What if your bank failed to deposit your paycheck?

One piece of emergency prep advice that is often overlooked is to have some emergency cash at home. The typical reason given is that major storms will knock out power so ATMs won't work for several days when you might need cash to buy supplies or pay repairmen.

And now a recent event in England gives another reason...

Many people live from paycheck to paycheck with no reserves or savings. In June NatWest Bank had a computer glitch that failed to update customers’ balances overnight on a pay-day. Customers using ATMs or online found that their paycheck was not there! What did the bank do?  It apologized and promised to fix the problem “as soon as possible” (Wow what service!) It also said "no customers would be left permanently out of pocket" (huh, does this mean instant loans?) and kept 1000 branch offices open until 7pm just in case you had a day job.

Customers were not amused.

Saving Money on Gas

Finance.yahoo.com suggests many ways to counter the $4 per gallon price of gas...

1. Read your owner's manual
   It will tell you the best type of oil for your car, what level of gas to use, the best tire pressure, etc.
   Oil change companies suggest new oil every 3000 miles but your manual may tell you that every 7500 is sufficient.
2. Check your tire pressure every month
   You'll burn more fuel with under inflated tires
3. Lighten your car
   Take out anything you don't really need from your trunk &  back seat.  100 pounds can decrease fuel economy by 2%.
4. Aggressive driving burns fuels
   Avoid quick starts and stops. Fuel economy is worse at higher speeds.  "Every five miles over 60 mph is like paying another 20 cents per gallon for gas."
5. Use the Internet to find the lowest priced gas in your neighborhood
   But also keep in mind that at $4/gal it costs about 20 cents to drive 5 miles (at 25 mpg). To break even with a fill-up of 10 gallons of gas, that station 5 miles away needs to be 2 cents per gallon cheaper then the station a block away. If you drive 5 to save a penny per gallon, you've lost 10 cents.
6. Take advantage of loyalty and rewards programs at gas stations and credit cards

The check is in the mail

CBS news Los Angeles has an interesting story about identity theft. A church reported its bank account information was stolen and used to counterfeit checks of $1,100. Detectives traced the ID theft to an LA couple "where they found hundreds of bank account numbers, fictitious and stolen IDs, check manufacturing equipment, identity profiles and counterfeit checks, according to officials." In total this couple had stolen more than $16,000 from 20 victims.

How were the bank accounts stolen? The couple admitted to dumpster diving at a Self Storage company "and stealing hundreds of partially-shredded checks, which they reassembled to access the routing and bank account numbers. Detectives say they used the information to manufacture more than 30 counterfeit checks" which they used throughout the region.

When you dispose of a check be sure that the routing numbers at the bottom are unreadable. You might cover it with a permanent black marker or tear the numbers into tiny parts and dispose of the bits in different places.

When the US Embassy in Iran was taken over back in the 70's the US diplomats dutifully dumped all sensitive documents into a cross-cut shredder. The Iranian government collected the shredded bits and gave them to their best carpet weavers who pieced the documents back together again.

So even a good shredder won't help you if you dump the bits in one place and a determined thief wants to put them together again. Try cutting checks in two or more parts along the routing number and shredding each part separately into a different bag.

A $5,500 Cat?

My wife & I love pets, both dogs and cats, and yet they can be very expensive at times. We once had a German Shepard who ate about 1/2 a cup of raw flour which became dough in his gut and blocked all passage of food/water. An emergency vet massaged the gut to release the dough ball. Another dog, very old, was taken to an animal hospital when ill. Because we did not say, "do not resuscitate", they charged us $1000 to revive her when she died (and then she died again while still at the hospital).

At the Consumerist there's a story of How My Stupid Cat Has Cost Me $5,500 Over Three Years.

Hooligan (the cat) medical-related expenses: August 2009 - Current

• First-year vet checkup and vaccination rounds: $200
• Ear mites: $50 for meds
• Intestinal worms: $50 for meds
• Vet visit to figure out why his hair was falling out in nasty clumps: $200
• Ringworm: $50 for meds
• Anti-fungal medication for my boyfriend, who got ringworm from the cat: $10
• Neutered: $250
• Emergency vet visit because my roommate thought he had eaten a couple of her Adderall pills (yes, true story, and no, he had not): $200
• Urinary blockage 1: $500 for catheterizing
• Urinary blockage 2: $500 for catheterizing
• Urinary blockage 3: $1500 for overnight stay and catheterizing
• Fancy dancy C/D or S/O prescription-only cat food to prevent future urinary blockages: $40/month x 16 months (and counting!) = $640 (and counting!)
• Vet visit because he was pooping blood: $200 for x-rays and TWO enemas
• Vet visit because he was pooping blood again:$150 to diagnose the problem as "stress"
• Pills for "stress": $50

Will that be Debit or Credit?

The Consumerist describes 5 Situations Where You Shouldn't Use A Debit Card,

1. When shopping online or making a large purchase:
   If you use a credit card you may be able to dispute a damaged or missing item from your order through your credit card company. Some credit cards also offer extended warranties.
2. While traveling:
   Some credit cards offer services when traveling like insurance coverage and concierge services.
3. When worried about begin ripped-off:
   With a debit card you must report fraud within two business days of discovering the problem or you can lose up to $500. With credit cards, you're loss is limited to $50 for unauthorized purchases.
4. When you want to raise your credit score.
   Debit cards won't help your credit history.
5. When you want to earn money on purchases.
   Most debit cards are cutting back on rewards to save money.

Spend Less Than You Earn

The fundamental principle of financial security can be said quite simply, "Spend Less Than You Earn". Or as Saturday Night Live put it many years ago, "Don't Buy Stuff You Cannot Afford". FreeMoneyFinance.com says, Becoming Wealthy May Be Simple, But It’s Not Easy

While simple in theory, there's a few gotchas to keep in mind.

1. You must spend less than your take-home pay which will be much less than your salary. Taxes and Social Security take a big bite out of the pay check.
2. You need to factor in emergencies. It's not enough to say I keep my expenses within budget but this month I had to visit the vet, the doctor, the mechanic, etc and that put me over budget. Emergencies are part of life and need to be part of the budget too.
3. You need to prepare for retirement. If you spend every penny you earn today, what will you live on when you stop working?

One way to address the issues above is the 50/30/20 budget described by Liz Weston at MSN Money.

1. Start with your after tax income.  "If your employer deducts other expenses from your paycheck, such as 401k contributions, health insurance premiums and union dues, add those back into your net pay to get your after-tax income."
2. Work hard to limit your "must-have" expenses to 50% of what you earn after taxes. The "must-haves" included insurance, rent/mortgage, utilities, essential food, and minimum loan payments. If you choose not to buy something (like clothing) then it is not a "must-have".
3. Limit your "wants" to 30% of after-tax pay. This includes gifts, clothes, dining out, extra features for your TV or phone, etc. Is the Internet a want or a must-have? Think about it.
4. Save 20% of your after-tax income for savings or early debt repayment. "Any loan payments you make above the minimum belong in this category, as do contributions to your retirement and emergency funds."

For many families this may sound impossible. But when you exceed the limits above you put yourself into an impossible situation of a debt that you cannot pay back.

 “Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation. … Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.” - J. Reuben Clark Jr., 1938

Strategic Shopping: The best months to buy foods

"We used to build civilizations. Now we build shopping malls."
~Bill Bryson

The SurvivalistBlog.net has an excellent article entitled Strategic Shopping: A Month-by-Month Analysis by M.D. Creekmore.  Here's a summary of the best months for certain food specials and deals:

January

• After Christmas Sales (wrapping paper, tape, bows, winter clothes)
• National Oatmeal Month
• National Beef Month
• National Meat Month
• National Tea Month
• National Soup Month
• Super Bowl (excellent prices on chips, salsa, soda and snacks)

February

• National Canned Food Month
• National Hot Breakfast Month (pancake mix & maple syrup)
• National Snack Food Month
• National Cherry Month
• National Potato Lover’s Month
• Sweet Potato Month
• Celebration of Chocolate Month
• Valentines Day Sales (candy)
• Chinese New Year (soy sauce, teriyaki sauce, noodles, bamboo shoots and water chestnuts)

March

• St. Patrick’s Day (corned beef & cabbage)
• National Red Cross Month (CPR class & first aid items)
• National Noodle Month
• National Frozen Food Month
• National Peanut Month
• National Peanut Butter Lover’s Month
• National Celery Month
• National Flour Month
• Spring Cleaning (cleaning products)

April

• After Easter Sales (candy & ham)
• Daylight Savings Time (batteries, smoke detectors, and carbon monoxide monitors)

May

• Memorial Day Sales (condiments, picnic items, chips, soda)
• National Barbecue Month
• National Hamburger Month
• National Salsa Month
• National Strawberry Month
• National Salad Month

June

• National Dairy Month (butter)
• National Iced Tea Month
• National Seafood Month
• Adopt-a-Cat Month (buy one cat, get one free? :-)  (cat food)

July

• Fourth of July (picnic/party items)
• National Hot Dog Month
• National Baked Bean Month
• National July Belongs to Blueberries Month

August

• Back to School Sales
• National Peach Month
• National Coffee Month

"Summer items begin to go on clearance. Keep an eye out for charcoal, lighter fluid, paper plates and plastic utensils, sunscreen and insect repellent."

September

• Labor Day (last of the picnic/BBQ sales)
• National Chicken Month
• National Honey Month
• National Better Breakfast Month
• National Mushroom Month
• National Rice Month
• National Preparedness Month
• Summer Clearance Sales (clothes)

October

• Halloween
• National Apple Month
• National Tomato Month
• National Pasta Month
• National Dessert Month
• National Seafood Month
• National Pork Month
• National Eat Country Ham Month
• National Chili Month
• Adopt-a-Dog Month (dog food)

November

• Thanksgiving Sales ( Baking goods such as butter, sugar, flour, chocolate chips, etc.)

"The week of Thanksgiving is the best sales week of the year."
Expect cooling weather sales on canned soups, coffee, tea, and hot chocolate.

December

• Christmas Sales (hams)

Bottom Line

A food storage is not just a wise precaution for preparedness, it can also save you money if you buy and stockpile items when prices are low and use them later in the year.

When will House Prices Return to Normal?

“Home is where you can say anything you please, because nobody pays any attention to you anyway”
- Joe Moore

In 2008 a sharp drop in home prices ($9 trillion lost) resulted in a near total collapse of the financial markets. If you're lucky any stocks you owned may have recovered back to 2008 levels. If you're a home owner you may be wondering, when will my house price recover and start going up again?

If the Case-Shiller Index by Yale economist Robert Shiller is correct, the answer is not good. House prices ballooned by 87% starting in 1997 and the pricing decline won't cease until homes return to 1997 values (adjusted for inflation).

Steve Barry at Ritholtz.com/blog created a chart illustrating Shiller's housing price index from 1890 and updated it to Jan 2011 (adjusted for inflation). The index is for home resales, not new sales.

As you can see from the chart, the current "boom" still has some deflating to do.

Bottom Line

I've been thinking that this was a good time to buy and a bad time to sell a house. But if the prediction of the chart above is accurate, then house prices will fall even further and stay flat until the next boom. So do you sell now or wait? Tough call. The chart above is missing a few things that push prices upwards:

"One should also adjust home prices for size — homes square footage shot up tremendously from 1995 to 2007, for Inflation (we had a huge inflationary surge from 2001-07, as the dollar collapsed 41%) and for Quality (high end materials and appliances migrated from the most expensive homes through to the top 30%."

P.S.

If you use this chart, please credit Steve Barry and his website Ritholtz.com/blog

See also http://www.pewsocialtrends.org/2011/04/12/home-sweet-home-still/ for a PEW report on prices and public perception.

Things that are Worth the Money

“Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.”
-Benjamin Franklin

Typical financial advice tells you how NOT to spend money. But I like the list at wisebread.com of 11 Things That Are Worth the Money.

1. Insurance - spend a little to avoid having to pay a lot
2. Culture - I'm all for culture, my wife & I love museums and visited one just a few days ago. But it's also easy to overspend here. We don't do Broadway Plays - I'd love to but the cost is ridiculous. We also save money by renting CDs instead of going to movie theaters.
3. Doctor Visits - your health is worth spending a co-pay for
4. Education - maybe. There is much talk of a "higher-education bubble" where the cost of college now exceeds the benefits. Education is great - but look for cheaper ways to get a college degree.
5. A Haircut - it is important to look nice, people do judge by looks. Just don't overspend at post hair salons.
6. Health - buy healthy food and do what is necessary to get some exercise
7. Home Maintenance & Repair  - a home is the most expensive thing you own - treat it well.
8. A Sharp Interview Outfit - see #5
9. Well-Made Shoes - Not sure if the list is thinking of dress shoes for looking good, like #5 and #8, or well-made shoes that won't hurt your feet.
10. Travel - Don't go into debt but travel is a great form of education. And fun too.
11. Visiting Family & Friends - "maintaining those relationships is something you can't afford to not do"

Bottom Line

What items do you think are worth the money?

End of Year Money Checklist

"Money often costs too much."
-Ralph Waldo Emerson

The year is almost over and year-end is a great time to give yourself a financial checkup. The website TheDigeratiLife recommends 16 Money Moves For Your Year End Financial Checklist.

1. Check your Credit Report - you can request a FREE report once a year from Equifax, Experian, and TransUnion. The website http://www.annualcreditreport.com/ makes this easy to do. Watch out for sites that claim to offer a free credit check but also sign you up for a fee-based service.

2. Review your expenses for the year - are you over budget? Do you have a budget? Do you know how much you spent?

3. Evaluate your financial plan - do you have a plan for paying off the mortgage and other debts, for building up an emergency savings account? Did you meet the goals of your plan?

4. Get all medical/dental check-ups done before year-end. With most insurance plans, the insurance deductibles reset at the start of the new year, so you'll pay in full for any doctors visits in 2012 until you reach the deductible again.

5. Spend your FSA - if you have a Flexible Spending Plan for medical expenses then you must spend it or lose it. Some plans have a grace period of up to 2 1/2 months. Know your FSA deadline for spending.

6. Review your insurance claims for the year - is everything OK?

7. Add something to an IRA

8. Contribute to 529 plan for your kid's college

9. Give money to your kids - some gifts to kids can be tax deductible up to federal limits. Check out the rules for this.

10. Prepay tax deductible expenses - I'm not a fan of this one. By paying early you're taking from next year's deduction to help this year.

11. Review your investments like stocks, bonds and mutual funds

12. Sell investments for tax purposes. If you sell a losing investment in this tax-year it can help offset the taxes for investments that made money. Think carefully about this. Unless the investment is junk that you want to get rid off, personally I'd hold on to it and hope that it recovers instead of locking in the loss. Or hold on to it and sell in a tax year where I have huge gains elsewhere.

13. Defer buying mutual funds till next year. Mutual fund companies are required by law to pass on any fund capital gains to their investors. If you buy in December you'll get a tax bill for the gains made in 2011 that you missed out on by buying late in the year.

14. Make your annual charitable donations

15. If your 70 1/2 or older be sure to take money out of our IRA to meet minimum distribution requirements

16. Prepare for a year-end bonus. If you're lucky to get a bonus, how will you spend it wisely?

Bottom Line

Read the Digerati article in full because some of the suggestions above are very tricky and can backfire if done wrong or without the help of a financial planner.
http://www.thedigeratilife.com/blog/year-end-financial-moves-money-reminders-annual-checklist/

One thing I would do differently is check my credit history at three different times of the year from Equifax, Experian, and TransUnion. Why get three reports at the same time when you could get one report in Jan, one in May and one in September instead?

When to take a pay cut

"No success in public life can compensate for failure in the home."
-Benjamin Disraeli

There's a interesting article at Penelope Trunk Blog about the times in your life when it's OK to take a pay cut.

1. For emotional Independence. Yes you could make more with a large firm but you want to be your own boss and run your own business.
2. When changing careers. You're doing something new for you, why should you still get the big bucks.
3. When you're over 40 years old. Salary peaks at age 40! (that's a rude shock to learn). There are exceptions - lawyers, surgeons(?), and those who succeed in climbing the corporate ladder.
4. If unemployed for six months.  You'll most like need to take a pay cut to get hired again.
5. If changing jobs to be close to family. Relationships trump money.
6. If you get a great boss.
7. If you can not cope with the stress of not working.
8. If you need better insurance.

Bottom Line

Penelope has an excellent conclusion,

You are not your salary. You are not worth less in the world because you are paid less in your job. Get your self-worth from a wide range of things and a pay cut won't matter to you. Focus on the components of a good job: learning, personal growth, friends at work, and a good family life. All those things are worth a lot more than a pay cut.

Free Outdoor Fun

Rows and flows of angel hair,
And ice cream castles in the air,
And feather canyons everywhere,
I've looked at clouds that way.
- lyrics from Both Sides Now (one of my favorite songs)

Continuing my theme of FREE things to do, here are
50+ Ways to Have Free Outdoor Fun from Julie Rains at WiseBread.com.

Relax and Contemplate

1. Gaze at the stars. Learn how to spot a satellite.
2. Walk a labyrinth.
3. Relax on a park bench.
4. Look at the clouds.
5. Watch a sunrise, sunset, or both: sunrise-sunset website.
6. Compose a letter, record your thoughts in a journal, or create a blog post.
7. Read a book or eBook outside.
8. Listen to the night sounds.
9. Do yoga poses or Tai Chi outside.
10. Visit a nearby river or creek or fountain and listen to the water flowing.

Learn Something New

11. Study various architectural styles in your neighborhood.
12. Visit public gardens.
13. Go on a bird walk.
14. Visit a national monument.
15. Go to an air show.
16. Take walk with a Park Ranger.

Hang Out With Your Kids

17. Look for four-leaf clovers.
18. Climb a tree.
19. Play at the playground.
20. Build a sand castle at the beach or playground.
21. Play flashlight tag after dark.
22. Teach your kids how to play outdoor games (or let them teach you the games they play).
23. Collect rocks from your backyard.
24. Watch construction from the visitor’s side of the fence.
25. Play catch.
26. Toss a Frisbee.
27. Go to a parade (or walk in one).
28. Cool off by wading in a creek, river, or lake.
29. Catch and release fireflies after dark.
30. Build a snowman, make snow angels, or have a friendly snowball fight.
31. Go leaf viewing.
32. Walk around to see blooming flowers in the spring.

Hang Out With Friends

33. Attend free outdoor concerts or plays.
34. Go window shopping in historic downtowns.
35. Visit street festivals.
36. Watch people rock climbing, kayaking, or sailing, to see if you would like to start a new sport.
37. Take in a kids’ ballgame.
38. Sit on the grass outside the stadium (if allowed) for college or professional events.
39. Talk with friends outside.

Be Productive While Having Fun

40. Volunteer for a charity bike ride, triathlon, or road race, such as a 5K or marathon. Find events using Active.com.
41. Take photos of your family members for your annual holiday cards.
42. Exercise your dog (and yourself).
43. Get involved in a community gardening.
44. Participate in a community cleanup or river cleanup project.

Move Around and Get Fit or Faster

45. Hike. Check out Backpacker Magazine's community recommendations.
46. Go running at a steady pace.
47. Do interval training.
48. Swim in a lake, river, or ocean. Be careful.
49. Take a stroll in your neighborhood. Stop and talk with your neighbors.
50. Take a bike ride alone or with a bike club.
51. Enjoy a multi-use trail. See trail finder.

Enjoy Nature

52. Visit a National Park.
53. Take photos of nature. See tips for capturing images of birds, flowing water, and more.
54. Watch the moon go through its phases.

Bottom Line

My wife & I have enjoyed many free concerts this summer at West Point with the Army Jazz Knights and Orchestra. The final performance on Labor Day Sunday included the 1812 Overture with real canons and fireworks afterwards. The fireworks were amazing close and filled the sky overhead!

On Labor Day Monday we enjoyed a "free" BBQ at home. We could have paid to attend a cookout but had more fun inviting a friend to share meats and veggies cooked on our grill.

Where to get Free Stuff

“The truth shall make you free, but first it shall make you angry”
-unknown

Is money tight? Are you living on a limited budget? Then I suggest Where to Get Free Stuff: Mega Guide to freebies at
http://www.wealthinformatics.com/2011/08/19/where-to-get-free-stuff-freebie-guide/

It includes

• Free travel resources like free bike rentals, free tour guides, free lodging and free showers.
• Free entertainment: movies, TV, music, and museums
• Free samples of health and beauty supplies
• Free items on your birthday
• Free information: books, magazines, online courses, etc.
• Free technology
• Free financial advice
• and more

Bottom Line

As a teen I loved buying books (soft cover - I'm not crazy enough to pay hard cover prices). My dad said, why not use the public library, it's free. But I liked the idea of owning books I wanted to read and reread. This changed mid-way through college when my book collection was stolen from the dorm's summer storage area. I was not going to buy the books a second time and now use the library instead.

Gas Tanks Are Draining Family Budgets

"Finland has produced so many brilliant distance runners because back home it costs $2.50 a gallon for gas."
~Esa Tikkannen, 1979
[when $2.50 was expensive!]

From Gas Tanks Are Draining Family Budgets:

“Households spent an average of $369 on gas last month. In April 2009, they spent just $201. Families now spend more filling up than they spend on cars, clothes or recreation. Last year, they spent less on gasoline than each of those things. . . . Only twice before have Americans spent this much of their income on gas. In 1981, after the last oil crisis, Americans spent 8.8 percent of household income on gas. In July 2008, when oil price spiked, they spent 10.2 percent. Average hourly earnings, meanwhile, have risen just 1.9 percent in the past year. That’s only just enough to keep up with inflation.” And only if the measure of “inflation” doesn’t include gas prices.

Bottom Line

I never considered that the cost of the gas could exceed the cost of the car itself. But then I never imagined spending $40-50 every week to commute to work.

7 Money Moves to Make Now

"The art is not in making money, but in keeping it”
-Proverb

My wife sent me a link from Ladies' Home Journal about Financial Spring Cleaning: 7 Money Moves to Make Now.

1. Review your Insurance

"We bundle our policies with one provider for a lower overall cost; we keep deductibles high to keep premiums low; and we take advantage of discounts." 

Are you over insured? If your car is old, drop everything but liability (subject to state laws). Collision and Comprehensive won't pay much to repair a clunker.

Is the value of your house over appraised? For $7.95, accucoverage.com assesses your home's value using the same data insurers use.

2. Pay Off Credit Cards ASAP
If you have a lot of credit card debt consider this, "Take out a three-year personal loan from a credit union. You lock in the rate, which can be about the same as a transfer fee, and it's better for your credit score."

Bonus Resources: Creditcardguide.com has info on credit offers and deciphering fine print. Credit.com gives you a "soft" estimate of your credit rating without the request registering with credit agencies.

3. Roll Over an Old 401(k)
If you change companies consider rolling an old 401(k) into a new one. This can protect you from your old company going out of business. "You can also roll it into an IRA, which may give you more investment options. (Look for a low-cost provider like Vanguard, T. Rowe Price, or USAA.)"

In my case I left my 401(k) with my prior company. It's stable (150+ yrs old) and offers a different mix of mutual funds than my new 401(k).

4. Get a Home Energy Audit
Look for free or low cost Energy Audits on how to save money heating your house. Some states and energy companies will cover the costs.
Bonus resources: The Department of Energy website (energysavers.gov) offers a DIY guide to energy audits and a list of upgrades that qualify for federal rebates. The Database of State Incentives for Renewables & Efficiency (dsireusa.org) has a state-by-state guide to rebate programs.

5. Open a Higher-Yield Checking Account
Look online for banks that will offer you a better deal on checking. But watch out for the rules and penalties. Also beware - last decade Iceland was famous for its high rates until the country's banking industry collapsed.
Struggling banks sometimes offer high interest rates as a way to try to boost their funds, so be sure to type the bank's name into Bankrate.com's "Safe & Sound" engine. Look for a rating of at least three stars.

6. Look for Cheaper Cable and Internet.

7. Consolidate Vital Records

"Dealing with all this money stuff showed me how balkanized our finances are: I take care of some things, Rob takes care of others. If something happened to either of us, the other could not necessarily jump right in. We needed an overall map, a worst-case-scenario guide, to our financial affairs."

Google "Merrill Lynch" and "Organizing your financial life. Critical information at your fingertips" for a useful form and checklist to get you started. The form documents all accounts and recommends you locate and properly store important records such as property deeds and passports.

Bonus resource: The legal website LawEasy.com gives free access to all sorts of legal templates, including a "child emergency health form" that would be useful for babysitters or daycare facilities to have.

Bottom Line

One easy way to save money is not to spend it in the first place. The ideas above will help you cut cost and expenses.

Retirement Savings

The trouble with retirement is that you never get a day off.
~Abe Lemons

How much retirement savings do you need? Probably more than you think. I read one column about a couple that thought 1 million dollars would be enough. But the children needed help with their mortgages and the money was greatly depleted.

Megan McArdle at TheAtlantic.com says, You Need More Retirement Savings. The old school thinking was that your expenses will be less during retirement. The house is paid off. (Maybe? Did you get a second mortgage or treat the house as an ATM with repeated home equity loans?) The kids have graduated college. Your house is furnished and you're not planning any major changes. Only a car loan remains.

In retirement the work expenses of commuting driving or train, business lunches, business clothes, etc are a thing of the past. But there'll be new expenses for health care - especially once you're off the Cadillac quality health plan and facing higher copays and deductions.

"Medicare does not cover everything--Medigap insurance is costly, and may still leave you with considerable out-of-pocket expenses."

You may also find that you'll need to hire a maid service to keep the house clean, or someone to mow the lawn, shovel the snow, etc. Not that you're lazy or lack the time but you might be physically unable to do the labor like you used to.

But I've thought of that you say. I'm planning to sell the house, buy a cheaper condo or assisted living apartment and pocket the difference. But suppose you're trapped in a terrible housing market like we have now where no one is buy or you get half of what your home used to be worth? Or you're competing with the other baby boomers for decent retirement space and prices for "retiree" homes shoot up.

Bottom Line

McArdle concludes that you retirement spending habits will be "about the same amount as I need now ... Even assuming that Social Security continues as promised, most people don't have nearly enough saved to make up their current incomes."

Unclaimed Property

“Well, you know, I was a human being before I became a businessman.”
- George Soros

The Consumerist recommends Unclaimed.org, a free non-profit site that's a convenient portal for searching for unclaimed property state by state. You pick a state and unclaimed.org opens the official state website for unclaimed property searches.

Here's some info from Unclaimed.org's Q&A page:

What is unclaimed property?"Unclaimed property (sometimes referred to as abandoned) refers to accounts in financial institutions and companies that have had no activity generated or contact with the owner for one year or a longer period. Common forms of unclaimed property include savings or checking accounts, stocks, uncashed dividends or payroll checks, refunds, traveler's checks, trust distributions, unredeemed money orders or gift certificates (in some states), insurance payments or refunds and life insurance policies, annuities, certificates of deposit, customer overpayments, utility security deposits, mineral royalty payments, and contents of safe deposit boxes."

What happens to accounts that have no activity?"Companies are required by law to send funds from lost accounts to the state of the owner's last known address. "
"Most states hold lost funds until you are found, returning them to you at no cost or for a nominal handling fee upon filing a claim form and verification of your identity. Since it is impossible to store and maintain all of the contents that are turned over from safe deposit boxes, most states hold periodic auctions and hold the funds obtained from the sale of the items for the owner. Some states also sell stocks and bonds and return the proceeds to the owner in the same manner."

There are "Finder" companines that will charge you to search or notify you of money found in exchange for a finder's fee. But they don't have any more information than is available free to the public, so why pay them when you can find it yourself?

Bottom Line

How do I keep my property from becoming lost in the future?"Property becomes lost due to a company having no communication with the owner. You should contact institutions that hold your money or property every year and especially when there is an address change or change in marital status. For security reasons, most financial institutions do not forward mail. Keep accurate financial records and record all insurance policies, bank account numbers with bank names and addresses, types of accounts, stock certificates, and rent and utility deposits."

• Cash all checks for dividends, wages, and insurance settlements without delay.
• Respond to requests for confirmation of account balances and stockholder proxies.
• If you have a safe deposit box, record its number, bank name and address, and give the extra key to a trusted person.
• Finally, prepare and file a will detailing the disposition of your assets.

Confusing Credit Terminology

The creditor hath a better memory than the debtor.
James Howell

John Ulzheimer, President of Consumer Education at SmartCredit.com, explains seven pairs of confusing credit terms at http://www.mint.com/blog/how-to/confusing-credit-terms-02212011/

I'll paraphrase and elaborate and try not to make any mistakes.

Credit Report vs Credit Score

A credit score is a financial "grade" based upon an interpretation of your current credit report by a credit agency. (See FICO score below)

Credit Report vs Credit File

A credit file is all the information about you that is floating around a credit bureau’s database waiting to be compiled into an official credit report. No one outside a credit bureau should see your credit file while your credit report can be purchased by banks, auto dealers, etc.

Credit Reporting Agency vs Consumer Reporting Agency
“Consumer reporting agency” is a legal term describing any organization that regularly compiles information about consumers for the purposes of selling it to a 3rd party. 

A credit reporting agency is just one example of a consumer reporting agency. A non-credit example is LexisNexis; they collect personal data and create consumer reports for employment screening, resident screening, insurance underwriting, and volunteer background checks.

Credit Score vs FICO Score

FICO is an acronym for the Fair Isaac Corporation, the creators of the very popular FICO credit score. There are other credit scores like NextGen and VantageScore but hardly anyone uses them. It is important to know which type of score you have because the ranges are different: A FICO score is between 300 and 850. A VantageScore score ranges from 501-990.

Home Equity Loan vs Home Equity Line

A home equity loan is a loan with a fixed payment for a fixed number of months. (Ignoring for simplicity variable rate loans.)

A home equity line is a revolving line of credit, just like a credit card. You can borrow against it, pay it back, and borrow again.

In both cases the loan/line is secured by your home, which means if you default on your payments you could lose your house.

Credit Card vs Charge Card

A credit card is a revolving account, which means you have a variable payment depending on your outstanding balance for the month. 

A charge card (like American Express) requires payment in full each and every month. There is no minimum payment and no rolling the rest over with interest to be paid in the future.

Chapter 7 vs Chapter 13

Both are types of consumer bankruptcies.  Under Chapter 7, “liquidation”, any "statutorily dischargeable debt" is eliminated. 

Under Chapter 13 the debt is "adjusted." The consumer pays to a trustee who then distributes the money to the consumer’s creditors.

Bottom Line

When my wife got a home mortgage she had a great lawyer. He made her read the entire contract with the bank. She said, but that's your job.

He replied, no. It's your money and your home. You must understand what you are signing. His job was to make sure the contract was fair and to help her to understand the language of the contract she would have to live with for the next 20 or 30 years.

Always read and understand any financial document you sign.

Hidden Costs

"It is an unfortunate human failing that a full pocketbook often groans more loudly than an empty stomach".
~President Franklin Delano Roosevelt

10 Hidden Costs That Hurt Your Wallet from WiseBread.com

1. Over-Insuring Yourself
If you and your spouse both work, are you double covered for medical and life insurance? Are you buying personal life insurance and are also covered by insurance through your employer?

2. Hanging Around People Who Are Materialistic
It's hard to save money if you hang out with friends who are big spenders or eager shoppers. My wife shops with a friend who is always saying, "You have to try this," and so there is frequently an unplanned item or two purchased.

3. Buying in Bulk
First check the price - bigger doess not always give a cheaper unit cost. Second ask yourself if you can use or consume the bigger quantity before it goes bad. Warehouses sell giant cans of tuna which have a great price but is way too much food for my wife and I. We'd be wasting money if we toss out the uneaten tuna after a few days.

4. Eating Everything on Your Plate
Restaurants prices may be high but you get value with huge portions, right? Wrong. Few of us can resist eating more than we should which impacts our heath (and future medical bills.) And I'm amazed at how few people take leftovers homes. There's a lot of wasted food left behind.

5. Getting the Plan That Covers The Worst Case Scenario
Did you buy a cellphone plan with a huge number of minutes that you never use so you'll never go over the limit? You'ld be better off with a cheaper plan and pay the extra fee for the rare times that you go over limit.

6. Being Unreasonably Loyal
Don't let brand warranty trick you into paying too much. It could be cost-effective using newer, better, and cheaper alternatives.

7. Thinking that Limited Spending Will Help Stop the Urge to Spend More
Shopping can be addictive - it's hard to stop with just the one item you actually need versus the many items that you want. Distiguish your needs from your wants. 

8. Trying to Maximize Your Opportunities
Have you even seen a good deal but held back waiting for it to get even better? And then missing any deal at all when prices suddenly change?
"Sometimes it's better to take advantage as soon as a deal is worth the effort. ... it's not a question of whether you got the best deal, but how often you can find deals that benefit you."

9. Being Cheap

"There is a fine line between being cheap and living frugally. It's one thing to take advantage of corporations by using coupons for example, but it's completely different if you take advantage of your friends."

Cheap also has a hidden cost; cheap goods are lower quality and break sooner. You may pay more in the end by replacing cheap items multiple times.
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10. Valuing Your Time Too Much
What is your time worth? Are you using your time effectively? Is it worth hiring a house painter so you have more time to watch TV?

Bottom Line

Living frugally is not simple. Many of the ideas above look good on the surface but have hidden costs or hidden wastage built end. You have to look at the big picture and your personal behaviors and lifestyle.

Common Money Mistakes

Picasso, self portrait

“I'd like to live as a poor man with lots of money.”
- Pablo Picasso

The website GetRichSlowly has a guest post from Money Girl, Quick and Dirty tips for Richer Life that describes Common Money mistakes at different stages of life.

Your 20's - You've graduated college and are good making money (hopefully). Don't spend it all! And don't get cocky:
- Avoid accumulating credit-card debt: don't fall into the trap of spend and pay later
- Do participate in a 401(k): yes retirement is far away but it takes time to build a nestegg that will last for decades of retirement. Start now!
- Seek professional advice: admit it, you've new to managing money. Learn how to do it right with an advisor or financial coach.

Your 30's - at this stage you most likely have a family and home to care for. Watch out for the following:
- Emergency Fund: you should have emergency savings to cover at least six months of living expenses like rent, groceries, and utilities. Given the current economy, unemployment is lasting for more than six months so go for a year of savings if you can.
Be honest in what a month of expenses is. Look at your bank account and credit cards to see what you really spend monthly.
- Don't skimp on retirement savings: invest all you can for retirement, you won't regret it.
- Insurance: be fully insured to protect yourself from financial disaster if you lose your house, your car, or suffer extreme illness with huge bills.

Your 40's - the kids are leaving the nest, retirement is only two decades away
- Don't ignore retirement:  use online retirement calculators to see if you are on track or falling short. It is not too late to invest with 20 or 25 more years of employment
- Don't accumulate debt: Debt is the opposite of retirement savings. It eats aways at your net worth with interest payments. Aim to be debt free ASAP.
- Don't raise financially ignorant children - teach your kids to manage money. Don't let them become adult leeches that will suck you bank accounts dry. And don't pay their way into an expensive car or home. It took you years of hard work to get the lifestyle you have. They should not expect to start at your level. Also be careful with loaning money - loans to relatives are the cause of much bitterness

Bottom Line

"Taking the time to learn about money and wealth pays off whether you’re a young student, a grandparent, or somewhere in between." - Money Girl