Jill Russo Foster

Tips for Successful Personal Finances

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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.

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.

Your Money In Interesting Times

Have you ever heard of the old curse: “May you live in interesting times?” For the past ten years or so we’ve been obsessed with the Greatest Generation, a generation made famous by living through two World Wars and the Great Depression. What we loved about them, is that as the going got tough, they got tougher.

What we’re seeing now is hopefully not as bad as what they lived through, but we could still learn a lesson from them. This isn’t a great time for jobs, banks, investments, or mortgages. If you’ve been watching or listening to the news, you know that our country’s financial systems are in bad shape. Our government is working on saving the banks, but you’re probably wondering who’s going to save you?  It’s not like the weather has been that great either in this La Nina year. So how do you keep your money and possessions safe in difficult times? By living carefully.

Banks

The Number 1 thing you must do is keep your hard-earned cash safe. You can do that by keeping your money in an FDIC insured bank. That means if the bank fails, a good portion, if not all, of your money will be refunded. For more information on this please go to my blog and read The FDIC: What You Need to Know.

Once your money is in an FDIC insured bank, then you need to make sure you would get a full refund if the bank fails. If you have over $100,000 in a bank, you need to talk to your banker. You may find that you need to move money into different accounts and maybe into multiple banks. Check out www.myFDICinsurance.gov for more information.

Home Disasters

If you were located in an area devastated by a hurricane, floods, or fire, and you had to evacuate your home, how would you access your money?

First, make sure that your income is direct deposited. It might be a while before you can get your paycheck by mail or pick it up at your company.

Second, make sure you have an ATM card. If you had to temporarily relocate to another area, you might not be able to cash your payroll check. You could possibly deposit it another bank, but taking money against it is something that not all banks will allow you to do if they don’t have a relationship with your employer themselves (or with you.) If you have an ATM card, there will be a machine somewhere that you can access. You might have to pay a fee if it’s not your bank, but at least you will be able to get cash for food, gas, and lodgings.

Mortgages

It’s going to be a lot harder to get a mortgage from now on. The best thing you can do for yourself if you need to refinance or want to get a mortgage is to protect your credit score. Read my article Fico Has Something to Say About You for more information on how a bad credit score can affect your chances to get a mortgage. Check your credit report 3 times per year, pay your bills on time and don’t over extend yourself.

Investments

I wouldn’t dream of advising you on investments. All investments are a gamble, with some bets beings safer than others. At this point, I’m not sure which investments are really the safest. We’ll have to wait and see.

I hope this helps you plan for interesting times. As always, the best thing you can do for yourself is plan ahead, take care of your credit, and choose your bank carefully.

I had a great time at the Queens Book Fair!

Jill at the Book Fair

I had a new experience this past weekend. I participated in my first book fair On Saturday, I had a booth at the Fourth Annual Queens Book Fair in New York and was a Featured Author on their Author’s Panel. I spoke to the attendees about teens and how to introduce teenagers to the concept of managing their own money. I was able to sell books to a market that had never met me before, as well as talk to people about future speaking engagements. So stay tuned I’ll keep you posted on where I’ll be next.

How to Choose a Bank

How do you know if your bank is right for you? If you have been a subscriber to Quick Tips, then you know the first questions that must be answered: Is the bank an FDIC member and FDIC insured? The answer should be “yes.”

What other questions should you ask?

Location. Does the bank have branches or ATM machines that are close to your home, work, favorite stores, or activities? Remember that most banks charge a fee for using another bank’s ATM machines. You’ll also want to deposit any checks or cash quickly. Choose someplace close where it’s easy to make your transactions.

Fees. Do they charge you to have an account? If so, is there something you can do to lessen the fee or avoid it all together? Some banks waive their fees if you agree to direct deposit your paychecks, keep a minimum balance in your account, or have more than one linked account. You should be able to avoid any bank fees.

How to avoid bank fees. Banks have to make money to stay in business. One way they do this is by lending out money and charging interest. The other way is by charging fees.

You should be able to avoid fees with good record keeping. Keep your minimum balance and never use more money than you actually have (overdraft).

Every bank charges for overdrafts. It’s not only inconvenient for them, it’s actually illegal if you do it on purpose.

Keep accurate records with either a paper checkbook register, computer software, or handheld device. Your goal is to never have these fees charged to you.

The Bank Gave My Money Away

Do you ever get the feeling that you have lost some money? We’ve all lost money out of our wallets, our purses, behind our dressers, or under car seats. But, did you know that you can lose money in the bank?

If you have a bank account that has not had any activity for three to five years, your bank has to turn the money over to the state. The same is true for payroll checks that haven’t been cashed, and for safety deposit boxes that haven’t been visited.

How do you avoid losing your money like this? Make a deposit or withdrawal on each and every bank account at least once per year (either online or at the physical branch). Interest going into a bank account is not considered activity. Deposit and/or cash your payroll and gift checks quickly before you have a chance to lose or forget about them.  Use traveler’s checks as soon as possible. If you have a deposit box, visit it at least once a year.

Keep your contact information up to date. Make sure that you update your address on each and every bank account, so the bank can send you important notices and you have a reminder that your accounts exist.

Do you want to see if you have any unclaimed money? Go to www.unclaimed.org and look under all the states that you have lived in. You may find that it is worth the trip.