BANKS: CHECKING AND SAVING

Banks know what they’re doing. They’re in business to keep your money safe. And to just plain keep your money. We’re in the business of helping you keep your money for yourself. We don’t mind banks making a living. In theory, they provide a valuable service. But we don’t like having our pockets picked. Don’t pay more than you absolutely must.

1. Free checking: There's no reason to pay for a checking account these days. Look for ads in your local newspaper for banks offering free checking. Washington Mutual (WAMU) is an example of one of these banks, but there are many others. If you are paying for each check or a monthly fee, it's time to make a change. Always make sure that there are no fees for services you regularly use, like ATMs, online banking, stop payments, etc. For example, instead of a check fee, WAMU requires a small deposit in a linked savings account (a few hundred dollars), but there are other systems as well that might suit you better, like direct deposit of your salary checks or social security checks, etc. Also, make sure you have an online banking option that is free....this way you can pay your bills and not pay postage. (Those stamps cost quite a bit: do the math. Paying only five bills a month by snail mail will run you over two dollars. That’s over twenty-four dollars a year in postage. Why, that's enough cabbage for a tank of gas if you happen to own and operate a time machine.)

2. Savings: If you're one of the fortunate ones who has savings, make sure your bank is FDIC insured for the amount in your account. Take a look at: http://www.fdic.gov/consumers/consumer/news/cnwin0708/limits.html. Because of the uncertainty of the stock market and bonds, you may decide that a Certificate of Deposit is the way to go. Check out: https://www.moneyaisle.com/ or http://www.bankrate.com/ to find the best rates. Transferring money to a CD is easy with wire transfers or bank transfer so the bank you use does not have to be local. Again, make sure the funds are FDIC insured and you haven't exceeded the maximum deposit amount.

3. Investing: Always use a Certified Financial Planner. Just because you've used a bank for years and trust them, you should still proceed with caution. The reason people always trusted banks was because of the Banker, not necessarily the Institution. Good luck even finding a bank with a banker who's still there between bank visits.

Here's an example, a bedtime story guaranteed to keep you up nights, a cautionary tale as it were: A friend of ours (let's call her Ruby) has been banking with a MAJOR bank for over 30 years. She took out a loan for some construction and wanted to keep the money liquid to use as needed but still earn some interest on the money to help offset the interest of the loan. The local banker called in a consultant from another branch. This guy was not from the Bank but from bank's brokerage division. The guy took some of the money and invested in short term CDs. He put all the CDs in one bank that exceeded the FDIC insurance. Strike One. (Fortunately, she did get that money back). He took the rest of her money and put it in a PIMCO Bond fund. He told Ruby she could access the money in seven days. Under normal circumstances, that money would remain liquid, but in this market, Ruby would actually lose money to cash in the fund because there has to be a buyer for the bonds, and there are no buyers around these days. Strike Two. (It turns out a lot of investors were defrauded this way, resulting in a Class Action Lawsuit filed by the NY State District Attorney, among others.) Our friend trusted the bank and assumed that she was getting CDs since the bank rep knew she was investing borrowed money. So now Ruby doesn't have access to her money, she has to pay interest on this loaned money, and the bonds in the Fund don't come due until 2049, if she is forced to wait for maturity. OUCH. That's gotta hurt.

So here’s the CHEAPIOSITY BOTTOM LINE.

Find a Financial Planner from a referral who is completely satisfied with the Planner. Assume nothing, and read up on what you buy. There are no stupid questions. Ask questions until you understand everything. Don’t worry about what your banker thinks of you. You are your own best (and sometimes only) advocate. You need to understand what’s going on. And check the purchase order to make sure you’re getting exactly what you want. Check out this article: http://online.wsj.com/article/SB121561982539839543.html?mod=hpp_us_inside_today

Here are some common PERSONAL FINANCE misperceptions and clarifications:

A. You pay no interest on a 0% car loan. That’s only true if you get the car discounted. If you take out a 0% loan but pay full price for the car, all you've done is pay more for the car in the long run. Yes, you saved interest, but you paid more for the car upfront.

B. Hold stocks for the long term to save on taxes. Sometimes it's true, but what about those tech stocks that tanked a few years ago? You may hold it long term, but you're holding something that's worthless. We'd rather get more of our money out, pay tax and not watch the stock become worthless.

C. Paying mortgage interest is good because it's tax deductible. Interest in general is BAD. Basically you're paying more money for something you bought. A house you bought for $200,000, that you've paid $50,000 in interest for so far and is still worth $200,000 is not a good thing.

D. If you refinance at a lower rate on a long term mortgage will save you interest in the long term. Not necessarily. If you have a 30-year mortgage at a higher rate that you've paid on for years and refinance for another 30-years at a lower rate, all you're doing is paying more interest over a longer term . Do the math and look at the numbers. What you want to do is refinance for a shorter term. Also, don't forget all the refinance fees....make sure it's really worth it.

E. Some people think all Variable Annuities are rip-offs. It is true of many but not all. This is because of high expenses and high surrender fees (when you sell them). Some may prefer a no-load mutual fund instead, however there are Annuities with low expenses and no surrender fees. Investigate immediate annuities as well. This is the time to check with a trusted financial planner to make you are investing in financial products that are right for you.

F. Beat the Market. People feel that if their portfolio isn't beating the market, their investments aren't doing well. Beating the market was a good idea in the '90's, but it's 2008. Good luck finding a CD that's over 4%. Things change according to the Market and right now, it's all bad news. Better to look for consistency over the long term when the good and bad times average themselves out, as they have done historically.

Lastly, let's talk a moment about cash flow. Here are a few tips to help you gain access to your money and pay bills on time.

a. Use direct deposit. This means that instead of getting your check in person, the money is automatically added to your account on payment day. It saves you the hassle of going to the bank or mailing your paycheck, and the funds are instantly available.

b. If all your bills come due at the same time, call your creditors and request a customized closing date. This way, instead of receiving bills all at the end of the month or the beginning of the month, you can stagger them, so you have more use of your money in a way that's convenient for you.

c. Use online banking as mentioned above. Arrange to make all your recurring payments (mortgage, car payment) automatically on a specific date each month.

d. Electronic account alerts will help remind you when deposit are made, when your balance reaches a specified amount, when a payment is made, etc. Most banks have a mechanism to set this up and can be helpful.

e. Some people find it helpful to pad their accounts to prevent them from bouncing checks. If that works for you, by all means do it.

EDITOR'S NOTE: For those of you dedicated enough to have made it all the way to the end of this post, here's a little tidbit to reward you. Let's face it. Banking isn't sexy. Banking isn't even interesting. But here at CHEAPIOSITY, we just can't pander. Oh sure, we could increase our readership by adding sexy gossip and humiliating paparazzi photos of semi-naked celebrities. But we take our mission seriously, so seriously in fact that this post got finished in spite of what many might consider nothing short of a phobia. When discussing financial planning issues, one of CHEAPIOSITY's founding members finds herself slipping into a coma. Just the concept of bonds makes her dizzy. The dizziness can only be relieved by something chocolate or a very long (and very fitful) nap. Trying to make heads or tails of the Ruby story took her (literally) days, interrupted as it was with bouts of her very own brand of psychosomatic Epstein-Barre syndrome. A particularly relevant episode of thirtysomething comes to mind. Melissa's parents send her to see a financial planner of some sort, and she is reduced to monosyllabic childhood, shrunken and baby-voiced and swinging her stick legs from a gigantic leather chair. That's the perfect fictional realization of financial intimidation, fear and trepidation. But here's the thing. Even if money makes you want your daddy, it's crucial that you act like a grown-up. That's all we're saying.