Beating Broke

Personal Finance from the Broke Perspective

Capital One 360 Review

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For many years, I was a user of ING Direct and their online banking products.  When word went out a while back that the US branch of their online bank was being sold I began to worry that a good thing was about to be ruined.  When we learned that the company that was buying them was Capital One, it didn’t exactly help me not worry.  I’ve had a credit card from Capital One for longer than I’ve had an account at ING Direct, and while I’ve never had a terrible experience with them, I’ve never really felt that I was anything more than just another cardholder; easily replaced and nothing worth going out of their way for.  If that level of service came to the online bank side after the purchase of ING Direct, I might have had to find something else.

The prospect of having to move my accounts at what was ING Direct to somewhere else upset me a bit.  I’ve tried several of the online bank options, and so far, haven’t found one that was as easy to use as the accounts were with ING Direct.  Now that ING Direct US is no more, and it’s been sold to Capital One, and re-branded to Capital One 360, what has my experience been?

Click here to start saving with Capital One 360Surprisingly, I have no complaints.  I truly expected that they’d start squeezing in some new fees, or making it harder to get things done, but the experience so far has been very similar to what it was with ING Direct.  There’s the obvious rebranding that came with a change of logo and color scheme, but for all intents and purposes, they’ve done a very good job of keeping the function and service levels where they were when it was ING Direct.

I suppose there may be some things behind the scenes that I don’t see that are different.  And they may just be biding their time before they start implementing some new fees and roadblocks, but if so, they are taking their sweet time doing it.  In the mean time, many of the features that I really loved about ING Direct are still resident in the Capital One 360 system.  It’s still super easy to create a new account, making it simple to have an account for each purpose and being able to segment your money by purpose.  Every other place I’ve tried this at, make it much more difficult to create a new account and that process becomes a roadblock to use.

The interface of Capital One 360 is very easy to use, with all of the major functions and features that most bank customers use right at your fingertips (or mouse pointer I suppose).  The rates that they pay on their savings and CD accounts still aren’t the best around, but they remain competitive with most other online banks, and they are double and triple what my local banks and even Credit Unions are paying.

The connection between Capital One 360 and Capital One Sharebuilder remains, making it easy to transfer money to investment accounts and IRAs at Capital One Sharebuilder.  Does that make a huge difference?  Not really, but it is convenient.

Overall, I think Capital One has done a really good job of bringing the Capital One 360 accounts into the fold and not rocking the boat.  I hope that they remain dedicated to keeping the excellent service and system in place.  Even with a new name, Capital One 360 is still my favorite online bank.

Frugality Will Change You

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Ninja, over at Punch Debt in the Face, wrote an article last week about being addicted to savings that got me thinking. Or, thinking harder, I suppose.  The attitude that he talks about towards savings is one that I’ve noticed in myself and others who have gone the way of the Frugaler.  He calls it an addiction.  I think it’s something a little more sneaky.  Something that creeps up on you and then grabs hold and won’t let go.  Something many will call “Habit”.

Views vary on how we pick up habits, but, by definition, a habit is something that you do over and over without much thought.  An unconscious task that you repeat.  It’s no coincidence that many addictions are also referred to as habits.  Smoking is sometimes referred to as a bad habit.  A pot of coffee a day is sometimes referred to as a bad habit.  But, a savings habit is a good habit.  One that many will struggle to establish.  Drug habits, smoking habits, and coffee habits are all habits that are easy to pick up because they cause a pleasure response in you body.  A savings habit is a bit harder to pick up.  But, as Ninja will attest, it can be done.

How?  Repetition.  Do something repeatedly, for a long enough time period, and it becomes a habit.  Being a successful Frugaler is a product of habit.  We start off forcing ourselves to turn off lights as we leave a room, shop for good deals before buying something, save a certain amount out of every paycheck, and set aside a certain amount each month for charitable giving.  And, before we know it, those things that we started off forcing ourselves to do become habits and we do them automatically, without having to think about doing them.  If there’s one thing anyone with a bad habit will tell you, habits are hard to break.

I know that I’ve felt it.  I often spend a month or more deciding on whether to buy something or not.  Especially if it’s on that fringe where it may or may not be necessary.  I’ve spent weeks bidding on items on eBay, determined to get an item at a specific price point.  Something that I could have paid a few dollars more for and had weeks earlier.  Like the junkie looking for his/her next fix, I’ve got a saving habit that I can’t quit.  The more I do it, the harder it is to spend any money at all.

Of course, like anything that’s good for you, there is a line where it becomes slightly less good for you, and then can become downright bad too.  Saving is good.  Pushing your savings to a point where you’re taking it to extremes is less good.  And becoming a downright miser is bad. Setting savings goals is a good way to limit the extremity of your saving.

A Frugality habit will change you.  As your savings tasks become habit, it becomes easier and easier, and eventually, you hardly notice it.  What are your savings habits?  How did you establish them?

photo credit: epSos.de

Are You Suffering from Optimistic Financial Denial?

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Some people suffer from a certain form of optimistic financial denial.  They look at part of someone else’s circumstances and use that to justify their own way of life, without considering the entire picture.  Take, for example, a relative I have that I will call Stacey (not her real name).  Stacey is nearing retirement, and she doesn’t have quite as much socked away for retirement as she would like because finances were very tight when she was young and she and her husband just didn’t have the extra to put away.  Her husband died young, and she entered the full-time work force in her early 40s, which is when she began putting away for retirement in earnest.

denialStacey isn’t one to worry.  She tells herself that she should be able to get by just fine with the money she will have in retirement and uses the rationale first, that you never know how long you will live, and second, that her parents did just fine on a limited retirement.  She is firm about retiring at 62 and cannot be persuaded otherwise; she is not interested in working part-time early in her retirement.

Regarding Stacey’s first point, it is true that you never know how long you will live.  I have, unfortunately, known plenty of people who retired and died within a year or two.  Others died before they were even able to retire.  However, Stacey’s parents lived to be 88 and 90, respectively, so if she takes care of herself, there is a good chance she will live well into old age.

Second, her parents did retire on a relatively small retirement savings, but they made some serious adjustments to their lifestyle.  Here are some of the smart financial moves they made to make sure their retirement nest egg stretched:

  • they immediately sold their paid for house, freeing themselves from the expense of upkeep, property taxes, and heating and cooling a large home
  • they took some of the money from the house to buy a fifth wheel trailer, and they lived there during the summer months on their children’s property
  • they took some of the money and bought a trailer in a retirement trailer park in Florida.  They were then only responsible for monthly trailer park fees and heating and cooling
  • they took the rest of the money and invested it
  • they only went out to eat occasionally, usually when their children were visiting them in Florida
  • they sent each of their 38 grandchild a crisp dollar bill for their birthday and at Christmas

On the other hand, here is where Stacey is:

  • she still owes $70,000 on her 1,600 square foot home
  • she has no immediate plans to sell, which means she is paying thousands of dollars a year on property tax, maintenance, and heating and cooling costs
  • she goes out to eat several times a week and plans to continue doing so when she retires as that is her main way to socialize
  • she only has 3 grand-kids, but she spends $100 to $125 per child per year for Christmas and birthday presents
  • she would like to travel, including traveling internationally, when she retires

While Stacey is right that her parents did not have a large, comfortable retirement, she is only looking at part of their financial picture.  Her parents were willing to make significant changes to downsize their expenses so they could live comfortably on the retirement they did have.  In fact, when her last parent died at 90, there was still enough left over to give a small inheritance to each of their 9 children.  To have a comfortable retirement of her own, Stacey should also downsize her lifestyle.  It is the only way to make the money stretch as her parents did.

When it comes to your own retirement, or financial planning in general, it does little good to compare your finances to others.  Ultimately, it can lead to a form of optimistic denial that can lead to considerable financial stress in the future.

Do you know anyone who suffers from financial optimistic denial? 

photo credit: robynejay