A look at the new Ally Bank Interest Checking account and the Raise Your Rate 2 Year CD.

There are a lot of banking products to keep track of lately. Within the last few months, we’ve extolled the virtues of:

• A free savings account to help you set your financial goals from SmartyPig
• A checking account with debit card perks from PerkStreet Financial
• High yield CD and online savings products from Sallie Mae
• Personal savings accounts from American Express

And these are just the latest in a line of high yield savings accounts and other savings options that we’ve covered here. And there are a few more I’d like to introduce this week. I’d like to take note of the latest products from Ally Bank, which now includes an interest bearing checking account and a replacement to their popular high yielding 2 year certificate of deposit. Following are the details:

Ally Bank Interest Checking Account

Ally Bank boasts a free high yield checking account that has the potential to earn you the equivalent of interest you’d get from a high interest savings account. It’s called the Ally Bank Interest Checking Account with several features that you may like. Just like Ally Bank’s other savings products, this checking account is easy enough to start and maintain, given that it does not require a minimum deposit nor a minimum balance to keep around. Here’s a closer look at its features:

• No minimum balance required. $0 to open an account. Can’t get easier than that!
• No monthly fees
• Maintain a balance of up to $15,000 and receive a 0.50% APY
• Maintain a balance above $15,000 and receive a 1.15% APY
• Free online bill pay and online banking
• Free debit card
• Unlimited check writing
• Get cash back by using your debit card (at select retailers)
• No ATM fees anywhere
• Free alerts on your balance

But bear in mind that the bank will charge you for non-sufficient funds, stop payment and return deposits, although these are pretty standard fees I’ve seen levied by most banks. The one thing I’d like to point out is this: seriously, at the rate some of these banks (online or otherwise) are ratcheting down their rates, there doesn’t seem to be much of a competitive advantage between checking vs savings accounts anymore. Take for instance WTDirect, which is certainly considered a top high interest savings account. If you look at their account’s features, there is no longer much to be desired here, with the long term interest rate lingering at 0.15% for balances under $10,000 and 1.16% for balances reaching $10,000 and higher. So if you’re going to make a comparison here, even the Ally Bank Interest Checking Account looks like a better choice over the WTDirect Savings Account, since you get all the benefits of a checking account when you opt for the former.

Ally Bank 2 Year CD With Rate Increase Option

In addition to the checking account, Ally Bank is replacing their 2 Year High Yield CD with one that has a “rate increase” option. It’s called the Ally 2 Year Raise Your Rate CD and it’s intended to give savers a bit of a break. Typically, when you open a CD account, you’re locked into the current rate for the full term of the CD. But with the Raise Your Rate CD, you have the opportunity to opt for one rate increase anytime during the term of the CD. So if rates go up anytime between now and the next two years, you have one chance to raise and lock in your rate at that level.

Given that we’re in a rate climate that hasn’t exactly been favorable for savers (it’s been a low interest environment for a while now, with no signs of a change in the trends), the “raise your rate” feature may offer a bit of insurance. Here’s how it works:

1. Open an Ally Bank 2 Year CD and lock in your rate. The rate is currently at 2.02%.
2. Monitor the CD rate on this product.
3. If the rate goes up within the next 2 years (during the term of your CD), you have the option to lock in that new rate.
4. Call Ally Bank at anytime to request the new rate.
5. Receive the one time rate increase for the rest of your term.

Ally Bank Interest Checking & 2 Year CD With Rate Increase Option

You can achieve a great wardrobe makeover even if you’re on a budget. Here are some ideas on where to get cheap clothes online and anywhere else.

My clothing budget is one of the lowest you’ll see around. I simply do not spend much money on clothes. I figure — if it’s functional, I’ll use it. Brand name or not, generic items or clever copies, I don’t really care just as long as I don’t pay much for it. As a true geek from Silicon Valley, I feel that trade shows are just as likely to be a source of new attire as anywhere else . It’s one budget category that can easily yield savings, if you know what to do. Surprisingly, you only need to be resourceful to make sure you continue to look your best despite not spending a fortune in the process. To illustrate this concept, check out these wardrobe makeovers, which don’t seem to take that much work or money to achieve (images are from ABCNews.com).

The takeaway here? Less skin = classy, especially when we’re talking about work attire.

Also, one way to save a bunch of money on clothes and your appearance is by finding clever replacements for the more expensive stuff. Some time ago, I wrote about how to save money by buying replicas and the issues we face when we buy fake goods. But when it comes to clothing and accessories, “fake” seems to be the way to go in order to rake in some great savings — take the humble cubic zirconia, for instance.

There are certainly many more ideas for lowering your clothing costs. As promised, following are several steps that you can take to ensure that your wardrobe looks great and is budget friendly.

Tips To Get Cheap Clothes Online or Elsewhere

1. Shop at outlet malls.

Outlet malls offer the same quality clothing as retail stores but at deeply discounted prices. They typically feature outlets for the big name brand clothing stores like Liz Claiborne, Gap, Old Navy, Adidas, and more. I found a great pair of Adidas tennis shoes at an outlet mall for $20. These shoes normally sell for $75 at a retail store, but at the outlet mall, I got a significant discount.

2. Earn rewards when you spend.

If outlet malls are too far to travel to, then do some comparison shopping in the comfort of your own home. A lot of times, you can get great deals on apparel and other merchandise through deal sites and online shopping retailers. A deals portal like Ebates can help save you money when you shop (for more on how to earn cash back when you shop, check out our Ebates review). Always figure out how you can earn rewards or cash whenever you have to fork out anything: doing so will help soften the blow of your spending.

3. Look for coupon codes that you can use at online retailers.

Be a wise or shrewd shopper. Another great tip is to simply search for promotional codes before you visit an online store. As an example, you can get great deals for shoes by securing a Shoebuy coupon code or a Macy’s promo code prior to dropping by these sites to comparison shop or place orders.

4. Check out Freecycle.org.

Freecycle.org is a web site where members can give away and receive free items. Visit your local Freecycle.org and get to know the members in your community. It is very surprising to find what people are willing to give away: as they say, one person’s junk can be another person’s treasure. Some of the things you’ll find here include brand new or gently used clothing, shoes, and accessories as well as many other items.

5. Shop for seasonal items after the season is over.

This is essential to adding new items to your wardrobe. For instance, if you wait until after the holiday season, you can find great deals on holiday dresses and outfits. And to make sure that your purchases get a lot of mileage, you should try to stick with classic designs rather than trendy items. Classic styles and colors will still be appropriate the following year. This way, you have something new and different to wear every year, and you get it at a clearance price. Remember that timing could make a huge difference — just check out this article on the best time to buy stuff.

6. Use accessories to change the look of outfits.

You can essentially wear the same basic underlying items, and change the entire look of the outfit with accessories. Find stores that offer great prices on necklaces, earrings, scarves, hats, and belts. Each of these types of accessories can transform an outfit from business casual to a date night outfit. I personally love the accessories at New York and Company. They offer a variety of colorful necklaces, earrings, and handbags that jazz up any outfit and just bring the whole look together.

7. Shop at thrift stores and Goodwill.

I know it does not sound glamorous, but thrift stores and Goodwill often offer some of the most basic items that you need for your wardrobe. Black slacks, white shirts, cute tees, and jackets are just a few items I have found at the local Goodwill. I also found my favorite pair of jeans here. You do have to rummage through the place for a while, but when you find that piece that you absolutely love, the search pays off. On my most recent trip, I found two cute t-shirts and a pair of jeans, and my total cost was all of $8! That is less than I would spend on a pair of earrings at a store at the mall. Look for the basics at these stores, and spice them up with new items. For more tips, check out these great places to earn and save money on used items.

8. Hold clothing swaps or exchanges.

So you may own a few nice pieces while your friends do as well. When you find yourself in such a serendipitous situation, could it be possible to conduct a trade or clothing/item swap with your friends? I think that clothing exchanges are an awesome idea. And don’t worry about having unmatched wardrobe sizes either since you don’t have to limit these trades to clothing. After all, you can also decide to trade accessories and shoes (okay, that may be a bit of a stretch, but you get the idea). Get a list of all your friends and/or family members and find out who among them would be interested in a clothing/accessories trade. Not only does this help you find new items for your wardrobe, but you get to declutter your closet as well. In my case, I’ve receive a countless number of hand-me-downs from my generous sister and mother who both have excellent taste in fashion. I have them to thank for what’s in my closet!

Get Cheap Clothes Online or Elsewhere With These Tips

If you’ve decided to get your first credit card, there are a few things to keep in mind. I believe that credit cards are a great financial tool when used responsibly. So whether you’re a college student just starting to receive credit card offers in the mail or you’re seeking to build your credit history, you might find the following tips and reminders helpful as you seek your first credit card.

Things To Consider Before You Get Your First Credit Card

Here are a few things to consider before you sign up for a card:

1. Know your reasons for owning a card.
Rather than fill out applications at random, stop to consider why you need a new credit card and determine what sort of card will fill your needs. Many credit card users like to make online purchases. Others use their cards for automatically paying for their utilities and other bills. Others enjoy the benefits of a credit card rewards program.

2. Make sure you can afford to own a card.
Before you sign up for one, make sure you can actually afford to carry a card around. You should also figure out where the credit card will fit into your financial life. Be honest with yourself and ask yourself if you can afford to pay off your balance each month. How much interest are you willing to pay? Can you make the minimum payment each month?

Start With A Secured Credit Card

If you don’t have a credit history yet, it can be difficult to find an unsecured credit card. So one way to establish your creditworthiness is to seek out a secured credit card. In most cases, you’ll be required to put up a deposit, with your credit line usually being equal to your deposit.

An example of such a card is Applied Bank’s Platinum Zero Secured Visa Credit Card. Through this card, you can obtain a credit limit of $500, but you’ll have to back it up with a $500 deposit. If you don’t have $500 to start with, you can open an FDIC insured deposit account with Applied Bank with just $100, and work your way up to the $500 required balance. Other features include an interest rate of 0% APR for purchases and 9.99% APR for cash advances. And as far as fees, there is no annual fee for this card but there does exist a $9.95 monthly fee. In my opinion, I’d consider the yearly payout of $119.40 as pretty much what stands for the annual fee for this card.

The benefit of applying for such a credit card is that there aren’t requirements for credit or income, which makes it easy to become a cardholder. Also, your deposit is covered by FDIC insurance. In addition, you’ll build your credit history when the issuer reports your account activity to the credit bureaus. The downside though is that secured cards may charge you heftier fees for the privilege of using them.

Another place to search for a secured credit card is through a local bank or credit union. If you already have a local checking or savings account, stop by your branch to ask if a secured card is offered.

Credit Cards for Students

It hasn’t been too long since I walked around my college campus and ran into credit card offers aimed at students. I’m sure it’s no different now. Well, my opinions on this matter haven’t changed either. I would suggest that you do some research first before you sign up for the nearest offer.

I would look for a card that offers:

• A decent line of credit (more than a few hundred dollars)
• An interest rate that won’t penalize you (below 18%)
• Low or no annual fees
• Some type of credit card rewards program, like the Citi ThankYou Points Network.

The great thing is that there are some credit cards right now that try to encourage the development of good and healthy credit card use among students. Check out this list of best student credit cards.

Let’s take a look at the Citi mtvU Platinum Select Card and the Citi Forward Card for College Students, which are on the list. They have no annual fee, a 0% APR on purchases for 7 months and can be used as balance transfer credit cards. On top of this, you can earn reward points for being a responsible cardholder — from taking care of your card account and credit line, to maintaining a solid GPA.

Another option for students is the Discover Student Credit Card. It has no annual fee and offers unlimited rewards. If you qualify, your APR for purchases is 0% for the first 6 months; then the standard 14.99 % variable rate kicks in.

Become an Authorized User

Another way to gain access to your first credit card is to become an authorized user on someone else’s account. For instance, credit-seeking students might be able to ask their parents to allow them to become authorized users.

But here’s where I’ve seen many a debate unfold on the issues of letting younger people gain access to credit cards. In fact, we even wrote about it in this article on how credit card companies get our kids to sign up. So as a parent, I always preach caution on these matters: it’s best for the cardholders and authorized users to agree on appropriate limits for the card’s use ahead of time. Unfortunately, some families are certainly going to run into problems if their authorized users max out their cards on spring break. There needs to be consequences on the first sign of card misuse.

For those who are planning to become authorized users, be aware of what’s expected of you once you sign up for a card. You should learn how your credit will be impacted if a negative event occurs. What happens if payments aren’t made on time or worse, if they’re skipped? Be aware of how your actions (and those of others on the same credit card account) will impact your credit.

Become a Savvy Credit Card User

You’ve probably heard of consumers mired in debt which they never seem to escape from. If you’re someone still waiting to get a hold of your first credit card, you can head off future financial trouble by preparing yourself now.

Know your credit card’s limit and don’t exceed it, otherwise you’re going to run up your interest rate and incur possible over the limit fees. Also, set up automatic payments for your credit card if possible. By making it a habit to pay your bills monthly in full and on time, you’ll be able to gradually build up to a solid credit rating and score.

My final tip? Be alert for the first sign of problems when managing your credit card debt. Once you start having debt problems, be proactive and cut up your cards or freeze them. You should only be using cards if they’re helping make your financial life easier.

How To Get Your First Credit Card

If you’re a first time investor, it’s best to start investing with mutual funds. Mutual funds offer a simple way to garner near instantaneous diversification, the liquidity to buy and sell whenever you want (within limits), along with professional management. In particular, you should consider index funds for their low-cost and tax efficient approach. I do think though that along with index funds, there’s room in a portfolio for Exchange Traded Funds (ETFs). ETFs, when used appropriately, are really an extension of the index mutual fund, but offer investors a myriad of opportunities otherwise not available to a regular old mutual fund.

Image from emagazine.com

Interested in ETF investing? Well here’s a brief primer on this investment vehicle: an ETF tracks an index or a basket of assets like an index fund, but trades like a stock on an exchange. These securities share the diversification and performance of an index fund, but their pricing, tax efficiency, and investment flexibility make them a lot more alluring for many investors. In fact, I know several financial planners who recommend nothing but ETF portfolios for their clients (even though many won’t because they don’t get paid through such recommendations).

Why ETF Investing Should Be Part Of Your Investment Plan

1. Exchange traded funds have efficient pricing.

Like stocks, ETFs trade throughout the day and their prices fluctuate accordingly. The pricing of an ETF closely tracks the price changes in its underlying securities. For most ETFs, there is a highly liquid market, making it possible for investment managers to execute buy or sell orders as soon as market conditions change. The pricing of an ETF is efficient because ETFs offer shares through a creation and redemption process. Check out this list of the best online brokers that offer low trading fees for ETF investing.

2. ETF costs are manageable.

Index funds are already quite low, but often, the expense ratio of ETFs can be even lower. Of course we like lower costs, because that means we keep more of the profits to ourselves! But, be careful: buying and selling an ETF will incur commission charges as you would trading stocks, so you need to consider this cost when evaluating overall investment costs.

3. Exchange traded funds are tax efficient.

I also like the fact that capital gains tax exposure is minimized with ETFs, due to passive management, low turnover and their unique redemption process. When redeemed, ETF shares are simply sold on the open market and the tax liability is usually based on the seller’s original purchase price for the ETF, just like a stock. The ability to buy and sell on the open market avoids the problem that mutual fund shareholders typically experience. In particular, when other shareholders sell shares from a fund, a mutual fund company may ultimately have to sell some of the securities it holds and realize a capital gain which is allocated to all shareholders of the fund. And don’t forget — mutual funds are required to pay out all dividends and capital gains annually. So even if the portfolio has lost value that is unrealized, there is still a tax liability on the capital gains that does have to be realized. ETFs typically do not have this problem.

4. ETFs have flexibility.

One of the biggest differences between an ETF portfolio and a regular mutual fund investment portfolio is the flexibility you get. This is more important for those of you who are a bit more sophisticated in your approach and/or who like hedging your stock investments. For instance, ETFs can be purchased on margin, bought and sold at intraday prices, and can be utilized with stop and limit orders or sold short. These are things that you can’t do with a regular old mutual fund. In particular, if you want to redeem your mutual fund shares during the day, you’ll need to wait till the end of the day to get your Net Asset Value (NAV), and therefore your sale price, locked.

ETF Investing: Some Shortcomings

I like the flexibility that ETFs offer: stop and limit orders can be beneficial to risk averse investors, and using an ETF for covered call writing provides great diversification for more conservative stock and options investors. However, I’ve got a few concerns. The technical gripes I have include the fact that the open market pricing gap between the NAV and actual share values (especially for a less liquid fund) can be quite noticeable and determined simply by supply and demand. So I can see how ETFs can potentially become more overvalued or undervalued compared to their mutual fund counterparts. Also, some ETFs aggressively target small regions, commodities and industries, and seem too risky for most investors. In this case, it’s investor beware! ETFs can be a great investment to own — just make sure you know what it is exactly that you own!

But probably my biggest gripe with ETFs is that they encourage short-term stock market trading and stock market timing. As an advocate of long-term investing, I believe that most people — professional or novice — are NOT able to adequately time the market on a consistent basis over time. But more than that, investors who frequently trade in and out of ETFs are racking up commissions costs and potential taxes that ETFs were, in part, designed to avoid. Look at the turnover rates that Business Week recently reported:

“Turnover rates for ETFs are at an average annual rate of 200% per year (an average holding period of just six months), with the most popular ETFs recently running turnover rates from 578% to 735%, all the way up to 7,100% (Russell 2000 iShares (IWM), a small-cap stock index) and 8,500% (SPDR Energy shares (XLE)). In all, some $390 billion of the current $410 billion ETF base represents a vast departure from the beneficial attributes of the original index fund.”

There are several ETF “trading systems” out there that look interesting, but I have yet to see one that offers superior, long-term performance. Those that “back test” their performance don’t offer me comfort. At some point, I’ll report back on what I find.

The bottom line here is that ETFs used wisely can be a great thing. You can use them as part of your long-term approach to lower costs, to reduce tax liabilities, and to achieve a solid and well-targeted asset allocation.

 
Contributing Writer: Todd Smith, CFP

ETF Investing: Why Exchange Traded Funds Are Part of My Portfolio

Imagine that you’re in a financial bind: would you be able to resist those ubiquitous ads around the web that entice you to “get a fast cash loan”? You may be one of those wondering how to get a personal loan in these tough economic times. These days, many people with little to no money are turning to high interest payday loans to assist them when financial emergencies arise or even to pay monthly bills. However, many do not realize the danger of cash advance payday loans until they are deep in debt with no way out.

Image from StopPaydayPredators.org

What exactly is a payday loan?

To put it simply, a payday loan is a short-term loan. An individual goes to a payday lender, writes a check for the amount they want to borrow plus a fee. The payday lender then holds the check for a short period, typically two weeks, and cashes it at the end of that period. The borrower may also have the option of extending the loan at the end of a two-week period if they don’t have the sufficient funds to pay. Now this is where people get into a lot of trouble because when loans are extended, these loans accumulate more fees. This is precisely why payday loans are dangerous — they’re extremely expensive because they charge an enormous amount of interest and fees, typically with an over 100% annual percentage rate. They are in no way, shape or form, a good way to manage money or borrow money.

Whom do payday lenders target?

It’s always the most financially vulnerable who fall prey to these arrangements. These loans are targeted at lower income individuals who have no other means of borrowing money when an emergency arises. You will notice that you will never see a payday lender in an upper class neighborhood, but you’ll often find these establishments well ensconced in geographically low-income areas. Customers of these establishments are individuals who need quick cash and are looking for an easy way to get it. And indeed, it can be a tempting “way out” for many poorer clients, since by simply writing a check (whether or not you have funds at the moment), you can get a cash advance payday loan and worry about the consequences later. It’s fast and easy, with no credit check required!

What are the consequences?

Financial counselors and experts will tell you that clients who begin using payday loans typically have a very difficult time paying them off. What typically occurs is an endless cycle of borrowing and paying until the individual reaches a point when they can no longer afford the fees and interest charges that have compounded from extending payday loans every two weeks. At this point, the borrower will call a credit counseling agency for help with paying things off. Unfortunately, it’s also at this point when their credit gets shot as they’ve become delinquent on their loans and see no way out, given the amount of income they are bringing in.

Have A Cash Advance Payday Loan? 3 Tips For Paying It Off

Unfortunately, most credit counseling agencies are unable to place payday loans on a debt management plan. Payday lenders rarely offer benefits or lower personal loan interest rates through credit counseling programs. Still, there could be constructive ways to help a payday loan borrower in a bind. If you find yourself in this position, then here are some options to consider:

1. Talk to the payday lender.
The first option is to try to negotiate. Call the payday lender and see if it is possible to speak with the manager of the establishment. You can then ask this person if they can place you on some type of hardship program where you can afford the payments and possibly have a lower interest rate. The same ideas apply here as you would if you wanted to lower your credit card interest rates. While payday lenders are in the business of making the most out of each loan they approve, they’re also eager to salvage agreements with those borrowers who are sincere about working out their payment problems.

2. Wait for your payday loan to go into collections.
Another option is to wait until your loan goes into collections. If you have borrowed money and the accounts are past due, you can expect your payday lender to go to great lengths to coerce and threaten you to pay. If you continue to be uncooperative, then eventually, your loan will be turned over to a collection agency. Once this happens, you may be able to roll over your accounts in collection onto a debt management program. This will provide you with a more manageable payment and an estimated payoff time.

3. Settle your debt.
Finally, you can try to contact a debt settlement company and proceed with a settlement, or file for bankruptcy. With this approach, you’ll need to deal with a bankruptcy attorney or debt professional.

Final Thoughts

You should avoid getting a payday loan as much as possible. Still, there are people who insist on securing such loans regardless of the consequences. If you are one such borrower, then make sure it’s truly your last resort to go down this path. Weigh the risks and the benefits of a quick cash advance or short term loan. The risks here are great, so your benefits (per your particular situation) better be worth the money you end up forking out, if you do decide to opt for a loan like this.

Always do your best to find other alternatives to borrowing. Perhaps you can find out how to apply for a loan through other avenues and sources. As an alternative, do your very best to save up for an emergency fund in a high interest savings account, so that you do not have to depend on a credit card, bank, or payday lender to get yourself out of an emergency. This is the best way to avoid falling prey to payday lenders.

Have A Cash Advance Payday Loan? Tips For Paying It Off

For us residents in California, we’re used to seeing budget cuts applied to a lot of things. The financial crisis in California is particularly apparent when you see its effects on the public school system. Well, this article from my local paper just made me wince, because as you can see, the story describes just another example of how our government (this time, at the state level) has been handling its finances.

Well, here’s the latest expose and more fodder on the California budget crisis — apparently, government employees have made off with pretty huge paychecks here in California, simply by NOT taking vacation time. Their unused vacation time translates into big six figure payouts, with the top 25 checks reportedly ranging from $203,921 all the way to a dazzling $815,736. Wow. Imagine this — those state government positions can be a gold mine, with overtime paying off for a whole lot of people. Here is an image that portrays this predicament (Click this link or the image below for a larger picture.):

And here’s a breakdown of vacation pay amounts across California agencies:

Small wonder California is broke.

Want to Attend A Suze Orman Event?

On another note, I’d like to inform you about a personal finance event that’s coming to Club Nokia in downtown L.A. this Sunday, March 14. Suze Orman is slated to speak at this club at an event called “Waves of Inspiration: Women and Money”. The seminar will feature Suze and other ladies and personalities who will talk about personal finance, self-growth and empowerment. For the curious, TD Ameritrade is the sponsor for this event. If you end up attending, you’ll also receive a free annual all-access pass to Suze Orman’s “Save Yourself Retirement Program” (reg cost: $40). There’s also a planned Q & A at the end of the seminar.

You can purchase tickets from Ticketmaster.com, or if you’re interested in picking up a complimentary ticket, let me know (contact me here) — I may have a couple to give away (while it lasts). Here are the event details:

WHAT: Waves of Inspiration: Women and Money with Suze Orman
WHEN: March 14th, 2010 at 2PM
WHERE: Club Nokia, 800 West Olympic Blvd., Los Angeles, CA 90015

Have fun!

Great Personal Finance Articles

• Wise Bread: Worried About Debt? Tips On Managing Your Loans
• Studenomics: Why Parent’s Shouldn’t Pay For Their Kids’ College Education
• Free Money Finance: Top Personal Finance Experts
• Lazy Man And Money: Build Your Financial Home Brick By Boring Brick
• Frugal Dad: Implementing PAYGO Rules For Personal Finances
• Million Dollar Journey: Canadian Income Tax Deadline
• Mighty Bargain Hunter: Would you out a friend’s spending patterns on Facebook?
• Miss Thrifty: The Festival of Frugality
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• Don’t Mess With Taxes: Carnival of Taxes
• FIRE Finance: The Festival of Frugality

Vacation Pay for Unused Vacation Time? Plus A Suze Orman Event

We’ve covered some of the best high interest savings accounts in the past, and I’d like to add a few more savings products to the list. While I associate American Express with top of the line credit cards, they actually also have a banking arm through which they’ve been offering a couple of high yield savings account options.

So if you’re looking for a place to stash your cash, and would like to work with a familiar name in the financial space, then I’d like to point out the following Savings Accounts from American Express Bank, FSB.

Personal Savings From American Express

American Express Bank has two types of accounts for your savings. Here are some details:

#1 Online Savings Account

The High Yield Savings Account from American Express is an online savings account that currently yields a 1.30% APY, with interest compounded daily. This account does not require a minimum balance and does not incur any fees. You’ll also get 24/7 access to your account via phone or the web. And of course, your accounts are fully FDIC insured. You’ll be able to access your money through the standard methods of electronic transfer and check writing.

#2 Certificates of Deposit

The American Express Bank also offers a variety of certificates of deposit of varying terms. Just like their savings account counterpart, these accounts are FDIC insured, are accessible 24/7 and don’t charge a monthly fee. Their terms range from 3 months to 5 years (60 months); the corresponding interest rate you can earn ranges from 1.00% APY for the 3 month CD to 2.95% APY for the 5 year CD. A one year CD yields 1.50% APY at this time.

These look like great options for your cash funds. For more information on these offerings, you can always check out the official site for Personal Savings from American Express. You can read more about these products through the site’s FAQs, as well as open an account in no time.

Personal Savings from American Express Review

Some more retirement investing advice.

So how long do you think you will live? I am thinking I will make it to age 81. Well, if I’m lucky. My grandmothers lived to be 88 and 93 so that’s pretty good. The men in my family have all passed in their 60s or 70s. Uplifting thoughts, huh? Morbidity aside it really is important to think about your life expectancy and whether you are really ready to live for a century.

So, what do you think your chances of living to a hundred are? Of course, the fairer sex always wins this particular “race”, if you see it as such. Here’s how it generally breaks down:

This table shows the chances that an American man or woman will reach the target age specified, given that they’re currently middle-aged (in this case, that age is 40). If you’re looking for something more accurate, you can do a search for a mortality or longevity calculator. These statistics are for the “average” man or woman and do not really account for things like genetics, lifestyle, etc.

Following is a Wikimedia map to see what life expectancies are like around the world. If you can’t make out the label and details, just click the graphic and it will expand to a larger image. Basically, this is what the colors break down to: Dark Red = life expectancy of under 50 years; Red = life expectancy of 50 to 60 years; Orange = life expectancy of 60 to 70 years; Yellow = life expectancy of 70 to 75 years; Light Green = life expectancy of 75 to 80 years and Dark Green = you’re expected to reach 80 or older. Well isn’t that interesting! People in Australia and Canada on average, live the longest?

The good news is that there are more centurions alive in America today than in the past, and the U.S. has been in the forefront of medical advances. Also, lifestyle changes and diet allow us to increase our chances of living longer each day. The flip side of this are the issues posed if we do beat the odds: not many of us may be financially prepared to live long lives. For some of us, it would have a potentially disastrous effect on our families.

For instance, a poll by Money Magazine found that 3% of respondents worried about losing their health, 69% of losing their mental abilities, and 60% of running out of money. Where do you fall? What worries you most? Personally, my biggest fears are that of losing my health and running out of money. Not necessarily for my sake, personally, but because I would most likely become a warden of the state or a burden on my family or both.

Financial Retirement Planning For A Life Expectancy of 100

Let’s go through a few issues involved when planning for the distant future. Here are a few considerations I found important:

1. Review life expectancy numbers.
Of all the assumptions made in financial planning (inflation, rate of return, tax brackets, etc.), your life expectancy is probably one of the biggest of all. Using the wrong number can be detrimental. I would always suggest using a higher number than you think. The averages listed above are just that, averages. They do not reflect anything about diet, exercise, family history, etc. I have always focused on the century mark as a “worst” case scenario.

For instance, based on your projections, you may want to ask yourself: how would you fare should you live to a 100? But, this is the part that truly becomes overwhelming for people. Here’s an example I’d like to run:

Using the landmark ages above (85, 90, 95, and 100), how much would you need to cover your expenses should you spend $75,000 a year currently? The answer (excluding social security or pension payouts) would be $2.5 million (age 85), $3.6 Million (age 90), $4.6 million (age 95) and $5.9 million (age 100).

Those numbers look daunting for anyone. It’s no wonder that people run and hide from planning and avoid trying to provide for their future. But, with the proper planning and due diligence on your part, these numbers seem less awe inspiring. For instance, there are other considerations you’ll need to make — perhaps your expenses may not be that high, or you may be expecting social security and/or pension payments that will supplement your portfolio earnings. Some of us may even consider working past retirement, and may therefore need less. But the point of all of this is to have some idea and plan for it.

2. Visualize your retirement years.
I think it’s a good idea to visualize your retirement years as definitively and concretely as possible. This will help you narrow down exactly what your expenses will be. Part of that is knowing where you are going to live (check out this piece on best places to retire for cheap).

Don’t make the mistake my parents made by moving to some remote area in Colorado. Not only are their winters rough, but access for family members flying in for support is harder and expensive, medical care is less abundant, and networks to nurture and support their older days are few and far between. They also did not think about the practicality of living in a farm house structure. While charming in its own way, it offers a host of challenges for my father’s health now and will become more problematic when they reach their 70s and 80s. Of course, they retired in their 50s and did not think of these things. So, please know where you will live and why.

3. Don’t underestimate your retirement expenses.
You also don’t want to underestimate your retirement expenses. Many people assume that they will spend around 85% of their current expenses in retirement, but that’s pretty arbitrary. You must factor in again where you will be living, your expected lifestyle, getting help as you age, and the huge costs of healthcare. All these factors can lead to your retirement expenses (or income need) being the same or even higher than when you were working.

Some scary statistics from the Employee Benefit Research Institute study showed that a 65-year-old today would need to have socked away at least $122,000 to have a 90% chance of fully covering his or her future healthcare costs. And, that’s with employer-sponsored retiree insurance. As if retirement wasn’t hard enough for many people. So check if you’ve saved and invested enough for your retirement. Make sure to factor additional costs in and try to become properly insured to cover the extras (long-term care, etc.) Otherwise, as you reach the century mark you may easily run out of money.

So, how long do you think you’ll be around? How does that factor into your planning and your current savings and investment plan? Please do yourself and your family a favor and get as specific as possible about your retirement plans. You will most likely be around a lot longer than you think and you want to be prepared.
 
Contributing Writer: Todd Smith, CFP

Financial Retirement Planning For A Life Expectancy of 100

Would you know how to remove spyware, malware or any computer virus off your machines? Revanche of A Gai Shan Life shares her stories and questions on the matter of keeping one’s computer clean! For more of her delightful anecdotes on life and finances, you can subscribe to her RSS feed.

The pop-ups and virus alerts were off the charts for me yesterday.

When Avast and Microsoft Defender both failed to trace which nervy little bugger was causing Internet Explorer, the bane of my browsing existence, to pop up with nonsense and Failed 404 error pages, I did what any savvy netizen would do: I emailed my young cousin, the family tech geek.

It was a much easier diagnosis than usual. He promptly (for a footloose and fancy free college student) emailed back with his suggestion. The free anti-malware du jour, he said, is found at Malwarebytes, a program that his private college uses in their tech department. I had some trouble initially downloading and running the purportedly free program, but I eventually worked it out and was presented with a list of infections discovered in my computer (most of which I recognized from the invasive IE pop-ups) along with a Paywall to fix them.

Verdammt!

Intrepid cousin did a few more evaluations. I then ran the nearly hour-long scan for a thorough check. This time, the program came through with flying colors, finding and repairing all points of infections. We’ve been running a clean ship ever since. I highly recommend the Malware program as an adjunct to your primary virus protections.

How To Remove Spyware, Malware or Any Computer Virus?

The quick and free (but for family favors) service got my wheels turning. I almost always have the benefit of a family or family friend’s expertise when it comes to IT maintenance; the one time I used paid “experts” at the local Best Buy, I sorely regretted the experience.

In short, when it came to having “professionals” work on my computer, I did without my machine for two weeks whilst they “diagnosed” the problem and called me back to the store with a regretful, “We can try running a [insert unintelligible test here] but it’ll cost $200 and then the repair will be extra. Oh, and you’ll lose all your data whether or not we can fix the problem.”

Thanks but no thanks! Here’s what I ended up doing: I took my neglected machine home to find that the Geek Squad had left their mark in the irreparably broken brightness function. Robin managed to salvage the machine AND my data, but we co-existed with eye strain for another three years (always with a touch of resentment that my precious Vaio had been violated).

The late lamented CompUSA was always a decent resource for new parts and somewhat informed advice, but where does one go now for good IT and computer hardware assistance? Other than cultivating your very own Family Geek, do you have a reliable resource for troubleshooting? Would appreciate your thoughts!

As an aside, it’s always a good idea to be prepared for computer downtime. Check out these articles on this subject:

• Carbonite vs Mozy: Online Backup Services
• Back Up Your Data And Save A Thousand Dollars

How To Remove Spyware, Malware or Any Computer Virus?

Can this interesting stock trading strategy help you beat the market? Let’s see what Stephen Jeske, an independent option trader, has to say. He’s come up with themeatballeffect, a complete swing trading option strategy. If you’ve gotten your diversified, core investments off the ground, have picked up some free investing tips and ideas from brokers like TradeKing and Scottrade, but would like to be a bit more adventurous, then you may be interested in learning how to manage trades for maximum profit potential.

Disclaimer: the following information is not for the weak-hearted. What’s ahead is a description of some pure stock market plays (and trades) that I’d consider only relevant to those who are highly interested in active investing and trading (e.g. this may not be for the average long term equity investor).

Image from AutomatedStockTrading.org

Think of your favorite stock. Surely, there must be a price at which you would be willing to buy more. Conversely, there must be a price at which you would gladly sell your existing shares. Today, we’ll show you how to buy that stock at a discount and sell it at a premium each and every month. The goal is to do this consistently enough so that you increase your portfolio returns while reducing its volatility. This technique can also be a wonderful complement to a mutual fund investment portfolio or a basic stock portfolio.

Regular readers of The Digerati Life may already have read about using options to buy stocks at the prices you want. But it’s the combination of both techniques, buying at a discount and selling at a premium, that really makes the difference.

Getting Started With My Stock Trading Strategy

The best way to learn this technique is by discussing an example (but I’ll change the names). The only thing I will leave out is the commission and taxes. We won’t use any margin here either. So let’s check our favorite stock The Digerati Life (symbol TDL).

As I’m writing this, my discount broker account shows that TDL is currently trading at $127.47. Let’s buy 100 shares for a total cost of $12,747. I’m willing to sell my 100 shares of TDL for $135 if it hits that price over the next several weeks (e.g. 58 days).

So I sell 1 MAY 135 Call for $62. (100 shares equals 1 option contract).

I’m also happy to buy 100 more shares of TDL for $120 if it hits that price over the next several weeks. I have an extra $12,000 cash sitting in my online broker account, ready to buy those shares.

So I sell 1 MAY 120 Put for $107. (100 shares = 1 option contract).

Now whatever happens, I get to keep the $169 ($62 + $107) option premium that I sold. Let’s look at the possible outcomes:

1. Scenario 1: TDL reaches $135 or more at the end of 58 days. My stocks get called away. By selling that call option, I agreed to sell my stocks at $135. So I’m selling at a premium because I also collected $0.62 + $1.07 per share from the call and put I sold. I’ve made a profit on the stock, I’ve made a profit on the call option I sold, and I’ve made a profit on the put option I sold. Altogether it works out to a 26% annualized return.
2. Scenario 2: TDL reaches $120 or less at the end of 58 days. I have to buy 100 more shares of TDL at $120. That’s the agreement I made when I sold the put. (I’m buying at a discount but I’m also collecting $0.62 + $1.07 per share from the call and put that I sold). I’ll have a paper loss on my shares, but I will also have an extra $169 cash in my account. That’s from the put and call that I sold.
3. Scenario 3: TDL remains in between $120 and $135. Both the put and the call expire worthless. I will still have 100 shares of TDL and $169 in cash from the call and put that I sold. I’ve reduced the cost basis of my shares by $1.69 per share.

But what do we do in the next cycle?

1. In the first scenario, I could buy 100 shares again, then sell 1 call and 1 put.
2. In the second scenario, I could sell 1 or 2 calls, since I now own 200 shares. I could also sell a put, if I were comfortable with yet again owning more shares.
3. In the third scenario, I can sell 1 call and 1 put, since I own 100 shares.

Using Options to Enhance Returns: The Key To Making This Work

This strategy works best on the more stable stocks — definitely avoid dealing with the cheap stocks. Also, any companies in wacky industries will just cause you too much grief: sure, you can collect a lot from selling the options of volatile stocks, but that’s because these stocks move around a lot… in fact, too much in most cases.

You also need to acknowledge the fact that you can’t predict prices. You can’t be greedy nor resentful; you need to focus on your own success. Use this technique consistently and you won’t have to worry about stock market timing.

If the stock shoots way up and it’s called away, you can’t be too upset. You made a good profit, be happy. If the stock drops to the strike price of the put ($120 in our example) you have to be comfortable buying it. You can’t be second guessing yourself and constantly changing course mid-stream.

In order for this to work well, you need to be consistent, systematic, disciplined and capable of following a plan. But aren’t those the hallmarks of a successful investor anyway?

My Stock Trading Strategy: Using Options to Enhance Returns