How Costco Is Like An R-rated Movie

March 11, 2015

Recently, my teenage daughter wanted to go with some friends to see an R-rated movie but she’s not 17 yet.  I had to inform her that the rules are the rules and that she couldn’t go to that movie without an adult. That’s when my wife chimed in and asked if she could apply that adult supervision rule to me when I go to Costco!

Being a good financial planner, I use Costco to save money on items that my family uses frequently and buys in bulk. I admit, however, that one of my challenges is that the TVs are right by the door. Even though I come in with a list of things to buy, I almost always stop and check out the latest and greatest TVs and start thinking about which ones would be the best for sports, which would work better for movies, etc.

That 3 or 4 minutes of distraction sometimes lowers my vigilance and while I haven’t walked out with a new 70 inch TV, I have made a couple of small impulse purchases. Personal finance is just as much or more about our behavior as it is about math.  So what are some things that I – or you – can do to avoid the need for adult supervision?

  1. Make a shopping list and stick to it. Remember that if a product is as good and useful as it appears to you at that moment, the supplier will continue to make it.  You will be able to calmly and rationally decide at home whether that purchase really would make sense the next time you go or if it was just an impulse buy.
  2. Understand what your triggers are. In my case, I love to watch sports and am always looking for the “perfect TV” to watch a game. Since a large TV is a major purchase, I have avoided the temptation to unnecessarily buy a TV but I have learned that the TV dreaming at Costco triggers my desire to want things that aren’t necessary. Now I make a conscious effort to move past the TVs as fast as possible so that I can avoid my trigger. What is your trigger?
  3. Set a budget for your shopping trip and keep tab of what you’re spending. If you know what you’re shopping for, you should have a good idea of what it will cost. Set a limit – say $200 – and use the calculator app on your phone to keep track of how much you’ve spent so far. That way if you get up to $180 and you still have items on your list, it’s much easier to see that no matter how tasty that free sample was, it isn’t affordable today.

Use these tips to save yourself a substantial amount in impulse purchases, and if you know of any good deals on TVs – let me know.

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Money Management For a Busy Single Mom

March 10, 2015

Years ago, I had a friend who was trying to get her finances together but she was struggling as to how to do it. She was a single, recently divorced, full-time working mother of four, with three of the kids under the age of 5. I knew whatever strategy we developed had to be easy and automated. Continue reading “Money Management For a Busy Single Mom”

Why I’m Still Sticking With Cash

February 20, 2015

 

I recently read an article in the Delta Sky magazine that talked about the future of how we pay for things. The author summarized that cash and credit cards will soon be as obsolete as encyclopedia sets, 8-track players and typewriters.  His opinion is that new mobile technology such as Apple Pay or Google Wallet will be the preferred way to buy our groceries, gasoline and everything else because it will be more convenient and safer.  In fact, an article in Business Insider points out that U.S. consumers are using cash less than debit and credit cards for the first time.  So, will cash go the way of the typewriter?

While new technology is exciting and can help make our lives more efficient, it can also create new problems. For example, smartphones can keep us connected, but we now live in a world that feels impersonal and forever noisy. I appreciate convenience as much as the next person, but I’m not convinced that giving up cash will make life that much easier.  Here’s why:

  1. Cash is tangible.  Many people prefer cash because they can touch it, hold it, and see it. It is the easiest way to understand how money works and still helps many live within their means. The envelop method of budgeting is based on the principle of putting cash into physical envelopes for different categories. It may be old school, but it works because when the cash is gone – it’s gone.
  2. Cash doesn’t need electricity. I remember when a nasty storm blew through town a few years back and brought the area to its knees. The wind and ice took out the power and/or telephone lines in most of the city for almost a week. As power and phone service were brought back on, it was clear that cash was king. Many businesses had generators to power the basics but only accepted cash. Most banks were closed so no ATM. My father taught me to always have cash on me but over time, I grew lazy and reliant on using my debit card. After living through that storm and lack of electricity, I now keep cash on me at all times!
  3. Cash can earn you discounts. Credit card companies like Visa, American Express and Discover charge merchants up to 3% on all transactions. Apple Pay and Google Wallet are simply fancy ways to pay for your purchases using your existing credit cards. That’s why some business owners offer an incentive for their customers to pay with cash instead of credit.
  4. Cash is secure. Millions of Americans’ private credit data was stolen last holiday season when hackers compromised retailers like Target and Home Depot. These retailers do an incredible job of trying to keep their customers’ information secure, however there are inherent risks with using credit cards. While the new mobile payment companies use new technology to make those transactions more secure, it’s only a matter of time before the bad guys figure out how to hack this too. Cash doesn’t have that problem. If you are concerned about keeping your private data secure, consider paying in cash more often.

These new technologies may indeed be the norm years from now. But until the technology becomes more mainstream and proves to be more secure, I think I’ll stick with good old cash as much as possible.

Where is Your “Government Waste?”

January 09, 2015

Every year, in the December/January time frame, there are a lot of articles looking back at the prior year or looking forward to the New Year.As a bit of a political junkie, I love reading stories about predictions for the coming year but one of my favorite things to see each year is a look at how the government (mis)spent enormous sums of taxpayer’s dollars. This isn’t a Democratic or a Republican issue; it’s a big organization problem.  Continue reading “Where is Your “Government Waste?””

The Price of Inattenton

January 02, 2015

As we look back at the previous year, I have started thinking about people I’ve talked to this year who have left an impression on me. One of the more memorable people that I was able to have conversations with started with a story that was disturbing on a few levels, but has come to a relatively happy conclusion. The fun part for me was getting updates on her progress and seeing the change in her voice, posture and energy level as things got better.  Continue reading “The Price of Inattenton”

Oh No, I Forgot to Check My Line-up!

September 02, 2013

If you are a sports–obsessed, fantasy football player like me, you’ve probably been mortified as you said those dreaded words at some point.  If you are a football widow like my wife, you’ve probably heard that before and wished it happened a lot more often. Why does someone need to check their fantasy team line-up? Didn’t they spend a bunch of time in August putting together the greatest draft strategy in the history of man or at least the history of football? With super star players dominating at every position, why should you bother with something as mundane as checking your line-up before each game?

Well, I guess someone could get hurt. Of course, every team has a bye week so you wouldn’t want to start Tom Brady if the Patriots are off. If you really want to reach the playoffs, then I guess you might not play a lot of Broncos wide receivers if Peyton Manning couldn’t play.

Of course, then there is my team.  If usual form holds true, my quarterback will be crippled by week 3 (Sorry to all Matt Ryan and Julio Jones owners), I will not realize that my back-up quarterback, tight end, kicker and defense have the same bye week and my can’t miss rookie running back will be buried somewhere below whale dung on the depth chart. In short, stuff happens.

The same is true in our financial life.  It always amazes me to see how much time, effort and money people will devote to putting together a financial plan and then rarely if ever re-visit the plan.  In my own life, I’ve seen multiple changes in the last year, let alone the last 5 – 10 years.  Sticking with the old plan would be a quick trip to the losing locker room. While as any of the guys in my fantasy football league will tell you, I’m the last person who should give fantasy line-up advice, here are a few tips for how and when to check your financial line-up:

Set a time each year for an annual review of your plan

  • Have it coincide with the start of something like New Year’s or the start of the school year

Resources:  Financial Planning Checklist    Financial Goals Worksheet     How to Check Your Family’s Finances (9-minute checkup)     E$Planner (Retirement Calculator)

Re-balance your investments

  • If you aren’t in funds that re-balance automatically, this should be done at least once a year
  • When you do your annual review you can choose another memorable day like April 15th

Resources:  Beginner’s Guide to Asset Allocation, Diversification, and Rebalancing     Guide to Rebalancing (WSJ)     Create an Investment Policy Statement

Review your home and auto insurance

  • Having inadequate coverage could leave you in a huge bind, or you could be paying too much
  • Start this process about 60 days before your annual policy renewal so you have time for changes

Resources:  Cars and Auto Insurance    Homeowners Insurance    Homeowner’s Checklist

Update your budget

  • This is really the most basic and most crucial.  Probably good to do with those resolutions, but if you don’t remember when you last updated your budget, do it NOW!

Resources:  Budget and Net Worth Worksheet     Mint    You Need a Budget     How Do I Create a Budget?

Re-evaluate your estate plan

  • This is definitely one that everybody puts off because it just isn’t any fun and can be depressing to think about. Consider doing this on every 5th birthday, for example 40, 45, 50.  A lot can change in 5 years from tax laws, to your income, to kids being in the home or not and even your health situation.  You probably will do something fun anyway for that milestone birthday so that can cheer you up after thinking about this.

Resources:  5 Steps to Estate Planning    A Simple Estate Planning Checklist For a Challenging Topic

Last, obviously if God forbid your star quarterback really does go down with a season-ending injury (please stay healthy Matt Ryan) you need to reassess your fantasy team immediately. If you have a major event in your life, good or bad, it is always a good time to do a top-to-bottom review of your plan to make sure that it is still relevant for you and your family.  Please, pay attention to your financial line-up and if you have any ideas on back-up running backs leave them in the comments section ASAP!

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You Don’t Need To Pay Lifelock To Protect Yourself From Identity Theft

May 03, 2012

If you’ve read Greg’s post on computer malware, you may we wondering about other ways to protect yourself from the growing problem of identity theft. No, you don’t need to sign up with a company like Lifelock or one of the many credit monitoring services. (In fact, given the news around Lifelock, you can even say that it’s a bit of a scam itself.) The fact is that for low or no cost, you can get essentially the same protections that these companies are charging monthly fees by following these tips.

Guard your information

The first step in stealing your identity is for the identity thief to get your name and sensitive financial information like your Social Security or credit card numbers in order to get loans in your name or make withdrawals from your bank account. Here are some ways to protect that information:

  1. Shred any documents with sensitive information on it before throwing them out.
  2. Be careful of using your credit or debit cards at locations like remote gas stations or ATMs since thieves can attach skimming machines to them that steal your card info.
  3. Verify that emails are coming from your financial institution before entering financial information and account passwords.
  4. Keep a record of your credit card information so that you can quickly cancel a card that is lost or stolen.
  5. If you have cards with Radio Frequency Identification or RFID, consider protecting them from scanners with an RFID safe wallet or credit card shield.
  6. Avoid using your debit or credit cards in places like restaurants when they’re taken out of your sight.
  7. Take steps to protect your computer and smartphone from malware.

Protect your credit

Even the best precautions won’t always work to prevent a thief from accessing your information. The second line of defense is to prevent the thief from using that info to open a line of credit in your name.

You can do that by setting a credit security freeze with each of the three credit bureaus. Since it prevents new creditors from accessing your credit file unless you specifically grant them access, it’s stronger than a fraud alert. Each state has slightly different procedures and fees. Where I live in California, placing and lifting the freeze is free for identity theft victims, $5 for people over 65, and $10 for everyone else and it stays active until you remove it.

Monitor your credit

If all else fails, you’ll want to catch the consequences of identity theft as soon as possible so you can quickly get it fixed. At the very least, look at your bank and credit card statements regularly for any fraudulent charges. You can also get free credit monitoring through creditkarma, which alerts you if there are any changes in your credit file like a new loan opened in your name. After all, a new loan probably won’t show up on your current statements. If you do find yourself a victim, you can learn about the steps to take here.

Take action

When you consider the costs in time, money, and stress of dealing with identity theft, it’s definitely worth taking these precautions. The problem is that it’s too easy to get complacent about something that you think won’t happen to you. But I’m sure the 1 out 18 US households that become victims each year probably thought that things like this only happen to “other people” too.

So in addition to protection yourself and your family, feel free to share this post with your friends and followers on Facebook and Twitter. If just 18 of them read it, odds are that you’ll save one of them from becoming another victim.

What It’s Like to Live on a Boat

April 27, 2012

I was talking to one of our other financial planners, Erik Carter, a few days ago about his Extreme Early Retirement blog posts, and he pointed out something that I hadn’t noticed myself. I live a lifestyle that some would consider unconventional and might very well fall into the Extreme Early Retirement category. So, for those of you who are brave enough (my friends would say crazy enough…) to try something like this, here’s what I’ve done. Continue reading “What It’s Like to Live on a Boat”

What an Accident Taught Me About Car Rental Insurance

April 19, 2012
Updated June 14, 2017

If you’ve ever had to rent a car, you know that car rental companies love to sell insurance on their cars. They’ll often ask whether you’d like just the basic coverage or additional coverage at the counter even after you’ve already declined both when making your reservation. After all, it’s one of their big profit centers. Continue reading “What an Accident Taught Me About Car Rental Insurance”

7 Steps To Financially Prepare For Your Own Business

March 22, 2012

While most of what we do at Financial Finesse centers around helping employees, we sometimes get questions on our financial Helpline from people who are interested in starting a business on the side. We recently received a question on our blog about how to start a poultry farm. While I’m certainly no expert in poultry farming (or anything remotely like farming), there are some basic financial steps you can take before you start any type of business.

Take charge of your cash flow

As important as budgeting and saving are, they will become even more important if you’re self-employed. That’s because without a steady paycheck, your income could see lots of ups and downs and probably a lot more downs than ups in the early years.

The key will be discipline, not just when times are bad but also when times are good. I remember that when I first started working on commission and had a big payday, I tended to celebrate by splurging and buying something expensive that I really wanted. When the good times were followed by the not-so-good times, I quickly learned the importance of saving that extra cash for the next rainy day. See some of my earlier posts for ideas on how to minimize your expenses, pay off any high-interest debt you may have, and…

Beef up your savings

Speaking of saving extra cash, having lots of cash will become even more important. In an earlier post, I wrote about how the size of your emergency fund should be based on how risky your income is. Well, few things are as risky as starting your own business. Not only may you need to cover personal emergencies and income shortfalls, you may need to pay for some business emergencies and other costs out-of-pocket too.  Aim for at least 1 year of expenses and ideally 3-5 years somewhere safe and accessible.

Buy health insurance

This is one personal expense that’s likely to go up when you’re self-employed. Under COBRA, you can keep your group health insurance for about 18 months after you leave your job (but generally without your employer’s subsidy so the rates are likely to be higher than what you’re used to paying) and then after that, you’re on your own.

One way to reduce your premiums is to choose a high-deductible plan, especially if you’re in good health and have enough savings to pay for that high deductible. On the other hand, an individual plan could be out of reach if you have pre-existing conditions or are in poor health. In that case, as much as you may come to dislike the President’s health care plan as a future employer, you may love it as someone who may benefit from the regulations and the subsidies that could make individual health insurance more affordable.

Get a handle on your credit

In addition to savings, you’ll probably need access to credit of some kind. The trouble is that it will be harder to get once you don’t have a regular income. If you can benefit from refinancing your mortgage, do it before you leave your company. The same goes for signing up for a home equity line of credit. You might also want to start developing positive relationships with your local bankers.

Since you won’t have much income to show, more weight will be put on your credit score. If you haven’t gotten a free copy of your credit report in the last 12 months, order one from each bureau at annualcreditreport.com and fix any errors you find. You can also use sites like creditkarma.com and quizzle.com to get a free copy of your credit score and see what other steps you can take to improve it.

Learn as much as you can about your future business

When Warren Buffett was asked why he didn’t invest in tech stocks before the dot com bubble burst, he said that it was because he didn’t understand them. This is even more true when it comes to investing in your own business. Study the industry you’re entering into as much as you can and find a mentor that you can learn from. You can also get general information on starting a business from the Small Business Administration. It’s good to learn from your mistakes but it’s even better to learn from someone else’s.

Know the rules

Even if you know everything there is to running your business, you can easily get tripped up by taxes, lawsuits, and regulations. You’ll need to decide whether to set your business  up as a sole proprietorship, partnership, LLC, or corporation. The LLC has become particularly popular as a way to shield you from both the personal liability of a sole proprietorship or partnership and the double taxation and regulatory burdens of forming a corporation.

You’ll also want to get a tax identification number from the IRS, register your business name with your state and find out about your state’s tax, worker’s compensation, unemployment, and disability insurance requirements, check local zoning laws before choosing a location, make sure you have the proper licenses and permits from all those various levels of government, and keep your personal and business finances separate.

Depending on the complexity of your situation, you may want to hire a business attorney and/or an accountant to help you with all this.

Look for ways to shelter your income from taxes

Once your business becomes profitable, you’ll want to start protecting those profits from the tax man. If you have a high deductible health insurance plan, you can contribute to a health savings account. In addition, there are a myriad of tax-sheltered retirement accounts for small business owners like SEP-IRAs, Simple plans, and Individual 401(k)s. These accounts will also help diversify your wealth away from your business.

Starting a business is exciting but as I’m sure you realize by now, these initial steps can be a lot of tedious work. After all, we’re just scratching the surface here. (We didn’t even get to talk about the chickens!) Just remember that your sacrifices today can save you from catastrophe tomorrow and eventually make your dreams come true.

 

 

How to Handle Old Debt and Debt Collection Agencies

January 25, 2012

With identity theft and fraud being such common threats, it’s important to exercise caution in every facet of your financial life. You likely know not to give out your social security number to anyone you don’t trust, nor should you ever invest in any get-rich-quick work or investment schemes. The list goes on.

If you have debt issues, you may be further at risk of having your identity or financial information stolen. You may also be pressed for payment for a debt for which you are, in fact, not liable, despite what a debt collection agency may say. If you have any old debt or are faced with the hassle of dealing with a debt collection agency, there are a number of ways you can deal with the situation.

Monitor Your Credit

Monitoring your credit is very important to not only avoid accruing debt, but to check and see if you have any old outstanding debt that is weighing you down. Be sure to review your credit report and continue to check it on a regular basis.

Forget about the companies that want to charge you a fee for this service – you can request a free copy of your report once per year from all three credit reporting agencies via AnnualCreditReport.com. If you have any debt from the past seven years, this is where you will find it. Any debt older than seven years should not appear on your credit report.

Know the Law

It is important to realize that there is a statute of limitations on old debt, which varies by state. Usually, it ranges from three to six years.

Next, understand that if you do have old debt, the collection agency must send you a written notice explaining the amount of money you owe and to whom. If you respond to them within 30 days to dispute the debt, they cannot contact you again until they verify the debt. Send your response via certified mail and keep copies of all correspondence.

Know What Debt Collection Agencies Cannot Do

Here is a list of tactics that debt collectors are not allowed to employ:

  • Call before 8am or after 9pm
  • Use obscene language
  • Call you at your place of employment after you ask them to stop
  • Falsely claim to be someone else (such as a lawyer or someone associated with law enforcement)
  • Threaten to have you arrested
  • Continue to harass you after you’ve asked them to stop
  • Talk with friends, family, or professional references concerning the debt – they can only talk to you or your lawyer
  • Threaten you with wage garnishments unless they have the authority to do so (check with your state guidelines)
  • Threaten to sue, unless it is allowed in your state – in some states, suing is not an option

Hypothetical Situations

Here are four hypothetical debt situations and how to handle them:

  • Debt that is older than seven years and outside the statute of limitations: There is no liability here whatsoever. Due to the statute of limitations, no collection agency can come after you for payment, and it should no longer be included on your credit report. If it is, dispute it and get it removed.
  • Debt that occurred within the last seven years but is outside the statue of limitations: You may want to consider settling this debt to have it removed from your credit report. However, before you pay the entire amount, consider negotiating a settlement with the collection agency by offering to pay back a percentage of the total owed. However, realize that if you opt for a settlement (rather than paying the debt in full) this will more significantly hurt your credit score.
  • Debt that is older than seven years but is not outside the state of limitations: This is a very rare occurrence. Such a debt will no longer have an affect on your credit rating, but you still are exposed regarding collection agencies. Use your best judgment here as to whether you should pay off the debt in full or via a settlement.
  • Debt that occurred within the last seven years and is not outside the statute of limitations: Pay this debt in its entirety if you have the ability to do so. It is damaging your credit score, and collection agencies are legally authorized to come after you for it.

Additional Tips

If you are ever contacted by a collection agency, say as little as possible over the phone, and just hang up if anything makes you uncomfortable. Never agree to pay back the debt (even verbally), and do not acknowledge the validity of the debt over the phone. If you do either one of these, it could actually reactivate the debt and put you on the hook for the amount owed.

If you do get taken to court over an old debt, you must show up in court, regardless of the validity of the debt. Not showing up could result in a claim against you.

Finally, keep in mind that older unpaid debt cannot hurt you nearly as much as new or recent debt. If you have debt issues, focus on the more recent ones.

Final Thoughts

No matter the age of your debt, there is always the moral obligation to pay it back. You can address this issue as you wish; however, I would not suggest that you avoid paying back any valid debts in your life just because there is a loophole. But remember that there are many predatory collection agencies out there that may come after you for “zombie debt” that you do not technically owe.

Do yourself a favor: If faced with the issue of old debt, educate yourself. Know the ins and outs of the entire scenario before making any final decision, and do what’s best for you.

Do you have any old debt horror stories? What are your tips for dealing with collection agencies?

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Budgeting: You May not Think You Like it, but Give it a Try

May 27, 2011

So, this just might be the most embarrassing thing I have ever written. This is one blog I hope that NONE of my friends read, because this is just far too much information for them to have at their disposal. Here it is, my confession, I really like the show “Glee.” I can’t believe I’m admitting that. I watched one episode to see if it was acceptable for my kids to watch, and I won’t share my opinions about that part, but my daughter and all of her friends are huge Gleeks (fans of Glee), and now…so am I. Why do I tell you this most embarrassing of admissions? Continue reading “Budgeting: You May not Think You Like it, but Give it a Try”

Budgeting: Is that Laptop Really Worth $1500?

February 16, 2011

I’m not sure who said it, but I can bet you they were trying to sell you something.  If you’ve read any of my previous blogs  (and if you haven’t, why not?) then you know I have a tendency to prefer paying more for higher quality stuff that should last longer rather than buying cheaper stuff that will likely break down sooner and only end up having to be replaced more frequently.  Well, I’ve since modified my position on the issue.  Here’s what happened: Continue reading “Budgeting: Is that Laptop Really Worth $1500?”