The Five Most Expensive Traffic Violations

The cost of incurring a traffic violation has gotten much higher in recent years. Fines in many jurisdictions have doubled, tripled, or even more. Even worse – because they are recurring – are the insurance surcharges that apply after most violations. And at the extreme, some violations can even result in jail time.

Here is a list of what are generally the most expensive traffic violations you can have, in no particular order:

1) Reckless Driving

Reckless driving is a broad category, that can be defined differently from one jurisdiction to another. Generally speaking, it is driving in a way that endangers yourself and other people on the road. It can involve speeding, but there’s usually some element of danger that goes well beyond it.

Fines for reckless driving are generally heavy, but may also depend upon the seriousness of the violation. In extreme circumstances, reckless driving can lead to loss of license and even jail time.

Insurance surcharges can cause your premiums to nearly double. Should that happen, you may find yourself unable to afford auto insurance, and therefore unable to drive. In that situation, you may also experience economic impairment – since you have no car, you’ll be unable to get to work, and will likely lose your job.

2) Speeding

Speeding is probably the most common traffic violation, but it’s not always the most expensive. And how expensive it is will be a matter of degree. In most jurisdictions, there is a wide variation in fines between going 10 miles over the posted speed limit, and going say, 30 miles over.

Not only can fines be all over the place, but so can insurance surcharges. Much like fines, they are progressively higher the more you exceed the speed limit. Your insurance can rise more than 30 percent as a result of a single speeding episode. Multiple speeding tickets cause both the fines and surcharges to accelerate.

Though jail time is unusual in connection with speeding violations, if you accumulated several citations for speeding, your insurance company may drop your coverage after determining that you are an unacceptable risk. High-speed driving, after all, results in high-speed accidents. Those are usually the most extensive kind, the type most likely to result in serious injury and fatalities.

3) Driving Under the Influence (DUI or DWI)

This is generally the most expensive traffic violation you can incur. Insurance premiums can virtually double on a first offense, and fines can be prohibitive. Cancellation of insurance after a first offense, and certainly after a second, is hardly out of the question.

Once again there is the very real possibility of experiencing an economic loss as a result of this violation. Depending on the laws in your state, the loss of your license for a period of time is common. That can make earning a living very difficult, and even impossible. The loss of income will dwarf even the combination of fines and insurance surcharges – unless of course you are unemployed at the time of your incident.

This is not a violation to take lightly. Penalties are only becoming more severe as tolerance for drunk driving declines. As well, the loss of a job due to a DUI could end up being a career killing experience, that will leave your income permanently impaired.

4) Running a Red light

Like speeding, running a red light is a fairly common violation. This is particularly true given the confusion over right-turn-on-red provisions in many jurisdictions. Typically, you are required to come to a full stop before turning even where the turn is permitted. But it’s incredibly easy to forget to stop when you’re used to making such turns.

Unfortunately, the courts and insurance companies are not particularly forgiving over such a mental lapse. Again, the fines vary between jurisdictions, and can be particularly heavy in urban areas where there is a lot of pedestrian traffic. Insurance surcharges can easily run as high as 20%.

While it might be convenient to dismiss a right-turn-on-red violation, there is a fairly high rate of injury and even of fatalities connected with these violations. For that reason, jurisdictions are taking them more seriously all the time.

5) Careless Driving

Careless driving is the younger cousin of reckless driving. Where reckless driving is generally considered to represent a pattern of driving that is dangerous to anyone on the road, careless driving is more along the lines of a mental lapse. It could be something as simple as failing to use your blinker while changing lanes on a multi-lane highway.

Once again fines vary from one jurisdiction to another, and also by the fact that careless driving takes in literally dozens of offenses that range in severity. Insurance premiums to rise by 25% or more as a result of a single careless driving violation.

Though careless driving carries a much lighter cost than the other violations listed here, the combination of fines and insurance surcharges can raise your cost of driving considerably.

The best advice is to be more mindful of what driving activities rise to the level of violations, and do your best to slow down and stay in control. Getting a traffic ticket for something incidental and occasional is bad enough, but getting one that is the result of bad driving habits is something that you can and should control.


The “Miracle” of Being Debt-Free

Many millions of people struggle with being in debt. No matter how hard they try, they don’t seem to be able to get out of it. Like yo-yo dieting, they go from one failed strategy to another, never able to get control of their debt, and to eliminate it once and for all. The problem may not be the strategy. It may have more to do with motivation. If you have a clear idea as to why you need to be debt free it might be easier to accomplish, no matter what plan you use. There’s a “miracle” of being debt-free, and if you can grasp that concept, the problem may very well take care of itself.

Here are some of the components of the miracle of being debt free:

You’ll Be Free to Quit a Bad Job

How may times have you been tempted to quit your job, only to be stopped dead in your tracks by the realization that you can’t leave because you have debts to pay? That’s actually not an uncommon situation. In fact, it’s one of the main reasons why people continue to stay in jobs that are so uncomfortable that they become physically ill because of them.

It may not even be that the job is causing the ailments, but rather the perception of being trapped in an unsatisfying position.

Let’s look at the flip-side. Let’s say that you are in a bad job – a legitimately bad job, because of an overbearing boss, a weak organization, and even toxic coworkers – but you have no debt. In that situation, you probably won’t stay in that job long enough for it to ever take a physical toll. You’ll simply leave when it becomes clear that the job is beyond redemption.

That by itself can provide strong motivation to getting out of debt. Your ability to move between jobs will be so much easier if your life is not obstructed by debt.

You’ll Be Free to Start Your Own Business

One of the major reasons why people don’t start their own business is because of debt. The problem is that self-employment generally involves a period of time when income is seriously reduced. If you have large debts to pay, you probably can’t afford for your income to drop even as much as 10% per month before you will no longer be able to afford the payments.

It doesn’t matter if you have a brilliant business idea, and all of the skills necessary to make it a reality. If your fixed living expenses are too high, you might not be able to afford to risk a drop in earnings. That means that you are effectively locked into your current level of income.

If you do have plans to start your own business someday, one of the very best ways to prepare yourself for it is to begin getting out of debt right now.

You’ll Be Free to Make a Geographic Move

You have a dream to move to the mountains, to the beach, or even to a small town in farm country. But just as is the case with quitting a bad job or starting your own business, you can’t act on your desire because you have too much debt.

It often seems that big debts are part and parcel of the metropolitan lifestyle. This is because you need a metropolitan level income in order to make the debt service. But if the day comes when you want to step out of that metropolitan lifestyle, your debts will act like a chain-link fence around your life, preventing you from moving outside the pen.

Once again, if you have a dream to move into a different location – one where the income may not be so generous – one of the best ways to prepare for it is to get rid of your debt.

You’ll Probably Enjoy Your Work More

Have you ever seen that bumper sticker, the one that’s adapted from Snow White and the Seven Dwarfs, that reads something like this:

I owe, I owe, So off to work I go!

That’s kind of cute, wouldn’t you agree? But it’s also incredibly depressing. It implies that a debtor works mainly to pay his debts. What about working because you enjoy what you do for a living? Or because it enables you to live a comfortable life, and to do many of the things you want to do?

The sad reality is that when you’re buried in debt, work does become a burden. That’s because so much of your extra money is soaked up by debt, and that robs you of your ability to appreciate and enjoy your work.

My guess is that if you get out of debt, you’ll find that you’ll enjoy work a lot more. The burden will be lifted because you’ll have more control over your income. You’ll be working to create and live a certain lifestyle, rather than to service your debts.

You Can Live Life With One Less (Major) Worry

A debtor’s mind is never very far away from his or her debts. And if it ever is, the monthly bills that arrive faithfully are there as a reminder. Debt causes you to worry because it is an actual restraint. It limits your options to move forward in life, or even to solve short-term problems.

This can manifest itself in the form of constant worry, lack of sleep, permanent distraction, and even an inability to perform efficiently at work. The only solution to that problem is to get out of debt. And once you do, it will be something like getting a strike and knocking down all of the bowling pins of worry in life.

Debt is an option killer. The more of it that you have, the fewer options that you have. You can expand your options dramatically simply by getting out of debt. And you can seriously reduce the amount of worry that you live with in the process. If that isn’t a miracle, then I don’t know what is!

Are you motivated to get out of debt?


Why a Roth IRA is a Must Have Plan

You are probably aware of some of the virtues of a Roth IRA. But there are at least five reasons why a Roth IRA is a must-have plan.

Tax Free Income in Retirement

This is the most obvious benefit of a Roth IRA, and it’s repeated in virtually any discussion related to the plan. Even still, this advantage is well worth reemphasizing.

Virtually every other type of retirement plan is a deferred plan. That means that the tax liability on the account – both your contributions and the investment income that the account earns – will be taxable when you start making withdrawals from the plan. At that point, the withdrawals will be added to your other retirement income, where they’ll be fully taxable at ordinary tax rates.

A Roth IRA stands alone as a retirement account from which you will be able to make withdrawals and pay no income taxes whatsoever.

Roth IRAs Are a Form of Retirement Tax Diversification

Most people probably never given this a thought, but the potential is very real that you can be in a higher tax bracket by the time you reach your sixties than you are right now. The reason will be multiple income sources. If you’re receiving income from Social Security, an employer pension, a deferred retirement plan, non-retirement investment income, or any income from continued employment, you may be earning much more money than you ever imagined.

The problem is that all of those income sources – including a percentage of your Social Security benefits – will be taxable in retirement. If you are earning $60,000 per year pre-retirement, and your income jumps to $90,000 when you retire, you may have a tax problem. You will have deferred income from a time of relatively low tax rates, only to pay higher tax rates in retirement.

This is where the tax-free nature of a Roth IRA really shines. While all of your other income sources will be creating tax liabilities, the withdrawal received from your Roth IRA will be completely tax-free. That will provide you with income tax diversification at a time when it will be badly needed. A Roth IRA is a way of making sure that at least some of your income will not create a corresponding tax liability.

Short-term Liquidity – Just In Case

Since contributions to a Roth IRA are not tax-deferred, you’ll have the ability to withdraw those contributions prior to age 59 ½ free from tax consequences. Since many people have the vast majority of their financial assets in tax-deferred accounts, this can be an important option to have.

A Roth IRA can give your portfolio some much-needed liquidity. It’s never a good idea to withdraw funds from any kind of retirement account before reaching retirement age. But it is still a good option a have. Life can be complicated, and it doesn’t always go according to our plans. A Roth IRA can give you the built-in flexibility that other retirement accounts can’t.

It Offers More Investment Choices Than an Employer Sponsored Plan

One of the frustrations that many people have with employer-sponsored plans is limited investment selection. For example, your employer-sponsored 401(k) plan may have only a half a dozen options, all of which are mutual funds. Those funds may not be anything close to the best performers in their classes. This can leave you stranded with nothing better than mediocre investment choices for the account that holds the largest amount of your money.

A Roth IRA is self-directed, just like a traditional IRA. That means that you can choose the trustee that holds the account. And in doing so, you can make sure that that trustee – typically an investment broker – provides the widest variety of investment options possible.

You can also make sure that the trustee provides the largest selection of low cost investment options. This is another limitation of most 401(k) plans. Not only do the plans themselves often have high investment expenses, but the limited investment options that you have within the plan also have investment fees that are above the norm in the market.

No Required Minimum Distributions (RMDs)

Virtually every other form of tax-sheltered retirement plan is subject to required minimum distributions, or RMDs. That means that once you reach the age of 70 ½ you are required to begin taking distributions from the plan. In fact, plan trustees are required to begin issuing RMDs when you reach 70 ½, so you won’t even have any choice.

They will take the balance of any retirement accounts that you have, and divide the balance by your life expectancy at that point in your life. You will receive distributions based on that formula, and it will apply to traditional IRAs as well as employer-sponsored plans.

There is no such requirement for RMDs for Roth IRA plans. You can literally keep your Roth IRA open and growing for the rest of your life. While other retirement plans are gradually depleting due to distributions, your Roth IRA can stay healthy and strong.

This can be an important part of an overall strategy to prevent you from out-living your money. Even as your other accounts are being drawn down by RMDs, you can allow your Roth IRA to continue growing so that you will have plenty of money in the later years of your retirement. With people now routinely living well into their eighties and even nineties, this can be an important asset preservation strategy.

If you have an opportunity to take a Roth IRA you should absolutely do so. There are just too many benefits that make it one of the most important investment plans that you’ll ever have.


The Good and the Bad of Taking Online Courses

Technology has come to the classroom, or – maybe more to the point – technology is moving people out of the classroom. There is an explosion of online courses, whether included in a college degree program, or as part of continuing education. There’s good and bad in taking online courses, but either way, they offer an excellent alternative to traditional classroom based courses.

The Good of Taking Online Courses

Having taken a few online courses myself, I’m a big fan of them. Here’s what I’ve found to be the biggest advantages.

You can take them from home. Since home is where you are most comfortable, it could also be the perfect environment for learning. After all, it’s most likely the place where you’d be doing your homework, so why not also take the course from home?

No on campus or commuter expenses. If you’re taking college courses, there’s usually a fee associated with taking it on campus. And even if there isn’t, you will still have the cost of commuting to and from the school. Since you can take online courses at home, there will be no campus fees, and no commuter costs. Not to mention wear-and-tear on your car, or the time and aggravation of spending time commuting either long distances or in heavy traffic.

They’re easier to fit into a busy schedule. Since you have control over when you take an online course, it will be less of a scheduling challenge. You can take it any time of the day, evening or even weekend that you want. And if you’re a night owl, you can even do it at night when the rest of the world is asleep. In fact, you can take online courses any time it’s convenient for you. That will allow you to build the course around your life, rather than being forced to build your life around the course, as you would have to do with an on-site course.

You can work at your own pace. This will allow you to spend less time on less challenging course material, and to linger longer on areas you’re struggling with. That arrangement will probably make it easier for you to master the course work. If you are moving particularly fast, you can even decide to complete the coursework early.

They’re a godsend if you learn best on your own. Some people learn more easily through self-study. It may have to do with the previous benefit of working at your own pace. If you are the type who can master a course without oversight, online courses will work better for you.

They work especially well with easier courses. Some courses lend themselves better to self-study, so online courses may be a way to lighten your schedule by taking the easier courses that you can blow through in less time and with less effort.

The Bad of Taking Online Courses

Alas, taking online courses isn’t a perfect situation, and certainly not for all people. Here is some of the bad side of taking online courses.

You have to be self-motivated. As in really self-motivated. Not everyone is capable of keeping pace in a learning environment that’s less structured. As well, the fact that it’s done from home could cause you to underestimate the amount of work that you need to put into the course.

It may not work if time control isn’t your strong suit. Online courses work very well in helping you to juggle a busy schedule, but that’s only if you have the time control thing working in your life. If you don’t, you’ll never have the time needed to make the course work. The casual nature of online courses can make it easy to keep them as a low priority, routinely putting them at the back of your schedule when ever you get busy with other things.

No everyone can learn from self-study. Some people need generous amounts of structure in their learning environment. They need a teacher to set the agenda, impose a schedule, enforce completion of assignments, and provide critical feedback. If this is your learning style, taking online courses could be a complete waste of time and money.

Direct support is limited. More specifically, this means that there’s no teacher readily available for face-to-face meetings on a regular basis. Some students need that more than others. If you’ve ever taken an online course, you’re probably aware that direct support is no better than limited. It’s usually email support, or very limited telephone contact, and it’s not always easy to come by.

There are no classmates to “compare notes with”. Some people learn better in group environments. Not only does it create a kind of synergy to feed off of (think study groups), but it also gives you a chance to work with other students when you miss an assignment or need extra help on a one-on-one basis. Depending on the type of course you’re taking and where you live, there may be no one else taking the course within hundreds of miles of where you live.

It’s easy to let online courses slip. For any of the above reasons, it’s entirely possible that you might simply let the course slip. You may get busy with other things, find that you can’t learn in an informal setting, or simply get hung up on certain course work, then quit the course.

Online courses aren’t for everyone. But they can be a real advantage if you understand all that’s involved and are prepared to make them work.

Have you taken online courses? What has your experience been?


The Dangers of Paying Off Credit Cards With Home Equity

When people accumulate a little too much credit card debt, there’s always a strong temptation to work out some sort of debt consolidation that will make the plastic go away in one fell swoop. On the surface this can seem like an excellent idea. But debt consolidation is really about converting debt from one type to another – without actually paying it off. There are all kinds of riskS to this maneuver, but especially when you use your house for the consolidation.

Here are five reasons you shouldn’t use your home equity to pay off your credit cards.

1. Increasing the Mortgage Puts Your Home at Greater Risk

Anytime you increase the amount of money you owe on your home, you also increase the risk of owning it. This is especially true if you use a home equity line of credit (HELOC) to payoff your credit card loans. A HELOC is really just a credit line secured by your house, and you’ll be moving your revolving debt from unsecured status to secured – by your house.

But that’s not the worst of it.

HELOCs typically come with variable rates, which is part of the reason they have lower closing costs than a traditional mortgage. Since the HELOC is secured by your home, the rate on it is generally lower than what it is for credit cards. But since it’s variable, it can change – meaning increase.

Nothing constructive will be accomplished if you consolidate a bunch of 10% credit card debt into a 5% HELOC, if two years later the rate on the HELOC is up to 10% – or higher. A large HELOC balance at much higher interest rates could threaten your ability to make the monthly payment on the home.

2. It May Not Be As Easy to Sell or Refinance Your Home With a Higher Mortgage

Whether your credit card debt is consolidated using a HELOC or a straight up refinance of your first mortgage, you will be increasing the indebtedness on your home. That will make it harder to refinance or to sell, should the need arise.

This can be a serious problem should the value of your property fall as it did in much of the country after 2007. A 25% drop in the value of your home could leave you “underwater” on your mortgage, if your indebtedness reached 80% of the original value. That could leave you trapped in the home, unable to sell or refinance it.

Even if values don’t fall, the increased indebtedness could leave you with less equity after a sale, and that would leave you with less cash to put down on your next home.

3. You’ll be Converting Short-term Debt to Long-term Debt

Credit card debt is short-term debt. But when you consolidate it on your home, it becomes long-term debt. You may be converting unsecured revolving debt to a 30 year mortgage on your home.

If your credit cards happened to contain – among other short-term purchases – last year’s summer vacation costs, then you will be paying for that vacation for the next 30 years. You may also be converting last years Christmas gift purchases, last weeks dinner at Olive Garden, and a whole bunch of Starbucks latte’s to semi-permanent debt. That’s a bad trade off, no matter how much you’re saving in interest costs.

4. Refinancing Your Mortgage Costs Money

Should you refinance your first mortgage to payoff credit cards, you will incur costs as a result of the refinance. These costs are generally between 2% and 3% of the new loan balance. On a $200,000 loan, you may pay $5,000 for the refinance. That means that the credit card consolidation was accomplished at a very high cost. For example, if the refinance was mainly to consolidate $50,000 in credit card debt, you will have paid 10% of that amount to make the refinance – up front!

The problem is compounded if you reset your mortgage term. For example, let’s say that you have 25 years remaining on your 30 year mortgage. In order to consolidate your credit cards, you refinance your first mortgage back to a 30 term. The payment may be lower than what you were paying for your old first mortgage plus the credit card payments, but you will have added an additional five years of payments to the back end of the loan.

5. One Debt Consolidation Will Beget Yet Another

We can categorize this this one under “moral hazard”. If you use your home to accomplish one credit card debt consolidation, you’ll use it again. That’s because the consolidation makes it easier to get into – and out of – credit card debt. Refinancing your home is a way to get out of credit card debt without actually having to repay the debt.

Anything that’s easy is something you’ll do again. Nothing is learned about the negatives of running up large credit card balances, because fixing the problem was so easy.

At least part of the reason so many people lost their homes in the housing and mortgage meltdown was because they engaged in serial refinancing for debt consolidation purposes. Sure, their homes increased in value over the years, but they consistently borrowed the equity out to cover non-housing expenses. Eventually, the perpetually rising mortgage balance outstripped even the sizeable gains in property value.

You have a chance to prevent that outcome, by not using your home as a debt consolidation scheme for your credit card debt.


6 Signs You Might Lose Your Job

One of the unfortunate realities of today’s workplace is that we’re usually not given advanced warning about an upcoming job loss. Many employers would have us tool along thinking everything is fine, right up until the day we’re asked to leave. But even if there is no formal notification that your job is in jeopardy, there several ways to know if it is.

Here are several strong clues…

1) You’ve Just Had a Bad Review

You can virtually assume that you are on probation if you have just had a bad performance review. Even if your employer doesn’t tell you as much, you will most likely be gone if you don’t begin showing measurable improvement soon. But a bad review can be an even bigger marker if you’re pretty certain that it isn’t true. Some employers will use a bad review as an unofficial warning, or as an attempt to push an employee out the door.

Do your best to improve your performance after a bad review, but it’s also a good time to start considering other options. You can never be entirely certain that it’s really about your performance, or maybe about something much bigger.

2) An Important Function (or Two) Has Just Been Taken Away From You

Everyone has one, two, maybe three, critical functions that substantially defines their job, and justifies their existence on the payroll. If one of these functions has been taken away from you – without your consent – there is a better than even chance that you are being demoted, even if your title and pay aren’t degraded.

It’s generally a sign that either your employer has lost confidence in your ability to perform that function, or they think that someone else can do a better job. Unless the removal of the function has been accomplished to free you up for a more important function, it’s probably best to assume the worst.

3) You’re Company Has Been Bought Out

If your company has been bought out by a larger organization, there is an excellent chance that you – and many of your coworkers – will lose your jobs. It may not happen immediately, but there’s an exceptional chance that the axe is being sharpened.

Most companies involved in mergers will dedicate a lot of ink, emails, and stage presentations to assuring all staff that their jobs are safe. But don’t bet on it. One of the major reasons why businesses merge is to take advantage of economies of scale. That is, they will merge operations and eliminate excess staff from one or both entities.

If your company has been bought out, make sure that your radar is up, and that you’re now approaching your job as though you are a rookie who has to prove himself all over again.

4) You’re Increasingly “Out-of-the-Loop”

If you have recently noticed that there are a lot of closed-door meetings and private conversations going on your department that don’t involve you, you may be a short-timer. This is particularly true if you have previously been part of the loop in most information exchanges.

All employees are excluded from a certain amount of information, but if you find that it is more common than not, something is getting ready to happen that you won’t be informed of – until it’s too late.

Sometimes information exclusion can affect an entire department. That probably means something negative is coming down the pike, and layoffs are a distinct possibility.

5) You’ve Been Re-assigned to a Job You Didn’t Ask For

Employers sometimes reassign employees in the hope that they will “take the hint” and leave the company. This is especially true if you have been with your employer for several years. The employer may be trying to engineer the voluntary resignation, rather than being put in the position of having to fire a long-term player, who may have the respect of her coworkers.

On the other hand, if you approve of the change – even though you didn’t request it – it may be an opportunity to thrive in a different capacity. If that’s the case, sit down and discuss the situation with your superiors, making it clear that you’re perfectly happy with the new position and harbor no ill feelings over the transition.

6) You’re Employer Is Losing Money – A Lot of It

These days, employers won’t sit much longer than two or three quarters in red ink before throwing the layoffs switch. If your employer is losing money, particularly a lot of it, you should never ignore this. This is especially true if the company becomes obsessed with cutting expenses, even little ones. I’ve seen companies go from cutting back on the coffee service to large-scale layoffs in less than six months.

This doesn’t mean that you should panic and prepare to jump ship at the first sign that the company is losing money. But it does mean that you should be aware that the situation has changed, perhaps radically, and you may need to have your parachute in good working order.

None of these events mean categorically that your job is in jeopardy. But if any is particularly severe, or you see a combination of several, it will be time to prepare yourself and your finances for whatever may happen.


How to Teach Kids the Value of a Dollar?

Teaching my kids the value of a dollar is something that’s important to me and I’m always trying to find ways to help them understand that process of earning & spending money isn’t as simple as swiping your credit card.

There aren’t as many teaching moments as there were in my childhood because money is less visible in our society now. Credit cards, direct deposit, and auto bill pay mean that I hardly ever have actual cash in my wallet and my kids don’t have as much exposure to money coming in and going out of the household.

Teaching through Stories
Money Lessons Little House on the Praries
I was really pleased when I unexpectedly ran across a discussion on the value of money in a book my son is reading. He’s really gotten sucked into the stories of pioneers as told in the “Little House on the Prarie” books. The rigors and dangers of life as a pioneer in the 1800s are enough to keep him interested and excited to read more each night before bed.

Reading about how the Wilder family got by with so few worldly possessions and how hard they worked just to put food on the table and a roof over their heads teaches a little about the value of hard work and money. But last night we ran across a section in the “Farmer Boy” volume of the series where a young boy named Almanzo asked his dad for a nickel to buy some lemonade at the town Fourth of July celebration.

I liked his answer and also that my son read it in a book. Sometimes advice from mom and dad goes in one ear and out the other. But when they read it in a book or hear it in a story sometimes it soaks in a little more. So here’s the mini-tale of how this boy’s dad helped him understand the value of a money.

Money for Lemonade

To set it up, they’re at a July Fourth celebration in the town square and the young Almanzo is jealous because all his friends and cousins are buying lemonade. He approaches his dad who’s in conversation with the men of the town and asks his Father if he can have a nickel:

Father looked at him a long time. Then he took out his wallet and opened it, and slowly he took out a round, big silver half-dollar. He asked:

“Almanzo, do you know what this is?”

“Half a dollar,” Almanzo answered.

“Yes. But do you know what half a dollar is?”

Almanzo didn’t know it was anything but half a dollar.

“It’s work, son,” Father said. “That’s what money is; it’s hard work.”

So I can imagine at this point the boy probably has a confused look in his eyes. He looks up to his dad so he believes what he says but he doesn’t understand what it means. So then his Father goes on and relates it to something more specific that the boy can relate to.

Father asked: “You know how to raise potatoes, Almanzo?”

“Yes,” Almanzo said.

“Say you have a seed potato in the spring, what do you do with it?”

“You cut it up,” Almanzo said.

“Go on, son.”
“Then you harrow ? first you manure the field, and plow it. Then you harrow, and mark the ground. And plant the potatoes, and plow them.”

“That’s right, son. And then?”

“Then you dig them and put them down cellar.”

“Yes. Then you pick them over all winter; you throw out all the little ones and the rotten ones. Come spring, you sell them. And if you get a good price son, how much do you get to show for all that work?”

So up until now Almanzo’s been talking about something he knows well, helping grow potatoes. Earlier in the book it talks about all the steps that he and his brother go through to help with potatoes. So this is something he does every year and not necessarily something he enjoys. Now his dad relates all that hard work to money.

“How much do you get for half a bushel of potatoes?”

“Half a dollar,” Almanzo said.

“Yes,” said Father. “That’s what’s in this half-dollar, Almanzo. The work that raised half a bushel of potatoes is in it.”

Almanzo looked at the round piece of money that Father held up. It looked small,compared with all that work.

That part of the story is neat because the dad helps him tie the value of the money to all the work that the boy does to help grow potatoes. But the next part is even cooler because the dad puts his son’s newly gained understanding of the value of money to the test.

I don’t know if my kids would act as responsibly as young Almanzo does in this next section but I’d like to think they’d at least consider it. So continuing on:

“You can have it, Almanzo,” Father said. Almanzo could hardly believe his ears. Father gave him the heavy half-dollar.

“It’s yours,” said Father. “You could buy a pig with it, if you want to. You could raise it, and it would raise a litter of pigs, worth four, five dollars apiece. Or you can trade that half dollar for lemonade, and drink it up. You do as you want, it’s your money.”

What I really love about this part of the story is that his dad doesn’t use a typical generic statement that us parents often fall back on, like “don’t waste money”. Instead he shows his son an alternative to spending his money on lemonade. It’s also neat because he’s planting entrepreneurial seeds, showing his son how to turn some money into more money.

Almanzo forgot to say thank you. He held the half-dollar a minute, then he put his hand in his pocket and went back to the boys by the lemonade-stand.

Frank asked Almanzo:

“Where’s the nickel?”

“He didn’t give me a nickel,” said Almanzo, and Frank yelled: “Yah, Yah! I told you he wouldn’t. I told you so!”

“He gave me half a dollar,” said Almanzo.

The boys wouldn’t believe it till he showed them. Then they crowded around, waiting for him to spend it. He showed it to them all, and put it back in his pocket.

“I’m going to look around,” he said, “and buy me a good little pig.”

So after the dad’s mini life lesson is over, he lets his son make the decision on his own. So how could this lesson be updated for the current day?

So if my son asked me for a dollar to buy a lemonade at the fair I suppose I could offer to give him $20 to use to setup his own lemonade stand. If I gave him that much money would he listen to my advice and use it to invest in his own business or would he just spend it on lemondade and candy? I don’t know but I guess there’s only one way to find out.

How about you, what teachable moments have you encountered with your kids? What have you done to help them understand the value of a dollar?


Cut Medical Bills With a Hospital Billing Negotiator

Have you ever received a great, big, ugly bill for services rendered from a hospital or other healthcare provider? This can happen to just about anyone, whether or not you have health insurance. When a bill of this size comes in, you can sometimes get it cut by using the services of a hospital billing negotiator.

That’s a person or agency who steps in on your behalf and negotiates a reduction in the amount of the bill, or can set up other terms that will make it easier for you handle the obligation.

Why you may need a hospital billing negotiator

There was once a time – long gone – when you could have a major medical procedure and never see a bill from a provider. If you did, it was a small amount, probably no more than a few hundred dollars.

That whole situation has changed today. It’s now more the rule than an exception that you’ll receive a bill for thousands of dollars in connection with just about any health care procedure you have. Whether or not you have health insurance will determine the size of the medical bill you need to pay. If you have health insurance, your portion may be a few thousand dollars. But you don’t have insurance, the bill will likely be in the tens of thousands of dollars.

In recent years, health insurance companies have increased the amount of out-of-pocket payments by patients in order to keep premiums more affordable. The kind of health insurance that will provide you with top coverage without ever seeing a bill from a provider is prohibitively expensive, if it’s even available.

The patient portion – comprising the bill you’ll receive – typically includes co-payments, deductibles, co-insurance, and uncovered charges. It’s precisely that combination of responsibilities that can make figuring out a health care bill so complicated.

As a patient, the complexity of a medical bill can be overwhelming. Not only will the bill be written in some language that looks like Greek, but if you have no experience in negotiating, trying to handle it yourself can be beyond difficult.

Going the DIY route to negotiating

If you have at least some basic knowledge of medical billing, and you are confident in your ability to negotiate, you might want to try the do-it-yourself route.

If you do, make sure that you review any bills you receive from the healthcare provider. Check the bills for errors, as well as for overcharges and for services not provided. If there are any items on the bill that need to be disputed, this should be the first place you’ll start your negotiations. You want to get the bill down to its true amount, and nothing more.

Once you and the healthcare provider are in agreement on the amount owed, it’s time to do what you can to cut down the bill to a number that you can actually afford to pay.

Healthcare providers, and especially hospitals, often negotiate lower settlements. Just like everyone else, providers want to get paid, and they are well aware of the half a loaf is better than none doctrine. In addition, they don’t want to push the patient into bankruptcy, in which case they’ll get nothing at all.

You can use this to your advantage. Try to get the provider to cut the bill as low as possible. You may have to make the entire payment in order to get the biggest reduction. But failing that, make the biggest upfront payment that you can, and work to arrange a monthly payment plan that your budget can accommodate.

Using a patient advocate

Healthcare providers, and especially hospitals often have a person on staff – either an employee or an outside contractor – known as a patient advocate. It’s this person’s job to represent the patient’s interest throughout the process, typically from pre-admission through your final payment.

While the job of the patient advocate isn’t strictly to handle the financial side of your treatment, they can nonetheless represent an inside contact when the bills start coming in.

The advantage to using a patient advocate is that they are involved in the system, and understand how works. They are aware of various financing options that the provider has available, options that you as a patient would never know about. They may be able to direct you toward the proper parties within the organization, help to arrange financing plans, or even settlement options.

However else you might plan to handle your hospital billing, it’s a good idea to start with the patient advocate.

Using a professional hospital billing negotiator

If you’re not getting much help from the patient advocate, or you don’t feel comfortable negotiating a settlement on your own, or the size of your bill is just so enormous that you have no capability of ever paying it, you always have the option of bringing in a hospital billing negotiator.

This is a person or agency specifically involved in the business of negotiating medical bills. Since this is what they do, they have a solid idea as to what can be done to reduce medical bills, and even how much flexibility a specific provider will offer.

A good hospital billing negotiator starts by validating the accuracy of your bills. Once that’s done, they will handle the negotiations for you, and negotiate the best settlement possible. Some will even review and negotiate your charges prior to your receiving services.

Hospital billing negotiators do charge fees. However, they do it by charging a percentage of the amount they’re able to save on your overall bill. Their fees are typically somewhere between 25% and 35% of the amount that they reduce your bill.

Let’s say that you receive a bill of $10,000 from a hospital for a recent stay. If the hospital billing negotiator can get that bill cut down to $5,000, and their fee is 30%, they’ll take $1,500 of the $5,000 that they saved you. This is similar to attorneys working on a contingency basis, and only charging you if they win your case.

This will mean that you will owe the hospital $5,000, the hospital billing negotiator $1,500 ($5,000 X 30%), and you will get the benefit of a $3,500 savings on what was originally a $10,000 bill. You’re total out of pocket on the bill will be reduced from $10,000 down to $6,500.

Which ever way you choose to go – DIY, patient advocate, or hospital billing negotiator, it’s important to develop a strategy for dealing with large medical bills. It‘s likely they’ll only increase in the future.


Should You Let Your Family and Friends Know About Your Debt Struggles?

This is a touchy subject – it’s easy making a case for keeping personal debt problems secret from your family and friends. But let’s take the opposite side of that debate – should you let your family and friends know about your debt problems?

Despite the problems that are inherent in sharing negative information about yourself with people close to you, there are compelling reasons it may be to your advantage.

They may be able to help

Generally speaking, no one is in a better position to help you – or more willing to do so – then the people who you are closest with. Even though family and friends may not be able to help you to completely fix your debt problem, they may be there as a safety net to provide for short-term needs while you’re working out a longer-term solution.

Family and friends may also know of people or organizations that can help you to deal with your debt. Simply pointing you in the right direction might provide the kind of assistance that even money can’t buy.

Under extreme circumstances, and if the friend or relative has the money, they might be able to help you in a more direct way. For example, they may offer to payoff your debt with the stipulation that you will repay them.

This arrangement, while tempting, will represent transferring your debt problems from creditors to a friend or family member where the arrangement will be very personal. You have to consider the possibility that the relationship may be impaired or permanently destroyed if you are unable to repay the debt to that person. You may not be able to do it, for all the same reasons that you can’t pay your creditors now. Tread lightly if this offer is ever made!

Still, even if you don’t accept such an arrangement with a friend or family member, it can be comforting just knowing that it’s available – just in case.

You’ll have less explaining to do when you can’t afford something

One of the stickiest parts of not telling family and friends that you have a debt problem is that it leaves you constantly explaining to them why you can’t participate in certain activities. This practice gets old in a hurry. If you let family and friends know that you’re having debt problems, that you can’t afford to keep up with them, you might be lifting a major burden from yourself.

If nothing else, you won’t need to come up with an excuse every time you can’t afford to do something with other people close to you.

You may be surprised to find that some of them have the same problem

When we’re going through a crisis of any sort – including debt problems – we often think that we’re the only ones who have the problem. But it can be both a shock and a comfort to find out the others close to us are having the same issue.

That’s not even an unlikely situation. A lot of families have still have not recovered fully from the recession a few years ago. Many are still dealing with either a career crisis, or the aftermath of an extended period of unemployment. Any of those situations could leave them saddled with oversized debts.

If you find a friend or family member with debt problems, you’ll have a confidant to talk to about your problems. And you can know that person fully understands the situation in you’re in, and won’t judge you.

You should never go through a serious crisis alone

Money problems can be embarrassing, which is why a lot of people try to keep it from others, especially those closest to them. It’s hard not to blame yourself for debt problems, even if you weren’t entirely to blame.

A debt problem is a crisis, even if you are fully responsible for it. And like any crisis, you should never go through it alone. You need people, especially family and friends, to help you go through it. Their camaraderie alone can make the experience easier to live with, and even speed a solution.

There are whole lot of emotional issues that go with debt problems, and you’ll need the people closest to you to help you weather those issues.

Creating accountability

People tend to go through debt problems alone, embarrassed that anyone else might know. They also cling to the idea that somehow “I can handle it”.

In truth, if you don’t share your debt problems with at least one or two people who are close to you, the chances that you will come out victorious over the problem is a lot less likely.

Accountability is often necessary in order to deal with a long-term problems like debt. If secrecy is one of the fundamental reasons for debt, accountability will be one of its solutions. The fact that someone else is aware that you have a debt problem, and especially the magnitude of it, can make you accountable to them should you decide to come up with a plan to pay your debts off.

It’s human nature that we tend to behave better when we know that other people are watching. That’s what accountability does for people with debt problems. If there’s no one keeping  an eye on what’s going on except for you, there is a very good chance that the problem will continue to do what it has always done, which is to get worse.

Is there a downside to cluing in family and friends about your debt problems? Of course. But in many cases, the benefits outweigh those negatives.


Five Alternatives to Raiding Your Retirement Savings Early

Every year thousands of people raid their retirement savings early. It could be to get out of debt, to cover living expenses during a time of unemployment, to deal with a medical crisis, or even help a family member in trouble. While the reasons for doing so may be perfectly noble, it’s best to consider all possible alternatives before doing this.

There are at least four reasons why raiding your retirement savings early is not in your best interests:

  • Income tax liability – If the money is withdrawn before you turn 59 ½, the amount of the distribution will be added to your income, and taxed as ordinary income.
  • Early withdrawal penalty – If income tax liability weren’t bad enough, you’ll be subject to the IRS early withdrawal penalty, equal to 10% of the amount of the distribution.
  • Permanently weakening your retirement – Because of the time value of money, any funds that you withdraw will represent a permanent reduction in your retirement plan. That means you will have less money available when it comes time to retire, and there’s no way to make that up once you do.
  • Selling “the family jewels” – In most households, retirement savings represent the largest percentage of their financial assets. This is long-term money, and if you withdraw it for short-term needs, you will be weakening your family’s overall financial position.

What alternatives do you have to avoid raiding your retirement savings?

1) Sell what ever you don’t need

If you absolutely need a few thousand dollars to cover an emergency expense, consider selling some kind of personal asset instead of raiding your retirement savings.

It could be an extra car, a recreational vehicle, a boat, or even a second home. Selling any of these would be preferable to liquidating retirement savings, as they generally will not create an income tax liability (except perhaps the second home), and certainly not a penalty on top of it

2) Borrow from a family member

Still another way to borrow money rather than liquidating retirement funds, is to get a short-term loan from a family member. If the need for cash is brought on by a true emergency, then a family member would be more likely to step in and help you in your time need.

Once the crisis passes, you can begin working out repayment using one or both of the strategies below.

3) Slash your expenses radically

There are two factors at play here. First, it’s often true that when a person needs to tap retirement savings early, it’s due to some kind of financial imbalance. While the imbalance could be due to temporary factors, such as a job loss (which could become long-term) or high medical bills, it can be due to long-term factors just as well. That might include excess debt levels, high living expenses, or a lack of liquid savings.

If the need for cash is in any way related to long-term financial difficulties, you should seriously consider slashing your expenses radically. That will be the best permanent solution to your money troubles.

Second, lowering your living expenses will also help you to pay off any short-term financing you took to deal with your emergency. Eliminate any recurring expenses that you don’t absolutely need, cut way back on discretionary spending, and even consider how you can reduce your major expenses.

It may be that the house you’re living in is simply too expensive for your income level. In that case you may have to consider downsizing your living space. Or it may be that you have two cars, both of which have payments. You may need to sell one of the cars, and replace it with a very used car that does not require a monthly payment.

Sometimes the only way to get control of your finances is to cut your structural expenses. Not easy to do, granted, but it is a permanent solution to a financial problem, and may help you to repay short term loans taken to deal with the emergency.

4) Borrow from your 401(k)

If you have an employer-sponsored 401(k) plan, you probably have the option to take a loan against it. Under IRS regulations, you can typically borrow as much 50% of the value of the plan, up to $50,000. And you’ll have five years to repay the amount of the loan.

Borrowing money would be preferable to taking distributions because not only would it avoid creating a tax liability, but it would also leave your retirement savings intact.

5) Create an additional income stream

Creating an additional income stream can work well in combination with a short-term loan from your 401(k) plan, a family member, or some other source. The idea is to borrow the money that you need – without taking distributions from your retirement savings – and then to pay it back out of the additional income.

The extra income could be from a part-time job, or a side business. Not only can this be used to cover short-term loans once the crisis passes, but it may also be a way to improve your long-term financial situation, so that you will have less debt and more liquid savings. When the next crisis comes, you’ll be in a better financial position, and won’t need to consider raiding your retirement savings early.

Avoiding early withdrawal of retirement savings is mostly about advanced planning. That means creating extra room in your budget – either by lowering your living expenses or creating more income – so that you won’t have to resort to raiding your retirement savings.

Any one of these strategies will put more money your pocket, without causing an income tax liability that will only add to the financial problems caused by the emergency you need to deal with.



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