So this week’s assignment was profoundly un-fun. On one level all I had to do was compare savings rates so that I might move my lump sum of cash somewhere smarter than where it sits today. But even that simple task spilt a soup of worries which almost led to complete paralysis. Worries such as
- Where is that savings account I opened two years ago? And is there any money in it?
- What’s going on with my ISA? How much money have I put into it? Did I put any money in last year? How come I can’t make heads or tales of the balance statement? It looks like my balance is ZERO, oh my god — that cannot be
- What is the interest on any of my accounts? And why is it a lot less than what my bank is offering other customers for the same account?
These worries stem from the usual combination of my own weaknesses (a slippery grasp of financial products, a lifetime of operating without a simple system to track my money) plus the nature of banking itself (entrenched in fine print designed to trick us, confusing explanations of savings rates and other methods of burying basic information about the financial products we’ve bought or are contemplating buying).
But these worries also have nothing to do with completing this week’s assignment. They are just related areas of worry that started to attack me as soon as I was forced to compare my savings options.
A few weeks ago one of my N4F’s* announced over drinks with myself and another FFF that we should be aware of the best 1-year, 2-year and off-shore savings deals. At all times.
She was met with stoney silence.
Actually, it only takes a couple of minutes on Google to get to these answers — but the real question is harder: The longer I tie up my money, the more interest it will make. But I don’t know when exactly I’m going to need my money to buy a flat. Which has been true for the past 1,127 days.
Again, another red herring!!
I just needed to keep concentrating and brush these legitimate but ultimately distracting worries out of my way. Obviously the least I should do is find a good savings account that’s instant-access. I don’t even need to worry about finding the best — just one that’s basically in line with the better rates out there at the moment. They pretty much all suck, so this isn’t hard.
This led me to ING which turns out to be the same bank where I opened that lost savings account a few years ago. So I called them. They helped me track down my lost pin, password and account whereupon I discovered that I’d put £1,000 into the account when I opened it. They were able to explain why that money had only earnt £23.21 in the past two years and they talked me through the 3 alternative savings accounts I might now consider. I compared the rates on these accounts (2-3%) with the rate on the account where my lump sits today (.6%). And then, since I’m not ready to tie up my money for an extended period of time, I opened a new instant-access account with them at 2.5% and transferred my lump sum.
This entire process took about twelve minutes. Which is 0.00073 of the 1,127 days I’ve been mulling this over. Not that this means much to me — let’s just say it’s less than 1% of even ONE SINGLE DAY of mulling this over. This is what I meant by “screamers” a few posts back — to-do’s that are screaming at me which would take almost no time at all to kill off.
Coincidentally, having to track down the interest rate on my NatWest account where the lump money sits today, led me to discover that my own bank — while unable to offer me a good deal on my basic savings account, is offering one of the best ISAs on the market. And so even though I still have to work out the impossible-to-understand annual statements concerning the ISAs I already have with another financial institution, it made sense to make a few more clicks on the screen and transfer my annual tax-free allowance into a new NatWest ISA.
And so what is the moral of this story? The moral is that by forcing myself to solve the immediate problem at hand — what to do with the lump sum, I ended up resolving most of my other worries about my savings BY ACCIDENT, without extra effort.
The entire exercise reminded me of the following advice I received from one of the 3 blogs I subscribed to at the start of the year:
Attention morons: The difference between 1% and 2% on even a $10,000 balance is about $8/month. You do not get rich from rate chasing. Instead, pick a bank you trust, fold it into your automation system, and get on with your life.
Enough said. For the other dumbest money mistakes people make, see Ramit’s advice here.
* N4F = Non Financial Fuckwit Female Friend (and yes the Female part is significant since women tend to be a lot poorer than men)