This week, I am visiting my brother and his family in Los Angeles, California. To be more specific, they live in Pasadena. People from Los Angeles don’t like when you say “They’re from L.A.”. You need to be more specific, because the city is so huge. It’s a fun city. The whether is amazing, but the traffic and the cost of living is enough to keep me away. I’ve been observing some of the interesting ways that they save money in this city. Los Angeles is a little different than big cities such as New York, Chicago, and Atlanta. It is a hybrid city. It has a downtown, but very few people live there. They live in the hundreds of towns that surround the core of Los Angeles. You can’t call these smaller cities suburbs of Los Angeles, because they still feel like the big city. Los Angeles doesn’t have a great public transportation system. It’s so spread out, that a transportation system to cover every area would cost a fortune. Here are a few ways that my brother and his family save money to live well in Pasadena.

• They use a cloth diaper drop-off service. They use the cloth diapers, throw them in a big bag, and a delivery truck drops off fresh cloth diapers and picks up the dirty ones. The service is expensive, but it cuts down the trips they need to take to the grocery store to buy diapers. Plus, they don’t have to use as much water to wash the diapers themselves.
• My brother works from home, and his wife works about ten minutes away from their house. Even though her commute is nothing, she still car pools with a friend from work. Their gas expenses are minimal, because they hardly use their cars during the week. They’ll also spend less on car maintenance.
• They shop at Trader Joe’s, a cheaper grocery store than Whole Foods or Ralph’s Supermarket. Los Angeles is trendy, People get caught up shopping at supermarkets that are convenient rather than cheaper. Trader Joe’s has quality foods at a cheaper price, and they have a great selection of organic foods.
• They buy memberships. They have a membership to their favorite museums, the zoo, and other places of interest that charge for admission. A one-year membership always has price advantages, so it’s silly not to take advantage of it if you know that you’ll visit often throughout the year.

These are just a few ways that they save money in a city that will tap your bank account dry if you’re not careful. If you live in the city, share your tips about saving money in the concrete jungle.

The economy is slow, inflation is rising, and the price of everything seems to be higher. What will you do about it? Use your credit card to supplement the difference? I don’t think that’s the answer. The opposite is the answer. Trash your credit cards today, and you will be free from their bondage.

I’ve written about the advantages of using cash over credit cards, even when you never carry a balance on your credit cards. Here are a few more reasons that support my stance on using cash over credit. Donna Rosato from Money Magazine wrote an article in this month’s issue titled, “Life Without Plastic”. Here are some studies she refers to that support the notion that we spend more when we use plastic.

• Researchers performing a study of supermarket shoppers found that people who use credit cards spent more than those who stuck with cash, checks, or debit cards. The average total spent on groceries with cash was $32.96 compared to $43.49 using a credit card. The average total spent on non-essential items using cash was $9.08 compared to $18.72 using a credit card.
• Researchers held an auction for tickets to a sold-out Boston Celtics vs. Miami Heat pro basketball game. They found that people using a credit card were willing to bid up to $60.00 compared to those bidding with cash in their pockets who bid up to $28.50.
• A survey was performed on college students existing a campus bookstore. The survey’s data found that paying cash helps you remember how much you spent. Those that paid with cash remembered how much they spent 68% of the time. Those that paid with a credit card remembered how much they spent only 35% of the time.

There is so much psychology that goes into using a credit card. Credit card companies have mastered the art of making you feel powerful when using a credit card. They name them “platinum”, “gold”, and “preferred member” cards because they want you to feel a false sense of cultural status. The evidence is there. Credit cards help you spend more money, even if you never pay interest on a card. If you want to save more money this summer, cut up your credit cards.

I am in California right now visiting some family and friends for the holiday weekend. The posting has been sparse lately, but I am coordinating with a friend of mine to do some guest posts tomorrow and friday. California is a crazy state, and Los Angeles is even more crazy. I have tons of topics to discuss including saving money by using public transportation and how to save money in a big city.

I hope everyone has a great 4th of July. Take a minute to think about the freedoms that we take for granted every day. The United States is a great country, and we owe it to our ancestors for their hard work and sacrifice. God Bless America!

For those of you that like to borrow money to the point that it comes out of your eyeballs, you might not want to listen to this advice. But, for those of you that are fed up with owing money to everyone for everything, and you don’t want to put your kids through the same agony that you’ve gone through, this is the article for you. The problem is that our nation is indoctrinated to think that borrowing money for everything is a way of life. Swiping the credit card has been woven into the fabric of our society, and now children are learning how to borrow at a very young age. So, the cycle will continue unless parents start teaching their children something different. Don’t count on the schools to do this for you. Most of them don’t even have a personal finance cirriculum, and if they do, it’s probably sponsored by a credit card company. Here are some tips for how to teach your children not to borrow money.

Teach Older Children To Save With The Pay for Performance Method

Teaching a child the value of saving money on a recurring basis is a lesson they will thank you for the rest of their life. When they ask for a new toy or to go on a certain class trip or trip with a friend, that is the perfect opportunity to teach them to save. Write down a savings plan on paper or on the computer with them so they can have a goal for how much they need to save each week or each month to reach their goal. Then, brainstorm for ideas about how to earn that money. This is best for middle school and high school aged children. Put in writing which chores they can do around the house that will earn them extra money, and define which chores they must do just for being a resident of the house. For instance, they shouldn’t get money just for cleaning their room. But, you can pay them for mowing the lawn, helping you paint a room, cleaning out the gutters, organizing the garage, or any other out-of-the-ordinary chore around the house.

Make Saving Fun With Young Children

You need to capture the minds of young children. Saving money does not sound fun during that initial conversation with your young child. Make a project out of it by picking a piggy bank or jar to decorate with him or her. Then, explain to them that you will give them a 100% match for every dollar they save. Making their savings bank look cool and giving them an incentive to save can help your 7 or 8 year old want to save their money.

Don’t give a teenager a credit card.

Many people give their teen daughter or son a credit card for emergencies, especially when they first start driving. Please don’t do this. They will begin to see how easy it is to swipe that card, and they never get to see the bill. If you want them to have something for emergencies, get a prepaid debit card that you can load money onto and have them carry that. Besides, if you really want them to learn sound financial principles, explain to them the importance of having an emergency fund.

Give them a less on interest.

There is interest that works highly in your favor and interest that works highly AGAINST your favor. Show your children the difference between savings interest and debt interest. I guarantee that if they grab this at a young age, they’ll never want to borrow a dime in their life!

There are many other methods, but these are just a few. The best thing that you can do for a young person is teach them about money and how to live a life debt free. If your child gets out of college without any debt, he or she will start their professional life with a tremendous advantage over the young people who come out of college with $50,000 in debt from student loans and credit cards. Do them a favor and teach them not to borrow money.

This might sound silly, but hear me out. There are two different scenarios that would cause you to consider quitting your job to save money. The first scenario is if you are a man or woman who just works to make extra money, and the other spouse earns the majority of your income. This scenario also requires that you have young children that need to be cared for. The second scenario is if your commute is longer than 45 minutes each way to work. Given the rising gas prices, food costs, and a stock market that has been stagnant, we really need to start looking at the value of our jobs. Here is the reason why you may want to consider quitting your job if your situation falls into one of these two scenarios.

Spouse working for extra money. If you’re making less than 25% of your household income for an extra job and you are paying for child care because of the extra job, it might not be worth it. Take your net income after taxes for the month, and then subtract all of the extra costs for having the job such as gas, child care, and extra costs for eating out more during the week. You’ll start to see that it isn’t worth it to keep that job. Now, this scenario doesn’t work if you both have full-time careers that make similar salaries.

The long commuter. Gas is at $4.00 a gallon, but it will probably rise to $5.00 a gallon. Paying $100 a for a gallon of gas on a Honda Accord is becoming more of a reality. So, if you have to fill up twice a week, because of your commute to work, you better be making some serious coin. There’s no rule of thumb, but if you end up spending $200 a week on gas, then you probably live too far away from your job. Start looking for opportunities closer to home. If there are none, consider doing a car pool with someone who might live near you. Websites such as eRideShare can help you find carpool companions.

Home-Based Businesses

I foresee an even larger boom for people starting businesses out of their home. We’re going to see more lawyers and CPA’s do business out of their house as well. Is this is viable option for you? Do you have a service idea that you can perform out of your house? Do you have a product you can sell out of your house? Think about all of the money you can save each month with NO commute to work. I bet some people are spending $400 a month on gas for EACH car. An extra $400 a month invested in a growth stock mutual fund for the next 30 years will make you a millionaire. Working from home is becoming a sexier option more and more nowadays. You can make it happen if you truly work hard to do it.

So, is your job worth it? It might not be if you’re commuting a long distance, paying for child care, and spending more on car maintenance and eating out at night.

If you are wondering if you should lease or purchase a car, here is a link to a decent calculator to help you make the decision.

Calculator: Lease vs. Purchase a Car

What Would A Money Crasher Do? If you choose to follow the 11 principles of a Money Crasher, you would never consider leasing a car. I don’t think it’s ever worth it, because there are a lot of fees and if you end up buying it at the end of the lease, you’ll spend more money than if you had purchased it in the first place. I’ve read a bunch of articles about the justification of purchasing a new car rather than a used car. I don’t buy it. I’d buy a two or three year old car any day over a new car, because someone else broke it in and took a bunch of depreciation with them.

We are continuing to see the fall-out of the housing slump which means more foreclosures, falling home values, and more financially distressed homeowners. Scam artists love to prey on people that are in a tough financial situation. It is only fitting that scammers are trying to capitalize off of the housing crisis. Here are some housing scams that you need to watch out for:

Rescue Scams: Con artists will set up fake companies acting like they want to help you keep your house or pay your mortgage payment. What they do is get you to sign a document called a “quit claim deed” that essentially signs the deed to the property over to them. Then, they go and sell your house out from under your feet, and you are forced to leave the house.

Equity Stripping Scams: Renters beware. Fraudulent investors don’t make the mortgage payments, but rents out the vacant property until the lender forecloses on the property.

Straw Buyers: The identity of the borrower is concealed through the use of a nominee who allows the borrower to use the nominee’s name and credit history to apply for a loan.

Fraudulent Appraisal: Usually a whole ring of scammers from the mortgage broker, investor, and title company are paid off to help inflate the value of an appraisal on a house. The home might really be worth $150,000, but the house is sold for $200,000 to an unsuspecting buyer.

Air Loans: These are loans secure for property that doesn’t even exist. Every document is made up out of “thin air”.

Silent second: Either the mortgage broker or seller gives the buyer the money for a down payment to help them qualify for the loan. If the primary lender doesn’t know about it, then it’s definitely not a legal move. Make sure if the seller offers this as an incentive to buy the house, that they have received pre-approval from a lender.

Tips for Avoiding Housing and Lending Scams:

1. Never sign a document that you don’t understand.
2. Do your homework. Research the area you want to buy a house and recent sales made in that neighborhood.
3. Never leave any part of your application blank.
4. Never give out personal information over the phone when someone first contacts you.
5. Use this rule of thumb. If it sounds too good to be true, it probably IS too good to be true.

Recently, I was listening to the Dave Ramsey Show, and there was one story that struck a chord with me. I love to hear all of the different stories people have to tell. They range anywhere from a mom that stole her son’s identity to success stories about people paying of $60,000 in two years. This particular story was a man who called in to tell about how he helped a friend from church get a loan on a car by co-signing for the loan. He never thought that a really close friend from church would stop paying the payments, so he went ahead and signed on the dotted line. About a year later, he realized that she hadn’t been paying the payment, and the car was repossessed. Now, the bank is going after him for the money still owed on the loan. It’s a common story told on Dave Ramsey, and it’s a life lesson that is usually learned the hard way.

Life lesson: Never co-sign a loan for anyone under any circumstance.

Problems with co-signing a loan

• You want to help a friend or family member out by co-signing for a loan. This is a dangerous trap. You think you’re doing a good thing for someone by co-signing on the loan, but you really aren’t helping them. If the bank thought they should have this loan, they wouldn’t be asking you to co-sign for it.
• You’ll always end up paying off the loan. From every had story I’ve heard about co-signing loans, the co-signer always ends up paying the loan. Again, if the bank thought that that the borrower could actually pay off the loan, they wouldn’t require a co-signer!
• By the time you realize that the borrower isn’t paying the loan, it’s too late. Usually, the borrower is too ashamed to tell you that they can’t afford to pay the loan anymore, so they let it default. Then, the car ends of getting repossessed and you have a repossession on your credit. You would have much rather had them tell you that they stopped paying the payment, so you could start paying it and sell the thing. Oh by the way, the bank has no obligation to notify the co-signer that the loan is past due. Isn’t that nice?

The bottom line is, stay away from it. If you’re poor mother needs a car, buy her a $2,000 beater. Don’t co-sign a car loan under any circumstance. You’ll save your credit history and save yourself a big hassle.

Okay, there are basically two different energy policies being proposed to help alleviate a possible energy crisis. Here is a synopsis of both:

Bush/McCain Proposal: They want to “drill here, and drill now”. Basically, they want to reverse a bill signed by Bill Clinton that took away the possibility of drilling for oil offshore of Florida and in Anwar, Alaska. They want to start drilling for oil in North America to take away the dependency on foreign oil, alleviate some of the high prices by increasing supply, and give companies and entrepreneurs a chance to continue development and research for alternative fuel resources.

Obama/Environmentalist Proposal: Continue to pump money into research and development for alternative fuel resources and drastically reduce the consumption of fuel and energy to reduce demand, rather than increase supply.

I think these are both legitimate proposals, but it is hard to tell which one would help in the short-run versus the long-run. My proposal would be a combination of both. Drill now to help alleviate the scarce supply which will cause speculators to back away from driving up the price of oil. But, do this only to give us enough time to develop alternative fuel resources. The alternative fuels is not happening any time soon. This stuff takes time. We need to stop depending so much on what Saudi Arabia and the UAB tells us what to do. We can drill and do it without destroying the environment, but only do it as a temporary solution while we perfect clean, efficient fuels.

What’s your take on this? Comment below.

Hopefully, you don’t have any credit accounts that are in default. But, some of you may have recently seen the light about changing your finances, and now you’re trying to clean up your past. Part of that cleaning up may involve dealing with bill collectors. Bill collectors have one of the worst jobs in the world. It is their job to collect money from people that don’t have any money. Collectors have made a very bad name for themselves in the past few decades, because they have been known for their harsh collection practices. In fact, their treatment of customers was so bad, that it spawned a federal act to be drafted called the Fair Debt Collection Practices Act. This act gave more rights to the consumer and restricted collection agencies from certain practices. It basically stopped collection agencies from acting like monsters and gave consumers a legal argument against the way bill collectors treated them. If you are not familiar with this act, please click on the link above and read about your rights as a consumer and the rules and regulations that collectors must follow in order to fairly collect the debt you owe.

There are many different types of bill collectors out there. There are collectors who work for the company collecting the debt, collectors who work for a third-party agency trying to collect the debt for a certain company, and collectors who buy old debt and try to collect it to make a profit. Each collector has their own style for collecting a debt. You need to make sure that their style does not violate the regulations set for in the FDCP Act.

Staff Collection Representatives: You will typically find that staff collectors are a little easier to work with than the other two types of collectors. They need to represent the company in a good way, and they might be willing to work with you to set up a fair debt collection plan. If the debt is between six to twelve months delinquent, then you’ll typically deal with a staff collector for major credit card companies, mortgage companies, and other secured debt like a car loan. These people will be firm on what they want to collect from you, and they will be reluctant to settle for less than the debt is worth. It’s extremely tough to settle for a percentage of a debt that is less than a year old. However, you can usually work out a payment plan with staff collectors. This is not to say that you won’t find bad seeds. Sears credit agency has been notorious for having very harsh collection practices.

Third-Party Collection Agencies: Again, you’ll run into these collectors when the debt hasn’t been delinquent for very long. Many credit card companies, cell phone companies, and utilities companies will pay a third-party to handle their debt collection. It’s important to remember that the debt is still owned by the original company that you owe money to, but a third-party is acting to collect the debt on their behalf. I’ve found that these collectors can be a little more pushy and rude than staff collectors. They will abide by the FDCP Act for the most part, but they tend to push the limits. They are usually reluctant to work with you. They’ll accept your partial payments, but they’ll rarely work out a payment plan with you in writing.

Primary Collection Agencies: If you find yourself in a situation trying to negotiate with a primary collection agent, then you most likely forgot that you owed money or really let your debts go for a long time. Typically, when a delinquent debt gets to the three, four, or five year mark, companies will sell off their old debts for pennies on the dollar to these collection companies. These are the bottom feeders of the industry. Don’t ever believe a word that comes out of their mouth. They will definitely push the limits when it comes to their style of coercing you into paying the debt. They are typically pushy and rude. However, if you play your cards right and deal with how rude they will come across, you may be able to work out a settlement with them. If they bought the debt for 25 cents on the dollar, then they are probably willing to accept 50 cents on the dollar as a settlement. But, they won’t agree to this right away. You have to really do a good job of convincing them that you don’t have the money or assets to pay the debt in full.

Things To Remember When Dealing With Debt Collectors

1. Always get agreements in writing. If you make any agreements or deals with a debt collector, make them put it in writing, or else you might as well not consider the deal. All types of collectors are notorious for breaking their word, and people get burned all the time thinking that collectors will stick to what they verbally agreed to in terms of collecting a debt.
2. Never allow electronic access to your checking account. If you give a collector electronic access, they will wipe your bank account clean until they’ve received the full balance of the debt. Even if they say that they won’t do it, they will.
3. Never let a collector bully you into paying a debt. You hold the checkbook, so you set the terms of repaying the debt. They will try everything in the book. They will try to make you feel like a horrible person for being delinquent. If they ever threaten you in any way, hang up immediately and write them a letter stating that you will sue them for a violation of the FDCP Act if they do not abide by its rules. Send the letter by certified mail.

The moral and ethical thing to do is pay off all old debts. However, if you truly don’t have the money, then you don’t have the money. Don’t ever pay an old debt when it means that you won’t be able to feed your family for the month or pay your mortgage/rent. They took on the risk by extending you credit, so always pay for necessities first, then anything extra goes towards paying off outstanding debts.

If you have any other questions about a specific situation, you can contact me to discuss it.