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Posted under Simple Savings
05/07/2010
IconMortgages, Taxes and Bigger Homes The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Gary, We have very nearly paid off our mortgage! We put a lot of spare money into it because the mortgage had a higher interest rate than any safe investment we could find. But for some personal reasons we would like to have a different house, probably one that is nicer than our current one. My husband says that since interest is tax-deductible, getting a new house makes financial sense especially with today's fairly low interest rates. So he's all for it. To me, as much as I'd like to have a new house, it feels as if we have finally "caught up with our tails" only to begin chasing them again. Can you give us some perspective? Thank you, Rebecca Congratulations, Rebecca! It sure does feel good to own a home without a mortgage. Financial life is much easier without a mortgage payment. On the other hand, she and her husband have a lot of company in wanting a bigger and better home. According the National Association of Home Builders the average home has increased in size from 1,500 square feet in 1970 to 2,265 square feet in 2000. That's a 50% increase in just 30 years. Rebecca's husband isn't the only one to think that the deductibility of mortgage interest makes a more expensive home a good deal financially. But sometimes the 'conventional wisdom' isn't really wise. So let's pull out our calculators and take a look at mortgages, taxes and housing prices. We'll assume that Rebecca is in the highest tax bracket. That would mean she gets the biggest possible benefit from the deductibility of mortgage interest. In 2002 the top bracket is 38.6%. So for every dollar of interest that Rebecca pays the mortgage company her tax bill would be reduced by 38.6 cents. Not such a good deal. In fact she could cut out the middle man and just give a buck to a friend. I'm sure that the friend would be willing to give her 40 cents in return! Is it really that simple? Probably not. There are other factors to consider.Some people would argue that it's still a good deal because of the benefits of using OPM (other people's money). That's an old idea. And one that does indeed work well when prices are increasing. Let's see how it works. Suppose Rebecca buys a house and she's paying a mortgage at 8% per year. But with the tax deduction the true cost of the mortgage is really 4.9%. How did we get the 4.9% figure? To calculate the true cost of your mortgage, first you'll need to know how much your deduction will be worth. To get that multiply the interest rate on the mortgage (in this case 8%) by your tax bracket (38.6%). That works out to 3.1%. Next you'll subtract the deduction rate from the mortgage interest rate to get your true cost to borrow (8.0% minus 3.1% = 4.9%). Now back to OPM. For Rebecca to benefit from the money she borrowed the house would need to appreciate by more than 4.9%. Is that possible? The Office of Federal Housing Enterprise Oversight publishes an index that compares housing prices going back to 1980. For the first quarter of 2002 housing prices across the U.S. had increased by 171% compared to 1980. That works out to about a 4.4% annual increase in price. So it would be close for Rebecca. There were some regional differences. Some areas did quite well for awhile. But others did not. For instance, in the Northeast prices dropped after 1989. Prices didn't return to 1989 levels until 1998. So all housing markets aren't created equal. Even though you can't predict the future, studying the history of your community should give you an idea of how lively the housing market is. As Rebecca has pointed out there are also personal reasons to want a nicer home. And only she can put a value on what a nicer home would mean to her family. Should Rebecca go ahead and buy the bigger house? That's up to her. But if they are going to do it, her husband is right. Low mortgage rates does make it easier. Whatever they decide I hope that they enjoy their home and it's never a financial burden to them. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website: www.stretcher.com You'll find hundreds of practical money saving ideas. Copyright 2002 Dollar Stretcher, Inc. All rights reserved. Permission granted for use on DrLaura.com More >>

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Posted under Simple Savings
05/07/2010
IconUnemployed Bill Crisis The Dollar Stretcher by Gary Foreman Gary, My husband has been out of work for 5 months and the income he did bring in when he was working was double what I currently bring in. Needless to say, my checks and the unemployment are not paying the bills. I am starting to panic because bill collectors are calling daily. I cannot tell them when I can make payments so they continuously call at home and work. I feel like I am going to lose my mind because of this!I am making sure that my house payment is paid, utilities, car insurance, but everything else is getting severely behind. What do I do? Do we have any way of getting out of this mess? Any rights? SS in WA Sounds like SS is in a tight spot. We'll spare SS the obvious advice of cutting unnecessary costs. Let's rather focus on how to handle the mountain of bills. First, it's important to get some breathing room. SS won't make good decisions if she's losing her mind! Begin by asking the collection agencies to stop calling you. Do it in writing. Use a postal method that proves that your correspondence was received. Bill collectors are required by federal law to stop calling you if you ask them. Second, estimate how long the situation will last. Are you looking for a one month solution? Or one that will work for one year? Estimating will mean honestly evaluating hubby's job prospects. Is it realistic to expect him to find a similar paying job in your community? If not, you'll need to make some decisions. Would SS be willing to move to another area and give up her job to replace his lost income? In any case, you'll need some estimate of when income should increase. This may be a good time to evaluate a change in career paths. Sometimes happiness is found in a lower-paying, but less stressful career. Third, SS will want to inventory their bills. How much does it cost each month for the basic necessities? Thankfully, it appears their current income covers the basics. She'll want to look at her bills with an eye towards reducing or eliminating them. Start with the biggest ones: the mortgage and any car payments. SS should check to see if they have credit insurance that could make payments until hubby is employed again. Many consumers forget that they even have it. A simple call to your creditor can tell. Consider refinancing your home. Not just for a lower rate of interest, but also to stretch out the term of the loan. The longer the loan the lower the monthly payment. SS may also want to use the equity in her home to pay off some debts. Especially ones like credit cards that are charging very high rates of interest. Try to negotiate a new loan on your car. Either your current lender or another may be willing to allow you to finance the car over a longer period of time. SS may find that it's best to either sell or even let one car be voluntarily repossessed. A repo could leave her owing money after the car is sold, but at least the monthly payments and cost of insurance would disappear. Now on the smaller monthly bills. SS needs to make a list of all of the bills with the monthly minimums and the interest rate being charged. Contact the people that you owe money. Begin with the biggest bills. Explain the circumstances and offer to pay what you can. Before you contact them know how much you can realistically afford to pay each month. Do not make promises that you won't be able to keep. SS may find that even after talking to her creditors that she can't cover all the monthly minimums. That leaves her with a few choices. One, pay some minimums and let other accounts go unpaid until after hubby returns to work. A second option would be to work with a debt management firm. Often they can get creditors to reduce minimums and interest rates. Usually late fees will be waived. Talk to a couple of companies before choosing one. Ask them to explain what they can do for you and what you'll be charged for the service. A final option is to declare bankruptcy. If job prospects are poor and you simply can't keep up with the minimum payments a bankruptcy could be inevitable. All of these choices will leave marks on your credit history. That can't be helped when you fail to pay bills. It may take up to 10 years before your record is completely clean. But the road to recovery will begin as soon as you take control of the situation and begin making payments at an agreed rate. Let's all hope that SS's husband finds a great job real soon. Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website www.stretcher.com and ezine Copyright 2003 Dollar Stretcher, Inc. All rights reserved. Permission granted for use on DrLaura.com More >>

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Posted under Simple Savings
05/07/2010
IconMom's Finances The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Gary, My 70-year-old mother lives alone a few miles away from two of her five daughters. She's fiercely protective of her privacy and independence. However, she cannot handle her money. We think she may have early Alzheimer's. She's always been bad with bouncing checks and having the utilities cut off for non-payment. But now she's much worse. She gets a retirement pension which is about three times as much as her normal monthly expenses, but she's always broke by the 15th of the month. So we're trying to get control of her money. Our plan is to open up a new checking account for her pension to be automatically deposited in that she will not have access to. We're going to change the address on her bills and I will become the bill-payer. We'll give her an allowance of $500 a month for groceries, gas, and other expenses, which I think is very ample for a single person. Whatever doesn't go for her bills will be put aside for an emergency fund and for future medical bills. My sisters are all in agreement that something needs to be done. Now we have to get our mother's cooperation. Natalie S. Natalie's problem is a common one. As people live longer more become frail in their later years and need help with their financial affairs. I'm assuming that Natalie only wants what's best for her mother. The state can't assume that. So they write laws to protect the rightful owner of property. In this case, Natalie's mother. The presumption is that your mom is an adult, it's her money and she should be able to spend (or squander) it anyway that she thinks is appropriate without Natalie's approval. So, the first thing is to get mom's willing agreement. You're walking a tight rope. If she's truly incompetent you might need to force the issue. But, if she's mentally fit, coercing her is just like stealing her money and her freedom. If mom doesn't want to give up control of her money Natalie would need to go to court and prove that she's not mentally capable of handling her affairs. In that case the court will appoint a guardian. Even then there's no guarantee that a relative will become the guardian. And Natalie's relationship with her mother would probably be seriously harmed. If mom is agreeable to getting help from her children the job is much easier. You'll still need to consult an attorney. This is too important to mess up. The simplest solution to making sure that bills get paid would be to have one or two children authorized to write checks on mom's account. Then have the bills sent to the child for payment. Unless a check limit was set at the bank, it would allow the child to write a check for all of the money in the account if they wanted. Avoid joint accounts. Money in a joint checking account legally belongs to everyone listed on the account. So it's possible for mom's money to be taken to pay for a daughter's debts. Natalie could consider a limited power of attorney. That's a legal document that's usually drawn by a lawyer. It could allow one or more of the daughters to act on mom's behalf in certain situations. The problem with a power of attorney is that banks are wary of them. Because they don't want to take a legal risk it's easy for them to reject a power. That way they avoid taking any chance that they're honoring a fake power and helping to steal someone's money. The most complicated but best legal document for this type of situation is something called 'a living trust'. A living trust is a document that any competent adult can have created. They can also change it anytime they want as long as they're alive and still ok mentally. An attorney should write it, but they're not as complicated as you might think. Property is placed under control of the trust. In this case probably mom's checking account and the proceeds from her pension. The trust says how the assets are to be used. Trustees are allowed to act within the authority of the trust. Mom would be the original trustee. And when she's not able, a successor trustee(s) would step in and take over for her. Probably one or more daughters. Natalie and her sisters are in a sensitive position. If mom is truly not competent to take care of herself then getting her help is the right thing to do. And loving children would step in. But being irresponsible doesn't mean that someone is incompetent. And it doesn't give others the right to take control of your property. So children would honor their parents by respecting their freedom and giving only the help that the parent requests. Hopefully Natalie and her sisters will be wise in striking the proper balance to help their mother. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website . You'll find hundreds of articles to help stretch your day and your dollar. Copyright 2002, Dollar Stretcher, Inc. All rights reserved. Permission granted for use on DrLaura.com. More >>

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Posted under Simple Savings
05/07/2010
IconInsuring Your Possessions The Dollar Stretcher by Gary Foreman gary@stretcher.com Gary, When I moved into my new 3 bedroom apartment, the insurance agent asked me questions about my property and said I should increase my coverage from $29,000 to $40,000 (a $2.63 a month increase) based on my belongings (including a lot of antiques). I did as she suggested. Do you think this is a reasonable expense? Also, how do I document my belongings (antique pieces as well as other furniture, accessories, clothes, electronics, food in freezer etc.) in case I would ever have to make a claim? How do they determine the 'costs' to replace my belongings should I ever need to? LB LB doesn't say whether she's purchased or renting her new apartment. If she owns the apartment a standard policy will cover possessions up to 50% of the value of the structure. So if you've insured your home for $100,000, you won't collect more than $50,000 for your possessions. Is 50% enough? Or should LB spend the extra $2.63 per month for additional coverage? The first thing to remember is that you buy insurance to cover losses that you can't afford yourself. So you don't want to be underinsured. Chances are there's a lot of stuff in your home. Furniture, everything hanging on your walls, stuck in your closets and cabinets are all considered household possessions. And, don't forget appliances, clothing and toys, too. The only way to know whether LB can justify the additional coverage is to take an inventory and put a value on her stuff. The list should include prices paid and when the item was purchased. Model numbers should be noted. Pictures or videotapes of the items are also helpful. Don't make it overly complicated and give up on the process. Any information is better than none at all. Guess where necessary. Once LB has totaled the value of her possessions she can talk with the agent about how much coverage she needs. Ask about more than just the total covered. Some categories aren't covered adequately by standard homeowners' policies. Many of us have jewelry or some type of collection. Even though you might not spend that much on any one item, it's possible that the entire collection has a significant value. LB should also ask about exclusions. Are there specific things that your policy won't pay on? Antiques are commonly excluded. So anything over 25 years old would be a problem for LB. It also could exclude any keepsake items. Grandma might not have been wealthy. But some of her things could have appreciated significantly since they were purchased many years ago. Most policies will not pay more than $2,500 for any individual item. Thresholds vary with insurers so ask your agent. Back to the inventory for a moment. It makes it easier to collect on your policy if you suffer a loss. Sit back and try to think of all of the contents of your bedroom. Difficult? Now imagine doing that for every room of the house after a fire or burglary. That's what you'll need to do after a loss. Remember to store your list somewhere outside your home. Keep it at your place of work, safe deposit box or with a friend or relative. If you must keep it in your home, buy a fireproof box or store it in your freezer. Talk to your agent about how much you'd be paid if a loss occurs. Most policies cover your possessions for 'actual cash value'. For instance, your clothing would be valued as 'used' clothing. Nevermind that you'd be hard pressed to replace all of your clothing at thrift store prices. Realistically you'd have to buy some items at full retail. LB might want to consider getting 'replacement cost' coverage. That would pay her enough to buy a new replacement for lost items. But even that doesn't eliminate every problem. Replacement cost doesn't apply to some categories like antiques and collectibles. For antiques, LB will probably need to either be able to demonstrate the value through comparisons to other similar items, or, better still, have an appraisal done. If she has items that are valuable LB might need to get 'agreed value' coverage for them. That's when the company and LB agree on the value of an item now. If it's lost later, that's how much she'll receive for it. Obviously, we hope that LB never needs to collect on her policy. But if the worst happens, we hope that she has the right coverage and the proper documentation to assist in starting over. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website: www.stretcher.com You'll find hundreds of articles to help you live better for less. Copyright 2002, Dollar Stretcher, Inc. All rights reserved. Permission granted for use on DrLaura.com. More >>

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Posted under Simple Savings
05/07/2010
IconHome Business Expose The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher, What can you tell me about a deal of making money on the internet just byhaving your own website and giving free items away for shipping. Thereseems to be a guarantee to get your money back if you are not satisfied orcan't make money on it. Peggy I don't mean to ruin Peggy's dream, but this offer looks like a scam. Butit's better to be disappointed now rather than disappointed and poorerlater. Let's look a little closer at what's being proposed. Peggy will need a website. That's not terribly expensive, but it does costmoney. Unless Peggy knows hypertext coding she'll need to hire someone tocreate the pages for her or, more likely, use templates that the companyhas set up. Using templates is fine, but it will mean that her site won'tbe able to include anything unique to attract visitors. Keeping even a very small website online will cost Peggy $10 or more eachmonth. And she'll probably need to authorize a monthly charge to her creditcard. Once Peggy has a website she'll need to get people to visit it. Having freestuff won't be enough. Just for fun we put "free" into one of the largesearch sites. It returned over 183 million sites! Even paying foradvertising isn't likely to separate Peggy from the competition.Realistically she's going to struggle to attract visitors to her site. But suppose that she does get people to visit. And they do agree to payshipping and handling for the 'free' stuff. How much can the company reallyafford to pay Peggy to give away merchandise? If the offers are good they don't need her. Word-of-mouth will bring peopleto the company website without her help. More likely, the offers aren't really that good. A few years back marketersstarted offering all kinds of items for free on the internet. The catch wasthat many of them had shipping and handling charges that were more than theitem cost locally. So maybe Peggy doesn't do so well and decides to get her money back. A'money-back guarantee' is only as good as the company offering it. Millionsof people have tried to get their money back only to find out that theguarantee was no better than the original offer. We'd hope that the company would stop charging her credit card if Peggyasked them to. But it's not unusual for charges to continue for months evenafter a 'stop' notice has been sent. Why am I so sure that this offer is a scam? There are a couple of reasons.First, the company doesn't appear to want any talents or skills that Peggyhas. Only her checkbook. If it's a job that 'anyone can do' then it won'tpay very well. And, you won't have to invest your money to get the job. Second, the business plan that Peggy is supposed to execute doesn't makesense. How is she going to compete with everyone else to get visitors toher free stuff page? What makes her offer unique and worthwhile? Finally, the company's business plan does make perfect sense. Buy oneserver and connect it to the internet. Set up hundreds of people like Peggywith websites. Charge them each month for web hosting services. Even ifPeggy doesn't make a dime the company will make plenty. Peggy can check out the proposal by doing a little homework. First, findout how much the website will cost to set up and maintain. Ask about anyother start-up expenses that she'll be asked to cover. Then look at the free items that are being offered along with the SHcharges. How do they compare to shopping at your local discount center? Will people want them? Then find out how much she'd make on each free item that's 'given away'. Dothe math to figure out how many items will need to be given away each monthto cover her expenses. Finally, how many visitors would she need to the website to give awayenough items to be profitable? And what will it cost her to attract thatmany people each month? Only if Peggy can work through all of this and determine that the businesslooks reasonable should she go forward with it. Many home businesses arestarted on a shoestring. But it's going to be hard getting to profitabilitywhen you have an initial investment and an ongoing monthly expense. Gary Foreman is a former Certified Financial Planner who currently editsThe Dollar Stretcher website You'll find hundreds ofarticles to help stretch you day and your dollar.Copyright 2002, The Dollar Stretcher Inc. All rights reserved. More >>

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Posted under Simple Savings
05/07/2010
IconWhy Not Lease? The Dollar Stretcher by Gary Foreman gary@stretcher.com Is it better financially to buy or lease an automobile since it's a depreciating asset? Thank you kindly. Mark Like most people, Mark is probably attracted to the lower monthly payments of an auto lease. But, even with the lower payments it's usually better to buy. There are a couple of reasons that's true. You don't build up equity in a leased auto. You'll also be prone to trade cars more often and you give up flexibility if you need to get rid of the car quickly. Mark's question points to the main reason why leasing isn't the best deal. A car is a depreciating asset. And a car depreciates more quickly when it's newer. A $15,000 car will lose approximately 25% of it's value in the first year. From year two through year six the car will lose between 6 and 9% each year with the bigger losses in the earlier years. Once you lease an auto you're much more likely to drive a new car every few years. And the first miles are the most expensive that you can put on a car. Your cost of ownership drops dramatically if you keep a car 6 or 7 years. For instance, if you drive 12,000 miles per year, the depreciation alone during the first year on a $15,000 car will cost you 31 cents per mile. By the time you get to the sixth year those miles only cost 7 cents each. Clearly those first couple of years are very expensive ones. Let's take a look at a fairly typical dealer ad. It offers a popular new model for $13,998 with 1.9% financing or a four year lease with $1,000 down and monthly payments of $249. If Mark takes the lease deal he'll pay a total of $12,952 over the 48 month period including his $1,000 down payment. So he's pretty much paid for the entire car. But, when the lease ends he won't own the car. He'll be required to turn it in. And, if he's put on more mileage than the lease allows or the car shows any unusual signs of wear, Mark will face extra charges. Suppose he chooses to buy the car instead. He'll spend $13,508 over a 48 month period. That assumes a $1,000 down payment and the 1.9% financing. His monthly payment would be $281. Not much more than the lease. Let's further suppose that Mark's credit isn't good enough to qualify for the 1.9% financing. We'll assume that he pays today's average rate of 8.4%. That would bump his monthly payment to $319. That's $70 more each month than the lease, but he'll be building equity in the car. The big advantage to buying comes at the end of the 4 years. He'll own the car outright. It will be worth approximately half of it's original $13,998 purchase price. So he'll end up with an asset of about $7,000 that he can continue to drive. If he had leased there would be few choices. He could buy his old car from the leasing company. That would mean adding a couple more years of payments. He could be paying 6 or 7 years on the same $14,000 car! Or he could turn the car in and go find something else. Probably another lease. And he'd join the ranks of those who will always be driving new, but expensive cars. Maybe Mark is concerned with the reliability of a four year old car. Most cars can give more than four years of dependable service. But let's buy an extended warrantee that would cover the car until it's six years old for an additional $850. So instead of signing a new lease at $250 per month, he's spending about $35 a month for the extended warrantee. In the fifth and six year he'll have saved $5,100 on lease fees plus he'll have his old car to use as a down payment for a newer car. Besides the ownership issue, a lease could set Mark up for a nasty surprise. Sure, he expects to drive the car for four years. But everything doesn't always go according to plan. A lost job or sick child could make that car payment too big to handle. If he should need to get out of the deal early, it's harder to terminate a lease. Most carry a hefty penalty if you want to turn the car in early. Some leases can be sold, but Mark would still be hurt financially. Selling any car in the first year or two is costly. Owning the car does give him more chances to get a better price. OK, one final argument. What happens if Mark can only afford the $249 per month. Maybe $319 is too much for his budget. The correct answer for Mark still isn't to lease. It's to find a car that he can buy that fits within his budget. It might be smaller. Maybe used. But at the end of four years he'll own a car instead of walking away from the dealership empty handed. Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher website www.stretcher.com/save.htm You'll find hundreds of free articles to stretch your day and your dollar! More >>

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Posted under Simple Savings
05/07/2010
IconSurviving Layoffs The Dollar Stretcher by Gary Foreman gary@stretcher.com I am frustrated by stories on conventional financial planning. I have been "downsized" three times in my career and suffered a major setback each time, so the usual planning doesn't succeed. Also, technical jobs are few and low-paying in my area so it's harder to come back each time. A data center where I worked was closed in 1990 and it took me nine years to work my way back up to the same income. Plus, I had to "eat" my 401(k) portfolio to survive. then of course I was penalized by the government in extra taxes. Just this month, my current company downsized with no notice and I was laid off at 53. Luckily I have a good emergency nest egg, but my new job will be a $2.50 per hour pay cut. The advantage is that I'm switching to a health care company where layoffs don't seem to happen, but again, I'm working my way back up. Any helpful hints on surviving in the New Economy, where job security is nil? Thanks! Nick T. in Sioux Falls, SD Nick is not alone. Nearly 150 million people work in the U.S. About 12 million of them experienced some period of unemployment last year (U.S. Dept of Labor). He has already taken the first step. That's recognizing that he's responsible for providing his own security. Both in his career and in his financial affairs. An emergency fund is a necessity. Fortunately, Nick has accumulated one. Without it any job loss will be a struggle. In fact, credit counselors say that about half of their clients were doing fine until they faced a job loss or medical crisis without savings. Granted, saving money isn't always easy. But if you're spending all of your income now, you will not survive the lower income that follows a layoff without serious financial problems. 401k's are a good savings tool. Even if you have to take money out early like Nick. Remember that some of that money was contributed by your ex-employer. And that it's been growing without taxes. So even with the early withdrawal penalty, Nick was ahead of the game. As much as possible, invest your 401k in something besides your company's stock. That way if the company has trouble you won't lose your job and your savings. Nick would be wise to routinely try to figure out how he'd honor his commitments if his paycheck were replaced by an unemployment check. The U.S. Bureau of Labor Statistics (BLS) study showed the median length of unemployment was a little over 12 weeks. So his plan should cover at least three months of lower income. Always try to avoid any commitments that you couldn't make if you lost your job. You might want a new car. But if you couldn't cover the payments during a layoff, you could lose it and your good credit rating, too. If you are carrying credit card balances you might want to get credit insurance. It's usually not a good deal, but if you suspect a layoff is coming it will continue to pay your monthly minimums while you're unemployed. Don't wait until you fall behind to contact your lenders. As soon as you lose your job talk with them. Some may offer to reduce your minimum payments until you're employed again. If you can't keep up, consider credit counseling. It will affect your credit rating. But continuing to fall farther behind or a bankruptcy would be worse. Expect to not only change companies, but also to change careers during your life. Very few career paths will remain the same for three or four decades. And the jobs that offer more advancement are the ones most likely to change. A BLS survey shows that about 45% of displaced workers received advanced written notice that their jobs were going to be eliminated. Unfortunately Nick wasn't one of them. But there are often warning signs. When you do the same work as younger, lower paid workers you're in jeopardy. Also, watch your company for signs of trouble. A company that struggles for earnings each quarter or a change in management could be a sign of impending layoffs. Check job openings in your field even while you're employed. A lack of openings isn't good. Especially as you get older and farther up the pay grade. Let's face it. A higher salary makes you less attractive to prospective employers. BLS studies show that older workers have a harder time finding comparable employment after a job loss. Continually learn new skills. As jobs change, so must you. What will you need to know to hold your job in three years? And do you have those tools or do you need to learn them? Be realistic in your expectations when searching for a new job. Of the people who lost their jobs 24% took a pay cut of 20% or more. Don't turn down a lesser paying job because you're holding out for something that doesn't exist. Nick has proved that you can survive in uncertain times. It's often a challenge, but it can be done. Let's hope that his new job is a great one! Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website www.stretcher.com/save.htm . You'll find hundreds of articles to help you stretch your day and your dollar! copyright 2002 Dollar Stretcher, Inc. All rights reserved. Permission granted for use on DrLaura.com More >>

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Posted under Simple Savings
05/07/2010
IconSummer Cooling The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher, What is the best way to save on cooling bills? We live in an 1962 house that gets direct sun and no shade. More insulation in the attic? Gail in Texas Gail's right. It's that time of year again. When the temperatures rise and shade is a wonderful relief. What can she do to reduce those cooling bills? Experts say that the main source of heat build-up in your home is sunlight being absorbed through the roof and walls. A secondary source is appliances generating heat inside your home. We'll begin by investigating 'passive coovling'. That's using natural methods to reduce the amount of heat in your house. According to the U.S. Dept. of Energy about a third of the heat in your home enters through the roof. Even white colored shingles absorb 70% of the solar radiation that hits them. One way to increase reflection is to use a roof coating. There are products for different types of roofs. Gail will find them at her local home center. Built in 1962, Gail's home was constructed when insulation wasn't a major consideration. So she'll want to make sure there's enough in the attic. Fortunately, insulation is not that expensive. And adding it is a simple do-it-yourself project that doesn't require special tools or training. Gail should also make sure that the attic has enough ventilation. Hot air rises. Vents in the eaves will allow cooler air to enter. A ridge vent or attic fan will allow the hotter air to escape. Proper attic ventilation can reduce cooling costs by 10%. Homes with darker colors will absorb more heat. Whether Gail is choosing new shingles or an exterior paint she'll want to consider lighter hues. She mentioned one common method of passive cooling: shade. Trees, especially on the south and west, can block enough sunlight to reduce her bills by 30%. Unfortunately for Gail, it takes time to grow shade trees. So she'll need patience. In the meantime, she might want to consider keeping the drapes closed during daylight hours. Awnings can also block sunlight. And reflective window tint will pay for itself in a short time. Speaking of windows, Gail will want to make sure that windows and doors are properly sealed. Also pipes or anything else that enters through the walls. Caulking is inexpensive and pays big dividends. Newer windows are much more energy efficient. Unfortunately, the energy saved will not pay for new windows in the short term. Once Gail has blocked and reflected as much sun as possible, she'll want to give her air conditioner a check-up. A professional should service the unit each spring. Contact your local electric company. They often have special deals or even pay for the inspection. While Gail's investigating, she'll want to check for any duct leaks. No sense filling the attic or basement with cool air. She may also want to consider insulating the ducts. Next check the a/c compressor outside. It needs room to breathe. The heat removed from your home is exhausted there. Don't trap it with overgrown bushes. Of course all shrubbery isn't bad. Your a/c unit runs cooler if it's in the shade. So plant bushes close enough to provide shade, but far enough away so that the air flow isn't blocked. Clean or replace dirty a/c filters monthly. This simple step will improve efficiency dramatically. Thermostats should be set at 78 degrees. A six degree higher setting will reduce your cooling costs by 20%. Inside Gail will want to make maximum use of fans. Circulating air will feel 2 degrees colder than it really is. If ceiling fans aren't practical Gail can pick up inexpensive room fans. She may also want to consider a minor room make-over for the summer. Replacing warm colors (browns and reds) with cooler colors (blues and greens) sets a psychological tone. Just changing throw pillows could be enough to encourage some cool thoughts. In drier climates like the southwest, Gail might want to check out an evaporative cooler. It's a little like a humidifier used for cooling. Their operating costs are about one fifth of an air conditioner's.Finally, avoid generating heat inside your home. Try to move cooking outdoors. Or use a crockpot and the microwave. Use the 'air dry' setting on your dishwasher. Any heat that's generated must be removed by your air conditioner. You'll pay once to create the heat and then again to remove it. Here's to a wonderfully cool summer for Gail and her family! Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher website www.stretcher.com/save.htm You'll find hundreds of articles to help stretch your day and your dollar! More >>

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Posted under Simple Savings
05/07/2010
IconD-I-Y? The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Gary, We've got water on the basement floor which came from the gas water heater. We two ladies don't know what to do and whether we must have a plumber, which we can ill afford. We're willing to make adjustments or simple repairs and would surely appreciate some guidance.Thanks so much for whatever you can suggest. Dee Most homeowners have found themselves in Dee's position. As an avid do-it-yourselfer I can relate to Dee's dilemma. The trick is to get enough information to make a good decision before you spend a lot of time and money. Dee will want to begin by trying to find out what's causing the problem. In this case, what's the source of the leak. She could start by looking at the water heater and the floor. Where specifically does she see water? On the tank? Near the valve or drain? Is it all over the floor? Or limited to one area? After Dee has checked the 'crime scene' it's time to do some research. In most cases she'll need to learn more about the appliance that's broken. Begin with friends and neighbors who have some do-it-yourself experience. Generally they're willing to share because others have helped them in similar circumstances. Dee can also explore the library. Most will have some guides to home repair projects. Don't be put off by older sources. Many old troubleshooting techniques are still valid. Check the periodicals guide, too. Magazines like Popular Mechanics have regular home repair columns. Many will take you step-by-step from diagnosis through repair. If you have web access you might not even need to go to the library. For instance you'll find many resources online. Two of my favorites are www.PopularMechanics.com and www.RepairClinic.org . Both include a good library of home repair topics. In Dee's case it's probably one of three things. The drain or temperature and pressure (TP) valve could be leaking. It could be condensation on the outside of the tank. Or the tank itself has rusted through and is leaking. How did I know that? The search feature on PopularMechanics.com led me to an article on water heaters. All I had to do was enter "water heater leaks". Armed with the additional information Dee will be able to look at the symptoms with new understanding. She'll probably have enough information to guess what's causing the leak. Next, she'll need to determine what it takes to stop the leak. More research may be required. She wants to know how the specific repair is made. Once she has an idea of how to fix it, she'll need to decide if she's up it. How tough is the job? Has she done anything similar? Does she have the necessary tools? If not, can she borrow or must she buy them? If she runs into trouble is there a knowledgeable friend that could help bail her out? Don't forget to check how accessible the repair is. Many a do-it-yourselfer has taken apart three things to get to the one that really needs replacing! If Dee wants to attempt the repair she should make sure that she understands any physical dangers involved. Electrocution or scalding shouldn't be part of home repair! She'll also need to decide what would cause her to give up mid-project and call in a professional. Before beginning find sources for any needed parts. She doesn't want to find out too late that she can't get a replacement part. Often the same place that you'd call for a service person also sells parts. Dee will want to accumulate a few basic tools. She'll find that many simple home repairs only require common tools. If she faces a job that does require specialty tools, she might want to rethink tackling it herself. Special purpose tools are often expensive. They're also a warning sign of potential difficulty. Even if she goes to a professional at this point, she still is much more knowledgeable about the repair and less likely to be ripped off. Before she agrees to a service call, there's one more question to answer. Is the appliance worth repairing? RepairClinic.com suggests that if a repair is likely to cost more than 50% of an appliance that's more than 6 or 7 years old, it might be better to simply replace it. Obviously, that's a generality. But, it's certainly something to consider before you have a repair technician come out and pay for a service call. Can Dee repair her water heater? It probably depends on where the leak is coming from. But a little work before calling a plumber could help her make a dollar-wise decision. Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher website www.stretcher.com/save.htm You'll find hundreds of articles to help stretch your day and your dollar. More >>

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Posted under Simple Savings
05/07/2010
IconCorrecting Your Credit Report The Dollar Stretcher by Gary Foreman Dear Gary, My student loan went into default. I called the collection agency in January, 2001 to make payment arrangements, which I have been making religiously. I was told that after 12 months of payments I could be considered for financial aid programs. I called about two months ago and asked them about my account and they said that it was being rehabilitated and that the credit bureaus will be notified so it wouldn't show that the loan is still in default. We decided to buy a car and finance it. We couldn't because the student loan still showed in default. I called the collection agency for an explanation. They said a payment back in July was two days early so the loan was reported late a second time. I didn't receive any letters from them about this. Any suggestions? What should I do? Thank you, Connie Connie has found out just how important your credit report is. It's used when you apply for a mortgage, car loan, credit card, or want to rent an apartment. Credit reports are kept by Credit Reporting Agencies (CRA's). They collect information from lenders like the people who hold Connie's student loan. The CRA's organize the information so that when you want to borrow money, a potential lender (like Connie's car dealer) can request your history from the CRA. A federal law called the Fair Credit Reporting Act (FCRA) controls how your information is collected, used and corrected. The three major credit reporting agencies are: Equifax, PO Box 740241, Atlanta GA 30374-0241; 800-685-1111 Experian, PO Box 2002, Allen TX 75013; 888-experian Trans Union, PO Box 1000, Chester PA 19022; 800-916-8800 Independent studies indicate that about 70% of all credit reports contain errors. And about one in four reports have an error big enough to cause credit to be denied. In fact, the Federal Trade Commission advises checking your credit report before making any major purchase. That will allow you to correct any errors before a potential lender asks for your report. So what should Connie do? First, she'll need to gather some information. Is her report showing her late once and still in default? Late once and now current? Or is it showing her late twice? Since Connie was denied credit because of her report, the company that denied her the credit must tell her which CRA they used to obtain her information. And because she was denied credit, Connie has a legal right to a free copy of the report as long as she asks for it within 60 days. Unfortunately, the credit reporting agency is not required to seek out errors in her report. Their only responsibility is to list what's reported to them by creditors, include any statements about errors from borrowers and correct any errors found. So Connie is going to have to take the lead to get things straightened out. Once Connie receives the credit report she'll need to determine whether the entries are correct or not. Accurate information will stay on her report for years. Most items will remain on file for 7 years although bankruptcies show for 10 years. If Connie's payment was received early, then it cannot be reported as late. But she'll need to be able to prove it. She'll want to contact the credit reporting agency by phone and by registered or certified mail. Her correspondence should state specifically what the error is and provide proof to support her claim. The agency is required to investigate the claim within 30 days. They must also forward any relevant info to the lender involved. Connie will also want to notify the lender by phone and by mail. The lender must also investigate the claim. Both the company providing the inaccurate information and the CRA are responsible for correcting any errors. And, if an item is incomplete, the CRA must include additional relevant information in Connie's file. For instance, if she was late but is now current the report can't just show her account as delinquent. Once the investigation is complete the credit reporting agency must send Connie a copy of the report. If there was an error and Connie asks, they must also send revised copies to anyone who has received Connie's report in the last six months. Like the car dealer. If Connie feels either the lender or credit reporting agency isn't responding she can report them to the Federal Trade Commission. To register a complaint with the FTC call 1-877-FTC-HELP. Connie shouldn't get their hopes up. The FTC will only look at complaints if they find a pattern of abuse. They will not arbitrate individual complaints. Hopefully Connie will be able to get any errors cleared up with a minimum of difficulty. Unfortunately if she disagrees with either the CRA or the lender there isn't much that she can do that's not expensive and time consuming. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website http://www.stretcher.com/save.htm You'll find hundreds of free articles to stretch your day and your budget. Permission granted for use on DrLaura.com More >>

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