Archive for October 7th, 2009
Alcoa Surprises With First Profit in a Year
Aluminum giant Alcoa posts its first profit in a year. Details to come.
Yikes! The $38 Latte
Momentum is gaining behind a proposed crack down on overdraft fees — the big penalties banks charge when customers spend more than they have in their accounts. One of the big complaints is that many consumers only discover they have overdraft protection when they check their bank statement. Then it’s too late. Suddenly a $3 latte costs an extra $35.
How to be an emotionless investor
It’s one of the truths of mutual fund investing: You buy the manager as much as the prospectus. So it pays to have someone you trust.
How to be an emotionless investor
It’s one of the truths of mutual fund investing: You buy the manager as much as the prospectus. So it pays to have someone you trust.
The Pitfalls of Prepaid Debit Cards
Prepaid debit cards have stepped into the market for consumers who can’t get a credit card, don’t have a bank account and want the convenience (or the status) of whipping out a card. But beware, the fees on these cards will gobble up your cash.
Beware Fake Swine Flu Vaccinations
As swine flu vaccinations started this week across the country in the government’s effort to immunize more than half the nation in a few months, expect online scammers to begin doing their thing by selling fake vaccinations.
Kmart Brings Layaway to Your Computer
Kmart made news last year when it revived its layaway program and sister store, Sears, quickly followed suit. Now, both Kmart and Sears are extending the program to online shoppers, bringing a decidedly old practice to the newer medium.
Congress is riled up – Overdraft fees
A new battle is brewing in Congress, riding the same populist wave that pitted banks against consumers on credit card fees earlier this year.
Should Apple Fear Google, Verizon Pact?
When Verizon Wireless announced Tuesday that it was putting substantial resources into developing and selling phones using Google’s Android software, many tech observers speculated whether the pact would soon threaten Apple iPhone’s market share. Only time will tell. Here are two opposing views from DailyFinance.
Stocks Don’t Reflect Economy’s Red Flags
The stock market’s fall last week was not dramatic enough to alarm investors. But there are signs that things could be getting worse. One expert warns that danger lurks if individual investors remain complacent while bigger players quietly sell their investments and “slip out the back door.”
How Much Should You Have in Savings?
A couple of weeks ago, we had a fine discussion about how much we should save for retirement. But how much should we have saved for today? How much should we have in cash reserves?
As I write my own book, I’m reading (and re-reading) dozens of other money manuals. While perusing Bert Whitehead’s Why Smart People Do Stupid Things With Money, I came across his table of “minimum base liquidity”. (Whitehead is a highly-educated financial advisor. He uses terms like “minimum base liquidity” instead of “cash on hand”.)
Whitehead writes:
After making the commitment to save 10% of their income, the next question most people ask is, “Where should I be investing these savings?” The first goal is to have adequate cash reserves.
Many financial pundits in the media say everyone should have cash reserves equal to 3 to 6 months of income. For most middle-income people, that is simply a pipe dream…With our clients, I use a different and more realistic approach.
To Whitehead, adequate cash reserves differ depending on your circumstances. His “different and more realistic approach” uses a tiered system:
- If you are an employee with a regular income, you should have 10% of your annual income in savings.
- If you are self-employed or your income fluctuates (through commissions, for example), you should have 20% of your annual income in savings.
- If you are retired, you should have 30% of your annual income in savings. (I’m assuming this means retirement income since if you’re retired you don’t have employment income.)
- If you’re in danger of losing your job, you should have 40% of your annual income in savings.
Whitehead draws a distinction between cash reserves and emergency reserves. I’m not exactly clear on what he thinks each is for. I get the impression that the cash reserves — the “minimum base liquidity” — is merely the minimum Whitehead believes we should have on hand to aid in our cash flow. This should also be used for occasions when the car breaks down or the roof leaks.
As insurance against severe emergencies, Whitehead recommends maintaining “emergency liquidity” equal to twice your cash reserves. (He also says to hold this money in retirement accounts, not savings accounts.)
Though I find certain elements of Whitehead’s plan confusing, I do like his tiered approach to saving. It makes sense to me that not everyone should save the same amount. Our circumstances and needs are different. As always, do what works for you.
For more information, borrow Why Smart People Do Stupid Things With Money from your public library.
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Related Articles at Get Rich Slowly:
- Don’t Just Save Your Quarters — Save Your Dollars, Too!
- SmartyPig: A Goal-Oriented Savings Account
- Ask the Readers: When Is It Okay to Spend Your Savings?
- Money Market and High-Yield Savings Accounts
- Certificate of Deposit (CD) Rates
