Gather-member Faith is on a savings kick (see Do you go through phases on Gather? My current phase is making & saving money), and so am I.
I'm saving for at least a down payment on a vacation/investment property like this one I spied in Yacatan, Mexico. In Mexico, all foreign buyers must put 20 percent down on a property (equity above the sales price doesn't count). In the U.S., buyers aren't required to put 20 percent down. However, mortgage insurance isn't required on homes with at least that much down -- a savings of up to several hundred dollars per month.
I'd like to use the property myself, so that rules out my IRA as a financier. Consequently, setting aside enough for a down payment is my initial goal. Ideally I'd like to pay for the property outright, since that will save me 3xs the loan amount in interest fees over the course of a 30-year mortgage. But, since I just started saving for this on July 7, I have a long way to go!!
I'm going about this in a number of ways that force personal savings, and provide decent returns:
1) I started depositing 10 to 20 percent of every check I receive into a money-market savings account (one that pays 2.3 percent interest monthly at PayPal).
A few less trips for eat-out food and drink each month: Free. Losing weight and saving without much pain in the process? Priceless.
2) I signed up for Bank of America's Keep the Change program. Every debit card purchase is rounded up to the nearest dollar, and the difference is deposited into a Keep the Change savings account. It's a slow crawl upward, but I've saved around $30 extra dollars over the past month -- all of which will be matched 100 percent at the end of the year by BofA. (I worked with the personal banker to make sure the account is free for the first year.)
BofA Student Checking Account: Free. KeeptheChange Savings Account: Free. 100 percent interest? Priceless.
[The Bottom Line bonus: Email me at jd@self-directed.info and I'll send you a special sign-up link that entitles you to an extra $10 to $50 free money deposited by Bank of America directly into your new account!]
3) I signed up for Wachovia's free checking account and automatic transfers into its free Way2Save account. The account earns 5 percent interest, and matches an extra 5 percent at the end of the year.
It can only be funded by automatic transfers (I'm doing $100 every other week to start, funded from my other savings accounts above) or from $1 automatically deposited from your checking account everytime you make a debit card purchase. This is long-term savings though, since the extra 5 percent match only applies to money still in the account after the one-year time period. Meanwhile, I'll be transfering over the money accrued in the no-interest BofA Keep the Change account as part of my automatic transfers each month, so I can make that money work even more for me.
Wachovia basic checking: Free. Way2Save program: Free. 10 percent annual interest on savings, plus 100 percent matching from BofA? Priceless.
[The Bottom Line bonus: Email me at jd@self-directed.info and I'll e-mail you back a registration coupon that entitles you to a $25 Visa gift card just for opening your free Wachovia online account.]
After less than one month from my savings-plan kick off, I have $600 socked away specifically for my investment-real-estate-purchase dreams.
Follow the same ratio and in three months I'll have $1,800, six months $3,600 and a year $7,200. Add in the $250 cap for BofA Keep the Change matching, 2.3 percent interest on the PayPal account, and 10 percent interest on the transfers to the Way2Save account, and the total is around $8,200 in a nice little account one year from now. It's a step in the right direction, for sure. (Though at 20 percent down, it will only finance a $41,000 home -- so I'll definately have to work harder on this end to make the work I do pay a higher premium. That way, the 10 to 20 percent I'm flowing into savings is more than $600 per month.)
The added bonus? When I pay myself first, I really don't miss the money at all!
rate
email
print
link to this page
Comments: 27
Thanks for the note Jennifer P. I'm indeed happy to be gathering.
Thank you Sonia M. I love the "Ms.M:MM" moniker. Fabulously short.... ; )
So nice of you to say Heather M. I'm delighted that you joined my frugaliving.gather.com group, and am please to have you as a new connection.
I am currently paying myself first for my college tuition. I want to be able to write one large check for the loans after I graduate.
Thanks once again for the priceless information that you give!
So glad you like it! ;-)
Thanks Sonia!
R. Ethan, you're completely on the right track. College loans are 0 percent interest until graduation (or at least they used to be). It makes a lot of sense to make the money work for you now -- and then pay off those loans before you're hit with even a dollar of interest.
Sure, a college loan may be one of the lowest-rate loans you'd take on. So there is an argument of leaving that one to pay down on a higher-rate loan, like your first home. But it sounds like you're doing everything in measured steps. First the college loan paid off, then the house loan saved for, and so on. You're well ahead of most of us already R. Ethan. ; )
Glad I could be of assistance Alexsandralyn S. I found out about the PayPal program accidentally (maybe I signed up for it initially, but forgot?), when I forgot about one of my personal PayPal accounts and left a balance in it. I checked it out about a year ago and discovered interest. Nicccee. Glad I did! Let me know what you find out.
No worries Karen. I'm committed to this goal! Now that I've started, there's no letting up now. There have been times in the past week when I could have dipped into the savings (a cell in the battery in my car died, and I could use some other car upgrades), but I figure I'll use future income for that rather than the money I've already socked away.
I just started a new account at WAMU so that I can start socking money away for those darn self employment taxes next year.
Great adage Tom!
Good thinking Cybergwen. Self-employment taxes can take quite a chunk, so it's good to start saving 25 percent of your income now for that purpose. Hope all is well with you!
First, "Customers enrolled in the program earn a 5 percent annual bonus in year one, up to $300, and a 2 percent annual bonus in years two and three, up to $300. Bonuses are calculated on an annual basis for the first three years on eligible balances. The eligible balance is equal to the savings contributions for the current year (i.e., the sum of the $1 transfers and up to $1,200 of the recurring transfers) or the Way2Save account balance, whichever is less."
Second, the maximum transfer per month is $100. You can schedule up to four transfers per month, but the total must be no more than $100 ($25 per week, for example).
That's a bummer, since I was really counting on being able to deposit more. Oh well, at least we know that a penny saved in the first year is indeed still a penny (and 10 percent) earned.