Money Blue Book

Due to my desire to go completely paperless and to streamline my finances, I eliminated paper billing from my life at the start of last year. Of course there are still a few pesky old fashioned companies that insist on sending me paper bills through snail mail, but the vast majority have complied and converted my monthly statements into E-billing. I’ve also taken it one step further by setting up and activating automatic online debit payments for all of my bank, credit card, and home utility accounts. Since I switched to online billing and automatic debit payments, it’s been much easier for me to manage my finances. My primary Citibank checking account is now linked up with all of the paid services that I use, allowing me to easily pay home utility bills and credit cards at the touch of a mouse click. I view my account balances from one convenient page using an online account consolidator program like Fidelity Full View, which is powered by Yodlee. Most services provide the automatic debit option for free, as they should, since it allows companies to save money on payment handling expenses.

Your Payments May Be On Autopilot, But Don’t Lose Track Of Recurring Charges

The convenience of automatic paperless bill pay is not without its hazards and pitfalls as I soon learned. Automatic bill pay is extremely easy to set up but it can be tricky to maintain. I’ll tell you why. Yes, you no longer have to deal with tracking credit card due dates and bothering with the hassle of licking stamps and remembering to mail off payment checks, but you have to contend with the danger of being lured into a false sense of security and lax oversight. Despite its automated nature, mistakes do happen. If you don’t keep an eye on your account activity periodically, you may still find yourself being penalized with non sufficient fund fees or interest charges due to overdrafts in your linked checking account or overdue bill statements.

Once automatic payments have been activated, keep in mind that they will continue nonstop like clockwork until you stop them. In the event you need to temporarily halt an automatic bill payment from going through, the first thing you need to do is call the company to put an end to the order prior to the execution date. The next step is to ensure that you still have sufficient funds in your linked checking account to satisfy the bill amount in the event the payment still goes through. The unintended payment can ultimately be reversed, but usually there is a slight lag time before prior authorized automation can be halted.

Now when you set up automatic debit payments for the first time, and especially for credit cards in particular, it may take up to 1-2 months for the automatic payments to kick in. Remember to continue making regular payments until you receive confirmation that automation has begun (usually a notation on your online account or a paper confirmation sent to you). I made that mistake the first time I started and ended up missing my payment due date. Luckily Citibank was kind enough to drop the finance charges due to my good past payment history.

Be Selective Of Which Charges and Bill Payments You Decide To Automate

The best bills and charges to automate are those that occur monthly at around the same time and involve a fixed amount. Such fixed amounts present less opportunity for contention, and are thus less error prone. Examples of fixed expense bills include monthly health and auto insurance premiums, monthly gym fees, cable TV, satellite TV, and internet service. Mistakes such as double billing do occasionally occur with fixed charges, although they are usually rare.

The bills that I don’t particularly advise automating are those that fluctuate drastically or may contain charges that you ought to verify first before paying, such as credit cards and cell phone charges. My own credit card statement balances fluctuate wildly. Sometimes a statement may be $200 and the next month it’ll spike up to $900 depending on usage. I recommend holding off on automatic debit payments for your credit cards until you get the hang of monitoring your account regularly online and get accustomed to regulating your available bank account balance to satisfy incoming charges.

Personally, I automate everything, including payments for variable monthly expenses such as credit card bills and cell phone charges. In my case, I always make sure I keep an abundant amount in my checking account to pay for all monthly recurring charges with extra room for the unexpected. I also make a concerted effort to keep tabs on fluctuating bills by reviewing them immediately when the statements become available online. Usually my credit card accounts in particular will send me an email reminder when the statements are ready for viewing. Thus, although you can conveniently set your account payables to autopilot, you still shouldn’t fall asleep completely at the wheel.

I left the traditional attorney job behind a few years ago and now do finance and legal work on a contractual basis. I’ve been doing this for more than a year now and so far it’s been enjoyable, although not without its ups and downs. But then they don’t call it a job for nothing. I probably can go on and on about how miserable I was working as an attorney but I think I’ll save that for another day. Suffice to say, the legal field is overly saturated and the profession simply isn’t the lucrative and inspiring field it used to be. I think most attorneys today, including myself would be wary about recommending law school to those contemplating a field of study. I am constantly trying to tell younger friends to bypass law school and do something more worthwhile and meaningful with their lives, but they never seem to listen. They’ll know what I mean when they get out.

A Change Of Profession Is What I Needed

So here I am in my current job, working on a contractual basis in a field somewhat related to my area of study. The job security and rapid advancement opportunities may be gone, but my sanity and happiness have flourished ten fold. Working on a contractual basis, I now have the opportunity and time to develop and improve my various side ventures – things I’m quite passionate about. Of course, perhaps one day I will tire and choose to get back to the nitty gritty legal practice. Tax law and small business consulting maybe.

All in all, it was definitely worth the transition, although I do look back with tiny tinges of regret and musings of – what if? What if I had done something different with my life? What would be my dream job? I’m sure we’ve all pondered these questions at some point in our lives. Well here’s a list of a few fantasy jobs I wanted to have during different times in my life, starting with the most recent and working my way into childhood:

1. Sports Anchor – I currently love watching and following spectator sports. I love playing fantasy football and I take it seriously, spending a lot of time researching and tracking player and team performance statistics. My dream job would be to become a sports commentator for a major network like ESPN or even for a local television station. Everytime I watch Comcast SportsNet I always wish I was sitting on the sofa in front of the camera sharing my thoughts and predictions about my favorite sports teams. I have so much to say but no group to call an audience. My girlfriend is not into sports although I think she enjoys watching me get all excited when I talk about how my favorite teams are doing.
2. Investigative News Reporter – I think I see a trend here. I really should have gone into journalism as I love to write and speak my mind. I’ve always envisioned myself walking the news beat exposing bad business practices, defective products, as well as cracking down on white collar computer crimes. I think I would greatly enjoy chasing perpetrators down to get the story. I would probably focus my first investigative pieces on exposing online scammers, and those who engage in phishing and other illegal online activity.
3. Doctor - Like everyone else when they were young, I originally wanted to be a doctor – that is, until I realized how disinterested in the sciences I was. I started college as a biochemistry major on the pre-med track but ultimately shifted gears into computer science and finance. Eventually I went on to complete law school. I think if I had continued, I could have ended up becoming a doctor, although it would have been out of character for me. I’m simply not very passionate about medicine or the natural sciences.
4. Video Game Designer – When I got out of the pre-med track, I studied computer science for a year before I transitioned into finance. During the transition I initially wanted to become a video game designer. Ever since high school I loved playing role-playing video games and I always wanted to design them. When I was a kid I remember making my mom buy me an expensive computer paint shop program so I could dabble in graphic design. However I eventually grew out of it, although my interest for web designing and programming remained.
5. Pet Shop Owner – Okay, I know this one’s extremely random but when I was very little I wanted to run my own pet shop. I’ve had a variety of pets in my lifetime, including a parrot that I still own today. At the time I thought it would be so cool to have my own breeding facility where I could raise baby animals. Of course that’s before I got older and realized that I wouldn’t be able to keep them forever and would have to give them up to paying customers. Well, it was whimsical while it lasted.

So, now you know my current and past dream jobs. What are some of your own?

These are uneasy times if you are an E-Trade broker customer or investor. For those who bought and currently own E-Trade stock, these are probably one of the most trying times you’ve ever faced as share prices have plummeted more than 90% within the last year. Triggered by Citigroup’s downgrade in November 2007, many investors and account holders are fearing the worst and some have jumped ship, shifting their assets to another brokerage firm. Just yesterday share prices tanked more than 20% in yet another day of volatile trading in response to further analyst warnings that E-Trade is in dire need of an additional capital infusion to stay in business.

Shareholders are bailing – a grave concern for many current E-Trade brokerage account holders as many fear for the safety and security of their stock investment accounts. E-Trade has released numerous press releases and web based announcements to reassure customers that they have taken drastic steps to shed exposure to the dreaded mortgage backed assets that have been generating so much business losses, and that they currently have the necessary capital liquidity to stay afloat.

If you’re an E-Trade account holder, you can sigh in relief as your assets are generally well protected. However, if you’re an actual E-Trade stock investor – my condolences, as you may be of luck unless you could somehow successfully demonstrate that you were defrauded.

Escape From E-Trade If You Must, But Your Assets Are Secure

I used to be a long time E-Trade customer but eventually shifted my brokerage and bank account funds to another firm earlier in 2007 for reasons completely unrelated to the recent meltdown. But even if I still currently had cash and security assets managed by E-Trade, I think I would still have the confidence to stay on board. But I do understand why many are bailing out of E-Trade and transferring their funds to another brokerage firm. However financially speaking, investment accounts and financial assets managed by E-Trade or any other major brokerage firm like Fidelity, TD Ameritrade, Scottrade, or Charles Schwab are generally well insured from loss.

Here Is How Your Accounts Would Be Handled If E-Trade Or Any Other Brokerage Firm Failed:

1) Cash Deposits - Bank deposit accounts at E-Trade or any other brokerage bank are insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC). Deposit accounts cover checking, savings, as well as certificate of deposits (CD’s). For those E-Trade customers that chose the Extended Insurance Sweep Deposit Account (ESDA) option, cash deposits are covered up to $500,000. View (E-Trade’s Asset Protection Statement).

2) Stocks and Bonds – Customers of a failed brokerage firm will recover all of their security assets such as stocks and bonds registered in their name. Afterwards, the broker’s leftover assets are divided among the remaining customers. Finally, if there are still insufficient assets to cover the rest, the Securities Investor Protection Corporation (SIPC) kicks in. The SIPC provides coverage for major brokerage firms that are members of the Financial Regulatory Authority (FINRA), formerly known as the National Association of Security Dealers (NASD). The protection covers asset classes like stocks and bonds, but it does not cover derivatives like options or futures. The SIPC allows customers of failed brokerages to recover up to $500,000 per customer (including $100,000 for cash claims).

Thus In the Event Of A Catastrophic Brokerage Failure:

1) Best Case Scenario: Usually the securities and assets of a failed brokerage firm or bank are quickly bought up and seamlessly transferred to another broker dealer without significant business interruption. For example, when Netbank went belly up, ING quickly assumed control without any major problems.

2) Worst Case Scenario: If the failed brokerage firm’s record keeping is terrible and it goes into liquidation status, a court appointed trustee will usually referee customer claims to help them get their money and assets back. According to the SIPC, should any major SIPC insured broker like E-Trade go out of business, you can expect to receive your property and assets back within 1-3 months after the broker’s records have been verified. The trustee will send you a claim form that you will need to complete and mail back. Thus, it’s also in your own best interest to keep accurate personal records as well.

Other E-Trade Specific Safety Nets

1) Additional Brokerage Protection For Trading – E-Trade indicates that it also provides additional insurance protection for its broker customers up to $150 million per brokerage account, underwritten by London insurers, with an aggregate limit of $600 million. This provides at least somewhat reassuring triple insurance protection.

2) Sufficient Existing Capital To Cover Losses – Although there are serious questions surrounding E-Trade’s ability to weather the current financial storm with its existing cash and capital reserves, E-Trade’s former CEO Mitch Caplan categorically denied a few months ago that the mega brokerage firm was headed towards bankruptcy. So there you have it – whether E-trade can stay in business is anyone’s guess, but if you are a brokerage customer, your assets should be safe and secure so long as you are within the insurance protection limits.

Most ordinary investors know about the general wisdom of investing in the stock market and the importance of portfolio diversification, but have you ever considered investing in gold? Admittedly, the very concept of investing in gold is strange to begin with. After all you’re paying money to buy a shiny piece of metal dug from the ground that is more commonly associated with jewelry meant to adorn the body. With all the technological advancements and investment vehicles out there today like stocks, bonds, currency exchanges, and options, why would any sophisticated investor choose to include this physical asset as part of his or her investment portfolio?

The answer lies in how gold has been regarded and used throughout history. Since the beginning of time, gold has been prized as a measurement of wealth due to its rarity and unique functional qualities. From ancient China to the ancient Egyptians, to pre- modern day United States, gold has been used to stabilize and back currencies. Even our United States currency remained on the gold pegged standard until 1971 when President Nixon suspended the convertibility of U.S. dollars into gold. Since then, world currencies including the dollar have operated on a float fiat money system where currency value comes not from the underlying intrinsic value of the paper itself, but from supply and demand driven by exchange traders.

Gold Performance Vs. Stocks

Because they are from two completely different asset classes, investors value gold and stocks quite differently. As a precious material, gold has always had the ability to retain its value over time and has historically moved inversely with the U.S. dollar. This means historically whenever the value of the dollar has dropped or become extremely weak, as it is now, the value of gold has increased. While gold can store its value due to its durability and limited quantity, the value of stocks is based on the perceived rate of return due to growth, performance, and dividends. Thus while stocks tend to perform extra well during periods of political and economic stability, due to its intrinsic value gold tends to be more desirable and perform better during periods of bank turmoil, falling interest rates, and times of political crisis or war. In fact, many gold bug investors track the price of gold today to gain insights into the health of the overall economy, and to forecast where it is headed as well as the likelihood of future instability and pullbacks. Some also preach the value of investing in hard assets like gold as an important component to weathering and surviving a recession.

The current rise in the value of gold can be attributed to recent geopolitical instability as well as the continued dollar depreciation. This has caused assets not tied to the value of the dollar to become much more appealing. The continued U.S. recession talks, problems in Iraq and Iran, the flattening credit markets, and increased demand from places like India and China, have caused the value of gold to rise. However, keep in mind that prices do waffle and fluctuate significantly.

Options For Buying Gold and Investing In Gold Operations

I don’t think gold should be seen as a replacement for stock investments. In the long run, stocks have much higher growth potential, but gold can complement a diversified portfolio and help hedge against some risk. Thus, having gold comprise 1-5% of your portfolio would probably be sufficient. Here are a few ways to invest in gold assets.

1) Gold Bullion – The most direct way to invest in gold is to simply buy the real thing in the form of gold coins or gold bars from a broker. Of course, unless you are Scrooge McDuck, you probably don’t have a large money bin to stash your loot, so storage may be a concern. Also, when you want to sell, you’ll likely need a gold appraiser to calculate the value. Another downside is that the Internal Revenue Service treats gold bullion as a collectible and the sale of it as a gain taxed at rates up to 28%, well above the 15% capital gains for stocks and mutual funds.

2) Exchange Traded Funds (ETF’s) – For those of you who don’t have the money to buy or rent large warehouses to store your gold doubloons, you may consider investing in a gold ETF that does all of the gold buying, storing, and insuring for you. That way you can avoid the hassle of owning the physical asset itself, while still getting needed direct exposure to gold. Shares of popular gold ETF’s include StreetTracks Gold Shares (GLD) (up nearly 40% in the last year or so) and iShares Comex Gold Trust (IAU). Both can be traded like any stock. Keep in mind that there are usually management fees to cover storage cost. Unfortunately, long term capital gains for gold based ETF’s are taxed the same way as owning the physical asset itself. However, if you held the ETF in a retirement tax-free account like a Roth IRA, the gains would be completely tax-free. Certainly something to think about and consider.

3) Mutual Funds – Mutual funds offer exposure to mining operations and companies that primarily mine gold while offering some semblance of diversification. Rather than relying on the success of one mine alone, you get to invest in a pool of related mines and companies. Here are a few high performers to consider – (link).

4) Stocks Of Gold Mining Operations – Another roundabout way to invest in gold is to buy stock in a company that mines gold. However, such an investment is also subject to the usual corporate risk associated with a going concern pegged according to the perceived rate of return of the company. Stocks that you may want to take a peek at include the two biggest mining companies – Newmont Mining (NEM) and Barrick Gold Corp. (ABX). Both have been performing quite well recently.