Monthly Archives: June 2009

Weekly Roundup: Checking Out Ally Bank Edition

Posted on by  at  6:00 am
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I’ve recently been investigating the offerings from Ally Bank, which is essentially a “rebranding” of GMAC Bank.  From what I’ve heard, they are striving to be customer-friendly, and offer competitive rates on CDs and savings accounts. I’m also fond of their commercials – particularly the one below which features a little boy and his red truck.

Ally Bank Truck Commercial

I crack up every time I hear the boy say, “It’s a piece of junk. I want the red truck!”  That’s the exact expression and tone I use when dealing with irritating online banks and credit card companies that like to pull a “bait and switch” on customers.

The Fab Five*

*I lost this entire roundup post at about 10:00pm last night, so rather than my usual comments at the end of each link, I’m just going to post them and get to bed. I’ll get back to regular programming, including a “Best of the Rest” collection next Thursday (or maybe include a part two this Sunday to make up for it).

Quick Hits

Again, sorry about the technical SNAFU this week. It seems like every time I try to get one of the roundup posts done at the last minute something goes wrong. You’d think I would have learned my lesson by now!  Hope everyone has a great week. Check back tomorrow for a mid-year checkup on my 2009 goals. Should be fun!

Extreme Saving When You Are Young: How Much Is Too Much?

Posted on by  at  9:33 am
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Is it possible to save too much money, particularly when you are young? After all, aren’t these the years when you should be filling your time with life experiences that you will never have the opportunity to repeat? There’s college, and trips with friends and the freedom from an 8-5 grind that you’ll never get to experience again. However, your 20s are also an excellent time to lay a foundation for wealth building that can give you a great head-start on financial freedom.

I recently received an email from a concerned Frugal Dad reader we’ll call “Brian.” Here’s the relevant portion of his message to me:

I’m 22, employed, making “OK,” but not “great” money, live at home but have several monthly expenses beyond the standard cost of living. I’ve managed to save $26,000 over the last year and a half after paying off almost $6k in credit card debt. I’m currently in the process of attempting to save $750-1,000/month.

Being tight with my money in order to meet my savings goals sounds like sound advice on the surface, but im begining to question if all this attention to saving is worth the heache. I’ve spent the last hour going over my finances to try to justify the additional monthly cost of the new iPhone…and while I clearly “could” afford it, I’m finding my lust for saving money to be much stronger than my attraction to the iPhone.

So my question is. How can I enjoy these years of financial freedom guilt free while saving for my future?

Well Brian, you’ve certainly impressed me with your savings intensity. It’s hard for an old frugal dad like me to find fault with your plan, but because you took the time to put what you’re feeing into words, I suspect you are slightly resenting your financial plan.

When I was your age, I was on a fairly similar path. I married young (when I was 20), and instantly wanted to learn, and do, everyone “grown ups” did with their money. I began learning about Roth IRAs and 401(k)s and starting dabbling with single stock investing. I was a savings madman.

Sensing my over-exhuberance for all things finance, my grandfather wrote me a letter on my 20th birthday, and one line in particular really stood out. He told me to slow down, enjoy life, to stop and smell the roses. Life is meant to be enjoyed. It had a profound effect on me because I realized then that even smart things done to a point of obssessing over them didn’t make them any smarter. In fact, it hurt you in the long run.

So, while I salute your ability to pay down debts, and save $26,000 at such a young age, I would also advise you to live a little. If you want that iPhone, can afford to pay cash, have researched and thought long and hard about the purchase, and still decided you want it – then I say go for it! By allowing yourself a few rewards you will be less likely to grow resentful of your plan.

On the other hand, your penchant for saving money and living frugal may mean that you decide a new cell phone will do, or a cheaper version BlackBerry may meet your needs. Think more in terms of what the device will cost each month to operate rather than the initial cash outlay, because it is those monthly bills that will get you in the long-run.

One word of caution. It’s a slippery slope. Today’s iPhone might be a new entertainment system tomorrow, and then a new car, and then a bigger house, etc. You see where I’m headed. Continue to approach things from a frugal perspective, separating true needs from true wants, only occasionally allowing yourself some of those wants.

I fully expect you to be a millionaire one day because you have such a great foundation. Keep up the great work!

First Time Home Buyer’s Guide To Fixed Rate Mortgages

Posted on by  at  6:00 am
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It’s easy for a first time home buyer to get lost in translation when swimming in the sea of mortgages. Common questions of first time home buyers are “what mortgage is right for me? What are the benefits and downsides of certain mortgages? How much will I end up paying in interest payments over the long term? How much can I expect my monthly mortgage repayment to be?” If you are a first time home buyer who is simply trying to get a brief education on the most popular mortgage, a fixed rate mortgage, I’ve got you covered. Here is an in depth, yet simple to understand, review of the fixed rate mortgage.

Steady Mortgage Repayments

Fixed rate mortgages are the most popular mortgage choice amongst home buyers known to date. Fixed rate mortgages allow for borrowers to pay their mortgage repayments on a set monthly amount that will not be subject to change over the course of the mortgage repayment process. For example, if you purchase a home today under the term of a 30 year fixed rate mortgage and your current monthly mortgage repayment is $1,400 per month, twenty five years from now your monthly mortgage repayment will be the same amount.

Interest First

The most popular fixed rate mortgage term is a 30 year term. However fixed rate mortgages are available in terms as short as ten years or as long as fifty years. The mortgage repayment structures for fixed rate mortgages are designed to primarily pay down the interest payments that were paired with the initial mortgage.  However attractive loan officers may have packaged fixed rate real estate auctions, their efforts fail to mask the biggest defect of this mortgage system. The defect is that borrowers end up paying the creditor far more than 100% of their loan’s principal in interest alone.

Sandra the Home Buyer

For example, let’s say Sandra purchases a home in January of 2009 and borrows $250,000 under a 30 year term and has been given an annual interest rate of 8%. At the end of the 30 year term, Sandra has paid a total of $660,387.60. Exactly how much of that money has gone towards interest payments? A total of $410,387.60 has gone towards interest payments; which is 164% of the principal.  Throwing around all of these numbers is probably not the most eloquent way to get my point across. In order to minimize confusion, I’ve provided a screenshot of the example.

mortgageterms

If you enjoy the security that a fixed rate mortgage provides, you are not alone. If you are okay with paying practically twice your home’s actual worth in interest payments alone, you are sitting by yourself in an abandoned town.

Most home buyers who fall into the trap of the fixed rate mortgage fit into one of two categories. Category A) the buyer is desperate to purchase a home and has been declined by every other mortgage application aside from a fixed rate mortgage. Category B) the buyer failed to translate the 8% interest rate per year into the accumulated interest rate over the entire loan term.

Editor’s Note: Jazmin’s example represents an extreme example assuming an 8% interest rate. Current rates are far lower for borrowers with good credit, but there are still some products on the market that look a lot the old “sub-prime” mortgages with interest rates much higher. If you can’t borrow at a more competitive rate, I would submit that you cannot afford to buy a home. As Jazmin points out – it is simply too expensive. Remember, there is no shame in renting!

Jazmin Espinal is a professional freelance writer and the owner of Capital Web Writing, a web content solution for businesses and webmasters. To contact Jazmin or to see samples of her writing, please visit CapitalWebWriting.com.

What Order Should I Pay Off My Debt?

Posted on by  at  2:00 pm
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Stacy writes in with the following questions regarding getting out of debt:

Q: If you have a canceled credit card and its balance is the lowest should you work on paying that one off first or one that isn’t canceled? Also, would you work on paying over the credit limit cards or paying off payday loans first?  We have ideas but just aren’t sure where to start and attempt to tackle the debt.

A: Stacy, there are about as many ways of paying off debt as their blogs dedicated to the subject!  First of all, I commend you for taking control of your financial situation and eliminating the temptation to go even deeper into debt.

The usual advice is to wait until your card is paid off to close it, because it can be detrimental to your FICO score to reduce the amount of credit available. Having said that, I’ve violated this advice myself and closed an account before paying if off because of the way the credit card company treated me.

From your question, it sounds like you have a variety of debts including a canceled credit card, an over-the-limit credit card or two, and some payday loans. The standard advice is to pay off the debts in the order of the interest rate – paying off those with the highest rates first. In my own experience, I have found that method of snowballing debt to be tougher to work through because of the lack of emotional reward returned.

However, if you go this route, move your balances after considering the 18 month promotional balance transfer offer from Discover® More Card.

I recently linked to an article over at Man vs. Debt about the Debt Tsunami method of paying off debt.  According to this debt snowball style you line up the debts giving priority to the one that is most emotionally charged. or gives you the biggest emotional boost when paid off. In your example, that might be the payday loans, or a personal loan that you’d like to clear from your list of debts. For me, it was my car loan, because since marrying my wife eleven years ago I’ve never known freedom from a car payment.

The other thing to consider is the fees associated with the over limit credit cards. Perhaps it makes sense to prioritize those first until the point that they are all safely under the credit limit and current. Then you can regroup and reorder your debts in the priority that works best for your situation.

Finally, there is no easy way out of debt. For me, the climb out of debt has taken more dedication, more perseverance, and more sacrifice than anything in my life up to this point. However, the rewards at the end are just as sweet. I suspect because you took the time ask for help with lining up your debts that you also have a gameplan for paying them off, and I have little doubt that you can do it. Let us hear from you again when you are debt free!

Top 50 Frugality Blogs that Will Help You Save Money

Posted on by  at  6:00 am
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Miranda writes for Bankling, a new portal for personal finance information, which publishes a weblog, and a resources section that contains tools like the highest bank CD rates , the highest savings account rates, free mortgage rate calculators, and more.

With the recession on, many people are interested in saving money. It is no surprise that frugal is back — and in a big way. Here are 50 blogs (in no particular order) that can help you save money and live a frugal lifestyle. While you’re checking these blogs out, don’t forget to stop buy the new Frugal Dad coupons and coupon code directory for all of the latest deals.

General Frugal Living

These are general frugal living blogs that often combine frugality tips with personal finance ideas and insights.

1. Frugal Dad provides insight into living frugally by eschewing debt, getting the most for your money, and being happy with what you have.

2. Being Frugal offers a number of helpful articles on frugal living –  including a regular feature called Tightwad Tuesday.

3. Simple Mom is a blog that offers frugal living ideas, as well as personal finance information and life hacks.

4. Festival of Frugality is a rotating blog festival. It features great articles from a number of writers every week. The Festival has its own blog, which shares great information, tips and helps for frugal living.

5. Almost Frugal shares a personal journey on the road to frugality, and provides insights that can help you come along.

6. A Mother in Israel provides frugal insight for living a kosher life.

7. Domestic Sense is about finding ways to improve your quality of life while being frugal.

8. A Frugal Living Blog by a Frugal Guy focuses on making the most out of your life through frugal living.

9. The Frugal Duchess features helpful information on being frugal, while remaining fashionable and fun.

10. Pat Veretto’s Frugal Living Blog gives readers a first hand account of living frugally.

11. Frugal Zeitgeist offers personal finance ideas with a focus on saving money and frugal living.

12. Not Made of Money looks at frugal living from the perspective of a husband and wife team.

13. Fabulously Broke is a blog about saving money while still enjoying a good life.

Frugal Tips, Tricks and Bargain Hunting

Looking for tips and tricks to save a little money? Want bargain hunting advice? These blogs show you how you can save money every month.

14. $5 Dinners is a great frugality blog that focuses on helping you create delicious dinners for less than $5.

15. Frugal Babe chronicles her quests for great deals. Once you see how she does, you will see how you can do it, too.

16. Money Saving Mom focuses on grocery shopping tips, and providing information on good deals.

17. Ebates Shopping Blog is all about tricks, tips and offers to help you save money on almost anything.

18. It’s Frugal Being Green provides proof tips and tricks for being environmentally friendly while living a frugal lifestyle. It really is possible!

19. Mashup Mom is focused on sharing tips that can help parents live more frugally every day.

20. Make It From Scratch devotes itself to tips and ideas that can help you save money by making a number of things — from food to carpet cleaner — on your own.

21. Home Ec 101 provides helpful ideas on saving money around the house, from food to cleaning to fixing things up.

22. Fabu Daily offers frugal tips, as well as deals and coupons (and how to use them).

23. Frugal Blog on Families.com is chock full of helpful advice and frugal tricks on getting the most out of your money.

24. Mighty Bargain Hunter shares tools and tips to help you get the best deals and live frugally.

25. Savvy Frugality offers a number of tips and tricks to help you remain focused on living within your means.

26. Frugal Sister features helpful information, tools and more — from a pair of sisters helping each other live the frugal life.

Coupon Blogs

Part of frugal living is clipping coupons and finding online specials. These blogs can help you do just that.

27. Coupon Cravings provides regular deals, coupons and specials that can help you save money.

28. Mommy Saves Big printable coupons lets you peruse what’s available, and then print out coupons for your offline shopping needs. Online coupon codes available as well.

29. Coupon Mom Blog offers a number of coupons — by state — and provides information on free samples and offers to boot.

30. Coupon Blog specializes in online coupons, providing daily deals from different retailers.

31. Donna’s Coupons is the About.com site on couponing. A great, daily roundup of online coupons and more.

32. Coupon Mountain has a blog that posts special deals for online and offline merchandise.

33. Coupon Chief offers a number of Internet deals. Others can submit coupons, and there is a trust score so that you know whether coupon contributors can be trusted.

34. Coupon Cactus provides codes, and even has a coupon alert system to let you know when your favorites are available.

35. Live on Coupons is from Idaho Press-Tribune, but there are plenty of coupon deals that are available anywhere.

36. Coupon Shak provides coupons on specific items, as well as rebates and travel coupons.

37. Retail Me Not lists merchants and coupon codes to help you save money when you check out.

38. Find Savings offers all a number new deals available daily.

Frugal Blog Posts

These may not be frugal living blogs per se, but there are often some good frugality posts. Here are some posts on frugal living from some great personal finance blogs.

39. Free From Broke offers 9 ways you can save money when it comes to baby costs.

40. Modern Gal shares specific ways she will save money while going green.

41. Stretchy Dollar has a great post on turning a super spender into a frugal saver.

42. M is for Money features some delicious meals that you can make frugally.

43. Savings Advice provides a handy step-by-step article on getting the most out of your coupons.

44. Christian PF lists 6 things you can buy now that will pay for themselves by this time next year.

45. Five Cent Nickel helps you avoid shopping pitfalls that can cost you more.

46. Moolanomy offers an interesting quiz: Are you frugal, or are you cheap?

47. My Two Dollars knows 25 household items that you can reuse to enhance your frugality.

48. Bible Money Matters looks at way you can eat out for less.

49. Pay Less for Food features a look at why now could be a good time to try store brand products.

50. Christian Money Mountain shares information on saving money on gas.

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