How to Be a Saver

If you aren’t already a saver, then you probably have very little chance of developing a saver’s mentality.

There are always exceptions, of course, but you are either a "saver" or a "spender", and for most folks, no matter how hard they try, they’ll never be able to change.

And you know what? There’s nothing inherently wrong with either (unless you take it to extremes, of course). It has a lot to do with your God-given personality.

So, if you’re a spender, not a saver, accept the way you are. Acknowledge your weakness. Say, out loud:

“I am a spender, not a saver. I know I should save more. I will find a way to save more and plan for my future.”

Now, develop a plan to overcome your weakness, one that doesn’t involve changing who you are! (Because we both know that’ll never happen.)

Accept the fact you will have to do a couple things that may be unpleasant to you, for various reasons:

1. Figure out what you earn and what you spend
2. Adjust spending until you reach your desired savings amount
3. Decide how much you will save, and with what vehicle (401(k), Roth IRA, traditional IRA, high-yield savings account, brokerage account, etc.)

But wait! If you know there is no way you’ll ever do these things, then find someone who enjoys doing them, and hire them to do it for you. Problem solved! Now, all you have to do is turn over your information, and wait for the report.

Don’t be foolish, though. Before hiring help, make sure you find:

1. Someone you can trust with your personal financial data
2. Someone who charges on a fee basis only
3. Better yet, someone who might be willing to barter services with you

Now, decide on a reward you will give yourself when you have completed the your tasks (or hired someone else to). What will it be? A night at the movies? A bubble bath? A new CD? Make it something you really, really want.

All done? Good. Enjoyed your reward? Great.

Take the final step to guarantee you’ll be a saver forever:

Set up automatic withdrawals from your checking account to your savings vehicles for the amounts you need to save.

That’s it. That’s all there is to it.

You already know how much you can save. You know where you want to save it. Just set it up to run every week, paycheck, month, quarter…whatever works for you!

Go to the websites. Go to the Human Resources representative that can help you with paperwork. Pick up the phone. Just do it.

Now, plan your reward for completing this final, all-important task. Make it worthwhile.

Again, if you feel you’d never complete this task regardless of how much you want to save, hire someone to do it for you! They’ll know your user ID’s and passwords, so you may want to change those once the setup is complete.

The point is, what you’re doing now doesn’t work. Unless you completely change your tendencies, you’ll never do what you know you should—save some, or more, money. So you MUST do something different!

Why not try this?

Once your system is set up, you will have nothing left to do but spend whatever money is left over! Your savings are in place, and you’ll get used to not having that money, because you never see that money.

And when your statements arrive in the mail showing how much you’ve saved and/or invested, you’ll be thrilled!

Not everyone is a saver. But everyone can save!

Now go to it.

Do You Have Credit Card Fraud Protection?

A friend of mine just told me her credit card number was stolen (although the card never left her wallet), and $15,000 worth of fraudulent transactions were made within 36 hours.

She downloads her transactions regularly and was able to catch it fairly quickly.

My friend contacted her credit card company, who had already noticed the fraudulent activity, shut down her card, and taken steps to reach her (albeit by snail mail).

They assured her she wouldn't be liable for the purchases. All she'd have to do is fill out an affidavit stating the charges were fradulent.

My friend is still puzzled, as she and her spouse rarely use this particular card for any kind of online shopping. The only time it leaves their sight is when they use it in a restaurant.

All this leads to a bunch of questions YOU need to be asking about your credit card companies. (Hopefully, you don't have that many.)

What's their policy if your card card or card number is stolen? How much are you liable for?

If you're using a debit card and someone gets hold of that card number, how much are you liable for? Can they clean out your bank account?

(My friend and her husband were switching to debit card use exclusively...now they're re-thinking that, depending on what their bank's policy is regarding debit card fraud).

Some steps you can take to protect yourself:

1. Make sure you know how much you're liable for should your card or card number get stolen.
2. Regularly (if not daily) check your credit card online for strange transactions, and contact your card company immediately if you notice anything funky.
3. Never let anyone walk away with your credit card. Pay for restaurant meals with cash.
4. Check to see if your card company has special software that will generate a unique one-time-only card number for online purchases. Use these religiously!

Finally...who do you think is eventually going to pay for that $15,000 my friend's unknown thief racked up?

YOU and ME, my friend.

So do your part...protect yourself...and put these really, really evil guys (or gals) out of business.

Readers Help With Spoofing

In yesterday's newsletter I shared how I was "spoofed" by a "phishing" email that very closely resembled typical eBay e-mails.

I must have touched a nerve, because several readers wrote in to share their own experiences.

I also had readers offer some helpful hints:

From Vickie:
"I just wanted to add a thought to your info- you can forward those "pfishing" emails to "spoof @paypal.com" or "spoof @ebay.com".....they can use the info to maybe stop some of this craziness....."

From Beth:
"Leo, please reinforce in writing what you said in your video:

NEVER, EVER, EVER click on a link 'within an e-mail' that connects to your financial information."

There you go, Beth. Now it's in writing.

Even if the e-mail IS legit, it won't kill you to navigate to the site, log on, and make sure.

"How To Own Your Paycheck Again" Issue #47 Up

I sent out my latest newsletter yesterday.

If you aren't subscribed, or didn't receive yours, you can go here to read it:

http://clicks.aweber.com/z/ct/?EHeDAtPeDIg.QsxFBS.Qyg

Enjoy.

Get Returns of 20% or More on Your Money

So, last week the stock market was tanking. In a big way. 200+ points or more.

Interesting.

If you have a credit card balance with interest at 20%, and pay it off with any extra cash you may have, you're getting a 20% return on your money. That's a heck of a lot better than the stock market average of anywhere between 7% and 11%, depending on which types of stocks or funds you own.

I'm not saying you shouldn't invest. There's no better return that contributing to your 401(k) or other plan that is tax-deferred up to the amount your employer matches.

For example, if your employer matches 50% up to 6% of your income, you're getting 100% return on 3% of your salary. I'd take that ROI (return on investment) any day. It would be foolish to not take advantage of such an offer. Restructure your budget so you can at least contribute up to the employer match.

But if you're already doing that, and still have money lying around in a 1-2% savings account somewhere...why would you forego paying down any debt with interest greater than what you're earning on your savings?

Just something to think about.

Debt Management: How To Do It Right

Got debt?

Chances are, you’re doing what you can to pay it off, as quickly as possible. You want to be debt-free.

A worthy goal, to be sure.

But what do you do in the meantime?

Having a debt management plan is just as important as having a debt reduction plan. It can save you hundreds or thousands of dollars in interest, and maybe even reduce the total amount of time it takes for you to be come debt-free.

Here’s how to do it right.

Promise yourself you won’t take on any more debt. Put all your credit cards somewhere besides your wallet. Try putting them in a cup of water and sticking them in the freezer. By the time you defrost them, your urge to spend will be gone.

Why so drastic? Because you can’t management your debt if you keep adding to it.

Now, you need to make a list of all the debts you have. Creating a chart or spreadsheet is probably the easiest way to sort all the vital information.

List the following:

Creditor’s name
Principal currently owed
Minimum payment
Interest rate
Contact phone number
Website address with login information

Next, add any credit lines with zero balances to the above list. (I’ll explain why later.) Fill in all the above information, except principal and minimum payment, of course.

Take your list and start calling each of your current credit card companies. Ask what their current offers are for balance transfers. Insinuate that you’re closing your account for better offers elsewhere (because you certainly would move your balance in that case, right?).

Take notes on your chart or spreadsheet for each offer. Watch the fine print: ask if there are balance transfer fees, how long the lower rate period lasts, what happens to the transferred balance if you make a late payment, etc.

Be aware that a common gimmick now is to offer a very low rate for transferred balances with no fees, as long as you charge a certain amount each billing period, say $25, which is billed at a higher interest rate than your transferred balance. Since the credit card companies apply your payment to the lowest-rate balance first, you’ll accrue the higher interest rate on the monthly charges until your transferred balance is paid off.

For example, say you transfer $5000 at 1.9%. The rate goes up in 6 months unless you charge at least $25 a month by the close of the billing period. Purchases are charged at 11.9%. If you pay $200 a month on the card, it’ll take you 25 months to pay off the transferred balance (ignoring finance charges). Meanwhile, for 25 months you’re charging $25, which grows to a balance of $625 plus interest of 11.9%.

This gimmick won’t hurt you if you can get a low interest rate for purchases (say, less than 9.9%) and you make sure you only charge the amount needed to maintain the low transfer rate. When the transferred balance is paid off, have the cash on hand to pay off the purchases, too.

Okay, back to debt management.

After you’re done calling all your credit card companies, choose the one with the best offer. Transfer as many of your balances as you can to that card. If there’s not enough room, ask for a credit limit increase, or transfer the rest to the card with the second-best offer.

Note: if you ask the best-offer card to increase your credit limit, it’ll show on your credit report, so unless your credit is sterling, be careful.

Figure out when any introductory rates expire and make a note on your calendar. If you won’t have your balances paid off by then, back up about six weeks and make a note to search out a new lower rate.

When you’re done, you should have all your credit card balances on just one or two cards. Maybe three.

At this point, most experts would recommend you close your other accounts. I disagree, unless it would improve your credit, and you need to make a large purchase soon, such as a mortgage. Put those cards in the freezer instead.

Why not close them? Because if you need to transfer balances again, those credit card companies will be hungry to get your business back. If you’ve faithfully paid your transferred balances on time, your credit will be in good shape (or at least better than it was) and they’ll fall all over themselves to get you to transfer balances back to them.

Another note here: if you can’t control your credit card spending, then by all means close the accounts. No debt management strategy is worthwhile if it means you’ll only put yourself deeper in debt!

Some folks often ask me if it makes sense to put their credit card debt on a home equity loan or line of credit, as they often have low introductory interest rates. I hesitate to recommend this. Home equity is secured by your primary residence. If you can’t pay, the banks foreclose. Why take the chance if there’s another way?

Get your debt to the lowest rate possible, keep track of when low rates expire, and pay as much as you can as fast as you can.

Those are the secrets to successful debt management!

How Much Does That Sofa Really Cost You?Some Debt Advice

So, your sofa is looking pretty nasty. It’s covered with Kool-Aid stains,and throw pillows are hiding threadbare spots where the tufting peeks through. You even had to throw down some plywood to keep the pillows from sagging.

Time to go out and buy a new one, right?

Not if you don’t have the cash.

Here’s why that new sofa is going to cost you a lot more than the $800 sticker price if you go into debt for it.

Let’s assume you buy the sofa as well as matching loveseat and end tables for a grand total of $2000. You finance your purchase through the furniture store for three years at an interest rate of 21.45% (let’s leave out the “no interest for two years” deal for a minute).

Your monthly payments will be…drum roll, please…$75.

“Wow”, you think. “That’s pretty affordable.” Sure it is.

Until you count the true cost of that sofa.

Let’s assume you’re 30 years old and you’re going to retire at 65. Let’s also assume you have access to a 401(k) that your employer matches at 50%, you can earn a 10% average return on investments, and your combined federal and state tax brackets are 20%.

If you pay for your furniture with cash and invest the $75 a month in your 401(k) for three years instead, you’d have $4,330 more in your account at the end of the three years (plus your sofa). Now keep that $4,330 in your 401(k) without any additional investment and in another 32 years, at retirement, it will have grown to $83,112.

So, basically, your sofa cost you $2,000, plus $700 interest, plus $83,112 that would have grown over 32 years in your retirement account.

Final sticker price: $85,812.

Yikes.

Here’s an alternative plan: hang on for another two years, save $80 a month in a money market mutual fund or savings vehicle that earns at least 4%, and use cash to pay for your new living room set.

Final sticker price: $1,920

Here’s an even better alternative plan: hang on for another two years, save $80 a month, and after you buy the sofa, put $80 a month in your 401(k) instead (you were already living without it for two years).

Final sticker price: $1,920, plus an extra $815,699 in YOUR bank account by age 65.

Now what about those “no interest for two years” deals? Well, you can certainly take advantage of those, if you’re disciplined enough to pay off the balance in less time. Most people aren’t.

You can use this strategy for every major purchase you make.

The cost of debt is a big deal, when it’s compounded by time, interest and 50% employer matching.

So next time you hit the furniture store and the salesman is telling you, “It’s only going to cost you $75 a month”…you’ll know better. Tell him or her, “Nope! It’s actually going to cost me around $800,000. See you in two years.”

Here To Help You Get Out of Debt

Hi there. Most of you already know me through my newsletter and "How To Own Your Paycheck Again" program, but just in case you don't, here's what I look like.

I'm looking forward to using this blog, since it'll let me post my ideas, thoughts, advice and any pertinent links quickly and easily, without having to write up a newsletter or clog your inbox.

For those of us who actually DO know it all, blogs are a great way to let everyone else in on our little secret. :-)