Mashable has found 5 ways Twitter can save you money:

1. Find Deals
2. Save on Gas
3. Budget Better
4. Collect Debts
5. Avoid Bad Investments.

Click through for the full article.

Originally posted on pfhacks.com: 5 Ways Twitter Can Save You Money

According to the article, they are not doing this because of a newfound realization of the benefits of a frugal lifestyle, instead, it is because they have no other alternatives.

From credit cards, to home equity, many Americans are completely tapped out – beyond tapped out.

The national savings rate has went from 10% in the mid-eighties to slightly negative currently.

It gets worse. Check out this quote from the article:

For the 34 million households who took money out of their homes over the last four years by refinancing or borrowing against their equity — roughly one-third of the nation — the savings rate was running at a negative 13 percent in the middle of 2006, according to Moody’s Economy.com. That means they were borrowing heavily against their assets to finance their day-to-day lives.

Negative 13%! That is simply astounding to me. I can’t fathom the thinking that would go into funding your lifestyle with home equity borrowing, but apparently 34 million people thought this was an acceptable idea.

Originally posted on pfhacks.com: Americans Embracing Frugality . . . Because They Have To

But, when the Fed Funds Rate declines, so to do rates that banks pay savers.

Take a look at this chart of 1 year CD rates from BankRate.com

As you can see, rates have dropped like a stone, mirroring the Fed Funds rate.  The average yield for a one year cd is now 3.47%.   By doing a little digging, you can still find rates higher than this average. 

Bankrate.com allows you to search for the highest yields by deposit product type.  A quick search today shows that MetLife Bank is offering a 4.02% rate with a 4.10% APY, but to get that rate you have to have a $25,000 minimum deposit.  GMAC Bank has the second highest rate at 3.83%, with an APY of 3.90%, which only requires a $500 minimum deposit.

What about money markets and savings? 

As you can see, a similar trend.  However, after searching BankRate again, I found that there are a number of institutions still offering relatively high rates.  For instance, AmTrust Direct is offering a savings account with a 4.51% rate and a 4.60% APY.  E*Trade Bank is offering a savings account with a 4.31% rate  and a 4.40% yield.  The highest money market yield is being offered by Flagstar Bank, at 4.32% with a 4.40% yield.

Remember that banks can change rates on savings and money market accounts at any time, while certificates of deposits have a contractual rate for the term of the cd.

Takeaway:  Do your homework!  You should always shop rates when you are looking to move, or add to, you short term savings.

Originally posted on pfhacks.com: Searching For Yield

Introduction

The primary purpose of an emergency fund is to replace lost income should a member of your household lose a job.

Secondarily, you can use it for large, unexpected, expenses such as a car repair. An emergency fund allows you to face a traumatic event, knowing that you don’t have to take on debt. If you finance an emergency with debt, you are compounding your problems.

Keep your emergency fund in an account that you can access quickly, without early withdrawal penalties. A savings or money market account is ideal.

How much should you keep in your emergency fund?

When establishing your fund, a general rule of thumb is to keep 3 – 6 months of expenses. Expenses, in this case, would include mortgage and other loan payments, utilities, insurance, and groceries.

Here are some factors you should consider when determining whether you want to save more than the 3 month minimum:

• How many “bread winners” do you have in your household? If only one person is responsible for most of your household income, you may want to increase your emergency fund.
• How many people are in your household? If you are single, or have no children, you may feel safe with only 3 months of savings. If you have children, you need to think carefully about increasing your emergency fund.
• Where do you earn your income? If you, or your spouse’s job is in a cyclical industry, you should increase your emergency savings

Saving your Emergency Fund

I would suggest defining the amount you want to save, divide that amount by the number of months you think it will take you to save, then have that amount automatically transfered from your paycheck into your emergency account.

If you don’t have enough room in your budget right now, start by saving a small amount, say 5% from each check, then increase the savings as your income increases.

Ideally you should strive to have a fully funded emergency account within 24 – 36 months.

When to use your Emergency Fund

Remember, the emergency fund is for large, unexpected expenses. Vacations, or a home remodeling project, are not emergencies. These are medium term savings goals, and should be saved for in a separate account.

If you are forced to use a portion of your emergency fund, you should immediately stop all other savings plans until you have replenished your account.

Emergency Funds and Debt

While I advocate everyone have an emergency fund sufficient to get them through tough financial times, I also think it is a very good idea to be completely free of consumer debt. By consumer debt, I am primarily referring to credit card debt, but also other non-mortgage debt such as automobile loans. It doesn’t make a lot of sense to build up an emergency fund, while sending money out the door every month in interest payments.

Consider saving a partial emergency fund ($2-$3 thousand), then pursue an aggressive debt reduction plan. If an emergency should occur during this time, you will have at least made room on your existing credit lines.

Originally posted on pfhacks.com: Planning Your Emergency Fund

The rule of 72 allows one to quickly determine how long it will take, at a given interest rate, to double your money on and investment.

For instance, if you have $1000 that is earning interest at the rate of 10% per year, how long will it take for the investment to grow to $2000, assuming all interest payments are reinvested at the same rate?

Your first instinct may be to say that the it will take 10 years, since 10% of $1,000 is $100, and it will take 10 years to add an additional $1,000 in earnings.

The actual time is approximately 7.2 years, which we get by dividing 72 by our interest rate 10. The reason this works is due to the magic of compound interest.

Interest compounds as you begin to earn interest on previous interest. Returning to our example, at the end of year one, you will have $100 in interest earning adding back to the principal balance giving you $1,100. At the end of year 2, you will have $110 in interest income. The additional $10 of income was produced from you adding the $100 earnings of year one back to the principal balance. As your earnings on your “retained” interest grows, you will quickly see an escalation in yearly interest income, culminating in your initial investment doubling in about 7.2 years.

To summarize, to determine how long it will take for an investment to double given a fixed interest rate, divide 72, by the expected rate of return (the interest rate).

Originally posted on pfhacks.com: The Rule of 72 and Compound Interest