The end of Bing Cashback

It's too bad really, I was a big fan of Bing Cashback. I first started using Bing Cashback late last year, when, in an effort to diversify the free internet services I frequent (i.e. I don't like relying too much on any one provider, be it Yahoo, Google, or Microsoft), I switched to Bing Search. Since that time, I've saved nearly $250.

But according to their site, that's all changing:

We are writing to notify you that the Bing cashback program will be discontinued, and the last day to earn cash back on your Bing Shopping purchases will be July 30, 2010.

So why did it close down? Usually, these things just boil down to profitability. But here's NPR's take:

Note that Microsoft themselves said, "We did not see the broad adoption we had hoped for." That could mean not enough users of the program or not enough increased search engine market share or... But who knows?

So what if you're a Bing Cashback user and you have rebate money you haven't redeemed? No worries, you have until July 30, 2011.

But what if you're such a Bing devotee that you aren't interested in other rebate programs? There may be hope for you after all. Did you notice that at the end of their announcement, they say, "...and we are currently working on an exciting new program which you will hear more about from us later this summer."

Hmmmm... I'm intrigued.

Posted by Matthew at 9:21 AM | TrackBack
Category(s): Family Finances
Tag(s): budget, family finances, money saving tips

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Is pet insurance worth it?

I'm torn. I can't decide if my love for our dog outweighs my distaste for feeling duped into buying yet another kind of insurance: pet insurance. Yes, it's real with actual revenue numbers to back it up. Opinions vary regarding its merits: this piece acknowledges the value, while this piece does not. Then there's this information about calculating the worth of your pet.

If you ask me, it's impossible to put a price on a face like Gertie's. But I think I'm in the "factor it into your budget" camp. In other words, instead of paying premiums to a pet insurance company, open a pet savings account and "pay yourself" instead. If we put money aside now, not only will it be there if we need it but we'll get the benefit of compounding interest.

But that's only half the story, the money-saving, budget-conscience half.

Isn't there a stewardship issue here? Don't think so? Maybe this piece will change your mind. It willl certainly incense the hard core pets-aren't-people-they're-possessions crowd. Even a big-time pet lover like myself was taken back. Listen to this:

APPMA reports that 42% of dogs now sleep in the same bed as their owners. I'm not judging anyone... yet.

Half of all dog owners say they consider their pet's comfort when buying a car. I barely consider my kids' comfort.

With annual growth nearing 50%, the pooper scooper industry is now experiencing a lot of consolidation...There's a "pooper scooper industry"?

I'm not going to say that some of these crazy things people do for their pets are morally or even financially wrong because I don't know their heart or their giving. But it's hard not to have questions when you learn that Fido could be put on a cocktail of Slentrol and Reconcile; one for the unwanted pounds he put on while being depressed and the other for the depression from all the canine separation anxiety. My question in particular: Why medicate when he could just have liposuction and go everywhere with you in your canine-cozy Caddy? ;-)

Is it just me or is there a financial stewardship issue banging around in here somewhere? I think so, or at least there certainly can be without proper balance. You see, I want my giving to reflect how much I love the God and love other people. So it's more about my love for Him and less about my lack of love for Gertie.

Besides, when pet cloning comes down in price, Gertie will know how much we love her for the rest of her lives.

(This piece originally appeared in a July 2007 blog post (membership required) of The Sound Mind Investing Weblog.)

Posted by Matthew at 2:30 PM | TrackBack
Category(s): Family Finances, Giving and Stewardship
Tag(s): budget, family finances, insurance, money saving tips, savings strategies

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A review of Swaptree.com

Last summer, we wrote about Swaptree, a website that allows you to list and trade books, music, DVDs, and video games for free (and soon you'll able to trade Blu-ray discs and audio books). Since then, I've had a chance to use it in real life.

Here's how it works in general. Lots of individuals create lists of items they want, as well as items they have to trade. For the most part, you're saying that you're willing to trade any item on your "have" list for any item on your "want" list. (You always have the opportunity to reject a trade, but if you do this too often, Swaptree will evidently get cranky.) This is important, because in most cases Swaptree arranges deals among three parties, rather than two. In other words, you're sending an item to person A while getting an item from person B.

Here's the detailed version of how this works:

After you sign up for a free account, you are prompted to list items you have to trade and those you'd like to have. Listing items you have is quite easy. You either search for it or, better yet, simply enter in the UPC or ISBN in the "Have" list box and click "Add". From there, you select the item's condition and give a description if you'd like, then submit. Very quick and easy.

To add items to your Want List, type in the name of the item in the search box, then click the "Want It" link when it pops up. It's really that easy.

Next, you can view potential trades by clicking on your "Want List" and then sort the selections by "View Only Get Now Items." If there are any trades available to you, they will show up here. Next you can initiate a trade, assuming you are okay with the exchange. But not all items are equal. You may not want to trade a popular movie for an old paperback. But if you are good with the terms, you can initiate the trade and wait for the other party to accept (they are given roughly 2 days). If it's accepted, you'll get an email (or you can check back on the status by clicking the "My Trades").

Assuming it's accepted, you have a couple days to mail the item. Swaptree will give you the person's mailing address. You can either have Swaptree calculate and print the postage/mailing label for you right then (you'll need a credit card to pay for the postage if you select this option and they charge a small fee for this service - but it's extremely convenient and the prices are quite reasonable), or you can calculate your own postage.

After you mail it, you can "Contact the user" to notify them of your ship date and/or ask them questions/make comments. Once you've received your item, you can come back to "Rate the User". This rating might make a difference with whom you trade in the future. Since other users also likely take notice, it's advisable to solicit positive feedback if they haven't already rated you.

And that's Swaptree in a nutshell. We recently moved and came across some old movies and video games that I had intended to sell on eBay. But since I didn't want to hassle with auctions, and there were some DVDs we wanted, I thought I'd give Swaptree a try. And it works as advertised. I'm notified when someone initiates a trade and I check back once a week to see if there any available trades I may have missed or if I want to add some items to our Want List. So far, I've made 4 trades (traded movies for movies and traded video games for movies) and haven't had any issues. The only fees I've paid were the shipping costs. Again, Swaptree makes a small profit when you buy and print postage but you don't have to use their postage generator.

If there's a downside to Swaptree, it's that pending the size of your Want and Have Lists, a trade could take a while. So if you're in a rush, this probably isn't your best option. But it will likely be on my pre-eBay checklist if there's an book, movie, CD, or video game I'm interested in getting. And it sure beats paying retail because as is often the case, patience pays dividends for the frugal.

UPDATE: Swaptree has acquired Swap.com. Besides an eventual name change and a bigger user base, the changes brought about by this acquisition will take some time to manifest. In the meantime, it's free trading as usual.

Posted by Matthew at 3:13 PM | TrackBack
Category(s): Family Finances
Tag(s): budget, debt, family finances, money saving tips

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An "easy" way to reduce your mortgage

Wanna get out of debt? Start by looking at your biggest expenses and find ways to reduce or eliminate them. For many of us, that biggest expense is our mortgage.

But not for 45-year-old Jay Shafer of Sebastopol, California. Why? Cause Jay has taken downsizing to a whole other level. Jay lives in an 89-square-foot house he designed and named "Tumbleweed." Jay, a former grocery store clerk, now designs these houses for a living. And not only has his mortgage disappeared, his utilities are now under $100 a year. Here's his story:

That said, I wouldn't go near this lifestyle till we're empty nesters because of the following equation:

Posted by Matthew at 10:36 AM | TrackBack
Category(s): Family Finances
Tag(s): debt, family finances, mortgage

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Interview with Mint.com founder

You may have heard us mention Mint.com a time or two around here. For the uninitiated, Mint is a free, web-based money management tool. Founder Aaron Patzer launched Mint in 2007. It quickly rose to the top of web-based financial tools and two years later, he sold it to Intuit (maker of Quicken/Quickbooks) for $170 million.

While most of the beefs I had in the SMI review I wrote in 2008 (subscribers' link) have been addressed, I wanted to ask about a couple that hadn't:

• An envelope budgeting option, and
• The possibility of a comprehensive part standalone product, part web-based product, and part mobile product all rolled into one.

I was able to ask Aaron Patzer (who still heads Mint, though now as part of Quicken) about these two features during a live webcast he did yesterday. If you're interested in how he answered, fast forward to the 13:16 and 28:00 marks, respectively.

Posted by Matthew at 11:35 AM | TrackBack
Category(s): Family Finances
Tag(s): budget, money saving tips

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Big picture finances

Back in April I was thumbing through Consumer Reports' annual auto issue when I came across an article entitled, "Best Values: Small Cars and Family Cars Provide the Most Bank for Your Buck." No real surprise there, but always looking to reassure my value-seeking sensibilities, I continued on to read about road-test scores, predicted reliability ratings, and five-year owner-cost estimates — which is when it got really interesting.

On the next page was a list of 60+ cars with various data points (here's a similar article open to the public). The most compelling data to me was called "cost per mile." I quickly scanned till I found our two-year-old Honda Odyssey (which I LOVE and have NO problems whatsoever saying as much). Cost? $.71/mile. I remember thinking, "Man that's high." But then I went on with life and didn't give it too much extra thought.

The significance of this expenditure didn't dawn on me till the other day when we were carpooling with some folks to an out-of-town event in Frankfort, Kentucky. From where I live in Louisville, that's about 50 miles — i.e. $35.50...one way.

Yes, Consumer Reports' cost-per-mile factors in gas, maintenance, depreciation, insurance premiums, even sales tax. And it's based only on a five-year ownership. But for someone who hems and haws over spending $.99 on an iPhone app, it occurred to me that thinking about cost-per-mile could be revolutionary.

For instance, I often hop in the Odyssey (yeah, I could use our other car, but like I said, I'm the Minivan Man) and drive two miles up the road to the quickie mart for a Diet Coke. I now realize this is costing me $3.78/soda rather than the mere $.94 that I was rationalizing.

So I'm now thinking in terms of MPM (money per mile) rather than MPG (miles per gallon). Where we live, a trip to the grocery is not seven miles away, it's $4.97 away. And another $4.97 if I want to come back.

Okay, okay, I know — it's not technically "costing" me this at the time I'm driving. But it's roughly "equating" to this over the first five years. And yes, Consumer Reports is making some assumptions, so it's not 100% precise (Edmunds.com's True Cost to Own calculated the ownership operation to be $.58/mile).

So why bring this up? Because you and I often lose site of the big picture when we think about our finances.

We fall into the trap of "the-more-you-buy-the-more-you-save" sales (a oxymoron if I've ever heard of one — the more you buy the more you spend!). We hold on to a falling fund with a lot of our assets in it just so we don't get hit with a $50 early redemption fee. Or worst of all, we're stingy with our tithing on earth, even though we're promised eternal rewards in heaven. We would do better by keeping the big picture in mind.

So the next time your debating whether to buy a shirt that you only "kinda like" but it's 95% off (this is me nearly every time I go to Old Navy), or to drive an extra three miles out of our way to save $.02 on a gallon of gas, maybe you should stop and ask some questions:

• "Do I really need this?"
• "Can it wait?"
• "Is it part of my long-term plan?"
• "Am I being penny wise, dollar dumb?"

And most importantly:

• "Am I being a good steward of what's been entrusted to me by storing up treasures in heaven?"

Posted by Matthew at 12:40 PM | TrackBack
Category(s): Family Finances, Investing Principles

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Multiple savings accounts — follow-up

The New York Times' Bucks blog offers good follow-up info on a topic we discussed in the June issue of SMI (subscribers' link): using multiple savings accounts as an aid to reach specific savings goals.

From Bucks' writer Jennifer Saranow Schultz:

A growing number of banks are offering features intended to help you allocate various savings accounts to specific goals.

As of [July 1], FNBO Direct customers no longer have to fill out complete applications to open new savings accounts. Instead, FNBO Direct fills out most of the applications for them. The new feature is aimed at making it easier for customers to open multiple savings accounts, each of which customers can name for a specific savings goal and all of which customers can track online with the same user name and password....

Since last year, Ally Bank has also had a similar offering, including the ability for customers to quickly set up multiple savings accounts, "nickname" them and see them all in one place online.

A spokeswoman for ING Direct, which has long offered such features, said 10 percent of the bank's customers had multiple savings accounts, with the top five nicknames (or savings goals) being "savings," "vacation," "emergency fund/rainy day," "house" and "taxes."...

Many credit unions also offer similar features as do other banks, including Capital One and Bank of America.

As we noted in our June article:

Having a series of dedicated savings accounts creates a structure that will help you follow through on your savings goals, especially when combined with automatic transfers from your checking account.

Goals can be a powerful driver of behavior, and being able to see — at a glance — how much is in each of your accumulation accounts (as well as in your emergency fund) lets you know exactly where you stand in relation to your various savings goals. As you see your balances rise, you'll be encouraged to keep moving forward.

For Ally customers, step-by-step instructions for setting up multiple accounts are here. Details for ING customers are here.

Below, Bob Lotich of ChristianPF.com explains how he uses ING's multiple-savings-accounts feature, which he calls a "virtual envelope budgeting system."

Posted by Joseph at 11:20 AM | TrackBack
Category(s): Family Finances
Tag(s): savings strategies

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Debt-relief programs often put debtors in deeper hole

A year ago, in an article titled Settle A Debt for Less than You Owe?, we looked at so-called debt settlement companies, noting that (to put it charitably) they tend to over-promise and under-deliver.

[R]eaching a debt settlement isn't quite as easy as [these companies'] ads imply. A settlement works only if you qualify and only if everything goes just right....

[I]f things go wrong, the debtor could end up with more debt, an angry creditor, a severely damaged credit score, perhaps a lawsuit — plus be out hundreds (maybe thousands) of dollars in fees.

We also warned that "this is definitely a 'let-the-buyer-beware' area. The field of debt settlement is replete with firms that appear to be little more than scams."

On Saturday (June 19), the New York Times published a helpful (though somewhat heavy-handed) front-page follow-up.

[Debt] settlement companies typically harvest fees reaching 15 to 20 percent of the credit card balances carried by their customers, and they tend to collect upfront, regardless of whether a customer's debt is actually reduced.

State attorneys general from New York to California and consumer watchdogs like the Better Business Bureau say the industry's proceeds come at the direct expense of financially troubled Americans who are being fleeced of their last dollars with dubious promises.

Consumers rarely emerge from debt settlement programs with their credit card balances eliminated, these critics say, and many wind up worse off, with severely damaged credit, ceaseless threats from collection agents and lawsuits from creditors....

In the typical arrangement, the companies direct consumers to set up special accounts and stock them with monthly deposits while skipping their credit card payments. Once balances reach sufficient size, negotiators strike lump-sum settlements with credit card companies that can cut debts in half. The programs generally last two to three years.

"What they don't tell their customers is when you stop sending the money, creditors get angry," said Andrew G. Pizor, a staff lawyer at the National Consumer Law Center. "Collection agents call. Sometimes they sue. People think they're settling their problems and getting some relief, and lo and behold they get slammed with a lawsuit."...

In April, the United States Government Accountability Office released a report drawing on undercover agents who posed as prospective customers at 20 debt settlement companies. According to the report, 17 of the 20 firms advised clients to stop paying their credit card bills. Some companies marketed their programs as if they had the imprimatur of the federal government, with one advertising itself as a "national debt relief stimulus plan."...

"The vast majority of companies provided fraudulent and deceptive information," said Gregory D. Kutz, managing director of forensic audits and special investigations at the G.A.O. in testimony before the Senate Commerce Committee during an April hearing.

The Federal Trade Commission is expected to release new rules (PDF) this summer aimed at curbing abuses in the debt settlement industry. In addition, several states may act to cap fees that debt settlement companies charge.

As we noted in Settle A Debt for Less than You Owe?, a more fruitful approach for those struggling with significant debt problems is to work with a nonprofit credit-counseling agency to set up a debt-management plan (DMP). A DMP helps consumers pay their debts (in full) over 36-60 months.

DebtAdvice.org, the website of the National Foundation for Credit Counseling, offers a searchable database of such counseling agencies.

Posted by Joseph at 10:45 AM | TrackBack
Category(s): Family Finances
Tag(s): debt, debt-settlement

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Getting ready for Christmas

"Christmas Club accounts are now largely a thing of the past (undercut by the rise of easy credit)..." — so I wrote in the current issue of the Sound Mind Investing newsletter in an article on multiple savings accounts (subscribers' link).

That's true — Christmas Clubs have faded into the past for the most part.

But a reversal may be in the offing. Sears/Kmart promoted a Christmas Club program last year. Now, the New York Times reports another major retailer is rolling out such a club for this year:

Toys "R" Us is counting on an Eisenhower-era tactic to get consumers to spend this Christmas. The toy retailer will begin offering a "Christmas Savers Club" [this week] that allows shoppers to put money away with the company for holiday gifts.

Participants will receive a card similar to a gift card, and can contribute funds to it through cash or credit card payments. As an incentive Toys "R" Us will add 3 percent interest on the balance.

The program is a throwback to what banks and credit unions offered in the 1950s and 1960s before credit cards allowed people to spend money they did not have.

Our Level 2 article focused on Christmas Clubs run by banks, but many retailers had them too back in the day — to build customer loyalty, of course. That's exactly what Toys "R" Us is going for.

Shoppers can sign up for the program in Toys "R" Us stores, either at the cash register or the customer service stand. The company will add the interest on the balance as of Oct. 16, and the funds will be available Oct. 31 for purchases at Toys "R" Us and Babies "R" Us stores and Web sites.

Earning 3% is nothing to sneeze at these days, but unless you are absolutely, positively planning to buy something from Toys "R" Us — and you know exactly how much you're going to spend — it's probably better to set aside your Christmas savings in an earmarked bank account.

Earlier this week, I talked about the benefits of having multiple earmarked accounts with host Bob Crittenden on Faith Radio's Faith Meeting House program. Listen below (13 min.) — or download an mp3 (right click/save as).

Posted by Joseph at 10:10 AM
Category(s): Family Finances
Tag(s): savings, savings strategies

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The (overdraft) protection racket

"We're willing to offer protection — for a fee. But if you want it, you'll have to sign up." That's the message many banks and credit unions are sending to their debit-card customers, as implementation nears for new Federal Reserve rules (PDF) on debit card overdrafts. You may be told that you will lose "important protections" or "a valuable safeguard" if you don't opt in.

Below is a snippet of the letter I received from my bank late last week.

MarketWatch's Chuck Jaffe has the background on what this is all about:

[Under current rules,] if someone present[s a debit] card against insufficient funds, [most banks will] make good on the transaction, put the account into the negative and tack on a fee of up to $40, putting the account further into the red....

All told, banks collected $38.5 billion in this type of overdraft fee alone in 2009, according to Moebs Services, a Chicago-based bank-industry consulting firm.

Under the Federal Reserve's new rules — which go into effect July 1 on new accounts and August 15 for existing customers — banks can only charge an overdraft fee on ATM and debit transactions if they first get customers to opt in to overdraft services.

If you don't opt in — and don't arrange for one of your accounts to back up another — and there's not enough in the account to cover a transaction, and you try to use your card against an inadequate balance, the purchase or withdrawal will be declined.

Sure, it's no fun being told that your card won't be accepted, but are you willing to shell out $30 or more to avoid embarrassment? Besides getting rejected might push you to get serious about the tasks of documenting your spending and balancing your checkbook.

"For many people, an overdraft is something accidental, where they haven't reconciled the account or recognized that their spouse just went out and bought something on another debit card linked to the account," said Gerri Detweiler, author of The Ultimate Credit Handbook....

"I just don't think that saving face with a clerk is worth 35 or 40 bucks a pop," Detweiler said.

Jaffe also quotes Greg McBride, senior financial analyst for BankRate.com: "Nothing will ever solve this problem better than knowing your balance and simply managing your spending so that overdrafts are never a problem." Amen.

By the way, recurring debit-card transactions — i.e., auto drafts for regular bills, such as a mortgage payment — are exempt from the new rules. If you overdraw, the bank will cover the transaction — and, of course, you'll pay a fee.

For a quick primer on debit cards (including some significant downsides of using one), see Mary Hunt's article, "What You Need to Know About Debit Cards," in the current issue of the Sound Mind Investing newsletter.

Update: The overwhelming majority of checking-account holders never overdraft their accounts, according to the FDIC. Most overdrafts are concentrated among about 14% of users (see graph).

Posted by Joseph at 8:30 AM | TrackBack
Category(s): Family Finances

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One of the best things you can do to stay out of financial trouble

The fundamentals of good financial management aren't difficult, but they do require 1) planning and 2) discipline to stick with your plan.

In a short interview Monday on Alabama's Faith Radio, SMI assistant editor Joseph Slife (right) talked with host Bob Crittenden about the importance of having a savings plan. In a follow-up to air soon, he'll discuss a simple way to make sure your savings plan works.

Use the audio player below to listen — only 7 minutes!

Posted by Matthew at 11:09 AM
Category(s): Family Finances
Tag(s): savings, savings strategies

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Where to put your savings

In these days of low, low interest rates (not to mention a fair amount of bank instability), where is a good place to store your savings?

SMI's executive editor Mark Biller (right) discussed that question with host Chuck Bentley on yesterday's MoneyLife radio program from Crown Financial Ministries.

Click the arrow below to listen (20 min.) — or use this link to download an mp3 (right click/save as).

Posted by Joseph at 10:05 AM
Category(s): Family Finances
Tag(s): Crown Financial Ministries, radio, savings

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Are mortgage-savings programs a good idea?

My family recently moved and with our new mortgage came some new mortgage product offerings. One such offering is a mortgage-savings program. If you're unfamiliar with these programs, they promise to accelerate your mortgage payoff by taking weekly or bi-weekly prepayments to apply to your mortgage, in turn saving you thousands.

As I was reading over the letter, an unpeaceful, uneasy feeling started to creep up. Here are some highlights from my letter:

• You do not increase your monthly payment
• You can eliminate more than 10 years of payments
• The equity in your home increases faster

These all sound great. Where do I sign up? What?... There's a catch?

Yep, it costs Kentucky residents an enrollment fee of $245.

Yikes, that is a lot. But I'll get a lot more back in saved interest. What... there's more?

Yes, it costs $3.50 per transaction if you're in the bi-weekly program or $1.95 per transaction for the weekly program.

Ouch. Let's see... 3.5 times 26, carry the one, that's another $91 for the bi-weekly and, hold on — $101 for the weekly. Well, I don't like it but since it's the only way to accomplish this... huh... there are other ways?

Do it yourself.

Do it myself? Uh... how?

Open a bank account from which to pay your monthly mortgage payment every month. Into that account, pay half the monthly payment every two weeks. At the end of each year, write a check on this account for an amount equal to your monthly payment and send it to the lender.

What's even easier is if you add an amount equal to 1/12 the monthly mortgage payment to each monthly mortgage payment. Not only is it easier, you'll pay off the loan a tad earlier than if you pay it bi-weekly.

Well, that's all fine and good, but that requires extra cash flow. This system won't increase my mortgage payment.

That's not entirely true.

It has to be true. Aren't you listening? I already went over this. It's written in this highly-bolded and underlined too-good-to-be-true sounding sales letter: "You do not increase your monthly payment."

It's a shell game. You see, they cut your payment in half, but they are essentially requiring you to pay every 28 days rather than every 30.5. So in total, you're paying more.

I'm confused.

Say your mortgage was $1,000. In a standard payment process, you'd make a $1,000 monthly payment and after a year's time, you'd have paid your lender $12,000, right?

Yes.

Now, instead of $1,000 every month, lets' do $500 every two weeks (ie, bi-weekly). There are 52 weeks in a year, so there are 26 two-week periods (52 / 2 = 26). You with me?

Yep.

So 26 bi-weekly payments of $500 would equal $13,000 after a year's worth of time (26 x $500 = $13,000).

Hey! That's tricky of them... borderline dishonest.

Perhaps. But let me leave you with another piece of info. Does that letter say anything about how the payments are processed?

Actually, it does. How'd you know?

Because I'm your conscience... your gut... your instinct... and when things seem to good to be true, they almost always are. What exactly does it say?

It says, "We process your bi-weekly debits from your checking or savings account, then make your monthly mortgage loan payment when due."

So let's get this straight... they are going to take our bi-weekly payment, but only pay it monthly. So what is that money doing in the meantime?

They're probably getting interest off of it!

That's right... you're catching on. They're getting an interest free loan on roughly 1/12 of a payment each month until they make the 13th payment at the end of a year.

So they're getting an interest free loan, an enrollment fee, and weekly or bi-weekly transaction fees for something we could do without them? What a rip!

Our thoughts exactly.

Posted by Matthew at 9:15 AM | TrackBack
Category(s): Family Finances
Tag(s): bi-weekly mortgage payments

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Do you need it — or just want it? [UPDATE]

[NOTE: Do not attempt without the express approval of a supportive, loving spouse who is willing to go along with your tech-loving cost-cutting split personality!]

Back in February, I challenged myself (and hopefully you as well) to question needs vs. wants, especially keeping in mind technology and digital services. With companies constantly releasing "must-have" devices and services, both the upfront costs and the monthly fees that accompany such products can make living within your budget especially challenging.

First up, our cell phone. More specifically, texting. I had said:

Unfortunately, there's only one family plan and the individual plans wouldn't cover our average monthly texting. However, I'm experimenting with apps like textPlus which allows free texting to other textPlus users.

My first impression of textplus was less than favorable. Now admittedly, I haven't played around with it enough to give a comprehensive review, but to date, we haven't switched over. So no money saved there.

Next up, if you'll recall, was getting a credit for incorrect cable billing.

... Secondly, there was a package I NEVER signed up for (and never use) but was being charged $8/month for. I promptly canceled that one too and asked for a refund... The rep was friendly but said she couldn't do that... So I called back the next day, spoke with [another] rep, and then that rep's supervisor. I'm still waiting for a call from the supervisor's supervisor.

Well, after some kind-but-forceful persistence, the supervisor's supervisor did indeed issue us a credit of a couple hundred dollars. Just goes to show the importance of checking your bills and keeping companies accountable for their mistakes.

Third item — our home phone. I wrote:

With our home phone getting used less and less, I've been wanting to get rid of it (and its $26/month fee) for quite a while. I nagged my wife to death and she finally relented. So I ordered an Ooma. In a nutshell, Ooma is a device that connects to your high-speed Internet and your home phone and allows you to make calls at no charge...

We recently moved, so I figured I'd wait and set up the Ooma at the new house. So last week I did just that. I'm VERY happy to report that we now have a "free" home phone service. Setup took a little longer than advertised, but otherwise, it does everything it says it does and does them well.

We could add the extra features of Ooma Premier if we wanted to pay $10 a month, but we're going to pass. But I might pair it with my wife's cell phone/Google Voice so that whenever someone calls her, our home phone rings as well and she won't use her cell phone minutes. But in the meantime, we're content with saving the $26/month we were spending on a home phone.

But we weren't finished quite yet. You know that move I mentioned? We decided that would be an ideal time to cut cable TV altogether. Yeah, I said it... no TV. Not only does it save money ($50/month), it saves time. Admittedly, this may not stick as we like college basketball and football. So we'll see how it goes. If we get desperate, we could resort to watching TV on the computer. And we could always get a digital antenna and pickup signals the old fashioned way. Until then, we will keep our bare bones Netflix plan and/or use the nearby Redbox for our moving watching endeavors.

The point of all this is to get you evaluating true needs from wants. For the record, I'm not opposed to satisfying some wants if they're within your budget. Just be honest with yourself about the motivation for the product or service. You might be surprised at how few needs there really are.

Posted by Matthew at 8:50 AM | TrackBack
Category(s): Family Finances
Tag(s): christian financial, family finances, money saving tips

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Harmful rule changes ahead for Education Savings Accounts?

One irritating thing about taxes — and anything related to taxes — is that the rules change with annoying frequency.

Case in point: several changes are likely to be forthcoming at year's end for tax-favored Coverdell Education Savings Accounts (ESAs). Certain provisions enacted by a Republican-led Congress in 2001 are set to expire, and at this point the current Congress doesn't seem inclined to renew them.

Although Coverdells have been overshadowed by state-sponsored "529" plans, they actually offer more investment flexibility than 529s, giving parents greater choice in where their money is invested. In addition, ESAs (unlike 529s) can be used not only for college expenses, but also to help pay qualified education expenses at the elementary, middle school, and high school levels. That's a great benefit for parents with children in private schools, as well as for parents paying for academic tutoring or extended-day programs.

Unfortunately, the "pre-college" aspect of ESAs seems likely to be on the way out. Moreover, contribution ceilings for Coverdell accounts, already not very high, could be sharply reduced.

Details from the Wall Street Journal:

[F]amilies planning to use a Coverdell account to pay for pre-college education expenses should think twice about opening or contributing to an account this year. Starting next year, withdrawals from Coverdells to pay expenses from kindergarten through 12th grade will no longer be tax-free, unless Congress acts to extend that benefit, which is not a sure thing.

Another prospective rule change would lower the limit on annual contributions to $500 starting next year, making Coverdells less useful for college savings. Already, the $2,000 limit has made Coverdells much less popular than 529 college-savings plans, which offer similar tax benefits for college costs and [have no federally imposed contribution limit]....

[Right now, i]nvestors can claim a Hope or Lifetime Learning tax credit for education in the same year they use Coverdell funds, as long as the tax credit and Coverdell money aren't used for the same expense. For example, an investor can take a tax credit for tuition in the same year he is using Coverdell money for books.... This is another benefit that could expire at year's end; the two tax benefits could become mutually exclusive.

The WSJ reports that Sen. Charles Grassley (R-Iowa) has introduced legislation that to preserve the pre-college benefit of Coverdell ESAs and keep the annual contribution cap from falling. But Joe Hurley, founder of SavingForCollege.com, is skeptical that Sen. Grassley's legislation will see the light of day — in part because many lawmakers don't like the idea of Coverdell accounts being used to pay for private school at the elementary and secondary level.

Mr. Hurley suggests either spending Coverdell accounts on K-12 expenses before the end of the year, or just accepting that the funds will have to go to college expenses later. He also points out that investors can move funds in Coverdell accounts to 529 accounts without triggering tax penalties.

That might make sense if the rules expire that currently allow people to use Coverdell funds and claim Hope or Lifetime Learning credits in the same year. Investors in 529 accounts have that same right, and [right now at least] it isn't at risk of changing.

Posted by Joseph at 9:29 AM | TrackBack
Category(s): College, Family Finances

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The difference between saving and hoarding

A few weeks ago, I applauded the work ethic of the lowly ant — how it prepares for the future, storing up provisions for a later time. The Bible twice mentions the ant as an example of working hard to prepare for the future (Proverbs 6:6-8 and Proverbs 30:25).

But as Campus Crusade for Christ founder Bill Bright used to say, "Your biggest strength can be your biggest weakness." And believe it or not, this can be true of focusing on the future. You can over-do it and end up not enjoying life today.

Do you know someone who counts the cost of everything (ahem!... not that you could ever be one of those people)? I know people like that, and I believe their hearts are in the right place in that they're trying to be good stewards of God's money. But they can also zap some fun out of life. How?

• By guilting you with a barrage of questions about what you paid for something;
• By mooching off of you because they don't want the expense of paying for something themselves;
• By denying themselves a side of sour cream for their Burrito Inferno because of the 35-cent upcharge.

Ecclesiastes 5:12 says, "... the abundance of a rich man permits him no sleep." Is that because he's too busy worrying about his wealth? Verse 13 goes on to say, "I have seen a grievous evil under the sun: wealth hoarded to the harm of its owner."

Let's be clear here, the term "rich man" was used to describe a faithless person whose identity was tied to his wealth. But you can see how hoarding could easily prevent someone from the blessing of being generous, which in my book, falls in the "harm of its owner" category.

Not surprisingly, Scripture offers a solution for the hoarder. 1 Timothy 6:17 begins this way:

Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain...

If our confidence and security are in our bank account, we'll never be satisfied. (This same sentiment is in Ecclesiastes 5:10). People whose hope is in money are never satisfied; they live uneasy and restless lives.

The middle part of 1 Timothy 6:17 says, "...but to put their hope in God..." Whenever our hope is in something other than God, we'll inevitably be disappointed. So in that sense, money is no different than power, looks, status, IQ, athleticism, job, fame, and so on.

But my favorite part of the verse is the last part, when it concludes:

"...who richly provides us with everything for our enjoyment."

Wow! How liberating, especially for the hoarder. God wants you and me to enjoy whatever material blessings He's given us, whether big or small. This isn't to say that we should ignore the principles of the ant. And it certainly doesn't negate the need to give God the first fruits and to manage wisely what He's entrusted to us. In fact, this verse alone makes me want to increase my giving and improve my stewardship, if for no other reason than to show appreciation for his loving kindness in wanting me to enjoy his blessings.

Collectively, these verses tell me that being prudent by saving for the future and enjoying material blessings are not mutually exclusive. So as long as my hope is in God and I am a faithful and generous steward, I'll have no trouble enjoying that side of sour cream.

Posted by Matthew at 9:55 AM | TrackBack
Category(s): Family Finances

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Financial Literacy 101: How much should you save for emergencies?

Fourth in a series for
Financial Literacy Month

During National Financial Literacy Month, we're featuring a series of posts covering investing and personal-finance basics.

Here's post four — about having a sufficient level of savings for financial emergencies.

Before putting money at risk in the markets, you should first establish a savings reserve. Without savings to turn to during a financial emergency or a period of unemployment, you may end up being forced to sell your long-term investments just to make ends meet. Even worse, you might have to sell at a bad time (i.e., when prices have dropped).

How large should a savings reserve be? Financial planners generally recommend an amount equivalent to three-to-six months' living expenses. SMI has long suggested a reserve of at least $10,000, but we recognize one size doesn't fit all.

Let's run the numbers. According to the U.S Census Bureau, the average "married-couple family" had a gross income of $73,010 in 2008 (the most recent year for which figures are available). Technically, the Census figure is a "median" not an "average," representing the point at which half of all married couples are above this amount and half below (see income table here). But we'll use $73,010 as the "average gross" for purposes of this illustration.

When trying figuring how much to set aside in emergency savings, we're not actually trying to replace gross income, however, but after-tax income.

Here's why: A savings reserve is designed to cover living expenses in the event of a loss of income. You won't need to replace your total income because a certain percentage of your gross goes to taxes — taxes you won't have to pay if you're unemployed.

So from the gross of $73,010, we'll subtract an estimated 16% for payroll, federal, and state taxes. This leaves $61,327 in after-tax income, which translates to a need of $5,110 per month.

Of course, in an emergency, some normal spending — for entertainment, vacations, 401(k) contributions, etc. — can be postponed. As a result, we've estimated that only 75% of normal spendable income would need to be replaced from savings in the event of a financial emergency.

Therefore, a three-month savings reserve for this typical family would amount to roughly $11,500 ($5,110 x 75% x 3). A six-month reserve would total $23,000.

The table below shows target amounts for three- and six-month savings reserves at various income levels.

You can see that the $10,000 "rule of thumb" is a good initial target for a three-month cushion, but depending on where you fall on the chart, you might want to go higher or lower (but not too much lower).

Actually, it's better to prepare for longer than three months.

(For the table, we used a uniform 16% estimate for the amount of gross income consumed by taxes. Those with lower incomes should use a smaller percentage; those with higher incomes will need to use a larger percentage.)

It's wise to keep at least two month's worth of your emergency savings in a money-market mutual fund or a bank money-market account so you can access it quickly if the need arises. Beyond that it's okay to branch out into conservative bond investments. But recognize that if you need all your savings at once, you might have to sell your bond funds while prices are down.

Ultimately, the target size of your savings reserve will depend to some degree on your lifestyle and preference. Just don't make the mistake of thinking the need for a well-funded emergency reserve doesn't apply to you.

SMI's Financial Literacy 101 series

• Creating your own personal financial plan
• Save by paying yourself first
• Where to put your savings
• How much should you save for emergencies?
• The upside of index funds
• A simple and steady investing strategy
• Inside-out investing
• Making the 'right' investing decisions
• Your most important investing decision

Posted by Joseph at 9:10 AM | TrackBack
Category(s): Family Finances

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Financial Literacy 101: Where to put your savings

Third in a series for
Financial Literacy Month

During National Financial Literacy Month we're presenting a series of posts on basic principles of investing and personal finance. (Each post in the series can be identified by the orange character at right, working diligently on a financial plan.)

Here's post three — about choosing the most appropriate kind of account for different kinds of savings.

Money set aside for emergencies should be saved in a different type of account than money being accumulated for a major purchase years down the road. That simple and sensible guideline — different savings vehicles for different needs — is routinely ignored. Many people simply put all their savings in low-yielding bank savings account and leave it at that.

Consider the following range of choices instead.

Money Market Funds. A good MMF is a solid choice for an "emergency fund" — i.e., money that might be needed at any moment. MMFs provide instant liquidity through check-writing privileges.

True, MMF yields are at rock bottom right now, but for an emergency fund, you should be much less concerned with the return on your money than the return of your money. With MMFs you can get your money back quickly. As for safety, only one retail money market fund has lost money in the past 40 years.

Money Market Accounts. MMAs also work well for an emergency fund, and have the advantage of being insured (up to $250,000) by the FDIC.

The highest-paying MMAs are through online banks. Online MMAs let you create an electronic "link" to your regular checking account, giving you virtually instant access to your MMA savings in an emergency.

Certificates of Deposit (CDs). CDs require you to commit your money for a term of one month to five years. The longer the period you're willing to commit to, the higher the interest rate you'll receive.

CDs carry penalties for early withdrawal, so they're best used for funds you're confident you won't need until a specified future date.

Short-Term Bond Funds. If your savings won't be needed for two-to-three years, step up to higher-yielding short-term bond fund.

The downside: the prices of bonds owned by these funds can fall when interest rates rise. That makes them a somewhat risky proposition for savers with time frames of less than two years. If your savings goal is at least that far away, however, the higher yields of short-term bonds usually compensate for any near-term losses created by rising rates.

Mortgage-Backed Bond Funds. These funds, often referred to as GNMA (Ginnie Mae) funds, invest in mortgage-backed securities issued by the Government National Mortgage Association. Ginnie Maes are even more sensitive to interest rate changes than short-term bonds and can definitely lose money in the near-term, so a longer holding period is critical.

Historically, the higher yields of these bonds have eventually more than compensated for any short-term losses caused by rising interest rates. This can take time though, so only choose them if your holding period is at least three years.

A few things to keep in mind: any interest rate increases over the next few months will be good news for savers using MMFs and MMAs, while short-term bond funds will suffer initial losses. As for CDs, remember that buying now will lock you in at today's very low rates.

Although you need to be aware of how rate changes affect certain savings instruments, the easiest way to decide where to put your savings is to think about the time frame until you need the money. For money you may need right away, keep it in an MMF or MMA. For funds you probably won't need it for a couple of years, a short-term bond fund might be the best choice. For even longer time frames, consider mortgage-backed funds.

For more on this topic, see chapter 6 ("Investing Your Emergency Fund") and chapter 7 ("Investing Your Accumulation Fund") of The Sound Mind Investing Handbook (5th ed.) by Austin Pryor.

SMI's Financial Literacy 101 series

• Creating your own personal financial plan
• Save by paying yourself first
• Where to put your savings
• How much should you save for emergencies?
• The upside of index funds
• A simple and steady investing strategy
• Inside-out investing
• Making the 'right' investing decisions
• Your most important investing decision

Posted by Joseph at 9:10 AM | TrackBack
Category(s): Family Finances

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Financial Literacy 101: Save by paying yourself first

Second in a series for
Financial Literacy Month

April is National Financial Literacy Month — and at SMI we're doing our part with a series of posts on basic principles of investing and personal finance. (Each post in the series can be identified by the orange character at right, diligently working on his financial plan.)

Here's post two, offering practical ideas for building up your savings.

When it comes to saving, despite your best intentions, it's easy to rationalize putting it off until the next paycheck. One way to overcome this is to have some of your money put aside automatically before you have the opportunity to spend it. Here are two paths to automated savings:

• Sign up to have part of your paycheck (you decide how much) automatically deposited into a savings account at a credit union or local bank. It's easy, convenient, and offers useful discipline. Plus, your savings are insured and available for withdrawal without penalty whenever you wish.
• For a higher rate of return, set up automatic transfers from your checking account to a money-market fund (a type of mutual fund) or a money-market account (a type of bank savings account). Such transfers are relatively easy to set up, and you can have them made on a weekly, bi-weekly, or monthly basis.

If you're in your 20s, we suggest saving 5%–10% of your income. Initially, this will go toward building your contingency fund. Once that's in place, your savings can be used for a down payment on a house and other large purchases.

In your 30s and 40s, move up to a savings rate of 10%–15% of your income. Usually at this age, the primary use of savings will be to invest for retirement.

Many people believe they could never save 10% of their income! But let me ask you — what would happen if a cutback at work resulted in fewer hours and a 10% reduction in your income? Wouldn't you make the necessary adjustments in your spending so you could still cover the basics? Unpleasant though it might be, you would.

In the same way, saving a similar amount isn't beyond the financial capabilities of most families. Usually, it's a matter of having the willingness to sacrifice and make the necessary changes in lifestyle.

Adapted from chapter 5 ("Do You Have Adequate Savings?") of The Sound Mind Investing Handbook (5th ed.) by Austin Pryor. Copyright © 2008 by Austin Pryor.

SMI's Financial Literacy 101 series

• Creating your own personal financial plan
• Save by paying yourself first
• Where to put your savings
• How much should you save for emergencies?
• The upside of index funds
• A simple and steady investing strategy
• Inside-out investing
• Making the 'right' investing decisions
• Your most important investing decision

Posted by Joseph at 9:05 AM | TrackBack
Category(s): Family Finances

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Financial Literacy 101: Creating your own personal financial plan

First in a series for
Financial Literacy Month

We suspect this sneaked up on you, but April is National Financial Literacy Month!

It's a fairly new observance, stemming from attempts by the JumpStart Coalition, founded in 1995, to improve financial literacy among American teenagers. Later, in unhappy recognition of "pervasive financial illiteracy among adults" (who apparently never learned what they should have when they were teens), the U.S. Senate passed a resolution (PDF) in 2004 in support of a Financial Literacy Month for all.

So, to do our part to help Americans become more financially savvy, we're featuring a series of posts during April focused on basic principles of investing and personal finance. Some will link to articles we've published in recent years.

Here is the first post in our series — on creating a financial plan.

What's the most common mistake people make when managing their finances? Making spending and investment decisions apart from a personalized financial plan. No matter how good your investing choices are, if they're made outside the framework of a larger plan, you're inviting trouble.

Imagine you're preparing to build your dream home. Over the years, you've accumulated scores of ideas that you'd like to see incorporated into it. Before construction begins, you sit down with your builder to review your design goals.

You ask him how long before the blueprints will be ready, but to your surprise, he tells you he doesn't work that way. Rather than planning everything ahead of time, he prefers to develop the design as he goes along. He'll keep your ideas in mind, but "blueprints are so restricting," he says — he wants to have the freedom to be spontaneously creative as the house is being built.

Most of us would be reluctant to hire a builder like that! When building a house, we recognize it's a good thing to have a carefully considered blueprint for action before taking on a challenging task. In fact, the more important the project (e.g., having open heart surgery), the more emphasis we place on careful planning.

Unfortunately, too many people use the "we'll work out the details as we go along" approach when it comes to one of the most important projects they'll ever take on — building a secure financial future. [More...]

SMI's Financial Literacy 101 series

• Creating your own personal financial plan
• Save by paying yourself first
• Where to put your savings
• How much should you save for emergencies?
• The upside of index funds
• A simple and steady investing strategy
• Inside-out investing
• Making the 'right' investing decisions
• Your most important investing decision

Posted by Joseph at 11:35 AM | TrackBack
Category(s): Family Finances

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What do bugs and money have in common?

Bank deposits were up 13.5 percent, or $641 billion, in 2009, according to this piece on MoneyRates.com. That's a prudent move. Many Americans were caught short by the recent financial turmoil. Now, we seem to be learning to save again.

But it gets even better. A joint survey by MoneyRates.com and GetRichSlowly.com found that out of the 1,629 people responding to the poll, "30% reported saving 25% or more of their monthly income, and 34% reported saving between 10% and 25%."

Nice. Granted, these are money-minded people frequenting financial websites, so they are likely to be in the over-achiever crowd. Still, it's encouraging.

Sound Mind Investing is a big believer in setting aside emergency funds and building accumulation funds for future purchases. We're just sorry it has taken a national financial nightmare to get some people motivated to save.

One reason we have always encouraged saving is because the Bible encourages preparing for the future. Proverbs 21:20 says, "In the house of the wise are stores of choice food and oil, but a foolish man devours all he has" (emphasis added).

Of course, saving for ourselves must be kept in balance. Yes, God "richly provides us with everything for our enjoyment," we are told in 1 Timothy 6, but we're reminded of that provision in the context of being generous toward others. Furthermore, in James, we're warned against presuming on the future. That provides yet another needed balance to our savings and investment efforts.

But save we should. In fact, the Bible encourages us to save by pointing us to the most humble of insects, the ant. Proverbs 6:6-8 says, "Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest" (emphasis added).

Hmm. Are you and I as smart as a bug? It doesn't take a financial (or natural) disaster to get the ant preparing for the future! God hard-wired it into the ant's DNA. Maybe saving doesn't seem hard-wired into you, but you can learn how to do it. Start saving now!

And before your flick a pesky ant off your picnic blanket, at least stop to admire his preparation and determination in providing for the future. He may be doing a better job than you are.

Posted by Matthew at 8:35 AM | TrackBack
Category(s): Family Finances

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What do your finances look like?

If you had to visualize what your finances looked like, what would come to mind?

• Water down the drain? (It's slippery, moves fast, and it's almost impossible to hold in place.)
• Maybe one of those barrels of peanuts at a restaurant? (A few shelled peanuts in a pile, a handful "reserves" still in the shell, but mostly lot of remnants of what use to be — i.e., not at lot there that's worth much.)
• Perhaps Rich Uncle Pennybags from Monopoly? (Financial life is good, you have money to throw around, and plenty more where that came from!)

            

Before you answer, maybe you should visualize it on a calendar, like Matt did from Steadfast Finances. Matt had the great insight to look at how long he works to pay for his different obligations and then plotted the findings on a calendar (this is similar to Tax Freedom Day, but rather than freedom from taxes, this is from your stuff... perhaps a "tax" in its own right). Here is what he found:

Here's what he learned:

1. I bought way too much house on a single income.
2. I was two paychecks away from defaulting on a loan (if I couldn't borrow money from family).
3. I wasn't living beyond my means, but I was very close!

What an eye-opening experience this was for him and would be for most of us should we take the time to do it. You just might find out that Rich Uncle Pennybags better plug the drain or he won't be worth peanuts.

Posted by Matthew at 9:05 AM | TrackBack
Category(s): Family Finances

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A newbie's first look at real couponing

Of all the different ways we've learned to save money, couponing has been low on the list. But of all the different irrational things that scare me, couponing has been high on the list... higher than the fear of Big Foot, stuck crossed-eyes, and breaking someone's back by stepping on a crack — combined.

Why? Because of all the work you hear it takes, the tricks involved, and the learning curve.

I'm more of a good-deal finder or luxury cutter type of a guy. I mean sure, if we're mailed some coupons, we'll thumb through them and keep those we might use. But I'm talking about actively and intentionally using coupons to pocket substantial savings — not just saving $5 off the purchase of two combo dinners at El Restauranto.

Maybe I should change my mindset. Maybe I need to think of couponing as a challenge and not a chore. Besides, according to this piece in the Wall Street Journal, couponing is the newest extreme sport.

[D]iscount devotees have formed vast online communities that collectively unearth and swap digital, mobile-phone and paper coupons. The cleverest shoppers combine dozens of coupons and go from store to store buying items in quantity, getting stuff free of charge.

Of all the different systems out there, the one that kept coming to my attention was The Grocery Game. I first learned about The Grocery Game from SMI friend and frugal guru Mary Hunt.

In a nutshell, you pay a bi-monthly fee to have access to sales lists at various stores. The lists tell you how to combine coupons (which you've either kept from your Sunday paper or clipped online) to buy items at huge discounts, sometimes getting them for free. The idea is to build a stockpile of goods. This can take some time (and space). But once the stockpile is built, you'll have on hand what you need and it takes fewer purchases (which again, will be on sale) in the future to maintain what you keep at home.

Sounds doable. Hey, it's even called a "game." I like games. So right now we're in our 4-week free trial period. I'll report back to update you on my savings.

And what kind of savings can I expect? I have a friend whose been doing The Grocery Game for more than six years. He said to me, "If I don't save 40-50% off my groceries, I feel like a failure."

Combine savings like that and The Grocery Game's supposed ease of use and, by comparison, Sasquatch just got a little scarier.

Posted by Matthew at 8:12 AM | TrackBack
Category(s): Family Finances

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Advantages of using a credit card

Be it the unintended consequences of the CARD Act signed into law last year making things worse for consumers not better, the controversial safety and hidden fee issues, or the oft-recited studies showing you spend typically 10-30% more when paying with plastic rather than cash, credit cards are getting a lot of bad press these days.

And all this may be fine and true, but there are some "free" upsides to credit cards. One of my favorites is Purchase Protection:

What it does: If something you bought with your credit card is damaged or stolen within 90 days, you can receive a refund of the purchase price.

The catch: This protection has many exclusions, including items that are lost without any evidence of a wrongful act or are stolen because of a lack of due diligence. Used, antique and collectible items generally are not covered.

Value: Refunds limited to $300 (American Express), $500 (Visa) or $1,000 (MasterCard) per item. American Express has an additional program with refunds of up to $1,000 on certain types of items, including clothing and electronic equipment. Caps on the total refunds received by cardholders also apply (e.g., a total of $25,000 per cardholder with MasterCard or $50,000 annually with American Express).

Now this reason alone might not be enough to get the cash-only crowd interested, but when combined with other perks like free roadside assistance, lost-luggage reimbursement, and extended warranties, there is a case to be made for using credit cards in moderation for specific purchases. But don't even consider this if you struggle to exercise financial self-discipline. The best perks in the world aren't worth it if the trade off is a load of debt.

Posted by Matthew at 9:33 AM | TrackBack
Category(s): Family Finances

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Do you need it — or just want it?

As we become a more and more data-centric society, all that information consumption not only eats up our time but also our money. And if you're anything like me (and for your sake I hope you're not), it's easy to fool yourself into categorizing a "want" as a "need."

Take, for instance the cell phone. Until January 2009, I was an anti-cellphone-ite, a breed on the doom of extinction. My wife, my son, my nephews — even my mom — had a cell phone. I didn't want the extra expense, the extra interruptions, and the extra cargo to lug around (I had trouble enough not forgetting my wallet and keys).

But I eventually caved, in part because my wife wanted me to have a cell phone, and in part because of the convenience factor. And if I was going to schlep one of these around everywhere, I wanted a good one... so I got an iPhone.

With all the things it can do, it's closer to 1-part convenience, 3-parts entertainment. There's nothing wrong with that, as long as I'm honest about it when factoring it into our budget: this is 75% an entertainment-budget item.

This leads me to a New York Times' piece on the cost of home entertainment. There are some interesting figures to consider:

It used to be that a basic $25-a-month phone bill was your main telecommunications expense. But by 2004, the average American spent $770.95 annually on services like cable television, Internet connectivity and video games, according to data from the Census Bureau.

By 2008, that number rose to $903, outstripping inflation. By the end of this year, it is expected to have grown to $997.07. Add another $1,000 or more for cellphone service and the average family is spending as much on entertainment over devices as they are on dining out or buying gasoline.

And those government figures do not take into account movies, music and television shows bought through iTunes, or the data plans that are increasingly mandatory for more sophisticated smartphones.

Incredible really. All this got me wondering 1) how bad the damage was at the Pryor household and 2) where could we cut costs on digital services yet still keep most of the functionality?

I started with our cell-phone plan. I went to the website, downloaded our usage, and checked our monthly average of minutes and text messages used. We use about 450 minutes a month, but had a 750-minute plan. Unfortunately, that's the lowest family plan listed on the site. But I called anyway hoping there were other unlisted options. Sure enough, there's a 550-minute plan that's $10 less. Then I asked about texting (which I use way more than I talk). Unfortunately, there's only one family plan and the individual plans wouldn't cover our average monthly texting. However, I'm experimenting with apps like textPlus which allows free texting to other textPlus users. This could reduce our phone bill by $20/month if we're diligent about using it.

My next call was to our cable company, which provides our home phone, internet, and TV. I started off by kindly letting them know I wasn't happy with my 15% bill increase over the past year and wondered what they could do to help me. In seconds, the rep offered to knock off $13 from the internet portion of my bill, but said that was all he could do. I took him up on his offer, thanked him, and hung up.

I then immediately called back to talk to someone about the TV packages we have. Turns out, we were paying for a package that has only two channels that we ever watch (and not with much frequency). Dumping that tier of service shaved off $10/month. Secondly, there was a package I NEVER signed up for (and never use) but was being charged $8/month for. I promptly canceled that one too and asked for a refund.

The rep was friendly but said she couldn't do that. Now in their defense, I understand: any yahoo could call up months after the fact and say they didn't ask for it and demand a refund. And had I diligently been studying my cable bill every month and comparing it to the ever changing TV package line-up options, I suppose I could have caught the error. But on principle, I couldn't let it go. I had been overcharged. And had they not made the error to begin with, I wouldn't be in this mess. So I called back the next day, spoke with a rep, and then that rep's supervisor. I'm still waiting for a call from the supervisor's supervisor.

Let's re-cap: to that point, I'd knocked off $10 + $13 + $10 + $8 = $41/month (not to mention all those convoluted taxes and fees). And this doesn't include a potential $20/month if textPlus meets our needs. But I wasn't done yet.

With our home phone getting used less and less, I've been wanting to get rid of it (and its $26/month fee) for quite a while. I nagged my wife to death and she finally relented. So I ordered an Ooma. In a nutshell, Ooma is a device that connects to your high-speed Internet and your home phone and allows you to make calls at no charge. It does other things as well, but we're getting it primarily so we can cut the $26/month phone bill. It will take about 10 months to pay for itself, but should be worth it (I'll do an article or post once we've been using it for a while).

So put all these things together and by the end of the year, I will have shaved $67-87/month off our monthly expenses, while not sacrificing a great deal in these luxury/entertainment categories. Notice I said "shaved" and not "saved" because as our good friend Mary Hunt says, "You don't save money buying things on sale unless you stop at the bank to deposit the money you saved."

Bottom line: Be honest about your budget categories and your "needs" vs. your "wants." Technology is nice, but all those 0's and 1's really add up.

Posted by Matthew at 9:20 AM | TrackBack
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Tag(s): budget, family finances, money saving tips

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The Olympics... cheapskate style

In her never-ending quest to get/keep us debt-free, Mary Hunt posts rules for the Debt-Proof Living Winter Olympics. I haven't entered yet, but I'm considering the No Eating Out event. I'm sure I've qualified many times over.

What about you? What spending area needs the most discipline and training? And certainly, if you enter, let us know on our Facebook Page. And then together, Team SMI will cheer you on to fiscal excellence!

Posted by Matthew at 8:40 AM | TrackBack
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A law with unintended consequences

"It wasn't supposed to turn out this way." So we wrote in our November 2009 article (subscribers only) about the unintended consequences of the Credit Card Accountability Responsibility and Disclosure (CARD) Act, signed into law last year by President Obama. The law takes full effect today.

AP Personal Finance writer Eileen AJ Connelly picks up the theme:

During the past nine months [since the bill passed and before it took full effect], credit card companies jacked up interest rates, created new fees and cut credit lines. They also closed down millions of accounts. So a law hailed as the most sweeping piece of consumer legislation in decades has helped make it more difficult for millions of Americans to get credit, and made that credit more expensive.

It wasn't supposed to be this way....

[The new law is expected to sharply] cut into future profits [for credit card issuers]. FICO Inc., the company best known for its credit scores, projects the average card will generate less than $100 a month in revenue within three years, down from $200 a month before the law.

That helps explain why the industry reacted so aggressively to the legislation.

No kidding.

"It's unprecedented that the government will come in and restrict the ability of [a company] to price the product the way they want to," Ben Woolsey, director of consumer research for CreditCards.com told the Atlanta Journal-Constitution. "But the fact that credit cards touch so many American households, the political pressure was so great that something had to be done," he said.

(Now that the precedent has been set, President Obama wants the federal government to have the authority to block insurers from making premium rate increases. Story here from today's Wall Street Journal.)

Going forward, the CARD law does offer new protections for consumers. Here is a list from the Journal-Constitution:

1. 45-day notice: Card issuers must give a 45-day notice to cardholders in advance of an interest rate change.
2. If you opt out of card changes, you have five years to pay off your balance at the existing rate.
3. Monthly statements must be mailed or delivered 21 days prior to the due date. Card issuers can no longer set a deadline before 5 p.m., cannot charge for online, phone or mailed payments unless it is made on the due date or the day before.
4. Card issuers cannot issue cards to anyone under age 21 unless they have a co-signor [sic] or can prove they are able to repay debt.
5. The pay-off period when making a minimum payment must be disclosed, along with how much would need to be paid per month to pay off the balance in 36 months.
6. Card issuers can no longer employ double-[cycle] billing.
7. Cardholders must opt-in to be able to exceed their credit limit.

CreditCards.com has additional details on how the new law is likely to affect card users.

Posted by Joseph at 10:45 AM | TrackBack
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Tag(s): christian financial, credit cards, family finances, money saving tips

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Buying coupons can be a big money saver

Are you aware that you can buy coupons? If that isn't the perfect marriage of the Internet and the American capitalist spirit, I'm not sure what is!

I found out about this one day when I Googled "Lowes promotional code" for an online purchase. Next thing I know, I'm on eBay where there's an entire Coupons on eBay section.

Hmmm. I hadn't done this before, but I thought, "Why not? I'll give it a try." I needed to buy siding for a shed I'm building and there were lots of Lowe's and Home Depot coupons on the auction block. Sounded like an easy way to save some cabbage. So I bid on eBay and won an auction — $24 for a 20%-off-your-entire-purchase-at-Home Depot coupon.

Lowe's honors competitor's coupons, so after the coupon I arrived, I headed to Lowe's for the moment of truth — and was a little nervous for a couple reasons: 1) The Home Depot fine print specifically excluded vinyl siding. Since I was there primarily to buy siding for the shed I've built, I knew this would present a problem if Lowe's terms were the same; 2) Lowe's didn't stock the color I wanted, so I was going to have to place a special order.

I had been burned by Lowe's before when I bought several garage storage chests online (because they didn't have them in stock in the store) and then wasn't eligible for the promised rebate because it wasn't an "in-store" purchase. I wasn't sure if this special-order siding would somehow fall into that same category.

Anyway, I placed the special order for the siding, got my paperwork, and started to head to the cashier's desk up front. But wait. I decided to use the coupon on something else, as well. After all the coupon was for an entire purchase, not a single item. So, being the good steward that I am (and the good husband that I am), I decided to go ahead and get a new dishwasher for my wife (she was in a daily struggle with the old one). I knew which washer I wanted, so I told the guy, signed some papers, and I was ready to check out.

I went up front to pay for everything at the customer-service desk. I explained I had two orders in the computer and that I wanted to apply a Home Depot coupon against my overall purchase.

The customer-service rep looked up the orders and started reading over the coupon. I started wondering if I blew 24 bucks.

One minute turned into two, then five, then ten. At this point, I'm thinking I'm toast and my shed will forever remain vinyl-less. But I was wrong. She told me that the hangup was that they couldn't invoice the orders on the same ticket and that I would have to pay for them separately. No problem-o. She also told me that the labor charges to install the dishwasher wouldn't get the 20% off. I wasn't counting on that anyway.

So a couple of card swipes later and I scurried out the door before they could tell me they messed up and couldn't honor the coupon. Whew!

Bottom line: $132 (siding discount) + $70 (dishwasher discount) - $24 (cost of coupon) = $178 savings.

So, the next time I build a shed, buy an appliance, or know that I'm going to spend enough money to more than recoup the cost of the coupon, I'm heading to eBay first to buy some cheap money.

Sniff sniff, sniff sniff. Hey! I think I smell the next great work-at-home-in-your-jammies business model! Or maybe not...

Posted by Matthew at 12:07 PM | TrackBack
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Tag(s): family finances, money saving tips

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On Presidents' Day, financial wisdom from past presidents

Below are several quotes about money management from late U.S. presidents. Some quotes relate to personal financial management, others to the management of the government's finances. Some touch on both areas.

First, from Kiplinger.com:

George Washington: "As a very important source of strength and security, cherish public credit. One method of preserving it is, to use it as sparingly as possible… but remembering also that timely disbursements to prepare for danger frequently prevent much greater disbursements to repel it" (Farewell Address, 1796).

Thomas Jefferson: "Never buy what you do not want because it is cheap" (from "A Decalogue of Canons for Observation in Practical Life," 1825).

Abraham Lincoln: "That some should be rich, shows that others may become rich, and hence is just encouragement to industry and enterprise. Let not him who is houseless pull down the house of another; but let him labor diligently and build one for himself" (from an address to the New York Workingmen's Democratic Republican Association, 1864).

Now, a few more from other sources:

Grover Cleveland: "I feel obliged to withhold my approval of the plan to indulge in benevolent and charitable sentiment through the appropriation of public funds.... I find no warrant for such an appropriation in the Constitution" (from an 1887 veto message, when vetoing an appropriation to help drought-stricken counties in Texas).

Calvin Coolidge: "I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar that we prudently save means that their life will be so much the more abundant. Economy is idealism in its most practical form" (Inaugural Address, 1925).

Franklin D. Roosevelt: "Any government, like any family, can for a year spend a little more than it earns. But you and I know that a continuation of that habit means the poorhouse" (from address made as a presidential candidate in 1932).

And here's a personal favorite, specifically about government, but apply it to your household finances as well — and take warning:

Ronald Reagan: "Government always finds a need for whatever money it gets."

Posted by Joseph at 10:10 AM | TrackBack
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Tag(s): christian financial, christian investing, family finances, investing principles, money saving tips

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Big Brother is watching... and compiling... and selling

The Information Age seems to have taken us full circle back to the days of hunters and gatherers — only now they're digital hunters and gatherers. Massive bureaucracies and corporate entities are all too happy to hunt down the details of our lives, scoop 'em up, and sell 'em to a willing bidder. And it's only going to get worse.

Don't believe me? Read this piece from Consumer Reports and you'll be enlightened. It outlines eight ways Big Brother is behind the scenes, quietly rummaging through life's daily transactions. Sure, some of these are supposed to be for our protection, but mostly they're for Big Brother's.

Remember that ill-fated sweater you bought for your wife last year, the one that she returned to Kohls? Big Brother remembers it:

Your purchase returns
The Retail Equation maintains information on merchandise returns made to an undisclosed number of national retailers...

What’s here?
It can include a record of your past returns at participating stores, the purchase prices, and whether or not you had receipts.

How is the information used?
Retailers are on the lookout for certain fraudulent and abusive practices.... If your pattern of returns at a particular store raises red flags, you might not be able to get your money back the next time you try. (emphasis added)

Yikes! Makes me a little nervous about my next home improvement project when I'll inevitably buy the wrong thingamajig — many times. Will I have to kowtow at every trip to the return register, praying I don't hear the dreaded, "No return for you!"?

If there's an upside, perhaps it's a potential business opportunity. I'm not sure how it would work, but there's a mint to be made for a company that can sell anonymity. If you have any ideas on how to make this happen let me know, I would love to go into business with you. But first I'd need to access your credit report, run a criminal background check, examine your insurance-claim history...

Posted by Matthew at 9:17 AM | TrackBack
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It's not how much you earn...

While searching for something else, I stumbled across this ABC News story from October: "Latest Celeb Money Meltdown: Nicolas Cage." The article recounts the financial trials of various celebrities and semi-celebrities who have seen the the financial rewards that accompanied professional success somehow slip away.

Among those on the list:

• photographer Annie Leibovitz ("has struggled to stay out of debt");
• actor Stephen Baldwin (he and his wife "defaulted on over $824,000 in payments to their mortgage");
• baseball great Lenny Dykstra ("foreclosure sale of [his] $18 million California mansion");
• mob-boss daughter Victoria Gotti ("apparently owes $650,000 to JP Morgan Chase Bank");
• actor Willie Aames, former star of 1970s and '80s hit shows Eight is Enough and Charles in Charge ("filed for bankruptcy last year, and his home is in foreclosure");
• actress Jodie Sweetin of Full House fame ("house is in foreclosure...water has been shut off twice").

As for Nicholas Cage, one of Hollywood's highest-paid stars, the ABC report says he "owes the IRS more than $6.6 million in income taxes." A CNN story quotes the actor's former attorney (against whom Cage has filed a lawsuit) as saying Cage needed to earn $30 million a year "just to maintain his lavish lifestyle."

In a court filing, the attorney noted that in 2007 Cage went on a "shopping spree" that included "the purchase of three additional residences at a total cost of more than $33 million; the purchase of 22 automobiles (including nine Rolls Royces); 12 purchases of expensive jewelry; and 47 purchases of artwork and exotic items." Cage also reportedly bought two castles, one in England, one in Germany.

Nicholas Cage may earn millions of dollars a year, but I'm reminded of a line from Dickens:

Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.

The numbers, of course, are relative. Annual income $20 million, annual expenditure $20,600,000 (or more), result misery.

Financial security/stability is far less about how much you earn than it is about how much you spend — and, of course, how you choose to invest any surplus.

Posted by Joseph at 9:33 AM | TrackBack
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Tag(s): christian financial, family finances, money saving tips, mortgage

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How do your money habits compare to the Jones's?

There's a site in beta that allows you to compare your spending (and soon, saving) habits with the proverbial Jones's. It's called Bundle.com. That's more interesting than it may sound at first, as you can slice the data any which way — by geography, age group, income, type of household...you name it. You can even see which business end up with the most of your hard earned money.

It's quite interesting to see the story Bundle tells via its data. But it also comes with a warning label. When I reviewed Mint.com (membership required) I said the following:

The second "Trends" section is what they call "SpendSpace." Here you can choose a category and a geographical location and see how your spending compares to others across the country. You can even compare your spending by merchant.

Caution #7: This is one of the most interesting, addictive, and useless features in Mint. Why should I care if I spent less on "Hair" than someone in Cleveland? Or more at Old Navy than your average Alaskan? I shouldn't. It's not going to change my spending decisions one cent. Nevertheless, like much of the Web, it's a fascinating time waster.

This type of reporting is more-or-less the point of Bundle. Yes, there are other features like "Discoveries" which is a blog aggregate, and a spending quiz that groups you into a "spendtype." But the primary reason to visit Bundle is to, as the site says, "... see how people like you spend and save money...".

I'm not sure how actionable the data is (though it probably has its uses). But it's certainly interesting, and a little bit addictive. So consider yourself warned.

Posted by Matthew at 4:42 PM | TrackBack
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Tag(s): christian financial, money saving tips, savings, spending

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House ≠ Happiness

I recently read Stop Acting Rich...and Start Living Like a Real Millionaire, the latest book by Thomas Stanley, author of the 90's best-seller The Millionaire Next Door. There was one specific part that jumped out as something to share here.

First, let me point out an underlying truth, that hopefully most SMI readers will immediately recognize: there's a lot more to true happiness than incomes, spending habits, and such. Without Jesus, the rest isn't worth anything, whether a person thinks they are "happy" or not.

With that said, though, it's important to also point out that Christians are not immune to the correlations between money usage and happiness. So don't be too quick to discount the way you handle money as a strong influence on the degree of happiness you feel. The great news in this regard is it's the way you carry out your stewardship duties (my choice of wording) that is found to be predictive of happiness in study after study, not the absolute level of wealth or income you possess.

Back to Stanley's book. Throughout it he illustrates the contrast in spending habits between two groups: those with high incomes but low net-worth (big earners but big spenders), versus those with high net-worth who may or may not also have high incomes.

In his chapter on housing, Stanley goes into some detail about the degree of happiness these groups (and some subsets within those groups) report. Most happiness studies find that factors such as health, loving families, and enjoyable jobs are the most important ingredients to overall happiness. But in his studies, even when these other factors were present, there was still a noticeable split in happiness among the high-income group.

Stanley explains:

Much of their dissatisfaction is found in certain choices the have made. Two key choices are neighborhood and house. Both of these elements influence consumption patterns. What if you earn $200,000 a year but spend like neighbors who earn $300,000? You are likely living above your means. As my surveys and studies have found, those who live above their means tend to be dissatisfied with their lives. Conversely, those who live below their means are significantly more likely to report that they are happy.

He goes on to develop the point that the price of the home is only the beginning. When you live in a more expensive neighborhood, the cost of everything seems to creep up, if for no other reason than the spending habits of your neighbors tend to pull yours upward. Few are immune to that tug (and those who are probably are less likely to buy into the more expensive neighborhood in the first place!).

Stanley is hitting on a theme here that we've mentioned before in this blog, namely that absolute income is not as good a predictor of happiness as relative income. To illustrate this simply, someone making $100,000 is statistically more likely to report they are happy if they live in a neighborhood where most of the neighbors make $75,000. In fact, it's quite likely that person could make more money, say $150,000, and wind up reporting they are less happy — if they live in a neighborhood where most of the neighbors make $200,000.

In case you're tempted to think you would be happy in any of those scenarios, given the high incomes I'm talking about, guess again. The same pattern holds whether you cut all the numbers in the prior paragraph in half or double them.

Stanley has this advice for those caught in this trap, or possibly inching towards it without even realizing what they're about to do:

How can these Smiths [those with relatively lower incomes than their neighbors] find happiness? Get out of Jonesville [i.e., neighborhoods with houses that are a struggle for them to afford]! This is an especially urgent message now with real estate prices plummeting and some tempted to grab a so-called bargain in or around an exclusive neighborhood. Never forget that that nice house in the prestigious community will cost you considerably more than the price of the mortgage, real estate taxes and insurance.

Your ego may take a bit of a bruising by admitting that you don't have the income to live among the glittering, but bruises fade with time, and it's almost guaranteed that your satisfaction with life will increase once you are no longer fighting to keep up with those who can simply run faster.

Posted by Mark at 2:13 PM | TrackBack
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Tag(s): christian financial, family finances, mortgage

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The Ghost of Christmas Budgets Future

By now you've worn it, played with it, smelled it, ate it, listened to it, watched it, cut with it, mixed in it, served on it (or in my case, because I didn't really know what to ask for, broke something on purpose and then Mighty Puttied it), or some combination of the above. Some of you have already returned it for whatever it was you really wanted.

But my question is this, "How'd your budget do? Does it need a little Mighty Putty of its own, or did it hold up pretty well?" Or perhaps a better question is, "What, if anything, will you do differently next year?"

As for me, next year I'll do a better job of looking at sites like dealnews.com (slogan: "Where every day is Black Friday") before I go out shopping. But I have to say, using these online saving tips paid off, especially Bing Cashback.

I'll also continue to use cell phone apps like have ShopSavvy which kept me from overpaying on more than one occasion. With ShopSavvy, you simply take a picture of a product bar code with your phone's camera, and within a few seconds you're shown a list of the best local and internet prices for that item.

And perhaps next year, I'll focus our September-November shopping on the non-toy presents. According to Dan de Grandpre, founder and chief executive of dealnews, the best time to buy toys is at least two weeks after Black Friday (or about two weeks before Christmas) when retailers, such as Toys 'R' Us, Wal-Mart and Amazon.com, slash prices to clear out unsold inventory.

I'm also going to push for drawing names on my wife's side of the family. It's so much more enjoyable (and quite a bit less expensive) to worry about buying gifts only for one or two people. Plus, they get better presents 'cause we can afford a little bit more.

The downside is if you draw you-know-who's name (a.k.a. MrOrMrsImpossibleToBuyFor - because they either don't like anything or they're just going to take it back, or they're taking it back because they don't like anything), you're up a creek for a bigger present.

But all and all, if we keep to the same intentional and pro-active strategy next year, will we let our budget scare us? Not a ghost of a chance.

Posted by Matthew at 8:11 AM | TrackBack
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Tag(s): budget, family finances, money saving tips

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The Ghost of Christmas Budgets Present

Just one more week until Christmas. How's your shopping coming along? Better yet, how are you doing on your budget?

Me? We're doing great. We had 1/2 of it done before Halloween. Years ago, I decided it would be less stressful and therefore more enjoyable if we got a jump start on our shopping. So when September rolls around, my wife and I start using our date nights to leisurely talk about ideas and peruse the offerings.

Something that also helps is that we limit our children to 3 presents each, because Jesus got 3 presents on the first Christmas. Furthermore, we cap the total price per child. These safeguards keep the budget in check and the focus on Christ.

Plus, when you've decided early on what presents you're getting for your loved ones, you have plenty of time to track down the best deals, which often times is often just a mouse click away.

We have learned from Ghosts of Christmas Budgets Past but maybe you have some tricks of your own? Consider this "Budget Check" a collective warning from the Ghosts of Christmas Budgets Present.

Posted by Matthew at 9:07 AM | TrackBack
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The Ghost of Christmas Budgets Past

In our December 2008 Level 1 article, we reviewed Mary Hunt's Debt-Proof the Holidays. My favorite parts of the book were the stories people had written about all the various traditions they celebrate. One such tradition:

A balanced Christmas: A tradition in our home is to limit our gift-giving to four specific categories. Each child receives a gift of Love, which is something homemade; a gift of Warmth which is something like socks or a lap blanket; a gift of Knowledge such as a science kit, books, or educational DVD; and a gift of Joy - that one thing they really want. This has helped to keep our Christmas balanced, our budget small, and our gifts meaningful.

What a great way to add meaning and fiscal control to your Christmas. But homemade and inexpensive are not synonymous.

Take for instance Andrew's rehashing of the great Christmas debacle of '97. If you've got money to burn, that craft is for you.

And then there was 2006 - Year of the Dog. My sister-in-law had spent significant time and money on homemade cookies, candies, and treats. We're talking chocolate-covered candy canes, butterscotch cookies, fudge brownies, the whole nine yards. Unfortunately for us, these were the days when we gave Gertie, our pug-mix, run of the kitchen while we were gone. You guessed it... we came back from some festivities to discover an ill-looking dog resembling Gertie curled in the corner and an empty platter with nary a crumb for the humans.

As you probably know, dogs and chocolate a happy dog do not make. So you're probably thinking we took her to the vet and got a fat bill on the way out. If so, you must not read much of what I write because I'm too cheap for that (plus, I wanted to incorporate a money saving tip into this post). Turns out, a cap full of hydrogen peroxide down her gullet and minutes later, we got all our treats back! To this day, butterscotch and Matthew a settled stomach do not make.

So in your efforts to keep spending down this year, embrace the ghosts of Christmas budgets past. Listen to them and learn what you're getting yourself into. Who knows, you may hear them moaning, "Administer peroxide outdoors."

Posted by Matthew at 11:58 AM | TrackBack
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Work-at-home scams update

Our June cover story, "Making Money From Home," reported on the growing problem of work-at-home scams.

A Google search on "work at home" yields about 1.8 million results, some touting intriguing pitch lines such as "Earn $500-$1000 per day" and "Mom Makes $5K/Month at Home." Guess what? Most such ads are simply scams dressed up in work-at-home clothing....

[One of the most common scams], promoted on hundreds of web sites, goes by many names: Google Money Tree, Google Profits, Google Money System, Fast Cash with Google, Google Home Business Kit — you get the idea....

The pitch varies from site to site, but is often something like this: "Hi! My name is Cindy Ward, and I'm a stay-at-home Christian mom in Greenville, South Carolina. I've discovered how to make a great part-time income using my computer from home! I work about 15 hours a week and bring in an extra $1,300/week on average. I can stay home with my three wonderful kids and still make money, and anybody can do it!" (One site with the "I'm-a-stay-at-home-Christian-mom" pitch advertises heavily on conservative blogs, targeting conservative Christians who are ripe for taking the bait.)

Now, Google has filed a lawsuit against Utah-based Pacific WebWorks and 50 other unnamed companies alleging unauthorized use of the search-engine company's name.

From Google's complaint (PDF), filed this week in U.S. District Court in Utah:

At the heart of the scheme is a false representation that consumers can participate in a Google-sponsored program that will allow them to make hundreds of dollars a day working at home performing a simple task that requires no particular experience or qualifications.

Although the program is often advertised as “free,” in fact consumers must pay an "instant access" fee for online access to a members-only portal, or a "shipping and handling fee for a DVD, that, they are told, will explain how to make money through the program. Consumers must pay the fee by submitting their credit or debit card information through a website....

[However, c]onsumers are not enrolled in any program that provides opportunities for generating income. Instead, they are subjected to continuing monthly fees that often exceed $50 and range as high as $79.90 After discovering that they have been duped, consumers typically find it difficult, if not impossible, to cancel the continuing charges, or get a refund of their money.

According to a blog post published Tuesday on Google's official site, the company is taking steps to remove scam-related URLs from its search index.

That said, we can't guarantee that schemes like these won't pop up...someplace else online — either on a different network or under a different name.... [So] you should be skeptical and review any offers online before sending any information, and always be on guard when presented with an offer that seems too good to be true....

Names to be wary of: Google Adwork, Google ATM, Google Biz Kit, Google Cash, Earn Google Cash Kit, Google Fortune, Google Marketing Kit, Google Profits, The Home Business Kit for Google, Google StartUp Kit, and Google Works.

At a Senate hearing in September, Jon Leibowitz, head of the Federal Trade Commission, offered (PDF) specific information on Google Money Tree:

[This and similar alleged scams] simply lure consumers into divulging their financial account information using the false promise of a lucrative work-at-home opportunity. Consumers who purchased the Google Money Tree work-at-home kit expected a small charge of $1.99, but what they got were months of recurring monthly charges they never authorized.

For legitimate work-at-home ideas, see SMI's "Making Money From Home."

Posted by Matthew at 12:39 PM | TrackBack
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Thrifty couples are the happiest

New research from the National Marriage Project at the University of Virginia shows that "consumer debt...plays a powerful role in eroding the quality of married life."

Here are excerpts from the Project's report, "Thrifty Couples Are the Happiest" (PDF), authored by Jeffrey Dew, an assistant professor of Family, Consumer, and Human Development at Utah State University:

Consumer debt fuels a sense of financial unease among couples, and increases the likelihood that they will fight over money matters; moreover, this financial unease casts a pall over marriages in general, raising the likelihood that couples will argue over issues other than money and decreasing the time they spend with one another....

Consumer debt is also an equal-opportunity marriage destroyer. It does not matter if couples are rich or poor, working class or middle class. If they accrue substantial debt, it puts a strain on their marriage.

Assets, on the other hand, sweeten and solidify the ties between spouses. Assets minimize any sense of financial unease that couples feel, with the result that they experience less conflict....

[C]onflict over money matters is one of the most important problems in contemporary married life. Compared with disagreements over other topics, financial disagreements last longer, are more salient to couples, and generate more negative conflict tactics, such as yelling or hitting, especially among husbands.... Not surprisingly, new research that I have done indicates that conflict over money matters predicts divorce better than other types of disagreement....

Clearly, money matters play a crucial role in shaping the quality and stability of married life in the U.S.... In particular, couples who are wise enough to steer clear of materialism and consumer debt are much more likely to enjoy connubial bliss.

After reading the article, I've decided to give a newlywed couple I know (married just last weekend) a copy of The Sound Mind Investing Handbook. In light of Professor Dew's research and similar studies, the Handbook would seem to be a great way to guide them toward a long, healthy, and happy marriage.

Posted by Joseph at 3:10 PM | TrackBack
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Online saving tips roundup

If you're shopping online anyway, you may as well save some money while you're at it. Here's a quick overview of some Internet-based money savers:

Bing Cashback: Search for an item, and Bing Shopping will display the different stores' normal price, as well as the "Cashback" price (i.e., store price minus the Bing Cashback amount). You can then request your Cashback amount about 60 days after your purchase as long as there is at least $5 in your Cashback account. Cashback discounts start at 2% and go on up. Combine it with a store with already low prices like Wal-Mart, and savings can be even more substantial.

Invisible Hand: Invisible Hand is a notification add-on for your browser that shows you the cheapest price it can find of an item you're viewing. Simply put, it's the lazy man's shopping comparison tool. Say you're on Amazon looking at a toy kitchen for your 4-year-old daughter (shhhhhh!), you'll notice a bar drop down from the top of your browser showing a cheaper price at Meijer.com. Voilà! But be careful, it's not perfect. It doesn't factor in shipping or any other discounts you might get (such as Bing Cashback).

FatWallet.com and Ebates.com: These are two more cashback sites. Similar to Bing Cashback, these free membership sites allow you to search for items, then get the advertised cashback sent to you on a periodic basis. Unlike Bing, they also list online coupons. Ebates offers refer-a-friend sign-up bonuses and FatWallet has a forum for sharing even more money-saving ideas. (That said, it appeared to me that Bing's cashback percentages were higher.)

LogicBUY.com: LogicBUY.com also aims to be your one-stop shop for all things savings, although it doesn't offer a cashback program. It's claim? "LogicBUY offers the most comprehensive coupon codes, deals and price drops from hundreds of popular merchants to save you the most money possible." It also offers social and sharing features on deals, coupons, reviews, and rankings. While I wouldn't consider it the only destination, LogicBUY seems like a worthy stop on your road to savings.

That should be enough to get you going. But if you're hungry for more, NYT's "Site-Hopping for Holiday Savings" offers a nice overview of additional portals, including those from Chase, Citi, and Bank of America.

Bottom line: With so many online options for the savvy shopper, there's just no reason to pay full price anymore.

Posted by Matthew at 9:43 AM | TrackBack
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Mary Hunt's "Cash only approach"

"Banks and retailers benefited greatly over past decades by promoting a cashless lifestyle. They convinced us that it's safer and more convenient to carry plastic. Cash, they declared, is old-fashioned and clunky. Plastic is hip and cool. Gradually, we fell for the pitch and, in turn, got more than we bargained for. Going cashless turned us into a debt-ridden society.

But things are changing on the consumer front. Cash is making a comeback." Continue reading...

Special offer from Mary Hunt for SMI Members.

Posted by Matthew at 9:43 AM | TrackBack
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Revisiting the homebuyer tax credit

Mark recently wrote about the misguided economics of renewing and expanding the federal homebuyer tax credit. Although the legislation (signed into law last week) gained the support of many economic conservatives in Congress, it "struck me as a bad idea," Mark wrote.

In its latest iteration, the credit applies to current homeowners in addition to first-time buyers, and Congress has raised the income limit for eligible buyers from $150,000 to $225,000.

Writing for the New York Times' Economix blog, Harvard economist Edward L. Glaeser explains why the expanded credit is likely to have limited economic impact.

I'm not a fan of the original home buyers' tax credit, which offered up to $8,000 to buyers who currently don't own a home, but at least that policy could be justified as a tool for increasing homeownership and selling our current stock of vacant homes. I'm not sure either of those goals is worth subsidizing, but I can't think of any significant benefit that comes from giving current homeowners a buyer's benefit.

Certainly, extending the tax credit to current owners doesn't increase homeownership.... There is also no reason to think that a tax credit that encourages house-trading among current owners will help the overall housing market.

A subsidy for existing homeowners provides an equal incentive for buying and selling. There will be no net decrease in the vacant housing inventory; basic economics suggests that any policy that provides equal incentives to buy and sell will do little to increase housing prices.

The good news, Prof. Glaeser writes, is that the homebuyer tax credit has an expiration date: May 2010. But, then again, that may not mean much.

Unfortunately, the events of the last week [the extension/expansion of the credit] lead me to suspect that the tax credit will continue to exist, like a B-movie zombie, long after it should have settled in its grave.

To read all of our mortage-related articles and receive our latest investment recommendations, become an SMI Web Member. It only costs $8.95 per month, and you can cancel anytime — no long-term commitments. Try it today.

Posted by Matthew at 2:03 PM | TrackBack
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Blog post roundup: credit card edition

Coming at you with another batch of interesting sightings, this time credit- and debit-card related. Who knew plastic could be so controversial?

How thieves can steal your card info without you knowing it: "Taking just 5 seconds to inspect any credit/debit card readers before you swipe could end up saving you from identity and credit card theft. I’ll show you what to look for before you swipe your next card. The con is called skimming..."

Identity Theft Hysteria Overblown, Watch Your Debit Card Instead: "I recently interviewed her (Avivah Litan, VP and distinguished analyst at Gartner research) over the phone about consumers can protect themselves in an era where just keeping your mother's maiden name a secret doesn't cut the mustard..."

Mary Hunt Hates Debit Cards: "MasterCard and Visa have really done a number on Americans by convincing hundreds of millions of people that they need to own and use debit cards so banks can collect fees every time they do..." Special offer from Mary Hunt for SMI Members.

3 new credit card fees you should know about: "Apparently since all the new rules for credit card companies go into effect in a few months, many of them are starting to try some new ways to squeeze out some more profits..."

Teens need debt driver's licenses: "Graduated drivers' licenses — which restrict when and with whom young people can drive — seem to do a pretty good job reducing auto accidents and fatalities. Perhaps it's time to adopt something similar to ease teenagers into their financial responsibilities..."

Posted by Matthew at 2:27 PM | TrackBack
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Personal-finance blogs roundup

My "future posts" folder is getting crowded, so here's a quick roundup of some Personal Finance blog posts I've been sitting on for a while:

3 Reasons to Run from Debt Settlement Companies: "You may have seen ads on TV featuring companies that claim they can 'repair' your credit. They tell you that you won't even have to pay all that you owe to creditors because they’ll negotiate your debt down to a smaller percentage..."

The Spending Habits of the Average American: "Last week, a site called Visual Economics posted a chart showing where the average U.S. consumer spends her money. Here's the chart in question, which has been making the rounds of the internet..."

How Credit Cards Are Getting Meaner: "What's going on inside the minds of credit card companies now that the CARD credit card reform act is coming down the pike? A customer service supervisor for a major credit card company emailed us to give us the low-down: reduced grace periods, cutting credit lines, increased fees on balance transfers, and, of course, jacked up APRs..."

How to Negotiate and Lower Your Bills: "We've recently been looking at our expenses to see if we can lower any of our bills. So far, the results have been promising. Earlier this year, we cut our car insurance bill in half. We also noticed that our cable and internet bill went up, so we called our provider. After speaking with customer service, they extended our promotional rate for another year. That 5-10 minute phone call saved us around $150..."

iSave: 50 iPhone Apps to Help You Save Money: "It's easy to get behind on your budget or lose track of your daily spending when you're on the go all day long. But what if you had the opportunity to take all of your financial tools with you on the road? These 50 iPhone apps make it possible to save money all day long without having to save every receipt, carry around a heavy calculator or check in with your broker every half hour..."

Posted by Matthew at 11:38 AM | TrackBack
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Consumers jumping off the credit card wagon

It's not all voluntary, and it's not always a decision made of virtuous intent. But for a variety of reasons, consumers are rapidly cutting their credit card use.

Marketwatch reports that consumers cut their borrowing by nearly $12 billion in August, a 5.8% annualized rate of decline. Nearly $10 billion of that cut was credit card debt. That was the 11th consecutive month in which credit card debt declined, which is the longest stretch since this sort of thing has been tracked.

A lot of this is forced budget tightening, but there's a decent amount of anger mixed in too. We've reported about some of the changes credit card companies and banks have been making in recent months, and these changes are evidently rubbing many consumers the wrong way.

Credit-card holders are so irritated that 32% of them told Consumer Reports in a recent survey that they have paid off or closed a card in the last 18 months. Half of those who canceled did so because they were peeved by recent actions credit-card issuers took, such as cutting limits, hiking interest rates, jacking up fees or imposing new charges. (my emphasis)

Among those holding credit cards, 21% of respondents said they were treated unfairly by card companies. Less than half, 41%, said they were highly satisfied with their card issuer.

While the process is painful and the result is a sluggish economic recovery, in the long run our economy is only going to be as healthy as the underlying consumers it is comprised of. So to the extent that we are being forced off our credit card addiction, this is almost surely a positive long-term development.

Posted by Mark at 2:23 PM | TrackBack
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Looking beyond money funds

Today's money-fund yields are scraping bottom, but the Wall Street Journal notes that the super-low returns should be kept in perspective.

A $10,000 money-fund stake yields just $5 a year in earnings at last week's average 0.05% seven-day yield on taxable funds, as tracked by iMoneynet Inc.... (emphasis added)

To be fair, though, savers amazed at low money-fund yields should recognize that the funds are doing exactly what they are designed to do: pass along the interest rates in a particular segment of the financial markets, that of high-quality debt with very short maturities. The Federal Reserve has pushed those rates near zero in its effort to stimulate the economy.

And by one measure — their ability to preserve the spending power of people's cash — money funds aren't doing any worse than usual these days. Over the 12 months through August, the average money fund returned 0.65%, according to Lipper Inc., while the U.S. consumer-price index fell 1.5%. Money-fund yields are barely moving forward, but prices have gone backward.

In other words, if you're simply trying to keep your savings ahead of inflation, you can still do that in a money fund (assuming the official measure of inflation is accurate).

Still, a return of 0.05% in a money-market mutual fund is significantly less than you can earn today in an online savings account, a high-yield checking account, a CD, or a bond fund.

From the Journal:

While the yields on money funds are a product of market conditions and the funds' expense levels, "yields on bank deposits are dictated by what the bank is willing to pay," says Greg McBride, senior financial analyst at Bankrate.com....

One drawback: Savings account rates have been declining and are likely to continue to drop, Mr. McBride says. And a bank with a competitive rate this month could be far from the top ranks six months or a year from now.

With certificates of deposit, by contrast, you can lock in an interest rate for months or years [assuming you don't need ready access to your money].... As of last week, the average one-year CD had a yield of about 1%, and the highest yields were twice that, according to Bankrate.com....

Another way to boost the income you are earning on your cash is to move some or all of those dollars into funds that hold debt securities that are somewhat longer in maturity than those in money funds.... For instance, Vanguard Short-Term Bond Index, with a big slug of government debt, last week was yielding 1.65%, and Vanguard Short-Term Investment Grade, with a focus on high-quality corporate debt, was yielding 2.71%.

But you might lose most of that additional income in a period when [market interest rates] rates rise.

All of the above illustrates that there is no "perfect" solution or "best" choice among savings vehicles right now. Each has assets and liabilities.

You simply have to weigh the options — looking at both the available rates and the inconveniences that come with certain choices such as high-yield checking — and decide what what's best for you.

Posted by Joseph at 3:45 PM | TrackBack
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A powerful illustration

The unhappy September jobs report (PDF) offers a powerful illustration of why the SMI Four Levels process stresses building a contingency fund. The report notes that the average duration of unemployment is now 26.2 weeks — almost exactly half-a-year.

At Level Two we encourage you to "set aside three-to-six months of living expenses for emergencies." (For more specifics, read How Much Emergency Savings Do You Really Need?)

Layoffs and job reductions happen. Facing a job loss with a cushion of ready cash can make all the difference in the world.

Posted by Joseph at 4:07 PM | TrackBack
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Lobbying for more options in your 401(k)

"My company retirement plan has a lousy set of fund offerings. How do I convince my employer to offer more (and better) options?"

One of our readers e-mailed with this question recently. For the benefit of other readers in the same boat, I thought I'd publish my response here on the Weblog:

The best possible outcome would be for your employer to add a "brokerage window" or "self-directed" option to your 401(k) plan (or your 403(b), if you work for a not-for-profit). Such an option would allow you to invest in funds offered by a brokerage firm selected by your plan administrator.

A couple of years ago, my wife's employer (a small college) added a brokerage window. The number of funds from which we could choose grew, literally overnight, from about 20 to hundreds. (And, of course, I immediately moved her retirement money from some slow performers into SMI's Upgrading recommendations!)

Getting your employer to make positive changes to your 401(k) will require convincing the benefits decision-maker that such a change is in the company's best interest. The folks at The Motley Fool offer a helpful guide on how to build a persuasive case. (They even include a sample letter to send to your company-benefits director!)

Fodder for your letter will come from your plan's Summary Annual Report, Summary Plan Description, and/or Fee Arrangement. Request a copy from your company's 401(k) plan point person. (It may be someone in your human resources department, or even the company CEO or CFO if you work for a smaller outfit.)

Buried in these documents is the dirt on the fees your plan charges — both the investment expenses and the plan expenses — and whether your boss covers administrative costs or if they are passed through to plan participants (that's you)....

"In a half hour, you can figure out what your expenses are," says Stop the 401(k) Rip-off! author [Google Books preview] and retirement-plan industry veteran Dave Loeper. "If you find out that you are getting ripped off, the next step is to complain to your employer without sounding like a complainer."

Since this topic can be touchy, your aim is to inform, not complain, Loeper says. Don't focus on the needlessly high expenses you're paying. Instead, note that you have calculated the expenses you're paying and are wondering if there are some lower-cost alternatives available. Judiciousness should be your default mode. You've got to convince your company that, in dollars-and-cents terms as well as employee-satisfaction terms, something needs to change.

This Morningstar article (free registration required) covers some of the same territory as The Motley Fool piece, but lays out additional options.

If adding a brokerage window is "a bridge too far" for your employer, you need a fallback position — namely, requesting the addition of several low-cost index funds. The Wall Street Journal reported a few weeks ago that more employers are adding index funds to their plans, so there might be a trend here your employer would be willing to follow.

But, as the WSJ notes, getting indexes added presents its own challenges.

The stodgy 401(k) world won't change strategies overnight. Fund companies won't easily relinquish their active-management fees, which tend to be higher than those charged on index-tracking products, especially at a time when rocky markets are pinching profits. And actively managed funds tend to do more "revenue sharing," which involves fund companies making payments to plan administrators.... (emphasis added).

Still, some big players are betting that the stars will begin realigning....

In a recent survey of about 150 employers by consulting firm Hewitt Associates, 17% of them said they are likely this year to replace some or all of their plan's actively managed investment options with index funds. That is up from 8% a year earlier....

Some smaller plans that don't have the purchasing power to access the lowest-cost index funds on their own are banding together in multiple-employer plans that take a passive approach.

(The WSJ also takes note of "a spate of recent lawsuits [in which] workers have claimed their 401(k) plans charged excessive fees and offered actively managed funds that failed to beat cheaper index-tracking alternatives." For an example, see here. This is probably not something you want to bring up in a confrontational way — you don't want to come across as adversarial — but the fact that some employees are willing to go to court reinforces that this is an important issue to workers and one employers need to be aware of as well.)

If you can get your employer to add even just a handful of index funds representing the major market categories (large companies, small-medium companies, international stocks), you could put together something similar to our Just-the-Basics strategy. Such an approach is likely to offer superior results to being invested in not-too-stellar pre-chosen funds.

Workers with limited fund options within their retirement plan will likely benefit from reading our research on how to choose funds in your 401(k) when your options are few (SMI web membership required). When we tested this simple approach a few years ago, its returns more than tripled the broad market's over the 8-year test period!

Posted by Joseph at 4:02 PM | TrackBack
Category(s): Family Finances, Retirement

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My experience with Restaurant.com

If you're unfamiliar with Restaurant.com, it's a site dedicated to helping you save money when you eat out (their slogan: "Eat. Drink. Save. Money"). They do this primarily by helping you locate restaurants (by city, state, or zip) that offer discounted gift certificates.

A popular option is the $25 gift certificate that costs only $10. The certificates are added to your Restaurant.com account and then are available to be printed. Sounds like a no-brainer — if it weren't for the fine print.

These certificates have conditions, such as a requirement to spend X dollars over the amount of the certificate, a gratuity that's calculated on the full price (i.e. the certificate value plus the out-of-pocket), and, of course, certain menu items are excluded. So maybe not a guaranteed good deal, right?

But what if you could get that $10 gift certificate for $1? That was the case a few weeks ago (if you follow us on Facebook or Twitter, you would have seen us spread the word). For a limited time (if you used a certain promo code), you could get a $25 certificate for only $1.

Being the bargain hunter I am, I loaded up: spent $11 for 11 gift certificates (eight to restaurants we frequent during basketball season and three we go to on special occasions). But given the aforementioned conditions, was this really a good deal? This past Saturday, we found out.

My wife and I, along with our two little ones, joined one of my brothers and his family (I told them about the deal, so they had the same certificate) at a family-oriented sports restaurant called Beef 'O' Bradys. The certificate was for $25 off — but to meet the conditions for use, we had to spend $35, plus a required 18% gratuity would be added to the full amount.

So my goal was to spend right at $35 (not including the tip). The kids' meals were only $4 each. My wife and each ordered something was about $8 each. Hmm. Even after adding in (over-priced) soda and tea, we were still going to be short by 8 bucks. So we got an appetizer to share around the table to meet the $35 mark.

When the bill came, it was $36.14 with tax (but not including gratuity). Pretty close. At the time, I wasn't sure if tax would be allowed to be included (if not, we would have had to buy something else), but the fine print also gives the restaurant owner/manager some discretion. My fingers were crossed and, voilà, discount accepted, giving us an on-site obligation of $15.95.

So how much did we "save"? Interestingly, if we had ordered like we normally would have, we would have spent about $35 (two adults, two kids, two drinks, no appetizer, tax and tip). Instead, we spent $16.95 (the on-site bill + $1 for the gift certificate). So we spent $18 less and got an appetizer to boot. All and all it worked out well (my brother had a similar experience in savings).

But suppose we had purchased the Restaurant.com gift certificate at the regular $10 price? Would that be a good deal? In that situation, we would have spent $25.95 ($15.95 on-site + $10 for the gift certificate). So we would have spent about $9 less than normal. Not bad, but nothing to write home (or blog) about.

So it worked out quite well for us in this situation (we could have saved even more money if I thought to link our purchase through a rewards program such as Upromise.com or Ebates.com). Sure, it would have been cheaper just to eat at home, but there are going to be times when we eat out, so we might as well save some money when we do.

If you use Restaurant.com, keep in mind that (1) each restaurant may different requirements; (2) you'll likely pay a set gratuity no matter the level of service received (our service was lacking); and 3) you may have to order something you wouldn't normally to meet the dollar-amount requirement.

On the flip side, if you can score a 90% discount on an already 60%-off gift certificate, you'll leave the restaurant with more money in your pocket and perhaps a bag of leftovers too.

Posted by Matthew at 12:21 PM | TrackBack
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WSJ quotes one of our own

Congratulations to Jenny Migdal, long-time SMI subscriber (perhaps a charter member?) and recent guest author of our May article on Women and Social Security. Jenny was quoted in the Wall Street Journal's "Practice Management" column last week:

Jenny Migdal, a CFP with Forthright Financial Planning in Albuquerque, N.M., tells clients she shops regularly at discount and warehouse stores. One client also started purchasing printer ink from Amazon.com after Migdal mentioned the discounts she has found there.

This summer, Migdal tried an experiment she called "My closet isn't getting any bigger!" She wore a different outfit each day and didn't run out of combinations until mid-August, though she did wash and wear the same pair of trousers a couple times. Unworn clothes in good condition went to organizations that provide professional wear for women.

Migdal plans to discuss the take-away lessons with clients, including: don't shop because you're bored.

Jenny posted this follow-up about the interview on the SMI message boards:

When asked to provide comments about whether I share anything personal with clients, I said I share my whole life — teaching kids about money, wanting a new car (cars), but keeping the old ones that work well, bad investments that my husband wanted to make and how we laugh about those.

Sadly, the part where I said that we try to live on half of our income in order to save aggressively and give generously didn't make it. I think that's because she wanted to know how much money my husband made, with the implication being that if one is "rich enough," one can live on half of anything. I told her we had been living that way for 20 years, but it didn't make the cut.

Great job Jenny!

Posted by Mark at 8:33 AM | TrackBack
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Free Online Education

Interested in taking some college-level courses but not concerned about earning college credits? Sure you could sneak into Econ 101 and hope the professor doesn't do a role call. But there's a much easier way. Let me introduce you to the OpenCourseWare Consortium.

According to their site, The OpenCourseWare Consortium:

... is a collaboration of more than 200 higher education institutions and associated organizations from around the world creating a broad and deep body of open educational content using a shared model. The mission of the OpenCourseWare Consortium is to advance education and empower people worldwide through opencourseware.

The site goes on to say, "An OpenCourseWare is a free and open digital publication of high quality educational materials, organized as courses." So essentially, it's free online learning supported by major colleges and universities.

As Internet delivery has become a more accepted source of higher education, it's not surprising that attendance has been gradually increasing. The recent recession has caused more people to consider this option as well. According to this piece from the WSJ, some classes have seen as much as a 30% increase.

I've had one experience with online learning and it was quite good. In 2004, I took a basic accounting class from an accredited institution. I felt the content was good, as was the attention I received from the teacher. I'm not sure how the paid class I took compares with OCW, but since it's free, your time is all you have to lose if you're inclined to try it.

Update: To compound the savings of this idea, be sure to try the various discount text book options online. Bookswim has a text book rental program that looks intriguing (though we haven't used it).

Posted by Matthew at 3:07 PM | TrackBack
Category(s): College, Family Finances

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Do you feel protected yet?

Today, the first provisions of the new Credit CARD Act — designed to protect consumers from the dirty tricks of credit card issuers — kick in. Unfortunately, as is so often the case with federal legislation, the law of unintended consequences appears to have kicked in already.

As Chuck Jaffe points out, this law that was supposed to make things better for consumers is, in many cases making things worse. How? In a nutshell, by making it harder for credit card companies to tighten the screws on specific card holders in response to bad credit behavior, the new act has pushed the companies to simply start treating everyone as if they are a bad credit risk.

Used to have a low fixed-rate card? Now that the card companies can't promptly jack up the rate if your credit profile starts looking squirrelly, they're simply converting most everybody's fixed-rate cards into variable rate cards (which don't face the same provision). Didn't like the old "universal default" clause issuers used to raise rates on one card when another card's payment was late or missed? Then you'll love the new informal "universal cutoff" policy the companies have replaced it with by amending their agreements in advance of the new CARD act.

"Everybody is pretty squeamish about risk right now, and card issuers are mitigating that risk by closing unused credit lines, cutting credit lines, changing terms on customers whose credit record has changed, and by raising interest rates while they still can," said Greg McBride, senior financial analyst for BankRate.com. "In many, many cases, they are doing this to consumers who have not set a foot wrong, people who have paid their balances every month, who don't have big balances, or who maybe haven't used their card in a while."

He added: "Once upon a time — not so long ago — these were the best customers a credit-card issuer could have, the ones they were giving big incentives to get; now, they are following a 'Ready! Fire! Aim!' approach and hurting people who were not the problem and who likely would never be the problem."

Many of these changes have happened over the past few months as card issuers prepared for the new regulations. But many companies continue to make changes to their card terms, so now is definitely a time to actually read any changes about your cards that might be included with your statement or mailed to you separately. What you don't know can certainly hurt you in this department.

For instance, the Wall Street Journal reports today that Citigroup is initiating new annual fees on some of its cards. If you've got good credit and aren't getting some "extra" benefits that you value highly, there's no reason to put up with an annual fee being slapped on your account. You have two months to opt out, paying off your current balance under your original terms before closing the account. Use the time to line up a replacement card and send a clear message that you're not going to pay unnecessary fees. You can be sure the other card companies are watching closely to see how this brazen maneuver is received.

Of course, the best approach is to quit using credit cards altogether. You won't have to worry about these changes in terms, and you'll almost certainly find you spend less. (Many studies have shown that consumers spend more — typically 15-30% more — when paying with plastic rather than cash.) But if you're not willing to quit the credit card habit altogether, at least be sure you keep a close eye on your terms and statements over the next several months.

Update: Mary Hunt analyzes a different aspect of the new CARD Act — its implications for young adults (students) and their parents. If you have a child in college, or will soon, you need to read this.

Posted by Mark at 10:42 AM | TrackBack
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Swaptree.com... ebay without money and hassle

So you're ready for book two of a three-book trilogy but don't want to put book one on the shelf just to gather dust. You could always sell it on ebay and get a little money for it, right? But then you have to list it, wait for the auction to end, wait for the payment to hit your account, mail the book, transfer the payment out of PayPal, give buyer feedback, solicit seller feedback, and one long week later you're done. It's a lot of work for a little money.

While something can be better than nothing, what if you could simply mail book one to someone in exchange for book two from someone else? That's the idea behind Swaptree.com. This free service allows you to list the books, CDs, DVDs, and video games you're ready to get rid of by simply entering the UPC and the condition of the item. Then for each item you list, your personal library of items you can get will grow. To start a trade, simply select "Get Now" and the process begins.

You can also start a list of items you want by searching for each item manually or importing your list from another list or website, including your Amazon Wishlist. Once you've got an item on your "I want" list, Swaptree starts looking around for what it will take to get it.

Once a trade deal is found or initiated, you are emailed the recipient's address. So the only thing you'll pay for is the postage to mail the item. There's no listing fee, PayPal transaction fee, membership fee, nothing. And the site's clean, intuitive interface keeps the whole process relatively painless (a far cry from how involved ebay can be).

Swaptree won't replace ebay. But it is a convenient alternative likely to keep some money in your pocket and some dust off your shelf.

Posted by Matthew at 4:22 PM | TrackBack
Category(s): Family Finances

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5 tips for dealing with a home-equity-line freeze or reduction

In the April issue of SMI, we reported that even homeowners "with good payment records and strong equity levels in their homes" have had their home equity credit lines frozen, reduced, or closed during the economic downturn. "The fine print gives banks that option," we noted.

Last week, the Federal Reserve Board issued an updated five-point guide on what to do if your bank exercises its option to alter your credit-line agreement.

Read the Fed's five tips here — or download them in a PDF file.

Posted by Joseph at 2:27 PM | TrackBack
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Enlightening interview with Dave Ramsey

Christian radio's great conversationalist Chris Fabry (of Moody Radio's Chris Fabry Live) interviewed popular radio talk show host (and Fox Business TV host) Dave Ramsey last week.

Dave is a follower of Christ who was introduced to Christian financial teaching through the ministry of the late Larry Burkett. Today, Dave is one of the most influential financial teachers (Christian or non) in the U.S.

(Larry Burkett was also a catalyst in the launch of Sound Mind Investing.)

You can listen to the Fabry/Ramsey conversation here — look for the "Listen now" link in the right column. The interview begins about 12 minutes into the program.

Posted by Joseph at 3:23 PM | TrackBack
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Prosper.com back in business — again

In the June 2008 issue of Sound Mind Investing, we reported on the burgeoning "peer-to-peer" (P2P) lending industry.

P2P lending brings together the ideas of social networking and micro-credit, matching people who have money to lend with people searching for a loan. P2P eliminates the middleman — the banking industry — by allowing loans to be made directly from one person to another.

A few months later, most P2P lending came to an abrupt halt when the Securities and Exchange Commission stepped in. The Commission said that if P2P lenders wanted to stay in business, they would need to go through the SEC's registration process.

In October, P2P-industry leader Prosper.com entered a "quiet period," allowing no new loans until the SEC process was complete. Prosper briefly relaunched in late April under an intra-state exemption from the California Department of Corporations, then went quiet again after the SEC said the exemption wasn't sufficient.

Now the SEC registration process is complete and Prosper is up and running again, notes the WSJ's "The Wallet" blog.

The completion of the SEC registration process "means loans that are now purchased on Prosper are technically registered securities which means they can be resold in the secondary market," said Chris Larsen, chief executive and co-founder of Prosper.

As part of the registration process, the SEC approved Prosper’s auction-based platform, which works like an eBay-style marketplace for would-be borrowers and lenders. It’s the first time that regulators have approved a pricing mechanism where the final price of a security isn’t secured in advance. By contrast, other peer-to-peer players offer lenders a range of fixed rates....

Like more traditional lenders, Prosper has tightened up on borrowers. As part of its re-launch, Prosper raised the minimum credit score requirements for borrowers to 640 from 520 and introduced a new rating system that takes into account the loan performance of 29,000 Prosper loans as well as credit score data.

"The Wallet" also reports that two other P2P lenders, Lending Club and Pertuity Direct, are now registered with the SEC. U.K.-based Zopa Ltd., however, decided to exit the U.S. market.

This WSJ graphic offers a quick overview of the major P2P lending sites.

Posted by Joseph at 1:56 PM
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How the "cap and trade" bill will change your life

When Mark mentioned the Obama administration's push for "cap and trade" legislation back in a February blog post, his emphasis was on the tax burden it would impose. Those taxes are one part of the story, but another is the "Big Brother" aspect of the entire effort.

For example, how would you like it if you couldn't sell your current home until you "retrofit" it with the energy "improvements" dictated to you by Washington? It's not clear to me if there would be a direct prohibition via national zoning requirements, or if the same goal is accomplished by mandating that all Fannie Mae and other government-related mortgage programs require the retrofit before buyers would qualify.

Here are two recent reports concerning the scope of this legislation. Read them and you'll get a picture of just how bad this is going to be.

First, from the National Review, comes an article listing what the authors say are 50 reasons to fight the recently-passed House bill (by opposing it in the Senate). Excerpts:

Two main things to understand about Waxman-Markey [the American Clean Energy and Security Act]: First, it will not reduce greenhouse-gas emissions, at least not at any point in the near future. The inclusion of carbon offsets, which can be manufactured out of thin air and political imagination, will eliminate most of the demands that the legislation puts on industry, though in doing so it will manage to drive up the prices consumers pay for every product that requires energy for its manufacture — which is to say, for everything.

Second, it represents a worse abuse of the public trust and purse than the stimulus and the bailouts put together. Waxman-Markey creates a permanent new regime in which environmental romanticism and corporate welfare are mixed together to form political poison....

The House of Representatives, famously, did not read this bill before passing it... We cannot cover every swirl and brushstroke of this masterpiece of misgovernance, but here’s a breakdown of its 50 most outrageous features....

21. The bill regulates every light fixture under the sun. Actually, the sun might be the only light source that isn’t regulated specifically in this legislation. There are rules governing fluorescent lamps, incandescent lamps, intermediate base lamps, candelabra base lamps, outdoor luminaires, portable light fixtures — you get the idea. The government actually started down this road by regulating light bulbs in the 2005 energy bill. This bill merely tightens the regulations, which means the unintended consequences produced by the 2005 bill — more expensive light bulbs that burn out quicker — will probably get worse.

22. The bill extends its reach to cover appliances as well. Clothes washers and dishwashers, portable electric spas, showerheads, faucets, televisions — all these and more are covered specifically in the bill. You thought we were kidding when we said this bill represents the federal government’s attempt to expand its regulatory reach to cover everything. We weren’t....

24. The bill requires the EPA to establish environmental standards for residences, meaning a federally dictated one-size-fits-all policy for greening every home in America. When you’re retrofitting your home according to EPA guidelines, it will come as little comfort to know that the government is reimbursing you for your troubles, especially if you’re doing the work around April 15....

29. The bill undermines federalism by prohibiting states from creating their own cap-and-trade programs. Nearly half of all U.S. states have already taken some sort of action to cap greenhouse-gas emissions by forming regional compacts and implementing their own emission standards. Understandably, these states support a federal cap so that they are not at an economic disadvantage to states that do not cap emissions. If these states want to hamstring their own economies in the pursuit of green goals, that should be their business. States that don’t see any reason to do so should not be forced to share in their folly....

This is very serious stuff. The article is rather lengthy and not layman-friendly, but worth investing a little time trying to understand how it will change our country, your city, and your personal financial life and freedoms.

Reuters weighed in with this summary of the bill at the time it was passed in the House. Here are a few excerpts:

Section 201 of the Waxman-Markey Act calls for the development and adoption by state and local governments of a national energy efficiency code. A summary of the main provisions are as follows:

1. Establishes a “national energy efficiency building code” for residential and commercial buildings, sufficient to meet each of the national building code energy efficiency targets.

Goodbye to local authorities having the codes they think best for their state/city. Washington will now handle that little task, thank you.

2. Sets energy efficiency targets for the national building code...

Hmmm, and I wonder what happens if you don't meet the targets?

4. Requires that states and local governments comply with or exceed the national energy efficiency building code, and provides for enforcement mechanisms for states which are out of compliance.

Can't wait to learn more about those "enforcement mechanisms."

Even if you're not particularly activist when it comes to contacting your U.S. senators, this looks like a good time to speak up. Their phone numbers, where you can register your opposition to the Waxman-Markey energy legislation if you wish, can be found here.

Posted by Austin at 1:25 PM
Category(s): Family Finances, Taxes

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Student-loan changes now in effect

Interest rates and other terms for student loans change each year on the first of July.

What's new this year? Income-Based Repayment is now available for the first time, Pell grants have gotten bigger, and interest rates on new Subsidized Stafford loans and existing variable-rate loans have gone down.

Details here from the Project on Student Debt.

Also, this article from the Washington Post notes that "people working in public service jobs — all levels of government work, teachers in public schools and universities, employees of public hospitals, and anyone working for a 501(c)(3) nonprofit would all qualify" for the new Income-Based Repayment.

Posted by Joseph at 11:35 AM
Category(s): College, Family Finances

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Best online finance tools

Well, SMI's 401k Fund Tracker didn't make this Wall Street Journal list of the best online tools for personal finance, but I guess I won't hold it against them.

We've highlighted a few of these for you in the past (particularly a number of the budgeting sites). But there are more unfamiliar names on this list than familiar. Might be worth a minute to peruse their list of tools for creating financial plans, tracking investments, checking for fraud, keeping track of credit, and (hopefully not) managing loans.

If any of you have used any of the mentioned tools and have feedback, either positive or negative, add it for the community in the comments below.

Posted by Mark at 3:23 PM
Category(s): Family Finances

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Cutting costs on digital services

UPDATE: Andrew here... Matt's post below is right on target. It motivated me to check on the various things I receive, and what I found surprised me so much I decided to repost his original entry with my findings. One thing I found was an online special for my home telephone service. I will continue to get the same basic package for $19/mo less than what I was paying. Additionally, I found an extra $4 monthly charge for a billing fee I was able to get removed. So, all-in-all I'm saving $276 a year! That's a lot of cash back in this Pryor household for merely checking in on my phone company. So, invest the time to review your services. You may be surprised at the kind of return you get. Here's Matthew's original post again...

Weren't we supposed to be paperless by now? Not only are we still buying paper (maybe more now than ever), we have all these digital costs piling up. I love a cool piece of tech as much as the next guy, but I'm less than thrilled about the added expenses.

How to Cut the Beastly Cost of Digital Services gives some good advice on how to make small but meaningful changes:

• DON’T ASK, DON’T TELL: Cable, satellite and telephone companies can only be overjoyed that millions of their customers take no action to lower their bills, and instead routinely pay much too much for overpriced plans they purchased a decade ago.
• IF THEY SAY NO, THREATEN TO SWITCH: If you’re thinking about switching to another satellite, cable or phone provider, call your current one and let 'em know.
• BUNDLE YOUR SERVICES: With traditional landline ownership dwindling as more customers use only cellphones, the major phone and cable companies are chockablock with packages intended to keep you from straying.
• RECONSIDER THIRD-PARTY CARRIERS: Once, third-party long-distance companies offered cheaper long-distance calling than you could get from your local provider, but that might no longer be the case.
• ASK FOR CORPORATE DISCOUNTS, MONITOR WEB SITES FOR DEALS, AND IF ALL ELSE FAILS, DOWNGRADE

Have you tried any of these? Or maybe you know of some better ways that aren't listed?

Me? I'm ready to get rid of our landline altogether since we have cell phones (which I finally succumbed to in 2009). Most of the calls aren't for me anyway. That'd save about $350 year. Hmm, that's about how much I'd need to buy one of them fancy new paperless Kindles...

Posted by Matthew at 1:35 PM
Category(s): Family Finances

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Get free 'specialty' credit reports

In our current issue of SMI, Andrew Pryor explains how to get a free copy of your credit reports and why it's important to do so.

But did you know that there "specialty" credit reports as well — ones that document such things as your check-writing history, medical payments, tenant history, and insurance claims? I didn't know that until I came across this post on Mark Oleson's "Financial Tip of the Week" blog:

FTC regulations require companies that prepare reports on consumers for employment, insurance claims, rental, check writing, and medical records history, [to] as a minimum establish a toll free telephone number for ordering the free file disclosures. Many companies also provide information for ordering the file online.

As is the case with credit reports, you are eligible for one free report per year (i.e., one insurance report, one tenancy report, etc.)....

It makes sense to order a specialty report before shopping for new insurance, opening a new checking account, and prior to renting.... Consumers who find errors in a specialty report have the same rights to dispute as with errors found in a credit report.

Several specialty reports are available via this site.

Posted by Joseph at 11:52 AM
Category(s): Family Finances

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Endless rise of cable prices

Consumer Reports' piece, "Cable Rates' Endless Rise," outlines how cable prices are consistently going higher:

Rates...have spiked 122 percent since 1995, the Federal Communications Commission noted recently. That's three times the rate of inflation.

It goes on to push the need for à la carte pricing, allowing customers to pick and choose which channels they want to pay for. However, I've heard industry experts make compelling arguments that this would actually lead to higher prices.

The money-saver in me says cheaper is better, so I'll stick with the package deal. But I also hate subsidizing channels that consistently put forth filth. Might be worth it to pay more overall in order to "support" only those networks that produce family-friendly content.

Putting aside the idea that people who don't like the pricing do have the option to cancel their service, what do you make of a different pricing structure?

Posted by Matthew at 4:11 PM
Category(s): Family Finances

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And a little child shall lead them

The winner of the 2009 Financial Literacy Poster Contest, sponsored by the National Foundation for Credit Counseling, is fourth-grader Jenna Fink of Sparks Elementary School in Frisco, Texas (near Dallas).

See her winning entry here (PDF).

"At such a young age, Jenna did an incredible job illustrating the importance of saving money, living within your means and sticking to a budget," said Todd Mark, vice president of education for the Consumer Credit Counseling Service of Dallas.

Posted by Joseph at 2:08 PM
Category(s): Family Finances

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Saving on groceries

Consumer Reports' May cover article entitled "Shop Smart & Save Big" is an informative piece on shopping for groceries. The entire piece is reserved for members, but here are a couple highlights they left open:

13 ways to save arms you with a strategy when navigating the store.

Great everyday products profiles items that are worth the money.

Another note of interest is the result they came to when comparing 30 products at warehouse clubs to "Savvy shopping" (someone who found the best deals on perishables/national brands, searched for coupons in newspapers and online, and used store bonus card): Warehouse clubs were 6% cheaper. And warehouse clubs were only 1% more than only buying store brands at the supermarket.

Warehouse prices being cheaper than supermarket prices should not be news to SMI readers. But I was pleasantly surprised to see that buying only store brands hardly made a difference.

What I'd really like to see is how warehouse clubs fare against grocery saving systems used by The Grocery Game and/or Little Miss Know It All.

If you use one of these systems, we'd love to hear how it's going. Until then, I'll continue shopping at Costco guilt-free.

Posted by Matthew at 10:03 AM
Category(s): Family Finances

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Coupon Sites

Whenever I shop online, I do a quick check for coupon codes that I can apply to my order. I'd say half the time, I've been able to find some savings in less than five minutes. But I've often wondered which site was the best for fear that I was leaving money on the table.

In The 10 Best Coupon Sites by PC Mag, they do a nice summary on each of their favorites. Of those they've listed that I've used, RetailMeNot.com is my favorite. It's easy to find merchants I'm looking for and there's even a success rating for each code. They also have a message forum and other features but I really only have experience with the coupon codes.

What about you? Do you have a favorite online destination for coupons or coupon codes? If so, please share.

Posted by Matthew at 2:44 PM
Category(s): Family Finances

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Goodbye Countrywide, hello flat-fee closing costs

Monday, the infamous Countrywide name was scheduled to disappear forever, as Bank of America (BoA) tries to cut the memory cord with that symbol of the subprime disaster years.

While it is mildly interesting to see the deep-sixing of a brand that was the largest mortgage financer in the US (financing 20% of America's mortgages) just a few years ago, the really interesting news is the new pricing structure BoA announced that same day.

If you've ever taken out a mortgage, you've likely been baffled by the array of fees that make up your "closing costs." They differ from one lender to the next, with certain items called different things...you'd almost get the idea they were meant to be intentionally confusing and hard to compare (I'm shocked...shocked!).

BoA is taking a significant step towards ending the closing cost confusion by offering flat-fee mortgages. Depending on your state, you'll either pay $2,995, $2,495, or $1,995 for your loan costs. At present, these flat-rate terms are only available for new purchases (not refinances) and only through BoA branches. But it's a start.

I don't know that those specific price points are anything to write home about, but it seems like a step in the right direction in terms of clarifying this often-confusing aspect of buying a home. If it forces other lenders to follow suit, it could lead to a more easily navigated landscape for consumers shopping for a mortgage.

Posted by Mark at 9:44 AM
Category(s): Family Finances

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Refinancing to a fixed-rate mortgage

Hopefully most readers have long-ago done this, but it occurs to me that we haven't really discussed that the current interest rate environment is ideal for homeowners to refinance out of adjustable-rate loans and into low-rate fixed mortgages. A huge number of homeowners have been refinancing this year to take advantage of the current historically-low interest rates.

Some think these low rates will be with us for some time, but I personally wouldn't wait around if I had an adjustable-rate mortgage and planned to stay in that house for more than a year or two. The ability to lock in 15- and 30-year rates around 5% is a no-brainer, especially given the alternative of a variable rate that is extremely vulnerable to future inflationary (upward) pressure. Nobody knows when those inflationary winds will start blowing in earnest, but some think we may be seeing the first traces already breezing through the bond market.

At any rate, hopefully this post is redundant and any readers with variable-rate mortgages have already refinanced to low fixed-rates. If not, now is an extremely opportune time to do so.

Normally I'd encourage the 15-year loan for anyone who can swing the higher payment, but given the economic uncertainty and the fact that 15- and 30-year rates are pretty close in many markets, it may be worthwhile for some to consider sticking with the 30-year loan and simply doubling up your principal payments (rather than being locked into the higher 15-year payment). I'm not advocating any radical change in philosophy here. I'm simply acknowledging that in an extremely uncertain economic and job climate, payment flexibility may be more valuable than shaving an extra eighth or quarter off the interest rate. It's real easy to turn a 30-year loan into a 15-year with principal prepayments; it's very difficult to do anything to ease the pressure of a 15-year loan payment if you're unfortunate enough to lose your job at some point.

Posted by Mark at 2:33 PM
Category(s): Economy, Family Finances

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A financial genius? Or a financial hustler?

Early in the "Rich Dad, Poor Dad" craze, SmartMoney (a magazine published by Dow Jones) did a very interesting interview with/investigation of the author, Robert Kiyosaki. I liked the article very much because it introduced a note of caution with regard to the best-selling book that was influencing countless families. I attempted to get reprint rights to use as a cover article in SMI, but SmartMoney's rates were prohibitive.

This week I was tossing out stacks of old magazines when I came across the one from February 2003 that carried that particular article. Knowing that older content often finds its way to the publisher's Internet site, I looked to see if it was available. If so, I planned to post on the topic and link to the article.

Alas, it wasn't to be found. But I did find that Mr. Kiyosaki remains a controversial figure. Here is a lengthy rundown of his career by real-estate writer John Reed. Having not heard of Mr. Reed, I can't vouch for his accuracy, but he does appear to be a reputable voice with respect to real-estate writing/reporting. Here's his take.

This three-part series, published by Steve Braun of homeschoolblogger.com, likewise is quite critical. Again, I can't vouch for the accuracy of the allegations. Braun, however, links to a WSJ article by Jonathan Clements, a familiar and reliable source.

Finally I found mention of Kiyosaki on the Motley Fool site. It references the SmartMoney article, also taking a dim view of the advice in "Rich Dad, Poor Dad." You can read it here.

I would have balanced the above links with positive reviews, but I didn't come across any (although I didn't check the reader reviews at Amazon). Perhaps you know of some. If you have links to more favorable assessments of the author, his book, or his strategy, feel free to post them in the Comments section.

Posted by Austin at 2:36 PM
Category(s): Family Finances

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What the supermarkets won't tell you

SmartMoney starts their piece entitled 10 Things Supermarkets Won't Tell You this way:

When the economy slows and businesses begin to feel the heat, grocery stores are often exceptions to the rule. That’s because when consumers cut back on frills like eating out, they tend to make even more trips to the supermarket. Still, all bets may be off in the wake of the crash of 2008.

For me, grocery stores seem the least predatory of all retailers. I don't know if it's just my naivete, the fact that I'm buying essentials and not luxuries, or the no-frills environment. But reading an article like this reminds me that I probably have it 180 degrees wrong.

Any shenanigans you've experienced that didn't make the list?

Posted by Matthew at 3:46 PM
Category(s): Family Finances

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Longtime SMI reader a guest on MoneyLife

One of our loyal SMI readers, Connie Parks, was Chuck Bentley's guest recently on Crown Financial Ministries' MoneyLife program. Connie is a Crown Money Map coach.

She talked about how husbands and wives can work together on their finances. Details — and audio — are here.

Great job, Connie!

Posted by Joseph at 4:09 PM
Category(s): Family Finances

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"Bracing for a depression"

"American consumers are hunkered down, bracing for a depression," said Britt Beemer, chief executive of America's Research Group. "The dramatic drops in shopping levels have no match in our database in the last 30 years."

That's the takeaway of this MarketWatch article detailing the serious changes in consumer spending, saving, and other financial behavior happening in the U.S. right now.

It's not a pretty picture. But it's hard to look at a massive shift toward lower spending, paying off debt, increasing savings, etc. and not see that as a positive long-term development. In the short-term, it hurts like crazy. But in the long-term, it would seem these changes should put our economy on a healthier footing than the quicksand of debt we've been building on for some time now.

Posted by Mark at 10:54 AM
Category(s): Family Finances

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An extra $10 a week

Tax blogger Kay Bell has been running the numbers and she's figured out that most of us should start getting an extra $10 a week in our paychecks starting April 1.

The extra take-home pay is one result of the $787,000,000,000 "stimulus" bill signed into the law last month.

Why $10 and not $13 as announced earlier? Because the earlier estimate assumed the IRS wouldn't be able to roll out the required change in the withholding tables until June, meaning the $400 tax cut would be spread over seven months (June-December).

But the IRS was quicker on the draw than expected, so the rollback will be spread over nine months instead (April-December).

The tax reduction starts phasing out at $75K of income for single taxpayers and at $150K for married taxpayers filing jointly. That means higher-income taxpayers will see an increase of less than $10 a week — or perhaps no increase at all.

Posted by Joseph at 4:19 PM
Category(s): Family Finances

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Money-saving tips roundup

Some resources for your money-saving pleasure:

Save $50 a Day: This piece in Kiplinger's gives us penny pinchers some advice on saving money in small, painless ways. The money-saving tips are categorized for your convenience.

Feedflix.com: Get your money's worth out of your Netflix membership. Create a free account and link it to your existing Netflix account and you can see how much you're paying per DVD rental, average rental time, DVD returns by week and more.

CheckingFinder.com: Here's an alternative resource to Bankrate.com. Simply type in your zip code and find bank account interest rates in your area.

As always, we love hearing from our readers. If you have any sites that have been helpful to you, please share.

Posted by Matthew at 4:49 PM
Category(s): Family Finances

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Another money-saving-tip resource

Amidst the Crown Financial Ministries and Mary Hunts of the world, smaller sites don't often get the attention they deserve. The Simple Dollar is one such site. But that seems to be changing for the author, Trent Hamm, as his 2 1/2 year-old-site is garnering a nice following of active posters and breadth of content.

Last week he posted "Little Steps: 100 Great Tips For Saving Money For Those Just Getting Started." Here are a few of my faves:

6. Master the thirty day rule. Whenever you're considering making an unnecessary purchase, wait thirty days and then ask yourself if you still want that item...

10. Don't spend big money entertaining your children. Most children, especially young ones, can be entertained very cheaply. Buy them an end roll of newspaper from your local paper and let their creativity run wild...

50. Swap babysitting with neighbors. We live in a neighborhood with an army of young children out and about. Because of that, there are a lot of parents out there who are quite willing to swap babysitting nights with us, saving you the money of hiring one for an evening out...

If you're looking for an additional resource of money saving ideas, check out Trent's site. Or if you have a favorite site (besides SMI, of course), please share.

Posted by Matthew at 4:34 PM
Category(s): Family Finances

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Home equity and emergency savings

The idea of opening a home equity line of credit (HELOC) as a source of emergency cash is a fairly common bit of financial planning advice. Setting up an HELOC gives you the ability to tap the equity in your home in case of a job loss or other financial emergency. It's the sort of thing you should set up when times are good (you're employed and have good credit) in anticipation of a possible time when things are bad (no job) and you might have trouble getting credit extended to you.

Note that an HELOC is different from a home equity loan. With the line of credit, you ideally wouldn't have any balance actually borrowed most of the time, so you aren't paying any interest typically. It's there for emergencies if you need it, but isn't costing you anything (some have annual fees to watch out for, so it pays to shop around). With a home equity loan, you're borrowing the money up front and paying interest. So they're two different animals.

This article is nearly 10 months old, but I just came across it today and thought it was worth passing along. It details how banks have been freezing HELOC's based on general housing price declines in an area, regardless of the actual value or loan-to-value ratio on specific houses. Most troubling are the numerous confirmations I've seen elsewhere that some banks (especially Citibank) have often suspended the HELOC prior to notifying the customer, causing checks to bounce and credit ratings to be damaged.

This post highlights a key issue in using an HELOC as part of your emergency savings strategy. That point is simply this: Your HELOC exists at the whim of your bank. As such, you can't count on it being available when you need it.

That's not to say I think having an HELOC is a bad idea. It's not (as long as you aren't paying much in fees for the privilege) - I have one myself. But it's crucial that you recognize an HELOC is not the same thing as actual emergency savings. It can be a helpful supplement to real emergency savings, but you really can't rely on it being available when you need it most.

Liquidity matters, particularly in a financial emergency. With layoffs rising, more and more people are realizing the importance of that 3-6 month savings reserve. Seeing these HELOC's being frozen and/or closed just as people need them most is eye-opening. There simply is no shortcut that allows a person to avoid the sacrifice involved with living below their means and saving for the future.

As a side note, this is also a good example of why we typically don't recommend people use every available dollar to pay off their mortgage. Until you have a fully funded emergency fund, it's probably more important to be building that emergency fund than paying down your mortgage, even if you're only earning 2% in your savings account and your mortgage is at 6%. In the past, many people might have felt secure paying down the mortgage without any liquid emergency savings, figuring that they had the safety net of a HELOC backing them up if needed. This post clearly exposes the flaw in that plan.

New readers sometimes question why we don't include the mortgage when writing about our Level 1 - Getting Debt Free goal, and instead indicate that it's okay to move on to Level 2 when your consumer debts are paid off. This is the main reason. Paying down your mortgage is a great idea, but it needs to be secondary to establishing a reasonable level of emergency savings.

Posted by Mark at 9:43 AM
Category(s): Family Finances

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On the radio

Ron Blue and Jeremy White discussed their new book, Surviving Financial Meltdown: Confident Decisions in an Uncertain World (Tyndale House) this week on the Focus on the Family radio program.

Part one is here, part two is here.

On Crown's MoneyLife program, Chuck Bentley chats today with Rusty Leonard of Stewardship Partners about "protecting your investments." Details here.

Posted by Joseph at 11:25 AM
Category(s): Christian Interest, Family Finances

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Lowest mortgage rates in decades

Mortgage rates continue to drop to levels not seen in decades. 30-year fixed rates are hovering around 5%, while 15-year rates are approaching 4.5%.

We've blogged on the idea of refinancing a current mortgage before recently, but it's worth mentioning again because it's such an easy way for many families to put money back in their pockets (or better yet, get out of debt sooner!).

The catch here is that only those with solid credit scores are going to qualify for these refinancing rates. But this is one case where following the biblical priorities of paying down debt and establishing savings (two disciplines which will presumably have helped your credit scores) can have a very direct and tangible impact on your finances. I know several friends who had "good" rates before that have recently refinanced into "great" rates. It's worth looking into.

Note that while these lower rates are great for refinancers, many are still warning new buyers about purchasing too soon.

Posted by Mark at 3:20 PM
Category(s): Family Finances

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