Personal Finance Ology

In my last blog, I talked about online banking and it’s association with customers concerns about identity theft. Well here I will take a moment to explain to you the safety of the money in your account as it pertains to your banks stability. I know with the current economic instability and the prevalence of banks going under there is a high concern of where your money is and if it should stay there or not. The reality is there is some protection of your money by the Federal Deposit Insurance Corporation. The origin of this entity goes back to the Great Depression of 1929-33 which caused the crash of the stock market. It was during this time that a lot of depositors lost their money due to the failing banks. Due to this turn of events, bank regulations were created to protect the bank and it’s customers.

The FDIC

The creation of The Federal Deposit Insurance was designed to insure up to $100,000 of the money deposited by the banks customers. This means in the case of bank failure the FDIC will guarantee a return of your funds up to and not to exceed $100,000. Any bank that offers the protection of their customers deposits by the FDIC will have a sign in their facility that says “member FDIC”. When opening an account with a bank be sure to look for this sign to ensure your protection.

Although the FDIC covers $100,000 per customer there are a few exceptions to the rule. U.S. Treasury securities, annuities, insurance products, stocks, bonds and mutual funds are examples of items not covered by the FDIC. Although you may come across some of these products that operate like a checking account-allowing you to write checks, etc.-it is imperative to find out if it is protected by the FDIC.

Is Your Bank Safe?

A good way to check out the stability of your banks is to visit www.bankrate.com and use the rating service titled “Safe and Sound”. This tool gives you a rating of banks and credit unions by using different financial measurements such as earnings (how profitable a bank is), liquidity (how well the bank can meet its day to day expenses), asset quality (the quality of the loans provided by the bank, how risky they are and how many are delinquent) and capitalization (how much of the company’s assets are company owned or owned by it’s shareholders as opposed to being owned by creditors). The strongest rating is a 1 and the weakest rating will be a 5.

You can use the ratings provided by the website to choose a bank or decide if you are going to stay with your current bank. However, this doesn’t mean that the ratings are 100% accurate but they will give you an idea of where each bank stands.

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Online Banks vs. Traditional Banks (Which is right for you?)
Aside from the option of banking at physical financial institution you can walk into there is the option of banking online. The advantage to online banks are that, due to them not needing actual employees, or buildings or anything of that nature, they have less overhead and can offer better interest rates on investments opportunities as well as interest bearing accounts. There have been some concern amongst customers in regards to identity theft, however the online banks know this concern and it’s importance and has gone through great lengths to be sure (and prove) that your money and identity is just as safe as if you were using a brick and mortar bank. The truth is, because of the technical skills of a lot of thieves, if a thief really wanted to steal your identity they could do it through computers that access online bankers information as well as brick and mortar bank customers information. The key is to take precautionary measures to be alerted when there are suspicious transactions on any of your accounts.

Net-Only Banking

Online banking isn’t for everybody. It has its disadvantages. For instance, the majority of the Net-Only banks, or Online banks, only allow access to tellers through email. Therefore, you won’t get an immediate response but instead have to wait for them to answer your email. There used to be a problem with having to make your deposits by mail, however a lot of Net-Only banks are now making ATM’s available to their customers allowing immediate withdrawals and deposits. Even though the disadvantages are slim to none it is important to go to the website of the Net-Only bank you are deciding on choosing and make yourself familiar with their site and the way they operate. You may find that you will be able to become accustomed to online banking or that it is just not right for you.

Why Choose A Net-Only Bank?

If you find yourself on the fence about Net-Only banking some things to consider would be if you travel a lot or have to relocate often a Net-Only bank will work for you due to you not having to worry about it being in the region you are moving to. With Net-Only banks, they go wherever you go! Also, as previously stated, Net-Only banks offer lower fees and better interest rates than brick and mortar banks. On top of these advantages, Net-Only banks also offer the same services as brick and mortar banks such as online bill pay, applying for loans, purchase certificate of deposits, transfer money and of course manage your account online.

I have a savings account with a Net-Only bank simply because I wanted to try it out and I must say so far so good. It is pretty much the same as a regular bank however I did get a sweet interest rate on my account. And to my surprise communication is not just through email, there is a 1-800 number I can dial if I need immediate assistance with my account. If you feel comfortable with online banking I recommend opening at least a savings account so that you can take advantage of the higher interest you can get!

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Now that the $787 billion stimulus package has been negotiated to terms both Congress and the President can agree upon, the new question is what effect does it have on those dealing with this weak economy. I know throughout all of the meetings and disagreements, I was curious as to how it would be changed around and how it would benefit me. Well here is what I’ve discovered after following this saga venomously.

According to CNNMoney.com the money’s allocation is broken down into three parts. $308 billion (39% of the money) goes to discretionary spending. This includes projects related to energy infrastructure, such as making homes energy efficient etc. $267 billion, which is 35% of the funds, is dedicated to direct aid. This increases unemployment and food stamp benefits. Lastly 26% of the funds, $212 billion dollars are allocated for tax relief focused mainly on individuals however some businesses may benefit from this relief as well.

In an effort to break the recovery plan down further I’ve decided to add a few pointers. The recovery plan includes:

A $400 credit per worker. A full credit is given to singles making $75,000 or less and for couples the credit will double for those making a combined $150,000 or less.

Temporary expansion of the child tax credit will lower the income requirement by $3,000 this year and next year.

Homebuyer incentives that are increased to $8,000 as opposed to $7,500 for homes purchased from January 1, 2009 to December 1, 2009. It also removes the requirement that made homebuyers pay back the credit if they stayed in the home over three years.

Car-buyer incentives offering the ability to deduct state and local tax if your income is less than $125,000 as a single filer or less than $250,000 if you are a joint filer.

Higher education tax credit goes from $1,800 to $2,500 and shall be in effect this year and next year.

Alongside these prominent points the recovery plan also has a lot more to offer. Other benefits include a twenty five dollar weekly increase to unemployment benefits, a 13.6% increase to food stamp payments, health insurance assistance for the unemployed, a 5% increase in the earned income tax credit, a one-time $250 payment to retirees, those who are disabled and those who are not working, it even offers a tax break for families in the higher income bracket.

I tend to believe this recovery plan covers a spectrum of assistance and it has the potential to assist a vast majority of people. As with anything it takes time to fix and recover all that has been lost but I am looking forward to it slowly reviving a dying economy. However, I am curious to see how others feel about this $787 billion recovery plan. Please feel free to comment, complain or applaud the efforts of the higher ups and vocalize any concerns, resolutions or tips on how you will use your portion for benefit. We all can learn from one another’s opinions and ideas!

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With all of the stress and worries the downfall of this economy is causing, I thought I’d take a minute to stop and smell the roses. All of the talk about the importance of becoming financially stable made me take a moment and think about the real reasons I wanted to become financially stable.

I understand repairing your credit and having an ample amount of savings for a rainy day (which is an estimated 3 months worth of your overhead according to the experts) is vital and can be a stress reliever, knowing that you have some sort of cushion in case of an emergency, however I feel there’s something more important to financial stability. Therefore, the real question isn’t just “how much money do I need to pay off my debt?”, or “what more do I need to do to fix my credit?”. The most important question is “why do I want more money?”

When you find the answer to that question, you are not only discovering what really makes you happy but you are also providing yourself with the motivation that will make obtaining financial stability that much easier. If you were to use your true happiness as a focal behind all of the hard work you have to put into creating financial stability all you will see is the outcome and not your current situation.

Financial stability to me is more than simply having more money it’s about having the ability to provide financial freedom for yourself and your family that will allow to do the things you enjoy all while doing what you love. If you happen to be in situation where you are not doing what you love then you can focus on just that-being able to do what you love. My point here is that in the event there is some sacrifice on your part your main concern should not be the sacrifice it should be the reward.

Your work and your process towards financial freedom is actually that financial freedom. I’ve figured with all of the stress and worry of what’s going to happen next with the economy, the most important thing is our sanity and our strength. I happen to find my sanity around those I love and find strength in my journey to financial freedom and acquiring the ability to do the things I enjoy most. Without that there really isn’t a life or a purpose. I know we all wish we could just wake up and be Bill Gates or Donald Trump, however the most important thing to remember is that Bill Gates and Donald Trump didn’t just wake up with that net worth. They had to sacrifice and push towards their goals in the face of adversity. The thing to take from their stories is their success. They did it! And you can too!

While I am only ¼ the way to the type of financial freedom I would be satisfied with, I have learned to take my time, learn all I possibly can and follow the detailed map I’ve drawn out for myself all while taking the time to enjoy the process, my family and those along the way. It’s always better when you stop and smell the roses!

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