One of the reasons I titled this site My Next Buck was because I wanted to keep track of where my next dollar was going. Was it being spent on food, drinks, or put into a savings account?  While this is important for me, there are some ways to take what I am trying to do and apply it to your life.

Many are in agreement as to where our money should go after we get paid. Here are the typical steps a young professional’s money should flow out of their wallet:

1: Contribute to 401(K) to your employer match – this is free money, take advantage of it. (varies on company match – max of $16,500 in 2010)
2: Pay off consumer debt - if you have credit card debt, it’s time to pay those things off.
3: Max out your Roth IRA – you can’t beat tax free earnings. Every person in their mid 20s should have a Roth IRA if they qualify. ($5,000 annually)
4: Build an emergency fund – pick a number that will be able to sustain you anywhere from 1 month to 6 months and start socking the money away. (1-6 months of expenses)

(After priority four, things get a bit fuzzy. The next four financial priorities are all equally important in my opinion. If you do any of them, regardless of order, you are in good shape. Or you can do a bit of each and diversify your money.)

5: Pay off low interest debt – this is your car payment, your school loans and your home mortgage. Anything with less than 8% interest.
6: Build savings goals – start saving for those near future expenses. Want to go on a rockin’ cruise or relive spring break with your friends?  Start saving so you don’t have to dump it on the credit card.
7: Invest in the market – let your money work for you by putting it into the market and watch it grow in a brokerage account.
8: Max out the rest of your 401(K) – some people would say this would be the natural number “5″ as it’s the last of the priorties that has a “real” number as it’s limit. However, depending who your 401(K) is through, you may have a hard time investing in some of the better funds out there. That’s why I am putting it last on my list. (max of $16,500 in 2010).

Do you want to see where My Next Buck is prioritized?  Take a look at the image and you will get a sense of where my 2010 priorities lie.

As you can see, at the bottom, my lowest priority (but still important) I put my money into savings goals, the market, and I pay off low interest debt.

Does your money flow like this? Do you prioritize something differently than myself?

Today features an AMAZING guest post by my friend Fred Schebesta. Fred writes about saving money at Savings Account Finder, he focuses on helping people  find, compare and apply online for savings accounts to put their hard earned money away. Earning extra interest for people makes him happy!

Saving on your electricity can be as simple as changing a few old habits and with power becoming more expensive and everyone becoming more aware of their carbon footprint, shouldn’t we all be doing all we can to conserve energy. These 72 simple tips are going to be even easier for you and your family to adopt in your home when you realize it won’t cost you a cent to start saving.

1 Turn Off Your Lights
A simple habit to remember and one which can save you a fortune. Turing off the lights when you leave a room and when you go out makes financial sense, and should appeal to your common sense too.

2 Stop Your Dishwasher Drying Your Dishes
Turn off the dish drying function of your dishwasher cycle and boost your savings accounts by letting your dishes dry naturally.

3 Using Table Lamps
Table lamps will light just the space you are using, making them a much more efficient option than turning on all the numerous and larger overhead lights.

4 Shut Off Mains Power
If you are willing to reprogram your alarm clocks and recorders when you return, turning off your mains power when you leave the house can save you a lot of cents when you add up the power used when appliances are on standby.

5 Only Use Lights When Needed
Get out of the habit of turning lights on whenever you enter a room. Often by simply opening a curtain you’ll have enough light for general tasks during the day.

6 Turn Lights Off When You Leave a Room
A habit which is going to save you money on your electricity bill when you do it regularly – plus there is no substance to the myth that turning lights off and on uses more power than leaving them running, so no matter how long you’re leaving a room for, turn off the light.

7 Free Cooling Passages
The air comes into your fridge and freezer through a vent on the inside so make sure you don’t place food or items in front of that vent, as the appliance will have to work harder.

8 Use Task Lighting
If you’re working on the computer or reading a book, use lighting which will light up just the space you need. This is especially important if you are at your desk where your computer, monitor, printer and office equipment is already powered up.

9 Hand Wash Single Dishes
If you have a full load then your dishwasher is more water and energy efficient, but if not, wash the few plates or mugs by hand.

10 Untangle Your Drying
If you separate your washing before putting it in the dryer the dryer will be much more efficient.

11 Indoor Clothes Drying Area
Setting aside a space inside to hang your clothes on an airer will make it easier for you to stop using the dryer and all that extra power.

12 Turn Off Your Home Office
When working from home you need a break from the office too, even if you just close the door to the spare room

and forget about it for the weekend. Well, while you’re forgetting about work, unplug all of your office equipment on the weekend too.

13 Unplug Your Home Office
If your home office doesn’t run at the same pace as an inner-city business then you don’t need to be using the same amount of power either. Therefore, if you’re not printing anything unplug your printer, if you’re not scanning anything unplug your scanner, if you’re not using your audio equipment then unplug your speakers.

14 Turn Off and Turn In
Before you go to bed it will cost you nothing to double check that all lights, TVs and electrical equipment are turned off.

15 Use Your Front Door Not Your Garage Door
Your garage door opener uses power every time you come and go from your house. Therefore, if you’re stopping at home quickly leave your car in the driveway instead of opening and closing the garage door. Plus, if you have an entrance to your home from your garage, use it, instead of opening and closing the garage door for your car, and again for yourself.

16 Turn Off Your Computer
A simple money saving habit to get into and one which will save you a fortune in power you’re just wasting when your computer sits idle.

17 Not a Fan
If you are cooling off in front of a fan, make sure to turn it off when you leave the room. A fan is only going to make you feel cooler when you are in front of it and leaving it on when you’re not there is not going to lower the temperature of your home.

18 Turn Off Appliances When You Leave
If you’re not watching the TV remember to turn it off, same too for your computer and games console. You can turn them right back on when you return.

19 Transfer From Freezer to Fridge
If you plan out the next several meals you can transfer all that food from your freezer to your fridge at once. Opening your freezer less will mean it doesn’t have to work as hard as if the door was regularly being opened.

20 Christmas Lights Light Up the Night
Don’t leave your Christmas lights running during the day – no one can see them. Also make sure to wait until it’s actually dark to turn them on at night.

21 Turn Off Lights When TV is On
The TV provides its own light if you need to get up and move around the room and you certainly don’t need the light on to see the TV better – in fact it’s likely to look better in the dark.

22 Turn the TV Off When You’re Not Watching
If you’re going in and out of the room getting ready for work or cooking or cleaning, don’t leave the TV on when you’re not there to watch it.

23 Watch Less TV
Turning the TV off when you leave a room may also lead you to watch less TV all together which can save you even more. Plus, flat screen TVs especially, get very hot when on for long periods of time so get off the couch and couple saving electricity with exercise, gardening or board games.

24 Don’t Dehumidify When It’s Not Humid
You will only need a dehumidifier to be running when it’s humid so to avoid unnecessary electricity consumption, turn them off during late autumn, winter and early spring.

25 Unplug Battery Chargers
After your iPod, camera or other device has charged, unplug the device and the charger from the wall. Even when your device isn’t plugged into its charger, the charger is still consuming electricity.

26 Turn Off Appliances
Leave your fridge and freezer running of course, but make sure all other appliances are off when you leave the house – your microwave, stereo and coffee maker don’t need to stay on while you’re gone.

27 Take All Food From the Fridge at Once
If you’re cooking take all the ingredients from the fridge at the same time, or if you’re making a sandwich get all the toppings in one go as opening the fridge door less, means it doesn’t have to work as hard.

28 Clean Fridge Coils
Clean coils means your fridge will take less electricity to keep its contents cold.

29 Use Half As Much Light
Go through your house and unscrew every second light bulb and see whether you really do need so much light in your home.

30 Clean Dishwasher Drain
If your dishwasher is clean, then your dishes will be too and if you allow only clean water to come through the drain, there is less chance you need to rewash the dishes and use yet more power.

31 Keep Dryer Lint Trap Clean
If the moisture can easily leave the dryer through a clean lint trap then it will be more efficient and be able to run for less time.

32 Run Full Loads of Laundry
If you run full loads of laundry you can therefore put more items in the dryer at the end of each cycle, and run the dryer less often.

33 Soak Your Dishes
Soaking off the tough food stains on your dishes overnight means that the following day you can put your pre-soaked dishes in the dishwasher on an energy conservation cycle.

34 Check Your Dryer Before the End of the Cycle
Just because you’ve set the dryer for 90 minutes, it doesn’t mean the items won’t be dry before then. Checking before the end of the cycle allows you to remove the items which are dry and turn off the dryer, or let the items which need more time dry more quickly on their own.

35 Check Your Dryer Efficiency
As your dryer runs it may tangle large items such as sheets. However, if you check their progress regularly you will be able to untangle them so they can dry more quickly.

36 Don’t Completely Dry Clothes in the Dryer
Taking items from the dryer when they are still damp will help them last longer and it also means you can use your dryer less if you hang them up to dry naturally.

37 Can Your Dryer Sense Moisture?
If your dryer has a moisture sensor feature make sure this is activated as your dryer will shut off once it senses the clothes are dry.

38 Do Consecutive Loads of Laundry
When your dryer is already warmed up, keep washing to take advantage of the warmth, rather than making it heat up from cold again another time.

39 Don’t Use the Wrinkle Shield Feature of Your Dryer
If left unattended, the Wrinkle Shield will run the dryer at the end of the cycle for two minutes, every five minutes to stop the clothes wrinkling inside. If you’re out and unaware, your dryer will be running almost the entire time.

40 Turn Off Your Home Office
If you don’t want to scramble around with cables when you’re not using your office equipment, at least turn them off when they’re not in use.

41 Put Scanner on Sleep Mode
This means you don’t even have to remember to turn off your scanner after use, and you can still save electricity.

42 Put Printer on Sleep Mode
Using the sleep function means you don’t have to plug in and unplug your printer each time you stop using it, but you can still save on your power bill.

43 Put Fax Machine on Sleep Mode
Leaving your fax machine on full time in case a fax comes through is unnecessarily using power but putting it to sleep mode can combat this waste.

44 Turn Off Your Games Console
Anything like a Nintendo an X-Box or a PlayStation will keep using power even when you’re not playing so if you’ve finished or are taking a break, save and turn it off.

45 Unplug Your Games Console
Even if the console is off it is still using power so unplug your Nintendo, X-Box or PlayStation at the wall.

46 Unplug Your Phone Charger
Even if you’ve unplugged your phone from its charger, the charger is still sucking out power if it’s left plugged in.

47 Manual Gardening
Use manual shears to trim the bushes and hedges in your garden rather than powering up your electric trimmers.

48 Manual Can Opener
If you have an electric can opener, you probably still have a manual one so get it out of the drawer and stop using an electrical appliance when you have a manual one which works just as well and for free.

49 Have Bread Not Toast
Choosing to eat your bread fresh rather than toasted can save a lot of power over breakfast, especially if the whole family gets onboard with bread.

50 Rotate Cordless Phones in One Charger
Instead of having several cordless phone handsets charging at once, use just one charger base on a rotation basis.

51 Computer on Standby
This is a setting you can easily change and you can chose the time-out period before your computer powers down after inactivity.

52 Air Dry Your Hair
Before you blast your hair with the hair dryer, consider whether you really need to – are you going out, are you going to catch a cold? Probably not, so where you have the opportunity to air dry you hair, do – try washing your hair at night and when you wake up in the morning it’s dry, for free.

53 Light Free Day
Get into the habit of using no lights for just one day a week. You can make it into a game or challenge for your family, or simply start a romantic candle-lit dinner tradition – all while saving on your power bill.

54 Don’t Dispose of Garbage in the Sink
If you have a garbage disposal system in your sink, think before you use it – do you really need to or can you just take your rubbish out to the bin?

55 Fill Up Your Dishwasher
Don’t run your dishwasher unless it’s full as you’re going to do more loads in the long run and waste all that power and water on a half load.

56 Unplug the Second Fridge
If you have a second fridge in the laundry or garage for beers and food and other drinks for parties, it doesn’t need to be plugged in all the time. If you can, even try to get rid of it all together.

57 Disconnect the Microwave Light
Your kitchen is likely to be quite well lit so when you (responsibly) unplug the light bulb in the microwave to save on electricity, you probably won’t even miss it.

58 Raise the Fridge Temperature
Don’t raise the temperature so far that your food spoils, but just check the setting now – is it on the coldest setting? Probably. Well it doesn’t need to be, turn the thermostat just a few notches warmer and your fridge won’t have to work so hard.

59 Raise the Freezer Temperature
The same electricity saving idea can be applied to your freezer too because unless your freezer is packed to the brim, it doesn’t need to be on the absolute coldest setting to keep things frozen.

60 Remove One Light Bulb in Your Garage Door Opener
While it’s convenient for your garage door opener to light up when you’ve just entered, most systems will have two light bulbs, so try it with just one and see whether there’s enough light.

61 Turn Off the Porch Light When You Get Home
If you’re the last one home at night, who are you leaving the porch light on for? This is a simple habit to get into when you get home.

62 Leave the Porch Light Off
Chances are your street is lit with street lights so do you really need to leave the porch light on at all? Moonlight, coupled with the street lights or even the light of your mobile phone should be enough to help you find the right key at night for free.

63 Use a Single Power Board
You can use one power board in the lounge, one in the office, one in the bedroom, one for the kids…once you connect all appliances in a room to one power board you can quickly and easily turn off everything at once so you can be sure you’re not wasting any standby power.

64 Separate Your Fridge and Stove
If your fridge is next to your stove, your fridge is going to have to work a lot harder to keep cool with all that extra hot air around – especially if you open the fridge while you’re cooking.

65 Paint Light
Choosing light paint colors can help minimize the need for more lighting as light paint naturally reflects light into dark spaces.

66 Give Your Electronics a Holiday
When you go away on holiday, give your electrical appliances a break too and unplug all the clock radios, DVD players, game consoles and TVs. If you’re leaving for an extended period even try and empty out the fridge so you can unplug that too.

67 Fill Up Your Fridge
If your fridge isn’t full, place some (full) water bottles inside as this leaves less space that your fridge has to work on to keep cool, and the cold items will keep the fridge itself cold too.

68 Collect Leaves Manually
Use a rake instead of a leaf blower and take the opportunity to get a little exercise as you save some electricity.

69 Clean Your Light Fixtures
If your light fixtures are clean, you will probably find you can get away with turning on fewer lights, as there is more light coming from the ones already on.

70 Keep the Pool Pump Clean
Make sure the strainer baskets in your swimming pool pump are free and clean, because when they start to get blocked, the pump has to work harder and use more electricity.

71 Keep Your Freezer Full
If your freezer is full, the frozen items will work to keep the inside of the freezer cold and allow the freezer to use less electricity.

72 Shovel Snow by Hand
Get out there and put your back into shoveling snow by hand, rather than using your snow blower. It might even help you work off those extra winter kilos you put on over the holidays.

For the past 6 months, I have talked to scores of people, mostly in real life, and have tried to give them free money.  None of them have accepted.  Not one!  What I am talking about today is the ING Direct $25 Referral Bonus.  If you sign up for an ING account after a friend or an individual has sent you a referral code, you get a FREE $25 with your first deposit of $250.  The only catch is that the $250 has to stay in your account for a month.

The whole process to set up the account takes about 10 minutes.  That’s $150 an hour. I know a handful of folks that are pulling that down (and you know what, they already have ING!), but for the rest of you, this sounds like time well spent.

The return on your money in one month’s time is 10%. Try finding that in the market these days.  The past months have been good, but a guaranteed 10% return? How can you beat that?

Maybe its because I associate with the younger crowd that still rolls their eyes when I talk about personal finance.  Maybe my friends are all living paycheck to paycheck in an expensive city and can’t afford to park  $250 for a month.  Or maybe they are all just a bunch of lazy whiney brats that think spending 10 minutes of their time is not worth “the hassle”, “the extra account”, “the <insert lame B.S. excuse here>”.

I know most bloggers run out of these referral codes.  Tell me bloggers, what’s different between your audience and mine?  Tell me readers, why the hell aren’t you taking advantage of an amazing deal?

I’ll close with a thought from a conversation I had with a CFP recently.  He suggested his job is to optimize every single dollar of his clients.  He doesn’t keep $1000 of stock in an inferior investment just because he is working on an $8,000,000 portfolio.  In the spirit of optimizing every dollar, we should take advantage of these types of deals.  Speaking of which, Contact Me Here for a referral code.  I obviously have plenty.

While planning for my August Cash Flow Recap, I noticed something a couple of days ago.  I have a positive net worth for the first time since I have actually cared about money.  This of course has some caveats as a big chunk of my liquid assets was from my car insurance settlement.  However, until I purchase another vehicle, that money is in my account and thus counts towards my net worth.

So, there you have it, I am out of the red and into the black!  That is until yesterday, when I had to cut a check for August’s rent and I fell below $0.00 in net worth again.  It may be a while (after I purchase my car) but I know I will be in the black again, and next time I am, I will be there for good!

Hopefully this time next year I will have as much money invested as I do outstanding in my student loans (something I am in no rush to pay off while the market is so low).  Maybe when I get into the black I will move my cash flow recaps into net worth recaps and work my way towards that goal of a cool million in the bank.

This is a guest post from Stephen Popick, a US Government Economist and long-time Forums Administrator / Guest Writer for GetRichSlowly.com.  His new series here will touch on bridging the gap between the global economy and the personal economy; understanding what statistics mean for personal fiscal planning in the next year.  Mr. Popick is a long-time swing dancer who also enjoys scootering, softball, and Civilization IV.

In this first column, I would like to touch on a statistical number that is grossly misrepresented in the pop media, how it should be interpreted, and how to apply a new understanding what it means to your personal finance planning.

Recently at GetRichSlowly.org , JD wrote about the personal savings rate (PSR).  I had previously written on the personal savings rate here , but let’s start off with what’s going on with the PSR.

The Bureau of Economic Analysis reports the PSR.  In their news releases is embedded a definition of this calculation, which isn’t what we’d think it is, since it says “Savings”.

The PSR measures:

(Personal After-Tax Income minus Personal Outlays) / (Personal After-Tax Income)

Included in Personal Outlays would be things like 401Ks, Roths, CD, Stocks, Bonds, Commodities, etc.  But aren’t these considered to be savings?  Not by the PSR, because you have to outlay cash to buy them!

In short, the personal savings rate doesn’t measure savings! It’s more a measure of cash-flow

In actuality, savings rates could be going up as we cut back on disposable consumables (likely a good thing), or it could also be that consumers have stopped contributing to the 401ks (likely a bad thing) and the real savings rate is lower.  What is known is that however we’re saving; we’re saving with less risk (and less return).

Let’s wrap this back into what it means for you, the personal finance blog reading consumer.  What you know from this statistic is that the typical American consumer is keeping more greenbacks in the bank or in their mattress (By the way, this also nicely explains why inflation hasn’t gone up much).  Further, it may mean that consumers are moving out of riskier savings vehicles and deciding to spend some money on consumables and keep the remainder in very safe low yield accounts.

For the Personal Finance blog reader, what does PSR mean to you?  For most folks, the PSR increases reflect the current uncertain economic situation and “emergency funds” are more funded these days.  Of course, if you already had a well-funded emergency fund, then you might want to consider a different reaction.  If my conjecture above is correct that investment activity is lower now as consumers substitute 401K savings or bond savings to cash-like savings, then follow Warren’s advice to “Be greedy when others are fearful”as there would be a greater chance of some good long-term investments  being sold at a wonderfully reduced price.  Further, the PSR appears to be continuing to rise. You can bank on the current economic climate continuing beyond the next 12 months pretty certainly based on this.

Next week, I’ll cover just what the real story is behind the mysterious Unemployment Rate and why it shouldn’t be used to measure how the economy is at this very moment.  Controversial statement, but I will explain it neatly.  As a teaser, did you know there are 6 different versions of it?  Which one is reported?

After discussing the errors of my past yesterday, I think it is important to highlight my future prospects.

Today I declare that I am officially joining J. Money’s Million Dollar Club.

I was walking in DC last week, listening to the audio book of The Millionaire Next Door when I spontaneously broke out smiling.  The reason for my emotional display was because I realized in that instant that there will be a day when I have a net worth of over One Million Dollars.

How Am I Going to Do It

I would like to think I could frugal my way into a million dollars.  This, however, isn’t possible.  What I can do is make a decent amount of money over the course of my working years – commensurate to my education and my experience – and over time, build a nest egg that will provide me and my family with financial freedom!

My Proclamation:

I can and I will employ solid personal finance theories in my life.

I will spend less than I earn annually.

I will never buy a car just to keep up with appearances.

I will not buy a house that is more than myself or my family need.

I will not spend money just to spend it.

The Process

It’s hard for me to judge where I will be in 5 years.  Most people don’t settle into a career into their late twenties or early thirties.  However, if this year is to be an example if future income and spending trends for my life, I feel comfortable saying I can save at minimum of $20,000 a year between my own savings, 401(k) matching, etc.

Without knowing my future wages, the estimation process is tricky, especially since I haven’t tapped my earning potential, but without any windfalls and with a conservative annual return in the market I will have a personal net worth of One Million Dollars in 25 years.  When that day comes you are all invited over for some hot dogs and beers.

Now that I am a member of this club, you will see the logo displayed on my site at all times.  It will serve as a reminder to work towards my goal of financial freedom and as motivator for everyone else that has a goal and is willing to put in the effort to achieve it.

When looking for an employer or while at your current employer there is value spent at looking into your full benefits package.  There are the obvious benefits, health insurance, 401(K) matching (which isn’t a benefit unless you take part in it… so get on that if you haven’t!), paid time off, etc.  However, there are other benefits that some employers have that may have been mentioned in an interview and you forgot to sign up for, such as discounted gym membership, discounts on computer purchases via the IT department, etc.  There are also some unwritten fringe benefits that you can use to your advantage.

Each one of my jobs, and if you have read my blog for a while you know that I currently have four of them, has a unique benefit that I am reluctant to give up.  Other than my paychecks, which pay off my standard expenses and investment accounts, I consider these benefits to be a legitimate part of why I do each of these jobs.  Each one saves me money or provides with an opportunity.  Let me go through each for you.

• My Career: My company is great, it has great people and great benefits.  One of those benefits is that I receive SmartBenefits.  For those not in DC, this is basically a monthly credit to my Metro card.  My commute from home to work costs $9 a day roundtrip.  An average month will have about 22 workdays, that is close to $200.  Now, the SmartBenefits won’t cover all of that.  But I did mention the people at my company for a reason.  There are other people at the company that only use 25% of their SmartBenefits (and if you don’t use them, you lose them).  A few individuals have offered to switch cards with me from time to time so I can use their benefits up.  This is creating maximum utility for all parties involved (I owe the people that have allowed me to use their cards a drink and dinner).  I now pay $0 to commute to and from work.  Oh, I should mention that the benefits I receive here are pre-tax, please add another 30% to the monthly benefit.  Monthly savings: $200 post tax.

• My Concierge Job: This job is customer service based, therefore it offers two unique benefits, networking, and free time.  While I have additional tasks, my primary role in this position is to be polite, courteous and friendly with residents in the building.  That often times comes with conversation.  A lot of resident’s have become friends and some have created networking opportunities.  Additionally, when its slow (first thing in the morning) there are no people around, and this provides with me with an opportunity to read, write or do research.  I even can do work for my career to get ahead for the next week.  Monthly Savings: $0, Return on Investment for my Future: Unknown.

• Dominos Pizza:Another customer service job that offers multiple benefits outside of the paycheck.  I have made friends with some of the guys that work with me, and we have a lot of fun when on the clock.  It becomes “guy-time” where we talk about sports and a host of other things.  The only difference in “guy-time” is that we are holding pizzas instead of beers, and hopping into our car every few minutes.  Another benefit, like most retail establishments is the discounts.  Yeah, Dominos may not be healthy, but please tell me you wouldn’t eat a large pizza over the course of a weekend if it was only $5.  This job keeps my weekend food costs down which can surely be expensive if I ate out a lot. Monthly Savings: Estimated $150.

• Scorekeeping: My last position is as a scorekeeper for the hockey league that I play in.  This job is ultra flexible and allows me two great benefits.  One, I get to scout a lot of different players throughout the league.  This can be valuable information for when I play a specific team, or I could find a guy that may be willing to join my team and improve our roster.  Either way, this is a win-win.  Also, I don’t get a paycheck here, I get league credit.  My league credit is tax-free and allows for me to play hockey for free (which is hard to do in the DC area).  Yearly Savings: $1300.

Above are the side-benefits to all of my jobs. Please leave a comment and tell me what the benefits are at your work place that go above and beyond the paycheck?

Start Saving – Get $100 Free

I was forwarded a link over the weekend that I wanted to share with everyone.  TD Ameritrade is offering a unique promotion that will give its customers a Free $100 for signing up and continually depositing money into their non-retirement savings account.  You can see the promotion details here.

The Fine Print

In essence, TD Ameritrade wants to promote the concept of savings, so if you deposit $100 a month into your account for 12 straight months, you will be given $100.  The account also has a small interest rate of .50% .  The interest rate is kind of weak, but if you are only going to deposit the minimum, you will still earn over 8% on your money for that first year.  For those that don’t mind opening an extra account to take advantage of a promotion, I say this is a worthwhile option.

My Credit Score Update

A couple of weeks ago I wrote about Liz Pulliam Weston’s discussion with Jim and JD on the Personal Finance Hour.  Since that discussion I have signed up for MyFico just to watch my credit score (with a free trial) and to see how things change.  I was shocked to see that my score was in the high 600s.  Last time I checked it was around 730 or so from one of the credit bureaus, but maybe that wasn’t my “real” score.

Having a score of  692 was a bit of a shot to my ego, but that is a decent score for someone who doesn’t have more than a few credit cards and is only 24 years old.  I also had a ding on my report for a late payment or two from before I figured out how to handle my student loans and my finances in general.

The Decrease

About two weeks ago I received an e-mail that my score had dropped by 17 points.  I was flabbergasted! The only thing that had changed was that I had built up about  $2000 in credit card bills over an extended period (I changed the billing date of my Amex and it basically meant that my bill was due 24 days later, almost a whole month!).

The Increase

Just as Liz said, my credit score will adjust itself quickly.  I paid off all of my cards in full, and sure enough my balance jumped back up 18 points to 693.  An almost 20 point swing, both positive and negative, seems quite large, I will be watching for as long as I can to learn more about credit scores and I will report my findings here.  Take a look at the chart below to see how MyFico tracks your score.

My Credit Score Tracking from MyFico

I am debating about buying the MyFico service to watch my score and report.  I probably don’t need it, but it would provide some interesting perspective over the course of a year.  Has anyone else used these services for an extended period and has anyone seen such large fluctuation within one month?

What is an Emergency Fund

An emergency fund is a pool of money that has no allocated purpose other than to be available to you quickly in case of an emergency (health issue, car accident). It isn’t there for frivolous wants, but solely for the unforeseen expenses that will have a drastic effect on your finances.

People often ask how big of an emergency fund they should have. Most people recommend that you have enough money available in your fund to cover anywhere from 1-6 months of expenses (including your mortgage or rent). This is to ensure you can financially survive a traumatic life experience such as a job loss or a stack of unexpected medical bills.

Who Needs and Doesn’t Need an Emergency Fund

Having an emergency fund is never a bad thing, but I don’t think it is as high of a priority for certain individuals as other bloggers and personal finance experts believe. If you have a young family and a house, yes, you absolutely should have an emergency fund. If you are in your early to mid 20s (like myself and several of my readers), are renting and don’t have a family to support, you simply don’t NEED an emergency fund.

What Should I Do with my Money that I Don’t put in an Emergency Fund?

First things first, pay off your debt. If you are in debt, get serious about it and throw every penny you have at getting out of that hole. It should be noted that if you have been working to get out of debt lately and didn’t have an emergency fund set up, did you need one in all of that time?

Second, invest in a Roth IRA. The reasons why this is step number two is explained below. A Roth IRA is an asset unlike any other, and if an emergency doesn’t happen, think of what that money can turn into over time (please see my post Turning $5,000 into $110,000 (Tax Free) – All it takes is time.  It’s safe to say whenever you have extra money, a Roth is probably the best place to put it.

Third, create sub savings accounts. Save money for your short to medium term goals with the money that you have left over.

Fourth, create a buffer in your checking account of a few hundred dollars (maybe $1000) to make sure you don’t overdraft your account when a bill is higher one month.

What Happens if an Emergency Occurs

Well, you tried to play the odds and hope that no emergencies would take place. Unfortunately disaster hit and now you need cash, and quickly. Don’t sweat it, just because you don’t have an emergency fund doesn’t mean you are screwed. You have several options in front of you.

• Option 1: I know no independent 20something wants to hear this, but ask your parents for money. This is an emergency and families are there to support one another. Swallow your pride a bit and ask. It may make things easier in the short and long term.
• Option 2: Take the cash from your short to midterm savings goals. I guess your trip to Paris isn’t as important anymore in light of the recent emergency or you may have to hold off buying a new car in two years (may have to push your goal back by a year or two, but hey, life happens.)
• Option 3: Take your contributions out of your Roth IRA. This would royally suck to do, but it is a legitimate option. You can take your Roth contributions out at any time without penalty. The caveat is that you can’t put them back in as if your Roth gave you a quick loan. If you have been putting $416.66 a month into your Roth to hit the $5,000 contribution limit, it’s possible that you have enough in there to last you a few months should something disastrous happen. (Please note: you can take earned money out of your Roth without penalty if you are paying significant unreimbursed medical expenses or are paying medical insurance premiums after losing your job.)
• Option 4: Charge it. Yes, it would suck to go back into debt, but if you were that focused about getting out of debt in the first place, you can surely do it again. Think of all you learned getting out of debt the first time, and think of how much easier it may be to get out of it a second time if it was a necessity.

How to Prevent an Emergency from Happening

If you want to avoid using your already established emergency fund, or if you are like me and don’t have a designated fund for emergencies, you should focus on preventing them from occurring. Here are a few tips to help prevent an emergency.

1)Get regular medical and dental checkups (this is the best preventative maintenance you can have and will make sure your body is in tip top shape)

2)Stay active. Eating and being healthy is easier said than done, but if we could all focus on this a bit more we are less likely to have expensive problems down the road.

3)Keep up with the maintenance on your vehicle. It’s amazing how many people equate their livelihood to their car. If your car gets regular checkups like your body does, it will last a lot longer.

4)Pick up a part-time job. Diversifying your income is the best way to hedge against job loss. Even a few hundred dollars a month is going to help you if you get laid off. This extra income can help boost your savings or Roth contribution; helping you in case an emergency does pop up.

I definitely don’t expect everyone to agree with me about the necessity of an emergency fund, but please remember I am only advocating this strategy as an alternative to younger adults who could be boosting their savings in the years when an emergency is least likely to happen. I personally don’t have an emergency fund, but I do have targeted savings goals and a Roth that I can tap into if necessary.

Please leave a comment and let me know your thoughts about this break from the personal finance norm of having an emergency fund.

On the metro this morning I saw a gentleman reading the Wall Street Journal. I politely asked to borrow the section with an article headline that caught my eye: 7 Smart Places to Stash Your Cash.

I should mention that once the gentleman gave me the section I realized that the entire page was one big advertisement for buying US Coins and armored safes. The page was disguised to look like a legitimate news article in the journal (go check it out – page A7 in today’s WSJ) but clearly, further investigation was necessary.

The article gave seven ideas on what to do with your money to keep it safe. Each idea is in the order they gave followed by my reaction.

1. Be sure your institution is insured – This is sound advice. If your bank is FDIC insured you have nothing to worry about in terms of keeping your money safe (if you are approaching the $250,000 limit then you may want to look at splitting your money between different institutions).
2. Start and grow a coin collection – What? This is the second smartest place to stash your cash? Anyway, this is not a bad idea for hobbyists, but the author describes the coins as never losing their cash value (which is true), however inflation will make your newly minted never circulated coins worth a few percent less next year. The author of another article on the page mentions that a specific uncirculated coin from 1974 has seen a 500% increase in collectors value. It sounds like speculation to me and I would rather have money in the market (By the way, the Dow Jones was around 600 or so back in 1974.  Even at its weak 8000 today, that is over a 1000% increase.  Do the math!)
3. Keep cash safe at home – This is another suspect idea. If your money is at home it is (a) not earning any interest. (b) available to be lost or stolen, and (c) susceptible to being lost completely if something tragic (like a fire) takes place.
4. US Savings Bonds – I have no qualms with bonds, but this article was talking about tangible paper bonds. I personally view individual bonds as a bit of a hassle. It’s much easier to invest electronically in bonds and saves you the hassle of keeping these documents on hand until they mature, which would be my preference. J. Money over at Budgets are Sexy talks about his bond experience here.
5. Gold and silver – Another idea that I have no issue with. I am not personally interested in the precious metal market, but I always hear buying gold is a relatively safe investment. Then again, this requires more research. I do know that a lot of PF bloggers say to steer clear of buying gold, and they have spent more time considering this issue than I have.
6. Hold on to real estate – I fail to see how this relates to stashing your cash, except that you are likely to need a home just to store all the coins and bonds that the article recommends.
7. Buy a good safe – Here is the whole point of the article (err, advertisement), they want you to buy one of their safes. This sounds more like spending your cash then stashing it to me. The utility of a safe exists, especially a fire safe that can house important documents and valuables.

The moral of the story is to be careful what you read. I was suckered into this article for a minute or two until I noticed it was an advertisement. This “article” speaks to people that are scared and frightened of the economy right now and it’s looking to take advantage. Similar to all media, you need to question what you read and think critically about the material. If you are thinking of taking a new avenue down investing, please check with a financial planner or with people that you trust before reallocating your wealth.