My Family’s Money

On Friday, January 23 I was informed by my bank that my online savings account had been compromised.  Apparently, on January 20 there were log ins from two different locations and this triggered a fraud protection mechanism that my bank has in place to ensure that my money is secure and baddies cannot get access to my funds.

I, however, was not aware of this when at around 9 AM I attempted to log in to my account only to be accosted by the following ambiguous announcement:

Unable to verify identity

Being at work, I was forced to wait until noon to call the customer service number to figure out what the heck was going on. During the call I was asked 50 million verification questions (some of which I couldn’t answer! – like the name of my employer listed on the account).  Having to answer so many questions did make me feel at ease – I pretty much know for a fact that since I couldn’t even answer some of them somebody who wasn’t me had no chance of answering them.

After the fraud representative was sufficiently satisfied with the fact that I was the actual owner of the account, she filled me in on the two log in issue that froze my account.  I do sometimes log in at work and at home (even on the same day) so this was my initial thought about what might have happened.  The rep seemed shocked that I couldn’t remember for certain if this was the case.  “It was only a few days ago,” she said.  Here incredulity cut through the receiver like a dagger aimed at my masculinity.  Luckily, I don’t care that I don’t remember stuff like and the blade bounced safely into oblivion.

To try and rattle my memory she asked me who my internet providers where at the locations that I normally log in at.  “Umm,” I searched frantically in my mind for knowledge I didn’t have.  “I couldn’t tell you who my internet provider at work is.”  My calmness and composure seemed to annoy the rep like honey on the face of a hiker buried up to his neck in sand, an ant hill just a few feet away.  She was well trained, firing back by asking the same question a dozen times with only slight variation in an equally calm and professional tone.

After we danced back and forth for 5 minutes about how I was brain dead for not being able to remember what happened on Tuesday I put an end to the Spanish Inquisition, which I didn’t expect (but who does)  and for which I was grateful for.  “So let’s say that my account was compromised, what do I do?”

She outlined several steps that can be summed up as the following: go to your local branch, they will sort this out for you.  I obeyed and went into my banks brick and mortar establishment.  There, through my ability to look at computer screens and read information, came to understand that the bank had also locked all debits to my accounts made electronically.  Words in all CAPS are easy to read from 4 feet.  This also made me feel safe – my money was in good hands.

The nice man behind the desk opened a new account for me, kept enough cash in my old accounts to handle an outstanding check, and was generally friendly and amenable.  Within 20 minutes the vast majority of my cash was in a new, uncompromised checking account.

My Online Banking Takeaway

It is very useful that a bank puts a serious kibosh on fund transfers once they think an account has been compromised.  I think this is fantastic and it makes me feel like my money is safe.

Remembering things about your life is harder than I thought, especially when I don’t really think too much about odd details.

It is totally time to get a new online savings account.  My banks rates were already pretty crappy (1.5% APY) and now that I don’t have the account anymore I need to find another place for ~$28,000 in cash.

I am completely impervious and highly in tune to the veiled barbs of customer service reps.  This skill has to be useful in some type of money making sort of way.  Maybe I could become some sort of consultant or something.

~o0o~

I wrote a few notes on Twitter documenting my experience.

Our financial lives can be summed up by a very simple equation:

Money Earned – Money Spent = Money Saved + Money Given

Everything about personal finance boils down to this.  All the talk about debt, credit cards, 401(k)s, IRAs, investing, stocks, bonds, asset allocation, mutual funds, frugality, simple living, DIY, budgeting, high-yield savings accounts, and additional income has as its goal the enlargement of this sum.  It is an unavoidable necessity.

Some of these topics attempt to generate more money - like investing – while others seek to reduce expenses - like frugality.  I think both are incredibly useful, but it is my belief that those who can reduce the amount of money that they spend have a long term advantage over those that simply focus on earning more and more money.

A case in point: eating.  Once you learn to eat on under $2  a day (reduce expenses) you experience a cost reduction that can be life long.  A reduction of food costs from $4 to $2 a day will reduce the lifetime expense on food for a 26 year old male by $54,020.   I would need to earn an average of $1350.50 more over each year of my working life (up to age 66) to make up the difference.

Alternatively,  if I were to cut the costs from $4 to $2 a day and I were to earn that additional $1350.50 each year I would see an net swing in my available cash of $2810.50 (the $1460 saved on food expenses plus the $1350.50 earned).  Over a 40 year period of doing this I would see a nice tidy sum of $218,272.73 – assume a 3% rate of return per year. This sum would feed 299 people for a single year!  Obviously earning more and cutting costs is much, much better than just doing one or the other.

To me, budgeting is a way to give yourself this “both, and” perspective that is so important to the financial equation of our lives.  We need to focus on both our income and our expenses so that we can maximize savings and the amount of things we can do to improve the collective condition of humanity.

Budgets only really matter because they help us maximize the use of our money.  Budgeting for budgeting’s sake will never satisfy you or make tracking your income and expenses anything other than a chore that you want to avoid.  It is only when we see budgeting as a tool that helps us do something great will we ever take budgeting seriously.

Increasing earnings and reducing spending is good for you and good for others.  This is a mighty bold claim – but I really, really believe it.   A life that primarily seeks the earn more to spend more (consumerism) is an empty and shallow life by any serious/coherent worldview.  Instead, we should view our ability to create wealth for adding little-to-no objective value to the universe as a great privileged by which we can add real, objective value to the universe by alleviating suffering and promoting social justice.

Budgets, though simple and extremely personal, can have a large impact on the common good.  Budgeting is not the only financial tool that can be used to acheive the ends of greater savings and greater giving, but it is a useful tool for many people who want to become much more concious of their financial habits.

Becoming a father has highlighted one simple fact for me – time is limited.  With this in mind, I want to use my time on My Family’s Money as best as I possibly can.

I have been thinking about different things I would like to write about here and have come up with few topics/ideas  that really get me excited, the only problem is that I really don’t have the time to do them all.  If I tried to I would end up doing none of them very well and I don’t want to spend lots of time doing something poorly.  Maybe if I focus on one thing I can do it and do it well.  So, I have come to the conclusion that I want to spend the next several weeks working on a series of posts either on online savings accounts or budgeting.

And I want you, people who read this blog, to help me decide.

If I were to do a series on online savings accounts I would get a list of 5 or 6 banks that offer high yield (at least 2% APY in today’s interest rate market) online savings account.  I would then try to find out which bank provides the best service using a wide range of factors.  Right now, I am developing a 9 component, 20 point rating system that will objectively rate these banks against each other.  This fits in well with my goal to earn $1000 in interest income this year and could be useful to others as well.

To be totally honest, I also hope to make a few bucks rating these online savings accounts.  If a bank has an affiliate program I plan on joining it so if people find my site and like my analysis of the bank and decide to set up an account I will get a little something for my efforts.

If I were to do a series on budgeting I would essentially explain how I set up my budgeting system.  My plan would be to create a series of videos to go along with the posts so that I could show you how I do things in addition to telling you.  I really like the idea of making videos because I am a teacher at heart and love instructing – but my first few attempts at recording myself were much, much harder than I originally anticipated.

A series on budgeting would largely help those who want to learn some basic spreadsheet skills (like how to use certain functions, make spreadsheets ‘talk’ to each other, make use of different sheets to keep screens clean, etc.) and how I use these to run my family’s budget.  This might have a less broad appeal but might be extremely helpful to some individuals.

So, if you had to pick which a series for me to write, would you have me write a series rating online savings accounts or make videos explaining spreadsheet budgeting?  Let me know in the comments and the poll.

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Setting relevant and meaningful short term goals is an important thing for me and my family.  They help remind us of our longer term goals (not working for food) and give us a roadmap to getting there.

This year I want to focus on avoiding debt in graduate school while positioning my family to have a steady stream of income once my three years in school are over.  For this I need to get two things – cash and ‘passive’ income.

We need cash to cover the tuition costs and other major school related expense (like books and housing).  A steady stream of income will help me be able to focus on studying instead of working to eat.  I like to eat and do not want to give that up.

Here are my family’s 6 financial goals for 2009:

Save $8,000 for graduate school.  This should cover tuition and books for at least a year, giving us a head start on the additional $16,000 that we need for the two years after that.  Getting through school without having $16,000 worth of debt is something that my wife and I are very serious about, so saving this cash is really going to help us position ourselves well to accomplish this bigger goal.

Earn $9,200 income online.  I have set some pretty aggressive goals for earning money on the internet for 2009.  I am planning on a gradual ramp up of revenue throughout the year with a year end monthly income goal of $1700.  I think that this is a very aggressive goal for me, but I think it is reasonable and achievable if I put in the effort.

Earn at least $1,000 in interest income.  With all the cash I have on hand I really need to find an optimal strategy for maximizing the return on my cash while also keeping it relatively liquid.  Earning $1,000 in an interest rate environment of 3% annual percentage yield will require that I average about $33,000 in interest bearing accounts for the year.  This is definitely doable, but by making it a goal I’m sure that it is going to get some of my attention.

Learn about investing, particularly dividend investing.  Growth investing is all fine and dandy, but I want to generate enough ‘passive’ income to be able to focus my life’s energy on accomplishing what I want to accomplish more than making enough money to feed my family.  Dividend investing is certainly one way to accomplish this.  Since I don’t know much of anything about investing, it is time I get educated.

Learn about real estate investing, particularly land lording.  Dividend investing is one way to reach financial independence – real estate investing is another.  Real estate investing can be much, much riskier, has the potential of much greater return, and can take a lot more time to manage than dividend investing.  Right now I’m not sure which investment vehicle I should get into first, but I imagine that at some point in time I will be getting into both of them before the day I die.  It just seems prudent to start my researching now.

Expand my do-it-yourself skills.  I do not have a very deep or broad skill set, which means I have to pay for a lot of things that I should be able to do myself.  This comes from years of being lazy and ignoring the advice of my father.  This year I plan to do as many things as I can myself, with a few ”special projects” thrown in to help expand my set of skills.

By the end of 2009 I hope to be in a very strong financial position with enough passive income and cash on hand to be able to focus on school and avoid any debt.