Remember to Pay Your Bills

“A man who pays his bills on time is soon forgotten”
- Oscar Wilde

My wife handles the billing paying and she uses google calendar to send her reminders when bills are due. She's also saving event and meetings on the calendar so that year-end we can add up mileage driven for volunteer organizations and deduct it on our taxes.

A similar plan for bill reminders can be found on Consumerist.com.

1. For each bill, I set up a new task named after the bill in question and the day of the month it's generally due (for example, my AT&T bill is usually due on the 5th of every month, though occasionally it'll be on the 8th).


2. I set it up to repeat monthly.

3. If it's a bill that has a fixed monthly minimum payment (student loans, car payments, etc.) I add that information in a note, along with the URL to log into the site if online billing is available.

4. Set as priority level 2. I use priority solely so that when I look at my list of tasks in Gmail (using the Firefox extension), which is where I see them most often, I can immediately tell what bills, if any, are due soon. I use priority level 2 because I like the color, but any other level would work just as well for this purpose.

5. Tag as "bill." I saved a search for "tag:bill" so that they're all grouped together.

Bottom Line

Let technology work for you. Set up reminders for important things you must not forget. I have entered the special dates for friends and relatives on Hallmark.com. It will email me reminders in advance so I don't miss a birthday or anniversary.

International Cell Phone Costs

“To be happy in this world, first you need a cell phone and then you need an airplane. Then you're truly wireless.” - millionaire Ted Turner

Warning - Cell phone companies are only too happy to take your money when you make mistake and are quite unwilling to write off the error.

For example, the first cell phone my wife & I owned was open face, meaning the number keys are always exposed. We did not lock down the phone and the 0 key must have been accidentally hit while the phone was in my wife's purse. We were charged for 60 minutes of operator assistance time. Not cheap. We objected - if an operator had picked up, clearly they would detect the mistake and terminate the call - total time of 1 minute. Why leave a "dead" line open for 60 minutes? 
No dice - we had to pay and now we only use clam shell style phones.

The first time I called by sister in Canada I used my cell phone and discovered afterwards that the rate is 60-80 cents a minute. That adds up fast!

The Consumerist tells a story of a college student who says she checked Facebook for 5 minutes a day for a week via her phone while on family vacation in Cancun. The bill is $11,667.73 for 600MB of data services to a foreign country.

Bottom Line

Unlike a credit card, the phone companies give no warning when huge charges are piling up. A commenter on the Consumerist story has the following suggestions:

This is why when I took my phone to Canada I shut it off 10 miles from the border. So many application on your phone can transmit data without your knowledge these days it's just easier to leave it off. Facebook may not have transferred 600mb worth of data, but there are other applications which can. Many of the applications I've downloaded on my Droid X talk to the Internet in the background, the app tells me it's going to do this, I just have to keep track of them.
My recommendation: Turns your smart phone off when going on a trip and buy a pay-as-you go phone when you reach your destination. Coasts about a hundred for phone and minutes, but you have a phone when you get where you're going.

P.S.
Speaking of cell phone costs. I visited the AT&T store after losing my cell phone. I'm not eligible for a free replacement (with new contract) until November. But I can get $75 off a phone with an early contract extension. However I was shocked to find that the cost of the "free" phones is $200 and up when purchased separately so I'd have to pay $125 to replace my phone. When I declined the AT&T rep suggested they could reactive an old AT&T phone if I still had one from prior contracts. I'll give that a try.

Living within Your Means

“Unemployment is capitalism's way of getting you to plant a garden.”- Orson Scott Card

Last year I was laid off and unemployed for the first time in my life. My job hunt for a new job lasted six months. During that time my family was naturally concerned but not panicked. We did OK and suffered no long-term harm.

Looking back I ask myself – what did we do right? (The wrongs are easier: not keeping job skills up-to-date, not job hunting at the first sign of trouble, trusting managers to care about my welfare)

So what did we do Right? Minimizing expenses and avoiding debt. My wife and I are both debt adverse. In order to graduate college without a loan I had to work at the university and every summer (night shift for extra pay). My wife worked two jobs and rented out the basement to a boarder to pay the bills before we met & married. After we married, some of the money from my job went towards extra payments on the mortgage so that it was paid off a few years later. We drive our cars until they fall apart and then buy a used car paid in cash or financed as little as possible. Our credit cards are paid in full every month. We do not tolerate debt.

The formula for debt avoidance is quite simple – spend less than you make. In order to make this work you need to have a budget. The evening I was laid off, we sat down at our computer and looked at our budget for anything and everything that was nonessential and could be cut out. No magazine subscriptions, no online-computer game fees, no eating meals out, no movie rentals, no new clothes, and so on. It helped a lot that we had no debt to pay off.

A debt-avoiding budget has two parts- Earnings and Expenditures.

For Earnings look at how much money you take home after taxes and payroll deductions. Don’t forget to subtract out town & school taxes, water bills, and other local government expenses. What remains is your spendable earnings.

For Fixed Expenses add up your monthly bills for electricity, oil or gas, telephone, cell phone, cable TV, Internet, tithing, mortgage or rental payments, car lease payments, credit card minimum payments, etc. If your bills exceed your spendable earnings you’re in real trouble and need serious financial help.

Discretionary cash. If you subtract your fixed expenses from your spendable earnings, what’s left is discretionary cash. This needs to cover food, gifts, clothes, school supplies, and everything else you will buy at a store or online or at a restaurant. This is where modest living and a budget really helps. If you know you have just $100 available to spend this week, will you buy new shoes or food?

When I was unemployed, we tried to lower our discretionary cash spending to as close to zero as we could. We used our Food Storage and bought very little at the grocery store. We fixed old clothes. We did not vacation or travel. By doing this we could almost (but not quite) get by with the amount of the weekly unemployment checks.

Often times discretionary spending, either with cash or credit cards gets out of control. Each year my wife and I fill out a spreadsheet with the money we spent. We look at checks and the credit card bills and assign expenses to categories to determine how much we spent on food, clothes, meals, etc. The hardest thing to categorize is cash spending, for this we try to keep receipts. When we did this for 2008 we found that I was spending way too much cash for breakfast and lunch in New York City. So we agreed on a new plan for my new job – I would eat out once a week and bring lunch to work the other days.

While I was unemployed, my wife used our budget in a clever way. She calculated the minimum we could expect to pay on bills and food with some money set aside for emergencies like car repair, vet bills, etc. We then doubled that amount to calculate the minimum salary I would have to earn to continue living in New York State. We doubled the amount because we assumed half the money would be spent on taxes, church tithing, and a tithing paid to our retirement account. We were quite surprised at how much I had to earn to pay for a modest lifestyle in this area.

Bottom Line

Spend less than you make. Tally up your expenses to discover your spending habits. Create a budget and adjust your expenses to fit within your spendable earnings.

Bank Fees

“A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.”-Robert Frost

Banks are in the business to make money. It used to be that they borrowed your money (via deposits) and made profits loaning that money out to others. But banks got greedy and wanted even higher rates of return through risky loans and risky investments. We saw how this imploded last year. Now banks are looking for alternative ways to make up their losses and one method is higher banking fees. In 2008 banking fees generated 53% of banking-industry income; up from 35% of income in 1995. Last year the average bounced check fee was $1, this year it is $29. Credit card fees have risen 80% from 2003 to 2008.

Here are 10 fees to watch out for:

1. Checking Accounts
   Banks are bringing back minimum balance fees and maximum number of transactions fees. Less obvious is the “fee” of lower interest rate in checking accounts vs saving accounts.
2. ATM
   If you use an ATM from a different bank, BOTH banks (yours and the ATM bank) can charge a fee of $2-4.
3. Overdraft
   If you overdraw your ATM or write more in checks than you have cash, banks will hit you hard for each overdraw and charge interest on the debt.
4. Bounced Deposit
   If you deposit a check from someone else and it bounces, you will be charged a fee. And it often happens that you assumed the money was good and wrote your own checks against the deposit that are now bouncing resulting in overdraft fees too.
5. Tellers
   Banks may charge to speak to a teller or charge if you make “excessive” use of teller (i.e. more than two visits a month).
6. Phone Inquiries
   If you speak to a bank rep by phone, you may be charged for the exchange.
7. Closing Accounts
   Some banks will charge you to close an account that is less than 90 days to 6 months old.
8. Currency Conversion
   You can use your credit card or ATM in foreign countries but your bank will charge you a fee of 1-3% for currency conversion.
9. Credit Cards
   Grace periods are getting shorter; late fees and rates are higher.
10. Annual Membership
    Some credit cards are bringing back a yearly fee for using the card.

Bottom Line

Examine your bank statement and credit card bills closely each month. Look for any new fees and call to complain. If the bank does not waive the fee, consider moving to a different bank or changing your banking habits.

Update

Here's a story about an attempt to trick customers into paying higher fees:

"Yesterday, my fiancee received an envelope from Chase (her bank). Inside was a brand new debit card with a stick on it that says it is replacing her old card and to activate it immediately. The two cards looked almost identical. The only difference between her old card and the new one is that the new one had the phrase "leisure rewards" in small letters on it. My fiancee immediately called Chase to find out why she was sent a new card when her old one hadn't expired yet. The Chase rep, who my fiancee says was kind of rude (and attempted to upsell her on a credit card while helping her out) told my fiancee that she did not have to activate the new card, it was optional. By activating the new card, my fiancee would be enrolled in a new debit points program where she would gain four points for ever dollar she spends (except that the program will not award points for any transaction that uses the PIN, effectively ruling out most uses of a debit card). On top of that, there is a 25 dollar a year fee for using the new card."

Clever Ideas for Saving Money

“A penny saved is a penny earned”
- Ben Franklin in Poor Richard’s Almanac

According to the The 2009 MetLife Study of the American Dream, “A disturbing 50% of Americans say they are only one month — or only two paychecks — or less away from not being able to meet their financial obligations if they were to lose their job, and more than half of these, a startling 28% of the total respondents, couldn’t survive financially for more than two weeks.” [MetLife] And yet, with the current recession, “Three quarters of Americans have already been touched by unemployment in some way as a result of the financial crisis, with nearly two in ten reporting that they have recently lost a job and an additional 55% having a friend, relative or neighbor who lost their job.”

When I was laid off last year, it took me six months to find a new job close in pay to my old job. We still had to pay bills, especially the COBRA insurance payments, buy food, etc, using only a modest severance payoff, a pittance from unemployment insurance and our cash savings.

Everyone needs an emergency savings account. Otherwise you can be forced into some very bad choices. For example, if you stop paying for health insurance, you create a “gap”. When you do get employed and resume insurance, the new insurer may refuse to cover any “prior conditions”, that is ANYTHING you’ve seen a doctor for in the past.

Liz Weston at MoneyCentral wrote that, “A reader asked me for help after racking up more than 2,000 in bounced-check fees. Another owed thousands to a payday lender. A third despaired of ever paying down his credit card debt. Every time he started to make some progress, his car would break down or he'd encounter another unexpected expense that wound up charged to the cards.”

Fortunately MSN has an excellent article called An emergency fund out of thin air. The author, Donna Freedman, asked readers for ways to save money and they responded.

• Save part of every paycheck, no matter how small. Just $10/month will add up over time.
• Ideally you should save 10% of your earnings instead of $10. This may not be possible – so set a value that works for you, set it aside, and don’t touch it.
• If possible have your bank automatically direct-deposit your fixed monthly savings from your paycheck to a separate account.
• Save spare change, found coins, and dollar bills and deposit these in your emergency fund
• Sell items on eBay or Craigslist
• Rent out your parking spot or condo for weekends
• Use coupons
• Get a second job (even if it's just temporary or seasonal)
• Shop for better insurance rates online
• Collect cans or metal for recycling cash
• Trim your budget, spend less
• Sacrifice a little, drop cable TV and get films from the library for free or watch them online
• Make your own food. Eat out less and buy fewer prepared meals.

Bottom Line

The secret is to be consistent and most importantly to spend less than you earn. At my last job, 11% was deducted from my paycheck to go into a 401-K. Unfortunately I don’t have that option at my new job so I have to come up with my own plan for setting money aside on a regular basis.

a la carte Fees

“I hate banks. They do nothing positive for anybody except take care of
themselves. They're first in with their fees and first out when there's
trouble.” - (abt 1960) Earl Warren, Supreme Court Justice

The AP reports that “Consumers spend billions each year on fees and add-on charges, many of which are unnecessary, and often because they're just not paying attention.” Avoidable costs include late fees on credit cards and bills, overdraft charges, cell phone fees, etc.

The article Aim that rage against the corporate fee machine lists 20 fees that you can eliminate with some advance planning. Here are a few examples:
1. Manual Billing Fees: some companies now charge for sending you a paper bill. Sign up for e-billing and save money. Just be sure to check your email frequently to avoid a late charge.
2. Spread Payments: my town allows me the option of paying my taxes in two payments instead of one – but at the cost of a $2 fee. If you have the money, pay bills in full and avoid the fee which greatly exceeds the interest that money would earn sitting in the bank.
3. If you have a cell phone and a landline phone, make the cell phone your main number and use the landline only for emergencies. Reduce the cost of the landline by canceling options for voice mail, caller ID, etc.

Bottom Line
Corporations love these add on fees; they are a big profit maker. For example my $60 cell phone plan has $10 in extra “fees” that I have no control over. The AP article notes that:

Consumer advocates see such charges, which they call "a la carte" fees, as misleading. "The trend is to deceive consumers into thinking the price is still the same, by adding fees and extracting services that used to be included," said Edmund Mierzwinski, a senior fellow at the advocacy group U.S. PIRG ...
"A la carte pricing is really not good for consumers, because it essentially prohibits them from doing legitimate comparison shopping," said Jack Gillis of the Consumer Federation of America.

Lessons from being Poor

“Poverty consist in feeling poor.” - Ralph Waldo Emerson

Reuters reports that one in 10 Americans (32.2 Million) are now receiving food stamps. An all time high. For many people this will be a new experience – coping with being poor. Sadly it’s much easier to become poor than it is to become rich.

Spending is easy! I knew one family with an adult daughter who had no intention of ever paying off her credit cards. It was free money to her. Another person once told me that "poor people" need budgets. My retort was that without a budget even the rich will become poor. It is not uncommon for lottery winners, celebrities (Michael Jackson), and sports stars to spend their way into bankruptcy.

What happens when the money runs out? I’ve written before about how the poor times of the Great Depression affected my grandparents. My Mother’s parents became pack rats. Nothing was ever wasted or thrown away. My Father’s parents became minimalists; living a simple, uncluttered life with long-lasting, quality belongings.

Successful SciFi author, John Scalzi, recently wrote about how Having Been Poor impacts his buying habits today even when he has money.

1. “I tend to save a lot more of my income than most people I know, so that if the bottom drops out of my life, I have a cushion.” Scalzi saves 20% vs the average of 4%.
2. “I’m notably debt-adverse. Having seen first-hand how debt screws with people.” He uses primarily an American Express card that requires full payment each month.
3. “We don’t get fancy with the debt we do have, namely our mortgages.” He has a simple 30-year fixed-rate mortgage.
4. “I buy for value over flash.” Scalzi expects his car to last 12 years. After purchasing a new computer, the old one goes to his daughter. He’s annoyed that a cell phone or blackberry will only last 2 years.
5. “You’re also not going to be seeing me spend conspicuously.” Before buying something he asks himself, “why are you spending money on that?” If there is no better answer than “it looks pretty,” he tends not to buy it.

Bottom Line
Scalzi sums up what he learned from being poor as “Don’t buy what you can’t afford, don’t buy what you don’t have use for and have enough on hand for when life whacks you upside the head.”

PBS Celebrity & Financial Advisor Suze Orman is also urging people to SAVE money. "If you have an unpaid credit card balance [and] not much saved up in emergency savings, I need you to listen up. My advice has changed. I want you to only pay the minimum due on your credit card balance, and instead, make it your top priority to build as much of an emergency cash fund as you can," Orman said on the Oprah show.

Yes debt is bad. It should be avoided when possible or paid off ASAP. But in today's economy you might lose your job tomorrow and you will need an emergency nest egg to cover 8 months of bills. Don't count on your credit cards to carry you through unemployment. You might max them out and then what have you got?

How do you Pay Your Bills?

“Bank failures are caused by depositors who don't deposit enough money to cover losses due to mismanagement” – Vice President Dan Quayle

Although I’m a computer programmer (or perhaps because I’m a computer programmer) I don’t trust modern technology 100%. In some ways my wife and I are Luddites, resisting (though not necessarily opposed to) new technology. We embraced cell phones only after many years and still lament the high cost. Another technology that we’ve put off adopting is automatic bill paying.

In the story, Energy Company Debits $1.28 Million From Your Bank Account, a Colorado restaurant owner had arranged for auto-pay from her bank account with the Xcel Energy Company. This worked well for many months. But recently her rent check for the restaurant bounced. She called the bank and discovered she was overdrawn by over 1 Million dollars. A billing error at the Xcel Company had charged her $1.28 Million and Auto-Pay never objected.

Fortunately this story ends happily. Xcel corrected the bill and promised to pay any overdraft charges. But if you’re caught in a similar situation with one company accidentally draining your account, you may have a dozen other checks bounce before the problem is discovered. Each bounced check could leave a black-mark on your credit history, late fees, raised interest rates, and hours of phone calls to straighten out.

Bottom Line

If you use Auto-Pay, always read your bills and double check the amount deducted. This also applies to credit cards. I’ve been doubled charged by gas stations and overcharged and falsely charged. It’s rare but you need to watch for it.

All forms of payments have drawbacks. Last year a check payment for our Discover Card got lost in the mail. Fortunately my wife keeps an eye on our balance online and noticed that our account had not been credited with payment. She arranged to pay by phone before late fees were applied.

If you elect to pay your bills with cash don’t go to this extreme: Upset With $350 Electrical Bill, Man Pays In Pennies. 170 pounds of pennies in two large duffel bags!

Help with Winter Heating

"If you saw a heat wave, would you wave back?" - Steven Wright

In New York there are signs that winter is approaching - frost on the ground in the morning and even a snow forecast! So with much regret we turned on the house heat and started burning oil. I say with regret because heating oil is VERY expensive this year - a delivery we got last week cost nearly $4/gallon.
Unlike most of America which uses gas or coal for heating, there are many in the North Eastern states that use oil. And not everyone will be able to afford the bill. If this is your situation then check out Consumerist.com on the topic of heat. A recent story, Ways To Get Help With Paying For Heat, recommends the following...

1. Low-Income Housing and Energy Assistance Program (LIHEAP) Direct funding for heating bills from October to March

2. The Weatherization Assistance Program (WAP) Funds "low-income" homeowners to make their homes more energy efficient

3. Check with your local electrical company for winter assistant plans.
For example: Con Edison provides assistance with bills through the winter months with Level Billing, energy grants for needy families, and payment plan options; 1 (800) 75-CONED.

4. Look for a Salvation Army, an American Red Cross, or a local advocacy center in your town or city.

BOTTOM LINE
Data collected in 2001 indicates that nearly 600 deaths a year are caused by extreme winter weather. Over half of these will be elderly, children or disabled adults in homes unable to afford adequate heating. In late 2008 gas/electricity shut-offs have been running 17 percent higher than last year among customers of New York state's major utilities, and 22 percent higher in economically hard-hit Michigan. Also up are Pennsylvania, Florida and California.

Under the laws of New York and many Eastern and Midwestern states, power CAN NOT be shut off for nonpayment during winter months.

Ideas for spending less

"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well." - Warren Buffett

As the stock market plummets, banks fail, and prices rise due to high fuel costs, you might be looking for ways to save money. The consumerist.com has a great article 5 Expenses To Cut Right Now If You're In Debt. In fact the story is better than the title - the story has five links to five other stories each with a list of ways to reduce expenses. Suggestions include:

1. Get your life organized and stop paying late fees on bills, overdraft fees on your checking account, fines on overdue books or parking tickets, ...
2. Cut out the extras - the deluxe cable TV package with premium movie channels, meals at restaurants, gym membership, an expensive car, ...
3. Use Coupons at the grocery store, don't pay extra for pre-chopped food, try generic products, compare prices at different stores, ...
4. Watch out for the cost of the information age: Cell phones, Internet service, etc.
5. Create a budget and follow it.

Bottom Line

I heard a story recently about a friend of a friend, let's call her Betty. Betty would go through mood swings and spend wildly when up but then become depressed when the money was gone and she was unable to pay for rent and other essentials. My friend has tried to convince Betty (unsuccessfully) to pay her bills and groceries FIRST thing when she gets a paycheck. Then she can party with what is left over. NOT the other way around. It amazes me and my friend that not everyone understands this.