Free Money Finance

New Feature at Free Money Finance: Best of FMF

It may be way too early to start a "best of" feature for a blog that's been around only four months, but hear me out. Free Money Finance has grown rapidly over the past few months which means it has a lot of new readers who missed the first few months of posts (some of which are good). ;-)

Furthermore, if this growth continues, we'll constantly have an influx of people who missed some good posts. Therefore, I'm starting a "Best of Free Money Finance" feature where I'll highlight a particular post that I feel was a good one and was missed by most of the current readers here.

If it makes you feel any better, think of "Best of Free Money Finance" as simply replacement wording for "You May Have Missed This but I think It Was Good." ;-)

Star Money Article: The Cost of a Bad Investment Advisor

A week ago, I announced a new feature here at Free Money Finance, the Star Money Article. Today I'm giving out my first star.

This one goes to Kimmunications for a post that shows how much a bad investment advisor (or a bad investment for that matter) can impact a portfolio over a long period of time. The post profiles what one investor earned on his investments (7.21%) versus what he could have earned if he just performed at market average (10.9%) and how much it cost him over nine years. Here's the point of the piece:

"That is a 30% difference in just nine years - $435,000 additional real dollars in your account. Imagine how much more pronounced this effect would be over longer periods of time - say the forty years it takes someone to save for retirement? To quote Warren Buffett on how to be a successful investor, 'Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.' "

Stop by and check out the article. It's a star.

Comments: Stop Smoking

Here's another post highlighting some of the comments received here at Free Money Finance.

I've posted about smoking and how people should give it up to save a ton of money. I've also posted about how it's killing our nation's finances.

As you can imagine, there's been a lot of feedback on this topic from both sides. Today, I'll share a few of those comments.  Here's the first:

"Quitting smoking is a great idea - there was an article in The Week about this. Apparently in a study by Ohio State, they found that smokers saved less than non-smokers because they didn't consider smoking in their budget, I discussed it at my blog."

I love it when people agree with me. :-) Here was my response to that comment:

"Yep, this stuff can really add up. If someone smokes half a pack a day and a pack costs $5, that's $913 per year wasted, if it's a pack a day, that's $1,825 and if it's two packs a day, that's $3,650 -- all money that's literally gone up in smoke. Then multiply this by five, ten, or twenty years that people smoke, add in what they could have earned if they had invested the money, and consider the extra health care costs of smokers and you can really see that from a financial point of view, smoking does not pay. If you visit here again, please leave the link to your article. I think people would like to read it."

Here's another person who's agreeable:

"Wow, cool post. I did the math for my father-in-law...I even low-balled the numbers. Check this out. He has been smoking a pack a day for 50 YEARS. Let's just average that at 2 dollars a pack for 365 days a year. That THIRTY SIX THOUSAND FIVE HUNDRED DOLLARS. And this is probably a very low estimate. WOW!"

And here's a testimony:

"My best friend finally quit 9 days ago after smoking for about 10-11 years. His parents paid for the acupuncture treatment. He smoked about a pack a day at 3.75/day for a sum of about 13687.5. It's more than he paid for his car. Now he uses his extra money for "toys". It's like you said in It's not what you earn, it's what you spend that determines your net worth."

However, life as a blogger that recommends people quit smoking is not all a bed of roses:

"Why should I quit smoking? First off....all the COOL people smoke. Nothing is cooler then seeing someone light up a cig and take a drag. Second off, smoking is not bad for your health. Asians smoke 3 packs a day and will outlive most Americans. I will quit smoking when Americans quit shoving oreo cookies and twinkies down their throats. Lastly, MO is the greatest stock in the world. MO has more money then most nations on this planet. Keep the lawsuits coming ...yet MO is still rolling in cash.....cash is coming out of their wazoooo...."

Smoking is not bad for your health? Not sure what planet this person is living on, but it's not earth! Alas, he has a friend (though it's just one interested in the money):

"Concur with MO rules. Proud owner of MO. Whether you smoke or not, you are putting MO in your mouth everyday."

And another, though he qualifies it a bit:

"I agree. There is nothing wrong with an occasional smoke and tobacco stocks are great investments!"

What do you think? Do you have any comments?

Money Saving Tip: Ask for a Discount on Damaged Clothing

Here's a way to save on clothing that really works:

Inspect clothing thoroughly for holes, stains or other imperfections before you buy. If it’s something you have to have, ask for a discount if the item has a flaw.

I saw this tip in action the other day -- at Wal-mart. The lady ahead of us in line pointed out a small problem with the blouse she was buying and received an immediate discount.

As a note, this not only works on clothing, but anything that's less than perfect.

The Best Financial Book I've Ever Read, Part 10

Here's the next installment from top personal finance bloggers offering their single-best financial book they've ever read.  Today, we'll hear from Michael at It's Your Money who says:

"Having read piles of books in both the investment and personal-finance realms, I can recall only one which absolutely changed the way I viewed the world.  That book was Your Money or Your Life, by Joe Dominguez and Vicki Robin.

Honestly, I really didn’t appreciate the book that much when I first read it.  But subsequent readings opened my eyes to some really vast truths, foremost among them the YMOYL concept that we trade the better part of our lives for money (via working), and so it only makes sense to take great care regarding the spending and use of that money.  I’ll admit that the “simple living” encouragements in the book didn’t move me all that much – I love “stuff” just as much as the next guy – but everything else the authors conveyed went straight into my money soul. 

When Dominguez and Robin wrote that “Your worth as a person does not come from what you are paid; it comes from who you are and what you give,” I knew they were right.  When they repeatedly stressed that debt (no matter the form) is bondage, I listened.  They weren’t the first to tell me this, but they were the first to make me believe it.  And they made me believe I could change my life, and that of my family, by planning my spending, saving, and giving.  They were right.  In my opinion, there are a lot of good personal-finance books . . . and then there’s YMOYL.  For pure “money thinking” realignment, I’ve found none better.

Your Money or Your Life caught me at the right time.  It truly spoke to me, and I am absolutely thankful for it."

Pretty good recommendation, don't you think? I've got even more reading to do now. ;-)

Click here to read part 11 of this series.

What to do When Retirement is Approaching and Your Savings is Lacking

Unfortunately, Americans as a group are not the best of savers. This is particularly a problem when it comes to retirement as millions start approaching the day when a regular income ends with far less saved than they would like or need. If you're in this situation, what should you do? Here are some suggestions from Money Magazine:

• The most important thing you can do now to improve your situation is to start saving immediately. If your company offers a 401(k) or other retirement savings plan, contribute the max. If you qualify for an IRA -- either a traditional or Roth -- contribute as much as you can there too (up to $4,000 this year). And if you're 50 or older, try to take advantage of those catch-up contributions too (an extra $4,000 this year in 401(k)s and another $1,000 in IRAs). You'd be surprised at how large a nest egg you can build even in just 10 years if you do some serious saving. It's quite possible to accumulate a six-figure retirement portfolio within 10 years even if you're starting from scratch.
• Avoid taking on new debt in the years leading up to retirement and, if possible, paring down debt you already have so you don't go into retirement burdened with big interest payments.
• Re-assess your investment strategy. Typically, individuals invest more conservatively as they approach the end of their careers. That makes sense because you don't want to take big risks with the nest egg it's taken a lifetime to build. But if you're still trying to build your retirement portfolio, you may have to be more intrepid in your investing. That doesn't mean throwing all your money in high-octane tech stocks. But it might mean investing a larger portion of your money in stocks than you otherwise would, although you should make sure that the core of your stock holdings are stable blue-chip companies.

This is some good advice. If you're behind, these ideas will help you catch up. But they may not be enough. Money says:

Even these moves may not be enough to allow you to retire in comfort on the schedule you would like. In that case, you may need to resort to other strategies, such as postponing retirement a couple of years to allow your portfolio's value to grow more or even relocating to an area with lower living costs.

And they wrap it up by saying:

To sum up, the time to hesitate is through. If you want a decent shot at retiring in comfort in 13 years, you've got to start saving, investing and planning now. Do that and you should have enough time to make up for your blunder and significantly improve your chances of having a secure and enjoyable retirement.

Five Smart Ways to Give

I haven't written much (if anything) about giving on this blog to date, but that's going to change over the next few months. I'm a firm believer in the practice and its benefits. But for now, I wanted to share a series I found on Five Smart Ways to Give. It details some very practical issues you need to consider when you make charitable donations including (with some comments from me):

1. Do your due diligence. I only give to organizations that I'm familiar with. I know what they do and how they spend their money.

2. Watch the fundraising cost. I try to give to organizations that only have fundraising costs less than 20% of total expenses. Why give to an organization that spends a big chunk just asking you to give more?

3. Ask for key documents from the charity. This is a no-brainer. If the charity can't provide audited financial statements and receipts for donations, don't deal with them.

4. Don't respond solely to phone solicitation. I NEVER respond by phone. If called, I ask them to mail me something, then I review it when I have time and can do a bit more research.

5. Make sure you know the difference between a reputable charity and one that sounds like a reputable charity but isn't. This is pretty straightforward.

Giving is a great honor and privilege and has many financial benefits, but you must do it wisely. Follow these principles and you'll be sure of directing your funds into charities that will make good use of them.

Money Saving Tip: Save on Gas

Instead of my usual short money saving tip, today I'm going to highlight an article that you may want to check out. It's from Smart Money Magazine and is simply titled "Save on Gas". The article starts by stating the obvious:

"The best way to cut your gas bills is to make sure you're buying the cheapest gas around."

As I read this, I was thinking, "Ok, sounds like there are several rocket scientists at Smart Money." But it gets better in the next sentence, and they make some valid points:

"Gas prices can vary — sometimes significantly — from station to station. In Portland, Ore., you might pay as much as $2.53 per gallon or as little as $2.17. So stay informed. Keep a notebook in your car to jot down the prices at gas stations you pass. And for this to really work, you'll need to note the time and date you passed by, too. (You do want to save money, don't you?)"

The article then goes on to list some good, practical tips:

1. Buy at the right time of the day.

2. Buy at the lowest priced station along your daily route.

3. Don't have any preconceived notions of which station is the lowest (or highest) priced.

4. Find the best gas-monitoring web site for your area.

5. Know when to cut your losses.

It's a pretty quick read -- and worth your time.

Identity Theft is Worse than You Think It Is

As regular readers of this blog know, I follow events relating to identity theft pretty closely. In fact, I post on it so often that many of you probably think the name of this site is Free Money Identity Theft! ;-) 

But Even I was shocked when I ran onto a post by Trey Jackson that detailed how bad it was. She documented every incident she could find in the last 100 days where a company has compromised sensitive consumer data.  This is what her study has yielded to date:

• 1 out of every 6 people in the U.S. has had their personal information breached in the last 100 days. US population = 296,689,763.
• 1 out of every 4 people over the age of 18 have been exposed to identity breaches in the last 100 days. US pop. over 18 = 209,128,094 - That's 24%.
• At this pace, every consumer record in our country will have been exposed/breached/stolen in less than two years.
• 50 million consumers have had their private information breached since 4-08-05

She goes on to list 20 different exhibits that show the range of ID theft -- from hospital records to financial institutions to federal employees and everything in between.

She concludes with the following solutions:

1. We need to require that all consumer data is encrypted. (Currently only 10 percent of businesses encrypt their data.)

2. Stop people from walking around with laptops that have thousands of consumers' information on them.

3. Better computer security to prevent hacking.

4. Shred paper documents.

5. Have strict screening procedures in place for all companies that are applying to pull credit reports and/or use any consumer database.

What do you think needs to be done? What are you doing personally?

Becoming an Ex-Compulsive Shopper

The past two days I've commented on an article from Money Magazine called Confessions of a Compulsive Shopper. It featured the story of Kristine Rogers, a 36-year-old suburban mother of four who is a shopping "addict" who ran up $50,000 in credit card debt. I wanted to highlight a couple other parts of the article before I move on.

First, Business Week lists "5 Signs You're in Trouble" (spending too much) and says:

"If the following statements describe you, you may be at risk of being a compulsive shopper:

1.  You get a "rush" from shopping.
2.  You buy items you don't need. 
3.  You keep purchases secret.
4.  You buy with money earmarked for bills.
5.  You feel guilty and ashamed."

Second, the magazine offers "4 Ways to Kick the Habit":

1.  Track your spending
2.  Change your patterns
3.  Cut off your fuel supply
4.  Seek assistance

It's an interesting article. And Business Week gives specifics for each of its suggestions. Stop by and read the article if you think it may benefit you or someone you know.

The Best Financial Book I've Ever Read, Part 9

Here's the next installment from top personal finance bloggers offering their single-best financial book they've ever read.  Today, we'll hear from Jim at Blueprint for Financial Prosperity who says:

"My parents never taught me anything about the financial markets and so until I found "The Motley Fool Investment Guide," I knew, basically, nothing. This book is a must-read for every stock market novice who wants to learn about how to analyze a company's fundamentals to make smart stock picks. They also push forth a good idea, that "buy and hold" is a smart trading strategy that is better for a novice than churning and day-trading. If nothing else, you'll at least learn that buying an index fund beats out any mutual fund a vast majority of the time.

While not as comprehensive and in-depth as more advanced books, I think anyone can pick up this book, read it, and come away with a tremendous amount of information that will help them demystify the markets. Secondly, I also recommend folks check out the Motley Fool website as it has carries the same irreverent humor and "down to earth"-ness that they have come to be known for."

I'm a big fan of the advice given by the fools. I'm going to check this book out. (literally) ;-)

Click here to read part 10.

Money Saving Tip: How to Handle "Dry-Clean Only" Clothes

Here's a way to save on clothing:

Purchasing “dry-clean only” garments can end up costing you a bundle, so be sure to check the label for care before you buy.  Air out your dry-clean items by hanging them up immediately after wearing to allow several uses between cleanings and to prevent wrinkles. Wash select delicate items at home. Be sure to test a seam or inside facing before washing the entire garment. Spray ties with fabric protector to avoid frequent dry-cleaning.  Finally, search out a discount dry cleaner – many charge just $1.50 for any item.

High Net Worth Wealth Grows 8%; Millionaires Up 7%

The 2005 World Wealth Report offers some very fascinating information on the world's wealthy. I found the following information particularly interesting and thought you would as well:

• The world’s high-net-worth wealth grew strongly in 2004 for a second consecutive year, increasing 8.2 percent to $30.8 trillion.
• The number of high-net-worth individuals (HNWIs) — individuals with a net worth of at least U.S. $1 million, excluding their primary residence — grew by 7.3 percent to 8.3 million, a net increase of 600,000 worldwide. North America led with a nearly 10 percent growth rate to 2.7 million HNWIs, surpassing the 2.6 million in Europe. Asia-Pacific’s growth rate of over 8 percent — to 2.3 million HNWIs — was twice that of Europe.
• Singapore, Hong Kong, Australia and India saw the highest rates of HNWI population growth, while wealthy people in South Africa and the Middle East benefited from the rise in commodity and oil prices. Growth generally lagged in Europe, with only two nations — the United Kingdom and Spain — showing growth comparable to the worldwide rate.
• As wealth continues to grow, the report notes that HNWIs with financial wealth between $5 million and $30 million are facing particular challenges in managing their increasing net worth.
• After 2004, a year that marked the strongest economic growth worldwide in 20 years, growth is expected to temper in 2005. A combination of factors, including rising inflation and interest rates, is expected to slow global growth and affect the value of financial assets. As a result, global high net worth wealth is projected to grow at a compound annual rate of 6.5 percent over the next five years, reaching U.S. $42.2 trillion by 2009.

One thing I'm looking forward to: "facing the particular challenges in managing my increasing net worth" when I get between $5 million and $30 million. ;-)

How to Afford Parenthood After 40

Here's a confession: I love Jean Chatzky, one of the columnists for Money Magazine.

No, not in THAT way, but I love her in that she writes in a simple, practical manner with money tips that people can actually use to improve their finances. (Imagine that!!!) Unfortunately, this is a rather rare trait for personal finance columnists, but that post is for a different day.

Today, I want to highlight Jean's latest article that addresses a growing issue many couples are facing: having children at an older age and thus trying to balance the competing financial demands of raising a child/college with saving/paying a mortgage/saving for an upcoming retirement. First of all, here are the facts:

• The birth rates for 40- to 44-year-old women between 1980 and 2002 have gone up 32%
• The birth rates for 40- to 44-year-old women between 2002 and 2003 alone have gone up 6%
• 14% of AARP members have children under the age of 18 living at home

In other words, this is an issue that many people are currently facing and that more and more will be facing in the future. Here are the issues these people need to address:

• "Think of the double whammy of being hit with college expenses and retirement at the same time. Or of maintaining health insurance for your family after the age you personally would qualify for Medicare. These and other issues are only magnified when, as is often the case, a late-in-life child comes in a second marriage and you already have older kids."
• "Presumably, if you decide to have a child after 40, you'll be on firmer financial footing than when you were 25. The downside is that you could get hit all at once by three big money sponges: college tuition, retirement and your own aging parents."

Now, what to do about it:

1. Invest for retirement first, college second -- There's no financial aid for retirement; there's lots of financial aid for college

2. Tweak your estate plan -- When you have children at an older age, you risk dying while they're relatively young. When you're selecting guardians, look to nieces, nephews, even your own older children. Also, don't put too much money in the hands of your kids before they can handle it. Think carefully about how much you want them to receive and at what age, and establish trusts that pay out over time.

3. Consider extending your life insurance -- "We don't necessarily find that our clients need more insurance, they just need it to last longer." Say you had a baby at 30 and purchased a 20-year level-term policy -- then had another child 10 years later. When your initial policy runs out, your second child will be only 10. If you want coverage until you're 70, a simple term policy with the option to convert to a permanent (cash-value) policy (which allows you to keep your insurance in the event of a health scare) is best.

For more financial tips for expecting parents, click here.

Money Saving Tip: 30-Day Challenge

Here's a tip that will likely be quite enlightening for many people and also help to save you a bundle of money:

Track your cash spending for thirty days. Every penny -- cash, checks, credit cards, automatic payments, etc. You may be surprised by what you discover about your spending habits. After you track these expenditures, it's likely that you'll reveal some new information and generate ideas on what you can spend and what you can save.

Net Worth of a Compulsive Shopper

Yesterday I highlighted an article from Money Magazine called Confessions of a Compulsive Shopper. It featured the story of Kristine Rogers, a 36-year-old suburban mother of four who is a shopping "addict" who ran up $50,000 in credit card debt.

What I didn't comment on was the chart to the side of the article that listed the Rogers' net worth. A summary:

• Assets:         $19,000
• Liabilities:   $77,000
• Net Worth:  ($58,000)

Just a few comments on this:

• This is for a couple that makes $102,000 per year. What do you think the problem is -- too much spending or not enough income. I think the answer is obvious.
• While not as bad, these numbers are a reflection of America as a whole. Yes, it's true that most Americans don't have the problem with clothes spending like this couple does, it's also true that many Americans spend well more than what they make. And those who don't spend it all spend almost as much as they make. How else can you explain the low net worths out there today?
• If you don't want to be a statistic like this, start applying suggestions like the ones found at Free Money Finance and other financial sites and blogs. Make a little progress each day and over time, your net worth will grow and grow.

The Best Financial Book I've Ever Read, Part 8

Here's the next installment from personal finance bloggers offering their single-best financial book they've ever read.  Today, we'll hear from David at the Mortgage Planning Blog who says:

"The best financial book I ever read?  I would define that by the book that has made the single largest contribution to my net worth.  That would be the concepts presented in “Missed Fortune 101”.  For example, “Consider how much would you deposit in an investment account with the following features:

• The customer can determine the amount of monthly contributions and length of time for each of the contributions to continue.
• The customer can pay more than the minimum monthly contribution, but not less.
• If the customer attempts to pay less, the financial institution keeps all of the previous contributions.
• The money in the account is not liquid.
• The money deposited in the account is not safe from loss of principal.
• Each contribution made to the account results in less safety of the principal.
• The money deposited in the account earns a zero percent rate of return.
• The customer’s income tax liability increases with each new contribution.
• When the plan is fully funded, there is no income paid out to the customer.

When the author presents this investment to potential investors, the features make it extremely unappealing.  Would you invest serious cash is such an investment account?  The fact is, you probably are investing in the investment described above:  If you have a traditional mortgage, then it’s your house!

He then goes on to make us all even more uncomfortable as we begin to look at the realities of the Traditional IRA’s and 401K’s in our country.  Here is how he puts it:  “If you were a farmer, would you rather save tax on the purchase of your seed in the springtime and pay tax on the sale of your harvest in the fall, or would you rather pay tax on the seed and sell your harvest without any tax on the gain?”

I would rather purchase the see with after-tax dollars and later sell my harvest tax free.  In the book he teaches how to do the latter.

In my opinion, this book should be required reading for all who desire to build serious net worth!  I recommend it to all my clients."

This book may be a bit too complex for a simple country boy like me. What do you think? ;-)

Click here to read part 9.

Free Money Finance Part of Carnival of the Vanities

Free Money Finance is part of the new Carnival of the Vanities with my post on Stop Smoking, It's Killing the Nation's Finances. Stop by and check out some great posts!

Good News on the Alternative Minimum Tax

Here's some good news on the alternative minimum tax:

"A presidential panel said Wednesday that the alternative minimum tax, designed to snare affluent tax dodgers but now hovering over the middle class, should be abolished."

Now some of you may be saying, "What is the alternative minimum tax and why should I be worried about it anyway?" Here's a brief history:

"Congress invented the alternative minimum tax, or AMT, in the late 1960s after learning that a few wealthy individuals paid no income tax. It has ballooned in the decades since under the effects of inflation, and it increases taxes for more middle class families every year."

And now, why you should be worried about it:

"It affects nearly 4 million families this year but will hit nearly 21 million next year and more than 51 million in a decade, according to statistics compiled by the Treasury Department and presented to the panel."

Yes, that's right, 51 million people in 10 years will be impacted. It will hurt the middle class the most. What was once an idea to keep the very wealthy from escaping taxes is now threatening people who are far from very wealthy.

It's good to see Washington working on this issue.

10 Biggest Mistakes of Novice Real Estate Investors

Yahoo has an interesting article titled 10 Biggest Mistakes of Novice Investors that deals with some of the pitfalls of real estate investing. There are a lot of "investors" out there, so there is plenty of room for mistakes. According to the article:

"The National Association of Realtors reports that nearly a fourth of all the houses sold in 2004 went to investors; about 80 percent of investment properties are existing single family houses."

But just because a lot of other people are doing it, doesn't mean you should. Buying real estate is complicated and frought with risks -- there are a lot of pitfalls. Yahoo's top 10 are:

1.   Falling in love with the property.
2.   Not performing your due diligence.
3.   Forgetting the rule of home improvements.
4.   Thinking you'll get those low mortgage rates you see on TV.
5.   Not pre-screening tenants.
6.   Breaking your own rules.
7.   Investing long-distance.
8.   Paying too much for the property.
9.   Not studying the competition.
10. Being underinsured.

If you're new to real estate investing (or thinking about it), I'd recommend this article as a great primer on what to avoid.

Free Money Finance in Carnival of the Capitalists

Free Money Finance is part of this week's Carnival of the Capitalists with my post Don't Believe Financial "Experts". Stop by to see some great articles on a wide variety of topics.

Confessions of a Compulsive Shopper

While most of America is spending faster than it earns, here's an example that takes the cake.

In Confessions of a Compulsive Shopper, Business Week Money Magazine covers the story of Kristine Rogers, a 36-year-old suburban mother of four who is a shopping "addict." To set the scene:

"Rogers first recognized she'd crossed the line from merely being an enthusiastic shopper to genuine illness about 18 months ago, when Gymboree held a clearance sale in which every item was priced at $7.99.

"I was literally shaking, trying to get my daughter dressed to get to the store," Rogers recalls. "I went to three or four different stores that day, I had a friend on the phone going to a Gymboree near her to buy for me, and I had my mom online ordering too. I grabbed clothes my daughter didn't need. I bought four of the same coat in different colors." By the end of the day, Rogers' compulsion had cost her $800."

Oh, my. But this is just the tip of the iceberg. The story continues:

"At the height of her addiction in 2003 and 2004, Rogers estimates that she spent $400 a week and eight to 10 hours a day, every day, shopping for Gymboree outfits on the Web. Maxed-out credit cards, more than $50,000 in shopping-related debt and the slow realization that she chatted more with other Gymboree-obsessed moms than she did with her own family finally convinced Rogers that she needed to kick her habit."

Unfortunately, this behavior isn't as rare as you might think:

"Compulsive shopping affects up to 8 percent of the U.S. population, and 90 percent of those shopaholics are women. Some, like Rogers, zero in on one product or brand. Some shop in binges, others are equal-opportunity buyers who snap up whatever catches their fancy whenever the impulse occurs. Many focus their buying on someone else's behalf -- in Rogers' case, her youngest daughter, Skylar, 3."

Here are Business Week's suggestions for correcting a situation like this:

• Cut expenses further
• Renegotiate debt
• Save for the future
• Stay sober

Comments: Spend Less by Making More

Early on in the life of this blog, I wrote a post called "Get Out of Debt". (Here's part 1 and here's part 2) These posts generated a couple of good comments. Here's one that was mentioned on part 2:

"All excellent ideas, and some that we're actually considering (we were especially convicted on the cable thing). I noticed that all of the ideas stated above involve doing without something.  Another option, instead of spending less, is to earn more.  There's a double advantage here: you're spending time making money and not spending time spending money."

Generally, I agree with this. But, I had this response:

"You are correct!  Making money is also an option.  That's covered under my Principle #1 articles -- I write about it a lot -- so please stop back as I'll be covering that topic quite a bit in the future.

That said, I find that making money is not really the issue for most people, but spending is.  I've advised people making $20,000 annually to people making $140,000 per year and it seems that the more people make, the more they spend.  Plus, spending is more controllable (it's easier to cut off your cable than find a decent spare job) and more realistic given that much of America already works 50+ hours a week.

Thanks for reading and leaving a comment.  I really appreciate it and enjoy the dialog.  If we get more people to join in, we'll all end up earning more and spending less!  :-)"

What do you think?

Money Saving Tip: Save Money on Kids' Clothes

Here's a way to save money on kids’ clothes:

Start a clothing swap with friends, family or a church group.

It's a simple concept, but quite effective. My wife has friends and family members that give us clothes their kids have grown out of (quite nice clothes, I might add) and we have others that we pass our clothing on to when our kids get too big. In all, I bet we've saved $500 to $1,000 over the past few years and our kids always have new clothes to look forward to!

New Feature at Free Money Finance: Comments on Comments

Some of the best content here at Free Money Finance is not stuff that I write. It's in the comments -- thoughts left by people all over the world on what they think about financial topics. And while I read every one of them (though I can't respond to them all) unfortunately many of these comments are lost to most readers who read the content I write, but not the comments.

So I've decided to bring the comments to the forefront.

My new feature here at Free Money Finance will take the best comments on the site, add my thoughts/comments, and post them as a new entry. I think you'll find them to be educational, interesting, and (often) funny.

Finally, feel free to make comments on all the posts here at Free Money Finance. They could make you the subject of an upcoming post! ;-)

The Best Financial Book I've Ever Read, Part 7

Here's the next installment from top personal finance bloggers offering their single-best financial book they've ever read.  Today, we'll hear from Steve at In Cash Flow We Trust who says:

"My favorite financial book is still The Richest Man In Babylon by Georgs S. Clason. Although it was written in 1926, the message is timeless. Here are some of my favorite nuggets:

1. Our prosperity as a nation depends upon the personal prosperity of each of us as individuals.

2. My favorite, Pay yourself first, no matter what!

3. Get additional education if needed and surround yourself with others who can help you-sounds a lot like networking.

4. There is nothing spiritual about being broke-Rather, Men of action are favored by the goddess of good luck.

5. He never once mentions "Saving for Retirement".

6. Clason was not confused by having advice from a "Rich Daddy" and a "Poor Daddy".

7. He gave us his best advice in his first book-we don't have to read seven sequels to "Get It" And the best reason I like the book is because I will never have to read about Young, Fabulous and Broke in Babylon."

I've heard a lot of great things about this book and just picked it up from my local library. I'm looking forward to reading it after Steve's recommendation.

Click here to read part 8.

The Best Financial Book I've Ever Read, Part 6

Here's the next installment from top personal finance bloggers offering their single-best financial book they've ever read.  Today, we'll hear from Alexander at Wealth Junkie who says:

"The best financial book I've ever read has to be, without a doubt, "One Up On Wall Street" by Peter Lynch.  I have read the book several times through, and find myself reading small passages quite often.  Each time I learn something new. 

Peter Lynch is one of the most successful investors of all time, and to learn how he looks for and evaluates potential investments is worth millions in itself.  But most refreshing, I think, is how he shows that you how many opportunities he has missed and how many blunders he has made.  His insight can certainly make anyone a better investor."

I love this book too and I admire Peter Lynch. I recommend this book wholeheartedly.

Click here to read part 7.

Carnival of Personal Finance #6

Welcome to the 6th edition of the Carnival of Personal Finance and to Free Money Finance. For those of you who are new to the carnival, it's a sampling of some of the best articles from top personal finance bloggers over the past week.  I subscribe to every one of the.blogs in this week's carnival and I can attest that they all contain some good stuff. I've learned plenty from every one of them and it's likely you will too.

If you want to see more of the carnivals, last week's edition was hosted by I Will Teach You to be Rich and next week's will be hosted by In Cash Flow We Trust. But for now, this week's version is here at Free Money Finance. So brace yourself for a ton of ideas to help your finances! Here they are:

Is AAA Worth It?

Blueprint for Financial Prosperity asks Is AAA Worth It? Personally, I think it is. Jim has a different conclusion. In this post he talks about how his AAA membership is too expensive and how he's going to cancel it. The best part of the post isn't necessarily the post itself but the numerous comments people have left -- they uncovered some benefits that Jim didn't know about. He still cancelled it though. :-)

Teaching Kids about Money

Everybody Loves Your Money gives some advice on how to Teach Your Kids to be Smart With Money. This is a brief post that talks about ideas to teach your kids good money habits -- from ideas for earning money to what to do with it once they have earned it. This is something I will certainly read. Now, if I could only get my 9-year-old and 7-year-old to internalize it...

Save Money on Staples

Frugal for Life writes about Staples on a Shoestring. If anyone knows how to save money, it's Dawn, so I'd really recommend you check this out. She particularly likes this post because "it brought about a number of people who voiced their opinion and that is always a good thing." So be sure to read the comments here too.

There's More to Life than Money

I Will Teach You to be Rich discusses What are we doing on this site? In this post Ramit shares an interesting first-hand story about how he discovered that there’s more to life than just budgeting and saving. There is? Oh, yes, of course there is!

The Bottom Line on Student Loans

Optimized Living writes about Student Loan Consolidation. The post encourages consolidating student loans and then using various incentives to reduce the fixed rate. It's a must read for those of you who have student loans outstanding.

The Origin of Saving for Retirement

In Cash Flow We Trust posts Saving for Retirement and asks when the phrase "Saving for Retirement" first came into play. I guess I never thought of it -- but Steve has. For his thoughts, check out this post.

Are You Wealthy?

All Things Financial gives the inside scoop on How to Determine if You’re Wealthy. He uses the rule-of-thumb formula used in The Millionaire Next Door (my favorite financial book of all time) for determining whether or not you are wealthy. Check it out and see if you're rich or not! :-)

Is Auto Leasing a Good Deal?

Mighty Bargain Hunter discusses Auto Leasing is Back — and Better? While the article he discusses seems to think that leasing is a good (or at least better than in the past) idea, this blogger is not so sure. Read the post and see what he recommends.

What to Do about Identity Theft

Modblog.com discusses Identity Theft......What to do About It based on his experience receiving a horrible phone call. His credit card company called to ask about an unusual charge. A charge he hadn't made. Yes, someone had stolen his card. Read this post to see what he recommends you do to protect yourself from identity theft and what you should do if you find yourself facing this situation.

Chasing Investment Performance

The Canadian Capitalist enters this week's carnival with Chasing Performance. The post addresses one of the deadly sins of investing, chasing performance, and how mutual fund investors tend to make precisely the wrong investment at the wrong time. Sounds like they're talking about my investing history! ;-)

Free Consumer Reports!

Five Cent Nickel adds Free Access to Consumer Reports (and More) to the carnival. I personally LOVE Consumer Reports. But what I love even more is FREE stuff (it's my first name, after all). Nickel tells how to get my beloved Consumer Reports (and many other publications) for free!! This post saved me $30 per year with CR alone! Check it out to see how you can save too.

Mutual Fund Basics

The Happy Capitalist posts The ABCs of Mutual Funds. He comments that nothing is quite so perplexing to mutual fund investors as the issues around sales charges and share classes, no-load funds and advisor-distributed funds, the alphabet of share classes and 12b-1 fees. What do they all mean? This post is a discussion of the mind-numbing array of share classes and expenses
associated with advisor-distributed mutual funds.

Business for Women

Tick Marks rounds out the carnival with a post titled Ladies: Start Your Business (vroom, vroom) that details where women can get help starting their own businesses (a great way to add to your income and move your net worth up a bit).

The GE of China

The Real Returns posts on Reliance Industries - India, India’s largest company in terms of market capitalization. He calls it "India’s GE."

What Will Happen in a Market Crash?

Smart Money Daily wonders about a market crash and suggests "a large part of money management is anticipating and mitigating risk. The next black Tuesday will happen, just like the next earthquake, the question is when. It's worth it every once and a while to pretend it is tomorrow and see what kind of shape you'd be in."

Tour of Free Money Finance

I don't have an entry per se this week -- I'm just basking in the glow of all these other great posts. However, if you'd like to know more about Free Money Finance, you can take this mini-tour to see what this blog is about. I posted it when Business Week magazine recently recommended Free Money Finance.

Thanks for dropping in to this week's carnival -- I really do appreciate you stopping by! And as a reminder, next week's Carnival of Personal Finance is at In Cash Flow We Trust. So mark your calendars and be sure to stop by there next Monday. Have a GREAT week!

Update: Linking to the Beltway Traffic Jam.

Money News for the Week Ending July 22

Here are some unique and interesting money-related articles this week from around the world:

• University of Southern Calif. says database hacked.
• A primer on student loans.
• Help! My college money is running out!
• Am I Saving Too Much for Retirement?

Money Saving Tip: Cut Gas Costs

Everyone knows that gas prices are sky-high this summer. Here are a couple ideas for you to save on your gas purchases:

• Buy gas early in the morning or later at night. Gas is densest during this time and you’ll get more for your money since gas is measured by volume, not fuel concentration.
• Use the lowest grade of gasoline your owner’s manual recommends. Most cars don’t need premium gasoline.

What Can You Do with $1,000

If you had an extra $1,000 in your hands, what would you do with it? The most recent issue of Kiplinger's has some suggestions for you including:

• Inspire others. Start a charity.
• Fill gaps in your investments.
• Take a financial physical.
• Buy a piece of a growing country.
• Pump up your 401(k).
• Put your estate in order.

Plus many, many more ideas.

Money Saving Tip: Check Your Bank's Math

Here's a very simple money saving tip, but one that's saved me a couple hundred dollars over the past few years:

Banks make mistakes!  Balance your checkbook each month to check for errors and to avoid expensive fees for bouncing a check, falling below your minimum balance, etc.

The Best Financial Book I've Ever Read, Part 5

Here's the next installment from top personal finance bloggers offering their single-best financial book they've ever read.  Today, we'll hear from JLP at AllThingsFinancial who says:

"I would have to say that my favorite personal finance book is actually an investing book.  It is the newest book by Jeremy Siegel called The Future for Investors – Why the Tried and the True Triumph Over the Bold and the New.  The book is basically what Professor Siegel discovered while doing research for Stocks for the Long Run, which is that the companies that were in the S&P 500 when it began in 1957 outperformed the stocks that were added to the index over the years.  In other words, the new companies that were added to the index over the years actually put a drag on the index’s performance. 

The reason for this is that as the index tried to adapt to the changing economic landscape it added companies from “hot” sectors like technology and banking where expectations were high.    It turns out that “expectations” were the key.  When expectations are too high investors tend to overpay and then end up underperforming the rest of the market.  When expectations are low, investors are able to find companies that are reasonably priced and have a much better chance of outperforming the market.

Anyway, the book is full of interesting observations written in an easy-to-understand way.  If you read this book and apply it, you will be a better investor."

Looks like I have another book to add to my "to read" list.

Click here to read part 6.

Making Money as a Stay-at-Home Mom

It's not new news that the economy is constantly changing and what was unthinkable ten years ago is now sometimes taken for granted now. But I was still surprised by an article titled Job Opening? Work-at-Home Moms Fill Bill. I wasn't surprised at the story itself, but the type of work that's being done in homes today:

"Thomas is among a new generation of moms who have chosen to stay at home but earn an income, too. She's a loan officer and independent contractor for Pacific West Financial, doing loan work and research while Carlyjo, age 2, sleeps or watches TV. She also gets some work done after her husband, a teacher, gets home from work."

It seems to pay better than I suspected as well:

" 'It's very lucrative," says Thomas, 33, of Morgan Hill, Calif., who also manages other loan officers. "You do have to manage your time very well. I can work in my pajamas.' "

What's driving more and more of this? Simple changes in the economy:

"Many moms are redefining the stay-at-home experience by using today's technology — and employers' growing reliance on free agents — to earn an income without ever setting foot in an office."

Any work-at-home moms (or dads) read this blog? What are your thoughts and experiences?

Call for Carnival of Personal Finance Entries

Notice to all personal finance bloggers: the deadline for this week's Carnival of Personal Finance is approaching. The deadline for guaranteed inclusion is 7 p.m. eastern time on Sunday, July 24.

Another notice: I will NOT be searching the web looking for articles from blogs who do not submit something. What I will do if I only receive a few submissions (I have three at the moment) is round out the carnival by searching for great articles on the blogs who have submitted something already. So it's in your interest to submit. ;-)

Money Saving Tip: Keep Your Car in Top Shape

Here's a money saving tip for those of you who are crumbling under the weight of high gas prices:

Keep your car in top running shape – starting with tire inflation. Under-inflated tires can lower your fuel economy by up to 2 percent for every missing pound of pressure. And make sure your engine is tuned. If it’s not, it can use up to 8 percent more gas.

The Back-to-School Decision

From Kiplinger's Personal Finance:

"An advanced degree could be your ticket to a better-paying position, faster advancement, or a new career entirely. But are the costs and rigors of grad school really worth it?"

A very interesting question. I've known several people who have gone back to school to get MBAs and stayed in the same position (with no raise) after they got it. The reason? They were in the same field and didn't realize that employers really don't care about a grad degree after a certain level of experience. A grad degree often opens the door to an initial job (usually for a younger worker, not always for an older one), but soon thereafter, experience trumps education. Employers will almost always take a well-experienced person over a less experienced person with an advanced degree -- at least in the business world. Wouldn't you?

What's Kiplinger's advice? Here is a summary:

"If you're going to graduate school because:

• Your firm won't promote you to the position you want unless you have an advanced degree: right reason.
• You're waiting for the job market to improve: wrong reason.
• You want to pursue a different field of study: maybe the right reason.
• You want to buy time because you aren't sure what you want to do with your life or you don't feel ready for the working world: wrong reason.

If you're tempted by any of the wrong reasons, save yourself the time, money and stress and get a job instead. Breaking out of the routine of school for a while could help you gain greater perspective about your skills, interests and career goals. Besides, you can always go back to school later."

In my experience, this is very good advice. After all, an advanced degree will cost you a lot (in money, time, relationships, etc.) and not always add to your salary. Your time may be spent much more profitably in other endeavors.

Identity Theft Legislation

Smart Money reports that the Senate recently introduced a bill to protect against ID theft. Details are still a bit vague, but here's the Washington-speak version:

"Under the bill, known as the 'Identity Theft Protection Act,' the Federal Trade Commission would come up with rules within one year requiring companies to develop data safeguards. The FTC would also enact credentialing procedures for third parties seeking personal information as well as procedures for disposal of data."

Seems like somebody in Washington has wised up to the fact that this is a major issue:

" 'With the problem of identity theft reaching epidemic proportions, a bill designed to protect Americans is absolutely essential,' said Senate Commerce Committee Chairman Ted Stevens, R-Alaska, one of the co-sponsors of the bill."

News flash: a real-world issue has finally hit Washington, D.C. It seems to me that they should have been working on this a long time ago.

The article also reports that:

"The legislation, which would preempt state and local laws on data security, would also make it easier for consumers to put security freezes on their credit reports and make it tougher to obtain Social Security numbers."

I'm going to keep track of this one and see what happens. I'm hopeful because at least they're talking about it but doubtful because many powerful companies don't want to be held responsible for actions like losing data, handling it inappropriately, etc.

Call for Contributions to Best Book Series

If you're a personal finance blogger and would like to participate in my latest series (The Best Financial Book I've Ever Read), please drop me an email. I'll include your review as well as a link to your site.

The Best Financial Book I've Ever Read, Part 4

Here's the next installment from top personal finance bloggers offering their single-best financial book they've ever read.  Today, we'll hear from Joshua at Wealth Today who says:

"I've read few books that really cover the topic of money, and while all of them are special, 'The One Minute Millionaire' by Mark Victor Hansen and Robert G. Allen is my current favorite.

The One Minute Millionaire is actually two books in one. It has logical, practical, and factual information on the left pages in the book, and on the right pages it has a fictional story that elaborates on the topics. Demonstrating an earnest attempt to reach everyone, the left-brained readers will enjoy the useful information in it's easy to understand delivery, while right-brain thinkers will learn lifelong money lessons through the story of the books characters as they unfold on the right pages of the book."

Joshua's review goes a bit more indepth and can be read at Wealth Today. For those of you who just want the bottom line, Joshua concludes:

"In conclusion, this book is an inspirational piece that allows us to understand that becoming a millionaire can be accomplished by anyone and the process is perhaps easier than we've ever expected."

I haven't read this book in awhile, but I plan to re-read it again. I remember it as being "ok". Anybody read it? What did you think of the book?

Click here to read part 5.

New Feature at Free Money Finance

Here's a bit of news that won't really be a news flash to any of you: I don't have the market cornered on great personal finance posts.

I see so many great posts on blogs and websites and have been thinking of a way I can highlight them on Free Money Finance. So here's what I've decided to do:

• I'm starting a new award called the "Star Money Article" award (Yeah, I know, very creative, huh? But it serves its purpose and ties in with my nice star at the header of this blog) :-)
• I'll be scouring the web for great blog posts and web articles and when I find one, I'll give it the "award" here on Free Money Finance, summarize it for you, and provide a link to the full piece. This will also serve to introduce readers to some great new blogs, something I like to do at Free Money Finance.
• The criteria is basically what I think is a good piece, so it can't be defined easily. But a few things the piece must have are that it must be practical, relatively easy to implement (if a suggestion), and help to increase the net worth of the reader.

So stay tuned -- there are some great Star Money Articles out there and I promise to search far and wide to bring them to you.

Money Saving Tip: Keep the Heat Out

Here's a money saving tip to help beat high cooling costs this summer: keep the heat out of your house.

Ok, that seems a bit obvious -- that you can save a lot by keeping the heat out of your house. But how can you do this?  Hera are some suggestions:

• Keep out daytime sun with blinds or shades.  Blinds with a white or neutral backing color reflect sunlight and can be found in most paint, department and drapery stores. 
• Insulate your attic and under the house’s crawl space. 
• Add inexpensive gaskets under all light switch and receptacle plates to prevent warm air from entering your house. 
• Use exterior shading devices or deciduous plants to shade your home and windows from the sun.

Identity Theft Issues Everywhere

Here are a couple of interesting articles on identity theft from USA Today.

The first is titled Not Even 2, and Girl has had Identity Stolen Twice is about 22-month old Jabriona Terry who has had a couple of identity thefts in her brief lifetime:

• "Someone used her name and Social Security number on his tax return, claiming her as a dependent to get a larger tax refund."
• "Her mother discovered her daughter's name listed in a phone book and soon realized an acquaintance had used the girl's Social Security number to set up the phone service."

Unfortunately, this is rather common:

" 'We get those by the thousands,' says Karl Niblick, a deputy chief with the Fort Wayne Police Department.

Utility companies are a particularly popular way to use someone else's identity. People get someone else's name, birth date and Social Security number and turn on telephones, electricity or gas service and never pay the bills. When the power gets turned off, they get a new name and number and get new service, often in a new home, police say."

The second piece titled Visa to Cut Ties with Card Processor reveals that banks that issue Visa cards have until Oct. 31 to cease having CardSystems Solutions process payments. Why the change? For some pretty good reasons:

"[CardSystems Solutions] left 40 million credit and debit card accounts vulnerable to hackers in one of the biggest breaches of consumer data security."

Ok everyone gets one mistake, as long as they correct it, right? But it seems like CardSystems can't correct the issue:

"CardSystems Solutions "has not corrected, and cannot at this point correct, the failure to provide proper data security for Visa accounts," Rosetta Jones, a Visa vice president, said in a statement."

For those of you who have non-Visa cards:

"Spokeswomen for MasterCard International, American Express and Discover Financial Services did not immediately say whether they would take similar steps to ban CardSystems."

Looks like identity theft is here to stay -- and the thieves are getting more and more creative.

The Two Dumbest Ways to Pay Down Your Credit Card Debt

If you've been reading Free Money Finance for any time now, you know that I'm not a big fan of credit cards. Oh, I don't suggest that you shouldn't have any (like Dave Ramsey does), but I'm not pro-credit card because many people simply can't handle them. In the end, this is more of a problem with the people themselves than with the cards, but that post is for another day.

Today I wanted to talk to those of you who are working to pay down your credit card debt. First of all, congratulations. You're on the way to increasing your net worth. Second, be sure you pay down your cards in a smart way. In The Two Dumbest Ways to Pay Down Your Credit Card Debt, Suze Orman talks about two ways that are BAD for people to decrease credit card debt. She says:

"Whatever you do, don’t you ever use a Home Equity Line of Credit (HELOC) or a loan from your 401(k) to pay off your credit card debt!"

Why? Here's why to avoid a HELOC:

"Your credit card debt is what is known as “unsecured.” What that means is that if you default on paying this debt, the credit card issuer can’t take possession of any asset of yours as a way of getting their money. A HELOC, on the other hand, is what is known as a secured loan; there is collateral on the loan so if you default, the lender can indeed grab that collateral as a way to get paid. And guess what? The collateral on a HELOC is your home. If you get behind on that loan—say you lose your job, or become too ill to work—and miss too many payments, the lender has every right to force you to sell the home to pay off the debt."

And here's why borrowing from your 401(k) is a bad idea:

"When you contribute to a 401(k) you use money that has not yet been taxed. But if you borrow against your 401(k), you will repay it with after-tax money. Then that money you have used to “repay” your 401(k) loan will be taxed again when you eventually make a withdrawal in retirement. I think being taxed once is plenty."

So keep paying off those credit cards. Just do it the right way.

The Best Financial Book I've Ever Read, Part 3

Here's the next installment from top personal finance bloggers offering their single-best financial book they've ever read.  Today, we'll hear from Nev at NevBlog who says:

"In Think and Grow Rich, you can FEEL Napolean Hill's energy and enthusiasm throughout the book.  I like how he tells his readers to play the game with the cards you've got.  He features numerous examples of how individual people facing large setbacks beat the odds, including his own son.

It was the ONLY book I've ever read twice."

I like this book as well. In my opinion, it's the best book out there on the psychology of money.

Click here to read part 4.

Great Retirement Guide

Business Week currently has a great retirement guide online -- their annual retirement guide. Here's a summary:

"No matter how you see your retirement, it takes a lot of serious thought to get there. Financial planning is paramount, of course, because it gives you the freedom to make choices. So is the planning for what you will do with your time, and where you will live.

In BusinessWeek's Annual Retirement Guide, we help you think through these issues. We've tested new money-management services that will help you invest and spend wisely. We've looked at immediate annuities, which can be a good way to make sure you don't run out of money. We've also identified several great mutual funds, any of which can make a worthwhile addition to your portfolio."

It's a great read with lots of useful information.  Whether you're close to retirement or just interested in knowing more about this area of personal finances, it's certainly worth your time to stop by and check it out. Topics covered include these and much, much more:

How To Tap Your Nest Egg -- And Not Go Broke: New software and services are designed to make sure your retirement funds last as long as you do.

Getting with the Retirement Program: Before shelling out up to $199 for financial planning software, check out our comparison of four products to see which suits you best.

Figuring Out Retirement Software

Making The Most Of Your Money

Insuring Your Income: Immediate annuities do just that, but don't rush into a contract.

The Richest Fictional People

OK, this doesn't have much to do with increasing your net worth, but it is a fun money story that I thought you'd get a kick out of.  Seems that Forbes has named The Forbes Fictional Fifteen -- the richest fictional characters ever.  The top 10:

1. Santa Claus
2. Richie Rich
3. Oliver "Daddy" Warbucks
4. Scrooge McDuck
5. Thurston Howell III
6. Willie Wonka
7. Bruce Wayne
8. Lex Luthor
9. J.R. Ewing
10. Auric Goldfinger

All of these are extremely wealthy, but they all have very different lives (versus the real Forbes list where most come from business backgrounds).  If you could be one of them, who would you be? I'm partial to #7 myself. :-)

It's More Important than Ever to Track Every Penny

Here's a post from the "Big Brother" school of finance. I found an article titled What the Banks Know about You (but won't tell you) and Why It Matters that is summarized as follows:

"Third-party databases, similar to credit bureaus, are keeping track of overdraft information and creating debit scores, which can be used to deny checking accounts."

Here are the details:

"Companies that operate private data banks are tracking your banking behavior - and most banks and retailers are happy to tell them when you slip up. One company even crunches the details into a debit score. It's like a credit score, but instead of getting you turned down for a credit card, a low score might mean you can't open a checking account. And, unlike the credit score, you're not allowed to know your debit score."

Why is this happening and what's the result:

"The point is to reduce bad check losses, a $30-billion problem for banks last year. The downside is that consumers who end up blacklisted by ChexSystems can have difficulty opening an account for up to five years."

This looks like a process that's a problem just waiting to happen. For example:

"The cardinal sin in ChexSystems' world is to owe a bank money. Banks report customers to ChexSystems for overdrafts as small as $36, typically after giving a customer 45 days to pay, according to a survey four years ago by the National Community Reinvestment Coalition. Even if the bank is eventually paid, the negative notation stays on a customer's ChexSystem record for five years. By contrast, debts to retailers as a result of bad checks are typically removed from databases shortly after they are paid.

The coalition said its survey found that most banks rejected customers who had any negative information in ChexSystems and failed to consider an account applicant's employment history, rent payment history or other variables."

In short, simply keeping close track of your money and expenses (including balancing your checkbook every month) should keep you out of trouble like this. It used to be that even if you slipped up once in awhile, it wouldn't harm you financially. With systems like the one described above starting to develop, even one slip today can have dire consequences for years to come.

Don't Gamble on Your House

I found an interesting piece today at CNN/Money that talked about the following phenomenon happening as part of the current "housing bubble":

"The biggest gamblers are attempting an extremely tricky maneuver, according to Christian Coleman, district director for Zip Realty, a publicly traded real estate broker with offices in 10 states. They're selling their houses with the intention of buying back into the market at a lower price in a couple of years or so -- after the bubble bursts, they believe.

The advice from the real estate industry pros is: Resist this temptation. It's almost impossible to time this market."

Have people lost all common sense? Does this really sound like a good idea to anyone?

This is one time I agree with the "experts."

Really, when it comes down to it, money management is very simple. Stick with the tried and true principles of spending less than you make and doing so over a long period of time. That simple advice will steadily increase your net worth over the years and you won't have to try something crazy (like the idea above) to get rich.

Money Saving Tip: Maintain Your Stuff

One great way to save money is to avoid major expenses.  Regularly maintaining the high-cost items you own can significantly increase their lives. This means servicing your car regularly, having the furnace and lawn mower cleaned seasonally, and vacuuming refrigerator coils monthly. Check owner’s manuals for maintenance specifics.  Maintaining your possessions can keep them running more efficiently and lasting longer saving thousands over the years on utilities, repair bills, and, of course, replacement costs.

Jodi D. of St. Petersburg, Florida has reaped the benefits from this practice.  "My last refrigerator and washing machine each survived 20 years and a move to Europe because I took care of them regularly,” she comments with pride.  “It took some extra time and effort, but I even performed preventative maintenance.  And the appliances repaid me by lasting much longer than I expected.”