Pick a Savings Sacrifice: An August Challenge

Is there fat or folly in your budget? During the next month, I'm going to carefully examine my spending habits and make a list of areas where I could cut back and save more. It's my August challenge. During the first week of September, I'll publish my areas of weakness and opportunities for increased savings.

The ritual of saving should be sacred during a recession. A survey from Women & Co. shows that "affluent women cited regular savings as one of their smartest financial moves."

Below are some decent savings tips from Women & Co. My favorite is the "savings sacrifice," which involves reflection, honesty and discipline.


"Take a snapshot of your finances. Saving requires you to analyze, plan, organize and evaluate. But first, you need to know the current state of your finances. Start by downloading Women & Co.’s helpful worksheet.


Set savings goals. Slice and dice your savings needs, first into long-term (e.g. retirement) and short-term (e.g. home repairs) goals. Then you’ll be able to better decide how to allocate your money to help you reach them.


Make a “savings sacrifice.” Track your expenses carefully for an entire month and then evaluate them. Are there services or products that you don’t use or can stretch between uses, like visits to the salon or dry cleaning? You may have to make a lifestyle sacrifice for a limited period until you meet your goal.


Save some money monthly. Automatically put a set amount – no amount is too small – of every paycheck in your savings account. Immediately deposit unexpected income such as birthday checks or garage sale proceeds.


Establish an emergency fund. Aim to accumulate enough to cover 3 to 6 months of living expenses at a minimum. Determine as a household what defines an “emergency.”


Pay down debt. It doesn’t make much sense to scrimp to put money into emergency savings if you are carrying high-interest debt. Put money toward paying down this debt first, while still adding as much as possible to your emergency fund.


Invest in your future – before your child’s. If you can’t save for both college and retirement, save for your retirement first. There are other options to fund college – grants, loans, scholarships, etc. – but none for funding your retirement.


Stay up-to-date and involved. The lives and financial needs of women are unique, and can potentially impact our retirement, Social Security benefits, and healthcare expenses. Continue to build your knowledge about your finances and stay up-to-date on the key issues impacting your savings plan. Actively seek out the financial information you need."
--source: Women & Co.

Financial Emergency Kits and Other Storm Preps

With the recent earthquakes in California and the June 1 start of hurricane season in Florida, the annual ritual of preparing for weather-related emergencies and storms is underway in my home. In addition to collecting candles and batteries, we're also creating an emergency plan for our money. Here's a quick roundup of tips from different sources.


From Consumer Credit Counseling Service:

"Start an emergency savings account. Most experts recommend having a minimum of three to six months of living expenses in an emergency fund. This fund can provide financial security in the event a hurricane hits, and can greatly reduce the stress of recovering from a major storm or other disaster. These funds can be used to make disaster repairs, cover insurance deductibles, or pay monthly bills if your income is interrupted by job loss.

Review your insurance coverage. Review your policy and make sure you have the proper amount of coverage to repair or replace your home and belongings. Pay special attention to deductibles that apply to specific events, such as hurricanes, which can be a percentage of your home's value. Also review your flood coverage, which must often be purchased separately from your homeowner's insurance. You do not want to be in the position where you need coverage that you thought you had, but do not.

Secure critical documents. Take some time to make sure that your critical documents are in a safe, secure place and could be taken with you if you have to evacuate. Collect critical paper records and if you have records on your computer, be sure to make a backup and store it away from your home. Documents you will want to secure include identification records (driver's license, green card, passport); social security and tax information; titles, deeds, and registrations for property and vehicles owned; insurance policies; credit card, bank and investment records; birth certificates, marriage certificates, and wills. Invest in a fire-proof box or safe-deposit box to keep these records secure.

Review your "what if" scenarios and make a plan. What if your place of employment is damaged and will close either for a few weeks or indefinitely? What if your employer is ready to reopen but schools are still closed and you don't have a place to bring your children? What if your home is damaged and no longer safe to live in? It is a good idea to think about all the ways the storm could impact your life and what you would do if that happened. For example, if your place of employment will not reopen for weeks or months, do you have an emergency savings fund to carry you through? Is there another place you could work in the meantime? The rebuilding effort following a storm often creates new job opportunities. Talk to friends and neighbors about sharing the childcare responsibilities until school reopens so that you all miss as little work as possible."

Here is a roundup of emergency preparation tips from the folks at Wise Bread:

From Will Chin: "I like this tip from New York Times about creating a secure USB disk backup with all your essential financial info. Linsey Knerl has a good tip about how to prep your freezer when you know power will fail."

And from Myscha Theriault: "Frugal hurricane prep - we are just gearing up for that as well. A couple of things we're doing:

• Buying cases of things like cracker snack packs, dried fruit and shelf-stable things


• Making sure we have multiple propane tanks filled for both our grill and our Coleman two-burner camping stove. This will help us not have to order takeout as much when the power goes out.


• Extra containers for water storage."

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Sharon is the author of the Frugal Duchess: How to Live Well and Save Money and a contributing author in Wise Bread's 10,0001 Ways to Live Large on a Small Budget.

How I Sabotaged My Emergency Fund: 5 Mistakes & Cures

Common wisdom tells us to have an Emergency Fund with at least three to six months of living expenses. I'm on my way to that savings target, but my efforts have been hit by setbacks. Here's where I have made mistakes, and here's how I plan to fix those errors:



1) Easy Access: For the sake of electronic ease, the account containing the Emergency Fund was linked to my primary checking account. Bad move! For sure, that link made it easier to transfer money into the Emergency Fund. But that same e-link made it easier to transfer money out of the Emergency Fund.

Solution: The April 2009 issue of Money Magazine offers this advice: "Your emergency fund -- cash you'll need if you lose a job -- must be in a bank account that's 100 percent safe but needn't be so convenient; if you get a good yield, don't worry if it takes a day or two to transfer the money."



2) Multi-tasking funds: I've erred by establishing a one-size-fits all savings account. It's too easy to use emergency funds for other savings goals or spending binges.

Solution: Vacation account savings, funds for long-term purchases and emergency money should not be housed together. General household funds also need their own home. "Grocery money goes in checking," according to a great piece featured in Money called: "5 Things to Know About Stashing Your Cash," by Sarah Max. See also: The 7 new rules of financial security


3) Unreasonable goals: Unrealistic targets are formulas for failures. When I set the savings bar too high, I feel defeated and slide back into bad savings habits.

Solution: I'm downsizing my dreams and targets. I'll save more if I demand less.


4) Lack of Priorities: When I pay myself last, I often fail to pay myself at all.

Solution: The Emergency Fund should rank above other savings goals, including vacation accounts, holiday gift funds and other savings targets.


5) Emotional loopholes: As a creative writer, I can be very creative with my rationalizations about saving, spending and living. A wide list of so-called emergencies can rain on the Emergency Fund umbrella.

Solution: Effective April 1, I will track my expenses for a two-month period. This daily accounting should provide an honest picture of where my money is going. Also, I will create and adhere to strict definitions about the emergency cash. It might help to have a lowercase emergency fund for household expenses and an uppercase Emergency Fund with cash sufficient for three to six months of living expenses.











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Getting the Most From a Tax Refund: CCCS

Pay bills? Boost or start an emergency fund? Invest in a college fund? Avoid refund anticipation loans? Here are a few ideas from CCCS about putting a tax refund to work.

"Chances are you are going to get a refund when you file your 2008 income tax return. While the opportunity to borrow against your anticipated refund may be tempting, Consumer Credit Counseling Service (CCCS) of Palm Beach County and the Treasure Coast cautions against taking a loan against any refund or rebate you expect to receive.

A Refund Anticipation Loan (RAL) is a high-cost loan secured by your pending refund. They typically range from 7-14 days and interest rates can range from 50 to 500 percent or more.

"Refund Anticipation Loans are almost never good for consumers," said Jessica Cecere, president of CCCS. "They come with extremely high fees and can leave consumers with significant debt if their refund is lower than expected."

There are alternatives to Refund Anticipation Loans that can help consumers get their refund quickly without going into debt. Taxpayers can prepare and electronically file their 2008 tax returns for FREEvia www.irs.gov if their adjusted gross income is $56,000 or less. Free tax preparation help and filing is also available for low- to moderate-income consumers through the Volunteer Income Tax Assistance (VITA) program and AARP's TaxAide (www.aarp.org/taxaide).

To locate the nearest VITA site, call 1-800-829-1040. You can find a TaxAide site by typing your zip code into the website. Electronic filers who use direct deposit can expect their refund in approximately two weeks.

When you do receive your refund and your tax rebate, CCCS suggests putting the money to good use. "Tax refunds provide a great opportunity for consumers to take control of their finances," said Cecere. "If used wisely, they can help eliminate debt, serve as the foundation for a college education, or help fund the dream of homeownership."

• Contribute to or start an emergency fund. In these challenging economic times, it is more important than ever to have money set aside in the event of a job loss or other life-changing event. Most experts recommend saving three to six months of living expenses, and your tax refund is a great way to jump start this account. By placing the cash in a separate savings account or short-term CD, you're going to be less likely to use it, and it will be there to help pay your mortgage, rent, and other living expenses in the event of an emergency.
• Service the car and tackle other things on your to-do list. If you've been putting off getting an oil change, cleaning your gutters or fixing the leaky roof - now is the time to cross those things off your list. Using your tax refund to maintain your expensive possessions now could save you money in the future.

If you already have an emergency fund and your to-do list is up-to-date, here are some other wise ways to put your refund to work:
· Pay down credit cards or other high interest loans. Credit card debt is simply an unsecured loan. If you can't pay them off completely, make an extra payment or commit to paying more than the minimum each month. People struggling to make ends meet in these difficult times should make sure to utilize their tax refunds to pay for essential items, such as food and gas, before using a credit card to pay for these items.

· Continue making regular mortgage payments. Many people are juggling a variety of debt, but it's a priority to make your mortgage payment before paying other bills. Falling behind on your mortgage payment will put your house at risk, especially in states where lenders don't need to utilize the court system to foreclose on a home. A tax refund can help you continue making these payments.

· Invest in retirement. Retirement is expensive, and most consumers believe they are behind in saving adequately to ensure a comfortable retirement. Whether it's in your 401(k), IRA or Roth IRA, investing your tax refund now will help provide financial security after you retire. The sooner you start saving, the more time your money has to grow. Make retirement savings a high priority by setting goals, devising a plan and sticking to it.

· Open a 529 College Savings Plan. A college education isn't getting any cheaper. With 529 College Savings Plans, deposits made now can be withdrawn tax-free when used for higher education. Plus, some plans come with tax benefits.

Review your exemptions for next year. While getting a tax refund is nice, do you really want to lend your money to the government all year instead of putting it to work for you? Consider reviewing your exemptions so less is deducted from your paycheck. Then make arrangements for the extra money to be deposited into a savings account to help pay bills or build up your savings cushion."

source: www.cccsinc.org.

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Cover Your Assets: 4 Ways to Protect Your Job

Feeling insecure on the job? Join the crowd. After watching friends, strangers and associates receive layoff notices, it's easy to feel nervous about the future. Bulletproof Your Job: 4 Ways to Stay Employed, by a Careerbuilder.com writer, provides excellent insights.

Writer Stephen Viscusi asserts that in this atmosphere, "You must understand that your job is your most valuable asset -- and your primary objective is to protect it."
--Bulletproof Your Job: 4 Ways to Stay Employed

Here are the four tips:

1. Stay visible. Work long hours, dress well, pay attention to details and volunteer for projects.


2. Be low-maintenance: Don't complain and watch your tongue.


3. Volunteer: Network, be a mentor for younger employees, develop multiple skill sets.


4. Have a Plan B: Save money, keep your resume current and join professional organizations.

My own advice: Develop multiple sources of income and revenue. Hobbies, second jobs and freelance projects can provide financial and professional cushions.

Related Posts:

Need a Second Job? Ideas & Strategies For Extra Money

Reformed Spenders Provide 10 Ways to Save in 2008

I Cashed My Check at the Bookstore: The Pits & Perks of Extra Money

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Financial Preperations for Hurricanes, Storms & Other Natural Disasters

I live in Paradise with palm trees, an ocean breeze and hurricanes. But you don't have to live in Florida to create emergency plans for your home and money. Unfortunately, wild fires, high winds and floods can happen anywhere.

Based on that reality, the following release about emergency plans for money apply to all of us:

"Hurricane Season starts June 1, and while Florida was spared from a major storm the last two years, many Floridians have already begun preparing for what could be a very active 2008 season. You may have already stocked up on batteries and bottled water, tested the generator, and planned an evacuation route, but have you thought about how you will manage financially should a storm come our way?

"The economic impact of a major hurricane will be felt long after the storm has passed," said Jessica Cecere, president of Consumer Credit Counseling Service of Palm Beach County and the Treasure Coast (CCCS). "Proper financial preparation and follow-through can make the difference between surviving a natural disaster and being financially devastated by one."

CCCS offers tips to help families weather the storm:

Start an emergency savings account. Most experts recommend having a minimum of three to six months of living expenses in an emergency fund. This fund can provide financial security in the event a hurricane hits, and can greatly reduce the stress of recovering from a major storm or other disaster. These funds can be used to make disaster repairs, cover insurance deductibles, or pay monthly bills if your income is interrupted by job loss.

Review your insurance coverage. Review your policy and make sure you have the proper amount of coverage to repair or replace your home and belongings. Pay special attention to deductibles that apply to specific events, such as hurricanes, which can be a percentage of your home's value. Also review your flood coverage, which must often be purchased separately from your homeowner's insurance. You do not want to be in the position where you need coverage that you thought you had, but do not.

Secure critical documents. Take some time to make sure that your critical documents are in a safe, secure place and could be taken with you if you have to evacuate. Collect critical paper records and if you have records on your computer, be sure to make a backup and store it away from your home. Documents you will want to secure include identification records (driver's license, green card, passport); social security and tax information; titles, deeds, and registrations for property and vehicles owned; insurance policies; credit card, bank and investment records; birth certificates, marriage certificates, and wills. Invest in a fire-proof box or safe-deposit box to keep these records secure.

Review your "what if" scenarios and make a plan. What if your place of employment is damaged and will close either for a few weeks or indefinitely? What if your employer is ready to reopen but schools are still closed and you don't have a place to bring your children? What if your home is damaged and no longer safe to live in? It is a good idea to think about all the ways the storm could impact your life and what you would do if that happened.

For example, if your place of employment will not reopen for weeks or months, do you have an emergency savings fund to carry you through? Is there another place you could work in the meantime? The rebuilding effort following a storm often creates new job opportunities. Talk to friends and neighbors about sharing the childcare responsibilities until school reopens so that you all miss as little work as possible.

"With the prediction by NOAA of up to 16 named storms and 5 major hurricanes, chances are good that we will find ourselves in the recovery process this year," said Cecere. "While we can't disaster-proof our community, we can be prepared to handle the challenges the storm leaves behind."

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Lessons From A Fire; What I Learned While Stuck on A Balcony

Fire struck the apartment building in which I live. The fire left one family homeless and taught the rest of us valuable lessons. And while stuck on my seventh floor balcony, I had plenty of time to digest a few frugal and life lessons.

Here's what happened: A microwave on a lower floor blew up and created a huge flame. Because he was walking the dog, my husband was already out of the apartment and my children left the apartment, exiting through smoke. But I was in the shower, and by the time, I dressed and attempted to help an older neighbor, I was not able to leave the building. The stairwells were filled with smoke.

It all ended well. No one was injured and my neighbors have found a new home until their burnt out apartment can be repaired in about three months.

Here's what I learned from the fire.


1. Even small doses of time matter: I really did not delay. But in the short time that it took me to dress and inquire about my neighbor, the stairwells were too filled with smoke to exit.

Financial lessons: From paying bills to saving for a vacation/education/retirement: Times flies and time matters. Move quickly, move thoughtfully; but don't panic.


2. Pay attention: While I ran from stairwell to stairwell, all of those lessons from school fire drills came back to me and I was belatedly happy that I had paid a little bit of attention to the instructions. I knew, for example, not to try to exit through the heavy smoke because more people are seriously injured from smoke inhalation than burns.

Financial lesson: Pay attention to details. Listen to instructions. You never know what piece of advice you'll need in an emergency.


3. Find a safe haven: My balcony became my safe room. In the open air, I did not have to worry about smoke fumes and I knew that if the fire spread, I could be reached by a cherry picker.

Financial lesson: Have a good exit strategy and find a save haven for finances.


4. Have a plan. My family needs an emergency plan. My husband was walking the dog when the fire started. I was in the shower and my children left the apartment on their own without shoes. (The firemen helped them down)

And until they saw me on the balcony, everyone was worried. In the future, we'll have some kind of system for emergency evacuations and a meeting place.

(I wasn't alone. Other families were stranded and separated in different parts of the building.)

Financial lesson: Create a plan, a budget, a financial strategy and stick with it.) Drills are also important.

Meanwhile, here are some fire safety tips.

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Borrowing from the Economides to Fix My Used Car

Due to assorted repairs, our used minivan has recently put a $1,000 dint into our emergency fund. To save money, we'll eventually have to replace our car. But until then, I plan to tap into the car advice provided by The Economides, "America's Cheapest Family."

I read a money-saving column featuring the Economides in Bottom Line/Personal (www.bottomlineSecrets.com. The article featured great tips, but the car advice really hit home.

Here's the Economides Car strategy:

1. I should estimate our yearly car expenses: gas & maintenance.
2. Divide that expense into per-paycheck allotments. (A monthly figure would work best for me).
3. Set aside that fixed amount for car maintenance with each paycheck. (bi-weekly or monthly).
4. If I don't use the car fund during one month or paycheck period, rollover that amount --untouched!!!--until the next month. This accumulation of car maintenance funds will provide a cushion for inevitable repairs.

"This way it's never a financial strain when the car needs needs new brakes --we have the money saved to cover it." --The Economides as quoted in Bottom Line/Personal.

The Economides publish The HomeEconomiser Newsletter (www.homeeconomiser.com) and have recently publish a new book: America's Cheapest Family Gets You Right on the Money. (Random House)

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Tapped the Emergency Fund: Major Car Repair

I think a major car repair qualifies as an appropriate use for an emergency fund. On the eve of a short trip to visit my folks, we took our car in for an oil change and check up at a fairly trustworthy auto repair shop. We left the auto shop with a bill of about $800 for assorted repairs, including a gas leak over the engine. Not good, especially before a modest vacation.

But we didn't have to borrow money from friends, family or a credit card. We tapped into the emergency fund and the repair bill did not feel like such a big burden. We'll work extra hard to replace the depleted funds.

My new goal is continue saving and to replace the auto-repair funds by February 20. Deadlines and concrete goals provide real-time, real-money targets for achievement. Deadlines motivate me. If I work on an extra article or two, over the next 15 to 30 days, I should be able to repair the emergency fund. That's at top priority.



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$10K Challenge: Joining Free Money Finance's Hunt for Side Income

I thought about writing about how the world of child stars (modeling & dancing) has knocked at my door with promises of large contracts for my children's childhood. (No deal! Child stars like Britney Spears and others scare me.) It would have been an entertaining post, but totally TMI (too much info).

Instead, I read Free Money Finance's post about hunting for an additional $10,000 in side income and I found my topic. His post is excellent, with a fixed number and a concrete plan.

Building a larger emergency fund has been on my mind this week and I've written a few posts on the subject. But my plans have lacked two things: 1) a specific number and 2) a definitive strategy.

Free Money Finance, on the other hand, crunches the numbers and calculates how many articles @ $400 each he has to write to hit his target. His post also includes links to other helpful and insight articles.

I think a goal becomes more real if you name the target. To say I want to enhance my three to six-month emergency fund lacks the emotional authority of this statement:

I want to add $10,000 to my emergency fund over the next 12 months.

In Winning by Jack Welch (with Suzy Welch), the Former CEO of GE, makes that same point about goal-setting. Spend time, Welch says, setting real-time, real-money goals.

Therefore, I will join Free Money Finance's $10K challenge with the following plan:

1) I will learn how to drive and turn my efforts into a story that I will sell to a national women's magazine. (One has already approached me. The catch: I have to drive first.) My sale Target: $500 to $2,000. I will also try to work on more magazine assignments.

2. I will broker my content through a national chain of family-friendly print magazines. They pay --I recall--less than $40 per story, but the chain accepts recycled material. It's a self-syndication plan. If only 10 magazines from that large chain pick up one of my stories, that's a few hundred dollars with minimal effort on my part.

I will find the link to that site and post it within a week. I'm annoyed with myself for losing the info.

3. Package myself as a speaker? I could register at one of the national speaking bureaus. Featured speakers at conventions and other corporate gatherings make a few grand per appearance. Maybe I can earn a few hundred by talking to smaller groups.

So that's my list. Thanks to Free Money Finance for creating the challenge.
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Beat February Financial Funk: A Money Map

Stall purchases, huddle with the hubby and launch a "crisis cash" fund, those are a few possible cures for beating the annual “February Financial Funk,”
according to Howard Dayton, author of Your Money Map: A Proven 7-Step Guide to True Financial Freedom (Moody Publishers 2006). He offers these tips for better finances in 2007:

1. Crisis Cash: Set aside regular amounts in an emergency fund. Start by saving $1,000. Then, increase that amount. Eventually, you should have enough to cover three months of living expenses. --Dayton

My comment: I'm working on a three to six-month fund, financed primarily with income from extra projects and surprise money. In an earlier post, I provided other suggestions for bankrolling an emergency fund.

2. Automate: Don’t rely on good luck to pad your finances. Set up an automatic withdrawal of 10% of your paycheck that will go directly into your savings. --Dayton

3. Family Huddle: Agree with your spouse on a regular, weekly time to assess and maintain your family spending plan.
--Dayton

Comment: We don't have a set schedule for chatting about money. Maybe I'll try this tip.

4. Stall to Save: Require yourself to wait two full days before buying something you’ve seen in a catalog, on the Internet, or in a store. --Dayton

Comment: I call it the permanent lay-away plan. When I shop, I put things on hold for a day or so. If I still want the item, I come back within the set period. If not, I call back and ask the clerk to put the merchandise back into circulation: Hence, a permanent lay-away plan.

Actually, I've restricted my shopping to August end-of-summer sales. (Summer clothes are perfect year-round in Miami).

5. Debt Repayment: Cut small expenses like cable, a morning cup of coffee or video rentals and put that money directly into paying off your debts, starting with the smallest and working your way up. You’ll be amazed at the results as you gain momentum. --Dayton

“One successful, practical change,” says Dayton, “does more good for your finances than hundreds of unrealistic promises. Focus on small adjustments in the way you manage your money, and you will find that they make a huge difference.”


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