Christian Finance Blog

Great news! The Treasury Department said Thursday that the special economic stimulus rebates would be distributed five days earlier than first said. The first round of rebates are expected to be sent starting Monday, April 28 rather than May 2 as previously thought.

About 800,000 tax filers will receive rebates on Monday, Tuesday, and Wednesday. An additional 5 million will be distributed on Friday. The economic stimulus plan signed in February by President Bush will distribute more than $110 billion to 130 million taxpayers.

So what are you going to do with the money? Most people I’ve talked to and read about seem like they aren’t spending it but rather paying down debt and/or boosting their emergency funds and not necessarily the economy. I’m doing the same.

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I just saw a post on FatWallet that talks about the Provident Direct online high yield savings account that’s currently paying 4.50% (edit: now only 3.75%)! It seems like a good deal especially given today’s market conditions. However, the Fed is expected to drop rates again tomorrow so who knows how long this rate is going to stay competitive. Currently, it’s the highest that I know of. It’s also FDIC insured at Provident Bank which has been around since 1886. The online portion has been around since November 2007.

It says that there are no minimum balance requirements and no monthly fees. You only need a dollar to open. The major downside is that withdrawals are limited to $5000 per transaction but you can do multiple transactions per day. However, savings accounts are government regulated and cannot exceed more than 6 transfers out in a month. Any withdrawals after that will be charged a $5 fee. You can bypass the $5000 limit by “pulling” from another account rather than “pushing” from the Provident account. Apparently there’s also a $25 fee for closing the account within 180 days and a$5 monthly fee if the balance dips below $300.

I’ll have a full review when I open an account in a little bit. I’m going to wait and see what happens to the rate first. It would be a great place to park my emergency fund which is currently only earning 3.85% at FNBO Direct.

In other news, there’s a new concept in the online savings space that I stumbled onto today. It’s called SmartyPig and it basically combines an online savings account with social networking. The basic premise is that you need to set goals that are funded by monthly deposits into SmartyPig. The goal is active until it is reached. The social aspect comes in when you make your goal public. People can help fund your goal by using a credit or debit card (with a $4.95 processing fee). Once goals are met, you can “withdraw” the money via MasterCard debit card or a gift card from participating retailers. At this time, there is no way to receive that money via ACH transfer in cash. This is apparently done so that it’s harder to use the money since the purpose is to save it.

Deposits are FDIC insured and held at West Bank, which has $1.3 billion in assets. Deposits also earn a very competitive 4.30%, albeit with some limitations. I think it’s a good idea, but I definitely wouldn’t use it to hold my emergency fund because it’s not liquid enough. However, I don’t think it was intended for that purpose either. I think there’s a market for this and if it helps people to set savings goals and encourages them through the social aspect, it could be a winner. I’m holding off on it for now, but maybe I’ll revisit it later. Maybe I can set up a public goal to get out of debt and you guys can contribute!

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The Fed recently cut the federal funds rate (the rate that affects consumer loans such as home equity lines of credit, auto loans, and credit cards) by a half percent after cutting it by three-quarters of a percent on January 22 in an emergency meeting. The federal funds rates now stands at 3% which is the lowest it has been in two years. The discount rate (the rate at which banks borrow from the Fed) was also cut half a percent to 3.5%.

What does this mean to you and me? The rate cuts means lower rates for borrowers but also lower rates for savers. Average 30 year mortgage rates now stand at 5.49% which is also the lowest in two years. If you’re looking to buy a home, it seems like now’s the time to buy with home prices considerably lower than even a couple years ago in some markets. It may also be time to refinance your existing home mortgage if you can save at least one percentage point or more.

You should also see lower rates for your variable credit cards. If you don’t, give your credit card company a quick call and ask them to lower the rate. If they don’t, ask for the retention department and threaten closing your account and transferring balances elsewhere. The retention department has the power to lower the rate for you. Of course, this doesn’t affect you if you pay off your credit balances off each month.

But these rate cuts also mean lower rates for your emergency cash savings in CDs and savings accounts. ING Direct now stands at 3.40% and Electric Orange is at 2.25% for balances up to $49,999 (if you want a free $25 for opening an account, let me know). FNBO Direct (which is where most of my emergency fund now sits) is at a still-great rate of 4.30%. WaMu’s online savings account now stands at 4.25%. HSBC Direct stands at 3.80%. You can check out Bankrate.com for the latest rates. But your emergency fund is not designed to make you money; it’s just there for an emergency and it’s nice to earn a little interest on it. But if you already have your 6 to 9 month emergency fund in place, it may be time to look at longer-term investments in the stock market. I absolutely love Roth IRAs and an index fund within a Roth IRA is perfect for most people! If you have a 401K offered by your employer, it may be time to increase your contributions.

One last thing to remember. Just because the rates are lower doesn’t mean you have to borrow. Remember that the goal is to save more and not spend or borrow more. But at the same time, there may be some opportunities to save some money. God Bless!

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I hope that everyone had a happy holiday season and is ready to tackle another new year! I believe this year can be your turnaround year! Let this be your year of new beginnings! With a new year brings new goals, new life situations, and a fresh outlook on life. Don’t let this year be just another year. With that being said, here are my top money goals for 2008:

1. Save more, spend less. One of the golden rules to becoming wealthy is spending less than you make. Live on less than you make and you can use the extra to pay down debt or invest for your future. If you can’t do this, you need to make more money!

2. Pay down debt. Yes, even a personal finance blogger like me has debt! But I have a plan to get out of debt and although I won’t be debt-free this year, I’m still making progress. I want to pay off my car within a couple years. I’m sick of a car payment…

3. Beef up my emergency fund. I have an emergency savings account that’s not quite up to 6 months of expenses. I want to achieve that this year and some extra. I currently have my emergency fund at FNBO Direct (currently at 5.05%) and ING Direct (currently at 4.10%). If you want a free $25 bonus for opening an ING account with at least $250 to start your emergency fund, make sure to contact me.

4. Start saving for Christmas now. Christmas is not an emergency! Christmas happens to land on December 25 every year and yet many people end up charging Christmas on their plastic credit cards and end up paying way too much in interest. Start saving now and pay cash! I plan on doing that starting right now.

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Since HSBC Direct’s 6% promotion ended yesterday, FNBODirect.com is now offering that same 6% promotion until September 28, 2007. That’s nearly a full 5 months of high interest!

They are listed at Bankrate with a four-star safe and sound rating so I think you can trust them. I’m going to open an account tonight. I’ll have a review of it soon.

With no monthly fees and no minimums, this would be a great place to put an emergency fund. If you don’t have an emergency fund yet, what a great chance to start one today with a high interest rate!

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I ran across an interesting CNN article on emergency savings.

Here are the vital statistics:

Only 40% of Americans have a separate savings for emergencies

Only 19% of those aged 18-24 have separate emergency funds

Only 23% of people with less than $25,000 in annual household income have them

31% of African Americans and 32 percent of Hispanics have them

58% of those with annual income of $75,000 or more have emergency funds

This is some sad news indeed on the financial state of this country. However, it is pretty expected since this is a debt nation with a negative savings rate. We are spending more than we’re earning and borrowing the rest. The sad fact of this survey is that the people who need an emergency fund the most, don’t have them. That’s why people have to resort to rip-offs like payday loans and credit card advances!

Another interesting thing to note about the survey was that 81 percent of those surveyed believed their rainy-day savings would be sufficient to cover emergency expenses this year. Are we delusional or what? How can 81% say that their emergency fund will cover emergencies when only 40% even have one? We really need to change our thinking in order to get into financial shape as a nation. It’s going to be hard, because it’s so ingrained in the culture, but it isn’t impossible. If you can change, and then teach your children the right way to manage money, we can change as a nation. It will be a slow process, but it begins with you. God Bless!

Here’s the link to the CNN article.

It’s pretty much common knowledge now that everyone should have an emergency fund of 3-6 months (some experts say even more) of expenses in liquid savings (money that’s easily accessible). But unfortunately, common knowledge isn’t necessarily common practice and many people just don’t have anything in savings. The key to getting out of debt is to have some sort of emergency savings that acts as a cushion against life’s hurdles. Without this cushion, you will be forced to use your credit card or payday loans and go deeper in debt.

If you’re struggling with debt, you absolutely need to have an emergency fund. It is extremely important. Here’s a great plan to get out of debt from Dave Ramsey:

Step 1: Stop borrowing. Simple enough.

Step 2: Save $1000 and put it in the bank. This is the beginning of your emergency fund. You want to do this before you start attacking your debt because this will act as a cushion to protect you for emergencies.

Step 3: Start attacking your debt using the “debt snowball”. We’re going to pay off all your debts except your mortgage. List your debts on a sheet from smallest to largest (in amount, not interest rate). Then start attacking the smallest debt and pay minimum payments on the rest. Once that’s paid off, take that payment and add it to your next debt and so on until all your debts are paid off.

Step 4: Fully fund your emergency fund which is 3-6 months of expenses. You can download an emergency fund worksheet from Bankrate. It’s a PDF that you can view or print. To get the 6 month emergency fund, you just need to multiply each line by 6 instead of 3.

Step 5: Then start investing and grow your net worth.

This is not my plan. This is from Dave Ramsey who is a great Christian finance guy. I’m going to do a review on one of his books so stay tuned for that.

A great place to put your emergency fund is a high yield online savings account. I’ll have another post on some of the savings accounts that I use.

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