Changing banks can be a huge hassle but there comes a time in every persons life when their original bank just doesn’t satisfy his or her needs.

Here are some guidelines to follow when changing banks to make sure the process is as smooth as possible.

None of these things require any cash to be moved just yet, and should all be done before you actually change the way your money flows in and out of your life to insure you don’t overdraft or lose track of things in the process.

My loving wife adds that the first thing you should do when you think the time has come to change banks is discuss the change with your wife. When dealing with finance as a couple, be sure to make these kind of decisions together.

1. First things first, you need to actually choose a new bank and open an account. Here is my guide to walk you through the process of evaluating your needs and choosing the bank that fits you the best. After making the choice, open a new account and get your online banking set up.

2. Once your new bank is set up, you need to get checks, deposit slips and debit cards ordered. Even if you don’t plan to ever use checks, some things like direct deposit still require a voided check to be on file to create the connection between employer and bank.

3. Check with your employer to see how quickly direct deposit can be changed over. In many cases the process can take between two weeks and a month to get finalized and have your paychecks deposited into your new bank. Don’t initiate the direct deposit change just yet but knowing how long it takes is essential to a smooth change.

4. Set up electronic connections between your new bank, and all of your old banks. This can take 2-3 days on average and is really important to have set up before you make any changes to your financial system.

5. Look over your bills and all outgoing cash. Evaluate when the best date would be to move your money from one bank to another. If you don’t do this and happen to change your direct deposit, or move the money from your old bank to your new bank too late or too early in the month, there is a high chance you could interrupt your cash flow. You don’t want to risk bills coming due when your money is pending somewhere, stuck in limbo.

Normally, your bank account balance will ebb and flow during the month. You should switch at a high point so you aren’t spreading the little cash you have at a down point between two banks.

6. Aside from the bills you pay manually, double check your old account for automatic withdrawals for things like club memberships or insurance premiums. Insurance companies in particular will usually give you a discount if you are set up with an ACH withdrawal directly from your checking account to pay for your insurance, but if you forget to move this to your new bank, you could be hit with overdraft fees.  Tip:Try sorting transactions by ACH Debit in your old account and see what shows up.

7. Get your previous Payees added to your new bank. This doesn’t take too much time, but getting your BillPay system in line before you even move any money to your new bank will help speed up the process of getting used to how your new system works.Tip: Once you have completed step 8, send trial payments to each of your Payees to insure the money gets to the right place, something like $5. This can also help you gauge how fast your new bank’s BillPay works.

8. Once all of the above it taken care of, you are ready to start actually making the switch. Get your direct deposit switched to the new account. As soon as that is finished, and if you followed all the steps above, you should be able to seamlessly move any money you have left in your old account to the new account and start operating completely from there.

Remember that when switching banks, you are essentially completely replacing the cornerstone of your financial life. Any hitches with the move can throw your finances into disarray and cause serious stress. By following the guidelines here, you can reduce that stress and shift from one bank to the other without major issue.

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Choosing a bank can be almost as difficult as choosing a spouse, and traditionally lasts longer than the average US marriage! When searching for a bank, you will have certain criteria to match, and many banks will fill much of what you need, but very few will be complete solutions. Here are the things I look for in a bank (or credit union, brokerage, etc.), in order of importance.

Is the bank modern?

One of the biggest complaints I have with some of the banks I have used in the past is that they are way too outdated. Their online interface is clunky or non-existent, their BillPay system is slow and unorganized, and their practices and procedures are archaic. I have a hard time trusting a bank that doesn’t have an online interface because it makes me think that if they are this behind the times, what does their vault or look like? But I have an even harder time trusting a bank when their online banking password requirements consist of, your password must consist of letters…that’s all, have fun!

Obviously you will need to define what criteria your bank needs to meet in this area, but to me a bank must at least have an online interface that is secure, is easy to use, and is convenient to access. A mobile interface as well as a mobile app itself are huge advantages with smart phones becoming the norm, and everyone doing their banking on the fly.

Another sign of a modern bank that meets current standards is being FDIC insured. After going through a bank closure, I am a huge believer in the FDIC and won’t touch a bank without it.

Is the bank free?

Your bank is the house for your money, and should be there to keep your money safe, not drain parts of it away for no good reason. With so many banks, online and off, available to you, you should not have to fight to get fees reduced for your most basic banking needs.

Pick a bank that has no fees. Call customer service when researching a bank if you are unsure of their fee schedule. Check on fees not only for checking and savings but for checks, BillPay systems and even investment vehicles. Even if you have part of your money elsewhere for some of these things, you want to have options and not be restricted by fees if you decide to start investing from the same bank you have your checking account with.

Is the bank friendly?

Customer service is very important to me. When I need something from my bank, I want to speak with someone helpful, and comforting to get my problem taken care of as quickly as possibly. Your bank is the cornerstone to your financial life, and if something goes wrong there, your whole life can be briefly thrown off course.

If something does happen with my bank, I want to be able to call someone at my bank and get the problem fixed while I’m on the phone, the first time I call. I don’t want to get off the phone unsure as to what I should be doing or what the bank will be doing to solve my problem, left with feelings of insecurity and nervousness.

Your bank should have customer service reps that are kind and treat you like a customer, not a user. You should also be able to call your bank with any questions you have about new accounts or other services. If you don’t feel comfortable calling your bank about problems you have, there is no way you will be willing to consult them about other financial decisions that already make you feel vulnerable like planning for retirement.

Is the bank convenient?

Convenient is in the eye of the beholder. For me, I don’t care if there is a branch nearby, but I do want my bank to be available online 24/7 and I want my bank to have a wide range of office hours so that if I need to call about something, I can reach someone and talk it out. If the bank is open from 8-5, Monday – Friday, chances are I won’t ever be able to call the bank if I have a problem.

For you, convenient may mean having a brick and mortar branch right down the street from your work or home, or in the grocery store you visit most often. If you need to actually go into a branch, deposit cash or checks, or talk to representatives in person, convenient will mean something entirely different to you.

Does the bank offer a wide variety of services?

I think back in the day, people used one bank for everything they did in the financial world. Now, most people have at least two banks they use for different things, if not triple that. Personally, with all of my investment accounts, retirement accounts, savings and checking, I have accounts with a dozen banks, not to mention loans and other services I use. It would be nice to have a one size fits all bank that offers every service under the sun at the best rates available, but I don’t see this as a realistic deciding factor for where I bank.

On the other hand, if you can find a bank that satisfies most of your needs, and has services you will one day want to use at competitive rates, this could be very convenient.

Once you find a bank that fits your needs, you will have to make the switch which can be a difficult task. Check out my 8 step guide to help you along, and good luck with your new bank! It can be an exciting new adventure, or a disaster, but you never know what a new bank may have in store for you until you try one out. The grass may not always be greener on the other side..but sometimes it is!

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This past Sunday marks the official end to the weight loss challenge I joined in May and I thought it appropriate to give a recap of the competition and share a few things that I learned along the way.

The winners of the competition have yet to be announced but so far we are holding in 5th place. Even though it doesn’t look like we will be taking home the $10,000 in cash prize, the competition was an overall success. Each member of my team (Baker@ManvsDebt, Brad@EnemyofDebt (and EnemyofFat), Paul@FiscalGeek, and Darren) did an amazing job and lost more weight in the past three months than I would estimate the average American does in an entire year, all without the use of any weight loss drugs or crash diets.

Personally, I am really happy with my progress. I went from a pudgy 227lbs to a much healthier 197lbs (although at the Doctor used for the competition ranking, the scale read 200lbs). I went on a fairly strict diet and exercise program and as a result lost close to 30lbs, and over 15 inches from my body!!

The diet consisted of eating much more protein, less fat and more frequently than I typically have eaten in the past. I eat lots of lean meats and veggies. The only thing I really cut from my diet was processed sugar. I continued to eat breads, fruit and just tried to balance the types of foods I eat. I drank about 64oz of water each day.

As for exercise, the mental aspect of activity was a huge thing for me. I just tried to get as much exercise as I could in my day by doing the little things like parking at the far end of the parking lot, walking out to get the mail, and not hesitating to leave my desk when the chance arose.

I also focused much of my energy on sports as I felt those were more of a total body workout including some strength building compared to just running on a treadmill. I played Basketball, Volleyball and Tennis against my very athletic brother-in-law, which proved to be quite the challenge. There wasn’t a day during this competition that I wasn’t sore in some way or another, and I had no trouble getting to sleep at night.

Here are a couple of action shots for ya! I have always been self conscious of taking pictures ( surprise surprise), but these I am proud of because I know what they are a result of and what doing those activities has helped me gain!

Here are a couple things I learned during this competition.

The little things matter

I tried really hard to focus on the little improvements I could do in my daily routine. I parked farther away from buildings, stopped using elevators completely, and never turned down my daughter when she asked me to play outside. Even though none of these things really made me sweat or sore, I know they contributed hugely to my activity level and total weight loss. All abnormal pain from my body like back aches and leg pain from sitting too long went away, and I felt much younger and healthier just by doing these things.

As for nutrition, I was very strict. I knew that if I broke stride here or there and saw no ill affects on my weight loss, I would be more open to breaking back into my old habits of eating too much and at wrong times. I never eat after 8pm, no matter what. I tried very hard to stay within my caloric guidelines each and every day and I stuck to my meal times religiously. After a couple weeks, my body adjusted to how often and how much I was eating and I could actually feel when I was late on eating, or feel when my body needed more water.

You can’t plan everything

During the challenge, each member of the team had a semi-major problem that realistically should have thrown them each off course, myself included. My problem was that I came down with Shingles. If you haven’t heard of Shingles before, it is the resurfacing of the Chicken Pox gene and it essentially exposes your nerves and hurts like nothing I have ever felt before. For the last month of the competition, I really couldn’t exercise like I was before nor could I go in the sun for more than a few minutes without being in extreme pain.

Despite all of the setbacks we had, each and every member pushed through them and continued doing everything they could to keep the momentum we started moving forward.

Winning isn’t always whats important

After starting this competition, each of us realized that our health was the most important thing regardless of the money or if we won it. Each of us tried to change our lifestyles and create sustainable healthy habits that would carry us forward into the rest of our lives. That’s what this was all about, and I want to congratulate all of them for doing just that. Lifestyle change is incredibly difficult, and each of these guys were able to change their habits for the better.

I learned a thousand more things, but I’ll leave it at that for now. This weight loss challenge really changed my life for the better and I plan on maintaining what I did and learned onward into the rest of my life.

I want to give a huge thanks to my team of awesome guys ( I know without them, I would still be sitting on the couch eating bon bons ), the people at HealthyWage.com for creating this competition and Marc@BuiltLean for creating the diet and exercise plan I used in the competition. THANK YOU!

I’ve got two young kids, and another on the way. One thing I am always interested in is ways that I can get my kids interested in learning about money just like their Daddy. So when I was offered a chance to review a set of CD’s based just on that topic, I jumped at the chance.

The CD  set includes one CD full of stories about Sammy the Saver, the main character of the stories and the face of the company.

These stories aren’t your typical kids stories. Each story was in depth, and far more detailed than I expected. The stories each had a simple problem to be solved that had something to do with money, and Sammy figures out a way to solve the problem by applying advice he learns from his family such as saving a little every day to reach a big goal later, and making things a habit.

My favorite thing about the stories are that they aren’t just about money. They include real life lessons that may be overlooked if your kids are a bit younger, but they are there waiting to be found as your kids get older.

One of the stories in particular was all about entrepreneurship, and didn’t include your typical lemonade stand (although another story did include lemonade stand) but it had Sammy creating a unique idea for a business and following through with that idea to actually generate a profit.

Another thing that I liked about the CD of stories was that it was very interactive. The stories were separated into chapters and at the end of the chapters, the author would ask a question following it with the answer. I haven’t seen this strategy in an audio book before, and it felt a lot like there was actually a teacher there, so I paid closer attention to the stories so I could answer the questions correctly. Even if the stories were meant for kids, I got into them and found the stories pretty interesting. My wife on the other hand gets enough kids stuff watching the kids all day, so she didn’t appreciate me turning the CD on every time we got in the car even if the stories are educational

The stories were also interspersed with songs that had something to do with the chapter being read. The songs were short, but gave you a little break to think about what you had just heard in the story.

On the second CD, I was actually happy to find all the songs from the stories, but in full length versions. Each song had a theme and lesson for the kids to pick up on. My kids loved the music. The lyrics were catchy and I caught myself singing the songs to myself at work.

What I found most impressive about the songs though were that they were so well done. Many of them sounded like something you may find on a Christian rock CD; very uplifting and positive, while others sounded like something you may actually find on a regular radio station. They were catchy, creative and had really talented musicians singing the songs. The genres the songs cover include Gospel, Rap, Rock, Reggae, Pop, Latin, Punk, Dance, Bop, Country and Soul…just about every type of music out there and my3 year old picked up the lyrics pretty quick and loved to sing along.

After listening to both CD’s I thought I would do a bit of research about the company and author of the stories. It turns out Sammy Rabbit actually does live appearances!

The companies website is full of resources to help teach your kids about money, and other life lessons. There are parts of the website that are obviously written for kids, and then other parts written as tools for adults. The authors back story is pretty interesting too.

I really think this company has some great tools and products to teach real lessons to kids about money, on top of the simple “save your money” (for no reason at all) that is common among kids teaching tools. The stories had experiences and examples of why you need to save, and what you should do once you save your money. Teaching kids this early to start writing down ideas, and pursuing them, is invaluable and will really help kids become successful.

The only thing I found a little odd is that on the CD with the stories, in-between stories there are interviews with the author. While I found these interesting, and they are done in a kid friendly way, my kids (technically, a little young for the CD set anyway) lost interest and wanted me to skip to the next story.

Other than that one small complaint my kids had, I think this company has struck a unique idea, is making a difference in financial education and is worth checking out.

Disclosure: While I was given the CD set to review, all opinions and embarrassing moments of me singing kids songs at work in front of my boss are mine.

This is the second part of a three part series. The first and second parts of this mini-series can be found:

• Do You Put Your Emergency Fund To Work? – Part 1
  
• Do You Put Your Emergency Fund To Work? – Part 2

This next part of the series is contributed by Phil Taylor, creator of PT Money: Personal Finance. These are his thoughts on alternatives to the traditional savings account for holding an emergency fund.

A wise first step in any financial plan is to have a bit of easily accessible cash in the case of emergencies. This will help you avoid depleting your checking account when you face an emergency financial situation. It will also help you avoid having to resort to credit to help you out. Conventional wisdom says to put this money in a place that’s easily accessible and safe. But there are alternatives to this approach. And you can either plan to use one of these different directions, or you can resort to one if you’re not prepared with the traditional approach.

Home Equity Loan – If you have equity in your home (the value is more than 20% of what you owe), then you can pretty easily get a loan using this equity as the collateral. Getting this loan might take more than a few days, however. And because it’s a loan, you’ll need to pay interest to the bank when you are paying it back. This debt is similar to your mortgage in that it’s tax-deductible.

Credit Card – If you have room on your credit card, then this can serve as a temporary emergency fund. Of course, unless you take advantage of some promotion, you’ll have to start making payments right away not to mention credit card interest charges are through the roof. You also have to remember that if you have to max out your credit cards it will hurt your credit score.

401K Loan – If you have money saved in a 401K or 403b, you likely have access to a loan against those funds. You are borrowing against your own money, so what payments and interest you have to pay back are going back into your account. However, when you have the funds borrowed you usually can’t make contributions. And if the market sees a big up swing, you’ll miss out on potential gains. Remember that your 401K is for retirement, not credit.

Cash in a Safe – You could just keep your money under the mattress at home, or in a safe. The problem with this approach is that the funds aren’t insured. So if your house burns down or the safe gets taken, there go your funds. Homeowners insurance might be able to help you but odds are they won’t replace 6 months of expenses (typical emergency fund amount) for you. I’m a fan of keeping a little bit of cash in a safe but not the entire emergency fund.

Roth IRA Withdrawal – Finally, if you have funds in a Roth IRA, you can withdraw the contributions at any time without tax or penalty. There are even certain Roth IRA brokers that will let you keep your funds in a CD or other FDIC insured account. On the surface, this seems like a good approach. Does anyone out there use this method? I’m still against it because it uses a retirement account for something other than retirement. (Note from Jesse: you recall earlier in the series I discussed using a Roth for an emergency fund investment vehicle. Check the second part of the series to get the details, and be sure to share your thoughts in the comments about this approach!)

Most of these ideas come in a distant second, in my opinion, compared to a fully-funded emergency fund in a liquid, high-interest savings account. There really is no better tool to cover your expenses when you experience a job loss, major out-of-pocket medial situation, or other unexpected expense. But everyone’s situation is different, and one of these approached may work for you better.

What do you think? Do any of the options during this three part series interest you? Do you already use any of them?

Image by AMagill

This is the second part of a three part series. The other two parts can be found here:

• Do You Put Your Emergency Fund To Work? – Part 1
  
• Do You Put Your Emergency Fund To Work? – Part 3
  

Just a quick refresher in case you missed the first part and are unwilling to quickly read it over

The bank I hold my emergency fund has closed down. I have since moved the money from that account to my savings account but I want to find a more suitable home for it. The money is my emergency fund, so there are certain requirements that have to be met by any investment or account that it sits in. Those requirements include:

• Liquidity: I must be able to access the money within three weeks time.
• Risk: The investment must not fluctuate more than 10%
• Simplicity: The money has to stay together in one investment and be simple to change or access.

Yesterday I went over a couple viable solutions, and today I will finish those solutions with the ones I am leaning more towards. They are less conventional for an emergency fund, but they do come with benefits.

Most of the options below encompass using a Roth IRA as an investment vehicle. The advantages to a Roth IRA are; everything contributed is after tax money; contributions can be withdrawn without any tax penalty, at any time; and any growth in the Roth IRA from investments is tax free but cannot be withdrawn without penalty till the age of 59 and a half.

Putting my emergency fund into a Roth IRA, I have the option of investing in individual stocks, mutual funds, index funds or even target date funds.

Moderate risk, moderate return and high liquidity, plus tax advantages: Roth IRA + Index fund/Mutual fund

Just glancing at my brokerage account, and their branded index funds, the total return for this year is an average of 17.44% between four different funds. I would have the option to invest in any fund from my Roth IRA, even those not affiliated with the bank that houses the IRA.

This option is more risky than just planting the money and getting a 17.44% return. The market fluctuates drastically from time to time, and the ten year return on these funds is closer to zero. Using this approach, I would have to actively watch the market, and make sure my investment was always within my 10% risk threshold.

The time frame for this is about one business day. I would have to sell any securities I hold, and then just move the money from my Roth to my checking which is with the same bank, therefore instant.

This option also includes mutual funds, which are actively managed leading to a higher expense ratio, and slightly lower average return, just looking at what my bank offers in house. I don’t plan to use mutual funds where index funds are available but they are an option.

Low risk, moderate return and moderate to low liquidity, plus tax advantages: Roth IRA + Short-term bond fund

Bond funds are new to me so bear with me as we explore this option.

A bond fund is an fund that invests solely in bonds, in this case specifically short-term bonds. The type of bonds this fund holds include commercial, mortgage and asset-backed securities. The fund also includes some insurance and FDIC backed bonds.

Bonds are considered very low risk, especially if a fund includes federal backed securities. Bonds are usually not something I would look into because with the low risk, they are usually a very low returning investment, but these past few years due to the market fluctuations, bonds are returning very high. The short-term bond fund featured at my bank has a one year return of 9%, and a ten year of close to 5% average. The risk index given to this particular bond fund is between -1% and 12%.

The term short-term in a bond fund’s case means an under twelve month maturity, but the liquidity is somewhat unclear.

These options to house an emergency fund are less traditional but they offer higher returns with other potential benefits such as the tax advantages of a Roth IRA account. However, the risk is higher and virtually indeterminable because the market can go in any direction, at any moment.

Personally, I am leaning towards using my Roth IRA to house my emergency fund, but I am still back and forth between what type of investment to use within the Roth. If you have or currently use these options for your emergency fund, or investments in general, please let me know your thoughts on them.

Image by Mykl Roventine

This is the start of a three part series. The other parts can be found here:

• Do You Put Your Emergency Fund To Work? – Part 2
  
• Do You Put Your Emergency Fund To Work? – Part 3
  

Since my bank closed down and I would be moving my emergency fund money over to one of the other banks I use, I got to thinking that I really need to put that money to work for me. A fully funded emergency fund ( 3-6 months of expenses), for just about anyone, is a lot of money, and having it sit in a no-yield account really seems like a waste.

Here are the requirements I came up with for ways to make your emergency fund work for you, and below, some options that meet these requirements.

Requirements:

Whatever the solution may be, it must be fully liquid. The purpose of an emergency fund is to cover you when you have an emergency. If the fund is tied up in some long term investment, you can’t really put life on hold while that money gets freed up. For me, the liquidity threshold for my emergency fund is between one and three weeks. It goes without question that this threshold is different for each and every one of you.

The solution must be low risk. I don’t mind having some risk involved because risk is almost always a requirement for gain. As long as the money is still fairly liquid and I understand the risk before going into the investment, I can handle moderate risk. My risk tolerance for the emergency fund is about a %10 fluctuation.

The solution must encompass only one thing, and be simple. What I mean is that I don’t want the emergency fund money to be spread out across several different short term CD’s or invested in multiple accounts. The money must all stick together and be simple to get at, on top of the liquidity time frame requirements.

The solutions:

So with those requirements in mind, I have come up with a couple options for my emergency fund. If any of you see any discrepancies in my choices, please let me know. I have done some research on these options, and will do plenty more before I choose something but the emergency fund money is currently without a home so I want to get it in something as soon as possible.

Lowest risk and instant liquidity: Checking/Savings

I could keep the emergency fund in my regular checking account or the attached savings account. That would give me the highest liquidity with the lowest risk, but it would also provide the least amount of gain. The liquidity with this option is also almost too much for me, as the money would be far too easy to get at and could be spent. The return here would be up to .65% interest, with an access time frame of instant.

Low risk, higher return and moderate liquidity: High Yield Savings Account

With a high yield savings account, the money would be separated from my regular checking account which helps from a mental standpoint as I would not be able to see, or spend the money without some effort. This is where my other savings sits currently, such as money saved for specific goals. The interest rate is 1.10% with no minimums with an access time frame between three and five days, which is acceptable. The interest rate is variable and could go down (or up) depending on the market.

Low risk, higher return with low liquidity: Certificate of Deposit

I know right away that this option does not fit my requirements for liquidity, but like I said, everyone here will have different risk and access time thresholds.

The shortest CD I can find is a 6 month CD which is beyond my threshold for liquidity. The interest rate for this CD is .70% which is just .5% above our Checking/Savings option interest rate. The only real plus side to a CD (and the only reason I could see anyone getting a CD right now as the interest rate on a high yield savings account is actually higher, and money more liquid) would be that the interest rate is locked in so if the market drops, that rate will be in effect as long as you keep renewing the CD.

Update: One of my commenters brought Ally Bank’s 11 month CD’s that offer early withdraw without any penalty to my attention. These offer an interest rate of 1.30% and without a fee on the withdrawal, they would be as liquid as a high yield savings account. This may be a great option for housing an emergency fund and will be included when I make my decision.

These are the most traditional options I could come up with for the time being. I have a few more on the wing that I will be posting about shortly to complete this mini-series. So far, I am still on the fence about which of these three, or the others, I will choose from…

Image by covilha

I am all for learning from new experiences. I seek out new things to get my hands dirty with all the time, but this weekend, I was able to experience one of those things that no one seeks out or ever wants to – bank closure.

Late Friday night while I was thinking about investing (yea really, I did just read I Will Teach You To Be Rich and it’s still fresh in my mind) I got an email from the bank (ShoreBank Direct for the curious) that holds my entire emergency fund. I get regular emails from them saying the interest rate has change (usually down) so this wasn’t unusual until I got an identical email from the FDIC a few seconds later.

The emails said that the bank is closing it’s doors and the FDIC it taking over. They assured me that my deposits were safe and banking would continue as usual.

I didn’t buy that. To be honest, I was pretty nervous about this. Due to a steady decrease in interest rate, I had been planning to abandon ship anyway so I immediately initiated a transfer out of there.

In light of this new hiccup in my finances, I thought I would share a couple things I learned about the FDIC and bank closure, first hand.

Surprisingly, in that same email from the FDIC, I found that they had already found a buyer for the bank and everything had been transitioned over before I even knew the bank was closed!

You see, the FDIC insures just about every bank out there or at least the good ones (banks have to meet certain standards to be FDIC insured), and when a bank goes under, the FDIC is left holding the reins. That’s a lot of responsibility and way too much liability for them, so they line up a buyer for failed banks immediately.

As a consumer, when the FDIC takes over a bank, you are the last to know. This is because they want to reduce “runs” on the bank, and keep it operational. You can actually still continue to use the same online interface you have become familiar with, the same checks and debit cards. You are also still required to pay on loans and debts held against you by the bank.

Just like HR traditions in a big company for hiring and firing, the FDIC has set up ways to make the closing of banks seamless for everyone involved. They usually close banks on Friday, getting back to business on Monday.

If by chance the FDIC doesn’t find a bank to sell the failing bank to, they may operate the bank themselves, as a federally owned bank, for a short time. In the worst case scenario for insured deposits, your funds with the bank will be frozen during this time. Eventually, if no buyer is found and the FDIC decides to stop operating the bank, the FDIC will cut you a check for the amount of money you have with the bank, as long as it is under their insured amount.

Uninsured deposits with a failed bank are a different story. If the bank is sold, the FDIC has to see what money is available to be distributed to those with uninsured deposits. If the bank is never sold, and is closed down, there isn’t much that can be done for your uninsured deposits. If you find yourself with uninsured deposits in a failed bank, that means you had over $100,000 in one bank account and you will be waiting quite some time to see what fate holds for your money.

The most important thing I learned though is that bank failures can come out of no where. We are sort of used to hearing about them because of the financial crisis in 2008, but banks did fail before that, and will continue to fail in the future. You will never be able to predict a banks failure and the best thing you can do to make sure you don’t lose money when a bank fails is observe the limits of the FDIC, diversify your holdings between different banks, and always prepare for the worst so when it comes, it’s no surprise.

Image by zieak

Out of the 35 entries to the giveaway, the lucky winner is:

Mike from SavingMoneyToday.net!

Mike, I will shoot you an email and get the book off to you as soon as possible!

Thank you all for entering the giveaway, and keep watch, I have more books to giveaway in the coming weeks, as soon as I get time to read them!

Now I want to highlight your comments from the giveaway post in response to my question:

What is one financial thing you wish you did earlier in your life.

wyojeff and Daniel@sweatingthebigstuff both commented about getting out of debt earlier. Jeff says,

“I kept telling myself I would but never manned up and did it until recently.”

Better late than never you two! It takes a lot of effort and drive to change one’s behavior, not to mention time and the fact you guys have changed and have started working on your debt, versus continuing to wrack it up, puts you ahead of %40 percent of people in the nation who live beyond their means and continue to get further in debt.

Craig@FFB, Suba@wealthinformatics, Mrs. Accountability@OODA and Mike@SMT all voiced their thoughts about saving and investing earlier on. Craig said,

“Even a little bit would have grown substantially by now.”

Even if you don’t start investing early on, it’s so important to start learning how to save, and building a savings up so that when you feel comfortable you can start investing as soon as possible. The most proven way to riches is investing; be it in other companies, or in yourself, so get started!

And the Car Coach gave his unique take on his regrets. He says,

“I wish i had NOT invested any money in retirement my first 5 years out of college.”

“I really wish I had put the money into a house about 5 years earlier than I did”

He makes a valid point there, that sometimes putting money in one place costs in opportunity, but I say that it’s better to get into something early, even if it is the wrong something, than do nothing at all.

and just for fun, here are some statistics about money from around the web:

• Americans carry, on average, $8400 in credit card debt. If one were to make a 2% payment every month at an annual APR of 15%, it would take about 30 years to pay off and include about $13,000 in interest. (from ProgressiveRelief.com)

• 96% of all Americans be financially dependent on the government, family, or charity at retirement.
• Nearly half of all Americans have less than $10,000 saved for their retirement. 39% of Americans are anxious about their ability to achieve their desired retirement lifestyle.
• Among parents with children ages five and older, only 26% feel that they’re “well-prepared” to teach their kids about personal finance. (from Money-101)
• Almost half of parents admit that they do not set a good example for their children in how they manage their own finances.
• Sixty-four percent of consumers ages 18 to 24 do not know what interest rate they’re paying on their credit card(s).
• In 2005, 98% of Baby Boomers regret how they spent their money before retiring. (from Senior Journal)

Finally, check out this infograph of the worlds debt. It’s a pretty scary thought! (click to enlarge)

I have heard the term Financial Freedom many times, but I really have never fully understood what that meant because I was in debt and didn’t have that freedom; I didn’t know what it actually felt like.

As my families financial situation has improved since we started actively seeking out improvement, I finally am starting to see that debt really is a prison and I now have, even if it is just a taste, a bit more of an understanding of what financial freedom really feels like. It really is liberating, like nothing else I have ever felt before. It is a feeling of control and security.

Let me give you a few examples of where I have felt this freedom. The most recent example was just this week. We as a family have spent the last two years really focusing on improving our financial situation. We have a fully emergency fund, we have started planning for retirement along with starting to build on that plan, we have no credit card debt and we have some investments that although not without problem, are proving to be worth our time. My wife and I are also working really hard on diversifying our sources of income so we will never have to rely on a single job, and never be in a position where losing a job would completely cripple our progress. Things have changed a great deal in the past two years but until recently I haven’t felt the freedom people are always talking about.

Next week is my wife’s birthday, she will be turning 23. Usually we go out to dinner on her birthday or go on a mini vacation to California, visit family and hit Disneyland. We prepare all year financially for it, but early this year we decided not to take that vacation opting to do something locally instead. We hadn’t talked much about her birthday and I actually forgot about it, realizing just this week that it was fast approaching. So I decided to surprise her with an unexpected gift.

Her current laptop is almost five years old, and really hasn’t aged well. She complains about it’s speed on a pretty regular basis, and I can’t even stand to touch it much less spend enough time on it to speed it up for her, it’s that frustratingly slow. I decided it was time for a replacement.

Normally, I would research for at least a few months before making a purchase like this, but I hopped onto Amazon.com, spent about an hour researching what was available and what prices looked like (I work in the computer industry, so the technicals of the machine didn’t need researching, just the currently released makes and models) and made the purchase. Not only that, I was able to make the purchase, guilt free, knowing it would have no effect on our day to day finances; knowing it would come out of savings that are in excess of what we use on a monthly or even yearly basis, and knowing she would never even see the money gone because those accounts are on autopilot and never need looking into.

Excited by the purchase, I gave it to her early, and she was very surprised. She had no idea and I could also tell that the purchase didn’t make her worry at all about where I came up with the money to buy it.

That right there is the freedom others talk about. That is the freedom I have been dreaming about for years, and the freedom we are working towards. We aren’t there yet, but these little tastes of freedom we get keep up motivated.

They say money doesn’t buy happiness, but my philosophy is that money buys opportunity and peace of mind.

Image by Dazzie D