Jill Russo Foster

Suggestions for lowering your expenses

You know how tracking your spending and budgeting are important things to do. These are the only ways that you can make the changes necessary to achieve your financial goals.

After suggesting that you track your spending, I did a month of tracking for my family. It was an eye-opener. Here are some of the changes we made:

Decreased our TV bill by eliminating channels and services
Eliminated some of our cell phone services that we didn’t use
Used a local pet store for some of our pet’s vaccinations (instead of the vet)
Planned our meals a week in advance using the supermarket sale flyer
Cooked ahead on weekends so that there was food available to eat for lunches

These reductions in cost saved us enough money that we were able to make some necessary home repairs without having to stress about tapping into savings to pay for it Our furnace is cleaned and tuned up for the winter, our roof is repaired, and the car had a tune up – all things that needed to be done, but were things I would have considered “budget-breakers” before reducing our expenses.

Our food spending is still higher than I would like, and I need to get that down even more. Next week, I will tell you what I did to reduce our grocery bill while still cooking meals at home.

Did you do the budget exercise with me? I know that several of you requested my budget worksheet. What did you learn about your spending? Let me know.

What can you do with $10?

What can you do with $10? If your first thought is “I can buy something!” you’re not alone. But, $10 won’t get you very far, and then you will be left with zero.

Another option is to save the $10.

You are probably thinking that isn’t much money. Maybe you think it’s not worth going to the bank to make a deposit so small. But, look at it this way. If you saved $10 each week you would have saved $520 in a year, but with an interest rate of 1% that would be $532.46.

You are still probably thinking that’s not much money. But, after two years, you would have $1,060.20. After three years you would have $1,593.26. After five years you would have $2,675.57.

Most people can find $10 a week to put into savings. If you look at what you are spending, there has got to be something you can eliminate to get the $10. On the other hand, if you think that $10 a week isn’t enough, challenge yourself to save more. Can you find $20 to save? That would give you $5,249 in five years. Can you find $50 to save? That would give you $13,379 in five years.

Saving any amount on a regular basis can give you money to fall back on. So the next time you are out shopping, think about the item on the shelf. Is it worth buying, or would it be better to save the money instead?

Layaway for the Holidays

I was in Costco before Labor Day and they already had holiday displays. They seem to “deck the halls” earlier and earlier as each year passes. Personally, I am not thinking about the holidays this early, but it’s not a bad idea to think ahead.

How are you going to pay for your holiday purchases? Do you have savings set aside for this time of year? If not, you are not alone.

In this economy, stores are lobbying for dollars and they want yours. They know that people are cutting back on credit card spending so they’re bringing back layaway plans.

What is a layaway plan? It’s a little like store credit, with one big exception: the store keeps your purchase until you’ve paid in full.

Here’s how it works.

You pay a down payment or deposit to start the process
You may have 30-90 days or a “must be paid by” date that coincides with a holiday
Usually, you can pay as often as you like. Many people pay weekly (after they get paid themselves).
As soon as your purchase is paid in full, you can take it home.

Why use a layaway plan? It may help you stay within budget. Credit cards make you feel like you have endless money to spend. If you can walk out of the store with that cashmere sweater, then it’s all paid for, right? Wrong! Some people won’t have their holiday credit card bills paid down until next spring. A layaway plan, on the other hand, never lets you forget that you’re paying installments.

What are the costs?

As with any installment payment plan, there will be fees.

Many stores charge a fee for layaway. For example, Wal-Mart is charging a five dollar fee, and Best Buy charges a five percent fee. These fees are typically non-refundable.
In addition, there could be a cancellation fee if you change your mind.

Which retailers are offering layaway plans this year? I know of T J Maxx, Marshalls, Toys R Us, Wal-Mart, K-Mart, and Best Buy. There are probably more.

You might be thinking, “Should I sign up for a layaway plan now or wait for the Black Friday sales?” That’s a question only you can answer. If you want to wait, start your own “layaway plan” by putting aside cash each payday. That way, you’ll have money for your purchase by Black Friday, whether it goes on sale, or not.

Prepare for Winter Now While the Leaves Are Still Falling

Summer has ended and we are now into Fall. Do you know what that means? There are important preparations to make! Yes, of course, you need to rake, and bake, and make costumes, and shop for the holidays. But isn’t there something you’re forgetting?

You need to prepare your home for winter weather! Those of us in Connecticut have seen unusual weather this year: earthquake, tornados, hurricane, not to mention feet of snow… and 2011 isn’t over. I hate to think how much snow we’ll get this year.

Here are several things you might want to do before winter sets in and why you should do them:

Have your heating system cleaned and tuned up for winter

Why? It may seem counterintuitive. How can paying for a tune-up save you money? For starters, it’s much more expensive to replace or repair a furnace. And, obstructions and dirty vents can reduce your energy savings. That’s not to mention the dangers of carbon-monoxide poisoning. Check to see if your utility offers a free annual checkup.

Seal up any drafts from windows or doors.

Why? Leaks cost you money, every day, every minute that your furnace is running. Our front door developed a crack in the wood that we repaired to seal up the draft. If you need to replace windows and doors, check to see what energy tax credits are available to you.

How do you check for drafts? Here’s a fun trick: Have someone aim a hair dryer from outside while you hold a lighted candle inside – carefully! If the flame moves or goes out, you know you have a heat leak.

Have your roof inspected for leaks before the snow piles up (we should have done this last year)

Why? Learn from my failure. You don’t want to deal with a roof repair in winter. Trust me on this.

Have your chimney inspected.

Why? Chimney bricks are more exposed to the elements and quicker to crack than the bricks on your walls. They’re also difficult to repair in winter because the cement mixture that holds them together needs to dry. You don’t want to cope with water damage in February when it can be prevented with an inspection in October.

Trim trees and bushes (or remove them)

Why? What do you see after every single snow storm? Photos of damaged property from fallen limbs and trees. Taking care of dead or weak branches can help protect your home.

Let me know what you are planning on doing for your home.

Debit or credit?

Which should you use: a debit card or a credit card? You all know the difference between the two – a debit card uses your own money and a credit card means borrowing with interest.

Here is what I recommend:

Use a debit card when…

You make everyday purchases in person. These are items that are part of daily living: groceries, doctor co-pays, restaurant meals, etc.

Use a credit card when…

You are purchasing big ticket items, anything with a warranty, travel reservations, online purchases, etc. Using a credit card will (usually) give you extra consumer protection for little or no additional cost.

More about that added layer of protection:

When you travel, certain credit cards give trip insurance for items such as lost luggage protection. If you are purchasing electronics, some credit cards extend the warranty period. If you purchase something online and it never arrives (or arrives broken), you can dispute the charge with your credit card company after you have attempted to resolve this with the merchant. You should check with your credit card issuer to see what benefits you have with your credit card. Then make your purchases where you will get the most benefits.

Planning for 2012 Financially

I have to admit that I am a planner – I already have my 2012 calendar. Even if you prefer to live in the moment, you have to admit that some areas of your life must be planned ahead.

For example: if you are a homeowner and have your homeowner’s insurance escrowed, you can’t just switch insurance companies a week or two before the policy is set to renew. You need to make the changes ahead of time so that your mortgage servicer can send the check to the new insurance company.

Getting divorced? You might have to make alimony or child support payments. Children grown? Your alimony or child support will be ending soon. Is your employer struggling? You could see a reduction in wages, medical coverage or even be laid off.

Finances can be overwhelming. They certainly can be if you have to make many changes in a short amount of time.

I pencil noteworthy financial dates in my calendar to help me start the process early. In my case, my homeowner’s insurance policy will expire in early February. I don’t want to tackle this project during the holidays, so it’s on my calendar to do in early December.

Thinking ahead will save you the eleventh hour stress. Look at your year and pencil in the important changes you have coming in your future. By addressing these matters with time on your side, you can do more comparison shopping and make changes to save money. Get out your 2012 calendar and start planning.

Confession: Saving is not my best skill

I have to admit that I am not the best at saving money. There are months that I have plenty of extra, and that can go into savings. But there are other months that things happen (you know what I mean). And then there are those things I really want (but don’t need). Yes, this even happens to me.

I mentioned to you back in July that I was tracking my spending and making changes. I need to do this periodically to see where my money is going…so that I can be aware. I am just finishing up my September tracking as you are reading this. I know all about my monthly bills, but it’s the little things that get away from me. I need to be a more mindful spender and consider what I am spending my money on.

Here are two things that help me save money.

First, my savings account is not at the bank where I have my checking account. The local bank makes it too easy for me to access my money. It’s nearby and would be linked to checking. So, I have my savings account in a virtual bank – there are no branches where I can withdraw cash and a transfer takes time. In addition, I don’t have my savings linked to an ATM card. Therefore, it’s not easy for me to access the money if a want arises.

What you should take away from this: if you are having trouble saving as much as you want, don’t have your savings account easily accessible.

Second, I have multiple savings accounts – each for a specific need.

vacation savings (for my travels)
home repair savings (after the weather we have had this year, all homeowners need one of these)
emergency savings (for whatever life throws at you)
long-term goal savings (for whatever your plans are – home, car, education, retirement).

These are two of the things that I do to make my savings work for me, but it’s not enough. Help me out and tell me what you do to save money.

Using layaway for holiday shopping

I know you don’t want to hear this, but the holidays are about 3 months away. Are you ready to do some shopping?

If the answer is “no”, then consider this: retailers are bringing back layaway plans. They’ve noticed that people are spending less because money is tight and they want to keep that holiday cash flowing.

Layaway plans offer you the convenience of making payments over time so that you can budget your purchases.

What you should know about layaway plans:

You can’t take your purchase home with you until it is paid in full. The store keeps it until you make your final payment.
There is typically a small fee for the layaway plan.
If you change your mind there can be a cancellation fee as well.
Payment plans are typically 60-90 days.

Why not use your credit card instead? With a credit card you might pay more in interest and take longer to pay it off. You may also spend more because you can take your purchases home with you, giving you a satisfied (but very wrong) feeling that your work is done.

Layaway plans could be the better option if you cannot afford to pay for your purchase in one payment.

Isn’t it better to just wait for a sale?

What if it doesn’t go on sale? You have to decide if it’s better to buy now on layaway or wait until Black Friday when there may, or may not, be a lower price. If Black Friday is your choice, then you can create your own layaway plan by saving money each pay period so you have the cash to make the purchase. That way, whether it’s on sale or not, you can get that special gift.

Either way, the holidays are coming and that is the time of year that we tend to break our budgets. Start early and spread out your purchases.

WBDC CT Budget Coaching: Enroll Today

You know that I am a big believer in budgeting. Knowing where your money goes is the only way you can make changes to your spending so you can achieve your goals. For some people budgeting is a scary idea.

In today’s economy, many people are struggling with their finances. Simple short term or long term goals such as paying bills, planning for retirement or a child’s education can seem impossible when you’re worried whether you’ll still have a job in a few years. It’s critical that individuals gain an understanding of their current financial picture as well as set, and work towards, future financial goals.

I am involved with a program that can assist you with your personal finances and budgeting. This program assists with providing clarity on what is important in your life and your personal finances. We facilitate and empower you to build a budget, and a plan, that supports your needs and goals for today and your future. Through this program you will uncover more choices in managing how you think, feel, and act around money.

How to enroll

This budget coaching program is a four-month program which includes workshops and one-on-one coaching both in person and over the phone. For more information, an application, and eligibility requirements, please call me at 203-353-1750. Completed applications must be received by September 30. There is a $40 fee if accepted into the program.

Should you pay off your credit card debt with a mortgage refinance?

In our last Quick Tips, we talked about refinancing your mortgage. I hope you did your homework. If you decided that refinancing is right for you, you may be tempted to pay off your other debts by financing them into your mortgage.

Should you do it? Follow these steps to find out.

List all your debts

If debt is a problem for you, take a closer look. Make 5 columns:

Column 1: Write down the name of each creditor (credit card companies, auto dealership, bank, hospital, etc.)

Column 2: Write down why you took a loan or used a credit card. This will help you see how you came to be in debt. Were these essential expenses like a car or a hospital emergency? Or, were these items you could have saved for, like a vacation, clothes, or furniture.

Column 3. Write down the interest rate.

Column 4. Write down the current payment amount.

Column 5. Write down when it will be paid off at the current payment rate.

I know that this can be scary, but you need to know. Congratulate yourself for doing this. This is a huge step forward.

Why is it important to really look at your debt? If your debts just disappear into your mortgage, you could forget where they came from. Most people who consolidate their debt this way have credit card debt again in just a few years. My assistant told me that it happened to her, and she regrets it. Not only was her mortgage increased, but it delayed the real cure: fixing the leaks in her budget.

Refinancing may not be the answer, but knowing how and why you spend will help you stay out of debt in the long run.

Consider the downside of consolidating credit card debt into your mortgage

Credit card debt is unsecured, so you would be taking unsecured debt and betting your house on it (securitizing it).

When you have credit card debt and can’t make payments, that’s a problem – but, your creditors cannot take your home. On the other hand, if you can’t make your mortgage payments, then you could lose your home in foreclosure. If you increased your mortgage loan in order to cover credit card debt, you could end up with a larger house payment – one that you can’t afford! That’s why I don’t recommend refinancing your unsecured debt into a mortgage.

Consider the long term outcome when refinancing secured debts into your mortgage

Secured debt has a physical object that can be repossessed if you don’t pay: it could be a car, or even a home equity loan or line of credit. Here are three questions you should ask before making your decision:

1. If you combine your mortgage with your home equity will this mean you need to pay mortgage insurance? Mortgage insurance is added when the total amount of your mortgage is equal to, or over, 80% of your home’s appraised value. That will increase your monthly mortgage payment.

2. Will you need the home equity line in the future? It will be difficult to get a new line in these economic times.

3. Is it better to pay off your debts yourself, and have a tight budget for the short term? Or combine them with your refinance and have a bigger mortgage in the long term?

Think long and hard about what you put into your new mortgage. Consult with your tax preparer for an objective opinion.