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If you save it, then you choose how to spend it!

Friday, March 12th, 2010

Today’s article is titled Spending a school fund on CNNMoney.com.  It brings to question a subject that many of us either don’t think will ever happen, or, at least we hope it won’t!  The question?  What happens when your child decides not to go to college, and you’ve saved lots of money in an ESA, 529 or other savings account for them to use on that schooling?  Worse, what happens when you have 2 children, and 1 of them used the college fund, and the other decides against school and says you should just give them the money?  I bet you can guess my answer!

If the child decides not to go to school, there will be penalties in an ESA or 529 account that isn’t used for schooling, so you can just kiss some of that money goodbye.  Now, this isn’t a totally terrible thing, since had you not saved it for education, the money would’ve been taxed anyway, but I’m sure it will still sting a little.  I don’t have a huge problem with a child that decides not to go to school, financially anyway, because it’s not impacting your budget, only (possibly) their future. 

My problem, as I’m sure our regular readers know, is with the child who asks for (demands?) the money you saved for their education, to be paid out to them in cash, since you paid for their siblings education.  In spite of what your child seems to think, your money is NOT their money.  I know that you want to be fair with your 2 children, but this money was set aside for their education, not for their amusement.  It’s your money, and if the child decides not to go to school, it should STAY your money!  Like the article says, if the child wants money, tell them to get a job! 

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You might want to start saving for college BEFORE you have kids…

Friday, March 5th, 2010

College tuition is a very hot topic with most people.  Either you went to college and experienced the hefty cost, sent your child to college and experienced the hefty cost or decided not to go to college BECAUSE of the hefty cost.  What’s worse than the cost of tuition??  When the cost goes up almost every year!  Today’s article, Public college tuition spikes 15%, even 30% reports on the recent spikes in college tuition, thanks to the lack of funds in some states’ budgets.  This is no news to some of us.  Some of us experienced yearly increases of around 10% each year in college (one particular year the increase was 17%…ouch!), but I digress.

An example of the worst increase?  The University of California, which estimates a 30% increase in the 2010-2011 year, thanks to the huge state deficit that’s been in the news for the last few months.  But irregardless of these increases in tuition prices, public schools are still much cheaper than private schools, which average $26,273 a year!  And people pay the price tag, so there is no deterrent to raising the rates…so it will continue. 

So what do you do?  You start saving for college, for you or your child, and you start saving as soon as you can!  Dig into our past blog post that has tips for saving for college.  With rates going up so often, you should be looking into savings plans before you go to college or before you have children.  Planning for the future is always a good start on the road to success!

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Your bank and overdraft protection…

Friday, February 26th, 2010

Today’s article, Banks use scare tactics to get you to sign up for overdraft protection, addresses the new bank overdraft “protection” law that basically says that you have to voluntarily sign up for the overdraft protection to let your bank keep processing your debit card transactions even after you run out of money.  As far as I’m concerned, at $35 per transaction, overdraft protection is no service to it’s customers, and certainly shouldn’t be anything someone would voluntarily sign up for!

Now, I’m sure you can tell from above, we believe if you can’t keep a minimum amount in your bank account, or can’t keep from overspending because you aren’t diligent, then you shouldn’t have a bank account, and should operate on a cash only (money orders to pay bills) system.  However, if you choose to have  a bank account, and struggle to keep funds in it, then use the other services that many banks offer, that don’t come attached to a ~$35 fee PER TRANSACTION! 

The scary stuff you get in the mail from the bank, that says your debit card will stop working and the like is true, because OF COURSE it should stop paying people if you don’t have any money in your account!  That is the way it is supposed to work!  The card is not supposed to let you spend more than you have!  Overdraft “protection” is like you receiving a mini loan from the bank…kind of like those payday check cashing places, but wrapped in a prettier sounding name.  Ignore these letters from the bank!  You don’t want to keep paying $35 a transaction loan fees for the rest of your life!  DO NOT opt in to this plan, just learn to watch your account and don’t over spend. 

If you absolutely CANNOT LIVE without overdraft and refuse to be on cash only (hard headed, aren’t you??), then there are a couple of alternatives.  Many banks will allow you to link your checking account to your savings account to prevent overdrafts.  Some will also link it to a line of credit (not something we recommend) to prevent these overdrafts from happening.  Neither of these programs are free, but they are cheaper than overdraft, and won’t catch you off guard either, because, let’s face it, if you don’t have the money to cover your purchase, you definitely don’t have the money to cover your $35 a transaction overdraft “protection”.

If or when you start receiving these notices from your bank, do yourself a favor, and “just say no” to overdraft protection…instead, be more diligent with your account, or switch to cash!

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Why spending today costs more than you think…

Friday, February 19th, 2010

Once again we look to Dan Miller and his 48 days blog (visit the links section of our website for more info on Dan Miller) for an interesting article.  Today’s article, Look rich-die broke was inspired by a sign in front of a car accessories shop in Florida that read: “Rent your wheels and tires here”.

Like furniture rental places, you can apparently also rent the rims you’ve been dying to have for your car as well, that way, you can look cool, and rich, even if you’re broke.  Dan Miller has a knack for talking about topics that are important to me, and there are few things that get my blood boiling more than people who spend themselves into debt chasing status.  He highlights the new book from Thomas Stanley, author of The Millionaire Next Door and The Millionaire Mind, both of which are excellent books (I will be buying and reading this newest addition to his works).  This new book highlights some of the habits of the truly rich (as opposed to those who only appear rich), which, in general, does not include renting your rims. 

Read the post, and go buy (or check out from your local library) Thomas Stanley’s newest book, Stop Acting Rich.  Let’s all begin to be open minded to the idea that having fancy things (for status) and spending obscene amounts of money on weddings and “McMansions” are not the real way for the average person to become wealthy.  Once you stop believing you are going to simply luck into a fortune, or become famous and rich out of the blue, you can focus on becoming rich the way most people do…through saving, working hard, and striving to be the best at their passion so they can advance themselves in that particular field over the years.

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Cars, cell phones and burgers…

Friday, February 12th, 2010

While researching for today’s financial news post, I had a problem that I’m not sure has happened in the past.  I found TOO MANY good articles to write about!  Now, they’re not exactly hard hitting journalism, but they are all something our readers/consumers should be aware of, and so I’ve decided to share them all.  For the full story/article, you will need to click on the link and read it at the source.

  • Majority of scrapped GM,Chrysler dealers file appeals - Basically, what’s going on here is that GM and Chrysler, in order to stay in business, had to cancel contracts with some of the dealerships that owned the rights to sell their cars.  The dealerships, instead of finding a different product to sell, or closing down, are filing appeals to FORCE the 2 companies to keep supplying them with inventory or to pay a huge settlement.  This will cost the already struggling automakers (remember, they were bailed out already) even more money, and they probably will struggle with getting back on track and making a profit.  I hate that these dealerships will have to close and that jobs will be lost, but when a company expands too far and has to draw back to stay in business, this is what happens.  By trying for a settlement (these dealerships agreed to the terms of the contract, they knew the contract could be terminated), they are actually hurting the company more.  Nice.
  • Toyota’s next problem: Lawsuits - With the multitude of recent news stories and recalls, Toyota is working around the clock to combat the bad press and sort out their problems.  It might not help, though, thanks to the over 30 lawsuits (already, and growing) and class action suit (there will probably be more later) that are already filed against the automaker.  Here’s the deal…Toyota should pay for any medical bills (and final expenses etc.) of those people found to have directly been injured or died because of a faulty piece of equipment in the vehicle, and I have no doubts in my mind that they would willingly pay these costs.  There are 2 problems that stink with this situation though; 1. Some lawyers just see dollar signs and think of a big payday, so they will file suit for ANYTHING, even things their client doesn’t deserve, and some judges will award it, which just causes more financial problems for the automaker, and could cost jobs for their employees, and 2. the more lawsuits and such that are filed, the more bad press they receive, which could also cost money/employee’s jobs.
  • Your cell phone company’s dirty little secret - The big carriers have come out recently and lowered their prices on the “voice usage” side, or the “talk time” side of their business, but their secret is that they’ve started charging non smartphone users a fee to access the multimedia capabilities of their phones, whether they want to or not.  They say it’s because most people don’t know they can access the net, so they are making sure the user gets full use of their phone.  I say bull crap.  I shouldn’t be forced to purchase a service I don’t want.  I have a smartphone and DO NOThave a data package, because I don’t need one.  I did not buy the phone for it’s ability to surf Facebook, I bought it for other features like touch screen/qwerty keyboard/nice layout/and a calendar.  Maybe it’s more phone than I needed, but that’s my choice.  They know that people pick the phone they want, and so they figure they can charge you extra for service, because you like the phone.  It’s sneaky, but clever.
  • The burger and beverage recession - This one actually surprised me, but not in a bad way.  Coca cola, McDonald’s and Molson Coors all reported that their product demand is stronger abroad than in the US.  These are the products that we think of as recession proof, but apparently, people are still not willing to part with their dollars for them!  I very much hope that the companies can cut costs and innovate to continue to be profitable, but I am very excited that consumers continue to be wise with their money.  Spending less and saving more is a proven way to have something for yourself as you get older.  Are there quicker, more volatile ways?  Of course.  But with great gains comes great risks.

Follow the links to see the full articles!

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Reality check for the amount you’re saving…

Friday, February 5th, 2010

Do you think you”re saving enough?  If so, are you sure?

Today’s article, titled, How much should I save?by Donna Rosato, is an in depth look at an entrepreneur and her retirement portfolio.  The entrepreneur is hoping that a financial planner who looked at her portfolio will “bless it” and tell her good job.  Unfortunately, like most people, she isn’t saving as much as she thinks she is!  Most people think that by saving anything, or by getting their “company match” in a 401k program that they are set for retirement…they’re not.  Yes, it is good to get that company match, but if that is ALL you’re saving, you won’t be able to retire with the same lifestyle you have now, and that is where the misconception comes in for a lot of people.  They think, “oh, well, as long as I get my company match, I can retire living at the same level I live at right now”.  WRONG!  If it were that easy, we’d all retire with no debt and a vacation condo!!  As the financial planner in the article figures out, the entrepreneur is saving less than half of what she needs to retire at her current lifestyle level. 

What is going on here?  As adults, we underestimate things…it’s what we do.  For example, we underestimate the amount of calories we take in in a day (to the tune of 20%-40% from what I have read) and we underestimate how much we should be saving.  So, how do you keep from underestimating things?  Get some help!  You can pay for it, or get the free kind.  Either will be better than nothing, but if you’re paying for it, be sure that the expert isn’t just trying to sell you products…if they are, then they DO NOT have your best interests in mind!  Need some basic (and free) ideas on how much you should be saving?  Check out this link at CNN Money, to get a rough idea of where you are and what you need.  Some extra tips are to be diversified, preferably in growth stock mutual funds, and, the article and I agree, that small cap, mid cap, large cap and international funds are all good places to invest your cash.   Whatever you do, figure out what you need to retire.  Don’t just think that a 6%-8% contribution to your 401k is enough.  Max it out!!  Start contributing to a Roth IRA!  HAPPEN to your life…don’t let your life HAPPEN to you!!!

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Why handouts aren’t good in the long run…

Friday, January 29th, 2010

A new blog post by one of my favorite Authors/entrepreneurs, Dan Miller, caught my eye, and I thought it would be worth sharing.  The post, titled, When Helping Hurts focuses on some recent developments regarding our national unemployment program.

The government is looking into extending benefits in the unemployment program for the 5th (that’s right, I said 5th) time since the recession started, just a couple of years ago!  Normally, the benefits are doled out to the unemployed over 26 weeks (aka 6 months), with the option to get a 13 week extension.  Basically, this means that you can draw unemployment for 9 months before you have to go back to work, and a lot of people do just that!  They collect full benefits before even really trying to get a job!  Why, you ask?  Well, I assume for some it’s because they think it’s “free money”, but, as we all know, that’s never the case for anything.  Somebody always pays, be it the company, the taxpayers, the government (which takes its money from the taxpayers) or the consumer (who is almost always ALSO a taxpayer).  Under the new proposed benefits, the pay outs can run as long as 99 weeks…almost 2 YEARS!

The funny thing is that some studies sited in the post indicate that people are most likely to find a job when the unemployment runs out, no matter if that length of time is 2, 26 or 99 weeks.    People seem to think that because they are drawing unemployment, they economy must really be in the toilet for everyone, and so they don’t try.  However, when there is no more unemployment, they “magically” find work.  Amazing!

There are many examples of these programs being run the wrong way and abused by some of the participants.  I’m not going to get into that, because I have a feeling many of you wouldn’t want to read a post that long.  If I’m wrong, say so in the comment section, and I’d be happy to oblige!

Dan Miller draws an interesting observation, drawing a parallel between the way bears hunt and the way we as humans acquire a job.  Bears hunt more efficiently when they aren’t given food from humans…you know, when they have to hunt.  We are the same way with money and jobs.  When there isn’t somebody giving them to us, we get creative and figure out a way to do it.  Be that start our own company, go to work for someone else or sell some stuff, we will make it work.  Can’t find work in your area?  Perhaps you should move.  Think outside the box people!

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Oh, the insanity!

Friday, January 22nd, 2010

Just when you think you’ve seen all the silly things you can on the Internet, you run across something that makes you CRACK UP LAUGHING!  Such it today’s article, 9 reasons to love credit cards, by Liz  Pulliam Weston.  As the title might indicate to you, our readers, I’m not a fan…and that’s putting it lightly! 

The article is a little lengthy, but it’s worth the read, if only so you can laugh at it as you read.  Here are some highlights:

  • Arbitration – The author says that credit card arbitration is a fabulous feature.  Well, when I used credit cards, I never had to use this feature, even when I had problems with stores.  Also, opinions are split as to whether arbitration is good or bad.  This article says the consumer doesn’t usually come out on the winning end. 
  • Automatic bill payment – Obviously, you can set up your bills to be paid from your account.  So?  You can do that with a debit card as well, which comes from YOUR money, not borrowed money. 
  • Bulwark against identity theft – The author points out that credit card companies have laws in place to make sure they don’t charge you for fraudulent charges, after a $50 fee, within 60 days.  This is true.  However, debit cards have systems in place as well.  Within 2 days, it’s a $50 fee and a $500 fee up to 60 days.  Most banks voluntarily choose to extend the $50 fee to 60 days, and not charge $500.  So again, it’s a wash.
  • Credit Improvement – I wish people would quit focusing on “improving your credit score through credit cards!  Having cash to pay for things makes credit cards pointless, doesn’t it?  Which makes your credit score less important.  Yes, you might need it to buy a house, but if you put at least 10% to 20% down when you buy the house, and have a good income, I doubt they will pay close attention to your credit score.
  • Extended Warranties – These things are a waste of money most of the time anyway, so tauting them as an advantage doesn’t really make sense.  Period.
  • Interest Free Loans – Well, interest free loans don’t matter if you pay for what you want with cash!  If you don’t have the money for it, don’t buy it.  Want money for “emergencies”??  That’s why you have an emergency fund!
  • Purchase Protection - Some cards pay to fix or replace items broken that you paid for with a credit card.  They don’t do it out of the kindness of their hearts.  You, and others, are probably paying for it, you just might not know you are.
  • Rental Car Coverage – Your auto insurance covers this.  So, why do you need more?  A silly advantage, considering auto insurance is mandatory, and credit cards are not!
  • Rewards, Rewards, Rewards- Yes, some cards offer rewards, but that only encourages you to use them more!  Also, unless you stay in hotels a lot, fly a lot or whatever else they offer “points” for, the points are not useful.  Other rewards are usually not worth it, or are something that you could have bought outright, and saved on interest if you carried a balance.  I do know 1 person who got use out of their points, but it was her business credit card.  In general, not worth it!

My favorite quote from the article:  “I get all these goodies largely because so many other folks play the credit card game so badly.  The profits they generate for the credit card issuers essentially pay for my freebies.”  So, she plays the “game” well, and you pay for her rewards and benefits.  Why not just get out of the game?  Use debit cards or cash.  You’ll save more money in the long run!

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They want to tax your junk food.

Friday, January 15th, 2010

A new article from WalletPop.com is discussing the good and bad things that could come from a tax on soda/junk food.  The article, titled Should we tax junk food to control obesity?, caught my attention right away. 

Now, one might think that this is a good plan, since the article sights some very compelling statistics, including the following:

  • 58 million people are overweight, 40 million are obese, and 3 million are morbidly obese
  • Eight out of 10 are over 25 lbs. overweight
  • 78% of Americans are not meeting basic activity level recommendations
  • 25% are completely sedentary
  • 76% increase in Type II diabetes in adults 30-40 years old since 1990

What does this mean to us?  It means that, yes, we are getting fatter.  A lot fatter.  We are coming up with new products like body shapers to hide our fat rolls, and some sort of tape to make our arms look thinner!  Don’t believe me?  Check this out!  And I don’t think anybody remembers the word “muffin top” ever being used until we started wearing pants that sat low enough on our hips to “show off” our fat rolls.  By the way, if you have a muffin top, by a bigger size and a belt! 

So we’re getting fatter!  I hate it!  I love to exercise, and I try to watch what I eat…but I’m not a health nut.  I have junk food on occasion!  I am not model thin, and don’t expect that I ever will be, since my goal is strength and not a 22 inch waistline.  However, I keep my weight within a normal weight range and an average Body Fat Percentage.  I worry about the people I see and know that don’t get any exercise, and don’t watch what they eat at all.  I worry for their lives!  I don’t, however, think that taxing the people to the poor house is the way to go about fixing it!  We’re nuts if we think these people don’t know that this food/soda is bad for them.  They know it!  Punishing them (i.e. taxing them) for their “bad behaviour” is not a RIGHT that I want to give our government, thank you very much.  The next thing you know, the government will be punishing us for all of our bad behaviours, like watching too much TV, not flossing and not recycling ALL of our trash!  It’s not up to them to legislate our behaviour. 

The article takes a much more positive approach to this tax then I would.  Yes, it breaks my heart to see children and teenagers that are not active at all.  12 year old girls that have to shop in the “women’s plus” size section at a store because the cool, stylish clothes for their age don’t fit them.  I want these people to get healthy as much as the next person, but it has to start at home.  They have to decide for themselves that they are dissatisfied with how they look and how they feel.  And then, they have to be mad enough at themselves to do something about it! 

The article says that the taxes raised could be used for education and health programs.  Yeah, it could, but it won’t be.  Have we all forgotten the promise of lottery money being used for education (read this)?  Think about it rationally, without emotion…you know as well as I do that they won’t use the money for what they say they will, or if they do, it will be like 1% of the revenue.   Taxing these people won’t fix the problem, and I don’t want the government legislating what I do or don’t eat.

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Married Couples pay more under new health bill!

Friday, January 8th, 2010

Today’s article, from the Wall Street Journal, titled Married Couples Pay More Than Unmarried Under Health Bill, is obviously about the new health care bill.  Apparently, under the new bill, if a married couple doesn’t receive insurance from their employer, and instead chooses the public option, they will be out a lot more money than their unmarried (couples who live together and share bills but aren’t married) counterparts. 

The article looks at an unmarried couple who make a combined income of $50,000, and a married couple who make a combined income of $50,000.  The unmarried couple will pay only (yeah, only…ha ha) $3,076 a year under the House bill and $3,450 under the Senate bill.  If that couple decides to get married, they would have to pay $5,160 under the House bill and $5,100 under the Senate bill.  That’s a difference of between $2,084 and $1,650 respectively!  Just for deciding to get married.  The individuals that helped write the bill (democratic staff) acknowledged the existence of the penalty, but said that it couldn’t be fixed without creating other inequities.  To me, this seems like a pretty big penalty to be left in place, for fear that you would upset another group, or be unfair to others.  I mean, married couples are a pretty big group to upset!

The article has this quote from a Democratic Senate Finance Committee aide  - “The Finance Committee, along with other committees in the Senate, took pains to craft the most equitable overall structure possible, and that’s what we have here,”.  The MOST EQUITABLE bill.  So, they know it’s not fair for everyone, and one group that will pay will be married people!  This gives people an incentive to stay single.  Great!  Just what we need in this country!  A financial incentive to lose the institution of marriage.  As a country, we’re already doing things that would have been morally wrong just 20 years ago.  Gone on 2 dates with someone?  Ehh, that’s long enough to sleep together.  And we wonder why children in the 6th grade are experimenting with sex…could it be their role models?

I know that legal “mumbo jumbo” is the last thing any of us want to read or look into, but I think it’s important that we know what is and isn’t being approved with the new health care bill, especially since our politicians have a habit of sneaking in extra things when they pass a bill/law.  Be aware of your government!  Watch what they’re doing.  If you don’t, then when things don’t go your way, you have NO RIGHT to complain!

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