1.  Indulge her green thumb.  Sure, Mother’s Day flowers are sort of cliché, but lots of moms do love to get a colorful bouquet.  But the typical bouquet of cut flowers can run $30 to $40 – that’s a lot to spend on a gift that’s going to wither away in a week or so.  Instead of hitting up the flower shop this year, cruise by your local gardening center instead and spend $10 something that mom can plant in the garden and enjoy for years to come.  Or, if flowers aren’t Mom’s thing, consider a houseplant to brighten up her favorite room.  You can get a nice bamboo plant, an orchid, or an interesting succulent for around $20.

Savings:  You’ll end up saving anywhere from $10 to $30 by getting a little creative with flowers.

2.  Get crafty. Handmade gifts are cost-effective (you can spend as much or as little as you want), and they’re a great way to get kids involved in the fun. Create a personalized coupon book for mom, full of “gift certificates” redeemable for things like a week of dish-washing or an afternoon of “me” time, or an afternoon.  Or, create a “memory book” — comb through family photographs and mementos (plane tickets, programs from concerts or recitals, drawings from the kids – anything goes) and paste them into a scrapbook.  Use stamps and stickers to decorate it, and you’ve got a completely unique gift that Mom will cherish.

Savings:  Varies.  With DIY projects, you can spend as little (or as much) as you want – just be sure to factor in the cost of any art supplies – like markers and stickers.  If you’re doing a scrapbook, you can pick up a nice one for around $20.  Even if you splurge on some fancy paper or decals, you’ll end up spending way less than the national average of $150.

3.  Treat her to a fancy dinner . . . at home.  Let’s face it:  Waiting for two hours in the lobby of a noisy, expensive, filled-to-capacity chain restaurant is probably not Mom’s idea of fun.  When Mother’s Day rolls around, just about every restaurant in town offers some sort of special – and people turn out in droves to take advantage of two-for-one specials or free dessert offers (in most cases, these “specials” are still pricier than a nice dinner at home).  Want to give Mom something really special?  Cook her favorite meal (don’t forget to clean up after!), put on some fun music, and celebrate at home instead.

Savings:  Varies.  Eating at home will save the family from the stress of getting dressed up and fighting the crowds – and it’s also cost-effective – no tipping, and no expensive add-ons like overpriced drinks or desserts.

4.  Plan a fun family activity.  This Mother’s Day, treat mom to a day of something really priceless:  Quality time with the people she loves.  Plan a day of family fun centered around the things she likes to do:  Go on a hike or a picnic; plan a marathon of her favorite movies; break out the board games and order takeout from her favorite restaurant – whatever makes her happy, do it!

Savings:  Varies – but again, much less than $150.  A nice picnic lunch or a takeout meal might cost around $30 – but a hike or a movie marathon might cost less than $10.  A fun family activity is a super-frugal option.

5.  Hunt for bargains.  If you shop smart, you can find some great prices on more traditional gifts for Mom this year.  Scour daily deal websites like Groupon or LivingSocial to find deep discounts on indulgences like manicure/pedicure services or massages.  And many online and brick-and-mortar retailers such as Amazon.com, Best Buy, and Target run great specials on movies, music, and books.

Savings:  For around $20 to $30, you can get Mom a season of her favorite TV series, a mani/pedi at her local salon, or that new paperback she wants.  Look for the best deal and you can spend around $100 less than the national average.

Here’s wishing you (and Mom) a happy Mother’s Day!

And this is where so many folks run into trouble.  We tend to see budgets as things that are set in stone – and if our carefully-planned budgets don’t work as well in practice as they did in theory, we see failure.  We throw in the towel, blame ourselves, shake our fists at our Excel spreadsheets and go on with our impulse-purchasing, overspending ways.

Here’s the thing, though:  Making a budget is just a (very, very) small part of successful budgeting. If you want to make your budget work, you have to go back and make adjustments every now and then.  You might find that you didn’t allow yourself enough money for groceries, or that your budget is sorely lacking in fun money.   Put another way:  A good budget is not set in stone.  A good budget should be a work in progress – the more you refine and adjust it, the more successful it will be.

Here are six ways you can make your budget better:

1.  Do a reality check.  Yes, budgets are supposed to help you stop overspending – but they’re not supposed to stop you from spending altogether.  If you can’t live on the $20 a month you allowed yourself for groceries, it’s time to make a change.  A good budget should allow you to pay your monthly bills, get to and from work, feed yourself, put a nice chunk in savings, and – gasp! – even have a little fun.  And speaking of fun . . .

2.  Don’t cut fun out of your budget.  Seriously.  If your budget doesn’t include a little “fun money” – that is, money that you can spend on anything you want, no matter how frivolous or unnecessary – you’re not likely to stick to it for long.  Keep in mind, though:  Spend your fun money wisely.  Once it’s gone for the month, it’s gone.

3.  Prepare for emergencies.  You probably know that I’m a big believer in having an emergency fund.  And with good reason:  You never know what’s around the corner – especially in today’s economy.  No matter how carefully you stick to your budget, an unexpected home repair, a sudden illness, or a layoff can spell financial disaster if you don’t have money set aside for emergencies.  Your monthly budget should include putting a set amount (even if it’s only $20 or $30) into an emergency fund that’s separate from your savings account.

4.  Make it personal.  It’s important to remember that your budget is, well, yours.  It should reflect your lifestyle, your expenses, and the things that are important to you.  If you’ve got a long commute to work, make sure you’re budgeting enough every month to cover gas, as well as associated expenses like car maintenance and tolls.  If charitable giving is important to you, make sure that you include that in your budget, too.  And, make sure that you’re actually budgeting in a way that you’re comfortable with — if you’re a technophobe, there’s no reason to use fancy budgeting software.  A pad of paper and a pencil work just fine.  If you’re an on-the-go type, you might prefer tracking your expenses on your smartphone instead.

5.  Have a goal.  It’s a lot easier – and a lot more fun and fulfilling – to stick to a budget if you’re working toward a specific, measurable goal.  Maybe you’re trying to pay off that high-interest credit card or save up for a down payment on a home.  Maybe your goal is to have $2,000 in your emergency fund.  Maybe it’s something as simple as cutting your grocery bill down by $20 a month.  Don’t have a goal?  Make one. Use your budget as a tool to work toward it.  And once you’ve met that goal, set a new one.

6.  Be patient.  Chances are, you’ll have to make several adjustments to your budget before you get it exactly right – and, as I mentioned earlier, that’s okay.  Don’t worry about perfection – at least, not right away.  It may take months to find the budget that’s right for you.

What adjustments have you made to your household budget?  Do you have any tips for creating a better budget?   Leave a comment and let me know.  Happy budgeting!

It’s easy to get swept up in fantasies about blowing your entire tax return on fancy techno-gadgets or a new designer wardrobe – but splurging a big-screen TV or an all-day shopping spree probably isn’t the best way to spend your tax return.

If you’re getting something back from the IRS this year, here are a few ways you can make the most of your money:

1. Don’t spend your tax return before you get it.  Don’t make purchases with your credit card, and don’t put down a deposit on a big-ticket item with the intention to pay the rest when you get your tax refund.  A tax return can take several weeks to process, and a lot can happen in that time:  You might have an unexpected financial emergency, like a major home repair.  Your refund might be smaller than you thought it would be, or it might come a few weeks later than you expected.

2. Pay yourself first.  Use your tax refund to start an emergency fund, or put a portion of it in a retirement account or a Roth IRA. Not sure how much to save?  I recommend saving at least a third of your refund – but if you can afford more, go for it!  Your future self will thank you.

3. Pay down your debt.  If you have credit card debt, try to pay off (or at least pay down significantly) your outstanding balance.  If you have more than one card with a balance, choose the card with the highest interest rate and focus on that one.

4. Make purchases that will help you save.  For many folks, a tax refund provides a rare opportunity to pay cash for a big-ticket item.  Maybe your 1980s-era refrigerator is on its last legs, or maybe your washing machine has seen better days.  If you’re planning to buy a big-ticket item with this year’s tax return, try to buy something that will save you money in the long term, like an energy-efficient model that will cut down on your electric bill for years to come.

5. Treat yourself (a little).  There’s nothing wrong with having a little fun with your tax return – as long as you don’t go overboard.  Allow yourself a set amount – say five percent of your tax return – and use it however you want.  Go to dinner at a nice restaurant, buy that new pair of running shoes, or renew your subscription to a favorite magazine.  But remember:  when that money’s gone, it’s gone – no exceptions.

Are you expecting a refund this year?  How do you plan to use it?  Leave a comment and let me know!

Here’s some good news for folks who want to trim their budgets this spring:  You don’t need a complete financial overhaul to start saving some serious cash.  In fact, by making a few (very) small changes in your lifestyle, you can save hundreds of dollars a year.  Small things like skipping your daily cup of fancy coffee or changing a light bulb can make a big difference.

If you’re looking for a few ways to kick-start your savings, try a couple of these.  You might be surprised to learn how much you can save:

1. Cut out the coffee shop.  If you have a habit of driving through the local Starbucks on the way to work every morning, you might balk at the thought of giving up your morning caffeine rush – until you do the math, that is.  If you buy a fancy coffee drink (with flavored syrup, a shot of espresso, steamed milk, etc.), you might be spending around five bucks a day.  That’s $1,825 a year!  Of course, that’s an extreme example, but still:  Even if you only go, say, two or three times a week, you could save a few hundred dollars a year if you cut it down to only once a month or less.  If you absolutely have to have that morning jolt of Joe, make it at home for a fraction of the price.

2. Get rid of cable.  Expanded basic cable TV costs around $30-$50 a month – which means that if you cut it off, you stand to save $360-$600 a year – that’s a pretty big chunk of cash.  There are other benefits, too – without temptation of an all-day “Jersey Shore” marathon, you might find that you and your family have more time left for other interests, like reading or exercising.  If you just can’t live without your favorite shows or the occasional movie, there are several streaming services or DVD rental options — like Redbox or Netflix – that are much more economical than paying for cable.

3. Say goodbye to your landline telephone.  Do you have a cell phone and a landline?  If so, it might be time to make a choice.  At around $50 a month (or $600 a year!), a landline isn’t exactly cheap – especially if you’re paying for cell phone service on top of that.  Unless you have a really compelling reason to keep your home phone, consider pulling the plug on this service.

4. Brown-bag it to work.  The average fast-food lunch costs around $7 a day.  So, if you buy your lunch 5 days a week . . . that adds up to a supersized total of $1,820 every year!  I’ll spare you the lecture about why fast food is bad for your health – but I will say that spending nearly $2,000 on lunch every year is hardly my idea of a financially balanced meal.  For around the same price of one fast food lunch, you can buy a loaf of decent-quality wheat bread, lunch meat or peanut butter, and a big bag of pretzels or chips.  That’s a week’s worth of healthy (or, at least, healthier) lunches for the price of one combo meal.

5. Get “green” lights.  At around $3-$5 a pop, energy-efficient light bulbs cost a little more up-front than their traditional incandescent counterparts – but if you make the switch, you’ll quickly find that the savings make up for the initial expense.  According to the Energy Star program, energy-efficient bulbs (like CFL or halogen bulbs) can save you nearly $200 a year in electricity!

So, there you have it:  Five little things you can do to save really big this year.

Financial success and stability isn’t all about budgeting and saving – it’s also about knowing how (and when!) to spend wisely.  The thing that gets people in trouble is that we make purchases based on our emotions.  Instead of weighing the facts, considering the alternatives, and making a careful and informed decision, many of us simply break out our checkbooks (or debit cards, or even worse, our credit cards) and say, “I have to have that new XX right now!”

It doesn’t matter if you’re buying a new car, a new computer, or even something small like a new pair of shoes – all of your purchases matter.  And if you’re in the habit of letting your emotions run away with your wallet, you’re going to have a hard time staying out of debt or building up your savings.

Sometimes we do need to spend money – there’s no avoiding that.  And sometimes, it’s okay to splurge on something you really want (as long as the purchase doesn’t derail your entire budget).  But we can

spend smarter, and we can take the emotional aspect out of it.  Before making a purchase – any purchase – run your decision through this flow chart:

Click Here: For the “Personal Purchase Flowchart”

But if you want it after 30 days, or if you really do need it, you should still consider the alternatives:  There might be a more affordable option that’s just as good as the thing you want – or you might find that, after careful consideration, you should go ahead and make the purchase.  And that’s okay – as long as you’ve weighed all of your options.  This flow chart isn’t about not spending money.  It’s about making sure that you spend money on the right things, for the right reasons.

Eventually, if you work through this decision making process enough times, you’ll find that you won’t even need the flow chart to help separate needs from wants and make good spending choices.

Bottom line?  If you don’t have a retirement plan (or you just want some extra financial security in the future), you should definitely check out a Roth IRA.

Not sure how to get started?  Here’s a quick, step-by-step guide to choosing the right Roth IRA.

Step 1:  Make sure you’re eligible.

Roth IRAs were devised by the U.S. government in 1997 as a way to help middle-class, working people save for retirement.  They’re not designed for gazillionaires, or for people who live off of trust funds – basically, they’re designed for average Americans with average incomes.

To qualify for a Roth IRA, you must meet two really basic requirements:

• You can’t make more than $105,000 a year if you’re single (or $173,000 a year if you’re married)
• You can only invest earned income – meaning, money you worked for.  You can’t invest inheritance money, student loan funds, or interest you made from other investments.

So, unless you’ve got a serious trust fund or earn a very high salary, you’re probably qualified for a Roth IRA.  Let’s move on to the next step.

Step 1.5:  Pay off your credit card debt.

Okay, so this one doesn’t have to do with a Roth IRA specifically – but before you invest in a retirement plan, I suggest that you pay down your debt first.  If you can’t pay all of it off, you should at the very least try to knock out a very large chunk of it.  I’d also recommend putting a few hundred dollars aside in an emergency fund, if you haven’t already done so.

Step 2:  Do some comparison shopping.

Once you’re financially ready for a Roth IRA, it’s time to take a look at your options.  You can enroll in a Roth IRA at a bank or credit union, or you can open one at a specialized financial institution, like a mutual fund company or a discount brokerage.

There are advantages and disadvantages to each one:

• Banks or credit unions may have lower minimum deposit requirements or they may offer lower fees – but they may also limit your investment options.  Some banks only allow you to use the money in your Roth IRA for, say, CDs.  If you’re looking for ways to diversify your investments, you might want to look at your other options.
• Mutual fund companies give you more ways to mix things up, but you might be looking at a significantly higher minimum initial investment (think a few thousand dollars, rather than a few hundred).  To learn more, check out the Roth IRA options at big-name companies like T. Rowe Price, Vanguard, or Fidelity Investments
• Discount brokerages may offer lower fees and lower initial investments — but they don’t always offer the level of financial advice or customer service you’d find with a mutual fund company or a bank.  Need a starting point? Take a look at Sharebuilder, Firstrade, or Zecco.

When shopping for a place to open a Roth IRA, I’d suggest looking at all three options closely — and be on the lookout for ways to sidestep fees or alternatives for very high minimum deposit requirements.  A mutual fund company, for example, might waive its $3,000 minimum deposit requirement if you commit to an automatic deposit of $200 a month.  Or, your bank or credit union may have special offers for existing customers, such as reduced (or nonexistent) annual fees.

Really, the best way to choose is to do lots of research.  If possible, try to talk to a real person and ask a few basic questions.

Once you’ve decided where you’d like to open a Roth IRA, there’s really only one step left . . .

Step 3:  Open your Roth IRA (and set up automated deposits!)

After you’ve done all of the preliminary research, opening a Roth IRA is super-easy – most banks, mutual fund companies, and brokerages give you the option of doing most (or all) of the application paperwork online.  The process will probably take about 30-45 minutes from start to finish.

Once you’ve opened your account, don’t forget to set up automated deposits.  The automated deposit feature is one of my favorite things about a Roth IRA – by putting your contributions on autopilot, you don’t have to remember to put money aside every month, and you’re less likely to decide to use that money on something else.

They’re the latest innovation in credit- and debit-card technology:  “Swipe and go” cards make it easier than ever to get in and out of the grocery store, the gas station, or anywhere else.  These new cards look like traditional cards – except that in addition to the traditional magnetic strip, swipe and go cards are also equipped with a small radio frequency identification (RFID) chip containing your credit card information. Instead of running your card through a card reader or handing it to a cashier, you simply wave your card or wallet in front of an RFID-compatible scanner.  In an instant, the scanner reads your credit card, the transaction is approved, and you’re out the door.

But are these high-tech cards putting you at a greater risk for ID theft?  While some people say that RFID technology makes for a simpler, safer card transaction, others say the cutting-edge technology also opens the door for tech-savvy crooks.

It seems like the truth is somewhere in the middle:  For the most part, swipe and go cards actually help protect against ID theft – but the technology does present some opportunities for new forms of credit card theft.  Here’s a breakdown of the pros and cons of credit cards with RFID technology:

The Pros:

•  Fewer people handling your card.  Cards equipped with RFID technology eliminate the need for you to hand your card over to cashiers or servers – in fact, you don’t even have to remove the card from your wallet!  And, of course, the fewer people that handle your card, the lower your risk of someone stealing your information.

• Transactions are superfast.  Did I mention that you don’t even need to take your card out of your wallet?  Swipe and go transactions are much quicker than your typical credit card transactions – if you’re the type that likes to get in and out as fast as possible, RFID is probably the way to go.

• Encrypted data adds extra protection.  Unlike the information in the traditional magnetic strip, the information in your card’s RFID chip is encrypted.  In other words, if a thief manages to steal your credit card information by, say, using an RFID scanner, that information will be completely useless unless he can break the encryption on it.

The Cons:

•  Thieves are tech-savvy.  Although it’s unlikely, it is possible for thieves to use a combination of RFID scanners and mobile devices (like smartphones or tablets) to fish for credit card info. Although there haven’t been reports of large-scale RFID theft, teams of tech researchers have been able to successfully steal swipe and go credit card info – and some have reported successfully hacking through encryption.

• RFID technology doesn’t protect against old-fashioned credit card theft.  Swipe and go cards are still credit cards – and that means they can still be stolen.  While swipe and go technology has made it difficult for thieves to access and use your card’s RFID data,  these new cards don’t offer any extra protection if your card gets stolen from your wallet.

The bottom line is, while swipe and go cards generally offer a quick and safe transaction, you should still use them with caution, just like any other credit or debit card.  If you’re worried about hackers or high-tech ID theft, you might want to invest in an aluminum-lined wallet or credit card sleeve, which prevents would-be thieves from scanning your card on the sly.

Not sure if your card is equipped with RFID technology?  Call your bank or credit card company, or look for a logo on the back – the cards are usually marked.  If your card is on the new side, you might have one.

How To Create A Simple Budget (and Stick to it)

“Budget” is perhaps the scariest word in the English language: Few things strike fear in the hearts of average Americans like the thought of sitting down and – gasp! – writing a monthly budget. Maybe it’s denial: Do you really want to be held accountable for the $50 in gossip magazines you read every month? Will a budget mean that you have to give up your morning Starbucks routine?

Don’t worry. Budgeting isn’t really all that scary. With a little planning, you can set a budget that works for you. You can stick to it. And, if you’ve really done it right, you can keep your morning cup of coffee, too.

Step One: Your Monthly Income

Start by adding up your household income for the month, including your pay, your spouse or partner’s pay, and any other sources of income you may have, like alimony or child support. If you work at a job with irregular pay (like bonuses or commissions), figure out what you make on average. Once you know exactly what you make in a month, it’s time to see where that money goes.

Step Two: Your Monthly Expenses

The key to writing a budget is to understand exactly how you are spending your money each month. Most of your expenses probably fall into two basic categories:

• Fixed Expenses: These expenses stay pretty much the same every month. Fixed expenses include things like rent or mortgage payments, homeowner’s fees, electricity bills, car payments, and insurance, to name a few.
• Variable Expenses: These expenses are much harder to plan for because they can change from month to month. Gas, food, clothing, and entertainment are all typical variable expenses.

First, gather all of your monthly bills and add them up. Those are your fixed expenses for a typical month. After that, you’ll need to figure out where the rest of your money is going.

Next, keep track of your variable expenses in a month. Save your receipts for every purchase, no matter how small – if you’re on the road a lot, consider keeping a manila envelope in your car at all times for gas, food, or parking receipts. At the end of the month, divide and add up all of your receipts by category:

• Food. Include receipts from the grocery store, restaurant and drive thru meals, coffee, and snacks. If you eat or drink it, add it up.
• Transportation: Gas, parking, toll roads, or public transportation. If it helps you get from point “A” to point “B”, put it in the stack.
• Miscellaneous: Add up all the money you spent on “extras” during the month. This could include clothing, impulse purchases, entertainment, or gifts. And don’t forget about emergency funds, like replacing a flat tire.

Step Three: Writing Your Budget

Now that you know how you’re managing (or not managing) your funds, you can start writing a budget that you can stick to. It’s easier than you think. Here’s what to do:

• Deduct all of your fixed expenses from your monthly income. This is the amount you’ll need per month to pay the bills.
• Deduct each of your variable expenses from your monthly income. This should tell you how much, on average, you’ll need to pay for food, transportation, and other expenses. Disappointed with the amount you’ve got left over? Try budgeting less for things that you think you can live without. For example, if you spent $100 on restaurant meals last month, try whittling that amount down to $50 – you’ll have more money to play with.
• Decide on an amount you can put into savings. Use some of your after-expenses money to fund your starving savings account. If you don’t have a savings account, get one. Pick an amount that you think you can live without, whether it’s $25 or $100. Make saving even easier by setting up an automatic transfer from your checking account.
• Allow yourself a little “fun money.” A budget is a lot easier to stick to if you let yourself have a few little luxuries here and there. After your bills are paid and you’ve put a little in savings, treat yourself to something that’s not essential, like fancy gourmet coffee or a magazine here and there. The important thing is to set an amount and stick to it: Once it’s gone, it’s gone.

Step Four: Sticking to it

So, you have a budget. That wasn’t so scary, was it? Now that you have a plan to cover your expenses, save money, and give yourself a few fun extras, you should be on the road to financial security. To make sure your budget works for you, try living on it for one month. Did you have a little extra in the bank, or were you scrimping to cover your expenses?

Allow yourself the chance to reassess your finances at the end of a month; if you had a hard time, try moving things around a little. After a few minor adjustments (like taking money from “entertainment” and moving it to “transportation”), you’ll have a budget that you can truly live on (and with).

Copyright 2005-2012 Mike Peterson

It’s that time again. Income tax time, that is.  And whether you’re planning to file online or by mail; whether you’re going to a tax professional or taking the DIY approach, it’s important to be on the lookout for errors.  I’m not talking about big mistakes, either.  Even a small thing like forgetting to put the date on your tax return can spell IRS trouble.

Here’s a list of five common mistakes that people make when filing their taxes – and how to avoid them.

Mistake 1:  Forgetting to sign and date your tax return

This is a small mistake, but it could have huge consequences.  It doesn’t matter how many times you’ve checked and double-checked your tax return form.  It doesn’t matter that you did a great job of keeping every receipt, or that you’re finished with your taxes a month early.  If you forget to sign and date your tax return, you technically didn’t file your tax return.  Before you submit your tax return, make it a point to double- and even triple-check to make sure you have signed and dated it.  If you’re married and filing jointly, make sure both of you have signed.

Mistake 2:  Losing track of receipts

If you want to deduct things like charitable contributions, medical expenses, or business expenses, you’ll need to make sure you have dated receipts that back up your claims – in the event of an audit, you’ll need proof that your deductions are legitimate.  If you can’t prove it, it might look like you’re trying to put one over on the IRS.  My advice is, if you can’t prove it, don’t deduct it.  Want to make sure you’re prepared for next year?  Collect all of your receipts in an envelope, and keep them someplace safe.  When tax time rolls around, you won’t have to tear the house apart looking for proof of that business trip or donation.

Mistake 3:  Claiming the wrong marital status

Your marital status for your tax return should reflect what your marital status was last year – meaning, if you were single through December 31, 2011 you should file single – even if you got married since then.  On the other hand, if you were married last year but aren’t now, you should still file married.  Mistakes like this can change your eligibility for certain types of tax credits.  Form 1040 has some detailed instructions about how to choose your marital status – it’s a good idea to read this section thoroughly if you’ve had a recent change in marital status.

Mistake 4:  Not checking your bank account number

One of the great things about filing online is that you have the option to get your tax refund deposited directly into your bank account.  One of the not-so-great things about this option?  If you make a mistake – say, if you write down the wrong account number or routing number, your refund could end up in limbo until the mistake gets corrected.  If you’re opting for direct deposit, make sure you check your account number several times.

Mistake 5:  Paying income taxes with plastic

Nobody wants to owe money at tax time – but if you find yourself owing the IRS this year, don’t use a credit card to pay your taxes.  If you’re already in debt, you’re just adding to an existing problem.  But even if you’re not in debt, there are still good reasons to pay cash:  The IRS will charge you an extra 2.5 percent for paying with a credit card.  Pay cash – no exceptions.  If you don’t think you can pay the whole amount you owe, talk to the IRS about setting up a payment plan.

 If you’ve got a credit card, chances are good that your credit card company has tried to sell you some other credit-related service.  At first glance, some of these offers sound kind of good – especially if you’re struggling with a high balance or dealing with credit score issues.  After all, who doesn’t want a better credit score or a safety net to protect against theft, job loss, or other disasters?

The truth is, the extra “services” offered by your credit card company (and some third parties) are mostly unnecessary.  At best, you’re paying your lender for a service that you can get for free anyway.  At worst, you’re actually paying a monthly fee to keep yourself in debt.

Here’s a list of some common credit card services – and a few good reasons to go without them:

Unnecessary Service 1:  Credit score monitoring

Some credit card companies offer you round-the-clock access to your credit score (for a fee, of course).  Of course, it’s always good to keep an eye on your credit – but paying your credit card company for 24/7 access is taking things a little bit too far.

Everyone is entitled to one free credit report every year from the three major credit reporting bureaus (Equifax, Experian, and TransUnion).  Unfortunately, these free reports don’t actually tell you your score – they only show you what’s on the report.  To see your credit score, you have to pay an extra fee that varies from company to company.  The thing is, though, you don’t really need to monitor your credit score.  What you need to monitor is your credit report.  Since you do get a free report from each of the big three reporting agencies, I suggest ordering one report every four months or so.  You won’t get a credit score, but you will be able to see any mistakes or items that need to be corrected in order to keep your credit score from dropping.

Unnecessary Service 2:  Identity theft protection

Many credit card companies offer some sort of coverage or protection against identity theft.  Although the specifics vary from card to card, most of them work something like this:  You pay your credit card company an extra $5 a month, and if your credit card gets stolen, you won’t be held responsible for purchases made with your stolen card . . . sounds great, right?

If you have a credit card, you already have identity theft protection.  It’s called the Truth in Lending Act, and it’s been around since 1968.  In a nutshell, the Truth in Lending Act says that if someone steals your credit card number and goes on a shopping spree, you’re only liable for $50 in bogus charges (as long as you report the lost/stolen card right away). Instead of paying your credit card company to protect you against ID theft, invest in a paper shredder to make sure your personal information stays, well, personal.

Unnecessary Service 3:  Credit score repair services

You’ve probably heard about companies that claim to be able to “fix” your credit score.  Don’t get me wrong:  Your credit score is important, and it’s always a good idea to improve it – but credit-repair companies tend to make your credit score sound like a big mystery that only be solved by a trained expert.

There’s nothing mysterious about your credit score.  In fact, it’s pretty straightforward.  Your score is determined by a combination of factors, such as your payment history, how much you owe, and what types of credit you use.  If you want a better credit score, it helps to pay on time, to carry a low balance,   and to avoid opening new credit cards – there’s no secret weapon or shortcut, and you don’t need to pay a third party to help you do these things.

Unnecessary Service 4:  Missed Payment Insurance

This is another of those services that sounds really great until you think about it for a while: In exchange for a monthly fee of $5 for every $100 on your outstanding credit card balance, you have the option to suspend your payments for two years. This service is usually promoted as a way to guard your credit score against unforeseen events, like getting sick or losing your job.

Like I said, this offer sounds great at first.  Who wants to worry about credit card payments after getting laid off, right?

Instead of paying to avoid penalties later, you should be focusing on paying down your credit card debt.  If you’re’ not carrying a balance, there’s no need to worry about making payments.  Rather than enrolling in some sort of insurance plan, work on paying off your credit cards and bulking up your emergency fund.

Unnecessary Service 5:  (Most) Balance Transfer Offers

Before I get into detail about this one I’d like to point out that in some cases, balance transfers make sense.  Balance transfer offers usually come with an enticing introductory offer, like zero percent interest for a period of anywhere from three months to a year – and there’s usually some sort of balance transfer fee involved.  If you can pay off your entire outstanding balance during the introductory period, you can come out ahead.

But, in many cases, especially if you’ve got a large balance, once that introductory period is over you’re back to square one.  At that point, you’re stuck with a big balance at a high APR – just like before.  You can either keep making payments or look for another balance transfer offer (keeping in mind, of course, that every time you apply for a credit card, you’re putting a dent in your credit score).  This is how a lot of people get stuck on a never-ending merry-go-round of balance transfers.

I’m not a romance guru, and I’m not the first guy anybody would go to for dating advice.  But I am good at helping people save money and live within their means.  So, if you’re looking for a way to celebrate Valentine’s Day without getting yourself into debt or spending way too much, here are a few things you can do.

According to a study by the Better Business Bureau, the average person will spend around $126.  I don’t know about you, but I think that’s a lot of money.  Of course, that’s the cost for your “typical” Valentine’s Day:  Red roses, a fancy dinner, and a box of chocolates.

The thing is, though, if you get creative, you can have a romantic evening for way less than the average person.  You can still have the flowers, the dinner, and even the chocolate – but you can also keep your bank account out of the red.

Let’s’ take a look at each component of a “typical” Valentine’s Day and a few wallet-friendly alternatives:

Red Roses

Red roses are the “go-to” Valentine’s Day gift.  But they can get expensive – a dozen red roses will typically set you back $50 – and maybe more if you splurge on a fancy vase.

If you want to give flowers, consider going beyond the typical red rose.  You can get bouquets of other varieties, like tulips, stargazer lilies, or daisies, for around $30.  If red roses are an absolute “must,” consider a single red rose.  If your significant other has a green thumb, consider a pot of red mini-roses – mini-roses run about $30, but unlike regular cut roses, you can plant them in your garden and make them last.

A Fancy Dinner

There are lots of reasons to avoid restaurants on Valentine’s Day:  First of all, there’s the cost.  Even at a mid-priced restaurant, you’re probably looking at around $50, plus a tip (probably more if you order appetizers, dessert, or any other extras).  Second, there’s the crowds: Valentine’s Day is one of the most popular holidays for dining out, so if you’re looking for a quiet, intimate evening, you might want to look elsewhere.

Instead of dining out, consider a romantic dinner at home.  Make your favorite meal (or get a pre-made dinner for two from your local grocery store), light a few candles, and get dressed up.  You don’t have to tip and you don’t have to wait for a table.  If you really want to go out on the town, consider going out for dessert.  You still get the experience of dining out, but for a fraction of the cost of a full dinner.

A Box of Chocolates

Instead of splurging on overpriced chocolates, consider a homemade gift. If you want to give something sweet, you can bake your own cookies or cupcakes – you can use heart-shaped cookie cutters or Valentine’s-themed decorations and still save money.  A box of chocolates might cost you around $30, but a box of cupcake mix and some red sprinkles costs about five bucks.

 Or, if your significant other isn’t into sweets, consider other thoughtful, DIY gifts.  Put a favorite photo in a frame (check out stores like Target or Walmart for stylish, economical frames) or make a book of “coupons” good for household chores.

We all know that credit cards are hazardous to our financial health, but Americans are still using plastic just as much as ever.  Just how bad is our addiction to plastic?  According to a recent Cardhub study, Americans racked up a little over $18 million in credit card debt in the second quarter of 2011 alone!

That’s a lot of debt.  So, what gives?

As it turns out, many otherwise intelligent and well-meaning people have developed some pretty bad habits when it comes to credit cards.  We shop when we need an emotional pick-me-up.  We’re impulsive.  We’re competitive.  And when it comes to making smart credit card decisions, we often let our emotions and impulses take over.

Are you at risk?  Do you find yourself locked in a seemingly endless cycle of credit card use?  As it turns out, just a few bad decisions or spur-of-the-moment purchases can put you on the path to serious debt. Read on to learn more about the six deadly sins of credit card use:

Deadly Sin 1:  Competitive Spending

It’s easy to get caught up in a permanent game of keeping-up-with-the-Joneses in an effort to outdo your friends,  neighbors, co-workers, or family members.  It’s tempting to whip out the credit card to buy a bigger TV or a trendy designer handbag – but all you’re really doing is getting yourself deeper in debt.  Forget the Joneses.  If you can’t pay cash for it, don’t buy it. End of story.  Say “no” to aspirational or competitive spending.

Deadly Sin 2:  Falling Into the “Buy Now, Pay Later” Trap

Retailers know that deals like “zero percent interest” or “no payments for 18 months” are hard to pass up – especially when it comes to purchasing big-ticket items like appliances and furniture.  Those kinds of gimmicks appeal to our desire for instant gratification.  They sound like gret deals – until the interest-free period wears off, that is. Want true zero-interest deal?  Save up and pay cash.

Deadly Sin 3:  Excessive Bargain Hunting

Everybody likes a good deal, but some folks have trouble knowing where to draw the line – especially now that online bargain hunting via services like Groupon has become a kind of national pastime.  But the thing about a bargain is, it’s only a bargain if you were planning to buy it anyway.  And more importantly, it’s not a bargain if you can’t afford it. If you have to charge it, you don’t need it – no matter how great of a deal it is.

Deadly Sin 4:  Buying (Temporary) Happiness

If you’re the type to indulge in a little “retail therapy” after a hard day, you might be putting yourself at risk for serious debt.  I’m not saying that shopping can’t be fun from time to time, but you have to know where to draw the line.  Using your credit card to make a bunch of impulse purchases might cheer you up in the moment – but that mood won’t last when you get your monthly statement.  If you’re prone to overindulging at the mall, stay away when you don’t have cash.  Or, leave your credit cards (all of them!) at home and go window shopping instead.

Deadly Sin 5:  Getting Hooked on Getting Cash Back

You say you only use that credit card because it gives you cash back on your purchases?  Well, the problem with that is, you have to spend a lot to earn any serious money from cash-back credit card offers – most cards give you something like one dollar for every hundred bucks you spend.  In the long run, you’ll save (a lot) more money if you opt to pay cash instead of using a credit card.

Deadly Sin 6:  Misusing Balance Transfers

When used responsibly, a balance transfer can be a helpful way to avoid high interest rates and pay down debt.  But it’s easy to get stuck in an endless cycle of balance transfers, using one credit card to pay off another credit card, then another, and so on.  When you transfer a balance, you should pay that balance off as quickly as possible – and don’t use a balance transfer as an excuse to rack up new debt!

Are you guilty of any of these deadly (and costly) credit-card sins?  Are you an emotional or aspirational spender?  A balance-transfer junkie?  The good news is that once you know your weaknesses, you can start to make changes in how you spend money and use credit cards – and that’s the first step to breaking the bad habits associated with high-interest credit card debt.

Whatever the reason, if you want to pay down your debt in 2012, I’ve got a plan that can put you on the right track, no matter how much you owe.  Just follow these five steps and you’ll be on the path to a debt-free year.

Step 1:  Take Stock of Your Financial Situation

You can’t wipe out your debt until you know exactly what you’re dealing with. Once you know how much you owe and how much you can afford to pay every month, you’ll be able to come up with a long-term plan.

First, get all of your credit card bills together.  Look at how much you owe, and pay special attention to the interest rates on each card.  (Note:  you’ll want to concentrate on paying off the card with the highest interest first – but more on that later.)

Next, add up your monthly expenses – the “have-to” stuff, like your mortgage or rent, utilities, transportation, and grocery bills. Subtract your monthly expenses from your monthly income, and you’ll know how much money you have left over – this is the money you’ll be using to pay down your debt.

Step 2:  Call Your Credit Card Companies

If you’ve fallen behind on your credit card payments, it’s a good idea to get in touch with your credit card company – lenders are almost always more willing to work with you if they see that you’re at least trying to do the right thing.  You don’t have to give them a laundry list of excuses about why you can’t afford your monthly payments; just explain that things are tight and ask if you can get your minimum payment reduced.

If you’re on top of your credit card payments, call your lender anyway – ask if you can get a lower interest rate.  It doesn’t hurt, and chances are good that they’ll say yes.  Even if the reduction is small, it’s better than nothing.

Step 3:  Research Balance Transfers

Many balance transfer offers give you anywhere from a few months to more than a year of an introductory zero-interest rate on the amount of your original transfer – and that could mean big savings if you’re able to pay off your transfer relatively quickly.  If you’ve got a card with a very high interest rate, a balance transfer may be worth looking into.

Keep in mind, though, that most lenders charge a balance transfer fee,which is usually around three to four percent.  Also worth noting:  To be eligible for a balance transfer, you need to have pretty good credit.  If you’ve got a less-than-stellar credit history, you might not qualify for a balance transfer.

Step 4:  Make a Payment Plan (and Stick to it!)

After you’ve done all of your research, negotiated lower payments or interest rates, and applied for balance transfers, you should have a pretty good idea of what you’re working with, debt-wise.  Now, you can start to prioritize and pay down your debt.

I recommend starting with the card with the highest interest rate.  Decide how much you can pay on that card each month – it should be more than the minimum payment.  Continue to pay the minimum payments on your other, lower-interest cards.  Once the card with the highest interest rate is paid off, focus on the card with the next-highest interest rate, and so on.

Step 5:  Be Wary of Settlement Offers

There are a lot of scammers out there, just waiting to take advantage of people who are feeling overwhelmed by credit card debt.  Many so-called “debt settlement companies” promise to negotiate for settlements or lower monthly payments are just looking for a way to profit from other people’s financial woes.  A good rule of thumb is, if something sounds too good to be true, it probably is.  Paying off debt is a bit like dieting:  There aren’t any shortcuts if you want lasting results.  It takes discipline and work.

So there you have it – a five-step plan to being debt-free.  Of course, if you want more guidance or if you feel so overwhelmed by your debt that you don’t know where to start, you can contact the experts.  Visit DebtGuru.com or call 800-259-0601 today to learn how we can help you pay down your debt.

Happy New Year from all of us at DebtGuru.com!

No worries.  This year, I’m kicking off the holiday season by sharing a few of my favorite shopping tips.  If you’re looking for ways to keep things frugal (and festive!) this year, consider a few of these:

Tip 1:  Cash in rewards points

This is one of the best ways to stretch your holiday shopping dollar.  After all, why spend money when you can cash in loyalty points, reward bucks, or gift cards?  Many popular stores – like Hallmark, Starbucks, and Best Buy, to name a few – have some sort of customer loyalty program.  You get a membership card, and for every dollar you spend, you earn points toward gift certificates or store credit.

Before you hit the mall this year, check and see if you’ve got any rewards coming your way.  A $10 or $20 gift card could help jumpstart your holiday shopping.

And speaking of gift cards . . .

Tip 2:  Use gift cards

Remember that gift card you got for your birthday last year?  The one from that store you never, ever visit?  The holidays are a perfect time to dust off any old gift cards you’ve got lying around.  If you’ve got unused cards, you can use them to buy presents for the people on your list.  Or they can make great gifts on their own — just make sure that there’s no personalized message on them first.

If you’ve got a few gift cards with leftover balances on them, use those, too.  A few dollars might not pay for a whole gift, but you could knock a few bucks off your purchase.

Tip 3:  Get thrifty

As in, “thrift store.”  No, really.  Thrift stores (or yard sales or flea markets) are perfect places to search for offbeat items for hard-to-buy-for folks on your shopping list, like your uncle who still watches VHS tapes or your niece who collects weird coffee mugs or 1980s toys.  Thrift stores aren’t just for kitsch, though.  You can find really nice things at thrift stores, too – like designer clothing with the tags still on or jewelry and accessories still in the original packaging.

Tip 4:  Swap with friends

It’s not new, but it’s new to you.  Swap parties aren’t just for the holiday season, but they can be a cost-conscious way to find great gifts.  Get some friends together and ask everyone to bring a gift or two.  Make some snacks, put on some festive music, and you’ve got your very own swap meet.  Swapping is ideal for items for younger kids, like books they’ve grown out of or DVDs they’ve seen a zillion times. Swap parties are also perfect opportunities to find homes for gifts you’ve received that just weren’t “you.”

Tip 5:  Clip (or download) coupons

If you’re not usually a die-hard coupon clipper, the holidays are a perfect time to start.  Before you start shopping, it’s a good idea to search for coupons first.  Check the newspaper – especially the super-thick Sunday edition – for store circulars filled with coupons, rebates, or special “doorbuster” or “early bird” sales for shoppers visiting the store at a certain time. If you’re more of an online shopper, be sure to check for coupon codes and free shipping offers before you hit the virtual checkout.

Tip 6:  Consider “Black Friday” . . . carefully

The great thing about Black Friday is, you can get some seriously good deals on high-ticket items.  If you know that your family is getting, say, a new flat-screen LCD television this year, it might be worth getting up at 2 a.m. and fighting the insanity to save a couple hundred bucks on your purchase.

That said, there really is something insane about getting up at 2 a.m. and fighting mobs of other holiday shoppers.  Plus, all of the deep discounts on Black Friday make it really easy to overspend – unless you’ve got some serious willpower, you might come home with more than a TV set.  Remember: You’re not “saving” anything if you’re buying something you don’t need and didn’t budget for.

So, that’s it for now!  I hope these six holiday shopping tips help you make the most of your gift-giving budget this year.

Happy holidays!