4 Alternatives to Big Banks and Their Record-High Fees

Originally published CNBCBig bank fees are at an all-time high while the interest they pay is at an all-time low. Worse yet, evidence recently has come to light of the criminal abuse of a practice common among large banks since the fall of Glass-Steagall: cross-selling.

Cross-selling is rooted in consumer research that large financial institutions tend to salivate over. It shows that customers are more profitable for longer when they own more products. How else could they get us to settle for deposit products for which we pay them? Does this absurdity leave you wanting to bolt the big banks?

Fortunately, you have alternatives. Here are the top four:

1) A good option for most is to flee the big brick-and-mortar bank for its younger virtual sibling: the online bank. Online banks, which lack the overhead of their more traditional rivals, can offer higher interest rates, lower fees, free ATM withdrawals and low or no minimum balance requirements. And they do.

I’ve been using an online bank for several years now and haven’t paid a single ATM fee for that entire time—and I can go to any ATM in the known universe (seriously). In the past year alone, I’ve received more than $200 in ATM fee rebates!

I recommend that you choose an online bank that best serves your needs and lifestyle. Mine, for example, offers unlimited ATM reimbursement, but others will cap the reimbursement amount or restrict you to a (typically large) number of “free” ATMs. Those banks, however, may pay a higher level of interest than my bank. Nerdwallet did an excellent job summarizing the best online checking accounts of 2016.

2) But for consumers who still want or need a physical bank, consider a community or association bank or a credit union. There’s really only one reason I can imagine “needing” a physical bank, and that’s to deposit cash. (For our family, even that is a rarity because if we get a wad of cash, we’ll just use it for expenses anticipated in our budget, like groceries.)

Beyond daily banking, however, it can still be good to have a relationship with a local bank or credit union, because they also tend to offer higher rates on deposit products and lower rates on loans. You may also want use them for a financial planning tool that I value very highly for unexpected opportunities or emergencies: an unused home equity line of credit (preferably with a rate no higher than Prime plus one, no origination fees, no annual fees and no pre-payment penalties).

Regardless of whether you use an online or physical bank, the only options you should consider are those with FDIC protection.

3) What if you’re blessed to have cash in excess of the FDIC limits? In that case, you might consider warehousing your short-term cash through a U.S. Treasury Money Market fund located in your taxable brokerage account. As we learned in the financial crisis of 2008-2009, it is indeed possible for a traditional money market account to lose money. Therefore, if safety is your priority, you should find it (and slightly lower interest rates) in a money market instrument holding only vehicles backed by the full faith and credit of the U.S. government.

4) If you want to maximize the earning potential of your short-term cash management strategy without putting that money at risk, you may consider good ol’ CDs (Certificates of Deposit) with FDIC protection. You might even create a “CD ladder,” positioning multiple instruments at varying maturities and rates. It means more work and complexity, but it would likely result in higher returns, too.

You can create your CD ladder through traditional, big banks, but it’s likely easier to purchase “brokered CDs” in your taxable accounts, although this strategy certainly requires more skill.

Given these readily available alternatives, are there any good reasons to stay with a big, traditional bank?

Not really, unless you’re interested in strengthening the bottom line of banks deemed “too big to fail.”

You May Not Drive A Racecar, But You Still Need Life Insurance: Lessons from Danica Patrick

Originally in ForbesSince her early 20s, Danica Patrick has driven a racecar for a living, speeding 200 miles per hour around a crowded track bordered by concrete walls. It’s dangerous. Really dangerous. And she recognizes that.

“There are things that happen in the car that you can’t plan for and that are out of your control, like a tire blowing on you or an engine blowing up or a crash that happens in front of you or someone hits you,” Patrick told me in a recent interview. “So no matter what your skillset is, those things just happen. Absolutely it is a risk.”

But it’s a risk that she has chosen to manage, in part, with life insurance. Patrick has owned life insurance since she started racing, and the subject is important enough to her that she now advocates on behalf of Life Happens, a nonprofit founded to help consumers make smart insurance decisions.

Commendable though it sounds, I wanted to know more about why. Why was she motivated to buy life insurance at an age when most people don’t even think about it? Why did she feel she needed life insurance—then and now?

What A 12-Year-Old Ukulele Player Teaches Us About Authenticity In Our Work

I don’t watch reality television contests, because as a rule, the best participants rarely participate and when they do, they almost never win. Whether the over-commercialized, profit-over-art system is to blame—or the television audience, or both—I’d rather not suffer the invariable disappointment of an unjust outcome. But quite randomly, a 12-year-old ukulele player named Grace VanderWaal, inspired me to break my own boycott.

On our way to another channel, my family stumbled on America’s Got Talent a few months ago just in time to see one of my favorite instruments—the ukulele—adorning the neck of a diminutive blond girl. “Wait a second,” I said.

She’s clearly overwhelmed just to be there. “It’s crazy,” she says, as her voice cracks in response to the judges’ welcome.

“What are you going to sing?” asks the legendarily gruff host, Simon Cowell.

“I’m singing an original.”

“Really?” Simon says, eyebrows raised.

“Yes.” Confidently, but not defiantly.

It’s just her and the miniature instrument on the stage. And then she parts from reality singing contest convention launching into a song that she—as a 12-year-old—wrote herself. It’s not a tune that the crowd can recognize and cheer for. Judges can’t easily identify with it to help sway them in her favor. She’s on her own.

“I don’t know my name…” she begins. “I don’t play by the rules of the game.”

Indeed. Her uke is a little out of tune (but it’s almost impossible to keep them in tune). Her voice is interesting—quirky, but good. Her pace is variable, perhaps intentionally. But in her vulnerability, her apparent imperfection, she endears her way toward her own version of perfection.

In the song’s climactic stanza, she rejoices with soaring authenticity, “I now know my name.”

By the end, I’m visibly crying, much to my 10 and 12-year-old sons’ utter shock. (“You’ll understand one day, once you have children,” I assure them.) And to my shock, everyone loves her, the judges anointing her with instant superstardom. She, in turn, is shocked, overwhelmed that she put every bit of herself out there for the world to see—and the world embraced her.

But even more surprising is that in every subsequent show, working toward the final round, she played another original. At no point does she curry favor through the influence of another. With almost no accompaniment, she just keeps playing and singing her own brilliant, old soul 12-year-old songs.

Then, in last night’s final round of performances (prior to tonight’s minting of the new millionaire Vegas headliner), every contestant got an extended vignette as a prelude to their performance. You know, the tear-jerking journey that each performer has endured on their way to the big stage.

Grace, the final performer of the night (no pressure, right?), has a vignette that doesn’t feature her, so much. It’s a collage of YouTube videos featuring other people playing her songs, songs that even her middle school classmates hadn’t heard 13 weeks ago that have now gone viral.

Without an ounce of pretension, but with conviction in who she is and what she does, she brought the house down.

“On paper,” her voice couldn’t compete with the virtuoso opera singer. Her production couldn’t compete with the contortionist. She didn’t have an ounce of the showmanship of the Sinatra protégé,  and she was clearly the least experienced of the entire field.

But she was easily the most comfortable in her own skin. She seemed to need the praise least of all. “I’m just glad it’s over,” she said in response to the standing ovation. For the first (and likely last) time, I actually got on my phone to vote for a reality show contestant.

And despite all the commercialism, media manipulation and bias against true originality—God bless America—justice prevailed. She won.

But I’m not a music writer. My specialty is personal finance, of which career is a primary component, and the whole notion of vocation or “calling” is one with which I am fascinated. I believe that we each have a unique combination of personality characteristics, natural proclivities and honed skills that when employed in the service of others at the right time and in the right environment can bring uncommon fulfillment. (But be warned, it may not bring money, fame, or even a job.)

So what vocational lessons might we learn from this unlikely 12-year-old star?

1) There may be no stage in life in which it is harder to be authentic than middle school. If she can do it then, we can do it now.

2) Nothing conveys authenticity better than vulnerability. (But while life-giving, being vulnerable can be exhausting, and it’s never easy.)

3) Most of the work we do requires trust on the part of those we serve. Vulnerability—even the upfront acknowledgement of our faults and shortcomings—is the quickest path to trust.

4) We need not be free from constraints and the influence of others in order to exercise authenticity and our own brand of creativity. (This is something I learned from James K. A. Smith in his new book, You Are What You Love.) Many a tortured musician would spurn the mere thought of submitting him or herself to a venue as “establishment” as America’s Got Talent. But with innocence and whimsy, Grace was able to be fully herself—even while being constrained by a decidedly commercialist enterprise. You don’t have to be “out on your own” in order to be fully you. Constraints can ironically inspire creativity, and the best organizations welcome individuality in the midst of their communities.

5) We all have creative potential. Whether a plumber, priest or professional, we can all bring a certain artisanship to our work.

What does this mean for you?  What is the next step in authenticity, vulnerability or creativity that you could take?

How Fantasy Ruins Football (and Investing)

Originally in ForbesIt’s that time of year again, where the heat of summer recedes, sweatshirts make a comeback and businesses lose billions in flagging productivity due to fantasy football. But it’s not just businesses losing out—fans and players come up short as well.

How, after all, can I truly dedicate myself to rooting fully for my beloved Baltimore Ravens if I took Le’Veon Bell—who, for those not acquainted with the best rivalry in football, plays running back for the Steelers—second in the fantasy draft? It can’t be done. It’s just wrong.

I’m kidding, right?

Partly. But there are more serious personal and financial implications to embracing fantasy (sports or otherwise). The danger in fantasy is its distance from reality. It’s “betting on a future that is not likely to happen,” according to Psychology Today.

Our fantasies tend to sensationalize what we’d prefer to imagine while ignoring what we’d prefer to not. Then, when our actual spouse, child, parent, friend or co-worker falls short of the impossibly high bar we’ve set for them, we—and often, they—are crushed.

“Emotional suffering is created in the moment we don’t accept what is,” says Eckhart Tolle, who, perhaps unintentionally, delivers a potent dose of truth that especially informs us in our personal dealings with money.

Here are a handful of financial fantasies, followed by their unvarnished truths:

Don’t Let Wall Street Fool You Into Taking Too Much Risk

Originally in ForbesCompetition for your dollars creates an inertia that always seems to lead Wall Street down the path of unhelpfully increasing the risk in your portfolio. The recent Wall Street Journal headline, “Bond Funds Turn Up Risk,” illustrates an especially alarming trend. Specifically, of increasing the risk in the part of your portfolio that should be reducing overall risk—bonds.

Bonds are supposed to be boring. The primary role they serve in our portfolios is not necessarily to make money, but to dampen the volatility that is an inevitable byproduct of the real moneymakers—stocks.

Thank God Life (and Investing) Isn’t Like the Olympics

Originally in ForbesImagine that your entire life revolves around a single performance lasting less than 14 seconds. You’ve sacrificed your youth, close friendships and any semblance of a career in pursuit of validating your Herculean effort on the world’s largest stage. The hopes of your country on your shoulders. Tens of millions of gawkers eager to praise perfection — and condemn anything less.

And then.

You dork it.

Jeffrey Julmis

That’s precisely what happened to Haitian hurdler Jeffrey Julmis in the Olympic 110-meter semifinal heat when he crashed into the very first hurdle, tumbling violently into the second.

Wow. I love the Olympics, the pinnacle of athletic competition. I even see past all the corporate corruption and commercial sensationalism, drinking in every vignette, simply in awe of all that the human body, mind and spirit can accomplish in peak performance. But thank God life isn’t like the Olympics (even for Olympians).

We aren’t subject to the imperial thumbs up or down based on a single momentary contest (or even a handful of them). But we’re certainly capable of treating life that way, often to our detriment. Don’t believe me? When was the last time you said (or thought):

“This is the most important thing I’ve ever done.”

“It’s all leading up to this.”

We’re trained to think this way because that narrative is more likely to keep you from switching the channel, more likely to motivate you to buy that car (or house or hair product), all of it promising to be that singular moment or lead you to it.

This script is especially common in the world of financial products. If you surveyed the marketing collateral for a host of investment products, you’d think the product being sold was a sailboat, new golf clubs, a winery or beach house — a life without care. But success in investing is actually achieved through the tedium of saving and the application of a simple, long-term investment plan — not the sexy new investment product or strategy that pledges to deliver your hopes and dreams.

Thankfully, this is also true in life (and athletics). “Success” is cultivated in the millions of unseen moments, the application of simple disciplines employed in pursuit of goals that don’t expire the minute we’re out of the spotlight. And even at the moment of our most abominable failures, the humbled Haitian hurdler provided us with the only example we need:

He got up and finished the race.

Is Your Attitude Toward Work Killing Your Retirement Dreams?

Originally in ForbesDo you have a generally positive or negative impression of the word “retirement”?

I ask because it dovetails nicely with a series of questions (inspired by Rick Kahler) that I use to begin most speaking engagements. These questions are designed to incite self-awareness, offering us clues about how our life experiences have shaped the (often unarticulated but powerful) beliefs that unavoidably influence the decisions we make with and for money.

Work or retire as a concept of a difficult decision time for working or retirement as a cross roads and road sign with arrows showing a fork in the road representing the concept of direction when facing a challenging life choice.

Regardless of an audience’s homogeneity, their responses are consistently inconsistent. I have, however, seen some generational persistency on the topic of retirement. For example, on average, baby boomers have a generally positive view of retirement—no doubt shaped in part by the incessant financial services commercials that promise a utopian post-career existence with beaches, sailboats, golf and an unlimited supply of vintage Pinot Noir.

On the other hand, the finance and accounting students that I had the privilege of teaching at Towson University—almost all members of the Millennial generation—had a generally negative view of the notion of retirement. This is for two prominent reasons:

  1. They pictured hot, humid, early buffet dinners in rural Florida.
  2. They don’t think that the American dream of retirement is available to them.

The Relative Irrelevance of Market Highs

Originally in ForbesThis week we’ve heard a lot about the U.S. stock market achieving new highs. So what? Should this record transcendence inspire confidence or fear, action or inaction?

Market High Wire

You’ll find sufficient supporters for both the pessimistic and the optimistic view, with a far greater number of pleas to act on these views. But I invite you to consider the relative irrelevance of market highs for the following simple reason:

Any investment with a positive expected rate of return should regularly revisit and recreate its all-time high as a matter of course. Otherwise, it wouldn’t have a positive expected rate of return!

The Real Reason I Moved to the ‘Best City In The World’

Charleston, South Carolina

Originally in ForbesAccording to Travel + Leisure magazine, “Charleston is a remarkably dynamic place, so it’s no surprise that it has achieved its highest ranking ever in our survey as [2016’s] best city in the world.”

It’s the first time a U.S. city has received the top honor, but Charleston ranked No. 2 last year and has been ranked the No. 1 city in the U.S. and Canada for four years running. As scored by Travel + Leisure readers, Charleston received its top-ranked status based on six categories: sights/landmarks, culture/arts, restaurants/food, people/friendliness, shopping and value.

But please allow me to give you the top three reasons why my family moved to Charleston two years ago, and the reason we’ll stay (and invite you to join us).

Hope Deferred Makes the Heart Sick

The practical present application of ancient wisdom

Originally in Forbes“Hope deferred makes the heart sick, but a longing fulfilled is a tree of life.” So reads a Solomonic proverb penned in the 10th century B.C. Consider with me, however, a contemporary application of this ancient wisdom, especially in the realm of personal finance.


“We’ve got to apologize, Tim,” said a financial planning client with whom I had a great relationship.

“Whatever for?” I asked.

“You know that new Lexus? The one that backs itself into a parallel parking spot?”

“Yes, I’ve seen the commercials.”

“We bought one,” the client said, with his head bowed in apparent shame.

I’d never communicated that these folks—or anyone, for that matter, who has sufficient means—shouldn’t use said means to purchase a vehicle of their choosing. But the general impression the public has toward financial advisors and educators seems to be that we all think the best use of money is in storing it up and avoiding its deployment. Defer, defer, defer.