Jill Russo Foster

Choosing between savings and debt repayment

This is a question that I hear all the time:

“Should I pay off my credit card debt or build an emergency savings account?”

The answer shouldn’t be one or the other – it should be both.

Let’s look at the numbers by using this example: Joe (a person I made up just now) has $5,000 in credit card debt with an interest rate of 14%. His minimum payment is about $100 a month. Joe’s monthly expenses are $4,000 (that includes everything – his mortgage, utilities, food, even his minimum credit card payment). Joe has reduced his expenses enough that he has about $400 left over each month that he can use to pay an additional amount on the credit card or to deposit into his savings. He’s committed to his cause, but he’s not sure what to do. He knows that carrying credit card debt is not a good thing, but neither is not having an emergency savings to fall back on in times of need.

Here are some choices Joe could make.

Joe could pay $200/month towards his credit card debt. That will take him 30 months (2 1/2 years) to be debt free assuming that he stops charging.

If he pays $250/month, he will be debt free in 23 months (2 years).

If he pays $300/month, he will be debt free in 19 months (1 1/2 years).

None of these choices take up all of the $400, so there is still money for his emergency savings. He will be putting away $100 to $200/per month towards his emergency savings and that means he will have saved $1,200 to $2,400 (plus interest) at the end of each year.

The smart choice is to do both versus one or the other. Getting yourself out of debt should be one of your top financial goals, but not at the expense of your savings account. One emergency without a savings account will put you right back into debt.

Budgeting for 2011

Have you made a resolution to stick to your budget in 2011? So far this year, I have overspent in my budget category of snow removal I am sure I am not alone What do you do when it’s only January 20 and you have overspent? You have some tough decisions to make.

You have several options If you decide that you want to continue having your snow removal done by someone else, you could find another way to pay for this expense You would have to give up something else that would free up the money for more snow removal You could do it yourself, if you are physically able You can access your emergency savings account Remember that savings account that I have been asking you to build up so you have one year’s worth of expenses to spend on life’s “what if’s” now could be one of those times.

Budgeting is only as good as your projections and sometimes we project too little That is why you need to be flexible with your budget, so that when you have unexpected expenses or more costs than you have planned, you can deal with it Overages in one category mean shortages in another Determine what you can lessen to have the extra money for the overages Build that emergency savings for those overages so you have a cushion to fall back on Because you never know how much snow we are going to get in a season.

Increase Savings and Reduce Expenses in 2011

What are your New Year’s financial resolutions? Is it to save more? Reduce your expenses? We all have good intentions in January, but what happens to them in the coming months?

If your resolution is to save more, start by saving a small amount each week The amount should be something you think you can easily do without a problem If you are thinking that there is no money left over after you pay your bills to do this, you are thinking about this backwards Savings needs to be your first priority and not your last Take the amount you can afford to save weekly and take it off the top, before you pay your bills This way, you will ensure that this will happen Lots of people don’t keep their resolutions because they goals are too much for them.

If you have never succeeded in making this resolution in the past, start small By small I mean start with $5 per week If you can do this easily, then increase the amount for next month Then increase again and again until you get to an amount that you were originally thinking you wanted to save in the past This is much easier for you to accomplish with baby steps than if you said I want to save $100 a week and then fail to do so You are building your success with small steps and sticking with your resolution.

To reduce your expenses, think baby steps again Look at one category of spending and figure out a way to reduce that category by 10% Once that is done, go on to the next.

Resolutions / goals are something that you can do any day of the year There is no need to only do them in January of each year Remember, anything that you want to accomplish will take effort on your part.

Paying the Holiday Bills

Now that the holidays are over, it’s time for the bills to start to come in This time of year is when you need to be extra careful about your finances I know that this is a resolution that many of you made on January 1 You need to be carefully checking your statements (both your bank and credit card accounts) for accuracy In my experience, this is when the most errors occur So check those statements to your receipts, balance your checkbook and immediately call to dispute any discrepancies Look for unfamiliar transactions that you are unsure of Sometimes a charge will appear with a different company name than the store you made the purchase from Call to get more information to determine if it’s your transaction The longer you wait, the less protection you have.

In addition, now is the time of year to read the inserts in your statements You know those pieces of paper that you automatically toss Banks and creditors will inform you about changes to your accounts increased fees, new requirements etc You need to know about these before they take affect and it’s too late to do anything about them.

Be proactive with your finances by staying on top on what is happening with your money, will benefit you in the long run You will be able to make choices that are right for you and possibly save you money on fees Wishing you a happy and prosperous new year.

Financial Goals for 2011

With the new year approaching, it’s time to think about your finances What do you want to accomplish in 2011? Whatever you want to accomplish, you need to have a goal.

Remember that a goal needs to be specific, with a timeframe and measurable You wouldn’t write “I want to save more” because that isn’t specific enough You would write “I want to save (amount) per (timeframe)” or “I want to reduce my expenses by (percentage or dollar amount) per (timeframe).” Write down your financial goals this week, so that you are ready for the start of 2011.

You can’t achieve your goal without knowing where you are now It’s like starting a diet You need to know where you are today and where you want to be at the end (the goal) Next, you need to make a plan to get from today to the goal What steps do you have to do? Make your list now Then start working towards your goal, by making the changes on your list.

Periodically, you need to check your progress to see how you are doing If your goal is to save $25 per week, then you need to go back and check how you are doing Did you do this every week? If so, you did it and continue the great work If not, then you need to review your goal and why it didn’t work Do you need to make adjustments to your goal to make it work? Then implement those changes Remember that anything is possible if you put your mind to it and follow your plan.

Careful Giving

With the end of the year coming up, people are being asked to make donations to many organizations While others are planning ahead for the end of the tax year Either way, you need to make sure the charity that you are donating to is legitimate.

With many people out there to scam people, choosing a charitable organization can be challenging Here’s what you need to look for:

Find out whether they have a 501(c) tax status if you are planning to deduct this on your IRS tax return.

Find out how much of each dollar is used for the cause, versus how much is used for administration expenses The higher the dollar amount used for the cause the better.

To find out this information go to www.Give.org to do your research before making your donation Once you have decided to make your donation, then you need to make sure you have the proper documentation for tax purposes.

For monetary donations, a cancelled check would be your receipt For non-cash items such as food, clothing, household items, furniture etc, you will need to make an itemized list of the items and the value Make sure to get a receipt from the organization that you are making the donation to Attach this to your itemized list and keep with your tax records.

Getting the Deals When You Need Them

Do you see those online daily deals for discounted merchandise and wish you knew about them before they sold out? Did you buy something to find out later that you could have bought it for less on a website? It seems as if many retailers are offering them I see them from office supply stores, utility companies, credit card companies (so you use that credit card more) and I am sure that I miss most of them They seem to be like the grocery stores that offer the really great deal on a few products to lure you in They know that you will buy more once they get you to the store.

If you are looking for something specific and want to see if you can purchase the item at a discount, then you may want to look into these daily deals Remember, it’s not a bargain if you buy something because the price is so good that you can’t turn it down Retailers (and websites) are counting on you to make that purchase since it’s such a great deal But, it’s only a deal if you were looking for that item before you saw it Don’t impulse shop.

Since there are so many, how are you to keep track? There are a couple of websites that will help you with this www.Woot.com, www.DealCatcher.com and www.DODTracker.com will consolidate deals from numerous retailers in one location That way, you don’t have to track many different websites to find the item you are looking for, or worse yet, finding the deal when it’s already sold out Shop wisely and within your means.

Holiday Returns – Restocking Fees

We are in our second week of December Most of us are already thinking about the holidays and gift giving Many stores are luring you to spend with statements like “we’ll refund your money if you are not completely satisfied” and “tryit and you can return it for a full refund” I bet you have heard these offers before It might sound good, but you need to be aware of restocking fees (No, these don’t have anything to do with your Christmas stocking.)

Retailers charge restocking fees to cover the cost of selling an opened package at reduced prices For example, if you bought a computer and opened the box and then returned it, the retailer cannot sell that item as brand new Therefore, you might be charged a restocking fee That seems fairly reasonable to me Many retailers are adopting restocking fees You could see it on mattresses, automobiles and other items that don’t have package restrictions.

Restocking fees can be expensive, as much as 25%.First, ask the store what the policy is and ask to have it in writing before you make the purchase Once you fully understand the policy, then determine if you want to make your purchase at that retailer If the purchase is for a gift, you might want to consider a gift card instead, so that the recipient doesn’t have to deal with the restocking fee.

Holiday Shopping Tips

The holiday season is in full swing Were you one of those out there at midnight shopping on Black Friday? It’s easy to spend money during the holidays We shop to make the holidays special for those we love and also to look good and feel good during the darkest month of the year.

If you’re worried about spending too much, think about these things before you shop.

Do you really need the item? If not, don’t buy it.
Can you (or the person you are giving this to) live without it?
Do you have the cash to pay for the item? You don’t want to charge items that you can’t afford to pay off when the bill arrives.
Is this a good price? Do your research ahead of time to know that you can buy it for less.

This year with the economy we are in, I would suggest that you do some planning before you tackle the holiday season First look at your list are there people that you can eliminate buying a gift for? Maybe you could spend time with that person creating new memories instead of buying an item off the shelf For the people on your list that you will be buying for, think long and hard to determine what amount of money you have to spend This should be an amount within your budget (not on credit cards that must be paid off later) Your holiday budget should include all the items you have to buy, such as hostess and/or food gifts for parties, tips for the service people in your life, additional gas and holiday clothing for yourself.

If you’re going to buy something (especially during the holiday season), do it wisely and within your budget Let the joy of the holidays extend in January by avoiding the stress of January credit card bills Remember, a bargain isn’t a bargain if you’re buying something you don’t need.