Money Tip Central

Looking around my home I have expensive ways to collect dust. Old electronics, old toys, and a myriad of other things that I don’t use anymore have only done one thing in the last year; collected dust.

In the last few weeks I’ve declared war on my expensive dust collectors. All the old recording studio gear I never use any more…gone. The old books I haven’t read lately…gone. Anything of value that hasn’t been touched for a year…gone. Slow moving friends and pets…gone. There were some pangs of sorrow when I sold some items. But getting rid of clutter feels good. The house stays cleaner. There is extra cash in my wallet and for those with allergies getting rid of stuff can actually cut down on dust.

The top seven ways to get rid of junk
1 - Craigslist - Get a higher price by using pictures and don’t copy the manufacturer’s marketing text.
2 - Local Classified Ads - Most local newspapers have low rates or let you post for free
3 - eBay - While this isn’t the best option it can help you sell more specialized items
4 - Donate to library - Surprisingly our library rejected many of the books we tried to donate
5 - Donate to thrift stores - Some donations are eligible for a tax write-off
6 - Yard Sale - Our neighbors have a yearly yard sale so we donated to their things to sell
7 - Throw stuff away - This is a last resort but sometimes things just have to go

Do you have any other ways to get rid of junk? Leave a comment.

In the past I touted not having to pay any phone bills. A big part of the strategy was using a VoIP service called the MagicJack. The MagicJack is a USB to phone jack converter that uses your Internet connection to make phone calls. After five months of service we’re switching to a different VoIP service.

MagicJack was a disappointment because:

• 10% of the time it worked as advertised, with clear signal. The other 90% of the time we had terrible sound quality, it wouldn’t accept incoming calls, or it would send people to voicemail automatically.
• We had to restart our computer each morning to have it work. Screensavers or extended downtime of the computer would regularly interrupt service.
• Our friends and family thought we were avoiding them.
• When I accidentally formatted the MagicJack I was forced to work with their customer service. The first hour we tried an array of troubleshooting techniques to get it working. Once we tried everything the service rep told me to restart my computer, router, and modem. After working with a few of these customer service people I found this was their way of telling you they didn’t want to work with you any more.
• When I’d work with new people they would start over at the top of the trouble shooting list. I would ask them to read my past chat sessions but they were persistent on having me repeating all the steps I’d already taken. There are only so many times I can unplug and re-plug my MagicJack in my computer.
• Customer service would wait 5 to 10 minutes between responses in a chat session. Talk about annoying.
• After 3 1/2 hours working with their customer service they couldn’t fix the problem. Worse yet, they wouldn’t work with me on getting a replacement MagicJack. Instead, they wanted me to sign up for another year of service plus buy the hardware again. No credits for a free year or the ability to use my remaining contract time.

Summary
The idea of getting phone service all year for $20.00 is awesome. But using MagicJack for regular use isn’t a good idea. For occasional phone calls or international travel it could be a great solution. Part of me hopes MagicJacks sticks around because the idea is brilliant. When they get all their issues fixed maybe I’ll give them another try.

If you like free legal music then this list is for you. Please leave a comment if you have more ideas.

Internet Radio on Steroids

Thesixtyone.com features independent music, newly signed bands, and bands you might not hear on the radio. Sorry, no Backstreet Boys here.

Make a profile and try to rack up points by “bumping” good songs early, referring people, and listening to “the rack”. Thesixtyone.com encourages a lot of interaction between bands and listeners. Many of the bands give away their music for free and allow you to download as you listen. Others provide a link so you can buy it. To say the least thesixtyone is an indie music paradise.

Deezer
With super simple sign up you’ll be listening to music in no time with Deezer. Create you own playlist or have Deezer suggest new songs based on songs you’ve suggested.

Pandora will suggest new music based on their users listening habits. A huge database drives the listening experience. As you listen you teach Pandora about your tastes. It learns your unique preferences and makes new recommendations. It is scary how good Pandora is at picky music you like. It’s awesome.

Tell musicovery your favorite genres and mood and it will do the rest. It has a playful interface you’ll love from the start. Yea! Bubbles!

Social Media Music

imeem: where artists, fans and friends share their tastes and discover blogs, photos, music and video.

Last.fm connects you with your favorite music, and uses your unique taste to find
new music, people, and concerts you’ll like.

Look up and listen

Dizzler - type in your favorite band’s name here and listen for free. This is a good resource for finding bands and songs you already know a little about.

Do you have a great place to discover music on the web? Please leave a comment.

Summary
The Total Money Makeover was written to dispel financial myths and outline a 7 step “money makeover” plan. Dave’s style is rough around the edges and he doesn’t tip-toe around issues. If you need a kick in your pants to start being financially responsible this is the book for you. The myths he dispels are important for those trapped in financial pit. The first few steps of the money makeover are right on.

Highlights
1 - Debt is carries high risk and makes you financially “flabby”
2 - A step-by-step guide is outlined to get on your feet
3 - Financial security comes from within, but so do the problems
4 - The grass under your feet will feel different when you own your home
5 - You must have “Gazelle Intensity” to survive
6 - Avoid car payments. Instead, save cash and buy a quality reliable used car, like a lot of millionaires do as they build wealth.
7 - Being in debt has been so deeply engrained into our culture some people face ridicule from those ‘disciples’ of debt. Debt is not a tool. Instead, the added risk will eliminate any short term gains.

Criticisms
1 - He reads the audio book himself. His voice can (sometimes) be a little annoying. He is a professional talk show host so it’s not that bad though.
2 - The last few steps in the money makeover are debatable (i.e. paying off the mortgage completely, investing solely in mutual funds). That’s not to say they aren’t good ideas, there just might be some alternatives that are better for some people. He presents them as hard fact when there are many options once a person has considerable cash and no debt.
3 - This is rookie friendly but doesn’t advocate becoming financially literate.

Closing Remarks
If you are struggling with debt this is the book for you! It has some great advice for getting your feet underneath you. He commends people that pay with cash (even for their homes) and advocates a debt free lifestyle. It’s a fun read and you’ll enjoy his unique way he discusses the issues.

Buy the The Total Money Makeover: A Proven Plan for Financial Fitness

If you’ve read the book please leave a comment, we’d love to hear from you.

Bills come every month. Bills demand attention. Not paying bills will ruin your life. When you’re late paying a bill a late fee is assessed. We respect bills. So why don’t we respect ourselves as much as we respect our bills? Why don’t we have the same set of rules for bills that we have for ourselves?

The difference between being financially independent and being a financial slave is due to one thing: we make new bills instead of treating ourselves like a bill. When we graduate from college we buy a big house, a nice car, and eat at nice restaurants. We buy nice toys and new bills show up in our mailbox. The more money we make the more bills we create. The cycle continues until we can’t keep up, crisis strikes, or we wise up.

If you treated yourself like a bill you’d being doing pretty good. You’d be on your way to a great retirement. Your kids would have enough money to go to college. You’d likely be out of debt and you’d sleep better at night.

There are many ways to pay yourself like a bill. Setting up an online savings account or an online brokerage account is fast and easy. Making a goal and to max out a ROTH IRA is a great way to start. To do that you’ll need to automatically pay yourself $100 a week. Can you afford to pay yourself $400 a month for your retirement? If not, try killing off some bills and/or paying down debt. When a new shinny toy demands your money, tell it to go to hell because you’re paying yourself first.

EmigrantDirect has been my online savings account until recently. The change of banks was a result of my research on high yield savings accounts. EmigrantDirect also started requiring paper verification of new funding sources. Between the higher interest and being able to verify everything online I went with FNBO Direct. Both banks are FDIC insured and require no minimums.

Signing up
The sign-up process wasn’t completely easy but it was manageable. One thing I didn’t like was the requirement to tell them where you were getting the money. I’ve never had to give that information before so it can’t be required by law. They also pulled my credit to open the account. I’m not sure if it was a soft pull or a hard pull. In retrospect it would have been nice if they had given me warning that opening an account involved pulling my credit. I’m sure they disclosed that in the eight page ‘terms and conditions’ I agreed to.

Connecting my external bank account
This part was easy and it only took a few minutes to do. The best part is that FNBO Direct offered two options to add an external bank account. The first option requires two small amounts being deposited into your original bank account. This method is the most common practice among online banks. It usually takes about a week for everything to be deposited and verified. The second option is much quicker. In lieu of the deposit method FNBO simply asks for your login name and password at your current bank’s internet site. After 30 seconds my bank account was verified and I could add funds to my new savings account.

Security
This is FNBO’s strong suite. They were very thorough about security. Other banks I’ve worked with sacrifice usability to increase security. FNBO allowed me to pick the answer to my secret question without any problems. Other banks will ask a question like “What’s your nickname?” and if you type in “Bob” an error message will show up saying “Your answer is too short.”. If your nickname really is “Bob” this is really frustrating. This is not the case with FNBO. Their secret questions are easy to set up and you can make them anything you’d like.

Another positive thing for FNBO is that every page on their site started with the secure https://. For those not familiar with what that means let me explain. Regular website addresses start with http://. When a website is encrypting data their website addresses will start with https:// (notice the extra ‘S’ at the end). Any time you enter your financial information or sensitive passwords make sure you look for the “S”. Some websites won’t start using encryption (https://) until you’ve gotten a little deeper into the sign up process. FNBO has it on every page of their website.

Depositing Money
An FNBO Direct account doesn’t require a minimum deposit to get started but I deposited funds anyways. It took a few days for the transactions to register in the account. FNBO doesn’t post the new deposit to your account for three business days. This is an industry standard. Something that surprised me is that FNBO doesn’t show any evidence that a transfer has occurred until the funds have settled. Most banks will show an increase in your balance but your ‘available balance’ won’t change until three business days have passed. FNBO does have a note stating that funds take three days to show up in your account.

Nice little extras
FNBO automatically sent me an ATM card which is free to use on all ATMs on the Star system. It’s a nice feature they don’t mention as I was signing up. They other nice feature they don’t mention is their Bill Pay feature. I’ve been using the Bill Pay feature with my current bank and I love it.

So…Am I done now?
When I first signed up I wasn’t sure if I was done yet. There weren’t any clear messages that said, “Thank you, you’ve completed the first stage of the sign-up process”. Instead they offered me an account number and a summary of my signup. But when I tried to sign in FNBO wouldn’t accept my new account number. What they hadn’t told me is that it takes a day to verify the account. Once the account is verified they allow you to set up your username and password. To their credit they did send some emails with these instructions but they didn’t show up for a few hours. To say the least, I was confused after I signed up.

Any regrets?
I’m kind of wishing I signed up for eTrade. While eTrade has the highest rate I was hesitant to sign up with them because they are the worst for nickel-and-diming their brokerage customers. On further inspection it looks as if they are sincere with their “No fees” claims. Right now eTrade has FNBO beat by 0.25% of a percent offering 4.10%.

Summary
FNBO is a great company and I feel secure with managing my online savings account with them. Their rates are among the highest (anywhere). They would be a good choice for anyone wanting to open an online savings account.

If you have a savings account that you enjoy please leave a comment.

After paying down debt, getting an emergency cash reserve is the next thing to do when building a solid financial base. The only exception to this is maxing out your 401(k). Always take advantage of your 401(k) match regardless of your debt or emergency fund situation.

What is the ideal amount for a cash reserve?
Everyone has a different standard of living, career, and tolerance to risk. With that said, the primary reasons for having an emergency reserve are the same. Firstly, we don’t want to damage our credit when tragedy strikes. Next, we don’t want to be evicted from our homes. Lastly, the added stress of financial problems isn’t worth it. Extra cash adds a ‘buffer’ that protects us from life’s unexpected ups and downs.

An emergency cash fund should cover:

• Mortgage or Rent payments
• Insurance costs
• Utility bills
• Groceries
• Car payments
• Student Loans
• Minimum payment on credit cards

A standard cash reserve goal should cover six months of expenses. If your monthly expenses total $2000 you should plan on a cash reserve of $12,000. Six months is a starting point but there are other factors that you might consider. If your job is in high demand you might be able to lower your time from six months to three. The economy’s strength is a factor as well. In times of recession (or suspected recession) it might be wise to pull some money out of high risk investments and build your cash reserve.

Word of warning
While having cash handy for emergencies is a wise decision, too much cash can actually hurt you in the long run. There is a balance between cash and investments. Saving too much cash can undermine your investment and retirement goals. Excessive cash holding is risky in terms of opportunity cost. Opportunity cost is the difference between what you could have made VS. what you actually made. For example, an NBA basketball star could take over his families furniture store and make $100,000/year after graduation. On the other hand he could play for the NBA and make $10,000,000/year. The opportunity cost of taking over the family business is $9,900,000. That same idea of opportunity cost plays a big role in determining the ideal balance between cash and investment. A few percentage points makes a world of difference in terms of compound interest.

Where to keep your cash
Where should you keep your cash? Keeping your cash in an account that will keep up with interest is important. Stuffing money into your mattress isn’t going to keep up with inflation. With the Fed cutting interest rates the return on FDIC insured savings accounts have decreased from over 5% to 3.75%. While the decrease is unfortunate one fact remains; online savings accounts are still the safest (and most profitable) when compare to other alternitives — which aren’t FDIC insured. Read more about online savings accounts with high interest.

The CD Shuffle
If Certified Deposits (CDs) were more attractive right now this strategy would optimize the return on your cash reserve. Unfortunately CDs, according to BankRate, were all under what you could receive with an online savings account.

If the interest rates on CDs ever improve beyond online savings accounts you could use this strategy. The concept requires multiple CDs being opened with different expiration dates.

Your first purchase would include the following:

1 month CD (expires in 1 month)
2 month CD (expires in 2 months)
3 month CD (expires in 3 months)
4 month CD (expires in 4 months)
5 month CD (expires in 5 months)
6 month CD (expires in 6 months)

As a month passes your 1 month CD will expire. Take the money from that CD and buy another 6 month CD

2 month CD (expires in 1 month)
3 month CD (expires in 2 months)
4 month CD (expires in 3 months)
5 month CD (expires in 4 months)
6 month CD (expires in 5 months)
6 month CD (expires in 6 months)

As the second month expires take that money and buy another 6 month CD

3 month CD (expires in 1 month)
4 month CD (expires in 2 months)
5 month CD (expires in 3 months)
6 month CD (expires in 4 months)
6 month CD (expires in 5 months)
6 month CD (expires in 6 months)

After 6 months every one of the CDs will be 6 month CDs. As the CDs expire continue to buy new 6 month CDs.

6 month CD (expires in 1 month)
6 month CD (expires in 2 months)
6 month CD (expires in 3 months)
6 month CD (expires in 4 months)
6 month CD (expires in 5 months)
6 month CD (expires in 6 months)

In a previous post, Phone Service for Free, I wrote about the possibility of getting phone service for almost nothing. Well, I’ve done it. I’ve taken the plunge and won’t be paying any monthly phone bills.

These are the steps I took to save over $1500 a year by cutting out my monthly phone bill.

Step 1- Buy and Test the MagicJack

If you haven’t read my previous article on MagicJack here’s a summary. MagicJack runs off your computer’s internet connection. It’s a USB to phone jack converter. You get a local number. Every call within the United States is free. It costs $39.99 the first year and is only $19.99 a year from then on. There are no taxes, fees, or other extra costs.

We thought it best to test the MagicJack before we made big changes in our phone setup. To our delight it works very well. We decided to take the leap.

Note - Part of testing the MagicJack involved buying a portable phone system with multiple handsets. Those type of phones require a single phone jack connection and we place the extra headsets around the house.

Step 2 – Cancel the regular phone line

We’re finishing our basement and I rewired all the phone lines. The old lines were broken or poorly wired so I upgraded the wiring. Before we finished the Sheetrock I wanted to make sure the future owners of the house would have a working phone line. For a few months we had a regular phone line. Their cheapest service was $11.00. That’s not bad. But when the bill came it was $28.00/month; almost three times more because of taxes and service fees! We’d gone without a land line for years without any problems so this wasn’t a hard decision.

Step 3 – Switch to prepaid cell phones

The contract on my cell phone was set to expire within a month of testing the MagicJack. Because I have a young family I thought depending completely on the MagicJack would be a bad idea — for safety reasons. After shopping around for some prepaid plans I found that Cingular had the best option for a prepaid phones. If you buy $100 of prepaid minutes they don’t expire for a whole year. Other prepaid phones have minutes that expire. Cingular also has the option of unlimited mobile-to-mobile within the Cingular network. This plan works great for my situation and I get to keep my old number.

I will still carry my cell phone. Without any cost I can see who’s calling me and call them back from a land line. The added safety and convenience of having a cell phone will come in handy from time to time. By turning off my cell phone I’ll save an extra $90 a month.

Summary

I will save $130 a month with this new setup.

Besides saving money the other added benefits are:

• I don’t drive and talk on my cell phone anymore. This happened infrequently but was still dangerous
• It encourages me to plan ahead and make lists
• I don’t have to wait for the weekend or 9:00 PM to talk with unlimited minutes

The total cost of everything is Magic Jack — $40, Prepaid minutes for my phone — $100, Portable phone system — $50. Next year I’ll only pay $20 for the MagicJack and $100 for the prepaid minutes.

This year I’ll save close to $1500. Next year it will be slightly more. If you have any questions or comments please leave a note below.

My sister asked me a question regarding debt consolidation. She wants to get her finances in order and didn’t know where to start. The following is her email and my response.

Hey, I had a question for you because your good with money. Bill and I’s plans have changed a little so we’re not looking for a house, but I have debt to pay off…it’s kinda an embarrassing amount, actually. But I’ve been good about payments, etc and haven’t gone over limits so my credit is in good shape. My question is how easy is it to get it moved from a credit card to a personal or other type loan, where the interest rate is lower? Is it something we could do or is that a pipe dream? I think if we work hard at it and are smart we could possibly get it paid off in a year. I just want to get this taken care of and gone so we can save and work on investments ASAP…rich dad poor dad kinda thing. I’d like to talk to you more about it and our plans but this might get the ball rolling.

Love you bro

-Jen

Hey Jen,

Paying off your debt is one of the most important steps towards financial freedom. The savings you’ll see from not having to pay interest will be immediate. You’ll also increase your credit score considerably. If you have a low debt-to-income ratio you’ll get a better rate when you apply for a home loan. As far as getting a loan to consolidate your debt there are four major options people use: special debt consolidation loans, home equity loans, credit cards, and something new, prosper.com.

Debt consolidation options

Debt consolidation loans and services provide an all-in-one solution to lower your interest and simplify your payments. They will negotiate with your creditors for lower interest rates and payoff deals. From what I know about this option they tend to be the highest cost as compared to other options.

If you had a home (with some equity) you could lump your debt into a home equity loan. While this option might lower your monthly income and give you lower interest the overall cost is the most expensive out of all the options. Spreading your credit card payments over 30 years will lower the monthly bill but you’ll pay a lot more in the end. If you can, avoid this option.

If you have good credit and are just looking for lower interest I would apply for some of these zero interest balance transfer cards . Those cards will provide you with 6 to 15 months of interest free payments. Instead of paying 30% of your payment towards your interest you can pay 100% towards your debt. Another perk about those cards is that they won’t charge you any balance transfer fees. You will also have some incentive to have your debt paid off before they start charging you interest.

If applying for new cards isn’t an option try working with the credit cards you already have. Call the number on the back and ask them if they can lower your interest and increase your limit. This is why you want to increase your limit; the more credit you have available but aren’t using the better your credit score will be. For example, if you have a card with a $5,000 limit it is best to never cross $2,500 on your balance. After six months of not using your new balance call again to have them lower the interest rate and increase the limit.

Prosper.com is a site that connects individual lenders and borrowers. As a borrower you submit your debt and the lenders bid on it. The interest rate you pay depends on your credit worthiness and how competitive your offer is. The better your credit score the lower the rate you’ll have to pay the lenders. That’s nothing new but the idea of individuals lending to each other through a website is. It’s worth a try.

Payoff Schedule

There is a set amount of money you’re putting towards your debt each month. Lets say you have five accounts, which you pay $100 a month for each account. Your total debt payment is $500/month. Target and payoff the account with the highest interest first. Once you pay off the first account don’t change your total payments to $400. Instead, use the extra $100 towards the next account with the highest interest rate. Don’t lower your $500 payment commitment until you’ve eliminated all of your debt.

Here’s an example:

1sr phase of payments
A - 14% account - $100
B - 12% account - $100
C - 11% account - $100
D - 9% account - $100
E - 8% account - $100

2nd phase of payments
A - Paid off!
B - $200
C - $100
D - $100
E - $100

3rd phase of payments
A - Paid off
B - Paid off
C - $300
D - $100
E - $100

Etc…

Get a credit report

Cleaning up your finances requires fixing any problems you might find in your credit report. With good credit you’ll be able to pay less interest on your existing debt and when you do buy a home you’ll save with a low interest rate. The government allows you to get a free credit report annually. You can read more about it here.

The all cash way of life

One final tip, try switching to an all cash way of life. Avoid using your credit cards for anything. Using checks, cash, or a check card will force you to live within your means. It’s something we’re doing and it feels good to know where we stand each month.

Word of warning

Most people who use debt consolidation restart the debt cycle and end up worse then when they started. If you aren’t willing to change your mindset that got you trapped in the first place don’t even think about debt consolidation. Remember, debt = risk. The more debt you have the more risk you live with. If you max out every opportunity for credit you are living a high-risk lifestyle. Not only will your stress level be higher but you’ll also be a slave to your creditors. Make a commitment to break the cycle and reclaim your freedom!

Wrapping up

Paying off debt feels really good. It is a lot of fun. Once you get the “anti-debt” bug it seems like all you want to do put every penny towards financial freedom. If you’ve got the “bug” you’ll be free in no time!

I’m cheering for you,

Matt

If you’re like me you’re probably running out of hard drive space. Experts agree that running your system at full capacity will cause more data errors and could make your system crash more often. Since I’m within a few gigs of being completely full on all my hard drives I thought its time to buy a hard drive with more capacity. Installing an internal hard drive is actually pretty easy but if it’s not your thing there are always external hard drives. The external hard drives are very close in price to the internal counterparts. A few years ago external hard drives were more expensive so it’s nice to see them come down in price.

Before buying a new hard drive I do a quick check on cost per gig. In the past I’ve used low cost aggregators like pricewatch.com. After being burned a few times by the low cost leaders I now use newegg.com. These prices are from Newegg.com and reflect the lowest cost SATA hard drives for the various sizes.


Internal Hard Drives

				Best Value
Gigs	160	250	320	500	750	1000
Cost	56.13	69.99	79.99	99.99	154.99	271.99
Cost/Gig	0.35	0.28	0.25	0.20	0.21	0.27

The 500 gig hard drive is the best value closely followed by the 750gb drive. Surprisingly the 160gb drive is the most expensive. I almost bought the 160!

External Hard Drives

Gigs	Cost	Cost/Gig
40	59.99	1.50
60	53.49	0.89
80	64.99	0.81
120	65.99	0.55
160	59.99	0.37
200	67.99	0.34
250	83.33	0.33
320	79.99	0.25
400	107.80	0.27
500	107.80	0.22
750	168.99	0.23
1000	239.17	0.24

Again the 500gb wins for value. This list only includes those that require an extra power source. Out of curiousity I looked at the new USB hard drives that don’t require a seperate power supply. They averaged around a $1.00/gig.

Hopefully this helps in your hard drive shopping. It’s made me rethink the decision to buy an an internal 160 gb hard drive. The 500gb external is probably what I’ll get.

If you have any suggestions please leave a comment.

Hard Drives, Internal or External, All available at Newegg.com