Finance Challenge 2017 – Week #7

You know, looking over my last few weeks I noticed that I haven’t done a true “automation” post yet. Post 3 used an app to make finding which credit card to use to maximize rewards incredibly easy, but that didn’t make my current system of accounts and cash flows any less manual. To make matters worse, I’ve added a few accounts since starting the challenge (see post 1 & 2) and will probably be adding more into the mix. While it is nice to do everything manual since you can keep an eye on things, it is time consuming. Any time freed up on the day to day activity of my accounts can be redirected into savings or generating more income. With that, I’d like to present my first step in automation. I opened a Northpointe Ultimate Account, an American Express Serve Card and linked my Schwab Roth IRA to automatically withdraw $100 each month.I’m not proud to admit it, but I haven’t been contributing to my tax advantaged retirement account (Roth IRA) regularly for over a year now. I opened my Roth IRA during my senior year of college along with couple other accounts (more on those in a later post) with Schwab. Those familiar with my story (you can read it here) know that I didn’t have a job when I graduated from college and it took nearly 4 months to get a job and begin paying back my student loans as well as other expenses. My luckiest break was that my parents were still happy to have me at home and didn’t require nearly any compensation for my room and board. During this time I amassed a small sum in my Roth IRA, but no where close to the $5,500 IRS mandated limit. Fast-forward a few years and I had moved out of my parent’s place. Now I was supporting two people (my girlfriend and myself) and all of the costs associated with maintaining a household. I was facing a significant headwind financially though; we had moved to a much more expense “cost of living” part of the US compared with where we both grew up and we were temporarily living on a single income, mine. Fortunately, we moved because of a much better job opportunity.

While living together for the last two years, finances did get very tight. I often found myself in the situation that most Americans do, reaching for a debt based solution at the end of the month after the paycheck failed to cover all bills and living expenses. Suffice to say that the first thing crossed off the budget was savings goals and investing. The dark clouds have recently been pulled back, now that we have two incomes, but we are still facing challenges and regrets. I regret that I missed an opportunity to fully invest in a market that has marched all the way to new record-breaking highs. I didn’t miss it completely with what I built up in my Roth IRA while I was living at home. I’m uncomfortable with the decent sized hole I dug in debt to keep my household afloat. But like I mentioned at the beginning of the year, this challenge will be my opportunity to get on a better foundation for years to come.

With that, I want to regularly contribute to my retirement again. In my budget app (I promise that review is coming), I estimate that I can plow a little more than $100 in my IRA again regularly, right now. But as you probably know by now, I’m much too curious about personal finance and I need to poke around and see how I can optimize even something as simple as an ACH transfer of $100 from two personal accounts.

Enter Northpointe Bank. I’m not sure what it is about high interest bearing accounts that attracts me like a month. Most likely it’s because I can earn around 5% on my deposit, virtually risk-free and with immediate liquidity. That can’t always be said about the capital markets, even though I’m much more interested in “sexy” investments than simple bank accounts. I opened a Northpointe Bank Ultimate Account at the end of 2015, because I liked the concept and figured that eventually I’d have money to put in it. The Northpointe Ultimate Account is a terrific retail product in my opinion. The account sports a 5% APY on balances of $5,000 or less once certain requirements are met. The requirements are: 15 or more debit card purchases totaling at least $500, Enroll in eStatements, and setup direct deposit or automatic withdrawal of $100 or more. This account, in contrast to the other High Interest accounts I’ve previously spoken about, doesn’t have the 6 withdrawals a month limit imposed on it. In fact, the amount of activity on the account benefits it, since the requirement for transactions will be satisfied. The benefit of easy access to the funds in the account comes at the cost of effort. The funds in the Netspend account mentioned in post 1 just need to sit there, basically every 90 days a transaction needs to happen to avoid any inactivity fees and the interest needs pulled out. The Ultimate Account’s requirements are much more demanding. But, having my Roth IRA pull money from the Ultimate Account for $100 each month does satisfy the other requirement.

Remember earlier when I said that if I can automate my system, I can use the free time in pursuit of earning or saving more. The Ultimate Account appeared to be both mixed into one. I needed to figure out a way to automate the 15 purchases to satisfy the last requirement. If I could do that, I’d have one more 5% account that I could earn interest from and I could automate my retirement savings.

Enter American Express Serve. The American Express Serve card is a pre-paid debit card, just like Netspend. The Blue Serve card has a $1 monthly fee (boo!) but it is reloadable with a debit card. The icing on the cake is that debit card reloads can be scheduled, i.e. automated. I have found my 15 debit card transactions. I scheduled a daily payment of $5.00 and for right now I am adding a higher value debit reload of $200 (the daily maximum) manually five days before the statement date for the Ultimate Account. This is only temporary though while I am testing this method out. Eventually I’d move to a daily reload of $17 (17 X 30 = $510). This means I should satisfy all requirements of the higher interest rate. There also another benefit of this method.

The Ultimate Account is great, but one thing I noticed was that sending an outbound transfer from the Ultimate Account to another external account of mine, would incur a fee. This means that if I wanted to transfer money from the Ultimate Account to my Synchrony Savings Account, Northepoint would charge me to do so. The Serve card, does give provide a work around though. Serve allows one debit card and one bank account to be connected for transfers. The key is that they don’t have to be the same account. That means that I can link my Ultimate Account debit card and my Synchrony Savings Account. So I can transfer money from one to the other through the Serve card. The restrictions on the daily load limit of $200 does hamper the utility of the account, e.g. transferring more than $200 will require a couple of days unless you are holding more than $200 already in the account. Speaking of longer time, since the money is going through two financial institutions instead of one like normal, it does take longer for the funds to transfer and settle. Still it’s better than nothing, in my experience it’s been an extra three days. Using the Serve card at an MoneyPass ATM will allow quicker access to funds and the ATM withdrawal limit is higher at $750. Non-MoneyPass ATMs have wicked fees, so they should be considered a last resort.

So in summary, another 5% account on $5000, a prepaid debit card, and regular automated deposits into my retirement account. If you’d like to know more about these accounts, check out the links below. Again, I can’t stress enough that you need to do your own research and that I’m not a licensed professional and the information provided above is for entertainment purposes.

Schwab

Serve

Northpointe

 

Until next time!

 

Finance Challenge 2017 – Week #6

Week #6 is here! Hope you enjoyed your Valentine’s Day! This week I wanted to share a recent purchase I made and how I spent a lot less on it than I thought was possible. Instead of focusing on one app like my other posts, this involves a few apps used in combination (consider it fair, since I’m one day late in posting it this week). We begin looking for a new winter jacket.

I’ve been in the market for a new pea coat or drivers winter jacket for a couple months now, mainly because I have to look presentable at my 9-5 each day and unfortunately, my current winter jacket didn’t fit the bill. A good jacket was definitely going to set me back at least $150 and I was willing to accept that price. Now, I fully realize that this is not a lot to drop on a jacket, especially one that was supposed to be nice. My budget is tight, as I imagine yours is, too. I finally found a very nice charcoal gray Ralph Lauren wool jacket and it even passed the difficult girlfriend test as well. The cost? Only $119. I was already thinking this was a jackpot, coming a whole $31 under budget. But as I tried it on and looked in the mirror, I thought to myself, “I wonder how much I could really get off the $119 sticker?” So, from my earlier credit card post, I knew to check my Wallaby app and confirm which credit card would get the most rewards for this department store type purchase. So with 2% back, I brought the coat’s cost down to $116.62 once the cash back was redeemed. Off to a good start.

Next, I looked for coupons. I don’t have a single coupon site that I use, but frequently Retail Me Not, is a top google search. I’ve had mixed results with coupon success though. This purchase was no different; no useful coupons turned up. Plan B was to check the store’s website for a promotions link at the very bottom. This time it turns out that this store had a $10 off coupon if you joined their newsletter. While I can already hear you, “is $10 worth the spam?” I argue only you can answer that question. I don’t mind and typically don’t have any issue unsubscribing after the first couple newsletters that make it into my inbox. What do you do if you already belong to the newsletter of that store? A few options would be to use another email account (if you have one), create a new email account (you could possibly dedicate this account to this types of offers), or a significant other may not (truth be told that is what I ended up doing). Now the cost of the jacket was done to $106.82 ($119-$10, then times (1-.02) for the cash back). This was great! I achieved a 10% discount on the jacket with pretty minimal effort, but I wanted to keep digging lower!

I revisited the 2% cash back I would get from the jacket and realized that the $10 off made it less than 2% off the retail price of $119 and became a little discouraged. I mean, it was a measly $2.00. What if I could get more than a 2% discount of sorts? I thought about changing how I paid, what if I bought a gift card first, and then used that to buy the jacket? Well that actually doesn’t work, because the gift card would be for the after coupon amount. What if I bought someone else’s giftcard though? Most people don’t realize this but there is a secondary market for gift cards. I think this is fascinating. If you were the unfortunate recipient of a (potentially less-than-thoughtful) gift card that you have no use for, you’re basically screwed out of that money; however, you can no list the giftcard for sale of several websites to recoup at least a portion of the face value of the giftcard. There are several services out there, but the one I find myself most frequently using is Raise. I like the user interface, the decent selection of giftcards, fast shipping, and the 1 year balance guarantee on each purchase. Another big plus is that Raise will typically have promotions of their own, like $10 off of $100 in gift cards. I just so happened to be shopping for a jacket that was on the last day of a $10 off of $100 promotion that Raise was doing. I had a minor hang-up (more on that later) but I was able to find digital gift cards for the store I was at. This meant that I could use them immediately after my order was processed. Oh yeah, and the discount off the face value of the five gift cards I purchased was 6.68%. In order to get over the $100 mark to use the $10 off of $100 Raise discount, I had to purchase more gift cards than I would have liked though. I bought five gift cards for a face value of $161.20 (which is well over the $119 mark) but I only paid $140.14, which means I locked in a 13% discount with this retailer, forever. Now the compounding starts to begin. I earned 2% cash back on the purchase of those giftcards. The final cost of the jacket at this point (applying all cash back towards the cost of the jacket) would be $106.19 (a whole $0.62 lower than above, wow), but I’d have $52.20 in gift cards left over. Again, I can’t stress that carrying this extra $52.20 in gift cards puts a heavy drag on cost savings and I realize the irony in “save money by spending more!” But I do plan on returning to make a purchase at this store, eventually.  Before I hit the checkout button the gift cards, I got another idea; use a cash-back portal online.

What helped prevent me from getting discouraged about going backwards in my cost savings was the fact I could use a shopping portal to further the cash-back on the purchase of both the giftcards and the jacket! What’s a cash back portal? It’s a website that you use to shop for things online. As long as you make the purchase while going to the portal first and having the portal redirect your browser to the retailers website, you earn an additional amount of cashback or rewards on your purchase (in addition to your credit card!). Just like the secondary market websites for discounted giftcards, there are several different shopping portals. I usually use Ebates more often than others though. Just like Raise, they may not be the best with cash back all the time, but I like the user experience and their customer service has been positive each time I’ve need to use them. Like Raise, they aren’t without their faults either, but I’ll summaries that in a later section. Ebates offered 1% cashback on my Raise purchase of $140.14 for an extra $1.40 in cashback to apply towards the remaining $106.19, for a new total of $104.79. Since I had already found my jacket on the retailers website, I checked what Ebates offered for this retailer. It ended up being an extra 3% of cashback! With this knowledge I left the store and went home to order the jacket online. To be clear, I was able to double down on Ebates, with 1% back on giftcards from Raise and now 3% on the jacket from the store’s website.

In the end, I’m proud of my haul.

  • $119 jacket
  • $52.20 in giftcards
  • $7.48 from cashback
  • Final out of pocket cost was $140.14

This means the jacket cost me $101.52 after using the $10 coupon and all $7.47 of cashback towards the cost. That’s about 15% the jacket alone.

You’re probably thinking, “damn, that’s a lot of work for $17.48 off” and you would definitely be right, but now that I have the framework for a process to squeeze nearly all of my purchases for even more savings. I know it’s not like 50% off, but it’s definitely a good result, given I had to make something out of nothing. There’s also nothing stopping me from using this framework with a bigger discount coupon or using this on larger purchases (e.g. if this scenario was for $1,500 vs $150). I’m also proud that I stayed under my initial budget of $150. I could make this appear to be a better deal if I count the mark down on the jacket from full retail, but let’s be real a) God only knows what the full retail for Ralph Lauren is, and b) who would pay full retail? Oh, and I qualified for free shipping online since the order total was over $100.

There is definitely room for improvement:

  • Higher rewards (than 2%) from the credit card used to purchase the giftcards
  • Raise potentially could have had a higher discount on the giftcards
  • Ebates potentially could have had a higher cash back rate
  • Potentially higher discount coupons from the retailer
  • The competitors to Ebates and Raise could potentially have higher rewards/discounts

There is also a few pitfalls to this framework though

  • Increased time and effort
  • Potential for giftcards to be out of stock
  • Potential to have to purchase a giftcard that costs more than the original purchase and to have to either hold that value or resell the excess at a loss
  • Potential for giftcards to only be available via physical mail, delaying the purchase
  • Going online could mean additional costs like taxes and shipping
  • Increased complexity and thus a chance for something to go wrong

As far as my review of Raise and Ebates, while I use both nearly exclusively I have had minor issues in the past. Raise, emails me discount codes (e.g. $10 off $100) and while this is good, I’ve had maybe one work on the first time of me entering it at checkout. The codes seem to expire on Raise’s system days before the expiration date listed in the email I receive. Luckily, Raise features a live chat feature and their support staff is able to correct the situation immediately. Ebates will also offer sales,coupons, increased rewards via email regularly. The issue I have with Ebates is that I need to babysit my transactions. Sometimes the retailer doesn’t report the transaction to Ebates and this requires manually entering the information along with providing a copy of the emailed receipt. Ebates support staff has been very helpful in sorting these situations out though and I have never missed an opportunity to earn cash back. As a side note, the fastest way to get paid cash back from Ebates requires a paypal account.

As always, individual experiences may vary, but hopefully you can start thinking about squeezing more savings out of your own purchases!

 

 

 

Finance Challenge – Week #5

Week #5 is here, nearly 1/10th of the way through the Finance Challenge! First, I apologize for letting those of you down this Saturday that were expecting a new post. I’m releasing this article on a Tuesday, since it appears that my posts seem to get the most views on Wednesdays since the challenge has started. I’m still getting used to blogging and all of the data analytics available, so this change in posting date may be subject to change. Anyway, on to what I’ve done over the last week to improve my financial situation. The last week of January and first two weeks of February are a special time in the USA. Most of us will be getting waves of tax documents during this time period, something that most of us won’t bother with until April 14th. I must confess, this has been the strategy I’ve used for the last decade. I’ve even waited until April 15th two years in a row while in college. So the change I’ve made this week (an year) is to file my taxes early. As I get ready to e-file my returns, it dawned on me that I have produced a few different benefits by filing in February versus filing in April.

Firstly, I am not a Tax Account, nor do I play one. Please consult a CPA with your tax related queries. Also, if you are self-employed, different rules will apply, versus what is described below from the employee perspective. I have; however, always filed my own taxes. My father instilled this virtue in me after my first summer job. I don’t follow the tax code updates that are released each year and thus I rely on a software based solution each year. I’ve never used a free service, since I believe you get what you pay for in the end. I do research what seems to be the best software offering each year though. I’ve consistently purchased TurboTax each past April, due to it constantly being ranked in the top slot for a ton of software reviewers. It’s not to say other products are bad, it’s just that I’ve come to trust TurboTax with each passing year. The pricing for features has definitely tempted me to consider other options though, since TurboTax in recent years has been notorious for removing more advanced features at base offerings, thus requiring users to pay up for pricier versions to use features that their situation dictates.  This isn’t  review of TurboTax though. This is a public service announcement that TurboTax is never cheap in April. The deals seem to evaporate come March. So for the past 10 years, I have paid ~$10 more than I should have, if only I would have had the foresight to start looking for the software in January. This year was different and I was able to purchase the software from Newegg.com during a promotion TurboTax ran until the end of January. I saved $20 this year! That only leaves me some $80 in the red.

So $20 is already a small victory that I’m proud of, but I realized another benefit of filing earlier. We all know that taxes are taken out at each paycheck. In April of the following year, when we file our taxes, we are essentially tallying our tax liability against what was gradually taken out in taxes from each and every paycheck. When you signed on with your current employer, you had to file a Form W4, which, depending on your specific situation, determines the amount of tax taken out of each paycheck. The Form will walk you through picking the right number of “allowances” which determine the amount taken from each paycheck.Your W4 is supposed to get you close to what your tax liability is at the end of the year. If the cumulative amount of taxes taken out of your paycheck is more than what your actual calculated liability is, you receive a refund. The opposite is also true, if not enough is taken out, you’ll end up having taxes due by April 15th.

Hopefully, you’re eyes haven’t glazed over yet. Taxes and Economics seems to always have that effect. If you remember, one of the goals of the Finance Challenge is to earn more money. Getting a big refund is earning more money, isn’t it? Actually, it probably is not. You’re paycheck happens gradually over the course of a year. This process has been called, “an interest free loan to the government” by many internet prognosticators. They’re definitely not wrong. This is the realization that I had, what if I had deposited that same amount of taxes into an interest bearing account over the course of one year? I’d earn the interest instead of the government. Keep in mind that come April 15th, this means you’ll be paying Uncle Sam your fair share, instead of getting that juicy refund. It’s not that bad of a proposition though, since you keep the interest. Ironically though, you will have to and pay taxes on that interest when your Form 1099-INT comes in the mail. It’s a case of something being (much) better than nothing.

In my opinion, this practice of paying the bare minimum each pay check and saving the rest to be payed by April, builds some good financial habits. You’ll have to fight the urge to spend that money that you deposit and if you don’t deposit a sizable amount all at once, you’ll have to discipline yourself to save each paycheck.

The combined cost savings for the software and what I could have earned in my Synchrony Optimizer Plus account would have netted me $50 last year (before taxes). I’ll be modifying my W4 to help me achieve this result for tax-year 2017!

While this sounds good, again, I can’t emphasize enough that I’m not a professional and your W4 should accurately reflect your situation and making changes to it is done at your own risk. There are plenty of resources online to help you walk through your W4 and how to tailor it to your situation. If you have TurboTax, you might even be able to ask their dedicated support staff.

Until next time!