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Posts Tagged ‘Finances’

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!

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!

Don’t be afraid to say NO!!

Monday, January 11th, 2010

This Mucho Moolah Money tip is probably more for our younger readers, but hopefully all of the readers will find some value in it!  I wanted to talk about saying no, canceling services and returning items.  I don’t know why, but for some reason, we have a negative stigma in this country about it!  This is completely ridiculous!

When we buy something or request a service, it is perfectly within our right to return it or cancel it, for whatever reason we deem worthy, with the exception of damage that we caused.  Why then, do some people fear returning things or canceling services?  My guess would be that it has to do with the marketing of retail companies, the “strength” of the sales people, and the idea that people (friends, family, the cashier) will think poorly of us for returning it. 

Well, as far as the retail companies go, they spend millions (maybe even billions) on marketing every year, so why wouldn’t they be able to give us the idea that we shouldn’t cancel their service, or return their product.  You have to stay strong and recognize this tactic for what it is…marketing, period. 

As for the sales people?  It’s their job to be pushy, get you to buy something, and, if you come back to return the product or cancel the service, convince you that you shouldn’t.  They aren’t looking out for your needs (in general…there are exceptions, but very few) and they don’t really want to be your friend…they just want their boss to see that they are doing their jobs, and that is it.  So what do you do/say when you want to return something or cancel a service and the sales team won’t “let” you?  Before you go back to the store in question, decide on what you’re going to say.  Let’s say that you are going to say “the device doesn’t work as promised, and I’d like a refund…here is my receipt.”.  Now, if/when they try to talk you out of it, you simply, but firmly repeat your first statement.  Repeat it again, and again, if you have to.  If you still haven’t made them listen, ask for a manager, and state the same sentence for them.  Eventually, they will decide you aren’t worth their time, and will do as you ask. 

When it comes to our friends and family, we all want them to think we are financially stable and secure.  When we return an item or cancel a service, some of us fear that our friends will think we don’t have the money to pay for it, and we feel embarrassed.  Whether or not this is true, it doesn’t matter.  Your business is your business, and keeping your budget balanced is more important than what someone thinks of you and how much money you have.  Don’t worry about what they think.  It’s NONE of THEIR business!

No matter what you’re trying to return or cancel, never forget that it’s your money in question.  You paid for the item or service, because at the time, it was worth more than the money in your hand, but when you decide it is no longer worth that money, don’t feel that you don’t have the right to get it back (or stop paying for the service)!

The dangerous reverse mortgage.

Friday, October 23rd, 2009

There’s a lot of talk these days about reverse mortgages, and whether or not they are a good idea.  While I think they are dangerous, I think the real danger is in people not knowing what they are and getting involved with these mortgages anyway.  It’s my opinion that you should never sign your name to anything that you do not completely understand (that is how people got into trouble with the sub prime mortgages), and therefore, you shouldn’t take out a mortgage (or other financial product) you don’t understand.

So, what is a reverse mortgage?  Well, you can read the full description here, but a simple explanation is that it is a loan for senior citizens, used to release (give back to the owner) the equity of the property as one lump sum or multiple payments over time. The home owner’s obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves (usually going to a long term care facility). 

Today’s article (CNN Money Blog post) is titled Reverse mortgages: Sub prime mess déjà vu?, by Carla Fried.  It looks at how a lot of retirees are taking out reverse mortgages, since they have insufficient nest eggs to carry them through retirement, and how a lot of people, Comptrollor of the Currency John Dugan included, think these financial products have some of the same characteristics as sub prime mortgages.  Considering the mess to which the sub prime mortgages contributed, that should definitely make us be wary of these products.

Some resources to check into, if you want to learn even more about reverse mortgages and their pitfalls, are as follows:

  • AARP.org – A section on this website is dedicated educating seniors on reverse mortgage basics, their alternatives and ways that the financial product might be abused.  Check out the web page here.
  • U.S. Department of Housing and Urban Development – An informative website put on by the government.  It’s not as suspicious of the reverse mortgage product as the AARP website, but it still speaks of the dangers of scam artists peddling information that they give away on their website for free!

I know that there are some people who think these products have their place, but I have to disagree.  As I have said, I’m fine with 15 yeaar fixed rate mortgages, but products like these, just seem to part people with their money.  Make your own choice, but don’t say I didn’t warn you.

Terms to keep up with the recession talk at the water cooler!

Friday, October 2nd, 2009

Today’s article is Recession Lingo by Laurie Frankel.  I thought this would be an appropriate article to write about because many of us don’t keep up wit the latest news, and are, on occasion, confused by the terminology that develops.  This article, specifically, is about the terminology surrounding the recession.

I will give a brief definition here, but if you want the full description, check out the original article.

  • Bailout – This was the money designated for and given out to struggling businesses (usually very large businesses) whose closure would negatively impact the economy.  Had, for example, an automaker like Ford closed, thousands of people would have been out of a job.  However, the financial situation of the business was such that it wasn’t making enough money to support itself or it’s employees.  Think about that…businesses that don’t make money (aka a profit) can’t pay their employees and have to shut down.  That is the way things are supposed to happen (not that I wish a job loss on anyone, but unfortunately, jobs come and go…luckily, qualified people find new jobs, or start their own businesses and make their own way).  Some (myself included) would argue that by using taxpayer dollars to keep these types of businesses functioning, we are all (taxpayers) collectively paying the salaries of these people, and paying for the business to stay afloat. 
    • On a slightly different (but not too different) topic, the “cash for clunkers” program, which offered a $3500 to $4500 voucher that a consumer could give to a new car dealer and get that amount off of the purchase price of a new car.  These vouchers were paid for out of the bailout program, which means that the vouchers were covered with taxpayer dollars.  That means that if your neighbor got a new car with the “cash for clunkers” program, you are providing some of the money to cover their discount…i.e., you paid for part of their new car. 
  • Consumer Confidence – This is a gauge of how the average consumer feels about the economy (whether or not it is strong and relatively safe, or weak and unsafe) at that time, and what is coming in the future.  Unfortunately, if people aren’t informed, their response or confidence in the economy can be misguided.  Stay informed!
  • Deflation – A decline in prices across the country.  While this sounds fantastic, it can cause problems.  Prices falling means people are spending less and can lead to more unemployment.
  • Depression – A long recession.  It typically includes business and/or bank failures, high unemployment, falling job wages and, in general, economic collapse.  A depression lasts significantly longer than a recession, and while a recession can be considered a normal downturn (on occasion) in the economy, a depression is not normal.
  • Recession – A generally accepted definition is a decline in economic activity lasting at least two quarters (6 months).  As stated above, this can be a normal business cycle, and the recession we are currently in is considered the 11th recession since World War II.  
  • Stimulus -  This is part of the Government’s fiscal policy.  Fiscal policy is the use of government spending and revenue collection (i.e. tax collection) to influence the economy.  Stimulus, in particular, is a short term government intervention to encourage spending when they economy is weak.  An example of this is a tax rebate, like the May 2008 tax rebate, where payments of  $300 for singles and $600 for married filing jointly were issued.  Some interesting points…people who have “no net tax liability”, which basically means they don’t actually pay taxes, still received this TAX REBATE, and people who made more than $75,000 single ($150,000 married filing jointly) received an adjusted (lower) amount.  As the income increased, the rebate gets phased out.  So, people who didn’t pay taxes get a tax rebate, and people who pay A LOT more taxes get a  reduced tax rebate.  Interesting, huh?

Hope these terms help you feel a little more in the loop the next time you find yourself in a conversation about the economy!  To do more research, go here.

Do you need to “baby-proof” your finances?

Friday, September 25th, 2009

Today’s article is titled Baby-proofing the family finances by: Yuval Rosenberg.  For me (and I suspect for many of you), it’s a very relevant topic right now.  Since Jerrill and I are trying to start a family, we are in a whole new planning phase of our lives as well, and while I think this article is possibly a little specific to the situation of the couple in the article, the topic is one that needs to be discussed.

The article centers around Chad and Stephanie Grant, from San Diego, who are both 31, have been married 7 years and are starting a family.  They make a very good living, with a nice nest egg already started, but not a very big emergency fund.  The article points out that they have a few actions to take to be ready for baby.

If you are in the same situation, trying to start a family, I have a few tips:

  • You MUST have an emergency fund of AT LEAST $1000, but preferably 3-6 months worth of expenses.
  • It’s a good idea to find out what the total cost of doctor visits and delivery will be and save that amount (or as close to it as you can) to pay cash for your baby when it’s born.  It’ll be nice not to finance your child, right?
  • Now is the time to get diversified, as the article points out.  Make sure you don’t have all of your retirement “eggs” in 1 basket.  You should diversify between small, mid and large cap funds, and international funds.
  • Insurance!  We all know that health insurance is important, but life insurance is equally important when you are starting a family.  If you die, something has to replace your income!
  • A Last Will and Testament is important for you and your spouse, but when you have a baby, it’s IMPERATIVE.  If you don’t have a local lawyer, or don’t have the cash for a lawyer, then go to USLegalForms.com and do it yourself on the cheap!
  • And, of course, stock up on diapers (or ask for gift cards to buy diapers)!

That’s it!  Check out the article, and use these tips to get you on track, if you aren’t already!  Good luck, and I look forward to your questions and comments!

Friday’s Financial News…Video games that help your finances!

Friday, April 24th, 2009

While scouring the internet this morning, I found an article on a great new tool for parents to help their children learn personal financial responsibilities.

Today’s article is “This Video Game Could Rescue Your Finances”

Brief summary: Author George Mannes and his son tested a new online video game designed to teach children and teenagers personal financial responsiblities.

Okay, so the object of the game is to collect tokens in the air. In Debt Ski (the name of this game), you are playing the character of a pig on a personal watercraft. The tokens are money (for the most part), or things you spend money on: Necessities, like food etc., that you are required to obtain and desires/luxury items like TVs etc. that give you “happiness points” when you pick them up. The cool thing is that the luxury items cost you some of that money you pick up (thankfully the video game is mirroring real life, for once). You pay for them at the end of the round, with cash or credit. At first, I had a problem with the game having the credit card option, but luckily, the credit cards count as debt, and if your debts outweigh your money, your happiness points count against you.

The point of the game is to score as many points as possible, which you get by multiplying your net worth (money minus debt) by your happiness points. This is a good thing if you have more money than debt, but if, like above, you have more debt then money, all of those happiness points count against you (which also mirrors real life). Another fun point…if you don’t buy enough necessities, you automatically lose the game, because, like real life, you have to have basic necessities before you have luxury items. Side note: Health insurance counts as a necessity. If you have a big screen TV and no health insurance, you need to reevaluate your priorities.

Overall, I think this could be a very good tool for a parent to begin teaching their children how to be responsible with money. We all know that the country is in financial trouble (at least I hope we do), but to fix the problem we have to start at home. Not only do we, as adults, need to rethink what we have been doing at home with our money, but we need to make sure that we are teaching our children the NEW THINGS we are learning (i.e. savings are good, debt is bad), because if they learn the bad habits that got us into financial trouble, they will fall into the same financial trap!

Budget Series, Part 2…Can you get there from here?

Wednesday, April 22nd, 2009

At this point, you should have a list of financial goal and a list of financial responsibilities. That, beleive it or not was the easy part, because most people can figure out what they want their finances to look like and after tallying up bills and receipts, most people can figure out what they owe and to whom. The next part, however, is a little more difficult, because a persons emotions come into play.

Combine the list of financial goals and financial responsibilities and assign priorities to each of them. You have to decide if Christmas gifts are more important then paying down debt, and if that $6 coffee is more important then some monthly bill or credit card payment etc. Every item has to be arranged in a list of most important to least important (you can assign numbers next to each if you like). A few tips here: Your rent/mortgage payment, food, electricity and water should top the list as most important financial responsibilities, since you have to have a safe, warm place to live, with running water and food.

Now, add all of your expenses together. If your expenses total more than your income, then you have a problem. That means that every month, you (just like countless others) have been spending more money then you make, and are accruing debt. Now, don’t get discouraged if your expenses exceed your income. You simply need to focus on cleaning up the mess. If it looks overwhelming, remember, it doesn’t matter how bad the problem is, you just take it one step at a time. So, here is what you do: if your expenses total more than your income, remove expenses from the list, one by one, until the total expenses does NOT exceed your income. The first thing to go should be anything that resembles extravagance, and yes, that includes $6 coffee.

Another choice is to add income. If you want to keep all of your expenses on the list, then you might need to figure out a way to make extra money. A paper route? Pizza delivery? If you’re a teacher, you can pick up club activities at school, which pay extra. Be creative. If keeping all the “stuff” you’ve accumulated (and the debt that goes with it) is important to you, then you need to increase your income til it matches your list of expenses.

If your list of expenses did not exceed your income, congratulations! You are at a very good starting point! Now look at yout financial goals, and determine which of them are and are not being met. Are you covering all of your expenses but not saving anything and you want to? Then you have some work to do as well.

Next week, we will discuss “how to get there faster”!

Friday’s Financial News…Money etiquette.

Friday, April 17th, 2009

I found a great article relating to personal finance that helps with “sticky situation” questions.

Today’s article is “11 Money Etiquette Issues, Solved”

Brief summary: Author Teri Cettina outlines 11 money/etiquette problems that can occur in our lives, that, unfortunately, most of us do not know how to resolve.

Problem #1 – Someone asks nosy questions about something you own or your salary, and you don’t want to share.

Solution – You aren’t obligated to tell, so say “I have a policy not to share prices or salaries with anyone, it’s easier that way”.

Problem #2 – You’re out to dinner, and the bill shows up…you ate cheap and everyone else splurged…do you have to split the bill evenly?

Solution – Ask up front, before you even order, “we’re all paying for our own meals and drinks, right?” or ask the waiter for a separate bill. Do not feel obligated to pay for anyone else.

Problem #3 – You raise money for charities and are conerned about asking too often.

Solution – With immediate family it is always acceptable to ask for help. Extended family should only be asked a couple of times a year. Match up a family members interest to the charities (i.e., ask a cat lover for a donation to an animal shelter). With friends, limit your requests to 2-3 times a year. Also, take note of any family and friends that repeatedly turn you down. They might only have a certain amount set aside for charity and prefer to use it on their own charities. They also might be strapped for cash (who isn’t right now) and not have any to spare!

Problem #4 – You lent money to a friend and they missed a payment, and now you see them with something shiny and new!

Solution – You are going to have to have to say something, but be cautious, because the something new could have been a gift, or they could have just gotten a raise and are ready to pay you back. Either way, say “This is bothering me. You missed a payment with me, and now you have that nice new thing. Can we talk about this?” This will either fix the situation, or you learned the hard way that you shouldn’t lend money to friends, and at that point, you need to make it a gift, if you want to preserve the friendship.

Problem #5 – A friend is an accountant, attorney, event planner, computer programmer etc. and you want their advice/help…should you pay them?

Solution – Yes, you should. People assume that their friends and acquaintances go into their chosen profession because they love their work, not for the money, and therefore, it’s okay to ask for free help. It isn’t. If the friend doesn’t bring it up first, you should ask something like “how are we going to take care of the business side of this?” and negotiate from that point, that way, you won’t be surprised when a bill arrives, and your friend won’t feel taken advantage of if you don’t compensate them. If they offer to do it for free, show your appreciation with a gift card to a restaurant or a goody bag of baked goods etc.

Problem #6 – Everyone is “chipping in” for a group gift, and the item chosen is WAY more money then you wanted to spend…should you say something, or just pay what they say you owe?

Solution – If the gift has already been purchased, explain that you had a different gift in mind, and therefore, won’t be able to contribute to the group gift, and go buy something in your price range. If they haven’t decided on a gift, but the one they are thinking about is too expensive, suggest an alternative to the whole group, with a breakdown of each persons monetary responsiblity, and offer to pick it up as well!

Problem #7 – Your friends make more than you do, and they push aside your efforts to pay your own way. You feel like a charity case. What do you do?

Solution – Say “thank you”. Let them pay if they want to, and find ways within your means to thank them. Give them a scrapbook of the trip that you took together. Or make some baked goods at home and give them to the person. Suggest cheaper places to go or potlucks, so that you can contribute your share.

Problem #8 – You’ve made a financial commitment to friends or family, but now you see the cost is outside your budget. What do you do?

Solution – First things first…when you are in the process of making the plans, state upfront what you can and can’t afford, that way there are no misunderstandings. If reservations have been made before you have discussed it, say up front that it was more than you were planning to spend, and you can’t afford it. If you agreed initially, but for some reason, have to back out, you should offer to help with any cancellation fees. If they offer to lend the money, refer to Problem #4 above. It is never a good idea to lend/borrow money from a friend!

Problem #9 – A friend complains about being broke all the time, then you see them with tons of new stuff. What do you do?

Solution – The friend could just be the type to whine about money, or they could be in financial woes. Tell them “you tell me you are broke, but I see you with these new things, are you in financial trouble?”. If they are in financial trouble, help them find help, but don’t get into their business. If they aren’t in financial troubles, then just understand that some people complain about money, and deal with it.

Problem #10 – Someone asks where you got the new shirt you have on and you don’t want to reveal that it’s inexpensive and from a chain store, what do you do?

Solution – You are totally within your right to keep that information to yourself. Just say “oh, it’s so old I can’t remember” unless it’s obvious that it’s new, then say “I did so much shopping that day I can’t remember”.

Problem #11 – You are collecting money for a group gift. The gift has been bought, and now people owe you. What do you do?

Solution – Send out an email, tell everyone you are collecting the money and give a specific date by which you need the money. If there are still some “no pays”, it is absolutely OK to send out another email noting the names of those who have paid with thanks. If you only lack a couple of people, ask them if they sent it to you and you didn’t receive it. don’t be accusatory, as it can cause relational problems. If they’re short on money, accept whatever they can give and move on.

All in all, I was very pleased to see that this article had been written, because too often, situations arise that we just don’t know how to handle. But, as my mom taught me, it’s better to err on the side of caution!