Couples and Cents

Money market funds are on their way down. By the end of February, the average taxable fund yield could be down to 2.4% . That’s not enough interest to keep up with inflation. However, there are a couple of alternatives that will help you preserve the value of your savings.

• Online Savings account - Etrade is currently offering 4.4% interest on their savings. There is no minimum balance and no account fee. This is a much more flexible option than a CD, however the rates can change at any time.
• Certificate of Deposit (CD) - If you are willing to lock away a larger chunk of money for a while, CD’s can provide a solid rate. IndyMac  is offering 4.8% on a 7 month CD with a minimum deposit of $5,000. The advantage in a CD is the ability to lock in a rate for a given period of time.
• Muni-Bond Funds - Although slightly riskier, muni-bonds offer tax exempt interest rates. Schroder Short-Term Muni Bond has a rate around 4%.

What Savers Should Do as Rates Drop

Want a quick crash course on how to reduce your spending? This book will point you in the right direction. In one monthly shopping trip, the Economides family (appropriate name) spends only $350 and feeds the family for a whole month.

America’s Cheapest Family cover everything from staying out of debt to thrift store shopping. Should you take all of their advice? Maybe not. But its worth a read just to get some good ideas on ways to cut your spending.

A new type of lending is catching hold using the power of social networking to connect borrowers and lenders. Peer-to peer lending connects individual lenders and borrowers at rates that are often more attractive than those of banks or credit cards. It attracts borrowers who are trying to consolidate debt from high-interest credit cards at a lower rate and lenders looking for a higher rate of return on their invested money.

Sites that facilitate this type of lending include zopa.com and Virginmoney.com. At Zopa.com, investors become members of a credit union and are able to insure their investment because funds are put in to a CD. Investors can choose who they want to loan money to. Rates however around a rate of 5%. Virginmoney.com focuses on facilitating loans between family and friends. You provide the funds, and virginmoney will take care of all the paperwork, legal documents and payment processing.

Its an interesting new concept and the idea of having a third party facilitate loans between family members is a smart one. These types of loans carry a lot of emotion and a service like this can help take some of the emotion out of it.

How to use peer-to-peer lending sites to borrow money - MarketWatch

Famed investor Jim Rogers is predicting that the United States will fall in to the worst recession since World War II. Rogers believes that we go go beyond a recession and enter into a period of stagflation ( (a combination of slow economic growth and inflation).  Rogers has even gone so far as to sell his New York mansion and relocate to Singapore to be closer to the strong Asian markets.

The message is clear here: be prepared. Economies are too complex for any one person to predict, however there are clear indicators that things are turning in the wrong direction. Use caution, build your savings and cut your spending.

Jim Rogers: ‘It’s going to be much worse’ - Jan. 31, 2008

For a parent, there may be no bigger concern that the wellbeing of your children.  And between extra curricular activities and educational expenses, the bills can begin to add up quickly. Here are 3 ways that you can provide a financially secure environment for your children.

1.  Build a strong financial foundation for yourself - Make sure you have plenty of money put away in an emergency fund, build your net worth, and avoid expensive debt.
2. Purchase life insurance for you and your spouse - Avoid whole life insurance and purchase a reasonable term life policy. Your not looking for a windfall, just enough money to provide a level of security and continuity for your family.
3. Invest in your children’s education - As early as possible, start saving money in a 529 educational savings account. University tuition is extremely expensive and saving early will help ensure that your children have access to good schools.

Ask the Expert - Money Magazine Your kids don’t need life insurance «

Do you eat out a lot? Most people do. Its tasty and easy for busy working people. However, if you invest a little time each week planning a menu, you can cook at home and save lots of money. Furthermore, the food can be just as good and often more healthy.

If you are a beginning cook, here is a book to try. Its called The Healthy College Cookbook: Quick. Cheap. Easy and its gotten good reviews on Amazon.com.

If you have a good credit score, its a great time to refinance or secure a home equity line of credit. During the last week of January, fixed rate mortgages were down to about 5.75. Lending standards have tightened however, and people with low credit scores may find it difficult to qualify for financing.

If you have a high fixed rate mortgage, refinancing at a lower rate can free up your monthly cash flow. You can then divert that money into savings. If you have an adjustable rate mortgage, switch to a fixed rate. Don’t put yourself in a position where you cannot afford your mortgage payments after your rate adjusts.

A home equity line of credit (HELOC) can be a great source for an emergency fund if you absolutely need cash to get through a rough spot. Don’t spend it on home renovations right now because the return on investment is currently low. Just secure the credit and use it for an emergency only if you have to.

Rates are good right now, but remember, debt is a tool. Be smart about it and use it wisely.

Borrowers With Good Credit May Benefit - New York Times

Get out of debt specialist Dave Ramsey regularly preaches about the importance of living debt free. For the most part, I agree with him. Most people do not know how to properly manage debt and after a while it consumes them. In many families, credit card debt is the number one killer. It is easy and tempting to splurge on a credit card and then worry about paying it back later. But often this debt snowballs to a point where it becomes unmanageable.

Many couples often have an issue with hiding debt from their spouse. Not only does this hurt the family financially, but it also damages trust and destroys marriages. Dave Ramsey offers a few tips on breaking your debt hiding habit. It starts with telling the entire truth and getting everything out on the table. This is the hardest part. After that, a plan needs to be established to work through the problem. Finally, an atmosphere of openness must be maintained into the future. Its easy to slip back into the same habits.

The best advice is to avoid these types of situations to begin with. But if you are already in debt trouble, its time to get out of it. Be honest and work through the problem. It may not be easy, but it is possible to work yourself out of debt.

Marriage, Money and Secrets

Need help finding ways to save money? Here are some tips.

1. Adjust your taxes - If you find that you are getting a tax refund every year, then you are paying too much taxes. Don’t give the government a free loan. Hang on to your money throughout the year and invest it in short-term savings.
2. Use your 401k. Most 401k’s will match your contribution up to a certain amount. Its free money, and your 401k contributions are tax deductible.
3. Raise your car insurance deductible.
4. Pay off your credit card - You will never earn enough interest in savings to compensate for interest paid on credit cards.
5. Use credit card rewards - but be careful. Carrying a balance will eliminate any benefit you receive from credit card rewards. Pay it off each month.
6. Take you lunch to work everyday.
7. Take advantage of bundles with your phone, tv, and Internet bill.
8. Track your spending - This is the only way to really know where your money is going.
9. Use the public library for books and dvd’s.
10. Cut down your energy usage. Get a programmable thermostat and turn off appliances when they are not in use. Carpool to work or use public transportation.

20 Small Ways to Save Big - Kiplinger.com

The most recent jobs data released this week showed a decline of 17,000 jobs, a surprise number. Forecasters had expected a rise of 80,000 jobs for the month of January. This is just another sign that the economy is slowing down.What does this mean for your family and how can you survive it? The biggest risk of recession for the average American is that they will lose their job and thus lose their source of income. If the economy slows down, companies are forced to cut back on expenses (like payroll) because they no longer have the sales to support their current infrastructure. Moreover, healthy companies will often be cautios about hiring new employees due to the threat of recession. Jobs in construction and manufacturing have been falling for a while, but January’s numbers also show an 11,000 drop in professional and business services employment.

If companies are being cautious with their spending during a recession, then you should be too. It may be time for you to make some spending cuts at home. Are you saving at least 10% of your disposable income? If not, take a look at your spending and see what cuts you should make. You should have at least 3 months worth of emergency funds or more. If you are not close to that number right now, its time to get moving. Try a 3 month savings binge in which you cut all but the essentials.

Also, start working on that resume. If you haven’t touched it in a while, its time for an update. A recession can be unpredictable and the possibility of getting laid off can be very real. Get your contacts organized and touch base with your network. If you don’t have an emergency fund yet, it is even more critical that you begin to prepare for a job hunt.

Jobs data | Worried about your job? | Economist.com