7 steps you should take before you wed

Hallmark cards tells us summer is the preferred season for weddings, with August now edging out June as the preferred month. (July’s next, followed by September, October, May, April, November, December, March, February and January.)

But today’s newlyweds face a dramatically different financial landscape than their recent predecessors, thanks to tighter credit, tumbling home prices and rising layoffs. The penalties for money mistakes are higher and recovery from those errors can take longer, so it pays to be careful.

If you’re thinking about getting married in these recessionary times, here are some suggestions for keeping your union on financial track and reducing money-related tensions that can help lead to divorce:

1. Review your credit reports together. Romantic date idea, it’s not. But visiting AnnualCreditReport.com together and reviewing your files from all three credit bureaus will ensure you both know what you’re getting into. Make a plan for paying off any toxic debt (such as credit cards and payday loans) and polishing up your credit scores.
2. Have a spending plan. Review your income and your expected bills as a couple. If your basic expenses–shelter, utilities, food, transportation, child care, insurance, minimum loan payments–will exceed 50% of your take-home, look for ways to trim. Discuss the mechanics of who will pay bills and from what account. Whether you have separate accounts, joint accounts or a combination matters less than that you agree on an approach, and have enough flexibility to change if your system isn’t working. (Many couples find putting one person in charge of paying bills works best, but the other person needs to be kept in the loop about the family’s financial situation with weekly or at least monthly updates.)
3. Track your spending. This is especially important if you share an account. You don’t want to wait until the end of the month to discover you’ve spent your income twice over. Desktop software like Money or Quicken can help, or use online trackers such as Mint, Wesabe or Quicken Online.
4. Make a commitment to honesty. Lying about purchases, having secret credit cards and hiding money or property isn’t okay; it’s financial infidelity that can undermine your marriage. But:
5. Consider a slush fund. Even if you combine your accounts, consider setting up an “allowance” so each partner has money to spend with no questions asked. The amount depends on your finances, but it should be enough to cover a few indulgences and maybe gifts for the other person. Trust me: fewer fights, more happiness.
6. Set a “discussion” point. It’s smart to discuss all major purchases together before you buy, but what constitutes “major” depends, again, on your financial situation. For some well-off couples, it might be any purchase over $500; for others, it might be anything over $50.
7. Don’t overspend on the wedding. It’s pretty simple, really: if you can’t afford to pay cash, you can’t afford it. Borrowing only makes sense if what you’re buying will eventually appreciate in value (such as a house) or allow you to increase your income (such as a reasonable amount of student loans or business loans). Weddings don’t qualify. If you don’t have the cash, save up until you do. If the wedding date’s already set for this summer, do some triage now to trim costs and make paying off any wedding-related debt a top priority.

For more, read:

• Financial infidelity is rampant
• Get real: marriage is a business
• Are your finances as strong as your marriage?
• The myth of the marriage penalty

Amex, US Bank battle over Northwest WorldPerks cardmembers

If you’re one of the million-plus people who have a Northwest Airlines WorldPerks credit card, take note: your plastic will soon be useless. The airline’s merger with Delta means the WorldPerks program will be going away by the end of August.

U.S. Bank, the WorldPerks issuer, is sending out replacement cards, but they’re not affiliated with the merged airlines’ frequent flier program. Instead, the so-called FlexPerks program will allow users to earn tickets on any one of 150 airlines. Just 20,000 miles buys a ticket, compared to 25,000 miles for most airline-affiliated cards, with no black-out dates.

Such travel rewards programs are often favored by less-frequent travels who prize their flexibility. But elite frequent fliers and others who want to maximize miles in the newly-merged airline’s frequent flier program might want to consider switching to the Delta SkyMiles Card from American Express.

This co-branded credit card allows users to earn Delta frequent flyer miles with their spending, just as the WorldPerks card used to allow them to earn Northwest miles. As an incentive, Amex is waiving the first year’s annual fee and offering 25,000 bonus miles to new cardmembers.

For more on choosing the right rewards card, read:

• 4 ways to snag the best rewards card
• 20 credit cards that pay you back
• The coolest credit card perks
• Credit cards with the happiest users

Is cell phone reform next?

One consumer group that represents senior citizens says cell-phone companies’ unclear and confusing calling plans, fees, penalties and disclosures should undergo the same scrutiny that credit card companies will now face.

Knowing that Congress was going to take a hard look at credit card companies and their billing practices, The Seniors Coalition commissioned a March 2-5, 2009 survey by Opinion Research Corp. The survey polled two groups of cell phone users  — 1,595 for some questions and 1,336 for other questions — and has a margin of error of +/- 3%. The survey found:

• 40 percent of Americans do not know what penalty they would pay if they canceled their cell phone service.  While this confusion extends to 60 percent of consumers aged 65 or older, it also includes 46 percent of those aged 45-54 and 49 percent of those aged 55-64.

• 48 percent of cell phone consumers either already are at the end of their penalty period (7 percent) or in its last 12 months (41 percent).  Depending on the cell phone company they are patronizing, many consumers can come out ahead if they switch to a better cell phone deal now and pay a small penalty for breaking a contract that has not yet expired.

• 54 percent say they use fewer minutes than they pay for every single month.  Seven out of 10 Americans say they go under on their minutes every month or “nearly every month.”

• When consumers were asked to estimate their minutes used each month, the mean was 228 minutes, including 252.5 minutes for contract-based phone users and 117.7 minutes per month for prepaid users.   According to one leading industry source, the amount of cell phone air time actually used by U.S. consumers averages a bit less than 550 minutes per month.

• Cell phones are now nearly as ubiquitous as credit cards, with 80 percent of American adults using cell phones, including 65 percent of those aged 65 and older.   Of all adults with cell phones with cell phones, 84 percent have contract-based phone service and 17 percent have prepaid phones. (The small overlap is accounted for here by people who have both types of cell phones.)

Consumers owe it to themselves to get the best deal. Here are some suggestions:

Make sure your plan fits your needs. If you consistently use fewer minutes, see if you can step down to a cheaper plan (although this may require agreeing to another two-year contract) or shop around at your carriers’ competitors for another plan. Phonedog.com and LetsTalk.com are among the many Web sites that specialize in comparing plans.

Consider a second-tier provider. Hate contracts but love a deal? Virgin Mobile and Boost Mobile both offer unlimited calling with no roaming charges and no contracts for $50 a month. These providers, along with Cricket and Metro PCS, are trying to win customers away from the big 4 (AT&T, Sprint, T-Mobile and Verizon) with better deals.

Go prepaid. Prepaid cell phones aren’t just for people with lousy credit anymore (folks with bad FICOs have trouble getting approved for typical cell carrier contracts). If you use less than 300 minutes a month, take a look at the pay-as-you-go options. This Consumer Reports post, “How to buy a prepaid cell phone,” can get you started.

Here are a few of my columns to check out:

• Yikes! Checked your cell bill lately?

• Is cell-phone banking safe?

• How to fight all those hidden charges

Some student borrowers luck out

If you still have variable rate federal student loans and haven’t consolidated, your procrastination is about to pay off.

Rates on Stafford and PLUS loans originated before July 1, 2006 are about to fall to historic lows, according to Mark Kantrowitz of FinAid.org. On July 1 of this year, rates on these loans will drop almost two percentage points. The new rates:

* Stafford Loan (In-School/Grace Period): 1.88%
* Stafford Loan (Repayment Period): 2.48%
* PLUS Loan: 3.28%

Borrowers who consolidate after July 1 will lock in the following rates for the life of their loans:

* Stafford Loan Consolidation (In-School/Grace Period): 2.00%
* Stafford Loan Consolidation (Repayment Period): 2.50%
* PLUS Loan Consolidation: 3.38%

So if you have these loans, and haven’t consolidated, get your application in to the Federal Direct Loan Consolidation program after July 1. Procrastinating any more doesn’t make much sense. You can wait a year until to see if rates drop lower, but that isn’t very likely, Kantrowitz notes.

If you’ve got a lot of debt, consider choosing a longer loan term when you consolidate (15, 20 or 30 years instead of 10) to lock in these remarkably low rates. Use the money you save to pay down other, higher-rate debt.

These rates don’t apply to Stafford or PLUS loans made after July 1, 2006, or to Perkins loans, all of which are fixed. You don’t want to include Perkins loans in any consolidation, Kantrowitz notes, since you lose the subsidized interest and forgiveness benefits these loans provide.

Hurricane season starts today. Are you prepared?

Weather forecasters are expecting fewer storms than last year, but it only takes one hurricane to wreck havoc on your property and finances.

Expectations are for 12 storms for the 2009 Atlantic season, including six hurricanes and two storms that could reach major status with Category 3 winds or higher. Some forecasters are also predicating more activity on the East Coast this year than along the Gulf Coast.

“Forecasts of an average season should not lead to complacency,” warned Jeanne Salvatore, senior vice president of the Insurance Information Institute. “An average hurricane season was also forecast in 1992 when Hurricane Andrew destroyed much of South Florida, causing more than $23 billion (in 2008 dollars) in property losses. The time to prepare is now.”

To prepare for a hurricane and other disasters, the insurance institute recommends the following:

Check your insurance coverage. You need enough insurance to rebuild your home and to replace all your personal belongings. If you have made a major alteration or improvement to your home or have made significant purchases, notify your insurance agent so that the increased value is reflected in your policy.

Check deductibles. Be aware that coastal residents have percentage deductibles for storm damage rather than the traditional dollar deductibles that are used for other types of losses such as fire or burglary.

Ask about flood insurance. Flood damage is not covered under most standard home insurance policies, as many Hurricane Katrina victims learned. Flood coverage is available from the National Flood Insurance Program (NFIP) and some private insurance companies. It can generally be purchased from the same agent or broker who provides your homeowners or renters insurance. Additional information on flood insurance can be found at FloodSmart.gov or by calling 888-379-9531.

Create a home inventory. An inventory helps ensure that you have purchased enough insurance to replace your personal possessions. It can also speed the claims process and substantiate losses for income tax purposes. A detailed home inventory is also helpful should you need to apply for disaster aid. (The I.I.I. provides free Web-based software at KnowYourStuff.org. Storing your inventory online gives you the ability to access it from any computer in the event your own computer is destroyed.)

Protect your property. Homeowners should secure loose roof shingles, seal openings, cracks and holes. Keep in mind that unsecured building materials or trash from partially completed homes could become airborne missiles impacting nearby buildings.

Plan your evacuation. Know where you will go and how you will get there. Try to have more than one option: the home of a friend or family member in another town; a hotel; or a shelter. Keep a map and the phone numbers and addresses of these locations handy. If you have a pet, identify locations where animals are welcome.

Pack an evacuation kit. Remember to have key items ready to take with you:

* Medicines, prescriptions and first aid kit.
* Bottled water
* Clothing and bedding (sleeping bags, pillows)
* Flashlight, battery-powered radio and extra batteries
* Special items for infants or elderly or disabled family members
* Computer hard drive or laptop
* Photographs
* Pet food and other items for pets (litter boxes, leashes)
* Important documents such as insurance policies, passports, drivers licenses, wills and deeds, birth, adoption and marriage certificates, recent tax returns, stocks, bonds, and other negotiable certificates

Practice. Give yourself just 10 minutes to get your family and belongings into the car and on the road. You’ll find out if there is anything you need to modify in your emergency plan, and your family will know what to expect.

Need more info? Check out my columns for more tips and the latest on insurance policies:

• 3 costly myths about insurance

• Do you need disaster insurance?

• 10 things your insurance may not cover