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Archive for June, 2009

If you and your spouse both work, you may have wondered whether to use separate checking accounts or joint accounts. The truth is that there’s no one right way. However, many personal finance experts recommend that you each maintain a separate account, as well as a joint account — in other words: yours, mine, and ours accounts.

There are two ways to make this work. Jean Chatzky outlines the different systems in her book, “Make Money Not Excuses.”

  1. Divide, then conquer

Have your paychecks direct-deposited into separate checking accounts. Then, have a preset percentage of your income funneled (put this on automatic pilot with your bank) into joint checking.

2. Conquer, then divide

Have your paychecks direct-deposited into a joint checking account. Then have a preset amount of money funneled into separate checking or money market accounts. Work backward from your household budget. It identifies your fixed costs, the money that you have to spend to keep your family running. Whatever is left over can be divided.

Which method do you prefer?

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Credit Card Hell

Mint.com recently posted an enlightening comic highlighting the drawbacks of the new credit card laws. Credit is an important tool, but as the comic deftly indicates, it can also lead to much havoc. Take a look:

creditcardhell21

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For the next couple of weeks, I’ll be reading (and re-reading) some of the most popular personal finance books written by women and for women. I’ll post the tidbits and insights I found the most useful.

This week’s book:

Jean Chatzky’s “Make Money Not Excuses”

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Jean starts the book by listing the most common excuses women give her, preventing them from achieving wealth:

  • I’m just not good with my money.
  • My husband takes care of our finances.
  • I’m going to buy those shoes. After all, you only live once.
  • I don’t have time to deal with my money.
  • I’m not a numbers person.
  • I shop. He saves.
  • I’m single. I’ll think about money when I get married.
  • I don’t have enough money to make a difference.

Sound familiar? If so, you need to move beyond the excuses. You CAN learn more about money management.

The truth is, women are great investors. Chatzky cites the work of Terrance Odean and Brad Barber, professors at UC-Davis. Here’s what they found:

  • Women are far less likely than men to hold a losing investment too long.
  • Women don’t wait too long to sell winning investments. Men do.
  • Men are much more likely to put all or too many investment eggs in one basket. Women are more likely to diversify.
  • Men trade securities so often that the transaction costs are a drag on their investment returns. Women buy and hold on to their advantage.

Inspired? Start reading up on personal finance and sign up for email updates from Pazit!

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As soon as my husband and I announced our engagement, we immediately became the beneficiaries of a truckload of advice on all things wedding-related. Everyone, it seemed, had an opinion on where I should look for a wedding gown, who was the most-talked-about florist, and how I should have my hair styled.

Despite my thriftiness — I rented my wedding gown at a gemach (communal co-op), we got our dining room breakfront off of Craigslist, and my little brother won us four wooden chairs in a raffle to complement the dining room table my in-laws graciously loaned us — a constant chorus of “buy, buy, buy” streamed in the background. I began to wonder whether I really needed the $350 brocade linen, the $2,000 sheitel, and the $500 professional pots and pans. Wouldn’t the $100 set of pots suffice? (Several Shabbat meals later, I can honestly vouch that they do!)

But it was the $300 negligee in a Brooklyn store that stopped me in my tracks. “It’s an Italian designer,” the saleslady told me, surprised by the shocked look on my face. Clearly, she had customers willing to pay hundreds of dollars for a slip of fabric.

It’s no wonder, then, that Jewish newlyweds have little idea how to manage their finances. Few pre-marital classes or officiating rabbis offer anything in the way of financial advice. And cultural norms encourage young Jewish brides and grooms to register to their heart’s delight — no need to peek at the price tags.

But as the economy remains at a standstill and the costs of leading a Jewish lifestyle (including day school tuition and membership at a synagogue, temple, or JCC) continue to rise, it’s more important than ever for newlyweds to establish a firm financial foundation on which to build their life together. Often the financial decisions made early on in a marriage will forever impact a couple’s ability to afford to lead a lifestyle in line with their Jewish values. And research indicates that an ability to frankly discuss finances and money habits with one’s spouse is a key indicator of relationship satisfaction.

That’s one of the reasons why I launched Pazit (www.pazit.org), a nonprofit organization dedicated to empowering Jewish women (and the men they love) to take control of their financial futures. Pazit, Hebrew for “pure gold,” offers financial education events for Jewish singles and young couples in their 20s and 30s in the tri-state area, as well as a Money Club, which provides a safe space for groups of a dozen or so Jewish women to talk about their challenges and insecurities when it comes to managing money.

It’s important to “get a sense of each other’s financial habits ahead of time,” preferably before marrying, says Bard Malovany, a financial adviser with Sagemark Consulting in Annandale, Va. This includes discussing student loans and significant credit card debt, as well as plans for paying it off. “If one spouse brings significant debt to the marriage, it can cause significant friction. And if you’re really thrifty and uncomfortable spending money, that can be as much of a burden on a relationship if you’re marrying someone who’s completely the opposite.”

Before deciding where to rent or buy a home, the engaged couple should establish a budget, also known as a spending plan. Calculate your after-tax monthly income and deduct expenses (rent, utilities, renter’s or home insurance, food, cell phones, Internet, cable TV, groceries, synagogue membership, gas and transportation, recreation, student loan payments, auto insurance, etc.)

Decide in advance how much tzedakah you’d like to give for the year as a couple, given your financial situation. Aim to invest at least 10 to 15 percent of your pre-tax income in a 401(k) (if your employer gives you that option) and/or a Roth IRA, and begin stashing away savings to create a rainy day fund equivalent to six months of living expenses. “Be sure to budget extra for debt reduction and for savings,” says Greg Womack, author of the book “Wisdom and Wealth” (Beacon Hill Press: 2007). “Make a commitment to always live within your means, spending less than you make.”

Couples should decide together how they’d like to divvy up financial roles like paying the bills and whether they want to use joint or separate checking and savings accounts. There’s no right and wrong. “Different things work for different people,” Malovany says. “If a couple is marrying very young and neither has much in the way of assets, starting out with joint accounts makes sense,” he says. The same applies to couples where one spouse isn’t working. “From a psychological perspective, there’s something nice about feeling like you’re in it together, and that includes money.” Other couples, especially those with two incomes, prefer to maintain separate accounts and divvy up the expenses according to their salaries.

Financial experts like syndicated “Money Talk” columnist Liz Pulliam Weston recommend that couples each have some private funds. “Even a few bucks a week to blow on lattes or a movie can be enough to preserve a necessary sense of independence,” she write in her book, “Easy Money” (FT Press: 2008). Another way to avoid disagreements is to agree with your spouse not to make purchases above a certain amount (say $200) without consulting one another.

Once married, schedule a monthly “money date” with your spouse. “Many couples know that talking about money is important, but either fail or put off talking about it because money can be an emotionally charged issue,” says Kristy Archuleta, Ph.D., who co-directs the Financial Therapy Clinic at Kansas State University.

Despite a couple’s best intentions, there will always be disagreements, says Malovany. “Marriage involves a lot of compromise. Money is just one of the things you learn how to compromise on.”

(Published in The Jewish Week, June 2009. Copyright Tamar Snyder)

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The New York Times recently launched a Web page where readers can share their strategies for getting by in the economic downturn? Share your best advice, ask a question, comment on other peoples’ strategies and recommend the most helpful ones.

Some of my favorites:

  • LESS Amazon, Borders & BN and MORE Public Library (@iBelin, via Twitter)
  • Stop going to the movies or Blockbuster and go to your local library. They have a large selection of DVDs you can check out, for free. (Bonnie, Wilmington,DE)
  • Look for freebies on craigslist, it’s fun shopping without spending a dime. (@ziggywiggy, via Twitter)
  • Go talk to your landlord about a rent reduction, especially if you have you a good history! Don’t be afraid to try, it works in this economy (Bill Randle, Big Apple)
  • Volunteer. You’d be amazed… it’s entertaining, it’s free, it eats time that you’d spend doing expensive things, and it opens doors…(Brian, Boston)
  • Ditch sodas and bottled water for regular tap water – improve your health, your pocket and the environment (Michael Donohoe, Brooklyn, NY)
  • Use olive oil. For your hair (as a conditioner), as a moisturizer, on your food. Cheaper than store bought H&B aids, and great for the skin. (JG, Carmel, NY)

What are YOUR favorite tips?

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1164836_coins_5Ruby Herman, a budget and financial consultant with Future Performance Consulting, shared a list he created of 100 ways to save money immediately. Not everything will apply to everyone, but it’s definitely worth reading.

Some highlights:

24. Move money to high yield savings accounts

44. Borrow movies from the library for free

60. Order your prescription medicines via mail order whenever possible

61. Pay your bills on-line

88. Pay your mortgage on the 10th of each month. As much as the banks like it on the 1st, it’s not usually due until the 30th. They have a right to charge you a late fee if it’s after the 10th or the 15th, depending on the bank.

90. Prepay your mortgage by 7-8 years. Adding $100 a month to an average $300,000 mortgage at 6% will lower your payment schedule by 7-8 years. If you can pay semi-monthly ½ the amount due, you could lower a 30 year mortgage to 18 years.

91. Only use doctors in your medical plan (in network). Pay for all out of pocket expenses from a FSA, or HSA. Negotiate all medical bills not covered by insurances.

94. Order a credit report from all three credit bureaus, and clean up your credit report. 90% of credit reports have at least one error, or more. Dispute any errors, or items older than 2 years. Increase your credit score.

To read the entire list, visit Ruby’s Web site and scroll down to the “list of files to download.”

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For more daily deals, check out Wisebread’s best deals.

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