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Wednesday, February 2nd, 2011

Spend Smarter to Save Time & Money

As anyone recovering from bankruptcy, trying to eliminate debt or otherwise reshaping their finances knows, shopping and buying new things can be a source of stress – after all, we all need stuff now and then (whether it's a new part for a car, a new refrigerator or new shoes for our kids). But we shouldn’t have to worry that our purchase will turn into a nightmare if something goes wrong.

A recent post from WalletPop.com outlines what it calls a “Customer Bill of Rights,” which offers suggestions for what ordinary consumers should look for in their purchasing to make sure they won’t be scammed or led into a labyrinth of red tape should something malfunction.

Know What to Look for in a Company

Here’s a summary of how to better navigate your spending and buying experiences.

  • Look for contact information. If a company doesn’t readily display contact information (with email addresses or phone numbers on a web site and actual representatives in a store), you may not want to shop there. After all, if you can’t easily communicate with the company, you’ll probably be in for some serious headaches if you want to ask about a return or repair policy down the road. Before you spend your money, make sure you know how to ask the vendor questions.
  • Know your timeframe. If the first person you speak with can’t help you resolve a problem, ask for a manager. It’s easy during customer service calls to get frustrated and give up, but remember that you spent your money on this company’s product, and you need help with it. Customer service reps shouldn’t act like this is a burden; if they do, you’ve learned one company not to buy from in the future.
  • Know the policies and ask about changes. Return and warranty policies change frequently at some retailers. Be sure to read such policies and ask how a company handles changes: if, for example, you buy something and the policy changes before you need it fixed, what will your options be?
  • Be wary about warranties. Many stores offer expensive warranty deals that are not worth your money. Instead, consider looking at online warranty vendors (like SquareTrade.com) or simply setting aside a fund for all your appliances – that way, you have somewhere to draw money from if you need repairs.
  • Do some homework. In an ideal world, we wouldn’t have to worry about whether a retailer would treat us respectfully if we needed to make a return, but in the real world some vendors have better reputations than others. A quick online search should yield lists of companies that have high and low ratings for their customer service. You can also look at forums where customers chat about their experiences.

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Wednesday, January 26th, 2011

Avoid Refund Anticipation Loans this Tax Season!

If you’re counting on a tax refund this year, you may have heard of refund anticipation loans (or RALs), which some tax-preparation services offer to people as part of tax preparation services. But these loans, as most consumer advocates will agree, are not a good deal for you the consumer.

Here’s a look at why tax refund anticipation loans (sometimes called a refund anticipation check) may not be all that they're promised, and what the federal government is doing to help you avoid them.

Why RALs Are a Bad Financial Move

So what is a refund anticipation loan? Basically:

  • It’s a cash advance loan that charges you a high interest rate to get some of your tax return dollars earlier than you would have otherwise gotten them.
  • Some tax preparation services offer them to customers who are expecting a tax return that year. Generally, a customer can receive the money for a “fee” of some kind – just like a payday loan. In fact, RALs are very much akin to payday loans: their “fees” are just high interest rates disguised to look harmless.
  • RALs eat into whatever tax return you can expect to get. After all, you have to pay for the privilege of receiving your money early, and that money comes out of whatever you would have received from the federal government.
  • RALs can also set you up for debt. What happens if there’s a mistake in your tax forms or if you end up getting a smaller return than you expected? If you take out a refund anticipation loan for the full amount of your return and then receive a smaller actual return from the government, you’ll still be responsible fore repaying the loan amount in full. Yikes.
  • RALs may present a tempting prospect to unbanked Americans – after all, if you don’t have a bank account, waiting for a refund check from the government and then paying to have it cashed can seem like a waste of time and money. But paying for the RAL itself will almost always cost more.

So What Are the Feds Doing about the RAL Problem?

This year, the Treasury is launching a new program that offers an alternative to refund anticipation loans, particularly aimed at people without bank accounts who might be susceptible to the RAL’s siren song. Here are the gist:

  • Debit card distribution: The Treasury will be sending debit cards pre-loaded with people’s refunds to 600,000 Americans selected at random to participate.
  • Experiment to see what works: If the program proves popular, the pre-loaded debit card system could become standard practice in future years.
  • Varied terms on cards: In order to test various features, the debit cards will come with a variety of features. Some will require no fees to make purchases or withdraw money from ATMs, while others will charge small fees to be activated, check balances or use at certain retailers.

The goal of this program, it seems, is to offer a lower-cost alternative to RALs and RACs to the people most likely to be tempted to choose them.

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Posted in Finance 101: Secure Your Future, Predatory Lending | 1 Comment »

Thursday, September 9th, 2010

Study: Americans are Spending Smarter… Sort Of

A study recently conducted by the National Foundation for Credit Counseling has found that, as a result of the Great Recession, Americans are more interested than before in paying down our debts. But, it seems, we still don’t quite have the financial habits that will get us to that goal.

Eliminating Debt by Watching Your Money

The study found some interesting nuggets of information about the way we tackle debts in this country:

  • More than half of poll respondents reportedly noted that the economic slowdown had inspired them to pay down their debts; but
  • Only 37 percent of those polled indicated that they had a good idea of how they spent their money each month; and
  • Only 20 percent said that they planned to begin budgeting their expenses in order to get on track financially.

The good news from the poll’s findings is that we seem to have had a collective wake-up call about the real cost of debt. But, clearly, we aren’t all on the same page about what kind of financial habits will get us to a debt-free lifestyle.

Steps for Getting out of Debt

Representatives from the NFCC and other financial gurus often offer similar advice for getting on target with financial goals. In fact, the steps to debt elimination are almost identical to those for rebuilding and maintaining healthy finances after filing for bankruptcy:

  • Track your spending: In order to seriously pay down debt, you have to know where your money goes each month. Luckily, this step is fairly easy to accomplish, once you decide to do it: for a month, write down everything you spend money on, including rent, utilities, food, clothes and entertainment. No purchase is too big or too small to count – and if you leave anything out, you won’t have a realistic idea of where your finances stand.
  • Create a budget: Armed with the information about how you currently spend your money, you can devise a plan for spending and saving your money more effectively – that might mean putting more money toward credit card bills and less toward new shoes, or switching to home-cooked meals most nights of the week. Be sure to give yourself some breathing room so you don’t feel deprived by your budget and give up.
  • Start saving money: Now that you’re actively, consciously managing your finances, it’s important to put some money aside each month so you’re ready for any unexpected event (such as illness, injury or job loss). Don’t be daunted if you can only save a little each at a time – anything at all is better than nothing, and your funds will build up over time.

Remember: good intentions are important, but they won’t get you out of debt and back on track financially unless you act on them.

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Wednesday, August 18th, 2010

Back to School Doesn’t Have to Break the Bank

Each year, retailers and shoppers alike anticipate back to school sales with the intense focus of a professional athlete. This focus is a result of the high stakes of the event, as reports show the average family of four spends almost $600 getting their children prepared for school.

Even worse, the weakened state of the American economy has heightened the anxiety with which consumers approach late summer shopping. Fortunately, there are ways ensure that you don’t have to break the bank while shopping for school necessities.

To help frustrated consumers, the Sacramento Bee recently provided some wise strategies to carefully budget your school shopping.

Take Your Time

Don’t feel pressured to buy every single item your child needs before the first day of school. There may be some supplies you can buy later at a reduced price, as stores look to unload their excess inventory. Ask your child’s teacher which supplies can be purchased at a later date.

In addition, you don’t need to buy all your child’s clothes before school starts. According to the article, many fall clothes go on sale in October as stores clear their shelves for the holiday rush. This also gives your kids a chance to make crucial fashion decisions at their own pace.

Coupon, Coupon, Coupon

It sounds simple, but coupons can help you shave substantially costs off your back to school shopping. Many Americans are now reducing their debt by actively seeking coupons to use when they shop for basic necessities.

Today, with the aid of the Internet, finding coupons has never been easier. Some helpful coupon websites include CurrentCodes.com, dealcoupon.com, Becentsable.com, and Retailmenot.com.

Check Your Supplies First

Before rushing headfirst into new purchases, check your closets and cabinets for supplies that may save you the cost and hassle of making new buys. If you have enough old binders and pencils for a small army, recycle those instead of buying new items that will add to the clutter.

This strategy also applies to clothes, but may be less helpful since children grow out of old garb so fast. Fortunately, no one outgrows pencils and pens.

Make a Budget

Set a detailed budget before heading to the mall, and stick to it. Also, don’t be afraid of sharing this budget with your children. By creating a set budget, and meeting its limits, you will be able to protect your wallet while giving your children an important lesson in the benefits of sound financial planning.

Plus, by turning your search for school supplies into an opportunity to improve your children’s financial literacy, you will be giving them a valuable education well before the first school bell rings.

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Sunday, August 1st, 2010

Long-Term Savings Might Mean Short-Term Spending

Did you know that a common contributing factor to bankruptcy filings is serious illness or injury? In fact, many Americans who file for bankruptcy to escape overwhelming debt do so because of medical bills they can’t afford and didn’t see coming.

It makes sense, then, to review some key ways to spend a little money now to avoid greater expenses in the future. Here’s a look at how you can protect yourself and your family, according to a recent article from U.S. News & World Report.

When to Buy New

  • Cribs and children’s furniture: Even items that seem to be in good shape can be a health risk, as safety recalls on baby items are fairly common. Rather than scrambling for an item’s history, opt for a new crib with a proven safety record.
  • Car seats: While nobody likes to think about getting in a serious car accident, they do happen and can be devastating if you and your loved ones aren’t prepared. Because safety standards are improved and changed commonly, opt for a new seat for your child. Also: consider that some damaged seats may look okay. Better not to find out the hard way.
  • Bike helmets: Did you know that bike helmets are built to protect the head for only one crash? A used helmet may not provide the protection you think you're getting.
  • Car tires: Like many of the items on this list, tires don’t come with an accident history and might not show visible signs of serious damage. But remember: the cost of new tires is probably less than the cost of the damage that could be caused by a serious accident. An ounce of prevention here is well worth the price.
  • Computer software: While buying secondhand may seem like the cheapest way to go, it could end up being a total waste of money. Many kinds of software come with serial numbers that are registered with the company – after one registration, they can’t be used again and so would be worthless. Better to buy new software for yourself and avoid the risk of throwing away money.
  • Mattresses and bedding: The cost (in dollars, hours, health and frustration) of dealing with bed bugs, mold, mites, bacteria or anything else that might linger on a secondhand mattress is rarely worth the savings. And don’t think these concerns are memories of a distant past, either: even mainstream retailers have had trouble with mattress-loving critters in recent weeks.
  • Shoes: If you aren’t repelled by the idea of wearing someone else’s shoes, they may seem like an intriguing bargain. But be careful: used shoes tend to be molded to someone’s feet other than your own, and their support structures can be worn out. If you plan to be on your feet a lot, you may avoid serious back problems by buying new.

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Thursday, April 22nd, 2010

On Earth Day, Go Green to Save Green

In honor of Earth Day, the Fair Trade Commission (FTC) has posted on its web site a variety of >suggestions for improving your home's energy efficiency (and potentially decreasing the amount of money you pay for utilities).

Here's a summary of some of those suggestions—visit the site for more!

In the Kitchen

  • Move your refrigerator away from the stove, dishwasher or any other heat sources (like radiators). To keep the coolness inside, make sure door seals are airtight.
  • Wash only full loads in your dishwasher and clothes washer. Be careful not to overload, though, which can strain appliances and leave stuff dirty.
  • Cook with pots and pans that fit your burners and keep lids on whenever possible to trap heat.
  • Set your water heater to 120 degrees. Some come preset to 140, which can cost extra cash!

In the Utility Room

  • Keep utilities in top shape by setting up regular checkup dates. Be sure to have your air conditioner and heating system inspected annually to save on potentially costly repairs.
  • Get a professional to inspect the airflow in your house. Having leaks sealed can help minimize lost energy and save you money in the long run.
  • Replace air filters, seal fireplace flues if you don’t use them, hang curtains on windows and tend to holes around pipes to make sure hot or cold air isn't leaking from your house.
  • Go digital with your thermostat so you can arrange to have one temperature when nobody's home and another when you are.
  • Try ceiling fans to better circulate air during the summer and help reduce the amount of money you have to spend on air conditioning.

For Your Car

  • Drive smart and save . Staying within the speed limit, braking gently and using the kind of gas your manufacturer recommends can help you maximize your mileage.
  • Maintain your vehicle. Regular oil changes, filter replacements and air-pressure checks can help keep your car on the road for a long time.
  • Leave the car home if you can walk, cycle, carpool or take public transit. You’ll be doing a favor for the planet, your health and your car's lifespan.

If You're Buying

If you're in the market for new appliances, windows, vehicles or a new house, keep in mind that many energy-efficient options are now available and can save you money in tax rebates and lowered energy costs in the long term, so consider buying a "green" edition of what you need.

Additional Resources

For more tips on saving money and eliminating debt, check out The Debtress blog.

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Monday, January 18th, 2010

Research Suggests Ways to Spend Smarter

High unemployment rates and sluggish recovery in the job market mean that many Americans are still budgeting carefully and watching every penny that leaves their wallets. It’s times like these when studies like the one conducted by researchers at San Francisco State University can help us make important spending decisions.

Memories Last Longer than Stuff

The new budget study examined recent purchases made by adults enrolled at SFSU. Here's what the researchers discovered:

  • Happiness from things fades. On average, researchers found, the thrill brought about by new objects faded in six weeks to three months. This means that, no matter how much you love that new computer, dress or TV, you will get used to it in a few months and the pleasure it brings you will dwindle.
  • Happiness from memories lasts. On the other side of the coin, the pleasure induced by spending money on experiences (like sporting events, plays, hikes, etc.) endures, thanks to our ability to remember and relive these experiences.

So how can you use this information to make the most out of the money you have for leisure? Focus on participating in events rather than accumulating goods. And, suggests the study, recruiting friends and loved ones to join you is a particularly useful way to make sure you enjoy yourself and create enjoyable memories.

Here are some ideas to consider when thinking about an experience (rather than an object) to spend money on:

  • Take a class. Many community colleges and organizations offer continuing education departments that offer fun classes like ballroom dancing, cooking, yoga or sculpture.
  • See a play. Check local newspapers or schools for events put on by community and school theatre or music groups. Bonus: these are often low-cost outings.
  • Plan a picnic. Even in bad weather, you can organize a picnic indoors to shake up the monotony of chilly days. Team up with friends and make everyone responsible for one part of the meal. Or have everyone agree to bring a dish they've never had before.
  • Be a tourist at home. Spend a day visiting museums or landmarks close to home that you've never actually explored. See what you can learn about your hometown.
  • Get lost. Team up with a friend and try to get lost. Then spend the day driving or walking around areas you’ve never seen before. Take pictures as souvenirs.

For more great posts about eliminating debt and stretching your dollar, check out The Debtress.

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Saturday, December 5th, 2009

FDIC: One Quarter of Americans Unbanked or Underbanked

At the beginning of 2009, the Federal Deposit Insurance Corporation (FDIC) initiated an examination of the unbanked and underbanked people of the U.S. as part of Census data collection.

The report was released this week, and shows some worrying trends about financial institution usage, particularly among minority populations.

  • Unbanked: This term refers to people who have neither checking nor savings accounts, and who rely primarily on non-bank financial institutions (like check cashing services, payday lenders, refund anticipation loans, etc.) for their financial needs.
  • Underbanked: This refers to people who have either a checking or savings account, but rely on alternative financial sources at least once or twice a year.

The Banking Study

According to the executive summary of the report, its goal was to address a gap in reliable data on the number of unbanked and underbanked households in the U.S.

The issue matters because those without bank accounts lose out on access to lower-cost financial management. Bank use can also permit people to build credit histories and establish financial stability – in other words, it’s in the best interest of the U.S. as a whole to improve access to banks for everyone.

Here’s a look at the hard numbers:

  • 25.6 percent of American households (about 60 million adults) are unbanked or underbanked.
  • A breakdown by race shows that 43.3 percent of Hispanic households, 44.5 percent of American Indian/Alaskan households and nearly 54 percent of black households are unbanked or underbanked.
  • At least 71 percent of un- and underbanked households have incomes of $30,000 per year or less.
  • The most common reason people offered for not having a bank account was feeling that they did not have enough money to justify one.
  • About two thirds of unbanked households use one or more of these financial tools: non-bank money orders & check cashing, payday loans, pawn shops, rent-to-own agreements and refund anticipation loans.
  • About one quarter of unbanked households use none of the aforementioned services, which suggests that cash is their go-to commerce tool.

Opening and maintaining bank accounts is an important step toward financial stability for individuals and households. On a larger level, the high numbers of unbanked Americans can be seen as one symptom of our country’s varied economic woes, as little savings can often lead to bankruptcy if debts become unmanageable.

Additional Resources

Full FDIC Report (PDF)

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Friday, November 27th, 2009

True Bargains: What Makes a ‘Good Deal’

While looking for low prices is an important part of financial responsibility, it’s only one component: getting the value you need is the other half. For example, buying the cheapest brand of conditioner may seem frugal, but if you have to use twice as much as any other brand, it may end up costing just as much.

Value Vs. Price

The "value" of an item is subjective, while price is relatively fixed. Two people may see the same item as having different values even when the price is the same.

  • Value: How much an item is worth to a buyer/seller (usually determined by how much you need or want an item).
  • Price: How many dollars an item costs. Dollars are sort of a generic value unit we’ve all agreed upon.

In many cases, value and price line up pretty well, and merchants will try to keep the two in line. Value really shoots up when a seller is asking for less than you’re willing to pay.

Maximizing Value

So how can you make sure you spend your dollars to maximize their value? Here are some tips.

  • Buy second-hand: Thrift stores, flea markets and garage sales are all excellent places to find good values because they’re filled with items that haven’t declined in intrinsic worth but whose owners grew tired of them. Gently used items are often steeply discounted and still perfectly functional (but avoid super-cheap items that are simply junk).
  • Spread the word: Let your friends and family members know what you’re looking for – someone may be trying to “get rid of” exactly what you need. When you’re in a store, tell the sales associate what you’re looking for. Ask for advice and find out if any discounts might be available.
  • Shop ahead & behind: If you know you’ll need a new pair of sneakers once a year, keep your eyes peeled at all times for bargains – many staples won’t “go bad” from sitting around a while. Take advantage of end-of-season sales to stock up for the next year (think Halloween decorations on November 1st).
  • Use the Internet: Craigslist, eBay, Freecycling, Amazon and other websites often offer significant discounts from retail prices. But if you don’t want to buy online or don’t like to pay for shipping, you can still use the Internet to get an idea of what various vendors charge for the item in question (and use that knowledge to bargain).

If you start thinking in terms of value, you'll be able to save money while getting your true dollar's worth—particularly important if you're struggling with debt or rebuilding your finances after bankruptcy.

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Monday, September 28th, 2009

More Tips for Outsmarting Marketers (And Keeping Your Money)

Thank goodness psychologists keep researching human behavior – thanks to their studies, we can know how and why we spend money on stuff we don’t need. Here are some tips (adapted from the book Predictably Irrational) for avoiding classic marketing and behavior traps that may lead to bad financial decisions.

Admit It: You Procrastinate

We all put off chores if at all possible (this is why fast food exists). Rather than assuming your behavior will change anytime soon, plan for procrastination.

  • Avoid free trials. Most free trials automatically enroll you in a service you have to pay for when the trial ends. You could, of course, cancel the free service at some point – but that takes planning and effort. Either avoid such services or set up a system to remind yourself to cut them off.
  • Watch out for convenience store prices. Convenience stores are so called because they’re just that – convenient. While it may be tempting to grab a gallon of milk or a few bars of soap while you’re picking up a prescription, resist the urge. You’ll save money by shopping in regular grocery outlets, even if it’s a little more out of the way.

Keep an Open Mind

  • Rely on your own judgment. If you’ve heard good (or bad) things about a brand or an object, you may be more likely to interpret your experience in that framework. But try to keep an open mind – you may find a less-expensive version of something that suits your needs just fine.
  • Sift through the lingo. Products touted as premium or professional grade often tempt us because they sound like they’re high quality. But remember that these words have no quantifiable meaning – the way they work is what matters.

Remember: Cost Does Not Equal Quality

There’s a joke that goes, A man will pay two dollars for a one-dollar item he needs. A woman will pay one dollar for a two-dollar item she doesn’t need. While arguably sexist, this illustrates an important point.

  • Don’t equate price with value: An item is not a bargain if you don’t need it. Similarly, if you must have something, it’s worthwhile to spend money on it.
  • Know when you’ve erred: Sometimes, we don’t want to admit we spent too much for something. But doing so allows us to see our mistakes and hopefully improve our behavior in the future – and maybe even get a refund.

Make Your Money Work for You

Whether you're saving up money for a vacation, creating an emergency fund, or learning to stick with a budget after filing bankruptcy, it's important to make every dollar work for you. By avoid these common pitfalls, you may be able to reach your goals with your budget – and your sanity – intact.

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