6 Ways to Save for the Holidays
October 12, 2009

During the holidays, it is so easy to get caught up in the spirit of the season and to overspend. So, here are my top 6 tips for planning ahead to stretch your dollar this season.

  1. Start Saving Now. How many paydays do you have until the week before Christmas? How much will you be able to save out of each one? Add that up to determine your cash budget. If you already have planned ahead with a Christmas account, good for you! Add that to your cash budget. This total represents what you can afford to spend without going into debt.

Resolve Not To Use Credit. How many times have you started a new year with debt from the holidays? Now is the time to steel yourself against impulse purchases, guilt gifts, and gifts for yourself. Make 2010 the year you don’t carry debt forward.

Make a gift plan (budget). How much will you allocate to each family member or friend? Divide up your funds so that you know exactly how much you can afford for each person. You may really want to buy your brother that new Blu Ray player, but can you afford it? Or should you be looking for something less expensive? Thinking through these purchases will really force you to stick to your budget.

Shop Smart. The key is to either shop early or shop last minute to get the best deals. If you can start early, you have the luxury of time, and can shop online. Google for coupons, and look for free shipping. Make sure to cross items off of your list as you find them.

Make Personal Gifts.  Typically less pricey than buying something, but it is appreciated just as much.

Make A New Gift Giving Tradition. This might be the year that you propose the adults in your family draw one name to buy for. Don’t be shy to suggest new ways to celebrate the holidays with your family. Now is the time to make these plans, though, before everyone else starts their shopping.

I promise that if you act now, you will spend less money and lose less sleep over the holidays.

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Debit Cards are the New Cash Cow for Banks
September 10, 2009

The Credit Card Act that took effect this year, coupled with the recession, has created a void where many fees have been collected in the past. What pays banks more than penalty fees on credit cards? You may be surprised to learn that it is overdraft fees on debit cards.

Debit cards have been marketed as similar to an ATM. When the money is gone, you can’t make a transaction. However, since most are now endorsed by Visa, banks are covering transactions, and charging large fees when the transaction occurs on a negative account.

What does this mean to you? Even if you don’t have the funds to cover a transaction, it may still be approved. In which case, be prepared for your bank to charge you $20 or more for that transaction. Those fees can easily add up to more than is possible to cover. If you, or someone you know, is in this situation, contact your financial institution. You may have to opt out of the provided overdraft protection. But it’s worth it.

Debit cards are becoming more and more like a checkbook. Which is why it is more important now than ever, to reconcile those accounts on a regular basis. In this age of electronics, many people are relying heavily on bank balances as an indicator of funds available. Make sure to keep your own check register, or log of what you have spent, so that you don’t fall victim to one of these fees.

For more about the debate in Washington, Click Here to read the New York Times article published this week.

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How to Pay off Debt: Comparing Popular Debt Reduction Methods
July 16, 2009

We all want to pay off credit card debt, and ideally be debt free. However, what is the best way to get there? I will compare two methods, and give you some feedback so that you can decide which debt plan works for you. Both of these scenarios assume that you are already paying the minimum for all cards, and can afford to pay additional money each month. I probably don’t need to mention this, but if you are struggling to pay the minimums, then that should be your primary focus.

1. The Snowball method works this way:

  • List your debts from the smallest balance to the largest balance.
  • Apply extra money to the smallest balance until it is paid off. For instance, if you have a debt of $150, with a minimum of $10, pay the minimum plus extra payments ($50 for example) until it is paid in full.
  • Use that missing payment amount (the minimum of $10 plus the additional $50 you were paying) to apply to the debt with the next largest balance.
  • When the second debt is paid, use the missing payments from those two debts toward the third.
  • Continue that process to continue to pay more and more towards the largest debts until the last one is paid.

2. The alternate method is to attack the debts with the highest interest this way:

  • List your debts from the highest interest rate to the lowest interest rate.
  • Pay extra money to the first debt until it is gone.
  • Use that missing payment toward the next debt on the list.

Take a look at the calculator I used for an actual comparison between the two approaches:

So, which method is right for you? Obviously, you can save more money by paying off the highest interest rate first. However, if you know that you struggle to stay motivated in your plan to pay off debt, the Snowball method will give you the personal satisfaction of accomplishing smaller goals. Either way, the fact that you are tackling your debt will be your ultimate reward. Click here to use my free calculator to compare these two debt strategies for your situation.

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