More Banks Bite the Dust

As of Oct. 2009, more than 100 banks have failed in the U.S. this year, costing depositors millions of dollars. Most people know that the FDIC insures deposits up to $250,000, but many consumers may not realize that this $250,000 in protection applies to the total of all your regular accounts – checking and savings – that you have with a given bank; not to each individual account. Right now, there are more than 400 banks on the FDIC’s “Watch List” – meaning they’re financially shaky. What should you do? Keep tabs on your bank by staying abreast of the news, and learn more about limits to the FDIC coverage, by checking out the “Failed Bank Information” section on the FDIC’s web site (www.FDIC.gov).

For more information, read my article called “With Hundreds of U.S. Banks Still in Jeopardy, Credit Crunch May Last Decades.”

10 Ways to Save on Your Purchases — Reader Participation Required for Success

A step toward becoming debt free is to cut your spending and maintain your new lifestyle. Some people feel it is too hard, say, to stop smoking, cut coupons and then remember to use them, or do your own home maintenance. So start with what you can handle.

You know your own vices and where you waste money when you could be saving. I can tell you what to do, but sometimes in order to motivate yourself, you need to take charge. As a result, I am giving you an exercise to determine how you can save on purchases or cut your overall spending for your own household. Come up with 10 ways to save and share part or all of your list with other readers by leaving a comment. Here’s a list of three to get you started.

Charge only what you can pay off. Getting a low interest rate on your credit cards can save you hundreds, even thousands of dollars a year in interest, but you can save even more if you don’t carry a balance. When you make purchases on your credit cards, be aware what you have in your checking account. If you will not be able to pay off the entire balance at the end of the month when the bill is due, then don’t buy the item.

Choose take-out or eat at home. Have you ever paid more than $5 for an omelet when you know a dozen eggs cost under $2? What about $15 for a plate of pasta when a box of Rigatoni and a jar of Ragu at your grocery store would feed at least four people and cost you less than $7 total? Eating at home can save you a ton of money. However, if you feel you really crave restaurant food, try buying take-out, and save on tips. You can even double your savings by getting take-out at lunch time when many restaurants charge less for the same meal they serve during dinner hours. Just save your lunch take-out for dinner.

Buy generic brands. Buying generic brand products, especially staples such as cereal, sugar, flour and other items can save you several dollars at the checkout lane without compromising quality or taste. Opting for generic prescription medicines are also a great way to keep money in your pocket.

5 Tips for How and Where to Save Money

By Lynnette Khalfani-Cox, The Money Coach

We all can take advantage of some money-saving strategies, whether or not we have Financial Deficit Disorder. Whether you want to save money to buy a house, sock away for retirement, college or a rainy day, here are five tips, adapted from my book “Your First Home: The Smart Way to Get It and Keep It,” that will help you slash your expenses.

1. Save on Your Car. There are a lot of expenses involved with having a car: gas, maintenance, insurance, parking, and a monthly payment if you have a loan. To save on gas and parking, you can give up a paid covered parking spot and park for free on the street, or take public transportation into the city to avoid feeding quarters in a meter or shelling out cash at a garage. To save on car insurance, opt for a higher deductible in exchange for 10% to 25% off your annual premiums, or ask your insurer about good driver discounts, discounts for having an alarm system, or lower rates for taking a defensive driving course. You can even save on your car loan by refinancing it, just as one might a mortgage, but without the closing costs. Try Capital One Auto Finance, which offers refinances in 15 minutes.
2. Save Money on Food. I know you already know you can save money if you went to fast food or sit-down restaurants less often, but you can also save money by keeping those loose coins in your pocket. Stop making daily runs for coffee or ice tea, or even donuts or a bagel before work. (You can buy a whole bag of bagels from the grocery store for the cost of just one bagel at some delis, so why not just grab one out of your cupboard instead?) And avoid those trips to the vending machines for junk food. Many people spend about $5 to $8 a day on drinks and snacks, amounting to $1,200 to $$2,000 a year! While you’re saving by buying those bagels and snacks at the grocery store instead, don’t forget to clip coupons and use them to save even more!
3. Save Money by Kicking Bad Habits. If you have a habit that’s hurting you, financing or health-wise, it’s time you kicked the habit. For example a chain smoker could save $300 a month or $3,600 a year! If you’re a drinker, cut down from three drinks on your nights out to just one and save yourself $10 – $20 by the end of the night.
4. Save Money on Utilities. Leaving appliances plugged in when you’re not using them only adds to your electric bill. Unplug toasters, coffee makers and blenders until you need them and only run dishwashers and washing machines when the load is full. If you make a habit of all this, you’ll save 10% on your energy bills.
5. Save Money on Entertainment. Stick to free or low-cost forms of entertainment. For example, choose free museums — or even if it is a paid museum, most offer a free or discount day, attend then. Walk around a lake or have picnics in the park. If you’re a partier, get to the club early before they start charging a cover. For those of you who wouldn’t be able to resist buying more drinks because you’re there longer, then opt for a party at a friend’s house.

Your First Home: The Smart Way to Get It and Keep It

For these and other money-saving tips, see Chapter 3 of my book “Your First Home: The Smart Way to Get It and Keep It.

Do You Qualify to Refinance Your Mortgage Under Obama’s Making Home Affordable Programs?

By Lynnette Khalfani-Cox, The Money Coach

If you are a homeowner in good standing with your mortgage, but you can’t seem to get refinancing because your home has lost equity in this declining economy, you might instead qualify to refinance your mortgage to something more affordable under the Home Affordable Refinance plan if you can answer yes to all of the following questions:

1. Current on your mortgage? If you haven’t been more than 30-days late on your mortgage payment in the last 12 months prior to applying to the program, then yes, you are considered current on your mortgage.
2. Owner-Occupant? If you live in the home as your primary residence or at least in one of the units of a property you own with four or less units, then yes, you are an owner-occupant.
3. You owe about what your property is worth? If you owe on your current mortgage close to the appraised value of your property, but not more than 105% of the current market value of the property, then yes, you owe about what your property is worth. The current value of your property will be determined after you apply to refinance, but as an example, if you think your property is worth $200,000 but you owe $210,000 or less on your first mortgage you may qualify.
4. Fannie Mae or Freddie Mac own your loan? If your loan is owned by or has been securitized by Fannie Mae or Freddie Mac, you should qualify. To find out if either organization backs your loan, call 1-800-7FANNIE or 1-800-FREDDIE or enter your address online at the lookup tool here at Fannie Mae or here at Freddie Mac. Please double check the ownership with your lender or loan servicer. If you do not have a Fannie Mae or Freddie Mac loan, you will not qualify. Note, if your monthly statements come from say, CitiMortgage or Wells Fargo, your loan still could be backed by Fannie or Freddie, so be sure to check.

If You Answered Yes to All
If you were able to answer “Yes” to all of the above questions, you may qualify to have your loan refinanced under the Making Home Affordable — Refinance program and are ready for the next step, which is to call your lender or mortgage servicer at the number listed on your monthly statement. You can also apply through any Fannie Mae approved lender if your loan is backed by Fannie Mae.

If You Answered No to Some
If you could not answer “Yes” to all of the questions, don’t despair. You might qualify for the “loan modification” section of the Making Home Affordable program. To see if you qualify for that option, read my piece, “6 Steps to Determine If You Qualify to Modify Your Mortgage Loan to Lower Monthly Payments.”

Note: You have until June 6, 2010 to apply for and close on this refinance option.

Tip: To learn more about keeping your home, read my book, “Your First Home: The Smart Way To Get It and Keep It.” It has plenty of tips to suit even homeowners who are in their second or third home. See the table of contents and an excerpt in this downloadable PDF.

Tip: Renters Insurance is a Good Deal, Here’s Why

By Lynnette Khalfani-Cox, The Money Coach

Even in a home buyer’s market there are still people who will need to rent, and where there are renters, there should be renters’ insurance.

Renter’s insurance is excellent protection to have. Unfortunately about 7 out of 10 renters — among more than 80 million renters in the U.S. — don’t have this valuable coverage.

The majority of homeowners — about 96% according to an Insurance Research Council poll — have homeowners insurance to cover themselves in the event of theft, fire, or accidents by people on their property. Even if you’re renting out a single-family home, you should still have your own coverage.

Here are three reasons you should have renter’s insurance if you’re renting:

1. It’s affordable. About $12 a month is about average for a policy that gives renters roughly $30,000 in property coverage, and $100,000 in liability coverage.
2. Protect your valuables. Even if you think your only valuables are a computer and your child’s Play Station, have you also considered the cost of replacing all your other stuff, like your clothes, jewelry, TV, furniture, CDs/DVDs, microwave, etc., in the event of theft, a fire, flood or some other mishap? State Farm estimates that it would take about $25,000 to replace all the items found in a typical 2-bedroom apartment. Renter’s insurance would replace all of that if it gets stolen, damaged or destroyed.
3. Reduce your liability if you’re sued. Liability coverage protects you if someone trips, or gets hurt in your apartment. The liability portion also protects you if you have a dog that bites someone else and that person chooses to sue you. So having renter’s insurance can limit your personal liability.

Think $12 a month sounds too steep? Check back with this blog in the coming days for tips on how to lower your insurance premiums.

Financial Tips for Stay-at-Home Moms

By Lynnette Khalfani-Cox, The Money Coach

Stay-at-Home Moms are very valuable. If the typical American stay-at-home mom got paid, she’d earn more than $116,000 a year for her work, according to a Salary.com survey. A SAHM (or dad) can even use a tool to personalize her own salary. But regardless of how much value a mom actually adds to her family, it is important to take mom’s contributions seriously and be prepared financially. If you’re a stay-at-home mom, here are five financial tips to help protect you and your family:

1. Get a life insurance policy on yourself.

Many people think that only working individuals need life insurance; but that’s a mistake. You want life insurance because if something should happen to you – heaven forbid – the cost of replacing all the services and things you provide for the kids would be enormous. Consider this: You’re essentially the children’s full-time doctor, chauffeur, a teacher to them, their daycare provider and more. If you weren’t around, your husband would have to pay for all these services, or cut back on them, and you don’t want your kids to be short-changed.

2. Plan for a pink slip – even if you’re sure your spouse won’t get one.

While your family may currently be able to get by on just your husband’s income, you must think about how you all would fare if your spouse, by some misfortune, lost his job. Not only would it be financially daunting to make ends meet, but it could also cause marital problems too. PayPal’s 2009 Can’t Buy Me Love survey found nearly half of all couples surveyed in the U.S. said they were arguing more about money amid the recession. Needless to say, it didn’t help that many people have recently been downsized, had their hours cut, or seen their pay slashed. Avoid potential money battles by establishing a budget together, eliminating debt, and building up an emergency cash cushion. You’ll never regret being prepared for a “worse case” scenario.

3. Open at least one credit card – and a separate account – in your own name.

Don’t make the mistake that many stay-at-home moms make by allowing all the family’s credit to be held solely in their husband’s name. Some women are simply added as “authorized users” on credit accounts. It’s better for your personal credit rating to be listed as a co-signer on an account, or to have one or two credit cards in your own name. This also protects you in the event of divorce (you won’t have to apply for new credit, and get “inquiries” on your credit file, which can hurt your credit rating). A credit card account in your name can even prevent hassles in the event of a spouse’s death. Additionally, opening a separate checking account will help you to achieve financial harmony with your mate. You’ll both have a bit of financial autonomy, and you will avoid common money spats over spending because neither one of you will have to account for or “get permission” to make routine purchases. Just be sure to set a limit on how much each of you can spend independently. For example, you might say: “We’ll check in with each other if we want to buy anything over $300.”

4. Stop secret spending.

Plenty of stay at home moms engage in “secret spending,” where they make purchases and hide them from their partners. Working women do it too. But the typical stay at home mom has more opportunity to stash clothes, purses, shoes and other merchandise while her husband isn’t around. Secret spending – whether you’re splurging on yourself on buying stuff for the kids — can easily get out of hand and cause you to rack up big credit card bills. Moreover, if your spouse finds out about your hidden items (and don’t think he won’t ever look in the back of your closet, or notice items with tags still hanging on them), he’ll wonder what other secrets you’ve been keeping from him. Don’t erode your husband’s trust. That could put you on the fast-track to divorce court.

5. Don’t rationalize irrational spending.

Some stay at home moms who go on spending binges or frequently make impulse purchases often justify their constant spending by rationalizing about all the money they’ve allegedly saved. Some women resort to the old “but it was 25% off!” as their rationale for buying something that their spouse later questions. In many cases, it’s an item that they didn’t need or simply couldn’t afford – even with a 25% discount. Other times, stay at home moms think it’s OK to spend excessive amounts of money based on the illogical argument that they’ve already saved money by not going to work, and therefore are not having lunches with colleagues, not commuting, etc.

Savvy Money-Management Strategies for Every Month of the Year

By Lynnette Khalfani-Cox, The Money Coach

There’s no better time than the present to kick your finances into high gear. But why limit yourself to just making a single financial New Year’s resolution in January when you can plan a series of smart financial moves for the entire year? Use these financial planning tips and savvy money-management strategies for help with budgeting, handling credit and debt, saving money, retirement planning and more.

JANUARY

Action Item: Open an Individual Development Account or IDA

Explanation: Everyone wants to save more money. If you do, then you should supercharge your savings with an IDA, or Individual Development Account. An IDA lets low-to-moderate income earners save money for a specific goal – such as a down payment on a house or starting a business – and receive matching funds from non-profit groups, corporations, and government agencies. Many IDAs provide a $3 to $1 match, meaning for every dollar you save, you get $3 in contributions. What’s the catch? You must agree to save money for a set period of time, usually at least one year.

The Payoff: If you save $100 a month, or $1,200 in one year, and your IDA has a $3 to $1 match, at the end of a year, you’ll receive a $3,600 contribution.

Resource: Visit http://www.IDAnetwork.org to find an institution in your area that offers Individual Development Accounts.

FEBRUARY

Action Item: Make a Realistic Budget

Explanation: One reason people fail at budgeting is because they have unreasonable expectations. A better strategy is to establish a realistic budget – one you can live with because it isn’t overly strict and doesn’t make you feel deprived. Start by listing your necessities – housing, food, utilities and so on. If you have money left over, then budget a modest amount for the occasional luxury – like dinner out once a month, or trips to the hair salon or manicurist. Set reasonable limits on these latter categories, but don’t feel compelled to completely slash them from your budget. That way, you’ll be able to stick with your budget over the long haul.

The Payoff: Creating a realistic budget and staying with it will give you more cash flow and reduce the strains of living paycheck to paycheck.

Resource: Become a better saver and learn to budget properly using the online tools available at www.mint.com, www.budgettracker.com, or www.budgetpulse.com.

MARCH

Action Item: Get Your Credit Reports and FICO Scores

Explanation: Thanks to the FACT Act, consumers nationwide are entitled to a free copy of their credit report every 12 months, from each of the “Big Three” credit reporting agencies – TransUnion, Equifax, and Experian. It’s a smart idea to monitor your credit file on a regular basis. But it’s especially important to know your credit history, as well as your three-digit FICO scores – which range between 300 and 850 points – whenever you are ready to apply for a mortgage, a college loan, auto financing, or even a new credit card.

The Payoff: With your credit reports in hand, you’ll be able to spot and fix any errors, as well as work on improving your credit rating. Stronger credit will save you money on loans, decrease the cost of life and auto insurance, and help you qualify for a job, rent an apartment or buy a home.

Resource: Obtain your free credit reports at www.annualcreditreport.com and find out your FICO credit scores from: www.myfico.com.

APRIL

Action Item: Book an Appointment with Your Accountant (or Find One)

Explanation: A good accountant can give you tax tips and strategies for paying less money to Uncle Sam. He or she will also make sure you file your taxes by the April 15^th deadline, and help you engage in tax-planning all year round. Use this month to book a future appointment (after tax season has ended) with a CPA, or Certified Public Accountant CPA and you’ll reap the rewards of doing so in the coming year.

The Payoff: By getting a jump on next year’s taxes you’ll save yourself time, money and be less-stressed about your finances.

Resource: Visit the website of the American Institute of Certified Public Accountants at www.aicpa.org to find an accountant in your area.

MAY

Action Item: Adjust Your W-4 Withholdings at Work

Explanation: Did you get a juicy tax refund check this year from the government? Before you start gloating over it, realize that you actually gave Uncle Sam an interest-free loan. That’s not smart financial planning. You let the feds take too much money from your paycheck. To fix this problem, get a W-4 form from your HR department and adjust your withholdings so that your employer takes out fewer taxes from your paycheck.

The Payoff: Since the average refund check is about $2,400, by adjusting your w-4 withholdings, you should pocket an extra $200 a month.

Resource: Go to the IRS website at: www.irs.gov and get Publication 919, which explains how to correctly fill out a W-4.

JUNE

Action Item: Apply For Federal Financial Aid

Explanation: Are you in college or have a child going to school? Then don’t be late in filling out the FAFSA, or Free Application for Federal Student Aid. The deadline is the end of June. You can even submit a FAFSA over the Internet, as long as you get your application in on the web by midnight Central Daylight time, June 30, 2009.

The Payoff: Free federal grants and work-study aid will reduce or eliminate the need for student loans, which must be repaid. And the average college grad takes 15 years to repay student loans.

Resource: The FAFSA application in online at the Department of Education’s website at: www.fafsa.ed.gov.

JULY

Action Item: Lower Your Summer Electric Bill

Explanation: Save money by saving energy around the house every day. Turn off lights when you leave a room; regulate your air-conditioner use; unplug appliances you rarely use; switch to newer energy-saving light bulbs instead of using old style incandescent bulbs; and turn your water heater down a few degrees.

The Payoff: Collectively, these simple steps can reduce your electric bill by 25% or more.

Resource: Learn more tips on saving money through energy efficiency at home from the U.S. Department of Energy at: www.eere.energy.gov/consumer.

AUGUST

Action Item: Set Up a “Holiday Fund” Using an Online Savings Account

Explanation: Instead of running up credit card bills in December, give yourself several months to save money for holiday gifts. Have automatic deductions taken from your paycheck and deposited into an online savings account. Online accounts pay higher interest than brick-and-mortar banks, because the latter have more overhead expenses.

The Payoff: You’ll be able to buy presents with cash, avoiding holiday debt.

Resource: Check out the HSBC Direct online savings account at www.hsbcdirect.com. This account is FDIC insured and is currently paying 2.60%* APY, among the best in the country. (*As of 1/14/2009. APY is variable and subject to change.)

SEPTEMBER

Action Item: Create a Last Will and Testament

Explanation: No one likes to think about dying. But do it for your family’s sake, at least long enough to create a last will and testament. Wills aren’t just for rich people. Even if your assets are modest, you may still need a will. Perhaps you own items with sentimental value – such as your wedding ring or family china that’s been handed down to you. A will lets you have a say-so over how your assets are distributed, no matter how large or small those assets are. Also, a will gives you the opportunity to tell the state your wishes concerning who should take custody of your kids in the event of your death.

The Payoff: A will cuts down family squabbles about money, since you lay out your wishes and say who should get what. You also make it easier on your relatives by handling custody decisions ahead of time – choices the family won’t have to make.

Resource: If hiring an attorney is too costly, create a will inexpensively online: just $19.95 at www.BuildAWill.com and $69 at www.LegalZoom.com. After you print your will, don’t forget to get it signed by at least two witnesses and notarized.

OCTOBER

Action Item: Get Proper Life Insurance Coverage

Explanation: An estimated 25 million Americans – roughly one in five households – don’t have life insurance. Even those who do are often vastly under-insured. You need life insurance if you fit into any of the following categories: you have minor children; you’re married and your spouse relies on your income; you own a business; or the value of your estate exceeds $1 million. A rule of thumb: buy enough insurance to cover seven to 10 times your annual earnings. So if your yearly salary is $40,000, then your life insurance policy should fall within the range of $280,000 to $400,000. The exact amount you need depends on your specific situation.

The Payoff: With life insurance, you have the peace of mind of knowing that your family will be financially secure in your absence.

Resource: Shop around for competitive pricing at websites like www.insurance.com and www.insure.com.

NOVEMBER

Action Item: Review your Open Enrollment and 401(k) Retirement Plan at Work

Explanation: November marks open-enrollment season at many companies, the month you can review or change your healthcare coverage and other benefits. Evaluate your 401(k) plan too. Are you contributing? If not, start doing so now. Already participating? Then consider increasing your contributions.

The Payoff: Saving money for retirement now means a more comfortable lifestyle during your Golden Years.

Resource: Learn about the tax breaks and other benefits of 401(k) plans at the Employee Benefits Research Institute (www.ebri.org).

DECEMBER

Action Item: Make a Tax Deductible Year-End Donation to Charity

Explanation: Donate clothing, electronics and other household goods you no longer want or need to an IRS-approved charity by December 31st. You’ll probably be surprised at the big tax deductions you can reap for your generosity.

The Payoff: If you get receipts for your donations, and itemize your taxes, you’ll be able to claim those donations on your federal income taxes. You’ll also feel good about helping someone less fortunate!

Resource:  Visit www.ItsDeductible.com, a free online tool from Quicken that helps you keep track of your donations year-round.

 

NOTE: This content was originally written by Lynnette Khalfani-Cox, The Money Coach, for YourMoneyCounts.com, a financial literacy website.

Top 10 Smart Financial New Year’s Resolutions for 2009

 By Lynnette Khalfani-Cox, The Money Coach    

1. Eliminate credit card debt. Answer this question: Do you really want to be in debt year after year and living paycheck to paycheck? If you said “No,” then it’s time to get serious about managing your money and getting rid of excessive debt. You can do it – but you must have an action plan and you must stick to it. Get help from the National Foundation for Debt Management (www.NFDM.org), a reputable non-profit agency.
2. Slowly set aside 3 months’ savings. If an emergency happens – from a job loss to a car breakdown – your savings cushion will protect you from resorting to credit cards. Get free wealth-building tips and pointers on how to save more at www.AmericaSaves.org.
3. Prepare your taxes early. Get any tax form you need from the IRS at www.IRS.gov and file your taxes ASAP. You’ll avoid the procrastination and stress, as well as the hassles and long lines, at the Post Office on April 15th. Early filers also get faster refunds.
4. Make a financial plan. Start writing out your financial goals and what it will take to achieve them. Get help from the Financial Planning Association (www.FPAnet.org).
5. Create or update your will. Nobody likes to think about his or her own death. But you can’t ignore reality. Look at the Hurricane Katrina, 9/11 or the unfortunate, 150,000+ victims killed by the Tsunami that spread across Asia and Africa. Tomorrow isn’t promised. For a low-cost will, visit www.buildawill.com or www.legalzoom.com.
6. Fund a retirement plan. If you have a 401(k) or 403(b) plan at work, start contributing, or increase your contribution. Learn all about 401(k) plans at www.401k.org. No 401(k) plan or you’re not eligible for it? Then open an Individual Retirement Account.
7. Ask for a raise. List the ways you’ve contributed to your company’s prosperity or your department’s well being, and approach your boss for a raise. The Wall Street Journal’s Careers section has tips for getting a pay hike at www.wsj.com. If you work for yourself, give yourself a raise by raising your prices or offering higher-end products and services.
8. Get proper insurance. Get life insurance worth 5 to 10 times your salary, and adequate coverage for your valuables and property – home, car, etc. – too. If something goes wrong, you and your family will be so glad you did. Find quotes at www.insurance.com.
9. Share your knowledge. Mentor a young person, teach your children about “wants” vs. “needs,” or tell a friend about some smart financial tips you have learned.
10. Improve your financial record-keeping. Get your paperwork in order, and keep good records all year round. This will save money in the long run and reduce your aggravation come tax time. Try the free online budgeting and record-keeping tools at www.mint.com.