A few days ago, I opened my mailbox to find an official looking letter from a company called I.C. System, Inc. They said they were a debt collector hired by eBay to begin debt collecting activity.

I first scoffed at this and assumed it was some type of scam. Then I began to become worried as I did some Google research and found this was a legit collections agency.

There were two major problems with this. First of all, while I use eBay occasionally, there is no way I sell enough to account for the $60 some dollars they claimed I owed them. I actually logged into my eBay account which showed a balance due of $0, with my last payment of $2.12. Secondly, my name was spelled with an “h”, as in “John” instead of “Jon”, which I haven’t used since fourth grade.

As the collections agency was closed over the weekend, I emailed eBay, after spending ten minutes searching for a way to contact them about this matter. I told them I had received a letter and was trying to find out why eBay claimed I owed them this money. Two days later I received a response, asking me to please send them the headers from the email.

That’s interesting, because last time I checked letters sent via the postal service don’t have headers. Customer support hadn’t even bothered to read my email enough to see that, in the very first sentence, I said I had received a letter in the mail.

I got in touch with the collection agency tonight, who were actually surprisingly helpful. They gave me more details on the account, including the email address and eBay user ID - neither of which belonged to me. They said now that the issue is under investigation my credit will not be effected, and that if I don’t hear back from them I can assume the issue has been resolved (though I can guarantee I will be calling back to confirm this).

I have been a loyal (albeit light) user of eBay since 2001. Now they have alienated a customer for life, and have motivated me to do everything I can to let everyone else know of what happened. Bravo!

This weekend, my wife and I both sat down in front of the computer. We both placed one finger on the mouse button, and clicked. Yes, in retrospect it was kind of lame, but I wanted to celebrate the moment: I had just paid off my first car.

The car is a 2003 Honda Civic which I named Stella, after A Streetcar Named Desire. I bought it in the summer of 2003, a few months before I moved into an off-campus apartment and needed transportation. I took out a five year loan at a rate of 0.9% interest.

(Yes, 0.9% interest. Having a father as a lawyer, who spends his whole day negotiating, can be quite handy).

So next month, I will take that payment of $278 and funnel it right into savings. It will also make paying the loan on my Honda Accord a bit easier, as for the past six months we have had make payments for both cars.

Now to the other good piece of news. Until recently, Massachusetts did not allow competition for auto insurance rates: They were dictated by the state government. That alone isn’t great, but what made it worse is that the payments were setup in a “socialist” way, in that you didn’t get breaks for being a safe driver, and you didn’t get penalized for being a bad driver. My wife and I have never been in an accident, never gotten a ticket - heck we’ve never even been pulled over. And yet we were still paying a premium of $200 a month.

Then a few months ago, Massachusetts changed their rules and allowed agencies to set their own prices. What does that mean? I found a quote for progressive for $76 a month, or about 1/3rd what I currently pay! And this is for better coverage!

This, combined with making my last car payment, means more than $400 a month extra we will be saving, which is just fantastic.

My wife and I married at 22, about three months out of college. A lease started on our new apartment in Philadelphia literally three days after our wedding, so we had a brief honeymoon in Rockport, Massachusetts (just a thirty minute drive north from our wedding!). For the next two and a half years I was in graduate school, paying for it from my day job to avoid a loan, and at the same time starting to pay my undergraduate loan. So vacation wasn’t exactly an option, though we did manage to get to a few family get-togethers.

So now we’re about 26 years old, and with discussions of starting our own family taking place, we decided that it was really about time we take a vacation together - before it’s too late!

About a month ago, I started looking at vacations in the Caribbean. We had never been anywhere tropical, so we figured it’d be a great place to go. Aruba sounded like a perfect destination, until I made the discovery that fares from Boston rarely got below $400 per person. Next I see that hotels average around $300 a night, and that most people spend over $100 for dinner! Adding all this up, along with the miscellaneous fees and spending money for excursions, and we were looking at well over $2500.

I scoured the deal sites that everyone recommended to me, but either they were too strict in their dates, or the “deal” evaporated when you read the fine print (or reviews for the resort).

I had nearly given up hope when last week, I was browsing through Farecast when I saw a small inconspicuous link which said “Deals from Boston”, and below that “SFO for $220.” SFO? As in, San Francisco? As in, a coast-to-coast flight for about $200? Say it ain’t so!

In a frenzy of instant messages my wife and I tried to decide whether to jump on this or not. Of course, while we were doing this, the flight doubled in price back to the standard fare, and I felt crushed. I swore if I ever saw an opportunity like this again, I would just jump on it.

So when the same fare reappeared three days later, I did. I sent a message to my wife - “We’re going to San Francisco in 7 days” - and bought the tickets. Yes, this flight was indeed for the next weekend, or six days from today. I am rarely this impulsive, but after a month of frustratingly searching for the perfect vacation, I wasn’t going to miss my chance.

Next I started looking for hotels. They were quite expensive, with even one or two star hotels averaging over $200. I looked at places outside of the city, but San Francisco is very friendly to walkers, and I didn’t necessarily want to have to drive into the city every day.

So I couldn’t believe it when I saw the Omni Hotel (a four star luxury hotel rated the #3 luxury hotel in the U.S. by TripAdvisor) had a deal for $185 per night through Expedia - about one quarter of their normal nightly rate! I have no clue what caused this deal, but I thought the opportunity to stay in a luxury hotel for less than $200 per night (compared to their standard rate of $699 per night) was too good to pass up.

We’re both very excited about this vacation, but I have to admit that it took a lot of effort for us to spend money on it. See, when it comes to quality, long lasting purchases (like the couches we bought recently, or a new computer), I am able to justify these purchases to myself. Sure, leather couches may cost $2000, but they will last at least five years, and are something we use every single day. In the end, we’re spending about one dollar per day for those.

Compare that to a vacation which might cost $2000 for four days, and we’re instead spending $500 per day, or 500 times the amount of those couches! Of course, sitting at home watching a movie on those couches will not be nearly as thrilling as walking through Muir Woods or taking a cable car to Chinatown. But at least from a financial standpoint, it’s very hard to weigh those two things against each other.

Still, I don’t regret it. We have been married three and a half years, and deserve a vacation together, and I think that we aren’t being nearly as extravagant as we could be with it.

As many of you know, my full time job is as a web content manager. So besides the multitude of personal finance sites I have in Google Reader, there are also an equal number of web design sites. One of these sites today posted a list (a list!) of the top 25 colorful websites.

So what does all this have to do with personal finance? Well, one of the sites that intrigued me is called Bookkeeping-in-a-Box. I at first thought it was some type of software-on-demand, like Mint.com, for managing personal finances.

Boy was I mistaken.

The site promotes management of personal (and business), which is good. It does this by basically selling a $150 plastic box, which is bad. Of course, it’s described as a “system.” I have read a vast array of systems for managing personal finance, covering nearly every facet you could think of. Yet I never read anything about the fairly straightforward process of, well, putting papers into folders.

I did a double-take at this point, thinking that maybe the picture of the plastic box with file folders was a physical representation for a complex digital repository that would store your latest auto insurance policy.

Nope. That is the actual box you are paying $150 for, that costs $20 at Staples, and is still a rip-off at that point.

Ok, so I am being a bit unfair at this point, because I am not covering what the true value of this product is supposed to be, which is the “system.” Maybe I am giving the general populous too much credit here, but do we really need a system to place pieces of papers into their corresponding folders?

According to the FAQ though, it does much more of that. Apparently it will help you with applying for and securing a loan, and even eliminate overdraft charges.

Here is my system. I’ll even be generous and give it away for free: Buy the cheapest box and file folder you can find. Write labels for major financial area in your life (insurance, auto, utilities, loans, etc). When you get a new document relating to one of those folders, put it in the folder. Get every statement you can delivered electronically – they are just as valid and save paper.

But of course, my system doesn’t come with rubber bands.

I wrote this entry for fun, and it’s probably a result of watching too many Daria reruns. I’m sure this system works well for some people. I just thought I would poke fun at something that asks you to spend an egregious amount of money to help you … save money.

My wife and I started living together back in junior year of college, before we were married (oh don’t worry, her father is a minister and even he was fine with it). We soon began to discover our different approaches to money. My father, a divorce lawyer, claims that money is the number one reasons he sees couples split, so I was a bit concerned about how this would play out in our relationship.

Seven years later, and I can say that besides the occasional squabble about video games (me) or shoes (her), we both have nearly the same approach to money. So that’s never been the problem. Figuring out exactly how to handle the money, though, has proven to be a bit more challenging.

See, I like paying bills. Actually, I love it. I look forward to the end of the month because, in part, I get to pay all my bills. I usually load up Quicken at least once a day, hit the update button, and anxiously await news on my finances. I have never, in my life, paid a bill late, so I also trust myself more than anyone to get the bills paid on time.

Of course, things would be a bit unbalanced if I paid all of the bills with us both pulling in bi-weekly paychecks. So what we’ve done in the past is listed all our shared expenses, subtracted that from our combined net income, and ended up with a “spending” amount both of us could have at the end of the month. My wife would then transfer over a certain amount of money to my account which would result in us both having the same amount of money.

Or at least, that was the plan. Unfortunately, our bills varied quite a bit month to month. No sooner would I adjust for higher heating costs in the winter, before we would then start paying higher gas bills for vacations in the summer.

Another big problem was differentiating necessary expenses from … not so necessary expenses. I always liked to keep a float of $2000 in my account, so I never really knew how much an effect buying Call of Duty or those nice Calvin Klein pants had, as it was all lumped together on the same credit card as our electricity bill and grocery shopping.

So, inspired by a comment on another personal finance site, we decided on another approach to splitting our finances. We currently have three checking accounts and one savings account, all at HSBC Direct (with two local checking as well for the necessity of paper checks).

Without further ado: the flowchart please!

Throughout the month, we both will be using the same credit card to make our necessary expenditures, such as groceries and gas. Any personal spending, such as clothes, restaurants, movies, etc, will be done instead with our individual credit cards. We put together a spreadsheet listing what we consider to be necessary expenses, along with their costs, so that only those end up on that card. Every two weeks, our paychecks will be directly deposited into our main checking account, the expense account.

At the end of the month, I will begin by paying our bills, as well as the expense credit card. Next, I will send my monthly check to my father for my college loan ($14k and counting, by the way, which I am looking at having paid off in less than two years!). After that, I will transfer a set amount into savings. And lastly, I will transfer a set amount into our individual checking accounts.

From our individual, “spending” accounts we will each pay our credit card. Depending on how much we have in our accounts, we can move money into savings.

We’re both excited about this new approach to handling our finances. I think that paying our expenses from our combined incomes will make us both feel better, instead of my wife feeling like she was paying me. I am also really looking forward to having necessary expenses and voluntary expenditures clearly delineated, so I can keep track of whether I’m going overboard buying Xbox 360 games.

It will require a bit more bookkeeping, but hey, I like doing that anyway. Having to use different credit cards will take some getting used to, but it will also have the side benefit of getting more cash back deals, since I always max those out on my main card.

What is everyone else’s experience with splitting finances?

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Interest repayments on your credit cards weighing you down? The Thrifty Scot can help

Today I made a transfer of $263 from my checking account to our emergency savings account, “officially” topping it out. We have saved four months worth of living expenses into that account. We decided on four months due to the fact that we are both working, and I feel strongly about my job security.

It took just over one year to accomplish this, starting with savings of just about one month. And for half of the past year my wife was not working (and not spending a dime either), so all in all I am very pleased at our accomplishment. This goal also comes a month after the expenses of moving (paying movers, paying double rent) as well as buying new leather couches (yes, you can spend and save at the same time!).

So … now what? It is a great feeling, to know that I can start saving for all of our other goals, but also a challenging one in that now I have to think of the best way to split money we put towards savings. Before, it was any money left over from our expenditures that got dumped into the emergency savings.

The biggest challenge, as always, is the fact that about twenty percent of my salary comes in the form of quarterly bonuses. So while I can still take a certain amount of money each month and set it aside for savings, that amount pales in comparison to what I can save each quarter from bonuses.

Currently, we have three main savings goals:

• A House:

We would like to be ready to purchase a house as soon as possible. Considering the fact that the median house price north of Boston is $450,000, this will be a few years. We do have a generous gift of part of a down payment from my wife’s parents, but will still need to save a large amount of money ourselves.

• A Baby:

At some point in the next couple years, we would like to have a baby. From what I could find, a baby costs about $10,000 in the first year. We would like to save at least several thousand dollars towards this to help lessen the strain on our monthly expenses.

• Retirement:

I am 25, and I know I could wait another five years before saving for retirement and still come out ok, but I also know that starting at least some type of savings now would help immensely.

At the end of the month, I will be opening another savings account at HSBC. This will be a long-term savings account, at this point focused towards our down payment, that we will never, ever touch. For baby savings, I figure we can add to the emergency savings account (which I should probably rename), and just make sure when we withdraw for baby expenditures to never go below our emergency amount. For the IRA, I will save $2,500 in my checking account. Once I reach that point I will open a Roth IRA at Zecco (I can buy and sell stocks, funds, etc at that point for free, minus a fee of $30/year).

All in all, it’s exciting, if not somewhat overwhelming. We were to want to save 10% for the downpayment of a house over the next two years, we would have to save nearly $2000 a month for that alone!

A few months back, I opened an account at HSBC Direct and moved nearly all my money over to this online bank. This was after quite a lot of deliberation on trying to balance the advantages I would receive from online banking compared to what I would be losing from local banking.

So what have I learned in six months of online banking?

1. It is extremely difficult to survive without paper checks. Nearly all major online banks do not offer paper checks. They instead tout their online, free bill pay systems, which for the most part work very well. I have a few checks that go out each month automatically for utilities, loans, and rent. Yet I still find myself writing a paper check about once a month. For instance, this month I had to pay the DMV for registration on my new car, and I couldn’t possibly have mailed them a check through bill-pay instead. This Sunday I need a check for my new apartment deposit.

   I keep $300 in my local checking account for these situations, but often times the check is more than $300, which means I need to transfer funds from my online bank. The problem is that it takes a full four business days to complete this transaction. So if I ever need to write a check for more than $300 without four days notice, I am in a bit of trouble! The only solution I see is to keep more money in my local checking account, but that reduces the benefit I get from interest. Speaking of which …

2. Making interest on all banking accounts really adds up! A major reason many people use online banking is for their high interest rates, on both savings as well as checking accounts. While I had been using the online bank Emigrant Direct for my savings account, I had never seen it worth the hassle to setup an interest bearing checking account at a local bank that would earn me 0.25%. Now that all my accounts earn interest automatically though, I find all those dollars really adding up. Also, being able to transfer money from checking to savings instantly earns me more interest in the end, instead of my previous method of having to wait a week for the funds to move over.
3. Not having any ATM fees, ever, is just as good as it sounds. A few days after setting up my account, I went to my favorite local sub place – and forgot that they only accepted cash. The cashier pointed to the ATM machine in the corner, and I told him thanks but I’d rather avoid the $3 machine fee and $2 fee from my bank for not using an in-network machine. And then it dawned on me that my new online bank didn’t charge any fees and reimbursed any machine fees! I have to say that this has been my favorite aspect of online banking. Whether it’s visiting my family in Ohio, withdrawing some money at a casino, or just needing some quick cash for a turkey sub, not having to worry about ATM charges is fantastic. The ATM fees still initially go through, but are reimbursed in one to two weeks.
4. Depositing is a slight inconvenience. I know, depositing by mailing my check should be just as easy, in theory, as depositing at the ATM. But it isn’t. Normally, I would deposit any checks I had at the time I was making a withdrawal, which was easy enough. Now, I have to find an envelope, write out the address, find a stamp, and make a trip to a mailbox (which for some reason is a mile away from where I live). Besides that, I am more hesitant to put checks in the mail. I like depositing into an ATM because I can see the result immediately online. Not to mention mailing cash for a deposit is impossible. So instead I’ve met halfway by depositing in my local account and then transferring to my online account. Still this isn’t ideal as it now takes seven business days to get that money.
5. Consolidating accounts into one bank makes organizing my finances much easier. Before, when my checking account was at a local bank, my only option to earn decent interest on my savings was to have it in an online bank. Besides the delay in transferring money between the accounts (as mentioned above), it also meant multiple logins to see my account status, multiple statements, etc. Now my account, my wife’s account, our savings and our business accounts are all at the same place. As long as we don’t surpass the $100,000 FDIC limit, I see this being a good thing.

Overall, I am very happy with my decision to move online. The slight inconveniences are far outweighed by the advantages. I didn’t go into too many details on my specific bank, HSBC Direct, but suffice it to say I am very happy with them. They were one of the online banks that offered complete ATM fee reimbursements (something the popular ING Direct does not), no other fees to speak of, competitive interest rates, and a great online interface.

They do not, however, offer referral bonuses, which may be why you don’t see it mentioned as often as ING Direct on other personal finance sites.

I kid, I kid!

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When I first read that my country was giving me back $1200, my initial reaction was outrage. Every day I read about the trillions of dollars of debt we’re in, how the nation is going into a recession, how the dollar is losing value as we owe more and more to other nations, and yet the government is giving away its money?

Now I understand that the idea is people will go out and consume things with this money, which in turn helps stimulate the economy. Yet what most people seem to think will happen is the rich people will save the money, not helping the economy one bit, while the poor will spend it on something they can’t afford in the first place.

While I consider myself far, far away from “rich”, I count myself as one of the people that will be putting this money right into savings (or maybe towards my college loan). As do most other personal finance bloggers it seems.

Sometimes, you just have to shake your head at how unbelievably kind fate can be.

At the beginning of this week, my business line received a call from, of all places, Fuddruckers. You know those glass bowls you drop business cards into for a free lunch? Well, for the first time in our life my wife and I dropped a card in. This was a call letting us know we had won a lunch for not two, but fifteen people. It was a very nice surprise to start the week with.

I should be honest here and, at the risk of insulting any Boston readers, mentioned I was still recovering from the Cleveland Indian’s loss to the Red Sox in the ALCS. Yes, I live in Boston. But it’s hard to steal a team’s affection away from a Cleveland hometown boy.

So the call from Fuddruckers helped brighten my mood a bit. Then, on Wednesday night I checked my email right before going to bed. I saw an email with the title “You won!”, and almost threw it into my spam box before noticing it was from Flexo over at Consumerism Commentary, one of the personal finance blogs I read every day. To be honest, at first I couldn’t figure out what this might be referring to. I opened the email to find out I had won the contest he had posted last week for a free Sumo Lounge “Omni” chair – basically, a luxury, incredibly comfortable, massive bean bag chair.

What a surprise this was! The last contest I won, in all seriousness, was when I was eight years old, opened a pack of Bubble Yum gum, and won a shower radio. Not only was I excited about winning, but I also really wanted the prize! From some reviews I’ve read, it’s a great thing to lounge on when playing video games. Even better, my wife is a huge fan of lying on the floor when reading, so at least now she can be more comfortable doing it. Thanks Flexo!

Then yesterday came the biggest news of all. A few days ago, I posted about living on a salary where a bonus accounts for a large portion of your yearly pay. Well this week was our fiscal end of the year bonus. My boss had mentioned several times that this was going to be a nice bonus, thanks due to a new, expensive publication we started and then sold out of a week later.

I can’t really say the amount of the bonus, as I don’t like revealing too many exact figures about my financial life, but I can say this: It was the largest check I have received in my life, and was more than three times the amount I had expected. When I received the check, my hands started shaking and I was having trouble getting oxygen. Funny how the body responds like that, even to good news!

This check hammered home one of the things I love about the company I work for: They appreciate and reward hard work. This past month, I have stayed late a large amount of days, and worked over two weekends, all in preparation for launching our new website. I think they noticed that, and besides simply telling me their appreciation, also expressed it in this bonus.

Now here comes the challenge: Budgeting this very large sum when I had only planned for receiving one-third of it. I threw around some numbers last night and came up with this plan:

• 30% to my dad, for my college loan. This will put me within two years of paying off the remainder of my loan.
• 20% to reach my goal for my emergency savings!
• 20% towards a down payment for the used car I plan on purchasing in December (don’t worry – I have been planning on getting a new car for several months now. It wasn’t the bonus that made me decide to do this).
• 20% to pay off the remaining eight months on my current car’s loan.
• 10% to test my self control.

As for that last 10% … I am honestly not sure what to do with it. I know that it is really only fair for me to spend some of that on something I would really enjoy, either a nice night out with my wife or a new gadget from Best Buy. The problem is, I have been near-salivating over an Apple Powerbook for the past half year. I have decided to get rid of all my current computer equipment and replace it with a single laptop. The thing is, I don’t need a new computer right now. So it’s going to be a very difficult decision to make regarding how much to spend of that remaining 10%, and what to spend it on.

Oh, and one more thing. Last night I got to go see one of my favorite groups, Mates of State, play at the Museum of Fine Arts in Boston. It was a great way to cap off a fantastic week.

When I was hired, I was told an interesting fact. Everyone at my company gets the exact same hourly rate. What sets, say, customer service apart from the president is the amount of their bonus check each quarter. Actually, this check isn’t really so much of a bonus as it is a different way of paying salary, as our “actual” salary is far below the norm for most positions here.

The mentality behind this is that the company is able to give bigger and better bonuses when the company performs well. I do have to say that I definitely feel a desire to help the company succeed when I know that I will directly profit from its success. On the other hand, bonuses can be smaller when the company isn’t doing as well – even when that is due to forces beyond our control, i.e. the stock market (my company is involved in investments and so is affected by people’s desire to invest).

Besides the issue of the actual amount of the bonuses, there are also distinct advantages and disadvantages to being paid this way.

The main disadvantage is obvious: It can make it very difficult to budget. When my wife was working, we had enough money each month to easily pay our bills and expenses every month. But since she quit in July, we are getting by just about by the skin of our teeth each month on my base salary.

As a quick aside, I have to mention how much the emergency fund helps in this regard, both psychology and as an actual resource. When I had to pay $800 to fix my car’s air conditioning system in July (yes, apparently even Honda Civics can break), I was able to draw that out of my emergency fund without a problem, instead of having to hope I was getting a bonus soon to pay for it.

There are some other smaller disadvantages as well. I miss out on a few months of interest by only getting paid my bonus once every three months, though honestly that’s not too big of a deal. Depending on the timing, it can make it harder to contribute the max to my Roth IRA, though again I’m still not at the point where an IRA is my biggest savings goal.

So you might wonder where the advantage might lie in all of this. Well, after being at this job for ten months, I have learned to live on the base salary I am paid. So when I get these sizable checks every few months, what do I do? I save them! I am not someone who splurges on a whim, so I am able to put this money to good use.

Currently, I split each bonus check halfway between the loan to my dad and emergency savings. It feels great to send my dad a nice sized check every three months on top of the monthly money I send him. In fact, with the recent increase I decided to make in my monthly payments to him, I’m now paying $800 a month when you take into account the bonuses. That means I will have my college loan paid off to him in just over two years, though with a prospect of a part-time job for me, and my wife actively looking for jobs again, I hope to have it paid off even sooner.

So in a way, I love being paid like this. If I did get paid my full salary every month, I might very well have the discipline to save it – but I’m not quite as confident about that as I am about my ability to save these bonus checks.

Of course, not everyone in this situation might be able to pay their monthly expenses using only their base salary. If this was the situation, here is what I would recommend: First, calculate how much extra money you need per month for your expenses. So say you are about $200 short each month when being paid only your base salary.

Next, set up a new savings account. You could also use an account that you either never (or rarely) withdraw from. Each quarter (assuming you get quarterly bonuses), deposit three times the amount of money you need each month from your bonus check to this savings account.

Now each month you can make a guilt free withdrawal from that account for $200 to help with your monthly expenses. As for the rest of that bonus check? Save it!