Have you ever put an old chestnut like “save more” or “spend less” on your list of New Year’s resolutions? I’ve done it, too, with results undetectable by the most precise financial calculator.

Instead, here’s a top ten list (in traditional David Letterman order) of concrete resolutions you can actually accomplish. I’m not saying they’ll be easy, but all of these are either on my list for 2010 or are resolutions I’ve successfully completed in years past. Pick a couple of favorites and go to town on them. Happy new year.

10. Make or update your will. The number one reason people don’t do this is that they believe they will never die. If you are, in fact, immortal, go ahead and skip this one. Otherwise, if you have a simple estate, you can make a will on the cheap: get Nolo’s Simple Will Book or use their Online Tool for $70 (and it’s on sale for $50 until January 7). If you have a complex estate (do you employ a chauffeur with a name like Worthington?), get a lawyer and remember the first rule of estate planning: don’t forget a little something for your personal finance columnist.

9. Set up an automatic savings plan, if you don’t already have one. Even $5 a week is a fine place to start. SmartyPig works well for this. Pick a specific goal, check your progress periodically, and don’t mess with it—except to increase the weekly allotment.

8. Get rid of useless crap. No time like the present

7. Start a business. Hmm, that sounds too ambitious. Instead, start a side project that happens to be tax-advantaged. And start small. It could be selling crafts on Etsy, any kind of shop or repair work (I sharpen knives, for example), or even freelance writing. Go legit—get your city business license and file Schedule C. Why? Even if you don’t itemize, business expenses are tax-deductible. It’s fun to get paid (even a little) for something you enjoy. And if you become un- or underemployed, having an existing side business gives you something to focus on. Which brings us to…

6. Simulate bad news. Armies and city governments run disaster simulations. You can play the home game, the financial equivalent of testing your smoke alarm. Are you doing enough to prevent an emergency or life change from becoming a financial disaster? (Oh my God, I totally sound like an insurance salesman.) This year, evaluate your insurance, your emergency fund, and your family’s plans in the event of job loss, natural disaster, death or illness, and other bad things. This will not be fun, but you know what would be less fun? Doing it during the actual emergency.

5. Plan for financial good news. Now, this is more like it! Here’s hoping you get a raise, bonus, or inheritance this year. It’s about damn time, right? (I mean, not that I’m actively hoping you get an inheritance. Unless it’s from a rich uncle you never met.) Furthermore, here’s hoping you spend some of it on fun and some of it on long-term goals. Decide now. It’ll take you five minutes. What percent of any unexpected income will you set aside for retirement or the emergency fund this year?

4. Talk to your relatives about a gift moratorium. I know, sounds like negotiating with North Korea. But if you do raise the idea, do it in the summer—far from winter holidays and not too close to anyone’s birthday—and make the terms clear (maybe children and handmade gifts are excluded from the cease-fire, say). Explain that it’s not because you don’t love getting presents, but because you’re taking charge of your financial situation and find it hard not to spend on your wonderful siblings and cousins and uncles without making a pact. Oh, if my parents are reading this, next year I’d like a stocking full of candy and a donation to my favorite charity. And a chauffeur. Kidding!

3. Look into Roth IRA conversion. As of 2010, there’s no longer an income limit for converting a traditional IRA to a Roth IRA. (If you couldn’t convert to a Roth in the past because you made over $100,000, congratulations.) Converting your traditional IRA (or an old 401k or 403b) to a Roth may or may not be the right move for you—talk to your financial adviser—but if you’re even considering it, you’ll need to think about where the money will come from to pay the tax on the conversion. Good news: you can pay the taxes over the course of two years.

2. Take a nice vacation. You’ve earned it. Just one rule: you have to pay cash, and you have to save up the cash with the vacation in mind. This year we’re taking a family vacation to Japan; we’ve been planning and saving for it since 2007. If you follow through on this resolution, do me two favors: have a great time and don’t invite me over to watch your slide show.

1. Don’t buy a house. Okay, maybe this one is just for me. Have you ever saved up for something and then realized you didn’t want it anymore? For years, my wife and I have been socking away money every month into our down payment fund. And it’s getting awfully close to our goal. Due in part to the housing collapse, however, we have completely lost interest in buying a house. So one of our resolutions for this year is to determine how to reallocate that money—probably to beef up our retirement savings and emergency fund. Although, come on, how much can a chauffeur cost? Seriously, that much? Never mind.

Matthew Amster-Burton, author of the book Hungry Monkey, writes on food and finance from his home in Seattle.

Embed the above image on your site
<embed width="500" height="350" src="http://www.mint.com/blog/wp-content/uploads/2009/12/MINT-EXPENSIVE-CITIES-R4.swf" type="application/x-shockwave-flash"/><br /><a href="http://www.mint.com/">Budgeting</a> – Mint.com

(Over Kind Man)

At first glance, it might seem old hat to anoint Brazil as the land of new opportunity. Long characterized by crime and corruption, Brazil has historically fallen short of its moniker as “the country of the future.” However, data has emerged in recent years suggesting that Brazil’s economic forecast is brighter than most might think. Despite a 1% contraction in GDP during 2009 (much of which can be attributed to the worldwide financial meltdown), TradingEconomics.com refers to Brazil “…one of the fastest growing emerging economies in the world.” Brazil’s economy also “…ranks highest among all the South American countries”, as well as having acquired “…a strong position in the global economy.” The country stands as the richest South American country in terms of GDP, and despite the recent dip in growth, Brazil is showing signs of an recovery, propelled largely by tax cuts on consumer goods. As we head into the New Year, you may be thinking about greener pastures. In this first of a series on recovering economies, we’ll look at what Brazil has going for it economically speaking – the opportunities, the government incentives to producers, the fastest-growing industries, and what the future has in store.

The Opportunities

The business opportunities in modern-day Brazil are not confined to native citizens. Indeed, citizens of presumably better-off, developed countries are concluding that, in many cases, Brazil offers something of a new ‘promised land.’ A recent BBC report, highlighted the story of a Lebanese entrepreneur named Jimmy who came to Brazil after working in France for six years. While conceding that France is, “…a great country to visit”, Jimmy maintained that, “…there’s a lot of restraints: you have to pay lots of taxes, food costs are high, so there’s lots of things that push you to come here to Brazil.” And that’s what Jimmy did, opening his own jeans and clothing manufacturing business while working at a restaurant on weekends. Taxes, especially, are a major driving force behind multinationals and expatriates flocking to Brazil. When reminded that he paid taxes in Brazil as well, Jimmy countered frankly, “…you can’t compare the European taxes with the Brazilian taxes.”

(Claudio Matsuoka)

More broadly, the BBC reports attributes much of Brazil’s burgeoning opportunity to the fact that, “…street traders and hustlers” hocking t-shirts, toys and computer games has been supplemented by, “…more formal enterprise.” This stands in contrast to what BBC calls, “… informal bustle and street dynamism”, which limited Brazil’s economic appeal to outside interests for decades. What explains the change? Several factors, not least of which is the introduction of democracy 25 years ago, spelling a reduced role for the military in politics. Prior regimes, with their preference for resolving domestic conflicts with force, created uncertainty amidst which business activity simply could not flourish. With these regimes a thing of the past, Brazil’s modern governments began actively courting multinational investors and businesses to the country with various incentives. Tax breaks to exporters have been foremost among these incentives. In 2005, International Tax Review reported that Brazil had enacted, “…special tax regimes” to exporting local entities, as well as companies working in the IT space. Retirement program taxes, “…levied on importation of fixed assets and services used in software development and the supply of IT services”, for instance, were suspended for both IT companies and all exporters for whom exporting comprised, “…80% of their annual gross revenue.” Taxes levied on, “…importation of new capital goods (for example, machinery, equipment, and tools)” were also suspended during the same year.

The Incentives and Top Performers

More recently, BusinessWeek reported in November 2009 that Brazil had cut taxes on furniture and construction supplies. The, “…Tax over Industrialized Products (IPI) for the furniture sector, ranging from 5 to 10 percent depending on the product, will fall to zero till the end of March 2010″, while the cuts on construction supplies, originally slated to end in December, were extended through June 2010. BusinessWeek states that these cuts were part of a broader portfolio of incentives, accompanying, “…tax cuts in such sectors as vehicles, construction supplies and household appliances to boost domestic consumption and help its economy bounce back from the financial crisis as soon as possible.”

(Esdras Calderan)

By and large, the incentives have worked. In its 2009 Letagum Prosperity Index, Prosperity.com noted that, “…490,542 new businesses were registered [in Brazil] in 2007, the second highest figure in the Index.” While computer access is “…very low by global standards at just 16 personal computers for every 100 citizens”, this still represents the highest figure in all of South America. Payment for royalties is high, “…indicating that Brazil is able to capitalize on its intellectual property.” Perhaps most conducive to entrepreneurial opportunity is the relatively high level of freedom Brazilians enjoy. According to the Prosperity Index, Brazil boasts, “…the highest possible rating for freedom of movement, religion, and speech”, good for sixteenth on the personal freedom section of the Index. With eight out of 10 respondents believing that Brazil is a good place for minorities, perhaps this is why businessmen like Jimmy feel comfortable setting up shop in Brazil.

Some of the fastest-growing Brazilian industries have been hinted at thus far. Consumer goods remains an economic juggernaut, while exporting continues to be emphasized and promoted by President Luiz Inácio Lula da Silva’s government (or known affectionately as ‘Lula’). The nation’s consumer electronics industry, in particular, is said to be, one of the fastest growing consumer markets in the world. The Brazilian automobile industry is also growing despite the recession, projecting a compound annual growth rate of 10% from 2009-2013 according to PR-Inside.

What The Future Holds

Indeed, the road ahead appears quite prosperous for Brazil. Bloomberg reported on December 19, 2009 that Brazil’s jobless rate, “… fell for a third month to the lowest level of 2009″ – 7.4%. The country is reportedly expected to add over 2 million jobs in 2010, according to Labor Minister Carlos Lupi. Zeina Latif, chief economist for Brazil at ING Bank, was quoted as saying that domestic demand and demand for consumer goods, “…weren’t hurt by the international crisis.” In a similarly optimistic vein, the Wall Street Journal sees Brazil’s economy growing by 5.5% in 2010, granting that, “…it’s perfectly possible for industry to grow at a rate of 6% to 7%.” Looking ahead even further, ThePicky sees Brazil becoming the fifth largest economy in the world by 2050. All things considered, it’s no wonder why Brazil’s $1.5 trillion economy is being called the new land of opportunity.

If you spent most of your Christmas morning tearing and swearing as you tried to get the packages open, you may be wondering if all of this wasteful packaging is really necessary. Consider these facts about the role of packaging in our consumer economy. One third of our waste comes from packaging from the 430 billion dollar global packaging industry. That’s larger than the global auto manufacturing industry. So what can you, as an individual, do about it? Here is one look at the disposable stuff that comes with a famous 11.5 inch doll, herself an icon of American consumer culture.

Embed the above image on your site
<a href="http://www.mint.com/blog/wp-content/uploads/2009/12/PlasticSurgery.jpg"><img src="http://www.mint.com/blog/wp-content/uploads/2009/12/PlasticSurgery.jpg" alt="PlasticSurgery" title="PlasticSurgery" width="600" height="1403" class="alignnone size-full wp-image-7803" /></a><br /><a href="http://www.mint.com/">budget planner</a> – Mint.com

With just a couple of days left to complete your holiday shopping, you’d better make sure you know how to shop smart and aren’t wasting time and or money. Here are some quick tips that can help get you through those last few stressful hours.

DO: Make a Plan Overspending during the holidays is easy to do when you don’t have a plan. Take a few minutes and plan for everything you will need to spend money on this season from gifts to decor to travel. Mint.com can help you figure out how much to safely spend, without a holiday hangover in January.

DO: Ditch the Department Store Off-price retails like TJ Maxx and Marshalls are bigger than ever. They offer the same on-trend brand name merchandise found in department stores and boutiques for 20-60% less. You’ll find everything from designer clothing for the entire family and to gourmet food items and kitchen utensils to small electronics, books and DVD’s along with the hottest toys.

DON’T: Shortchange the Garbage Man This year, according to the NRF (National Retail Federation) American families will spend an average of $682.74 on holiday gifts. However the majority fear this is not enough leading 70% of consumers considering cutting their list with the service sector and garbage man (54%) topping the list.

DO: Be Efficient Cutting back does not mean you have to go without. Instead find ways to save doing all the things you love to do during the holiday season. Try investing in decorative lights that have energy saving light bulbs; consider purchasing an artificial tree that can be used every year or if you prefer a real tree, scale down the size this year to save money.

DON’T: Sacrifice Quality It may seem like you’re getting a deal when discount stores offer multiple items for a low price. But many times those items were manufactured to sell at that low price and the items will not stand the test of time. Instead spend a few dollars more to invest in quality – it will save you money down the road.

DO: Have Happy Holidays

Farnoosh Torabi is a personal finance author, expert and television personality. In 2008 she published “You’re So Money – Live Rich Even When You’re Not,” a tell-all for young adults searching for financial independence and can currently be seen on SoapNet’s new series “Bank of Mom and Dad,” coaching young women struggling with piles of debt.

You know what they say about a picture being worth a thousand words? When it comes to explaining concepts like inflation or describing how the Federal Reserve works, a visualization or infographic can educate while it entertains. From bankers to bailouts to taxes and unemployment, the economic downturn provided plenty of fodder for infographics this year and it quickly became part of our mission to produce ‘em to help make sense of it all.

Our visual guides, Mint maps, and animations have proved popular and we’ll be putting even more emphasis on them in the year ahead. For those that may have missed ‘em, here’s a look back at our best financial infographics of 2009, according to you, our readers.

Charity: Who Cares?

Americans lead the world in charitable contributions, giving $300 billion a year to charities. Sounds like a lot right? But this is just a drop in the bucket compared to the over One Trillion Dollars needed to keep US charities in operation, more than the US government collects in taxes. The rest comes from their own assets, government support, and foreign investment. Our visual guide to giving shows who’s paying and offers some tips on how to pick a charity of your own.

Who is paying taxes?

Recent news articles have brought to light the fact that almost 47% of households in the US currently have zero or negative federal tax liability. We take a closer look at this lack of liability across each income level, highlighting the percentage in each range that will not pay any taxes. Also shown is a full breakdown of who is paying the bulk of all taxes collected by the Federal Government each year.

A visual guide to inflation

Inflation. It’s bad right? When prices rise your money is worth less and nobody wants to see their hard earned cash decline in value. But what is inflation anyway and what are its root causes? Turns out the situation is not as straightforward as it first appears. In this first of a two-part series we take a look at inflation and examine the pros and cons of this important barometer of the health of the US economy. Stay tuned for part two next week where we look at inflation’s alter ego, deflation. We look forward to your feedback and comments below.

The Fall of GM: A Visual Guide

In recent weeks, GM has been making a last-ditch effort to deal with its mounting problems and somehow escape bankruptcy. The final outcome remains to be seen, but any bailout efforts or even the most drastic of moves at this stage seem to be, as visualized below, the equivalent of lifting massive, crushing weights with simple balloons. The announcement of the resignation of GM Chairman and Chief Executive Officer Rick Wagoner at the behest of the Obama administration was just the latest in a series of moves designed to reassure public confidence in the flailing automotive manufacturer.

Mint Map: America’s Most Frugal Cities

We all know that Americans have cut back on their spending during the recession but where are they cutting back the most? Comparing 20 cities across 25 “discretionary” categories we found that five cities spend less than the national average and cut more of their spending (yr over yr) than the national average. Our latest map is based on the aggregate data from over one million Mint.com users, a representative sampling of US consumers.

Student Loans by the Numbers

While it’s been said you should never underestimate the value of a college education, neither should you underestimate its price. Without proper financial planning, you could be paying off those student loans for the rest of your life. College tuition costs are rising at twice the rate of inflation, in part because colleges are attempting to make up for reduced public funding under the previous administration and passing the costs on to you and your parents. The Obama administration has proposed a massive overhaul of up to $6 billion dollars in federal loans but many fear this will lead to the same kind of death spiral that got us into a financial mess with the housing crisis. The numbers tell the real story.

Mint Map: The World’s Resources by Country

A country’s economic worth can be measured in more ways than just its GDP and national debt. It is also important to consider the economic potential that lies in the harvesting of the natural resources within its borders. This map shows the top producing countries of each resource, or the proved reserves in the case of oil and natural gas. Each circle represents the percentage of the world’s total that the country produced in the last two years. Though some of the resources are renewable and some are not, it is interesting to see which parts of the world are rich in resources that are essential to our way of life, and to consider what this map might look like 10 or 100 years from now.

Golden Parachutes: How the Bankers Went Down

When high-ranking executives are fired from a company, for whatever reason, they don’t go to the back of the unemployment line. Instead, they typically receive compensation in the form of the “golden parachute.” Golden parachutes can include severance pay, cash bonuses, stock options or other benefits. In the case of the financial crisis and the ensuing bank failures, if it seems like these executives are being rewarded for poor performance, you may be right. Here’s a look at what some bankers made on their way down.

The Descent into Credit Card Debt

When used wisely, credit cards can be the cornerstone of a sound financial strategy. A solid credit history makes you a good credit risk and that in turn allows you to purchase the necessities of life. But credit cards can also be a slippery slope. One misstep and you’ll tumble into the abyss of credit card debt hell, a mounting spiral of missed payments, fees, high APRs, and rate increases that will take years to recover from. Only by remaining vigilant can you hope to avoid this fate. Here’s our guide to what you may experience on the way down.

China vs United States: A Visual Comparison

Everyone knows that China’s got more people and that its importance as an economic superpower has escalated in recent years. What you might not understand is how the differences between our countries, in economic philosophy, in population, in geography and in how the military is built and paid for ultimately play into the entire economic relationship.

Photo: Daniel Y. Go

Everyone knows by now that long-term retirement planning is important, right? And you probably have some sort of budget or other system for planning daily, weekly, and monthly expenses.

Great. Glad to hear it. But what about those medium-term, medium-size expenses like vacation, car repair, furniture, and holiday spending? You know, the expenses that always seem to bite you in the ass?
Here’s my strategy: every time I get bitten, I open a new savings or checking account to collect money for a particular type of budget-busting expense. I’m now up to sixteen of them.

That’s just checking and savings accounts—it doesn’t include CDs or brokerage accounts. But bear with me, because I’m not insane: I really do have that many bank accounts, and it actually does make my life simpler.

In order to explain why I have so many accounts and why I think you should also have a bunch, let’s look into the past. (Cue dissolve and piano glissandos.)

The bad old days

I’m old enough, barely, to remember a time when most people had only two cash accounts: a checking account and a savings account. They were basically the same, except that the checking account let you transfer money to another person by writing on a little rectangular sheet of paper. This was so long ago that I can’t even remember what they called those things.

Schmecks, was it?
Back then, if you wanted to open a new account, you had to walk into the branch and sit down at a desk. If you wanted to set up an automatic monthly transfer between accounts—if your bank even offered such a service—you had to fill out paperwork. If you wanted to transfer money between accounts at different banks, you had to write yourself a schmeck or pay a wire fee. And if you had accounts at different banks and wanted to see them all at once in a single interface? Here, pal, take your free thermos and get out of my bank.

Yes, the good old days really sucked. Luckily, we don’t live there anymore, and we shouldn’t bank as if we do.

I have an emergency fund. A vacation account. A medical account. A short-term savings account. A home improvement account. An account to save for quarterly self-employment taxes. Each of these gets an automatic monthly transfer from my checking account.

To be clear, I do not have an account for groceries, entertainment, or rent. That really would be insane. This is only for unexpected expenses and things that take a few months to save up for.

A word from Chase

“Wait, wait, wait, you have 10 or 20 different accounts?” asked Tom Kelly, media relations staffer for JPMorgan Chase.

“Sure,” I said.

“To have all those multiple accounts, it’s complicated…you spend a lot of time on this?” He also speculated that I must be paying a bundle in monthly fees for maintaining low balances. (Chase charges $4 or $5 a month for savings accounts under $300.)

Well, he was right about the low balances, but I spend a few minutes—and not a dime in fees—on banking every month. Two of my accounts are with Chase. The rest are split between BECU (a Washington state credit union) and EmigrantDirect, a bank which offers online high-interest savings accounts.
Opening a new account at BECU or EmigrantDirect takes about one minute online, and it’s free. I can set up automatic monthly transfers between accounts and change them anytime. I can manually or automatically transfer money between banks for free. (This is called an ACH transfer, and some banks charge for it; be sure to ask yours.) And I can see all of my accounts together in Mint.com. If you’re wondering, having 16 cash accounts puts me in the top 0.6 percent of all Mint.com users. Where do I pick up my tiara?
Most of my accounts are savings accounts, and they earn a little interest. When I need to spend out of, say, the furniture account, I transfer money into my checking account (time invested: one minute) and head to Crate and Barrel.

What’s the point, though? Why maintain sixteen accounts when I could split all the money between one checking account and one high-interest savings account? Then I could use pencil and paper or Excel to keep track of how much of the savings account is dedicated to vacation, clothing, or medical. After talking to the guy from Chase, I started to wonder if I was a few pennies short in the mental account.

Join the Christmas Club

Then I spoke to BECU’s PR guy, Todd Pietzsch. Not only am I not crazy, said Pietzsch, but I’m not as cutting-edge as I think I am. “We used to have what was called the Christmas account, which is essentially exactly what you’re talking about,” he said. “But with today’s web-based technology, you can still have your Christmas account, you just name it ‘Christmas Account,’ right?”
Indeed I do. “So I’m not doing something you discourage?” I asked.

“Absolutely not,” said Pietzsch. “We identify the long-term goals that we have, and hopefully you do that through your retirement planning. But for your short- to mid-term goals, I think that’s a great tool to do that.”

Many credit unions, in fact, still have a Christmas account, usually called the Christmas Club. Typically, it’s like a hybrid of a savings account and a CD: you open it in January, set up an automatic weekly or monthly transfer, and pay a penalty if you withdraw before November 1.
There’s a penalty for withdrawal in my homebrewed system, too: Once the money is in a (virtual) box marked “vacation,” it’s like somebody stamped “vacation” on my benjamins. I feel dirty just thinking about taking money out of there and spending it on something else.
What I’m coming around to is a very old idea. Ever had someone recommend putting cash into envelopes marked with spending categories? This is great advice if you want to make a burglar happy, but it has never worked for those occasional major purchases, unless you own a kickass safe and hate earning interest.

Do it yourself

If you want to go down the many-accounts road, two caveats:
1. Choose a bank or credit union with an excellent web interface and unlimited no-fee deposit accounts. ING Direct, HSBC Direct, and many credit unions fit the bill. If you have to fill out paperwork to add an account or an automatic transfer, go somewhere else.

2. You can only make six withdrawals (of any type—transfer, ACH transfer, wire, ATM) per month from a savings account, or you’ll be socked with a big fee and possibly have your account terminated. So if you have a high-traffic spending category and want to use a separate account for it, make it a checking account.

Other than that, my system works great, no matter what Chase might say. Okay, here’s the downside: it makes saving so automatic and spending so guilt-free, you might sit all day refreshing Mint, like Scrooge McDuck with a computer.

Matthew Amster-Burton, author of the book Hungry Monkey, writes on food and finance from his home in Seattle.

Photo: niteseeker

Time is running out: It’s the fourth quarter, you have no time-outs left and you haven’t even begun your holiday shopping.

It’s time to huddle up. Starting in 2010 you can get organized. You’ll make a budget and commit to staring and finishing your shopping before December 1st. Right now, you just need to get out there and get it done without ending 2009 burdened with the national debt of a South American nation on your credit card. You don’t have time to worry about getting the perfect gift for everyone. Just follow these tips for last-minute shopping on a budget and focus on buying a good gift at the right price.

Make a budget, then cut it by 20%

Sit down and make a list of whom you need to buy for and how much you need to spend on each person. List those people in order of importance so you can allocate your resources accordingly. (Just don’t let anyone see that list.) Tally up the total, then cut it by 20% — and stick to that number. How?

Try to talk certain people into not exchanging gifts this year. Take advantage of every sale you see. (When you give her something from the “clearance” rack it’s another way to say “I love you.”) Keep track of your purchases so you stay aware of how close you are to your stated limit. Staying aware of how much you are spending will help keep you from going in the red.

Plan your shopping excursions

Too often we find ourselves reenacting Death Race 2000 in the mall parking lot trying to find just the right pair of slippers for mom two days before Christmas. Or, you’ll spend hours wandering up and down department store aisles wondering what size sweater your sister wears. Do yourself a favor this year: Make a plan before you go to the mall.

The internet is a great tool for comparison shopping. A quick search will tell you how much the same camcorder costs at Best Buy, Wal-Mart or Target.This lets you go to the malls and be a sniper. You can go from store to store picking off the best gifts at the best prices.

Also, don’t get tempted to sign up for a high-interest credit card at the counter when you go to check out. Sure, they’ll give you a discount on what you buy that day; however, if you don’t pay the bill off as soon as you get it, you’ll find yourself paying more for it over the long-term as the interest starts to accumulate.

We have two more tips for last-minute shopping on a budget next…
Next Page >>

Click the circles to advance to the next image

Photo: schottjohnson

UK Banks Vote to Phase Out Paper Checks—Will the US Follow?

Somewhere in my files, there are photos of me holding up those giant checks that foundations love to hand out to charities. It was 1995 and I was raising money in Los Angeles for victims of the Great Hanshin Earthquake that leveled Kobe in Japan. Over the course of a few weeks, I lugged shopping bags full of checks—more than 10,000 donations amounting to millions of dollars—over to our accounting firm. The giant checks were great, but the bags of small, individual donations were like offering of personal prayers written on each slip of paper.

I’m not sure I would have felt the same sentimental satisfaction holding up a printout of a large electronic debit.

This week, the British banks governing the UK Payments Council decided to phase out their check clearing system by October 2018. In effect, they set an expiration date for the use of paper checks (or “cheques” as they prefer). In a statement, the group’s chief, Paul Smee, noted: “There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement.”

Like letters of credit, demands for payment and bills of exchange, bank drafts can trace their history to Roman times, when checks were known as “praescriptiones.” Paper drafts analogous to today’s checks were in use in the Islamic world in the 9th century and as early as the 12th century Templars honored pilgrims’ checks from one chapter house to the next. In England, clearing houses have had responsibility for settling checks since the early 1800s (before that they were often cashed in coffee houses).

Bankers complain that many British retailers don’t accept checks anymore, that young people don’t even have checkbooks, and that it’s costing them as much as a pound (about $1.63 today) to process every check. But the decision certainly has its critics—especially advocates for the elderly and small business owners. On one hand, a generation uncomfortable with electronics will be forced to risk carrying and handling more cash. On the other, mom and pop stores have one more disadvantage against giant competitors (some of whom are starting to act as banks themselves). The move will also put the “unbanked”, who have to pay fees to cash checks but also lack access to accounts capable of electronic payments.

Will the US Follow?

The cost of cash keeps going up while the cost of using credit cards and electronic payments keeps going down. More retailers accept credit cards than checks these days. But while US banks also worry about the costs of handling cash and checks, they aren’t likely to echo the UK decision any time soon. Yes, paper checks are increasingly rare in high-tech countries—whether advanced Scandinavian nations or developing/modernizing regions such as Africa—but the US doesn’t rate as high-tech when it comes to personal finance (present company excepted of course). It has lagged dramatically in the modernization of its financial traditions, such as implementing electronic payments, even compared to Britain.

Instead, US banks such as Bank of America and Chase have been investing in new ATMs that make it easier for customers to deposit checks without envelopes, deposit slips or extra keystrokes. In fact, a law known as “The Check Clearing for the 21st Century Act,” which took effect in 2004, made it easier for banks themselves to settle checks by exchanging scanned images electronically instead of physically managing and transporting paper.

The use of paper checks in the US may have peaked, but they aren’t evaporating in proportion to the explosive rise of electronic payments. According to Federal Reserve statistics, the number of checks written in the US has fallen—but only slightly—from an average of 112 per person in 1971 to 102 in 2006. While the number of checks written in the UK is only a third today of what it was in 1990, the decline isn’t quite as stark here in the USA. British check-writing peaked in 1990 at about 10.8 million drafts. Compare that to some 70 billion written annually in the US by 2001.

Perhaps one reason they aren’t falling more significantly here in the colonies is that we all seem to have so many more monthly bills and accounts these days? Inevitably some of those new store credit cards, nifty home utilities and specialist medical providers still have to be paid by check. And credit cards, electronic debits and automatic payments are easier but often come with service fees, interest charges or “gotcha” surprises. Also, many government institutions, landlords, utility companies and others still preclude (or penalize) electronic payments. It can cost hundreds of dollars to use a credit card to pay your income taxes. Meanwhile, many of us hate walking around with cash anymore, and wouldn’t want to keep more around for house cleaning and home repairs.

The federal government isn’t likely to encourage a return to an uncounted cash economy, either.

A Generational Issue

Using paper, plastic or electronics instead of cash is a generational issue, too. McKinsey & Co. found in a 2006 study that 54% of consumers still pay most of their bills by putting checks in the mail. Another study by Forrester Research found that 71% percent of people who don’t like to pay bills online would rather write checks and receive paper statement for their record keeping. The biggest group of such “traditionalists” is retirees, but regardless of age, most people consider paper to be safer for both security and accounting reasons. (Although a younger sampling might point out that a paper check reveals a lot of personal information, such as address and driver’s license number.)

The idea that electronic fund transfers are more prone to fraud may be more than just perception. As of last year, 76% of US banks reported losses due to debit fraud compared to only 56% losing money to check fraud.

Once, crossing a downtown parking lot on a rainy night, my eye caught two pieces of paper blowing across the concrete. They were checks, that appeared to have been endorsed, deposited and apparently in the process of being transferred from one institution to another. One was for only pennies, but the account belonged to a well-known celebrity. I didn’t recognize the name on the other, but the amount was for something like $55,000. The security department of the bank where the checks had been cashed took little interest, so…

Steve Barth blogs about work, play, society and politics at Reflexions.