Budgeting and Money-Saving Ideas: February 2009

My Student Loans Are Killing Me. Any Advice?

It's sad to know that in order for you to earn a bachelor or associate degree, you have to incur debt. It's like this debt thingy is inevitable. Most average college students, except for those who are scholars and who are from wealthy family, has to borrow money at one point in their college lives. Today's college students must be hustler. It's bad enough that more and more jobs are losing. When the time they graduate, would there be jobs available for them?

College grads now carry nearly $20,000 in student-loan debt on average, so you are not alone. To lighten your load, consider consolidating. Transfer all your variable-interest loans into a fixed-rate one (do it now-rates are around 5.3%). Plus, Sallie Mae will shave off one percent off your consolidation loan after you make on-time payments for three years. Also make sure you to get your tax break; if you make less than $65,000 a year, you may be able to deduct some of your student-loan interest from your income tax. That can mean hundreds of dollars back in your pocket.

5 Simple Ways To End Up With A Boatload Of Money

There are lots of ways to save money. In times like this, you have to tighten your budget and minimize your daily expenses. It may sound challenging to others but to some, this is their practical way to save the day. Every penny counts. If you save $1 a day, that would be a savings of $30 a month, or $365 in a year. You may say that it may not be that much but this is just a way to develop your own money-saving habit. Once habit becomes a daily thing to do, it becomes a character.

A woman making the average annual salary of $31,000 saves a measly $500 a year-less than 2 percent of her income, according to research. That's not even close to the 10 percent experts recommend. Why don't women save? They tend to put it off till they have a new job or get married. But by procrastinating, you lose out on compound interest (a.k.a free money).

Here are the 5 ways to build a bigger nest egg:

Reduce your spending by just $5 a day. Brown-bag your lunch, get regular coffee instead of Frapuccino, and boom! You've done it! Follow this plan and you'll save about $150 a month., or $1,800 a year.
Do not neglect to sign up for your 401(k). Contribute as much as you can, since you will get a tax break on the money you invest.
Arrange to have money deducted automatically from your paycheck and placed directly into a savings account or mutual fund if your employer does not offer a 401(k). When you make your cash a little harder to get to, you will be a lot less likely to spend.
Do not hit the ATM more than once a week, unless you are in a serious pinch (no, a sample sale does not count). According to Lois Frankel, author of Nice Girls Don't Get Rich, "Women don't accumulate as much wealth as men partly because we spend more freely on impulse purchases."
Hunt for savings everywhere. Go to pfblog.com, ftc.gov, soundmoneytips.com for advice on everything from cheap car insurance, lowering utility bills to banks with interests on savings account.

Will Your Bank Fail? How To Know

Headlines about banks failing are scary. The thought of paying higher taxes to bail them out is infuriating. But what does it mean to you if your bank fails?

The money in your account will be safe, since deposits up to $100,000 are insured. But you may be inconvenienced. For example, when one New York bank was closed for an FDIC investigation on the Friday before a long weekend, its customers could not cash paychecks or deposit or withdraw money for four days. To make matters worse, they couldn't use their ATM cards. If all your money is in one bank, knowing the signs of trouble are important.

Read bank mailings and newspapers for word of "restructuring."
Note unexplained changes in service--a sharp decrease in the number of tellers, elimination of special services (like safe-deposit boxes).
Watch interest rates on savings accounts. A sudden hike above the market average usually means the bank needs more of your money. You can benefit, but be aware of the implications.
Monitor the bank's stock price for sudden drops.

If you note any of these changes, consider setting up a back-up account...just in case.

What To Know If Your Car is damaged In An Accident

Do you know that over 34 million cars are damaged in accidents every year? If yours becomes one of them, fast thinking and hard questions can save you a lot of aggravation and money.

The repair shop--With the variety and complexity of cars today, the shop must have the equipment and experience to fix your kind of car. If the car must be towed, have it stored until you decide who will do the repairs. Don't let a tow truck operator take the car to a "friend who does great work."

The estimate--There are two reasons to keep repair costs down.

1. Your auto insurance premium may rise if you have a huge repair bill.

2. If you are sued, your repair costs may be used as an indication of the severity of the accident. Beware of the shop that asks what your insurance deductible is and offers to pad the estimate to cover it. If they are willing to break insurance fraud laws, they may cheat on their repairs as well. If there is a lot of damage, get more than one estimate. Tell one of the shops that you, not the insurance company, are paying and compare this estimate with the other.

Parts--Always ask whether the estimate is for new or used parts. If new, will they be original manufacturer's parts (OEM)? Ask if replaced parts are sold for scrap. Of so, their salvage value should be deducted from the repair costs.

Loaners--Many shops offer a free or low-cost car to use while yours is being repaired. If so, ask if there is a mileage charge. Many shop don't mention it. Also find out what the car looks like; some are gaudily covered with the shop's advertising message. If your insurance covers a rental car, it may be a better deal.

Well-Kept Tax Secrets

Some tax breaks are regularly overlooked by people when they fill out their returns. If you fall into any of the categories below, you may be eligible for one.

You're married:

*Filing separately can save you money. Most of the time, of course, it doesn't. But if you itemize your deductions and you had big unreimbursed health care bills last year--for example, for psychotherapy, which is rarely fully covered by insurance--you might come out ahead by filing separately. You can deduct only medical bills that exceed 7.5 percent of your adjusted gross income, and you may have trouble meeting that figure when your and your husband's incomes are combined. If you list your medical expenses on an individual return (married, filing separately), you may be able to take the deduction. Remember, however, that if the two of you have children and want to take the child care credit, you must file a joint return.

*You can prevent the IRS from refusing your refund because of your spouse's bad financial history. Let's say you and your husband file a joint return and claim a refund. If he is behind on child-support payments or on repayment of his college loans, the IRS may refuse to send the refund even though most or all of it was due to overwithholding on your paychecks, your deductions and credits. But there is a loophole. Under a special provision of the law designed for "injured spouses," you can file Form 1040X, showing what part of the refund belongs to you, and the IRS will send you this portion.

You're a mother:

*You may be eligible for the child care credit even if you aren't working outside the home. This credit, which can reduce the taxes you pay, can be claimed by many "nonworking" mothers. For instance, you can take the credit if you pay someone to care for your child while you are job hunting. And if one spouse works, child care expenses incurred while the other spouse is in school full-time are covered. You can include not only the money you spend on day care and sitters but also the cost of summer day camp. The social security and unemployment taxes you pay on your sitter's wages are eligible too.

*The IRS may owe you money.

If you have a child who lived with you in 1990, and you earned under $20,264, you may be able to collect an "earned income credit" of as much as $953. When you fill out your tax return, you subtract your credit from the taxes you would otherwise owe. If your credit turns out to be more than you owe, you get back a check for the difference from the IRS. For more details, call 1-800-829-1040 or visit a local IRS office.

You're divorced:

*Maybe you're not "single" in the eyes of IRS. There's another tax category besides "married" and "single": "head of household." Since its tax rates are lower than those for "single," check to see if you qualify. You may if your child lives with you for more than half the year--even if her father claims her as a dependent on his return.

*You can get a tax break for costs related to your divorce. Legal fees for a divorce are rarely deductible, but fees for tax advice for a divorce are, and so is money you pay a lawyer to collect past-due alimony. Get a separate bill from your lawyer for these fees.

5 Tax Habits That You Need To Break in 2009

Many of us fill out our tax returns exactly the same way year after year, without stopping to ask ourselves whether our approach still makes sense. Here are five common tax habits that it may be time to reconsider.

1. Mailing your tax return

If you file your return by mail, it usually takes six to eight weeks to get your refund. Now, however, it's possible to file electronically and get your refund in only three weeks. To do this, you must use a tax preparer or transmitter accepted by IRS; you can find one by checking newspaper and TV advertisements. The service usually costs roughly $25 to $40. If your refund is under $500 it's probably not worth this fee to get your money four or five weeks sooner, but if your refund will be substantial and you need the money fast, check out his alternative.

2. Taking the standard deduction

The IRS gives you a choice of taking the standard deduction ($11,400 for a married couple or qualifying widow/widower, $8,350 for head of household and $5,700 for a single person or married filing separately) or else itemizing your deductions one by one. Clearly, it pays to take the standard deduction only if it's larger than your itemized total--and if your circumstances have changed in recent years, it may not be. For example, if you changed jobs, got a good raise or moved to another state, you may be paying a larger amount in state and local taxes, which are deductible. You may also have extra deductions if you suffered a major uninsured loss through theft or fire in the past year, or if you now own your home rather than rent. if any of these cases apply to you, try itemizing to see if you're entitled to a bigger deduction this year.

3. Using one of the "short forms"

You can pay your taxes with the standard Form 1040, or you can use one of the shorter, simpler tax forms (1040A, or 1040EZ if you are single). The short forms are a breeze compared to 1040, but you may save substantial sums by using the latter. Among other thins you can't itemize unless you use 1040, nor can you write off certain investment losses--for example, if you sold a stock for less than you paid for it. Moreover, you can't deduct contributions to a Keogh or SEP retirement plan unless you fill out the longer form. If you have started to acquire investments, have bought a home or have gone into business for yourself, 1040 makes the most sense.

4. Doing your return with a calculator

If you are computer-literate, this could be the year to invest in a tax-preparation software program. The good ones lead you step by step through tax forms, so that you are unlikely to miss any deductions, exemptions or tax credits to which you are entitled. In addition, you avoid the arithmetic mistakes that the IRS tells us are responsible for many of the errors on tax returns--and the delays in getting a refund. For ease of use, you may try TaxCut, TurboTax Premier and CompleteTax.

5. Assuming an IRA is not for you

Since 1986, if you or your husband works for employers who offer retirement plans (even if you don't participate in them) and you earn more than a certain amount, you can no longer deduct IRA (Individual Retirement Account) contributions on your tax return. Because these changes have been widely publicized, many young women no longer consider IRAs a good financial option. But the law provides important exceptions under which IRAs are still deductible for many people. If you meet the requirements, there are big financial advantages, so you should consider putting something into an IRA this year. Other rules govern those who file as head of household or as "married, filing separately,"; check with your bank for details.

The Three Must-Have Habits Leading To Financial Freedom

During these times in which global economic crisis and unemployment loom every industry in almost every country, it is expected that you have to live within your means. Or else, you will find yourself starving and live from the charitable support of the social welfare. You have to prepare for the worst because many economists and world finanial analysts predict that the effect of the economic downfall can be felt in the succeeding years to come. You can start by inducing youtself to curb your daily expenses and develop money-saving habits. You have to look for other source of additional income as well.

Must-Have Habit #1: Saving. Back to Lincoln's "a penny saved is a penny earned" axiom; yes, even pennies matter! A penny saved helps build the habit of saving. Every time you "save," you create a feeling, an inner sense of "building," and you strengthen a habit. If you SYSTEMATICALLY save, that feeling becomes pretty powerful. It has an impact on your self-image, self-esteem and self-confidence. If you SYSTEMATICALLY save, that habit becomes automatic behavior.

In the beginning, your saving activity may not mean much in pure dollars and sense. You may start just by putting "spare change" into a coffee can at the end of every day, and putting a tiny 1% of every paycheck into a savings account. That will take a long time to build up. But getting this habit working for you is what's important, regardless of the dollar amount.

Later, as you savings build, you can begin using more sophisticated investment methods, like Individual Retirement Accounts (IRA'S), mutual funds, and so on. In the beginning, very ordinary savings vehicles are fine. And even small but consistent savings, in ordinary mechanisms like bank savings accounts, can add up, thanks to "compound interest."

Must-Have Habit #2: Giving. The practicality of what we're about to suggest is, admittedly, mysterious--you might even call it mystical. We are not even going to attempt to explain it. But we will insist that it works. Every individual who tries this idea reports remarkable results.

If you have three apples and give one away to a hungry person, your "wealth" has decreased from three to two, right? On paper, yes. But in real life, the act of giving seems to increase wealth rather than to decrease it. The act of giving actually violates the math we learn in school. When people combine The Habit Of SAVING with The Habit Of GIVING, they seem to "attract" new job opportunities, promotions, raises, even money coming to them from unusual and unexpected sources.

You may want topic a favorite charity, your church, a local civic project, a food bank, a homeless shelter, whatever, and regularly and consistently give a small donation. Just like "paying yourself first," you might set a percentage, even 1% or 2% or 3% of all the money that comes to you. Each time you get paid, give even just $5. The amounts are less important than consistency and frequency.

Giving of time counts too. Your community is overrun with worthy, charitable organizations and projects in need of volunteers. Volunteerism is an American tradition that enriches everybody's lives.

Must-Have Habit #3. Self-Improvement. Whether through formal education or informal education: reading, going to seminars, people who experience increasing incomes and prosperity are always actively involved in self-improvement.

We are "TV generation." No previous age group has spent as much time watching television as we do. Now, we're not going to "bash" television. We enjoy TV just as much as anybody. We use TV for news, for entertainment, for watching sports, for information, even for shopping. But the person who uses the TV as an "escape" from real life...who flops in front of it as soon as they arrive home from work and stays there until the fall asleep...this person does himself a terrible disservice. Instead, some portion of your time should be deliberately and wisely invested in self-improvement.

When you stop to think about it, "YOU" are the only thing in life over which you have a great deal of control. "YOU" are the one asset that can never be lost or stolen. Doesn't it make good sense to invest and money in improving that asset?

Three Simple Steps to End Slavery to Debt

Some of us cannot avoid to have debts. That is a very hard fact of life. Why is this happening? Well, there are various reasons for that. But the problem lies with the $10-dollar question: When can you pay off all your debts? Don't let yourself be a slave of debt.

Today, we are very much into "instant gratification." We want it-and we want it NOW. Well, for certain purposes, modern credit is a wonderful thing. But misused and overused, it can literally make you a SLAVE to it.

Most people do not understand the true cost of credit. If you finance, say a $500 stereo system on a credit card or plan, that stereo may cost you $680, $770, even $950 before you get it paid for. If you do that a lot, say with $5,000 worth of credit instead of $500, it will cost you at least $900 a year just to keep the interest current. If you go through life paying double what you should for everything you buy, it stands to reason you're not going to win the money game! A sure sign that you're e losing badly, by the way, is making only the "minimum monthly payment" on your credit cards.

If you are a slave to debt now, you should very seriously think about breaking those chains of slavery as soon as possible. If you are deeply in debt and unable to make even the minimum payments due on all your bills every month, you should probably get some professional assistance. Legitimate credit counselors can help you work with your creditors and devise a plan you can live with, to get your debts under control. Look in your city's Yellow Pages under "Credit" and find "Credit Counselors" or another reputable credit counselling and assistance organization. If in doubt of which organization to call, check with your local Better Business Bureau, your bank manager or your family accountant for a referral. If you're just mildly in debt, you will be able to reverse the process whithout help. One way or another, escape from high interest debt is a very smart financial move.

In fact, there are three simple steps to end slavery to debt:

Step 1:STOP doing whatever has gotten you into debt in the first place. If it is buying things on impulse, stop doing it. Lock your credit cards in a drawer and only take them out for a carefully thought-out purchase if you must, but don't carry them with you all the time. If it's living way beyond your means, stop that. Pull back. Do without if you must for a while. Delay major purchases. If there's a more serious problem, like drinking or gambling, get help. There is no shame in getting help for a problem. The shame is in refusing to honestly face your problems.

Step 2:Devise a plan to systematically reduce your burden of debt. After you pay yourself first, then take a pre-determined percentage of your paycheck and any an all other monies that come to you and use that to reduce debt. If you happen to own your own home or some other mortgageable asset and you have a lot of high interest consumer debt, like credit card debt, you may be able to use the equity in your home to get a debt consolidation loan, pay off a bundle of the high interest debts, and have a lower interest (i.e. lower cost) loan in its place. If you do this, though, you MUST avoid running up the credit cards all over again--even if you have to cut them in half and close the accounts to do it.

Step 3: Avoid taking on new debt unless it definitely IMPROVES your financial situation, such as incurring debt to buy a home and stop renting, or further your education, or move to a new city to take a better job, or to take advantage of a carefully chosen business opportunity.

The Only Law About Money You Ever Really Need To Know To Escape From Financial Prison

Going through life paycheck to paycheck, using up all your money even before the next paycheck, is like locking yourself up in financial prison and throwing away the key.

This negative cycle MUST be broken before you can ever hope to get ahead. You break it by obeying "The Only Law About Money You Ever Really Need To Know." This "Law" requires a habit that, over time, changes the lives of all who use it for the better. At first, the results may seem insignificant. But it is the habit itself that leads to big differences. The Law is: Pay Yourself First. Out of every dollar that comes to you, in your paycheck or from any and every other sources, expected or unexpected, you take a pre-determined percentage off the top and put that aside as an "untouchable," as savings, BEFORE you pay any other bill. You might choose just 1%: from a dollar, a penny. You might choose 5%; from each dollar, a nickel. But "lock in" on that percentage and keep this promise to yourself no matter what.

Now, we know this is going to sound crazy to many readers. "Hey." you might argue,"I'm not getting all my bills paid now, using 100% of my income--now you want me to manage with 95%?--how's that gonna work? Fortunately, you don't have to believe this law makes any sense for it to pay dividends. All you have to do is obey it. If you will try this idea, and stick with it absolutely, for just three months, you will see for yourself how your attitudes about money AND your actual financial situation almost miraculously changes for the better.

Here is 'bottom line': You must change the way you THINK about money, before the actual money situations of your life will change.

7 Steps to Hassle-Free Settlement

If you are first-time home buyer, chances are, you could be or might be one of those home buyers who face a lot of challenges at the settlement. Of course, you don't want to undergo the stress and pressure associated with the process. Heck! No way! You know that there is definitely some ways to ease up the journey of home ownership. Yes, there are. So get a cup of coffee as you read on below.

Here are the seven steps that you can follow to make the settlement process as smooth as possible:

1. Know all the players and the process. At the settlement, the buyer, the seller, brokers for both parties, and the title company representative (or a lawyer) meet to review the details of a property sales agreement before final signatures. All the provisions of the agreement will be explained one last time.

First, clear up any unresolved matters with the property. Resolve any problems with the property's title not corrected during the walk-through. Also, obtain the title insurance. Next, the attorney or title representative will explain the Deed of Trust, the mortgage note, lender instruction forms, and the transaction settlement sheet to the buyer. The buyer signs all these documents and the balance of the downpayment is paid to the seller with a certified check.

The closing costs and settlement fees are also explained. They include loan origination fees, recording fees, county taxes, attorneys' fees, and appraisal fees. The buyer may have to pay some of these fees at the closing. Closing costs are roughly 4% to 7% of the total loan. Any reimbursed fees for taxes or insurance that may have been paid in advance are returned to the proper parties as well. The seller and the brokers are supplied a copy of the settlement sheets for their records. The house keys are then passed to the owner.

2. Obtain closing documents in advance. It is best that the buyer gain access to the loan documents to review before the settlement. Ask the mortgage lender representing you at the closing to obtain the documents for you in advance. Reviewing such documents in advance can help you solve problems that could jeopardize the agreement.

3. Understand the provisions of the programs you participate in. There are a variety of first-time home buyer programs, so it is up to you to understand what you are entitled to or what you are responsible for providing if you participate. Make sure whoever is doing your paperwork is familiar with the program you're in so that hey get all the proper forms and they know everything they are supposed to turn in.

4. Know how much money to bring to the meeting. This sounds like a very simple matter, but if you can't meet the financial obligations in your loan agreement, the sale may not go through. Find out in advance how much money you'll need to bring with you, and who the checks made payable to. Fees for the title insurance company or inspections are common. Normally, the realtor would help you do all that kind of processing up front.

5. Make sure all the documents are fully executed. Inaccurate or missing information on important documents can delay your purchase. Develop a checklist to keep track of forms that need to be completed so that everything is in place at the closing. Whenever you do anything, like turn in forms, check it off the checklist and follow up to make sure the papers were received. Everything that the bank sends you, send back as soon as possible. Also, go back and double-check with your loan processor or agent to make sure that they have everything so that your process runs smoothly and you stay on schedule. Remember that it is the responsibility of the buyer to make sure that the title company has gotten all necessary and all documents are recorded properly at the courthouse. That house isn't really yours until those documents are recorded at the courthouse.

6. Don't panic over errors. The calculation of the closing costs usually generates most of the headaches and misery. Pay attention to the estimate a broker brings to you, note down the closing costs and how much money they're really borrowing.

7. Take time tounderstand before signing. You should never sign anything that you don't understand, so don't feel pressured if problems arise at the closing. Take your time. Read carefully the documents. If you have questions, like there's a term you are not familiar with, ask for an explanation. Don't be afraid to speak up because you are going to be responsible for whatever you sign. There's no turning back once those papers are signed.

3 Important Things That You Have To Remember Before Doing The Settlement

You are so excited to finally own that house that you have dreamed of. But at the same time, you are a little bit nervous. If you are a first-time home buyer and you want to avoid any inconvenience that might delay the settlement process, you should do the three important things below. These three tasks can help you in terms of avoiding possible headaches and frustrations that can be avoided beforehand. It pays to be prepared before making the closing.

Here are the things you need to do before settlement to make sure that the process goes smoothly.

1. Schedule the settlement during business hours. If you schedule the closing after business hours, and your bank or any agency has to make adjustments to your paperwork, the office might be closed.

2. Consult a lawyer before the settlement. The critical time to have your lawyer involved with your purchase is well before the closing. Your attorney should review the purchase agreement, resolve any complications with the title, and make certain any other issues you deem important are covered to your satisfaction. by the time you get to settlement, you have already signed a sales contract as a buyer, the seller has signed, and both of you have created an agreement that spells out the therms. At that time, the terms and conditions are binding and enforceable so bringing an attorney to settlement is a waste of time unless you are expecting a problem.

3. Resolve issues with the property before signing the agreement. The most common obstacle to a successful settlement is when the buyer goes through the final walk-through and the property is not in the condition that hey agreed to. For instance, if a faucet doesn't work, that issue needs to be ironed out or negotiated at settlement between the two parties to produce an amicable resolution. Instead of asking the seller to fix the problems, you might negotiate for a lower price before closing and fix the minor problem yourself.

Mortgage-What You Need to Know First

Are you a first-time home buyer? First time on applying for mortgage? Wondering if you're qualified for it? So much debt and no down payment? Read on to know the basics of getting a mortgage.

Lending companies look at three things when you apply for a mortgage: credit score, debt-to-income ratio and downpayment. If you have two out of those three mentioned, then you are in good shape to buy your new home.

All lenders are credit-score-driven these days. FICO scores, the most commonly used, range from 300 to 850, but the number to shoot for is about 750. The higher the score, the more flexible lenders will be. But even with a score of 700, you will still be considered an A borrower and qualify for the best rates.

Another thing that you need to consider is your debt-to-income ratio. Most lenders have followed the 28/36 rule. It means that no more than 28% of your monthly gross income should be dedicated to your mortgage payment, property taxes and insurance, with total debt equaling no more than 36% of your gross income. But if you have no other debt, you can dedicate 36% of your income to home payments. With an FHA-backed loan, you may be permitted to apply as much as 41% of your income to total debt.

Coming up with the down payment is a struggle for many buyers, but it can make a big difference, especially if you don't have stellar credit. The more money you put down, the less risk the lender takes on. A 20% down payment is the threshold at which you're exempt from private mortgage insurance, which can add a few hundred non-tax-deductible dollars to your monthly payment.

Sailing on the electronic ocean

Keep your information superhighway. I'll sail on the electronic ocean, thank you. Need crew for the Wednesday night club race? Post an electronic mail message and you could fill the boat in minutes. Look up a design review online, check the electronic classified ads for the price and availability, then join an electronic discussion and ask for opinions from other sailors. It's all possible now, and the possibilities for the future are mind boggling.

The explosive growth of online services is making it easy and affordable to take advantage of high-tech communications once available only to students and university students. Growing numbers of sailors are using their computers to access a wealth of information online.

To join the online fleet, you will need a personal computer equipped with a modem. A modem is a device that lets your computer connect with worldwide networks of computers over an ordinary phone line. Next, you must choose an online service. Two with extensive resources for sailors are CompuServ and America Online (AOL). Others that may be useful are AT&T, Bellsouth, Verizon and etc. Each service provides a network of local phone numbers, so you do not have to pay long-distance charges to connect. Most offer an introductory membership that includes several hours of free time to explore the service.

Using a computer and a modem to connect to an online service be a little daunting. But remember, once you are connected, there are literally millions of online users who will be happy to guide you through the sometimes confusing world of cyberspace.

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