The Tasgall Group

It’s worth doing a quick review of personal finance tools…  while it’s fun to talk about the macro-economy, sometimes we just need to make sure our own little micro-corner of our personal finances are under control too.  The established players in the space are our old Quicken and MS Money:

• Quicken
• Microsoft Money

I personally have a love/hate relationship with Quicken.  It is some of the worst software I’ve used, especially with the 2008 version.  It’s so bad that I would have stopped using it if it weren’t so darn useful.  A while back, I went looking for alternatives to Quicken or Money…

• Mint
• Wesabe
• Quicken Online - would it be less annoying than the desktop software?
  
• You Need a Budget
• Geezeo
• Yodlee’s MoneyCenter
• Rudder

The main drawback to almost all of these is that they are online/website solutions.  Can I trust my personal finances to some company’s website?  Beyond the usual paranoia of trusting other people, some of the marketing material leaves me a little curious how serious their security really is.

Anyone tried these out and have some feedback or suggestions?

At the end of last year I found myself banking at a new bank…  the interesting thing to consider is that I copied down the interest rates for my savings account at this bank at the time, which provides for a nice point of comparison.

Here is a quick table of the interest rates back then compared to today.  Mind you, this is only after 3 months time…

I can only imagine how low rates are at the big retail banks.

The interest rates to be earned on cash have been cut in half in barely a quarter’s time.  I read in a news article today that the same bank has put thousands of HELOCs on hold (HELOC = home equity line of credit) due to fear of falling real estate values that back the credit. 

The flip side is that you can still get higher rates from the online money market accounts…  ING Direct (3.4%), HSBC Direct (3.55%).  They’re down significantly from previous rates (~5% for HSBC), but not quite as dramatically as retail banks.

And if you’re not too particular (or have complete faith in the FDIC insurance) you can also go to E*Trade for 4.1% rates.

FYI, MM rates on many banks seem to be heading down. NC SECU just changed their MM rate from 4.5% down to 4% even (on 9/20/2007), ING went from 4.5% down to 4.3% (sometime in Sept). Makes sense though, since the banks will need this extra capital as the foreclosures and credit crunch continues to play out and I’m sure the Fed’s dropping of the discount rate helped further justify this drop. I expect a further slide in the coming months ahead. On a positive note, MM funds like Vanguard’s VMMXX are still holding steady and unchanged, promising a returning 4.97% after expense ratio is accounted for…

Ok, so here’s another attempt at a discussion…  feel free to comment below or do your own post as a trackback to this one.

Almost all financial plans promote the concept of building a pool of “safe money” to cover emergencies and unexpected expenses.  This is certainly a good idea, though to think about it critically, we need to look at the real requirement behind the idea.  The idea isn’t just to have cash in a bank account, the point is to have immediate access to funds if/when you have unexpected situations crop up.

The traditional place for safe money would be a savings account or money market account.  Keeping this pool of money in such a safe place gives you many benefits — almost instant access, near zero chance of loss, etc.  You also have the benefit of knowing exactly how much you have available — maybe enough to cover expenses for 3 or 6 months were you to lose your job/income.

In many respects, you can consider your lines of credit (credit cards, home equity loans, etc.)  as part of your cash reserve.  You have nearly instant access to it — in some cases even quicker than getting money out of a money market account.  You have a near zero chance of losing the credit line — unless you sell your house (for HEL) or close your credit card account.  You also know how much you have available in the form of your credit limit (and your credit score can actually benefit from having a lot of unused credit available).  You can also potentially build a larger pool of safe money if you have good credit — in effect having a credit line that exceeds the same amount you can/would keep in cash.

So, allow me to posit a question — is there a real difference in keeping safe money in cash versus keeping the same amount in available credit?  (more…)

The British ONS (Office of National Statistics) has created and made public a Personal Inflation Calculator. As you would expect, it applies and compares the values you enter to the measured CPI in Great Britain, but it’s still pretty darn cool.

The ONS “is fighting back against accusations, fueled by newspaper campaigns, that its inflation index is inaccurate and underestimates the rate of inflation experienced by most people.”

Anyone want to take bets on how long it will take the BLS to create something like this too?

A long time ago, John pointed me to the ETF Investing Guide.  It was originall published at Tech Uncovered before the author founded Seeking Alpha…  but the guide was preserved and is now hosted on the new site.

The ETF Investing Guide provides a sound argument for a simple asset allocation strategy using index ETFs.  It goes into detail on why you should avoid full-service brokers, index mutual funds, and other mainstream financial services.  Ditch all that, and manage your investments using index ETFs, take advantage of tax-loss selling, and enjoy the ride.

While I would argue with a few of the author’s points (e.g., staying away from all actively managed funds), it is a good guide for those who want a low-maintenance investment plan and are happy to earn average returns.

As 2006 is rapidly coming to a close, it’s worth a reminder to check on all your year-end planning… Here’s a bullet list of things to think about…

• Are there any losses you have in taxable accounts that you’d want to realize for tax loss selling?
• Have you contributed your max to retirement accounts to minimize taxable income?
• Rebalance your portfolio if you do it once a year.
• Pray that you don’t qualify for AMT.
• Watch for the earnings distribution estimates from your mutual funds held in taxable accounts.

(more…)

After briefly reviewing interest bearing accounts lately, I have to say b’bye to ING Direct shortly… Here are the other rates out there that I found more appealing (all rates are APY):

• HSBC Direct - 5.05% (not to be confused with plain old HSBC which doesn’t have such high rates.)
• Schwab - 4.82% (the default money market account for brokerage accounts.)
• OANDA - 4.825%
• Virtual Bank - 4.6%
• ING Direct - 4.4%

ING’s rate of 4.4% is certainly nothing to sneeze at… In fact, compared to normal retail banks, it is still pretty good. Wachovia can offer up to 3.55% in a money market account, but you have to deposit ridiculous amounts of money to get that rate — us mere mortals would earn between 0.25% and 2.48%. And ING is certainly not the fly-by-night operation that you can typically find sporting the highest rates on Bankrate.com… but then again, HSBC is a much bigger financial institution with a market cap in excess of $210 billion.

Even though ING used to lead the pack in high yielding money market/savings accounts, it’s now a lagger in this high interest paying competition. I plan to keep my account open in case they decide to lead again, but the majority of my savings will go elsewhere…

I found a blog the other day that is worth a comment… StockCoach’s Corner is a guy’s blog where he is detailing his trading activity, including every position he has, and the current portfolio value ($742,000).

I also found a guy with a blog called Irregular Payments, who has a much more humble account size (~$45k), and is more geared towards him dealing with his personal finances than investing…

I was visiting my commercial mail drop today to collect my mail.  All my mail is sent there and all my accounts show that address as my home address.  Nowhere is my name linked to my home address except in the records of utility companies, something I couldn’t avoid easily (though it is possible).  As I was leaving the maildrop, the proprietor informed me that a Durham County Sheriff had come in looking to serve me with papers.  (more…)