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Staggering your credit reports is harder than you think

Filed under: Credit Cards General on August 22, 2014 @ 11:50 am

There are two main things you should do to make sure your credit score is at its best: Pay your bills in full and on time; and check your credit reports periodically.

Paying your bills is (in theory) pretty straightforward. You get the bill, you write the check, you mail it. Even better: You pay through automatic debit each month.

But credit reports? I have yet to come up with a fail-safe system for checking them on time. You can get three free credit reports once a year at AnnualCreditReport.com. You can either pull the reports from each of the three major credit bureaus, Equifax, Experian and TransUnion, at the same time each year, or you can stagger them, and get one every four months.

I prefer to get one every four months, something that Nolo.com recommends. You’ll want to check for inaccurate information, such as an incorrect address, or anything that looks suspect, such as a credit card you aren’t familiar with.

But as convinced as I am that pulling a report every four months is the way to go, it never seems to work out that way. For example, I ordered the Experian report in January 2013 (a New Year’s resolution). Then, I checked Equifax in February 2014 (a late New Year’s resolution). Now, here we are in August, and I’m finally checking TransUnion’s report. That’s three reports in 20 months. Not what I originally intended.

I’m a woman who gives her dog his heart worm medicine every month on schedule. The air conditioner filters are diligently cleaned the first weekend of every month. I adjust our investment portfolio allocation every year on the dot. Why is it that I can’t get on a four-month rotation?

There’s something jarring about four months. You get your checking statement once a month. You get your retirement statements on a quarterly basis. Some magazine subscriptions are bimonthly. But there’s nothing that I know of that is on a four-month schedule. Add to that, you have to keep track of which report you pulled when, because they are free only once a year from each credit bureau. So, you can’t pull the Equifax report in January, then pull it again in May.

Then it hit me. What if I checked the credit reports on anniversaries, birthdates or other memorable dates? Would I be more likely to remember — and follow through — to order the credit reports? It won’t be a perfect four-month schedule, but I can at least get on a routine. So, here’s what I’m going to do:

January (the new year): Experian

April (a birthday): Equifax

August (the start of school): TransUnion

I’ve put those dates in my trusty 18-month calendar, which means they are now real.

So, why is keeping track of your credit reports so important?

Your credit report isn’t just for taking out a loan. It can affect whether you get a job, your insurance premiums, even renting an apartment, Quizzle points out. And don’t just check your reports for errors and mistakes, says Complex Research. Look for ways to improve your credit. Do you have the occasional late payment? Do you not have variety in your credit, which is one element of your FICO score?

There are five basic parts to your FICO score, the score most lenders track to assess your creditworthiness. They are your payment history, which makes up 35 percent; what you owe compared to what credit you have available, which is 30 percent; the length of your credit history, which is 15 percent; and new credit and types of credit used, which are 10 percent each.

My FICO scores have been in the 800s for years, although not because of any aggressive action on my part. I have simply taken advantage of the different parts of the FICO score by living my life.

But, one way I can improve is by making sure I check my credit reports every year. With my new system of using important events to remember to check the reports, I think I can make it work.

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Erasing credit report errors not an easy fix

Filed under: Credit Cards General on August 20, 2014 @ 2:40 pm

In a perfect world, a dispute over a legitimate error on a credit report would get corrected swiftly — as federal law requires. But that didn’t happen for me this year when I filed a dispute with the credit bureau Equifax.

Last winter, I pulled my yearly free credit reports at AnnualCreditReport.com and was surprised to see a negative item on my Equifax report. It turned out my husband had spaced out on paying his personal credit card, on which I was an authorized user. He was over 30 days late, and the red mark ended up on my report.

I knew that as an authorized user I wasn’t responsible for payment of the card. I immediately asked Capital One to remove me from the account. The customer service representative told me the item would be deleted from my credit report.

A month later, I looked at my credit report again and saw the negative mark was still there, so I filed a dispute with Equifax. That was in February, and the expected completion date for the dispute was listed as Feb. 17, 2014.

Under the federal Fair Credit Reporting Act (FCRA), credit reporting agencies have 30 to 45 days to investigate a dispute. Not resolving disputes quickly can hurt consumers: A 2013 Federal Trade Commission study found that one in four consumers had credit report errors that could cause them to pay more for auto loans, insurance and other products.

In the spring, when applying for a mortgage refinance, I checked to see if the dispute had been resolved. I used Equifax’s online dispute status checker, and found it still listed as pending.

I tried to hunt down the Equifax phone number consumers can call about disputes, but Equifax keeps it well hidden. According to their website, you need a current credit report to access the number.

When I checked again a few weeks ago and saw the dispute still listed as “pending” six months after it was supposed to be resolved, I finally caved in and paid $10.50 for a report. I was relieved to see that my husband’s account was no longer listed. I was lucky because some banks, after an authorized user is removed from an account, keep the history of that account on the person’s credit report. Capital One told me it does not, and the account most likely dropped off thanks to action by Capital One.

On Kiplinger.com, writer Jessica Anderson describes similar problems: Equifax never responded to her dispute within 45 days, and failed to respond again in that timeframe after she refiled it. Ultimately, it took her two years to resolve disputes with all three bureaus about an old water bill she never received after she moved.

Her advice: Go straight to the source, the creditor. For her, that was the utility company, where a customer service rep helped her figure out what happened. In my case, I realize I should have just called Capital One back. I have a perk-loaded rewards card with the issuer, and am always provided with great service. I think someone there would have helped me get my problem resolved much more quickly.

Sometimes credit bureaus do flout the law that requires them to investigate disputes in a timely manner, according to Consumerist.com. If you have no luck getting a dispute fixed on your own, you might want to enlist the help of an attorney who specializes in FCRA violations, Consumerist.com advises.

Another option: You can report it to the Consumer Financial Protection Bureau, which offers an online form consumers can fill out detailing their complaint about a credit bureau’s dispute investigation process. The credit bureaus have 15 days to respond to the complaint and issues are expected to be resolved in 60 days.

In retrospect, my issue would probably have been resolved more quickly had I just worked with Capital One or if I had filed a complaint through the CFPB. It would appear that the credit bureaus have morphed into these behemoths that just aren’t equipped to deal with the people whose data they market and sell.

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Avoid financial infidelity by building fiscal trust

Filed under: Credit Cards General on August 15, 2014 @ 9:28 am

When my husband and I were first married, I decided to refinance the mortgage on the house I had bought before we tied the knot. Against the advice of my attorney, who was an old friend, I decided to make my husband Mo co-owner on the house.

My attorney was concerned that if we divorced, I would lose an asset that had solely been my own. But something told me he was wrong, and that by sharing this property with my new, sentimental husband, it would seal our fiscal relationship. I was right.

Mo was overwhelmed with gratitude. He had never owned anything but a car he had bought at the age of 40, and his impoverished childhood made him greatly value ownership. With this one decision, I secured the nature of our financial partnership. For the next 20 years, we would share everything, no matter who made more money, no matter who budgeted the checkbook.

In the years I was home with the kids, not earning a dime, Mo never questioned a purchase I made. When I returned to work, earning half of what he made, he never alluded, even hinted, that I was not pulling my weight. He has repeatedly said we are partners in every way, and his money is my money. In fact, I manage our accounts. He calls me the “finance minister.”

That absolute trust has spared us from money arguments many couples have. If anything, I’ve worried that he puts too much faith in me, and that he needs instructions if something happened to me. So on top of everything in our safe deposit box is a letter that tells him who our lawyers, financial advisers and accountants are and how to reach them. In that letter is a tally of our accounts and what he’ll find in them.

I’ve learned over the years that the fiscal trust we have in each other is not the norm. Other women have told me horror stories about their husbands putting them on austere budgets and questioning their decisions at the grocery store. Some of my friends would respond by buying their kids’ toys on the sly, or sneaking out to buy an outfit while their husband was at work.

I ached for my friends because of the situations they were in, and was thankful that Mo and I didn’t have such a relationship. But whatever the motivation for my friends’ actions, there’s now a term for how they responded: financial infidelity.

An online poll for the National Endowment for Financial Education found that financial infidelity is as significant as sexual infidelity. In the January 2014 survey, which was conducted by Harris Poll for the endowment, 76 percent of those polled said that when financial deception occurs, it affects the relationship. A third of those polled said they had committed financial infidelity against a partner or spouse.

Financial infidelity can come in the form of a secret credit card or bank account, or paying for items in cash to avoid detection.

Daily Worth says there are two main reasons why financial infidelity occurs: The person feels controlled or is ashamed about his or her financial situation. When a spouse is deciding what his or her partner can and can’t buy, the other one might rebel. But also, the infidelity might occur because you put yourself in a financial bind and don’t know how to get out. So, you lie.

Lying about money isn’t just about malicious deception, The Fiscal Times says. There are times when the spouse is trying to be protective; for example, when investments have gone sour.

That’s something I could see myself doing, actually. As I’ve read about financial lies, and congratulated myself that Mo and I would never commit financial infidelity, my conscience has whispered that we are as vulnerable as anyone. Here’s the question I found myself posing: If our investments took a dive, what would I tell Mo?

Reading the study from the National Endowment for Financial Education made me realize that I owe it to Mo to be honest with him if something goes wrong with our investments. While I wouldn’t lie to him about a purchase or a phantom credit card, I might try to protect him from bad news.

And I understand now that if we are going to be the fiscal partners we say we are, then we need to share the bad as well as the good.

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When slowing down can actually save you money

Filed under: Credit Cards General on August 13, 2014 @ 7:45 am

When a home or auto disaster strikes, it’s easy to pull out your wallet quickly. But getting multiple estimates first could save you thousands of dollars.

Getting a second and third opinion saved me almost $2,000 this past spring.

During a heavy April rainstorm, my husband Joe noticed our roof was leaking. Water was dripping out of an upstairs ceiling vent.

We put a bucket under the leak and fretted. I worried about water damage and mold, so I wanted to act quickly. Then we noticed a spot on the ceiling I had recently painted: We had another small leak.

Our problem wasn’t an easy fix. We live in a home built in the late 1800s, and it has a pressed metal roof that’s probably over 100 years old. There aren’t many companies in our area that work on these roofs.

I found a general contractor who does work on a lot of older homes, and he told us that our roof needed to be recoated with an aluminum roof coating product — something that needs to be done periodically to our type of roof. The cost? A little over $2,000.

With more legwork, I found two companies that work on roofs like ours, and they agreed the roof didn’t need to be recoated. One roofer told us that doing the job before it was necessary might even harm our roof since recoating requires walking on the metal shingles. In the end, it cost us just $150 to get the two leaks repaired.

Personal finance blogger Len Penzo learned the hard way: He got a quote of $800 from the guy who cuts his lawn to fix a leaky irrigation pipe, weed and put down bark mulch. When the job took only two hours, Penzo realized he’d been taken.

If you’ve got a home project or car repair that must be done, here are some steps you can take to assure you get the fix you need — and the best deal:

  • Do basic research. Do some online searches before you solicit bids for a project, Penzo recommends, adding that he should have researched the cost of bark mulch before he looked for a service provider. Find out how much work the project entails, along with a ballpark range of what it should cost.
  • Find qualified bidders. Don’t just pick anyone to give you estimates for your project. Look at qualifications, experience, certifications, references and consumer reviews. I signed up for Angie’s List, and I use it as part of my research whenever I’m considering hiring a professional. Also ask what insurance they carry and what warranties they offer on their work, My Personal Finance Journey recommends.
  • First, describe the problem. When you talk to a pro, tell them what the problem is and ask what solution they’d recommend. For example, when I told the roofers about my roof leaks, I didn’t say I was told to have the roof recoated.
  • Get it in writing. You should get written estimates, and make sure they’re itemized, Penzo recommends. It’s much easier to compare estimates when they’re in black and white, and when the cost is broken down into components that include supplies and labor.
  • Don’t always go cheap. Sometimes, it makes sense to go with the lowest bidder, but not always, according to MLR, a guest blogger on Get Rich Slowly. It can be smarter to go with a slightly higher bid from a more qualified professional, according to Get Rich Slowly.
  • Look at alternatives for easy jobs. Do you have a basic home repair that would be easy to do it yourself, if only you were handy? Blogger MLR writes that her parents saved $14,000 by getting bids from a skilled neighbor for some home improvement projects.

It’s always a good idea to get multiple estimates before shelling out a lot of cash for a home or auto repair. It’s a simple, painless way to save.

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Don’t let medical bills pile up

Filed under: Credit Cards General on August 8, 2014 @ 10:44 am

One recent Sunday afternoon while cleaning out my garage, I felt an overwhelming ache in my abdomen and back. I tried to power through it, but after a while, the pain was too much. Eventually, I asked my husband to take me to the emergency room, where, after tests, they proclaimed that my gall bladder needed to be removed as soon as possible.

While money wasn’t the first thing on my mind, it occurred to me pretty soon after. How much would my hospital stay cost? What about the surgery? What would our health insurance cover?

Medical surprises can wreak havoc on your budget and can put a dent on your credit report if you don’t pay in a timely manner. Unpaid medical bills are pretty quickly passed on to collection agencies, because health providers’ top priority isn’t collecting money; it’s making you healthy. That’s why it’s important to not let those bills sit in your to-do pile for too long.

Healthcare Savvy suggests that if you have some financial resources and don’t qualify for financial assistance, you can:

Negotiate an interest-free payment plan. You’ll want to extend your due date and make sure you can afford whatever you promise to pay each month, Healthcare Savvy says.

Negotiate a discount. Ask to pay the negotiated rate that private insurance companies or Medicare/Medicaid would pay if you don’t have health insurance. Also, you can offer to pay the full bill at a discount, Healthcare Savvy says.

What if you flat out can’t afford to pay? ReadyforZero.com warns you not to ignore your bill, even if you only have bad news to share. And you’d be surprised what health providers will accept.

ReadyforZero advises that you first make sure you actually received the treatment that you are being billed for and check for double billing. You can use Healthcare Bluebook to gauge fair prices for medical expenses in your area.

Once you understand your bills, contact your healthcare provider and negotiate a payment plan. Fiona Lee of ReadyforZero was able to negotiate a $25 monthly payment. Fiona also advises that you get any agreements in writing.

If your financial resources are severely limited, you might qualify for government assistance. Medicare.gov has a publication that outlines assistance through Medicaid, Medicare Savings Programs, Supplemental Security Income (SSI) Benefits and a program called Extra Help, which helps with Medicare drug costs. Extra Help is for people who qualify for Medicaid, the Medicare Savings Programs or SSI. There is also the Children’s Health Insurance Program, or CHIP. This program varies from state to state, but you can get coverage in every state. CHIP is designed to provide affordable health insurance coverage for children of families that make too much money to qualify for Medicaid.

CreditCardGuide.com’s Allie Johnson gives tips on organizing your documents so that you don’t overlook anything. She warns that it is especially important to keep track of the bills you’ve already paid, because of the double-billing issue.

It’s easy to push medical bills aside, particularly when you are concerned about getting back on your feet. But, you need to stay on top of the documents your medical provider sends. Your mantra: Don’t let the bills go into collections. I plan to make paying my medical bills a priority. I like my good credit score too much to do otherwise.

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Don’t let restaurant meals eat away at your budget

Filed under: Credit Cards General on August 6, 2014 @ 9:54 am

Restaurant meals were eating up our budget, so I took some simple steps that saved us about $200 a month and helped us shed a combined total of 30 pounds, too.

My husband Joe and I live in a mid-sized Southern city not exactly known for its fine restaurants, unless you love fried meats, sweet tea and sides of veggies flecked with bacon. Unlike most big-city dwellers, we do not have an array of amazing eateries luring us away from our kitchen.

So, I looked at our behavior patterns to see when we were caving to temptation and eating out. Typically, we went out because: I was having a busy week with multiple deadlines and didn’t feel like cooking; or, we had traveled the previous weekend, so I hadn’t done my normal Sunday meal planning and grocery shopping. (I usually handle the meal planning and cooking, while Joe does kitchen cleanup duty.)

Are you spending too much on eating out, too? Here are six ways to get out of the restaurant rut to save your budget — and waistline — from restaurant meal bloat:

  1. Make mock takeout. I tend to be a little all-or-nothing when it comes to food: I usually make ultra-healthy meals such as vegetable soups, huge salads and veggie tofu stir-fry served over quinoa. But I was using takeout on busy nights as a way to reward myself. I wouldn’t have to cook, and I could indulge in fatty foods. So, I decided to make healthier versions of our favorite takeout meals that would taste like a treat compared to our usual fare. I made pineapple fried rice, pasta with cream sauce and asparagus and also enchiladas, and put this food on its own shelf in the freezer. We started reaching for those meals instead of the takeout menus.
  2. Create an emergency meal shelf. Every plan needs a back-up plan, so I decided to devote one out-of-the-way shelf in our pantry to canned or boxed items that could be whipped into a dinner quickly without the addition of fresh ingredients. Our emergency shelf contains canned soups, canned beans and veggies. I’ve also stashed a few boxes of angel hair pasta, to which we can add garlic and olive oil for a super easy, bare-bones meal. That’s not ideal, nutritionally, but it’s definitely better than a restaurant meal. For example: A 2014 study at Drexel University showed that a typical restaurant meal contains a staggering 1,500 calories, along with unhealthy amounts of sodium and saturated fat.
  3. Eat a non-meal meal. “Just eat something,” recommends Jessica Fisher, the blogger behind GoodCheapEats.com. She has a list of quick, no-cook dinners that includes hummus with flatbread and veggies, cottage cheese with melon and whole wheat toast or a salad of sliced tomatoes with fresh mozzarella, basil and a drizzle of balsamic vinegar. One of my favorite go-to meals is a half can of rinsed, drained garbanzo beans with cut-up tomatoes, cucumber, red wine vinegar and a drizzle of olive oil. Even cold cereal works in a pinch. Fisher writes: “Every meal does not have to be an event.”
  4. Stock your fridge with fresh ingredients. One of the best ways to get a quick, nutritious meal is to have the fixings for salads and sandwiches handy, according to personal finance blog Money Ning. It takes only a few minutes to toss some pre-washed salad greens into a bowl, throw some cherry tomatoes, carrots and olives on top, then add a protein and some dressing. (Yes, pre-washed greens are more expensive, but they’re cheaper than eating out.) Or, you can pack a pita with veggies, cheese, meat or whatever you like.
  5. List the downsides of restaurant eating. Make a tally of everything you don’t like about eating in restaurants, recommends Money Ning. I’ve already mentioned the calorie wallop that restaurant meals pack, so that’s one. Others will vary based on your own weaknesses or pet peeves. The temptation to order overpriced beer or wine is another one for me. Others might not like the noise or having to pay for parking.
  6. Make restaurant meals go twice as far. Given that many restaurant meals contain almost a full day’s worth of calories, put half of your meal in a to-go box before you start eating. Taking home half of your food is kind of like getting a 50 percent discount on your restaurant meal, according to Money Q and A.

Finally, it’s important to take care of yourself, Money Ning points out. Make rest and exercise a priority so you won’t find yourself stressed, tired and hungry — and reaching for that takeout menu.

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Why my new system for clothes fits like a glove

Filed under: Credit Cards General on July 30, 2014 @ 9:19 am

I used to look into a closet crammed with clothes and lament that I had nothing to wear. But discovering that I had too many clothes, not too few, has saved me time, hassle and money.

A few months ago, motivated mainly by frustration with my small closet, I Googled “people who have very few clothes.” I came across Project 333, in which you wear the same 33 items, including accessories, for three months. Each season, you can swap out items to choose 33 new things.

Project 333 saves money because once you’ve chosen your items for the season, you’re less likely to go window shopping, open deal emails and rack up credit card debt buying clothes, writes Project 333 founder Courtney Carver. You also free up time and energy to do stuff that’s more fun and fulfilling.

That was the inspiration I needed. I took a weekend and tried on tops, pants, skirts and dresses in my closet. Following Project 333 guidelines, I kept only clothes that: (1) fit me perfectly, (2) look good on me and (3) I love.

Everything that didn’t meet those three criteria went into big garbage bags to be donated to Goodwill. I’d had some of those items for over a decade and had moved them across the country multiple times. They cluttered my closet and my drawers, getting in my way every time I went to get dressed. I chose my 33 things for the season, putting away clothes that fit my criteria but weren’t right for warm weather.

Here’s what happened:

  • I found a bunch of clothes that fit, flatter me and that I love but that I had forgotten I owned because they were under piles of clothes. So, I found I didn’t need to buy any new clothes at the moment.
  • I stopped wearing yoga pants everywhere and started looking nicer on errands thanks to a Project 333 rule: Workout clothes don’t count in your 33 items, but you must wear them for their intended purpose only.
  • I started traveling light because I pack fewer items and accessories. That has made recent trips much less stressful. For a short trip, my husband and I can fit our clothes in one carry-on-size suitcase.
  • I look more polished and put together.

In the future, I won’t buy a bunch of new clothes at once. I’ll be more likely to buy one carefully chosen piece that meets my three criteria. Also, I don’t buy a lot of accessories anymore. I buy only those that I know I’ll wear with something I have and that flatter me and add sparkle to an outfit. (It’s amazing how many cool earrings I had but never wore because they blended into my brown hair.)

If you’re interesting in using Project 333 or other tactics to save money on clothes, here are four tips:

  1. Create a capsule wardrobe. That means you have quality basic pieces and accessories that can be mixed and matched, worn on a variety of occasions, and look good on you, according to Wealthy Winters, a financial independence blog.
  2. Consider your style. Take some time to look at outfits and style pages on Pinterest and other sites to figure out what you really love, Wealthy Winters recommends. Pinterest has lots of examples of capsule wardrobes.
  3. Pay with cash or debit instead of credit. When you do buy clothes, use money you already have and avoid store credit cards at all costs, recommends the blog My Personal Finance Journey. If you don’t pay the balance in full, interest can more than eat up any savings you got by opening the card.
  4. Wait for sales to snag pricy items. Look for high-quality items, and find ways to buy them at a discount, Wealthy Winters recommends. The key is knowing which stores carry the brands you like and keeping an eye out for sales. Also, know the retail cycle and when sales are most likely to occur, according to You Look Fab.

I’m so happy with Project 333 that I’ve decided to make it a permanent part of my life, and I’ve marked the seasonal clothing changes on my iCal. I love the fact that I’ve finally solved my I-have-nothing-to-wear dilemma without spending a cent.

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A few bumps, but debit cards for my teens were a success

Filed under: Student on July 25, 2014 @ 7:45 am

Several months ago, I handed debit cards to my teenage sons. Their reactions were interesting.

My 15-year-old, Byron, loved the idea, particularly the fact that he would have $150 in allowance to put in his account the beginning of each month. My 17-year-old, George, on the other hand, was stricken with fear.

You see, I told them they would be responsible for their school supplies, clothes, books and any incidentals that might come up. I wanted them to learn how to budget and how to anticipate expenses. Byron saw a parade of Domino’s pizzas in his future. George worried that he would not have enough money set aside in the fall for clothes and school supplies.

What followed was even more interesting.

In the beginning, Byron used all of his money on takeout, pizza delivery and the Apple iTunes Store. In April, he ordered pizza three times and ate at restaurants five times. He was out of money by April 20.

I didn’t bail him out the rest of the month, even though he didn’t have money for our Saturday morning tradition of breakfast tacos at a local restaurant. There was some gnashing of teeth, but the point was made. In May, he started the month with $50 set aside for necessities, and he only ordered Domino’s twice. However, he was down to $3 by May 17, spending his money on tacos and iTunes.

June was better, with $28 in his account by June 29. Today, he has $152 in savings for necessities.

Meanwhile, George immediately set $50 aside for necessities (he set up a subaccount with that name), and ended April with $48. When he realized that he could actually save more than $50 a month, he set a goal of buying parts for his old laptop so he could rebuild it.

George decided to spend no more than $50 a month on “fun” items, and in June, he spent $130 on computer parts. Today, he has $213 in savings for school expenses.

As you can see, my boys have very different ways of approaching money. I’d rather that Byron didn’t spend so much of his money on restaurants, but he is living within his means, which is the ultimate goal. Investopedia advises that you let your teen budget his way, rather than the way you think it should be. Budgeting can be done with paper, online software such as Mint or commercial software such as Quicken, Investopedia says.

FamilyEducation.com has a teen budget worksheet that includes such items as hobbies, transportation and the all-important cell phone.

MoneyAndStuff.info recommends that you give your teen a monthly allowance, rather than a weekly sum. The site has a sample budget for the teen. Money and Stuff likes the idea of a prepaid debit card, although personal finance expert Dave Ramsey points out that they are riddled with fees. That’s something I like about my kids’ credit union accounts: There are no fees, and we opted out of overdraft protection. That means that when their checking account runs out of money, charges are simply rejected. The savings accounts aren’t dipped into.

Rejected charges have a bonus. My kids get to experience the “walk of shame” from the store counter after being told they have insufficient funds for a purchase. It just took George one time for him to make sure he has enough money in his checking account before he goes to the store.

Now that we have a record of their monthly expenses for the past few months, I think it’s time for the boys to develop a formal budget.

I think George will embrace it. He seems to enjoy the concept of having his finances under control.

Byron will be the challenge. He keeps a running tally of his expenses in his head, which I don’t love. So far, his way has worked for him, but I’d like both of them to at least know their options when it comes to budgeting. When the fall school year kicks in, I plan to teach them the basics of Excel and show them Mint, to see if there’s a system that appeals to them.

Or maybe they’ll discover their own system. That would be even better.

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Composting toilets aside, I see a tiny house in my future

Filed under: Uncategorized on July 23, 2014 @ 9:18 am

I love my house, but it definitely can be a financial burden sometimes. There’s the mortgage that takes up a good chunk of the monthly budget, maintenance and repair costs and hefty utility bills.

Wanting a space of your own — without the huge money, work and time commitment of the average house — is part of what started the tiny house movement that has gained momentum in the past few years.

The tiny house movement is a social movement centered on building and living in very small houses for reasons that include financial freedom, simpler living and environmentalism. The movement has grown over the past several years, giving rise to companies that design and sell tiny houses, tiny house lifestyle blogs and nonprofit organizations such as the Small House Society.

A tiny house on display at the Tiny House Conference in Charlotte, North Carolina, in April 2014. | Photo courtesy of Ryan Mitchell, The Tiny Life

According to the blog The Tiny Life, the average American house is a gargantuan 2,600 square feet while the average tiny house is 100 to 400 square feet. Some other fascinating stats from the blog: Many working-class Americans put one-third or more of their income — or about 15 years of their working life — into their homes.

I recently watched a fascinating documentary called Tiny, about one man’s quest to build a diminutive house. It’s pretty impressive that some people can live in such small spaces. But I could definitely do without a composting toilet, thanks.

And while I admire those who do it, I can’t imagine myself , my husband Joe and our two dogs living in a house so tiny it can be pulled down the highway on wheels. But, a few months ago, I read an article in The New York Times about a couple who built a modest 700-square-foot house. Now, that I could do, and I started dreaming. I love the idea of dedicating less of my money to my living space. It also sounds fabulous to have more time and more freedom. Some small house dwellers say they can do their weekly deep clean in 15 minutes flat. Sign me up.

Several years ago, it never would have occurred to me to live in a little house. But, as blogger Miranda Marquit points out on Money Ning, the view of pumping money into a house as an investment no longer holds true, especially if you might not stay in your house long-term. Joe and I lost money — and had to come up with $10,000 at closing — to sell our last house at the height of the financial crisis, so this rings true for me.

Tiny houses tend to be more expensive by the square foot, but cheaper overall than larger houses, according to Forbes.com. Some people, if they do a lot of the labor themselves, are able to build a tiny house extremely cheaply. For example, after a foreclosure, one architect built her own tiny house for $11,000 so she could have her own space and be mortgage-free. The cost of utilities is much lower, too. For example, utility bills for a tiny house usually run $10 to $35 a month, according to the company Tumbleweed Tiny Houses. And you’re limited by space on the number of pieces of furniture and amount of stuff you can have. Overall, a small house can lead to big savings.

So, if you’re sold on the tiny house life like I am, where do you start?

The key is planning, according to the blog Tiny House Talk. Think ahead and consider how you use your space, because an efficient layout is essential for maximizing a small space. For example, one couple put their washer and dryer right in their clothes closet (yes, that’s singular — they share), while others create home offices in corners.

As for me, I’ll keep following the tiny house blogs, dreaming and trying to convince Joe that it would be great for us, and our finances, to live in a house that’s the size of a small apartment — one day.

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Tired of paying home loan PMI? Try refinancing

Filed under: Credit Cards General on July 16, 2014 @ 8:55 am

As daunting as refinancing your home loan can seem, I’ve found it can pay off in big savings on interest and other benefits.

My husband Joe and I are refinancing right now, and the biggest benefit for us is that we get out of paying private mortgage insurance (PMI).

Private mortgage insurance typically is required when you take out a mortgage and make a down payment that is less than 20 percent of the cost or appraisal value of the house you’re buying. Before we moved and bought our house three years ago, we had to sell our last house at a loss. So, much of the money we would have used for a down payment had to go to pay off our other mortgage.

PMI is costing us over $100 a month. Blogger Travis from My Personal Finance Journey recently refinanced too, partly to get out of PMI, which, he writes, “is like flushing money down the toilet each month.” I agree.

Joe and I are able to get out of paying PMI because we recently did a huge remodel that upped the value of our house. Our home used to be part of a B&B and only had a kitchenette. We created a real kitchen next to a more spacious living room in an open floor plan.

The increased home value means we have more equity, which could have gotten us out of PMI with our current mortgage company. However, our lender wanted us to jump through a bunch of hoops, including paying for an appraisal and writing them a letter.

So, we started thinking about refinancing. We were fed up with our mortgage company’s customer service anyway, and we knew we could reduce the term of our loan from 30 to 15 years and get a much better interest rate. Also, we were considering getting cash out so we could paint the exterior of our Victorian home. Flaking paint has made this a top priority because we want to protect the wood siding.

We shopped around and found a good deal with our own bank, a 3.4 percent interest rate for a 15-year term — much better than the 4.5 percent we’re paying for a 30-year term. With a better interest rate and no PMI, our monthly payment will be almost the same as it is now, and we’ll pay off our house in half the time.

So, how do you know if refinancing is right for you? Personal finance blog Get Rich Slowly offers five reasons to refinance: . lowering your interest rate, shortening the term of your loan, lowering your monthly payment, switching to a fixed-rate from an adjustable rate loan or tapping home equity cash for a home improvement.

One other factor: How long do you plan to stay in the home? Closing costs typically add up to several thousand dollars, so it might not be worth refinancing if you think you’ll move in a few years. For us, this was a wild card: We’re here for my husband’s job and don’t know what will happen in the future. We’re gambling that we’ll stay here for a while.

We decided not to pull equity cash out of our new loan. That’s because our home appraised for a bit less than we had hoped, meaning we would end up with paying PMI again if we took the cash out. By applying for a home equity line of credit (HELOC) instead, we were able to accomplish our goal of freeing ourselves from PMI.

A HELOC is a loan in which the borrower’s home serves as collateral. With a HELOC, you typically can borrow an amount equal to or less than 85 percent of the equity in your home.

Also, our bank is having a HELOC special with 1.99 percent APR for a year, so it makes more sense to go that route.

If you do refinance, financial planner Hank Coleman on DailyFinance.com  lists some common mistakes people make when refinancing. These include not shopping for the best deal, settling for the lender’s appraiser (a mistake we made, unfortunately) instead of hiring your own and not knowing that you can change your mind within three days of closing.

All in all, if you’re doing it for the right reasons, refinancing a mortgage can be a great financial move.

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