Personal Budget Training: May 2008

Shakin' All Over

I bet a majority of the folks in China were not expecting an earthquake, especially this couple on their wedding day.

An emergency fund is for those unexpected events that are not regularly planned for happening in life such as, you lose your job, there is an unexpected pregnancy, the car's transmission goes out, or an earthquake at your wedding. Money magazine says that 78% of us will have a major negative event happen in any given 10-year period of time. So get your rainy-day fund together.

You eventually want to have 3-6 months worth of living expenses.

Labels: emergency fund

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Death Comes Unexpectedly

Yes, this great line from the movie Pollyanna, in which the preacher yelled at the congregation. Well it is true, it does. Are you ready.

Sadly, over 70% of the life insurance policies sold today are cash value policies. A cash value policy is insurance that packages insurance and savings together. Do not invest money in life insurance, since the returns are terrible. An insurance agent will show you some excellent projections, but none of these policies perform as projected.

When you have kids, you need to take out a term-life insurance policy that is 10 times your annual take-home pay. The point is to have enough money to replace the income of the deceased spouse.

This is even true for stay-at-home moms and dads. They provide economic benefits by doing the majority of the cooking, cleaning, shuttling the kids, so do not forget to take out some life insurance on stay-at-home parents.

Here is a great place to view term life insurance comparisons.

Labels: insurance

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Crushing Blow to Payday Loans

One state has taken the first step in squashing payday loans.

Ohio is waiting for the governor's signature on a bill that would slash payday lending interest rates from the current 391 percent to 28 percent. It also would limit borrowers to four loans per year, require that loan terms be at least 31 days, and ban internet payday lending.

Labels: Payday Loans

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What is a Sinking Fund?

Have you ever heard of a sinking fund? It is a common term in our personal budget training.

A sinking fund is a fictional place where you store your money for upcoming expenses that do not occur monthly but you know are coming up in the near future. There are two types. The first is for regular expenses that do not happen monthly, for example, homeowners insurance and property taxes. You know how much these are going to be, so you divide the total by however much longer you have before the bill is due, and you have your amount to set aside.

The second type is for things that do not occur regularly, but you know will happen. Things like car repair, clothing, gifts, or furniture replacement. These things should be a line item in your budget, but will not have a fixed amount. This is something that you will decide. Most of this kind of sinking fund can wait till after you have established an emergency fund to deal with those surprises.

Labels: Budget, emergency fund, sinking fund

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Debit Cards

We all know you do not need to use a credit card when you are on a budget, but should you use a debit card?

Debit cards tend to be like a credit card in that it does not hurt to swipe, where it hurts if you pay cash. I recommend using a debit card for online purchases and booking travel in place of a credit card. Unless you can work out a good system of staying on budget using the debit card, I would use cash for the majority of your day to day transactions. Here are some pros and cons of using a debit card:

PROS:
-Can be used instead of a credit card for most situations such as online shopping
-Double as ATM cards to get cash
-No debt accrues, no interest charges, no late fees
-Many banks offer same fraud protection as with credit cards

CONS:
-Easy to overspend if you use them for variable categories like groceries and clothes, where cash is better for these
-Money is withdrawn out of your checking account if there is a merchant or bank error, so it is not available to you until the error is corrected
-Your bank may not offer the same level of fraud protection as with a credit card, so check the policies
-Some merchants may put a hold on for an amount larger than your purchase, apparently this is a common occurrence when paying at the pump
-Some rental car locations will not take them at all; others require a large deposit or put a large hold on your funds
-Some hotels/motels will put a large hold on your funds if you check in using one.

Labels: cash, Credit Cards, debit cards

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Identity Theft

What happens when you post your SSN on your commercials?

Todd Davis has dared criminals for two years to try stealing his identity in advertisements for his fraud-prevention company, LifeLock. In addition, he even offer his Social Security number next to his smiling mug.

LifeLock customers in in several states are suing Davis, arguing his service did not work as promised and he knew it would not because the service did not protect even him. Records of other people applying for or receiving driver's licenses at least 20 times using Davis' Social Security number, though some of the applications may have been rejected because data in them did not match what the Social Security Administration had on file.

Companies like LifeLock can help guard against only certain types of financial fraud by setting up alerts with credit bureaus, which inform them when someone tries to open a new line of credit or boost their credit limit.

The services do not guard against many types of identity theft such as use of a stolen Social Security number on a job application or for medical services, or even the instance of an arrestee giving police a stolen Social Security number to shield his own identity.

Identity protection companies are acting like the mafia, asking you to pay them for protection. Here is all you need to know about identity theft.

Labels: credit report, identity theft

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Sites for Coupon Clippers

Here is an article with a list of sources for coupons. Enjoy your weekend.

Labels: money saving tip

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Boomers Borrowing For Everyday Expenses

Here is a recent article that appeared on Yahoo.

The economic downturn is hitting about one in 10 middle-aged and older Americans especially hard, forcing them to borrow money for living expenses and seeking assistance from family, friends or charities, according to a survey released Tuesday by the AARP.

This is just another good reason to get some personal budget training so you can changed your lifestyles to live within your means. The people in these articles appear to just complain and not do anything to change their situations. Get on a budget and you can still enjoy life.

Labels: Budget, Debt

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Liability vs. Full Coverage

Car insurance can be confusing. Should you have just liability or full coverage too?

Insurance is risk management. Buying individual stocks and even mutual funds have some amount of risk. It is the same with dropping collision and comprehensive insurance. You can save money, but you have to consider the risks at hand.

It is a no-brainer to drop full coverage when your deductible is larger than the worth of the car, ie you have a $1000 deductible and the car, if totaled would be worth only $900.

Next, look at payback. Divide the value of the car by the savings in insurance. Lower numbers mean you come out ahead faster if there were a claim that would total the car. You always come out ahead if you never make a claim since your rates increase.

It's all just risk management, and how much risk you are willing to assume?

You have to look at several things:

1. Are you in position to replace your vehicle if it is wrecked and is your fault?
2. What is the vehicle worth versus what it is costing you. Paying $140 a month is pretty steep and that is $1680 a year. If your vehicle is only worth $3000, it would take you less than 2 years without an accident to recoup the cost. If it is $10,000, it would take you 6 years.
3. How much of a decrease in cost would you get by upping your deductible to $1000. Do the cost analysis on that and see if it would be worth it.
4. It pays to shop around your insurance to another company. If anything, it will get your insurance to lower theirs if you have a quote from another company.

I look at this pretty simply. The insurance companies know the stats and they are charging in such a way that they are likely to make money on you. So the only insurance you should have is for things that you cannot come up with the money for.

If you had a $30,000 car, you could not afford to replace it, so you need full coverage. If you have a $2000 car, it would be a bummer to have replace it, but you could.

Labels: insurance, money saving tip

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Credit Card Offers You Can't Refuse

In an attempt to ebb the tide of their profit loss, Barclaycard lays off 900, writes off $3.4 million and encourages cardholders to take cash out.

Recently the UK credit card Barclaycard was labled as grossly irresponsible for urging customers to take out cash on their credit cards. What the customers are not told is that interest starts piling up at a rate of 27.9 per cent the minute cash is withdrawn from an ATM.

It makes obtaining money this way about three times more expensive than taking a personal loan. Customers who do not pay their bill in full as soon as it arrives will find interest stacking up alarmingly.

Getting some personal budget training will decrease your dependency on credit cards. I can't remember the last time I used my credit card.

Labels: Credit Cards, Debt

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The Debt Cycle

An interesting article on how the debt cycle travels with us through life.

Robert Manning, author of "Credit Card Nation," studied the financial spending habits of Americans across generations to discover what influences the spending in their specific age groups.

Debt life stages:

College: As the cost of higher education increases, more students are taking out loans, hoping to pay them off later in life.

Young singles: At a time when people do not have much money, they need it to get established not only in their jobs, but lifestyles too.

Young families: Having children can stretch finances to the breaking point when you are not planning ahead for expenses.

Mature families: A time of relative security, but maybe too much spending due to a false sense of security.

Empty nesters: Now it is time to help the grown-up kids, or going deeper in debt with travel or giant purchases.

Retirees: Time to relax? Maybe.

How do you keep the ugly debt cycle away? Simple, discipline yourself like Paul Navone and follow a budget. As the saying goes, proper prior planning prevents poor performance.

Labels: Debt, money saving tip

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Credit Card Default

Kayla owes $30k to credit card companies. Collectors keep calling. If she keeps paying on them can they take legal action?

Labels: Credit Cards, Dave Ramsey TV Show, Debt Collection

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Hard Work

Don't judge each day by the harvest you reap, but by the seeds you plant.
Robert Louis Stevenson

Kentucky public defender, Adam Greenway, knows hard work. He delivers pizza to pay off college loans. Greenway, who works for the Kentucky Department of Public Advocacy, graduated in 2005 from Syracuse University College of Law in New York with a $130,000 student loan. Currently with a salary lingering right around $30,000 per year, a mortgage, three children and a $130,000 student law school loan to pay, Greenway picked up the second job in October 2006.

"Being a lawyer doesn't give me any kind of excuse not to work hard," he said. "It doesn't make me above anybody else just because I'm a lawyer. I could have decided not to be a public defender, not to come to Kentucky and stayed in New York or New Jersey or Pennsylvania and done private practice and done fine. But this is what I really love doing. As long as I still love it, I hope to keep doing it."

Labels: college, Debt Reduction

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Husband Debt

Nana's husband has been out of work. He is $28K in debt. Should she pay off her husband's debt?

Labels: Dave Ramsey TV Show, Debt Reduction, marriage and money, relationships

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Looking Into Other Options

Marty has two small children and is doing the debt snowball but still has debt. He can't get himself to work a second job. What should he do?

Labels: Dave Ramsey TV Show, Debt Reduction, Second Jobs

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Higher Gas Prices

Here are a few tips to combat the higher gas prices.

1. Cut out or combine some activities.

2. Stop running to the grocery store for missing ingredients.

3. Drive slower and with more care. Allow distance for coasting so you are no having to start from a complete stop.

4. Take one vehicle to an event. Get everyone to take one vehicle and save.

5. Stopped driving kids to school if the bus stops near you.

6. Don't go out to lunch, pack it and you can save.

7. Leave for work earlier so you could back off on the congestion.

8. Limit your meetings/inservices that you have to attend unless they are mandatory.

9. Changed your family vacation to somewhere local this year.

10. Start your own carpool.

And a few more fuel economy tips here and yea I guess you could put a sail on your car.

Labels: gas, money saving tip

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Getting a Plan

Melissa is $200k in debt, two months behind on her house and she received a cash advance from a payday loan place. How does she get caught up?

Labels: Dave Ramsey TV Show, financial planning, Payday Loans

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And The Walls Came Tumbling Down

Newly built Mere End Cottage has to be completely destroyed and removed within four months.

According to the planning committee in Chesire,UK, a breach of planning rules means that a $4 million home, surrounded by two acres of land with a double garage and boat house on the grounds, must be removed.

Permission had already been granted for a cottage on the site to be replaced by a bigger home, but the developers allegedly failed to adhere to the plans.

The developers were going back to the planning committee on a deal to approve the project and the demolition order would be contested.

This is part of the UK's Green Belt Policy which is for controlling urban growth. The idea is for a ring of countryside where urbanisation will be resisted for the foreseeable future, maintaining an area where agriculture, forestry and outdoor leisure can be expected to prevail. The fundamental aim of green belt policy is to prevent urban sprawl by keeping land permanently open, and consequently the most important attribute of green belts is their openness.

Over here in the US it is called Smart Growth. Portland's Smart Growth restrictions have changed one the nation’s most affordable markets for single-family housing in 1989 to one of the least affordable since 1996.

Portland has more traffic delay than Tampa-St. Petersburg and St. Louis, and the worst traffic congestion of any metropolitan area its size, despite its extravagant spending on transit. Portland has managed to experience the greatest increase in traffic congestion of any major urban area in the nation.

Labels: home improvements, Home Ownership, housing market, money saving tip

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Emotional Debt

Sarah was secually assaulted in 2003. The hospital wasn't supposed to charge her since she was the victim. The bill collectors keep calling, what should she do?

Labels: Dave Ramsey TV Show, Debt Collection

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Waste Not, Want Not

More than three million tons of wasted food are being dumped every year by households in the UK, that is about one third of what they buy, according to a recent study.

The group WRAP helps individuals, businesses and local authorities in the UK to reduce waste and recycle more, making better use of resources.

This study which is believed to be the first of its kind in the world, consisted of a detailed survey of households and a physical analysis of their waste.

A representative sample of 2,715 households in England and Wales was interviewed, and several weeks later, 2,138 of them had their waste collected for analysis.

The research was designed so that WRAP could quantify the amounts and types of food waste being produced, but also made links between this and the attitudes displayed by, and disposal options available to the household.

We throw food out for two main reasons: food gets forgotten and is left unused and we serve too much and do not use the leftovers.

Check out this site dedicated to keeping good food out of the trash.

Just by stopping the waste of good food, you could avoid 18 million tons of carbon dioxide equivalents from being emitted each year, the same as taking 1 in 5 cars off of UK roads.

Do you eat your leftovers?

Labels: money saving tip

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Overdraft Separation

Julie's husband overdrafts their account. She wants to have separate checking accounts. Is this her best options?

Labels: Dave Ramsey TV Show, marriage and money, relationships, Separate Checking Accounts

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The Breadwinner

Kathy recently became the family breadwinner because her husband has dementia. She is scared about doing her own budget. What advice can Dave give her?

Labels: Budget, Dave Ramsey TV Show, Family Sickness

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MasterCard Is Feeling No Pain

"The trade of the petty usurer is hated with most reason: it makes a profit from currency itself, instead of making it from the process which currency was meant to serve. Their common characteristic is obviously their sordid avarice."

Aristotle

MasterCard's profit more than doubled in the first quarter of 2008 as more customers outside the United States used their credit and debit cards for purchases.

Card use outside the United States surged faster than in the U.S., with gross dollar volume soaring 30 percent to $352 billion. Regions such as Latin America, South Asia, the Middle East and Africa saw particularly significant growth.

I wonder if investing in credit card companies is a good recession-proof stragey?

Labels: Credit Cards, Debt, MasterCard

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Foreclosure Smorgishborg

Take a look at this map. It shows the scope of the foreclosure problem today. This is just Denver, CO and covers the years 2006 and 2007.

Lenders foreclosed on about 7,700 homes in Denver last year and officials expect 11,000 this year. Among the neighborhoods hardest hit was this corner of the Green Valley Ranch subdivision. Click on the regional map if you really want to see the scope of the problem.

Labels: foreclosure, housing market

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The Enabler

Cindy's 28 year old son always needs money. She wants to support him but it is causing problems with her husband. How can she stop enabling her son?

Labels: Dave Ramsey TV Show, enabler, marriage and money, relationships

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Budget Busters

Do you have certain expenses that wreak havoc on your budget?
Here are a few:

1) Gas - even with driving to work only, it takes its toll on the budget.
2) Eating out - Those dinners add up and so do the drinks and appetizers.
3) Utilities - If you are not on a level payment plan with your local utility company, it could keep your budget predictable.
4) Gifts - Do you buy gifts for everyone you know for the weakest celebrations?
5) Compulsive buying - EBay and Amazon buyers beware, just because an item is at a great price, doesn't mean you have to buy it.

What are your budget busters?

Labels: Amazon, Budget, Ebay

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Painful Subject

Barbara has no control over money. She has been married for 25 years and has never made a financial decision. She is afraid her daughter will end up the same way. What should she do?

Labels: Dave Ramsey TV Show, Kids and Money

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Sneaky Credit Card Offers

This has got to be one of the sleaziest attempts to get you to open a credit card offer I have ever heard.

Don't be surprised if you receive a windowed envelope that looks like a IRS document with the year in bold in the corner, enticing you to open it up.

Then inside is a plastic card with my your on it with a VISA looking set of numbers and a sticker on the card that says "Protect against unauthorized use, activate your platinum account today. 1800-839-6176" in yellow. The card does not have a magnetic strip on the back.

Complements of Five Point Capital out of San Diego. Well, add it to the junk mail tank.

Labels: Credit Cards

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Be Fruitful And Multiply

Guess who is expecting?

We have just learned that the Duggar family, as featured on the Discovery Channel, is expecting their 18th child around New Year's Day.

The fast-growing family lives in Tontitown in Arkansas in a 7,000-square-foot home. All the children whose names start with the letter J,are home-schooled. The Duggars feed their entire brood for less than $2,000 per month. Every Duggar child learns to play both violin and piano. And best of all, the Duggars are debt free.

Labels: Budget, Debt Free, Duggar

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Start Selling!

Deloris has two houses in foreclosure and a ton of debt. What should she do?

Labels: Dave Ramsey TV Show, foreclosure, real estate

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Getting The Best Seat For Your Money

With the increasing prices for air travel, visiting this site to find the best seat on your next flight, may make it seem worthwhile.

Not all seats are created equal. Bulkhead and exit-row seats have extra legroom on most planes, so it is no surprise they are the most coveted seats in economy class. Actually nabbing one of those choice spots can prove difficult, however, because in-the-know flyers are all gunning for the extra space.

SeatGuru maintains a list of tips for securing the best seat in coach before you fly.

Give it a try and let us know if it worked.

Labels: airlines, money saving tip, SeatGuru

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Devastating Hobbies

Bobbi's husband is a race car fanatic working for a friend to get parts for free. She is working extra to bring home some more money and its hurting their relationship. How does she get through to him?

Labels: Dave Ramsey TV Show, marriage and money, relationships

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Health, Wellness and Money

For many years there has been a belief that healthy practices such as eating whole foods, avoiding processed junk food and exercising more is not only an investment in health but also an investment in the bottom line, both personally and as a society. So, I was interested to come across this article.

Granted, healthy practices do not prevent or cure all disease but I think there is plenty of evidence to show that healthy practices are worthwhile. So, I am continually baffled by the number of sedentary folks who eat mostly unhealthy foods and very few fresh fruits and vegetables.

As you either choose to exercise and/or eat well or choose to not exercise and/or eat poorly, what motivates your choices? Do you consider your financial well-being as you consider your physical well-being? In other words, do you see a relationship between the two?

Gary Taubes recently wrote a very good book called, Good Calories, Bad Calories. If you don't have time to read it, watch his video of a presentation about the book. This is a little over an hour and is worth watching. He exposes the myths about dieting and diseases.

Labels: insurance, money saving tip

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Room to Breathe

Sharon's husband passed away, she is getting life insurance money and her financial advisor says she should sell the house and get a job. What should she do?

Labels: Dave Ramsey TV Show

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Widowed Dilemma

Randall and his wife are both widowed. He wants to pay off his house. His wife doesn't want to use her money to do so. What should they do?

Labels: Dave Ramsey TV Show, marriage and money, relationships

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A Helping Hand

Lucy is almost debt free. Her friend's baby was diagnosed with cancer. Should she put her debt snowball on hold to help her friend?

Labels: Dave Ramsey TV Show, Debt Reduction

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Times Must Be Tight At Capitol One

Capitol One pulls out the big guns to collect $450, literally!

Larry Borneisen got into a heated exchange with Capitol One collections about their frequent calling, sometimes three times an hour. He says that he never mentioned bombing them, only wanting to put his foot up someones rear.

Five days later federal agents with guns drawn, raided his home looking for bomb making materials, but finding none. Federal investigators have not said if there is a recording of the conversation that prompted the raid and arrest. Capitol One also has not responded to questions about the call and if it was recorded.

What do you want bet that the recorded calls are kept less than five days?

Labels: Capitol One, Credit Cards, Debt Collection

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Tough Love

David's girlfriend is $40K in debt. Should he pay off her debt?

Labels: Dave Ramsey TV Show, relationships

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Saturday, May 31, 2008

Shakin' All Over

Friday, May 30, 2008

Death Comes Unexpectedly

Thursday, May 29, 2008

Crushing Blow to Payday Loans

Wednesday, May 28, 2008

What is a Sinking Fund?

Tuesday, May 27, 2008

Debit Cards

Monday, May 26, 2008

Identity Theft

Saturday, May 24, 2008

Sites for Coupon Clippers

Friday, May 23, 2008

Boomers Borrowing For Everyday Expenses

Thursday, May 22, 2008

Liability vs. Full Coverage

Wednesday, May 21, 2008

Credit Card Offers You Can't Refuse

Tuesday, May 20, 2008

The Debt Cycle

Credit Card Default

Monday, May 19, 2008

Hard Work

Husband Debt

Sunday, May 18, 2008

Looking Into Other Options

Saturday, May 17, 2008

Higher Gas Prices

Getting a Plan

Friday, May 16, 2008

And The Walls Came Tumbling Down

Emotional Debt

Thursday, May 15, 2008

Waste Not, Want Not

Overdraft Separation

Wednesday, May 14, 2008

The Breadwinner

MasterCard Is Feeling No Pain

Tuesday, May 13, 2008

Foreclosure Smorgishborg

Monday, May 12, 2008

The Enabler

Budget Busters

Saturday, May 10, 2008

Painful Subject

Sneaky Credit Card Offers

Friday, May 9, 2008

Be Fruitful And Multiply

Start Selling!

Getting The Best Seat For Your Money

Thursday, May 8, 2008

Devastating Hobbies

Health, Wellness and Money

Room to Breathe

Wednesday, May 7, 2008

Widowed Dilemma

A Helping Hand

Times Must Be Tight At Capitol One

Tough Love

Tuesday, May 6, 2008