"The World's Best Consumer Tips"
A Consumer Freedom Alliance Special Report

Part IV:  Rates, Rebates & E-States

The Big Boss emerges from his sanctum and clears his throat. "I have a big announcement" he proclaims, "you're all getting a big bonus and an immediate raise -- including you.  But that's not all: Each of you receives a magnificent estate, and from now on in this company your happiness is paramount!"

Won't happen!  Not unless the Big Boss happens to be The Second Coming. ;^)   So let's talk about how you can achieve a great financial future using more of the CFA's marvelously helpful and easy tips.

Your "E-State" -- What Is It?

"Didn't you just misspell estate?" you may ask.  Well maybe.  But only to make this point:  your "e-state" (really your state of enlightenment or happiness) has everything to do with the building of your "estate" (really your degree of financial freedom).  And what's your e-state made up of?  It can include emotions, education, excitement or any way of enjoying life that you happen to like!

A lot of people think that if they can just make enough good financial plays, then they'll become wealthy or at least well-off; and then they can finally take it easy and be happy.  It's better when we turn that thinking on its head, and realize that freeing our minds to a more positive attitude will naturally result in a more prosperous and happier life.

Much of this tipsheet will seem like little more than good common sense, but that does not mean it should be taken lightly.  It's tempting to overlook fundamental truths and values in a futile quest for vainglorious goals or futile desires that cannot last.  Almost everyone can find at least three to five ideas here that will really provide a good financial boost, if pursued in the twin spirits of self-interest and enthusiasm.

Your "Big Raise"

The Big Boss beams down from above.  "I'm a changed man -- I'm ordering that all my employees receive an immediate hefty raise!" he enthuses.

"I like the new Ebenezer" you say in stunned amazement.  "What are you giving me?"

"Nothing -- it's something you'll give yourself" he weasels.

"A penny saved is a penny earned" was Ben Franklin's famous saying -- but he was only half right.  Why?  Because whatever you earn gets taxed in many different ways:  federal income taxes, the social security tax and state income taxes -- before you even spend it!  And when the money's actually spent, Americans pay sales tax almost everywhere.  And after your purchases, you still get hit with a property tax on your home, car license fees on your car, and capital gains taxes on your investments.  And then there are the hidden taxes.  The government taxes merchants in many ways that you may not even know about -- care to guess whether those merchants pass the cost on to you?  If you were a landlord would you allow the property tax to erase your profits, or might you pass most of it on to your renters?

A "penny earned" dwindles to less than a half-pence after taxes, so any money you save is really worth about twice as much!  Happily, there are four common-sense principles that you can use to save money and virtually give yourself a big raise:

1.  Resist buying stuff that you don't need.
2.  Use less of what you do need.
3.  Buy needed goods at lower prices.
4.  Use credit cards that will pay some of your money back.

Here are some easy tips that you can apply to the first three of these principles, so you'll have more money and more free time for optimal enjoyment of your life:

1.  Waiting or "wish list."  Instead of buying something you want right away, make it a rule to wait a week whenever possible.  Oftentimes it won't seem worthwhile then, or maybe in the meantime you'll think of something even better to buy.
2.  Working-time cost.  When you're thinking of buying something, ask yourself how long you would have to work to earn the money to purchase it.  Is it worth that much time?
3.  Price checking.  Can you buy it for less online (perhaps at eBay), or pre-owned, or from classified ads?  Could you rent or borrow it instead?
4.  Save receipts.  Put them in a box and after a month look back on what you bought.  What purchases weren't really worth it?
5.  Expense projection.  Estimate each of your monthly expenses, then project how much you could save over the coming years by lowering or eliminating them.  Thinking in terms of five-year periods can give you a new perspective.

Now let's focus on how to use credit cards in ways that will actually improve your finances.

How To Stay Credit-Smart

The Big Boss hands you some plastic and says "Here, the company wants you to have this credit card."

You reply in jest "Oh look -- free money!"

The BB chuckles and says "Don't get smart with me -- get smarter about credit."

When you buy anything with a credit card, the merchant has to pay a fee of up to 3% to the credit card company.  Merchants usually pass this cost on to customers by raising prices.

To get your fair share of that money, you should use a rewards credit card to earn up to 6% back in cash rebates, credit, points, or frequent-flyer miles.  That's tax-free income, and you'll even receive rebates on the sales taxes you pay.  Getting one of the best rewards cards can help offset the high cost of gas by earning hundreds of dollars per year for you.

Most Americans are paying interest on revolving credit.  Why not get a balance-transfer card instead of letting the credit card companies have all that interest?  Some cards let you transfer balances at rates as low as 0% for twelve to fifteen months, after which the rate will rise to a new rate somewhere between 8% and 20%, depending on the card.  Occasionally the interest rate will be 3.99% to 6.99% for the entire life of the balance instead of just one year -- a better deal if you foresee paying off the card slowly.  The zero-percent deal is better if you plan to pay off the balance soon, or if you plan on getting a new zero-percent card each year.

Any balance-transfer card will charge higher interest on new purchases.  Your payments will go towards paying off interest first, then the transferred balance.  Your new purchases are paid off last and interest on them will keep building up in the meantime.  It's usually best to use these cards only for the low-rate balance transfer.  See the Best Balance Transfer Cards page for a list of these cards.

Two good sites to search for cards are CreditCards.com and ConsumerCardReport.com.  CreditCards.com lists more offers, while ConsumerCardReport.com excels at consumer-friendly advice.  They provide unbiased tips to help you quickly select the optimal card for your individual needs.

Consumers who can't obtain a balance-transfer card should definitely try calling their credit card companies and asking for a rate reduction.  You can read an excellent little tutorial showing how to do just that in Talk Your Way Out Of Credit Card Debt.  If that fails, think about paying off your debt at lower interest by borrowing more cheaply using home equity loans, kindly relatives, your 401(k) plan, or your life insurance policy.

Being credit-smart is an excellent way to give yourself a virtual raise.  If you haven't taken a look at getting a consumer-friendly credit card lately, why not do it now?

Your Estate (or is it "E-State"?)

The Big Boss continues "Now let me show you how I think small.  It's all about controlling your spending so you can grow your e-state and your estate," the BB pontificates.

You go "Please teach me, O Great One -- how can I make my thinking as small as yours?"

"I like your enthusiasm" says the BB, overlooking your wisecrack.

People who base their "e-state" on the things and experiences they purchase must stay in an earn-to-spend cycle, always needing more money to buy more and more goods and services.  That's fine if you love your job and you fully appreciate what you buy -- if that's you, go ahead and skip to the next section.

If you base your e-state on your inner being you'll pay mostly for basic needs, while putting the rest of your money to work for you as investments.  As you think small on material wants, your financial estate naturally grows.  So does your prosperity, social opportunities, personal growth, financial peace of mind, available career choices, and a host of other advantages.

"Is that the 'estate' you're giving me, a big fat financial sermon?!" you exclaim.

The BB smiles mysteriously.  "How do you think I got to be the Big Boss?"

To sum it all up, savings and thrift aren't about being cheap:  it's all about living well for less money.  You'll soon find it becoming easy to ignore commercial enticements and leave the "rat race" behind. You'll enjoy a pleasant retirement with the help of the CFA's Planning For Retirement page. And with your RealAge health plan, you'll soon find yourself living in a wonderful e-state.  That may be the biggest bonus anyone could ever receive... and it's something you can give yourself every day!

Exchanging warm farewells with the Big Boss, you comment "the bonus, my 'raise', the magnificent estate you promised... it doesn't seem to cost you one single dime!"

"I know" the BB breezes as he exits stage right, "Life is great when you're at the top-- see ya there!"

Thought for the Day:  "Modern man is frantically trying to earn enough to buy things he's too busy to enjoy."

~ Frank A. Clark (1911 - ), American writer and humorist


To-Do List:
1. Consider a MMA
2. Get a rewards or balance-transfer card
3. Relax and enjoy your splendid e-state!

At SmartConsumerTips.com anyone can get the blockbuster Special Report "The World's Best Consumer Tips".  It's fast, free and fun!
Earn More From
Your Bank Account

1. Checking account. Interest-bearing checking accounts pay very low interest, require minimum balances, and tend to come with more fees than non-interest-bearing accounts.  It's better to get a free checking account, which is offered by many banks.
2. Savings account. Most banks pay much less interest on a savings account than a Money Market Account, so MMAs are almost always better deals.
3. Money market account (MMA). MMAs are FDIC-insured savings accounts (unlike money market funds, which are not insured.) Most MMAs let you write 3 checks per month. Banks require a minimum balance, usually between $500 and $2,000. Many people settle for mediocre MMA rates offered by a local bank; better offers are listed at BankRate's MMA Rate Search page.
4. Certificates of Deposit. CDs pay slightly higher interest than MMAs, but you'll need to keep your money deposited for a certain period (usually 6 months to a year) or else you'll have to pay a withdrawal penalty. If you find yourself tempted to spend money you've resolved to save, keeping it in CDs can help you be more disciplined.

Surprisingly, Americans have over a trillion dollars in outmoded accounts paying less than 2% interest.  And billions of dollars are invested in mutual funds, the vast majority of which do worse than the overall market.  Those funds that outperform the market often fall back into underperformance soon, after a flock of incoming investors have diluted its value and focus.

When you hear promises that an investment will "outperform the market" that's usually just gambling in disguise, complete with winners and losers.  By using these simple tips to get better returns on your savings and investments, you can virtually reap a sizeable bonus!

Four Common-Sense Tips To Improve Your Investment Returns
1. Pay lower & fewer fees. Use a discount broker that charges low fees (many are rated by Smart Money Magazine) and avoid stock "churn" so you won't pay fees often.  Buy mutual funds with great caution because they charge extra fees and usually don't pay as much as the overall market.
2. Manage risks carefully. Ten years from now, the Dow may be at 30,000 or 3,000 -- nobody really knows.  Many people would be shocked to learn that the stock market lost nearly 70% of its real value between 1966 and 1982!  Stock "experts" tend to downplay the serious risks of the stock market.  Recommendation:  Broadly diversify your investments in various sectors and countries to minimize your risk.  If you're young, stay very patient and you'll probably profit in the long run; most others should lean towards MMAs and inflation-protected bonds.
3. Take control -- don't settle for what's offered to you. Some financial salespeople are able to charm people into making subpar investments while the salesperson gets a commission.  Never let your retirement account do poorly because it's being funneled into investments that aren't right for you.  Your investing options are much broader than what Mr. Smiling Salesperson offers you.  You have a great deal of control!
4. Give stocks, not money to charities. When you give stocks (or tangible assets such as artwork or collectibles) that have appreciated in value, you'll avoid capital gains tax (which is 15% for those in the 25% income tax bracket or higher) when you sell them. And you can still deduct the gift's full current market value. Be sure the charity provides you with a record of the asset's value on the transfer date. Note: You must hold the asset for longer than one year, and you can deduct no more than 30% of your AGI (Adjusted Gross Income.)


Joke: The Robbing Hood 

Late one night, a mugger jumps from the bushes and sticks a gun into a man's ribs. "Give me your money," he demands.

Indignant, the man replies "You cannot do this -- I am an IRS agent!"

"In that case," replies the robber, "Give me MY money!"

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Questions for Financial
and Personal Freedom
Of course, you are the only one who's really qualified to ask the questions and find answers that will lead to a secure and happy financial future! These 17 questions are just meant to get the ball rolling.

For starters, what expenses might now be limiting your financial future?

 Look around you -- what is really worth the money you've put into it and what wasn't?
 As you reflect on your experiences, which provided worthwhile enjoyment and which did not?
 What are others more impressed by -- what you own, or how well you live your life?
 How often do you chase costly and futile desires, as opposed to enjoying life in a free-spirited way?

How might you have been persuaded to make those expenditures?

 When people in your family see advertisements, how often are they convinced by them?
 When you were growing up, how often did your family emphasize things over love?
 How often do you try to keep up with what your friends and neighbors have?

What will take the place of the earn-to-spend cycle?

 Socializing in fun organizations?
 A personal passion that you've put off, for lack of time or money?
 Using the library to check out books, videos and music?
 New experiences that you imagine will bring excitement?
 Family or community activities?
 What would you be happy to own for years and years, instead of using it up in a short while?

How can you save more money?

 Spend less on services and goods, especially those that you couldn't resell for a good price?
 Get rid of past patterns of buying stuff that you don't get much enjoyment from?
 Track all your bills and receipts for a month, and find ways to save money on each of them?
 Drive used cars that cost relatively little, use little fuel, and will lose value more slowly?

Lower Those Monthly Bills
Question Your Phoning Costs.  The site most recommended by consumer advocates is SaveOnPhone.com.  They compare and rate a wide range of phone companies.  A good second choice is the Cognigen Rates Calculator.  You can also check for better rates on cell phone costs, and perhaps lower your local phone bill by switching to a measured-rate plan.

Satellite TV Is Now Practical.  Satellite TV can be installed almost anywhere nowadays, even apartments and condos.  Dish Network starts at $19.99 per month.  Installation is free and you'll receive a credit on your bill of $100 ($200 if you sign up for HDTV.)  If you sign up today, you'll also receive a free digital video recorder and a free movie channel package for the first three months.  DirecTV starts at $29.99 per month.  Those prices are for 40-channel packages; most people will choose to pay about $40 to get more channels at either site.

Explore Your Internet Alternatives.  Here are three ways to save big:
1. DSL Service. Broadband DSL is available in almost all non-rural areas from Verizon DSL for about $18/month.  Their site says "$14.99 per month" but in practice their taxes and surcharges will tack on a few more dollars.  Apply online and get a $25 Target gift card and your first 30 days free, with modem included.  A survey by J. D. Power (article) shows that Verizon DSL's customer satisfaction is significantly higher than average.
2. Cheap Dial-Up. Sites that offer unlimited dial-up service for about $10 per month include NetZero, PeoplePC and Netscape.  A survey by J. D. Power (article) shows that consumer satisfaction is highest for PeoplePC.
3. Free Dial-Up. Free dial-up service is unusual now, but it's still available from Juno.com.  You can also use your local library.

Want More Consumer Wisdom?
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1. Marshall Loeb's Lifetime Financial Strategies, book by Marshall Loeb, Little, Brown & Co., 1996.
2. More Practical Savings Tips, Employee Benefit Research Institute, Choose to Save program
3. 102 Personal Finance Tips Your Professor Never Taught You, YourCreditAdvisor.com article
4. Money market accounts, Bankrate.com article.
5. Bankrate.com MMA Finder Bankrate.com rate comparisons.
6. Banking Basics, The Motley Fool Banking Center
7. ConsumerSearch Online Brokers Reviews, ConsumerSearch.com feature.
8. Organize credit card debt, Bankrate.com article.
9. How To Improve Your Credit Scores, Janet Wickell, About.com Home Buying/Selling Center
10. Talk Your Way Out Of Credit Card Debt, book by Scott Bilker (excerpt), Press One Publishing, 2003.

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