Step #2 To Getting Rich: Banking
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You’d be surprised how much money you lose through bad banking. Here are some tricks to get you off to a good start.
Get rid of any fees: If you’re a student, switch to a student bank account with no annual fees. Here’s how the conversation will probably go:
You: “Hi, I’m a student and I’d like to get an account with no annual fees. I want free checking and no minimum balance.”
Banker: “Sorry sir/ma’am, we don’t offer those anymore.”
You: “Really, that’s interesting because (Bank of America/Wells Fargo/other competitor) is offering me that deal right now. Also, your customer-acquision cost is over $150.00 right now. Do you think you could help me now?”
Banker: “What a truly astounding coincidence. It seems my computer is suddenly showing that we can offer you a free account just like the one you asked for!”
You: “Why thank you, kind sir” (sip darjeeling tea).
There’s one thing to remember here: Banks don’t want to lose you as a customer. First of all, you’re a student–the customer group that pays the most in fees. Second, it costs an incredible amount (over $150.00) to acquire a new customer. Remember this next time you negotiate with your bank.
Get overdraft fees waived by asking. Banks are so nice. If you have a savings account and a checking account, and you accidentally write a check for more than you have in your checking account, they’ll helpfully transfer the money from your savings account to prevent a bounced check. They’ll also helpfully charge you $10 to $15, which can wipe out any interest earned from this year.
Fortunately, banks understand that people are occasionally stupid and they’ll waive your fee if you ask. This generally works the first time and is very hard after that (but can still be done if you have a good excuse). Remember: they want to keep you as their customer.
Get a credit card to build your credit. If you have strong credit, you can often get a house/car/loan compared with someone who has a lot of money but no credit history. All about credit cards.
Difference between savings and checking accounts: Savings accounts earn interest (checking accounts don’t). You should keep the bulk of your savings in your savings account (duh), where it earns interest, and only the minimum you need in your checking account. Transfer between accounts as necessary.
Set a budget: Use Quicken/MS Money/notepad to judge your expenses for 3-6 months. Then cut expenses accordingly (e.g., don’t need that Starbucks/Coke/dress/whatever every day). Once you start saving, you’ll have money to invest. The best way to start a budget.
Sometimes, you get the most interesting insights from places you wouldn’t expect. Years ago, Tim Ferriss invited me to ...Read More