Financial Literacy Month Blog

Room for Improvement

3/13/2008

Hi. I’m Kim, one of the team members who created FinancialLiteracyMonth.com and the 30 step path to financial wellness. I’ve been writing educational materials for Money Management International, a nonprofit financial education organization, for many years. Recently, I have come to the realization that it’s one thing to write about something and another thing to actually do it. For example, the column I wrote about how to eat right without starving your wallet… well, that is a good example of a “do what I say and not what I do” situation. In other words, I have some room for improvement! That is why I am committed to taking the 30 step path with you. Starting on the first day of Financial Literacy Month (April 1), I will take one step a day and blog about my experience. I invite you to comment about your experiences as well. So, let’s take the first step together!

I took the pledge!

4/1/2008

I am proud to be the 221st person to pledge that I will follow the path to financial wellness. That means that I am ready to accept responsibility for changing my financial situation for the better. I guess that also means that I am publicly admitting that change is necessary. After writing about money management for more than a decade, I have certainly learned a thing or two about budgeting and credit. Yet, there are still a lot of “do as I say and not as I do” moments in my financial life. For example, pledge #8 is about planning for periodic expenses. That is definitely good advice that I don’t follow (yet). So I realize that it might seem awkward to follow a path of someone who sometimes still gets lost. Or is it? If I were trying to change my eating habits, I know that I would rather take on the challenge with a friend who has a few pounds to lose herself than spend my precious time with a 112-pound coed in a bikini. And as much as I admire some of the better known financial experts, it can be hard to talk budgeting with someone who owns her own jet. So, I hope you will consider me a friend (with a few thousand to lose) and join me. Take the pledge today.

Nice Try

4/2/2008

I just finished taking the quiz on Step 2. Here are the results: Always Always Sometimes Sometimes Sometimes Never (YIKES!!!) Sometimes Sometimes Sometimes Always After doing a little math (at first I was a little annoyed that I had to do this on my own, but it was actually very easy), I came up with 12. That puts me into the ‘nice try” category: 11-15 Points: Reflects a good effort to manage your money effectively. The 30 step plan can help determine changes that can be made to improve your financial well-being. I can live with that. Plus, I’m happy that the first two steps were painless because I know that there is some harder (but necessary) stuff in a few days.

Making room for more

4/3/2008

I am at work today, so I cannot actually start to tackle Step 3 until later tonight, but I am thinking a lot about it today. The truth is that I hate clutter. I know for a fact that I have shoeboxes full of receipts dating back from 1990 and it drives me nuts. I can’t wait to get home and start tossing things out. Actually, I will probably shred them just to be on the safe side. It is rumored that my father-in-law has cancelled checks from the 1970s in his storage shed. I think I will forward him today’s step since that sounds like nothing but a fire hazard to me. What’s the oldest thing you’ve found lurking your financial files?

I nominate… someone else!

4/4/2008

Last night, I shoveled heaps of shredded financial papers into the recycle bin; it was like an old fashioned ticket tape parade! Now, I am ready to get organized. Step 4 says that the first thing to do is to elect a Family CFO. Thankfully, I have already done that and, believe it or not, it isn’t me. I’m not sure if it is a personality issue or a result of the fact that I work on credit and debt issues all day long, but I simply can’t handle the responsibility of being our personal CFO. Don’t get me wrong—I can and have done the work, but the stress it causes on me and the entire family just isn’t worth it. Since I want to be sure to pull my weight, I have instead self-appointed myself as the family CEO (sorry, honey!) This way, I can be sure that I am kept comfortably in the financial loop at all times without feeling the nagging need to compulsively check our account balances every five minutes. An online system is our family’s key to keeping financial communication open. How do you make it work?

Step 5: Get copies of your credit reports

4/5/2008

I just pulled a free online Equifax credit report from AnnualCreditReport.com and learned a few things I’d like to share: 1. Don’t get lured by a copycat Web site. There are a lot of sites that promise free reports, but AnnualCreditReport.com is the real deal. 2. Make sure your financial information is handy. In order to verify your identity, they ask you some questions about your existing accounts (I actually had to call the family CFO to ask him the exact amount of our mortgage payment!) 3. You need a printer with lots of paper. My printer jammed twice meaning that I needed a total of 45 sheets of paper to print the 27-page report. 4. Have some patience. There are a lot of screens to work through; many of them offering other credit report related products (that I declined). 5. You won’t get your score. If you want to know your credit score, you will have to pay for it. Before you make that decision, do some research. Each of the bureaus will offer you a score, but I can’t imagine that you’d want to pay for three. After I got my report, I took a quick look at the ‘summary section.’ At first glance, the report looks accurate, but I will take a much closer look at the accuracy of my credit report tomorrow when I tackle Step 6. Note: I could have also requested reports from TransUnion and Experian; however, you only get one free report from each of the bureaus once a year (according to the FACT Act). I know the information on the three reports can vary slightly, but I still thought it might be smart to pull the second report in a few months and the third a few months after that.

You can and should dispute credit reporting errors

4/6/2008

My credit report looks pretty decent. My credit mix is not great (according to Fair Isaac, your credit mix accounts for 10% of your FICO score), but at least the information is accurate. If you are not as lucky and find errors on your reports, you can and should take the time to have them corrected. To dispute information in your credit reports, you must file dispute forms with Equifax, Experian, or TransUnion directly. The bureaus must, at not cost to you, investigate the disputed information. The bureaus then will correct any mistakes or delete information that cannot be verified. I wouldn’t bother to try and dispute derogatory, accurate items. Most likely, you will have to wait out the 7 year timeframe outlined by the federal Fair Credit Reporting Act (this jumps to 10 years for Chapter 7 bankruptcy). If your negative information is the result of some kind of compelling story you are dying to tell, you do have an option to include with your credit report, a written statement of up to 100 words to explain. Before you do this, you should know that most lending decisions are made on your score, not your report. Also, there are some experts who believe that a statement can actually lower your score (kindof defeating the purpose). One more thing: it is possible for positive or neutral information to stay on your report for longer than 7 years. Don’t dispute these items. The length of your credit history also plays a factor in your score—the longer, the better.

Do I really want to know?

4/8/2008

Someday, in the not so distant future, I am going to be 40. Like most people (right?), I have a laundry list of things I am supposed to accomplish, milestones I am supposed to reach, and dreams that are supposed to be realized before the big 4-0 hits. One of those “to dos” includes an arbitrary net worth figure that I came up with when I was a very optimistic 20-something. As you might have guessed, I am not going to make it. Still, sometime today, I am going suck it up and complete Step 8 and figure out my net worth. That way, when I get to the steps related to setting goals, I can set realistic ones. After all, one day, in the not so distant future, I am going to be 60.

Is “Debt Free” a realistic goal?

4/9/2008

Years ago, I worked for a woman whose goal in life was to “owe no man no dollar.” At the time, I wondered how a crazy person landed such a good job. Today, I find myself wondering what life would be like without debt. In my lifetime, I have had much-needed student loan debts, medical debts, and mortgage debts. I can say with certainty that without taking on debt, I would not have my job or my home. On the flip side, I have also had not-so-needed personal loan debts, credit card debts, and auto debts. Debts taken on with more emotion than thought have cost me thousands of dollars. I guess you could say that I’m conflicted about debt. What I am sure about is that too much debt can be devastating. Debt has the potential to ruin families, careers, and esteems. The impacts of excessive debt are well outlined in Steve Bucci’s Bankrate article titled 8 reasons to manage debt in '08. The next few steps involve setting goals. After thinking a lot about Step 9, I will definitely put “pay down debt” on the list. Will “become debt free” make the cut?

I really need a Dyson

4/10/2008

Today’s step is about putting things in perspective. Categorizing things as “needs” or “wants” can help determine what is really important in life. “Needs” are defined as necessities, things you cannot do without or are required by law. “Wants” are things that are nice to have, but are not necessities of life. From these definitions, it seems clear that things like digital cameras and vacations should be categorized as wants, not needs. But what if your mental health is at risk if you don’t take a vacation now and then? Is there a point where a vacation can become a need? I am going down this path for a reason; I need an expensive vacuum cleaner. My old vacuum cleaner weighs a ton and it is louder than a jet. I have two very hairy dogs, so I vacuum every single day of my life. My current vacuum puts me in a bad mood. Several of my friends have Dysons and they talk about them like they’re family members. Not convinced? Maybe things aren’t so black and white; I need more categories! In her blog titled What you need vs. what you want and how to tell the difference, Sarah Winfrey has a category called “slightly less necessary needs.” Jumping on that bandwagon, my expanded set of categories includes: Need to live Slightly less necessary needs Things I need, but don’t really want Wants that I want so badly that I call them needs Wants that I just want So, I am putting the expensive vacuum cleaner down as a ‘want that I want so badly that I call them needs’ (as you might have guessed, items in this category rank high on my priority list.) Am I justified or did I just take the first step down a very slippery slope?

It’s SMART to involve the family

4/11/2008

I just finished reading about setting SMART goals and watching a free webinar called Setting Goals and Understanding Priorities. One thing that really struck me is that this needs to be a team effort. The counselors at Money Management International recommend that you share your list of financial priorities (Step 10) with your family (particularly your spouse) and discuss their similarities and differences. As you do this, just remember that the most important money move you might make is to embrace your differences. Understand that you may not be able to change feelings; instead, try to cultivate the positive aspects of each style. There is no one “right” way to handle your finances and a marriage of your money styles may be the perfect solution. For more, visit the Make Love, Not Debt financial relationship blog. Consider the following:

Sixty one percent of unhappily married people cite financial problems as the cause of their discord. Source: Money Management International Love and Money Survey, 2006
There is evidence that couples' financial problems (including debt) are associated with increased levels of stress, conflict, and marital duress as well as decreased levels of marital satisfaction. Source: Sanchez and Gager, 2000.
One of the unique strengths of the majority of happily married couples was that they did not have major debt problems. Olson, 2003.
Sixty six percent of survey respondents indicated that problems associated with major debt was one of the top five financial stumbling blocks in marriage. Source: Olson, 2003.

Déjà vu

4/12/2008

As I was writing out my short-, mid-, and long-term goals, it occurred to me that there was a distinct pattern. Short-term goals 1. Pay off unsecured debt 2. Travel to Costa Rica Mid-term goals 1. Pay off car 2. Travel to ? for 40th birthday Long-term goals 1. Pay off house 2. Travel to Europe My “pay off/travel” pattern might seem boring, but as the saying goes “if it’s not broke, don’t fix it!”

Debt’s far-reaching impact

4/13/2008

Yesterday, I set some short-, mid-, and long-term goals; half of which dealt with paying down debt. This is because I know that too much debt is not merely a financial problem. From the thousands of consumers who have written me though the Advice Team, I have learned that financial problems can negatively impact job performance, health, and personal relationships. Debt has even been held responsible for making the job of assembling some of the units needed in Iraq more difficult. Consider the following:

85 percent of employees use work time to deal with personal financial concerns. Source: www.ethomasgarman.net
Nearly one-third of workers admit that money concerns interfere with job performance. Source: www.ethomasgarman.net
A study of newlywed couples found that more than 60 percent had serious problems related to their finances. Source: Olsen and Defrain
There is evidence that couples' financial problems (including debt) are linked to increased levels of stress, conflict, and marital duress as well as decreased levels of marital satisfaction. Source: Sanchez and Gager 2000.
Data supplied to the Associated Press by the Navy, Marines and Air Force shows that the number of clearances revoked for financial reasons is increasing.
University administrators state that they lose more students to credit card debt than to academic failure. Source: UtahMentor, 2003
An astonishing 40 percent of employees stated that their health has been affected by financial problems. Source: www.ethomasgarman.net

Step 14: Expect the unexpected

4/14/2008

In addition to long-term savings, financial experts agree that consumers should aim to have three to six months living expenses saved for emergencies. I realize that is a lot of money, but I know first hand that a lack of savings can turn a minor financial setback into a major financial crisis. Following are some simple ideas on how to boost your savings: Pay yourself first. This just means that you need to make saving a priority. Make it automatic. Having money automatically deducted from your checking account into a savings account helps to ensure that you meet your savings’ goal. Even better, if your employer has the capability to automatically deposit your paycheck, have some of the funds directed into a savings account. Turn a hobby into income. Many people have untapped talents (unfortunately, I haven’t discovered mine yet). Whether you enjoy photography, painting, knitting, or metal work, consider possible ways to earn money by doing what you love best. Downsize. If you’re like me, you have a garage, basement, and attic full of items they no longer want or need. Holding a garage sale or advertising some of your things online could result in a boost to your savings account. Use gifts wisely. If you receive unexpected funds (like from a tax rebate), do not be tempted to spend them frivolously. Instead, put all “found” money into an interest-bearing savings account. Finally, don’t forget about your commitment to pay down debt. Reducing your debt allows you the freedom to make smart future financial choices.

Exactly How Much Are We Talking About?

4/15/2008

A reporter once asked me: “How much should I save for retirement?” I answered: “How the heck should I know?” Thankfully, he didn’t quote me. While it could have been said better, the answer was a good one. I’ll explain. While reading an old magazine, I came across a “simple guide to retirement savings.” But instead of taking the time to figure out the not-so-simple-looking guide, I starting looking for flaws instead. This turned out to be much easier than actually planning for my future. First of all, it assumed that I want to be living the same exact life I’m living now, only 30 years in the future. Second of all, it didn’t ask me if I had a passion for diamonds or not. I have no intention on living this same life tomorrow let alone 30 years from now. And furthermore, I do kind of like expensive things (though more along the lines of a Dyson than a diamond). Planning for the future is absolutely imperative, but relying on some set formula to determine how much you’ll need to save is nuts. What you need to do is figure out the kind of life you want to live 30 years from now and put the steps in place to make it happen (same goes for non-financial goals as well). It’s possible that you and your spouse may have different ideas about how to spend your golden years. Save enough for both. My husband’s idea of retirement bliss is living in a cabin on a small lake; he plans to fish all day. I want to travel Europe and spend the summers in Napa Valley. We better save enough money for him to fly out and visit me sometime. Regardless of where you want to go in the future, the message is to plan to get there. You may never win the lottery, but hopefully, you have the next best thing: time. If you haven’t heard, the eighth wonder of the world is compound interest. Here’s the formula: Future Value = Present Value (1 + interest rate in period).

Make a commitment

4/16/2008

In addition to the ideas on Step 16, another great way to show your commitment is to share and bookmark your favorite steps (or blog posts!) If you are new to this (like me), click on the Share & Bookmark links below to read about some of the Web’s more popular social bookmarking sites. Then, come back to FinancialLiteracyMonth.com; you can find links to Technorati, Bloglines, del.icio.us, and Digg on most of the site’s pages. Just look for this icon:

Losing weight and gaining financial wellness

4/18/2008

There are a lot of similarities between the efforts to lose weight and improve your financial situation. Both efforts take discipline, time, and are well worth the work. The main difference between the two is that when you monitor your spending, you are keep track of what you have put out; when you monitor your eating, you keep track of what you put in. I might as well try to “come out even” by putting less in my mouth and more in my wallet. Do you have a weight loss tip that might translate well into a financial tip? If so, please share it! Here’s mine: Drink a full glass of water before grocery shopping to help you stick to your list and your budget. Tips submitted may be used to fuel financial tip widgets and gadgets, which may be downloaded to desktops and social networking profiles around the world. Tips may also be used in an upcoming eBook designed to assist consumers in reaching their personal financial goals.

When buying a car, shop with your head and not your heart

4/19/2008

A car payment is an example of a fixed expense. And, obviously, owning a vehicle is no longer considered a “luxury,” even though the cost of transportation can be excessive for many middle-class American’s budgets. When buying a car, remember that it is, above all, a business transaction. Your car should provide safe, comfortable transportation. Before choosing a car, it is important to realize all of the costs involved. Car and lease payments, insurance, gasoline, repairs, and maintenance can really add up. In fact, these costs can consume up to 20 percent of the driver’s take-home pay. If you are buying from a dealer, check the Buyer’s Guide that the Used Car Rule requires dealers to post. According to the Federal Trade Commission (FTC), the Guide becomes part of your sales contract and overrides any contrary provisions. Among other things, the Guide must reveal whether the vehicle is being sold “as is” or with a warranty, what percentage of the repair costs a dealer will pay under the warranty and the major mechanical and electrical systems on the car, including some of the major problems for which you should be on the lookout. If you purchase a car from an individual, they are not covered by the Used Car Rule and don’t have to use the Buyer’s Guide. In this case, you should request maintenance records and have the car thoroughly inspected by a mechanic. Services such as CARFAX may also be helpful in discovering a vehicle’s history; reports include information about accident damage, flood damage, and odometer fraud. Also contact your local Department of Motor Vehicles to ask what forms they require to transfer the title. For example, some states require an inspection, some states require emissions testing, and others require the bill of sale from the current owner. Whether you buy from a dealer or an individual, research the car’s value by visiting the Kelley Blue Book’s Web site. You should also research the car’s recall history on the National Highway Traffic Safety Administration Web site. Choose your vehicle carefully; you do not have 72-hours to change your mind. A 72-hour cancellation notice applies only to certain home solicitations, telephone solicitations, and home improvement contracts. When you are ready to make a purchase, be sure to get all of the details in writing.

The holidays come every year—whether you’re ready or not

4/20/2008

I’m going to pick on the holidays for just a minute. In many households, the magic of the holiday season fades as soon as the bills start to arrive. For years, Money Management International, my national nonprofit credit counseling organization, has seen substantial increases in the number of clients who come in for help during February and March. According to the National Retail Federation, the average American spends more than $900 on holiday related expenses. And, just as the holiday bills become due, another festiveless season approaches—tax season. Unfortunately, credit cards are often used to pay for both. Both holiday and tax debts are periodic, meaning they are not part of regular monthly expenditures. In that regard, they join the ranks of other expenses such as auto registrations and vacations. So, I am going to do everyone a favor and let you in on a little secret: THE HOLIDAYS ARE GOING TO COME AGAIN THIS YEAR!! Don’t say I didn’t warn you…

Commit to finish strong

4/21/2008

I realize that filling out the expense worksheet in Step 21 is a less than exciting proposition (there are 672 boxes in that worksheet!), but it is vital. At this point in the game, you are probably starting to feel a little bit tired of money management, but don’t fall apart with a weak ending! This is the point where everything we have done so far really starts to come together. If you need a break, try a 7th inning stretch with Harry Carey. If you don’t need a break, check out some of Stacy Johnson’s free entertaining and money management videos.

Ways to “go green” and save some green

4/22/2008

Today is Earth Day and I am thinking about some ways that I can save some money and help the environment at the same time. I have already developed a phobia of plastic bags and have begun carrying my own cotton bags to the grocery store. As a bonus, my store gives me credit for the plastic bags not used! Following are some other easy ways I commit to “go green” and save some green. I will stop drinking so much bottled water. I am very tough and I am just certain I can survive tap water (or maybe I’ll get a good filter!) All those plastic bottles are piling up. Plus, Americans spend more than $10 billion a year on bottled water. I will hit “print” far less often. According to the Minnesota Pollution Control Agency, businesses tear through copy paper at an estimated annual rate of 10,000 sheets for each office employee. Besides, I already have too much paper on my desk. I will replace at least one of my burned out lightbulbs with a florescent lightbulb. According to the editor of SmartMoney.com, if every American replaced just one bulb, that small change would prevent greenhouse gases equivalent to the emissions of more than 800,000 cars. I will compost dog waste in something called The Pet Drum. I realize this is action a bit more extreme than the others, but I do think it is a very practical idea (especially since I don’t have as many plastic bags as I used to!) For more ideas, read The Digerati Life’s blog post from Earth Day 2007 titled 10 Simple Ways to Save Money and the Environment. I’d love to hear your ideas too! Submit your tips for change.

Going for groceries without going broke

4/23/2008

I have to admit that before FinancialLiteracyMonth.com, I had no idea that my organization offered free menu planners and grocery lists. I really, really need these tools because I am probably the worst grocery shopper on the planet. Take last night for example. I ran to the grocery store at 6:00 pm because I suddenly wanted a hamburger (in my defense, it was a very nice night for grilling!) While at the store, I picked up: ground beef, buns, bananas, soup, multi vitamins, dishwasher soap, pretzels, butter, sugar snap peas, and a tall decaf coffee from Starbucks. The bill was something like $32 (That is with my 5 cent discount for bringing my own bags!) I repeat a version of this madness every single day of the week. $32 x 7 times per week x 52 weeks = $11,648 per year on unplanned, chaotic grocery shopping trips. In addition to the 100 hours or so I spend on these grocery trips per year, I am spending way too much gas and money. According to the U.S. Department of Labor, the average American family of four spends $8,513 per year on groceries (could this possibly include stuff like dishwasher soap and vitamins??) Here’s what the experts at Kiplinger’s have to say about my grocery shopping style: “Making bigger shopping trips less often will cut down on your impulse buys. In fact, almost half of all shoppers go to the store three or four times per week. Shoppers making a "quick trip" to the store usually purchase 54% more than they planned, according to a study published by the Marketing Science Institute. If you go to the store three times a week and spend $10 on impulse buys each trip, that adds up to $120 extra per month. But if you go only once a week, you'll spend $40 per month on impulse buys. That saves you $80 per month, or $960 per year.” I know that this is one area where I can make some immediate, noticeable improvements to our financial situation. I am so committed to making a positive change in this area that I am going to make and print a goal certificate about it and tape it onto my car’s dashboard. I’d love to hear about some of your goals.

Sometimes, it’s easier not to do something

4/24/2008

I realize that money management are usually focus on what or how to do something; however, I am in a contrary mood today. Therefore, I am going to suggest five things that you should not do instead.

1.Don’t pay someone to “fix” your less-than-perfect credit reports. There is no company or person that can repair your credit any better than you can. 2.Don’t make the mistake of thinking that a divorce decree matters to your creditors. A divorce decree is between you and your spouse; not you and your creditors. If this becomes an issue for you, your best bet might be to find an attorney who can explain your rights and responsibilities. 3.Don’t ignore your interest rate(s). Even if you have a fixed rate, it is likely that your creditors can change it because of something called a Universal Default Clause. 4.Don’t think that you can just give a car back. If your car gets repossessed, it is probably not the end of your responsibility. Repossession is one of the most misunderstood aspects of collections. 5.Don’t cosign a loan. Period. Read what Mary Rowland had to say in her article titled Why you should never co-sign a loan: “Collectors go after the person who offers the best chance of recovering the money. If a loan becomes delinquent, a collector can choose to call you, harass you, rather than your friend or relative, if the collector sees that you have a much better repayment record. Even if the loan is repaid on time each month, another lender may consider the amount of debt that you co-signed when determining if you already have too much credit. In other words, if you've added your good name to someone else's debt, it could be counted against you if you need a loan.” Now it's your turn to add to our growing list of financial dos and don’ts!

Clearing the Path

4/25/2008

Today’s step is about uncovering and removing the obstacles that may keep you from meeting your goals. Following are some top money wasters to look out for. -Credit card interest. The average interest rate on a credit card is currently more than 13 percent. Credit card interest charges are a waste of your money and should not be considered an acceptable part of your budget. -Failure to manage your money. If you are not on top of your investment strategy or are not sure that you even have a strategy, it is time to take control. People who understand interest earn it, people who don’t pay it. -Poor loan decisions. Just because you qualify for a loan doesn’t mean you can afford the payments. Things like 110 percent mortgages and 72-month car loans are financial suicide. -Relinquishing control. Don’t cosign a loan or lend money unless you are comfortable with the fact that you may never see your money again. Think carefully before blending finances with a significant other until you have legal protections, such as a marriage might offer. -Not expecting the unexpected. At the very least, be prepared for periodic expenses such as auto repair bills and the winter holidays. Ideally, you should also be prepared for medical debt, divorce, and a job loss; even if you are lucky enough to avoid these financial disasters. -Over-withholding. Having the IRS withhold more taxes than necessary is a bad idea. There is no reason to take your hard-working money out of commission. Just think, if your annual refund is $1,000, that means you could increase your take-home pay by more than $83 a month. -Jeopardizing your future. If you withdraw money from your 401(k), you will have to pay tax plus a 10 percent penalty on any money withdrawn. The total tax bill will probably come to about 37 percent of the money you withdraw. Of course, there are some exceptions. Finally, try to avoid emotional spending. Remember, shopping is not a recreational sport. For help, read MP Dunleavey’s article titled 7 ways to control your emotional spending.

Perform a preventative health insurance check-up

4/26/2008

Being sick or hospitalized can leave you with a feeling of helplessness and the high cost of health care can make the situation even worse. Unfortunately, medical debt can quickly become overwhelming, causing it to be one of the leading causes of bankruptcy. A study by Harvard Law School and Harvard Medical School found that illness and medical bills cause about half of the personal bankruptcies filed. Hopefully, you will never face a situation that causes you to incur a lot of medical debt. However, if something were to happen to you or a member of your family, you will want to be prepared. The best plan of action is to take some preventative measures before injury or illness strikes. One great way to do this is to perform a check-up on your health insurance benefits. Does your plan cover pre-existing conditions? Sometimes, a plan may not cover treatments for an ongoing medical condition. Find out if there are there limitations or a waiting period involved in your coverage. Is the coverage sufficient? Find out exactly what services are covered and learn what preventive services are offered. Ask if there limits on medical tests, out-of-hospital care, mental health care and prescription drugs. What does it cost? Research your premiums and co-payments. Explore the difference in cost between using doctors in the network and those outside it. Find out if there a limit to the maximum you would pay out-of-pocket. What are my other options? Even if your current insurance plan seems to be adequate, it might be wise to review all of your options. There are many types of insurance such as HMOs, PPOs and fee-for-service. Many people are also able to get group insurance through membership in a professional association, club or other organization. You might also look into individual insurance options. Whatever you do, do not be tempted to allow your insurance to lapse. Unfortunately, the number of people who have no health insurance coverage is growing. According to a U.S. Census Bureau report, there are now 46.6 million uninsured U.S. residents. If you become unemployed, you may have the right to extend your coverage through COBRA (for the Consolidated Omnibus Budget Reconciliation Act of 1985). The government also offers programs, such as Medicaid, for people with low-incomes. Also check with your local state government about health insurance programs for adults and children.

Go figure

4/27/2008

I am going to let you in on a little secret. There are a lot of people in this world who think that I am smarter than I really am because of this handy calculator from Bankrate. This calculator can quickly answer questions like “if I have $5,000 on a credit card with 18% interest and pay only the minimum monthly payment, how long will it take me to pay it off?” (BTW, the answer is 150 months and you will pay $2,915.66 in interest.) Before you jump on my bandwagon, there are two important things to know when doing these calculations. The first if that minimum monthly payments are not as minimal as they were back in ought-5. This means that you should avoid being overdramatic by using a 2% minimum monthly payment if you will actually be paying 4%. The second thing that you need to know is that this calculator does this calculation correctly; there are a lot of others that do not. The difference is that smart folks at Bankrate know that no creditor will take less than a $10 payment. If they didn’t factor in this seemingly small fact, it would appear that your debt will take you a lifetime to repay in teeny, tiny increments. Speaking of teeny tiny increments, try playing with the What will it take to pay off my credit card calculator to see how much sooner you can repay your debts by paying just a bit more than usual.

What to do with your tax rebate

4/28/2008

Today’s step includes the word “tax,” so I am using that as an excuse to talk about taxes—or more specifically, tax rebates. After all, starting this morning, the much-anticipated rebate checks on officially on their way! It is always tempting to splurge with “extra” money. However, it pays to be patient and take some time before making any spending decisions. The experts at Money Management International offer the following ideas of how to spend your rebate wisely. Pay down debt. If you pay the minimum monthly payment of 4 percent on a $5,000 credit card debt with an 18 percent interest rate, it would take more than 150 months to repay. In that time, you would pay $2,915.66 in interest charges. Accelerating your debt payments is an easy financial decision. Save for emergencies. Americans are currently saving less than one percent of their disposable income. That means that any unplanned expense could turn into a financial emergency. Placing your windfall money in a savings account could be the difference between a financial difficulty and a financial disaster. Prepare for the holidays. Too many people get in over their heads during the holidays and being in debt is no way to begin a new year. By using your windfall for holiday purchases, you can take advantage of lower prices and avoid post-holiday debt. Invest in yourself. You are your most important and valuable asset. Use the newly acquired money to further your education or enhance a skill. Give to others. If debts are under control and your savings are adequate, consider making a donation to a favorite charity. Not only is it a good thing to do—it’s a tax write off. If you’d like to share what you plan to do with your tax rebate, visit SaveOrSpend.com.

All of the above

4/29/2008

Today’s step is about appreciating the benefits of improving your financial situation. I noticed that several of the suggested benefits seem to have more to do with mental health than financial health. I know from answering consumers’ questions submitted through the Advice Team that debt can negatively impact lives. But just how much impact does debt have? I say that any negative impact is too much. Try this quiz from iVillage to determine if debt is affecting you more than you know.

Random parting thoughts

4/30/2008

On this final day of 2008’s Financial Literacy Month, I should probably try to say something inspirational. So here goes: The quest for financial literacy should not be confined to any one month; achieving financial wellness is an ongoing journey that is well worth the trip. Now, I am going to spare you from having to read inspirational money-related quotes from famous people. Instead, I am going to offer random, straightforward thoughts that I sometimes wish I could tell Advice Team writers, but don’t have the heart. Don’t count on Social Security. You will not win the lottery. Writing “paid in full” on a check doesn’t mean diddly squat. Hiding a car from the repo man never works out in the long-run. The credit reporting agencies are not out to get you. The state of your credit report is not good cocktail party conversation. Shopping is not a recreational sport. No one cares more about your money than you. Collectors are people too. And last, but not least: Control your money; don’t let your money control you! Please feel free to share some of your random, straightforward thoughts.

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9/15/2008

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