Thursday, October 23, 2008

Friday, May 2, 2008

Save yourself $100

It can be a little daunting to think about all your major savings goals at one time. There's the massive retirement fund that you want to build, which never seems to get big enough. There's the emergency account that should be filled with at least enough money to cover three to six months' worth of expenses. There might even be one or more college funds, assuming college doesn't cost an actual arm and a leg by the time the little tykes grow up. Add these all up, and we're talking about hundreds of thousands of dollars. Yikes!

Obviously, you can't save all that money tomorrow, so let's start small. Think in more humble terms, especially if you're not saving at all or you can't figure out why you're not saving more. Ask yourself how you could put aside just an extra $100 per month.

Saving an additional $100 a month means (obviously) you'll have saved an extra $1,200 in a year. If you had put an extra $1,200 in your child's college fund this year, it would be worth $2,263 by the time she heads to college. That assumes a pretty conservative 5% growth rate.

Let's say you saved that money for retirement and invested your $1,200 in a fund that tracked the performance of the Standard & Poor's 500 Index, which represents about 70% of all U.S. publicly traded companies. Buying an index fund gets you shares of some of the biggest companies in the country.

The long-term average growth of the market has averaged about 10%. If the market kept up that performance, the $1,200 saved by a 35-year-old today would be grow to $20,939 by the time that person retired at age 65.

So, there's plenty of incentive to figure out how to save that extra $100 every month. To get you started, here's a list of savings ideas that don't require any major lifestyle changes. You may have to do a little research, but you won't have to sacrifice your morning jolt of caffeine. Combine a few and you might hit $100 in savings without doing much at all.

  • Contribute an extra 1% of your salary to your 401(k) or other workplace retirement plan. Because the money is withdrawn before taxes, you'll lose less than 1% from your take-home pay. You'll probably never even notice the money's gone, but your retirement fund will start to fatten up faster.

  • Review your telephone, mobile phone, Internet, and cable service. If your mailbox is anything like mine, it's full of special offers and bundled packages. See if you can get a better deal than the one you have now. If you see a better rate advertised, try calling your current providers and asking them whether they'll meet the competitor's rate. While you're reviewing all this, cancel any flashy services or premium channels that you don't use.

  • Call your credit card company and ask them to lower your interest rate. This could mean serious savings for anyone struggling to pay off a balance. (Your extra $100 should go straight to the credit card instead of going into savings, by the way.) If your credit company is hesitant to lower your rate, arm yourself with offers from competitors. You've probably gotten a bunch recently. If they won't budge, look for balance transfer options with lower rates. Before making any move, examine transfer fees and look at the interest rate that will be in place after any teaser rate expires.

  • Reexamine your car insurance. Your policy probably renews automatically. If you haven't looked at it since you first signed up, see if you still need all the coverage you have. Consider raising the deductible. You can take that extra money and stash it in an emergency fund so paying the deductible won't be a problem.

  • Stop heating the whole neighborhood. A little weather stripping and a programmable thermostat can go a long way to cutting the utility bills. They're cheap and easy to install, and they also save energy. Turn down the heat on your water heater if you have it set to "scald." Fix anything that's leaking. By the same token, shut down your computer at night and turn off the lights when you leave the room. (Yes, I know I sound like your nagging mother, but there's a reason she nagged you about this.)

  • Cancel any gym membership or subscription you aren't using.

  • Eat out of your pantry for a while. If you dig back there, you will find long-lost bags of pasta, cans of soup or beans, piles of rice. I, personally, have enough dry goods in my kitchen to feed the entire neighborhood for about a year. There's probably enough in your pantry to cut your grocery bill down significantly for a while. And, if you've been buying bottled water, consider switching to a filtered pitcher.

Hopefully, that will get you started thinking creatively about ways to fill your savings accounts without making radical changes. Then make sure to put that $100 in spare change toward your big savings goals.

Thursday, May 1, 2008

Inflation should change your savings rules

If prices keep rising, you may need to think differently about a few things. Have you seen the price of milk lately? It's up 13% since last year.

The pain isn't only at the supermarket, however. Hospital costs are up 8%; gas, 33%; and prices overall climbed 4% (vs. less than 3% annually over the past decade). Plus, with the Fed pumping money into the economy, the price pinch probably isn't improving soon.

No wonder inflation ranked as the No. 1 financial worry in a recent poll. While we're nowhere near the 1970s - yet - it's a good time to review how inflation changes the rules.

Rule 1: You can lose by saving

A one-year CD now pays 1.97% a year on average. At 4% inflation, you lose 2% a year before taxes. Best strategy: Shop for top savings rates. Keep bond and CD maturities short.

Rule 2: Stuff beats paper assets...on paper

When inflation is high, tangible goods - gold, oil, gems, art, even wheat - tend to have an edge over securities, especially bonds.

Reason: Because of their rarity, beauty or usefulness, these items have an intrinsic worth that doesn't change, even as paper money loses value.

That said, the market's evaluation of their intrinsic worth varies wildly - for many commodities, it's dangerously exuberant right now. Also, the cost of insuring and maintaining things like art eats into any profits.

Rule 3: Fixed-rate debt is your friend

Here's why: You repay a fixed number of ever-cheaper dollars. Not so with variable-rate loans like ARMs, HELOCs and - worst of all - credit cards.

Tuesday, April 29, 2008

$4 per gallon! Time for some commuting tips

Just getting to work is getting more expensive. But there are ways to cut down on commuting costs. Here are some top tips on how to save while driving to work.

1. Calculate Alternatives

Do you know just how much money you're using by commuting back and forth to work?

The typical commuter pays over $200 per month just to get back and forth to work. That's over $2,400 per year, or put differently, the same as a $3,500 raise in your salary.

So, think about how much you would save by taking mass transit instead.

Check out this calculator from that let's you see what the cost benefit could be if you hopped on the train or the bus.

2. Improve your mileage

Getting the most out of your gas tank is a priority.

Here's how to do it:

First, simply maintain your car. One of the most important things you can do it to make sure your tires are inflated properly.

According to tests done by, driving with tires underinflated by 25% caused a loss of fuel economy on an average of 3.75%.

If you have a roof rack that you're not using, take it down. It can cause a fuel loss of 1%.

And if you have a lot of junk in the trunk, make sure you get rid of it. That heavy load can really add to your gas bill.

If both spouses drive to work in separate cars, use the more fuel-efficient one for the longest commute.

3. Look to your employer

The federal and most state governments offer big tax breaks for commuters.

If your employer offers a flexible spending plan for transportation, take advantage of it. This program lets you put pretax money away for your transit passes or parking expenses.

And the money you contribute to this fund lowers your taxable income, so you'll be shielding the cash from Uncle Sam.

Make sure you ask your employer if this perk is offered.

4. Find a buddy

Driving to work may be a drag, but you can drastically cut down on your mileage by sharing the ride with a colleague or a buddy.

Sign up for the free service to find fellow travelers who are looking to connect and share rides.

You can also check out or your state's department of transportation for more information.

5. Call your insurance company

If you do cut your commute, let your auto insurer know.

You'll generally get a low-mileage discount if you drive fewer than 40 miles per day.

You may also be able to cut down on your mileage by pitching the idea of telecommuting one or two days a week to your boss.

Saturday, April 26, 2008

Stimulus Payments to Go Out Ahead of Schedule

The federal government, eager to boost the flagging economy, will start distributing special stimulus payments Monday—four days earlier than expected.

"Beginning Monday, the effects of the stimulus will begin to reach households," President Bush said Friday. "This money is going to help Americans offset the high prices we're seeing at the gas pump and at the grocery store."

The department announced the early arrival of the payments Thursday after saying last month that it would begin sending out the money on May 2.

As of next week, 800,000 tax filers daily will begin to have their checks directly deposited Monday, Tuesday and Wednesday. No checks will be distributed Thursday, and 5 million payments will be made Friday.

The payments will go out ahead of schedule because of a new computer program that updates records daily—faster than an older program that updates weekly, according to Andrew DeSouza, a Treasury spokesman.

Overall, the Treasury will distribute more than $110 billion to 130 million taxpayers by July and hopes to get the first $50 billion out by the end of May, DeSouza said.

The checks are the centerpiece of an economic stimulus program signed into law by President Bush in February. The aim is to boost consumer spending and help mitigate problems caused by the slowing economy.

Checks are being distributed to people who file 2007 tax returns. Those who opt for direct deposit with the Internal Revenue Service will start getting payments before those who use the mail.

The program calls for rebates of up to $600 for single filers making less than $75,000. Couples making less than $150,000 would receive rebates of up to $1,200. In addition, parents would receive $300 rebates per child. Filers who do not owe income taxes but have at least $3,000 in income would get a $300 payment.

Payments to taxpayers slated to get paper checks will start to go out May 9—one week earlier than originally planned.

The order in which tax filers will receive their payments will be based on the last two digits of their Social Security numbers.

Under the government's economic stimulus plan, 130 million people will receive tax rebate checks for $300 and up, starting Monday. What do you plan to do with your check? How do you think the stimulus plan will affect the economy?

There is fear that many, many Americans will pay down personal debt (which will not act as an immediate stimulus to the economy). And that's what we're doing. We still have over $45,000 in Home Equity Line of Credit debt hanging out there. My wife and I are starting a business and have been using excess cash to fund that. Therefore, we haven't had as much cash to pay down the debt. When our $1,800 arrives, I'm paying down debt.

Thursday, April 17, 2008

Killer credit card rewards

As the quantity and variety of credit card offers seem to expand like options on a Chinese food take-out menu, card issuers keep searching for new ways to capture and retain customers. One approach has been to appeal to consumers interested in benefits other than typical financial inducements such as low interest rates, no annual fees and travel rewards. By offering rewards that benefit the specific passions and interests of consumer niches, issuers have found that they can appeal to a particularly loyal base of customers.

Whether you are an extremely generous or loyal person, or someone in need of extreme pampering, there is almost certainly a credit card tailored for you. And if you are a partisan of long-term relationships, there is a credit card that claims it can make you a millionaire!

Extreme Generosity

Yes, Virginia, you really can do good things with your credit card beyond feeding your own selfish needs and desires. Some credit cards offer a convenient way to support worthy charitable and socially conscious programs.

Best Friends Animal Sanctuary Platinum Visa Card

This card benefits the Best Friends Animal Society, which operates an animal sanctuary in Utah and promotes the No More Homeless Pets campaign.

Basic reward:

  • 0.55 percent of purchases charged to the card are donated directly to the Best Friends Animal Society.

Bank of America Brighter Planet Visa Credit Card

Want to use your plastic to boost renewable energy projects? This card benefits Brighter Planet, which helps combat global warming and fund community-based renewable energy projects. Current projects include a wind turbine project supplying electricity to a rural Colorado school district and a methane abatement project at a Pennsylvania dairy farm.

Basic rewards:

  • Earn one point for each dollar spent.
  • Points automatically redeemed each month by Bank of America to purchase carbon offsets.
  • Through 2008, Bank of America will make matching contributions. At the current price of carbon offsets, this amounts to about $18 total redemption for each $1,000 charged (or 1.8 percent).

Target Visa REDcard Credit Card

Here's a credit card that helps build school playgrounds and purchase books. Select your kids' school or another eligible school. Through its Take Charge of Education program, Target will send twice annual checks to the school.

Basic rewards:

  • Earn one point for every dollar you spend at Target and every two dollars spent elsewhere.
  • Enjoy a 10 percent discount for a full day at Target every time you earn 1,000 points on your credit card.
  • Receive a 10 percent discount on prescriptions at Target pharmacies.
  • Target will donate 1 percent of your Target purchases to the eligible school of your choice.

Extreme Loyalty

Everyone has at least one substantial passion. Whether yours involves a pet, a theme park, a city, or a sports team, chances are that you will be able to merge that loyalty with a credit card. Here are a few examples:

Bank of America PetRewards Platinum Plus Visa Card

Pets are great, but they can be a costly indulgence. This card can take a bite out of that financial strain, while offering you the opportunity to carry a credit card emblazoned with your pet's photo.

Basic rewards:

  • Personalize your card with a photo of your pet or choose from one of three stock designs.
  • Earn one point for every dollar you spend on everyday purchases and two points for purchases at participating veterinary clinics and pet stores.
  • Redeem rewards for pet food discounts, veterinary care savings and shelter donations.

Disney Rewards Visa Card from Chase

How many households can you think of that have kids, but don't have at least a few Disney-related items and a desire to visit a Disney theme park? Probably not many, and that's why a Disney-branded credit card appeals to so many parents.

Basic rewards:

  • Earn one reward dollar for every $100 of card purchases.
  • Redeem reward dollars throughout the Disney empire--Disney stores, theme parks, cruise lines, and through the Disney catalog (clothing, DVDs, toys).
  • Receive additional theme park discounts, with no blackout dates.
  • Pay 0 percent interest for six months on select vacation packages.
  • Choose among six different Disney-theme card designs.

IN:CHICAGO Card from American Express

If Chicago is your kind of town, the IN:CHICAGO Card might be your kind of credit card.

Basic rewards:

  • Earn one point for each dollar spent anywhere, and double points for selective services in the city.
  • Redeem your points for rewards (dining, entertainment) in Chicago, and receive special discounts on a range of activities around town.
  • American Express offers similar cards for New York City and Los Angeles, and points earned on each card are redeemable in all three cities.

Nordstrom Visa Signature® Credit Card
Store-branded cards can be great choices for frequent shoppers. Nordstrom's is one retailer whose card was rated highly by an October 2007 Consumer Reports survey.

Basic rewards:

  • Earn two reward points for each dollar spent at Nordstrom's, and one reward point for card purchases elsewhere.
  • Earn double rewards during special sales held twice annually.
  • Automatically receive $20 Nordstrom Notes by mail every time you accumulate 2,000 reward points.
  • Free concierge services.

The KISS Visa Card with Chase Flexible Rewards

Fans of aging rock stars with painted faces and prominent tongues can bond with their musical heroes financially with this card. For better or for worse, there don't seem to be any KISS-specific rewards associated with this card beyond the colorful face of the card itself.

Basic rewards:

  • Earn one point for each dollar of card purchases.
  • Redeem points for the typical array of travel, cash, and merchandise offerings.
  • Extreme Gamble

    Enjoy rolling the dice? Rest assured that you can find a credit card to satisfy the craving.

    American DreamCard

    This card centers around a monthly jackpot drawing. The jackpot, which is equal to 0.5 percent of total dollars spent by cardholders that month, has ranged from $12,000 to $25,000 over the past two years. Winners' names are posted on the Web site. The more you charge, the better your odds of winning. This is probably not, however, a smart choice for those with gambling and shopping addictions.

    Basic rewards:

    • Earn one entry into monthly drawing for each dollar charged.
    • With Lady Luck's cooperation, win the monthly jackpot.

    Extreme Pampering

    "Concierge service" and "exclusive" are buzzwords in the promotional efforts aimed at credit card customers looking for a little extra attention. These cards tend to flow to high net-worth customers seeking individualized service, flexible or substantial credit limits, and a helping hand with scoring dinner reservations or finding a gift.

    American Express Platinum Card

    If you want more, sometimes you have to pay more. This card carries a hefty $450 annual fee, but promises experiences "that are a cut above the rest."

    Basic rewards:

    • Exclusive travel benefits (airport club access, cruise discounts, hotel upgrades).
    • Concierge service.
    • Access to invitation-only events.

    MERRILL+ Visa+ Credit Card

    If your idea of being pampered is having the option to spend huge amounts of money, here's a card that offers credit limits up to a whopping $250,000.

    Basic rewards:

    • Earn one point for each dollar spent.
    • Redeem points for air rewards (any airline, no blackout dates) or merchandise.
    • Concierge service.

    Bank of America Rewards American Express Card

    Here's a card available to consumers with good, but not necessarily great, credit ratings.

    Basic rewards:

    • Earn one point for each dollar charged.
    • Redeem points for travel (no blackout dates), hotel discounts, cash, or merchandise.
    • Flexibility to pay balance over time.
    • Concierge service.

Wednesday, February 6, 2008

Which presidential candidate is best for your wallet?

Regardless of how much money you make, you have skin in this game.

The four leading presidential candidates say they're concerned about the taxes that Americans pay out of their paychecks. And they all vow to do something about it if elected.

Now with the economy at the forefront of the presidential campaign, the leading candidates' tax proposals will come under increasing scrutiny in the coming weeks.

Here's a look at some of the ways that Hillary Clinton, Barack Obama, John McCain and Mitt Romney would realign tax policies and how those changes could affect your take-home pay.

Keeping the tax cuts in place

One of the central questions is what to do about a series of tax cuts passed in 2001 and 2003 set to expire in three years.

The four candidates seem to agree on one thing: They want to preserve the cuts for low- and middle-income earners. Those tax cuts include lower rates, reduced taxes paid by married couples and a higher standard deduction.

But the Democratic and Republican candidates part company when it comes to upper-income earners.

Both McCain and Romney have said they would preserve the tax cuts for high-income earners - typically defined as households that make $250,000 or more. Clinton and Obama want to repeal them for taxpayers in that group.

Clinton also would reduce the value of some personal exemptions and itemized deductions for big earners.

Part of the rationale given for restoring higher taxes on upper-income households is that they benefited the most from the 2001 and 2003 tax cuts, and that continuation of the tax cuts for those at the top of the heap may force the government to raise taxes on everyone else or cut spending.

Those who oppose taxing the rich more note that the top 1% - taxpayers making more than $250,000 - already account for 40% of all federal income tax revenue. Taxing them more, proponents of extending the tax cuts say, may lower tax receipts because high-income filers will seek more ways to shelter their money from taxes.

New tax breaks

The candidates also have somewhat different ideas about what kind of new income tax breaks to offer.

On the Republican side, Romney has said he wants to permanently lower the rate on the lowest tax bracket to 7.5% from 10%. Currently that tax bracket applies to roughly the first $8,000 for single filers and the first $16,000 for married couples filing jointly.

And he has proposed permanently exempting workers over 65 from having to pay payroll taxes, which are used to fund Social Security.

McCain hasn't yet offered up any individual income tax breaks beyond proposing to make the 2001 and 2003 breaks permanent.

On the Democratic side, Obama would offer a tax break to seniors by eliminating their income taxes if they make less than $50,000.

Obama also would create a credit worth up to $500 per working person ($1,000 per family) to offset Social Security tax on the first $8,100 of earnings. The credit would start to phase out for people with incomes between $150,000 and $200,000.

Both he and Clinton have said they want to expand the earned income tax credit for low-income workers. And they want to offer an expanded saver's tax credit although in somewhat different ways.

Clinton would offer a savers' credit equal to 100% on the first $1,000 saved by married couples making less than $60,000, and a 50% matching credit for couples making between $60,000 and $100,000.

Obama would match 50 percent of the first $1,000 of savings for families that earn under $75,000.

New retirement tax bites

The candidates' tax proposals aren't all sugar. There are notable differences, for instance, in how they might treat payroll taxes in a bid to shore up Social Security over the long haul.

Obama would consider increasing the amount of wages subject to the payroll tax. Currently, the first $102,000 of wage income is subject to the 12.4% tax, half of which is paid by workers and half by their employers.

Obama has indicated he might favor lifting that cap but only after imposing a "donut." A donut would protect from the payroll tax a certain portion of wages above the current cap - for instance, wages between $102,000 and $202,000. But any earnings above that ceiling would be taxed.

It's not clear yet whether a payroll tax increase would be in the offing under Clinton or McCain, because both candidates have been spare on details.

Clinton has said she doesn't want to eliminate the cap on the income subject to the Social Security tax. But that doesn't necessarily rule out an increase in that cap or a higher tax rate.

McCain, meanwhile, has said he would prefer Social Security funding to be shored up by reducing growth in benefits rather than by raising the payroll tax.

Romney doesn't want to raise payroll taxes, but instead favors the idea of letting workers have individual investment accounts and fund them with money from the surplus paid into the system.

Clinton and Obama oppose the notion of diverting payroll taxes - whether from the system's surplus or direct from your paycheck - to fund accounts.

Don't rearrange your budget yet

Of course, campaign promises are often easier to make than they are to keep. A lot can come between a newly elected president and his or her ideas about taxes.

Political reality, for one. Just look at President Bush and Congress. Their inability to come to agreement has stymied decisions.

Then there's deficit reality. The budget that Bush submitted Monday projects a deficit of more than $400 billion. That could tie the hands of the next president to make tax changes.

Or consider the Alternative Minimum Tax (AMT). Everyone in Washington says they want to do something about the outmoded tax scheme, which was originally aimed at the rich but is increasingly hitting the middle class. But no one has an appealing way to pay for fixing it. The price tag for reform or repeal ranges between $500 billion and $1 trillion over 10 years.

"No one has really staked out a credible claim at fiscal responsibility," said Len Burman, director of the Tax Policy Center. "They'd just devote deficits to different purposes."