Living Rich by Spending Smart

How to Get More of What You Really Want

Gregor-Jr Karp

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Dedication

For Dad and Grandpop,rolc modcls ond nohle mcn

Contents

Inhoaluction: The Sp€4lu4&]s4arlPbilqsaphyChapter 1 Financial FITness: lvhackine the \Morst Offenalers

stoc@Coupon Clipping Conundrum: Ha

Dinine Out: Celebrations Versus Poor MeaI Plannine

Tife Tnsrrrance: Tt's Yorrr Monerand Yorrr Tife

Wire.less Mobile Phone: Don't T,eJ Them Ce.ll You a Bad PIan

Home and Arrto Tnsrrrance: Don't PavToo Mnclr

Phone at Home: PavT,ess for Yonr T,andline

tex 2 Kn.}I^' Thine F,ne.rnv: It Is Us: The Proble.rn Retwee.nO r Ears

Smart People. Dumb Spending: Fire theEvaluating Value: Psvchological Income

Impulse Spending: HarneNo Excrrses: The Ties We Te.ll Orrrselves

Monev Personalities: What Tlpe Are You?

Shopprng Addiction: "Shop T htex 'r'Whflt a \Maste!: Pet Peer'es and II.}t R tt.}nsBotded Water: Tap into Savinss

.I nkv Tnsrrrance: F.xtended Warraniies and Other Tnsrrrance YonDon'tNeed

Tineshare Vaciiions: The Worst Real Estate Deal F.ver

Smoking: Your Monev-UltillsluqkcInkJet Cartridges: Refill Rage

Lotterv: Winning the Jackpqlls!{LaEltaltqialPlallTeitbooks: GeJ Scllooled in the Alternaiiles

Greeting Cards Discarded: SpcsiaLtQleasialtlqa{1ba4r(LBstba b[Chapter 4 The Bie Picture: Shateqies for Spenaline Smart

Compalsa!$happilrg: &Tracking Spcrd4gilaElNlc EltaltecsRules ofThurnb: Benchmarks for SpeqlilgSuaI[Buving Tactics: When the Price Isn't Realllr the Price

Hvbrid Ve.hicles: Have, Nonfinrncirl Rerson for Brrvins One

clrrse of Arrtomaiic Pa\''nents: Monthlv Commitments Will HarrntYou

Bul'ing Used: Secondhand Gives You a Leg UpSpclrdilrg U4lrdfallsi lalrtrBMembership Has Its Privileges: Savi

shoppurgQlrllrcicc€k&ur IChapter s Arounal the House: Ev ayfu

Running Hot and Cold: KeeLYaulBaugbLlllltdqalsGasoline: Fuel Savings with Better Mileage

Television: Tune In to Savings

Pers: Don't T,eJ Fido SinkYorrr Finan(:es

Prescription Drues: Just Sav No to Hiqh Prices forMedsIibrrrv: Free Shrff Galore

compaelluarcslcdsisect !dLawn and Garden: Grow Your Savings

Eveglasses and Contact Lenses: See the Price Difference

Clothing: Better Duds for Less

Chapter 6 Financial FoolishnessSe.r.vices

Brnk Accorrnts: Don't PavAnvoneto Hold Yorrr Mone

Credit Cards: Plav the Game RightCredit Crrds TT: Advrnced Tacrics

Debt Reduction: Finish PaJ'ing for Your Purchases

Index Mutual Funds: You Can't Beat 'em-Se.lqi!Lb!4

Chapter ? That Tine of Year: SeasSrnart

Back to School speltdiltgi&baqlD4zcHolidav Spending: Ho. Ho. Ho.

Valentine's Dav on the Cheap:UllltqrlEltdiltg Up tilt tbcDoghouse

Tax Prepalalialtilrugdl{4ys ta lc Sa!4

WeddingCihs: An lnvilation ls Nol an lnvoice

Kid BirthdrvParties: Re.in in the Ridicrrlo,rs

AmrrseJnent Parks: Costs Shorrldn't Take Yorr for a Ride

Vaciiion Accommodaiions: Hote.l Versrrs Home Rental

Chapter a Life Happens: Big{ic Infreqrrentsl)en.lingHow Mrrcl Car Crn T A{ford? Less Than You Think

Td eniitv Th eli: Wh at Protecrion s a re Worthwhile?

WhvBrrvUsed? Yorr'reNot Buvins Someone F.lse's Problem

HowMrrcll Horrse Crn T Afford? Don't Be "House Poor"

Moving Costs: Getting Your Stufffrom Here to There

Wedding Spending: Like Marriage.

College Tuition: The Two-Year-TyD:lcalPlallDivorce: Spenalinq Less on Splittinq Up

A Final ThoughliBuyil&Halpi nessIndex

Hospital Bills: Rampant Mistakes Are Sickenine

Frrnerals: Trvto Brrrvthe Pain and Grrilt

Acknowledgrrents

In 2oo3, Tribune Co. was creating a new personal finance section thatwould be available to all its newspapers, including the one where Iworked, tJre Allentorrn (PA) Moming Coll. That's when I successfullyproposed a new kind of consumer column that I would write. We wouldcall it "Spending Smart." It was first published in January 2oo4-

"Spending Smart" was an instant success with the millions of readerswho buy Tribune Co. newspapers, which include Ihe Chicago Tribune,Baltimorc Sun, HaftJotal Coutant, and, Oflando Sentinel, among others.The column's success ilid not stem liom my journalistic prowess.Rather, the topic of spencling your noney srnarter struck a chord withreaders. They had plenty of financ.ial writers advising them on how tomanage their extra money. But they didn't have someone telling themhow to accumulate that money in the first place how to spend theirmoney smarter so they had some left over to manage. That's why theylove the "Spending Smart" column.

Since the first column rolled off the presses, literally hundreds ofreaders have written and phoned with praise and critic.ism, both ofwhich were invaluable. I am gratef,rl and indebted to those readers-

"Spending Smart" the newspaper column the genesis of the idea forthis book would never have achieved liftoff witlout initial andcontinuing support liorn several top-quality editors at the Morning Coll.They are former Business Editor Michael Hirsch, Managing Editor DavidErdman, and Ealitor Ardith Hilliard. I thank them for that-

This book also benefited liom rnany of the eqrerts I talked to along the

way. They are far too numerous to mention by name, but I thank themnonetheless.

Thanks also to the folks at Pearson Prentice Hall, including E\ecutiveEditor Jim Boyd and Developmental Ealitor Russ Hall. Thanks too, tomanuscript reviewers Liz Pulliarn Weston, an author who also writescolumns for MSNMoneg, and q'nthia Smith.

Thank you to Coach Deb, who helped rne figure out what I wanted to dowith my professional life. Those Sunday evening coaching sessions byphone led direct15 lo lhis boolc Thanks, sis.

Finally and most importantly, I want to thank my immediate falnily forunwavering support. There were too many times when Daddy couldn'tpay enough attention to Jacob and Michael because he was cooped up inthe home ofEce tapping away at the computer keyboard at night, onweekends, and during holida]'s. And to my wife, Rebecca, thank you foryour constant encouragement and bounalless optimism. You are myinspiration.

About the Author

Gregory Karp is an award-winning, nationally published newspaperjournalist. Greg's column, "Spenaling Smart," is consistently among thepopular personal finalce columns in Tribune Co- newspapers eachSunday. In 2()()6 the colunn was narned Best Column by the Soc.iety ofAmerican Business Ealitors and Writers.

Greg's writing regularly appears in such newspapers as the ChicogoTribune, Neu)sdaA, Baltimore Sun, HaftJotal Coutant, OflandoSentinel, and, Allentou)n (PA) Morning CaII.lt also appears on the Websites of such television stations as IWIX in New Yorl! WGN in Chicago,and KTLA in Los Angeles.

Greg often writes family money stories for Better Homes and Gatalensmagazine. He's a frequent guest on the rnorning show, Good DaAPhiladelphia, and appears weekly on RCN-TV in the Lehigh Valley,Pennsylvania- He maintains a blog at themorningcall.com.

Greg lives near Yarclley, Pennsylvania, with his wife and two sons.

Introduction:Philosophy

The Spending Sllrart

Controlling Spending Is the Key to BuildingWealthSpending Smart is the only way to get out of debt and build wealth.That's a bold, but true, statement. It's like calories are the key to a

weight-loss diet. It doesn't matter what the new aliet fad is. A aliet to loseweight only works if you burn rnore calories than you consume.Everlthing else is just window dressing and hgre.In fact, controlling spencling is far more irnportant tlan the amount ofyour debt, which investments you choose, or even how much you earn.For people in debt, it wouldn't matter a bit if sornebody grac.iously paidoff all their credit cards or ifthey got a huge bonus at work to pay off thebalances. Before long, tleyd run up the card balance and be right backin serious debt because they didn't fi,\ the fundamental problem,spenaling too much money. Americans today don't have a problem withdebt- They have a problem with out-of-contol spending. Debt is simplythe result-

The truth is, you can't outearn durnb spending. Just ask all thernultimillionaire Holll'wood celebrities, sports stars, and lottery winnerswho ended up broke. Most people becorne wealthy and stay wealthybecause lhel care as much aboul moneJ going oul as mone) coming in-

Spending Smart provides both the philosophy and the details to helpyou care about your spending too. If you already care, it will speed your

trip to financ.ial lieedom and wealth.

The Trrrth About Getting RichThe basic premise of wealth must be understood. It doesn't matterwhether you earn $2o,ooo a year or $2oo,ooo. The only thing thatrnakes you wealthier is regularly spending less money than you make.

That was proven n The Millionaire NexT Doot, a tremendousbest-selling book that shattered mlths about who America's millionairesreally are. In fact, millionaires are not highly educated people whoinherit a lot of money and spend it on obscene lu-r_uries and pamperedlifestyles.

Instead, they are hard-working people who, among other commonattributes, care about what things cost and about getting good value fortheir money. In short, America's real millionaires not those who justlook the part care about their spenaling. And you should too-

I like to think ?he Millionaie Nert Doot proved the philosophy, andthis bookprovides the details.

Spenaling Smart is not about lieeing up a few bucks here and there, butliterally thousands of dollars, which compounded over a lifetime is thealifference betlveen struggling and being rich.

If getting rich isn't your goal, you still need to spend money smarterbecause money gives you options. You have options to quit a job andpursue a lifelong drearn, options to give money to charitable causes thatinspire you, and, in general, options to pursue what makes you happy.

Spencling money smarter will help your relationships and rnaybe evenyour sex life. Without the desperation and fear that comes with moneyproblems, all the relationships in your life can be rnore enjoyable.

You need to control spending to build wealth. It's the only way outsidean inheritance, lottery win, or some other windfall you'll everaccumulate enough money to make it work for you- That means gettingmoney to start making its own money. For most people working normaljobs, tlere are not enough hours in a day to build wealth sirnply liornworking for a wage or salary. Instead, you should spend less and investyour money, whether in stocks, mutual funds, investment properties,your own business, whatever. All that matters is your money is makingrnoney while you sleep-

For most people, it's the only way to get rich.

Learning to Spend Less"Living below your means" is a simple and often-stated concept inpersonal finance. But what isn't ex:plained is how exactly to spend moneysmarter, so you have sorne left over.

Many personal finance ex:perts advise you to "pay yourself first," whichis now a tired clich6 for socking away money before you start paying yourbills. But that works only if have enough self-control not to continuespending and simply throw the charges on a clealit card. That leads tothe illogical situation many Americans face saving money in the bank atless than 5 percent interest at the same time theyre paying 18 percentinterest on their crealit cards- Their return on that "investment" isnegative 13 percent.

t ltimalell, il all comes down lo spenaling.

Standard cost-cutting advice makes sense, such as eating out atrestaurants less often and forgoing a fancy coffee every morning. But it'snot nearly enough to liee up the thousands of dollars you need to make

a alifference in your life.

What you need are both overall strategies and spec.ific wa]'s to reducespenaling. It's stuff you could probably research and figure out foryourself, if only you had urlimited time and access to the nation'sleaaling ex:perts. With those resources, you could investigate everyalternative to buying ex:pensive ink-jet cartridges, figure out whetherextended warranties are a good deal, and read books on how to buyinsurance.

But you don't have that time. So, you bought this book instead. With thisbool! you won't have to figure out for yourself which contaalictory tipsare true about saving money with home heating and cooling, forexarnple. This book will just tell you. It will say, flat out, "This is right.This is wrong."

This book won't give you dozens of dopey ideas on saving a few pennieshere and there no tips on rnaking your own laundry detergent orreusing dryer lint-We'll cut to t]le chase and whack out the biggest offenders of wastef,rlspending and highlight the easiest cost cuts to make.

Spending Srnart Is Not About DeprivationSpenaling Smart is not a "live cheap, clie loaded" plan or some exerc.ise infiscal alorexia.Diets don't work if you're constantly hungry. And a plan to cut spenalingwon't work if you have to say no to buying things you really want- Thegoal is to reallocate spending to satisly all your needs and nany of yourwants.

You do that by plugqing the leaks of wastef,rl spencling and forc.ing your

dollars to go where you want them to. It's about spenaling on purposerather than by acc.ident and habit.

Who cares which phone company is provialing your dial tone? Switch to alower-cost carrier and save hundreds of dollars per year. Insurancepolicies are generally the same. They guarantee a certain payout if badthings happen to you, a car acc.ident, house fire, even death. Why wouldyou pay more for one policy over another? And does a jar of sale-pricedSkippy peanut butter taste any different than if you paid full price?

Life is flrll of spending choices, and rnaking smarter dec.isions time aftertirne adds up.

The average four-person household spends rnore than g62,000 a year,accoraling to government statistics. Cutting spenaling by just 1() percentreaps a cool $6,2()() a year, or $517 a month. That would go a long waytoward paying off debt- Or, you could reclirect that money into buying anicer car or paying for a home improvement.

Or, if you started investing that money, you'd save more than $3oo,oooin cash in 2() years, assuming a modest B percent return.That's the power ofnot spenaling.

Why Cutting Spending WorksIn the short term, not spenaling a buck beats earning a buck every tirne.Here's why:

. Magnitude. You keep 1oo cents of an unspent dollar but maybe 6() to75 cents of an earned one, after ta-\es, Soc.ial Security, and the otherdeductions take tleir bite liorn your paycheck. Cutting out a

$So-per-month cable TV bill is the same as a $3o,ooo-a-year worker

getting a year's pay raise of 3.3 percent, or $Looo. Benjamin Franklinsaid, "A penny saved is a penny earned." But that was before the eraof income taxes. Today, a saved penny is worth far more than anearned one-

. Speed- Cutting spending is faster- You can cancel an expense, such as

your gan rnembership, and start saving money today. You will beinstantly better off. But it tal<es a long time to change your income. Itnaybe rnonths before you can get a pay raise at worl! and overtimehours may be sporadically available. The only inmediate tlfng youcan do about income is to get a secondjob tlat starts this week. Or, as

many Americans do, you can use fake income, such as a crealit cardthat gives you an illusion that you have more cash- Of course, tlat justcreates a crisis later when the crealit card bill arrives.

. Control. You have more control over spencling tlan income. Youmake dozens of speniling decisions a day, liom a morning mocha latteat Starbucks to whether you turn up the heat an extra degree in yourhome. However, your dec.isions about income are few on a daily basis,outside of resolving to get up and go to work so you aren't fired-

. Tirne well-spent. If you think you don't have time to reduce spenaling,convert the time you spend on cost-cutting to an hourly wage- A 2oo2study at Virginia Tech University used students to comparison shopfor various purchases. In one case, 16 minutes of comparing prices onthe same model of color television saved $1oo. Converted to anhourly wage, tlut's $375 an hour. And ifyour total ta-\ bite with Soc.ial

Security amounts to 40 percent, it's the same as earning $625 anhour, or $r.3 million a year. Using the same math, spenaling threeminutes clipping and using $1o worth of coupons pa]'s $333 an hour-Taking 1() minutes to mail in a $5o rebate on a new computer printer

earns you $5oo anhour.For those who enjoy sports metaphors, spencling is like defense. Ask aknowledgeable fan of any rnajor sport to identifu the most importantfactor in winning, and you should get the same answer- "Offense is moreexc.iting, with the home runs, the touchdown passes, the slam dunks,"tle fan will say- "But defense wins charnpionships. It alwa]'s has."

And so it is with money. Earning, the other major component to money,is more exc.iting and sexier, like offense. But for average people, winningwith money ultimately depends on speniling, your defense. It alwa]'shas.

It's true that cutting costs is not a substitute for growing your incomeover the long term, but it allows you to get the most out of the incomeyou have, whatever it is, today.

Spending Srnartr A Proven PlanToo many financial books are glad to tell you what to do with all yourextra monet but how do you get tlat pile of cash in the first place? Youspend your money smarter.

I know, because I've written rnore than t75 newspaper columns aboutspencling money smarter. The colurnns appear in newspapers thattogether have millions of readers. Over the years, hundreds of readershave e-rnailed and called to tell me how usef,rl the tips were to them.Some gush about how easy it was to spend less money, all because theyhad the power ofknowledge. Besides doling out advice in the newspapercolumn, I've also talked about Spending Smart on television, raalio, andin ny Web log, or blog.

I've interviewed the money gurus, frorn Suze Orman and David Bach to

Dave Ramsey and Jean Chatzky. I've talked witl Thomas J. Stanley,whose book The Millionaite Nert Doot changed our notions about therich in America. And I've tapped the ex:pertise of those who are nothousehold narnes, but ex:perts in their field, whether that's aboutmanufacturer's coupons, ernotional spencling, or auto insurance-

And I've put these princ.iples and tips into action in my own home,lieeing up money to spend on things my family really cares about-

This book is organized into chapters with sections, each easily finishedin a short sitting. Sections are essentially independent. You can readthem in any order you like, with no plot or running theme to remember.

And don't be overwhelmed by the sheer volurne of information andadvice in this book. Wtile it doesn't nearly cover all areas of spencling inyour life, it does provide literally hundreds of actionable tips. You don'tneed to implement all the Spending Smart advice right awat but you doneed to get started today-

r. Financial FITness: Whacking tlhe \MorstOffenders

The first steps in cutting spenaling painlessly can be summed up in a

short acron]'n, FIT. It stands for food, insurance, and telecommuni-cations- These are the three best categories in which to start yourspencling nakeover. Reviewing these areas of spencling will send you onyour way to becoming financ.ially FIT-

Why? Because you can reduce spenaling without depriving yourself, thesavings are signficant, and the t]'pical waste is enormous.

Just as important, these are three areas of repeat spenaling- In otherwords, you'll be spenaling money in these areas again and again, everyyear for your whole life. For most people, that makes these ex:penses

more costly than any one-tirne purchase, inclucling a house.

The average family of four in America spends about $8,6()() a year onfood, $3,6()() on insurance, and $L3oo on telecommunications,accoraling to the U.S. Consumer Ex:penditure Survey. That's $13,5oo ayear in spencling, or more than a quarter of all spenaling.

Then, figure you have to spend money in these areas for your entireadult life of, say, 50 years. That's $675,000 of lifetirne spending, intodays dollars, on food, insurance, and telecommunications.

Granted, t]le proportion of spencling in these areas might fluctuateduring a lifetirne. For exarnple, food spending for retired empty-nestersmight be less than for families with hungry teenagers. But the point isclear. These are areas of massive lifetirne spencling. And theyre ripeareas for spenaling smarter.

Here's a prealiction: Aiter reaaling this chapter on food, insurance, andtelecommunications, you will be able to save at least $Looo this year,and probably much more. That means the first chapter alone will pay forthe cover price of this book hundreds of tirnes over and adequatelycompensate you for your time spent reaaling it.Each FIT area has a mega-concept ex:plained in more detail in followingsections. These big-picture ideas alone can save significant money. Theyiue:

. Food- Food spending has tlvo main categories: eating in and eatingout. The idea while grocery shopping is you generally shouldn't buywhat you need. Instead, you should buy what's on sale and stockpileit- For eating out, the idea is to eat out on special occasions andbecause you want to, not because you're a poor rneal planner.

. Insurance. The main idea here is you don't insure against litde things.Insurance is to protect you liorn financ.ial alisaster, not nuisanceexpenses. And life insurance is to protect people who rely on yourincome no matter how you clie- That usually means you just needplenty ofterm insurance, which is cheap.

. Telecommunications- This category refers to phone services. Makesure you're not paying for rnore service than you need. Telecomcompanies make pric.ing plans confusing on purpose, in hopes you'lloverbuy. There's nore competition than ever, so price and offeringschange continually. Shopping for service beyond your taalitionalphone carrier is key.

Tackle these three areas, and you'll be financially FIT with litde sacrifice.

Stockpiling Food for Savings: Bodega in the

BaserrrentWeekly grocery shopping can be a major headache, but it's also a majorsource of painless spenaling cuts. One great stlate$r involves buying allthe brand names you love and not clipping a single coupon.

It's stockpiling.

The first part of the strate$r is keeping a price list, a simple notebook ofprices on items you buy regularly. Then you'll know when something istruly on sale. You won't have to take the supermarket's word for it. Forexample, do you know whether 92.99 per pound is a good deal forboneless chuck steak? A quick look at your price list will answer thatquestion.

The second part of the strate€Xr is the key. You don't go shopping everyweek for what you need- Instead, you go to buy what's on sale tlat week.Then you load your pantry and freezer with sale-priced foods. When yourun out of peanut butter, for exarnple, you don't go to the store to buy itat f,rll price; you fetch a jar from your own pantry that you bought onsale. Before long, if you're stockpiling in the basement, for exarnple,you'll have a aliscount convenience store or bodega one floor down.

That's it know what's on sale and buy only what's on sale. That's thestockpiling stlate$r.Of course, exceptions to t]le stockpiling stratesr include perishables,such as liesh fruits and vegetables and milk. And if you live in a smallapartment with limited storage space for stockpiling food, t]le stratesrwill be less effective.

But for most people, stockpiling alone could save them 2() percent onthe cost of food and nonfood items at the supennarket. Considering anAmerican family of four spends a cornbined g6,700 a year on

grocery-store food, housekeeping supplies, and personal-care items.Simply buying the exact same products but at sale prices would save

$1,34o.Think about tiat: You go to the same supermarket you always went to,and you buy the exact sarne products, all brand names if that's what youprefe!. The only difference is you buy them at the most favorable times.How easy is that?

Here are detailed tips to help with stockpiling:

. Get the flyers. Items on the front and back pages of the weeklysupermarket circular are likely to have the deepest discounts.Supermarkets call tlem loss lecders, meaning the store actually sellsthe item so cheap it loses rnoney. The idea is to entice you to visit t]lestore and buy ot}ler items with high profit nargins. [,oss leaders arepedect stochile items. If you missed the supemarket flye! for yourfavorite supermarket, go online to ififlv.mlrgrocerydeals.com to lookit up. And often flyers are available at the store.

. Play the cycle. Supermarket sales run in rougbly p-week rycles, sofigure that items will go on sale about every three months. Thatmeans you don't have to go wild buying a year's worth of brealdastcereal because it will be on sale again fairly soon.

. Think nonfood iterDs too. If you see a great sale on batteries, papertowels, or shampoo, stock up on those when tiey're on sale.

. Consider a second freezer. Ifyou can get a secondhand food freezerthat's fairly enerry efficient, stockpiling frozen foods while they're onsale will more than pay for the freezet over time.

. Bring a calculator. Be sure to shop by unit price. For example, which isa better buy: four p-packs of Coca-cola soft drink cans for gto or a

6-pack of cans for $r.59? A calculator will help you figure the price perunit, which in this example is the price divided by the number of cans.The p-packs are a better deal at less tlan 21 cents per can, while the6-pack costs 26.5 cents per can. About a nickel per can doesn't soundlike rnuch savings until you figure your household might drink a case

of soda a week. That's a savings of nearly $7o a year just for buyingthe exact same soda in p-packs instead of 6-packs.

. Use warehouse clubs judiciously. Some staples, such as eggs andbutter seldom go on sale at regular supermarkets. So, they might becheaper at warehouse clubs, such as Sam's Club, Costco, and BJ'sWholesale, which sell many items in large quantities at a aliscount.However, warehouse clubs are hotbeds of temptation for buyingitems that are not such great deals. And you alwa]'s have to be wary ofbuying perishable items in huge quantities because they might spoilbefore theyre used, which will more than destroy your savings.

. Try store brands. People once derisively called thern "generics." Inrecent years, store brands have improved immensely in quality.Consumer Repotts magazine found that some are as good or betterthan name brands. In fact. the exact same manufacturers that makethe comparable name-brand products mal<e many store brands. Atleast try store brands for items you don't care much about whereaverage quality is acceptable. And try store-brand over-the-countermealications, such as aspirin. Formulations are regulated by t]le Foodand Drug Administration and usually mirror the active ingrealientsfound in name brands.

. Heed the usual advice. You've probably already heard such good tipsas shop witl a list to prevent impulse bu]'s and not to shop hungry,which might prompt you to overbuy and stray liom your stockpiling

stlate$r. And remember to only buy convenience foods thatsignificantly reduce hassle and are worth the cost. An obviousexample is buying liozen orange juice concentrate instead ofsqueezing your own oranges.

Try stockpiling for three months to see whether it works for you. If itdoesn't, you could alwaJs revert to buying groceries at f,rll price. Butrnost people will find they can save big money by not shopping for whatthey need, but shopping for what's on sale.

Coupon Clipping Conundrurn: Hassle orGoldrnine?

Shopper t: "Clipping manufactutet coupons is a u)aste oJ mAtime too much elfottfor too little saUings."

Shopper z: "Clipping coupons can save Aou hundreds oJ dollars a

Aeat becaLlse the little discounts rcaIIA add up."Who is correct? The answer is, they both are.

Coupons are a waste of time, unless gou use them correctlg. Clipping andfiIing litde pieces of paper every time you see a coupon is a tremendousinvestment of time.

On the other hand, huge savings are available. Industrywide,manufacturers offered $331 billion in savings through coupons in 2()()6,accoraling to CMS Inc., a coupon clearinghouse and operator of thecoupon industry site Coupo!{!IhNe]q-qe!4.

An American family of four annually spends about $4,Boo on grocerystore food, as shown in Table 1.1.

Table n Fooil Speniling in Arnerica

onc Pe^.n Fsmil) ofFnur

Source: Consumer Expenaliture Survey, 2oo5

A four-person farnily also spends g8oo on housekeeping supplies, g4ooon personal-crre products, and $13o on nonprescription drugs andvitamins, accoraling to government figures on consumer ex:penalitures.Those categories of items can be found at most supermarkets, and theyall have coupons.

Super shoppers claim they save 5() percent, or half off, using a

combination of sales and coupons. Their annual savings would be rnorelhan S3,ooo lor lhe average [amil5 o[ [our.

So, what's the smart way to use coupons?

One of the basics of proper coupon use is to stockpile items when it'smosl advanlageous lo buy lhem, nol lrhen )ou need lhem. lSee lheprevious section "Stocl-piline Food for Savinqs" for details on thestockpiling strate$/.) This eliminates t]le complaint, "They never have a

coupon when I need it" because you always need it for your stockpile.

Here's how to use coupons for the biggest savings with the least hassle:

. Use the triumvirate of supermarket savings. Weekly sales, coupons,and supermarket loyalty cards are the three wa]'s to get good deals on

groceries. The goal is to use them together to get as much savings as

possible. Avid coupon users regularly get items half off or even liee.. Don't clip. Instead of clipping Sunday newspaper coupons, save the

whole glossy insert, liom such companies as Smartsource, Valassis,and Procter and Gamble. You don't even need to look at the couponsinside. Just write the date on the corner of the liont page and file it ina drawer or container. When you're ready to go to the supennarket,go online to www.coup!!t!4et4{e]u and search its liee NewspaperCoupon Online Database for the item you're looking for. It will tell youthe date of the glossy insert where you can find the coupon. Forexarnple, ifyou see a sale on the Gillette brand ofrazors you use, go tothe online database to find the date a coupon was published for thoserazors- Then, pull the coupon circular to find a coupon to pair withthe sale. Its Grocery Deals list helps you match a coupon with a storesale. A similar Web site called The Grocery Game atwww.grocervgame.com also works well. That site charges a small feeof $S a month but promises to tell you about unadvertised sales andclue you in when items hit "rock-bottom prices" at your supermarket-

. Look on Sunda)'s. Newspaper coupons in the slick circulars onSunday offer the biggest savings. Weekday coupons tend to havelower values, and you can skip them altogether if you don't have timeto mess with them.

. Read t]le fine print. Look past the pictue on the coupon and read theoffer- Savings can apply to several sizes and varieties of relatedproducts other thanjust the one pictured-

. Smaller is better. When using a coupon, buying the smallest packagethat qualifies reaps the best savings. For example, $1 off a si\-pack ofsoft drinks has a bigqer percentage impact tlan $1 off a case.

. Double your savings. Using double-coupons savings, available atsupermarkets in many parts of the country, is an obviously good idea,but it's not tie or y rday to multiply savings. rrivith two-for-one sales,also called "buy one get one free," you can often use two couponsbecause you're buying both items-even though you're getting one

. Shop on the best days. Go to the supermarket on Sunday, Monday,and Tuesday. Store sales generally start on Wednesdays, but thecoupon to match that sale frequently doesn't come until Sunday. So,the time window to capitalize on both the sale and the coupon is bestafter you get the coupons on Sunday and before the nert sale cyclebegins on Wednesday.

. Use restraint. C.oupons can prompt you to bT new products andbmnds, and that's okay. But if you find coupons encourage you to buymore convenience foods and junk food, it won't be good for yourwallet or your waisdine. So, use coupons mosdy to purchase itemsyou already planned on buying.

. Print online coupons. You can print manufacturer coupons frommany Web sites. These coupons tend to have higher dollar valuesthan newspaper coupons, and you can print only the ones you want.Try such sites as Smartsource-com, CoupelE ee!t, CoolSarings.com,and Eversave-com. Pdnt the coupons in color ald bring in the wholeprinted page, instead of cutting out coupons. The supermarket ismore likely to accept it. Don't ever buy coupons from a Web site. Theyare likely to be liaudulent.

If you use coupons correcdy they can be more of a goldmine than ahassle.

Dining Out: Celebrations Versus Poor MealPlanningDining at restaunnts once rvas reseled for special occasions, such as abirthday, wedding anniversary, or job promotion. But today, manyfamilies are eating out several nights a week, even when nobody reallyfeels like it. Mosdy, it stems from busy families not having enough timeto prepare meals at home.

Meanwhile, making coffee at home for the conmute or brcwn-bagging alunch has become an almost quaint habit. In 1995, Arnericans spent lessthan 38 percent of their food budgets on eating out. Just a decade later,it was 44 percent, accoraling to government figures on consumerexpenditures. The rate is even higher among single people.That uend is costing Americans. big-time.

A family of four spends about g3,8oo a year on food away frorn home.That total isn't just celebratory dinneN out, but vending-machine softdrinks, convenietce-store snacks, McDonald's runs, delivered pizza, andtake-out Chinese food.What if you could cut in halfyour eating-out budget and still have all thespecial dinners out you wanted? You can. The secret isplanning planning to eat in and planning to take food and drink withyou. Here's how:

. Freezer meals for dinner. Make weekday cooking easier by usingfreezer rneals. When you're not rushed ald have time to cook, maketwo or three times what you need for that night's dinner and fteezethe rest. It doesn't take exha effort to male double or triple batches

because the ingredients and coohrare are out) and cleanup is aboutt}le same. So, instead of making a single meat loaf, mal<e two or tlrree_Triple t}te recipe for a casserole or make zo hamburgerc at a time. Thepayoff comes on a busy evening when you come home tired andnaybe grurnpy liom work or running errands. Instead offalling backon eating out, you can grab one ofyour freezer meals and microwaveit. It ends up being much cheaper and quicker tian eating out, andusually winds up being more healthful too.

. Lunches. If you pay g6 each workday for lunch, whether at thecompany cafeteria or at a restaurant or deli, you're spending about$r,5oo a year on lunches for one person. By contmst, bringing foodand drink to rvork might cost about g2 a day, or g5oo. you mustdecide whether that gt)ooo-a-year difference is worth a few minutesto throw a lunch in a bag to bring to work. It could mean paying for ayear of a child's education. How? If you instead invested that lunchmoney at 8 percent for a child's college education ftom birth to age r8,you would have about S4o,ooo on their high school graduation day,as shown in Table 1.2.

Table 1.2. Saving g4 a Day with a Brov..n-Bagged Lunch Turnsinto a Great Start Toward Colle8e Tuition

c'dh on $r.000 5ar'0d .r 3* Reium

Source: Calculated at alinl<ytown.net

Note: Final total could differ slighdy depencling on liequency ofdeposits.

. Day trips. Family excursions to the zoo, local swirnming pool,amusement par\ or even hiking and road trips, all can be donecheaper with planned-ahead food and drink. Even if you takeconvenience foods, such as prepackaged snacks, it will be cheaperthan eating out.

. Beverages out- Celebratory alinners out might involve a beer or glass

of wine. But try to skip the booze during more routine alining-outevents. A glass of wine before you leave for the restaurant is one idea,

assuming it won't impair your driving ability. Or plan to have a

nightcap when you get home. Soft drinks out are wilclly expensive forwhat you get- Try ordering liee water with meals for a few restaurantoutings and see whether you really miss your usual beverage-

. Keep the meal to one course. Surrouniling a alinner with appetizers,coffee, and dessert is a lot of consumption at one sitting, espec.iallyconsidering today's large portion sizes. If the restaurant's dessertsare special, plan to come back on a alifferent night and just ordercoffee and dessert. Then you have tlvo alining-out occasions for theprice of one. A couple of light eaters could easily split an entee ororder only appetizers.

. Dinner parties. Inviting friends over for a horne-cooked rnealaccomplishes the same soc.ial interaction and enjo]'nent as going outto alinner but witlout the restaurant prices. Swapping alinner partieswith friends, neighbors, and relatives could also cut down on the needfor baby-sitters ifyou can bring the kids along-

. Coupons. Many nicer restaurants, not just the chains, offer couponswitl significant values. One place to look online is Restaurant.com,which sells dining certificates. A t]'pical offer is a $25 certificate for$1o- Otlers are DinnerBroker.com for off-peak dining, andOpcltTabl€=eatt has a rewards points system. I cashed in on a superdeal at Restaurant.com when it offered a special coupon code for 7opercent off. So I bought a $2S coupon to one ofthe nicest restaurantsin my area and paid just $3, clearing $22 for a few minutes on thecomputer. Many metropolitan areas have Entertainment Books f,rll ofclining coupons. See details at www.entertainment.com or get t]lemeven cheaper through an AAA or other membership. Also, look forEntertainment Books in midsummer, when they're sold at a deep

discount. Just be aware that you,ll onJvIatue -instead ofa year -before couoonsTurn back the clock and male dhine ourDanK account will tlank vorr

Life Insurance: ft's your Money and your Lifell_"g!'j* ":"r1"0.

for bener prices on life insurance n* a*^, to"n ,,g::1_':* lr' plummeting prices over tle past decade h"; ,;;.;lmperatlve lor spendirg smart.If Jou }aven't looked at rates for telnprobabh wasting big mon"v. rt. til" "oilfl,

insurance recentiy. you'reoro pla.ver thariod?1l"..iii".idil '""t"urng to pav rsaS pfices for a

Life insurance.premiums are less than half what the\ \aere in *remld-t99os. as shown in Table t.?. Todav.

:::d.i": j-d",.dh""i,h!{*-;685;',:"1."#l;: j:"#]:nr,fi :Iqg4i that s nearl], $7,ooo difference overa decade.

Ta!\ r,S. Premiums for gsoo.oo(4o-rear-old MaIe Nonsmoker

t of rerm Life Insuralce.

get a few months worth ofexpire.

a special event again. your

Source: Insurance Information Institute

And it's not tlat big a hassle to sreitch polic.ies- A couple hours of workcan save ]iterally hundreds of dollars per year-

So, you should "refinance" your life insurance. It's similar to refinancingyour home mortgage to get a better interest rate, tlaaling a higher housepal nent for a lower one. With insurance, you can get the same policy forless money- Or you can buy a policy with a bigger payout $/ithoutinoeasing your premiums. And tle beauty of refinancing your lifeinsurance is that there are no closing costs like there are withrefinancing a mortgage. The insurance company pa]'s for tle switchingcosts, such as the meclical exam and paperwork. You begin saving rightaway-

Contemplating the financ.ial fallout liom your death is no fun, but it'spart of being a grown-up when other people depend on your incone-

Here are some straighdorward questions and answers about lifeinsurance and "refinancing" your policy to save money:

. What is it exactly? Life insurance should be relatively sirnple. Theinsurance company pa]'s your benefic.iaries aI agreed amount ofrnoney ifyou clie. For exarnple, if a middle-aged man with a $5oo,ooopolicy dies, his benefic.iary, usually his wife, would get half a milliondollars. She'll use the rnoney to pay for regular living expenses, kids'college, building a retirement fund, and other costs oflife. It replacesthe income the man would have earned if he had lived. However, lifeinsurance becomes complicated if you buy anlthing but terminsurance. The alternative, cash value insurance, has an investmentcomponent tied to the life insurance. Cash-value insurance has manybuilt-in fees and a lousy rate of return on the investnent portion. So,

most people don't need to consider anlthing but term insurance. Andterm is so much simpler. If you want to invest, that's great. Just do itseparately liom insurance.

. Who needs it? Breadwinners who have other people such as a spouseand/or children depenaling on their income need life insurance. Thetop earner in the family would be an obvious choice. And you mighteven need a small policy on a stay-at-home mom, for exarnple. Thesurviving husband might have to pay for services the mom provided,such as child daycare, after-school care, or possibly domestic help forhousehold chores such as cooking and cleaning. The bottom line onbuJrng life insurance for yourself is to asl! "Would anybody befinanc.ially distressed if I died?"

. Who doesn't need it? Children don't need life insurance. Almostnobody depends on a child's income to survive, and statistically very

few children die. Ifyour family would face financ.ial ruin from payingfor a child's funeral and burial expenses, a srnall term policy might beappropriate. Otherwise, skip child life insurance. Other tlpes ofpeople who don't need life insurance are chililless single people,independendy wealthy people, and retirees with substantial nest eggs

to last them their lifetime.. How nuch do I need? You have to decide how rnuch life insurance

you need and for how long. Consider such factors as your income,mortgage balance, and college expenses for kids. A general rule oftlumb is six to ten times your gross annual incorne. If collegeex:penses are your main concern, get a term policy to cover you atleast through graduation of t]le last student. Other people might wantcoverage to last until your ex:pected retirement date. Because tenninsurance is relatively inex:pensive, err on the high side, espec.iallybecause inflation will eat away at the value of t]le payout as time goes

by. The Internet has dozens of online calculators to help youspec.ifically assess your needs for life insurance. Use your favoritesearch engine to find "life insurance needs calculator." However, withthose assessment tools you might find you're doing a lot of guessingabout your future needs for money, rates of investment return, andinflation. You might be better offjust buying insurance equal to six toten times your income.

. How do I compare policies? Your fust stop would be with yourcurrent life insurer. Ask about current rates. Then you could callother insurers for quotes, but that can be time consuming. It's moreefEcient to go online and use insurance comparison services. Goodones include Accuouote.com, Term4sale.com, InsWeb.com, alldInsure.com. Use more than one comparison tool. It seems each has

afEliations with alifferent insurers. Don't assume buying extra lifeinsurance through your employer is the best deal, espec.ially becauseyou'll likely lose the insurance if you switch jobs.

. How do I switch polic.ies? It is critical to do things in the correctorder. Activate your new life insurance policy before canceling the oldone. Nobody knows for sure whether theyll flunk a meclical exam fora new policy if a previously uniliscovered alisease or ailment isfound, for example. The new conilition might preclude you liornqualifting for life insurance liom any cornpany. That's why you needto keep your current policy in effect until a new one is active. If theworst is aliscovered, at least you'll have your old policy.

. Is the insurer I chose safe? Term policies are mostly the same, so thebrand ofinsurance cornpany you choose doesn't matter much, as longas it's highly rated. After you choose a cornpany, look up its rating atsuch liee Web sites as A.M. Best, ww$..ambest.com, or Standard &Poor's, www.standardandpeels=ee!4. Reports are free with lieeregistation. Highly rated companies should all pay the life insuranceclaim and pay it in a timely manner.

. What if I already have a cash-value policy? Cash-value "permanent"polic.ies come in clifferent flavors, generally called uthole, uniuersal,alJd, uariable life insuronce. There are rnany good reasons to cash outor "surrender" your cash-value policy, replacing it with a term lifeinsurance policy. For one, term insurance will be far cheaper in somecases nearly ten tirnes cheaper meaning you can either save or investthe alifference or get a lot more term coverage for the same money.Although you may incur financ.ial penalties to get out of a cash-valuepolicy, it could be worth it. For $75 or less, the Consumer Federationof America will evaluate your cash-value policy and make

recommendations. Visit www.consumerfed.org or call 6o3-224-28o5.

The short version on refinancing your life insurance is this: Shop for agood price on tenn insurance liom a reputable company. Sign the papersand take the mealical exarn. Cancel your old policy. Put t]le saved moneytoward something you really care about.

Horne and Auto Insurance: Don't Pay Too MuchAuto acc.idents, house fires, theft, and similar unpleasant events are nofun to think about- And after you have these insurance coverages inplace, it's easy to think you're done. But revisiting your home and autoinsurances regularly can pay off handsomely in saved money. And, infact, your need for coverage chalges over tirne.

The average family spends $847 a year on auto insurance and $776 onhorne insurance. Itltimatelt insurance is just a cold, unemotionalcontlact. You pay premiums to an insurance company, and it paJs you ifa financ.ially devastating event happens. So, as long as the company isreputable and higl y rated, it doesn't matter which one you choose. Youcan shop byprice.Two main tasks can save big money on auto and horne insurance:

. Compare premiums- Premiums for both auto and horne insuralce canvary widely among companies, so it pa]'s to comparison shop. Get atleast three price quotes, and rnake sure you're comparing the exactsame coverage. You can call companies clirecdy or compare premiums

sites,Tnterne-t \l.!\\lr.lnsurance.COm,www.instantquq[€=ee]u, or wwwjnsweb.com. Your state insurancedepartment may also provide conparisons ofprices charged by rnaior

insurers. Don't become emotionally attached to any single insurancecornpany. And forget about payrng higher premiums because youthink you'll get better service. A 2oo5 study by the ConsumerFederation of America found no correlation betlveen price andservice. Your insurance company might drop you after just a fewspeealing tickets or car acc.idents, so this is no time to becompany-loyal. But make sure the company is reputable. Check withyour state insurance department and a database at w$'w.naic.org/cis.Also check rating agency Web sites, such as www.ambest.com andw $'w.standardandplll!=eelu-

. Raise deductibles. A deductiiile is t]le amount of money you have topaybefore your insurance kicks in. A $2oo auto insurance deductiblemeans tlat if you're in an auto acc.ident that causes $r,ooo of darnageto your car, the insurance company pa]'s you just $Boo. That'sbecause you're responsible for the first $2oo. Nobody wants to paymore out-of-pocket than they have to, but you're handsomelyrewarded for taking that risk. Higher deductibles on your car alonecould yield savings of 15 to 3() percent or more, says the InsuranceInformation Institute. So, that could mean more than $25o savings ayear. So raise your auto deductibles to at least $5oo or $Looo if youcan. You might opt for an even higher deductible on homeownersinsurance. For example, raising your home insurance deductible liorn$25o to $5,ooo could save 37 percent on premiums. Meanwhile,stash away several hundred dollars to cover higher deductibles if youhave a claim.

The main idea with all insurance is that you buy it to protect yourselfliorn finalc.ial alisaster, not annoyances, inconveniences, or financialpinches. That same concept applies to deductibles. Get a high enough

deductible that you can save significant money, even though you mightfeel the bite of paying it. But set it lower than an amount that would spellextreme hardship or financ.ial ruin- If you have a super-low $roodeductible on auto or homeowners insurarce, call your agent today andraise it.Here are a few other ways to save on insurance:

. Get aliscounts. Make sure you're getting all the policy aliscounts you'reentitled to. Auto insurance aliscounts may apply for low mileage,belonging to AA4 antitheft devices, driver-training courses, andcar-safety features, such as antilock brakes or airbags. A teen driverwith good grades often gets a aliscount. And, of course, you pay less ifyou've demonstrated you're a safe driver. Deadbolt locks, burglaralarms, and smoke detectors can lower rates for home insurance. Alsoask about a multipolicy aliscount for having home and auto coveragewith the same company. That price break alone can run S% to 15%.

Teens might get a break on auto insurance if they leave a car homewhile theyre in college, and retirees might get a aliscount onhorneowners insurance because theyre home all day, which lessensthe chances ofburglary and fire.

. Reduce coverage on old cars. Consider dropping collision andcomprehensive coverage on older cars. It may not be cost-effective tocontinue to buy this coverage on cius worth less tlan ten times theamount you would pay for the coverage. For example, the break-pointfor a $3,ooo car is $3oo in nonliability coverage. Usuallt you're acanalidate to drop coverage if your car is worth less than about$2,5oo. Find out what your car is worth at the Kelly Blue Book Website, www.kbb.com.

. Maintain good crealit. Insurers are increasingly using crealit-basedinsurarce scores to set auto coverage premiums. That's becausestualies show that people with good credit tend to file fewer claims.Check your creclit report liee at wwwannualcrealitrepelt ee!4. You'llhave to pay for a three-aligit crealit score at the previously rnentioneds e orwwwmr'{ico com

. Cut waste. Don't double-pay for coverage. For exarnple, ifyou have a

vehicle-towing plan through AAA, make sure you're not paying for iton your auto insurance policy. Say no to optional insurance at thecar-rental counter if your auto policy already covers rentals. Reviewyour policies regularly to make sure they still reflect your current life.For example, you could lower your coverage if your teen driver wentaway to college, if your work commute shortened considerably, or ifyou sold a valuable collectible that doesn't need personal propertycoverage an]'nore. For horne insurance, remember to insure just thevalue ofthe house, not the land it sits on. For more information, see a

helpflrl Web site developed by the National Assoc.iation of InsuranceCommissioners at www.insureuonline.org.

When bad things happen, you want to have the right insurance toprotect yourselffrom financ.ial alisaster, but you don't want to overpay.

Phone at Hornei Pay Less for Your LandlineGetting your spenaling right on your horne phone service isn't alifEcult,but you must regularly match what you use compared witl what'soffered in the fast-changing telecommunications markeq)lace. The goodnews is you can alnost certainly cut your telecorn spencling ifyou know a

fewbasic strategies.

Arnerican households that use lanalline local and long-alistance phone

services spend an average of $5o a month, or $6()() a year, accoraling tomarket-research firm TNS Telecoms.

The basic concept behind not overpaying for home phone service is toavoid wasting money by paying for services you don't use or overbuyingon services that you do use. Here's how to avoid that:

. Choose a long-alistance plan. Whatever you do, don't remain on thephone company's default long-alistance plan- It's the most ex:pensiveway to make out-of-town calls. First, call your current long-alistancecarrier and ask what plan is right for your calling patterns. Or go to itsWeb site for infonnation on plan choices. Then compare those plansto other long-alistance offerings- Call quality is mostly the same nomatter which long-distance company you choose, so it makes sense toshop by price. You should be able to tailor your long-alistance serviceto fit your calling habits. That's easiest to do at such Web sites as

ABTolls.com, TR{C.org, MvRatePlan.com, WhiteFence.com,PhoneRateFinder.com. CheapTelephoneBills.com,SaveOnPhone.com.

. Beware the bundle. Bunclles of services are wililly popular amongphone and cable companies. But the industry secret is that these"money-saving" bunalles, which often include unlimited long-alistanceservice, are likely to cost you more money than if you bought servicesa la carte liom alifferent providers. Although paJrng one bill eachmonth is more convenient, it's worth comparing prices to determinejust how much extra you're paying for that simplicity. For example, ifyou pay $r3 a month for unlimited interstate long-alistance serviceand only make an hour's worth of long-distance calls, you're payingabout 22 cents per minute. Meanwhile, the best rates for

long-alistance service are less than a nickel a minute, inclualing fees,for one hour oftalking. So, the urlimited plan is quadruple the priceor more than $1o a montl el(tra in this example. Put another way, thebunalle doesn't beat the best a la carte long-alistance plans until youmake about eight hours oflong-alistance calls every month. As a moregeneral rule, if you rnake less than five hours a month of long-alistancecalls, skip the bunalle. Instead, go to the comparison Web sitesmentioned previously and seek a low-cost long-alistance provider.

. Use wireless only. Many nore people today are reduc.ing lancllinecosts by canceling it. Instead, they use a mobile phone for all local andlong-alistance calls. This isn't a strate$r for everyone, but it'sespecially good for single people who aren't home often. And it avoidshassles of diwying up the phone bill with roommates- Obviously, it'snot a good idea for people who use their telephone line for Internetaccess or home security sl'stems. And rnake sure you have goodwireless phone reception in your home before you cut the cord. A lessraalical plan is to cancel your long-alistance service only and use themobile phone for long-alistance calls, which most plans include for noadditional charge. Make sure you have enough "anltime" minutes toavoid expensiveper-minute charges.

. Consider VoIP- Voice over Internet Protocol, pronounced "voJ4),"sounds techie, but it's becoming a mainstream way to use yourhigh-speed Internet service as your phone line. WitI paid services,such as market-leader Vonage, you can use a normal telephone andkeep your sarne phone number. Installation involves attaching a smallbox to your high-speed Internet connection and plugging a regularphone into the box- VoIP kits can be found at many big-nameelectronics stores. Such companies as Vonage, Packet8, and even

traalitional phone carriers offer unlimited local and long-alistanceVoIP calling packages at nearly half the price of similar traalitionallandline packages, with fewer junk fees and ta-\es. And they tend tooffer a ton of calling features, far beyond call waiting and caller ID, forno adalitional cost- Call quality is generally good with VoIP, withoutechoes or dela]'s, but will only be as good as your broadbandconnection. And realize your phone service won't work duringoutages in your electric.ity or Internet service. For that reason, it'sgood to have a wireless phone too, perhaps with a car charger orbackup battery.

. Try free Internet calls. Other services that use VoIP are free and don'tuse phone nurnbers. Instead, they use a small software prograrn onyour Internet-connected computer to talk to anyone else in the worldwith the same software on their computer. The alisadvantage is youare tethered to your computer with a microphone alld speakers, or aheadset that includes botl. If you want to try VoIP before committingto a paid plan, try a liee service first. The most popular choice isS\pe, wwwslo,rre.com, which is owned by online auction site eBay-

Similar offerings come frorn instant messenger services such as

Windows Live Messenger, Google Ta\ AOL'S AIM Triton, Yahoo!Messenger with Voice, and ICQ. Besides free calls, Sklpe and most ofthe IM services also offer paid services for calling real phonenumbers lanilline or wireless liorn your cornputer or receiving callson your computer from conventional phones. Internet calling, even ifyou have to pay a modest fee, becomes well worth the hassle if youmake many expensive international calls.

. Dial extra digits. Prepaid phone cards and ilial-around numbers areanother way to lower your long-alistance bill. BotI require you to alial

a few extra aligits on your home phone. You can buy prepaid cards atsuch wholesale clubs as BJ's, Sam's Club, and Costco. The rates areusually rock-bottom, many less than 5 cents a minute. When making a

call, you usually enter an access code and then the phone number youwant to call. Most modern phones allow you to program such anaccess code into your telephone so you don't have to hunt for the cardeach tirne you call. A warning, though: Stick witl cards liom reputableretailers and long-distance carriers. With alial-arounds, you clial ro-roplus a three-digit prefi-x before the number you want to call. Acomparison of clial-arounds is available online at www.1o-loPhoneRates.com- Watch the fine print for connect fees, montl yminimums, and other gotchas.

. Skip the add-ons. Even if you don't change the way you make calls,you can save money by examining your add-on services, such as callwaiting, caller ID, three-way calling, call forwarding, and voicemail-They can cost several dollars apiece. The dirty litde secret of thetelephone industry is that most of those services cost very litde toprovide, but then they charge you $B a month for caller ID and $3 forcall waiting. Wire insurance, often called "wire maintenance" isoptional- Most people can cancel the several-dollar monthly charge,which is a kind of insurance for problems with inside phone wiringand jacks. If you have wire maintenance, wiring repair inside yourhouse is liee. However, those repairs are rare, unless you have a veryoldhouse.

. Dial smart. Directory assistance is an ex:pensive service for what youget, often costing $r or more per look-up if you use 411 or the older555-12p. Phonebooks and Internet look-up sites are liee. Sitesinc.hrde www.switchboard.com. www.smartDages.com,

www.supClpAgCs.ee!4, and wwwjnfospAee=eet4. It also helps tomaintain a good list of regularly called numbers. A liee service called1-Boo-FREE41L which is the number you alial to use it, will look up anumber for liee, but you have to listen to a ten-second advertisement.Ifyou're looking for a toll-liee number, clial Boo-555-1212 to get a lieelook-up.

The last tlfng to lolow about home phone service is tlat offeringschange liequendy, and it can pay to keep on top of the latest telecomchoices- For exarnple, I got a brochure in my phone company bill thatoudined a calling bunclle similar to the one I already had for ny needs,it turned out a bunalle was, in fact, a good way to go.

The lower-tier bunille was similar to the one I had but didn't include lieecalls to Canada, which I rarely used; three-way calling, which I neverused; and speed-dialing, which I never bothered learning how to use. So,

I dropped down to the cheaper plan and saved $15 a month. That waspossible only because I knew the cheaper plan existed. Reaaling aboutthe plan online and calling the phone company to switch plans tookabout ten minutes. That's $1Bo a year in savings, just because I botheredto read an advertisement that came with my phone bill. In fact, it's notunusual for me to change phone plans several tirnes a year, as betterdeals becorne available. Chances are, you could save money too.

Wireless Mobile Phone: Don't Let Thern Cell You aBad PlanAmericans today spend far more on their wireless phone service thantheir home phone service.

Households that pay for wireless phone service spend an average of

about $84 a montl! accoraling to TNS Telecoms as shown in Table 1.4.

That's 66 percent more than households spend on alandlinephone.

Table 14. Householil Speniling on Phone Services

Arrrrge tlonrhly Expcnditurc

Source: TNS Telecoms, 2oo7

The most basic advice is to shop the phone plan instead of the phonehandset- You'll ultimately be satisfied or dissatisfied by the servicerather than the device. Even if you pay $2oo or $3oo for a fancyhandset, you'll pay far more than that on service during your first si\months.

Here are olher !ra)s lo cul wireless spenaling:

. Ditch it. Think critically about the convenience of having a wirelessphone versus the cost. Fifteen years ago, people seemed to get alongwell without one. Having a cell phone plan "for an emergency' isrnosdy a lame excuse. Just about any charged cell phone can clial 9rrwith no service plan at all. A friend or relative would be glad to giveyou an older cell phone that she has stashed in a drawer. Cancelingservice may require you to pay an early termination fee, but it may beworth it. For example, paying $175 to cancel service seems like a lot,but it's cheaper than continuing to pay $5o or $Bo a month for

another 18 montlN, which amounts to $9oo to $L44o. Anotheroption for getting out of your plan is to transfer the contract tosomeone else. Until recentlt that meant you had to find friends orfamily rnembers interested in assuming the contract. But now, anonline service can match wireless customers who want to dump a

contract with ones who want one. One swap service is found online atwww.celltradeusA.com. The benefit for the buyer is avoialingactivation fees in most cases, being responsible for only the balance ofthe contract, and possibly receiving a negotiated cash incentive liomthe seller. Be aware that the company charges the seller about $2o formaking the match. You also should check the tansfer details in yourown contract and be caref,rl how you complete the transfer if youwant to preserve the same phone number with a alifferent wirelessprovider. Including a wireless phone in the deal is optional.

. Right-size. Compare how many minutes per month you actually useto the number of minutes in your plan. Are you paying for moreminutes than you need? Most people are. It might be a good idea todowngrade your plan to include fewer minutes, even if you have topay extra on occasion for exceealing your allotted minutes. It could becheaper than paying $1o or $2o more every month for a bigger bucketof minutes. To help determine your ideal number of minutes, use arule of thumb provided by the nonprofit TelecommunicationsResearch & Action Center: If you regularly use 2oo minutes fewerthan your monthly allotnent, drop down a tier of service. If youconsistently exceed your allotment by 1oo minutes, consider going upa tier.

. Skip the extras. Lighten up on t]le text messaging, extra ringtones,and cell-phone video games, all of which cost extra. If your teen must

have text messaging, which is basically like sending short e-mails fromphone to phone, examine your provider's price packages. Make surethe package fits your actual texting use. When you are neiu a

computer, send text messages from the PC to a friend's phone, whichis liee. And consider whether you really need Internet access on yourcell phone. Is it really usef,rl or just a toy you haven't used since thenovelty wore ofI?

. Cooralinate plans. If you regularly talk on the phone to the samefriends and family members, try to get everybody on the samenetlvork. Using plentif,rl in-network minutes instead of valuableanltime-any netlvork minutes may allow you to drop down a tier ofservice and pay less.

. Prepay. You are not stuck signing a cell-phone contract.Pay-as-you-go prepaid wireless plans continue to improve, as

providers offer cheaper phones and lower rates. Traditional post-paidwireless service remains cheaper per minute, but that assumes youuse all the minutes. Post-paid rapidly becomes more expensive if youhave dozens or even hundreds of unused minutes every month.Another advantage is that prepaid minutes already include the fees,surcharges, and ta-\es that show up as separate line items on yourwireless bill and add zo% to 30% to the bottom line. That furthercloses the per-minute price gap betlveen prepaid and post-paid. Forlighter users of mobile phones those who use less than 2oo or even

3oo minutes per month prepaid service may well be the lessex:pensive choice. Check out the company Tracfone and such usualcarriers at T-Mobile and Verizon. Beware that prepaid minutes canex:pire in as few as 3o daJs. Leftover minutes and the money thatpurchased thern are wasted, just as minutes in most traalitional

to do tlfs- Many Web sites, such as mobiletz.com, fac.ilitate theprocess for liee, and paid software can make it easier too. Wtiledo-it-yourself ringtones are rnuch cheaper, realize tllat if you wantjust a few new tones, paying for them is a lot less hassle.

2. Know Thine Enemy; It Is Us: The ProblemRetween Our Ears

If it's true that knowledge is power, then understanaling why we're notalready spending monev brilliantly can be an epiphany. Once revealed, itcan be the "ah-hah" nomentthat changes everything.

The problem is, rnanv people don't take time to examine where theirmoney is going and make a conscious decision about whether it's goingto wortlwhile use.

Are y'ou spending your monev on purpose, or by accident and habit?

flltimate\-, !'our cunent financial situation is the sum rcsult of the man]-'monel- decisions ]'ou malie every da1' of rour life. If l'ou male more gooddecisions than bad, 1'ou'll be financiallv comfortable. Too manl'' baddecisions, and )'ou sbuggle.

l\tany of us knorv and have been inspired by the final lines in a RobertFrost poem:

Tuo roads diuerged in a uood

And I took the one less trawled by

And that has made all the dilJerence

Every day, lfe're confronted with spending decisions that represent forkafter fork in the road. Sometimes it's a decision to spend or notto spend.Other times, it's to spend on item A or item B- Still other times, it's to

spend now or spend later.

Repeateally making good decisions puts you on the road to prosperity.But make no mistal<e, to spend smarter, you certainly will have to makesome dec.isions other people broke people wouldn't- In other words,you'll have to take the road less taveled. And I guarantee you, it willrnake all the clifference.

The truth is, dumb spenaling doesn't stem ftom lack of knowledge notknowing you could get a better price on a box of tissues or tires for yourcar. It's born of consumer behavior. These behaviors are repeated overand over again in every spenaling dec.ision at every fork in the road.

Srrrart People, Durnb Spending: Fire theAccountant in Your HeadImagine you're in a downtown store, considering buying a fabulous pairof shoes for $75. Another customer notices. "Hey, I just saw that sameshoes on sale at Bloomingdale's for $5o," she saJs. It's a five-block walk.

This is a spenaling dec.ision that represents a fork in the road. Do youwalk the five blocks for the better deal? Most people would say yes,

research shows.

Now imagine you're eyeing a $2,5oo living room set and learn the sameset is available five blocks away for $2,475. Do you hoof it to the otherstore?

Surprisingly, most people would not- Now, think about that- Theunderlying question is exactly t]le same: "Is it worth walking five blocksto save $25?"It doesn't matter whether you answered yes or no. It only matters thatyou realize the dec.ision should be the same in either scenario. But smart

people make irrational dec.isions almost daily.

In the prececling exarnple, which illustrates what ex:perts call mentoloccounting, a dollar doesn't alwa]'s equal a dollar. In the context of a $7Spair of shoes, the $25 was significant. Some people immealiately see it as

a huge 33 percent savings. In a purchase of $2,5oo, it seems miniscule,just l percent.

But our pocketbooks and bank accounts don't know the percentages.Theyjust know the dec.ision is about $25.That's why people think nothing of saying yes to extras while buying a

car, for exarnple. Floor mats that cost $2oo seem inex:pensive comparedwitl the cost of a new $25,ooo car. But if you went into an auto partsstore the next day and saw floor mats being sold for $zoo, they wouldseem laughably overpriced.

Mental accounting is why it's so easy to lose back $5oo in casinogambling winnings and not care. In our minds, those won dollars don'thold the sarne value as dollars earned on the job. Yet, obviouslt thevalue is the same.

Here are other ways our irrational selves get us into money trouble,accoraling lo consumer-behavior research:

. Loss aversion- Most people are inoralinately aliaid of losing noney.They feel much rnore pain liom a loss than joy liom a gain. That's whypeople hold on to bad investnents, hoping to get even before theysell. Even ifthey know the investment is unlikely to rise in wlue, theyhold onto it for fear of rnaking a paper loss a real one. That behaviorbegs the logical question, "Why keep rnoney in a bad investmenthoping to get even, when you c1rn move money to a good investmentto try to get even?" It's because of the pain we feel liom loss.

. Sunk costs. The so-called sunk costjfallscy is lvhy people lvill \€ntureout in a dangerous snowstorm to attend a concert because they paid$1oo for tickets. But if they had free tickets, they would skip it andstayhome. You won't get money back in either case. It's also why youmight spend more money on car repairs because you've spent somuch on repairs already or finish reading a bad book because you'veinvested several hours to get halfi{ay through. The point is to leavethe past behind and make money decisions based on the present andfuture.

. Endorment effect. Often we place a higher value on what we alreadJ'have, compared with llhat we could have- Examples are remaining ina low-pating job because it's comfortable, keeping rctirement moneyin ulha-safe inveshnents because of confusion on choices, or failing torctum an inferior prcduct with a warrantv. That's why narketers usetdal periods and mone)-back guarantees. They knolv that people arevery unlik+ to retum the product after the]' take possession of it.

.Innumeracy. IUath illiteracy or ignorance about numbers can becosdy. It's why we think a 3 percent pay raise is okay during a time of4 percent inflation. In fact, you're actually poorerbecause your moneylost purchasing power. Ifpeople who gambled on state lotteries trulyunderstoodthe odds ofwinning, they would neverbuy a lottery ticketagain. It's why people have low insurance deductibles, when theprobability of filing a claim dictates they should pay loner premiumsfor higher deductibles. And it's why young people don't appreciatethe near-magical power of compounding investnent returns- TakeTable z-r, for exarnple, which shows the power of compounding bydoubling a penny every dav for a month-

Table z.r Woulil You Rather Have $1 Million or tfre FinalAnount of a Penny Doubleil Every Day for a Month?

2

lr

9r

. Ancllo$ away- How muchengagement ring? Of couNe,

should a man spendthe answer is only as

on a iliamond

afford. But because the aliamond industry tells us the anchor valueshould be two months' salary, every judgment he makes about thering's price is likely to be measured against that recomrnendation.Likewise, some investors may judge a stock's price against itsunwarranted all-time high, which becomes the anchor, instead of aprice based on more relevant measures of cornpany performance.

. Ego. With money dec.isions, overconfidence may lead you to makepoor purchasing dec.isions because you think you know more thanyou do about a product or brand. Or you may try to sell your house byyourself to save a sales commission but end up with a far lower salesprice. Ego is why investors think they can pick a mutual f,rnd that willbeat the market average when, over time, tlvo-thirds totlree-quarters of all mutual funds fail to do that.

The point of highlighting these consumer failures is the hope that onceex:posed, they might provide you an "ah-hah" moment and put you on apath to smarter spenaling.

Evaluating Valuei Psychological IncorneSave noney by spencling on what you care about.

That short sentence encompasses a philosophy that will h+ you notonly spend less but also get more satisfaction liom the money youspend.

You do that by training yourself to measure your owlJ psgchologicalincome, or the nonfunctional benefit liorn a purchase, espec.ially a

name-brand purchase. It represents how the product or service makesyou feel.

On the surface, that concept might seern hokey. But it pervades the

American consumer's life and is well-established in the world ofmarketing. Often tie term psychological income refers to supplementingjob income. For example, a social worker's income is paid in dollars, plusthe satisfaction of helping people.

But psychological income applies to spending, too. It's prcbably mostobvious in car buying. All reasonably reliable automobiles will get youfTom home to worl! for example. That's the functional component of thebuying decision- Some rdill get you to work in more comfort, with a

smoother ride, superior handling, an upgraded aualio system, and betterheating and air conalitioning. Those are real benefits that apply toeveryone buying that vehicle.

But you might deriye yet another benefit, a psychological one, thatcomes from driving a BMW, Mercedes, Le).ns, or other high-end vehicle.It could make you feel a sense of accomplishment because you havercached a level of wealth to afford it. Or it might make you feel betterabout yourseJf, even supedor to other dlivels. Buying a Jeep might maleyou feel adventurous. Buling a Volvo might mal<e you feel safe. Buying a

hybrid gas-electric cnr might make you feel like an envhonmentalist.

Other car buyers don't get a psychological benefit from a caa purchase.

They just want a vehicle to get them to and from work. It would be atotal waste of money for them to buy a luxury car.

So psychological income is highly individual. Reading product reviewsand evaluations, such as those in Consurner Reporfs, can help you judgequality and value. But they cannot measure for you the satisfaction youderive from the purchase.

For example, a man might care a great deal about his brand of golf clubsand get satisfaction from them during every rorurd of golf. But hecouldn't care less alout the tools and appJiances in his kitchen.

Meanwhile, a wornan who loves cooking gourmet meals gets greatsatisfaction liorn having a top-quality set of kitchen knives and a

nice-looking stainless steel high-end stove. But she doesn't care aboutthe brand of golf clubs she uses on weekends. Those two people shouldspend alifferent amounts on their golf clubs and kitchen appliances.

Consumers with a limited incorne which includes mosteverybody have to make tade-off dec.isions and can't afford to buy topquality for every purchase.

The point is to spend more when you c1ue more. If you don't care so

much, choose functional brands. It can save real rnoney alld lead to rnoresatisfaction because your money is going toward el(penses you care mostabout. It might even make shopping easier, considering the plethora ofchoices available for most purchases- In other words, it helps youpurchase on purpose.

Money not spent on a brand name could go to savings for futurepurchases or other immealiate purchases that matter more to you.

How do you dec.ide whether to pony up more money for an elite brand?Measure the PI psychological income for purchases in your life.Here's how:

. Mal<e a list- Write down the major categories of spencling in your life.Ifyou're already maintaining a household budget, this part should beeasy.

. Evaluate PI. In a column next to those spenaling categories, write 1 forthe lowest level of psychological income you derive liom thepurchase. Place a 2 beside tlose tlat provide a moderate level ofemotional satisfaction, and write a 3 next to those that dramaticallyaffect your feelings. Do this privately and be brutally honest with

yourself. Wlile shopping, use the list to spend extra money on thehigh-rated items and less money on low-rated items, opting forfunctional brands.

. Drill down. Break down the major categories of spenaling intosubcategories to reveal more opportunities for savings. For example,a man might rate his work wardrobe as a three for psychologicalincome. But more spec.ificallt he evaluates his suit and ties as threes,his shirts as tlvo and socks as one. The next time he goes shopping forwork clothes he knows how to diwy up his money to get the greatestsatisfaction ftom the purchases-

The simple exerc.ise forces you to think critically about the tlpes ofpurchases you care rnost about tlose that give you something extra. Ifyou don't get that additional boost, go for a cheaper brand and use thesaved noney elsewhere. Make PI a part of your everydaypurchase-dec.ision process.

Irnpulse Spendingi Harness the Urge to SplurgeAmericans today live a rnuch rnore lurr_urious lifestyle than previousgenerations. But with new abundalce cornes a new set of problemsgrandrna and grandpa didn't have. Among tlem is the overwhelmingnumber of opportunities to spend impulsively.

In previous generations, consurners who saw an entic.ing advertisementat home often had to wait at least until the next day when they couldwithdraw money and get to t]le store. That provided a built-incooling-off period that allowed the urge to pass. Or if they had no cash,they simply couldn't buy it.That has all changed- Today, the availability ofATMs, easy crealit, online

shopping, and home-shopping TV networks provides the potential to beround-the-clock consumers who can satisft buying urges immealiately.

That lends itself to impulse spending that can derail t]le best ofhousehold fi nancial plans.

Academic research suggests we only have a limited amount of willpower.This reservoir of self-contol is regularly depleted and replenished. It'ssimilar to exerc.ising a muscle. When it's fatigued, it works less well untilit recuperates.

So if we resist our impulses early in the day, for exarnple, we are lesslikely to be able to resist something else later that day. Experimentsshow tlat people forced to exert self-control were later willing to spendmore money for a product, buy more items, and spend more money than!rhen lheir resislance !ras al liill slreng$.Because todays consumers are constantly bombarded with buyingrnessages and offers of easy crealit to buy things they can't afford, theyneed a deep supply of self-control. Otherwise, they succumb to impulsespencling-

Here are ways to resist:

. Rest your 'Just say no" muscle. Don't ex:pect that you can adhere to astrict food diet a difEcult self-contol task and avoid impulsepurchases at the same time. If you're going shopping in the afternoonand will be tempted by irnpulse buJs, spend the rnorning doingenjoyable activities that come easily to you- It's about choosing yourbatdes and spac.ing them out.

. Avoid temptation. Different people require alifferent amounts ofself-contol, depenaling on how intense the urge is- Someone mightrequire a lot of self-contol to avoid impulse buls in an electronics

store but may have litde trouble rejecting t]le offer of an ice creamcone. Find your impulse-buying triggers and steer clear. That way,you don't need to tap your supply of self-control.For example, if television advertising tempts you, consider recorilingyour favorite TV shows and skipping cornmercials. If you Internetshop when you're bored, play a game on the computer instead.Don't touch merchanalise or try on clothes. Research shows phlsicalcontact with an item intensifies the temptation.

. Keep an eye on the prize. Setting detailed financial goals can help youavoid irnpulse spencling- That way, you have spec.ific reasons not tospend. It's easier to spend dollars not earmarked for anlthing inparticular. During a supermarket shopping trip, for example, adhereto a shopping list, which represents your goals.An unrelated tip is to use the self-checkout. For some reason,retailers report nuch lower sales for impulse buls such as candy,batteries, and celebrity tabloid newspapers at self-checkout aisles,presumably because shoppers are busy scanning and bagging theirgroceries.

. Monitor your mood. Research shows that your mood can affect yourability to resist temptation. Oddly, both extremely good moods andbad rnoods can encourage impulse buying. More helpf,rl is realizingtimes when you've had to botde up your high or low emotions. Thatrequires self-control, which depletes your reservoir and makes youvulnerable to your buying impulses.

. Use cooling-off tricks. Put some time and space betlveen you and a

would-be impulse buy- Place the item back on the shelf and wait 48hours to determine whether you really want it, or at least put it backand take a trip around the store. For bigqer-ticket items, avoid

impulsively buying the item but promise yourself to go home, get onthe Internet, and research the product's quality and compare prices.That could dampen the desire and can even lead to getting a lowerprice and avoialing troublesome products.At the minimum, force your intellectual self to challenge theemotional self, with the questions, "Do I really need this?" and "Will Ieven want this item tomorrow?" Or try to substitute. Instead ofbuying a $3oo handbag, treat yourself to an unplanned $4 fancycoffee to alleviate the urge to splurge.

. Get a do-over. If you succumb to an impulse purchase that you don'twant, take advantage of the retailer's generosity return the itemASA?.

No Excuses: The Lies We Tell OurselvesA lousy attitude and self-deception are part of many poor spenclingdec.isions. Weak and whiny exclamations are nothing more than excusesfor bad spending behavior.

An attitude adjustment can help. The following are quotations peopleuse every day for doing dumb things with their money:

. "I could alie tomolrow, so I'll live for today." This immature attitudejustifies actions of the buy-it-now and pay-for-it-whenever class. It'sthe primary excuse for not saving money. The solution is to developfinanc.ial goals. That way you can see "tomorrod' in a more concreteway and have a reason not to go overboard on todays spending.

. "I work hard, I deserve it." This is akin to a four-year-old throwing atantrum in the toy store crying, "Gimme, gimme." Many Americansare overworked, it's true. And, yes, you have to treat yourself

occasionally. Aiter all, enjoying money is one ofthe few things you cando with itB.uI self-gifting, as academics call it, is more prominent today,possibly because marketers are using it as a pitch to sell suchproducts as day-spa services and right-hand cliamond rings forwomen. Advertisers are quick to point out that you should buy theirproduct "because you deserve it." Of course, you also deserve to liveout a retirement that doesn't include regular helpings ofAlpo.

. "I don't have a head for nunbers." This is t]le excuse given for notpaying attention to personal finances. But managing money doesn'trequire complicated mathematics. Besides the availability of cheaphandheld calculators, consurners have a plethora of online tools tohelp wilh aI sorls o[ Enancia] planning. Go lo wwr.dinkyorvn.com,for exarnple, to see how easy tley are to use. The biggest help tofinances will be calculating exacdy how much money is coming in, howmuch is going out, and where it's going. That involves grade-schooladalition and subtaction.You don't need to be ex:pert in complicated financ.ial concepts. In fact,many of the complications in personal finance think whole lifeinsurance, annuities, sector mutual funds aren't good ideas foraverage consumers anylvay. Accept the concept of "good enough." Behappy to do smart things with your money, even if they aren't theabsolute best you can do. Often, the absolute best involves more riskthan you should be taking.

. "I'm too busy to compiue prices or manage money." This might betrue for a small fraction of people, but mosdy it's a lie. Witheasy-to-use personal finance software, the Internet to compareprices, and automatic savings and bill paying, it takes less time than

ever to manage money. Shutting off the TV one night a week willprovide most people plenty of time to manage their finances. Forthose truly time-strapped, consider hiring a good financial adviser.It's more expensive than managing finances yourself, but better thandoing nothing.

. "It's an investment." Most consumer purchases are not investments.Investments are supposed to have a chance at being worth more inthe future than they are today. Almost all consumer purchasesplummet in value the moment you leave the store, a guaranteed loserof an "investment." So you don't "invest" in a car, a plasma 1V, or anew pair of shoes unless somehow they'll make you money. They areexpenses. Pacifting your spending guilt by calling them an in'estmentis seH-delusion.

. "I don't ean enough to save money." Saving is not about lvhat youearn, it's about what you keep. The common advice to "pay yourselffirst" can help. It rcferc to setting aside a litde money, preferably witian automatic paycheck or bank account withdrawal, beforc !'ou startpaying 1'our bills. Paying yourself first might seem irnpossible untilyou trT it. One way to save for retirement, for example, is to use a

4or(k) plan at work and contribute the madmum to get the companymatch, often 6 percent of pay. If your paycheck truly only covers thecost of bare necessities, you have an income problem. It's time towork more hours or earn more with the hours you work. Do not use"pay yourself first" to save money at a low interest rate, when youhave high-interest debt.In that case, paying yourselffirst would meanearmarkinge{ra mone5 for debt reduction.

. "People who think about money are greedy." You had better be

thinking about money a lot. No recent generation has had more

responsibility for their own money management tlan today'sAmericans. Your parents or grandparents might have had definedpensions, which guaranteed them a retirement income. Butsornebody else rnanaged that money. Todat we manage our own, in4or(t)s, IRAs, and other financ.ial vehicles. Stock options and grantsused to be for the highest-level executives. Today, hourly ernployeesmight receive them. With children living at home longer and elderlyparents moving in, t]le "sandwich generation" has to provide for morepeople on the same income. Thinking about money isn't being greedy.It's about being a responsible adult.

Money Personalitiesi What TJ4)e Are You?Researching big purchases, comparing prices, using coupons, and havinga general knowledge about spenaling your money wisely matters litde ifyou car't overcome emotional spencling.

That concept might turn off some people, espec.ially those who thinkpersonal finalce is about numbers and math. But personal finance isoften rnore personal than it is finance.

Marketers know it. With advertising, they can persuade consumers tobuy things they don't need, or even want, by appealing to their emotions.Beer and soft drink narketers often show beautif,rl people having a greattime, as if by consuming their product you too will be beautif,rl and havea great time-

Your feelings about money also play a role in your relationships withspouses and significant others. Money fights are often c.ited as a majorfactor in alivorce in North America-

Often your bad rnoney attitude can be traced to your parents, and unless

the cycle is broken, will be handed down to your children. In that way,it's like an inherited money gene. It can affect your family tree forgenerations. Some people will mimic their parents' money habits. Othersrebel.

In fact, recognizing your emotional triggers for earning, spencling, andsaving is a prerequisite for all other spending advice. To beginuncovering your emotional ties to spencling rnoney, ask yourself thesequestions:

. What personal ex:periences, good or bad, relating to money do yourecall liorn childhood?

. Did you work for rnoney as a teenager? Why or why not? What didyou do with your money as a teen?

. How did your parents manage money? How did they handle a

financ.ial crisis? Did money cause tension in the family?. What alid your parents actively teach you about money? How much

lieedom did they give you to make money dec.isions?. What role clid money play in your career choice?. What are your fears about money?. Complete this sentence: "IfI had a lot more monet I would.--"

That simple quiz should shed sorne light on why you act the way you dowith money. Further self-examination will also reveal you have a moneytlpe.Much has been written on rnoney personalities, and ex:perts categorizethem alifferently. Some describe si\ basic qpes, whereas others use nineor eight or four. The number ofpersonalities doesn't matter as much as

realizing you have one- And your rnoney personality doesn't necessarilymatch your soc.ial personality. Your money personality is more likely to

be influenced by your parents and upbringing. You either mimic yourparents' money habits or rebel against them-

You should also know that rnoney personalities take center stage inmany marriages and other relationships. The consensus seems to bethat opposite rnoney personalities do, indeed, athact. Part of thechallenge of rnarriage and other relationships is reconc.iling thoseclashing money tlpes.Below are descriptions of najor money q'pes. The goal is not todrarnatically change your money t]'pe but to help you prosper with theone you have:

. The Joneses- In "keeping up with the Joneses," you are the Jonesesbut don't realize it. You're focused on achieving success and lettingothers knowjust how successf,il you are by buying lots of shlff- TheJoneses equate money with success, or at least, it's the main way ofkeeping score. Ambition is the upside; overspenaling is t]le downside-The Joneses usually earn enough to have the nice plalthings theywant, but often think they can outearn their consuming stupidity. Youshould capitalize on your money-making ability by keeping more ofwhat you earn- Slow down and fit your "want" purchases into the restof your fi nanc.ial priorities.

. Garnblers. You're t]le thrill-seeker and risk-taker with money. Youoften think you're smarter than the rest and are certain to make a bigscore. The upside is you're comfortable with ris\ which can pay offhandsornely with noney. But untamed risk-taking is dangerous andcan land you in financ.ial ruin. Try to rein in your bet-the-farminstincts by, for example, investing in a stock mutual fund rather thanindividrral stoc.ks

. Financial fugitir€s. You get a thill from buying, rvhich causes )'ou tooverspend and go in debt. O! you lost a source ofincome and use debtto pay for necessities. Either way, you quicHlr find yourself on the runfrom cretlitors. If there's an upside, it's that you know the pain ofbeing in huge debt and may have developed the resolve to get out.Yourweakness is you either overspend or underearn, and you turn tocredit cards as the bailout. Cut up your cards, find a way to makemore than the minimum paJ'ment and second-guess each purchasingdecision. Others will need to reexamine their career path and earnmore money.

. Cruisers- You ma]' be coping or even thriving financially, but yourmoney life is on cruise control. A lack of a money crisis has made youconrfortable witi the status quo. The upside is \''ou'rc organized andrcsponsible. But complacencv means you're missing out onopportunities and greater prosperit-y. Shake things up and reviewyour finances comprehensively. For example, set a goal for a cushierretirement and determine whether you're saving aggressiYe\ enoughto reach it.

. Ostriches. You bury your financial head in the sand because you'reuncomfortable with money, even confused, intimidated, orembarrassed by it. The upside is you're not consumed by the idea ofaccumulating and spending money, which allows you to focus onmore important things in life. But you'll end up regretting totalavoidance of your money problems and not setting financial goals.Use set-it-and-forget-it money strategies such as automaticbill-paling and automatic investment plans-

. Misers. You hoard monev and miss out on the fun and good 1'ou cando witi it. You're intenselv afraid of losing mone]- and exert a great

deal of effort to spend less. You might live too far below your means,perhaps in a joyless existence. The upside is you're an excellent saverbut at the ex:pense of what else money is good for spending, giving,and allowing money to make its own money- Dip your toe inhigher-risk investnents by moving some money out ofultraconservative places, such as bank certificates of deposit, into a

mutual f,lnd that tracks the Standard and Poor's 5oo stock indexes.And plan a nice vacation. You've earned it-

Shopping Addiction: "Shop Till You Drop" Ain'tFunnyThe burnper stickers can be arnusing: "Born to shop," "Shop till youdrop," "I am a mall-aholic," and "I came, I saw, I did a litde shopping."

But for some, the lighthearted catchphrases point to a serious problemof out-of-control spending. It can destroy relationships and plungeconsurners and their families into overwhelming debt, even bankruptcy.

Some z4 million people suffer liom compulsive shopping disorder,accoraling to a Stanford University study. And about one-quarter ofAmericans have a cornpelling need to purchase that hasn't becomedestructive, accoraling to other estimates. It can affect the rich and poor,wornen and rnen-

Compulsive spencling results in buying things not for a need or even a

want. It stems more from a desire to feel better, whether to feel moreself-confident or to ex:perience a temporary adrenaline rush, similar to adrug addict scoring a fi,\. The high is liom the act of purchasing, ratherthan owrfng the purchased item.

ManyAmericans have spenaling adalictions to varying degrees, with most

being manageable. But it can be a serious prcblem if you recognizeyourself or someone you know in the {ollowing questions, developedwith help from Olivia Mellan, a former spend-ahoJic turned author.money coach, and psychotherapist.

. Do you spend money when you go shopping,you need al;thing?

. Do you buy things or take financial risks even

regardless of whether

when you can't affordto?

. When life gets stressful, do you seek consolation by spendingmoney?

. Do you spend money to cheer yourself up when feeling arxious,depressed, or bored?

. Do you celebrate by rewarding yourself with a spending or gamblingspree?

ff you think you might have a serious spending problem, considerseeking psychological counseling lo uncover the root of the problem orjoining Debtors AnonJrmous at $'uw-debtorsanonvrnous_org/ or call781-4Sg-2743.

Ifthe problem has yet to become overly destrucfve, first admit there's aproblem and track how you feel when you spend. That will help identifi,higgers for overspending. Then set a goal for where saved money wouldgo, from a child's college tuition to buying a sailboat. That will give you areason to resist your buy-it-now urges.Ifyou have a shopping compulsion, try tlese tips:

. Pay for purchases with cash, check, or debit card.

. Make a shopping list and buy only what is on the list.

. Avoid temptation. Stay away from garage sales, discount warehouses,

and the mall. Allocate a specific amount to spend when you do visit a

retail store. Avoid catalogs, and don't watch TV shopping channels.. Window shop only after stores have closed. If you window shop

during the day, leave your wallet at home.. Take a walk or exerc.ise when the urge to shop comes on-. Get help. If you can't nanage your shopping addiction yourself, don't

hesitate to get professional help liorn a rnental health professional.And consider a financial adviser, who can provide perspective on yourEnarces ard give 5 ou a reason lo slop shopping.

B. \Mhat a \Maste!: Pet Peeves and Hot Buttons

One of the cardinal rules of spenaling smart is to stop wasting money.Although that can be achieved in hundreds of waJs, some topics aremore controversial than others.

This chapter is likely to contain at least one section tlat makes you mad.And that's okay. You can ilisagree and ignore the advice. But you shouldat least read the section alld have good reasons to spend yourhard-earned rnoney on such follies as tirneshare vacations, c.igarettesrnoking, and botded water.

Other areas of spenaling aren't necessadly controversial, but they annoyus all. They include buying ink-jet cartridge refills at prices that soonsurpass the price of the printer, those wilclly expensive collegetextbooks, and greeting cards that cost $5 a pop.

It's not tlat these spec.ific topics are the only areas of wastef,rl andfrustrating spenaling. But reaaling this chapter will give you generalconcepts about how to spend your money smarter. It will help youchallenge the notion that you're just stuck paying rialiculous prices, nomatter what the purchase.

So, this chapter addresses spec.ific topics on both big one-time ex:penses

and small expenses that can add up.

Either way, they are prime speniling areas to examine and cut waste.And yes, they are a few ofmy own personal pet peeves.

Bottfed Water: Tap into SavingsMoney doesn't grow on trees but water does fall liorn the sky for liee.

Yet, Americans lik+ spent in the neighborhood of $16 billion on botded

water in 2()()6.1Maybe it's no acc.ident that naive spelled backw?rd isEvian. Botded water can easily cost $1o per gallon, many times the costofgasoline. Meanwhile, plain tap water, which for generations has been aperfecdy fine source of drinking water, costs about half a cent per gallon.For an interesting comparison, seeTable:.r.1 $16 bilion is an approximation deriled from $ro-9 bilion in wholesale sales as

reported by the Be\erage Marketing Cory- plus a 5(r percent markup at retail-

Table 3.r Botdeil Versus Tap \Mater: C-ost in Perspective

(kll{nrs oarqr srftwnr.rn hn! ntr$16

'rnllrtrl)slou qr ljllwill' 3.200 grllo s

So, if botded water costs thousands of times more, it must be spec.ial,

right? It must really come iiom mountain springs or glac.iers or thefountain of youth- Unlikely. The origin for a lot of botded water,inclucling such big narnes as Dasani and Aquafina, can be traced tomunic.ipal tap water. That's right. Big companies like Coca-Cola andPepsi Co. run tap water through a filter, botde it, and sell it to you atricliculous prices.

Okat then, botded water must be safer than tap water, right? There's noevidence of that, eitler. In fact, federal regulations for the testing of tapwater are stricter than testing requirements for bottled water. Tap watermust be tested for safety several times a day. Botded water must be

tested once a month. Think about which is probably safer.

Fine. But botded water tastes better, right? People claim that's true. Butin a slew ofblind taste tests, consumels tlpically can't tell t]le alifferencebetween botded and tap.

Otler arguments against botded water:

. No fluoride. Botded water doesn't have fluoride. Some people like theidea of eliminating it, but fluoride does prevent tooth decay.

. The environment. Mother Earth isn't tlanking you for drinkingbotded water, considering how much energr and crude oil it takes tomanufactue plastic botdes, let alone the fuel consumed to transportbotded water by truck. By contrast, delivery of tap water comes bypipes using environment-friendly gravity.

But ifyou're alissatisfied with tap water, here are conmon objections andsome alternatives to botded water:

. Taste. Do yourself the favor of conducting a simple blind taste test todetermine whether, in fact, you can tell t]le alifference betlveen yourtap water and botded- If you can detect an objectionable chlorineaftertaste, fill a pitcher with water and store it uncovered in t]lereliigerator overnight. This will allow the chlorine to alissipate andeliminate the aftertaste- You could also use a simple carafe filter ormore extravagant filters tlat go on your faucet or under t]le sink. Andmany refrigerators today have filtered-water clispensers. All thosechoices will be cheaper than botded water- The only option that ismore ex:pensive is delivered water for water-cooler ilispensers,accoraling to Consumer Reports magazine.

. Safety. Tap water is by and large safe. If you're concerned about the

safety of your tap water, contact your water company or authority.Federal law requires them to provide consumers witl a water-qualityreport each year by JuIy r- Yours might be online at www.epa.sov/sa-fewater, or call the EPAS Safe Drinking Water Hodine at800-426-4791. And ifyou have a temporary concern \eith the safety oftap water, you could boil it to remove many potentially harmf,rlcomponents.

. Health. Water is a healthflrl substitute for such beverages as

sugar-laden soft clrinks, juices, and sport drinks- It has no caffeine orcalories. But that's hue of any water botded, filtered, or tap. So

health is not a reason to choose plain botded water over other water.However, in certain on-the-run scenarios, botded water could rnakegood health sense. For exarnple, if you're thirsty in a conveniencestore and determined to buy a drin\ botded water could be a betterchoice than soda, for exarnple. You'll be vasdy overspeniling nomatter what you buy in a single serving. At least, water won't damageyour health.

. Convenience. Turning on your home's faucet is ex:ponentially easierthan driving to t]le store, stanaling in line to check out, and luggrnghome botded water. Instead of buying botded water for when you'reon-the-go, you could buy t]le most ex:pensive, feature-laden refillablewater botde you can find. Fill it with tap water or filtered water, andyou'll quickly recoup the cost of the water botde and continue to reapsavings-

. Status. This may be t]le real reason some people buy botded water- Ifyou derive self-esteem lion carrying name-brand water, then judgefor yourself how much that's worth. An alternative is to buy a case ofnane-brand water on sale or at a ware.horrse chrb and refill bottles

with tap water. The people you'rc tryint to imprcss won't loow thedifference, and you'll save a bundle.

You won't save big bucks solely by skipping botded water, but itillustrates a broader point about eliminating lame excuses for buyingthings you don't need.

Junky lnsurance: Extended Warranlies and OlherInsurance You Don't NeedIf there's one main way to save money on insurance, it is to avoidoverinsuring. You cal do that by understanding a single concept:Insuronce is supposed lo protect Uou fiom fnoncial ruin, not minormoney annoyances.

Yet consurners are offered insurance rcgularly ald for routinepurchases. Extended warranties ale one of the most prevalent foms ofinsurance though technically not categodzed as insurance. Someretailers make far more money on the extended warranty they sell youthan on the purchased item. That's because it's almost pure profit. Youpay through the nose for the warranty, and they rar+ have to pay for adefective item. Today, you can insure your cell phone, your eyeglasses,and almost any purchase at an electronics store.

You can also insure your life against specific causes of death, includingcancer, heart alisease, or eve! accidents while traveling. Here's an easyrule ofthumb for tlose qpes ofinsurances: Just say no. It's alliunk-

Extended Wan.'IoLntiesErtended warranties are the fust of the insurances you prcbably do notneed. At best, o'tended waranties are a Ope of insurance t}lat usually

turns out to be a waste of money. At worst, the add-on warralties arecold-hearted rip-offs tlat play on the fears of consurners during avulnerable moment at checkout. In nearly every case, extendedwarranties are a great deal for the salesperson, who receives a fatcommission- And tleyre a bad deal for you because you're unlikely touse the warranty, and you're vastly overpaying for protection- See Tablcp for how profitable warranties are for electronics retailer Best Buy. Infact, you might say Best Buy is more in t]le business of selling warranties

Table 3.2. Extenileil Warranty Case Stualy: Best BuyEl ec.troni cs

201)',iuJ Prnis 9tJlililliu,t00t fnnk lrcr .*.trd.d \Rnrtrti.r 3790 trillioi!, ofclnrFn,yprcfir lrou .xrrd(l \qrra i.r 5t*

The scene is played out over and over again, espec.ially at electronicsstores. I witnessed one m]'self during the Christnas shopping season as

a rnan of naybe 4o years old bought a cornputer. Wtile processing thecheckout, the youtlf,rl salesrnan asked the man if he wanted anextended warranty- Blindsided by the question, the man stammered afew seconds trying to process the question and decide. But before thecustomer cor d utter another, "Well,.-.uhhh," the salesman chimed inwitl an autloritative and well-rehearsed argument for buying thewarranty- I was out of earshot, but the man's body language said it all.His shoulders and head drooped slighdy. His head nodded. He hadsuccumbed to one ofthe biggest rip-offs in retail today.

You might pay $3oo for a iligital camera and $6o for an extendedwananty. That's 2() percent of the camera's cost, or like paying $S,ooofor a warranty on a $25,ooo car a terrible deal. Besides, if it's defectiveyou'll know right away. The store will take it back for ftee under itsreturn policy. And the manufacturer warranty often covers the productfor the fust several months to a year. So, if you buy an extendedwananty, you're betting that t]le item will break in a spec.ific window oftime after the rnalufacturer warranty ex:pires and before the extendedwarranty ex:pires. You're also betting the repair will cost more than theprice of the warranty. That's an irnprobable and pessimistic gamble,espec.ially when so many products are reliable.

Other reasons not to buy extended warranties start with the caralinalrule ofinsurance you don't insure against srnall financial problerns, likea carnera rnalliuctioning. Also, you might already get an extendedwarranty tluough your crealit card, if you used the card to buy t]le item.And, you could self-insure by setting aside in a separate bank account allthe money you would have spent on extended warranties. Tap that fundforrepairs.One further point is to never buy an extended warranty on a rapiallydeprec.iating product. For exarnple, a $2oo warranty on a $Looocomputer becomes a lot less valuable in its third year when thatcomputer might be worth just $2oo. In other words, at year numbertlrree you could sirnply buy the same computer new instead of getting itrepaired. In this example, if you bought an extended warranty, youwould have paid $zoo to insure sometlfng worth $2oo.Other insurances you probably do not need include

. Spec.ific-death insurance. It doesn't matter whether you alie liom

cancer, in a plane crash, or by alien abduction, you need life insuranceto protect t]le people who rely on your incorne. And you'll need tocover all kinds of expenses, not just your mortgage and crealit cards.So, skip cancer insurance, air travel insurance, creilit card insurance,mortgage life insurance, and the rest ofthe spec.ialty insurances. Theyonly duplicate what should be covered by your term life policy.

. Child life insurance. If you think about it, this makes no sense.Virtually nobody depends on a child's income for financ.ial security. So

what's the point ofgetting an insurance payout in the unlikely event a

child dies? If you would be financ.ially devastated by funeral andburial costs, you could consider a srnall term life policy on a child.

. Rental-car insurance- First, your regular auto policy may cover rentalcars; three-quarters of polic.ies do. Second, if you pay by credit card,you rnay receive adclitional coverage as a standard benefit of the card.You need rental-car insurance;just don't pay for duplicate coverage.

. Crealit card loss protection. Most crealit cards don't hold you liable forany purchases a thief makes with a lost or stolen crealit card. Othersmight charge you t]le federal limit of $5o if you don't report it rightaway harallyinsurance-worthy.

You do, however, need long-term disability insurance, which pays you ifyou're out of work for an extended tirne because of an illness ordisability. It protects one ofyour most valuable assets you're ability toearn an income. Getting group disability insurance through an employerwill be far cheaper than getting an individual policy.

Tirneshare Vacations: The Worst Real Estate DealEverGoing away on vacation is often among the highlights of any calendar

year, but it can turn into a nightmare if you fall for high-pressure salestactics and buy a vacation timeshare.

A timeshore is a right to use a vacation home, usually during the sameearmarked week each year. The idea is that ifyou buy a tirneshare, youdon't need to pay for a hotel or rental house when you go on vacation.And tirneshares can be rnore lurr_urious than many rentals and hotels.They usually offer tlvo bedrooms, a kitchen, and a clothes washer anddryer. Timeshares appeal to people who dream of owrfng a vacationhome but can't afford one.

Consumers usually buy timeshares after lengtht high-pressure pitchesfrorn tirneshare salespeople. The pitches seem to be working. Timesharesales in 2()()6 totaled $1o billion, up 81percent over five years, accoralingto the American Resort Development Association. All told that year,there were 4-4 million timeshare owners. The average price shelled outfor these vacation weeks was $18,5()2. See Table 3.? for how drarnaticallysales have increased.

Table S.3. Tirneshare Sales

Despite the popularity of timeshares, there are many good reasons notto buy them- Here are a few:

. It's a lousy investment- A timeshare will lose value liom the momentyou buy it- You would be fortunate to sell it for half price the day afteryou buy it-

. You usually can't unload it at all. Timeshares are notoriously alifEcultto sell, even if it's in a prime location and you're willing to take a loss.The Federal Trade Commission has warnings about timeshares,saying in part, "be aware that resales are dif&cult, if not impossible,because there's no secondarymarket-"

. You keep on paying. Maintenance fees average $S55 a year and riseannually. And you might have to pay separately for real estate taxesand spec.ial assessments for unex:pected costs at the resort. You haveto pay the fees every year, forever, regarilless of whether you actuallyuse the timeshare.

. It takes a while to break even- One of the attractions of a timeshare isyou can lock in a price for your vacation lodging and don't have to dealwith hotel rate inflation. But you will pay a lot of money upliont- Itcould literally take a decade or tlvo before you even reach thebreak-even point and start to realize a financ.ial benefit of a locked-inprice. And that doesn't even include the opportufty cost or whatelse you could have been doing with that money instead of makingpa]'nents on a timeshare. Of course, all the annual fees you shelledout over the years erode your savings.

. You lose vacation flexibility. Timeshare resorts like to highlight howeasy it is to trade your unit for timeshares elsewhere. But it's often ahuge hassle and could require vacation planning a year in advance.Traaling costs paid to a timeshare-swap company involve an annualfee of about $1oo and a per-transaction fee of up to about $15o. Also,

if you have a slow-season tirneshare in Pennsylvania's Poconos, forexample, don't ex:pect to tade for a prime week in Maui-

You don't have to believe me that timeshares are a terrible purchase.Believe these real timeshare owners who emailed me after I wrote abouttirneshares in my national column, "Spenaling Smart," published inTribune Co. newspapers:

"HeIp! We haUe a timesharc and alon't knou) hou) to get rid oJ it. Weknou) that u)e u)iII not get out moneA back, but u)e don't knou) u)hete

"Do Aou haUe anA suggestions aJtet the damage has been done, as

fat as unloading this beast?"

"I simplA utant out oJ this timesharc, eUen iJ it means Jo{eiting mAinitial inUestment anal assessments paid to date."

Ifyou still think a tirneshare is for you, at least buy one secondhand andlet the initial owner get soaked on the deprec.iation- You can buy it forpennies on the dollar, and plenty are available, no matter where youwant to vacation- If you're not paying cash for the timeshare, it might bea good sign that you can't afford it-Ifyou already own a tirneshare and are desperate to get out, don't pay anupliont listing fee to someone promising to sell your timeshare. You'reunlikely to get any results. Your best bets for dumping a timeshare are tosell it back to the resort although, that seldom works or advertise itonline or in local newspapers or vacation magazines. You could alsodonate it to a charity and at least get a ta-\ deduction and escape the

obligation of annual fees.

More information on ridaling yourself of a timeshare is available atthe Timeshare Trap,various Web sites,

www.timesharetraD.com-including

Srnoking: Your Money, Up in SrnokeA dec.ision about $3 million is a big deal, even to the richest among us.The decision lo smoke cigarefles is even bigger.

Here's how: A pack-a-day srnoker will spend about $2,ooo a year onc.igarettes, which is $S-5o a pack times 365 da]'s in a year.

If that person srnokes liorn age 18 through age 65 and the price ofc.igarettes never goes up, he will have spent $96,()()() on c.igarettes.

That sounds like a lot that is, until you examine the opportunity cost,or what else he could have done with his c.igarette money. If he insteadput that $2,ooo a year in a Roth Inalividual Retirement Account (IR{)that earned an u percent return, he would accumulate $3 million inta-\-liee cash at age 65. Three million dollars!

Hope he liked the smokes-

That shows how smoking is a lousy habit, even before considering theobvious health problerns it causes for smokers and people around thern.

Still, one in five adults or some 45 million Arnericans srnokesc.igarettes, accoraling to tle Centers for Disease Control. And smokelsspent $82 billion on c.igarettes in 2oo5. Unfortunatelt statistics showthose most likely to srnoke are those who can least afford it. Thirtypercent of people living below the poverty level are srnokers. Andsrnoking is higl y correlated witl education. For example, more than 43percent of adults with a General Education Development (GED) diploma

smoke, compared with just 7 percent for those with a graduate collegedegree.

Smokers certainly have the right to spend tleir money on cigarettes analgnjoy their habit. But they should know that smoking can brcak youfinancially and cost your family long after you're prematurely dead. That$3 million decision by an 18-year-old to smoke is just the beginning oft}e financial hardship. Consider tle foUowing

. Collateral spending. The cost of cigarettes alone is not the oDlyexpense. Insurances are much costlie-r for smokers- Life, health, evenhomeowners insurance prcmiums will all be more expensive. Othercosts are more difficult to measure, but you can imagine spendingmore lha n nonsmokers on teeth cleaning and lr hitening, dry cleaning,ard replacing clotJres and furniture rnarred b5 cigarette burns. Thenthere's the lower resale value of vehicles and homes because thevsmell ofsmoke. which ma) total lilerally thousands ofdo[ars over alifetime. Smokers also tend to be less productive at tleir iobs andspend more on healtl caie. In t999, $e CDC estimated tie cost to tleaverage smoker in the hidden expenses of health care and lostproductivity alonetotaled g7.r8 per pack.

. Your career. Employers in some states have actually fired employeeswho smoke, even if they smoke only during non-work houls. Otheremployers have vowed not to hire smokers in the first place. In 2oo5.lhe National Workrights Institute estimated lhat more Lhan 6,000companies refused to hire smokers. Employers cite higher health-carecosts for smokers and lost productivity at work.

. Return on quitting. Business people always want to know the returnon investment, or ROI, for motey they spend. The ROI on investing

in a smoking cessation program is a no-brainer, if it helps you quit.Over-the-counter nicotine replacement s]'stems, whether gum,lozenges, or patches, cost $4 to $5 a day. Meanwhile, many smokerseasily spend more than that daily for c.igarettes. So, pa]'rng forteatment is actually cheaper than smoking. Then you reap the bigsavings after you've quit for good. Of course, quitting cold-turkey maybe more difEcult, but it's absolutely liee. Then the ROI is a return onyour investment of effort and self-disc.ipline.

. Cost to your family. Besides the obvious hann to your farnily lionsecondhand smoke which costs nonsmoking Americans nearly $6billion a year, accorcling to the American Academy ofActuaries yourfamily is paying for your habit in other wa]'s. Ifyou're a breadwinnerin the familt your likelihood for premature deatll starts kicking induring ) our lale 4os and ea rl5 5os, 5 our prime income-earning ) ears.

That robs your survivors of whatever income and greater inheritancethey might have had if you had quit sooner. And through the years, allthose thousands of dollars spent on smoking could have instead beenspent on falnily vacations. Or it could have led to lower financ.ialstress and greater family hannony.

And if a child picks up the habit because mom or dad smoked, you'vepassed the financial curse to a new generation.

Ink-Jet Cartridgesi Refill RageGasoline is the liquid whose price seems to inf,rriate Americans most.But quickly gaining on consumers' rage scale is the price of ink-jetprinter refills.The cumulative cost of ink-jet refills can quickly surpass the cost of theprinter itself. And that's the business rnodel used by printer makers. It's

like the razor-blade rnodel, where they practically give you the razor andrnake big profits on the blade replacements.

But you're not stuck paying ricliculous prices for narne-brand inkcartridges. You have alternatives, although there's a trade-off betlveenprice and quality. Studies show the printer's manufacturer makes thebest-quality inks for any given printer. Nevertheless, you don't alwa]'sneed top quality.

If you're printing out an email, driving alirections, or your child'sgrade-school project on regular copy paper, you probably don't need theabsolute best quality. You might not even need top quality when printingdigital photos. If the photo fades after tirne because of using a

lesser-quality inl! you could always print it again.

One of t]le best alternatives for printing snapshots is to let someone elsedo it. Using a photo-finisher at various retailers, inclualing Wal-Mart andrnany chain drugstores, provides excellent quality at a cheaper pricethan you can print thern yourself. Consumer Reports found that photofinishers charge 15 cents to 25 cents for a 4-by-6-inch print, whereasprinting at home costs 25 cents to 4c) cents.

Another idea is to use tlvo computer printers. For text, use a

black-and-white laser printer, which will give you comparatively cheapprintouts. For photos, use a color printer with high-quality ink or a smalldealicated snapshot printer.

If you like the convenience of printing at home and regularly will bebuying ink-jet refills, your options are presented in the following list indescencling order of price and ink quality. This list was developed afteran extensive interview with Charles Brewer, managing eclitor of ?heHatd CopA Supplies JournaI, a publication by imaging industrymarket-research firm Llra Research.

. Brand names. If you must have the absolute best quality, use ink andpaper that match your printer, whether Hewlett-Packard, Canon,Loonarl! or others. You'll get the most accurate colors, and the printis less likely to fade. This is the most ex:pensive option, so compareprices online and in stores. Compare the unit price of inks becausesorne lower-priced cartridges mightjust contain less ink.

. Store brands. These cartridges are offered by such narnes as

OfEceMa-\, OfEce Depot, and Rhinotek. The print quality will likely begood, but they are more susceptible to faaling than brand-name inks.

. Refill stores. Such lianchised retail shops as Cartridge World andCaboodle Cartridge allow you to bring in your old cartridge to berefilled or swapped with a different refilled cartridge.

. Refill machines. These are cartridge-refill machines in such stores as

Walgreens and OfEceMax. The rnachines use a limited number of inksthat may or may not match your printer well, so there may be sometrial and error.

. Refill kit. Do-it-yourself refill kits can contain quality inl! but it's amessy chore to transfer ink to your cartridge. And a word about allrefills, whether liom a do-it-yourself kit, refill shop, or machine: Anink cartridge can only be refilled four to ten times with any of theserefill methods. After that, the print head could burn out.

. Online generics. If a generic replacement for your $45 cartridge costs

$7 online, there's a reason, Brewer said. You just can't count on thequality of the ink and the cartridge, which may leak. Batches of t]lesa m e ca rl ridges migh I di lIe r in qu ali q .

So, how do you choose? One idea is to start with store brands, and eachtime you need refills drop a level in quality to save money. Ask yourself

whether you notice a alifference. If the quality becones so inferior, it'snot worth the savings, go up a level in quality, and you've found yourink-jet comfort zone your ideal trade-offbetlveen quality and price.

One additional warning: Wherever you buy carnidges, don't buy toomany at a time- Cheap printers break easily- Ifyou have to replace it, youmight be stuck with a box lirll of cartridges that won't fit anycurrent-model printer.

And a dirty litde secret of the industry is tlfs: Your printer lies. It willtell you it's running out of ink long before it really is. For exarnple, a2oo7 study commissioned by printer-maker Epson, revealed thatmulti-ink s]'stems used less than 60 percent of the ink before thecartridge had to be replaced- And multi-ink printers aren't alone. Youcan remove, shake, and replace all ink-jet and laser-jet cartridges andpotentially get hundreds more pages out of t]lem.

LotteryiPlan

Winning the Jackpot Isn't a Financial

Playing t]le lottery can be fun. It can provide the fantasy of hitting ajackpot and all the house-on-the-beach and red-sport-car images youcan conjure.

But it's a bad use of your speniling noney. Even more so if you're an avidticket-buyer and you secredy count on leinning t]le lottery to financeyour retirement or compensate for your financial despair. A surveycosponsored by the Consumer Federation of America showed rnanyAmericans witl low and moderate incomes believed they had a betterchance of builcling a $Soo,ooo nest egg for retirement by playing t]lelottery tlan by saving and investing.

Lotteries are known, ungrac.iouslt as a tax on the stupid. That's a litdeharsh. More accuratelt lotteries are a tax on the hopeless. Onlysomeone with no prospects would resort to such lousy odds for anJtiingmore than fun and whimsy.

There really aren't any tips for not playing the lottery. Just don't. Buthere are some interesting facts about t]le probability of winning one ofthose big lottery iackpots. They might persuade you to spend yourmoney elsewhere.

. You're five times more lik+ to die in an automobile crash driving tothe store to buy a lottery ticket than to win the jackpot.

. The probability of winning a major jackpot is about 1 in 15o million to1 in 17S million. The chance of dJrng by snake bite this year issignificantly better, 1 in 96 million, accoraling to the U.S. NationalSafety Counc.il-

. You're more likely to become president of the United States or a

Catholic saint, at least accoraling to the odds.. Take an exarnple of a relatively small lottery, where you have a 1 in 14

million chance of winning. The odds of winning the small lottery arethe same as plunking down a dollar and betting you can repeateallyflip a coin and have it come up heads 24 times in a row, accoraling tocalculations by Fred Hoppe, professor of matlematics and statisticsat McMaster University in Hamilton, Ontario. Take a coin out of yourpocket and start flipping to get a sense of how urlikely that is- Don'tforget to plunk a dollar on the table each time.

If instead of playing the lottery every day, a person put $1 a day into agrolrtll mutual fund earning 12 percent per year from birth to age 65,they would amass $5 million. Though not a huge lottery iackpot, it's a

nice sum ofmoney.

And it's far more likely than winning the lottery.

Textbooks: Get Schooled in the AlternativesAs if college tuition wasn't ex:pensive enough, college textbook priceshave soared- Some students are speniling more than $Looo per year-Many books cost more than $1oo each.

Rising prices are even more irritating when textbook publishersliequendy and sometirnes unnecessarily revise eilitions, rnaking olderones obsolete. Adding CD-ROMS and study materials the professordoesn't require and won't use boosts textbookprices.

But you're not necessadly stuck paying ouhageous prices at the campusbookstore. You can spend less maybe even hundreds of dollarsless with a litde planning and effort. To cut spenaling on textbooks,here are sorne ideas aside liom the obvious tip to buy used books ftomthe campus bookstore, which may be in short supply:

. Plan ahead. Find out what books you really need, even by contactingthe professor if you can't find out online or through the bookstore.Don't get the optional books until you know you'll read t]lem. Get t]le1o-digit ISBN code. It's easier to shop for books by number than title.You could also buy previous eclitions of the book if the professorapproves.

. Get the book liee. Sometimes students can study liom textbooks onreserve at the carnpus library, although students won't have theconvenience of using the books anltime tley want, and they can'tmark in the books. English maiors espec.ially can benefit ftom

dollr oacling liee classic novels that are out of cop]'right protection.For example, you can dollr oad ttr-de ond PrEudice by Jane Austenot MobA Dick by Herman Melville via such Web sites as ProjectGutenberg, www.gutenberg.org- Free study guides are available atSparkNotes, $\1\1..sp4lk!tq[cs=ee]4. Another liee way to get books isto swap them with other students on campus or at\1\1\1.. campllsbeel{llap=eql]l.

. Shop online. Buying books online gives you a wider selection of usedbooks and better prices on new ones. If you order from anout-of-state vendor, you might also avoid state sales tax. Check suchWeb sites as Amazon.com, eBav.com, Abebooks.com, andBestBookBuys.com. Order early enough to leave time for processingand shipping, and read lhe return polic).

. Shop early. You'll get t]le best deals because you'll have time toresearch the best prices and choose liom the largest quantity of usedbooks. And when shopping online, a retailer is less likely to bungleyour purchase during a slow period, as opposed to when it isswarnped with orders near the start of school. Also, you will have timeto choose the cheapest shipping option, which sometimes is liee ifyou're willing to wait a couple weeks.

. Strip down the book. If you have a choice, skip the bundled studymaterials, such as CD-ROMS and study guides, unless you know yourprofessors will use them or higl y recornrnend them. Often theywon't. Look for textbooks that are available in softcover andblack-and-lthite versions, !rhich are less e\pensive.

. Buy overseas. International ealitions are often the same books butcheaper and wildly cheaper if used. Check return polic.ies, if youlhinklou mighl need lo return lhebook

. Save receipts. Ifit turns out your instructor doesn't really use the textor you end up quickly dropping the class, return the book for a

refund. Of course, that assumes you didn't write in the book orhighlight it.

. Sell early. If you can finish studying for finals before everyone else,you'll have a better chance of selling back the book if the bookstore isaccepting a limited number of book buybacks. But you may receivernore rnoney by selling it yourselfin person or online.

Hybrid Vehiclesi Have a Nonfinancial Reason forBuying OneDriving a hybrid car or truck makes sense for several reasons. T]'picalreasons are helping the environment, helping the United States break itsdependence on foreign oil, and helping yourself save rnoney on gasoline.

But the last one, saving monet is a bit of a fallacy. Yes, you save moneyon gasoline. But you have to pay such a premium to buy a hybrid car thatyou're unlikely to recoup that extra money in gas savings at leastduring the first five years of ownership.

That was tJre conclusiott ol Consumet Reports in 2()()6, when it did themath on several hybrid vehicles. In that studt just two srnall hybrids,the Toyota Prius and Honda Civic Hybrid actually saved enough noneyin gasoline over five years to warrant the added expense and thosemodels barely made it worthwhile.

Since that report, the hybrid market has continued to evolve. But even ifthe price premium declines for buying hybrids over gasoline-only modelsin the coming years, you'll have rnany considerations if cost savings isyour prirnary goal. They include

. Hrgher cost- Hybrids can cost tlousands of dolla$ more tlan theirgas-only counterparts, which rneans paying more sales tax and moreinterest if you're financ.ing the vehicle- And as of this writing, hybridswere in high dernand relative to production, which rneans dealers areless likel) lo give big discounls olTsticker price.

. Your mileage may vary. For years, the window-sticker mileageestimates, sanctioned by the Environmental Protection Agenct havebeen inflated, with few consumers able to achieve the listed miles pergallon. Those nurnbers will change in 2oo8 to better reflect real-worlddriving conalitions. But it doesn't matter what that number sa]'s; whatmatters is the mileage you achieve- So, if you do a lot of highwaydriving, where hybrids are less helpf,rl on mileage, your breakevenpoint for recouping the hybrid price premiurn extends further into thefuture.

. Ta-\ credits- You might have heard about lucrative tax crealits you canget for buying a hybrid vehicle. Unfortunately, those creclits expired,and hybrid buyers in zoo8 aren't likely to get a similar break unlessCongress acts. Those creclits were included in the Consumer Reportsstudy. Witlout ta-\ creclits, hybrids are even less likely to make goodfinalc.ial sense.

. Deprec.iation. All vehicles deprec.iate iiom the moment you buy them.And hybrids deprec.iate in value faster than gas-only nodels.

. ongoing costs. Hybrids cost slighdy more to insure and maintain.These aren't primary considerations, but it adds to the burden ahybrid has to overcome before being a financ.ially prudent buy.

Ifyou're buying a hybrid vehicle on princ.iple, that's fine. Just know whatit's really costing you. And a plus for hybrids is they tend to be very

reliable, which is worth something in dollars, and hybrid owners tend tobe very satisfied with their purchases. But don't buy a hybrid strictly forwhat it can save your pocketbook. You and your pocketbook are likely tobe disappointed.

Greeting Cards Discarded: Special-OccasionCardboard RethoughtSenaling a greeting card on holidays, birthdaJs, anniversaries, and otheroccasions has long been a nice taalition. The cardboard greetings cansay such momentous things as, "I'm thinking about you," "I'm proud ofyou," or "I love you."

But the cards are not cheap, often pushing past $4 each, if purchasedindividually. And after you plunk down the money and take the time toadd postage to mail the card, you wonder whether all tlat effort andex:pense was even apprec.iated.

Americans spend nearly $7.5 billion on greeting cards each year,accoraling to the Greeting Card Assoc.iation. The 9() percent ofhouseholds that send cards buy an average of 3o individual cards a year-Add sales ta-\, postage, and boxed cards, and total household spendingon greeting cards could easily near $r5o.That's not a make-or-break total for most families' finances, but it'senough to question whether buying greeting cards is worth it, or to atleast examine less-ex:pensive alternatives.

The rub is to reduce greeting-card spencling without appearing cheap oralisrespectfil to family and friends accustomed to receiving cards liornyou. The key is judging your auilience. Cards accompanying a gift to anelementary-school child will be quickly discarded. Yet, a mother might

treasure a greeting card as a gift. Your brotler might give t]le card aquick read and irnmediately trash it. An etiquette-consciousglandmother might be hurt if a birthday card never arrives.So, you have to judge the value a tecipient places on receiving atraditional greeting card. Here are wals to cut the cost ofgreeting cardswithout looking too cheap:

. Plan ahead. The most er?ensive way to send $eetings is to leave cardshopping to the last minute and dash into a Hallmark store fo! alast-minute lix. Most of tJIe time, there's no excuse. your brother'sbirthday and your wedcling anniversary are not unerpected events.Mark your calendar with important birthdays and holidays, and thenback up a week and add a reminder to buy a greeting card. Then youhave t}e time to shop for an inerpensive card or seek altemativegreetings.

. Personalize. Mailing a store-bought card that you simply sign isimpersonal, regardless of how much you spent on it. The recipientmight appreciate it more ifit contains a handwritten note, even ifit's acheaper card. That only costs a few minutes ofyour time.

. Don't pay full price. Check out discount stores, dollar stores, andwholesale clubs that may sell last year's cards. Birthday and holidaywishes don't change much in a year. Look for deals on seasonal cardson sale after the holiday.

. Buy in bulk. Buying boxes of cards can dramatically cut thecost-per-rard- Buy cards witl universal designs and greetings, andthen personalize them witi a handwriften note.

. Send e-cards. Electrcnic cards are sent by ernail-or more often, anInternet web link to the card is sent to tle recipient by email. A

variety of online vendors offer such cards and let you customize amessage. Many e-Grrds contain sound and animation- Although somee-cards are liee, you have to pay for others, sometimes through asubscription of say, $14 a year for an unlimited number of cards- Butif you can send most of your cards electronically, that would becheaper than buying paper cards. A side benefit offered by manye-card sites is a reminder service that alerts you to send an e-cardwhen an event nears- And they offer delayed delivery of cards, so youcan choose the card and schedule it to be automatically emailed later.Try such Web sites as Americangreetings.com, Hallmark.com,12?greetings.com, Regards.com, and Greeting-cards.com.

. Make it yourself. Do-it-yourself cards don't need to betime-consuming. Creative and artistic people won't have a problemassembling a homemade card frorn craft materials available aroundthe house. For others, relatively inex:pensive computer softwarepackages for $15 to $5o help create professional-looking paper cards.The software is generally easy to use and comes with hundreds oftemplate cards you can customize. The cards corne out lookingnice although not glossy on a regular color ink-jet printer. You justneed to buy card stock and envelopes. The cost per card is lower tlanmost store-bought cards. And several Web sites, inclualingAmericancreetings.com, allow you to design and customize cardsonline and print them. Digital photography buffs can use thecomputer to create a photo card with an overlaid text message, whichmakes a nice greeting.

. Pick up the phone. With low long-alistance phone rates, callingsomeone on a spec.ial occasion may not only be cheaper than a cardbut more apprec.iated. Five dollars could buy a nice greeting card and

postage stamp. Or $1 bu]'s aconversation at 5 cents a minute.includelieelong-clistance calls.

2o-minute long-alistance phoneOf course, rnany cell phone plans

4. The Big Picture: Strategies for SpendingSmart

Spending can be like the game of chess. Most every chess game isdifferent. But proficient plaS'ers have learned both specific tactics andoverall strategies for gaining advantage. Even ifthey have never seen anexact position before, they recognize falniliar patterns in differentsections of the board.

So it is with spending. Universal guidelines cal govem how we spendour money, even if the details are different. Tactics to win retailskirmishes and overall strategies to win with money canbe learned.Some strategies in this chapter will be immediately recognizable, such ascomparison shopping, tracking your spending, and buying itemssecondhand. Though some topics are familiar, they are powerful. Othertopics will surely contain advice you haven't heard before.So read on to develop strategies to force a checkmate in your battle tospend smarter.

Comparison Shopping: What's a Good Price?Comparison shopping is fundamental to spending money smarter.Paying more tlan you have to just isn't logical, especially in a time whencomparing prices is so easy and fast.Accepting the fust price you see is making a decision to be powedess.You're deciding to buy something based on nothing more than a trusttlat the seller is offering a fair price. You often have no reference point

for whether the offered price is good or bad.

The fundamental point is this: Prices vary, sometimes significandt onthe exact same items. Here are tips on comparison shopping:

. Don't overvalue your time. People like to compare time spent savingmoney to tleir working-hour rate of pay. For exarnple, sorneone whoearns $zo an hour likes to say an hour-long task to save $15 isn'tworth his time. But that's only true if during that hour t]le personcould have and would have worked to get the $2o. Otherwise, thecornparison should properly be a 915 savings versus zero dollars inearnings. Additionally, even if you would have worked that hour, thefact that your $2o in earnings is subject to income ta-\es furtherdeflates the argument.A 2oo2 study at Virginia Tech University used students tocornparison shop for various purchases. In one case, 16 minutes ofcomparing prices on the sarne rnodel of color television saved $1oo.That works out to $375 an hour-In a 2oo3 studt researchers were shocked to learn tlat cherrVpickers consurners who shopped rnultiple supermarkets to get goodgrocery deals were not rialiculous cheapskates- Their savings norethan made up for their investment of time, accoraling to the studysauthors, Stephen Hoch, a rnarketing professor at the Wharton Schoolof the University of Pennsylvania, and Edward Fox, a marketingprofessor at Cox School of Business at Southern MethoalistUniversity.I felt like I got a good deal on a new laser printer for my home ofEce.The $129 price of the printer was pretty good, but then I needed a

cord to hook it to my computer. That alone cost $3S at my local

big-box electronics store. Then I remembered a local dollar storecarried a variety of computer cords. Sure enough, I got a printer cordfor $1 and returned the $35 cord. The cheaper cord worked great.Stopping by the dollar store was certainly worth my time.Of course, paying for the convenience of not comparison shopping is apersonal choice, and it's true that your liee time is worth somethingin dollars. But ask yourself how much you're willing to pay for thatconvenience. What else could you have purchased with all the moneyyou could have accumulated if you weren't constandy beingovercharged?

. Go online. By using the Internet, you can regularly find better valueand reduce the investment of time spent comparison shopping.Consumers can quickly research the qpe of product they should buy.Consumer Reports online, www.consumerrepel!!.elg, and a host ofother Web sites offer reviews ofproducts and services- To get a betterprice, use shopping-comparison sites, called shop-bots. Plug inspec.ific model numbers ofproducts at such Web sites as Froode.com,Mldimon.com, Shopzilla.com, DealTime.com, and Shoppine.com.Even if you don't want to make a purchase online, you'll see a varietyofprices and be able to recognize a competitive price. You could evenuse that knowledge as leverage to haggle for a better price liom a

bricks-and-mortar merchant.. Realize srnall savings add up. It's true that a one-time savings ofa few

cents or even a few dollars might not be worth your time spentcomparison shopping. But repeat purchases in large quantities addup in a hurry. Grocery shopping is a good example. Consumers oftenclisregard prices on grocery items that cost just a few dollars becausethe nickel-and-dime savings seems small. But when those small

savings are applied over and over again to dozens of items in yourgrocery cart, you're soon talking about real money. Saving 3() cents onan item bought each week becomes annual savings of nearly $16.Multiplied by 50 items, you're talking about $Boo a year savings.

. Beware of retail gimmicks. Retailers can make it more difEcult tocomparison shop or try to reduce the incentive to compare prices. Forexample, many retailers offer a price-matching guarantee, where tleywill refund uo percent of the price if you find the item cheaperelsewhere. Research shows such a guarantee might be a sign theretailer actually has higher-than-average prices. Many people will feelreassured by the guarantee and simply assume they are getting t]lelowest price. They never bother to compare prices after theirpurchase, and therefore don't cash in on the guarantee.Other tricks include end-of-aisle display items that aren't really onsale and reference pric.ing, where a sign might say an item usuallycosts $99.99 and is now $59.99 whether it's true or not. Mail-inrebates seem to lower t]le price but often don't. That's becauseconsumers never bother to wade through the confusing instructionsto submit rebate paperwork. And sorne retailers change modelnumbers on products, making it more alifEcult to comparison shop,even though tleir product is widely available.

. Test yourself. If you're unconvinced that comparison shopping isworth your time, conduct an ex:periment. Recall prices on several ofyour most recent ex:pensive purchases. Then go online to a shop-bot,a site that combs the Internet provialing users with product prices,and plug in the model numbers. Note the wide range ofprices. Howdoes the price you paid rank? By how rnuch clid you overpay? Howlong did it take you to find a significandy lower price? Now ash

"Would comparison shopping have been worthwhile?" The mostlikely answer is a definite yes.

Tracking Spending: Forensics on Your FinancesBefore you can cut wastef,il spencling, you have to know where t]lemoney is going. So tracking your spencling is a first step toward getting ahanille on your personal finances.

The process is a bit like the popular CSI television prograrns, wherecrime-scene investigators look for clues that lead to the capture of thekiller. With spending tacking, you collect clues about where your moneyis going to find out what's killing your finances.

This is not about the dreaded "B" word iiudget. Creating a budget andsticking to it can be an immealiate turnoff, and for good reason- Itrequires a level of cliligence rnany people aren't willing to exert,espec.ially if tleyre just starting to pay attention to their money.

The point is to know where your money is going, so you can realirectspenaling to fit your priorities. For exarnple, buFng a $3 latte everyweekday norning and a $7 lunch at work seems han ess, until youscrutinize and total that spenaling. That's when you realize it amounts torougl y gz,5oo a year. Ifyou made coffee at horne and brown-bagged it,you might be spending closer to $5oo a year. That $2,ooo alifferencecould be spent on something you care more about, even if it's a vacationin the Caribbean-

So tacking spenaling isn't some exerc.ise in overly consc.ientiouspersonal finance. It allows you to plug the leaks of wastef,rl spenalingand realirect money to your true priorities. And it will prove how litdeexpenses addup.

The good news is you don't have to do tlfs tracking forever, althoughthat would be ideal. Track daily spending for tlvo months, realizing thatyou'll miss out on some seasonal expenses, such as air conalitioning orsummer vacation-

Persuade all the spenders in the family to partic.ipate, inclualing spousesand children. It's a worthwhile exerc.ise, and most people will iliscoverseveral areas ofwastef, spenaling that shock them.

And know this: Your day-to-day spencling dec.isions will impact yourfinances more than any investnent dec.ision you will ever make.

Here are ideas for tracking spencling:

. Keep receipts. This might be the simplest and best tactic. Ask for andkeep receipts for all purchases. Designate a spot for all the litde slipsofpaper. Injust a few weeks, some alisturbing spenaling patterns arelikely to become obvious, without even totaling the receipts. Alsokeep all the billing statements that come in the mail, such as theelectric bill, phone bill, and crealit card statements-The receipt method might be best if you have a reluctant spousewho's wary about the exerc.ise of ex:pense tlacking- At the least, he orshe would probably be willing to dump daily receipts into a kitchendrawer.

. Track on paper. If you can carry a srnall notebool! iot down allpurchases- Or keep a piece of paper clipped to your charge cards tolog transactions.

. Write checks- A checkbook comes with a register to record purchases.But you'll have to combine this method with another, becausepersonal checks are not universally accepted. If you're bad aboutrecoraling checks, get the kind of checkbook that has duplicate pages.

. Use software. Quicken, Microsoft Money, a spreadsheet, or personaldigital assistant (PDA) software all allow you to record spenaling anddo some analysis that might be quicker than with pencil and paper. Besure to avoid GIGO, or Garbage In, Garbage Out. It's a computer termthat refers to bad data going into an analJsis, which rnesses up theconclusions. The sarne is true of ex:pense tracking. The most obviousarea is cash spencling. It doesn't help much to have a huge category ofspending called "cash." You should break this down into what t]lecash is spent on for a truer picture of spenaling. Save ATM receiptsand with a pen, rnake notes about cash spending on the back of thereceipt.

. Use cards only. Using a debit or creclit card for purchases is helpf,rlbecause all your transactions are available in a single place yourbank statement or crealit card bill. However, the crealit card idea is abad one for people who carry a revolving balance. Those people wouldbe better off spenaling cash and tracking it.

Aiter recorcling spencling for a month, compile the ex:penses intocategories and total them. This is a crucial step. Repeat after the secondmonth.

When the surprise wears off that you're spencling $Bo a month onconvenience-store soft drinks, $2oo a month on eating out, and $3oo a

month on smoking c.igarettes or whatever ex:penses pertain to yourlife resolve to funnel your money to things you really care about.

If the money-tracking exerc.ise goes well, you might be a canalidate tocreate a f,rll-fledged budget. That means graduating liom cliscoveringwhere your rnoney went in the past to telling your money where to go int]le future.A budget is not a restriction. In fact, a budget is about having

more more of the things that are important to you and more control. Ifyou find your budget isn't reflecting your real spenaling or your realpriorities, you can change it.You might even find rnoney for something you love that you didn't thinkyou could afford, which really casts budgeting in a positive light. Maybeit's quitting a job and staying home with the kids, buying a home,cornpleting a house improvement, buying a big-screen TV, or vacationingin Europe.

Budgets aren't complicated. You allocate money to alifferent categoriesof eqrenses and then agree not to exceed those specified amounts. Aitertracking spenaling for a couple months, you should have an idea of howmuch to allocate to each category. And, of course, you'll have to keeptracking to know whether you're speniling more or less than your budgetallows.

A few examples of budget forms available online includeww$..consumercrealit.com/budget-sheet.htm; the Microsoft Excel Website, www.ofEce.microsoft.com (click the Templates tab); andww !f .monelDuIpQEgiQy{Q!4.

Rules ofThurnbi Benchrrrarks for Spending SrnartKnow-it-all ex:perts in the financ.ial world pooh-pooh rules of thurnb,contenaling that everybodys money situation is unique. That's true to anextent, but good rules oftlumb can be powerfil.First, rules ofthumb are so easy that people uncomfortable with moneytopics might be encouraged to examine their spencling. Second, the rulescan provide perspective about your noney and give you ideas torestructure your spending and saving habits.

Some savings rules of thumb are fairly well known, such as having anemergency fund ofthree to si\ months of ex:penses and contributing 10%

to 15% of pay to retirement savings. The following are a few spenclingrules of thumb to consider. Take them with a grain of salt, especially ifyour situation is alifferent liom the qpical American's. But they arequick benchmarks against which you can measure your own speniling:

. Overall spencling. One rule of thumb is the basis ofAll tsou Worth:The Llltimate LiJetime MoneA PIan, a 2oo; book by HarvardUniversity professor Elizabeth Warren and her daughter, AneliaWarren Tyagi- In it, the authors suggest you should spend half yourafter-tax income on "must-haves," 3() percent on "wants," and 2()percent on savings. To calculate your after-tax income, add to yourregular take-home pay employee and employer contributions to your4o1(t), which is allocated to savings, and your portion of healthinsurance costs, which is allocated to must-haves.What goes in each category might not be obvious. For example, the"must-haves" is a desperation-q?e budget, like you might live onafter you've lost ajob and were c.ircling the financ.ial wagons. Clothes,cable TV, and cell phone service fall into the wants category. Payingoffdebt counts as savings.It's a usef,il exercise to tally your own spenaling to see how it breaksdown, compared with the 5o/3o/2o formula. Many people will findtheir must-have commitments much higher than So percent.

. House. Your mortgage pa]'nent and assoc.iated costs should notexceed 29 percent of your gross monthly income. This includesmortgage princ.ipal and interest, real estate taxes, and homeowner'sinsurance, the usual items included in a monthly mortgage paynent.

An even simpler rule is the total mortgage should not be more than2.5 times your gross income.

. Debt. Total debt paynents should not exceed 36 percent of grossincome. This includes the monthly pa]'nents for such items as

mortgage, automobile loan, crealit cards, student loans, and alimony.Keep in mind that the debt rules of thumb are ceilings. A healthierhousehold budget would spend far less on debt. The Federal HousingAdministration, the government agency that helps people buy homesby guaranteeing loans, allows up to a 41 percent total debt load, butthat's quite hefty and risky.

. Car. This may be the most shocking calculation for most people. Yourcar or truck pa]'nent shouldn't exceed 7 percent of your grossincorne less if you have other debt. This derives liom the previoustlvo numbers: 36 percent total debt, minus 29 percent mortgage debt,leaves you 7 percent maximum for auto loans. And that assumes nocreclit card debt, student loan debt, or other obligations. So, ahousehold with $Bo,ooo in income and 29 percent mortgage debtcan, at most, afford auto loars totaling $467 per month. That gets youa $19,5oo car, assuming a 7 percent loan over four years. To recap, a

household rnaking a healthy income of g8o,ooo and being debt-lieeexcept for the mortgage can afford pal'nents on one car costing lessthan $2o,ooo, which means that household can't come close tobuying most new cars.

. Car repairs. If the repair costs less than half of the trade-in value ofthe vehicle, repair it. Otherwise, sell it and buy another car. So, if a

car's trade-in value is $3,ooo and the repair costs less than $Lsoo,it's worthwhile or at least worthy of serious consideration- You canfind trade-in values online atkbb.com, edmunds.com, and nada.com.

. Holiday gifts. Spend no more than 1.5 percent of your gross incomeon the holida]'s, including gifts, decorations, travel, wrappingpaper everlthing. That means a household with $4o,ooo in incomewould spend g600, while a gloo,ooo household would spendglsoo. If you have a lot of consumer debt, you should considerspenaling less than l percent.

. Life insurance. A breadwinner whose family depends on his or herincone should consider term life insurance equal to si\ to ten timesgross pay. Another rule advises five tirnes your gross incone, plussuch ex:penses as the mortgage, consumer debt, and kids' collegecosts. And the main rule of thumb is to buy only tenn life insuranceinstead of cash-value life insurance.

. Net worth. Net worth is the ultimate measure of financ.ial success. It'sall you own, minus all your owe. If you liquidated your life, whatwould you have left? For example, the equity you have in your homeis part of what you own, while your remaining mortgage balance iswhat you owe. You own investments and belongings, while your carnote and crealit card balances are owed. Accoraling to the best-sellingbook The Millionaire Nert Door, if you're interested in being a"wealth accumulator," your net worth should equal your age timesyour pretax income divided by ro. A 4o-year-old with $1oo,ooo inannual income should have $4oo,ooo in net worth.

The main drawback for such rules of thumb is that spending shouldreflect your priorities. Sorne people would glaally buy an inex:pensive carbecause cars don't matter to them. Perhaps they want to spend lavishlyon gourmet foods, Christmas gifts, or electronics, because that's howthey choose to spendmoney.

That's fine. But ballpark estimates can at least keep you in the ballgame.

Buying Tactics: When the Price Isn't Really thePriceNegotiating the best price on goods and services is standard practice inmany countries, but Americans often don't try to haggle. As a result,rnany of us aren't very good at it and feel awkvard asking for a betterprice.

But numerous face-to-face buying situations lend themselves tonegotiation, outside the most obvious example of car buying. Big-ticketitems, such as f,uniture and appliances may lend tlemselves to pricenegotiation. And you'll have better luck at pril'ately owned retailels andservice-providers than with national chains.

Here are some haggling tips:

. Develop a price plan. Entering negotiations without a plan can quicklylead to overpaying. First, you need to know a range of prices for theproduct or service. Then, dec.ide on tlvo price points, your ideal priceand the price you could live with. The dollars in betlveen are thenegotiation batdefield- Also identifu nonmonetary goals, such as

getting the purchase completed quickly, service after the purchase,and maintaining a relationship with the seller. In beginning thenegotiation, start with your numbers, not the salesperson's- Mostimportant, maintain your walk-away power. If the salesperson won'tnegotiate witlfn the boundaries you set, you need to walk away andreassess your price range or find another seller.

.Assess the balance of power. Evaluate how eager you are to buy,cornpared with how baally the vendor wants to sell- If you have moreleverage he wants to sell more than you want to buy be agqressive.

For example, you might be able to play hardball for a better deal at theend of the month if a salesman needs to reach a quota- On the otherhand, if you want to buy a car with a si\-month waiting list fordelivery, the seller has rnore leverage. In that case, try to negotiatefringe issues that might not matter much to the seller- Haggle aboutbetter loan financ.ing or get them to throw in floor mats. Leverageswings to you on multiple large purchases. Ifyou're buying a room f,rlloff,uniture rather than a single piece, the salesperson is likely to bemore flexible on the total price.

. Seek win-win. If you will have an ongoing relationship with the seller,such as a private landscaper, housecleaner, or small-shop automechanic, it's often better to seek a deal that works well for both ofyou- That's not just to be nice, but because relationships can tanslateinto saved dollars down the road- Where there's an element of trustinvolved, shoot for a fair price rather than the ultimate bargain-

. Know when to be ruthless. If rnany identical products are offered bylots of sellers witl plenty of inventory available and no need for anongoing relationship, it's take-no-prisoners time. Car buying might bean example if the same nodel car is available liom a variety of sellers.You don't need a relationship with a private seller, a used-car lot, oreven a dealership because you could get maintenance and repairs atany auto shop or another dealer. Your strength comes liom yourpower to walk away and buy elsewhere-

. Be emotionless. Nothing zaps your bartering power more than beingemotionally tied to buying. If a salesperson smells a hint ofdesperation, you're toast- Any leverage you had is gone.

. Request "best and final-" Bids and offers are usually padded withroom for negotiation. So sirnply ask for a best-and-final price, or ash

"Is tlat the best you can do on price?" If it's an in-person verbalexchange, remain silent and maintain eye contact until thesalesperson responds. The silence is torture for somepeople, who willfill the void with an offer they alidn't really want to make.

Will haggling work all the time? Of course not. It may not even workmost of the time. But this is one case where the clich6s apply: "It neverhurts to ash" and "you won't get ifyou don't ask."

Curse of Autorrratic Pa5,'rrrentsi MonthlvCornrnitrnents Will Haunt YouPeople save more money if they make it automatic. That's why it's sopainless to save in a 4o1(k) retirement plan or a Christmas club account.You don't have to do anlthing. Automatic savings make people's lack ofself-disc.ipline work for them. This seemingly simple concept was thebasis of a best-selling book The Automatic Millionoire, by David Bach.

But the automatic approach has an evil flip side. It works againstconsumers when theyre automatically spenaling instead of automaticallysaving. It's the health club rnembership you don't use anynore, themusic club tlat sends CDs you don't want, the premiurn cable channelsyou don't watch, and the wireless phone minutes that go unused. Thelist of recurring monthly and arurual charges goes on and on andamounts to a lot ofwasted money. Check your bank statement or crealitcard bill for rnore exarnples.

Sonetirnes bad choices stem from good intentions. In the health clubrnembership exarnple, getting in shape is a good idea. Ifyou use the S/mseveral tirnes a week, an annual membership ends up being cheaper thanpaying each time. But good intentions stray far frorn reality. Researchers

found 85 percent of users who chose a monthly conhact would havebeen better off paying by the visit. [n fact, they were overpaying by anaverage of $7oo during their membership term, compared ivith aper-use contract, according to research by fllrike Malmendier ofStanford University and Stefano DellaVigna of the University ofCalifornia at Berkeley.

Consumers generally don't work out at a g,rn as often as theyanticipated when they signed up. The tlpical S,'m member used thefacilities a paltry four tirnes a month in the study.

So, automatic pa!'rnents are most dangerous when we're maldngunsoundjudgnents about ourseh€s, being too optimistic tlat we'll usetie seNice tiat's incuring the regular monthly charges.

You can end the financial damage of automatic spending simply b.v-

canceling tie prcducts and serrices you don't need or use. Somecommitments are more difficult to unwind, such as a vacation timeshare,rvhich can be notorious\ difficult and expensive to unload. In that casethe reculring payrnent is the financing of the timeshare, themaintenance fees of several hundred dollars a year) and the cost oftraveling to the timeshare to use it.To prevent automatic spending gaffes, here are some tips:

. Buy a la carte. Al$.ays prefer the pay-as-you-go option, at least at first,until you know how much you'll rea\ use the service. In other words,be as aliaid of spending commitments as a dedicated bachelor is ofengagement rings. Avoid yearly contracts, even if they include aaliscount over the monthlv rate. Most times, you can switch frommonth-to-month to a aliscounted annual rate after you determinewhetler the service is truly \rorthwhile.

. Don't forecast high use. Realize tlat t]le moment you rnake apurchase or sign a contract is the most motivated you may ever be touse that service- You can't count on that same level of interest in thefuture. In fact, choose the initial contact based on your worst futurebehavior. Then adjust t]le contract later, if you find you use theservice more-

. Check the cancellation process. Many services with automaticpa]'nents make it difEcult to cancel. A health club might only allowyou to cancel in person. A credit card might require you to cancel bywriting a letter. Those procedures are designed so you procrastinatethe cancellation. Ifit's a curnbersome cancellation process, it might bea sign that you'll underuse the service.

. Tally the nurnbers. Most automatic pa]'nents are expressed as a

monthly fee, because the dollars don't sound as ex:pensive. A $25monthly contract seems harrnless enough- But multiply it by 12 anddetermine whether the service still seems worthwhile expressed as

$3oo a year.

Ifyou could cancel or downgrade just four automatic contracts you don'tuse: a health club rnembership, $7o per month; a premiurn channel onthe cable TV package, $1S per rnonth; Internet access on your cellphone, $ro per month; and a movies-by-mail subscription, $18 permonth. That alone would save you $r,356 a year.

That's how wasteful automatic spenaling adds up.

Buying Used: Secondhand Gives You a Leg UpBuying used rnerchanclise can end up being a good deal or a bad one byresulting in saved or wasted money. But being smart about buyingpreviously owned iterns can be a key to spenaling smarter.

Nowadays, traalitional outlets for used iterns, inclucling garage sales,yard sales, flea markets, tlrift stores, and newspaper classified ads, areaugmented by such online options as auction site eBay andCraigslist.com.

Here are general criteria for evaluating whether to buy an item used

. Savings. Buying used usually means taking on rnore risk because youcan't return the item to a retailer or manufacturer. Therefore, theprice alifference betlveen buying used and buying new must be largeenough to compensate you for taking on this additional risk. Quicklydepreciating items can be the best bargains. Their resale prices will besignificandy lower soon after the initial purchase. Automobiles are theprime example. A car can lose 3() percent of its value in the first year-Ifyou can swoop in at year No. 2 to buy a lightly used car and avoidthe depreciation hit, you c1rn save thousands of dollars. Timesharevacations are another example. A new timeshare might cost $15,ooo,while buying frorn sorneone desperate to dump one cor d cost a smallliaction ofthat.

. Buying used might or might not mean taLing a step down in quality.For example, buying a used table made of real wood is actuallysuperior in quality to a particle-board table purchased new. But if theitem is lower in quality because it's been used, rnake sure the savingsjustift the downgrade in quality.

. Gross-out factor. Buying some used items might make yousqueamish. Undergarments and mattresses are examples. Differentpeople will draw the line at alifferent tlpes of purchases. Lingeriemight be a definite no, while a secondhand pair of ieans might be

okay. And you might evaluate shoes on a case-by-case basis. I didn'tmind buying a used suit at a high-end consignment shop. I bought thesuit for $24.99, along with two silk ties for $B each. I've worn the suitat family flrnctions and during television appearances. It fits great andlooks great for a small liaction ofwhat a new suit would have cost.

. Used quality. Some items are functionally no alifferent used than new.Books, music CDs, video garnes, and sorne sports equipment, as longas theyre not damaged, function the sarne way used as t]le day theywere purchased new.

. Life span. Avoid items with short life spans. For exarnple, an oldermodel ink-jet printer might be cheap when purchased used, but youmay no longer be able to find ink cartridges for it- Many items withrapidly evolving technolosr would fall into this category.

. Length of use. Ask yourself how long you're likely to use the item. Theshorter the use, the better deal it is to buy used. Kids clothing is agreat buy used because you know the child will outgrow the garmentquickly. Kids to]'s can also be a good buy, considering nanyyoungsters' short attention spans.

. Uncertainty of use. Avoid buying new if you're unsure about whetheryou'll get a lot ofuse from the item. Ifyour child starts taking lessonson a musical instrument, it's best to buy a used violin or piano untilyou're certain he or she will continue for more than a few months.Consider buying used when taking up new hobbies, such as goltskiing, or camping, that require ex:pensive equipment. You canupgrade later, when you're ready to make a commitment to theactivity. By then, you'll also be more knowledgeable about what tlpeof equipment you'll need.

. Quality needed. Nobody needs top quality for every purchase. Storage

shelving or bookshelves that will be out of sight in the basement canbe purchased used, assuming the units are sturdy. If an item'saesthetic appeal is low on the list of priorities, it might be a goodcanalidate for buying used.

. Complexity. The fewer moving parts, the better when buying used- Inbuying tools, a used hamrner or wrench is low ris\ whereas buying a

used power saw is riskier. Exerc.ise durnbbells are a better bet than atreadmill. Buying a used computer is a worse idea than buying a usedpatio set. An exception would be buying a cornplex item that is factoryrefurbished and cornes with a warranty.Golf balls are pretty simple. That's why even though I'm anabove-average golfer, I buy used balls. They're narne-brand balls inmint conalition. They play just as well and hook and slice just as

lrell as nelt balls [ora liaction oIlheprice.. Safety. Maintain a strong bias against used items that could be a

hazard to adults and espec.ially to children. For these items, price isless a concern than the quality of the item. If you have any doubtabout the safety of a child's car seat or plalpen, for exarnple, considerbuying new.

. Seller. If you know the seller, perhaps a relative, friend, or neighbor,you might have more confidence that the product has beenwell-maintained. That can give you peace of mind when buying itsecondhand-

. Budget. Consider buying more items that are used if you'recash-strapped or trying to get out of debt. It can provide somebreathing room for a tight household budget. And for a homebusiness on a limited budget, buying used ofEce furniture andequipment can heh fatten the bottom line.

Saving money is the upside of buying used. Among the downsides arethat shopping for used iterns often requires more time and effort thanretail shopping, espec.ially if done in person. And you're bound to end upwith a defective item once in a while. Also, some people get sucked intothe thrill of the bargain hunt and end up buying used items they don'tneed.

But if you can buy used iterns wisely, you'll often get good value for yourmoney.

Spending Windfallsi Don't Blow ItWe've all heard the stories about the lottery winners who go broke andthe professional athletes and celebrity entertainers who go bankrupt.Blowing millions of dollars seerns unfathornable, but it happens withdisturbing regularity.

And rnultimillionaires aren't the only ones. Every day, regular peoplesquander inheritances, court setdements, salary bonuses, ta\ refunds,and garnbling winnings. That's because, contrary to popular belief, it'shard to spend money well. And wisely spencling a windfall is evenharder.

True, dealing with sudden money is a nice problem to have. But it'simportant to realize that windfalls, especially sizable ones, can be lifealtering- They potentially offer a more cornfortable lifestyle or a path toself-destruction.

Up to 7() percent of people who receive large lurnp surns of rnoney blowit in a few years, accoraling to the National Endowment for Financ.ialEducation. So, the first rule of dealing with sudden money is not to loseit, which means maintaining as much respect for the rnoney as if you

eamed it in a regular paycheck.

Here are other tips:

. Do nothing. Unless you're fac.ing bankruptct don't spend the moneyfor a while at least three months and preferably six. During thisperiod, don't dramatically alter your lifestyle. That means don't quityour job and don't start spenaling on lu-r_uries. Park the moneysomewhere safe, such as a savings account or money market account-Growing the money isn't the first goal. Give yourself time to adjust toyour new financ.ial boundaries. And in the case of an inheritance lioma loved one, you need time to grieve so confused emotions don't leadto bad spenaling dec.isions.

. Seek he$. Develop relationships with professionals who can help you.Seek advice on such issues as insurance, ta-\ planning, and estateplanning. Some financial planners spec.ialize in clients who becomewealthy quickly, such as those found at www.suddenmoneJr.com. Beon guard for unscrupulous "professionals" who prey on those whosuddenly come into large sums ofmoney.

. Consider the wonderfil possibilities. Play the daydrearn gameeveryone has tried. "If only I had more money, I could..." Besideshome improvements and spending on lu-r_uries, force yourself to addto t]le list meaningf,rl and long-lasting uses, such as continuing youreducation, saving for retirement, or starting a business.

. Devise a plan. Tops on your spenaling list should be paying off debt,except possibly mortgage debt, and creating an emergency fund ofthree to si\ montlN of living ex:penses. Start or augment savings forsuch long-tenn spenaling goals as children's college costs andreiireJnent

. Enjoy it. Nobody needs to tell you how to spend money on fun. Butstart slowly and moderately. Before buying t]le red BMW S Series youalwa]'s wanted, rent one for a few weeks to determine whether thethdll wears off and you would be just as happy with a slighdy usedHonda Accord. Before building an addition to your home, start with asmaller project, maybe with some interior painting. Before quittingyourjob and volunteering at a charity, work at the charity part time-

. Give- Sharing money, whether with family rnernbers or charities,brings a special joy and possibly ta-\ breaks. Favor giving overlencling rnoney, which often leads to headaches.

Whatever you do witl your windfall, airn for maximum satisfaction andfew regrets.

Mernbership HasAssociation

Its Privileges: Savings by

"Membership has its privileees," sa]'s the American E\press slogan- Theability to save rnoney is among those privileges, not just for crealit cardsbut many groups, clubs, and organizations.

The problem is, most people don't know about or use these lucrativebenefits, which in essence they already paid for through rnembershipfees or just belonging. That's why it's worth maLing time to learn aboutthe side benefits of being a card-carrying nernber of groups you belongto. E\amples are industry organizations and your local chamber ofcomrnerce. They're good for professional netlvorking, but they mightalso offer access to group health insurance if you're self-employed. Yourcrealit union or ernployer rnay have aliscounted tickets to amusementparks and concerts. Your mutual fund conpany might have usef,rlfinancial planning tools on its Web site and offer a aliscount on

tax-preparation software. Membership at a zoo in your hometown mightprovide liee admittance to other zoos around the country.

Here are several cornrnon mernberships and some of their lesser-knownprivileges. They could save you literally hundreds of dollars.

. AAA. This organization, formerly called the American AutomobileAssoc.iation, is known for its roadside assistance and towing service,hotel aliscounts, and liee rnaps and travel guides. .dd{ has 49 millionmembels in North America. But .dd{ has rnany other benefits too,inclualing services to book your trip, not just plan it- The group hasexclusive deals with Hertz rental cars and Disney amusement parks.Other perks are trip-specific.For exarnple, a rnernber booking a cruise through AAA might receive aliee cabin upgrade- AAA also offers favorable tenns on creilit cards,auto loans, money market accounts, and certificates of deposit. And itoffers a variety of insurance, as well as advice and services for carbuying. You can stop by any AAA branch ofEce to obtain haveler'schecks at no cost. Retail aliscounts include 3c) percent off atLensorafters eyewear, 2() percent off FID flowers, and 1() percent offat Target and Payless ShoeSource. The AAA Web site (www.aaa.com)

has an online tool for tacking maintenance on your family's vehicles-I bought eyeglasses liorn LensCrafters, which were going to cost me ahefty $4oo. But after my A.d{ aliscount, the whole package ofdesigner frarnes and lenses cost about $28o. Granted, that's still a lot.But I paid a lot less tlan I could have for the exact glasses I wanted.My backup pair cost just $r7 liorn an online retailer. And thatincluded shipping and tinted clip-ons.By the way, if you're a member of AAA, use its towing service and

roadside assistance instead of one through your auto insurance.Consumer Reports found that using your insurer's service, even if thebreakdown alidn't involve an accident or tafEc violation, could raiseyour insurance rates. You don't need both, so cancel your insurer'stowing service.

..dARP. Formerly known as the American Assoc.iation of RetiredPersons, this group is the prirnary lobbying and informationorganization for people over age 5(). AARP boasts 36 millionrnembers. Mernbers receiveAARP me Magazine,AARP Bulletin, and,all the other benefits of nernbership, inclualing aliscounts oninsuralce, as well as on travel and Internet access. More than 3,2oochapters offer driver safety courses and ta-\ preparation help. One oft]le big AARP benefits is tle Web site itself, at www.aarp=elg, which isf,rll of useful information- It also highlights aliscounts, such as 20percent off at Reebok stores, 35 percent off.dARP book titles throughBarnesandNoble.com, and 4 percent off Home Depot gift cardsbought through tle AARP Web site-

. Warehouse clubs. Under such names as Costco Wholesale Corp.,Sarn's Club, and BJ's Wholesale Club, these stores offer wholesale-likeprices on a variety of supermarket items and merchanalise for theannual fee of about $5o. But they offer other services too, inclualingaliscount vacation packages, insurance, check printing, and fihnprocessing and photo printing. Sorne offer deeply aliscountedeyeglasses and prescription drugs, even aliamondjewelry.BJ's, for exarnple, offers aliscounted gasoline at the BB service stationsit operates. It offers horne heating oil in eight northeastern states. Itoffers custom ernbroidery, custom-built sheds, and aliscounts onhome-security systems. You can even use the club to buy a car for you

with its auto-buying program.. Crealit cards. Most Americans have creclit cards, but many don't

realize all the fringe benefits they have. Many perks revolve aroundinsurance for car rentals, travel cancellations, tavel acc.idents, airlineluggage losses, and hotel burglaries. When taveling abroad, paying bycredit card is likely to yield a better currency exchange rate tlan cashor traveler's checks. Another common perk is an extended warrantyon items purchased with the card. Check your agreement or call thecustomer phone nurnber on the back of your card and ask whatbenefits you're eligible for.And that doesn't even include rewards cards, which pay you in cash,merchanilise, airline miles, and other currenc.ies just for using thecards. Unless it's a temendous deal, stick with cash rewards cards. Ofcourse, most all benefits of a creclit card are wiped out ifyou regularlycarry a balance and pay outrageous interest charges.

These are only a few exarnples ofhow rnernbership has its privileges. Thepoint is to get the most out of all your assoc.iations.

Shopping Onlinei Geek Your Way to SavingsMany smart shopping habits are rooted in common sense. They haven'tchanged much since your grandparents were young, or even theirgrandparents- But tools for being a smart shopper have changeddramatically in the past decade, with the dawn of widespread use of theInternet for commerce.

Shopping online, or at least researching a purchase online, has becornef,rndamental to smarter speniling. Here are a few reasons to incorporatethe Internet into your shopping habits:

. Research. Nobody is lorowledgeable about every product and service,so having the wealth of information available on the Internet isinvaluable. You can search for products and read reviews.Amazon.com is espec.ially good for looking up user reviews. Of course,Consumer Reports online, www.consumerrepo4s.elg, is a standby ofindependent product tests, although you'll need a $26 annualsubscription to see much of t]le content. Consumersearch.comcompiles and rates product reviews, essentially providing a review ofthe reviews- A more informed consumer is alwaJ/s a better consumer-

. Price comparisons. You won't know what a good price is until youknow what price different vendors are selling the item for. That q?eof comparison shopping used to be laborious. It meant traveling fromstore to store- Today, you can find competitive prices in just a fewclicks ofthe computer mouse. You can search not only retail prices fornew products but prices for used products too. Auction site eBaJr.com

is the most obvious example of a site selling used items. To compareprices on new products, use a shopping robot, or shop-bot. Try suchsites as Froogle.com, M'dimon.com, Shopzilla.eorq DealTime.com,and Shoppilgtou.I used a shopping comparison site to upgrade my computer speakers.Speakers I liked at my local big-box electronics store, complete witl a

bass-booming subwoofer, cost $13o. Too rich for rny blood. I carnehome and ordered the same speakers on eBay for 929 plus 915shipping, or $44. That still might seem excessive to some people, butit felt like a deal to me.During a alifferent electronics splurge for an auilio receiver for mymodest home theater setup, shopping online got me a $549 receiverfor g3r8, shipped.

. E-mail newsletters. Visit your favorite retailers' Web sites and sign upto have tleir newsletters or sales fliers delivered by e-rnail to yourin-box. Some retailers offer subscribers good deals unavailable to thegeneral public.

. Printable coupons. Some retailers provide coupons you can print outand bring witl you to their bricks-and-mortar store. You can evenprint manufacturers' coupons for the supermarket. They're oftenmore valuable than the coupons that come in the Sunday newspaper.Try such sites as Smartsource.com, Booille.com, Coupe!ts=ee!4,Coolsavings.com, and Eversave.com.

. Coupon codes. Called variously coupon codes, promotional codes,and aliscount codes, these codes are secret series of letters and/ornumbers that during online checkout unlock such gooilies as apercentage aliscount on your order, dollars off your purchase, andaliscounted or liee shipping. Before making an online purchase, do aquick search for a coupon code. To find codes, use a regular searchengine, such as gaaglc=ealu, or a coupon aggregator, such as

Coupa!]Mq]]{a!4, Coupalteabil]{at4, FlamingoWorld.com, orCoupa!!4au!I!a1!]{aru. Codes are also found in retailers' newslettersand promotional e-rnails.

. Rebate portals. Wlile shopping on the Web, try entering retailelsthrough the side door to aliscounts, called a rebate portal. A shoppingportal, or entrance, is a separate free Web site that has anarrangement witl retailers. Retailers pay a commission to portaloperators for senaling Internet consumer trafEc to the retailer'ssite a kind of referral fee. When the consumer makes a purchase, theretailer pa]'s the portal a commission. A "rebate" shopping portal goes

a step further and shares its commission witl the consumer. It's akin

to getting crealit card rewards points or cash back for using aparticular creclit card.For exarnple, if you wanted to buy a $3oo KitchenAid mi\er atCooking.com, you could go to a popular rebate Web site such as

Fatwallet.com and click on Fatwallet's link for Cooking.com- Thattransports you to the retail site, where you shop as you wouldnormally. But now, you'll get money deposited in cash in yourFatwallet account. If the rebate is 6 percent, for example, tlvo extraclicks to shop through the portaljust earned you $18.HeavJ. users of online sites could receive rebates of hundreds ofdollars a year, espec.ially if they're buying big-ticket items, such as

computers and jewelry. Learn more about rebate portals atComparcB€!@lds.ea!4. When choosing a portal, give preference toones that pay in cash, rather than points. Examples besidesFatwallet.com are Ebates.com, Jelh{sh.com, and OuickRewards.net.

. Sales ta-\. In many states, you're supposed to pay state sales ta-\ onInternet purchases. But, as a practical matter, that rarely happensunless the retailer has a store in your state and is required to chargesales ta-\ upon checkout. Otherwise, you can avoid state sales ta-\ byshopping online. If you live in a state with 6 percent sales ta-\, that's$6 savings for every $1oo spent. Of course, buying online ofteninvolves a shipping charge, which can offset any sales-ta-\ savings.

. Hassle. You not only save rnoney by shopping online, you can savetime. What's easier than going online and making a purchase with a

few clicks of the nouse? The item is delivered right to your door- Aside benefit is tlat you avoid impulse buJs that might tempt you inthe mall.

Ifyou're new to online shopping or wary about how safe it is, try a small

purchase from a household-name retailer and see how it goes. You'relikely to be pleasantly surprised. And you'll find that online shoppingadds a valuable weapon to your arsenal as a smart consumer.

5. Around the House: Everyday Spending

Everyday spending is the prime culprit of neeallessly wasting money.Some of the easiest spenaling cuts to ma]<e witl the least pain will helpyou becorne financially FIT, as iliscussed in Chaplcu, "Financ.ialFITness." Those areas are in food, insurance, and telecommunications,or FIT. However, other areas of daily spencling are accornplices-

The common thread throughout this tlpe of spencling is that you payover and over again, day after day, often without giving it much thought.Small one-time wastes of money aren't harmf,rl, and lianklt aren'tworth bothering about. But with repeated speniling, even srnall savingsgrow in magnitude. They can be as ex:pensive as the biggest one-timepurchases you rnake all year.

Heating and cooling your home is a prime example. When it's cold, youneed heat. When it's hot, you need air conalitioning. For the most part,these are not optional. So, many people stop there, throwing up tleirhands and resigning themselves to paying the cost, whatever it is.

That's a mistake.

True, you have to pay for heating and cooling, but you can be smartabout it and save a lot of money. The same is true for buying gasoline,cable TV service, or prescription drugs. Few people are able or willing tocut out these ex:penses altogetler, but you can reduce them-

This chapter will help.

RunningIndoors

Hot and Cold: Keep Your Bought Air

It might not be surprising that you can save money on heating andcooling, or keeping your "bought air" inside your home. What mightsurprise you is learning the truth about the fantastically bad advicedoled out by the media every sunrner and winter for cutting costs onheating and cooling. A surprising amount of the tlpical advice willactually cost you far more money than it saves. Fact is, some of the beststeps you can take are cheap and liee.It's worth doing. The tlpical Anerican household spends about $1,ooo ayear on heating and cooling, with heating accounting for about $Boo ofthose on ener$r costs. Cutting that spending by a mild 1() percent yieldssavings of $1oo just for one year. That's a decent savings but not huge,which highlights why you shouldn't spend a lot of rnoney onener$r-saving measures around the house.

There are only tlvo main wal's to save money on heating and cooling. Youhave to take steps that allow you to raise the thermostat in the summerand lower it in t]le winter. Or, keeping the thermostat the same, youneed the f,unace or other air temperature regulator to turn on lessfrequendy, rnosdy by keeping your bought air indoors longer-

Those sound like ridiculously simple concepts, but theyre important-Theyre important for all those people who in the dead of winter arewalking around their homes in bare feet and a T-shirt- Theyre importantfor all those people who keep their windows closed and run their airconalitioners when it's a beautif,rllybreezy 7o-degree day outdoors.

Because there's so much misinformation and confusion, below are cleardo's and don'ts when it comes to cutting spencling on home heating andcooling.

. Don't replace your windows. Replac.ing the current windows in your

home with enersr efEcient ones to save money may be the worstadvice ever spewed on the American public. Replac.ing windows is so

expensive easily costing thousands of dollars that you'll behard-pressed to ever make back in energr savings what you spent ont]le windows. It may literally take decades before you break-even andstart saving even a alime. However, a completely alifferent scenario isif you plan to replace your windows anyrvay, maybe for cosrneticreasons. In that case, it may well be worth getting moreener$r-efEc.ient windows. It's much easier to make up in enersrsavings the price difference betlveen tlvo q4)es of \eindows tlan it isbetlveen enersr-efEc.ient windows and not replac.ing windows at all-

. Do seal windows, doors, and cracks. To reduce heat loss throughwindows, repair broken ones and buy inexpensive, do-it-yourselfwindow insulating kits at any hardware store or home center. Thesame goes for doors. Maybe even more important is to seal cracks,like those around pipe cutouts to the outdoors, gaps aroundchimne]'s, recessed lights, and unfinished spaces behind cupboardsand closets. Seal t]lem with inexpensive caulking and insulation. Formore on sealing, see the publication "Guide to Ener$r Star HomeSealing" by the EPA. Call aaa-7a2-7937 or get it online atEnersvstar sov

. Don't buy a progranmable thennostat, necessadly- Thesethermostats by themselves do nothing to save you money. Theyrejust timers to set the home's temperature automatically duringcertain times of the day and throughout the week They are similar toa timer tlat automatically turns on a lamp while you're on vacation todeter burglars. If you're absentminded about turning down the heatwhen you leave for work in winter, for example, a programmable

themrostat might help and could quicHy pay for itself. But it won'tmake your firrnace run more efficiendy. In the old days, peopleaccomplished much the same thing by walking over to the thermostat,raising their arm) and adjusting the thermostat by hand before theyleft home or went to bed. So, a programmable thermostat is mostlyinsurance against forgetting to set the tempemture vourself atd asmall luxury so you can wale up or come home to a house at acomfortable tempemture. It won't help much if you have an enaticschedule and need heating and cooling at unpredictable times duringeach day. All that said, I installed a programmable thermostat in myhome andfind it useflrl, though not necessary.

. Do use free heating and cooling. Opening and closing blinds anddrapes during the day can help control heat from the sun that ente$t}le house. Thev also act as an insulator against draJts in winter or ashield against sun in sullmer. Open windows when it's confortableoutdoors. And don't forget the ultimate in ftee temperatureconhol the human body. Wearing a sweater and footwear in winteruses your free body heat to make you wamer. Dressing lighteraround the house in summer allows you to raise the temperature anduse less air conditioning. If you're insulted by how simple tlosesuggestions are, reflect on times when you didn't dress appropdatelyfor the weather and wasted energ/.

. Don't heat with an open fueplace. Burning a wood fire in an openfireplace often sucks more heat from your home and shoots it up thechimney than it throws off in radiant heat. The effort or cost toacquire the firewood adds to the waste. However) using awood-burning fireplace for ambience can be pleasant. Just realizey'ou're actually paying to have the fire, ald it's not a heat-source

supplement. You can trim you energr losses by closing doors to thefireplace roorn and cracking a window an inch. That allows the fire touse oxygen from outdoor air instead of being fueled by your paid-forheated air. Lower the central heating thennostat to about 5() degreeswhile the fire is burning.

. Do vary the temperature. Somewhere the mlth got started that it'scheaper to keep your heat or air conalitioning on all the time ratherthan varying the temperature. It's not true for most heating s]'stems,espec.ially if you change the temperature by more than S degrees forseveralhours.

. Don't wildly crank the thermostat up or down. It won't heat or coolany quicker. You'll probably waste rnoney because the s]'stem willactually cool the house more than you need if you adjusted it to 5()degrees during a hot day, for example, when you really only needed itto be 72 degrees.

. Do seal ducts. Duct leaks account lot 20 Io 40% of enersr loss,accoraling to the Lawrence Berkeley National Laboratory, whichstualied the issue. But duct tape isn't the answer; it's actually a poorway of sealing duct cracks and seams. The best, but most ex:pensive,way to seal ducts is have a contractor spray an aerosol-based polJrnercalled Aeroseal through the ducts, which plugs the holes. That couldcost hundreds of dollars, even a couple thousand. A cheaper idea is touse a mashed potato-like sealant called mastic. Use the water-basedkind- You paint it on duct joints and tiny holes, and it hardens. Or usemetallic duct tape with an UL-181 rating. Those do-it-yourselfsupplies cost a small liaction ofprofessional duct sealing.

. Don't be careless about ceiling fans- Ceiling fans do nothing to cool aroom, but they do create a wind chill that makes humans feel cooler.

That simple fact has several implications. Fist, don't turn on fans inrooms where there are no people. It's a waste. But you can use fansand air conalitioning together, as long as the fan's wind chill allowsyou to turn up the thermostat and use less air conalitioning. In winter,common advice is to use ceiling fans to alistribute warm airaccumulated near the ceiling. That makes sense, but the truth is thatmodern well-insulated hornes have relatively low ceilings where thetemperature liom floor to ceiling doesn't vary much- And if the fancreates that wind chill, you'll actually feel cooler and might have touse more heat. The federal Enersdtar program insists tlat if you usethe ceiling fan's reverse setting to create an updraft, and you set thefan on low speed, air may alistribute more evenly. You can try this, butremember it has to make your horne so much warmer that you turndown the heat and save rnoney. Otherwise, you'll be losing moneybecause you'll be using the same amount of heat and paying for thecost to operate the fan. Speaking offans, when the inside and outsidetemperatures are very alifferent use kitchen, bath, and otherventilating fans sparingly. They can pull out a housef,rl of wanned airinjust an hour.

. Do replace f,unace air filters. Replac.ing filters monthly is standardadvice. But the seoet truth here is you don't need fancy air filtels.The cheap ones at t]le home center that cost about 6() cents to $1 eachwork fine. Also, cover the filter slot with a piece of wide tape to makesure all the air goes through the filter.

Gasoline: Fuel Savings with Better MileageRising gasoline prices irritate consumers more than the price of anyother purchase- Maybe it's because we're reminded of the prices by

gigantic signs as we drive through most every commercial intersection- Ifthe price of milk was posted so prominently, perhaps we'd throw a fitwhen milk prices jurnped a dirne.

But there's good reason for consurners to pay attention to gasolinespencling. The average household spends about $2,7oo a yeiu on gas.

And while you have no control over gas prices, you do have control overhow rnuch gasoline you use. If you can improve your mileage just 2()percent, you could save hundreds of dollars.

The best way to save money on gas is to buy a higher mileage car, buttlat's only good advice if you're car shopping right now. Otherwise, hereare some do's and don'ts to spend less on gasoline alld squeeze rnoremiles out of each gallon.

. Do check for the lowest prices in your area. Online site GasBuddv.comand othe$ allow you to compare gas prices in your area as reportedby fellow drivers. But don't go far out of your way to save a fewpennies. Any savings will be used up traveling to a alistant servicestation and back.

. Don't bother with gas adclitives. Advertisenents for gasoline adalitivesthat supposeally deliver better mileage are exaggerations or outrightlies, accorcling to the Environmental Protection Agency, which hastested more than 1oo ofthern. Sorne adclitives might even harm yourvehicle.

. Do get a tune-up. A poorly tuned engine can increase fuelconsumption 4 percent, and fi,\ing a faulty orygen sensor couldimprove mileage 4() percent.

. Don't be a lead foot- Each 5 miles per hour above 6o you drive is likepaying an additional dirne or rnore per gallon. Driving 75 mph, rather

tlan 65 mph, could cut your fuel economy by 15 percent-. Do replace air and oil filters- Clogged air filters can increase fuel

consumption 1() percent.. Don't drive like a jackrabbit- Antic.ipate tafEc conalitions to avoid

sudden braling and acceleration- Aggressive driving can lower gas

mileage 33 percent on the highway and 5 percent in tle city-. Do keep tires inflated. Underinflated tires can increase fuel

consurnption rnore than 3 percent. Find t]le proper inflation level onthe driver's side doorjamb or in the manual

. Don't keep junk in tle trunk Each 1oo pounds reduces gas mileageby 2 percent-

. Do use the right oil. Use the recornmended grade of motor oil,preferably one witl "ener€X/ conserving" on the label. Gas mileagecould improve l percent to 2 percent.

. Don't pigsrback. Carrying large items on the roof of the vehiclecreates drag that can cut gas mileage 5 percent.

. Do use cruise control- Using your vehicle's overdrive gears and cruisecontrol improves fuel economy.

. Don't overbuy. Buy regular-grade gasoline, unless your owner'srnanual saJs otherwise- Cosdier high-octane gas does not improveperformance and could actually hurt gas mileage.

. Do combine trips. Several short trips taken from a cold start can usetwice as much fuel as one trip covering tle same alistance when theengine is warm-

. Don't run air conalitioning unnecessarily, but don't lower yourwindows at high speeds, eitler. Botl create drag on the car.

. Do take tle smaller car on errands. Ifyou own more than one vehicle,drive the one that gets better mileage for running around town-

. Don't idle. Sitting still yields o miles per gallon. The best way to warmup a vehicle is to drive it. More than 3() seconds of ialling on winterda]'s just wastes fuel.

More raclical changes albeit impractical for some people includechanging your work hours to avoid rush-hour trafEc, using carpools andride-sharing prograrns, taking public transportation, walking to worl!and working lion home.

Television: Tune In to SavingsThough many Anericans would argue, pay television is optionalentertainment. It's clearly a "want" instead of a "need," despite howsome people rnay feel they "need" to watch a football game, a popular TVseries, or even the nightly news.

On the other hand, TV can be relatively cheap entertainment, espec.iallycornpared with such entertainment options as live events, sportsactivities, ormanyAmericans' favorite entertainment choice, shopping.

But it's important not to overpay for television- Many farnilies easily rackup $1,ooo a year in television service and watch-at-home movies.

Today rnore than ever, Americans have alternatives to traalitionalcable-cornpaly TV service alternatives that can save you money. Forthe first time, many Americans have choices among competingcompanies for receiving their TV signals, whether liom satellite TVcompanies or traalitional telephone companies. And the television set isnot the only place to watch shows and movies an]'nore, with morepeople watching video entertainment on computers and handhelddevices.

As witl most products and services, the more competition, the better

consumers fare on price and choices- The following are ideas for cuttingyour costs for video entertainment:

. View TV service as a lu-r_ury. If you're deeply in debt and have nosavings, you can't afford TV service- That may seem halsh. But tlfnkabout it in terms of dollars and time. First, you could reclirect all thosedollars spent on TV to better uses- Just as important, you could usethose Tv-watching hours to instead work and earn rnore, read a bookor take a class to get a higher paying job, or do a household budgetand financial planning. Once you're back on track financially, addsubscription TV back into t]le household budget.

. Tier drop. Don't buy rnore service, or a higher "tier," than you need.Of the scores of charurels fed into your horne, how nany do youactually watch? Research sa]'s the tlpical household regularly tunesin to 17 channels, while nany TV packages deliver more than 1oo-And if you don't have a digital or high-definition TV, the digital tiermight not do much for you- Ifyou mostly watch news shows and gameshows, as opposed to movies and sports, a better picture might beless important- And consider that to get the digital tier with a cablecornpany, you also have to rent a converter box for every TV on whichyou want to receive digital channels- That adds to t]le overall cost-Check out the cheaper "family'' tiers if you only subscribe to cable orsatellite TV for t]le kids-

. Go online. Many TV netlvorks allow you to watch their f,rll-lengthprograrns free online. You can also buy and dow'nload your favoriteshows a la carte to play on your computer or handheld device, such as

a video iPod. Sports fans can see or hear rnany out-of-market games

online, inclucling Maior League Baseball and even some college

sports- Most people can rig a system to connect their computers totleir televisions sets, if they want, altlough t]le picture quality mightbe inferior to regular TV. Meanwhile, sorne prograrns are available as

liee dollr oadable podcasts that you can play at your convenience.However, some podcasts contain only t]le auilio version of a prograrn.

. Haggle. Call your service provider and tell them you want to cancelbecause it's too ex:pensive. Listen to their offers to retain you as acustomer. The representative may at least offer you a temporary deal,such as a reduced price for six rnonths. You have nore leverage if youhave mLrJtiple services, a high bill, or competition in Sour area.Haggling won't work every time, but it's worth a few minutes on thephone to try. If you don't succeed at first, try again. Oddly, differentcustomer service reps will often give you different answers and offers.And it's not unethical to ask for a aliscount- It's merely negotiating aprice betlveen tlvo parties, sometlfng done in legitimate businessevery day.

. Buy bundles. Cable and phone service providers offer aliscounts whenyou subscribe to several services such as TV, Internet, and phoneservice in a bunalle. Just make sure you actually need and want all theservices in the bundle. Price out your options separately too, toensure the bunalle is actually saving you money-

. E\amine premium channels. Instead of subscribing to premiumchannels, you could pay a la carte for movies. Do that by rentingD\aDs at a store or by mail service, such as Netfli\ and BlockbusterTotal Access, which charge a monthly fee. Or watch pay-per-viewmovies from your cable or satellite provider- The exception is if youwill definit+ watch a lot of movies on the premium service everymont]l. Find your break-even point- If Showtime costs an extra $2o a

month but you can get pay-per-view movies for $4 each, you'll need topay for five movies every month before Showtime becomes a bettervalue, assuming you think the tlpes ofmovies offered are similar.

. Subscribe seasonally. It's easier than ever to add and subtactservices, such as premium channels. If you love an HBO series thatonly runs for six months, order only for those months and thencancel. Or if you watch a lot of movies in the summer while nehvorkshows are in repeats, subscribe to a premium channeljust during thesummer months. If you must have ESPN for college basketball, butdon't like much else on ESPN or the tier that offers it, subscribe to thehigher tier only during the season. Tlpicallt there is no annualcommitment for packages, giving you the flexibility to add and dropservices to suit your seasonal viewing habits.

. Exploit the cable TV secrets. A litde-known tactic for getting cheaperTV is to subscribe to the most basic tier, often less than $1S a month.It gives you all the broadcast netlvork channels and a few others. Evenless known is a federal law that gives consumers the right to purchasethe cheapest cable tier and add premiurn channels such as HBO,Showtime, Cinema-\, and Starz. It also allows lowest-tier subscribersto order pay-per-view movies. Most cable companies don't advertisethese options, hoping you will assume you need a higher tier ofservice to have premium channels. Be aware, however, that the cablecompany c1rn require you to rent a set-top box to receive premiumchannels or pay-per-view. The federal rules, called "tier buy-through"or "basic plus premium," do not apply to satellite TV.

. Compare satellite. Satellite television service has been an option foryears. But the price savings with switching may be srnall depenclingon the package you order, and you'll need to install a satellite alish

and buy a converter box for each television- Consumer satisfactionsurveys have shown people are happier with satellite than cableservice.

. Cut the cord. Cancel your subscription TV and go with what you canget liee off the air, which now includes digital and HDTVprogramming. Your local elechonics store can set you up with anantenna. Then, you can supplement broadcast offerings with DVDrentals of not only movies, but also previous TV seasons of shows.And don't forget your local library, which is a great source of freevideo entertainment. Meanwhile, non-Tv entertainment can be foundin such print sources as newspapers, magazines, and books, whileother sources include raalio and the Internet.

As more competition enters the TV service business, it will pay to keepan eye out for packages and services that are more appropriate for youthan your current ones-

Petsi Don't Let Fido Sink Your FinancesAmerica is largely a nation of pet lovers. That helps explain why in zooTwe spent an estimated $4o.8 billion on our furry, feathered, and finnedfriends. For perspective, that's about the size of the entire econorny of amealium-sized country, such as North Korea or Kenya, and more thanGermany spends on its military. See Table q.r for how spenaling on petshas grown.

Table S.1. Total U.S. Spenaling on Pets

Sp€nding in Billion ol Dolhrs

Source: American Pet Products Manufacturers Assoc.iation

But our love for animals doesn't quite ex:plain Gucc.i brand "long-hairedgoat dog beds" for $2,o5o, sterling silver cat food bowls lined with yellowgold-plating for $L22o, Chanel Bow-wow perfume, caviar for cats,jeweled collars, nonogrammed sweaters, and designer bird cages. Andtlen tlere's pet Christnas gifts, doggie birthday parties, and, believe itor not, dog wedalings.

It's important to realize that such lavish spencling and pampering issolely to make the pet owner feel good- Because the trutl is, the petdoesn't care. Most animals just requfue you meet their basic needs, suchas food and shelter, while such social arrimals as dogs also crave humaninteraction- The overspending probably stems liom a culture in whichAmericans show affection and apprec.iation through buying something.

But if the pet doesn't really apprec.iate what you bought, then it's a

waste.

Folloleing are the biggest categories of pet spenaling, how muchAmericans spent on thern in zoo7, and some cost-cutting tips:

. Pet food, $16-1 billion- Frugal consurners can check t]le Internet for

pet-food recipes. For exarnple, you can rnake dog food by miringwhole grains, oil, and chicken broth and baking it. Or you could shopfor the best prices on prepared pet food and use coupons where youcan. Warehouse clubs and aliscounters are good places to findinexpensive food. Although, some argue that if the food is inferior innutrition, you could spend more on health care than you save onfood.

. Veterinary care, $9.8 billion. Finding affordable health care for yourpet is the same as for any purchase. Compare prices by calling localvets and asking for price quotes. Charges can vary widely. Althoughyou rnay be comfortable with a particular vet, at least considershopping around for a better price on routine procedures- And askyour vet to suggest inex:pensive alternatives to pricey mealications.However, most ex:perts don't advise skimping on checkups and shotsfor pets that need them- A healthier pet will cost less in the long run.Pet insurance is a alicey topic but may not be worthwhile unless youhave an old pet and can get relatively inexpensive insurance. Be awareof deductible amounts you have to pay and exclusions for whatinsurance will not cover. To gauge cost, the average annual surgicalvet cost is $453 per dog and $363 per cat, although costs could runinto the thousands of dollars. In the end, you might be better offself-insuring. You do that by saving in an interest-bearing account thernoney you would have paid in insurance premiums. Tap that accountwhen your pet needs an ex:pensive operation or treatment.

. Supplies/over-the-counter mealic.ine, $9.9 billion. Prices for petsupplies can vary widely. Check the Internet for prices on rneclic.ines

and dog grooming supplies, fish-tank filters, and cat-litter supplies.Prices can be drarnatically cheaper, even with the shipping charge.

. Pet services, grooming, boaraling, $2.9 billion. Professional groomingfor a pet is similar to lawn care or housecleaning- You can save abundle if you're willing to do it yourself. And getting a neighbor towatch a dog while you're on vacation is far cheaper than boarcling,even if you bring the neighbor back a nice souvenir as a thank-you.

. Live animal purchases, $z.r billion. Note that actually acquiring thepet is the least ex:pensive part of pet ownership. Give greaterconsideration to the costs of care and feeding the animal. If you'relooking for a cheaper but still enjoyable pet, consider colorfil bettas,also called Siamese Fighting Fish. Theyre cheap, hearty, andlow-maintenance. Birds, rodents, rabbits, and gerbils are alsoexarnples of relatively cheap pets. Owners tend to be less emotionallyattached to those kinds of animals. And, as unpleasant as it is to thinkabout, that makes it easier to let them alie when they become injuredor sick rather than spenaling a lot ofmoney in a futile effort to makethem well-

If you cut wasteful spencling, your lower stress level liom having lessdebt will be the greatest gift to your pet, giving Fido more joy than a $15owall-mounted, ergonomically correct dog alish ever would.

Prescription Drugsi Just Say No to High Prices forMedsThe seemingly outrageous prices on narne-brand prescription drugsaren't a surprise to most people who need the neclications, but thosepeople might not know they have cheaper alternatives.

That's important when drug prices and insurance copa]'rnents areconsuming rnore of household budgets. Americans spent $2So billion onprescription drugs in 2()()6, accoraling to the National Assoc.iation of

Chain Drug Stores. Meclication expenses for individuals could easily runinto thousands of dollars a year, depending on their prescription druginsurance plan assuming they have one at all-

Here are ways to spend less money on prescription drugs. Any strate$r'you try should be cleared witl your doctor.

. Substitute. Ask your doctor whether a less expensive mealicationwould work just as well for your ailment. If you no longer need thepower of a brand-narne cholesterol-lowering drug such as Lipitor, forexample, you may be able to switch to a less expensive name-branddrug or a generic drug, which is a copy of a narne-brand drug.Generics, which despite the name are not inferior to name brands,can cost 20% to Bo% less. On average, t]le cost of a brand-narneprescription in 2()()6 was about $11L while generics cost about $32,accoraling to the drugstore assoc.iation. Generics are only available fordrugs whose patent has expired. So, instead of thinking of generics as

inferior to name brands, think of t]lem as tried-and-true neclicationsthat have withstood the test of time. Insurance copays for genericsoften are less than for brand-narne drugs.Another possible substitute for high-priced drugs is anover-the-counter mealication again, assuming your doctor approves.For those with insurance, you might find an over-the-countersubstitute costs less than your prescription copay. For information onmaking cost-effective drug substitutions, go online towww.crbestbuvdrugs.org for a Consumers Union report.

. Buy in batches. Most health plans through employers offer a

mail-order option that allows you to buy drugs in larger quantities fora aliscount- A three-month supply by mail order can cost nearly the

same as a one- or tlvo-month supply at a retail drugstore- The savingson generics is even greater. When cornparing prices of alifferentquantities, convert prices to a price-per-pill by dividing the total priceby the nurnber ofpills. The result will reveal the best deal. For tlosewith prescription insurance, buying in larger quantities meansshelling out fewer copaJs over the long run.

. Shop around. Drug costs can vary widely among pharmac.ies, so itpays to compare arnong online, nail order, and bricks-and-mortarretailels, espec.ially if you take the mealication regularly. Pricecomparisons and information are available at such Web sites as

DestinationRx.com, Pharmacv0hecker.com, and PillBot.com. Tablc5=2 shows mail order, which includes online sales, is the fastestgrowing outlet for meds.

Table 5.2. We're Changing Where We Buy Prescription Drugs

Source: National Assoc.iation of Chain Drug Stores

. Beware of liee sarnples. Free drug sarnples liom your doctor soundlike a good deal- But once the lieebies run out and you have to fill t]leprescription, you could find those liee medications to be quite costly.Some clinics and hospitals won't even use samples, claiming it's

cheaper for patients in the long run to use generics than name-branddrugs tlat are prescribed just because the phannaceuticalsalespe$on gave the doctor samples.

. Split pills. One of the best wa''s to save money on drugs is to buymealications at double strength and split the pill in half. You take justhalf a pill to get the correct dosage. The bargain cornes because oftenthe price of mealication is the same regaralless of dosage. So, you endup paying half-price for the drugs or shelling out half as much ininsurance copays. Pill-splitting is most prec.ise when using a plasticpill-splitting tool, also called a tablet cutter, which you can buy at adrugstore for about $5. Be aware that some pills cannot be split,inclucling tirne-release drugs and capsules. And t]le patient must beable, phJsically and rnentallt to split pills and be dedicated to doingit.

. Canada conundrum. Buying brand-name drugs liom Canada can becheaper, but it's technically illegal. Consumer Repotts tecomrnendsthat ifyou are determined to buy a name-brand drug liorn Canada, go

to Pharmaq{hecker.com for a list of approved oudets and look forthe seal of approval by the Canaalian Intemational PharmacyAssociation. Generic drugs are nore likely to be cheaper in the UnitedStates

. Get aid. People without insurance or with low incornes rnay qualift fora variety of programs that help pay for prescription drugs. Amongthem, accoraling to Consumer Reports Money Adviser, arePartnership for Prescription Assistance (www.pparx.orq); R\Orrtreacll (v|^|{,rya!.t!caeb-sa!a); TogetherR\Access

federal, state, and local(wwwtogetherrxaccess.com); along withgovernment programs-

Library: Free Stuff GaloreOne of the worst wa]'s to waste money is to voluntarily pay for things youcan get for liee. And few places offer rnore liee stuff than your localpublic library.

Of course, it's not really liee. But you will pay for the library with yourta-\ dollars whether you use it or not. So you might as well get a librarycard and check out the surprising array of offerings at one of t]le 16,000public libraries in the United States.

Here s a sampling o[ lhe ollerings al libra ries:

. Reaaling materials. Books, magazines, newspapers, and printedresearch and reference materials are standard fare at libraries. Theymight not offer the same arnbience as sipping a $5 coffee at a retailbookstore, but at least you can leave with your reaaling material free.Even in rural locales, libraries are likely to have a robust assortmentoffiction and nonfiction books and the latest subscriptions to popularperioclicals. The average family offour spends 9136 a year on reaaling,accoraling to federal government estimates. Surelt some of thatspencling on reacling could be substituted liee by going to the libraryoccasionally. And the benefit multiplies if you use the consumeradvice books and rnagazines to help spend your money smarter.

. Internet access- Free online access has become a standard service atvirtually all libraries. And today, a quarter of public libraries and twoofthree academic libraries offer wireless access, which means you canbring a wireless-enabled laptop computer and log on liee. If you're a

light Internet user, perhaps checking e-rnail a few tirnes a week ordoing occasional Web searches, canceling your home Internet service

could be worthwhile, especially if a library is nearby. If yourhigh-speed Internet access costs about $4o a month, tlat's a savingsof nearly $5oo a year. Libraries also offer access to ex:pensive onlinedatabases of information.

. Entertainment. For adults, eight of ten libraries offer culturalprograrns, inclucling talks by authors and musical and theatricalperformances. Occasionally swapping in a cultural program at thelibrary instead of two tickets to a show could save hundreds of dollarsa year. For the kids, libraries rnay offer such fare as story hours,puppet shows, and skits.

. Business resources- Libraries offer business resource centers withinformation on how to start a small business, find a job, or write agood cover letter. Some offer seminar series or netlvork andmentoring programs.

. Recorded music. Most libraries carry an extensive collection of auilioCDs. It could pay to listen to an artist first before wasting money on aCD you don't enjoy.

. Videos. Most libraries now carry a lot of mainstream movies, not justhow-to and documentary videos. And nany offer the video in DVDformat, not just VHS tapes- Most families could easily cut in half theirmonthly video store spending by swapping in one or tlvo older moviesliom the library. And borrowing children's videos is perfect forchildren who want to watch a program several times but then growtired ofit.

. Recorded books- Books on tape or CDs are great for long car rides,airport layove$, or exerc.ising, but tleyre ex:pensive. Libraries lendaualio books at no cost. Sone libraries even offer digital MP3 versionsof audio books, letting you dow'nload them to your own computer or

handheld device. There are no late fees because the books "time out"at the end ofthe lending period, and youjust delete them.

. Meeting rooms. Reserve liee space at the library for rneetings andcommunity gatherings, a service that might otherwise cost hundredsof dollars.

.Instructional programs. Libraries offer liee classes, incluclingprograms on identity theft, how to buy or sell a horne, gardening, orusing common computer software, such as Microsoft's PowerPoint.

. Research. Research librarians are among the most helpf,rl peopleyou'll ever meet. Most are pros at using both printed research booksand expensive electronic databases that you'll have liee access to.

To locate a library near you, consult your phone book or check an onlinelist at www.publiclibraries.com.

Cornpact Fluorescentsi See the LightSavings opportunities at home are all around us, inclucling the nearestlight fi,\ture. That fi,\ture and rnany like it around your home areprobably excellent canalidates for compact fluorescent lamps, or CFl,s.

Using compact fluorescent bulbs saves you monet both on the bulbsand on electric.ity costs. In fact, each bulb will save you at least $3o overits life compared witl incandescent bulbs, accorcling to conservativeestimates by the Department of Ener€Xr.

It's a savings that adds up fast once you start counting the number oflight bulbs in your home. But it's a tough choice to make because it firstappears that CFLS are more expensive, because you pay more initiallyfor a single bulb. Maybe that's why CFLS only make up about S percent ofthe light bulb markel accoraling to enersr department estimates.

The bottom line is that consumers are actually wasting money bypurchasing taalitional incandescent bulbs for all their fi-\tures. In fact, itc1rn pay to remove perfecdy good incandescent bulbs and replace themwitl CFLS- Wtile tlere are many environmental reasons for trying CFLS,

there are also financ.ial ones. Here is generally what you need to knowabout compact fluorescents:

. Price- Every product that runs on enersr has tlvo prices, the upiiontpurchase price and the operating cost- CFLS are cheaper on bothcounts. CFLS last B to 15 tirnes longer than incandescents- So,

although it's true that one CFL might cost $3.5o and one regular bulbis 5() cents, you would have to buy maybe a dozen bulbs at a total costof $6 before one CFL goes dark. So, over tirne, CFLS win on initialpurchase price.Second, through its life the CFL uses a quarter of the electric.ity of atraditional bulb- Ifbulbs were cars, that's like replac.ing a car tlat gets2() miles per gallon with one that gets Bo miles per gallon.So, using the energr deparhnent's estimate of $3o savings per bulb,which is conservative, replac.ing just 25 bulbs reaps $75o over the lifeofthose bulbs and probably rnuch rnore-

. Quality. Years ago, the high cost and lower quality of CFLS

cliscouraged consumers. The bulbs didn't turn on right awat andwhen they did, they flickered and hurnmed while giving off anunappealing color- And tley were too large for rnany fi,rtures- Overall,it was an ex:pensive, inferior product- But in recent years, the cost ofCFLS has plummeted. Todat they are smaller and better quality. Ifyou tried them before and were clissatisfied, it's time to try themagain.

. Other benefits- Because CFLS last so long, you'll have to replace themless often. That means less hassle trying to regularly change bulbs inhard-to-reach places, inclucling ceiling fans and outdoor fi)(tures.Another benefit is that because CFLS have such low wattage, you canproduce a rnuch stronger light in the same fi)(ture. And CFLS staycool, which can cut air-conalitioning costs in the summer. They alsocome with long warranties, often five years or rnore.

. Drawbacks- You probably can't use regular CFLS in every fi,\ture inyour house, inclualing those on alimmer switches. You can pay apremium for dirnrnable CFLs, but you might be clissatisfied. Forexample, alimmable CFLS have a narrower range of alimming andmight be unsuitable for a very dirnly lit home theater. There's noproblem with three-way CFLS, except they're a litde rnore expensive.Also, many CFLS have a slight, but perceptible, delay in coming onand becoming f,rlly bright. You might find that eitier annoyingbecause it's alifferent or enjoyable because it's less abrupt than anincandescent's instant-on. Read product packaging for otierrestrictions. You might have to try a few brands before you get oneyou like-Be aware that CFLS contain a tiny amount of mercury, tloughhundreds of tirnes less than thermostats or old-style thermometers.For that reason it's best not to alispose of CFLS in the household trashif better options exist. Find out your alisposal options atwww.earthqll.org or by calling 1-877-EARTH91L

. How to buy. At a savings of more than $3o per bulb, consumers mightbe tempted to run out and buy CFLS for all tleir fi,\tures. But startwith replac.ing your five most-used bulbs. By easing into CFLS, youcnn get a sense of the clifferences, while still saving money. The bulb

size might be slighdy alifferent and the shape will definitely bealifferent, with many looking like an ice cream cone spiral.Buy bulbs by brightness, called lumens, instead of wattage. Forexample, a traalitional 6o-watt bulb and a 1s-watt CFL both produceabout Boo lumens. See Table q.r for a conversion chart.The packaging of many CFLS prominently displa)'s its incandescentequivalent. Also, note the color, measured in "degrees Kelvin." If youwant a similar light color as many incandescent bulbs, look for CFLS

with the color temperature of 2,7oo degrees Kelvin or labeled "wannwhite," which has a yellowish hue. The color at 3,ooo will be neutralwhite, while those over 4,ooo will be bluish-white, or "daylight."Buy only Ener$r Star rated CFLS, and look for good deals on them inmultipacks in home centers and warehouse clubs.To research more on CFLS, start with an online guide by advocacy

Environmental Defensegroupwww.environmentaldefense.org/go/cflguide. The guide, whichincludes reviews by people who used the bulbs, asks where you'll usethe bulb and what shape it is, along with any spec.ial features youwant, such as being alimmable. It then suggests appropriate brandsand model numbers of CFLS. The Ener$r Star CFL Web site,wwwenergvstar.gov/cfls, has a product search section, along withother information.Keep receipts from purchasesone doesn't last as long as itproofofpurchase.

of CFLs. They have long warranties. Ifshould, you can have it replaced with

Table S.J. Lighl Ourpul Equivalenc]

Source: Enersr Star

Lawn and Garden: Grow Your SavingsSome 85 million U.S. households, or three out of every four, does somesort of gardening and lawn care, accoraling to the National GardeningAssoc.iation. Those households each spend an average of about $4oo ayear on plants, power equipment, fertilizer, and other products andservices that comprise the $34.1billion lawn and garden industry.So examining your lawn and garden spencling is worthwhile. Here aretips to help you get t]le most bang for your green-thumb buck:

. DIY. The most obvious way to save money is to do it yourself, if youare able, instead of hiring a landscaper to mow the lawn, rnulch andweed the flower beds, and perform other chores. Time is the trade-offfor rnany people who contend they are too busy to attend tolandscaping.But you should ask yourselfwhether you are really too busy to carveout an hour a week to mow the lawn, for exarnple. At a mowing chargeof $35 a week for si\ months, you could save more than $84o.E\erc.ise in the yard might even allow you to cancel your health clubnernbership, which saves hundreds of dollars more-

However, if yard work rnakes you miserable and you have the money,paying for help might be money well spent- You must dec.ide its value.

. Lawn. There are three simple rules for cutting grass, but manyhomeowners don't follow them- They are to set your mower deck atits highest setting, don't cut more than a third ofthe grass height, andleave grass clippings on the lawn. Not only will these tips help makeyour lawn look lush, they will save noney by allowing you to use lessfertilizer and weed killer. Grass clippings provide essential nutrientsfor the soil, and longer grass can choke out weeds before they grow.Contary to popular beliet leaving clippings on the lawn does notcause a buildup ofthatch. Thatch is caused by overfertilizing, so save

money by not adaling extra fertilizer. Overfertilizing also causes morehassle because the grass grows faster, and you'll have to cut it moreoften-

. Weeds. Prepared weed killer in a botde can be expensive, espec.iallycompared with cheaper alternatives. For killing weeds in sidewalksand patios, douse them with boiling water or vinegar. You can save

mone5 on vinegar b5 diluting il wilh !raler, usingjusl one parl vinegarto tlvo or three parts water.

. Tools. Gardening experts advise buying good-quality gardening handtools rather than cheaper ones likely to break within a single season.But you don't have to buy them new. Check yard sales, espec.ially ofolder people who might be selling quality tools made decades ago. Ifyou have a small garden, skip power tools. Use hand tools, which areless expensive and will probably save time because you don't have todeal with electrical cords or fuel.When you do have to use gardening power equipment, such as a tilleror lawn aerator, cooralinate with neighbors and rent equipment for

the day, taking turns using it. It's not only cheaper but avoids thehassle of storing a large, seldom-used piece of equipment.

. Composting. Hornemade compost can be better fertilizer thananlthing you buy in a store, and it's liee. You don't need a fancycompost bin; just a 3-foot-square space. Pile on your yard waste, egg

shells, coffee grounds, and pretty much anlthing that was alive butnot part of an anirnal. The pile will start to stink if you use animalremains.The drawback of cornposting is it's a slow process. You will have towait about nine months to start using a passive compost pile. But ifyou are more consc.ientious about mi\ing materials caref,rlly, such as

balanc.ing vegetable waste with leaves, and rotating it to allow in air,you can have good compost in three months.The cornposting process highlights a general point about frugalgardening: You c1rn save money if you're willing to wait. Buyingsmaller plants, such as trees and shrubs, is cheaper but requirespatience be[ore lhe) become lhe size ) ou envision.

. Mulch for less. Dyed hardwood mulch for garden beds is not onlyex:pensive but soon fades to the color of undyed rnulch. So you'repaying exta for a temporary appearance. Mulch also could be as

sirnple as shredded leaves saved lion the fall. You can shred leavesby running over them with a lawn mower. Straw is also a cheapalternative to wood mulch, and stone is more ex:pensive initially butless costly over the long term because you won't need to replace it-

. Share. Swap cuttings and divisions of plants with friends, relatives,and neighbors. It's a liee way to introduce new plants into yourgardens. Local nature preserves and botanical gardens often hostplant sales and sell their plant alivisions inexpensively-

. Water. One way to save money on your water bill is to attach a barrelto your home's downspout to catch rainwater. Ideally, the barrelwould have a spigot for easy access to the water, but filling wateringcans works too. Use soaker hoses where you can. It is the mostefEcient way to deliver water to your plant roots and wastes lesswater.And, in general, water gardens deeply but inliequently. Light dailysprinklings are a bad idea because they encourage shallow roots inplants, which in turn require more liequent watering.

. Vegetables. At fust, $owing vegetables won't be cheaper than buyingthem at a supermarket because of startup costs with a garden- Butover time, vegetable gardening can end up being less expensive. Evenif gardening turns out to be about t]le same price as supermarketproduce, gardening can be a good value because you're gettingsuperior quality-

Eyeglasses and Contact Lenses: See the PriceDifferencePrescription eyeglasses and contact lenses are part of everyday life fornany people, yet t]le vast majority are wildly overpaying for theircorrective eyewear.

Americans spend $28.7 billion annually on vision products and services,accoraling to t]le Vision Counc.il of America. Eyeglass liarnes and lensesmake up t]le largest portion, about $16 billion- Wlile you probably canreceive slightly better prices on contact lenses, eyeglasses are the biggeroppotunity for huge savings.

Still, many of the 47 million adult eyeglass wearers probably don't knowthat because few shop around- Prices vary widely. People can pay rnore

than $1,ooo for a pair of glasses, while at least one Internet providerpromises a pair for $8. An identical pair of eyeglasses sarne lenses andsarne brand of liame costs ftom $178 to $39o, depending on theoptic.ian or optometrist, accoraling to research in seven U.S- cities byConsurners' Checkboo\ a consurner information guide.

The single most important consumer tip for buying eyeglasses orcontacts is to relax. Inexpensive glasses pose no health risk to your eyes.Even a bad pair ofglasses won't give you an eye infection or permanendydarnage your eyes, although they could cause headaches until they arefi,xed- And once a doctor fits you for a particular brand and tJpe ofcontact lens, you can buy them anylvhere and they should be identical towhat your doctor sells.

So you should consider comparison shopping. In fact, a r97B FederalTrade Commission ruling, called the Ophthalmic Practices Rules, saysyou have a right to take your prescription anywhere to buy glasses. Asimilar law for contact lenses exists, called the Fairness to Contact LensConsumers Act, passed in 2oo4. It alictates tlat your eye doctor mustautomatically give you your prescription after he fits you for contactlenses. Doclors can l charge lor il or male ) ou sign a !raiver.

The point of tlese mandates is to break the domination of eye-carepractitioners selling corrective lenses. That's where prices are likely tobe highest. To be fair, though, people report receiving the best serviceliom their neighborhood optic.ian or mealical-center eye doctor,accoraling to a survey of 9z,ooo readers of Consumer Reports magazine.

The dec.ision about buying glasses and contacts generally comes do!!n towhere you buy them- The simpler your prescription, with normalmeasurements and no bifocals and trifocals, the better luck you're likelyto have buying liom a cheaper source than your eye doctor.

Here are categories of eyewear outlets, with tips for buying glasses-

. Docto$ and independents. Ifyou're willing to pay more for glasses inreturn for good service, buy liom your eye doctor or an independentoptical shop. Buying eyewear could include a trust factor tlat mightbe higher with your doctor or a neighborhood optic.ian-They are also likely to carry brand-narne liarnes, which is largely apersonal fashion choice. But the secret about name-brand liames iscompanies such as Giorgio Armani and Ralph Lauren don't make theliames, Consurner Reports said- They just license their names to aregular ftarne manufacturer. So you might find a very similar andcheaper liarne rnade by the same manufacturer that doesn't bear adesigner narne.

. Chain stores. If you're willing to pay to get your glasses quickly, try achain store, such as LensCrafters, which promises glasses in about anhour. Be sure to receive the aliscounts you're eligible for. For exarnple,a aliscount witl a AAA rnernbership might be nore valuable thanusing your employer vision insurance. Be aware t]le pe$on you talk toat t]le chain store is mosdy a salesperson whose job is not only to helpyou, but h+ you spend the most money.

. Warehouse clubs. If price is important, try a warehouse club. CostcoWholesale Corporation scored very high with Consumer Reportsreaders and Consumers' Checkbook findings. BJ's Optical, found inEastern states, also scored well. For sorne warehouse clubs, you don'tneed a membelship to buy glasses.

. Online- If price is paramount, try an Intemet merchanL I boughtprescription glasses liom Zenni Optical, wlfw.zenniopuealralt, for$B and arn pleased with them. With shipping and an optional clip-on

EveglassRetailerReviews.com and GlassvEves.blo gspq!.rat4.

One advantage of ultracheap glasses is that, even if everlthing goes

badly with your transaction, you're not out a lot of money. That makesonline retailers an ideal outlet for buying a backup pair of eyeglasses. Ofcourse, you won't have an optic.ian to adjust the liames so theyrecomfortable and to ensure bifocals are aligned properly with your eyes.

You could also try a hybrid plan, where you buy liarnes online and takethem to an optic.ian to have lenses inserted. You'll have to judge whetherthe hassle is worth the savings.

No matter where you buy eyeglasses, view lens add-ons skeptically.You'll be offered a variety of lens materials and coatings, such as

polycarbonate lenses or anti-reflective coating or polished edges. Foradd-ons that you can test out, ask to see samples of glasses with andwithout the feature to detennine whether it's worthwhile.

With contact lenses, the best tip is to get advice from your eye doctorabout the different qpes of lenses, get a trial pair with a fitting check-upand perhaps even buy the first set from the doctor. But afterward, buylenses espec.ially clisposables elsewhere, such as a warehouse club, bynail order, or on the Internet. Lenses will be identical to what yourdoctor can get, so there's no advantage to paying more. Savings withcontact lenses won't be as large as with glasses, maybe $So to $1oo eachyear-

The big idea is to shop for corrective lenses sornewhere besides your eye

doctor to see your way clear to savings.

sunshade,m5 lolalbill !ras Slo.qo. Bul lhere are otheronline glassesRevier.t's of them

Clothing: Better Duds for LessClothing is a necessity, but spending a lot ofmoney oIr it isn't. Apparelex:penses are low-hanging fruit to cut spencling from a householdbudget. It's easy to save, look great and still wear narne brands, if you

A fardly of four spends an average of $z,B5o a year on apparel andapparel services, accoriling to the federal goYemment's ConsumerE\pendifure Survey. That's nearb g24o a month. So it is an expenseworth addressing. Here are ways to dojust that:

. Do nothing. Most adults have enough clothes to get by for months. Ifyou need to get out ofdebt or save money quicklv, make do witl whatyou have. That may seem obvious, but it helps to acknowledgeconsciously that you don't "need" new clothes right now.

. Buy used. This is the cnr.\ of saving big on clothing buyinghigh-quality, name-brand used clothes. If you refuse to buysecondhand, you will not save much on clothes in the long-term. Tobuy quality clothing inexpensively, you'll need to get acquainted withsecondhand stores, such as thrift stores and consignment shops- Thescene is not usually the stin$, disorgarrized store with rumpledclotles that you might envision.Many of today's secondhand stores are more akin to regular rctailstores. Many of the clothes are just lighdy worn. Some are new, lvithoriginal tags. Of course, as with any used purchase, secondhandclothing must be examined thoroughly for flaws. For example, don'tforget to test zippers.Buying used clothes for children can save even more because kids

outgrow garments so quickly. Besides the obvious idea ofhand-me-downs from siblings-or even other relatives, iiiends andneighbors-Ey online auctions, such as eBay, which can be a goodsource of kids clothing bargains.If you're uncomfortable buying used clothes, take baby steps bybuying one item, maybe something inexpensive at a high-endconsignment shop. I've had good luck buying a suit, a tuxedo, andneckties at a secondhand store.

. Use garage sales wisely. Garage sales canbe sources ofgreat bargains.But for adult clothes, it's more like a time-consuming treasure huntthan shopping for what you need. Chances are low that you i{illhappen to find geat clotles in your taste, your size and in a color thatlook good on you during tle few minutes that you happen to showup at the sale. Your chances improve when there is morc inventory inone place, such as at a church rummage sale.However, gamge sales are a tremendous oudet for children's clothes.That's because you can buy items in a child's current size or futuresize, knowing they will grow into the clothes. And for youngerchildren, stJ'le and colors matter less.

. Strategize. Many adults assemble their wardrobes haphazardly,buying items tlat strike their fancy. Instead, organize your closet andtake inventory of vrhat you have. That way, you can determine whatyou need. Wdte it down. Also, reflect on t]le colols and styles thatlook good on you. And, buy for the size you are now, not tie size yousomeday hope to be.For children, hold a fashion show with them periodically to determinewhat still fits, what doesn't and what's too tattered. That planning willallow you to take an organized approach to shopping.

. Simplift. Buy classic styles that will look good for years. And assemblea base of neutral colors blacks, khaki, nary blue that can mi\ andmatch to create a number of outfrts. The same concept goes for shoes.

. Save on buying retail. Ifyou won't buy secondhand clothes, go to yourfavorite store's Web site to check its sales every week. Similarly, signup for your favorite store's e-mail newsletters to receive coupons andlearn about coming sales. If you can't wait until the end-of-seasonsales to save money, at least wait until mid-season.And take a quick tour through such aliscounters as T.J. Ma-.ot Targetand Wal-Mart to see what qpe of clothing you would be willing to buyat those places. Realize that inexpensive clothing likely to last only asingle season or maybe tlvo ends up being expensive for adults,cornpared with quality clothes that could last much longer. Butaliscounters are a good deal for children' clothes.

. Maintenance. Realize that garnents that must be dry-cleaned costmore over their li[e. Also, be wary of fabrics that tend to pill or weartoo fast. And put your clothes in the dryer for just a few minutes, thenhang them to dry.

6. Financial Foolishness: Overspending forFinancial Services

The financ.ial services industry is fueled in great part by money thatconsurners simply do not have to spend- That's a bold statement, but it'strue. Banks, investment firms, and a mFiad of other financ.ialinstitutions thrive in part because consurners are intimidated by theworld of rnoney and are ignorant about how it works. Consurners' dollarsleak through caref,rlly planned cracks in the financ.ial s]'stem, like adripping faucet that ends up wasting hundreds ofgallons ofwater.We have talked about why many insurances are unnecessary and howmuch money consurners waste on insurance. But the waste doesn't stopthere. Consumers are unnecessarily paying fees for sirnple bankaccounts, paying far more than they need to for the privilege of having a

creclit card, and throwing rnoney away by chasing hot mutual funds tlatwill almost certainly underperform the market.

The good news is the financ.ial services world is f,rll of noise you can tuneout daily movements of financ.ial markets and ridiculously cornplicatedfinanc.ial products, for example. It all amounts to a lot of blah-blah-blahthat shouldn't affect your money life in the least.

This is purposef,rlly not a book about investing, so we won't cover all thetlpes of investnent vehicles, such as Roth Individual RetirementAccounts (IRAS) and E\change Traded Funds (ETFS). But following arejust a few topics on how to spend your money smarter on financ.ial

Bank Accounts: Don't Pay Anyone to Hold YourMoneyWhere competition thrives, consumers win. The banking industry hasmore competition than ever with the introduction of online banks. So,you don't have to put up with overpaFng for checking and savingsaccounts.

The main idea is to remember that you're giving them the privilege ofholcling your rnoney, so it's up to the bank to sell itselfto you.

Still, bar*s today are nickel-and-diming tleir customers withever-increasing fees. The average ATM fee is $1.64, with 98.3 percent ofall banks charging such a fee, accoraling to a survey by Bankrate.com.Table 6.r shows how ATM fees have risen. If you want interest on yourchecking account, you might have to shell out an average of about $11per month and maintain a balance of $615, on average. The averagebounced check fee is nore than $27.

Table 6.r ATM Fees Rising

Source: Bankrate-com

All those fees could easily devour any meager interest you eiun onchecking and savings accounts. They could essentially force you to paythe bank for using your own rnoney, a losing proposition.

Here are tips to avoid unnecessary bank fees:

. Shop around. You want a bank account that fits your needs anddoesn't charge fees. For exarnple, ifyou work in ajob tlat pa]'s in tips,you nay need unlimited access to tellers to sort through yourdeposits of bills and coins. But if you do your banking online and atATMS, investigate what perks a bank will give you for forgoing tellervisits, an ex:pensive service for banks to provide.

. Find liee checking. There are enough competing banks that youshould insist on free checking, leith unlimited check writing, nominirnum balances, and no monthly service fees, whether a flat fee orbased on the number of checks you write. Even better is aninterest-bearing checking account. But if you keep getting zappedwith low-balance fees, shift money into a free checking account. Thescant interest the accounts pay isn't worth even a few low-balancepenalties.

. Order your own checks. Of course, liee checking isn't liee becauseyou have to buy t]le checks. But you don't have to buy them from yourbank for up to $25 per box- Other companies will print checks at aliaction of the price, often $6 to $B for a box of 2oo checks. Theywork just as well. Check out deals liom Wal-Mart,www.walmartchecks.com, for exarnple. For more choices inbackground designs, search the Internet for "check printing" and find

such sites as www.checksinthemail.com, wwwcheclo rorks.com, and$'ww.checksunlimited.com.

. Use combined accounts. Sometimes you can avoid minimum-balancerules if you have multiple accounts or loans through the same bank.Also, sorne banks will base the minimum on the cornbined balances ofall your accounts.

. Try online banks. You don't get to make small talk with a bank teller,but banking online is a better deal for most people because theminimum balances needed to avoid fees are lower. Also, online banks'interest-bearing checking accounts yield significantly more thanbricks-and-mortar banks on average. That means you're achievinginvesting's Holy Grail, greater return for no more risk, assuming theonline bank is federally insured (FDIC). For savings, try such onlinebanks as Emigrant Direct, www.emigrantdirect.com; ING Direct,www.ingdirect.com; and HSBC Direct, www.hsbcdirect.com. All offerfar more interest than traalitional savings accounts. If you'reuncomfortable with online banking, try opening an online accountwith a small deposit until you becorne more comfortable with theprocess.

. Use automatic transactions. Online bill paying and automatic bankaccount withdrawals can eliminate the ex:pense of a check. It alsoensures you don't get hit with late fees. For example, you might allowthe electric company to automatically debit your checking account topay your bill- In addition, automatic deposit of your paycheck getsmoney into your account quickly and efEc.iently, which may preventoverdraft penalties.

. Try your creclit union. Crealit ulions have a long traalition of offeringsome of the most consurner-frienclly bank accounts. Theyre worth a

look.. ATM fees. Americans waste billions of dollars a year takingwithdrawals from another bank's teller machine. The most obviousadvice is to manage your cash, so you can always take out fee-freemonev from your own bank's ATM or one afEliated with your bark'sATX{ network. Failing that, if a grocerv store is nearbv, buv somet}ringsmall and pay for it witi a debit card. Then get cash back bv chargingmore tJlan the amount of the purchase. You lvon't have to pav a fee,and the result is the same as an ATM withdrawal. Fortunatelv. somebanks are eliminating ATM fees altogether as a marketing tactic, butit's not yet widespread.

. Belrare overdraft loans- When a bank customer's account is empty,the bank will cover a check, ATM withdran'al, or debit cardhansaction without warning or notice. Then when the customermakes a deposit, the bank takes back the or.erdrarvn money plus a feeof, sa]', $2o to $35. Worse, it's a "senice" the customer neYerrequested, but some banks automatically attach it to accounts. Manyconsumers would be better offif the bankjust rejected the withdrawalrequest when there was not enough money in the account. Thoughnot technically loans, t]le fees can be equivalent to a loan with r,ooopercent interest- So it's worth takng geat pains to make sure )'oudon't overdraw your acrounts by diligendy monitoring tlrem aldmaintaining a cash cushion.

Credit Cards: Play the Game RightCreclit card companies are masters at separating vou from your monev.But vou have power too- For example, did 5'ou know credit-cardcompanies \r.ill take a litde less money from vou and all vou have to do

is ask? You just have to know how to play the game.

A secret of the crealit card industry is this: If you've been a long-timecustomer and have paid on tirne, a card issuer will bend over backvardto keep you even if it makes less money. That's because it's cheaper forcard issuers to cut you a break than lose your business and have to find a

new customer, which involves rnarketing alld other ex:penses.

Periodically, you want to call your card cornpany and ask for threethings: a lower interest rate, a higher limit, and waived fees. You cansave literally thousands of dollars.

So you don't get tripped up in trying to land a great deal, use thefollowing script when calling your creclit card company and do it today.The script is adapted iiom a variety of sources, inclucling a liee e-book"Credit Card Insider Tips" by Cindy Morus.

Call the phone nurnber on the back of the creclit card and prepareyourself to be polite but aggressive during the conversation. Remember,you won't be hurting anybody's feelings by naking these requests. Andeach time you call bac\ you're likely to get a alifferent operator whomight give you a better deal-

Here are the three requests you should make:

. Lower my interest rate. The less interest you pay, the more you canput toward eliminating the debt completely. A script might go likethis:You: "Hi, can you tell me what my current interest rate is?"Operator: "Your current interest rate is X percent."You: "Hmmm- I would like you to lower my interest rate now, please."Don't say another word- The ball is in their court, and theyll fill thesilencewith an offer

Operator: "Okay, I can lower it to X percent-"You: "That's not enough, but I will take that for now. Thank you foryour help. I'd like to tell your supervisor how helpf,rl you've been.Could you pass me over?"Supervisor: "How can I help you?"You: "First, I wanted to let you know how helpf,rl the operator was.She/he did an excellent job of helping me. Now, can you tell me whatmy interest rate is?"Repeat script above- Then, call back in a month or tlvo and do it allagain. Don't worry about nagging them. It won't hurt yourrelationship with a giant card compant and you might luck into a newdeal it is offering. The point of asking for a supervisor is that he or shemay be authorized to do more for you than the operator is.

. Raise my credit limit. This one is a litde trickier and seemscounterintuitive. You might wonder why you'd want more crealitavailable if you're trying to get out of debt. The reason is your crealitscore, which is pardy calculated on how much debt you havecompared with your available crealit. So, even if your creclit cardbalance is always $1,ooo, it's better to have a limit of $5,ooo than$2,ooo because you're using less of your total available crealit. Thatcan help your crealit score, which can, in turn, help you qualift forlower interest rates on a mortgage or car loan, and even lowerinsurance rates. So it translates to real dollars-But your crealit score might fall if the credit card company makes anofEcial inquiry to your crealit report or "pulls" a report and deniesyour request for a higher limit. So use the same basic script as given inthe previous example, except when asking for a higher limit be sure toash "How much crrn you raise my limit without pulling my crealit

score?" Here too, you can double-dip by asking for a supervisor.Another advantage to having a higher limit is avoialing anover-the-limit fee, which happens when you rnax out your card.You're less likely to do that with a higher limit- Be aware that thedanger of having more available crealit is that you could spend moreand incur even rnore debt- If you know yourselfwell enough to realizethat's a danger you alwaJs end up ma-ring out your cards then skipthis request.

. Cancel my card fees- With competition among cards so fierce, there'soften no reason to pay an annual fee. Ask the operator to waive thefee. When you get tlat, ask the operator to waive the current year'sfee that you already paid- Ifjust one card company eliminates its $5ofee for the current year and next year, tlat's $1oo you made in abouttlvo minutes. A bigger issue is why you even have a card that chargesan annual fee- Many do not, and it might be worth switching.

Similarly, if you were late with a paynent but otherwise have a goodpa]'nent history, call and ask for the late fee to be waived.

Of course, these scripts won't work all the time, and conversations arelikely to deviate from the scripts. Just roll with it- If your efforts fail, askthe supervisor what steps you should take to get a lower rate, raisedlimit, or canceled fee. And realize these tactics work with such largecompanies as Visa and MasterOard but rarely work with departmentstore charge cards.

Although getting better terms on your creilit cards is a great idea, itdoesn't fi,\ the fundamental problem if you're in debt- If you carry abalalce, you spent more rnoney thal you could pay. No amount ofhaggling with card issuers will fi,\ that. You need to know why yourspencling exceeded your ability to pay. When the srnoke clears, there are

only two possible reasons: You spent too much or you alidn't earnenough- So, those are the issues to deal with in the long term.

In the short term, try to get better terms on your crealit cards. You're notguaranteed to win the game, but if you don't asl! you're guaranteed tolose.

Credit Cards II: Advanced TacticsCreclit cards are clearly a vice for manyAmericans. They're an easy wayto overspend and buy stuffyou can't afford. Even people who don't carrya balance are likely to spend nore using a crealit card than cash, stualiesshow.

But for all their ills, creclit cards can have advantages for someconsumers, narnely people who can control their spending. Realizingthere are many ways crealit cards can hurt your finalces, here are someofthe waJs they could help:

. Built-in benefits. The first benefit of using a credit card and paying offthe balance is improving your creclit score, or FICO score, whichallows you to spend less on interest for other bonowing, such as

house ald car loals, and even insuralce. Other benefits of using a

creilit card are lesser known. They might include a host of insurances,inclucling car rental insurance, travel cancellation insurance, travelacc.ident insurance, airline luggage insurance, and hotel buglaryinsurance. You're likely to get favorable foreign exchange rates forusing a creilit card overseas.For purchases, sorne cards will replace or repair rnerchanclise you buywith the card ifthe item is defective, stolen, or destroyed. Others willautomatically extend the manufacturer's warranty. Otler cards offer

such perks as concierge services, upgraded hotel rooms,peak-demand restaurant reservations, or liee valet parking.And you are not liable if the card is stolen and liaudulendy used. Butto use the benefits of your card, you'll have to take the time to learnabout them. Go online to the crealit card Web site or call the numberon the card to inquire about the card's benefits.

. Rewards. Getting sometlfng for nothing is the ultimate in smartspending. And that more-or-less describes rewards crealit cards. Youcan reap a host of lieebies, liom cash and merchanalise to gasolineand airline miles. A rewards card crealits you with points for everydollar you spend on your crealit card. Then you redeem your pointsfor cash or ftee stuff. The danger comes ifyou use the rewards card tospend more money than you would otherwise. And for those whocarry crealit card balances, rewards could be dwarfed by the extainterest you would pay with a high-rate rewards card. In choosing a

rewards card, find out how quickly you can accumulate points and askyourself whether you really want the stuff you get with points. Ingeneral, give preference to cash rewards cards, which are simpler andoften more lucrative than earning points to spend on merchanalise orairline tickets- In looking for a rewards card, try these Web sites:CardRatings.com, Cardweb.com, Crealit-Reviews.com, Bankrate.com,and Crealit0ards.com-

. Risky tactics. With all t]le competition among cards, some people aretempted to game the s]'stem using dangerous tactics. One is "surfrng"balalces from one o percent introductory offer to another.Continually transferring your debt can reduce the amount of interestyou pay, but it takes diligence. The danger of surfing arises when youmake a late pa]'nent or let the introductory period expire without

spend your investment dollars.

In any purchase, whether an automobile or a pair ofjeans, consumersrnake buying dec.isions using certain criteria. They at least want decentquality at a fair price. But a smart shopper's dream is to findabove-average qualify al a belolr-average price.

That adequately describes a stock index mutual fund, which mimics anestablished benchrnar\ such as the Standard & Poor's 5oo stock index.The main alternative to buying an index fund is to buy a more ex:pensiveactively managed fund. Managed stock funds are operated byprofessional money managers who try to pick winning stocks. Winning istlpically defined as beating the established index.

Stop and think about that. You're paying professionals extra money inthe form of higher fund fees, and all they have to do is beat a minallessindex that does nothing. That's not an accomplishmenL That's the leastthey could do for their pay. But most fail.

That sets up the long-running philosophical argument betlveenstock-pickers and indexers. And it's no wonder consumers are confused.Evidence supports t]le counterintuitive ideas tlat doing nothing isbetter than doing something, and you don't get what you pay for bothof which are rarely true in other parts of our lives.

In fact, many money managers must be losers because in the financialmarkets for every buy, there's a sell- A manager can only make youmoney if someone else loses money. The markets are a zero-sum game.

ln 2006, 76 percent of active funds investing in large U.S. companiesfailed to beat a large-company stock index benchmarl! the MSCI U.S.Prime Market 75o, accoraling to data liom Morningstar, Inc. For largevalue funds, which try to pick undervalued stocks, 94 percent of active

funds failed to beat tie value index. And 2()()6 was not an unusual year.Failing to regularlybeat the markets is a pattern active funds repeat overand over. As a group, they are consistent losers.

Yet investors continue to trust their hard-earned money to stock-pickersin the vain hope of beating the market. Here are reasons to buy indexfunds, based on criteria consumers would tlpically use for any purchase:

. Quality. It's extraoralinary and newsworthy when a stock-picker canouq)erform an index over time. In fact, they only need to beat themarket for a few years to become wilally famous. That means indexfunds are high quality because most actively managed funds can'tbeat t]lem consistently. In many years, index f,rnds beat aboutthree-quarters of actively managed funds. And if you pick a fund thatouq)erforms the index one year, it iiequently has a hard tirnerepeating tlat the following year-

. Price. Index funds are cheaper tlan actively rnanaged funds becauseyou don't have to pay a stock-picker. And index funds don't buy andsell stocks as frequendy as rnanaged f,rnds, so the transactioncosts the costs to buy and sell stocks and ta-\ effects are likely to bernuch lower. A key reason index f,rnds are high quality is because tleyare cheap, which neans they return more ofthe gain to the investor.

. Warranty- An index fund won't protect you iiom general marketdownturns, but you won't see years where your fund does terriblycornpared with the benchrnark index. You're also protected againstbad stock-pickers who stray liom the t]'pes of stock you want to own.So, like t]le factory warranty on a refrigerator, you're protected iiomsornething unusually bad happening. You will get what you paid for ata fair price.

. Cost of ownership. A higher-cost managed fund isn't a one-timeex:pense. You'll pay higher costs year after year due to the built-inexpenses of the fund. It's like buying what you think is a nice car. Butyou lolow it will be expensive to operate, maybe neealing ftequentrepairs and getting lousy gas mileage, cornpared with other cars.

. Ease and convenience ofuse. The iPod digital rnusic player is popularbecause it's easy to use. So are index funds. You could buy a singlemutual fund that will give you the aggregate returns of all U.S. stocks,for exarnple. If you want to invest in the stock of foreign companies,you can buy an international index fund. Actively managed funds aremore complicated not more sophisticated and superior, just morecomplicated. You can use index funds to assemble most any pordolioyou want. For example, a 4o-year-old might assemble a retirementpordolio of6c) percent in a broad U.S. stock index fund, 2() percent ina broad foreign-stock index fund, and 2() percent in a bond indexfund. Most mutual fund farnilies offer index funds, includingespec.ially good ones at Vanguard, Fidelity, and T. Rowe Price.

Even with these no-brainer reasons for choosing index f,rnds, investo$will continue to chase "hot" mutual funds in hopes of beating themarket. But t]le truth is, you can't beat 'em. So you might as welljoin 'emby using index funds.

ldenlity Thefti Whal Proleclions a-re Worthwhile?Consumers are scared into spenaling money unnecessarily every day.Among the newest booge]'nen is identity theft.That's not to suggest identity theft isn't a serious problem for somepeople. And part of being a smart consumer is protecting your personalinformation so it's not misused. But the attention identity theft receives

seems overblown: Just 1.5 percent ofAmericans annually are victims ofthieves opening accounts iiaudulentlt accoraling to a report by t]leFederal Trade Commission.

Fear generated by incessant aliscussion of identity theft, however, canrnake people susceptible to sales pitches for ID theft products andservices. Many are not worth buying. In fact, some come-ons could beattempts to steal your identity, further victimizing t]le victim.

The truth is, identity theft often does not cost consumers a lot of money,at least alirectly. Federal and state laws limit a consumer's liability forwhatever a thief does with your identity. For consumers who iliscoverthe identity theft within five months, tlvo-thirds have no out-of-pocketexpense, accoriling to a study by the FIC. The most serious andrelatively rare tlpe of ID theft opening new creilit accounts costconsumers an average of$L1Bo, most ofitin cleanup costs.

Of course, when banks and other companies absorb the cost of theft,consumers ultimately pay in the form of passed-along higher prices.Perhaps the bigger cost is the hassle of cleaning up after ID theft, whichon average took 3() hours, the FIC found. Other estimates are far higher.

The biggest problem witl ID-tIeft statistics is what's included- Misuse ofa crealit card number counts as identity theft- In fact, it's by far thelargest form of identity theft. But consumers are protected iiomftaudulent charges on their crealit cards. It's no-cost, because most cardcompanies won't hold you liable even for the federal limit of $5o percard. And resolving the problern is relatively low-hassle. Just phone yourcard cornpany and clispute the charges. It will issue you a new card.

This is exactly what I did when someone stole my American Ex:press

card nurnber and began charging things at Blockbuster's video-rentalsite online. I called to report the liaudulent charges. Amex sent me a

new card, which arrived a few da]'s later, and it eliminated the chargesliorn my bill. It was low hassle, compared with all the nightmare storiesyou hear.

Adaling to consumers' fear is the perception that ID t]left is usuallyperpetrated by some anonynous criminal mastermind who has chosento become your evil tlvin and rip you off. The fact is, more than half ofserious ID thefts are perpetrated by people the victim knows.

All this is to say you should be lorowledgeable and guarded aboutidentity theft, but you shouldn't be scared into buying bad products andservices.

Here are do's and don'ts for protecting your identity:

. Don't buy identity-theft insurance. Wlile cheap, many ex:perts saythis is not worthwhile. Insurance, which costs roughly $2 to $1S amonth, covers some inc.idental costs of cleaning up a case of identitytheft. It includes such reimbursements as mailing costs, phone calls,and lost wages, which doesn't help people on a salary. Some mightcover pre-approved attorney fees. But most victims of ID theft incurfew, if any, out-of-pocket ex:penses and won't collect anlthing frominsurance. Many policies have a several-hundred-dollar deductible aportion you pay before insurance kicks in that will exceed the costsof cleaning up the mess.Perhaps the biggest problem with ID theft insurance is that peoplemisunderstand it. They think that if, for example, someone stealsmoney frorn their bank or investment account, the insurancecornpany will repay them. Not so: Insurance won't pay for stolenmoney. So, while $25,ooo in ID theft coverage sounds like a lot ofprotection for a snall premiurn, policies are so limited that you're

extremely unlikely to recoup anlthing near that much. ConsumerReports and the Privacy Rights Clearinghouse are just tlvo of theex:pert sources advising against buying ID theft insurance-

. Don't necessarily pay for a crealit-monitoring service. Crealitmonitoring doesn't prevent the crime of someone applying for creclitin your name. Itjust alerts you tlat sometlfng already has happened.Monitoring services t]'pically cost $5o to $155 per year, with $12.95 a

month as a common price. But monitoring your crealit reports issomething you can do yourself for liee by looking at your crealitreport. See details next.

. Don't buy crealit reports. You no longer have to buy crealit reports.You can receive thern liee liom the three crealit bureaus once a year atwww.annualcreilitrepolt !e!4, which is the only ofEcial site to provideliee reports. It's safe to tlpe in your Soc.ial Security number to thesite. The first time you check reports, you should check all threecreclit bureaus, Equifa-x, Transunion and Ex:perian, although all tlrreeoften have the same information- A year after your initial chec\stagger your reviews by checking one report every four rnonths. If youhaven't examined your crealit reports for errors and liaud and foreveryone in your family do it today.Note that while you don't have to pay for a copy ofyour clealit report,you do have to pay to see your three-digit creilit score, whichdetermines how crealit-worthy you are. You can get it online at

. Don't necessarily buy a crealit restoration service. This is somethingyou could do yourselt though it can be time-consuming. If youridentity is stolen, restoration services sometimes available throughinsurance policies promise to help you clean up the mess and

reclaim your identity. But realize that a restoration service can'tnecessarily do everlthing for you- Many crealitors will only deal withyou, not a tlfrd-party service, unless you sign over power of attorneyto the restorer.

. Don't buy crealit-card insurance.charges on your creilit card and,

If you're not liable for liaudulentyou're not what are you insuring

against?. Don't use personal checks. Avoid writing checks, which have a lot of

personal information on thern. Checks might include your name,address, phone number, bank narne, balk account number, electronicrouting number and signature. It might also include your driver'slicense number, which in some states is your Soc.ial Security number,ifthe store clerk wrote it on the check.

. Do guard your information. An easy, liee way to limit your chances ofgetting your identity stolen is to safeguard your personal information.You also should review your financ.ial statements regularly andcareflrlly. The quicker you catch identity theft, the less likely you'llincur a major hassle or expense.

. Do buy a shredder. Micro-cut shredders, which turn paper into tinychips that can't be reassembled, are ideal. That is opposed to a ribbonshredder that cuts in strips. As a general rule, the srnaller the confettia shredder rnakes, the better. In short, shred anlthing that has yourSoc.ial Security number on it or any account number.

. Do be smart about mail. Opt out of crealit card offers atBBB-sOPTOUT or OplQ!.tPrcsqeel]{a!4. This will prevent a thiefliom stealing a card offer ftom your mailbox and signing up for a card.Don't put outgoing mail witl identity information on it in yourmailbox, where a thief could steal it- And consider buying a locking

mailbox-. Do consider plac.ing liaud alerts on your crealit report. Paid services,

such as the heavily advertised "Lifelock" service, place a liaud alerton your crealit report for 9() da]'s- That means whenever anybody triesto apply for credit in your name, the bank or crealitor will see the alertand will likely take extra precautions to confirm your identity. Thesepaid services renew the liaud alert when it automatically ex:pires

every 9() da]'s. But you can renew a liaud alert youself, if you'rewilling to contact a creilit bureau every tluee months. You only needto contact one bureau to place an alert. It will notift the others-Beware that whether you do it yourself or pay for a service, liaudalerts are a potential hassle because you rnight not be able to apply forcrealit on the spot for buying a car, getting a mortgage, applying for acharge card or activating a wireless phone contract, for example. Youcould speed the double-checking process by providing yourcell-phone nurnber as the contact number to confirn your identity.Whenever you activate a liaud alert, you're eligible to receive anothercrealit report liom each of the bureaus. So instead of receiving threeliee reports a yeiu, you could get 15 your regular three liee ones,plus three others every 9() da]'s.With an alert, potential lenders can still access your crealit report, buttley will see a note that a liaud alert has been placed on the report.

. Do use a creilit lieeze if you're very worried about ID theft- A creditlieeze is rnore restrictive than a liaud alert. You can freeze yourreport, meaning lenders can't access your report until you provide apersonal identification number to temporarily lift the lieeze.You don't need to renew the lieeze every 90 da]'s, but most peoplehave to pay a fee, usually $1o to each of the three bureaus, to activate

and lift crealit lieezes. So initially lieezing all three reports might cost$3o. ID-theft victims and people over age 65 liequently are exemptliom the fee. You must contact each bureau separatelt perhaps inwriting by certified nail, which adds a minor expense. Rules and feesare first alictated by state law and then by the crealit bureaus for stateswitlout their own crealit lieeze laws.To find out more about your state's law and how to fteeze your crealit,go to Financ.ialPrivacvNow.org, a Web site of Consumers Union. Butlike a liaud alert, you won't be able to receive instant crealit, andpotential employers will be unable to perform a bac\ground checkuntil you lift the fteeze. It could take several business da]'s to have a

lieeze lifted.. Do use creilit cards- Ideally, you want to expose sorneone else's

money to t]le risk of your daily transactions, and not your own. That'swhat crealit cards provide, as opposed to personal checks or debitcards. You often are not liable for liaudulent charges made with a

crealit card, and at most could be out the federal limit of $5o per card-Debit cards are an alternative. But it's easier to alispute a crealit cardcharge and not have to pay it, rather than persuaaling a bank to putstolen money back into your account after a debit card theft. Youcould be waiting for weeks while the bank investigates.But using crealit cards is a dangerous stratesr for those who carry abalance subiect to hefty interest charges. In that case, you'd be betteroffusing cash.

In sum, the only spenaling you must do to protect yourself liom identitytheft is to buy a shredder and potentially pay crealit freeze fees. All otherpurchases are either highly optional or a waste ofmoney.

So, if ID theft typically doesn't cost consumers rnuch rnoney, why does

the FIC receive more complaints about it than any other tlpe of liaud?It probably stems ftom an emotional issue. Victims feel violated, similarto having tleir home broken into and ransacked, even tlough nothingwas stolen. They get very upset, not at losing money but that someonewould rob tleir most personal asset who they are.

7. That firne of Year: Seasonal Strategies forSpending Srnart

Every year, ex:penses arise that can pinch the household budget. But thetruth is, some of thern are annual events that you could, and should,planfor.Is it a surprise that the kids need new school clotles in August andSeptember? Did you not foresee Valentine's Day? If you've spent moneyon Christmas gifts every year of your adult life, did you think this yearwould be different?

Ifyou don'tforesee and plan for seasonal changes in yourjob, you couldbe fired. Why would you operate your personal finances so haphazarally?

We often overspend for annual events because we don't plan for them.First, we don't save money for the expense in which case the purchaseends up on a creilit card to potentially rack up interest charges. Second,we spend too rnuch because we ran short on time and rushed into badbuying dec.isions.

This isn't rocket science. Skip a half-hour TV show one night, and you'llhave time to plan for the next seasonal ex:pense.

Back to School Spending: School DazeEverybody knows holiday spending and the annual vacation will bebig-ticket ex:penses throughout the year. But back-to-school shoppingseems to sneak up on many families. And, in fact, some families mightspend more money on getting kids ready to go back to school espec.ially

if college students are involved than any other spenaling event of t]leyear.

Back-to-school shopping is alifferent than it was a generation ago.Purchases stretch beyond No. z pencils, a lunchbox, and a pair ofjeans.For some students, calculators, personal aligital assistants, cell phones,and bacfuacks on wheels are standard gear. Trendy clothing and shoescan wipe out a school-shopping budget in a single lap around the mall.

American families with school-age children spend an average of $563 onback-to-school shopping, accorcling to the National Retail Federation.Nationwide, it's an $18.4 billion shopping spree.

To cut the waste in back-to-school spencling, consider these stategies:

. Plan and budget. Those words elic.it yawns, but theyre fundamentalto using money wis+. School shopping shouldn't begin at the mall. Itshould start with a conversation. Plan with your children what youmust purchase and how much it's likely to cost. That means taking aninventory to determine what supplies and clothing are missing andcreating a shopping list. It also means forecasting what ex:penses arelikely to crop up during the school year, such as new cleats forbaseball or soccer, spencling money for a school trip, or cash for prornor a year-book. Be clear about how much money you, as a parent, willcontribute and what extras must come from the child's own spenclingmoney. That should prompt a iliscussion of the clifference between"needs" and "wants." G]'n shoes are a need; $r5o gzrn shoes are awant.

. Start early. Start back-to-school shopping closer to the Fourth of Julythan Labor Day. See Table 7.1 for when people say they beginshopping- Get a list of specific school supplies your child needs. Find

out if the school or parents organization offers a school-suppliesbundle. With bulk buying, it's likely to be cheaper and definitely willbe less tirne consuming than trudging to a store and hunting for justthe right color folders and brand ofglue. For college students, startingearly gives you time to search for used textbooks online or orderinternational ealitions of texts, which tend to be cheaper but containthe same material.

Table 7.r When Will You Begin Shopping for Back-to-schoolMe.rc.h andi se?

^t l.!d hvo nndx lrlor s.l,ml {ns

Tlrrt! \{!ls to x n,o tl, L{lort.

National Retail Federation, 2oo7

. Hold a fashion show. Determine what's missing liom each child'swardrobe or what's too small or tattered to wear for t]le next schoolyear. Create a list of items to buy, and budget a spec.ific dollar amountfor each child. With teens, set a dollar amount and give them someiliscretion over what they buy. Explain the concept oftade-offs buying ex:pensive soccer cleats means buying just two pairofjeans rather than three. Of course, mom and dad retain veto powerover anypurchases.

. Buy short-term items used. Some clothing and school supplies areused for such a relatively short time that theyre hardly worth buying

new. Ask friends and family for hand-me-downs, or host aneighborhood clothing-swap party. Check out thrift storcs forbaryains. Witlt younger students, don't call tlem used orhand-me-downs. Instead, call them "first-grade clothes," as in, ,,you

get to wear these special clothes when I'ou graduate to fust grade."Backpacks and scientific calculators are items to hunt for at yard salesor online auctions, such as eBay. If the student needs a computer,consider one with lower specifications. You don't need top-of-thelinecomputer powe! to run word-prccessing prcgrams. If the child wantsa high-porvered gaming machine, require him or her to pay the pricedifference.

. Compare. Use the usual savings tactic ofcomparing prices. Backpackscan cost $1o or g4o, and school scisso$ c"n cost 5c| cents or 93.Personal digital assistants and computerc may be cheaper at onlineletailels. Visit a warchouse club, such as Sam's Club, BJ's Wholesale,or Costco for bargains on clothing and school supplies. Dollar storesare good sources of off-brand items) such as tape and glue. And evenifyourteenage child refuses to buy clothes in a discount store such asTarget or Wal-Mart, they might not mind buying such items asunderwear and sock tlerc.

. Buy late. An altemative to early shopping is late shopping. Limitclothes buying until after school starts, which allows you to spreadout the erpense over the year. A.nd inevitably, your son or daughterwill return to school and aliscover some new fashion he or she simplymust have. Bulring during prime tim€ in August can be a good plan ifyou can find hue baryains at back-to-school sales, and if your stateholds a sales tar-free shopping event in August.

. Spend cash. Avoid using credit cards if you'll carrv a balance from

month to month. And if teens are doing their own shopping, givethem cash too. Tell them as long as they get everlthing on their list,they can keep the leftover money. Then you'll see some smartspencling.

Holiday Spending: Ho, Ho, Ho. Where'd MyMoney Go?Holiday spencling can have its own momentum, like a snowball rollingdownhill. The result is not only overbuying on gifts and holiday-relatedmerchanalise but making purchases unrelated to Christmas, Hanukkah,and other late-year celebrations.

Many Americans return from the mall to spill out their largess froncolorfil shopping bags, only to realize some items aren't for giftrec.ipients at all. Americans fork over an average of nearly $Boo onholiday rnerchanclise, accoraling to the National Retail Federation. Theywill spend an adclitional $1oo on themselves, the survey showed.

There are some obvious reasons for overspencling. First, holidayshoppers are visiting retail stores, where temptations abound- Thesights, sounds, and smells of a store, espec.ially around the holidaJs, cancreate buying urges. Stanaling in liont ofan item allows your emotions totake over. It's the same as having good intentions to skip dessert duringa restaurant alinner until the dessert tray comes and you succurnb to thechocolate mousse.

Other emotional triggers are less obvious. For example, people are norelikely to spend rnore when theyre feeling espec.ially good or bad,research shows. So, both holiday cheer and holiday stress contribute tospencling.

Here are some ways to avoid holiday overspenaling:

. Shop online. That might sound like an unorthodox tip for savingmoney, but you can eliminate many of the triggers for overspenilingby not visiting a retail store at all. Nearly all the sane merchanilise isavailable over the Internet, where you can call up the item on thecomputer, order it, and have it shipped to you or the rec.ipient. Youhave the added advantage of being able to get better prices by usingshopping-comparison sites, or shop-bots, or simply surfrng to severalretailers in a matter of seconds. So, shopping online not only allowsyou to save money on what you buy but also reduces temptations,saving you money on iterns you might have purchased if you visited astore.

. Adhere to a budget. This is standard, though often ignored, advice.List the gift rec.ipients and the amount to spend on each. Do not stayliom that list- Research shows once you cheat a litde with shopping,it's easier to start binge buying. The planning part of creating a budgetmeans you won't be frantically shopping at the last minute andoverpayingjust to get your shopping done.

. Keep holiday trips separate. Designate shopping trips forgift-shopping only. Don't mi\ a trip with household errands andpersonal shopping. Do the same for online shopping. Sit down at thecomputer and block off tirne for holiday shopping only. It will helpyou keep on task.

. Don't touch. Ever notice how sorne packaging allows you to touch theitem through a cutout in the box? Research shows that ifyou handle apiece of rnerchanclise and start envisioning it as your own, you're farmore likely to buy it.

. Shop at t}le dght time. If you will be shopping in pe$on, avoid oowdsby going during stores' early and late e)rtended hours. Fewer oowdsmean lower shess, which lowels the chance for impulse purchases.Another trick is to shop after 6 p.m. on the day before an advertisedsale begins. Many retailers program theft registers the evening before,meaning the sale price might already come up in the register even ifsale signs aren't on the floor yet. You can also ask salespeople aboutwhen big-ticket items are likely to go on sale.

. Give cash or gifi cards. This is another way to avoid the whole retailscene and its temptations. You'll have to decide whether cash or a giftcard is appropriate. Be sure to read the nrles for gift cards, includingexpiration dates.

Valentine's Day on the Cheap...Without Ending Upin the DoghouseMany men perform few tasks worse than planning for Valentine's Day.And for men, trying to please a significant other witlout going broke is astruggle. That's not to say some women couldn't use a fewexcellent-but-frugal ideas too.

The keys to a successft Valentine's Day are creative and sincerereflections of love, which have nothing to do with money- But simplycheaping out on Valentine's Day can be dicey. Maybe that's whyAmerican consurners spent nearly gt7 billion on Valentine's Day, or onaverage about $r2o each, acrording to the National Retail Fedemtion.The avetage mal spends about 9156, while the average wornan spendsabout 985.

So, here are some ideas, some endearing, others purely practical, for the

two primaryparts ofvalentine's Day t]le date and the gift that will putless stain on the budget without staining the relationship. They aregeared more toward men because, as the spenaling statistics show, menneed more help keeping the spencling down-

The date:

. Move the celebration. Getting a baby-sitter or maLing a alinnerreservation for February 14 or the prior weekend might be difEcult. So

suggest to your partner that you shift Valentine's Day to the followingweekend. Besides rnaking logistics easier, it allows you to getchocolates, cards, and flowers at deeply aliscounted post-Valentine'sDay prices. However, it would be smart to plan some small gesture ont]le day itself, perhaps alluding to plans for the following weekend.

. Think clinner alternatives. Consider maLing alinner at home with yoursweetheart's favorite alishes. Or make reservations at the fanc.iestrestaurant in town but just for appetizers or dessert- You get theex:perience of elegant alining without t]le high price. Instead of alinnerout, you could do a Valentine's brealdast, which is far cheaper- Thatworks better if t]le brealdast kicks off a flrll day ofplanned Valentine'sactivities-

. Cheap dates are fun too. Instead of an ex:pensive alinner or shoqconsider a date to a liee art museum or concert or a trip to anaquarium or zoo. A park picnic in warm climates works. Or in colderregions, consider a date for snowshoeing or cross-country skiing,using rented or borrowed equipment. Bookstore browsing leitl coffeeis nice. More unconventional is a fun date to visit auto dealershipsand test-drive fancy cars, regaralless of whether you're serious aboutbuying although you can debate the ethics ofwasting a salesperson's

time doing tlat-. Pay attention to detail. Canalles, incense, and music can set an

arnbience for a rornantic date, even if it's at home. And tley don't costmuch.

The gift:

. Plan ahead. Scrarnbling for last-minute flowers and chocolates alnostguarantees you'll spend more than you want to. And it ends up beinga gesture of minimal sincerity.

. Play your cards right- More people buy greeting cards for Valentine'sDay than any other holiday except Christmas, accoraling to theGreeting Card Assoc.iation. But they can be wilally expensive for whatyou get. Instead, a cheaper card iiom a dollar store, a homemade cardmade with paper and glue, or a card printed liom the computer cansubstitute. However, that might come across as cheesy unless youcome up with your own customized message. Ideas include a poern, a

short essay on why you love her, or a top ten list about why she's thegreatest.

. Cut down on candy. Who needs a giant box laden with emptycarbohydrates and calories? Instead, go to a candy shop and buy oneor tlvo fancy pieces of candy. That satisfies the sweet tootll whilecutting cost and calories.

. Consider flower options. Instead of buying a dozen red rosesdelivered to her for $Bo, stop at a local florist and buy her a singlepink or yellow rose for $4. That may satisft the flower requirement ifit's part of a bigger planned celebration.

. Buy fake bling. Diarnonds rnay be a girl's best friend, but costumeiewelry with look-alike gemstones is nice too. Only a gem expert can

tell the difference. A diarnond tennis blacelet may cost nearlv$1o,ooo, but a look-alike with cubic zirconia stones could be had for$1oo or less. Moissanite is more expensive than cubic zirconia. but ithas more sparkle t}an a diarnond and is a fraction of the price. Tellher you plan to one day rcplace it with real diamonds when voubecome wildly rich liom spendingJour mone) smarter.

llltimately, you'll have to decide the most appropriate way to show yourlove and get the best value for vour money.

Tax Preparation: Frugal Way5 16 Pay Uncle SamIt's bad enough that we have to pay federal taxes when the moneysometimes goes to questionable expenalitures. But it's even worsebecause the complexity of the tax code has us pa],ing exbajust to get theta\ return filed.Nine of ten U.S- tar?ayers used either a professional preparer or acomputer prcgram to help prepare their ta\es, according to the NationalTaxpayers Union. Table z.z shows how consumers have needeal moreand more help through the years. Out-of-pocket costs per individualta\-payer avemged g2o7 fo! tax prepamtion alone. That muld be moneywell spent, given that you have no choice but to lile a tax return. Buisome spending on tax preparation and filing is a huge waste. Followingale a few tips but not a comprehensive list for spending less andgetting better value for vour money next tal( season:

Table 7.s. Use of Paid Preparers anil Computer progams

Source: National Tar(:payers Union

. Sirnple should mean cheap. Generallt the less complicated your ta-\situation, the less you should spend on ta-\ preparation. If you wantto hire a certified public accountant to fill out your 1o4oM form, youcan. But it's a waste of money. In recent years, the tax preparationindustry has started targeting young people, rnany of whom havesimple ta-\ situations- The pitch is that these on-the-go young peopleshould attend to their important soc.ial engagements rather thanspend a few minutes filling out a ta-\ form. If you have no chililren, nomortgage, and work for someone else, you're a good canalidate to dothe simple return yourself and save on ta-\ preparation costs.

. Check out Free File. Ifyour income level qualifies for the IRS Free Fileprogram, try it. Free File offers online do-it-yourself tax preparationand electronic fiLing through companies that partnered with the IRS.For more information, go to wwwjrs.gov and click Free File. Be awarethat doesn't mean it's liee to file your state income taxes. In 2()()6,you qualified if your Adjusted Gross Income was $5z,ooo or less,which included some 95 million tar:payers, or 7() percent of alltar:payers.

. Books can be bargains. Ta-x advice books are relatively inex:pensivehelp for ta-\ preparation. Discovering a single additional deductioncould more than pay for the cost of the boolc Among those featuredon many lists of best ta-x books for average people are the "Dummies"

books co-written by Eric T]'son-. Test-drive the software. Different ta-\-prep software appeals to

alifferent people. Go to leaaling online Web sites, such as

www.turbotax.com, www.t€L\cut.com, and wwwtaxbrain.com, andstart plugging your numbers into their online tax preparationprograms. They are liee to try. You pay only to e-file or print thereturn- Pay for the one that asks questions in a way that makes senseto you and helps you remember forgotten deductions. TurboTa-x andTa\Cut come in deskop software versions too-

. Take advantage of liee ta-\-prep services. Seniors and low-incometar:payers might be able to get free h+ witl their ta-\ returns tlroughcommunity organizations. Watch the local newspapers for suchoffers, keep an eye out in community newsletters, and if you're asenior check with the local senior center. Also check with the AARPprogram Ta-\-Aide for free in-person ta-\ return heh,www.aarp.ors/monev/taxaide, ot 1-888-227-7669. Low- tomoderate-income tar:payels may qualift for the Volunteer IncomeTa-\ Assistance Program (VITA). Call 1-Boo-829-1o4o to find a localsite. Those in tle military qualift for iiee ta-\ preparation from t]leArIned Forces Tax Corrncil at offices within th e.ir in stallaiion s

. Hire a pro? Professional tax preparers, whetler CPAS, enrolledagents, or other professional ta-\ people, can more than pay forthemselves. Their fee is worthwhile if they find wal's for you to payless ta-\ and significantly reduce the hassle of ta-\ preparation. Hiringa pro is a good idea if you had a significant change in the past year,such as buying or selling a house, starting a business, or retiring.

. Shop for a pro. There's nothing wrong with cornparison shopping fora professional ta-x preparer. Fees lary widely. Ask about the total cost

ofpreparation. Some chain stores suck you in with a low advertisedprice and then nickel-and-clirne you for minor adclitional services.

. Don't pay to file electonically. The IRS loves e-fiLing because it cutscosts for the government, compared with paper tax returns. But it'snot worth paying $2o to e-file when you could mail the ta-\ return forthe cost of a couple of postage stamps. Professional preparers shouldnot charge you a separate fee for fiLing electronically. It's part of tleircost of doing business.

. Forgo fast cash. Absolutely say "no" to reflud antic.ipation loans.That's where a preparer gives you instant cash, based on yourex:pected ta-\ refund. But you're basically paying a fee to borrow yourown money. These fees can amount to hundreds of percent interest.Besides, if you file electonically and have the money clirecdydeposited to a bank account, you should have your refund inside oftlvo weeks. You overpaid the government all year long. Why would itsuddenly be urgent to have that money on the day you file yourreturn?

. Spend your refund on paper first. You'll end up happier if youpurposef,rlly allocate refund money before it arrives, rather than justtossing it in the general-fund checking account where you will fritter itaway on who-knows-what- For example, use half the money for debtreduction or savings, one quarter for a home or car repair, and theremaining quarter for fun money.

Wedding Gifts: An InvitationAnending !reddings are mosll5 jo5ousstressf,il for guests on a tight budget whoa lavish wedding gift.

Is Not an Invoiceoccasions, but they can be

feel like they have to fork over

The average wedding gift costs $BS, accoraling to the Assoc.iation ofBridal Consultants. Alone, that's not a big ex:pense. But it becomes moresignificant if you already shelled out for an engagement gift, shower gift,and travel and lodging to get to a far-away wedding. Then, multiply thatby several wedclings in a year, and you're talking real money.

First, don't consider t]le wedaling invitation an invoice for an ex:pensivegift- Instead, base the gift's value on what you can afford and how wellyou know the couple. Presunably, you were invited to share in thecouple's big day, not for how much you can add to the largess. The trickis to focus on giving a present the couple will apprec.iate withoutnecessarily spencling a bunalle. At the same time, you want to adhere togift-giving etiquette so you don't offend anyone.

Consider the following tips ifyou're on a tight budget:

. Avoid cash. Many couples apprec.iate gifts of money. It can deliay thecost ofthe wedaling or hone]'noon, or contribute to a down pa]'nenton a house. But if you give cash, there's no way to hide the fact thatyou're trying to be frugal.

. Use the registry. Even if you choose something inex:pensive off thewedding registry, you'll at least know the couple wants t]le gift- Don'tbuy a registry gift elsewhere for less noney because that leads toduplicate gifts, and the couple will notice. Franklt t]le idea withinex:pensive gifts is to fly under the radar.

. Buy small. When buying off tlre registry, buy several small,inex:pensive gifts. Frequendy, guests don't choose to buy the smallitems, such as kitchen gadgets, even though t]le couple wants them.

. Top it off. Embellish a relatively inexpensive gift- If you're buying a$3o pasta pot, include a few boxes of gourmet pasta. If you're buying

wine glasses, include a $zo botde ofwine. Both will look like $roo giftpackages for halfthat price.

. Weight counts. Heavier gifts seem more ex:pensive. So, considerinex:pensive kitchen appliances such as blenders and toaster ovens.

. Buddy up. Cooralinate with other guests to pool money and buy anex:pensive item on the registry, sometlfng the couple doesn't reallyex:pect to get. You look like a hero because you were pardyresponsible for a drearn gift, but you could actually spend less than ifyou bought a cheaper separate item.

. Get personal. If you know the couple well, assemble an inex:pensivegift you know will be mearringf,rl or espec.ially usef,rl. Just be certain itdoesn't duplicate something on the registry. Buy gifts assoc.iated withtheir hobbies, whether camping, gardening, or listening to countrymusic. Or sign t]lem up for a local wine-tasting class, if that's whatthey enjoy.

. Save on shipping. When buying a gift liorn an online registry, have itshipped direcdy to the couple, rather than to yourself. If you takedelivery, you'll just have to repackage it and forward it to the brideandgroom.

Kid Birthday Parties: Rein in the RidiculousChildren's birthdaJs nowadays just aren't what they used to be. Insteadof a simple party with farnily, friends, and a cake, a party can includepony rides, a backyard petting zoo, or professional magician. Someparties are held at bowling alleJs, laser tag fac.ilities, and the localarcade-and-pizza joint.That change means parties are more ex:pensive. Americans spend some

$ro billion a year on birthdays, accoraling to greeting card conpany

Hallmarlc And children's birthday parties are a big part of that.More birthday expense arises when your child attends a friend's partyand has to come bearing a gift. Here are tips for reining in the cost ofyour child's party and the cost ofgifts your child buys for friends:

. Money can't buy you love. Spencling a lot of money on your child'sparty has nothing to do with making it more enjoyable or mernorable.Instead, it has to be a meaningf,rl event, whether going to a baseballgarne, a play, or the zoo with the family and perhaps one friend. Apicnic in the park is a good idea for young children because theyusually prefer to run around and play their own games instead ofpartic.ipating in structured activities.

. Buddy up. A rule of thumb is to invite one friend for every year of thechild's age. A five-year-old would have five friends. But sometimesparents will invite a child's entire school class to a party, which putspressure on other parents to do the same. One idea is to collaboratewith other parents whose children have birthda]'s in the same month.Host a single big party and invite the whole class. The cost and hassleofplanning the party can be spread arnong several parents.

. Set spending limits. It may seem overkill to set a budget for a party orfor year-round children's gifts, but a spending plan can h+ parentsplan their finances and avoid irnpulse buJs. Older children mightapprec.iate a party budget if you let them choose how the money isspent. Give them power to allocate the money among party favors,decorations, relieshments, entertainment, and other parts of theevent. That way, planning the party becomes part of the birthdaymemory.A budget is also important for buying gifts for another child's birthday

party. Set a budget ofbetlveen $1o and $2o, for example, and let yourchild choose a gift in that price range. That has t]le added benefit ofbeing a lesson about living on a budget.

. Skip the card. Most kids won't apprec.iate a $5 birthday greeting cardand fancy wrapping paper. So forgo the card or give a handwrittennote instead. And wrap a gift in the Sunday comic section of thenewspaper. Similarlt most four-year-old bo]'s won't care whether theplastic cups match the paper plates, so don't bother spenaling extra tocooralinate alisposable parB'ware.

. Make the usual unusual- For exarnple, keep refreshments simple andinex:pensive, but give t]lem fancy names, suggests Hallmark on itsWeb site. A baseball theme lends itself to "home-run hot dogs" and"pop-fly popcorn," and a magic theme calls for "celestial cupcakeswith stardust sparkles" and "magic pink lemonade."

. Think nonmaterial gifts. Take a day off liom work and bring yourchild to a rnuseurn or give hirn a new privilege, such as a later bedtimeor curfew. Or talk with your child about taking a year off liombirthday gifts. Instead, encourage friends, relatives, and partygoers todonate money or a toy that will go to a charity. The child can then go

in person to present the donation and enjoy the thrill of giving.

Anuserrrent Parks: Costs Shouldn't Take You for aRideAmusement parks can be a fun family getawat but too many familiesneecllessly overspend for their day of roller coasters and water slides-

An admission ticket to a regional amusement park often costs about$5o. Add parking, relieshments, and a host of other ex:penses, and a

farnily offour could easily spend g3oo on a one-day outing.

Most times you can save a lot ofmoney withjust a litde planning. Hereare some tips for speniling less on amusenent parks. Some also apply tosuch anractions as lhe zoo, museum, and aquarium.

. Never pay retail. Listed admission prices are for suckers or peoplewho just don't care about wasting money. They're like a new cIu'ssticker price tlat nobody actually ex:pects you to pay. In fact, someparks are raising rates only to boast that they're offering biggeraliscounts, knowing some consumers care more about the aliscountthan the final price.

. Use a coupon- In most cases, if you can't find a coupon for a

aliscounted admission price, you're not trying hard enough. Manyparks will give you a discountjust for going to their Web sites. Otlerplaces to look are on soft drink cans, in the newspaper, AA4 yourwarehouse club, and at your employer's human resources ofEce.

. Planning ror. Check out all the latest promotions on the park's Website and then phone the park. Ask the guest relations person aboutaliscounts and promotions the park is offering. Wtile on the phone,inquire about how crowded the park is likely to be on t]le day youwant to go and whether any spec.ial events, such as parades, musicconcerts, corporate picnics, or fireworks are happening that day. Youmay dec.ide to alter your plans to attend on a Sunday instead ofSaturday, for example, to avoid crowds.

. Recruit friends. Most parks offer group rates, some for as few as tenpeople. Ifyou plan a trip to a park with a few neighbors, you could notonly get the group rate but also save on parking and gasoline if youcarpool with a large vehicle or t!vo.

. Time it right. Arrive first thing in the morning when the gates open to

avoid crowds. Alternativelt try after 5 p.m. when you could qualiftfor a cheap late-day pass and crowds will be subsiding. The best da]'softhe week to go are Tuesda]'s through Thursda]'s to avoid weekendcrowds. And the best time of the year is September, followed by earlyApril. Even Labor Day weekend might be okay because most familiesare in back-to-school rnode and are mentally finished with theirsurnrner fun.

. Go against the grain. Avoicling crowds will give you better value foryour amusement park buck. Upon entering the park, get a map anddevelop a game plan. If one ride in particular intrigues you, go therefirst thing in the morning and get your fill- Other stategies are tohead for the back ofthe park and work your way forward, avoialing thecrowds, or after entering the liont gate, make a left and continueclockgise around the parl! which is the opposite ofwhat most peopledo. Eat before u a.m- or after r p.rn- if you're buying food at the park.You'll avoid lines at food vendors and be on the rides while manyothers are eating lunch.

. Bring food. Usually, you can't bring relieshments into a parl! but youcan exit the main gate and come back in. So, avoid overpriced andpoor-quality food by keeping a cooler of food and drinks in the car.Some amusement parks even offer picnic grounds near the parkinglot. So, try to land a parking spot near the picnic area. Inside the parl!you may be able to bring a botde to refill at water fountains.

. Go easy in the gift shop. Give kids a limit for gift shop purchases andsave shopping for the end of the day. That way, you avoid lugging theitems around all day and possibly the cost of renting a locker. Hit theliont-gate gift store on the way out. It will have a variety of the bestitems and provides one-stop shopping. If you're on a tight household

budget, you want to skip the gift shop altogether.

Vacation Accornrnodations: Hotel Versus HorneRentalVacation planning often involves choosing among hotels and motels nearyour destination. But you have other choices for accomrnodations.

Whether headed to the beach, the mountains, a lake, or a theme parl!nore farnilies are renting f, l vacation houses, cabins, and villas.Surprisingly, rental hornes besides being nuch rnore spac.ious can beless ex:pensive than renting a hotel room.

In fact, renting a house instead of a hotel room is often a better choice.Renting a whole house or condominium is a familiar concept for tlosewho regularly vacation in some parts ofthe country, such as East Coastbeach locations. But in other regions, t]le idea of renting a vacation horneis just catching on.

A vacation home rental might be the smartest way to spend yourvacation dollars. Here's what to consider:

. size of your party. Generallt if you're traveling with three or morepeople and have to get at least tlvo hotel rooms, a home rental will becheaper. You'll get a lot more space, often with multiple bedroomsand bathroorns, and bigger living and dining areas. In some ex:pensivemarkets, rentals are cheaper than a single hotel room of comparableluxury. Envision a 2so-square-foot hotel roorn with two double bedsand a rollaway for the same price as an L8oo-square-foot,three-bealroom house. With more space, you'll be comfortable justrela-\ing, rather than feel like you have to be away liom the small hotel

room and on the go. And people accustomed to their 3,ooosquare-foot houses or larger might feel cramped in a hotel room allweek.

. Eating in. Having a kitchen in a vacation rental means you'll have toeat out less often. Dining out for every meal is not only ex:pensive andtime consuming but also can be a stressf,il hassle if you have a largegroup or young children. Sometimes, a quick brealdast of coffee andcold cereal or a bagel before hitting the beach might be moreenjoyable than waiting for a table at a restaurant every morning-

. Amenities. With a vacation rental, you won't have daily housekeeping,conc.ierge service, room service alining, and a fitness center, but youmight have use of a grill on a patio, beach chairs and beach toJs,bicycles, and kitchen appliances and utensils. You might have a lieewasher and dryer, which allows you to pack fewer clothes. Vacationrentals are more likely to have video players, board games, and booksto keep kids occupied on rainy daJs. And, like many hotel rooms,rentals might have Internet access included.

. Minor chores. With vacation rentals, you might have to put sheets onthe beds when you arrive and take out the garbage during the weel!among other srnall tasks. Of course, tlat's unnecessary with hotels-

. Privacy. A vacation rental's walled-off rooms with doors means adultscan steal some "alone time," away lion children or other people inyour vacation party- And separate rooms fac.ilitate young children'snaps and early bedtimes.

. Pets. Many vacation rentals allow pets, which cIrn save you money onkennel costs. In general, rentals that allow pets will be nicer thanhotels that do.

. Ease of reservations. Hotels win on this count because vou can call

toll-iiee numbels anltime or even book on the Internet- However,booking vacation rentals has become easier with such Web sites as

HomeAwav.com and its afEliates \aRBO.com, CvberRentals.com, andGreatRentals.com. Others are VacationHomes.com andvacationhomerentals.com, but you can find rnore with an Internetsearch engine. Searching through home rentals takes more time thanchoosing a hotel, but it's potentially more fun too, almost like houseshopping.

. nexibility. Pay-by-the-night hotels offer tle most time flexibility, andyou can cancel on short notice- But you don't alwa]'s have to committo a weeklong stay at a vacation rental. Many homeowners will let yourent by the weekend or even on a nighdybasis, particularly during theoff-season- Most still ex:pect you to pay by pelsonal chec\ but othersaccept crealit cards or online pa]'nent s]'stem PayPal-

. Risk. Dealing with individual horneowners carries rnore risk thandoing business with established hotel chains. So at first, maintain a

skeptical attitude by asking a lot of questions and insisting on awritten contract- Ask if the property is professionally cleaned betlveenrental periods. Use Web sites that charge homeowners for a listing,rather than liee listing services. Pay sites might do at least cursorychecking to make sure t]le vacation property actually exists and mayban listings that garner complaints. And if the property is listedthrough a property management agenct it's less likely to be a scam.

In sum, if you're after the best value for the money in terms of space andhorne-away-liorn-horne living, rentals are the way to go. Theyreespec.ially good for families and large groups. But if you're into simplicityand parnpering and money is less of an issue then hotels stillrepresent the best choice.

a. LifeSpending

Happens: Big-ficket Infrequent

Wtile it's important to pay attention to the litde daily spending thatadds up, you can't ignore t]le big monster ex:penses tlat happen lessoften. We all know what they are: cars, hornes, wedclings, rnedical bills,and the like.

These large inliequent expenclitures are prirne areas for saving a bunilleof money at one time. But theyre also areas that much is written about,and information is readily al'ailable. So, I'll try to give you overallconcepts about tlfs q'pe of spencling.

For some topics, I'll put first things first- For example, t]le first questionin buying a car is not, "What car do I want?" Instead, it is, "How muchcan I spend?" followed by "What car do I want for the money I can affordto spend?" It seems elementary, but it's crucial to think about cars andother large ex:penalitures in that way, in that order. In fact, cars are thesource of so rnany spending problems that I've included two sections onthe subject.

In other sections, such as moving costs and getting a alivorce, I'll pointout some spec.ific money-saving tactics.

The following tips aren't the be-all and end-all about these subjects.Aiter all, entire books are written about buying cars, buying hornes,planning weddings, and paying college tuition- But the advice here willgive you plenty ofideas for spenaling smarter when life happens.

How Much Car Can I Afford?-Less Than YouThinkFor man) consumers, lhe logic goes like lhis:

"I need a vehicle for tansportation.""New vehicles cost about $3o,ooo-""I must spend about $3o,ooo for a vehicle."

The problem is the third notion, the conclusion. It's lazy thinking thatstems iiom "wants" car lust rather than aI analJsis of"needs" transportation.

"The worst auto accidents you'll ever see occur on the showroom floor,"sa]'s get-out-of-debt spec.ialist Dave Ramset a.ulhot ol me Total MoneAMakeouer.

Those acc.idents happen as consumers sign up for years of crippling debtto buy vehicles tley can't afford. Americans have quickly gotten used tonew car prices starting north of $3o,ooo. The fixation seems to be ont]le car pa)'nent. Consumers figure, "I'll alwaJs have a car paJment-Everybody has one." That's why they don't even care what the car costsor how rnany years theyll be paying it off. They oDly care about t]lemonthly pa]'rnent.

If that sounds like your attitude, you might have fallen for the carpa]'nent debt trap, t]le never-eniling cycle of financ.ing automobiles. Itrobs manyAmericans oftheir potential wealth because theyre funnelinga huge portion oftheir incomes into an asset that's plummeting in value.

Can you afford the car you have right now? Think carelirlly. That's a

alifferent question than "Can you make your pa]'nents so the car doesn't

get repossessed?" It means, "Can you afford your car so it fitscomfortably in your financ.ial life and isn't driving your financialpriorities?"

The key is to first figure outlot, instead of trying to fitvehicle you just bought.

Here are si\ signs tlat your

what you can afford before you go to the caryour household budget around the pricey

automobile might be too expensive for you:

. You bought a new car. Deprec.iation is the 3c) percent in value yournew car loses during the first year of ownership. On a $3o,ooovehicle, tlat's a $9,ooo loss. If $9,ooo is pocket change for you, thenyou can afford a new car. If $9,ooo is a lot of money in your world,you'll need a less expensive car. It's not a more dif&cult anal]'sis thanthat. For most people, that will rnean buying a used car- A moremodesdy priced exarnple of a Toyota Camry is in Table 8.1.

Table 8.1. Costs of a Base-Moalel Toyota Carnry

slungr cohprrud *jtll Ne* rrsRP

Source: Kelley Blue Book

. You financed the car- Here's a harsh statement: If you cannot pay fora car in cash, you calnot afford the car. "But," you counter, "Wheream I going to get money to pay cash for a car?" That's tle wrongquestion- The question is, "Where do I find a car to buy with t]le cash

I have?" One answer is the cash-onlt trade-up plan. It goes

something ]ike this: Keep your current car for at least three yearsafter paying it off. Aiter paying it off, continue making monthly carpa]'nents to yourself, perhaps in a separate bank account. When youneed a new car, buy one for the price of your savings plus the salevalue of your old car- Repeat this process every few years, and you'llregularly trade up to a more expensive vehicle while paying cash.

. Your car pa]'nent is too high. Although paying cash is ideal, mostpeople will refuse to heed that advice. So when is a car pa]'nent toohigh? Many experts suggest all your car pa]'nents should add up toless tlan 15 percent of monthly take-home pay. Let's assume that's agood rule ofthurnb. That means a family with the mealian U.S. annualhousehold income of $46,242 might take home about 75 percent ofthat, or about $34,7oo. That family can afford total car pa]'nents of$434, which would get you one $14,ooo car, assuming no downpa]'nent or trade-in and a three-year loan- Bg that math, the tgpicalhotLsehold in America can't alford half the price of todaA's neu) carc.The other rule ofthunb, mentioned in Chap[c!]t, "The Big Picture," iseven stricter- It suggests car paynents should not exceed 7 percent ofgross income and that's if you have no other debt. That means themealian U.S. household could afford total car pa]'nents of about$270.

. You financed for more than three years. Assuming you won't pay cashfor the vehicle, determine whether the paynent for a three-year carloan is too much for your household budget to handle comfortably. Ifso, t]le car might be too ex:pensive for you. If you must finance a carfor longer than four years, it's definitely too ex:pensive. Instead offinancing for a longer period to reduce the pa]'nent, get a smaller

pa]'nent by purchasing a less ex:pensive car.. You leased the car to get a lower pa]'lnent. This is a tell-tale sign youbought too much car. Few auto leases are worthwhile for most peopleand almost never make good financial sense.

. Your vehicles total half your income. The total current value of allyour cars plus boats, motorcycles, and similar vehicles should beless than half your gross annual household income, accoraling to a

Dave Ramsey rule ofthumb. That's regaralless ofwhether you own thevehicle outright or are still making finance paynents. So, if yourhousehold income is the U.S. median of$46,242, t]le total value ofallyour vehicles should not be more than about $z3,ooo. You can findthe current value of vehicles at such Web sites as Kelley Blue Boo\wwwkbb.com. The idea is you need to limit the amount ofmoney youhave tied up in assets tlat are going down in value.

So, what do you do if your car is too ex:pensive for you? Ifyou're near theend of the loan term, you might suck it up and keep paying the loan,vowing never again to buy a car you can't afford.

If your vehicles are sinking your finances, consider selling one or rnorevehicles- Sell privately instead of traaling in to get the most money youcan. Then buy a far less expensive used car. If you're "upside down" onthe vehicle, rnearring you owe more than the car is worth, get a personalloan for the clifference so you can sell it and buy a cheaper one- Your bestbet might be a loan iiom a crealit union. It's better to owe a few thousanddollars to the crealit union than tens of thousands to the auto financingcompany.

Ifyou don't look closely at your automobile ex:penses, you'll be literallydriving away your wealth.

Why Buy Used? You're Not Buying Sorneone Else'sProblernFew events in life offer a better chance to waste money than buying a caror truck. And the ultimate in overspenaling is purchasing a brand-newvehicle.

Don't be offended if you're oneonly new cars. Years ago, there

But times have changed, and so should your attitude toward used cars ifyou want to spend your money rnore wisely.

It's not news that the value of new cars, trucks, vans, and SLIVs falls off acliff the minute you drive it liom the dealer's lot. That moment can costyou 2() percent of the car's value, or $5,ooo on a $25,ooo car. So, that"ned' car is worthjust $2o,ooo on t]le used-car market in minute No- 2of ownership. Then through the first year ofthe car's life, its value dropsby another 1() percent, accoraling to Edmunds.com.

That's paying a huge premium for new-car srnell-

Smart spenaling alictates you let someone else absorb the profoundlypoor investment ofbuying new, while you swoop in later for the value. Itcan be especially prudent if you are determined to buy a hr-\_ury car youcan't really afford to buy new. Buying used is the ideal solution-

In fact, for all car buyers, purchasing a used vehicle rnakes more sensetoday than ever before. That's because many of t]le arguments againstbuying a pre-owned carjust don't hold up an]'nore. Here's why:

. Quality. The most common objection to buying used is "I don't want

of the millions of Arnericans who buywere good reasons to stay away from

to buy someone else's prcblem." Previously, buying a three- orfour-year-old vehicle meant you would own itjust in time for a seriesof mechanical problems to develop, which required expensive repairs.But the quality of cars today is the best ever. Years ago, a car's lifepetered out at loo,ooo miles. Today, reliable cars can last almosttwice tlat long. Many Honda Accords, an example of ultra-reliablesedals, are likell' to go 15o,ooo miles witi just nomal maintenance.

. Warralties. Some bumper-to-bumpet waranties covet four years or5orooo miles, and powertrain waFanties can last ten years orloo,ooo miles. That's much more extensive coverage than ageneration ago. Many warranties are tansferable to secondaryowners, although it's important to check the details.

. Used-car glut. There are more and better used cars for sale becausethey're corning off leases. And because of low financing ntes and highrcbates in rccent years, sorne car buyers have traded in late-modelcars for even newer ones. That leaves many gendy used, low-mileagecars for the used-car market, leading to greater choice and relativelylowerprices.

. Infonnation. You can know exactly what you should pay for a used carby using liee online Web sites, including Edmunds.com ard KelleyBlue Book, n'n'rv.kbb.com - Consumet Reports offels a report for glo.And unlike years ago, today you can get a repot about the vehicle'shistory. Youjust supply the vehicle identification number (\{}I). Thereport, many available instandy online, will tell you whether the carwas totaled, detail its mileage and ownership history, and tell youwhetler it was involved in a fire or flood. One good source is a g2oreport fTom Carfax, $\\nl'.carfaL com.

. New marketplaces. For-sale signs on the windshield, newspaper

classifieds, and even new-cu dealerships are still good places tosearch for used cars, but today there are more options- Onlineauctions, espec.ially at eBav.com, can be a good source ofused cars atgood prices. It can even pay to buy cars in far-away places in theUnited States and either pay to ship it or buy a one-way plane ticketto pick up the car and drive it back Online classified ads are availableat a number of Web sites. Large car-buying sites include,www.autobltel.com, www.autotrader.com, www.carsalirect.com, andwww.autos.msn.com.

. Certified pre-owned- Ifyou're nervous and want to alip a toe into t]leused-car pool, consider a used car certified by the manufacturer. WitIa factory-certified used car, you'll pay rnore, naybe about $2,ooomore, but you should get an extended warranty, and you can resteasier knowing you're getting the cream of the used-car crop. Moreimportantlt it will make you feel more comfortable buying used carsin t]le future. Just be very clear about what "certified" means and getdetails. Manufacturer warranties are far superior to car-lotwarranties.

Make no mistake, buying a used car is a litde or a lot more worlc Itcould include nore research and requires the legwork of getting the carevaluated by a mechanic. And a private-party transaction will requireyou to hanalle the paperwork of transferring the car's ownership. Inmost cases, however, your effort will be handsomely rewarded withhundreds, or even lhousands, oIdollars in savings.

If you're convinced that buying your next car used is t]le best idea, tlenchoose at least three models to pursue to maintain flexibility- Also,consider quality cars that don't hold their value well because theyvealready suffered their greatest deprec.iation- If you like late rnodels, own

a car during the sweet spot of its lifecycle, buying at year No- 2 andselling at year No. 5. Of course, buying used and holding it for a decade isagreatideatoo.Buying used cars instead of new ones can be the smartest spenalingdec.ision you make in your lifetime.

How Much House Can I Afford? Don't Be "HousePoor"Buying a house is a fabulous idea and rernains part of many people'sdefinition ofliving the "American Dream."

In the past, it often ended up being t]le single best spencling dec.isionmany Americans ever made.

Perhaps the most startling statistic comes frorn looking at people'sultimate measure of wealth, called net worth. It's simply all you own,minus all you owe. Americal horneowners have a mealian net wortl of$184,4oo, while renters are worth $4,ooo, accoraling to the most recent2oo4 figures liom the Federal Reserve.

But homeownership alone is not a panacea, espec.ially in an era of easylending and complicated horne loans. Those recent changes have ledmany consumers to buy houses they sirnply cannot afford, which leadsto the gut-wrenching process offoreclosure.

Here are some considerations when buying a home:

. Know the mortgage you can afford. The Federal HousingAdministration, the government agency that helps people buy hornesby guaranteeing loans, has a formula for horne affordability- Mortgageprinc.ipal and interest, plus real estate ta-\es, plus homeowner's

insurance should not exceed 29 percent of your gross income. Thatmeans a family with $75,ooo in income could afford a house pa]'nentofabout $LBoo.And your total debt, inclualing the mortgage, car loans, crealit cards,and the like, should not exceed 41 percent, accoraling to FHA. Thatalso neans if you have no debt, you could technically afford amortgage and assoc.iated costs ofup to 4l percent ofgross income.However, that's a liberal, and even risky, formula. You would be saferkeeping those total ex:penses, plus adalitional maintenance costs, toabout a third ol yotrl take-home pay, which delivers a veryalillerenl and lolrer allordabiliq Egure.More conservative yet is that the house pa]'nent should not exceed aquarter ofyour take-home pay on a 1s-year fixed-rate mortgage.Mortgage affordability calculators abound on the Internet. Run yournumbers tlrough a dozen of them to get a feel for what price rangeyou should be looking at. Start witl calculators at Bankrate.com andDinkr'town.com and use your favorite search engine to find otlers.

. Don't think "dream home." You may one day live in your drearn horne,witl the hl\_urious back porch, the granite countertops, or thewhirlpool bath, but it's unlikely to be your first home or even yourthird. The priority is to get into something you can afford, and thenwork on traaling up or improving the house you have. Wlile homeshopping, avoid t]le temptation to visit homes for sale outside yourprice range.

. You don't need a huge down pa]'Inent. Getting togetler enough cashfor a 2() percent down paynent is a good idea, but unnecessaryan]'lnore. Putting down less cash should be okay in a decent housingmarkeL as long as you're conservative on the size of your mortgage.

Saving at least $S,ooo to $1o,ooo to put down on a small house willbe a signal to yourselfthat you're serious about being a homeowner. Ifyou're wondering where to get money for the down pa]'nent, youneed only to read other parts of this book to spend your moneysmarter.

. Do your research- Buying a horne is likely the single biggest purchaseyou'll make, so it's worth doing research- Know tle housing market,read about and compare mortgage financ.ing options, and alwaJs dothe math on whatever home-buying topic comes up- If you're notwilling to do the learning and wor\ you're not ready to be a

responsible horneowner.

Ifyou can't yet afford to buy a home, don't alismay. You're not the sinnerrnany people will rnake you out to be. You will not be forced to wear a

scarlet letter "R' for "renter." Ifyou're concerned about the alifference incost betlveen buying and renting, p\ in nurnbers to an online calculatorb) morlgage-backer Ginnie Mae al ww!r.g!Il]!e!Iff4ov.Possible reasons to continue renting are that you don't want t]le hassleand added expense of maintaining a home, or you want the flexibility tomove your residence quickly. Or your might be convinced your area isex:perienc.ing a real estate bubble tlat soon will see deprec.iating prices,and rents are relatively inex:pensive.

Or t]le best reason is tlat you're continuing to rent until you shape upyour finances enough so that you're in a position to buy a home and startachieving your own "American Dream."

Moving Costs: Getting Your Stuff frorn Here toThere

Moving you! belongings into a new apartnent o! house can bephvsicrlly, emotionally, and financially draining. Today,do-it-yourselfers have a plethora of choices for trading off cost withhassle-

Full-service interstate moves can be outrageously expensive, while atotal self-move can be stressfirl and back wrenching- So it pays to laro\swhat help is available ald how to cut out unnecessary expense, whetherfor a local move costing several hundred dollars or a coast-to-coastfrrll-service move costingthousands.Beware that the moving business, which hanalles 40 million householdmoves each year, has more than its share ofscam artists, Here are sometips on saving money and avoialing scams:

. Get your employer to pay. Ifyou're moving for a job, try to get all youcan in rcimbu$ement of moving expenses. A firll relocation package isideal, but anlthing you can negotiate is just liee money. Also, keepyour receipts. Some orpenses may be ta"\ deductible. To see the taxrules for moving o(penses, go online to $$$..irs.gov and search forIRS Publication S2L called "Moving Lxpenses-"

. Be flexible on timing. May through September and the beginning andt}le end of each monti are busy times for rnoving companies andhuck rcntals, which means they may be more ex?ensive than duringoff times. A midmonth winter move might yield the best deal, if youhave that flexibility. It can be a doubly good value because you're alsolikely to get a better moving crew during off-peak times.

. Chuck it- Because frrll-service moving companies charge by thepound, the less stuff you tal{e the cheaper it \t'ill be. And if you moveyourseJf, it could mean rcnting a smaller truck and saving money, or

at least lugging less shrff out ofyour old aligs and into your new place.Use a critical eye as you go through possessions and be ruthless aboutthrowing stuff out, donating it, or selling it at a yard sale. That'sespec.ially important for heary items, such as pool tables, sectionalfurniture, and exerc.ise equipment.

. Get lieebies. You might want spec.ial packing boxes for valuables, butliee boxes fron the grocery store or elsewhere work fine fortransporting your more durable possessions, such as books and CDs.And it will save money on moving supplies.

. Supply your own packing materials. Wardrobe boxes, packing tape,bubble wrap, and similar products might be cheaper to buy at a

self-rnoving company such as U-Haul International, Inc., or a

shipping-supply company rather than buying alirectly from themoving company you're using.

. Pack stuffyourself. You can save hundreds of dollars by packing mostof your belongings yourself. An exception would be liagile andvaluable items, which you might want packed by a professional. Thereare tlvo reasons. First, the items are less likely to be broken ordamaged if packed by a pro in packing materials designed for fragileitems. And second, many movers won't insure boxes you packedyourself.

. "You load, we haul-" This is a hybrid option, where you packbelongings yourselt and t]le trucking company drops off a tailer atyour house for a couple of da]'s so you can load it. Then a professionaldriver will pick it up and drive it to your new home, where he drops it,and you unload it yourself. This might be an espec.ially good idea forthose who want to move themselves but are nervous about driving a

large truck.

. Beware of low-ball estimates- Get at least three price quotes forf,rll-service moves, with an eye toward companies recornrnended byfriends and relatives. Be skeptical of price quotes that far undercutcompetitors. It may be a sign the mover will come up with extracharges once he has your possessions locked in his truck. He willessentially hold the stuff hostage until you pay a ransom. You canincrease your chances of finaling a reputable cornpany if you rnakesure it's a member of the American Moving and Storage Assoc.iation,www.moving.org, or 703-683-741() .

. Spot a scammer. If a moving company wants to charge by t]le cubicfoot rather than weight, it's a dead giveaway that the company maynot be reputable. Be careflrl of a mover that doesn't agree to anon-site inspection ofyour household goods and gives an estimate onlyover t]le phone or Internet. And be suspic.ious of moving companiesthat demand cash only or a large deposit before the rnove- For helpf,rlinformation on inte$tate moves, see Web sites for t]le Federal MotorCarrier Safety Administration, www.plqtcgblQu!4eyq€ey, or theAmerican Moving and Storage Assoc.iation.

Wedding Spending: Like Marriage, It's AboutCornprorniseIt's pleasant to think about a fairy-tale wedding where nobody nentionsthe word budget, where money is no object. But tlen, it's more pleasantto think about a fairy-tale rnarriage where never a harsh word is spokenand you live out your love-struck da]'s in eternal bliss.

That ain't happening either.

Wedalings can be extreme$ expensive. The average cost of a traalitionalAmerican wedaling is pushing $3o,ooo, with costs in pricey regions such

as New York totaling much more.

But a secret of the wedding industry is that a lot of those dollars arespent on items and services tlat won't make much alifference to thecouple or the guests. The key is to scrutinize every aspect of thewedding, starting with t]le invitations and paying spec.ial attention to themost ex:pensive part, the reception. Then detennine whether the couplewill get significant value liom each expense. If not, cut it out orsubstitute something cheaper.

It's about choosing priorities, about spencling your money on what'simportant to you. Insisting on having the best of everlthing is animmature attitude and just not practical- You will alwa]'s have to cheapout on something. The good news is you get to decide.

Here is advice on speniling money smarter when planning a wedcling,with help from folks at TheKnot.com and Alan and Denise Fields,authors of several books on wedclings.

. Revere the B word. Not bride budget. Come up with a total dollarfigure and use industry averages as a guide to break down how muchyou should spend in each area. TheKnot.com has a budget calculatoron its Web site. For example, with a $25,ooo wedaling and 15o guests,it suggests spenaling $Lsoo on the wedaling dress, $2,ooo on alcohol,and $Lsoo on the reception band or disc jockey. Of course, youcustomize those areas to whatever is most important to you. Having a

budget also makes dealing with vendors easier. For example, give theflorist a dollar figure for all the flowers and provide the colors youlike. Let him do the work of sorting through choices and presentingyou with options.

. Be creative. If you're shopping at traditional wedaling oudets, you're

almost sure to overpay, espec.ially if the retailer's name has the word"wedding" in it. To be creative, you might have to lose attitudes aboutthe proper place to buy things. For example, Costco, the bigwarehouse club, is a great place to get aliamond engagement rings forless. Buying a wedding dress frorn an online retailer or mail order cansave money, as can renting a lirnousine liom a funeral home.

. Make sure the time is right- The bride nay alwaJs have dreamed of aJune wedding, but if she can be flexible enough to hold it during a lesspopular time ofthe year, the savings can be substantial- You can havea rnore lavish wedcling for the same price if you'll hold it during a lessex:pensive time of year. Similarlt avoiding the usual Saturday eveningwedding is sure to reap savings. An earlier wedcling and a lunch orbrunch reception crrn save a bundle. And for Christian churchwedclings, consider Christmastime nuptials. The church is alreadydecorated with holiday flowers, which cuts out an entire category ofexpense.

. Trirn nultiplied expenses. Spenaling cuts that involve guests can bebig savers because even a small savings turns big when rnultiplied bythe number of guests. For a wedding with 2oo guests, a small$s-per-guest savings reaps $1,ooo- And ifyou can cut down t]le guestlist, it means big savings at the reception on food, alcohol, tablecenterpieces, and other costs. You can cut the food cost-per-guest bybringing in an outside caterer ifthe reception venue will allow it.

. Save on blooms. Take an espec.ially hard look at your flowers category.Most people don't notice flowers and can't tell whether a red bloom isarose or a carnation liorn to or zo yards away. So, choose a color, nota spec.ific flower. Overall, try to cut in halfthe price ofthe florist's firstsugqestion by substituting less expensive flowers. And you can easily

eliminate or reduce the size of the huge bridal bouquet, which mosdygets in the way of seeing the bride. Use potted plants instead of floralarrangements at the reception, where it's usually dark an1'way. Arented plant might cost $15o when a large floral arrangement couldcost up to $75o.

. Dress success- Order the designer dress of your dreams but ask for itin a less expensive fabric. Nobody will know the alifference, and youcould save $5oo. Cut down on the embroidery and save another$r,ooo on high-end dresses. If you're at all handt make the bridalveil for $1o, rather than spencling $5oo. Also, check out sample salesfor dresses in Decernber and January, when wedaling salons sell floorclisplay models to rnake room for new shipments. A $S,ooo new dressmight cost $1,5oo as a "sample."

. Piece-of-cake savings. Instead of a large wedaling cake, get a small onefor photos. Aiter the obligatory wedding-cake photos, wheel the cakeout of view and have the wait staff serve inalividual helpings frorn anundecorated sheet cake stashed in the kitchen. A sheet cake can cost

75 percent less because it's not decorated, and guests won't know theclifference. Marie Antoinette had it right let them eat cake. Whyserve a dessert course at t]le reception alinner when there's cake?

. Booze budget. Don't stock brand-name liquor in the open bar. Fewpeople will notice t]le alifference after the first drink an)'way. Limitwhat the open bar includes. If you cut down to beer and wine only,add at least one spec.ial cockail and give it a clever name that meanssomething to the wedaling couple.

. Easy cuts and trade-offs. Forgo hand-done calligraphy for t]le outsideof wedding invitations and all the layers of enclosures. Cut thelimousine service. Or consider using a rented or borowed h]-\_ury car.

There's no need for floral arrangements in the bathrooms of thereception facilitv, despite your florist's urgings. co $.itl simplereception-party hols d'oeu\,Tes and splurge on the enhees instead.Say no to the fancy cases and albums for the wedding rideo andphotos. They can cost hundreds of dollars. You can buy nice onesmuch cheaper. And if you're going with live music, don't hire aseparate band for cocktail hour. Instead, hire a few members of thereception band to come early.

. Buyer beware. Surely, the majorit-y of wedding vendors earn theirmoney, but be on guard for rip-offs. For example, some hotels andcountry clubs have rirlictrlous charges, such as "cake-cutting fees,"which cost 50 cents to $2 per guest simply for slicing the weddingcake. Some florists change the price ofwedding flowers based on whatme of car drives up. Show up in a BtrIW, and you might pay topdollar. Gown preservation services that promise to cleal ald preservethe wedding dress are mosdy a rip-off. Most dress shops simplythrow the gown into a regular washing machine in the back of thestore. And preserving the dress for a daughter is a nice idea, but itrarely happens. Just 2 percent ofbrides weara family heirloom dress,surveys show.

. Where not to skimp. After the music has faded away, the food iseaten, and the flowers are wilted and gone, all you have left is yourmemories, captured on film and video. Don't skimp on photography.To cut photography costs, use a professional photographer for theceremonv, but not for the reception. Instead, place disposablecameras on the tables ald have guests tale pictures.

College Tuition: The Two-Year, Two-Year Plan

College costs continue to rise far ahead of inflation, often sadcllingparents with huge tuition bills or t]le student witl suffocating studentloans.

But high school students and their parents should consider oneparticularly good alternative: a community college as an economicalstarting point for a four-year degree.

The idea is that students who intend to pursue a four-year bachelor'sdegree can complete tleir introductory coursework at a tlvo-year school.Students can then transfer to a four-year school as ajunior and graduatewith a bachelor's degree.

Using total-ex:pense statistics for the 2006-07 school year lion theCollege Board and multiplied by four years, here is a breal<down of thechoices in round nurnbers: private college, $133,ooo; tlvo-year school,then private college, $79,ooo; public college, $65,ooo; two-year school,then finishing at a four-year public college, g45,ooo. Single-year priceclifferences are highlighted in Table B.z.

Table 8.2. Annual C.ollege Prices Vary Drarnatically

Source: The College Board 2()()6-2()()7

Note: Two-year college figures assume commuting to campus. Four-yearcollege figures assume resialing on campus. Public college assumes stateresidency.

That two-year/two-year plan nets out to about a $55,ooo savings forprivate school and $2looo savings for public school. Savings figuresexclude room and board costs for living at home for tlvo years. In otherwords, it assumes mom and dad would allow the student to live and eatat home liee. Here are financ.ial reasons to consider attenaling acommunity college for t]le first tlvo years of a four-year program:

.You pay for it regaralless. on average, 7() percent of communitycollege errpenses are covered by ta-\es, accoraling to the AmericanAssoc.iation of Community Colleges.

. Two years at half price. Tuition and fees at public community collegesaverage less than half of those at public four-year colleges and aboutone-tenth ofthose at private four-year colleges-

. Results are good. Studies show that students who spend their firsttlvo years at a community college and then go on to graduate from a

four-year college are as well prepared academically as those who go

alirectly to a four-year college, accorcling to the College Board.Research also shows students who take the community college routeearn just as much money after they graduate.

. Favorable teaching conalitions. Community college students learn inrelatively srnall classes liom instructors whose primary responsibilityis teaching, not research. Many teachers have extensive "real-world"ex:perience in their subject areas. And the average student-teachercontact time is higher at community colleges.

. The stigma has faded. Negative stereotlpes about communitycolleges from previous generations have changed. And consider thatin using the tlvo-year/tlvo-year plan, a bachelor's degree is issued bythe four-year college. The aliploma doesn't mention being a "transferstudent."

. Live cheaply at home. The community college route not only haslower tuition and fees, but it avoids the expensive cost ofhousing andfood at a four-year school- For community college, the cost of roomand board would be basically groceries and transportation. That'slikely to be far less than the $7,ooo per year for room and board at asla le school or sB,loo annuall) [oraprivaleuniversib.

. Ability to work. Community college course schedules are flexible,which might help students work their way through school easier thanat a four-year school.

. Fickle protection. Many 18-year-olds don't know exactly what careerpath they want to pursue or whether college is right for them at all-Exploring their career choices is a lot cheaper at community collegerates.

. Lower student loan bills. Many graduates of four-year schools aresaddled with enormous student loans, arnounting to tens ofthousands of dollars. That debt will burden them for years aftergraduation, affecting what houses and cars they can afford, forexample. Lower college costs allow students to dig out of that holequicker.

However, there at least a few possible reasons to pay more money forfour years at a state or private college. It's up to you to put a price tag onhow much tleYre worth:

. You don't have to worry about whether a student's academic crealitsearned in the first tlvo years will apply toward a four-year degree.Rules for tansferring creilits are spelled out in "articulationagreements" betlveen colleges.

. Many community college students will need a vehicle to get to schooland bac\ while a student living at a four-year school could get alongwitlout a car.

. A comrnunity college transfer might have to wait until junior year forsome soc.ial aspects of a four-year school, such as living apart liomparents, having a link to nationally known athletic teams, and joiningliaternities and sororities.

Divorce: Spending Less on Splitting UpDivorce can be life's most traumatic event, but if the dec.ision to split upis final, the process should become a relatively simple businesstransaction to aliwy up assets. But because ernotion plays such a largerole, ilivorce can get a lot more complicated and a lot moreex:pensive than it needs to be.

About $5o billion a year is spent in North America as a alirect result ofilivorce, accoriling to t]le Institute for Divorce Financ.ial Anal]'sts.Divorces can range ftorn simple to complex, but saving rnoney largelyrevolves around tlvo strategies: paying less to your lawyer and payingless to Uncle Sam.

Here are a few ways to avoid wasting money as you navigate the alivorceprocess.

. Cooperate. Working together on any level is far easier said than donebecause feelings ofbitterness and alistrust are common- It might even

be irnpossible for espec.ially contentious alivorces. Most wasted moneystems liom emotional dec.isions, so trying to collaborate will help.Realize you won't get everlthing you want, which is true of any fairnegotiation.

. Limit lawyer bills. Everybody wants a good lawyer to protect his or herinterests, but the price of a lawyer is also a factor, espec.ially if theprocess is unlikely to result in a court batde. If you have a sirnplealivorce, you might not need a partner in the finn but an assoc.iate,

who will be less cosdy. After you hire a lawyer, use him or hersparingly. An attorney should hanille court paperwork and lay outyour legal rights, duties, and options. If you have few assets and nochildren, you could use one of the online alivorce services to getunhitched for a few hundred dollars.

. Be prepared- Write down questions for your attorney meetings to usethe time etEciently. Drawn-out conversations will be billed at thehourly rate of maybe $z5o an hour or more. Don't call your lawyer forminor developments. Instead, keep a journal and update your lawyerperiodically.

. Use other professionals. Your lawyer is for legal advice. Ifyou need a

therapist, by all means, get one. If you need a financ.ial planner, getone. Either will be far better at grving you what you need and farcheaper than billable attorney time. Use your lawyer for only whatlawyers can do.

. Use other resources. Library shelves are f,rll ofbooks on clivorce, andthe Internet has a slew of Web sites, such as www.divorceinfo.comoperated by Alabama ilivorce lawyer Lee Borden. An inex:pensivebook rs The IDFA DiUorce SuruiDaI Guide ($9.95), written by twoleaders ofthe Institute for Divorce Financ.ial Anal]'sts.

. Tax considerations. The old joke is there are three parties to a

alivorce: the husband, the wife, and the Internal Revenue Service.Cooperating spouses c1rn structure a alivorce to pay as litde ta-\ as

possible, but you might need help ftom a ta-\ pro. For example, theway you split up stocks that have apprec.iated by alifferent amountscould have big capital-gains tax consequences. You must dec.ide whoreceives the child ta-\ deduction and head-of-household ta-\ filingstatus. You even might try to time your alivorce to happen late in thecalendar year or early in the next year, depenaling on the ta-\ impact offilingjoindy or as singles. And structuring pa]'nents as child supportor alirnony can have a big ta-\ impact.

. Don't rebound. People who have been in a stagnant marriagesometimes go wild with rnoney, dating every night and spendingrnoney frivolously- And if you rebound your way into anothermarriage, you could be soon fac.ing clivorce all over again.

Hospital Bills: Rarnpant Mistakes Are SickeningSome hospital charges are outrageously ex:pensive, but many, like thereal-life exarnples given here, arejust dead wrong:

. A $r,r33 charge for clipping a toenail and sending it to a lab for testing

. A g1,oo4.5o toothbrush

. $57 for a teddy bear listed as a "cough support device"

. $r5 for a bag ofice listed as "thermal therapy'

. $1L2o for a box of tissues listed as a "clisposable mucous recoverys]'stem"

Health-care billing errors cost consumers big time, with about 5 percentof bills containing "major" errors, accoraling to survey results by

Consumet Reports. Consumers are spenaling more than $ro bi]lion ayear on overcharges, clairns Medical Billing Advocates of America, aself-described patient advocacy group that also sells aualiting servicesthrough its members.

Overcharges often go undelecled because insurance companiesroutinely pay them through automated bill-pa]'nent s''stems. To theircrealit, some in the health-care industry, including the AmericanHospital Assoc.iation, have begun efforts toward "patient-friendlybilling."But rampant problems remain, and even if you have health insurance,billing mistakes are costing you through your deductibles andeventually in the form of higher copa]'nents and less coverage-

The first step in making sure youtre not overcharged is to get a detaileditemized bill and scrutinize the charges. Here are more tips, somecoming with help from hospital bill aualitor Nora Johnson, who helpsoperale Medical Billing Advocales oIAmerica.

. Ask whether all the health-care pros are "in-net!vork." Before going infor a scheduled surgery or procedure, make sure all tlre spec.ialistswho will work on you, such as the anesthesiologist or raaliologist, arein your insurance netlvork or charge you only in-nehvork rates.

. Track your drugs- Keep a list of drugs administered to you, or have a

friend or family member help track them. Be aware you don't have topay for such over-the-counter supplies as aspirin or an enema, whichare part of the hospital's cost of doing business and shouldn't bebilled separately.

. Scrutinize emergency procedures. Bills that include an emergencyprocedure are rnore likely to have errors. That's because mealical

personnel working quickly make a priority out of saving the patientfirst and completing the billing paperwork later. That makes sense,but so does billing you correcdy-

. Note weird charges. If the bill notes a circumcision for a baby girl ortime for a man in the labor and delivery room, it's a good sign there'ssomething wrong. But you'll only find them if you're looking.

. Look for repetitive charges. If you see multiple X-ra]'s for the samething, start asking questions. If tley took three because of a problernwith their equipment or the X-ray alidn't turn out right, they can't billyou for the extra one.

. Examine charges for supplies. Hospitals can't charge for tissues,gowns, and other routine supplies, which are part of the room rate.Similarlt operating room supplies, such as gloves, tape, and gauzeare included in your per-minute operating room charge. A hospitalcan't bill separately for it.

. Beware the bunalle. Look for terms such as a surgical "trat" "kit," or"pack." Sometimes items within those bunalles of supplies aredouble-billed as separate items. It's even more egregious if they areroutine supplies that were already billed as part ofthe operating roomrate, resulting in triple billing.

. Clarift vague charges. Get an itemization of such charges as "lab fees"or "miscellaneous fees" to make sure you're required to pay them.

If you find errors, you can alispute them yourself by contacting thehospital billing deparhnent. But don't f,rlly trust a hospital's own billingaualit. If you can't get a problem resolved with the hospital, you can gethelp by contacting the consumer alivision ofyour state attorney general'sofEce or hiring an independent nedical bill aualitor- An aualitor is yourbest bet for finaling overcharges, but realize aualitors are often paid by

keeping 35 percent to 4() percent of whatever over-billed charges theyfind- Other aualitors charge by the hour.

Funerals: Try to Bury the Pain and GuiltPoor spencling decisions often stem from emotions and ignorance. Asharsh as it sounds, that's why many people overspend on funerals andburial services. Aiter all, few life events are more emotionally traumaticthan death of a loved one. The key as a consumer is to separate yourgrief liom the business transaction of buying funeral and burial productsand services. To be clear, being a smart consumer is not about cheapingout on a funeral, It's about providing a dignified farewell without wastingmoney money that instead could be used by people still living or bycharities, depencling on where the estate passes.

Americans annually spend billions of dollars arranging more than tlvomillion funerals for farnily members and friends, accoraling to theFederal Trade Commission- Funerals are among the most ex:pensivepurchases consurners will make in their lifetimes. A traditionalflrll-service funeral costs roughly $6,5()(). E\tras can easily push thatpricepast $1o,ooo. Cemetery costs are separate and can add thousandsmore.

The most helpf,rl, yet morbid, advice stems from this fact: No casketwith gaskets, grave liner, burial vault, or any tlpe of embalming willpreserve a body indefinitely- Spending extra money trying to preserve a

body is a waste.

Funeral spencling decisions should be mostly based on farnilypreferences and religious issues, but here are money considerations:

. Compare. In most states, you don't even need to use a funeral home,but assuming that most falnilies probably will use one, know whatyourre getting into by comparing pdces of products and services.Federal regulations require that funeral homes give you price quotesover the phone, so comparing is easy.

. L{plore options. cetting the right firneml for t}e right price is allabout examining your choices and not blindly picking a package dealfor a "tpical" funeral. Funeral homes are required to give you aprinted menu of options.

. Realize embalrning is optional. Many funeral homes requireembalming if you're planning a viewing or visitation. But embalminggenerally is unnecessary if the body is buried or cremated shortlyafter death. It is purely for cosmetic purposes. The United States andCanada are the only countries in the world that routinelv embaln thedead.

. Forgo the fanry casket. The casket, with its 3oo% to Soo% pricemarkup, is usually the largest expense, ranging from about g2.ooo togro,ooo. The purpose is to have a decent-looking box to hold thebody if there will be a viewing. Ask to see all the models because somefuneral directors will at first show you only ex?ensive ones. Orpurchase a casket somewhere else, even online, and have it shippedto the funeral hone. The funeml dircctor must use it and not charge afee for using a third-party casket.

. Rent a casket for cremation. Ask about renting a casket for a viewing ifthe body will be cremated. F,Iiminate the casket cost altogethei ifthere will be no viewing. No state or local laws require a casket fordirect cremations.

' Beware at the cemetery. Unfortunately, federal regulations that

protect consumers for funeral purchases do not apply at thecemetery. For example, state laws do not require a vault or liner in theground to protect t]le casket. Cemeteries might require them but onlybecause it keeps the ground liorn setding and rnakes lawn nowingeasier. It has nothing to do with the body. You can shop elsewhere tobuy an outer burial container if the cemetery insists on one. The samegoes forheadstones.

. Plan your own funeral. Much of the stress of making funeralarrangements can be avoided by simply rnaling your wishes known toloved ones. Put your funeral preferences in writing. This does notmean prepaying for a funeral, an idea many experts advise against.

. Learn more. Consumers are protected by federal regulations called"The Funeral Rule." For more infonnation, see a consurner guide bythe Federal Trade Commission (FIC) online atwww.ft c. gov/bcp&a!{iltclbubqbcrdecqfu ltqalbEu1-877-FIC-HELP. Also see www.funerals.ors.

A Final Thought: Buying Happiness

The point of reaaling this bool! assuming you accepted the spenclingsmart philosophy, is to spend less noney on tlfngs you don't care aboutso you can spend rnore on things you do care about.

But what do you care about? Or more importandy, what should you careabout? How should you spend your money to derive the greatesthappiness?

This is the subject of academic studt and the conclusions are in: Itseems we can, in fact, buy happiness. The key is this concept:

PositiUe IiJe expefiences contribute to happiness morc than things do.

This point about spenaling for happiness was well-documented inresearch by Leaf Van Boven of the University of Colorado at Boulder andThomas Gilovich at Cornell University. They reported finalings in "To door have? That is the Question," which appeared rn Ihe Joutnal oJPerconalitg and Social PsAchologA and,later in other academic journalarticles. Their research confirmed what literally dozens of otheracademics had found that people get more happiness liom ex:periencestlan material goods. Further, they found that materialisticpursuits bigger houses, faster cars and the latest electronics actuallyerecled a barrier lo achievingli[e satis[action.

Why is this so?

Ex:periences are more valuable because of mental ealiting, Van Bovenexplained to ne. The scrapbook in our minds rnosdy rernembers thegood parts of ex:periences, such as vacations. It's not that you completelyforget the annoyances; you just rernernber the joltrl events more

forceflrlly. Because of this memory ealiting, what academics call positivereinterpretation, the experience actually improves with time, like a finewine.

Think about your favorite memories. If you and your family reminisceabout an amusement park outing, you would rarely talk about the longlines or overpriced food but about the fun you had. You barelyremember the day it rained on your great beach vacation. Mecliocregolfers clisregard the rnany duffs and shanks during a round and insteadrecall fondly sinking a long putt or hitting a gloriously long drive. Apositive rnemory obliterates in importance the bad shots and keeps thegolfer coming back for another round.

By contrast, material purchases rnosdy lose value as they age, botl inmonetary worth and how much we apprec.iate them. You likely will neverbe more thrilled witl a material purchase than during the first few da]'syou own it. It's dow'nlill liom there.

Sorne people prefer material possessions because they have somethingtangible to show for their noney. They fail to recognize that memories ofexperiences are durable and every bit as valuable as something you cantouch-

Here are tips to get the most out ofyour ex:perience dollars:

. Set goals. Imagine yourself at the end of your life and looking back.On your deathbed, would you regret not buying t]le latest iPod musicplayer or spencling rnore quality time with your children and friends?Or, to use a collective American ex:perience, put yourself in themind-set of the da]'s following the Sept. 11, 2oo1, terrorist attacks.What seemed important t]len?Mostpeople would value experiences more than the possessions, but

it's easy to lose perspective in daily living and spenaling. So writedown your values and goals, and wa]'s to achieve them. The list willnot only give you a road rnap for spencling your monet but alsospencling your time.

. Include people. Do as many enjoyable activities with other people as

you can. Inclucling others is a fundamental component to a trulyhappy experience.

. Don't overspend. On a happiness scale, you don't necessarily get whatyou pay for with ex:periences. It has far more to do witl the quality oftime spent with other people than how extravagant or hl\_urious theex:perience is.

Spenaling smarter can liee up rnoney- And money can buy episodes ofhappiness. The key is to spend iliscretionary rnoney on doing, ratherthan owrfng.

Learn more about spenaling smart online at www.qreqkarD.com.