Thu 2 Jul 2009

5 ways to slash theme park costs

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DSC03799A single day at a theme park can cost you hundreds of dollars, especially if you don’t plan ahead. To make sure you get more fun for the buck:

Buy your tickets in advance. You can almost always get a discount, and at the very least you can skip one of the many lines by buying and printing your tix at home. Check MouseSavers and Theme Park Insider for the current deals. If your trip is totally spontaneous, whip out your membership cards–AAA, AARP, whatever–at the ticket booth to see if you can win a discount.

Bring snacks. Theme parks vary on their policies about outside food, but most will you bring in a reasonable number of drinks and snacks, as long as you’re not hauling a cooler. Speaking of which:

Consider stashing a cooler in your car. Fill it with lunch fixings, and repair to your car rather than an overpriced restaurant at lunch and dinner times.

Buy your souvenirs elsewhere. If there’s a Wal-Mart near the park, chances are it will carry related merchandise. You can also find discount Disney souvenir stores near both the Anaheim and Orlando parks. If you must buy souvenirs, shirts and caps at the park, do so at the end of your trip, when you’ve had a chance to view all the available options.

Give your kids their own money to spend. Otherwise, you’ll be nagged all day long for treats and souvenirs. Give them $10 or $20 with the understanding that when that money is gone, it’s gone.

For more, read:

The penny-pincher’s guide to theme parks

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Wed 1 Jul 2009

Room for debate: Is graduate school worth the cost?

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3291964121_310d92bed9How do you know if a graduate degree is worth the cost? I’m one of four experts who take a shot at answering this question at the New York Times’ Room for Debate blog.

My take:

In some fields, such as business or engineering, a graduate degree typically boosted income by more than enough to justify the cost. In others — the liberal arts and social sciences, in particular — master’s degrees didn’t appear to produce much if any earnings advantage.

If you have to borrow to pay for extra schooling–as the majority of graduate students do–you should research your likely earnings your first year out of school and use that as your guide for how much to borrow.

For more, read:

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Wed 1 Jul 2009

Health reform has significant public support

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107946390_e957d5d809Some key findings from the 2009 Health Confidence Survey from the Employee Benefit Research Institute:

  • Between 68 percent and 88 percent of Americans either strongly or somewhat support health reform ideas such as national health plans, a public plan option, guaranteed issue, expansion of Medicare and Medicaid, and employer and individual mandates.
  • Those experiencing health cost increases (53% of those with insurance) tend to say these increases have negatively affected their household finances. In particular, they indicate that increased health care costs have resulted in a decrease in contributions to a retirement plan (32 percent) and other savings (53 percent) and in difficulty paying for basic necessities (29 percent) and other bills (37 percent).
  • Many consumers report they are changing the way they use the health care system in response to rising health care costs. Seventy-nine percent of those who experienced increases in the amounts they are responsible for paying under their health insurance plan say these increased costs have led them to try to take better care of themselves, and 77 percent indicate they choose generic drugs more often. Sixty-seven percent
    also say they talk to the doctor more carefully about treatment options and costs and 64 percent go to the doctor only for more serious conditions or symptoms. One-quarter (25 percent) also report they did not fill or skipped doses of their prescribed medications in response to increased costs.

Clearly, many American households are trying to do what they can to contain health care costs–even if that means endangering their health.

We’re pretty much hitting the limits of what individual effort can do. It’s time for lawmakers to step up and create affordable, universal coverage.

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Tue 30 Jun 2009

Keep after your lender if you’re refinancing with a HELOC

Posted by lizweston under Credit & Debt, Q&A with Liz, Real Estate
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Dear Liz: I’m in a potentially bad situation with my home equity line of credit. I’m trying to refinance my primary mortgage and would save nearly $150 a month. But the HELOC lender is dragging its feet on agreeing to a subordination. If the lender doesn’t agree, I lose the deal. I’m wondering why the lender does not believe it to be in its interest to help when I am trying to improve my financial situation. Can you give me some insight into the line of thinking here?

Answer: Unfortunately, many would-be refinancers are in your uncomfortable position. They have a second mortgage, such as a home equity line of credit, on their property. These loans are known as “seconds” because the lender is in second position to be paid off when the home is sold, after the primary lender has been paid.

For a refinance to proceed, these HELOC lenders have to agree once again to be subordinated into second position. Some lenders balk because they don’t believe their borrowers have sufficient equity to cover both loans (even though, as you note, a lower payment on the first mortgage could make it more likely that the borrower could make payments on the second).

But a bigger problem seems to be lack of staff and lack of priority. Lenders are so busy trying to meet the demand for refinancing that other concerns, including subordination, often fall to the bottom of their to-do list.

That means you have to be extremely vigilant if you don’t want your refinance deal to fall apart. Call your new lender and your HELOC lender every few days to track the progress of your subordination. If there are problems or missing paperwork, promptly address those issues.

If your rate lock is within two to three weeks of expiring and your subordination still hasn’t been approved, call your HELOC lender and politely ask that your request be given top priority.

If you can’t get through to the subordination department’s main line, ask the phone reps if there is a fax number or e-mail address you can use. If all else fails, take your problem to the bank’s chief executive. You’ll find the name and address online.

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Tue 30 Jun 2009

More on FICO effects from a short sale

Posted by lizweston under Credit & Debt, Credit Scoring, Q&A with Liz, Real Estate
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Dear Liz: I’m curious about your recent answer to the folks asking about a short sale. In it, you said, “Short sales . . . typically harm credit scores as much as foreclosures do.” As a real estate professional, I am under a different impression.

Certainly, in financial distress, one’s credit score takes a beating, but I don’t believe there is a code or classification for short sales on credit reports. We generally encourage short sales when possible as we feel short sales allow a debtor to get back on their feet quicker. I’d appreciate other data if you have it, as this would change how I educate clients. I do think we may see some changes in the future. As the number of short sales increases, we may see some way to note such transactions on credit reports.

Answer: The information about how credit scores are affected by short sales comes directly from FICO, the company formerly known as Fair Isaac Corp., which created the leading credit scoring formula.

You’re right that the formula has no specific code for a short sale, which is when the lender agrees to accept the proceeds of a home sale as full payment of a mortgage, forgiving whatever additional balance is owed. But most lenders report short sales as a debt settlement, which has a strongly negative effect on credit scores.

In many cases, the borrowers’ scores were already trashed by late payments and by the notice of default, which is filed by a lender after several skipped payments. A settlement notation or a foreclosure just makes a bad situation worse.

But you may have a good point about the debtor potentially being able to bounce back faster with a short sale. The foreclosure process can drag on for months, and sometimes more than a year, with each missed payment causing additional damage to the borrower’s score. Arranging a short sale may help a borrower put an end to the credit damage so he or she can start the long road back to better scores.

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Tue 30 Jun 2009

Parents, write your wills

Posted by lizweston under Liz's Blog
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Guardian angel

Guardian angel

There may or may not be a custody battle brewing over Michael Jackson’s kids. (His mother was granted temporary custody of the three, ages 7 to 12, and is seeking to make that permanent.)

But there may be a battle over YOUR kids if you die without a will or other estate document that names a guardian. Even worse: your kids could wind up in foster care.

Sometimes parents put off this necessary chore because the partners can’t agree on a guardian, or simply because they don’t want to deal with the possibility of their own deaths. Get over it. Your children are the ones who will suffer if you don’t get your act together.

Quicken WillMaker costs $40 and will give you the legal documents you need. If your estate is complicated or you have contentious relatives, you may want to invest in the services of an experienced attorney.

But do it now. Don’t leave it to fate, or the courts.

For more, read:

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Fri 26 Jun 2009

Are you on target–or totally missing the point?

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target_bigturkeythumbTarget-date funds can be a good choice for people new to investing, or those who simply don’t want to mess with the details of picking asset allocations and rebalancing their portfolio. Many big-company 401(k) plans now offer target-date funds, as do most big mutual fund companies and brokerage firms.

These funds do all the heavy lifting for you, gradually adjusting the investment mix over time so you take less risk as you approach your “target date”–typically a year near when you plan to retire.

But apparently a lot of people have misconceptions about target-date funds and what they can accomplish.

Behavioral Research Associates interviewed 250 Americans and found that many thought the investment option offered some kind of guarantee. For example:

•    Over 60% of employees say that investing in target-date funds means they will be able to retire on the target date.
•    38% think target-date funds offer a guaranteed return.
•    30% of workers think they can save less money and still meet their retirement goals if they invest in a target-date fund.
•    Over 23% of workers believe that there is little to no chance that they will lose money either before or after the target date.
•    41% think there is little to no chance of losing money in any one-year period, and
•    70% think they are equally as likely or less likely to lose money in any one-year period, as compared to investing in money market funds.

Obviously, none of these misconceptions is true. Target funds adjust your risk over time, but they certainly don’t eliminate it. Even when you approach your retirement date, your target fund may still have half or more of its assets in stocks.

That doesn’t mean you should bail on your target-date fund, but–as with all investments–you should understand the real risks and rewards.

You can CLICK HERE to read the researchers’ comments to the SEC and Department of Labor about their findings.

For more on this topic, read:

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Thu 25 Jun 2009

What percent of U.S. households are in financial trouble?

Posted by lizweston under Liz's Blog
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foreclosedhomeOne of the reasons I hate the bogus statistic that “the average American has $9,000 in credit card debt” is that it paints such an inaccurate picture of U.S. household finances. (In reality, more than half of American households have no credit card debt, according to the Federal Reserve; the median owed for those that do was $3,000.)

But clearly, plenty of people have big problems with debt, and finances in general. Here are just some of the relevant stats:

  • 3.1 million households started the foreclosure process last year, and 861,664 families lost their homes, according to RealtyTrac.
  • Over 1 million personal bankruptcy cases were filed in 2008, and the American Bankruptcy Institute predicts 1.4 million more this year.
  • 14.5 million people were officially unemployed in May, for an unemployment rate of 9.4%. Some economists expect that rate to peak at just over 10%.
  • About 15% of U.S. households, or 17 million families, funneled more than 40% of their incomes toward debt payments in 2007, the latest year for which Federal Reserve statistics are available. The 40% mark is considered a “compelling indicator of distress” by the Fed.
  • 28% of U.S. households had “no spare cash” after paying bills in 2005, an ACNielsen poll found.
  • About 46% of U.S. households carry credit card debt, according to the Fed. Card debt seems to peak among households headed by people in their 40s; of that group, 14.3% owe $10,000 or more.

To me, the two most worrisome stats are the 15% that owe 40%, and the 28% that live paycheck to paycheck. These are the households who were living on the edge before the recession, and are most likely to tumble off.

My gut feeling is that about a third of U.S. households are in financial distress; for about half of those, the distress is acute.

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Wed 24 Jun 2009

Couples need to be in sync on money, retirement

Posted by lizweston under Liz's Blog
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fidelityCommunication about finances is one of the keys to a happy marriage, as I wrote in “7 steps to take before you wed.”

Unfortunately, most of the couples recently surveyed by Fidelity Investments are falling short, at least when it comes to their own finances.

More than half of the older, affluent couples (aged 45 and up, with incomes of $75,000 and above) surveyed said that one of the best pieces of advice they would give to newlyweds is to make all financial decisions together. But fewer than half (45 percent) of the same couples reported making decisions jointly about day-to-day finances. Only 15 percent of couples feel confident that both of them could assume responsibility for their joint finances if necessary.

These couples often weren’t on the same page about their retirement finances, either. Key findings:

  • 60 percent of couples do not agree on their retirement ages
  • Almost half don’t agree on whether they will continue to work in retirement
  • More  than 40 percent don’t agree on their expected retirement lifestyle

Time to start talking to each other and working things out. You need a plan that both of you can agree with and understand. Here are some of my columns with tips to get you going:

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Wed 24 Jun 2009

Living paycheck to paycheck? Knock it off

Posted by lizweston under Banking, Budgeting, Q&A with Liz, Saving Money
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Dear Liz: Like many Americans, I often must scramble to make ends meet between paychecks. I vigilantly monitor my account online, and when my balance is getting low, I curb my expenses as best I can.

Recently, I have had an overdraft experience that leaves me wondering about ethics and legalities. It was three days from payday and I had about $45 in my account.

I made four purchases under $10. Then a $54 automatic payment came through that I could not reschedule. One would think I would then be charged one overdraft fee, as all of the previous purchases made were within my available funds at the time.

I logged in today to find that the bank cleared the largest transaction first, which threw all other small transactions into overdraft. I was charged five overdraft fees because of this rearrangement of clearance order. I talked to a customer service manager who said that nothing could be done.

Essentially, it appears that the bank is manipulating transactions to capitalize on overdraft fees. This strikes me as unethical, and I wonder if I have any rights in this situation? Aside from getting a better job and making more money, what can I do to protect myself?

Answer: Of course the bank is manipulating your transactions to increase its fees. Most banks do. Lawmakers and regulators have questioned the practice, but so far it’s not illegal.

What you can do to protect yourself is to stop living paycheck to paycheck. That may sound like a flip answer when you’re on the financial edge, but you’ll never get ahead as long as a $54 overdraft can throw your finances into chaos.

Having just a $500 cushion in the bank can reduce not just bounced-check fees but also worry, sleeplessness and lost productivity at work, according to a savings review by Stephen Brobeck, executive director of the Consumer Federation of America.

How do you get a cushion? Try a “no spending” month. Limit your purchases to true essentials. Eat out of your cupboards instead of at restaurants. Entertain yourself at home or at the library. Most people can raise at least a couple hundred dollars this way, which you could supplement by having a yard sale and selling unneeded items online.

If you want more ideas, there are a wealth of frugal-living websites; start with one of the oldest, the Dollar Stretcher, at www.stretcher.com.

You also need to limit the bank’s ability to swamp you with “gotcha” fees.

First, sign up for true overdraft protection. Banks often automatically enroll you in an inferior substitute, called “bounce protection” or “courtesy overdraft.” These programs allow the banks to approve over-limit transactions and charge you $30 or more for each one.

True overdraft, by contrast, links your checking account to another of your own accounts: typically a savings account, line of credit or credit card. If your transaction exceeds your balance, the money is drawn from one of these accounts. You’ll pay an annual fee of around $50 and possibly a $10 per transaction fee, but the costs for making a mistake will be substantially lower than under bounce protection.

If the bank won’t approve you for true overdraft, ask it to stop approving over-limit transactions. If it won’t, take your business elsewhere.

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