Would You Go Carless?

June 23, 2016

About 4 months I ago, I finally got rid of my 1995 BMW 325ic. I always knew that day would arrive and in many ways, it happened in the best way possible. Instead of breaking down in the middle of the highway or slowly eating away my bank account in small repairs, it simple failed the CA smog test and would have cost me more to repair than the car was worth. Since I couldn’t legally drive it, and it made no financial sense to fix it, my decision was easy. I sold it to a mechanic I met as my Uber driver and decided to go carless.

As with getting rid of cable TV, I’ve never regretted it. (The fact that I’m thinking of moving back to NYC helped too.) But kids, before you try this at home, here are several things you’ll want to ask yourself:

How much does you car really cost you? It’s not just the car payment. Think about the cost of insurance, gas, and maintenance and repairs too. I bought mine in cash so I didn’t have a payment, didn’t drive much, and had a no-frills high-deductible insurance plan. However, I still spent about $85 a month in gas and $35 a month in insurance plus a decent amount in repairs each year.

What’s your life like? What’s your commute to work? Where do you tend to go?

In my case, there are several reasons why I don’t drive much and am able to get along well without a car. When I’m not traveling, I work from home so there’s no need for a commute. I also live in a neighborhood in which I can walk to 3 grocery stores, countless restaurants of every cuisine you can imagine, and even my doctor, dentist, and eye doctor. Your mileage (pun intended) may vary.

How will you get around without a car? We all need to go places that aren’t walkable from time to time. Do you have a spouse with a car? How is public transportation in your area? What other options do you have?

My girlfriend has a car, but I can’t always rely on that. San Diego is also notorious for not having the best public transportation system so I tend to use Car2Go and ride sharing apps like Lyft and Uber. Car2Go allows you to rent little smart cars (gas and insurance included) for short trips and is generally the cheapest option if you park it in a home area (generally urban areas of major cities). If you’re not in a rush, you can also minimize the cost of Lyft and Uber rides by choosing the Lyft Line and Uber Pool options, which give you a lower rate in exchange for possibly having to share your ride with other people going in the same general direction. This is particularly beneficial in longer, more expensive rides as it can cut the cost almost in half (a recent ride went from about $26 to $16) and I’ve only had to share a ride a couple of times.

The best rewards of being carless aren’t financial though. It’s the lack of stress worrying about navigating through traffic (versus playing on my phone as a passenger), looking for parking, and dealing with car problems. Knowing you’re doing your part to literally save the world doesn’t hurt either.

 

Don’t Let Medical Bills Ruin Your Financial Health

June 21, 2016

If you have read my posts, you know that my family has been in the emergency room so often that during one visit, the nurse was able to get our information from memory. This experience gave me a taste of what people with ongoing medical expenses go through. We are lucky that most of our visits needed little to no follow-up and we are all healthy though.

Not everyone is so fortunate. A study by Harvard University showed that medical expenses are one of the top reasons for bankruptcies. If your medical expenses are crippling your finances, consider doing the following:

Shop around for prescription medication. The same drug can cost wildy different prices depending on where you go to get the medication. This is because the price of the drug typically depends on the pharmacy’s deal with the supplier, the pharmacist’s overhead and profit margins. FDA regulates the drug, not the price. Shop around for the best price or use websites like GoodRx.com or LowestMed.com to shop around for the best price in your area.

Bonus Tip:  Typically, you do not need to be a member of warehouses like Costco or Sam’s Club to use their pharmacies.

Before you get a medical procedure, find out the average cost. Even though your doctor may be covered by your insurance, the facility where you are getting your procedure may not be, so be sure to verify insurance coverage. The price of a procedure can cost three times or more as much at one facility vs. another. Call local hospitals or use websites like Healthcare Bluebook to gauge how much your medical bill may cost. Finally, try to negotiate the cost of your procedure before you get the service.

Bonus Tip: Even after you have your procedure, still do a cost comparison. If your bill is much higher than the average for your area, use that information to negotiate your medical bill.

Contact your hospital if you cannot afford to pay. Many hospitals have programs for people who are uninsured or under-insured. Contact your medical provider before the procedure if you feel like you might not be able to cover the bills. The billing office may be able to find alternate ways to pay for the bill.

In addition, ask the hospital for a written financial assistance policy. The policy should spell out eligibility and the process of applying for assistance. Make sure any deals and/or discounts you get are in writing as well.

Bonus Tip: Medical bills are notorious for errors. After your procedure, ask for an itemized bill and your medical records. Any items on your bill that do not match your medical records should be disputed.

If you do not have the time, patience or ability to negotiate on your own, consider hiring a medical bill negotiator. Years ago, I was involved in a car accident and quickly mounted several thousand dollars in medical bills. After going back and forth with the insurance company and lawyers, I hired a medical bill negotiator to review my bills and they found errors that saved me thousands of dollars. The cost of the services varies. A company may charge by the hour. Others charge as a percentage of service. You can search for a medical bill negotiator on websites like the National Association of Healthcare Advocacy Consultants, the Alliance of Claims Assistance Professionals, and the Patient Advocate Foundation.

Bonus Tip: See how much you can negotiate on your own before hiring a professional.

Remember that you have a lot more negotiating power than you think when it comes to your medical expenses. If possible,  consider using the resources mentioned in this blog post to shop around for the best price for your medical needs and to proactively check your bill for these. This can go a long way to slashing your medical costs.

 

 

3 Things You Can Do About Student Loan Debt

May 27, 2016

One of the biggest things that we see not only in our research but also in day to day conversations is the impact that huge student loan balances are having on people of all ages, especially younger employees or those who went back to school during the “Great Recession.” My biggest piece of advice to anyone would be to avoid student loans as much as you can by working first and/or part-time, going to a less expensive state school or community college for the first couple of years, or any number of things. But for those that have already rung up a hefty student loan bill, there is still hope. Here are a few things that you can try with little or no pain involved.

1. Focus more on your student loans now but contribute just enough to get the company match to the 401(k) and sign up for the rate escalator feature if available. By putting the majority of your money towards your debt, you can focus your energy and efforts on the here and now but also have your 401(k) running on autopilot in the background. This way, if it takes you 10–15 years to pay off your loans, you are still in a great spot towards retirement instead of being debt free but with no savings.

2. Make your own “matching program” for your student loans. Look at each bill that you have and research to see if you can find a less expensive alternative and then set up automatic extra payments to your highest rate or smallest balance student loan equal to what you will be saving. So if you cut the cable and just use streaming services and it would save you $50 per month, “match” that saving to an automatic increase to one of your student loan payments. This could be a great project on an evening or weekend when rainy weather keeps you inside. If you don’t have the time, look at services like BillCutterz to do the work for you but you have to share the savings with them.

3. Ask your employer if they have any programs to help with student loans. While many employers do not currently have a student loan repayment plan, more and more companies are offering special deals on student loan refinance programs like SoFi or  actual repayment plans like Tuition.io or Student Loan Genius. There is even a bill before Congress to make a certain amount of student loan repayment tax free to the employee, similar to tuition reimbursement programs, so hopefully this will become a common benefit in the future.

Don’t get me wrong. There may not be a magic solution to your student loan issues. However, these steps can help you not just survive but thrive while you balance paying off the debt and engaging in life along the way.

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Let’s Get Ready to Rumble…

May 24, 2016

I may have mentioned in prior blog posts that I am a huge boxing fan. There really was no choice. From the time I could crawl, I remember sitting in my dad’s lap watching boxing with my brothers and loving every second of it. (Unfortunately, I loved it a little too much and my teacher once called my parents about a boy I practiced my left hook on – mind you, he did dare me.) My earliest memories of television are watching Michael Buffer introduce the boxers and give his famous tagline,  “Let’s Get Ready to Rumble.”

When summer starts coming and the expenses start mounting, I often think of Michael Buffer’s tagline. Summer time is a rumble between my finances and ever-mounting increases in expenses. Initially, I just noticed that money was tighter in the summer time, not really being able to figure out why. After I discovered the power of creating a monthly spending plan and tracking my expenses over a number of years, I noticed a certain pattern began to emerge in my family’s spending and I was able to prepare for the increases in expenses.

Summer Camp – I live in the south so my kids are done with school and free daycare (public school) at the end of May. Even though they have after-school care and school activities, summer camp is still more expensive. If this sounds like you, consider contacting your daycare about sibling discounts, reductions based on income or early registration. Second, research the summer camps not only for the best fit for your children but for the best value. Consider using last year’s childcare expense as a starting point, divide it into 12 to get a monthly average and contribute that amount to a dependent care flexible spending account (FSA) if eligible so the funds can come out tax-free to pay for your childcare expenses.

Vacations – Make sure your summer vacation does not follow you for the next 6+ months in credit card expenses by saving for it now. Honestly assess your finances to see if you can afford to get away on a vacation or if an inexpensive staycation is a better financial fit. Consider using a  travel budget calculator to estimate your travel expenses. To come up with the amount of money you may need to save for your vacation, divide the estimate by the number of pay periods you have. From there, it’s a matter of setting aside the funds until your vacation.

Utilities – Depending on your climate, you may find your utility bills creeping up. I live in Atlanta and I find my electricity skyrockets in June. If you have a pool, your expenses may go up due to water and pool maintenance. Your water bill may also increase due to lawn care. Review your statements from last summer to estimate your costs for this year and look at where in your budget you may need to cut back to make up for the additional cost.

Holidays – I find Memorial Day, the Fourth of July and Labor Day to be expensive holidays because we typically do a day trip or a lot of activities on those days. Consider thinking through what activities you want to do. Will you be flying or driving? Will you need a hotel? Will you be eating out or munching on picnic foods?

Write down what you think the expenses may be. Add 10% for extras. Then break down the amount by the number of pay periods you have until the event and start saving.

Parties –  If you are like our family and love to cook and feed people then summertime gives you plenty of opportunities as well as expenses. All of a sudden, the patio furniture may need to be replaced and a new grill may be “needed.” Plan for the food and estimate the costs. Then divide the costs by the pay periods you have until the event to estimate how much you may need to save.

Gas:   Typically gas prices go up in the summertime. There’s not much you can do about the increases, but you can look on apps like gas buddy to look for cheaper gas. You can also use some of the fuel economy tips from the U.S. Department of energy like driving the speed limit or removing unneeded items from your truck or using cruise control to make your car more fuel efficient.

Consider thinking about the things you want to do and start saving for them now. One great idea I heard was to create a “summer sinking fund” that you use to save throughout the year so you have a pool of money available for upcoming summer expenses. Saving now, even in small amounts, will a long way into taking out the worry of summer expenses.

 

15 minutes Could Save You $150

May 19, 2016

My colleague Tania Brown recently wrote a blog post about cutting her cable cord. It’s something I did many years ago too and never regretted it. If you’re not willing to go quite that far but still want to save some money on your cable bill, another colleague and former Financial Finesse blogger Greg Ward writes about how to negotiate your bill down…

When it comes to in-home entertainment, you have a lot of choices. Phone, television, and Internet services are available through a countless number of providers, but here’s something you may not have thought about. By having so many options, you can have these service providers compete for your business rather than just accepting what they charge you for their programming. Knowing this, here’s an easy way for you to save $150 or more over the next six months.

Contact your in-home entertainment provider right now and ask them what specials they are offering new subscribers. Unless you have recently subscribed yourself, I’ll bet that what they are offering new subscribers is better, either price-wise or programming-wise, than what you are getting today. If that is the case, then you need to be assertive and tell them that you want the same privileges that they are giving new subscribers. In other words, you want more service or a lower price (or both as the case may be).

Now most likely two things will happen. The first is that they will try to accommodate you by offering a different programming package. If you are really looking for a different programming package then hear them out, but if not, hold your ground. Let them know that unless they are willing to work with you, you are willing to work with someone else (i.e., a different provider). Have a few names of other providers that your provider competes with so that they know that you’ve done your homework.

Once you’ve determined that the first operator is not going to be much help, you’ll most likely have to talk with an “account specialist” to see if they might be able to do something for you. That’s good news, because in most cases, the initial person who answers the phone is NOT able to make any concessions. Once you have the account specialist on the phone, you can calmly let them know of your intention to discontinue service in the absence of reaching an agreement. They will also try to accommodate you through other offers, but stand firm.

My experience has been that they WILL make a concession as long as you are kind and persistent. I did this recently, and the specialist was able to apply a $25 discount to my bill for the next six months. That’s $150 in just 15 minutes!

A word of caution: know your other options. Account specialists usually know what their competitors are offering, so if you are going to suggest that you will terminate service if they are not willing to work with you, be prepared to walk.  Hopefully it doesn’t come to that.

The Number New College Students Need to Know

May 16, 2016

What’s the most important number for a new college student to know? Is it the Expected Family Contribution calculated based on a family’s Free Application for Federal Student Aid? The number of credit hours needed to graduate? The time the library closes? While all of those are important, the critical number that a student needs to know is the HCC, the “hourly cost of college” or the total amount it costs a student for each hour of school.

Why does this matter? Let me give you a personal example. When I was a freshman at Georgetown University, I had an early morning French class three times per week. The professor was quite strict, and students who were even a few minutes late were locked out of class.

I was an immature 18 year old who spent many evenings my first year of university at fun, social events instead of getting to bed at a reasonable hour. It won’t come as a surprise that I missed my fair share of morning French classes because I did not arrive on time. What exactly did that cost my family even when I didn’t go to class?

Calculating the Hourly Cost of College

Using the credit hour method, the hourly cost of college is calculated by dividing the annual total tuition, room and board, books, fees and other charges by the total credit hours taken per year. Take Georgetown as an example. What would it cost a student who skips an hour of French class today? According to the university website, the total cost of undergraduate attendance in 2016 is $69,770. I did not receive any scholarships, but if any kind of direct aid applied (not loans), you would subtract it from the total.

A student needs at least 120 credit hours to graduate, and it typically takes at least 15 credit hours per semester or 30 credit hours per year. $69,770 divided by 30 is $2,325.67 per credit hour. You’ve paid for it regardless, so if you skip a class, you don’t get what you have purchased. That’s a pretty expensive hour to blow off!

An alternative method is to divide total college costs by the amount of total hours a student spends learning. At my alma mater, students are expected to spend at least 30 hours per week studying for a semester of 14 weeks (12 weeks of classes plus 2 weeks of exams). $69,770 total annual costs divided by 28 learning weeks per school year divided by 45 hours per week is $55.37 per learning hour. In this scenario, it’s not just skipping a class that’s an expensive waste of money. It’s avoiding the library when you should be studying to hang out playing Frisbee on the lawn.

Neither methodology for calculating the HCC changes if a student attends school close to home or goes to a public university or a less expensive private college. There’s an hourly cost of college no matter the school, and it’s important that students know what it is in order to avoid or moderate behavior – like showing up late for French class – which wastes huge amounts of money.

Borrowing Increases Your HCC

Many families who send their students to a university don’t pay the full cost of education out-of-pocket. If your student is borrowing to finance part of the cost of higher education, their HCC will increase. Remember, student loans are not financial aid. They are a financing mechanism, which increases the total cost of education.

Let’s examine what would happen if a student borrowed $20,000 at 6% interest to finance some of the annual costs in our example above. The loan will be repaid monthly over a ten year period beginning after graduation, with total interest paid of $6,645. Using the conservative method of calculating HCC in this scenario, borrowing the $20,000 increases the HCC by $221.50 per credit hour. Using the “learning hour” method, it increases the HCC by $5.27 per learning hour.

Most students aren’t used to thinking of the school experience as a consumer experience, something for which there is a clear financial cost and benefit. By helping your student calculate and understand their HCC, you are teaching them an important lesson about the relationship between their personal behavior and money. In the financial behavior change process, awareness and assessment usually lead to action (going to class instead of sleeping in) and thus are critical first steps for future financial success.

How about you? What was your hourly cost of college?  Email me at [email protected] or follow me on Twitter at @cynthiameyer_FF.

 

3 Lessons I Learned About Insuring A College Bound Kid

May 03, 2016

I was talking to a group of friends whose kids were going off to college. Since I am a late-in-life parent, I was curious to see how they are handling being empty nesters. I expected some tears and sad stories about their kids leaving the nest. Instead, my friends were high-fiving each other that they survived the teen years and deciding what do with their kids’ rooms. They were even talking about going out and celebrating!

Of course, as the financial professional in the group, I had to burst everyone’s bubble. I asked the group if they had talked to their insurance providers about their kids going to college. I  brought this up because of all the lessons my family learned when my nephew went to college.

Lesson #1: Times have changed. When I was in college, my car, TV and computer were worth about $1,000. Today, a kid is going to college with thousands of dollars of electronics between their smartphones, iPads, X boxes and laptops. When my nephew’s dorm room was burglarized, my brother and his wife learned that their homeowner’s policy extended to my nephew’s dorm room but unfortunately, the extension did not cover the amount that was stolen. Contact your insurance company to make sure you have adequate insurance and consider adding additional coverage.

Lesson #2: Moving off campus is a game changer. The second lesson we learned is that when my nephew moved off campus, my brother’s homeowner’s policy did not provide my nephew with any coverage and in our case, a renter’s insurance policy may be needed. Contact your insurance carrier to see if your child will still be covered under your policy if your child lives off-campus. If not, consider renter’s insurance.

Lesson #3: Always update your auto policy carrier about any changes. If your child is leaving his or her car at home, ask about a discount since they will be driving it significantly less. This could have saved my brother and his wife hundreds of dollars in unnecessary car insurance.

Sometimes you may need to pay more though. After my nephew took his car with him to college, he was involved in a fender bender. When my brother contacted the insurance company, they refused to pay because my nephew was using the car for work to deliver pizzas part-time and we learned that he needed additional coverage.

So what’s the bottom line? Whenever you have a major life event, like a child going to college in this case, contact your insurance carrier to make sure that you have the best insurance for your needs. You don’t want to learn any of these lessons the hard way.

 

11 Easy Ways to Save Money Without Changing Your Lifestyle

May 02, 2016

Does saving more money mean you have to make big sacrifices? If you are trying to find wiggle room in your budget to apply towards important goals like retirement or paying off debt, the first place to look is at the easy hacks. Where can you cut expenditures without drastically altering your lifestyle? Here are some ideas, all of which I have personally tried:

Spend less on hair and nails. I live in NJ, where big hair and gel manicures aren’t just something you see on reality TV shows. That kind of primping at the hair or nail salon is expensive.

Switch from coloring your hair to less frequent highlights and you can save $100 per month.  Doing your nails at home can save another $40-$50. For guys, switching from a salon stylist to a barber can save you another $40.

Give up restaurant beverages. Drink water instead of soda or alcohol and you can save 10-20% on the cost of eating out. If you eat out frequently, including lunch at work, you don’t even have to do this all the time, just most of the time, to see big savings. Your employer doesn’t provide beverages at work? Bring your own from home instead of using the vending machine or corner convenience store.

Join the library. I once had a Very Serious Book Habit. I adore book stores, read voraciously, and could easily spend $150 per month or more on new books and magazines. If I didn’t like the book enough to keep it, I’d trade it in for store credit after I was finished reading it.

I reduced my book buying habit reluctantly. First, I gave up magazines in favor of the library copies and then I made a concerted effort to also read library copies of those books I was pretty sure I didn’t want to own. I now use an e-reader and buy fewer printed books, which has cut my book buying considerably.

Go from two cars to one or even none. Do you really need two cars?  Maybe, but maybe you don’t.

Try living with one car for two weeks and see how you do. Can you take public transportation, carpool or catch a ride to work from your spouse? You may find it’s less painful than you expected. Giving up a car can save you as much as $700-900 per month. I know because I did it myself.

Shop for insurance. You may be able to save by changing your home and auto insurance. Every few years, shop around to compare coverage and prices. The right coverage could save you $100-$200 per month.

Host a swap party. Clothes, accessories, toys, holiday cookies, unopened gifts, books – almost anything could be swapped! What is unwanted to you could be valuable to someone else and vice versa. For more tips on hosting a clothing swap party, see this article.  The same principles can be applied to any swap or exchange party.

Share babysitting. A reliable babysitter can cost $10-15 per hour in my area. Babysitting during a night out with your spouse adds $40–$90 to the total cost of the evening.

What can you do if you don’t have family to help? Form a babysitting club to trade nights out with your friends. You watch their kids one time and then they watch yours the next.  Some friends I know took it a step further, forming a neighborhood group. Once a month, one family hosts a pizza/movie night at their home, while all the other parents get a night on the town.

Fill up at the cheapest gas station. Our neighborhood suffers from zip code inflation in gas prices. A favorite hack of my husband, Steve, is to take a certain route home from work that passes a less expensive station and fill up there. The result? He spends 30 cents less per gallon.

Quit the gym and mow the lawn. Another one of Steve’s hacks is that he thinks of yard work as his personal exercise program. Instead of paying a gym membership, he mows the lawn and chops wood, doing something every day as his workout.

He decided he wanted to do this on purpose, even though we planned for landscaping in our budget. Did I mention we live on top of a hill and have three acres and abundant trees? Needless to say, he is very fit, and our bank account is fatter.

Stock a snack box. How many times a week do you pick up a snack at a coffee shop or store? Those lattes and muffins can easily add up to $3-10 per day. Add in kids, and a quick trip to Starbucks is twice as much. Keep a well-stocked box in your car and your office with easy snacks.

Not ready to give up the coffee shop coffee? I don’t blame you. (I am a fan.) Consider ordering a less expensive version, such as an iced coffee instead of a fancy coffee drink. You can save 50-60% on each cup.

Fill a gift closet. If you have kids, you know that birthday party gifts can cost upwards of $100 per month. Plus there are always hostess gifts, teacher gifts, office gifts, etc. It’s easy to forget those expenses, but they can really eat into a monthly budget.

Set a maximum amount you’ll spend on them for the year and then shop in advance. We recently bought 8 ultra cool birthday presents on Woot.com for only $80! Stock up on inexpensive small house presents and interesting wines when you see them on sale so you’ll always have something to bring when you have dinner with friends. Better yet, shop for holiday gifts right after the holiday season has ended, often for 75-85% off.

Do you have an easy way to save money without changing your lifestyle? Please email me at [email protected]. You can also follow me on Twitter at @cynthiameyer_FF.

 

 

How to Get the Best Deal On a Car

April 27, 2016

My first car was a beat-up 1987 Ford Tempo that I called Shirley Tempo (nerd alert!). I paid cash to a family friend who had been using her as a loaner at his auto repair shop. Shirley got me around town in high school but when I went to Kalamazoo for college, my dad helped me negotiate for a slightly newer Geo Metro (aka “Ginny Geo”) – a car that could make the 200 mile trip without breaking down. By senior year, Ginny’s radiator was shot, the door locks didn’t work and my mechanic deemed her “unsafe to drive.” Needless to say, I was anxious to get a “big girl” car now that I had a “real job” upon graduation.

As soon as I returned from my graduation trip the summer after college, I found myself at the Saturn dealer test-driving a fully loaded coupe. Of course, I was in love and I signed a lease on the spot for Sally. Fast-forward a few months when my student loan payments kicked in and I was wishing I’d done a little more shopping around for that car. Sally was super fun to drive, but her payments were WAY outside my budget.

As my husband and I begin shopping for a bigger car now that his sedan is starting to wear out, we are being much smarter about this purchase. Here are some of the tips we’re using to find the best deal on a new ride:

  • Shop at the end of the month. The car sales guy actually told my husband this. They have quotas to meet, so if you head to the dealer toward the end of the month when the pressure’s on to meet that quota, you should be able to negotiate a few thousand more off the price. That could be a negligible amount to the dealer, but a nice chunk in your bank account.
  • Consider buying certified pre-owned. You’ve probably heard that a new car loses more than 10% of its value the minute you drive it off the lot. By getting in line as the second owner, you are paying significantly less for an almost-new car that still has warranty protection.
  • Know the wholesale price. If you just can’t resist a new car, at least know what the dealer paid for it. This is easy to find now by searching the make and model of your dream car along with the phrase “factory invoice price.” That way if the sales person tries to tell you they’re “losing money on this deal” when you’re negotiating (and you should at least try), you’ll know if they are trying to pull as fast one.
  • Remember that a car is NOT an investment. A car is what we CPAs call a depreciating asset. This is financial speak for it loses value over time and unless you’re a car collector, you will be selling the car for less than you paid for it. Remember that when you’re thinking about financing. (Try to pay as much in cash as you can).
  • Get full value for your trade-in. We took our car to CarMax and they gave us a trade-in estimate for no cost. This is just a best guess, but gives you a starting point when negotiating with the dealer. Edmunds and Kelley Blue Book are good online sources and you might also take it to a dealer to see what they will offer you. Depending on the make and model of your car, the dealer may be seeking used cars. SUVs are particularly hot right now due to low gas prices.
  • Don’t get cheap and choose an insurance deductible that’s too high for your savings. If you have a $2,000 deductible, you should have $2,000 on hand in case something happens. Use these best practices from my colleague Tania, who learned the hard way to make sure you’re properly covered.

Finally, as exciting as buying a new (to you) car is, try not to be impulsive. Take your time in researching and test driving to make sure you’re getting the best deal while also making a purchase that fits your lifestyle and budget. That new car smell fades pretty quickly. A too-high car payment takes a LOT longer to wear off.

 

 

Don’t Overspend on Assets That Depreciate in Value

April 22, 2016

My middle child, who is merely days away from taking his driver’s license exam, thinks that it is a major hardship that he isn’t going to have a car on day one after he gets his license. That’s not such a bad problem to have considering all the problems in the world. I asked him about the kind of car he’d like to drive and he said he wouldn’t mind a new Mercedes or BMW…a Ferrari would do. In a perfect world, a Lamborghini or Bugatti would be his preference.

That’s when I reminded him that the world is not perfect and that it was time for a quick re-visit of our reality. I had my hiking boots in my car and told him he is going to get a car that resembles those old hiking boots, probably not a car that a high level executive would drive, but it beats walking or riding a bicycle. My rationale: a first car is far more likely to be dented, dinged and wrecked than a car that you buy after 20 years of driving experience.  Inexperienced drivers pay higher insurance rates because they are a higher risk, so we are going to opt for an old ugly car that goes slow and is incredibly safe over a shiny, fast small sporty car. I’d like to see him live a long, healthy life and this car choice will help that along.

I use this theory for buying my cars:

Buy a high quality car that is 3-5 years old with 40,000–60,000 miles and coming off the first lease. I can pay pennies on the dollar based on the original price. I’ll drive it until it has 200-300k miles on it and leaseholders tend to take very good care of their cars. I’m getting a nearly new and high quality car at a low price. My current car is a luxury model that I bought for just under $10,000 2 or 3 years ago and has been a great purchase.

For my son:

If he wants a Mercedes or BMW, that’s great! But it’s not going to happen. Unless we find one that is 10+ years old, has 100k+ miles on it and can be had for a very low price. More likely, we will look for great deals on high quality cars with lots of mileage. He will be commuting a few miles to work or school and taking the occasional road trip.

I want him to have a 4 cylinder engine to be effective on gas mileage and not have much horsepower. And I want the car to have a great safety record from a car maker that has a reputation for safe cars. Looking at cars.com, I found 200+ cars for under $5,000 that my son, his mom and I can all pitch in and purchase together. Now his job is to pass his exam and come up with 1/3 of the cost of the car!

What do I hope you learn about from my son’s car? Don’t overspend on assets that depreciate in value!  Americans spend far too much on cars and other things that don’t increase in value. Set some rules about how much you’re willing to spend on things like this and stick to them.

My kids all laugh when they say they’re going to “invest” in a new computer or video game. They roll their eyes when I ask how much of a profit they’ll make if they sell their new “investment” 5 years later, knowing that they’re about to hear investing means trying to earn a profit. Spending is what we do when a purchase decreases in value. The moral of this long story is to minimize the cost of purchases so that you have room to invest for your future.

 

5 Songs That Could Ruin Your Finances

April 13, 2016

I love how music can pump you up, calm you down, soothe a broken heart, bring back old memories and generally set the tone in any situation. Ever notice yourself singing along while grocery shopping? That’s not on accident. Those songs are strategically selected to make you stay longer and buy more.

There are lots of great songs out there that have positive money messages (here are 5), but there are also plenty that send the wrong idea to listeners. At the risk of sounding like a boring fuddy duddy, I came up with some financial guidance to help solve these artists’ money blues. Try not to make these mistakes with your money:

Last Friday Night – Katy Perry: There are plenty of things mentioned in this song that moms everywhere wouldn’t approve of, but the part about maxing out your credit cards is what gets me. First of all, you don’t have to max out your cards to have fun and second, you definitely won’t be doing it all again next Friday without some serious financial discipline during the week to pay down the balance. Just in case, here’s our Debt Blaster calculator to help reign in that debt, Katy.

Time Of Our Lives – Pitbull: I actually understand what it’s like to take a look at your bank account balance and know that there’s not enough in there to cover upcoming bills. What I’m not a fan of is going out to “get up in this club” and blowing what money you do have when you know your rent is going to be late. If Pitbull just used the No-Tracking Budget to make sure he has enough set aside to cover bills, I bet he could pay his rent on time AND still have a good time.

Mo Money Mo Problems – Notorious BIG: I said this phrase to a friend in jest once, and he shot back with, “I bet the panhandler down the street would disagree.” That really made me think. It’s true that lottery winners and other people who strike it rich tend to have people coming out of the woodwork asking for money, and the whole idea is that we wouldn’t have these problems if we didn’t have money, but let’s not confuse that with thinking if you didn’t have money, you would have fewer problems. They’d just be different problems.

One of my favorite bits of wisdom to share is that if we all threw our problems in a big pile and could pick any ones we wanted, we’d all take our own back. Remember that the next time you get stressed about your finances (even if it IS a lack of having enough) and remember that it could always be worse. Shift your focus to what you DO have and you just might be surprised at how you begin to see more of those good things in your life.

If I Had A Million Dollars – Barenaked Ladies: So if you actually had a million dollars, you probably shouldn’t buy a llama or an emu. Here are some things you could do though: pay off debt, establish your emergency fund, max out your 401(k), or do something fun and then save the rest for the future. DON’T quit your job unless you’re pretty close to retiring already.

Just Got Paid – ‘N SYNC: One thing I could conclude about this is that Friday night is a bad night for your finances! Seriously though, I know plenty of people who celebrate “Paycheck Friday” with a “treat yo’self!” attitude and then spend the rest of the week complaining that they’re broke. It’s fine to cut loose and celebrate the weekend. Just make sure you’re putting something aside for the future, paying your bills and saving for budget-breaking expenses before blowing the rest on Friday night.

What about you? What are your favorite money songs? Share them with me on our Facebook page or email me and I’ll include them in a future post.

 

 

5 Songs That Are Good For Your Money

April 06, 2016

I love a good playlist. I have one for driving, one for doing cardio, one for cooking dinner, and even one for blogging. So to celebrate National Financial Capability Month, I’ve curated a short playlist of money songs that have a positive financial message for your listening pleasure.

Thrift Shop – Macklemore: Obviously you can save money by thrifting as long as it’s not an excuse to shop and spend money but instead to buy things you need for less than full-price retail. Otherwise, it’s no different than loading up the cart at TJ’s on things just because they’re bargains even if you don’t need them. This song tops the list because it’s also a good reminder that if you’re donating to thrift shops, make sure you’re making the most of the tax deduction.

No Scrubs – TLC: This is in line with Chapter 6 of our CEO’s new book What Your Financial Advisor Isn’t Telling You. How a person handles money is a key indicator of how they do life, so good money management is a sign of personal responsibility and accountability. Want someone who makes excuses and complains but never buckles down and does what it takes to improve? Then go for a scrub.

Billionaire – Travie McCoy featuring Bruno Mars: Don’t we all wanna be billionaires pretty frickin bad? But seriously, you don’t have to be a rock star who packs stadiums in order to have a comfortable lifestyle. First, make sure you’re not pre-spending like you already are a billionaire. Then run the numbers.

One recent calculation says that Millennials are going to need $1.8 million to retire comfortably. At Financial Finesse, we prefer to base the amount needed on replacing a percentage of your income, as our Retirement Estimator calculator does, so don’t let that $1.8 million paralyze you. If you’re 30, you’d need to save about $800 per month at an 8% average annualized return to get to $1.8 million at age 65. That’s doable, and hey, you’ll at least be a millionaire! That’s not so frickin bad.

B*tch Better Have My Money – Rihanna: The lesson here? Don’t lend money to family and friends. And if you need to borrow, people you actually like or are related to should be a last resort. But if you must go there, make sure you protect yourself and your important relationships by making it a formal agreement.

Nothin’ On You – B.o.B. featuring Bruno Mars: I just can’t resist the line about “plus you pay your taxes.” I’ll be honest. I hate paying taxes just as much as the next guy and I take full advantage of any tax rules that minimize what we have to pay. But taxes are part of our responsibility as citizens of this great country and we all have to pay them, so no excuses. Pay your taxes.

How about you? What are your favorite money songs that send the right kind of message? Shoot me an email at [email protected] or send me a tweet at @kclmoneycoach. And stay tuned for next week, when I’ll share the top 5 money songs that are bad for your finances. Any guesses what they’ll be?

5 Great Ways to Have a Spring Staycation

March 22, 2016

Spring is in the air and if you are like me, you are thinking about what to do with your kids during the season. For many, it is taking time off to spend quality time with your family. You start to think about beach trips or a trip to Disney. Then a cold dose of reality hit. For me, it is my family’s commitment to our financial goals and for others it may be the knowledge that if you have to finance your vacation then you probably should think twice about taking the vacation.

If  you find that traveling away from home for spring break is not in the cards for you, never fear. The staycation is here. You can have a great vacation, full of relaxation and family bonding.

The key is to make it as much like a family getaway as possible. Have some ground rules for your staycation: no smartphones (or limited use), no tablets (my eleven year old nearly died), limited television, no working from home, and no cooking, cleaning or laundry. (I fought for those.) Remember, the only thing your kids really want is uninterrupted time with you. How it happens does not really matter to them.

Before you begin, come up with a budget. Although staycations are typically cheaper, the costs can add up quickly without the boundary of a budget. Below are 5 ideas on cost effective staycation ideas:

Discount sites. Use online discount websites like Groupon or Living Social for discounts on local activities like roller skating, fairs and plays.

The library. Visit your local library to learn about free events like puppet shows or movies. Some libraries offer free passes to zoos and museums.  At our library, you can also check out parking passes to national parks.

Picnic in the park. Have fun with it. You can get kites at a dollar store. You can also get a bucket, fill it with dishwasher liquid and make huge bubbles. Our kids loved it (and so did we). Check your local area for free movies in the park or free music and bring popcorn.

Movies. If you live near a discounted movie theater, take the family to go see a favorite movie you missed or a favorite movie the kids would like to see again. Many discount movie theater have ½ off nights.

Camping outdoors or under the table. Surprisingly, this was my kids’ favorite activity. We got popcorn and told ghost stories. You can even grill out.

Spring break doesn’t have to mean debt. You can have a family vacation that won’t follow you in credit card charges for the next 6 months. Taking the time to do a little bit of research to unearth staycation ideas can create a vacation your kids will remember for years.

 

What Philosophy Can Teach Us About Our Finances

March 14, 2016

I recently asked my fellow planner, Brian Kelly, CFP®, to tell me about his personal financial wellness story. I expected a compelling tale. Brian has a dry sense of humor, a big heart and strong opinions, and I wasn’t disappointed. What I didn’t realize until he sent me this post is that Brian is also a philosopher who connects the dots between financial wellness, a 19th century movement and eighties music sensation The Talking Heads.  Here’s what Brian shared with me: Continue reading “What Philosophy Can Teach Us About Our Finances”

Living Paycheck to Paycheck? Here Are 4 Places to Find Money

March 02, 2016

One of the things I love the most about living in a big city is that we are the first ones to have access to innovative products and services like Uber, Instacart and Flywheel. Whenever I start to daydream about moving back to the quiet of a small town like the one I grew up in, I have to remind myself that I’d be giving up things like the option of having my groceries delivered from Trader Joe’s or the variety of workout options I can choose from each week. (I currently teach BODYPUMPTM and have credits at Zen Yoga Garage and Flywheel.) If I want to live where you can hear the grass grow and the need to carry Mace is laughable, I won’t be able to be so picky about where and how I get my sweat on. Continue reading “Living Paycheck to Paycheck? Here Are 4 Places to Find Money”

What A New Baby Really Needs

March 01, 2016

I was talking to a friend about two weeks away from giving birth. She was crying over something. (At her stage of my pregnancy, I remember crying over a grocery store commercial.) After she could tell me what was bothering her, she said that she felt like an unfit parent. Continue reading “What A New Baby Really Needs”

5 Ways to Make the Most of Eating Out

February 25, 2016

Over the last few weeks, I’ve written about ways to save money on “fixed” expenses as well as discretionary expenses like travel. Another big discretionary expense for many people (me included) is dining out. Yes, we can prepare food at home more often (which is also healthier) but what about for those times that we want to eat out? Here are some ways to reduce the cost and make the most of the money you do spend: Continue reading “5 Ways to Make the Most of Eating Out”

Are Your Purchases Like Super Bowl Ads?

February 19, 2016

Less than a week ago, I had friends over to watch the Super Bowl. We had a bit too much food, drank a few adult beverages and watched a game filled with excellent defensive play. It was a pretty good game. Continue reading “Are Your Purchases Like Super Bowl Ads?”

How to Save Money On Your Travel Bookings

February 11, 2016

A couple of weeks ago, I wrote about ways to reduce “fixed” expenses to free up money for goals like paying down debt or saving for a home purchase or retirement. But of course, it’s generally easier to reduce discretionary expenses that we have more control over like eating out and travel. The challenge is doing that without feeling like we’re depriving ourselves. Continue reading “How to Save Money On Your Travel Bookings”

Is It Better to Rent or Own?

February 09, 2016

One of the biggest questions I get when I talk to people is, “Is it better to rent or own?” I tell them that it is not as simple as a yes or no answer. The cost of living in your area, your area’s housing market, and your financial stability are all factors in deciding if renting or owning is the better decision. For some, renting temporarily is a better option but no matter what I say, I normally get the following rebuttals from those determined to buy a home now: Continue reading “Is It Better to Rent or Own?”