There is a great article on the woes of the US Postal Service in today’s WashingtonPost. According to the article, Postmaster General John Potter went in front of Congress today and warned that unless the Feds coughed up several billion dollars the PO would need to implement massive layoffs and cut delivery from 6 to 5 days per week (here).
Here is an idea, why don’t we just privatize the Post Office. I don’t know about the rest of you, but in my view the federal budget is strained enough as it is. Plus, historically the postal service has consistently lost money and delivered substandard service. It’s high time it was done away with and the taxpayers stop sinking money into an inefficient operation.
One feature of healthy personal finance is relentless expense reduction. Most people who think about the subject look at lifestyle factors, such as reducing eating out or shopping with coupons. However, there are ways to scale back your expenses without making painful changes to your lifestyle. The way to do this is by exercising consumer choice when deciding on financial services and products.
You may not have a great deal of choices when when it comes to your 401k, but you can decide about who hosts your IRA and who handles your checking accounts. So, when you’re shopping for financial services and products, focus on low fees.
But wait, you might say, don’t some banks provide a superior product or customer service and therefore merit a higher fee? – Maybe, maybe not. Most financial institutions provide essentially the same types of services, the only question is how much they’ll charge you for it. Fees impact your bottom line, the average consumer spends about $2,000 in investment and bank charges over the course of a single year. This is $2,000 that could go into your pocket rather than the banks. So, when you make the decision to deal with a new bank or open an IRA, think about fees. They drastically affect your ability to build wealth.
Here are three specific ways you can choose to save money without sacrificing your lifestyle or quality of services.
1) Choose free bank accounts. Some banks will entice you to open fee laden accounts by offering higher interest rates. Most of the time however, the fees these accounts charge can outweigh the benefits of the added interest rates.
2) Go with low cost financial products. Instead of buying high commission insurance, annuities, or mutual funds, consider looking around for alternatives that are cheaper. Very often you can find products that meet your needs for much less.
3) Use discount brokers. Companies that broker stock and mutual fund sales are a lot like banks. You really just need them to buy, sell and hold your securities, a high fee scale is often not justified. So, instead of opening an IRA with a bank or insurance company, consider getting it with a discount broker like Etrade or Schwab. There is no reason to sink your wealth into overpriced brokers.
The main point is that you can substantially reduce your long term expenses by choosing low cost financial alternatives, both when you choose who to do business with as well as what products to buy.
The economic downturn is turning up the rhetoric not only here but also in Europe. Here is a clip from Daniel Hannan, a representative to the European parliament from England. In the clip, he’s attacking the British Prime Minister for his economic policies. Of course, the clip is about politicians fighting over economic policy, which is a little off topic, but the rhetoric is just too entertaining to pass up.
Check out this 4 minute clip from Bloomberg news on some of the basic terms of personal financial management. If you want to become empowered and take care of your money, learning the basic terminology is an important first step.
Okay, this was news to me. I just saw an article from the Washington Post back in 2007. Evidently if you have good credit, you can rent it out from any where from $125 to $2,000.
While not having looked at this issue thoroughly I would personally be very concerned about allowing someone with bad credit to be associated with my credit score. – Even if you do get paid a couple of grand per transaction. Short-term gain might hinder your long-term wealth goals.
A few years ago my wife and I were in a Washington Mutual branch in Eugene, Oregon. We were waiting in line at the teller window. While we were chatting, we were asked if wanted the chance to buy some variable annuities. We read the fine print and saw that buy the annuity would have cost us 6% annually – a very high rate.
The moral of the story is, don’t get suckered into a complicated financial product you don’t understand. They generally will not allow you to build wealth, which is your primary goal! Sometimes the complexity can camouflage a high fee structure – or worse.
Like most people, you are probably looking for ways to save a few bucks on your budget. Well, here are eight ways to trim the fat.
1) Make your own coffee in the morning or drink free coffee at the office. Don’t go to Starbucks or Dunkin Doughnuts.
2) Buy a used car. You’ll certainly pay a lower price and you’ll probably save a few bucks at the DMW or possibly on your insurance as well.
3) Carpool. If its convenient, try getting together with coworkers and organizing a carpool. You’ll save on ton on automobile costs.
4) Music downloads. Don’t pay for CDs or downloads. Try free on-line services like Youtube or Pandora. They cost nothing and have a huge selection.
5) Do your own nails. Miel does this frequently. The cost for nail polish, nail files, etc. over the long run is less than you’d pay for day spa visits.
6) Buy generic. Most of the time its the same stuff anyways, especially for staples like flour and sugar.
7) Buy off season. Instead of getting gift trimmings during the holidays, get them during the summer. The same with clothing: buy summer stuff at the end of the season or winter clothes at the end of the winter for maximum savings.
8) Increase your insurance deductible. Most of the time, you really only need insurance to protect against a disaster, so a high deductible is probably okay.
Hopefully these ideas help you save money on lots of products!
Evidently, the Fair Issac Corporation (FICO) is changing the way it calculates individual FICO scores. The economic downturn and the mortgage meltdown have created a need for more accurate measurement of credit risk. The Model is called FICO 08.
FICO 08 will take into account the same factors as the old version including timely payment history, length of credit history, amount of debt, ratio of debt to available credit, type of debt and any excessive amount of recent new credit. However, it will add several new elements and redo the weighting of some others:
1) Only spouses and children can be authorized users of accounts. It won’t be possible to rent your credit to any more.
2) Debts less than $100 will matter less if they are sent to collections.
3) The score will be calculated with your total picture in mind. For example, if you have only one delinquency, but everything else is okay, your score won’t be affected as much.
4) Having less available credit will drag down your score more.
5) Diversity matters more. If you have a mix of credit cards, student and car loans, your score will be helped.
