Financial News – Blog articles

Why I Ditched My Vanguard Money Market Fund In Favor Of ING Direct

Written on February 9, 2010 – 4:21 am | by admin

For several years, I kept my emergency fund in the Vanguard Prime Money Market Fund (VMMXX).  For a while, this Vanguard money market fund was yielding over 5% while most high yield savings accounts were stuck in the 4.5% range (those were the days, huh?).  This made perfect since, because while online savings accounts are FDIC insured, money market mutual funds are not;  I interpreted the yield differential as being compensation for taking on slightly more risk.

All figures are accurate as of the date of publication:  2/8/2010.

And Then Came The Crash…

2008 was a bad year for pretty much everything, but money market funds were hit particularly hard.  A few of the larger ones even broke the buck, meaning they had to be subsidized by their sponsoring company to prevent investors from suffering losses.  That was the last straw for me.

To add insult to injury, money market fund yields are as low as I ever remember them being in my (admittedly short) investing experience.  The highest-yielding taxable Vanguard money market fund, VMMXX, is not yield a dismal 0.02%.  That’s not a typo:  0.02%!  Surprisingly, the Vanguard Tax-Exempt Money Market Fund (VMSXX) yields over three times as much as its taxable equivalent, or 0.09%.  Even investors in the very lowest tax bracket will come out ahead with the tax-exempt fund, and that’s practically unheard of.

It’s Not Worth The Risk

To be sure, Vanguard is a fine mutual fund family and no Vanguard money market fund has ever lost money.  Furthermore, the Prime Money Market Fund has been very attentive to risk throughout its history.  There is no reason to believe any Vanguard money market fund will ever lose money;  however, I’m sure most investors in those other funds felt the same way.  It’s just not worth the risk.

Now, I hold my emergency fund at ING Direct, which is yielding 1.2% as of this writing.  Not only that, but my account is 100% FDIC-insured to the fullest extent of the law.  Even if the money market funds regain their usual yield advantage going forward, I think I’ll stick with ING because

1. ING Direct’s rates are consistently competitive.  My emergency fund isn’t huge, so chasing the very highest yields isn’t a priority.  ING usually isn’t the highest on the market, but they are also never the lowest.
2. Money Market Funds aren’t as safe as I thought they were.  The risks can go undetected for years at a time until the fund implodes with no warning.  I’m willing to take on additional risk with my long-term investments, but not my emergency fund.
3. I have better things to do than worry about an extra $200 per year in interest from my emergency fund.  It’s there for safety, not for earning maximum returns.

The Orange Savings Account. Earn high interest. Great rates, no fees, no mini

Read more…

Posted in Financial News | No Comments »

The 4-Hour Workweek By Timothy Ferriss Review

Written on February 9, 2010 – 1:41 am | by admin

Note:  This is a review of the Expanded and Updated edition of the book, which I highly recommend over the original.

Timothy Ferriss seems to be one of the world’s greatest self-promoters these days.  Don’t get me wrong, his book is solid, his methodology works, and he definitely practices what he preaches, which is a breath of fresh air in today’s guru-driven self-improvement market.  Still, I can’t help but conclude the good majority of his success comes from his incessant self-promotion.  This guy is everywhere these days telling you how great he is.  Note to self:  constantly tell everybody how great you are.

I still think the whole concept of the 4-hour workweek is unrealistic for most people.  Most just people can’t break out of the 9-t0-5 mindset.  They are happy where they are in life, even if their favorite past-time is complaining about work.  There is nothing wrong with that.  They are not losers.  Just just value security and comfort over adventure and mountains of money.  After all, there is risk involved in embarking down Timothy’s path, much of it he hasn’t even conceived of yet.  But he will, don’t you worry.

The 4-Hour Workweek Delivers On All The Hype

But does it work?  Absolutely it does.  Like most good self-improvement products, this book does a stellar job of laying the practically infinite possibilities in front of you.  Tim makes it sound as though the world is your oyster.  And he’s not lying:  it is, but that’s not the primary strength of this book.  The thing about the 4-Hour Workweek is, it actually shows you step-by-step how to accomplish what it promises.

The book starts with a bit of inspiration.  By the end of the first chapter, you’ll be tempted to run in and quit your job first thing in the morning.  I wouldn’t recommend doing that just yet, but you’ll begin to see how a steady, secure, full-time job can be as much of a hindrance to your happiness as anything else.   Having money and living in a decent neighborhood is nice, but is that really what makes you happy?  Chances are you didn’t spend your childhood aspiring to be a middle-class work-a-holic.

The Nuts And Bolts

The rest of the book reads like an outline for an Entrepreneurship For Dummies book with a twist:  only businesses not requiring a full-time effort will be considered.  The concept of “loving-what-you-do” is exposed as the bunk it is.  Do you love what you do for a living?  Great!  But most people simply don’t love anything enough to want to spend their entire life doing it.  There are plenty of things I like doing, maybe even a few I wouldn’t mind spending 40 hours per week doing for the next 3 or 4 years.  But for the next 40?  No thanks.

Ferriss spends a lot of time on preaching about hyper-optimizing your productivity.  If you’re to get away with working just a few hours per week, you’ve got to make sure you actually get the job done on the rare occasion you do sit down to work.  The theory (it’s totally true, by the way) is that most people spend half their time goofing off at work, and the majority of the work they do get done during the other half of the day isn’t terribly important.  In short, most people invent work to do just so they can feel they’ve accomplished something.  Don’t let this be you.  You can accomplish just as much in 10 hours per week as 40 if you only do what truly needs to be done.

The muse section of the book (that is, the section devoted to creating semi-passive income streams) leaves a bit to be desired.  Ferriss offers broad methodologies to follow for finding good low-maintenance businesses to start, but practically no information you could apply today.  There’s plenty to start, of course, but you’ll still probably struggle for a year or two to figure out exactly what works and what doesn’t.  Still, the basic methodology Ferriss sites is pretty much what I use (significantly less-effectively than he describes, of course) and it does work.  It’s just not quite as easy as he makes it sound.  Still, 4 or 5 years of part-time work is probably more than enough to go from rank beginner to six-figures if you’re persistent.

The 4-Hour Workweek is absolutely, positively, without a doubt worth a thorough read or two.  The time-saving tricks and productivity tips alone are worth the price of admission.  While I already knew much of what Ferriss writes in this book, I still learned plenty.  Many of the online resources and odd time-saving tools were completely new to me, and I’ve delighted at exploring them for myself.  I’ve found Evernote and Dropbox particularly useful.  I now use them regularly.

The 4-Hour Workweek is an easy read in the traditional sense, but don’t think it won’t challenge you mentally.  It will have you questioning everything you’ve ever taken for granted to be true.  I suppose the most complimentary thing I can say about this book is it got my questioning what is and is not possible in life.  I realized that to most people, “impossible” really just means “I haven’t tried it yet, but I’m assuming it can’t be done.”

Buy The 4-Hour Workweek from Amazon.com and learn what it takes to live the good life without the usual 80 hour work weeks!

Posted in Financial News | No Comments »

How to Combine ING Direct Accounts

Written on February 8, 2010 – 8:18 am | by admin

My lovely wife and I both opened individual ING Direct accounts before we were married. In the latest step towards consolidating our financial accounts, we’ve decided to take all of our individual accounts and work towards combining them when it made sense. We’ve left investment and retirement accounts alone but online bank accounts are perfect for combining. Our latest move was to combine those ING Direct accounts into one.

I called a CSR yesterday to discuss consolidating our accounts and learned that the process is much simpler than I imagined. You can’t consolidate two separate ING Direct login accounts but you can add a joint account holder to an existing savings or checking account. This

Read more…

Posted in Financial News | No Comments »

How to Find the Best Prepaid Card for a College Student

Written on February 7, 2010 – 6:35 pm | by admin

Prepaid cards are gaining popularity among college students (and their parents) for several reasons. First, with a prepaid card, you don’t have the risk of going deep into debt, high interest payments, or late fees. Second, if parents are involved in the finances, they can easily add money to the card online. And finally, under the new credit card law that goes into effect this month, students do not need parental consent to get a prepaid card like they will for a traditional credit card.

A prepaid card, sometimes called a prepaid credit card or a prepaid debit card, acts like a debit card but without the bank account.

Read more…

Posted in Financial News | No Comments »

Payday Loans Are Detrimental To Your Financial Health

Written on February 7, 2010 – 5:19 am | by admin

At some point, you may find yourself in need a little financial pick-me-up between paychecks. Emergency expenses can crop up at any time and when you are in need of quick cash, a payday loan can be a tempting offer. The true costs of a payday loan, however, are absolutely astounding and are usually swept under the rug by greedy lenders.  Needless to say,  a payday loan should be an absolute last resort.

Paydays loans are titled as such because one borrows cash with the promise to pay back the full amount plus interest on the next payday. There is an upside to payday loans, such as the ability to get a quick approval, access fast cash, and essentially all you really to initiate the process is a job and a bank account. O

Read more…

Posted in Financial News | No Comments »