High-Yield Savings Accounts

ben_franklin_2There are (at least) 3 different kinds of savings accounts at credit unions and banks.

  • Regular or Basic Savings.  Used to be called “passbook” savings accounts.  Low minimum balance requirement.  Allow an unlimited number of withdraws, which may be made at any time.  Pay the lowest amount of interest.
  • High-Yield Savings.  Limited number of withdraws, but withdraws may be made at any time.  Pay higher interest (but not as much as certificates of deposit).
  • Certificates of Deposit.  “CDs” or “time deposits”.  High minimum balance requirement.  No withdraws until after a specified time (months or years).  Pay the highest interest.

If you’re keeping all of your emergency savings and other savings accounts in a regular savings account, the value of your savings is decreasing as inflation takes its toll.

You savings could be earning a higher interest rate if you put them into certificates of deposit, but then the money won’t be immediately available to you if you need it to take care of an emergency.

A high-yield savings account, which combines the best features or basic savings accounts and CDs, might be just right.  You can make withdraws whenever you want (but you are limited to a certain number of withdraws per month), but at least you’re getting some interest that will offset the effects of inflation.

Search the internet, and you’ll will many banks offering high-yield savings accounts.

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A Penny Saved is Worth More Than a Penny Earned

You’ve probably heard the old saying, A penny saved is a penny earned.

As we use that saying today, it means that saving a penny, by making sure always to use money efficiently and avoid unnecessary spending, is as good as earning a penny.

In other words, if you earned $100 and spent $75 to buy something you needed, then you would have $25 left.  But if you were able to buy the exact same thing for $74, then you would have $26 left — which would be the same as if you earned $101 and had to spend $75.  So, to update the old saying: A dollar saved is a dollar earned.

save_vs_earnHowever, let’s think about what happens if you actually earned another dollar.  Say that you’ve been earning $100 a day and that amount is increased to $101.  If we’re talking about your gross (before taxes) income, then that one-dollar raise is going to increase your take-home pay by less than $1.  You might get to keep 85¢ of it, or 75¢ of it, or some other amount, depending … but you won’t get the entire dollar.  Another way of looking at it is that to get an increase of $1 in your take-home (after taxes) pay, you need to earn something like $1.25 or $1.35. or more.

On the other hand, if you are able to decrease your spending, you get to keep 100¢ out of every $1 you don’t spend.  Thus, every additional dollar in savings is worth more than an additional dollar of income.

Breakfast for a Week for $4: Hard-Boiled Eggs

Hard-boiled eggs are an excellent and inexpensive breakfast food, especially if you know the best way to cook them.

childrens-book-humpty-dumptyI think most people like hard-boiled eggs, but the problem is doing the hard-boiling.  If you undercook them, they have a gooey or runny center, which is bad if that’s not what you want.*  If you overcook them, then they get that ugly greenish gray color around the center and they may have an “off” odor and unpleasant taste.  You have to cook them just the right amount, not too little, not too much.  It’s not easy to do.  For one thing, there’s no way you can measure what’s going on, cooking-wise, inside the egg.  The exterior of the egg doesn’t change color as it cooks.  It doesn’t feel any different if you touch it.  You can’t poke a meat thermometer into it.  However, the one thing you can measure is time, which goes a long way towards solving the egg-cooking problem, if you can keep the cooking temperature constant.

Measuring the length of time your eggs have been cooking only helps you if the temperature of the water around them is the same every time.  However, this is difficult to achieve.  You put water in a cooking pot, bring it to a boil and add the eggs.  Adding the cold eggs to the water immediately lowers the water temperature.  But by how much?  That depends on the quantity of boiling water you have, how cold the eggs are, and how many eggs you put into the pot.  One egg will lower the temperature of the water just a little.  Several eggs will lower the temperature quite a bit.  The more the water’s temperature is lowered, the longer it takes to return to a boil and the longer it takes the eggs to cook.  Another factor is the amount of heat being produced by the stove.  Is it the same every time?  All things considered, there’s a lot of temperature inconsistency from one egg-boiling session to another.  That means you don’t know how much heat is being transferred to the eggs, so you have no idea how of precisely how long you need to cook them.  Perhaps if you were careful to use exactly the same amount of water, in the same cooking pot, and the same number of eggs, and the same setting on the stove every time, you might, by trial-and-error, eventually determine the correct cooking time.  The same problems arise if you put eggs in pot of cold water and bring them to a boil.  How cold was the water to begin with?  How many eggs?  How hot is the stove?  Again, inconsistency, unless you carefully measure all of these things and experiment carefully.

Thankfully, there’s a much easier method that yields much better results, every time.

To give credit where it’s due, I believe this method was developed be the cooking experts at Cook’s Illustrated magazine.  It’s genius.

Basically, you put a steamer basket in your pot, fill it with water up to (but not above) the level of the basket’s bottom and bring the water to a boil.  Then put your eggs, making sure they’re not cracked or broken, straight from the refrigerator, into the basket.  Cover the pot with a tight-fitting lid.  Turn the heat down to medium-low, sufficient to maintain a slow boil.  Allow the eggs to cook in the steam, covered, for 12 or 13 minutes.  The exact cooking time will vary a bit, depending on the size of your eggs and how cold your refrigerator is, but this method is far superior to anything that involves eggs submerged in boiling water.

You should keep the pot covered the entire cooking time, but you might peek once to make sure the water hasn’t boiled away.  If your lid fits tightly, this shouldn’t be a problem.  After the time has elapsed, carefully transfer the eggs to a bowl of cold water and ice and allow them to cool for 10 minutes.  Store in the refrigerator and use as needed.

The beauty of this method is that the cold eggs are not submerged in the water, so they don’t reduce the water temperature.  The water keeps boiling as you add the eggs to the basket.  Therefore, there’s plenty of steam, and the temperature of the steam stays constant, something very close to the temperature of boiling water.  By keeping the eggs out of the water, most of the variables are eliminated.  One great thing about this method is that it works equally well with just a couple eggs or as many as can fit in the basket under the lid.  I usually cook 10 eggs on Sunday and eat 2 each morning during the M-F workweek.  Given that eggs cost around $3 (or less) per dozen, $4 per week allows boiled eggs, maybe a piece of toast, and perhaps an avocado once in a while!  Avocado-Egg Toast!  Mmmmmm!

Compare this to the cost of getting a breakfast sandwich at a fast-food place.  That could easily be $16 per week.  Cooking your own eggs means $12 per week saved.  $12 × 50 weeks per year = $600 per year.  If you’re not putting 10% (or more) or your income into your retirement savings accounts, here’s something that can move you toward that goal.  (Your savings might be even more if you eliminate the temptation to buy more than just a sandwich at the fast-food place.  Make your own tea or coffee and you’ll save more.

* I like soft-boiled eggs just fine, but I like them only if they’re served hot.  The steam-cooking method also works for soft-boiled eggs.  If you want soft-boiled eggs, reduce the cooking time to about 7 minutes for very soft or 9 minutes for medium-soft.

Cashier Scam at Convention Center

Everyone knows you should always count your change whenever you handle a cash transaction, right?  I know that.  But once, I forget.

Some years ago my wife wanted to attend a large hobby show at the downtown convention center of a nearby city.  We decided to go, taking our children and my wife’s mother.  We left early in the morning and arrived after a couple hour’s drive.  It was a huge affair with big crowds and a long line to buy tickets.  I knew that the tickets would be a bit over over $100, so I had come prepared with some $100 bills.

cash_registerAfter standing in line for at least a half hour, I told the cashier how many tickets I wanted.  She told me how much I owed.  I gave her two 100-dollar bills and took my change when she handed it to me.  I stepped away and put the change into my wallet.  Why didn’t I count it in front of her?  Maybe I wanted to get in to see the show ASAP.  Maybe I didn’t want to keep my wife and family waiting.  Maybe I didn’t want to slow down the line and make the next customer wait for me.  I don’t recall exactly, but maybe the cashier was already starting to ask the next customer what he needed.  As I put my change into my wallet, I had an unnerving feeling that something wasn’t right.  I counted the change and immediately discovered it was exactly $20 short.  It was very clear that I had been shortchanged.  The only cash that had been in my wallet before I bought the tickets was all in $100 bills.  The only bills that weren’t $100’s didn’t add up to the amount of change that I should have gotten.

I turned around and walked back to the ticket window, having to cut in line in front of several dozen people to do so.  As soon as I did, I saw that the cashier whom I had dealt with wasn’t there.  She had been replaced by another cashier.  I explained what happened, asked what had happened to the cashier who had been there less than a minute earlier, said I wanted my $20 … and soon saw that I wasn’t going to get anywhere.  The cashier who shortchanged me $20 was gone.  Maybe it was all an honest mistake, an accident, and just a coincidence that the cashier went off duty just after I was out $20, but what are the chances of that?  Seems more likely that the cashier saw her opportunity to rob me and did exactly that.

I could have sought out the manager, but what good would that have done?  Even if I had been able to confront the cashier, it would be a he-said-she-said situation.  I could demand that they count all the money in the cash drawer and see if that amount was  $20 over what should have been there, but what if the cashier had already pocketed the money?  I don’t think I could have her searched.  And what if she did have $20; she could always say it was hers.  In the meantime, my wife and family were waiting to get in to see the show.  Did I want to give up a half hour or more of our one day to see the show just to have a chance, no guarantee, of getting back my $20?  It’s easy to imagine that the cashier had all of this figured out as soon as she saw me and my money.  Basically, in the sense that I could have prevented the whole thing from happening if I had just counted the money right in front of the clerk as soon as she had given it to me, it was my fault.  Live and learn.

That dishonest cashier could easily get more by shortchanging a few customers than she would earn from working the whole day.  If she shortchanged many customers, she might have left work when the day was done with a nice handful of cash.  I doubt she would declare it on her tax return.

Be wise and learn from my mistake instead of making your own.  Always focus on your finances, concentrate on your cash, and count your change in front of the cashier before taking it out of the cashier’s sight.

It might also be a good idea to clearly state how much money you’re giving the cashier as you hand it over.  After the cashier says how much you owe, you say something like “out of twenty” or “here’s one hundred”, which makes it clear that you know how much money you’re giving the cashier and does a little something to force the cashier to acknowledge the fact.  This shows that you know how much change you should be getting, in case the cashier, if confronted, might try to insist that you paid with a $10 bill and not a $20, or whatever.  If you want to be really careful, you can take a look at the serial number of the bill(s) you’re paying with and quickly memorize the last 3 or 4 digits.  Then, if the cashier says you paid with some other denomination, you have something that proves the bill in the cashier’s drawer is the one you paid with.

Amazingly, my scam story has a happy ending.  At the end of the day, as the convention center was closing, the workers in a concession stand that sold frozen lemonade and huge pretzels were throwing everything that hadn’t sold into the garbage.  This caught my eye and as I looked for a moment, the worker said, “You want this? Go ahead, take all you want!”  Frozen lemonade and pretzels were just the thing we needed for the ride home, and servings of each for six people were worth more than the money I lost earlier that morning.

Save or Spend: Give Money To Your Future Self … or … Take Money From Your Future Self

Oftentimes, when it seems easier to do the wrong thing (like, it’s easier to spend some money now to get some immediate gratification) instead of the right thing (like, avoid spending money unnecessarily), it can get easier to do the right thing if I find a different way of thinking about it.

credit_devilSure, I might like to have something from one of the restaurants next door to my office.  There’s a lot of ways to spend money: sandwiches, ice cream, doughnuts, pastries, iced coffee.  I could easily spend $5 or $10 there every day.  And why shouldn’t I?  I work hard.  I deserve a treat.

Then I think of my future self.  I see myself 20 or 30 years from today.  What about him?  Don’t I want him to be as comfortable as possible?  Maybe he would like to have money for a sandwich or some ice cream.

It’s as simple as that.  The more I spend today, the less I can give to my future self.  So, when I’m at work, if I can make do with the food I’ve brought from home, I can give a bit more to my future self.

  • Spending now is taking money away from my future self.
  • Saving now is giving money to my future self.

(And spending now by borrowing now, by means of charging today’s spending on a credit card and then having to pay interest, now that’s really taking money away from my future self!)

Just Park the Car

As much as possible, I try to avoid going anywhere that has a crowded parking lot.  If I can, I’ll go to popular destinations sometime between Monday and Friday instead of during the weekend when they’re more crowded.  But sometimes it’s inevitable that I will have to park my car in a nearly-at-capacity parking lot.

Lakewood Center, Lakewood CAWhen this happens, my strategy is simple.  Instead of driving around searching for a “good” parking space, I just drive away from my destination’s main entrance, towards the farthest reaches of the parking lot, until I find an empty space.  If this means parking as far as possible from the entrance, that’s fine.

Here’s why:

My “just park the car” method probably saves time.  Instead of driving and driving, repeatedly circling the full spaces near the entrance, I drive directly to an open space, park, and start walking towards the entrance.  Quite often, as I’m walking in the front doors, I see a a driver who was looking for a space when I first drove into the lot still cruising past the parking lot’s “good” (but full) spaces.  Meanwhile, I’m inside starting to accomplish my trip’s purpose.

Even if it doesn’t save time, it saves gasoline, oil, and transmission fluid and avoids unnecessary wear on the brakes, transmission, and everything else on the car that wears out with use.  The less you use your car, the longer it will last.  It’s only going to go maybe 150,000 miles — why use them up driving around in parking lots?  “Just park the car” also reduces the amount of air pollution I’m making by driving a car.

My method reduces the chance of an accident.  Driving in a parking lot is distracted driving.  Looking for an empty space, watching people that might be walking towards their cars, scanning for brake lights and reverse lights, all while driving around among other people doing the same thing.  Why take the unnecessary risk?

My method is stress free.  When a large number of drivers are looking for a small number of parking spaces, it inevitably becomes a competition.  Psychology takes hold.  Someone is going to win, others are going to lose.  That’s stressful.  I don’t need to raise my blood pressure over getting a parking space.  I don’t engage in the competition and I avoid the stress.

Who doesn’t need exercise?  You park a little farther away and you have to walk a bit.  So what?  I see that as a benefit.  Some people pay to use a gym.  I get this exercise for free.  Sometimes it’s a nice day, but even if the weather isn’t ideal, I enjoy the walk.

For many of the same reasons, I never use a drive-thru on the occasions I buy fast food.  To my way of thinking: If you can’t haul your butt from the car to the inside of the restaurant, you don’t deserve fast food.

Let’s be Honest

starbucks_receiptYou need to be careful when you calculate how much you will save by changing some small habit.  I’ve heard or read statements like, “Coffee at the Starbucks costs $2.70.  So make your own and you’ll save $1,000 per year”.

How did that $1,000 get calculated?  It looks like they took $2.70 per day and multiplied by the number of days in a year, $2.70 × 365 is $985, and then rounded to $1,000.

What’s wrong with that savings of “$1,000”?

  1. Can you produce coffee at home for free?  If not, then your daily savings aren’t going to be equal to the cost of the coffee you buy away from home.  Coffee made at home costs something.  Your savings will be the cost of the away-from-home coffee minus the cost of made-at-home coffee.  Let’s say $1.00 is the cost of the made-at-home coffee.  If so, then your savings are $2.70 – $1.00 = $1.70.  You savings will equal the cost of away-from-home coffee only if you give up coffee completely.
  2. Do you really buy away-from-home coffee every day of the year?  If you only buy one cup of coffee on days you work, and you don’t work every day of the year, then you probably don’t buy coffee more than 250 times per year.  (That’s 5 days a week × 50 weeks per year.)  Of course, if you buy coffee twice a day, …
  3. Does the coffee at Starbucks really cost $2.70?  If you order something less expensive, you’re annual savings aren’t going to be less.  (On the other hand, yes, if your coffee costs more than $2.70 per day, then you can save more.)

Don’t get me wrong!  I still think that you can save a significant amount of money by avoiding convenience and doing as much DIY as possible, but it’s also important to do our calculations honestly and make sure our expectations are in line with reality.

There are some who say that they give up the away-from-home coffee, but they don’t see the savings.  Problem is, there are so many other expenses.  Some come irregularly or change from one month to the next.  It’s personal finance chaos!  The made-at-home coffee savings signal gets drowned out among all the financial noise from all the other expenditures.  This, however, doesn’t mean that there are no savings.  There are.  It’s the accounting that is the problem here.  If you’re actually spending $1.00 per day instead of $2.70, then you need to take control of that money and ensure you don’t spend it on something else.  Take that daily savings of $1.70 and literally put a dollar and a few quarters in a jar every day.  Or move $8.50 from out of checking and into your savings account each week.  Whenever you’re developing new habits to save money, you need to really save that money.  Be careful not to let it just sit around telling you to spend it on something else!

Now that we’ve taken care of that …