Random Order Weblog - Nothing’s too random!

The other day I took some time out to figure out exactly what it was I am doing with the money I earn. I know it’s bad, but usually I keep very poor records and just sort of deposit funds as I get them without doing a lot of personal finance research and planning. When I started reading online, I found out that there are tons of resources that take a lot of the work of personal finance planning out of your hands. For example, there are actually personal finance news websites that are entirely dedicated to helping keep people informed of personal finance issues, possibilities, and developments.

While some of these sites are informational only, others offer useful tools that can help you plan out your goals and aspirations, and then calculate what it will actually take for you to get from point A to point B. One really neat tool I found was called the Millionaire Calculator—what it does is it lets you enter in some basic information, like what your initial deposit will be, how much you plan on depositing on a recurring basis (and you can also specify the time interval for the recurring deposits), the annual interest rate you expect to earn, and finally the average inflation rate. You can then click compute and the program will tell you how many years it would take you to reach a million dollars at the rate you entered, and also what that one million dollars will actually be worth in comparison today’s dollars (PV, or present value, of that money). Remember, a million bucks in 10 years isn’t the same as a million bucks today, because I you got it today you could be earning interest on it for 10 years. Econ 1 . Anyway, there are some very cool personal finance websites out there like this one that help you with everything from 401k plans to personal accounting. Lots of useful, and free, tools out there!

My grandma up in Oregon is considering getting a reverse mortgage to help her pay the bills. For those of you that have dealt with them before, you’ll know that reverse mortgages can be really complicated. In the United States, after the age of sixty two you are considered a senior citizen and this often makes you eligible for a reverse mortgage, as I understand it. The basic concept is that instead of making monthly payments, the “would be monthly payments” are added to your debt in the home (like a home equity line of credit, or HELOC loan) Furthermore, many seniors will choose to actually receive money instead of making a payment (thus the term reverse mortgage) and have the money they receive be added to the debt amount. For a lot of older people this kind of mortgage sounds really appealing. They aren’t going to be around forever, they know that, and they want to enjoy life as much as they can while they are alive. A reverse mortgage could potentially help them do that.

What I am most concerned with is that I would hate to have my grandma end up in some tricky deal that robs her of her hard earned home. For that reason, my family / father and I are going to make sure she finds a good attorney in her area that can not only help her find a good reverse mortgage lender, but also help her understand exactly what the deal means for her. This way we will all know exactly what she is getting into before it happens, and we will also have the comfort of a lawyer advising us to make sure we don’t mess anything up.

In the mean time, my farther and I have been doing our best to read up on reverse mortgages as much as we can on the internet. Luckily, as with most subjects, the internet seems to be rife with just the kind of information we’re looking for.

When I got my first bank account I remember how proud I was that I got to carry a cute little bank book around. I really had no idea what it represented other than the fact that my allowance was somehow getting hidden inside it each week.

Now that I’m all grown-up I still find the bank a mystery. Here’s a place where I’m expected to deposit my money and then pay fees for them to “allow” me to use it. I write checks withdrawing my own money and I have to pay the bank. It really makes little sense and most banks just assume that we’ll pay the fees without much fuss.

Deciding that I wasn’t going to take those fees without a fight I decided to do a little research into the best bank deals. I wanted to find a bank that would let me deposit, withdraw, write checks and just generally use my own money without having to pay an arm and a leg.

What I found isn’t all that surprising. The best bank deals are generally banks that offer no fee checking accounts. This is one of the best bank deals because you can have as many transactions as you please without having to pay any fees. You can use the ATM machine, write checks and make deposits all for free.

There is a catch however. You do have to keep a minimum amount in your checking account. If you’re good at balancing a budget this isn’t hard to do, but if you let the balance dip below that amount, even for a few hours one day, they’ll zap you with some fees. In this case those best bank deals quickly turn into expensive bank deals, so keep a close eye on your checking account’s bottom line.

This is a post that sort of applies more to the locals, since others aren’t likely to know what Bonny Doon even is (for future reference, it’s a small sort of “rural” town just outside of Santa Cruz in California).  My buddy Tarik recently moved up there and has been spending a lot of time riding ATVs, mini bikes, and full-sized dirt bikes.  It is really pretty fun since there is just so much space, forest, etc., and also because most of the locals up there have set up little tracks so you can hit jumps, race and try things on different terrain.

After settling down in his new place up there, my friend Tarik upgraded ATVs.  He went from one that was on the property when he got there to one that cost him over $5,000.  Needless to say, with the new, pricier ATV, insurance was something he checked out.  I offered to help him since I have more experience than him online.  We started by checking if ATVs insurance even existed—neither of us had ever heard of it before—and quickly found that it does indeed exist, and that there are actually a wide range of providers / options.

Using some online tools we checked for an ATV insurance quote in Bonny Doon.  They were slightly higher than what we had been hoping for, and Tarik suggested that he could just insure it at his parents’ house and “keep” it there to save money.  I replied that I thought that was a silly idea because it would surely be more expensive to insure the ATV in Santa Cruz where there was an increased potential for theft, accidents, and vandalism simply because of all the people.  Well, we checked anyway and I was very surprised to see that it is indeed cheaper to insure an ATV in Santa Cruz than Bonny Doon—at least with the providers we happened to check.

I have no idea why… it doesn’t make any sense to me.

For years I only used Visa and MasterCard.  The only real exposure I had to American Express was through marketing (commercials, direct mail, etc.), and the pressure put on me by Costco to get an American Express card.  I always ignored the hype / ads, but lately I’ve been noticing the great benefits of high cash back benefits.  I use an Emigrant Direct credit card which gives me 1.4% cash back on all purchases, which, to the best of my knowledge, is pretty darn good.  At Costco, however, I noticed that American Express cards beat that 1.4% in certain areas—specifically by giving 2% back for travel and 3% back for restaurants (which, I’ve noticed, also seems to apply to bars / pubs, which is very cool for us younger guys).

After I saw these benefits, and thought about the fact that every time I fly to Denmark (where I have family), I drop about $1,000 on various travel expenses, I started to think about getting an American Express card.  Using the Denmark / Euro trip example, that’s $30.00 cash back—and that adds up over time.  Even comparing it to my already impressive Emigrant Direct card at 1.4%, that’s a $16.00 improvement—good enough for me to sign up, especially since the offer I was faced with had no annual fees (I believe, do not quote me on this).

While I’m on the topic of my finances, I’ll also ramble that I’ve been getting more and more interested in trading stocks online.  Online trading has been a big deal for years now, but, like American Express cards, it’s something I’ve somehow avoided.  Most recently, I’ve been doing online trading through Ameritrade.  For some reason my “free trades” I was supposed to get for opening the account didn’t seem to work—not sure what that was all about—but so far online trading has been an easy and positive experience for me.

Unfortunately I no longer count myself among the lucky group that have a few credit cards sitting in their wallet.s Credit cards are a great resource if used properly. However, not everyone is able to manage their credit as well as others and for them, bad credit credit cards are the only option.  Here’s what I’ve found:

A bad credit, credit card is essentially a secured loan. The person wanting the credit card has to supply a security deposit to the credit card company before the card is issued. This security deposit is equal to the credit line supplied. Let’s say you wanted a $500 credit limit on a credit card. If your credit is less than stellar, you’ll have to hand over $500 to the credit card company.

It seems almost fruitless to give away $500 if you need $500 worth of credit. Granted you could just use the cash to make your purchase, but you shouldn’t look at it that way. Instead think of it as that $500 buying you a better credit score. If you make your payments on time, don’t use all the credit every month and work hard to pay it off, you’ll be re-establishing your own credit.

Another type of credit card that many people don’t consider applying for is are small business credit cards. This is particularly true for people who run a small business out of their home. Instead of getting a credit card that is just for the business, they end up using their personal credit cards. Although this can seem like a good idea, it’s really not for several reasons.

Even though your business is home based, the expenses from it aren’t. Keeping the business finances separate from your personal finances is really important. Another benefit is that quite often small business credit cards are going to offer you a lower interest rate than the cards you are already carrying. You don’t need your accountant to tell you that means you’re going to save money, which every business owner, big or small wants to hear.