Sneaky Ways to Save Money

We all know that saving money is hard, especially given the way the economy is going. It’s always the same thing. We say we’ll save on the next raise or when the car is paid off, but we never do. Savings has become something that we do when all of our other bills are paid off and, unfortunately, that’s not working for us. The reality is that there usually isn’t anything left over after we’ve paid all of our bills so we have to change our mindsets in order to achieve any savings.

Now, I say we because I have been guilty of this in the past. I’m very good at maxing out my contributions and then some to my retirement accounts; however, I’m not always so good with my liquid savings. Ideally, you want about six months worth of expenses saved, just in case. And in an economy where the job market is so uncertain, this really becomes important.

Now then, how do we build up a savings account and not feel the crunch anymore than we already do? Here are some tricks I’ve tried that have worked for me (and, they’re working for other people too because Bankrate.com posted a similar article about sneaky practices.)

1.) Treat your savings like a bill

I personally set my savings account up as a bill in my online bill pay that is automatically drafted every pay period. I tried having my employer just take a portion from my check and deposit it to savings, but that didn’t work because in my mind I still had that money. Thinking of it as a bill changes my perspective. I don’t think of that money as mine anymore. It belongs to the savings account. Ok, so technically it’s still mine; however, since I changed my mindset I haven’t pulled from the account like I would before when it was just a transfer from my paycheck.

2.) Live at least one raise behind

When you get your next raise, don’t include the extra money in your budget. Put that money in savings. You’re already used to living on the old salary, so instead of increasing your spending put the extra money away for a rainy day. Then, on the next raise, increase to what the previous raise was and put the rest away. You live behind the raises and it will help you spend less than you make, plain and simple.

3.) Get cash back

Anytime you go shopping and you’re asked if you want cash back, say yes. I know, I know. That sounds very defeatist to what we’re trying to accomplish, right? Not really. You’re not going to spend that money. Take and make a deposit to your savings or put it in a piggy bank you can stash away in your home. Don’t just leave it in the account and think you’ll transfer it because that rarely works out. Plus, as cash back you count it as part of the original purchase and then forget about it. Pretty sneaky, huh?

4.) Fast Food Jar

This works a lot like a curse jar where you add money when you curse. Every time you eat out at a fast food restaurant, add a dollar (or whatever amount you prefer) to the jar. This works on two things at once, if you think about it. If you eat out a lot, this method is going to show you just how much. Each time you add the dollar (or whatever you chose) you’ll see that jar building up with money. It’s great for your savings, but it’s going to make you really consider eating out. It does require some discipline, though. You can’t commit to this and then cheat because you don’t want to pay the jar a dollar. If you don’t think you can do this one, I recommend choosing other methods!

5.) Start your own laundry mat

Put a jar over the washer and dryer and each time you use either, add a quarter. Like the fast food jar, you have to be committed, but it’s a great way to see your savings add up. Once the jars are full, take them to your bank or local grocery store and exchange them for larger bills TO BE PUT DIRECTLY INTO SAVINGS.

Can you think of any other sneaky ways to save?

Popularity: 2% [?]

Need a Holiday? Try House Swapping!

Want to take a vacation, but the funds are too tight?  Try house swapping!  There are several variations of house swapping, but the main idea is that two parties agree to swap houses for a vacation. Besides the massive savings of not having to rent a hotel room, many times a swap includes the use of the family car and appliances.  This means you can save even more money by not having to rent a car or go to a laundry mat.   

So how does this work?

There are websites designed for house swapping.  A good one to try is Homelink.org.   For a $110 fee, you can advertise your home, with photos, in a directory and on the websites for twelve months.  This membership gives you access to the member-only WebPages.  For an extra $60 you can receive a print directory of the available homes available.  Intervac.com is another good site to try. 

Members of a house swapping, or house exchanging, site look through the prospects until they find one they are interested in.  Contact is usually made through email.   Then, the prospective swappers decide if they would like to do an exchange.   Your chances for finding a decent swap are higher if you live in a popular area.  If you live in a nondescript town in the middle of nowhere, find all the positives you can about your area to make it more desirable for a swap:  What makes your town unique?  Is there an interesting festival or event in your area?  Are there recreational activities within a short drive?  Do you have a great house to offer? House exchanges can be for any agreed-upon amount of time, but typically last about two-to-four weeks. 

Sounds great:  Free lodging, free car rental, and I can do my own laundry – (wait, is that a plus?) 

So, what’s the catch?  

Remember, it’s a house swap so while you’re enjoying the comforts and amenities of someone else’s home, strangers may be sitting in your favorite Lazy-Boy enjoying the game on your big screen television and using your – ahem – lavatory.   However, the upside is that having someone living in your house while you’re away is that your house isn’t left vacant, which can attract burglars.  With a little extra negotiating, you might even be able to have your fellow house swappers water your plants or feed your animals.    

Experience your vacation destination as a local

A bonus of house swapping as opposed to getting a room in a hotel is that you can live like a local.  When you lodge in a hotel, you’re usually surrounded by the “tourist traps”.  On the other hand, living in someone else’s house might put you in contact with different experiences, such as meeting the local people discovering their favorite hangouts.   

Is it safe?

You might worry about a stranger rifling through your belongings or doing damage to your property.   Fortunately, reports of such activity have been rare.  Most complaints seem to center around housekeeping issues.  You always want to have your house spotless for your guests, and you’ll want to leave your vacation house in top-shape for when the owners return.  You’ll also want to lock up any valuables for safekeeping while you’re away.   You and your fellow swappers will want to sign an agreement to work out the details:  What is included in the swap and who’ll pay for incidentals, such as long-distance phone calls and use of food items. 

House Swapping: A great way to vacation!

Have you had your eyes on traveling to see the castles in Europe or the Hawaiian volcanoes, but thought it would be too expensive?  Try house swapping; you’ll save a lot of money – and have a great experience.   

Popularity: 2% [?]

Auctioning Debt to the Highest Bidder?

If you haven’t heard the news buzzing around about auctioning off debt on eBay, allow me to fill you in. A woman in Erie, PA tried to auction off her debt, totaling $103,245.11. She listed out what her debts were and offered the winning bidder the choice of keeping her house and car. She even went so far as to inform the bidders that they could turn around and sell her possessions to get a return on their money. Very thoughtful of her, wasn’t it?

I give this woman points for creativity, but I have to say, I find it incredibly irresponsible of her to attempt an auction of her debts. Number one, what is that telling her children? While she likely didn’t intend for it to impart a negative lesson, the whole ordeal does suggest that it’s ok to run up your debt until you can no longer afford it because other people will take care of it for you. Number two, this was her debt and she’s trying to give it to someone else. I guess she missed the statistic that America is $900+ billion dollars in debt with the average American family contributing well over $8000 to that debt. Other people have their own problems to worry about.

But, this got me to thinking about debt and how we handle it in general. So, I called up my grandparents and asked what they thought. My grandmother snorted and said that in her day you didn’t talk about your debts with other people. You saved and penny-pinched until you could pay it off. You made arrangements with your debtors and you stuck to the agreement, plain and simple. My grandfather put his two cents in, as well. He said that he believed it to be a difference of generations. His generation didn’t really run up a lot of credit because they usually just paid cash for everything. On the off chance that there was quite a bit of debt built up, most people took a second job or did odd jobs until they paid it off. In today’s society, people just get bankruptcies.

And that brings me to my next issue with people and their debts. Bankruptcies!

It is my firm belief that there are VERY limited situations in which a bankruptcy is appropriate. A single mother working three jobs with medical bills stacking up I would say is a legitimate reason to have a bankruptcy. However, a friend of mine, also in the banking industry, has a couple that she’s worked with on various things for over 15 years. Since my friend has known this couple they have filed two bankruptcies. She got curious one day and asked them why they had filed twice when they seemed to be making enough money to cover their bills. They told her they had filed every 7 years since they were 30 because they were working the system.

Every 7 years this couple got rid of their debt and never had to pay it back (mind you, this was before the new bankruptcy laws) and they’d get new credit within five years; completely free to run it up in two years time only to file and start the process all over again. That’s just irresponsible and somewhat greedy, if you want to know the truth. There’s no good reason to file a bankruptcy if you don’t have to. And this couple could have been fairly well off. The husband was an engineer and the wife was an RN at a major hospital. Frankly, I rather like the new bankruptcy laws. If responsible individuals have to pay back their debts, so should everyone else. I’m ok with some sort of structured settlement to reduce fees and the like. Everyone needs a break sometimes. I’m not ok with people working the system to run up tens of thousands of dollars in debt and then just get to start all over again every 7 years, never paying anything back and keeping everything they’ve bought.

Call me old-fashioned but I believe people should be held accountable for their debts. I believe they should have to struggle and learn because only then do they grow as individuals. People who struggle through the hard times have a better understanding and appreciation for the things they have in life. Offering these easy-out solutions to their financial problems doesn’t help anyone in the long run.

Ok, stepping down from the soapbox, now.

Tell us what you think. Are these solutions an appropriate way to handle your debts?

Popularity: 4% [?]

Arm your Children with Financial Knowledge

There’s a saying that goes, “It’s not how much you make, it’s how much you keep.” My kids are pretty creative when it comes to making money – they have the entrepreneurial American spirit. However, I would like them to learn how to keep their money – or better yet – how to make the money they make grow.

In today’s world, there’s not a whole lot of teaching about how to keep money. We are surrounded by advertisements enticing us to buy the latest and greatest gizmos. Kids are often the most targeted. Think about it: Companies know that teens have jobs and they don’t yet have the financial responsibilities of an adult. They have money to spend- and if you’ve spent any time at a shopping mall, you see the results of that advertising: teens with armloads of shopping bags. Lured. Baited. Caught. Trapped.

So much stuff to buy

The “keep up with the Jones’s” attitude is usually attributed to adults, but think of what children face each day. Your son goes to baseball practice and Gerald Gymsocks shows up with a new professional series mitt. The next day, half the team has a new mitt and a few of the kids even have expensive new cleats. Your son misses a catch and claims that if he only had “that new mitt”, or “if he wasn’t wearing those crummy old cleats” he wouldn’t have missed the ball. He might even get teased – and it doesn’t end there.

There is so much stuff that kids want to buy: cell phones, iPods, gaming systems, expensive name brand clothing, and as they get older, cars. We need to teach our children the importance of being satisfied with what they have so they can save for the future. If we don’t, they will get caught up in the “keep up with the Jones’s – kid version” and will want to spend every cent they get. If our children are armed with financial knowledge, they will be better prepared to withstand peer pressure - and might even start to feel sorry for their friends who are caught up in spending all their money on “stuff.”

The power of compound interest

Teach your children about the power of compound interest to help them understand the importance of saving early. The earlier children learn how to use this powerful tool, the more it can work in their favor. For instance, if thirteen-year-old Sally Savesalot puts $5,000 into a savings plan that earns her 8% interest, in twenty-years, that $5,000 will have grown to $23,305 – without putting in another penny! If the account stays at 8%, by the time Sally is sixty-five, that $5,000 will be worth $234, 508!

On the other hand, Patty Procrastinator doesn’t contribute to a savings account until she is twenty-six-years-old. Patty earns $5,000 for winning a Spam-eating contest and puts the money into an account at 8%, and leaves it there until she is sixty-five-years-old. When she is ready to withdraw the money, it has grown to $100,576 – which is a lot of money. However, Sally had earned more than double that amount with the same initial investment! If children can learn and understand the advantages of saving early – they can have the power of compound interest on their side.

Children also need to understand the other side of compound interest. I frequently make offhand comments to my kids when I see advertisements for “buy now, pay later.” I always have to add, “Yes, you can have it now, but it will take you forever to pay it off, and you’ll end up paying at least double or triple the amount.” My kids have heard me say it plenty – and I don’t think they will ever want to buy now, pay later.

Financial knowledge early equals more financial security in the future

Sure, our kids will still want to buy those cool gizmos and gadgets every once in awhile – but they will also know that gizmos and gadgets break, go out of style, or wear out. If our children are armed with financial knowledge, they will be less tempted to buy stuff. They will be motivated to invest their money in order to secure a better financial future.

Popularity: 4% [?]

Teach your Children about Finances Part - II

Children and teens need more financial savvy as they get older.  They start earning more money and they have more expenses.   They are also ready for more depth in their financial education.  While it’s important to teach your children about finances, it’s also important to let them make a lot of their own decisions (within reason) about money.  Experience is a great teacher!  

1-  Help your child set some goals.  Discuss with your child some financial goals and write them down.  Post his goals in a place where he can refer to it often.  If your child has goals to work toward, he is less likely to squander his money away on consumables. 

2-  Help your child budget.  Get some sort of notebook or bill book to keep track of expenses.  My oldest son has a composition notebook that he uses to write things down.  Each month, he writes down all the expenses for the month.  He also writes down his earnings and he figures out where to allocate his money.  Any extra money goes into a savings account.   

You could also have your child save receipts to help track spending.  It can be a real eye opener to really see how much money went toward buying soda and potato chips!

 3-  Read and discuss good books on money.  There are lots of wonderful books about money.  Give a list of book options to your child and let him pick one to read.  Plan a date to discuss the book (you will need to read it too!)  I like to take my child out for an ice cream cone or for a walk in the park while we discuss the book.  Ask your child what he liked or didn’t like about the book.  What did he learn?  Did he agree with what the author had to say?  Try and pick a new book to read each month. 

Here are some of my family’s favorites:

•      Rich Dad, Poor Dad for Teens
•      The One Minute Millionaire   
•      Growing Money     
•      The Kids Business Book
•      If you want to be Rich and Happy, Don’t go to School 

4-    Play games together.  Games are a fun way to learn about money.  My kids especially like playing Monopoly.  Robert Kiyosaki’s Cashflow for Kids is another good one to play. 

5-  Let them pay for more of their expenses.  Kids learn best by doing.  Let your children pay for some of their expenses.  Once kids are in charge of paying for their own things, they learn how to be frugal in a hurry! 

6-  Teach your kids about investing.  Let your children do some research on different types of savings accounts.  Take them to a bank or credit union to discuss some different options with a financial advisor.  Teach your kids about the Stock Market and let them do some research on different companies. 

I recently found a simulation game online called The Stock Market Game designed to teach children to learn about investing.   Kids are grouped into teams and they “invest” play money on real stocks.  See if your child’s school would be interested in participating in the next simulation scheduled for October 2008.

 http://www.stockmarketgame.org/index.html   

As you teach your children about money, you will find that you have more financial savvy yourself. 

Popularity: 5% [?]

7 Ways to Squash your Credit Card Debt

Freedom.  It’s a wonderful feeling making the final credit card payment.  Unfortunately, the way credit card payments are set up it takes a long, long time to pay off debt – longer than you might think.  The credit card companies want their customers to pay interest as long as possible.  Payments are determined by a percentage of the balance; as the balance goes down, so does your payment.  While this might seem like a good thing for your monthly budget, it makes it hard to get your card paid off.  Credit card companies like it that way. 

Many credit cards require a minimum payment of 2% of the remaining balance.   If you have just one credit card with a balance of $2,000 at 18 % and you only pay the 2% minimum balance, it will take you about thirty years to pay off and you will pay over $5,000 in interest!   That should be enough to get you motivated to Squash your Credit Card Debt!     

Rule:  Always pay more than the minimum payment.  Any extra money you pay on your credit card bill will go directly toward your balance, instead of the interest.  

But I can barely afford the minimum payment.  How can I afford to pay more?

Let’s talk about some ways to get rid of the old ball and chain: your debt. 

1-    Use your Stimulus check.  Put as much as you can toward your debt.  Since interest is calculated on the balance, paying a chunk of your debt off quickly will lessen the amount of interest you pay. 

2-    Sell your stuff.  Go through your house and gather up anything you’re not using anymore and have a yard sale.  This can generate some quick cash for a good payment. 

3-    Shrink your entertainment budget.  Look for cheap or free dates and family outings.  Try free community concerts, picnics at the park, watching the sunset, or just taking a walk.  

4-    Cut down on treats.  Estimate how much money you spend on treats in a given week.   Get that money out in cash each week until your next credit card bill comes due.  Then put that money into the bank and put it toward your next payment. 

5-    Drive less.  Condense your driving into fewer trips where possible.  Sit down at the beginning of the week and plan what errands you will need to accomplish.  If possible, have one day where you take care of your errands.   Don’t go to the grocery store more than once a week.  This will save on gas, and on groceries. 

6-    Keep to the basics.  You probably need less than you think.  Think of the basics:  Food, clothing, shelter, medical, and necessary school or work expenses.  If you’re tempted to buy something that doesn’t fall into one of those categories, don’t do it.  Every thing you don’t buy equals more money to put toward your debt.  If it’s not absolutely necessary, wait.   

7-    Cook from scratch.  With the cost of groceries skyrocketing, it pays to cook from scratch.  Buy things you use often in bulk to save money. 

It’s worth the sacrifice to put extra money toward your credit card debt.  When that final bill comes due, and after you make the very last payment, take a deep breath.  Freedom.  

Popularity: 6% [?]

Why You NEED More for Retirement

This is going just a little off topic from the natural order of this blog, but I hope that you will indulge me. Given the state of the economy and the fact that EVERYTHING is going up in price, I felt it was a prudent time to address this situation. Plus, I just had a conversation with the most infuriating person in my life about why he doesn’t have enough for retirement….*groan*

So, let’s talk some specific numbers here. Realistically, how much do you think you’ll need in retirement? I had a conversation with a couple nearing their golden years the other day. Naturally we talked about retirement and they told me their financial advisor told them they would only need 70% of their current income because costs would decrease once they hit retirement. I told them to fire their advisor.

First of all, it is a myth that your expenses will decrease in retirement unless you do something drastic to make that happen. No longer working the 9-5 doesn’t magically make your electric bill go down. In fact, because you’re home all day, it’s likely to go up. People planning for retirement should ALWAYS plan for more than what they think they need. And if you still have credit card debt when you hit retirement age, guess what? That still has to be paid back. There is no magic pass that says you get out of debt just because you retired. Wouldn’t that be nice, though?

Back to specific numbers. Let’s take a look at how much it will cost you to eat in your retirement years:

Here’s to hoping you are one-half of a couple in retirement and both of you have got to eat. Most people like to eat three meals a day - I know some don’t, but in retirement, why not? The average meal comes to something like $8, but if you live in an expensive part of the country, you may want to calculate a higher number. Now, I like to eat everyday and I’m guessing most other people do, as well. So we’re talking 7 days a week and 365 days a year here. And, just for giggles, let’s say you plan to enjoy your golden years for at least 20 years. Now we have an equation….

2 people x 3 meals a day x $8 per meal x 365 days a year x 20 years = $350,400

Take a good, long look at that number. Now take a look at your 401(k) balance. Will you be able to eat once you reach retirement? Here’s something else to consider - this number doesn’t include anything but food. It doesn’t account for medical bills, living expenses, housing expenses, or any activities you dreamed of doing once you made it to retirement. And, just for good measure, let me remind you that this doesn’t take into account inflation either.

As of now, experts recommend that senior citizens have a minimum $220,000 saved for medical expenses alone to cover what Medicare won’t. Ideally, that number should be closer to $500,000 as expenses are expected to increase every year. So, with medical expenses, that puts you at a little under $3 million and we haven’t touched living expenses or entertainment. Remember those trips you wanted to take? Well, you can forget about it if you’re not fully prepared for retirement. The other option is to keep working all your life and rely on social security, which gets smaller every year and may not be around for much longer.

I think you can see why it’s important to adequately prepare for retirement. You may think these numbers sound extreme, but the reality is that they’re probably underestimated. Living on a fixed income is hard. You probably did it for years while you worked, living pay check to pay check. But you can’t afford to do that in retirement. I can’t stress enough how important it is to evaluate where you are with your retirement goals. You should be talking to your advisor at least once a year, preferably twice a year, to go over your goals and where you are. If you’re just contributing to a 401(k), then you should consider other options.

And don’t put off planning just because you think you have plenty of time. Start now! Couples in their 40s have to work twice as hard as couples in their 20s. The earlier you start the easier it is to reach your goals and live comfortably in your retirement.

So, are you ready?

Popularity: 9% [?]

What They Really Meant

We’ve posted before on the differences between banks and credit unions, but I’d like to take that a step further. A really big difference that I’ve noticed between the two is that while they say the same kinds of things to their customers, they really mean different things. Let me translate some things you may hear your bank or credit union say.

1.) Yes, we’d love to have your business here!

What they really meant: Yes, we’d love to have all of your money and if you don’t have money, then we’d love to earn fee income off of you!

Let’s think about this. Banks are held accountable by their stockholders so they need to be making money. Someone bringing in large amounts of money from elsewhere has provided new money that the CFO can now use to lend out and earn even money for stockholders through interest. If the new customer doesn’t have money and isn’t very good at keeping up with their account, then the bank earns fee income from all of the fees that the customer is charged. Either way is a win/win for the bank.

2.) I’m sorry that you’re account is overdrawn, but unfortunately we’re cannot waive any fees unless it’s bank error.

What they really meant: I’m sorry that you’re account is overdrawn. I wish I could help you out but my boss is a bit of a tight wad and won’t give refunds unless it’s bank error.

Each branch has a specific amount of money budgeted each month for refunds and many of the managers don’t want employees arbitrarily handing out money. Don’t fret though. In most cases, the employee is hoping you’ll ask for the manager because they genuinely want to help you, but are limited in what they can do. So, if you ever find yourself in such a position, ask to speak to the manager. ***Tip*** If you’re super nice to the employee and the manager, you’ll usually get some refunds (unless this is a habit for you, in which case, they’re going to start telling you no).

3.) I’ll be glad to assist you with that transaction.

What they really meant: I’ll be glad to assist you with that transaction.

Surprise! I know you were expecting some ulterior message with this response, but employees are generally happy to do what they can to help their customers. Think about it, you may hate your bank, but there are usually one or two employees that keep you there, if for no other reason than you subconsciously enjoy seeing them when you go in. ***Note*** Be sure to show your appreciation of them if you can. They’re overworked and underpaid, so the gesture will make their day!

4.) We’re just going to ask you a few questions and get you pre-approved for this (insert lending product).

What they really meant: We’re going to run an application.

I’m not suggesting that all banks do this, nor do I think it’s the norm. However, if you should run across this situation, be very careful; especially if you’re not interested in what they’re pushing. I left a bank because my manager did this and asked me to run the application. When the customer was declined he was more than a little upset by the fact that we had run an application when he was under the impression it was just meant to be a pre-approval. Just be careful is all I’m saying.

5.) When an employee takes you out of the teller line and says they can help you with your transaction.

What they really meant: I’m sorry to take you out of line but my boss is making me do this so I can sell you something.

Nine times out of ten, they can’t process that transaction themselves. They have to take it to the tellers, leaving you waiting. What they want is to see if there is anything they can sell you. For one of the banks I worked for, this practice was enforced with write ups if we didn’t do it. The top salesperson in the country was superceding his goals by 75% or more every month and he attributed his success to this technique. I suppose it’s not without its merit if it’s done in the customer’s best interest, but my problem was that it wasn’t always to the benefit of the customer. We pulled random people out of line, how could we know what their situation was? Maybe we can’t help them because they have everything they need. Or maybe there’s a no solicitation note on their account (yes, you can do that). Now we’ve just made them mad because they were pulled out of line when all they wanted was to make a deposit or withdrawal.

6.) Sign here next to the ‘X’ and your new account is all set up.

What they really meant: You agree to all terms and conditions set forth by the bank, whether you know about them or not.

There are a lot of terms and conditions that go into an account with a bank. Most of the time you don’t really think about it until something happens that seems out of the ordinary. For example, a bank that posts items as they come in as opposed to all credits before debits on a given day. That can have a huge impact on your account. Or a bank that posts debits in order from largest to smallest. If you run out of money in the account before all of the debits are paid, it is frustrating to have items under $5 returned or to be charged a $30 fee for them. That’s why banks give you the rules and regulations pamphlet when you open your account. Realistically, they can’t go over everything with you so there is some responsibility for you to understand your account. However, once you sign the signature card, you are fully responsible and unfortunately “I wasn’t told that” doesn’t go very far.

So let’s play a game. You tell me what your bank told you and I’ll tell you what they really meant!

Popularity: 11% [?]

Don’t fall into the ‘Rewards Trap’

Credit card rewards programs can be a great idea for some cardholders. If you use your card a lot then a good rewards program will give you cash back for every purchase, or points redeemable toward travel or merchandise through partnering merchants. Use your card, earn cash. Use your card, get an airline ticket. Use your card, get a bike. Sounds like a win-win situation, right?

Of course, it’s never that easy. Rewards cards sometimes have higher interest rates and extra fees, although a little diligence and perseverance on your part will probably result in you finding a nice rewards card without all the extra fees attached. If you have great credit, then it shouldn’t be tough to pull off at all.

So if you’re able to find a rewards card that doesn’t cost you any more than other comparable cards, what is the problem? Sometimes there is no issue with rewards cards; people use the cards, earn the rewards, and then cash them in for something useful. Other times, however, the rewards become a compelling factor for cardholders to spend, spend, spend.

Don’t use your rewards cards just for the sake of earning points.

You’re standing in line at the grocery store and you’re poised to pay with your debit card. It then dawns on you that by using your rewards credit card you will earn some points for the purchase. Your plan then becomes to use your credit card, but then go straight home and log onto your account so you can pay off the grocery trip.

“What an easy way to earn rewards!” you think, gloating about your cleverness.

The problem arises when you don’t pay off the purchase right away, and instead use the money that was earmarked for groceries in your checking account for something else entirely. Pretty soon you realize that all the grocery purchases, gas fill-ups, and little shopping indulgences you charged on your rewards card are all earning you rewards, but they are also earning interest…interest you have to pay.

The key to successfully using rewards credit cards is to keep everything in perspective. These cards are designed to compel you to spend more in an attempt to earn rewards. If you spend more than you can afford, you’ll carry a balance and therefore pay interest. When you compare the interest you pay to the rewards you earn, you’ll probably find that you would have been better off not using the card to begin with.

Not paying interest…now that’s a reward!

This is certainly not to say that rewards cards are evil. Quite to the contrary, a good rewards card can be quite a useful tool in the right hands. It’s much better to think of the rewards as perks or bonuses, and not as something that you should go out and earn. Once you get the idea in your head that you’re earning rewards by using your card, you’re poised to get yourself into some trouble.

A better frame of mind would be something like this: “How nice that the credit card company wants to give me small percentage of cash back for my purchases. I suppose that will add up eventually.” Try to think of it that way instead of, “I can earn free money from my credit card company! I’ll show those suckers…I’m going shopping!”

The credit card companies want you to get excited about the rewards they offer, and they want you to eagerly charge up purchases so you can earn more rewards. As far as credit card companies are concerned, in a perfect world you would shop like mad to earn points and then never cash them in.

Oh, and you would make minimum payments on that balance, too.

Find a good rewards card, but don’t get too wrapped up in the whole process of earning points and rewards. Don’t salivate over the potential reward points you can earn from a huge purchase, yet glaze over the fact that you can’t afford the purchase.

In other words, don’t fall into the Rewards Trap!

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Six Ways your Kids can Help out with the Budget!

Is the rising price of food and gas wrecking havoc with your monthly budget? Put your kids to work – after all, you use the gas to take them to soccer practice and they eat the food that you buy for the pantry. I’m not talking about having your five-year-old flipping burgers for eight hours a day (there are laws against such things, you know.) There are things that kids can do to make a difference in the monthly budget. Heck, even if your family is rolling in dough, it doesn’t hurt to have your kids do their part to help with expenses – it’s good practice for when they’re adults.

1- Let kids start paying for their “stuff”. If you’re at the grocery store and Junior begs you to buy him a lollipop, tell him that he is now in charge of buying his treats and toys. Make sure you also do plenty of teaching about the value of money and savings, but let Junior buy some of his own things.

As Junior gets older and starts earning more money, let him pay for more of his expenses. My oldest son has a cell phone and I don’t pay one penny of his bill. Let me tell you, he is real careful not to go over on minutes and his careful not to download too many extras - well, he doesn’t anymore. One month of paying $0.45 per minute because he exceeded his airtime minutes was enough to keep him careful about such things.

Kids can help pay for their own clothing. Parents don’t need to fork out $75 for designer jeans. You can give your child a set frugal amount of money for their clothing budget. If they want to spend money on expensive name-brand clothes, let them make up the difference.

2- Teach them to cook from scratch. In our busy lives, it’s all too easy to grab dinner at the fast food drive-thru. Convenience foods fill our shopping carts because, well, they’re convenient. Not only are fast foods and meals-in-a-box expensive, they are bad for our health.

It takes time to prepare healthy meals from scratch. This is where you can put your kids to work. Take some time to teach them how to make meals. My thirteen-year-old daughter is the bread maker of the family. This has saved us a lot of money. She makes five loaves at a time and we freeze any that we aren’t going to use right away.

Have your child wash and chop enough vegetables for the week. That way, you have vegetables ready for whenever you need them. Even the youngest child can help out. My two youngest children like to wash the lettuce in our salad spinner for our dinner salads. I have a friend that assigns each of her five children a day of the week to fix dinner. They plan what they will make in advance and then do all the cooking.

3- Assign your child to be on Utilities Patrol. Teach your child the importance of conservation. Let him look at the utility bills and ask him for suggestions for ways to lower the usage for the following month. Make it a game to see how much you can lower your utility bills. Play board games or read in the evening instead of watching television to help cut back on electricity. See who can get clean while taking the shortest shower to help save on the water bill.

4- Give your child a garden to take care of. Food is expensive these days, and a lot of the time, the quality isn’t very good. Let your children help plant and take care of a garden. If you have a big garden, maybe your children can each have their own rows or sections to take care of. I like to have raised garden beds. They’re easier for me to take care of and I don’t get as many weeds. It’s a great experience for a child to have his own garden box. Let them plan what vegetables to plant and show him how to take care of them. Growing vegetables is a great way for children to help with the family budget.

5- Let them come up with ways to save on gasoline. Brainstorm with your children about ways to save on gasoline. Could you consolidate trips? What about carpooling with friends? What about (gasp) walking? I saw some pictures recently of families traveling by large bikes in India. Some bikes had large baskets or carts attached to them for hauling the entire family. I got to thinking that having one of these family bikes wouldn’t be such a bad idea!

6- Have a family council. Sit down as a family and let your kids see how a budget works. Get the bills out so they can see how much money it takes to run a household. When it comes to miscellaneous expenses, get your children’s input. As parents, you have the final say, but kids usually come up with some great ideas. Tell them you have “X” dollars for the monthly entertainment budget and get their ideas on how to make the most of it.

There are many things that kids can do to help with the family budget and they will learn valuable life skills in the process. So, go ahead – put your kids to work!

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