Browsing Category: "Finance Management"
Six Consumer Items You’re Wasting Money on
Looking for a relatively painless way to save money? Stop buying things you don’t need.
Next time you mindlessly reach for an item you’ve grown accustomed to buying out of habit, stop and think about whether you really need it. Consuming less (of anything) is not only great for your budget, it also benefits the planet.
Here are some things most of us don’t need to purchase:
Air fresheners are not only completely unnecessary, but they can also release hazardous chemicals into your home. The Natural Resources Defense Council found phthalates (hormone-disrupting chemicals that are linked to birth defects) in 12 of the 14 common household brands of air fresheners it tested, including those that were labeled “all-natural.” Open your windows and let the fresh (and free) air in. If your home has a persistent odor, your best bet is to find the source and fix it rather than simply masking it.
Bottled water isn’t proven to be any cleaner or safer than tap (in the United States). The New York Times estimates that it costs $1,400 a year for someone to drink eight glasses a day of bottled water, versus around 49 cents for an annual supply of tap. Drinking filtered water is a lot less expensive, just as healthy, and good for the environment.
Dryer sheets can do more harm than good since they are loaded with a mixture of synthetic chemicals that can cling to your clothes and be absorbed through your skin. Here’s a cheaper and healthier alternative to make your clothes soft and static free: Add 1/2 cup white distilled vinegar or 1/4 cup baking soda to your laundry, suggests Patti Wood, at Grassroots Environmental Education. Want your clothes and bedding to have a scent? Wood says to spray a small piece of cloth with an essential oil and toss it in your dryer.
DVDs and books are easily borrowed from the library. Worried about due dates or late fees? Check out the growing number of websites, such as Swaptree, that can help you trade books, movies, music, and video games. Some other money-saving and planet-friendly entertainment tips: Download music from the Internet instead of buying CDs. It’s not free, but you can save money by only purchasing the songs you like and cut back on landfill-clogging packaging. Eliminate your cable television service. See if your favorite shows are available for free on Hulu.
Trash bags are a necessity for most of us, but that doesn’t mean you always have to pay for them. Consider using the shopping bags you get for free at the grocery store instead of buying new plastic garbage liners. You’re helping the planet by getting two uses out of a bag instead of just one. It’s like having a bag made from 50 percent recycled content, says Martin Wolf, Director of Product & Environmental Technology at Seventh Generation.
Wrapping paper is something most of us can get along without since a little creativity can go a long way. Raid your recycling bin for old maps, sheet music, kids’ artwork, newspapers, magazines, paper bags, and more. Wrapping gifts in newspaper or magazines need not be dull, especially with a little forethought. Is the recipient a sports fan, gardener, or cook? Choose relevant images or wacky photos. Paper bags can be cut up and decorated (or not).
By Lori Bongiorno
How to Avoid a $62,000 Phone Bill
It’s an old story, but here we go again: One caller into a CNN TV show sounded like a man on his very last legs as he explained how a trip to Mexico turned abruptly expensive. No, “Alberto” wasn’t kidnapped and held for ransom by a drug cartel. He was the victim of his cell phone carrier, who slapped him with a $62,000 bill after he downloaded a copy of Wall-E to his laptop via his cellular data card.
Alberto’s not alone: Tales of multi-thousand-dollar cell phone bills are legion (I’ve written about several of them here), but looking through the cases you’ll see a few common themes over and over again. Want to avoid getting slapped with a bill that’s higher than the price of a new car? Here’s some advice that every cell phone customer should keep in mind.
> International roaming is often the enemy in cases like this. Neither standard voice nor data plans cover calls when you’re out of the country, and yes that includes Mexico and Canada. I’ve even heard of one case where a caller got a mega-bill while standing on a boat docked in Miami but which was deemed “international” until he could prove he was still in U.S. territory. International roaming rates are exorbitant and are billed by the minute (usually over a dollar/minute) or the kilobyte, so your best bet when leaving the country is to leave your cell phone at home if you can — or call your phone carrier to ensure that international roaming is disabled so you won’t be billed for accidental calls or automatic data pings like the iPhone performs.
> If you need connectivity overseas, make sure you understand the rate you’re paying. $1.29 a minute is easily understandable but $0.0195 per KB doesn’t mean much to many data users. That tiny number adds up quickly. Case in point: Downloading a single, simple web page like this one will run you about eight dollars. Now imagine downloading a one-gigabyte movie and you’ll understand how these five-figure bills happen. Leave your data card behind!
> One strategy many travelers undertake is to buy a prepaid SIM card they can use overseas or get a cheap phone if they don’t already have one that’s compatible. In Europe, pay-as-you-go plans can be had that offer calls for about 30 cents a minute. If you don’t have a GSM phone, you can get one at any cell phone shop for $30 or less. None of these plans require long-term contracts. You just pay for the minutes you use.
> The other major issue with big bills is going over your plan’s data cap or allotment of minutes. Data’s the biggie: Most wireless data plans top out at 5GB, after which you pay by the KB. The rates aren’t as egregious as they are for international use, but downloading that 1GB movie after you’ve exhausted your 5GB of data will still run you an extra $500. Carriers allow you to check your data usage online, so make liberal use of that feature if you think you might be getting close to the cap.
> Text messages cost money, too, so think before you SMS. A Philadelphia man racked up a $26,000 bill just for texting last month… of course, he was trying to land a spot in Guinness World Records, so really he had it coming.
Common Homebuying Blunders to Avoid
The declining home values that are plaguing homeowners are just one of the factors creating an opportunity for prospective home buyers.
Standard & Poor’s latest Case-Shiller index, which tracks home prices across 20 major U.S. cities, reported that values dropped 19% in January from a year earlier.
Those depressed values, combined with near-record-low mortgage rates and government incentives (an $8,000 first-time home buyers’ tax credit included in the stimulus bill), are luring more first-time home buyers into the market. Indeed, a recent Century 21 Real Estate survey found that more than three-quarters (78%) of potential first-time home buyers say now is a good time to buy.
If you agree, be aware that buying a home comes with plenty of potential missteps. Here are 10 all-too-common mistakes first-timers make.
1. Not knowing how much house you can afford.
Many novice home buyers spend a lot of time researching homes – comparing kitchen layouts and backyard square footage – but very little time researching their financing options. One of the first things buyers should do is talk to a qualified lender and get preapproved for a mortgage, says Claire Clark, senior vice president of business development at Prudential California Realty. Without first figuring out how much house you can afford, you risk falling in love with one you can’t.
2. Assuming foreclosures are great deals.
Just because the previous owner owed $450,000 on a house before the bank took it over doesn’t mean it’s worth that much now. Values have slipped significantly, says Jay Michael, partner at Estate Property Group, a Chicago real estate brokerage, so you may not be getting the bargain you think with a foreclosure. Also, most homes owned by lenders or banks have been sitting vacant for months and may have been vandalized. That could require extensive renovation or repair. Weigh the costs of fixing up the property against the savings you’ll likely reap by buying a lower-priced foreclosed home.
3. Letting your true feelings show.
No matter how much you’ve fallen in love with a house, don’t let the seller’s agent in on it. Otherwise, they will gain the upper hand in negotiations.
4. Failing to find a good buyer’s agent.
Landing a mortgage is tough these days. So buyers should rely heavily on knowledgeable agents to help them get their finances in order, says Michael. After all, buyer’s agents have a fiduciary responsibility to the buyer exclusively — and should be looking out for their best interests. Start your search at the National Association of Exclusive Buyer Agents, a nonprofit representing buyers. Or consider using an agent recommended by a relative or friend. Interview each candidate about their experience, if they’ve worked with first-time buyers before and what kind of service you’ll get from them.
5. Underestimating the costs of owning a home.
Whether it’s a rusty pipe or a leaky roof, things go wrong and need to be fixed. Many home buyers don’t anticipate the additional costs for repair and maintenance, or for an increase in utility costs, says Erin Baehr, CFP and president of Baehr Family Financial. Consider the age of your new home and how well it’s been treated by the previous owners in your budget. Be prepared to set aside a small percentage (1% at most) of the home’s purchase price annually for repairs and upkeep.
6. Failing to budget for property taxes.
Property taxes – and the likelihood that they’ll climb over the course of your time in the house – should be factored into any home-buying budget, says Baehr. To get an idea of how much you’ll be paying, call the local assessor’s office or talk to people in the neighborhood.
7. Assuming your first offer will get accepted.
As home prices get even more affordable, competition is bound to heat up. “You can’t assume you’ll walk in there, make the offer and get it,” says Clark. Try not to get discouraged if you lose out on the first – or second – house you make an offer on.
8. Skipping the inspection.
Before signing anything, hire a professional inspector, says Justin Lopatin, a mortgage planner with American Street Mortgage Company. The seller isn’t likely to tell you there’s mold in the basement or the walls are poorly insulated. Lopatin advises buyers to find and hire their own inspector – independently of the realtor – to ensure there’s no conflict of interest. (You can find inspection companies in the phone book, or by doing a simple web search with your zip code.)
9. Doing too much too fast.
Some buyers want to make the house their own right away, says Baehr. They overextend themselves on credit to do so, and assume the improvement will pay for itself by increasing the home’s value. But that’s not always the case – especially in today’s market. Instead, buyers need to exhibit patience and make changes over time.
10. Failing to include a contingency clause in the contract.
A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through or the appraisal price comes in under the purchase price. Should one of these events occur, the buyer gets back the money he used to secure the property. Without the clause, he can lose that money and still be obligated to buy the house, says Lopatin.
By Lisa Scherzer, SmartMoney.com
How to Protect Your Money in a Recession
Five Financial Moves You Should Definitely Make — and Five You Shouldn’t
Despite recent gains in the stock market, portfolios remain badly damaged by the market performance of the past 18 months. With jobs still falling away at a rapid clip, the recession is still a serious concern and policymakers are scrambling to implement expensive and complex solutions.
As we wade through these difficult times, how should you think about your own financial situation? A good starting point is to remember what Kipling wrote: Keep your head about you as everyone is losing theirs.
It’s a great temptation in times such as these to think things will never get better. But if history shows us anything, things do eventually improve. In fact, judging by the standards of past economic shocks, this recession is getting long in the tooth. The average recession since World War II has lasted 11 months, and the longest was 16 months in 1981-82. Our current crisis is 15 months old.
Also, hints of bottoming are starting to surface. Oil prices have begun to rise, indicating some increased demand. China is importing aluminum again. In addition, the stimulus plan will start to kick in later this year, creating jobs and, perhaps, helping soothe some of the enormous fears in the marketplace.
So, there are definitely brighter times ahead. Until then, here are some strategies to help you keep your head about you: five things that you definitely should do and five things you definitely should not do, as you weigh how to protect and build your assets.
Let’s start with the five things you should definitely do:
1. Reduce Your Expensive Debt
Too many of us overextended ourselves during the past decade with credit cards and other debt. These bills now hang over people like the Sword of Damocles.
The first order of business is to reduce this expensive debt, even before saving for retirement or investing in the stock market. One smart strategy is to take advantage of much lower gasoline prices. One year ago, gas cost more than $4 a gallon in much of the country. Today, it’s less than half that. You should devote the money you save to eliminating your credit-card debt.
2. Get On a Budget
Thrift is the new black. That means getting on a budget, measuring exactly what you spend and looking for ways to save money. Perhaps you are eating out more than you appreciate or spending too much on a cup of coffee. Budgeting is a lost discipline for many people and one that should be rediscovered.
There are several free Web sites, such as Quicken.com and Wesabe.com, that can help you sort out your spending and give you a sense of where you can save money.
You upload password information for your credit cards and other accounts, and the sites aggregate and sort the data, so you can see how much you’re spending on, say, groceries, eating out and movies. You can then track your spending habits over time and make adjustments to save money.
What’s more, some of these sites, notably Wesabe, also have active communities discussing various budgeting issues. If you are just getting started on developing budgeting discipline, talking with others who are doing the same can help make it easier.
3. Guard Against Inflation
Currently, inflation is a relative nonissue, and most commentators — not to mention the Federal Reserve — believe that it won’t become a problem anytime soon.
Yet, many things are taking place that could raise the specter of inflation in rapid order.
For starters, the federal government is spending money like a drunken sailor. There’s the nearly $800 billion stimulus program, a proposed budget of $4 trillion (up from $3 trillion in the previous year) and hundreds of billions more in bank, real-estate and credit-rescue packages. On top of that, short-term interest rates, set by the Fed, are essentially at zero and quite low in other countries as well.
All of which is like so much kindling waiting for a spark. Once that spark hits, growth and inflation could come roaring back to life.
For that reason, it’s smart to have a portion of your fixed-income investments in Treasury inflation-protected securities, or TIPS. These bonds are backed by the U.S. government, like normal Treasurys, but also have built-in protections that boost returns to account for inflation.
Another inflation-hedging strategy is to invest in commodities. When growth resumes, demand for oil, copper and other commodities will rise, making their prices increase. A warning, though: Given the volatility of commodities, financial planners recommend that investors have no more than 5% to 10% of their portfolio in this sector.
4. Have a Stock-Market Strategy
Despite the recent sprint in share prices, investors remain leery of the stock market. It will take more than a four-week rally to soothe the pain caused by the stock market since it tumbled from its late-2007 highs. When so much doubt surrounds the stock market, it’s usually a time to think about investing in equities. Despite the horrid pain most of us have suffered in the market during the past 18 months, stocks, like the economy, will not remain down forever.
That doesn’t mean going whole-hog into the market, however. Consider coming at stocks first through your retirement account. For many of us, that account has a longer time horizon and built-in tax efficiencies, and often comes with a corporate match — which is essentially free money.
Outside of your retirement account, be sure to maintain a diversified approach among stocks, bonds and cash. A good rule of thumb is to use your age as the percentage of assets you should have in safer bond investments. Thus, if you are 50, you would be split 50-50 between stocks and bonds. If you want to be more conservative, you’d carve back some of the stock exposure and leave it in cash.
Even with the recent runup in stocks, you still might have a larger-than-usual chunk of your assets in bonds these days, because bonds did well last year and have remained solid this year. If that’s the case, rebalancing toward stocks makes sense, especially with their prices so low.
5. Preserve What You Have
One of the lessons of the past few years is that the stock market and your home are not ATMs. They are assets that can rise and fall. Having a strategy to preserve your gains is prudent in these challenging times.
Along with diversification of assets — stocks, bonds, cash — maintain diversification in the stock market, as well. Buy broad, low-fee index funds, rather than individual stocks, to lower your exposure to risk.
And maintain a rainy-day fund in safer places, such as TIPS, certificates of deposit or highly rated municipal or corporate bonds. A good rule of thumb is to have a reserve of six months’ earnings in case of a job loss.
So, what should you definitely not do?
1. Don’t Bury Your Money in the Backyard
With things the way they are, it’s tempting to simply opt out altogether. Fear of financial-system failure, the uncertain nature of the stock market and just a sense of foreboding have people thinking that it’s smarter to keep their money in the backyard, a mattress or an empty can.
But it really isn’t. The bank-insurance system works for holdings under $250,000. I know because my bank once failed, and the transfer of assets was seamless. So, at least keep your cash in certificates of deposit earning some sort of return. An overabundance of fear and caution can cost you money; don’t let that happen to you.
2. Don’t Chase Returns
This is a great temptation in any market, but especially so today. Bonds had a great run last year, but some analysts believe they may just be the next bubble waiting to burst.
In short, don’t double down on an asset that has had such a tremendous run. You are likely coming to the game too late, since most of the gains have already been made. That can skew your portfolio too sharply in a single direction, making you vulnerable to a decline in previously hot asset groups.
Look at it this way. In the past few years, the temptation to chase returns led people to buy too many houses, invest too heavily in a soaring stock market and aggressively bid up oil. All of it ended badly.
3. Don’t Abandon Diversification
There’s a great desire now to stay safe by holding only cash or only Treasurys. This kind of behavior is really just the same as chasing performance. Be disciplined. Stick to a diversified strategy and rebalance your holdings every year to reduce your exposure to the high-fliers.
4. Don’t Stop Saving for Retirement
In times of turmoil, we tend to focus on what’s right in front of us: the current bills, the savings account and what the day will bring. But we are all still going to want to retire at some point, so that means remaining disciplined about saving for retirement.
Employer 401(k) programs remain a good vehicle, even if the stock market has smacked their holdings. These programs allow you to invest money tax-deferred, and many companies, as noted, provide a corporate matching program.
Rather than ignoring your account statements, as many of us have done, take a look at them and make sure that your holdings are diversified and balanced. Ignoring your savings — or discontinuing them — will come back to haunt you when you want to leave off working and relax on the beach.
5. Don’t Ignore Common Sense
Much heartbreak in the recent past has stemmed from an ignorance of common sense. Fraudsters promising overabundant returns snookered many investors. Some people viewed housing and the stock markets as never-can-lose gambits. Others spent far more than they had.
Personal finance, at its heart, boils down to common sense. You have to eliminate your high-cost debt and get on a budget. You must save for retirement. And you need to make sure that you own a home you can afford and enjoy, as opposed to seeing it as a get-rich-quick scheme.
In short: Be prudent, save money, invest wisely. Getting back to these very basics will help all of us rebuild our portfolios and set sail for a better day.
by Dave Kansas – provided by The Wall Street Journal
Mr. Kansas is editor at large at FiLife and author of “The Wall Street Journal Guide to the End of Wall Street as We Know It.”
Write to Dave Kansas at dave.kansas@wsj.com
ATM Virus that Steals Your Money
Russia’s leading computer security labs have warned of a new software virus which infects Automatic Teller Machines (ATMs) to steal money from bank accounts of their users.
Two leading anti-virus software producers ‘Doctor Web’ and ‘Kaspersky Lab’ claimed to have discovered a new virus, in the networks of several bank ATMs, which is able to collect information from bank cards.
“This is a malicious programme intended to infect and survive in ATMs. It is possible that new software will appear, aimed at illegitimately using banking information and removing funds,” an official of the Kaspersky Lab was quoted as saying by RIA Novosti news agency.
He said the virus is a Trojan, which is able to infect the popular American Diebold brand of ATMs, used in Russia and Ukraine. Judging by the programming code used, there is a high probability that the programmer comes from one of the former Soviet republics, he added.
The computer security experts say the number of infected ATMs is minimal but individual bank cardholders will not be able to detect whether an ATM is infected or not. However, banks can run a security software to find out if their machines are at risk.
