Monthly Archives: January 2014

What Does a Car REALLY Cost?

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I’m a pretty “green” kind of person.  I make the effort to recycle (even the plastics that won’t be picked up at curbside and I have to make a special trip to a recycling station at my local fire station).  I compost in my backyard.  I like to reuse and repurpose things in order to keep them out of the landfill.  I’m working toward making the switch to all LED light bulbs.  And I drive a Toyota Prius hybrid.  But my reason for driving the Prius is much less about the fact that I’m green and much more about the fact that I’m frugal (or maybe even “cheap”).

Prius

At the end of 2013, Consumer Reports declared the Prius to be the best overall value in vehicles, for the second year in a row.  The way they determine this is by factoring in not only the cost of purchasing the car, but also the costs of ownership (maintenance, fuel, repairs, etc.).  The fuel advantages are clear with a hybrid.  I regularly get between 40 and 50 miles per gallon with my Prius.  But other expenses can really add up as well.  How often do things go wrong with the car?  Are they major expenses to repair?  How much does regular maintenance cost?  How much do tires cost?  Is labor particularly expensive for this make/model?  These are all things that everyone needs to consider when making a major purchase like an automobile.  The car with the cheapest price tag is not necessarily the best value.

Nearly all of you will at some point in life purchase a new (or at least new to you) vehicle.  When you get to that point, don’t forget that you’re not just buying a pretty car that meets your transportation and hauling needs and that has nice options.  Consider the price.  Consider reliability.  Consider maintenance expenses.  Consider the cost of driving and owning it, not just the cost of buying it.  I’m not saying that everyone should drive a Prius.  But I am saying that everyone should think about all of these factors when making this very large financial decision.

Health Insurance: Have you bought yours yet?

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health care

Health insurance has been a hot topic of conversation in the news for over a year now.  The Affordable Care Act has been enacted in full with the start of this calendar year.  Now we are all required to have health insurance or pay a penalty for not doing so.

If you have insurance through your employer, your spouse or your parents, you are all set.  Or perhaps you bought a policy in the fall that covers you for the full year.  If not, you have some decisions to make in the VERY near future.  You have a few options available to you:

You can purchase the Penn State student health insurance policy offered through Aetna.  The deadline to purchase this policy for the spring semester is January 22 (that’s WEDNESDAY!!!).

  1. You can purchase insurance through the Affordable Care Act insurance exchanges.  Through this venue, you may qualify for a tax credit that reduces your total cost, so it may actually be cheaper than the student policy (but it might not).
  2. You can do your own research and buy a private health insurance policy.
  3. You can tempt fate, pay a penalty of 1% of your income or $95, whichever is greater (up to a maximum of $285), and hope and pray that you don’t end up sick or injured.

Now let’s talk a bit more about why you should NOT choose option #3.  You should always approach health insurance assuming that you are going to experience a major illness or injury.  If you are diagnosed with cancer, will you be able to afford treatment?  If you are in a serious bicycle accident and need surgery on your arm, will you be able to pay for that?  The answer is easy.  Unless you are independently wealthy, you definitely need to have health insurance.  Otherwise, you could ruin your financial future with a huge medical debt that will haunt you for decades.

So now that we’ve established the importance of having insurance, how do you select the right policy?  There are a lot of things to consider.  What is the cost of the premium?  How much are co-payments?  How much is the deductible?  How much is your co-insurance responsibility?  How high is your out-of-pocket maximum?  Always assume you’re going to have a major illness or injury…then select the policy that gives you the best combination of these elements for your budget.  If all this jargon has left you scratching your head, take a look at this classic Moneywise Tip for a quick primer.

If you know you need to buy health insurance but are baffled as to how to pay for it, talk to your Financial Aid Director.  She can help you build it into your financial aid budget.

 

Vampire Power and the Great Cable Experiment

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Back in September I wrote about my great cable TV experiment.  I cancelled my cable and now do all of my television viewing through Internet streaming.  Four months later, I still don’t miss cable at all.  I’ve found that I read more.  I listen to music more.  I go to bed earlier at night (and reap the benefits of a decent night’s sleep!).  I don’t just “tune out” in front of the TV anymore.  Yes…I still vegetate on the couch from time to time.  I’ve been binge watching Parks and Recreation and Scrubs for the last couple of months.  But I definitely spend a lot less time staring at the screen.

cable box

I’m not surprised.  I expected all of these results from my cable cancellation.  But there is one specific side-effect of cutting the cord that has been a very pleasant surprise for me.  My electric bill has gone down.  Significantly—about $10 per month!  I always knew that my four (yes…FOUR) cable boxes were sucking vampire power while they weren’t really in use.  But I had no idea how much.  It seems cable boxes (especially DVRs) are among the worst vampires around, using more energy than most appliances.  A new agreement is going to make sure future cable boxes are more efficient. But in the meantime, you may want to consider plugging those set top boxes into a power strip that you can flip on and off.  Or just cut the cord altogether, like I did. 😉

Phishing (a classic tip from 10/14/2013)

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I recently came across this article about how a scammer posing as Sallie Mae was trying to steal private information by claiming the federal government was offering student loan forgiveness during the government shutdown.  This reminded me that phishing is alive and well in the world, and is something we should all be thinking about.

Imagine it’s 1996.  You are enjoying the Internet through America Online when an instant message pops up.  Someone masquerading as an AOL employee asks you to verify your password.  This was the birth of the Internet scam called phishing.

From its early start as attempted AOL password harvesting (thus the “ph” replacing the “f” in the word fishing) scam, phishing has evolved into the practice of sending out e-mails that appear to be from banks or other reputable organizations with the intent of luring the recipient to reveal sensitive information such as Social Security number, usernames, passwords, credit card information or bank account details.

The scam artists who run phishing schemes are quite clever.  They have made an art form out of creating e-mails and web sites so like those of the organizations they are impersonating that it can be near impossible to tell the difference.  Usually they are asking for the intended victim to “update” or “validate” their account information.  Often they will try to incite fear with threats such as “your account will be canceled” if you don’t provide the requested information.  The phishing e-mail then provides a link to a web site where the intended victim will be asked to provide the private information the phisher seeks.

You can learn to identify phishing scams by looking for these clues:

  • Watch for address spoofs.  The original e-mail may appear to be from a legitimate address, such as eBay.com, but this is really just concealing the scammer’s actual address.  The enclosed link will lead to a look-alike web site at a similar but fake address such as eBayverifysite.com.
  • Phishing e-mails almost always link to a web site that is not secure.  It’s very simple for you to tell the difference between a secure and a non-secure site.  A secure site will always start with “https://”.  A non-secure site lacks the “s” for secure and will start with “http://.”
  • A genuine e-mail from a financial institution you work with will likely include your name or a partial account number.  A phishing e-mail will likely start with a more generic “Dear Customer.”
  • Phishing e-mails almost always use scare tactics such as threat of account cancellation.

You can further protect yourself from phishing by doing the following:

  • If you get an e-mail asking for personal information, do not click on the link in the message.  If you are concerned that it may be a legitimate request from a company you work with, you should go to that company’s web site directly to confirm your account information there.
  • Do not e-mail personal or financial information.  E-mail is not secure, so you should only send confidential information through secure sites.
  • Regularly review your bank account and credit card statements to ensure that all transactions were initiated by you.
  • Install anti-virus software on your computer and keep it updated.  Some phishing e-mails will contain software to track your Internet activities without your knowledge.  Anti-virus software and firewalls can protect you from this.
  • Always be cautious about opening attachments in e-mails—even from people you know.
  • If you receive an e-mail you are certain is phishing, you should report it to the Anti-Phishing Working Group at http://www.antiphishing.org.

If you have given out personal information, here is what you should do to limit the damage:

  • Report the theft of your information to the holder of your account as soon as possible.  This will limit your liability.
  • Cancel the account and open a new one as soon as possible.
  • Monitor the stolen account for fraudulent use.
  • If you have downloaded a virus, you should install or update anti-virus software and run a full scan.
  • If you have given out personal identification information such as your Social Security number, you could be a target for identity theft.  You should contact the three major credit reporting agencies (Experian, Equifax and TransUnion) to place a fraud alert and a victim’s statement in your file.  You should regularly monitor your credit reports to watch for any fraudulent activity.

The Internet is a powerful tool.  It has drastically changed the way we do just about everything.  But the Internet is also a dangerous place.  It is important for us to keep this at the forefront of our minds and exercise caution in your Internet use.

 

 

How Health Insurance Works (a classic tip from 2/25/2013)

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Health insurance is complicated and confusing.  It’s one of those things that you rarely think about until you need it.  But when you need it…you had better be prepared.  Best case scenario:  you need it, you have it, and it covers everything flawlessly.  Worst case scenario:  you need it and you don’t have it, and you end up with a tremendous debt.  Typical scenario:  you need it, you have it, and you learn surprising lessons about how much you still need to pay out of pocket.

There are four basic ways that you have to pay when it comes to your healthcare:

  1. You pay the premium on your health insurance policy.
  2. You likely pay a co-payment (usually $10 or $20 on typical doctor’s office visits) on office visits and prescriptions.
  3. If you have to have medical procedures done you likely have to pay an annual deductible amount before your insurance starts covering things.
  4. After your deductible is met, your insurance likely still will not pay the full remaining bill.  They will pay a certain percentage (80% is a good example) and you are responsible for the remainder.  This remainder that you have to pay is called co-insurance.

Thankfully, there is one more health insurance term you should know about, which may be your saving grace in the case of a catastrophic illness.  Once you have reached the annual maximum designated by your insurance policy (note:  not all policies will offer an annual maximum), you will not have to pay any more out of pocket for co-insurance for the rest of that calendar year.  (You will still need to continue to pay co-payments, however.)

So, for example, assume you have a surgery done that costs $50,000.  You have a deductible of $500 and your co-insurance is 20% (the insurance pays the remaining 80%), and your annual maximum is $2,000.  For this surgery, you will have to pay the first $500.  The insurance will pay 80% of the remaining $49,500, or $39,600.  At first glance it looks like you will need to pick up the remaining $9,900.  Thankfully, your out-of-pocket annual maximum is $2,000, so you only need to pay a total of $2,500 ($500 deductible plus the $2,000 annual maximum on the co-insurance) for this adventure in medical care.

Have you looked at your health insurance policy?  Do you know how much your co-payments, deductible, co-insurance, and annual out-of-pocket maximum are?  If not, you should take a look.  This is better to know in advance rather than scrambling to find out when you are face to face with a medical emergency.

 

Lessons from Joe Paterno (a classic tip from 1/23//2012)

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JoePa

It’s impossible to be a part of the Penn State community without knowing that yesterday marked the ending of the life of a legend.  Coach Joe Paterno was known for football.  But he was an educator first and a coach second.  He was the coach who re-affirmed the “college” in college football.

That being said, Coach Paterno had a lot to teach in many aspects of life.  What always amazed me about him was his relationship with money.  He was monumentally successful in his career, but he didn’t let his success (and the financial benefits that came with it) change who he was fundamentally.  He and his family never moved to an expensive McMansion.  They continued to live in the modest home they bought decades ago.  Coach wasn’t known for driving fancy cars.  He was known for preferring the simplest mode of transportation—for as long as he was able, he walked to work.  He loved his wife and his family and his very modest lifestyle.

So, what did Joe Paterno do with his money?  He gave it away to causes that he cared about.  He was passionate about literature and the humanities (and almost went to law school rather than going into coaching), so he donated huge sums to Penn State’s library, which now bears his name, and to establish the Paterno Fellows program for undergraduates in the liberal arts.  And these were just the extraordinarily huge gifts.  Coach Paterno gave and gave, both of his money and of himself.  We can learn a lot from his example.

Live simply.  A modest life can be an extremely happy one.  Lifestyle does not have to escalate with income.  Loving the people you care about will bring you more joy than possessions will.  Be passionate about what you care about, and give of yourself to those causes (whether it be in time or in money).

“Little things make the difference.”—Joe Paterno

 

 

Conscious Spending (a classic tip from 1/31/2011)

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More and more often I’ve been hearing the phrase “conscious spending.”  But what does it mean?  It’s more than just knowing where your money is going.  It’s about making a conscious decision to spend more money on some things and less on others—in fact really scrimping in some areas to allow yourself to spend more on the things you truly want.

Conscious spending is about defining your priorities and spending your money to best meet those priorities.  It becomes clear to me every time I talk to my friend Heather.  Heather’s top spending priority is travel.  She will cut back in every other area if it means she can take a trip…to anywhere.  I’m exactly the opposite.  I don’t care if I never travel, because my top spending priority is my home.  Home is the place I most want to be, and I do spend a relatively large portion of my money on not only the house itself, but also improving it and decorating it nicely.  That is what is important to me.  I’m content to buy my clothes at Goodwill, drive old cars, and vacation in a tent in a state forest only a few miles from home if it means that when I come home, it’s the home I want.  Heather doesn’t care if she stays in her rental apartment forever, as long as she gets to travel (without sleeping in a tent).  And we are both very happy with our decisions.

Everyone’s spending priorities are different.  For some it’s clothing.  For some it is a car.  For some it is food.  For some it is entertainment.  For many reading this, I suspect it’s education.  But the thing to remember is that you should make that conscious decision about what things are important to you and make a plan that allows you to spend some of your money on those things—even if it means you have to make cuts in areas that are less important to you.

What are the things that are most important to you?  And what are you willing to give up in order to spend your money consciously on the things you most value?

The Hidden Cost of Bad Credit (a classic tip from 11/8/2010)

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Do you pay your bills on time?  Every time?  If not, you really should.  Not just because it’s the right thing to do.  Pay your bills on time every time because that is the easiest way to establish good credit.  And good credit not only makes your life easier…it makes things less expensive.

For example, Sally and Betty are each buying a new (to them) used car.  Sally has great credit.  She heads off to the dealership pre-approved for a loan at 4% interest.  She borrows $15,000 at 4% and will pay $276.25 a month for 5 years for a total of $16,574.87 for that loan.  Total interest paid=$1,574.87.  Betty, on the other hand has bad credit.  She is lucky that the dealership is able to offer her financing at all, since she doesn’t have a co-signer.  But she is thankful to get the loan at 8% interest.  She borrows $15,000 at 8% and will pay $304.15 a month for 5 years for a total of $18,248.75.  Total interest paid=$3,248.75.  Betty will pay more than twice as much for the convenience of financing her used car because she has bad credit.

The cost of credit is only one of the many ways that bad credit will cost you more.  Want a cell phone?  You may have to pay a security deposit to get a contract.  Need to set up utilities in a new apartment?  You’ll likely have to pay a security deposit.  Need to find a new apartment?  You may need a cosigner to get a lease.  Have a car?  You’ll likely pay more for your insurance premiums.

Do you pay your bills on time?  Every time?  You really should!

DIY (a classic tip from 10/4/2010)

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My aging body aches today from spending most of the weekend power-washing my deck in preparation to re-stain it myself.  As my cramping hand and aching back screamed at me, I couldn’t help but think it might have been a good idea to pay someone else to do this job.  But when it comes to financial good sense, there is no good reason to pay someone else to do a job that you are able to do yourself.  I’m easily saving $350 or more on labor costs by re-staining the deck myself.  Have I done this before or know how to do it even a few weeks ago?  No.  But I have access to the Internet and can follow instructions, which makes nearly any Do-It-Yourself job manageable.

Many basic home and auto issues are easy to take care of on your own if you have initiative and can follow instructions.  Here are just a few things you might want to try on your own the next time:

Change your car’s oil

  • Change your car’s air filter
  • Change your wiper blades
  • Rotate your tires
  • Repair or replace a faucet
  • Replace a light fixture
  • Paint a room
  • Refinish a piece of furniture

The possibilities are endless.  And you may never know which is greater:  the money you saved, or the satisfaction you earned by doing it yourself.

Dining Out on the Cheap (a classic tip from 2/1/2010)

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The best way to save money on food is not to dine out.   But sometimes a meal in a restaurant can be a very nice treat.  And with a few tricks, you can do it without breaking the bank.

Try the early bird special.  Many restaurants offer reduced prices in the early evening.  You don’t have to be a senior citizen to take advantage of it.

  • Go out for lunch rather than dinner.  A lot of restaurants serve similar offerings on the lunch and dinner menus, but at very different prices.  The lunch menu is almost always less expensive.
  • Order the big portion—and a doggy bag.  Many restaurants offer multiple portion sizes on their entrees.  In some cases you can get up to twice as much for only a few dollars more.  Take the big portion.  Split it in half and take the extra home.  You’ll get two meals for the price of one!
  • Eat out on off nights.  Most restaurants are busiest on Friday and Saturday nights.  Be on the lookout for places offering special deals on weeknights as incentive to lure customers in.
  • Use coupons.  Watch the newspaper for coupons for national chains.  Find other coupons in the Entertainment Book or buy discount gift certificates at Restaurant.com.
  • BYOB.  If you like a glass of wine with dinner, look for a restaurant that doesn’t have a liquor license but will allow you to bring in your own bottle of wine.
  • Drink water.  There is a huge profit margin on beverages at restaurants.  The glass of soda that costs the restaurant only a few cents to pour will likely cost you a dollar or two to purchase.  But water remains free…and much better for your health!

Follow these tips and enjoy some great restaurant meals without going broke.  Bon appétit!