In Savings Habit 3, We looked at why it is wiser to Use Cash Versus Credit and Debit Cards for Discretionary Purchases Today, we are going to look at the final Savings Habit in our 4 part series:

Savings Habit #4.  How To Avoid All Unnecessary and Late Fees! - What’s worse than giving the government an interest free loan?  How about throwing away money already in your pocket?  If you were to go back and check the amount of late charges and ATM fees you paid over the last year, I am guessing it is somewhere between $100-$500.  That is real money you’re throwing away and by doing this, you are going the wrong direction.  Remember it’s not so much the amount of money but the direction and path you are on financially.  One way to avoid paying late fees is to Automate Your Finances. Let’s look at what you can do right now to fix this and stop paying these fees!

Action Step 4: In an earlier post, I wrote How To Automate Your Finances in 2010.  No Surprise; this was one of  The Wise Buck’s Most Popular Posts.  Read this post and simply start doing these things today.  The time management benefits alone are worth it alone but don’t you really want to stop throwing that money out the window?

By automating your bills you will be sure they paid on time and you will avoid paying late fees in the process.  Something that has genuinely helped me manage my personal financesis that on every 3rd Wednesday of the month, I review all my bills to make sure they are paid.  Then, I review all my accounts for potential errors or discrepancies.

Conclusion

I hope you have found this 4 Part Series on How To Boost Your Savings relevant and useful.  The only thing left is for you is to take action and implement the steps.  Here is what I would do.  Put aside 1 hour.  Then, go back, read through each of these 4 Savings Habits and begin to implement them one at a time.

These 4 simple savings habits and steps in between have made all the difference in the world for me.  The best part is that none of these ideas require that you earn a higher income.  These steps WILL put more money back into your pocket and make you feel a lot wiser for doing so.

Share your ideas as to how you are putting these and other savings tips to work for you.

In Savings Habit #2, we talked about how Not To Pay More Income Tax Than You Owe Now, we are going to do something more interesting and definitely A LOT  more fun!   By the way, it’s okay to have fun with this stuff.  There is no rule that says you have to struggle through these steps (as if they were chores) Make them fun!

Savings Habit 3. Use Cash for Discretionary Purchases - I’ve often heard Dave Ramsey proclaim (And, I agree with him) that paying cash for things hurts more than when we use plastic (debit or credit cards).  It seems that we just aren’t as sensible when we are using our credit or debit cards; this should be evident given the economic climate.   Yet, we are much more reluctant to spend when we have to give someone our “hard earned” cash.  This is because we assign a positive emotion to cash and it’s hard to give it up.  We’re attached to it! Want to put this to the test?  I do and I am.

Action Step: Beginning next Sunday, go to your local ATM and withdraw the amount of cash you would typically spend on discretionary items for the week (food, gas, coffee, snacks, lunch, etc)  The rule is that you can’t use your credit or debit card the whole week.   See how you fare.  Do you feel an emotional pull when you have to pay with things for cash?  Do you give more thought to what you are buying?  Do you find yourself putting things back on the shelf?  These are some of the results many people have when applying this technique.

If you’re like most people, you will find that you spend a lot less than if you had used a credit or debit card.  Do you think this will work for you?  Please explain why or why not?

In Savings Habit 4 we will look at How To Avoid All Unnecessary and Late Fees for Everything once and for all.  I will teach you strategies on how to do this.

So, In Step One we looked at How To Get The Most Out of Your Current Savings. This is the concept of not leaving available money on the table.   And, while we don’t want to leave money on the table – Guess what?  We also don’t want to pay more taxes than we owe.  What I am showing you here is completely up to you, but I would suggest that you stop giving the government an interest free loan.  That money should go into your new found High Interest Checking Account, right?   You want your money working for who?  You…

Step 2. Don’t Withhold More Taxes Than You Owe

I used to look forward to that reliable tax refund check at the end of the year.  Many of us intentionally have more taxes withheld than we owe to avoid an inconvenient tax bill at the end of the year.  However, those excess withholdings could be earning you interest .  When you start to earn enough interest on your savings, you can buy whatever it is you would have bought with that tax refund anyway.

Action Step 2: Check out the IRS’ Withholding Calculator Figure out your correct tax.  Adjust your withholdings with your employer or CPA.  Now that that extra savings and put it into your new high interest checking account.

In Savings Habit 3 we will look at something very interesting: the concept of using cash versus credit cards to pay for discretionary items.

One of my goals for the month is to provide you with some valuable ideas on how to improve your savings habits.   And, while some of these savings tips may sound simple,  let me share a little secret with you:  The key to improving your financial profile isn’t about one killer idea or hitting the lottery, but rather its about developing a set of very simple and proven habits that work over time.   These habits will set you in the right direction and give you the control over your life your are looking for.

I’ve learned that developing these solid habits while respecting my limitations (not taking unnecessary risks) has made all the difference.  This also makes the journey much more enjoyable.  If your financial life seems out of control, understand that you will start off slow and eventually gain momentum.  Then, suddenly all of these habits will kick in and pay dividends. Pay attention to the order of things here because most people look for the results first with out practicing the habits.  And it just doesn’t work that way.  However, if you read most of the marketing messages out there it’s understandable why so many people fall off course.

Initially, these dividends are nickels and dimes.  Then, they become quarters and dollars.  Eventually, if you stick with what I am about to show you, these dividends become the equivalent of a phone bill, a car payment, the mortgage and eventually your entire monthly expenses.  The idea is to make your money work for you versus you being a slave or subservient to money and debt.

Over the course of the next several days I am going to introduce these 4 Savings Habits to you.  For today, we are going to look at your current savings accounts and show you how you can more than double the current interest rate being paid.

1) Get The Most Out of Your Savings – This isn’t the first time I’ve suggested the idea of making your money work for you versus you being a slave to debt.  Previously I wrote How I am Earning 4% on my Checking Account and You Can Too High Interest Rewards Checking Accounts that are backed by FDIC banks currently offer interest rates between 3% t0 5%.    I am guessing this is much higher than your big bank who is currently paying around .50%.   That difference is around 3% to be conservative.  On savings of $10,000 that is $300 per year of $25 per month.  That’s your internet bill right there.

Action Step 1: Stop and evaluate your current savings accounts and check out Check Finder and locate a rewards checking account near you.

Next,  we will look at how to stop paying unnecessary taxes.

Lately, you’ve heard of PIIGS?  I’d imagine your next thought is what are these people referring to?  No, it’s not that farm animal in your head.  I typically write about personal finance topics.  You know things like getting out of debt, how to plan for retirement, etc.  However, in order to act prudently it helps to understand the world around us.  So, what are these PIIGS anyway?

One of the things that happens after a boom is that you have to deal with the debt and easy credit that was created.  Countries that borrowed too much during the boom times are struggling to pay their debt back to their competitors.  Eventually, some of them default as a result of weakening demand.   As the world’s reserve currency, the Federal Reserve has the ability to print money and essentially buy the bad loans off the balance sheets of banks and even other countries, in order to protect the financial system.  People get really riled up about this…but guess what?  That is actually their job, like it or not.  I don’t necessarily agree with how they are doing things but that is their job (protect their charter banks) It’s not a conspiracy.  Onto how this started…

In 2007 it was the sub prime lenders.  In 2008 it was the investment bankers.  In 2009, I would guess your bank changed names?  Guess what is next?  Countries. Yes, countries.

The countries most likely to blow up this time around are the “PIIGS”: Portugal, Ireland, Italy, Greece, and Spain. One ore more of them will likely default in the next couple of years. And, that could result in the death of the Euro currency.   Now a lot of people are calling for the death of the dollar.  What they fail to realize is the entire global banking system uses USD as their reserve currency.  By default, the dollar will be the last to go…My guess (And I am not a gambler) is that the dollar will be on par with the Euro in a couple years.

It’s like watching history in the making.  Kind of exciting if you ask me.  Eventually we’ll (most likely have to go to a resource backed currency) in years, not months.  And this is how you bring value back into a financial system that is falling apart; you back it with SOMETHING!  Time will tell…it’s only time.

Things change.  Everyone is guessing right now.   Asset protection is your #1 priority, IMHO!

Bernie Madoff’s ponzi scheme affected thousands of lives.  Did you know there was one person who had been tracking Madoff and his Criminal Syndicate for years?

Saving Money Online with Digital Coupons, Freebies, and Comparison Shopping

One of the areas we need to  look at and examine when it comes to saving money is not just how much we’re putting away but how we can save money on things we are already spending. And, that is one of the keys; things we are already spending money on.   “A penny saved is a penny earned,”  The saying goes.

The internet has allowed us to save money by eliminating or reducing numerous expenses.  To mention a few: postage, telephone services and travel (as many work from home).  To put it mildly, the internet is a great invention for it allows us to save money.  But we have to know where to look to find the savings.  In this post, I will give you some really cool and simple places where you can save money.   The good news is that you no longer have to clip coupons out of the Sunday paper.

“Motivation is what gets you started. Habit is what keeps you going” – Jim Rohn

In the previous 2 posts we looked at the “damage” from the housing bubble - in terms of the percentage of mortgages underwater.   I mentioned that it probably wasn’t the best idea to think about the (sales price) highs of 2007 in terms of forecasting the immediate future of real estate prices.  As discussed, the real estate prices reached in 2007 are pretty much for the history books and not to be visited anytime soon.  As  Edwin pointed out in the price to rent ratio, home prices are heading back to fundamentally affordable levels.  I think this is a “good thing”  as we all need affordable housing and the prices at the peak of the housing bubble aren’t sustainable.   We still need to determine if we are at  a bottom in housing prices and how to navigate the present and near term with regard to real estate.

When you look at the national housing market up to about 2009, it is quite obvious  that a few areas (Florida, California, Arizona, Nevada) account for an inordinate amount of the “damage.” As we go through 2010, you can expect to see a direct correlation with the unemployment rate and foreclosure activity.  For example,  as unemployment increases, areas like Michigan (Big Auto) Idaho, etc. begin to show negative housing statistics as a result of unemployment in their respective region.   This gets into why I see this unwinding or corrective process taking longer than people expect.

So, given the unemployment picture,  I believe that 2010 will set the record for foreclosures and mark the actual bottom in the housing market.  The bottom does not mean we immediately turn up and back to robust growth.  This will simply mark the bottom.   The real estate market and banks will be working off banking foreclosures well into 2013.   This is my best guess as to how the next few years will play out.   I see this playing out for 3 key reasons:

1) Unemployment is currently around 10%.

2) There are $ 2.5 Trillion of Option ARM and ALT A Loans that are coming due over the next few years.

3) Currently there are several hundred thousand mortgages that are showing late or delinquent status (but not in foreclosure yet).

The other area that will hold housing down for some time is that banks are still somewhat reluctant to loan as they work through their REO (Real Estate Owned) inventories after helping to assist this housing bubble.  So, given that picture, I wouldn’t be in a rush to go out and buy a home, however; I would start to prepare for an environment that will serve up a multitude of affordable housing regions.   Here are a few steps to consider and prepare for over the next few years whether you own currently, or are planning on buying soon.

1) Evaluate – What can you afford and be real!  First, if you own a property, evaluate whether you can afford your current mortgage or not.   This is only my opinion – but if you are in a home that you simply cant afford or is more than 15-20% underwater, contact your bank and either look to rework your mortgage of consider a short sale.   This is not advice to act irresponsibly however, in order to survive in this environment you need to work out the best deal possible for your self.  I also believe that the banks are eventually going to be forced to take write downs (discount) on prices across the board to bring liquidity back into the market.  So, don’t feel stuck if you are an existing home owner.  On the flip side, don’t sit on your hands just doing nothing or waiting for prices to rise to your level.

2) Research  - If you are on the sidelines and considering buying real estate, I would recommend that you start tracking the median prices for areas of interest via  particular zip codes.  Certain areas will correct more than others and because of this offer better deals.  You can do this by visiting places like Realty Trac or Zillow

3) Investigate – Once you’ve determined the areas above that are desirable, you should begin to visit the particular neighborhoods in the area to get a feel for what feels like home to you.   A lot of people do this in reverse not knowing the home they just bought is in a rapidly declining area.   This step can actually be a great idea for weekend getaways.

The good news with all of this is that there should be some absolute steals in real estate for the next several years.   Hopefully, this 3 part series has given you a better insight to the real estate market correction and how to better prepare for the immediate future.  Don’t fear it; just understand it and take action.

The 2 preceding Posts to this 3 Part Series can be read here:

Understanding the Real Estate Correction Part 1

Understanding the Real Estate Correction Part 2

A couple days ago, I posted Understanding the Housing Correction in an effort to explain my opinion that most people don’t necessarily understand the housing bubble and that housing has entered a long term bear market .   This isn’t meant as an insult but rather to show just how conditioned we are/were about housing prices.  And, it is understandable.   Up until 2007 housing prices had risen for decades without pause.  Of course, we had a blow off top that most people want to pretty much forget about.    The many years prior to the blow off top (Note: the “blow off top” is the period roughly from 2004-2007 where housing went parabolic) were gradual increases in home values tracking real wage growth.  This is similar to what happened in the general stock market from 1980-2000 with the blow off top in tech stocks form 1996- 2000.  Of course, monetary policy gave us one more “umph” from 2002-2007 (this also facilitated the blow off top in Real Estate)   So, here we sit in “correction ville.”

The housing bubble has placed us on a different trajectory and cycle now that will not be easily accepted for it is not understood.  People will disagree, fight, offer up senseless (emotional) reasons why real estate is coming back and at the end of the day the only cliche that makes sense to me is “Adapt or Get Left Behind.”  And while politicians from both sides battle useless arguments, the market asserts it’s truth.  There is no political power or  financial entity that is strong enough to fight the markets natural trend.  History shows these cycles are a completely expected.  Not having the contraction in the business cycle is about as senseless as trying to stop the natural tide of  the ocean.   However, politicians do not want to let the cycle turn down on their watch or at least run its course.   This is what we are witnessing today.   Instead of trying to learn from the market they are trying to fight it.  But guess what?  The cycle will come anyway…You can see all of this and the results of the housing bubble popping playing out in the following article.

New home sales plummet 11 percent in January, the 3rd monthly decline in a row

WASHINGTON (AP) — Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who were expecting a 5 percent increase over December’s pace.

While winter storms were partly to blame, home sales have fallen for three straight months despite sweeping government support. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.

“There is no doubt that January and February are going to be messy months for housing, given the severe weather conditions, but that doesn’t take away from the fact that the housing sector has taken another big step back, even with the government aid,” Jennifer Lee, a senior economist at BMO Capital Markets, said in a research note.

A rebound in housing in the second half of last year helped to boost overall economic growth back into positive territory. Each new home built, for example, creates about three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.

However, economists are worried that if housing falters in coming months, that will be one more headwind the recovery will have to overcome. The decline to an annual purchase rate of 309,000 in January was 6 percent below the previous record low set in January last year.

“I don’t think we are going to have a double-dip recession in housing, but it is going to take us longer to recover from a very deep hole,” said Patrick Newport, an economist at IHS Global Insight.

January’s weakness was evident in all regions except the Midwest, where sales posted a 2.1 percent increase. Sales were down 35 percent in the Northeast, 12 percent in the West and almost 10 percent in the South.

The drop in sales pushed the median sales price down to $203,500. That was down 5.6 percent from December’s median sales price of $215,600, and off 2.4 percent from year-ago prices.

New home sales for all of 2009 had fallen by almost 23 percent to 374,000, the worst year on record. The National Association of Home Builders is forecasting that sales will rise to more than 500,000 sales this year, an improvement from 2009 but still far below the boom years of 2003 through 2006 when builders clocked more than 1 million new home sales per year.

January’s data increased concerns that the housing rebound could falter in coming months as the government withdraws the support it has used to try to bolster the housing market. The real estate crisis was the epicenter of the country’s overall recession, the worst downturn since the 1930s.

The Federal Reserve has been holding down mortgage rates by buying $1.25 trillion in mortgage-backed securities, but that program is set to end March 31. And temporary tax credits to bolster home buying are scheduled to expire at the end of April.

Federal Reserve Chairman Ben Bernanke told Congress Wednesday that by holding the securities on its books the central bank would continue to help keep mortgage rates low. Economists believe that as long as the Fed owns the securities it will reduce the overall supply and thus help support the price.

Bernanke, delivering the Fed’s twice-a-year economic report to Congress, said that the Fed’s record low interest rates were still needed to attack high unemployment levels and help the overall economy recover.

Understanding This Real Estate Correction Part 3