More Ways to Save Money

Hello! I’m Salinas Bankruptcy lawyer Cypress Coast Law with your Friday Financial Tip. Something to help you stay on the path to financial success. I’m the only bankruptcy lawyer you’ll hear with advice about how to avoid the need for bankruptcy.

In my show here in KRML I’ve provided many tips designed to help you develop power over your finances. This power is what will motivate you to develop the good habits that will keep you out of debt problems. Although we’re well into 2015, here’s some tips for today about saving money in the new year:

  1. Implement a new shopping strategy

Next time you plan to buy something pricy—a camera, a BBQ, even a lawnmower, be sure to comparison shop at a minimum of three stores that carry each item. To save time, do this online. And another way to save big is by shopping during off-peak periods. If you typically spend $600 on school or winter clothing but make the decision to shop the smart way: markdowns that average 40% will yield cost savings of at least $240.

  1. Develop a spending plan

If created and implemented correctly, a budget will reveal weak areas and force you to live within your means . However, only about a third of Americans prepare a monthly budget that tracks their income and expenses. That leaves two out of three consumers who may have no real way to assess their finances and incorporate more responsible spending habits.

One unfortunate result is overdraft charges. The Consumer Financial Protection Bureau has found that consumers who don’t make use of a budget year average $225 a year in overdraft fees.

  1. Plan your meals

When making the grocery list for the week, plan your meals around the sales and corresponding coupons that are available. I know that couponing can be very time-consuming, but there are even websites that can provide coupons for just what you’re interested in. In a pinch, try eliminating a few items from your list or substituting generics to save at least $20 per week.

  1. Reduce budget busters

The little luxuries may seem inexpensive and worthwhile, but they add up rather quickly. Try cutting variable expenses, such as coffee drinks, smoking, gym memberships, or cable TV. Shaving down your $4 caffeinated beverage from five to two cups per week can save you up to $624 per year. On the other hand, if you cut out that $55 monthly gym membership and seek free alternatives, you can save up to $660.

  1. Scrap the loyalty

Switching to Geico (or any other insurance company) may or may not save you money, but it’s definitely worth looking into. Even if you have been with one car insurance company for years, use online comparison tools and shop around to find the most competitive rate. If you find a better quote, call your present carrier and see if they can beat it in order to retain you as a customer.

  1. Load up the rainy-day fund.

Failing to have a sufficient emergency fund in place is the easiest way to enter and remain in debt land. To put things into perspective, if you charge $600 for a set of new tires to a credit card with an interest rate of 16.9% and a minimum payment of $20 per month, you will end up paying $186 in interest over the course of three years. And set that rainy day fund up with a local credit union—it’s one of the easiest ways to develop a relationship with a potential lender. Fund the account with an automatic deduction from your paycheck—it’s got to be automatic to work.

  1. Finally for today, renegotiate your debts.

It never hurts to call around to each of your creditors and attempt to have your interest rate lowered. Be familiar with your recent use of your card to show that you’re a valuable customer—someone your creditor doesn’t want to lose. Set aside some quiet time to call. If you’re unsuccessful with the telephone rep, respectfully but firmly ask to speak with a supervisor. I’ll bet you’ll have at least one or two successes on your first try.

Folks, gaining power over your finances is a series of these small steps. But those first small steps can lead to feelings of frustration and hopelessness—a feeling that the problem is so big that nothing can be done. And because we can’t solve the whole problem at once, we often discourage ourselves from even trying. I’m here to encourage you to take those small steps, and to create those good habits, that can make changes in your life.

If you have questions about ways to save or to avoid common financial traps, or if you’re in trouble financially, visit my website, cypresscoastlaw.com, where you can access my full library of Financial Focus shows, or call me at 424-1764, that’s 424-1764. Initial consultations are always free.


A Bankruptcy Lawyer's Guide...To Avoiding Bankruptcy

In my thirty-plus years as a bankruptcy lawyer, one surprising fact has become apparent: A majority of my clients did not get into financial difficulty “on purpose.” Rather, they found themselves with impossible debt loads almost by accident—essentially by being unconscious of their own unwise financial habits. Sadly there is no comprehensive education available to citizens about how to handle money matters and avoid such harmful habits.

This state of affairs is not surprising when we realize that debt is the most heavily advertised product on the planet. The answer, of course, is debtor financial education. Knowing more about how debt can ensnare the unwary will lead to more responsible spending, less resort to debt—and fewer bankruptcies.

Here are some suggestions for good financial health you can apply to your own life.

Believe it or not, your first step, and one of your most powerful moves, is to put your credit cards in a drawer. Don’t carry them around; use only cash and your debit card. While you can always take the card out in an emergency, the unconscious use of credit cards is a major reason folks lose control of their finances. Avoid credit cards like (forgive me) the plague.

Once the cards are out of the way you can address your spending. It is common for clients I see to simply not know where their money goes. With no financial “compass” to guide them it’s an easy next step to getting into debt difficulty. But getting present to one’s finances is a huge step toward getting control. What is “getting present”? Simply put: Pulling out your bank records for the last three months and actually sorting out by category every dollar you’ve actually spent. Just seeing where your cash goes leads to wiser spending.

Next, map out your credit card bills. List them with all the balances, interest rates, minimum payments, and due dates. Since your cards are already locked a drawer you’re now going to develop a plan for paying them down. Start with setting automatic payments from your bank account so you’ll never miss another payment. Then concentrate on the card with either the highest interest rate or the lowest balance. Make paying down the cards one of your highest priorities.

Next tip: Develop an emergency fund. Regardless your income, everyone should have a savings plan and, for it to work, it should be automatic. I recommend setting up a savings account with a local credit union and then fund it with an automatic deduction from your paycheck. It doesn’t have to be a lot—say $25 per payday. The secret is to save consistently. Having a cushion built up the next time there is a money crisis means avoiding having to go into debt.

A last tip that applies to all efforts to get control of your finances: Be on the same page as your partner. Whether you’re married or just in a committed relationship, competing interests are suicide. This applies to all facets of your financial lives. Have a real heart-to-heart, and don’t keep secrets—put everything on the table.      

These are just a few of the many steps it takes to build financial wisdom. But the first steps can lead to discouragement—a feeling that the problem is so big that nothing can be done. I’m here to encourage you to take those small steps and to create those good habits that can make changes in your life. If you apply yourself you will see changes in just a matter of weeks. Best of luck!


Financial Myths

In my bankruptcy practice I’m often amazed at the number of credit myths that many folks carry around. Distinguishing between what’s reality and what’s nonsense is not straightforward—so folks will often not ask questions at the risk of appearing foolish or uninformed. So let me deal with some of these myths today.

  1. One credit report is enough. Simply, wrong. The three major reporting agencies—Experian, TransUnion, and Equifax, each use slightly different criteria in assessing your credit history that can result in a spread of 50 or even 100 points. Also, an error may appear on one report and not another. If you’re checking your credit, always use a service that checks all three agencies.
  2. Self-checking my credit hurts my credit score. Not true. When you check your own score this is a “soft” inquiry that has no effect on your score. An inquiry when you apply for credit is called a “hard” inquiry that can temporarily affect your score.
  3. Debit and Credit Cards Affect Credit Scores Equally. Not even close. With a credit card you are in effect borrowing from a lender, who you will repay with interest. A debit card on the other hand withdraws your own money from your account—there is no credit transaction and thus no risk to a lender.   Debit cards therefore do not affect your credit score.
  4. Paying the Minimum Balance is Sufficient. A minimum payment on a credit card will usually result in it being paid off in 20 years or more. Plus, a history of just minimum payments is not good for your score. If your cash is limited and you’re prioritizing payments, a good rule is to be sure to make the minimum payment on every account other than the one with the highest interest or lowest balance, and then concentrate on paying that one off.
  5. You only owe half of a co-signed debt. When you co-sign for another you are promising that in the event of default you will be liable for the entire balance. If your friend loses their job, the creditor is going to come after you for the whole amount. If you’re both working they may come after both of you, but if your friend is unemployed, or absent, that leaves only you.
  6. I Don’t Make Enough to Save. Also incorrect. Saving is the core of every financial plan. Every single person who has an income should have some form of savings—whether it’s dropping leftover change in a jar or having an automatic deduction from your paycheck into a savings account. If you don’t save, you won’t have money when emergencies come up, and you won’t have money when it comes time to retire. Plus, saving is a habit—once you have it, it becomes easier until it’s second nature.
  7. Library Fines Don’t Count. Oh yes they do. If you owe money and don’t pay your creditor—whether the gas or water company, the library, or the homeowners association—they can and will refer you to a collection agency, which will quickly report your non-payment.
  8. I Can Start Over With a New Credit Identity. Folks, there’s only one way to create a new credit identity and that’s to commit fraud. Such techniques often involve falsely obtaining a new Social Security number or even using one that’s been stolen, which constitutes identity theft. This can result in a criminal prosecution or, at the very least, smear your credit reputation for years.

Folks, I’m hoping you stay away from these harmful myths. If you find yourself in debt trouble always seek out the advice of a financial professional or experienced bankruptcy attorney. The only foolish question about your financial wellbeing is the one that doesn’t get asked.