Every Day Finances

Will Your Bank Fail?

With banks failing at record numbers, you want to make sure that you keep you money safe With over 100 banks failing this year alone, you want to make sure your money is safe in the bank After all you worked hard for it and you shouldn’t lose it because your bank fails.

The FDIC (Federal Deposit Insurance Corporation) insures bank accounts and the NCSIF (National Credit Union Share Insurance Fund) insures credit unions These two government agencies will reimburse you if you bank with one of their insured banks / credit unions up to their limits.

This is what you personally have to do First make sure you are banking with an FDIC or NCSIF institution You would check this out by going to www.FDIC.gov and then clicking on the Deposit Insurance tab and finally on Bank Find Here you can look up your bank to see if they are part of the program If not, move your accounts to a bank or credit union that is insured.

If you are at a bank that is insured, you need to make sure you accounts are covered with the limits If you have more than $250,000 in one bank (that includes all the different bank locations), then you need to check to see if you are covered or need to move part of you money into bank Take these steps so that your money is secure and is there when you need it.

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:

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.
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.
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.
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.

12 Months Free Financing – No Money down

Reader Question: The store is offering a buy now-pay later deal – is there a catch?

The only catch is that you might cheat yourself.

Many stores offer these deals and they are legitimate. If you pay the loan off on time (and it is a loan) you won’t have to pay interest. If you don’t pay it off on time, you pay interest for the length of the loan – that could be 15% interest for 12 months on a $5,000 purchase. Ouch. Some bargain.

The real problem with these deals is that most people don’t pay off the loan on time. The rule is simple: if you can’t afford to save up for a purchase, then you probably can’t afford to make the payments.

I am not in favor of this type of offer. I strongly encourage you to start saving and wait before you buy. If you hate your furniture, take some pride in saving for a new set. In fact, brag it up. Saving for purchases is smart. You might find that you can get a deal on much better furniture if you save ahead of time instead of buying the sale items that the store is trying to unload with their “buy now-pay later” deal.

However, if this is truly an emergency purchase that can’t wait, like a furnace or hot water heater, then make paying it off a priority, even if it means cutting back. I’ll discuss clever ways to cut expenses in future posts.

Why Waste Time Balancing

Reader Question: I never overspend – is there a benefit to balancing my checking account? Do I have to balance it exactly?

Yes, to both questions.

You balance your checkbook for two reasons:

to prevent mistakes
and to prevent theft.

While you may have your budget memorized, your good spending habits won’t protect you if your account is being skimmed either intentionally or by accident.

A balanced checking account shows that you and the bank agree on your purchases and deposits. You keep track and they keep track, then you compare notes.

How do you keep track? You could write everything in a check ledger, or use checks with carbon copies. If you use a debit card almost exclusively, get a portable receipt holder for your car or purse, or make sure your wallet has a spot just for debit card receipts, and please double check your receipts or keep a ledger for that as well.

Times are tough right now and skimming accounts or padding transactions has become more common. It happened to me. I recently found that a restaurant overcharged me several dollars more than what I had on my copy of the receipt. By entering a “tip” or “cash back” amount to the register, a cashier can take money for herself from your transaction.

You should also assume that the bank will make mistakes. I recently deposited a check through the ATM, but it didn’t show up in my account. I had to file a dispute to reclaim my deposit amount.

Take careful notes of online transactions as well. You may mistakenly sign up for a monthly subscription instead of a single purchase. Or maybe the online vendor is from Canada or Australia and you didn’t realize your bank would add an international transaction fee to your purchase.

Keep track and balance. It’s the only way to protect your money.

Is My Bank Safe?

Reader Question: With banks failing, is my bank account safe?

Yes, but only if your bank is properly insured. Bank accounts should be in an FDIC insured bank (Federal Deposit Insurance Corp). Credit union accounts should be in an NCSIF insured credit union. (National Credit Union Share Insurance Fund).

The insurance will only cover checking, savings, and CD accounts. It will not cover investment accounts if your bank is also an investment house. For this year, the reimbursement limits have been increased to $250,000 per account holder. If you keep all your money in one bank, make sure that the balance of all your accounts is under that amount. If your total is more than $250,000, you should move some of the money to a different bank.

Remember, these limits go back down to $100,000 on January 1, 2010 (unless Congress increases them again), so make sure your money is divided accordingly.

Some of you may be thinking that you’ll never have more than $100,000 in the bank, so you won’t have to worry about it. But, there are circumstances that could make you the temporary holder of a large amount of cash such as a home sale with delayed home purchase, an insurance or legal settlement, or a pending asset distribution after the death of a relative. Even if you only have the money for a few weeks, that’s long enough for a bank to fail, so keep it safe by following these rules.

What is the difference between a debit card and a credit card?

A debit card is a convenient way to make a purchase using your own money. When you use your debit card, you are authorizing the merchant to access the funds in your bank account. This is true even if you sign off on the purchase as though you were using a credit card (instead of using a pin number.) Always track your debit card purchases in a check ledger to avoid overdraft fees. A debit card has limited fraud protection, so know where your card is at all times and check your receipts against your bank statements.

A credit card (as the name implies) is a convenient way to make purchases using a credit company’s money. Every time you make a purchase with a credit card, you’re taking a loan that you will have to pay back – usually with interest. Credit cards are helpful for building credit and for the consumer fraud protection. But, they can be dangerous to your financial health if you use them to purchase items outside of your budget.

You CAN Lower Your Out-of-Control Expenses: Part 2

Using instructions from last week’s column, you figured out your average monthly expenses. Now, you need to ask yourself two questions:

1.) Are you spending too much on some items?

2.) Can you lower the amount you spend on some items?

Some fixed expenses can’t be lowered. Your loans and mortgage/rent are legal agreements, and full coverage insurance is mandatory with some loans. But, you do have some control over your utilities. You can choose a different phone company. You can also control how much water, gas, and electricity you use by making small changes. Try line-drying your clothes, using a fan instead of air conditioning, or running the dishwasher only when it’s completely full.

Look to your variable expenses to save money.

Do keep up your auto and home maintenance, but try to cut back on groceries, entertainment, gifts and clothing.
Try using the library, buying cheaper food brands, and buying seasonal clothes at the end of the season.
Instead of buying expensive gifts, give “service coupons.”
If you’re spending more than you earn, some of these changes will be mandatory.

With some creativity, it’s possible to reduce expenses without feeling deprived.

You CAN Lower Your Out-of-Control Expenses: Part 1

Not sure where your money is going? Let’s find out.

First, make a list of your fixed monthly expenses. (“Fixed” means the dollar amount is the same every month.) These include items like:

mortgage/rent
loans
and insurance.

Utilities go under fixed expenses because they only vary by season. If you’re on a utility budget plan then you already know the amount. If your utility bills vary month to month, then add up the last 12 months and divide by 12 to get your average for each utility company.

Now, make a list of your variable expenses. (“Variable” means the dollar amount changes every month.) These include items like:

your groceries
entertainment
auto/home maintenance
gifts
clothing
and more.

The amount will vary each month, so get the average monthly expense for each item by adding up the last 12 months and dividing by 12.

Were you shocked by how much you spend and how you spend it? Most people are. We’re busy people and we like convenience, which means we tend to spend more than we should. Check back next week for Part 2 to find out what to do with this information.