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Best online brokers for investing

Are you ready to start investing? Choosing a brokerage is a very important decision before investing. A lot of it depends on your investing style. Some people might be dividend investors, some growth/value investors, some just do index fund investing etc. Based on your requirements, you need to understand what all features various brokers offer and then go about choosing best online brokers for you.

Factors to consider when choosing from best online brokers

1. Account Offerings

There are different types of investment accounts. Like retirement accounts (401K’s IRA’s), individual investment account, checking account etc. Not all brokers offer all types of accounts. There are certain types of investments you should buy inside specific tax-sheltered accounts to maximize tax free returns. Most retirement accounts also have limits on amounts you can contribute yearly. Depending on your requirements you might need all types of accounts or maybe just one. But usually for a sound retirement strategy people have both retirement and individual investing accounts.

2. Account features

Not every broker offers all type of features. Ability to reinvest dividends(DRIP) is very useful to keep your investing on auto pilot. Automated Customer Account Transfer(ACATS), helps in transfer of securities from one broker to another. Some brokers do not have the ability to transfer in. This could be much needed if another broker of yours decides to shut down abruptly. You might need ACATS-in ability in your second broker to move stocks. Real time quotes, analysis/research on stocks, ability to place different kind of orders like limit, stop etc. and schedule execution are all also very important features. Ease of moving money from and into accounts. Is the broker fast enough to move money? Since many times you will only get a buying opportunity for a day or two and you need the money then to buy stocks.

3. Fees

This includes fee to buy or sell an individual stock. Any fees to start the brokerage account? Annual fee on the account? (this should not even exist). Any minimum balance requirements to maintain? Some brokers have different fees to buy individual stocks and different fee for ETF’s/index funds etc. So, make sure when you make your decision you do know about the fee charges. Also, a reminder free is not always the best route to go. You might be compromising on some other features in exchange of no commissions. More on this later.

4. User Interface

This includes the website UI as well as a mobile application UI. Ability to look at charts, create watch lists, create stock screens is important. Availability of educational resources which you can read through in your time.  Security settings and brokers emphasis on keeping data safe. Ease of access to historic records/statements for tax purposes, to calculate or look at how you are performing is helpful to track your progress over time.

Based on above factors, best online brokers are:

1. Schwab

Key highlights:
  • Now commission FREE (0$ to buy/sell stocks and ETF’s) starting 7th October 2019 
  • $0 – $76 for index & mutual funds only to buy, no fee to sell (this only applies to non-Schwab funds, which makes sense since they want to encourage you to buy more of Schwab owned funds).
  • For non-Schwab ETF’s fees may be $0-$20 depending on the ETF.
  • Schwab ETF’s & index funds both cost 0$ to buy or sell.
  • $0 annual fee on most individual accounts, $0 – 1000$ minimum balance, check more here. I would suggest the standard Schwab one account for individual account and their standard IRA accounts which come with 0$ minimums.

This brokerage has been around since 1975. Their customer service is top notch. Not only can you ask questions about your account, you can even get advisors to talk to, ask about transferring your brokerage from other places etc. They are helpful on every doubt you have. Their chat support is phenomenal. I haven’t had to call in at all even once! Other features I mentioned above are also offered by Schwab. Before 1975, trading fees were fixed regardless of the size of your trade. The government abolished this practice in May 1975. Schwab was the pioneer to introduce discounted trades at that time. The company has a history of making decisions and introducing changes in favor of the individual investor. Schwab was one of the best online brokers in 1990’s and continues to be today. Currently they also have a 100$ sign up bonus to sign up for new account. Also a fair warning, Schwab usually does a hard credit pull if you open an account with them for first time ever(without any prior relationship). But I think it’s totally worth it.

Good For:
  • People who want a person on other end to ask any questions. Really good customer service.
  • Those who want to do DRIP investing. Set your dividends to DRIP and forget about them.
  • People who like to buy index funds, as Schwab has cheap expense ratio index funds.
  • The checking account comes with a debit card that doesn’t have any fees when used abroad anywhere!
  • People who like to visit a physical branch once every while. Schwab has a big network of physical locations where you can walk in and chat with advisors, make deposits have some snacks, all on the house.
Shortfalls:
  • Although Schwab provides ACH in and out functionality and a checking account, it holds deposits into any account for 2-4 business days. This kind of holds your funds for some time if you want to move it to another account within Schwab or outside.
  • It is still a for profit publicly traded company that has other ways to make money irrespective of fee-free trades it provides.

2. Vanguard 

Key Highlights:
  • $0-$25 to buy or sell stocks/etf’s depending on account size (Not free yet).
  • $0 to buy or sell Vanguard ETF’s and mutual funds plus some third party etf’s.
  • Some Vanguard mutual funds have 1-3K USD minimum requirements to start buying.
  • Incentive aligned with average investor. Not a for profit company.

Before Oct 2019, I used to have Robinhood as my second choice broker. Mostly because of their fee free stock trades. I used to recommend them over other big brokers for most beginners in investing. However starting 2019 October, most big & best online brokers decided to offer fee free trades.  So Robinhood is now out of the picture. In comes Vanguard. This company has also been around since 1975. I mentioned above in shortfalls of Schwab that they are still a for profit, public company and need to generate profits. Vanguard is a company that is held by investors who invest in Vanguard funds. So there is no incentive to generate any profits. You can read more about their structure here.  J L Collins also wrote a very nice article on why he trusts Vanguard with his money. Vanguard’s ownership structure allows it to operate at cost and charge minimum  expense ratios to make sure it covers expenses. This is what separates Vanguard from rest and makes them one of the best online brokers.

Good For:
  • People who want to invest in index and mutual funds only. Vanguard’s funds are the most famous and have some of the least expense ratios.
  • Vanguard is a big proponent of long term investing in index funds. So their platform is really focused on dissuading people from trading in individual stocks. Their fee structure, research, basic guides are all focused on long term investing. In my opinion this is a big positive for us everyday retail investors.
Shortfalls:
  • Not the best online broker if you buy individual stocks.
  • Their mobile app/web application is very basic. No frills, no big features. Good to check balances and place a trade. That’s about it. Don’t expect Vanguard to provide latest features you see elsewhere in other broker mobile apps.

Pitfalls about commission free trading

With most of the best online brokers offering commission free trading, there are things to be aware of. Commission free model encourages trading. It removes a psychological block in your mind and encourages you to be more open to sell/buy stocks based on daily stock prices. A lot of my friends who started with Robinhood app, buy and sell daily because they feel there are no problems since the fee is 0$. They are inadvertently day trading/short term trading. Selling as soon as it goes up a bit. Selling even if it goes into huge loses etc. Not realizing the enormous tax liabilities, they create in process. This is just a warning, you can obviously invest any which way you want.  All I am saying is you need to have an approach and be disciplined when investing.

Another problem for brokers is they still need to make money. They are not in charity business after all. Most brokers like Schwab, Etrade etc already have banking divisions. They make money using the interest rate spreads on the cash in your trading account. You get very low interest on the cash you save with them for investing. They lend it to people at higher rate, pocketing the difference. Vanguard is a rare anomaly here as it moves all of the cash in your trading account to a money market fund that gives you market interest rate while it waits to be invested. Brokers also have incentive to make money on spread between bid and ask prices for any order you place. When you place an order they might direct your order flow to high speed frequency traders and get some commission from them. This might result in you not getting the best price for your order. These might not be a huge concern if you do not trade often and invest for long term. Just be aware that brokers still have to make money and they are probably making you pay one way or another.

In Conclusion

Apart from these 2 picks, there are a few others who always feature in most lists of best online brokers I found during my research. However, I haven’t used them so I cannot write helpful descriptions on them. If you would like you can also look to Fidelity (for best retirement planning/investing) TD Ameritrade (for good data and options platform). Another pro-tip is a lot of big brokers allow for fee free ACATS-IN transfer of securities (they will even reimburse fees charged by your existing broker to ACATS-in to their service). Some also give you a fixed number or duration during which you can trade for commission free. They might even give you bonus money to move your account. You can always ask check with your broker if they offer any commission free trades if your account balance is above certain limits.

choose brokers both

At the end of the day it comes to your requirements, your investment style, philosophy etc. If you like the customer service and more options available to you, go with either Schwab/Vanguard. Schwab has more features and research if you would like to venture into individual stock investing. Vanguard is the best solution to keep everything on auto pilot and investing in index funds without applying much brains. You can even have both accounts. No harm in that. I do! My aim was to just elucidate some factors on which you can base your decisions.

 

October 11, 2019 0 comment
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Tips & Tricks

Using Chase Collision Damage Waiver Benefit

The I am sure many of you have heard credit cards provide collision damage waiver coverage when you rent a car. Some of you might have been in unfortunate situation when you had to use it. I am sure applying for a claim is a confusing process. Do you pay the rental company for damages? Get reimbursed by your credit card company later? What if the amount is too much to pay out of pocket?

Do not worry, I recently had the unfortunate necessity to file a claim with Chase for collision damage waiver on a rental. Read on to find out the process to make sure you do not end up paying for the damages yourself.

agent handing out keys

On a recent trip to Utah I had a small rock chip come out of nowhere and hit the windshield on my rental car. Thankfully no major harm was done to us. However, the windshield was left with a small hole shown below. Luckily for me, I had rented using my Chase Sapphire Reserve(CSR) card. As they mentioned I had declined my Collision Damage Waiver (CDW) coverage from Enterprise and paid in full using my CSR. So, when this happened I was at least relaxed knowing that CSR would be able to reimburse me for any damages. I called to make sure what the process was. I just wanted to create this guide for anyone who rents using CSR or any of the chase premium cards and ends up needing to file a claim:

car windshield issue

What is Auto Rental Collision Damage Waiver ?

Chase as part of its cardholder benefits provides cdw coverage on rental cars. They cover up to 75000 USD in damages for theft or collision on a rental car. All you have to do is decline the CDW coverage provided by your rental company and pay for the full rental using your chase card.

Chase Sapphire Reserve (CSR) and Chase Sapphire Preferred (CSP) offer primary Collision Damage Waiver. It means you can just go through them to claim for insurance in case you need to. Most other Chase, Discover and Amex cards provide secondary CDW coverage. Meaning, you also need to involve your car insurance provider first and then credit card provider might step in to cover rest of the bill.

Start a claim online as soon as possible

Chase outsources their claims process to a company called eclaimsline. Head over to the following website: https://www.eclaimsline.com/ start the claim:

Hit new claim and enter your card number and the name on card:

collision damage waiver claim1 collision damage waiver claim2

 

We will select Collision Damage Waiver since we are trying to claim for a rental car incident. Enter your address and personal info on next screen:

select collision damage waiver option rental car claim4

 

 

 

 

 

 

 

 

Give details on the incident, rental car and if you made the payment at the counter, then choose yourself as the benefits payee. You can change this later. Upload the required documents in the next screen. You can submit some documents later as well:

rental car claim5 rental car claim6

 

 

 

 

 

 

 

 

Once you hit submit, you should get a confirmation about the claim. You should also get an email from the site with the details.

rental car claim7

 

Decide whether to pay for damages out of your own pocket

Next step is while returning the vehicle decide whether to pay for the damages on your own or not. In my case the damage was small (317$) so I paid it while returning the car. However in case when the damage is huge, it might not be possible to pay out of your pocket. In such cases make sure to let Enterprise/rental company know that you started a claim with eclaimsline. Its possible that you might have to pay a deductible that the car rental has set depending on the type of damage. They might even ask to put a hold on your card for the damages. This depends and varies from rental agency to another agency. But do not worry, take receipts and document anything you pay.

Documentation for Collision Damage Waiver Claim

Get as much documentation as you can. Things like original rental agreement that shows you declined collision damage waiver. Itemized receipt for any payment you paid.  Photos of the damage. Police report if you have any.  Incident report from car rental company. I even have this list in one of the screenshots above. In addition to this, the claim website also asks for a copy of your card statement with any payment charge. Upload all the documents to the claim website against your claim.

documents collision damage waiver

Now waiting begins

Now that you uploaded all documents, the ball is in the claims website court. Usually you get a response after 5-7 days. However this is when I realized that that there are 2 other documents that the eclaimsline website needs to complete the claim. Its the demand letter and itemized bill/estimate of repair. Its according to this estimate that they payout. I learned that the rental car company needs to send this demand letter and estimate. However getting this form the rental company turned out to be easier said than done.

rental car claim9

More waiting

I kept getting reminder emails from eclaimsline website asking me to submit the demand letter and estimate. I had to call Enterprise a few times but they seemed clueless. All they seemed to say was it will take at least 30 days for them to generate the demand. At this point I kind of felt taken for a ride when I paid for the damages myself. And was not getting proper responses for the demand and estimate.

Respite at last

I finally got an email from enterprise stating claim was processed and my case closed. It mentioned no payment was needed from my side since I had already paid for damages. However I actually had to call enterprise again to remind them to send me the demand letter and estimate since I still needed those to get myself reimbursed. I eventually received the demand and estimate form Enterprise via email. To my surprise the demand and estimate were only for 185$ when I had paid 317$ for the damages while returning. On calling enterprise once again, I found that the original cost was indeed a deductible. Eventually they returned me the 117$ via a check and I had to submit the demand and estimate for the rest(185$) to the eclaimsline website as part of collision damage waiver claims process.

Got my money back!

After about a week of submitting the demand letter and estimate, I got an email form eclaimsline asking for my electronic deposit information to reimburse me for the remaining 185$. The process lasted 75 days from the day of incident to getting my money back.

rental car claim10

Pros:

  • The process works as expected. Its simple enough to follow.
  • You have 365 days of to submit all documents from the date of incident. So you do have ample time to make sure you get through the whole process right.

Cons:

  • I wish there was more transparency in the process.
  • Communication on the process is poor. Had to follow up with Enterprise to get the demand letter and estimate. Had to follow up to understand why the demand was for lesser amount than what I paid. There was no communication about a check from Enterprise at all!
  • Need to follow up to make sure things are moving along. I think the usual process takes about 2-3 months. But constant reminders from eclaimsline regarding demand and estimate. Along with poor communication from Enterprise forces you to follow up. Although I do think 2-3 months should be enough for the process to complete. Do keep in mind that if you paid for any part of the damages while returning your vehicle, you will not bee seeing that money for at least 2-3 months.
Check out step by step process to file a claim for collision damage waiver benefit on an auto rental using your chase credit card. Click to Tweet

In Conclusion

As I mention in my other article, Chase Sapphire Reserve is one of my all time fav cards despite the 450$ annual fee. The benefits you get are just too good for the price. Having saved so much money on my trips before by not paying for insurance I have already made it well worth the fee. This time I even used the claim process and was able to get my money back from Chase within 2-3 months of the incident. Here is a summarized list of things you need to do if you get in some incident (Or in general to make sure you are prepared for any situation):

  • Make sure to decline collision coverage on your rental and put all amount on the CSR card. (This is a must condition for Chase to take care of your collision coverage in case of an incident)
  • Take pictures of your car at the shop before picking it up.
  • Do a detailed walk through and report any problems on car if you find any.
  • Make sure you check out the gas tank level before driving off.
  • Make sure to get the Rental agreement hard copy/email before driving off.
  • In case of an incident inform and start a claim as soon as possible.
  • Take pics of damage.
  • Either pay the charges out of pocket/ask rental agency to follow up with claims website with details of claim info.
  • Upload all documents requested by claims website.
  • Call the rental agency if you need the demand/estimate of repairs.
  • Wait for the process to complete and make sure all parties are happy with the outcome.

rental car relax

This is just a generic guide and an account of how my experience was while claiming for car rental damage. I got my collision damage waiver through the Chase Sapphire Reserve card. But I do think the general process for most other primary coverage cards is the same. Little things or steps during the process may differ from person to person and base don incident. But I am sure this account will be helpful for all. Head over to the respective credit card provider website to make sure you understand all the terms to use collision damage waiver coverage.

August 25, 2018 0 comment
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Tips & Tricks

Best Credit Cards for 2018

best Credit cards main

Following up on my article suggesting using credit cards to your advantage. I wanted to suggest some of the best credit cards I have used over the years:

Chase Sapphire Reserve (CSR)

Key highlights:

  • 450$ annual fee
  • Free Priority pass access to lounge and some restaurants at major airports
  • 300$ credit towards a lot of travel related purchases including tickets
  • No Foreign Transaction Fee (FTF) when traveling abroad
  • 1 Global entry credit every 4 years
  • Primary Auto Rental collision damage waiver
  • Baggage and Trip insurance, roadside Assistance

So, I understand 450$ is a pretty high annual fee. However right off the bat you get 300$ in credit for any travel related purchase. So, any flight tickets booked through airlines, Uber etc. purchases count towards this. So effective fee is 150$ annually. Now question is if the other benefits are worth more than 150$. The card offers 3% in Ultimate Rewards(UR) points back on most dining and travel related purchases. You can also redeem these points for 50% more than the usual rate if booking flight tickets using the CSR UR portal giving effective 33% discount on prices.

Good for:

  • People who travel 2-3 times or more a year for pleasure/business. Usually car rental collision insurance is about 15-25$ a day. If you travel for just 8-9 days a year and rent a car. You are saving 180$ an year by not having to pay insurance at car rental counter. I do not know about you, but I like to be safe and insured when I am renting. I have had an incident where I also had to claim because of a rock chip struck my rental car. Check out my experience on claiming insurance damages here.
  • People who travel internationally 1-2 times or more a year. Most lounges are located in international terminals. Priority pass usually gets you in for free. You can have a meal, drinks and use facilities at these places at no charge. Layovers are now a lot more fun! The no FTF and trip delay and baggage insurance are also totally worth it! Visa cards being accepted at most places internationally makes it must have for international trips. On top of it, global entry will allow you to zip through immigration and customs.
  • Great card for travel and dining purchases to accumulate chase UR points.

Shortfalls:

  • Obviously, no point paying the fee if you do not travel or use benefits enough.
  • The fee 450$ seems too high for anyone new to credit cards. Many people don’t even think about paying any fee for having credit card. However, for reserve, I think the benefits far outweigh any fee you pay for it.
  • Needs good credit score. This card is a visa infinite product which needs at least 10000$ credit limit. So, chase would need to make sure your credit score is good enough to grant you that limit. Otherwise your application will be rejected. Usually people have success with scores around 700+.

Chase Freedom

Key highlights:

  • Has 5% cashback rolling categories every quarter. Like restaurants, grocery stores, amazon etc. up to 1500$ in spending. 1% on all other purchases
  • No annual credit card fee
  • 150$ worth of sign up bonus on 500$ in spend
  • Ability to pool points with the CSR ultimate rewards points into one account to get better reward redemption options.
  • Purchase protection up to 500$ per claim

This card is great card to have if you don’t want to pay any annual fee. I mostly use it for the 5% cashback categories it has. I find the categories like Amazon during year end apt and thoughtfully positioned. With a CSR card, this can even help you juice your UR points balance since you can combine them. Then redeem them for airline miles, hotel points or flights etc. using CSR UR account. You can even buy grocery store gift cards during grocery category quarter to last you the whole year and get 5% cashback. Similarly buy more gift cards at 5% cashback and keep using them throughout the year in other categories also.

Good for:

  • Beginners, newbies who are starting out don’t have a really great credit.
  • Great add-on card to someone who also has a CSR.

Shortfalls:

  • Not great for people who don’t want to get into cashback or points game. Or who don’t want to keep tracking which category is a bonus cashback every quarter.
  • Outside of the quarterly purchase category, cashback is only 1% which is quite less. Many cards offer 1.5-2% by default irrespective of the category.
  • Not too great for people who travel as this one doesn’t have many rewards in that category.

Discover It

Key Highlights:

  • 50$ sign up bonus
  • 5% cashback categories every quarter up to 1500$ in quarterly purchases
  • Best part is they double the cashback at end of the year. Essentially 10% cashback on quarterly categories for year 1
  • No annual fee

I like this card for the sole benefit of double cashback in year 1! But its worth it. They have categories like gas stations, grocery, warehouse clubs like Sam’s, Costco etc. Again, going by the same trick to buy gift cards of various places where you shop throughout the year, you can easily max out the 1500$ quarterly bonus spend. At the end of year, you get another 5% cashback to bring your total to 10%. I find this feature awesome since I can get 10% discount for a lot of things I need.

Good for:

  • Again beginners, newbies. This card is easy to get with modest credit scores.
  • If you can max out the 1500 in purchases using gift cards or other means, go for it.

Shortfalls:

  • Discover isn’t widely accepted outside of the US. So not great card to take on travels
  • Plus, no free foreign transactions also make it difficult to take for international travels.

Bonus Pro-tip with Credit Cards

Increasingly it as gotten more beneficial if you are loyal to a bank or company that issues a set of cards. Most companies have multiple credit cards in their line up. For e.g. Chase has the CSR, Freedom and Freedom Unlimited (which offers 1.5% cashback on every purchase). Ideally you can put your dining travel expenses on CSR. 5% category expenses on Freedom and everything else on Freedom Unlimited. This will probably maximize your cashback you get across most purchases you make daily. Its easy to remember which card to use when if you have only 3. The added advantage being you can at the end of day pool all points from Freedom and Freedom Unlimited to your CSR account. You can then use them buy flight tickets at 33% discount using Chase travel portal(benefit for paid card show above). Similarly, Amex has Platinum, Everyday Preferred cards which you can also use in conjunction to pool points maximize your daily spending etc. However currently because of difference in fees, benefits and general acceptance of Amex, I like Chase Visa cards better. If you follow this approach be mindful not to have all your eggs in 1 basket. Meaning only have credit cards from Chase and no one else. What if tomorrow Chase deems me as a customer which is not profitable or playing by their ‘rules’. Or if anything negative happens on my account and chase decides to sever relationship with me and close all my credit cards. That will probably impact my life in a huge way. Credit score will be impacted, normal purchasing will become difficult etc. So be sure to also get cards from other banks/providers and use them once every few months to keep active and build history if you decide to go this route.

In Conclusion

bets credit card girlAll the cards discussed above have some or the other sign up bonuses that come with them once you apply. But I did not discuss them much in detail. I really wanted to focus on usability/benefits of cards in the long term not just for getting a sign up bonus. Another thing to remember is that different banks/issuers have different rules. For e.g. Chase doesn’t allow you to get a credit card if you have gotten 5 in last 24 months. Amex doesn’t allow you to carry more than 5 personal cards from them. So bottom line, before you decide to apply for one of these cards make sure you understand the rules issuer has. There are plenty of websites like DOC,  TPG etc. dedicated to just credit cards and gaming the system to your advantage. You can look at these to understand more about the rules before applying. Lastly, do not go overboard and carry a lot of credit cards with you. Make sure to pay the bill on time every month and in full.

 

Disclaimer: None of the links, mentioned have my referrals. This is purely for informational and educational purposes. Most of these cards do carry a sign up bonus so make sure to get the highest one if you decide to apply.

August 22, 2018 0 comment
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PrinciplesTips & Tricks

Net Worth: What, why & how to track it

From my first article on being wealthy, we know Net Worth = Assets – Liabilities. Its a sum total of how much you are worth. It gives an idea about financially how healthy one is.

Why should I track my Net worth?

1. Important piece of data

Unless you do not sit down and find your net worth, you have no way of knowing how much wealth you have. You have no way of making any decisions that might help you grow wealthy. You have no idea if you are in deep trouble or are doing great for your age/situation etc.

2. Keep you on track to Financial Independence

How would you know if you are on your way to becoming financially independent or not? Its easily possible you are losing money every month and not realizing it. Tracking your net worth in fixed intervals allows you to be in check with the reality.

3. Make smart financial decisions

Do you know if you are in a healthy position to take a big loan? What if a big debt you have needs to be paid down faster or not because of high interest rate? Do you know if you need to increase investments in order to get higher return to get where you want to be? All these decisions require information about net worth. How much cash do you have on hand etc. Without knowing this information, its easily possible to make bad decisions and land in sticky situation few years down the line. Maybe you find you are spending way too much money every month. This might lead you to dig deeper to figure out where and how you can reduce that. Maybe that encourages you to start meal prep. Stop eating out daily. Reduce costs etc.

4. Makes you a businessman/woman

I strongly believe a house needs to be run as a business. Every few months family/concerned people need to sit down. Figure out the net worth. See how many accounts increased in value. See what went down in value. This would give so much more information to make decisions and move towards financial independence together. It gives you better understanding if an item is an asset or a liability. For e.g. if you keep tracking your car loan payments and car value using KBB every few months, it would help you realize you keep paying down your car loan amount every month. But the car value also keeps decreasing. You realize that car is taking money out of your pocket and reducing your net worth slowly. Many people keep on leasing a car every few years not realizing they keep paying money to do so. Reducing their net worth slowly and steadily.

5. Give encouragement and motivation to yourself

Once you start tracking your net worth. You start making smarter financial decisions. It just becomes way simpler to decide to take a loan or not, to go on a costly trip or not with that information in mind. You start spending money wisely once you understand your net worth needs to go up for you to become wealthy. When you track it and see that line going in the top right direction. It makes you feel good! Its gratifying! It encourages you to make even better decisions. Also gives you motivation to keep going! It can also give you great motivation to dig yourself out of debt if you have any.

How to track your net worth

There are lot of apps/websites on the market which allow you to sync all your accounts and track net worth. However, the process in each case is the same. You create placeholders/accounts for each type of item. Checking accounts, saving accounts, car loan, house mortgage, house value, car value, investments. Everything can have 1 account each. Then you group them into assets and liabilities. Some of the asset accounts would be checking, saving, investment accounts etc. Liabilities would be car loan, house mortgage etc. If you are having a hard time figuring out what goes under assets and what goes under liabilities. Do not worry. Most apps/websites already group this for you and ask you to just enter the information. After you have your assets and liabilities, you just subtract them to get your net worth. It’s that simple!

Manual or online the lazy way?

A plethora of apps like Mint/Personal Capital etc. give you the ability to simply connect your checking, saving, investment accounts directly to their app. This allows the amounts to be synced automatically. You do not have to do anything. While this sounds easier to do, I have a few issues with this approach:

  • Sometimes banks change their secured login API’s and most of these apps are not quick to change it on their end. What if your app tries to connect 2-3 times and bank ends up locking your account for this reason?
  • Secondly, I do understand that these type of connections for Mint to my bank account are very secure. They provide read only access, no one can make a transaction using that access etc. But, I still do not want to be in a position where some new sophisticated attack manages to take some other useful information using this type of connection. What if the bank refuses to acknowledge any fault if I am in a pickle, citing third party connections?
  • Lastly, I think doing it manually once every quarter forces you to be involved in the process. If you do an automatic sync, you are less likely to focus on it. With automatic sync, you might not even know when your net worth increased or decreased. Doing it manually forces you to take time out of your routine to sit and look up each account and enter the balance in the app/website. The more time you spend doing that, more you would think about it. It’s reinforcing the whole concept of tracking net worth to motivate and encourage yourself. That’s why I like to track my net worth manually every quarter.

How often to track net worth?

According to me one needs to do this manual exercise of going through all accounts once every quarter. It doesn’t need to be daily since that would be an overkill. You got to spend more time on other productive things. You do not want to do it only 1 a year, because by year 2 you would have forgotten about it. Doing it once every few months will force you to be in check with reality of your financial health. You can even start doing it once every month in beginning to get a more detailed idea of finances. After a few months you can switch to quarterly intervals. Again it is very gratifying to see your efforts and decisions take that net worth line to the top right in your chart.

My choice for tracking net worth: Personal Capital

Key highlights
  • It’s a free app/website on available for both Android and iPhone.
  •  Very easy to use interface to enter accounts manually.
  • Excellent charts/graphs to show your progress over time.
  • Connections to do real time sync with many different type of accounts. Although as I mentioned before I usually do not even use this feature.
  • In conjunction with above, it even has inbuilt portfolio, 401K analyzers. However, these again need you to connect your accounts to the service. So I don’t really use them. Since I do manual account setup.
  • The UI to look at charts and arrangement is great! I can easily say there is nothing else on the market with such great UI. Just look at some pictures below.
Shortfalls
  • Fair warning, once you reach a net worth of about 100K, Personal capital calls you to schedule advisor sessions with them. They make money using their advisory services which are totally optional. The app is completely free. I usually just politely decline such calls. But do understand that you will get them.
  • They even have a budgeting tool, which is a new feature and I think it still needs polish. But having said that again, I do not use this feature. I solely use this app to track my net worth. So, for me its not a big negative.

net worth 1

net worth 3

net worth 4

net worth 2

Here is a direct link to sign up for free.

In Conclusion

Some of us have performance reviews at work. We usually track our work done in the last few months and discuss that with our managers. Similarly tracking net worth helps you keep performing better financially. Smallest of financial decisions taken today will help you 10-15 years down the line. When you see your net worth in black or red, you are forced to face the reality.  It helps you keep grounded in your journey to financial independence.

 

Disclaimer: None of the links in this article are my referral links or affiliate links. I do not get any benefit of purchases you make. I have signed up and have found the app pretty useful for my own self and decided to share this with readers.

July 14, 2018 0 comment
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Tips & Tricks

How to lower your Cell Phone Bill

Cell phone bill is a huge drain on everyone’s wallet. Most US customers have monthly payment plans with the top three careers. These plans charge around 40-80$ per line per month for data. On top of this most charge you an additional 25-50$ per month for just buying the phone on installment plan.

cell phone bill high

Reduce Phone Installments to 0, go with NO contract!

In my opinion there is no need to buy a phone in installments. If you cannot afford to pay 700+ dollars for a phone outright. You don’t need to buy that phone on installments at all. Phone is just another liability like a car. Its depreciating asset whose value will go to 100$ or less in 2 years. Plans today like JUMP, NEXT etc. are designed to get money out of you every month. 1 year done? Time to upgrade to latest I phone. All you got to do is keep paying. Remember planned obsolescence from my article? Phones now a day are not created with good quality control. Most of them have some or the other issues. But it’s still possible to use them for 2-3 years if you want. So, there is no point in buying the best I phone for a 1000$ only to change it 2 years later. That’s like 1000$ down the drain. Saving money on phone is easy:

  •  Buy cheap phones from companies with good customer service because you are probably going to need it.
  •  Make sure you buy using a credit card that doubles your warranty. You will probably end up using later and the card company will service it for free.
  • Avoid buying the latest gen phone, buy a generation older instead. There is a small difference in specs and things phone can do between 2 immediate generations. Most of it is just software gimmicks.
  • Buy latest gen when you know you are getting a great deal as incentive when you switch carriers.

Reduce text/talk/data cell phone bill

Now lets come to the meat of the article which is cell phone bill for talk text & data. I have listed a few carriers which I really like and which are continuously innovating to help reduce the bill on your wallet.

Project Fi

Key highlights:
  • 20$ base + 10$ per GB of data monthly
  • Credit on next month cell phone bill if you don’t use all data on prorated basis. If you use only 300MB of 1GB you get back 7$ next month.
  • Same data rate internationally (3G-4G speeds) in over 170 countries.Check countries here.
  • Unlimited plan available to but I won’t recommend that.
  • Works only on few phones. Although they have added more options in all price ranges recently!

This is an offering from Google. They basically rent networks from Tmobile, US Cellular and Sprint. They have a smart tech that switches you from one network to another if a network is weak in your area. The switch is seamless, and I never had any problem with it. You can even do calls using your laptop and using your wifi on phone. It links to your Gmail account and you can do messaging off there too.

Good for:
  • People who have access to wifi most day so they can save on data daily.
  • People who travel internationally a few times a year.
  • Great customer support on any question related to billing,device support if bought from Google.
Shortfalls:
  • Limited number of devices that are officially supported.
  • 20$ for talk and text and 10$ for 1GB of data seem steep in today’s world of unlimited data.

Check out here to apply for Project Fi.

Tmobile

Key highlights:
  • Family plan with 4 lines costs only 40$ a month on Tmobile One, more people the merrier! (this is the only plan I recommend)
  • Can be reduced to 30$ cell phone bill every month using kickback on less than 2 GB data usage.
  • Gets you Netflix access for free on plan with minimum 2 people.
  • Tmobile Tuesdays has great deals that can get you a dough nut/movie tkt etc. for cheap every week.
  • They also provide 2G-3G speed data internationally at no cost in over 140 countries.

This is probably the only big carrier that has been innovating like crazy. The above-mentioned points make it really cheap to use Tmobile as your provider. Helps save money on Netflix as well! For almost 30$ a month you can easily get 2GB of data with kickback on a family plan per line making it even cheaper than Project Fi.

Good for:
  • People who will be able to create a plan among themselves.
  • Those who are judicious with data usage and can take advantage of kickback.
  • People who travel internationally since it gives an option to not buy a local sim.
Shortfalls:
  • Most customer service is usually nonexistent.
  • Sometimes the MVNO provider

Don’t forget the MVNO’s (Mobile Virtual Network Operators)

These are virtual network operators. Just like Google’s Project Fi, these networks rent out bandwidth from big 4 carriers and then let users use it. They in turn offer way cheaper prices and allow you to bring your own device. So you can buy a cheap phone online and use them. Since they rent networks from the big carriers, there is no problem with connectivity. I would suggest you check the coverage map on their website before signing up with them. Some of the best ones are Mint, Teltik, Ting(Tmobile Network), Redpocket(Works using all) or Cricket(AT&T).

My only warning is to make sure you check the coverage area on the provider’s website. Search online to see what network they rent from. Also make sure you know the phone you have is supported on that network(GSM/CDMA). People are usually hesitant to give MVNO’s a try but its easy to sign up and connectivity is great at insanely cheap prices.

Good for:
  • People who are a bit tech savy and know what type of phone is needed under BYOD plans.
  • Those who want absolutely rock bottom prices. Some of these plans start at 10$ for 500MB-1GB of data a month!
Shortfalls:
  • Most customer service is usually nonexistent.These are pretty small business that just lease the network. So don’t expect a great customer service, although the service at big 4 carriers isn’t great either.
  • Sometimes MVNO has  lower priority on the main providers network they rent. Usually this is very rare and too small to worry about or notice any difference.
  • Some advanced features like Wifi calling or texting from laptop may or may not be available. Maybe you don’t need those.

cell phone bill decision regrets

In Conclusion

If you are paying more than 35$ on your monthly cell phone bill then you are doing something wrong. Cell phone bill is another monthly liability which you should try to reduce as much as possible. Think about how you use your phone. Do you make a lot of calls for work or personal use? Do you just need data to check social media and browse internet during the day? Make sure to incorporate your daily habits into decision making. Make sure to buy phone without contract and choose a provider that allows unlocked phones and charges low. Hopefully the tips above help you reduce your monthly cell phone bill.

 

June 2, 2018 0 comment
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Tips & Tricks

High Interest Yield Saving Accounts

Ever since the great recession of 2007, interest rates on saving bank accounts have been close to 0. This means most of the emergency fund stays in accounts earning interest that barely beats inflation. However its pretty important to beat inflation and get better returns for your money. With that in mind, there are a few saving accounts which I have been using in last 2 years which give around 5% interest on savings with minimal requirements.

Insight Prepaid

This is an account that is managed by Republic Bank of Chicago and is FDIC compliant. So your money up to USD 250K is basically insured. This is a prepaid card which you can apply for using the process below.
Fee plan: Pay As You Go
Hard/Soft Pull: Soft
Transaction Fee: 1$ per transaction
Application link: https://direct.insightcards.com/
Avoiding Fee: 1$ ACH from external account to prepaid card every 90 days
Application Process:
The application process requires a little work but I have got it covered.
1. go to the URL and click the button to get started

saving_accounts_start

2. Enter your info and hit next

saving_accounts_step_2

3. Choose the pay as you go plan, since it has no fee and I am sure we do not want to pay any fee.

4. Enter info like your SSN, email and phone number and then hit next.

5. At this point, you may get an error message as shown below:

saving_accounts_step3

A lot of times they are not accepting new applicants and just show this error message. Try going back into the same url and starting the application again later, or from home, or a different network or on a week day instead of weekend. Usually trying to alter one of those things works to get in an application.

6. Once you proceed from previous step, you might get a screen with verification questions like the nearest street, hospital, older address to verify your identity.

7. After you answer those questions, you will get a confirmation page saying your application was approved and you should now wait for the card.

8. However here is the twist, even after waiting for 2 weeks, it’s possible you won’t receive your card. In such case, just call them up and let them know about your application. They might ask you to re verify your address and then send you a card. This seems like a process rather than an anomaly because the next time I again applied for another card I had to do the same, but I was able to get the second card.

9. Once you receive your card, go online and create your account.

10. Next find the routing number and using another checking account which you use rarely or your hub account, setup an ACH link. I would suggest using Ally, Discover or Alliant, those 3 accounts have not given me any problems with connecting to Insight. Other major banks like Chase/BOA have been known to cause issues or refuse to connect with an insight prepaid account.

11. Once the ACH link is established, go to account online –> there is an option to enroll in savings account. Enroll for that. This will then give you access to the 5% interest rate per annum.

12. First do a test transfer from Discover/Ally account to the prepaid card. This is free. Once you have the money in your prepaid card, try to transfer the money from prepaid to the savings account you enrolled for in previous step. This savings account is will earn 5% interest up to a maximum of 5000$

I currently have 2 of these cards and keep receiving the 5% APR interest at the end of every quarter without a problem. From various other online blogs, it seems like the limit is 4 cards. But after applying for 2 I have hit a brick wall to bypass the error page in step 5 online. But 2 accounts have worked well for me.

UPDATE!

So on further research I was able to get my 3rd and 4th Insight card with 5K limit on 5% interest rate. On the insight website, there is an option to search for local centers where you can load/get cards.

In the results you can look at the nearest center and go down there and request for a new insight card. Most of these are payday loan centers and ask for your personal info to keep in file for some time. If you don’t find any, look for check cashing places in your area and try to walk in and ask them about the insight card. These places are allowed to issue you 2 cards and will bring you up to 4 total cards.

HUGE UPDATE 23rd May 2018

So looks like Insight is no longer offering the 5% savings account attached with the prepaid card. To me it looks like they were paying the 5% interest rate by borrowing money from FED . As the interest rates started rising it probably costs way more to pay these interests now. From some people who called in it looks like existing accounts might receive the interest at 5% only till July. So we will have to see then if its worth having this account anymore after then. Looks like Netspend is the only account now that works for 5% interest and allows multiple accounts.

Things to remember:

  • To earn 5% your money should show up in the savings balance and not the prepaid balance.
  • You can only connect the prepaid account to your external hub/checking account.
  • Move money from external Checking Account –> Insight Prepaid –> Savings account. To withdraw money move the money in opposite direction.
  • There is a 3.95$ dormancy fee if you do not have a transfer or transaction on prepaid card every 3 months. Make sure to move 1$ from your external account to prepaid card every 3 months.
  • Since the transaction fee is 1$, make sure to never use this card as your shopping card. This card good only for earning 5% savings interest rate.
  • Create an ALLY/Discover/Alliant checking account first to move funds to Insight card. There have been reports on many other forums that Chase and some other major banks shut down/cancel the ACH link to prepaid cards. So its way better to setup the ACH link from one of the 3 banks I mentioned to move money.

Netspend

It’s another prepaid card which is offered by 2 big banks (Metabank & Bofi Federal Bank) in the US. Both these banks are FDIC compliant. So your balance up to 250K USD is safe.

Fee Plan: Pay As You Go

Hard/Soft Pull: Soft

Benefits: 5% annual APR on savings account up to 1000$ in balance.

Application URL: www.mynetspendcard.com

Avoiding Fee: 1$ ACH from external account to prepaid card every 90 days

Application Process:

It’s very simple, you input the details in the form and after you get approved and get your card you create an online account. After creating the account process is similar to Insight. You need to enroll for savings account that comes with the prepaid card. You will have to again connect your prepaid account using some external checking account. Ally, Discover, Alliant again seem to work very nicely with Netspend accounts.

Things to remember:

  • To earn 5% your money should show up under savings account balance and not prepaid account balance.
  • You can only connect the prepaid account to your external hub/checking account.
  • Move money from external Checking Account –> Insight Prepaid –> Savings account. To withdraw money move the money in opposite direction.
  • 5.95 inactivity/dormancy fee, so make sure to do a 1$ ACH in from your external account to your prepaid account every 3 months
  • Since the transaction fee is 1$, make sure to never use this card as your shopping card. This card good only for earning 5% savings interest rate.
  • Similar to last point in previous section, setup a Discover/Ally/Alliant checking account to link to prepaid cards.

Here’s the best part. You can open 6 of these cards each with 6 savings accounts under them having 1000$ each earning 5% annual savings interest. The only condition is that you cannot have more than 3 from the same bank partner (Bofi or Metabank). So you can go for the following cards(clicking the picture takes you to the application form):

Metabank Bofi Federal Bank
netspend saving accounts std brinks saving accounts
wu saving accounts heb saving accounts
711 saving accounts  

 

 

So if you get 4 Insight cards and put 5k on each and 5 Netspend cards and 1k USD on each you will be earning 5% annual saving accounts interest on 25K which would work out to 1250$ in interest every year! Whats even better is your partner/so can also get another 25K at 5% with accounts on her/his name.

April 1, 2018 0 comment
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PrinciplesTips & Tricks

Car buying: New, Used or None at all!

Never buy a new car PERIOD. Its a completely needless expense you will take which is almost guaranteed to drain money out of your pocket. First up let’s look at a graph of car’s value and car loan payments after its bought new. Let’s try and track it along the course of its lifetime. I am mostly using the cars values from public sources and websites and trying to plot them on a graph:

car used new graph

Let’s say you paid 2k$ down for a new vehicle(total price = 20K). We see that the moment you buy a new one and drive it off the lot. Its value decreases by at least 10%.  What you will find is its already worth 18K if you try and sell it back to the dealer same day. Talk about a liability taking money out of your pocket! If we keep plotting your monthly car payments as expenses, you can see how your expense on the car keeps going up and up and look at the value of the car as it keeps slowly decreasing year by year. Over years 3-5 its already lost about 40-50% of the value of the new car! All these expenses are just monthly loan installments. We have not even included any car repairs or insurance payments at all in the above graph. So, when you take all those expenses into account, I hope you do realize that buying a brand-new car is just draining your hard-earned money down the hole.
Instead you can simply buy a car that’s 3 years old and still get same level of performance and it depreciates a lot slower as compared to a new car. I personally got a 3-year-old Camry from a third party dealer which has worked out really good for me so far! I still use it and have had barely any problems. Any small repairs I do myself like changing aux ports, filters etc. and haven’t really had to spend too much on any major repairs.
When it comes to lease, what you are paying for is that high rate of depreciation on the vehicle. The 160-200$ payments which look pretty good at the start make you only pay for the fast decreasing value of the vehicle. Once at the end of the lease you decide to say buy the car, the manufacturer will ask you for 300$ monthly payments now not your 200$ payments!
With all this in mind, I can only say that we should realize that a car is a liability in the long run whose value is almost always bound to go down to 0. A car is probably the second largest purchase you will make. In order to be wealthy as we know we need to have more assets than liability! So ideally, we should try to reduce as much as possible of this liability and here are some alternatives:

1. Used cars

Instead of getting a brand-new car, 3-4 years old used cars are often reliable. Cost very less and do not have many expenses at all. I personally got a 3 year old used car which has barely given any problems. It has worked real good so far! I do minor repairs like aux port changes, filter changes myself. Then take it for inspection once a year to see if I need any changes.

2. Public transportation

If you live in big cities like New York, Chicago or Seattle, you should make use of the public transportation system. I even have a few friends in cities like Houston and Dallas that are not that much known for their transportation. But they have been able to make really good use of public transportation for their day to day routine.

3. Uber/Lyft

These days ride sharing apps are all the buzz. Its possible to use these apps and completely give up your vehicle. If you add  expenses for your vehicle like insurance, monthly payments and fuel costs. Most of the ride sharing apps have monthly ride passes which are very cheap. They also offer very competitive discounts since they are new. You may be surprised to know sometimes using ride sharing apps is a better option then owing a car.

 Let me know in the comments if you have any questions or how your car buying experience went!

February 13, 2018 0 comment
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Tips & Tricks

How to take advantage of Credit Cards?

credit cards picI keep hearing from my friends and reading from a lot of articles that we should avoid using credit cards. Most of them suggest that use of credit card essentially means using money which you don’t have. Credit cards incite you and encourage your spending behavior. They make you careless about your lifestyle and finances. Before you realize you will be falling down the credit card debt spiral.

I do agree to most part, however I do have few reasons on why to use credit cards and how to use them. By being more efficient in using them and learning to control your habits, you can bring them on your side. Credit cards can then not only help you get a better credit score but sometimes also help you achieve some financial and personal goals.

Here are some of the reasons you should use credit cards

  1. No liability

    Most of the credit cards today offer zero liability protection. This means if your card details are hacked (which believe me happens way more often than you think). You find unauthorized transactions, you can just call the credit card company and get those charges disputed. You will never end up paying for those fraudulent charges. Some debit cards do offer this protection. But I think it’s easier to get this processed through a credit card company. Debit card provider may take a lot of time and leave you without some cold hard cash in the moment.

  2. Fee free foreign currency Transactions

    When you travel outside US, you need some form of payment. You can withdraw money from local ATM or maybe carry cash to the country by changing it at a bank. That works if you are visiting a country where primary form of payments is cash. But downside is you get hit by bad transfer rates and fees especially at ATM’s. They are notorious for this. Credit cards again come to the rescue by providing fee free transactions in foreign currencies at almost little to no extra cost. Usually banks that provide credit cards add a very-very small commission rate on top of the prevalent exchange rate between your card currency and the foreign currency. You always come ahead as compared to if you withdrew cash at ATM. One thing to remember is to always ask the merchant/cashier when traveling to charge your credit card in local currency.

  3. Rewards!

    Credit card companies earn money on transactions by taking a cut from the vendor when you swipe your card. They then offer you a fixed or variable amount of rewards in form of cashback or points. There is a whole world of information out there that deals with cards to maximize these rewards. I will probably not go into details of that here. But I can tell you using these rewards I have not bought a flight ticket out of my own money in the last 3 years. Just by making use of credit card rewards systems. I have been to many places domestically, internationally without having to pay anything out of my pocket. Shopkeepers usually markup and charge all customers extra in order to compensate for the 2-4 % cut of every transaction that the credit card company charges them. If you are not using a credit card and earning the cash back. You are just using your debit card/cash to pay for someone’s processing fee and not getting any rewards in return!

  4. Purchase protection/Extended warranties

    Many credit cards now come with purchase protection and extended warranties for most of the electronics you buy. These features have helped me get out of pickle many times now. I have bought smartphones from some companies that have just randomly stopped working after 13 months. I found myself out of warranty with the manufacturer (and believe me this was a very big company). They refused to help me since I was out of the standard warranty. Luckily I bought this phone using a credit card which provided extended warranty. All I had to do was just ask the manufacturer for an estimate and send that estimate to the credit card company. They reimbursed me that amount and my phone got fixed. I think this is a very big advantage and I highly suggest readers to use credit cards to purchase electronics. Companies are practicing planned obsolescence to force you into buying more and make profits.

  5. Rental Car Insurance

    A lot of credit cards come with collision coverage for when you rent a vehicle on a trip. You need to make sure that the coverage your credit card offers is primary. This will come into effect without going through your own car insurance. Many cards offer this. I think this is an excellent advantage for people who travel a lot. I will write a detailed article on this later.

  6. Better organize finances!

    When you pay by debit cards or cash, you pay then and there. Money is gone from your account instantly. When you pay using credit cards, you pay the credit card company on or before your payment date. But the transaction may have taken place 20-30 days before you made the payment. How to take advantage of this? You can ask your credit card provider to change your payment dates, so that you pay your credit card bills after you get paid from work. You can then organize your purchases on different cards with different payment dates. If you get paid twice in a month then it becomes even more easier because you can put your next purchase on a card that always has a later payment date!

  7. Building Credit!

    This is probably the most basic features of credit cards. If you are young, starting out on a job and no credit history. Credit cards usually help to build credit history real fast. You must obviously utilize your card very carefully. Always pay of balance in full before due date. Never carry any leftover balance. Try to clear the balance even before it hits your statement to take your utilization lower. Eventually this helps you in getting better interest rates when you go out to shop for cars house and whatever!

In Conclusion

So, with all this in mind, I do highly request readers to use credit cards. Before you go though, I would like to also write up a short note on self-control. I do believe credit cards encourages spending and makes it easier. However, we all must exercise self-control. I can only go as far as to give you tips on why to use credit cards. Maybe even how to become better in managing your money and growing it further. All of these steps require you to exercise control over your temptations which at the end of the day are the exact things keeping you from becoming financially independent and allow you to pursue other goals which bring you more happiness!

 

February 10, 2018 0 comment
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