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Saving Money: The Warranty Fund

Finance

Home theater projection screen displaying a hi...
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Last weekend, my DVD player died.

No big deal, right?  We watch a lot of movies. We get a lot of enjoyment out of watching a lot of movies.  Movies are fun for us.  We’ve got a projector and a movie screen in our living room.  Movies are our biggest pastime.   Naturally, losing the movie machine hurts.

The thing that hurts the most is that this hasn’t been a good month for us, financially.  My wife gets paid hourly, with semi-monthly paychecks.  This means that, in a short month(like February!), her second paycheck is small by a few hundred dollars.   When her company switched to that nonsensical plan, I watched for a few months, then set our budget to match the smallest paycheck she received.   They haven’t been using this ridiculous plan for a full year, yet.

February caught me by surprise.

I know, it shouldn’t have.  According to my research, there has been a February in every single year since well before I was born.  I should have been expecting it.  Oops.

So, to recap:  our favorite pastime was dead and money was a little bit tight.   There was no money to shake out of the budget to cover a new DVD player and there was no way we’d hit our emergency fund for something as frivolous—if enjoyable—as movies.

What to do?

About a year ago, I decided to start a warranty fund.  There are things we can’t easily afford to replace, so we pay for warranties on some of them.  For example, our cell phones have a repair plan, and that plan has saved us more than it has cost us.  We have a repair plan for some of our appliances, and that, too, has saved more than it has cost us.  My goal was to self-warranty my stuff.  I wanted an account that had money that served no purpoase but to help me avoid paying for warranties.

I set up another ING Direct savings account and scheduled an automatic deposit.  It’s only set to deposit $25 per month, but over a year, it was enough to replace our home theater system, with some left over.   It is, quite simply, money to use when our stuff breaks.

With no warning, and no time to prepare, we still had enough money socked aside to handle one of life’s little surprises, without wrecking our plans.

How do you prepare to replace the things that are going to break?

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Delayed Gratification

Finance, Parenting

I work daily to raise my kids to be more financially responsible than I have been.  One of the most difficult pieces has been to explain the benefits of delayed gratification to my children. It’s hard enough, as an adult, to take delayed gratification to heart.  For a child?   It seems to be almost impossible.

My son wants an XBox 360 Elite.   Good for him.  He wants to renegotiate the terms of his allowance to get it faster.  Currently, every other time he gets an allowance paid out, it goes into his bank account, to be mostly untouched.  The other times he can do as he pleases with his money.   We are enforcing a 50% long term savings plan. Now, with a medium-term goal in mind, he wants to keep all of his money, and only put gift money into the bank account.

Should we let him tap his bank account for a shiny new bauble?  It’s been building for a while, so it’s delayed, right?   I don’t think that would accomplish much. Like any other 10-year-old, his interests change often.

Should we let him change the terms of our agreement, speeding a medium-term goal at the expense of his long-term savings?  My wife and I haven’t had a chance to discuss this, but my initial reaction is not to allow it.   His savings has the potential to turn into a decent car in a few years, if he wants.  That would be a car he knows he earned.

Last week, when we were at the store, he asked if he could borrow some money to buy a game.   I don’t expect him to carry his money around everywhere, so I would have allowed it, if he would have had the money at home.   He didn’t.   His plan was to pay me what he did have as soon as we got home, then work his butt off for a few days to earn enough extra to pay it back.   I won’t be a credit agency for my kids, so I said no.  He was disappointed, but, by the time he had earned the money, he no longer wanted the game.   I consider that a win, but I don’t know that he learned any lesson other than “Dad’s a jerk.”

Someday, when his life launch is smooth due to a lack of debt-dependence, he’ll look back on these lessons and smile.

I hope.

Fixing Your Credit Report

Finance

Sometimes, negative things appear on your credit report.  Usually, they do a good job of maintaining

Credit card (Photo credit: Wikipedia)

accuracy, but mistakes do happen. The creditor or the reporting agency may screw up, or you may have your identity stolen.  If either of these situations are true, you’ll want to correct your credit report, making yourself eligible for lower rates on future credit and, occasionally, lowering the cost of things like auto insurance.

If you throw “credit repair” into Google, you get 18 million hits.   Most of those are either outright scams or hopelessly optimistic about what they can accomplish. As I said once before:

Credit Repair is almost always a scam. There are ways to get correct bad information removed from your credit report.  If the information is correct, those methods are illegal.   There are two legal methods to repair your credit.  First, stop generating bad credit.  Make your payments on time and eventually, the bad items will fall off.   Second, write letters disputing the actual incorrect items on your credit report.  There are no quick fixes, and anybody telling you different is flirting with a jail sentence, possibly yours.

There are ways to avoid the scammers.

  • Avoid advance-fee credit repair. If they are any good, you will pay for results, not intentions.  If they charge beforehand, they are already breaking the law.
  • If they insist they can erase the accurate, but negative information, run away.
  • If they tell you to dispute everything negative, even the accurate information, run away.
  • If they tell you to create a new credit identity, don’t just run, report them.  It’s a felony.

Legally, you cannot get valid information removed from your credit report.  Anyone who tells you differently is advocating a crime. However, according to the Fair Credit Reporting Act (FCRA), you are entitled dispute incorrect records.

To verify the accuracy of your credit report, you need to see it.  You can get a free report if your credit is used to deny you for something.  This is known as an “adverse action” .  You have 60 days from the denial to request the report.  You can also get one free report from each of the major credit bureaus each year. I space out these requests so I see my credit report every 4 months.

If there is inaccurate information on your report, dispute it in writing.  Send a letter to the credit bureau that is reporting the error.  Explain the problem and politely demand an investigation.   They will contact the creditor, who usually has 30 days to respond.   In the meantime, send a dispute letter to the creditor, along with proof of the inaccuracy.  If the investigation does not go your way, the creditor will have to report the dispute status to the credit bureaus in the future.

If the negative items are accurate, there is only one way to get it off of your report legally:  Wait.    Most negative information can only be reported for 7 years, while a bankruptcy will be reported for 10.

Another way to build your credit in the face of negative credit is to start building good credit to overshadow the bad. Get a credit card.  Your first credit card from the bottom of the debt-barrel will probably be a gas card or a store-branded credit card.    That’s fine.  The main consideration is are low or nonexistent fees.   Don’t accept application fees, activation fees, fees for carrying a balance or fees for not carrying a balance.    Annual fees are becoming a fact of life, so look for low fees.   The interest rate does not matter.   You will be paying this card off immediately, meaning no less often that every two weeks.  Make sure every penny is paid during the grace period, and make sure your card comes with a grace period.   Some don’t.  Those are bad cards to get.

There are no quick fixes for bad credit, just good new habits and time.

 

Year of the Unfair Fees

Finance

The year 2011 was a challenging economic year for many, with housing prices continuing to fall in many parts of the country, with unemployment numbers remaining high and with a credit crunch making it challenging for many to get new cards or unsecured loans.

Those going through economic turmoil were, unfortunately, faced with little understanding from many corporate conglomerates. In fact, so many companies instituted so many silly fees and surcharges that 2011 may as well be known as the year of unfair fees.

Whether you are taking out unsecured loans, opening a bank account or signing a TV service contract, it is up to you to read the contract carefully and be mindful of the fees you are being assessed.

Debit Card Use Fees

Many people who are trying to get out of debt and pay off credit cards, unsecured loans and other obligations may consider making a commitment to avoiding credit and using their debit card instead. Unfortunately, in 2011, many banks wanted to try to make this more expensive for consumers who were trying to be financially responsible.

Faced with a limit on the fees they could charge for debit transactions, a number of banks began to explore the idea of a monthly charge to consumers of between $4 and $5 just for using their debt card. Politicians and the public reacted so strongly against this, however, that the banks relented and gave up the plan. [ed. Just like Suze Orman’s new blunder!]

Fees for Depositing Cash

Also near the top of the list are the fees that certain banks institute to business customers who deposit large sums of money. Some banks will charge a small fee if you deposit in excess of a certain amount, depending upon the type for account you have. For instance, one major bank charges .20 for each $100 in cash deposited over $10,000. The fees are small, but some customers are still upset at the principle. After all, just what is that fee justified by since all you are going is giving the bank your cash to put into your account.

Airline Fees

Airline fees aren’t a new thing and almost everyone is now aware that they’ll be charged for bags on many flights. However, in 2011, some airlines decided to try to take things a step further. Passengers faced fees for booking a ticket, for printing a boarding pass at the counter instead of at home and even for taking a carry-on bag. These surprise fees that hit you may make it difficult to comparison shop for the best flights, making it harder for cash-strapped consumers to find affordable travel.

Early Termination Fees

Early termination fees have become standard for cell phone contracts, but the dreaded charges are now spreading to other industries as well. Some television service providers have now instituted early termination fees for consumers who end their contracts with the service providers early. The cable and satellite companies attempt to justify this by saying they need to cover the prices of the expensive equipment used to provide you with service, but the companies have come under fire anyway. In fact, one major satellite company recently had to settle with regulators over its business practices and cancellation policy.

Watching for Fees

Only by being diligent will you avoid the excessive fees that banks and other companies are beginning to institute in a time when every cent counts.

Post by MoneySupermarket.

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Hippy Month – September’s 30 Day Project

Finance, Life

A photograph of the inside of an unripe wild-t...
Image via Wikipedia

My 30 Day Project for August was…forgotten.  I didn’t notice August roll in, and when that fact finally registered, I had already blown the project.  With that, and our planned vacation, I decided to take the month off.  Yes, I am a slacker.

So, now that it is September, I’m getting back on track.  This month, we are going used.  For the next 30 days, we are buying nothing new.

The Ground Rules

1.  We aren’t buying anything new.  No retail purchases.    If we need to buy something, it will be used.

2.  Food is an exception.  Used bananas are gross in too many ways.

3.  Consumable hygiene products are an exception.  We are not recycling shampoo or deodorant.  We are also not willing to spend the month smelling like hippies.

4.  My wife is not a loophole.  Her shopping counts as my shopping, so this is something we have to do together.

4b. Neither is her mother’s credit card.  We are doing this for real.

There is a group called The Compact that started this movement.  They went for an entire year.  They are hippies.  Ick.

I am not a hippy! This did, however, make for a good lesson in how to be environmentally friendly.

My main goal for Hippy Month is to break our consumer addiction.  We need to get used to “making do” or doing without.  We also need to make a habit out of looking for used and cheaper options, first.

Our secondary goals are to save money and stop accumulation so much danged stuff.

It won’t be easy.  Goodwill is far less convenient than Target.   It’s so simple to run into a store to replace something that’s broken instead of fixing it or finding a used alternative.

These projects wouldn’t be fun if they were easy.

Anyone care to join me?