True Adventures in Money Hacking

Starting your own Herb Garden Part 5: Garlic, ginger, and other easy-to-grow herbs

2010-10-26T13:08:00.000-07:00

Missed the rest of the series? Read them here: Starting your own Herb Garden: Part 1: The Benefits of Fresh Herbs, here: Starting your own Herb Garden Part 2: Planning and Layout, here: Starting your own Herb Garden Part 3: Seed Starting and Growing from Cuttings, and here: Starting your own Herb Garden Part 4: The Indoor/Potted Herb Garden.

Did you know that some of the most widely used and most delicious herbs are the easiest to grow? In this last of installment of the Starting Your Own Herb Garden series, we'll show you how to grow your own garlic, ginger, and cilantro.

Ginger
Ginger has loads of health benefits (just do a Google search and you'll come up with tons), so much so that many people take daily ginger in capsule form. I prefer it fresh or pickled, sushi style. Fresh grated ginger is fantastically useful for cooking, especially in Asian dishes, and it makes a lovely tea. It's also ridiculously easy to grow your own.

Note: This is ornamental ginger (comes it pink or red flowers). It's pretty but not edible. The edible kind is not pretty, doesn't flower at all, and is much smaller.

To grow your own, visit your local farmers' market after the last frost. I got mine from the local grocery and it grew fine, but I was lucky--much of the commercially grown ginger is treated so that it won't reproduce. Select a rhizome (this is what most people refer to as the ginger "root," but that's actually incorrect) at least 3 inches long and with at least two well-developed growth buds--little protrusions at the tip of a "finger" of the rhizome, kind of like eyes on a potato. The more growth buds your rhizome has, the better. If the tips of the "fingers" are greenish, even better.

A ginger rhizome with 7 fingers and many growth buds. This could produce up to 10 ginger plants.

Planting Ginger
If you're unsure whether your ginger rhizome has been treated with an growth retardant, soak it in a glass of water overnight before you plant it. What's cool about ginger is that if your rhizome has more than one "finger," you can cut them apart and plant each one separately to produce several ginger plants. The only rule is that each section you plant should be at least 2 inches long and have at least one growth bud.

Growing Ginger
You can grow your ginger in a pot with potting soil, like mine, or if you live in an area that never frosts, you can plant it directly in the ground, as long as the soil is well-drained and not too clayey. Ginger takes 8 to 10 months to mature and hates the cold, which is why you should opt for potting unless you live in an almost year-round warm climate. Plant your rhizome sections 6 to 8 inches apart and 1/2 inch deep, growth buds facing up. Water regularly, but don't soak them. Ginger hates having wet feet. After a few weeks (sometimes several), you'll see the first growth. It'll look like a thin green spike.

Ginger plant spike with first leaf

6 months later

Harvesting Ginger
Ginger is ready to harvest when the leaves turn yellow and begin to wilt, 8 to 10 months after planting. I recommend harvesting in the morning so the rhizomes have ample time to dry in the sun. To harvest, loosen the soil with a garden fork and lift the whole thing gently out of the ground. Brush as much of the dirt off the remaining rhizomes as you can and lay them in the sun for the rest of the day. At this point you can cut off a few sections of the rhizome with good growth nubs to replant for next year. Break up the rest and cut off any remaining stems.

Storing Ginger
There are three options I know of for quality long-term storage of ginger:
1. Keep unpeeled in a ziplock bag in your refrigerator's crisper (up to 2 months).
2. Scrape off the skin with the edge of a spoon, cut into 1-inch chunks, and store covered in vodka or rice wine (up to 1 year). The ginger won't lose its flavor, and you can use the leftover liquid in stir-fry dishes, salad dressings, or sauces. I've yet to make a ginger vodka martini, but I'd love to try it.
3. Pickle it by peeling as above, cutting into 1-inch chunks, and storing covered in rice vinegar for 3 weeks. Remove from liquid. Use the remaining liquid as above, and store the pickled ginger in the refrigerator up to 1 year.

Cilantro
Ordinary cilantro is also easy to grow and not too picky about its soil, as long as it's fairly loose and not too wet. It prefers shade or filtered sun, will grow in pots or right in the ground, and grows quickly. Five cilantro seeds will yield you quite a bit of cilantro in a month or two. Plant the seeds 4 to 6 inches apart and 1/2 inch deep. If planting outdoors, wait until it's relatively warm out to plant your seeds. They don't like the cold.

Cilantro, one week after planting seeds. If you want instant herb gratification, this is your plant.

Garlic
Garlic is another quick sprouter, though it takes longer to mature than cilantro.

Planting Garlic
Unless you're in a year-round warm climate, the best time to plant garlic is in mid-autumn. Buy a head from your local grocery or farmers' market and keep it in the fridge until you start to see little roots sticking out the bottom. Then separate the cloves and plant them in a sunny spot, root side down, 6 inches apart, and 2 inches deep. No need to peel off the skin. The soil should be loose and well-drained.

Growing Garlic
After a few days you'll see the shoot coming up. These will die down once it gets cold. When that happens, mulch well over the whole bed. Your job is done until spring. In the spring, remove the mulch. More shoots will appear and these will continue growing into leaves that look like onion leaves but flimsier. About a month before the garlic is ready to be harvested, they'll send up something called a scape. The scape looks like a thick, hard green onion, and it's edible. It tastes just like garlic but milder and you can cut it off to eat once it's about 4 inches long. If you let them keep growing, they'll get very tall and start curling like something out of a Tim Burton movie. Once they start to curl, they'll get tough and begin losing their flavor.

Garlic, two days after planting

Garlic, 1 week after planting

Harvesting Garlic
You'll know when your garlic is ready to harvest because its leaves will start to turn brown and wilt. As with the ginger, loosen the soil and carefully pull the whole thing up. Brush off the dirt and hang the whole thing in a cool, dry place for 2 to 3 weeks. They should be dry and not smell very strongly at this point. Cut off the foliage and peel off the outer layers of skin until it looks like something you'd see at the grocery store.

Storing Garlic
Do not seal your garlic bulbs in bags or airtight containers; this promotes molding and rotting. Garlic will keep in the fridge for 2 to 4 weeks, but the moisture level there is too high for it to keep long term. Garlic keeps longest in a cool, dry place, like in a terracotta jar or in the basement.

Growth update!
The habaneros still haven't germinated. I planted five seeds, 3 three weeks ago and 2 two weeks ago. Nada. I've heard they take as long as 2 months to germinate, so I'm not giving up yet. I'm keeping them in direct sun as much as possible to maximize warmth. Somebody I know said his didn't germinate until he started setting them on top of the clothes dryer every time he ran it.

The watermelon seedlings are growing, but not rapidly. We now have nine of them. No sign of the forget-me-nots germinating yet, but it's only been one week.

The basil and mint that I transplanted last week from the cuttings are flourishing, so I'm excited about that. I'm already dreaming of caprese salads.

Mint cutting transplant

Basil cutting transplants

Starting your own Herb Garden Part 4: The Indoor/Potted Herb Garden

2010-10-19T13:15:00.000-07:00

Missed the beginning of the series? Read them here: Starting your own Herb Garden: Part 1: The Benefits of Fresh Herbs, here: Starting your own Herb Garden Part 2: Planning and Layout, and here: Starting your own Herb Garden Part 3: Seed Starting and Growing from Cuttings

This week TAiMH will show you how to make a variety of beautiful recycled herb planters and get some ideas for creating your own unique indoor herb garden. It's time to get creative.

But first, an update on the seeds we planted last week in our totally recycled starter pots:

Yes, I confess these are watermelon seeds, not herbs. My herbs are already potted or planted. But you get the idea. It works.

8 out of 14 watermelon seeds (from farmer's market watermelon) germinated!

Also, I happened to buy a little ceramic elephant oil burner that came in this little clear plastic box. So instead of throwing away the packaging, I've recycled it into the perfect mini-greenhouse.

I planted habanero pepper seeds in these. They're notoriously hard to germinate. Cross your fingers for me.

Inside are more recycled starter pots, these ones made from styrofoam coffee cups. Starbucks espresso cups work well too, by the way. However, I certainly don't recommend buying disposable cups if you can bring your own travel mug for them to fill. MDT just happened to buy us surprise snacks at the fair last week, which came in these.

Recycled mini-greenhouse

Now that your little seeds have germinated, the next step is to pot them. Here are some ideas for creative recycled planters

Hack #1: Turn vegetable cans/tins into a matching set of planters for your indoor herb garden.

Materials

vegetable cans/tins (remember to poke holes in the bottom for drainage)
ribbon, buttons, bottle caps, bows, or any other little decorative, waterproof things you've got lying around
a hot glue gun (or at least some super glue)
Scotch tape
Sharpies

Possibilities:

I've been dying to do one covered in multicolored buttons, but I haven't collected enough yet.

Need more inspiration? How about these great recycled planters:

culantro (related to cilantro) in a broken concrete block

2 liter bottle herb garden from GreenScaper

Coffee can hanging planter, tutorial on Beach Petals

recycled windowsill herb garden, from Apartment Therapy

If you haven't got any suitable materials to recycle into planters, why not buy some cheap ceramic pots and paint/decorate them yourself? Fresh paint is also a great way to recycle an ugly old pot into a pretty one that matches your kitchen. ;)

Plain ceramic pot $1, painted with acrylics

Ready to transplant?

Transplanting Seedlings
When your herb seedlings are about 3-4 inches tall, they're ready to transplant into your new lovely planters. Fill your new planter to about an inch from the top with potting soil and make an indent in the center in which to place your seedling. Peel off the masking tape from around the starter pot, carefully remove the paper bottom, and place your seedling, paper towel roll and all into your new planter. Water lightly.

Transplanting cuttings
When your cutting has roots at least 4 inches long, you're ready to transplant it. Again, fill your new planter to about an inch from the top with potting soil and make an indent in the center in which to place your cutting. To ease the roots' transition from water to soil, make sure the soil in the pot is very wet. I do this by simply pouring a bunch of water right into the indent I've made for the cutting, and immediately inserting the cutting. Then add soil to fill the hole, and water again lightly.

Basil (transplanted from cutting) and Cat Grass (from seed)

More basil cut from the same parent plant and transplanted

Next week, join us for our final Starting Your Own Herb Garden installment where we'll show you how to grow garlic, ginger, and other herbs you can plant straight in the ground.

Starting your own Herb Garden Part 3: Seed Starting and Growing from Cuttings

2010-10-11T16:40:00.000-07:00

Missed Parts 1 & 2? Read them here: Starting your own Herb Garden: Part 1 and here: Starting your own Herb Garden Part 2: Planning and Layout

This week we'll learn how to start your seeds indoors for later planting outside, and how to start a new plant from a cutting.

Indoor Seed Starting
Hack #1: Make your own "peat" pots for free
The point of starting your seeds in peat pots rather than in plastic containers is that you can put them straight in the ground, pot and all, and not have to worry about ripping roots. But you don't have to go out and buy these guys, you can make them yourself with household items.

Materials
For the pots:

a newspaper (B&W pages only)

several toilet paper/paper towel rolls
scrap paper
masking tape or string

For the tray

a plastic grocery bag
duct or masking tape
a cardboard box

Directions
If you're using paper towel or toilet paper rolls:

For toilet paper rolls, cut in half. For paper towel rolls, cut in four.
Wrap a piece of masking tape around the middle of each roll. This is so that after a few days of watering, the rolls don't start to come apart and unravel (like they are in my picture).
Cut your scrap paper into roughly 4" x 4" squares.
Stuff a square of paper into each roll and shape it to form the bottom of the pot.

If you're using newspaper:

Find a cup, jar, or can with roughly the circumference you want for your pots (about as big around as a toilet paper roll).
Take a sheet of newspaper and wrap in around the jar several times. Then fold the remaining length on the bottom to cover the bottom of the cup/jar/can.
To make the bottom stay put, wet it just a little. I use my ironing spray bottle. Then smash it down hard.
Slide your new pot off the jar/can/cup and fold the remaining length on the top down inside the pot to strengthen the walls. Spray with a bit of water if necessary.
Let dry.
Repeat process for each pot.

toilet paper starter pots with paper bottoms and potting soil

For a tray to put them in:

Cut down the sides of your cardboard box to about the height of the pots.
Cut your plastic grocery bag down the sides, and cut off the handles. Use it to line the inside of the box. Tape in place.
If you're going to plant more than one type of seed in the tray or you're making more than one tray, you might want to label the outside of the tray/box with a marker, so you don't forget what you've planted where.

Planting Your Seeds
Hack #2: Instant Greenhouse

Materials

Starter pots and trays
potting soil OR regular soil plus liquid fertilizer (e.g., Miracle Gro)
plastic wrap or other clear plastic

Directions
Now that you've got your starter pots ready, it's time to plant.

First, fill your pots with soil. If you're using regular soil, spray each filled pots generously with the liquid fertilizer and then wait until tomorrow to plant your seeds.
Check your seeds packs for any special instructions, such as soaking the seeds in water. Then, using a chopstick or a pencil (eraser end), poke a hole about an inch deep in each pot (or less, depending on the type of seed) and drop in a seed.
Spray the seed with water and gently push the soil back over it. Do not press down. The soil should be loose, not packed.
Cut the clear plastic to fit and lay it over the pots.
Set the tray in a sunny window, under a lamp with an incandescent light bulb, or in some other warm location.

Messily taped but fully functional seed tray with starter pots and "greenhouse" (AKA clear plastic)

Keep your seeds warm and moist and they'll germinate in no time. Once germinated, they'll need sun as well as warmth, so clear some windowsill room. Leave the plastic on top only until the seedling get about an inch high.

Starting a New Plant from a Cutting
Materials

old soda or water bottle with a narrow mouth, clear plastic is best so you can see the roots growing
a plant that propagates from cuttings
liquid plant food (e.g., Miracle Gro) optional

Directions

Choose a stem with at least four leaves and cut it off on the diagonal, preferably just above a lower set of leaves. The cutting should be at least four inches long.
Fill your old bottle with water and gently set the cutting in it. Pour out excess water until only the bottom 2-3 inches of the stem is immersed.
Change the water every few days, adding a tiny bit of liquid plant food if desired.

Several mint cuttings, after about 2 weeks in water

Next week, Planting in Pots and Outdoors: Learn how to make a variety of beautiful recycled herb pots and planters and get some ideas for creating your own unique herb garden. It's time to get creative.

Starting your own Herb Garden Part 2: Planning and Layout

2010-10-03T16:28:00.000-07:00

Missed Part 1? Read it here: Starting your own Herb Garden: Part 1

Planning Your Herb Garden

Maybe you're thinking you can skip this step. Who needs to plan? Let's just throw some seeds in the ground! But some herbs are picky. Several are very difficult to germinate and are best started by cuttings from an existing plant. Some difficult to germinate plants don't propagate well from cuttings; these you'll be best off buying as seedlings. Planning is especially important with regards to timing and placement. Some plants prefer a shady spot, while others grow best in full or partial sun. Some need well-drained soil, while others can be put in a spot that gets a lot of rain.

Did you know that fall is the best time to plan your spring gardens? That's because it gives you plenty of time before spring to plan your garden layout and get your seeds on sale. It's also a nice opportunity to freshen up your living space for the long winter. A few fragrant potted herbs on the windowsills goes a long way to brightening up your home when outside things are chilly and dreary.

Herb gardens come in many different shapes and sizes. If your space outside is limited or you want to keep your garden growing year-round without fear of frost, you can plant your herbs in pots and keep them by a sunny window. Potting your herbs can also be a good idea if you have poor soil or if you live in the city and only have a balcony or rooftop for your yard. Some herbs like mint (see photos below), which will spread like crazy if you plant it in the ground, are simply better suited to pots. Plan well or all your efforts may go to waste. Not to worry, though. We'll show you how to make garden planning quick and easy.

Mint growth and spreading in 1 month

Step 1: Choose which herbs you'd like to grow and get the seeds.
You may want to grow a certain herb based on taste, smell, or just because it's pretty to look at. See the list of commonly used herbs in Part 1, but keep in mind that this is just a short list; there are many more choices available. If your local gardening store doesn't carry the seeds, you can order them from a seed company online. Since this is a blog about saving money, here are some tips for getting cheap seeds.

Ask your friends, relatives, coworkers, and neighbors if they have seeds or cuttings they could share with you.
Check your local dollar store. They'll often have seed packs of common herbs for less than a dollar a piece.
Late spring to midsummer is the best time to find seed packs on sale. Garden and home improvement stores will often put all their seeds on clearance around this time. Though it might be too late to plant them outside, you can always plant them inside in pots and move them outdoors in the spring or just hold onto them for next year. I've found that most seeds last at least one year after the expiration date stamped on the packet, with no ill effects.

Step 2: Determine when and where to plant your chosen herbs.
Read the seed packets or, if you're not planting from seed, just do a Google search for information. For partial-sun- or shade-loving plants, consider potting them and keeping them inside near a window or putting them in a hanging basket under an overhang. You can also plant them outside in the ground if you have a suitable shady area, perhaps along a wall or solid fence (to block harder rains) or under a deck overhang or awning. If your garden will be totally indoors, put the plants that need the most sun in a window that faces south or southeast (assuming you live in the Northern Hemisphere.) Most herbs will do fine with about 5 hours hours of indirect sun a day.

Also pay attention to the level of moisture preferred by each plant and check the soil in the various locations you've chosen to plant. You don't want to put a plant that prefers drier soil in a low spot where water tends to gather, for instance.

Step 3: Plan your herb garden layout.
Draw a simple map of your yard/balcony/apartment and label where you will place each plant according to your findings in Step 2. Don't forget to allot windowsill and porch space.

Example garden layout plan

Step 4: Schedule the planting.
When to plant your herbs depends partially on your location. Consult the seed packet/internet instructions for best results. Most of them will have a map showing the best time to plant those seeds in your area. Some plants have a better chance of surviving if they're started in peat pots indoors a little before outdoor planting time and then transplanted as seedlings into their outside beds. Consult those seed packets again. Now, on the garden plan you made in Step 3, note the outdoor planting time for each herb and whether you're going to start them indoors beforehand.

Example garden layout plan with timeline

Step 5: Make a planting timeline.
If you're only planting a few herbs you won't need this step, but it's helpful if you're planning a larger herb garden with many varieties. On the back of your garden layout plan or in the margin, make a list, in chronological order, of when you will plant and transplant each herb. This will help you stay organized so you don't forget and miss your planting times.

Basil in a sunny, well-drained spot

Next Up: Starting your own Herb Garden Part 3: Planting
Learn how to create recycled "peat" pots in which to start your seeds indoors, how to grow your garden organically on the cheap, and how to make a variety of beautiful recycled planters. Also: ideas for unique gardens. It's time to get creative.

Starting your own Herb Garden: Part 1

2010-09-27T10:09:00.000-07:00

The Benefits of Fresh Herbs

There are so many benefits to growing your own herbs. You save money on store-bought fresh herbs, which tend to be overpriced, and home-grown always tastes better. Plus, with your own herb garden there's no realizing you don't have the spice you need halfway into cooking dinner. You just step outside and pick it! And, did you know that herbs are extremely good for you? According to the Nutrition Diva, ". . . ounce for ounce, fresh herbs like oregano, rosemary, parsley, and basil are among the most nutritious greens you can find." Besides vitamins and antioxidants, she adds that "herbs are also very rich in a wide range of disease-fighting phytochemicals. Almost all green herbs have potent anti-bacterial and anti-inflammatory properties." She also notes that, like fruits and vegetables, herbs are most potent and contain the most nutrients when they are freshly picked.

Some commonly used herbs and their benefits/uses

Basil: helps regulate blood pressure and prevent free-radical damage, antibacterial, anti-inflammatory

Chamomile: helps calm the nerves and promote sleep, anti-inflammatory, antibacterial, antifungal, and antiseptic

Cilantro: helps increase HDL cholesterol (the good kind) and reduce LDL cholesterol (the bad kind), promotes healthy liver function, helps reduce menstrual cramping, antibacterial, anti-inflammatory, antioxidant

Dill: helps neutralize carcinogens, high in calcium, antioxidant

Garlic: lowers cholesterol and blood sugar levels, helps prevent blood clots and cancerous tumors, fights bacterial, viral, and fungal infections, and supports healthy heart function

Ginger: lowers cholesterol, stimulates blood circulation, helps relieve indigestion and joint pain, used as an expectorant

Oregano: high in iron and manganese, protects against and fights dysentery and is especially effective against Giardia, one of the most common intestinal infections caused by water parasites

Parsley: high in iron, folic acid, and vitamins A and C, antioxidant, antibacterial, diuretic

Peppermint: helps calm muscle spasms and relieve headache, nausea, and menstrual cramps, and gastrointestinal upset; used as a cough suppressant and decongestant

Rosemary: helps kill bacteria that cause infection, improve digestion, and clear congestion, may help prevent Alzheimer's disease, antioxidant

Sage: helps reduce digestive problems, sore throat, premenstrual cramps, and even excessive perspiration; lowers blood sugar, antibacterial

Thyme: helps protect against age-related change in the brain, high in manganese, antimicrobial

Pretty amazing, right? Next week, we'll get started on helping you plan and plant your own herb garden. Stay tuned.

References
http://www.vitaminstuff.com/herbs.html
http://www.nutrition-and-you.com/cilantro.html
http://www.whfoods.com/genpage.php?tname=foodspice&dbid=100
http://www.whfoods.com/genpage.php?tname=foodspice&dbid=77
http://www.vitaminstuff.com/herbs-peppermint.html
http://nutritiondiva.quickanddirtytips.com/are-herbs-good-for-you.aspx

Fun and Cheap Ways to Spend Time with Your Honey

2010-09-19T14:53:00.000-07:00

Let’s face it: the whole pizza-and-a-movie-at-home bit gets old really fast. So don’t let it get to the point of cholesterol problems from pepperoni grease or multiple viewings of Date Night. Your body, your mind, and your significant other will thank you. Simply browse through the following ideas for ways to spend time with your special someone that will get you out and about, learning more about each other, and having fun while nurturing your wallets.

Group or Double Date with Board and Video Games
This is a great idea if you know some other couples in your area who’d rather not break the bank over one night at a fancy restaurant. Schedule some group or double dates at each other’s houses or apartments, playing a new board game or trying out a new Wii challenge together. It will get you out of your own place, so it’s a change of scenery, and you’ll get to interact with other fun couples. Chances are that you’ll learn something new about each other, such as a hidden talent for singing Rock Band solos. You might still order some pizza, but changing one out of two tired dating habits isn’t too shabby.

Go Local
Try checking out your city’s website to find out if you have some of these events or venues in your area:

Farmer’s market: Reasonably priced and fresh, it’s also a fun place to go if you want to simply look around together. You can look up recipes beforehand, pick up the perfect ingredients at a budget-friendly rate, and enjoy cooking a meal together later in the day.

Art, history, or science museums: These are often free or very reasonably priced for admission. You’ll learn something about the world around you and might even discover a special interest or hobby that your date is passionate about.

Used bookstores: If you’re of the literary persuasion, this is fun, interesting, and expands your book collection for next to nothing. Find out what kinds of books you both enjoy, then get double the value by reading each other’s purchases.

Consignment shops: If you ever do go out on a “real” dinner date, dress each other up for the special occasion by shopping together at consignment shops. Make a deal that you’ll set up a budget for the outfits and that you each have to wear what the other one picks out.

College and university exhibitions: Students in all kinds of arts programs often set up events that are free and open to the public, such as art exhibitions, dance and music recitals, and theatre productions. If there’s a charge, it’s usually minimal and goes to support higher education, so you’re not throwing your money away. You might enjoy the experience and find that you’re frugal patrons of the arts.

State or national parks: Make a day trip of it, bring a picnic, and have a great time. You might invest in some good trail shoes, but otherwise, you won’t have to buy anything. Most parks have free admission, and if not, the fee should be low (around $10). If the park you choose does charge too much, try gardens at universities and colleges for your picnic location.

This article was written by guest blogger Alexis Bonari of www.collegescholarships.org. Thanks for the ideas, Alexis!

Make a Cat Scratching Post for FREE

2010-08-16T10:35:00.000-07:00

So, yesterday I made a scratching block for my cats, in under 20 minutes, just like the ones I've seen at pet stores for up to $25 (see below). For absolutely free. And it's double-sided!

Materials:

corrugated cardboard (from shipping inserts, old cardboard boxes, etc.) If you don't have any around, ask at your local corner store or grocery store if they have any extras lying around. That's what I did.
duct tape
scissors or a box cutter
ruler
pen or pencil
glue (regular school glue works just fine)

Directions

Take apart your box so you are left with flat pieces of cardboard.
With your ruler and pencil, measure and mark 2" strips, the desired length of the scratcher. (Mine is roughly 18" long because that's how long my boxes were once I disassembled and flattened them.)
Cut out the strips. Don't worry about creases. They don't matter.
Keep cutting out strips until you have enough, when stacked on top of one another and smashed together, to make the desired width of your scratcher. Mine ended up being about 6" wide. Next time I might make it a bit wider.
Once all your strips are cut, it's time to glue them together. Put a generous line of Elmer's on your first strip, lay another on top and repeat for the rest of the strips, making sure they're lined up evenly and working quickly so your glue doesn't dry yet.
Duct tape each end together to hold them in place and then place a couple of bricks or something else heavy on top of the whole thing to compress it and help the glue set.
Wait 10-15 minutes, remove the bricks, duct tape 2 layers around the whole thing to secure it, and you're done.

Tips:

As a treat, sprinkle some catnip on the scratcher every once in a while.
I find my cats like the scratcher best either on carpet or a rug; otherwise it can slide while they're scratching--unless they're sitting on top of it like Ed likes to do.

Recipe: Enchiladas that taste better than the ones you get at restaurants

2010-06-27T12:10:00.000-07:00

We haven't posted a recipe in a while, so here's a most delicious one that's supremely easy and quick.

Ingredients
1 pack of whole wheat tortillas
2-3 green onions, finely chopped
2 cans fat-free refried beans
1 can of diced tomatoes OR 3-4 medium tomatoes, diced
1-2 jalapeño peppers, finely choppe
1 can enchilada sauce
1 bag shredded reduced-fat Mexican cheese
large handful of fresh cilantro, finely chopped

Preface
In my opinion, the enchilada sauce in the most important ingredients. Enchiladas are just not enchiladas without the sauce. Do not attempt this recipe without it. I find it difficult to make my own that has the right taste and super-smooth liquid texture, which is why I use the (delicious) stuff in a can, but if you can do it, go for it (and send me your recipe!)

Directions

Heat the beans in a pan just until warm and soft.
Line an oven dish with aluminum foil and preheat your oven to 350.
One by one, prepare your enchiladas side by side in the oven dish, making sure to place them snugly; this will help hold the tortillas in place so that they don't unfold. Spread refried beans down the middle of a tortilla. Follow with a spoonful of enchilada sauce, a scoop of diced tomatoes, a sprinkle of green onions, and a sprinkle of cheese. Roll tortilla closed and repeat to make the next one.
When all the enchiladas are made and in the oven dish, pour the enchilada sauce generously over the whole lot and sprinkle cilantro and cheese on top of the sauce.
Bake for 10 minutes or until the cheese on top is melted.

Serving Suggestions
Try these accompanied by rice, salad, and fried plantains.

Money-Saving Laundry Tips: Quick Tips for Saving Your Cash and Your Clothes

2010-06-10T15:44:00.000-07:00

Use less soap. Detergent makers want as much of your money as they can get. One way of accomplishing this goal is to advise you to use much more of their product than is necessary. For a large load, 1/2 cup is usually plenty. Too much detergent (often the advised amount) can actually leave your clothes less clean and cause them unnecessary wear and tear.
Use cold water whenever possible. Unless your clothes are seriously soiled, cold water works just fine.
A little soaking goes a long way. For particularly dirty laundry or tough stains, instead of using hot water, soak the load for a couple of hours before washing. (Follow the instruction on your washing machine to load, add detergent, and fill as usual, but stop the cycle before it starts agitation.)
The sooner you treat a stain, the easier it will be to get out. Whatever your preferred method of stain-fighting, do it as soon as possible. Set-in stains are very difficult to get out.
For organic stains, such as blood, do not use hot water. Rinse immediately with cold water and wash as soon as possible. If you can't wash the item right away, soak it in a bucket of cold water and a sprinkle of soap until you can.
For particularly potent items (think day-old, soaked-in-sweat soccer socks), before washing, soak for at least one hour in a bucket with either a capful of bleach or 1/2 cup of baking soda and 1/2 cup vinegar.
If you want to use fabric softener, go with dryer sheets instead of liquid softener. They're almost always much less expensive (and easier to lug home from the supermarket).
Line-dry your clothes whenever weather permits. Do your washing in the morning to allow for drying during the sun's most intense hours. My laundry often dries in under two hours this way. If you're like me and don't like the slightly stiff feel your clothes get drying in the sun, just pop them in the dryer for 5-10 minutes afterwards, along with a clean, damp (not wet) rag, and a dryer sheet (if desired).

Know any other money- and/or environment-saving laundry tips? Leave them in comment below!

Frugal Home Decor: Add seating and color to your patio with a DIY recycled patio bench

2010-05-24T18:19:00.000-07:00

We have pretty magnificent sunsets here. And there's nothing like relaxing on the porch and having a couple drinks in the evening. All we used to have for seating, though, were a couple of ugly plastic chairs, and those finally cracked and broke. So I set about gathering materials to build some deck furniture. I'm no expert carpenter, mind you, so I kept it simple for my first project: a wooden bench (cushions to come as soon as I can get by the fabric store). This is about the most simple bench you can build and it requires very few tools. It's a super quick, super easy, and super cheap, afternoon or weekend project.

All the materials used to build this bench were recycled, except the paint, and we got that on sale because it was already mixed. Even if you had to buy the wood, too, you'd spend less than $15.

Supplies:

4 2x4s, the desired length of your bench (we got these from a neighbor who had them left over)
hammer and nails
a hand saw or circular saw
1/2 quart of indoor/outdoor wood paint (if you have some leftover from another project, all the better)
a paintbrush
concrete cinderblocks or other support (leveled tree stumps, upside-down metal buckets, etc.)

Directions:

Take one of your 2x4s and cut from it 2 11" lengths. These are the pieces that will hold the your bench seat together. Scrap the rest of that plank and keep it for another project.
Using an electric sander (unless you want really sore hands and arms), sand one side of the 3 long 2x4s until very smooth. Don't forget the edges and corners.
Prop all 3 planks, smooth side down, atop your supports (or two sawhorses, etc.) and align them carefully. Place the two shorter pieces across them at either side, 5-6 inches from the edges, and mark around them with a pencil. If you have C clamps, you can skip the pencil marking and just clamp them together.
Flip everything over, realign, and place one nail in the center of each long plank, aligned with the center of the short support pieces. (See image below.)
Flip everything back over and hammer the sharp ends of the nails sideways so that they're flat against the wood.
Paint! Follow the directions on the can as to how long to wait between coats; you'll probably want at least 2.

Et voila! Your new patio bench.

Tip: Use leftover paint to color other accent pieces on the porch or around the yard for a unified look. I used mine on some upcycled flower pots.

Decorating/Gardening on the Cheap: Pineapple Top into Interesting Houseplant

2010-05-10T05:30:00.000-07:00

Looking for something to spice up your office or home interior? Add a little green (and sometimes pink) to your environment with a new, free houseplant. Pineapples make great houseplants; they don't attract bugs, they don't require much care, and they're incredibly easy to grow. Have a cat that chews on every plant or flower you bring into the house? No worries, the pointy, thick leaves of a pineapple plant won't interest them. And, if you treat your pineapple plant well, you may even be rewarded with a cute little (edible) baby pineapple.

Here how you do it:

Next time you buy a pineapple at your local grocery or farmer's market, make sure it has a nice green top. The leaves shouldn't pull out easily, and the bottom of the pineapple should smell strong and sweet. If your pineapple is still a bit green, no problem, just perch it upside down (to help it ripen evenly) in a windowsill when you get home and wait a few days for it to turn yellow. If it's just a tiny bit green, it's probably just fine to eat. An overripe pineapple is not a pretty, or tasty, thing.

When you're ready to eat it, use a towel or garden glove to grab the whole green top and twist is gently off. Don't pull, just twist. If you're lucky, your pineapple top will already have some rootage going on, like in the photo below, or at least a row or two of root nubs.

Then, cut off the little bit of fruit left on the stump with a knife and, starting with the lowest set of leaves (usually brown and dried), rip off the several bottommost rows of leaves until your pineapple plant will sit nicely in a jar of water with the stump immersed. Set your new plant and its jar in a window (it doesn't have to be very sunny) and wait. In a week or two, your new little friend should have enough roots to plant in a pot, or even directly in the ground.

Pineapple #1 after a few days in water on the windowsill.

Pineapple #2 after a few days in water on the windowsill.

If you live in a tropical or near-tropical locale, and you can plant your pineapple in the ground rather than in a pot—just be aware that these plants get extremely large when allowed to do so, and will take up a lot of space in your yard. They do, however, take kindly to being trimmed, but in my opinion they don't look as nice that way.

We eat a lot of fresh pineapple around here.

Once your little friend has established an inch or so of roots all around, he's ready to be planted. You can use potting soil, but mine did fine in just regular dirt. You can start with a little 6" pot, like I have and repot as it grows, or you can put it directly in a larger pot (20" or so ought to do it) so you won't have to move it.

Newly potted pineapple (along with newly potted orange and lime trees).

Pineapple plants like full sun to partial shade, warm weather, and moderate watering. Keep the soil moist, but don't overwater. If you live in an area that gets cool, bring your potted pineapple inside when it starts to get cold, way before any danger of frost. Pineapples are hardy, but they are tropical plants.

First pineapple in the ground, just planted.

First pineapple (front) still doing well, now accompanied by four others (along with some rosemary and wild chayote).

I now have one pineapple plant in a little pot and six lining the fence in my backyard. I have to choose wisely what I plant along this fence because there are often cows grazing on the other side of it. I'm fairly confident they won't want to chomp on sharp, slightly serrated pineapple leaves, and tiny, needle-like rosemary leaves, but the chayote I'm not sure about. But it just popped up there, so there's no point in pulling it out.

Pineapple plants take at least a year, usually two, to bear fruit, so be patient. In the meantime, your living space will benefit from your pretty new houseplant and some extra, freshly created oxygen.

Carnival of Money Stories 2: Disaster Issue

2010-03-08T05:00:00.000-08:00

Welcome to the March 8, 2010 edition of carnival of money stories 2. I've decided to go with the disaster theme based on the content of some of the posts submitted, most insignificantly but amusingly, Jim's (at Blueprint for Financial Prosperity) which revolves somewhat around the apparently impending zombie invasion.

Enjoy!

Editor's Choice

Usually picking the editor's choice articles is challenging, but this week one article stood out so much (inspiring, refreshing, and well-written) that I have no choice but to give it the number one spot. I don't know where Baker found her, but I'm glad he did. You should take a look at her own blog/site while you're at it:

Baker presents a guest blog by Carmen 8 Effective Ways to Raise Frugal Kids posted at Man Vs. Debt, saying, "Follow these 8 simple, but effective tips to buck the consumerist trend and raise frugal kids!"

However, the prize for most humorous comments goes to.... jim at Blueprint for Financial Prosperity for his post Best Places to Hide Money At Home.

And I'd like to highlight CreditCardAssist's post on How to Donate to Relief Organizations simply because the world could use more good samaritans.

Business

Ryan @ Cash Money Life presents How to Organize Small Business Finances posted at Cash Money Life, saying, "Tips on how to organize your small business finances, including how to separate your personal and business income, use business checking and savings, accounting software, and more. Essential reading for small business owners and freelancers!"

FMF presents Office Depot's Strange Way of Applying Coupons posted at Free Money Finance, saying, "My unusual experience with Office Depot."

BWL presents 3 Mistakes to Avoid if You're Self-Employed posted at Christian Personal Finance, saying, "Whether you’ve decided to turn your blog into a business, sell a multi-level marketing product or rent a storefront to start selling your homemade jewelry there are some mistakes you will definitely want to avoid…"

Investing

Adam presents Don't Act your Age: How to Keep Saving and Keep your Friends posted at Magical Penny, saying, "Some people begin investing because they think they should, but they haven't fully worked out the right amount to invest. They could easily get discouraged by friends or by other needs if they haven't budgeted correctly. This article is full of points to help maintain your resolve; to not act like most other young people; to show respect to your pennies in the present for a better future tomorrow (and so you don’t have to rely on the lottery in your old-er age)."

Silicon Valley Blogger presents Best Ways To Invest Small Amounts of Money posted at The Digerati Life, saying, "Some of my personal stories and examples of how I've been able to make my money grow with only small outlays towards various investments."

The Dough Roller presents How to Open a Scottrade Brokerage Account Online posted at The Dough Roller.

Other

Money Beagle presents I Love When The Free Money Fairy Stops By posted at Money Beagle.

Craig Ford presents How to Afford to be a Stay at Home Wife or Mom posted at Money Help For Christians, saying, "Outlines a step by step plan for couples who want to live off one income."

Jeff Rose presents What Happens When a Life Insurance Policy Lapses posted at Jeff Rose.

me in millions presents Moneytalk Class #3: Planning for Future Life Events posted at me in millions, saying, "As a twenty something, I never really gave much thought to end of life issues. I just took a class and this is what I learned."

2 Cents presents Financial Literacy Is Like Green Eggs and Ham posted at Balance Junkie, saying, "This article looks at some good reasons to become more financially literate and encourages us, like Sam I Am, to try it!"

Sun presents TurboTax 2010 Has Some Nice New Features posted at The Sun’s Financial Diary.

The Smarter Wallet presents The Truth About Bank Fees: What Your Bank May Be Hiding posted at The Smarter Wallet, saying, "On banking matters."

Shopping

For the ocularly challenged among us, Tom @ Canadian Finance Blog presents How I Got $8 Glasses posted at The Canadian Finance Blog, saying, "Alan lets us know how he was able to get new glasses for only $8!"

And just because I can:

I'd take zombies over that any day. Aaaaand that concludes this edition. Hope you enjoyed it. Submit your blog article to the next edition of Carnival of Money Stories 2 using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Pet Food: Save Money (and your pet's health) by Preparing Your Own

2010-01-06T13:10:00.000-08:00

For years our cats were accustomed to eating the rather expensive Nutro brand dry cat food. But after moving to a small town, we found it quite difficult to find dry food for our cats, period, let alone good food that doesn't contain animal meal, by-products, or tons of corn and other grain fillers that cats don't need in their diets.

Turns out the unavailability of cat food here has been a blessing in disguise.

First we gradually switched them from their regular dry food to canned tuna, but after some research found that an all-tuna diet, especially canned tuna prepared for human consumption, can be unhealthy for cats over time.¹ Since the dry food we have access to isn't good for them and feeding them tuna all the time isn't either, we were back to the drawing board. After some more research we decided to switch our cats to a raw diet—well, partly raw. We now feed them either small chunks of raw chicken or boiled fish (boiled because still more research showed that raw fish may be unhealthy for cats². The jury seems to be out on that claim, however, as many raw feeding advocates seem to think raw fish is just fine.³

The new diet has been a great decision for us and for the cats. They've been on their new diet for about three months now, and they're clearly thriving. Their coats are shinier, they have tons of energy, and Esmie's little dandruff problem has completely cleared up, all on its own. We now save on the exorbitant price of high-end (read: barely decent) cat food—our old dry cat food of choice costs around $14 for a 4-pound bag and contains a large amount of unnecessary grain filler.⁴ Best of all, the cats love their new meals so much more.

What We Buy, How We Buy
Our local fishmonger sells fish scraps for about $1.50 a kilo (68 cents a pound). Try asking for leftovers or scraps from your fish retailer or at the seafood section in your supermarket. They may not be as cheap as they are here in Costa Rica, but they'll be much cheaper than, for instance, fillets. Be aware, however, that very large fish such as tuna, salmon, tilefish, and king mackerel may contain high levels of mercury and other dangerous toxins since they are at the top of the fishy food chain.

Chicken gizzards and "cuts" also run cheap. Here, the gizzards (or "extras": liver, heart, and other organs) also go for about $1.5o a kilo (68 cents a pound), while the "cuts" (pieces of wings, legs, and thighs) are about $3 a kilo ($1.36 a pound). You should be able to find these for cheap at any butcher shop.

Preparation
Our cats seem to prefer the chicken livers and hearts, but it's often worth it to me spend the extra $1.50 to avoid juggling those slippery organs. As for preparation, I cut off all the meat from the bones, separate the pile of meat into small meal-sized piles, and then package and freeze the meals individually. Upon butchering, I discard the bones or give the cats a large bone each as a snack (and as a reward for controlling themselves while I handle all that delicious raw meat in front of them). Each day we thaw a meal for breakfast and one for dinner. We never freeze or cook the bones; we've learned these can both cause them to splinter easily, which could create a choking hazard.⁵

Savings
For our cats, each kilo of chicken or fish meat yields roughly 10 meals, about 1/2 cup per meal. So if we feed the cats fish or chicken gizzards, we spend about 15 cents per meal, and if we feed them chicken cuts, we spend about 30 cents per meal. We rotate the three types of meat on a fairly regular basis, so the average price per meal is about 20 cents.

Compare that to the cost of our old Nutro brand kibble—about 60 cents per meal, according to their suggested serving size—and we're saving quite a bit of money: 40 (depending on the type of meat) per meal, which comes out to nearly $25 a month per cat. I don't know about you, but saving $50 a month with little hassle and added health benefits for them sounds pretty cool to me.

Questions or thoughts about feeding raw or savings money on pet food? Leave us a comment!

Notes

According to PetEducation.com, a website of veterinarians Drs. Foster and Smith, "large amounts [of canned tuna formulated for human consumption] can cause malnutrition, since it lacks proper levels of vitamins and minerals." http://www.peteducation.com/article.cfm?c=1&aid=1029
An article on Australia's CatWorld.com also cites human-grade canned tuna as a cause of yellow fat disease or steatitis. http://www.cat-world.com.au/steatitis-yellow-fat-disease-in-cats
The same article from PetEducation.com lists raw fish as dangerous for cats because it "can result in a thiamine (a B vitamin) deficiency leading to loss of appetite, seizures, and in severe cases, death. More common if raw fish is fed regularly." See also the article "Eight strikes against fishy feeding" at the Cat Nutrition Blog.
See for instance RawFedCats.org's "Practical Guide." ProVet.co.uk also considers fish to be "a good raw ingredient to incorporate into cat foods," but concedes that it "has certain draw backs."
Nutro Natural Choice Complete Care Ingredient List
See http://www.rawmeatybones.com/faq.php#CookedBones and http://www.rawfed.com/myths/bones.html

Additional References and Resources

Excerpt from "Food Pets Die For: Shocking Facts About Pet Food." Ann N. Martin. NewSage Press (1997). Website of Jeff Feinman, VMD.
"The true horrors of pet food revealed: Prepare to be shocked by what goes into dog food and cat food." Jessica Smith. NaturalNews.com
"What's Really for Dinner? The Truth About Commercial Pet Food" Tina Perry, Animal Protection Institute. Reprinted from The Animals' Agenda Nov/Dec 1996.
"What’s Really in Pet Food" Born Free USA united with Animal Protection Institute. May 2007. An incredibly informative, thorough, and well-cited article.
"Pet Food Regulation" Jean Hofve, DVM. The Whole Dog Journal and Little Big Cat.
RawFedCats.org
RawFedDogs.net
RawLearning.com
Yahoo Raw Feeding Group
Yahoo Raw Fed Cat Group

No-Bake Cookie Twofer: Oatmeal Dark Chocolate Cookies and Coconut Bon-Bons

2009-12-28T15:03:00.000-08:00

Image via Wikipedia

I hate to cook, but I quite like to bake. This really doesn't work out well for me because we don't have an oven here in Costa Rica. What's a girl to do for delicious baked goods during the holidays without an oven? Buy them at the local bakery? Nope. The bakeries here don't make anything good (in my opinion) besides doughnuts and whole cakes; everything else is dry and brittle, full of hydrogenated oils (trans fats), and/or tasteless. Costa Ricans also seem to be generally confused about chocolate; for some reason they think it's supposed to be made with shortening and have no taste of cocoa whatsoever. The result is much like the oily and rubber-like "icing" top on a Hostess cupcake. No thank you.

My solution to the no-oven dilemma? No-bake cookies! That's right, cookies made entirely on the stovetop. Quick, easy, delicious.

These first cookies, I'll admit, don't look that great, but they *do* taste good. A variation that I tried with half the batch is to roll them into balls instead of just plopping them onto the wax paper. Let them chill in the fridge an hour or two and then roll them in powdered sugar, so they end up looking like doughnut holes. The result is a much prettier, still tasty cookie that looks nice when paired with the bon-bons in the following recipe. Almost like I planned them to go together.

Dark Chocolate Oatmeal Cookies

Ingredients

2 cups sugar
1 stick butter (1/2 cup)
1/2 cup evaporated milk
1 tsp vanilla
2 1/2 Tbs cocoa
1/2 cup peanut butter (optional but recommended)
3 cups rolled oats (or sub rice krispies cereal)
1 cup powdered sugar (optional)

Directions

Combine all ingredients except peanut butter and oats in an medium-size pot and cook over medium heat. Bring to a boil.
Let boil for about 5 minutes, stirring constantly.
Remove from heat and stir in peanut butter and oats.
Spoon out quickly onto wax paper or aluminum foil.
(optional) Refrigerate for 20 minutes to an hour, then roll into balls and coat with powdered sugar.
Cookies will harden as they set.

Coconut Bon-Bons

Ingredients
1 (15 ounce) can sweetened condensed milk
1/2 cup butter margarine
2 1/2 cups sugar (powdered works best, but either will do.)
1 (12 ounce) package shredded coconut
1 cup cocoa powder
1/2 cup whole milk/cream/condensed milk
1 cup crumbled or ground peanuts

Directions

Mix together condensed milk, butter, 2 cups sugar, and coconut. Cover with wax paper and chill for 24 hours.
In medium-sized saucepan, combine cocoa powder, milk, and remaining 1/2 cup sugar. Bring to a boil, stirring constantly. Remove from heat and let cool 20 minutes.
Roll coconut mixture into 3/4-inch balls and dip into chocolate.
(optional) Roll in nuts.
Place on wax paper to cool and dry.

Serving suggestion: Ever had frozen bon-bons? These are better; I guarantee it. Freeze them. You'll thank me. There's a reason there's only 1 left.

Give Homemade, Wrap Homemade: How to create your own festive and frugal wrapping paper, gift bags, and gift boxes.

2009-12-21T19:33:00.000-08:00

Since we've dedicated the last several posts to homemade and frugal gifts, it's only fitting that we now share homemade and frugal ways to wrap those gifts. There's no use worrying about saving money on gifts and then spending the money you saved just to wrap them, right? So here are some ideas for cheap, cute, thoughtful giftwrap.

Make your own wrapping paper
Turn paper grocery bags into functional works of art. Use them plain and dress them with pretty ribbon or colored twine or get creative and decorate the paper with paint, crayons, or colored pencils.

If you're making paper for more than one gift, chances are you'll want to mass-produce to save time. This is where the stamps come in. Use rubber stamps and ink, X-mas cookie cutters with paint or make your designs by carving some potato stamps. If you've got kids, give them some finger paint or crayons and let them go to town. This is a great opportunity to involve them in the giving process.

If you don't have paper grocery bags lying around, art and school supply stores offer economically priced brown or white butcher paper on large rolls. No paint around? Dying with coffee or tea can give some surprisingly classy-looking results. I especially like the vintage-y combo of coffee or tea-dyed newspaper.

Alternate Wrappings
Don't have the time to make your own wrapping paper? Or perhaps you're not feeling very artistic? No problem. Try wrapping gifts with other spare items such as:

scrap fabric
Image via Wikipedia
maps (if you don't have a bunch of old ones lying around like I do, you can pick them up from your local tourist information office for free)
old newspapers or comics
children's artwork
magazine pages—choose festive spreads or be clever and pick pages that hint at the recipient's interests or even the gift itself

Boxes, Bags, and More
Need something to protect your gift before you wrap it? Try one of these before you pay for a gift bag. (If you must buy gift bags, hit up the dollar store first; they usually offer them for 1/4 what regular stores charge.)

shoeboxes
coffee cans
oatmeal canisters
baskets
glass jars

check out this tutorial about how to turn a cereal box inside out for a frugal, eco-friendly gift box

Tags
Hole punch, add ribbon, et voila!

scrap cardboard from food boxes
scraps leftover from grocery bags or wrapping paper
cards from old board games
playing cards
last year's Christmas cards

Bows/Gift-toppers

old hair ribbons, bandannas, or scarves
scrap fabric or ribbon
Christmas ornament (homemade or otherwise)
for children: spare GI Joes, Polly Pockets, or other small toys
a sprig of holly or spruce
tissue paper (or plastic grocery bag) pom-poms
candy canes or other festive-colored candies
a few loops of cranberry garland
small glittered pine cones
paper grocery bag handles (these can be quite easily glued into cute bows)

Giveaway: Peapod $10 credit

2009-12-16T16:49:00.000-08:00

Image via Wikipedia

In honor of nothing in particular, TAiMH is giving away a $10 credit, good on your next order from Peapod.com, the online grocery delivery service. There's no minimum purchase amount to use this credit, so if you just want to get $10 of free groceries, that's fine by me. Use it however you like. If you don't already have a Peapod account, it's quick and easy to open one. Peapod's service is not available everywhere; check their website for details.

To enter the giveaway, just leave your e-mail in a comment below, so we can contact you with the credit code when you win. ;)

Giveaway ends 12/30.

Disclaimer: Peapod.com does not sponsor this blog in any way. I'm pretty sure they have no idea we even exist.

Quick Hack: Easy Recycled Materials Christmas Candle Holder

2009-12-14T11:43:00.001-08:00

Make a pretty, festive, tapered candle holder for absolutely free with items you have sitting around the house.

Materials
4 toothpicks
glue
1 candle
2 rubberbands
pocket knife or craft knife
wide ribbon or scrap of fabric
any plastic container with a spout that roughly fits your candle (I used a small bleach bottle.)

Directions

Cut your container about 2 inches from the top.
Cut it again about 3 inches from the bottom.
Discard the middle piece.
Invert the top piece and insert it into the bottom piece. Glue to secure them together. This is your holder.
With your knife, cut small notches into the middle of your toothpicks. This isn't essential, but it helps the glue hold them together better. Two of the toothpicks will need one notch on each side; two of them (the top and bottom toothpicks) will only need one notch each.
Stack your toothpicks in a star formation and glue, preferably with either superglue or a hot glue gun.
While the star is drying, wrap your ribbon or scrap fabric around the holder and glue in place. Use the rubber bands to hold the ribbon or fabric in place while the glue dries.
If desired, paint or otherwise decorate the star. Gold glitter looks especially nice in candlelight, I think.
Once both the holder and the star are dry, glue the star onto the ribbon/fabric. Balance between the candle and the toothpick container until it dries, et voila!

33 Easy and Frugal Homemade Holiday Gift and Decoration Ideas

2009-12-14T06:51:00.000-08:00

Image via Wikipedia

With the unemployment rate at a record high and the economy doing so poorly, many of us have resigned ourselves to giving and receiving less this holiday season. But that doesn't have to be the case. Homemade gifts are more thoughtful and personal, as well as more frugal. There's no reason being on a budget has to mean toning down the fun and festivity of the giving season.

Making homemade gifts for kids can be more challenging. They've likely had a list of expensive toys or video games ready for the past month. If this is the case, choose one or two of the less expensive items on their list and combine it with one or more homemade gifts from the "Especially For Kids" section below. This way they get just as many presents as they're used to, but you spend less money. Plus, it's a great way to introduce children to being creatively frugal and ushering them away from consumer comercialism.

The key to creating fantastic, frugal, homemade gifts is to know your strengths. What do you do well? Cook? Bake? Sew? Build? Knit or crochet? Draw? The following are a set of lists of inexpensive, easy-to-make homemade gifts your friends and family are sure to adore, organized by talent. I haven't seen this type of organization before; I hope it's helpful.

Cooking

Homemade preserves, jams, and spreads. Make a variety, put them in cute jars with printed or handwritten labels, and arrange the jars in a basket. You can often find small inexpensive baskets at garage sales, craft stores, or home and garden stores.
Homemade sauces, condiments, and marinades. Package as in #1.
Homemade cookbook or recipe cards. Know someone that loves your cooking? Compile recipes of their favorite dishes (or ones you think they might like). Print them on paper and arrange in a decorated binder or write them by hand on homemade recipe cards. If you're not strong in the art department, you can usually find cute sets of inexpensive blank recipe cards at Marshall's. If you can find or decorate a cute box for the cards, even better.

Baking

Loaf of special homemade bread. Make it a regular white loaf, or if your loved one is more health conscious, try a whole wheat or mixed whole grain loaf. Tip: Spice it up: make a flavored and herbs like rosemary, dill, tomato-basil, or sourdough or make it look fancy by braiding it.

If fresh bread won't work for travel or other reasons, try making bread mixes instead. Put each in a small paper bag and label nicely. Include handwritten recipe cards with instructions. Collect bags in a basket or larger gift bag.
Two words: gingerbread men (and/or women, snowmen, wreaths, etc.) These are super fun to make and decorate and they're a great project to do with kids. Make them to eat or to use as ornaments.
Assorted homemade cookies. This is good if you have multiple people to "buy" for. Make one or more batches (depending on how many people your giving to) of several types of cookies and package in small baggies tied with festive ribbon. In a nice basket or other container, one for each gift recipient, put one baggie of each type of cookie. If you're in a pinch, even personalized brown lunch bags can be prettied up. As in #1, if the gifts have to travel a ways or for other reasons keep for a long time, consider making mixes instead.
Homemade pancake, waffle, muffin, or biscuit mix. Package as above. A small wooden scoop is a nice touch. You can find these at craft stores. Package the mix in small brown bags or mason jars tied with a ribbon and hand-labeled.
My all-time favorite baked gift: cherry pie. Do not underestimate the giving power of a homemade pie. Cake, flan, or other delicious desserts are also welcome. (Hint, hint.)

Sewing/Knitting/Crocheting

Handmade tool belt, tote, makeup bag, purse, pencil organizer, or messenger bag.
Ready-to-hang embroidered or needlepoint work in frame.
Embroidered/personalized handkerchiefs, scarf, pillows, or sachets.
(Relatively) quick knitted/crocheted items such as scarves, gloves/mittens/glittens, cozy winter hats, socks, woven belts, etc.

Building/Crafting

Picture in handmade frame: Make your own from wood, or if you're less skilled with carpentry, try making simple ones from rigid cardstock and decorating them with felt, marker, paint, fabric, and/or glitter.
Handmade Christmas ornaments. Ideas: dyed popcorn and/or cranberry strands, oranges with cloves, gingerbread ornaments, sparkly pine cones, photo ornaments, paper snowflakes, felt cutouts, etc.
Try this fabulously simple salt-dough recipe to make paintable ornaments: Combine 1 cup flour, 1/2 cup salt, and 1/2 cup water. Roll out dough and cut either by hand or with cookie cutters. Bake at 250F for 2 hours.
Colored, scented, and/or decorated candles. Go a step further and make candle holders, too!
Bowls, planters, vases, or ashtrays made from old vinyl records—bad ones can usually be found for around 50 cents each at thrift stores.

Drawing/Painting/Design

Coffee mug with treats: Find some plain mugs at a thrift store or garage sale, get some ceramic paint, and create a personalized, useful coffee mug. Stuff it with a baggie of whole coffee beans or candies, and tie with a ribbon.
Decorated plant pot with seeds or small plant and care instruction card.
Thoughtfully designed, personalized stationery, note cards, postcards, or phone/address book. Make them on the computer or by hand the old fashioned way with rubber stamps, colorful paper, and glue. Warning: rubber stamps and decorative papers don't come cheap. Attempt this only if you already have these items.

No talent required

A pound of pistachios, nice teas, or coffees, packaged nicely by hand.
Homemade cocoa mix: recipes here. Package in a decorated mason jar or paper lunch bag.
Gourmet, homemade teas: Recipes here. If you can find a cute inexpensive teacup or pot, arrange your homemade teas inside it and add a pretty ribbon.
Homemade organic body scrubs, lotions, oils, bath salts, or bath bombs. Recipes here.

Especially For Kids

Homemade play dough: make a variety of colors and place in assorted tubs or other plastic containers. Label and package in a dressed up box or basket, preferably one that they can use permanently to store their new play dough.
Handmade stuffed animals.
Lacing cards made from old greeting cards or magazine pictures glued (glue stick works best) to cardstock.
Homemade crayons. Collect broken or super short crayons, melt them down, and create beautiful swirled crayons in fun shapes.
See "cookies" under "Baking" above. Duh.
Painting Set. Combine some paint brushes, assorted paints (corresponding to the child's age and ability), paper, and perhaps a palette. For the palette, try an old cutting board or plastic lid with a child size thumb hole cut out. Or if that's out of your crafting league, check your local art supply store, dollar store, or toy store for inexpensive ones.
Drawing Set. Combine assorted weight pencils, charcoal, and erasers with an inexpensive drawing pad and perhaps a tracing pad. Depending on the child's age and ability, you could throw in some drawing books as well. You can often find these in the "bargain" section at bookstores.
Gardening Kit. Combine and package a few different types of seeds and/or bulbs, toy gardening tools (sand castle kits from the dollar store work well and are cheap), a labeling kit (popsicle sticks and cardstock rectangles), and perhaps a toy watering can.
Costume Chest. In a large box, decorated perhaps with the child's name, combine various articles or clothing that would be fun for playing dress-up. Raid your closet for items that either don't fit or are out of style and make a trip to Goodwill to make up the rest. The more outrageous the better.

Quick Hack and Holiday Gift: Homemade body scrubs, lotions, oils, bath salts, or bath bombs

2009-12-09T17:16:00.000-08:00

Image by Amanda *Bake It Pretty* via Flickr

Everybody loves a nice relaxing bath, and I don't know a female on the planet who doesn't love receiving bath-related gifts. Last year, I made a batch of each of these and made bath gift baskets for all my friends and relatives, even the guys. (They got manly scented salts and bombs only, and they loved them. MDT especially is sucker for a hot bubble bath. His favorites are the bombs. What a surprise.)

This year I'm too far away from most of my friends and family to make these, so I'm sharing the recipes with you. Have fun!

Already got your holiday gifts covered? Get together some girlfriends and have a DIY pamper party. Everybody brings one ingredient, in bulk, and you get to spend an evening with your pals drinking wine and making pretty stuff. At the end of the night, swap for your favorite fragrance combos and take home a basket of goodies. You'll be set for the next year.

Bath salts

Ingredients
6 cups Epson salts
2 T baby oil
1/2 tsp of the essential oil of your choice
1/8 tsp food coloring - gel works best
assorted jars or containers

Directions
Mix liquid ingredients first. Add in salts and stir. Package in 1 cup jars.

To use
Add 1/4 cup salts to warm running bath water.

Salt (or sugar) scrub

Ingredients
6 cup sea salt or sugar (large grain, unrefined works best)
3 cup oil (almond, olive, baby, etc.)
30 vitamin E capsules
a few drops of the essential oil of your choice
Dried flower petals, dried herbs, the zest of lemons or other citrus fruits (optional)

Directions
Dissolve vitamin capsules in oil over low heat. Mix all ingredients, and package in small jars.

Powdered milk bath

This is one of my favorites. I love stepping out of the bath with baby soft skin and smelling pretty. It's a simple pleasure.

Ingredients
3 cup powdered milk
1/2 tsp essential oils

Directions
Combine and mix well. Package in small jars.

Additions/Substitutions:
You can substitute vanilla extract for the essential oils.

Vanilla and honey bath oil

Ingredients
1 cup baby oil
1/2 cup honey
1 T pure vanilla extract
1/2 cup liquid soap (optional, for foam)
small bottles (I save all my condiments bottles—hot sauce, soy sauce, etc.—and recycle them for this.)

Directions
Combine and mix well. Package in small jars.

Bath bombs

These are super fun. I love love love using them. So much, in fact, I always make several extra for myself.

Ingredients
2 T citric acid
2 T cornstarch
1/4 cup baking soda
1/4 tsp essential oil
5 drops food coloring
Dried flower petals, dried herbs, the zest of lemons or other citrus fruits (optional)
3 T oil—olive, coconut, almond, etc.
Wax paper, molds, or cupcake tin

Directions

Mix dry ingredients.
Mix oil fragrance and coloring in another bowl.
Incorporate wet mix into dry mix.
Roll into balls, place on wax paper. Or, if using cupcake tin or molds, scoop mix in and pack well.
Wait 2 days.
Store in sealed containers or wrap in colorful plastic wrap

Quick Hack and Holiday Gift: Homemade Gourmet Tea Blends

2009-12-07T12:41:00.000-08:00

Image by hiromy via

Besides tasting lovely, tea is said to have many health benefits including increased energy, reduced blood pressure, immune system strengthening, enhanced concentration, and even healthier, younger-looking skin.

But contrary to popular belief, you don't have to spend a small fortune for gourmet tea. If you make your own, it's ridiculously cheap, especially if you grow your own herbs. But not to worry if you don't have an herb garden—all the ingredients for the following recipes are easy to find and can be acquired on the cheap at your local grocery or farmers' market. Moreover, when you make your own tea blends from loose tea, not only is the quality of the tea much higher, but it's more economical as well. In general, loose tea costs less than tea bags and you can resteep loose tea, thereby stretching your tea dollar, so to speak.

Make these frugal, gourmet teas for yourself or package them in neat jars or tins and give them as gifts to your favorite foodies/tea-lovers. Include an inexpensive tea strainer or infuser, maybe a small jar of honey or some homemade tea biscuits or scones and you've got the perfect gift for your favorite foodies/tea-lovers/anglophiles.

Don't forget to check the brewing tips at the end of the post!

On to the recipes.

This first isn't exactly a tea but rather a spice mixture. Add a bit to your favorite black tea along with a splash of warm milk, and you've got Chai (literally just means "tea," but is used worldwide to refer to Indian-style spiced tea with milk). This mix is a personal favorite and a result of lots of trial and (tasty) error. Perhaps the name is a bit biased, but so be it.

Perfect Chai (Indian Spiced Tea) Mix
Yields 3 cups of mix. (Each cup of mix makes 24 cups of chai.)

Ingredients
2 cups powdered sugar
1 vanilla bean
4 tbsp ground ginger
2 tbsp ground cinnamon
4 tsp ground cloves
4 tbsp ground cardamom
4 tsp ground nutmeg
4 tsp ground allspice

Directions

1. Cover the vanilla bean with the sugar and store overnight in an airtight container. The sugar will absorb the vanilla flavor. In the morning, remove the bean and throw it out.

2. Combine all the ingredients and mix well. If some of the spices are not ground to a fine powder already, pulsing them all together in a food processor should do the trick.

Preparation
Add 2 tsp of mix to a half-filled cup of hot black tea, fill with warm milk, and stir.
It's also quite good cold; just sub iced tea and cold milk.

Gourmet Herbal Teas

Combine any flavors you like and mix with loose tea—red, green, or white all work well. For an even more thoughtful and personalized gift, choose herbs with target benefits to create a custom blend for your loved ones. (The links above are to the most economic bulk loose teas available on Amazon at the time of this writing.)

Supplies
your choice of herbs
mortar and pestle (depending on your selection of herbs)
small jars or plastic baggies
ribbon
basket or other gift container

Suggested Blends
(All herbs should be dried and either whole or crushed, not ground.)

1 part ginger root, 1 part cloves, and 1 part nutmeg
1 part chamomile flowers to 1 part peppermint leaves
1 part dried ginger root to 2 parts peppermint leaves
4 parts anise,  1 part cinnamon  bark, 1 part cloves, and 1 part vanilla bean 
3 parts rosemary,  3 parts lavender flowers , and 3 parts marjoram 
1 part cloves, 1 part allspice, and 1 part cinnamon bark
2 parts lemon verbena leaves to 1 part lavender flowers

Directions
Mix herbs thoroughly, toss the mixture with the loose tea of your choice, and store in an air-tight container.

Preparation
Brew 1 tsp of tea in 1 cup of not-quite-boiling water.

Tea Brewing Tips

1. Most teas take between 30 seconds and 2 minutes to brew. Any more and you risk oversteeping, which makes the tea bitter.

2. Like coffee, tea doesn't take well to boiling water. I do recommend boiling the water to purify it, but just make sure you let it cool a few minutes before adding it to your teapot.

3. You can reuse or resteep loose tea leaves up to 4 times. Just let each brew steep a minute longer than the one before. Don't try this with tea bags; it won't work. That's a difference between loose tea and tea powder. Just another reason why making your own loose tea blends is more economical than buying boxed flavored tea or tea bags.

Want to get ahead on next year's gifts or just want to keep yourself in organic cooking and tea ingredients? Winter's a perfect time to start a little indoor herb garden.

Quick Hack and Holiday Gift: Homemade Hot Cocoa Mixes

2009-12-04T15:00:00.000-08:00

One of my favorite things to do in chilly weather is to cuddle up under a patchwork quilt near the window with a good book and a cup of delicious homemade hot cocoa.

Below are recipes for American-style hot cocoa mix, Mexican-style hot cocoa mix, and chocolate syrup.

Not only are these recipes quick and cheap hacks that cost significantly less than making hot chocolate with a store-bought dry mix or Hershey syrup, but pair a jar or two of these mixes with a nice mug, a bag of mini marshmallows, and a few candy canes for stirrers, and you've got a great, homemade holiday gift.

Note: A lot of cocoa mix recipes call for powdered nondairy creamer, but you'll want to steer clear of those ones. Almost all nondairy creamers, such as CoffeeMate and Creamora, contain hydrogenated oils (trans fats). Because most store-bought hot chocolate mixes are made with these nondairy creamers, they too are choc (sorry, I couldn't resist) full of trans fats. Swiss Miss, get a clue: Drop the hydrogenated oils! (Ironically, even their sugar-free and low-fat packs, the types marketed to more health-conscious consumers, contain trans fats.) Tsk, tsk.

Delectably Fat-Free Homemade Cocoa Mix

Ingredients
4 cups nonfat powdered milk or powdered soy milk
1 cup cocoa powder
2 cups powdered sugar

Additions/Substitutions: You can use regular granulated sugar if you prefer, but I find that powdered sugar mixes better and makes the end product creamier. For a really rich cocoa, Italian style, add 4 oz unsweetened dark chocolate, coarsely chopped.

Directions
Combine all ingredients in large bowl and mix well. Transfer to storage jar(s).

To make hot cocoa
Use 2 Tb per mug (or to taste), fill with hot water.

"Chocolate Fiesta" Mexican Hot Cocoa Mix

Ingredients
1/3 cup light brown sugar
3/4 tsp ground cinnamon
1 1/2 tsp powdered vanilla (or 1 whole vanilla bean)
1/4 cup cocoa powder
2 1/2 cups powdered milk or powdered soy milk
1/2 tsp of red (cayenne) pepper (optional)

Directions
Combine all ingredients in large bowl and mix well. Transfer to storage jar(s).

To make hot cocoa
Use 2 Tb per mug (or to taste), fill with hot water.

Chocolate Syrup

Ingredients
1 1/2 cups water
3 cups sugar
1 1/2 cups cocoa powder
1 tablespoon vanilla extract
1/4 teaspoon sea salt
2 tablespoons light corn syrup

Directions
In a small pot, boil water and sugar. Gradually whisk in cocoa powder, sea salt, vanilla extract, and corn syrup. Keep whisking until everything has dissolved and simmer until desired thickness. Let cool and transfer to bottles.

Use for hot chocolate, cold chocolate milk, or as a dessert topping.

Tip
Save your ketchup, mustard, syrup, and other squeeze bottles to reuse for this project. Remove the labels and add your own!

Quick Hack: Candle holders from bottles and cans

2009-12-03T17:17:00.000-08:00

Last week the electricity kept going out, sometimes only for a few seconds, sometimes for several hours. I never did find out what was going on, but I found myself in need of candle holders, ASAP. And so I found another way to upcycle plastic bottles and aluminum cans.

What you need:
scissors
candles

These are both super quick and super easy.

Aluminum Can Candle Holder

Carefully remove the tab from an empty can and cut around the can about an inch from the top.
Recycle the bottom portion or reuse it, for instance, as a planter.
Push the flap back up to create a flat surface on top.
Flip the can top over and carefully fold in a couple centimeters of the edge, towards the inside, so that it doesn't have sharp edges.
Set a tealight inside and you're ready to go.
These also float, so if you feel like being fancy, you can make a bunch and float them in a large bowl, preferably glass for the nicest effect.

Plastic Bottle Candle Holder

Cut the bottle roughly a third of the way from the top.
Turn the top section upside down and insert a candle in the cap. If it doesn't fit snugly in the cap, drip some wax around the base until it's stable.
Pour a few inches of water in the bottom section for stability.
Insert the top section, upside down, with the candle into the bottom section. The water should not be high enough to touch the cap.
Light and enjoy.

The bottle candle holder isn't very pretty when not in use, but the water and the clear plastic actually do very pretty things with the candlelight in the dark. With a bit of paint or some ribbon, I think it could look quite nice just sitting around.

The fence that makes good neighbors needs a gate to make good friends

2009-11-23T19:09:00.000-08:00

I've never really had friendly neighbors before.

The house where I grew up was in a small neighborhood of mostly elderly people who rarely left their houses. The couple next door was friendly. My father and they would exchange garden produce and they'd invite my sisters and I to swim in their pool. But most of my exchanges with the other neighbors were limited to waves and hellos.

In my adult life I've lived in four cities: St. Louis, New Orleans, London, and Boston. In none of them did I even know my neighbors. I couldn't have told you their names. No one came by to introduce themselves when I moved in, and few even had a smile to offer when passing.

What ever happened to the days when new neighbors showed up on your doorstep with a casserole or invited each other for dinner or just to chat on the front porch? I wondered. Didn't I see that on Leave It to Beaver or Little House on the Prairie?

I don't want to slag on Americans in general (There are plenty of other people to do that, right?), but what's the deal? I made attempts to get to know and befriend the people in my neighborhood in every place I lived, but without luck. Nobody was interested. And look, I'm a pretty damn interesting person. I don't smell. I'm not insane, annoying, or pushy. I don't have any weird tics or a third eyeball or anything. So what gives? I don't have trouble meeting people or making friends elsewhere, but I'll be damned if I can make friends with the people who live 50 feet away from me and whom I see nearly every day.

Until now, that is. Since MDT and I have been in Costa Rica (a little over a month), not only have we met all our immediate neighbors (and their extended families), but we even consider them our friends.

The couple across the street is awesome. They have been incredibly helpful. The guy is a contractor, and has come over to help us fix several things around the house that had us stumped (the frighteningly named "suicide shower" that is endemic to Central America, for one), and given us lifts to town, etc. His girlfriend made us rice pudding, her parents brought us Guanabana shakes, and her daughter stops by almost daily to practice her English and play with the cats and often brings us oranges or bananas that she's picked. They're like our adoptive family. It's pretty cool.

Plantains brought to us (and wrapped with birthday paper) by Angelica, age 7.

An entire branch of bananas from our friend Pablo.

Our landlady and her daughter live next door and two doors down, respectively. They've also brought us fruit and given us rides, and her seven-year-old granddaughter is always running around playing and bringing me flowers.

Flowers, picked and delivered by Angelica. Yes, that's a giant tin of tomatoes. We didn't have a vase.

Another neighbor, a guy MDT plays fútbol with, has invited us for drinks at the bar next door and to his upcoming birthday bash, and others routinely give us a lift to or from town if they're passing by. We know everyone's names (and their dogs', cats', and horses').

It's always difficult when you're new in town, but this time we're new in the country, and the language is new, too. I can't even believe how much at home they've made us feel here, in so little time. When our time comes to move on, we'll be very sad to leave them.

Um. . . so where are you going with this?
I know this post isn't exactly about personal finances or being thrifty, unless of course you count my passing mention of us walking everywhere (not owning a car) or the fact that we've saved money on food because people keep bringing us stuff. But the whole point of being frugal and minding your financial situation is, ultimately, to be more comfortable, right? I'm not saying having money makes you happy. But I am saying that life's a hell of a lot easier when you don't have a huge debt hanging over your head or when you don't have to worry about how you're going to pay your bills at the end of the month or how you'll ever be able to afford your own home (seriously, can someone fill me in on how the hell people do this?).

I've talked a lot about sharing garden produce, tools, rides, etc., in other posts. And I hate to take things back to the kindergarten level, but you know what? It's nice to share. And to be friendly. It's makes everyone more happy.

So go make a casserole, already. Pick a neighbor you don't know very well, knock on their door, and make their day. Go ahead. You'll feel good afterward, and you just might make a new friend.

Thanks to One Mint for including this post in the Economy and Your Finances Carnival.

And the winner is....

2009-11-23T12:07:00.000-08:00

Congratulations to Marina, the winner of the DigitalRoom.com rolled canvas poster print. I hope your daughter likes her new wall decoration!

Thanks to everyone who entered. More giveaways to come.

-Wren

Another Easy-to-Win Giveaway: 16”x20” Rolled Canvas from DigitalRoom.com

2009-11-16T10:49:00.000-08:00

Just in time for the Holidays, our sponsor DigitalRoom.com is rolling out another giveaway: a 16¨ x 20¨ rolled canvas print (with free UPS shipping to the US, of course). Rolled canvas prints are perfect for home decor, photo prints, and signage. And they make fantastic, thoughtful gifts.

Ready to enter?
All you have to do is leave a comment on this post telling us what photo gifts you want to have printed for their family and loved ones.

Really want the print? For additional entries, you can do any or all of the following and leave a comment here telling us you've done it:

Blog about this giveaway and link to this post and UPrinting.com. (2 entries)
Tweet this: ¨Win a 16¨ x 20¨ rolled canvas print + free shipping! Perfect for home decor, photo gifts, and signage. http://bit.ly/1eWxHw #giveaway¨ (2 entries)
Follow us on Twitter, Facebook, and/or MySpace. (1 entry each)

Giveaway ends at noon on November 23rd, so get your entries in quick!

We'll announce the winner on the blog and a coupon code will be sent to the winner’s registered email on November 27, 2009, so if your blogger profile doesn't display your email address, be sure to leave it in your comment.

Good luck!

Thank you to DigitalRoom.com for providing us here at TAiMH with our own free print. It´s awesome. And thanks to UPrinting for hooking us up with them. See their review at YouTheDesigner.

Couchsurfing to Save Money and Make Friends While Traveling: Our Experiences.

2009-11-14T18:13:00.000-08:00

Reminded by the mention of couchsurfing in Man vs Debt's recent post that I compiled for the Money Hacks Carnival I hosted last week, I've decided to write a review, of sorts, of couchsurfing based on my and MDT's experiences as couchsurfers. We have not as yet had the pleasure of hosting any surfers as we've been in the process of moving first across the U.S. and then to Central America and setting up shop here. But, as we've been here in Costa Rica a whole month now (!!!) and just purchased an air mattress, perhaps we'll receive guests soon and I'll be able to update this article with our experiences hosting.

What is CouchSurfing?

I heard about couchsurfing.org a year or two ago, but didn't try it out until this fall. MDT and I had decided to move to Costa Rica, but needed a place to stay during our two-week house-hunting visit. Couchsurfing.org describes itself and its purpose thusly: "CouchSurfing offers you, via our website and regional events and activities, the opportunity to intimately encounter the world. Through meaningful connections with locals, Couchsurfing seeks to promote self-awareness and understanding of others. Being a CouchSurfer means you are part of an international community of travelers who recognize similarities and appreciate differences in all peoples."¹ It's a travel community with a (supposed) purpose and with a general attitude of acceptance that can come off sounding a bit peace-and-lovish. Not that I have anything against peace and love, of course. But I've had enough random experiences with, let's say, "the less down-to-earth" sort to be slightly wary of people one might encounter via couchsurfing. However, my concerns have so far been unfounded.

As an aside, I have had a close encounter of the hippie kind here (an aging—and braless—Californian woman who invited me to her monthly New Moon women's group where they dance and "summon [their] ancestors and [their] progeny," but it had nothing to do with couchsurfing.

I will say, however, that on the couchsurfing site it's best to carefully read the profile of anyone you're considering staying with. Personally if I see phrases like "sacred space," "auras," "star-child of the universe," (yep, that one's real) in a profile, I just move on. Depending on where you're traveling to, the type of people you'll see on couchsurfing vary widely.

To sign up for couchsurfing.org, you simply fill out a basic profile (10-15 minutes, depending on how in-depth you want to be) and then you're free to start searching for available couches. The search feature is easy to use and includes information about each registered couchsurfer (and/or host—you can choose to be one, the other, or both). Select the area you're planning to travel to and start browsing profiles. You can do more in-depth searches if you're traveling to populous areas with a larger selection of profiles.

Our Experience

We e-mailed (via couchsurfing.org's interface) eight or nine people. A few didn't respond, and a few who did weren't available at the times we needed, but we ended up finding three available hosts in different areas.

Our first night in Costa Rica, we stayed with a young Tico man in what turned out to be his mother's house (though she was out of town). This first couchsurfing experience was the worst: the house was filthy, I mean disgusting. It looked like nothing had been cleaned or so much as dusted for five years. The young man and his friend, who was also staying the night, were mostly friendly and we chatted, somewhat uncomfortably for me at least, for an hour or two before we were shown our room. It was during the chatting that MDT spotted and discreetly pointed out to me the biggest roach I've ever seen in my entire life—and I've lived in New Orleans. This thing was big enough to have facial features I'd probably recognize if I saw it again. I behaved very well, however, and no one noticed my horror. The bathroom was horrible, so much that we couldn't even shower for fear of coming out dirtier than before, and the bedding was so repulsive that we slept (or attempted to sleep), fully clothed, on top of our jackets laid on top of the bedding. It was an experience I hope never to repeat.

At this point, I was pretty terrified of what to expect of our next "couch," but thankfully, our second host, another young Tico, just our age, was a ray of sunshine—and has since become our good friend, whom we hang out with often. He, too, lives with his parents (or rather they live with him), but his house is very clean and he and his family are very hospitable. We only planned on staying with him for a day or two, but he offered for us to stay as long as we like, and he even devoted several days of his time to driving us around town and helping us house-hunt. He showed us how to make traditional Tico-style food and introduced us to his friends. We felt very much at home, even though he is the only one in his family who speaks English and our Spanish at the time wasn't fantastic. After a few days, we were already friends, hanging out, going to the bar, etc. He even took us to the beach for the day where we all swam, ate home-grown oranges, and picked coconuts. You couldn't ask for someone more generous and friendly.

We stayed at a hostel in another town for a few nights, and then for our last night in Costa Rica we stayed just outside the capital with an Italian girl a few years younger than us (and her mother), who own a nearby gelato establishment. The girl picked us up in a taxi and brought us back to her home, which was pristine, huge, and magnificent. I'm not sure if I've even been in such a fancy house. The girl was very hospitable, but left soon after we arrived to go to a friend's party. She invited us along, but we'd been traveling for two weeks and just needed to shower and rest that night. She very trustingly left us alone at her house, telling us to make ourselves at home, and after briefly showing us around disappeared for the rest of the night. We had showers and a snack and settled down to watch one of the movies she'd pointed out to us before she left. Her couch was magnificently comfortable, but we were given the guest room to sleep in, whose bed was also immensely comfortable. I commented to MDT that we might as well have been in a hotel. The girl returned around 3 am with a friend, partied a bit more (which woke up MDT but not me), and was still sleeping when we left in the morning. We had a bit of trouble maneuvering around her two very large (but deceptively friendly) dogs whilst attempting to unlock and get through the front gate without letting them loose, but otherwise it was a relaxing and good experience.

The verdict:

If you're looking for a possibly wild and crazy experience and are the adventurous (and imperturbable) type, give couchsurfing.org a try. Don't expect to be waited on or fed—though it could happen. If possible, talk with the person on the phone before you stay with them, just to get an idea of who they are and if you'll get on well. Again, much of your experience will depend on the culture and general way of life of the area you're visiting. That said, we had three very different experiences in the same region of the same country. My advice, if you're interested in couchsurfing, is to try it out in your own country first and see what you think before you do it halfway across the globe.

If, however, you're not an extremely social person or are just looking for an easy, relaxing vacation and you're on a budget, you might want to skip couchsurfing and check out some hostels or budget hotels.

Even if you don't need a place to stay, I'd say that couchsurfing is a good way to meet people wherever you are traveling, or even in your hometown. There's even a search option to find people who are willing to just meet you for coffee or a drink and talk with you about their country, culture, travels, etc. It's a great way to get to know an area and to meet a variety of people.

Other Opinions?
Have you ever couchsurfed? If so, what do you think about it? If not, would you ever consider doing it?

Notes
1. From the couchsurfing.org homepage.

Thanks to The Financial Blogger for including this post in this week's Festival of Frugality, to Sadie for including it in the Carnival of Savings, and to One Mint for including it in the Economy and Your Finances Carnival.

Money Hacks Carnival #90: Minimalist Edition

2009-11-11T05:35:00.000-08:00

Without further ado, this week's best in financial blogging:

Editor's Picks

PT presents PocketSmith: A Calendar-Based Financial Planner posted at PT Money.

freefrombroke presents Its Official First Time Home Buyer Tax Credit Extended Now For Existing Owners Too posted at Free From Broke.

Miss M presents Lending Club Update: Some Interesting Developments posted at M is for Money.

DR presents Balance Transfer Credit Cards posted at The Dough Roller.

D4L presents 10 Stocks Taking Their Dividends Up A Notch posted at Dividends Value.

Credit Cards

Ray presents Best Credit Card posted at Financial Highway.

Manshu presents Disney Rewards Visa Credit Card posted at OneMint.

David presents Quicken Rewards Visa® Credit Card posted at Credit Card Offers IQ.

Mr Credit Card presents Bombshell Deal From Chase and British Airways posted at Ask Mr Credit Card's Blog.

Debt Management

oneadvice presents Debt Management Solution posted at One Advice. Looking for a debt management solution which is right for you? Be clear and concise about your debt management requirements before signing ANYTHING....

Real Estate

Paul Williams presents How Big of a Mortgage Can I Afford? posted at Provident Planning.

Tom presents Save Money By Selling Your House Without A Real Estate Agent posted at The Canadian Finance Blog. Selling your house without a real estate agent can be a great way to save money, but only if you do your research and are willing to put in more of your own time.

General Financial Planning

Miranda presents Elements of a Financial Checkup posted at Personal Dividends.

Hank presents Get Back To The Blocking And Tackling Basics of Personal Finance posted at Own The Dollar. A lot of people have forgotten the basics of money management. We need to get back to the basics to be successful.

Wojciech Kulicki presents X Marks the Spot: Navigating Financial Treasure Maps posted at Fiscal Fizzle.

J. Money presents Try working on finances when you're in the mood :) posted at Budgets are Sexy.

Studenomist presents Are You An Expert On Personal Money Management? posted at Studenomics.

Investing

Matt presents How To Start Your Own Personal Hedge Fund posted at The Online Investing AI Blog.

TradingStocks.com presents Penny Stock Scams posted at Trading Stocks.

Praveen presents Just Bought Hyatt Hotels (H) posted at My Simple Trading System.

Jeff Rose presents 2010 Traditional and Roth 401k Contribution Limits posted at Jeff Rose.

Small Business

Christy Horgan presents Hip Hip Hooray! Permanent exemption from 404(b) for Small Business is Possible! posted at Gray Matters.

Misc.

FMF presents How to Buy a New Furnace and Air Conditioner posted at Free Money Finance.

Kris presents Ask the Internet: Eating Healthy at Conferences? posted at Cheap Healthy Good.

Baker presents Travel Hacking for Noobs: How We Save Hundreds on Airfare, Get Free Accommodation, & Make Money while Overseas posted at Man Vs. Debt.

pkamp3 presents California… What…? posted at Don't Quit Your Day Job - Personal Finance, Economics and Investing.

The Financial Blogger presents Do You Cheat Sometimes? A Look at Fidelity posted at The Financial Blogger. A look at financial fidelity.

Thanks to everyone who submitted to the carnival and to all our lovely readers. I hope you enjoy this week's posts.

Homemade Pico de Gallo with Garden Tomatoes

2009-10-27T22:41:00.000-07:00

We can't help reiterating that one of the best ways to save money is to make your own food. It's almost always fresher, healthier, and tastier this way.

Take my salsa recipe. We were able to pluck nearly all of the major ingredients from our summer garden—the tomatoes, cilantro, and habaneros. Yes, the onion, lime, garlic, salt, and black pepper were store-bought, but these come cheap. So in a sense we only paid a pittance for about a liter of deliciousness.

Try out this recipe, but also experiment. Add your own ingredients like chipotles, mangoes, etc., if you wish to create your own flavors. Let us know about your recipe in a comment below.

Homemade Pico de Gallo

6 medium red tomatoes
6 medium yellow tomatoes
1 1/2 medium white onions
1/2 medium orange habanero (substitute: 1 Tablespoon cayenne)
1/2 cup cilantro
2 cloves garlic
1 lime, or to taste
salt, pepper to taste

1. Chop all ingredients and throw in a large mixing bowl. Chop garlic and especially the habanero super-finely.
2. Add the juice of one lime, salt, and pepper to taste.
3. Refrigerate for at least an hour before eating for flavors to blend.

You'll never want to buy any of that jarred stuff again.

This recipe was included in the Carnival of Gluten-Free Recipes and the Carnival of Savings.

As Promised, The Next Big Giveaway: 100 Custom Postcards from UPrinting

2009-10-22T19:42:00.000-07:00

We promised another giveaway today, and here it is. Our awesome sponsor UPrinting is offering two lucky TAiMH readers 100 free custom postcards (with free UPS shipping to the US, of course). Make them for yourself or someone else. Use them to promote your blog, special event, or business. Get creative and use them for invitations, thank-you cards, moving announcements, or whatever your little heart desires. These are really fantastic cards: 4 x 6, full-color on both sides on a sturdy 14-point glossy cardstock.

Ready to enter?
All you have to do is leave a comment on this post telling us how you might use the free postcards if you win.

Really want the cards? For additional entries, you can do any or all of the following and leave a comment here telling us you've done it:

Blog about this giveaway and link to this post and UPrinting.com.
Tweet this: Win 100 free custom postcards for invitations, biz promo, etc + free shipping! Enter at TAiMH: http://bit.ly/2LqVfV #giveaway
Follow us on Twitter, Facebook, and/or MySpace. (1 entry each)

Giveaway ends at noon on Thursday, October 29th, so get your entries in quick!

We'll announce the winner on the blog and a coupon code will be sent to the winner’s registered email on November 6, 2009, so if your blogger profile doesn't display your email address, be sure to leave it in your comment.

Good luck!

Don't forget to enter our other current giveaway from UPrinting, for an awesome 24 x 36" vinyl banner with grommets ($62 value plus free UPS Ground shipping).

Thank you to UPrinting for providing us here at TAiMH with our own set of 100 free postcards. We love them.

UPrinting Business Card Giveaway: And the winner is...

2009-10-22T09:44:00.000-07:00

Thanks to everyone who entered and helped promote the UPrinting business card giveaway.

The winner by randomly generated selection is:

lonestarlifer

Congratulations! UPrinting will be contacting you soon with the coupon code for your 250 free business cards. We hope you enjoy them and that you have success promoting your new business.

If you didn't win, don't fret. We'll be offering lots of other giveaways in the future. In fact, there's a new one coming up today, so check back in a bit. You can also enter the UPrinting Vinyl Banner Giveaway; it runs until October 29th.

As a side note, MDT and I have recently moved abroad for some long-term travel, so until we get settled into the new blogging groove here, posts may be fewer and farther between than usual. But we'll do our best.

Investing for Retirement: Retirement Accounts Overview

2009-10-17T21:02:00.000-07:00

Retirement Basics: Common Sources of Retirement Income

Social Security Benefits
Though the future of social security is uncertain to say the least, right now the deal is that you pay into the system for as long as you work (6.2% up to the "wage base"--$102,00 in 2008), whether you're an employee or self-employed. In the case of the employed, the employer must also pay the same 6.2% on the worker's wages. In addition, both the employee and the employer must pay another 1.45% each on the total yearly income of the worker. The self-employed do not pay Social Security tax as such, but under a separate law are required to pay 15.3% of their total income; they basically pay both the employee and the employer shares of the Social Security tax, though they can deduct half (the employer's share) when they file their federal income taxes.

The calculation process for how much Social Security benefits a person will receive is ridiculously complex, so I won't get into it here, suffice it to say that it's based on the average of the worker's covered earnings (the largest amount covered in 2008 was $102,000) for the 35 years in which the worker earned the most.

Workers can begin receiving benefits at age 62, but they will be "reduced benefits." Workers are not eligible to receive the full benefits until the normal retirement age, which is currently defined as 67 years old for anyone born after 1960. For ever year after normal retirement age that a worker delays receiving benefits, the benefit amount will increase when they do begin accepting them.

Social Security also provides for the worker's spouse (though currently same-sex spouses are not covered) and children, and with a little maneuvering, it is even possible for the spouse and children to receive benefits even if the worker decides to continue working after his or her retirement age. A worker's widow or widower is similarly provided for, as is, in some cases, even a divorced spouse or divorced widow(er).

The problem is that even if (and it's a big IF) social security benefits are still around by the time we get to retirement age, it's doubtful they'll be enough to live comfortably on. Even now, the average individual's monthly social security check is only around $950, and it's taxable. Obviously, you're going to want to secure other sources of retirement income.

For more information about Social Security benefits visit their website.

Work Pension Plans/Employer-Sponsored Benefit Plans
There are two main types of employer-sponsored retirement plans: defined benefit plans and defined contribution plans.

A defined benefit plan promises a specified monthly benefit at retirement. The plan may state this promised benefit as an exact dollar amount, such as $100 per month at retirement. Or, more commonly, it may calculate a benefit through a plan formula that considers such factors as salary and service--for example, 1 percent of average salary for the last 5 years of employment for every year of service with an employer. The benefits in most traditional defined benefit plans are protected, within certain limitations, by federal insurance provided through the Pension Benefit Guaranty Corporation (PBGC).

A Cash Balance Plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance. In a typical cash balance plan, a participant's account is credited each year with a "pay credit" (such as 5 percent of compensation from his or her employer) and an "interest credit" (either a fixed rate or a variable rate that is linked to an index such as the one-year treasury bill rate). Increases and decreases in the value of the plan's investments do not directly affect the benefit amounts promised to participants. Thus, the investment risks and rewards on plan assets are borne solely by the employer. When a participant becomes entitled to receive benefits under a cash balance plan, the benefits that are received are defined in terms of an account balance. The benefits in most cash balance plans, as in most traditional defined benefit plans, are protected, within certain limitations, by federal insurance provided through the Pension Benefit Guaranty Corporation (PBGC).

A defined contribution plan, on the other hand, does not promise a specific amount of benefits at retirement. In these plans, the employee or the employer (or both) contribute to the employee's individual account under the plan, sometimes at a set rate, such as 5 percent of earnings annually. These contributions generally are invested on the employee's behalf. The employee will ultimately receive the balance in their account, which is based on contributions plus or minus investment gains or losses. The value of the account will fluctuate due to the changes in the value of the investments. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans.

A Simplified Employee Pension Plan (SEP) is a relatively uncomplicated defined contribution plan geared towards the self-employed and owners of small businesses. A SEP allows individuals to make contributions (up to 25% of their annual earnings with a maximum of $49,000) on a tax-deferred basis to individual retirement accounts (IRAs). Fidelity has a good site with more detailed information regarding SEPs and even an SEP-IRA Contribution Calculator.

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)
Don't get confused, you're right--whoever thought up the acronym for this defined contribution plan cheated a bit. Nevertheless, that's what it is, even though it's easy to confuse with the Simplified Employee Pension Plan above. Whatever. There are two main options for this type of tax-deferred IRA: 1) the employer contributes 2% of the employee's pay each year and the employee is able to contribute up to $10,500 per year. 2) The employee contributes to the plan (with the same maximum contribution) by deferring a percentage of their salary, and the employer must match that contribution (up to 3% of the employee's salary).

A Profit Sharing Plan or Stock Bonus Plan is a defined contribution plan under which the plan may provide, or the employer may determine, annually, how much will be contributed to the plan (out of profits or otherwise). The plan contains a formula for allocating to each participant a portion of each annual contribution.

A 401(k) plan is a defined contribution plan where employees can elect to defer receiving a portion of their salary which is instead contributed on their behalf, before taxes, to the 401(k) account. Sometimes the employer may match these contributions. The money in the account is then invested in stocks, mutual funds, and/or other securities. There are special rules governing the operation of a 401(k) plan. For example, there is a dollar limit on the amount an employee may elect to defer each year. An employer must advise employees of any limits that may apply. Employees who participate in 401(k) plans assume responsibility for their retirement income by contributing part of their salary and, in many instances, by directing their own investments.

An Employee Stock Ownership Plan (ESOP) is a form of defined contribution plan in which the investments are primarily in employer stock.

A Money Purchase Pension Plan is a defined contribution plan that requires fixed annual contributions from the employer to the employee's individual account.

For non-retirement specific investment information, see our Investments Primer.

Annuities: What Are They and How Do I Find the Right One For Me?

2009-10-17T20:17:00.000-07:00

When you buy an annuity, the bank or insurance company invests your money and agrees to pay you back according to the annuity's contract terms. In very basic terms, you make one or more (depending on the contract) payment to the bank/insurer as your investment, and they in turn agree to make a series of income payments to you, starting immediately or at some point in the future, for as long as you live.

Fixed annuities guarantee a set payment amount and are similar to CDs in that they have a fixed interest rate. Check around; often fixed annuities have higher interest rates than CDs.
Note: Always read the contract carefully. Some so-called fixed annuities only fix the interest rate for a specified period, such as one year, and the rate is variable after that.

Advantages

Promises a steady stream of income when you retire.
Guarantees a fixed payment amount and interest rate.
Tax-deferred growth—interest is not taxed until you collect your money.
Typically low investment minimums (as little as $1,000).

Disadvantages

Not insured by the U.S. government or by the insurance company/bank where you buy them.
Often come with high fees and a heavy penalty, called a surrender charge, for cashing before a designated period of time has passed.
Payment amounts do not rise to keep pace with inflation, i.e. they will be worth less as time goes by.

Taxes
Some annuities help you set aside money on a tax-deferred basis. You don't pay taxes on the income (interest) earned by this money until you retire. Other annuities allow you to receive income immediately, but it won't be tax deferred.

How they work
An annuity has two phases: an accumulation phase and a payout phase. During the accumulation phase, you make purchase payments, which you can allocate to a number of investment options. For example, you could designate 40% of your purchase payments to a bond fund, 40% to a U.S. stock fund, and 20% to an international stock fund. In addition, variable annuities often allow you to allocate part of your purchase payments to a fixed account, which unlike a mutual fund, pays a fixed rate of interest. The insurance company may reset this interest rate periodically, but it will usually provide a guaranteed minimum. During the accumulation phase, you can typically transfer your money from one investment option to another without paying tax on your investment income and gains, although you may be charged transfer fees by the insurance company.

At the beginning of the payout phase, you may receive your purchase payments plus investment income and gains (if any) as a lump-sum payment, or you may choose to receive them as a stream of payments at regular intervals. If you choose to receive a stream of payments, you will often be able to choose how long the payments will last, e.g. for 20 years or for your lifetime. In addition, you may be able to choose to receive fixed payments or payments that vary based on the performance of your funds. The amount of each periodic payment will depend, in part, on the time period that you select for receiving payments.
Note: Some annuity contracts are structured as immediate annuities, which means that there is no accumulation phase and you start receiving payments as soon as you purchase the annuity. Annuities with an accumulation phase are called deferred annuities.
Many annuities carry a death benefit: if you die before the insurer has started making payments to you, your beneficiary is guaranteed to receive a specified amount—typically equal to your total payments. They also sometimes offer optional features (that carry extra charges), such as a guaranteed minimum income benefit, which guarantees a minimum payment amount even if you do not have enough money in your account (perhaps because of investment losses) to support that level of payments.

Fees, Charges, and Penalties
Annuities carry a number of standard fees as well as extra charges and penalties that can be incurred. Like mutual funds, variable annuities often carry some administrative fees (in addition to the administrative fees of the mutual funds it contains!).

A fairly standard charge for variable annuities is the mortality and expense risk charge, which is expressed as a percentage of your account value, typically around 1.25% per year. This charge compensates the insurance company for insurance risks it assumes under the annuity contract and is sometimes applied toward your financial professional's commission for selling the variable annuity to you. (Yes, they get commission; financial professionals get commissions from every investment product they sell you—which is why you need to make sure you understand for yourself the terms of any prospective investment and not just let your planner delegate your money to best suit their pocketbooks.)

Many variable annuities also have penalties for certain actions, such as early withdrawal. For instance, if you withdraw money from your account during the early years of the accumulation phase, you may have to pay a surrender charge, which is usually a percentage of the amount you withdraw (sometimes up to 15%), though many contracts allow for withdrawal of a certain percentage of your account value without incurring surrender charges. Surrender charges, when they do apply, generally decrease over time; for example, a 7% charge might apply in the first year after a purchase payment, 6% in the second year, 5% in the third year, and so on until the surrender period is over. In addition to surrender charges, you may have to pay a 10% federal tax penalty if you withdraw anything before the age of 59½.

Other fees, such as initial sales loads and transfer fees may also apply. Plus, any special features or options you choose for your variable annuity, such as a stepped-up death benefit, long-term care insurance, or the guaranteed minimum income benefit, normally carry additional charges. As with mutual funds, you can find a description of all charges in the prospectus.

Equity-Indexed Annuities (EIA)

The first thing you need to know about EIAs is to be careful with them. Investment advisers get big commissions when they sign people up for an EIA, so some unscrupulous advisers will push EIAs even when they're not the best option for their client. Furthermore, EIAs are not regulated by the National Association of Securities Dealers or the Securities and Exchange Commission (until 2011).

How they work
EIAs are almost always deferred annuities, and during the accumulation period, they credit your account with a return whose rate is based on the performance of a particular stock index. Most EIAs guarantee a minimum return, often 3%, during this period. After the accumulation period, the insurance company will make periodic payments (or one lump sum) to you under the terms of your contract.

It is important to note, however, that even with a guaranteed minimum return, you can lose money with an EIA if your guarantee is based on an amount that is less than the full amount of your purchase payments.

Factors affecting rate of return
The index
Some EIAs use a simple price index, which means they calculate the rate without counting reinvested dividends. This can make quite a difference to your ROR. For example, in the past forty years, the average S&P 500 gain is 3.8 percentage points higher with reinvested dividends than without.

Method of Calculating Index Changes
EIAs also employ different methods for calculating yearly changes in an index, which can produce wide disparities in returns. Three common methods are:

Annual Reset (or Ratchet) - This method credits index-linked interest based on any increase in index value from the beginning to the end of the year.
Point-to-Point - This method credits index-linked interest based on any increase in index value from the beginning to the end of the contract's term.
High Water Mark - This method credits index-linked interest based on any increase in index value from the index level at the beginning of the contract's term to the highest index value at various points during the contract's term, often the anniversaries of the annuity's purchase date.

Caps
Caps are limits on the rate of interest the EIA can earn, regardless of the performance of the index.

Participation rates
The participation rate determines how much of the index's gain will be used to compute the index-linked interest rate. If it is less than 100%, you won't be getting the full index gain. For example, if the participation rate is 80% and the index increases 9%, the return credited to your annuity would be 7.2% (9% × 80% = 7.2%).

Between participation rates and caps, an EIA's earnings can be significantly lower than you might expect. Participation rates and caps may be changed annually, depending on your contract.

Principal Guarantee
Many EIAs provide that you'll receive at least 100% of your invested funds; others guarantee only 90%.

Taxes
Your EIA earnings are tax-deferred until you withdraw them, at which time they are taxed as income; gains from an S&P 500 index fund are taxed at lower capital gains rates.

Fees, Charges, and Penalties
Spread / Margin / Asset Fee
Some EIAs annually subtract a certain percentage of the index gain and call it a "margin," "spread," or "administrative fee." In the case of an annuity with a "spread" of 3%, assuming no cap and a participation rate of 100%, if the index gained 9%, the return credited to the annuity would be 6% (9% - 3% = 6%).

Surrender charges and tax penalties
You also may have to pay a significant surrender charge and/or tax penalties if you cancel early. In addition, in some cases insurance companies may not credit you with index-linked interest if you do not hold your contract to maturity. Also, if you make any withdrawals before the age of 59 1/2, you'll be charged a 10% tax penalty in addition to the income tax on the amount withdrawn.

The final word: Be very careful with EIAs. Read the contract meticulously, and do not rely solely on the assurances of the adviser or salesperson.

Variable Annuities
A variable annuity is part insurance/part security investment; the "variable" means that its value and your income from it is variable—it can move up and down, i.e. you can lose money. Since variable annuities are long-term investments that can tie up your money for many years, the younger you are, the better.

Taxes
Like 401(k)s and traditional IRAs, variable annuities are tax-deferred, which means you pay no taxes on the income and investment gains from your annuity until you withdraw your money. You may also transfer your money from one investment option to another within a variable annuity without paying tax at the time of the transfer. When you take your money out of a variable annuity, however, you will be taxed on the earnings at ordinary income tax rates rather than lower capital gains rates. In general, the benefits of tax deferral will outweigh the costs of a variable annuity only if you hold it as a long-term investment to meet retirement and other long-range goals.

Choosing an annuity
Like with any investment, before buying an annuity you should request and read the prospectus and compare the costs and earning potential to other variable annuities and to other types of investments, such as mutual funds. You'll also want to consider the financial strength of the insurance company, which can affect their ability to pay any benefits that are greater than the value of your account in mutual fund investment options, such as a death benefit, guaranteed minimum income benefit, or amounts you have allocated to a fixed account investment option.

For more information and helpful examples, see the SEC's page on variable annuities.

See also:
Stocks: What To Look For, How to Trade For Long-Term Gains

Bonds: The Basics

Funds: Mutual Funds, ETFs, Closed-end Funds, Hedge Funds , Oh My!

Investing main

Funds

2009-10-17T19:36:00.000-07:00

A fund is a pooled investment vehicle--where many individuals pool their money to purchase many investment products, each owning a percentage of the whole, or a share. There are three basic types of pooled investment vehicles: open-end funds, closed-end funds, and unit investments trusts (UITs).

Open-end funds are called open-ended because the number of shares they can sell is is not fixed; they continuously issue new shares and redeem existing ones. Mutual funds are the best-known examples of open-end funds.

Closed-end funds, unlike mutual funds, sell a fixed number of shares at one time (in an initial public offering) that later trade on a secondary market.

Unit Investment Trusts (UITs) make a one-time public offering of only a specific, fixed number of redeemable securities called "units," which will terminate and dissolve on a date specified at the creation of the UIT.

Exchange-traded funds (ETFs) can be either open-end funds or UITs and aim to achieve the same return as a particular market index.

**Hedge funds**
A "hedge fund" is a non-legal term meaning a private, unregistered investment pool traditionally limited to experienced, wealthy investors. Because hedge funds are not mutual funds, they are not subject to the regulations that govern mutual funds and therefore do not offer the same protection for investors.

There are even "funds of hedge funds," which often have lower minimum investment thresholds so that they can sell to more investors that traditional hedge funds, but offers more limited rights of redemption than mutual funds. Funds of hedge funds are usually not listed on any exchange.

Chances are, if you're reading this, you're not an experienced, wealthy investor, so you should probably steer clear of hedge funds for the time being. To learn more about hedge funds and funds of hedge funds, see FINRA's Investor Alert, "Funds of Hedge Funds--Higher Costs and Risks for Higher Potential Returns."

Mutual Funds (open-end funds)

How they work
Mutual funds are established so that individual investors can pool their money and create a diversified portfolio. When you buy mutual fund shares, you become a shareholder of a fund that holds a variety of investments. By diversifying, a mutual fund spreads risk across numerous investments sources (often including stocks, bonds, and money market assets) rather than relying on just one to perform well. Many investors choose to buy mutual funds that spread their investments across a range of industry sectors to further diversify their holdings, while others

Mutual funds have varying degrees of risk. They also have costs associated with owning them, such as management fees, that will vary depending on the type of investments the fund makes. The price that investors pay for a mutual fund share is called the NAV or net asset value per share, plus any shareholder fees such as sales loads. All mutual fund shares have a high degree of liquidity, meaning that investors can decide to sell their shares back to the fund at any time (at the current NAV plus any redemption fees and charges).

Mutual funds are run by investment professionals who decide which investments to buy or sell for the fund. Their decisions are guided by the fund's investment goals. For example, some mutual funds are designed for people who want to have easy access to their money and invest only for a short time. These funds invest primarily in government securities or very short-term bank CDs, where the investment risks are moderate. Other mutual funds appeal to people who are willing to take on more risk with the goal of a higher return. Such funds invest primarily in corporate or municipal bonds. Most mutual funds, however, are more diverse, offering a mix of investments. A typical fund portfolio includes between 30 and 300 different stocks, bonds, and other investments.

Since mutual funds are managed by financial professionals, they can be a good choice for a beginning investor. This is not to say, however, that mutual funds are risk-free because even financial investment planners aren't perfect (despite what they may tell you). But in general, the potential gains from investing in a mutual fund outweigh the potential losses if you're in it for the long haul.

Funds can earn money in 3 ways: dividend payments, capital gains distributions, and increased NAV.

A fund may earn income in the form of dividends and interest on the securities in its portfolio. The fund then pays its shareholders the income (minus disclosed expenses) it has earned in the form of dividends, or the shareholder can choose to have the dividends reinvested in the fun to buy more shares.
The price of the securities a fund owns may increase. When a fund sells a security that has increased in price, the fund has a capital gain. At the end of the year, most funds distribute these capital gains (minus any capital losses) to investors, unless the investor has chosen to have these earnings reinvested.
If the market value of a fund's portfolio increases after deduction of expenses and liabilities, then the value (NAV) of the fund and its shares increases. This increase is not paid to the investor, but reflects the higher value of the investment.

Pricing
The share price (the price that investors pay to purchase mutual fund shares) is the approximate per share NAV, plus any fees that the fund imposes at purchase (such as sales loads or purchase fees, discussed below). The price that investors receive on redemptions is the approximate per share NAV at redemption, minus any fees that the fund deducts at that time (such as deferred sales loads or redemption fees, also discussed below).

Fees and Expenses
When choosing a mutual fund, you'll want to look at not only its holdings, stated goals, risks, and past rate-of-return, but also any fees and expenses incurred--all of which you can find in a fund's prospectus. All mutual funds charge fees (hey, those fund managers have to pay for their BMWs somehow), which are usually listed as a percentage of average net assets, called the total annual fund operating expense (aka expense ratio). Obviously, the lower the percentage, the better, as fees and taxes diminish a fund's return. Unfortunately, investors must pay the shareholder fees, sales charges, and other expenses (see below) regardless of the fund's performance. All shareholder fees and operating expenses (see below) must be displayed in a fund's prospectus in the fee table.

Shareholder Fees
A sales charge (aka front-end load) is a fee expressed as a percentage of your investment. For instance, if you want to invest $1,000 in a fund with a 5% sales charge, $50 will go to the broker for the front-end load and the remaining $950 will be invested. Some mutual funds reduce the front-end load as the size of your investment increases. Similar to the sales charge is the purchase fee, which some funds charge in order to pay some of the administrative costs of trading shares. When you sell your shares, another fee, called a deferred sales charge (aka back-end load), which goes to the broker who makes the sale. Usually it depends on the length of time the investor owned the shares (decreasing with time); this type of back-end load is called a contingent deferred sales load (aka CDSC or CDSL). A redemption fee is basically the same as a purchase fee, except that it's paid when you sell your shares rather than when you buy. Some funds charge what they call an account fee that they use for account maintenance and administration; it's usually imposed on accounts with a low value.

Note that even no-load funds may charge shareholder fees, such as purchase, redemption, and account fees, as well as operating expenses.

Breakpoints
Some mutual funds that charge front-end sales loads will charge lower sales loads for larger investments. The investment levels required to obtain a reduced sales load are commonly referred to as breakpoints. You should always ask how a fund you're interested in establishes eligibility for breakpoint discounts (if it has them), as well as what the fund's breakpoint amounts are. NASD's Mutual Fund Breakpoint Search Tool can help you determine whether you're entitled to breakpoint discounts.

Annual Fund Operating Expenses
These fees are paid out of fund assets. Management fees are administrative fees that go to the fund's adviser or manager; distribution (and/or service) fees (aka 12b-1 fees) cover the costs of marketing and selling shares and investor services. Other fees may be imposed to defer custodial, legal, and accounting expenses.

When choosing a fund, pay close attention to the fee tables as even a small difference in fees can translate into a big difference in returns over a long period of time. You can compare the fees and expenses of up to three mutual funds, or the share classes of the same mutual fund with FINRA's (Financial Industry Regulatory Authority) Mutual Fund Expense Analyzer. It also allows you to compare the fees and expenses of up to three mutual funds. Enter each fund's ticker symbol or select the fund through the drop down menu. If you can't remember the exact name of the fund, you can search for it using key words.

The SEC's (U.S. Securities and Exchange Commission) online interactive Mutual Fund Cost Calculator can also help you compare the costs of different mutual funds and understand the impact that many types of fees and expenses can have over time. Unlike NASD's Mutual Fund Expense Analyzer, you'll need to enter fee and expense information manually from a prospectus or other disclosure document when using this tool.

Share Classes
Many mutual funds have what they call share classes, usually denoted as Class A, Class B, etc. All the share classes of one fund will invest in the same portfolio and have the same investment goals, etc.; the difference is in the shareholder services and/or distribution arrangements (and correspondingly, different fees and expenses. In general, mutual fund class structures work like this:

Class A shares typically have a front-end sales load, a lower 12b-1 fee, and lower annual expenses than other share classes. If you're considering Class A shares, be sure to ask about breakpoints.

Class B shares typically do not have a front-end sales load, but may impose a contingent deferred sales load and a 12b-1 fee (along with other annual expenses). Class B shares also might convert automatically to a class with a lower 12b-1 fee if they're held long enough.

Class C shares may or may not have a 12b-1 fee and either a front- or back-end sales load, but the loads for Class C shares tends to be lower than other classes. This class of shares generally does not convert to another class and tends to have higher annual expenses than other classes.

Categories of Mutual Funds
There are thousands of mutual funds to choose from; most of them fall into one of three categories: money market funds, bond funds (aka fixed income funds), and stock funds (aka equity funds), each having different features, advantages, and disadvantages.

Money Market Mutual Funds (MMMFs)
MMMFs are low-risk, low-return mutual funds that invest in the short-term money market. By law, they can only invest in certain high-quality investments issued by the U.S. federal, state, and local governments, as well as U.S. corporations. Money market mutual funds pay dividends based on current short-term interest rates, and because returns for these funds are generally lower than for bond or stock funds, inflation risk can be a concern. Do not confuse a money market fund with a money market deposit account. The names are similar, but they are completely different:

Bond Funds
Bond funds usually have higher risks and higher returns that money market funds. These risks may include credit risk, interest rate risk, and prepayment risk. Credit risk, the possibility that the companies whose bonds the fund owns default on their debts (the bonds), can be kept low by choosing a fund that invests in insured bonds or bonds issued by the U.S. Treasury. Interest rate risk is the possibility that the market value of the individual bonds will go down when interest rates rise; longer-term bonds are generally at higher risk for this. If interest rates fall, a bond issuer may decide to pay off its debt (your bonds) early and issue new bonds paying a lower interest rate that is more in line with the market. Your fund will then have to try to reinvest that money in another set of bonds; the risk here is that if prepayment happens, the fund may not be able to find another bond that pays as high a return as the original bond (since interest rates have lowered). This is called prepayment risk, and since it depends on the market, there's really no way to prevent it.

Stock Funds (aka equity funds)
Stocks have historically performed better than bonds and treasury securities over the long run. The biggest risk with investing in stocks (and stock funds) is overall market risk--the danger that stock prices will go down because of the general state of the economy (as is happening now) or because of a fall in demand for particular products or services that the companies you've invested in provides.

Types of Stock Funds
There are several types of stock funds, including growth funds, which invest in stocks that have the potential for large capital gains but that may not pay regular dividends, income funds which instead focus on stocks the do pay regular dividends, index funds, which invest only in companies of a specific market index in hopes that the fund will achieve the same return as that index, and sector funds, which invest mainly in a particular industry, such as technology or energy.

There are three basic styles used by fund managers in choosing which stocks to include in their funds' portfolios: the value approach, the growth approach, and the blend approach. In the value approach, managers choose stocks that are undervalued compared to similar companies; in the growth approach, managers look for stocks that are growing faster than their competitors or than the market as a whole; these are often well-known, established companies. The blend approach is used to build a portfolio of both value and growth stocks.

The stocks in a fund's portfolio can be U.S. companies or foreign companies. Since in the past U.S. and international economies have not been in sync, i.e. their stocks experience, as a whole, growth at different times, most financial advisers recommend diversifying by choosing both domestic and international funds for your portfolio.

Depending on your investment goals, of course, it is usually wise to further diversify your asset allocation further between different types of funds (stocks, bonds, cash/stable value funds) and to include all three "caps" in your portfolio. Cap or capitalization is a measurement of the size of a company, and is relevant because size/worth is related to growth potential and risk. Generally, large-cap companies are worth over $5 billion, mid-cap companies are worth $500 million to $5 billion, and small-cap companies are worth less than $500 million. Larger cap funds tend to have slower but more stable growth and usually have relatively low risk, while smaller cap funds may have faster growth potential but also might carry a higher risk.

Trading Mutual Fund Shares
Once you've found a fund you want to buy in to, you can either contact the fund directly, your broker, financial planner, or bank.

Exchanging shares
Some funds offer exchange privileges within the fund family, a group of funds that share administrative and distribution systems but that may have different objectives, strategies, and risks. Not all funds are part of a family, but if they are, you can often transfer your holdings from one fund to another as your investment goals change, usually without any fees. Taxes consequences do apply on exchanges, though--you'll have to pay taxes on the capital gains of your old shares (or if you've lost, you'll be able to take a capital loss).

Tax Consequences of mutual funds
When you own individual stocks or bonds, you must pay income tax each year on the dividends or interest you receive, but you won't have to pay any capital gains tax until you actually sell and unless you make a profit. Mutual funds work differently. When you buy and hold mutual fund shares, you will owe income tax on any ordinary dividends in the year you receive or reinvest them, and when you sell your shares, you will owe taxes on any personal capital gains. You may even have to pay capital gains taxes each year you hold the shares (since law requires mutual funds to distribute capital gains to shareholders if they sell securities for a profit that can't be offset by a loss.)

Tax Exempt Mutual Funds
Though some or all of the dividends from tax-exempt funds such as municipal bond funds are exempt from federal (and sometimes state and local) income tax, you do have to pay taxes on capital gains.

Here's the trick: if you receive a capital gains distribution, you will probably have to pay taxes even if the fund has had a negative return since the point during the year when you purchased your shares. For this reason, you should contact the fund to find out when it makes distributions so you won't pay more than your fair share of taxes. Sometime that information can be found on the fund's website.

Comparing mutual funds
When comparing mutual funds, be sure to take each of the following into account:

category/type of fund
tax consequences
fund objectives/goals and strategies
level of risk vs. return
share classes available
dividends
fees and expenses
level of diversification
types of holdings (industry, company size and health, etc.)
past performance (though this is not necessarily a reliable indicator of future performance)
price/affordability of shares
minimum initial investment
how shares are purchased and redeemed

You can find all this information (except perhaps the share price, which varies) in the fund's prospectus. Always request a prospectus (and read it!) before you invest in any fund.

Here's some of what you'll find in mutual fund prospectuses:

Date of Issue — The date of the prospectus should appear on the front cover. Mutual funds must update their prospectuses at least once a year, so always check to make sure you're looking at the most recent version.
Risk/Return Bar Chart and Table — Right after the fund's narrative description of its investment objectives or goals, strategies, and risks, you'll find a bar chart showing the fund's annual total returns for each of the last 10 years (or for the life of the fund if it is less than 10 years old). Except in limited circumstances, funds also must include a table that sets forth returns, both before and after taxes, for the past 1-, 5-, and 10-year periods. The table will also include the returns of an appropriate broad-based index for comparison purposes. Bear in mind that the bar chart and table for a multiple-class fund will typically show performance data and returns for only one class.
Fee Table — The fee table includes an example that will help you compare costs among different funds by showing you the costs associated with investing a hypothetical $10,000 over a 1-, 3-, 5-, and 10-year period.
Financial Highlights — This section contains audited data concerning the fund's financial performance for each of the past 5 years. Here you'll find net asset values (for both the beginning and end of each period), total returns, and various ratios, including the ratio of expenses to average net assets, the ratio of net income to average net assets, and the portfolio turnover rate.

Closed-End Funds
Generally, closed-end funds sell a fixed number of shares at one time (in an initial public offering) after which the shares typically trade on a secondary market, such as the NYSE or the Nasdaq. Closed-end fund shares are also generally not redeemable, i.e. the investment company is not required to buy its shares back from investors upon request. Some closed-end funds, commonly referred to as interval funds (see below), offer to repurchase their shares at specified intervals.

The investment portfolios of closed-end funds are usually not managed by the company itself, but by independent investment advisers that are registered with the SEC. Be aware that closed-end funds are permitted to invest in a greater amount of illiquid securities than are mutual funds. Because of this feature, funds that seek to invest in markets where the securities tend to be more illiquid are typically organized as closed-end funds.

Pricing
Unlike mutual funds, the prices of closed-end fund shares that trade on a secondary market after the initial public offering is determined by the market and may be greater or less than the fund's per share NAV.

Interval Funds
An interval fund is a type of investment company that periodically offers to repurchase a certain number of shares from its shareholders. Shareholders, however, are not required to accept these offers.

Even though interval funds are classified as closed-end funds, they differ from traditional closed-end funds in the following ways:

Interval fund shares typically do not trade on the secondary market.
Interval fund companies are permitted to continuously offer their shares at a priced based on the fund’s NAV.
An interval fund will make periodic repurchase offers to its shareholders, generally every three, six, or twelve months, as disclosed in the fund’s prospectus and annual report. The interval fund also will periodically notify its shareholders of the upcoming repurchase dates. When the fund makes a repurchase offer to its shareholders, it will specify the last day shareholders are allowed to accept the repurchase offer. The actual repurchase will occur at a later, specified date.

Pricing
The price that shareholders will receive on a repurchase will be based on the per share NAV determined as of a specified (and disclosed) date. This date will occur sometime after the close of business on the date that shareholders must submit their acceptances of the repurchase offer (but generally not more than 14 days after the acceptance date).

Fees and expenses
Note that interval funds are permitted to deduct a redemption fee from the repurchase proceeds, not to exceed 2% of the proceeds. The fee is paid to the fund, and generally is intended to compensate the fund for expenses directly related to the repurchase. Interval funds may charge other fees as well.

Exchange-Traded Funds (ETFs)
Like index funds, ETFs seek to achieve the same return as a particular market index and primarily invest in either all of the securities or a representative sample of the securities of companies that are included in a that index. For example, one type of ETF, called a Spider or SPDR, invests in all of the stocks contained in the S&P 500 Composite Stock Price Index. ETFs, as their name suggests, are traded on exchanges, so you can purchase shares via a broker account (like individual stocks).

How they work
Exchange-traded funds, or ETFs, are investment companies that are legally classified as either open-end funds or UITs, but that differ from traditional open-end companies and UITs in the following respects:

ETFs do not sell individual shares directly to investors and only issue their shares in large blocks that are known as creation units. Investors generally do not purchase creation units with cash. Instead, they buy creation units with a basket of securities that generally mirrors the ETF’s portfolio. Those who purchase creation units are frequently institutions.
After purchasing a creation unit, an investor or institution often splits it up and sells the individual shares on a secondary market. This permits other investors to purchase individual shares (instead of creation units).
Investors who want to sell their ETF shares have two options: (1) they can sell individual shares to other investors on the secondary market, or (2) they can sell the creation units back to the ETF.
In addition, ETFs generally redeem creation units by giving investors the securities that comprise the portfolio instead of cash. So, for example, an ETF invested in the stocks contained in the Dow Jones Industrial Average (DJIA) would give a redeeming shareholder the actual securities that constitute the DJIA. Because of the limited redeemability of ETF shares, ETFs are not considered to be—and may not call themselves—mutual funds.

An ETF, like any other type of fund, will have a prospectus. All investors that purchase creation units receive a prospectus. Some ETFs also deliver a prospectus to secondary market purchasers. ETFs that do not deliver a prospectus are required to give investors a document known as a Product Description, which summarizes key information about the ETF and explains how to obtain a prospectus.

Fees and Expenses
An ETF will have annual operating expenses and may also impose certain shareholder's fees that are disclosed in the prospectus. However, ETFs are generally more cost efficient than mutual funds because they are based on an index, and do not need to be actively managed, thereby saving you management costs. Like stocks, investors can purchase ETF shares on margin, short sell shares, or hold onto them for the long haul.

See also:
Stocks: What To Look For, How to Trade For Long-Term Gains

Bonds: The Basics

Annuities: What Are They? How Do They Work? And How Do I Find the Right One For Me?

Investing main

Bonds

2009-10-17T19:31:00.000-07:00

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How they work
When you buy bonds, you are lending money to a federal or state agency, municipality, or other issuer, such as a corporation. A bond is like an IOU. The issuer promises to pay a stated rate of annual interest, called the coupon rate during the life of the bond and repay the entire face value when the bond comes due or reaches maturity. The interest a bond pays is based primarily on the credit quality of the issuer and current interest rates. When bonds are purchased, they may be held to maturity or traded. In general, bonds are lower risk investments that have lower returns than stocks.

A bond may be sold at face value, which is the amount returned to the investor at maturity, (also called par) or at a premium (higher price) or discount (lower price). For example, when prevailing interest rates are lower than the bond's stated rate, the selling price of the bond rises above its face value and can be sold at a premium. Conversely, when prevailing interest rates are higher than the bond's stated rate, the selling price of the bond is discounted below face value.

Yield-to-maturity is the effective yield of the bond from the current date until the bond reaches maturity and depends on the total interest payments remaining, and the difference between today’s market value (current price) and par value. Yield-to-call is the same calculation based on the total coupon interest payments remaining between now and the first call date (rather than the maturity date) as well as the difference between today’s market value (price) and the call price.

Risk
Bonds are fixed income products, meaning that the amount you will receive is set when you buy it. In this way, bonds are low-risk investments. The bond market as a whole has historically been less volatile than the stock market, as well. Corporate bonds are usually riskier than government, Treasury, or municipal bonds because there is the potential for the corporation to go under and not be able to afford to pay its bonds when they reach maturity. All bonds carry some risk, however, including inflation risk and interest rate risk (because bond prices generally decline when interest rates rise and vice versa.) These two types of risk are related in that inflation leads to higher interest rates. Bonds with the lowest coupons are at the highest risk when interest rates rise.

Short-term bonds (those with maturities of three years or less) usually have lower yields than longer-term bonds, especially those with maturities of ten or more years. This is because the longer a bond is held, the more subject the holder is to inflation and interest rate risk.

Inflation-indexed securities like Treasury Inflation Protection Securities (TIPS) are designed to get rid of inflation risk.

Ratings
Firms like Moodys Investor Service and Standard & Poor's rate bonds. With corporate bonds, the company's bond rating is based on its financial picture. The rating for municipal bonds is based on the creditworthiness of the governmental or other public entity that issues it. Issuers with the greatest likelihood of paying back the money have the highest ratings, and their bonds will pay an investor a lower interest rate. Remember, in general, the lower the risk, the lower the expected return.

Callable vs. Noncallable
The idea here is the same as with callable and non-callable CDs.

Types of Bonds
Government Savings bonds (EE/E or I bonds) are U.S. government-issued and backed. There are different types of government savings bonds, each with slightly different features and advantages. Series I bonds are indexed for inflation, meaning that they protect against the deterioration of your investment from inflation—the earnings rate on this type of bond combines a fixed rate of return with the annualized rate of inflation. Savings bonds can be purchased in denominations ranging from $50 to $10,000, and typically earn higher interest than savings accounts and CDs, but often lower than other types of bonds.

Ginnie Mae
The Government National Mortgage Association (GNMA aka Ginnie Mae) is a government agency that buys mortgages from lenders, pools them together, and sells shares of the pool to investors (or to brokers who then sell them to investors). The pools are called Mortgage Backed Securities (MBS) aka "pass-through" securities because the mortgage payments (from the home-owners who hold the mortgages) pass through banks (which take out a processing fee) to the investors who've bought the MBSs.

What makes Ginnie Mae MBSs unique is that since the GNMA is a government agency, they get special treatment such as low interest rates on any money they borrow from the government and tax-exempt status from (most) states and municipalities, and are therefore often able to offer higher yields than other MBSs. Plus, Ginnie Mae MBSs (unlike Freddie Mac's, Fannie Mae's, and other MBSs) are fully backed by the U.S. government, i.e. your money is as safe as houses (pun intended) no matter what happens with the housing market, various financial agencies, etc. This means that Ginnie Maes are just as safe as Treasuries but often pay higher interest.

Investors receive a monthly payment either of interest and a portion of principal or of interest only. In the latter case, the principal is paid in a lump sum when the mortgage matures. The minimum investment for Ginnie Maes is $25,000, making them out of reach (or just plain undesirable) for most of us, but that's where mutual funds and the secondary market come in. Like other bonds, Ginnie Maes can be sold by their current owners who are willing to unload them at a lower price because, for instance, their interests are low compared to newer issues or they're close to maturity and there isn't much principal left to be paid.

The risks for Ginnie Maes are minimal but existent. A bunch of the mortgage holders in the pool could decide sell their homes, pay their loans off early, or refinance, causing the investors to be paid back early. This isn't so much a risk as it is slightly unfortunate. You don't lose anything; you just don't get paid as much interest as you would if the mortgages were held to maturity.

Treasury bonds, bills and notes are sold by the U.S. Treasury to pay for an array of government activities and are backed by the federal government (like Ginnie Maes). Treasury bonds are securities with terms of more than 10 years and that pay interest semiannually. Treasury bills are short-term securities with maturities of three months, six months or one year and are sold at a discount from their face value. The difference between the cost and what you receive at their maturity is the interest you earn. Treasury notes are securities with maturities ranging from two to ten years that pay interest every six months. Treasury Inflation Protected Securities (TIPS) are securities that, like Series I government bonds, protect against inflation. With TIPS, interest is paid on the inflation-adjusted principal.

Treasury securities are sold in increments of $1,000, and along with government savings bonds, can be purchased online directly from the U.S. Treasury. There is no state or local income tax on the interest earned from Treasury and savings bonds

Municipal Bonds
Municipal bonds are issued by a state, state agency or authority, or a county, city, town or village. The money invested in the bonds is used by these entities primarily for public projects such as building or repairing schools, roads, highways, bridges, hospitals, and low income housing. This type of bonds is among the safest of investment types and is special because of its tax-exempt status. This feature makes munis especially attractive to investors in the highest tax brackets.

Taxes
The interest munis pay is often lower than that of other bonds, but since other bond interest is taxed, you will not actually receive that much. For a more accurate comparison of actual interest you would receive, use the muni's tax equivalent yield (TEY) for your tax bracket. The TEY will be higher than the stated yield; it's basically the pre-tax yield that a taxed bond would have to pay in order to equal that muni's stated yield. Discount muni bonds may be subject to capital gains tax when sold.

Corporate bonds are basically loans an investor makes to a company in exchange for interest. Buying bonds for a single company is much like owning stocks in a single company; if something happens to that corporation, you can lose some, if not all, of your investment. Bond mutual funds are an alternative that spread the risk among multiple companies. While bond funds can lose money as interest rates increase, they tend to offer greater protection from losses than single bonds or stock funds.

See also:
Stocks: What To Look For, How to Trade For Long-Term Gains

Funds: Mutual Funds, ETFs, Closed-end Funds, Hedge Funds , Oh My!

Annuities: What Are They? How Do They Work? And How Do I Find the Right One For Me?

Investing main

Stocks: Owning Part of a Company

2009-10-17T19:26:00.000-07:00

Buying stock makes you a partial owner of that company. You're basically betting that the company will be successful. This can be exciting, especially if you're really interested in what the company does. But the most common, and best, advice about buying stocks is that you can't put all your eggs in one basket. In other words, do not, no matter how great the company is, put all your money into that one stock. The risk is just too much. It's generally advisable to diversity your portfolio, which means investing in many different companies and industries. To diversify a portfolio, an investor should own at least ten different stocks in different industries.

Unless you have loads of cash and are able to buy millions of dollars of diversified stocks, by nature owning stock directly carries a higher risk than investing in a mutual fund. The advantages are in the lack of management fees (because you do it yourself) and direct control over your investments.

How they work
When you buy stock, you become a part owner of the company and are known as a stockholder, or shareholder. Stockholders can make money in two ways--receiving dividend payments and selling stock that has appreciated. A dividend is an income distribution by a corporation to its shareholders, usually made quarterly. Stock appreciation is an increase in the value of stock in the company, generally based on its ability to make money and pay a dividend. However, if the company doesn't perform as expected, the stock's value may go down. There is no guarantee you will make money as a stockholder. In purchasing shares of stock, you take a risk on the company making a profit and paying a dividend or seeing the value of its stock go up.

Day-trading and other short-term stock holding techniques make for some very risky investments. The best way to minimize risk and maximize potential is to become a long-term investor. Plan on holding your stocks for years--at least five and preferably many more. The idea is that if you choose the right companies, over the years they will grow and continue to be successful and their stock will appreciate. The longer the investment term, the more the risk decreases since you're allowing time for any spikes in performance to even out to a slow growth.

Why Some Investments Make Money and Others Don't
You can potentially make money in an investment if:

The company performs better than its competitors.
Other investors recognize it's a good company, so that when it comes time to sell your investment, others want to buy it.
The company makes profits, meaning they make enough money to pay you interest for your bond, or maybe dividends on your stock.

You can lose money if:

The company's competitors are better than it is.
Consumers don't want to buy the company’s products or services.
The company's officers fail at managing the business well, they spend too much money, and their expenses are larger than their profits.
Other investors that you would need to sell to think the company's stock is too expensive given its performance and future outlook.
The people running the company are dishonest. They use your money to buy homes, clothes, and vacations, instead of using your money on the business.
They lie about any aspect of the business: claim past or future profits that do not exist, claim it has contracts to sell its products when it doesn't, or make up fake numbers on their finances to dupe investors.
The brokers who sell the company's stock manipulate the price so that it doesn't reflect the true value of the company. After they pump up the price, these brokers dump the stock, the price falls, and investors lose their money.
For whatever reason, you have to sell your investment when the market is down.

Buying Stock: How to Pick 'Em
Before investing in a company, learn about its past financial performance, management, products, and how the stock has been valued in the past. Learn what the experts say about the company and the relationship of its financial performance and stock price. Successful investors are well informed.

Where do you find all that information? You could go to the company's website and try to find its financial statements and annual reports, then visit a bunch of financial news sites or get a free subscription to Investor's Business Daily. But if you're short on time, websites like Morningstar, TDAmeritrade, Scottrade, and Yahoo! Finance make the basic information you'll need easier to find. Each of these sites let you search stocks by ticker symbol and access profiles of that company and its stock. Most include of these sites include in each company's profile organized financial stats, analyst commentary, relevant news, and helpful charts. If you don't have a certain company in mind, all of the above sites have free customizable stock screeners which let you search stocks by various criteria.

No set of criteria will guarantee you a winning stock, but here are some tips:

Look for companies with high cash to debt ratios. Then look for mid-level payout ratios; too high could be dangerous because it could mean that the company is overreaching. You don’t want a company that pays out more than it can afford. A good average is around 40%.
Also avoid stocks with high dividend yields (for the market at the time). By nature of its definition, a stock's dividend yield falls when its price goes up, and vice versa. A yield above 6% could mean that share price is plummeting. Furthermore, high yields tend to indicate mature companies with little opportunity for growth.
This one might seem obvious, but it's important so it's getting listed anyway: profits. Look for companies with high profits, and more specifically high profits relative to revenues. If Company A and Company B both have 1-year profits of, say, $2 million, but Company A's revenue is lower, all else being equal, Company A's stock would be more desirable. Why? Because a higher percentage of the money it brings in directly benefits its shareholders by increasing the company's net worth.
Look for a high P/E (above 30). This tends to indicate a better growth rate and expectation of future profits. Particularly avoid stocks with low price-to-earnings ratios (below 15) because they tend towards slower growth and lower profit expectations.

Once you've found some stocks you're interested in, you can create a watchlist for them. A watchlist allows you to monitor stock prices, company news, etc. See the bottom of this page for step-by-step instructions on creating a free watchlist at Morningstar.com. Some of the above websites also let you set alerts to notify you when a stock price reaches or falls to a specified amount.

If you're serious about learning the details about a company, it's time to check out their financial statements and reports. Most of these you can access from the company's website and/or from the monitor/broker sites listed above.

Your first stop: the income statement. The income statement contains the following information:

Revenue: how much money the company has earned
Expenses: how much money the company has spent
Gross profit: how much money the company has left after sales to pay its operating expenses (revenue − cost of sales)
Net income: how much money is left after all expenses are paid, i.e. actual profit. Also called earnings, profit, "bottom line."
Earnings per share (EPS): net income ÷ number of shares outstanding
Equity aka stockholder's equity aka net assets aka net worth: how much more the company owns than it owes
Market capitalization: a company's market value (stock price × shares outstanding)
Gross margin: gross profits ÷ revenues
Operating margin: operating profits ÷ revenues
Net margin: net profits ÷ revenues
Price to earnings ratio (P/E): very roughly, how expensive or cheap a stock is at the moment (stock price ÷ earnings per share). One way to gauge how a stock is valued relative to the market is to compare its P/E with the average S&P 500 P/E.
Return on equity (ROE): net income ÷ equity
Dividend Yield: annual dividends per share ÷ stock price

How to set up a free watch list on Morningstar:
(from the Morningstar.com website)

Go to Morningstar.com and click on the tab labeled "Portfolio."
In the Portfolio Manager window, under "Create a Portfolio," click "New Portfolio."
You'll see a box labeled "Step 1." It's automatically set up to build a watch list, so click "Continue."
Pick a name for your portfolio, or just call it "watch list." Then, plug in the ticker symbols of the companies you want to watch. Click "Done."
In the following window, you'll see a list of updates, alerts, and tips that Morningstar will send you daily for the companies in your watch list. Click "Done" again.
Now you have a watch list that you can visit anytime by clicking the Portfolio tab on Morningstar.com.

Credit Scores: How They're Calculated and How They Affect Your Interest Rate

2009-10-17T19:17:00.000-07:00

Your credit score is based on how you manage the credit you already have. Credit cards, car loans, mortgage loans, student loans, and utility bills all play a part in your credit score. If you miss payments, make late payments, or default on any of these, your score will fall. Conversely, if you always pay at least the minimum payment and always pay on time, your score will increase.

Maintaining a good credit score is incredibly important. If you have poor credit, it will be very difficult to get a good interest rate on a loan for, say, a house or a car when the time comes. It can even affect how much you pay for insurance.

Federal Trade Commission's article with more info on credit scores

Credit Reports
You are entitled to one free copy of your credit report from each of the three major consumer reporting companies (Equifax, Experian, and TransUnion) once a year. Anything above that, you will have to pay for (they charge up to $9.50). In order to receive your credit report, you must contact the agencies and request that they mail it to you. Do not contact each company separately; they've set up a website and toll-free number (1-877-322-8228) together, so that you can do all your requesting in one place.

Federal Trade Commission's article with more info on free credit reports

The consumer reporting companies are allowed to report most information about your credit for up to seven years, except for bankrupcy which can be reported for up to ten years.

Federal Trade Commission's article about how to recognize credit repair scams

If you find an error on your credit report, you can dispute it with the reporting company by contacting the credit reporting company (online, by fax, or by certified mail) and identifying the creditor you have a dispute with and the nature of the error. Include verifiable information, such as canceled checks or receipts, that support your complaint. The credit reporting company must investigate your complaint
within 30 days and get back to you with its results.

If for some reason, the error does not get resolved, contact the creditor with whom you have the dispute directly and try to correct the error that way. Once it's corrected, ask them to send notice of the correction to the credit reporting company.

If the error still remains unresolved, you have the right to explain in a statement that will go on your credit report. You also have the right to issue this sort of explanation even if the issue is not a reporting error, i.e. if you were actually at fault. For example, if you did not pay a car repair bill because the mechanic didn’t fix the problem, the unpaid bill may show up on your credit report, but so will your explanation.

See also: Credit Cards main, Choosing a Card: What to Look For, Establishing Credit

Choosing a Card: What to Look For

2009-10-17T19:07:00.000-07:00

Finding the Best Deal on a Credit Card
There are tons of credit cards out there, and they all have different fees, interest rates, qualifications, restrictions, and benefits. You'll want to compare these to find the card that's right for you. Here are some factors to consider:

Annual percentage rate (APR): The APR is a measure of the cost of credit, expressed as a yearly interest rate. Check out the "periodic rate," too. That's the rate the issuer applies to your outstanding balance to figure the finance charge for each billing period. For example, if you have an outstanding balance of $2,000, with 18.5 percent interest and a low minimum monthly payment, it would take over 11 years to pay off the debt and cost you an additional $1,934 just for interest, which almost doubles the total cost of your original purchase. Watch out for low "introductory rates" that will later skyrocket, often after six months. Look instead for a low "fixed rate." But if you're using a credit card like you should, and paying it off completely every month, then you really don't have to worry about this.

Grace period: This is the time between the date of a purchase and the date interest starts being charged on that purchase. If your card has a standard grace period you have an opportunity to avoid finance charges by paying your current balance in full. Some issuers allow a grace period for new purchases even if you do not pay your balance in full every month. If there is no grace period, the issuer imposes a finance charge from the date you use your card or from the date each transaction is posted to your account.

Annual fees: Many credit card issuers charge an annual fee for granting you credit, typically $15 to $55. But there are plenty of cards with not annual fees. The only reason to get a card with a fee is if you absolutely cannot qualify for a fee-free one. And if that's the case, you probably shouldn't have one anyway. See Establishing Credit. If you do choose a card with a annual fee, it may be possible to get it waived if you pay all your bills on time. Call the customer service line and ask.

Transaction fees and other charges: Some issuers charge a fee if you use the card to get a cash advance, if you fail to make a payment on time, or if you exceed your credit limit. Some may charge a flat fee every month whether you use the card or not. Hint: avoid these like the plague. You shouldn't have to pay simply to have a credit card. See above.

Make note of all finance charges that could be applied--there will usually be a chart of them on the application or the terms of agreement. These include various transaction fees, service fees, late fees, and interest rates. Above all, stay away from costly cash advances--most of the time, they're a total ripoff.

Credit Limit: This is the total amount you're allowed to have charged on your account, (including purchases, cash advances, finance charges, and other fees) at any one time. The credit card company will set this limit depending on your credit history. If you're just starting out it will probably be fairly low, maybe even only $500 to $2,000. It will probably increase automatically as your credit score improves; if not, you can always call customer service and ask them to raise it. Try to stay well under your credit limit, so you'll have credit available if you need it in an emergency.

Customer service: This is actually really important, as crappy customer service from a credit card company can make your life miserable if say, you lose your card or get mischarged. Some companies are notoriously bad at giving a brother a break; others have great reviews in that department. Make sure, at the very least, that your company has a 24-hour, toll-free telephone number.

Other benefits: Lots of cards offer cool benefits like insurance (especially travel insurance), credit card protection, discounts, cash rebates, frequent flyer miles, and special merchandise offers. Make sure you look around and see what's out there.

Here are a couple of good places to start when looking for a card. They'll let you compare different types of cards from different credit companies and banks, and even search by different factors such as credit score required, rewards, annual fee, and APR.

CreditCardGuide.com

CreditCards.com

E-Wisdom's credit card page

Credit-Land.com

If you're a student, you can also try

StudentCredit.com

Federal Trade Commission's article with more info about prescreened offers of credit and insurance.

See also: Credit Cards main, Establishing Credit, Credit Scores

Establishing Credit

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Image via Wikipedia

What Lenders Look For
Before creditors lend money, they need to be assured that the funds will be repaid. In other words, is the prospective borrower creditworthy? To find out, they ask for various types of information, which they obtain from your credit report, a computerized profile of your borrowing, charging, and repayment activities.

1. Income & Expenses

Lenders will look at what you earn and your regular expenses, such as rent, utilities, food, and other ongoing items. The amount left tells them whether you can afford to take on additional debt.

2. Assets

Do you have assets that can serve as collateral? Lenders will look for things like bank accounts, insurance, and valuable items such as a house, if you own one.

3. Credit History

How do you manage debt? If you have credit cards or have borrowed money before, you have a history that shows prospective lenders whether you are creditworthy by revealing details about the amount of debt you already have, how many credit cards you have, and whether you make payments on time.

It's easy to qualify for credit if you have a good credit history, but what if you have never used credit before? This is a common problem for people who just started working, those who work in the home, people who always pay in cash, and those who do not have assets or accounts in their own names. For them, the first step is to establish a credit history.

How to Establish a Credit History
Begin by opening an individual savings and checking account in your name. Over time, your deposits, withdrawals, and transfers will demonstrate that you can handle money responsibly.

Another easy way to establish credit is with utility bills. Having one or more utility bills in your name and paying them in full and on time will add to your credit score. Even cell phone bills work.

You could also apply for department store and gasoline credit cards, which generally are easier to obtain than major credit cards. Keep in mind that if you are repeatedly apply for cards and get denied, it will lower your credit score, so if you're denied more than twice, get a copy of your credit report and find out why before you apply for any other cards.

Once you get a credit card, an easy way to establish good credit is to just put a few purchases on it, and pay it in full at the end of the month. Do this for several months, et voila! You've established good credit.

See also: Credit Cards main, Choosing a Card: What to Look For, Credit Scores

Certificates of Deposit (CDs)

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A certificate of deposit, while technically a type of bank account called a time deposit, is more like a bond—a "product" that you buy for a specified amount and that earns a fixed interest rate until the end of its term. When the term is over, you can redeem your CD for the money you originally invested plus the accrued interest. Unlike other investments, CDs are federally insured up to $100,000. CDs are offered by traditional banks, online banks, credit unions.

How They Work
When you purchase a CD, you invest a fixed sum of money for a fixed period of time, called the term. CD terms can be almost any length, from 6 months to 20 years. In exchange for "lending" the bank your money (the principal), the bank pays you interest, typically at regular intervals, throughout the term. You get the total amount (principal plus interest) at the end of the term. However, if you redeem your CD before the end of the term (called its maturity), you typically have to pay an "early withdrawal" fee or forfeit part of the interest it earned.

Brokers
Traditionally, CDs were issued by local banks, but nowadays its common to also see them offered by brokerage firms or independent brokers, called "deposit brokers," who can sometimes negotiate a higher interest rate from the bank since they bring in so many customers. Note that deposit brokers do not have to be licensed, certified, or approved, so before engaging with one, do your research. Call your state securities regulator or check with FINRA's (the Financial Industry Regulatory Authority) Central Registration Depository to make sure 1) your broker is registered with them (allowed to trade securities) and 2) that they don't have any complaints filed against them.

You can find your state securities regulator at NASAA's (North American Securities Administrators Association) website or by calling (202) 737-0900.

To contact FINRA, call 1-800-289-9999 or use their online BrokerCheck tool

Also important when using a broker is to find out which institution issued your CD because there's a possibility that, if you're loaded and carry your other investments through that institution, your FDIC insurance might not cover everything. You see, the way FDIC insurance works is that its limited to $100,000 for each depositor at each bank. So if you've got $50,000 in one investment and $60,000 in another at the same bank, $10,000 or that is uninsured by the FDIC. Granted, considering this audience, this is highly unlikely, but it's good to know nonetheless.

One more thing--sometimes brokered CDs are held by a group of unrelated investors--each of them owning a piece of a large CD. For instance, a broker could offer you a 1-year $2,000 CD, but in reality you're getting 1/5 ownership of a 1-year $10,000 CD. The reason they do this is because banks usually offer higher interest rates for higher principals. Hence, it can be a good deal for you. Just be sure that you confirm with your broker exactly how your CD will be held and get a copy of the exact title of the CD. Always, always save all your paperwork. Not just with brokers or CDs but with any sort of investment.

Penalties for Early Withdrawal
Apologies for the vaguely dirty-sounding heading, but this is quite important. Before you invest in a CD, you need to make sure you can do without access to that money for the length of the term, because if you have to pull out (OK, that one was intentional), you could end up losing money. Always find out what the penalties are before you invest. And beware brokers who tell you their CDs have no early withdrawal penalties; it could be true or it could be a bit of a trick. You see, if you are sharing the CD with other customers, the broker has to sell your share to someone else. This may not be a problem if interest rates have gone down since you bought in, but if interest rates have risen, the broker might have to sell your portion at a discount, meaning that you lose some of your principal. It's not technically an early withdrawal penalty, but for all intents and purposes it is. (The reason that interest rate changes affect the ability of the broker to sell your portion is that CDs operate within a market. If your CD is locked in at 5% but rates have risen so that now there are other CDs available that earn 7%, no one is going to want to buy your lower-earning CD. Conversely, if rates have fallen, your 7%er might be quite an attractive buy. The moral of the story here is to ask questions and get everything in writing, so you know what you're getting in to.

Interest Rates
In general, the longer the term of a CD, the higher the interest it pays. While the CDs traditionally have had fixed interest rates, there are now also variable-rate CDs available. The variations all work differently, so you'll need to check with your bank or broker to make sure you understand how and when the rate will vary. For example, some feature a "multi-step "or "bonus rate" structure where the rates change over time according to a set schedule. For others, the rates change according to market performance; they're often linked to a specific market index, such as the Dow Jones Industrial Average or the S&P 500.

Before investing in a CD, whether variable-rate or not, be sure to get the interest rate (and how it will change) in writing from the bank or broker and find out how often interest is paid and when and how you will receive it.

Bankrate.com has a useful CD interest calculator where you can enter a deposit amount, an interest rate and type of compounding, and a length of time that the CD would be held, and the calculator will tell you the APY and what the ending balance would be. It also has a more general search function that gives you the basic info for CDs available in your area.

Money-rates.com is definitely the best CD (and savings account) search out there, updating every few minutes, and listing daily specials with rates way higher than usual. Some restrictions may apply on some of the specials. They also have separate pages with listings for short-term CDs (less than 1 year) and for longer term CDs. Good deals can be found. The search-by-state blog, however, is less helpful.

Callable and non-callable CDs
Some CDs give the issuing bank the right to "call" the CD back--effectively ending your agreement--after a set period of time. When that happens, the investor receives their full principle (the amount they paid for the CD) plus any interest that has accrued up until the call time. Banks won't always call a callable CD, but they're reserving the right. Because, naturally, investors do not want their investments to be terminated prematurely, callable CDs usually offer slightly higher interest rates to make them more attractive. It's a give-and-take situation. For instance, if interest rates fall, a bank might choose to call its higher interest CDs, and you'll be out of the game. However, if you've invested in a long-term fixed-interest CD and rates rise, you'll be locked in at that lower rate.

So, very basically, if you're worried rates might fall, you might look for noncallable, fixed-interest CDs; if you think they might rise, you might go for a callable, variable-interest CD. Either way, there's a risk, but compared to stocks, bonds, and mutual funds, it's fairly minimal.

Credit Unions

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A credit union is a non-profit financial cooperative (and therefore exempt from federal and local taxes) that offers many of the same services as a bank, such as savings accounts (called share accounts), checking accounts (called share draft accounts), and CDs (called share term certificates), loans and online banking. Federally chartered credit unions can also write residential mortgages and issue credit cards. Because they don't have to pay taxes, credit unions can charge below-market rates on loans and also pay higher rates to their account holders.

Over 10,000 credit unions currently serve more than 79 million people in the U.S., and of all types of financial institutions, they consistently rank #1 in customer satisfaction. The vast majority of these credit unions are federally chartered and therefore regulated by an independent federal agency, the National Credit Union Administration (NCUA). In fact, there are currently fewer than 500 non-federally insured (state chartered) credit unions. To be safest, make sure yours is not one of them.

How they work
In order to participate in a credit union, you must be a member; all credit unions have their own requirements for membership. Typically, they are organized to serve people in a particular community, employees of one or more companies or industries, or members of an organization or association, and only those people are eligible for membership. Sometimes relatives of members are also eligible to become members, even if they do not meet the requirements.

Credit unions are democratically run and owned by their members, which is why they are allowed to be non-profits. Members pool their funds to make loans to one another. The volunteer board that runs each credit union is elected by the members.

Finding a credit union
The best site I've found for searching credit unions is the painfully obvious FindACreditUnion.com (run by the Credit Union League) because it lets you search by location, affiliation, ethnicity, and other common membership qualifiers.

Checking Accounts

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The purpose of a checking account is not to save or earn money, but simply to handle it conveniently. A few checking accounts earn a small percentage of interest, but most do not.

Not all checking accounts are created equal
When searching for a new checking account, there are several things to keep in mind:

Location, location, location: Having at least one bank branch (or ATM at the very least) is much more important for a checking account than a savings account. With a checking account, you'll probably be making transactions fairly often. You may need to cash a check, deposit a check or some cash, or make a withdrawal. If you don't have access to an actual bank branch with teller services, you can't cash checks or make large withdrawals (as ATMs usually have a withdrawal limit of around $250 per day.) Also, many people are wary about making cash deposits via ATM; the potential for the deposits to be lost or miscounted is higher than with checks, as cash is not traceable, and there is no teller there to verify the transaction.

That said, it's also good if your bank has several ATMs around your city/state. That way, you can have access to cash when you're out partying downtown.
Account Fees: Look for a fee-free account. There's no need to pay $50 a year just for the privilege of having a checking account. Most banks have checking accounts aimed at students, and these almost never have fees. Beware of hidden fees like "minimum monthly service charges." If you're pretty sure you'll keep the account minimum (if there is one), then you don't really have to worry about low-balance fees. Just don't forget.
Online banking and bill pay: This is more important to some people than to others. But if you've never used it, you should know: online banking can be a life saver. Need to transfer money *right now* and can't get to the bank? No problem. Need to check your balance? Easy peasy. Want to save trees and stamp money by receiving and paying your bills online? You got it.
ATM fees: If you travel a lot, these can kill you. Almost no bank will charge you to use their own ATMs, but almost all of them charge you to use other banks' ATM. Find out what the bank's policies are regarding ATM fees (and partner bank ATMs, if any) before you open your account.
Interest: Most checking accounts right now pay half a percent or less in interest. Many pay no interest at all. If you can find one that pays 1 or 2 percent interest with no fees or catches, grab it. If not, no worries. Most people don't keep enough money in their checking accounts to accumulate much interest anyway.

Bankrate.com has a cool feature that lets you compare various aspects of checking accounts in your area, such as APY, account opening fee, annual fee, fees for bounced checks, required amount to open the account, required minimum account balance to avoid fees, whether they offer online banking, and ATM fees and surcharges. It's super helpful.

The Dreaded Bounced Check
When you write a check for more than you have in your checking account, your bank has one of two options. It can either front you the money and pay, or it can "bounce" your check/transaction. If it does pay, your check doesn't actually bounce, but your account will overdraft and the bank will usually charge you an overdraft fee. And if it doesn't pay, then you get charged a bounced check fee, plus whoever you wrote the check to might charge you a returned-check fee too. If you screw up and bounce a check for the first time, don't be afraid to ask your bank for a break, especially if you've been a good customer thus far. Sometimes, they'll be willing to waive or reduce your fees. Don't expect that to work more than once, though.

ATMs
ATMs (or cashpoints for all you Brits) are wonderful inventions, but they can be expensive little buggers if you're not careful. Banks love to charge access fees which will sometimes show up as unwelcome surprises on your bank statement. Normally your bank will only charge you an access fee (or surcharge) if you use an ATM owned by another bank, and often it's doubled because that other bank tacks on their own surcharge. (One transaction can end up costing $8. No joke.) Most of the time this isn't a problem because you know where the nearby branches of your bank are, and you stick to using those ATMs. It's when you go out of town (or out of the country) that it can become problematic. One temporary solution, if you only need a bit of cash, is to use your debit card somewhere for a small purchase, pack of gum, etc. (or better yet, something you need anyway) and then use it to get cash back. But if you know you'll be out of town, check your bank's website ahead of time and find out if they've got branches where you're going and where they are. Also, most banks have partnerships with banks from other regions that allow their customers to use any of the partner banks' ATMs either without a surcharge or with a smaller surcharge. This information can be found on your bank's web site or by simply phoning and asking. Make sure you find out 1) what ATMs you can use 2) how abundant they are in the area where you'll be traveling and 3)if there will be any surcharges.

Savings Accounts

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In addition to the regular savings account that we're all familiar with, other types of savings accounts include money markets and certificates of deposit, all of which are insured by the FDIC up to $100,000 (assuming your bank is member of the FDIC) and earn interest. Savings accounts are offered by credit unions as well as traditional banks and online banks.

How do you know which type of savings account is best for you? Here are some basic characteristics of each:

Regular savings

Allows frequent transactions and transfers
May require a minimum balance to avoid fees

High-yield savings

Allows frequent transactions and transfers, though is geared toward deposits rather than withdrawals
May require a minimum balance to avoid fees
Pays higher interest than a regular savings account
Often exclusively online
Often requires a fairly high minimum initial deposit
Potential 4-5 day lag in transferring funds
May offer debit card, but typically not check-writing services

Money market

Normally requires a fairly high minimum balance to avoid fees
May offer check-writing or debit card services
Pays higher interest than a regular savings account
Allows a limited number of withdrawals per month
Potential 7-day lag in accessing funds

Certificate of deposit (CD)

Does not allow for withdrawals without an early withdrawal penalty
Pays the principal and interest at the end of the term
Is a relatively low-risk investment
Typically offers a higher rate of interest than a regular savings account

A money market account is a type of deposit account, but which often includes the ability to write checks and use a debit card and typically earn a higher rate of interest than regular savings accounts. This type of account allows only 6 withdrawals (by check, debit or transfer) per month, only 3 of which can be by check; the limit may or may not include ATM withdrawals, depending on the bank.

Calculating Interest
Almost all savings accounts these days pay compound interest, which simply means that whatever interest you earn in one period is included in the principal for the next period, so that your interest is earning interest too. It's a good thing.

Here's a quick example. Say you put $1,000 in a high-yield savings account paying 5% interest compounded yearly for 3 years and you never deposit or withdraw anything in that 3 years. Here's what happens with compound interest:

Initial deposit: $1,000
End of Year 1: $1,000 x 1.05 = $1,050
End of Year 2: $1,050 x 1.05 = $1,102.50
End of Year 3: $1,102.50 x 1.05 = $1,157.63

Now, that's assuming interest is compounded annually, meaning that interest is calculated once a year. Other common interest periods are quarterly, monthly, and daily. The more often your interest is compounded, the more you'll earn. See for yourself. Try the calculator at MoneyChimp.com.

Resources
Want help finding banks near you that offer the best bang for your buck? MoneyAisle.com has an "online auction" service where banks make automated bids for your business, based on your initial deposit amount. Search for either high-yield savings accounts or CDs.

Glossary of Financial Terms

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12b-1 fees: fees paid by a mutual fund out of its assets to cover the costs of marketing and selling shares and sometimes to cover the costs of providing shareholder services. "Distribution fees" include fees to compensate brokers and others who sell fund shares and to pay for advertising, the printing and mailing of prospectuses to new investors, and the printing and mailing of sales literature. "Shareholder Service Fees" are fees paid to persons to respond to investor inquiries and provide investors with information about their investments.

401(k) plan: a tax-deferred investment and savings vehicle that serves as a personal retirement fund for employees.

Acceleration clause: a stipulation in a loan contract stating that the entire balance becomes due immediately if other contract conditions are not met.

Accrued interest: interest that has accumulated on any unpaid principal on a loan

Account fee: a fee that some mutual funds impose on investors for the maintenance of their accounts. For example, accounts below a specified dollar amount may have to pay an account fee.

Amortization: liquidation of a debt by making periodic payments over a set period, at the end of which the balance is zero.

Appreciation: an increase in value or price.

Back-end load: a sales charge (also known as a "deferred sales charge") investors pay when they redeem (or sell) mutual fund shares, generally used by the fund to compensate brokers.

Balance sheet: a financial statement showing a “snapshot” of the assets, liabilities and net worth.

Bankruptcy: a legal proceeding declaring that an individual is unable to pay debts.

Beneficiary: the person designated to receive the proceeds of an investment or insurance product in case of the owner's death

Blue chip stock: stock in a company with a national reputation for quality, reliability, and resilience

Capitalization of interest: Accrued interest added to the principal balance of a loan each period. Subsequent interest accrues on the sum of this new higher principal.

Certificates of deposit: a certificate issued by a bank to an individual depositing money in an account for a specified period of time.

Collateral: asset(s) pledged to secure a loan.

Closed-end fund: a type of investment company that does not continuously offer its shares for sale but instead sells a fixed number of shares at one time (in the initial public offering) which then typically trade on a secondary market, such as the New York Stock Exchange or the Nasdaq Stock Market. Legally known as a "closed-end company."

Compound interest: interest computed on the sum of the original principal and accrued interest.

Contingent Deferred Sales Load: a type of back-end load, the amount of which depends on the length of time the investor held his or her mutual fund shares. For example, a contingent deferred sales load might be (X)% if an investor holds his or her shares for one year, (X-1)% after two years, and so on until the load reaches zero and goes away completely.

Conversion: a feature some mutual funds offer that allows investors to automatically change from one class to another (typically with lower annual expenses) after a set period of time. The fund's prospectus or profile will state whether a class ever converts to another class.

Corporate bond: a certificate representing the purchaser’s agreement to lend money to a business on the promise that the debt will be paid, with interest, at a specific time.

Credit: the granting of money or something else of value in exchange for a promise of future repayment.

Credit union: a cooperative organization that provides financial services to its members.

Creditor: lender

Deductible: the amount of loss paid by an insurance policyholder. The deductible may be expressed as a specified dollar amount or a percent of the claim amount.

Default (on a loan): Failure to make payments on time or to meet other contract terms that persists for a consecutive 270-day period.

Default risk: the potential that a bond issuer will not pay the interest or return an investor's money when it matures.

Deferment: A period during the repayment phase of a loan when the borrower does not have to make principal payment and may or may not have to pay interest. Deferment may be granted when the borrower returns to school (for a school loan), is on active military duty, or is experiencing financial hardship.

Deferred Sales Charge: see "back-end load."

Delinquency: An account status that indicates that the borrower failed to make timely payments under a loan or other credit agreement.

Distribution Fees: see "12b-1 fees."

Dividend: a share of profits paid to a stockholder.

Equity: ownership interest in an asset after liabilities are deducted.

Exchange Fee: a fee that some mutual funds impose on shareholders if they exchange (transfer) to another fund within the same fund family.

Exchange-Traded Fund (ETF): a type of an investment company (either an open-end company or UIT) whose objective is to achieve the same return as a particular market index.

Expense Ratio: a fund's total annual operating expenses (including management fees, distribution (12b-1) fees, and other expenses) expressed as a percentage of average net assets.

Face value: the principal amount of a bond, which will be paid to the investor at maturity.

Financing fee: the fee a lender charges to originate a loan. The fee is based on a percentage of the loan amount, one point representing 1 percent.

Forbearance: A period of time during which a borrower is temporarily allowed to stop making payments on a loan or to pay a lower monthly amount. Forbearance is granted at the discretion of the lender, normally for reasons of financial hardship.

Foreclosure: the legal process used to force the payment of debt by selling the collateral

Front-end Load: an upfront sales charge investors pay when they purchase fund shares, generally used by the fund to compensate brokers. A front-end load reduces the amount available to purchase fund shares.

Government Savings bond: a document representing a loan of more than one year to the U.S. government, to be repaid, with interest on a specified date.

Grace period: For student loans, the period of time before the borrower must begin making payments on the loan. For Federal Stafford loans, the grace period lasts for six months after you leave school or become enrolled less than half-time.

Grant: a form of student financial aid or a monetary award that does not have to be repaid.

Hedge fund: a private, unregistered investment pool (not a mutual fund) traditionally limited to experienced, wealthy investors.

Illiquid security: according to the SEC, a security that cannot be sold within seven days at the approximate price used by the fund in determining NAV.

Index fund: a type of stock fund or Unit Investment Trust (UIT) whose investment objective typically is to achieve the same return as a particular market index, such as the S&P 500 Composite Stock Price Index, the Russell 2000 Index, or the Wilshire 5000 Total Market Index.

Individual retirement account (IRA): an investment account to which individuals can contribute each year on a tax-deferred basis.

Inflation: a sustained increase in the prices of goods and services.

Inflation risk: the risk that inflation will outpace and erode investment returns over time

Initial public offering (IPO): when a company first sells its shares to the public

Investment company: a company that issues and invests in securities. The three basic types of investment companies are mutual funds, closed-end funds, and unit investment trusts.

Leverage: the ability to use a small amount of money to attract more money, including loans, grants and
equity investments.

Liability: 1. debt 2. a kind of insurance for the policyholder’s legal obligation to pay for either bodily
injury or property damage caused to another party.

Lien: a creditor’s claim against a property, which may entitle the creditor to seize the property if a debt is not repaid.

Liquidity: the ease with which an investment can be converted into cash.

Load: see "Sales charge"

Loan servicer: The organization hired by the lender to administer the loan and collect payments from the borrower. Not all lenders use outside servicers.

Management fee: a fee paid out of fund assets to the fund's investment adviser or its affiliate for managing the fund's portfolio or any administrative fee payable to the investment adviser that is not included in the "other expenses" category. The management fee typically appears as a category under "Annual Fund Operating Expeneses" in the prospectus's fee table.

Market Index: a measurement of the performance of a specific group of stocks considered to represent a particular sector of the stock market. For example, the Dow Jones Industrial Average (DJIA) is an index of 30 "blue chip" U.S. stocks of industrial companies (excluding transportation and utility companies).

Master promissory note: The contract between a borrower and a lender that outlines the terms of the loan.

Maturity: the time when a note, bond or other investment option comes due for payment to investors.

Money Market Mutual Fund: a low-risk, low-return fund that is restricted to investing in the short-term money market.

Municipal bond: a bond issued by cities, counties, or states to finance public projects, such as the construction of bridges, schools or highways.

Mutual fund: an investment tool that pools the money of many shareholders and invests it in a diversified portfolio of securities, such as stocks, bonds, and money market assets.

NAV (Net Asset Value): the value of a fund's assets minus its liabilities. SEC rules require funds to calculate the NAV at least once daily. To calculate the NAV per share, simply subtract the fund's liabilities from its assets and then divide the result by the number of shares outstanding.

No-load Fund: a fund that does not charge any type of sales load. But not every type of shareholder fee is a "sales load," and a no-load fund may charge fees that are not sales loads. No-load funds also charge operating expenses.

Open-End Company: the legal name for a mutual fund. An open-end company is a type of investment company

Operating Expenses: the costs a fund incurs in connection with running the fund, including management fees, distribution (12b-1) fees, and other expenses.

Par value: the face value of a stock or bond

Portfolio: an individual's or entity's combined holdings of stocks, bonds, or other securities and assets.

Premium: the amount of money required for coverage under a specific insurance policy for a given period of time. Depending on the policy agreement, the premium may be paid monthly, quarterly, semiannually or annually.

Prepayment: Paying off a loan earlier than the due date so as to avoid high interest accumulation.

Principal: 1. the unpaid balance on a loan not including interest. 2. the amount of money invested, not including interest

Prime rate: the lowest interest rate on bank loans, offered to preferred borrowers.

Profile: a document that summarizes key information about a mutual fund's costs, investment objectives, risks, and performance. Although every mutual fund has a prospectus, not every mutual fund has a profile.

Prospectus: a document that every mutual fund must have to describe the fund to prospective investors. The prospectus contains information about the mutual fund's costs, investment objectives, risks, and performance.

Purchase Fee: a shareholder fee that some funds charge when investors purchase mutual fund shares. Not the same as (and may be in addition to) a front-end load.

Rate of return: how fast money in an investment grows.

Redemption Fee: a shareholder fee that some funds charge when investors redeem (or sell) mutual fund shares. Redemption fees (which must be paid to the fund) are not the same as (and may be in addition to) a back-end load (which is typically paid to a broker). The SEC generally limits redemption fees to 2%.

Return (on investment) or ROI: the profit made on an investment.

Risk: A measure of the likelihood of loss or profit; the uncertainty of an investment’s rate of return.

Sales Charge (or "Load"): the amount that investors pay when they purchase (front-end load) or redeem (back-end load) shares in a mutual fund, similar to a commission. The SEC's rules do not limit the size of sales load a fund may charge, but NASD rules state that mutual fund sales loads cannot exceed 8.5% and must be even lower depending on other fees and charges assessed.

Savings account: A deposit account at a bank or credit union that pays interest and allows withdrawals.

Share Classes: different types of shares issued by a single mutual fund, often referred to as Class A shares, Class B shares, and so on. Each class invests in the same "pool" (or investment portfolio) of securities and has the same investment objectives and policies. But each class has different shareholder services and/or distribution arrangements with different fees and expenses and therefore different performance results.

Statement of Additional Information (SAI): a document that conveys information about an open- or closed-end fund that is not necessarily needed by investors to make an informed investment decision, but that some investors find useful. Although funds are not required to provide investors with the SAI, they must give investors the SAI upon request and without charge. Also known as "Part B" of the fund's registration statement.

Stock: An investment that represents shares of ownership of the assets and earnings of a corporation.

Shareholder Service Fees: fees paid to investment advisers associated with a fund to provide information and assistance to shareholders of that fund. See also "12b-1 fees."

Subsidized student loan: a loan for which the federal government pays the interest that accrues during the student's in-school, grace, authorized deferment periods.

Tax-deferred: not subject to income tax until it is withdrawn from an account

Total Annual Fund Operating Expense: the total of a fund's annual fund operating expenses, expressed as a percentage of the fund's average net assets. You'll find the total in the fund's fee table in the prospectus.

Treasury bill: an investment issued by the U.S. government for a year or less.

Treasury bond: a government bond with a term of more than 10 years during which interest is paid semiannually.

Treasury Inflation-Protected Security (TIPS): a bond or note issued by the U.S. Treasury that is tied to inflation so that the principal amount of the investment increases or decreases according to the annual inflation rate, thereby protecting against inflation risk.

Treasury note: a government security with a maturity that can range from two to 10 years during which interest is paid semiannually.

Unit Investment Trust (UIT): a type of investment company that typically makes a one-time "public offering" of only a specific, fixed number of units. A UIT will terminate and dissolve on a date established when the UIT is created (although some may terminate more than fifty years after they are created). UITs do not actively trade their investment portfolios.

Unsubsidized student loan: A non-need-based loan for which the borrower is responsible for all accrued interest. Includes PLUS loans.

U.S. savings bond: a security issued and backed by the U.S. government in denominations of $50 to $10,000.

Loans: What to Look For

2009-10-16T23:23:00.000-07:00

Chances are, you'll have to take out some sort of loan during your lifetime. Maybe you already have. Here's some basic guidance on the three phases of dealing with loans: choosing one, repaying it, and (should you need to) refinancing it.

Shopping for a loan
When shopping for a loan, focus on the long-term cost of the loan, not the monthly payment. “Many car dealers or even mortgage lenders will entice borrowers by asking how much they can afford to pay each month,” said FDIC Senior Consumer Affairs Officer Janet Kincaid. “It may be better to pay slightly more money each month, but for a shorter time period, if it means you will be paying less in total interest.” She also said that some people look so much at the monthly payment that they don’t notice certain fees or service charges that are imposed. “You’ve got to look at the full picture before signing a loan agreement, including the APR and provisions of the loan that can increase fees,” Kincaid said.
(Taken from "51 Ways to Save Hundred on Loans and Credit Cards," FDIC Consumer News, Summer 2007.)

Do your research; shop around for the lowest interest rate, though your credit score may determine what interest rates you are offered. If you're looking for an auto loan, there are an abundance of online calculators you can use to compare rates.

As far as school loans, take what you can get (but only if you really need it) from Uncle Sam. Federal Stafford loans will almost always be the best deal. If you're offered subsidized loans, go for it; they won't accrue any interest until you graduate! They also won't accrue interest if you go into deferment after graduation. You can, of course, start paying them off early, but since they're not accruing any interest, you might be better off investing any extra money you save while you're in school (or using it to pay off other interest-bearing debts). Unsubsidized loans start accruing interest as soon as you get them. Still, they generally offer much better rates than private loans and you don't have to start repaying them until six months after you've finished all your schooling—though the sooner you can start paying on these the better since they're accruing compound interest.

With certain types of loans you can avoid unnecessary interest charges if you pay for certain costs out of your own pocket instead of borrowing that money, too. Let’s say you’re getting a new mortgage and you’re offered the chance to add the closing costs to the loan instead of paying them upfront. Sounds good on the surface, but remember that you’re not getting out of paying the closing costs—they’re added to the loan balance, so your monthly payments will increase and you’ll be paying interest on the closing costs.

Repayment
If you can afford to pay off your loans early, do it. You can save interest expense by increasing your monthly payments and/oror choosing a shorter payment term on your loan.

With auto loans, beware the trap of getting “upside down”—owing more on the car than it is worth when you sell or trade it in.

Talk to your banker if you’re having problems repaying a loan. Explain the situation and any unusual circumstances. Many lenders will agree to temporary or permanent reductions in your loan interest rate, monthly payment or other charges. Open communication is key. Again, it helps if you’ve had a clean record in the past.
(Taken from "51 Ways to Save Hundred on Loans and Credit Cards," FDIC Consumer News, Summer 2007.)

Refinancing
Refinancing is paying a loan off “early” with a new, better loan, and it can save you money. But you have to know when refinancing a mortgage makes sense. According to the Consumer Action Handbook published by the Federal Citizen Information Center, “Consider refinancing your mortgage if you can get a rate that is at least one percentage point lower than your existing mortgage rate and if you plan to keep the new mortgage for several years.” Also consider any extra fees in acquiring the new mortgage.

Consider refinancing an auto loan if you expect to make payments for several more years. It may be harder to find a better interest rate because your car has probably depreciated in value. But if the savings from a lower interest rate more than offsets any closing costs, refinancing can make sense. If you have multiple student loans, look into the potential benefits of consolidating them into one new loan at a lower interest rate. Compare the rates, terms and costs. “It may not be worth consolidating if it means losing a good fixed-interest rate, giving up a long grace period before loan payments are due, or running up other costs that would exceed those on your existing loans,” said Sam Frumkin, a Senior Policy Analyst in the FDIC’s Division of Supervision and Consumer Protection.
(Taken from "51 Ways to Save Hundred on Loans and Credit Cards," FDIC Consumer News, Summer 2007.)

Beware Scams
Steer clear of fraudulent or deceptive offers targeting borrowers. Unscrupulous individuals try to lure consumers into questionable, high-cost deals or fraudulent transactions, usually involving new loans or credit cards or offers to help deal with debt problems. Here are some examples:

“Predatory” loans: People from nonbank or home improvement industries may use false or misleading sales tactics to make high-cost loans to consumers in need of cash. Victims who can’t afford the loan may be pressured to refinance. Borrowers who pledge their house as collateral could lose it in a foreclosure. "Payday loans" make up the majority of predatory loans. There is a load of (false) information about predatory loans and the system that supports them at the ironic Predatory Lending Association website.

Credit repair scams: Con artists may promise to erase a bad credit history or make easy loans to people with spotty credit histories. Most charge exorbitant fees or never provide the promised money. Only steady and consistent on-time payments by a consumer can legally repair a credit record.

Mortgage foreclosure frauds: Thieves may contact homeowners at risk of losing their home to foreclosure and propose to help by “paying your mortgage” while you temporarily “rent” your home from them. They then trick you into signing documents that transfer the ownership of the property to the crooks. In other scams, phony companies claiming to be housing counselors offer to negotiate a new loan or perform other services for very high upfront fees and do little or nothing in return.

(Taken from "51 Ways to Save Hundred on Loans and Credit Cards," FDIC Consumer News, Summer 2007.)

Federal Trade Commission's article with more info on recognizing deceptive offers for private student loans

Credit Card Basics

2009-10-16T23:13:00.000-07:00

Credit Cards vs. Charge Cards
Many people use the terms credit card and charge card interchangeably, but there are important differences. In general, a credit card lets you make purchases for which you are billed later. Most credit card accounts allow you to carry a balance from one billing cycle to the next; however, you have to pay interest on that balance. Usually, you have to pay at least a certain amount of your balance each time you receive a bill.

A charge card is a specific kind of credit card. The balance on a charge card account is payable in full when the statement is received and cannot be rolled over from one billing to the next. Because you cannot carry a balance, a charge card doesn't have a periodic or annual percentage rate, so there is no rate for a charge card issuer to disclose.

When you apply for a credit or charge card, a card issuer must either disclose:

The annual percentage rate (APR) for purchases made on credit (credit cards only).
How the APR is determined (for variable rate APR credit cards only).
The method the issuer uses to compute the balance for purchases against which the finance charge is imposed. Calculating an average daily balance or using the outstanding balance at the beginning of the billing cycle are examples of these methods (credit cards only).
The amount of any minimum finance charge (credit cards only).
Any transaction fee for purchases, whether a specific dollar amount or percentage fee.
Transaction fees for cash advances and fees for paying late or exceeding the credit limit.
The amount of any type of annual fee that you will be charged.
When charges made to a charge card are due and payable.

Tips for Using Your Credit Card Wisely

To avoid late fees and finance charges, always make your payments on time. If you're mailing a check, send it at least a week in advance of the due date. If you're paying from a checking account online, make sure the transfer or bill pay's "deliver by" date is one or before the due date. If you miss the date and have to send your payment in late, it's often worth giving your credit card company a call and asking them to waive the fee if you've always made your payments on time in the past.
Charge only what you know you can pay at the end of each month. Keeping a balance is costly, even with a fairly low APR.
Use the online banking services associated with your card to keep track of purchases. Monitor it closely, and if you see an unfamiliar charge, call customer service immediately. If you've been incorrectly charged, you'll want to let them know ASAP so they can take the charge off your account.

Avoid having a delinquent account (what they call your account if you don't make at least the minimum payment on time) at all costs; these will severely lower your credit score and take forever to come off your record.

If you keep a balance on your credit card--Don't. Just don't. There's no way you're every going to get anywhere paying 18% interest. Pay it off as fast as you can, and don't even think about investing until you've got it paid off. There's no investment out there that's going to guarantee you higher than 18%, so you'll just be losing money anyway.
OK, so if you've already got a balance on your card, there are some things you can do to cut those crazy interest rates. Look for a new card that has an interest-free introductory period (sometimes up to a year!) and check into transferring your balance from your old card to the new one. (Don't forget to close the old credit card account!) This will buy you some time to save up money to pay off your debt. If you absolutely can't find a card with an interest-free introductory period, look for one with a lower interest rate. But be careful of balance transfer fees; many new cards will offer free balance transfers when you first open the account. Also, make sure you find out how long your new interest rate will last and how it may change.
Be especially aware of your card issuer’s billing practices, which can significantly affect your costs. How your card company treats the balances on which you are charged interest can be critical. Here are examples of potentially high-cost practices that many people don’t know about even though card issuers must disclose them:

Two-cycle billing: This billing practice is rare but is used by some card issuers. Practices may vary but, in general, if you pay your credit card bill in full one month but then only pay a portion of the bill the next month, your interest charges ultimately will be based on two months of card charges and not one. This may result in you paying more in interest charges than you would under the more common one-cycle billing method. To find out if your card is subject to two-cycle billing, review the cardholder agreement and disclosures from your lender or call their customer service number.
Payment allocation: This involves cards with multi-tiered interest rates. For example, there may be a low rate on a balance transferred from another card, a higher rate on new purchases, and an even higher rate on a cash advance. If you pay only part of your monthly bill, card companies typically will apply your payment to the balance with the lowest interest rate first, while the highest-rate balance continues to run up interest costs until you pay the entire balance.
Universal default: This happens when a card issuer increases a customer’s interest rate because he or she made late payments to other lenders or had an overall decline in a credit score—even if that customer paid the card bill in full and on time. While this once-common practice is rare, be aware that it could be used.

(#7 taken from "51 Ways to Save Hundred on Loans and Credit Cards," FDIC Consumer News, Summer 2007.)

See also: Choosing a Card: What to Look For, Credit Scores, Establishing Credit

Investments Primer

2009-10-16T23:05:00.000-07:00

An investment is anything you acquire for future income or other financial benefit. Investments increase by generating income (interest or dividends) and/or by growing (appreciating) in value.

It's important that you go into any investment in stocks, bonds, annuities, or mutual funds with a full understanding that you could lose some or all of your money in any one investment.

As you can see in the chart below, different kinds of investments generally provide different rates of return (as well as different risks—highest to lowest in the chart below). Note that average rates of return are not guaranteed; they only show what has happened historically.

Asset Class	Rate of Return*
Stocks of smaller companies	14%-16%
Common stocks	10%-13%
Long term corporate bonds	6.5%-8%
Long term US government bonds	5%-7.5%
Short term US Treasury bills	3.5%-5%

*Average rate of return since 1926, Ibbotson and Associates

When choosing an investment type (stocks, bonds, annuities, funds, etc.), start by figuring out how much risk you want to take. Yes, yes, obviously we all want low risk, but low risk generally means low returns, so in some cases it's worth the added risk to earn the added cash. Here are some questions to ask yourself to determine the amount of risk you should take:

Do you have a specific financial goal? An amount you need to accumulate over a given period? If not, ask yourself how much you'd like (realistically) to have in ten years, twenty years, forty years, etc. If you're hell-bent on becoming a millionaire (and good luck!), you might decide to opt for higher risk, higher return investments. Also, if you're saving for retirement and it's a ways away, you have more freedom to go with higher risk investments because you have longer to recoup your losses if things don't go your way.
When are you going to need money the most? In other words, how long can you leave your savings tied up in investments before you start needing to spend it? Are saving for your first house in a few years or are you planning on leaving your investments grow to support you in your retirement? Generally, the longer time horizon you have, the more risk you can tolerate because investments tend to have more even growth over long period of time.
How financial stable are you? Can you afford to lose some of your investment or will that leave you completely destitute? If you absolutely cannot take the chance of losing any of your money even if it means the chance of gaining more (yes, it's a gamble that way), choose lower risk investments.

Investors best protect themselves against risk by spreading their money among various investments, hoping that if one investment loses money, the other investments will more than make up for those losses. This strategy, called diversification, can be neatly summed up as, "Don't put all your eggs in one basket." Investors also protect themselves from the risk of investing all their money at the wrong time (think 1929--or recently) by following a consistent pattern of adding new money to their investments over long periods of time.

Monitoring Your Investments
Some people like to look at the stock quotations every day to see how their investments have done. That's probably too often. You may get too caught up in the ups and downs of the "trading" value of your investment, and sell when its value goes down temporarily--even though the performance of the company is still stellar. Remember, you're in for the long haul. Check monthly or quarterly instead.

Keep in mind, though, that it's not enough to simply check an investment's performance. You should compare that performance against an index of similar investments over the same period of time to see if you are getting the proper returns for the amount of risk that you are assuming. You should also compare the fees and commissions that you're paying to what other investment professionals charge. Look for a low expense ratio (below 1%).

Invest Wisely / Don't be stupid (adapted from SEC's "Invest Wisely")
Never:

Send money to purchase an investment based simply on a telephone sales pitch.
Make a check out to a sales representative personally.
Send checks to an address different from the business address of the brokerage firm or a designated address listed in the prospectus.
Allow your transaction confirmations and account statements to be delivered or mailed to your sales representative as a substitute for receiving them yourself. These documents are your official record of the date, time, amount, and price of each security purchased or sold. When you receive them you should verify that the information in these statements is correct and file them away safely.
Trust anyone who tells you, "Invest quickly or you will miss out on a once in a lifetime opportunity!"or otherwise puts pressure on you to make an investment quickly.

If your sales representative asks you to do any of these things, contact the branch manager or compliance officer of the brokerage firm.

Certain activities may indicate problems in the handling of your account and, possibly, violations of state and federal securities laws, such as:

Recommendations from a sales representative based on "inside" or "confidential information," an "upcoming favorable research report," a "prospective merger or acquisition," or the announcement of a "dynamic new product."
Representations of spectacular or specific profit, such as, "Your money will double in six months." Remember, if it sounds too good to be true, it probably is!
"Guarantees" that you will not lose money on a particular securities transaction, or agreements by a sales representative to share in any losses in your account.
An excessive number of transactions in your account. Such activity generates additional commissions for your sales representative, but may provide no better investment opportunities for you.
A recommendation from your sales representative that you make a dramatic change in your investment strategy, such as moving from low risk investments to speculative securities, or concentrating your investments exclusively in a single product.
Switching your investment in a mutual fund to a different fund with the same or similar investment objectives. Unless there is a legitimate investment purpose, a switch recommended by your sales representative may simply be an attempt to generate additional commissions for the sales representative.
Pressure to trade the account in a manner that is inconsistent with your investment goals and the risk you want or can afford to take.
Assurances from your sales representative that an error in your account is due solely to computer or clerical error. Insist that the branch manager or compliance officer promptly send you a written explanation. Verify that the problem has been corrected on your next account statement.

If You Have a Problem (adapted from SEC's "Invest Wisely")
If you have a problem with your sales representative or your account, promptly talk to the sales representative's manager or the firm's compliance officer. Confirm your complaint to the firm in writing. Keep written records of all conversations. Ask for written explanations.

If the problem is not resolved to your satisfaction, contact the appropriate regulators listed at the end of this document. Investor complaint information assists these regulators in identifying violations of the securities laws and prosecuting violators. However, none of these organizations is authorized to provide legal representation to individual investors or to get your money back for you.

Obtain information on using arbitration to resolve your dispute by contacting FINRA, the Financial Industry Regulatory Authority, the Municipal Securities Rulemaking Board, or the Chicago Board Options Exchange. Each of these organizations operates a forum to resolve disputes between brokerage firms and their customers. You may also wish to consult an attorney knowledgeable about securities laws. Your local bar association can assist you in locating a securities attorney.

Securities Regulators to Contact:

U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Office of Investor Education and Advocacy
Online Complaint Form

North American Securities Administrators Association, Inc.
Suite 710
10 G Street, NE
Washington, DC 20002
(202) 737-0900
Web site

Each state has its own securities regulator. You can find your regulator at the website of the North American Securities Administrators Association.

For more specific information, click on one of the investment types in the menu on the left.

The ICI has a great set of educational resources for investors on their website, complete with charts, graphs, and worksheets to help you understand investing principles.

See also:
Stocks: What To Look For, How to Trade For Long-Term Gains

Bonds: The Basics

Funds: Mutual Funds, ETFs, Closed-end Funds, Hedge Funds , Oh My!

Annuities: What Are They? How Do They Work? And How Do I Find the Right One For Me?

Investing for Retirement: Retirement Accounts Overview

Banking

2009-10-16T22:59:00.000-07:00

Bank Accounts
There are two main categories of bank accounts: loan accounts and deposit accounts. The purpose of loan accounts is to hold a debit balance (where the account holder borrows money from the bank), and the purpose of deposit accounts is to hold a credit balance (where the bank "borrows" from the account holder). The type most of us think of when we hear "bank account" is the deposit account; popular types of deposit accounts include savings, checking, and certificates of deposit (or CDs).

Another way to categorize bank accounts is by their function—while some accounts are designed for frequent transactions (transactional accounts), others, such as CDs, are not.

Overdrafts
When a customer withdraws more than the account's available balance, an overdraft occurs. An overdraft, in essence, means the bank is providing credit to the account holder, giving the account a negative balance. If the overdraft is unauthorized (i.e. the account is not a loan account), the bank will normally charge an overdraft fee, often around $30, though if you call and ask nicely, some banks will waive your first overdraft fee, especially if you are a student or if it's your first time overdrafting.

The best thing to do to avoid overdrafts, of course, is to keep close track of all your transactions, and always be sure to keep a "cushion" of at least $50 more than you expect to be withdrawn (both directly and through debit cards, checks, and transfers) just in case you miscalculate. This number should be higher if the majority of your withdrawals are large ones. If you overdraft on your checking account by writing a check for a sum larger than your balance, it could result in a bounced check and additional fees.

They can do this every time you make a charge over the amount in the account. So, say you've got $50 in the account, and you use your debit card once for $60 and once for $10. Your bank can charge you the overdraft fee twice.

Sucks, doesn't it? Which is why you've got to diligently keep track of what's in your account. Write down everything in your balance ledger (or just keep a close eye on the account online). And don't forget to figure in any automatic payments you may have set up--or outstanding checks that haven't been cashed yet.

If you do overdraw, the only thing you can really do is put money in it ASAP (enough to cover the amount you went over plus the fee) so that you don't get charged any more. Some banks will even charge you every day you have a negative balance. If you're lucky and you catch it right away, your deposit might even make it in before the charge applies (but I wouldn't hold my breath).

Most banks offer what they call overdraft protection, or what I call a big fat scam. Some of them are set up like mini insurance policies--you pay a few dollars every month as insurance in case you overdraw, and then if you do, the bank won't charge you. This is often set up as a line of credit--the bank gives you a certain credit limit and if you overdraft, the remaining amount after your account balance hits zero is charged to this line of credit. This is a loan, and you'll have to pay interest on it the same as you would a credit card balance. Also, most banks still charge a fee (albeit a smaller one) every time the line of credit is used (every time you overdraft). Alternatively, some banks charge a monthly fee simply for the line of credit service, whether you use it or not.

Another kind of overdraft protection some banks offer is to link your account to another account at the same bank or to a credit card, so that if you overdraft, the bank can just transfer the required amount from the linked account so that your balance doesn't hit zero. The problem with these programs is that the bank usually charges a transfer fee, which while usually less than an overdraft fee, is still a fee and still sucks.

As far as I'm concerned, these forms of "protection" are hardly worth it when you consider the amount of fees associated with them. Still, it's a good idea to finding out what your bank offers as far as these programs; it's possible they might offer a good deal--but your best bet is probably just to be careful and make sure you keep a little padding in your account.

See also: credit unions, CDs, savings accounts, checking accounts

We're Giving Away 250 FREE Business Cards

2009-10-14T01:22:00.000-07:00

What? Another Giveaway?
That's right. More free stuff for you.

This time our lovely sponsor, UPrinting is offering 1 lucky TAiMH reader 250 free business cards (with free UPS shipping to the US, of course). Make them for yourself or someone else. Use them to promote your blog, special event, business, or even your favorite charity. Tired of scribbling your number or e-mail when you meet interesting new people? Here's your chance to get some hip, look-at-me calling cards.

Ready to enter?
All you have to do is leave a comment on this post telling us how you might use the free business cards if you win.

Really want the cards? For additional entries, you can do any or all of the following and leave a comment telling us you've done it:

Blog about this giveaway and link to this post and UPrinting.com.
Tweet this: Win 250 free business cards of your choice (many options to choose from) + free shipping! Enter at TAiMH: http://bit.ly/16PmfD #giveaway
Follow us on Twitter, Facebook, and/or MySpace. (1 entry each)

Giveaway ends Wednesday, October 21st at midnight, so get your entries in quick!

We'll announce the winner on the blog and email him or her by Friday, October 23rd, so if your blogger profile doesn't display your email address, be sure to leave it in your comment.

Good luck!

Don't forget to enter our other current giveaways, for a free 1-of-a-kind TiredofBeingPoor.net T-shirt and a 24 x 36" vinyl banner with grommets ($62 value plus free UPS Ground shipping) from UPrinting.com.

Thank you to UPrinting for providing us here at TAiMH with our own set of 250 free business cards. We love them.

Another delicious fall drink recipe: Best Hot Buttered (Rum) Cider Recipe Ever

2009-10-14T00:43:00.000-07:00

Image by podchef via Flickr

Clearly, I'm on an autumn-inspired beverage kick. All this rainy, dreary, Midwest fall weather is making me want to do nothing more than curl up in a cozy window seat and read a good book whilst sipping a toasty, possibly alcohol-infused, beverage. Pip, pip!

Apparently, it also makes me think I'm British. But on with the recipe!

Best Ever Hot Buttered (Rum) Cider

Ingredients:
1 64 oz. bottle of apple juice (or apple cider)
1/2 cup brown sugar
1 tsp ground cinnamon (or 4 cinnamon sticks)
1/2 tsp ground nutmeg
6" square of cheesecloth (or a coffee filter)
6 whole cloves
1/2 tsp. allspice AND 1/2 tsp ground nutmeg (or just 1 tsp. pumpkin pie spice)
1/2 tsp. vanilla (imitation works just fine)
a bit of lemon peel (do not substitute lemon juice)
1 cup rum (optional; I prefer dark or spiced rum for this recipe)
1 Tbs butter (or butter substitute)

Combine juice/cider, brown sugar, vanilla, and rum in large pot over high heat. Combine spices and lemon peel in cheesecloth or coffee filter, and secure with a bit of clean string or a twist tie.
Drop sachet in pot and heat to boiling.

Reduce heat and simmer for 15 min. Remove sachet.

Pour cider into mugs and top each with a thin slice of butter. Serve immediately.

Did you try this recipe? Leave us a comment and let us know what you think!
Got a cider recipe you think is better? Share it with us. (We dare you.)

T-shirt giveaway ends Wednesday! Enter now!

2009-10-11T14:44:00.000-07:00

Only a few more days left for our t-shirt giveaway! It ends Wednesday, October 14th at 9pm. We're giving away the first-ever TiredofBeingPoor.net T-shirt. That's right, we've hit the bigtime now.

Who's to say, you wear our shirt, in a few years time, you could be in the hot seat.

To enter to win this superbly awesome, unisex T-shirt (size S, M, or L; colors vary), simply do any of the following and leave a comment on this post letting us know your method(s) of entry: (Be sure to include your email, so we can contact you if you win.)

Leave a comment on any post other than this one. (1 entry per comment)
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Tweet or blog about TAiMH. (2 entries per tweet/post).
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And finally, we'd be tickled pink to post a picture of the winner wearing (or at least making some creative use of) the shirt on the blog along with a personal shout-out and/or link of his or her choosing.

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