October 2008 Archives - Free From Broke

Money Hack Carnival #36 – Scary Finances Edition

Welcome to Free From Broke and the 36th Money Hacks Carnival – Scary Finances Edition! With Halloween around the corner and some stomach turning days on Wall Street I thought it would be fun have a scary theme for this week’s carnival.

EDITOR’S PICKS

Make sure you pay your credit card bills on time otherwise you may find some scary charges on your next bill!

Ray presents How To Build A CD Ladder and Get The Highest Interest Rate posted at Money Blue Book Finance.

The Happy Rock presents Credit Card Signups At Checkout – Worth it or not? posted at The Happy Rock.

Aaron presents Surround Yourself with Positive People | Where You Are Now posted at Where You Are Now.

pfincome presents Frugal Birthday Party Tips posted at Passive Family Income.

PT presents Start Saving Money for Holiday Expenses posted at Prime Time Money.

INVESTING

Check your credit report once a year and before major purchases to make sure there aren’t any ghouls lurking in it!

Raag Vamdatt presents Equity Investment is Risk Free – Here’s the Proof :: RaagVamdatt.com :: Financial Planning demystified posted at RaagVamdatt.com.

The Financial Blogger presents Decrease Your Management Fees In Your Investment Portfolio posted at The Financial Blogger.

Mac presents Top 10 Secrets of True Wealth posted at Actorlicious.

D4L presents Buying Stocks On The Rebound: Four To Consider posted at Dividends4Life.

Investing School presents Do Your Own Stock Analysis posted at Investing School.

The Shark Investor presents Is Investing A Big Fat Lie? posted at The Shark Investor.

Mike presents What Are Bonds? posted at ABC’s of Investing.

Ripe Trade presents 401k strategy Best seasonal period posted at Ripe Trade.

INCOME

Start planning for retirement early in your career or else you could be like the walking dead later on!

BTG presents BTG Basics: What Is A Debit Card? posted at Bridging The Gaap.

CAREER

Check prices online before a purchase to make sure a salesman isn’t sucking the life out of you!

David Wilson presents Job Search Tips posted at Leaving The Folks.

FMF presents Why You Should Take Practice Interviews posted at Free Money Finance.

ECONOMY

Stay out of debt as it can feel like King Kong is on your shoulders!

Andy presents US Dollar Rising and Outlook posted at Saving to Invest.

DEBT AND CREDIT

Seal up the leaks in your budget or it can sink like the Titanic!

Aryn presents How to Join an Adopt-a-Family Program posted at Sound Money Matters.

FIRE Finance presents Best Gas Credit Cards posted at FIRE Finance.

FRUGALITY AND SAVING MONEY

Two things in life are certain – Death and Taxes!

Kat presents SaveWater and $180/year posted at The Part-Time Life.

Tiffany Washko presents America’s Cheapest Family posted at Natural Family Living Blog.

jim presents » Top 5 Online Banks: Savings or Checking Accounts on Blueprint for Financial Prosperity posted at Blueprint for Financial Prosperity.

ChristianPF presents Drive slow = Save gas posted at Christian Personal Finance.

J. Money presents My cell phone broke in half, and then my battery died… posted at Budgets are Sexy..

Miss T presents Vintage Shoes: A Buyer’s Guide posted at Miss Thrifty.

So there you have it! Hope it wasn’t too scary. Make sure to check out next week’s Money Hacks Carnival hosted by Living Almost Large.

Federal Funds Rate And Your Savings

Written by Glen Craig 4 Comments

I’m sure most of you have heard a story on the news about the Fed (Federal Reserve) raising or lowering the Federal Funds Rate. Did you pay close attention to the story?

What the Fed says about the Federal Funds Rate will affect your savings!

What is the Federal Funds Rate?

The Federal Funds Rate is a target interest rate that is set by the Federal Reserve. It directly affects the interest rate that is charged to a bank when borrowing from another bank. Banks are required to keep a certain percentage of funds in reserve in Federal Reserve banks. When funds fall below the reserve percentage they must borrow overnight to bring their reserves up to the required percentage. If a bank has more than the required reserve then they can lend the money to other banks.

When the Fed changes rates what they are doing is implementing monetary policy which helps promote national economic goals. What this does is affect how available money is in the economy. When the rate is low money is “cheaper” and banks are more likely to lend money out to businesses so they can grow. When the rate is high banks are less likely to lend which leaves less money available for businesses to borrow.

But how does the Federal Funds Rate affect my savings?!?

When the Federal Funds Rate changes banks change the interest rates on their savings accounts and their CD rates. The bank interest moves in the same direction as the Fed Funds Rate so when the Fed rate goes up your savings rate goes up and vice versa.

If you’re like me and have savings in a high interest savings account then you love getting that email that says your rate is going up (and curse when it goes down). This is a direct result of the Fed rate changing.

So you see what the Fed decides to do can directly affect your savings!

If it’s the Fed that changes the rate then what can I do about it?

Not much.

The Fed doesn’t exactly take a vote from the general populace. But you can prepare for the change and act on news to help maximize savings.

Understanding trends in the Federal Funds Rate can help you decide when to buy CD’s and for how long. Let me give you an example: A couple of weeks ago there was talk that the Fed was going to cut rates to help keep money flowing for the economy. It was pretty much a given that the rate was going to be lowered which meant my savings account interest rate would lower too. What I did was take some of my savings and buy a couple of CD’s to lock in higher rates before the rates were cut. I bought a 6 month CD at 3.75% and a 12 month CD at 4.25%. Sure enough the Fed cut rates and my savings account went down from 3% to 2.75%. (One of the great things about some online banks is you can open a CD with any amount).

By paying attention to the Fed rate in the news I was able to get a better rate on my savings!

When you hear “Federal Funds Rate” on the news make sure you pay attention because your savings rate may be changing!

photo credit: swanksalot

What Are Your Kids Gift Expectations?

Written by Glen Craig 23 Comments

I hear some people complain that they have to buy expensive things for their kids because it’s what they expect. Some don’t know what they are going to do this holiday season as times are getting tight. How are we going to get little Johnny the latest (insert expensive popular toy here)?!?

Here’s what I say – Don’t!!

Where do your kids get their expectations from? Do they get them from friends? From television? Those are influences but not the real source. Children get their expectations from their parents!!

If you make it a habit to buy your kids expensive gifts for every occasion then you are setting yourself up for financial trouble! The younger you start the worse it will be. If you are already buying expensive items when the child is a toddler what are you going to do when they get older? How about when they are in their teens?

It’s tough to tell kids they won’t be getting all the goodies they are used to. But if your spending is putting you in debt or you don’t have an adequate amount for savings and retirement then you better re-think your holiday spending plans! Make your kids understand that they won’t be getting as much this year.

But all their friends are getting it!! Hmm. Are their friends paying your bills? Are they putting money away for retirement. Are they making sure the mortgage is on time? I didn’t think so. Teach your child to take pride in who they are not what they have. This lesson will be valuable for their entire life!

And you better practice what you preach!! Your child’s expectations come from watching you as well. Don’t think you’re getting that new flat-screen TV or expensive cell phone while they don’t get the goods. Parents must set the example for their kids. We are not our stuff!!

Say that to yourself – We are not our stuff! It’s important. Get this into your mind set and teach it to your children, not just by explaining but by setting the example.

I’m not saying don’t buy any gifts. But watch what you buy for your kids. Yes, they love getting stuff. I know I did as a kid. But what is the child really getting out of it? Are they using and loving the gift? Not just for a day but for months, maybe years? Or did they say it was their favorite for a few days then it joined all their other stuff in the corner? Do your kids really appreciate the gift? If your always buying them expensive stuff then your kids will start to see you a the person who will get them stuff. Not for the person you are! Think about that.

Stop the cycle of consumerism that hurts us in the end. You don’t have to buy your kids everything they want. Let them love you as the great parent you are rather than the person who gets them stuff. They won’t hate you if you don’t get them all the hottest toys. If they say they do then think about the values you are teaching them. We all want to make our kids happy but we need them to grow up responsible too.

photo credit: Gaetan Lee

What Is The Dow?

Written by Glen Craig 9 Comments

What Is The Dow Jones Industrial Average?

We’ve hear a lot about the Dow in the news. It goes up and folks are happy. It goes down and folks panic. But what is this mystical Dow that everyone is talking about?

The Dow actually stand for Dow Jones Industrial Average. It’s made up of the 30 largest and most widely held public companies. The average is a scaled average which is price weighted to account for stock splits. Although it only accounts for 30 companies, the Dow has historically been in line with the larger US market. For this reason it tends to be the most common indicator of the market in general.

The Dow was first published in 1896 and consisted of 12 companies:

American Cotton Oil Company
American Sugar Company
American Tobacco Company
Chicago Gas Company
Distilling and Cattle Feeding Company
General Electric
Laclede Gas Light Company
National Lead Company
North American Company
Tennessee Coal, Iron, and Rail company
US Leather Company
Unites States Rubber Company

Today’s Dow looks very different:

3M
Alcoa
American Express
AT&T
Bank of America
Boeing
Caterpillar
Chevron Corporation
Citigroup
Coca-Cola
DuPont
ExxonMobil
General Electric
General Motors
Hewlett-Packard
Home Depot
Intel
IBM
Johnson & Johnson
JPMorgan Chase
Kraft Foods
McDonald’s
Merck
Microsoft
Pfizer
Procter & Gamble
United Technologies Corporation
Verizon Communications
Walmart
Walt Disney

Update – On June 8, 2009 GM and Citigroup were replaced by The Travelers Companies and Cisco Systems.

When it started the Dow averaged 40.94. It’s recent high was 14,164.53 on October 9, 2007.

Why is it so important?

Since the Dow represents 30 of the largest US companies, changes in the stock prices of the Dow can be seen to represent the general health of US companies. Higher averages mean growth and profits while lower averages represent contraction and losses.

Do you follow Dow prices? Do you think it’s an accurate economic indicator?

photo credit: epicharmus

Causes Of Poverty – Blog Action Day 2008

Written by Glen Craig 23 Comments

To paraphrase Wikipedia, poverty is the deprivation of common necessities which determine the quality of life. In our age of Nintendo Wii’s, online banking, flat-screen TV’s, and more, poverty is still a huge problem in our world. Poverty affects about half of the world’s population.

Here are some of the main causes of poverty:

Environmental factors: This includes erosion, desertification and overgrazing, deforestation, drought, and lack of natural resources included fresh water and fertile land.

Economic factors: Unemployment; food prices; capital flight; unfair property laws; and unfair trade.

Health factors: Inadequate access to health care, poor nutrition, disease, and substance abuse.

Government factors: Lack of democracy; weak rule of law; poor resource management; corruption.

Demographic and social factors: Overpopulation; crime; cultural causes; war; discrimination.

About half of the world population suffers from poverty!

What can we do?

Kiva.org is an organization that provides micro-lending to the working poor. In impoverished nations it’s very difficult to get loans. Kiva helps by giving small loans so people can improve their livelihoods.

End Poverty 2015 Millennium Campaign – In 2000 189 world leaders made a promise to meet the eight-point development goals to help end poverty by 2015. Check out the goals and what you can do to help achieve them.

This post is part of Blog Action Day 2008. Blogs from all walks of life are getting together to discuss poverty and what can be done to end it. Go check out the Blog Action Day site and the participating sites.

Poverty can be wiped out if we want it to. It’s up to us to push that goal!

photo credit: jamesfischer

I’m Saving By Bringing Lunch To Work

Written by Glen Craig 17 Comments

So as you know, we’re living off of one income now as my wife took off from her education job to stay home to raise the kids. We’ve been looking for all sorts of ways to cut expenses to make my salary stretch a little farther.

One thing I’ve started to do is bring lunch to work a few days a week.

I work in NYC. I don’t tend to go too crazy on lunches in general. I tend to stay away from the expensive restaurants. This was a habit before we were on one income. But the costs of eating in Manhattan do add up anyway. A sandwich is easily $5 at least if I go to a small deli. More if I go to a bigger establishment. Salads cost at least $7. One thing to note is that I don’t eat at fast food places such as McDonald’s, Subway, or Wendy’s. I could get cheaper lunched there but I gave up that food long ago. I try to keep my eating healthy. It could cost more at times but I think the payoff to my health is much greater in the long run!

So now my wife has been making lunch for me around three times a week. If I would have spent $5 on lunch then that saves me $15/week. That’s around $60/month or $720/year! And that’s if I only spent $5. I’m saving more if my lunches were more expensive on those days.

I also don’t buy any beverages for lunch. We have a coffee machine and water cooler at work which I use instead. This also goes back to eating healthy since I wouldn’t buy soda or sugar drinks anyway.

So there’s one way we’re making our money stretch. I’ll be telling you about others ways in future articles.

How do you stretch your money?

photo credit: the prodigal untitled13

Best Financial Advice You’ve Received

Written by Glen Craig 22 Comments

There’s a meme going around that I saw at The Digerati Life who got it from Sound Money Matters. It’s basically asking everyone to answer:

What’s the best financial advice you ever received?

Probably one of the best pieces of advice I received was from my dad. When I go my forst credit card he told me to be careful and not go into debt with the cards. “Pay off your balances every month,” he said. Unfortunately I was young and headstrong and had to learn mistakes the hard way. I’d go onto opening numerous credit cards – Macy’s, Bloomindale’s, two CitiBank cards, and others.

At first I was real good with my cards and paid them off. But as I got older with more responsibilities the balances started to grow (that and I couldn’t keep my hands off buying “stuff”). In the end I had debt in the thousands. I was able to slowly pay everything off with a little help from my family as I moved back in with them for a while.

I was foolish for not taking my dad’s advice to heart. I’m sure many people out there have a similar story. They know what the right thing to do is but somehow their credit card debt got out of hand anyway.

If you’re one of these people – You can get out of debt! It may take a while but small steps will lead to big changes over time in paying back your cards. Start now!

If you’re not in credit card debt then make sure you stay that way! Be responsible with your charges and make sure you can pay back everything once the bill arrives.

I’m not one of those who thinks that credit cards are evil. The mistakes I’ve made with them I take full responsibility for. They can be very useful in fact. But you have to be responsible with them.

I’m tagging the other members of the Money Life Network to answer the question: What is the best financial advice you ever received? (MiB Smarter Money, Bible Money Matters, Sense To Save, Remodeling This Life, Prime Time Money, and Milk Your Money).

If you’re reading this then consider yourself tagged too! Write about it or drop a comment here.

What’s the best financial advice you ever received?

photo credit: mikebaird

We Got Our Insurance Deductible Back

Written by Glen Craig 5 Comments

Some years ago we got into a car accident.

Fortunately I called the police and had the officer file a car accident report. As a result, a full report of the accident was on file for my insurance company to use in their case against the person who hit us. If we didn’t have a report on what caused the accident, the other driver, then we would have been responsible for the deductible.

Not calling the police would have cost us $1000!

How is that possible? The other driver rear ended us putting the fault of the accident on him. Without that police report stating what happened, and that the other driver got a summons for driving too close, then we would have shared the blame in the accident. That would have meant we’d have to pay our $1,000 deductible.

A little while after we repaired the car from the accident we got a check in the mail from the car insurance company for $1,000.

Whew! Everything worked as it was supposed to and we got our insurance deductible back.

Our insurance company paid for all of the repairs but we had to pay $1,000 of the repairs out of pocket. I was afraid everything would drag out and it would take even longer to get the deductible back. Or even worse, something would happen and we wouldn’t get it back. In fact the collision company that fixed our car stressed that we should firmly follow up with our insurance since some companies keep the deductible. You always hear about some paperwork SNAFU that causes you to not get your insurance money. Thankfully our insurance was great and they paid us back without any problems.

So you understand, our insurance takes all of the information about the accident and basically sues the other driver’s insurance company for the damages. The success of the case determined whether we got our deductible back. If our insurance couldn’t win it back then we wouldn’t get it back either. Fortunately that wasn’t the case. A big part of that was having a police report saying the other driver rear-ended us.

Some of you might wonder why our deductible was so high?

I set it up that way with my insurance so I would have lower payments. Since we had the $1,000 socked away we could afford to have a high deductible. A higher insurance deductible is a great way to save on your car insurance.

This is a great example of why it’s important to have adequate savings! If I couldn’t back up the deductible I’d be paying higher insurance OR I might have to find the money somewhere else such as a credit card. That would not have been good.

If you are going the higher deductible route to save on your car insurance make sure you have that deductible handy in savings.

So to recap: Make sure you have the police at a car accident. And raise your car insurance deductible as much as you can afford in order to get lower car insurance payments. Also have enough savings to cover your deductible should you ever need to pay it.

photo credit: curly_exp( l)osure