Liz’s Blog Category
A big storm is threatening the East Coast, and my buddy Elizabeth Razzi had some good advice yesterday for getting ready:
“From my experience, most important prep includes doing ALL the laundry, making milk jugs of ice for the fridge, clearing leaves from drains and having a good supply of ground coffee for the French press.”
At the same time, Ann Carrns over at the New York Times’ Bucks blog was wondering about “Keeping Cash on Hand, Just in Case.” Carns asked whether it might be prudent to have a stash of green in case hackers took down an ATM network. Of course, the more likely scenario is that nature will be the culprit: hurricanes, floods, earthquakes, blackouts and other disasters can make getting cash tough.
I’ve kept a stash of cash handy ever since I lived in Alaska, land of extreme weather and earthquakes. Up there, I also learned to keep a two-week supply of food, water and fuel at home, to carry emergency supplies in my car and to always keep the car’s gas tank at least half full. (You can learn more about emergency preparedness at www.ready.gov, among other sites.) Our supplies include camp stoves for cooking, since both gas and electric lines can get disrupted. You can get single-burner camp stoves for about $20 and propane cylinders for around $5.
We’re so used to modern conveniences, from a ready supply of electricity to a steady supply of ATM cash, that it can be hard to imagine what we’d need to survive life for several days without them. If you’ve ever flipped on a light switch when you knew the power was out, you know what I mean—our brains really aren’t wired for disaster. But taking a few minutes to gather some supplies, check flashlight batteries and tuck away a little cash can make getting through any disruption, by nature or otherwise, a lot easier.
What emergency preparations have you made? What do you still need to do?
Back in June I wrote a post about “How to get free summer travel.” I’d arranged a 5-day trip with my daughter to the Pacific Northwest using a variety of rewards programs. The trip, which we took over Labor Day weekend, was a heck of a lot of fun. Like most vacations, it wound up costing a bit more than planned but I also learned a few things.
Including:
Re-price your reservations before you go. I checked both hotel and car reservations a few days beforehand to see if prices had dropped. They hadn’t at the Doubletree in Portland, which was in fact sold out. But the rates at Enterprise car rental fell like a rock. Plus, Enterprise emailed me a last-minute 10% off coupon for being part of its frequent traveler program. My cost for the two-day car rental went from over $100 to just $37. I love that.
Don’t try to make a same-day connection on Amtrak. We took the sleeper car up from Los Angeles, and the train fell waaaaay behind schedule–five hours, in fact. That was good news for us, since we got to see some gorgeous scenery around the California-Oregon border that would normally pass by in the dark. Passengers who were trying to make a connection to the Empire Builder, the train that goes from Portland to Chicago, weren’t so happy. They had to get off in Klamath Falls and ride several hours on a bus to meet the other train. If I were to book an Amtrak trip that involved a connection, I’d try to arrange it so that we had an overnight stay in between.
Portland’s public transportation is awesome. There was a light-rail MAX station right outside our hotel, and it took us everywhere we wanted to go while we were in town, including the Saturday Market and the zoo. A day pass for an adult was just $5. Parking at the zoo alone would have been $4, and a hassle, since there are limited spaces. When it was time to leave, I took the red line out to the airport to pick up our rental car–easy peasy.
Check out the artist/farmers markets. Speaking of the Saturday Market: I was blown away by many of the vendors there. This weekend market along the river features some really skilled craftsman offering handmade stuff at reasonable prices. I stocked up for Christmas.
Splurge a little. My daughter’s a huge fan of the Great Wolf Resort and its indoor water park south of Olympia. The rates in the summer can be steep, but my sister and I decided to split the cost of a Kid Cabin room with bunk beds. That way, we got to spend more time together, our kids had a ball and we were each out of pocket $160 rather than $320.
Peach fritter with cream cheese? Might want to skip that. My friend Michelle Rafter suggested we meet at VooDoo Donuts for a treat. Yes, the long wait was worth it, but no, I don’t think I’d order the peach fritter again–it was almost as big as my head. Next time it’ll be the maple bacon donut, for sure.
Do you have questions about money? Here’s a secret: we all do, and sometimes finding the right answers can be tough. My new book, “There Are No Dumb Questions About Money,” can make it easier for you to figure out your financial world.
I’ve taken your toughest questions about money and answered them in a clear, easy-to-read format. This book can help you manage your spending, improve your credit and find the best way to pay off debt. It can help you make the right choices when you’re investing, paying for your children’s education and prioritizing your financial goals. I’ve also tackled the difficult, emotional side of money: how to get on the same page with your partner, cope with spendthrift children (or parents!) and talk about end-of-life issues that can be so difficult to discuss. (And if you think your family is dysfunctional about money, read Chapter 5…you’ll either find answers to your problems, or be grateful that your situation isn’t as bad as some of the ones described there!)
Interested? You can buy this ebook on iTunes or on Amazon.
This may be a first: I’ve been cited to the Supreme Court.
Specifically, a column I wrote back in 2006 about “zombie debt” was cited in a brief filed by AARP, the Consumer Federation of America, the National Association of Consumer Advocates and other good folks for a case known as Marx v. General Revenue Corp. The case is about whether someone who lost a lawsuit against a collector can be forced to pay damages if the lawsuit wasn’t filed “in bad faith and for purposes of harrassment.”
Olivea Marx sued debt collector General Revenue Corporation after it contacted her employer to find out about her employment status. Marx believed that General Revenue’s action violated the Fair Debt Collection Practices Act. She lost, and the U.S. Court of Appeals for the 10th Circuit ruled she had to pay more than $4,500 to cover the collector’s legal costs.
The Federal Trade Commission, the Department of Justice and the Consumer Financial Protection Bureau also have weighed in against the decision, saying it was inconsistent with the FDCPA, which says people who lose cases against collectors must pay defendants’ litigation costs only if the consumers sued in bad faith or for purposes of harassment.
Collectors complain about frivolous lawsuits. Consumer advocates counter that more lawsuits would be filed if people truly understood their rights. The AARP/CFA brief notes that there isn’t much regulatory enforcement of fair debt collection practices laws, which leaves private action in the form of lawsuits brought by consumers. Debt collection already tops the list of industries that draw FTC consumer complaints; imagine how much bolder collectors might be if they could win damages against anyone who sued them and lost.
This post won’t be relevant to the vast majority of you. But if you’re rich or have rich parents, listen up.
There’s a window of opportunity right now to reduce future estate taxes by moving money out of large estates. People who don’t take action could be missing a chance to save their heirs a bundle.
Here’s the deal: Currently, the estate tax exemption limit and the gift tax exemption limit are both $5.12 million. Both are scheduled to revert to $1 million after Dec. 31.
What that means is that wealthy people can give over $5 million away (over $10 million for a married couple) without owing any gift tax on that transfer. Such gifts can reduce the size of the wealthy person’s estate, so that the estate tax bill will be lower when he or she dies.
The money can be given away directly, or put into certain kinds of trusts. Any good estate planning attorney can outline the possibilities. If you’re planning to pass money to your kids, or a business, or real estate, it’s worth reviewing these.
Interestingly, a recent survey from U.S. Trust found two-thirds of the wealthy folks it polled hadn’t taken advantage of this opportunity and didn’t plan to do so. The survey respondents all had a minimum of $3 million in investable assets, with 31% having $5 million to $10 million and 32% having more than $10 million.
Now, it’s possible that Congress with pass some kind of patch or extension of the current exemption limits. It hasn’t been able to agree on much late, of course, but that can always change.
Still, if you’re concerned about estate taxes, it would make sense to meet with both a fee-only financial planner (to see if you can afford to give money away) and an estate planning attorney to see if it makes sense to pass some money along to your heirs now, rather than waiting until death.
“If you can save for college, you probably should.”
That’s the mantra I’ve chanted in columns, speeches and interviews over the years. An article in today’s Wall Street Journal shows a lot of upper middle income parents aren’t listening, gauging by the amount of student loan debt they’re taking on. What the Journal found:
- Among households with annual incomes of $94,535 to $205,335 (80th to 95th percentile of all households), 25.6% had student-loan debt in 2010, compared to 19.5% in 2007. Among all households, 19.1% had education debt in 2010 compared to 15.2% three years earlier.
- The amount borrowed by upper middle income households rose to $32,869 from $26,639, after adjusting for inflation.
- Fat student loan bills are no longer an anomaly. More than three million households have a student loan balance of $50,000 or more. That compares to about 794,000 in 2001 and less than than 300,000 in 1989, after adjusting for inflation.
The Journal threw in another statistic: More than one in three households with incomes of $95,000 to $125,000 who had a child entering college in 2011 didn’t save or invest for that child’s education, according to a survey by Human Capital Research.
Here’s the deal: A child’s financial aid package will be based in large part on what the parents earn. If they have a six-figure income, or close to it, the kid won’t get much help. Colleges expect that if you have that much income, you should have been saving some of it for education–whether or not you actually did.
Even families with lesser means could find they’re getting a lot less help than they expected, with much of it coming in the form of loans rather than grants.
Either way, that means the parents, the kid or both could be taking on a lot of debt.
The Journal suggested that this burgeoning debt may lead more families to more carefully consider cost and value when considering colleges, something that “could make it difficult for all but the most selective schools to keep pushing through large tuition increases.”
We’ll see about that. In the meantime, if you’re lucky enough to have a decent income, consider putting at least some of it aside for your kids’ educations. Do it even if you won’t be able to pay for everything, or you want your kid to be mostly responsible for the cost. Every dollar you save is a dollar your child–or you–won’t have to borrow later.
Shopping for auto insurance is still a pain in the butt.
I’d hoped it would be better by now. I’d hoped that the Internet would make the whole process more transparent. But you still have to check several Web sites and pick up the phone to call a few agents to get a truly comprehensive picture of what various insurers are charging. Some of the big companies don’t participate with online comparison services (which is why you have to visit their sites and, often, talk to an agent to get a quote).
Why would you go through the hassle? Because the differences in premiums can be huge–not just hundreds of dollars a year, but thousands.
That’s because insurers are all different. They have different policies and ideas about what poses a risk and how much of that risk they want to take. If they don’t want teen drivers, for example, they will make it extremely painfully expensive to add one. Other insurers will just make it painfully expensive.
Insurers also adjust their pricing to add or shed customers. If they want to get bigger in a certain market, they’ll chop their prices to attract more drivers. If they decide they’ve gone overboard, they will jack their premiums above their competitors to slow new applications. If you’re a long-time customer who doesn’t know any better, you could find yourself paying a lot more for the same basic coverage than you’d pay with one of those competitors.
If you want some incentive to start getting quotes, check out CarInsurance.com’s Rate Comparison Chart and then read Des Toups’ accompanying post, “The most and least expensive cities for car insurance.” The average premiums cited conceal a lot of variation, Des noted.
For example, the average rate from six major insurance carriers for ZIP code 48101 in Dearborn, Mich., was $2,522 — but that included rates as low as $1,776 and as high as $4,374.
Des ran the numbers for a ZIP Code closer to me–90025, or West Los Angeles. There the average was $1,915, but the range was from $1,106 to $3,136.
Price isn’t the only thing to consider, of course. How fast and how well the company handles claims matters a lot, too. Your state insurance commissioner may have complaint data that will help you figure out which companies to avoid, like this one at California’s Department of Insurance. The number to pay attention to is the “justified complaint ratio” which divides legitimate complaints by the number of policies the insurer has in the state. Just as there are big difference in price, there are also big differences in complaints.
In any case, you shouldn’t assume you’re getting the best deal. Every year or two, check around to make sure.
The conventional wisdom—that people who file for bankruptcy are deadbeats who choose not to pay their debts—is typically dead wrong.
Ask any bankruptcy judge or trustee. Most people who file for bankruptcy don’t do it as a first resort. Most people, in fact, put off filing for far too long. They struggle for years with impossible debts, often draining retirement funds or home equity in vain attempts to satisfy their creditors. The tragedy is that the money they’re pulling from their IRAs or their homes would be protected from those same creditors if they had filed for bankruptcy sooner. But they try to do the right thing, and as a result wind up far worse off than they might have been.
Add up all your unsecured debts. Unsecured debts include:
- Credit card debt
- Medical bills
- Unsecured personal loans
- Loans from friends and family
Unsecured debt does not include auto loans, mortgages or student loans.
If your unsecured debts equal half or more of your current income, then you should make two appointments:
- Visit the National Foundation for Credit Counseling and set up an appointment with a legitimate credit counselor. These folks can tell you if you may qualify for a debt management plan that would allow you to pay off your credit card debt within three to five years. Credit counselors try to help you avoid bankruptcy, so to get a complete picture of your options you should also:
- Visit the National Association of Consumer Bankruptcy Attorneys and get a referral to a nearby experienced bankruptcy attorney. The attorney can review your situation and let you know your options in bankruptcy court. Many of these attorneys offer free or discounted initial sessions.
Even if you’re determined to avoid bankruptcy, you should consult with a bankruptcy attorney about your situation if you’re being sued over your debts or your wages have been garnished to pay your debts. Once the courts are involved, you need a lawyer’s help.
Foreclosure, bankruptcy or a history of missing payments can send your credit scores into the basement. The good news: nothing is permanent in the world of credit and credit scoring. You can rehabilitate your scores over time if you know how.
Here’s what to do:
Pull your credit reports from all three bureaus. Check for errors and dispute any serious mistakes, such as accounts that aren’t yours or late payments being reported when you paid on time.
If you don’t have any credit cards, apply for a secured card. These cards give you a credit line that’s equal to the amount of cash you deposit with the issuing bank. NerdWallet recommends the Capital One Secured Card and the Orchard Bank Secured Card.
Use your cards lightly but regularly. Your charges shouldn’t total more than about 30% of your credit limit—10% or less would be even better. And you shouldn’t charge more than you can afford to pay off in full every month. Carrying balances doesn’t help your credit scores, and it’s expensive. So don’t do it.
Apply for an installment loan. Your credit scores will recover faster if you have a mix of credit, which means both revolving accounts (credit cards) and installment accounts (mortgages, auto loans, student loans). If you don’t already have an installment loan, consider applying for a personal loan from your local credit union. These member-owned financial institutions often have been rates and more flexible credit standards than traditional banks. Don’t belong to a credit union? You can find one you’re eligible to join here.
Pay your bills on time, all of the time. One skipped payment can devastate your scores. So can an account that’s charged off, or that’s turned over to collections.
You can track your progress by using a credit monitoring service that includes your credit score. Some sites, like Credit Karma, offer credit monitoring for free, although the credit score you get isn’t the FICO score most lenders use. To get your FICO, you’ll need to sign up with MyFico.com.
If you’re in the market to replace a vehicle, check out Edmunds.com’s list of 2012 Used Car Best Bets, which include:
Compact Sedan: 2005-2010 Hyundai Elantra
Midsize Sedan: 2005-2010 Nissan Altima
Large Sedan: 2006-2010 Hyundai Azera
Coupe: 2005-2010 BMW 3 Series
Convertible: 2005-2010 Mazda Miata
Wagon: 2005-2010 Pontiac Vibe
Compact SUV/Crossover: 2005-2010 Honda CR-V
Midsize SUV/Crossover: 2005-2010 Ford Explorer
Large SUV/Crossover: 2005-2010 Chevrolet Tahoe
Minivan/Van: 2005-2010 Honda Odyssey
Compact Truck: 2005-2010 Toyota Tacoma
Large Truck: 2005-2010 Ford F-150
Luxury: 2005-2010 Infiniti G35/G37
Hybrid: 2005-2010 Toyota Prius
Sport Compact: 2005-2010 Subaru Impreza WRX
Edmunds.com editors picked the cars based on reliability, safety, value and availability. The editors considered cars that were two to seven years old, which is pretty much the sweet spot for used car purchases.
Since all cars are used cars as soon as you drive them off the lot, you might as well let someone else take the depreciation hit. You can tens of thousands of dollars over your driving lifetime by buying slightly used cars. Save even more by paying cash and keeping them for 10 years or so.
For more details on Edmunds.com’s list, visit http://www.edmunds.com/car-