Financial Products That Are a Waste of Money

You can save big bucks by skipping unnecessary financial products and services.

There are many things that people buy, sometimes repeatedly, that are a waste of money or just a bad value. Often, you don't need them at all or you can opt for less-costly or free alternatives. Take a pass on these financial products and save hundreds or even thousands of dollars.



Skip it: Collision on older vehicles
Save: $300 a year, based on national averages in 2007

If you have an accident, collision coverage reimburses you only up to the value of your car, no matter how severe the damage. So at some point, the cost of the coverage might approach or exceed the maximum the policy would pay on a claim. You might consider dropping collision once its cost equals 10 percent of the car's book value.

[Click here to check savings products and rates in your area.]

Do this instead

Self-insure by putting away a fixed amount each month to cover unexpected losses. Decide whether you should keep comprehensive coverage. Typically less costly than collision, it reimburses you for theft and nonaccident damage, for example, if a rock cracks your windshield or a falling tree limb dents your hood. But like collision, it won't pay more than the vehicle's worth, so weigh the cost.

Skip it: Load mutual funds
Save: About $200 to $300 on an initial investment of $5,000

Load funds siphon off 4 to 6 percent of your investment for sales commissions. No-load funds generally perform as well or even better.

Do this instead

Skip the load and put your entire investment to work for you. Compare funds by type and rating at www.morningstar.com.

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Skip it: Extended warranties
Save: $30 to a few thousand dollars

Some products, such as cars, have become more reliable, and others, including electronics, aren't likely to break down during the extended service contract period. Service plans often cost more than you'll recover, and many have fine-print terms that can limit or disqualify your claim.

Do this instead

Buy reliable brands and models, and follow the manufacturer's usage and maintenance recommendations. If possible, make purchases with a credit card that extends the warranty. And if a product fails after the warranty has expired, try negotiating with the retailer and manufacturer for compensation.

Skip it: Fee-based checking
Save: $36 to $600, plus any per-check fees each month

There are many no-fee checking accounts that don't require you to maintain a minimum monthly balance. Some even pay interest, such as FNBO Direct (www.fnbodirect.com), which pays 1.25 percent.

Do this instead

Check local and national banks and credit unions for the best deals. If you regularly use your debit card for purchases and can set up direct deposit or automatic billing, consider a high-yield checking account. To find one, go to www.checkingfinder.com or www.kasasa.com.

Skip it: Credit-card insurance
Save: 18 cents to $1.35 for every $100 of your balance each month

Also known as payment protection and credit safeguard, this coverage promises to make your minimum payments for a certain period or erase your entire credit-card debt in case of unemployment, injury, disability, or death.

Do this instead

Check for coverage you already have in other policies, such as life and disability. Or set up a fund to cover your bills if you lose your income.

Skip it: Cancer insurance
Save: $200 to $3,000

Like any disease-specific coverage (including those for strokes or heart attacks), cancer insurance might duplicate or even negate coverage you already have under your basic health insurance. Some cancer policies exclude certain types of cancer, or they might not pay at all unless you're hospitalized. And they're certainly no substitute for comprehensive medical coverage.

Do this instead

Check to see what your health policy covers. If you're on Medicare and want more coverage, consider buying a Medicare supplemental policy. Medicaid recipients don't need additional coverage.

Skip it: Identity-theft protection
Save: $120 to $240 a year

These services might do less than they claim. In May, Lifelock, a leading vendor, agreed to pay $12 million to settle charges by the Federal Trade Commission and 35 state attorneys general that "the protection it actually provided left enough holes that you could drive a truck through it," said Jon Leibowitz, the FTC's chairman.

Do this instead

Take steps to protect your identity. For example, you can place a security freeze on your credit reports at all three major credit-reporting bureaus (Experian, Equifax (NYSE: EFX - News), and TransUnion). That will deny access to your credit report to prospective creditors and prevent a scammer from setting up an account in your name.

Skip it: Cell-phone insurance
Save: $48 to $96 a year

Between the cost of the coverage and the deductible, typically $25 to $100 or more, this insurance might not save you anything if you need to replace your phone because there might be fine-print exemptions. And if the policy does replace your phone, you might get a different or refurbished model.

Do this instead

Check your home and auto insurance policies to determine if your phone is (or can be) covered. When you get a new phone, don't chuck your old one if it still works. If the new one is lost, stolen, or breaks down, you might be able to use the old one for the duration of your contract. Another option is to buy a less-costly "unlocked" replacement

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6 Financial Issues to Discuss Before Marriage

Marriage is a monumental moment in every adults life, and the changes that come with this step are huge. Everything from living accommodations to how you spend your free time changes once you marry your significant other. With the economy being the top concern for most Americans and marriage rates at all time lows for America’s young adults, it is important to discuss and plan out a few important financial issues before tying the knot. The following list includes certain broad Personal Finance topics that each couple should discuss to see where compromise is needed and where common goals are already shared.

1.Bank Accounts. This is a subject that used to be a moot point in traditional marriages. In the past, bank accounts would be merged and that would be the end of it. But, in today’s America where it is quite common for both spouses to have productive and lucrative careers, many engaged couples are finding the issue of how to deal with separate accounts challenging. Should all accounts be merged or should each keep a separate account as well as opening one joint account? It’s a personal decision, but from a logistical stand point, having at least one joint account makes it much easier to keep track of expenses that are shared by both parties.

2.Housing: Do you or your spouse have bad credit? If so, the issue of buying your first home together could become really troublesome. If your score is significantly higher than your spouses, you might have to consider owning the mortgage solo to take advantage of the better rates that will be offered to you versus a joint application.

3.Spending Plan: If you haven’t had a budget while single now might be a good time to create one for your future combined household. A personal budget is the building block of any sound and successful financial plan. Figure out what you earn and spend each month, and then go through this list to see where waste can be eliminated or where income can be increased.

4.Billy Paying. This again is a generational shift that is occurring. In the past when only one spouse typically worked a full time job, the stay at home partner would handle all the bills. With today’s culture that expects both partners to work, the question of who runs the homes finances is front and center. While it may be beneficial for one to still handle the majority of the bills, the other partner should still be aware of what bills are being paid and where the couple stands financially.

5.Financial Goals. A constant in most Pre-Marriage counseling sessions, a couples financial goals need to be out in the open and accepted by both partners. Compromise might be needed here, but make sure your long term goals are being respected by your significant other.

6.Debt. This is a topic that needs to be discussed by each couple prior to marriage. Surprising your spouse with $100,000 in student loans on the day of your wedding is not the best way to start your life together. Make sure each partner understands what baggage is being brought into the marriage and figure out a plan to eliminate this debt as quickly and as efficiently as possible.

Readers, any other financial tips for soon to be couples? Do you agree with the ones listed above? Have you had issues during your marriage about any of these topics? Let us know and maybe you could help someone just starting out in their marriage make it a smoother ride!

Preferred Financial Services is a debt reduction firm certified by the CFC (Center for Financial Certifications) and accredited by U.S.O.B.A. (United States Organizations for Bankruptcy Alternatives). Headquartered in Andover, Massachusetts, Preferred Financial Services has been a leader in the debt reduction industry since 2003. Preferred Financial Services has acquired some of the best experience in the industry over the past 7 years. In 2009 alone Preferred Financial Services reduced over $16.5 million worth of consumer debt for just $6.4 million, for a savings of about 60%- and over 2,900 accounts were settled on behalf of their clients.

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10 Tips for Helping You Survive the Recession

1. Create a budget. This is the first step to getting through hard economic times. Being aware of how much you are making, how much things cost, and how much you have left over will ensure that you are in control even in circumstances that may seem out of your control. As you track your expenses, you’ll be surprised at how much you spend and where. Decide how much money you should allocate monthly to food, gas, housing, bills, etc and do your best to stick with it!

2. Along with making a budget is abiding by the principle of living on less than you make. If you are doing this, then you will always have enough to go around. Try to avoid incurring additional debt, and work hard to slowly pay off the debt which you may already have. Getting out and staying out of debt is crucial to surviving a recession.

3. Companies will charge you quite a bit on fees for being late on a payment. Avoid the hassle and worry of remembering to pay your bills by setting up automatic payments online.

4. Earn a little extra money by finding odd jobs where you live. Ask around and see if you can watch your neighbor’s kids, freelance blog posts for a company looking to expand their social media plan, clean an elderly couple’s home or grocery shop for them. Put that money away and you’ll find that it will slowly add up to be a good chunk of change!

5. Reduce spending by cutting back on unnecessary spending. Take a look at your budget and decide where you could be spending less – groceries, driving less, eating out, shopping, etc. Saving every little bit definitely helps!

6. Purchase locally when possible. In addition to sustaining your local economy, you’ll find that fresh, in-season produce straight from the fields is often cheaper (and more delicious) than store bought produce. Check your local newspaper for a listing of farmers markets in your area and then check them out!

7. Purchase pantry staples on sale. You’ll save lots of money by stocking up on things that you use on regular basis while they’re on sale. Beware of the urge to use coupons advertising low prices on items you don’t normally buy – their goal is to get you to buy these things! Stick to your regular list and you’ll save money on sale items and avoid spending extra on junk.

8. Stay organized. It’s easy to feel overwhelmed and out of control when you aren’t organized. Make a list of things you need to do each day and take the time to cross things off as you complete them. You’ll feel more organized and productive as you do so!

9. As you’re organizing your life, take a day or two to clean out your garage and closets. You may be surprised what you find! Sell the things that you no longer need online and make a few extra dollars!

10. And finally, to survive the recession you need to be happy. Taking time to do the little things you enjoy can make a real difference in your attitude and outlook on difficult circumstances. Whether you like to visit the ocean, read a good book, take a walk through a local park, play the lottery online, call up a friend, bake chocolate chip cookies, or ride your bike, taking time for yourself will help you stay happy and optimistic amidst uncertainty.

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6 habits that will make you broke

It's still a week until payday, but your checking account is almost empty already. Where did all your money go? We all have our black holes, those money pits that seem to magically make our cash disappear.

Here are six bad habits that will make you broke, and how to break them:

1. Window shopping
It can be fun to browse the aisles and see what's out there. We all have our weak spots, like home goods, electronics or clothes -- even if you don't like to go to the mall. You don't even have to leave the house to window shop anymore; those catalogs, the Internet and commercials advertising the latest sale can be just as tempting.



Window shopping is a bad financial habit that takes some discipline to break. Staying away from your favorite retailers and not requesting catalogs or e-mail updates from your favorite stores is a good place to start. Before buying that latest item you pine for, ask yourself two questions: Do I need it, and can I pay cash for it? If your answer to either or both is no, walk away.

2. Carrying lots of cash
You know that paying with plastic is bad, but carrying lots of cash can be a bad habit too. Cash can give you the feeling of having extra -- fun money that's just sitting there.
Online holiday shopping: 5 pitfalls





Carry only enough cash for what you need, and leave the rest at home. Avoiding plastic is great, but budgeting is just as important when choosing to pay cash.
If you like the green, try budgeting your cash with envelopes: one for groceries, one for entertainment, etc.

3. Saving your info with vendors
Those online shopping sites are so considerate to save your address and credit card information -- some even have one-click ordering buttons, so you can buy something in just a second. It's very easy and very dangerous. Not only does this easy shopping make you broke if you're prone to impulse shopping, it also eliminates the feeling of spending money, because all you do is click.
Don't allow vendors to store your credit card information. Avoid signing up for e-mails and catalogs if those tempt you to shop when you really shouldn't. It can be great to know about a sale, but if you didn't need anything, it's just another temptation.

4. Clipping coupons you don't need
We all feel the pinch in this tougher economy, especially when buying groceries. Clipping coupons is downright trendy today -- but is it really a good habit? Sure, getting 50 cents off that package of cookies or that brand-name detergent is a discount, but you may be surprised to find that your grocery bill isn't going down despite all your clipping.
The truth is that buying generic brands that are just as tasty is often cheaper; coupons can make us buy things we didn't plan for.

Start with a grocery list for the week, and then look at your clipped coupons. If you can use one, great, but try supermarket brands too for the best bottom line.

5. Shopping with your emotions
It was a rough week, or a good one, or you want to reward yourself for losing a few pounds, so you go shopping. You earned that new dress, that new gadget, that big pie -- it was on sale, too. Letting your mood dictate your buying decisions is the quickest way to go broke.
Sober up before shopping. Do you need these items, and can you afford them? Be honest with yourself. Reward yourself by doing something that doesn't cost, like taking a nice bath, or spending time with loved ones.

6. Not planning ahead
It's Tuesday, you're tired, and you have no idea what you'll make for dinner. A great night for takeout, right? Using data from the Bureau of Labor Statistics, it's estimated that the average family of four spends more than $4,000 per year on eating out -- a very expensive habit that will make you broke in a hurry.

When you make your grocery list, make a menu for the week at the same time, so you always have ingredients for a meal. If your week is hectic, try cooking on Sunday and freezing meals for the week. Plan for lunches the same way; not only will you save money, you'll eat healthier by avoiding fatty restaurant food.

The bottom line
It takes some discipline to break these bad habits. With some planning, restraint, and avoiding tempting situations, you can break these habits -- and maybe even find you have a little extra cash at the end of the month.

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12 money mistakes you're probably making

Miscalculating your budget
Research suggests that creating an annual budget instead of a monthly one works better, largely because we feel less confident in our annual estimates, so we tend to add more cushioning for unexpected expenses. In one study, college students underestimated their monthly expenses by 40% while overestimating their annual expenses by 3%.

The best holiday deals and steals
Overspending on housing
It's almost impossible to get ahead financially unless you save a significant chunk of your income -- ideally, $1 of every $3 you earn. But many people get tripped up by their housing costs. Traditionally, financial advisers have encouraged buyers to spend about one-third of their income on housing. But for many people, especially anyone with student loan debt, child care payments or other hefty expenses, that's too big a chunk.

Skimping on career investments
Expect to pay more for your holiday meal

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Investing in a career coach or development course can help you snag a promotion, get "unstuck" from a career rut or transition into your dream job. The price of one-on-one coaching typically starts at around $200 an hour, but less-formal advice can come from meeting with more-experienced colleagues over lunch or coffee.

Falling into spending traps
Rewards credit cards sound good in theory, but in reality they encourage you to spend more than you would otherwise. Economists dub this phenomenon "purchase acceleration," because you ramp up your spending when that reward is in sight. Rewards cards also carry a higher interest rate -- two percentage points, on average -- than cards that don't offer rewards.

Failing to negotiate prices
Even department stores often offer some wiggle room on their posted prices, and big-box stores usually match competitors' prices. This negotiating trend has become so prevalent that the advertising firm Cramer-Krasselt came up with a name for such pushy customers: "neo-hagglers." But many consumers fail to realize that prices are flexible and don't bother asking for a better deal.

Earning from one income
The average worker now holds 10 different jobs before age 36. While some of those job changes are voluntary, many also result from layoffs. By earning income from a variety of sources, workers can increase their financial stability. Options for new sources of income include freelance work, a teaching gig at a local community college, or a potentially money-making blog.
Taking on too much -- or too little -- debt

Not all debt is bad. It can enable you to return to school, buy much-needed professional outfits before receiving your first paycheck or even cover your rent during a tough month. Being so afraid of debt that you avoid it altogether can force you to miss out on opportunities, while taking on too much can lead to financial ruin.

Trying to beat the market
Timing the market would require a "Back to the Future"-style time machine. That's why investing a little bit at a time, regardless of the market's behavior, is the safest way to go. Retirement accounts such as 401k's, which invest money from your paycheck each month, make it easy to invest this way.

Paying too much attention to the Dow
Focusing too much on the ups and downs of the stock market just causes stress. When the market's plunging, concentrate instead on your hobbies, family and outdoor activities. Avoid cable television news, which often treats every dip in the market like a major crash. If your investments are well-diversified, then you've done all you can.

Counting on Social Security
As they think about retirement, today's thirtysomethings should be aware that the Social Security trust fund is scheduled to run out in 2037. That means, if nothing changes, benefits will shrink to about three-quarters of what they are now, because only money that is being paid into the system will be paid out. Young professionals need to plan on funding the bulk of their retirement with their own savings.

Overspending on gifts
Pollster John Zogby has found that the amount of money people say they intend to spend on Christmas gifts has been steadily declining since 2001. Consider joining that movement by making your gifts more meaningful and less expensive. Instead of pricey jewelry and electronics, consider cookbooks and museum dates. You can also consult websites such as craftster.org to find unique do-it-yourself gift ideas.

Underestimating tax bills
People who earn money beyond their usual paycheck, from freelance work or a side business, are most at risk for owing a lot of money in April. And poor tax planning can also trigger additional fees. Married couples who earn similar high salaries are also at risk, because of the so-called marriage penalty. Check to see if you've been paying roughly the correct amount of taxes by reviewing your payroll stubs or other documentation.

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5 ways to trim your grocery bills

To help you get a grip on this tasty but often expensive cost of living, here are five ways to cut the fat from your grocery bill:

1. Make a grocery list and check it twice
Going through your kitchen before hitting the supermarket is free, and a little planning can fatten your wallet by preventing expensive impulse buys. You might even save on gas by being organized, because you won't need to make a second shopping trip to buy those forgotten items.

Use this free printable grocery shopping list to help you plan your next trip to the market.

2. Watch the price scanner
Mistakes on price scans are common at the grocery store and can cost you additional dollars. A recent Consumer Reports survey found that 6% of respondents were overcharged at the grocery checkout, and no particular chain stood out as more or less accurate than the others. Watching while your grocery prices scan and verifying their accuracy at checkout can save you money and may even score you free food -- many grocery chains will give you the item for free if it scans at the wrong price, but it's up to you to spot the error.

3. Buy generic items over big brand names
Save a huge 10% to 50% on every shopping trip by switching your brand-name buys for generic items. It costs big bucks to market brand-name products, and you're paying for that expense when you buy a food item with a recognizable label. Compare many generic items to the brand-name equivalent and you'll find that the brands are not necessarily better than their less-advertised alternatives.

4. Stop clipping the wrong coupons
Take a good look at the grocery coupons you're clipping before getting excited about the deal. Many coupons offer deals on highly packaged foods low in nutrition and high in unpronounceable ingredients. Skipping the coupons for bad buys and opting to pay a little bit more for whole foods may be a better deal for your health in the long run.

5. Skip the cans, buy dried beans in bulk
Why are you buying beans canned in captivity? Buying dried beans in bulk and soaking them overnight is a frugal way to add protein to your diet without paying for the high cost of meat. Besides, dried beans are extremely cheap and expand when soaked, so your family gets more meal for every dining dollar spent by forgoing the canned variety.


Does it pay to buy organic

Finding simple ways to cut your everyday food expenses takes a bit of practice, but the payoff can be huge. Keeping track of your budget using this free household budget spreadsheet can also help you save money on all your other living expenses.

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How cheapskates do dinner

A $26 ribeye tastes that much juicier at $13, at least to me.
So while some people shy away from dining-out discounts, fearing perhaps the scorn of their teenage servers, others like me won't leave home without one.

"I try to go out only if I have a deal," says Tonya Ward, a stay-at-home mother from Winston-Salem, N.C., who clips newspaper coupons, surfs the Web for discounts and goes to kids-eat-free nights at local restaurants.

One night, Ward even dressed her whole family up as cows, with black and white spotted t-shirts, to get a free meal at her local Chick-Fil-A restaurant.
"I am never one to pass up a free meal," Ward says.

But it doesn't take a costume to get discounts, provided you are willing to plan ahead, be flexible and use coupons and gift certificates unabashedly. And some of them are so discreet your date will never know you went cheap.

Discount blogger Anjie Henley, for instance, doesn't think twice about combining coupons and gift certificates to get her meals for a fraction of the price.

"I try to never pay full price for anything, especially food," says the operator of FreelanceByU.com. "You can eat out for pennies on the dollar" if you know where to look for discounts, she says.

Henley once bought a $50 T.G.I. Friday's gift card for $20 on eBay and then used it at a restaurant with a $7 coupon she received by e-mail. That's $37 in free food.
More from MSN Money


Stiff competition in the restaurant business and a down overall economy are prompting more restaurants -- even white-tablecloth eateries -- to offer deals to bring in new customers and reward return patrons.

That makes it easier for diners find good meals at even better prices -- often discreetly.
The cash-back program Rewards Network, for example, gives its customers up to 20% back from their final tab, including tip and taxes. Rewards Network's members pay a membership fee or are referred by their airline's miles program in exchange for a rebate on each meal.

Customers register their credit cards. When they dine, they simply use that credit card to get savings. The server and your date don't have to know you are getting a discount. The rebate is refunded to the credit card a few days later, and the diner is notified by e-mail.

The savings "add up pretty quickly," claims Chris Curtis, a spokesman for Rewards Network.
However, prospective members should peruse Reward Network's site first to see if the restaurants you like are affiliates.

For someone like me who dines out only occasionally and doesn't drop a ton of money on a meal, the program is barely worth the $49 annual membership fee (deducted from your initial savings, not paid up front). If you join the program through an airline frequent-flier program, the membership is free, but you get your money back in miles.
Of course, even these miles can be turned into free dinners, if you know how.

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20 ways to save on a shoestring

Savings.

When you hear that word, do you feel a clutching sense of guilt and inadequacy? If you're like most Americans, you must. According to a study of saving behavior by economists Steven Venti of Dartmouth and David Wise of Harvard, more than 75% of respondents said they knew that their savings, specifically for retirement, were insufficient.

That's shocking, but not as remarkable as their discovery that how much you save has very little to do with how rich you are. Venti and Wise divided the 7,700 households they studied into 10 income groups. The top 10% of the lowest income group nonetheless had saved more than $150,000 per household. Meanwhile, middle-income folks, on average, had only $45,000 in assets.

That's annoying and embarrassing, and it means I have no excuse for my inadequate savings. And neither do you. Because what Venti and Wise found to be the most significant savings factor was no more jaw-dropping than this: Ya just gotta save it.

But hooooow, you whine? How can you save a red cent when you just barely live on what you earn? Well, since you asked: Saving is a two-step process. First you retrain your brain, and then you find all kinds of clever ways to live on less (many of which are conveniently located below).

Step 1: Retrain your brain
Saving money is a state of mind. Before you can start, you have to renounce the spending -- and stop believing you actually need all the stuff you've been spending money on. Just don't. Spend, that is. Sure you want it, but that's no excuse for buying it. The next time you want to buy something, take the $50 or $100 out of your wallet, and stash it somewhere. See? That's called saving. You don't end up with stuff; you end up with MONEY. A few other tips for the brainwashing you're about to do:

Accept frugality as your savior. Become a closet cheapskate and emulate your frugal friends. Note that they fix the shower curtain instead of buying a new one. Sit down with Depression-era relatives and ask about economizing. That's what I did. And, yea, did the spirit of saving take hold of me!

Seek inspiration. Get thee onto MSN Search and type in "living cheaply," "frugal living" and "voluntary simplicity." You'll find a gazillion Web sites devoted to living on less, including The Frugal Shopper and The Simple Living Network.



Cry poverty -- with style. Learn handy phrases like, "Let's eat somewhere cheap." And "Shopping? Blech. Let's go for a bike ride." It's less embarrassing than you'd think, because more people are in your shoes than you think -- and they'll be grateful you spoke up.

Step 2: Now save it!
There are a thousand ways to live on less. But you don't want to make your life a misery. Here are some of the most painless ways you can economize without losing out on quality of life.
Don't even think about it. Direct deposit is a saver's best friend because the money is whisked away into your IRA, 401(k) or money market account -- and you don't have to do a thing. Except drop by your payroll department and/or your bank and fill out the damn forms. Today.

Go veggie. If you can do three meatless days a week (without substituting pricey fish), you could save $25 a week, which equals $100 a month, which equals $1,200 a year! Beans: Ya gotta love 'em.

Play money games. Whenever you get a $5 bill, put it aside. Or do it with ones, with quarters or all your spare change. You'll have a nest egg before you miss a nickel.
Never spend a windfall. Take your income-tax refund, that holiday money from your folks, the $16.35 overpayment check from the telephone company and any other extras and save 'em.
Haggle. You'd be amazed at who will drop their prices, fees and interest rates: airlines, hotels, credit card companies, computer/appliance/rug salespeople. (For more on how to haggle, read Liz Weston's column here.)

Re-evaluate. Re-evaluate. Re-evaluate. That dinner out cost more than you spend on groceries in a week. That pair of shoes is worth half a commuter pass. Learn what your money is worth, and you won't be so quick to dispose of it. Use some of the tools here at MSN Money to analyze your spending.

Don't overpay your taxes. Sure you love to get a fat refund from the IRS every spring. The fact is, however, you're effectively lending money to the government interest-free. Go through your tax return and see if you can plan your withholding so you get to Dec. 31 maybe getting a $100 refund. That way you can use your money NOW. (And bank the refund when you get it.)
Raise your insurance deductibles. Reassess the deductibles for various kinds of insurance. If you can raise them, your premiums drop.

Get your mortgage costs down. First, look at whether the rate is too high. If it is, look at refinancing -- if you'll save money. Next, let's look at the private mortgage insurance (PMI) you've been paying because you didn't have enough money to make a 20% down payment. You're protecting the lender, not you. If the equity in your home is greater than 22%, demand that your lender cancel it. It's the law. Lastly, pay ahead on your mortgage. If you can swing an extra $100 per month, you will save thousands in interest costs over the long haul.

Toss the catalogs. The most insidious form of spending temptation known to man or woman. Chuck them straight in the trash. Yes, including Victoria's Secret. Sorry, guys.
Don't pay unnecessary fees. Like the $1.50 you pay just because the ATM is right there, right now as opposed to walking two blocks to your bank, where you don't get charged every time you use your cash card. Or the late fees for returning videos. I know a woman who paid $60 in late fees to a video store last year. (It wasn't me.) (OK, it was.) Or those fat charges banks hit you with when you write a check that, well, bounces.

Clean it yourself. I've discovered a nifty trick: When a clothing label says, "Dry Clean Only," I wash it. Or I dab out that little coffee stain with an old-fashioned cleaning device known as a sponge.

Never pay a pro. If you can fix the neighbor's car, and she can paint the bathroom: Do it.
Bank your raise. You may find that measly 3% to 5% boost in the paycheck irritatingly tiny. So add that to your direct deposit and live on your previous salary.
Pay less for long-distance. Evaluate your phone bill and see how much you're paying per minute. Some dial-around codes or cheap calling cards (one without a surcharge per call) may give you a better rate. Not only do you save, but you may find you won't need to speak to Al in Schenectady so often.


No pet pampering. Does your dog need those pricey snacks? Does your cat need acupuncture? We didn't think so.

Never pay full price. If you must shop, for Pete's sake, discover the online world of discount Web sites. Ebay is still OK, but half.com and craigslist.org are excellent sources of "lightly used" goods -- everything from books to jewelry to office furniture -- to the entire first season of "Star Trek" on video.

I could go on an on, but let's stop here. If you follow even a few of these tips (as I have) you'll end up with a substantial chunk of extra cash every month. Just stay in the savings state of mind, and don't blow it on those post-holiday sales, OK?

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Surviving Unemployment

Losing your job may be the toughest financial blow you'll ever have to take, yet people do survive unemployment; in fact, they often emerge on firmer financial footing (because they've quickly learned to budget and cut back) and with greater confidence in their abilities. This section shows you how to move from desperation to success.

Sorting Out Severance Packages and Unemployment Insurance
Your first step should be to assess how much money you may still have coming in — usually from two sources: Severance pay (a lump-sump check from your employer) and unemployment insurance.

Many companies don't offer severance packages, so its' certainly not guaranteed. If the company is laying off employees because it is having financial difficulties, you probably wont' be offered any severance pay, but you may be offered a severance package that might include job-placement assistance, continued use of an office so that you still appear to be employed, and freelance opportunities to finish projects that you've been working on. This assistance is not common, however.

If you are offered severance pay, the amount will most likely be based on how long you've worked for the company: A months' pay for every two years worked, for example. If you're offered this pay — six months' worth of income, say — immediately put it away in a safe, interest-bearing account so that it will last you six months (or, perhaps, even longer).

If you're not offered any severance, or if the severance pay is so paltry that it runs out before you've even had your resume printed, you're not alone. Sadly, few companies offer this assistance — those that do are usually companies that have recently merged (and, therefore, have a lot of cash) and have laid off a small part of their staff.

If you were fired from your job because of misconduct, unemployment insurance and COBRA-defined coverage will probably not be available to you. These benefits are meant to assist employees who lose their jobs through no fault of their own.
You're far more likely to receive unemployment benefits, however. The moment you hear you've been laid off, call your states' unemployment-insurance agency. While you may have to visit the unemployment office, some states allow you to file a claim by phone or online.

The amount of your unemployment insurance and the length of time you'll receive it is based on how long you've been employed, the state you live in, and the general economic condition in your area. (In times of severe economic downturn, unemployment benefits are often extended for many more weeks than in relatively healthy economic periods.) Your state's unemployment office will know how many weeks you're eligible for and whether you have any chance of having those benefits extended.

As soon as you find another job, your unemployment benefits will stop. Some states, however, have a self-employment assistance plan that encourages you to start your own business. You receive the same benefits as you would if you were looking for work, but instead of sending out resumes and going on interviews, you're spending your time getting your business started. Ask your state whether a self-employment assistance program is available to you.

Locking In Your COBRA-Defined Coverage

The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 was designed to help employees who leave their jobs and are, as a result, without medical insurance coverage. If your former employer had 20 or more employees, COBRA allows you to continue medical insurance coverage for up to 18 months after leaving your company.

The fine print? Well, it's a doozy. You have to pay the entire cost of your insurance — the portion you paid before (it was probably deducted from your salary) and the portion your employer paid on your behalf, which may have run several hundred dollars per month. (Your former employer is also allowed to charge you a 2 percent administration fee.) The coverage you receive — including deductibles and limits on coverage — should be identical to the coverage you had as an employee.

When you're laid off, you should receive information about continuing your medical coverage under COBRA. If you don't receive it, ask for it! You usually have 60 days to elect to continue your coverage (and when you sign up, the coverage is retroactive to your last day on the job) and pay the first payment. If you fail to make the payments, which are usually due monthly, the coverage will be terminated.

Before deciding whether to accept COBRA coverage, call around or search on the Internet for short-term health-care coverage. If you're willing to go with a high-deductible plan (which means that you don't get any benefits until your medical expenses total a ridiculous amount, but you're covered up to a few million dollars if a catastrophe occurs), you may be able to pay hundreds less per month for insurance and still have coverage if a catastrophe occurs.

It's no small irony that when you can least afford to pay the entire portion of your medical insurance costs, you have to, in order to continue your coverage. However, if you're tempted to just go without insurance, don't! Doing so may turn a bad financial situation into a catastrophic one.
Many conditions, including pre-existing ones and pregnancy, aren't covered (or aren't covered until a year after the policy begins), and a few of these policies can't be renewed after they expire (usually in six to nine months).

COBRA's biggest benefit could be that even though it expires 18 months after you sign on, if you still haven't found work, you're eligible for insurance policies that aren't allowed to exclude pre-existing conditions.


Seeing to Your Other Insurance Need
If you're able to lock in COBRA insurance for the next 18 months, you have one major insurance need taken care of, even if it is frighteningly expensive. But you want to think about your other insurance coverage as well, especially insurance that may have been covered by your employer and insurance that you may be tempted to let lapse while you're unemployed.

Employer-Sponsored Insurance

Your employer may have paid for life, disability, dental, and vision insurance, in addition to medical coverage. Of these, life insurance is the one that's most important to secure while you're unemployed.

Some people think of life insurance as a way to leave great wealth to their children or spouse upon their death, but for most people, life insurance is simply a way to help your family pay for funeral costs and get through a year or so without your income.

Many people, therefore, buy enough coverage to pay funeral expenses, pay off the mortgage, and pay for one or two months of income or unemployment benefits. Funeral expenses vary by area — call your local funeral home for an estimate.

You can find out your mortgage balance by calling your mortgage lender and asking for the payoff amount. Use WORKSHEET 12-1 to see how large your life-insurance policy should be.

WORKSHEET 12-1

Amount of Life Insurance Needed

Funeral expenses:

$

Mortgage payoff:

$

Monthly income or unemployment benefits:

$

Other amount needed:

$

Other amount needed:

$

Other amount needed:

$

Other amount needed:

$

Other amount needed:

$

Insurance You've Been Paying For

Your employer has probably had nothing to do with your homeowner's or apartment insurance and car insurance. When you're unemployed, you want to keep those insurance policies intact, although this is a good time to shop around for a better price and, if necessary, higher deductibles.

You may also have had a retirement plan at your company. For now, don't feel that you need to do anything with this plan, unless you think your company might be in danger of declaring bankruptcy. Otherwise, let it sit until you've had a chance to figure out your next move.
Most states won't allow you to let your auto insurance lapse (they'll eventually take away your license plates), and most lenders won't allow you to let your homeowner's insurance lapse (they'll cancel the mortgage and force you to sell your house).

Although this may seem intrusive on their part, consider what would happen if you had a fire in your house and didn't carry insurance. The mortgage company wouldn't have a house to sell in order to recoup their loan, so they would make you pay that loan in full immediately.

Don't let unemployment go from bad to worse by not maintaining some insurance coverage for your house and car.

Paring Your Expenses Down to the Bone

Now that you have a sense of what your income might be for the next few weeks and have discovered the cost of paying for your insurance policies, you can create a bare-bones budget that you'll live on until you find your next job.

Your next step is to eliminate every single unnecessary expense so that, even with the increase in medical insurance payments (and, potentially, other insurance premiums, too), you can make your unemployment insurance (plus any savings you may have) last as long as possible.

This is your time to experience living like a monk. Unless you can show directly how spending money will get you another job, put away your credit cards and begin a period of absolutely no discretionary spending.

Read more »

Freezing Your Spending for the Short Term

If your spending is getting the best of you and creating more and more debt for your family, try freezing your spending for the next several months. Freezing your spending isn't easy, but it can stop your accelerating debt dead in its tracks.


What Freezing Really Means
Freezing means going cold turkey on your spending — you temporarily stop buying. For the short term, you cut out all but the most essential spending; your cuts will include personal appliances, home appliances, clothing, shoes, CDs, DVDs, decorative items, linens, computer accessories, and so on.

You freeze your spending for a predetermined amount of time — usually six to twelve months — and just stop shopping. Of course, you can still buy groceries and the required supplies for your home, but you don't buy anything else.

Reducing Temptation During a Freeze
People who temporarily freeze their spending usually find that the best way to stay the course is to steer clear of opportunities to spend money:

Don't read the ads that come in the Sunday paper.

Don't stop at outlet malls when you travel.

Dispose of all the catalogs you have in your possession.

Call all the companies that send you catalogs and have them both remove your name from their mailing lists and stop selling your name to other companies.

Don't visit Internet sites that sell products.

Don't go to the shopping-mall food court for a quick meal.

Don't meet friends for an afternoon at the mall or any other store.

Don't go window shopping at an appliance, music, or computer store.

Discontinue any music or book clubs, even if you have to buy your remaining required purchases to do so.

When grocery shopping, don't inadvertently wander into the consumer-goods section of the store.

Send gift certificates instead of actual purchases as gifts, so that you don't have to go to a store or browse a catalog or Web site.

The following sections will help you freeze your spending a little less painfully.

Establishing What's Really a Need
Understanding the difference between a need and a want is really the crux of sorting out your financial difficulties. In an effort to make ourselves feel better about being consumers, we continually elevate wants to the level of needs. But we actually have few needs, at least in the realm of products that you can buy:

Shelter
Clothing
Food and water
Thousands of years ago, this list meant a mud, straw, or wooden hut, along with some animal skins and just enough calories to survive. Today, we have escalated these basic human needs, and they have become so intertwined with wants that we're not sure how to separate them.

Yes, you need shelter, but you do not need a four-bedroom home with a formal dining room, a fireplace in the great room, a three-car garage, a kitchen with cherry cabinets, and a bonus room over the garage. That's a want.

The same is true for clothing. Humans need a way to stay warm and dry, but they do not need ten suits or eight pairs of jeans. Those are wants.

And while everyone needs food and water to survive, that food does not have to come from a five-star restaurant. You also only need enough calories to survive, not enough to add three to five pounds each year, as the average American does.

The desire to own and consume is very strong in Americans, and it enables us to justify nearly any purchase in the name of needs. Don't buy into it. Instead, use WORKSHEET 5-1 to list every need you have (you might want to use a pencil, though, and keep a good eraser handy). Be very specific in your list: Don't just list “house”; instead, write a description of the house you need and the amount it will cost.

WORKSHEET 5-1

Needs Versus Wants

Need (Description)

Cost

Consequences of Not Buying

$

$

$

$

$

$

$

$

$

Identifying the Consequences of Not Meeting a Need

After you've listed all your needs, identify what would happen to you if you didn't get each one, asking yourself the following questions:

Would you or others around you die?

Would you or others suffer physical pain or extreme physical discomfort?

Would your health or the health of others suffer in the long term?

Do you know for sure that you would lose your job without this item?

If none of these would happen, it isn't a need, it's a want, and you have no business buying it during a spending freeze. Remember this the next time your mind tries to talk your wallet into giving in.

Establishing — and Sticking to — a Shopping List for Your Needs

Before you leave the house and head out to spend money, write out a shopping list of your needs (which are likely to include only groceries and toiletries). Be sure that they're needs, and don't pad the list because you're in the mood to buy. Keep in mind that you are probably feeling deprived, so you may try to satisfy your spending itch by splurging on groceries and toiletries.

Don't justify veering from the list because something is “such a good deal.” Instead, remember that the best possible deal is to spend $0, so even if an item is half price, you can't buy it unless it's on your list.
Before you leave for the store, write down everything you need to get, and also scribble in an estimate of how much each item will cost. Then total the bill.

If it's less than you planned to spend, stop writing out your list and immediately go to the store. If the total is more than you planned to spend, begin crossing items off your list before you go, until you get down to the budgeted amount.

Then, buy only the items on the list. Don't add items to the list and then cross them off while you're standing in the checkout lane. Instead, stick absolutely to your list.

If you see something you're sure you need but it isn't on your list, put it on next week's list when you get home. Today, you can buy only what's on your list. Be vigilant about this process, and you'll never overspend on groceries and toiletries again.

Putting Away Your Credit Cards

No, seriously, put them away for at least six months. Put them in a safe place that's hard to get to, such as a safe-deposit box at the bank (which will probably cost around $20 per year, an amount that's worth spending if it keeps you from getting further into debt). The farther away the credit cards are from you, the better.

For six months, pay for all of your day-to-day purchases with cash and pay your bills with a check. When you're shopping for purchases that are allowed — such as groceries and toiletries — write out a list before you go, estimate how much you'll need, and take no more than $10 over that amount.

When you're not supposed to be making any purchases, limit the amount of cash you carry around to $5 and a few quarters. That will allow you to pay for parking if you need to, but not lunch or a flat-screen TV!


Tucking Away Your Debit Card
Although a debit card is technically like cash or a check, in reality it feels much more like a credit card. Because you don't hand over cash, you may feel as though you're not really paying for this purchase, much like when you use a credit card.

And if those funds are earmarked for other needs (like paying off your debt or saving for a vacation), you'll end up without enough money to meet your needs by the end of the month.

If you take $80 in cash to the grocery store, you'll be very careful not to exceed that amount with convenience foods. But if you take a debit card, you're not likely to be nearly as careful. Put the debit card in the same place you put the credit cards — your best bet is in a safe-deposit box.

Creating a Wish List

A wish list is an outlet for your hot little fingers and creative mind while you're in a spending freeze. The basic idea is that you write down everything you'd ever like to buy. The list may range from a new TV to whitening strips for your teeth to a sailboat. Anything you're not allowed to buy during a spending freeze is fair game. Nothing on the list has to be sensible or practical or a wise financial decision.

Sometimes when you're not spending, you feel disconnected from our consumer-oriented society, and a wish list makes you feel like your old self again. When you feel the itch to spend, go online or look at a friend's catalogs and write down the item number, description, page number, and so on of any item that looks interesting.

Act as if you're really going to buy the item. But don't. Just add the item to your list and let the list sit for a while. The act of writing the item down will feel, strangely enough, very similar to how you feel when you actually buy something. It sounds completely crazy, but it works!

When you brainstorm your wish list, think pie-in-the-sky. You're just daydreaming right now — later, you can make your list more realistic. So write down whatever you can imagine in your future. But make sure it's your wish list. Don't put a sailboat on your list if you really don't like water!
Paring Down the Wish List

Just listing the items can be cathartic when you want to buy, buy, buy. But listing the items on WORKSHEET 5-2 can also help you cross some items off the list. When you write down an item's name and cost, also check off one of the three needs categories: “Need Today,” “Need This Month,” or “Would Like Someday.” If none applies, don't check anything off.

Tomorrow, revisit any item that you indicated you needed today. Is the need still strong? In a month, review any items that you needed this month, and also look at the items that you'd like someday. Do you still feel strongly about them? Cross off any item you no longer feel you need and/or check off new categories for some items.

WORKSHEET 5-2

Your Wish List
Item Name

Cost

Need Today?

Need This Month?

Would Like Someday?

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

$

Reviewing a Sample Wish List

Your wish list may look like TABLE 5-3:

TABLE 5-3

Sample Wish List
Item Name

Cost

Need Today?

Need This Month?

Would Like Someday?

Smoothie maker

$30

✓

Honda Element

$26,000

✓

Garden arbor

$275

✓

New luggage

$350

✓

Two pairs of jeans

$130

✓

iPod

$249

✓

Cabin in the woods

$210,000

✓

Now, suppose 30 days have gone by, and the list looks like TABLE 5-4:

TABLE 5-4

Sample Wish List, Round Two
Item Name

Cost

Need Today?

Need This Month?

Would Like Someday?

Smoothie maker

$30

✓

Honda Element

$26,000

✓

One pair of jeans

$65

✓

iPod

$249

✓

Cabin in the woods

$210,000

✓

TABLE 5-5

Sample Wish List, Round Three
Item Name

Cost

Need Today?

Need This Month?

Would Like Someday?

Smoothie maker

$30

✓

One pair of jeans

$65

✓

iPod

$249

✓

At this point, you've narrowed your list to items you would clearly like to own and can begin to save for when your spending freeze is over. You also have a ready-made list if anyone asks you what you really want for your birthday.

Read more »

Sticking to Your Budget in an Emergency

Too often, a budget gets derailed because of an unexpected expense, especially in the first few months. Ideally, you want to keep money in savings for such emergencies, but in case you haven't had time to build up your cash reserves, this section gives you ideas for sticking to your budget even in the worst of times.

If Your Car Breaks Down
Most people on a tight budget have one prayer: “Please don't let anything happen to my car.” That's because car repairs can cost hundreds or even thousands of dollars, and you often can't get back and forth to work without a car. So what do you do if your car does break down?

Immediately Find a Way to Work

Whether you have to arrange for a ride from a coworker, ride a bike, take the bus, rent a car, or walk, if you're in an accident or your car isn't running, figure out a way to get to and from work without delay. Too many jobs have been lost because, for three or four days, an employee couldn't get to work and an employer wasn't very understanding.

If you have to miss or be late for even one day of work because of your car, call your supervisor and explain that you have car problems and are trying to find an alternate way to work right away.

Consider alternate ways to get to and from work before your car breaks down. Even if you never have a bit of trouble with your car, you'll have the peace of mind that comes from knowing how you'd handle a car crisis if you had one.
Research Your Warranty and Insurance Coverage

If you recently bought the car new and your car troubles aren't due to an accident, your car is probably under warranty and will be repaired for free.

Even if you bought the car used, you may have a short-term warranty that covers the repairs you need. If your car isn't running because of an accident, call your insurance company to determine how much of the repairs your policy pays for.

Get a Free Repair Estimate

How do I describe a problem if I don't know anything about cars?
Simply tell the repair shop what sounds you're hearing as you drive (try to make the sounds for them) or what happens when you turn the key. This will give experienced mechanics enough information to give you a ballpark estimate of the repair costs.
If you can get your car to a repair shop, take it there and ask for a free, no-commitment estimate. Make sure you emphasize the “free” and “no-commitment” parts of the estimate. Many repair shops don't charge for estimates as long as you end up repairing your car there.

If you decide not to repair it, or if you go somewhere else for the repair, they'll bill you $50 or $100 for the estimate! Be sure to let the repair shop know that you're on a very tight budget and need to know the least expensive way to get your car running again.

If you can't get your car to a garage or repair shop without towing it (which can be very expensive), call a few garages and describe the problems you're having. Tell them about your tight budget and ask for a ballpark estimate for the problems you're describing.

Some car repairs are simple enough to do yourself. If you or a friend or family member know anything about cars, consider buying the parts and fixing it yourself. If you have an alternative way to work every day, you can spend a few hours each evening working on your car until it's repaired.
Call Around to Compare Your Price

After you know what the problem is, call several garages in your area to find out what they will charge for the same repair. Emphasize that you need to know the total amount and can't afford any surprises. If they won't give you a price, call somewhere else.

If you're going to have it repaired and can't drive it, also call several towing companies to find out how much they'll charge to tow your car to the shop. Keep in mind that your insurance company or travel club may also offer free towing in a limited area. Find this out before you call a tow truck.

Find Out If the Shop Will Let You Pay Over Time

When you find the repair shop that has the best prices and can get the job done quickly, find out whether they'll let you pay over time, say, in three or four payments, without charging interest. They may say no, but it's worth asking.

There are several credit cards that help with car expenses, either giving you rebates on gasoline purchases or giving you points that you can use to buy a new or used car, maintain your car (with tune-ups and oil changes, for example), or make needed repairs.
Develop a New Budget

Using the repair estimates, develop a new budget. Do you have money in savings that you can use? Can you pay the shop a little each month? Can you make the repairs yourself? Can you live without a car and walk, bike, or carpool to work? Can you buy a new-to-you car and still stick with your budget?

Investigate every possible option, but be realistic in your numbers. Whatever route you decide to take — whether that's to make the repair, get another car, or find a way to do without — use your revised budget to begin working toward your financial goals again.

If You Incur Extensive Household Expenses

While you can put off some household repairs, others are critical. If the roof leaks, the sewer drain is clogged, the water isn't running, or you've lost electric power to some of your rooms, you need to get them repaired or replaced. These repairs, however, can be expensive!

The first thing you want to do is try to fix the problem temporarily, so that the repair doesn't blossom into something bigger. Can you, for example, stop the roof's leak by going up into the attic and putting plastic under some of the decking to stop water from coming in? Can you clean out the sewer line with a snake (available from any hardware store)? Have you called the water company to see whether the problem is on its side (that is, in the lines leading up to your water meter)?

Ultimately, however, you're going to have to make one of two choices: Sell the house with the problem or fix the problem. The next two sections discuss these two options.

Sell the House

One way to get out from under large, expensive repairs is to sell your house and move to a smaller one. The problem, of course, is that either you'll have trouble selling the house to any buyer or you'll have trouble selling it for very much money.

One way to avoid losing too much money is to price the house as though the repair did not have to be made (as if the roof were in great condition, for example), and advertise up front that you'll give back half (or two-thirds, or all) of the amount necessary to make the repair at closing. You won't actually have to come up with that cash out of your savings or other account.

Instead, that amount will be subtracted from your equity (the amount of your house that you have paid off) and given to the buyer as a lump sum. You'll get that much less money from selling your house, but you're likely to get more buyers than if you simply price the house lower in the first place. Why? Because many buyers can't afford to make large repairs — they're using all of their cash reserves for the down payment.

Don't ever (ever!) sell your house for less than you owe on the mortgage. If you do this, the lender will immediately demand full payment for the mortgage, and you may not have the money to pay up. Instead, make the repairs.
Here's an example. With a new roof, your house would be worth $90,000. You price it at $84,000 to account for the new roof the buyers will have to get. The buyers are putting 20 percent down and they'd planned on buying a house for $90,000, so they've saved $18,000 for this purpose.

If you price the house lower, they'll have to put down only $16,800, so they're able to keep $1,200 of their down-payment money. But $1,200 isn't enough to pay for the roof! Instead, you sell the house for $90,000 but give $6,000 back at closing. They put down their 20 percent ($18,000), but also walk away with a $6,000 check to pay for the roof. And you still get your $84,000 (minus whatever the balance is on your mortgage) and can look for a smaller house.

Many people don't realize that a Realtor's commission may be negotiable. Before signing with a selling agent (also called a listing agent), discuss the commission (usually 3 percent or 3.5 percent to each agent or 6 percent to 7 percent if one agent represents both the buyer and seller). See if your agent will drop down to 3 percent or 2.5 percent for each half of the sale.
If you're thinking of selling your house, keep in mind that many house sales do not require the use of a real estate agent. Because agents get 6 to 7 percent of the selling price of the house, if you don't hire one, you can afford to do a lot of advertising and pay for an attorney or Realtor to draw up the paperwork (which usually costs $500–$1,000), and still come out ahead.

Many people use real estate agents because they believe they'll get a higher price for their homes — after all, realtors get a higher commission if the house sells for more money. But even this may not be true. Most realtors would rather sell a house cheaply and quickly than price it high and wait for it to sell.

If they have to wait an extra three months — and do quite a bit more work showing and advertising the house — to sell it at a higher price, they actually lose money; they'd rather sell it three months earlier for less money.

Keep in mind, however, that if you act as your own agent, you'll have to put up a sign, take out ads in your local paper, and show the house yourself, and you won't have a realtor to turn to for advice along the way. Use your best judgment.

If you take some time to read up on how to sell your own house and think you're up to the task, go for it. If you don't think you'll be successful at selling your own home, shop around for a good realtor.

Pay for the Repair (But How?)

If you have money in your savings account, even if it was earmarked for something else, you probably want to use it to pay for your home repairs. Short of that, the most logical way to pay for overwhelming household repairs is to refinance your home and cash out some of the equity to pay for the repair.

Even if you don't have much equity in your house (to find your equity, subtract the amount owing on your mortgage from the amount your house is worth), some lenders will still give you cash back, financing your house for up to 120 percent of its value. This can help you pay for your home's repair, but can hurt you in two ways:

Your monthly payments may soar. (On the other hand, if interest rates are lower than when you bought you house, your monthly payments may stay the same.)

You may not have any equity in your house if you plan to sell it in a few years.

You never want to finance your home for more than you can sell it for. If your income changes, you might be trapped in your home, unable to sell it and unable to afford the payments.

If Family Medical Bills Overwhelm You


Even if you carry medical insurance, unexpected medical bills can still pile up. Here's why. Suppose your insurance carries a $250 deductible and then pays 80 percent of your medical expenses (your 20 percent is called your co-payment).

You are in a car accident that doesn't do any permanent damage to your body, but does result in $15,000 in hospital bills. Of that $15,000, you'll owe $250 for your deductible and $2,950 for your co-payment, for a total of $3,200! Where in the world are you going to come up with that?

Generally, you have only one option: Work out a payment plan with the hospital. (A second option is to pay the bill with your credit card and pay it off aggressively each month, but often the interest rate on credit cards is sky-high.)

Some hospitals offer interest-free payments if you pay within three to six months; others charge interest (but usually less than credit card companies charge) no matter how soon you pay.

Most medical providers are willing to work with you to pay off a large balance. They need to know immediately, however, that you'll have trouble paying the balance and want to set up a payment plan.

Never ignore payment notices from a hospital or doctor's office. So many people do this that medical providers are quick to turn to collection agencies and send negative reports to credit-reporting agencies. You may damage your credit rating for years to come.
If you're not sure how much you can pay, revisit your budget. Eliminate any expenses that aren't absolutely required, and see how much you may be able to eke out each month. If this isn't enough, look for larger-scale ways to cut your expenses.

When you've determined how much you can afford to pay each month, approach the medical provider with this amount to see whether it's acceptable. You may have to sign an agreement saying that you'll pay this amount each month — be sure you can pay it before you sign.

Remember: Check your budget first. If you're given a monthly amount by the medical provider, don't agree until you've run the numbers on your budget.

If You Become Sick or Disabled — Even Temporarily

f you're in an accident or develop an illness that leaves you disabled even for a short period of time, call your employer immediately. Most employers carry disability insurance on their employees that ranges from 40 to 80 percent of your income, and most can offer you some pay for sick time until that insurance kicks in.

Send your employer every bit of information they need to process your claim, including letters from your physician. A call from your doctor to your human resources (HR) representative can also be quite helpful.

Whatever you do, don't get defensive with your employer. Your HR rep should feel as though you're as horrified at your absence as the company is, and that you can't wait to get back to work.

Keep in mind that some employees fake illness and injury in order to collect disability pay without working, and you don't want to be labeled as someone who is trying this scam.

If the company doesn't believe that you're actually disabled, you could lose more than a few weeks' pay — you could lose your job. You might be able to fight it in court, but that takes money, too. Instead, contact your employer immediately and work with them to resolve your problem.

Even if your company carries disability insurance, however, it may not kick in for some time, and when it does, it won't give you 100 percent of your pay. In this case — or if your company does not carry disability insurance — take the same actions that you would if you lost your job.

If You Lose Your Job

If you are laid off from your job, you'll probably feel angry, overwhelmed, and out of control, but this is an important time to stay calm.

Not only will you need to keep your wits about you to make the best possible financial decisions, you'll want to watch what you say to coworkers, supervisors, and company representatives. You never know when someone whom you work with now will land at a company you apply to later; you'll want to keep your reputation intact so that you have as many future networking opportunities as possible.

If a Friend or Family Member Has a Special Need
Many, many people are in financial trouble because they've given a friend or family member financial assistance that they clearly cannot afford — making a loan that isn't paid back, offering free room and board, buying a car for someone. Don't let this happen to you.

If a friend or family member is in need, you absolutely must help. But, if possible, avoid helping financially unless you can afford to lose that money completely. Always assume that loans won't be paid back or will be defaulted on, expenses associated with free room and board will be completely on your shoulders, and so on.

If you can't afford to lose the amount of money that helping your friend will cost, don't help financially. Offer prayers, free babysitting (for a limited period of time), an occasional ride to work, and so on.

Also consider taking your friend to a credit-counseling agency or to a lender to see about getting financial assistance. Don't, however, co-sign any loan that you cannot afford to pay off yourself.

Read more »

Saving Money for College

Saving for college is on the lips and minds of nearly every parent in America. Although few people are actually able to save the total cost of tuition, fees, room, and board needed by college freshmen, the pressure of trying to do so is still stressful to parents. This section will help to reduce some of that stress.

College costs can be a bit confusing; this section clears up what these costs are and what the average is today.

Tuition and Fees

This covers the salaries of professors, maintenance of buildings, use of school medical clinic, and so on. Basically, it's the cost of being a student (whether a commuter or resident) on a campus.

At public colleges, this number is currently averaging just under $6,000 for in-state residents; it is over $22,000 for private schools, and about $2,300 per year for two-year public colleges.

Room and Board

Room and board includes a place to live and food to eat. Prices for tiny dorm rooms are exorbitant — room and board tends to cost between $7,000 and $8,000 per school year. You can usually save a bundle by living off campus, particularly if you share a rental house with other students.

Sometimes, parents with a bit of extra cash will buy a house for their college kids. The kids living there split the cost of the mortgage payment, taxes, and insurance (and often pay the same price they would if renting), and the parents sell the house when the kids graduate. It's really not a bad idea.
Books

College textbooks are expensive — textbooks can cost over $100 each. The average bill for books for a school year is about $900.

Study Abroad

Many college students try to take one semester or year and study abroad. Expenses vary by the student and the location, but this cost generally includes airfare to and from the location; tuition at the foreign school; and spending money at the location. However, when attending a very expensive university (such as Harvard, MIT, Notre Dame, and so on), studying abroad may actually cost less, even factoring in the increased travel costs.

Internships

Internships are becoming more and more vital to graduating college seniors. If you're able to work in your field of interest before graduation, you'll have a much easier time finding work in your field. Many students live at home while interning during summers; those who can't live at home will need to pay for an apartment during the internship period.

Transportation

Some economists predict that college costs (tuition, fees, room, and board) will rise 6 percent per year, which means that current public-university tuition costs of, say, $6,000 per year, will rise to over $17,000 in 18 years.
Some freshman aren't allowed to have cars on campus, but if a student is to have any flexibility at all, taking a car to school — even an old clunker — is a good idea.

You will, however, have to estimate gas, maintenance, insurance, excise or personal property taxes, and license. Transportation costs vary widely based on the cost of gas, but you can estimate about $1,000 per year for on-campus students and about $1,500 for commuters.

Miscellaneous Expenses

Miscellaneous expenses range from music downloads to late-night pizzas to gas. They generally run around $1,500 per year, for a student on a budget.



Determining How Much You Can (or Want to) Help Out by Tere Stouffer
This isn't a subject that many people talk about, but at some point, you need to make a decision about how much you can or want to help your child pay for college.

Paying for all of a child's college expenses is out of reach for many parents, and if you do so, it may make your child less able to appreciate the gift that attending college really is. A child who really wants to attend college will find a way, either by working part time, winning scholarships, or taking out loans.

Don't assume that you and your spouse or partner feel the same way about whether to pay your kid's college expenses. While you want to try to come to a consensus, agreeing to disagree is okay, too.

Also be sure to include your growing child in this conversation. Kids who expect to pay for all or part of college will be better equipped to deal with finding money than will kids who assume money is available and then are told later that full support is not available.

Just as you can support your child financially, you can also support your child by visiting, calling, texting, sending emails, sending care packages, and so on. College can be quite lonely, especially during the first semester, and your emotional support will surely help.



Seeing How Much You Can Save by Tere Stouffer
How much you can save for your child depends on three factors: How much you're able to invest; how long you have; and how much you can earn in interest.

In general, investing a small amount each month for 18 years will yield greater savings than investing larger amounts for four or five years. Table 18-1 below gives some examples of what you'd save if you put money for college in a tax-free or tax-deferred account.

To find out how much you can save for your child's college fund, visit the FinAid site and click on their Calculators section. You can play around with the numbers and determine how much you can save over time.

TABLE 18-1

Saving for College
Monthly Deposit

Interest Rate

Number of Years

Total Savings

$25

5%

5

$1,707.24

$25

5%

18

$8,766.43

$165

5%

18

$57,858.41

$165

2%

18

$42,928.53

$165

9%

18

$89,161.77

$500

5%

3

$19,457.41

$500

5%

18

$175,328.52


Taking Advantage of Government-Sponsored Savings Plans by Tere Stouffer
If you have 18 years to save for college, chances are you'll end up with quite a bit of money for your child. But even if you don't have that much time, three tax-free college-savings vehicles can help you save for your child's college expenses.

Between the grants that are available to students and the tax savings you can realize, the government can actually be a big help to you and your child. On average, students receive more than $3,000 in grants and tax benefits at public four-year colleges; $9,000 per year at private four-year schools; and $2,200 per year (or nearly the entire amount of tuition) at two-year colleges.

Coverdell Education Savings Accounts

Although renamed the Coverdell education savings accounts several years ago, these are still often called by their old name: Education IRAs. These accounts allow you to contribute $2,000 per year, tax free, for college. The withdrawals are tax free, too.

The account is in the name of the child (called the beneficiary), and nearly anyone can contribute to it tax free, including grandparents, godparents, aunts and uncles, and you, up to the maximum amount each year. Contributing more than the maximum amount, even from several different sources, can result in penalties.

The tax savings for contributing to Coverdell accounts begins to phase out at $95,000 in income for individuals and $190,000 for couples. That's a lot of income, yes, and probably doesn't apply to you, but if other family members or friends want to contribute to your child's IRA, they should be aware that there are income limits on who can receive the tax break.
The money in Coverdell accounts can be used not only for college tuition, fees, room, board, and books, but also for an education-related computer, academic tutoring, and transportation to and from school. The money can also be used for K-12 expenses, including private-school tuition.

If the funds aren't used for education, the account remains in the name of the beneficiary — it doesn't revert back to you or the other donors, and this might really grind your gears.

There's only one catch, really: The funds must be used within a month of your child turning 30 years old. If money were ever left in a Coverdell account and your child turned 30 plus a month, he or she could start another account in the name of another child. This does mean, however, that Coverdell accounts aren't very useful for older adults who want to return to college.

Okay, there's kind of another catch, too. The financial institution that holds your Coverdell account will charge the account a maintenance fee for managing the investment account. The fee is usually small, however.

529s: College Savings Plans

All U.S. states currently sponsor college-savings investment plans. Currently, money put into a state-sponsored 529 is tax free upon withdrawal, and some states give a tax break when you contribute to the plan, too. Beginning in 2010, however, withdrawals will be taxed at the child's current tax rate.

How can I get information about my state's plan?
The Saving for College website lists every 529 savings plan administered in the country, and then reviews information about the plan's manager and its investment rating.
The fact that states sponsor the plans (and may give state income-tax breaks on the deposits) leads some people to believe that your child has to attend an in-state public university in order to use the funds. Only state-sponsored prepaid-tuition plans have that requirement; funds in 529 college-savings plans can be used at any college or university in the country.

Basically, the plans operate very much like an education IRA, except that instead of the money being owned and controlled by the child, 529s are owned and controlled by the parent. Your child is still the named beneficiary, but he or she has no legal right to the money if you choose not to authorize a withdrawal. And you can change the named beneficiary at any time. Anyone can contribute to the 529 fund.

Another striking difference between an education IRA and a 529 is that the amount you can contribute to a 529 is virtually limitless, with no loss of tax benefits for high-income donors. Also, the plan doesn't stop at age 30, so you can establish one for yourself to earn your first degree or attend graduate school.

The tax implications of 529s are not easy to understand. If you're already using the services of a tax accountant, be sure to discuss your college-savings plan, too. If not, consider hiring a qualified tax accountant to help you wade through the many regulations covering these plans.
The account is placed in the hands of an investment-fund manager who charges a maintenance fee, and you can establish direct-deposit funds into the account, making deposits to the plan simple and relatively painless.

Another Kind of 529: Prepaid Tuition Plans

A prepaid-tuition plan allows you to buy tuition shares or units and then hold on to those shares until your child wants to use them. Buying a share is just like paying tuition, but at today's prices. You lock in at today's tuition rates, thus avoiding the dreaded annual increase in tuition.

Family members and friends can buy shares for your child, too, but some states require contracts that lock you in to buying a certain number of shares in a given period of time.

When your child receives the prepaid-tuition shares to use to pay for college, the federal government usually taxes them as income. Since your child has a low tax rate, it may still result in tax savings. States don't usually tax prepaid-tuition shares.
The plans vary greatly in where and how they can be used. Some colleges and universities sell tuition shares directly, but they can be used only at that school.

In other cases, states sell the shares, and they can be used at any public — and sometimes private — college in that state. Some blocks of schools (like a group of private schools) sell the share.

If your child decides not to attend that college or isn't accepted at one, you may be eligible for a refund of the tuition shares, but often a penalty is levied. If you purchased the shares directly from the college or university, you may be able to sell them to another family to use.

Finding Other Ways to Pay for College by Tere Stouffer
Tax-free savings plans are great if you have a few thousand dollars a year to invest for your child. If you're not able to squeeze that much out of your budget, however, consider the following ways to help your child pay for college.

A 15-Year Home Mortgage

One creative way to pay for college if you don't currently have the money to do so is to buy a house (or refinance an existing house) on a 15-year mortgage when your child is born. When you pay off the house 15 years later, begin putting that “mortgage payment” into a savings account or low-risk investment fund.

The account will have 36 “mortgage payments” in it by the time the child is ready for college — an amount that, depending on your mortgage payment, could be substantial. At 5-percent interest, a $1,000-per-month “mortgage payment” into your savings account will yield $38,914.81 in three years. You can then continue using what was mortgage money for college money throughout your child's four or five years at college.

Scholarships and Grants

Scholarships range from athletic grants to academic scholarships to money that's based on geography or heritage. Peruse the many money-for-college books at your local library, and encourage your child to apply for any and every scholarship that looks appropriate.

The majority of academic scholarships now offered to college-bound seniors are based on scores received on the PSAT and SAT. Because only the best scores are reported, encourage your child to take the test early and often, perhaps even investing in a study course.

While the tests and study courses do cost money, they could add up to tens of thousands of dollars in scholarships if your child scores among the top students in the country. Some colleges even offer free tuition and fees for students who score a perfect or nearly perfect mark.

To become eligible for any government grants or loans, your child must complete a Free Application for Federal Student Aid (FAFSA). This form can be time-consuming to complete and may include information that you would rather keep private. Still, no government grants or loans are given unless this form is on file.
The most well-known college grant is the federal Pell Grant, which gives money (up to $4,050) directly to low-income children attending college. It does not have to be repaid, and is available only to undergraduates earning their first degree.

Federal Supplemental Educational Opportunity Grants, which range from $100 to $4,000, may also be available to low-income students.

Loans

Loans are different from scholarships and grants in that they must be repaid after the child graduates from or stops attending college. Federal student loans are usually borrowed directly from the government or from qualifying private lenders — both offer an attractive low interest rate. Many families, even those that do not appear to demonstrate much of a need, are eligible for federal student loans.

Federal Perkins Loans are borrowed directly from the school (also at a low interest rate), but are available only for low-income students. You can borrow up to $4,000 per year for undergraduate study.

Federal Family Education Loans (FFEL) and the William D. Ford Federal Direct Loan are administered by the U.S. Department of Education as either Stafford Loans or PLUS loans.

Stafford Loans are available directly to students, and may or may not be based on need. Total loans vary from $3,500 per year to $10,500 per year for undergrads. PLUS loans are available to the parents of college-bound students, but instead of being due when the child graduates, they must be repaid while the child is still in school.

Work Study and Other Jobs

A lot of students work while in college, and not only does working often not hurt the student's chances of succeeding, it can actually improve his or her chances of being hired after college! Working forces students to be disciplined, and also may provide real-life experience (especially when doing a co-op or internship) that can make a resume shine.

Here are some broad categories of work opportunities for your child:

Work study. Federal work-study programs allow students with financial need to be employed, usually by the university or surrounding community, for a certain number of hours per week. This option is considered part of a student's financial-aid package, along with grants and loans.

Part-time job. A student can apply for a job at the bagel shop or as a professor's assistant and is usually paid minimum wage.

Full-time job. Your child can opt to work full time and attend school part time. Although the full-time job usually isn't professional work, the company may offer some tuition assistance or a flexible work schedule built around class schedules. Most students take six to 10 years to finish a degree while working full time.

Co-operative education. A college co-op education alternates semesters of full-time college attendance with semesters of full-time work in the student's field of interest. The semesters of work usually pay quite well — sometimes enough to pay all of the student's college expenses, plus living expenses during the work semesters.

Co-op positions are difficult to get, and they're demanding because the student must behave professionally during the work semesters and must take full course loads while at school. Most co-op students graduate in five years. Because of their real-life experiences, however, students who co-op are usually the first ones hired upon graduation.

Internship. An internship is similar to a co-op, except that students usually attend their eight semesters of school like other students, interning only during summers and other school breaks. Unfortunately, some internships pay poorly or not at all, but they do provide necessary real-world job experience.


Creating a Budget That Includes College Expenses by Tere Stouffer
In order to begin saving for your child's (or your own) college expenses — whether you have 18 years or 18 months — you'll need to sharpen your pencil and rework your budget.

First, look at your budget to see how much you might be able to pull together each month by reducing your expenses. Then visit FinAid to determine how much you'll be able to save.

WORKSHEET 18-2

A Child-in-College Budget

Monthly Expense

Amount

Ways to Reduce/Eliminate

New Amount

College costs

$

N/A

$

Groceries and household items

$

$

Day care

$

$

Contributions

$

$

Savings

$

$

Rent on furniture or appliances

$

$

Entertainment/babysitting

$

$

Eating out

$

$

Rent or mortgage

$

$

Car payment or lease

$

$

Electric bill (average)

$

$

Gas bill (average)

$

$

Water bill

$

$

Sewer bill

$

$

Trash pick-up bill

$

$

Cable/DSL/satellite bill

$

$

Telephone bill

$

$

Cell phone bill

$

$

Bank charges

$

$

Haircuts/manicures/pedicures

$

$

Home equity loan

$

$

Other loan

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Child support or alimony

$

$

Car maintenance

$

$

House maintenance

$

$

Auto insurance

$

$

Property taxes

$

$

Gifts

$

$

Events to attend

$

$

Clothing and shoes

$

$

Home insurance

$

$

Vehicle registration

$

$

Vacation

$

$

Club membership

$

$

Other:

$

$

Other:

$

$

TOTAL:

$

$

Another way to determine your savings is to ignore the fact that you'll be earning interest on your money, and just multiply your monthly contribution by the number of months you have between now and the time your child will start college.

FedMoney lists dozens of government programs that give students money for college. If you've been thinking that you can't afford college, visit this site before you give up! There are other sites, too: Search on the phrase “college scholarships.”
Compare that number to today's tuition, fees, room, and board, and you'll have a good idea of how much college your savings will buy. The reason this method works fairly well is that college costs are rising by about the same amount that most investments are yielding.

If you're not satisfied with your potential savings, see if you can find extra money in your budget (by cutting back even further on your expenses), and then calculate how much you'll have saved by putting away that amount.

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Holding Down a Couple of Part-Time Jobs

If you're unable to find a full-time job to replace the one you had, one way to get your financial picture back in focus is to look for a couple of part-time jobs and combine the hours to work full time (or longer).

The following sections give you a few tips for successfully managing two part-time jobs. Keep in mind that working long hours can take a toll on you and your family.

Make Each Employer Aware of the Other

If your hours aren't fixed at either job, make sure that each employer knows you have another job — and let each employer know what hours you're available to work. You'll have a better chance of making this situation work.

Establish Boundaries

Scheduling two part-time jobs can be extremely difficult unless you establish some boundaries for the hours you work on each job.

For example, Job A might be weekday mornings only — anytime from 6:00 a.m. to 1:00 p.m., Monday through Friday. Job B might include weekend hours, from early in the morning until late at night.

You'll still have some conflicts — like when your weekend boss has you working until midnight on Sunday and your weekday boss wants you in at 6:00 a.m. on Monday. But by establishing some boundaries for each job, you'll have less overlap.

Try to Get a Set Weekly Schedule

When you look for part-time work, give priority to jobs that give you the exact same hours each week. That way, you'll be able to work your other part-time job around the first without any overlaps.

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