Entries for May 2008

I recently chatted with Amy Bordoni, a writer and blogger in the Chicago area. (Disclosure: She is also the sister of my colleague Liz Wolgemuth, author of the Inside Job blog.) As the mother of two young sons, Bordoni said that she has noticed that her family ends up wasting a lot of money on little things that add up over time. "Although we rarely eat out, shop secondhand, strive to be energy-conscious, and avoid developing a Starbucks habit, we still waste a lot of money that could be saved because we are disorganized," she told me. Here are four of her big money wasters—and how she conquered them.

• Overdraft fees. Bordoni and her husband usually pay bills online and write checks without keeping a record of the money going out, so they end up overdrawing their account at least once a month, with a $39 fee each time. When she got frustrated and called the bank to figure out her options, she found that she could open a new credit card account with the bank and have overdraft protection for just $10 each time it is used. "A big 'savings,' especially for a couple with uneven cash flow...and no intention to ever get into Quicken," she says.

Biff from Basic Financial won the first Alpha Consumer Challenge. Congratulations, Biff! He said he would use a $1,000 windfall to save more money:

The first thing I would do is buy a decent bicycle so that I could bike to work (on non-rainy days), since I live only 6 miles from work. This would cut down on my gas costs, especially if I start now. I would also convert a dog pen we have into a greenhouse to grow my own veggies and sell the rest at the local farmers market down the street. I would also probably put between $400 to $500 into our emergency fund.

Since he blogs anonymously, he is opting not to have his photo and full name featured here, but he will receive a copy of Curtis Arnold's How You Can Profit from Credit Cards. Stay tuned for the next challenge, coming soon.

If you get a call from your credit card company informing you that your account has been flagged because of suspicious activity, be skeptical.

A current scam works like this: A fraudster, claiming to be from the security department of a credit card company, tells the consumer he is checking unusual account activity. He may even offer a badge number. Then, he tells the consumer that a fake purchase, such as an $800 television from Best Buy, has been made on the card.

Dear Alpha Consumer,

I contribute 10 percent of my income to my 401(k), which turns out to be around $14,000 a year. But if I get a raise next year and that 10 percent exceeds the $15,500 annual limit for contributions for people under 50, then what will happen? Will someone tell me that I've reached the annual limit, or will I get the money back in some way? Is there a way to contribute exactly $15,500?

Over the weekend, I spoke with WTOP about couples and financial management. We talked about what each spouse should know about money and how to start those conversations. Listen now, download in iTunes, or subscribe to the RSS feed.

Consumer psychologist Kit Yarrow recently spoke to me on the Alpha Consumer podcast about what shopping means to us, beyond the ability to buy material goods. She explains how it can define us, how to get control of overspending, and what makes generation Y different.

You can also hear the Alpha Consumer Tip of the Week on how to eat on a budget. Listen now, download in iTunes, or subscribe to the RSS feed.

For an upcoming story, I am looking for parents who have decided to give money to their children well before dying. For example, some parents contribute to a mortgage or set up charitable donations in their kids' names. If you would be willing to share your story, please E-mail me at alphaconsumer@usnews.com.

Almost 50 people submitted responses to the first Alpha Consumer Challenge, making my job of choosing the top three difficult. Answers to the question—What would you do with $1,000?—ranged from the practical, such as buying a new toilet, to the pleasurable, such as taking a trip to the tropics.

It wasn't easy, but here are my top three choices. Now, it's your turn to vote on the winner, who will get his or her name and photo posted on the blog and also receive a copy of Curtis Arnold's How You Can Profit from Credit Cards. Voting will stay open until Thursday, and the winner will be announced Friday.

I asked each blogger who participated in last week's debate over how to spend $1,000 to comment on each other's approaches, which were quite different. J.D. Roth said he would save the money to put toward his larger financial goals, such as a trip to London and new car. Farnoosh Torabi said that if her job didn't prohibit it, she would invest in the stock market, but otherwise she is going to use it on future splurges, such as summer beach weekends. Meanwhile, Boston Gal said she would save almost all of it.

Here is what they had to say about each other's choices:

J.D. Roth of Get Rich Slowly on Boston Gal's approach:

This week's Carnival of Personal Finance has great advice on everything from shopping at garage sales to controlling impulse purchases. My favorite post—from the blog But Why Doesn't It Grow on Trees?—is on what the writer's mother taught her about money management, including making her own bread and avoiding soda.

While I was interviewing Bonnie Eaker Weil, author of Financial Infidelity: Seven Steps to Conquering the #1 Relationship Wrecker, for a story on her book, she mentioned an intriguing concept: "pop shots," which she defines as "pissed-off purchases," usually made after a fight or falling out with a romantic partner or spouse. According to her survey, the average pop shot is $486, and people average three to four a year. That adds up to almost $2,000 a year—a lot to spend because of a few fights. I am somewhat skeptical of that number—are so many people really so unhappy in their relationships and willing to blow so much money because of it?—but Weil stands by the survey results.

She also has a solution to such conspicuous consumption: Hug or kiss your partner. "That high that you're looking for [when you spend], you can get that from your partner. If you hug for 20 seconds, you get a dopamine high. If you kiss 30 seconds, you get a dopamine high. You can actually have an affair with your partner—you don't have to shop until you drop," says Weil.

Are you convinced?

The Alpha Consumer Challenge will remain open to submissions until 9 a.m. Monday. To participate, just post your answer below to this question: If you suddenly had $1,000, what would you do with it? After we've narrowed the entries down to three, you can vote to pick the best one. The winner will get his or her name and photo posted on this blog and also receive a copy of Curtis Arnold's How You Can Profit From Credit Cards.

Here is what the blogger at Boston Gal's Open Wallet would do:

If $1,000 was suddenly to fall into my lap, my first instinct is to save it. I'm a saver, and saving money is generally what I do. However, I do have expenses and many needs and wants which require spending money to satisfy. Found or unexpected money mostly gets divided. Some goes into savings, some goes toward purchasing a need, and the rest goes toward obtaining a want.

It's Day 2 of the Alpha Consumer Challenge, which means there is still time for you to answer the question: If you suddenly had $1,000, what would you do with it? To participate, just post your answer below. After narrowing the entries down to three, we'll vote to pick the best one. The winner will get his or her name and photo posted on the blog and also receive a copy of Curtis Arnold's How You Can Profit From Credit Cards.

To get your wheels turning, I asked You're So Money author and TheStreet.com correspondent Farnoosh Torabi what she would do with the windfall:

For information on preventing ID theft and what to do if your information is stolen, you can watch this video of my discussion on Retirement Living TV:

As my mom, grandmother, and I barbecued on a community grill in Florida earlier this year, we chatted with a woman struggling to keep her flame lit as she cooked hamburgers. "My husband always did this for me," she said, adding that last year, at the age of 60, she became a widow.

Before we parted, after she had successfully mastered the grill, she offered me some advice. "Women today should learn to do everything themselves," she said. "Don't wait until you have to."

If you suddenly had $1,000, what would you do with it? Would you save most of it, spend it on a new bike, or buy a plane ticket to Paris? That's the question I put to three personal finance bloggers, all of whom have very different approaches to spending and saving. Over the next few days, I'll be posting their answers to that question, and their responses to each other's choices.

Then it's your turn. In the first edition of the Alpha Consumer Challenge, the question is: What would you do with $1,000 that dropped unexpectedly into your hands? To participate, just post your answer below. I'll pick the three choices that are the most creative, savvy, and also realistic (of course, there is a lot of subjectivity in those criteria), and then we'll pick the best one in a vote. The winner will get his or her name and photo posted on the blog and also receive a copy of Curtis Arnold's How You Can Profit From Credit Cards.

I recently spoke with Felicia Taylor at Retirement Living TV about why you should know your credit score and how to improve it. Here is the video:

For more tips on how to take advantage of the Fed's recent interest rate cut, you can tune in to my discussion on WTOP radio. We talked about asking for a lower rate from your credit card company, getting a good deal on an auto loan, and the pros and cons of refinancing. Listen now, download on iTunes, or subscribe to the RSS feed.

Welcome to the 151st edition of the Carnival of Personal Finance! If this is your first time visiting Alpha Consumer, welcome. You can check out the top posts on the bottom right-hand side of the page and subscribe through Alpha Consumer's RSS feed.

Today's theme is managing money in tight times. Tax rebates, the much-discussed recession, and food prices were among the topics on bloggers' minds.

I recently spoke with one of my favorite personal finance gurus, Liz Pulliam Weston. She has written a new book, Easy Money: How to Simplify Your Finances and Get What You Want Out of Life. You may have seen her columns on MSN Money. I asked Liz to about her book and to share some of her top advice on saving money. Here's what she had to say:

What are the most common mistakes people make with their money?
Number one is confusing "need" with "want." Before you understand the difference, you may think of yourself as a victim or as having limited choice about where your money goes. When you understand the distinction, you realize that virtually all of your spending is a choice of some kind. That's pretty powerful, and puts you back in charge. Yes, you need food, but you don't need steak, and eating something less expensive may mean you can take a killer vacation or do something else you really want to do.

I am excited to be hosting next week's Carnival of Personal Finance, which will be posted Monday. You can submit blog entries to it through CarnivalofPersonalFinance.com/submit.

Also, if you are interested in writing a guest entry for Alpha Consumer during the week of May 19, please email me at alphaconsumer@usnews.com. It can be on anything personal finance or consumer-related, especially advice, your personal experience, or an opinion on something consumer-related happening in the news.