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Tag Archive for 'savings'

An unavoidable expense of $8500

rusty pipeWhen I was leaving for work last Thursday I noticed a big pile of dirt on my neighbor’s front yard. A group of men were gathered around a hole in the ground. I approached to find out what was going on and the men pointed at a stretch of wrecked copper pipe. It looked like someone had bitten a chunk out of it. The pipe connects my neighbor’s house to the water main and had to be replaced.

I later spoke to my neighbor and he said his family noticed a pressure drop, spotted water coming out of the ground in the front yard, and called the service. $8500 is the repairs bill that they are now facing.

Our homes were built 5 years ago at the same time and have exactly the same design. My neighbor said I should start saving money. The service people suspect that the cause is either defective pipe material or poor job the builders have done with the piping, but in either case the owner is the one to take the hit since neither manufacturer nor the builder can be held liable.

I called my Allstate agent and she explained that the home insurance will not cover the cost since no damage is done to the house. This is really bad news for us, and all I can think of right now. My friend told me of a family he knew who had a similar problem with their house and within 2-3 years all homeowners on their side of the street had to eventually replace piping.

A desperate idea to move has visited me tonight; especially since we were planning to do so when kids grow a bit (public schools in this area are not very good), but then I thought that I would need to disclose any problems with the house to the buyer, and while this problem at this point is only hypothetical, it can easily scary away a potential buyer.

So it looks like a deadlock at this point and I can’t think of any way to avoid the upcoming financial disaster. What would you do in my case?

Photo courtesy of atlef at flickr

Preserving Savings: Stocks, CD’s, or Precious Metals?

Economic recession, declining dollar, rising gas prices, growing budget deficit… In the times like these I wish I was a small child and didn’t have to worry about anything. But I am not and this is why I am spending this night trying to figure out what my investment strategy should be for the next 2-3 years.

This is a really tough decision for me. For my IRA account the investment vehicle of choice hasn’t changed, I stay loyal to stocks. For the shorter term savings however I consider these options:

Stocks and Mutual funds

You know the drill. Open an account with a brokerage and invest in the names you trust. The stocks that perform well in recession are staples, health care, energy, tobacco & beverages and gambling. VICEX is the mutual fund that tracks many of these companies. You might also want to consider some foreign stocks. The economies of China, India and Russia are booming. Also check out these recommendations from Seeking Alpha, a very popular blog among investors.

CD’s and Savings

The rates banks offer on savings accounts and CD’s keep going down and the last 75 points rate cut by Federal Reserve has brought more new announcements. I just received emails from ING, WaMu and I am sure there were many more that followed. However if you look just a little harder you can still find savings rates well above 4%. One of such bargains comes from Natinal City who currently offer a 48 months CD with 5% APR. A great resource for tracking these offers is the Bank Deals blog.

Precious Metals

This is a venue which I have avoided so far. Gold has always looked too expensive and I feel too uncomfortable with other alternatives. However I think I found a silver bullet and it came from nobody else but Robert Kiyosaki, the guy who wrote “Rich Dad Poor Dad”. His last article on Yahoo Finance is somewhat gloomy but if you skip the “inconvenient truth” of the first part, the last two paragraphs offers some sound investment advice.

Silver is consumed in many industries, and it’s reported that the world has less than a 10-year supply of it left. That’s why I believe silver is currently one of the best investment opportunities there is — even for people with limited financial training.

Conclusion

I don’t believe in fortune tellers. No one can predict where we are going to be in a few years from now. Therefore my strategy will probably be a mix of some of these investment vehicles. Have you given it a thought? Please share your own approach in the comments.

High Yield Bank Accounts – October, 2007

This is another update from BankDeals — my favorite banking blog. On average the rates have come down compared to July when I did an update last time. The long term CD’s are affected the most. Market is obviously betting on Fed to keep cutting rates in the near future.

Noticeably, H&R Block and Countrywide are two banks with great CD rates. These two banks have been significantly affected by the sub-prime crisis and aggressive CD rates is a way for them to fix liquidity problems (read more: CNN Money on Countrywide, Reuters on H&R Block).

Checking/Savings/Money Market Accounts:

3-Month Certificates of Deposit:

6-Month Certificates of Deposit:

9-Month Certificates of Deposit:

12-Month Certificates of Deposit:

18-Month Certificates of Deposit:

24-Month Certificates of Deposit:

36-Month Certificate of Deposit:

48-Month Certificate of Deposit:

60-Month Certificate of Deposit:

Source: Bank Deals Weekly Summary for October 27, 2007 at BankDeals

Moving my primary bank account to WaMu

WaMu Savings 5%I have been using Citibank as my primary bank account for a while. It is a big bank with tons of cash and lots of customers and as such it tends to provide services of mediocre value. Banking with Citibank is almost like overpaying for a brand name, just in finance world.

I have speculated about a move for a while and the last straw has been the $23.50 check printing fee Citibank slapped on me last month, so I finally decided to look for greener pastures.

In my search, I have avoided any pure online banks. I want my primary bank to have a local branch for easy access to my money. Also, burned by recent Netbank failure, I wanted it to be a financial institution with solid reputation, a bank I can truly trust.

After some research and your useful tips, I settled on this offer from Washington Mutual and opened an account last week. This checking/savings combo totally blows away anything Citibank currently offers and beats most offers from other banks. Where else can you get 5% APY on your regular savings? And that free overdraft protection can easily save you $25-30 a year depending on your bank. Here are the offer details in brief in case you consider a move as well:

  • No minimum monthly balance
  • Free checks for life
  • No ATM charges on WaMu’s part
  • One free overdraft protection per year
  • Free outgoing wire transfers
  • 5% APY on your savings
  • Free online bill pay

Coincidently, Washington Mutual also holds my home mortgage and I find it very refreshing to see my debt as well as my savings in one place. Kind of puts you down a bit. ;-)

What bank do you use? What do you like / not like about it? Please share your own experience in the comments

Fed Funds Rate affect on Bank Savings Accounts

Jonathan from MyMoneyBlog has touched the topic that has always interested me personally: how Fed Funds Rate affects all these savings accounts.

Banks make money by borrowing and reinvesting funds and I would assume Feds Fund Rate is the benchmark they don’t want to go over when borrowing since this is the rate at which they can borrow from the government or from each other. On the other hand if they attempt to borrow at low rate (offer low interest rates on savings) they will have trouble attracting deposits from people.

To see the relation on a live example, Jonathan has collected historical data for savings rate at two popular online banks: ING Direct and Immigrant Direct. The result of his work is this chart:

Fed Rate and Savings

You can definitely see some correlation, but it’s not perfect. It looks like ING was more aggressive in 2002-2004, and then gradually become satisfied with fatter margins. Emigrant seems to be following the curve closely, which would indicate an interest rate drop soon.

The bottom line is that while there certainly is a correlation, each bank sets its marketing strategy differently and can offer savings rate higher or lower than Fed Funds Rate depending on how aggressively they need to attract deposits. Higher rate means more money coming in to the bank but less profits to make. Lower rate means less people opening deposit accounts but also means fatter margins for the bank. For more ideas on the subject read Jonathan’s blog post.




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