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Free Money Finance - Simple Dollar - Bargain Hunter
Cashing in With the Vanguard Tax Exempt Money Market Fund
 13 Oct 2008 at 8:33am

Over the weekend, I was poking around the Vanguard website when I ran across this little tidbit of information… The Vanguard Tax Exempt Money Market Fund (VMSXX) is currently yielding 4.53% (as of 10/13/2008). On top of that, it’s exempt from federal income tax. Thus, assuming that you’re in the 30% tax bracket, that’s the equivalent of a 6.47% yield (i.e., 4.53%/0.70 = 6.47%).

Why such a high rate?

According to Vanguard:

The yields of Vanguard’s municipal money market funds have risen dramatically in recent days. In a reversal of the usual relationship between yields of municipal and taxable money market funds, the yields of Vanguard Tax-Exempt Money Market Fund and similar state-specific funds have risen far above those of taxable funds, including Vanguard Prime, Federal, and Treasury Money Market Funds.

The unusual situation is being caused by current conditions in the short-term debt market. Many firms that help create and market short-term municipal securities for state and local governments are finding they need to boost yields to create greater demand for these securities. As a result, securities with extremely short maturities?including those that mature in one day or one week?are being offered at exceptionally attractive yields.

As part of their normal operations, Vanguard’s tax-exempt money market funds purchase these kinds of short-term securities every day, causing the funds’ yields to move in step with the yields being offered in the marketplace.

Source: Vanguard.com

The downside

While this is an incredibly attractive rate, it’s important to keep in mind that money market mutual funds aren’t typically insured against losses. Yes, Vanguard is participating in the U.S. Treasury money market fund insurance program, but that applies only to funds that were already in place as of September 19th, 2008. While fund companies strive to maintain a price of $1/share, there are no guarantees.

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Track Your Finances Free With Quicken Online
 13 Oct 2008 at 6:04am

Late last week, I received an e-mail announcing that Quicken Online will be available for free effective today. Here’s the scoop:

Quicken is excited to announce that Quicken Online will become FREE starting Monday, October 13th. Until recently, Quicken Online was free to try, but cost $2.99 per month after a trial period. Beginning October 13th, there will be no charge to use the Quicken Online program.

If the online version isn’t your cup of tea, then check out the available discounts on Quicken 2009 — you can get up to 36% off the list price.

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U.S. Treasury Insurance for Money Market Funds
 13 Oct 2008 at 5:11am

As many of you know, there’s a big difference between money market savings accounts and money market mutual funds. The former is held at a bank, and subject to FDIC insurance coverage. In contrast, the latter is typically held at an investment company or brokerage and, while money market funds are designed to maintain a price of $1/share, they’re still technically mutual funds. Thus, despite being functionally equivalent (more or less) to their bank-based counterparts, there’s always a chance that money market funds will “break the buck” (i.e., allow share values to fall below $1) such that you’ll wind up losing principal.

With that as a backdrop, I wanted to spend a bit of time talking about the U.S. Treasury’s recently announced money market mutual fund insurance program. In case you weren’t aware, the Treasury recently introduced this plan in an attempt to increase confidence in money market funds and combat a recent run by panic-stricken investors who were pulling their money out at an alarming rate. Unfortunately, while this plan guarantees that participating funds won’t “break the buck,” it’s still nowhere near as good as FDIC insurance coverage.

Here’s why:

  • The guarantee is limited only to funds that voluntarily participate. The good news here is that most major fund companies have thrown their hats into the ring, meaning that the vast majority of these sorts of funds are now covered.
  • The guarantee only applies to money invested prior to September 19th. Because this was intended to stop people from liquidating their holdings, new contributions aren’t covered.
  • Your investment returns may suffer as a result of this plan.While the funds companies are responsible for paying the costs of this insurance, it’s likely that they’ll ultimately pass it along to investors in the form of slightly higher expense ratios.
  • The coverage is only temporary. As of right now, the coverage is slated to last only three months. While it’s possible that the Treasury will extend the plan, there are no guarantees.

    • So… Unless you already had money in place in a covered fund, the Treasury’s guarantee is a complete non-issue for you. In fact, it could be viewed as somewhat of a negative in light of the fact that participating companies will have to pay a bit extra for the coverage, and those costs will ultimately come out of your pocket. This is exactly why Fidelity and Vanguard both dragged their feet before agreeing to participate. Both companies are extremely well capitalized, and neither one saw this as a necessary step to protect their funds.

    If you’re concerned about the preservation of capital, you would be well advised to stick to bank accounts that are covered by FDIC insurance (note that FDIC coverage was recently increased to $250k), or credit union accounts that are protected by NCUA insurance.

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    Don?t Be Stupid - Leave Your Money in the Bank
     10 Oct 2008 at 8:53am

    Check this out… Despite the recent increase in FDIC insurance limits, Richard Cruz of New York no longer trusts banks. In order to protect his money, he has decided to withdraw his money, place it in a shoebox, and then allow a newspaper to publish his photo such that everyone will know what the guy with the box full of money looks like.

    Curious to know how he settled on a shoebox? Well…

    “No one hides their money under a mattress any more. That’s the first place people would look.”

    I guess it’s hard to argue with that sort of logic…

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    Recovering From a Stock Market Decline
     10 Oct 2008 at 7:09am

    Did you know that it took the stock market 25 years to recover from the Great Depression? Or that the stock market (as measured by the Dow) made virtually no progress from it’s pre-Bear peak in 2000 until mid-2006? Pretty scary stuff, especially when you consider that the Dow just experienced its third consecutive triple digit loss, dragging it down to a five year low.

    As bad as this all sounds, it’s important to keep in mind that the situation would be considerably better if you continued investing throughout the down periods. Indeed, by sticking to your guns and investing in a down market, your “new” money (invested during the downturn) will turn a profit by the time your “old” money makes it back to even. All you need is nerves of steel…

    Investing through a down market

    Don’t believe me? Check this out… Assume that you invested $10,000 in a mutual fund that cost $100/share. Further assume that you had horrible timing, and the market went south the very next day, resulting in a 50% decrease in share price over the next 18 months. Fortunately, things eventually started looking better, and your investment rebounded to $100/share over the following 18 months.

    How would you have performed? Well… If you had:

    • sat tight, then you’d be back to even money
    • panicked and sold, you’d have locked in at least part of your loss
    • bought through the downturn, you’d be ahead of the game

    Just to make things a bit more concrete, let’s assume that the price dropped linearly to $50/share during the first 18 months, and then recovered linearly to $100/share over the next 18 months. Let’s further assume that you invested another $10k after one and two years. In other words, your timing wasn’t great, and you ended up buying in about 6 months before the bottom (on the way down), and again six months after the bottom (on the way back up).

    How would things look after three years, when the market is finally back to even?

    Running the numbers

    Here’s a quick look at the numbers:

    Original investment: $10,000 @ $100/share = 100 shares
    Year one investment: $10,000 @ $66.50/share = 150.375 shares
    Year two investment: $10,000 @ $66.50/share = 150.375 shares

    Now, in year three, you’re sitting with 400.75 shares at $100/share. Guess what? That’s a total value of $40,075 even though the market has been flat overall, and you only invested $30,000. Calculating your internal rate of return over that three year period works out to an average annual return of 15.10%.

    And yet… The market didn’t actually go anywhere. Not too shabby.

    While the numbers above are somewhat contrived, and the specifics will vary with things like how far the market falls, how much you invest during the downturn, and how quickly it recovers, the larger point still stands. Regular, consistent investing pays dividends over the long run, even in the face of market turmoil.

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    $50 Sharebuilder Signup Bonus
     8 Oct 2008 at 1:39pm

    As a followup to my previous post about TradeKing’s $50 signup bonus, I just wanted to share this little tidbit of information with you…

    Sharebuilder, which is now a subsidiary of ING Direct, is offering a $50 signup bonus. To qualify for this bonus, simply enter “CASH50” when prompted for your promo code and then make a trade before the end of November 2008. That’s it. There’s no minimum deposit requirement. Within 4-6 weeks, they’ll deposit $50 in your account.

    If you have any other (active) promo codes, let me know and I’ll compile a list.

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    WaMu Drops Interest Rate, Alternatives Abound
     8 Oct 2008 at 10:46am

    A reader named William wrote in recently to point out that, as expected, Washington Mutual (WaMu) has cut the interest rate on their online savings account to 3.00% APY, dropping them from being a rate leader to being middle of the pack. Apparently they no longer need to pay a premium to attract (or retain) deposits now that they’ve been taken over by Chase.

    As for us, we’re sitting tight with FNBO Direct, which currently pays 3.50% APY, and is rated as one of the safest online banks. In all likelihood, I’ll close our WaMu account. We opened it shortly before the collapse, and never got around to transferring any money over there, so what’s the point?

    I’m also considering opening an E*Trade account, as they offer a competitive interest rate (currently 3.30% APY) along with a linked brokerage account with relatively low commissions ($9.95/trade). Yes, you can do better with outfits like TradeKing ($4.95/trade) and Zecco (free trades), but it’s hard to beat the convenience of a linked savings account at the same institution.

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    FDIC Insurance Limits Increased to $250k
     8 Oct 2008 at 5:05am

    In case you haven’t heard, the recent economic bailout bill included a provision for increasing FDIC insurance limits to $250,000 per depositor per insured bank. This move is intended to shore up confidence in struggling banks and improve liquidity in banks across the country.

    What increased coverage means for you

    The new limits mean that a married couple such as my wife and I could conceivably keep up to $1M at a single bank — individual accounts for each of us ($250k/each) plus a joint account ($500k). Not that it matters too much for us, but the increased coverage is currently slated to end in December 2009, though it’s conceivable that additional legislation could extend this deadline, or make the change permanent.

    Who’s paying for the increased coverage?

    Interestingly, FDIC premiums (paid by banks) are increasing, with the average premium going up to roughly double the current rate (from 6.3 to 13.5 cents per $100). This change has actually been in the works since July, and will apply only to the first $100k of deposits per depositor, as the FDIC isn’t being allowed to increase their rates to offset the additional coverage. Rather, they’ll have to borrow from the Treasury to cover losses due to the higher limits.

    The future of FDIC insurance

    On a related note, Congress actually approved new limits that would peg FDIC coverage to inflation back in 2005. However, that measure wasn’t scheduled to go into effect until 2011. Stay tuned — I’m sure this isn’t the last we’ll be hearing more about FDIC coverage in the coming months…

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    Five Tips for Reducing Your Debt
     6 Oct 2008 at 6:24am

    The latest issue of Kiplinger’s has a big section on debt reduction, including a list of tips for getting rid of whatever debt you might have. While a number of the tips are pretty standard stuff stiff, I still thought they were worth highlighting, especially given the current economic climate.

  • Break your debt into small pieces. Whether you choose to pay highest interest or lowest balance first, it’s important to view your debts individually rather than looking at the whole, depressing ball of wax. The key is to stay current on everything, but focus on knocking out one chunk at a time.
  • Track your spending. While you may often run out of money before you run out of month, you probably have more money coming in than you think. By tracking every penny that you spend, you can get a better idea of where everything is going, hopefully cut some extraneous expenditures such that you can throw a bit extra at your debts.
  • Don’t miss any payments. As I said in #2, above, it’s important to stay current on all of your debts. You have a tough enough job ahead of you. Don’t harder by adding penalty fees and higher interest rates to the mix. Also, if your credit score falls, you might wind up paying more for things like insurance.
  • Boost your income. Cutting spending can only get you so far. Another great way to supercharge your debt reduction efforts is to increase your income. Pick up a second job or, at the very least, sell your extra stuff on eBay. Then take whatever extra income you generate and throw it at your debts.
  • Get help. Honestly, I have a tough time with this one as a blanket tip, as there are so many credit repaid and debt reduction scams out there. However, if you’re in over your head, you should consider getting help from a reputable credit counseling agency or financial planner. You can start your search for a decent agency at NFCC or the AICCCA.

    • To these, I would add… Stick to it. No matter how good your plan, it won’t work if you don’t see it through to the end. This is easier said than done, so take Step #1 very seriously. If you need the psychological boost, definitely consider attacking the smallest balances first to get a few small victories under your belt.

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    Porkbarrel Spending and the Economic Bailout
     3 Oct 2008 at 7:19am

    In an attempt to make the $700B economic bailout more palatable, lawmakers have apparently stuffed it with $110B of earmark (porkbarrel) spending. While some of these earmarks are arguable useful, like an tax credit for research and development and an increase in FDIC insurance, others are much less attractive (at least to me).

    Here’s a sampling:

    • Creation of a seven-year cost recovery period for construction of a racetrack
    • A refund of excise taxes to Puerto Rico and the Virgin Islands for rum
    • Income averaging for money received from the Exxon Valdez litigation
    • Provisions related to film and television productions
    • Extension/modification of duty suspension on wool products, and duty refunds
    • Exemption of a specific arrow for child archers from an excise tax

    So tell me… Exactly how do these projects relate to saving our economy?

    Source: CNN.com

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    $50 TradeKing Signup Bonus
     3 Oct 2008 at 5:18am

    Throughout the month of October, TradeKing is running a promotion where you can get a free $50 bonus for opening an account, funding it with at least $2,500 within the next 30 days, and then making a trade within the next 180 days.

    To take advantage of this offer, you’ll need to click one of the special links in this post. When you reach the signup page, you should be greeted by this image:

    In case you’re not familiar with TradeKing, they’re widely considered to be one of the best online brokers, and were rated #1 in customer service by SmartMoney. Another strength of TradeKing is that they have dirt cheap commissions, with equity trades costing just $4.95/trade.

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    Lessons From the Stock Market Game
     2 Oct 2008 at 10:49am

    I came home last night to find our ten year old sitting at the computer looking up stocks on Yahoo! Finance. When I asked him what he was doing, he told me that they’re playing a stock market game at school, and he needed to find some good companies. The rules are that they have $100k to invest, they can’t buy stocks that cost less than $5/share, and they have to buy at least 100 shares of each company.

    When I asked him how long the game would run, he wasn’t sure, but it’s not terribly long. Thus, on order to perform well in this game, you have to choose stocks that will perform exceptionally well over the next few weeks/months, as opposed to focusing on what really matters. In fact, I’d be willing to bet that the winner will be someone who chooses a single stock that happens to perform exceptionally well.

    While I’m thrilled that they’re talking about this stuff in fifth grade, I wish there was a better (more realistic) way of teaching kids about investing — one that wouldn’t send the wrong messages. Despite these limitations, I decided that this would be a good opportunity to start imparting some wisdom. In fact, his savings account has built up to the point that I’ve been planning on teaching him about “real” investing sometime soon (though we’ll rely on index funds as opposed to individual stocks).

    What follows is a list of some things that I hope to help him get his head around…

    The importance of diversification

    At first, he was focusing in on finding that one “right” company. While this might work out fortuitously in the short term, it’s definitely not a good strategy overall. After explaining this to him, he seemed to recognize the risks…

    “Oh, like if I put all my money money in Google, and then terrorists decided to blow it up, I’d lose all my money.”

    Exactly. I also suggested that he might want to pick companies that are in different industries.

    So far, these are the companies that he’s most interested in:

    • Visa (V)
    • Yum! Brands (YUM)
    • Procter & Gamble (PG)
    • Apple (AAPL)
    • Exxon/Mobil (XOM)
    • Google (GOOG)

    When I suggested the possibility of a drug maker, his eyes lit up and he asked:

    “Who makes cocaine?“

    Hah.

    Price alone doesn’t make a stock expensive/cheap

    While he’s not allowed to buy shares under $5, and needs to keep a lid on the upside due to the $100k total limit and the requirement to buy at least 100 shares, he’s still grappling with the fact that a $10 stock isn’t necessarily “cheaper” than a $20 stock. He’s probably going to end up skipping Google simply because he can’t buy 100 shares and still keep a balance portfolio. But aside from those sorts of limitations, there’s no need to avoid (or favor) a stock solely because it has a high (or low) dollar value.

    Likewise, he needs to learn that a $5 increase in a $50 stock is the same as a $10 increase in a $100 stock. This shouldn’t be too hard, because he’s actually quite good at math — I think I simply need to point it out to him. Nonetheless, while evaluating stocks, he was dazzled by the dollar changes without regard to the underlying share price.

    The importance of thinking long term

    As I noted above, the stock market game that he’s playing encourages short term thinking, which had him looking at yesterday’s performance as an indicator of whether or not a stock was doing well/poorly. Down a few bucks? Wow, that’s a bad stock. Up a bunch? Looks like a winner. To help him understand the relative unimportance of performance over a short timeframe, I zoomed out from the intraday stock chart to show him the 5 year chart. That definitely provided a bit of perspective.

    The “buy low, sell high” mentality

    This is related both to the issue of pricing, and to the importance of thinking long term. As seasoned investors know, a short term decline isn’t a reliable indicator of a bad stock any more than a run up indicates a good stock. While I realize that I’m oversimplifying things here, some of the world’s greatest investors have made their money buying downtrodden stocks (or buying into downtrodden markets) and waiting for a recovery.

    Anyway, this should be a fun little exercise for both him and me.

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    Admin: Anti-Spam Images for Leaving Comments
     1 Oct 2008 at 4:00pm

    Are you having trouble leaving comments? If so, please let me know.

    I recently had to implement a simple little challenge-response test for leaving comments due to a recent deluge of spam comments. When trying to leave comment, you should see a “captcha” image containing a financial word. Simply type the word into the required field and you should be good to go. I apologize for any inconvenience, but my spam filters were getting overwhelmed, so I had to act.

    With that said, I’d appreciate some feedback as to whether or not it’s working properly. Comments are down overall since I made the change, which could either be natural variation, or it could signal difficulty leaving comments. If it works, don’t hesitate to leave a comment. If you’re having trouble, please contact me directly with details.

    Update: I’ve implemented a new strategy that seems to: (1) allow legit comments through, and (2) do a reasonable job of blocking spam outright, before it even hits the filters.

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    Escape Your Mortgage Due to a Bank Failure?
     1 Oct 2008 at 8:13am

    As a followup to my previous article about what happens to your mortgage when you bank fails. I recently ran across an interesting article from last winter that talks about banks losing track of mortgage paperwork and being unable to foreclose on deadbeat homeowners.

    Judges in at least five states have stopped foreclosure proceedings because the banks that pool mortgages into securities and the companies that collect monthly payments haven’t been able to prove they own the mortgages… More than $2.1 trillion, or 19 percent, of outstanding mortgages have been bundled into securities by private banks… Those loans may be sold several times before they land in a security.

    Whenever loans are sold, the sellers are required to sign over the mortgage note to the buyers, but in the recent mortgage boom, that step wasn’t always properly completed.

    According to Alan White of the Valparaiso University School of Law:

    “Loans were mass produced and short cuts were taken. A lot of the paperwork is done in the name of the original lender and a lot of the original lenders aren’t around anymore.”

    In fact, more than 100 mortgage companies closed their doors during 2007, and I would imagine that the number has just kept climbing since then. Thus, in addition to all of the mortgages being sold through the normal course of business, the recent uptick in bank failures has created an even bigger mess. While mortgage banks can file a lost note affidavit fully document ownership of a particular loan, an increasing number of people are apparently challenging the ownership of their mortgage note.

    Maybe it’s just me, but I’m surprised that people can get away with this. While the details vary from place to place, mortgages typically result in a lien on the property, and are filed with the county courthouse. This should establish that there is (or at least was) a mortgage on the property in question. If you combine that with evidence that the homeowner had been willingly paying the mortgage before going into default, the obvious conclusion should be that the mortgage is legit, resulting in what should be an open-and-shut case.

    Of course, common sense and legalities don’t always intersect…

    Source: Bloomberg.com

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    The Three Biggest Risks of Retirement
     30 Sep 2008 at 7:59am

    The latest issue of Money Magazine had an interesting interview with a retirement expert from York University named Moshe Milevsky. In it, he detailed the three biggest risks of retirement. Any guesses as to what they are? Here’s his view:

  • Longevity risk
  • Inflation risk
  • Market risk

    • What follows is a quick breakdown of each one…

    Longevity risk

    Longevity risk refers to the possibility that you’ll outlive your savings. With retirement lasting anywhere from 10-40 years (perhaps longer depending on how early you retire) this is a very real issue for many retirees, especially now that most people are relying on their 401(k) and IRA funds instead of a monthly pension check. Fear that retirees will outlive their savings is one of the reasons that so-called longevity insurance (which is really just a re-packaged, deferred annuity) has become increasingly popular.

    Inflation risk

    Inflation isn’t so much a risk as an inevitability. When you’re working, your income typically increases to keep pace with inflation. But after retirement, many individuals are living on a more or less fixed income, and inflation becomes a major factor. Consider this… Over a 25 year span, 4% annual inflation will devalue a $1,000 monthly pension to the equivalent of just $375. Even if you’re not on a fixed income, you still have to manage your money in such a way as to minimize market risk (below) while staving off inflation risk.

    Market risk

    When you’re working, down markets aren’t necessarily a big deal. You’re still smack dab in the middle of the accumulation phase and, as long as you buy and hold, you have plenty of time to recover. In fact, as long as things eventually recover, down markets can boost your returns, as you’ll be buying shares on the cheap. That being said, a down market can wreak havoc if it occurs early in your retirement. The reason for this is that, once you hit retirement, you’ll likely start selling assets to generate cash. And when you pull money out during a down market, you effectively lock in that loss making it hard to recover.

    Reducing your risks

    As with anything, it appears that the key to defusing these risks is to diversify. According to Milevsky, this might include not just an age-appropriate mix of stocks and bonds, but also fixed and variable annuities. Traditional mutual fund investments help protect against inflation risk, whereas fixed annuities protect against longevity risk, and variable annuities promise some of the gains of the overall market while guaranteeing a minimum payout in the face of a bear market.

    Note: Just to clarify the last bit about risk reduction… When asked about the fact that his own previous research that showed variable annuities to be overpriced, Milevsky responded:

    If today’s variable annuities looked like the product of the same name 10 years ago, I’d still be opposed to them. They used to promise to make up losses only if you died while the market was down. But the new ones deliver benefits while you’re still alive. And the protection that they provide against market losses would be very expensive if you tried to buy it in any other way — say, in the options market. So I used to be something of a crusader against variable annuities, but now I fall back on what the economist John Maynard Keynes said when someone challenged him for supposedly flip-flopping. “When the facts change,” he said, “I change my mind. What do you do, sir?”

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    Breaking News: Citi to Acquire Wachovia
     29 Sep 2008 at 11:51am

    Another day, another bank takeover… This time it’s Citigroup, Inc. (C) acquiring the banking assets of Wachovia Corp. (WB) for $2.1 billion in stock. They are also assuming $53 billion in Wachovia debt.

    Once again, the FDIC orchestrated this takeover (with help from the Treasury Department and the Federal Reserve). In this case, however, the FDIC may wind up on the hook for losses in connection with Wachovia’s mortgage portfolio. As was the case with the WaMu takeover, the transition should be seamless for bank customers.

    Source: WSJ.com

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    How to Become a Millionaire - Lessons From an Eight Year Old
     29 Sep 2008 at 5:05am

    A weeks or so ago, I shared some tips from Warren Buffett about how to become a millionaire. Today, I wanted to share some tips from our eight year old.

    This weekend, I had an interesting financial conversation with our eight year old. This is the same kid that has an impressive knack for saving. To set the scene, we were tooling around town when the subject of cars came up…

    As we pulled up to a stoplight, a particularly sweet ride rolled by. As soon as they spotted it, our kids started marveling at how nice it was, and how much it must have cost. The undertone of the conversation was that the owner must be über-rich. Never one to miss out on a teachable moment, I mentioned that stuff like that isn’t necessarily an indicator of wealth.

    Taking a page from “The Millionaire Next Door,” I explained that some of the wealthiest people that they’ll ever meet are the ones that don’t flaunt it. In fact, they probably won’t even realize that these people are rich — rather, they’ll seem just like “regular” people leading a “normal” life.

    This prompted our eight year old to say:

    “Why doesn’t everyone just buy normal stuff? That way they could get rich. And if millionaires just bought normal stuff, then they could stay rich.”

    While this is a bit of an oversimplification, I think our society could use a healthy dose of eight year old logic. In fact, if more people thought like him, we wouldn’t be talking about negative savings rates and multi-billion dollar bailouts.

    Intrigued, I asked him if he wanted to be a millionaire. His response?

    “Maybe someday, but not right now. If I was a millionaire, I’d probably just worry about my money all the time.”

    From the mouths of babes…

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    Inside the Washington Mutual Takeover
     28 Sep 2008 at 11:24pm

    As you’re likely aware, JPMorgan Chase took over all WaMu deposits effective September 25, 2008. This move has no doubt left WaMu customers with a lot of questions and concerns. In an attempt to address as many of these issues as possible, Chase has put together a FAQ page for WaMu customers.

    In short, things will remain much the same, at least for the foreseeable future. If you have accounts with both backs, both will remain separately insured through the FDIC for up to six months. Moreover, if you had more than the FDIC limits at WaMu, your deposits are safe — the full amount will be carried forward to Chase. Another bit of good news is that WaMu’s rates have, at least for the time being, remained stable.

    Read on for a complete rundown of questions and answers…

    What’s different?

    • Your deposits at WaMu are now backed by the financial strength of Chase in addition to continuing to be insured by the FDIC.
    • If you bank at both WaMu and Chase, your deposits continue to be insured separately today just as they were yesterday, and generally will be for another six months. At that time, your deposits will be insured by the FDIC for up to $100,000 per depositor (with an additional $250,000 for self-directed retirement accounts), and will continue to be backed by the strength and security of JPMorgan Chase.

    What stays the same?

    Continue to bank just as you usually do:

    • same account numbers,
    • same Washington Mutual name on your account,
    • same checks, debit cards, credit cards, deposit slips,
    • same online banking website and passwords,
    • same branches & ATMs,
    • same familiar bankers, and
    • same great service!

    What will change?

    Soon:

    • You’ll be able to use over 9,300 Chase ATMs fee-free — jointly, that’s 14,000 ATMs for your banking convenience!

    In the future:

    • You’ll begin to see the Chase name on your statements, online, and on your credit cards as they reissue.
    • Your branch will be re-named Chase and you’ll be re-issued new debit cards with the Chase name. Until then, bank as you do today.
    • As our systems merge, you’ll be able to use any of the Chase branches nationwide. This won’t take place this year, and we’ll let you know well in advance of any changes.

    Frequently Asked Questions:

    Q. What will happen to my account at WaMu? And to my branch?
    A. It’s business as usual. As of September 25, 2008, JPMorgan Chase has assumed the deposit and loan accounts, and all branches, of Washington Mutual. You can continue to access your accounts just the way you’ve accessed them in the past: use your same branch, same debit, credit and ATM cards, same checks.

    Q. Is my money safe?
    A. Yes; in addition to FDIC insurance, now you’re assured your bank is backed by the strength and security of JPMorgan Chase. If you have money in both banks, your deposits have separate FDIC insurance for up to six months. Come see us and we can help you review your coverage.

    Q. What if I have more than $100,000 at WaMu?
    A. Your money is secure and now protected by the strength of Chase. Chase assumed all deposits of Washington Mutual.

    Q. When can I bank at Chase branches in my area?
    A. We’ll be working hard to combine systems as quickly as possible so you can begin to enjoy expanded branch convenience in your area, and we expect system changes to begin late next year. We’ll let you know in advance of any changes; in the meantime, simply continue to bank at WaMu branches as you do today.

    Q. Do my direct deposit, automated payments and transfers remain the same?
    A. Yes. These services all continue for you without interruption or action on your part.

    Q. Where do I send my credit card and loan payments?
    A. There is no change in how or where you make payments; payment instructions and addresses remain unchanged.

    Q. I have a Chase credit card, car loan, and mortgage. Can I make payments at a WaMu branch now?
    A. Not yet! We’ll let you know when you can make Chase credit card, car loan, mortgage or other loan payments at WaMu branches, or vice versa.

    Q. I have deposit accounts at both WaMu and Chase. Are both of my accounts insured?
    A. Yes! Your deposits are insured separately today just as they were yesterday, and generally will be for another six months. At that time, your deposits will be insured by the FDIC for up to $100,000 per depositor (with an additional $250,000 for self-directed retirement accounts), and will continue to be backed by the strength and security of JPMorgan Chase.

    Q. I’m a small business owner. What will change for my business?
    A. Immediately, no change at all ? bank just as you do today. As our systems merge, we look forward to bringing you innovative services ranging from online invoicing to convenient ways to help you manage your cash flow. Chase is a national leader in business banking services, and is the nation’s #1 SBA lender.

    Q. I have a relationship with the WaMu Commercial Group. What will change for my business?
    A. Immediately, no change at all - work with the Commercial Group just as you do today. As our systems merge, we look forward to bringing you innovative services. Chase is a national leader in commercial lending and cash management solutions.

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    From the Archives (September 21st - September 27th)
     28 Sep 2008 at 10:55pm

    Here are some of my favorite FCN articles from a year ago this past week:

    And here?s what was going on two years ago:

    And finally, here?s what was going on three years ago:

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    Weekly Roundup - On My Own Edition
     28 Sep 2008 at 9:33pm

    This past week, I decided to part ways with the MoneyBlogNetwork. It was a completely amicable separation — I just decided that it was time for a change — and I wish them all the best. And with that, it’s time for a quick trip around the personal finance blogosphere…

    • Flexo provided firsthand evidence that you should never (ever!) expose short-term money to the stock market. In short, he dumped some cash into a charitable gift fund with the intention of disbursing it later this year. Unfortunately, he put it in a broad market index fund and it’s dropped 20%.
    • Jim talked about how to get out of jury duty. I’ve never actually been called for jury duty (knock on wood), but this was an interesting read nonetheless.
    • Trent talked about the dangers of rewarding children for normal behavior. Honestly, I think that his point goes far beyond material rewards. Far too often, my wife and I hear parents lavishing praise on their children for doing the most mundane things. While it’s important to be a positive influence in your child’s life, there’s no need to go overboard with congratulations for simply living life.
    • Jeremy warned against compounding your investment losses. As I’ve said in the past, it’s important stay the course, and avoid trying to time the market.
    • Finally, Ron has some great tips for getting ‘back to basics‘ in the face of our current financial crisis. It’s simple, really… Start living within your means, paying off your debts, and saving for the future.

    And with that… I hope you all have a great week!

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    WaMu Trial Deposits Posted, Account Active
     26 Sep 2008 at 7:38am

    On the heels of last night’s revelation that WaMu is being acquired by Chase, I just wanted to report that I’ve received the two test deposits in my external checking account. For those who haven’t been following along, these deposits stem from my decision to open a WaMu account.

    As expected, it’s business as usual today at WaMu in the wake of the buyout by JP Morgan Chase. The transition appears to have been seamless, and I was able to activate my account by logging in, clicking on “External Accounts” in the left sidebar, and then simply following my nose. It appears that the FDIC was right, in that this was a total non-event for WaMu account holders.

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    Breaking News: Washington Mutual to be Acquired by JPMorgan Chase (Update1)
     25 Sep 2008 at 8:10pm

    Update1: From USA Today…

    JPMorgan Chase (JPM) acquired the banking operations of Washington Mutual, (WM) the nation’s largest savings and loan, for $1.9 billion Thursday night in a deal brokered by the Federal Deposit Insurance Corp.

    “For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks,” said FDIC Chairwoman Sheila Bair. “For bank customers, it will be a seamless transition. There will be no interruption in services, and bank customers should expect business as usual come Friday morning,” Bair said.

    Original: Apparently JPMorgan Chase & Co. (JPM) is close to a deal to acquire Washington Mutual (WM). Federal regulators have apparently been heavily involved in the negotiations.

    While the exact structure of the deal isn’t know, the FDIC apparently won’t be on the hook for any of the costs. That being said, the Wall Street Journal is reporting that it’s likely that “another arm of government” will bear at least a portion of the costs. This makes me wonder if the government might not be picking up some of WaMu’s bad debt to sweeten the pot for Chase. Details should be forthcoming, as Chase has a conference call scheduled for 9:15 PM EST (about 5 minutes from now).

    See also: Is WaMy on the Cusp of Failure?

    Source: WSJ.com

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    Improve Your Gas Mileage by Slowing Down
     25 Sep 2008 at 5:20am

    I was recently presented with an opportunity to run a little gas mileage experiment. I’ve done this in the past when I investigated the degree to which I could improve my gas mileage by altering my driving habits around town. Interestingly, I was able to increase my mileage by 15% in return for a few minor driving tweaks.

    This time, I had to make a 350 mile roundtrip on the interstate. As such, I decided to drive “normally” on the way out, and to go out of my way to keep my speed in check on the way back. I filled my tank at the beginning, at the turnaround point, and at the end. Thus, I was able to calculate my mileage for each leg. For background, I have a 2005 Honda CR-V that’s supposed to get 23 city mpg and 29 highway mpg.

    The impact of slowing down

    As noted above, I drove “normally” on the way out of town. For me, this meant running at roughly 75 mph. In order to keep things as accurate as possible, I decided to use the cruise control to hold my speed steady. While I realize that I could’ve done a good bit better mileage-wise if I had controlled my speed manually (especially on hills), I wanted this to be an apples-to-apples comparison. Upon arriving at my destination, I learned that my outbound mileage was 25 mpg.

    On the way back, I decided to ratchetthe cruise control down to 65 mph and hang out in the slow lane with the trucks. At the end of the trip, I was surprised to learn that I had achieved 32 mpg - that’s a 28% improvement! To be fair, I was driving into a bit of a headwind on the way out, and had the wind at my back on my return. Then again, it was considerably warmer on my return trip, so I had to turn on the A/C to stay cool.

    While I fully expected to see an improvement, I was a bit surprised by how much of an impact slowing down had on my mileage. Of course, that 28% improvement was based on a relatively small amount of data (i.e., one roundtrip of 175 miles each way), so it might not be entirely accurate. Nonetheless, speed obviously has a pretty major impact on highway mileage.

    Is slowing down worth the trouble?

    Sure, slowing down saves gas. But in an economic sense, was it worth it? Let’s take a look at the numbers… For simplicity, I’ll base my calculations on a 100 mile trip and $4/gallon gas — you can easily extrapolate from there.

    At 75 mph… 100 miles would take 1:20, and would consume 4 gallons of gas.

    At 65 mph… 100 miles would take 1:32, and would consume 3.125 gallons of gas.

    So… I’d spend an extra 12 minutes on the road, but would save 0.875 gallons of gas at an estimated cost of $3.50. Extrapolating this out to an hourly rate, I could “earn” $17.50 per hour (tax free!) of extra driving, not to mention the environmental benefits of burning less fuel. Not bad considering I was relaxing and listening to podcasts the entire time.

    While your mileage may (quite literally!) vary depending on your vehicle of choice, driving style, etc., the bottom line here is that you can definitely save a few bucks (and be a bit greener) by slowing down.

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