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05/07/2010
IconSlash Your Food Costs by Mary Hunt Next to your rent or mortgage payment, food is probably your biggest expense. Don#146;t believe me? For the next thirty days keep track of every nickel you spend to feed your face and tell me if that doesn#146;t add up to one boatload of cash-ola. Just think: Every dollar you do not spend on food is a dollar you have in your pocket to use for something else ... like prepaying your student loan or stashing into your savings account. That dollars was already taxed and you don#146;t have to wait for it to show up in a future paycheck. It#146;s yours right here, right now. Here's a snappy collection of the best tips for slashing your grocery bill: Don't shop hungry. Studies find you will spend at least 17 percent more. Shop with a list. As much as humanly possible, do not buy anything that is not on the list, but be willing to substitute. Prepare your list. Use the store's weekly sale ads found in the newspaper as a guide and build your menus from there. Go for loss-leaders. These are the items that are deeply discounted in order to get you through the door. Time your trip. Avoid shopping the first of the month and right before holidays. Stores regularly adjust prices up on the days they anticipate heavy traffic. Know your prices. Keep a written record of the regular per-unit prices of the items you buy most often so you'll know whether a Special is a bargain. Many times they have nothing to do with a sale but more to do with a marketing ploy. Buy in season. Fruits and vegetables will be the best quality and the lowest price when they are in season. Shop with cash. Take only the amount of cash you have decided to spend on this trip. If you come across a fabulous bargain and don't have enough cash you can always return to the store to stock up. Carry a small calculator. Keep a running total of your items in your cart so you won't be embarrassed at the checkout. Stick to the two or three cheapest stores in your area and then rotate your shopping trips. Shop at larger stores. Because of volume discounts, larger stores are generally cheaper than smaller ones. Find a bakery outlet. These kinds of thrift stores offer wonderful bargains if you can be highly disciplined. Visit a salvage store. This is the land of dented cans and mis-labels. Buy in bulk as appropriate. If you can't use it before it goes bad, it's a bad deal no matter how good the bargain was. Don't overbuy your storage space. It takes a lot of room to store a year's worth of toilet tissue. "On sale" without a coupon is usually cheaper than the regular price with a coupon. Be coupon selective. Only use a coupon if you would have purchased the product anyway. Buy the smallest size or quantity that the coupon allows for the greatest percentage of savings. Always check expiration dates. If you have a choice choose the date farthest into the future. Consider generic and store brands. Many times the product is identical to the brand name except for the lower price. Shop solo. Being distracted can be quite costly. Make friends. Produce, bakery and meat department staff may mark down day-old items if they know you as a regular customer. Look high and low. Expensive brand names are purposely positioned at eye level. Fancy packaging increases the price. Example: Quaker Bagged Cereals vs. other brands packaged in fancy boxes. Check those eggs. Do not purchase a cracked egg. Don't buy non-food items at the grocery store. Housewares, pharmacy items, greeting cards, paper goods and cleaning supplies can be purchased for less elsewhere. Avoid individual-size packages. Buy the big bag or size and divide into smaller portions at home. Avoid convenience items. It's more cost-effective to make your own salad dressing, chicken-coating mix, and so on. Buy on sale. A national brand on sale is usually less expensive than a store brand at regular price. Learn sale cycles. Study sale flyers until you recognize predictable cycles. Buy enough when it's on sale to last until the next sale. Follow these guidelines and stop eating out so much and I promise you#146;ll see big results in little time. Mary Hunt is the founder and publisher of Cheapskate Monthly newsletter and is a respected authority on spending habits and financial responsibility. She and her husband Harold dug their way out of a horrible mountain of consumer debt and lives to help others get out of debt and live joyfully beneath their means. The door is always open at her popular Web site, www.cheapskatemonthly.com Permission granted for re-print on DrLaura.com. More >>

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05/07/2010
IconPay as You Go But Not With a Chicken by Mary Hunt It#146;s not easy being a consumer these days. In fact it can be downright confusing because of all the payment choices. First you have your cash, your checkbook and credit card. And who can possibly forget the debit-card, deferred billing, skip-a-payment, nothing down, no payments and zero-interest till the next millennium. See? Confusion pure and simple. Prehistoric consumers had it easy. Just one choice: chickens. They traded poultry for the things they needed. The rules were simple: No fowl? No food, fun, futons, fillies or fricassee. Then along came the invention of currency and that gave consumers a second choice#151;one that caught on quickly since folding a chicken to fit neatly into one#146;s wallet was, shall we say, messy. A third option was born the day some unknown retailer came up with a payment plan, surely named in memory of the good ol#146; chicken days#151;layaway. Which brings me to the topic of this month#146;s article: What happened to layaway anyway? Not that long ago, every major department store in the country allowed customers to buy merchandise on layaway. The item was placed in the back room and customers could take all the time they needed to pay it off. Interest free. When they made the last payment, they took the item home. Layaway was simpler, upfront. There was a start and a finish. There was delayed gratification and a sense of responsibility and anticipation. With layaway there were no surprises. The layaway pay-as-you-go method for holiday shopping was particularly effective because it produced none of the fiscal shocks that come with today#146;s post-holiday credit card bills. Without much notice, layaway programs started to disappear in the 1980s. Extolling the virtues of consumer credit, retailers convinced consumers it was better to take everything home right away, avoid those annoying progress payments and then commence to pay for it for the next 15 or 20 years. They did such a good job of convincing, layaway plans all but disappeared. But they did not disappear completely and for that I say, rejoice! You#146;ll be happy to know some of your favorite national chain stores still offer layaway. Just visit the local K-Mart or Wal-Mart, two stores where layaway programs continue to thrive. Others include Marshalls, TJ Maxx and Circuit City. Many small independent retailers are more than happy to set up a layaway plan, they just don#146;t talk about it. You must inquire. While cash up front will always be the best choice, making payments on layaway is much better that making payments on a credit card account because: The store keeps the items until it is paid in full. No debt is incurred. There are no interest charges, although some stores charge a small layaway service fee and restocking fee if you cancel. Typically the customer is protected if the item goes on sale during the layaway period and the price of the item is reduced accordingly. There is no legal obligation. If you change your mind, you can get a refund. Clearly, layaway and early holiday shopping were made for each other. Getting started ahead of time in the off-season means you#146;ll be less likely to fall into the trap of weary, last-minute shopping when everything is expensive and you are prone to buy frivolous gifts just to have something#151;anything#151;to give. To avoid misunderstandings, get specific information about a store#146;s layaway terms before you participate. Ask for a written description of the store#146;s plan, and read it before you agree to a layaway purchase. No matter how you choose to do your holiday shopping this year, make sure you start early. And pay as you go with cash#151;which remains just slightly more convenient than chickens. Mary Hunt is the founder and publisher of Cheapskate Monthly newsletter and is a respected authority on spending habits and financial responsibility. She and her husband Harold dug their way out of a horrible mountain of consumer debt and lives to help others get out of debt and live joyfully beneath their means. The door is always open at her popular Web site, www.cheapskatemonthly.com Permission granted for re-print on DrLaura.com. More >>

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05/07/2010
IconNo Money Down by Gary Foreman gary@stretcher.com Hi Gary, I see a guy on TV all the time. He says that you can buy a home with no money down and then come from closing with money in your pocket. Supposedly people buy homes and make millions a year. Do you know about this? How this could be done? Is it worth the 3 payments of $59.99? Or is it a scam? Kevin Sure sounds tempting. You walk in with nothing, sign some papers and walk out with cash and the keys to a house. And, you can do it over and over until you make a million! Much as we'd all like to believe that the road to riches was that easy, it's not. Yes, you can make a million in real estate. And some people have started with nothing and built an empire. But, it's not easy and certainly not a sure thing. A quick disclaimer. I have not seen this specific course. But similar courses pop up anytime that the housing market is hot for awhile. And unless this guy has discovered something that no one else has tried before, you don't need his course. Here's the $180 secret. It's called leverage. Borrowing money to invest isn't new. People who buy stocks on margin or play the commodities markets do it every day. It is interesting to note that there are limits as to how much they can borrow. The regulators know that if you borrow too much it's dangerous. I'm not saying that this strategy hasn't worked for anyone. It has. Given the right set of circumstances you can borrow money to buy an asset, have that asset appreciate and sell it for a profit. Here's how it's done. Suppose you buy a home for $100,000 and pay cash. Three years pass and the house is now worth $150,000. You sell it and make $50,000 on your original $100,000 investment. That's a 50% return in just three years. What happens if you had taken out a mortgage. Suppose that you put $10,000 down. Again, three years later you sell it for a $50,000 profit. But this time that's a 500% return on your original $10,000 investment. The reason is that you were making money on borrowed money. That's called leverage. Could you go in with 0% down and make that profit without putting any of your money up? Yes, if you could find someone willing to lend you 100% of the purchase and the house appreciated 50% over three years you could indeed make $50,000 without putting up your own money. So if it's so easy why shouldn't Kevin jump right in? There are a couple of reasons. The first problem is higher payments because Kevin is financing more than the value of the house. He'll probably also pay a higher interest rate because he didn't have a down payment. That means less money for food, health, auto and other routine expenses. The second problem is that he's locked into the home. Unless he's willing to write a check at closing, he won't be able to sell until the house is worth more than the loan. Suppose he takes out a 7%, 30 year mortgage for $103,000. His regular monthly payments won't reduce the principal to under $100,000 for nearly 3 years. So he's literally trapped in the house until it appreciates. And, contrary to popular belief, home prices can go down. If home prices drop by 10% Kevin's house will be worth $90,000. It will be 9 years before Kevin's mortgage drops to that level. Another potential problem is that Kevin's lender will be quicker to foreclose. They count on the value of the house guaranteeing the loan. They can't afford to let Kevin miss payments if the loan is bigger than the house's value. Finally, can he use this strategy to buy more properties? Typically you want income property to pay for itself and leave some extra income for you. Using this method the higher mortgage payments will make it hard to build equity or have a positive cash flow. And, landlord Kevin can expect some repairs, late rental payments and the occasional vacancy. Unless he has cash to ride out these storms, any problem could make him late with his mortgage payment. And that's when things start to unravel. Kevin could consider other alternatives. There are some safe, predictable strategies that have worked for years. One possibility is to start with a duplex. Live in one side and rent out the other. It's a good way to live inexpensively and build equity at the same time. Or buy a fixer-upper. Quite often a few dollars in cleaning, paint and repairs can add thousands to the value of a home. And a cheaper home means a smaller mortgage. Kevin will enjoy the lower payments and build equity more quickly. He'll also be able to sell and move any time he wants. One final thought. Have you ever wondered about guys who claim to have made millions and go on TV? Why would someone so wealthy charge so much for workbooks, tapes and cassettes? Call me skeptical, but I think they know that it's easier to take your $180 than to make money in real estate. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website www.stretcher.com . The site contains hundreds of free articles to help stretch your day and your dollar. Permission granted for reprint on DrLaura.com. "The Dollar Stretcher, Inc." and DrLaura.com does not assume responsibility for advice given. All advice should be weighed against your own abilities and circumstances and applied accordingly. It is up to the reader to determine if advice is safe and suitable for their own situation. More >>

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05/07/2010
IconDRIVING DOWN CAR COSTS By Cheryl Gochnauer A few years ago, my husband, Terry, sacrificed his bass boat so I could stayhome with our daughters. I remember thanking him and saying, "Don't worry,Babe. We'll get you another boat someday." A few months ago, I made good on that promise, and we bought a boat. A few weeks ago, the only vehicle we had that would pull the boat, our11-year-old minivan, blew its transmission. A few days ago, I got sick of looking at our dead van and stranded boat. Itwas time to go car shopping. "FOUR HUNDRED dollars a month? For a USED car?" I sputtered, clutching thedesk at the local dealership. The salesman didn't blink. Neither did salespeople at the dozen other lots I cruised over the next weekand a half. A grand delusion had swept the dealerships in our city:Everybody else is in hock up their necks; you should be, too. Guilt-freeand zero percent down. Aaaacck! A few hours ago, I decided a $1,500 rebuilt transmission didn't sound so badafter all. Hey - our van may be old, but it still looks good and it'scomfortable. With a little TLC, we'll be able to eke another year out ofthis baby. (At least, that's what the transmission shop guarantees.) And it's the best financial decision for us at this time. After all, $125a month ($1500 divided by 12 months) for a decent used van beats any deal I've heard this week. In fact, after being floored with $400-plus quotes, Iactually feel like I'm saving money! It's all in your perception. For instance, I recently spoke with a mom whowanted to come home, but they needed to cut out a car payment first. Theproblem: they were "upside-down" in their loan. "We owe $10,000, but the car's only worth $8,000." She thinks they're $10,000 in debt, but take another look. If it were me, I'd consider selling the car for $8,000, immediately reducing the balance to$2,000. Since the car was collateral for the loan, my finance company will want theremaining $2,000 when the car is sold. So, I would either take the moneyout of savings, get a small home equity loan, or take a cash advance on mycredit card to pay it off. Better yet, I'd set a goal with my husband of saving the $2,000 differencewhile I was still working, then sell the car. If I needed a replacementcar, I'd concentrate on picking up something we could pay cash for. I'dstart networking with friends and family to find that elusive "little oldlady's car" or similar, inexpensive transportation. Here are some helpful online resources as you look to trim or control yourbudget: The Dollar Stretcher: www.stretcher.com Cheapskate Monthly: www.cheapskatemonthly.com Crown Financial Ministries: www.crown.org Miserly Moms: www.miserlymoms.com (Comments? Write Cheryl@homebodies.org , or visit her website at www.homebodies.org . Her book, " So You Want to Be a Stay-at-Home Mom ," isavailable through Dr. Laura#146;s Reading Corner . Copyright2001 Homebodies.Org, LLC. Permission granted for use on DrLaura.com.) More >>

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05/07/2010
IconOh My, How it Adds Up! by Tawra Kellam The average American often feels overwhelmed by debt and doesn't know whereto start or how to go about getting out of debt. It's a misconception thatthe more money you earn the easier it is to save. My husband and I paid off$20,000 of credit card debt and medical bills in 5 years on an averageincome of $22,000 a year. Here is how you can save over $7,000 in just oneyear cutting a few things from your grocery bill. They are painless, simpleand add up over time. If you don't think that cutting out one bag of potatochips or one soda will add up, look at the numbers at the end of a year. Ifyou're trying to save so you can be a stay at home mom or dad or for a downpayment on a house, pay off some credit card debt or just have someemergency money, here are 13 ways to do it without depriving yourself. By eliminating one $2.00 bag of potato chips (not all just 1 bag) from yourgrocery bill each week you can save $104.00 per year. Cutting out onesix-pack of soda will save another $104. A weekly $4.00 box of granolacereal adds up to $208 a year. If you eat out one less time each week at$30 a meal, you can save $1,560 and ordering one less delivered pizza at$20, can save you $1040 per year. Similar annual savings can be realized by cutting out weekly purchases offruit rolls ($130), daily gourmet coffee at $2.50 per cup ($910), a dailyliter of soda ($365), snack cakes ($455), one less bottled water ($455), onecup less juice per person in a family of four ($546), 3 lbs. less red meat aweek ($390), and by eliminating a $4.00 lunch five days a week ($1040). By themselves, these efforts may seem small--but they add up to over $7,000a year you could save. Tawra Kellam is the author of Not Just Beans: 50 Years of Frugal FamilyFavorites . For free money saving tips and recipes or to purchase a copy of the cookbook: Not Just Beans: Your Frugal Family Cookbook visit our website at www.notjustbeans.com . Permission granted for use on DrLaura.com More >>

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05/07/2010
IconSingle Parent Homeowner The Dollar Stretcher by Gary Foreman www.stretcher.com Dear Dollar Stretcher, I am in the process of a divorce and want to keep the family home. Are there any programs out there for single parents that would offer a more favorable interest rate for re-financing? Sarah N. Sarah's question brings good news and bad news. The bad news is that she's not likely to find anyone to offer her a lower rate because she's a single parent. The good news is that there are some things that she can do to stay in her home. Only a non-profit agency would consider a special rate for borrowers like Sarah. Some do offer help for needy home buyers. But I'm not aware of any that will help with refinancing. The reason that a regular mortgage company doesn't have special rates is simple. Her ability to repay the mortgage will be hurt by the divorce. The mortgage company looks at a borrower's total assets and liabilities. They also compare the amount of income to monthly expenses. Sarah's income will be going down. Even if she was the major family breadwinner, she's probably going to be taking a big income hit when her husband leaves. Unfortunately, Sarah's expenses won't be going down as much as her income. Sure, some things like auto expenses could be cut in half. But it costs just as much to heat and cool her home as it did before. In fact, some expenses could go up. The kids might still be covered under Dad's medical insurance at work after the divorce. But Sarah will have to pay for her coverage unless it's provided through her work. What can Sarah do to be able to stay in her home? The biggest hurdle is to have enough income to afford it. Sarah needs to keep her housing expenses to less than 33% of her take home pay. That includes utilities, maintenance, property taxes and home repairs. Some people in the mortgage industry might be willing to lend her more. She'd be foolish to do that. Remember that those who encourage her to spend more on housing won't be scrounging to find the money for the mortgage every month. Do the math. Suppose she spends 33% of her income on her home. Add an additional 15% for auto and 15% for food. At this point she's already consumed 63% of her take home pay. That leaves 37% for things like child care, insurance, clothing, medical/dental, entertainment and everything else. Trying to take another 5 to 10% for housing will make her budget unworkable. So how can Sarah increase the odds of success? Nothing flashy, but there are some simple things that she can do. First, Sarah will want to set up a 'rainy day' fund for unexpected expenses. The truth is that they can be expected to happen. We just don't know exactly when they'll occur. She should put some money aside every month that it doesn't 'rain'. Not only will there be surprise expenses, but Sarah might find that her income isn't secure. Even court ordered child support and alimony is not guaranteed. If she doubts that, she can check with a few divorced friends. Her Ex could face a layoff. He's likely to pay his own rent before sending her a check. She'll need to have a plan for handling home maintenance and repairs. Routine maintenance can keep a small problem from turning into a major expense. That's important when money is tight. Unless she has a very good income, Sarah can expect to sacrifice other desires to provide extra dollars for the house. She may find that she can keep the house if she's willing to give up an annual vacation or drive an older car. Increasing her income is another option. One way to do that would be to share the house. It's possible that she could find another single woman or mother that could move in and help share expenses. Finally, she should consider what it would take to convince her that she shouldn't keep the house. Better to make a thoughtful decision now rather than an emotional one later when the pressure is on. Sarah needs to be careful that she doesn't slide into being 'house poor'. The first sign will be that she's a little short each month. Then an unexpected bill for auto or home repair pops up. If she uses a credit card she'll only delay the consequences. Borrowing money isn't the answer, it's the beginning of a serious problem. Am I trying to scare Sarah? In a way, yes. I don't know the circumstances of her marriage. But I can tell her that every day questions come in from single parents who are worn out from the continual struggle with bills. Most families with children need two incomes to make ends meet. Some are able to make it on a single income if one parent stays home and uses their home management skills to reduce expenses. But it's very hard for a single parent. For instance, cooking from scratch isn't realistic if you're working full time. It's understandable that Sarah wants to stay in her home. And, naturally I'd like to see her have the best for her family. But she'll needs to be very careful to make sure that she makes an intelligent decision and doesn't let a house drag her family down into financial quicksand. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website. You'll find hundreds of free articles to help stretch your day and your dollar. Permission granted for use on DrLaura.com. More >>

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05/07/2010
IconAddicted! The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher, I need some help to deal with my husband's and my addiction to spending. We are currently $60,000 in debt on top of our mortgage. This includes a second mortgage and tons of credit cards and personal loans. It got so bad that we turned all the unsecured debt over to credit counseling and are paying through them. My husband makes a very good income at his regular job and had to take a part time job. I work part time and I don't make a lot but it is all I have been able to find. The problem seems to be that as soon as we have extra we spend it on dinners out or things we don't need. Then when we need the money we are behind again. So all my husband's overtime and his second income plus my paychecks are just being spent instead of being applied to bills. It doesn't help that I work in a craft and sewing store which are my two weaknesses. And my husband works in a tool store which is his weakness. Should I change jobs? Should we seek counseling for addiction? I am at the bottom and don't know where to turn. We have thought of bankruptcy but only as a last resort. Also did I mention that my grocery bills are astronomical and its just us two! And most of the food goes bad before we eat it because we are always eating out. Any suggestions or advice would be appreciated. June June is in pretty deep. But she has plenty of company. Consumer debt in the U.S. reached a total of over $1 trillion in 1999. Credit card debt was over $500 billion. Over 1.2 million Americans filed for bankruptcy in 2000 according to the American Bankruptcy Institute. That's up from 330,000 in 1980. So even if you're not overwhelmed with debt, it's possible to learn from June's situation. If you regularly carry a balance on your credit card you could be in June's place in a few years. As she suggested, there are two ways to address this problem. One is to consider the psychological aspects. The other is to physically stop the spending. They'll need to work with both. Let's begin with the psychological. It's often been said that if you want to really know a person examine their checkbook and credit card statements. The reason is simple. People will spend money to satisfy the needs that are important to them. You'll notice that I didn't say that they spend on the things that are important. But, rather they spend for the needs that they feel will be satisfied by the purchase. Hopefully, by studying their spending, June will find a pattern. There's a story about children at an orphanage right after World War Two. The doctors found that the children slept much better if they were given a piece of bread at bedtime. They didn't eat the bread until morning. To them the piece of bread was assurance that they wouldn't be hungry in the morning. June might find that they buy groceries for the same reason that the orphans hung on to the bread. Whatever the reason, understanding why they spend will allow them to eliminate spending for imaginary needs. June and her husband may well be demonstrating addictive behavior. Only a trained professional can diagnose that. If they are, professional psychological counseling would be appropriate. But, even addiction is no excuse for not starting to control their spending now. June and her husband appear to be allergic to cash. As soon as they come in contact with it they spend it. One way to solve that problem is to not have any cash available to spend. Direct deposit could be a good idea. If that's not available, they should deposit paychecks on the way home from work. An allowance could be helpful. That way each of them would know what they have available to spend on a regular basis. It could also allow them to learn to ration their allowance throughout the week. Once they've taken the cash out of their hands they'll need to protect savings. Reducing debt and emergencies should be the only reason to take money from savings. June and her husband will need to decide what constitutes an emergency well before they face an actual decision. Otherwise they'll convince themselves that a non-essential expense is an 'emergency'. Both of them will need to make a commitment to each other not to spend any money where they work. And, if they find that they can't keep that promise, they'll need to find new part-time jobs. It could be like the dieter who works in a bakery. Even the most disciplined person will crack if enough temptation is present. Finally, they'll need to decide whether they really want to solve this problem. It's not going to be easy. It will take a willingness to make hard decisions. But, June's right about the alternative. The next step for them if they fail now is probably bankruptcy. Hopefully they'll avoid that consequence. Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website www.stretcher.com/save.htm . The site contains hundreds of free articles to help stretch your day and your dollar. Permission granted for use on DrLaura.com. "The Dollar Stretcher, Inc." and DrLaura.com does not assume responsibility for advice given. All advice should be weighed against your own abilities and circumstances and applied accordingly. It is up to the reader to determine if advice is safe and suitable for their own situation. More >>

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05/07/2010
Icon Expensive Legal Documents The Dollar Stretcher by Gary Foreman www.stretcher.com gary@stretcher.com Do you have any recommendations on how to set up a living trust without paying high priced lawyer fees. I figure by the time we are done working with our local lawyer who has a good reputation it will run just over $1,000. We have children and need to make plans just in case. Julie in MI  Julie is to be congratulated for making 'just in case' plans. Far too many parents assume that nothing will happen to them and fail to take the necessary precautions. Unfortunately, the simple answer to her question is "no" I don't advise trying to set up a trust without a lawyer. But let's look a little deeper into Julie's question. Perhaps it won't be as expensive as she thinks.  We'll begin by considering a frugal truism. Avoid making expensive mistakes. A problem with your will or some trusts are almost impossible to correct. There's a reason that they call it your "LAST will and testament". Once you're dead you cannot amend or revoke it.  Being a sharp consumer doesn't mean always taking the least expensive alternative. In fact, doing that can sometimes cost you more in the long run. This is probably one of those cases.  In fact, not only should Julie contact an attorney for her will or trust, she'd also be wise to find one that specializes in estate planning in her state. There are some nuances that an attorney who works in another area of law or another state might not know. In fact, if you move to a new state it's important to see if your estate plan should be updated.  Let me be clear about this. I'm not a big fan of attorneys. Wills and trusts are more complicated than they need to be. And attorneys are a large part of the reason that they're so complicated.  But the unfortunate truth is that it does take specialized knowledge to do them so that problems don't crop up after your death. Not only with federal taxes, but also with state laws. And much as I don't like paying lawyers, the cost of doing it wrong could be very expensive for my children. So finding a lawyer who knows estate planning is likely to produce the right document at the lowest cost.  Julie might be tempted to consider some of the do-it-yourself will kits available. No doubt that some are quite good. Just remember that you'll die believing you did a great job. A problem won't come out until some judge says that your will or certain portions are invalid. So make your selection carefully.  So what should Julie do? She doesn't say so, but it could be that her concern is simply for her children's welfare. If that's the case a living trust probably isn't required.  A living trust is often used to avoid federal estate taxes. And that usually isn't a problem until you have over $500,000 in assets. So if Julie's goal is simply to make sure that if she and her husband die that the money goes to her kids and that she gets to select the children's guardian, then a living trust isn't necessary. Typically a will, which costs less, can handle the job.  Selecting a guardian is important. Remember that each state sets an age where a child is considered an adult. Until that age they cannot manage their own financial affairs. The guardian could be an individual (for example your sister, friend or attorney) or a corporation (a bank or trust company). There are various ways, including trusts, to set it up legally. You also have the option of letting the guardian control the money even after your children reach adulthood. Discuss it with your attorney.  Another reason this process, called estate planning, is important is that if you don't make your wishes known in writing before you die, the state will follow its own laws and make the decision for you. Not only as to managing the money, but who will raise your children. Your irresponsible bachelor brother could be asked to care for them. This is also a good time for Julie to talk with her choice and make sure that they're willing to accept the responsibility.  One final word of caution. I am not a lawyer and this isn't a place for amateurs. All I can do is warn you of the potential dangers. So before you make any decisions, contact the appropriate experts. Yes, experts do cost money. But this is one area where saving can be very expensive.  Gary Foreman is a former financial planner who currently edits  The Dollar Stretcher website  and newsletters subscribe@stretcher.com  You'll find thousands of articles to help stretch your day and your dollar. Copyright 2003 Dollar Stretcher, Inc. all rights reserved. Permission granted for use on DrLaura.com. More >>

Tags: Budget, Children, money, Parenting
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