Free Money Finance

Best of FMF: Saving on Cooling Costs

I was in Nashville last week and boy was it hot there!! I almost melted walking out to may car. So while I've posted a lot of money saving tips on cooling already, I know there are parts of the country who could stand to see them again. As such, I'm naming two early posts of mine (Save Hundreds on Your Cooling Bill This Summer, Part 1 and Part 2) as a couple of the Best of Free Money Finance.

I hope all you people in Nashville take this to heart. ;-)

Money Saving Tip: Save on Eating Out

Here's a money saving tip to help you save on those (expensive) restaurant expenses:

When you go out to eat, make it for breakfast or lunch.  Prices are typically lower than during the dinner hours.  Saving five dollars using this tip every other week saves you $130 a year.

Two words for you: McDonald's pancakes. My kids LOVE them and they are cheap and easy. We can get more food there for half the price of places like Denny's and Bob Evans (and those places are pretty cheap themselves). One tip if you're a soda fan -- order the small and refill often. Refills are free at McDonald's.

One last thing: learn from my mistake and ask the price before you order at a different time of day. I went to a Chinese buffet the other day and was charged $15 for what I thought was a $7.50 meal. Turns out I was past the "lunch" time and into "dinner" time by an hour, hence the higher price (for the same exact meal). I had assumed it would either be the lunch price or a couple dollars more at the most. Last time I'll let that happen.

Fixing Bad Credit

If you've been turned down recently for credit, there are things you can do to improve your credit reports. This article from Forbes details some steps to take:

If there's an error in your credit report or an outdated item, you can challenge it at no cost under the Fair Credit Reporting Act. Contact the company making the inaccurate report, and then contact the three major credit reporting agencies: Equifax, Trans-Union and Experian. Remember that all objections must be made in writing.

You can avoid many credit problems simply by requesting a copy of your credit report and reviewing it annually.

In addition to inaccuracies, keep an eye out for outdated information.

If the negative information in your credit report is accurate, you can't remove it simply because it makes life difficult. However, the passage of time can help. In most cases, negative information can be held in your report for seven years.

If you've been hammered by negative but accurate credit reports in the past, responsible behavior now and in the future is the best cure.

One last reminder from me: beware credit score quick fixes.

12 Financial Rules Made to be Broken, Rule 10

Here's part ten of our series on the 12 financial rules that should (or shouldn't) be broken:

Rule No. 10: Monthly payments on installment debt shouldn’t exceed 20% of your take-home pay.

Verdict: Thumbs down. That’s too narrow a snapshot. After all, when prospective lenders look at your current debt, they look at all of it. That includes installment debt, such as car loans and credit card balances, plus your mortgage.

A better rule is to figure that your total monthly debt payments shouldn’t exceed 36% to 40% of your total monthly income, says Bob Walters, chief economist for Quicken Loans.

Don’t have a mortgage? If you’re planning to buy a home soon, keep in mind that lenders generally limit your monthly mortgage and escrow payments to no more than 30% of your monthly income. If you want to qualify for the largest mortgage possible, that leaves you with only about 10% of your monthly income for other debt.

But even if a lender allows you to borrow that much money, that doesn’t mean it’s a good idea. The debt-to-income calculations only include the minimum monthly payment on your credit cards, for example.

I agree again. It's now three posts in a row that we've seen eye-to-eye. Am I getting soft? Or are these just smart people? ;-)

Click here to read Rule 11.

Hurricane Katrina Blog Relief Day

Tomorrow I'll be taking part in a blogosphere effort to help raise funds for victims of Hurricane Katrina with several other bloggers. If you have a blog, please consider signing up as part of this effort.

My relief charity of choice is Samaritan's Purse and I'm kindly asking you to consider making a generous donation to this organization or your favorite relief charity. Here's a list of several charitable organizations helping out in the effort (scroll down a bit).

I'll match gifts from readers of this blog up to $500 total. (You give to the charity of your choice, email me telling me the charity and the figure, and I'll give a corresponding amount to Samaritan's Purse.)

Update (3:43 pm): Denali Flavors, the sponsor of this site and makers of Moose Tracks ice cream, has pledged $5,000 to International Aid's disaster relief efforts!

Comments: Best Practices for Driving Traffic with Blog Carnivals

OK, here's another warning for my regular readers:

1. Looooooong post ahead.

2. It's about blogging. Skip it if you're here only for finance stuff.

I received several comments and bits of useful advice from my post a couple weeks ago on Best Practices for Driving Traffic with Blog Carnivals. I'll try to get them all in here, but if I miss one or two, please email me and let me know -- I want to include everyone.

We start with a comment from Jay, one of the founders of the Carnival of the Capitalists:

Very nice! In the case of CotC, I e-mail Instapundit. Once in a while, a host will beat me to it and he'll link via that, but he particularly looks for the e-mail from me.

Good to know. If you host a carnival, make sure the "owner" or "creator" of the carnival emails InstaPundit (and you should as well).

Then, there's some advice from InstaPundit himself:

ADVICE TO BLOG CARNIVAL ORGANIZERS: I'll add one more item -- if you want me to link your carnival, be sure somebody sends me the link!

I can't believe I forgot to mention this. Yes, of course, don't just email InstaPundit and say "the carnival's up", also give him the permalink to the piece. Do this for everyone you contact via email asking them to post on it. It makes it tons easier for them to write about the carnival (which is what you want to happen, isn't it?).

Shifting gears a bit, I received these additional tips on how to promote your carnival:

• Add the Carnival to the UberCarnival at The Truth Laid Bear (TTLB). Here's how:

1) If the host blog is registered in the TTLB Ecosystem, and has a working RSS/Atom feed, you can tag a Carnival entry post to be picked up automatically by including the following exact phrase in your post's text, replacing [Carnival Name] with the name of the carnival and with ÜberCarnival as an active link to http://www.truthlaidbear.com/ubercarnival.php:

"[Carnival Name] can also be found at The Truth Laid Bear's ÜberCarnival."

The Ecosystem scans will notice this text and automatically add your Carnival entry to the ÜberCarnival. The one caveat with this method is that if you don't put the tag at the top of your post, and your RSS/Atom feed doesn't provide full text of your entries, the tag may not be included in the feed, and therefore won't be found by TTLB.
 
2) Add it manually, by using the submission form here:

http://www.truthlaidbear.com/addcarnival.php

The manual approach will still require that the Carnival entry you are submitting includes a link back to the ÜberCarnival (http://www.truthlaidbear.com/ubercarnival.php) page, but it is more forgiving as the link can appear anywhere in the post (the validation step for the manual page accesses the post directly and does not rely on RSS/Atom feeds).

• Get the blog added to Science And Politics' weekly Meta-Carnival
• Add the carnival to Blog Carnival. It includes the most recent editions of all the carnivals.

And if you want to know more about carnivals (and how to make the most of them), here are a couple of pieces that you should read:

• Blog Carnivals And The Future Of Journalism gives a good overview of carnivals -- all the basics.
• Great summary from Multiple Mentality on his recent carnival hosting experience.

What do you think? Did I miss anything?

Star Money Article: Three Reasons Why I No Longer Buy or Sell Individual Stocks

I found a post today titled "Three Reasons Why I No Longer Buy or Sell Individual Stocks" that pretty much summed up my investment strategy. Like the author, I used to concentrate on individual stocks until I learned the lessons he details here. Now most of my money is in mutual funds and most of that is with Vanguard.

This article earned a Star because I could have written it myself -- and I wish I did. :-)

The Risks of Interest-only Mortgages

I'm no fan of interest-only mortgages. I think they are misused in most cases by people who have no business buying a home as large as they are buying. They stretch to the breaking point, using these mortgages to get their "dream home", and then when a financial emergency arises (which it always seems to do), they are in deep trouble.

Here's an article from Money where a person writes in and asks:

Dear Armchair Millionaire: I'm getting ready to buy my first home and I'm thinking about getting an interest-only mortgage to make it more affordable. What do you think of these types of mortgages?

First, he describes what interest-only mortgages are (in case we didn't know):

An interest-only mortgage is one that gives you the option of making only interest payments on your loan for a certain period of time, typically five to seven years.

After this period, it converts into a regular amortized loan for the remaining life of the mortgage. This means your monthly payment will jump, because you will now be paying interest plus principal over a shortened period of time -- just 20 to 23 years, as opposed to the standard 30 years of many mortgages. Alternatively, you can refinance at this time.

Next, he covers the benefits of interest-only mortgages:

Interest-only mortgages are booming in popularity for one good reason: They lower your initial monthly payments. Not only does this save you some money in the first years of the mortgage, it can enable you to get a larger mortgage (and more expensive house) than you'd otherwise qualify for.

For example, a traditional 30-year, fixed rate mortgage for $300,000 with a 5.875 percent interest rate would mean a monthly payment of $1,774 per month. On the other hand, an interest-only, adjustable-rate mortgage at 5.5 percent would mean a monthly payment of just $1,375.

But then he gets to the "real" answer -- for most people, they aren't a good idea:

As tempting as those lower initial payments may be, proceed very cautiously here. Despite their popularity, I believe that relatively few people are actually good candidates for interest-only mortgages. My guidelines will help you decide if it makes sense for you.

When interest-only mortgages don't make sense:

When it's the only way you can afford the house. With rapidly escalating home prices in many parts of the country, many people are finding that they only way they can afford their dream house is with an interest-only mortgage.

This route is risky. Your monthly payments will take a big leap after a few years -- bad news if you're struggling to make the payments now. While you could sell the house before you're required to begin paying principal, there's no guarantee that we'll still be in a hot housing market then.

When interest-only mortgages might make sense:

When you're planning to only stay a short time. Some people are certain that they'll live in the home just for several years and want to leverage interest-only mortgages to capture the biggest potential gain in equity they can. Again, however, the housing market is a big wildcard -- if prices drop, you could owe more than the home is worth when you want to sell.

When you have an irregular income. Interest-only mortgages can make sense for some people with irregular incomes (for example, people who work on commission). They can pay the lower interest-only payments when times are lean, and then make extra payments toward principal when they are flush. However, they have to have the discipline to put that extra money against the mortgage, and not a Caribbean vacation.

When you're sure your income will grow. If you are absolutely sure that your income will increase enough to cover the larger payments by the time the interest-only period is over, these mortgages can make sense. Most people just don't have that kind of surety in life, however.

Then he wraps it all up for us:

THE BOTTOM LINE: Interest-only mortgages make sense only some of the time. If you get one when it's not right for you, you're running unnecessary risks with your biggest investment.

I would have been a bit more anti-interest-only mortgages in this piece if I were him, but overall I can agree with the advice given here.

Help for Hurricane Katrina Victims

I'm sure by now that you all have heard about (and likely been tracking by the hour) the devastation of Hurricane Katrina in the southern part of the U.S.  This is a chance for us to consider finances from a different standpoint -- to move from focusing on increasing our net worths for a bit and take some time (and money) to help others.

If you would like to help out victims of Hurricane Katrina, here are some charities I recommend:

• Samaritan's Purse
• Salvation Army
• Red Cross

Please consider making a generous donation to one of these or to your favorite relief agency.

Money Saving Tip: Save on Babysitting

I don't know about your area of the country, but where we live babysitting costs a fortune. And that's assuming you can find a sitter who's at least semi-responsible. Well here's an idea that will not only save you money, but also cut down on the frustration associated with finding the right babysitter:

Eliminate (or lower) babysitting costs by starting a co-op with friends.  Trade sitting times with a family or two.  You’ll save $15 or more on each date – netting $180 a year if you go out once a month.

My wife does this quite often for day appointments she has. A friend will watch our kids while she goes out, then the next week they will trade roles. It works out great and the kids see it as fun since they get to visit their friends.

The Eight Commandments of Credit Cards

Here's an article from Yahoo that lists their eight commandments of credit. More specifically, the piece deals with credit cards. Here's what they recommend:

1. A credit card is just that -- a credit card. You have been deemed creditworthy by some entity that is willing to let you borrow money for a short period of time. Though your credit limit may add up to $34,538, that is not how much money you should spend.

2. Ignore bankers' rules on what is an "acceptable" level of debt. Your debt-to-income ratio is the measure of how much debt you carry to how much money (after taxes) you have coming in. In the world of lending, it is acceptable to carry 25% of your income in debt. The ideal number is zero. But at the very least, you want to keep your debt -- including car loans -- to 15% or less of your after-tax income.

3. Don't pay by their rules. The "minimum amount due" is cleverly calculated to keep you beholden to The Man for your entire adult life. A $4,500 balance will take 44 years to pay off, even if you don't put another dime on the card. Oh, and the interest you'll pay on that loan? A cool 17 grand.

4. Play the system. Remember, you are the customer. Do you want a lower interest rate? Sick of paying an annual fee? Not interested in paying the $35 late-payment fee -- and swear that it won't happen again (at least in the next six months)? Just ask! Your lender would rather keep you as a customer than shell out (anywhere from $50 to $150) to acquire a new customer. Use your leverage.

5. When you get into trouble, stop charging. If you find yourself struggling to make even the minimum payments on your credit cards, stop, drop, and roll. Stop charging. Drop your spending. And roll your balance over to a credit card that charges a lower interest rate. And then pay it off with fervor.

6. See yourself through others' eyes. You have the power to see how you rate in the eyes of the banking world. Your credit report (provided by three major reporting agencies) and your credit score (a three-digit number that lenders use as your credit GPA) is at your fingertips. Check out what's there to make sure that your record is an accurate reflection of your borrowing ways.

7. Carry just what you need. Most people need only one or two credit cards: one for purchases they pay off each month, and another for emergencies (or business purposes). Any more than that is usually overkill. If you consolidate your spending on one card, consider getting a "rewards" card where you earn miles, stuff, or cash back on your spending.

8. Teach your children well. A totally cashless society is becoming less futuristic every day. If you have any critters, let them know that the shiny plastic card represents the amount of money you have to spend on Barbies and Barney.

Good tips overall. Follow them and you'll be well ahead of most in the credit card game.

New Best of Series: Best Financial Tips from FMF Readers (Reminder)

Just a reminder to submit your ideas for our new "Best" series called "The Best Financial Tips from FMF Readers". If you read Free Money Finance, you're eligible to participate.

Here's what you need to do to enter:

• Send me an email telling me what your best financial tip is (something like a great money-saving tip, a practice you use personally that's been great for your finances, etc. Note: I am NOT looking for "great" stock tips.) ;-)
• Include your name as you would like it to appear on the site.
• Give me your blog's URL if you want it referenced (could be some good traffic sent your way. Note: It does not need to be a personal finance blog.)

That's it. The series will start soon, and I'll put the posts up on a first come, first served basis.

Give to Others and to Yourself

Here's a quick tip you can use this fall that allows you to give to others while also helping yourself out financially:

Simplify and get rid of unused items.  You’ll be helping others in need, and if you itemize, charitable contributions are fully deductible.  Estimate the value of non-cash items like clothes, furniture, and books. Always request a receipt for your records.  Just by cleaning out your closets each spring and fall you can easily save $200 to $300 -- and at the same time bless others who would treasure your "junk".

We do a massive cleaning twice a year. Basically, we go through the house and anything that hasn't been used in a year (and has no foreseeable future use), gets given away. I know what you're thinking: "As soon as I give it away, that's when I'll need it." Well, I used to think that, but we've been going through this process for five years now and have never had it happen -- though I have had my wife sneak in a few things I wanted to keep but she saw an opportunity to dispose of them. ;-)

Surprising Money Facts from Entrepreneur

Here are a couple money facts I found interesting from the September issue of Entrepreneur magazine:

58% of consumers say they would rather put $1,000 into a savings account than invest it in the stock market.

44% of low-income consumers are cutting spending because of gas prices; only 18% of affluent are.

I was surprised at all of these numbers. I thought the vast majority of people would put money in the market before putting it into a savings account. I also would have thought that more than 44% of low-income consumers were cutting spending because of gas prices (isn't gas a major expense for anyone on a tight budget?) and much less than 18% of affluent consumers would change due to gas prices (does this really even make a dent in their budgets?).

Then again, what do I know? ;-)

12 Financial Rules Made to be Broken, Rule 9

Here's part nine of our series on the 12 financial rules that should (or shouldn't) be broken:

Rule No. 9: Don’t buy long-term-care insurance if you have less than $30,000 in annual income or more than $1 million in assets.

Verdict: Thumbs down. This rule does make sense on the low end. The United Seniors Health Council recommends, in general, that you have at least $25,000 to $35,000 in annual retirement income and $75,000 in assets (not counting your house and your car) before considering long-term-care insurance. If your income and assets fall below those levels, you’d quickly qualify for Medicaid if you needed nursing-home care.

Even so, buying long-term-care insurance is preferable to relying on Medicaid if you can afford the premiums. Private insurance gives you significantly more choices.

The $1 million cutoff on the upper end doesn’t make the grade. In theory, if you have that much in assets, you can afford to pay for your own long-term care. But many people would rather buy insurance and avoid the worry.

Insurance also alleviates the concern that caring for one spouse could deplete a couple’s assets, leaving the surviving spouse in a bind. And many people buy long-term-care coverage to protect assets for their children.

I have to agree with them again -- for the second rule in a row.

Click here to read Rule 10.

Even Affordable Housing Increasingly Out of Reach

I found an article from Money Central that discusses how today's home prices are increasingly out of reach for even middle income earners. Here's a summary of the situation:

Housing prices are far outstripping salary increases for low- and moderate-income jobs, putting the American dream of owning a home beyond the reach of teachers, firefighters and other community workers in many cities, said a study released Tuesday.

The report, by a coalition advocating affordable housing, found that even cities once considered affordable, such as Tulsa, Okla., are rapidly becoming too pricey for lower-income workers such as janitors and retail sales employees.

The study found the median price of a home in the United States rose 20% in just 18 months, to $225,000. During the same period, wages for teachers, firefighters and nurses in most cities remained flat or increased slightly, but still fell far short of the annual salary needed to buy a home, the report from the Center for Housing Policy said.

The piece then goes on to detail this issue -- relating how the housing boom is having an affect on many, many people:

"It's not just the level of housing prices versus wages, but the fact that, especially in some areas, the housing prices are growing so much faster," said Barbara Lipman, the research director for the center.

"It's creating this dynamic where people who work these jobs must feel like they'll never catch up. The dream of home ownership may be unattainable," she said.

Some of the most affordable places were in the Midwest, places like Waterloo, Iowa, Saginaw, Mich., and Lima and Youngstown, Ohio. But Lipman said cities like Tulsa and Minneapolis, which had traditionally been thought of as more affordable, are now a concern. "We're seeing a problem in areas where you'd expect and then beyond that because of the flatness of the wage growth and the increased pressures on home prices and rents," said Lipman. "Even though we have historically low interest rates, that doesn't solve the problem."

The median home price in the Florida city has jumped nearly 32% since 2003, to $245,000. To qualify for a mortgage, a person would need to make about $77,600 a year, up from $57,600 in 2003. That would put a home out of reach for schoolteachers and police officers in the community, whose annual salaries are in the low to mid-40s. The gap is even greater for nurses, who make about $36,000, and child care workers, whose salaries are in the low to mid-20s.

Also Tuesday, the National Association of Realtors' chief economist, David Lereah, said the market "is probably close to a peak right now in terms of sales activity, but there is tremendous momentum.” He said in the NAR's August forecast that sales are expected to coast at historically high levels into next year, but would trend slightly downward.

NAR President Al Mansell, of Salt Lake City, said housing shortages persist, which will propel the market to its strongest rate of price growth in 25 years. “It’s a great time to sell, but it may be a better time to buy about a year from now when the market should come closer to balance," Mansell said. He warned buyers to weigh postponing a purchase against the prospect of higher rates.

The article also lists the top least affordable and most affordable cities.

This is an angle of the real estate run-up that I hadn't considered. But sooner or later the market will hit the threshold where there will not be enough buyers for the number of sellers -- then prices will come down (probably dramatically).

MND: The Typical American Millionaire, Part 3

Here's another post in our series on the learnings from the book The Millionaire Next Door. (For the next few posts in this series, we'll be focusing on qualities of the typical American millionaire.):

Who is the prototypical American millionaire? What would he tell you about himself?

Most of us (97 percent) are homeowners. We live in homes currently valued at an average of $320,000. About half of us have occupied the same home for more than twenty years. Thus, we have enjoyed significant increases in the value of our homes. (page 9)

A couple thoughts here:

1. $320,000 is not that much. Clearly, these people did not stretch themselves to the razor's edge (like many people do today) to buy as much house as they could.

2. A home is a good investment -- especially if you stay in it, let it appreciate, and avoid buying/selling costs of moving every 5-10 years.

Click here to read part 4 of this series.

Best Money Post I've Ever Written, Part 7

This post continues our series from top personal finance bloggers writing about the best money post they've ever written. Today's entry comes from Frugal for Life where Dawn says the following about "What's a Penny Worth to You?":

I base the best post I have written on feedback from people, and I found that the post "What's a penny worth to you?" generated a lot of responses on picking up pennies.

Here's the heart of the piece:

Now I told this to a friend of mine and she said, “I wouldn’t stoop down for anything less than 25 cents”. I reminded her that over the course of the last couple of days, I had picked up at least 25 cents in pennies, she still thought it wasn’t worth the time to bend down for them.

There are 24 comments as of this writing. Stop by and see if people think a penny is worth picking up. Do you think it is?

Free Money Finance Part of Two Blog Carnivals

Free Money Finance is part of two Carnivals this week. They are:

Carnival of the Capitalists includes my post on Best Practices for Driving Traffic with Blog Carnivals

Carnival of Personal Finance features my piece titled You Can Beat Debt

Please stop by each of the above carnivals.  You're likely to find a new blog or two that you absolutely love.

Money Saving Tip: Save on Non-Food Items

Here's an easy way to save on non-food items:

Shop at a general merchandiser like Wal-Mart or Target for non-food items like detergent, toothpaste, and shampoo.  Most grocery stores have high mark-ups on these items. Saving an average of two dollars each week gets you over $100 per year. Better yet, buy the store version of the item to save even more.

We ALWAYS at least try the Wal-mart Equate brand if it is an option. More times than not, we'll like it as good as the national brand, and when we don't, Wal-mart takes back the unused portion as part of their satisfaction guarantee. We've saved tons of money using Equate. For instance, 48 tablets of Tylenol Allergy Sinus runs $4 and change while the same exact product in the Equate brand runs $2 and change. We use Equate regularly for mouthwash, fiber supplements, allergy and cold medicine, muscle rub, pain pills, and more. (Note: We haven't had good luck with the Wal-mart brand food products -- just not as good as the national brands.)

The Value of Education

In the early days of this blog, I wrote how a key part of increasing your net worth was to maximize your income. One way to do this is to get a college education -- even beyond a 4-year degree if it suits your disposition. Why? Consider this from Money magazine:

The money you spend on a college degree still yields a sizable return on your investment. Over a working lifetime, the typical college graduate earns about 75% more than a high school grad does. On average, that difference totals $1 million more -- easily enough to re-pay those student loans and then some. The payoff from graduate school is even bigger: People with advanced degrees earn two to three times as much over their lifetimes as those without a college degree and increase their average total earnings by as much as $2 million.

Personally, I would be making a fraction of what I make today if I hadn't gotten my MBA. It opened the door to my first job (at a Fortune 500 company) that set my career on the right path.

401(k) Plan Doesn't Mean You Can Ignore Savings

Even though your company has a 401k and you participate in it, you still need to manage it actively in order to maximize its value. An article from USA Today gives a few pointers and tips you should consider:

You generally don't need to do anything (regarding enrolling) if your company decides to automatically enroll you. But you will need to speak up and "opt out" if you don't want to be in the plan.

Companies typically put only 3% of your paycheck into the 401(k) plan. This may not be enough to qualify for the full matching contributions that companies chip in to help build up your retirement funds.

Many companies that have automatic enrollment will put employees in conservative investments. While money-market or stable-value funds are great for the risk averse, those who are young and can stomach more volatility might want to choose a more aggressive investment.

Automatic enrollment generally benefits young and low-income workers the most, because that group is less likely to enroll or to actively participate in a 401(k) plan.

Active investors may be able to do better on their own than with automatic enrollment. The reason: "Employers tend to set their default rates at such low levels that people who would have contributed more end up contributing 3% rather than 6%" of pay, says Jack VanDerhei, an EBRI fellow and Temple University professor.

Most companies don't automatically raise the percentage you're investing as your salary rises. So review your contributions each year to make sure you're saving as much as you can afford.

Even if your company offers automatic enrollment, don't assume that it applies to you. About 78% of large employers with this feature currently enroll only new hires, according to Hewitt.

Good tips to consider. In my opinion, the 401k is one of the great wonders of the financial world. Be sure you do all you can to take full advantage of it.

Five Dangerous Loans to Leave Alone

Here's a great piece from Money Central on five dangerous loans to leave alone. Their five include:

1. Payday loans, also known as a deferred deposit service, are loans issued against a paycheck. These are small, short-term loans that typically range from $100 to $500. To get one, you write a postdated check for the amount desired, plus a fee. The check casher or payday lender holds the check until you get paid. The typical loan period is two weeks. On payday, you take cash to the lender and exchange it for your postdated check, or you allow the lender to deposit the check. If you do not show up with cash, the lender cashes the check. If you cannot pay back the loan at the end of the two-week period, expensive problems begin. If you ask the lender to hold the loan for another pay period, you pay the fee a second time and the loan rolls over. If you are charged a $20 finance charge on $100, your annual percentage rate is 521%.

2. Pawnshop loans carry terms of one to four months and are secured by a piece of property. Interest rates range in different states from 2% to 25% per month. Loan periods range from 30 days to 90 days, also depending on the state. Almost all states require pawnbrokers to allow a grace period, says Bob Benedict, executive director of the Dallas-based National Pawnbrokers Association. The collateral is sold if the interest or loan amount isn't paid in the specified period.

3. Title loans are secured by your car's title. The lender determines how much you can borrow, based on your car's value. Typically car title loans range from $250 to $1,000, but can go as high as $10,000. The duration of these loans is most often 30 days. If you fail to make loan payments -- maybe just one -- the lender can repossess the vehicle. The allowable interest rate varies from state to state. For example, the Florida Attorney General's office explains that Florida law allows a title lender to charge a fee of as much as 30% per year for the first $2,000 borrowed; 24% per year for any amount borrowed between $2,000 and $3,000; and 18% on any amount borrowed above $3,000.

4. A high LTV home-equity loan is a loan secured by the equity in your home, but one that obliges you to pay more than your equity is worth. Some home-equity lenders allow you to create a loan-to-value ratio of as much as 125%. Getting a loan for more than your property is worth can be a gamble. Houses rarely sell for more than their fair market value. The interest rates on 125% loans are usually higher than lower risk, regular home-equity loans, too, says Gerri Detweiler of Sarasota, Fla., author of "Slash Your Debt." Also, all of the interest paid on the loan may not be tax deductible.

5. Advance-fee loans are those in which a company accepts a fee in exchange for a promise to find a lender who will make a loan or issue another type of credit. These companies claim a high success rate, even with borrowers with a tainted credit history. If you pay the fee before checking into the lender and the offer, you risk getting taken. The FTC says legitimate lenders may require consumers to pay application, appraisal or credit report fees, but these fees are never required before the lender is identified and the application completed.

All of these sound VERY sketchy to me. If you have any of them, I'd advise you to pay them off as soon as possible and never use that method again for borrowing. These are just way too costly and risky.

Big Jobs that Pay Badly

Here's a piece from the "kicked in the teeth" file. In most cases, extra education leads to a significant increase in income over the lifetime of the person educated. In these cases, the huge costs of education are justified -- the investment pays off handsomely. But here's a piece from Money magazine that focuses on the double whammy -- careers that require a lot of education (and hence cost) but don't pay that well. Here's the introduction:

Most of us work hard for a living. And if we're lucky, we're well compensated for the effort. But there are some jobs you should take only if you really love the work because the investment you make to get the job and the hours you keep aren't necessarily commensurate with what you earn.

Ok, so what are these "you better love them because the money/time commitment stinks" jobs:

Architects -- Architects may spend up to seven years completing undergraduate and master's-degree studies, or up to three-and-a-half years in a master's program if they majored in another area during college. To be eligible to take the licensing exam, they also must log three years as interns working for licensed architects. Architects with a master's might enter the work force with between $50,000 and $80,000 in student loan debt. But as first-year interns, they might earn only $34,000, the national median according to the 2005 compensation survey by the American Institute of Architects. Meanwhile, several steps up the ladder, senior architects earn a median of $68,900.

Chefs -- Culinary school graduates who might have spent two to four years and tens of thousands of dollars to get their degrees might get a low-level job on the kitchen line paying around $32,000 soon after graduation (more if they had experience prior to culinary school). By the time they work their way up to sous-chef after perhaps three or four years, they might make around $55,000, Hengst said. And the hours they log on their feet average about 12 hours a day, Hengst said, although 80- to 100-hour weeks aren't unusual for some.

Academic research scientists -- A career with one of the most disproportionate ratios of training to pay is that of academic research scientist. A Ph.D. program and dissertation are requirements for the job, which can take between six and eight years to complete. Add to that several years in the postdoctoral phase of one's career to qualify for much coveted tenure-track positions. During the postdoc phase, you are likely to teach, run a lab with experiments that require you to check in at all hours, publish research and write grants – for a salary that may not exceed $43,000.

By the grace of God, I decided to get an MBA and doubled my salary for two years of education. Plus, I worked every weekend as a grad assistant, and while I went to a Top 25 school, I graduated with less than $5,000 in debt -- and amount that was easy to pay off.

Update: Linking to the Beltway Traffic Jam.

12 Financial Rules Made to be Broken, Rule 8

Here's part eight of our series on the 12 financial rules that should (or shouldn't) be broken:

Rule No. 8: Save 10% of your income each year.

Verdict: Thumbs up. It’s a great habit to get into, and the earlier you start, the better off you’ll be. Be aware, however, that you may have to adjust the amount depending on your savings goals.

Let’s assume that your goal is retirement. You want to live on 70% of your current income (adjusted for inflation) when you stop working. At age 30, you’d have to save 11% of your income to reach that goal, according to an analysis by T. Rowe Price. Wait until age 40 to start saving, and the percentage jumps to 21%. But if by age 40 you had already saved an amount equal to your annual salary, you’d need to set aside only 14% a year.

Of course, if you want your investments to provide more than 70% of your pre-retirement income, you’ll have to bump up those figures. It’s best to work with a financial planner or use a retirement calculator to draw a more precise bead on how much you’ll need to save to reach your goal.

Short comment here: I agree.

Click here to read Rule 9.

How Many Credit Cards Should You Have?

Update (March 2009): Here's a simple answer: one credit card is all you need.

Here's a very interesting article from Yahoo on the right number of credit cards you should have. What do you think it should be? Zero? (The Dave Ramsey answer.) One? (Many people say this?) Two? (I'm in this camp -- or maybe the "one" camp). More? First of all, let's start where most Americans are today:

Most Americans carry between five and 10 credit cards, some people carry up to 50.

50!!!!???? Yikes!!!!!!! But how many should we have:

Most experts say there's no single magic number. Rather, the question can be answered by scrutinizing how much you spend and how much you can pay off. But there is an upper limit: Credit agencies warn that the more cards you have, the bigger risk you carry for racking up debt and damaging your credit.

Oh, great. One of those "suck you in with a catchy title and then don't give a real answer" articles. But there are some valuable tidbits in this piece. Here's what I found:

"Some people go hog-wild at Christmas and open lots of store credit cards to get that 10 to 15 percent off their purchase," says Cate Williams, vice president of financial literacy at Money Management International. "Relatively speaking, that is a good idea if you pay off the balance and close the card right away. If you don't, then you will be costing yourself more money in the long run when your credit score isn't up to par."

Each time you open a store credit card, 20 points are taken off of your credit score.

A good rule of thumb is to keep two to six credit cards. "Make sure the credit cards you have are Visa, MasterCard, American Express or Discover, because merchants will take almost any of them," he says.

Another rule of thumb to remember is to keep your debt ratio under 50 percent. If your credit card has a $5,000 limit, don't carry a balance of more than $2,500. "Keep credit purchases under 50 percent of the credit limit. (If you have a) $5,000 limit -- and you want to buy a $4,000 furniture set -- split the purchase onto two cards," says Williams. She says that creditors don't like to see a card almost maxed out; they look at you as a risk, someone who is using too much credit and has trouble paying off debt.

There is no one sure-fire way to have perfect credit. In fact, four credit experts were interviewed for this story and each had contradicting advice. However they all agreed on two major things:

Make your payments on time. One late fee or even two can really bring down your credit score and increase the rates on your other credit cards. You are the only person responsible for payment.

Do not run up your credit. Ideally, you should keep your balance low -- less than 30 percent of your credit limit on each card.

My thoughts:

1. Two cards is the "right" answer for me -- both major name brands. I carry American Express (cash back) and MasterCard (car repair credits).

2. Pay off your card every month. If you can't do that, don't charge it in the first place.

3. Get a system that ensures that you pay on time every month.

Best Money Post I've Ever Written, Part 6

This post continues our series from top personal finance bloggers writing about the best money post they've ever written. Today's entry comes from Mighty Bargain Hunter who tells why "Auto Leasing is Back -- and Better? How so?" is his best post ever:

The big financial websites usually have decent articles.  Sometimes, though, they give advice that isn't really that financially sound.  Part of what financial bloggers should be doing is filtering articles, pointing out the good stuff and the bad stuff, and not apologizing for their opinions if they're reasonable.

Leasing a car is rarely a good idea for long-term wealth building.  So, when this article talked about leasing incentives and things to look for in a lease, etc., I had to comment on this and remind people that there are other ways to get a car, most of them being cheaper in the long run.

I have to agree. It's a great piece, so stop by and check it out.

Click here to read part 7.

12 Financial Rules Made to be Broken, Rule 7

Here's part seven of our series on the 12 financial rules that should (or shouldn't) be broken:

Rule No. 7: A Roth IRA is always better than a traditional IRA.

Verdict: Thumbs up. The Roth IRA, with its promise of tax-free withdrawals in retirement, is the better choice, assuming you meet the income qualifications. The opportunity to use a Roth is phased out as adjusted gross income rises between $95,000 and $110,000 on a single return and between $150,000 and $160,000 on a joint return.

If your income is too high for a Roth and you’re not covered by a retirement plan at work, fund a traditional IRA and deduct your contribution.

Not eligible for a deductible IRA because you’re covered by an employer-based plan and your income is too high? Invest in taxable accounts rather than a nondeductible IRA. Now that the tax rates on long-term capital gains are so low, taxable accounts generally trump nondeductible IRAs. When you make withdrawals from an IRA, your earnings will be considered ordinary income and will be taxed at a rate as high as 35%. That compares with a rate of 15% (or less) on long-term capital gains in a taxable account. Unlike an IRA, a taxable account doesn’t require minimum distributions, and your heirs won’t owe income taxes on the earnings when you die.

I know it's nitpicking their word choice, but a Roth is not always better, just as their comments show (i.e. you're above the income limit). However, in most cases a Roth will be better. Better yet, fund your 401(k) to get the full employer match first.

Click here to read Rule 8.

12 Financial Rules Made to be Broken, Rule 6

Here's part six of our series on the 12 financial rules that should (or shouldn't) be broken:

Rule No. 6: Your life-insurance coverage should equal six times your annual income.

Verdict: Thumbs down. A better rule is eight to 12 times your annual income, says Robert Bland, chief executive officer of Insure.com. You’ll need the higher amount if you have young children and are the sole breadwinner in your family. If both you and your spouse work and you’ve saved enough to cover most of the kids’ college bills, the lower figure may be sufficient.

To get a more precise number, add up your family’s expenses, then subtract sources of income available after your death -- and buy enough life insurance to make up the difference.

When calculating coverage, don’t neglect the value of a stay-at-home spouse. In the event of his or her death, your expenses for child care and other services could increase significantly.

Forget any rule in this category, but instead follow their suggestion above: add up your family’s expenses, then subtract sources of income available after your death -- and buy enough life insurance to make up the difference.

Click here to read Rule 7.

Money Can't Buy Happiness

Recently I cleaned out a bunch of old files and one contained money articles I had saved over the years. It was from Money magazine's October 2004 issue and dealt with people's feelings on how money contributed to their happiness. Here's what they found:

85% agreed that "Money doesn't buy happiness, but it helps."

29% said "The more money I make, the more money I find I need."

39% reported "I am sometimes frustrated that I do not have as much money as others my age."

I have two thoughts on these findings:

1. Many people think that money and happiness are correlated and to a certain extent, they are right (if you have enough money, it does eliminate some of life's headaches and makes things a bit smoother). However, as wealth grows past a reasonable/average level, it often becomes negatively correlated with happiness. In the end, money certainly can not buy happiness by itself, and if you're not happy and get a lot of money, it's likely that you'll be even less happy.

2. I think 29% of the people in this survey were honest on part #2. In reality, needs seem to creep up with income for almost everyone.

MND: The Typical American Millionaire, Part 2

Here's another post in our series on the learnings from the book The Millionaire Next Door. (For the next few posts in this series, we'll be focusing on qualities of the typical American millionaire.):

Who is the prototypical American millionaire? What would he tell you about himself?

Many of the types of businesses we are in could be classified as dull-normal. We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors. (page 9)

I certainly believe this! After having several of the people listed above at my house the past few years, I can vouch that they're earning a good living! ;-)

Click here to read part 3 of this series.

Get Real about Working in Retirement

Here are the results of a survey that was featured in the August issue of Money magazine. It addresses the topic of how Baby Boomers plan to spend their retirements:

• 42% work and leisure
• 17% never work for pay
• 16% work part time
• 13% start their own business
• 6% work full time
• 6% other

This was surprising to me, but I feel it's pretty realistic. Given the state of most people's retirement savings (very small) and the amount Social Security contributes to monthly expenses (also small), more and more people will need to work during retirement. This isn't necessarily a bad thing -- the U.S. will keep a well-experienced and knowledgeable set of workers and the workers themselves will stay active (we've all heard the stories of people who retired and did nothing and were dead six months later). However, this could be an issue for younger workers (who may be competing for the entry-level part time jobs older people could be taking). Stay tuned.

Update: Time to link to the Beltway Traffic Jam.

12 Financial Rules Made to be Broken, Rule 5

Here's part five of our series on the 12 financial rules that should (or shouldn't) be broken:

Rule No. 5: Always go with a fixed-rate mortgage -- especially when interest rates are rising.

Verdict: Thumbs down. Even when rates are rising, you can save a lot every month by going with an adjustable-rate mortgage -- if you plan to move before the rate changes.

With a hybrid 5/1 ARM, your rate is fixed for the first five years, after which it adjusts annually. Rates on a 5/1 ARM are running almost one percentage point lower than rates on a 30-year fixed-rate loan. So, for instance, you’d pay $1,266 a month for a 5/1 ARM on a $250,000 loan at 4.5%, versus $1,403 for a 30-year fixed-rate mortgage at 5.4%. With the ARM, you’d save $8,220 in payments over five years and pay off almost $3,000 more in loan principal.

But if you stay in the house longer than five years and the rate on the ARM rises to 7%, your monthly payment would jump by $397 -- making it $260 more than the fixed-rate loan. One way to avoid that risk is to go with a hybrid 7/1 ARM, currently 4.9%, which locks in your rate for seven years.

What did they just say? I read that three times, and I'm still missing it. I think I need a bigger calculator.

My take on this is mixed. As with the rule last time, there's not one answer here that's "always" right, so I'd agree on that point. However, I would advise doing the math both ways, considering how long you'll be in the house as part of the equation, and evaluating your temperament (can you bear the "risk" of a potential rate increase?) as you decide. I guess this is what they're really saying, so I think I've talked myself into agreeing with them.

Click here to read Rule 6.

Diet Yourself Rich

I found an interesting fact in the September issue of Money magazine relating to wealth and weight. It reads:

They say you can't be too rich or too thin, but your chances of being rich go up when your weight goes down. Ohio State University research has found that white adults who reduced their body mass index (BMI) score by 10 points saw their net worth rise by about $12,000. Calculate your BMI at Fitnessonline.com.

I'm not sure what to make of this data -- other than I'm going to stop eating for a few days and see if I do better financially. Maybe it's all that saving on meal expenses that does it? ;-)

Best Money Post I've Ever Written, Part 5

This post continues our series from top personal finance bloggers writing about the best money post they've ever written. Today's entry comes from I Will Teach You to be Rich where Ramit says the following about “All About Stocks and Bonds”:

It describes what stocks and bonds are, how to pick them, and dumb mistakes people make about investing.

It's a good primer for people who are just learning about stocks and bonds.

Click here to read part 6.

New Best of Series: Best Financial Tips from FMF Readers

Our latest "Best" series is starting to fizzle out, and I think many of the personal finance bloggers out there are simply too busy to contribute. Therefore, I'm launching a new series from you -- the readers of Free Money Finance! It's called "The Best Financial Tips from FMF Readers" and can be from anyone who reads Free Money Finance.

Here's what you need to do to enter:

• Send me an email telling me what your best financial tip is (something like a great money saving tip, a practice you use personally that's been great for your finances, etc. Note: I am NOT looking for "great" stock tips.) ;-)
• Include your name as you would like it to appear on the site (if you want it to appear -- it doesn't have to be listed)
• Give me your blog's URL if you want it referenced (could be some good traffic sent your way. Note: It does not need to be a personal finance blog.)

That's it. The series will start soon, and I'll put the posts up on a first come, first served basis.

What's a Bond?

Here's an introductory piece that I thought a lot of people would be interested in. The article simply defines what a bond is, how they work, etc. The overview:

A bond is essentially a long-term loan. If a company issues bonds, it's borrowing cash and promising to pay it back at a certain rate of interest.

Now, the details:
 
Bonds sold by the U.S. government's Treasury Department are called "Treasuries." State and local governments issue "municipal bonds," while businesses issue "corporate bonds" (sometimes called corporate "paper"). Companies that may be perceived as low-quality are forced to offer high-interest-rate "junk" bonds to attract buyers. There's a higher risk that someday they won't have the cash to cover interest payments and the bonds will default.

Bond investors receive regular interest payments from the issuer at what is called the "coupon rate." For example, a $1,000 bond with a coupon rate of 10% generates payments of $100 per year. When the bond matures -- after perhaps five, 10, or 30 years -- investors get back their initial loan, called "par value." Most corporate bonds have a par value of $1,000, while government bonds can run much higher.

Sometimes a company will "call" its bond, paying back the principal early. All bonds specify whether and how soon they can be called. Federal government bonds are never called.

To calculate a bond's yield, divide the amount of interest it will pay over the course of a year by its current price. If a $1,000 bond pays $75 a year in interest, its current yield is $75 divided by $1,000, or 7.5%.

Once issued, bonds can be traded among investors, with their prices rising and falling in reaction to changing interest rates. For example, when rates fall, people bid up bond prices. If banks are offering 6%, an 8% bond starts looking good.

In the long run, stocks have outperformed bonds handily. According to Jeremy Siegel's Stocks for the Long Run, from 1802 to 2001 (yes, you read that right -- about 200 years), the stock market offered an average nominal annual return of 8.3% per year, compared with 4.9% for long-term government bonds.

The article has a bit more on bonds (plus a few links to even more information), so if you want to know more about this investment option, simply click through.

Best of FMF: More Ways to Create Cash

Here's another post of mine that you probably haven't read (I think I was up to three readers by this time -- me, mom AND dad) and even if you have, it's a great piece to review. It's called "More Ways to Create Cash" and is a follow-up to my post "Eight Unusual Ways to Create Cash".

Hey, who couldn't use a bit more cash? Check them out in case you'd like some yourself. Come to think of it, I'm going to re-read both those posts! ;-)

12 Financial Rules Made to be Broken, Rule 4

Here's part four of our series on the 12 financial rules that should (or shouldn't) be broken:

Rule No. 4: Buying a car is always cheaper than leasing.

Verdict: Thumbs down. It depends on your driving habits, the type of car you’re considering and what else you could do with the money.

One big benefit of leasing, says Michael Kranitz, chief executive officer of LeaseWizard.com, is that you can keep more money in your pocket. You don’t need a down payment and monthly payments are lower -- nearly half as much on some luxury models if you lease rather than buy. Invest the difference, and you could come out ahead.

Leasing is also the better deal if your car’s value declines more than predicted, says Kranitz. This can happen if the manufacturer offers rebates on its new cars or introduces a new model, making the used car less attractive. "You’d probably come out better at 36 or 48 months because the leasing company absorbs the depreciation," says Kranitz.

In general, if you buy a new vehicle as soon as your old one is paid off, leasing can save you money. Buying is a better deal if you hang on to your old car.

I think they are stretching here and playing on words. The "rule" they discuss is quoted as "buying a car is "always" cheaper than leasing." In personal finances, there are really rather few "always" rules. So from that standpoint, they are technically correct (it isn't "always" the best option to buy). However, in the vast majority of the cases, buying is going to be better.

I admit that they do have a point on people who want to have a new car every couple of years, but if you're reading this blog, you should be waaaaay past that issue.

Click here to read Rule 5.

More Car Saving Tips

A couple days ago I posted some tips from Yahoo on how to save on car expenses. At the end of that post, there were a couple suggestions from readers of the Motley Fool (where the article originally came from). Here are the two (great) tips:

From Craig Glaser: "You mentioned changing your oil as recommended. Changing your type of oil could have a much greater impact. I've used synthetic oil for the past 10 years. I change my oil only once a year or every 25,000 miles. Synthetic makes your car more efficient, you produce less waste (since you're not throwing out oil every 3,000 miles), and it saves you a lot of money. My first car in which I used synthetic lasted 156,000 miles. I would probably still have it, but it was totaled in an accident eight years ago. My current car has 136,000 miles, and I plan on keeping it the rest of my life -- hopefully 30 or 40 years!"

From Paul Wyles: "Regularly check your gas mileage -- how many miles you're getting per gallon of gas. If the gas mileage drops, it often indicates that something needs to be repaired. Example(s): The gas mileage dropped on my Dodge Grand Caravan, and I didn't pay attention to it. The engine had allowed a lot of unburned fuel into the exhaust system, which destroyed the catalytic converter, muffler, and resonator. Had I picked up on this earlier, the $600 repair would have been unnecessary, and I would have saved some gas, to boot. The second example involves the same vehicle. This time I paid attention to the reduction in gas mileage. I started to do a tune-up and found a bad spark plug wire. This time it was a $20 repair instead of replacing the entire exhaust system again. Also, I know that summer gas mileage is higher than winter mileage for my vehicles. I use a program to track all vehicle expenses and gas mileage. It tells me when scheduled maintenance is due, and I will notice when gas mileage drops. The program I use is Vehicle Record System, a shareware program that can be used free for up to three or so vehicles and for a registration fee can be used to track additional vehicles."

Great tips!

When to Ask for a Raise

Feeling underpaid at work? Thinking of asking for a raise? Well, according to Money magazine, now is the time you should be asking for it. Money says in its September issue:

Nearly 60% of large companies do salary planning in the fall, so make your bid for next year's raise now, not in November or December, when it may be too late.

I have found this to be true in the business world. If businesses can plan on an added expense, it's much more likely to go through than something they have to "find room for" in the middle of a fiscal year.

Three Critical Kinds of Savings

Here's an article from Yahoo detailing the three critical types of savings. The three are:

To put your savings into context, think of your finances as a wedding cake. The bottom layer is your long-term savings. The goal is to compound that long-term money into a wide, deep foundation for your finances. Ideally, it will eventually be the biggest piece of your cake, broad enough to support a long and active retirement. Since it's the bottom of the cake, it is the least accessible. Leave it alone until the proper time has come; otherwise, your cake will crumble.

Short-term savings first appear in the second tier of the cake. This is the big-ticket fund you plan to spend within about five years. It might be five years' worth of living expenses if you are already retired, a college fund if you have older kids, or a house down payment. This is also where you stash money earmarked for the new roof, new car, or even a major vacation. CDs or short-term bonds can be used for these predictable expenses. Being the middle tier, it should be accessible sooner than the stuff in the bottom layer, but not until the proper time.

The top tier of the cake is your rainy-day fund, your peace-of-mind money. It's there for medical emergencies, car-repair emergencies, pink-slip emergencies. Think of it as the credit-card-avoidance fund, if you like. This money needs to be readily available -- but not too readily available, if you know what we mean. A money market account with check-writing privileges would be a good place to keep it, but your everyday checking account probably would not. You don't want to start thinking that a trip to Cancun is an emergency.

Interesting article, though we do it a bit differently at our house. We combine the last two, so we end up with simply short-term savings and long-term savings (retirement and college are the two biggest parts of this group). Guess our wedding cake is a bit too short for Yahoo. ;-)

Free "How to Pay for College" Advice from Kiplinger's

I saw the following in the September issue of Kiplinger's Personal Finance magazine:

To get free, customized advice that addresses your specific situation, take advantage of Kiplinger's How to Pay for College hotline. From 9 am to 6 pm eastern on August 26 you can call 888-919-2345 and put your college-financing questions to members of the National Association of Personal Financial Advisors.

Hey, there's nothing like free financial advice, huh? If you need some, here's a great opportunity.

Best Money Post I've Ever Written, Part 4

This post continues our series from top personal finance bloggers writing about the best money post they've ever written. Today's entry comes from Wealth Junkie where Alexander says:

The best money post I've ever written has to be "Crawling Out of Debt".  I think it describes a struggle that many of us face in today's society. It took me some time to accumulate my debt, and it took a lot of effort to change my spending patterns. I learned a great deal in the process, and I am glad I had the opportunity to share. 

I was just getting our site started then. I have always felt that a lot of people never had the chance to read it.

It's a great post -- very honest indeed. It will be well worth your time to read it.

Click here to read part 5.

Free Money Finance in Carnival of the Vanities

Free Money Finance is part of this week's Carnival of the Vanities with my post on Best Advice: Financial Advice from Successful People, Part 1. Stop by to see some great articles on a wide variety of topics.

12 Financial Rules Made to be Broken, Rule 3

Here's part three of our series on the 12 financial rules that should (or shouldn't) be broken:

Rule No. 3: The percentage of stock in your portfolio should equal 100 minus your age.

Verdict: Thumbs down. It’s not a bad guideline, it’s just too conservative. Think of it as a baseline figure rather than a hard-and-fast rule.

Consider a couple who retire at age 65. With only 35% of their portfolio in stocks, says Evelyn D’Amico, a financial planner in Paoli, Pa., "their assets will have a tough time growing enough to keep up with inflation." D’Amico recommends that her clients have at least 50% of their retirement assets in stocks at age 65.

For a more aggressive guideline, modify the rule to subtract your age from 110, and then multiply that figure by 1.25, recommends Stuart Ritter, a financial planner with T. Rowe Price. Using that formula, our 65-year-old couple would keep 56% of their portfolio in stocks. For a 50-year-old, the stock portion would be 75%. If you can count on a traditional pension to provide a guaranteed annual income, you can afford to be even more aggressive.

Bear in mind that this rule applies to the long-term portion of your portfolio. Money you’re saving for goals that are fewer than five years away should be invested more conservatively.

Investing is almost a case-by-case basis, and tolerance for risk and total assets are two of the main variables, so there's really no standard rule in my mind.  In fact, if people save like they should during their working years, they can actually have very little in stocks and still have quite a good income available at retirement.

Click here to read Rule 4.

Net Worths of Financial Bloggers

A couple more updates on net worths of financial bloggers:

The $1,000,000 blog is above water with a net worth of $676

The Alpha Guy is at $26,973

Good, Better, Best Money-Saving Ideas: Appliances

Today we're concluding our series from Yahoo on "Good, Better, and Best Money Saving Ideas" . Again, the ground rules:

We asked experts to provide a simple tip that will easily save money (good), another tip that might take a little more time or effort but which will save more money (better), and a more extreme tip that will help readers save the most -- but which would require the most thought or effort (best).

Here is what Yahoo names as good, better, and best ideas when it comes to saving on appliances

Good: Before you buy any appliance, call the electric company to see if it has rebates available for special models, says Kay. It sometimes makes such offers to encourage you to buy an energy-efficient model.

Better: Take advantage of the Internet. "Go to www.froogle.com and find the very best price on the make and model and style that you want," Kay says. "Once you've found the best price, print it out and take it to a local vendor and ask them to match it."

Best: Buy barely used. "Some people upgrade their appliances like they do their cars, a new one every year," says Kay. "I purchased a one-year-old washer and dryer for 50 percent off." It still had a warranty. For smaller appliances, Kay suggests going to garage sales and swap meets. "You wouldn't believe what you can buy from people who have been watching QVC a little too much," says Kay. And don't forget eBay, the online auction site, which is a great place to get appliances. Make sure you're buying from a reputable known source that has a good rating, Kay cautions.

Some great ideas here! I'm going to take advantage of them the next time we need an appliance.

Star Money Article: Ten Things You Should Buy to Save Money

Financial bloggers (myself included) talk a lot about saving money by NOT buying things. Well here's an article that does the opposite: it gives ten things you SHOULD buy to save money.

The summary list:

• Programmable Thermostat
• Faucet Aerator
• Compact Fluorescent and LED Lights
• Light-emitting diode (LED)
• Things You Use When They Go On Sale
• Rechargeable Batteries
• Safety Deposit Box
• Clothes Line or Clothes Rack
• Water Filter
• Low Flow Shower Heads

Stop by to read why you should buy each of these and how much they can save you. It really adds up, and that's why I give this post a Star.

MND: The Typical American Millionaire, Part 1

Here's another post in our series on the learnings from the book The Millionaire Next Door. (For the next few posts in this series, we'll be focusing on qualities of the typical American millionaire.):

Who is the prototypical American millionaire? What would he tell you about himself?

I am a fifty-seven year-old male, married with three children. About 70 percent of us earn 80 percent or more of our household's income.

About one in five of us is retired. About two-thirds of us who are working are self-employed. Interestingly, self-employed people make up less than 20 percent of the workers in America but account for two-thirds of the millionaires. Also, three out of four of us who are self-employed consider ourselves to be entrepreneurs. Most of the others are self-employed professionals, such as doctors and accountants. (pages 8-9)

Interesting facts about both the age and employment of millionaires. Shooting to be a millionaire by 30 probably won't work using the methods talked about in this book, but they do seem to work over time.

Click here for part 2 of this series.