Tag Archives: savings

Using ING as our primary bank

INGYesterday, I wrote about our money management dilemma: when we keep extra money in our checking account, we’re more likely to overspend, but without a cushion we’re vulnerable to overdraft fees. We only keep enough money in checking to cover our living expenses, so I’d like a safety net to avoid fees if I make a mistake.

We considered opening an additional savings account with our primary bank to use as overdraft protection. Unfortunately, our brick and mortar bank requires a minimum savings balance that’s higher than I want to keep there considering the low interest rate.

Instead, we’re switching to ING Direct as our primary checking account. My ING checking account is attached to a line of credit that serves as overdraft protection. If I miscalculate and overdraft my account, money will automatically be transferred from my line of credit to cover it. I’ll be charged a low interest rate on the money I’m borrowing until I replace it.

Because my emergency fund is linked to my ING checking account, I’ll be able to immediately transfer money into my checking account to avoid paying interest. There are no fees for the transfer, just the interest rate until the money is paid back. Since it’s highly unlikely that I would overdraft my account at all, let alone more than a few dollars, this is a great solution for us.

Most of our bills are paid electronically, so an electronic checking account won’t cause a problem. The only problem is our rent. Our leasing agent requires a paper check, and we often don’t have enough in our checking account to pay it until my husband is paid on the last day of the month, but it takes 5-7 days to mail a check.

Our solution is simple: the rent comes out of my husband’s paycheck every month. When my husband updated his direct deposit information, he set it up so that the rent money will go into our brick and mortar bank and the rest of his paycheck will go into ING. That way we can write a check and pay the rent from our brick and mortar bank on the day he’s paid without having to move money around or wait on a paper check to be mailed.

I’ve written before about my hesitance to switch to ING for primary checking, but after some research I discovered a few things:

  • There is nothing a brick and mortar bank can do that ING can’t do. The only difference is the delay in sending checks, but it’s completely free to do so.
  • Their customer service hours are better than most banks. Representatives are available 8 a.m. to 8 p.m., 7 days a week. Based on my own experience, they’re always very helpful and courteous.
  • We’ll earn a little interest on our checking account. It’s only 0.25%, but hey, that’s better than 0%.
  • ING is FDIC insured, so our money is safe.
  • There are no fees for cash withdrawals at AllPoint ATMs.

I updated our account information for all of the bills that are automatically drafted from our checking, and changed our account information for direct deposit of our paychecks. I moved most of the money over to ING, and once everything clears, I’ll move the rest. I’ll let you know how it goes!

Interested in opening an ING account? Use one of my affiliate links and make an initial deposit of $250 or more, and you’ll get a $25 bonus! I’ll get a $10 kickback for telling you about it. :)

Note: This bonus also applies to savings accounts. ING Direct has some of the best savings accounts around with no minimum balance, an interest rate of 1.3%, and easy account management that allows you to open several separate sub-accounts for separate savings goals.

Open an ING account

Open an ING account

Open an ING account

Open an ING account

Open an ING account

These referral links are good for only one account, so if the first link doesn’t work, move on to the next one or contact me and I’ll send you a valid link!

Should you keep a cushion in your checking account?

nickels and dimesA little over a year ago, we moved most of our money into our savings account. We didn’t want to keep very much money in our checking aside from what we need to cover our monthly expenses.

I decided to leave a $1,000 cushion in our checking account. The idea was that $1,000 would serve as the zero mark. It would just sit in the account, unspent, serving as a cushion so we’d never overdraw our account in the event of a miscalculation.

Fast forward 14 months. Each month we went just a little over budget. $50 one month, $25 the next month, $100 the month after that. The motivation to stay completely on target wasn’t as strong because there was extra money there. Now, our $1,000 cushion is gone. Even though we have a pretty health savings account, it feels a lot like living paycheck to paycheck.

I’ve considered putting a little money aside each month in the budget to rebuild our cushion, but here’s the thing: I don’t know if I want a cushion.

Even though I don’t like the feeling of an empty checking account at the end of the month, we’re less tempted to overspend a little here and a little there when we’re cutting it so close. But it still feels like living on the edge. One error and we could be hit with overdraft fees (our bank hasn’t yet allowed opt-in and opt-out for overdrafts like Chase and Bank of America).

I feel like we’re stuck between two crappy choices: the risk of overspending vs. the risk of overdrafting.

I’ve decided to open a new savings account with my bank (our main savings is with ING) and put $100 or $200 in it to reduce the risk of steep charges in the even of a miscalculation. It’s unlikely since I watch our spending so closely, but I don’t like worrying about it.

The thing is, our dwindling cushion wasn’t due to error. It was due to poor judgment. As long as we had “extra” money in our account, we were more likely to make poor choices. As I said last week, we don’t make big purchases, but we nickel and dime accounts to death.

How do you handle this dilemma? Do you keep a cushion in your checking account, or do you move all of your extra money to savings to protect it?

Photo by heypaul

Necessity is the mother of frugality

money jarTony will finish graduate school in May 2010, but after that he’ll have a semester of student teaching before he’s certified to teach. Right now he receives a stipend for teaching undergraduate classes, which he won’t receive while student teaching. Unfortunately, this means we’ll have to live on my income alone for about 7 months. The student teaching program is full time, and we’re hoping he’ll be able to work nights and weekends, but I don’t want to count on that considering the trouble he’s had searching for part time jobs in the past.

We’re also preparing ourselves for after the move. I’ve done a little research, and in the area where we’re moving, it looks like we can expect Tony to start somewhere between $32,000 and $35,000 as a high school teacher (according to what I read, he’ll be paid slightly more than a normal first year teacher because of his master’s degree and experience). Of course, this number is just an estimate. If you have any information about what starting teachers in the Indianapolis metro area make, by all means please pass it along!

I will continue to generate freelance income, but I won’t be working full time since we’re planning to start a family shortly after Tony finds a teaching job. Freelancing is feast or famine, so we don’t want to factor my income into our normal budget. That means we need to start planning now for a reduced income with a baby.

On top of all this, our savings goal has increased since we’d like to buy a house sooner rather than later.

To help us reach these goals, we’ve decided to reduce our monthly spending by about 5% and increase our total monthly savings amount by 25%. Put simply, that means we’re cutting about $150 from our monthly spending and adding it to our monthly savings.

I spent some time pouring over the budget. I determined that if we continue living on a cash budget, cut our weekly spending by $25 a week and make some minor adjustments in other areas, this is totally doable. If we hadn’t spent the summer on such a tight budget, I never would have thought this was possible. I thought we were saving as much as we possibly could, but after a summer of tight expenses, instead of feeling like we need more, I only see where we can cut.

In real terms, this means we’re cutting our grocery budget from $50-$60 a week to $40-$50. Our “shopping” budget, which covers household expenses like cleaning products and other miscellaneous items, is being cut from $20 per week to $15.

As we move into fall, we’ll increase our additional savings by another $50 when our electric bill drops from $100+ during the summer to $40-$60 a month during the cool winter months.

Over the next 8 months, this will increase our total savings by about $1500. More importantly, it will better prepare us for next summer and fall when we lose 1/3 of our total income. It will also make it easier for us to transition into a single income home in spring 2011 when I’m no longer working full time.

My point is this: if you’re looking ahead to a lower income, now is the time to make cuts. It’s always easier to transition slowly than it is to jump into the cold water. Don’t wait until you lose your income. Learn to live on less now so you can bank the extra money for the future.

Photo by jayd

Should we pay off all debt before buying a home?


We’ve been doing some big planning again for the future. That’s always dangerous. :) But lately, we’ve been talking about a timeline for becoming homeowners.

The closer Tony gets to finishing school (about 17 months now), the more confident we feel that we want to live near family. We’re pretty set on starting our own family shortly after Tony finds a teaching job, and we don’t want to raise our kids more than a couple hours away from their grandparents, aunts and uncles.

Now that we’re pretty sure we know where we want to settle down, we’ve been bitten by the homeowner bug. We want a backyard where the dog can run, and we want more space of our own for our family. Our original plan was to rent a house when we move. Then I started looking at the cost of rent for even small houses.

I don’t know how much the market will change in the next couple years, but as of right now with our stellar credit history and low housing costs in the Midwest, a small, older home in Indiana would likely yield a lower mortgage payment than we’d pay to rent a comparable home, especially if we can save a chunk of change for a down payment. It just doesn’t make sense to me for us to pay more in rent than we would if we owned a home, especially since we don’t want to move again for a long time. We’ve spent the last 6 years of our lives moving way too frequently. We’re ready to just settle down and stay put.

The only problem is that we won’t be anywhere near paying off our student loan debt. In the past I had lofty dreams about paying down our student loans before even thinking about buying a home. But now I’m just not so sure.

Currently, our only remaining debt is $60,000 in student loans. It’s overwhelming, and when I think about trying to pay that down, save for a house, and survive all on one teacher’s salary, it feels impossible.

The plan was to move into an apartment, pay down that debt, and then start saving for a down payment for a home after that. I’m just concerned that on that plan we’ll be 35 before we can start saving for a home.

So we’ve been talking about an alternative plan: continuing to save as much money as we can, renting a tiny apartment for a year or so after we move to save even more money for a down payment, and then buying a home. Then we’ll work toward paying off student loan debt from there.

Even the tiniest apartment will be doable for just a year while we’re working toward the goal of home ownership. The longest amount of time we’d have to live there with a baby would be 3 months (and that’s under the unlikely circumstance that I got pregnant immediately after we start trying). However, I wouldn’t want to be cramped like that for the long term while we paid off student loan debt and saved for a house for 5+ years.

Right now we’re paying a little more than the minimum amount on the student loan debt, and that’s what we’d continue to pay while saving for a house. Now that we’re out of credit card debt, I feel okay about paying off the student loan debt slowly while we’re getting started. It’s going to take us so much time to pay off, I just don’t want to wait years to start working toward other goals.

What do you think?

A little symbol to remind us of our goals

Photo by benklemm

Just last week I wrote about the importance of dreaming big. Sometimes the day-to-day reality of living frugally can be tough. Having big goals to remind you why you decided to scrimp and save can make it easier. By keeping my eye on the prize, I’m reminded of why the daily sacrifices are so worth it.

It’s been almost a month since we cut back to a limited cash budget for the summer. Even though we’ve been living frugally for almost two years, this is more extreme than anything we’ve ever done. I’ve been reminding myself of our big goals more frequently lately to stay on track as it’s starting to get a little tougher.

One of our biggest goals is an extended trip to Europe after my husband finishes grad school in a year and a half. We’re trying to save enough cash for two frugal months in Europe in addition to money for moving and an emergency fund. This is a huge goal, which is part of the reason we’re cutting back even more than before.

Last week, I received a tangible reminder to keep with me. My lovely friend Kacie at Sense to Save sent me about 15 US dollars worth of euros that her husband collected in an overseas trip. Her bank wouldn’t let her convert the coins, so she sent them over to me in the hopes that we’ll be able to use them on our trip. (Thanks, Kacie!)

These little coins have actually been incredibly helpful. It seems silly, but having something tangible to keep the trip on our minds is exciting! It motivates me to push that much harder toward our goal. I look at those little coins, and I’m so excited about the possibility of this trip that the daily extras don’t seem so important anymore. They serve as a symbol for why we’re working so hard.

If you have a big goal you’re working toward, why not see if a tangible reminder can help keep you on track? If you’re saving for a new car, maybe you could pick up an air freshener and save it until you can hang it from your new rear view mirror. If you’re saving for a new house, maybe pick up a piece of art at a yard sale or a welcome mat for when you move in.

Having a tangible symbol of your goals not only feels like a step toward accomplishing them, but it also serves as a reminder of why you’re working so hard.

Have you ever tried this? Leave a comment if you have an idea!

The importance of dreaming big

frugal goals
Photo by martie

I’m the first to tell you that frugality is a real struggle sometimes. No matter how committed I am to this lifestyle, no matter how appreciative I am of the security and peace of mind it brings us, I still have weak moments when I look at what other people have and want.

I want to own a pretty little house with a huge fenced-in backyard and a cozy fireplace.

I want to travel every other month and see the world.

I sometimes even want to buy big ticket items that we don’t need just for the luxury, like a big screen TV or new furniture or even a second car.

But the hardest part isn’t the big stuff. I can always easily remind myself why we need to wait for those things. I remember what debt feels like, and I don’t want to owe a furniture store or a credit card company ever again.

The hardest part is not spending little amounts every day. Sometimes I find myself wishing I could spend $5 on a frou frou coffee drink from Starbucks or $15 on a book or $30 on a restaurant meal.

Don’t get me wrong, we give in to those urges every now and then. But we can’t give in every time I want to or we’d never make any progress. We’d nickel and dime ourselves right out of our savings.

When I find myself struggling to say no to the little things, I remind myself of our big dreams. Our trip to Europe, the house we want, the family we plan to start in the next couple years. When I think about those big dreams, and how every penny is bringing us closer to achieving them, it’s much easier to resist the temptation to spend a little here and a little there.

When I think about our big dreams, suddenly buying a frou frou coffee drink isn’t nearly as important. I can live without that little stuff if it means we’ll have the big stuff sooner.

How do you keep yourself going when frugality gets tough?

Life before our emergency fund

Every once in a while I’m struck by the difference between life now and life before we started living frugally. Back when we made more money than we do now, but we were always strapped for cash. Back when a car problem or unexpected bill could completely wipe us out and then some.

It hasn’t been easy to keep it up. Like any frugal family, we struggle constantly to avoid falling into old habits. The more we save, the more comfortable we become. We start to feel invincible. After all, with several thousand dollars in the bank, we can weather most unexpected expenses without stress. We start to feel the itch to spend more.

I have to remind myself that even though we may have more money in the bank than we’ve ever had, that money is what stands between us and disaster. The more money we’re able to save, the safer we become. Sure, we could pay our car insurance deductible with no problem. We could pay our entire health insurance deductible for the year without breaking a sweat if it was necessary. But what if I lost my job? What if I couldn’t work anymore? We have enough saved to make it a couple months, but the thought of emptying the savings account we’ve worked so hard to build is terrifying. Then what? When that money is gone, what do we do next?

More importantly, though, I never want to spend just because we can. Spending just because the money is there is how people with twice our income remain constantly broke. If we can keep saving, keep living frugally no matter how much we have in the bank or how much we make in a year, then we’ll always be one step ahead of ourselves. We’ll be capable of dealing with any financial disaster, and we’ll never be broke.

It’s amazing what an emergency fund can do for your peace of mind.

New to frugality? What to do first

Frugality is overwhelming in the beginning. I remember reading blogs from frugal veterans who made it sound easy, but I was terrified. Cutting groceries down to $35 a week, zero-based budgeting, coupon clipping, drug storing? It may have been easy for them, but I didn’t know where to begin.

Take a deep breath. Remind yourself that frugality is a major life change. It’s not going to happen overnight. The best way to get started is to jump in, and don’t try to change your life too drastically in the beginning. Frugality is a gradual change, one that you’ll hopefully be able to maintain long term. It’s okay to start with baby steps.

Here’s how to get started:

Figure out where your money is going.

Before you can cut expenses or create a budget, you need to know what you’re spending and where. Link your bank accounts to Mint.com, and spend normally for a couple weeks. This step was incredibly eye-opening for us in the beginning, and we immediately saw some areas where we could easily cut back.

Create a budget.

Next it’s time to face the dreaded b-word. Don’t be scared, though. Budgeting is actually empowering, especially in the beginning. Don’t try to deprive yourself or make drastic changes at first. Just create a zero-based budget to ensure that you’re not spending more than your income. I use Mint.com to set limits on our spending, and then I track it in real time. Every dollar has a purpose, and anything left over goes to savings or debt. You can always reduce your expenses later. The most important thing in the beginning is getting used to tracking and following your budget.

Open a savings account.

Even if you’re deep in debt and struggling to make ends meet, find a way to start saving something. You can always increase the amount later. What’s important now is establishing the habit. Even if all you can spare is $25 or $50 a month, open an ING savings account separate from your checking and start putting a little money away.

Learn to entertain yourself without spending money.

The first step to having fun without spending money is learning to love your library. If you don’t have a library card yet, go get one right now and start borrowing books and movies for free. Check out a cookbook first. If you’re like my husband and me, eating out is probably one of your favorite date night activities. Learn to have fun cooking for yourselves, and you’ll drastically cut your food budget.

Create menu plans & grocery lists.

When you first start cooking at home, it’s tempting to go overboard at the grocery store. You don’t have to cut your grocery spending to $35 a week to make the most of your shopping trips, though. Find a menu planning strategy that works for you, plan your meals with the grocery ads in front of you, and start buying meats and staples in bulk. You’ll cut your grocery expenses without affecting the quality of food you eat.

It’s okay if you makes some frugal mistakes in the beginning. Learn at your own pace. As you master these basic frugal habits, you’ll gradually find yourself learning new ways to save even more money. It’s an ongoing process for everyone, even the frugal masters.

As long as you’re committed to saving money and reducing debt little by little, your life will continue to improve. Remember, frugality is about improving your quality of life, not just cutting your expenses.

We’re making some serious progress

If you’re following my progress through my progress meters in the sidebar, you may have noticed some changes over the weekend.

Our emergency fund is now over 75% complete! Woo hoo! We’re getting so close! Our Europe fund doesn’t appear to have changed, but it did. I increased our savings goal for Europe to $10,000 since we’re now hoping to take an extended trip.

So how did we make such a sudden jump in our savings? We decided to move the money from our “summer savings” account into our emergency and Europe funds early.

Originally, our plan was to keep the money we’d saved for the summer in its own account until we made it through our no spend summer without needing extra money. Now that it looks like our cash budget will get us through the summer on our tighter budget, I kept looking at that money like it was “free” money. But “free” money is dangerous for me. When I have free money, I start thinking about all the stupid things I can buy with it.

So I went ahead and moved half of it into our emergency fund and half into our Europe fund. It’s still there if we get into trouble later in the summer, but I’ll be a lot more hesitant to pull money from our emergency fund than I would have been with the summer savings account.

Basically, I don’t want to make it easy for us to fail. As long as that safety net was there, the stakes weren’t quite as high for our cash-only budget. But now that I’ve gotten used to a 75% complete emergency fund, I’m going to work extra hard to keep it that way.

Bottom line: the easiest way to save money is to do just that — save it. When money is floating around without a purpose, it’s too tempting to spend it. When you assign it to a specific savings purpose, you’ll be a lot more likely to protect it.

Do you keep extra money in your checking account? If so, I recommend that you move it to a savings account, set a purpose for it, and keep only the money you need to live in your checking account.