My Bonus Center has many magazines like Discover, Elle, Maxim, Real Simple and others for free trial of three months.

You can select up to three magazines at a time and must have a valid credit card number.

I have selected Real Simple as am I trying to simplify my life and would like to read more on it.

If you do not wish to continue the subscription then you will have to get your subscription canceled. To be on the safer side you can use a virtual credit card number with a set limit (I use a Citi credit card which lets you do this).

Makes me wonder if you can just keep on re-doing this and get free magazines for life…! But before you jump on that, spare a thought for the environment as if you do not read these magazines it would just be a waste of high quality paper.

My checking account pays me 4% interest and as of this writing HSBC Direct pays 1.45% (which by the way is one of the top online savings account), which brings me the conclusion, DUMP YOU SAVINGS ACCOUNT…!

If you notice the interest rate is more than double, it used to be 5% when the rate HSBC was offering was around 2-3%.

The checking account is not a regular checking account it is High Yield Checking Account (HYCA).  There are some difference in a high yield checking account (HYCA) and a checking/savings account and to earn the high interest rate you have to meet certain requirements which are generally easy to meet.

My account requires:

1. One direct deposit or auto-pay per month.
2. Ten signature based purchase using DPS.
3. Online Statements.

I have looked at many other HYCA’s  and the requirements are pretty similar to the one I have (but please read and understand the requirements). Some accounts are available nationwide

But I anyways do these with my regular checking account, so with no added hassle I am getting much higher interest rate then what I would have got.

I still use my Credit Card for big ticket items but for regular daily purchases < $10 I use the debit card (for ~10-12 transactions). If you are addicted to tea/coffee and you pay by CC for them then this debit card can your Tea?Coffee-Time-Credit-Card…!

Now if are wondering how to get a checking account that pays high interest you have obviously not read my post on Checking accounts.

How to do it.

1. After you have found your High yield Checking Account, make sure you understand the requirements.

2. Link your checking and Savings account both ways (always good to do).

3. Transfer money to your checking account.

4. Make sure you meet the requirements.

Don’t make any excuses here, these requirements are really simple to fulfill, if you do not have Direct Deposit, set up auto pay for your Credit card or utilities bill. If you do not make ten CC purchases, buy some thing small on CC to cover up, like 99cents chips from a store that accepts CC for it (many do). There are many ways these were some that I could just think of the top of my head.

Now, whoever thought checking account could pay more interest than an online savings account…!

Let the savings account pig turn blue…here

PS: That was fun to do…

This is just a recap of some of my popular posts on the site fr my new readers:

1.  How Warren Buffet gets better deals than you? (And how you can do it too).

A analysis of the six simple methods that Warren Buffet uses to get the best deals.

2.  How to select a Checking account? Fees in a checking account? And more.

A complete reference on checking accounts.

3.  The basics of an emergency fund

What is an emergency fund? Why do I need an emergency fund? How much do I need to save?

4.  How to invest the emergency fund?

5. Lessons we all should re-learn from the present financial crisis.

Some personal finance lessons we probably knew about but never

To stay in touch.

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We are probably already living in the longest recession since the great depression of the late 1920’s and early 1930’s. Many people have lost jobs; many large and small businesses have gone under; it’s difficult to get credit which many were so dependent on and need the most now. For many people like me this is the first recession they are seeing and things have been tough.

Now, I did not intend to scare you by saying all this but it is such difficult times that get us thinking on how could one prepare for such a situation if it was to happen again or still continue to worsen? How one could avoid the adverse effect of such a situation on their finances and wealth?

I read, discussed and pondered and then it struck me that we all knew the solution all along, but probably due to the economic prosperity we have seen in the recent years, one did not give these lessons enough importance. If only we re-learn these five lessons…

Buy a home that you can really afford.

Home ownership is touted as ‘The American Dream’. While home ownership has many advantages, buying a home is a big decision which if gone wrong can have several negative consequences like foreclosure, bankruptcy, etc. If you qualify for a mortgage it does not necessarily mean you can afford it. Buy a house for which you can comfortably afford to pay the monthly mortgage payment for throughout the duration of the loan and not just a teaser rate for the early years.

Build an Emergency Fund.

An emergency fund is like a safety net you can build to insulate yourself in case of any unfortunate events that may happens in your life. When we have a steady source of income we tend to ignore this and assume that things will continue to be smooth.  Some people depend on their credit cards limit for their emergency fund but it is not certain you will have it when you need it. Your credit line may be reduced or worse the credit card company may go under. One should also learn how to invest the emergency fund.

Stock market investment is not for everyone.

Historically stock market returns have been better than many other investments that are easily accessible but there has been significant volatility in their returns in the short run. Any money you need in the near future say 5 years (may be for college tuitions, travel, buying a home, medical expenses, etc.) should not be in the stock market. Passive investment in stock market (aka index funds, mutual funds) can also lose a lot of money (The stock market had tanked more than 50% in the eighteen months leading to March 2009).

Do not over invest in your company’s stock (or sector).

So let us say you worked for Chrysler/Lehman Brothers and also had a significant portion of your investment in their stock (normal accounts or via retirement savings accounts like 401K), what could happen? Your job may be in danger and a significant portion of your investments would have been wiped out, even worse, if you are close to retirement that savings could be your life’s hard work. I guess you see the point.

Frugality

A word that had some negative connotation associated with it has gained some popularity now. More and more people have started seeing the value in saving money for the future, trying to spend on necessities than luxuries and living within your means have become the ‘in thing’.

Received the following email from Lending club:

There’s never been a better time to refer a friend to Lending Club:
With the financial markets showing renewed levels of uncertainty, you know that Lending Club notes offer an asset with little correlation to traditional equity and fixed income markets and average net annualized returns over 9.5%. Notes offered by prospectus filed with the SEC.

We’ll give $25 to invest in Lending Club notes to registered investors you refer. It’s a great way for your friends to become a part of our financial community.

Two ways to invite your friends to join Lending Club and have them receive $25 to invest:

* Have your friends type in this Referred by code when registering: goodlender
* Use this link to automatically upload a list of email addresses and send your friends a personal note:  https://www.lendingclub.com/invite/invite.action <This is not valid if you do not have an account>

Have a question or comment for us, contact us anytime at support@lendingclub.com or call 1-866-811-9225.

Regards,

The Lending Club Team

It seems like they have reduced their joining bonus for invited members from $50 to $25. Its still free $25 to try out lending club.

Note: This is not an article to guide you on stock picking.

You know Warren Buffet as a successful investor (and if don’t then you are probably an alien…!) and it’s no secret that he gets better deals in everything he does.  When he wants to invest in a company, the company offers him a better price for its stock and then throws in some preferred stocks or warrants. People pay millions to meet him and dine with him.

So how does he do it? And how can you do it?

1. Stick to the basics.

Warren Buffet has always only invested in businesses that he can understand well and he thinks that will remain in demand consistently; for they satisfy specific needs people have. If something is too complicated for you to understand you will probably not be able to take a right decision on it.  Stay away from things that are not intuitive to you. There will always be enough opportunities that you can understand and be comfortable with. You may have to just look around a bit.

2. Negotiate.

Do you think Warren Buffet takes the first offer he gets for a company stock? No way..! He negotiates. And you think it is cheap to negotiate even when billionaires are doing it. Negotiation is one of the best skills you can learn, it will come in handy at various points in life, right from buying your home or car to negotiation your salary.

3. Network and create a reputation for yourself.

Research may be a good source to find opportunities but the best deals are still struck by knowing people.  Warren Buffet’s network of rich and influential people who hold him in high regards helps him get to opportunities before other s.  Network with people, and care about what they think about you.

Communicate with your friends, employees, investors on a regular basis. If there is something they will come to know about you or your firm, let it be you who tells it to them. This is the best way to build trust and reputation.

4. Get there first.

Good deals don’t last forever and Warren Buffet knows that. You will never see Warren Buffet investing in what is hot now (because people have already got there). If you have missed the wave, you have missed the wave. There is nothing you can do about it.  Instead of trying to jump on it start looking for the next wave. Whether it is investing or any other decision; research and domain knowledge adds value. Spend time to gain some expertise in the domain of your interest and you will be able to spot opportunities before other people see them.

5. Adopt simplicity.

Warren Buffet still lives in the house he bought several decades ago for approximately $31,500. A carefree life style will also affect other aspects of your decision making. As long as you are able to keep it simple, you are increasing your odds of success.

6. Be confident.

Warren Buffet once said:

I always knew I was going to be rich. I don’t think I ever doubted it for a minute.

That’s confidence.  Confidence can be the difference between what you dream about and what you achieve.  Believe in your abilities and work on improving your skills and you will get there.

Everything you really need to know about checking accounts.

In this article:

• Why start with checking account?
• What should you look for in a checking account?
• Various types of fees associated with your checking accounts and how to avoid them.
• How many checking accounts should you have?
• Some additional tips.

Why start with checking account?

Selecting is good checking account is good way to start organizing your personal finance and to set the stage for better things in your personal finance.  (Which I will continue to help you with )

What should you look for in a checking account? How to select the best checking account?

Things you should consider are:

1. Does the checking account have any monthly fee?

It is crazy how many people are actually paying these fees. Almost all banks have ‘No-Fee’ checking accounts available if you maintain a minimum balance or do a direct deposit (or even without any of these requirements, see Some Additional Tips section). If you are on a payroll it should be easy for you to set up your direct deposit through your employer. If you are a student then many bank offer free student checking account without any requirements. Even if you are a part-time student, try investigating about this option.

2. Interest rate.

For long I was under the impression that checking accounts do not pay any interest (or a negligible rate of interest, at best). However after some looking around I found some high yield checking account and the interest rates were pretty high. They generally have some additional requirements but they can be easily satisfied and they pay anywhere from 3-5% interest rate. To find a checking account that pays high interest you can use a website like CheckingFinder or a list like this. This single piece of information can be a game changer for your passive savings and your emergency fund savings. This is also one of the reasons I stick my emergency fund in a checking account over a CD.

3. Accessibility and Convenience.

Things like, how convenient it is for you to go to the bank (if you have to)? Do they have online banking (nearly all banks have online banking these days and it makes sense to use it to cut down your visits to the bank).

4. Debit Cards.

Debit cards that are Visa, MasterCard or Amex can really come in handy at times. They will be accepted anywhere credit cards are accepted. Make sure your bank issues one of these to you. Some banks also have cash backs and rewards associated with debit card.

5. Personal relationships and community.

Banking with people in your community is great way to help your community. Consider local credit unions, they are easy to deal with and they play a role in the development of the locality. You can locate a credit union in your area using one of these two services,  Credit Union and Find a Credit Union.

6. Special rates.

Some banks offer lower rates on loans and higher rates on CDs to their checking account customers. I would suggest that you some research here and open a checking account with the bank if it helps you get a better rate just before making a large CD or getting a loan from that bank. Banks like Chase will take of up to 0.25% of your mortgage interest rate which can be substantial savings.

7. Security of your Money.

Is the bank FIDC or (NCUA) insured? Is the bank location physically in a safe area?

Various types of fees associated with your checking accounts and how to avoid them.

There are various fees a bank charges in association with a checking account. Some of these are:

a. Monthly account fee.

b. Overdraft fees: When you try to withdraw (or write a check for) more money than you actually have in your checking account banks will charge you a fee, unless you have an over draft protection plan. These can be exorbitant.  Some banks are really cruel when it comes to this fee. I read an article where a person was charged an over draft fee for a debit card transaction and then another over draft fee as the original over draft fee could not be paid…! (Thankfully it did not continue recursively).

c. Over draft protection fee: Some bank will scare you with the huge over draft fee and then tempt you in to paying a couple of dollars per month to avoid any over draft fees. Avoid accounts with such plans, there are many banks that offer over draft protection as a line of credit or will link it to the cash advance on your credit card.

d. Check writing fees: I have never encountered a checking account which actually charges this fee but I have seen some claim that they do not, this make me wonder that there might actually some banks that charge this fee (or it may just be a marketing gimmick..!)

e. Fees for check books: Some accounts come with unlimited check books, so no worries for them. While I would suggest that you perform most of your transaction electronically; so you would not need so many checks in the first place but not having to pay for a checkbook when you need one cannot hurt. If you do have to buy a checkbook then compare your bank rates with other online services, on average the later should be cheaper than the former. Do not spend money on buying fancy checks they are simply not worth it.

f. Bounced check fee: If you happen to deposit a check that does not clear for some reason, the bank may charge you a fee. It’s a double whammy.

g. (Out of network)ATM fee: When you use an ATM that is outside the network of your bank (generally your bank and any associated subsidiaries) you may be subject to two fees:

i.  The ATM machine provider charges you for using their machine.

ii.  Your bank may charge you for using an ATM out of their network.

h. Block check fee:  If you happen to write a check and loose it or if you have already given it out to someone and later decide that you do not want them to use it, you can ask your bank to block the check (i.e. only before the check has already cleared…!). The bank will also charge you a fee for this.

Banks are very creative with these fees and they actually make a lot of money by charging these fees.

How to avoid these fees?

Most of this is pretty obvious and just knowing about these fees will make you try to avoid them. So read about these fees or ask your banker about them.

The minimum balance requirement may be computed in different ways by different banks, some require a daily minimum balance and some require an average minimum balance over the month. If you do not know what the requirement on your account is; call you bank to find out…! Or you may assume it is a daily minimum balance, that way you are covered for both the cases. If you have to maintain a daily minimum balance, keep some more money in your checking account than the required minimum balance to allow some transaction to go through without actually going below your required balance.

How many checking accounts should you have?

This depends on your personal situation and how many accounts you wish to mange. Most of us should be fine with 1-2 accounts. I would suggest having two checking accounts, one with a high interest rate (even if the account is not very easily accessible) and one which is easily accessible (even if does not have high interest).

Some additional tips.

1. Never have more balance in your checking account than what is protected by FDIC coverage. Bankruptcies of bank come as a surprise and it may just catch you at the wrong time. If you do happen to have so much in cash consider splitting them in to accounts in various institutions so you are still under the limit.

2. If you are a married, then at least have one joint account and one independent account. Merging your finances can be a long process; a joint checking account will be a good start. Even if you have decided not to merge your finances completely, it is still easier to have one for common transactions. An independent one can come in handy when you want to plan that surprise vacation for your partner and do not want them to become aware of it when they see the statement.

3. Checking account is great place to store some portion of your Emergency fund. However if you have a checking account that pays low interest rate (consider moving to a high yield checking account) do not put a lot of money in it as you will lose some valuable interest, instead keep the money in high yield savings account.

4. Some banks (like Bank of America) offer free checking accounts without direct deposit if you open them online. If you cannot satisfy the requirement for direct deposit or minimum balance then open such an account.

5. Many banks let you set alerts on your account in case of a withdrawal/deposit above a certain limit. This feature can be used as tool to enhance security and identify unauthorized transactions as soon as they occur.

6. Always look at your monthly statements to identify if the bank is charging you any fees or if there any unidentifiable expenses.

7. Getting all the factors right in a bank can be difficult, so get an account that fits most of your needs rather than trying to get the best and holding on to a really crappy checking account.

PS: This article was featured in the Carnival of personal finance #211.

This is a two part post covering the following topics.

Part 1:

What is an emergency fund?

Why do I need an emergency fund?

How much do I need to save?

Part 2:

How to get started?

How to invest your emergency fund?

What are the common pitfalls of emergency fund and how to avoid them?

How to get started?

So you know how much you need in emergency funds, but do you have that much allocated?

If you are well covered, then that’s great. That is like a landmark achievement in your personal finance history…! Now you can feel more comfortable to face any surprises life may present you with however if the number you came up with overwhelms you, don’t get worried, now is the time to start to achieve that number.

If possible you should devote most of your savings in the next few months towards building your emergency fund. If that is not possible or that will not be enough, start small, say by saving 10% of your salary, by not eating out for some time or by cutting down on your daily addictions, whatever works for you and helps you save a little extra, even if its $10-20 a week. Eventually you will find ways to save more or earn more.

• Transfer these savings in a separate savings account or a designated checking account on a regular basis. This is very important. If you do not separate out the money, you may not be able to save more.
• Do not use the money in this account for any other purpose but an emergency.
• Keep setting small achievable targets for increasing the funds, if you miss the target think about cutting back on some of your regular expense to cover up for it.

How to invest your emergency fund?

Congratulate yourself for coming to a stage where you can think about investing your emergency fund.  The key here is to keep your money accessible. Putting it in a designated high interest savings account or a designated high yield checking account is a good idea. This will help your emergency fund grow passively and you can focus on other financial goals.

Only if you have saved more than what you came up with as a number you need for your emergency fund you should consider other investments.

What are the common pitfalls of emergency fund and how to avoid them?

Resist any temptations to invest this money in stock market or mutual funds. Although they may be a good long term investment, they are very volatile in the short term and can lose you substantial amount of money. It gets even worse in times of economic turbulence when many people lose their jobs as well as take a huge hit in their savings which they had intended to use in case of emergencies.

Avoid putting these funds in long term certificate of deposits (CDs) as they are not very easily accessible and you may have to pay penalties to en-cash it before they mature.

Another common pitfall is that you may have created an emergency fund some time back and forgotten about it but as the circumstances in your life change, the amount of money you need in your emergency fund also change. So keep monitoring the amount you have in your emergency fund.

Rebuild your emergency fund as soon as possible after you have used some or all of it for an emergency. If you faced an emergency you would have realized how well this emergency fund served you, so if you have to; get started all over again.

Keep coming back to see tips some tips on how you can accelerate your savings and earn a little extra.

This is a two part post covering the following topics.
Part 1:

• What is an emergency fund?
• Why do I need an emergency fund?
• How much do I need to save?

Part 2:

• How to get started?
• How to invest your emergency fund?
• What are the common pitfalls of emergency fund and how to avoid them?

What is an emergency fund?

An emergency fund is the money you set aside to use when life presents you with unfortunate and unexpected events.

Simply put, emergency fund is the money you save in an easily accessible account so that it can be used to cover up for some expenses which you did not foresee or budget for; like a breakdown of your heating system, major home or car repairs or more unfortunate circumstances like job loss, major medical expenses, disability, accidents, etc.

Why do I need an emergency fund?

While I hope none of these events happens to you but none the less if you do make an emergency fund you will be in a better financial position to handle such an event. Many people seem to underestimate the chance of them having to face such a situation, especially young people, so if you are one of them, think again; Ask yourself, do I have enough saved up to cover for my expenses for some months in case of an emergency?

There are some psychological advantages to know that you have your back covered in unfortunate times, this will really help you live in a better way by relieving some of your stress.

It is very important, considering the critical nature of these funds I would recommended building an emergency fund over any kind of debt (even credit card debt, you heard me right…!).

How much do I need to save?

Unfortunately there is no magic number here but these guidelines should help you come up with your own number.

1. Calculate your regular expenses. Your regular expenses should include things that you generally spend on, on a regular basis. You could take an elaborate way to fund this out (like the one described here) but a back of the napkin approach works well too. Just add up the following:
   • Your monthly mortgage payments/rent and car loan payments.
   • Your monthly cost of insurance.
   • Monthly cost of essentials (groceries and travel).
   • Monthly miscellaneous expenses, like entertainment, shopping, etc. Your credit card (or debit card) statement should come in handy here.
2. On average you should save enough to cover up for about three to six months of regular expenses. This should help you in cases like job loss or a temporary disability.
3. You regular expenses will be higher if you have dependents that you support.
4. In general you will need more in emergency funds if you have more responsibilities and obligation to take care off. Just be sure to include all such expenses and then add a reasonable buffer on top of that.
5. Also make a list of expenses that you could quickly get rid off in an event like a layoff, say if you are an iPhone user, you could drop the data plan, or get rid of the extra channels in your cable connection. This might just come in handy. You do not have to write it down; just keep it in your mind. In general the more expenses you can cut down in case of a financial emergency the lesser you will need in emergency funds.

Part 2 here.

PS: This post is featured in the 209th Carnival of Personal Finance published at Living Almost Large

Great news people, I have been thinking a lot about the improvements I want to implement on this site.

In the following weeks you can expect the following:

1. A new look for the site.
This could be a new theme, a new logo or just an enhanced layout for the existing theme.

2. Exciting new and original articles.
I have drafted up some interesting topics on personal finance but they are not yet complete and ready to be posted. So lots of work required here.

3. Round ups.
I have decided to do periodic round ups of the best articles that I read on the blogosphere.

4. Memberships to blogging networks.

I will join some good blog networks in order to get some visibility and spread some link love.

5. A Secret..!
Yes you bet, I have a secret armor under my belt but this one requires quite some time and strategic move to be effective. So till then it remains a secret.

I have been tied up with the upcoming CFA examination and have temporarily stopped working on posts. I will start posting again from the second week of June.