Personal Banking E-Newsletter - July 2012
Tips for Garage Sale Shopping
Summer is in full swing, and many consumers take advantage of the nice weather to either host or shop at a garage sale. Whether you call them yard sales, garage sales or rummage sales, they're a great opportunity for shoppers to save money and sellers to get rid of unwanted items without accepting a complete financial loss. Before you hit the sales this weekend, consider the following tips for garage sale shopping:
Plan where and when to shop. It may seem like common sense, but where and when you go shopping should depend on what you're shopping for. For example, if you want higher-quality items, you're more likely to find them in more affluent neighborhoods. If you're looking for a big ticket item - furniture, TVs, etc. - get to the sale early because these items typically sell quickly. If you're looking for the absolute lowest prices, get there just before the sale closes because the seller will be more willing to discount items that haven't been sold yet.
Have your money ready. Remember to bring along small bills. Often the seller will not accept personal checks. If you've purchased a large item that you need to pick up later in a different vehicle, obtain a receipt or pay with a check to prevent confusion later.
Try before you buy. Especially with electronics and mechanical items, be sure to plug them in and test them before purchasing. When buying anything battery-operated, be sure to check the battery compartment for corrosion, too.
Talk to the seller. If you're looking for a specific item, ask the seller directly if they have it. You'll avoid wasting time and potentially buying items you don't need. Once you've selected an item to purchase, don't be afraid to haggle or name a price for a group of items.
Know what not to buy. There are certain items you should never buy at a garage sale, no matter how much you might save. Bike/motorcycle helmets, child car seats and infant cribs should all be bought new. There's no way of knowing if they've been damaged and poorly repaired or if they no longer meet safety standards. If you have any concerns about purchasing items, refer to the Consumer Product Safety Commission website at www.cpsc.gov, where you can find lists of recalled items and unsafe products. Shoppers should also avoid used shoes, because the sole will be molded to a differently shaped foot, which can cause discomfort when walking.
Shopping at garage sales is a great way to save money on clothing, books and other items. Remember to carefully inspect each item before you buy, and don't forget to tip the kid at the lemonade stand on your way out!
WBA Consumer Column for June 18, 2012.
Congrats, Graduates! Now Start Saving For Retirement
Nearly two million Americans will graduate from college with an undergraduate degree this year, and most of them will enter the workforce rather than continue on to a graduate degree. As these twenty-somethings begin earning wages from "real jobs" for the first time, many overlook the need to start saving for retirement. However, saving early is more important than ever. With pension plans becoming increasingly rare and Americans living an average 22 years longer than they did when Social Security was created in 1937, today's youngest members of the workforce are largely responsible for their own retirement income.
Here's a quick overview of the most common investment accounts used to save for retirement:
IRA - If your employer doesn't offer a company retirement plan (or if you're currently under- or unemployed), start your own nest egg by opening an Individual Retirement Account (IRA). These accounts provide tax advantages that a regular savings account does not. The maximum contribution to an IRA is $5,000 per year if you're under age 50. The money in IRAs is invested by the company managing the account and it is also easier to withdraw from than a 401(k). However, there are still several fees and penalties associated with early withdrawal.
401(k) - This type of retirement savings account is directed by employers and contributions are deducted from paychecks, before taxes. The account is then taxed when a withdrawal is made. The current maximum annual contribution to a 401(k) plan is $17,000. Also, many employer plans include a matching contribution, which is money that the employer will contribute to the account in addition to the employee's contributions. For example, if the company you work for has a program where they will match 50 percent of your contribution up to 3 percent of your paycheck, if you contribute the full 3 percent, you'll receive an additional 1.5 percent from your employer. That's free money for your retirement!
Roth vs Traditional - There are two types of both IRAs and 401(k) plans, Roth and Traditional. The basic difference is when the contributor pays taxes on the account. With a traditional retirement account the taxes are paid when the money is withdrawn. With a Roth account the taxes are paid when the money is added to the account. Roth accounts are especially valuable to young workers, as they are more likely to climb into higher tax brackets as they age, meaning they would owe more in taxes on the same amount of money later in life.
Notice that keeping cash under your mattress isn't on this list. Money that isn't invested or placed in a bank account earns no returns or interest. Make your hard-earned money work for you by investing in an IRA or 401(k) or depositing it into an interest-earning savings account.
If you have questions about how to get started saving for your retirement, ask your employer's Human Resources personnel or talk to your personal banker.
WBA Consumer Column for June 4, 2012.
Make Summer Vacation Debt-Free
It's a cruel, cruel summer for some Americans who want to travel but don't have the money.
Many families try to duck that problem by relying on credit cards to pay for their summer fun. But when they get home, they can find themselves facing massive bills.
We spoke to travel experts about what consumers can do before, during and after their summer vacation to make their travels something they remember fondly instead of something they regret financially.
Here are the five best tips we found:
1. Put a little aside from each paycheck
"If you have a monthly budget that you live by, configure your budget to include a travel fund," says Erica James, the owner of Erica James Travel. "Every payday, set money aside to go towards your travels."
James says she used this tactic herself before she became a travel agent. If you set aside $50 from each paycheck and get paid twice a month, that's $1,200 saved annually just for travel expenses. Many travel agents, James included, offer travel accounts to help travelers preemptively put some cash away.
2. Go all-inclusive
Avoiding debt while you're on vacation can be even harder than avoiding it before you go. Those extras add up, especially if you didn't budget for them. Several of the experts we spoke to said they recommend that budget travelers consider a vacation that can be prepaid, such as one at an all-inclusive resort or a cruise.
"All-inclusive resort packages are the best way to have a debt-free vacation," James says. "You can start paying on your vacation about 10 months ahead of time and then, when you get to the resort, everything is paid for and you don't have to have extra money to pay for food, drinks, and entertainment when you get there."
Parents might find this especially helpful, since finding family-friendly and inexpensive dining options may be difficult, and you may find yourselves breaking your dining budget relatively early on in a trip. If you go all-inclusive, however, all food and drinks are included in packages for the whole family, which can help take out the guesswork.
3. Use social media to hunt for deals
Meredith Holt, a public-relations manager at Walker Marketing who has done work for several tourism boards, suggests following the Twitter, Facebook or Pinterest accounts of some of your favorite locations' tourism organizations for discounts and bargains.
Following the social media accounts of cruise lines, airlines and rental-car companies can also prove fruitful, but it takes time and effort. You'll need to be dedicated to checking these accounts daily to find the best offers.
4. Consider travel insurance
Debt isn't something that people plan for, which is why buying a travelers insurance policy may be a smart choice for you.
"I highly recommend a travel insurance that covers job loss," says Christina Ernst, the president of VIP Alpine Tours, a travel agency in Cleveland, Ga. "This is included in one of the standard policies I sell daily. If a client books a dream trip over a year in advance, we may think of a death in the family or medical emergency, but we do not know what may happen with our jobs or home. It's nice to know that great vacation is protected."
Not all travel insurance will cover job loss, so make sure you read through any policy before putting down money.
5. If you don't have enough money, wait
Just because you found a great vacation deal using the tips above doesn't mean you should go if you're just going to be putting it on credit cards and or depleting your savings account.
Travel writer Dean Jacobs, a published travel author, says there are many ways to save on your travels, but if you don't have the money to travel in the first place, just put your vacation plans on hold.
"If you don't have the money to take the trip you want, wait and save a little longer," he says. "Coming back to work off a vacation takes some of the joy out of traveling."
How Couples Sabotage Their Finances
With a wedding coming up, you'd think Jay Buerck would be obsessing about the usual details: Writing vows, choosing appetizers, or figuring out seating charts to accommodate challenging relatives.
But what worries the 29-year-old St. Louis marketing professional isn't any of those things: It's money.
Not that he and his bride-to-be Liz Downey won't have enough; they earn comfortable salaries. What really freaks him out is the inherent challenge of joining two people's finances.
"Money is the reason why many people get divorced," says Buerck. "I have a buddy who got married and didn't tell his wife about the extent of his debt, and they had a rough go of it when he came clean. That's something I want to try and avoid."
The couple has already taken steps to prepare their finances. That's a smart strategy, according to financial experts, especially now that U.S. couples are waiting longer to marry, and many people have thousands of dollars in student loans and credit card debt by the time they take their vows.
Money causes more arguments than other typical flashpoints, according to a recent survey by the American Institute of Certified Public Accountants and Harris Interactive.
A full 27 percent of respondents said their spats started over money, more than problems with kids (16 percent) or chores (13 percent).
Couples who lock horns over finances at least once a week are 30 percent more likely to get divorced, according to a 2009 study by researchers at Utah State University,
"I probably spend 15 percent of my time with couples actually talking about money, and the other 85 percent talking about personal issues," says Chris Kimball, a certified financial planner in Lakewood, Washington, who also has a Masters of Divinity degree.
"It all ties into money. It's a very powerful thing that can do great things in people's lives, or can really mess them up."
Shockingly, nearly one-half of all people have lied to their significant other about money, according to an April poll by Self Magazine and Today.com.
And a survey conducted this spring by CreditCards.com revealed that 6 million Americans have hidden financial accounts from their spouses or live-in partners.
The deception isn't usually malicious. Often it's prompted by guilt and embarrassment about spending. Compounding the problem is that financial behavior is very deeply set, and can't be altered easily.
So where do couples go wrong, when it comes to money -- and how can they make it right?
Have the Money Talk
Only 43 percent of couples talked about money before marriage, according to a May 2010 survey conducted for American Express.
But lack of disclosure about your financial issues -- maybe you're struggling with $100,000 in student debt, or maybe you filed for bankruptcy at some point -- isn't really any different from lying. Be up front about your financial situation, have the "money talk" long before the big day, and tackle any challenges as a couple.
"My significant other didn't tell me about the money problems we were having, and then one day we had no credit left and had lost pretty much everything," says Holli Rovenger, an author and speaker in Greenville, South Carolina. "If we'd worked together, maybe our finances wouldn't have spiraled out of control."
Minor money differences can be overcome as long as you have the basics covered: You have your daily needs met, you're bringing in more than you're paying out, and you're able to build a nest egg for the future. But once overspending and debt enter the picture, all bets are off.
"I was always a black-belt shopper, and hated to miss a sale," says Jenny Triplett, an entrepreneur in Powder Springs, Georgia, who's been married to husband Rufus Triplett for 22 years. "I'd have bags full of new clothes in the closet, and only bring them out one piece at a time. But eventually we came to a compromise, and I got my spending under control."
That's exactly the right template for resolving money disputes, planners advise. Even with differing money styles, if both partners take strides toward the middle and agree on broad outlines of a budget, it could prevent countless disputes.
Hiding from Help
Money is such an emotional issue that it could be difficult for couples to untangle all the knots on their own. A trained third party can help you figure out the core issues, and mutually agree on a financial plan.
"I've had clients yelling at each other in the parking lot, who came into the conference room and then wouldn't say a word to each other for the first hour," says Kimball. "But eventually we were able to work through it. Talking to someone can help air these financial issues in a safe environment."
Check out the website of the Association for Financial Counseling and Planning Education, which has a searchable database of trained financial counselors.
Being on the Same Page
It's helpful to have basic guidelines in place that will keep you on the same page. For instance, purchases under a certain dollar amount can be left to each spouse's discretion, while larger ones should to be cleared with your partner.
Some couples might be comfortable pooling all of their money, and others may not; neither is the "right" choice, but that should be decided explicitly.
"Understanding your partner's values on money is so very important," says Andi Wrenn, a financial counselor in Boston with a master's in marriage and family therapy. "Talk about how they learned money management, and what they plan to do in the future with the money they have and earn. Not often do people marry that are from exactly the same background."
That certainly applies to Jay Buerck and his bride-to-be. She's traditionally been more of a budgeter, and he's more laissez faire when it comes to counting pennies. But since they set up a joint account and moved in together, finances have "actually become less stressful," he says. "It's all about being open and honest."
5 Steps to Counter $4 Per Gallon at the Pump
With gas prices hovering around the $4 per gallon mark, many consumers are finding their budgets stretched thin.
"Some people have no idea how much they're spending on gas because they're so disgusted by an increasing expense that they have no control over," says Dorothy Barrick, group manager and financial counselor for Farmington Hills, Mich.-based credit counseling organization GreenPath Debt Solutions.
While you can't control what your local gas station charges, here are five steps you can take to save on gas and reduce the amount you spend to fill up at the pump.
Take out your owner's manual
A lack of familiarity with your car's owner's manual could be costing you money. It tells you what octane level of gasoline to use, the type of oil that's most efficient and your car's optimal tire pressure.
Very few auto manufacturers recommend premium fuel. "If you put that in, you're unnecessarily spending money," says John Nielsen, AAA's director of Automotive Engineering and Repair.
Proper maintenance, such as regular oil changes and air filter replacements, also can save on gas. In fact, you can increase your gas mileage by about 4 percent if you keep your engine tuned to your owner's manual's specifications, according to the Federal Trade Commission.
However, too much maintenance can negate your gas savings. While some people change their oil every 3,000 miles, their owner's manuals may recommend doing so after 7,500 miles, Nielsen says.
In addition, properly inflated and aligned tires also can lead to savings on gas, potentially adding 3 percent to gas mileage, the FTC says. Check your tire pressure monthly, says Brandy Schaffels, senior editor at TrueCar.com. And you don't have to get your hands dirty in the process since most tire centers will check it for free, Schaffels adds.
Remove junk from the trunk
One of the easiest ways to save on gas is to get the junk out of the trunk. Take a few minutes to determine what you need to carry around and chuck the rest. The lighter your car, the less work your engine has to do, Schaffels says. The FTC estimates that an additional 100 pounds in the trunk can decrease fuel economy by up to 2 percent.
Avoid using your trunk as a storage unit. "Don't leave golf clubs in there all week if you only play on weekends," says Ronnie Kweller, spokeswoman for the Alliance to Save Energy in Washington, D.C. Likewise, a change in seasons could be a natural time to clean house. For example, shovels or bags of salt that you hauled around in the winter should be moved to your garage now that summer is here.
Adjust your driving habits
We live in a fast-moving society, but you should "plan to spend a little bit longer getting to where you need to go because aggressive driving is a tremendous fuel burner," TrueCar's Schaffels says. Avoid quick starts and stops. Coasting to a stop is more cost-effective than waiting until you get up to a red light to slam on the brakes. You can improve your fuel economy around town by up to 5 percent by driving more gently, the FTC says.
Plan your trips, so you can string multiple stops together and avoid driving during rush hour, Nielsen says. Also, it's more cost-effective to turn your car off and on than to idle for a long time, so if you're waiting at a drive-through, consider turning the ignition off. Warming a car for an extensive period of time is also unnecessary. If you're spending more than 30 seconds warming your car, you're wasting money, Nielsen says.
And when you drive faster than 60 miles per hour, your gas mileage decreases. "Every five miles over 60 mph is like paying another 20 cents per gallon for gas," Kweller says.
Take advantage of gasoline apps
Thanks to technology, it's easier than ever to pay less at the pump. A number of smartphone apps can show you maps of gas stations in your area and let you sort by price and location. Among those recommended by Schaffels are the free GasBuddy, the free AAA TripTik Mobile and the $2.99 Fuel Finder.
However, price isn't the only thing you should consider when using these apps.
"Costco gas might be 10 cents or 15 cents cheaper, but if you're going to wait in line a half hour to pay that, what's the value of your time versus what you're going to save?" Schaffels asks.
The same applies if the station with the lowest-priced gas is miles away. "It might be worth paying a couple pennies more per gallon for the gas station that's around the corner as opposed to driving a couple of miles to save," Schaffels says.
Cash in on rewards and loyalty programs
Some credit cards offer cash back on gas purchases. Likewise, some retailers reward spending with discounts at affiliated gas stations. These offerings can potentially save you money as long as you recognize they're not always the ideal choice.
Many gas stations offer a lower price per gallon if you pay in cash so compare the rewards or loyalty discount to the cash option to see which is a better deal.
In the case of loyalty programs, make sure the gas station that's offering the program is close enough to justify the savings. When it comes to credit card rewards, keep your card in your pocket, and use cash if you carry a balance on the card, GreenPath's Barrick says. If you're paying interest on the card, that's just adding to your gas budget, Barrick says.
Anyone can cut their spending on gas with a little forethought and planning. "Very small incremental items add up to make a larger difference," Schaffels says.
How to Avoid Your Next Money Crisis: A 5-Step Prep Plan
What's a surefire way to inspire yourself to clean the house? Schedule a party. And there's nothing like unexpected visitors to get the job done even faster.
Deadlines -- or out-of-the-blue events -- are also great motivators when it comes to financial housekeeping. Baby on the way? Adjustable mortgage rate about to re-set? Portfolio allocation all out of whack? Household income suddenly cut in half? Give us a pressing reason to get our money affairs in order, and the job may just get done.
But there's a big difference between getting it done quickly and getting it done right.
Financial frenzies come in many flavors. But the most common triggers that send folks into money triage mode are the death of a loved one, divorce/marriage, dealing with complex financial products, and preparing for retirement.
These life/money events are fraught with emotion and unfamiliar challenges, and there is no more lethal cocktail than anxiety, complexity and a tight deadline. Even worse, spur-of-the-moment money decisions often lead to even bigger problems down the road.
But you can avoid all this unpleasantness. The key to sailing through a crisis is simple: Prepare in advance.
Here's a five-step plan that'll ensure you're prepared for issues you've already identified, along with any crises that might pop up out of the blue.
1. Take a Snapshot of Your Finances
"Be prepared" is a good motto for scouts and income-earning adults alike. At the very least, you want a snapshot of your overall financial landscape -- how much you own, what you owe, a sense of your general financial priorities. Use this must-do quarterly review checklist to get your personal balance sheet in order in a snap. The more soul-searching you do now, the better you'll be able to identify any money messes that need to be contained.
2. Earmark Any Issues
Think about your immediate money questions ("Is it worthwhile to refinance?" "Should I sell this stock?") and your future ones ("What if Biff doesn't get a football scholarship?" "What if Fluffy needs long-term pet care?"). Are there any financial "uh-ohs" on the horizon? You actually can prepare for unexpected emergencies with an adequate emergency cash cushion. (Use these guidelines to determine how much emergency savings you should have.) Other issues may require that you seek outside counsel. If that's the case ...
3. Decide What Kind of Outside Help You Want
What kind of professional opinion do you need? You probably need a lawyer to help you write a will, but perhaps you can find the right insurance on your own. Figure out how much hand-holding you want before you seek paid professional advice. Some factors that will determine what kind of help and how much you need include:
- How much money you have
- The complexity of your finances
- Your interest in learning about/researching financial products
- Your available time to devote to managing/researching financial matters
- Your level of expertise in investing, asset allocation, estate planning, etc.
- How confident you are in your level of understanding
There are all kinds of advice for sale. In "You Need a Financial Advisor," Robert Brokamp goes through the various flavors of financial advisors.
4. Consider Costs
Financial advice can cost hundreds to thousands of dollars -- on an ongoing, single-use, or occasional basis. You might be surprised to learn, however, that finding out how your advisor gets paid is even more important to your bottom line than how much he or she charges to dispense financial advice.
Before you go shopping for a money cleanup team -- or hire someone to give you a one-time second opinion -- find out how your pro earns a paycheck. Is the advisor paid via flat fee? Hourly? Asset-based? By commission? The answer to that question is the easiest way to determine whether the recommendations you'll receive are based on what's best for your financial situation, or what may be the most lucrative for theirs.
You've paid for good advice from a trusted source. The next step may seem obvious -- put the plan in action! -- but you might be surprised by how many people fail on the follow-through. Don't wait for a moment of crisis to act. While you've got the time and wherewithal to put things in their proper place, use the momentum (hey, you're already done most of the heavy lifting!) to get the job done -- and done right.