Thursday, October 16, 2008

Madd Money: From "Saving Silver" to "Going Orange"

In the past several months, I have undertaken a different method of simplifying and organizing both mine and our family's finances. There are a lot of things that we want to do, and it seems there's never really enough to do everything we want to. That's certainly true if we react to everything in the classic 'I want it and I want it *now*!" mode of thinking we as a culture have grown accustomed to.

What makes things even more interesting is the line in the sand I and my family have drawn that says "We do NOT borrow money". Well, OK, that "line" is more of a hypothetical wish, in the sense that if I were to say we were absolutists on that front, our credit card would not exist and we would use a Debit Card for every single transaction... yet we don't, at least not yet.

Still, since I am "tremendously reluctant" to pull out a credit card to purchase things I don't know for a fact that I have cash for, I have taken on a number of interesting processes to help me get into a mode of mentally and physically saving for things I want to get. For the better part of 2008, I made a goal to save money so that I could get dance outfits made for Karina and Amber (see my previous blog entries for the Labor Day Pow Wow to see what a professional outfit designer can do that I can't do as well (LOL!) ). Every pay period, I was allocated a small amount of money that is referred to as "Blow Money". Both Christina and I have these amounts set aside for ourselves. These are monies that we can use to do just about anything, no questions asked. Everything else requires a budget line item or a family meeting to discuss and declare. Blow money is exempt from that process. To that end, I decided to dedicate a large portion of my blow money to creating the girls outfits. The question was, how could I help motivate myself to save that money?

I came up with the following. Every pay day, I went down to the post office just down the street where I worked, and I purchased a single postage stamp with a $20 bill. in return, I received a single stamp, change to round up to a dollar, and then 19 silver dollar coins. Each $20 bill was used to purchase one stamp. As you might guess, each pay period I came home with a substantial number of Susan B Anthony, Sacajawea and President dollar coins. They all went into the clear piggy bank that I had. Once the bank filled, I could progress on contracting the work to make the outfits. I started this process January 15, 2008 and ended it August 31, 2008. The net result was that I put away a lot of silver dollars. The interesting part of the experiment was that I discovered just how hard it is to spend that money once it's been accumulated in that manner (let's face it, you're not going to go grocery shopping with a pocket full of dollar coins; the embarrassment of pulling out so many of them at the check-out line is enough to give most people plenty of pause... and for that very reason, it worked perfectly :) ). Ultimately redeeming the coins wasn't that difficult, though it did require that I wrap the coins, put our account number on them, and then deposit them and wait three days for the deposits to be verified.

So on the whole, the experiment was a success, with two caveats. The first is that, as stated, the very act of getting that many dollar coins over so many months made me very reluctant to spend them, and also made for a hassle when it was time to actually deposit them en mass. The second is that, while the coins were sitting in my piggy bank, they collected no interest whatsoever. Now granted, the total amount of interest we're talking about here, and in the time frame, amounts to about what a Happy Meal would cost. We're not talking about major amounts of money. Still, I wanted to get at least a *little* return on the money I was squirreling away.

Enter ING DIRECT. They make it very easy to have the equivalent of my "dollar bank", and set things up in such a way that you can categorize how you want to order your funds, what goals you want to set, and their set-up is such that there is a time-delay before you can get to your funds; any deposits that are placed into an ING DIRECT Orange savings account are not available for witdrawal for five days. For my purposes, since this is an account that is set up for middle term savings goals (i.e. the item in question is something that will be purchased in a time frame ranging from several months to five years) I liked the idea of an account that required a little amount of time for you to process transactions. For me, the necessary "cooling off" period allows me to reflect and think about what I ultimately want to do. Since I almost never buy anything on a whim, the five days doesn't bother me. Add to the fact that ING DIRECT accounts pay interest comparable to many Certificates of Deposit, and, well, what's not to like?

Setting up the account was quick, naming it for a specific purpose is easy, and the interface to transfer funds is very simple to use. What's more, I just like being able to log into a bank and see an account called "Blow Money" :).

So for anyone out there giving consideration to setting up a high yield savings account, don't necessarily want to cut ties with their current bank, and if you find that you don't mind placing a little bit of "are you sure?" logic into the equation, then I wholeheartedly recommend "Going Orange". If you can't handle the built in delay in the system, well, I can honestly say that my "Saving Silver" approach proved to be pretty darned effective, too (LOL!).

1 comment:

Beefche said...

Oh, yes, indeed. I agree that online savings accounts are so much better than what I've been able to find in my neighborhood.

I use Emigrant Direct--I found that they offer a higher APY than some of the others. They, too, have the delay if you manually transfer money from your checking (my checking account is with a local bank--not with Emigrant) to savings.

What I have found to be extremely helpful is to have money directly taken from my paycheck and deposited into my savings account. Each pay period, a set amount is deposited into savings and there is no delay and I don't have to think about it. Was that Dave Ramsey who suggested that you pay yourself first? Worked for me.