Jill Russo Foster

Confession: Saving is not my best skill

I have to admit that I am not the best at saving money. There are months that I have plenty of extra, and that can go into savings. But there are other months that things happen (you know what I mean). And then there are those things I really want (but don’t need). Yes, this even happens to me.

I mentioned to you back in July that I was tracking my spending and making changes. I need to do this periodically to see where my money is going…so that I can be aware. I am just finishing up my September tracking as you are reading this. I know all about my monthly bills, but it’s the little things that get away from me. I need to be a more mindful spender and consider what I am spending my money on.

Here are two things that help me save money.

First, my savings account is not at the bank where I have my checking account. The local bank makes it too easy for me to access my money. It’s nearby and would be linked to checking. So, I have my savings account in a virtual bank – there are no branches where I can withdraw cash and a transfer takes time. In addition, I don’t have my savings linked to an ATM card. Therefore, it’s not easy for me to access the money if a want arises.

What you should take away from this: if you are having trouble saving as much as you want, don’t have your savings account easily accessible.

Second, I have multiple savings accounts – each for a specific need.

vacation savings (for my travels)
home repair savings (after the weather we have had this year, all homeowners need one of these)
emergency savings (for whatever life throws at you)
long-term goal savings (for whatever your plans are – home, car, education, retirement).

These are two of the things that I do to make my savings work for me, but it’s not enough. Help me out and tell me what you do to save money.

Using layaway for holiday shopping

I know you don’t want to hear this, but the holidays are about 3 months away. Are you ready to do some shopping?

If the answer is “no”, then consider this: retailers are bringing back layaway plans. They’ve noticed that people are spending less because money is tight and they want to keep that holiday cash flowing.

Layaway plans offer you the convenience of making payments over time so that you can budget your purchases.

What you should know about layaway plans:

You can’t take your purchase home with you until it is paid in full. The store keeps it until you make your final payment.
There is typically a small fee for the layaway plan.
If you change your mind there can be a cancellation fee as well.
Payment plans are typically 60-90 days.

Why not use your credit card instead? With a credit card you might pay more in interest and take longer to pay it off. You may also spend more because you can take your purchases home with you, giving you a satisfied (but very wrong) feeling that your work is done.

Layaway plans could be the better option if you cannot afford to pay for your purchase in one payment.

Isn’t it better to just wait for a sale?

What if it doesn’t go on sale? You have to decide if it’s better to buy now on layaway or wait until Black Friday when there may, or may not, be a lower price. If Black Friday is your choice, then you can create your own layaway plan by saving money each pay period so you have the cash to make the purchase. That way, whether it’s on sale or not, you can get that special gift.

Either way, the holidays are coming and that is the time of year that we tend to break our budgets. Start early and spread out your purchases.

WBDC CT Budget Coaching: Enroll Today

You know that I am a big believer in budgeting. Knowing where your money goes is the only way you can make changes to your spending so you can achieve your goals. For some people budgeting is a scary idea.

In today’s economy, many people are struggling with their finances. Simple short term or long term goals such as paying bills, planning for retirement or a child’s education can seem impossible when you’re worried whether you’ll still have a job in a few years. It’s critical that individuals gain an understanding of their current financial picture as well as set, and work towards, future financial goals.

I am involved with a program that can assist you with your personal finances and budgeting. This program assists with providing clarity on what is important in your life and your personal finances. We facilitate and empower you to build a budget, and a plan, that supports your needs and goals for today and your future. Through this program you will uncover more choices in managing how you think, feel, and act around money.

How to enroll

This budget coaching program is a four-month program which includes workshops and one-on-one coaching both in person and over the phone. For more information, an application, and eligibility requirements, please call me at 203-353-1750. Completed applications must be received by September 30. There is a $40 fee if accepted into the program.

Should you pay off your credit card debt with a mortgage refinance?

In our last Quick Tips, we talked about refinancing your mortgage. I hope you did your homework. If you decided that refinancing is right for you, you may be tempted to pay off your other debts by financing them into your mortgage.

Should you do it? Follow these steps to find out.

List all your debts

If debt is a problem for you, take a closer look. Make 5 columns:

Column 1: Write down the name of each creditor (credit card companies, auto dealership, bank, hospital, etc.)

Column 2: Write down why you took a loan or used a credit card. This will help you see how you came to be in debt. Were these essential expenses like a car or a hospital emergency? Or, were these items you could have saved for, like a vacation, clothes, or furniture.

Column 3. Write down the interest rate.

Column 4. Write down the current payment amount.

Column 5. Write down when it will be paid off at the current payment rate.

I know that this can be scary, but you need to know. Congratulate yourself for doing this. This is a huge step forward.

Why is it important to really look at your debt? If your debts just disappear into your mortgage, you could forget where they came from. Most people who consolidate their debt this way have credit card debt again in just a few years. My assistant told me that it happened to her, and she regrets it. Not only was her mortgage increased, but it delayed the real cure: fixing the leaks in her budget.

Refinancing may not be the answer, but knowing how and why you spend will help you stay out of debt in the long run.

Consider the downside of consolidating credit card debt into your mortgage

Credit card debt is unsecured, so you would be taking unsecured debt and betting your house on it (securitizing it).

When you have credit card debt and can’t make payments, that’s a problem – but, your creditors cannot take your home. On the other hand, if you can’t make your mortgage payments, then you could lose your home in foreclosure. If you increased your mortgage loan in order to cover credit card debt, you could end up with a larger house payment – one that you can’t afford! That’s why I don’t recommend refinancing your unsecured debt into a mortgage.

Consider the long term outcome when refinancing secured debts into your mortgage

Secured debt has a physical object that can be repossessed if you don’t pay: it could be a car, or even a home equity loan or line of credit. Here are three questions you should ask before making your decision:

1. If you combine your mortgage with your home equity will this mean you need to pay mortgage insurance? Mortgage insurance is added when the total amount of your mortgage is equal to, or over, 80% of your home’s appraised value. That will increase your monthly mortgage payment.

2. Will you need the home equity line in the future? It will be difficult to get a new line in these economic times.

3. Is it better to pay off your debts yourself, and have a tight budget for the short term? Or combine them with your refinance and have a bigger mortgage in the long term?

Think long and hard about what you put into your new mortgage. Consult with your tax preparer for an objective opinion.

Protecting your child’s credit

If you have been a reader of this column, you know how important it to maintain good credit. Unfortunately, it is not enough to monitor your own credit, you must protect your child’s credit as well.

Good credit is as important to your child’s financial future as GPA and SAT numbers are to career goals. Recently, I was asked by the parents of a newborn what they could do to keep their child’s credit /identity safe.

Unfortunately, the answer is not a thing. You probably don’t like that answer. But it does make sense – let me explain.

To protect your personal credit / identity, I recommend that you place a credit freeze on your credit report so that no one (not even people you authorize) can view your credit without you unfreezing your credit. You have to pay for the service, so you should only do it when you don’t think you will have a need to finance something in the immediate future. Freezing and unfreezing can be costly to your wallet.

Well, you can’t freeze a newborn’s credit, or for that matter, a child’s credit. If you think about it, your child has a social security number shortly after birth, but they do not have credit yet. You cannot freeze credit if there is no credit to freeze.

To protect your child’s credit / identity, you will have to order their credit report at www.AnnualCreditReport.com periodically to make sure that no one has requested credit under your child name and social security number. Don’t wait until they are ready for their first loan or you may find out someone stole their identity years ago.

Is Refinancing Right for You?

“Refinance, refinance, refinance!” That’s what everyone is saying. Yes, rates are low – maybe the lowest they’ll be. You can never tell… until they go up and you’ve missed your chance.

How can you know if refinancing is right for you? You need to ask yourself these questions before deciding:

Question 1. How long do you plan on living in your current home? If the answer is “not long” then it’s probably not worth the cost of refinancing. Do the numbers test below.

Question 2. Are you refinancing to pay off your mortgage faster or to lower your monthly payment? You really should know the answer to this question before you refinance your home. Lower monthly payments are going to look awfully tempting if you’ve got a big wish list or a tight budget. Let’s look at your options.

Let’s say you have a 30 year mortgage, but you’ve been paying on it for 10 years. That means you have 20 years left. You could refinance into a 20 year mortgage to keep the terms the same. Obviously a new 30 year mortgage would have much lower payments, but at what cost? No one wants to be paying a mortgage after retirement

Most people have heard of 15 and 30 year mortgages, but you can actually refinance mortgages in 30, 25, 20, 15 and 10 year terms. Do what’s right for your budget.

Refinancing is a long-term numbers game. Many people think that a low mortgage payment means money saved. That’s not necessarily true – it may simply mean you have more spending money this month, but you will have much less money for yourself over the next 20-30 years.

How can you tell? To find out, let’s do some math! Get out your pencil and get ready to write down some numbers.

Step 1. Take the estimated refinance principle and interest payment and subtract it from your current principle and interest payment. This will be your savings per month.

Step 2. Assume that the closing costs of the refinance will be about 4% to 6% of the mortgage amount. Example: Closing costs would be $10,000 on a $250,000 house if they charge 4%. Figure out your closing costs and write that down.

Step 3. Take the number from step 1 (your monthly savings) and divide that into step 2 (your closing costs). This is the number of months it will take you to recoup your closing costs. Example: If your refinanced payments will be $200 less your current payment, and your refinance closing cost will be $10,000, it would take you 50 months (over 4 years) to make up the difference.

Now that you know how long it will take you to recoup your costs, you should decide whether you’re going live in the house that long. If you plan to move before you can make up the difference, don’t refinance.

A New Sheriff’s in Town – the Consumer Financial Protection Bureau

If you haven’t heard, we now have a Consumer Financial Protection Bureau.

You may wonder why? What does it do? How can you use it? Good questions!

Why?

This has been needed for a long time. The CFPB describes itself as a neighborhood cop on the beat, supervising banks, credit unions, and other financial companies. Although we have consumer protection laws in place, there was no central policing agency for consumers to turn to when they faced unfair practices, or even illegal actions, from lenders.

There are many David and Goliath stories out there. Too often, when you have a financial problem, you’re the little guy against a big immovable corporation. You may have seen the news story about the foreclosure on a house with no mortgage. How can a bank seize your house if you don’t owe any money on it? A good question. This man literally had no one on his side until he turned to a local news station.

Hopefully, the days of fighting unwinnable battles are over. Thanks to the Dodd-Frank Wall Street Reform and the Consumer Protection Act of 2010, the CFPB is here to help. Hurray!

What does it do?

Its mission is to educate consumers (you), enforce the current Federal consumer financial laws, and study the actions of consumers, financial service providers, and the markets.

Education. If you know what you’re getting, you’ll make better choices. The CFPB believes “An informed consumer is the first line of defense against abusive practices.” You may say, “I don’t want an education, I just want the terms of my loan to be easy to understand.” They’re working on that, too. Most of us didn’t major in finance and we shouldn’t need a financial degree to understand the terms of our mortgage.

Enforce current laws. As mentioned above, we need a powerful advocate on our side. Unfortunately, it’s not enough that the laws are in place. We need someone to enforce them because the banks and credit card companies haven’t been willing to follow rules meant to protect their customers.

Study. The CFPB will study consumers, banks and the markets, so they can learn what the current problems are, how best to address them, and keep us informed on new risks.

How can you use it?

The CFPB actually wants you to use it, and they’ve made it easy with their interactive website. You can voice your opinions, submit complaints and learn more about finances.

Tell your story. They want your stories, good or bad, whether you’re an employee or a consumer. They want to know what people are up against. They want to know what doesn’t work and what does.

Vote on new practices. Right now they are looking for consumer opinions about simplifying mortgage paperwork. This is so needed. Having been in the mortgage field for many years, and having dealt with the numerous disclosures, I know how confusing it can be. The website is asking you to cast your vote for a disclosure with all the costs listed. Take a look and vote.

There is also a section for you to submit a complaint on a problem you have with your credit card company. They will forward your issue, give you confirmation, and keep you updated. So the next time you feel you are not getting your issue resolved, you might want to have the Consumer Financial Protection Bureau assist you.

They’re still a new agency, so we won’t expect miracles anytime soon. The best way to protect yourself is to do your research ahead of time so you can make informed choices. You can do that by following Quick Tips and passing it on to your friends. And don’t forget to bookmark www.consumerfinance.gov, the CFPB website.

Connecticut income tax increases begin this month

Changes for Connecticut Residents

When you open your paycheck in August you will notice that it’s smaller. The new CT income tax deduction took effect August 1, but it went into effect retroactively from January 1st (7 months past).

With only five months left in the calendar year, the money has to be made up. From now until the end of the year, you will be having more than double the CT income tax withdrawn from your paycheck to catch up.

Come January 1, 2012, you will go back to paying the regular new income tax amount.

Check with your tax preparer, but it is my understanding that the tax increase will not affect you if you are filing your taxes as single and earn less than $50,000, or married and earn less than 100,000. If that’s you, you won’t see a difference in your paycheck now or in January.

Connecticut Sales Tax Increases

No matter your tax bracket, you will be paying more sales tax when you shop in CT. In case you didn’t know, CT shoppers are now paying 6.35% as of July 1 (up from 6%). And you will pay it on more items. Some items that were tax exempt in the past are now taxable. For example, you didn’t used to pay sale tax on clothing under $50, but now you will as you shop for back-to-school. Remember that there is a tax-free week for clothing from August 21 to 27 for purchases under $300.00, so you may want to plan your shopping ahead.

How to get the best price on a new car

Are you in the market for a new or used car? How can you tell if you’re getting the best price?

You don’t want to pay more than the car is worth. Here are some tips to help you get started.

Myths Busted

People say to shop later in the month because the sales staff will sell at any price to meet their quotas. The truth? You don’t know how they calculate their quotas. Maybe it’s quarterly. Maybe the dealership tallies sales on the 3rd Friday of each month. Maybe they’ve had a great month and don’t need to cut you a deal. You won’t get a good price by guessing the salesman’s income. Do your car research instead.

Research Your Car Online

You can research ahead of time if you’re looking for a specific make and model. Or, you can research online after the dealer makes his offer. One website is Overstock.com. You can select the car make and model, and all the options, and it will give you a suggested price that you can take to the dealer. Another website is CarsDirect.com. There, you can select the make, model and your zip code. You can also try Kelly Blue Book and the Insurance Institute for Highway Safety. Both sites give good information on car repair and safety features for current makes and models.

Save Money on Financing

If you need financing, do the research ahead of time. Start by reviewing your credit and making any corrections that are necessary. Once your credit is handled, then it’s time to research for the best terms for your loan. Don’t just rely on the dealer for their financing. Check with your bank or credit union, and then other lenders, for the best terms.

Bottom line, do your research so you can negotiate with real up-to-date information. That way, you’ll know you’re getting the best deal.

KEY ~ Feed Your Body How to Simplify Your Life and Save Money

by Vicki Heise, CHC, CHHP/AADP

Did you know that not only can you save money by cooking at home but it doesn’t have to be complicated?

If you think you don’t have time to add another thing to your to-do list, with a little planning you can not only save money, but feed your family great tasting nutritious food and not spend lots of time in the kitchen.

Here’s how:

1. Use whole foods. Buy whole foods, the ones you find around the outer edge of the grocery store. That’s where you’ll find the fresh herbs, fruits, vegetables, meat, chicken, fish and dairy. Add some things from the bulk bins like grains, beans and nuts (a huge money saver) and don’t forget to get some canned beans and frozen vegetables that are real time savers.

2. Prepare them simply. You don’t need lots of recipes with long lists of ingredients. Save the complex, full of ingredient recipes for when you have the time to enjoy the whole cooking experience.

3. Make large batches ahead of time of the things that take a while to cook like beans and grains. Yes they do take time, but it’s on the stove time, not you actively being involved time. They’ll be ready when you get home so you can quickly put all the pieces together. Use a quick cook method for the other ingredients and make extra to have leftovers for lunch/dinner the next day or later in the week.

4. Add flavor. How about letting everyone season their own meal? Prepare the food simply and have favorite condiments, spices and dressings on the table. Everybody gets to decide how much and what flavors they want to add. This make it easier on you and keeps everybody happy!

Take a little time to plan ahead to save yourself time and money starting this week!

If you’d like a copy of the Live Your Healthy Life meal planning and grocery list, just email Vicki at info@liveyourhealthylife.com. She will email it to you and also send a complimentary subscription to the weekly Live Your Healthy Life e-newsletter full of healthy tips and ideas AND your 12 page special report on the 7 Keys Every Woman Needs to Unlock Her Healthier, Happier Life™ (Retail Value $27). Privacy is important to me, so I will never sell, rent or give your name or address to any third parties.

Vicki Heise, Your Healthy Life Mentor is the founder of LiveYourHealthyLife.com and creator of the “7 Keys Every Woman Needs to Unlock Her Healthier, Happier Life™”.