The Finance Fiend

Getting Financial Freedom by 35!

Consumer Ed 101: Marriage and Divorce April 30, 2009

Filed under: Uncategorized — Rebecca @ 9:16 am

When thinking of your financial future you probably think of money coming in, investments made, even home ownership. Rarely do people think of their marriage.

Marriage is a great institution, but sometimes your life situation will change but the people in the marriage do not change – or they do, but not for the better. Unfortunately, this is when people begin thinking divorce.

How does a divorce affect your financial future?

Well, that all depends on your financial situation. If you have no children and no assets a divorce is as simple as contacting two attorneys and filing in court. For less than $500, wham bam thank you ma’am, you are divorced.

For most people its not that simple. Or remotely inexpensive.

Love is grand, divorce is  Twenty-Grand. That’s right, the average THRIFTY divorce  costs $20,000, and this is just the immediate cost.  The government spends and average of $30,000 for every divorce.  Public assistance programs (like food stamps and subsidized housing)  are largely affected by divorce.  All in all, it depends on what is going on with your life.  Many attorneys will quote an average in the 40 and 50 thousand dollar range.

What are some of the areas effected?

1. Income Obviously your income (as a household) will change.  If you were a 1 income family, both spouses will most likely need to work.  Even if you are a two income family, living expenses will increase.  Even with child support or alimony your entire life and budget will be changing.

2. Housing I know some people that continue to live together after they are divorced, but honestly I can’t imagine enjoying that.  If you have a home that both partners own, it will likely need to be sold.  Many times, homes in these situations are sold for less than their value just to have them sell quickly.  Even if the home sells quickly and for a profit, quite often you will see a housing downgrade and move from that nice 4 bedroom to a 2 bedroom apartment and taking laundry down to the corner.

3. Taxes I am not going to go into the tax implications, but trust me they are complicated.  401Ks and IRAs may need to be divided, or heaven forbid cashed out. Taxes and penalties can take away large portions of your retirement.  Its best to speak with a CPA so you can lose the least amount of money.

4. Your credit score One nice advantage in a marriage is that you can boost each other’s credit scores.  With a divorce, you could see yours drop.  If joint assets, like a home, is given to one partner, it can still affect the other partner.  You might find out, you can’t get a car loan because your debt ratio is too high.  If the partner keeping the house, can’t keep up on payments and get behind on payments it can effect you as well.

5. Wills and Insurance If you are divorced you will most likely want to change your beneficiaries.  Even if you keep your beneficiaries, additional term life insurace might be a good idea.  If I got a divorce and died, who would take care of my children?  Whether or not you get custody of the kids, this is something you should consider.

Have you tried marriage counseling?

All in all, if you are in tough times with your marriage, you might want to consider your options. Marriage counselors cost about $100/session and will see you once a week for three months.  For $1200 you could save your marriage. Family counseling does tend to work faster than individual counseling, which will boil down to less cost for you. Even if you were in marriage counseling for two years, it would only cost $10,000 dollars or half the price of a thrifty divorce. There are also other added benefits of a marriage staying together.

If you are in hard economic times yourself, look to your local church or synagogue. Many religious organizations offer free counseling, and there may be local groups that offer sliding scale fees.  That means, if your marriage is on the rocks because you lsot your job, you can still get help. Also look into support groups.  They tend to be low cost or free and can help you get friendship and support outside of your weekly couseling session.

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Consumer Ed 101: Credit Cards April 27, 2009

Filed under: Uncategorized — Rebecca @ 12:09 pm
Tags: ,

Where did they come from?

These days it seems like everyone takes credit cards: grocery stores, restaurants, even gas pumps. But where did they come from? Well the first plastic was the Diners Card. The Diners Card made it so you could eat at one of 27 New York restaurants and not have to pay, until the end of the month.  The card didn’t allow people to carry a balance though, meaning it was actually a charge card. The Diners Card was aimed at the well off and traveling businessmen.

American Express and Bank of America (VISA) issues their own cards in the late 50s.

Credit cards gained federal regulation in the 70s with additional and modified laws as time progressed. Before that some credit cards would send active cards out in mass mailings. Talk about identity theft!

What are the requirements to get a card?

In this day and age, anyone over the age of 18 with some source of income can get a credit card. If you go over to creditcards.com you view all sorts of cards for all sorts of people.  Since everyone is different, many credit card companies have cards for certain groups.

College students can get cards with specific rewards for purchases at bookstores or restaurants.  Another, great option for the financial infants: prepaid cards.

People with longer credit histories, and high credit scores can expect the greatest and best perks. Lower interest rates, bigger rewards, etc.  Its all based on your amount of risk to the credit company.

Prepaid cards

Benefits:

These are similar to a bank debit card, you have to have money to spend money.

You generally don’t need a credit history, and if you have a poor credit history you can still get one of these cards.

Most of them will give you perks for direct deposit of your paycheck or “government funds” and allow you to withdraw your money and ATM for no fee.

They build your credit.

A few will even pay you (via interest) to use their card.

The cons:

Most cards have a balance limit ($5000 or $10000 dollars).

Many cards have weekly or monthly fees. (That means its not useful for an ’emergency’ card or backup card. Its meant to be used for day to day purchases.)

Many want you to have direct deposit or pay additional fees.

Rewards Cards

These cards allow you to earn ‘points’ or “miles.” You can turn the points in for gift cards or merchandise and the miles are used for buying plane tickets. Other rewards cards will have large annual fees but allow access to travel lounges in airports, or concierge service and other benefits at hotels.  Depending on your circumstances you can find a card that will benefit you.  Most people may not need special concierge service, but may enjoy earning a free plane ticket.  Most cards will focus on a certain area that you can earn extra rewards like travel purchases, retail purchases, and even certain on-line retailers.

A sub category of the rewards cards are the cash back cards.  They will give you back a certain percentage of your purchases in cash (sometimes they are rewarded as points and you turn in points for cash).

Many retailers offer rewards cards either saving you at the POS (initial purchase) or with cash back.

Other cards:

Other companies offer particularly low interest rates for purchases or balance transfers. If you have credit card debt at a really high percentage rate and cannot get the credit card to lower your interest rate, you may want to look into a balance transfer credit card.  A balance transfer will usually involve a fee (say 3%) and then have a different interest rate than for new purchases. Occasionally you can find a card that offers no interest on balance transfers for 12 months or more. If you are working on paying off debt, a balance transfer could boost your repayment.  If the card adds on 3% to transfer the card, and then you don’t pay interest for a year, that’s effectively like paying 3% interest for a year. I have yet to see a credit card offer that as an APR (except for specials where you get0% interest).

They aren’t all bad

I don’t think people should all go out and get lots of credit cards, but they do have a place.  Credit cards used responsibly can make your life easier.

We have a credit card, that we use for all of our household purchases.  The company has a special program on their website that categorizes our purchases and shows how we spend each month in areas, as well as help us track spending over the year.  Its not a substitute for a regular budget, but it does make it easy to say “we have spend 24% of our purchases on eating out this month, whoa Nellie.”  Even if we have not made our other typical monthly purchases (gas, groceries, etc) it can stop us from grabbing a burger on the way home in order to not go over our budgeted $50 in our spending.

 

Consumer Ed 101: So you want a car April 23, 2009

Filed under: Uncategorized — Rebecca @ 10:10 am
Tags: , ,

Contrary to what many Americans believe, a car is not vital.

In some places they are actually unnecessary. I remember talking with a classmate in high school, he was planning on going to college in California, and he knew that the high tuition prices would make it hard to have a car as well.  He also knew he wouldn’t use the car much.  The campus he was going to had a bus system, a grocery store, and housing.  He knew it made more sense to rent a car for a weekend at $50/day than to pay for the upkeep of a car every day.

So how much does a car cost?

1. Insurance this can cost anywhere from a dollar a day (for collision only) and up to five dollars a day for full coverage. It may cost even more in other parts of the country and based on your risk, I am basing these numbers on my experience in the Midwest.

2. The price of the vehicle. Whether you buy your car outright, or buy something on payments you need to account for that price.  New cars start at around $10,000 for the small models, while larger cars start in the $30,000 range.  Even if you want a new car there are wide ranges in price.  There is also the option of buying used (an option I fully support). A two year old car will retail for less than 50% of the new price. When we bought our2 year old car, it was about $8,000 from a private seller (we bought it spring of 2007 and it was an ’04 model).  With all the car info they gave us, they had the invoice from the purchase of the car, and they had spent almost $30,000 for it when it was new with their extras.  If you are buying a new car every two years, you should realize you are spending thousands of dollars for that.  Trade in prices are nowhere near as good as selling to a private individual either. Also, remember that if you get a lien on your car you are paying extra money to the lender.

3. Vehicle repairs. All cars need maintenance, and some cars need repairs.  Repairs are more common with older vehicles and vehicles with high miles because they have been used so much.  Know when a repair is worth it.  When I was younger (and more foolish) I bought a car from my brother for $400.  He knew the breaks needed fixed, and told me it should cost a few hundred dollars.  When I went in for repairs they told me it would be $1200.  I repaired it, but it wasn’t the best decision as the clutch went out 3 months later. Know when a car is sucking money away from your budget.

4. Gasoline. Currently gas prices are rather low, they have been hovering around $1.90 for a few months, but that won’t last. Prices may stay this way for a few more weeks, months, or even years. You may find a car you like, but if it gets 10 miles to the gallon its not the best for commuting.  If you are buying a truck for hauling things, do you need the large one, or will a smaller truck work just as well? Gasoline isn’t a one time purchase, and it may be worth it to buy a more expensive car to get better mileage.

So you still want a car?

Don’t forget your other options! Many places it makes more sense to use public transport.  If you think 45 minutes if your time is too much when you could drive and get there in 20, don’t forget the other costs of a vehicle. How much is that 25 minutes worth to you? You can earn, what a few more dollars to drive.

Don’t forget your transit costs can be tax free. In Obama’s Economic Recovery plan, they have increased the amount of money you can put into a pre-tax ‘transit account.’  If your employer offers this, it can allow you to take the up to $230/month for train and bus passes.  You won’t be seeing any special tax breaks for driving yourself to work, and you can probably buy passes for your other family members as well as yourself.  Do your kids take transit to school? or to grandmas? They may have a less expensive monthly pass, but you can also get that $20 untaxed.

Its the green thing to do. So you hate that being ‘green’ is so trendy?  Well keep this in mind, in my town the public buses run on a set schedule.  Empty or full, they will drive from downtown to the movie theater to the hospital and even to work.  That is a lot of wasted fuel if no one is on the bus except the driver.

You won’t be late. Buses may get behind schedule, but not by much.  As long as you catch the bus you can expect to get to work at around the same time every day. And, its not just the poor working class that take the bus.  In our town all of the buses hub at a location downtown.  Parking downtown costs a lot, and can be hard to find.  Its easier for the banker or merchant to take the bus than spend extra time and money finding parking.

So before you buy that second vehicle, or trade yours in for a new model, consider your options.  You might just be glad you did.

 

Will a Garden save money? April 22, 2009

Filed under: Uncategorized — Rebecca @ 4:53 pm

I know this isn’t exactly related to the consumer ed series, but I am allowed to change topic.  Its my blog afterall.

Gardening has become all the rage this year.  Call them Victory Gardens, Recession Gardens, or just being more green, garden appeal to many people across the board.  First off all, I must let everyone know, the first year of gardening is the tell of if you can cut it. Also, depending on your ground area, you may or may not break even in cost.

How much does gardening cost?

For a small vegetable garden, it can cost as little as a couple of dollars for seeds, or as much as a few hundred for plants and other materials.

I built a raised bed this year. I followed the plan from Sunset and made a sturdy planter that will last at least 10 years with little or no mainenence.  But don’t go thinking it was cheap.  It really wasn’t.  It cost me about $200 for materials, the biggest cost was the cedar.  Man was that stuff expensive.

I bought seeds, but of course my mind was bigger than my garden, and I have plenty of seeds for next year. I also started several plants inside, almost everything  didn’t work, except the tomato plants (go figure).  The tomato plants thrived, and I just put 7 plants in, and stared at the other 7.  I will be giving those away to friends and neighbors.

When will the garden pay for itself?

I expect to break even this year.  I know the $200 was a lot to fork over at one time, and on our meager salary, but its like an investment. Next year I won’t have to amend the soil, several of my crops are hierloom vareties meaning I won’t have to buy more seeds, and thanks to a cold frame top I will have an exended growing season. I am also doing square foot gardening, which means I will end up with more crop per area.

If that doesn’t convince you, think of it this way. If I am lucky I can get tomatoes for 99 cents/lb at the store. Cucumber are maybe 75 cents each, and leaf lettuce for maybe 99 cents per bunch in season.  So if I can grow 200 lbs of tomatoes, 300 cucumbers OR 200 heads of lettuce I break even.  Of course, I am not going to get that much of any one item and I am growing things that are rather pricey like sugar snap peas to support my stir fry addiction. Some foods pay for the packet of seeds with just one seed (or just one fruit).

This doesn’t sound like my cup of tea…

Gardening takes time.  Whether you are growing food or herb or just pretty plants, it requires work.  There is a reason why most people don’t have gardens.  It might not be the weeding, watering, or harvesting that gets to them; they just don’t have the time to do any of those things.

There are other options.  Some plants are perennials (meaning they come back every year). Strawberries are a good example.  Asparagus is also a plant that comes back every year, but you can’t harvest and eat it until the third year.  Rhubarb is another example, it looks like a red stemmed celery, but its a very bitter fruit.  I learned my lesson when I was 9. There are also berry bushes and trees, and perennial greens both herbs and spinaches etc.  All of these need maintenence, but less than a traditional veggie patch.

If you think you won’t have time for a vegetable garden consider planting in containers. You can get the nifty looking hanging tomato or pepper plants, or you can just buy a pot for your patio or balcony.

The best thing about gardening, is the harvest.  The first zucchini, tomato, or strawberry is always exciting. Plus, when you have 20 ripe at once, you can meet your neighbors and let them share in your bounty.

 

Consumer Ed 101: Debit Cards vs Credit Cards April 21, 2009

Filed under: Uncategorized — Rebecca @ 12:05 pm
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What is the difference?

If you have a checking account, you will most likely have a debit card.  These might be as basic as an ATM card that you can use with certain stores and vendors and entering you PIN.  A debit card is VISA or Mastercard secured, and allows you to sign your name instead of providing a PIN. They bank will take money immediately from your account with PIN requiring debit, but will usually take a day or so to process transactions run as a ‘credit.’ Your money always comes from funds available in your checking account.  Its pretty much like a faster, and more convenient check.

A credit card is a card that allows you access to a line of credit given to you by a bank.  Every card has its own terms, but you will be given a certain amount of credit and an annual percent interest (APR).  Different options typically have different APRs.  A regular purchase might have a 12% APR while a cash advance is 25%.  Also, many credit cards give a certain amout of time as a ‘grace period’ where they will not charge interest as long as you are in good standing with the company.

So which one is better?

Well, each has its good points.

Debit cards are great for people that have a harder time controlling their spending. While they may be able to swipe the card and go, the money is taken immediately from thier checking account making more of an impact.  This also means that if you have no money in there, your transaction will be denied. That may, or may not be a good thing depending on your spending habits.

One advantage of credit cards is the large amout of federal laws they have to follow.  If you experience credit card fraud, the company is required to investigate if you send a written request within 60 days.  You also only have a $50 liability. That means if someone takes you card and buys $300 worth of gas in a day, you will by law not have to pay more than $50 for the charges.  In my experience, many credit cards will relieve you of all liability to keep you as their valuable customer.

With a debit card, the liability is $50 if you notify your bank within 2 days of noticing the fraudulent charges. After 2 days, the liability is $500, and after 60 days its the balance of the account.  Now obviously if you only keep a couple of hundred dollars in your checking account, you would be better off waiting until the 61st day if you missed the 2 day cutoff.  Some banks do not increase the liability, but its not regulated federally.

In the case of fraud,in general you are more protected using a credit card than a debit card.  Just look into the details of your bank to find out if your bank has a set limit or not.

I have experienced identity theft/fraud twice.  The first time was when I had just moved away from home and lived with my sister.  Her car was broken into and her debit card was stolen on a Friday night.  The bank called Monday morning asking why she had purchased gas 4 times in a town 30 minutes away over the weekend.  She told them her car was broken into, and she had no idea the card was even gone.  The thieves took her debit card and used ‘pay at the pump’ features to fill everyone’s gas tanks.

The second time, was my own experience with a credit card.  I was a student and a while rather foolish, somewhat frugal at the time.  I bought my groceries with my credit card because it was easier, smaller, and I didn’t have to worry about having cash lost or stolen.  Later that week, I recieved a call from my credit card asking about a purchase in Florida. The vendor had actually contacted them to see if it was fraud, and yes it was.

In both cases, neither of us paid anything.  So, while law dictates a $50 max, many banks and credit card will waive fees to keep you happy.

Whats best?

I personally say, why not get both.  I rarely use my debit card.  Not because its harder to use than my credit card, but because it doesn’t have as many perks.  When I first got the debit, I would earn 1% on all ‘credit’ purchases using my debit card.  After a few months the 1% was only for certain vendors, and since I had only earned 28 cents, I figured it wasn’t worth it.  I now primarily use my debit card when I will need cash.  Whether I want cash back at the grocery store or just a 20 from the ATM, there are no higher interest rates for getting cash with a debit card because its your money.

For most purchases I use a credit card.  By using one credit account, it simplifies where the money logs are, making it much easier to track spending and enter all the info into our monthly budget. We also pay the entire balance of the credit card off at the end of the month.  If you have the right bank account, you can actually make money doing this.  If you keep your money in a savings account that earns interest, you can earn a few pennies by using a credit card and paying it off at the end of the month.  I don’t condone that because it can be risky (money didn’t transfer, etc).

Have you had enough of this yet?

 

Consumer Ed 101: Checking Accounts April 17, 2009

Filed under: Uncategorized — Rebecca @ 8:30 am
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What is a checking account?

A checking account is a federally protected account through a bank or credit union that you can deposit and withdraw money from. You are given ‘checks’ which are security enabled pieces of paper that you can use to make payments.  Most financial institutions also offer an ATM card and/or a debit card.

Where can I get one?

Walk into any financial institution and ask.  Some banks require minimum deposits to open an account, but virtually all banks and credit unions have checking accounts available. There are even checking accounts available via online banks. Online checking accounts can make it harder to access your funds, but many off other perks that make them worthwhile to you.

Why use a checking account?

Bank accounts can provide a neat and tidy way to track your finances.  You can use them for cash deposits, checks and money orders, fund transfers, and even cashless transfers at store (via ATM or debit cards).  Put simply, they can save you the hassle of carrying around large amounts of cash while giving you a list of your comings and goings every month.

Basic Blank Check

John Doe 101
123 Main Street Date____
City, State Zip
Pay to the
Order Of _______________________________________________ $
______________________________________________ DOLLARS
YOUR NEIGHBORHOOD BANK
For ___________________                                        ___John Doe___
|123456789| 123456| 0101|

Above is a basic blank check. Its not very pretty because I made it in excel then copied it over.  Still, it gets the basics across.

The Blue is your personal information. Sometimes your driver’s license number or phone number may be at the top.  Its sort of up to you, what you want there.  I would recommend not putting your social security number on your checks as that would set you up for identity theft if you ever misplaced your checkbook, or wrote the wrong person a check.

In pink we see the value of the check. The box with numeric dollar amounts should match the written version on the line below the name of the person or company you are giving the funds.  I remember being told that if the numbers do nto match a bank will not take the check.  I also start writing at the beginning of the line, and mark throu any space that I don’t use so no one can modify the amount of the check.  It might be easy to add a digit to the number box, but its much harder to add in a word.

The bank information (routing number, account number, and check number) are in green at the bottom right side of the check, as well as the top left corner.  The check number makes it easy to keep a ledger of your spending.  Even though many people do not use checks as a way of payment, it can be useful to mark transactions with numbers like a check.

The FOR line is handy for including account numbers when sending payments to credit cards or utilities, as well as personal notes like “Birthday present” or “Groceries” or “Auto.” This is can make categorizing purchases easier when it comes time to budget.

And of course, your very own John Hancock goes in the bottom right corner.

How useful are checks?

Well, they can be very useful.  When I first had an apartment, I used checks for all of my utility payments, as well as my rent.  They kept a written record of payments, and made it easy to have each roommate’s money accounted for.  We would divide the bills, write how much it needed to be on a marker erase board, then pin our checks to the fridge.  It was easy to see who paid, and since we each put the utility account number on our checks we never had any problems with not getting the company paid.

In addition, some people enjoy the convenience of a debit card, while needing the written record of a check.  A check can be filled out (not signed) for transactions and marked with a large VOID across the check.  This is very useful for financial newbies. Granted, you can just use the checkbook registar and enter in debit transactions, but I have in the past entered info into a check for record keepign purposes.

Banks will also send you the processed checks for your records. (Some banks also send copies of the original document, or just make scanned images available unless you request the original document.)

There are your basics. Any questions?

 

New Series! Consumer Ed April 14, 2009

Filed under: Uncategorized — Rebecca @ 3:11 pm

I am starting a new series titled Consumer Ed.  It will be based off the very basics of consumer education, from writing a check to buying a cell phone.

I am excited to have given myself a topic, since I couldn’t think of anything to write on after the mortgage info.  I also got some constructive criticism on the visual aspect of my posts, so I am going to try and work on that.

Thanks for reading!