Countdown to Financial Fitness: Audio Release of Live Well, Grow Wealth

Countdown to Financial Fitness: Audio Release of Live Well, Grow Wealth: I'm pleased to announce that the audio version of my nonfiction book, Live Well, Grow Wealth, is now available. To preview or order, cl...

Audio Release of Live Well, Grow Wealth

I'm pleased to announce that the audio version of my nonfiction book, Live Well, Grow Wealth, is now available.  Jennifer Henry did an excellent job with the narration, so please check it out. To preview or order, click here.

Live Well, Grow Wealth can be described as Personal Finance 101, a commonsense guide to shrinking your financial footprint. Based on my experience of living frugally, investing, and retiring early, I compare achieving financial fitness to maintaining a healthy weight. In ten easy-to-follow steps, Live Well, Grow Wealth shows ordinary people how to build wealth by living within their means without compromising their values.

Here are the ten steps that are discussed in detail in Live Well, Grow Wealth:

1.       Live Within Your Means

2.       Find the Best Value

3.       Get out of Debt

4.       Build an Emergency Fund

5.       Save for Retirement

6.       Begin to Invest (basics)

7.       Consider Relationships

8.       Teach Your Children

9.       Get Completely out of Debt (pay off long-term debt, like a mortgage)

10.   Invest More (stocks and covered calls)

 I hope you'll check it out and share it with someone who can benefit.

Sharon Marchisello is the author of Live Well, Grow Wealth.

Sign up for her newsletter at sharonmarchisello.com

Countdown to Financial Fitness: Cash, Credit, or Debit

Countdown to Financial Fitness: Cash, Credit, or Debit: In preparation for the release of the audiobook version of Live Well, Grow Wealth , I'll be sharing excerpts each week on this blog.   ...

Cash, Credit, or Debit

In preparation for the release of the audiobook version of Live Well, Grow Wealth, I'll be sharing excerpts each week on this blog. 

This excerpt is from Chapter One, Live Within Your Means, and it discusses the pros and cons of various forms of payment. 

Many financial consultants will tell you to cut up your credit cards, or to never apply for credit at all. I won't tell you that. I love my three credit cards; they are a secure alternative to carrying a lot of cash. I use them for groceries, gasoline, and even some utilities; I pay by credit card whenever one is accepted without an additional charge for the convenience. The secret is to remit the balance in full every month, on time, so you never pay one penny of interest. For me, a credit card is a convenient form of payment, and a side benefit is that I get to use other people's money for a short while. Additionally, many credit cards offer rewards like frequent flyer mileage, gift cards, or even cash back. If you think of a credit card as a magic plastic wand that enables you to buy something you cannot otherwise afford, perhaps cutting yours up is a good idea.

Those who tell you to cut up your credit cards may counsel you to operate on a cash-only basis, and this works well for some people. The premise is simple: when you run out of cash, you can't spend any more. Personally, I find it harder to keep track of expenditures when I pay in cash. Withdraw twenty dollars from the ATM, and it disappears. At the end of the month, it's just something that went into the "miscellaneous" column. If you are a cash-only person trying to get a handle on where your money is going, be diligent about writing down every expenditure. When you use credit cards, debit cards, and/or checks, you can retrace your steps and account for every outlay. Keep the credit card receipts and make use of your check register so you can reconcile them with your statements each month.

If you pay mainly with cash, keep coins working for you. Many people cast their small change into a drawer, the bottom of a purse, or the floor of a car and do not even bother to pick it up when they drop it. I'm not advocating stopping at the bottom of an escalator or jumping into traffic to retrieve a quarter. But I find it odd that so few people take the time to pick up a "lucky" penny—or nickel or dime. That penny you found on the sidewalk yesterday may come in handy today when your total is $5.01 and it keeps you from breaking a larger bill. The smaller the monetary denominations, the less they matter, and the faster they go. Check your coin purse to see if you can produce exact change for your purchase; cashiers will appreciate it (especially if you can pull it out quickly enough to avoid annoying the customers in line behind you). The longer you hold onto those larger bills, the richer you’ll feel.

Some people save all their change and take it to the bank once they fill a mason jar, treating the proceeds like a windfall. My father saved his change for about thirty years. I collected coins as a child, and he continued the hobby long after I lost interest. He figured the coins would appreciate in value, which was true for the ones issued before the early sixties, when the U.S. mint stopped making them out of silver. When he died, I inherited his collection: a steamer trunk full of jars and jars of pennies, nickels, dimes, quarters, half dollars, and silver dollars. Most of the coins only fetched face value and were more trouble than they were worth to transport and cash in. Some banks even wanted to charge a fee to accept them! Unless you come across a rare issue or a coin older than 1964, spend your change.

Some people claim the best solution is a debit card. It offers the convenience of a credit card, and it’s easier than writing a check. You don’t have to carry a lot of cash, yet you are unable to spend more than you have in your checking account. While you don’t have the same protection as with a credit card, some merchants offer the option to select "credit" instead of "debit" at the time of transaction, which adds some fraud protection. But because the funds are paid immediately from your checking account, it's harder to dispute an incorrect charge, and your financial life can be crippled if a thief steals your card number and PIN, and then wipes out your account (or even overdraws it, incurring additional charges). If you write checks and also use a debit card, be sure to document debit transactions on your check register and keep track of your balance to avoid getting hit with overdraft fees. Also, be vigilant with your statements to ensure there is no unauthorized or forgotten activity.

To learn more, read Live Well, Grow Wealth by Sharon Marchisello.

Sign up for her newsletter at sharonmarchisello.com

Countdown to Financial Fitness: Absolutely Necessary Expenses

Countdown to Financial Fitness: Absolutely Necessary Expenses: In preparation for the release of the audiobook version of Live Well, Grow Wealth , I'll be sharing excerpts each week on this blog.   ...

Absolutely Necessary Expenses

In preparation for the release of the audiobook version of Live Well, Grow Wealth, I'll be sharing excerpts each week on this blog. 

This excerpt is from Chapter One, Live Within Your Means. I suggest categorizing your expenses as absolutely necessary, necessary but reducible, discretionary but important, and totally unnecessary. This post discusses expenses deemed absolutely necessary, such as housing, taxes, and insurance.

The absolutely necessary category should contain fixed expenses like your rent or mortgage payment, which are hard to reduce, but not impossible. You might be able to refinance your mortgage or move to a less expensive dwelling; however, while those actions can save you money over the long term and may be warranted, they can result in added short-term expenses.

Taxes belong in this fixed-cost category, as they usually are not negotiable. But if the value of your home has dropped significantly, you have the right to contest your property tax assessment with the county. (You can do it yourself; you don't have to hire one of those companies who offer to do it for you—for a fee that eats up most of your savings.)

F.I.C.A. is a fixed part of your payroll tax, but if you work more than one job and earn a high income, don't forget to re-claim the excess at the end of the year. Review your pay stubs and ensure you have not paid more than the maximum.

If you received a large income tax refund last year, or if you need more money in your pay check now, change the amount of federal tax your employer withholds by adjusting your W-4 form. You still have to reconcile next April 15 when you file your tax return, but do the research to ensure you are claiming every deduction to which you are entitled.

Insurance is another fixed cost that is hard to reduce. But if you haven't done any comparison shopping lately, obtain quotes from competing companies to ensure you're getting the best possible rates for the coverage you need. If you do find a lower rate for the same coverage from a different provider, your current provider may be willing to match it in order to retain your business.

Consider raising your deductibles to save money on premiums. Set the savings aside in an emergency fund in case you have a claim.

Look for unnecessary line items. Do you have a teenager on your policy who is no longer driving your car? Are you carrying collision insurance on an old car whose blue-book value is less than the deductible? Are you paying for towing insurance when you're a member of the Automobile Association?

If your net worth is high, do you have an umbrella policy? For a small surcharge, this additional liability coverage can provide good value. Are you getting all the discounts that apply to your situation?

Some people buy more insurance than they need. Life insurance is important if you're the main breadwinner and you have a family dependent on your income. But if you're single, who will suffer financially when you die? If the answer is "no one," why do you need to pay for a lot of life insurance? My husband and I each carried supplemental term life insurance while we had a mortgage. After the mortgage was paid off, we dropped the life insurance coverage. Because we both worked and had accumulated assets, the death of one of us would not have caused undue financial hardship for the other. Those premiums were better spent building up our assets.

Think carefully before letting an insurance agent talk you into buying a "whole life" policy, which is sometimes marketed as a savings plan. Unlike term life, which covers a specified period of time when it's needed, whole life covers the insured's entire lifetime, provided the premium is paid. Premiums for whole life insurance are generally higher than for term life, and the policy builds up a "cash value" as well as having a death benefit. My parents purchased whole life policies for my brother and me when we were babies, which carried a $1500 death benefit. Now that our parents are gone, my brother and I each own our paid-up policies, and the cash value exceeds $1500, but the money our parents spent on premiums could probably have grown a lot more had it been invested in something else.

Even if you don't need life insurance, you might, however, need disability insurance to help support yourself if you can no longer work because of illness or an accident, and you need your wages to cover your expenses. On the other hand, if your income is not dependent on your ability to work, why buy disability insurance? I discovered that my 94-year-old mother-in-law was paying $19.00 a month for an accidental death and dismemberment policy; unlike wages, her pension and Social Security would continue even if she became disabled, so why insure her income against disability? She had stopped driving, and even if she died in an accident, I believe it would have been hard to convince the insurance company that her death was not at least partially attributable to natural causes. The fine print on the policy read that the death benefit would be cut in half "once the insured reaches age 70"; she was over 80 when this totally inappropriate policy was sold to her through her credit union. When purchasing insurance, consider your age and what risks you face. What's the probability and the impact, versus the cost to insure against that risk?

Think carefully before you purchase travel insurance or all the add-on coverage the car rental agencies try to sell you. What risks might you face, and what would it cost you to deal with that situation without insurance? Check your existing policies (auto insurance, medical) to ensure you're not duplicating coverage you already have. Some credit cards offer certain protections when they're used to pay for car rental, cruise, or plane tickets.

A word about travel insurance. For years, my husband and I passed up purchasing travel insurance when we booked cruises at the last minute, often at a very low rate. We figured the odds of our canceling and losing our cruise fare were slim. Also, working for an airline, we'd fly space available, and missing our cruise because we couldn't get a standby flight—the biggest risk we faced—was not a covered loss.

I also had a bad memory of my mother's experience with travel insurance. Her companion dropped dead of a heart attack a few weeks before their planned trip. While the company refunded my mother's money because "death of traveling companion" was covered, they refused to refund his portion because his death "must have been due to a pre-existing condition." And dealing with travel insurance bureaucracy, providing proof that his "pre-existing condition" was cancer, not heart trouble, was the last thing his bereaved family wanted to do.

My attitude toward travel insurance changed when we took a Panama Canal cruise, with a stop in a small Central American port that our airline does not serve. A woman from our ship collapsed and died during a shore excursion. The cruise line put her husband off at that remote location and left on time. Fortunately, the couple had purchased travel insurance to cover those many unanticipated expenses: hotel accommodations while dealing with the death and securing release of the body, transportation of human remains back to the United States, etc. Now, my husband and I usually purchase travel insurance when our itinerary includes remote destinations.

Final thoughts about all types of insurance: don't buy more than you need, but don't skimp where it’s most important, or you could leave yourself vulnerable to catastrophic loss.

Review each of your expenses carefully, decide which ones are truly necessary, which ones can be eliminated or reduced, and then make a fiscal plan. The sooner your outgo becomes less than your income, the sooner you can start building wealth and enjoying financial security.

To learn more, read Live Well, Grow Wealth by Sharon Marchisello.

Sign up for her newsletter at sharonmarchisello.com

Countdown to Financial Fitness: Trimming Necessary Expenses, Part II

Countdown to Financial Fitness: Trimming Necessary Expenses, Part II: In preparation for the release of the audiobook version of Live Well, Grow Wealth , I'll be sharing excerpts each week on this blog.   ...

Trimming Necessary Expenses, Part II

In preparation for the release of the audiobook version of Live Well, Grow Wealth, I'll be sharing excerpts each week on this blog. 

This excerpt is from Chapter One, Live Within Your Means. I suggest categorizing your expenses as absolutely necessary, necessary but reducible, discretionary but important, and totally unnecessary. This post discusses necessary expenses such as groceries and household services. 

Are you paying someone else to perform tasks you could do yourself? For example, mowing or fertilizing the lawn, cleaning the house, walking your dog? If so, perhaps you can realize some savings there. And speaking of a lawn, you can save money on water and fertilizer by letting some of the manicured green area go natural, planting drought-tolerant ground cover, or even paving it over.

Groceries, too, may seem like an uncontrollable expense. What can you do about the price of milk? My mother used to peruse the grocery ads, circling the best sale prices at each store, and then make the rounds. She was a housewife living in a small town where distances were not great between businesses; most people do not have time for this. Compare the regular prices of the items you purchase most often, and then choose the store with the best overall prices and service for your main shopping. By frequenting one establishment, you'll be more in tune to sales and thus be able to take full advantage when they happen. If your grocery store has a free frequent shopper program that offers discounts, sign up. But keep an eye on sales offered by competitors so you can pick up bargains when that store is on or near your route.

Menu planning and organization are essential to saving money on groceries. If chicken is on special this week, prepare your family's favorite chicken dish; why buy hamburger at full price? If you're planning to cook a perishable item right away, consider a "manager's special" that has been "reduced for quick sale" because it's nearing its expiration date. But if you have no immediate plans for that item in your menu, forgo the bargain, because chances are, it will rot and stink up your refrigerator.

Work in some meatless meals if you can convince your family to try vegetarian cuisine. Lower-cost meat substitutes can anchor a balanced meal.

Avoid purchasing junk food which often consists of expensive empty calories. And if you have the time and ability to cook from scratch, stay away from pre-packaged convenience foods as much as possible.

Stock up on items you use regularly when they are on sale, especially non-perishables like canned goods, dried pasta, and paper products. With proper timing around specials, you can avoid ever having to pay full price. Buy fresh fruits and vegetables when they're in season and incorporate them into your menus. Freeze extra packages of meat, and make note of the date. Don't waste food by buying more than you can use or store safely, or by stashing it where you can't find it until it has spoiled. Label leftovers and serve or recycle them promptly. If your family is averse to eating leftovers, avoid them by learning to prepare less food at mealtime.

Know what is in your refrigerator and on your shelves to keep from re-purchasing items you already have, and to ensure everything gets eaten while still fresh. When you stock up on items you already have, group them together and store the new behind the old, so you'll use the item with the oldest date first. Keep a grocery list in a convenient location—and take it with you when you go shopping—so you don't have to dash out to purchase a needed staple in order to finish cooking dinner.

Shopping on a full stomach and sticking to your list will help you avoid the temptation to buy unneeded items, especially those placed strategically beside the cash register. Accepting a tasty sample and a coupon from a salesperson does not obligate you to buy the product. If your spouse or children have a habit of succumbing to temptation, leave them at home when you shop.

Pay attention to package size to ensure you're comparing prices accurately. One brand may appear cheaper, but the package may contain less product. Some store labels include a price per ounce, or per unit, to help with these decisions. A calculator can be a useful tool if, like me, you have trouble doing the arithmetic in your head. And try to remember what price your items were marked when you arrive at the register. Write them down if necessary. Some stores will give you an item free if it scans incorrectly. That scenario rarely happens, but you may miss an opportunity if you're not paying attention.

Coupons play a role in saving money on groceries. Some stores will even double manufacturer's coupons up to a certain amount. But before using a coupon, compare the price of competing brands, particularly the store brand. Sometimes the coupon provides the better deal, especially if it can be doubled, but often the store brand is still cheaper. If the food tastes just as good, why not buy the lower-priced item instead? Some store brands have a satisfaction guarantee; if you buy it and don't like it as well as the name brand, the store will refund your money or replace it with the name-brand product. Only use coupons for items you really want to try, or were planning to buy anyway. Otherwise, you're spending more money instead of saving it. (Why do you think manufacturers offer coupons in the first place?)

Rebates are another way to save money on groceries, as well as on other household goods, but sometimes, they are more trouble than they are worth. With a coupon, you know at the point of sale whether it will be honored; with a rebate you have to trust there is nothing in the fine print to disqualify your application after you've jumped through all the hoops, used the product, cut out or soaked off the UPC label, mailed in the original cash register receipt, and waited six to eight weeks. Some companies allow you to submit rebate applications online, which takes pain and guesswork out of the process.

Another way to save on groceries and other items is to belong to a discount warehouse store, such as Costco, Sam's, or B.J.'s. Contrary to popular belief, you don't have to buy everything there in mass quantities. I remember telling a neighbor we'd joined Costco and he remarked, "You don't seem like the type to buy fifty pounds of potato chips." While some products are sold in bulk, or in larger quantities than you'll find in a grocery store, some can be bought individually—furniture, name-brand clothing and accessories, jewelry, appliances, electronics, tools, household goods, pharmaceuticals, alcohol, many grocery items—and the quality is often quite high.

But don't assume because a product is sold in a warehouse—or outlet mall, or other "discount" store—that it's the best deal. Sometimes an item can be purchased at your local grocery store for less, especially on sale and/or with a coupon. It's always important to compare prices. Also, warehouse stores charge annual membership fees, so if you join, make sure you'll shop there enough to offset the cost. Before joining, visit with a member or ask a store employee if you can come in and have a look around, to determine whether a membership will really benefit you.

Plan your purchases for items such as clothing, school supplies, and bedding to take advantage of seasonal sales or sales tax holidays. Consider shopping online if free shipping is offered. (But don't buy something you don't need just to bring the total order amount high enough to qualify for free shipping.)

Dry cleaning is another area where you may be able to reduce expenses. My mother refused to buy a garment if it wasn't washable. Her advice is not practical for everyone, but do consider the cost of cleaning and maintaining your clothing when you purchase it. I bundle my dry cleaning to take in a couple times a year, and look for coupons that offer a percentage discount if the total is over a certain amount, or a set price for ten items, thus lowering the average cost per item. If you wear a uniform or other work-related garment that must be dry-cleaned regularly, check around for special pricing. Many dry cleaners offer discounts for military personnel, law enforcement, or airline staff.

Ask the price when you drop off your items, and let the dry cleaner know about any coupons you possess or discounts you are requesting, to ensure they will be honored. I have friends who routinely drop off their dry-cleaning without asking what it will cost, and then just pay whatever bill is presented without question. I always ask for a quote up front, even though some dry cleaners don't like to give it. One place I went to charged extra for silk, extra for wool, extra for pleats, extra for each color in a garment. I never did find out what type of fabric would qualify for standard pricing; everything I ever brought them incurred a surcharge. It's best to know about those hidden costs before you agree to the cleaning, so you can negotiate or shop around.

Whether you're dealing with a dry cleaner, a cell phone company, a cable or internet provider, a grocer, an airline, an insurance company, you can save money by asking the right questions and insisting on an accounting of what you're paying for, preferably before you agree to buy. Take advantage of the fact that there is competition in most of those industries. Don't be afraid to take your business elsewhere if you're not treated fairly.

To learn more, read Live Well, Grow Wealth by Sharon Marchisello.

Sign up for her newsletter at sharonmarchisello.com