How I Ditched Debt: Penny Pinchin’ Mom

Published: Monday, March 20, 2017 @ 8:00 AM

In this series, NerdWallet interviews people who have triumphed over debt using a combination of commitment, budgeting and smart financial choices. Their stories may even inspire you to pay off your debt.

A year before Tracie Fobes was married, she declared bankruptcy. It eliminated her debt, but by the time she and her husband had their first child, they’d accumulated $37,000 more debt due primarily to a home equity loan and two auto loans. Fobes said that until they began to have open conversations about money, she hadn’t realized why they had gotten into debt in the first place.

How I Ditched Debt: Penny Pinchin' Mom

Tracie Fobes blogs about her family’s debt repayment journey as the Penny Pinchin’ Mom.

The Missouri couple started their repayment journey in November 2007, and today, they’re free of all consumer debt. Tracie Fobes is a stay-at-home mom and now blogs about family life, money management, saving and finding deals at The Penny Pinchin’ Mom. Here’s their story.

How did you end up in debt?

Tracie Fobes: When our oldest was born, I quit my job to become a stay-at-home mom. This was something that was important to both my husband and I, so we knew it would make our financial situation tight, but it was well worth it. We purchased a brand new minivan right after she was born. At the time, I had another vehicle and owed much more than it was worth. That meant we had to roll that amount into the financing on our van. Our payment had to go up as result. My husband had a pickup as well. While it was a bit older, we still had to take out a loan to make the purchase, which contributed to our debt as well.

We also decided that it would be “smart” to pay for things we needed around the house by taking out a home equity loan rather than using credit cards. The interest rate was lower, but it was still a very stupid mistake on our part. We also had one small credit card that did not have much of a balance on it. We really never used cards too often, so we did not have to worry about that.

What triggered your decision to start getting out of debt?

I remember going to dinner with some friends one evening. While money was tight, my husband told me that I just needed to have an evening away from the kids. At the end of the meal, while most of us were using plastic to pay for dinner, my friend pulled out an envelope with cash. I asked her what the cash was for and she started to explain what they were doing and how they were digging themselves out from under their debt. In the back of my mind, I started thinking that if they could do this, why couldn’t we?

When I got home from dinner, I told my husband what they were doing. We knew that they made no more than we did. We began our research and within a week, we had started working on a budget and a debt plan. The rest, as they say, is history.

What steps did you take to reduce your debt?

We were a team. We knew we had to work together and be on the same page during this entire process, or it would not work. Our budget was 100% a joint effort. When it came to the debts to pay first, we talked it through and agreed as a team the path to take.

We both looked at what we could do to have money to pay off our debts. My husband decided to sell things he no longer needed. I took the approach of trying to reduce our budget, namely groceries. I began researching and learning ways to really save on the food we needed. In doing so, I began to share my findings with others. That led me to start my website, Penny Pinchin’ Mom, which also allowed me to make additional money that we were able to throw at our debt.

How has your life changed for the better since you got out of debt?

I wish that I could put the feeling into words, but I can’t. It is just something you have to experience. It is like happiness, relief, joy, calm and peace, all rolled into one.

We now have less stress when it comes to money. When the cost of groceries or fuel goes up, it doesn’t make us worry. Sure, we hate it as much as the next person, but it doesn’t really affect us negatively. We don’t worry how we will come up with more money to cover these increased expenses.

In addition, we can do the things we want. We took our three children on their dream vacation last summer. We spent more than a week in Florida doing all of the “kid” things such as Disney, the beach and Universal Studios. The best thing about this trip was that it was paid for in cash.  100% of it. No bills following us home after our trip. Our hard work and savings afforded us this amazing opportunity to do something amazing for our kids.

We also have less stress about job loss. There is money in the bank to cover us should that happen. When you remove financial stress from your life, you get to live the life you want. There is no better feeling.

Make your own ‘get rid of debt’ plan

If you have debt you’d like to eliminate, you’re going to need a plan of attack:

  • Start by stopping: Avoid adding to your existing debt or opening new accounts.
  • Next, assess what you owe and rank your debts from highest interest to low-interest or “good” debts, such as a mortgage payment.
  • Then, determine where you can cut spending and how much you’ll devote to paying off each debt. If you need some psychological motivation, try paying off your smallest debts first with the debt snowball method. Or you might prefer the debt avalanche method, in which you pay off your highest-interest debts first. This method is likely to save you the most money on interest and help you pay off your total debt faster.
  • Finally, make a commitment to stick to your plan.

As part of your larger payoff plan, consider consolidating your debts into one new debt with a lower interest rate. This can lower your monthly payments and even help you pay off your debt sooner. You can consolidate with a 0% balance-transfer credit card or a personal loan. Try using a personal loans calculator to learn about possible interest rates and monthly payments, according to your credit score.

Anna Helhoski is a staff writer at NerdWallet, a personal finance website. Email: anna@nerdwallet.com. Twitter: @AnnaHelhoski.

Better to give? 7 things to know about donating to charity as a holiday gift

Published: Tuesday, December 12, 2017 @ 11:17 AM

Nearly 7 In 10 Americans In New Survey Say They’d Give Up Giving Gifts This Holiday Season

If "Family Feud" featured "the top reasons you donate to charity instead of a Christmas present," these answers might pop up on the board: Ran out of time. Angry at recipient. Too much materialism. Really love the charity.

But would a family member or other loved one really appreciate these (mostly) noble efforts? Possibly if you’ve selected the right gift recipient among other things.

A donation to charity could become a bona fide Christmas present, according to Consumer Reports. "Giving to charity in lieu of, or in addition to, a traditional holiday gift has a lot going for it," the consumer watchdog noted. "It restores the idea that the holidays are about caring for and helping others. And it's a simple and elegant alternative to finding a gift for that person who has everything."

RELATED: The best and worst charities for your donations

Scott Galupo, a writer for The American Conservative, considers the gesture problematic at best.

"I'm not sure these are 'gifts,' properly understood," he wrote. "A gift by its nature is supposed to be selfless." A donation to charity, according to Galupo, "violates this principal virtue of gift-giving. It reflects attention back to the giver. A certain sense of self-righteousness underlies the whole enterprise. 'We all have so much already,' the giver says. 'I want to help the less fortunate.'"

But Galupo agrees with CR and other experts that there are times a charitable gift at the holiday is a good thing, just not for everyone or even most people.

These experts, including nonprofits that benefit from charitable gifts at the holidays, shared seven tips for donating a charitable gift at Christmas:

Make sure the recipient wants a donation. This means no passive donations made because a relative never reciprocates or you've learned they always return your other gifts on Boxing Day. "Not everyone will be happy with a charitable donation made on their behalf, especially if they're expecting a traditional gift," CR noted. "Consider asking in advance, even if it spoils the surprise."

According to experts at The Life You Can Save nonprofit, good indicators that a person might be open to a charitable donation in their name include prior complaints about owning too much stuff and being open to new ideas and charitable giving in general. In other words, if Uncle Mort prides himself on never donating a dime and has worn the same suit for 20 years, he's not a good candidate.

Combine a charity gift with another gift if needed. Sometimes Christmas is one of the very few times a recipient gets a nice or traditional gift. So if you've always given your Aunt Marge a new nightie at Christmas, you might need to continue that tradition or add a personal touch to the charity gift. Add a smaller but related present, like a sleep mask, for example.

Choose the appropriate organization. Start by noting which organizations your recipient already contributes to throughout the year, advised Galupo. "Maybe, instead of those mosquito nets, the intended recipient would appreciate a donation to her local parish; instead of that animal shelter, a battered women's shelter. Agreement, in other words, should not be assumed."

Make sure a donation doesn't involve an automatic rollover. The Life You Can Save blog noted that automatic rollovers are tough to keep up with, and you may inadvertently be giving the same gift for years if you're not careful.

Avoid charity gift cards. It's convenient to pay for a gift card that allows the recipient or loved ones to select from a list of charities they'd like to receive the money. CR criticizes this option in most cases. "We've seen handling fees of as much as $5, which would go to a charity if you donated directly," the media outlet noted. "There also can be mailing fees and additional charges when the recipient designates the group or groups to receive the money. There may be few or no local or regional groups." Last, a charity gift card might expire, returning the money to the issuer, not a charity.

Give a gift that gives back instead. You can also give a charitable Christmas gift that turns the gift-to-donation ratio upside down. There are numerous holiday gifts that involve goodies for your loved one and a little extra for a beneficiary charity.

Just a few recommended by Good Housekeeping include travel-size skin savers that also benefit victims of domestic abuse; a French-inspired tote with all proceeds going to making pregnancy and childbirth safe for women worldwide; and floral rain boots that turn 10 percent of profits to education initiatives.

Always check out any charity you plan to give to. A good place to start is Give.org, the "wise giving alliance" for the Better Business Bureau.

4 things to look for to get the best life insurance

Published: Thursday, November 23, 2017 @ 10:55 AM

One key factor in buying a life insurance policy is to shop around because companies can vary widely.
One key factor in buying a life insurance policy is to shop around because companies can vary widely.

If no one at all depends on you financially, you are free to forget all about life insurance. But everyone else should set aside the cultural distaste for talking about death and work toward finding an individual life insurance policy plan to provide for dependents after you're gone.

» RELATED: Do energy-efficient bulbs really save you money?

According to Forbes contributor and wealth advisor Tim Maurer, those depending on a replacement for your income might include a spouse and kids, sure, but also an ex-spouse, life partner, sibling, employee, employer or business partner.

"You don't have to become an expert before you buy life insurance, but it's important to be an informed consumer and know your options," noted the Vermont Department of Financial Regulation.

Within those options, which all fall loosely into the categories of either term or whole life insurance, here are four things to look for before settling on the best life insurance.

A policy that offers enough coverage: A few numbers to consider are the amount it will take to cover such expenses as your mortgage, personal or car loans, property taxes and so forth, recommended DFR. You may also want to include enough life insurance payout to cover your final expenses, and, if you're a parent, some of your children's future college tuition and other expenses. 

But don't assume that life insurance will have to cover those expenses in their entirety, DFR added. It recommended also listing all the income sources and assets your family would have if you were gone starting tomorrow and using that to offset the total insurance benefit they would require. Also add the face value of any group life insurance you already qualify for. "Do not forget to include the ability of other members of your family to earn a living," DFR noted. 

A policy you can afford: While you want enough life insurance, buying a policy you cannot afford is counterproductive since you're likely to lose it when you can't pay the premiums, noted DFR.

If you're straining to purchase enough insurance to give your dependents the financial support they would need if you died, term life insurance is for you, according to Kiplinger, which added, "Dollar for dollar, term gives you the most protection for your money. Period."

» RELATED: 4 warranties you should always buy

A company that will be around a long time: You want to be sure the company you purchase from will be around long enough to protect your loved ones after you die, DFR noted. Obtain information about a company's financial strength from your insurance agent or a commercial rating service that evaluates insurance companies' financial strength and ability to pay claims, like Moody's Investor Service.

A carrier who charges the least for your health issues and habits: Before you shop for individual life insurance, recognize that rates are based on life expectancy. There are some factors you can't do much about: young people get better rates, for example, and so do women, because they statistically have longer life expectancies. But with other individual risk profiles, different companies are more lenient with certain factors, according to Kiplinger. It advised consumers to shop around for the companies with the best requirements in these areas:
  • Weight: Since obesity can cause or be related to other severe health conditions, insurers will consider your weight, Kiplinger noted. But the designated weight ranges for the best life insurance rates vary by company, so use an online quote site like AccuQuote or Insure.com to see who is most lenient if you have weight issues. Women should seek companies that use unisex weight tables, which ordinarily allow more weight for top rates.
  • Family history: All life insurance providers will determine whether your close relatives have died or been diagnosed with life threatening and chronic illnesses. But according to Kiplinger, an online quote site should divulge insurers with more lenient standards in this area.
  • Travel plans. People planning travel to risky parts of the world ordinarily have to pay a higher premium for life insurance. But comparison shopping pays off here, too, since rules on overseas travel vary from company to company. 
  • Credit history: Some life insurance providers will put your credit history into play. If you have concerns, like a bankruptcy in the past five years, find a broker or online quote service to tell you which insurers don't use this factor in setting rates.

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Do energy-efficient bulbs really save you money?

Published: Monday, November 06, 2017 @ 5:43 AM

Are savings from using energy-efficient bulbs worth the money? First, it helps to understand the basic versions of home lighting options.

They are:

  • Fluorescent, including linear fluorescent lamps/Circline lamps and compact fluorescent lamps.
  • Incandescent, including mercury vapor lamps, metal halide lamps and high-pressure sodium lamps.
  • Outdoor solar, including standard incandescent (A-type) lamps, energy-saving incandescent (halogen) lamps and reflector lamps.
  • Light-emitting diode (LED).

Cost savings

Switching from an incandescent bulb to a light-emitting diode (LED) light can save about $13 a year if the LED is used at least five hours a day, according to Money Talks News.

Incandescent bulbs cost about 50 cents each, while an LED bulb costs around $20. Exchanging your least-used bulbs - ones that are on for maybe only 30 minutes a day - results in savings of about $1.20 per year.

EnergyStar persuasion

However, a different story is told by EnergyStar: if all Americans replaced their inefficient light bulbs with ENERGY STAR-certified LED bulbs, they would save $1.5 billion in annual energy bills and prevent 17 billion pounds of carbon pollution annually.

LED bulbs are now an affordable option for the average consumer, with prices at around $2 per bulb across the country (and as low as $1 in many areas). Using less energy, the bulbs pay for themselves in a matter of months and can save households $50 to $100 each year in utility costs.

By 2020, the federal government expects to see widespread adoption of LED bulbs, as utility programs across the country educate consumers about the energy-efficient options that are available and continue to offer rebates on the bulbs.

Today, 71 percent of homes have no LED bulbs in use and most consumers have little knowledge about the various light bulb options. The average American home contains around 50 light sockets and about 60 percent of them still contain an inefficient bulb, according to EnergyStar.

LED bulbs that have earned the government-backed ENERGY STAR label are independently certified, undergoing extensive testing to ensure they save energy, deliver on brightness and work the way consumers expect. Bulbs that have earned the ENERGY STAR use 70 to 90 percent less energy than incandescent bulbs and last at least 15 times longer.

Health risks

If you're sensitive to light, those savings might not be worth the painful headaches that can be caused by LED bulbs.

Arnold Wilkins, professor of psychology at the University of Essex, in the United Kingdom, said LED light bulbs switch on and off hundreds of times every second, leading to disruption of movement control of the eyes and causing double or multiple vision. Headache risks also double while reading with a flickering LED light bulb.

LED bulbs are also capable of inducing feelings of dizziness and pain within 20 minutes of turning them on.

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4 warranties you should always buy

Published: Monday, November 06, 2017 @ 5:36 AM

From cars and houses to iPads and phones, no one wants to pay to replace a high-end purchase. But that doesn't necessarily mean you should pay for an extended warranty, either.

"From a purely economic standpoint, it usually doesn't make sense to buy an extended warranty," according to Rajiv Sinha, a marketing professor at the W.P. Carey School of Business at Arizona State University.
Consumer Reports goes so far as to call most extended warranties "money down the drain," noting that "retailers may push hard to get you to buy these plans because they're cash cows for them. Stores keep 50 percent or more of what they charge for these contracts. That's much more than they can make selling products."

Still, there are four extended warranties you should always buy, or at the very least seriously consider:

Protection for previously owned products

Used cars in particular often warrant the price of an extended warranty, Sinha said. Owners usually hang on to well-maintained, problem-free cars, while the substandard, poorly maintained cars make it to used car lots and online sellers. The odds of defects and damage in the pool of used cars makes buying an extended warranty a smart financial move.

A home warranty for This Old House

Even older homes that have been lovingly cared for can benefit from a home warranty, Sinha said. This is especially true if the appliances included in the sale are dated.

Extra coverage for items added to a home

After noting precisely what a home warranty covers and what conditions you are accountable for, it usually makes sense to buy a warranty for items you add to a home, including windows, fireplaces and shutters. U.S. News cites the example of Margaret King, who bought a lifetime warranty from Home Depot for all 26 windows of her Philadelphia town house. The warranty cost was added to the initial purchase, increasing the price by nearly 20 percent, but she's already replaced windows six times, avoiding $500 in out-of-pocket expenses. "It's quite refreshing to pick up the phone, not your checkbook, to correct any problems – from stains to breakage to track issues," King told the magazine.

When you need the peace of mind

If you're the type who experiences excessive stress and sleeplessness worrying about a smartphone emergency or laptop catastrophe, the $100 or so for an extended warranty is probably "money well spent," according to U.S. News.
Still, there's no need to cave to pressure at the checkout counter. For example, you can usually wait until just before your new car warranty expires to buy the extended version. According to U.S. News, ProtectCELL, which sells protection plans for tablets and phones, also allows some wiggle room, letting customers buy a warranty 30 days to 12 months after purchasing a device, depending on the product.

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