thoughts on personal finance

Sorry for the recent silence; I’ve been having a rough couple of weeks on the Life front. No financial crises, though, at least not yet! Thanks for all the recent comments — it cheers me up to see so many people reading.

This week got off to an interesting start for us with the early-buzzard circling of Washington Mutual.  WaMu has been my primary bank for over a decade, and currently holds all of our liquid assets — currently around $30,000 in checking and savings.

Now, all of that money is covered by FDIC insurance, so I’m not worried about a possible bank failure costing me money in the long run. But what about the short run?

Marc Hedlund posted to the Wesabe blog Wheaties for Your Wallet yesterday with an explanation for “What happens to your money if your bank closes?”.  Most of it is based on the experiences of one NetBank customer who reported a delay of two to three weeks before he had access to his money after the FDIC shut NetBank down.

This was … alarming, in our circumstance.  But it didn’t match what I remembered hearing from my friend Stacy, also a NetBank checking customer when it folded.  To be certain, I phoned her up and grilled her on her post-closure financial access.  Here’s what she said:

• She never lost access to her money. Debit cards continued to work uninterrupted for purchases and at ATMs.
• She lost online account access for two days, over the weekend. By Monday morning everything was available online again. In the interim, phone support and balance queries remained functional.

I have no idea why her experience was so different from Wesabe’s informant, but that’s an almost unnoticable blip in service. I’ve been more inconvenienced by Comcast going on the fritz.

So I’m not going to rush off and open up a new non-WaMu checking account for bet-hedging purposes. But I think I will be making one other change …

Yesterday I heard an interview on NPR’s All Things Considered with Hurricane Ike refugees in Houston. I was struck particularly by two things: one, that stores in Houston were running out of food.  Wha? I mean, it’s not Manhattan Island here, we’re talking about one of the great highway hubs of the nation, and they can’t truck in nonperishables to restock?  And two, that all purchases were cash-only.  I couldn’t tell from the report whether this was because of logistical reasons (like power outages) or emotional ones, but it did give me pause.  Jak and I typically have no more than $40 cash between us, and often none at all.  Seattle is a lot safer than the Gulf Coast, but there’s always the chance of, say, a really big earthquake.

So on the list for this week is pulling about $200 out of our WaMu accounts into a Cash Stash. Our biggest problem then becomes keeping it out of the hands of the teenager, who keeps losing her debit card and thinks that we should be her personal ATM.

(Photo by zephyrbunny.)

A recent conversation on the Get Rich Slowly forum about finances and children caught my eye — specifically, how do you balance the desire to give your children everything they want (or everything you did or didn’t have) with the practical need to limit expenses?

This is an issue that Jak and I negotiate regularly, because we have very different natural approaches. He is a pushover susceptible to unplanned financial generosity where the children are concerned, whereas I am a tightwad firmly grounded in the practical.

For example, we recently signed up for an expensive orthodontic regime for Michaela, who is fifteen. Jak and I agreed to pay extra for the best medical treatment but for none of the short-term cosmetic-only ‘upgrades’ that were offered, like clear or colored braces.

All was fine until, at the second ortho visit, Michaela started begging Daddy for the clear braces, which instantly triggered Jak’s kid-generosity reflex and returned the intra-parental negotiations to square one.

For my part, I remain relatively unswayed by pleading children. In Round Two negotiations what I proposed to Jak was this: we tell Michaela that we aren’t going to pay for the clear braces, but that if they are really important to her, she could earn the money herself between August and December (when the braces actually go on). This would be an achievable goal, as she earns $5/hour for chores at our house, including babysitting her younger sister, and occasionally earns more for babysitting elsewhere, along with money her mother pays her. (Currently she spends money almost as fast as she makes it, mostly on movies, at coffeeshops, and on the occasional expensive trendy clothing item.)

Privately, Jak and I agreed that if Michaela were motivated to earn the entire amount, we would surprise her by paying half, leaving her with $150 of her savings. My thought was that if Michaela weren’t willing to sacrifice anything to get the more unobtrusive braces, we shouldn’t be expected to do so. But if she proved she was willing to put in the extra effort, we would reward her by helping. This plan would have the added benefit of giving her more experience at saving and making tough financial choices, something I’ve been actively looking to promote.

Jak relayed the plan to Michaela — minus the secret match — and she dropped the whole idea. I think Jak was a little nonplussed that her desperate pleading had so easily turned to nonchalance, but I was unsurprised: like most kids, I think she values her own time and money very highly but has little concept of the cost to adults of either. Eventually, she will learn … before she’s a full adult herself, if I can manage it.

Despite the fact that Michaela didn’t ‘take the bait’ and choose to save for something she wanted, I think this was a very good approach, and plan to use it often over the next three years. Eventually there will be something that she is motivated to sacrifice for, and she’ll get that experience. In the meantime, we saved $300.

Read the forum conversation for some other good thoughts from parents about balancing generosity with financial limits.

(Photo by Pingu1963.)

One of my research projects-in-progress for Pocketmint has been a comprehensive chart of airline bag fees. Since I can’t keep straight who charges what for which item of luggage, I figured other people must be having the same problem.

Turns out someone else saved me the trouble! Travel search engine Kayak (of which I am very much a fan) has a chart that shows not only bag fees but also charges for food, pets, unaccompanied minors, seat assignment, and legroom. The chart appears to be regularly updated; as of this writing, none of the entries are more than a week old.

One interesting thing I learned from this chart is that Southwest offers free service to unaccompanied minors. Claire’s first solo trip this summer, to visit her aunt and uncle in Eugene, was in dire jeopardy because the unaccompanied minor fee would have added $150 to the ticket price. (We worked out a way to drive her instead.) Southwest doesn’t fly SEA–EUG, but we may send her to family in Austin next year, so that’s good to know. Since Southwest is the one airline that has been protected from high fuel prices, this may even still be relevant a year from now.

Also, Airfare Watchdog has a list of other fees to watch out for. Did you know that many airlines now charge for reservations made on the phone or in person? Luckily for me I actually prefer the Internet.

(Photo by Drewski2112.)

If you’re not a regular listener of This American Life, you may have missed the May episode entitled “The Giant Pool of Money”. It explains why what we have now isn’t just a ‘sub-prime mortgage lending crisis’ but a ‘worldwide credit crisis.’ It’s masterfully written, taking all the jargon and translating it into plain, often witty English:

Alan Greenspan: The FOMC stands prepared to maintain a highly accommodative stance of policy for as long as needed to promote satisfactory economic performance.

Adam Davidson: You might not believe me, but that little statement: that is Central Banker-speak for “Hey, global pool of money — screw you.”

Alex Blumberg: Come on, that’s not what he said.

Adam Davidson: It is! I speak Central Banker and that’s what he’s saying.

Anyone interested enough in the economy to be reading a personal finance blog — this means you! — absolutely should not miss this episode. Clear an hour to listen to the show, or you can read the transcript instead.

(Photo by Jeff Belmonte.)

I had a sort of mini-vacation last week; didn’t go anywhere, but took off work to hang with a visiting friend. I had every intention of posting during the break, but … I was too busy playing. And eating. Stacy and I are both unapologetic foodies, which means we spent much of our time bouncing between restaurants, markets, and kitchens …

I’ve been trying to hit the farmers’ markets as much as possible this summer, but I’m finding those visits increasingly stressful. I am hugely in favor of both buying local and supporting small farms, but that desire is at war with my equally strong tendency toward frugality.

Today I was talking with a friend who lives in the DC metro area; he extolled the cheapness of farmers’ market produce, which he reckons as being about on par pricewise with the budget grocery chains like Safeway, but with consistently superior quality. I was envious to say the least. In the Seattle area, even Whole Foods is often cheaper than the farmers’ markets. This week, a pint container of organic multicolored cherry tomatoes is $4.50 at various farmer stalls, but only $2.99 at Whole Foods.

Last Thursday I tried a different market from my usual, in hopes that maybe it was a neighborhood thing, but no — still expensive. I did walk away with some cheap zucchini (three large for $2!), but otherwise the prices were astronomical. Peaches were $4/pound; I bought four small ones. They were much more flavorful than the ones I got at Fred Meyer for .79/pound, but at a dollar for about six bites, they were no bargain.

Tom reports that in Maryland, eggs at the farmers’ market go for $3.25 or $3.50 per dozen. Last week I saw eggs at the market listed at $5 and $6 per dozen. At the regular grocery they run around $2.50, and by watching for sales I can cut that considerably — this weekend I got two dozen for $2.69 in a buy-one-get-one-free deal. Costco regularly carries two dozen for under $3.

I have no idea why market produce is so expensive here. Perhaps it’s another manifestation of our (relatively) robust local economy, and farmers are merely charging what the market will bear. Perhaps Seattleites have such a green-and-local focus that the demand outstrips the supply — certainly the markets have been mobbed every day I’ve been since June.

Meanwhile, my internal battle rages on. Lately I’ve been compromising by buying certain ‘treat’ foods where flavor quality is most important — the sweet peaches, Rainier cherries, assorted berries — from the farmers’ markets, and getting the bulk of our staples from grocery sales and Costco. But I sure do wish I could satisfy both mandates at the same time instead of having to choose.

(Photos by Sasha Kopf and Chas Redmond.)