Archives for May 2012

Free SmartMoney Magazine Subscription

Rewardsgold is offering a free 2-year subscription to SmartMoney magazine for a limited time. You have to fill out a brief one-page survey as well as “tell” two friends about the offer. Your friends don’t actually have to sign up for the offer or actually do anything at all. No credit card required. Arrives in 8-10 weeks.

These free subscription promos are usually done to boost subscriber counts for the magazines so they can sell more ads, and most times actually do arrive in my experience.

Why Asset Allocation Doesn’t Matter Very Much

A helpful reader sent me a WSJ article with the provocative theme that all this investment advice about asset allocation doesn’t matter for most people. Why?

For the vast majority of savers, improved investment returns won’t materially extend how long retirement money lasts. That’s, in large part, because few investors have enough money in their retirement account to tilt the balance.

Far more important, says the paper from the Center for Retirement Research at Boston College, are three variables that don’t require a brokerage account: how long you work, controlling spending and tapping the value of your home.

Briefly, the study found that 47% of households would fall short of their income needs in retirement at age 67, when Social Security kicks in for those born after 1960. However, even if investors were able to theoretically earn a guaranteed 6.5% above inflation annually in a riskless investment, 44% would still be short.

How little are people saving? The WSJ article notes that having $500,000 in financial assets by retirement age would put in you in the top 10% of savers. The CRR working paper itself mentions that “the typical 401(k)/IRA balance of households approaching retirement is less than $100,000” but I didn’t see a source.

The Employee Benefit Research Institute (EBRI) found that in 2010 the average IRA individual balance (all accounts from the same person combined) was $91,864, while the median balance was $25,296. EBRI also found that at year-end 2010, the average 401(k) account balance was $60,329 and the median account balance was $17,686. But that’s for all folks, not just people of retirement age.

This shouldn’t be too surprising. Your savings rate is the most important factor in determining if you can retire comfortably. Working longer is the same as saving more and spending less (for a while). Getting used to spending less now would aallows you to need less in retirement. Doing a reverse mortgage is just another word for cashing in your savings, isn’t it?

Why asset allocation is still important. The paper concludes that financial advisors should focus more on savings rates and less about the complex ETF portfolio they just designed for you. Probably true. However, asset allocation has always been something that we did to help our situation without actually doing the hard work of having to save more. Imagine a pill that we could take to lose weight, while not actually eating less or exercising more.

I suppose we should view designing an asset allocation more as a potential “boost” to our nest egg than the driving force, and realize that earning an extra 1% or 2% a year won’t help if you’re just compounding a small chunk of your income. How much is enough? Studies have found that a savings rate of 16.62% would have worked out well historically. Review: The End of Paper Bills?

Most people still elect to receive paper bills, even though almost every vendor is pushing paperless. Why? Personally, my e-mail inbox is so much more cluttered with crap compared to my post office mailbox. It’s very easy for me to forget about a short e-mail saying “you have a bill waiting” with 86 other unread e-mails shouting at me. But then again, I do end up paying the bills online, so perhaps there is a better way? This is where comes in.

Making Paperless Billing Better

All your bills are organized in one central place. You give Manilla your login information*, and they handle the rest. If you need to look up an old bill, you don’t need to open the filing cabinet or reset your password (again) to that archaic water department website designed in 1995. You can just view or print out the .PDF from Manilla. They promise to store your bills for free, forever. I do wish there was a way to download all your stored bills at once, perhaps in a .zip file.

You may find that Manilla may not list some of your local vendors, although you can suggest future account providers for them to add. I couldn’t find my local water utility. You can also add magazine subscriptions, frequent flier mileage programs, and hotel rewards programs.

Easy-to-manage bill reminders. You can request e-mail or text message reminders to 7 days, 3 days, and/or 1 day before the due date. I need these repeated reminders, and it’s nice that they turn off automatically after they see that the bill has been paid.
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Don’t Fall For These Common Mortgage Refinance Myths

Mortgage rates are still setting record lows! Qualification is still very difficult to refinance for those with little home equity, but there’s still many people out there that are eligible (maximize your appraisal). Don’t miss your opportunity to lower your interest costs and own your home faster by believing in one of these common mortgage refinance myths:

#1 I don’t want to pay the high closing costs again.

It’s true, when you refinance there will be additional costs. The mortgage broker has to eat! However, that doesn’t mean you actually need to pay anything extra.

First of all, you can get paid for negative points. Depending on the interest rate, the originator/lender will actually pay you a credit each 1 point = 1% of the loan principal. The lower the rate, the less points you’ll get. But if the credit is high enough, that may cover all your costs, making it a “no-cost” refi. Alternatively, they may simply advertise “no closing costs” which means they cover a certain list of fees.

When you apply for a refi, you’ll get a Good Faith Estimate (GFE) with a total closing costs amount listed at the bottom. However, you should separate the true costs from the stuff that you’d otherwise have to pay anyway, including:

  • Prepaid or partial month interest
  • Homeowner’s insurance to escrow
  • Property Taxes to escrow

The remaining amount (origination fees, doc fees, application fees, appraisal fees, title insurance, credit report fees, etc.) is what I would just call the true cost of refinancing. Some “no closing cost” lenders still make you pay the title insurance fee.

#2. I can’t refinance because it’s been too soon since my last financing.

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MMB Reader Invitation: Citibank Paid Market Research Panel

Citi is trying to learn more about the needs of small business owners and believes that many readers might fit their desired profile. They are looking for primary banking decision-makers of small businesses (titles will include but not limited to: owner, principal, partner, CFO) to join the Business Advisory Board for Citibank.

In the Business Advisory Board for Citibank, an online community created by Citibank, you will have the rare opportunity to “Learn, Do, and Connect” with other business owners and decision-makers who share your goals and challenges, as well as get an advance look into and impact the creation of new products and services aimed at businesses like yours, as well as the chance to impact the development process.

Community members will receive a $10 welcome gift as well as around $20/month for participating an average of 5-15 minutes per week at a time of your convenience. The sign-up period and the spots are limited (update 5/30 still live), so please apply promptly below if interested.

Citibank Business Advisory Board application page

Database for Searching Class Action Settlements

Here’s another potentially useful bookmark. is a database of class action settlements so that you can quickly determine if you’re are eligible for a claim. It appears to be run privately by an individual, so I don’t know how extensive or well-updated it will be in the future, but for now it does include a lot of settlements that I wasn’t aware of. AT&T DSL, Apple iTunes gift cards, Skechers shoes, Vita Coco water, etc. In the end, you’re given the link to the appropriate official claim form.

It reminds me of sites that help you find unclaimed money, which I never really trusted until it actually worked for me. There are still many scammy unclaimed money sites, though, so I’d never pay money for any such services.

Miles by Discover Card Promotion: Up to 20,000 Bonus Miles

Here’s a promo that would work great together with the the ChargeSmart fee waiver for utilities purchases. The Discover® Miles Card has upped their sign-up bonus so that you can get 1,000 Bonus miles every month you make a purchase for the first year – up to $120 in travel rewards. To confirm, look for the following in the Terms & Conditions on the application:

TERMS OF 20,000 BONUS MILES OFFER: Earn 10,000 Bonus Miles for every $2,000 you spend, up to 20,000 Bonus Miles. Purchases must be made within 6 months from the date your account is opened. We are not responsible for merchant delays in processing transactions. This promotional offer is in addition to the Standard Miles earned on purchases. Promotional Miles will be applied within 8 weeks of reaching $2,000 and $4,000 spend amounts. (This promotion is now over)

The $2000 spending requirement over six months works out to $333 per month. What you’d be looking for is $350 per month in utilities (electric, gas, sewer, water) that previously didn’t accept credit cards for payment (at least without a big fee), which now you can pay Discover via with no fees. If you don’t reach that, I would even prepay some utilities and let it apply to future bills. There is also double miles (2 miles/$ spent) on the first $3,000 spent combined on restaurant and travel purchases. If you can charge $4,000 in 6 months, you’d get the max 20,000 bonus miles.

In addition, you’ll still get the standard 1 mile per $1 spent on the utilities charges. 10,000 miles can be redeemed for $100 towards any travel from any vendor. You just have to put a travel purchase (airfare, hotel, car rental) on the card and then go online and redeem your “miles” for a travel credit. So buy any $150 airfare from any website on the Miles card and redeem 10,000 miles for a $100 statement credit.

No annual fee. Rewards do not expire as long as your account is in good standing and the card is not inactive for 18 consecutive months.

Groupon Class Action Settlement: Use Your Expired Groupons

Update: There is now an official website at The court hasn’t approved an official settlement breakdown yet, the claim form is available to submit by e-mail.

What, Groupon already has a class action settlement? Yup. Bloomberg reports that Groupon has agreed to pay $8.5 million to settle a class-action lawsuit alleging the expiration dates on its coupons are illegal. Part of the lawsuit alleged that Groupon should be treated like gift cards, which in many states are not allowed to expire. However, like with most settlements, Groupon denies that and doesn’t admit any fault, yada, yada.
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Pay Your Mortgage With a Credit Card Via ChargeSmart

ChargeSmart is a bill payment service that allows you to pay many bills with a credit card that usually don’t accept such payments, including mortgages, auto loan, student loans, and utilities. Only participating vendors are eligible, but they seem to have signed up several large companies including Bank of America/Chase/Wells Fargo mortgages, Sallie Mae student loans, and Ally Financial auto loans. In general, it works with all Visa, MasterCard, and Discover branded cards.


If you have a rewards credit card, this service gives you the ability earn cashback or frequent flier miles on more purchases. You’ll also be able to take advantage of your card’s grace period since you won’t have to pay up until your credit card bill is due (up to 45 days later depending on when you charge in the statement cycle). If you have a card with a introductory 0% APR on purchases, you could extend the interest-free period even longer.

Another side perk would be for $500+ credit card bonuses, where you use this service to meet the minimum spending requirements. For example, the Chase Sapphire Preferred® Card will get you $625 in travel after you spend $4,000 in purchases within the first 3 months. If you’re a little short, paying a 2-3% fee to reach that requirement is worth it since a $625 bonus on spending $4,000 is effectively 15.6% back. (You’ll also get 1.25% back on your purchases toward travel as rewards.)


In most cases, there is a fee involved that depends on the vendor. This may or may not be worth it to you, depending on how much you value your credit card points or miles. Here are a few special cases to consider.

Discover Utility Bill Fee Rebate (Expired)
Previously, if you used a Discover card to pay a participating utility vendor, Discover would have provided an instant rebate your Chargesmart fees. Paying my water bill would have otherwise cost me $16.40 for a $500 payment (3.28%), or $6.10 for $50 payment (12.2%). You’ll even earn all the usual rewards that your Discover card offers. I like the Discover More card for their 5% back on rotating categories feature.

Hidden “Large Payment Security Fee”
You should be aware that their initial fee calculator can be somewhat misleading. I was trying to pay a test payment to a mortgage lender for $2,000, and was given a fee quote in Step 1 for $21.95, which was 1.1% of $2,000. Not bad, I thought, you can get 1.5% cash with something like the Capital One Cash Mastercard.

Step 2 is your address information, and Step 3 is your credit card information. So far so good. But in Step 4, they tacked on a “large payment security fee” which added another $25.71 to make the total fee amount $47.66, working out to 2.4% of $2,000. Trying out some different lenders, the final fee amount seems to always work out to about 2.4% for payments over $1,000 or so.

One last wrinkle… there’s a little box that tells me if I sign up to make this payment every month, I’ll get $10 off this first month’s payment. (You can cancel later.) That would make it $37.66 out of $2,000 or 1.88%. That makes it a little better, but not a screaming deal. But for meeting bonus requirements, a mortgage/auto loan/student loan payment is an easy way to charge something you need to pay anyway.

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Why Nobody Budgets

I was watching a Techcrunch interview about finance start-up Personal Capital (review) and was surprised by a comment about budgeting. The founder was Bill Harris, who was former CEO of Intuit and Paypal, and Product VP was Jim Del Favero, who was also a former Product Manager of Quicken. While guiding us through their new iPhone app, they shared:

Our #1 takeaway over the years was… nobody really uses budgeting. Everyone means to do it; Nobody really does it. The more important concept is cashflow. It doesn’t matter that you spent $200 on clothing this month or last month, what matters is at the end of the month, do you have more money than you spent.

So the guys in charge of the most popular budgeting software admit that… nobody budgets. Well, maybe not nobody but it’s probably safe to say that the great majority of people don’t track their spending monthly. This is an issue I’ve thought about many times. I often talk about budgeting, but I don’t really budget either.

Why is it so difficult? I point to recent books and research about willpower and how it is similar to a muscle. If we have to track every purchase, it causes us fatigue and sooner or later we give up because it becomes just too hard. Doing one push-up isn’t that hard. Doing a hundred push-ups in a row is another story.

The sheer number of choices we must make each day — what foods to eat, what products to buy, what information merits our attention, what tasks to prioritize — can be overwhelming. […] Put simply, the more conscious willpower we have to exert each day, the less energy we have left over to resist our brain’s primitive and powerful pull to instant gratification. According to one study, we spend at least one-quarter of each waking day just trying to resist our desires — often unsuccessfully.

Behavioral psychology has also found that happiness is earning $60,000 a year. As Del Favero suggests, perhaps it’s because all we really want is to spend comfortably and at the end of the month have something left in the bank account. That number just happens to be about $60k in the US.

So what should the personal finance “experts” be pushing instead of budgeting tools that nobody will use? Here’s one possible plan of attack.

  1. Determine a safe savings rate. What percentage of your salary do you need to save for retirement? The idea of a safe savings rate was introduced and researched by Wade Pfau, and varies based on the assumptions. 15% is a good minimum number to start with, although if you don’t want to work for 30 or 40 years you’ll have to save more.
  2. Automate that savings. Automatic 401(k) or 403(b) deferrals are great, as well as automated contributions to Roth/Traditional IRAs. It’s best to have the money taken away before you even see it, so there is no temptation to spend. Every automation means one less decision.
  3. Check your cashflow. Are you good? Then stop, and enjoy your life. Or do you still spend more than you earn, net of the automatic savings?
  4. Don’t think about the small things. Deciding not to get that coffee or not to order lunch with all your coworkers every day may exhaust more of your willpower than is worth it.
  5. Instead, try attacking one BIG thing. Housing and cars are the biggest expenses for most people. Moving into a smaller or cheaper apartment or house. Move closer to town, sell a car, and use public transportation. Switch to a economical car and drive it for 10 years. Look for something you can cut once, albeit painfully. You may not like it initially, but it’s much easier to get used to that than to rely on repeated displays of willpower.

For example, a prospective college student with limited financial resources can choose to go to in-state university instead of private, as opposed to worrying about the price of every textbook and having to constantly choose between studying, socializing, or working at one of three part-time jobs on the side.

CIT Bank CDs With Rising Rate Protection (Rate Hike Update)

Update: CIT Bank actually raised its rates on some of their CDs with a raise-your-rate feature. Rates updated in review below.

As a follow-up to my cash reserves post, I wanted to note that CIT Bank also has some very competitive rates on FDIC-insured CDs with added flexibility that makes them unique. They have a very simple website and appear to be focused on certificates of deposit, although they recently debuted a savings account with a 1.05% APY interest rate on balances above 25k.

Their Achiever CD has a current rate of 1.05% APY for 1-year term and 1.20% APY for the 2-year term with a $25,000 minimum opening deposit. The first unique feature is a “rate bump” option that allows to you raise your rate again in the future if the rate increases. The second unique feature is that you can add more money to your CD one time at any point you choose throughout the term.

You buy CDs to guarantee your rate won’t drop during the term. But these two features allow you added protection from rising rates in the future, and you already start with a competitive rate. You could match future rates, and move your other money over to match those rates as well. The primary limitation would be the higher minimum deposit requirement. Interest is compounded daily.

If you don’t have the $25,000 minimum, they also have their term CDs with a $1,000 minimum opening deposit. Those are paying 1.01% APY for 1-year term, 1.15% APY for 2-year, and 1.30% APY for 3-year. Those are nearly as good as the Achiever CD, but they don’t have the rate-bump and add-on features of the Achiever CD. The early withdrawal penalty is 3 months of interest for the 1-year CD, 6 months interest for the 2-year CD. A quick comparison table:

Name Term Minimum to open Interest rate Features
Achiever CD 1-year $25,000 1.05% APY One-time rate-bump, one-time add-on
Achiever CD 2-year $25,000 1.20% APY One-time rate-bump, one-time add-on
Term CD 6-months $1,000 0.45% APY Low minimum deposit
Term CD 1-year $1,000 1.01% APY Low minimum deposit
Term CD 2-year $1,000 1.15% APY Low minimum deposit
Term CD 3-year $1,000 1.30% APY Low minimum deposit


Consumer Reports Ratings: Best Value in… Toilet Paper?

I know, not exactly hard-hitting consumer news. 🙂 But actually toilet paper is important to me, and ever since I got a “real” job I’ve been buying Charmin Ultra Soft toilet paper. I don’t even check the price, I just buy it in bulk and revel in the luxurious softness compared to the industrial-grade junk I used to buy.

In the May 2012 issue, Consumer Reports ran their scientific lab tests on 25 different varieties of toilet paper (subscription required for full article) to find the best combination of price, softness, strength, disintegration, and tearing ease.

The findings? First, the hidden shrinkage by retail brands that we’ve seen in various products like orange juice cartons (59 oz. instead of 64 oz.) has spread to toilet paper. Sheets have been made smaller, and rolls are smaller as well. The right way to calculate value is by square feet, but who does that?

The top overall pick was the White Cloud 3-Ply Ultra Soft and Thick brand sold at Wal-mart, which performed well in all categories while maintaining a good price of 25 cents per 100 sheets. The cheapest Scott brand (1,000 sheets per roll!) performed poorly and cost 8 cents per sheet. But if you’re having to use three times the sheets, who cares?

The top green pick was the Seventh Generation brand, which is made from recycled content and did alright in most areas except strength but still had a good price of 22 cents per 100 sheets.

My beloved Charmin Ultra Soft came in 6th, done in by a poor showing in disintegration tests and higher-than-average cost. But wait. The 30-roll megapack at Costco is usually $17.99. Every few months the coupon packet has a $2 off coupon, which is the only time I buy it. Each “Jumbo” roll has 231 double-ply sheets, which works out to after-coupon cost of only 23 cents per 100 sheets. The quoted retail price in Consumer Reports is 41 cents per 100 sheets. I rarely shop at Wal-mart, so it seems that my toilet paper buying habits are still within acceptable frugal parameters.