[AllFinancialMatters] May Was a Good Month for Stocks

May was a pretty good month for the Standard & Poor’s indexes. All three of the indexes I track (the S&P 500, MidCap 400, and SmallCap 600) had total returns of more than 1.50%. The S&P 500 Index was up over 5.5% for the month of May. All three of the indexes are up significantly over the last three months. Unfortunately, all three were down significantly in January and February and all of 2008.

As good as the last three months have been, I hardly think we are out of the woods yet. Long-term we still have inflation to worry about and the real estate and credit markets are far from being fixed. I don’t think this bull market has legs.

[Blueprint...] Ally Bank Review

In mid-May, GMAC Bank changed its name to Ally Bank. With General Motors in the news every day for something negative, it’s hard to do business when everyone thinks you’re about to go out of business. The funny thing about it all is that GMAC Bank’s parent company, GMAC Financial, hasn’t been a part of General Motors for several years. When you have financial companies in distress and auto companies in distress, a bank that people think is inextricably linked to auto company is in some deep trouble.

So, they changed their name.

But are they a good bank to do business with? Let’s find out.

History Lesson on GMAC

If you are confused with all the acronyms and relationships between businesses, you aren’t alone. I was very confused. GMAC stand for General Motors Acceptance Corporation and was once a wholly owned financial services arm of General Motors, the auto manufacturer. The financial services company provided financing to GM dealers, among other things. In 2006, General Motors sold a majority stake in GMAC to Cerberus Capital Management, thus providing some separation in the GM and GMAC relationship. Last year, GMAC was converted to a bank holding company to give them access to TARP funds.

GMAC Bank is a subsidiary of GMAC Financial Services, which offers a whole host of other financial products. This year, in May, GMAC Bank changed their name to Ally Bank.

Whew! Hopefully that all makes sense, but the end result is that Ally Bank/GMAC Bank is part of GMAC Financial Services, which is separate from General Motors itself and has been since 2006.

 

 

FDIC Insured

First things first, always confirm that the bank is FDIC insured. I would never bank at a non FDIC/NCUA insured financial institution and neither should you. Ally Bank is FDIC insured under FDIC certificate #57803 and have been since August 2004. The FDIC certificate still lists gmacbank.com as their primary internet web address but that will redirect you to the Ally Bank homepage. If you’re curious, their headquarters is at 6985 Union Park Center, Midvale, UT 84047.

Bankrate Safe & Sound rating: I don’t put a tremendous amount of credence in bank ratings because I believe FDIC insurance trumps everything, but they are valuable to read so you know what you’re getting into. Since the reports are quarterly, the most recent one is from December 2008, which is arguably a little dated. Back then, they still had a three star rating (out of five) and their predictive indicator was positive. You can read the memo for GMAC Bank here. I didn’t find a more recent report.

Online Savings Account

Let’s get to the reason why you and I care about Ally Bank in the first place, their deposit products. Ally Bank’s 2.25% APY interest rate on their high yield savings account is pretty good, enough to snag the top spot on my table of high yield savings account rates (Everbank is listed higher with an asterisk because they offer a promo rate for three months). The minimum to open is a comedic $0 (they will close your account if you don’t fund it, but I’d read that to say “no minimums”) and there are no monthly fees.

One thing I do like seeing is the explicit listing of a limit of six withdrawals or transfers per statement cycle. This limit is true on all savings accounts because there is a six transfer/withdrawal limit mandated by federal regulations. So many people, myself included, run into this problem with online accounts and it’s mostly out of ignorance. It’s nice to see them inform people about it.

No Penalty Certificate of Deposit

They’ve been heavily promoting the fact that they have no tricks, with no fees, no minimums, and all sorts of other anti-gimmick messages. It’s a great angle, especially during a time when banks are trying to earn as much revenue as possible, but a lot of other banks have very low minimums and don’t have any maintenance fees. In that respect, they’re not that much different. However, they do have one unique product – a no-penalty CD.

The no penalty CD lets you withdraw your money without paying a penalty, which is usually several months worth of interest. On CDs shorter than 12 months, the standard penalty is three month’s worth of interest. On CDs greater than 12 months, the standard penalty is six month’s worth of interest. For the no penalty CD, the penalty is in fact $0. The difference is in the interest rate.

They offer a 9-month No Penalty CD at 2.50% APY and a 9-month regular CD at 2.60% APY rate, a difference of 0.10% APY. That translates into $0.75 on ever $1,000 deposited over the 9 month period. Seventy five cents doesn’t look like a lot, but to be fair you need to compare it with the interest you would’ve earned at 2.60%. When you calculate the difference as a percentage of the total interest earned, it’s not a significant price to pay at 3.86%. You lose a little under percent to gain the flexibility to cancel, it doesn’t seem too bad and would be a fair price if you think interest rates are rising.

The only downside with the no penalty CD is that the only term they offer is 9 months.

Summary

It’s FDIC insured, they have great rates compared to their peers, and they seem to be in sound financial shape. I don’t have an account with them but I’ve heard good things about people who opened GMAC Bank accounts because of their great rates. I don’t see anything that would stop me from banking with them.

Do you have a GMAC Bank/Ally Bank account? What do you think of them?

[Blueprint...] $250 Social Security Stimulus Check

I’ve been getting a lot of emails lately about the $250 Social Security stimulus check so I thought a post would be the best way to answer all of your questions. If you’re wondering where your $250 Social Security stimulus check is, wait until June 4th before trying to contact the Social Security Administration. The American Recovery and Reinvestment Act of 2009 gave all social security recipients (SSI included) a one-time $250 payment, so if you are one of the 50 million individuals who get those benefits, the check is in the mail!

Who is eligible? You must be eligible for Social Security, SSI, Veterans, or Railroad Retirement benefits during November 2008, December 2008, or January 2009. If you were not eligible at that time, you will not receive the check. If you are eligible for multiple benefits, you will only receive one payment.

When and how will I receive the payment? You will get it the same way you are getting your current Social Security and Supplemental Security Income benefit. If you get it by check, you’ll receive the payment as a separate check. If you get it by direct deposit, you will get it as a separate direct deposit. The government has staggered the mailing of those payments throughout May so if you haven’t received it, it’s likely in the mail or in processing. You don’t have to do anything to receive the check and the Social Security Administration will not contact you for any information.

What if it’s after June 4th and still no sign of a check or deposit? Visit the Social Security Administration’s website for the one-time economy recovery payment information page to find out who you need to contact for more information. If you just want more information, this electronic booklet about the one-time economy recovery payment is also very informative.

$250 Social Security Stimulus Check

[Blueprint...] Lowest Foreign Transaction Fee

In a couple months, my wife and I will be taking an extended vacation to Europe. It’ll be a fantastic trip, one we’ve been looking forward to for months, and with the dollar strengthening and the economy across the world weak, we figured we could take advantage of lower prices to get some traveling done.

As I did a few years ago when we went to China, I wanted to confirm that my Capital One card still had the lowest foreign transaction fees. Fortunately, USA Today did all the leg work for me and has an updated list of foreign transaction fees by bank (Discover is excluded because it’s not accepted internationally, but they charge 0% as well):

1. American Express: 2.7%
2. Bank of America: 3%
3. Barclaycard/Juniper: 2-3%
4. Capital One: 0%
5. Citibank/Diners: 3%
6. Diners Club: 3%
7. HSBC: 3% (most)
8. JP Morgan Chase: 3% (most)
9. US Bank: 3%
10. USAA: 1%
11. Wells Fargo: 3%

Here’s the same list, reordered based on percentage charged:

1. Capital One: 0%
2. USAA: 1%
3. American Express: 2.7%
4. Barclaycard/Juniper: 2-3%
5. Bank of America: 3%
6. Citibank/Diners: 3%
7. Diners Club: 3%
8. HSBC: 3% (most)
9. JP Morgan Chase: 3% (most)
10. US Bank: 3%
11. Wells Fargo: 3%

Looks like Capital One retains the crown for the best international credit card. Which reminds me, I should probably make some small charges to it so it doesn’t get closed on me!

Lowest Foreign Transaction Fee

[Blueprint...] Review: Money Strategies for Tough Times by Matt Bell

Matt Bell is a personal finance writer in Chicago who ran into financial difficulties early on in his adult life and, in turning it around, used his experiences and knowledge to try to help others who may have gotten themselves in a similar situation. His professional career began as a radio journalist, having been featured on NPR, and Money Strategies for Tough Times is his second book, his first being Money, Purpose, Joy.

One of the unique angles about this book is that it incorporates religion, specifically the Bible, very heavily throughout its sections. While I’m not a very religious person, I can’t argue with Bell’s assertion that “Tough times call for timeless principles, and the principles taught in God’s Word have stood for thousands of years.” Religion, whether it’s Christianity, Buddhism, atheism or any other faith; is an integral part of our lives and it’s not surprising to see a book drawing on faith to overcome secular financial challenges. We often turn to religion in the darkest of times.

From an advice standpoint, it does a pretty good job. It lives up to its title of offering good strategies during a difficult financial time, with large sections of the book devoted to overcoming debt and how to handle job loss. With hundreds of thousands of workers losing their jobs each month, it’s not surprising that the book focuses so much on debt, loss of income, and how to intelligently tap into your reserves. As you would expect, there are even sections devoted to bankruptcy, rebuilding your credit, and the creditors you should never stiff (friends & family). Finally, as if offering a light at the end of the tunnel, there’s a smaller section devoted to sound financial strategies that are smart anytime.

Overall, I think the book has good, albeit somewhat pedestrian, information. The true value is in how Bell ties in the Bible and if you are someone who responds favorably to that, then this may be the right book for you. If you’re turned off by linking finances and religion, this book will be less valuable to you. I can guarantee you one thing, if you flip through it in the library or bookstore, you’ll know within minutes whether its right for you.

[TheSimpleDollar] The Simple Dollar Time Machine – May 30, 2009

Many newer readers of The Simple Dollar haven’t been exposed to the hundreds of great articles in the archives of the site, so this is a weekly series that highlights the five best posts from one year ago this week, as well as the five best posts from two years ago this week. I call it … the Time Machine.

One Year Ago (May 24-30, 2008)
Anticipation Buying – Sometimes we buy things in anticipation of a need, not in response to an actual need. Is this actually a sensible way to buy things?

Personal Finance 101: What Exactly Does It Mean to Own a Stock? – A great discussion on what it actually means to own stock.

The Methods You Use to Deal with Ordinary Life Will Fail You As an Investor – Investing doesn’t work like everyday life. In order to succeed, you need to control the impulses that help you to succeed in normal life.

Do I Need Long Term Disability Insurance? – This turned into a surprisingly useful discussion on whether younger working adults (particularly parents) need it.

Baking Soda: My Favorite Frugal Substance – There are so many useful ways to use baking soda – and it’s so inexpensive!

Two Years Ago (May 24-30, 2007)
Review: The Random Walk Guide to Investing – This may be the most insightful guide into how the stock market works (and why you should just invest in index funds) that I’ve ever read.

The “White Sheep” Syndrome: What To Do If You’re The Only Financially Sound Person In Your Family – A surprising number of people find themselves in this very situation. Everyone around them is drowning in debt and very poor at managing their money – and it causes a lot of problems.

Defining The Middle Class Through Statistics: Upward And Downward Mobility – The New York Times reveals some statistics on people who are upwardly mobile – and people who are downwardly mobile. I pull three usable conclusions out of the data.

Six Points of Advice If You’re considering Loaning Money to a Friend – Loaning money to friends is usually a bad idea. Here are six things to think about if you’re even considering it.

My Kitchen Bookshelf – These are the books I use for cooking advice and recipes in my own kitchen. I wrote this before I discovered How to Cook Everything, which is the best one-stop cookbook I’ve yet found.

If you’d like to browse through more of the archives, visit the chronology, where all posts are listed in chronological order.

Eight Ways to Get More out of The Simple Dollar
This is kind of a FAQ for new readers and is posted each week along with the Time Machine. Here are eight great ways for new readers to dig deeper into The Simple Dollar.

1. Subscribe by email or RSS. Visiting The Simple Dollar’s website is great, but for many people, it’s more convenient to receive the articles in another form. It’s easy to join 60,000 other subscribers and get The Simple Dollar’s content by email or in your RSS feeder (if you’re unfamiliar with RSS, check out Google Reader.

2. Comment. Each article on The Simple Dollar has lively discussion. Just click on the green square in the upper right of each article on the website and join in!

3. Read my story of financial meltdown and recovery. The Simple Dollar isn’t based on what I’ve read in books or learned in school. I’ve made a lifetime of financial mistakes – The Simple Dollar is a record of what works for me during the process of getting my life on a better track.

4. Download my free 49 page e-book. Everything You Ever Really Needed to Know About Personal Finance On Just One Page is completely free. It summarizes all of the key lessons I’ve learned along the way about personal finance in one tidy package – in fact, all of the main principles can be found right on the cover.

5. Follow me on Twitter. I post tons of interesting articles, quotes, follow-up material, commentary, and other material on Twitter. Follow me! If you’re unfamiliar with Twitter, it’s essentially an open discussion forum for people to share ideas and thoughts with other like-minded folks – you just choose the people you want to listen to and their ideas and thoughts are all delivered to you on a single page.

6. Dig through “31 Days to Fix Your Finances.” 31 Days to Fix Your Finances is an article series that outlines how you can get a grip on your finances over the course of a month.

7. Send me your questions and suggestions. Send me an email and let me know what you’re thinking, what you’d like to see, and any questions you might have. I try to respond to as many emails as possible and I read them all. I may even use your question in a future article!

8. Email a great article you find to a friend. Find an article that you think your friend would love? At the bottom of each article, you’ll find a link that says “Email this” – just click on that, type in your friend’s address, and send it right along to them!

[AllFinancialMatters] How Quickly Mortgage Rates Can Change, Affecting Your Payments

Think about this for a minute…

On Tuesday, the rate on a 30-year fixed mortgage stood at about 5.03%. That same mortgage had a rate of 5.44% on Thursday. To get an idea of what this means dollar-wise, I ran some numbers. Because mortgages are such big, long-term loans, small changes in interest rates can have a significant impact on payments and interest expense:

How changes in interest rates affect mortgage payments.

On a $200,000 mortgage, a person would have to pay $50.75 more per month if they took out their mortgage on Thursday instead of Tuesday. This increased interest rate would also mean that they would pay $18,269 more in interest over the life of the loan. Stating it a different way, 80.4% of the first payment would go to pay interest on the 5.44% mortgage while it would have been 77.8% with the 5.03% mortgage.

I included the last column in the graphic as a reference point to where interest rates were back in late October. In other words, mortgage rates have a ways to go before they are back to October’s levels.

If you’re in the market for a house, it pays to pay attention to mortgage rates. If you are looking, you might be wise to try to lock-in your rate. You’re under no obligation to use that rate (should rates decrease) but it does protect you should rates increase before you actually get the loan. Check with your bank or loan officer to see how long this protection lasts.

[TheSimpleDollar] The Art of the Marinade: Making Inexpensive Foods Dazzlingly Tasty for Pennies

Whenever I see great deals on free range chicken or beef, I stock up without hesitation, filling our freezer with pounds of roast, tenderloins, chicken breasts (and other pieces… and whole chickens), fish fillets, steaks, and chops. You might open our freezer and see dozens of pounds of such cuts, purchased because we found an exceptional deal.

One big complaint I often hear with such bulk food buying is that it’s boring. One older email from Jennifer sums this feeling up quite succinctly:

Buying food in such bulk quantities seems incredibly boring to me. What can possibly be tasty or exciting about having chops for the twentieth time this year?

I agree with Jennifer on one level – having the same old boring chops or chicken breasts every week for months would get quite old. I would certainly get tired of it, anyway.

The trick is to know how to jazz up these entrees, making them into something much more interesting – and with much more variety – for just pennies. Around here, most of our entrees find themselves undergoing some sort of preparation which will widely vary the flavor.

About Marinating Meat
The purpose of marinating meat is twofold. First, it serves to tenderize the meat – that’s why most marinade recipes include some sort of acid (vinegar and fruit juice are common ones). Simply soaking a meat in such a solution makes the meat softer – easier to cut and easier to chew. It also causes the meat to absorb some of the liquid, often making it moister.

Second (and perhaps more important), marinades imbue meat with additional flavors. During the process of softening the meat, the meat absorbs some of the liquid around it. If that liquid includes a variety of flavors, those flavors are absorbed into the meat itself.

Given the nearly infinite things one can use as a marinade, there’s a nearly infinite variety of flavors you can imbue your meat with.

What if you’re vegetarian? Almost any tough vegetable can be marinated. Zucchini, cucumbers, squash, and eggplant all turn out very well when marinated. In fact, I often use such tougher vegetables as a side dish.

About marinate versus marinade: marinate usually refers to the process of soaking the meat, while marinade refers to the liquid solution in which the meat is soaked.

Trent’s Ten Favorite Homemade “Nickel” Marinades
Here are ten homemade marinades that cost just pennies and can each really improve the flavor of your food. Using these marinades can transform an ordinary cut of meat in ten drastically different ways, from spicy to sweet, from sharp to subtle, from Mediterranean to Asian. Just mix the ingredients together, put the mixture on the meat in a bowl, and let it soak according to the times below – when it’s done, cook the meat as you normally would and enjoy some distinctive and delicious flavors!

Simple Marinade 1/2 cup lemon juice, 2 tablespoons olive oil, 1 teaspoon oregano, pinch of salt, pinch of pepper

Flexible Marinade 1 cup any kind of fruit juice you have on hand, 1 teaspoon garlic powder, 1 teaspoon black pepper, 1/2 teaspoon salt

Apple Marinade 1/2 cup apple juice, 1/4 cup soy sauce, 1/4 cup honey, 2 tablespoons lemon juice, 1/2 teaspoon garlic powder, 1/4 teaspoon mustard, 1/4 teaspoon ginger (this is fairly low acid marinade, so leave it on for twice as long as listed below)

Asian Marinade 1/2 cup soy sauce, 1/2 cup balsamic vinegar, 1/2 cup chunky peanut butter, 1/3 cup cilantro, 1/4 cup lemon juice, 2 tablespoons honey, 1 tablespoon ginger, 2 cloves garlic or 2 teaspoons garlic powder, 1/2 teaspoon cayenne pepper

Balsamic Marinade 3/4 cup balsamic vinegar, 1/2 cup olive oil, 2 teaspoons brown sugar, 1/4 cup minced onion, 3/4 teaspoon black pepper

Donkey Marinade 2/3 cup lemon juice, 1/3 cup olive oil, 1 teaspoon salt, 1/2 teaspoon pepper, 1 teaspoon Worcestershire sauce, 1 teaspoon mustard, 1 teaspoon garlic powder

Lime Marinade 1/2 cup lime juice, 1/4 cup oil, 1 teaspoon tarragon, 1 teaspoon onion salt, 1/4 teaspoon ground black pepper

Mediterranean Marinade 1 1/2 cups olive oil, 1 cup lemon juice, 1/2 cup red wine vinegar, 3 tablespoons oregano, 2 tablespoons garlic powder, 1 teaspoon salt, 1 teaspoon ground black pepper

Sneaky Marinade 3/4 cup orange juice, 4 teaspoons olive oil, 1/2 teaspoon anise, 1/2 teaspoon ground pepper, 1 1/2 teaspoons salt, 2 teaspoons tarragon

Spicy Marinade 1/2 cup lemon juice, 1/3 cup vegetable oil, 1 tablespoon onion, 1 tablespoon garlic powder, 1 tablespoon sugar, 2 teaspoons red pepper flakes, 1 teaspoon thyme, 1/4 teaspoon oregano

Teriyaki Marinade 1/4 cup vegetable oil, 1/4 cup brown sugar, 3 oz. soy sauce, 1 clove garlic or one teaspoon garlic powder, and 1/2 cup pineapple juice (this is fairly low acid marinade, so leave it on for twice as long as listed below)

(Oops… did I include eleven marinades?)

How Long Should I Marinate?
If you marniate a meat too long, the meat will become soft and mushy from the effects of the natural acids in the marinade. If you don’t leave it on long enough, the meat won’t gain enough extra flavor. Here are some starting numbers to use – obviously, times may vary depending on the size of your meat, but these should get you in the ballpark.

Beef roasts 2 hours
Beef large steaks 1 hour
Beef small steaks 40 minutes
Chicken with bones 1 hour
Chicken without bones 40 minutes
Fish 30 minutes
Lamb chops 40 minutes
Pork chops and tenderloin 40 minutes
Pork roasts 2 hours
Shrimp 15 minutes

Additional Tips
First of all, don’t toss the marinade when you’re finished soaking the meat! I like to pour the leftover marinade directly on the entree just as it goes on the grill or into the skillet. This packs an additional punch of flavor. However, do not save the marinade and use it later in the cooking process – a marinade must be cooked just like the meat is, and if it is not, you run the risk of ingesting unhealthy proteins.

Another use for the marinades: they make great mix-ins for burgers. Make up a batch of your favorite, then add it directly to ground beef or ground turkey, roughly 1/2 cup per pound of meat. It can really change the dynamic of the burger!

Another tactic I like to use to try new marinades to ask for marinades and sauces for Christmas gifts, particularly those from local companies. We go to several gift exchanges around Christmastime and a few bottles of marinade and sauce make for a great, easy-to-select gift. Combined with the inexpensive bulk meats in our freezer, these sauces and marinades can create a true flavor explosion – much better than some gift you’re anxious to return as soon as you leave.

Good luck!

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