DR, On Friday June 4, 2010, 10:23 am EDTFor all the financial advice we find in books, magazines, and online, we still make a lot of mistakes when it comes to money. Some of these mistakes might not cost us much, but others can cost us a small fortune. And even the small mistakes, multiplied over a lifetime, can add up to a princely sum.
In the hope that we can make better financial decisions, here is a list of some of the common money mistakes many of us make every day:
1. Buying expensive mutual funds: Do you know how much you pay for the mutual funds in your retirement account? If you don't know, you're not alone. Mutual fund companies don't send out monthly or quarterly bills. Instead, they quietly deduct their fees from the returns on your investments. These fees, quoted as an expense ratio (a 1 percent fee means you are paying 1 percent of your account balance in fees each year), add up to thousands of dollars over a lifetime of investing. To see just how much you are paying, use a free service such as Morningstar.com to track the actual expense of your mutual funds and ETFs. You can track your portfolio for free on Morningstar, including the total cost of your investments.
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2. Neglecting credit scores: Credit scores have a major impact on our financial lives. An excellent credit score results in lower interest rates on mortgages, car loans, and credit cards. It also results in lower insurance premiums. But many do not know their credit score or how their financial decisions shape their score. The first step is to regularly review your credit report, which is available for free from annualcreditreport.com. You can get your report from each of the three major credit bureaus for free once a year. Checking each report for errors can not only improve your credit score, but also help guard against identity theft. While your report will not include your credit score, there are several options to obtain your credit score for free or at a low cost.
3. Equating monthly payments with affordability: Far too many of us decide whether we can afford something based on whether we can manage the monthly payment. This is particularly true for homes, cars, and furniture. But just because we can handle a payment does not mean we can truly afford something. Monthly payments also ignore the true cost of ownership. A car, for example, costs a lot more than the monthly payment when you consider insurance, gas, repairs and maintenance. Instead of focusing on the monthly payment, separate needs from wants and evaluate how you might better use the money. If you still have consumer debt, for example, consider paying the debt off before buying something that will commit you to future monthly payments for potentially years to come.
4. Overpaying on a mortgage: Reducing a mortgage by even 1 percent can result in substantial savings. Whether because of falling mortgage rates, which are at historic lows, or an improved credit score, many may be able to save thousands of dollars over the life of their home loan by refinancing. Yet for various reasons, many have not taken advantage of falling rates. Even if you have a low rate now, check current mortgage rates to see if you can do better. In some cases, a savings of just 1% or less can justify the cost of refinancing.
5. Missing good deals online: Thanks to the Internet, you can find deals, coupons and promo codes on just about anything. And many retailers offer additional discounts if you buy online. From cell phones to home improvement, the savings can be substantial, and shopping online is often far more convenient than driving around town and waiting in lines. The problem is that we often make purchases completely unaware that these deals exist. To find these deals, search online for coupons before you make significant purchases and bookmark coupon sites such as Retailmenot.com and Fatwallet.com, which regularly update the latest offers from popular retailers.
6. Overpaying taxes: A big tax refund can be a source of much needed cash each year. But a tax refund is the result of having too much tax withheld from your paycheck, which gives the government an interest free loan with your money. Instead of letting the government hold on to your money for up to a year, adjust your withholdings so you can pocket your money now. The goal should be to match your withholdings as close as possible to your tax liability.
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7. Making minimum payments on credit cards: Even low interest credit cards charge a high interest rate. As a result, making the minimum payment on credit card debt will add a lot of interest to your total payments over the life of that debt. Making just the minimum payment also extends the time it takes to pay of the debt by many years. Rather than making just the minimum payment, commit to paying more than the minimum, even if by just a few dollars. Allocate some or all of your next raise to your credit card payments, and reexamine your budget in an effort to increase the payment as much as possible.
DR is the founder of the popular personal finance blog, the Dough Roller, and author of 99 Painless Ways to Save Money.
Tuesday, June 8, 2010
7 Money Mistakes We Make Every Day - Yahoo! Finance
Saturday, June 5, 2010
Financial Literacy: Financing For Love
| I use to be a “court TV” junkie. Does anyone remember Judge Wapner? I’m still a big Judge Judy fan, but I started getting frustrated with all the women suing their boyfriends over cell phones, unpaid rent, and car loans. The men on these shows were also “financing for love.” I’ve seen men suing their ex-girlfriends for cosmetic surgery bills, trips, and clothing. Why are people spending money they really don’t have to finance things for their girlfriend or boyfriend?
My heart really went out to a young woman that called a show I was listening to. She personally signed not co-signed for a student loan for her then boyfriend. Now, four years later, they are no longer a couple and he refuses pay. What a hurtful situation she put herself in. Another woman cried because she financed an expensive car for her ex-boyfriend. She whimpered, “He had bad credit, but was smart and convinced me he needed a Mercedes Benz to make big money in music industry.” A nice guy maybe 35, looks over at his now ex-girlfriend in court, he paid for her to have breast implants and now wants the thousands of dollars he spent on them back.
“Financing For Love,” is a concept that’s been around forever. What scares me about today’s financing is that women seem to be the number one lenders. How did this happen? I’ve heard men complain about paying for dates and expensive gifts giving women the names like “gold-diggers” but what do we call men that use women for their money? I’m not sure but I haven’t heard a song about them.
Rather woman or man financing for love is a very dangerous model to use when trying to establish a long lasting relationship. So what should you do when your partners money run out? I’m not saying you should never offer to help, but make sure you can really afford to GIVE the money as a gift not lend the money with an expectation to get it back. Otherwise I might see you next on Judge Judy!
Warm regards, Dina Harbour, Extraordinaire Stay Connected to W.O.W. download our customized toolbar today!CEO & Host of Women Obtaining Wealth Women Obtaining Wealth Organization W.O.W. Conversations on Internet Radio, Sundays @ 9p EST Call-In # for show: (646) 478-5836 Recommend Me! |
Thursday, June 3, 2010
Financial Literacy: Living An Underground Financial Life
| When I think about the financial life I had in my twenties I ponder why I made such ignorant choices with my money. I always had goals; such as owning a home, starting a business and traveling but what I didn’t have at the time was a written plan. An unknown author stated, “ A goal without a plan, is just a WISH.” So really I was just wishing that all those things would fall out the sky and be mine.
The sad part about this way of thinking is that it becomes habit forming. Many individuals are still wishing for things to fall out the sky, because without creating and working a plan it’s just a fantasy. These wishful thinkers are “living an underground financial life.”
You can recognize people living this lifestyle very easily; they do things such as cash their checks at check cashing places not realizing how much extra money they are spending on fees and time. Their cell phone number changes frequently or it’s disconnected several times because they haven’t put a budget/plan in place to factor in their monthly expenses. They always need to borrow money and continue to have emergency after emergency; which cause them to lose out on life-changing opportunities. Are you living underground?
When I run into “under grounders” I try to give them information that will help them move towards a healthier financial lifestyle. I am careful not to put them down or sound condescending. For instance a woman was telling me that a local bank refused to cash one of the two cashiers checks that they issued to her. She didn’t have an account with them but was issued a check from one of their customers, which is why she went to them in the first place. I explained to her that the bank was not obligated to serve her because she was not their customer and most banks would expect a person to deposit a cashier’s check into their personal bank account to retain the funds. She was so upset that she could see the bigger picture. She was not a banking customer. Therefore they were not going to treat her like one. What was her answer to this dilemma? She simply made the choice to spend a considerable amount of money on fees at a check cashing location instead of becoming a customer. This was sad and disappointing.
I can only speculate why she would rather pay astronomical fees rather than open up a FREE checking or savings account. Did she write bad checks in the past? Is she hiding her income from the government? There could be hundreds of reasons, but the point of this story is, the financial life of the “under-grounder” is a costly one! Warm regards, Dina Harbour, Extraordinaire Stay Connected to W.O.W. download our customized toolbar today!CEO & Host of Women Obtaining Wealth Women Obtaining Wealth Organization W.O.W. Conversations on Internet Radio, Sundays @ 9p EST Call-In # for show: (646) 478-5836 Recommend Me! |
Tuesday, May 25, 2010
Financial Literacy- Parental Financial Abuse
| For most of us our parents are the people who protect and take care of us. They are our first love relationship and they teach us what trust is all about. When we think of “abuse” we may think of a physical attack from one person to another. But there are many types of abuse so I have decided to call this one “Parental Financial Abuse.”
My definition of “Parental Financial Abuse” is the act of one or both parents using their child’s identity as well as social security number to get credit and/or services in their name for the purpose of avoiding high deposits or being denied access to credit. Usually a parent does this act to get services such as a phone or utilities and sometimes credit because they have ruined their own identity and made bad financial choices in the past. So in most cases their bad decisions continue on with the stolen identity and the child’s credit profile is also destroyed.
The sad part of Parental Financial Abuse is the victim in most cases does not even know of the abuse until years later when they themselves are ready to start a financial life. They are shocked when they apply for credit or services for school loans, an apartment or a vehicle. Another hurtful outcome of this type of abuse is that it is actually a criminal act due to the identity theft and fraud laws. But who wants to press charges against their own parents?
Recently, while working with many individuals and couples facing Parental Financial Abuse I have witnessed how violated this financial crime has made them feel. They are extremely angry, hurt, and baffled about what they should do to create a more stable financial life after such a catastrophe. They are also concerned about how to repair the trust and respect they once had for their parent, the perpetrator.
I never tell my clients exactly what to do, but I try to give them choices based on their individual scenario. The sensitivity of this situation requires me to operate with extreme caution. Here are a few of my options depending on the details and the time frame of the incident.
Talk to your parents about the situation before doing the following:
In most cases parents are shameful of their actions while others may feels a sense of entitlement because you are their child. In either case, use your best judgment regarding the matter and I pray that everything works out for the best and that the relationship heals! Warm regards, Dina Harbour, Extraordinaire Stay Connected to W.O.W. download our customized toolbar today!CEO & Host of Women Obtaining Wealth Women Obtaining Wealth Organization W.O.W. Conversations on Internet Radio, Sundays @ 9p EST Call-In # for show: (646) 478-5836 Recommend Me! |
Financial Literacy - Back to the Basics With Budgeting
Every year I offer a free budgeting class be it on-line or at local libraries to help people get their finances in order. Although you hear many financial professionals giving the advice to others that they should create and stick to a budget, they never really explain how to actually accomplish this task. A budget basically tells your income what to do. You start with a 100% of your net income and then by priorities you need to subtract your expenses until the money is gone. Now here is the part that confuses some people. Certain categories should NOT exceed over a certain percentage of your income. Housing for instance should be no more than 35%, debt 15%, savings10%, charity/tithe 10%, and other 30%. You may have several categories that fit your particular family needs. The example in the paragraph above is just a snap short of a general budget. Regardless of which categories you might use most of us will have some basic ones like housing and food. If for any reason you are having trouble keeping up with your monthly expenses make sure you are paying your bills in this order: 1. Food Remember if your housing exceeds 35% of your income you must address this discrepancy and if budgeting is still overwhelming seek out professional help. The goal of budgeting is to be able to pay all your expenses, save money and to live within your means. Warm regards, Dina Harbour, Extraordinaire Stay Connected to W.O.W. download our customized toolbar today!CEO & Host of Women Obtaining Wealth Women Obtaining Wealth Organization W.O.W. Conversations on Internet Radio, Sundays @ 9p EST Call-In # for show: (646) 478-5836 Recommend Me! |
Sunday, May 23, 2010
Financial Literacy-Does Reaching For The Stars Mean Driving An Expensive Car?
| I cannot help but notice that many working class people spend so much money on purchasing new expensive vehicles with payments that are exceeding more than 30-40% of their net income. In my hometown this scenario is not uncommon and I too got caught up in the nice, new, and expensive car charade in my twenties. Between movies, music videos, and friends my thought process at that time was that a nice car was a sign of success and status. It never occurred to me that my car was depreciating rapidly in value over time and by financing my cars I was doing the opposite of what “WEALTHY” people do. According to an article entitled "Knowing The Deal On Auto Depreciation" by Lucy Lazarony on average a vehicle loses about 12-15% of it's value per year and for a brand new car the depreciating value is huge. This happens because as soon as the person drives off the lot the car's value goes from retail to a wholesale price. When I started becoming what I call "financially focused" I made sure I paid cash for my car after I sold my home in 2004. Sure it wasn't a brand new car with that great luxury never touched smell, but I immediately became the owner and the title came directly to me. It was truly an accomplishment as well as a great empowering feeling. So now when I return home to visit family and friends I am always amazed at how many beautiful new luxury cars I see in the parking stalls of apartment buildings. I wonder to myself if the drivers of these beautiful cars realize that their monthly payments over time could have went towards the down payment of a home instead of being thrown away by what some call “dummy depreciation”?Warm regards, Dina Harbour, Extraordinaire Stay Connected to W.O.W. download our customized toolbar today!CEO & Host of Women Obtaining Wealth Women Obtaining Wealth Organization W.O.W. Conversations on Internet Radio, Sundays @ 9p EST Call-In # for show: (646) 478-5836 Recommend Me! |
Friday, May 21, 2010
Financial Literacy: Breaking The Cycle Of Being Broke
Now that I'm older I can look back on some financial decisions I've made and shake my head. Luckily for me I was able to break the cycle of "being broke." The sad part of my past is that I wasted so much time and money on things that had no REAL value. It started with my first credit card at the age of 18 and escalated to cars and stupid material things in between. Being a financially responsible adult wasn't at the top of my radar. However being successful and looking the part was. So like many young adults I accepted the job that offered me the most money while purchasing the latest gadgets, designer clothing, and must haves. Hence, racking up consumer debt with things I really could not afford. My weakness was cars. I decided to purchase one almost every year. I did this by trading them in and carrying over the negative equity to the new vehicle. Doing these transactions was a form of financial rush in roulette in which I later learned a valuable lesson. But one of my ultimate car sins happened when I upgrading into a luxury vehicle by going into a lease agreement. It wasn't until I got tired of not having money after just getting paid or moving from apartment to apartment because I did not like the area or my neighbors that I realized I was doing something terribly wrong. I started looking around for answers and examples of the things that I TRULY wanted out of life. I call these things my core goals.
I knew I wanted stability, which for me meant a home of my own, the second thing was a career doing something I was truly passionate about, and the third was to have enough money to help me achieve what I needed and wanted out of life without relying solely on borrowing money from banks, family or friends. My simple action steps begin at the library where I started reading about budgeting and saving money, next the book store, seminars, radio programs etcetera. The light switch came on when I heard the voice of Larry Burkett on the airwaves. Mr. Burkett was one of the founders of Crown Ministries. He passed away July 4, 2003, but his teachings will live on within many others and me. Suze Orman's tough and straightforward style put the "no excuse" motto in front of my "broke" mentality and I really got focused about being a financially empowered women. I can name many others that helped me see the light but the two I mentioned were my first mentors and teachers. Luckily in my quest to be financially fit, I was able to brake the cycle as well as reach some of my core goals by finding security in my first home purchase, doing what I’m passionate about with writing and teaching others about financial literacy, saving, and giving money towards the things that I believe in. Throughout my journey I've learned that buying things that only decrease in value or that looks flashy in most cases are really not worth the money. Find out what TRUE wealth means and start by educating yourself about money, it’s never to late! Warm regards,Dina Harbour, Extraordinaire CEO & Host of Women Obtaining Wealth Stay Connected to W.O.W. download our customized toolbar today!Women Obtaining Wealth Organization W.O.W. Conversations on Internet Radio, Sundays @ 9p EST Call-In # for show: (646) 478-5836 Recommend Me! |
