Americans have forgotten how to save in recent years.
By Jason Zweig, Wall Street Journal
First, we came to regard the stock market as our piggy bank; if we needed a little spending money, surely we could always sell a few shares of stock or a bit of a mutual fund at a profit. Then, we viewed our houses as money machines that would always provide a surplus of cash on a moment's notice, since real estate "never goes down in value."
All that has changed, at least for now. People finally have again realized how important it is to save. After all, thrift was once one of the quintessential American virtues: Just think of Benjamin Franklin intoning, "A penny saved is a penny earned."
Our ancestors knew what we had forgotten until recently: Unless you save, you cannot make your wealth grow. It's much easier to tell ourselves that our horse will come in at the racetrack, or that we will win the lottery if we just keep playing 4-7-10-14-36-51, or that some stock we heard about online is the next Google, or that we can simply use our credit cards to buy whatever we feel like today and pay it all back tomorrow...after our horse comes in at the racetrack.
But Benjamin Franklin was right when he wrote: "Human felicity is produc'd not so much by great pieces of good fortune that seldom happen, as by little advantages that occur every day."
And the biggest of all "little advantages that occur every day" is the simple act of saving money. That, in turn, requires you to become more mindful of where your money goes and why, and whether you are spending it wisely and saving enough.
Here are a few simple ways you may be able to raise your own rate of saving. Each will save you something; together, they will save you a lot.
Drive more efficiently. Driving at 55 miles per hour, instead of 70, will save you the equivalent of roughly 70 cents a gallon, which could easily put hundreds of dollars a year into your pocket.
Before you start your car, get your kids seated and belted and do all your other preparations for driving. This will save you a few minutes' worth of gasoline usage every day. And don't idle your car; if you know you will have to wait more than a couple of minutes, turn it off. For more tips, see fueleconomy.gov.
Conserve energy. Set your home's thermostat to 65 degrees in winter and wear a sweater. Before you go to bed, set it down to 60 degrees and use a second blanket if needed. In summer, set the air conditioning at 70 degrees. Adjusting your home thermostat wisely could save hundreds of dollars annually.
Also make sure your home is properly insulated and that windows, doors, chimney and the basement are properly sealed. Here, too, the annual savings can be in the hundreds of dollars. For more advice on saving on fuel bills, see energysavers.gov.
Walk or bike to work. If it's feasible, walking or biking, instead of driving or paying for a bus or train, could save you $5 a day, $25 a week, $1,250 a year.
Don't buy lunch every day. Instead, make and take your lunch to work. Better yet, pull together a brown-bag club with a few friends, with each of you bringing your own food plus something to share. You could save another $1,250 a year.
Cut back on dining out. Take a cooking class. You will acquire skills and recipes that you can use to make better food in your own home than most restaurants serve -- and you will be able to make it for a fraction of the price.
According to the U.S. Bureau of Labor Statistics, the typical American household spends $6,133 a year on food, 44% of it on meals eaten outside the home. When you do go out, don't be afraid to skip an appetizer, share an entrée or split a dessert. Always inquire how much the specials cost. (Specials are typically no better than regular menu items, but they tend to be more expensive.)
Don't order the second cheapest wine on the list, as many people do to avoid embarrassment. Instead, unabashedly order the cheapest one. It's usually almost identical in quality.
Quit smoking. With cigarette prices at roughly $5 a pack, someone who smokes two packs a day could burn through $70 a week, or more than $3,600 per year. Smoke like that for 20 years and, if you are still alive, you will have spent roughly $75,000.
Rent DVDs free from the library. Depending on how often you rent, you could save $100 or more a year.
Put your refrigerator on ice. Before you open the refrigerator, pause for a moment to see if you can move several things in or out at once. Every time you open the door of the fridge, you make it work harder. My guess is that a family that becomes more mindful about opening the fridge can save about 50 cents a week, or $25 a year.
Don't shop on an empty stomach. Walking into the supermarket when you are hungry can make you more inclined to buy food you don't really need. Eating a light, nutritious snack before shopping could easily save you $ 100 a year, not to mention several hundred calories a week.
Don't sign up for insurance, service contracts or extended warranties. Avoid the added cost of these extras for appliances and consumer electronics -- especially on things like cellphones, which you probably won't lose or damage and are likely to use for only a couple of years.
Manage credit-card spending. Pay with cash or checks when possible. Credit cards are essential for a few things, such as online purchases, car rentals and airline tickets. But you can do fine without them most of the time.
And ignore the minimum payment on your bill. You should be paying the maximum you can afford. If the minimum payment is $20, but you owe $774.84, see if you can pay $200 (a little more than 25% of the balance) or even $80 (about 10%).
Also, if you can find a credit card with a better rate somewhere else, switch. You can compare rates at federalreserve.gov/Pubs/shop/survey.htm and at bankrate.com.
These are only a few ideas for economizing. You will have others, many of which will be better than mine. Send your favorite suggestions on saving to intelligentinvestor@wsj.com.
Showing posts with label banks. Show all posts
Showing posts with label banks. Show all posts
Tuesday, December 1, 2009
Tuesday, November 10, 2009
5 Ways to Raise Money Today
With a little persistence and creativity, you can still find financing.
By CJ Prince
With banks still holding fast to their funds, credit remains scarce for businesses. But that shouldn't put you off the capital hunt. With a little persistence and creativity, you can still find financing. Here are five ways to get started:
1. Seek a microloan. Small businesses with reasonably good credit have a fair shot at getting a small line--usually up to $50,000--from a microlender, even if they've been rejected by a traditional bank. The Fox Valley Micro Loan Fund requires applicants to submit a turndown letter from a bank. While Fox Valley does consider credit history, it doesn't set a target credit score, focusing more on the circumstances affecting one's score.
2. Use your assets. As banks have pulled back on lines of credit, asset-based lending has leapt forward. At First Business Capital Corp., you can secure a line of credit against eligible receivables in which the lender fronts you 85 percent of the total, then forwards the remaining 15 percent after your customer pays in full. You'll pay about 1.5 points to 3 points over prime for the advance, but, says Michael Colloton of First Business, "that's how we can lend to companies that don't have the greatest creditworthiness."
3. Turn to the web. For a small amount of working capital, try peer-to-peer networks, which marry lenders and borrowers online. Though it's a relatively new concept, "over the next three to four years, peer-to-peer lending will take a significant leap in providing necessary capital to small-business owners," says Steve Bloom, an advisor and the former chair at SCORE's Atlanta chapter. Sites such as prosper.com, lendingclub.com and loanio.com allow entrepreneurs to search for lenders and borrow up to $25,000, with three-year terms and widely ranging rates.
4. Go around the big banks. If you have good credit and a profitable business, research local banks to find a business-friendly lender that hasn't been caught in the mortgage maelstrom. When Marco Giannini, 33, founder of pet food maker Dogswell, needed some flexible cash, he beelined for California United Bank, which lends mainly to manufacturers and distributors. He received a $3 million line of credit based on receivables and inventory. Before applying, he increased his chances by scrubbing his balance sheet and making sure his P&L statements were in line. "You need to make sure your numbers are realistic," he notes.
5. Sweet-talk your vendors. Often overlooked as a source of credit, vendors are uniquely motivated to keep their customers' business going and will often work out a payment structure to help clients survive a rocky period. When Giannini first started out, he received favorable terms from his manufacturers, easing the cash-flow burden for his company. If you can show a vendor your profitability, says Giannini, they'll take a chance on you.
By CJ Prince
With banks still holding fast to their funds, credit remains scarce for businesses. But that shouldn't put you off the capital hunt. With a little persistence and creativity, you can still find financing. Here are five ways to get started:
1. Seek a microloan. Small businesses with reasonably good credit have a fair shot at getting a small line--usually up to $50,000--from a microlender, even if they've been rejected by a traditional bank. The Fox Valley Micro Loan Fund requires applicants to submit a turndown letter from a bank. While Fox Valley does consider credit history, it doesn't set a target credit score, focusing more on the circumstances affecting one's score.
2. Use your assets. As banks have pulled back on lines of credit, asset-based lending has leapt forward. At First Business Capital Corp., you can secure a line of credit against eligible receivables in which the lender fronts you 85 percent of the total, then forwards the remaining 15 percent after your customer pays in full. You'll pay about 1.5 points to 3 points over prime for the advance, but, says Michael Colloton of First Business, "that's how we can lend to companies that don't have the greatest creditworthiness."
3. Turn to the web. For a small amount of working capital, try peer-to-peer networks, which marry lenders and borrowers online. Though it's a relatively new concept, "over the next three to four years, peer-to-peer lending will take a significant leap in providing necessary capital to small-business owners," says Steve Bloom, an advisor and the former chair at SCORE's Atlanta chapter. Sites such as prosper.com, lendingclub.com and loanio.com allow entrepreneurs to search for lenders and borrow up to $25,000, with three-year terms and widely ranging rates.
4. Go around the big banks. If you have good credit and a profitable business, research local banks to find a business-friendly lender that hasn't been caught in the mortgage maelstrom. When Marco Giannini, 33, founder of pet food maker Dogswell, needed some flexible cash, he beelined for California United Bank, which lends mainly to manufacturers and distributors. He received a $3 million line of credit based on receivables and inventory. Before applying, he increased his chances by scrubbing his balance sheet and making sure his P&L statements were in line. "You need to make sure your numbers are realistic," he notes.
5. Sweet-talk your vendors. Often overlooked as a source of credit, vendors are uniquely motivated to keep their customers' business going and will often work out a payment structure to help clients survive a rocky period. When Giannini first started out, he received favorable terms from his manufacturers, easing the cash-flow burden for his company. If you can show a vendor your profitability, says Giannini, they'll take a chance on you.
Tuesday, October 27, 2009
Bank Fees You Don't Know You're Paying
By David K. Randall
Banks are cutting overdraft fees, but there are other hidden charges.
In the wake of the uproar over bank fees charged to debit card holders--and the looming threat of congressional action--banking giants Bank of America, JPMorgan Chase, and Wells Fargo have announced drastic changes to their overdraft policies.
What banking customers might be missing is that debit card overdraft fees are the tip of the iceberg. Banks nickel and dime their customers in numerous other ways that can easily cost the average person $100 or more per year. Adding insult, many of the fees are poorly disclosed and levied regardless of any action the customer does--or doesn't--take.
"There is a long list of fees that people pay that doesn't require any type of acknowledgment on the part of the consumer," said Greg McBride, a senior financial analyst at Bankrate.com. Here are five major areas of hidden bank revenues.
Balance Transfer Fees
Banks commonly mail out ads pitching low interest rates for customers willing to transfer credit card balances from another institution. What many don't advertise is that there is often a balance transfer fee of between 3% and 5% hidden in the fine print.
"If you're transferring a balance from a card with a rate of 15% to a card with a rate or 13%, but you're paying a 3% admission fee, you're not saving any money," McBride said. Moving a balance of $5,000 from one credit card to another with a slightly lower interest rate could result in a $150 charge being added to the balance that you owe and pay interest on.
If you're thinking about switching to a card with a lower interest rate, ask the bank what type of transfer fees it charges. These fees are separate from the annual interest rate that you pay.
Cash Advances
Consumers who take cash advances from their credit cards will also be hit with a transaction fee that they might not have been expecting. As with balance transfers, cash advances often come with a fee that ranges between 3% and 5%. That's not all.
"If cash advances weren't costly enough with interest rates in the high teens, there's no grace period, and the interest clock starts ticking right away," McBride said.
Foreign Currency Surcharges
Using a debit or credit card while traveling overseas is wonderfully convenient. Perhaps too convenient. Over the past few years, banks have commonly started charging a 3% fee for any purchases made in foreign currencies. That means if you go to Paris on vacation and buy presents in euros, the charges will show up on your statement in dollars--with the 3% fees built in.
If you plan to use a debit or credit card abroad, consider opening an account with Capital One or Charles Schwab, whose foreign currency exchange fees run as low as 1%. If you are going to be taking money out of an ATM in another country (another place where banks ring up additional charges), Wells Fargo and PNC offer some of the lowest fees.
Balance Requirements
Many banks offer to waive monthly service fees on checking or savings accounts if customers maintain a collective balance above a set minimum. Dip below it, and you could be hit with a charge of $8 or more every time your balance falls below the minimum.
"These requirements are really a lose-lose proposition," McBride says. "If you don't maintain the balance, you get socked with a fee. If you do maintain it, you have the opportunity costs of stranding money in a low-yielding account when you could be earning a more competitive return in an online savings account."
ATM Fees
Bank of America and other banks now charge customers from other banks $3 to withdraw money from its ATMs. But at least you have to agree to pay the fee at the terminal. What some customers may not realize that is that their own bank often levies a $2 fee every time they use a competitor's ATM as well. Adding up all the bank fees, it may cost $5 to take out $20 of your own money. That's a 25% commission, and the bank didn't have to do a thing.
Banks are cutting overdraft fees, but there are other hidden charges.
In the wake of the uproar over bank fees charged to debit card holders--and the looming threat of congressional action--banking giants Bank of America, JPMorgan Chase, and Wells Fargo have announced drastic changes to their overdraft policies.
What banking customers might be missing is that debit card overdraft fees are the tip of the iceberg. Banks nickel and dime their customers in numerous other ways that can easily cost the average person $100 or more per year. Adding insult, many of the fees are poorly disclosed and levied regardless of any action the customer does--or doesn't--take.
"There is a long list of fees that people pay that doesn't require any type of acknowledgment on the part of the consumer," said Greg McBride, a senior financial analyst at Bankrate.com. Here are five major areas of hidden bank revenues.
Balance Transfer Fees
Banks commonly mail out ads pitching low interest rates for customers willing to transfer credit card balances from another institution. What many don't advertise is that there is often a balance transfer fee of between 3% and 5% hidden in the fine print.
"If you're transferring a balance from a card with a rate of 15% to a card with a rate or 13%, but you're paying a 3% admission fee, you're not saving any money," McBride said. Moving a balance of $5,000 from one credit card to another with a slightly lower interest rate could result in a $150 charge being added to the balance that you owe and pay interest on.
If you're thinking about switching to a card with a lower interest rate, ask the bank what type of transfer fees it charges. These fees are separate from the annual interest rate that you pay.
Cash Advances
Consumers who take cash advances from their credit cards will also be hit with a transaction fee that they might not have been expecting. As with balance transfers, cash advances often come with a fee that ranges between 3% and 5%. That's not all.
"If cash advances weren't costly enough with interest rates in the high teens, there's no grace period, and the interest clock starts ticking right away," McBride said.
Foreign Currency Surcharges
Using a debit or credit card while traveling overseas is wonderfully convenient. Perhaps too convenient. Over the past few years, banks have commonly started charging a 3% fee for any purchases made in foreign currencies. That means if you go to Paris on vacation and buy presents in euros, the charges will show up on your statement in dollars--with the 3% fees built in.
If you plan to use a debit or credit card abroad, consider opening an account with Capital One or Charles Schwab, whose foreign currency exchange fees run as low as 1%. If you are going to be taking money out of an ATM in another country (another place where banks ring up additional charges), Wells Fargo and PNC offer some of the lowest fees.
Balance Requirements
Many banks offer to waive monthly service fees on checking or savings accounts if customers maintain a collective balance above a set minimum. Dip below it, and you could be hit with a charge of $8 or more every time your balance falls below the minimum.
"These requirements are really a lose-lose proposition," McBride says. "If you don't maintain the balance, you get socked with a fee. If you do maintain it, you have the opportunity costs of stranding money in a low-yielding account when you could be earning a more competitive return in an online savings account."
ATM Fees
Bank of America and other banks now charge customers from other banks $3 to withdraw money from its ATMs. But at least you have to agree to pay the fee at the terminal. What some customers may not realize that is that their own bank often levies a $2 fee every time they use a competitor's ATM as well. Adding up all the bank fees, it may cost $5 to take out $20 of your own money. That's a 25% commission, and the bank didn't have to do a thing.
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