I got an email today from someone over at Wesabe. It is apparently a social personal finance site aimed at helping members gain a better understanding of their spending. To do this they offer a free web based tool which I assume is similar to Microsoft Money or Quicken. If you’ve been thinking about trying out a money management software tool, you might want to check them out. First of all, it’s free (at least as far as I know), and it’s another option that just might work for you.

Personally, I’m not really into the whole money management software thing. I find it to be quite time consuming and any data that it may track usually just reaffirms what I already know (i.e. little things really do add up and eating out is really expensive). You may be different though and find such a thing really useful. Thus I wanted to let you know about it. There is no one correct approach to personal finance and you can probably also gain quite a bit from the community aspect.

If you do happen to check it out, please let us all know what you think about it. I’m sure others would also be interested.

There’s been a lot of talk recently about the recent rate cut from the Federal Reserve of 0.5 percent. It was obvious that Wall Street loved it as the market experienced a large upswing, but many others are critical of the move and view it as a Wall Street bailout. What does it mean to your average person though?

Within days of the rate cut, I was informed that the rate on my ING DIRECT money market account was being lowered to 4.3% APY from 4.5% APY. This isn’t isolated however, savings and money markets are lowering rates all over the place.

Those with ARM mortgages might benefit as their loans may reset to a lower rate after the introductory period lapses. This is nice for those that bought more house than they realistically could afford, but interestingly enough, longer term rates have actually increased. These longer term rates are what affect the traditional fixed rate mortgages. So it would seem that the financially prudent will once again be paying to bailout the unwise.

Whatever your view is on the recent rate cut, there isn’t much that the average person can do about it. What we have to be able to do is adapt as best we can to the circumstances that we’re given. If interest rates continue to drop for money market accounts, other options can be explored. The stock market usually reacts positively as interest rates fall which could be helped further as people pour more money in as their cash accounts don’t perform as well.

Most people won’t be noticeably affected by what’s going on, but for those of you who pay attention to these sorts of things, you’ll begin to notice ways that you can take advantage of the changes. It also serves as a reminder that our financial plans can’t be static. We must be willing to make changes and adapt to the changing market and financial conditions.

Many people wonder whether Certificates of Deposit (CDs) are really worth looking into, much less investing in. And there’s good reason for this with the high rates one may earn with a money market fund. Whether you’re interested in them or not, it’s nice to understand how they work. You never know when a CD might be just the thing for some situation.

The Low-Down

When one purchases a certificate of deposit, he/she invests a fixed amount of money for a specific amount of time. Typical durations are 6 months, 1 year, 18 months, or 5 years although this could vary. While the money is invested, the issuing institution pays you interest usually at regular intervals. You receive the original amount plus any accrued interest when the CD matures. It sounds simple enough, but there are a few things to look out for before you invest.

Watch Out For…

Most CDs come with an “early withdrawal” penalty. If you may need the money at some point during the term, a CD probably isn’t the right product for you. Any interest earned would probably be negated by the penalty charged. If you’re sure you won’t need the money during the chosen term, you won’t have to worry about this type of penalty.

You’ll also want to look into whether the CD you’re considering has a “call” feature. These are mostly found with longer term CDs. When a certificate of deposit is callable, the bank has the right to terminate the CD and return the principle and any unpaid accrued interest. The investor does not have this right. Banks will use this feature if interest rates fall and they can issue CDs at a lower rate.

You’ll also want to confirm the interest rate and know whether it’s fixed or variable. You should receive a disclosure document that details all of this information. You will also want to know when the interest will be paid, be it semi-annually or monthly. If something isn’t clear to you, make sure you ask all the questions you need in order to be completely comfortable with your decision.

There’s an important distinction that I want to make clear for people when it comes to the interest rates that are quoted, be it on loans (interest you pay) or on an investment (interest paid to you). When you’re looking into a financial product, realize that what you’re being quoted is best suited to the providers purposes.

If you’re looking for a loan or comparing interest rates on credit cards, you’ll typically see the Annual Percentage Rate (APR). Even though it says it’s annual, it doesn’t take into consideration any effects of compounding. Therefore, you should realize that the actual effective interest rate could be higher than what you’ll see advertised.

When you’re comparing savings accounts, money market accounts, or any other interest bearing account you’ll typically be quoted the Annual Percentage Yield (APY). This figure does take into account the effects of compounding so it could be an inflated figure.

You can see how these two different figures suit the purposes of either the lenders or the account providers. It’s not necessarily going to make a huge difference, but it’s an important distinction to understand regardless.

With the abundance of online savings accounts that are typically offering over 4%, too many people are essentially leaving money on the table by keeping all of their cash at their local bank. There are benefits to using a local bank, but it doesn’t mean that you shouldn’t look at other options.

A local bank allows you to make in person deposits and withdrawals and gives you access to their ATMs which are most likely very convenient. Having someone to talk to when you have questions or concerns can’t be understated, but you can take advantage of these things without having to keep all of your money there.

Most online high yield savings accounts can be directly linked to your existing checking account so you can transfer money back and forth quite easily. If your main concern is that you need the availability of your cash, you can have it transferred within about 2 to 3 days. When you don’t need your money, it’ll be earning a nice rate for you that’s well above the usual 0.5%.

Your traditional bank is probably now best used as a way station to direct your money to better places. You’ll still be able to use your usual checking account and ATMs, but you’ll also be able to have the benefit of the best prevailing interest rates. So, do yourself a favor and look into an online high yield savings account.

Insurance is one of those things that most people hate to look into, shop for, or even deal with. Most people don’t even want to really think about it. It’s one of those set it and forget it situations. Because of this, a lot of people are paying way too much for their insurance needs.

One of the easiest ways to save on insurance is to increase your deductibles. This is the money that you have to pay before the insurance kicks in if you file a claim. By raising this amount, you’ll be able to significantly reduce the amount of your premium. If you do need to pay the deductible, that’s what an emergency fund is for.

Insurance products are changing all the time. If you haven’t looked at your polices for a while, it’s probably time to review them and see if they are still the best option for your current life. Maybe you don’t need as much life insurance anymore. If you’re car is a little older now, you may want to consider dropping some of the coverage or the comprehensive part altogether. You may also just want to shop rates since companies are always changing them to try and stay competitive.

You also might want to check on your health insurance coverage. If you get this through your work, check and see if another option might be more cost effective. If your situation has significantly changed, make sure your insurance actually meets your needs.

Insurance is not exactly the most exciting topic and it’s definitely not something most people are interested in. However, it’s something that can cost you a lot of unnecessary money if you’re not careful. Now’s the time to review things if you haven’t in a while. If you don’t even know what your policy covers or how much you pay for it, that may mean that you need to take a look.

When people find themselves in a mound of credit card debt and there doesn’t seem to be any way out, using home equity sometimes provide that “light at the end of the tunnel” feeling. Should this option be pursued, or avoided altogether?

This option was listed in an MSN Money article entitled The 3 Worst Money Moves You Can Make. Obviously you can see the slant they provide. Like most other things, there are always multiple ways to look at things and each situation is unique.

I’m definitely not a fan of using the equity in your home to fuel a consumerist lifestyle. I think most rational people would agree. This however, is not really the problem. When you’re loaded with debt from credit cards and the like, you tend not to think as rational anymore; it becomes more emotional.

Realize that paying of the credit cards is not the ultimate solution to the problem. You need to figure out how you arrived at your current situation in order to make sure it doesn’t happen again. Also, realize that paying off credit cards with home equity is not paying off the debt; it’s merely shifting the debt.

You need to firmly commit to paying off your debt. Once you’ve made this commitment, you can then begin exploring options to help in this endeavour. Using the equity in your home is one of these options. Other options may include balance transfers to another card with a lower rate or promotional offers.

Using home equity can make a lot of sense and is a viable option for those carrying credit card debt. However, remember to treat it as a balance transfer that allows you to reduce your interest payments and therefore pay the balance off quicker. The focus should be on reducing your debt in the timeliest manner possible.