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I said in a previous post that I was going to discuss some of the promotions that banks and credit unions around the state are trying to use to attract deposits. BECU is the largest credit union in Washington State at over $8 billion dollars in deposits. They were one of the first companies that I can recall that created and heavily advertised any sort of accounts with super high rates. Let’s take a look at the programs that they offer.

BECU currently offers what they call the Member Advantage account. Essentially these are enhanced savings and checking accounts that pay a substantially higher rate provided certain criteria are met.

For Member Advantage savings accounts, members earn an APY of 7.5% on the first $500, and 1.76% APY on all balances above that. If you only have regular savings, you will earn 1.76% APY on your entire balance. It sounds like a big deal, but the Member Advantage will only get you ((7.5% - 1.76%) x $500) an extra $28.70 per year irregardless what your savings balances are.

Member Advantage checking accounts earn 7.5% APY on the first $500 and then .5% on everything above that. Regular checking earns .5%. Having the Member Advantage checking account will earn you ((7.5% - .5%) x $500) an extra $35 per year.

So what do you have to do to qualify to get Member Advantage and potentially earn an extra $63.70 per year?

Here are the official requirements:

• Open both a BECU Savings and Checking account
• Sign up for free eStatements instead of receiving paper statements in the mail
• Sign up for one or both: Free online Bill Payment and make at least one payment a month and/or a recurring Direct Deposit into your BECU Checking account
• You must continue to meet the qualifications to remain eligible for Member Advantage benefits

Basically as long as you use paperless statements and either have direct deposit or use bill pay, then you will be eligible for the enhanced account. Like any account, rates are subject to change and can have an affect on any stated earnings here. To see the current requirements on the official BECU site, click here.

I have noticed an interesting trend going on as CD rates continue to drop. At my institution we don’t change rates all that often. All in all we change them maybe 2-3 times a months. Other places around town will change them on almost a daily basis. After people have seen our rate stay the same for a while they become slightly shocked when rates drop. They tend to comment, “wow your rates sure have dropped,” or “your rates sure are a lot lower than other places.” Then, about two weeks later our rates are still at the same spot. When that same person comes in they tend to get super excited about how high our rates are. Interesting because we hadn’t changed them since the last time. I guess the best thing to take out of this is that savings rates are all in relation to something else. You could be paying 7.5% interest, but if you are the lowest guy in town then people will think your rate is low. Alternatively if you are paying 3% and you are the highest in town, people will get all excited about how high the rate is.

Anyway, I wasn’t really trying to go anywhere too far with this. I just thought that I would point out an interesting pattern that I have been observing. Also, even with rates this low there are still a lot of people opening CD’s. This is fairly surprising to me. To their credit they have all been fairly short term of about 18 months or less.

Another interesting observation is refinances. About four months ago we didn’t have enough open time slots to do refinances. Now with rates even lower than they were then the amount of people inquiring about refinancing has completely disappeared. Our borrowing rates must be a lot higher than other places around town. I guess everyone could have already refinanced as well.

This post is going to cover the rest of the things that I spent money on for the week of 5/12-5/18. In the future I plan on having one post at the end of the week that goes over all of my purchases rather than multiple posts.

If you remember from my previous post, I had $96 left to spend for the rest of the week. Here is how the rest of my spending broke down:

• $2 for coffee
• $2 for a powerade at lunch
• $10 to park downtown
• $8 at Burgerville
• $14 for food and drinks with friends
• $6 for sunscreen
• $7 to share Chinese food for lunch
• $40 at Ross for some new work clothes
• $5 to wash my car

The total spending for this comes out to $94 dollars, so I beat my goal by $2! Right now I don’t care how much I beat my goal by, I just care that I beat my goal.

Here is the story behind my purchases:

For the weekend, my girlfriend and I were traveling to Portland, OR to visit some friends for the weekend. In order to get a head start on our drive down there, we decided to drive downtown and pay for parking ($10). Since she started an hour before me I had some time to kill so I bought a coffee ($2). It was really hot outside at lunch and I forgot to bring water so I went to Rite Aid and bought a Powerade ($2. Actually $1.09, but I don’t count change.) After work we drove down to Portland but got hungry along the three hour drive since we hadn’t eaten for lunch. We decided to stop at this fast food joint called Burgerville which was in this tiny town north of Vancouver, WA ($8). It actually wasn’t too bad. The next night we went out to dinner with our friends in Portland to this brew pub. I forget the name of it but they make some pretty good food. The beer wasn’t as memorable ($14). Before we left to go home we decided to do some tax free shopping in downtown Portland. I’ve decided to start wearing ties more often to work, so we decided to pick me out a couple of shirt/tie combos. I got two shirts and two ties ($40). For lunch we stopped at your typical Asian fast food place and got a two item combo to share ($7). On the way back we stopped at the Target at Jantzen Beach. The only thing I really needed was some sunscreen ($6). When I got home, I discovered that my car had gotten pretty dirty since the last time that I had washed it, so I decided to take it to the Brown Bear self wash. I always tend to miss a spot, but I don’t really trust the machines either. It looked good, but of course it rained the next day. It’s Seattle, go figure.

I had $2 left over from the week, but I also received $58 in repayment for utilities, so I actually had $60 in my wallet. I took out $60 from the ATM on Monday. It didn’t make sense to put $60 in just to take out $120. I’m actually not even sure if I can deposit money into the ATMs with the Money Pass symbol. I will try to find that out and report my findings.

On Monday I began my trek into the all cash world. I must say that I have been doing well so far. I definitely feel a little bit more pain when I slide that cold hard cash across the counter than when I simply swiped my debit card. When you use your debit card you don’t see the money coming out, but with cash you definitely do. As you may remember, I decided to take out $120 each week. Whatever is left over I put back in.

Here is how I have fared.

• $1 for a banana for lunch.
• $16 for a haircut kit
• $7 for an extension cord

I feel good about these purchases because they were all justified.  I forgot to bring my banana to work for lunch, so I bought a replacement one. It actually cost me $.55, but I don’t consider coins to be money, so I just round up. I am going to keep all of my coin in a jar and then bring it into the counter every so often. I just need a jar. Right now it is sitting on my desk.

I think that the haircut kit was extremely justified. If you go to Hair Masters a cut will run you $15-$17 plus a few bucks for tip. Even after all that I am still not completely happy with it. It probably doesn’t help that I have a 50/50 chance of getting someone who uses English as their primary language. Maybe it is just me, but I find slight discomfort in not knowing whether or not my hairdresser actually knows what I want. Typically I just hope for the best. So the haircut kit cost the same amount that a haircut from a professional would have cost. The kit has already paid for itself! What a deal! I’m definitely not a pro, but it turned out only a half notch below what Hair Masters would have given me. Throw a little gel in there, and you won’t be able to tell the difference.

The extension cord was a necessary purchase because for some reason we do not have any outlets in the bathroom. I cut my hair in the bathroom, so I needed a place to plug the clippers in. The extension cord solved this problem nicely.

I’ve spent $24 so far so that leaves me with $96 for the weekend. The goal is to not spend it all. We shall see.

I recently decided that I need to adjust my money management strategy. As you may have read in my previous post, I was attempting to find a new institution that had more convenient access. Turns out though my bank has partnered with some other banks ton increase its’ ATM network. That works out nicely for me, because with my new strategy I will be using the ATM a little more often.

So here is my new money management plan:

• Each Monday I will take $120 out of the ATM (equates to $500/month).
• I will use only that money for my weekly expenditures.
• The left over money will be put back in on Monday, and an additional $120 will be taken out.
• All coin will be collected in a coin jar to be counted at a later date.

This new strategy should allow me to better manage my money, since I will be able to physically see what I have spent and what I have left. I have always found it a lot harder to spend with cash than with my debit or credit cards. I am going to make a few exceptions for things that I don’t spend cash on:

• Rent
• Cell Phone
• Utilities
• Gas
• Gym Dues
• Car Insurance

These items will either be paid by check or automatic transfer. This should theoretically work out for me. I will keep my current status posted each week. I plan on documenting what I spent each week and whether or not I met my goal.

I have always been an active saver, but it is always good to save a little extra. Each month I transfer $416 to my Roth IRA in order to maximize my yearly contribution. I haven’t been at my job long enough to qualify for their 401k program, but once I do I will switch my contributions to them in order to maximize my employer’s matching policy. I also transfer $50 per week into an online savings account. This allows me to save the money before I even see it. That way I am not tempted to spend it. So far it has worked well. I am just afraid that I am spending more than I have left over, which is why I have switched to this savings strategy.

I’d be interested to hear how anyone else who has tried this strategy has fared. All comments welcomed.

This weekend my girlfriend and I went down to Portland, Oregon to visit some friends. It is always nice getting away from all the hustle and bustle of Seattle and going somewhere different. Portland is a nice city that seems to be quite a bit smaller than Seattle, but is not lacking in any of the amenities of a larger city. One of the main draws for people to the Portland area is the fact that Oregon does not have a sales tax. According to Taxadmin.gov, there were only five states that had no sales tax as of 1/1/2007. Those states were: Alaska, Delaware, Montana, New Hampshire and Oregon.

The sales tax in Seattle is roughly 9%. When we go down to Portland, we like to take advantage of the fact that there is no sales tax. I got to thinking on the way down that there is probably a decent population that drives from Seattle to Portland and back in one day just for shopping. These people have no other reason to visit the city (ie: visiting friends/family, sightseeing etc.) They only make the trek to save some money. I started to think about how much money a person would need to spend in Portland so that their tax savings would equal what they spent on gas to get there.

The trip from Seattle to Portland is roughly 175 miles. This would make the round trip (175 x 2 = 350 miles). Let’s also assume that the car being used is fairly economical and gets 30 miles to the gallon and gas is $3.10 a gallon for regular (which it currently is in our neck of the woods). It would take the car (350 miles/30 mpg) 11.67 gallons of gas to make the whole trip. At $3.10/gallon, it would cost (11.67 x $3.10) $36.16 to make the trip. In order to save $36.16 in taxes, one would have to spend ($36.16/.09) $401.77. At this spending level, you would be no better off than shopping in Seattle. Anything spent over this amount, and your trip would be a success. If you spent any less than this amount, then it would actually cost you more to shop in this tax free environment. If you decided to carpool with a friend, then you would only have to spend half as much to break even.

Let’s take a look at a chart that shows how much you would need to spend based on the mileage of your car in order to break even.

Obviously, the worse the gas mileage, the more you would have to spend on goods to break even. Here is something else to think about. The lower the differential between tax rates, the more you would have to spend to break even. Lets go back to the 30 MPG example. Imagine if the tax rate in Seattle was only 6%. Here is how much you would have to spend. 350/30 = 11.67 gallons of gas x $3.10/gallon = $36.16 to make the trip. Now, we divide $36.06 by .06 rather than .09, and we get $601. With a change of only 3 percentage points, a consumer must spend almost 50% more to break even!

The lesson learned in this story is that although tax free purchases may sound good on the surface, you must spend a lot to make the trip worth it.

I have attached to this post a graph I created in Excel that shows how as MPGs decrease, one must increase their spending to make the tax free savings worth it.