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IconGetting Out of an Auto Lease The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher: I would like some advice on how to sell, trade-in or otherwise get rid of a car. I have a 2000 Toyota Camry with 53,000 miles on it. The lease is up in 2004. The last car dealer I spoke to told me that I needed to wait for the lease to be up in order to trade down. He said that the difference between what I owe and what it's worth is $10,000 and that my mileage should be okay if I move closer to where I work. Is this person telling me the truth? Is there any other way I can get a lower car payment or get rid of this car before 2004? My goal is to be a stay-at-home mom to my little boy and this car payment is stopping me. Linda Lexington, KY Linda has asked a question that I get regularly. How can I get out of a car lease? Anyone who is already leasing or thinking about leasing should consider how they would answer Linda's question. Linda needs to recognize that a car lease is fundamentally different from buying a car and making payments. When you buy a car you own it and have agreed to pay a certain amount for it. You can sell the car. Typically you can pay your loan off early. When you lease a car you've agreed to keep it and make payments for a certain period of time. You do not own it. So you can't sell or trade it. A typical new car depreciates approximately 30% in the first year. Linda's car isn't typical. It's a high mileage car. A Camry with her mileage is worth about $8,000 less than when the car was new. She hasn't paid that much so far. But she will before the lease is over. A trade isn't going to help even if she went to a much older, cheaper car. It will cost thousands to walk away from the Camry. Unless she can pay that amount now, it will just be added to the cost of the 'cheaper' car. The end result would be payments that are similar to what she already has. If Linda insists on trying to terminate her lease, she should do it directly with the leasing company. Involving a car dealer could cost her more. Linda will need to read her lease agreement carefully. Sometimes there's more than one fee or penalty involved. The transaction charges alone could cost up to $750. She'll want to contact the leasing company to see what it would cost to terminate the lease early. Then recheck their math. Mistakes are rarely in the customer's favor. Very few leases will allow you to turn the lease and the car over to someone else. It might be tempting to try to do that without telling the leasing company. Avoid the temptation. Linda could find herself financially responsible for the other person's accident, negligence or carelessness in using the car. If Linda did find someone who wanted to take over the lease, she should contact the leasing company and arrange to have them work directly with the other person. Experts generally suggest that it's best financially to stay with a lease until it's over. So is there anything that Linda can do? It's possible that the leasing company might extend the term of the lease and lower Linda's payments. Moving to reduce her commute might be a good idea, but that could be expensive. A cheaper solution might be to find a job closer to home. Carpooling could provide Linda with a solution. A three person carpool could cut her commuting costs by 2/3. It would also reduce the excess mileage. Another possibility would be for Linda to provide rides for a couple of co-workers and charge them. That would provide some money to help pay the monthly lease. Before starting she should contact her insurance company to make sure that she has the proper coverage. If Linda's family has two cars they might consider trading their other car for something less expensive. Any money left over could be used to pay the monthly lease payments. The bottom line is that it will be very hard for Linda to stay home with her son until the lease is over in 2004. That's sad, but it's true. What can the rest of us learn from Linda's experience? A car lease is very easy to get into and very hard to get out of. When you commit to a lease you will almost certainly pay the entire amount no matter what happens in your life. Lay-offs, babies and medical problems will not get you out of a car lease. Even if you don't need the car you'll continue to pay month after month until the lease is over. Leasing companies shout about their 'low monthly payments'. If you ask around you'll find someone like Linda who knows just how high those payments can be. 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 >>

IconA New Air Conditioner? The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Dollar Stretcher, Our house and the central air conditioner is at least 12-14 years old. Our serviceman has told us that the compressor unit is too small for our house and the original builder should have put in a larger unit. We are considering having the AC unit changed to a new, more energy efficient model that would be the correct size for our house. My question is - where can I get information to compare costs of running the two units, so we can decide if a new unit would be worthwhile, financially? Donna Highland, IL For many in the U.S. this has been a scorching summer. Fortunately, about half of all homes have central air conditioning. The bad news is that it does cost money to run them. Central air conditioning and heat pumps rank third in total residential energy usage. Only heat and water heating consume more. Let's take a look at three topics: air conditioner efficiency, selecting the right size air conditioner and buying a new system. An air conditioner's efficiency is measured by it's SEER (Seasonal Energy Efficiency Ratio). The Department of Energy defines SEER as the total cooling in BTU's divided by the watts consumed. A higher SEER indicates a more energy efficient system. Until 1979 the average central home air conditioning system had a SEER of 6.0. In the '90's a minimum standard of 10.0 was set. New, even higher standards, are being debated now. As you might expect, an air conditioner with a higher SEER will cost more. The DOE estimates that a unit with a SEER of 13.0 will cost about 15% more than one with a SEER of 10.0. But that 13.0 unit will provide 30% more cooling per watt consumed. Will a more efficient unit save enough to pay for the increased cost? The DOE thinks so. They figure that operating the 13.0 SEER unit vs. a 10.0 SEER one will save $113 more than the additional cost to purchase it. If you have web access you'll find the DOE's fact sheet on air conditioners at www.eren.doe.gov/erec/factsheets/aircond.html Not for Donna, but if you live in a warmer climate you might even want to consider a higher efficiency unit with an SEER of 15.0 or more. It will cost more, but could pay dividends in areas requiring heavy air conditioning usage. Remember that SEER only measures the efficiency of the air conditioner. It doesn't take into consideration how well your home is insulated, the condition of your ductwork or other factors that affect cooling. Determining the correct size is a harder problem. Air conditioners are rated in Btu's/hour or in 'tons'. A ton is 12,000 Btu's/hour. A bigger air conditioner is not necessarily a better air conditioner. If a unit is too big it will cost more to buy, more to operate and won't do as good a job dehumidifying the air. According to The Consortium for Energy Efficiency (CEE), a national, non-profit public benefits corporation, a properly sized air conditioning system can reduce energy usage by up to 35%. Determining the correct size isn't easy. It's not just a matter of calculating the volume of air that you need to cool. The climate, style of your home, number of windows, amount of insulation, weather stripping and shade as well as other variables all effect the size of the unit needed. It's hard to do the calculation yourself. You really need a professional. In fact, the industry has created a formula that considers all the variables. The easiest way for Donna to get an idea of the correct size is to get three bids on a new system. Not only will that allow her to compare prices, it will also give her three estimates of how big a system is required. Before calling for estimates she should do any insulation upgrades or weather-stripping since that will effect the calculation. She'll also want to check with the local electric company before making a purchase. Many offer rebates when you buy a more energy efficient air conditioner. Don't forget to consider the repair record and the warrantee offered by the manufacturer. Should Donna replace her air conditioner before it quits working? According to the DOE, a 13.0 SEER unit would only reduce the electric bill by $42 per year vs. a 10.0 SEER unit. Of course that's an average. If Donna's unit has a SEER of 8.0 and she replaces it with one at 12.0, she'll reduce her cooling bills by one third. At 12 to 14 years old, the air conditioner is nearing the 15 year average life span. Donna might be wise to start shopping now while she has time to make a careful selection. Even if the new unit doesn't pay for itself right away it could be a wise purchase. Gary Foreman is a former purchasing manager 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 >>

IconFinancial Planning for Baby's Future From newswise.com and the University of Alabama at Birmingham: Financial planning for a new baby goes beyond saving to pay for the hospital bill, which can cost as much as $5,000 for a healthy child. Read the entire article here. More >>

IconMARRIAGE AND MONEY MINDSETS By Cheryl Gochnauer Danny and Tricia's combined income places them firmly in the upper middleclass, so most of us would assume their financial problems are over. Notso. Though they bring in a substantial amount each week, Danny and Triciahave never learned to effectively handle their resources. Like many couples, Danny and Tricia don't keep close track of where theirmoney is going. They have separate accounts, since each respects theother's right to "their own money." Tricia likes not having to answer toDanny for every penny she spends. Unfortunately, she doesn't answer toherself for every penny she spends, either. Dollars flow into their threechecking accounts - hers, his and theirs -- then flow right out againwithout hanging around long enough to draw interest. With all the activity in their accounts, Danny and Tricia figure they aredoing okay. Bills are usually paid on time, and when the checking accountbalances disappear, they always have their good credit to draw on. Whenthey receive their charge card statements each month, a fleeting discomfortsets in while reading the multiplying totals. But they've never had aproblem making the minimum payments. After all, two more checks are comingin next week. At least, they assume so. Tim and Rhonda make half of what Danny and Tricia bring home, and yet are inbetter financial shape. That's because they regularly do the math to seeexactly where they stand, money-wise, using a loose budget that guides theirspending decisions without hog-tying them emotionally. Early in their marriage, Rhonda and Tim pledged to openly discuss all moneyissues. Together, they planned and identified mutual goals. They usecredit sparingly, and postpone big purchases until they can pay cash or atleast make significant down payments. That doesn't mean they don't enjoythe occasional financial fling. It's just that those sprees are plannedfor, not regretted in a resulting 21 percent APR after-glow. Because they know where the funds are flowing, this couple knew exactlywhere they could cut when Rhonda decided to become a stay-at-home mom.Budget modifications were minor, since they had never delved into seriousdebt. Freedom from monetary strangleholds enabled them to make family, notfinance-, focused choices. Tim and Rhonda understand the fundamental difference between "wants" and"needs". You can bet this young couple can visualize themselves in the sameluxury car their friends drive, and would savor the same 5-star meals andcostly vacations that launch Danny and Tricia's account balances into thestratosphere. Sure, Tim would look great in that car. But the paid-off one he alreadydrives is dependable and economical. Yes, Rhonda needs a new outfit. Butis she really getting twice as much quality by spending $100 on that dress,instead of $50? And though a special meal is nice every once in a while,how often should they spend $40 for dinners they could fix at home for $7? Free-spiritedly riding the financial wave from week to week is both riskyand restrictive. The most glaring potential peril is losing everything dueto an unforeseen layoff or illness. But it isn't a prospective catastrophethat poses the most danger to a couple's emotional bottom line. Instead,it's the strain accompanying financial uncertainty and consistently livingbeyond their means. To positively approach marital money management: Review finances together. Agree on spending priorities. Identify mutual goals. Make a budget. Regularly review the budget, tweaking it to reflect your currentsituation. Stay in tune financially with your partner. It'll nurture the kind ofmoney-handling relationship you each want and need. (Homebodies is available as a free weekly email newsletter. To subscribe,visit Cheryl's website at www.homebodies.org . Copyright 2001Homebodies.Org, LLC. Permission granted for use on DrLaura.com.) More >>

IconAlmost Retired Planning The Dollar Stretcher by Gary Foreman gary@stretcher.com Dear Gary, I am 53 and my husband is 60. We have managed to have our house nearly paid for, one car free and clear, the other will be paid off in 2 years. We have modest savings and some stocks ($30,000). It is unfortunate that both our careers were in industries that either made no provisions for retirement or went bankrupt leaving behind very small pensions. All the articles I have read are for people wisely planning for retirement early on. Can you give me some pointers for late comers such as myself and my husband? We truly have been unwise and are growing old too fast. Patricia Miami, FL Each year about 4 million people celebrate their 65th birthday. And many of us don't think about how we're going to finance our retirement until a few gray hairs appear in the mirror. And the process of retirement planning has gotten harder. Patricia and her husband might not live into their 90's. But they need to be prepared in case they do. The basic problem that Patricia faces is obvious. They probably don't have enough income to support a comfortable retirement. The question is: how much do they really need. Finding out will require estimating after-retirement income and expenses. First, how much will Patricia and her hubby spend after retiring? Traditionally experts figured about 70% of pre-retirement expenses. That estimate will probably get her close but she might want to take a look at her current expenses and calculate work related costs. One wild card in Patricia's calculation is the cost of health care. AARP estimates that those over 65 pay $480 per year for prescription drugs. But that's not as bad as the $56,000 per year it costs for the average nursing home. Medicare will cover many, but not all, medical expenses. Patricia shouldn't worry about getting an exact number on expenses. For now she just wants to get a reasonable idea of her after retirement expenses. Next she'll need to estimate their income. You can find out how much you'll get from Social Security by filling out an online form at www.ssa.gov or by sending a request to: Social Security Administration, Wilkes Barre Data Operations Center, PO Box 7004, Wilkes Barre, PA 18767-7004. For private pension plans the plan administrator or your employer should be able to tell you what you'll get. Now for the moment of truth. Compare the income and expenses. Patricia will have three options for any shortfall. She can trim expenses, earn extra income or count on income generated from their savings. Reducing expenses can be hard for retirees. Once you get past travel and entertainment, there isn't much discretionary spending. Housing, food and medical expenses can only be reduced so much. Earning part of your retirement income is becoming more popular. As more retirees enjoy good health, they happily consider some work as part of their lifestyle. AARP estimated that there are over 30 million workers who have passed their 50th birthday. But Patricia will need to be careful. If she earns too much she'll begin to lose Social Security benefits. Up to age 65, she'll lose $1 for every $2 earned over a limit of roughly $10,000 per year. Past age 65 the loss is $1 for every $3 earned once she's reached the limit ($17,000 to $25,000 per year depending on when you reached age 65). Patricia is correct. They don't have enough money saved. If her $30,000 nest egg earns 5% it will only generate $1,500 per year in income. Their investment plan is important. Although CD's are safe, they won't provide the higher return that Patricia needs. She'll want to find a good stock and a good bond mutual fund. Approximately two thirds of their savings should be in the stock and one third in the bond fund. Either fund could lose money in any given year. But with a 30 year horizon there's time to recover any losses. Once they retire they'll take income from their savings account. About 7% per year is a reasonable amount that won't deplete the principal. How much do they need in savings? To calculate that, take the desired income (for instance $3,000 per year) and divide it by the rate of return (say 7%). In this case $3,000 divided by .07 equals $210,000. Patricia might be overwhelmed by the amount they need. She can't let that keep her from getting started. Better to save half of what you need than to have saved nothing at all. Fortunately, they still have a few years left to aggressively save money for retirement. And they might need to get aggressive. A move to a smaller home or selling a second car might be in order. Patricia and her husband do have some things working for them. They don't have a lot of debt. Social Security income will provide for most necessities. There are more job opportunities for people in their 60's and 70's. Will they live out their golden years traveling the world? Probably not. But, if they take appropriate action now, they probably won't end up among the 10% of retirees who live in poverty. 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 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 >>

IconBut First Consider the Consequences by Mary Hunt I wish I had a quarter for every stupid purchase I#146;ve made in my life. I#146;d have some major coinage. Regrettably, my financial faux pas have been remarkable in both quantity and quality. I#146;ve made some real doozies. Take the above-ground swimming pool. Its a la carte price was bad enough. Adding everything required but not included took it past barely reasonable to absolutely ridiculous. First there was the heater and filter. Then a cover, chemicals and test kit. Of course we needed search and rescue equipment (this was one monstrosity of a pool) and a few necessary pool toys. Oh, and let#146;s not forget the cost of eventually getting rid of the albatross. Let me put it this way: There is not a lively secondary market for this kind of thing. If I#146;d had the courage to consider the consequences of such a major purchase before making the decision to buy, I am quite certain we could have avoided a five-year industrial-strength headache and saved one huge pile of dough. I#146;ve since learned how important it is to keep a simple self-test handy. A check list clears away impulsivity and allows good sense to prevail. This process allows for no feelings-based answers. Nothing that includes "I feel" or words like happy, disappointed, sad, guilty or afraid. This exercise is about facts not feelings. Feelings are fickle. They trick us, but worse they change like the wind. When it comes to making wise financial decisions feelings cannot be trusted. Do I need it? If the honest answer is no and you do not have oodles of discretionary income, case closed. You#146;ve just saved yourself from a foolish purchase. Can I afford it? If you have to go into debt to make the purchase, you cannot afford it. Forget it. Do I already have something that will do just as well? An honest assessment of all the stuff you already have could easily produce an affirmative answer to this question. End of discussion. Can I wait until I find a cheaper more reasonable substitute? Have you ever noticed that you require your children to be patient but rarely put the same requirement on yourself? The bonus with this question is that while waiting, the need often disappears. Have I found the best deal? It takes time and effort to comparison shop and that also makes for breathing room. When making wise decisions, time is a valuable ingredient. Am I willing to wait? A false sense of urgency brought on by overwhelming desire#151;or a sale#151;can really skew your otherwise good sense. Simply getting away from the situation for a couple of days has a remarkable way of clearing your mind. If the purchase is right for you today it will still be right a few days from now. What if I don#146;t? Make a list of what will happen if you don#146;t make the transaction. If it#146;s paying the rent you#146;re questioning, that#146;s simple. The consequence is eviction. You must proceed. But if the subject is buying another pair of shoes, a faster computer or season tickets to the symphony, the consequences of not making the purchase will be quite different. What if I do? Here#146;s where the rubber meets the road. What will be the exact consequences of going through with this transaction? Don#146;t cheat on yourself. Don#146;t accept "I don#146;t know" as an answer. If you don#146;t know the true costs you are not ready to make the decision. So you think my pool fiasco was a financial disaster? Truth be told, that purchase was relatively mild compared to impulsive acquisitions I#146;ve considered since then. Trust me. And no one is more grateful than I#151;-my husband being a close second#151;-that I#146;ve learned to consider the consequences first. 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 >>

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 >>

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 >>

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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