Avoid overdrafts at all costs.

A recent Forbes article cited that in 2012, consumers in the United States paid $32 billion in overdraft fees.

If you didn't grasp that number, it's this: $32,000,000,000.00

A hell of a lot of zeros.

Avoid overdraft fees at all cost.  Trust me, I've been there got the T-shirt.  At one time, years ago, we were so overdrawn in our checking account that when it came time for payday, we ended up being less than thirty bucks in the black.  Luckily, I had a part-time job that was going to be paid the next day, but it was still very unsettling.

Overdrafts are like quicksand.  It's like a hole you can't quite seem to get out of without doing something drastic.

What did we do?  My wife and I sat down at wrote out a detailed budget.  We even quit paying on some of our bills so we could at least stay afloat.  Our three kids needed to eat and we needed gas in the car.  We cut what we could.  We've always been an advocate for eating at home, so we just bought more on sale and only what we needed.

We also quit using the checkbook for a time.  We literally put it in the freezer, and only took it out what we got it under control.

Then, we worked hard not to get back in that situation again.

What tricks have you done to keep yourself out of overdrafts?

My harsh reaction to a dangerous Motley Fool article regarding Dave Ramsey

Today I discovered a disturbing article regarding financial guru Dave Ramsey.  I discovered this as I was perusing his website and came across a half-hour radio interview with the article writer from the Motley Fool.

I give the guy kudos for at least agreeing to go on the show and debate his views, and I equally give Dave kudos for not ripping the guy a new one--something he sorely needed.

The article in reference on the Motley Fool site is listed here, and the basic gist of his argument is regarding the 12% average rate of return the stock market has done since the mid 1920's.  This supposedly causes people anxiety as they harp on with "Oh, you can't get 12% on your mutual funds!"

I have one word for this: bull.

The company I work for offers a 401(K) program, and in its mutual fund offerings I have four I am invested in.  The average in the last 3 years (the furthest back the data provides unless I view the prospectus), one did a little less than 10%, two were are 13%, and one did 16%.  I don't know about you, but that's a lot more than 12%.  Besides, I looked at the information Wells Fargo gave us and ALL of the information they state advised that the average rate of return was 12%!

And here's my greatest contention in response to the "foolish" article: WHO CARES!  You're splitting hairs and analyzing data to death, depending on how you want to look at it.  This is why I hate following politics any longer, because when the government spews out data for something, you can analyze it fourteen different ways to Sunday and come up with a different analysis--this depends on which political party is in power and which news program you're watching.

Take Ramsey's teachings of never having a car payment.  If you were to save for decades what you'd pay for in car payments, investing in mutual funds which have averaged 12% rate of return, it comes to 5-7 million dollars--and to top it off, Dave ALWAYS ends this statement with "And if I'm half right, you're still okay!"

I tried to comment on the Fool's article, but I could not without registering on their website--something I am not about to do.  Because of this, I will not EVER visit their site nor purchase any of their products.

(Oh, by the way, the guy who wrote the article had NEVER attended his 9-week Financial Peace University course, had NEVER read any of his books--except for a few choice article in the Total Money Makeover--and was not a regular listener to Ramsey's show.  I don't know about you, but if I was going to write an article trashing someone's views, I'd want to do a lot of research and read a lot on what that person said.)

Debt limits what you are able to do

Having debt (in any amount) steals away from your income.  In return, it also steals away what you are able to do.

You are not able to give more.

You are not able to buy more.

You are not able to save more.

Even if circumstances arise and you find yourself in need of cash (a recent funeral you need to fly or drive to, for example) you may not be able to do this if you have debt.

Years ago, a friend's father passed away.  Even though I was much closer to where the funeral was, I was still not able to make the one and a half hour trek to go to it.  Why?  Because I had to work and we had debt.  The work was a second job, which I needed in order to keep up with our expenses (which debt was a large part of).  I felt bad for not being there.  His father was a great man.  I only bring this up now because the same friend had to travel the 6+ hours this past week to attend a funeral and I thought of how I wanted to be there at his father's funeral.

Having a sizeable amount of debt has affected our life dramatically.  It has hindered what we've been able to do and even save for.

If you're in debt, create a plan to get out of it.

If you're not in debt, create a plan to stay out of it.

And stick to it.

If you're unsure about retirement planning, seek a professional

If you're sick, seek a doctor.

If your car is in need of major repairs, seek an auto mechanic.

Retirement planning is no different.  Seek a professional if you need advice on what you should do.

Professional retirement planners come, for the most part, in two major forms.  The first is a fee-based independent planner.  For a small fee (small is a relative term here), they'll go through your finances with you and offer advice on what you should do.  The second are planners who work for a company.  Typically, these planners are selling you on their products and take a small (another relative term here too) percentage of your overall portfolio.

Which is the best for you?  Honestly, it's up to you.  Interview 3-4 (or more) until you find one that you're comfortable with.

The Minnesota Cold Weather Rule is not an excuse NOT to pay your bills

The Minnesota Public Utilities Commission has offered a list of frequently asked questions regarding the Minnesota Cold Weather Rule.

Bottom line: the utilities company can still shut off your electricity if you don't contact them and set up some kind of payment plan.

There is even financial assistance available for those who qualify, so if you think you do please check them out.

Don't get stuck out in the cold this winter.  I understand the state of the economy may get you down, but if you don't take the appropriate measures you can find yourself without anything to keep you warm.

$1000 Target Gift Card . . . yes, it's another scam

Last night, I recieved a text message that I won a $1000 Target Gift Card.

Yeah!  Christmas gifts for all!

But wait . . . it told me I had to click on the Target Winner.com link and enter a five-digit code within the next 24 hours in order to claim it.

I thought, I have to . . . what?

Now, I fill out a lot of store surveys and I could've easily done one for Target.  But I don't recall ever entering my cell number.  Next step, Google!  Guess what I found?

IT WAS A SCAM!

Bottom line: if you get this kind of text message, delete it immediately.

Overwhelmed with debt? Try this simple 4-part strategy.

I know how it goes: you sit down for a meal and the phone rings.  Which creditor is it this time?  You are the epidemy of "so-much-of-the-month-left-at-the-end-of-the-money" and the "living-paycheck-to-paycheck".  Trust me, I've been there and got the T-shirt.  Not proud of it, and at times lately we're still struggling with that--hence the reason I posted a "Please Donate" button on my blogs.

Are you so overwhelmed with debt that you don't know where to start?

Dave Ramsey speaks on this often, and he mentions what he calls the four corners of your financial foundation.  This is about priorities--something my wife also reminds me of.  Would you let your kids starve but need to stay current on your Discover or Citi or Chase or American Express bill?  No way!  If you are unable to do anything else, it is recommended that these four areas be your focus.  And what money is left--if there is any--gets allocated to the debts.

The four corners are:

Food

Housing

Utilities

Transportation

Once these four areas are met, you will also start to feel better because it's idiotic to stay current on your credit cards when your house is close to foreclosure.  Set your priorities.

**Please keep in mind, the advice given above is only my opinion, and your situation may be different so it would be adviseable to seek legal counsel**

Always review your bank statement

This may seem like simple advice--always reviewing your bank statement--but we had an incident that recently bit my wife and I in the butt because we got out of the habit of doing this.  It's our own fault for letting it happen for more than a month, but no more.

This all stemmed from a company called AuraVie.

I'm not going to talk about the quality of their products and whether or not they do what they say.  What I'm going to briefly touch on is their business practices.

My wife, back in May, ordered some supposedly free samples.  Free for the products, but you had to pay shipping and handling.  In order to accomplish this, you needed to enter your credit or debit number--in our case it was debit as we do not have any credit cards and never will have them again.  Ever!  Well, lo and behold, they took it upon themselves to charge us $97.88 a month for a box of their skincare products.

We received them in the month of June--supposedly, I'm going to say, as we do not recall ever recieving them.

We also recieved them in July, just a few weeks ago.  This one we did get and I've since sent it back RETURN TO SENDER.  I have a video I'll be posting in a few days.  I'm waiting to see if they'll respond back to either the RETURN TO SENDER package and/or the contact e-mail I sent them.

Bottom line: always, and I mean always, review your bank statement.

As far as my quest with AuraVie . . . stay tuned.

I found an error on my credit report - now what?

You got your free credit report through the Annual Credit Report site and you found an error.  Now what?

This is fairly simple.  First, you send a letter to the credit bureau agency with the error (send this certified mail, return receipt requested, so you prove that you sent the letter) and explain the error.  From the moment they receive your letter, they have 30 days to either prove the accuracy of the entry or remove it completely.

Then, once the 30 days is up, the credit bureau should contact you with their decision.  If they prove the accuracy and you still know it to be wrong, you will need to contact the creditor directly to resolve it.

The yearly financial check-up

Once a year, it's a good idea to check your credit report.  You can get one from each of the three reporting credit agencies--Equifax, TransUnion, and Experian--by going through the Annual Credit Report site.

There are many places that say they can give you a free credit report, but the link above will take you to the official place.

You can either do it online, print out a PDF and send it through the mail, or call and request one.  You can get one once a year--or, if you want to spread it out, you can set a schedule and have one of the three done every 4 months.

An easy way to pay for your child's sports

Having grown up in a town where hockey is the predominant winter sport, there are tales of parents taking out loans at the beginning of the season just to pay for all of the equipment, fees, traveling, etc.  This isn't exclusively with hockey--although, I must confess, my son played hockey for many years and even though it's not in the same town as where I grew up, it's still expensive.  This can be for any of your child's activities.

What I suggest for those out there fighting this battle is this: start a sports fund.

The concept is simple.  Figure out what you'll need for the entire season (or even for the entire year) and split that total up by 12.  If you really want to get crazy, you could divide it by 26 if you get paid every two weeks, but going by a monthly budget, this works the best.

For example, let's say you figure out that all sports will cost around $2,000.

$2,000 / 12 months = $166.67 a month.

Okay, but what if your total sports costs around $5,000?

$5,000 / 12 months - $416.67 a month.

The importance of an emergency fund

The other day I was at the grocery store and I overheard the cashier talking with the stock boy bagging up my groceries.  She said that they're been without water in their house for three days (not sure why, as she didn't say and I--a complete stranger--didn't want to seem like a nosy prick).

The cashier went on to say that the plumbing company completely tore up their yard and their parents had to take out a $10,000 loan to pay for it.

Then a thought struck me: if they had an emergency fund, they wouldn't have to go into debt to pay for it.

This truly was an emergency, and it shows one small example of why it is important to have an emergency fund.

What is an emergency fund?

An emergency fund is a fund used for . . . emergencies.

The water heater goes out.

The transmission on the car dies.

Your right rear tire goes flat.

And the list goes on.

Emergencies are something that, if you didn't have the money saved up, you'd probably borrow it or put it on a credit card.  Not good!  The last thing you want to do in an emergency is get yourself into more debt.

Where do you put it?  In a savings account that is easily accessible but not too accessible.  You don't want it in CDs where there is a penalty for taking it out, and you sure don't want it in the stock market.  I probably wouldn't keep it under your mattress either.

You can also put it in a money market account with check-writing capabilities.

Keep in mind, this is for emergencies.  Not movie-night money.

Buying at a consignment store

Consignment stores are great places to look for bargains.

Clothes, electronics, bikes, books, etc. can all be had for mere dollars.

Simply put, if you're looking for something in particular, or are looking for a bargain on something, don't forget consignment stores.

Wedding dresses can also be had there.  When brand new dresses are several hundred dollars, these gently-worn bargains can be snatched up for around $100.

Is lending to a friend ever a good idea?

A friend may come over to borrow your new power tool, or a new movie or book, or even some kitchen utensil and we don't think anything of it.  But if it's money, then the entire interaction feels different.

Is borrowing money to a friend ever a good idea?

Many may be inclined to say "Of course, if my friend needs help."  But is borrowing the right thing?

The best thing for your friend is to look into why they're asking for money.  Did he/she get laid off and has been unable to find work?  Did they just find out a close family member has cancer and had to help out this family member, even though their own financial picture isn't all that bright?

If someone is in trouble, then just giving them money could be the best solution.  Otherwise, you'll be looked upon as a sort of banker to them and they know they have to pay it back.  And no friendship, if it's worth anything, is worth this.