I went into the bank the other day to see if I should refinance our car loan. I have really outstanding credit and I wondered if I could parley that into a lower interest rate, shorter term or lower payment. Turns out that I could do all three, but I did not do it after I saw the numbers.

Original loan principle: $17,490
Interest rate: 8.01%  Total term: 72 months
Monthly payment: $306  Total P and I: $22,085
Total interest paid over the life of the loan: $4,595

Remaining principle: $11,850
Interest rate: 8.01%   Remaining term: 45 months
Monthly payment: $306   Total remaining: P and I: $13,758
Total interest remaining: $1,908

When I walked into the bank, I assumed that I was about to refinance my loan. About fifteen minutes later, I walked out without a new loan even though I was offered an interest rate that was two points below my current APR. Here were my options:

If I paid an additional $75 per month:
Monthly payments would be $381
I would pay off the loan 11 months early
Total repayment: $21,655
I would save a total of $430

If I were to lower my monthly payment:
6.01% for 48 months
Monthly payment: $278
I would take 3 months longer to finish the loan
Total repayment: $21,623
I would save a total of $462

If I were to shorten the term and lower the rate:
6.01% for 36 months
Monthly payments would be $361
I would pay off the loan 8 months early
Total loan repayment would be $21,242
I would save a total of $413

As you can see, I could actually save a little money by lowering my interest rate and extending the length of the loan in Option #2. However, if I can pay extra principal every month as in Option #1, I can significantly reduce the term of the loan. Option #3 offers a lower interest rate, a shorter term, a higher monthly payment, but, surprisingly enough, I would pay more interest than option #1. Option #2  lowers my monthly payment $28, but lengthens the loan by three months. The loan also came with a refinance fee – I cannot remember the amount – but it would have added to my principle up front or I would have had to pay out of pocket.

The question that made the difference was, Are you trying to lower your payments or accelerate your loan payoff?

I was too focused on the interest rate. I assumed that at lower interest rate would automatically make it easier to pay off our car loan. But I learned that a refinance makes sense only if your principal amount is really large – like with a home mortgage or large amounts of school loans. However, if you are having no trouble making your payments and your principle is lower than $15,000, paying down principle will usually make more of a difference than going through the trouble of a refinance, even if the APR reduction is a lot.

In my case, I just want to get rid of this debt as soon as possible. I am going to add every spare dime that I can to my car loan payment and accelerate out of debt.

Article by Stew

Photo by Martin Pettit

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Every once in a while, I take a minute to sit back and think about life before some of the technology that we have today. I mean, I am not that old, but I can remember writing papers for college courses with an electric typewriter – some teachers were still accepting handwritten assignments. Our dormitory that housed seventy-five people had one pay phone for the entire building. I called home about once every two weeks. Then it was car phones, cell phones, mobile phones, texting . . .

I remember when email first showed up on our campus – there were only four computers to serve the student body of about 600 and I got about one email a week. I remember seeing the first computer that had internet access. It was at least a year before I figured out why anyone would want to get online. There was only one computer with internet on the whole campus and the entire library could hear when the dial-up modem connected to the web.  Now you can stand in the middle of the football field and log on to the wireless network at my alma mater.

Yep, we have come a long way since Al Gore invented the internet. When my wife and I first considered getting internet in our home, we looked at it as an expense that we might not be able to afford. However, over the past seven or eight years, we are more dependent on the internet as a way to save money. Our internet connection pays for itself every month – not just because I am a blogger – but because we use the internet to hold the line on spending.

Comparison shopping

This is the number one money saver, in my opinion. We can comparison shop without leaving home – saving money on gasoline and food costs. If time is money, then comparison shopping on the internet is the way to go. The internet allows us to compare prices on the little things like food and gasoline as well as the big things like airline tickets, automobiles and electronics. Insurance is a great thing to comparison shop on the internet, especially life insurance.

Consumer research

I do research on insurance, electronics, cars and vacuum cleaners online. I read restaurant and hotel reviews. We do not go to the movies often, but when we do, I make sure that the flick is worth our time and money by reading what others have said about the movie before spending my money on it.

Cash Back Shopping

When you make a purchase online, be sure to shop through a cash back website. Mrs. Stew and I always use Ebates, but there are plenty of other good ones out there. The internet allows us to comparison shop, do consumer research and then sometimes get cash back on items that are priced the same as in the brick and mortar store. Shipping and handling fees can make online shopping more expensive, but do the math and make sure. Cash back plus time plus gas sometimes add up to more than shipping charges.

Information

The internet is a great source of information. We no longer get a newspaper, even coupons can be printed online. I, in particular, like to follow politics and really enjoy reading history online. Obviously, the internet can be a source of MISinformation, you have to use common sense. And it is not like the New York Times always gets it right . . .

Communication costs

Our culture communicates more than any other time in history and the internet makes much of it possible. In the last month, I have communicated with people from Maine to California to China to England to Germany without licking a single stamp. Email, phone calls over the internet, online chatting and, of course, Facebook have revolutionized communication. My mother actually expects me to touch base somehow every day and she lives three states away!

Online Banking

I enjoy that the internet allows me to check my bank balance, spending habits and transaction records at a moment’s notice. I can pay bills online and research financing options without every driving to my bank.

Advice

Where would we be without advice? Gather Little by Little and other personal finance blogs offer all kinds of financial tips and tricks. Mrs. Stew has a cooking blog. You can find out how to do all kinds of stuff on the internet. Just the other day, I was having trouble with my mobile phone and I was going to take it to a service shop. Before I left, I decided to search for the answer online. One hour later, I had fixed my phone without spending a dime or even starting the car. The particular repair that I performed thanks to the internet had cost other people $50 to $100. That event alone justified our internet expense for that month.

I might be more likely to carry water in a bucket and live without heat in my home than to quit paying for internet.

Article by Stew

Photo by James Cridland

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I set out to write a post about how to get the best deal on air travel. My list consisted of the following:

• Book travel as far in advance as possible.
• Use an air travel aggregator site.
• Get an airline “miles” credit card.
• Look for airlines that feature child fares.

That is a pretty good list, not too much wrong with it, but most of you knew all of that already.

Mrs. Stew and I are veteran flyers. I fly five to ten times a year for business. Mrs. Stew flew four to six times a year while she was in college and we have continued to fly throughout our marriage, both before and after our children were born. Our seven year old has flown over a dozen times in her life and I think our five year old flew four times before she was two. In recent years, we have flown less as a family since it usually costs less to drive five people a thousand miles than to pay for five round trips, but we still have reason to fly fairly often – always to see family. This last fall, Mrs. Stew flew to see her parents with all three of our children in tow.

If you see us in the airport, we are family with three children each pulling a roller backpack through the terminal. We are also the family whose two year old understands how to get through security and knows to whom he needs to hand his boarding pass. Our kids do not scream on flights, they enjoy talking to the flight attendants and ordering their in-flight beverage.

That said, years ago we quit using flight aggregator websites to get the best price. We used to hunker down in front of the computer, checking multiple websites and different airports, trying to get the best possible price. We quickly learned where to get the best fares: Southwest Airlines.

I know, I know, you think I am being paid to say this, but the fact is, neither I nor Mike will get a dime from Southwest for this post – that is one way they keep costs low – I think. Southwest is not on the usual aggregator sites, you have to book directly through their site. But here is how Southwest is beating the competition in my estimation:

• Fares: the bottom line is the bottom line. I recently flew on Southwest for $112 round trip. I keep tabs on the other airlines, but they never beat Southwest.
• Free bags: Southwest is the only airline who does not charge extra for checked bags – both bags! There are still weight requirements, but your first two bags are free. This is a $50 savings over most airlines right off the top – that is if you are only checking one bag.
• Venues: When we first started flying Southwest, venue was a problem, the nearest airport that carried Southwest was a three hour drive from our house. Even then it was a better deal to drive and park than to fly other airlines.  Since then Southwest has added a huge number of places and serves the whole country. I have flown everywhere from Philadelphia to Portland to San Diego to Charlotte to Miami to Denver to Phoenix to Las Vegas to Minneapolis and more on Southwest.
• Flight credits: I have earned a number of free flights through Southwest. The best trip we ever took as a family was when both of our daughters were under two years old. I had earned a free flight for my wife and both of my children were free. I booked a flight for myself and our entire family of four flew 2,000 miles round trip for $179.
• Children under two are free. They are considered a “lap child”. Be sure to bring a birth certificate and make sure your child has an aptitude for contentment while being held . . .
• Friendliness: Customer service is really important to me, but I will rarely pay extra for it . . . at Southwest, we get frugal value and great customer service. I can sincerely say that after ten years of flying Southwest, I have yet to have a bad experience with anyone connected with the company.
• Changes to itineraries: If you miss your flight or have to cancel, it takes some talking, but Southwest has almost always let me used my money toward a flight that works better for me. There are fees to change an itinerary, but I almost always get those fees reduced one way or another. One time, I missed my flight because of traffic in Chicago. Southwest booked me on the next available flight without charging me another penny.
• On time: I have never been on a Southwest flight that was late – even in terrible weather. In fact, most of the time, I find that I am ten to twenty minutes early.

There might be things that you don’t like about Southwest – no first class, only 737’s, no assigned seats, limited meal service – but if you are only looking at the bottom line, SA is the way to go.

Article by Stew

Photo by doortoriver

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If our financial situation ever worsened to the point where had to cut every single unnecessary expense, coffee would be the last thing to go. There is something about that black, bitter brew that just keeps me coming back for more. And I am not picky about my java, if I listed all of the places and formats and temperatures at which I had consumed the beverage, this post would start to sound like a Dr. Seuss poem. I drink gas station coffee, truck stop coffee, bank lobby coffee . . . I would drink it in a box, I would drink it with a fox, I would drink it in a house, I would drink it with a mouse . . . As a result, I am always on the lookout for a cheaper way to get coffee for less.

Here are just a few ways that I keep my coffee expenses low:

1. Never waste a drop. If we brew a pot of coffee and we do not happen to drink it all, I never pour out the excess. I have learned that coffee will keep for several days in the refridgerator and will drink it cold or rewarmed. Mrs. Stew makes iced coffee for a refreshing drink later in the day. I know, I know, most of you like your coffee fresh. Me too, but sometimes beggars cannot be choosy.
2. Mix higher-priced, gourmet grinds with cheaper brands. You will have to experiment to find the right combination, but blended coffee will stretch your java dollar. Our favorite low-priced coffee is the 8 ‘O Clock  brand. Our favorite gourmet coffee is from a roasting company in a small town in Wisconsin. Email me glblstew (at) gmail.com if you want to know specifics.
3. Add cinnamon. Sounded crazy to me too, but if you want to make cheaper, bitter coffee taste more like a smooth, expensive brew, throw a little cinnamon into the grounds before brewing. It really works!
4. Look for deals. Mrs. Stew and I find free coffee all the time on the internet or in newspaper ads. Even big chains like Starbucks give away free coffee from time to time – you just have to pay attention and make an effort.
5. Find alternatives to coffee filters. One coffee money drain is the materials used to filter coffee. There are reusable coffee filters on the market and sometimes we just use part of a clean paper towel . . .
6. Collect coffee in hotel rooms. This will not work if you do not travel much, but I often travel with larger groups who stay in hotel rooms for several days. Call me a skinflint if you like, but I collect any unused coffee packets every morning and take them home. If you take the two or four packets that are in every room, the maid service always replenishes the stock for the next day. I think I brought home close to forty packets a couple of months ago. The nice thing is that we occasionally like to share a decaf pot of coffee in the evenings – hotel coffee works great for this. We never have to buy decaf.
7. Don’t be a snob. For some of you, this will be hard. Mrs. Stew suffers from this affliction, she will often look a gift cup of coffee in the mouth. Me? I just pour it down the hatch. I’ve learned that almost all coffee can be enjoyed once you get past the first couple of sips. Cream and sugar can do wonders as well. If you are picky about coffee, you will find it difficult to go cheap.

Hopefully some of you have some more tips to add to the list!

Article by Stew.

Photo by [ jRa7]

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Last week, I attended an Economic Conference about the global stock market. The economist pointed out that most Americans started saving again instead of spending away all their money. I was happy to see that the population has finally realized the impact of saving money towards achieving their goals instead of borrowing money on their home to pay off their credit cards. This is a huge step to gain control of your personal finance.

Back in early 2008, there was a review of SmartyPig done in this blog (you can read the Smarty Pig Review here). Since we have now arrived at a time to save money, I started looking for the best interest rates in savings’ accounts.

My first reflex was to look at ING. They usually have the best rates of all. It appeared to be at 1.30% as of November 23^rd 2009. Then, I went back to Select CD to see if I could beat it. Their main page showed a rate of 1.75%. Encouraged by my research, I kept searching to see if I could reach the psychological mark of 2%. Well I found it at

SmartyPig: They now offer 2.01%!

Then, I started reading more about Smarty Pig; I read previous reviews by Larry and looked at what had been said across the blogosphere when it was first launched. I picked up 2 interesting reviews written by other famous Bloggers;Bible Money Matters,  Being Frugal and Trent over The Simple Dollar.

Most reviews I found were issued in March or April 2008. At that time, Smarty Pig had some flaws:

- Long delays to withdraw funds (money was sent by check back then)

- There was a fee to withdraw funds

Now the Smarty Pig team has done their homework and settled those minor hassles: there are no longer delays to withdraw funds as electronic transfers into your checking account are available and there are no fees to withdraw money as well!

A VERY POWERFUL WAY TO SAVE MONEY

Let’s take the following example:

You want to save $200 per month for twelve months. Your total capital saved will then be $2,400. Along with your capital, you will gain some interest: an additional $22 (at 2.01%). So you are now at $2,422. BUT, we are not done yet. If you buy a gift card from a retail partner, you can get an additional bonus (the biggest one is at Macy’s with a mega booster of 12%). This means that you would get $290 free in your pocket for a total of $2,712! Now we are talking!

If you don’t want to buy stuff at Macy’s, you also have the following choices (and mentioned rebate):

Babies”R”us (2%)

Barnes and Nobles (5%)

Bed Bath & Beyond (4%)

GAP (5%)

iTunes (2%)

Jared (7%)

Kmart (4%)

Kohl’s (5%)

Overstock.com (7%)

Sandals (10%)

Sears (4%)

Toys”R”us (2%)

Travelocity Hotel Gift Card (10%)

Travelocity Vacation Gift Card (2 to 10%)

Hum… this sound like a perfect way to save money for Christmas and birthdays!

Click on the following link to see the complete list of Smarty Pig Partners (as some of them don’t offer rebates).

10 REASONS WHY YOU WANT TO OPEN A SMARTYPIG ACCOUNT:

There are plenty of reasons to open an account at SmartyPig, it is a smart way to save money:

#1 The interest rate is almost unbeatable.

#2 You have the possibility to get bonus percentage (now up to 12%) at retail partners.

#3 Automatic withdrawals from your bank account (minimum of $25 per month) is the best way to save money.

#4 Opening an account is FREE!

#5 There is a social network to encourage achieving your goal

#6 Your relatives can contribute to your goal

#7 You have plenty or retail partners to choose gift cards from (there are retailers for almost any projects from gifts to renovation and travelling)

#8 You can now split your savings among gift cards, electronic transfer back to your checking account or adding money to your SmartyPig MasterCard debit card.

#9 It’s FDIC Secure.

#10 I am giving 2 SmartyPig gift card of $50 each to start your goal as a giveaway!

How to enter the giveaway?

1- one entry if you sign up for my mailing list (it’s free)

2- one entry if you comment here and mention how much you save per month.

*Winners must have a SmartyPig account opened as money will be transferred directly into their account at SmartyPig.

I am giving you until December 18^th to register. Then, I’ll send $50 to 2 people in their SmartyPig accounts for Christmas in order to help support their goals.

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Congratulations! You are going broke! I mean… getting married! As I mentioned in my first post on how to save money for a wedding over at my other blog, my best friend is getting married next spring (and I also have a sister-in-law getting married at the end of next summer, in 2010). So, while I will end up  broke in 2010, as I am the best man for both weddings, I will try to share all the money savings tips related to  weddings that I could find:

Money Savings Tip #1: Talk to people

I have already written about how much money you can save through your network. A wedding is definitely a great occasion to test how good your network is to help you save money. So, whatever you are looking for (dress, flowers, ballroom, cars, etc.) tell as many people as you can. One will ultimately come through with something like:

“hey! My friend is a DJ, he’ll give you a good deal”.

The only problem with using your network is that you might risk compromising on the results. Therefore, I suggest telling your connections that you are still shopping around and ready to meet the friend without obligation. You don’t want to hurt feelings; you simply want to save money on your wedding!

This would be a great idea if you are a looking for a nice car for your wedding: if you have a rich aunt, this is the moment to give him a call .

Money Savings Tip #2: Go back to school

I was able to get a ridiculous price for our flowers because I used the first and second money savings tips for my wedding at the same time: a friend of a friend had a sister finishing her courses to become a  florist. Therefore, she was ultra motivated to do our stuff while she didn’t charge much because she was not officially done with her classes yet.

Getting a student to do certain things (I wouldn’t let a student cut my fiancé’s hair for example ), can help make things affordable. In addition to the money you are saving, they are usually very motivated as it is one of their first jobs (and it is so cool to work for such a cute couple that is getting married ). We were very pleased with the results and we paid half price.

Money Savings Tip #3: The DIY method

We used this trick to save on wedding invitations. Instead of paying $500 for some pieces of paper that will be thrown out after a month (except by your parents!), we picked nice paper with letterhead and printed all the invitations. You just have to add a personal touch (nice envelopes or ribbons) and you will have nice wedding invitation cards for 50% of what it costs if it’s done by someone else.

Money Savings Tip #4: Try combinations

We were lucky enough to combine the ballroom with the food; we actually found a nice restaurant with a room reserved for private parties. The room was big enough to welcome 150 people and looked like a medieval chapel (with granite floors, stained glass windows and a huge wooden bar). Since the restaurant was taking care of the food for 150 people, they didn’t charge us for the room. By combining wedding services, you might be able to save a few bucks!

Money Savings Tip #5: Prioritize

There are virtually no limits on how much you can spend on a wedding. Some people like it very fancy and spend $75,000 and some others manage to get a frugal wedding for less than $10,000. I guess it is all a matter of prioritizing. In my case, I really wanted to have nice cars. This is why I decided to spend more money on cars and spend less on something else. By making your wedding list budget, it will become easier to make decisions.

There are several ways to save while planning a wedding but one thing I would not be shy to spend on would be the honeymoon… after all, this is the most important part of the wedding, right?

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On Monday, I wrote about some of the problems with mass transit and I thought that I would spend today on some of the other means of transportation.

When my wife and I were first married, we assumed that we needed two cars. Looking back, it was a little ludicrous. We both worked within two miles of our home. After we had children, Mrs. Stew quit her job to stay home, but we still continued to pay insurance, maintenance, and registration for two vehicles. About three years ago, I totalled my car and never replaced it. Ironicly, a car accident has actually saved us money in the long run . . . The point is, that we have met our responsibilities with one vehicle. We never thought it was possible, but with a little planning and a little self discipline, we are doing just fine. There are days when I have to take the car to work and Mrs. Stew has to be content to stay home or walk, but in the past two years, I have tried out several other ways to get to work.

Walking

My job has a “peak season” where I often work seven days and put in 70 to 80 hours in a week. During the off-peak season, I have the option of coming into work anytime between 9 am and 10 am. So last year, I walked the three miles to my office several times a week. It takes me about 50 minutes and I enjoy the exercise. I had to make sure that I had good shoes and proper clothing for the weather, but once those items are purchased, walking can be a really inexpensive way to get to work – if you have the time in your day. My wife often picked me up after work, so I did not have to walk both directions. You might be able to walk to work – try it once and see how you like it.

Cons: time, shoes, clothes, weather

Pros: good exercise, no registration, no insurance fees, no maintenance, low fuel costs (food)

Cycling

Before I started walking to work, I was riding my bike. This is my favorite way to get to work. A little exercise, not a whole lot of time lost and it does not wear out your shoes quite as much. I was also fortunate to have a pretty nice bike, because I had a friend who worked in a factory and used his discount to get it. I loved the bicycle . . . until it was stolen last summer. I have not found a way to replace it, although I plan to make an effort to find one at a second hand store or rummage sale this year.

I have a friend who bikes thirty-five miles one way to work every day when the whether is nice. You might be surprised how easy a bicycle commute could be.

Cons: bicycle expense, clothes, weather, flat tires

Pros: almost as fast as driving, good exercise, no registration fees, no insurance costs, little maintenance, no fuel costs

Scooter

My latest work transportation is a little scooter that someone at work had in storage. They gave it to me and said, “If you can get it running – it’s yours”. The tires were flat, but only needed new valves. It leaks oil, but I add a little every week. It has trouble starting – sometimes it takes 30 or 40 “kicks”, but overall it has been a nice little way to get to work. I have since found out that it was made in China and parts are extremely difficult to get, so if it dies, I probably will just junk it.

In the meantime, my state does not require scooters of this size to be licensed, so I can drive back and forth to work for about $2.50 a week. That is really my only cost for this little bike so far. The biggest issue is weather. Riding can be painful if the temperature is less than 70 or it is raining. My scooter is not cool at all – no bright colors, it is old and has some cosmetic damage, but it gets me from A to B. Scooter riders have to deal with interesting looks from other people. A scooter provides for way more eye contact than driving a car. It can be unnerving.

Cons: cannot give rides to my kids, weather, rude stares, helmet head

Pros: same time as a car, no license/registration fees, no insurance, little maintenance

So what is your favorite way to get to work? Have you thought about getting there the cheapest way possible? - Article by Stew

Photo by palindrome6996

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Many people use mass transit to save money. I like mass transit. A couple of years ago, I visited Germany and fell in love with their rail system. Buses, trains, light rail, the subway, the elevated train all make sense as a way to reduce cost and congestion – but not in every circumstance. Make sure that you are actually saving money before making the switch to the bus or train.

Government cost

One of the problems with mass transit in the United States is the cost to our government (us). You might be able to ride the bus to work for only $2.50 a day, but the cost of the ticket does not come close to paying for the bus, bus driver, maintenance, bus stop and road wear. That money comes from taxes and you are taxed for that bus whether you use it or not. If you aren’t taxed for that bus, your employer is being taxed for it.

Many municipalities and states have put in light rail in an effort to curb congestion, but often spend far more in debt and upkeep costs than riders save. I love to ride the Chicago area Metra and Elevated Train, but I always remember that I do so at the expense of the Chicago area tax payer. Amtrak, the federally subsidized railway that serves most of the United States can be a fun and relaxing way to travel, but from a fiscal point of view, every ticket sold is subsidized an average of $100. A New York to Los Angeles ticket comes with a $1,000 taxpayer subsidy.

Density

Mass transit has been a success in Europe, as I mentioned. It has also been a relatively good success in the United States – as long as the area is heavily populated. New York, Chicago, Los Angeles are all cities with a dense population. The urban setting allows for enough ridership to support the rail or bus system.

Cities with smaller populations and a  geographic area that is spread out cannot fill rail cars or buses. Not enough people live close enough to the rail stations on one end or work close enough on the other to make riding the rail practical.

Comfort and Convenience

If you have a driveway at home and a place to park at work, driving is just better. There is more freedom to leave when you like and stop to pick up a carton of milk on the way home. Need other reasons to drive? How about comfortable seats, your own radio, temperature controls and a cupholder. Comfort and convenience need to be a part of the equation. Is it worth an extra $2 a day to avoid sitting at a bus stop when it is twenty-below?

Sanitation

In this age of SARS and swine flu (H1N1), you have to think about this. If you are worried about health costs, you might need to include sick days and doctor visits in the cost of your mass transit. Mass transit system might add to the spread of disease and sickness.

Although for some of us, our cars might be just as dirty as the subway or germy as the bus.

You still need a car

If I lived in Germany, I would not need a car – there are multiple trains every hour that go every place you might need to go and those trains make sense because they are always filled. However, you must remember that Germany has 85 million people in a country with 137,858 square miles or roughly half the size of Texas which has a population of 27 million. In Germany, the train put me within a reasonable walking distance of any place that I wanted to go.  The same could be said for large urban areas as I mentioned earlier.

Here is the bottom line when calculating the cost of mass transit versus driving your car: if mass transit allows you to divest yourself of a car, in other words, if mass transit in your area can make you “car free”, then it makes a lot of sense to use mass transit. However, if you need a car to get to the train station every day, you might be better off just making the drive. Once you pay for insurance, gas, maintenance and storage, you will probably not save much money or time by riding the bus.

We like to ride the train for fun – we enjoy riding into the city for a day, but that does not mean it is the most frugal way to get to work. - Article by Stew

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I was reading over on CNN Money this weekend that a health care market research company is seeing a growing trend in consumer use of credit cards to pay for medical bills.  Due to high unemployment and ever increasing health care costs, consumers are reaching out to credit in order to continue receiving health care.  Now, here’s the scariest part: CNN also reported that health care industry watchers see a multi-billion dollar opportunity to offer specialized “medical” credit cards!

If you haven’t figured this out already, let me explain this simply: “Consumers” (That’s you folks) visit the doctor one day, and potentially pay for that doctor’s visit for the next 1-5 years.

Already, 25% — 74 billion or so — of the $294 billion spent on out of pocket medical expenses is charged to standard credit cards.   With our current economy and jobless rates skyrocketing, this number is expected to grow quickly.  A health care consulting company, McKinsey Consulting, expects this number to grow to $150 billion by 2015.

How can you avoid having to use a credit card for medical expenses?

Here are just a few ways you can avoid using credit cards to pay for your medical expenses:

• Have a medical emergency fund – Start saving money to a medical emergency fund.  Use this fund to cover unexpected medical costs.  Learn more about specialized emergency funds.
• Set-up a Flexible Spending Account or Health Care Savings Account – Not only do these specialized savings accounts reduce your taxable income, they also can cover your medical expenses.  I’ve used an FSA (Flexible Spending Account) for the past 10 years and found it to be a powerful too for saving money and covering required medical expenses.  Learn more about Health Care Spending Accounts from Cash Money Life.
• Budget for medical expenses – First, if you don’t have a budget, create a budget.  Make sure you include an expense category for planned medical expenses.  This category would include any prescription medicines you require, over the counter products, upcoming doctor’s appointments, etc.  Accounting for these costs in your budget allocates money for those expenses and will keep you from having to use credit cards.
• Talk to your doctor – If you’re struggling financially right now and feel you might not be able to cover medical costs without resorting to credit cards, talk to your doctor.  Doctors can often reduce their expenses, provide tips for getting lower cost health care, or refer you to services that can assist you with medical expenses.  Don’t be ashamed to ask!  Medical costs are expensive.

What are your thoughts on this?  What tips can you share with other readers to soften the blow of medical expenses?  Add a comment!

This article is part of an ongoing series called Money Saving Monday. Each Monday, I share tips and techniques you can use to start saving money.  Have a tip?  Send it my way.

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When we purchased our current home, we knew it would require some work and a few upgrades.  Namely some new paint, repairs to some of the work the owners did (but didn’t do correctly) and yard work.  The big item we knew we would have to address was the upstairs.  When the original owners built the house, they left the upstairs unfinished.  The middle area of the upstairs was finished off as an office later, but it’s very obvious the work was done by the homeowner, and unfortunately not done well at all.  Then, when the owners decided to sell, their real estate agent recommended the remainder be finished off as well.  They finished it, but did even a worse job than before and cut corners.  For example, the middle office area has drywall ceilings.  The two outer rooms have cheap suspended ceilings.

We knew when we bought that the upstairs would need to pretty much be redone.  The other major issue with the upstairs was that being originally unfinished, it has no heating or AC.  Over the past few weeks, I decided to call around to some various heating and AC companies to get quotes.  In the process, I learned about the new tax credits for up to 30% of the cost when home owners make energy efficient improvements to their homes.  These new tax credits were introduced as part of the federal government’s economic stimulus package, passed in February.  This is a one time tax credit only, and is capped at $1, 500.

The trick with all of this is focusing in on the items that are actually worth it, as in many cases the cost of the upgrade doesn’t justify the tax credit savings.  Most financial experts agree that items worth considering are:

Add Insulation

Insulation is the least expensive energy efficiency upgrade that qualifies.  Installation of new insulation can also help you save an additional 20% on your energy bill as well.   To qualify, new insulation must meet the 2009 International Energy Conservation Code (check product labeling or call the manufacturer) and carry a two-year warranty (or be expected to last five years).

Insulation is measured in R-values, which stands for thermal resistance. It should range between R-30 to R-60. Each inch of insulation is equal to three to five R-value.  R-30 insulation, by this rule, would range between six and 10 inches.

Taking a peek at the insulation installed by our homeowners upstairs made me realize this something we’ll need to replace when we refinish the upstairs area.  They didn’t use adequate insulation, and this is probably one of the many reasons my electric bills were so so high over the winter.

New Windows and Doors

Need new doors or windows?  Now’s the time.  Prior to the new tax credits, upgrades to doors and or windows would only provide a max tax credit of $200.00.  The new changes raise that to $1500.00, but as with the insulation, only if the they new doors or windows meet certain requirements.

In order to qualify, Windows, doors and skylights require a label from the National Fenestration Rating Council (NFRC) that says their U-factor is no more than 0.30.   U-Factor is the measure of how well they window or door will insulate your home from heat.  The required label must also list a Solar Heat Gain Coefficient (SHGC).  SHGC measures how much of the sun’s heat penetrates into the home.  The SHGC must be no more than 0.30.  Storm doors also qualify BUT they must be accompanied by a tax credit eligible wooden door without exceeding a combined U-factor of 0.30

New doors and windows are expensive though, so really take a hard look before jumping in and doing upgrades on these items.   But, if you’ve been putting off replacement of a few windows or need a new door, now’s a good time.

Installing Air Conditioners

This is the one that has my attention.  To qualify, central air conditioners need a Seasonal Energy Efficiency Ratio (SEER) of at least 16 and an Energy Efficiency Rating (EER) of at least 13.  SEER measures the efficiency of the unit, and EER measures how the unit operates once the outdoor temperature reaches 95 degrees.

I had two different companies come up last week.  So far I’ve received a quote from one for $8200.00 for a tax credit qualifying unit, duct work, and labor.  Less than I expected actually, and with the $1, 500 tax credit that reduces the overall cost to $6,700.  Not an expense we were going to do right away, but with a $1, 500 savings on the line, we’re seriously considering it.

Some things to consider

There are a few things you to consider/be aware of.  Determining if the various products meet the requirements is tricky, so do your homework.  Dealers for these products are very quick to mention that tax credits and use that as a selling point.  They won’t guarantee they qualify though.  So you’ll really need to make sure you research the product yourself.  For example, just because an item is “Energy Star” compliant, doesn’t mean it qualifies.

Also, don’t forget it’s not an immediate savings, and you won’t see the savings until you file your 2009 taxes.   It is a tax credit, so you’ll receive the full $1500.00 (assuming you’ve spent enough in upgrades).

Photo by: Velo Steve

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