Stephanie, Author at Poorer Than You

Why I’m Glad I Never Got My American Girl Doll

By Stephanie, updated March 23, 2007 30 Comments
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When I was a little girl, American Girl dolls were so cool. My best friend and I were obsessed with them. We both read the books and talked about how much we wanted dolls of our own, and poured over the catalogs, pointing out all the accessories we’d get when we finally got our dolls.

We both read the books, too. My best friend liked Samantha, whereas I was a Kristen and Molly girl. I liked the Molly books the best, but I wanted a Kirsten doll because she looked like me (duh!). Every time the catalog would come (which was often), I would beg and beg and beg my mom to buy me one.

Pssh! That never happened. My parents learned their lesson about buying me expensive things when I was four years old. They bought me a really nice gold locket – and I proceeded to stick it in my mouth and chew on it whenever I wore it. I don’t think I’ve ever had anything expensive since then, except maybe my car.

But my best friend eventually got her Samantha doll, and we spent some time playing with her, which mostly involves dressing the doll up and talking about the books. It didn’t take long for me to realize, even at a young age, that the dolls weren’t all they were cracked up to be. They just made you want to buy even more accessories for them – and the catalogs certainly provided enough of those for us to yearn for.

It’s not that I didn’t play with dolls. I had Barbies and Cabbage Patch dolls – it-s just that I realized American Girl dolls were so friggin expensive, you couldn’t really do anything with them, for fear you might damage them. On my Cabbage Patch doll (which was reasonably priced since I was years younger than the craze period), I had no qualms using her hair to teach myself to braid. But American Girl doll hair was so delicate and pretty looking, I wouldn’t have dared style it myself.

What fun is that? A doll you’re afraid to play with?

Still, even today, the idea of owning an American Girl doll is pretty ingrained in my psyche. Maybe it’s because I loved the books so much. Or maybe it’s some residual jealousy that my best friend got one, and I never did. Or maybe it’s just ingenious marketing having left a permanent stamp on my impressionable brain. I. Still. Want. One.

Or at least, I did, until five minutes ago. Then I saw this post on Consumerist: American Girl Place Mocks 6 Year-Old For Having A Doll From Target, Refuses To Style The Doll’s Hair (which describes the blog post “Fake Out” by blogger “One of those horrible moms”).

Oh. My. God. There aren’t even words to describe my disgust. At this moment, I’m ashamed this company got my family’s money for the books, and I’m thanking all of my stars that I never put out the $80 or whatever it was for a full-blown doll.

I was actually looking forward to the idea of someday, in the far, far, distant future, maybe having a daughter and getting her one of these dolls. Or maybe even buying one for my niece in a few years (she’s two years old right now).

No way, now! Forget it, American Girl – you’re dirty. This also falls under my category of “Not Understanding Companies That Make It Difficult For You To Give Them Your Money.”

Why You Shouldn’t Owe Money to Family

By Stephanie, updated March 22, 2007 Leave a Comment
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The following clip from “Family Guy” demonstrates why you simply shouldn’t put yourself in a position to owe money to family members. It also demonstrates why you shouldn’t lend money to family, either. Although in the clip, the money exchange is due to a bet, this really goes for lending money as well.

Warning: Gratuitous, and hilarious, violence, as well as some language.

Both parties end up feeling guilty at the end – Brian for ducking out on the money he owed, and Stewie for causing Brian so much pain while trying to get the money. Also, everybody gets hurt. Even though your brother-in-law might not actually come after you with a flame thrower if you owe him money, he might feel like he wants to.

Simply put, don’t do it. It just causes problems.

From My Reader: JohnChow.com

By Stephanie, updated March 20, 2007 1 Comment
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“From My Reader” is a weekly series, highlighting one of over 30 blogs that I track using Google Reader.

Love him or hate him, John Chow knows how to make money online. In just a few months, he’s pulled a blog up from making nothing at all, to pulling in more than $7,000 a month.

John’s main tactic is to simply blog about how to make money online – especially with a blog! Oh, meta blogs, how I love thee! It’s a topic that nearly every other blogger is interested, even if only in passing.

He’s also decidedly pretty evil: leveraging his audience to meet his goals of increasing his revenue. But of course, we don’t mind, because by using us to make more money, he’s showing us how to do so! It’s all very incestuous, in a way. But I’m not complaining.

The main example of this is what you’re seeing right now: John offers a linkback to anyone who reviews his site. This is beneficial all around: his search engine ranking skyrocket, because of all the incoming links, and in turn, the linkbacks help all the blogs that linked to him.

John Chow is one of the few bloggers that can pull of a ReviewMe post and make me actually want to read it. He doesn’t just shill a site – he visits it, dissects it, and lays out his findings for his audience to see.

Speaking of dissecting, my favorite post of his has nothing to do with making money, but rather with him eating a live lobster. I hate lobsters, as a rule, because I’m girly and I think they’re gross. With that said, I could never eat a live lobster, because I never want a lobster within ten feet of me!

The posts I find most valuable are located in the Make Money Online section, but the other sections are definitely worth checking out. As far as improvement, I catch a grammar error here or there, and it always irks me. I know English isn’t John’s first language (and yet, his grammar is far superior to many people that I know), but I’m a grammar Nazi! (This does not go for my own site. I don’t proofread my own site. I hate proofreading myself! I’d rather criticize others!)

So why is John Chow in my reader? Because he writes on a topic that interests me, and he writes in a style that’s engaging. And he’s evil… and I like that!

[Update: John Chow is no longer in my reader. Eventually, after this article was written, he became too much of a shill and his site too spammy for my tastes. He crossed a line, as far as I’m concerned. But I’ll leave this original review intact, so that you’ll know that he used to be entertaining and readable.]

Reader Question: 401(k) Loan to Pay Off Credit Card?

By Stephanie, updated March 20, 2007 69 Comments
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Reader Vj dropped by with the following question:

If you have $10,000 worth of credit card debt at 10% interest would it be advantageous to get a loan from your 401K to pay it off and pay yourself back?

According to Liz Pulliam Weston over at MSN Money, this is one of the 7 most common 401(k) blunders. I’m not sure things are so black and white, but here’s what her article says:

What seems like a great idea — Borrow your own money! Pay yourself interest! — has plenty of traps for the unwary:

~ The biggest pitfall is the risk you take should you lose your job. Your loan would become due, and, if you couldn’t pay it back at once, you would owe income taxes and penalties on the unpaid balance.

~ The interest rate you pay yourself may be lower than what you would pay most other creditors, but paying yourself interest is no substitute for the real return you would be earning if you had invested those payments instead.

~ Borrowing from your retirement funds is often a sign that you’re overspending — particularly if you’re using the proceeds to pay off credit card debt. People who use “easy outs” like 401(k) and home-equity loans to pay off their cards often don’t change the underlying behavior that put them in the hole. They just run up their balances again, winding up another day older and deeper in debt.

There are several great points in there, but in the end it is still a possibility. But I would rank it as a “last resort.” Then again, if you’re having trouble paying your credit card debt, wouldn’t you also have trouble paying your 401(k) loan?

There are some definite alternatives you should look into first. Try this:

Call up your current credit card company, and tell them, firmly but politely, that you’re going to get this 0% balance transfer, and move your money off their card. Chances are, they’ll offer you a lower rate. Take it. This way, even if you can’t move your money, or if you can only move some of it, you have a lower rate on the original card.

Apply for that 0% balance transfer card, and hopefully, you’ll be approved. Move as much of the balance as you think you can pay off before the introductory rate ends. This part is very important. If you can’t pay off the whole $10,000 before the intro rate is up, and the regular rate isn’t better than your original card(s), then only move what you can pay off in the year.

This plan assumes that you’ve been making regular payments on all of your cards and bills, and thus have a clean enough credit history to qualify for a 0% intro rate. Since the original question had 10% interest rates on the credit card, that’s a pretty safe assumption (if your recent credit history was bad, you’d be looking down the barrel of 30+%!).

All in all, the 401(k) is not the first place I would look, not by any means. Do you have savings sitting around earning less than 10%? Do you qualify for a Lending Club loan at less than 10%? Is there anything you can trim down in your budget to free up some more funds for paying down this debt? If you can’t spend less, can you think of any ways to earn more?

Oh, and cut up the card(s) until it’s paid off. Once it is paid off, if you feel that you can use it without carrying a balance month-to-month, you can always call up the card company and have them issue you a new one. But no matter what method you use to pay down your debt, especially if it’s a loan from your 401(k), the key is to not charge anything more to that credit card.

Back to Basics #2: Savings Accounts

By Stephanie, updated March 19, 2007 2 Comments
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Most people have (or know they should have) a savings account. But do you know how the money in your savings account works, and earns interest?

How do banks work, anyways?
Banks work by buying your money from you and selling it to other people. I’m not even kidding. When you put your money into a savings account, your bank pays you interest for doing so, because now they have money to sell to other people, in the form of loans. I won’t lie, I wish I could buy money from people at an extremely low rate, and then sell it to other people at a much, much higher rate! I’d be rich! I’d be the Bank of Stephanie.

So obviously, it’s better to keep your dealings with the bank in the “savings” category, and not the “loans,” category – although that’s not always possible. But if you think about it, if you have a savings account and a loan at the same bank, you’re buying your own money back from the bank at a much higher rate. Ew.

So how much is the bank going to pay you for the privilege of selling your money? Usually, not much. My own savings account earns about 0.2% interest annually, which is about the average. Considering I barely use the account, there’s only about $15.00 that just sits in there, earning 0.2% interest. At the end of the year, that’s only about 3 cents a year that the bank pays me for my $15.00.

Even if I ramped up the amount I kept in the account to $10,000 (which would clearly mean I robbed the bank and then deposited that robbery money right into my savings account, which would be convenient!) that money would only earn $20 over the course of the year.

So why bother with the savings account at all?
For one thing, the money in a savings account is a little tougher to get at than the money in a checking account. Sure, you can get it out with your ATM card, but you can’t get at the money with a debit card or check. This encourages you to save, rather than spend – hence the name of the account.

And the other thing is, although you might not be earning much interest on your money, you are earning some, which means it’s better than stashing the money under your mattress.

But I want more!
Oh, it can be done! 0.2% interest is pretty dismal, especially when you realize that inflation is about 3% a year – meaning that your money in a savings account is actually losing value. Ick! So, can you beat out inflation with a savings account?

Oh, you totally can, thanks to the internets! Online savings accounts offer much, much higher rates. Why? Because they’re online, that means the banks don’t have to pay tellers or security guards or even janitors – they can just hire a few customer service people to man the phones. This frees up a bunch of their money to pay out to you, for using their savings accounts.

And of course, the banks go to great lengths to insure their databases are secure, so there isn’t a whole lot of worry attached with doing your banking online. You establish a “connection” between your new online savings account and a checking account that you already have. This allows you to electronically move money back and forth between the two accounts. You’re limited to 6 electronic transfers a month out of a savings account, but there’s no limit on transfers of money into one.

Ok, cool, hook me up.
Hold on, cowboy. Choose the right online savings account. This may not be the end-all-be-all decision of your lifetime, but it certainly warrants some thought. Here are the three accounts I would recommend:

Emigrant Direct
I opened my first online savings account with them, and I had a little trouble getting the account set up, but that was mostly my fault. They offer 5.05% annual interest on your money, which is so much better than that paltry 0.2% the brick-and-mortar banks want to buy your money for.

E*Trade
I opened my second account with E*Trade while they were having an “Open an Account with $1 and get a $25 bonus!” deal. This account also offers 5.05% interest, and I also had some dealing with their customer service (once again, the problem amounted to me being a dumb-dumb).

~~ING Direct~~ (Now called Capital One 360)
Capital One 360’s Orange Savings Account trails the pack in interest rates. However, those who have an account with them spend lots of time giving glowing recommendations to their customer service. I have a special place in my heart for good customer service, so I will certainly take the interest cut someday. Capital One 360 offers a $25 bonus if you sign up with a referral link and deposit at least $250.

Which of these accounts you chose is up to you. There are other accounts out there, some offering even higher interest rates. The important thing to do is figure out what matters to you most about a savings account, and pick the bank that best embodies that quality. If it happens to be local banking that matters to you most, then it might even be your brick-and-mortar local bank.