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A Christmas Shopping Financial Planning Disaster

Mint.com — Tue, 27 Nov 2007 14:00:45 +0000

Financial planning is something that we care about here at Mint. Learn more with great financial planning tips in our blog article index.

Last Christmas was a financial planning disaster for me. Since I’m still in school, I have very little credit - just one credit card with a $1,000 limit. But I had a ton of people on my list to shop for, including my four best friends, my parents, grandparents, and cousins. I went to the mall and bought everything on my list, not thinking about how much I was spending overall.

Soon after that trip to the mall, my mother and I got a call from my credit card company. They let me know that I had gone almost $500 over my limit! And I got charged about 12 overdraw fees on top of that. Ouch. I was working part-time as a grocery cashier, and I wasn’t making enough to be able to pay all of that off.

I had to borrow the money from my mom, since I knew paying the credit card balance off over time would cost me even more money in interest. My mom paid it, took my card away, and made me pay her back. She also made me start a $1,000 emergency fund. Before I could have the card back, I had to save at least $500. Now I make sure I know how much money I have.

Mint’s TakeAway

In last Thursday’s blog post, Ten Tips for Smarter Holiday Shopping, we outlined the steps this reader should have taken to avoid getting herself into this stressful situation:

Know what you have to spend. Setting a budget up front would have alerted her to the mismatch between her resources and her long “nice” list.

Reduce the length of your “must buy for” list and think outside the (gift wrapped) box. In our experience, parents and grandparents respond really well to gifts of time vs. material goods. And did all the cousins need gifts and/or separate gifts?

Shop for the best price online…and then buy online. Malls are well designed to get you to spend more money than you’d planned. By comparison shopping online, our reader might have been able to save money and avoid purchases above her budget thresholds. This year, we’re hoping she’ll try out some of the sites mentioned in our Five Sources for Savings and Rebates on the Web post.

Our reader was fortunate to have her Mom to pay off that credit card bill. And smart to follow her mother’s sound advice to build up a financial cushion against such financial planning disasters in the future.

A reminder (to ourselves) and all of our readers. This year, keep detailed records of what gifts you bought, for whom, and for how much. This will ensure that you don’t exceed your limits this year — and will help you plan a budget for next year.

Sign up for Mint.com today, set up your “Gifts” budget, and avoid some of those unhappy phone calls from credit card companies in January!

Train Wreck Tuesdays are a regular post of horrible financial mistakes. They are posted anonymously. Submit your story; if you’re selected, you get a Mint t-shirt. The best comment will also get one!

A Mortgage Negotiation Mistake

Mint.com — Wed, 12 Sep 2007 03:45:13 +0000

One of my biggest financial mistake other than not using a financial calculator was not negotiating the fees from my mortgage lender, Equitable Trust Mortgage.

Although I knew it was possible to negotiate, I felt pressure from the sellers to close the sale within two weeks, which by all accounts is very difficult to do. Since my only benchmark at the time were the closing costs associated with a loan from LendingTree — and Equitable Trust’s closing costs were significantly lower ($500 versus $995) — I had little reason to think about shopping around. Using a financial calculator I could have better weighed my options.

On both my first and second mortgages, the document prep fee to my lender, Equitable Trust, was in the $250 range. In hindsight, I’ll bet I could have negotiated this downward. There’s no reason why the preparation for my second mortgage would take as much time as the first one. It’s sort of like a quantity discount, and it could have resulted in $100 or more in savings.

As for the two mortgage rates themselves — 5.75% and 7.5% — I’d wager they could’ve been negotiated lower as well. At the time, I was hamstrung by the sellers’ two-week closing demands, so I didn’t feel I had much to negotiate with, especially when the lender knew my imposed time limit. Although Equitable Trust’s closing cost was low, it could have been a few hundred dollars lower had I taken the time to negotiate.

Mint’s takeaway:

In his story, our reader avoided negotiating his mortgage closing costs — which, whether because of seller intimidation, trust, or simple hesitancy — is more common that you might think. Especially if you’re short on time, it’s easy to overlook such a straightforward way to save some money.

When you apply for a mortgage loan, the lender or broker is required to provide you with a “good faith estimate” or (GFE), within three working days of accepting your loan application.

The GFE is provided to you in the form of an itemized list of estimated closing costs. These costs generally fall into two categories: lender / broker fees, and third-party and government fees.

Lender / broker fees are all negotiable. They can include items such as application fees, loan processing fees and administration fees. You should get as many of them waived or reduced as possible.

Watch out for third-party fees, too: they’re generally fees the lender has to pay to close your mortgage deal. Although many of these fees are set prices, if it feels like you’re being price-gouged, don’t hesitate to ask for clarification on a fee or research the standard rate for your loan size.

Even if the fee is a third-party fee, there may be ways to reduce it. Take itemized number 1108, title insurance, as an example. This is usually in the range of about $500. You can also choose your own title insurance company, and if you shop around, you can easily save hundreds of dollars.

In fact, you may be able to save up to 40% if the seller hasn’t owned the home you’re buying for more than 10 years. The title company may be willing to give you a re-issue rate, thereby saving you up to $200.

The moral of the story is that you should always make an attempt to negotiate and you should never feel as though you have to go with any particular lender. It can be easy to overlook these closing costs when you’re spending a few hundred thousand on a home, but these fees are coming straight out of your wallet.

When you plan ahead and acquire good-faith estimates from perspective lenders, you can better compare and contrast the individual itemized closing costs between the lenders. Remember, mortgage shopping may be time consuming; but for important financial decisions like these, it’s always best to take extra care!

More Resources:

Prep work can head off closing-fee surprises – USA Today.

Train Wreck Tuesdays are a weekly post of horrible financial mistakes. They are posted anonymously. Submit your story; if you’re selected, you get a free personal finance book. The best comment gets the same prize!

My Dumbest Investment

Mint.com — Tue, 14 Aug 2007 18:36:23 +0000

My dumbest investment turns out to be not so much what I bought, but what I didn’t sell. Just out of university, I joined a start-up tech company in the go-go days of the late nineties. It was a good time to be an engineer. Companies held BBQs to hire software developers and gave away PT-Cruisers just for applying for a job. Employers gave out stock options and bonuses like drunken sailors just to keep people from leaving. On-site massages were a common employee perk.

A high-flying, NASDAQ-listed, high-octane tech outfit bought out the start-up company I was working with. The value of my vested stock options was an incredible 70% of my net worth. In hindsight, I should have sold all my options as soon as I was eligible to sell. I didn’t know a thing about how the stock market worked then (my wife says I still don’t!) and was dreaming about the millions my options were going to be worth in the future.

I did think about selling but I was worried about the wrong things. I was worried about the taxes I would be on hook for and worried about how much of an idiot I would be if I sold and the stock rocketed from there.

You can easily guess how this story ends. A year or so later, my employer severely disappointed Wall Street expectations and the stock tanked spectacularly. A few months and a lot of internal turmoil later, my employer was acquired by a much bigger fish. The new company restructured operations by laying-off a significant chunk of the workforce, including yours truly.

Now, a couple of years later, I am (hopefully) much wiser for the experience. I consider my experience a very expensive education:

Never tie-up any more of your financial future with that of your employer more than necessary.
Never have too much riding on one stock.
Consider buying and selling a stock strictly on its merits, not tax issues.

Mint’s Take Away:

Although our Tuesday Train Wreck series are generally anonymous, today’s story was shared by the Canadian Capitalist at CanadianCapitalist.com.

Even if you didn’t experience the dot-com bust first hand, there are many lessons to be learned from that era. When you are considering investing in individual stocks, you should consider these two points mentioned above:

Never have too much riding on one stock.

Consider buying and selling a stock strictly on its merits, not tax issues.

Much like the importance of keeping track of your daily spendings, it’s also important to keep track of your individual stocks. Unlike many index or mutual funds out there, you can’t simply buy and ignore individual stocks. Because of reasons like these, you may be better off considering the value of investing through index or low-fees mutual funds.

To learn more about investing sensibly for your future, consider checking out books such as “The Boglehead’s Guide to Investing” or “The Little Book of Common Sense Investing” from the library. You can also submit your worse financial train wreck story to us and have a shot at winning these great personal finance books!

Debt Mangement – The Bike That Crashed Me Financially

Mint.com — Tue, 07 Aug 2007 18:19:14 +0000

Debt management is something that we care about here at Mint. Learn more with great debt management tips in our blog article index.

A year earlier, the motorcycle bug bit me. I’m in college, had no idea about debt management, and the thought of just grabbing that new sports bike and showing it off to all my female accomplices was too cool to resist. I went to the dealership and bought my new bike for $6000, taking out a loan from the dealership at an interest rate designed to bring the student to financial flinders. It was all good until I realized what I had just done.

I am in college and earning less than 300 bucks from my part time job.
My parents are paying the tuition and not my living expenditures.
Gas prices have gone up.

Nonetheless, I was determined to pay off the loan in due time. However, I lost that part time job and had nothing to give back to the loan. I wrecked my credit history and the thought of running away and living on an island, away from the bank calls was being engraved in my mind.

I finally had to ask my parents for help and was bailed out by my dad.

The lesson learned: No matter how much some things may tempt you during college, if you have to borrow money to buy it, you can’t afford it right now. Unless you have a firm and guaranteed plan for paying it all back, practice debt management .

Mint’s Takeaway:

Sure, it’s common knowledge that college is an especially important period to live on a budget — especially if you’re going to be paying off student loans for tuition. But the college atmosphere also hides the darker side of that social climate: whether you’re aware of it or not, peer pressure can severely affect you in your financial decisions.

When your dorm buddies or sorority sisters are going out every night or buying new toys to occupy their time, it can be tempting to follow suit. It might even turn out that you have the budget to do so, but stop and think first. Consider your budget before leaping into new purchases.

Mint can help you keep on top of your spending. With alerts to unusual spendings and methods to see your spending patterns, you can better keep on top of where your money is going, so you can direct it to where you really want it to go.

For long-time Mint readers:

What past Train Wreck stories does this college student’s plight remind you of? What did he learn that others may not have?

Train Wreck Tuesdays are a weekly post of horrible financial mistakes. They are posted anonymously. Submit your story; if you’re selected, you get a free personal finance book. The best comment gets the same prize! Check out past Train Wreck stories here.

Financial Mangement, Reducing Debt in Iraq: $68K to $10K in One Year

Mint.com — Tue, 31 Jul 2007 18:00:19 +0000

Financial management is something that we care about here at Mint. Learn more with great financial management tips in our blog article index.

I have a little bit of a twist on the dumb financial management story. After I got out of high school, I went to the US Air Force Academy. There are no tuition costs there, and I also got a small monthly stipend, so I thought I would be in great shape financially. It wasn’t long before that stipend wasn’t enough, and I started getting into debt. I racked up over $35,000 in debt by the time I left. This including a $25,000 loan, given to me at 1% that was almost completely squandered!

After I graduated, I had a commitment to Uncle Sam, and started working as an Air Force officer. I made a decent income, and thought I would be able to get out of debt. I quickly fell into old spending habits and racked up additional debt with a new car and home renovations. For each promotion I received in the military, my spending increased to match.

Early this year I looked around and realized that I was over $68,000 in debt, not including my mortgage. I was having trouble paying the bills, and knew that I had to do something. I desperately started searching for answers, and it wasn’t long before I discovered that my poor spending habits were to blame.

It was a turning point in my life. I started keeping track of my spending, and practicing sound financial management. I also needed to earn extra money. I sold my car, rented my house out, and volunteered for Iraq. Early this year, I had almost $70k in debt, and now I have less than $10k. If all goes well, I should leave Iraq with 0 debts, and some solid investments.

I am blogging about my experiences now, and all the details are there. Despite being in Iraq, I am very optimistic about where I am headed.

Mint’s Take Away:

Our Tuesday Train Wreck series are generally anonymous, but we feel that Nick wanted to share his story to more people. Nick is currently an Air Force officer that’s deployed to Baghdad, Iraq. As mentioned in the story above, he volunteered to go to Iraq because of the extra money he earns while he’s there. You can find his blog at Journey to Financial Freedom.

Nick’s story brings about an important aspect of keeping track of your spending. It may sound incredibly difficult to suddenly spend your way into five-figure debt without knowing, but when you don’t keep track of your cash flow and spend more than you earn, it can be extremely easy to go into debt.

This is one of the reasons why Mint will help you keep track of your money, so you can see where your money is going, and direct it to where you truly want it to go. We are incredibly impressed with Nick’s commitment to take up responsibility to diminish his debt. If you ever want to see an example of how tracking your spending, budgeting, and living below your means can save money, this would definitely be it.

Poor Financial Management The (College) Major Stumble

Mint.com — Tue, 24 Jul 2007 17:00:01 +0000

The following article is one example of our take on one of issues we care a lot about here at Mint, including: financial management and debt management, etc. Click here to find many more.

Source: kalebdf

My largest financial management train wreck was my unwillingness to accept that my major wasn’t cut out for me in college. I “worked” for three and a half years at Georgia Tech, trying to be a Computer Scientist. As such my GPA suffered, and I was eventually kicked out of school.

Had I accepted that I wasn’t a good computer programmer I could have saved thousands of dollars in tuition, and I could have avoided enrolling at a community college, trying to regain an acceptable GPA to get back into a four-year university.

Even past that though, when I got kicked out of college, I lost all support from those who were contributing to my tuition and living funds. I had a job at the time, but I was living slightly above my means. I then committed to a trip with roommates, which cost me nearly $3000 on my AmEx card — a balance I’m still working on paying off over 15 months later.

On top of that, my job at the time was an independent contractor; and while I had saved some money for Uncle Sam when tax time came, I had to spend that money just to pay bills before I moved home. When tax time came, I got hit with owing taxes equal to roughly what I make in a month at my current job. I’m on a payment plan with them, but it’s still a hefty chunk of my already-tight income.

My life didn’t end up in the toilet from this, but I’m struggling to make ends meet. I’m living free of rent with my family but I’m working a job which — although it doesn’t pay me much financially — I really enjoy. Sadly enough, though, I’m going to leave this job soon, because I need to make more money.

Currently I’m on schedule to have the balance on my credit card paid off in a year at most.

Mint’s Take Away:

Choosing the right major or career choice is certainly not an easy task. Before you decide on a program and school to study, you may want to consider how interested you are in the specific major.

Consider this fact, according to the U.S. Department of Education, the average cost of studying at a 2-year institution is about $6,200, while the cost of studying at a 4-year institution is about $14,500.

If you’re unsure of what you may be passionate about, it may be a practical financial choice to pursuit your academic studies at a two year institution first (such as a community college), and then transfer to a four year institution when you have a better idea of what you want to study.

Additional Resources:

Choosing a College Major: How to Chart Your Ideal Path

Cost of Higher Education

Living On A Credit Line

Mint.com — Tue, 17 Jul 2007 16:19:22 +0000

My worst financial train wreck is the reason why I enjoy Mint so much: it reminds me to keep my finances in control.

A couple of years ago I had a really great job, paying great money. My problem was that I thought I should live according to how much money I made. I got a huge apartment that cost tons of money. I spent my money as freely as possible. Then I decided to get a credit card for emergencies because I wasn’t saving a dime. I started using the credit card as my overdraft protection; big mistake! I was overdrawn every month. The fees were outrageous. At the time I never looked at my bank statement because I was afraid of what I would see. I just kept spending. I don’t even remember what I bought. I not only used my credit card for overdraft, but when I ran out of money I would withdraw from it. I could barely afford groceries most months.

Here’s an example of how much I knew about my finances. One month I put my rent check in the manager’s box and said, “Well at least I could pay that.” I walked away and forgot about it. A month later I paid my rent again. I got a letter in the mail from the bank. I opened it reluctantly and it said my account was overdrawn by $2000! I had no idea what had happened. I said there was no way I could have gone over by that much. I looked online and realized the manager of my apartment had put through this month’s rent check as well as last month’s. I had spent last month’s rent money without even noticing it hadn’t gone through. I called the manager and asked her why she did that. She said my check fell behind her desk. If I would have watched my bank account I would have noticed right away that it didn’t clear and called her. Now I was -$2000 and had to do something about it fast.

I finally gained control of my finances. I took a copy of my bank statement and went over every single line. I realized where all my money was going. I was wasting hundreds of dollars just in fees and interest alone. I quickly got my act together. I make less money then I used to but now I have more of it. I live a more “rich” life on less. It feels really good to finally have control of my finances.

Train Wreck Tuesdays are a weekly post of horrible financial mistakes. They are posted anonymously. Submit your story; if you’re selected, you get a free personal finance book. The best comment gets the same prize! Check out past Train Wreck stories here.

My Mom Stole My Identity

Mint.com — Tue, 10 Jul 2007 17:37:55 +0000

My situation may be different from most. I suspect others will talk about debt and credit cards, but my financial planning wreck should be talked about too, because it’s very important. I’m now 28, and my financial troubles lasted six years.

When I was 19 I went away to college (not too far away). Of course as we all know, credit card companies stalk you so you can begin your journey of credit card debt. I started school in August and by December I had about six credit cards.

To make a long story short, my mother thought it was best for me to send my credit cards home. She thought that as I was about three hours away from home, having so many would make me use credit cards irresponsibly and spend them on friends and other nonsense. After listening to my mother, I sent my credit cards home and thought no more about it.

Let’s fast forward a bit.

When I went home on breaks and holidays I noticed my mother using a credit card. I knew she didn’t have one but at the same time it didn’t matter to me. I never thought for a second she was using my credit card — 6 years ago, identity theft wasn’t anything I’d heard about.

Not long after, I left my mother’s home and moved in with a friend. About 8 months later I started to receive phone calls and bills from collectors. Apparently while I was staying on campus, the credit card companies were sending my bills home; and I can only assume that my mother threw them out. (Later I learned that she had made some monthly payments on them).

Scared out of my pants, I called my mother. She basically told me three lines: “You’re young, this will be fixed in 7 years;” “Nothing is going to happen;” or “I will help you pay.”

I was the type to always respect my mother, and so I did just that. I never even considered going to the police, because I never thought it was an option. So when I did receive the bills, it was already too late to schedule payments because they were already well into collections. Back in 1998, at age 19, I was telling myself not to worry. Since I was in school and didn’t spend the money, I thought, the problem would erase itself. But we all know that wasn’t the case.

Crazy thing was, back in the late 90’s I watched a slew of older friends and family members disregard bills, not pay, and still get more credit cards. They would get repossessions but were still able to get cars. As a result, I just believed my mother: this would go away.

When I did finally decide to tell the collection people of my problem, though, of course they didn’t want to hear me. They wanted their money. Being young and scared of my mother, I did nothing but continue to ignore the bills.

Fast-forward again.

Two years into this I was scared to ask my mother to pay. Of course others around me had opinions, but I was raised to respect my mother to the fullest and so I never did anything but mention it to her in passing. I never truly addressed the issue.

For the next 4 years I had to learn the hard way. When I applied for credit cards, I didn’t get anything. When it was time to get an apartment, I couldn’t get anything.

As I matured and realized that I couldn’t live like this, and with only one way to prove that I was serious (in the eyes of the judge), I filed a police report and sued my mother. It was the hardest family and financial decision that I’ve had to make. I suffered a long and hard ordeal. I lost many of nights of sleep and buckets of tears because of the turmoil, and I had a hard time convincing judges and lawyers. At times I felt they treated me like I was the criminal.

In the end I had a great lawyer that dealt with a lot of the major credit card companies on my behalf, and I won a modest amount of money. Don’t get me wrong: The result wasn’t easy, and I would give all that money won back to have my identity when I was younger. The process has had its drawbacks on my personality, as well: I’ve become very fanatic about money, pay every bill before it is due, and am very scared of debt (even good debt).

I guess the moral of the story is that identity theft isn’t necessarily from strangers — it can be your very own blood.

Mint’s Take Away:

Identity theft is never an easy issue to deal with and can especially be more difficult when the perpetrator is someone you know.

According to the FTC, about 9 percent of all identity theft are committed by family member or relative. That means that 1 out of 11 cases of identity theft is an inside-the-family job.

Here are some resources for those facing the same situation as the story submitter above:

When You Personally Know the Identity Thief

Identity Theft and Children

Personal Budget Management: Buying a Timeshare

Mint.com — Tue, 03 Jul 2007 13:00:42 +0000

The following article is one example of our take on one of issues we care a lot about here at Mint, including: personal finance and debt management, etc. Click here to find many more.

I took advantage of one of those vacation packages offered by a timeshare company. Personal budget management is easier with a free vacation. I had just finished my first year of work and was looking forward to a nice week off. The package included a 2 day stay in Fort Lauderdale, a 3 day cruise, and a 2 day stay in Orlando. I had never been on one of these trips and I had no idea what to expect. I was excited to get away from New York for a while.

On the second day of our arrival, we were loaded on a bus to view one of the properties. It looked nice enough, but I wasn’t really interested in a timeshare at all. During the “sell”, they presented me with various facts and figures in regards to vacation inflation and how I could protect myself if I bought a timeshare now. Not only would I be protecting myself, they said, but I could “bank” my week and vacation almost anywhere else in the world. For one reason or another, I got duped into buying one. They even made me feel better for picking a $14,400 unit as opposed to a $16,900 unit. Whoopdidoo!

My home budget was in for a shock. The interest on the loan was 19.99% and they would bill my credit card — which had already had a balance on it! The monthly amount charged on the card was about $260. I thought that charge was the end of my financial commitment. I was wrong, though: towards the end of the year, I received a bill to pay for real estate taxes as well as maintenance fees, which seemed to have increased every year. My last bill was over $600. Not only that, but today if I want to bank my week and use it someplace else, I have to be a member of a vacation exchange company which has annual fees all unto itself. I also have to plan my vacation nearly a year in advance if I want to go to any remotely popular location.

I’ve paid off the loan (and my credit card) but I am trying to get out of my timeshare. Little did I realize that timeshares are a heavy buyer’s market. My timeshare has been sitting listed at about $4500 and I’m thinking about reducing it again. Next time I take advantage of a “timeshare” marketing ad, I’ll make sure to pass on the sales pitch and most likely will pitch the offer in the garbage.

Mint’s Take Away:

Timeshares are a form of vacation property ownership where the use and costs of running the resort are shared among owners. They can be a suitable purchase for some people and a very poor purchasing decision for many people. It is definitely a purchase consumers should take extra care in, as it can easily be a long term financial commitment! In the story below, our train wreck submitter shares their experiences on buying a timeshare.

Purchasing a timeshare — as with many financial decisions — should require an in-depth research before commitment. If you solely rely on the timeshare salesman’s pitch, you will surely be doing yourself a disservice.

Additional Resources:

The Pros and Cons of Owning a Timeshare from AskMen.com

Timeshare Pros and Cons at Redweek.com

Win a Free Personal Finance Book!

Mint.com — Tue, 26 Jun 2007 13:00:27 +0000

Want a free personal finance book?

Which ones? Here’s a list of books Mint gives away:

All right, you have me intrigued. What do I have to do?

For the simple process of selling your soul to us… just kidding. All you have to do is submit your worse financial train wreck story to us (stories are posted anonymously).

If your story gets chosen for a Tuesday post, you’ll win a free book of your choice from the list above or perhaps a personal finance book you’ve been eying that wasn’t listed.

It’s as easy as apple pie!