Getting Off The Dime

Inertia is a great concept.  If you are stuck, you tend to stay stuck.  If you are in motion, you tend to stay in motion.    Here is the dictionary definition.

1 a : a property of matter by which it remains at rest or in uniform motion in the same straight line unless acted upon by some external force b : an analogous property of other physical quantities (as electricity)

Actually I like my defintion better. 

A case in point is financial activity.  If you are not saving, you tend to not start.  If you are not investing, you tend to continue not investing.  Conversely if you do save, you tend to save more.  If you are investing, you tend to invest more.  Like I said, if you are stuck, you tend to stay stuck.  If you are in motion, you stay in motion.

Here are some examples of stupid finanical inertia.  Number 1) Large cash balances.  There is something in our psyche that likes to see piles of money sitting around doing nothing.  I'm as guilty as the next person.  Flip on the computer, go to Chase.com, and look at that big pile of cash doing, like I said, absolutely nothing.   We're not the only ones that like large cash balances.  Banks love them.  Number 2) Tax refunds.  Nothing like getting a big check from Uncle Sam.  Except for one thing--it is our money.  We just loaned it to those morons in Washington at a zero interest rate.  Ok, enough.

What about smart financial inertia?  One is setting up your 401k ASAP and then not touching it until you, well, for a long time.  You start it and inertia takes over with those regular investments cashing in on the greatest investment tool ever--weighted average dollar cost investing.  Not sure that is the right term but close enough. 

Another one, after you max out your 401k, is investing the money you have just laying around.  Here the inertia is against you because banks don't like you doing this.  Case in point--Margot.

Seems with this new job in the oil bidness, Margot is forsaking the usual model (Rolexes, new cars, swinging from the chandeliers) and focusing on saving.  A good rule for this business is Make It and Bank It.  When times are good they are real good and when...

So got an email from her saying she had a bit of cash laying around (after maxing out her 401k) and what is a girl to do?  How about a little reimbursement to good old Dad for braces, horses, soccer, clothes, cars, prom dresses, college tuition, ad nauseum?  Not a chance.    

You got to take a shot, right?  No dice.  So did next best thing.  To keep Margot's focus on her job and continued employment, I went looking for investment opportunities in the short term market.  Thought it would be easy.

I have an account at Chase that is earning 4.9% so went to the Chase site and plugged in 'Savings' and got...1%.  Huh?  Thought I got the wrong page so tried again.  Same thing.  Ok, Chase, screw you.  Over to BOA.  Same thing. 

This can't be right.  So called my personal investment banker at Chase.  When you get a few assets and leave them sitting around at financial institutions like Chase, you get a personal investment banker.  Which is good if you need cash fast but not good for much else.  Hey, what is the deal on the savings?  Seems my rate was a brokerage rate and the low rate was because Margot (and 90% of the rest of the world) has only a checking account.  So for housing a few stocks at Chase, I get close to 5% but Margot gets next to nothing.

I'll show 'em.  On to the mutual funds.  Vanguard and Fidelity and T. Rowe Price.  Great rates.  Some over 5%.  But minimums from $2,500 to $3,000.  Minimums mean the money has to stay there.  Not exactly the definition of an emergency fund.  Not the right financial tool for Margot at this time. 

Getting a bit frustrated so Google.  Type in 'money market, no minimum' and got this.

An easy way to get higher rates on your savings. No fees Free checks and an ATM card* No minimum balance Easy online transfers to and from your existing accounts* FDIC insured for up to $100,000 per depositor Convenient online account access— see how it works Actually I got more than that but I am graphically challenged so can't move everything.  What it said was that Capital One is paying 4.8% with all the things pointed out above like automatic transfers from and, more importantly, back to banks.   The best thing is no minimums. So linked it over to Margot, she called them up, verified no strings and plunked down her $1,500.  Got to love that girl.  She's in financial motion and will continue to be. Plus I like Capital One.  Somebody there is using their head.  I kind of like those Viking commercials, too.  Don't ask me why.

 

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If she’s got an online brokerage account (or is considering one), she might want to check into the money market funds that they have available. Most brokers pay like 1% in the sweep accounts - so I my moved the cash in my Roth IRA over to the SW2XX (schwab) which pay’s 4.8%. No transaction fees, and the only strings that I see are that it takes a day or two convert to cash, and the initial minimum is $2000.

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