Budget Freak

My car insurance is coming due next month. I’ve been with the Auto Club for a few years now, and they’ve been pretty good to me. However, last week, they sent me a quote for the upcoming year, and it was just over$2,500!

Let me go back for a second. Last year, I was living at home, in a much nicer part of LA, and I had about a 5 minutes commute to work. My premiums were $1,500 for the year. When I moved to my apartment in September, to a much less desirable neighborhood only 30 minutes away, they sent me a bill for $300. (It’s not a bad or dangerous neighborhood, but just not as nice) The $300, by the way, was only for the 4 months or so remaining on my policy. If you break that out to a yearly figure, they charged me $800 for moving 30 miles. I couldn’t believe it.

Anyways, my premiums are now up to $2,500 because, in addition to the move, I’m now also driving more miles per year. So that dangerous combination led to a $1,000 increase. That figure was absolutely absurd, so I called up AAA to see if I could lower my premiums.

They guy I talked to was really nice, and he was actually shocked my premiums were so high. He couldn’t really explain the jump in price, other than the move was actually that expensive. He worked with me over the phone for awhile, and the only way to lower the premuims was to lower the coverage. My coverage was almost maxed out with pretty low deductibles, which is probably much more than I needed (could I realy cause $300,000 worth of damage in one accident???), so I figured it was in my best interest to lower them.

After playing around with the coverage and deductibles for awhile, I found a set of numbers I was comfortable with. The new premiums are going to be just under $1,900. While it is over $600 less than before, I still think it’s a bit high. So, I’m now going to be shopping around for a new auto insurance company.

So, my question now, is what’s the best way to go about it? I’m planning on getting quotes from various company’s websites, but does anybody have any better ideas? Any tips for getting the best price and discounts? Do insurance companies match prices? Any help is much appreciated!

I was looking at my finances last night, and I realized my cash flow for this month is going to be crazy awesome. I’m paid on a bi-weekly schedule, so since there are 26 paychecks in a year, that means there are two months where I actually recieve three paychecks. March happens to be one of those months. My company also have a pretty aggressive bonus program, that pays out ‘Project Profitibility’ bonuses three times a year. I just got that check (just over a weeks pay) yesterday at our company meeting. Also, I recieved my tax returns this month, which was good for another $1,000.

So, this month I’ll recieve 6 weeks of pay, a company bonus, and my tax return. I wish every month was like this. Part of the money will be going towards my car insurance, which is coming due next month. Part will go to service on my car (30k mile service), and registration, another $500. The rest, I’m probably going to invest. Stay tuned for that.

You may notice a new list of links over on the right sidebar. I’ve joined the Under 30 Honor Roll. From the website,

The Under 30 Honor Roll is a group of under-30 personal finance bloggers who have formed a network to support one another’s efforts in their financial endeavors. We want to make a positive impact on the financial lives of others in our situation, and hope that by sharing our experiences we can come out ahead!

Couldn’t have said it better myself. If you are in the twenty somethings or just enjoy reading some great financial blogs, please check them out. The list over there picks a random 10 blogs from the honor roll, so, when you have a few minutes, try it out!

I participated in my first carnival this week! For those not familiar, a blog carnival is a showcase of the week’s most interesting articles on a particular topic. Articles can be submitted to the carnival host, and then they assemble and highlight the posts as they see fit. This particular carnival is all about personal finance.

Tired But Happy host this week’s Carnival Of Personal Finance. Among my favorites this week:

Debt Consolidation News submitted the Young Adult’s Guide To Personal Finance, which has 65 tips and advice for the 20 something crowd. [Edit 1/14/08: Broken Links]

My Pocket Change posted an article about how the Young Professional should save for retirement. The numbers are a little scary (40 years from now, to live off $50,000 a year in today’s dollars, you’ll need to save $4.41 Million).

My post about Saving Money by Driving Slower also made the list.

Go check out the full list for yourself.

You’re allowed to make contributions to your IRA account for the previous year up until the tax deadline. So, for this year, you can make contributions to your 2006 IRA up until April 17th. I, in fact did this very thing a few weeks ago.

However, I was reading Blueprint yesterday, and he said you must make your contribution before you file your taxes. This could be a problem for me since I filed my taxes in February, and opened up my account in March.

I read a few of the comments, and No Credit Needed and The Happy Capitalist seemed to think it didn’t matter if you had filed before you made the contribution. I talked to my accounting teacher last night (who is a CPA), and she said it’s probably OK, but not the best way to do it. She said, in other words, “You’ll probably get away with it.” Not exactly reassuring.

Does anybody know for sure out there? I could understand if this was a traditional IRA account and I was deducting the contributions, but I opened a ROTH IRA with after tax dollars, so there is no deduction and, thus, nothing to report to the IRS. Right???

I have heard that by driving slower, say around 55 or 60, that you could save money on gas. PFAdvice says you can save up to 20% by driving slower. I was skeptical, but I’ve been trying over the past couple weeks, and it works.

Before, I used to average at least 75-80 mph on the highway. Even though I drive on the dreaded 405 every morning through the Westside (if you’re not from Southern California, think of the worst traffic zone in your area, then mulitple by 1,000,000,000,000,000 and you’ll get an idea), I wake up at 5am so the road is pretty clear. The past two weeks I’ve been changing my driving habits. I’ve kept my speed as steady as I could, using cruise control when possible, slower acceleration, less braking, and trying to stay behind large trucks whenever possible to cut down on wind resistance. I’d say my average speed for the last two weeks was around 65 mph.

Because I keep extensive gas mileage statistics, I know I’ve been getting around 18.5 mpg for the past 2 years. My best mileage, ever, per gallon for a tank of gas was 20.69. Well this past week, I averaged 22.2 MPG. A new record for me and a 20% increase over my average MPG, and nearly 10% better than my previous best! I couldn’t believe it!

If I’ve been speding $200 a month on gas, which I have been, a 20% savings will save me $40 per month, and $480 for the year. All for driving 10 MPH slower.

Now you’re probably thinking to yourself, ‘well sure your saving a few bucks, but it takes you forever to get to work.’ While it’s true it will take longer to get places, but probably not as much as you think. My commute is about 35 miles door to door. Ignoring traffic congestion, stop lights, and city streets for a minute, if I average 75 MPH, it will take 28 minutes to get to work. If I average 65 MPH, it will take me 32 minutes. A difference of only 4 minutes. Not that big of a deal.

Besides the gas savings, there are plenty of other benefits. For one, it’s a lot safer driving slower, and I never have to worry about speeding tickets. I’ve also noticed I’m much less stressed while driving. Before I’d get upset if there was a slow driver in front of me or if traffic was moving too slow. Now, I almost hope traffic is moving slower (55 PM would be ideal).

So there you have it. Slow down, and save $500 a year. Try it out for yourself.

Totally unrelated to personal finance, but still awesome. As part of my job, I’m onsite at LAX a couple days a week. Yesterday, the Airbus A380 made it’s US debut in New York and Los Angeles. The A380 is the largest passenger plane in the world and can seat up to 853 people. It’s 8 stories tall and it’s wingspan is as wide as a football field. I was lucky enough to be on the runway when the plane landed here in LA, and this thing is huge. Here’s some pictures…

Washington Mutual is offering a 5.0% APY savings account if you sign up for a free checking account online. (Direct Link to sign up page: here) There’s a $1 minimum to open and no monthly fees. I decided to apply for an account last week to hold my 0% balance transfer money. Even though I already had a Washington Mutual Checking account, I still needed to apply for a new one to get the savings account offer. Unfortunately, this means they’ll be sending me an ATM card for the savings account, a MasterCard Debit Card for the checking, and two books of checks. I’m pretty sure I’ll never use them, but I guess that’s the price you pay for 5% interest rate. The application took about 10 minutes to fill out, and the account was created immediately. I transferred $50 from my old checking account to the new one to take care of the minimum balance.

The next day, after my balance transfer checks cleared, I moved the $16,800 into the new savings account and started earning some interest. I had originally planned to move the money to my ING savings account, but after some thought, opened the wamu account instead. One reason was the interest rate. The extra half percent over ING will work out to about $85 extra throughout the year. Also, after the headache trying to cash the checks, I figured it would be easier and quicker to transfer within Washington Mutual accounts. The transfer from checking to savings was immediate, where if I transferred to ING, it would have taken 2-3 days. Not a huge deal, but it would have cost me another $5-$8 in interest waiting for the transfer to take place. I really enjoy my ING accounts, but it just made more sense to stick with Washington Mutual.

All is well with the world again. After depositing the checks on Monday and being told they would take 11 days to clear, I was a little ticked. I called the Washington Mutual Branch today to see if I could expedite the checks clearing. The conversation went something like this…

WaMu: It’s our policy to hold credit card checks for 11 days because most of them bounce due to insufficient funds. It’s also an out of state check so we have to hold it for 11 days. The best I can do is release $4,900 tomorrow, and the rest of it in 11 days.
Me: That’s not good enough. Let me talk to your manager.
WaMu: Hi sir, as a courtesy to you, I can release $2,000 right now, $5,000 tomorrow, and the rest in 11 days.
Me: That’s not a courtesy. I don’t want any courtesies. I gave you two checks for $16,800, and I want my money.
WaMu: Well, how much to you want right now?
Me: I want all of it right now.
WaMu: I’m sorry I can’t do that.
Me: You’re holding my money hostage. Please stop treating me like a criminal and assuming my checks won’t cash. I’ve been a customer for 8 years and never had a problem.
WaMu: I can try and call the credit card company to check the funds. Do you have a copy of the check?
Me: No, I don’t have a copy of the checks, I gave them to YOU to cash!
WaMu: Hold on a second, let me talk to the teller.
(On hold for 5 Minutes)
WaMu: I found a copy of your check, I’ll call them and then call you right back.
Me: Thank you.
(15 minutes later)
WaMu: I got a hold of the credit card company and the checks are OK. You’re money is available.
Me: THANK YOU!

And just like that, all $16,800 was available immediately. It’s important to note I never got mad or yelled at the supervisor, that wouldn’t have gotten me anywhere. I stayed calm and they eventually were able to help me out. My faith is now restored in Washington Mutual. I can now rest a little easier knowing my money isn’t in limbo and I’m finally earning some interest.

A while back I complained about gas prices going up again. Well, I’ve finally found the reason: Racoons! Seems a raccoon and opossum chewed through power cables and shut off power to a couple refineries here in LA, and gas prices jumped up 7 cents! Yikes!

Photo: mtsn

After putting it off for so long, I finally took the plunge and opened a ROTH IRA. This is in addition to my 401(k) through work (contributing 12% of my pre-tax salary), and a regular IRA thats holding rolled over 401(k) plans from previous employers. I’d been researching ROTH IRA’s for awhile now, and finally, after some helpful advice, I decided not to wait any longer. My biggest concern was that the money would be locked up until I retire, some 35 years from now. I would rather have the money in a savings account where I could access it quickly. Turns out, you can withdraw your contributions anytime without penalty. It’s only the profits you can’t touch (and actually, you can withdraw them under certain circumstances, which I won’t go into here. Go read The Motley Fool’s All About IRA’s). I don’t know how I missed that part during my research, but that solves the emergency access problem.

I decided to go with Vanguard after reading plenty of good things about them on other personal finance blogs. Pretty much any link over on the right will say good things about them. I opened the account online, and the process couldn’t have been easier. They walk you through 6 or so steps from entering personal information, banking information, and selecting funds. The whole process took about 20 minutes once I knew what funds I wanted to invest in, and I linked to my savings account so the money would be transferred quickly.

And speaking of funds, I chose their Target Retirement 2045 mutual fund. The target retirement funds base their asset allocations on when you plan to retire (2045 in my case), and then automatically adjust their holdings as that date nears. Right now, since we’re still 40 years off, the fund is around 90% stocks and 10% bonds. It’s designed for large growth, but with a higher risk. The retirement funds are great, in that I can just keep pumping money into them and not worry about allocation. They handle all the work. It’s the perfect lazy man’s fund.

Thanks to the tax laws, I was able to contribute this money towards last year’s limits. I put in the maximum yearly amount of $4,000. That means I can still contribute another $4,000 for 2007. It’s a little scary to throw a big chunk of money like that into something that I won’t be able to access for another 35 years, but consider this:

If I invest $4,000 today, and the fund earns a modest 8% annual interest over the next 35 years, that initial investment will be worth over $59,000. More realistically it’ll earn somewhere around 10%, which in 35 years will be worth $112,000.

That’s right. The power of compound interest. So yes, I’m giving up my money now, but when that $4,000 is worth $100,000 in 35 years, it doesn’t sound so bad.

My two 0% balance transfer checks came in the mail over the weekend. $16,800. My mind was racing thinking about what I could buy with all this money, but luckily, I had a little self control. The plan was to deposit the checks to my WaMu checking account, and then transfer over to ING to start earning interest. I went to the WaMu yesterday to make the deposit, and ran into a bit trouble. The funds wouldn’t be available for 11 business days!! I couldn’t believe it. I’d never heard of a check taking 11 days to clear.

They gave me a whole list of reasons for this: the balance of my account (I only had $150 or so since I switched over to ING checking), I’d never deposited this much money before, the checks were out of state (Citi is based in South Dakota), all checks over $5,000 have to be put on hold. Needless to say, I was a bit upset. I could maybe understand a 48 hour delay while they check with Citi Bank, but 11 days?? This is 2007, is it not?? I felt like they were treating me like a criminal trying to cash bogus checks.

I talked to a supervisor at the branch, and then called their customer service line when I got home, but both gave me the same story. The only hope I have to getting the money any earlier is to plead with the branch manager. They told me to call back in 2 days to check on the status of the checks, and then they could possibly expedite things.

I think my mistake was trying to go through Washington Mutual. I should have just mailed the checks direct to ING to cash. Even if they had to hold the checks, the money would be in the right place. I guess that is the problem with an online bank: there’s no easy way to deposit money. By my calculations, I’m losing just over $2.00 a day waiting for the checks to clear.

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I just requested a free credit report from www.annualcreditreport.com. You’re entitled to 3 free credit reports a year (I think it was a law that was passed a couple years ago), from each of the major credit reporting companies. They don’t include your FICO score, but it will list all your open accounts and if there are any late or missing payments. It’s a good idea to make sure everything is in order every now and again.

My report was all intact. They did misspell my company name (swapped one letter), but I don’t care enough to fix it. Hopefully that won’t hurt anything. Also, I noticed that Capital One noted that for 4 months in 2006, my account information was “Unknown.” How the heck don’t they know what my credit status was? The other 44 months on the report are all “OK,” but for some reason, those are missing. Strange.

I’m getting more and more concerned with my Capital One card. Part of the reason I wanted my report right now, is because of this article about Capital One hurting your credit score. It seems they record your credit limit as your highest balance, thus hurting your credit balance to credit limit ratio. On my report, Capital One doesn’t even have my credit limit listed, where every other card I have does. Lord only knows what that means.

Anywho, it’s good practice to check your credit report every couple months, especially now that it’s free. The way I’m going to handle it is just to get one report every 4 months from each of the 3 companies. Since I just got this one in March, I’ll set up a reminder in my calendar to request one again in July, and another one in November.

By the way, if you ever do need to check your FICO score, golbguru has posted a great tutorial on getting your credit score on the cheap. Check it out.

Here is my second post in my Financial Goals series. If you missed them earlier, please see my Long, Long Term Financial Goals. I’m going a little out of order here, but I wanted to get my year long goal posted sometime before the year is over.

As this is my first year attempting to be financially responsible, I have no idea how these are going to play out. Nevertheless, here are my goals for 2007.

• Have $20,000 In Savings - I started the year with just under $14,000 in my account, and as of today, I’m just over $15,000. With 10 months left in the year, I’ll have to save an average of $500 per month. Part of this money will eventually be used as a down payment on a house, but in the mean time, it’s a great emergency fund. In a crisis, $20,000 could last me at least 6 months.
• Put $2,000 into a ROTH IRA - At my age, I can put $4,000 a year into IRA accounts, but looking at my salary and other goals, I don’t think I can swing it. So far I’ve contributed $0. With 10 months left in the year, it’s only a $200 a month commitment. Seems like a perfect opportunity to set up an automatic savings plan so I don’t even have to think about it.
• Get Car Loan Below $5,000 - Ideally, I’d like to pay if off completely, but that’s probably not going to happen. I’m 23 months into a 60 month loan, and I’ve paid off half the principle. I’m a little bit ahead, but there’s still about $10,000 to go. Most likely, I’ll use some of my 0% balance transfer money to pay off a big chunk early, then make my usual car payments to myself to pay back to balance transfer. Still on the fence about that move, but either way, I’m looking at $500 a month towards this goal.
• Make $2,000 in Extra Income - Who doesn’t like more income? There’s plenty of opportunities out there, I just have to go out and find them. This will come from a combination of side jobs, credit card arbitrage, selling stuff, blogging, recycling, etc.

There you have it. 4 simple goals for the year. It’s not going to be easy, but with a bit of discipline, I think I can do it. I’ll keep you updated as the year goes on.