10 Things Your Bank Won't Tell You

SmartMoney's 10 Things Your Bank Won't Tell You is hilariously funny but hits the nail on its head.

Link: 10 Things Your Bank Won't Tell You

Enjoy!

Dilemmas of Debt: Suze Orman, Edmund Andrews & Credit Card Issuers

This weekend's New York Times Magazine (May 17, 2009), with Suze Orman on its cover, focuses on a theme that is at the forefront of the American national financial psyche: "Dilemmas of Debt."

As the magazine cover indicates, Suze Orman and her approach to debt anchors the various discussions in this issue. The lead article Suze Orman is Having a Moment, focuses on Orman and her financial philosophy: "Track your spending. Stay out of debt. Take care of your car. Look (sic) into a Roth I.R.A." Notwithstanding the quibbles I have about her endorsement of certain companies and products, her fundamental message about frugality resonates very well with my own too, viz., living a frugal yet balanced and healthy life.

The piece about Orman is juxtaposed with the New York Times economics reporter, Edmund L. Andrews' reflections on his own subprime mortgage mess: My Personal Credit Crisis. This article is a summary of his forthcoming book, Busted: Life Inside the Great Mortgage Meltdown (W.W. Norton), which is scheduled for publication in June 2009.

Reading the article about Orman's financial philosophy and Andrews' ruminations of his own financial missteps reminded me about a news article that appeared earlier last week: Thriving Norway Provides an Economic Lesson. The underlying theme of this article is how Norway's frugal and contrarian spirit places it in a position to thrive while others, like Britain and the U.S., are strugling to stay afloat in an ocean of debt:

The global financial crisis has brought low the economies of just about every country on earth. But not Norway.

With a quirky contrariness as deeply etched in the national character as the fjords carved into its rugged landscape, Norway has thrived by going its own way. When others splurged, it saved. When others sought to limit the role of government, Norway strengthened its cradle-to-grave welfare state.

By far, the most fascinating article in this issue is What Does Your Credit Card Company Know About You? This article describes how credit card companies are looking to human psychology to not only understand the motivations behind spending and paying, but also using those insights to squeeze as much as possible from their debtors.

See also other articles in this blog on:

• Suze Orman
• frugal living
• credit cards
  

Frugal Living & Planning for College

One of the biggest bill a family will face, besides buying a home, is college education. The average price of college education in the U.S. has risen well above the average rate of inflation. For the longest time, families cope with the ever rising cost of college by drawing equity from their homes or borrowing ever larger amounts of student loans, especially from private lenders. But with the collapse of the housing and financial sectors, many families are being forced to rethink their college planning strategies.

What if you are the frugal sort with no intention of going into massive debt to finance your offspring's education? What if you are heading to college and not wanting to graduate with a heavy debt load?

It comes as no surprise that many families and their kids are looking more and more toward the public university as an affordable choice that offers value-for-money college education. But as a recent Money Magazine article warns us, with soaring applications and diminishing state budgets, public universities may not be the panacea to college tuition sticker shock.

So what can you do about the ever rising college tuition bill? An earlier Money Magazine article, Ease the Tuition Squeeze offers six tips for dealing with this dilemma:

1. use your savings strategically
2. apply higher - and lower
3. play it safer
4. borrow smart
5. make tuition less taxing
6. stop worrying (at least for now)
   

Links:

• The Trouble With Public Colleges
• Ease the Tuition Squeeze

My Frugal Living Tip #4: Consider Used or Refurbished Instead of New

One of my favorite spring time ritual is rummaging through stuff at weekend garage sales. You never know what you might find. I haven't been that lucky to find hidden gems that turn out to be valuable antiques. No such luck. But I've picked up many household items (furniture, shelving, kitchenware, home decoration items, etc.) that not only saved me a considerable amount if I were to buy them new, but they also add charm and character to my home.

In other words, rather than spending lots of my hardearned cash buying new stuff, I can get the same used stuff from garage sales that look like they have always been in my home.

Likewise, I visit my local Goodwill, Salvation Army and St. Vincent de Paul stores to browse for good finds on weekends. If you visit these stores in better neighborhoods, they usually have higher quality donations that look almost like new. Why pay full price when you can get items that are like new at a fraction of the price?

As for books and movies, I turn to my neighborhood public library instead of buying new books and dvds. As far as I am concerned, why should I buy new books and dvds when I can borrow them? True, it may take a while to get that latest bestseller or dvd release, but I don't mind waiting if it saves me money.

As for those times when I want to buy a book or dvd for my personal collection, I visit my favorite online store Amazon.com for web-based purchases and my local Half-Price Bookstore where I regularly pop in to browse for interesting finds.

Read the other entries in my Frugal Living Tips Series.

How to Get The Best Seat On the Plane

How do you balance frugal traveling with comfort? Is it possible to get a decent (and even comfortable) seat in coach? Sascha Segan's latest article in Frommer's, How to Get The Best Seat on the Plane explains how you can land that elusive seat, with help from www.seatguru.com, which I myself consult regularly when I plan my own air travel. It is possible to travel frugally yet comfortably. You just need to do some sleuthing.

Link: How to Get The Best Seat on the Plane

See also my earlier blog posting:

• Frugal Traveling Strategies
• Buy Now or Later? Planning for Summer Travel

My Frugal Living Tip #3: Make Saving a Way of Life

I have blogged about saving here (My Experiences with Online Savings Accounts), here (Frugal Living & Managing Risk, III), here (Frugal Living & Managing Risk, IV), here (Thrift Nation), here (Free 49-page Personal Finance E-Book from The Simple Dollar), here (11 Ways to Save Money Now) and here (Changing Values: From Borrow/Spend to Save/Being Frugal).

Cultivating a lifelong lifestyle of saving is like cultivating a lifelong lifestyle of healthy eating. Sure, both ways of life are plain, boring and require much discipline. But the rewards are real. Lifelong saving leads to financial health just as lifelong healthy eating leads to physical health.

This doesn't mean that we don't splurge once in a while. Far from it. Just as it's nice to indulge in a rich dessert, e.g., rich creamy chocolate mousse, so too we should give ourselves a financial treat as dessert once in a while.

We end up leading an unhealthy lifestyle when we don't watch what we eat. Sure, it feels good to eat all those rich fatty treats and desserts instead of fruits and veggies, but at what cost to our physical health?

So too, when we don't save, but instead finance our lifestyle through debt, debt and more debt, we might have the latest toys and gadgets to show off to others, but at what cost to our financial health?

Is there hope to get out of the vicious cycle of debt that have plagued the modern American society? Perhaps, there may be, as yesterday New York Times article, Shift to Saving May Be Downturn's Lasting Impact. What do you think? Do you agree? As for me, the jury is still out.

Read the other entries in my Frugal Living Tips Series.

My Frugal Living Tip #2: Careful Use of Credit Cards

I have blogged about credit card use here (Credit Cards & Frugal Living) and here (Damage Control for Your Credit Score).

Credit Cards are like wine: both are meant to be used in moderation.

Let me explain: medical experts say that 1 glass of wine is good for one's health. But when one binges on wine, one becomes an alcoholic and needs to stay away from wine as far as possible. This is because the ill effects of alcoholism far outweigh the healthy benefits of wine.

Ditto for credit card use. As I explained in my earlier blog post, Credit Cards & Frugal Living, one should use credit cards judiciously, spending only what one is able to afford and paying off the balance in full at the end of each monthly billing cycle.

In other words, don't binge on credit card and end up addicted to easy credit. If you can't control your credit card use, then take a pair of scissors and cut up all your credit cards and close your accounts, just as a recovering alcoholic has to stay away from wine, no matter how healthy a single glass can be.

But if you are able to use credit cards judiciously, then you can reap the benefits of leveraging your monthly float between spending and paying, as well as earning rewards (cash back, rebates, statement credit, etc.) for using your credit cards.

Read the other entries in my Frugal Living Tips Series.

My Frugal Living Tip #1: Maximizing Savings with Coupons

I have blogged about using coupons here (Using Coupons), here (Online Coupons & Coupon Codes Sites) and here (Balancing Frugality with Healthy Living).

For my inaugural "Frugal Living Tip Series," let me share with you how I maximize my savings with coupons:

GOOD:

Using coupons to get a discount off the full retail prize (e.g., using a 50-cents off coupon to buy a tube of toothpaste at $1.50. Price paid = $1.00 + tax). This is where you start.

BETTER:

Combining coupons with store sales to get a discount off the sale price (e.g., using a 50-cents off coupon to buy that same tube of toothpaste at a sale price of $1.20. Price paid = $0.70 + tax). This requires some planning and figuring out the sales patterns/trends (e.g., supermarket A tends to have sales on toothpaste toward the end of the month).

BEST:

Using coupons at stores with a coupon doubling policy and combining that with store sales to get double discount off the sale price (e.g., using a 50-cents off coupon at a store with double coupon policy, i.e., 50 cents + 50 cents discount, to buy that same tube of toothpaste at a sale price of $1.20. Price paid = $0.20 + tax). For this you have to patronize stores with a coupon doubling policy (e.g., Kroger, Giant, Safeway, Meijer, etc.). Note that drugstores (CVS, Walgreens) and discounters (e.g., Target, Walmart) do not have coupon doubling policy.

PS: I personally don't have the time and patience to play the "Drugstore Game" (combining coupons + sales + rebates at Walgreens or Extra Cash Bucks/ECBs at CVS). If you, unlike me, have the time and patience, you could not only save but also get cash back under certain limited situations.

Read the other entries in my Frugal Living Tips Series.

Changing Values: From Borrow/Spend to Save/Being Frugal

Here is another recent article from the folks at Money magazine that talks about frugality and saving money: How the Crisis is Changing You. This article makes the case that frugality and saving money are in, debt and plastic are out, and bling is bad. The author, Dan Kadlec claims that the financial crisis and its ensuing economic meltdown have engendered a major shift in the financial values of Americans that he thinks will persist over time.

Do you agree?

Article Link: How the Crisis is Changing You

11 Ways to Save Money Now

Here's the latest online piece from the Money magazine team that touches on a subject that is dear to my heart: 11 Ways to Save Money Now. My favorites are:

#3: Accept the new norm and set realistic investment goals
How true! In other words, we have to accept the reality that we won't see the kind of outlandish returns of the 1990s and early 2000s for a long, long time, and therefore we have to plan accordingly.

#4: Lose Rate By Refinancing Your Mortgage
My take: But this works only if you are (1) gainfully employed with a real full time job (i.e., "no job, no loan" is the new banking mantra), and (2) you have real equity in your house (i.e., your house is now under water). If you are the lucky few, take advantage of it. Otherwise, blame your mortgage broker for tempting you into a loan that is way too much for your finances.

#5: Juice your credit score an extra 20 points
Easy steps, but require discipline to pay down that revolving balance though...

#6: Go cold turkey on monthly services...
#7: Turn off the TV...
This advice really works. I save a bundle by not having cable (since 2003), no Netflick, Blockbuster, etc. As for #7, I watch over-the-air digital HD broadcast with rabbit ears antenna on my digital LCD TV, borrow DVDs from my neighborhood public library and use hulu.com, boxee.tv, etc., to watch older full-length movies on a netbook that is hooked up to my LCD TV). Cutting a few dollars here and there and we're talking about real, cold hard cash being saved!

#8: Reorganize your insurance drawer
I did that in 2008 and save several hundred dollars by raising the deductible on my car insurance to $1,000/- and my home fire insurance to 2% instead of $500.00. Think about it: you don't want to claim insurance on small claims to avoid insurance companies jacking up your premiums. It makes more sense to save money by having the highest possible deductible and be disciplined enough to put that money saved into your emergency fund in a high yield online savings account. That way, the money and interest earned go to you and not to the insurance company.

11. Start your own "working capital" fund
Very good advice (my 12-month emergency fund also covers job search expenses, in case I'm laid off).

Article Link: 11 Ways to Save Money Now

Free 49-page Personal Finance E-book from The Simple Dollar

The Simple Dollar is offering a free 49-page personal finance e-book (in PDF format), Everything You Need to Know About Personal Finance on Just One Page, which collects and discusses Trent Hamm's favorite ideas and strategies about good financial planning and frugal living in one highly readable book. Here you will find Trent discussing in detail, his five-point plan for personal finance success:

1. Spend less than you earn (My comment: how true! Frugality and saving is still the best way to personal finance success, and not leveraging and gambling).


2. Earn more (Trent offers lots of strategies to increase your income and earning potential)


3. Life Frugal! (My comment: my sentiments exactly!). In this section, Trent outlines 100 great tips for frugal living, as well as things to avoid.


4. Manage your Money! Here Trent outlines all the steps you can take to manage your money well, e.g., pay off high interest debts, build emergency fund, etc.


5. Control your own destiny! How true.
   

In addition, Trent also includes his recommendations of personal finance books and blogs that you could read or follow.

In short, this free e-book is worth your time, not only because Trent has so generously shared it for free under the Creative Commons license, but his ideas and strategies are commonsensical yet ignored by many folks who fall prey to shortcuts that only lead to financial ruin.

Getting a free copy of your credit and other reports under FACTA & FCRA

Are you sick and tired of the wannabe rock star belting out that jingle about not checking his girlfriend's credit report with his band buddies in the freecreditreport.com ad? I am, especially since the TV ad is, in my opinion, not exactly truthful.

Here's the reality: you get your "free" credit report only after you sign up for a 7-day free trial membership in the Triple Advantage Credit Monitoring. More to the point, you will be charged a membership fee of $14.95/month after the free trial period expires. So "free" isn't really "free" after all.

It is a good idea to monitor all the data that various reporting agencies are collecting about you. Under the Fair and Accurate Credit Transactions Act (FACTA) of 2003 and the Fair Credit Reporting Act (FCRA), you are entitled to one free annual report from various reporting agencies in general, as well as one free report in the event of adverse actions being taken against you by an insurer, bank, etc., as I will explain in greater detail in the 2-part discussion below.

PART I: FREE ANNUAL REPORTS MANDATED BY FACTA

(A) Free Credit Reports

Instead of going to freecreditreport.com, head rather to the real site that is officially mandated by the Fair and Accurate Transactions Act (FACTA) of 2003: www.annualcreditreport.com

The website www.annualcreditreport.com is maintained by the three major US credit reporting bureaus (Equifax, Experian and TransUnion). Under the FACTA legislation, you are entitled to one free credit report from each of the three credit reporting bureaus (Equifax, Experian and TransUnion) every 12 calendar months. In addition to the free credit report mandated by FACTA, you could also purchase your credit scores from the three major credit reporting bureaus for a fee. If you discover any inaccuracies in your credit reports, you should dispute them as soon as possible, since banks, insurance, potential employers, landlords, etc., are relying on these credit reports to assess you as a person.

You do not have to request all three credit reports from www.annualcreditreport.com at once. If you request one report from a credit reporting bureau once every four months, you would have set up a rudimentary 4-month credit monitoring system. In my case, this is how I request my annual credit reports:

• Jan = Equifax
• May = Experian
• Sept = TransUnion.

(B) Other Free Annual Reports that you should request

What many folks do not realize is that the 2003 FACTA legislation also mandates that you are also entitled to the following free annual reports:

1. Your Comprehensive Loss Underwriting Exchange (CLUE) Report - this records all your insurance claims history;


2. Your Employment History Report;
   


3. Your Tenant History Report; and


4. Your ChexSystems Report (comprising data on how you handle bank accounts, checks, overdrafts, etc).
   

You should request your free annual reports for 1 (CLUE), 2 (Employment History) and 3 (Tenant History) from www.choicetrust.com

You should request your free annual report for 4 (ChexSystems Report) from the Consumer Debit Resource site.

PART II: FREE REPORTS IN THE EVENT OF ADVERSE ACTIONS

Under the Fair Credit Reporting Act (FCRA), you are entitled to a free report of your relevant financial records if the following negative or adverse actions have been taken against you:

• your bank/financial institution denied you an account or check-writing privileges. If you find yourself in this situation, you should head immediately to www.consumerdebit.com, where you can request your free ChexSystems report.


• your insurer (1) denied insurance, (2) increased your rates, (3) limited your coverage or (4) cancelled your policy. If any of these 4 circumstances apply to you, head to www.consumerdisclosure.com for your free report. This site is maintained by ChoicePoint.

If there are inaccurate data in the ChexSystems or ChoicePoint reports, you ought to dispute the inaccuracies as soon as possible.

Damage Control for your credit score

Last Thursday (April 30, 2009), the Washington Post's personal finance columnist Michelle Singletary discussed the issue of involuntary credit card cancellation by the card issuer and its impact on one's credit score in her Color of Money column. She discusses two possible scenarios: (1) where a card hasn't been used in ages and the cardholder pays off the credit bill in full every month, (2) where a card holder carries a balance. Singletary rightly concludes that in the first scenario, there is no need for any damage control. But that is not the case for the second scenario, since the closure of a credit card will reduce the card holder's total utilization rate.

As I explained in an earlier blog posting, Credit Cards & Frugal Living, I was not happy when Bank of America unilaterally closed my AAA Visa Card (formerly a gas rebate card issued by MBNA) which has been dormant for ages. Since I pay off all my credit cards in full every month, my credit utilization rate is not affected by the closure and my FICO score remains in the excellent range.

Indeed, I totally agree with Singletary's ending sentence: "It would be great if the long-term impact of this credit crunch is people relying less on credit and more on cash." I treat my credit cards as "cash" and use them as my monthly float and to get rebates for statement credit (thereby bringing down my actual credit card bill every couple of months). As far as I am concerned, there is nothing wrong in using credit cards if you are able to withhold an equivalent amount in cash in your bank account to pay off all your credit cards in full at the end of each billing cycle. Otherwise, credit cards become a trap that ensnares a person in a vicious debt cycle.

Making Tough Calls in College Choices

The Washington Post article, Downturn Toughens Choice of University reveals the tough realities facing many incoming college students. Should they choose a public or private college? For the first time in a long while, students and their parents are thinking hard about going into heavy debt for a college education.

Personally, I don't see the point of borrowing $50,000 or more for an undergraduate education. Coming from a frugal family, I chose an in-state public university that offered me a 50% tuition grant-in-aid and the balance 50% from a subsidized loan. That was the best decision I ever made. I repaid my subsidized student loan in five years by making extra payments along the way. My graduate education was financed with my own savings together with a collection of different scholarships, grants, assistantships and work study awards that I cobbled together.

It is possible to be frugal and get a stellar college education. You just have to look beyond the hype.

How to squeeze more life from your batteries

Lifehacker has come up with their Top 10 Battery Hacks, Tips and Tricks. While many of the tips are sensible practics that everyone, and not just frugal folks should do to squeeze more life from your batteries (e.g., turning off the LCD screen of digital cameras to save battery juice, turning off 3G when not in use, disabling all that eye candy stuff that suck power, etc.), the one that really got me chuckling is turning Size C batteries into Size D in a pinch with quarters! Now, who would have thought of that?

How Supermarkets Lure You To Buy More

Consumer Reports retail expert Tod Marks explains to Susan Koeppen of CBS's The Early Show that supermarkets exist to make a profit for their shareholders. Hence, everything from product placement to lighting is designed to lure you to buy a product. What can you, as an aspiring frugal shopper, do? Mark outlines 5 key steps:

1. The first thing to do when you go to the store is pick up the flyer.
   
   My take: I go one step further and visit the store's website to see what's on sale before I leave my home. I find that the best way to avoid the temptation of impulse buying, which is how supermarkets maximize their profits, is to visit the websites of my favorite stores, see what's on sale and plan accordingly.
   
   Mark further explains:
   

   "But just because something is featured in a flyer doesn't mean it's on sale. It may not mean it's a great deal at all ... It may mean a manufacturer paid advertising dollars toward the mention of that product."

   My take: I have experienced this firsthand. Burt's Bees (my favorite brand of personal care products) pays for product placement in Target and Walgreens weekly flyers. I notice that the Burt's Bees product placement in these flyers conveniently avoid mentioning the world "Sale Price" - a clear indication that the price is full retail price, and sure enough it is.
   


2. The End of the Aisle -- The "End Cap" -- Is the Single Hottest Selling Spot in the Entire Store
   My take: You can sometimes find clearance items or bargains of slow moving items at the "end cap" but always check the expiry date or condition of the product before buying.


3. Product Placement Is Key
   Mark says: "Prime selling space is right in the center, eye-level if you will ... The lower level and the high-on-top level, they're kind of the low-rent districts..."
   My take: You can find bargains if you are willing to bend down and look at the price. Supermarkets often capitalize on our laziness: we grab things at eye level and don't want to bother bending down or craning our necks to search for less expensive products.


4. Convenience Will Cost You
   My take: How true, when you compare, e.g., the price of prepackaged salads with that of a head of lettuce.


5. Saving Money Is in the Bag"
   Generally speaking," Marks says, "the better deal is almost always to be had when you buy the bag versus the loose produce."
   My take: You pay for the privilege of selecting your produce. While it is true that in a bag of apples there may be one or two that might be bruised, it's still cheaper per pound than selecting your own apples.

Frugal Tip: Putting Citrus Fruits to work as Household Cleaners

One frugal habit I have is substituting commercial cleaners with their potent chemical formulations with traditional natural alternatives using lemon and other citrus fruits. Besides the obvious fact that using lemon and other citrus fruits as cleaners save money, they also do not have the potent chemical concoctions that cause headaches and leave behind toxic residues that pollute groundwater or damage the environment. If you would like to try but do not know how to get started, here are two links with lots of tips and ideas:

• Put Citrus to Work as Household Cleaners


• 27 Household Uses for Citrus Fruits