Surviving 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 >>

Summer 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 >>

D-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 >>

Correcting 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 >>

Guilt Free Vacations The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher, I am looking for guidelines on how much money to spend on travel/vacation. We are a family of three living on about $45,000 per year. Twice each year my son and I travel to see my family. On one of those trips my husband accompanies us. We spend almost no money once there. So that is 5 round trip plane tickets each year. In addition, I would like for the three of us to take a family vacation each year. My question is how much is reasonable to spend total? Are there any rules-of-thumb? Percentages or something? We have no debt other than our home and are vigorous savers, which leads to guilt when spending. So I want to know how much is reasonable to spend so that I don't feel guilty about it. Dora Dora's right. Feeling guilty about your vacation spending sure can ruin a good time! According to the Travel Industry Association we spent $584 billion on travel last year. The average family will spend in excess of $2,200 a year on an extended vacation. Despite a recession and terrorist activities, 57% of Americans plan to take a pleasure trip during the first half of 2002. That adds up to a lot of vacation spending! But, average spending numbers can be misleading. In many ways travel is a form of entertainment that happens away from home. And every family has different patterns of recreational spending. For instance, some people prefer to spread their activities throughout the year. They spend on movies, sports and other entertainment regularly. Other families save all year and splurge on a vacation. Still others have little to spend and make the most out of long weekends while staying close to home. The goal is to get the most enjoyment from the money you spend. So choose what works best for you. Can Dora come up with an amount that should be budgeted for vacations? Sure! According to the U.S. Statistical Abstract a little less than 10% of the money we spend goes to recreation. So, in Dora's case that would be in the $4,000 to $4,500 range. Remember, that includes all forms of recreation so she'll need to subtract money going for other forms of entertainment. While it's possible for Dora to apply that number to her family, it might not be a good idea. A better method might be to see how their recreation spending fits in with the entire budget. For instance, Dora's family doesn't have a car payment or credit card debt. So there's more money available for things like vacations. She probably can afford to spend a little more than average. There's another way for Dora evaluate their spending. That's to look for the warning signs that you're spending too much. A big one is paying for the vacation after you've taken it. It's hard to have a good time when you know that you're spending money that you don't have. Saving the money before the trip can free you to thoroughly enjoy yourself. Another warning is when saving or paying for your vacation becomes a burden. Providing food, shelter, education and health care to your family comes before trips to visit family and friends. Once Dora's convinced that she's not spending too much for vacations, what can she do to relax and enjoy her trips? Know your budget before you leave. Plan your spending for transportation, lodging, food, amusements and souvenirs. If the plans are reasonable there's no reason to second guess them later. Remember that the rules are a little different on vacation. Eating in restaurants will be expensive. Sometimes you won't be able to find the absolute cheapest motel in town. And, that's ok. As long as you're staying within your budget and not being foolish don't fixate on how much you're spending. Don't let unnecessary money concerns ruin a good time. That's not to say that Dora should abandon her frugal life style. There's nothing wrong with a lunch of sandwiches at a city park or scenic turnoff. Her family may find that needless spending makes them uncomfortable. Finally, Dora might want to earmark some of the money that she routinely saves for use on vacation. That will help her to stay disciplined during the year. And she'll be more comfortable spending money that's been specifically saved for this purpose. Hopefully Dora will make some wonderful memories with her family. Bon Voyage! 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 stretch your day and your dollar. More >>

Overcoming Financial Fear by Joan Sotkin www.ProsperityPlace.com Fear is one of the most prevalent emotions that people express about their financial position. Some are in a panic, others have an underlying fear, or free-floating anxiety, about their financial situation. On a day-to-day basis, there is often anxiety about not having enough for necessities, either today or in the future. When it's bill-paying time, panic, dread, and even physical discomfort are not unusual. Taken to the extreme, people contemplate suicide as a way out of their financial problems. Often, people just can't see a way out of their financial situation. Feelings of being trapped and frustrated are common. Internal dialog often includes, "What's the matter with me? Why can't I get my financial act together when so many other people can?" Let me assure you that no matter what your level of financial anxiety, there IS a way out. A powerful antidote for fear is action. Taking action allows you to feel more in control of your situation and you can work towards a solution. As long as you allow fear to paralyze you, nothing will change. If you keep on doing what you are doing, you will keep getting what you already have. Whatever you are doing now is your habit. You probably have a financial pattern that keeps repeating itself. The goal is to break the habit and create a new, healthier habit. Is it easy? No. You've created a groove and your life goes around and around in that groove. Creating a new groove takes a strong willingness to change and the determination to work through your own resistance. The longer you have been in the grove, the more effort it will take to get out of it. Can you do it quickly? Probably not. It takes time to work through old patterns, and it is a complex process. But if you don't start, you will never move forward. It's not as if you have to wait until the process if over to see change. Change happens the minute you start. There is one thing you can be sure of: if you set your mind to become comfortable financially, and you are willing to work on it a little every day, you can do it. I'm going to ask you to agree to believe one thing: There is a solution for you and financial comfort and security are possible for you. You don't have to know how it is going to happen, you just have to agree to believe that it is possible, and then to act as if it will happen. Here's where the action part comes in. You are going to get yourself ready for financial success. Some of your actions will appear to have nothing to do with money. That's because your financial situation is an extension of your thoughts, beliefs and emotions (TBE's) as well as the energy you generate -- in all areas of your life. While you are working through the process, you will have to deal with the voice inside that is going to try to keep you where you are. Worry and fear will keep coming back. When you feel yourself starting to worry or give in to fear, it's time to do something else. After all, the worry and fear are only in your mind. You have the option of filling your mind with something else. When you thoughts are positive fifty-one percent of the time, you are moving in a positive direction. Affirmations are great. They can help you reprogram you subconscious to act on a more positive set of beliefs. Here are some actions I suggest you take. Take an inventory of your life and current financial situation. Raise your awareness about where you are so you can evaluate your current position and create a plan for change. Take a good look at your money - your earning and spending. Doing this, no matter what the situation, allows you take control of your financial future. Set realistic goals based on your personal values. This helps you create a strategy for change that will be in tune with who you are -- and who you want to become. Learn about money and investments. For a lot of people, this isn't easy. There seems to be so much to learn. Start with small things such as reading the financial section of a newspaper or magazine. Don't try to understand everything, just read it to get familiar with the terminology. Ignore the part of you that wants to run away. Wealthy people are familiar with the money world. Clean out the old. Get rid of the clutter in your life that keeps you connected to your past. Make way for a positive future. Talk to successful people and read biographies of those who have overcome obstacles to create success. Be inspired by others who have accomplished what seemed impossible. Connect to other people. You don't live in a vacuum. Aloneness is one of the greatest contributors to financial fear and discomfort. You may have to overcome a tendency towards isolation. Money comes from people and the more people you connect to, the more apt you are to create a financial flow. If you are in serious financial trouble, see a debt counselor or go to a Debtors Anonymous meeting. At these meetings, they deal with issues such as under-earning, compulsive spending and debting, and other causes for financial discomfort. See the resources at the end of this article for information about DA and meetings, online and off. Say Yes! Get used to saying yes to yourself and seeing things in a positive light. This may mean overcoming years of negative thinking. The screen saver I have set up on my computer is the word Yes! I see this many times a day. When you have doubts about where your life is going, assure yourself, "You can do it!" The fact that you are reading this means that you are looking for a new way. The steps above will get you started. Joan Sotkin is the creator of ProsperityPlace.com , author of "Build Your Money Muscles:9 Simple Exercises for Creating Wealth Prosperity" and "Prosperity Is an Inside Job" and publisher of Prosperity Tips, a free monthly e-zine. Visit ProsperityPlace.com . Copyright copy; 2003 by Joan Sotkin. Permission granted for use by DrLaura.com. More >>

Payback Time The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Gary, I just finished reading the letter from "Tina", who was upset that she was being "harassed" by a collection agency. Could you address the other angle of this? I'm 32 and I guess I have a big chip on my shoulder about people who run up debts and are then outraged that they would have to pay it back. I scrimped and saved in order to pay off my home mortgage and live debt free currently. In the past, I've had acquaintances who made me feel cheap because I was driving a 10 year old car. I've been called cheap, tight and stingy when I made dryer sheets, opted to eat at home rather than out, and made Christmas gifts or purchased them on sale throughout the year. It was some of these same acquaintances that lived penny to paycheck, asked to borrow money and complained that they couldn't afford a gallon of milk for their children. I want to scream when I hear them complain that creditors should "get off their back". Maybe they shouldn't have gotten into debt in the first place! Everyone makes mistakes, but I hear too much of this. Please address this side of the coin as well. Nancy Nancy makes an interesting point. Living within your means isn't always popular. Sometimes people imply that you're less of a person for being frugal. And, that makes it especially hard to listen to their complaints later when the bills come due. There's more than just hurt feelings involved. Approximately 1.5 million bankruptcies occurred in the past twelve months. According to bankruptcy.org "the average American family loses about $400 annually to bankruptcy filings". And that doesn't include the other expenses we all face when people don't pay their billsStatistics from The American Banker's Association show that 2.4% of all outstanding loans and over 5% of all credit card accounts are delinquent. That means that everyone who borrows money will pay slightly higher rates to compensate for the increased risk to the lender. Nancy's point is valid. People should be expected to live up to their obligations. When we borrow money, we agree to pay it back within a certain time and generally with interest added. We don't have the right to break that promise just because it becomes inconvenient later. And whining about it isn't fair to the people around us. However, that doesn't mean that creditors are allowed to abuse or harass debtors. Federal law prevents that. So if a collection agency is truly abusing someone they can be stopped. But we would probably also all be happier if people considered the financial effects of decisions they make. Divorce is an example. Many people would argue with me, but studies are pointing to divorce being a major cause of poverty. Take, for instance, a study done at the University of Michigan. It showed that household income for a family with children went from $43,600 before divorce to $25,300 after the split. That's a lot of money to pull out of any family budget. Pretty hard to avoid financial trouble down the road. I'm not saying that someone should stay in an abusive relationship. But in many cases marriage counseling could be a very good financial investment. In any event, considering how your finances will be effected would certainly be smart. One thing that Nancy and all of us need to remember is that there are different reasons why people are in financial trouble. Many do get behind because of foolish spending. But that's not the case for everyone. People who provide non-profit credit counseling tell me that about half of all the debtors who come to them did create their own problems by simply spending more than they earned. But, they also say that the other half generally were doing fine until a medical emergency or other unexpected crisis threw them into debt. While we want people to be accountable for their actions, we also want to make sure that we don't harden our hearts to everyone who struggles with bills. There's a temptation to dislike people who complain about situations that they appear to have caused. But it's bad for us to be without compassion. And, expecting responsibility and acting compassionately aren't incompatible. In fact, suggesting ways that people can spend less or make more will probably cut down on the whining and might help them to solve their problems. Those who aren't interested in hearing possible solutions are probably chronic complainers that can safely be ignored. Should Nancy speak up? Only she can decide whether a relationship is strong enough to handle that. But it is tempting to tell someone who complains about bill collectors that 'cheap' methods could help solve their problem. After all, true compassion is helping someone out of a bad situation. Nancy could be holding the key to their freedom. 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 stretch your day and your dollar. Copyright 2002 Dollar Stretcher, Inc. All rights reserved. Permission granted for use on DrLaura.com More >>

Summer Break for Mom The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher, I stayed home as a parent until my youngest started 1st grade. We happily survived on one income. Now I am an educational assistant in the same school system, same hours, same days off, as my two daughters. We have grown accustomed to my paycheck appearing every two weeks. This will end when school stops. So my question is: do you have any tips on how to handle the summer months? (more time at home, less money). Curious As to How the Summer Will Go Curious has a lot of company. Many mothers arrange their work schedules so that they can be home with their children when school is not in session. And for those who are able to take the entire summer off, getting through those months without accumulating credit card debt is always an issue. Let's see if we can't suggest some methods to help Curious survive the summer. The most obvious answer for Curious is to earn some extra income during the summer. Creating at-home work for just a few months is challenging, but not impossible. The first opportunities to consider would be those that use the skills she applies working at school. One possibility would be to take in other kids during the day. Curious could probably find some mothers who will continue to work during the summer and need a daycare option for just the summer months. Naturally she'd need to consider the appropriate safety and legal issues. Another strategy would be for Curious to adjust her income so that it's level throughout all twelve months of the year. She can total the amount that she'll earn during the school year and only allow herself to spend 1/12th each month. The extra during the working months could be set aside in a separate savings account. By the time summer arrives Curious would be able to pay herself out of the saving account. Just like she was getting a payroll check. Unfortunately, it's too late to start for this summer. But if she'll begin the program at the beginning of the next school year she'll be in better shape a year from now. She can consider ways to control expenses. The first step is to shift her expenses to the winter months wherever possible. Her goal should be to actually spend less when she's not working. She must avoid any payments that can't be covered by her husband's pay alone. One strategy is to prepay bills before the summer. Curious can either pay the bills in advance or simply set money aside for summer bills. She might find it very liberating to know that the car payments for July and August are already handled when she begins her summer break. She'll also want to save ahead for known summer expenses. If a vacation is planned the money should be accumulated during the school year. The same for any day camps or day trips that are planned. This late in the school year Curious will need to concentrate on things that she can do to reduce spending this summer. She has an opportunity to use the time that's not spent working to 'manage' her household expenses. If Curious considers saving money at home as if it were a job, she can actually save significant amounts. If she doesn't believe it she might want to visit the library and read "Miserly Moms" by Joni McCoy. A former purchasing agent, Joni found that she was actually ahead financially by applying her skills at home rather than at the workplace. Groceries are an excellent place to start. Convenience foods save time but are expensive. Cooking from 'scratch' can reduce a grocery bills big time. Curious could also take on some home repair projects (like painting) that might require a professional if left to a busier time of the year. It's also a good time to review auto, home and life insurance policies to make sure that you're getting the best rates. Curious and the kids need to recognize that more time doesn't necessarily have to mean more expenses. Free time should be just that: free. Every minute doesn't need to be filled with paid amusements. In fact, until recently people were expected to entertain themselves when work, school or chores weren't consuming their time. That means looking for creative ways to find free entertainment. Depending on their interests, they can use libraries, museums, athletics and other activities to have a great time. She'll need to search out ideas from the local paper and other sources. But she'll have the time to do that. Can Curious make this work? Sure! But her family will need to look at it as a twelve month challenge. Not just a summertime problem. Here's to a wonderful summer for Curious and her daughters! Gary Foreman is a former Certified Financial Planner and purchasing manager. He currently edits The Dollar Stretcher www.stretcher.com/save.htm website. copyright The Dollar Stretcher, Inc. 2002 - all rights reserved. Permission granted for use on DrLaura.com More >>

Reducing Your Mortgage The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher, I once heard that you can cut a mortgage in half by simply making one extra payment per year. Is this true? And does this work with any loans like...car, personal and student loans? Thanks. Tanya P. Like many of us, Tanya would like to get the mortgage paid off in something less than 30 years. And, she's willing to pay a little more than promised to accomplish that goal. So let's see whether one extra payment a year is enough to get the job done. Tanya does have the right idea. Especially in the early years of a mortgage. Her monthly checks repay very little of the principal at first. It will be years before she's made much of a dent in the amount owed on the mortgage. Let's take a standard 30 year, 8% mortgage. At the end of the first year, Tanya will still owe $991.65 for every $1,000 she borrowed. She will have written checks for $88.08 and only reduced principal by $8.35. So for the first year for every dollar that she paid, less than one thin dime went to repay the amount she owed. So Tanya's strategy is a good one. Put more of each payment to work reducing principal because there's less interest owed. But unfortunately she won't be able to cut her mortgage term in half with one extra payment per year. At least not at today's interest rates. In fact rates would have to be 17% for that to happen. But that doesn't mean that it's still not a valuable tool for Tanya to consider. One extra payment per year on an 8% mortgage would move her payoff on a 30 year mortgage up seven years. Not a shabby reduction. An alternative would be to add 1/12th of a payment to each monthly check. That would spread out the extra payment over the year. Doing that would pay off the mortgage a couple of months sooner than the extra annual payment. So one extra payment wouldn't cut the mortgage in half, but it would cut about 25% off of the term. What about other debts? The idea is the same. Paying additional principal means that more of each future payment is reducing even more debt rather than just paying the interest owed. One major difference. The longer the life of the loan the bigger the effect of any prepayments. Paying extra principal on a 30 year mortgage makes a big difference. The difference on a 3 or 4 year auto loan isn't so significant. For comparison, we're going to assume an 8% 48 month car loan. For every $1,000 borrowed the monthly payment would be $24.41. The payment is higher than for the mortgage because the $1,000 that was borrowed is being repaid over a much shorter period of time. For instance, in the first month that $24.41 payment actually reduces the amount owed by $17.75. But adding one extra payment per year will only pay off the loan 3 months early. So paying extra principal on an auto loan won't make a huge difference. But that doesn't mean that the strategy only works for mortgages. Credit card debts are another fine candidate for extra payments. Most credit cards are designed to keep you in debt forever. Many payments are as low as 1.5% of the amount owed. That means that you'll be paying only $15 per $1,000 owed. And if your interest rate is 15% (a typical rate) you'll be paying off that debt for 133 months or over 11 years. Even if you don't charge another cent or trigger any fees on the account. Doubling the $15 minimum payment to $30 would cause the loan to be repaid in just 43 months. A big difference. So Tanya's on the right track. Paying extra can make a difference. To get the biggest bang for her buck she should use extra money to pay off loans that run for many years like mortgages. Or ones that carry a high rate of interest like credit cards. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website and newsletters. You'll find practical information to help you stretch your day and your dollar. More >>

Dangerous Information The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher, Someone told me you weren't supposed to put your social security number on your checks. Also you shouldn't have your number on your driver's license since that number is used for a lot of private things. Can you give me some input on this subject? Marsha Marsha has asked a question that we should all be considering. How free should I be in releasing my social security number? And, frankly, what you're about to read isn't going to make you comfortable. Originally social security numbers were not to be used for identification. It even said so on your social security card. But no law was ever passed to support that. Recently, as our society has grown more complex the trend has been to use your social security number in many more places. They've cropped up on driver's licenses, mailing labels, student ID's. Surprisingly, the Social Security Administration has no legal authority to keep anyone from asking for your number. Nor can they control what someone does with it once they get it. To further complicate matters, some people want to use social security numbers to catch bad guys. The 1996 Immigration Reform Act required states to get a valid social security number before issuing a driver's license. The goal was to catch illegal immigrants. Some states used that change to move toward using social security numbers as a license number. Others have proposed requiring the use of your social security number for other government services. The goal was to catch 'dead beat dads' and other criminals. An admirable goal, but questionable from a privacy point of view. Currently, there are two problems with the way social security numbers are being used. The first is that many organizations use your social security number as a password. Knowing the number gets you access to the account. Clearly that makes it easy for anyone who knows your number to pretend to be you. The second problem is that many places use your social security as an ID number. Banks, hospitals, brokers and others all find it convenient. Names and addresses can change. But, your social security number remains the same. So that number makes it easy to identify you. But it also means that your number isn't nearly as private as it once was. And that's created an entirely new crime called 'identity theft'. According to the U.S. Secret Service identity theft crimes cost about $1 billion last year. It's estimated that there are 500,000 new victims yearly. Identity thieves will open a new credit account using your name. All they need is your social security number and date of birth. To keep you unaware of the crime they'll have the bills sent to their address. You'll never know about the account. Naturally they won't pay the bills and you'll be left with the bad credit entries. Thieves can also use your social security number to change the address on an existing account. They'll request an additional card and begin to make charges but you won't see any statements. And it's not just credit cards. Many savings institutions will allow a caller to transact business in an account if they have the name and social security number. They can transfer money out of your bank account without ever setting foot in the bank. Pretty scary, huh? And it's not hard to steal your social security number. It's often listed on billing and investment statements. All it takes is the theft of one statement from your mailbox. Would you even notice that it was missing? What's interesting is that in most identity theft cases the police don't consider you to be the victim of a crime. That's because the card issuer is liable for the fraudulent bills. Unfortunately your reputation doesn't have a dollar value. So how can you protect yourself? The American Association of Retired Persons suggests that you do not print your social security number on your checks. They also advise that you not carry your social security card with you. But that's only the beginning. The real question is what happens when you want to do business with someone and they ask for your number. Private organizations can demand your number for almost anything. You can refuse to give it to them. But then they can choose not do business with you. For instance, when you move the utility company may ask for your number before they initiate service to your home. They can do a credit check without your number. And they will if you request it. But that will take longer. And you might not be willing to wait to get your electricity turned on. When someone asks for your social security number find out why they need it. Expect to provide it when you apply for credit. For anything else, you might want to consider refusing the request. You'll also want to know how they'll use your number once they have it. Will they access your credit file once and that's it? Remember, the information that you provide may not remain private. Even 'reputable' businesses have been known to sell blocks of social security numbers. There's no one right answer for all situations. Just a lot of grey area. But by considering the request you should have a reasonable chance to come to a good decision. Finally, check your credit report often. Anyone misusing your social security number will leave evidence in your credit file. They're just counting on you not to notice. Check your credit rating at least once a year. There are three main credit reporting agencies. By law they may charge you up to $8 for your report unless you have been denied credit due to their report within the last 60 days. Equifax: 800-685-1111 Experian (formerly TRW): 800-682-7654 Trans Union: 800-888-4213 Naturally you don't want to have to pay for the report. Consider it low cost insurance against the hassle of an identity theft. So, should Marsha provide her social security number? Only when she feels that it's really necessary. And she, like all of us, need to be alert for unusual activity. Gary Foreman has worked as a Certified Financial Planner and currently edits The Dollar Stretcher website www.stretcher.com/save.htm and newsletters. You'll find hundreds of free articles to stretch your day and your budget. Visit Today! More >>