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THE WALLET MINDER 09/06/2006 www.walletminder.com In this issue: Do you like to buy DVDs? If so, read our first tip! Do you change your cell phones regularly? If so, find out how to protect your personal information in our second tip! Are you in serious debt? Read Tip 3 to learn more about dealing with your creditors. LETTER FROM THE EDITOR: For many parents, relief has finally come in the form of school. Yes, it is the "most wonderful time of the year" again, as children head back to school after three long hot months of fun. School also means lots of money spent on school supplies, books, as well as a host of new gadgets and toys, including cell phones. Perhaps it is a sign of my age that I find it hard to believe that most teenagers and even younger children are toting cell phones nowadays. I cannot but wonder how much money people are spending on their children's cell phone bills. If you are paying for your child's cell phone bill, I would like to suggest the following: First, there is nothing wrong with using a land line for conversation. Second, with the accessibility of the Internet and all the tools it offers, e.g. Microsoft's NetMeeting, and all manner of instant messaging services, your child really does not NEED a cell phone to communicate with his/her friends. Third, a cell phone is certainly useful for emergencies. So, buy your child one of the cool phones from cell phone providers, e.g. Cingular's firefly, that limits who your child can call, and whose calls he/she can receive. So, your child will have basic service (which is much cheaper, especially as part of a family plan) but will not run up large bills. Finally, if your children want to have full featured cell phone service, let them pay for it out of their allowance, or let them do jobs around the home to earn the money to pay for it. This will teach them to be responsible for what they do, and might make them more circumspect about using their cell phones. Most of all, it will teach them financial management. Mind Your Wallet! QUESTION & ANSWER: I have about $500 left over every month. Should I put it to savings or pay off debt with it? It is difficult to answer your question because I do not have enough details about your specific situation. For example, are you already contributing to a retirement account? How much do you owe, and at what interest rate? What kind of debt do you have? Taking into account the fact that I do not have specific details of your situation, my general principles are: pay off expensive debt, such as credit card debts which usually carry the highest interest rates. Once you have paid off your credit card debt, I would focus on building up retirement savings, in particular, contributing to any 401(k) that has employer matching. As you free up more cash, I would also start funding an emergency cash savings. But if you would like more information, please send us more information. Tip 1 Do you like to buy DVDs? If so, try out this tip! Many people like to buy DVDs of movies they really liked, or which they missed at the cinemas. That is fine and well, but DVDs are not cheap. Buying five or six a month, for example, could cost over $100. If you are not into keeping DVDs, then Netflix is of course a great option. (www.netflix.com) Joining Netflix lets you watch any number of DVDs, without spending a fortune. But even if you would like to keep the DVDs of your favorite movies, there is still no need to buy them at your local Best Buy, or Target, or Walmart. I recently found out that Netflix sells used DVDs (but still in good playable condition) on its website for under $10 per DVD, with most in the $5-7 range. Now, I am not affiliated with Netflix (though I subscribe to the service), but I thought that was a pretty good deal. I now have a copy of Mr & Mrs Smith, and I paid $8, about half what I would pay retail. Mind Your Wallet! Return to Top Tip 2 Do you change your cell phones regularly? If so, find out how to protect your personal information! Many people upgrade their cell phones once every couple of years. With today's cell phones that allow users to store all kinds of personal data as well as email communication, the safety of all that information is a vital one when you replace your cell phone. Most people believe that resetting their phones will delete all personal data from their phones. But this is not necessarily the case. A recent report cited a security software company that had managed to recover personal data from cell phones that had been "reset" and sold on Ebay. So, if you often sell your cell phones on Ebay after "resetting" them, you need to know that resetting your phone does not always erase all your personal data. Different cell phone manufacturers have different ways to totally erase personal data on their machines. Blackberry users, for example, can erase their personal data by entering their password incorrectly seven times in a row. If you are going to sell your cell phone, do call up your cell phone manufacturer to ask them for instructions on how to completely erase all personal data from your cell phones. Just imagine how your personal information can be used if it should fall into the wrong hands! Mind Your Wallet! Return to Top Tip 3 Are you in serious debt? Read on to learn more about dealing with your creditors. Sometimes, despite our best intentions, we can still end up in serious financial difficulties, without the means to pay off all our debts. If you are in this situation, here are some tips on how to best protect your interests. First, understand that while all late payments have a negative impact on your credit score, some late payments result in worse consequences than others. Second, set a priority on bills which are essential to be paid, and those which are less so. Essential bills include: your mortgage or rent, utility (electricity, water, gas, one telephone line: does not include cable or Internet unless you need it for work); and anything that allows you to keep working. For most, this will probably include their car payment. Child support and taxes are also essential bills. Less essential bills, when you are in desperate times, include credit card bills. Another way to look at essential vs non-essential bills, when you are in a desperate financial crunch, is to look at the consequences of your non-payment of those bills. For example, if you are late on a mortgage, or fail to make payment for a couple of months, you could find yourself in foreclosure. This means the bank can sell your home to pay off your debt, resulting in you becoming homeless. Late car loan payments, too, could result in your car being repossessed. Late payment on taxes and child support could result in jail time or wage garnishment: again, pretty serious consequences. Credit card companies will usually take six months or more of late/non payments before charging off the account and sending it to collections. Then you deal with the debt collectors, which we will talk about in another issue. While dealing with bill collectors is stressful and painful, it is not as bad as going to jail, or having no roof over your head. Finally, if you feel that there is no way you can keep your home, for example, it is still better to sell the house, than to have it foreclosed upon. This is because, if you sell your home, you have some control over prices, and you get to keep your equity in the home. It will also result in less damage to your credit score than if the home is repossessed by the bank. Mind Your Wallet! Copyright 2006. All rights reserved. Do not reproduce without written permission. You can obtain permission by contacting the Wallet Minder at http://www.walletminder.com. |
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