Why Index Funds Are the Best Choice for Most Investors

There are two basic ways to invest in equities. One is to take on the life of an active investor by researching, selecting, and tracking your own stock holdings or those of various actively managed funds. The other is to invest your money in index funds and then sit back, relax and enjoy the ride.

While it may seem that investing in index funds is the lazy man’s way to investing in stocks, it is also the more successful path for most investors. Index fund investing spares you a lot of the cost and complication of trying to be active investor.

Time and Effort

Being an active investor takes work! You have to follow market trends, track industries’ individual stocks, research your investment choices and, once they’re made, constantly monitor them for changes in position. That’s a lot of time and effort that most people don’t have.

By investing in index funds you don’t have to do any of that. You’re investing in the market and going along for the ride. Index funds really are a passive way to play the stock market. Rather than betting on any given stock, industry group or fund manager, you’re relying on a given index for that market or industry. You make a single decision to buy into the index fund and then you’re done.

You can invest in general market indices, such as the S&P 500. Or you can invest in index funds for individual sectors, such as emerging markets or technology.

You Probably Have Better Things to Do

This is the flipside of the time and effort factor. If you are retired or independently wealthy or in some other situation where you can devote a full-time effort to investing, then the active approach might work for you. But most of us have other things going on in our lives that don’t permit that kind of effort.

If you have a full-time job, a family, and an active life, those activities are probably soaking up most of your time – as they should. And in all probability, you work in a job that isn’t related to investing. That means that you are an “expert” in some other field. That field needs to get the bulk of your time and attention. Since you only have so much time and energy, active investing may take you away from that.

Fees!

A built-in problem with active investing is fees. Trading individual stocks involves transaction fees, and actively managed funds have higher fees than index funds. As an active investor, these fees will reduce your investment return. That can have a substantial negative effect on your investment portfolio over the long run.

Since index funds are passively managed, fees are reduced. This will improve your long-term investment return.

You Might Beat the Index Averages One Year But Lose the Next

One of the attractions of active investing is the potential to beat the market. If you are not content to earn market averages, and have a sense that you can do better, the idea of active investing will appeal to you.

But when it comes to investing, reality doesn’t usually match up well with our desires. You may beat the market averages in one year or even two, but you’ll probably give it back in other years.

One of the problems of active investing is the potential to fall in love either with your investment holdings or with your investment philosophies. For example, if you’re partial to certain technology stocks, you could get stuck holding too many when the market falls.

With index funds you’ll never be overweight in any stock.

Most Funds Managers Don’t Beat Market Averages Either

You don’t necessarily have to hold individual stocks in order to be an active investor. You can also invest in funds that are actively managed. But like active individual investors, actively managed funds also attempt to beat the market, and that adds greater risk.

The reality is that most actively managed funds do not beat the market, and in fact many under-perform it (some studies even indicate that most actively managed funds under-perform the market).

Just as is the case with individual investors, a fund manager may beat the market in some years but under-perform it in others. The net result isn’t as pretty as the advertising copy often suggests.

When you invest in index funds, you can never under-perform the market. Since the first rule of investing is not to lose any money, index funds put you ahead of the game. With all of the risks involved in active investing, most people will be better off using index funds instead.

What is your investing strategy? Leave a comment and let us know what you think of index funds!

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How to Avoid Drowning in Debt

Most of us are pretty close to drowning in debt and we don’t even realize it.

If you think of the Atlantic Ocean as a big sea of debt, some people in our country are living on land, out of the debt; but the majority of us are actually sinking in the sea of debt.

Cash Flow Submarines

People with positive cash flow have managed to build a little bubble, like a submarine, to protect themselves from the mortgage, auto, and credit card debt they’re surrounded by.  We float from day to day, feeling relatively safe, making enough payments to keep the crushing weight of debt at bay for another month.

However, one little puncture in our fragile positive cash-flow shell can spell disaster.  As the interest charges, late fees, and damaged credit start to pour in through the hole, our protective shell quickly starts to lose its strength.  As we rush to plug the hole, several others open up and it’s just a matter of time before it can’t hold back what we owe and we’re drowning in a sea of debt.

How Not to Drown in Debt

1. Carry less debt.

Of course, the less debt you have, the closer you are to the surface and the more likely you are to survive a swim out of debt.  Set up a plan to stop accumulating debt and start pay down what you owe.

2. Find additional income now.

The worst time to try and find ways to make extra money is when you really need it because then you’re more likely to get sucked in by scams or shady deals.  Instead, start looking now for different ways you can make extra money to help supplement your income in case you lose your job.

3. Buy insurance.

Try and get insurance to cover yourself against catastrophic expenses like car accidents, medical conditions, natural disasters.

4. Build an emergency fund.

Your emergency fund is exactly what you need to plug any holes that appear.  What’s really devastating is when several open up at once, ie. your furnance quits, car breaks down, and two weeks later you lose your job.  You spend a bunch of money and then suddenly your household income is drastically reduced.  For whatever reason, it seems like problems like these seem to crop up in groups so build up an emergency fund that can keep you going through a few months of tough times.

Are you drowning in debt? Do you see a way out? Leave a comment and tell your story.

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Disability Insurance – Protecting Your Income if You’re Unable to Work

What would happen to a surgeon that lost his hand in a home project accident? What would happen to a construction worker who lost the use of his or her legs? What would happen to a single mother who became ill for an extended period of time and couldn’t work as much as she needed to?

Disability Insurance Questions and Answers

These are questions to help you start thinking about short-term and long-term disability insurance. Let’s be honest, you’ve never daydreamed about buying disability insurance. It’s one of the least known and least purchased insurance policies in the United States by individuals. Thankfully, many companies will buy some type of disability insurance as a benefit to you.

Someone who makes $50,000 a year and works for 40 years will make $2 million dollars in their lifetime, and that doesn’t even factor in inflation. With inflation, the number is more like $3 million. Your income is your most important asset and your best tool for building wealth. This is why you MUST protect it by insuring it properly. Here are five things you need to know about disability insurance.

1. Who needs disability insurance?

Everyone who works and depends on their income to survive and pay bills.  Sounds like just about everyone, huh?

2. Does my disability insurance cover me between jobs?

It depends.  If your employer pays for your disability insurance as part of your benefits package, then it will terminate once you terminate your employment.  There might be an option for you to start paying the premium after your employer stops paying it, but you’ll have to contact the carrier directly to ask about that.

If you buy an individual policy, the policy will always cover you, even between jobs, but if you change jobs from one industry or type of job to another, you’ll need to notify your carrier.  Disability insurance rates their premiums based on your job and the level of risk involved in doing that job.  So, if you go from a desk job to a skydiving instructor, you better let them know or the insurance contract could be void, which means they would not pay the claim.

3. Is there supplemental insurance that I can get?

Yes, if your employer’s policy doesn’t offer as much as you want, you can always purchase more on your own.  AFLAC has great short-term disability policies and supplemental accident insurance policies.

4. What’s the importance of short-term and long-term disability insurance?

I recommend having both, because you just never know what might happen to you.  Your income must be protected, especially if you are the sole wage earner in your household.  Your family depends on your income, and you must insure it.  Short-term disability is typically great for working women that are pregnant; you can replace some of your income while you’re not working during maternity leave.

Long-term disability is extremely important, because if you’re disabled to the point that you can’t perform your current job or career, you could face financial hardship the rest of your life.  Especially for those of you in high-risk jobs, you must have this.

5. What if I’m not totally disabled, but only partially?

Make sure you have OWN-OCC disability insurance.  This ensures that you will receive benefits if you are unable to perform your current job.  Some disability insurances will not pay a benefit if you can still work.  For instance, a surgeon that loses feeling in one arm, but he could technically still be a check-out clerk at Wal-Mart.  This disability policy is crap.  Make sure you have own-occ, and ask your HR department if that’s what their policy offers.

Don’t be caught without income insurance.  This is basically what disability insurance is when you boil it down to the core.  Disability insurance should be cheap, unless you have a dangerous job like being a window washer.  There’s no reason not to have it.

Do you have disability insurance? Are you convinced you should get it now? Leave a comment and let us know!

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How to Save Money on Magazines

Follow the tips below and you can read all the magazines you want for little to no money out of your pocket! The tips are listed in order of most expensive to least expensive so if you really want to save money be sure to read them all.

1. Throw Away the Bill

Once you subscribe to a magazine you’ll begin getting vague letters on how your subscription is ending and telling you to send in payment now for two years to guarantee continuous coverage. I was so annoyed by the attempts of Hearst Corporation to trick me into paying for subscriptions frequently and pre-maturely that I tried a little experiment.

I threw away every letter I received from Hearst Corporation and it took me 8 months from the first letter until I stopped getting Smart Money magazine. Ignore their sneaky letters trying to get you to renew your subscription way before it’s due. Throw away their bills and you’ll know once your subscription ends because they’ll stop sending the magazine. Then you can pay the bill and the magazine will start showing up again.

2. Buy it on eBay

Why pay what the publisher charges when you can spend almost half as much by buying the exact same magazine on eBay? Keep an eye on the magazine listings on eBay and you’re guaranteed to find a good deal. Make sure the one you buy doesn’t charge you any shipping fees.

3. Ask for the Magazine as a Gift

This approach will still cost your friends or family money but you won’t pay a dime. I ask my parents for Smart Money or Kiplinger Personal Finance magazine subscriptions every year as a birthday or Christmas gift. This is a win-win; it is an easy gift for them to give and doesn’t cost you a thing.

4. Free Magazines at Work

The magazine rack at work is always full of recent editions of Business Week, U.S. News & World Report, Business 2.0, Fortune, Computerworld, and many more magazines. Companies send subscriptions to the decision makers in our company but they’re often to busy to read them so the magazines go in the free rack. Sweet deal for the rest of us!

If you’re looking for something less newsy this approach can work as well. My wife has several co-workers that read US and People magazine then bring them into work to pass around to others.

5. Use the Library

This one is pretty obvious. I find it works best for magazines that are a month or two old because my library lets people take them home without even checking them out. You bring them back whenever you’re finished; of course the negative is you can’t tear out interesting articles for future reference.

6. Read Articles Online

In this Information Age, there is so much free information available online. Many magazines make their articles available on the web after they’re published in print. The great feature here is that you can search on keywords to find articles that you’re interested in, a feature the printed version obviously doesn’t have. Being able to bookmark the article for future reference is also nicer than filing away a few ripped out magazine pages.

7. Take Your Pick from the Recycling Bin

Every time I recycle I’m amazed at the number and variety of magazines piled up in the recycling bin. This is probably the least preferred approach but it will work none the less. Of course you have to sort through the magazines but there are many for the taking.

I haven’t tried this one because the previous tips meet my needs but if the earlier ideas don’t apply to you, try this one out. As a side note, if you recycle your magazines, be sure to cut out your address from cover so others can’t get your information.

There you have it. Now there’s no excuse for you to ever pay more than zero to a few bucks for a magazine ever again!

Do you buy magazines? What are some more ways you can save money?

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Should You Buy Life Insurance or Invest First?

If you were to ask me five years ago, what you should do first; buy life insurance or invest into a Roth IRA, there is no question what my response would have been. Without a doubt it would have been invest into a Roth IRA and not wait to invest. Tax-free money baby! As a young investor myself, I get super excited about the idea of compounding interest, and how much a Roth IRA will grow to be over the next several years. Seriously, it gives me goose bumps just thinking about it.

After orchestrating the Life Insurance Movement where my goal was to bring awareness to all those that don’t have life insurance, that same question came up again:

Should you buy life insurance or should you invest first?

I found myself debating over that exact question again, and guess what happened? I didn’t have the same response. *Shocker!*

But why? Did I fall out of love with the Roth IRA? Nope, not at all. Let’s see what changed.

You Should Never Buy Life Insurance If . . .

First things first. If you are a young and single adult with no dependents, then there’s no point reading after this section. Do not buy life insurance. At least not yet. Buying life insurance might sound like the responsible thing to do, but you have no one to be responsible for; i.e. dependents. The better option is to invest. If you want the same goose bump effect that I have, then open a Roth IRA.

Not sure how to get started? Ben has an awesome post that walks you through how to get your IRA setup in less than 10 minutes.

Is there an exception to this? One exception could be if your parents have loaned you a lot of money, say for school or whatever financial bind that you’re in. In that case you could take out a short term policy to pay them back if something were to happen to you. Is that required? No. Is that a mature and sweet thing for a kid to do? It sure is.

Why did I change my mind?

The big change is when I started thinking about my family and my three young sons. If I was at a point in my life where I could only afford to do one or the other; buy life insurance or invest, and I had a family that was reliant on my income, what makes the most sense? Buying a cheap life insurance policy for $25 a month, or investing that $25 a month into a Roth IRA that will eventually grow to be a very large number?

If something happened to me today, my family would far greater benefit from me buying a life insurance policy than funding my Roth IRA. This might seem like common sense to many, but for me this didn’t sink in until now.

I’m not sure why it took becoming a family of five until I finally figured this out, but now it’s blatantly obvious. Over 1/3 of U.S. families don’t have life insurance so I know it’s still not common place. It’s time to wake up and get insured.

What would you do first, buy life insurance or invest? Share your answer and reasoning in the comments below.

By the way, if you are doing both, paying for life insurance and investing, consider yourself ahead of the curve. 🙂

Jeff Rose is a proud Iraqi combat veteran and certified financial planner. He blogs at Good Financial Cents and Life Insurance By Jeff, but primarily spends his day craving the next time he can eat In-N-Out Burger again.

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Betterment, Kapitall and Motif – Which Will Work Best for You?

There are a number of relatively new online investment services coming to the market with unique approaches to investing. Three of the more popular are Betterment, Kapitall and Motif. Each has its own pluses and minuses and can work for a different investment purpose. Which one will be best for you? We’ll take a look at all three side-by-side and try to help you answer that question.

All three investment services have been summarized on Money Smart Life, so we’ll just hit the high points here (including recent revisions).

Betterment

Betterment‘s investment strategy is based on two investment options: a treasury bond basket and a stock ETF basket. Each basket includes a mix of different ETF’s that are selected by Betterment’s management in what they consider to be the optimal mix for that investment class.

The purpose of this approach is to keep this strategy simple. All the investor needs to do is decide on a portfolio allocation for each basket and the rest is handled by Betterment’s management.

For the Basic account, there is no minimum account balance. However, that type of account does require minimum monthly deposits of $100. The monthly deposit requirement ends once your account balance reaches $10,000.

In regard to fees, Betterment is one of the best investment deals going. They don’t charge transaction fees! Instead they use an expense ratio that’s based on account size. For the Basic account the annual fee is .35% of your account balance. If you have $5,000 in your account you would pay $17.50 per year. The annual fee drops to .25% for the next tier that starts with the balance of $10,000. On balances of $100,000 or more, the expense ratio is reduced to .15%.

Betterment now offers Traditional and Roth IRAs and allows rollovers into those IRAs as well.

Kapitall

Kapitall offers a unique feature that allows you to “test drive” investing by playing an investment game before venturing into the real thing. How many people actually try the game first is an open question but it’s an interesting feature that could be a benefit to a novice investor who wants to try it on paper before committing real money.

Like Betterment, there is no minimum balance required. Transaction fees are on the reasonable end of the scale at $7.95 per trade.

One of the issues of Kapitall is that investment choices are very limited. In addition, the service offers no provision for retirement accounts such as IRAs. But like Betterment, it is a relatively new venture having only begun operations in 2008.

Motif

Motif is completely unique in its approach to investing. The system uses a unit similar to a fund, but refers to them as motifs. Each motif is a unique investment creation in that it is built around themes and ideas that are developed by the investors in the system. Though you purchase a motif as a single investment unit, you hold the stocks within it as a direct owner.

Motif does have an investment minimum of $250. And there is a transaction fee of $9.95 per trade. The commission is high when compared to discount brokerage firms, but it is being used to purchase the motifs which are not only customized, but completely unavailable elsewhere. As such, you’re paying for a unique product.

It’s important to remember that Motif itself does not provide professional investment management. A motif is established by the investors in the program and you as an investor have the option to buy into that motif or to try and customize one in a different direction. It’s a bit complicated, and probably is not something for the average investor, and certainly not a beginner.

Unlike Kapitall, Motif does offer IRAs including rollovers. The company is even younger than the other two, having been founded in 2010.

Which will work best for you?

Though all three investment strategies have definite similarities, there are nuances for each that would appeal to a different type of investor.

Betterment is probably the better choice for the average investor. It offers professional management and uses a mix of various ETF’s in order to accomplish investment goals. It’s a simple system in which all you need to do is decide on your portfolio allocation. The fees are very low and the system requires very little trading activity.

Kapitall is probably best for a beginning investor. It offers the online investment game that can help the novice investor find his or her way around the investment world before trying the real thing. This can also help a new investor determine what their risk tolerance is and that’s very important for any investor.

Motif is probably the better choice for the seasoned investor who is looking to try something new and different. You have to have some understanding of investments in addition to a desire to invest in a very specific type of asset mix. The program also offers retirement accounts, which will be an obvious advantage to someone looking to prepare for retirement.

Which investing option is right for you? What interests you most? Leave a comment!

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Is it Possible to Save Too Much for Retirement?

On the surface, this seems like a ridiculous question, but I‘m going to put on my contrarian’s hat here and dare to raise the question. There are probably far more people who are inadequately prepared for retirement than there are people who are over-funded for it. And yet retirement preparation can be a little bit obsessive at times.

It’s not that being well-prepared for retirement is a bad thing, but more that nothing that we do ever happens in a vacuum. While we’re preparing for retirement other things are happening in life. We could miss them if we’re too focused on planning for retirement.

Are You Forgetting The Near Future?

Retirement planning is about preparing for the final years of life. We can become so focused on preparing for our later years, that we can neglect the present and the many years that will play out between now and retirement.

A factor that is often neglected in the retirement equation is that many people may find themselves in their peak earning years during what we normally think of as the retirement years. If for example, you have a very successful business, you may find that the business increases throughout your life. Many people who have their own businesses never retire. When you work for yourself the desire to retire often doesn’t exist.

If this turns out to be your situation, then retirement preparation will have been mostly to develop an income/asset supplement more than anything else.

Paying Off and Staying Out of Debt

It’s possible to get so caught up funding your retirement that you find other ways to pay the bills in the present. That sometimes takes the form of debt. Your retirement plan rises over time, but so do your debts. Because so much money is going into retirement, less available for routine purchases, for making large down payments on major items (like cars), or even for paying down your mortgage.

If you have $100,000 in your retirement plan but you also have $50,000 in car loans, credit card debt and other loan types, it’s almost like having a margin loan on your retirement plan.

Having a well-funded retirement plan is an important goal, but so is maintaining a debt free position. And getting out of debt actually helps your retirement planning in a major way. The less debt you owe, the more money you have available to put in your retirement plan.

Investing Outside Retirement

It’s not unusual for people to have most of their money sitting in a retirement plan. But as important as retirement is, it’s equally important to save and invest money for other contingencies as well.

You can have an emergency fund that will help you in times of crisis, such as the loss of a job. But what happens if you have a sequence of major expenses or if the job loss is more than short-term? Your emergency fund will be drained in a hurry, and if you have no other savings or investments, you’ll either have to borrow money or consider tapping your retirement plan.

Another situation that’s becoming increasingly common is either forced or voluntary early retirement. It’s important to have non-tax sheltered money available for just such an event. That will prevent you from having to draw down your retirement savings ahead of schedule.

Helping Others

Most of us have a certain amount of discretionary income that will cover non-survival expenses, such as entertainment and travel, paying off debt and funding retirement. Somewhere in there should be room to help others. This is particularly true of those who are close to us, such as extended family and close friends.

How many people you want to help and how far you go with each is a personal decision. But if you have the means, leaving a little extra for just that purpose can enable you to help out where you can.

Building a Business

It’s possible to be so concerned with building your retirement plan that you’re hesitant to do anything to interfere with the process. You could stay at a job that you don’t especially like because your 401(k) plan is doing particularly well. You may harbor thoughts in the back of your mind of one day leaving your job to start a business in something you really enjoy. But you put that off because it might interrupt or even end your contributions to your 401(k) plan.

The years pass and you never do pursue the business idea. Retirement becomes a self the filling prophecy–you can’t quit your job because you have to fund your 401(k), so that you can retire and get away from your job. Throughout your career however, though your 401(k) is healthy, you’re never truly happy.

But let’s say that you do decide to quit your job and start a business? You’d be doing work that you enjoy while building your business and increasing your income. Soon enough you’ll be able to start a retirement plan through your business and resume increasing your portfolio. But even better, when you do reach retirement age you’ll have a business and that will open up some options.

You can either decide to sell the business to raise extra money for your retirement savings, or you could keep the business into retirement and use it as a nice supplement to your retirement income.

But that kind of opportunity will only happen if you’re prepared to let go of your job – and the 401(k) attached to it – and take a chance on starting the business. If retirement planning is the main force that drives you, you may never take that chance.

As important as it is to save for retirement, it should never dominate your financial situation. Many other obligations and opportunities are developing all around you, right here and right now. Make some preparation for the future, but don’t allow today to be neglected in favor of a retirement that may be decades away.

Are you investing for retirement? Or are you focusing on other financial goals? Leave a comment and let us know!

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What to Do About a Stolen Debit Card

For the most part, debit cards are about as easy and convenient to use as credit cards. But a stolen debit card–that’s where things get a bit more complicated. When a credit card is lost or stolen, your liability is limited to no more than $50. When a debit card is lost or stolen, you could be on the hook for a good bit more.

Potential liability for a stolen debit card

How much you can lose on a stolen debit card will depend entirely upon when you report the theft.

• If you report the theft before the card is used by the thief, you will have no liablitiy
• If you report the theft within two business days your liability will be limited to $50
• If you don’t report the theft within two business days your liability will be up to $500
• If you don’t report the theft within 60 days of the mailing of the bank statement containing unauthorized use your losses are unlimited
• If the loss is due to the theft of your debit card number and not the card itself, you are liable only for transfers that occur after 60 days if you have not reported the loss

The unlimited loss can extend beyond the funds deposited into your account, to the unused portion of the credit line used for overdraft protection.

Report the theft to your bank–immediately!

As soon as you determine that your debit card is missing, report it to your bank without delay. Don’t speculate that you may have misplaced the card–assume that it was stolen. In the hours that you might spend looking for the card, a thief could be running up hundreds or even thousands of dollars in charges. And since it’s likely that the thief knows that the charges will be declined the moment you report the loss, he’ll probably waste no time putting your card to his good use.

Once you report the theft of the card, your bank will not only cancel it, but they’ll issue you a replacement card (and card number) immediately as well. Even if it turns out that the card was only misplaced and not stolen, you’ll have the peace of mind of knowing that you prevented the worst outcome from happening.

Debit card issuers such as PerkStreet Financial usually have an 800 number for just such purposes. Keep it handy, and keep it separate from your debit card that way you’ll have it if your card is stolen. This is especially important if the theft happens while you’re not at home. If you delay reporting the theft until you return home, you’ll waste days that will increase your liability for unauthorized charges.

The Federal Trade Commission (FTC), the government agency that issues guidelines on debit card issues, also recommends that you follow up the phone call to your bank with a letter that includes your account number, when you noticed the card was missing, and the date of your call to the bank to report the loss.

Check with your homeowners insurance carrier

You may have an unexpected ally in the event your debit card is stolen. Homeowners insurance policies contain all kinds of hidden goodies, and one of them might include covering your liability on a lost or stolen debit card.

Check with your homeowners insurance carrier to see if you have this coverage, or if they offer it if you don’t. Some companies will allow you to add it to your coverage, but the time to do that is now before the need arises.

Keeping an eye on your debit card

Prevention is always the best course of action, and while you may not be able to fully prevent the theft of your debit card, you can develop habits that will enable you to report the loss quickly and thus limit your liability.

1. Check to make sure you have you debit card at least once a day
2. Check your bank account activity at least every two days
3. Keep your debit card PIN number in your head, never in your wallet
4. Keep your bank’s 800 number someplace other than your wallet; a cell phone contact list or a saved, coded text message are some possible alternatives
5. Check your receipts before leaving an establishment, or immediately if the purchase is over the internet
6. Keep receipts (paper and cyber) at least until you confirm the proper charge with your bank
7. Online, deal only with trusted sources
8. Never provide your bank account or debit card information by phone or by email to anyone claiming to represent your bank–your actual bank already has your information and doesn’t need to verify it

On that last point, there are unscrupulous people out there who duplicate the web pages and emails of well known financial institutions and use them to gather information from unsuspecting card holders. The emails and sites are very convincing, but usually contain minor spelling and grammatical errors you’d only find on close inspection.

If you think such an email may be legitimate, contact your bank to confirm it, but never answer the email directly. If it’s asking for your information, it won’t be legitimate.

For more information contact the Federal Trade Commission website.

Note: You may want to look into Identity Guard for identity theft protection as well.

Have you ever had a debit card stolen? What did you do and how did it turn out?

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Save Money By Watching TV Tuesday Nights

Watching Jean Chatzky’s new TV show “Money Matters” can give you a few new money saving tips each week.

I had a chance to chat with Jean about the new show and one of the things that sounds promising about Money Matters is that she’s getting personal with the viewers.

A “Personal” Finance Show

With the help of social media Jean’s connecting with and sharing the stories of real people and their money challenges.  There are also two segments per show where she goes out “into the field” and talks with people about their money.

I know from writing about money on this site that it’s one thing to talk about money, but taking that next step to put things into practice is where the real success happens. 

For example, Jean interviews an investing club, whose members have pooled their money to invest in something other than the stock market.  She also researches how to be a great shopper and in her results shares a somewhat surprising profile of a fabulous shopper.

Not Your Parent’s TV Show

Actually, it might be. Jean has taken care to focus on the challenges and advantages of the Baby Boomer generation in her show.  As she points out, people who are over 50 are not only worrying about their own retirement but may be simultaneously caring for older parents and paying for kids in college.

Whether due to the economy or just a new life phase many Boomers are starting a new career or looking to transition careers.  The show has a segment called Passion and Purpose that highlights people who have experienced this transition.  Jean will be profiling some interesting stories with big names such as Kay Unger, Kathy Lee Gifford, and Tom Brokaw.

Learn from Your Elders

Since I’m not from the Baby Boomer generation I asked Jean if Money Matters would still be a show for me?  As she pointed out, although the people being featured may be be a little older and wiser, the money advice should be applicable to a wide range of ages.

We actually talked a little about how some of the segments could be a good way to learn from the experiences of others.  In her years giving money advice Jean has heard so many people say “If I’d have only known….”.  You could see this show as a good chance for someone under 50 to pick up some things to watch out for as they go through their financial life.

Buyer’s Remorse Club

If you’ve ever regretted a purchase, you may feel a little schadenfreude over the segment called “Oh, I Shouldn’t Have”.  You’ll get to smirk as viewers talk to Jean over Skype and show pictures of things they purchased that they regret. 

It won’t teach you much about money but maybe it’ll make you feel better when you see a bigger dud purchase than the last one you made.  It happens to the best of us, Jean will be sharing some of her purchase regrets as well.

Unhappy Callers?

Over the years, Jean has had to field a wide variety of questions about money.  When I asked what questions stood out in her mind she brought up a frequently asked type of question that she always answers in the same way.

Many times people already know what they “should” do in a certain situation.  However, they don’t like that option so they’re calling in almost asking for permission to do what they’d like instead.

Although they may hang up unhappy, Jean never gives them permission to do the wrong thing.  She says it in a nice way but she always tells them NO : )

Money Rules
Every show Jean will talk about one of the principles from her book, Money Rules.  If you read my Money Rules review you’ll know that I really like the way Jean breaks down personal finance into these 94 rules.

When I asked what her favorite rule is she told me that she likes the “Shopping Trifecta” of these three rules:

• Don’t Shop Angry
• Don’t Shop Sad
• Don’t Shop Hungry 

Jean goes into the reasons behind each of these in her book.  I’m actually giving away copies of Money Rules on the Money Smart Life Facebook page in conjunction with the launch of Money Matters.

If you’d like to win a copy, be sure to tune into Money Matters on Tuesday nights on RLTV – then check out my Facebook page to see how you can win.

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Discover Bank Online Savings Account Overview

Discover, the credit card and financing company, is best known for its credit card accounts and cash back programs. What you may not know is Discover also has a retail banking division that offers several options for consumers.

Similar to Other Online Banks

Discover Bank is an online only bank similar to other population options such as ING Direct, HSBC, and Ally Bank. These banks do not have physical retail branches for you to deposit checks or talk to a teller. The lack of branches relieves the bank from the costs of owning or leasing the branch, overhead like electricity and security at each branch, and salaries of branch employees.

Customer service is handled via phone or e-mail; accounts are funded through electronic transfers from other banks. These cost savings allow online banks to offer more attractive and higher interest rates on savings accounts.

Competitive Interest Rates

How competitive are Discover’s online savings account rates? Discover bank pays a competitive rate in comparison to the other banks mentioned. Follow the links above for current rates.

Talking about rates in the 1% range may seem like small potatoes, but just a few years ago these online accounts were paying out interest rates in the 3% to 4% range. The rates are lower now due to the Federal Reserve’s monetary policy and should go up in the future.

Additionally the national average for savings accounts at the time of this writing is 0.21% APY so you’ll definitely be getting more than that with Discover Bank.

How to Fund an Online Savings Account

Without physical branches the act of opening and funding an online savings account is a bit different. To fund this account you must connect another account (online or with a traditional brick and mortar bank) and electronically transfer funds directly to the account. You can’t swing by the local branch and bring $50 in cash to get started since there is no physical branch location.

Once the account is funded you can continue to transfer back and forth between your linked accounts. Additionally you can set up direct deposit just as you would with any other bank account.

Do I Need a Brick and Mortar Bank?

Whether or not an online account can fully meet your banking needs depends on what those needs are. If you never deposit paper checks then it is definitely a possibility as long as you can get the account funded with another bank account.

Personally I always maintain at least one brick and mortar account just in case I have cash or a check I need to deposit. You can always transfer the money elsewhere, and most banks still offer free checking accounts that can be used for this purpose – switching to a new bank is pretty straightforward if you need to do so.

Discover Offers Additional Financial Products

Aside from the Discover Online Savings Account, Discover Bank offers additional financial products to consumers. These include Money Market accounts, Certificates of Deposit, and IRA Certificates of Deposit. Similar to the savings account these accounts are managed online and offer competitive rates.

What’s your favorite bank? How do you think Discover Bank compares to other banks?

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