http://www.sullivanmermel.com/index.htmlHot News!enuser@domain.comCopyright 2009 bridget2012-02-09T18:11:48-06:00 hourly 1 2000-01-01T12:00+00:00 Tue, 14 Feb 2012 16:03:07 -0600user@domain.comSaving2012-02-09T18:11:48-06:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/59e001caec93c0d4544582d9c11e3411-17.html#unique-entry-id-17http://www.sullivanmermel.com/blogmoremoneylessangst_files/59e001caec93c0d4544582d9c11e3411-17.html#unique-entry-id-17
Although I like a good vampire movie, I don’t like it when I feel like my big bank has fangs in my neck. Between high fees, low interest earnings, and lousy service I am fed up. Don’t get me started on the way they game the political system and the foreclosure crisis. I’m ready to change. Help!

Sincerely,
Not heartbroken

Dear NH,

Wow! Call me Bridget the Big Bank Slayer.

If you want to switch banks, here are some suggestions:

Suggestion one: stop auto-pays at your current bank.
The big banks focus on convenience; they were the first to figure out banking online makes it difficult to switch institutions. Auto-pays make it that much tougher to leave.

To prepare for the break-up, stop auto-pays; paying everyone manually through your online banking system is fine. Consider getting a regular paycheck instead of direct deposits. Or, find out what your payroll department will require for you to change the direct deposit of your check. Once you’ve switched to a new bank and you feel good about it, go ahead and start up the auto-pays again.

Suggestion two: Explore your local community banks
Local community banks are privately owned local banks. That means that they take deposits and loan them out to the local community. Large national banks may do some community lending, but with local community banks your dollars on deposit should help the local economy, not trickle off into corporate never-never land or the derivatives market.

If you look around when picking banks you can typically find a local community bank that is convenient to where you live or work. Online banking will probably be available, perhaps with an interface that seems more basic than as with the too-big- to-fails. When I got fed of with my big bank, I checked the ratings on Yelp before picking North Community Bank in Chicago for a lot of my banking.

Suggestion Three: Explore Credit Unions
Credit unions are created when groups of people pool their resources, hire a manger to run the operation, and provide banking services to themselves. Credit unions are owned by their members and can limit their membership.

They are run typically in a straight-forward manner with transparent agendas. They’re not trying to lure you in and extract fees. They’re trying to provide the best service to the most members.

Often credit unions originate with employers. I’m still a member of Summit Credit Union in Wisconsin, which I joined because my coworkers at my part-time job working for the state government when I was in college told me it was a good deal. Other credit unions have geographical boundaries. Here’s a website to help you locate a credit union that might work for you: http://www.findacreditunion.com

Suggestion Four: Find a Community Development Bank
Just add “development” to a community bank and you’ve got another type of bank. The difference between a community bank and a community development bank is that a community banks lend money to the community at large and community development banks focus their lending on people who don’t have access to regular banking. In other words they reach out to the economically disadvantaged.

Community development banking has taken off since legislation that encourages it was passed in the 90s. Although a rapidly growing sector of banking, there are far fewer community development banks than either community banks or credit unions. While deposits up to $250,000 are insured by the FDIC, this type of bank typically lacks some of the convenience factors of other banking institutions.

I posted a listing of community development banks on my website from Green America:
Green America Listing of Community Development Banks

For many people, the ideal would be banking at a community development bank down the street. Unfortunately, most people don’t have that available. Just like many decisions, picking a bank requires striking a balance between idealism and pragmatism.

So how to make decisions? Here’s my recent experience. I have one account I’m interested in moving right now: my high-interest Internet savings account.

I recommend high-interest Internet savings to stash emergency funds. Personally I’ve had this type of account with ING Direct for over 5 years. These accounts pay about 1% right now. That might sound pathetic until you open up a Chase statement and see the interest on their savings accounts: .01%. That’s right, the Internet accounts pay 100 times more.

From the bank’s perspective, I think these accounts are a marketing tool to get deposits. As a customer, my big concern is that a high-interest account will suddenly and silently become a not-very high-interest account. The biggest risk I’m taking in switching is that the bank will withdraw the high-interest.

So what are my options? My local community bank and my credit union don’t offer high-interest Internet savings. I haven’t found many that do. If I’m going to bother switching, it’s going to be to a local bank.

Chicago was home to one of the pioneers in community development banking, ShoreBank. Politicians of almost every ideology like banks that help people who can’t get loans, and ShoreBank was located in the community where Barack Obama got his political start as an Illinois state senator. I would venture to guess that somewhere there is a photo of a young-looking Obama smiling in between the founders of the bank.

ShoreBank got in trouble like a lot of banks did and ended up being taken over by the FDIC and selling its assets to a group called Urban Partnership Bank a few years ago.

Urban Partnership Bank is the ultimate political hot-potato. When ShoreBank was in trouble, some folks on the right claimed that because of the bank’s association with Obama, they were getting preferential treatment.

But the folks on the left have a lot to hate, too. Because who owns Urban Partnership Bank? It’s a private bank owned by a consortium of foundations and companies (including Goldman Sachs and Citibank). The owners sounds like fat-cats with questionable motives to many on the left.

So back to my banking decisions. When it comes to what I call sustainable personal finance, I’m not a purist; I’m a pragmatist. Urban Partnership Bank has a high-interest Internet savings account. Their mission is to loan to people who can’t get loans. They’re paying 1% and are FDIC insured. Political hot-potato or not, I’m going to give them a try.




]]>user@domain.comInvestingMedia Critque2011-07-29T16:43:44-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/762b6684b84359a9a611c6f795bdc03b-16.html#unique-entry-id-16http://www.sullivanmermel.com/blogmoremoneylessangst_files/762b6684b84359a9a611c6f795bdc03b-16.html#unique-entry-id-16user@domain.comInvesting2010-08-04T13:01:43-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/21e78d3313f478158a663f39ba6e449d-15.html#unique-entry-id-15http://www.sullivanmermel.com/blogmoremoneylessangst_files/21e78d3313f478158a663f39ba6e449d-15.html#unique-entry-id-15 

Dear Bridget,
In the 70s, when I was in high school, I shared a Pinto with   
my sister.  She bought the gas, I bought the oil.  When the BP   
crisis hit, inspired by the exhilaration of getting the Pinto   
up to 60 mph with the windows open, I bought some shares.  I   
know it's a risky investment.

I'm wondering what I can buy on the conservative side to   
balance my wild freewheeling.   Maybe my angst is out of line,   
but I would like to buy something that will most assuredly   
maintain its value.  I'm not impressed with the interest rates   
offered by FDIC-insured cash accounts. I've heard some gold   
talk, but it seems like a big step into the back-alleys of   
commissions and swindlers.

I am a regular reader and follow your advice closely to   
maintain some savings.

Pinto Inspired


Dear Inspired,   
I love your reasoning for buying BP!

Pretty much all researchers, including Nobel-prize winners,   
conclude that you can't "beat the market."  In other words, no   
one can reliably pick stocks that will make more money than the   
market.  Still, some people have an emotional desire to pick   
stocks, and there's nothing wrong with that.  Just be smart.

I suggest that you hold your stocks in a separate "fun money"   
account.  Don't let the account grow to over 10% of your total   
portfolio.  When the value of your "fun money" grows to over   
10% of your total portfolio, transfer some to your other   
accounts to bring it in line.

Never add money into your "fun money."  If it runs out, then   
you're stock picking days are over.  You're done.

For the other 90% of your money, design a well-diversified,   
tax-smart, low-cost portfolio.

Since you ask specifically about investments that are not   
risky, I suggest US Treasuries known as "strips" as part of your portfolio.
You can buy these through your broker (like Schwab or Fidelity) or from US   
Treasury Direct.  Currently a buying a treasury strip that   
matures in 2026 costs approximately $5,470 and will pay   
$10,000 in 2026.  That's a yield of around 4%.

Any financial professional who earns money based on   
commissions will discourage you from this strategy.   They   
earn little if any commission on US Treasuries.  "Oh, the   
yields are so low," is what I've heard.  In fact, treasuries   
protect you against deflation, because even if prices on   
everything start dropping, in 2026, you'll get your $10,000.   
Plus, the yields on treasuries always seem low.  You're buying   
them because they're safe and earn more than a CD, not to try   
to out-earn BP.  The yield seemed low when I bought US   
Treasury Strips in early 2008, but seemed brilliant a year   
later.

In fact, for clients and for myself, I build what is known as   
a treasury bond ladder for retirement.  The ladder is designed   
to have a set amount of treasuries maturing each year.  This   
creates what amounts to a guaranteed paycheck during   
retirement.

You also ask about gold.  You don't invest in gold; you   
speculate on gold.  Gold grows in value when someone else will   
speculate more wildly than you did when you bought it.  Some   
people want gold in case all hell breaks loose.  It makes them   
feel safe.  They like the option of being able to make a run   
for it with their gold stash.  I like feeling safe, too.

If you're in this camp, you could use 1-2% of your portfolio   
"fun money" to buy some gold.  Take physical custody of it;   
put it in your safe at home.  Buy enough to get you over the   
border, and remember the practicalities you are trying to plan   
for; small coins will probably work best.  You don't want to   
be stuck trying to get change for $1000 gold bars when the   
banks have closed.

To take the next step down this road, add the following to   
your safe:  guns, ammo, water, and copy of your favorite Mad   
Max movie.  If you can't watch Mel Gibson anymore, I thought   
The Book of Eli was okay and 2012 was even better.  However,   
none of these movies feature a post- apocalyptic gold   
standard.   According to them, if all hell breaks loose,   
you'll want guns, ammo, and perhaps a jet.
]]>user@domain.comShopping2010-06-18T21:05:16-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/e85d64b213962eb0cd2f8f3365154171-14.html#unique-entry-id-14http://www.sullivanmermel.com/blogmoremoneylessangst_files/e85d64b213962eb0cd2f8f3365154171-14.html#unique-entry-id-14user@domain.comShopping2010-05-25T10:15:18-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/1a055286601f653a9aecd2628978cfc0-13.html#unique-entry-id-13http://www.sullivanmermel.com/blogmoremoneylessangst_files/1a055286601f653a9aecd2628978cfc0-13.html#unique-entry-id-13Nichole Rohr recently interviewed me about saving money and angst while shopping online. She put together a terrific article about it.

Check it out by clicking here
]]>user@domain.comMedia Critque2010-02-25T14:27:19-06:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/898b5dea6b6db77a6c5567bda9dc87ba-12.html#unique-entry-id-12http://www.sullivanmermel.com/blogmoremoneylessangst_files/898b5dea6b6db77a6c5567bda9dc87ba-12.html#unique-entry-id-12Don't believe the hype on tax hikes. And certainly don't
spend precious energy worrying about them.

A Kate and Joe were in yesterday. They are professionals
raising four kids, who, between the two of them, make around
$350,000 a year. They were bemoaning the fact that, according
to the media, their taxes are going to go up.

When we actually looked at their numbers, I had a different
prediction: their taxes won't go up. How could this be?
Please excuse me while I get a bit tax-geeky (and
simultaneously simplify the tax code and the political system
for explanatory purposes.)

$15,000 of the $120,000 Kate and Joe pay in federal taxes is
the dreaded "Alternative Minimum Tax" or AMT. While
Alternative Minimum Tax sounds appealing, it basically limits
the deductions of people who make between $200,000 and
$600,000 a year. It usually kicks in if you pay a lot in
property tax or state income tax and earn $200-600K. Most
people who are paying it don't know they're paying it and
don't care about the distinction between regular tax and AMT.
It's all the IRS to them.

However, if regular tax rates rise, before Kate and Joe would
actually have to pay more, their AMT would have to go down to
zero. For instance, if the top bracket goes from 35% to 39.6%
on people making over $250K, Kate and Joe's taxes would
theoretically increase 4.6% * 100,000 = $4600. Because they
pay $15,000 in AMT, this "tax increase" would mean they'd pay
$4600 less in AMT and $4600 more in regular tax. The net
effect of the "tax increase" would be zero.

Using my example, the tax increases that the experts are
predicting will have the biggest impact on folks making over
$600,000. But Kate and Joe, and a lot of people like them,
shouldn't worry about tax increases.

That being said, I might turn out to be wrong. Have you heard
the pundits peddling fear of tax increases admit that?]]>user@domain.comSaving2009-10-14T11:59:18-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/3846a0724b7ed1fc3a1822e8742ef5b6-11.html#unique-entry-id-11http://www.sullivanmermel.com/blogmoremoneylessangst_files/3846a0724b7ed1fc3a1822e8742ef5b6-11.html#unique-entry-id-11If you were to get on the Internet and poll the financial
gurus, the message you would get load and clear is: Save
Money. No matter how much you've saved, you will be woefully
short when you get to retirement.

The first suggestion of these pundits? Put money in your
401(k). (I will use "401(k) as a surrogate for all retirement
savings plans: 401(k), 403(b), SEP, SIMPLE etc.)
I'm not against 401(k)s. Actually, I'm a big fan. However, I
think the advice is wrong.

Here's my message: Save 10% of your income. Put your money in
a savings account. This will become your emergency fund. ]]>user@domain.comShopping2009-08-01T16:45:45-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/fc88cb1489053461971148ef384a2c5c-10.html#unique-entry-id-10http://www.sullivanmermel.com/blogmoremoneylessangst_files/fc88cb1489053461971148ef384a2c5c-10.html#unique-entry-id-10Cash for Clunkers is such a success that the money seems to be running out. Figure out what to do next...]]>user@domain.comShopping2009-07-29T08:29:44-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/ceeec7fc022b7162613f94e4bf8b9cfc-9.html#unique-entry-id-9http://www.sullivanmermel.com/blogmoremoneylessangst_files/ceeec7fc022b7162613f94e4bf8b9cfc-9.html#unique-entry-id-9Thinking about buying a new car? Got an old one with low gas mileage? The “Cash for Clunkers” program that started this week might be for you! Also check out general financial wisdom for buying a car.]]>user@domain.comReal Estate2009-08-03T09:52:00-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/ff9e79705d36e2e8975df1e137694159-8.html#unique-entry-id-8http://www.sullivanmermel.com/blogmoremoneylessangst_files/ff9e79705d36e2e8975df1e137694159-8.html#unique-entry-id-8The WSJ weighs in on how real estate prices are doing around the country:
Home Sales All Over the Map

And how mansions are doing versus the rest of the housing market:
High-End Homes Frozen Out of Budding Housing Rebound
]]>user@domain.comReal Estate2009-07-18T16:01:35-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/f3067398d4b9e356879bd21b4fc1fed4-7.html#unique-entry-id-7http://www.sullivanmermel.com/blogmoremoneylessangst_files/f3067398d4b9e356879bd21b4fc1fed4-7.html#unique-entry-id-7Confused about real estate prices? Is now a good time to buy? Is real estate ready to rebound? I don’t offer predictions, but I do offer a way to think about real estate.....]]>user@domain.comScams2009-06-23T21:14:19-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/2f7b61491875b4e4fedebb4a8b3bfd88-6.html#unique-entry-id-6http://www.sullivanmermel.com/blogmoremoneylessangst_files/2f7b61491875b4e4fedebb4a8b3bfd88-6.html#unique-entry-id-6Bert Whitehead writes about how to avoid Madoff-type schemes, as well as other traps and rip-offs. Don’t let you or someone you know fall prey! Check out Bert’s Blog.

]]>user@domain.comMortgages2009-05-20T08:13:13-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/353852eb4a3725ec67909bd0c46cb887-5.html#unique-entry-id-5http://www.sullivanmermel.com/blogmoremoneylessangst_files/353852eb4a3725ec67909bd0c46cb887-5.html#unique-entry-id-5Following up on my post about what to ask mortgage brokers, the Wall Street Journal has an interesting article on the current state of mortgages. A Battle Plan for Refinancing Your Mortgage
]]>user@domain.comMortgages2009-05-07T14:55:56-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/c3c86320d05db2aa35b21fbca285e2fd-3.html#unique-entry-id-3http://www.sullivanmermel.com/blogmoremoneylessangst_files/c3c86320d05db2aa35b21fbca285e2fd-3.html#unique-entry-id-3Refinancing or buying a new home? Make sure you ask the right questions of your mortgage broker BEFORE you get started.]]>user@domain.comScams2009-03-19T17:33:28-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/2ca4ce6eb9a1b73d3cec20f192997723-2.html#unique-entry-id-2http://www.sullivanmermel.com/blogmoremoneylessangst_files/2ca4ce6eb9a1b73d3cec20f192997723-2.html#unique-entry-id-2Madoff used specific techniques to hook investors. Being aware helps!]]>user@domain.comShopping2009-02-05T17:31:25-06:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/b1496830fcc7d75a05574792a4522661-1.html#unique-entry-id-1http://www.sullivanmermel.com/blogmoremoneylessangst_files/b1496830fcc7d75a05574792a4522661-1.html#unique-entry-id-1Save money by looking for coupon codes online.]]>user@domain.comMedia Critque2008-10-02T17:53:00-05:00http://www.sullivanmermel.com/blogmoremoneylessangst_files/e525942dc545a95a22086c794d8f61fd-0.html#unique-entry-id-0http://www.sullivanmermel.com/blogmoremoneylessangst_files/e525942dc545a95a22086c794d8f61fd-0.html#unique-entry-id-0Be skeptical of the media reporting of the current financial crisis!]]>