Jill Russo Foster

Spring clean your finances

Now that Spring has arrived, most of us think spring cleaning. I am going to put a twist on that for this year that will save you money, too. I want you to spring clean your finances. This is not an all day project.

Take this month’s bills and go to your computer. You can do this in as little as an hour depending on how many bills you pay each month.

You are going to do some comparison research and try to lower your rates.

1. Start with your current company. Look to see if you can reduce your bill by changing the services you pay for – do you really use all of them?

2. Then, check out the competition and see what they are offering. Does it make sense to switch?

3. See if your current company will match the great deal you found at the other company. You have nothing to lose by asking. The worst they can say is “no”. Then you can make the choice.

Do this for each bill and see how much you can save. I’ve done it myself and it works.

I switched my power company and saved about 20% each month.
I switched to a cell phone plan with less minutes and saved $20 per month.
Several years ago we switched our insurance and were able to save several hundred dollars.

Trust me, when you see all the money that you can save, you will find that this is the best hour you’ve ever spent spring cleaning, and you didn’t have to break a sweat.

Making Your Money Grow

Last week, I spoke to a class of Accounting I students at a local high school, and an interesting topic came up when we were talking about saving for the future. I asked if they knew what interest rate their bank account was paying.

There were a variety of answers, but one took me by surprise. He said he kept his savings at home. How many of you do this?

For teens and adults, the benefits of saving in a bank account is twofold – both time and compound interest. He was missing out on the second. Yes, he has easy access to the money when he needs it (that may, or may not, be a good thing). But, he was missing out on interest payments. Interest is what makes your money grow.

Compound interest is defined as “interest added to interest previously earned on a principal balance”, according to Barron’s Dictionary of Banking Terms. So, if you were to save $10 a month for a year without interest you would have $120, but with an interest rate of 2% you would have $131. Add the power of time and after five years it would be $600 versus $642 and finally after ten years $1,200 versus $1,341.

You should be saving as much as you can by using a bank account that pays you the highest interest rate without paying fees. You may have to shop around and look at many banks, credit unions, online banks etc. to find the account that is best for you.

Take 5 Minutes Each Day to Improve Your Finances

One little step each day may be the answer to your finances being in order Are you the type of person who procrastinates about your finances? Do you dread the thought of addressing issues? This is your solution.

Take 5 minutes each day and do something to better for your financial picture These are some examples of how little things can add up Make a call to your credit card company to question a charge that you are unsure of Call and cancel that unwanted service that you are paying for to save you money on your bill Make that appointment to take that class Spend 5 minutes filing your receipts so that you’re able to easily balance your checkbook when the bank statement arrives Open that high interest bank account so that you earn more interest on your money Set up the automatic deduction so that you save money on a regular basis.

I personally called and cancelled a service that I wasn’t using on my phone bill I have registered for a driving class that will lower my auto insurance premium I called a doctor’s office to question a charge instead of just paying it without thought These little steps took me less than 5 minutes each We all can find 5 minutes in our day to address these issues that get put off.

These tasks may seem overwhelming all together But if you do one each day, your financial picture will improve and you will be taking care of your finances and saving money.

Home Disaster – It Could Happen to You

I have no idea what is going on with the weather around here. First, we start the year with a record number of snow storms and now the rain. What are we supposed to do? We need to be prepared for whatever weather comes our way.

How can you prepare?

Start by talking with your insurance company and/or agent and discuss what your insurance covers and what it doesn’t. You should be doing this every couple of years. If you can’t remember the last time you did this, then it’s time. You may find that you need to add or increase certain coverage. You should also discuss flood insurance. It doesn’t cover everything and usually has a high deductible, but you might regret not having it.

Next, do you have emergency supplies in your home? If you lose power, do you have lanterns (better than candles and not a fire hazard), battery operated items (radio, can opener ) barbeque grill for cooking, full tank of gas for your car (gas stations can’t pump gas without power), emergency cash on hand, etc. Do you know where these items are? I keep mine all together in one basket.

If you had to evacuate your home in a short period of time, do you know what you would need to take with you? You should have your important papers and records in one easy-to-grab place so you can get out fast.

Being prepared ahead of time makes it easier to ride out a storm in comfort or evacuate your home quickly.

In case of emergency…

I did a talk last week about financial organization. We all know that we need to keep our financial paperwork in order but sometimes we forget the basics.

The first step is to know what is in your wallet or purse. If I were to take your wallet away from you right now, could you tell me what’s in it? All of it? Most people can tell me most, but not each and every item.

Why is this so important? If you lost your wallet or purse, could you quickly call to cancel your credit cards and replace each and every item? Probably not! Did you know that the sooner you cancel your credit cards, the less liable you are for purchases made in your name?

Take an inventory of everything in your wallet or purse. Start with your credit cards. I suggest that you make a copy of the front of each card. Make sure to write the toll free customer number for each card on the copies you made (that number is found on the back of the card). You should also make copies or keep records of other items in your wallet that you will need to cancel or replace. That could include your driver’s license or any club cards you might have. Make copies of those as well, or create a list. Then keep these copies in a safe place where you can easily find it. I’ve spoken before of having two copies in case of a home disaster like a fire or flood. You might want to keep one copy in a locked home safe and one copy in a safe deposit box at your bank.

Keeping a record of what is in your wallet or purse is one step towards financial organization. Do it this week to be prepared in case of an emergency.

A Child Finds Money on the Sidewalk…

Here’s a trivia question: What would a child do if he found money that didn’t belong to him? (The answer is at the bottom of this post.)

Unclaimed Money: Are you missing any money? Would you know if you were? Banks and financial institutions do find themselves in the strange position of having to deal with what appear to be abandoned checking or savings accounts. Unlike the child in our trivia question, banks don’t have to ask themselves any moral or ethical questions, they just have to follow the law. If the account is unclaimed for three years, they are required to turn the money over to the State.

Sometimes “unclaimed money” isn’t lost at all! For example, let’s say you opened a savings account to store the $1,000 your grandmother gave you when you graduated high school. You assumed you could just let the money sit there earning interest until you were ready to use it. You would be wrong. Interest going into a bank account is NOT considered activity. After 3 years, your money would be transferred to the state.

To avoid having your money declared “unclaimed”, make a small deposit or withdrawal from your bank account annually.

Savings accounts aren’t the only accounts that can be categorized as unclaimed. Make sure that you cash checks you receive in a timely manner – even paychecks can be considered unclaimed money. Safe deposit boxes also fall under unclaimed money – make sure you access that safe deposit box at least annually.

To find out if you have any missing money, go to www.unclaimed.org and check each state that you have lived in to see if you have unclaimed money.

Answer to my trivia question: According to a NY Times article, 64% of children who found money either tried to return it to its rightful owner or turned it in to authorities. And, 82% of children who hadn’t found money said they would to the same. That makes you feel good, doesn’t it?

The Winning Prize Scam

Right now, people are struggling with their finances. Some are looking for easy solutions and that is where the scammers come in.

The “winning prize” scam typically starts with a notice that you have won a sum of money. This should be your first clue, since you probably haven’t entered any contests. If you follow the instructions, you will eventually receive a check in the mail for a few thousand dollars. You are instructed to deposit that check into your bank account and wire a “prize fee” to the sender. For example, if you get a $3,000 check, you may be asked to wire $2,500. Do you think you’ve won a $500 prize? Think again!

After you send your money, you will discover that the check they sent you is no good. Not only are you out the money you paid them, but you are liable for all the bank fees associated with depositing a bad check.

I can’t tell you this strongly enough – when you win something, you will NEVER have to pay fees. You should never be asked to give up any money in advance or ever. A legitimate win will be subject to taxes – but those would be paid with your tax returns. If you are contacted, be cautious and never give any money in advance to receive a prize.

Do-It-Yourself Identity Theft Protection

Have you received a letter from your bank or credit card company lately telling you that your personal information may be compromised? We’ve been getting these letters on a regular basis at my house. If you read further, you’ll see that these companies are trying to sell you identity theft protection for a monthly fee. It’s a good idea to guard against identity theft, but buying protection is not the most cost effective plan for your personal finances.

You can monitor your own credit and stop identity theft for minimal money. Simply put a credit freeze on the credit reports offered by the three major credit reporting agencies. A credit freeze prevents anyone from accessing your credit report (including you). If someone is trying to open a new credit account in your name, potential creditors will not be able to access your credit report. Creditors don’t give out new credit without it, so the thief will be stopped in his tracks.

How do you freeze your credit report? Contact all three credit reporting companies and pay a small fee to freeze your credit report. No one, including you, will be able to access your credit. That means if you want to finance a car, you will be denied since the potential creditor cannot access your credit. Don’t worry – you can unfreeze your credit for a fee when you need to.

Bottom line: The cost to freeze and release the freeze is substantially cheaper to you than the $10 plus dollars a month for credit monitoring. Credit freezes can stop new accounts from being opened by thieves even when they have your personal information. The only effort required on your part will be planning for your upcoming credit needs so you can freeze and unfreeze your credit accordingly. How often do you need to open a new credit account? Most of us do it very rarely, so it’s easy to plan ahead.

Why a big tax refund is a bad idea

Why is a big tax refund a bad idea? I’ve given you three reasons below. Let me know in the comments section if you can think of more.

Loaning your money for free to someone who doesn’t need it. What if I told you that you were going to loan someone $2,000 this year, and you weren’t going to charge interest. On top of that – you are going to wait a year to get it back, and ask for it in writing. Are you laughing at my question? If you are getting a tax refund this year, that is exactly what you have done! You loaned the government a portion of your paycheck every week, you didn’t receive any interest on that loan, and now you have to fill out a tax form to get it back.

Putting your money to work. The average tax return in 2008 was $2,683. So, you are not alone in doing this, but you should make sure it doesn’t happen again. When you see your tax preparer, ask him to adjust your withholdings so that you will not get a huge refund. I know you don’t want to owe $2,000 in taxes. Instead, aim to have the correct amount of taxes withheld. This way, you can have that extra money earning interest in your savings account, or saving you interest by going towards extra payments on your debt. That is how you make your money work for you.

You get less money with a tax refund. Are you worried that you won’t have the big check every spring for that special purchase? You might assume that a tax refund is a good savings plan. It’s not – good savings plans pay interest. Put the extra money in your own savings account instead. Divide your tax refund by the number of times you get paid each year. Then, have that amount automatically deducted from your paycheck and put into a savings account. If you want to have $2,500 saved in a year, that means you need to save about $48 a week. You are probably thinking that you don’t have an extra $48. Trust me; you will not miss money that’s not in your paycheck. Besides, if you’ve adjusted your tax withholdings, you’ll have more take-home pay.

The high price of instant tax refunds

It’s that time of year: holiday bills are arriving and you’re not sure you have the money to pay them. If you live on the east coast, you can add in unexpected snow removal costs. Where will you get the extra money? You might think that your tax refund is where you’ll get the money you need. That’s a good thought, but don’t sign up for an instant refund.

Some tax preparers or quick cash companies will tempt you with faster returns. They give you part of your tax refund ahead of time as a loan. Don’t do it! This is one of those money drains that isn’t worth the cost. All loans have fees and interest. With quick income tax return loans, the fees and rates can be outrageous. Let’s face it: companies who lend money are in the business of making money. It wouldn’t be worth their time and effort to give you a cheap loan. I strongly urge you to skip the quick cash and speed up the refund process with these three suggestions.

If you are expecting a refund, then by all means get your taxes done and filed as soon as possible. The quicker you file, the quicker you get your money back.
You can speed up the process by having your tax preparer file your tax returns electronically, which can save you the mail time.
Have the refund direct deposited to your bank account and again save the mail time.

If you do these three things, you can have your refund back in your hands in weeks. Then you will have the money you need and keep more of it in your pocket.