Suggestions for keeping more money in your pocket.
By Janet Groene, F47166
March 2008 FMC magazine
Could a financial overhaul get you out on the road earlier in life, or if you’re already full-timing make it possible for you to live better for less? If you are feeling a pinch in your wallet, as many Americans are these days, financial guru Steve Williams has advice for you. After building a million-dollar company from a $500 nest egg, Mr. Williams founded the Success Institute of America.
Whether you’re already full-timing or are putting together a fiscal plan to get yourself out there as soon as possible, Mr. Williams’ five-step program for regaining your financial equilibrium can be a starting point to help you realize your goals.
1. Assess your financial situation. Make an honest assessment of your current finances. Determine how much money you’re forking out each month. Don’t forget to include expenses such as medications, school lunches, and dry cleaning.
2. Decide where you want to be financially. Setting goals will help you focus. Consider what expenses you can realistically cut (daily mocha lattes, takeout dinners, etc.) to help create your action plan or road map for reaching your goal.
3. Pay yourself first. If you have direct deposit, set aside a certain percentage from each paycheck that will be funneled directly to a savings account. If you don’t have the money in your hands first, you won’t miss it as much. You must be diligent about allowing your savings to grow.
4. Explore your refinancing options. If you are mortgage poor (either in a house or motorhome), refinancing a problematic loan could help to ease your financial pain. Check out the U.S. Federal Housing Administration’s FHASecure loan program and other refinancing programs for folks who’ve been sucker-punched by “creative” financing that’s taken an ugly turn. Make sure you truly understand the terms of any loan you sign.
5. Money management. This is the most critical factor in building wealth, so learn to manage the money you have now regardless of the amount.
Mr. Williams said, “Carve out time to sit down, grab all of your bills, and outline your road map. Simply taking that first step will instill a sense of relief. Once you pass up those first few temptations that would normally have you whipping out your credit cards, you’ll feel good about yourself and you’ll feel your resolve growing even stronger. You’ll reach a point where it feels good to stop spending senselessly.”
The Financial Shell Game
In today’s economy you can’t let your guard down for a moment, especially when you’re on the road full-time. People who are on the go may be dealing with late mail, different state laws, and the distractions of travel. Delay can be costly. Here are areas where it’s especially wise to re-evaluate regularly:
- Insurance. Florida’s recent upheaval in no-fault laws is just one example of how one’s insurance needs can change even if you keep the same motorhome, same towed vehicle, and same “home” state. Rates and benefits constantly seesaw due to changes in state laws and other factors. A periodic insurance inventory could reveal ways you can save hundreds of dollars a year while getting better coverage. While you’re at it, investigate whether there are areas where you should increase or decrease your coverage. You might, for example, have a coin collection that has ballooned in value. If your family situation has changed, do you need to change a beneficiary or increase your life insurance? Consult with two or three full-service insurance agencies; ask for quotes; and carefully compare the rates and coverage before making any changes. Go to www.e-wisdom.com, where you can compare credit card rates, cellular telephone and phone card deals, insurance costs, Internet services, and loans.
- Refinance a loan. The topsy-turvy world of financing changes dramatically in today’s interest rate climate. Just by making a phone call you might negotiate a better interest rate on credit card debt. Look into refinancing opportunities available for your motorhome or towed vehicle. If you’re still paying on student loans, shop around for a refinance deal on them, too.
- Phone costs. Even if you’re locked into a yearly contract, there may be ways to get a better deal on cell phone service. Are you paying for services you don’t use? If your contract is up for renewal, can you negotiate a better deal for the next year? Can you bundle Internet, cell phone, satellite, or other communications to obtain a better price?
- Earn higher interest on savings. If you bank online, it’s easy to shift funds around to take advantage of the best interest rates. If you do all your banking with one brick-and-mortar bank, see a bank officer before letting a certificate of deposit (CD) automatically roll over. Ask about promotional or “teaser” interest rates, usually on CDs that have an odd interval, such as five months. The bank’s rep also may be authorized to give you a few extra points to sweeten the deal. Then re-evaluate the CD again when it matures, or it may roll over for a different interval, and probably at a lower interest rate.
- Shop for lower commissions. If you are trying to sell your house to go full-timing, don’t believe it when real estate agents pretend commissions are written in stone. Shop around for the best service for the least money. Brokerage firms, too, have different commission schedules and fees. They change regularly, so keep comparing. If you decide to shift your investments to a new brokerage firm, you don’t have to sell all your stocks and start anew. Ask that everything be transferred “in kind.” Hungry for commissions, a broker once suggested breezily that we “liquidate” before leaving the brokerage. Fortunately, we knew better. In addition to saving commissions for selling and then replacing stocks, transferring “in kind” saves endless bookkeeping and tax headaches.
- Pay less often or use automatic payments. It’s no longer true that a bill is a bill. Will a company give you a better price if you pay yearly or quarterly rather than monthly? Can you save by using automatic online bill paying or an automatic charge to a credit card? At the same time, check credit card bills for automatic charges that you no longer want. You may have unwittingly opted into a buying club or insurance plan that’s costing by the month.
- All credit cards aren’t the same. If you carry a balance, shop around for the lowest interest rates. Then call your card company and ask whether they’ll match the deal you found. If they agree, you don’t have to switch cards.
If you pay the bill in full, look for the best rebates. If your paybacks are in airline miles, contributions to your college alma mater, or anything other than hard cash, reconsider. If you’re entitled to a rebate (usually when your credits reach $50 or more), you have to phone or go online to ask for a check. Millions of dollars are lost each year because customers neglect this step. Some cards pay off monthly, crediting the rebate to your account.
If fuel is one of your biggest expenses, look into cards that rebate a higher amount, usually 3 percent, on fuel purchases and 1 percent on everything else. However, beware of cards that stop rebating after you have received a certain amount, such as $500. Be alert, too, for teaser rebates that apply for only a limited time. Read the fine print that comes with every credit card statement. Rules, rates, fees, and fines change constantly. A late payment, bounced check, or overlimit charge could cost $35 or more. Also be wary of having too many credit cards or switching cards too often, as it can affect your credit score.
- Banking bunco. Bank fees keep rising while personal service becomes harder to find. Know what you’re paying for everything from printed checks and stop-payment orders to copies of canceled checks. What is it costing you to spend long minutes on hold when you want to ask a question or solve a problem? What are you spending on ATM fees? How can you reduce or eliminate these costs?
- Try before you buy. It’s costly to rent golf clubs, power tools, skis, bicycles, boats, or personal watercraft, but consider it research that can keep you from making a big mistake on a major purchase. If you rent as you go, you’re not spending fuel dollars to haul around heavy gear. Meanwhile you’re trying many different brands and types to help make a wise decision when you’re finally ready to buy.