I always knew that my management company (or their insurance) would not cover any of my belongings if something were to happen to my apartment. For many years, I never considered my possessions to be of enough value to get any type of insurance coverage. Now that I live on my own and have acquired a lot of “stuff”, I felt the need to get some peace of mind over all of it. Just last year, I was walking home from the subway  and saw a couple buildings down the block from mine go up in flames. The street level had a laundry-mat/dry cleaners in one building and a chinese restaurant in the other, with apartments above both. It could have just as easily been my building that caught on fire that day, and I would haven’t have had any assistance in getting my life back in order.

Recently, I decided to get some peace of mind from fire, theft, plumbing issues, etc. I had read about InsureMe.com as a tool to get quotes from various insurance agencies all in one go. I went to the website and found it very easy to use for all types of insurance (home, auto, health, life, and renter’s to name a few). I proceeded to chose the drop down box for Renter’s insurance, filled out a couple of questions about me, my belongings, and my apartment and was immediately matched with agents.

To my surprise, within a couple of minutes two agents already called me to follow up! I spoke with them both on the phone to learn more about the different types of coverage and get some quotes. They both were able to e-mail me quotes the same day. I went a bit further and asked each one for the rental policy documentation to see what exactly was covered and what wasn’t, so I knew exactly what I was signing up for.

Having the conversations with the agents taught me about what to look for in coverage and industry lingo like “actual value” and “replacement value”.

The quotes varied drastically, so I was happy that shopping around was made so easy with the help of InsureMe. I will definitely use the site again in the future for all of my insurance needs.

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1. Path to the Green Light

Annual debit card spending (in 2009) exceeded credit card spending for the first time in history. I know that we have been consistently moving towards a pay by plastic society, away from paper cash and checks, but was under the impression most of these moves were on credit cards.

I’d like to think the increase in debit card spending is triggered by an active effort to be more financially responsible. I know that last year I tried to start using my debit card, which is a big step for me (I’m very attached to my rewards credit card).

It turns out that consumers were given some help by banks which chose to massively reassess credit limits. Unused portions of credit lines were reduced, and some cards were just closed due to inactivity. Some consumers had no option other than to increase debit card spending.   

The glitz and glamour of credit cards is now gone. Even the commercials for credit cards have decreased, and the glamour is focused on the rewards these cards provide. I know I enjoy those Chase Sapphire commercials. From what I remember, one is focused on what the points can be used to buy, and the other is about the excellent customer service Chase provides to its Sapphire cardholders.

After the CARD Act (Card Accountability, Responsibility, and Disclosure Act) was put into effective in February of this year, many of the banks are now charging annual fees to card holders, especially ones that do not carry a balance, because the bank misses out on interest and finance charges. In the move to using debit cards by choice or to avoid credit card fees, there are a couple debit card risks to look out for:

Risk of Closing a Credit Card

No matter what interest rates the credit card companies want to charge, or what they did with the rewards program, don’t close that credit card. We discussed how closing credit cards negatively impacts the Debt to Credit Ratio and your Credit Score as a whole. Moving to a debit card for everyday spending does not have to be a one for one swap with closing a credit card. Leaving a credit card open ensures it is still an option in the future. The only time I would advise against leaving the card open, is when an annual fee is charged on the card.

Frozen Funds

Some merchants will freeze funds on a card (debit or credit) until a transaction is completed. This is not a big deal at restaurants when they freeze an extra 20% of the bill on a card to ensure there are enough available funds for tip. This particular transaction is complete minutes after initiation. Its a different story when a card is used at a car rental agency or at a hotel. For example, if on a one week vacation, hotel and car rental are both paid for using a debit card, both companies will freeze more than the cost of the one week rental to cover incidentals. The additional frozen amount can be more than double what you may actually pay, and the impact is that these funds will not be available during the vacation, since the transaction will not be complete until the end of the trip. So when on vacation, consider carefully what type of card is used to pay for major expenses.

 Additional Risks

There are some quirks related to liability coverage on debit card transactions according to whether they are signed for or a PIN is used. Each card maker can have individual rules when it comes to liability coverage for debit card transactions, with only the requirement of providing provisional credit within 5 days of initiating an investigation. If anything were to happen to a debit card, all of the funds linked to it can be tied up for who know how long. At least with a credit card, the liability coverage is usually 100% and its not checking account funds that are tied up.

This doesn’t discount that a debit card is usually tied to a checking account and overdrafts can occur. Overdraft fees average about $34 per occurance, and these can add up over time.

 These are ideas to think about when considering how to pay for transactions using plastic. Please add a comment if there is another debit card risk that we should be made aware about.

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2. Thinking of Opening Another Store Charge Card?
3. Still have Gift Cards from Last Year?

Salary information is probably the most confidential topic that companies try to not share with employees. I’m a firm believer in transparency because it helps me know what I’m working hard to achieve. I saw a news report about a company that published salary information on the intranet. Employees of that company know how much each individual is compensated, letting them know what rewards are awaiting their hard work. Conversely, they know how much someone who is not pulling his/her weight is getting away with.

Overall, I think that knowing salary information can do more good than harm. I have found that Glassdoor.com does an excellent job of sharing real employee salaries while keeping the employees anonymous. To me, it achieves the goal of knowing this valuable information without invading privacy.

What can I do with Salary Information?

Even in these economic times where some people are happy to be employed, its good to know where you stand amongst your peers. I for instance work at a company that has over 100,000 employees globally. With the help of Glassdoor, I can see whether my salary falls in line with different groups of people:

• My peers in my department in my office
• My peers in other departments in my office
• My peers in my department in other offices

The list can go on and on with different combinations. But what I also find especially useful, is the information for the next promotion level. I have found myself adjusting the mental dollar figure I assumed for those at the level above me. People may speculate in the office about salary ranges, but the numbers speak for themselves.

The Key

The key to success at Glassdoor is that users must share information in order to access information. The site requires sharing salary information from an employer in the last 3 years. Every 12 months, users have to provide updated information. This requirement enables the salary information provided for various employers to be up to date at all times.

In addition, the site allows users to write anonymous reviews of companies including an approval rating for the CEO.  The reviews are a great way to see how others feels about their companies, especially for anyone interested in making a move.

I feel that knowing salary information can only be beneficial. I am interested in anyone’s opinion that differs.

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I figured this is a unique holiday season compared to previous years. I was thinking about the likelihood of people choosing to re-gift unused gift cards from last year and risks involved.  The re-gifting episode on Seinfeld was funny for a reason. Things don’t always turn out the way you planned. I’m not saying that you’ll give or get a label maker where the labels don’t stick and the post office will keep all your stuff, but what if your old gift cards don’t have as much value as you thought they did?

This is important not only for re-gifting possibilities, but also for your own spending. So many gift cards have monthly fees called ”inactivity fees,” “administrative fees,” or “dormancy fees.” This is unfortunate because the original purchaser of a gift card intends for the recipient to get the full value of the card. Lucky for consumers, many states are trying to pass laws to crack down on excessive gift card fees. The retailers justify these fees because an unused gift card sits on their books as a liability that has not been turned into revenue yet. (If you would like an in depth explanation behind the accounting, just e-mail me, I’ll break it down into debits and credits for you.)

Some cards have fees that start as early as 3 months from the day the card is purchased deducting up to $2.50 of the card’s value per month. The best thing to do is check out what fees are incurred on any gift cards you may be holding and to keep up with your balances. I’ve only heard of one instance where a company charged a card holder to check the balance on the card over the phone. So hopefully that won’t happen and balances will be easy to monitor. In the cases that fees begin to be charged, its important to know the state laws that may offer protection. I have located a website that provides a breakdown of state laws that is updated periodically.

I think that the state of New Jersey has one of the toughest and most consumer friendly laws that bans anys “dormancy fees” until 24 months after the date of sale or last use and limiting the fee to $2 month. In addition, prominent disclosure of the terms are required.

In New York, former Attorney General Eliot Spitzer went as far as filing suit against Simon Property Group (the largest mall owner and operator) for charging administrative fees after only 7 months after the cards were purchased. New York’s gift card law went into effect Oct. 18, 2004 prohibiting retailers from charging fees on gift cards until the card has been unused for 12 months.

All of what I have shared only covers retail gift cards. The bank cards (American Express, Visa, and Mastercard gift cards) that seem better than retailer cards because they are not limited to one store chain actually have the worst fees of any card. For example, Visa gift cards charge an activation fee at the time of purchase, usually around $5. In addition, this card charges a monthly maintenance fee starting in the first month. None of the state laws mentioned above have any impact on bank cards, so they should just be avoided all together.

In the end, cash is king, but if you do have any gift cards, spend them ASAP before its too late!

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1. Thinking of Opening Another Store Charge Card?
2. Debit Card Spending is Up, Way Up

As the holiday season approaches, I thought this would be a great time to share the benefits of my favorite airfare tracking site. Last spring, MIcrosoft Corp bought out Farecast.com, a site that monitors airfares to domestic and international destinations, so that you don’t have to.

Farecast provides a computer generated prediction of individual airfare changes in the next 7 days. You simply choose the route you are interested in and farecast outputs the current cheapest flights along with its prediction for the direction the fare will go in the next seven days.

The prediction includes a confidence level to help in your decision making process. I have seen high confidence levels (ex. 70% confident the fare will increase $25-$40), and low ones (20% confident the fare will decrease $5-$15). Keep in mind these confidence levels are only for fare changes in the next 7 days.

Unlike other travel sites, Farecast does not book the ticket for you, instead it will connect you to the airline carrier or travel site that has your desired flights and fare. There are no fees involved, only the benefits of not having to constantly monitor airfares. The site even offers e-mail alerts. Farecast has added hotel rate predictions, but I have yet to utilize this feature. Let me know if you have and it benefited you.

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Where is your emergency cash stashed?

At the beginning of September, the unemployment numbers for August were released. The number of people in the nation that were unemployed and actively seeking work was 6.1% up from 5.7% in the previous month. This level hasn’t been reached in 5 years (since 2003) and in my opinion the outlook isn’t very positive.

Considering the current economic situation of the nation, I got to thinking about my own emergency fund and the proper amount that should be stashed away. The first idea that comes to mind is my company’s severance package will take care of me.

Many of my peers across industries have been hit hard by corporate layoffs, finding that severance packages can drastically vary from one company to another. Young professionals who have been in the workforce for the least amount of time are hit hardest when it comes to weaker severance packages, and less time overall to have emergency cash sitting in the bank.

How much should I have saved up?

My opinion: 3 months of expenses in liquid accessible cash.

I understand that some people recommend savings of up to 6 months or even 1 year. But I also like to take into account other factors that will help extend the 3 months of cash.

The trick to saving up the 3 months of expenses is to have little opportunity cost with the money set aside. What I’m saying is, this saved money should not prevent you from making regular 401k contributions or an annual IRA contribution. The easiest way to build an emergency fund is to use unexpected income, like the federal stimulus package, or rebates from large purchases, or a bonus from work.

I also don’t think that all three months of expenses need to be sitting in a savings account. I prefer to have one month worth in my direct savings account and the rest in other accessible places like a bond/CD ladder, mutual funds or other liquid investments.

What are the other factors that help in an employment emergency?

1. Company Severance: According to discussions I have had, my peers from different companies have all continued to be paid their regular salary for at least one month from the day notice of a layoff was given. In some cases it was longer, but I like to make a conservative estimate.

2. State Unemployment Benefits: Every state has some type of unemployment program in place. The amount that is paid out and eligibility time period differs from state to state. Keep in mind that this is taxable income, so Uncle Sam will still get his portion.

• Most of my readers are in New York where the seasonally adjusted July 2008 unemployment rate for the state was 5.2% (August state numbers will be released on Sept 19th), so I did some additional research in what the state offers its residents. You can find the breakdown of benefits at the state’s website, it says if you make more than $42,200 a year, then the maximum an individual can receive is $405 a week for 26 weeks (6 months). This 26 week period was extended by Governor Paterson in July for an additional 13 weeks (3 months) in 2008 benefits.

• In the state of California where the rate was an amazing 7.3% in July, unemployment claimants can receive up to $450 a week for 12-26 weeks according to income level. The state has not mentioned if there will be any extensions in benefits CA like in NY.

• The state of Illinois reported an unemployment rate of 5.5% in the month of August. Maximum benefits are $369 for single individuals and the period is up to 26 weeks, currently this is no extension similar to NY.

In the scenario presented above, 3 months of saved expenses, at least a month of company severance, along with state unemployment should add up to 5 months of independent survival, if not longer.

Other Important Reasons for an Emergency Fund

Its easiest to associate an emergency fund with an unemployment situation, but the fact is, many different types of emergencies can happen. Its always a good idea to have at least the minimum deductible for your health insurance policy on hand in case something happened. This also applies to home owner’s/renter’s insurance and car insurance.

Lastly, don’t stress yourself out. Its a lot to save up, but with focus the goal can gradually be achieved.

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In F. Scott Fitzgerald’s The Great Gatsby the title character, Jay Gatsby, lived in an area known as West Egg. He, like his neighbors, was considered ‘new money’ and worked extremely hard to achieve the riches of life. Across the water from Gatsby’s home shone a green light at the home of Daisy Buchannan, the woman of his dreams. Daisy lived in the area of East Egg, where she and her neighbors were handed a life of wealth and status.

This blog represents my journey towards the green light in attaining my dreams. I’ll share my discoveries in becoming the next West Egger.

Dedication: This blog isn’t exactly a novel (yet!) but I’d like to dedicate my efforts to my parents who have achieved West Egger status and knew better than to raise me as an East Egger.

Grasp Happiness First, Everything Else Will Follow

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