How to Cut Insurance Costs, Part 1

Our society has become dependent on the insurance industry. We may not approve but there is nothing we can do about it. Hopefully, you will all be very healthy, your house will never burn down, you will be a safe driver, and you will live to be 100 (at which point you will be ready to go). Insurance was created as a gamble. That is, you are betting that something is going to go wrong and the insurance company is betting that nothing will go wrong and they will get to keep all your years and years of payments without having to ever pay out anything. So far, the insurance companies are winning as illustrated by their good profits. However, let’s not give them more than we have to.

Life insurance is usually necessary for the younger working couple with small children. Even if both of you work, if something happens to one of you, will the other be able to make a high enough salary to raise the children? However, once the children are grown, this insurance should not be necessary as the remaining spouse should be able to support him or herself. If you are from a one-income family, then you will probably want life insurance until that bread winner dies in order to support the unemployed spouse. Thus the two income family needs only term life insurance that lasts only up to a certain age. Yes, the insurance company gets to keep all of that if you do not die before you are say 45, but the rates will be much lower for you. Whole life insurance will be more expensive as it lasts until you die which means that eventually the company will have to pay out. It would be ideal if everyone started investing at a young enough age that, should something happen to one spouse, your portfolio would be sufficient to take care of the family. But this is not mentioned to young people today. You should look at what you currently have for life insurance and adjust it to the correct policy for you. And as with most things you purchase, shopping around for the best price among the different companies can also save you quite a bit of money.

Most importantly, concentrating on paying off your debts. If something does happen to you, your insurance money could be totally eaten up by creditors who will collect what is owed them before your family is taken care of. Paying off all of your creditors, even after you are dead, will not help in the daily support of your children you leave behind. So if you want life insurance to protect the future of your family after you are gone, pay off your creditors first or they will be the ones to benefit from your life insurance.

Medical insurance is also considered necessary today. Not so long ago, if you became ill with cancer, there was very little that could be done about it so your family took care of you until the end. Today, the majority of cancer patients (if caught early enough) will survive through the use of specialized treatment and drugs. And these treatments and drugs are very expensive. Therefore, unless you were on the ball and started investing at a young age or for personal reasons do not wish to go through such treatments, you will need long-term medical insurance. Again, assuming that you do not have a large financial portfolio, you will need day-to-day medical insurance to cover the usual appendicitis, broker bones, etc. Because so many people have no qualms about going to the doctor or the emergency room every time they have a head cold, insurance costs have sky-rocketed. However, usually it will still be worth your time and effort to research the different companies available in your state to find the lowest priced health insurance.

Tips on Credit Cards, Part 2

However, something that can help your monthly payment without increasing the interest rate or the length of time you will need to payoff your credit card is to look at the advertising you get in the mail for new charge cards. That is, these financial companies will frequently offer you a new charge card at a very small “teaser” interest rate of say 3% (instead of the usual 18%) for the first year. Obviously, it is worth their effort to offer this in order to get a new customer. Along with the small interest rate they will quite often suggest you transfer your outstanding balance(s) from higher interest rate cards. They figure that you will transfer these loans to their card for which they will give you a lower rate for one year and then up the interest back to 18% at the end of the year and you will not even notice. And most people do not notice! However, if you are serious about having more money in your life, you will pay attention and mark 11 months on your calendar. When you have used their low rate for 11 months, start watching the ads again for a special low rate on a new card. This way you are continuing to payoff the outstanding balance but with a smaller payment or the same size payment with more of your money paying the outstanding balance rather than the interest owed.

There is another type of credit card that people have a tendency to overlook. Let’s say you go into a store to buy a new mattress and box springs. You can fill out a credit form at the store and make monthly payments on your new purchase. The store has simply contracted with some lender to put this charge onto a charge card. You now have another card payment to make each month. If you need that new mattress set, take your time and shop around for a store offering “no payments and no interest for one year”. Now this may seem like you are just delaying the inevitable payment. Yes and no. Most important, as with any loan, you do not want to use this unless it is for something absolutely necessary. After you are out of debt you can buy things you simply want to have. The secret to this type of buying and saving money is to, again, mark your calendar. Before the time period is up you will need to find one of these charge card specials for 3% or so.

Yes, this does take some extra time and thought on your part, but it does allow you to save quite a bit of money over the course of this small loan. However, there is one warning. Be very careful and make sure they are offering “no payments and no interest for one year”. Some companies offer no payments but you still have to make the interest payment each month. Needless to say, we want to avoid as much interest as possible, not pay more. On this blog you’ll find lots of information on how you can save money in a variety of ways. We strive to provide you with great information on reducing debt, debt management, debt reduction and how you can settle debt for less and more. So stay tuned!

Tips on Credit Cards, Part 1

In today’s society, charge cards are used not only for necessary items and needs, but also to keep up with the Joneses. Although this was not their intention, so long as you continue to make your payments, the banks will encourage you to keep spending on anything and everything that you want in life. Because most people have misused these, credit cards are also one of the easiest places to save money. We don’t know if there is such a saying but there should be one for “if you want to save money, stop spending money”.

Thus the first way to save on your credit cards is to stop using them. Do not carry them with you. Cut them up keeping only one for emergencies. Only carry that one with you when you are traveling and might have an emergency such as a car problem. It is too easy to see something you think you want, know you should not spend the money on, and charge it anyway. If you do not have that card with you, you will have to think longer about whether you really want to drive all the way home and back to get that item or not. And, do you want to use the extra gas to drive back and forth?

However, you still need to work on the outstanding amount you owe on your cards. First, make a list of each card with its present monthly minimum payment (assuming you will not use the card again), the remaining balance to be paid off, and the interest rate. The way to get out of debt and save money at the same time is to work on paying off the card with the highest interest rate because that card is costing you more. Thus, each month you will make a minimum payment on the other cards and pay whatever additional amount you can on the highest rate card.

Do not consider consolidation loans. They may look good in the commercials but you are only getting a smaller monthly payment for all of your bills while paying a higher interest rate and for a longer period of time. If you want to get out from under your debt, instead of just living with it for the rest of your life, you must get them totally paid off. Consolidating your loans usually will not help because if you reduce your monthly payment but then charge on those cards again, you have just created a larger debt to payoff. Consolidating your loans only covers up the real problem of spending too much money. It is better to work at paying off those cards. Credit card debt is no fun. Look out for part two of this article soon.

Bankruptcy

 The idea of filing bankruptcy as been around a very long time but with a lot of changes occurring. Not so many years ago, filing bankruptcy was something embarrassing and humiliating. Unfortunately, our laws have made this procedure easier to do, easier to live with, and thus less embarrassing. 

The idea is that you owe so much money that there is no way you can ever pay it all off. So you file bankruptcy. In the old days, this meant that your creditors could still take everything that you had left to try to compensate them somewhat for trusting you. The laws now protect the individual up to a point. That is, you are allowed to keep any vehicles deemed necessary to earn a pay check and you can keep your home in order to have a place to live. Then your creditors have to leave you alone. Today the law also says that this bankruptcy will be stricken from your credit files after seven years. Thus, in the future you will be able to get loans again and once more get yourself into debt.

 w says and actually enforcing that law can be two different things. For instance, technically an old bankruptcy is to be stricken from your record. However, in actual life, any bank running a credit check on you is going to find out about that bankruptcy and will deny you credit. Yes, this is illegal, but they do not deny you credit because of the bankruptcy. They simply find some other little item that they can use as a reason. This is what actually happens no matter whether you approve of bankruptcy or not.

 Now, in all fairness, we have to tell you that we do not approve of bankruptcy. You took on your debts and it is your responsibility to pay them off. Our constitution guarantees us life, liberty, and the pursuit of happiness. It does not guarantee that it will take care of us financially for the rest of our lives nor should it. There is no debt that cannot be paid off eventually. Yes, your children may end up paying it off after you are dead, but it can still be paid off. Obviously, it is much better to work at paying it off now and staying out of debt for the rest of your life.

Keep in mind, that in the “old” days and in many countries around the world, if you do not pay your debts for any reason, you end up in prison. We did away with debtor prisons believing that a person imprisoned then had no way to work at paying off those debts. Therefore, we allow people to remain at large filing bankruptcy and then getting into even more debt. No, we are not suggesting going back to having “poor farms”, but we do feel the bankruptcy laws are actually hurting individuals more then helping them and, in the process, are hurting the financial well-being of our country which ends up effecting your family, friends, and even future generations. 

Basically what this boils down to is that you need to have pride in yourself and you cannot have pride in yourself if you feel our government should be taking care of you instead of you taking care of yourself. Remember to be socially responsible about debt and be realistic about what you really need and can afford. If you need a new car, you may not be able to afford a BMW convertible, but you can afford a Chevy. 

Are we the only people who feel this way? No. In studies of people who do pay their bills (even if occasionally late), the vast majority felt that our bankruptcy laws end up hurting the debtor by making it too easy to get out of what they owe. It also hurts our economy and families who do not have debt because companies have to make up that lost money from somewhere and guess who pays the bill? The rest of us. Interestingly, this same study found that the majority of Americans do feel that others who file bankruptcy should feel embarrassed by their actions. So if you decide to file for bankruptcy and feel there is nothing to be ashamed of, you are still looking at the world through rose-colored glasses just as you were when you ran up all those loans and charge card accounts.

If you are so far in debt that you cannot make your payments even after cutting costs and earning more money, you need to talk to your creditors and set up smaller payments. Most creditors will work with you on this. They really do not want to spend the time and money necessary to foreclose on your home or repossess your car. However, keep in mind that you have already promised them once that they would be paid. If you do not stick to even the reduced payments, your creditors will come after you very quickly. 

Then you could end up loosing your home and everything you own including your self-respect. 

If you have children, remember that how you handle yourself and your life, including living within your means and working part-time when necessary, is what you are teaching your children also. 

Entertainment Budgeting

Cable Television

We realize that there are some people who do not have cable service available in their area as well as some of you who do not chose to watch TV at all (or on a very limited basis). However, since most people do use cable, this can be another good sized savings. Obviously, you will want to look at your miscellaneous spending on movies to see if you can save by using cable or renting movies rather than going to a theater. Cable service is another area where you need to look at last month’s bill carefully. How much did your basic cable service cost? If you want to keep basic service, you will not be able to cut costs here. But how much did you pay for premium channels such as HBO? Most premium stations are movie stations and most movies that are released to these channels are also available for rental. Therefore, is it sensible to pay $30 a month to watch 2 or 3 movies a month at home when you could rent them for around $5 each ($15)? Again, a smaller savings that can add up to $200 or more a year in savings.

Also, how many TV sets do you have in your home? How many do you need? And how many of these need to have cable attached to them? If you have a place for young children to watch cartoons and such, they do not need cable on the TV. For other shows you want them to watch, they can use the family set that has cable.

Unfortunately, television watching seems to be the favored pastime of all ages today. But learning to cut back even a little will do more for your family then just save money. We know very well that it is much easier to just collapse in front of the TV after a hard day at work rather than go out for a walk, but we also know which is better for us. Try breaking the habit a little at a time. Instead of turning on the TV right after dinner every day, go for a short easy walk first. Yes, it takes more effort to plan a family trip to the beach or to go fishing then it does to spend the day in front of the TV, but we can just about guarantee that you will enjoy your day out more then you will watching old reruns all day.

Computer Lease

If you use your home computer for a home business or just for word processing and email, you do not need to have the biggest and fastest and most up-to-date computer out there. If you think you do, you are playing keeping up with the Joneses. If your home business requires very fast speeds and the best graphics available, then you probably do need the latest model. In other words, for the average user (and we are not talking about those of you already addicted to going online), a less expensive model will do and should last you for a very long time as word processing and email do not change a great deal. And if you feel that you need faster email service, remember that Grandma is used to waiting a week for a letter to come through the mail. If you need the newest model to keep your business running, you might want to consider a lease. The best way to decide whether a lease will help you financially or not is to ask your CPA or whoever does your taxes. Do not ask the salesman because he will tell you what is best for him, not what is best for you.

If you decide to use a lease, it can be for 2 or 3 years allowing you to trade in that older computer for a new one at that time. This will cost you less than buying a new computer outright every two years.

However, if you want to really save on your computer expense, the only way to do it is to not buy a new one. That is, keep the old one as long as possible. It is more cost effective to use a $2,500 computer for 6 years ($417 a year) then it is to buy a new one for $2,500 every 2 years ($1,250 a year). When bringing yourself out of debt, you must look at every purchase carefully. And the average person will not have any use for leases at all. A little precaution is good practice and a great way to make sure that you don’t need a debt cosolidation provider.

Credit Card Companies Find New Rules A Little Stifling

Regulators are expected to issue a new rule today that will help crack down on some of the most unfair business practices of Credit Card Companies. For decades consumers have been forced to agree to go along with sudden interest rate increases, ridiculous fees and fines. Banks are already reducing the amount of credit available to consumers, even with the bail-out packages. There’s no doubt that this much needed rule revision will only increase the banks actions to protect their profit margins.

Let’s be clear, it doesn’t really seem fair that after getting this huge bail-out package they actually want to hold back as much of the cash as possible. It’s very important for business espcially to have avialable lines of credit. Unfortunately only time will tell if and when the banks start to release capital to business owners and consumers.

Some of the new rules expected to be implemented are:

• A credit card issuer will not be able to raise rates on exsisting debt  unless it’s associated with the end of a promotional period, or if a payment is more than 30 days late.

• A rule that will prevent credit card companies to apply payments only to lower interest debt. For  instance if an account is over limit, the interest rate may be 12% higher (or more) for any balance over limit opposed to the regular under limit balance. Many companies will apply payments first (and the interest rate associated with that debt) to the over limit balance. This essentially enables the company to receive a higher interest rate overall.

• A new rule will bar banks from charging late fees unless they’ve given consumers a fair amount of time to submit the payment. The rule will give consumers 21 days from the due date to pay before they’re hit with a late fee. The maximum late fee is up to $39.

On average the industry charges the following fees:

Average penalty rate - 26.9%

Average late fee - $25.90

Average over limit fee - $29.13

Average annual fee - $43.50

Average returned payment fee - $32.03

Percent that change APR for “any reason” - 77%

Percent that change APR because of record with other creditors - 45%

Average grace period - 23 days

Amount that require arbitration to settle disputes - 71%

Hopefully the credit card issuers will find that having better overall business practices might actually increase their overall returns. Many consumers are simply walking away from their credit card debt. They’ll simply write it off in their mind and instead contract with a debt reduction company or tax relief agency who offers similar services.

Again only time will tell, and hopefully we’ve all learned something from this crisis.

A friend recently turned me on to a new financial news site. They have a lot of great information and sections for members to post questions and seek answers that they might not find elsewhere. It just recently launched but it’s a financial forum that’s already gaining a lot of traction. I think very soon they’ll be a very popular source of information of financial news.

It you’re looking for a new forum to ask questions about what to do if you’re in debt, have an interest in debt consolidation, debt management or simply need to vent about all of your credit card debt this is a great place!

The site can be found at www.Money-Marketplace.com

Check it out and let me know what you think.

Occasional Bills

These are bills that are not paid on a monthly basis. However, they are not miscellaneous cash spending either. These are the things that you must pay for but only occasionally. These will include new tires for the car, school graduation expenses, replacing an old appliance, painting the house. In other words, these are things that must be done or bought as opposed to things we would just like to do or buy. And they are difficult to plan for because you don’t know when that tire is going to suddenly need to be replaced (different brands, driving habits, and mileage will all effect replacement time). You may know that the house is going to need repainting in 5 or 10 or 15 years, but there is no sense in planning for this now. These are long-term expenses. They are also sometimes emergencies. For instance, if you didn’t keep an eye on your tires, you might suddenly have a blowout and need to buy a new one right now. If your washing machine goes, you need one now or at least within a few days. But painting your house can be put off for awhile.

There are two ways you can cut costs on these items. One is to take the time to shop for pricing. If you are 1,000 miles from home and have a blowout, you have to put on your spare now and, if it is one of those little donut spares, you have to get that tire replaced very quickly. But if you notice that one of your tires is beginning to wear more than the others, you will have time to make some phone calls to find the best deal. The same is true for non-emergencies such as painting the house or buying a washing machine.

The big problem with shopping for the best deal on anything is that a lot of us are not shoppers. If none of the adults in your family like shopping, how about the kids? Any child from 13 years old and up should be learning about budgeting money anyway so tell them what the criteria are and let them make the phone calls. A kid who likes doing research will be excited when he finds that he saved Mom and Dad $100 on a new refrigerator. If no one in the family likes shopping, then have everyone share the responsibility. Each person check out the prices at two tire stores and you will have quotes from eight places with only one quarter the effort.

Two, is to do-it-yourself again. Just as with your car, there are a lot of repair and maintenance jobs you can do yourself. Granted we have known people who would actually find old washing machines, pirate parts from them, and put together an actual working washer. However, we do not recommend this method unless you are really into this sort of thing. However, there are things you can take care of yourself.

You can paint your own house. Depending on how big a house you have, it could cost quite a bit and take a lot of time to paint your whole house. In that case, why not paint one side each year. This will spread out the cost, spread out the time involved, and keep your house looking great. And don’t think that only men do this type of work. One of the best roofers we have ever seen is a woman. She doesn’t do it professionally but, when a friend needs help, she is up there hammering.

When something does need repair or fixing up, think about whether you or your spouse or even one of the kids can do it. You can even make a family project out of it.

Occasional items are more difficult to save on but, even if you only make one major purchase a year, by shopping around for the right price you could be talking about a $50 to $200 savings on that one thing. By doing a major job like painting your house or laying your own carpeting, you could be saving thousands of dollars.

US Small Business Administration

Debt Management Explained – Your Reasons

Some of you may be very happy living with a lot of debt hanging over your head. Some people were raised this way even as a child and know no other way of life. But most people would like to stop the continual worrying about paying the bills and be able to enjoy life. No one likes to constantly deprive themselves because they can’t afford to do something fun once in awhile. And most people do not like having to deprive their families either. Therefore, a very important part of your plan is to formulate your reason or reasons for wanting to be debt-free as an incentive for actually doing it. Yes, you first have to decide you want to live debt free. But, second, you need a really good reason to change your life style. So let’s decide where you are going in life and what you want from your life.

First, just wanting to be debt-free is not usually a good enough incentive for most people to work so hard. That is, telling ourselves that if we lose more weight we will live longer is not nearly as good an incentive as telling ourselves that if we lose that weight we will become a beautiful model, make scads of money, marry a handsome man, and live happily ever after. Just saying that you will not have to be worrying all the time about paying bills is not nearly as good an incentive as thinking of how we can use that future left-over money for our own fun.

So what would you do if instead of paying out every cent on bills, you had an extra $500 a month to spend? The possibilities are endless, but you must decide on what you would do. To help you, let’s consider some possibilities.

With an extra $500 you could buy a lot of essentials like groceries or eye glasses. But you could also take a camping trip to a national park, buy discount tickets to Hawaii or Mexico, buy a new appliance or piece of furniture you have been wanting, take a college course, start a home business, buy General Electric stock for your future security, take a kayak trip, take up a new sport like golf or tennis. Now multiply that $500 a month by 12 months and think what you could do with an extra $6,000 a year. You could remodel a couple of rooms in your house or make a down payment on a new house, take a trip to Europe, pay for a lot of your child’s college education, invest it for your own financial future.

In other words, you need to create an incentive for yourself in order to last through one whole year of extra hard work. You need an incentive that is just right for you. Granted, what you consider an incentive and what your spouse considers an incentive could be two different things. If this is the case, don’t get greedy. That extra $6,000 a year (or more) should be able to get you and your spouse and the kids some extra fun in life. That’s serious debt reduction.

Now, write this incentive down. In big, bold letters write HAWAII and post this on your refrigerator, the thermostat, mirrors, on your desk at work, on the dashboard of your car, everywhere you will continually be reminded of what you are trying to accomplish. Just like putting the “fat” picture of yourself on the refrigerator in order to keep on your diet, you need the continual reinforcement this incentive will bring you. And even a great incentive cannot keep you going through years of trying to pay off your debts, but sometimes even a small one is all it takes to keep you going through just one year. And that is the important part, to stick to your cost cutting and increased income for a whole year.  

Save Money On Transportation

Whether you own one, two or more vehicles, this item can save you quite a lot each month. First, if you have two or more cars, do you need that many? Yes, we know it is more convenient, but is it really necessary. Again, there was a time in this country (which still exists in other countries) when families did share things. Is your work and your spouse’s work close enough that you could commute together? Just because your hours are different by a half or a whole hour does not mean you cannot share a ride. It just means one of you will get to work earlier then usual or leave later then usual. Or you can arrive and leave at the usual time but spend the extra time reading a book. If this seems difficult to you, remember that by cutting back to just one car, you will be cutting your car expense (including payments, gas/oil, insurance, and annual registration) in half. That would mean a savings of as little as $500 a year (if one car loan is already paid off) up to as much as $505 or more a month ($350 car loan payment + $100 for gas/oil + $50 insurance + $5 registration). This would be a savings of $6,060 a year.

If this is impossible due to working in opposite directions from your home or one of you works days and one nights, can you commute with someone else or take public transportation to work? Yes, this can be inconvenient and there will be times when your ride does not show up but when that occurs you could still share a ride with your spouse once in awhile. Or what about setting up your own car pool in order to keep your car? That is, find others at work who live near you or live in your general direction that can meet you at a particular place and ride in with you for a couple of dollars a day. Alternating whose car you use each week will still save you some gas money.

Another very important consideration today is whether to give your 16 year old their own car. No, we do not support this idea. Our family has always shared. Giving your teenager their own car is a huge additional burden on a family and doing so can make it easier for your kids to get into trouble. At least you can cut down on the possibility of trouble by insisting that the kids do their homework between school and when you get home from work and then they can use the family car one or two evenings a week to go out.

Again, depending on which method you decide on, you can save from $100 a month (commuting with fellow workers) to $500 or more a month (cutting back to just one car).

Another problem that we have seen is the individual who buys a new car and then finds that he cannot make the monthly payments due to unemployment, illness, etc. When this happens, rather than wait for the bank to repossess your car and ruin your credit rating, first tell the bank what is happening and what you have planned. Then sell the new car in order to pay off your bank loan and buy a used car. Yes, you may have to get by with an old beat up car for awhile but you will be able to sleep a lot better.