Update: Take Your Money And Run?
July 23, 2008
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I received lots of comments and questions on my last article about the safety of banks and how the FDIC insurance works. Here’s a quick rundown:
Yes, you can be covered for more than $100,000 based on how the account is titled. For example, you can have account(s) for 1$00,000, your spouse can have account(s) for $100,000 and you can have joint accounts for $200,000. Note: Joint Trust accounts are not included in this ownership. For more information, see the FDIC publication, “Insuring Your Deposits.”
You can also confirm that your accounts are covered by the FDIC at EDIE - Electronic Deposit Insurance Estimator. It will allow you to calculate the insurance coverage of your accounts at each FDIC-insured institution.
Someone else wrote in to ask why anyone would have that much cash in a bank anyway? That’s a good question and I’ll address that in a future article.
Warmly,
Cindy
Take Your Money And Run?
July 14, 2008
Does IndyMac Bank’s failure this week make you want to run right down to the bank and take your money out?
I received that very question from some clients this morning. David and Rhonda had heard that one of our local banks was in trouble and wanted to get my opinion on getting their money out. I hope my response caught them before they made the mad dash to the teller window.
Here’s what I told them:
“I doubt there’s a big rush to pull money from XYZ Bank.”
Remember, your money isn’t really “in” the bank. They’ve lent it out to others and they are required to have amount of deposits on hand to cover normal business. However, if everyone takes their money out at once it’s a “run on the bank” and will certainly cause the bank to go under (a la The Depression). Remember what happened in “It’s A Wonderful Life“?”
According to CNN, the FDIC had to close IndyMac because customers made a run for their money withdrawing more than $1.3 BILLION. Ouch!
“This institution failed today due to a liquidity crisis,” OTS (Office of Thrift Supervision) Director John Reich said.
What Should You Do To Protect Your Money?
- Make sure you don’t have more than $100,000 in any one bank
- Sit tight and don’t increase the chances your bank will fail by withdrawing your money. That’s why there’s an FDIC (Credit unions have the NCUA so they’ll be OK, too).
The last thing the government wants to see is banks failing and there are programs in place to make sure you don’t lose your money (up to $100,000 per person - not per account). It just increases all our costs when you take yours out.
There’s lots to worry about in the economy right now but so far, this isn’t one of them. You can be sure that if I’m concerned, I’ll be letting you know.
Warmly,
Create your own Anti-Emergency Fund
July 2, 2008
Do unexpected car repairs, quarterly insurance payments or those darned property taxes find you hard pressed to squeeze one more dollar out of an already stretched monthly budget? Or do you usually end up reaching for the plastic in your wallet to make up the difference? Those inevitable expenses can put less stress on your bank balance — and your mind — if you learn to expect them and save in advance.
Too often, irregular occurring expenses get left out of our financial equation. Our income stretches to cover the regular monthly expenses and the remainder trickles away toward little things like the morning espresso or lunches out or a dozen other daily splurges. We choose not to think about the brakes that are getting spongy or the plumbing that’s beginning to make strange noises. And we end up riding a financial roller coaster, never knowing when the next crisis will throw us for a loop.
Planning and saving for those events can help prevent an ordinary life from turning into a crisis and can also cut down dependence on credit cards. Not having savings is a major reason people get into debt — event when they don’t have problems controlling their spending.
An Anti-Emergency FundTM is the way to anticipate and save for those irregular events that are anything but unexpected. The Anti-Emergency FundTM is the foundation of a three-part savings plan.
With a little advanced planning, a broken water heater, a high winter heating bill or the family vacation don’t have to result in financial emergencies. An Anti- Emergency account helps in saving for those variable expenses, both expected and unexpected, that inevitably occur.
Some people call this their “emergency fund,” but it’s really a savings fund that helps you prevent financial disasters. No, you can’t predict when your car is going to break down, but you can predict that it will occasionally need maintenance and repairs and set aside a little money in advance for those events.
Here are some steps to help you get started on your Anti-Emergency FundTM:
Identify your irregular expenses.
Take an inventory of those variable expenses that occur throughout the year. Looking back at checking account registers and credit card statements can help you do this. Some examples of these include property taxes, insurance premiums, vacations, car tune-ups, holidays and birthdays. List as many of your non-monthly expenses as you can remember.
Write the anticipated amounts on the calendar.
In many cases, you will know when the expenses are due to occur. In others, you won’t. But you know that sooner or later a car will have problems or an appliance will break down. Try to anticipate these expenses and list them somewhat earlier than you actually expect them to come up. Be sure to update your calendar as you discover more expenses.
Include money in your monthly spending plan for non-monthly expenses.
If your car insurance, for example, is due in May, set aside a small portion each month starting in February. That way, when May rolls around you can transfer the expense to your spending plan and have money available to pay it. Setting aside even a few dollars each month for foreseeable expenses can make it easier to manage your money throughout the year.
You may think you don’t have any “extra” money during the month to set aside, but repairing your car or paying your insurance are not optional expenses. By setting aside small amounts ahead of time, you’re avoiding larger money woes ahead. So you may need to find ways to reduce your regular monthly spending. By tracking your expenses, you may discover areas where you can trim your monthly spending with only small sacrifices. Costs of twice-weekly trips to the drive through or a professional manicure can add up quickly over a month. The important thing is to start today. It may be discouraging at first if you find that you don’t have enough money to fully fund your Anti- Emergency FundTM, but you’ll begin to succeed the minute you start the process. Small amounts of savings add up quickly and start compounding immediately!
One of the mistakes people make when trying to get their finances under control is not having a savings account. They may reason that it’s better to put money toward reducing credit card debt at 18 percent interest than to toss it into a low-interest regular savings account. The problem is that if you don’t have money set aside for those unavoidable bills, you inevitably end up adding to your credit card balance to cover the difference.
Stabilizing your debt means agreeing not to incur new charges and to begin paying down what you owe. A savings account is a key element in making that happen — and in improving your financial freedom!
I recommend INGDirect for savings because they’re the best bank I’ve ever found!
Warmly,
Free Will & Trust Kit From Suze Orman (online version)
June 30, 2008
Suze Orman is making her online Will and Trust Kit available to all at no charge. I don’t know how long it will last! Here’s how to get it:
- Go to SuzeOrman.com.
- Click on Will & Trust Kit link on upper left menu.
- Click the orange Gift Code button.
- Type “people first“.
You can create a will, a revocable trust, Financial Power of Attorney, and an Advanced Directive / Durable Power of Attorney for Healthcare. No more excuse and it’s f-r-e-e!
This is a pretty basic package so if you have a large estate or other issues, you’ll want to consult an estate attorney. You can still go ahead and do the Healthcare Power of Attorney, though and save your family the heartache of having to make end-of-life decisons for you.
Free Summer Stress Package for Mom
June 25, 2008
Free Summer Stress Package for Mom
The ladies at Menu Planning Central have put together a little care package for stressed out moms! And they’re letting me pass them on to you!
Get special reports on “Kids Summer Activities”, “Family Friendly Summer Recipes” and “Summer Exercise for Mom”.
Warmly, Cindy
