Finance Challenge 2017 – Week #1

I’m excited to share the first outcome for the Finance Challenge. I now have a High-Yield Savings Account (or HYSA) funded with $1000 to be used as a bare-bones emergency fund. I decided to go with Netspend, a prepaid debit card issuer, for this account. Netspend has a prepaid debit card that also comes with a savings account that is FDIC insured. Currently the savings account offers 5% on $1000 and a lower rate of 0.49%  on balances above $1000. In full-disclosure, I have had a Netspend account for nearly one year now. But it is now fully funded! This should net me around $50 this year, for basically no effort! So why did I decide to announce this as the first item of the Finance Challenge?

Anyone familiar with personal finance has probably heard of Dave Ramsey and his “baby steps” to financial freedom. Baby step #1 is to have an emergency fund with $1000 in it. While I do not always agree with Dave’s principles, I do agree with this one. The Netspend account maximum for the high yield just happened to correspond with Dave’s first step.

When you sign up for the Netspend prepaid debit card, you are actually signing up for two accounts. One account is linked to a debit card like a regular checking account, which does not earn any interest. The second account is the HYSA. Don’t worry, they are both created automatically. The user interface for the Netspend website is actually really easy to use and looks better than most brick and mortar banks. You can view and transfer money between accounts in the website menu after logging into your account.

Since this is mainly an emergency fund, my top priority was whether I would be able to access my cash quickly. I would most likely use an ACH transfer to my regular bank account if I can afford the 2-3 business days of processing the transfer, but if not it is nice to have a debit card to pull money out of an ATM, even if you have to eat a $2.50 fee, plus the ATM operator fee (usually around $3.00).

Speaking of fees, here are a few more things to note about this account.

  • The pay-as-you go fee plan is the lowest cost fee plan and luckily, it is the default.
  • This account has monthly fees and transaction fees. The fees can be avoided if you do not use the debit card that comes with it for ATM withdrawals and purchases. The full fee schedule is also easy to find on the NetSpend website.
  • There is an inactivity fee. This can be avoided with some sort of transaction monthly. I am using an ACH electronic bank transfer with my brick and mortar bank to deposit and then withdraw $1 every month. This avoids the inactivity fee and is also free to do, unlike using the debit card as stated above.
  • The interest is paid quarterly, not monthly. This lowers the yield to 4.91%. The 4.91% should be used for comparison with other savings accounts and even Certificates of Deposit (CDs). Clearly 4.91% is much higher than the average of 1% available from traditional competitors and online banks.
  • To optimize the higher yield, the interest earned each quarter is probably best to be withdrawn as soon as available, because anything above the $1000 as it will earn at the lower rate. To earn a higher return, this interest should be withdrawn then immediately deposited in a traditional savings account or an investment account.
  • The 5% interest rate has been going on for at least a year now. It is so much better than competitors that I fear it may be lowered in the future. I will be keeping an eye out for any changes in the interest rate.
  • A traditional bank is necessary to have in addition to the Netspend account, in order to transfer funds into and out of the account fee-free. Paypal is also an option; however, I haven’t used Paypal with this account.
  • Again, full-disclosure, there was a small issue when setting up a link between my Netspend account and my traditional bank; however, a call to customer service easily fixed my issue.

For more information, check out the Netspend website here. If you are sure that your situation could benefit with this prepaid debit card and HYSA, I’d like to offer up my referral. You will receive $20 when you activate your Netspend card and deposit $40 or more using this link here. I will also receive $20. Feel free to use whatever link you are comfortable with, my goal is to inform.

I found the account through a quick Google search for High Yield Savings. There are other HYSAs out there, in case you are reading this and it is no longer available.

Finally, make sure to thoroughly check the FDIC insurance and fee schedule before, just in case the information provided here is no longer relevant.


Until next time!



52 Week Finance Challenge 2017

Happy New Year!

Just like many of you I have setup New Years Resolutions for 2017. Most people set financial goals with a set figure for saving or earning in mind. My resolution was to become more financially wise over the coming year. I decided on challenging myself to come up with 52 ways to improve my financial system and situation, one for every week this year. I’ll be sharing what I learn and deploy here on the blog, both good and bad. I’ll also provide updates if anything changes from prior weeks. The guidelines I’ve come up with are as follows:

The change must do one of the following:

  • Help save or invest more money (e.g. cutting costs & tighter budgeting)
  • Help earn more income (e.g. finding higher rates of return)
  • Help automate the process (e.g. setting up automatic transfers between accounts)

To be clear, the current status of my finances is not terrible, but it could always be better and I’m willing to turn over a lot more stones to make improvements. The great thing is that I’ll share what I’m doing and that may help others out there as well. I’m hopeful that the success of this challenge will bring more challenges for productivity and other such topics. Look for the first post this Saturday!


How I Plan on Being a Millionaire

I’m a perfect example of the person that knows what they should do, but for whatever reason doesn’t do it. I think this qualifies me as an idiot from time to time. The good thing about being an idiot though, is that you get to make mistakes and [hopefully] learn from them. Wells Fargo did a study of millennials recently and published the results. I saw them flash by on the news while riding the train into work and was surprised at how bleak my generation had become. The study found that more than half of men and almost three quarters of women between the age of 22 to 35 don’t believe they can accumulate $1,000,000, and that is like at all, like not in their lifetime. What’s especially sad about this is that our generation is the youngest working generation, which should mean, as of right now we are slated to live the longest and need that money to supplement our retirement more than any generation before us.

This study, even though it was only two power point slides and was up for less than two minutes, captured my attention for the rest of the day. It made me think about what I could do now that could boost my chances of being a millionaire. I came up with four principles work from and I think you should too.

1. Starting Early

The simple truth is that compound interest favors the young. What’s the difference between starting at 22 vs 32? A lot actually.  To use the cliche example structure, if you invest $1000 at 7% at 22 vs the same $1000 invested at 7% at 32 you would have nearly twice as much money! ($18344.35 vs $9325.34 compounded annually). Picture adding a single 0 to the end of that! If this math doesn’t sink in then this probably isn’t the right blog for you. We’re the generation that abides by the maxim of “work smarter not harder”. Starting now means that we are working smarter, it’s that simple. As an added bonus there have been a lot of advances in the last decade that can help structure and automate the process once you decide to start and take action. We can use apps that invest for us in the background and apps that have algorithms that track our spending patterns and identify savings and investments that take advantage of classical portfolio theory 100% automatically. None of this is going to do you any good, if you don’t start today. [Don’t worry, I plan on outlining all the tech I just mentioned in future posts!]

2. Expect the Unexpected

Unfortunately, shit just happens. Sometimes small things that happen can deviate your course. In fact, this principle hit me today. My cellphone just stopped working, for really no reason or fault of my own. Worse, it just turned one year old. Coincidentally, the warranty is also one year. I’m not eligible for a free phone for another year. It looks like I’m out about $400 bones and I would have really rather spent it on beer for the remainder of the summer. If you use your imagination, this situation can happen in better and worse flavors. The only sane way to be ready for these unexpected things that life tosses at you is to have an emergency fund. If you can sock $1000 in a high yield savings account [more on these to come!] and just leave the accruing interest you’ll be better prepared than 62% of all Americans according to a Google Consumer Survey. You won’t flinch when these life events happen.The most important thing to remember about an emergency fund is that it is separate from your investments. Readily available cash is crucial to fund emergencies and it’s better to shift money earning 1% towards paying it than to shift money potentially earning 7% not to mention any tax situations that you may get into.

The other side of the coin to expecting the unexpected is to use insurance and warranties. I go through a pair of Skullcandy headphones almost every year on my birthday. They’re only $12 or so, but I’ve only had to buy them once. Skullcandy has a great warranty on their products that I take advantage of when they do eventually short out on me. All it takes to save money on the stuff you probably use everyday is to keep the proof of purchase and receipt (the trend of emailed receipts is very helpful for this).

This also means having health and auto insurance. Health savings accounts are great for us since it’s basically an emergency fund that’s earmarked for an unexpected trip to the doctor. You can also use them for certain purchases at pharmacies and to take care of your annual check ups. They also usually feature a “catastrophic” type insurance policy that will cover those “holy shit” type emergency room visits.

Car insurance should be higher than state minimums. While it is more expensive, if your state is like mine and only requires $5,000 for property damage and you rear-end a Mercedes-Benz G-Wagon (or more) at $205,000 you’re screwed. Not to mention that health care costs are astronomical and a minimum requirement of $15,000 for bodily injury may be completely used up on the injured’s trip to the ER! That means you pick up the tab for any recurring rehabilitation or treatments. My simple solution is to take your state minimums and add a 0 to the end of them. Raise your deductible to bring the overall policy cost down and use your newly setup emergency fund to supplement the higher deductible.

3. Use Credit Responsibly

I know people that are literally scared of having a credit card. Why are we scared to tell our parents that we got approved for a flat 2% card with 6 months of 0% APR? [I’m currently reviewing my favorite cards and will post about them soon!] After all, it’s just a little piece of plastic and in all honesty, I believe that a rewards based credit card is the best tool that we the consumers have at taking the edge off inflation on the prices for things we buy everyday. The problem is credit card abuse. I was really bad at this in college and am still paying the price today. When our parents hear that we have a credit card, they probably think that we are going to go out an immediately max it out buying stuff we don’t need. I’ve never done this and the chances are that you haven’t done this either because you understand the basic premise of how a credit card works.  In my anecdotal experience, credit abuse has been  much more insidious. In college, I would have $25 bucks to my name until my next payday, but Saturday night usually meant hitting a local watering hole or two or all of them. In the midst of having a good time, I wouldn’t mind buying a whole round of Three-Olive Fruity Doopy shots and putting it on my card, because I knew that at the end of the night I would have enjoyed probably close to $100 with my friends, but that minimum payment was only $25. What a coincidence, right? If you can’t trust yourself, the simple truth is this; pay off your statement balance each and every month. If you can use self discipline (if you have to ask yourself this, you should skip to the next topic now).The advanced lesson is to use a 0% APR card, track your spending, and schedule all payments to be made one month prior to the promotion expiring. I recently started doing this and while I may spend $100, I’ll schedule four monthly $25 payments to withdraw from my account automatically. This way, I can plow the extra cash into my savings earlier and by auto scheduling the payments, I will have paid off that specific expense with plenty of time to enjoy the rest of the promotional period of 0% interest. Note: this must be done on an expense by expense basis and not a statement balance basis. You should avoid carrying a balance from one month to the next at all costs. Credit cards charge us upwards of 20% annually since we don’t have a long credit history and our incomes are usually low. There is no chance that you can make this 20% up anywhere else in your investments and savings. If you have a balance (like the one I am still fighting four years later) pay it off immediately and prevent the interest you earn on your savings and investments being sucked out by a credit card.

4. Know Your Worth

This is most treacherous item on this list. At my first job, I was shoulder to shoulder with what a fellow coworker affectionately called, “Lifers”. You probably said that to yourself with a snarky tone, but before you pass judgement, know that I enjoyed every day working with them and they were genuinely great and supportive people. What I never could understand and in all honesty what I was scared to ask is what they had planned to do with their lives when they were my age. A “Lifer” was someone that stayed in roughly the same job for 10 or more years. The scariest part was that there were detectable”symptoms” of becoming a “Lifer” and they had a simple order. It was, get the job, get a house, settle down and start a family. It seemed to me in just talking around the water cooler that this timeline fit every one of them. I was only at this job for two years and it may very well be because I don’t want to start a family, nor do I know where I’d like to buy a house and settle down. Now I know correlation doesn’t equal causation but it was a strange phenomenon that repeated. How does this tie into being a millionaire? Well, I wasn’t paid very much in that job. The yearly merit based raise was just about 2% per year. If I would have stayed put and accumulated the yearly increase and retired at 65 years old, my last pay check would have been $132 more than what my paycheck is now, only two years later (with the same company no less). You should know what you are worth and what you should be paid. In theory, the more you get paid the more you should be able to invest. It’s not hard to imagine that putting $5,500 into an IRA and maxing it out is easier to achieve making $60,000 than $30,000 where the former represents about 9% of income and the latter is about 17% of available income. Hold yourself to the principle of earn more, invest more. And if you start to see symptoms of your career falling into a rut, don’t just accept it, take action and speak up!

Remember while you are thinking about how you will implement these four principles into your daily life that despite what you might read on the internet you still must do your own research on these ideas before taking action. I’m not a licensed professional and I don’t take responsibility for what you do, but your local licensed professional is just a google search away. Have a conversation about any of these topics with them and start your plan to become a millionaire today!

Trust is All You Have

Save the Earth TDI

I spotted this VW Jetta  Wagon complete with all the “Save the Earth” stickers you could imagine on all sides, the only problem is… it’s a “clean diesel” TDI model. Which let me just remind you that the TDI moniker is suffering from one of the largest modern automotive scandals. My heart goes out to those individuals, like the owner of this Jetta, that believe in a cause and find a company that aligns with that cause, only to have the company destroy that loyalty.

The $15 Minimum Wage Dilemma

I have very strong feelings regarding the minimum wage. Notice I used the word feelings, because I am not an economist and I am not a politician. I like to think I am a rational human being though and I like to stay objective on hot topics. I am concerned that there are valid indirect effects and situations that are being ignored when it comes to discussing this topic.

Continue reading “The $15 Minimum Wage Dilemma”

The First of Many…

This is the first post that I will write for this blog and to be honest I don’t know where to start. But I think the key is to see that as an opportunity, not as an obstacle. I was (let’s be honest, I still am) terribly good at putting things off until that elusive “some day” in that bright cheery future where I will as if by magic be more productive and will be my ideal self. That’s not going to happen. No matter how much we can picture what we want, it will never happen without taking action.

Continue reading “The First of Many…”