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How Is Your Budget Doing These Days?

This article was written by Phil Cioppa in Planning. 21 comments.

This is a guest article by Phil Cioppa of Arbol Financial Strategies, LLC. Phil has over 10 years of financial service experience and specializes in asset management strategies, insurance planning and taxation issues. A budget is an important part of any financial plan, and right now is the best time to take another look at yours.

Do you feel like your dollars don’t stretch as far as they used to? No, it is not your imagination. They don’t, because we are experiencing some of the most difficult economic times since the gas lines of the 1970s and the Great Depression in the late 1920s and early 1930s.

What does this mean for you? It means that it’s time to revisit your household budget to make sure that you are living within your means, that you are not wasting your hard-earned dollars on items you don’t need, and that you are setting money aside for what is really important.

What is really important? No, it’s not having the latest high tech gadget, a flashy new car, or more clothes to hang in your closet. It’s building and maintaining an adequate financial safety net for yourself so that you have the money you need to pay for setbacks and emergencies. For example, you lose your job, your employer decides not to continue paying for your health insurance, your car dies and you need to replace it, your child has an unexpected medical problem, your home needs an expensive repair, and so on. Without an adequate safety net, you may have to use credit cards to fund the unexpected, which could be devastating to your finances.

Saving for retirement is also really important. No matter how far away you are from retirement, if you don’t begin planning for it now, your inaction will come back to haunt you. No matter what –- put money aside for the future! When that future becomes “now,” you will be glad you did.

I know that doing all of this may sound like a tall order, but it’s non-negotiable. To start, re-evaluate your financial priorities, study your budget to figure out how your spending and your priorities line up, and then reduce your spending as necessary so that you can begin building a financial safety net as well as a retirement fund. And yes, doing this may require some sacrifice on your part.

If you have to spend less, examine your essential expenses, like food and other day-to-day costs of living. What can you reduce? Also look at the fat in your budget –- the stuff that you enjoy or think is nice to have, but that you really don’t need. What are you willing to give up?

Here are just a few of the kinds of questions you should ask yourself as you rework your budget:

Is your current cell phone plan truly the best deal for you?
Can you save money by bundling your phone, Internet and cable service? You’ll usually find that new account holders get the best deals so you may want to change providers.
Have you explored whether you could purchase your electricity or gas from a less expensive source, assuming those services are deregulated in your state?
Do you really need all of the TV channels you are paying for? If you changed to a cheaper package, would you miss the channels you eliminated?
Are you paying too much for your insurance? Ask your insurance broker to evaluate your insurance needs and explore whether you could save by consolidating all of your insurance with one company.
What about your vehicles? Can you get rid of one or them? And, how often do you use the motorcycle or boat you pay to insure?
How much are you spending each week on restaurant meals, happy hours, and coffee drinks? If you take the time to add up those expenses, you may be surprised at your final total. Take the money you are spending on such nonessentials and use it to pay off your debt faster, or to increase the amount that you save each month.
If you’ve been dropping thousands on vacations away, take vacations closer to home or even consider a vacation at home. Given rising airfares, you could save a bundle.
Refinance your home. With interest rates at all time lows, you could realize a substantial savings by getting a new mortgage loan and paying off your current one.

Nobody likes to change their lifestyle, but nobody likes to be broke either or to come up short when it’s time to retire! The key to surviving and even flourishing in a down economy is to be realistic about your spending, to decide what your financial priorities and needs really are, to give up some of your creature comforts if necessary, and to save, save, save. It’s essential if you want more money in your pocket for today and for tomorrow.

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The 3/50 Project: Help Your Local Economy

This article was written by Emily Guy Birken in Consumer, Economy. 9 comments.

This is a guest article by Emily Guy Birken, author of The SAHMambulust. In this article, Emily explains and reviews the 3/50 Project, a movement designed to boost local economies.

The presents have been given out, the wrapping paper has been cleaned up, and Black Friday, Cyber Monday, and Small Business Saturday from American Express are just distant memories. Now may not be when most people are thinking about shopping, but it’s the perfect opportunity to commit to really help small businesses in your area for 2012. And what do small businesses need more than anything else? Loyal customers.

This is the basis of The 3/50 Project, spearheaded by Cinda Baxter, a retail consultant, professional speaker, and former retail business owner. Back in 2009, after hearing several reports about how patronizing local brick-and-mortar stores could help the economy, Cinda wrote about the achievability of economic recovery if we all simply commit to being good customers to independent retailers.

From that blog post, a movement was born.

The idea is very simple. Pick three local, independently owned businesses in your area — businesses that you would be sad to see shut their doors — and plan on spending $50 total per month among those three businesses. That’s it. The movement does not ask you to spend more than you already do. Just plan on $50 of your monthly expenditures going toward local businesses.

It is important to note that sometimes you will end up spending a little more money by purchasing locally rather than at the neighborhood box store or online. However, paying above bargain-basement prices means that you are also helping your local economy — a fairly easy trade-off in most budgets.

What’s exciting about making this commitment is the fact that it could contribute to our financial recovery. According to the statistics provided by The 3/50 Project website, every $100 spent in local brick-and-mortars results in “$68 return[ed] to the community through taxes, payroll, and other expenditures. If you spend that in a national chain, only $43 stays [local]. Spend it online, and nothing comes home.” Imagine the boom to the economy if everyone simply chose to spend some of their money locally.

The 3/50 Project is specific in how it defines an independent business. Though a franchised store may have a local owner, it is not one of the local businesses that The 3/50 Project is aiming to help. As a franchisee, the owner of a fast food restaurant, for example, can benefit from national ad campaigns, preferred vendor lists and large-scale price negotiations. This project is looking to help the independents who are relying on their own unique brand, pay their own expenses for marketing, rent and other operating costs, and operate from a storefront, rather than their home, a kiosk, or the internet. The full description of what constitutes an independent retailer is available here.

Deciding to try The 3/50 Project in your community does not mean that you have to give up your Starbucks coffee or your cheap groceries at Wal-Mart. There is room for national chains, internet shopping, and local stores in your commitment. This is an opportunity to be mindful about your spending, which should always be a goal of responsible personal finance. Why not help your local economy while you’re making savvy spending decisions?

Photo: Calgary Reviews
3/50 Project

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Bank of America Settles Overdraft Fee Lawsuit

This article was written by Flexo in Banking, Featured. 975 comments.

If you qualify for the Bank of America overdraft lawsuit settlement, you may have already received a postcard in the mail from the bank. Here is information on the overdraft lawsuit, only one of many class action lawsuits against Bank of America. If you recently received a check from Bank of America for about $98, you have received a benefit from an earlier class action lawsuit pertaining to the bank’s debit cards. This article pertains to a later lawsuit regarding overdraft fees.

December 2011 update: While the judge has approved Bank of America’s settlement related to the overdraft class action lawsuit and has ordered Bank of America to pay $410 million, a member of the settlement class who objected to the settlement has filed a notice to appeal the ruling. With an appeal filed, it could take at least a year for the issue to be resolved. If the appeal is denied, customers may still be disappointed. With 13.2 million affected customers in the class and fees to be paid from the settlement fund to the lawyers and class representatives, the benefits each customer will receive are sure to be less than the value of a refund of even one overdraft fee.

Any compensation to affected customers is on hold until the judge enters the settlement and any appeals are filed.

Like many banking institutions, Bank of America processes debit transactions not at the time they occur, but in a batch, from largest to smallest. If they don’t still take this approach currently, they did in 2009 when a class-action lawsuit combined several other legal actions. 24 other banks in the United States and Canada were named in the class-action lawsuit, including Citigroup, Chase, and Wells Fargo.

The banks say that by ordering debits from largest to smallest benefits customers. For example, mortgage or rent payments are generally the largest debits, so they should receive priority and should be the first to be paid. This is not how it works in practice, however. The system is designed to make more money in fees, particularly from the paycheck-to-paycheck class of customers.

For example, five debits may be scheduled to post on a Monday:

$800 mortgage payment (check)
$200 purchase at the grocery store (debit card)
$100 withdrawal at a different bank’s ATM
$25 purchase at the book store
$4 coffee

That’s the order the funds will be taken from this person’s account. If there is $900 in the bank account, the mortgage payment will be processed, but the four other transactions will generate overdraft fees, one for each, likely totaling more than $100. If the debits were processed from smallest to largest, only the mortgage payment would cause a problem, and the check will bounce. This could cost the account owner less money, but a bounced mortgage payment could be troublesome.

In the more likely event that there is only $500 in this checking account, ordering debits from largest to smallest ensures nothing will go through without generating a fee. However, ordering the debits from smallest to largest, only the mortgage payment would bounce, and there would be no overdraft.

Bank of America will be paying $410 million to settle the class-action lawsuit, which also notes that the banks did not tell customers they could waive overdraft protection, allowing certain transactions to fail rather than paying a fee. Not every bank handles activity posting the same way.

The deadline to opt out of or object to the settlement was October 3. The official website for the settlement is bofaoverdraftsettlement.com.

Photo: Wonderlane
Reuters

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Full-Year Budgeting for Teachers

This article was written by Flexo in Planning. 13 comments.

The school year within the United States public education system lasts about ten months, so some teachers face an interesting budgeting issue that most American workers do not.

The first issue is handling a below-average paycheck. Compensation for public school teachers varies wildly depending on years of experience and location, but for the most part throughout the country, starting teachers receive below-average compensation for their level of education. The pay may be accompanied by decent benefits and a pension, but it’s safe to say most people don’t go into primary or secondary education for the money.

Without getting into the reasons that compensation for public school teachers is low, a low salary requires thoughtful conservation of money. While many teachers are often part of a household that has two incomes, that isn’t always the case. The usual tips apply:

Design a budget that works. A budget, particularly for a household whose expenses approach or exceed income, is essential for coming out ahead at the end of every month.
Track your spending. Once you start paying attention to how much you’re spending on gourmet coffee or other unnecessary expenses, you will have a stronger ability to see room for financial improvement.
Get out of debt. Student loans are often the first debt teachers must tackle. The typical path to becoming a teacher requires four years of college education. That is the minimum; higher salaries are often available to teachers who have a master’s degree. While there are often alternative paths to receiving a certification, most teachers have at least a bachelor’s degree in education. While there are ways to keep the cost of this education low, that might not have been considered while going to college. Thus, teachers often start out in a low paying industry with thousands of dollars of student loan debt. Start a plan for eliminating that debt as soon as possible.

Teachers work (officially) about ten months a year, and school districts have different methods of paying their teachers. These are the two main approaches.

Teachers receive paychecks every week, every other week, or twice a month, even over the summer. This way the full salary is paid evenly over the entire year.
Teachers receive their full pay spread across the ten months they work, receiving nothing over the summer.

With the second approach, a teacher would need to take care not to spend all income throughout the ten months he is working if he intends to spend any money throughout the summer. Mathematically, the best approach would be to save one-sixth of each paycheck in a high-yield savings account, smoothing out income to include the summer months. When the summer arrives, the teacher can create his own paycheck by withdrawing from the savings account.

Many teachers continue working over the summer, whether acquiring additional certifications or preparing lessons for the new school year. Some have secondary jobs outside of teaching in order to earn an additional income, as well.

Teachers who stay in the same school district for over a decade can often turn below-average incomes to above-average incomes, and those who choose to go into administration can earn even more money, but teachers who have only a few years of experience or less can struggle financially. A teacher could improve her finances by being aware of their income and expenses and by budgeting for the full year.

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Student Checking Accounts Comparison, February 2012

by Flexo

As we head into summer, thousands of young adults will be heading to college for the first time. It’s important to get started on the right financial foot, and a free student checking account is an essential tool, particularly when combined with a savings account. Obtaining a student checking account that’s convenient for both students ... Continue reading this article…

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Avoid These Big Money Wasters

by Flexo

CNN is offering a compilation of the ten biggest money wasters. These items would be obvious to most loyal Consumerism Commentary readers, yet it would not be out of the question to disagree with some of these money-wasters in some circumstances. ATM fees. You shouldn’t be surprised that banks will charge multiple fees for the ... Continue reading this article…

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Florida’s Beach Property Boom: A Real Estate Lesson

by Dr. Dean Burke

This is a guest article by Dr. Dean Burke, author of The Millionaire Nurse Blog. Many years ago, someone I knew was fascinated with the real estate market in Florida, and he set up an investment company to allow others to invest through him. He promised his investors 20 percent returns. Needless to say, I didn’t ... Continue reading this article…

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Podcast 93: Debt Free for Life, David Bach

by Flexo

Today’s guest on the Consumerism Commentary Podcast is David Bach, author of Debt Free For Life: The Finish Rich Plan for Financial Freedom, the latest in the Finish Rich series of books and online tools. David, Flexo and Bryan discuss financial changes in the last year, the national trend toward paying down debt, the Done ... Continue reading this article…

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