I want to buy a bike. At least, I think I want to buy a bike. I used to love my bike, when I was a kid, until we moved further out into the country when I was 13 and there wasn’t anywhere to particularly bike to, and it meant a lot of “on the road” biking, which I wasn’t entirely comfortable with.

Now, we’ve moved to the suburbs and there is a giant bike trail system that runs directly behind our house. And so, I think I want a bike.

Is it a guarantee that I would use it? No, of course not. I’ve got a pair of roller blades in the garage that I’ve yet to teach myself to use. But at least I’ve tackled the learning curve on riding a bike.

Trouble is, I haven’t had a bike for years now, and I know absolutely nothing about buying one. And I have relatively no money (as you know). But I’ve got to figure that at least one of you out there has some useful knowledge on bikes so…

Where do I start?

If it helps at all, I’m a tall, largely out of shape, skinny woman that will be riding mostly on flat, slightly stone-y terrain. So I probably don’t need anything that could be described as “x-treme.”

I’d rather not just hop into Target and buy the prettiest cheap bike that I see… or is that my best option for the cost? See, I don’t even know! Seriously - who out there knows something about bicycles?

With the addition of an ING Checking account and a free and clear credit card to my banking arsenal, it became clear to me that I needed a different plan of attack for how I’m doing my banking. To show you what I mean, here’s a diagram of how I was doing things:

The black arrows represent near-immediate deposits or transfers, which take only a day or so. The gray arrows are slower deposits or transfers, which typically take three days or more.

So, if you look at the diagram that I crudely constructed, you’ll see that all of my income and deposits came into my Bank of America checking account, and then largely sat there, until either being moved to one of ING accounts, or used to pay one of my two credit cards.

Note: nearly all of my purchases are made using Credit Card 2, to earn rewards points and offset my purchases by one month before I pay the bill in full.

So what’s the problem with this? Convenience-wise, not a whole lot, except that the Bank of America checking account doesn’t earn me any interest, and that’s where most of my money was sitting most of the time. So I decided to entirely rework things, and came up with this new setup:

Ok, so, the paycheck from my on-campus job still direct deposits into my BoA account, and it’s still the convenient account for depositing checks at the ATM. But I’m quickly moving that money from BoA to my ING Checking account, so that it can earn interest, leaving only enough in my BoA account to pay the minimum payment on the credit card with the balance.

“Only the minimum payment?!?” you cry out, in shock and alarm. But, you will see that I’ve also got a new ING account in this setup. ING allows you to set up multiple savings accounts with minimum work and as quickly as humanly possible - I timed how long it took me to setup my new Credit Card Fund savings account, and it came out to 42 seconds!

Instead of making payments to the card itself, I’m now putting aside $140 of my monthly $160 payment (the other $20 is the minimum payment I make directly to the card) in the new savings account to earn interest. Then, the month before my 0% APR period ends, I will take all of the money in the account and pay off the credit card in full.

NOTE: This “paying your card off in your savings account” only works if you meet two conditions:

A) Your credit card interest rate has to be lower than your savings account interest rate. My savings account earns nearly 4%, and my credit card is at 0% for now, so it works. If your credit card interest rate is MORE than the card, then you should just pay off the card directly.

 

B) You treat payments into the savings account just like any other bill. You make the payments regularly, on time, and in the full amount. More importantly, do not take the money out of the account for any other purpose! Although it can technically serve as a second emergency fund, taking money out of the account is just the same as putting purchases on your credit card - it will completely counteract your credit card payoff efforts.

So, what are the advantages to my new setup, over the old one?

1. Interest, interest, interest. I’ve got much higher balance in my ING checking this way, so that’s earning much more interest. And I’m earning interest on the credit card payoff account, as well. Altogether, I’ve calculated this setup will earn me an extra $60 in interest this year. Which may not seem like a lot to some of you, but to me? A poor college student? That’s some serious gains just for rearranging my accounts!
2. Faster transfers. If it looks like there are more black lines in the second diagram, that’s because there are. Using mainly only ING accounts means instant transfers between three of my accounts - not even 1 day transfers, but instant!
3. Shows my undying adoration for ING. Sure, they don’t have the best interest rates around, but they’re still competitive, and I love them to pieces. Plus, I made as much money from their referral program last year as I did working my on-campus job for the fall! Out of the four high-yield accounts I have (the others being E*TRADE, Emigrant, and Citibank), I like ING’s interface and usability the best.

All in all, it might seem like I’m a little crazy to obsess over such minute details, but I figure it probably only took me a half an hour of work, and netted me $60, so that’s an hourly rate of $120! Not bad at all!

Anyone else have any little “bank life hacks” like this?

Tax time is in full swing, and as usual, I’m sitting around waiting for my last few pieces of paperwork to come in so that I can do my taxes. Every year, I strive to get my own taxes, and my mother’s, done as quickly as possible so that I can fill out the Free Application for Federal Student Aid (FAFSA), a bane of my existence, in hopes of getting as much aid as possible (not that it has really helped in any of the previous years).

I have a special hatred in my heart of hearts for the FAFSA. I think it’s a broken system indicative of greater problems in the US Department of Education, but its own problems are great enough to set my teeth on edge every time I hear someone sound out “Faaaph-sa.”

Who’s Your Daddy?

The FAFSA puts a special emphasis on everyone being a dependent, which often scams a lot of students out of aid that they might otherwise receive. Got rich parents that refuse to pay for your schooling at all? The FAFSA doesn’t care - it doesn’t even ask if you live with your parents, just when you were born, whether your parents are alive, and whether you yourself have a spouse or dependents.

Here’s a fun example: my situation for this year’s taxes and FAFSA. The IRS does not consider me a dependent of my parents, because I am over 19 and was only enrolled in school for 4 months of 2007 (you become a dependent when you’re enrolled for 5 months of the year). However, the FAFSA doesn’t even ask if the IRS considers you a dependent - it just assumes I am. Left hand, do you even know there is a right hand, let alone what it’s doing?

I’m sorry if this comes off as an angry rant - I’m steamed, but in the same calm, already-beaten-down demeanor that I have every year when dealing with the FAFSA. I know it’s broken, but I also know that I have to comply with their awkward regulations and just do it, if I want any financial aid at all.

Ch-Ch-Ch-Changes (Refusing to Face the Strange)

The information the FAFSA uses to assess financial need for the 2008-2009 school year comes from your (and most likely, your parents’) 2007 income. Therefore, things like sudden job loss or disability or divorce are not taken into account, if they happened late in 2007 or early 2008.

Your combined incomes on paper may be $150,000, but if they’re suddenly dropped for any of those reasons, the FAFSA just doesn’t care - your financial need is that of a family making $150,000, not what you’re really making.

Siblings? What Siblings? We Don’t See Any Siblings!

A good friend of mine had smart parents who knew that the fact that they made a good living would make it hard for their three children to get financial aid. So they put aside a good chunk of money to send the kids off to college when the time came.

So when my friend, the oldest of the three, filled out the FAFSA, and found that it only asked how many siblings he had in college. He checked none, and the FAFSA assumed that all of the money his parents had set aside was for him. The story is different this year, with his two sisters both enrolling, but the financial gouge that first year caused to him to have to put off going to his first choice school, and attend community college for two years instead, and then transfer.

Which is not, by the way, to knock community college. For my friend, it was the best choice and seems to have served him well and he’s very happy now that he’s at his first choice school. However, this happy ending for him can not necessarily be replicated by everyone.

I, for example, couldn’t have done anything like that. I was gearing up for film school, a heartless program with few general education credits. If you spend two years at community college, it won’t save you a single moment in film school (at least at the one I attended, and many others) - no, the program is set up to take you a full four years, no matter what. But as I’m fond of saying since I dropped out of film school - it’s not for poor kids.

All In the Family

Odd family configurations are foreign to the FAFSA calculation. Sure, there’s considerations for divorces and non-parental guardians, but it doesn’t go far enough. This is one of FAFSA’s more ambiguous quirks: for some people, it’s actually helpful, but for other’s, it’s just another knock against them.

Got legal guardians who don’t actually provide you a home or any financial support at all? The FAFSA counts their incomes all the same. Have a non-legal guardian, such as the unrecognized same-sex spouse of a parent? Oh, well, the FAFSA doesn’t count them, unless they provide more than half of your support. (The take-away here? Not having marriage equality means children of same-sex couples may be getting a greater boost in financial aid - think about that!)

So What’s to Be Done (Other Than Seethe)?

On the personal level? Fill out the form diligently, and take your own initiative to talk to your school’s financial aid office about the particulars of your own situation. Also, put a certain amount of effort into seeking out private scholarships.

On the large scale, well, it’s all about Department of Education reform. Ask your representatives what they plan to do about the broken FAFSA - after all, you are their constituents!

Does anyone have a FAFSA or financial aid nightmare to share?

Photo credit: Bent Tree News

I knew as I calculated out my numbers for this month that I was going to be down from last month - it wasn’t a surprise, so let’s just move right into the damage.

Change: -$325 or -1.04 %

It’s always depressing to have a “down” month, but three is a row is really starting to irritate me.  I’ve got to keep it in perspective though - there’s a truth here that the numbers aren’t really showing.

The only reason this month was down instead of up is that my car required another immediate repair (water pump and belt replacement). That set me back $360, which I had to actually put on my 0% APR credit card, because I drained my emergency/car fund two months ago, with the first repair.

Without that car repair, I’d be up $35 for the month. Not a huge gain, but it gives me hope for the coming months. I’ll be fighting tooth and nail to make sure that February is an UP month!

For a breakdown of my assets and liabilities, check out my NetworthIQ for January. There’s also an explanation of my NetworthIQ categories.