Why do you bank with who you bank with?

I opened up my first checking/savings account with Washington Mutual when I was 16. I loved WaMu and was not happy when Chase acquired them a couple years ago. I was a die hard WaMu fan, but had absolutely no loyalties to Chase, especially once they tried changing the terms of my checking account requirements. As my good friend Snoop Dogg would say “I dropped them like they’re hot.”

I’m kind of an account whore as Girl Ninja and I have a Credit Card with Bank of America, a Credit Card with Chase, a Checking/Savings account with Wells Fargo, and a Savings account with ING Direct. Needless to say, we get around 🙂

When I think about all of the different financial institutions I’ve banked with over the years, few have really impressed me. ING and Wells, however, have been pretty awesome.

ING is the Coolest. Bank. Ever. No joke. They’re hilarious. They have clever marketing campaigns and are always challenging their customers to save. In fact, one of their slogans is “‘No ones ever had savers remorse.”  They have a decent APY for their online savings account and are very customer friendly. I’ve used them for my primary savings account for a little over two years and couldn’t be happier.

I’ve had my Roth IRA through Wells Fargo since 2007, but didn’t open a checking account with them until 2010. While I wouldn’t necessarily say Wells is great for everyone, they DO offer a Portfolio Management Account  (PMA) to customers that meet certain minimum requirements. If you are able to qualify for a PMA account, I challenge you to find a bank that offers something better. 100 commission free online trades, no brokerage account annual fee, interest bearing checking, free ATM withdrawals (from other banks too), free checking, free saving, unlimited free custom checks, personalized debit cards. The list goes on and on. I switched from Chase to Wells and couldn’t be happier.

All right so now that I’ve shared why I love ING and Wells, it’s your turn to share who you bank with and why you love them. If you are a creature of habit and only bank with your bank because you have been with them for “X” years, maybe it’s time you start looking for something new. Life’s too short to have a mediocre bank.


For the first time ever I’m not loving the Roth IRA

Large McChicken

For three years now I’ve had a crazy love affair with my Roth IRA. It’s consistently been my favorite investment vehicle for serious wealth building. The long term tax benefit and the wonders of compound interest will surely give all PF lovers a warm fuzzy feeling inside. At least, it use to give me that feeling. I’m not so sure that’s the case for me this year.

Thus far, I’ve put a whopping zero dollars in to my Roth IRA. Why the lack of contribution you ask? A few reasons…

I punched debt in the face, literally. I started 2010 off with $16,193 of student loan debt. By June, I had that sucker paid in full. That means, for the first half of 2010, I was putting the majority of my money towards debt and not in to savings. Less money in savings equals less money to contribute to a Roth IRA

I was also preparing for a major life event, getting married! I was responsible for about $5,000 of wedding costs. Saving for the MOST IMPORTANT DAY OF MY LIFE definitely put a damper on having the liquidity to contribute to my Roth IRA. Don’t get me wrong though, it was worth it 🙂

Punching debt and saving for a wedding  is all fine and dandy, but when it comes to the REAL reason I’ve avoided my Roth IRA like plague, I’ve got to fess up… I’m a big wussy! Seriously, I don’t know what it is, but for the first time ever, I’ve thought NOT investing in my Roth might be a smarter option THAN investing.

I think I’m particularly freaked out because…

1) We only have $20,000 in the bank, $10K of which is earmarked for our E-fund. If I made the maximum 2010 contribution of $5,000, we’d be left with about $5K of discretionary savings. That’s definitely on the low side if you ask me. I’d be much more comfortable if we had about $30K total in the bank.

2) Lackluster performance over the last three years. I started contributing to my Roth IRA in 2007, immediately after graduating college. While I know compound interest favors early investing, I’m a little upset by my gains. I know, I know, three years isn’t enough time to let my Roth IRA work it’s magic, but seeing a negative ROI month after month starts to wear on me. Bah humbug.

3) The stock market is up like 16% since July. I don’t like the idea of buying when the markets are at one of their highest points in the last two years. I’m just not convinced we’ve seen all the potential drama. Many say a second recession is inevitable. If I had the liquidity to buy in 8 months ago (when the markets were going down), life would be sweet. Buffet said it best “Buy when everyone else is selling Or in other words, DON’T buy when everyone else is buying…like right now!

I have until April 2011 to decide what I should do with this $5,000. I seriously don’t know what I’m going to do and would love your input.

Anyone else that hasn’t yet made your 2010 Roth contributions a little unsure of what to do? I think what I really need is some encouragement from those that advocate FOR investing. I know any short term loss will be followed by a long term gain, I’m just a little freaked out right now. How do you stick to your goals when you get a little uneasy?

How much am I really investing?

Dave, Suze, Jim

Just about every personal finance guru has an opinion on how much you should contribute to retirement. Their suggestions usually falls between 10% and 20% of your gross income. For as long as I’ve been at this personal finance thing (since 2007), I’ve decided 15% is my lucky number.

Here’s what my retirement contributions looked like for 2009…

401K: 5% of gross income

Roth IRA: $5,000 (which was 10% of gross income).

Boom. Done. It really was that easy. Between a 5% 401K contribution and maxing out my Roth IRA, I met my 15% goal. There’s something missing though, I also get up to 5% of my 401K contributions matched. So what that really means was I had a total of 20% of my gross income invested for retirement in 2009.

Do you see the issue? Did I unintentionally invest more than I wanted? It’s definitely possible, so I need your help. How do you answer the following question…

Do you count your employer match as part of your total investment contribution?

What satisfies the 15% goal? Is it simply what I contribute, or should I be considering the match as well? When you look at my 2009 contributions above, do you consider that a 15% or a 20% investment?

When I asked this question on twitter, I got a 50/50 split. Half said they count the match towards their goal, while the other half said they pretend like the match doesn’t exist.

403b sucks

So Wife Ninja had a meeting with the San Diego District guy that is in charge of setting up teachers 403b plans. He sat down with her and explained all of the benefits, investing strategies, and insights in regards to the plan. She came home with a page of notes and I could tell she was excited to explain what they talked about. After talking through the logistics, we decided the 403b is not for us.

For the last three years, I’ve consistently invested 15% of my gross income between my TSP (Government version of a 401K) and my Roth IRA. If I continued investing the same dollar amounts, but added Wife Ninja’s income, we’d only be contributing about 9%. That means, either I or she, needs to be contributing an additional 6% to reach the 15% goal.

Yes, the 403b could be used to help us towards that goal, but three things are holding me back…

1) There is no match. If the school was offering a 5% match on contributions, then you better believe we’d be all over that thing. I would never pass up free money. But there isn’t one. So the attractiveness of a 403b becomes exponentially less sexy.

2) She doesn’t plan to teach for more than a few years. If she opened up a 403b and we move to Seattle (which is the current plan), than we will have to go through the process of rolling the 403b in to an IRA. Sure it’s not the most miserble process out there, but it’s one I’d prefer to avoid if possible. Especially seeing that she will probably work for a few different school districts during her working years. The less accounts out there, the better.

3) The Roth IRA is most likely a better option for us anyway. We anticipate our income only increasing from this point forward. A larger income, means more taxes. It would be smart for us to open up a Roth IRA in her name while we are in a relatively low tax bracket. The Roth IRA is a freakin’ HOT investment for a 23 year old woman. Wife Ninja is hot, Roth IRAs are hot, so it makes sense the two should begin a relationship.

Let’s assume our combined gross income over the next year will be $90,000. This means we would need to put $13,500 towards retirement each year to meet that 15% goal. If I max out my Roth ($5,000), she maxes out her Roth (another $5,000), then we are only $3,500 short of our $13,500 goal. I’m also currently contributing 5% to my TSP, which works out to $3,100/yr. I get that 5% matched by my employer for an additional $3,100 contribution. All said and done, we’ll be contributing $16,200 over the next year, which works out to 18% of our gross income. Sounds like a pretty good deal to me.

I honestly can’t think of one reason why we should sign up for the 403b. Anyone have an argument FOR the 403b? Would you handle our situation differently? Were you totally bored out of your mind today, since this post actually talked about finances?!

I’m too cool to dollar cost average…

If you’re new to the personal finance game, you might not even know what ‘dollar cost averaging’ (DCA) means, so let me explain it real quick. All it basically means is strategically investing a predetermined amount of money on a specified time interval. Many people utilize the DCA method for their Roth IRAs.

Here’s a typical example…

Helga can contribute up to $5,000 this year in to her Roth. She could make a one time $5,00o contribution and put the Roth on the backburner ’til the next calendar year. There is a pretty big risk with this though. if she invests that $5,000 right before the market drops 1,000 points, she’d be up a creek without a paddle. Instead of a one time $5,000 payment, she could take that money and divide it by 12 months. This would leave her with a $417 monthly payment. If invests this $417 from January through December, she will still max out her Roth contributions, but will also mitigate any sudden drops in the market. Since she is buying on a specific day, and not a specific stock price, she is going to be more consistent and less emotional when it comes to investing. It’s generally a pretty good strategy.

I, however, am a PF rebel and do things a little differently. Instead of break my Roth IRA contributions over 12 months, I break them up over three payments. I typically make a $2,000 contribution, and two $1,500 contributions at sporadic times throughout the year. There is really no telling when I am going to invest. I rely on two basic principles. 1) Have enough liquidity so I can afford to contribute and 2) Invest just before I think the market is going to go up. Yes, the second option is just random guessing, but it makes investing a little fun.

I would totally be to down dollar cost average and make even payments each month, but I am faced with one tiny problem. IT WOULD BE WAY TO EXPENSIVE FOR ME. When I first opened up my Roth, I didn’t know what the heck I was doing. I decided to open it with Wells Fargo. This ended up being a mistake. Not because Wells Fargo sucks (they’ve actually been quite pleasant), but because I didn’t pay attention to the fact that Wells charges a $35 fee for each trade I make. This would cost me $420 in fees ($35 x 12 = $420). That’s a whole extra payment!

This is why I make as few trades as possible… one for each fund I own. I am still getting charged $105 for those three trades, but I’ll grin and bear it for a short while longer. All Wells Fargo customers with account balances over $25,000 are deemed premier account holders. This comes with a few perks, the most important being 100 free trades a year. My Roth currently sits at $14,000. So after two more years of contributions and a small improvement in the market, I should hit the premier status and avoid those pesky trading fees. Once I’ve reached baller status, I’ll mix my investing game up and join the 12 month dollar cost averagers.

For those of you that dabble in the stock market, do you mess around with dollar cost averaging? What’s your strategy? Set payment each month? Random payments when you think things are on sale? Did you even know what dollar cost averaging was before this post? Did you hate that I actually wrote about something finance related?

Introducing the Roth IRE

Oh man. I might be going to personal finance hell for this one, but ya gotta at least hear me out. You’ve all heard of the Roth IRA right? You know, it’s a crazy awesome type of Individual Retirement Account. Well, today I would like to introduce you to a new concept. The Roth IRE. That’s right. An Individual Retirement Emergency fund.

If you’ve heard of the Roth before, you probably know the annual contribution limit is $5,000. You probably also know that Roth contributions are made with ‘after-tax’ money. What you may not know is this tasty little morsel: Anyone can withdraw their Roth IRA contributions at any time, without penalty. No, you can’t withdraw earnings, but the contributions are free game.

So here is what I’m thinking. I currently have $10,000 in my E-fund. Currently, that’s about 6 months of expenses. Once I get hitched, however, that $10K only becomes like 3 to 4 months of expenses. This means I am faced with two goals that will soon conflict one another. My goal to have 6 months in an E-fund vs. my goal to fully fund my Roth every year. Unfortunately, I can’t do both at the same time. Either the E-fund savings takes precedent, or the Roth contributions become priority.

This is why I have decided to intertwine the two goals.

I’m yet to contribute a single dollar to my Roth this year, as I’ve been aggressively paying down my student loans and saving for things like my wedding. This hasn’t left me with a ton of flexibility in my cash flow. What I plan to do is save $5,000 as quickly as possible. I’ll contribute to my Roth IRA in three increments (a $2,000 contribution and two $1,500 contributions…I’ll explain why I don’t dollar cost average in a future post). Since I will be diverting all of my discretionary income to my Roth, my E-fund will remain stagnant.

The chances of me actually needing access to my E-fund are slim at best. I have a very stable job, am in pretty good health (knock on wood), and don’t have a ton of expenses. Since I’m 96.3% sure I wont be using my E-fund any time soon, I’d rather contribute to my Roth and maximize it’s earning potential.

If, by some freak chance, I end up unemployed I’ll first use my $10K savings. If I am still jobless after three or four months of hunting, I can always tap in to my Roth. Yes, I know, using a retirement account as an E-fund is a personal finance sin, but if there is no tax penalties it’s not so dumb. Besides, it will only take me a few months (after I’ve contributed to my Roth) to build up my E-fund to a true six months worth of expenses, so the window for me to be “up a creek without a paddle” is very small.

What do you think about the plan? Would you contribute to your Roth or E-fund first? Anyone else out there do what I’m doing and use the Roth as a “short term” E-fund option? Any financial know-it-alls see any flaws in my game plan?

Different Strokes for Different Folks

Yesterday’s Net Worth update is the source of inspiration for today’s blog post. Not because of anything I did, but because of the comments you all left. They were made in regards to investment strategies, particularly heavily investing in the stock market. One commenter was all for it, the other wasn’t the biggest fan. I love when peeps leave opinionated comments as it allows for some great conversation.

The first comment reads…

I think your “100% stock” strategy is pretty good for your age – historically, the stock market has always outperformed other investment instruments and it’s a good bet that will still be the case, in spite of the market’s natural volatility (including huge psychological swings, but you majored in psychology, right?). If you happen to need your stock-invested money at the wrong time, then you are indeed hosed. But you seem to have picked up on that and have a nice amount of cash on hand to see you through an emergency.


And a completely different view…

I sold my last stock before the crash. Very happy about that. Now I just have one more mutual fund to get rid of and I’ll finally achieve my goal of all cash! Be careful of the buy and hold mentality, it’s quite dangerous. Do you have any time frame of when to sell? When is a good time to sell? How about re-balancing your investments towards less risky stuff in the future? Tough questions but crucial for retirement planning, usually neglected until it’s too late.


As you can see, Lola and StackingCash (SC) hold pretty different opinions on the safety of investing in the market. As you already know, I side with Lola. I’m a huge proponent of the long term investing strategy, particularly in diversified mutual funds.

So who is right? Lola or SC? I think you already know the answer….they both are. For someone like Lola, who is willing to take on some risk to reap a large return, the volatility of the market is nothing to worry about. For SC, however, cash is king. Who needs to take on risk, if you can find comfort in liquidity?

I personally believe in the US economy. Sure, the last couple years have been no fun, but I don’t think that negates the overall growth of the market. In fact, the Dow Jones has grown over 1,340% in the last 39 years. No, that’s not a typo. It really has grown over a thousand percent. Now call me crazy, but if you don’t think that’s sexy, I don’t know what is. If someone out there can find me a non-stock investment strategy that trumps this please let me know below so I can get in on that action.

I’d never tell someone to invest in the market, just like I would never tell someone to get out of it. That is a decision each person has to make for themselves. What are their goals? What’s their emotional attachment to their money? How much time do they have? What if their nipples turn in to Eggo waffles (just wanted to make sure you are still paying attention:))?

The phrase “Different strokes for different folks” is totally applicable with respect to investment strategies. My plan, may not be your plan, and you know what? That’s okay.

So I ask you fellow PFers… What’s your investment strategy? Are you a risk taker? Is liquidity your best friend? Why do you invest the way you do, or in other words, who do you get your advice from?