Trying to cut down on your credit-card bills? Don’t like to carry around large sums of cash? Then a debit card might be right for you. Debit cards, in fact, have grown in popularity over the years. That is because they are so easy to use. Consider a debit card an easy alternative to writing a check. When you go to your local grocery store, you can take out your debit card and pay the $80 for your groceries. You will not, though, have to pay that money back with interest as you would with a credit card. Instead, the dollars are taken immediately out of whatever bank account is connected to your debit card. In essence, debit cards are like plastic checks, except you will not have to take the time to write a check while you are paying for your groceries, gas, clothing or any other purchase. Usually, you’ll have to enter a PIN, your personal identification number, when you complete a debit transaction. After you swipe your debit card through a reader, you’ll be prompted to enter your PIN before the purchase is complete. This protects you in case your debit card is lost or stolen. Make sure, of course, that your debit card’s PIN is a difficult one for anyone else to guess. Don’t, for example, use your birth date or street address. Cautions Debit cards come with an obvious benefit: If you use them as an alternative to credit cards you will not be running high amounts of credit card debt and the interest that comes with it. Moreover, with a debit card you will not have to carry cash with you that can be lost or stolen. There are, however, some risks with a debit card. First, if you do not carefully track your purchases, you do run the risk of accidentally draining the account connected to your card. That could lead to expensive penalties from your bank. It might also lead to bounced checks, missed payments and late fees. So before you swipe that debit card, make sure you have enough money in your account to pay for your purchases. Also, be sure never to let your account balance get low enough so that a $25 fill-up at the local gas station puts you at risk of emptying your account. You should be careful, too, of thieves. If a criminal should gain access to your debit card — especially one that only requires a signature to complete a purchase — that thief can quickly empty your accounts. Keep an eye on your accounts for any unusual purchases. If you do suspect someone is using your card, immediately call your bank. You can also protect yourself by not using your debit card in particular dangerous places. Security experts, for example, recommend that you only use your card at ATMs located inside banks or other buildings. Thieves can easily connect machines to ATMs located outside that skim your debit card numbers as you swipe your card. What’s especially tricky about these skimming machines is that they often fit over the real card slots at ATMs. This makes them difficult to see, especially for consumers. Gas station fuel pumps are another dangerous area; security experts say. Again, the problem is often skimming. Many gas stations are busy places, with cars driving in and out and people milling about. There may also be little supervision. Because of this, criminals can easily set up a skimming machine on your favorite station’s fuel pumps. Finally, be careful using your debit card to make an online purchase. If someone steals your information online, that thieve could gain instant access to your cash. Instead, rely on your credit cards for online purchases. 

Using a Debit Card

View Resource Using a Debit Card
You know that setting up a household budget is something that you need to do. Doing so can help you prepare for your retirement, pay for your children’s college educations and make sure that you do not run up high-interest-rate credit card debt. Unfortunately, budgeting is also something few people like to do. It takes time and it requires organizational skills. That is something that many of us lack, or at least think we lack. However, here’s the good news: Creating a budget does not have to be difficult. In fact, there are three simple ways to create an accurate budget for your household. Just pick the method that works best for you and commit to it. Bring Out the Envelopes There was a time when the envelope method of budgeting was king. Today, this method feels a bit old-fashioned, what with the proliferation of online budgeting tools available. However, for many households, the envelope system works just fine. Here’s how it works: Set aside a series of empty envelopes and label each of them with a particular expense category. One envelope might read “mortgage payment.” Another might say “groceries,” while still another might say “entertainment.” When you receive your paycheck, put the appropriate amount of money — the money you’ve set aside for each expense in your monthly budget — in the right envelope. If you stick to this method, when each of your bills come due, you should have enough money in the corresponding envelope to pay it. Also, when you want to go to the movies or eat out, you can only do so if there’s enough money left in that “entertainment” envelope. This method has fallen a bit out of favor as more consumers are using their debit and credit cards to pay their bills each month. However, if this method works for you and your family, there’s no reason to abandon it. It is simple and effective, if done properly. Online Budgeting The Internet brings us the late-breaking celebrity news seconds after a star divorces or shows up on the beach 15 pounds too heavy. It lets us waste days Tweeting about what we ate for breakfast. It also gives con artists an easy way to scam people out of their hard-earned dollars. However, the Internet has given us some good things, too, such as online budgeting tools. The Web is now full of these tools, all of which let consumers enter their expenses and revenues to determine quickly where their money is going and whether they’ve breaking their budget. Some of the more popular online budgeting tools include Quicken and Mint. Both are powerful offerings that come with money management tools, financial calendars, calculators, spreadsheets and everything else you need to track your spending and earning each month. Mint and Quicken are just two options. Search the Internet for “online budgeting tools” and see what you find. The only way to find the right online budgeting tool for you and your household is to try out several. You’ll soon discover the online tool with which you feel the most comfortable. Separate Accounts You can use your bank for budgeting, too by opening separate checking or savings accounts for your various expenses. For instance, open a checking account reserved solely for your mortgage. For each paycheck you receive, deposit the right amount of money in that account. Then, each month, your mortgage payment should be ready to go. Do this with your monthly grocery allowance, an entertainment fund, insurance allotment and car payment fund. If done properly, this method works a bit like the envelope method of budgeting. Only with separate accounts, you will not have to worry about storing large amounts of cash in your home. Of course, these are just three of the many budget methods that you can employ. Be creative and experiment. You’ll soon find the budgeting strategy that works best for you. The only wrong method is not budgeting at all. That is a formula for running into debt and scrambling to pay your bills each month.

Popular Budgeting Methods

View Resource Popular Budgeting Methods
You finally committed to making a household budget, listing your monthly expenses and revenue streams. However, at the end of each month you find that you’ve overspent on going to the movies, eating out or buying clothes. It is enough to make you feel like a budgeting failure. Here’s the good news: You can fix your budget. You simply have to identify the most common reasons why budgets fail, find these common mistakes in your household budget and then correct them. Here, then, are the most common mistakes people make when crafting a budget: 1. They are unrealistic: When we sit down to make a budget, we too often do so with unrealistic hopes. We plan to spend just $50 a month on eating out, or we promise that we’ll only spend $400 a month at the grocery store. Then when the end of the month comes we discover that we spent $100 on pizza alone. At the grocery store, we ended up spending $700. The best way to avoid this mistake? Be realistic about your spending habits. If you like nothing more than catching a first-run movie on the weekend, don’t pretend that you’ll go through the entire month spending just $25 at the theater. 2. They do not plan for emergencies: Things go wrong, every month. Maybe your washing machine goes on the fritz. Maybe your dishwasher springs a leak. Maybe your dog needs an emergency visit to the vet. These emergencies require money, usually enough to break your monthly budget if you do not plan for them. Put aside a set amount of money each month for emergencies. If you do not need to spend that money? Great. However, you can bet that the following month, something will come up. 3. They forget birthdays, anniversaries and Valentine’s Day: Special occasions are not as infrequent as we sometimes think. Each month, it seems, features at least one birthday, holiday or anniversary. Buying presents and cards can eat into your monthly budget. Make sure to include a line item in your budget for these special events. 4. They give up too soon: Failure is not fun. When you reach the end of another month only to find that you’ve overspent again, it is too easy to give up on the budgeting process together. Don’t do this. Try again next month. Think of it this way: Yes, you overspent last month. However, if you did not have a budget in place, how much more would you have spent? 5. They reward themselves: It is easy to want to splurge if you receive an extra-large commission check or an unexpected bonus. However, be careful. It is easy to spend all that money on entertainment, gifts or high-end electronics. Once you’ve gone down that path, it is just as easy to continue with the habit of overspending. After all, you purchased that iPad with your bonus money. It sure would be nice to have that keyboard attachment to go with it. That purchase, though, won’t be funded by a bonus. That purchase could very well scuttle your monthly budget.

Why Budgets Fail

View Resource Why Budgets Fail
Why doesn’t your savings account grow? It could be a simple matter of how you allocate your regular paycheck. What happens every time you receive your paycheck? If your employer offers direct deposit, your money probably is funneled automatically into your checking account. If you get paid with old-fashioned paper checks, you probably drive to the bank after work and deposit your check into your checking account. So there’s the problem; your dollars never even reach your savings account, and your savings never grow. This could be a problem. What if you lost your job tomorrow? What if you suffered a serious injury and needed a hefty chunk of cash to pay medical bills? Without built-up savings, you might have to go into debt. Neglected Savings Most people begin withdrawing dollars from their checking accounts as soon as they deposit them. They need this money for groceries, rent, mortgage payments, car loan payments and entertainment. Then, if money is left over, they transfer that to savings. Unfortunately, too often there never is any left-over money. If there is, they forget to move it to their savings account and instead leave it in checking, where they eventually spend it. That is why automating your savings might be the key to making sure that you save enough dollars for a rainy day fund. Automated savings If your employer offers direct deposit, sign up for it. Then, instead of having your entire paycheck deposited into your checking account, have your employer send a fixed amount of your paycheck into your savings account each pay period. First, though, determine how much of every paycheck you can afford to devote to savings. Check your household budget — or draft one if you do not already follow a budget — and calculate your monthly expenses. Then determine how much of your check you need each paycheck to cover them. If your weekly paycheck is $750 and your weekly expenses are $675, that means you can afford to have $75 from each paycheck deposited directly into savings. Don’t be discouraged if after setting aside dollars for your expenses you only have a small amount of money left over for your savings. Every little bit helps, even if it is just $25 from each paycheck. If you do not have direct deposit at work, you can set up automatic money transfers at your bank from your checking account to your savings account. You might, for instance, authorize your bank to send $100 automatically from your checking account to your savings account on the second and fourth Fridays of the month. It is easier to save money when you do not actively have to think about moving that money to your savings account. If you automatically deposit $75 from every paycheck to your savings account, this savings will become a habit. Then your savings account will steadily grow.

Use Direct Deposit to Build Savings

View Resource Use Direct Deposit to Build Savings
There are plenty of rewards that come with the patient investing of your money. The best, though, might be compound interest. You might have heard that term previously. You might even know that compound interest helps your money grow faster. However, you might not realize how powerful compounding is and how much more quickly your savings can grow thanks to the financial miracle that is compound interest. Here’s a brief primer on how compound interest works, and why it pays to leave your savings untouched for as long as you can. How it works In its purest sense, compounding is what happens when you generate interest earnings on reinvested earnings. Effective compounding requires two things: You need to re-invest the money you earn on your original dollar investments. You also need to be patient enough to give your money time to grow. Here’s an example of how compound interest works. Say you invest $5,000 in an account that pays 6 percent interest annually. After one year, that account, thanks to interest, will have $5,300. If you leave that $300 you earned from interest in your account and kept it there for another year, your interest will compound. Your $5,300 will generate additional interest and turn into $5,618 at the end of the second year. That is just the beginning. If you keep that extra $618 in your account for another year, your account balance will jump to $5,955.08. This means that you will have earned more than $955 without doing any work. You can imagine how if you keep your money in your account long enough, you will steadily grow your balance. The key is that every year, a greater number of dollars are earning that 6 percent interest. This means that your balance will continue to increase as time marches on. Look at it this way. If you invest $15,000 at an interest rate of 5.5 percent at age 25, thanks to monthly compound interest that investment will stand at $59,140 by the time you hit 50. That is without you making any additional deposits in your account. The difference between what you originally invested and what you have at age 50 is all a result of compound interest. Boosting Compounding If you want compounding to work more efficiently for you, though, you need to invest regularly in your account. That means adding to your account balance with additional savings on a periodic basis. If you do this, and let compound interest do its thing, you’ll be surprised at how quickly a small investment can turn into a large one. Of course, you have to leave that money alone and allow it to grow. If you keep removing dollars to help with emergency expenses or your regular bills, you’ll sap much of the power out of compounding. There are three simple steps to letting compound interest work for you: First, start slowly. You do not need to make a massive initial investment. Secondly, be patient. Keep your money in place and watch it grow. Thirdly, make regular investments in your fund. Every extra bit of money you add to your account will grow at a compounded rate, too. That can quickly add up to big savings. Using the same $15,000 starting point as above, by adding $100 per month to your account for the same 25-year period will result in an ending balance of $123,638. By adding only $100 per month, you’ve more than doubled your money!

The Wonders of Compounded Interest

View Resource The Wonders of Compounded Interest
Tired of scrambling to pay your bills each month? The problem might not be that you make too little income. It might be that you spend too much each month. The good news? It is easy to reduce your expenses. You might be able to shave hundreds of dollars from your monthly expenses by making simple changes to your spending habits. After you make these little cuts, you might be surprised at how much money you have at the end of each month. With some restraint and planning, you might even have enough money to start saving. Looking for ways to cut your monthly expenses? Try these: Shop around: How do you shop for groceries? Do you just head to the store? A little planning will shave dollars off your weekly grocery bill. Before hitting the stores, check newspaper ads for coupons and sales. This way you can buy milk, chicken and apples where they are the most affordable. Do not forget the coupons: It takes time, but don’t forget to clip coupons before you hit the grocery store, head out to restaurants or take the kids miniature golfing. By becoming an obsessive coupon clipper, you can cut your monthly expenses by $100 or more. Brown bag it: Work in a busy downtown area located close to dozens of top restaurants? It is time to stop dining at these eateries and to start brown-bagging your lunch. By bringing a sandwich, chips and apple from home, you’ll not only dramatically cut down your expenses, you’ll also eliminate unneeded calories from your diet. Be thrifty at thrift stores: You might be surprised at the bargains you can find at thrift and resale stores on clothing, toys, electronics and tools. Don’t be ashamed of shopping in a second-hand shop. Many of the items they carry are in surprisingly good shape. Get on your bike: Gas prices continue to rise. So drive less and bike more. You do not need to take your car to get to the grocery store that’s a mile away. Jump on your bike and reduce your trips to the gas pump. Negotiate: Is your cable bill too high? Is the interest rate on your primary credit card in the double-digit range? It is time to start negotiating. Call your credit card company and tell them that you want a lower interest rate. Tell them that you’ll move on to another card issuer if you do not get one. Call your cable provider, too. Tell them you’ll drop the service if you do not get a lower monthly fee. You might be surprised at how willing companies are to negotiate to keep customers happy. Review your insurance: Insurance — whether auto, homeowners, life or health — can be costly. Review your policies to see if you can reduce your rates by dropping unnecessary coverage. Don’t be afraid to call your insurers to ask if you qualify for any discounts. Insurers, too, are often willing to lower rates to retain customers. A light bulb just went off: Install compact fluorescent light bulbs — better known as CFLs — throughout your home. They cost more upfront, but are more energy-efficient than traditional bulbs and will help you lower your monthly electric bill. Hit the library: Your local library probably lets you rent movies and CDs for free. Many even let you download books, movies and songs at no charge. Explore your library to help reduce your monthly entertainment costs. Cancel magazines and newspapers: You can get most of your news free online today. If your budget is thinly stretched, cancel your magazine and newspaper subscriptions. There are plenty of places to find news for free today. Once you’ve eliminated unnecessary monthly expenses, it is time for one last step: Take a close look at your monthly budget. Adjust it according to your lower expense levels. You just might find more than enough money to handle those monthly bills.

Little Cuts to Save You Money

View Resource Little Cuts to Save You Money
There’s a reason so many consumers are struggling today with sky-high credit card bills. U.S. consumers are addicted to plastic. We use credit cards to buy everything from flat-screen TVs and tablet computers to fast-food cheeseburger and fries meals. The problem is buying with credit can cause you serious financial pain. Simply put, paying for items with your credit cards is one of the costliest ways to make purchases. Cash is best The best way to buy something? Save up the cash you need and then make your purchase. This way, you will not be charged any extra fees or interest on credit purchases. You’ll only pay what the item costs. Of course, this is not always possible. Sometimes you will not have the cash available. In such cases, the next best option is to purchase an item with a credit card but then pay off that card’s balance once the bill comes due. If you do this, you will not be charged interest on your purchase. Also, it is when you do not pay off your credit card balance in full, and the interest starts piling up, that you’ll learn just how costly credit can be. The impact of interest Say you buy an $800 laptop computer with a credit card that comes with an interest rate of 18 percent. If you pay only the minimum payment on that debt each month — in this case, $16 — it will take you an astonishing 94 months to pay off that debt. What’s even more shocking, though, is the amount of interest you’ll pay during this time: more than $689. That means that you’ll end up paying nearly $1,500 for that $800 laptop computer. Consider that is on a relatively small purchase. If you let your credit card debt rise too high, you could end up paying huge amounts of interest if you do not pay off that balance each month. Other fees Paying interest is only one of the many ways that purchasing with a credit card can be more costly. Some credit cards, for instance, charge annual fees that you’ll have to pay whether you use the card or not. There are plenty of credit cards available today that don’t come with annual fees. There’s no reason, then, to sign up for one that charges such a fee, unless the card offers additional benefits that you find to be worth the cost. If you make your payment late, you might suffer a late fee of $15 to $35. That is not the biggest hurt that comes with late payments. Plenty of credit card companies will boost your interest rate if you pay late. This means that your rate can instantly skyrocket from a reasonable 14 percent to a painful 29 percent. What if you accidentally go over your credit card’s spending limit? Again, you’ll potentially face a fee. This is an over-the-limit fee and can run you an additional $15 to $35. Finally, be careful about taking cash advances on your credit cards. The costs for these vary according to the financial institutions issuing the credit card, but they can be excessively high. The lesson here? If you use credit cards, be careful. Your best bet is to pay off your balance every month. If you cannot do this, you might be surprised at how quickly that credit card debt grows. 

The True Cost of Buying on Credit

View Resource The True Cost of Buying on Credit
You’ve accepted a new job, but you’ll have to move yourself and your family across the country. Or you’ve earned a promotion, but the new position comes with a catch: You’ll need to move hundreds of miles away. The good news is that many employers offer relocation plans that help cover the costs of company-mandated moves. Your job is to study your company’s relocation package to make sure that it will adequately pay the costs of a work-related move. Moving Costs You might think you know how much it will cost to move you and your family. After all, you’ve already gotten a bid from your movers. However, have you considered all the costs associated with moving? For instance, if you are driving your family across the country, don’t forget to factor in gas and meals along the way. Also, once you arrive at your new home, you’ll inevitably have to add furniture and decor changes to your residence. Does your company help pay for those costs? What if your new hometown has a significantly higher standard of living? You might want to negotiate a higher salary, if possible, before agreeing to relocate. Written plan? When you company offers to move you and your family to a new city, make sure to ask for its written relocation plan. Most large-size companies will have one. This plan should spell out exactly what costs your employer will cover. In addition to the costs of physically moving your belongings across the country, your company’s relocation program should cover the costs of temporary housing, which you might need as you search for a new home. It should also include the costs involved in returning to your previous home each weekend if your family is unable to move with you immediately. You should investigate, too, whether your company will provide any job-search assistance for your spouse if he or she has to surrender a job to make the move to a new home with you. This assistance could include covering the costs of hiring a job coach, providing referrals or providing interview opportunities inside the company. Other benefits A robust relocation package will include other benefits. Some, for instance, might provide you with paid time off as you settle into your new home after making a long move. Others might provide you with assistance once you arrive at your new home. Some companies, for instance, will handle the important, but tedious work of setting up your utilities and garbage pick-up services. Others might provide you with information on the local public school system or area recreational activities with your children. When you arrive at your new home, some companies might even provide an employee who spends extra time with you to answer any questions about your new office and community. This individual might also be responsible for helping you to assimilate into the community.

Relocation Assistance

View Resource Relocation Assistance
What would happen to your family if you suffered a serious injury and could not work for a year or longer? What if you unexpectedly died? Would your family be taken care of financially? The best way to ensure this is to have disability and life insurance. The good news? Many companies with more than 500 employees offer both disability and life insurance options as a benefit. Your job? You need to analyze these benefits to make sure they are worthwhile. Disability insurance Too many employees give little thought to disability insurance. They may have taken out large life insurance policies. However, what if you are disabled and you cannot work? How will your family cope financially if you are the primary breadwinner? This is where disability insurance is helpful. This insurance will pay a portion of your salary — often 60 percent of it — if you are disabled and can’t work. True, a portion of your income is not as good as receiving all of it. However, even receiving a percentage of your regular income might be enough to keep your family financially afloat until you can return to work. Don’t think you’ll suffer a disabling injury? A survey by Sun Life Financial found that people are three times more likely to suffer a disability or injury that keeps them out of work for a year before they hit age 65 then they are to die. What does this mean? It means that disability insurance is every bit as important as life insurance. Fortunately, many employers offer this benefit. Unfortunately, many workers pass on it. According to the Sun Life study, just three out of every ten employees has taken out disability insurance. How disability insurance works If you sign up for disability insurance from your employer, your company will take out a portion of your regular paycheck to cover the costs. If you become injured or disabled to the point that you can no longer do your job and can’t return to work for an extended time, your disability insurance will kick in. In general, there are two types of disability insurance offered by employers. Short-term disability insurance usually kicks in within 14 days of your disability. This insurance provides coverage that can last from six months to a year. Long-term disability insurance then takes over after this period. Your employer’s disability insurance will come with certain restrictions. First, the insurance will only cover a portion of your salary. That number varies, but most plans provide disabled workers with 60 percent of their salary. Some policies will provide a percentage only of your salary. With others, both your salary and any bonuses you earn are used to determine coverage. As a side note, very few plans will allow you to contribute to your 401(k) while disabled. Some disability plans will come with a monthly cap on how much coverage you can receive. If you earn a high monthly salary, you might feel some financial pain here. If you make $20,000 a month in income and bonuses, but your disability plan has a $10,000 monthly limit, you will have to adjust your spending patterns until you can return to work. Life insurance Many employers also offer their life insurance benefits. You’ll have to decide, though, whether your company’s life insurance is worth your investment. Company life insurance plans typically offer either a flat fee in case you die — say $70,000 — or a multiplier of your annual salary. Life insurance policies offered might pay out two times your annual salary. If you earn $60,000 a year, your life insurance will pay out $120,000. There are two main questions you’ll need to ask before investing in a company life-insurance plan: First, is it worth it? Secondly, is it portable? A company life insurance plan might not provide enough protection for the investment. It often makes more sense for employees to rely on life insurance purchased from outside companies. Most employees who do take out company-sponsored life insurance plans do so as a supplement to their main life insurance. Portability is an important issue, too. You want to make sure that if you leave or lose your job you can keep your life-insurance benefits. Some policies offered by companies do not allow their holders to take them along if they find a new job or lose their current one. Like all employee benefits, you need to analyze your company’s disability and life insurance options carefully. Researching employer benefits is far from enjoyable. However, only by doing this research can you make a decision whether these plans are a worthy investment of your dollars.

Life and Disability Insurance Plans

View Resource Life and Disability Insurance Plans
Does your employer offer tuition reimbursement? If so, it is a benefit that could prove valuable. The cost of pursuing a primary or secondary college degree is constantly on the rise. However, this cost could be dramatically reduced for you if your company offers tuition reimbursement. Be careful, though, when signing up for this benefit. Not all offers of tuition reimbursement are equal. A popular benefit? It is unclear how many employers offer tuition reimbursement as part of their benefits package. Some resist this benefit because they fear that employees will use their free or reduced-cost education to earn an advanced degree that makes it easier for them to find new jobs. Other companies, though, consider tuition benefits as an investment in their employees. The hope is that the knowledge employees earn will make them better, more efficient workers. For you, the benefits of tuition reimbursement are evident: Advanced degrees can make it easier to receive promotions from your current employer or find new work outside your company. Either way, a new degree can help boost your earning power. Do your research Before taking advantage of any tuition reimbursement program, though, make sure to do your research. Many companies include stipulations in their programs. Some companies might require you to remain employed with them for a certain number of years after earning your degree. If you leave for a new job before these years pass, you’ll have to pay back all or part of your tuition. Though it varies, many companies require employees to remain with them for at least five years after earning their degrees. Other companies might require that you earn a certain grade-point average while earning your degree. An employer, for instance, might only reimburse you for 50 percent of your education costs if you can only muster a “C” average. If you earn an “A,” you might see 100 percent of your tuition costs reimbursed. Of course, you’ll be limited to the type of degree you can earn. If you work in an accounting firm, your employer probably won’t be willing to fund your pursuit of a master’s in creative writing. Is it a benefit for you? Not every employee should pursue an advanced degree, even if their employer offers tuition reimbursement as a benefit. For instance, if earning an advanced degree will not help you get promoted or find a more lucrative job, attending night classes and cramming for exams might not be worth the effort or the stress. Earning a second degree is no easy task when you are already working a full-time job. Also, if you are balancing a busy family life at the same time, you might find that you simply have no time to take the classes necessary to earn your advanced degree. Alternatively, maybe you’ve grown tired of your field and would like to branch out to a new line of work. Pursuing an advanced degree, even if your employer covers the cost, won’t make sense if you find your current career so unfulfilling that you are considering moving to a new field.

Tuition Reimbursement

View Resource Tuition Reimbursement