Do me a favor, ignore the majority of my advice

So I was reading the other day (Yes I do actually know how to read) and came across something profound. I’d like to share it with you now…

No one-size-fits-all recipe can guarantee a great relationship. Whether we’re talking about husband and wife, close friends, co-workers, or parent and child, every relationship is different. No two are ever exactly alike. What builds and sustains one is often of no value in another….

…..Each relationship has its own dance and drama, played out according to the unique strengths, needs, and personalities of the partners.

If you are wondering, this excerpt comes from the book “Contrarian’s Guide to Knowing God.” I think the author makes a valid point: What works for one person, might not work for another. Later in the chapter he goes on to discuss, that just because each person is different, that does not mean there are not fundamental rules in which we must all oblige. For example, don’t kill, steal from, or lie to each other. When these “ground rules” are broken, bad things happen.

Ready for the personal finance tie in? No two financial journeys are ever the same, but the ground rules apply to all. Sure there may be some disagreement in what is considered a fundamental financial principle, but here are mine…

1) Spend less than you make

2) Don’t accumulate debt (without a game plan to pay it off)

3) Have money set aside for a rainy day

If any one of these three financial principles are violated, you will almost surely face unnecessary hardships.  Notice, though, that there is room for WHAT YOU WANT within each parameter. Sure you need to spend less than you make to have financial freedom, but it’s up to you how much less. Maybe it’s $50/month, $500/month, or more. You get to decide what works best for you.

Becoming financially secure is not about following a strict guideline, but more taking some basic principles and making them unique to your situation. We need to be more tolerant of our peers gameplans (unless their plans involve money, vokda, a tiger, and a midget).

I’m a pretty stubborn individual so it’s important for me to be reminded that my way is not the best way (although I will definitely try to argue that it is).

What are some universal financial principles that you believe everyone must follow? Have you been stubborn, like myself, and become frustrated when people don’t do things “your way”?

How far will you go to get a good deal

We all have “that friend”, the one who will drive 30 miles across town to save $0.02 per gallon on their gasoline. I get a kick out of how far people will go to get a good deal. Call me crazy, but I’ll almost always take an okay deal with minimal effort, over a lot of effort for a good deal. That’s not to say that I don’t get a little intense from time to time.

Let’s run through a little test and see if you are normal bargain shopper, or if you fall in to the “obsessed with getting a good deal” category. Answer the following questions….

1) Do you shop on The day after thanksgiving (black friday)?

2) Do you send in rebates valued under $5?

3) Have you changed your savings account more than twice in the last year because of better interest rates offered elsewhere?

4) Have you bought more of something than you actually needed just because it was on sale?

5) Do you try and barter with salespersons that work at stores that typically don’t negotiate? (Best Buy, Costco, etc)

If you answered yes, to any of those questions, you are probably a pretty intense deal seeker. I have to admit I am guilty of question 5. I was at Costco once looking to purchase a monitor for my computer. The specific monitor I wanted was sold out, except for the display model. I tried for about 30mins to barter with the Costco manager, hoping he would give me a discount for purchasing the display model. He wouldn’t drop the price, so I had to punch him in the face say goodbye and leave monitorless.

We are probably all guilty of obsessive deal hunting, but the line has to be drawn somewhere. If you plan to wake up before 8am on Black Friday this year, you just might have an addiction to getting a good deal. I mean come on, people die at Wal-Mart as they get trampled by the bargain mob. And what about extreme couponing? Bargain Life posted an article about that sort of couponing and what it does to the family.Anyone else feeling brave and willing to share an embarrassing “deal hunting” story? Are you guilty of doing the across town gas station fill up?

"M" is for Mortgage (and Mullet)

Acquiring financing in these tumultuous times is probably the freakin’ scariest aspect of purchasing a home, or at least it will be for this Debt Ninja. If you are looking for financing or refinancing for your home, whether looking at an FHA mortgage, jumbo mortgage, VA mortgage, or a reverse mortgage, make sure to research the crap out of the various lenders so that you can take advantage of the lowest mortgage rates available.

Most conventional mortgages, with an affordable interest rate, typically require a down payment of anywhere between 5-20% of the purchase price. That can end up being a hefty chunk of change, but the general rule of thumb is choose the largest down payment plan you can afford- if possible 20% – with closing costs that equal up to about 3% to 5% of the purchase price, but you better make darn sure you have enough money left in your savings account to cover three to four months worth of housing expenses. A larger down payment will reduce the size of your loan, start you off with a lot of equity upfront, and possibly allow you to avoid paying private mortgage insurance. All around a pretty sweet deal if you ask me 🙂

There is also the option of getting a mortgage with little or no down payment. Before the housing market crash, lenders were increasingly willing to finance as much as 95%, 97% ,or even 100% of the home’s value. Essentially you could be broke, but still buy a pretty sick house. Generally speaking, the larger loans have higher interest rates than smaller loans. Why? Because mortgage lenders consider these highly risky (aka sketchy) loans. The borrowers may not only have to pay a higher interest rate, but they will also be stuck paying for the private mortgage insurance. Basically this is a pretty terrible option and I wouldn’t recommend using it, but I got to state the facts and this does work for some people.

Pretty much the only benefit to the larger financing options is the fact that it allows families with low or moderate incomes to be able to enjoy the life of homeownership…that is until they get foreclosed on for buying something they can’t afford. The recent housing market collapse, has left us all asking “Should someone that can’t afford to put down 10% on a home, be allowed to purchase one at all?”

High School Money

As people are looking for causes of the recent recession, I have heard it suggested (more than once) that high schools need to implement some kind of finance/money/economic course in their standard curriculum. It’s been argued that if people were equipped with sound financial principles in high school that the entire economy would be better off. If kids know that debt is generally a bad thing, they are less likely to make bad personal finance decisions later in life (like rack up a ton of CC debt or take out a 5 year ARM). Seems like a pretty good idea right?

While I agree the thought in nice, there is no way in HELLO that is going to work. Why? You can’t force high school kids to learn about things they have no interest in. I was a dork and enjoyed math and science, as a result I performed well in those subjects. I hated (and still hate) history and that was always my lowest grade. There was nothing anyone could do to make me want to learn about the civil war, period, end of story.

I could only imagine if my H.S. tried to force me to take an econ. or business class. Absolutely nothing about compound interest, saving for retirement, or taking on a mortgage appealed to me when I was 16 years old. Are you kidding? I was far too busy trying to figure out how I could get April Baldwin’s (super hot high school girl) phone number. Plus let’s be honest, it’s not like the majority of high school classes are really all that exciting, so a course about money would just be straight up miserable. Unless of course Mr. Ninja and Mr. J. Money were the teachers, but if that was the case there would probably not be too much “learning” going on in the first place 🙂

So what about you? Do you think you would have genuinely been interested in a personal finance class back in high school? On a side note: What subject did you absolutely despise back in the day? I think PF is something everyone should learn about, but they have to do it on their own will and desire. It’s like politics, I use to hate the stuff, but as I get older I am becoming more and more interested.

Class Dismissed suckers,

Savings accounts are just as tricky as woman’s bras.

Who wants to go a second round of making love with money? I do, I do! If you haven’t read part one, you can check it out here . I wasn’t originally planning on writing a follow up to the first article, but apparently it was a little to “Rated G” for some readers. I was checking which websites have sent traffic my way (like I do every 15 min) and saw that Bad Money Advice was a top referral site yesterday. He reviewed some of the articles that were posted in this weeks carnival of personal finance. He took the time to write a few sentences on my article…

…But I was disappointed by a post entitled “Making love with money is my favorite kind of romance.” I was hoping for something more edgy, possibly with tips on using Craigslist.

My heart sank when I read that. I know that I can’t please everyone that stops by my site, but I’m sure gonna try to. So Mr. BadMoneyAdvice, this article is for you 🙂 Thanks for taking time to include a link to my site and I hope this suffices in the edginess category…

Who remembers the awkward relationships we all had in high school? I know I sure do. Heck some of us are still in awkward relationships. I like to compare my relationship with money to that of friends with benefits (FWB). For those that don’t know what that means, it is basically when two people hook up, but are NOT in a committed relationship. While I don’t support this type of personal relationship, I gotta say it works wonderfully with money.

FWB has to begin with a grounded friendship. Remember it’s friends with benefits, not benefits with friends. How does this translate over to money? It implies that I have to establish healthy financial habits before I can try and cop a feel of my voluptuous cash. I have to be spending less than I make, saving for retirement, and avoid taking on debt. After I have established a solid friendship with my cash flow I can slowly transition in to more intimate territories.

My savings account is much like a woman’s bra. It keeps the “assets” looking nice. But as we all know, “with great boobs finances come great responsibility.” Guys, you remember how nervous you were to unhook a girls bra for the first time? Do you know why you were nervous? I bet it was ’cause you didn’t want to look like a complete D-bag and fumble around and kill the mood. Well, don’t even think about trying to access your savings account until you know exactly what the heck you are doing. Do you got a double clasp savings account, a triple clasp, or is it even one of those ever-so-sneaky front clasp savings? You gotta know all the small details about your account before you can attempt to play with it. I can’t simply pull money out of my savings account with no plan, much like you can’t just stick your hand up a friends shirt and expect her to like it. You gotta caress your savings account each month by throwing in a little contribution…after all, FWB is a two way deal. If you play your cards right, your savings account will love the respect you show it, and will pay you a little “interest.” Don’t think that a woman wouldn’t do the same. If you make them feel respected, they are for more likely to stick around.

Well, that’s about as edgy as I think I can get. I’m a PG-13 kind of guy and have no intentions to flirt with the rated R kind of stuff. I’m sorry if you were hoping for some raunchy, nasty, Dane Cookish analogies, but that’s not how I roll. I play it safe and keep it 5th grade status around these parts. However, I did see a really funny t-shirt the other day. It read “Please tell your boobs to stop staring at my eyes.” Hahaha…WTF?!

p.s. I have no idea how making love to money and craigslist relate so I couldn’t really tie that in, unless you were thinking I was gonna discuss the “exotic massages” section, I’m gonna have to pass on that one 🙂

p.p.s Today marks my 100th post!!!! WOOHOO!

Travel Fund before Emergency Fund…what?!

I’ll be the first to admit it, I’m kind of a blog whore and if your reading this, then chances are, you’re equally whorish. One of the things I find myself particularly drawn to on other PF blogs is the progress bar, much like the one on the upper right corner of this page. It’s a tiny snapshot of that bloggers financial soul. It’s always interesting to see how much debt someone is working to pay off or how much cash they have in their savings account. I like making goals for myself and progress bars allow me the opportunity to see what my fellow bloggers goals are. Progress bars are legit, what’s not so legit is the breakdown of some of these bloggers priorities, especially considering they are personal finance bloggers.

I’m perplexed as to how PF bloggers can have their “fun” progress bars (ie travel fund or new car fund), contain substantially more money than their debt payoff, emergency fund, and savings account bars. I don’t know what to do when I see a PFers travel fund have $3,500 in it and their emergency fund have$30.50 in it. It makes me wonder if their financial priorities are in order. Is it not hypocritical to write about the importance of fundamental financial knowledge, only to have your own website display such a large gap between the necessities (emergency fund) and extras (travel)? Maybe having an emergency fund doesn’t qualify as a fundamental financial principal and is more of a best practice? No wait, that’s ridiculous! Having some kind of emergency fund should be one of the first things we do as we fight to gain our financial freedom.

So to all you PF bloggers who have skewed priorities I’m challenging you to a blogging duel. Please explain or justify the logic behind your actions. Am I crazy? (don’t answer that)

*p.s. this tif is only towards those whose blogs contain financial advice for their readers, if your blog is not about money or only about your life than this is not directed towards you :)*

Wells Fargo or Redneck Bank…Do you know which bank is backed by the FDIC??

The answer to this question… BOTH.
I got my blogs first question from a pretty cool dude named Jeremy.

He asks….

I read your post about getting a better rate on my savings account . Makes sense, but how can one verify that the bank is legitimate? I’d rather not just throw money at somewhere I’m not sure of.


PS Wachovia has really been making me angry with their tiny savings rates. Before I started to be so disgusted with them I had quite a bit of money in their bank. Makes me wonder how much money you have to have in there to get some respect.

A valid question for sure, and one I didn’t address is my previous post about online savings accounts. So how can one go about making sure their hard earned cash is safe?

The most important thing to look at, when selecting what bank you want to hold your savings account with, is verification that “bank x” is backed by the FDIC (Federal Deposit Insurance Corporation). Essentially, being backed by the FDIC means if bank x sucks at doing their job and they can’t afford to give you back your money, Uncle Sam will pay you back instead. If you put $10K in the bank and six months later they pull a WaMu, you will get all $10K back from the fed. I can’t stress this enough, being backed my the FDIC is uber important!

Do not sign up with a bank just because they have a phenomenal interest rate – chances are, if their interest is WAAAAY above competitors something fishy is going on -. If you put $10K in a bank that is not backed by the FDIC and that bank fails, then you are, how do we say… SCREWED! You probably will end up losing all of your hard earned money. Most banks advertise on their home page if they are FDIC insured (they know it is a huge selling point). If you have any doubts that the institution your looking in to may not be, you can always go here and verify.
As far as the interest rates go, I feel ya on getting some pretty crappy rates right now. When I opened my Countrywide Online Savings account I was earning a little over 3% on my money, less than a year later I’m earning a dismal 1.6%. I personally don’t chase interest rates. Sure there are banks out there that have better rates than mine, but it is hardly enough for me to go through the hassle of managing yet another account.

For example, say Joe Six Pack puts $20K in to a Countrywide account tomorrow and lets it sit for one year at 1.6%. At the end of the year Mr. Six Pack’s account balance would be $20,320. If you took that same $20K and put it Zions Bank (currently at 2.15% interest) and let it sit for one year, your balance would be $20,430. The Zions account earned you an extra $110 over the course of the year. For some, that extra $110 may be worth chasing, and if so good for them. Personally, I prefer picking a relatively solid performer and sticking with it (unless its rates are SEVERELY lower). I initially signed up with Zions Bank because they offered one of the highest interest rates in the country, but when I found out I had to physically mail in my deposits I quickly said “Peace Out Zions” (I prefer to do everything electronically).

As the title of this posts alludes, Redneck Bank is, as far as my research has shown, legitimately backed by the FDIC and a subsidiary of The Bank of the Witchitas. Although their 3.1% offer is enticing, I’ll stick to my countrywide account for now.

Anyone else have any interesting insight in to the online savings accounts?

Keep on saving!