Score a Copy of your Credit Report

As I was chatting with a dear friend the other day, I was made aware of an alarming reality. Some think that checking your credit report will negatively affect your credit. Let me dispel this myth now: checking your own credit report will NOT lower your score!!! Check the Experian website right now! Worse, some people do not know where or how to access their credit reports. Not to mention, the lack of awareness that one is ENTITLED to three FREE credit reports per year under FEDERAL LAW. You should thus be checking your credit three times per year.

Let.Me.Break.It.Down.

There are three credit bureaus: Equifax, Experian and Transunion. For consumers like you and me credit bureaus are in the business of credit and information management. They are charged with maintaining our credit histories, explaining how to dispute discrepancies on our credit reports and helping us understand how to avoid, defend against and recover from fraud.

Check Your Credit Score and Check It Often

Well, you don't have to check it compulsively, but you should at least know what it is and its implications. A credit score is a measure of creditworthiness. Your score will determine whether or not you are a "good" loan candidate (i.e., you're more likely to repay your loan ON TIME and thus are considered a "low-risk" borrower), the amount of credit extended to you (like $200 versus $20,000) and the interest rate you are required to pay on loans/credit issued. Low credit score= poor loan/credit terms (FOR YOU).

The following factors affect your credit score:

• Payment History- Late for bill payments, in collections or bankruptcy? WHAP! Ouch, that hurt!
• Outstanding Debt- If you have 35% or more debt to credit ratio then...POW! IN YOUR FACE! Dammit that really hurts! Under 35% debt to credit? Sounds good to me.
• Credit Account History- Established a record of credit AND been making payments on time? What a fine young gal you are! Keep these accounts open and continue to make payments on time if you have any left, especially before large purchases that require loans. An established credit history in good standing will help your credit. Bad Credit History? THUD! OMG, you dropped an anvil on my foot!
• Recent Inquiries- Applying for new credit too often hurts your credit score because creditors check your credit report creating a "hard inquiry." Hard inquiries hit kinda hard.
• Types of Credit- Just make sure you have a "healthy balance" of credit accounts and loans (for a total of four to six accounts).

Your credit score can vary depending on the source from which you received it because there are thousands of algorithms used to compute a credit score. The range that your credit score falls within should be consistent though. Lenders/Creditors have the final say as to whether you will be extended or denied a loan/credit so ask your potential lender/creditor for their idea of "good."

OFF TO THE RANGES (FICO SCORE 300-850)

Oh Heaven: 800+

The Good: 700-799

The Bad: you fall somewhere below 650

The Ugly: Must I go there?

Note: your credit score can vary by as much as 40 points between the three credit bureaus, so check your credit and be sure to clear any inaccuracies.

If you fall under the "Bad" or "Ugly" categories creditors look at you, THEIR FACES GROW LONG AND HARROWED and THEY internally SCREAM, "You're NOT Worthy!"

Oh boy, that was harsh. You can bounce back!

RESILIENCE

Repeat after me: PAY, REDUCE, REMOVE, CURB!

• PAY your bills on time all of them. If you know you're nearing the end of a billing cycle and you can't pay at least call whomever you owe and set up a payment arrangement.

• REDUCE your debt. If you have credit card debt you canNOT pay the minimum payment and expect to EVER pay off your debt. Start paying quadruple the minimum if you can. If not, negotiate a lower rate with your credit card and gradually consolidate balances. If you feel confident that you can pay your debt off in a year then perhaps look into a balance transfer credit card that offers 0% interest for one year. Transfer manageable balances to that card. Pay the principal, INTEREST FREE.

• REMOVE any inaccuracies on your credit history if they exist.

• CURB your credit happy trigger. STOP applying for credit. That includes credit cards, loans, etc.

You my friend are now on the road to recovery!

SOME CREDIT SCORE DON'T YOU DARES (courtesy of Transunion)

• Close the oldest account on your credit reports. This could cause your credit history to appear shorter and could harm your credit score.
• Throw away old cards and expect your accounts to close automatically. The safest way to close an account is to send a certified letter to the customer service department of the credit company. You should receive an account closing confirmation letter in 10 days.
• You shouldn’t be pressured to cancel several accounts all at once. Gradually paying down and closing accounts may be the best plan if you are unsure about the impact on your credit score or the amount of debt you need to carry. If you want to cancel numerous credit accounts, spacing the closures over time will reduce the chance of attracting negative suspicion from potential creditors.
• Avoid over-consolidating balances onto one card. If your credit balances rise to above 35% of your available limits, you may see a drop in your credit score.
• Don't forget to check your credit reports for updates and errors after you close your credit accounts. Wait thirty to sixty days for the account to be marked as "closed" on your report. The account and your payment history though, will remain on your report for seven or more years.

I SWEAR I DIDN'T DO IT!!!

Found something on your credit report that you think is inaccurate? DISPUTE IT! It's your right to have any inaccuracies investigated. First you should play Watson yourself. Contact the creditor or lender that has made the alleged mistake. You should find their contact information under "Contact Information" at the bottom of your credit report.

Case is proving difficult to solve, eh? Call for back up! Contact one of the credit bureaus (if you choose by mail, use certified mail):

Equifax Online

By Mail:

Equifax
P.O. Box 740241
Atlanta, GA 30374-0241

Experian Online

Transunion Online

By Mail:

TransUnion
2 Baldwin Place
P.O. Box 2000
Chester, PA 19022

The credit bureau(s) will ferret out any inaccuracies, if any exist (sometimes we forget about that missed credit card/loan payment or two). There is no guarantee that a change will be made, but if one is made, you will be notified.

Keep Thieves Away from Your Credit (or as I like to call it, YOUR COOKIE JAR)Courtesy of Equifax

• Be careful about giving out personal information. Whether on the phone, by mail, or on the Internet, never give anyone your card number, Social Security number, or other personal information for a purpose you don't understand. Ask to use other types of identifiers when possible, and don't carry your SS card. Be sure to keep it in a secure place.
• Protect your mail. Tear or shred charge receipts, credit applications, insurance forms, bank statements, expired charge cards, and pre-approved credit offers. Deposit outgoing mail in post office collection boxes or at your local post office. Promptly remove mail from your mailbox after it's delivered. If you plan to go away, call the U.S. Postal Service at 800-275-8777 and request a vacation hold.
• Guard your credit cards. Minimize the information and the number of cards you carry in your wallet. If you lose a card, contact the fraud division of the credit card company. If you apply for a new credit card and it doesn't arrive in a reasonable period, contact the issuer. Watch cashiers when you give them your card for a purchase. Also, when you receive a new card, sign it in permanent ink and activate it immediately.
• Pay attention to billing cycles. Contact creditors immediately if your bills arrive late. A missing bill could mean an identity thief has taken over your credit card account and changed your billing address.
• Safeguard personal information in your home. Especially if you are having service work done in your home, employ outside help, or have a roommate.
• Find out who has access to your information at work. Verify that records are kept in a secure location, and are accessible only to employees who have a legitimate reason to access it.
• Be smart about passwords and PINs. Memorize your passwords and personal identification numbers instead of carrying them with you. Avoid using easily available information like your mother's maiden name, your birth date, the last four digits of your SSN or your phone number, or a series of consecutive numbers.

The Thief Got into Your Cookie Jar, but How?!

• Going through your mail or trash, looking for bank and credit card statements, pre-approved credit offers, and tax information.
• Stealing personal information from your wallet or purse such as identification, credit, or bank cards.
• Completing change-of-address forms to redirect your mail.
• Obtaining your credit report by posing as a landlord or someone else who has a lawful right to the information.
• Acquiring personal information you share on unsecured sites on the Internet.
• Buying personal information about you from an inside source -- for example, a store employee that gets your information from a credit application or by "skimming" your credit card information when you make a purchase.
• Getting your personnel records at work.

Now He's Using Your Personal Information to Steal More Cookies!!!

• Opening new credit card accounts using your name, date of birth, and Social Security number. When they use the credit cards and don't pay the bills, the delinquency is reported on your credit report.
• Establishing phone or cellular service in your name.
• Opening a bank account in your name and writing bad checks on the account.
• Counterfeiting checks or debit cards, and draining your bank account.
• Buying cars by taking out auto loans in your name.
• Calling your credit card issuer and, pretending to be you, changing the address on the account. Bills get sent to the new address, so you don't realize there's a problem until you check your credit report.
• Filing for bankruptcy using your name to avoid paying debts they've incurred under your name.

Victim of Fraud? FIGHT BACK! (from Experian and Equifax)

• Place an Initial 90 day Fraud Alert by calling any one of the 3 nationwide credit reporting companies. The agency that accepts your request will share your request with the other two credit reporting companies, which will add the alert to your file or request that you provide them additional information. You will receive a confirmation when an alert is added to your file.
• Inform creditors- Contact each creditor with the fraud account and inform them that the account is fraudulent.
• Document all contacts- Make notes of everyone you speak with; ask for names, department names, phone extensions and record the date you speak with them.
• Understand the process- Each creditor may have a different process for handling a fraud claim. Make sure you understand exactly what is expected from you, and then ask what you can expect from the creditor. At the conclusion of an investigation, ask the creditor for a document that states you are not responsible for the debt.
• Follow up- Make sure everything a creditor/credit reporting agency has requested is received. It is always a good idea to place a follow up call or send a letter for confirmation.
• Review reports regularly- Obtain another report several months after you believe everything is cleared up. If a new fraudulent account is discovered, you know how to handle it. If your credit report is back to normal, you can feel confident that all issues were resolved as you expected. It would be a good idea to check your credit report again in six months and a year later.
• Don't throw away files- Keep all notes and correspondence in an accessible file in case they are needed in the future.
• Place a Security Freeze on your credit file. You have the right to place a security freeze on your credit file under state law. To determine the availability of a security freeze for your state and to determine the fees for placing and temporarily lifting a security freeze, please click here. A security freeze will limit the three credit reporting agencies from reporting your credit file to third parties, such as credit grantors and other companies and agencies, except those exempted by law or those for whom you contacted us and requested that we temporarily lift the security freeze.

MORAL OF THE DAY: Check your credit report and check it AT LEAST three times per year. It's the best and easiest way to detect fraud.

Baby Steps: From Savings to High Yield Savings Accounts to...journeying toward higher interest bearing pastures to be continued

As I sat across from my local consumer banker asking about Individual Retirement Accounts (IRA's) and other saving options, I was shocked, embarrassed, saddened and upset when I learned that I had allowed myself to be CONNED out of interest on my money! My savings account was only paying me .2 percent interest on my balance. That means for every dollar I deposited, I didn't even earn one cent I earned .002 cent(s?) monthly!!! (Remember .2 percent is .2/100=.002 NOT 2 percent which is 2/100=.02). Meanwhile, the bank was probably using my money to make loans that yielded more than ten times my measly .2 percent interest; that's what banks do with the money you deposit. They make investments/loans which earn interest. They repay you for your kind gesture by giving you just a taste of interest and turn a profit for themselves. Outraged that this was being pushed as a good idea, I decided to search for something better.

I consulted bankrate.com to find a solution. I wasn't ready to really invest because I didn't have the time to pore over prospectuses of various mutual funds, exchange traded funds or assemble a portfolio myself; nor did I have the funds to hire someone to do this for me. I did however, have the moxie to look into short and long term certificates of deposit (CD's). After a few hours of researching SAFE options, CD's, I realized that they weren't that safe after all. Don't get me wrong, CD's are safe in that you can't lose the principal (the initial sum) you put in and are guaranteed to reap some type of return. However, CD's are NOT SAFE in THIS MARKET because one's money is tied up while the Federal Reserve cuts interest rates, more specifically the Federal Funds Rate, all willy nilly.

The federal funds rate is used to exercise control over interest rates and the economy. Banks are required to hold some of our deposits in reserve; reserves don't earn interest. To satisfy both the reserve requirements and the absolute need to profit, banks lend each other money on an overnight basis. Increasing the federal funds rate increases the cost of borrowing in the overnight lending market banks use to meet reserve requirements. The Federal Reserve achieves this rate hike by removing money from the Federal Reserve system, thereby contracting the money supply. In turn, short term rates that banks are willing to offer on money market accounts (MMA's), CD's, and savings accounts increase because banks are trying to attract your money to these accounts. The fed funds rate was 5.25% in June 2006. Now it hovers around the 0-.25% range. The subsequent cutting of the fed funds rate from June 2006 to present has depressed short-term interest rates. The rate cut basically means that there is an influx of money in the Federal Reserve System (money supply expands), so banks don't have much incentive to offer high rates on precious deposits into MMA's, CD's and savings accounts. Hence, the pitiful fall in three month CD yields from 2.76% in June 2006 to .75% in April 2009.

THINK OF IT THIS WAY. You let me hold $100 of your money for three months under the agreement that I will pay you five percent interest on it every month with one agreed upon exception. That is, if my economic circumstances sour, say: I lose my job, then my house, and lastly the cost of gas and commodities like rice skyrocket, I can pay you less and less interest. When I lose my job, I'll pay you three percent on your money. I lose my house, you get two percent on your money. The cost of rice goes through the roof, so dammit I'm hungry. In the same month the price of gas becomes explosive. Now, I can't even drive to the grocery store to pick up some Ramen Noodles because gas has just hit $4.00 a gallon and we live in NJ, so that's cheap compared to the rest of the country. I commit the ULTIMATE OFFENSE, and like a boldly indignant savings account, I pay you .2 percent on your money. You make $5.27 instead of $15.76 for a grand total of $105.27 rather than $115.76.

	Principal Amount	Month 1 (interest; balance)	Month 2 (interest; balance)	Month 3 (interest; balance)
Original Plan (5%/month)	$100	5%; $105	5%; $110.25	5%; $115.76
Change in Economic Circumstance	$100	3%; $103	2%; $105.06	.2%; $105.27

How would you feel? EXACTLY.

I didn't feel comfortable locking my money into a similar situation (i.e. a CD) for even three months--while all the turmoil listed above was actually happening and the Federal Reserve Open Market Committee tried to fix it all by cutting interest rates--if I could move it into another account earning more interest that was just as safe. In walks my solution.

I set my eyes on High Yield Savings Accounts (HYSA's)! I batted my lashes as if to say come hither my object of affection, but not too close I must inspect you first. HYSA's are online savings accounts. Banks like HSBC and ING (NOT AIG) can pay you more interest on your money because they reduce operating costs by conducting all business online. You receive your statements and account updates and transfer money online. This is much like what most banks are trying to move towards--ever heard of online banking? You do have the option of going to an ATM, at least with HSBC, but why when you can transfer money from bank to bank for free? Now, HYSA's work much like CD's in that interest rates they offer vary with the Federal Funds Rate. HOWEVER, unlike CD's, you are NOT usually bound to leaving your money in the bank's hands. Some require a minimum sum to open that may range from zero dollars to $10,000. And some require a minimum balance to avoid fees. I steered clear of all those that had anything other than a $0 minimum balance. I want the luxury, forget that, I am entitled to move my money wherever I so choose. The only downside I've experienced is that transfers are NOT INSTANTANEOUS! UGH. I have to wait four days to get my money, but that forces me to plan ahead. If anything that makes one all the more vigilant over his or her finances. I see no harm there. Also, HYSA's still tend to offer higher returns than even 1 year CD's which average returns of about 1.29% as of April 2009. My HYSA currently yields 1.65%. Check out your options here.

Did I say only one? There is ONE OTHER DOWNSIDE. I COULD BE EARNING MORE INTEREST ON MY MONEY. And so the journey towards that end must move onward...stay tuned.

Put Dollars in Your Piggy Bank With (Painless) Change

FOOD & DINING

• HOST A POTLUCK- Brunches, lunches and dinners add up. Many times we go out to "dine" for the company of our friends, the quality of the food or both. A great way to stop spending AND enjoy both, given that you and your friends can cook up some delectable dishes is by hosting a potluck. Poor Girl Gourmet is a fantastic blog that instructs you on how to create "low-budget, high quality food." The author makes cooking fun and though I'm a beginner, the food comes out absolutely delicious. Just ask my Mom. Anywho, offer up your place to avoid the drive to and fro. Whatever you buy, buy the store's generic version if you feel it is close in quality to what you'd normally get. It usually is. Set the item(s) out in nice dishes/containers. Your friends won't know the difference and it'll look like you tried. EAT, DRINK & BE MERRY!

• CAN'T I GO OUT SOMETIMES?!- Grab coffee/hot cocoa or dessert instead of a meal. You can spend just as much time with friends and eat something tasty, but instead of spending $15-$200, you can spend $5-$12, depending on where you go and what you order. The point is to maximize quality time and minimize money spent. Added tip, get a somewhat large dessert and split it with your friend; do this at meals too.

• BUY GENERIC- I alluded to this above. Buy store brand groceries instead of name brands. This saves you money and most times the food tastes just as good.

• HIT UP THE DISCOUNTERS- COSTCO, WALMART and TARGET are faring better than most retailers in this recession because they offer their customers deals. Their non-discretionary items like food and prescription drugs showed strength according to May 2009 retail reports though same-store sales fell more than Wall St. analysts expected due to a tapering in discretionary spending: household items and appliances, socks, pajama's, travel (Costco only), etc. Nonetheless, it's cheaper to go to them for both discretionary and non-discretionary items. CAUTION: Do NOT buy in bulk if you live alone with your cats or dog. This practice is most economical and practical for FAMILIES.

ENTERTAINMENT

• UNSUBSCRIBE- CANCEL your MAGazine subscription(s) and STOP buying books. Get a FREE library card, borrow and read. Some libraries belong to a consortium. So, if your library doesn't have the book you want another might. And as a convenient bonus, sometimes you can arrange for the book to be delivered to your library.

• BORROW, USE & ALWAYS RETURN- I HARDLY ever go to the movies, EVER!
  

• I borrow DVD's from friends or go to their houses for a movie night.
• Use your library. Some, like mine, allow you to borrow DVD's for free or $1 per night.
  
• Redbox: 15,000 convenient vendor machine locations. Choose and reserve your movie online and of course they have new releases. Plus, you can read the synopsis and watch the trailer online. Pick up your movie at the location you've designated and return it at any Redbox location. All for the cost of $1 + tax per day. redbox.com
  
• Finally some do the Netflix and Blockbuster thing. Eh...unless you watch more than nine movies a month and you're really bad about returning things on time, they're not worth it to me.

• THE GREAT OUTDOORS- Go for a walk, have a picnic, lounge on a park bench with a book and enjoy your surroundings. Sit on that bench and people watch. Go on a hike. Bike or roller-blade on hot asphalt. Play golf on your local park's course, tennis on its courts, games with friends on its fields. Feed the ducks and geese; they're feeling the recession too. It's all FREE and FUN.

• GROUP RATES- Get a bunch of your friends and tell them to invite their friends on trips to amusement parks and the beach. This cuts down on parking fees, gas, AND admissions rates if you have enough people. You can all go your own ways once you get in if you don't enjoy the company of everyone in the group. GRRR...play nice!
  

GREEN HOUSE

• IT'S ELECTRIC- Unplug things that you don't use. If you can plug electronics that are clustered together into a SURGE PROTECTOR (NOTE: I DID NOT SAY EXTENSION CORD. THOSE ARE DANGEROUS!). You can turn off all of those appliances at night by unplugging the surge protector. Don't want to unplug? Well, at least flip the switch off. I'd bet that would cut your energy costs too.

• FACING DIRE STRAITS? There are a number of energy assistance programs that will help pay utility bills like Low-Income Home Energy Assistance Program (LIHEAP) and Home Energy Assistance Program (HEAP). Primarily, these programs help with heating and cooling costs, but HEAP and others will assist with electrical. Check this link for detailed information and eligibility criteria.
  

• GOODBYE BOTTLED WATER- BUY A WATER FILTER and a RE-USABLE WATER BOTTLE. Brita Walter Filters (the pitchers) retail for as little as $10.99. Make that investment. According to Project Earth H2o YOU CAN FILL UP an 8oz GLASS with FILTERED TAP WATER 15,000 TIMES AND IT WILL COST LESS THAN PURCHASING a 12 PACK of BOTTLED WATER. Oh and from personal experience, it'll taste just as good...mmm hhmm...yum. Don't belive me? 40% of BOTTLED WATER is FILTERED TAP WATER.

• DISH TOWELS, RE-USE- STOP buying paper towels! Everytime you wash your hands, dry them using a dish towel. Designate two other towels to clean up messes (counter and eewww...floor).

• GO TOWARDS THE LIGHT- Buy Compact Fluorescent Light Bulbs at Walmart while you're grocery/prescription med shopping. These bad boys will last longer than the bulbs you're probably used to and save energy while providing quality lighting. So, you won't spend on bulbs too often and your electric bill will be lower. Remember, to check wattage needed at home before buying.
  

• FASTER AND SOFTER WITH BALLS- Buy these dryer balls. Apparently, they soften your clothes, so no more spending on fabric softener sheets AND they cut drying time by 25% saving you on electricity because of faster drying. Not to mention, the less but more efficiently you use your dryer the longer its lifespan.
  

COMMUNICATION

• CALL MY CELL- Get rid of your land line. Ask your service provider about an international calling plan for your cell phone before you do, if you make a ton of international calls. Got internet access at home?
  

• SKYPE- Get a Skype membership. Skype allows you to make international calls to landlines and cell phones CHEAP. Plus if you and your friend have internet access and Skype, then you can chat for free. Added bonus, with a webcam, you can see your friend, still free.
  
• GOOGLE TALK- SKYPE alternative for Google Fanatics. Okay, you and your mates have regular internet access and a microphone. Everyone involved has a webcam? Even better, VIDEO CHAT!!! Anyway, tell everyone to download Google Talk. THEN, add each other to your buddy lists. Now, click on the person and hit "call." Yes, you'll be chatting...FOR FREE!!! You can also leave voicemails. Love it!
• FACING DIRE STRAITS? There are assistance programs that will provide discounts/savings on your phone bill whether it be cell or land line. They go by the names Lifeline, Link-Up and Telephone Assistance. Lifeline will save $10/month or more on your phone service. The amount varies from state to state. Link-up will pay up to $30 for phone set up charges. Link-up also allows consumers to borrow up to $200,, interest free for a year, for set-up fees. For more information consult National Association of State Utility Consumer Advocates and or Universal Service Administration Company.
  

EXERCISE

• SUSPEND 3/4 of the Year- I have a Bally's membership. Bally's allows its members to suspend their membership for a measly $4 monthly fee. Instead of spending $29 bucks per month I spend $4 during the spring, summer and fall. I exercise outdoors during these seasons. The mornings and evenings are the coolest times to do so. I don't want anyone dying of heat exhaustion. Use your body weight, large stones, milk jugs filled with water, or if you have a set of weights, by all means use those for resistance and strength training. Check out Discovery Health's National Body Challenge for a free comprehensive fitness and eating plan (including free workout videos).

GAS & CAR WARE AND TARE

• CARPOOL- Find colleagues who live in your area. Befriend them. Set up a carpool.

• TRIPS- Take the bus or train. I'm not always a fan, but if you need to save. This could be a great way to do so. Boltbus currently offers service between NY and Boston, Baltimore, D.C. and Philadelphia. I mention Boltbus because the travel experience is superior to Greyhound and Peter Pan. Free Wi-Fi and electrical outlets are available on board. Reservations can be sent directly to your phone (so, none of that printing e-ticket or picking it up at a kiosk wawawa). The fare is usually cheaper. For those of you outside of these areas...Greyhound?

• Wash Your Own Car
  

STUDENT LOANS

• Working Part-time or Unemployed for whatever reason?- Apply for a Loan Deferment or Forbearance. If you have Federal Loans, they come in two forms. Subsidized and unsubsidized. Loan deferments are more favorable because the GOVERNMENT will make interest payments on SUBSIDIZED student loans while you are in DEFERMENT. Where as, DURING FORBEARANCE YOU are responsible for interest on any subsidized student loan, which will cost instead of save you money. If you qualify for deferment, opt for that over forbearance. Oh and if you’re approved, it’s good for SIX MONTHS.
  
  I would ask any private loan issuer to defer as well. Ask. If you can't defer try forbearance.
  

Purchase Your Happiness, Purchase Your Freedom

I recently read MP Dunleavey's book, Money Can Buy Happiness: How to Spend to Get the Life You Want. Her philosophy is spot on. Her main point is spend money on things that deeply interest you; these things will comprise your "happiness portfolio" which works much like an investment portfolio. You must decide the right allocation of each element of happiness, then use your money in ways that feed that happiness portfolio. She does NOT by any means advocate frivolous spending. Instead she urges us to make honest assessments of our lives given the way we choose to spend or refrain from spending our money. Think of things, experiences, etc you (would) find truly fulfilling or ideals you seek to aspire to, and then juxtapose them with your spending habits. Do your spending habits reflect your inner yearnings? Or do you hold yourself back from say, taking French classes to finally master the language of seduction because instead you spend on take-out every night and go to the movies every weekend? But wait, I enjoy my General Tsao chicken accompanied by shrimp fried rice and the latest box-office releases!!! You dare say?!?! Absolutely, enjoy that take-out, but maybe cut down to once a week and a movie once a month to make room for the endeavors that are more worthwhile and really conjure up that feeling of excitement within you (i.e. being healthy-spend on the gym or exercise equipment, quality time with family- spend on a trip to see the clan, daredevil stunts- spend on skydiving, cultural events- spend on the latest documentary/art exhibit/lecture).

Dunleavey also encourages readers to spend in ways that will make life less stressful. This does not mean, hire a personal chef because you hate cooking as it takes too long and staring at the stove literally boils your blood. That is, unless you TRULY have the money to do so; TRULY means that you're not paying for the chef's services with credit and hustling to deposit your next paycheck just in time to cover the bill, which after paying, there's nothing left to buy groceries or cover the utilities. I digress. I think an example would best illustrate my point:

Your in-laws are coming to town, the house is a mess, and you have a huge work project for which you've been working overtime every night to complete. The project is due the day they are set to arrive. You know your spouse won't be able to get things in order on his/her own, go figure? You can: a) decide to be a superhero and clean the house into the wee hours of the morning only to go to work smelling like Drano with matted hair and a groggy mind, b) get your spouse and or kids to do it day by day (fat chance, we've ruled this out) or c) hire a cleaning service to get the job done for you or perhaps a one time housekeeper to cook dinner, do the laundry and clean house. It looks like "c" will save you time, stress and Visine. Get some rest and spend your money WISELY! As Dunleavey says, "save time and buy yourself peace of mind."

Dunleavey doesn't just talk about spending money. She talks about curtailing spending in order to achieve happiness. For instance, one woman decided to stop working in order to pursue an education to become a massage therapist so that she could work with AIDS patients who find great pain relief through massage therapy. Her decision caused her family to incur about $10,000 of debt and certainly required them to budget more. BUT guess what?!?! Foregoing a salary in order to pursue her passion, in the end, made her HAPPY! Now, she's doing what she wants to do--living every day the way she defines it. Be willing to lower your spending to get ahead.

Decreasing spending in order to triumph over the despotic reign of debt will certainly get you ahead. Another couple mentioned in the book did just that. Their dream was to move to Australia. Their debt and neglect to prioritize debt payments over the next discounted vacation tied them down to living where they were, and in turn made them unhappy. They curbed their spending, started saving and within a year accomplished their dream of moving to the land down under. As Dunleavey puts it, "less debt equals more peace of mind." She goes through a plan to help you understand where your money goes every month, relieve debt and save for retirement. After all, "you can't invest in your own happiness, your own dreams, when your money is feeding a plastic card," that is assuming you're facing credit card debt. A safe assumption as the average credit card debt per household-- regardless of whether they have a credit card or not--was $8,329 at the end of 2008 according to the Nilson Report published in April 2009.1

Finally, I'll leave you with a couple quotes found in the book that I just loved:

"...there are a dozen ways I'd rather spend my money than on a bunch of forgettable sandwiches...That doesn't mean I renounced eating out. I just became a lot more conscious about where, when, and why I spent that money--always making sure that when I did, I took it as a delicious chance to catch up with a friend or spend time with my husband..." -MP Dunleavey

"...it's not about how much money you have, but how and where and why you spend it." -MP Dunleavey

"But when you shift your focus and invest more of your money in less conspicuous expenditures--enjoying life, exploring yourself, connecting with others, securing your future, and so on-- the returns are so much greater. You've enriched your all-around quality of life so that inner cravings for stuff abates. You may spend as much as you once did at the mall, but the satisfaction you receive is deeper. And because you're channeling your money into living, not buying--which includes easing financial stress and saving for the future--your fiscal picture improves." -MP Dunleavey

"What's money? A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do." -Bob Dylan

References:

Dunleavey, M.P. Money Can Buy Happiness: How to Spend to Get the Life You Want. New York: Broadway Books, 2007.

Woolsey, Ben, Schulz, Matt. "Credit card statistics, industry facts, debt statistics." <creditcards.com> 1

Low to Moderate-Income Without a Bank Account but Want to Purchase a Home, Education, or Save for Retirement?

So, you want the American dream, but you're not earning much and are not sure when (and more pessimistically, if ever) you will begin earning more? I came across a type of account that is being hailed as a Win-Win SOLUTION for YOU and participating banks. It's called an Individual Development Account (IDA).

IDA's allow low to moderate-income earners the opportunity to SAVE towards a FINANCIAL GOAL (i.e. purchasing a house or home repairs, financing an education, starting or expanding a business, buying a car or paying into a retirement account). But let's face it, these goals require more than pocket change and some lint. Instead, they are large investments that can prove difficult to save for on one's own. So, the best part is, individual contributions are MATCHED! And I don't mean matched 50 cents for each dollar you put in (though 50 cents is better than nothing). The matching rate can range from dollar for dollar or eight dollars matched for every dollar you contribute. To be fair, because I know your heart is racing, "Eight dollars for every dollar I put in!!! Am I on Oprah???!!!," the typical match rate is two to three dollars for each dollar you deposit, which is still more than you'd have on your own anyway. As I mention above, you're saving with a financial goal in mind, so what you save in an IDA canNOT be withdrawn for the next concert, date or random expenditure, and the money can't be touched for a specified period of time. If you ask me, it's best that way. A penny earned and a penny spent leaves no penny at all, and that would defeat the purpose of you saving, wouldn't it? You are held to parameters.

WHO IS SETTING THESE PARAMETERS?

Community/non-profit organizations, divisions of state or local government, or banks who create the IDA are called "sponsors." Sponsors are responsible for applying for matching funds and depositing them in reserve accounts at financial institutions. The sponsors therefore decide who qualifies for the individual development accounts and what the parameters are. Below are some typical eligibility standards, but don't be discouraged. These standards vary from organization to organization and you may just be able to find one for you.

THE STANDARDS (borrowed from FDIC article, reference link below):

• Maximum income levels—These levels are generally expressed as a percentage of the federal poverty guidelines or the area median income figure.
• Net worth—Some programs limit the level of household assets (such as a car, equity in a home, or other savings) that a qualified applicant owns. For example, applicants cannot participate in some programs if they own assets in excess of $5,000.
• Earnings—Many programs require that all or a part of an applicant’s savings come from earned income, most commonly a paycheck. However, public assistance payments, such as unemployment checks, TANF funds, disability payments, and Social Security, also usually are considered earnings.
• Credit history—Poor credit or heavy debt levels may disqualify applicants under some programs.
• Limitations on withdrawal—Withdrawals typically can only be made to buy a home, pay for education, or start or expand a small business. Some states restrict the purpose of the accounts even further, while others permit withdrawals for home repairs or automobile purchases. A prohibition period, usually one to three years, is common for withdrawals of matched funds. This period, which usually coincides with the length of time during which the funds are matched, allows time for the savings to accumulate.
• Financial education requirements—In most cases, participants are required to attend financial education classes, such as the FDIC’s Money Smart curriculum. Participants also may receive other types of financial counseling or training.

So, I WIN $2 bucks on every dollar and eventually my achievement. What do the banks WIN?

Banks win a relationship with you. Banks want to make money. So, when you open an IDA and finally withdraw your money perhaps you'll decide to choose them as your home lender. Or better yet, you'll choose them for all of your banking needs. You could open checking, savings and credit card accounts with them. Those accounts are their bread and butter. To increase their store of bread and butter banks must attract more customers. Low to moderate-income earners are usually either not using the mainstream banking system (i.e. using check cashing facilities versus bank checking account, purchasing money orders as opposed to using checks, etc.) or they use the banking system, but not as much as they could. As a result, low to moderate- income earners conduct transactions that help fuel a $250 billion non-mainstream banking business. Banks need to recruit and maintain their customer base. If they do right by you, you will likely do right by them by becoming a regular account holder. Even better, you'll tell your friends. Most IDA programs are set up such that community organizations partner with banks which will provide all or a portion of the matching funds (state programs, non-profit organizations and corporations pick up the rest) along with services like providing bank statements. Certainly, the community organization that introduces you to the IDA will praise the bank's involvement in helping you build assets (i.e. that home you bought or the education you now have or are acquiring).

YOU CAN DO THIS. PERIOD.

Complete a Google search for individual development accounts and or contact local agencies/organizations: Department of Community Affairs, Department of Community Development, Department of Social Services, Department of Workforce Services. Whatever the name of the department in your state, seek and you shall find. THEN, SAVE!

Link to a document that lists IDA contacts for each state

"Individual Development Accounts and Banks: A Solid "Match"