Jill Russo Foster

Tips for Successful Personal Finances

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Give to the Victims – Not the Scammers

With the recent events in the world, you may want to make a charitable donation to help the cause.  When disasters occur, they tend to go hand in hand with scammers.

The best way for you to donate and help is to research the charities before you give. Some charities may want monetary donations, others may want specific items.

Whatever you chose to do, make sure that your donation is being put to the best use for the cause and not lining someone’s pockets.

First you need to choose a charitable organization. Even if you have a specific cause in mind, there could be many organizations claiming to support the same goals you do.

Second, you will want more information about a charity, and how they use their funds, go to www.give.org.  Here’s what you need to know:

  • Find out how much of each dollar is used for the cause, versus how much is used for administrative expenses.  The higher the amount used for the cause the better.
  • Find out whether they have a 501(c) (3) tax status if you are planning to deduct this donation on your IRS tax return.

Now that you have selected the charity of your choice, you will to decide whether you will be making a donation of money or specific items to the charity.  Check to see what they suggest is best for what you want to accomplish.

For monetary donations, you should always use a check / debit card or credit card so that there is a record of the transaction. This is the easiest way so that you have proper documentation.

If you are donating specific items, you will need to have a record of what you are donating. For non-cash items, you can use the purchase receipt, itemized list along with documentation from the charity.  Please check with your tax preparer, so that you have the proper documentation.

What’s up with credit card companies lately?

There was a time when our mailboxes were full of credit card offers. Now the offers have been replaced with policy change notices.

Credit card companies are racing to make changes before the new regulations hit in February 2010. They’ve have had a bad couple years. It used to be easy to make money in the credit card business, but things have changed.

The first issue is defaults. Because of unemployment, more people are defaulting on their debts. So, credit card companies have been lowering everyone’s credit limits to help reduce the risk. Their reasoning is sound. The less debt you have, the less debt they will have to cover.  Expect your credit card limits to fall even if you have a good payment history.

The second issue is pay offs. More people are paying off their credit card debt because they’re anticipating layoffs. This means that the creditors are earning less from interest payments. They need risk-free revenue, so they’re looking at annual fees. Expect your credit card company to either add an annual fee or increase the fee you already pay.

Right now, under the old regulations, they can still make changes to your account with minimal notice.  If you get an unpleasant policy change in the mail, you should definitely call the credit card company and try to get them to revert back to the original terms.  If that doesn’t work you can always close the account.

Credit Card Shaving is Cut and Paste Fraud

Credit Card Shaving – it sounds like what you would say if you were cutting back on your credit cards, but that’s not what it means. This is the latest credit card scam and there is nothing you can do to prevent it. Isn’t that scary?

Credit Card Shaving Q & A

How do they get your credit card number? They get it through guesswork, not by theft. The thief makes a random list of 16 digit numbers. Then he tries to make purchases online with different combinations. If one works, then he knows he has a legitimate account.

Why is it called “Credit Card Shaving?” The thief literally shaves the raised numbers off of other credit cards (usually cheap gift cards) and glues them onto a new card in the correct order. The card looks legitimate. He can even use his own ID to prove the card is his.

How does he change the magnetic strip? The thief doesn’t need the magnetic strip, he just “scores” or scratches it so it can’t be used in the automated stripe reader. This forces the cashier to manually enter the numbers that are glued to the card.

What can you do about it? Always monitor your accounts. Check statements for unusual purchases. If you can access your accounts online, you can check more often.

Is it time-consuming to monitor your accounts? We treat credit cards like pre-approved micro-loans, or feel they’re safer than carrying cash because they can be canceled if stolen. In reality, the more cards you have, the more work is required to watch over them.

Can you save a year’s worth of income?

Can you save a year’s worth of income for your emergency savings account? Yes, you can. Here are some steps to get started:

  1. Be patient. You won’t save a year’s worth of income in a single year. Work out how long it will take by determining how much you can set aside each month. If it takes 3-5 years, then so be it. Five years will go by whether you save money or not, so you might as well have something to show for it.
  2. Set aside a firm amount from each paycheck. Think of it as a monthly or weekly bill you owe yourself.  You can even automate the process so it’s deducted from your paycheck like taxes or insurance.
  3. No take backs. Your savings account deposit should be just as irrevocable as your mortgage payment or utility bills. You can’t call the gas company and ask for your payment back so you can buy a new outfit. Don’t take money out of savings for anything less than a real emergency.
  4. Reduce expenses. There are so many ways to cut back, especially when you know it’s temporary. Do you have cable TV, a gym membership, an expensive stylist? Give those up for a few years.  As soon as you have a year’s worth of savings, you can go back to the way things were.

Remember, saving money is not a sacrifice because the money is ultimately yours.

How safe is a safe deposit box?

I have often told you to use a safe deposit box (SDB) to store copies of your most important paperwork. That way, if something happens to your home, you can deal with the emergency with all your paperwork intact. But people also use SDB’s for items that they consider irreplaceable, like jewelry or stock certificates.  While it’s not necessarily wrong to use an SDB this way, you should be aware of the risks.

Safe deposit boxes are loss resistant, not loss proof. You can lose the contents of your SDB if something happens to the bank itself.  Consider what could happen if your bank is in a fire or flood. SDB’s are typically made of metal. They are not water-proof or heat-proof, which means the contents could melt, be scorched, or water damaged. Store paper documents in a water-tight plastic bag. Keep back-up copies of flash drives or photographs. Metal items, like jewelry or antique coins, should be stored in a hard-plastic container to help prevent melting.

You should also know that you will NOT be reimbursed by FDIC for the value of jewelry or antique coins stored in an SDB. The FDIC only reimburses the cash in your bank account, not personal property.

You will also NOT be reimbursed by your renter’s or homeowner’s policy (unless you have the items insured separately.)

Finally, know that your SDB is a rental. Keep up on payments or the contents will be turned over to your state’s Unclaimed Property department. A safe deposit box is a great resource, if used wisely.

The holidays are here.

The holidays are here. If you need to stay within a budget, start early.

First, make a list of all the people on your holiday gift list, then see if you can make changes.

Could you give a family gift instead of individual gifts?

Can you go in on a gift with someone else and share the cost?

Would a name draw work for the family party? With a name draw, each person buys only for the person whose name they drew. It’s fun and inexpensive. Do a separate drawing for the children so each child receives one gift and gives one gift. Make sure to set a dollar limit that everyone can afford.

Once your list is complete, set a firm amount for each person and don’t go over. The grand total of all your gifts should be a realistic amount that you can afford. Be honest with yourself.

When shopping, keep your list of people and your budget amounts with you. Check the sales fliers now because holiday sales are already starting. Big retailers are also adding holiday layaway plans.  Layaway plans work great if you know your budget. They allow you to make affordable payments without using a credit card.

You could also try giving gifts that don’t cost a lot of money. Service coupons are a wonderful gift. For example, you could cater a meal for a family that has a busy lifestyle. Try an inexpensive but meaningful gift, like a photo CD or memory album. The choices are endless if you take the time to think of what each person might enjoy most.

The most important thing this holiday season is to have fun and enjoy your time together. Create new memories instead of new debts.

Which saves you more money: a debit card or a credit card?

Which saves you more money:  a debit card or a credit card? Most people believe debit cards are cheaper because there’s no interest rate or annual fee. But what about overdraft fees?

Debit card overdrafts are now the biggest source of revenue for banks. The danger with debit cards is twofold: One, the transactions hit your account instantly and two, very few people keep track of their debit card transactions in a check register.

Debit cards are convenient and fast. We use them for everything from buying $200 worth of groceries to $1.50 take-out coffee. The problem is that we aren’t notified at check-out if our account is overdrawn like we would be if we had maxed out a credit card. And overdraft fees are expensive – approximately $30 per transaction. Some people have found themselves with $60 – $1,00 in overdraft fees in a single day because they continued to use their debit card while their account was overdrawn.

Please, take a moment to record your debit card purchases. Remember, too, that debit cards hit your account instantly but deposits don’t. If you deposit a check and use your debit card on the same day, the debit card transactions will hit your account before your deposit clears.

Your Savings Account is Your Emergency Fund

Your savings account is your emergency fund. How much should you have? I’m not asking about your retirement or investment fund – I’m asking about your standard savings account. You probably don’t want to hear my answer, but I believe we all should have a year’s worth of income in savings.

That amount could tide you over if you lost your job, were laid off, or had to take a medical leave of absence. In the past I might have recommended 6 months, but you may have a harder time finding a replacement job in these economic times.

So how do you save 12 months worth of income? For most people it means cutting back. Try going over your bank statements to see where the money is leaking away. Are you spending $20 a day on fast food? $100 a month on cable services? $50 on parking? I’m sure you can think of other expenses that you could temporarily go without.

On the other hand, if you’ve cut your spending to the bone and still can’t save money, then look for extra income. Try getting a part time job, or selling unwanted items for cash. If you make the extra sacrifice now, you could have a sizeable savings account in a few years – one that could save you in an emergency.

Your Password is Easy to Guess

If you do any type of online financial transactions, whether you shop online, pay bills, or manage accounts, then you need good online passwords and you need to change them often. Here are some Do’s and Don’ts:

Don’t use passwords that are easy to guess like “welcome,” or “abc123.” And, don’t use passwords that are easy to research, like birthdays, phone numbers or addresses. It should be impossible for people to guess your password just by knowing you.

Do use a random combination of numbers and letters (both upper and lower case). Don’t use some personal association that’s easy to remember, because, no matter how clever you think you’re being, it will probably be easy to guess. You can learn to memorize a random number. After all, you know your phone number and social security number, and those are random.

Do change your passwords often. There are actually services out there that will steal your email password for a fee. They market themselves as private investigators, catching cheating spouses or business partners. If you use the same password for all your accounts, this puts you at great risk. Changing your password often won’t stop hackers, but it will make their work more difficult and expensive.