Money Matters

How to Save for a Better Financial Future

You know that you should be saving more money. However, it can be difficult to take those first steps. The task of setting up an emergency fund can seem daunting, and retirement seems a long way off. If you want financial freedom, though, it is important to make saving a priority. If you are having trouble finding the motivation to save, you might consider these tips, designed to help you get started with a savings account.

Start Small

You don't need $10,000 to open a savings account. You don't even need $1,000. And it doesn't matter if you can only put in a few dollars a week. The idea is to start a habit of saving, and that might mean starting small. Take what you can, and open an account with at least $25. Then, add what you can to it each week. Look for small ways to save money every day, so that you can put more into savings.

You should start now, though, because the earlier you start, the longer your money has to grow.

Go High Yield

It can be depressing to see the return you get on the money in a savings account. (Although 0.75% is better than nothing at all.) If you want to feel better about the interest you are earning, consider opening a high yield savings account. Find an account with no fees and (if possible) no minimums. Put your money in a high yield account so that it grows a little faster, and you will feel better about leaving it the account.

Another goal is to open a retirement account so that you can invest and receive even higher yields. Over time, these investments are more likely to provide you with a comfortable income than saving cash only. You will still want some cash, for liquidity and safety, but eventually you will want to diversify into stocks and bonds as well.

Add a Little More

As you get used to setting money aside, and as your income increases, you can start adding a little more to your savings account. While you may not start out saving at least 10% of your income, the goal is to eventually work up to it. You want to be able to gradually increase the amount of money that you set aside, so that you will have a larger nest egg in the end. Examine your financial priorities and goals, and make a plan to increase your savings so that you can meet your goals.

-- Miranda

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Don't Be Fooled: You Probably Don't Need Overdraft "Protection"

For years, banks have had standard overdraft protection policies that allow you to overdraw your account for the sake of convenience. It's why your debit card transaction goes through on that $19.99 Blu-ray when you only have $12.00 in your account. And why you can still get that $2.50 bagel when you are already $7.99 in the hole. Of course, this "generosity" comes with a price: Each transaction that is overdrawn comes with a fee of between $25 and $40, depending on your bank's policies. This type of standard "protection" has been the norm, which means you have been enrolled whether you want the service or not.

However, all of this changed on July 1, 2010. For those opening new accounts, it will be necessary to opt in to standard overdraft practices. (For existing accounts, you will have to opt in by August 15, 2010 in order to continue receiving standard overdraft "protection".) Now, if you do not specifically opt in to these overdraft practices, your debit card will be denied if you don't have enough money in your account. While this can be embarrassing, it's probably actually for the best.

(Note: The changes in overdraft rules do not apply to ACH automatic billing transactions, or to checks that you write. These can still result in overdrawing your account -- and in fees.)

Don't buy banks' marketing tactics

Banks make billions of dollars a year on overdraft fees. This is why many of them are aggressively marketing these overdraft practices as "protection" for your account, and playing up the convenience side of this "service". They want the fees. (And you might see fees head even higher if banks want to protect their revenue even more.) However, don't buy it. You really probably don't need overdraft protection.

Instead of relying on the bank to allow transactions even though you don't have money in your account, modify your spending habits. Keep track of your balance, and be vigilant about what you have in your account. Personal finance software can help you organize your finances and keep up to date with all of your expenditures and income. If you have a spending plan, and you keep track of your cash flow, there is no need for overdraft protection, since you won't be overdrawing your account.

-- Miranda

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3 Practically Useless Insurance Policies

You know that some types of insurance, such as health insurance and auto insurance, are completely necessary. However, there are many types of insurance out there. In fact, there are so many different insurance policies for so many different things that you could spend all of your money on premiums! You can save money by realizing which insurance policies are practically useless. Here are three insurance policies you don't actually need:

1. Credit Card Insurance

There are a couple types of credit card insurance. The first charges you a portion of your balance as a premium and then pays your credit card bill if you have a financial problem that prevents from making payments. You are actually better off just paying off your balance each month so that you don't have credit card debt that needs to be insured.

The other type is credit card loss insurance. This insurance reimburses you when your credit card is stolen for charges you are liable for. However, the law limits credit card liability to $50. Paying insurance premiums so you can save $50 in liability is a good way to lose a lot more money than what is stolen.

2. Car Rental Insurance

Before you sign up to pay a daily fee for damage insurance with the car rental company, check to see whether your own auto insurance covers it, or whether your credit card comes with rental car insurance. You might be surprised to find that you are already protected from damage to your rental car, and that insurance from the rental company is unnecessary.

3. Mortgage Life Insurance

The point of this insurance is to pay of your mortgage if you die before the term of the mortgage ends. This is completely unnecessary if you have a life insurance policy. Make sure that your life insurance policy is large enough to cover your home mortgage, other obligations, and provide some income for your survivors.

--Miranda

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Credit Card Fees Still on Tap

Last year, the Credit CARD Act was passed. All of the rules are in effect, including some limits on fee amounts, and requirements that credit card companies be more transparent. However, just because some fees have disappeared and some credit card practices have been discontinued, it doesn't mean you can relax. There are still plenty of fees cropping up. Be aware of the following credit card fees, and double check to make sure your card is not charging them.

Rewards fees: Believe it or not, you might have to pay money to use your rewards points. You may have to pay anywhere from $5 to $50 to redeem travel miles, or other rewards. Before getting excited about a rewards program, read the fine print.

Buying rewards points: Another issue is that it costs so many points anymore to travel. So you can buy more reward points to round it out if necessary. Do the math, because by the time you pay the per-mile cost, plus the transaction fee, it might not be worth it.

Getting rewards points back: If you pay late, some credit cards will take away your reward points for that month. If you want them back, you have to pay a fee.

If you aren't happy with your credit card fees, and if you are a good customer with a good credit score, you might consider switching cards -- and making sure your issuer knows exactly why you are leaving.

--Miranda

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3 Tips for Getting Ready to Buy a House

With low prices and low mortgage interest rates, many are interested in buying a house. However, before you buy, it is important to be truly ready to buy a home. Here are three things you can do to get ready to buy a house:

1. Review your budget

It is vital that you know how much you can afford in terms of buying a home. It is also important to make sure that your budget can handle the mortgage payment and all the costs that go with it. Many forget that property taxes, home insurance, PMI, maintenance, repairs and other costs come with home ownership. After you figure out your monthly mortgage payment (principal plus interest), add another 30% to that to account for other expenses. If your mortgage payment is $1,000, that means that you should budget at least another $300 for additional home ownership costs. Make sure that your total home ownership costs will not exceed 30% of your monthly income -- it's better if you can keep it to 25%.

2. Save up for a down payment

The bigger your down payment, the better. You will get a better mortgage rate, and borrow less money. Besides, many lenders want to see 5% to 10% down when you buy now. Some lenders are returning to the old 20% down payment rule of thumb. If you don't put 20% down, be prepared to pay Private Mortgage Insurance (PMI), which protects the lender in case of a default.

3. Improve your credit score

Your credit score is a big deal. For the best mortgage rates, you might need a 760. And few lenders are willing to accommodate a home buyer whose score is below 670. The subprime lending crash and global financial crisis have resulted in tougher standards. You can improve your credit score by reducing your debt, making on time payments and behaving in a financially responsible manner.

-- Miranda

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Savings Accounts: Getting More for Your Money

One of the best things you can do is to open some sort of account that allows you to save money for the future. This includes retirement accounts, other investments to help you earn a high rate of return, and emergency funds that can provide you with a financial safety net. When you are setting up an emergency fund, you should generally consider an account that is easy to access, and that usually means a savings account.

However, the days are gone when a brick and mortar bank was the place to go for savings. Many traditional savings accounts pay less than 1% interest. If you want to help beef up your emergency fund a little bit more, and have your money work a little harder on your behalf, you will need to go for a high yield savings account.

Finding a High Yield Account

One of the best places to look for high yield savings accounts is online. From WT Direct to EverBank to ING, you can get cash bonuses for opening accounts, plus yields of between 1.5% and 2.5%. And, when the economy starts to recovery, these rates will go up. No, these rates don't exactly compare with the possible returns you could get in the stock market, and even with some bond funds. However, the point of these types of savings accounts isn't to grow a nest egg; the point is to put your money somewhere safe and accessible. But there is no reason to earn less than 1% on the money when you could be earning close to 2%.

Make sure that the account you open is at a bank that is FDIC-insured so that your money is guaranteed safe.

-- Miranda

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Spend Less When You Eat Out

Whether you are traveling, or just not in the mood to make something at home, eating out can be a fun and relaxing activity. I know -- I love to eat out. But eating out starts to get expensive. You might try to limit the amount of times you eat out in a month, but you can also save money by being smart about what you do when you eat out. Here are some of my favorite ways to spend less when I eat out:

Go to Lunch

My husband and I go out to lunch once a week. It's actually a great way to save money on eating out. Lunch costs less, so everything from the meal to the tip is less expensive than going to dinner. Plus, since we go out to lunch, my son is in school when we go on a weekday, so we don't have to pay for a sitter. Even more savings at times when we just want to go on a date.

Stay Away from Dessert

Dessert at a restaurant is expensive. Instead of getting dessert at a restaurant, we sometimes make our own dessert later. Or we go to the local place that serves homemade ice cream for cheap, or stop at the pastry shop for a discounted pastry that's been sitting there all day. It's not stale yet, but the shop can't sell it the next day, so the end of the day is the perfect time to pick up discounted baked goods. Check your local bakery to see if they offer similar deals, and save on your dessert.

Choose Meals that Make Great Lunches

Pick restaurants that offer more bang for your buck with good portion sizes. Don't overeat, and save some of your food for the take-home box. Eat it for lunch the next day. You've just gotten another good meal for the price of one!

Look for Discounts

Look for coupons, "date night specials" (that might include movie tickets as well), and other discounts. We like to get discounted gift cards that allows us to pay $15 for a $25 gift card to a favorite restaurant. That way, we're saving when we eat out. Sites like CityDeals.com, Groupon.com and Restaurant.com can offer you access to some great deals.

What do you do to spend less when you eat out?

-- Miranda

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4 Frugal Travel Tips

As summer travel season approaches, many people wonder how they can save money on travel. You probably know that you can visit discount travel sites for savings, as well as be careful of currency exchange fees. But there are some other things you can do to save money that you might not have thought of. Here are four frugal travel tips:

1. Prepare Your Own Meals

You can save money by preparing your meals. Go to the local grocery and get ingredients for food. Many hotels offer kitchenettes in their rooms, or even just microwaves. You can also look for a park with public grills and cook up your own burgers or hot dogs. Sometimes, we bring a camp stove on trips, making it easier to prepare our own food. If you have a good cooler, you can bring your own condiments, drinks and other items from home on a short trip.

If you do decide to eat out some of the time during your vacation, consider eating out for lunch, which often costs less than eating out for dinner. So you can save money by eating out for lunch, and preparing your own dinner.

2. Use Public Transportation

If you plan on being in one city for your trip, consider using public transit. That way, you aren't paying for a rental car. Public transportation is usually fairly cheap (especially compared to taxis and rentals), and many cities will allow you to purchase unlimited rides for multiple days. Or you can purchase a discounted card that offers a certain number of rides, and share the card. My husband and I do this when we go to New York City, and pass the card across the turnstile.

3. Stay Away from "Touristy" Areas

Not only will tourist "hot spots" drain your cash, but all of the establishments around that hot spot are likely to feature higher prices as well. See more interesting sites by moving away from the places that tourists frequent in large numbers, and experiencing a little more of the local flavor. I did this in Austria, and enjoyed the local flavor without spending nearly as much.

4. Pack Light

The more suitcases you have, the more you will be charged to bring them with you. Pack light and plan to do laundry. If you are staying somewhere for more than a few days, you can wash your clothes at a local laundromat, or by using the coin-operated equipment at the hotel. Paying few dollars to do a couple loads of laundry beats paying $25 for a suitcase -- and you'll have less to carry around with you!

What are your favorite frugal travel tips? Leave your recommendations in a comment below!

--Miranda

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5 Things Your Cell Phone Provider Won't Tell You

You want to save money on your cell phone bill, but sometimes it can be hard -- especially since there is any amount of fine print whenever you sign a contract. And in many cases there is a contract to sign. Buried in all that fine print is important information that you need to pay attention, because your cell phone provider certainly won't tell you. Here are five things to look for in the fine print:

1. Your cell phone may not work for emergencies: Watch out for 911 call problems with cell phones. Even though the FCC has asked cell phone providers to equip phones with GPS to help emergency workers locate you, it isn't the law. So you may not get the help you need.
2. Additional surcharges: There are additional surcharges, including federal and state charges, that can add to your cell phone bill. Consider the entire cost before you sign the contract.
3. Early termination fees: You can be charged between $150 and $200 if you cancel your contract early. Make sure you are careful about this, because many contracts are for two years. Also, be aware that the two-year period might start all over again if you get a new phone, or switch to a new plan.
4. Some prepaid plans cost more: After you decide that a contract isn't for you, you might be steered toward prepaid cell phones. While prepaid can be a good choice for those who don't use the cell phone that much, for heavy users, prepaid can cost more, since the per-minute cost is often higher.
5. Texting will cost you: If you don't pay extra for unlimited texting, each text message could cost you. You might be surprised at how much. On prepaid plans, you will be charged a portion of your minutes for each text message you send and receive.

-- Miranda

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3 Ways to Save Money Today

It is true that many things in life require patience -- especially when it comes to saving money. Sometimes you need to be disciplined and wait to accumulate savings over time. This isn't always the case, though. It is actually possible for you to start saving money today, if you think about what you've been spending money on. Here are 3 things you can do to cut costs -- today!

1. Ask for a lower credit card interest rate: If you are trying to pay down debt and you have an account in good standing, you might be able to lower your credit card interest rate by as much as 0.5% to 3%, just by asking. Call your credit card issuer and ask if you can have a rate reduction. While it isn't guaranteed, it never hurts to ask. This could save you money in interest charges, and ensure that more of your payment goes to principal, helping you get out of debt faster.

2. Combine services: In some cases, you can save money by bundling. It is possible to buy phone, Internet and cable/satellite service onto one bill. This even includes cell phones in some instances. See if you can save money by bundling common services that you use. This applies to insurance as well. You can get special discounts if you get your auto, home and life insurance through the same company. Do a cost comparison and see if you can save by bundling.

3. Up your deductible: You can get a reduction in your insurance premium if you increase your deductible. If you agree to pay $500 out of pocket, instead of $250, or if you can pay $750 out of pocket, you can see a significant reduction in insurance premiums paid monthly. This includes health, property and auto insurance. If you decide to do this, though, you want to make sure that you have enough money in your emergency fund to cover the deductible.

-- Miranda

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Keeping Tabs on Your Credit Score

It is important to keep tabs on your credit score, and there are a number of ways to do this. It is important to note that when you check your own credit score, it doesn't count against you, like it does when you actually apply for credit. So if you are trying to improve your credit score, checking your own progress won't hurt you. And you should keep tabs on your progress, especially if you are trying to build your credit score.

There are a couple of things you can do to keep tabs on your credit score:

1. Check it yourself: Every time you check your credit score, you will have to pay for your score. You can get a three-in-one score that offers scores from all three bureaus, but you will still have to pay. If you are more interested in a general idea of how things are going with your credit score, you can use CreditKarma.com to check your TransUnion score for free on a regular basis. This can be a way to check whether your score is rising or falling.
2. Purchase a score monitoring service: If you want something more in-depth, you can sign up for credit score monitoring, paying a monthly fee to get regular reports. You can keep tabs on your credit score, and many of these services offer education and information on improving your credit score so that you can see improvement. You can even get help contesting negative items on your report.

In reality, you can keep an eye on your credit score on your own. And, if you just want the basics, you can do it for free. But if you want something more in-depth, you will have to pay for it.

-- Miranda

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Is That Credit Report Really Free?

We know that having a good credit score is important. Indeed, your credit score is used by a number of people (other than loan officers and credit card companies), from insurance companies to employers, to determine your reliability, based on your financial reputation. But it's a good idea to know more than just your credit score; you should also be up-to-date on what's going on with your credit report. Your credit score is based on your credit report, and you should know what's in there.

Free credit report

There are ads all over the place for free credit reports. However, it is vital that you read the fine print attached to these offers. Most often, you only get your free credit report after you have signed up for a credit monitoring service.This service costs money each month, and may even charge additional fees if the company challenges something on your credit report (which it will do, even if no error has been made). In truth, you are better off monitoring your own credit, checking your credit report for errors on a regular basis -- even if you have to pay a little bit to access your credit report.

The good news is that you don't have to pay for all of your access to your credit report. There is a truly free way to check your credit report.

Truly free credit report -- by law

By law, the three major credit bureaus (TransUnion, Experian, Equifax) are required to let you have one free copy of your credit report each year. You can visit www.annualcreditreport.com and see a free copy from each of the major bureaus. Some folks actually spread this out, getting one copy from one bureau every four months. This can be one way to monitor your credit regularly without paying a cent. However, it is important to note that the companies may not all have the same information, so you might not catch everything.

Finally, it is worth noting that if you are denied credit, you are entitled to a free copy of your credit report from the source, as long as you ask, in writing, within 60 days.

Don't get sucked in by companies that offer "free" credit reports. Instead, get the copy you are entitled to by law, and cough up the approximately $15 if you want to check another time during the year.

-- Miranda

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3 Suggestions for Your Tax Return

Now that tax day has passed, you might be anxiously looking forward to your tax return. Indeed, if you filed electronically and did so early, you might already have your tax return back. Before you spend your tax return, consider three suggestions for how to use it to your advantage:

1. Pay Down Debt

One of the best things you can do for your financial situation is to pay down debt -- and pay it down as quickly as possible. This is because the interest you pay on debt (especially credit card debt) doesn't provide you any benefit: it goes straight into someone else's pocket. If you have debt, one of the best things you can do for your finances is to pay it down. Having a big chunk of money, like what you get from a tax return, can put a sizable dent in your debt.

2. Pad Your Emergency Fund

Having an emergency fund in some sort of liquid account that allows you to earn interest is a good way to provide some sort of a safety net. If your debt is mostly under control, but you are concerned about your emergency fund, it is a good idea pad it up. Many financial experts recommend that you have between six months and a year's worth of expenses in an emergency fund. While your tax refund will probably not fully fund your emergency savings, you are likely to get a little closer to your goal with the help of your tax return.

3. Invest

Another option is to invest your tax return. If you have a tax return, you have already been giving the government an interest-free loan. Once you have your money back, you can make for it -- at least a little -- by investing it. This can include increasing your retirement account contribution, adding to a 529 college savings plan or beginning to invest in a DRIP.

No matter what you decide to do with your tax return, you will better your situation if you consider the future, rather than just spending it all at once on a consumer item that you don't actually need.

-- Miranda

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Taxes: Not Ready for April 15th?

April 15th is alarmingly close -- nearly upon us! Are you ready?

If you aren't quite ready for tax day, you do have some options. Whether your tax return isn't prepared or you can't afford to pay what you owe to the IRS, you do have options that can help you avoid the worst penalties. Here are some things to consider if you aren't quite ready for April 15th:

Not ready to file

There are many reasons that you might not be ready to file your tax return on April 15th. Whether you just haven't managed to get all your documentation together, or you are planning to open an IRA or take advantage of the home buyer tax credit, you can file an extension. Use Form 4868 on the IRS web-site to file an extension. You don't actually have to list a reason, and anyone is eligible to get a six month extension to file a tax return. Your best bet is to e-file your extension, or to send a paper copy certified mail so that you can prove that you did, in fact, send your extension form on time.

The caveat: realize that, even though you don't have to have your tax return filled out, you still have to pay your taxes by April 15th. Do a best guess on how much you will owe, and pay that. If you underpay, you will have to pay interest on the difference.

Can't pay what you owe

Many people find that they can't afford what they owe in taxes. In such cases, it is possible to set up an installments plan with the IRS -- provided you owe less than $25,000. You can contact the IRS, and they will assess your case and decide what to offer. You will have to pay interest and some fees, since it is a loan, but the costs are generally less than you would pay for credit cards or payday loans, and often competitive with bank fees and charges.

Realize that simply failing to file, or ignoring your taxes, will not go away. In fact, there are rather hefty fines for both. So if you aren't ready for April 15th, consider your options, and address the problem as quickly as possible.

-- Miranda

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Watch Out for Termination Fees

One of the most common things you will see these days as you shop around for great deals and savings is the idea of paying less - as long as you are willing to sign a contract for a certain length of service. Of course, if you decide to break that contract, you end up with termination fees that can be quite hefty. Here are some of the items that you are mostly likely to see termination fees for:

• Gym memberships
• Cell phone service
• Cable or satellite TV service
• Internet service
• Auto leases
• Apartment or home rental leases
• Bank CDs (even this savings vehicle can cost you if you try to withdraw early)

It is also worth noting that some mortgages come with prepayment penalties, so if you refinance your home or pay off your mortgage early, you will have to pay a fee.

Before you sign on the dotted line, it is a good idea to find out what the early termination fees are. Examine your spending habits and consider your needs and wants. If you are fairly certain that you will be able to fulfill the contract, go ahead sign. However, be warned that if something changes in your situation, it could be made even more difficult by the payment of an early termination fee. Weigh your options and see if you can some other provider with lower fees, or that doesn't charge them at all.

-- Miranda

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