Overdrafting my checking account

“I went to take money out of the ATM and it said we didn’t have any in the checking account.”

What??!!  How is that possible? Did you go online and check too? There has to be an error!

 

This is the conversation The Man and I just had last week.

I pull up our online banking information and sure enough and we are in the red. How is this possible??!!

It’s possible because I am an idiot. I miscalculated how much was available and how much I could pay towards the bills before the 15th. I was getting ahead of myself.

I still use an old-fashioned check register to track every transaction. Yeah, I know I can use an online system like Mint, but truthfully this has been working just fine for our 19 years of married life.

Until today.

I am truly embarrassed that I overdrafted.  The bank covered an automatic payment but charged me $25 for a check. Ugh!

I called to find out about the overdraft protection I have on the account. I have never needed to use it before so I was unaware of the regulations. The bank I use doesn’t charge for the first overdraft in a year, but it does for each subsequent.

This is such an anomaly for me that I got an instant headache and felt sick.

The Man said he did wonder if we somehow had been hacked and all of our money was stolen.

I remember not being able to pay my bills “back in the day” just because I had more month than money. Not the case this time.  Human error. Ugh!

I know in the grand scheme of things this isn’t that big of a deal. I had overdraft protection and money in savings to transfer over to rectify the situation, but I pride myself on NOT jackin’ up the checkbook.

C’est la vie. I guess I am human afterall. Don’t tell anyone.

Investing 101 Series part 3

Slide1This is the third installment of a series of blog posts about investing….the hows and whys. I originally posted  this series, with a few minor changes, at Daily Money Shot as a guest blogger.

As promised today’s post is about the S&P 500, the Dow Jones Industrial Average, and the NASDAQ.  It is important to know the difference between the three and also what they represent.

The S&P 500 is an index of the top 500 publicly traded companies.  “The index does include a handful (15 as of May 8, 2012) of non-U.S. companies.

There is a committee that selects which companies are allowed into the 500.  The S&P 500 is “representative of the industries in the United States economy.”   This is very simplistic. There are weightings of the different industries, but for our purposes we just need simplistic.

One of the things you may hear about or read about is an S&P 500 Index fund.  What that means is that a mutual fund  was created to attempt to mimic the returns of the S&P by having the same stocks in their portfolio.  There are a lot of brokerage firms that offer an S&P index fund.

The Dow Jones Industrial Average or the Dow is quoted all the time in regards to the market.   “It is an index that shows how 30 large publicly-owned companies based in the United States have traded during a standard trading session in the stock market.”

The Dow Jones Industrial Average has very little resemblance to the Industrial in its name.  It was originally founded to measure the performance of heavy industry in America.  Now it is the go-to index to gauge how the stock market is doing even though it only follows 30 stocks, albeit large companies in their industries.

When I want to know how the market is REALLY doing I check the  S&P 500 ticker.  The DJIA ticker is a good indicator of the stock market movements but 30 companies do not make a market, in my humble opinion.

 

The NASDAQ is also an index like the S&P and the Dow.  Like both of them, the NASDAQ “is a statistical measure of a portion of the market.”

As with the S&P, you can have a mutual fund that tracks the NASDAQ.

I know this is very confusing to most people.  I have found one of the best places for no-nonsense definitions is located on About.com ‘s Budget and Personal Finance page.

I inserted a lot of links this time, but I wanted to give credit to the websites for the definitions I used, plus I am not as eloquent as a writer in defining the indexes.  I don’t want to give you the wrong information.

And besides, why re-invent the wheel?

I hope this brings a little more clarity to some more of those mysterious acronyms and words you hear bandied about.

Part 4 will bring some insight into Investment Style and what that means.

Investing 101 Series part 2

Slide1This is the second installment of a series of blog posts about investing….the hows and whys. I originally posted  this series, with a few minor changes, at Daily Money Shot as a guest blogger.

 

I briefly touched on mutual funds in my last post, but let me put it in layman’s terms:

A mutual fund is a professionally managed portfolio of different equities, such as stocks, bonds and cash, designed to give a small investor the opportunity to invest in those equities with a small amount of cash. 

The mutual fund manager takes the money you give him/her and decides the best way to allocate those funds.

If you are in a bond fund, then the majority of your dollars will be allocated to bonds.

If you are in a large cap mutual fund, then the majority of your dollars will be allocated to large cap stocks ie. McDonald’s, Kimberly Clark, Caterpillar, etc.  (We will discuss “large cap” at a later time.)

Also, remember the manager will not be fully invested. They will keep some money aside in cash for various reasons…sometimes because they sold off a position and just haven’t re-invested the cash elsewhere yet.

Different investment vehicles

 

When I was recommending mutual funds to former clients some of them would get so confused that an IRA they were invested in was actually a mutual fund just dressed up into a retirement vehicle.  Are you confused by that too?  Well, let’s see if we can remedy that.

*Note: for the more advanced girlfriend out there, I do know there are retirement vehicles that aren’t mutual funds, but for my purposes I am sticking with this view. 

You can purchase a “regular” mutual fund.  There are tax implications with a “regular” mutual fund.  When the funds you invested gain in value, which is the goal hopefully, then you will pay taxes on that gain when you remove the dollars from the fund.

Also, you will receive a 1099-DIV from your brokerage firm if your mutual fund invested in any companies that paid out a dividend that year.  You probably didn’t receive a check for the dividend payout because more times than not someone advised you to check the box “reinvest dividends.”  It is a very common practice unless you need the dividend income to live on.  It’s also a great way to increase your portfolio value.

Now here is the confusing part, I think.  Your “regular” mutual fund is great for some medium-term goals, but if you have long-term goals, as most of us do, your advisor has probably suggested an IRA.  That is an Individual Retirement Account.  The money you put into that account is intended to stay there until you are 59 ½.  The IRS will penalize you if you remove it prior to that age, unless you qualify for one of their exceptions.  There are 2 types of IRAs, the Traditional and the Roth.

  • The Traditional IRA lets you deduct your contribution off your taxes which means this type of IRA is “tax-deferred.”  Since you didn’t pay taxes on your contribution you will pay them later along with paying taxes on all the earnings on said money.
  • A Roth IRA, on the other hand, is not deducted off your tax return.  All the money you put into the IRA and all it earns are tax-free.  The penalty applies to both the Traditional and the Roth if you take the money out prior to age 59 ½.

One thing to remember, an IRA is either yours or your spouses’ (if that fits), hence the term INDIVIDUAL.  Even if you don’t have gainful employment outside the home, but your spouse does, you are eligible to contribute to one. I mention this because a lot of my girlfriends tell me that they have their husband’s IRA. Not so. You may be the beneficiary, but you are NOT the owner.

If you happen to be lucky to work for a company that offers a 401(k), good for you and even better if they “match.”   A 401(k) is another retirement investment vehicle.  You contribute to your company’s plan. The dollars you put in are considered a salary reduction.  In other words, you don’t pay taxes on that part of your salary.  This is another tax-deferred plan.

The last retirement vehicle to discuss is the 403(b). I inadvertently called it a 503(b) in my last post.  I’m sorry about that.  Acronyms and numbers trip me up too.  A 403(b) is structured very similarly to a 401(k) but it is offered to certain employees of public  schools, tax-exempt organizations and ministers.

All of the plans have benefits and you can have more than one of them at a time.  They do have different contribution limitations though.  If you exceed the limits, you will be penalized so consult your advisor, the IRS, or shoot me a note and I can discuss this with you.

There are even retirement plans for the self-employed, but the above 4 investment vehicles cover most of the population and their options.

To summarize:  3 of the plans I discussed are tax-deferred because you get to deduct the contributions from either your salary or your taxes and 1 of the plans is tax-free because you don’t deduct the contributions.

The next installment will discuss the differences between the S&P, Dow Jones, & the Nasdaq…stay tuned!

Investing 101 Series

Slide1This is the beginning of a series of blog posts about investing….the hows and whys. I originally posted  this series, with a few minor changes, at Daily Money Shot as a guest blogger.

Like some of you, I didn’t know the first thing about investing.  All I knew was that my future husband went down to our local bank and opened an IRA (Individual Retirement Account) and I thought I should probably do that too.

The banker gave me some investment choices and I made my decisions based on those “stars.”  I even invested in the multi-national company that I worked for at the time.  They took $10 out of my paycheck every week to start my journey toward owning stocks.

Things changed for me, however, when I was finishing up my degree in business and I took a finance class.  I fell in the love with the concept of compounding interest…earning money on the interest earned.

The Birth of a Business

 

So let’s start at the very beginning of what I call the investing cycle…the birth of a business.  Most businesses don’t start out as large conglomerates.  Think Bill Gates and his garage here.  You (just as an example), and maybe a friend or 2, have an idea and decide to offer your product or service to those around you.  The idea takes off and more people want what you are offering.  You need a little more cash to either buy more supplies or to lease office space so you hit up Mom & Dad, your aunts and uncles, friends, neighbors, etc.  You ask them to loan you some money with the intent of paying it back with interest (more money than what you borrowed.)

Now the idea is really going and you know you need more cash for updated computer systems, maybe a truck, new tools, etc.  You get the idea.  You head to ABC bank.  They give you a loan (well, maybe not in this economy) and off you go to grow your business.

You are really cookin’ now!  And you need more money to hire salespeople, office staff, truck drivers, computer help, etc, but the bank isn’t interested in giving you more money.

So you reach out to what are called Venture Capitalists.  These are people or groups of people who are in love with your business.  They want to give you money.  Great!  The catch is that they want a “piece” of your business.  Let’s say they give you $200,000 to invest in the business but they want 25% of the profits.  So your business grosses (before taxes) $500,000 for 6 months, the Venture Capitalist takes their $125,000 in profits.

Make sense so far?

Your vision has changed and you want to go national with your idea, maybe even international.  Good for you and your success!

You decide you want to take your business “public” to raise even more money.  The Venture Capitalists aren’t going to be the only investors in your business any longer.  Large mutual funds will buy shares, as well as Mom and Pop.  You reach out to an investment bank to get your IPO (initial public offering) out to the public.  Once you are launched anyone can purchase a piece of your company.

And this is where “investing in the stock market” comes in for most of us.

We like a company or a product and we want to own a piece of it.  Most of us purchase what we think are pieces of companies through mutual funds.  Those mutual funds are dressed up into vehicles called IRAs or 401(k)s.  There are managers of those funds who decide which companies they want to invest in and what percentage of your money will go to each company.

Another example:  You give Ms. Money Manager of XYZ Fund $100 of your money.  Ms. Manager then invests in 10 different companies for you.   Now you “own” a piece of ten different companies THROUGH the mutual fund.  You don’t physically own the shares or the company.  Ms. Manager’s fund purchases pieces of the companies on everyone’s behalf and you purchase shares of the XYZ fund.  If you purchased some shares of your favorite soft drink company directly then YOU own the shares.

 

You still with me?

I think this is enough for you to chew on for now.

Not all businesses follow this exact trajectory, but it is safe to say a lot do.  I just wanted to give you an idea of the general process.

Next we will cover IRAs, 401(k)s, 503(b)s.  They sound scarier than they are.

As I always tell my girlfriends, you ARE smarter than you think.

 

 

 

 

What to do when your spouse isn’t on board with your financial plans

DSC06417I have girlfriends who are spenders and some who are savers.  The ones that are married tend to be married to their opposites.

Can you spell c-h-a-l-l-e-n-g-i-n-g?

So what do you do when your spouse or significant other doesn’t share your views on finances?

I think there are a couple of things:

  1. Don’t nag. Seriously. This never works. It might even entice your partner to become spiteful.
  2. Communicate your concerns. If you are the saver and would like to save more, suggest a visit to a financial planner/counselor. If that doesn’t work, let your partner know you are going to be putting “x” number of dollars aside into a savings or investment account. (you never want to have secret accounts)
  3. Try to find a compromise. This doesn’t have to be an all-or-nothing proposition. If your spouse/significant other thinks putting $500 per month into savings is too much (i.e. not in the budget) then see if they will agree to half.

I have counseled many couples who do not see eye-to-eye on finances.

The Man and I certainly did not when we got together.

One incident in particular comes to mind.

We had a small farmhouse butcher block table when we married. I was wanting something larger.

We aren’t “traditional” dining room table people and all I wanted was a table that could accommodate a guest or 2.

I found one and fell in love.

The Man was on his first deployment at the time.

When he came home he was not happy that I had spent $1200 on a table.

He made snide comments about it for months. The straw that broke the camel’s back, so to speak, was a comment he made when his brother and sister-in-law were visiting.

I exploded.

  • I was working full-time outside the home and making a considerable salary.
  • We had money in the bank.
  • We had food on the table.
  • The bills were paid.

It wasn’t a Maserati for goodness sake. I probably said a few colorful words, knowing me.

When we discuss finances and our differences, that incident is our go-to reminder that sometimes we need to adjust our way of thinking, especially when you are married.

There are 2 sets of emotions that have to be considered at all times.

I still “worry” that I am making a decision The Man might consider foolish. He, on the other hand, has become so lax in his concern about money it is scary. I might have created a monster HA!

Not being on the same sheet of music financially is a leading cause of divorce in America.

Talk to your spouse.

And above all, remember why you fell in love in the first place.

Credit and Debt

I was going to blog more on other types of retirement vehicles that you may run across, but I have heard from a couple of my girlfriends this week about debt and credit issues.

Let’s start with credit since it is the thing most people start out thinking they need to build and then proceed to fall into debt.  Sounds romantic, doesn’t it?  ”Fall into debt.”  Yeah, not so much.  Do you need credit?  Yes, you do.  I know there are some old timers out there who insist that they never needed credit and paid for everything in cash. I even know of a financial guru who swears that you should pay for everything, to include your car and house, in cash.  That is all well and good, but most mere mortals can’t do that.  And if you want that car or house you need good credit to get a good interest rate and the loan.

Now to be fair to those that do save and pay cash for their vehicles, good on you.  You have learned to delay gratification and have amazing discipline to save that kind of cash.  And good on you if you only buy used vehicles.  You are correct, you will save lots of money that way.  (See, I already anticipate some of the naysayers…I’ve been doing this awhile hehehe)

So, first things first.  You need to check your credit report.  The best website to use, IMHO, is Annual Credit Report.  This is NOT the one with the cute and funny jingle on tv.  Once you are at this site and put in some data, check the box to only get 1 report at a time.  There is a method to my madness.  You are only entitled to 1 free credit report per year.  If you pull Experian (name of credit reporting agency) in January, for example, then you can pull the TransUnion report in May and the Equifax report in September.  Then the following January you can do it all over again.  Most of the information is the same across reports.  Pulling your reports in this fashion allows you to monitor your own reports without having to pay for costly “credit monitoring”.

You will not get your credit score with your report unless you pay for it.  The only thing that is free is the actual report.  There is a Frequently Asked Questions tab on the home page.  Peruse it before proceeding.

So now you have your credit report in your hot little hands, or more precisely on your computer screen.  What the heck does it all mean?  Well, scroll through the tabs and down through the report to see all the creditors that say you have or had accounts with them.  Make a note of any discrepancies.  These will be items you will want to dispute. You want your credit report to be as accurate as possible.

Now there are many, many people giving their opinions about closing accounts and how that will affect your credit score.  I went to  this link Bankrate and found a question and answer section between Bankrate and a FICO product support person.  Bottom line, if you close an account that is in good standing, that account will fall off your credit report after 10 years.  Not a good thing.  If you leave it open, the account will stay on your report indefinitely.  As long as it was in good standing this is a good thing.  Check out the question and answers on the link.

So now we have credit.  There is different kinds of credit debt.  There are revolving loans and credit cards.  There are installment loans (car loans, personal loans).  There are bank credit cards and store credit cards.  Most people get into trouble because they have used too much of their available credit. There is usually too much month left at the end of the money.  If you find yourself in this position it is time to get a handle on this problem.

This is where your spending plan comes into play.  You need to know where your money is being spent every month…down to the penny. Seriously.  I know it is work, but if you want to get out of debt you will do this.  Once you know where your money is being spent then you need to make some changes to start paying down debt.  This website PowerPay is my absolute favorite website for helping figure out when you will get out of debt.  You have to sign in to use the site but it is free.  You input all your debt data to include balances, minimum pays, and interest rates.  It will calculate an “end date” to your debt if you do nothing else but what you are doing assuming you are paying on the debt..

Most people will not like that result, so I will encourage you to number your debt by priority. This is a very personal issue.  I know, I know, talking heads, your mother, your brother’s uncle, your cube mate, and your babysitter will all tell you the best way to pay down your debt….highest balance first, highest interest rate first, etc,etc.  I do things differently.  First I ask if there is a personal attachment to which piece of debt gets paid off first.  Most people don’t care, but some have a preference.  If there isn’t a preference, I tell the person to pay off the smallest debt first.  I don’t care about interest rate at this point.  I care about the psychology behind this.  When you pay off a bill there is a sense of accomplishment…”Woo-hoo!  I did it!!”  If you continue to slog away at the highest balance it can seem like f-o-r-e-v-e-r to get there.  People will quit.  It’s like dieting.  If the scale doesn’t move downward after a week or two, most people will get discouraged and want to throw in the towel.  It’s the same thing with getting out of debt.

Okay, so now you have paid off that first credit card.  Put the monthly dollars used to pay off that credit card onto the next debt on your list and so on.  Paying off your debt in this fashion will not require you to adjust your spending plan if you are only using the money you currently have allocated.  If you don’t have money allocated to outstanding debt then drastic adjustments need to be made.

PowerPay will also allow you to show how a lump sum payment onto debt will affect your payoff time.  It is tax refund season and alot of you will be putting your new-found cash onto outstanding debt.

As always, email me or leave me comments if you have any questions.  I’m here for you girlfriend.  Good luck!

Shout Outs

I decided to get a new carpet cleaner last week.  I had a Hoover a while back and loved it, but when the hose went I decided to try a Bissell.  I HATED it.  I mean hated it.  I like to clean my carpets a minimum of every 6 months.  We have 2 large dogs and 6 humans in our house, plus countless friends and acquaintances traipsing through.  You may think that is a little much, but it’s how I roll.
On to the cleaner….I bought a Rug Doctor.  It is not the cheapest machine available, but I have rented them in the past and was pleased with the results.  Let me say that I am loving the results of my new machine.  It is a bit unwieldy though.  It is not as easy to fill up the reservoir or empty it, for that matter.  I am going to justify the inconvenience with my pleasure at the job it does.  
Along those same lines is my Dyson vacuum cleaner.  Yes, I am a little nutty about my floors.  Just the way it is.  My family has accepted it.  I have had the Animal for 7 years.  Yep, 7 years.  I had plenty of other vacuums, but none that have lasted this long or had this amazing customer support either.  
My Dyson was in need of some TLC this year.  The hose sprung a hole.  The website was easy to navigate and the replacement arrived quickly.  2 months later, a plastic piece snapped at the top of the canister.  Again I went to the website.  It looked like I had to replace the whole canister for $75!  I didn’t like that option so I called customer service for clarification.  Yep, had to replace the whole thing.  Except….the guy sent it to me for FREE!!  Woo-hoo!!  I was psyched.  It arrived quick also.  And it is like having a whole new machine.  Love it!
I love my Thirty-One products too.  It helps that I am a consultant hehehehe  But that is WHY I am a consultant.  If I didn’t like or believe in the product and vision of the company I couldn’t sell the product.  Too many items to list so I will post a couple that I have photos of.  This is a zipper pouch.  It is perfect for holding all the cords ‘n stuff you need when traveling.  It holds my Nook too.  So when we are in the car/hotel and the kids ask for their games or chargers I hand them the pouch.  And they put their items back for later use.  They know that if they don’t and they lose them I am not responsible for replacement….and once you get to know me you will know I am serious about that lol
This is the Littles Carry-All Caddy.  It sits on the corner of my counter as the collection spot for all electronic devices ie DS consoles and games, iPods, chargers, headphones, etc.  See rule above if they can’t find their stuff hehehe
One of my favorite stores is LLBean.  Again, a tad pricey, but worth it in regards to quality and customer service.  I can’t even begin to list all the items we have from sheets, comforters, car mats, household mats to our living room couch. The list goes on and on.  I have a towel that has a hole in it.  I don’t remember how old it is, but I do remember it wasn’t cheap.  I am sending it back for a replacement.  I love that!  Same goes with my new friend Costco.  Anytime I am unhappy I can return something.  Love that!
Love this make and model of vehicle!  This is my third one.
You are probably wondering how I can spend so much on these items, but advocate saving money.  Well, the quality of the product is greatly important as is the customer service. I don’t buy “things” very often. In fact, I don’t like to shop (except for books…I do have a weakness) so when I do, I need companies that give exceptional customer service and superior products so I don’t have to “re-shop” for a replacement.  
I learned years ago that I could buy things on the cheap and save money up front, but I would wind up replacing them faster than if I had just bought the more expensive, quality product in the first place.
That is not to say that all expensive products are high quality.  Quite the contrary.  Before I purchase, I do research. And this is where The Man comes in especially.  He loves to research.
And the other thing we do before we purchase a large ticket item is SAVE for it.  I know, crazy right?  Save to buy something.  Who knew?  Do you or someone you know need help with getting on a spending/savings plan?  Let me know. I would love to help.