blog that I should probably just sit on the money for 6 months and then make a decision. That way, all the emotional rush from getting the money will have gone and I’ll be in a better mindset to make a rational decision. I’ll probably go this route but for sure, I’ll pay off my personal loans and high interest debts first.
Monthly Update
Posted by moonimus on Feb 4, 2008
I can’t express how I felt when the Giants won the Superbowl yesterday! It was great to see them step up and beat the Patriots. I’ve been a Giants fan for a long time and for them to win this when no one expected anything out from them, made the whole thing sweeter. I even wore my Giants jersey into work today!
As you can see from the Debt Scale on the right sidebar, we kind of had a financial hiccup. Most of it was due to timing from when I first started the Debt Scale. Certain charges hadn’t cleared the bank but ended up on the Scale this month. I’m not too worried as most of the credit card debt is on two 0% credit cards (until November and September). We should be paying off all interest bearing debt this month. I’m going to sock away any potential payments for the 0% cards into my One United savings account. I’ll pay then off when they come due. Hopefully, we can also start paying off the personal loans. I actually have the cash to pay back some of it but just need to send it out. I was hoping to pay those off with cash but it looks like I’ll have to use the good ol checkbook.
Also, you’ll notice on the Weight Scale I gained a pound from when I started. This was mostly due to battling a nagging cold for about 5 weeks. I’m back to good health and I predict that I will see some serious progress on this goal this month. The body fat% should follow.
Big expectations this month so it’s time to step it up, just like the Giants!
Death and Taxes
Posted by moonimus on Feb 1, 2008
It’s about that time again folks. Taxes, taxes, taxes. So what does this CPA do for taxes? I use Taxcut. I was really angry last year when we got a sizable refund from New York but ended owing the IRS nearly double the refund. I was stressed because we had bought our apartment three months earlier and we were strapped for cash. Of course, the IRS doesn’t care if things are tight and they certainly won’t wait for your state refund check to arrive so that you can pay your Federal taxes. They are like Robert DeNiro in Goodfellas. They want their money.
But this year I feel more at ease since we have a $1,000 emergency fund. Also, our daughter was born this year and we have a full year of mortgage interest to deduct. We did not nearly make as much money in 2007 as we did in 2006 since Mrs. Moonimus has stayed home for about 4 months. My expectation is to be within $500 on either side of our State and Federal taxes. And if we come out more than that on either side, I will have to adjust my withholdings appropriately.
Lately, I have also been thinking about our wills and general estate planning. While I plan to stay alive as long as possible, anything can happen at anytime. I’d hate to be financially unprepared for that moment especially if we were to leave our daughter behind. I have a friend who is a lawyer that specializes in estate planning so this will definitely be another “to do” in 2008. I have been waiting to finalize life insurance on Mrs. Moonimus which should be done by the end of next week. Life never stops…
Fed Rate Cut
Posted by moonimus on Jan 22, 2008
The Federal Reserve just cut the federal funds rate on overnight loans from 4.25% to 3.5%! I can’t remember the last time there’s been a 3/4 point rate reduction since I started understanding how the Fed affects the overall economy.
Overall, this was a response by the Fed to the declining domestic and international markets. I haven’t checked yet but I’m sure all my retirement accounts have taken a beating. I’m not that worried as I’ve got at least 35 - 40 years before I start to tap into that money. If my daughter’s 529 plan is any indication, the market has been tanking badly since last June. I wish I had a nice windfall of money right now as I’d most likely buy into this declining market across the board…
This rate cut will probably affect me in two ways. First, the interest for my online savings account is sure to decline. I’m not too happy about that because for the first time in my life, I actually have a $1,000 in a savings account accruing at a decent 5.3% APY. Second, I’m going to make some calls to a few banks and see if I can get a better rate on the mortgage for my apartment. A friend told me that refinancing shares are much easier and cheaper than refinancing a mortgage. If I can reduce my interest rate by even half a point, that would be a big difference. I’ll post in the future the results of my calls.
Time Out on 401ks?
Posted by moonimus on Jan 19, 2008
Recently I went to Gaetana’s for a friend’s birthday. I know the owner from my wild drinking days. He used to be one of my favorite bartenders in New York City. Anyways, this place is a hidden gem in the West Village. I highly recommend the pizza. It’s great!
As I was walking around the neighborhood with my daughter, I saw the cover of Time Out New York with the words “Get Rich!” and in smaller print “Why 401ks are for suckers.” For those of you who don’t know, Time Out New York is a weekly magazine that lists things you could do in New York for the week. It also reviews shows, movies, restaurants etc. If you’re ever in New York for a length of time, it might be worth your while to pick up an issue. For personal finance though, I’d rather stick to blogs.
The author of the article, is 26 and states that she hasn’t saved any money for retirement. She argues that she wants to live now and “not hoard (cash) away so I can score a nice trailer in Clearwater, FL, 40 years from today.” Joking or not, she sounds like your typical ignorant (but sophisticated and tragically hip) New Yorker. Nevermind that she hasn’t saved money, I just can’t stand someone insulting anyone else’s lifestyle. Get off your high horse.
Her employer’s plan contributes 50% match on the first 3% of her contributions. She implies that there is a 4 year vesting period to gain the full match (25% per year). She resents that companies are increasing 401k options instead of increasing wages and bonuses. She mentions the IRS concept of highly compensated employees for 401ks. She argues that “401ks are designed in such a way that everyone-financial advisers, stockbrokers, mutual-fund managers-gets paid before you do.” She also states, “…most folks enrolled in 401k plans don’t have a clue how they work.” She takes no comfort in knowing that “the government and my employer are directing my investments.” She sums up with the following, “So if I’m on the dole at 65, eating cat food out of a rusty hubcap, I’ll be content knowing that while y’all Steady Eddies were fastidiously stashing pennies [italics my emphasis], I was gorging myself on expensive cheese in Paris and snorting hard drugs off the backs of go-go boys in Berlin. In other words, I was living.”
I was in awe after I read this. The author has some misconceptions about 401k and saving for retirement in general. First, she should be contributing the 3% to get the match. Even if she stays for one year, she’ll have vested 25% of the match. Assuming she makes $40,000 a year and only stays one year, her contribution would be $1,200 and her vested employer contribution would be $150. We’ll just assume an 8% return at 40 year would be about $32,000. At 10% it would be about $67,000. I’m thinking she’s being a bit shortsighted about this. She’s also forgetting about the upfront tax savings.
Second, I’m not sure what she means about other people getting paid first if she enrolls in her 401k. Last time I checked if I contributed $600 into a 401k, my account received $600. Also though your investment choices may be limited, the employee directs all the investment choices in his respective plan. No government, no employer is telling me to invest in anything. It’s different if she can’t make an investment decision.
Lastly, I think it’s fairly easy to say when you’re 26 that you can live off of cat food but I seriously doubt she’ll feel the same way at 65. Also how can she afford to go to Paris, eat expensive cheese and score expensive drugs?
I’m pretty sure her editors wanted her to be as controversial as possible. But if that’s not the case her ignorance shines above her arrogance. I hope most 20 somethings don’t really think or feel this way about saving for retirement.
