Kids and money, loose change, and turkey leftovers

Carnival of Personal Finance #76 is up at My Financial Journey, with 47 entries. My personal highlights:

Finance-4-Kids gives some tips on how to teach your kids about money. One or two seem a little pie-in-the-sky--I'm not sure how you can "Eliminate fear and greed" in anyone, let alone children--but generally his points are well-taken.

(Incidentally, I've started CJ Jr. putting money in his piggy bank. At two-and-a-half years old, he is more interested in the loud "clunk!" sound from dropping the coins into the pig's belly than the value of saving today for something tomorrow. Hopefully, someday that will change.)

Jenna Coffee at Moneybucks Coffee writes about something dear to my heart, given the name of my blog: what she calls "nuisance money," or the coins at the bottom of her purse and in a jar on the counter. I didn't know Coinstar charged 8.9% for their automated machine to count your pennies (it's also free if you use the money to buy a gift card). Nice work if you can get it.

Finally, here's a post in the spirit of the season that I wish I wrote: What can you learn about money from a turkey dinner? at Money Smart Life. You'll be looking at your Thanksgiving leftovers in a new way.

Calculator gives you the basics for creating a budget

The thought of creating a family budget stops many people dead in their tracks. They look at the stack of bills and receipts on their desk, and suddenly cleaning out the garage is more appealing.

Often the reason is because folks don't know where or how to begin. But when it comes to setting up a budget, you don't have to recreate the wheel--there are any number of tools out there to get you started.

Take the "Ideal Budget" calculator on CNNMoney.com, part of its Money 101 series on the basics of personal finances. The "Ideal Budget" doesn't quite live up to its name in my book, but it's a quick and easy way to give you the basic framework for your own budget.

A broad financial picture
With the Ideal Budget calculator, you first input the amount of your income. Then you enter your expenses, in five broad categories: Housing & Debt, Taxes, Insurance, Savings and Investment, and Living Expenses. The calculator shows the percentage of your income going to each specific category, and provides an "ideal" budget allocation to see if you're spending too much or too little in one area.

It took me all of about 10 minutes to enter my family's information, though admittedly I have most of that information available at my fingertips. If you don't keep track of your expenses regularly or can't remember what you did with your last paystub, it will take you a bit longer.

I liked the fact that the budget was organized into just five expense categories. If you're just starting out making your first budget, simplicity is key. You need to have enough categories to make the personal financial "data" you're gathering and tracking helpful, but not so many that it's an administrative headache.

Not perfect categories
But I question a couple of the specific categories the Ideal Budget uses. For instance, I don't see a whole lot of value in budgeting your taxes. True, taxes are a big expense, but they are what they are. Most people with a steady paycheck or mortgage payment pay the same amount each month. If you're overspending in one category, you wouldn't be reducing your taxes to make up the difference. M and I base our monthly spending plan on after-tax income, which is truer to the actual income we have to spend.

I also don't like grouping Housing & Debt together. Yes, your home mortgage (if you have one) is debt, but it's also an investment--much different than the credit card balance you have for that plasma screen TV, or your new car loan. It's much more revealing to give your consumer (i.e., non-mortgage) debt its own place in your budget, and see just how much of your monthly income it's consuming.

Percentages can be questionable, too
The "Ideal budget allocation" percentages provided with the calculator are helpful. Some of the most common questions folks have about their finances are, "How much should I be spending per month on my house? On groceries? On entertainment? etc.," and the calculator gives a basic idea.

But like the categories themselves, the percentages come with some caveats. The calculator lists 25% as the ideal amount that should go for taxes, an amount which realistically could vary by the individual. It lists just 26% of income going for living expenses, but includes everything from food and clothing to gasoline and utilities. I don't know where the folks from CNNMoney live, but in New Jersey, the cost of living is probably higher than 26 cents of every dollar.

One "Ideal budget allocation" I agree with: 15% for Savings and Investment. That's truly an ideal figure, based on the fact that the U.S. savings rate has been negative for the past year, but one well worth striving for.

A first step worth taking
Judging by the "Ideal Budget," my family's in pretty good shape. We have little debt, so we're well below the 30% ideal allocation in that category. Our living expenses are running about more than a third of our income, which makes me question the cost of my 105-mile roundtrip daily commute--but since I love where I work and where I live, that's probably not changing.

If you've never created a budget before, the Ideal Budget calculator is worth a try. At least you'll get to say, "So that's what a budget looks like...!" But keep its limitations in perspective and think about how you could tailor it to your own needs. Hopefully, it will encourage you to put off cleaning the garage for another week.

How to save $1,000,000 and have your own jet, too

My friend Tim, hero of my recent "Shopping tips from a savvy online bargain hunter" post, proved again that he really knows how to find good deals online. Check out this one he found advertised a couple weeks ago on Dealnews.com for a Cessna Citation Mustang Light Jet from Sam's Club.

Sure, the $2.7 million pricetag might seem a bit steep. But consider that it's $1 million off the list price and comes with a Sam's Club lifetime membership. Chances to be a wise spender like that just don't come around every day. No wonder Sam's Club is already showing the jet as "sold."

High taxes may be the least of your problems

The politicians here in New Jersey are at it again--trying to figure out a way to lower the highest state taxes in the country. Few Jersey residents believe they'll make much headway, as this Philadelphia Inquirer article points out, and I, too, will believe it when I see it.

But if you think that lower taxes will make a big difference in your personal finances, think again. If you're complaining that taxes are too high and are a big reason you don't have enough money to live, you just might be looking at the wrong side of the equation.

It's not the taxes that are killing you

I was struck by this quote at the end of the Inquirer article linked to above:

"I just spent $200 on beauty products and makeup and had to pay $14 in sales tax," said Elisa, a woman shopping in Atlantic County. "I think that's ridiculous. They better start giving us something back or people are going to start moving to states where they have to pay out less money in taxes."

Now I'm trying hard not to rush to judgment. I've been with my wife M when she's bought makeup and I know it can cost a pretty penny (even at our local drugstore). Plus, I know that M wears makeup to look nice, mostly for me, and so I can be held responsible for the lipsticks and eyeliners in her purse. Guilty as charged. (Though she looks beautiful naturally, too--seriously.)

But $200? For makeup? And then complaining about $14 from a 7% state sales tax?

I can't make that kind of logic add up.

Taxes are a good, not great, deal
No one likes a big tax bill. And I've done my share of griping about the big chunk of our family income that goes to our federal and state governments.

But taxes are a fact of life. They pay for things our country and states couldn't do without, like roads, schools, and the protection of our homes and families. In the big scheme of things they might not be a bargain, but they could be considered a pretty good deal.

Being money-wise is less taxing
I don't know if Elisa is rich or poor. I don't know if that $200 in makeup will last her a year or a month. I don't know if she carefully included the expense in her monthly spending plan.

But if she's in a financial mess, I know one thing: Paying $14 less in taxes--or moving to another state with no sales or income tax--isn't going to get her out. Her best chance at financial redemption is to change how she thinks about her money, and how she behaves in regards to it. Save more, spend less, know where every dollar goes. That's taking a wise approach to managing your money.

It's good advice for every person to follow. And come to think of it, for every legislator too.

We've been "crammed!"

That's right, crammed. And I didn't even know it.

"Cramming" is the practice of unethical companies burying charges in the pages of your phone bill for services you never authorized or even used. The charges can range from a few dollars to double-digit amounts--but often not large enough for you to notice and question the total amount of your bill.

My family was fortunate because the charge was small, we picked up on it right away, and it took just one call to get it removed. But others haven't been as lucky. Cramming can mean shelling out quite a few bucks, wasting a lot of time on the phone, and dealing with a big headache.

Getting a name pays off
I discovered we'd been crammed thanks to writing this blog--specifically the "To get better service, get a name" post a few weeks back. I was going to write about my experience following up on a $7.64 "miscellaneous charge" included in our August phone bill from a company named OAN Services, Inc. The charge was for a call from our home phone line to a strange-looking, 9-digit number, one that neither I nor my wife M could recall making.

I called the 800-number provided on the bill for OAN and told their representative that the charge was either a mistake or bogus, and we wouldn't be paying it. The OAN woman briefly tried to explain what it was for--which I still don't know, but it was something having to do with the Internet--but I stood my ground. When she finally said she'd have the charge removed, I dutifully wrote down her first and last name--just like I advise in my post--and confirmed that it had been done a few days later by checking my bill online.

I couldn't recall the woman's name, so I couldn't use the experience for my "Get a name" post. But in looking up OAN on the Internet to try and jog my memory, I discovered that the company's business is scamming people through unauthorized phone charges.

Rip-off reports galore
According to posts on www.ripoffreport.com, OAN billed one person in Illinois $53 for "non-basic service charges." "After calling the numbers provided on the Verizon Bill...we were placed on hold for a period of time, then when we disputed the call they said we had said yes to this service. Verizon would not address this issue, only tell us to call the numbers provided," the Illinois resident said.

"This company is charging me for Directory assistance in Nevada that I never used. My phone Company...said that there was nothing they could do...My charge was $7.14. Imagine multiplying that by all the phones and cell phones in the United States and you have a MULTI_MILLION dollar business," wrote Patti from Missouri.

And blogger Brian Patton had to make five calls and spend a couple hours on the phone to get a $50 charge removed from his bill.

If you're a victim, too
The Federal Trade Commission (FTC) and Federal Communications Commission (FCC) are well aware of cramming. Here are a few tips from the FCC to protect yourself:

• Review your phone bill every month (as you should do with every bill and account statement you receive). Keep an eye out for calls to unfamiliar numbers, or for services that you don't recall ordering or using.


• Make sure you know what service was provided, even for small charges such as $2.00 or $3.00.


• If you can't explain what a charge is for, call your phone company or other service number provided and question its authenticity.


• Keep a record of the telephone services you have authorized and used – including calls to 900-numbers and other types of telephone information services.


• Read the fine print in promotional materials before signing up for telephone or other services to be billed on your phone bill.

If you have been crammed, immediately call the company that charged you and request to have the charges removed. If that doesn't work, you have several options: contact your state Attorney General's office, enlist the help of your local Better Business Bureau, or escalate your complaint to the FTC or FCC. The FTC, in fact, has a special cramming hotline at 202-326-3134.

One theme consistent in "cramming resolution" success stories: Be persistent. It may take several calls and some time, but you should be able to stop it and even have your money refunded.

And if OAN is the one you're after, here's where I reached them: 800-731-7777.

Visit this week's carnival of personal finance
Everybody loves the carnival, and Everybody Loves Your Money is the host of Carnival of Personal Finance #75. The list of personal finance articles seems to grow every week. Here are my favorites:

• It's Just Money: "How much do I say?" The LAMoney Guy struggles to decide whether he should speak up to help his sister and brother-in-law avoid a financial train wreck.
• Art of Money: "Micro-lending and the art of poverty" Jon profiles Muhammad Yunus, who will receive the Nobel Peace Prize in December for making loans to the poor.
• FIRE Finance: "All is well if our HEART is well" Here's an interesting and creative way to think about the things that make for a good retirement.

New cars may be more affordable, but still don't buy one

Cnnmoney.com ran an article recently that cars are at their most affordable levels since 1980. According to Comerica Bank's "Auto Affordability Index," better productivity in the auto industry combined with intense competition has driven the cost of a new car downward since its high in 1994. Meanwhile, the average family income has risen five percent over the same period.

"It's a pretty happy story for the consumer," Dana Johnson, chief economist at Comerica, is quoted as saying.

Not this consumer. Including finance charges, Comerica estimates the cost of the average passenger vehicle sold in the third quarter of 2006 at $26,500. That's about five percent less than the same period a year before, but still an awful lot of money to pay for something that's going to be worth about half that amount in a year or two.

If you are trying to get your finances on track--working to pay off debt, amass funds for your retirement or your kids' college, build up an emergency cash reserve--then a new car is a sure way to run yourself off the road. Just say no to buying one.

Used cars are a lot better deals than they used to be. I saved a few thousand dollars buying a 1998 Nissan Sentra with 12,000 miles on it eight years ago. It just passed the 170,000-mile mark. Best of all, it's completely paid for, giving M and I the freedom to work on our other financial goals--like trying to move up to a single-family home without mortgaging our life away.

How much does your morning coffee REALLY cost?

I recently wrote that I switched from buying donut-store coffee to grocery-store coffee to squeeze as much savings as I can out of my 1-cup morning habit. I self-brew and don't bother to invest the few dollars that buying coffee in a can saves me, so the switch isn't helping M and I pay off the house any quicker. But if you buy a $3 cup of gourmet coffee every morning before work, a cool little online calculator can show you how much it's potentially costing you over the long haul.

Hugh Chou isn't a financial planner. He isn't even in the financial services industry; he's a system administrator at Washington University in St. Louis, and self-proclaimed "geek." But he is a geek that makes great financial calculators.

Among the many--and I mean many--calculators you can find on his no-frills calculator webpage is the "Stop buying coffee and save" calculator. Just plug in the daily cost of your coffee (don't forget tax and any extra treats to go along with it) and see how much you could save by drinking a 25-cent cup from the office coffee machine. What's more, Hugh's calculator will show you how much those savings could potentially turn into if you invested them for a few years or decades or so.

You'll have to decide what's harder to stomach--the office coffee, or the smaller bank account.

Thanks to My 1st Million at 33, Frugal Duchess, and pfblogs.org for highlighting Hugh and his work. And thank you, Hugh!

A year-end goal: Get a will

It's "open enrollment" time for my employer's benefit plan. While making the selections for my family, I discovered a nice benefit I didn't know I had: As a participant in my provider's life insurance plan, I have access to a free service that will create basic estate planning documents, such as a simple will and healthcare power of attorney.

M has been after me for some time to have our will drawn up. I like to climb mountains occasionally as a hobby, and it makes her nervous. I point out that statistically a greater percentage of people die on the nation's highways than climbing up the likes of California's Mount Whitney or Granite Peak in Montana. But that gives her little solace since I have a two-hour roundtrip daily commute that includes the Pennsylvania Turnpike.

"Get a will" was going to be one of my New Year's resolutions for 2007. But since this service looks like it could be a pretty easy task, I'm going to try and get it done in 2006. I'll write a post on the whole experience a little later.

A handy checklist
Related to estate planning, I came across a handy tool on SaveAndInvest.org, a personal finance website for military personnel. The Family Financial Checklist puts on one page all the major financial areas you need to consider (e.g., Where does the mortgage payment get mailed to? How much is our life insurance?, etc.) in preparing your spouse and family financially for the time you may no longer be able to take care of them.

The list is very broad and basic, and doesn't provide explanations for terms it uses, such as a living will. However, it can serve as a good starting point for a heart-to-heart discussion with your spouse or family about a difficult topic. Plus, as you gather and document the information, you can check off each item upon completion (something I personally find very satisfying).

Having just celebrated M's and my third wedding anniversary, I'm about two years late in completing this extremely important aspect of family financial planning. But hopefully before New Year's Day, 2007, I'll be able to check it off.

Shopping tips from a savvy online bargain hunter

You couldn't drag my friend Tim to the mall for an all-day shopping trip. But he admits it can be tough to drag himself away from shopping online.

"I kind of like it just for the sport of it," he says.

Tim has a knack for finding good deals via the Internet, particularly electronics and technology. For example, he got all the components of his surround-sound home theater system--six speakers, one subwoofer, and a 7-channel receiver--online for less than $1000. "I was surprised at how good they sounded," he says.

Here's how Tim does it.

An informed consumer
Tim starts out by doing his homework. His first stop is usually Cnet.com, which provides product reviews and price comparisons for everything from camcorders to web hosting. "It's like an online 'Consumer Reports,' " he says. (He also subscribes to Consumer Reports, the magazine.)

He uses Cnet to check out a product's specifications and find out which ones offer the features he wants. For instance, he recently was shopping for a digital camera with ultralong, "12x optical zoom" and was able to quickly narrow down his choices to the few models that had that capability.

(One thing I like about Cnet is their video reviews, where an editor gives you a brief video tour of a product. When I was shopping for a digital camera, a video review helped me decide against one model because I could see that the buttons weren't placed very well on the body.)

Tim also browses through other sites to gather information. "Amazon has a lot more people using it, so you get a much broader number of reviews," he said.

On a price-hunt
Once Tim has a specific product in his crosshairs, he'll hunt for the best price. He prefers dealnews.com, a site which provides daily reports on the best product deals from established stores (It's slogan: 'How to go broke saving money'). "I'll search for prices by product or subscribe to e-mail alerts," says Tim.

Dealnews emphasizes that the deals it reports come from "reputable stores," because not all deals out there are as good as advertised, Tim cautions. You can get gypped by purchasing "grey market goods"--those not intended for use outside the United States and marketed by unauthorized resellers. While these products can be steeply discounted, you often can't get technical support or make a warranty claim if something goes wrong.

On the occasions when Tim questions a reseller's authenticity, he heads to resellerratings.com, where other users rate vendors they've used on a scale of 1 to 10.

Using loyalty as an advantage
Once Tim's found the right product at what he thinks is a good price, he pays a visit to JR.com, the website for J&R Electronics a brick-and-mortar store in New York City. If JR.com has the product he wants but at a higher price, he'll give the store a call.

"They have a price-match policy, and more often than not, they'll match a lower price somewhere else if it's within reason," he says. He's become a fairly regular J&R customer, though he's never set foot inside their unique structure at Park Row and Broadway.

"I have a comfort level with them, because they're reputable, they've always given me great service, and they have good prices," he says.

Weigh benefits versus costs
Shopping online, for all its conveniences, can take a lot of time and effort, which can outweigh the benefits of saving a few bucks on a printer. Despite the satisfaction he feels at getting a great product at a low price, Tim also knows that the point of shopping online isn't just to get the cheapest price out there.

"What's important is, are you happy with what bought, and the price you paid?" he says. "My brother could care less how much something costs, so he doesn't shop around much at all. I'm more frugal, so I'll do the legwork. But some people don't care and that's fine."

Perhaps his biggest tip: "Don't buy stuff you don't need," he says. "I saw these plastic freezer molds to make ice cube shot glasses for about $6. I thought, 'What a deal!' Then I caught myself; what the heck did I need them for? Fortunately, they were sold out."

Overspending? Maybe you need a smaller "bowl"

Life is like a box of chocolates. And a credit card is like an open bag of potato chips.

I love chips. Potato chips, nacho chips, corn chips. It doesn't matter. Like the ad says, I can't stop at eating just one.

And I've learned something about the way I inhale chips that also can apply to spending money: We need boundaries. In fact, boundaries can be very good.

Eating more than my fill
Here's what I mean. In the past--more often than I care to admit--I've sat down in front of the TV with a half or full bag of chips at my side. I'll begin munching, and before I know it, I'm shoveling the shards at the bottom of the bag into my mouth and feeling a little queasy to my stomach.

However, on occasion, I've caught myself heading to the couch with a chip bag tucked under my arm and stopped dead in my tracks. I then go over to the kitchen cabinet, pull out a medium-sized bowl, fill it to the rim with chips, and put the bag safely back in the pantry. Usually after the bowl is empty, I've satisfied my chip craving, I have a pleasant feeling in my stomach, and have no desire for a refill. (Besides, the kitchen is waaayyy over there...)

Cash surplus
What does this have to do with money? In October, M and I stopped using a credit card to pay for everything. My theory (supported by academic research and financial experts a lot smarter than me) was that making purchases with cash--especially for discretionary expenses, like videos, household stuff, even groceries--would help us stay within our spending plan and manage our money better.

I haven't tallied the final numbers yet but it looks like the theory held true. M and I went over our spending plan at the beginning of the month, paid cash (or used our debit card) for the majority of our non-fixed expenses, and ended up with a modest surplus. We were even able to pay an unexpected $127 for my stepdaughter's tumbling lessons that I forgot to account for in our plan.

Behavior change
What was the difference? Our behavior. With an $18,000 limit, our credit card was the equivalent of a huge, seemingly bottomless bag of potato chips. We never came close to using all of that credit each month, but with such a large boundary, we naturally tended to "consume" more than was really good for us.

Spending within the boundaries of our cash limit--which really, by comparison with our credit limit, is equivalent to a small bowl of chips--made us more focused on how we spent our dollars and used what we purchased. For example, when we ran out of ice cream--another food which, for me, is best served in a bowl--M made up the brownie mix in the cupboard instead of adding it to the weekly grocery list. Thus, we stayed within our shopping budget but still had a tasty dessert.

Many people argue that boundaries are bad. And they can be, if they are unreasonable or too stringent. But use them well and they can save you from feeling a lot of discomfort.

Now, if you'll excuse me, it's November 1. There's a bowl of ice cream with my name on it.