To what extent should you be focused on external events as it relates to your finances?

You have probably heard a large amount about the Greek debt crisis, particularly in recent weeks and months as it comes to a critical point in determining whether the bailout will be extended by Greece's lenders (primarily the International Monetary Fund and European Central Bank) and on what terms.  To the extent the two sides fail to reach a deal by the time the current bailout expires on June 30, Greece may be forced to exit the European Union.  Considering how far apart the sides are and the fact that the Greek PM has called a national referendum on the proposed terms of the extension of the bailout program, right now it looks likely Greece will end up defaulting on its debts and perhaps leaving the European Union.  

No one has any idea what effect a failure to reach a compromise and/or a subsequent default and exit from the European Union would have on markets.  Some are saying that it would be a relatively contained event that would have little effect on either the European Union or global financial markets.  Others, and I count myself in this camp, think that there is no way to know what kind of effects it will have.

The problem with being able to judge the effects of external events like the Greek crisis or the failure of Lehman Brothers in 2008 are several. First, no one has any clue what effect these events will have on markets.  Seven years later we are still dealing with the aftermath of the financial crisis that, in my opinion, really began to get really bad when Lehman Brothers failed.  No one at the time would have been able to tell you how long it would take us to recover from the financial crisis, to the extent you believe we have even recovered at present.  Secondly, the ability to tell when to pull out of and then get back into a certain asset class or the stock market is also extremely difficult.  I am skeptical that even the people on Wall Street are any good at it.  

Personally, I try not to be too worried about external events because I have seen studies that say people who pull out of the market invariably do much, much worse over the long term than those who leave their money in even when the market it is dropping like a stone.  To me this applies to both stocks and bonds. As nerve-wracking as it may sometimes be, I think you are always better off staying the course.  

Saving money on car, and other types of, insurance by paying your premiums at once

I'm probably beating a dead horse on the issue of ways to save money associated with your wheels, but there was one more I wanted to cover: car insurance and, specifically, how to save money on your premiums by paying in a single lump sum.

Most auto insurers will offer discount on your premiums if you pay the entire amount at one time vs if you pay it in either either monthly or quarterly installments.

Take my auto insurance policy for an example.  I have Progressive and am up for renewal every 6 months.  In January I received a bill saying my 6 month policy premium was $1,048.00 but it would cost me $823.00 (a $225.00 savings) if I paid the entire six months up front vs $175.00 (rounded off) if I paid it in monthly installments.  We paid it all at once, as we always do.  You just save too much money by doing it that way for me to want to do anything else.

You can get the same savings by paying your premiums in one lump sum for life insurance and homeowners insurance.  We pay our homeowners in one lump sum every March and do the same with life insurance policies as well. The life insurance saves us $5.00 per month or $60 over the course of the entire year (the annual premium is $300 if paid in a lump sum or $35.00 per month if you pay monthly).  A small amount, to be sure, but a savings nonetheless. 

I could see there being an argument that there might be better uses for your money than parting with the entire six months' premium at once versus just paying on a monthly basis.  However, leaving the money you would use to pay for the remaining five month policy term in a savings or investment account will not make up the savings you get for paying in full every six months.  Take my car insurance.  I save $223 by paying up front.  Inflation is not even 2% these days and your rate of return for using the money you did not pay towards your premium is not going to come close to beating a $223 savings over six months.  Unless you know about some sort of investment scheme I don't. 

This entire discussion is predicated upon the assumption that you have the cash to pay the entire premium up front.  I know some people suggest setting up an automated savings plan in order to have accumulated enough to be able to pay your premium twice a year.  That is not a bad plan to me, but I normally just budget things so we have enough "extra" in our savings to be able to make that payment every six months. 

In any event, I know it requires a substantial cash outlay to pay your insurance premiums at once but the savings are huge. 

Please pay for parking to avoid getting parking tickets.

Well, on the subject of saving money associated with your car there are ways to save on parking costs too.  

This is kind of a no-brainer but over the weekend I had to make a quick stop somewhere and I had no change so I decided to chance it by not putting anything in the meter for what I thought would be a quick trip to run a couple of errands.  I figured in the half our or so it took me to run my errands no one would come by to check the cars, particularly since it was Sunday. Well, I guessed wrong.   

It cost me $50 for the ticket. So in essence I tried to cheap out and avoid a $1.50 parking fee and would up paying $50 instead.  So instead of $ $0.05 per minute I paid $1.67 per minute.  Talk about negative ROI.  

Does your car have an eco mode? It's an easy way to save gas

On the topic of saving money, and saving money as it relates to your car and driving, I wanted to discuss the issue of using an "eco" mode or button.  By that I mean the setting your car may have in which it is more environmentally friendly and runs more efficiently and burns less gas.  I call it "Eco mode" because my little Hyundai has a button next to the steering wheel that says "Eco Mode."  

From my understanding, the way "Eco mode" operates is to make your car run more efficiently and burn less gas by restricting how quickly you can accelerate and regulating the transmission. 

Just doing back of the envelope calculations and based on my anecdotal evidence, my car averages around 37 mpg highway in Eco mode and 33-34 without it.  (All I have to do to engage it is press a little button next to the steering wheel and it switches to Eco mode).  I have an 11 gallon tank, so pressing that button (and assuming I have it engaged every time I drive) saves me an extra gallon every time I fill up my car. I fill up about once a week so that adds up to $150 in annual savings based on $3.00 per gallon for gas.  

Really the only times I have ever regretted using the Eco button were in situations when I needed to accelerate quickly.  My car has the lowest horsepower of any car in its class (I am talking the absolute worst) and so deploying the Eco button takes me from pathetic acceleration to having the acceleration of a two speed bike.  

Occasionally that will result in terrifying encounters with trucks, like once when  I was pulling onto the freeway at an entrance with an extremely short distance within which traffic entering the highway had to merge.  An eighteen wheeler was going way over the speed limit next to me and another car was rushing up behind me and cut in front of me to merge.  I found myself standing up on the accelerator and screaming "come on come on" at my car at the top of my lungs and I somehow made it in front of the truck.   I was almost toast and didn't use the eco setting for weeks afterwards.  

On the whole, however, there are not that many times I really need the extra horsepower besides the occasional brush with death on the highway so I generally use the Eco mode to save a few bucks every time I am in the car.  

Again, this is not a huge savings but enough that you should pay attention to it, in my opinion. 

Want to save money on tolls? Buy an easy pass

Having just moved to a major metropolitan area where many of the roads and highways are toll roads, I am only now realizing the value that purchasing an easy pass for those roads is.  

By easy pass I mean an electronic device that you preload with a certain amount of money for the tolls and then every time you pass under or through a toll platform it automatically registers that you have a pass and dings your account for whatever the applicable toll is. 

They go by different names in different places.  In Florida it is called a SunPass, in California a FasTrak, and EZPass in other states. (Please pardon me if I got the names wrong).  

Nome of the roads or highways where I grew up in the Midwest were toll roads so my first experience with paying tolls was driving to college, which required me to stop and pay a toll at a good fashioned toll booth on one of the state highways I had to take. 

After college, I never lived in another place that had any toll roads until we just moved.  We vacationed in Florida and would occasionally take the Florida Turnpike, which also had good old fashioned toll boths, but that was before I myself was driving.  

In any event, when I was interviewing for what eventually became my new job in this city, my wife and I drove down and discovered that all the highways and most major roads here generally all have various portions that are tolled.  It surprised me that there are no toll booths, which helps traffic move much more smoothly, but the the thing that surprised me the most was the difference in tolls between those who had the city's version of an easy pass system and those who were just billed by their license plate-the prices for those with the easy pass are half of that paid by the "toll by plate" drivers who don't have a pass.   

Further, and depending on what kind  of hurry you are in, some of the express lanes on the highways here are only available to those drivers with an easy pass-using those lanes without the pass means you are going to get nailed for a $100 fine. 

Upon investigating this further, the actual easy pass transponder itself only costs $10.00, which probably paid for itself within two weeks for me.  It was simple to buy one at the grocery store and then I just set up an online account and have it set to automatically replenish the funds in my account every time my balance hits $10.00.  I did the same for my wife's car.  

My wife's new job requires a commute over a bridge that requires a toll so we are also saving $0.60 on her commute every day.  

I know that doesn't seem like much but let's take just her daily commute as an example of how the small amounts you save on a daily basis can add up over time.  Say she commutes 5 days per week for 10 months (she is a teacher) and her saving $0.60 per day results in an annual savings of $120.  That does not even factor in what she saves when she drives anywhere else, whether on the weekend or after school-that is just on her daily commute.  

Anyway, the whole point of this is to point out how much you can save if you sign up for whatever version of easy pass your city or state offers.  It may not seem like much on a daily basis but that $0.30 on my wife's drive to or from work can add up over the course of a year.  

This whole discussion will probably strike those of you from large urban areas as silly, but some of my friends in major cities just never bothered to sign up for their version of an easy pass.  Please make sure you do that if you are somewhere with lots of toll roads.  

As my mother once said, a dollar in your pocket is better than a dollar in someone else's pocket.  

Want a cheaper price at the auto body shop? Just ask for one!

I was reminded how simple it can be to get a discount at businesses simply by asking for one or mentioning that there are other options out there for their customers.   

My wife has an eight year old car and we took it in to one nationwide chain of auto service places last weekend for an oil change and they told her she needed several different things done, one of which was a new battery put in.  She got a quote ($200) and then we took it somewhere else today because the estimate from last week seemed really high on some of the other work it needed.  So we took it to a competitor with whom we have had better luck in the past and got an estimate for the other work that was much lower.  We also had them check the battery and they also said it needed to be replaced and that they could do it for $200. My wife responded with "oh well I got it at [third competitor] five years ago for $130.   Is that the best you can do?"

The store manager responded "the best I can do is $160."   So we had it done for that price. Amazing that all she had to do was mention a competitor and ask for a lower price and she saved us 20%.  Pretty simple way to save a lot.  

She has also saved significantly on realizes in the past by saying she is a teacher and pleading poverty which I found hilarious but was impressed when she revealed it had saved us hundreds each time. 

So make sure to try this next time you take car in.  Worst they can do is say no.  

The future of Internet/cable bundles: cheaper or even more expensive?

Dish Network and T Mobile announced last week they were going to combine.  Interesting merger to me and one that seems a lot more likely to survive scrutiny by the government than the proposed Comcast/Time Warner combination that the companies ultimately abandoned when the Federal Trade Commission staff recommended that the merger be blocked. (By way of background, the FTC can block a proposed merger or acquisition or other transactions if it finds that the proposed transaction would have an anticompetitive effect. Typically what happens is that the FTC rank and file staff will conduct a very in depth review of the transaction and then present a written report to the FTC recommending whether to say yes or no to the deal.  If the staff recommends that the transaction be blocked then the parties to the proposed deal may choose to abandon it before it even gets voted on by the five Commisioners, as was the case with the proposed Time Warner/Comcast deal-Comcast walked after the FTC staff recommended the transaction be blocked because it would have anticompetitive effects. Sometimes the FTC will even go to court seeking an order unwinding a transaction after a transaction already has happened, which they successfully did against a group of Idaho healthcare providers last year, causing the court to order that the merger of the healthcare providers be unwound).

One of the most important factors motivating T Mobile to enter into the deal is that Dish Network owns licenses to some very valuable parts of the wireless spectrum that they have to use by 2021. (The government has legal ownership of the spectrum but auctions off the rights to it for certain periods of time, with the requirement that the winner of the auction has to actually "build out" the spectrum to a certain level within a certain time period). Dish currently has no ability to offer wireless service, but their spectrum is an extremely valuable asset that will help T Mobile in building out its own network immensely.

We have strongly considered switching from Verizon to T Mobile several times, although both my wife and I have each been loyal Verizon customers and generally happy with them for years, mostly because they were offering such good promotions. Ultimately we decided not to switch because we were concerned that the T Mobile network was nowhere near as good as Verizon's network.  I actually was able to negotiate out Verizon bill down $65 per month on virtually the same plan (with more data even!) but part, if not the only reason, I was able to negotiate it down was because we were out of contract. (By the way, I have put together a script for negotiating with cable or other utility providers so email email me if you would like a copy). So, we may consider switching again if this merger goes through and T Mobile spruces up its network a bit.

Time will tell both whether the transaction will be approved and, if it does, what effect it might have on what kinds of Internet, cable and wireless options and offerings exist in the future. It could mean that now you have the chance to bundle cable, wireless, and Internet, all with a single company. This may result in cost savings, which I doubt. But it's nonetheless interesting to consider what the future of our Internet and cable bundles is and whether they may include wireless too.

The most important aspect will of course be price and I am skeptical that this merger, or any other one, will actually drive down prices for consumers, regardless of what the companies might argue.

High Yield vs. Regular Savings Account

We’re in the process of selling our house in the old city and, hopefully, that means we will be able to walk away with a very good start towards a down payment to buy a house in our new, and much more expensive, city.  We’ve got one offer, but they low-balled us for quite close to less than we actually paid for the house, which was really irritating.  Things have appreciated in our neighborhood at least 5%, from what our realtors tell us, but the potential buyer insisted that it had not really increased in value at all.  More on that in a subsequent post. 

Today’s topic is savings account and where and how much of your funds that you stash at your day to day bank vs. a high yield account (if you split them up at all, that is).  Our emergency fund has just been sitting in our savings account at our local credit union earning a measly 0.1% since we used the majority of our old savings to put a down payment on the house we are now selling (but kept several months living expenses in reserve, of course). 

Once we switch banks, we are trying to decide what to do with our savings, whether to just stick it part of it in a high yield savings account and keep a certain amount for emergencies at the bank where we have our checking account or whether to just keep all of it in our savings account at the new bank.

As far as I see it, most of the online banks will give you somewhere between 0.7 and 1 percent vs. the measly 0.1 or below you will get from a regular savings account.  At the same time, leaving it in a regular savings account at whatever bank you have your checking account at means it is instantly available in the event you need all of it.  (Yes, I know that you can wire it from an online account or account with another bank to your day to day bank but that takes several days, aside from one option I discovered where some banks will let you do such a transfer effective immediately, but this comes with significant fees as one might expect). 

We’re leaning towards splitting it so most goes into the high yield savings (which is almost a misnomer in today’s interest rate environment) and then leaving the rest in our savings account at whatever new financial institution we choose. 

How do you handle your savings-all in one account at your day to day bank, all in a high yield account at a different bank than your day to day bank or some other arrangement?  How do you split your savings if you split it between multiple accounts or institutions?

Postscript to my out of town credit union checkbook fiasco

Well, as a postscript to my previous post on my struggle to find a way to get $3000 from my out of town credit union account, it turned out the potential landlord was not even permitted by his homeowners association to lease the place out, so we ended up out of luck anyway.

Basically that the landlord, a realtor of all things, hadn't checked his HOA restrictions carefully enough because he was only allowed to rent it once per yearlong period.  His tenants moved out a month early and him renting to us would have been his second tenant in the yearlong period since his first tenant had signed a lease, so he had to wait until that year term expired before he could rent it to someone else.

We're still trying to decide what to do.  Very strange ending to a very strange situation.

A Drawback of Credit Unions, at Least In One Case

Well, one of the drawbacks of using credit union became a reality for me yesterday.  In what is a very very hot real estate market, we found a place in our new city after a month of looking but they wanted the security deposit immediately to hold the place.  (Places go within hours of being listed).  

My wife is still finishing up her job in our old city, and I did not bring the checkbook with me to the new city, which is five hours away.   So I was left having to find a way to get a cashiers check and there was literally no way to get one from our credit union, which is the second largest in the state but has no branches within 4 hours of our new city.  (The landlord said they would not accept cash or money orders, which were the first things that came to my mind).

In googling this issue, I found some websites where some people had faced similar issues but were able to obtain a cashiers check from a credit union of which they were not a member because their credit union was a member of a nationwide network that lets its customers use any other member credit union in the country to get a cashiers check or for other services. Unfortunately mine told me that they are not a member of any such network, so I was completely out of luck.

Again googling my problem, it turns out that some banks will give you a cashiers check if you walk in with the amount in cash.  So my next thought was to wire the money to myself at Western Union, but of course they close at 4 o'clock and it was 4:30.  Meanwhile, my wife had called several bank branches in the area, all of which said that they would not give a cashiers check to someone who just walked in off the street with a bunch of cash.

So we called Wells Fargo, with whom we have our mortgage, to see if there is any way we could get a cashiers check from them and they said they would only do a cashiers check for people with a checking account at their bank and that it would take days to open and fund the account and before they would allow us to withdraw any money anyway.  So we were out of luck on that score.

However, I called my credit union one more time and it turns out you can do a transfer from your credit union account to someone else's account at another financial institution using a service called PopMoney (at least that is what my credit union uses for those types of transfers but it turns out just about every one of the national banks offers this, more on that in a minute) ....but the daily limit was $1000 less than the security deposit.  So I was up a creek without a paddle yet again.  

We ended solving the issue by doing a transfer from my wife's personal account at one of the large national banks to the realtor's account but I ended up burning hours at work and probably taking several years off my life expectancy because I was so anxious and stressed out that we were going to lose the place and not being able to find another.

The point of my story is that there can be drawbacks to using credit unions, one of which I found at the exact wrong time.  I am not sure how often a situation like this will actually present itself but it scared the crap out of me nonetheless.  This experience reflected a major shortcoming of credit unions, or at least the one we were using in our old city.