Then, when grabbing tea with my pal, GeekSugar, this morning, I noticed her handy trick. So you make the most of every last dollar and cent, wrap sticky notes around each with the remaining balance and take note of any purchases. In addition to being another more obvious use for your phone's calculator, it's a nice way to splurge on an afternoon yogurt without feeling like you've spent hard earned cash in the process.
One of my best girlfriends is in the market to purchase her first home with her new husband, and before applying for their loan she called to ask a question about her credit score. She wanted to know whether or not it was a good idea to open a new Amex card — she and her husband are antsy to start earning points. I answered her question the best I could; the answer is below, along with three other facts about credit scores.
- Generally, you should not apply for new credit right before your credit is evaluated for a loan. The application for a new credit card will instigate a hard inquiry on your credit and ding your score. Even if the damage is minimal, you could be offered a loan with a higher interest rate if your score isn't top notch.
- All of the credit bureaus use proprietary formulas to calculate scores, and you have to pay for all three scores to determine an average. If you're simply curious about your score and unwilling to fork up the cash to buy multiple scores, get your FICO for about $16 — according to the FICO website, 90 percent of the largest US banks use FICO scores.
To see two more facts about credit scores, read more
Job hunting might be the only thing on your mind after losing a job, but don't let your 401(k) from your previous employer slip through the cracks. Deal with wrapping up those loose ends before diving into the job search head first, otherwise you're more likely to indefinitely postpone the task.
Your 401(k) savings can be rolled into a Traditional IRA account without penalty. The bank that holds your IRA account will have paperwork for you to complete and will initiate the rollover. Your 401(k) will be liquidated and funds amounting to the account's market value at the time of liquidation will be transferred to your IRA account. From there, you'll need to rebuild your retirement account by choosing new investments. You could try and hold off until you've found another job and roll your retirement savings into your new employer-sponsored retirement plan, but there's no guarantee your new job will offer one.
Hey now, look who's making a comeback! The dollar has strengthened significantly compared to most currencies except the yen, and this month alone it has gained 11 percent against the euro. It could be a temporary trend that disappears as quickly as it happened, but The Wall Street Journal helps us understand how the current comeback affects Americans.
- Investors: Because a stronger dollar pushes down the value of foreign assets, overseas investments will take a hit.
- Consumers: A strong dollar will make imported goods cheaper, but any potential discounts depend on how flexible brands are with their suggested retail prices. While it's up in the air if the price of European designer goods will come down, the cost of European wine should fall 10 to 15 percent. Expect European auto makers to remain resilient to a strengthened dollar.
- Travel: International airfares aren't budging yet but this could change, and in general a stronger dollar is good for some Americans who are pleased about more affordable shopping abroad. The biggest bargain is Iceland — airfare is 21 percent lower than last year, and any service that requires labor like tours or spa treatments are about 50 percent lower.
Banks offering plans that deposit money into a savings account every time you spend money are encouraging their customers to build up their savings account, which is a good thing. But when the Consumer Reports Money Lab researched competing plans it found that most of them aren't the best solution for people serious about saving. Here is a summary breakdown from the November issue. Have you participated in programs like these?
- Bank of America's Keep the Change: The bank rounds up purchase amounts to the nearest dollar and transfers the difference to your savings account, so if a total purchase is $332.49, 51 cents will be transferred to your savings account. The interest paid on the basic savings account was recently .2 percent and 1.75 percent for the money market account, so even though the bank matches the transfer amount for the first three months and five percent after that, you'd be better off saving in accounts that pay more interest.
- Wachovia's Way2Save: Wachovia moves $1 into your savings account every time you make a debit purchase or pay a bill online. It pays 5 percent interest during year one and a 5 percent bonus, but only pays a 2 percent interest rate after that. After year one, the program isn't going to do much to boost your savings.
- American Express One: Because the card pays 1 percent cash back on purchases but charges a $35 annual fee, you'd need to charge $3,500 to break even. You'd be better off getting a card with greater rewards, minus the annual fee.
While there's no doubt the heads on Capitol Hill are spinning with what's been happening in our economy, it's not exactly a picnic for those of us feeling like we have a million and one unanswered questions. Watching big banks collapse and listening to what the news tells us was a horrendous day for the market, followed by the worst day ever, doesn't do much for the people anxiously sitting on the sidelines. Here are three things you can do right now to get a grip on your finances.
- Spend wisely and save as much as you can: Sometimes, it's easier to turn a blind eye on the things that make us anxious instead of dealing with them. Now is not one of those times. Buckle down on your budget and figure out how you can save more.
- Pay off debt: The economy has already lost 605,000 jobs this year and that number is likely to continue growing. You need to get aggressive with your debt (especially the high interest kind) in case you find yourself jobless — you'll need your savings for everyday expenses instead of debt repayment costs.
See two more ways to get a grip on your finances right now when you read more
When the market closed yesterday, the confusion and exhaustion caused by the recent events on Wall Street were escalated even more. The market suffered its biggest single-day loss in about 20 years after the House rejected the $700 billion bailout bill and stumbled back to the drawing board. The New York Times reacted to the news by providing a Q&A for the average saver and investor, and I've selected what I consider the four most relevant topics they covered.
- Why did the stock market fall so far so fast on Monday? Fear is likely the biggest factor. It could be a while before businesses have access to the short-term loans they need to operate a profit-making venture.
- My retirement portfolio has been wrecked by this. How should I respond? Keep saving and contributing enough to your 401(k) to get your company's match if it offers one. Because your savings have taken a beating they will need more time to cycle back to a place where you can retire comfortably.
See two more sets of questions and answers when you read more
It's been a rough couple of weeks on Wall Street, in Washington, and around the US (and the world) as we all worry about the unsteady US economy and the proposed $700 billion "bailout" effort of the nation’s financial markets. Here's a look back on what we've been talking about on Savvy.
What Happened on Wall Street?
What to Do When Your Job Is on the Rocks
Who Protects Your Money If the Bank Goes Down?
Why a Run on the Bank Is Bad
Do You Bank With WaMu?
Will the Street Ever Be the Same?
Sorting through the news lately has been an emotional, stressful experience that has everyone worked up. While it's important to understand how things came to be and the who's who of what's happening now, it's just as worthwhile (and maybe more so) to know how the Wall Street mess affects you and me. Here are some points to consider when trying to make sense of the various moving pieces.
- Employment: Hiring has slowed and employers are cutting back — employers that are hiring are holding more rounds of interviews and being more selective. Layoffs lead to a decrease in consumer spending, which can cause businesses to cut back even more, and so on. If you have a job, it may be more difficult to get a raise because your employer feels the pinch of a weakened economy.
Discover how borrowing and cash are affected when you read more
Bad banking news has many people fearing their life savings will suddenly vanish and has created a somewhat panic-ridden population. Questions are flying about pulling money from the bank in case it collapses, but that's the most counter-productive thing to do in this scenario. Keeping your money under your mattress is not the way to go!
According to Investopedia, a bank run is "a situation in which numerous bank customers try to withdraw their bank deposits simultaneously and the bank's reserves are not sufficient to cover the withdrawals." So, the fear that a bank will become insolvent and results in a bank run, is the exact reason a bank could become illiquid. When it comes to your money, panic-induced decisions are rarely good ones.