Blog Carnivals For The Week Of June 8th

Wealth Junkies was included one carnival this week:

The Festival of Frugality features our article Want A Lower Bill? Ask For It.  The article can be found under the heading “Saving Money is at the Heart.”

Stop by the carnival to read some great posts.

Want A Lower Bill? Ask For It

One of the simplest methods to reduce your bills is to call your service provider and ask for a lower rate. It doesn’t always work, but there’s no harm in asking — and if you can convince the rep you speak with that you’re considering canceling, there’s a pretty good chance that they’ll be able to offer you some kind of promotional rate or retention offer just so that they can keep your business.

Are You Bluffing?

One of the key factors in getting a discounted rate is that your service provider, whether we’re talking about cable or cell phone or something else, wants to keep you paying a monthly fee. Company representatives are able to offer discounts — but only if they think that you’re going to move to another service provider or drop the service entirely. If you even suggest that you’ll keep paying your current rate if you don’t get a discount, you won’t get the break.

That means you’ll either have to bluff your way through the conversation or be prepared to actually cancel your service if you don’t get what you want. Canceling may not be a bad idea — before you try to negotiate a lower rate, check around to see if any of the other service providers in your area can actually offer you a better deal for switching. At the very least, you’ll be able to ask your service provider to match their rate, and you definitely won’t have to worry if a rep decides to call your bluff.

Keep Trying

Just because one rep tells you that you can’t have a discount doesn’t actually mean that you can’t get it. Even simply calling back and speaking with a different rep can get you a different answer at many service providers. You may also find that the issue is the level of the representative you’re speaking with — if you can move up the ladder to a manager, you’ll likely find that a higher-up has the authority to offer far more discounts. If you get a ‘no’ at any point, it’s worth your while to keep trying.

Of course, you want to be polite about it. If you get multiple ‘no’s, it’s probably time to move on. And being nice throughout the entire process can make it much easier to get a rep to help you out. Anyone that you speak to over the phone has probably had to deal with more than a few impolite customers and won’t be inclined to really help another customer that falls into that category. Just keep calm, even when you’re asking to speak to someone’s manager. A surprising amount of decision-making power rests with whichever rep you wind up speaking to over the phone — a rep can choose to refuse a request, and you can get an entirely different answer if you call back and speak with another rep. That makes politeness even more important, because if it’s a situation that is purely at the discretion of the rep, you want the rep on your side.

Count Down to Credit Card Reform

The Credit Cardholders’ Bill of Rights Act of 2009 passed in the Senate last week and it’s just waiting on the President’s signature to become law. Because it’s a bill that has significant support, that signature will not be long in coming. When the bill becomes law, there will be some pretty major changes in just what credit card companies can do.

• Retroactive rate changes on existing balances will be prohibited, unless the account is 60 day past due.
• An account holder’s payments beyond the minimum automatically applies to the balance with the high rates.
• Promotional and teaser rates must last at least six months, and card issuers cannot raise rates during the first year an account is open.
• Credit card bills must be sent 21 days before payment is due.
• Unless a card holder has okayed over-limit transactions, credit card companies cannot charge over-limit fees.
• For account holders under 21 years of age, credit card companies must have the signature of a parent or another co-signer or proof that the account holder can repay credit.
• Account holders must have 45 days notice of any change in terms.
• Credit card companies must eliminate fees for paying by mail, phone or electronic transfer, unless users are paying for expedited services.
• Gift cards must have a minimum of a five-year life.

All these changes may take a little time to be fully implemented, but you may start seeing the effects sooner, rather than later. And while they’re meant to help consumers that struggle with credit cards and related debts, there will be rippling affects that will hit credit card users who don’t have any problems. Because credit card companies actually make a significant profit on card holders who struggle with payments and fees, they’ve dropped many of the costs that used to be associated with credit cards — like annual fees. But with that profit margin reduced by new limits on fees and interest rates, credit card companies will probably look for ways to charge for simply having a credit card, rather than using it irresponsibly. Rising interest rates, annual fees and other expenses look likely — though the exact changes to specific programs probably won’t be known for a while yet.

While these changes will protect consumers, it’s best to still work hard at paying off your credit cards in full and limiting your use of them where possible. It’s not inconceivable that your interest rate will jump when the Credit Cardholders’ Bill of Rights Act of 2009 actually starts affecting the way credit card companies do business. It’s also worth keeping a very close eye on any mail you receive from your credit card issuer. With things in flux, you’ll probably be getting more mail, if only to notify you of changes to your account. You don’t want to get caught unawares by such changes, so it’s worth making an effort to read and understand each message coming from your credit card issuer. And it’s possible that this bill may not be the last legislative change in the next couple of years. As consumers adjust to new spending patterns and credit card companies try new tactics to make money, it’s possible that the government will find it necessary to revisit these issues.

Graduation: What Comes Next?

Over the last month, I’ve gotten a stack of graduation announcements in the mail — and I’ve even attended a graduation or two. Some are high school graduations, some are from college and some are from graduate school. But no matter what level a person graduates from, there’s a certain sense of wondering what comes next. Even for those grads with a job lined up, there’s a transition process. It doesn’t help that quite a few people are getting degrees but aren’t so sure that they’ll be able to find a job to match.

The Best Laid Plans…

School, for some people, is just one more step on a very set path. I went to college with more than a few folks who were going to get a degree, land their dream job and work their way up the ladder — you probably did, too. But now, more than ever, the real world is throwing a monkey wrench into such plans. Adaptability has become a necessary skill for any recent grad. Maybe that dream job isn’t waiting for you as soon as you pick up your degree but that doesn’t mean that you can’t succeed. You can:

• Freelance until the right job comes along (or even freelance long-term)
• Volunteer with an organization like the Peace Corps
• Find a project of your own to work on
• Team up with a few of your classmates who are in the same boat

The possibilities are endless — even without considering taking a job, any job, just to get by. You may have considerations beyond paying for room and board when it comes to finding a job — student loans, anyone? — but assuming that your dream job is the only way to cover your obligations means missing out on a lot of other opportunities.

Transition As Far As You Want To

There’s a feeling that, as soon as you graduate, you must turn into a full-fledged adult, complete with a mortgage and a car payment. But you don’t have to make a complete transition — and in many cases, it’s probably better not to. You can pick and choose what parts of your lifestyle and your spending you want to change after graduation — maybe you want to stick with living with a couple of roommates, or maybe your beater will make it a couple more years. There’s nothing wrong with keeping a college lifestyle after you’ve graduated. Even moving home after graduation is becoming fairly common, and that’s a good thing for many recent graduates. As long as you can come to a good arrangement with your parents, the financial benefits of living with your parents and avoiding setting up a separate household of your own are pretty impressive.

There are plenty of opportunities out there right now — just because you’re graduating in the middle of an economic depression doesn’t mean that you’re in an impossible situation. Instead, with a little adaptability, it’s possible to forge a new path that will work out better for you in the long run.

Keep Your Home Insurance Costs Down: 7 Tips

It’s a rare situation that you can afford to be without home insurance. Most mortgage lenders require home insurance as part of the terms of a mortgage, and even if you own your home free and clear, insurance can be the easiest way to safeguard your investment. But home insurance isn’t exactly cheap — especially when you realize that the costs can vary by hundreds of dollars, depending on which insurance company you purchase your policy through. There are a few steps you can take to make sure your home insurance costs are low:

1. Shop around: This may sound like a particularly easy suggestion, but you’d be surprised how many people just sign up for the first home insurance policy they find. Try both online providers and companies in your area to find the best deal. Of course, you aren’t shopping just for the lowest price you can find — you need a policy that will cover your house well, and it’s okay to pay a litle more in order to go with the insurance company with great customer service.
2. Raise your deductible: If you want to drop the cost of your home insurance in a hurry, your best bet is to raise your deductible. Most policies have a deductible of at least $500, but if you can raise that to $1,000, you can save up to 25 percent. If you do choose to raise your deductible, it’s generally worth your while to set aside an amount equivalent to your deductible in a rainy day fund.
3. Don’t insure your land: It’s common to take the value of the land your house sits on into account when deciding how much coverage you need — but it isn’t necessary. A windstorm or a fire isn’t about to damage your land, so there’s no need to insure it.
4. Group your policies together: You can often get a discount on one of your insurance policies if you buy multiple policies from the same company. Take a look at your auto policy — can you buy from the same company for a lower rate? You may need to move one of your policies to qualify for such a discount.
5. Ask your agent for tips: Many insurance agents will offer you tips on how to decrease your costs with a particular company. For instance, many insurance companies will cut your costs if you make your home more disaster-resistant — especially if you have an older home that can use some retrofitting. Home security systems can also be a way to drop your rates.
6. Keep your credit clean: The number of insurance companies that take credit scores into account when deciding on your coverage and price are growing. In some cases, there can be a direct correlation between higher rates and lower credit scores. The cleaner your credit, the better.
7. Stay loyal: If you’ve been with one insurer for several years, you may be eligible for a loyalty discount. Such discounts are typically available after five or ten years — an insurer may reduce your premium by five to ten percent as a reward.

Saving For Your Child’s College: Maybe You Shouldn’t

I opened up a can of worms with a friend a while back: every month, rain or shine, she puts away money for her daughter’s college education. It’s the first place she puts any portion of her pay check. It’s great that she’s really devoted to a savings goal — but lately there have been more than a few rainy months. That aggressive savings plans is making it very difficult for this friend to actually make progress on her other financial goals, like paying down debt and saving for her retirement.

The Can Of Worms

I don’t think that a parent is necessarily obligated to pay for his or her child’s education — and I told my friend that. The fact of the matter is that there are a lot more options for finding money for college than for paying down debt, making it important to help yourself before helping your kids.

But my friend’s response boiled down to the fact that she would feel selfish and even like a bad parent if she didn’t set aside as much as she could for her daughter’s education. The whole conversation got pretty emotional: it’s hard to argue with a parent wanting to do right by her child.

Better For A Child

The more I think about it, though, the more sense it makes to de-prioritize saving for your child’s college. I’m not suggesting cutting such savings entirely, but I don’t think it should top the list either. It can even be a benefit to your child.

Prioritizing paying down debt and saving for worthwhile goals sets a good example for your children. But there’s another lesson to be learned from a smaller college fund: your child will have to take responsibility for paying for their own expenses, whether they’re taking out student loans or working part time. My own college experience played out like this. I received only minimal help from my parents, as far as money went, while many of my classmates had every expense paid for. But because I had worked all through college, I had a whole stack of job opportunities the moment I graduated. Some of those students with a great cushion from their parents were still looking for work a year after graduation.

The fact of the matter is that a person doesn’t have to have a huge college fund in order to attend even expensive colleges. Student loans may not be a particularly comfortable burden, but they do provide a certain flexibility in allowing a wide variety of people to pay for a college education. There are also scholarships, grants and part-time jobs as alternative ways to pay for school. That’s not even taking other options, like the Peace Corps or starting at a community college, into consideration.

There’s nothing wrong with a parent choosing to take care of his or her own financial priorities before trying to fully fund a child’s college education. It’s a good goal, but shouldn’t take priority over insuring one’s own financial stability.

Blog Carnivals For The Week Of May 11th

Wealth Junkies was included in two carnivals this week:

Money Hacks Carnival: Swine Flu edition features our article Credit Freeze: Stop Identity Thieves Cold.  The article can be found under Credit and Debt.

Money Hacks Carnival #64 features our article Close A Credit Card - The Right Way.  The article can be found under Debt and Credit.

Stop by the carnivals to read some great posts.

Buying A House in 2009 — Just For the Tax Credit

In the last week, I’ve received emails from just about every person I know who works in real estate. They all want to remind me that if I buy a house this year, the government will give me $8,000. My dad even called, telling me that he didn’t want me to miss out on this chance for what amounts to free money. I would like to buy a house in 2009 — but I’m not so sure that the tax credit should be such a major incentive.

A Real Estate Agent’s Perspective

Real estate agents are taking steps to point out the tax credit to all of their potential clients. In part, they want to help their clients as much as possible. But there’s more to the tax credit’s popularity with real estate agents. Business is down in the real estate sector — and agents only make money when a client buys a house. Furthermore, the amount of money an agent earns is based on the cost of the house in question. It’s in every agent’s interest to promote more clients to buy, especially if those clients can afford more expensive homes. The tax credit adds a little more to the ability of the average first time home buyer to purchase.

I’m not saying that it’s a bad thing that real estate agents are promoting this tax credit. But it’s worth remembering that they aren’t disinterested parties.

The Home Buyer’s Perspective

In the grand scheme of things, the tax credit won’t really determine whether or not you’ll buy a house. It doesn’t affect the amount of money you have available for a down payment or to make payments toward your mortgage. Heck, you won’t even see that money until after you file your 2009 tax returns and get your refund. At best, you can use it towards making larger payments on your mortgage. That’s assuming you get the money at all. There are plenty of restrictions on who’s actually eligible for the tax credit — and Uncle Sam actually has first dibs towards the money. If you owe taxes for 2009, your tax credit will be applied to that bill before you even see a cent.

If you’re looking for a house in 2009, it’s worthwhile to ignore the tax credit. If you can’t make the down payment comfortably without getting a check for $8,000 some time in 2010, you shouldn’t be making the down payment at all. There’s a reason the housing industry is so desperate to make sales right now: the credit that was extended to people who couldn’t really afford it allowed people to rely on money they didn’t have, but only for a little while.

2009 does have some opportunities for home buyers. It’s good to take those opportunities into consideration during the buying process. But the tax credit, along with other opportunities, shouldn’t be your motivation or your method for buying a house. It’s crucial to make sure your finances are stable enough to manage such a purchase — without $8,000 somewhere down the line.

5 DIY Projects That Make Financial Sense

There are plenty of DIY projects out there: you can raise your own chickens, change your own oil or even build your own house. But not all DIY projects make financial sense. There are plenty of items you can make yourself, but the price of the components you’ll need is actually more than the cost of just going and buying a finished product.

1. Baking Your Own Bread: There are thousands of recipes for breads that take just a few minutes to mix up. Even when you add in the cost of running your oven long enough to bake a loaf of bread, you can make your own bread for just cents a batch, compared to the rising prices of bread at the supermarket. It isn’t even a time consuming project: you’ll probably want to stick around while you actually have the oven on, but you can still do other things in the meanwhile.
2. Repairing Your Own Appliances: Even basic repairs to dishwashers, refrigerators and other appliances come with big price tags if you need to bring in a technician. There are literally thousands of websites where people list basic problems and easy repairs — just Google the issue, along with the appliance model. Of course, you do have to be comfortable making those repairs yourself.
3. Make Your Own Cleaning Supplies: You can clean just about anything in your home with some combination of baking soda, vinegar, liquid detergent and washing soda. You get the added benefit of avoiding some of the harsher chemicals that you probably don’t want in your kitchen and can even avoid many allergies. You can find a whole list of recipes for cleaning supplies at Care2.
4. Going Green: There are tons of ways to make your home more energy efficient (and save some extra dough), and you definitely don’t need a specialist to tell you how. Just browsing online can help you build a list long enough to keep you busy for weeks to come: replacing weatherstripping, installing programmable thermostats and many other projects that will cut energy consumption and keep money in your wallet.
5. Cleaning Your Carpet: Hiring carpet cleaners can be expensive, but you can actually rent the equipment to do the job yourself. Be careful, though — when renting a carpet cleaner, the recommended cleaning solution is always expensive. There are a wide variety of alternatives, however — including cleaning mixtures you can put together yourself. You’ll want to run a search to see what type of cleaning solution works well with the carpet cleaning equipment you’re using.

These projects make sense most of the time — but not for every person. That’s because different people place different values on their time. If you can make $50 in an hour, saving a few cents by spending that hour on a DIY project makes less sense. You’ll have to run the numbers for your own situation to see just how much sense a particular project makes — but you’ve already got a few starting points right here.

Know Your Insurance Options

Insurance is a way to hedge your bets — to get someone else to cover the risks of every day life. Your car insurance covers the risks you face on the road. Your health insurance limits the risks you face in the event of illness or injury. But with a little more knowledge about your insurance options, you can manage your risks even better.

Back Up Your Insurance With An Emergency Fund

Even with great insurance coverage, you’ll face expenses that simply aren’t covered by your insurance provider — or your deductible is high enough that your insurance doesn’t kick in. Maybe it’s a medical procedure, maybe it’s a cosmetic repair for your car — either way, having an emergency fund in place can help you eliminate the risk of an expense your insurance doesn’t cover.

Just how big an emergency fund needs to be varies, but even starting small can make a big difference. Even if you can only set aside $25 per week, at the end of the month you’ll have $100 saved up that you didn’t have before.

Keep A Close Eye On Changes

Especially in light of the current economic situation, many insurance companies are making changes to their offerings. They’re not the only ones, either: if your insurance is part of your benefits package from your employer, you may find that changes are coming from that direction as well. You should receive notice in writing of all changes — make sure that you read such documentation and understand it. In some cases, if may mean that you need to purchase supplemental insurance or change providers.

Make Insurance A Priority

It’s tough to manage all the insurance a person can really use. Even something as important as health insurance often falls by the wayside if you’re facing a financial crunch. But make it a priority to keep your insurance in place, especially your health insurance. You may not need it it — but it can just as easily make the difference between your finances remaining stable or an illness putting you entirely under.

It’s not just health insurance, either. If you can increase your home insurance, life insurance, long-term disability insurance and so on, it’s generally a good financial choice. We don’t know what the future holds, but we can see the risks. Minimizing the effects a situation can have makes sense, financially.

Check Out Your Insurer

Some insurance companies could use a little health coverage themselves right now. Take a look at the ratings for your insurance company from Standard & Poor’s or another ratings organizations: such information can tell you if your insurer is on solid ground. If the company is, great. If it isn’t, it’s worth shopping around to make sure that your policies will be there when you need them. This is especially true of policies you pay for over a long period of time for what may be a very large payout — life insurance, long-term disability and other options.

Close A Credit Card — The Right Way

Canceling your credit card seems like a simple proposition: call up the credit card company responsible for your card and tell them that you want to close your account. But there are a few twists and turns as you cancel your card, which can damage your credit if you aren’t careful. Being aware of such issues — and hopefully taking care of them — can get you through closing a credit card with no problems.

Are You Really Ready to Cancel Your Card?

No matter how careful you are, canceling a credit card will cause a drop in your credit score: the score is based, in part, on the amount of credit you have available. With your account closed, you’ll simply have less credit available. That drop can be small and temporary — as long as you’re doing everything else right when it comes to your credit score — but it will show up if any one checks your credit. You may want to delay canceling your card if you’re expecting a credit check in the near future. If you’re applying for a mortgage or a car loan, wait to cancel your credit card until your funding goes through.

Eliminate Your Balance

If you’re still carrying a balance on your credit card when you cancel it, you’ll face a penalty on your credit score. Furthermore, depending on your credit card’s terms, you may be asked to pay your balance in full immediately upon cancellation — which just makes the cancellation process more complicated.

Instead, it’s worthwhile to pay off your balance before you even start thinking about canceling a card. Ideally, you can just pay off the balance entirely but transferring it to another line of credit may also be an option.

Close Your Account Completely

Rather than relying on a phone call to make sure your credit card is closed, you’ll want a little extra confirmation — considering the long list of potential problems, like identity theft or fees on accounts you thought were closed, it’s just a practical decision. To get that confirmation, take the following steps:

1. Call your credit card company and cancel the card over the phone. You may be directed to a retention specialist who will try to convince you to keep your account open.
2. Write a follow-up letter, informing the credit card company in writing that you are closing your account and requesting the company report that fact to the credit bureaus. In your letter, you need to include your name, account number, address and signature. Make two copies of the letter: file one and send the other by certified mail to the credit card company. That way, you’ll be able to prove that the company received your request to close your account.
3. Check your credit report. It can take about a month for an account closure to be reflected on your credit report, so wait thirty days before requesting a copy (you can get free copies of your credit report through Annual Credit Report.com). If there is a problem regarding your closed account, you’ll need to call the credit card company, as well as send another certified letter, to have them fix the mistake.

Credit Freeze: Stop Identity Thieves Cold

Some people don’t rely on credit very heavily. They don’t often need to apply for a loan — like a mortgage or car loan. They don’t open new credit cards. If you fall into this category — even if you just don’t expect to need new credit any time soon — you can freeze your credit. A credit freeze simply means that no one can look at your credit history: no one can pre-qualify you for a credit card, no one can open up a credit card account in your name and so on. All of this adds up to the fact that it will be incredibly difficult for someone to steal your identity.

Requesting a Credit Freeze

In order to freeze your credit, you’ll need to contact each of the three credit bureaus — Experian, Equifax and TransUnion. With each credit bureau, you’ll need to request a separate credit freeze. There’s typically a fee associated with a credit freeze, making it less worthwhile to set up if you’re expecting to need credit in the near future. The fee is often between $5 and $10.

You can arrange to have your credit unfrozen at any time. If you do find yourself in a position where you need to access your credit, it’s generally a matter of just contacting the credit bureaus to do so — though it can take a little while to make your information again available for credit inquiries. That means you’ll want to plan ahead if you expect that you’ll need credit for something in the future. You can also choose to unfreeze your report for just one company, as needed.

It’s worth noting that your credit report is used for more than just opening lines of credit these days. Many employers use credit reports as part of their hiring process. Many landlords also use credit reports to determine the suitability of a prospective tenant. If you find yourself looking for a rental or a new job, you may want to make a credit freeze known during the application process, remove the freeze or otherwise make your credit report available to a potential employer or landlord.

Better than the Alternatives

There are a number of companies that offer identity-theft protection. In general, such services are not particularly useful: many simply set up credit freezes for their customers and charge much more than a $10 for the service. Others offer only minimal help.

On your own, it is possible to limit the effects of identity theft by being vigilant about where your accounts are being used and reviewing your credit report on a regular basis. That system can be effective, but if you don’t need credit, freezing your credit can make it easier for you to track your personal information. It’s generally still a good idea to review your accounts even if you have a credit freeze in place: it will not protect your existing accounts and there are some methods of identity theft that involve gaining access to your bank account or other funds not affected by lines of credit.

Money Management Makes For Financial Fitness

Mint.com provides a great suite of tools for managing your money, from tracking spending to building budgets. This week, the site announced the release of Financial Fitness, a new system within the site that provides customized tips to help users pay off debt, save money and even improve their credit scores. The tips are based on the information that a given user provides to the site — which includes the bank and credit card accounts that most users give Mint.com access to so that the site can collect and interpret spending and budgeting information.

The personal finance system is based on point values. You can complete a variety of activities, such as reviewing your credit report for errors, to gain points. There are also set tasks that can earn you points on a monthly basis — such as setting aside money for savings each month and successfully avoiding banking fees. The site offers a simple interface, similar to those used on other parts of the site. You can see at a glance what you’ve accomplished, what goals you can still meet and those that you’ve had less success with.

The point system makes a lot of sense, given Mint.com’s typical user. It’s almost like a video game: you can complete tasks, advance your skills and earn points. The tasks all fall into one of five central money-saving principles:

• know your money
• spend less than you earn
• use debt wisely
• invest savings
• prepare for the unexpected

While these categories don’t sound particularly glamourous, they are core techniques to keeping your personal finances on steady footing. Having a single system to follow can also significatly simplify the process of getting financially fit.

It does take a little dedication and effort to keep up with your finances, even with a good tool like Mint.com. However, given the fact that the website will even outline steps towards financial security for its users, the work necessary to handle your personal finances is truly minimal when compared to most options that require you to bring together all of your information on your own. There’s no checkbook balancing act necessary. You can even set up Mint.com to notify you about your spending or when you’re closing in on a goal or even when your credit card interest rate changes — you can get either email or text message notifications to help you stay on track even when you aren’t logged in to Mint.com.

The new tool is still in beta — it hasn’t been rolled out to most users yet. A few sites are offering invitations to the beta, such as Mashable. It’s worth keeping an eye out for opportunities to join the beta, though, especially if you’re working on simplifying your finances. Mint.com has already eliminated most of the work that goes into keeping your own books — now the site is making it much easier to set personal finance goals and meet them. Mint.com is available only to U.S. users, but it does have a very good track record when it comes to privacy issues — one of the big issues with most online money management options.

College Savings: 529s or Coverdell ESAs?

If you’re setting aside savings for a college fund, there are a few tax advantaged accounts that work similarly to retirement accounts. Deciding between them is a little more complicated than choosing between a 401(k) and an IRA, though. Both 529 College Savings Plans and Coverdell Education Savings Accounts can be attractive options for saving up for college — but which one is the best choice for you and your family? Before we can decide, we need to know a little more about our options.

Coverdell ESAs

The big benefit of using a Coverdell Education Savings Account to save for your child’s education is that you can use the money in the account for certain expenses you might encounter from kindergarten to 12th grade. You can start saving money up for educations far beyond just college as soon as your child is born. A Coverdell ESA is also a solid method for building up savings for college expenses. You (or anyone else) can contribute up to $2,000 each year into an investment trust, which grows tax free. As long as you’re using the money for qualified expenses, withdrawals are tax free. You won’t be able to contribute to a Coverdell ESA after the beneficiary — the student whose name is on the account — turns 18 and all funds in the account must be withdrawn before the beneficiary turns 30.

It is worth noting that some of the benefits of a Coverdell ESA may expire in 2010. Congress must act in order to preserve many of the benefits associated with Coverdell ESAs.

529 College Savings Plans

No matter what state you live in, you have access to some form of a 529 College Savings Plan — each state offers their own version. Some states rely primarily on 529 Prepaid Plans, which are less flexible, but you have the option of using another state’s plan if you so wish. With a 529 account, you have few limitations on how much you can contribute. Your contributions are invested, and — as long as withdrawals are used for tuition and educational expenses — your gains are not subject to taxes.

A key benefit of using a 529 plan is that it generally does not impact what financial aid your child is eligible for. You also can control account disbursements indefinitely — in general, a 529 plan remains in the name of a parent.

Which Plan?

When you’re considering what sort of savings account to use to fund your child’s education, the big question is whether you plan to use the same account to save for expenses for elementary school through high school. If so, it’s worth opening up a Coverdell ESA — along with a 529 College Savings Plan if you can go even a small amount over that $2,000 limit. But with the changes that may be coming to Coverdell ESAs, 529 College Savings Plans are the more flexible option. If Congress does not renew the features that make a Coverdell ESA so attractive, you’ll want to have you child’s college savings in a 529 account.

Stocks: The Long-Term Still Shows Promise

My husband and I have some money invested in the stock market. We used to have quite a bit more invested, but the same thing happened to our stocks that happened to the rest of the stock market. This situation bothers my husband: every so often, he mentions that we could pull that money out and use it for something else — at least until the market recovers. But the situation doesn’t bother me. Actually, I’m working on setting aside more money to invest.

We Plan for the Long-Term

One of the biggest reasons that I don’t worry is that we’re a long way off from retirement. I know I’d feel differently if retirement was right around the corner and we had been counting on those stocks for money. But the fact of the matter is that stock market does go through ups and downs and there’s plenty of time for both valleys and peaks before we’ll really need that money. This means that we’re not active traders. We have one strategy and that’s to buy and hold.

I’m absolutely confident that stocks will go back up — that’s one of the reasons that I’d love to add more to our investments now. Sure, there’s a distinct possibility that some sectors haven’t hit rock bottom. I’d really prefer to wait until rock bottom before investing, but I’m confident that prices will go back up far enough to make investing at current prices well worth my while.

We Pick Stocks Carefully

I’m very confident that our stocks will start rising again, for a number of reasons: we’ve invested in companies that are solid. I actually read annual reports and other business news — we do our best to pick investments that will remain solid for years to come. We certainly don’t have the most exciting of investments, but we also don’t have to worry about actively trading. Since we plan to hold on to all of our investments, we pretty much ignore any companies that would require us to time buying and selling. As long as our stocks remain on a general upward trend over the years, we’re doing okay.

We Minimize Stock Stress

I’m the first to admit that some scary things have happened in the stock market over the past year and a half. But it hasn’t become an impossible situation, for most people. I know more than a few people who had invested in the market and now seem to think that dropping stock prices mean the end of the world. But the fact of the matter is that what stocks do in the short term looks nothing like what they do in the long-term. If you can ride the current situation out, most stocks will recover in the long-term. Some specific companies (particularly in the financial sector) may not make it through the short-term, but companies that have a strong base will do just fine.

I’m not a financial adviser, and I’m sure that other approaches to investing work just as well for other people. But I’ve found that our system actually does very well for us and keeps us, aside from my husband’s occasional comments, from worrying too much about our finances for the short-term.

3 Steps to Take When Buying Used

Buying used can be a great way to save money or it can be a fast way to lose money. There are some products where buying used isn’t all that different from buying new — certified pre-owned cars, anyone? — but there are others where buying a used version can require significantly more work than buying new. There are a few ways to make sure that you really are getting a deal when you buy used. These steps may require a little more time than picking up a new version, but they can still result in significant savings.

1. Just what is the life of the product you want to buy?
   Manufacturers tend to have a good idea of the life time of the products they sell: a cell phone has an expected life of about two years. After two years, manufacturers expect a cell phone owner to be interested in changing contracts, upgrading his phone and taking other steps to get a new model. On the other hand, books have life times lasting years, making them a great used purchase. Before you go shopping for any used items, it’s important to know how long a life such a product has. That allows you to quickly determine if the price difference between your used option and a brand new item actually affords you savings. Many products, like clothing, can last much longer than is necessary to save on the difference between used and new prices. But some electronics don’t.
2. How has the previous owner cared for the item you want to buy?
   There is a lot of variation between the value and usefulness of used products, simply because previous owners put varying levels of wear and tear on their individual possessions. Even a visual comparison can tell you whether one used item is worth the same product with a different previous owner. Cars can be a very good example of this question: if someone takes great care of his car, it can be in perfect running order after ten years. But when someone doesn’t make those recommended oil changes or remember to do maintenance, a ten-year-old car can be an absolute mess. You can’t take the previous owner’s word that he falls into the first category. Check it out for yourself.
3. Have there been any recalls or other problems with this product line?
   While retailers with new products have an obligation to make sure that recalled products are off the market, it’s not uncommon for a used product to be sold with no such precautions. It’s up to buyers to do a little research to make sure that there aren’t any problems with a product line. It’s relatively easy to check for recalls: the U.S. government maintains Recalls.gov, where you can search for recalls for particular products.

Buying used can be a great way to save money, especially when you’re looking at products that can serve their purpose long after they’re actually new. But it is important to exercise a little due diligence when shopping for used items. The time you spend now can save you money down the road.

How Much is Your Network Worth?

When it comes to finding a job, finding a plumber or even finding a good deal at a local store, your network is one of your greatest resources. Your friends and family can often help you solve a problem or complete a project. But just what is that network worth to you? It may not be possible to put a dollar value on your connections, but there a few options for deciding just what your network is worth — and if it’s worth adding to.

Time is Money

Building and maintaining a network can be very expensive in terms of time — although it generally costs nothing in money, aside from an occasional lunch out with friends. You can generally coast on the amount of time you spend with your friends and family: your network won’t expand significantly, but you will have very valuable connections among friends and family. But if you’re expecting to need to draw on your network — like for an upcoming job search — it may be time to make an investment in your network.

Even a few hours can make a big difference in your network, as long as you have a plan on how to use those hours effectively. There are so many different ways to build a network that deciding in advance how you’ll use your time is crucial. You could attend local networking events or work on national contacts through social networking sites: your opportunities are endless, but your time is not. It’s crucial to weigh how you will invest your time, just as you consider your options when making a financial investment.

Focused Networking

When networking, you have the option of casting a wide net and seeing who you can meet. The alternative is to target some group specifically. If you were looking to change careers, for instance, you might want to meet as many people in your new career as possible — you could be looking for advice on where to start, industry connections and other value that such professionals have to offer.

Depending on who you talk to, each option is incredibly valuable. Having a very targeted network can really help you if you have a specific project in mind, while having more variety in your network means that you might see some more original ideas on how to achieve your goals and complete your projects.

Networks Versus Relationships

There is one clear indicator of value when it comes to networking: do you have connections or friends? If you have lasting relationships with the individuals in your network — if they know that they can come to you for help, just as you can go to them — they’ll prefer to have a relationship with you. But if you’re just aiming to build the biggest Rolodex in the city, your contacts really aren’t going to be so interested in helping you down the road. Building a relationship takes time, but it’s far more useful than just making contacts ever will be.

Blog Carnivals For The Week Of April 20th

Wealth Junkies was included in one carnival this week:

The Festival of Frugality features our article 5 Tips To Cut Your Grocery Budget Down To Size.

Stop by the carnival to read some great posts.

Local Currencies: What’s In It For You?

Last month, three Detroit business owners got together to create to create a local currency. The bills, called Detroit Cheers, will be accepted by more than a dozen Detroit businesses as a payment method — which is all that it takes to create a local currency. Local currencies have been popular during past economic crisis: during the Great Depression, thousands of towns and cities created local money in order to keep local economies going.

The Benefit of Local Bucks

For local businesses, using a currency like a Detroit Cheer is an easy way to keep money in the local community. It’s rare that a big chain store or restaurant will accept anything but nationally-backed currency — that’s an American dollar to you and me. The big benefit of a local currency is the fact that when locals don’t have the ability to earn money in amounts similar to national levels. It keeps prices at a level that locals can keep buying, keeping businesses going.

Detroit isn’t the only city experimenting with a local currency right now. Michael Shuman, the author of The Small-Mart Revolution: How Local Businesses Are Beating the Global Competition, estimated that about 75 local currencies are in use around the country.

Should You Use Local Currency?

If you’ve got the option of using a local currency, it can be pretty useful at those businesses which have already agreed to accept it — but a major hassle everywhere else. In general, the idea behind a local currency — like bolstering the local economy — is a good one. But it’s important that you can easily trade between your local currency and the national one. If you can’t get your money converted to something you can spend, it isn’t worth the paper it’s printed on. Detroit Cheers has a temporary fix for that problem — if you bring your currency to one of the three founders of the Detroit currency, they’ll convert it — but if a currency is widely adopted, finding that one person able to convert money can be impractical.

Another crucial concern is how that local currency is backed. Detroit Cheers are backed by $3,000, which has been placed in escrow. If something happened to the currency, at least a few people should be able to convert their money back into national currency — but it’ll depend on how many Cheers are actually in circulation.

There’s nothing wrong with using local currency, as long as your comfortable with it, though. Local currencies are legal tender, as long as they aren’t made to look like the national currency. Some business may even offer a discount if you use a local currency, especially if they’re working to encourage adoption of the new currency. You can also get a good feeling: by dealing in the local currency, you’re doing your part to encourage business to stay in your local economy — which may just pay off with more jobs and money available in your area. It’s a real trickle down effect.

Ask For A Raise — Even If Your Company’s Been Through Layoffs

At many companies, there’s a feeling that now is not the time to ask for a raise. Businesses are struggling, and many have laid off more than a few employees. Asking for a raise can feel like you’re putting yourself up on the chopping block and asking to go next.

But that’s not necessarily the case. While not all companies have a lot of room for negotiations, you do still have some opportunities to look for a raise.

No Harm In Asking

Asking for a raise is certainly not a reason that an employer might find acceptable for sending out another pink slip. As long as you’ve been working hard, your supervisor will at least show some sympathy for your request for a little extra in your weekly paycheck. Admittedly, that isn’t something that always translates into actually offering you a raise — but don’t let the fact that times are hard keep you from asking.

Even in companies with a pay freeze, I think it’s worth asking. Of course, asking straight up for cash isn’t likely to get you a thing, but if you’ve been putting in plenty of hours, you may be able to get a pay raise in the form of some other perk you’ve been after. If you can think of a benefit that would help you save the money you have to spend in order to work, it might be worth bringing up with your supervisor.

The Work of Ten Men

If there have been cuts in your department, the odds are pretty good that you’ve been landed with extra work and responsibilities. Your paycheck covers the job you were hired to do, making it very reasonable to ask for a raise if you’re doing more than your job description. In offices where there have been layoffs, you’ll need to step carefully, but there’s still no harm in asking.

Put together your reasons ahead of time. Document extra time you’ve been putting in at the office, projects you’ve taken on and deadlines you’ve met. Make sure that you really do have the paperwork to show that you’re doing the work of multiple people. You should also have a pretty clear idea of both what you want and what you’re likely to get. It is highly unlikely that you’ll just get the salary of the people who’s responsibilities you’ve taken over added to your paycheck. But adding a few bucks on to your paycheck each week will be cheaper for your employer than finding another person to take your position — and far less paperwork if there’s a hiring freeze on.

Even if you think that a pay bump is obtainable, I encourage you to doublecheck that there aren’t any perks that would provide you with a better payoff in the long-term. If you’ve been dreaming of telecommuting, getting your supervisor to agree to such a set up is probably easier right now than getting a raise. Even better, you’ll still wind up financially ahead with the money and time you save on your commute.