Why You Should Never Co-Sign a Loan

There are times when co-signing a loan seems like the right thing to do. It could be to help a young adult child get a car loan or a mortgage to buy a house. Or it could be helping a family member or friend re-establish credit after a bankruptcy or foreclosure. As good as any reason may be, and as good as your intentions are, think long and hard before you co-sign a loan for anyone.

There are consequences to co-signing a loan that go well beyond the realm of a family relationship or friendship. Anytime you co-sign a loan for another person, you are in some way compromising your own financial position.

A Co-Signed Loan Becomes Your Obligation

Most people in a non-lending world think of co-signing a loan as something more of a gentleman’s agreement. In fact, many people completely forget about a co-signed loan shortly after the fact. But rest assured that from a legal and financial standpoint, it carries significant meaning.

When you co-sign a loan it automatically becomes your obligation. If you later apply for a loan for yourself, the co-signed loan will appear on your credit report under your name. The entry may be notated as a co-signed loan, but the lender will view it as fully your obligation. They will consider the monthly payment on the loan as if it were being paid by you, even if it isn’t. It will be added to your total debt payments, and calculated as part of your debt-to-income ratio. It is even possible that you will be denied a loan because of the co-signed obligation.

Certain lenders, such as mortgage lenders, consider co-signed loans to be contingency obligations. They will allow you to exclude the payment from your total debt if you can get evidence that the primary borrower on the loan has made all of the payments, and made them on time, for at least the past 12 months. But if the loan has been outstanding for less than 12 months, or if there are any late or missed payments, or if you have made one or more payments yourself, the debt will be considered as it were yours alone.

The Affect on Your Credit Report

Since a co-signed loan is a credit obligation, it will appear on your credit report. That can have an effect on your credit scores. New loans, and loans with high outstanding balances compared to the original loan amount will have a negative effect on your credit scores (credit utilization). You can fully expect some drop in your scores as a result of co-signing a loan.

Late Payments by the Primary Borrower

Should the primary borrower be late with any payments, whether it is 30 days late, 60, or 90 days late, it will appear as such on your credit report and have an even bigger negative effect on your credit score.

Credit scoring does not differentiate between loans that are actually yours, and those on which you are only a co-signer. Any derogatory information will reflect on your credit scores as if you were the cause of the problem.

Even if the co-signed loan is paid off, the derogatory information will continue to appear on your credit report for at least seven years (and the primary borrower’s too). During that time it will have a negative effect on your credit scores. Even if the rest of your credit is outstanding, the delinquent information on the co-signed loan will continue to weigh on your credit scores.

Co-Signed Loans Will Become Your Responsibility Upon Default

Should the primary borrower default on the loan, the lender will come after you to payoff the account. That’s the entire reason why the lender wanted a co-signer on the loan in the first place!

Now ultimately you may be able to go after the primary borrower to reimburse you for the money you had to pay to settle the account. However the default will still appear on your credit report for at least seven years. Once again, the credit reporting agencies will not remove the derogatory information simply because you settle the account.

Better Ways to Help

If a loved one needs financing – and your co-signature – in order to accomplish a certain goal, there may be better ways to help without co-signing.

If you’re in a position to do so, it will be better if you make them a personal loan. You can set it up with a note, including interest and monthly payments. That will mean you’ll have to put money out of your own pocket, however if the primary borrower defaults on a co-signed bank loan, you’ll have to do that anyway.

Another option is to convince them to buy something less expensive that will not require the use of a loan. Failing that, recommend that they delay the purchase until they can save up more money so that they don’t need a loan – or a co-signer.

Co-signing a loan for loved one is only convenient at the moment that you do it. After that . . . is when the trouble starts.

Have you ever co-signed a loan for someone? Leave a comment and tell us a little about it!

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How to Buy a Used Rental Car

With the rise in new car prices, the used car market has become more competitive in recent years. Prices are up and cars are hard to find. But there is a source of used cars – a pretty big one – that most people are completely unaware of. Rental car companies hold onto their cars for just a year or two, and then they need to replace the older models. The old ones are sold off to make room for new cars, generally to ordinary people like you and me.

Why Buy a Used Rental Car

How can you buy a used rental car, and why would you want to in the first place?

1. Better prices than car dealers.

Used rental car prices are generally lower than what you would find with used car dealers. Car rental companies don’t give their cars away, but there are several reasons why they are, and can be, less expensive than car dealerships.

Car rental companies are not in the business of car sales. They’re trying to get rid of large numbers of older vehicles, and the quickest way to do that by selling at reasonable prices. There are also no middlemen, no advertising budgets and no profit margins to be protected.

Another price advantage is that car rental companies sell their cars with fixed prices. Much like Carmax, the price is what it is, and there is no haggling. Car rental companies will charge a price at which the cars are likely to sell. They don’t need to inflate the price in order to allow for negotiation. And not only does that make for a less expensive car purchase, but it also eliminates the stress that comes with negotiations.

2. Better maintained cars.

One of the biggest advantages to buying a car from a car rental company is that you know who the owner is. When you buy a car from either a used car dealer or even an individual, you don’t know anything about the previous owners.

What you do know about car rental companies is that they are in the business of providing reliable cars to their customers. That means the maintenance level on the car is very high and the vehicle is in good working order. You also have the benefit of knowing that the car had a single owner. With other used car sources, you can never be completely sure.

3. Extended warranties.

Car rental companies will often include a short-term warranty, such as 60 days or 2,000 miles. You can also purchase an extended warranty for longer periods of time. While extended warranties are also available at used car dealerships, you will not have them available if you buy directly from an individual.

Some car rental companies also offer a roadside assistance package for either a certain number of months or a certain number of miles. You may get this for free, or there may be a small charge for it.

4. Advantageous financing.

In order to facilitate the selling of their car fleets, car rental companies generally offer financing if you buy one of their cars. The rates are competitive, and sometimes they offer specials that will be hard to pass up. Since the financing is established precisely for the sale of the car rental companies vehicles, you’ll probably have more flexible terms than you will have if you go to a bank or other type of car financing company.

Buying a Used Rental Car

If you want to buy a used rental car start by going to the company’s website (it‘s generally a separate function from their rental operations). Most of them have a webpage set up specifically for car rental sales.

We’ll use Hertz as an example. They have a dedicated website specifically for car sales. The site itself is similar to those of car dealers. The most prominent feature on the site is the “Find Used Cars For Sale” box. It allows you to enter the make and model of the car that you want, then checks availability within 100 miles of your location. From there you can start the process.

The site also provides information on financing, warranties and other benefits.

One of the more interesting features offered by Hertz, is the Rent2Buy option. Once you select a car, you can test drive the car for three days before deciding if you want to complete the purchase.

It’s unlikely that you will find any major mechanical flaws driving a vehicle for three days, but it will give you a real opportunity to see if the car is really good fit for you. Sometimes a car can look good on the outside and according to all of the literature and descriptions, but there’s something about it that just doesn’t quite feel right. With the Rent2Buy program, you’ll have an opportunity to find out before finalizing the purchase.

If you’re looking to buy a used car, shop around at car dealerships and also look at some cars offered for sale by individuals. But add car rental companies as a third source. That will give you more options and probably better deals on used cars.

Have you ever purchased a used car from a car rental company?

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How to Buy Designer Clothes on a Budget

What do you do to buy designer clothes if you don’t necessarily have the budget to afford them? There are several places where you can usually find designer clothes and buy them at much lower prices.

Lower Priced Department Stores

When we think about designer clothes we usually think about high-end department stores and clothing boutiques. They are easily the most expensive places to buy designer clothes. Nice environments, sure, but you will pay top price to match.

The less expensive route is to go instead to lower-priced department stores. If the clothes you want are available at Nordstrom’s, look instead at lower-priced retailers, such as JCPenney and Kohl’s for the same items. If they do carry them, they will be good deal less expensive than they will be at the higher end stores.

The matter what stores you shop, pay close attention to the websites for advertised specials. Not only will they advertise when the stores have sales and specials on the specific designer clothes you want to buy, but they may have storewide sales that will offer you a fixed dollar discount if your total purchase of exceeds a certain amount (for example, $10 off purchases over $50).

Designer Brand Outlet Stores

This source can be a mixed bag so you have to be careful. Some outlet stores actually are less expensive than major retailers, but some others charge full price while they pose as discount centers. Check the prices carefully, and never assume that it’s less expensive just because it’s an outlet store.

Thrift Stores

Thrift stores can be an excellent place to find designer clothing. They typically carry gently used items, and some are almost new. On occasion, you may even run across an article of clothing that still has the store labels in it – they’ve never even been worn!

Clothing at thrift stores will be available for a fraction of the price of a major retailer. A $70 pair of slacks will probably cost no more than five dollars.

The disadvantage of thrift stores that anything that you see will be one-of-a-kind. They may have exactly what you’re looking for, but it may not be in your size. If that’s the case, you’ll just have to move on to another item.

Because of the one-of-a-kind aspect of thrift stores, it’s best to shop there on a regular basis. What you want to do is troll around to see what it is you can find. It will not be possible to go to a thrift store to look for a certain garment with the expectation of finding it. You’ll have to come in frequently and take whatever it is that you will find. Still it’s a way to come across designer label clothing for very little money.

Consignment shops

Consignment shops function in much the same way as thrift stores, except they tend to be more specialized. A consignment shop may be dedicated entirely to women’s clothing, to men’s clothing or to children’s clothing. That will increase your chances of finding something close to what it is you are looking for, even if it isn’t exactly what you are looking for.

Consignment shops tend to be more like boutiques then thrift stores however, so both the atmosphere of the shop and the merchandise they carry will generally be of higher quality. But much like thrift stores, consignment shops are largely limited to one-of-a-kind merchandise.

There is one advantage with a consignment shop that you don’t have a thrift store. Consignment shops are usually owned by just one or two people, and that gives you a chance to get to know the owner on a personal level. Once you do, you can leave an open request for certain articles of clothing (in your size) that you’re interested in buying. The owner can put those articles aside when they come in, and give you a call so you can buy them when they do.

Plato’s Closet

Getting more specific on the consignment shop idea, there are resellers, such as Plato’s Closet. They specifically target the designer and brand name market and do so mainly for the benefit of teens and twenty-something’s. In addition, they deal in very gently used articles of clothing, and act as a clothing exchange. You can go in and sell one outfit to them, and come out either with cash or with another outfit. That keeps the new merchandise flowing in continuously.

Plato’s closet has hundreds of stores throughout the United States, but there are probably competitors out there operating in much the same way. Find one in your area that is similar and you may have a ready source of designer clothes for less.

How do you get around paying premium prices for designer clothing? Leave a comment!

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The 5 Toughest Things About Getting Out Of Debt

There’s a cosmic rule about debt: getting into it is easy, getting out of it is not! Everyone recommends getting out of debt, and while it’s easy to agree with that recommendation, putting it into action is something entirely different. Here are the five toughest things about getting out of debt, but they are obstacles that need to be overcome before you‘ll be able to be successful.

1. Overcoming the force of habit.

If you’ve been carrying a significant amount of debt for several years, debt has become a travel companion – an old friend. Like a habit, it’s something you’re used to having around. Anything we are comfortable with will be difficult for us to separate ourselves from.

You have to stop seeing debt, or the state of being in debt, as being normal in any way. You need to start seeing it as the obstacle that it truly is. Only when you recognize it as a problem, will you be able to take action against it.

If you can resolve that in your mind, the next step is to put your credit cards away, and learn to pay either by cash, check or debit card. By not actually using the credit cards, you’ll be removing both the temptation and the ability to spend more than you have or earn.

2. Learning to spend less.

When you use debt frequently you can to buy what you want, rather than what you really need. If you’ve been doing that for a number of years you probably see a lot of wants as necessities, and that has to change. By putting away your credit cards, your debt situation will correct itself almost automatically. But that isn’t to say that it will be easy.

Spending less money is a lot like having your allowance taken away. It doesn’t feel good especially at the beginning when the only feeling that you have is one of self-denial. Let’s be honest, the benefits of less spending, and ultimately less debt, all occur later in the process when debt levels begin to fall and there’s more room in the budget for everything else. Until that time, it’s painful.

But it’s also necessary. There is no scheme that you can come up with that will allow you to get out of debt without learning to spend less money. You can cut your spending either by a certain dollar amount, or by a percentage of your income. That difference should be used either to build up savings or to pay down debt, but never for spending.

3. Getting rid of some expenses.

Debt isn’t always caused by uncontrolled spending. Just as often, it’s driven by high expenses. There may be no way for you to get out of debt without cutting some big expenses. This can include a house or a car with high monthly payments. It can also include a second home, boat, or recreational vehicle that’s eating up entirely too much of your budget.

These are large structural expenses in your budget that eat up a disproportionate amount of your income. Until you get rid of some of those expenses – and the assets that are causing them – it may be impossible for you to get out of debt.

4. Putting money into savings.

Credit can often be a substitute for savings. You don’t need to have savings because any money that you need for any purpose or emergency can be from credit lines. If you’re in this pattern, you’ll need to reverse it completely in order to point yourself in the right direction. If you’ve been doing this for a long time, making a shift be tough.

You’ll have to make saving money a priority, and that will involve a lot of self-denial. Instead of spending money, you’ll be putting money into savings. Once again, there will be no immediate benefit from doing that. It can take several months or even a couple of years to have enough money saved just a cover emergencies. While you’re saving that money, it will be all obligation and no benefit. But it’s a transition you will have to make in order to get out of debt.

5. Not having enough income.

It’s probably possible to live on any income level no matter how low it is. But that’s not possible if you have a lot of debt. In order to get out of debt, you’ll probably have to take a number of actions that will include increasing your income.

That could mean becoming more focused on your career in a way that will increase your income in the long run. It could just as easily mean that you have to look for additional income sources beyond your primary occupation. That can mean starting your own business as a secondary income, or getting a part-time job.

Both activities will cut into your free time, and that won’t feel good. But in addition to increasing your income, those ventures will serve another important purpose. The time you spend earning additional income will leave you with less time to be out spending money. We don’t think of this much, but boredom is often a reason why we spend money. A second income source will be a double win, as you’ll be earning extra income and denying yourself the time to spend it.

It will be tough to get out of debt, but the path will lead to a life not only of less debt, but more income and savings . . . and ultimately less stress and more free time. But nothing worth while is ever easy.

Do you feel like you can overcome these obstacles? Leave a comment and explain how!

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How to Save Money on Your Data Plan

Smartphones and tablets have taken consumers by storm. You can be constantly connected with slick apps to thousands of different services wherever you have a cell phone signal.

There’s only one problem: all of that connectivity uses a lot of cell phone data, and cell phone data is not cheap. With cell phone bills rising across the country, how can you save money while still staying connected?

5 Ways to Save Money on Your Data Plan

Here are some tactics to save money on your data plan costs each month.

1. Tether off of your smartphone.

The easiest way to save money on your data plan is to drop it for any non-smartphone devices you have. If your current cell phone plan has additional charges for tablets you can most likely drop that extra data plan charge from your smartphone plan.

How? Easy: you can simply tether the device off of your smartphone. Verizon, for example, used charged for this in the past, but the FCC stepped in and said they couldn’t charge you double for the same data. (You use your phone’s data allowance when you tether your tablet or laptop to it, so by charging you the carriers were getting to bill you for the data on the phone and then again for the right to use that data on your device.)

A great read about how this works can be found over at Cnet.com with What Verizon’s FCC Tethering Settlement Means to You.

However, this solution is not perfect. Here are some problems with tethering off of your smartphone:

• It does use your phone’s data allowance, so you could go over your allowance faster by using multiple devices on the plan.
• Hosting the access can drain your phone’s battery faster.
• If you have an unlimited plan your carrier may still believe they can charge you for the right to tether the phone (see the article above for an in-depth explanation).

At the end of the day tethering off of your smartphone only saves you money if you have multiple data plans you are paying for and your total data usage can fit under the smartphone plan.

2. Drop to a lower tier data plan.

What if you don’t have other devices you need to tether to your phone? Can you save money on just your smartphone’s usage?

Yes, absolutely. It just depends on your usage. The next easiest method to save money is to analyze your data usage on the plan you have. If you have a 6GB monthly data limit but only consistently use 3.5GB, then you could drop to the tier below (normally 4GB) and save the difference in the monthly plan charges.

3. Share data on a family plan.

The next step would be to combine plans with a family member and chip in together for a larger data plan. You can not only share minutes and messages, but the data too. All of the combining should save you money if you are careful with your plan choices.

4. Use FreedomPop.

A new device is out called the FreedomPop. Instead of charging you for monthly data like a carrier, the company charges you for the device and then gives you 500MB of data each month for free. This won’t work if you use a ton of data, but for light use this is an easy fix. The device is portable and as long as you are traveling in an area where FreedomPop has service then you’ll be able to connect over WiFi to the FreedomPop connection.

5. Change carriers.

Your last option is of course to change to a cellular carrier with a more affordable plan for your situation. A regional carrier may offer better service in your area at a lower cost than a national company. If you don’t travel a lot this may be a simple solution to your data plan cost problems.

How do you plan on saving money on your data plan in the future? Leave a comment and let us know!

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4 Ways to Buy Discounted Gift Cards

Sometimes you just aren’t sure what the right gift to get someone is, so you opt for the gift card. Although sometimes seen as a social faux paux, gift cards are also rated very highly as gifts to receive. It is, of course, much easier to shop for yourself than to hope someone else gets it right.

Before you go to the store and pay full price for a gift card, read on to find different ways you can get a discount on the gift you are giving. (Or just use the discount yourself!)

Different Ways to Buy a Discounted Gift Card

There are bunch of different ways you can acquire discounted gift cards.

1. Find used gift card websites.

The easiest method is to buy a “used” gift card off of a gift card reseller like Gift Card Rescue, Plastic Jungle, and Card Pool. These companies are like a trading house for gift cards. If you need to sell one, the company will buy it for you around 75% to 90% of the original value. For the seller this isn’t ideal, but it is better than having a gift card to a place you will never use it. You mail in the gift card, the company confirms it is legit and the amount is correct, and then sends you a check.

The company then turns around and sells you the gift card at a lower discount. Discounts can be as low as 2.5% for high volume stores like Wal-Mart and as high as 25% for some retailers.

2. Try holiday bonus gift cards.

Another simple way to get extra value for your dollars is to buy gift cards during the holidays. Many restaurants and retailers offer a bonus gift card if you buy a certain amount of gift cards. Common deals revolve around $50 where you might get $10 or $15 in bonus gift cards for purchasing that amount. While not a direct discount on the amount you want to buy, you are still paying less than the total value of the gift cards you are getting.

3. Shop on eBay.

eBay is the world’s biggest garage sale, and yes you can buy gift cards there, too. The discount will depend on the specific individual auction, but in theory you could save money here as well. My only concern is that you are buying something from an individual on eBay rather than through a company. So you might end up with a fraudulent gift card auction.

4. Go through airline, hotel, cash back, and credit card rewards shopping portals.

One last way to get a discount is to purchase gift cards through shopping portals of some kind. You can earn airline miles, hotel points, credit card points, or straight cash back depending on which program you buy through. Sometimes gift cards do not count for the portals so be sure to read the terms before making your purchase.

In rare cases you can also double dip – buy the gift card through the shopping portal and get points/cash back, then turn around and use the portal again and pay with the gift card to buy something you want, and again earn points or cash back.

Do you buy discounted gift cards? Where? Leave a comment!

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How to Cure Your Shopping Addiction

Shopping is one of those activities that feels really good until it’s over and you realize how much money you’ve spent. It’s even worse if you use credit cards to pay for your spending. The arrival of one or more credit card bills the following month chronicling your excesses can be a painful awakening.

Of course, we’re not talking about shopping for necessities here – everyone has to do that. What we’re talking about is recreational shopping, that kind of shopping that you do because it feels good or passes the time. If you shop for these reasons, you may have a shopping addiction. That’s not unlike cigarette smoking or excess eating or drinking. It’s a bad habit! Just like all bad habits, it leaves a trail of consequences in its wake.

The only way to get out of a bad habit is to replace it with a good one. Take a look at some new habits you can add to your schedule that might help you to spend less time shopping and more time doing activities that will improve the quality of your life.

1. Make a list of your most important goals.

Start making a list of your most important goals. Now notice that we’re saying goals and not things? There’s an important distinction.

Goals are something you achieve. Achievements are what you want to do with your life, and have the potential to make you feel a lot better about yourself and your life. Things, on the other hand, are something you acquire. That means buying more stuff, which feeds your shopping addiction. Either the shopping or the stuff make you feel better at the moment, but neither makes you feel better about yourself or about your life.

Once you’ve identified your goals, you can begin focusing your time achieving those goals. That will move you in a worthwhile direction that should eventually take you away from the need to acquire stuff.

2. Start an exercise program.

Whether it’s a goal or not, give strong consideration to taking up an exercise program or expanding the one you have. Exercise programs take time and will also soak up some energy. It will be something constructive to do in some of those moments when you feel like going shopping.

There are also significant psychological benefits to exercise. It tends to make you feel better in general, and better about yourself in particular. When you take control of your health and your body, by extension you take control of your life. That has important psychological and emotional benefits, in addition to the physical improvements it produces.

When it comes to good habits, exercise is one of the best – and a worthy replacement for time you might spend shopping! Oh and there’s a financial benefit too: Most exercise programs will cost you little or nothing.

3. Plan more activities with family and friends.

Shopping could be something that you do to make up for a void caused by a lack of time with family and friends. In a world in which we are often surrounded by home entertainment equipment, computers, and the Internet, there can be little room for interaction with people. That can cause a need to find emotional connection in other directions, one of which could be shopping. Let’s face it, when you are out shopping you’re out around people – even if you don’t necessarily know any of them.

Becoming more purposeful about your time and relationships with people can be a way of minimizing your shopping time. Relationships require time, which will leave you less for shopping. In addition, you may find that the more you bond with people – and the closer you become – the less need you’ll have for shopping.

4. Get more involved in charity and volunteer work.

Shopping can also be the result of a lack of meaningful involvement. That’s a void that can be filled by charity and volunteer work. The more time you spend on these activities, the less time or need you will have for shopping. You will also be doing your part to bring about positive change in the world, and that also has incredible emotional benefits that may lessen the need for shopping.

Charity work is shifting the focus to other people and situations beyond yourself. Shopping is largely about doing something for yourself; we all need some of that, but it should never be a dominant activity in our lives. When you get involved in charity work you move at least some of the focus in your life to other people.

Charity and volunteer opportunities are everywhere. Churches and synagogues need people for various purposes, schools and hospitals need help for just about everything, and there any number of charities in your community that could use your help right now. You don’t need any special skills, just a willingness to get involved.

5. Find a hobby.

A hobby is another constructive activity. Identify an activity that you really like, something that you may have been putting off that would be a natural draw for you if you would allow it to be. Start putting some of your time and efforts into the hobby, and you may find yourself spending less time at the mall.

You may even find that you have a hidden talent, such as playing an instrument, drawing, painting or writing. Each is a form of self-expression that can fill an emotional void and even set an entirely different direction in your life. Through that expression, you may find that you have less need to shop and to spend money.

The shift away from shopping may not be an overnight event. But if you involve yourself in enough non-shopping activities, eventually you’ll be saying goodbye to a bad shopping habit. Once you do, you’ll begin to notice your finances improving too.

Have you ever considered the possibility that you might be addicted to shopping? Is it something you wish you could stop?

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Should You Use a Job Offer to Negotiate a Raise?

Using a job offer to negotiate a raise from your current employer is hardly an unusual strategy. Some employers won’t give a significant raise unless they’re forced to by the prospect of an employee leaving. But if you do use this strategy to negotiate a raise, be aware of the risks involved and do what is necessary to minimize them.

Get the Offer in Writing

Never attempt to use a verbal job offer as leverage in salary negotiations with your current employer. If you can’t get the offer in writing, you don’t really have any bargaining position. In fact, you may not even have a job offer! Don’t risk your current job for a verbal offer that can easily be withdrawn or even denied after the fact.

Make Sure the Offer is Reasonable

If the offer you receive is better than what you’re being paid on your current job, you’re going to have to do some more research to make sure that it’s reasonable. This is especially true if the offer is much higher than your current pay.

Check sources such as Salary.com and the Bureau of Labor Statistics (BLS), Occupational Employment Statistics to see where the offer fits in the pay range for your occupation. Be sure to compare the pay level to the range in the area where you live, as this can vary from one region to another.

If the salary offer appears to be too generous for the normal range for your position, be careful – several scenarios are possible:

• The employer may be paying above average salaries to offset high turnover in the position, poor working conditions or high levels of employee dissatisfaction.
• The expectations for the position may be exceptionally high, even impossible to fulfill.
• The employer may be looking to pirate talent from their competitors, and one of the best ways to do this is by throwing a lot of money at them. But the strategy is aimed more at hurting competitors than it is at bringing in contented employees.

You may be lured away from your current job to one that isn’t exactly what it seems, and you’ll be a short-timer if you take it. That being the case, you may be forcing your current employer into a bidding war based on a salary that isn’t quite as real as it appears. In addition, the salary offer may be so far out of bounds that your current employer may opt to not match it.

Don’t Do it if You Aren’t Prepared to Take the New Job

You have to be fully prepared for the possibility that your current employer may not make an effort to retain you in the face of an offer from another company. Here are some of those possibilities:

• Your employer is not satisfied with your job performance.
• Your employer may not be in a position to match the offer.
• Your employer may have a policy – written or unwritten – in which they refuse to make counter offers.
• Some employers view employees applying for positions at other companies to be an act of disloyalty, and refuse to negotiate.

With of these possibilities in mind, you must be prepared for the very real prospect that you will have to accept the job you applied for. If you don’t intend to take the job, and your current employer does not counter the offer, you could become vulnerable in your present position. Your employer may see your use of an outside offer as merely an attempt to get a raise.

Negotiating With Your Employer

If you do have a written job offer, and it’s a legitimate one with a company that you would like to work for, you are in an excellent position to seek a counter offer from your current employer. It may not be a bad idea to combine the job offer with printed copies of your online salary research. The combination will give you solid documentation to show your employer that you’re worth more than they’re paying you.

If you try to call a meeting with your boss, your boss’s boss and someone from the human resources department they may see it as setting up a confrontation. Start with your boss alone and keep it informal. Your boss will have a good idea as to whether or not the company will attempt to renegotiate your salary. It can go up the chain of command from there.

You’ll want to be as diplomatic as possible in approaching your employer and presenting your documentation. You might start by saying something along the lines of, “XYZ Company invited me to come in for a talk. We went back and forth a few times and they made me a job offer. It’s a solid opportunity with an excellent salary. I really like working here, but it’s hard to ignore the higher pay. Is there anything we can do to close the gap?”

Give him the written offer only after you have first explained the situation. This will avoid you appearing to come on too strong. At this point try to judge your boss’s response. If he is sympathetic, then do your best to make him your ally in the process.

Hold off submitting your online salary information until the process moves up the ladder. At that point, it can help strengthen your boss’s attempt to get a counter offer in process.

You Can Only Do it Once

You may be completely justified in using an outside offer to get a salary increase. In the competitive business environment we’re in, employers are often reluctant to give out significant raises unless it’s absolutely necessary. But your employer may see your use of this strategy as an attempt to force their hand, which really is exactly what it is.

For this reason you will probably only be able to use the strategy once with your current employer. If you try to do it a second time, the employer may simply wish you well and say goodbye.

Have you ever used an outside job offer to negotiate a raise? Leave a comment and let us know!

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Do You Really Need Car Rental Insurance?

If you ever rented a car you probably know about car rental insurance. More formally known as the loss damage waiver, or LDW, it most typically covers the deductible portion of damage to the rental car not covered by your regular insurance, but it can cover even more.

The coverage is completely optional, but car rental companies are typically pretty aggressive in their recommendation that you accept the coverage. If you have no car insurance at all, LDW will be worth the price. Of course, car rental insurance companies may not even rent you a car if you don’t have state recommended insurance coverage the first place.

LDW Raises Substantially Raises the Rental Cost

LDW can be expensive, and this is particularly true in renting economy cars. The cost can run from $10 per day (OK, $9.99) to $20 or even higher. If you are renting an economy car $149 special rate for seven days, adding even the lowest cost LDW will tack on an additional $70 for the week.

This will be in addition to various other charges – including tax – that could raise the cost of your $149 special to something closer to $300 for the week. The arrangement suddenly looks far less like a bargain than the deal that brought you in the door. The “low” daily rental charge of just over $20 is now up to over $40 per day, with half the difference going to LDW.

Your Own Car Insurance Probably Covers Your Rental Too

If you don’t pay careful attention, or aren’t fully aware of how LDW works, you may get the idea that if you don’t accept coverage you’ll be completely on the hook for any damage or loss on the rental car. This actually isn’t true.

Your personal auto insurance policy probably covers car rentals as well. My insurance company fully covers the car rental so long as the rented vehicle is an equal or lower class car to the one that I have insured. Since I typically rent economy cars, this is never a problem.

The rental car is covered under the same terms that my regular vehicle is. Since the policy has a $500 deductible for my own car, it doesn’t need to be any lower for the rental car either. Maximum exposure on the rental car then is just $500 – same as my own car.

Since I don’t pay the expense of having a zero deductible policy for my regular car, I have no interest in paying extra to eliminate my deductible on a rental car either.

Don’t Be Quick to Cancel Your Collision Coverage

Before you assume that your regular auto insurance policy will cover your rental, first call and verify that you have the proper coverage. In some policies it may be part of the package, but on others it may be an added feature.

Another major factor is collision insurance. In order to save money on car insurance it’s common for drivers to drop their collision coverage once their car reaches a certain age. While that may save money on your car insurance, it will leave you unprotected with a car rental.

Unlike the eight or 10-year-old car you own and no longer needs collision coverage, rental cars are typically under two years old and the cost of replacement is high. If you drop your collision coverage you will want to take full advantage of the LDW option.

If you are a frequent car renter, you may even want to reconsider dropping your collision coverage.

Some Credit Cards Cover the Deductible

Until a few years ago most credit cards offered this coverage free of charge to induce people to use their card, but times of changed. Today, some credit cards offer it as long as the rental is charged on that card, but many have dropped it. Just as is the case with your own auto insurance, be sure to verify that you actually have this coverage from your credit card.

Some cards continue to offer it as an automatic benefit, some may offer it as an optional service for fee, and others may not have it all. Be certain of where you are with this coverage from your credit card, and never assume that you have it.

You Can Also Cover the Deductible Yourself

You have a deductible with your regular car insurance that you will cover out of your own funds. You can do the same with a car rental. If the car rental company charges $15 per day for LDW, or $105 for a week, and you have a $500 deductible on your car insurance policy, the LDW is not really saving you from your $500 deductible. It’s really saving you only $395, since you had to pay $105 to get it.

In reality, you are probably no more at risk for having an accident while driving a rental car than you would be with your own car. In fact it may be even less likely with a rental car, since you are unfamiliar with it and will naturally tend to be more cautious.

If you want zero liability, then paying $15 a day for the LDW may be worth it. But it seems like a lot of money to pay to avoid incurring a $500 deductible that you are fully prepared to pay on your own car.

Do you normally take the LDW option when you rent a car? Leave a comment and let us know!

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Why Early Retirement is About More than Retirement

Lots of people are hoping for and working toward early retirement. Some are hoping for retirement as early as age 35 or 40, but most are probably targeting something closer to 50 or 55. While we might think of early retirement as simply a version of traditional retirement that comes sooner in life, there other situations that early retirement can help you be prepared for.

Paving the Way for a Career or Business Change

While we might not think of early retirement in the same sentence as preparing for a new career or business, that’s exactly what could happen.

Like a lot of people, you may be working in a job and career that you really don’t like, but the pay is good so you soldier on. At the same time, there may be some other type of work that you would like to do, but it just doesn’t pay very well. This can be especially true if you’re thinking about transitioning from a high paying career field to a low-paying one, or one that takes several years to reach living wage status.

If you have prepared for early retirement, you will be able to make that transition. Because you have the resources that will afford you early retirement, you’ll be able enter the lower paying but more satisfying career and still have enough money to live on. Your early retirement planning will make this possible.

Preparing for Non-Income Producing Activities

Maybe you’ve been very involved in charity work or faith-based activities, and you’d like to take that up to a full-time status – early retirement can help with this too. These are the kind of activities that, while very satisfying, typically don’t offer much in the way of compensation. In order to participate in them on a full-time basis, you’ll have to have other resources. A solid early retirement plan will provide just that.

Taking Care of Family Concerns

Often by the time you hit your 50s, you’ll have family concerns to deal with. This can be carring for elderly parents, or helping adult children who have little ones of their own but are going through a tough time.

Family concerns can be time-consuming and emotionally draining. They can often interfere with your ability to earn a living. This is especially true if the problems are long-term in nature – and they often are.

If you are prepared for early retirement when these concerns arise, you will have the time and resources that you need in order to take care of your loved ones.

Dealing with Health Issues

This isn’t something most of us want to think about, but middle age sometimes brings health issues. A heart condition, a bout of cancer or some lesser-known ailment could reduce your capacity to work. If you have prepared your life for early retirement, you’ll be in a better position to deal with both the health problem and the financial concerns that go with it.

Early retirement could even help you to recover. Since you’ll be in a position to retire, you won’t have the stresses that come with the concern for keeping your job. You can take your time getting better, and the lack of stress can only help with that.

Being Prepared for a Mid-Life Job or Career Loss

Middle age isn’t always a warm fuzzy place to be in the job market. Because of age and higher income, you are vulnerable to layoffs. Finding a new job will be complicated by the same factors. If you are prepared for early retirement, you’ll already be in a position to deal with a career crisis.

It could even be said that an early retirement plan would just about remove a midlife career crisis as a problem. You’ll already be prepared to deal with it, and it will mostly be a matter of deciding which direction you want to go in.

You might want to start thinking about early retirement preparation as less about getting ready for a life of leisure, and more about preparing for life itself. Any of the above situations can come to be whether you are ready or not. But if you prepare for early retirement, you’ll be ready.

What motivates you to prepare for early retirement? Have you ever thought about the possibilities beyond retirement itself? Leave a comment!

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