Money Tips from The Money Coach

These practical money tips help teach kids, teens and parents about money!

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February Money Tip
If you don't know what things cost, money will be lost.
You and your children should be aware of how much goods and services cost.

Several decades ago, retail cash registers began doing more work for cashiers. Most registers now calculate the change due a customer when purchases are made. What affect has this had over time? Children, teens and adults are overwhelmingly deficient in their ability to calculate the correct change due. Many fast food restaurants use cash registers that make it even easier to ring up a total. They have a designated button for each menu item. So, what's wrong with making people's jobs easier? We adapt to these changes by thinking less. If you know someone who works in a fast food restaurant, ask them how much a large soda or a sandwich costs where they work and you'll see what I mean. They don't know the price of what they are selling?

When you are a customer at a restaurant you will be less likely to be aware of the price you are paying. How will you know if you get charged the wrong price or if you receive the wrong change? A few dollars a week can really add up. Mistakes made with your money that cost you an average of $10 a week will cost you $520 a year. Start paying attention to all of the money you spend in person, online and over the phone and you will definitely start to realize how much money you were wasting and are now holding onto.

January Money Tip
Financial resolutions for the New Year? Do not fear!
Start small and think big to insure keeping your financial resolutions.

Money issues can be overwhelming, but if you take small steps, you can start building good financial habits and over time you will be rewarded with more financial independence and less financial stress.

Here are a few ideas:
1. Increase your 401K or IRA contributions. If they are automatically deducted from your paycheck it's relatively painless to have a few more dollars a week deducted. For most, if you don't have it, you won't spend it (forced savings). Putting this money aside with pretax dollars should be another big motivator for you. If you currently deduct $50 a paycheck, increase it to $75 or $100. If you aren't putting money into a pre-tax retirement savings plan, start today!

2. Start a savings plan with and for your children. You might consider offering to double the amount of money they save for six months or a year. You make the rules including how they can earn the money to add to their savings account.

3. Pick three ways to save money in 2010 and set a dollar goal for each. Keep track of that money by putting it in a separate account or recording it in a notebook or on your computer. Remember, if you save $20 a week by bringing your lunch instead of eating out 3 times a week, you will save over $1,000 a year.

Remember, it takes time to develop good habits, so don't expect overnight results and don't be frustrated when you encounter setbacks. You're in it for the long run, so roll up your sleeves and start laying the groundwork for a successful financial future!

December Money Tip
‘Tis the season to spend less to avoid a future credit card mess
It could take you longer to pay off your debt than walking to the moon

You may have heard that it takes a long time to pay off your credit card balances, but most people don't realize just how long.  Let's say you have a $5,000 credit card balance at 19% interest and your minimum payment is 2% of your balance.  If you only pay the minimum payment every month it would take you 46 years and 3 months to pay off that debt. That assumes you never spend any more money with that credit card. Just add 46 to your current age to see how old you will be when you finally pay off that debt. You should also know that to pay off that $5,000 debt, you will pay back a total of $21,897. Those purchases don't seem like such good deals anymore, do they?

The moon is roughly 240,000 - 250,000 miles away or about 10 times the circumference of the earth.  At a walking rate of 2 miles per hour for 8 hours a day, it would take you about 41 years to walk to the moon.  So, you could walk to the moon faster than you would pay off that debt but that doesn't include all the pairs of sneakers you would need.

If you won't have enough money to pay your credit card bill in full when it arrives in a few short weeks, don't spend that money now.  It doesn't mean you love your family or friends less.  It means they won't inherit lots of your debt if you pass away before it's all paid off.

November Money Tip
Shop at home before you head to the store
Use less space in your home and have more money in your pocket

How many times have you bought food, clothing or home improvement items only to find that they were already in your home?  You've got a lot on your mind and you are only human, but a little effort can go a long way towards eliminating duplication of items in your home.  Why spend your money on things you already have when you could save your money for something you really need or want?  Better yet, you could add the money you didn't spend to your retirement account. 

Before you go shopping, make a shopping list and then check around your home to see what's already around.  Ask the people you live with if they know where the items on your list might be hiding.  Pay special attention to perishable as well as non-returnable items.  If you buy extra light bulbs or toilet paper it's no big deal as long as you have the space to store them until you need them.  A little bit of pre-shopping effort could save you hundreds of dollars a year.

October Money Tip
Get your monthly payments low and help the bank profits grow 
Stretching your payments out over a longer period of time is a bad idea.

When you are shopping for big ticket items like furniture, big screen TVs and cars don't be fooled by salespeople who tempt you with low monthly payments.  They tell you to "treat yourself" or "go for it" and "you can afford it with these low monthly payments".  What they don't tell you is that you will spend a lot more money in interest with a longer term loan.  Most salespeople don't even realize what they are trying to do to you.  Most likely, they are pushing you towards more expensive purchases in order to boost their commission.

Let's say you are buying a car that costs $25,000 including sales tax and registration fees.  If you put 20% down or $5,000, you will be financing the remaining $20,000.  By the way, the average price of a new car is currently about $28,000 and that doesn't include tax or fees which would easily add another $2,000.  Let's assume a 6.99% interest rate.  You would pay $617.45 per month for a 3 year or 36 month term and it would cost you about $2,228 in interest.  A 6 month or 72 month term would lower your monthly payment to $340.88.  Cool, you can swing that!  But, actually you would pay $4,544 in interest or $2,316 more.

A financially smart buyer would realize that they should either buy a less expensive car or wait until they save more money for a bigger down payment.  Other buyers may fall victim to the tempting lower monthly payments and regret it later.  If they decide to sell the car before the end of the loan term, they may really be disappointed to find that the loan balance is higher than what the car is worth.  It isn't fun when you sell your car and have to write a check to pay off your loan.

September Money Tip
Banks earning big profits when you're careless with your money isn't funny
Bank overdraft fees exceed $37 billion a year

According to a study conducted by management consulting firm Bretton Woods, banks and credit unions charged over $37 billion in non-sufficient funds and overdraft fees in 2008. 80% of these fees were incurred by about 20% of households who paid an average of $1,472 for the year!*

The best way to avoid these fees is to always be aware of how much money you have in your account including:
How much you currently have available.
+ when deposits you make will be available
- checks and other withdrawals that are outstanding (have not yet been deducted from your account balance).

Web access to your account and e-mail alerts/reminders are great tools to keep yourself up to date with your account balances and transactions. Managing your account closely is the best way to avoid overdraft fees other than maintaining a higher than necessary account balance.

Overdraft protection is another way to avoid overdraft fees, but many banks charge for this service, so get the details and shop around for the best deal. Overdraft protection can either automatically transfer your own money from another linked account or the bank can loan you the money to avoid negative balances.

Payday and other short term loans can be very expensive and should be only used as a last resort to avoid money shortfalls in your account.

Spending within your means is the best way to make sure that you always have enough money to pay your bills. Spending without thinking or calculating how much money you have will cost you a lot more money. Timing is also crucial. If you hope that your deposits will be credited to your account before checks, debit card charges or other withdrawals occur; you could miscalculate by one day and spend $39 per occurrence! Here's a simple example. You current account balance is $100 plus a deposit you made for $200. If an outstanding check for $150 clears before the deposit is made available to you, you will be charged an overdraft fee. If on the same day you use your debit card to buy a pizza for $15 and then later again to buy gas for $25, you could have overdrawn your account 3 times in one day and at $39 a pop, that's $117 in bank fees!

*source: ThinkCash Blog 1/16/09

August Money Tip
As students go back to school, make learning about money cool.
The best money lessons are experienced first hand.

Let your children participate in their own financial decisions as well as family financial decisions.  Money is not a 4 letter word!  So, don’t hide financial information from your children.  You can start by sharing certain household expenses with your children and let them help with some basic financial decisions.  For example, if you pay a lawn service $50 a week.  Let your children figure out how much you spend a year in lawn care and then compare it to buying a lawnmower and doing it yourself.  If your children are old enough, maybe they can cut the grass for a better price which would give them spending money and would save the family money.

Another example is how much you spend a year bringing your car to the car wash.  If you spend an average of $15 every other week per car, that equals $390 a year per car.  If you have two cars, that’s $780.  Let you children do the money math and propose how they can wash your cars for a better price which would again give them income and save the family money.

The possibilities are endless, but you have to be willing to let go and relinquish some control when it comes to sharing financial information with your children.  Although the examples above are not very personal or confidential, other financial information is.  You should make it very clear to your children that family financial information is private among family members and should not be shared with anyone else, not even their best friends.

July Money Tip
Student Loans: after graduation how much will you pay for money you borrow today?
Graduate magna cum laude in Debt Management.

Most college students need loans to help pay for their college education.  Students, parents and financial aid officers usually focus on how much needs to be borrowed based on the cost of attending college.  That's just a start.  As a college student you should determine:

• What's the least amount you really need to borrow?
• What will the monthly payments cost after you graduate?
• Will you be able to afford those monthly payments? 

You should borrow as little as possible.  Use your savings and money you earn with part time jobs to pay for tuition and other expenses.  Cut back all of your spending to as little as possible.  Remember, you're a poor college student.

Even though you won't know exactly how much you will earn after you graduate, you can start modeling different pay scenarios.  Do the same for your future living expenses.  Finally, calculate your loan payments based on the amount you borrow, the interest rate and the term of the loan.  Click here to start calculating your potential student loan payments now.

June Money Tip
Don't easily part with your money.  Money schemes aren't funny.
Falling for a money scheme is easier than you think. 

You may have already won.  Here's an easy way for you to earn more money a month than most people earn a year.  Make money at home.  Make money on the internet.  Just sign up a few of your friends and family members.  I am a respected businessperson from Nigeria.  You have probably been approached at least once recently by phone, e-mail or regular mail with one or more of these types of money schemes.  Sometimes offers are not obvious money schemes, so you should always proceed with caution.  Most of the time you should run...run as fast as you can no matter how hard someone tries to tell you what a great deal it is.

1.  Never give your money to anyone without researching the company's background.
2.  Don't pay money upfront.  It's very suspicious when someone is offering you a job or an opportunity to earn money, but first you have to send them money.  Don't let them disguise it as materials or startup fees.
3.  Ask for complete details of the offer in writing.
4.  Search the internet for any of the company names + "scam" or + "fraud".

Above all, you should know that when we are asked to research any of these types of offers or companies we almost always find that they are a money scheme or some type of fraud.

May Money Tip
Work on your "Honey Do List" and a money learning opportunity won't be missed.
Complete a family project & teach your children about money. 

Are there projects around your home that are waiting to be tackled?  Imagine completing a project on the "Honey Do" list while teaching your children about money.  Here's how you can accomplish both.
 
Step 1 - Choose a project that requires several items and several hours of labor to complete.  Here are a few examples:
            A.  Build a sandbox, playground, horseshoe toss or other play area.
            B.  Paint a room in your home.
            C.  Organize a closet with shelving and other closet organizers.

Step 2 - Create a materials list with your children and estimate the quantity needed of each item to complete the project.  List the estimated cost of each item and multiply by the quantity needed.  Then add all of the item costs to arrive at the total budgeted cost for the project.
 
Step 3 - Go shopping.  Encourage everyone participating to make suggestions about ways to reduce the cost of the project.  A few examples include not buying more than you need and minimizing waste, finding the same or similar items on sale or at other stores for less money, and "shopping at home" for items you may already have before you go to the stores or shop online.
 
Step 4 - Complete the project and then compare the actual amount of money spent on the project with the budgeted costs.  Discuss why you were under or over budget on certain items and what everyone learned by completing this project together.
 
Most importantly, have fun!

April Money Tip
Don't be an April Fool...
Start saving for retirement while you're in school!

Teenagers and their parents can open and contribute to a ROTH IRA up to the amount the teen earns in a tax year and no more than $5,000.  The teen/pre-teen doesn't need to pay income tax on those earnings or file a tax return to qualify, but will need to keep a record of those earnings which should be normal market rates.  So, if your teen cut your neighbor's lawn 10 times last summer for $50 a cut, the earnings were $500.  The teen or the parent can contribute up to $500 in a ROTH IRA for the 2008 tax year before April 15, 2009.
 
The Choice:
Option A 
Your teen opens an IRA at age 15 and makes an annual contribution for 6 years.
Option B 
Your teen waits until age 30 and makes the same annual contribution for 35 years.

The amount of money the current teen will have for retirement at age 65 is almost the SAME.  So, the key here is that time is on your side.  Note that this example is based on an average annual yield of 7%.  Long term equity returns can average 9-10%.  I know that you're thinking..."Recent stock market returns have been very negative!"  What better time for your teen to jump in when prices are so low!  And, the key point of this Money Lesson is to start saving early, not how you should invest the money.  For more information about this or our other Money Tips, e-mail us

March Money Tip
Paying off your credit card bills a little at a time should be a crime
Pay your credit card balances off FAST...interest charges are expensive!

You've probably either heard or experienced that credit card interest can cost you a lot of money. But, if you pay your balance in full every month before the due date, you will not be paying ANY interest or late fees.

Here's how to calculate actual interest charges. First, you need to either calculate or find on your bill, your monthly interest rate. It's easy enough to calculate. Just divide your annual interest rate by 12. Example: If your annual interest rate is 18%, your monthly interest rate is 1.5%.  Now you can determine how much money you will pay in interest for the current period.

Current balance x Monthly Interest Rate = Interest Expense for the current month

Example: Your outstanding credit card balance = $10,000 and your annual interest rate = 24%.
$10,000 x (.24/12) = $200. Your monthly interest rate is 2%, so your monthly interest charge is $200. That's a lot of wasted money. Hopefully, this lesson will encourage you to pay off your existing credit card balances and to spend less money. 

February Money Tip
The apple doesn't fall from the tree, so set good examples for all to see.
Your children hear and see more than you think.

Children learn a lot about money from their parents and grandparents; mostly by watching and listening.  Setting good examples when it comes to earning money, saving money, spending money and investing money can go a long way towards your children and teenagers building a successful financial future.   Including them in financial discussions decision making processes offers great first hand learning.  Working hard, saving as much as you can and careful research and planning before investing are all examples of good behavior that set good examples.

The same is true for bad money habits which are equally influential and can leave lasting impressions.  Spending money without questioning whether it's really necessary, not checking receipts or bills for accuracy and not saving enough money every month are all examples you don't want your children to imitate.

January Money Tip
Need to cut your expenses?  Have no fear; think about everything in terms of a year.
Take the first step - acknowledge how much you spend.

Times are tough all over and the current recession is affecting everyone in some way, shape or form.  You've probably started to pay more attention to how much you and your family are spending.  You've probably started to cut back or eliminate some of your purchases and household expenses.  Here's how you should think about expenses that reoccur every month, week or day.  Annualize them!  If you spend $100 a month on cable TV, that's $1,200 a year.  If you spend $50 a week on lawn cutting and maintenance, that's $2,600 a year.  If you spend $10 a day on coffee, snacks and gum, that's $3,650 a year.  Here's something else to think about.  If you find a billing mistake on your cell phone bill that charges you $15 a month more than you should be paying, that over charge will cost you $180 a year, so check your bills every month to make sure that they are accurate!

Here's a way to reduce your annual spending.  If you have 2 children and they typically get haircuts every 2 weeks for $15 each ($30 a visit) that adds up to $780 a year.  If you space their haircuts to once every 3 weeks that would be $510 (about 17 times a year instead of 26 times a year).  That would save you $270.  You could take those savings and apply them to a vacation fund.

December Money Tip
Happy Holiday Care - Let the buyer (or returnee) beware
Know the rules before you make a purchase.

It's a busy time of year and the holiday shopping rush is on.  It's very important that you pay attention to the terms sale no matter what you are buying.  If it's not on the front or back of your receipt look for signs posted at the checkout register or online checkout.  If you are unsure of the terms of sale or can't find them, be sure to ask before you buy.

• What is the return or exchange policy?
• How long do you have to return or exchange what you buy?
• What are the conditions of returning?  Examples include: unopened package, must be damaged or defective.
• Do you need to have your receipt?
• Is there a restocking fee?
• If it's an internet purchase, who pays for the shipping to return the item and the original shipping?

Most importantly, don't trust what someone tells you.  Make sure you have proof of the policies in writing.

Have a Happy & Healthy Holiday Season!

November Money Tip
If you don't have money to burn, it's time to explore more ways to earn
Money EARNING tips to help ease your household budget

The current economic downturn has lead to many news articles about ways to save money.  But, here let's focus on the other side of the equation; earning more money.  Earning just $50 a week (after expenses) with side jobs or a part time business = $2,600 a year.  What are you good at?  Can you turn it into a part time business?  Here are just a few ideas:

1.  Making handmade holiday gifts or gift baskets.
2.  Housecleaning
3.  Dog walking or dog sitting
4.  Organizing papers
5.  Computer repair or teaching people how to use computer programs

Here are a few things to consider when you are trying to determine whether you can earn extra money with a part time business:

• Study your market to learn about current competitors including what they charge for their products or services.
• Ask lots of potential customers what they want and how much they are willing to pay.
• Crunch the numbers at different price points to determine how much money if any, you might be able to earn.
• Beware of get rich quick schemes or any "business opportunity" that requires an upfront investment.  Thoroughly investigate and research any of these online before taking the plunge.

October Money Tip
Keep control of your pet, or you may owe a lot of money to the vet
Have your pets contained in your home or on a leash                

If your pet causes harm or injury to another person or another person's pet, you could end up paying A LOT OF MONEY in vet bills, medications and other fees.  Depending on the severity of the injuries, the cost can easily be several thousand dollars!

Even if your pet becomes loose by accident (they run out of your house or slip off their leash) you may be responsible if they bite or attack a person or another animal.

Check your local and state pet laws, because they are different depending on where you live.  And, if you don't have any pets, share this information with friends and family members who do own pets.

September Money Tip
Cosign a loan? Be prepared to moan.
Make sure you know what you are getting into before you cosign a loan.

When you cosign a loan for someone, YOU are agreeing to make any payments that person doesn't make. If the person you cosigned a loan for pays late or stops making payments, their credit score AND your credit score will decrease. A lower credit score can really affect your life with higher interest rates for credit cards or loans, higher insurance rates and it may even affect your ability to qualify for a job!

Make sure you always have current payment information. To avoid any surprises, ask the lender or finance company to e-mail you every time a payment is due, when a payment is received and if a payment is late/not received.

If someone you know (yes, even your children, siblings, or parents) doesn't qualify for a loan, they should either wait until they can qualify or maybe give you items as collateral in exchange for cosigning. Collateral are items of value (assets) used to secure a loan if the borrower doesn't make agreed upon payments. So, if they stop paying, you will make the payments, but you are allowed to keep the collateral or sell those items to recover the money you were forced to pay.

August Money Tip
By the Pound? Buy with caution and look around.
Buying Meat, Seafood, Cold Cuts at supermarket? Check the label!

When you buy any food sold by the pound in a supermarket, you should check the label to make sure that it matches the food you are buying. You should also check the price per pound to make sure you are being charged the right price. This is especially important when the item is on sale. Mistakes happen, but if you don't pay attention, other people's mistakes can cost you money. A few dollars a week equals a few hundred dollars a year.

July Money Tip
AVOID late fees. Once you develop good habits, it's really a breeze.
Late fees are expensive and they are a total waste of your money.

Always leave enough time for your bill payments to be received on time. Paying your bills with an online service from your bank is usually easier, faster and you have proof of when a payment was made. You also don't have to look for an envelope and a stamp.

If you pay your bills on time (maintain a good payment history), but make one payment late, you can ask to have the late fee waived as a one time courtesy. Many credit card companies will usually do this once a year, but check with your credit card company or other companies you do business with to find out what their policies are.   

April Money Tip
Financial Literacy Month is here, have no fear!
Invest in yourself and learn a financial concept or two

April is Financial Literacy Month and there's no better time than right now to invest in yourself by learning about money so you can reap the rewards of a successful financial future.  Here's one financial concept to get you started.

Do you know what compound interest is and how to calculate it?  Compound interest means that in addition to earning interest on the money you have invested, you also earn interest on the interest you have already earned.  If you start with $1,000 and earn 3% interest a year, you would earn $30 of interest at the end of the first year.  The second year you would earn $30.90 because you would earn 3% on $1,030 (the original principal plus the first year's interest earned).  This example assumes that the interest is only earned and compounded once a year.  Most interest is earned and compounded monthly or daily.  There are plenty of free online calculators to help you experiment with different interest rates and principal amounts.

March Money Tip
Follow the pot o' gold glow to the end of the rainbow
Ask your family members what they would do if someone gave them $100,000.

You've heard people say, "If I only had a million dollars..."  Maybe you've said or thought the same. 

Take a few minutes and try the following with your children (grown children and other family members can and should participate as well).  Give everyone a sheet of paper and imagine someone walking in right now and giving each of you $100,000 with no strings attached.  On a piece of paper, each of you should write down what you would do with the money and how much of the money each item would use.  Make sure that the total amount of money used does not exceed $100,000.  Allow 15 minutes to complete.

Share with each other what you would do with the money.  Did you save or invest any money for the future?  If you planned to spend it all, how long would it take before you ran out of money?  Discuss how you might improve your responses to this exercise as well as your everyday money habits.

The truth is it's not how much money you have or receive; it's what you do with the money.  Many multimillion dollar lottery winners spend most or all of their money quickly and end up with nothing.  Start small and think big when it comes to managing the money you earn, save, spend and invest.