Sulekha.com

Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.

There are a million articles on how to save more money, but how many of them contain advice you can actually use? We distilled the best advice we’ve ever gotten into five simple and universal truths.

1. The best way to save money is not to spend it. Even if you’re getting something on sale or at a great price, you’re still spending money. So when shopping for anything — from groceries to a house — make sure you really need it before you pull the trigger.
2. Learn how to comparison shop. For airfare and hotels, check multiple airlines at once using aggregate data from sites like Kayak.com. Check what interest rates different banks are charging on mortgages and credit cards on Bankrate.com. And before filling up your tank, find the cheapest gas in your zip code on GasBuddy.com.
3. Knock out impulse purchases. If “I just want to treat myself” is in your vernacular, add up how much a $5 nail polish, $10 iTunes album download, or $4 magazine costs you on a monthly basis. That may be enough to make you speak a different language soon.
4. Know when to buy used. Certain things — like mattresses and medicine — should always be purchased new. (Just whispering the words “bed bugs” in New York will cause many people to run screaming from you.) But there are plenty of normally pricey items — from jewelry to musical instruments to home decor — that can save you a bundle on great-quality stuff when bought used. Know what they are and get friendly with Craigslist and Kijiji.
5. Ignore the Joneses. Keeping up appearances when you can’t afford to puts you on the fast track to debt and financial insolvency. That may mean limiting your contact with people who live a faster lifestyle than you do, but a friendship with a competitive undercurrent is not a friendship you will miss.

Kaiser Family Foundation

The New York Times yesterday published a review of the Kaiser Family Foundation’s analysis of health-insurance premiums across the nation on its Prescriptions blog, which covers health-care issues. However, there is an economic fallacy lurking in its analysis worth pointing out.

The blog says:

If you live in Massachusetts or Vermont, the average monthly premium topped $400 a month in 2010, compared with just $136 a month in Alabama. The average across the country was $215 per month.

The authors of the analysis point out that some expensive states have higher insurance premiums because they make it easier for people with potentially expensive pre-existing conditions to get coverage.

The authors believe that the new federal health care law will probably reduce the variation in premiums, although they note that a state’s cost of living and overall cost of health care also contribute to the differences in premiums.

While it’s true that the Affordable Care Act will make premiums more uniform regardless of where you live, that idea is misleading. They’ll be more uniformly high — and covered up by subsidies for households between 133% and 400% of the poverty level, which puts the financial burden squarely on taxpayers. Additionally, the new law glosses over the reasons that certain states’ premiums are higher than average, like existing mandates for guaranteed coverage.

All of which leads us to question: “affordable care” for whom?

PerfectWeddingMag.com

If you’ve followed the conventional wisdom of making a budget to live within your means, you may think you can just kick back and reap the benefits, right? Not exactly.

There are a number of life changes that will require you to tweak or even completely redo your budget. Here are a few of the most important changes you can make to ensure your budget can adapt to major life events.

• You get a raise. You may be tempted to spend a chunk of that money on a bigger apartment or a fancy new car, but resist. If you allow your expenses to expand every time your income increases, you’re not any more secure financially than you were before the raise. Keep your monthly expenses the same, though, and your savings accounts will reap the benefits.
• You lose your job. When your paycheck evaporates, it’s time to tap into your nest egg. However, maintaining your previous lifestyle without an income is a fast way to deplete your emergency fund. What you need now is a [blank]-hit-the-fan budget. Strip down your spending to stay current on the essentials for survival (housing, utilities, food) and any debt obligations (student loans, minimum credit-card payments, and other loans) to keep your credit in good standing.
• You get married. When you legally become a two-income household, the IRS starts looking at your earnings in a new light. Sit down with your new spouse to make sure you’re paying the correct amount in taxes every payday to avoid an unhappy wedding gift from the taxman next April 15.
• You have a baby. Not a newsflash: Kids are hardly cheap. The Department of Agriculture calculates it costs $226,920 to raise a baby to adulthood. However, the early years need not be the most expensive. An infant doesn’t need dozens of toys, books, or expensive outfits (especially considering she will outgrow all of the above at record speed), and as long as it’s safe, he won’t care how much you spent on his nursery furniture. Resist the urge to splurge gratuitously on your new arrival. And here are some important other financial milestones to hit before Junior arrives.

MarthaStewart.com

Welcome to this week’s edition of our Tuesday Top 5, Econ4U’s weekly tips post to help you manage your money in five easy steps.

After paying for housing and utilities, the grocery bill is often the largest single line item in a household budget. So if you haven’t already tried these tips to shave dollars off the cost of feeding yourself and your family, they’re worth a shot.

1. Organic foods aren’t proven to be healthier. If you are on the organic bandwagon because of environmental reasons, that’s fine, but there’s no compelling health argument to justify paying more for organic. The Mayo Clinic says there’s no nutritional difference between organic and conventionally grown produce, so don’t feel bad about not paying the premium.
2. Don’t let a sale price entice you to buy something you don’t need. Remember: The easiest way to save money is not to spend it. Saving 20¢ on pudding still means spending two dollars that you weren’t planning to part with, so ask yourself first whether you really need it.
3. Plan your meals before you hit the supermarket. We’ve all been guilty of buying a nice piece of fish or a bunch of kale with the best of intentions, only to find days later it’s wilted and starting to smell up the fridge. Knowing what you plan to cook and when can go a long way to saving you from throwing away spoiled food.
4. Skip convenience foods. Pre-washed, cut, and bagged broccoli can be double the cost of a head of the cruciferous veggie. You’ll also pay extra for salad kits instead of lettuce and dressing, baby carrots over bunches, and pre-formed hamburger patties rather than a package of ground beef. Take the extra time to prep your food and your savings in the checkout line will add up.
5. The freezer is a budgeter’s favorite appliance. Buying the value pack of chicken breasts and the giant bag of peas is always smart because frozen meat and vegetables can keep up to six months in the freezer. Learn to read the cost-per-ounce section of every label to stretch your grocery dollar as far as possible.

PotteryBarnKids.com

While we can’t offer you respite from the heat wave oppressing much of the country, we can bring you good news of upcoming sales tax holidays to ease the burden on your back-to-school shopping budget. (Don’t have a household budget? This is a perfect time to create one and educate your kids about what all those new clothes, shoes, books, school supplies, and computers cost.)

Check out the following list to see if there is a tax-free shopping day coming to a state near you. (Live in Louisiana? Lucky duck!) And be sure to investigate additional discounts that stores may sponsor to coincide with the dates and get people through the door.

• Alabama (August 5-7): computers up to $750 per transaction, clothing up to $100, school supplies up to $50, books up to $30.
• Arkansas (August 6-7): clothing up to $100, no limits on school supplies.
• Connecticut (August 21-27): clothing and footwear up to $300.
• Florida (August 12-14): books and clothing up to $75, school supplies up to $15.
• Iowa (August 5-6): clothing and shoes up to $100.
• Louisiana (August 5-6): all purchases up to $2,500.
• Maryland (August 14-20): clothing and footwear up to $100.
• Mississippi (July 29-30): clothing and footwear up to $100.
• Missouri (August 5-7): computers up to $3,500, clothing up to $100, school supplies up to $50.
• New Mexico (August 5-7): computers up to $1,000, clothing up to $100, school supplies up to $15.
• North Carolina (August 5-7): computers up to $3,500, instructional materials up to $300, computer equipment and accessories up to $250, clothing up to $100, school supplies up to $100, sports equipment up to $50.
• Oklahoma (August 5-7): clothing up to $100.
• South Carolina (August 5-7): no limits on computers, school supplies, and clothing.
• Tennessee (August 5-7): computers up to $1,500, clothing up to $100, school supplies up to $100.
• Texas (August 19-21): clothing, backpacks, and school supplies up to $100.
• Virginia (August 5-7): clothing up to $100, school supplies up to $20.

(via the Federation of Tax Administrators)

In the first survey of its kind, the Pew Internet Project found that 35 percent of all American adults own a smartphone. (As Mashable.com points out, that means more people have smartphones than college degrees in the United States.)

The study found that 59 percent of people in financially well-off households (defined as income above $75,000) are smartphone users, which was expectedly high. But more surprisingly, 39 percent of people ages 18 to 29 with household incomes below $30,000 also own smartphones. And survey respondents were far more likely to describe their devices as “necessary” than as “expensive.”

We hope that all smartphone users are judiciously budgeting for data plans, which can add $30 or more per month to their bills (and that’s beyond the cost of the phone and a voice plan). But it seems to us that there’s a confusion of “wants” and “needs” going on here for many people — a problem that all too often leads to a lifestyle that goes beyond a household’s means.

Smartphones are understandably fun and convenient, but by and large they are not a necessity. If you are considering buying one, consider not just the cost of the device but also how much you will pay to operate it over its lifetime. While $30 per month for a data plan may not sound like much, that’s $720 over the course of two years. Is being able to Facebook on the fly worth that much to you?

CriticalMass.com

Despite the encouraging news that women in their 20s have more than made up the salary gap — with recent census data indicating that single, childless women outearn their male peers by 8 percent — women as a group are light years behind men in retirement savings.

Why is that?

For starters, as this Fidelity article points out, women live longer than men and are more likely to live alone as they age. But the bigger issue is that women in general tend to both save less and invest more conservatively compared to men, cumulating in a smaller nest egg that needs to sustain them for a longer period of time.

If you’re a woman who’s concerned about her future, here are some basic steps you can take to make sure you won’t have to eat cat food in retirement.

• Make long-term saving a priority, even if you’re out of the workforce. If you take time off to be a stay-at-home mom, make sure your significant other is funding a retirement account in your name in exchange for all that free child care you’re providing. Prioritizing his retirement savings at the expense of your own is one of the main reasons women are so much worse off financially after divorce or an untimely death.
• Start early and choose age-appropriate investment. When you have decades left before retirement, there’s no reason to stick to cash and bonds, which may not even keep pace with inflation. If you’re risk-averse, talking to a financial advisor can help you choose the right mix of investments that will give you a great long-term return with minimal sweating.
• Take an active role in the family finances. Stay on top of bank-account balances, quarterly investment performance reports, annual Social Security statements, pension protocol, and any other financial paperwork that details what income you are entitled to in retirement. Cultivating that knowledge will help you avoid unhappy surprises in your sunset years.

EveryJoe.com

In May, we brought you some of the lessons that having a summer job teaches teens who are working for the first time in their careers.

Now that summer is in full swing, the Christian Science Monitor has some more valuable takeaways from that first job:

• Getting to know tax forms and direct deposit. Having a paycheck will be most young adults’ first introduction to Uncle Sam. The Monitor encourages parents to help kids set up bank accounts if they don’t have them already, and teach them the value of living within their means. To this, we’d add our own article, “Pay Checks: Who Is FICA and Why Is He Getting All My Money?”
• Learning about plastic. Remember when swiping that first credit card with your name on it was a thrill? Rein in that youthful exuberance for spending by explaining the difference between debit and credit, and the importance of having enough cash to pay for your purchases — either now or at the end of the month.
• Making that first budget. Having a budget is not just for people with big household bills to manage every month. Teach teens to play around with budgeting software like Mint.com. With dozens of money-minded apps for tablets, smartphones, and other handheld devices, it can even be fun for young adults to learn about money management.

Zimbio.com

Pretend your brother has come to you with a problem: His credit score is shot, but he wants to buy a new car. He is asking you not for money but to cosign an auto loan for him of $20,000. You have a flawless credit report and you agree, but less than a year later, he defaults.

What does the lender do?

A.) The collections department exhausts every avenue of getting your brother to make good on his payments before approaching you for help.

B.) The collections department comes after you for the full amount of the debt, since you’re the one with the great credit history and probably the money to back it up.

See the answer after the jump.

The answer is B. When you cosign a loan, you’re agreeing to be on the hook for the entire debt. And unfortunately, the track record for borrowers is not great in the current economy.

The default rate on credit-card loans is currently 5.91 percent, with auto loan defaults hovering around 1.45 percent, according to the most recent S&P/Experian Credit Default Indices. Primary mortgage holders go into default at a rate of 2.16 percent, and second mortgages founder 1.51 percent of the time.

As financial columnist Megan McArdle wrote this week, “If you think that they really need the money, and that you’re not just helping someone dig themselves even deeper into financial irresponsibility, then my advice is to just give them the money.” And if you can’t afford to do that, then decline your loved one’s request to cosign — because a co-signature means taking on a risk you’d eventually be doing exactly that.

CamilaPaulucci.Wordpress.com

A new survey just published by the National Bureau of Economic Research found that 50 percent of U.S. respondents faced with a hypothetical emergency couldn’t come up with $2,000 within 30 days.

That’s not encouraging, America.

While funding an emergency account can seem like a low priority compared with paying monthly expenses, having access to cash sure beats having to put medical bills, car repairs, and other sudden, life-happens charges on a credit card. Then you’re not just contending with the emergency, but struggling to pay the balance and interest in the future as well.

Just something to keep in mind the next time you waver between saving and spending. Click here for our list of five situations where even a small emergency fund could save your hide.