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IconThe Check Out Check Up The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher, My family is really struggling with our budget. We are a family of five spending approximately $500 per month on groceries and household items. Do you think we could do better? I use coupons, buy only generic and sale items at the local grocery store. What else can I do?! Would I save more money or get more for my money if I shopped at the big warehouses like Priceclub? Pam According to the U.S. Statistical Abstract the average large family (five or more) spent $405 per month on food eaten at home. Pam and her family probably are a bit on the high side. So what can she do to reduce the amount she contributes to her local grocery store? The first thing to consider is the non-food items that end up our grocery carts. Most of us are in the habit of picking up cleaning supplies and paper products when we grocery shop. And that's a good way to boost your bill. At your grocer you'll find shelf after shelf of specialty cleaning products. Check the ingredients. They're all pretty similar. Most cleaners contain a combination of ammonia, vinegar, baking soda, bleach and a generous helping of good old-fashioned water. They also add a fragrance so that things smell clean after you've done your work. You can save some money by making your own cleaners. Recipes are available in books, magazines and on the web. Most are simple and just as effective as what you'd buy in the store. If you really don't want to mix your own, then at least locate a janitorial supply store. Most will sell to the public. They carry industrial strength and concentrated cleaners. You won't get pretty packaging, but you will get more cleaner per buck. Now on to the food in Pam's grocery cart. Next time you return from the grocery store take a look at what you bought. Pay specific attention to 'convenience' items. You won't find this definition in Webster's Dictionary, but it's the one that the food conglomerates use. When they call something a 'convenience' food, it means that they're going to charge big bucks and the consumer won't complain. In fact, we'll thank them for saving us some time! Examine your purchases. How much of your money is really buying something that you're going to put in your mouth and swallow? And how much is going to packaging, individual serving sizes and 'convenience'? I don't ever recall seeing convenience on a nutrition chart! If you want a shock compare the price per pound of a whole ham and the sliced ham at the deli counter. Sure, for some people being able to buy just a few slices justifies the higher price. But a little thought here could open up a whole new way to look at shopping. Pam mentions that she's using coupons. Depending on where you live coupons may be helpful. In some areas stores still double coupons or allow you to use both a manufacturer's and a store coupon on the same item. That can make a big difference and is well worth the time spent. But, even without doubled savings, coupons can help. Some families insist on nationally advertised brands. Coupons can reduce the name brand cost to the price of the generic equivalent. Warehouse clubs can be a help, too, but you need to be careful in how you use them. First, and this is obvious, don't buy food that you're not going to use. Buying more than your family needs is wasteful no matter how cheap the item is. We almost instinctively think that bigger is better. That's not always true. Secondly, do not assume that buying a large size will reduce your per unit cost. Sometimes it's true and sometimes it isn't. Manufacturers know that we assume that the 'large economy size' is the best value. And sometimes they take advantage of that. Always compare the per unit costs. Not only between the large and small package sizes, but between your local grocer and the big warehouse stores. Finally, Pam can take advantage of something that no professional buyer would be without. That's a price book. When a buyer gets ready to place an order they know when they've bought in the past, who they purchased from and how much they paid. That information is priceless. Pam doesn't need a fancy system to take advantage of the same information. A simple three-ring binder will do. Use one page for each item that you buy on a regular basis. As you shop compare the prices you see to the appropriate page in your price book. If the price you find is low, add a new line showing the date, store and unit price. And stock up on the item. You've found a bargain. But, often you'll find an item with a big 'sale' sign that's still more expensive than the low prices in your book. That's the time to buy only enough for current needs. It's not uncommon for people to save up to 20% on their grocery bills by using a price book. It sounds as if Pam is already starting to take control of her food spending. Here's to healthy diet and a healthy budget for her family. Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher website . You'll find hundreds of free articles to stretch your day and your budget. Permission granted for use on DrLaura.com. More >>

IconBoomer Caused Market Collapse The Dollar Stretcher by Gary Foreman gary@stretcher.com Gary,I recently read a book called "What If Boomers Can't Retire". The main concept is that about half of all baby boomers have retirement investments in stocks - IRA's, 401k's, mutual funds, etc. When boomers start retiring, those stocks will all start selling. Thousands and thousands of people selling stocks. Who will buy them all? There will be less working wage earners per retiree each decade, so they won't be buying as many shares. I would be interested in your thoughts on this. Larry Larry's concern is based on a basic rule of economics. If there are more sellers than buyers, prices go down. And, it is a fact that baby boomers will begin to take cash out of their retirement plans. But does that doom the stock market? Let's begin with some numbers. There were 77 million baby boomers born between 1947 and 1964. Or an average of 4.3 million per year. From 1965 to 1999 there were 140 million babies born. An average of 4 million per year. Not that big a drop. Next, remember that everyone won't sell at once. There's an 18 year span between the first and last boomers. The first ones will be starting retirement while the last ones are still in their peak earning (and investing) years. Baby boomers will live longer than their parents. Many don't plan on retiring at 65 and playing golf for 20 years. Some recent studies show that over half of boomers expect to work some during retirement. So they won't rely entirely on selling stocks to pay the bills. The tax laws also discourage stock sales. Many retirement accounts trigger taxes only when money is withdrawn. So boomers will delay selling as long as possible. The bottom line is that boomers will reduce their retirement savings at a slower rate that past generations. So the effect that concerns Larry will be diluted and happen over a long time. In fact, some retirement accounts will go to the boomers' heirs without ever being sold. Next, let's look at boomers retirement savings. They haven't invested everything in stocks. They have a mix that includes stocks, bonds, CD's, annuities and even their homes. That balance will gradually shift as they get older. If they're like previous generations, they'll slowly begin to sell stocks and their family size homes and put more of their savings in bonds and CD's for the income and safety. The shift will begin gradually before the first boomers even get to retirement. Some of the older boomers have already begun the process. The same free market that is the cause of Larry's concern also provides a solution. If stock prices fall fewer companies will offer new stock. So the supply of stock will shrink relative to the number of people. In fact, if stock prices fall below a certain level companies will begin to buy back their own shares. That will cause share prices to rise. Remember, too, that the U.S. stock markets are actually worldwide markets. And boomers aren't the only ones that tend to move as a group. Foreign investors are often either big buyers or sellers for a year or two. So far they haven't caused a market collapse. The long term trend of the stock market is much more closely tied to the health and size of the entire economy. The U.S. Census Bureau expects the domestic population to grow from 275 to 400 million in the next 50 years. So it's not unreasonable to expect the economy to keep growing. What should Larry do if he's a boomer thinking of retirement? His best strategy is to own a variety of assets. No retirement plan should be limited to stocks or any single investment type. Larry will be much safer if he owns a mix of stocks, bonds, real estate and CD's. The unforeseen events that will cause one type to go down will at the same time cause another type to go up. I would caution Larry not to count on Social Security to cover all his monthly expenses. Today there are 3 workers for every retiree. That will drop to 2 to 1 during the boomer retirement years. Current benefits cannot be maintained unless changes are made. Those changes are limited to benefit reductions for boomers, major tax increases for younger workers or a partial privatization of the plan. This is a hot political issue, but boomers will need to supplement Social Security if they want a comfortable retirement. A much bigger question for boomers will be did they accumulate enough savings before retirement. Using almost any measure a large number of them aren't saving nearly enough to support their current lifestyles. Hopefully Larry won't be among them. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website and ezine subscribe-dollar-stretcher@ds.xc.org . Permission granted for use on DrLaura.com. More >>

IconBuying a Refrigerator The Dollar Stretcher by Gary Foreman gary@stretcher.com Hi, I am in the market to purchase a new 25 cu. ft. side-by-side refrig./freezer. Is one time of the year better for sales? Should I try Ebay? Or what is cheapest method? Connie Connie asks a very good question. A refrigerator is not only one of the most expensive appliances you'll buy for your home, but it also consumes 20% of electricity you use every month. So a good decision now could save a few dollars every month for years. The experts I found say that you'll do best buying a major appliance during the winter months. No reason was given, but it might be that people are too busy paying off holiday debt to buy major appliances unless they have to. Of course, with something like a refrigerator the best time to buy is when your old one is still working. That way you won't be facing the cost of spoiled food and you'll have time to price shop. Connie should consider a three step approach. First, visit some local stores to see what's available. Get a general idea of pricing and what models and options she'd like to consider. Second, do a little research to narrow the search and compare prices. Only then is she ready to actually go buy her refrigerator. During her research, Connie will want to check repair records. It's hard to beat the information that Consumer Reports puts out. And, you'll find it free at most public libraries. Connie is wise to think of using the web to help her find a bargain. But Ebay might not be the place to look. A quick search under refrigerator only showed small under counter units and one commercial model. Even if Connie did find one at a price she liked shipping could be a major expense. But she will want to check out the websites for major retailers. Although she probably won't buy it online, she can get a very good idea of pricing. For instance BestBuy.com lists all of its side-by-side refrigerators on one page with basic size and price info. This is also the time for Connie to compare slightly smaller or larger units and to decide what features she really wants. For instance, a new side-by-side model will cost more to operate than a top freezer. Ice makers and water/ice dispensers are convenient but cost more. Once she's done her homework it's time to go visit some retailers. Before visiting the major national retailers it's probably wise to check out some alternatives. For instance a scratch and dent outlet might turn up a good deal. Connie might also want to check with rental centers. Often they have slightly damaged units that they're willing to sell cheaply. Remember that these units are sold as is. So make sure that you know exactly what's wrong and aren't missing anything important or expensive. She should also check out smaller local outlets. Many will meet the big boy's prices and offer more personal service. Don't forget that the initial cost of the fridge is only part of what you'll spend. Consider the operating costs. The yellow EnergyGuide labels are a great tool. The sticker will estimate how much each refrigerator will add to your electric bill per year. Remember that you'll probably keep a refrigerator 10 years or more. So a $25 difference between models is worth $250 over the appliance's lifetime. Once Connie has decided on a model it's time to find the lowest price. Don't forget that home improvement centers like Lowe's also sell appliances. And Connie doesn't have to limit her price shopping to physical stores. She can also use a published online price. A printout of the web page can prove handy. Now to negotiate with her favorite retailer. Most stores will match lower prices, including those found on the web. Simply ask the salesperson if they do. Even if their price is the lowest it doesn't hurt to ask if the listed price is their best price. And after Connie has negotiated the price ask for free delivery. If you haven't hit their rock bottom price yet they'll probably throw it in to complete the deal. Especially if you show a willingness to delay on the purchase. Connie will also be asked to buy an extended warrantee. But unless she's managed to choose a lemon, she really doesn't need the extra coverage. According to RepairClinic.com the average cost of an appliance service call is $120. Most extended warrantees cost quite a bit more. Gary Foreman is a former purchasing manager who currently edits The Dollar Stretcher website www.stretcher.com/save.htm and ezine subscribe@stretcher.com . Permission granted for use on DrLaura.com More >>

IconManaging Your Mortgage The Dollar Stretcher by Gary Foreman When I send in my mortgage payment and I send in more than the minimum amount, the return payment stub asks whether I would like the additional payment to go towards escrow or principal. Which direction would be the best? Jim Jim asks a very good question. How you manage your mortgage payments can make a big difference in your financial well-being. Let's begin with a little background about mortgages. Many of you will already be familiar with this, so just consider it a review. When you take out a mortgage you've borrowed money. And, you've agreed to pay interest to the mortgage company for the amount of money that you owe. On all but a few mortgages, you'll make monthly payments. Part of that monthly payment will go towards the interest that's owed for that month. Another part of the payment goes to repay the amount borrowed (called "principal"). Your mortgage payment may also include an "escrow" account. That's where the mortgage company collects an extra amount each month from you. Then when your homeowners' insurance or property taxes are due those bills are paid from money in the escrow account. If there is extra money in the account it may be returned to Jim periodically. But, if there isn't enough money to pay for insurance or taxes he'll be asked to make up the difference and increase the amount that he puts into the escrow account each month. Another part of your mortgage check could go to "private mortgage insurance" or PMI. If your down-payment was less than 20% you were probably told that you'd need to buy PMI. That's an insurance policy that pays the mortgage company if you default on the loan. Now let's look at whether any extra money should go to principal or escrow. And the answer is that depends on what he wants to accomplish with it. Perhaps he's afraid that the escrow account won't have enough money to pay for increased property taxes. Then he might want to put some extra in now so that he doesn't have to worry about coming up with the money later. But, if he's not concerned with the escrow account, he should earmark the extra amount to principal. The reason is simple. Prepaying your mortgage is one of the best ways to accumulate wealth. Consider an example. Suppose that Jim had a 30-year 7% mortgage with a monthly payment for principal and interest of $665. If he were able to put $1,000 toward principal next month it would shorten his mortgage by one year. Or, suppose that he'll be selling the house in 7 years. In that case, he'll have $1,700 more when he walks away from the closing table. Prepaying your mortgage is often the best investment you can make. You're guaranteed a rate of return equal to the mortgage interest rate. And, if you ever need to get the money back, it's fairly easy to take out a home equity loan or refinance your home. There are some other things that Jim should do to manage his mortgage. The first is to eliminate PMI as soon as he can. If his equity is greater than 22% federal law says that he cannot be forced to buy PMI unless he's been late with his payments. Jim will need to monitor this himself. There's two ways that his equity can increase. Either by gradually paying off the mortgage principal amount. Or, by the value of the house going up due to rising real estate prices. When he gets over 22% equity, Jim will want to contact the mortgage company and cancel PMI. This is also a good opportunity for Jim. He can take the money that had been going to PMI and redirect it to prepaying principal. His payments will remain the same, but his mortgage will begin to shrink. Jim also needs to manage his escrow account. Many communities give a discount if you pay your property taxes early. Or, penalize you if you don't pay on time. Make sure that the mortgage company is taking advantage of any discounts available to you. Remember that your mortgage is one of thousands that they manage and clerical mistakes commonly occur. It's also a good idea to regularly shop your homeowners' insurance. Just because it is being paid from the escrow account doesn't mean that you aren't allowed to find a lower rate and change insurers. Finally, be aware of the different types of mortgages available and refinance if that works to your advantage. The time when Jim could take a mortgage, make monthly payments and forget about it are over. Managing his mortgage is an important part of building wealth. Gary Foreman is a former financial planner who currently edits The Dollar Stretcher Website You'll find hundreds of articles to stretch your day and your dollar. Visit today! Permission granted for use on DrLaura.com. More >>

IconFive Money Myths That Can Keep You Apart by Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFP www.WIFE.org www.MoneyClubs.com Managing money with your significant other is difficult enough. Don't burden your relationship with half-truths that can make it even harder. Make sure these five money myths aren't keeping you apart. The partner who earns more, knows more. Your earnings are only a measure of how much you earn right now, period. They don't represent your negotiation skills, job skills, investing skills-or just plain common sense. The partner with more intuitive skills can more easily sense a bad investment than the one with a high income but a faulty BS detector. Respect your partner's contribution of knowledge and insight to your team-regardless of his or her financial contribution at the moment. Pennies make millions. A penny-pinching partner may starve the essence and spirit of his partner, instead of encouraging her to achieve her full potential-economic and otherwise. Monitoring day-to-day spending is fine, but don't keep your partner from pursuing dreams because of temporary financial risks. Concentrate on your partner's long-term potential. If you restrict her from achieving her best, she will always resent you for it-and the costs will far exceed pennies. We have to agree on everything. Some couples think that any disagreement is a deep and permanent conflict that will destroy the relationship. If he likes to spend and you like to save, or vice versa-this does not mean the end of the relationship. Agree to disagree on small matters, and compromise on the large ones. Remember, if two people agree on everything, one of them is unnecessary. We can't enjoy the present because we have to save for the future. An intelligent savings plan includes some enjoyment in the present. You don't have to go on an expensive vacation or spend lots of money on weekend entertainment, if that is outside of your budget. You do, however, have to reserve some time (and some funds) for enjoying yourselves right now. If you don't nurture your relationship with some pleasures now, you might not have a future together. Money is more important than our relationship. Every relationship has its share of money regrets. Each partner says to himself: "If only she (or he) had let me invest#133;or kept me from investing#133; or spent money on#133; or not spent money on#133;" These regrets and unfulfilled wishes can be very expensive in terms of energy and goodwill in your relationship. This ruminating is not productive, so let it go to make more space in your relationship for future inflows of money-and love. This article excerpted from the new book It#146;s More Than Money#151;It#146;s Your Life! The New Money Club for Women . Available at your local bookseller or through the non-profit Women#146;s Institute for Financial Education ( www.WIFE.org ). Permission granted for use on DrLaura.com. More >>

IconInherited Debts? The Dollar Stretcher by Gary Foreman Dear Dollar Stretcher, I've heard that when parents are in debt and they die the debts are left to the children to pay off. Is this true? My parents had gotten a divorce a few years ago. My mom is doing well because she is a saving queen. My dad had remarried two years ago. His wife does not work but loves to spend money. So now they have a $20,000 debt. If my father dies, his wife is responsible for the debt, right? What happens after she dies and there is still that debt? Also, what happens if she dies first, and then my father--who gets the debt? Judy Judy asks a question that comes up often. Can someone die and 'leave' their debts to you? The answer is no. Parents can't leave their debts to you. In fact, they can't even leave their debts to their spouse. Typically a will controls financial affairs after a person's death. A will distributes assets, not debts. But, before any money can be distributed to heirs, all the debts must be paid. So enough assets are sold to pay for any debts that remain. Only after the debts are paid will the remaining assets be distributed among the beneficiaries of the will. The key point to remember is that you are only responsible for debts that you contractually created. There are certain circumstances that would put Judy at risk for her dad's debt. But she would have had to do something to cause that responsibility. Suppose that Judy's dad asked her to co-sign a loan. Signing would make her responsible for the debt. Not only if her Dad died, but also if he failed to make a payment. But she shouldn't be surprised. When you 'co-sign' a loan, you do just that. You put your signature on the loan application. A similar situation occurs with a joint credit card. A joint account allows anyone named on the account to use it to create a debt. But it also means that everyone listed on the account is responsible for the entire debt that's created. Suppose Judy had a joint card with her dad. And he was the only one using the card. Any debts he left at death would be Judy's. But once again, it should be no surprise to Judy. She signed the joint application for the account. And it's her responsibility to be aware of whether it's being paid off or not. It wouldn't be unusual for Judy's dad and step-mother to have a joint account. In that case the survivor would be responsible for any balances on the account. Joint credit card accounts often create problems in a divorce. Often a couple has a joint account before the divorce. The credit card company isn't going to split the bill just because a couple throws in the towel. As far as they're concerned, both the ex-husband and wife are responsible for the entire amount of the bill until it's paid. And while a court can instruct one party to pay, sometimes it still doesn't happen. Another way that people end up paying someone else's debt is when you let someone use your credit card. Again, it should be no surprise when the bill comes in. So what happens to the debts of someone who dies? The credit card company will first try to collect from the estate. As mentioned earlier, assets will be sold to pay the bills. Then, if the account was a joint account, any survivors will be left holding the bag. If the debt belonged solely to the deceased, then the credit card company will end up eating the debt if there aren't enough assets to cover it. But Judy isn't completely off the hook. She might still want to advise her dad to control his spending. As her father and step-mother get older they could have trouble keeping up with the minimum payments. And, once they fall behind things will get tough. Credit card companies are quick to bump up interest rates when you miss a payment. And that would be trouble. Judy's father will probably be living on a fixed income during retirement. So the payment that was a struggle at 12% interest becomes impossible when the interest rate goes to 20%. And unless they have some assets that can be sold to reduce the debt, the minimum payments will dominate their finances. And that's where Judy comes in. I don't know her relationship to her father, but it would be awfully hard to watch a parent struggle to put food on the table. Even if they caused the problem by foolish past spending. It actually would be interesting if parents could 'leave' their debts to someone after they die. I suspect that many children would treat their parents much better if that were the case. Instead of parents threatening to cut a child out of their will, parents could run up large debts and threaten to put a child into their will! Never mind! It's a good thing that the law doesn't read that way. Somehow I don't think that it would be good for family relations. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website: www.stretcher.com/save.htm More >>

IconTemporary Downsizing? The Dollar Stretcher by Gary Foreman gary@stretcher.com Hi Gary, We're wondering if we should sell our house. My husband recently returned to school to get his degree, which will take two years of full time school. He's working part time while he's in school and I work full time as a social worker. Our mortgage payment is $1,030 a month--no problem when we were both working full time. Now that his income has been drastically reduced, the mortgage feels very steep. What about selling the house, using the equity to pay off our $20,000 second mortgage, and moving into a place that costs less per month? Rental costs in Denver are high, at $750+ for a two bedroom apartment. Is it smart to use your big asset to pay off debt and "slim down" for a few years, or is it stupid to give up a chance to continue earning equity? Thanks, Erin K. Erin has actually asked a two part question. Can she save money by moving to a smaller place for a few years. And, if she sells, will she regret not building equity during that time. The first question is easier than the second so let's start there. The difference between her mortgage ($1,030) and rent (we'll assume $750) is only $280. So that's about what she'd save each month. If her monthly payment doesn't escrow for insurance and property taxes she'll be able to add that to her monthly savings. A moving cost calculator at realtor.com estimates that it would cost $1,395 to move a two bedroom home. So the first five months worth of savings would go to the moving company. Erin shouldn't forget that there are a lot of small costs to moving that get overlooked. Things like shelf paper for the kitchen cabinets and picture hangers aren't terribly expensive, but they do add up. And, it's not just the money involved. She'll spend hours notifying everyone of the new address. It doesn't take much for a credit card bill to get lost in the moving shuffle. A tardy payment can cost you a late fee plus a black mark on your credit history. There are other costs to selling and buying a home. Erin could end up paying a commission to the real estate agent. Rates vary, but it's not uncommon for them to be 6% of the selling price. On a $150,000 home that's $9,000. That works out to 32 months of the rental savings. So it doesn't look like Erin is going to save much by selling and moving. But what about her equity? There are two ways to building home equity. The first - paying down principal on your mortgage - happens every time you make a mortgage payment. Erin can look at her mortgage amortization table and add up how much equity she'd build during the two year period. The second aspect to home equity is housing appreciation. She can't predict housing prices accurately but it is possible make a guess as to what will happen. Not owning a home for two years could be very expensive. To illustrate, if a $150,000 home appreciated 10% over two years, Erin's home would be worth an additional $15,000. That's about $625 in lost equity per month. So, if they don't sell, what should Erin do? First, recognize that the amount of debt they carry limits their options. It's admirable that her husband went back to school. But he might have to work full-time and go to school part-time. And that could be a good strategy. Many employers will pay for college classes that are related to an employee's work. Another option would be to try to reduce their expenses in other areas. Chopping out $280 a month won't be easy. Start by eliminating any extravagant spending. Then Erin should study their spending in major areas like food and autos for potential savings. A final option would be move into an apartment, but not sell her home. Presumably rental income on their home would be sufficient to pay the mortgage. Erin would still face the moving expenses, but wouldn't have to pay the costs of selling her home. And she'd still be building equity. Before taking this step, however, Erin needs to check out how it would affect her mortgage, insurance and tax situations.It might be tough for Erin and her husband for awhile. But the good news is that his earning potential will increase dramatically once he's completed his degree. According to the 2001 U.S. Statistical Abstract, mean income for a person with a college degree is $25,000 higher than for someone with a high school diploma. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website and ezine, to subscribe email subscribe@stretcher.com Permission granted for use on DrLaura.com More >>

IconSigns of Wealth The Dollar Stretcher by Gary Foreman email: gary@stretcher.com Everyone from songwriters to psychics to traffic engineers will tell you that it's important to 'read the signs'. And they're right. Take driving for instance. Traveling without signs would be difficult and dangerous. Our financial affairs are another type of trip that requires watching signs. To help us avoid trouble and make progress towards our goals. So let's take a look at some common financial road signs. The "Stop" Sign. Sometimes the best thing you can do is to stop before you make a purchase. And, just like when you're driving, you need to look around for oncoming traffic before proceeding. Failure to stop can cause an accident. How can you identify the financial stop sign? Look for it any time that there seems to be too much traffic. If a decision is complicated, there's a lot of traffic. If you're facing many financial decisions at once, there's a lot of traffic. If you feel like you're being pushed, it's time to stop, look around and only continue with your purchase after you're sure it's safe. The "School Zone" Sign. There are some situations that require us to drive very cautiously. There are financial situations like that, too. They require us to slowly and calmly evaluate a situation. Like the school zone, we need to be watching for the unexpected. Anytime that someone says you 'must act now' you should see a 'school zone' sign in your mind. And, just like with the school zone, failure to obey the sign can cause an unexpected accident. The "No Parking" Sign. There are places in life that don't allow you to stop. Sometimes you just have to keep going. For instance, you can't park on the expressway. That happens with our finances, too. If you're struggling to make your monthly payments you can't 'park' your finances. You need to get behind the wheel and take control. It's time to steer carefully and watch where you're going until you're safely out of traffic. The "Speed Limit" Sign. Many people dream of making a lot of money quickly. That's why lotteries are so popular. But those that try to get rich quickly often end up crashing. Just like driving too fast. Sometimes you can exceed the speed limit for awhile without a problem. But if you crash, it's often pretty nasty. The 'speed limit' sign isn't as easy to spot as some of the others. Often it is just a feeling that you're going too fast for the circumstances. For some reason women seem more aware of financial speed limit signs. The "Route Marker" Sign. Major highways have signs that reassure us that we're on the right highway for our destination. If we don't see the route sign for awhile we're probably going the wrong way. This, too, is true in our financial life. If you're saving for retirement you need to take a look at your retirement plan statements. Make sure that you're headed in the right direction. The "Exit" Sign. Missing an exit on the interstate is a real pain. Often it happens when you haven't studied a map to check where to get off. And, once you've missed your exit the only thing you can do is to backtrack. Our financial life also has some exits that we don't want to miss. If you're accumulating debt you need to take the next exit. If you're beginning to suffer 'burn-out' it's time to stop and visit a roadside diner to check your destination. Some exits, like paying for college, are well marked and easy to spot. Still, you need to prepare to make a safe move to the exit ramp. The "Merge" Sign. When you see a 'merge' sign you know to watch out for traffic from two lanes blending into one. We need to look around for cars coming our way. And then speed up or slow down to avoid an accident. That can also occur with our finances. Changes in work, health, marriage or education status are a sign that new situations are merging into our life. Hopefully we're ready to handle the new events, but ready or not, we need to evaluate them now and see what effect they will have on our finances. And, once we've studied the situation, we may need to speed up or slow down. That might mean changing our investments or the amount that we routinely spend. Can reading the signs prevent every problem that you might face. No, unfortunately that's not possible. But they sure can make the trip easier and less stressful! Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website: www.stretcher.com . Permission granted for use on DrLaura.com. More >>

IconBefore You Buy a Home The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Gary, I am hoping that in one year I will be buying a condominium. I have found the area of town I want to live in and found the condo complex that I can both afford and enjoy. I have bought a home before so I won't qualify for any first time buyers deals. I am embarrassed to say that when I bought my first home, my husband and I were disgustingly naive. I am no longer married and I want to be totally prepared to search and purchase within a few months of my lease expiring. I have almost $15,000 saved for a down payment. These condos are in the $95-$100,000 range. But, I don't have any idea what I should be doing besides continuing to save money. Should I be looking for a mortgage this early? What should I be doing at this point? Do I need to get a realtor, even though I know basically where I want to live? I have less than a $800 debt but my car is 11 years old. I think it will easily last another two years and maybe longer. Any information would be appreciated! Debbie in Nashville, TN Debbie is off to a good start. She's identified the major areas needing her attention. First, she will want to get her financial house in order. Debbie has already begun saving for a mortgage. She'll want to continue that. A larger down payment often means lower mortgage rates. She needs to figure out how large a mortgage payment she can afford each month. Experts advise that the mortgage, taxes and insurance be limited to around 25% of her monthly income. But a lot depends on other expenses like her car. She doesn't want to commit to a mortgage payment that will make it impossible to buy a car later. She'll find mortgage calculators on the web. Bankrate.com has some good ones. They'll translate a given mortgage size and interest rate into monthly payments. The mortgage will probably be more than she's paying for rent. Beginning now she should set aside the difference every month. That way she'll adjust to the new level of expenses before she buys. She'll also be setting aside some extra savings to help cover moving expenses. Second, Debbie will want to do some things early to make the actual buying process easier. She'll need to check her credit report. Approximately one in four people have errors in their report that are large enough to deny them credit or cost them a higher rate. It can take six months to get an error corrected. If Debbie has unused credit lines or credit cards she might want to cancel them. Large amounts of available, unused credit will hurt her mortgage rate. She'll need to collect some financial records prior to purchase. Pay stubs for the last 3 months. W-2 forms for the last two years. Recent bank statements. Also a listing of all of her financial assets and liabilities. Now is the time to learn the differences between fixed and variable mortgages. She'll also want to study some of the lingo so she'll understand the decisions she's about to make. Find out about escrow accounts and private mortgage insurance. Some lenders require them. Finally, there are some things that relate to the physical property to consider. Debbie has already found her neighborhood. Otherwise she would want to consider what communities would be best for her lifestyle considering tax rates and whether they're close enough to public schools, transportation and shopping. Debbie has also found a condo complex. She might want to visit with some of the owners and ask how happy they are. She will need to decide whether to use a real estate agent, a buyer's agent or just go it alone. An agent could help Debbie with many of these steps. If she's short on time or doesn't feel capable she might want the help. Depending on what she decides and the laws of her state she might also need to line up an attorney. Before buying she'll want to check out homeowners' insurance. Her lender will require her to carry insurance. Better to compare rates now while she has time. Before the closing a home inspection will be required. Now is a good time to find an inspector. Check their state certification and references. As Debbie knows, buying a home is a complicated process and takes some work to do it right. She's wise to start early and make it as smooth as possible. We hope that she finds the perfect condo for her needs and the whole transactions goes smoothly. Gary Foreman is a former Certified Financial Planner and purchasing manager who current edits The Dollar Stretcher website www.stretcher.com and email newsletter subscribe@stretcher.com Permission granted for use on DrLaura.com More >>

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