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No More Excuses! 3 Tactics To Start the Saving Habit

Written by Brett McKay

dreamstime_2262154.jpgAmericans are the world’s worst savers. Nearly a quarter of American consumers have no money left over after paying for their essential living expenses and spending discretionary money. Instead, we’re take on more and more debt. Poor savings not only hurts individual consumers it also hurts our national economy.

Why aren’t more American’s saving? We give plenty of excuses why we don’t. Further analysis show that these excuses are bunk.

“I don’t have enough money to save.” Hogwash! You don’t need hundreds in access dollars to start saving. Most banks allow you to start a savings account with as little as $25. Some require less. Even if you saved small amounts each month, it’s better than nothing.

“I’m focused on paying off my debt.” Paying down your debt is an admirable goal, but its not wise to do so at the expense of saving . Without savings, you might find yourself going back to credit cards when an emergency hits.

It’s too late to start saving. If you’re in your twenties and thirties and you’re giving this excuse, you need to be smacked across the head. You’ve got plenty of time for the wonders of compounding interest to work for you. If you’re older and are giving this excuse, you should be smacked, too. While you don’t have as much time for compound interest to work for you, having a solid savings built up will protect you from any financial misfortunes you might face- job loss, hospital stays, ect.

How to Start the Savings Habit

If saving money is not a habit for you, here 3 tactics to make it one.

Start today. Not tomorrow, not next week, today! If you don’t have a savings account, go down to a bank and open one. It takes about 15 minutes. If you already have a savings account, but are looking for a better interest rate, check out some of the online banks like ING and HSBC. (If you’re interested in ING, shoot me an email and I’ll send you a referral that will give you $25 for free when you start an account.) After you open your account, start looking for ways you can start filling it.

Automate. There’s no better way to make saving money a habit than making it automatic. Go down to your employer’s HR department and ask to have a percentage of your paycheck deposited in your savings account automatically. If saving is new to you, start small. Try 5% at first. Gradually build yourself up until you can save between 15 and 20 percent of your paycheck each month. After you set up your direct deposit, forget about it.

Save the difference. Next time you use a debt card, before you enter the amount in your registry, round up to the next dollar. So, if your total is $12.24, enter $13 in your registry. At the end of the month, your actual balance will be more than you have in your check registry. Take the difference between the amount actually in your checking account and the amount in your registry and stash it in to savings.

What tactics have worked for you in developing your saving habits? Drop a line in the comment box.

Are Coupons Worth Your Time?

Written by Brett McKay

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One personal finance tip that you see pop up over and over again is to clip coupons. Some people claim to save hundreds of dollars each month just by clipping coupons. There’s an entire site dedicated to helping consumers get the best deal on their groceries using coupons.

I don’t clip coupons for groceries. Never have and I’m not sure I ever will. I’ve tried clipping coupons on Sunday, but usually give up after 5 minutes. I just don’t think it’s worth the time investment. Here’s a quick break down why I think clipping coupons is a waste of time.

Coupons for stuff I don’t buy. Every time I’ve sat down to look through coupons on Sunday, I mainly find coupons for stuff I just don’t buy. I haven’t eaten a Lunchable since 4th grade, so I’m not interested in getting two for the price of one. We have to remember that coupons aren’t printed because food manufacturers want to help out our budget. Coupons are a marketing strategy to get consumers to purchase something they wouldn’t buy in the first place. I’ve also noticed that coupons get issued for stuff that’s already overpriced to begin with. I can save 15 minutes of my time and save the same amount of money buying the generic brand than clipping a coupon for the name brand.

Coupons can increase travel time. Some coupons are valid only at certain stores. Instead of doing your grocery shopping in 45 minutes in one store, in order to get the good deal with your coupon, you might have to drive across town, extending the amount of time of your errand. In addition to wasting time, the extra driving to get the deal wastes expensive gas. After you factor in the cost of gas, the extra effort to get the good deal will probably be mitigated.

Extra clutter. Clipped coupons means just one more thing to keep track of. I’m really trying to reduce the amount of stuff in my life and extra pieces of little paper floating around won’t help. I’m sure many people have established awesome systems to organize their grocery coupons. If it works for them, more power to them. Personally, I don’t think establishing such a system would be worth the time investment.

While I don’t clip coupons for groceries, I will clip coupons for restaurants. Restaurants offer great deals in the Sunday paper. My wife and I have had several cheap date nights thanks coupons from restaurants. Our favorite breakfast place, IHOP, often has coupons in the paper for buy one meal get the other free. You can’t beat that.

What do you all think? What’s been your experience with coupons? Any suggestions on making coupon clipping worth it? Drop a line in the comment box. I’m looking forward to you suggestions!

Image by BigFreaky

Fuel-Efficient Vehicles: To Buy or Not To Buy

Written by Brett McKay

Editors note: This is a guest post by Jennifer Barnett and Chrissi Nimmo, two of my classmates in my Environmental Law class at the University of Tulsa College of Law. Thanks for the great post!

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So, you want to buy a vehicle with better gas mileage. Perhaps a vehicle that is “good” for the environment? But where should you look? Commercials and news reports peak your interest, but you just aren’t sure if you have all the correct information. This article addresses these concerns and more, and will highlight some sources of information that will help you with the decision of which fuel-efficient car to buy.

What is a fuel-efficient car?

One of the most important things to consider when researching fuel-efficient cars is the vehicle’s miles per gallon (mpg) rating. Fuel-efficient cars create lower carbon dioxide (CO2) emissions, one type of greenhouse gas. Burning one gallon of gasoline can produce 20 pounds of CO2. (www.epa.gov) A car that gets 25 mpg, as opposed to 20 mpg, can save the production of 10 tons of CO2 over the vehicle’s lifetime. (www.epa.gov) In 2008, the Environmental Protection Agency (EPA) will amend its fuel-efficiency ratings to more accurately reflect today’s driving habits, which are much different than 20 years ago. Consumers have complained that the mpg on the car’s sticker doesn’t match how the car performs. As Dan Edmunds explains, “[t]he reason why fuel economy estimates have been coming out too high is simple: the EPA-specified testing and reporting method has not been updated since 1985.” (www.edmunds.com) A lot about car-driving has changed since ’85 – for example, maximum allowed highway speeds are now up to 80 miles per hour (as opposed to 60 mph a couple of decades ago), and this affects the vehicle’s true mpg. So, note to the buyer: don’t be surprised if you are comparing sticker mpg between a 2007 and a 2008 fuel-efficient car. 2008’s sticker will look like it has a much lower mpg, but will more accurately reflect fuel usage. For the buyer who wants the greenest car they can buy (assuming that the electric car isn’t a real option), the source to turn to is the EPA’s SmartWay green vehicle rating system. (www.edmunds.com) Cars are rated on two separate scales from 1 to 10, with 10 being the best. The two scales are: traditional tailpipe pollutants and the amount of CO2 produced per mile. This means that to qualify as SmartWay rated, a car must receive a 6 and a 7 rating, (the minimum combined score must be 13). The Toyota Prius and the Honda Civic Hybrid are two examples of cars that have achieved the SmartWay rating, with scores of 18 and 19, respectively. For cars, like the Prius and Civic, that earn a score of 9 or higher in each category, the ultimate green rating is bestowed: the car is SmartWay Elite. Other Elite cars include the 2-wheel drive Ford Escape Hybrid and the 2-wheel drive Mercury Mariner Hybrid. (www.edmunds.com)

Which cars are the best-rated?

Across the board for the 2007 year, the Toyota Prius dominated the fuel-efficient car ratings. At 60 city and 51 highway mpg, this car is an efficiency dream. When re-evaluated using the new 2008 EPA standards, the Prius dropped to 48 city and 45 highway mpg. But remember, this is still the best in its class, and is probably what the sticker should have listed in 2007. Other comparable vehicles for fuel efficiency were the Honda Civic Hybrid (in 2007, 49/51; in 2008, 40/45), and the Toyota Camry Hybrid (in 2007, 40/38; in 2008, 33/34). (www.fueleconomy.gov) For trucks, the Ford Escape Hybrid led the pack with 36/31 mpg, followed by the Mercury Mariner Hybrid at 32/29 mpg. (www.edmunds.com) (1)

An important caveat

The buyer who truly wants a car that leaves the least footprint should consider every facet of the fuel-efficient car propaganda, because nothing is ever as it seems, right? Take the Toyota Prius – great mpg, looks pretty good, much better for the environment than, say, a Pinto – right? Well, maybe. If you, the buyer, truly want to be “green,” there’s something you should know. The Canadian plant that makes the batteries in the Prius (the special batteries that allow the Prius to have that awesome mpg and SmartWay rating) pours out poisonous sulfur dioxide fumes that have so totally destroyed once beautiful terrain that it looks like the moon’s craggy surface – astronauts use it to test vehicles slated for lunar exploration. That’s not very green. On the other hand, the Ford F-150 plant is pretty damn green. Sedum on the roof filters rainwater, and the plant boasts several energy-saving techniques. The Ford F-150 may have lower fuel-efficiency rating, but it isn’t destroying the environment around the plant like the Toyota Prius plant. (www.edmunds.com)

Are they safe?

Another concern of people tempted to buy a hybrid may be the safety of these vehicles. Many of them are much smaller than your average car and may give green-minded people nightmares about driving in rush hour traffic surrounded by huge SUV’s. The Toyota Prius, the smallest of the “mass market” hybrids, has a surprisingly good crash test rating. (www.motortrend.com) The Prius receives 5 out of 5 for side impact collisions and 4 out of 5 for front end collisions. (www.motortrend.com) This is comparable to similarly sized gasoline compacts and even better than some of Toyota’s other gasoline models such as the Matrix. (www.motortrend.com) The bottom line on most of these cars is that they are as safe (sometimes safer) than their purely gasoline-driven counterparts.

However, what about the really “green” (and small) cars? The Smart Car, available from Daimler Chrysler and available for sale nationwide in the U.S. beginning in 2008, is very small. It is a mere 8.8 feet long and 5.1 feet wide. (www.smartusa.com) The web site boasts that you can fit two of these cars in one parking space! (www.smartusa.com) So, they are small, but are they safe? As the owner of a small car myself (a Toyota Corolla, which measures 14.85 feet long and 5.57 feet wide, www.toyota.com) and the typical skeptic, I jumped at the recent chance to test drive one of these funny little cars during a national tour stop in Tulsa. As my partner and I had already decided on this paper topic, I took the test drive very seriously, asking questions and taking notes. The promoters assured me that the car had many advanced safety features, such as the “tridion safety cell” (which basically means the entire passenger compartment is made from a unified steel cage). While the SmartCar was fun to drive around city blocks, I think I would be a little nervous to drive this glorified golf cart down the expressway next to a tractor trailer rig. However, because I live downtown and do most of my driving in town, I could see myself in this little car, it definitely has enough “get-up” for city driving and I would always be able to find a parking space!

Cost

Everyone wants to help save the environment right? But can the average American afford to go green? The SmartCar, mentioned above, is surprisingly affordable. The base model starts at just $11,590, making it one of the cheapest new cars, green or otherwise, available for purchase. (www.smartusa.com) However, most hybrids are much more expensive than their counterpart gasoline models. For example, the 2008 Honda Civic hybrid has a base price of $22,600 and gets 45 mpg, while the base price for the gasoline model with the same features is just $15,810 and gets 36 mpg. (www.motortrend.com) (www.automobiles/honda.com) So, is the initial difference of $6,790 worth it? Well, $6,790 worth of fuel in the gasoline-only model would get you 90,869 highway miles, whereas in the hybrid, it would get you 113,587 miles, and save you from burning 504 gallons of gasoline, which according to the estimates from above keeps you from emitting 10,080 pounds of CO2 into the air. (Author calculations using the current gas price of $2.69 per gallon). In addition to the gasoline savings, almost all hybrid cars qualify for a federal, and in some cases state, including Oklahoma, income tax deductions. The federal tax deductions range from $650 to $3,150 dollars depending on the model. The above mentioned Civic qualifies for a $2,100 federal income tax deduction. (www.hybridcars.com; www.irs.gov)

Bottom Line

The hybrid cars are as safe as pure gasoline models, comparable in price, and have far better fuel economy, so the big question is why everyone isn’t buying them. We think the answer to that question, is they will. (Some of these cars/dealerships even have waiting lists, see www.smartusa.com). Remember, the hybrid car has only been available nationwide in the U.S. since 2004 (the first models, introduced in 1999, had only limited availability). (www.motortrend.com) It seems that as the fuel efficiency, options, and availability of these cars increase, so will their sales. The bottom line is to find the car that fits all of your needs: price, safety, reliability, and “greenness.”

1. Author’s note: there are several great websites to visit for research. Consumer Reports gives the reader a very comprehensive list of fuel-efficient car ratings, including top lists of vehicles tested by their researchers. The EPA’s website is also a great place to get the scoop on past, current and future fuel-efficiency ratings, and includes tips and information from the basic to the technical. Dan Edmunds, mentioned above, heads a terrific website for the technically unsavvy buyer. Mr. Edmunds is the Director of Vehicle Testing, and his articles are informative, and his research is broken down into easy to navigate lists of efficient vehicles.

The Ultimate Tipping Guide

Written by Brett McKay

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Skipping out on a tip is not frugal. It’s cheap. Not sure when it’s appropriate to tip or how much you should tip in certain situations? Here’s your ultimate guide on how to tip. (Note: Tipping guidelines differ from country to country. This guide is intended for those who will be tipping in the United States.)

Traveling

  • Housekeeping at the hotel. A good tip for housekeeping is between $2 to $5. Don’t just leave cash on the nightstand. It might not be clear to your maid that the money is for them. Make sure to leave the tip in an envelope marked for housekeeping.
  • Tour guide. Tip between $1 to $5 per person in your group.
  • Skycap or bell hop. $1 to $2 per bag they lug for you. If you’re running late and the skycap books your luggage to your plane so you can get their on time, bump up the tip.
  • Doorman. Only tip the doorman at a hotel if he gives you a hot tip on the best places to eat or visit while in town.

Personal Services

  • Massage Therapist. Give 10 to 20 percent of the total cost.
  • Nurses. Usually tipping nurses at hospitals are not permitted, but don’t tell that to my wife’s grandma. She’s a retired nurse and believes you should definitely tip nurses and other health assistants. Any time she’s at the hospital you can guarantee she’s getting the best service because she gave her nurse “la boost.”
  • Garage parking. $2 for your car. When you valet park, tip the person who brings you the car, not the person who parks it.
  • Baristas/Smoothie Makers/ice cream scoopers. It seems like all these types of establishments have tip jars now a days. Spare change is always appreciated. If the barista starts making your order as soon as you walk in so that its ready for you by the time you get up to pay, tip a little extra.
  • Hairstylist. Tip 15% of the cost of the haircut.
  • Takeout. If you order takeout from a restaurant make sure to tip the cashier a bit. While they weren’t waiting on you hand in foot for, they did have to bust their butt to get your order together and ready. If they help you take your order out to the car, tip a bit extra.
  • Car washer. $3 bucks is good for a basic car wash. If they take extra time in your detailing, give 10% of the cost of the wash.
  • Manicure. 10 to 15% is a nice tip.
  • Tattoos/body piercings. 15% of what the total cost is. If the tattoo artist does an amazing job of capturing what your mother looks like on your arm, tip extra.
  • Tow truck. It depends on what services the person provides. If they jump your car or change your tire, tip about $4. If they tow it, $5 is good tip.
  • Bagger at the grocery store. Now a days people no longer tip grocery baggers. It’s not necessary, but definitely a nice gesture. $1 is a good tip.

Delivery Services

  • Newspaper deliverer. During the holidays, give them a card with $20. My in-laws do this every year and as a result, they have their paper delivered straight to their door instead of just thrown on the driveway.
  • Pizza/Meal delivery. 10 to 15% is customary. If the weather is bad, i.e. there’s snow and ice or a tsunami, tip extra.
  • Furniture/large appliance delivery. $5 per person. If they stick around and help you assemble or rearrange your furniture, tip extra.

Out On the Town

  • Waiters. 15 to 20% is customary. If they do an exceptional job, pay more. If you come in with a large group make sure to ask if gratuity is added into your check so you don’t tip them twice. (Of course, as a former waiter, I always appreciated it when someone give me a little extra in addition to the gratuity.)
  • Bartenders. 15 to 20%. Again, if they do an excellent job give more. If you come during happy hour and down 20 $.99 cent draws, don’t just leave 15%. Bartenders have to bust their butt to get those things poured for you and deserve more than just your change.
  • Casino. There lots of people you could be tipping at a casino. First, you have cocktail waitresses. 15% is customary. Many people tip dealers when they have a successful run.
  • Taxi. Standard tip is 15%. If they get you to your destination quickly, tip extra.

Holidays

During the holidays, it’s customary to give a little more for the everyday services we receive. Here is just a short list of people you should consider giving “la boost” to during the holidays.

  • Mailman. It’s against federal law to tip to federal employees, but they can accept gifts of less than $20. During the holidays, give your mailman a non-monetary gift valued at less than $20. Baked goods are always appreciated.
  • Garbage/recycling man. These guys have a dirty job, recognize their work around the holidays by giving them a tip. $10 per person is nice. You can also just give gifts.
  • Teachers. If you have kids in school, its usually customary to give their teacher a small gift at Christmas time. It doesn’t have to be big. I remember when I was a kid, I usually gave candles.
  • Babysitter. A gift in addition to their normal pay is nice. Gift cards are always appreciated.
  • Cleaning person. An extra week’s pay or a nice gift.

Can You Afford An Emergency?

Written by Brett McKay

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Sure, you know you should have an emergency account, but are you actually doing it? I’ll admit I’ve been one of those people who has known, but hasn’t acted. My wife and I have done a great job living within our means; however, for a time, we failed to build up a cushion in case something unexpected happened.

As is always the case, something always happens when you least expect it. We’ve had several instances where an emergency has happened, but we didn’t have the money at hand to pay for it. For example, we had the windows on our car broken by burglers and had to replace three tires.

We’ve learned from our mistakes and have started an emergency account. I feel much more comfortable knowing if an emergency strikes, it won’t pinch us as much financially.

Are you ready for these common emergencies?

Emergencies come in all shapes and sizes. Some are huge (like a car accident) and others are small (like replacing your tires). But even the small ones can hurt (especially if you’re a poor student). Here’s a short list of common emergencies that can definitely hurt your pocketbook.

  • Replacing four tires on your car. Look to spend about $450 for that.
  • Trip to the emergency room. I had to go to the emergency room last spring and it cost about $300 for the visit.
  • Replacing break pads: $450
  • Filling a cavity. Without insurance- $145. With insurance- $90.

How to set up an emergency account

First, determine how much money you want in your account. Most experts agree that you should aim for three to six months of basic living expenses. Figure out how much you spend each month and multiply that by three. That should be your goal. It may look overwhelming (especially if you’re a broke student like me), but I promise you that you can reach that goal. It will just take some time.

Second, open up an account. I suggest getting an ING Electric Orange checking account for two reasons. First, it has a nice 3.5% interest rate. That’s better than a lot of banks’ savings account interest rate! Your emergency fund will be growing even when you don’t put anything in it. The second reason is that it gives you easy access to your money when you need it. An ING Electric Orange comes with a debit card, so whenever an emergency hits, just whip out the card. The last thing you’re thinking about in an emergency is transferring money from savings to checking.

Third, set up an automatic savings plan. Decide how much you can afford each month to set aside in your emergency fund. It doesn’t have to be much. Just get started! Once you decide, set up an automatic deduction plan from your checking account to your emergency fund. ING makes this super easy.

Simple ways to save for an emergency fund

If you want to reach your savings goal, you’ll have to find more ways to save money. Here’s a quick list of easy things you can do to start saving money for your emergency fund.

  • Brown bag it. Instead of buying your lunch everyday, start bringing it from home.
  • Cut the cable. By getting rid of cable you can save about $50 a month.
  • Entertainment. Instead of going out to eat and seeing a movie, stay in and cook a meal and watch a movie you checked out from the library.

10 Personal Finance Blogs You NEED To Subscribe To

Written by Brett McKay

Knowledge is power, so part of my plan to take charge of my finances is to read up on personal finance. You could read some personal finance books; unfortunately most of them suck. That’s why I get most of my personal finance info and tips from personal finance blogs. There are hundreds of them, but only a few consistently provide amazingly useful content. Here are the 10 personal finance blogs you need to subscribe to by RSS feed or email.

1. The Simple Dollar. Trent cranks out tons of content every day. And it’s all good! To give you an idea of what kind of content to expect when you subscribe to The Simple Dollar check out Trent’s One Hour Finance Series. Subscribe to The Simple Dollar by RSS Feed or Email (visit the site to sign up).

2. Get Rich Slowly. There’s a reason Get Rich Slowly has over 30,000 subscribers (30,000!). J.D. takes the intimidating topic of personal finance and makes it approachable for any person. Which high-yield savings account is best? is a great example of what to expect when you subscribe to Get Rich Slowly. Subscribe by RSS Feed or Email (visit the site sign up).

3. The Digerati Life. I like the Digerati Life because 1) the author is a woman and we need more women personal finance bloggers and 2) the topics she chooses to write on are always engaging. Should You Quit School Because You’re Brilliant? is a great example of her writing. Subscribe to The Digerati Life by RSS Feed or Email (visit their site to sign up.)

4. Clever Dude. The Dude has been in my Google reader for quite some time now. Not only does The Dude write about money, he writes about how money affects relationships. As a fellow young married person, I can relate to a lot of what The Dude writes about. For example, Examine Your Motives:Having Kids was extremely relevant to my wife and I as we have discussed whether to bring Little Frugal Law Students into the world. Subscribe to Clever Dude by RSS Feed or by Email.

5. Wise Bread. Wise Bread is one of the few group personal finance blogs out there. As a result, they are able to produce tons of quality content on a consistent basis. Wise Bread runs the gamete on personal finance topics. Remove car dents quickly and cheaply and Socially Responsible Investing Goes Green are examples of what to expect from Wise Bread. Subscribe to them by RSS Feed.

6. Money Smart Life. I like Money Smart Life because of the writing style and the topics covered on the blog. Not only does the author focus on how to manage your money, he also focuses on emotional and psychological aspects of money management without sounding cheesy. For a great example, see Money Isn’t Everything. Subscribe to Money Smart Life by RSS Feed or by Email.

7. Money, Matter, and More Musings. What’s great about Money, Matter, and More Musings are its longer posts. While short tips posts are nice, it’s always a treat to go in depth into a topic with the author at Money, Matter, and More Musings. Looking At Life With A Stock Market Perspective was a recent fun read. Subscribe to Money, Matter, and More Musings by RSS Feed or Email (visit the site to sign up).

8. Boston Gal’s Open Wallet. Boston Gal is another great female personal finance blogger. Her posts are always informative and entertaining. She also keeps us abreast with the latest deals! See 401(k) Loans: At Your Own Risk for an example of Boston Gal’s most recent work. Subscribe to Boston Gal by RSS feed or by Email.

9. I Will Teach You To Be Rich. Besides founding and running PBWiki, Ramit Sethi also finds time to run an outstanding personal finance blog. Not only does Ramit focus on personal finance, he also writes about how young people can develop entrepreneurial skills that can help them earn more money. Check out Conscious Spending: How My Friends Spend $21,000/yr Going Out. Subscribe to I Will Teach You To Be Rich by RSS Feed or by Email.

10. Getting Finances Done. Getting Finances Done took the productivity idea behind Getting Things Done and applied them to finances. I like GFD for its articles on the technicalities in managing your finances. I’m always fiddling with how I keep track of my budget. GFD has done a great job in giving me some guidance. Check out Applying GTD Principles to Your Personal Finances Part I and Part II. Subscribe to Getting Finances Done by RSS Feed or by Email (visit the site to sign up).

What personal finance blogs do you all subscribe to? Drop a line in the comment box.