Asking a persons weight is considered impolite in most circles, but so is talking about money.  So when I read that half of Americans would rather give up their wight than reveal how much credit card debt they have I was shocked.  Half of Americans, the country where obesity is running rampant, were more ashamed of their credit card debt than of their waist line.  In the last 18 years credit card debt is up 400% in the U.S. (adjusted for inflation).  We have a major debt problem and from what I have seen people are just unaware of how to manage money.  Fo for the next couple of days I am going to look at how to get started getting out of credit card debt.  The process is easy to understand but takes some guts to get going.  I hope anyone out there that is in a debt bind will take these posts to heart and will put themselves on the path to debt freedom.

The stock market is a very fickle beast and people’s reaction to it is manytimes counter productive. Every time you hear someone talk about the market you will get the age old addage of “Buy low, sell high,” but so many people do not listent to the logic in that. Instead when the stock market drops people panic and take their money out in order to keep from losing more. And when it is going up they dump money in ensuring they buy at a higher price. The only thing that these brash reactions accomplishes is to make sure that over time you do not get the greatest benefit of being in the market. A perfect example of this reactionary nature is the American Funds family of mutual funds. They saw a 7% decline in assets from February to April. We aren’t talking about money value here, we’re talking about number of shares owned in their funds. Vanguard saw a decline over that period of 4%. THIS IS CRAZINESS!!!

The average investor cannot time the market. It just takes too much time and the learning curve is steep. What we can do is spend time in the market. The market has proven to go up over time (at about 11% a year over its entire history). So instead of selling off at a loss why not just let your money sit and grow. Check on things once or twice a year to make sure you are properly diversified and let it sit. This constant fretting over the exact price of our portfolios only brings stress and bad decisions.

A distressing part of people feeling the crunch of rising energy and food costs is that when they go out to eat they are not tipping as well as they were a couple of years ago.  Servers are reporting a decline in tip income.  This does not reflect the decline in traffic that many mid and upscale restaurants are experiencing but an actual decrease in per customer tips.  This means people are getting stingy with the tip money.  Of all the areas I encourage people to cut back this is not one of them.

The rules that I use are that if a person gives average service they get 15%, above average 20%. below average 10% (even though I am always tempted to leave 2 pennies).  If someone give amazing service and goes well beyond the call of duty I will tip 25%.  This rarely happens so I have to really be wowed to get to that point.

To some this method seems stingy and others it will seem excessive, but having been a server in the past and with a few friends still in the profession I find that these percentages are what is expected from the industry.  The tips these individuals receive is their real income.  Their hourly wage is very low and basically takes care of the taxes they have to pay and nothing more.  So next time you go cheap on the tip remember you are hurting the person that has been working hard to keep you happy.

It seems that almost no one is teaching their kids about money.  Each year the Federal Reserve does a study to see how much high school and college students understand about money.  The average high school student scored a 48 out of 100, while the average college student only got a 62.  This means that the average American fails to grasp a basic understanding of money.  Why is this happening?  I think the reason is three fold

1.  Schools do not teach the basics about money.  Home economics is not about the economy of the home.  In most schools there is no real mechanisms to show how to balance your budget or what debt actually costs you over a long period of time. 

2. It has become impolite to talk about money.  People find it offensive to be candid about how they handle their finances.  This is probably because…

3. Parents are misbehaving with their money.  You see if we do not talk about it we do not have to evaluate what we are doing with our money.  Simply put out of sight out of mind.  If you are handling your money, poorly and you have children, the only thing you are teaching them is how to handle money poorly.  This is a great reason to get your finances straight so that you can model proper behavior for your kids.  Also, by reigning in your mismanagement, you are able to properly save for retirement and for their college.  Now instead of saddling them with taking care of you in your old age and with large college loans.

So if you don’t know anything about money go out there and watch a video or read a book.  If you don’t even know where to start I would look at I Was Broke Now I’m Not.  It is the story of how Joe and Jenn Sangl went from spending more than they made to having enough surplus that they could take a 50% pay cut in order to follow their dreams.  It teaches all the basic principles you need to win with money and has links to tons of free tools to help you along the way.

Did you ever mistype an address on your computer only to get some weird looking site?  A common tactic by identity thieves is to register a domain name that is similar to that of a popular website, ex. googl.com instead of google.com.  They then have a program on there called a key logger.  A key logger is a piece of malware (similar to a virus) that lets the thief know all the keys you are typing on your computer as well as the web pages you are visiting.  Now imagine if you got one of these programs on your computer and then went and did your online banking.  Obviously it could get ugly fast from there.

So when I cam across HauteSecure while listening to Clark Howard on the Radio I thought this would be a great service to help others.  The really cool thing about this program is that it integrates blocklists from three different sources and then also takes content from the users.  So if you find out about a site that has a virus or spyware and report it you are helping out everyone who uses the HauteSecure software.  So far it is getting top ratings from sites like Download.com (part of Cnet who does tons of ratings on software and technology).  Installation and scanning were a snap and in my opinion this is a must have for keeping you information and computer safe.

The average car loan in America is now 70 months.  That right 70!! What are we doing to ourselves?  I cannot even look at the math involved in this.  Here is my experience with car loans.  I purchased a vehicle in 2004 and took out a loan for 75% of the value (25% down).  It took me 19 months to pay that vehicle off.  I NEVER want to go back to making car payments.  It sucks the life out of your budget.  $389 per month is the average car payment in the US.  Not having that hanging over you is like getting a $6000 per year raise (before taxes).  You see our problem isn’t that we do not have enough money.  It is that we spend our money in very poor ways.  Cars go down in value 99.9% of the time.  So when you are done paying off that vehicle it is worth as little as one fifth of what you paid for it (if you bought a Dodge even less).  So instead of going out and buying that shiny new vehicle why not deal with the clunker a little longer and save up your money for a nice used vehicle (that vehicle I puchased above only had 28,000 miles on it).  This way you do not take the big cut in value and get a great vehicle.  There is only one way to keep the house from winning in the game of car loans, and that is to not play.

One of my biggest complaints with Americans is that they are afraid of asking for a deal.  Many people just want to take the price that the store gives you and that is that.  A big area where you should always ask is your credit card rates.  Just by asking for a lower rate most card companies will shave 5, 10, or 15 percent of the rate you are getting on the card.  Whenever you do call first ask for zero percent.  Be nice and friendly and explain you are trying to get out of debt.  Many times they will come back with a counter offer that is not zero but is tons better than what you have at that point.  If you have racked up a bunch of interest already they will many times give you the 0% for a specific amount of time.  This is a great way to make your payments count more toward the principle and get out of debt faster.

Stimulus payments will start going out next week if you were one of the people who asked for them to be directly deposited into your checking account.  If not, then you will get a paper check by the end of May.

The real question is what to do with this money.  Many people will blow the money, spending it on frivalous items like televisions and game consoles.  I will be purchasing a new air conditioner for the upstairs of my home.  We have already gone one summer without central AC up there and another SC summer with window units starts to hurt the electric bill, not to mention improving the value of the home.

What are some ideas for using your stimulus check to really improve your life?  Instead of blowing the money why not put it away as a beginner emergency fund so that you can start paying off debt.  Or, if you have an emergency fund you can apply that money to debt that you have and take a big chunk out of it.  If you are worried about blowing the money you should start planning how you are going to use it right now, before you get it.  Do you have any other ideas of good ways to use your stimulus check?

Yesterday I posted about how the price of so many things seems to be rising.  To combat inflation we have to change the way we purchase everyday items.  Now some of you are very frugal by nature and have practiced controlled purchasing for a long time.  Others, like to purchase whenever it is convenient and do not want to bother with the “hassle” of controlling the spending.  Then there is the third group that looks for a deal but also will purchase out of convenience.  Each of us can do more to tighten the belt in some area of our spending.

The first step is to have a plan.  If you do not have a budget then you do not have a plan for your money.  This means your money ends up going to things that you did not expect at the beginning of the month.  Most people have some sort of plan for their life and it helps them to do more than they thought possible.  The same principle works with money.  If you do not have a budget you can read a series of posts I did on budgeting here.

Once we know how much you are currently spending on everything you can determine what areas  we are overspending.  Maybe you are eating lunch out five times a week at $8 a meal.  That is $200 a month.  Instead you could get three items off the dollar menu and spend only $60.  Or get really crazy and take your lunch and spend less than $40 on lunch food.  This is just one example of a simple way to cut a bad spending choice out of your budget and make some room for the rising prices.

The other key step is to reduce the amount of debt you have, preferably to none.  I know this is not something people can do overnight, but if you have a car payment that is $375  a month maybe you could sell the car and get a beater that will get you from point A to point B for only $1500.  Will it be as fun to drive?  Absolutely not!  It will however add $375 back into your budget.  I know cars are fun but so are vacations, home improvement, hobbies, and whatever else floats your boat.  $375 dollars a month translates into $4500 a year.  That is a pretty nice vacation.  Or that amount of money could buy you a pretty nice used car.

I realize that both of these ideas are somewhat abstract.  To have  a more practical application, tomorrow I will show you how my wife and I are only using $340 per month for groceries and eating out.  We have not changed this number in the last two years (since we moved and got settled) and are not going to change it because of the strategies I am using to keep our bills down.

Are you doing business with a shady character?  You may not know it but you probably are.  Turns out many of the country’s top corporations are not good at handling personal information and are the main place where ID theft occurs.   The Berkley Center for Law and Technology published a paper at the beginning of march outlining which companies have the highest rate of id theft.  Number one was Bank of America.  Rounding out the top five were were AT&T, Sprint, JP Morgan Chase, and Capital one.  Turns out the monster banks may not be looking out for us after all (like we didn’t know that already).  The best bank at keeping your info safe is ING Direct.  This seems counter intuitive since they are an online bank, but they are very careful with your information.  I love their log in process because it makes it very difficult for your account to be hacked.  You can check out the rest of the list here.  Looks like it may be time for me to write a letter to my cell phone provider too.