Last week on 6/1/2011, I requested quotes from two brokers and two banks to refinance my 30-year fixed jumbo-conforming mortgage. The criteria for my refinance is that it has to be no-point and is either no-cost or has very low-fee.

Broker H

I have worked with broker H for previous refinances before. She quoted me a rate of 4.375% with a 0.375% fee.

Broker A

This broker was recommended to me from a co-worker. She told me the rate was 4.375% with no-point and no-fee at that particular instance, but the rate was valid only on that day and it was already too late to prepare the documents to lock in to that rate. She requires an upfront $25 for the credit report and another $50 to submit the loan (which will be reimbursed at closing).

Bank of America

I received a quote of 4.75% for a no-cost no-fee loan. My current loan is 4.625%, so this option is a no-no.

First Internet Bank of Indiana (FirstIB)

Based on many good reviews, including that from TheFinanceBuff, I have been watching the online rate quote from FirstIB. The online rate quote on this particular day was 4.375% with ~$1200 fee.

What I did

I decided to wait for a better rate from the brokers, and at the same time, to submit the application with FirstIB and wait for the right moment to strike.

FirstIB does not charge a fee to submit the online application, so it was a relatively easy decision, with the only “cost” being a hit on my credit report.

I submitted the online application with FirstIB’s Gary (who has received many good reviews). I received a call back from Gary about 3 hours later. He told me the rate had improved after my application was submitted, and the new rate was 4.375% with a $5000 credit. This credit can be used to pay for the closing costs (estimated to be $3000), with the remainder going into the impound account to pay for future property taxes and insurance.

Since this mortgage rate and fee scenario met all my criteria, I locked the rate with Gary on the spot. Gary told me that he expects the refinance to close in 25 days.

I am keeping my fingers crossed and will post the timeline once my refinance with FirstIB is completed.

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• January 17, 2010 — Refinance Completed (2)
• November 5, 2009 — Refinance Still In Progress (0)
• September 29, 2009 — Refinance Started (1)
• January 19, 2010 — Junk fees in AT&T landline service (0)
• November 16, 2009 — Reverting back to using checks instead of ACH (1)

When I examine the bill closer recently, I find lots of fluff and taxes in the bill. Of the $15.01 bill, $7.28 is the cost of the “measured” service (I do not pay any additional toll charges) and $7.73 is the cost of taxes and all the other fluff, including

• federal subscriber line charge,
• rate surcharge,
• state regulatory fee,
• federal universal service fee,
• CA high cost fund surcharge-A,
• CA high cost fund-B,
• CA advanced service fund,
• California teleconnectFund surcharge,
• CA relay service and communications devices fund,
• local government fee,
• 9-1-1 emergency system,
• federal fees and tax, and
• local fees and tax.

That’s right, 51.5% of my payment went towards paying taxes and junk fees; only 48.5% is the actual payment for the service. Except for the 9-1-1 fee of $0.04, I consider the rest junk fees. Something is wrong here.

I have identified my land line replacement and I am now testing out the service. The replacement is essentially a VOIP (voice-over-IP/internet) service. Once I am happy with it, I would port my existing number over and rid myself of these junk fees!

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• June 6, 2011 — Refinance Started With First Internet Bank (3)
• January 17, 2010 — Refinance Completed (2)
• November 16, 2009 — Reverting back to using checks instead of ACH (1)
• November 5, 2009 — Refinance Still In Progress (0)
• September 29, 2009 — Refinance Started (1)

The following is the timeline:

• Week 1 :9/28 Mon: Applied for Star One’s 20-year fixed loan at 4.75%.
• Week 1: 10/2 Fri: Star One’s 30-year fixed mortgage dropped from 4.875% to 4.75%.
• Week 1: 10/3 Sat: Instead of re-locking the rate, I applied for a new 30-yr 4.75% mortgage with Star One. This cost an additional $12 for the new credit reports. Re-locking the rate would have cost me $250.
• Week 2: 10/6 Tue: Sent off the check to Star One to pay for the appraisal. Also faxed in some supporting documents.
• Week 2: 10/7 Wed: I wanted to use an online title company EntitleDirect.com. However, the processing officer from Star One informed me that Star One’s policy is that the signing must be done in a title company office. Consequently, I dropped the idea of using EntitleDirect and picked Chicago Title, the title company which closed my previous refinance with Bank Of America.
• Week 2: 10/10 Sat: House appraiser called to set up appointment for the house appraisal.
• Week 3: 10/14 Wed: The house appraisal was done.
• Week 4: 10/22 Thu: Appraisal report was posted online. Valuation is slightly higher than I expected.
• Week 5: 10/30 Fri: Emailed the underwriter. She said that they were swarmed with applications and were currently processing applications from the first week of September.
• Week 6: 11/02 Mon: I raised my concerns about the 60-day rate lock. The underwriter replied that the rate would be kept for me if they were unable to fund by the rate lock expiry date.
• Week 10: 12/01 Tue: No additional progress were made in the month of November. On 12/1, Underwriter informed me that they would be processing my loan the coming week.
• Week 11: 12/07 Mon: Received email from underwriter that my loan was approved.
• Week 11: 12/11 Fri: Loan processor informed me that they were requesting the list of fees from the title company.
• Week 12: 12/14 Mon: Escrow officer sent the list of fees to Star One for approval. Loan docs prepared and sent to the title company.
• Week 12: 12/15 Tue: Received closing statement, revised it and set appointment for sign-off on the next day.
• Week 12: 12/16 Wed: Sign-off the refinance in the title company’s office. I requested that the funding and closing dates not to straddle over a weekend. For the reason, read this post by TFB.
• Week 12: 12/19 Sat: End of three-day refinance rescission period.
• Week 13: 12/22 Tue: Star One funded the loan.

In total, the closing costs came up to be around $2100. The title charges (escrow +  title insurance) were about $1400, loan fees (appraisal + loan application) were around $600, and about $100 was charged by Bank of America to close out the old loan.

Overall, I am happy with the new rate but wished that the entire process could have been much shorter than the 12 weeks it took.

Unlike some who suggest to pay down the mortgage whenever possible, I plan to keep this mortgage to the full term. At the fixed rate of 4.75%, I am pretty sure I can find better opportunities elsewhere for any excess money that I have.

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• November 5, 2009 — Refinance Still In Progress (0)
• September 29, 2009 — Refinance Started (1)
• January 19, 2010 — Junk fees in AT&T landline service (0)
• November 16, 2009 — Reverting back to using checks instead of ACH (1)

Depositing money at brokerages

TD Ameritrade offers a very fast ACH system for funds transfers. Recently, after setting up two new links to my bank accounts, I used the system to move some money from one account to another. That however seemed to trip them up and their compliance department sent me a secure message telling me not to use their ACH system to transfer money. In addition, they pointed out that, at their discretion, money pulled in using their ACH system can be held for up to 60 days before I can withdraw it.

Funds deposited electronically may be withdrawn three (3) business days after settlement date. However, all electronic deposits are subject to review and may be restricted for 60 days.

If I sent them a check, the funds can be withdrawn in six business days; there are no further restrictions after six business days. If I use ACH, there could be restrictions for up to 60 days.

Transferring money

My current paycheck goes into the Fidelity mySmartCash account. I had setup the mySmartCash account a few years ago for its very good BillPay system and availability of market rate money market funds. But now that the market rate for money market funds is very low compared to online savings accounts, I have been pulling out any excess money and moving them to the savings account (I am using Alliant Credit Union’s savings account) whenever my paycheck is credited. (I know I know, I should update my direct deposit instructions…).

To transfer the money, I do not use Fidelity’s ACH system. Instead, I write a check against the mySmartCash account and deposit into one of Alliant CU’s network of ATMs. The result: I start earning interest on the day of deposit (say Thursday). The mySmartCash account is debited only on the following Monday.

Similarly, when I have money to transfer out from TD Ameritrade, I write a check against that account and deposit it into the Alliant’s network of ATMs. I no longer use TD Ameritrade’s ACH system.

Paying for taxes

To pay for state and federal taxes, I used checks instead of ACH. This gives me additional float of the funds before the debit.

Conclusion

On surface the ACH system is a very efficient means of money transfer, however because of its relatively lack of security for the bank “pulling” the money, many financial institutions have chosen to impose limits on these transactions. Some of the liability issues are discussed in the following post on BankDeals:

If a bank initiates an ACH credit to another bank, that ACH credit cannot be recalled. So if a bad guy somehow got into a Provident account and transferred all the money out, Provident would be liable to the account holder (assuming it was a consumer — not a business — account) and it would have no easy way to get the money back from the bank to which it was sent.

On the other hand, if another bank initiates an ACH debit from a Provident account, then NACHA rules allow Provident to reverse the transaction — no questions asked — for 60 days if they can produce a Written Statement Under Penalty of Perjury (WSUPP) from the account holder. They are under no obligation to investigate the legitimacy of the WSUPP.

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• March 21, 2011 — Low Fees Foreign Exchange Using CurrencyFair (Part 2) (1)
• March 12, 2011 — Low Fees Foreign Exchange Using CurrencyFair (Part 1) (1)
• January 19, 2010 — Junk fees in AT&T landline service (0)
• January 17, 2010 — Refinance Completed (2)

According to the loan officer, they are currently processing applications submitted in the second week of September. They will reach my case some time near the end of this month. I asked about the rate lock expiry (60 days). The loan officer told me that they will honor the rate if they could not process the loan by the lock expiry date.

I sure hope she is correct.

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• June 6, 2011 — Refinance Started With First Internet Bank (3)
• January 17, 2010 — Refinance Completed (2)
• September 29, 2009 — Refinance Started (1)
• January 19, 2010 — Junk fees in AT&T landline service (0)
• November 16, 2009 — Reverting back to using checks instead of ACH (1)

If I remember correctly, the increase in May 2009 was due to the increase in the tax bracket from 9.3% to 9.55%. This led to the corresponding increase in withholding from 9.3% to 9.55%. This is a reasonable change (I am just saying that the change in withholding is logical; NOT that the increase in tax rate is in any way logical in a recession).

Above: Tax withholding rates (before 11/1/09)

Above: Tax withholding rates (from 11/1/09)

In the most recent increase, the withholding rate was increased by 10%. For most people, this  increases the withholding from 9.55% to 10.505%. There is no logical reason behind this; the only reason for this was that the state government wants an interest free loan from the tax payers.

Below are some comments reported in the LA times regarding this change:

“Many families are sitting at their kitchen table wondering how they’re going to make ends meet,” said state Sen. Tony Strickland (R-Thousand Oaks). “At the same time, the state of California is taking a no-interest loan.”

Such temporary measures as the withholding tax increase don’t really fix the budget gap, “they just more or less hid it,” said Christopher Thornberg, a principal with Beacon Economics in Los Angeles. “I call it a fraud.”

But there is a way out of this:

Savvy taxpayers can get around the state’s maneuver by increasing the number of personal withholding allowances they claim on their employer tax forms, said Brenda Voet, a spokeswoman for the state’s Franchise Tax Board.

“People can get out of this,” she said, noting that most people would have to change their allowances through their employers. California’s budget leaders are banking on the hope that most won’t.

This is exactly what I did. I submitted the DE-4 form to slash my additional state tax withholding to zero and added the corresponding allowances as provided by the withholding guidelines. This will bring me very close to the 90%-mark for the amount of taxes to be withheld without paying an under-withholding penalty come April 15, 2010.

If you are in a situation to already receive a refund next year, take some time to update your withholding by completing the DE-4 form

http://www.edd.ca.gov/pdf_pub_ctr/de4.pdf

For all you know, as it already happened this year, when it is time to get your refund, the state might not even have the money to pay you and you will get an IOU instead. I would rather owe the state money than the other way round.

Additional links

[1] http://www.bogleheads.org/forum/viewtopic.php?t=45134&mrr=1257174149

[2] http://online.wsj.com/article/SB10001424052748703932904574511923279377100.html

[3] Sign the petition to repeal this additional withholding — No to Sacramento!

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• May 27, 2009 — Don’t be too quick to fleece the wealthy (1)
• July 22, 2008 — Running out of tax-deferred space (2)

I had already obtained quotes directly from the big banks (Bank of America, Wells Fargo & Chase) but most of their rates included an one point fee (which I do not want). And even with that, their rates were not very competitive.

I also obtained several quotes from brokers using Zillow’s online mortgage quote system. One of the quotes actually looked promising and I got to talk to the broker who called back quite promptly. His quote (for 9/28/09) was:

• 30-yr fixed, “conforming” loan (<$625.5k) @4.875% with zero point. Fees $2800 ~ $3000 out-the-door.

By “out-the-door”, he meant that it included lender fees plus title charges and recording fees (but excludes prepaid items like home insurance or interest). This broker had a handful of reviews, most of which were good. But one negative was that the loan required impounding for property taxes and insurance. To waive this,  an additional fee of $780 was required, bringing the total closing costs to $3600 ~ $3800 (note: my LTV or loan-to-value, is below 70% so a high LTV was not the reason for the impound).

I then looked at the credit unions in my area (San Francisco bay area). The most promising rates were from Star One credit union. Their rates yesterday were:

• 30-yr fixed “conforming” loan (<$625.5k) @5.00% with zero point.
• 20-yr fixed, “conforming” loan (<$625.5k) @4.75% with zero point.
• 15-yr fixed, “conforming” loan (<$625.5k) @4.375% with zero point.

Their estimated “out-the-door” closing cost is around $2000. This closing cost number is quite accurate according to a friend who closed a mortgage with them last year.

I crunched some numbers to compare the three options. This is illustrated in the figure below:

The 20-yr mortgage requires 20% more monthly payment than the 30-yr mortgage but gets paid off 10 years earlier. The 15-yr mortgage requires 41% more monthly payment compared to the 30-yr mortgage but gets paid off in half the time. Given the relatively high discount (25 basis points) in going from 30-yr to 20-yr yesterday, I decided to apply for the 20-yr fixed mortgage.

As I already had an account with Star One, it was a relatively painless process to apply for the mortgage. Everything was done online, and I was charged $12 for the credit reports (paid by credit card). I was approved instantly by the online system and I locked in the rate on the spot.

According to the warning in the online application, mortgage applications with Star One are taking an average of four to six weeks to close. We will see how it goes.

Addendum

By the way, the rates for Star One today are

• 30-yr fixed, conforming jumbo loan (<$625.5k) @4.875% with zero point.
• 20-yr fixed, conforming jumbo loan (<$625.5k) @4.75% with zero point.
• 15-yr fixed, conforming jumbo loan (<$625.5k) @4.375% with zero point.

On hindsight, there is a 50% chance that I might have picked the 30-year fixed mortgage if I were to lock today. 

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• June 6, 2011 — Refinance Started With First Internet Bank (3)
• January 17, 2010 — Refinance Completed (2)
• November 5, 2009 — Refinance Still In Progress (0)
• January 19, 2010 — Junk fees in AT&T landline service (0)
• November 16, 2009 — Reverting back to using checks instead of ACH (1)

Here’s the timeline:

Random list of previous posts:

Recently, on the Bogleheads forum, there is a long discussion weighing in this issue. I think it is quite a balanced discussion with many issues raised and debated. HERE is the link to the discussion.

I end this blog entry with a post by nisiprius:

First of all, every source of unbiassed advice I’ve ever read, starting with Consumer Reports in the 1960s, says it is better to “buy term and invest the different.” Nobody has ever recommended whole life except someone who was selling it.

Now, yes, the “enforced savings” feature of whole life is a Good Thing. So you should make sure you really do “invest the difference” by setting up some kind of automatic deduction from your paycheck that goes into some kind of investment account. Believe me, this is easy to do. Any mutual fund company or brokerage will fall over themselves with happiness to make this easy for you.

There are two reasons for this. First, term life insurance is pure protection, and you can only get it from an insurance company. Whole life is a combination product which mixes up the insurance you need with an investment component. There’s nothing magic the insurance company does with the investment that you couldn’t do better yourself, the investment may not be quite what you need/want, the insurance company always rakes in more than the expense ratio of a good mutual fund, and you’ve pretty well locked yourself into the investment for no good reason.

The second reason is that most people can afford enough term insurance and can’t afford enough whole-life.

Remember that the need for life insurance is temporary. Once the house is paid off and the kids are through college and you’ve got a few years’ salary saved, you don’t need life insurance any more. The purpose of life insurance is to provide an instant estate for your dependents if you die before you’ve managed to accumulate enough to provide for them. As the kids grow up, fewer dependents. As you accumulate, eventually you have enough, and your spouse does not need the protection of life insurance.

The cost of term life insurance does increase as you age and starts to skyrocket somewhere around age 55. But that’s not a problem because it doesn’t cost much and you usually can afford to pay the higher premiums as your career advances. The time the premiums become really huge is about the time you don’t need the insurance.

Oh, a tip: buy several smaller term policies, not one big one… because there is a point at which you both need less and can afford less, but still need some, and it’s helpful to be able to cancel the policies one at a time, instead of all at one [once].

Having said all that, buying whole life is not the worst thing in the world that can happen to someone. I think, yes, you should bail if you still can. I think you should buy term and invest the difference.

Yes, if the insurance agent is any good he or she will manage to make you feel lousy about it. Tough it out.

Random list of previous posts:

I first read about Obopay from Jonathan’s MyMoneyBlog. I went for it, applied and got some free cash out of it. However, I could not really find much use for the account.

Yesterday, I received a letter in the mail saying that they are adding a $4.95 monthly maintenance fee to the account starting from Nov 27, 2007. Since I am not using the account much, I logged in, removed the links to my credit card and banking account and sent them a request to cancel the account immediately.

If you have signed up for Obopay but are not actively using it, you might want to consider cancelling the account to avoid the rather hefty monthly fee.

PS. I think the monthly fee is only if you have the debit card (which I do). It might not affect people who do not have the card. Please check the new terms and conditions.

Random list of previous posts:

One of the many decisions to make is whether to contribute to the flexible spending account (FSA) and the related dependent care FSA. For many people, it usually makes sense to contribute to the FSA to save on taxes if the employer offers them. In my opinion, I think enough has been written on the tax savings if one were to contribute to the FSA. So, no, this post is not on this issue; rather, the aim of this post is to examine which income earner, in a double income family, should contribute to the FSA.

In a double income family, where the couple are both working and eligible for the FSA, a common question is who should contribute to the FSA? Like most people, I used to think that the person with the higher income should bear more responsibility in contributing to these accounts. However, on closer scrutiny, I find that from the tax standpoint, this common sense is actually incorrect.

Although it seems counterintuitive, it actually makes sense for the lower-income earner to make the contributions if we take into account the social security tax income limits. This is assuming the case where one income earner has an income above the social security tax income limit and the second income earner has an income that is below the income limit. I shall illustrate why this is so with an example.

The following table is an example for a hypothetical couple for year 2008 (the social security income limit for 2008 is $102,000):

In the above example, the couple earns a income of $200,000 in total. Assuming that they both plan to maximize the 401(k) contributions and the full FSA elections, scenario 2, where all FSA deductions are made from the lower income earner, results in a lower social security tax by the amount of $620.

The reason is because every dollar deducted from the lower income earner for the FSA account results in a 6.2 cents social security tax saving; whereas no additional social security tax savings is possible with the higher income earner since the social security tax is max’ed out at the income level of $102,000 anyway.

Note that in general, the above strategy would also give state tax savings if there are certain state taxes that max’es out at a specific income level. Therefore it is worthwhile to examine these deductions and plan them accordingly.

Random list of previous posts:

http://www.ebates.com/refer-a-friend/bonusoffer/index.htm?id=29080946

Update 12/2/07: The new promotional link, which expires on 12/31/07, is shown below:

https://www.ebates.com/refer-a-friend/signup/holidaybonus/index.htm?id=29080946

Update 10/31/07: I just realized that there is another promotion. This one lasts until Nov 15, 2007. The link remains the same.

I last wrote about the Ebates promotion in Feb 2007. The promotion for $10 signup bonus is now on again until Sept 15, 2007. Click on the following link to sign up if you are interested :

http://www.ebates.com/doublebonusoffer/index.htm?id=29080946

Note: If there is a problem with the link, send me an email (see “Contact Me” on the right) and I will send the referral directly from Ebates.Disclosure : The same bonus would also be credited to my account.

Random list of previous posts:

It looks like Fidelity will be rolling out a new checking account soon (rumored to be August 1, 2007). This account will be very similar to Charles Schwab’s checking account, with no minimum balance, free checks and ATM rebates. The link to Fidelity’s myCash account states the following features:

• 3.50% APY, higher than most checking accounts
• Free ATM refunds⁴-if you pay a fee, we’ll pay you back
• No account minimum balance or nuisance fees
• Free state-of-the-art online Fidelity BillPay^®
• No annual fee Fidelity Investment Rewards Visa Signature^® credit card lets you earn points that can be redeemed for cash into a mySmart Cash Account^SM at a 1.5% rate.²
• Free ATM/debit card
• Automatic and on-demand transfers between a mySmart Cash Account and a bank (EFT) or brokerage account
• Self-funded overdraft protection — link to other Fidelity brokerage accounts to automatically prevent bounced checks and cash shortfalls automatically
• Free automatic investing option schedules cash transfers from your bank to a Fidelity brokerage account to purchase mutual funds.

Additional reference: LINK to the FWF discussion.

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1. While the APY is moderately competitive (currently 4.5%), even better alternatives are available.
2. The above APY is limited to the first $25k only. The APY beyond $25k drops significantly to 2.75%. This makes the consolidation of liquid reserves troublesome.
3. Direct deposit is required to earn the 4.5% APY interest rate.

I looked and compared offerings from several online banks and even brick & mortar banks in my area. In the end, I decided to move my main checking needs to Fidelity brokerage. The following are the reasons:

1. Balances earn top yields using Fido’s money market fund (MMF). I use FSPXX, a California AMT tax-free MMF. For me, this fund spots a higher yield than even Vanguard’s MMF after taking AMT into consideration. (Note: Non-core MMFs might have minimum balance ($2000) fees but this can be easily avoided by enrolling into an auto-investment, typically $100 every 3 months or something like that).
2. Free and extremely fast (next business day) ACH transfers to linked bank accounts. Many banks and even Vanguard have much slower ACH processing times. In addition, there doesn’t appear to have a limit to the number of ACH links that I can set up.
3. Money can be transferred using ACH from external accounts. For example, from the Vanguard website, I can pull money out from the Fidelity account into Vanguard. Note that you typically cannot do this with MMFs. For example, you cannot pull money out from Vanguard’s Prime MMF from an external institution. (Note: There is an offering from Vanguard that let’s you do this for free but you need to have at least a million dollars with Vanguard to get it).
4. Unlimited check writing with no check minimum amount limitation. Most mutual fund’s MMFs have check writing minimums, for example this is $250 for Vanguard MMFs.
5. Free Billpay through the CheckFree system (one of the better billpay systems).
6. No direct deposit requirement.
7. Check card provided (moot point, since I do not intend to use it).

There are a few negatives that I can think of. These are

1. Lack of ability to deposit paper checks easily; for that I use a savings account (APY 5%) at a local credit union.
2. Need to manually buy into FSPXX. Otherwise, any money deposited goes into FCFXX which has a lower yield. This is usually not a problem since whenever I submit an ACH-in, I would submit a purchase request for FSPXX at the same time. Note: sale of FSPXX to cover debits (e.g. ACH withdrawals, checks, billpays, etc) are automatic.

Bonus : At the time of this post, Fidelity is still offerring a $100 sign-up bonus for new households with a $10,000 deposit. Link HERE.

Related internet resource : FWF’s Fidelity MMF discussion.

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Recently, I decided to investigate the feasibility of direct depositing my paycheck into a Vanguard MMF. On closer look, I found out that it does not really pay to direct deposit my paycheck into the MMF, especially if the paycheck is credited on Fridays. The reason is as follows.

According to the MMF’s propectus,

For an electronic bank transfer (other than an Automatic Investment Plan purchase): A purchase request received by Vanguard on a business day before 10p.m., Eastern time, will have a trade date of the following business day.

Earning Dividends

You begin earning dividends on the business day following your trade date. When buying money market fund shares through a federal funds wire, however, you can begin earning dividends immediately by making a purchase request by telephone to Vanguard before 10:45a.m., Eastern time (2 p.m., Eastern time, for Vanguard Prime Money Market Fund).

With my paycheck being on Fridays, the trade date on a direct deposit would also be Friday, which means that the money will start earning dividends only starting from Monday. This was separately confirmed by a secure message from Vanguard’s CSR :

Dividend accruals for new purchases begins on the first business day following the trade date. So a purchase made on a Friday would begin earning dividends on Monday.

What this means is that by direct depositing my paycheck into a MMF with Vanguard, I would lose the interest on Friday, Saturday and Sunday compared to the case if the money had instead been deposited into a bank account.

On every $1000 of a paycheck, the additional interest (assuming 5.3% yield before tax) is worth about (3 * 26) days / 365 days * 5.3% * 1000 = $11.33 a year (my paycheck is biweekly). If you are a two-income family, this amount could add up quickly.

Accordingly, I dropped the idea of direct depositing my paycheck into Vanguard’s MMF. Instead, I will put it into GMAC’s savings account and then ACH the money to Vanguard or Fidelity as needed.

The following is the related post I made on the Boglehead’s forum:

http://www.diehards.org/forum/viewtopic.php?t=1358

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 ”It is difficult to get a man to understand something when his job depends on not understanding it.”

It really reminds me why some IFAs I have encountered in the Sg cyberspace could never admit that buying term insurance and investing the money in low-cost diversified funds could be a good strategy compared to buying expensive whole life insurance.

This really says we can trust little in the title of “independent” in the abbreviation “IFA”.

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Personally, I have never been a big fan of using online tax filing services. Your private information is stored online and you have no control over who can access it. And if you are a non-paying customer (i.e. used the free filing service offered by the company), doesn’t it make you wonder how much money and resources the company really put in into securing your information online?

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More recently, I also received a similar line from Chase’s Home Equity loan: “in a recent survery, two of every three Chase home equity refinance customers reported that they lowered their rate by 1% or more.”

On first look, many people would be led to think that the company must really be charging less than its competitors. But on closer scrutiny, this might not necessarily be the case.

The fact is that many companies price their products such that some products are cheaper for a select group of customers (loss-leaders if you wish) and some products are more expensive for another group than their competitors. So, assuming that the customers do shop around, the savvy customers will end up with the company that charge them the least. When that happens, these customers will certainly report cost savings when they switch to this company.

Let me put it in an example with Geico: the customers who switch to Geico have certainly only done so because they find that they have cost savings by switching to Geico, i.e. the statistics that Geico reports are only for those customers who have switched to Geico and do not include those who did not make the switch.

Consider this. Maybe 100 people have requested quotes from Geico, but it is cheaper for only 10 persons. These 10 persons would switch to Geico. Of these 10 persons, 8 persons find that they saved $500 or more. Here’s what Geico would report:

8 out of 10 customers who switched to us report a savings of $500 or more.

Notice that the statement is completely truthful; yet it does not convey much information about whether Geico will really be cheaper for you or not. Therefore, I think it always pays to shop around and not be misled by any advertisement that claims that a certain company has the best rate.

As for myself, Geico certainly does not provide the lowest insurance quote. In fact, I don’t think it even belongs to the top three spots.

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… taxpayers are continuing to electronically file their tax returns at a record pace, up more than 5 percent from the same period last year.

‘Taxpayers are filing electronically at a record pace this year,’ said IRS Commissioner Mark W. Everson. ‘We encourage people to consider e-file and Free File as the tax deadline approaches. E-file reduces taxpayer errors and gets refunds back quickly.’

Now, that’s funny. For many people, e-filing does NOT come free while it actually saves the IRS money. So the IRS should actually arrange for e-filing to be provided free for all or to give incentives for the tax payer to e-file.

Next, if you are expecting a refund, you haven’t done your finances right. You should always adjust your withholdings to not have a refund; otherwise, you are simply giving an interest-free loan to the government.

Therefore assuming that you have done your finances right and are paying taxes for the previous year, there is no reason to e-file and then getting the money deducted from your bank account earlier.

So, no thank you, I will send in my tax return mid-April through the good old United States postal service and have the IRS take the money out from my bank account when they process my paperwork.

The credit cards have made life easy and are offered by so many companies and banks. One can easily apply for a creditcard online too, all you need is to go to the official website of a particular company or a bank and fill out a small online application form. The hsbc card are available with three choices and the selection is made depending on the consumers’ need. The mortgage broker are of great help whether you are seeking advice on reverse mortgage or any other related topics. One can also get the auto insurance quotes from online sources. There are some online website from where you can get free insurance quotes. The best thing is to choose from the top auto insurance companies for which you need to put effort and check out various websites.

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At the present moment, I still have one outstanding loan of around $73 at Prosper, which thankfully the borrower has been paying dutifully to this date. However, lenders on the whole did not do well at all. According to Jonathan’s estimates, if a lender were to diversify across loans of different profiles, the returns over the year would have been a measly 2% on average. That’s right, only 2% whereas you can get 5% to 6% from a FDIC-insured savings account from a bank, with no / little withdrawal limitations.

Personally, I would have to agree with his conclusions :

However, I am personally not interested. Given the returns information so far, I’d much rather stay with stocks. Prosper simply doesn’t tickle my fancy, I feel it’s far too much work and every time I’d see a late payment I’d just get annoyed.

I am glad that I “came to my senses” and did not invest any further in the Prosper system after my initial trial of two loans last year.

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