Well, this year is turning out to be an expensive one, and we still have a long way to go.

Here is a list of some of my expenses for the year that I will be forced to pay soon, or have recently paid:

ACL surgery:  $5,000 (that is our family’s health insurance deductible for the year)

Ice machine rental for knee recovery:  $300

Physical Therapy co-pay:  $480 (estimate)

Miscellaneous surgery related purchases:  $200

Braces for my youngest son:  $4200

College deposit for oldest son:  $200

Grand Total:  $10,380.

Ten grand is a lot of money to come up with all at once!

How I Plan To Pay For My Expenses

Well, the max we could save in our Health Savings Account (HSA) is around $6,000.  However, that will not accumulate in time for me to pay my bills.  The plan was to use that money for braces, but since I ended up having ACL surgery, we won’t have enough in our account to cover all the expenses.  However, we did have $2700 in our Health Savings Account that rolled over from 2010.  So, overall we will have $8700 to put toward our expenses this year.  But, we will have to pay some up front and get reimbursed throughout the year as the balance in our HSA accumulates.

In addition, I have spoken with our orthodontist, who will give us a 7 percent discount on the my son’s braces if we pay with a check, but they are going to allow us to pay half this year and half next year, which is actually what brought our bill down to $4200.

So, in the next month, I estimate I will have to pay about $8200 in medical expenses, and I will have about $3200 total in the HSA to help cover the bills.  So, I will have to pay $5000 from our ‘general fund’ to pay the balance. Ironically, that is about how much I will have accumulated in the HSA at the end of the year.  That means that all the rest of our medical and dental expenses for the year will have to be paid outside the HSA.

The Lesson?

I have said this a million times, but this is yet another example of why it is so important to have an emergency fund in place.  (Or savings, whatever you want to call it.)  When medical expenses come up, the last thing you want to worry about is how you are going to pay for it.  It is much better when the financial aspect is more of a nuisance than a stressor and you can just focus on recovery instead.

Also, if you are able to participate in a Health Savings Account, really think about how much money you want to put into it each year.  When in doubt, err on the side of over ‘investing’, since the money can roll over each year.  (This is NOT true for Flexible Spending Accounts (FSAs), you must spend the balance during the same year it is saved.)  I am so glad I had some money left over from the previous year that can be used for our expenses this year!

So readers, have you been happy with your Health Savings Accounts?

Recently, I wrote about how we had refinanced our home through ING Direct. In our case, we had enough equity in our home to do a standard refinance.  (Unfortunately, not everyone does.)

Those that do not have 20 percent equity in their homes may still be able to refinance though through the federal  Home Affordable Refinance Program (HARP).  The catch is, the mortgage must be backed by Sallie Mae or Freddie Mac.  However, not everyone knows if their mortgage is backed by Fannie or Freddie, and probably assume it is not.  (Bad assumption.)

How To Find Out if Sallie Mae or Freddie Mac Back Your Mortgage

You can either call or check online to see if your home is guaranteed by Fannie or Freddie.  It is really easy to check, and you don’t even need your account number:

Fannie Mae: 1-800-7-FANNIE or www.fanniemae.com/loanlookup
Freddie Mac: 1-800-FREDDIE or www.freddiemac.com/mymortgage

If your mortgage is owned by one of the agencies, there are still other qualifications that must be met.  A few examples are as follows:

*Home must have been sold to Fannie or Freddie on or before October 31, 2009.
*Timely payments must have been made on the property for the last 12 months.
*Your mortgage servicer must participate in the HARP program.

Additional Notes About Refinancing Through HARP

*Fees may still apply when refinancing.  However, it is possible that you will not need an appraisal.

*At this time, the program is only available until December, 2013.

*If you do decide to refinance, really think about the loan term you want to agree to.  Maybe consider taking a 15 year loan instead of 30 year if your monthly payment will be dropping because of the reduced interest rate.

*If you find that your mortgage is guaranteed by Fannie or Freddie, call your mortgage servicer to get more details and possibly initiate the process.

So, if you are frustrated with how high your interest rate is and wish you could lower it, click on the links above and see if maybe your mortgage is actually backed by Freddie/Fannie.  It only takes a minute to check, and it may just end up saving you hundreds of dollars a month if you actually are eligible for the program.

If you have actually refinanced or tried to finance through HARP (or want to discuss refinancing in general), please leave a comment!

We recently refinanced our home, and as part of the refinance, we had to have our house appraised.  Our appraisal came in high enough that we were able to refinance, so we were lucky compared to so many other people.  Fortunately, we refinanced before a neighboring house started plummeting in value.

The house I am referring initially went up for sale around $300,000 this past summer.  Now in January, it is down to $235,000, and it is a short sale.  I have no idea what happened behind the scenes.  All I know is the owners up and moved away out of the blue one day and the house was suddenly up for sale.

When I thought about how much this home has dropped in value, I thought about price-drop-prevention.

My Plan To Help Keep Home Values From Dropping

I thought a lot about the how quickly and severely the price of the home in our neighborhood dropped, and to me, the reason is obvious:  The house is very outdated.  Curb appeal is minimal; the family room still has paneling and pink carpet, etc.   I honestly believe you could put $10,000 worth of upgrades into the home and it would sell pretty quickly, and at a much higher price.   I was then wondering…what if banks that end up owning these homes partnered with contractors to fix up these houses instead of just allowing them to be sold at fire-sale prices?  I understand that banks are not in the ‘construction market’ (they are too busy in the ‘flood zone market’, but perhaps they could partner up with a company that was, at least in areas with big markets?

We Could Even Create A New Segment Of Government!

This plan could even possibly help the government.  Think about all the abandoned homes that are backed by Fannie/Freddie.  Perhaps instead of just dropping home prices by $10,000, that money could be invested in the home in order to increase home value and reduce the amount of time it has to sit on the market.  (Warren Buffett could even fund this initiative if he wanted to!)  Again, the government would have to get involved in a business they are not currently in, but at least this type of involvement would help increase home prices and provide jobs.

I know that some people justify walking away from mortgages by saying it is just a contract between a homeowner and a bank, and people are allowed to back out of the deal.  However, many others get hurt in the fall out too.  (Especially considering how little many appraisers put into their reports, these ‘comps’ can really hurt those who want to sell a home or refinance.)  Now, if someone had initially come in and paid $10,000 to fix up the house in my neighborhood, I am betting it would have sold for at least $270,000 months ago.  The house has a great structure and is quite large.  It is just hard to ‘see’ what it would become with it’s outdated carpet, walls, and fireplace.  I am guessing that ultimately someone will scoop the house up at some point and renovate.  If that is the case, I hope they sell it after the renovation so the ‘comps’ more accurately reflect the real value of the home.

I recognize that my plan is overly simplified.  However, think of the jobs that would be created and the possible increase in home prices if the banks (and Freddie/Fannie) could be proactive and actually try to improve the homes instead of just letting these homes languish on the market.

What do you think?

Our family loves to escape to Florida every year just to get a break from the cold, gray Michigan weather.  The past two trips, we have driven to Florida for a variety of reasons.  However, this year, I decided to go extravagant and bought refundable airline tickets for the five of us.

While enjoying my free peanuts somewhere over Georgia, I started wondering if flying really was ‘extravagant’, or if it actually made sense. I then started breaking down the costs for flying and driving, and the details are as follows:

How Much It Cost Us To Fly Round Trip To Florida From Detroit and Rent A Car

Ticket cost:   $1575  ($315/person, including taxes and ‘refundability’.  Actually, three of the tickets were free, but lets pretend I paid full price for all.)

Rental car cost for one week:  $208.  We got a Crown Marquis, so space was not an issue.

Gas:  $55.

Cost of driving to and from airport in Detroit:  $63.00 (100 miles x 63 cents per mile)

Airport Parking back in Detroit:  $140

Baggage check:  $50

Grand Total to Fly to Florida and Back:  $2091

How Much It REALLY Costs To Drive Round Trip to Florida From Detroit

Total Car Cost:  $1700  (2700 miles x 63 cents per mile, based on info from AAA.  Cost is probably higher as that per mile rate was based on $2.88 cost per gallon of gas.  Used a figure based on driving a minivan for 15,000 miles a year.)

Meals:  $240

Grand Total to Drive To Florida and Back:  $1940

Keep in mind, we drive straight through from Michigan to Florida, whereas most people would probably incur hotel charges and make the trip in two days.  If hotel costs were added, it would cost MORE to drive than to fly.

So Why Drive When You Can Fly For the Same Price Or Less?

To tell you the truth, I don’t have a good answer to that question.  Obviously, driving is cheaper up front because you only have to pay for gas on the trip, and possibly hotel.  (It isn’t like you have to pay money out for depreciation and wear on your car, so driving may seem more affordable.)  Plus, it is nice to have all your stuff with you in the car instead of being limited to cramming what you need in carry on bags to avoid the bag-check fee.

However, I can say I don’t think I will ever drive to Florida again.  Even though it is a little cheaper to drive than fly, I don’t want to give up 2 days of my life in a car like that again, not to mention how tired and awful I feel the day after driving that many miles.  I am glad we had the adventure driving, and we did actually have a good time in the car for most of the time.  (Those last 4 hours can be grueling.)   In essence, my time and comfort is worth way more than the small incremental cost of flying versus driving.

What are your thoughts?  Do you have ‘breakeven’ distance, where you insist on flying instead of driving?

First, let me start by saying I love the TV show Storage Wars on A&E.  The premise is this:  People rent out storage units, neglect to pay their storage rental bills, and the contents of these units go up for auction.  Storage Wars features five different people that bid on storage units for income or for collectibles:  Barry Weiss, Dave Hester, Darrell Sheets, Jarrod Schulz  and Jarrod’s wife Brandi.  At the beginning of the show, the auctioneer opens the storage units, potential buyers look at the contents from outside the unit (no touching allowed), people bid on the lockers, and then the show films each auction winner digging through the contents of their new locker.

And Behind Locker Number 1 Is…Something Valuable No Doubt!

Of course, almost every single storage unit ends up having something unique inside of it.  For example, a locker that appears to be stuffed with garbage ends up having beautiful (and valuable) little bird boxes (like a music box, but with a bird chirping).  You just never know what will be revealed!  (Hint, it is almost never just old clothes hangers and report cards!  Apparently every person that rents out a storage unit has something rare and valuable to place amongst all their junk.)

Anyway, the second half of the show follows each buyer as they go to a store or antique dealer to have their rare treasure appraised. Most of the time, the buyer of the unit comes out ahead and then says something like “I knew when I saw those golf clubs in the unit that there had to be something of value further in that I couldn’t see…”, and that something ends up being worth thousands of dollars.

So, Why Couldn’t I Be A Storage Unit Auction Participant?

Where I would struggle would be lack-of-buying remorse.  If I was in a bidding war and decided to let the other person win, I would be dying to know what ended up being in the storage unit, and how much everything was worth.  In other words, I would probably obsess over what I gave up, in hope of proving I made the right decision.  Then, when I found out that I could have made $10,000 in profit, I would be miserable.  Of course, that would be somewhat balanced by the times I passed on buying a unit that ended up being full of garbage and vermin.  However, I think I would put way too much thought into what I gave up, and it would drive me crazy.

How Storage Wars Relates To My Life

It is good that I recognize this about myself so that I avoid putting myself into those types of situations that would result in remorse of some kind.  I am sure it is part of the reason I don’t gamble- I would be saying over and over ‘if only this, if only that…’.  It is also why I don’t actively trade stocks (although I used to somewhat).  I hate that Monday Morning Quarterback feeling of “if only I had held this stock instead of selling” and such.

In the end,  it is best to know yourself, and accept your limitations in all aspects of life.   In my case, I know that I will beat myself up for ‘wrong’ decisions, so I have to steer away from situations where I can look back and think I should have done something differently.   I also know that I WILL look back, and moving on is not always so easy for me if I know I made a mistake.  So, in regards to financial management, index funds make a lot of sense for me because my money will just flow with the market.  I may give up a percent or two a year, who knows, but it isn’t worth the emotional turmoil for me to try and outdo the market. (And then get frustrated when I did worse than the market.)  It took me a long time to realize these things, but my contentment definitely increased once I understood that there are certain things I tolerate well, and things that I do not.

So, do you watch Storage Wars?  Have you ever participated in a storage auction?

We bought our house 10 years ago, at a price and interest rate that seemed incredibly reasonable.

A few years later, we refinanced our mortgage from a 30 year to 15 year term, and got what we thought was an incredibly low rate of 4.75 percent.

A few months ago, I started looking in to refinancing yet again, even though it was something I thought I would never have to do since my previous rate seemed so low at the time.  After a lot of research, we decided to refinance with ING Direct.  We chose a 7 year ARM at 3.125 percent.

The process was incredibly easy.  Most of it was done over the phone and internet, and the closing costs were reasonable.  (Yes, I do know there are no-cost refinancing options available, but from what I saw, the higher interest rate that came with the no closing cost options more than made up for what I would pay in closing costs.  Proved the point that not much in life is truly free.)   We didn’t even have to go anywhere to sign the final paperwork – a representative came to our house for that!

Refinancing took about a month, and the most stressful part was waiting for the final appraisal value on our home.  I wasn’t worried that our home was underwater or anything, I was just afraid it was way below what we paid for it since housing prices have dropped so much in our area.  Unfortunately, our house appraised out at $20,000 less than we paid for it 10 years ago, even though we have spent quite a bit of money in home renovations.  It could have been worse though.. but it does drive home the fact that a house is not an investment, but a place to live.

We didn’t just refinance what we owed.  We took out some extra money for various other reasons.  After all, when else will I ever have the opportunity to borrow money at just over 3 percent?  Keep in mind, we still plan on paying off our house within 6 years or so.  However, this extra money will provide some flexibility and we also invested some of the money in the kid’s college funds. (Considering we can deduct up to $10,000 in college plan contributions from our Michigan state income taxes, we are already coming out ahead since the interest rate on the borrowed money is so low.)  However, we still did not borrow the entire amount that we qualified for, as we wanted to keep our monthly payment below a certain amount.

My Biggest Tip When Refinancing Your Home

When you start the refinancing process, you are asked how much you want to refinance (meaning the amount owed or amount owed + cash back), and how long you would like the loan term to be.

Know the answers to those questions before you even initiate the process!!!

Mortgage companies want you to borrow as much money as possible and for as long a term as possible.  Don’t be influenced by what you can have, only take out what you can afford.  In our case, the increased payment is easily affordable and our payoff date will be no different after the refinance than it was before.  (Based on the payoff plan we created for ourselves.)  We are very disciplined when it comes to money, so we are trying to optimize the money available to us.  However, if you do not have a set amount in mind ahead of time, it might be tempting to just borrow the maximum amount allowed.   (Which can lead to disaster down the road.)

Overall, I found the entire refinancing process easy, and it was also interesting to know the market value of our home. (Even if it wasn’t the amount I wanted it to be.)  The real test will be how responsive ING Direct will be if any issues arise down the road.

Have you refinanced lately?  What was your experience?

Ok, so the first half of the title of this article is probably not earth shattering at all.  Whereas the United States tries to ensure that Americans graduate high school being able to read and write, the schools do an abysmal job at ensuring that graduates know how to save and manage household finances.

The feeling that Americans are not sufficiently educated in personal finance was driven home by an article on CNN.com which states that 25 percent of middle class Americans feel they will HAVE to work until the age of 80.  (In total, 75 percent of middle class Americans plan on working through retirement, including the 25 percent that will have no choice but to work.) What was just as surprising to me is nearly one third of people in their 60′s have less than $25,000 saved toward retirement.

How can this be?

Considering that the average life expectancy in the United States is around 78 years old, a quarter of the middle class figures they will have to work 2 years longer than they will live.  What about those that earn less than the middle class, will any of them be able to retire ever?

Maybe we need to redefine middle class?  Although it is difficult to find a perfect definition of middle class, it is generally based on income, not net worth.   Regardless of how much someone makes, it is ultimately how much money they have that really matters.  If I make $175,000, I may be considered ‘upper middle class’.  However, if I spend everything I make on fancy dinners or elder care for a disabled parent, am I really upper middle class if I have ten grand in the bank and  a big mortgage?

Regardless of statistics and definitions, something needs to be done to educate people at a young age that saving is important, and necessary. When I was a kid, I always heard and read that I should not expect Social Security to be around long enough for me to count on in my retirement. Funny thing though, nobody ever really explained was Social Security was, I just knew it may be gone one day.  I am glad I got the message though because I did start saving for retirement with my very first paycheck out of college.

Maybe Personal Finance needs to be part of the standardized testing in schools and also topics on the ACT and SAT. Since test scores seem to be what drives a lot of public school curriculum, maybe including personal finance in the testing would ensure that all kids would get at least the basics of finance before they enter adulthood.  It seems that kids from all economic classes seem to have smart phones and designer clothes, which makes no sense if their families are not able to save for the future.  I am very concerned that the priorities of the younger generation are more about having things and figuring that the future will somehow take care of itself.  Big news: the future comes faster than you think, and YOU need to figure out how you want to live.

It Is Never Too Late To Start Saving

Even though it can seem difficult to squeeze more money out of your paycheck every week, it can be done.  Take a moment and picture what you want for retirement.  Now, think about what you think is likely to happen in retirement based on what you have now and your saving/spending habits.  Are the two pictures different?  If so, then do what you can do RIGHT NOW to help bridge the gap between your dreams and what reality looks like by taking the following steps:

1. Know what you want.  You can’t just generically say “I want to retire and have a home in multiple climates”.  Do you know how much homes cost where you want to ultimately live?  Do you want to retire healthy?  (If so, then get your health in order now, and do what you can to maintain your health.)
2. Map out a plan.  You will never find your destination without a plan.  If your dream retirement is to travel a month of the year, then try to forecast the incremental cost of that travel.  Then, make sure you will have enough saved to make that dream come true.  Or, maybe you want to retire at 50.  You can’t just go spending blindly year after year and expect your dream to just magically come true.  There are many financial calculators out there that can help you predict how much money you will need to start saving now to attain a certain amount of money.  Take advantage of the information available to you so you can make educated decisions.
3. End the excuses.  Everyone likes a comfortable life, and some people easily earn enough to live comfortably.  However, most people need to sacrifice some in order to save.  Create an aggressive savings plan (mentioned above) and live each day with your plan in mind.  If you hit a wall and say “I can’t possibly save any more than I already am”, then solve that problem instead of throwing your hands up in defeat.  Maybe you need a second income?  Maybe you really don’t need that second car.  Only you know what the answer is, but don’t default to an easy answer, which is ‘it can’t be done’.  If you want something bad enough, you can make it happen. Almost every problem has a solution, and if your problem is that you don’ t have enough money, then fix it.
4. Educate yourself.  Tax rules change all the time, as does the economy.  Learn what investment vehicles are available out there and invest based on what you are comfortable with, and also take your age into consideration.  Is there an employee stock purchase plan available to you but you don’t participate because you don’t understand it?  Then learn!!!  Don’t let ignorance stop you from maximizing the money you make and having enough to retire comfortably.  If you feel you cannot manage your savings on your own, then hire a financial advisor.  (Don’t just find someone out of the phone book. Talk to friends and family and see if anyone is recommended.)
5. Alter your spending habits.  Unfortunately, many people feel that you have to spend money to have a great time.  I have actually found the opposite.  I would much rather spend an afternoon hiking through the woods than going to the movies.  I derive most of my enjoyment in life by interacting with others rather than going to events and such.  In other words, some of the simplest things in life can be the most rewarding.  Unfortunately, I think society is losing touch with ‘simplicity’  as electronics and image seem to have become a priority for many.

Beginning to save money is often a difficult process because it usually means giving something up.  However, once you begin saving, the security and comfort that comes from having extra money to spend will help replace the desire for whatever you have chosen to give up. Making simple changes in your lifestyle and spending some time on often disregarded items, such as cheap insurance quote, will often provide you with extra money to save without feeling like you are sacrificing a lot.

To find areas where you can save, write down all of your expenses for the week to see where you are spending money. If you watch cable TV or use your cell phone, be sure to include those costs as well, even though they are charged on a monthly, not weekly basis. Mark each expense for the week as a need or a want. Needs include items such as groceries, gas for the car and healthcare. Wants include items such as eating out, buying new clothes or going to a movie.

Once you create your list of needs and wants, look to see where you can make small changes in each section. Maybe you see cable as a necessity, but realize you do not watch a lot of the specialty channels. Some cable companies will give you a discount if you downgrade to a different package. If your cell phone bill seems expensive, take a second look at your plan. If you do not use your monthly minutes or other account limits, you may save money by switching to a different plan or a different carrier altogether.

Make small changes in your extra expenses. Instead of buying coffee or lunch everyday, alternate days. On the mornings you buy coffee, take lunch from home or make coffee at home the days you plan to go out to lunch. If you plan to go out to dinner in the evening, eat at home for the remainder of the day so that eating out will be a big treat. Look for cheaper ways to spend money with your friends by browsing the events section of the local newspaper, going to see a movie at a second rate theater rather than catching the newest releases or enjoying drinks at a friend’s house instead of a bar.

Analyze other items that you often forget about such as your insurance to determine if you may be able to save.  Get a cheap insurance quote online to see if you may qualify for a less expensive policy or will save money by changing to a higher deductible. Cheap auto insurance quotes are available, as are quotes for life insurance policies.

Taking a fine-toothed comb to your expenses will help you save money without feeling the stress too much.  Sometimes making several small changes can be easier to adapt to than making one major change.

This article was contributed by Nina Bernice exclusively for everydaytipsandthoughts.com and was updated on December 9, 2011.  All content is  for informational  purposes only and must not be substituted for any professional advice.

Each year, many people create goals.  Sometimes people start out strong and attack their goals immediately.  Quite often though, that enthusiasm wanes as the year goes by, and old habits start to sink in.

Next thing you know, it is December, and it seems like there is no way to make up for lost time.

Ah, but there is still time!

Sure, there is only 1/12th of the year left, but there is so much you can accomplish in the next month!

Things you can do to end your year on a good financial note:

1. If you have satisfied your medical deductible for the year, get any ‘discretionary’ medical things done this month, such as physicals, mammograms, medical tests, etc.  This will benefit not just your bank account, but your overall health as well.
2. If you have Flexible Spending Account (FSA) money left in the account, SPEND IT NOW.  You cannot get money back that you have put into a FSA for the year and have not used.  (Health Spending Accounts, or HSAs, allow leftover money from one year to be rolled over in to the next year.)
3. Deposit money into 529 plans, especially if your plan provides income tax benefits.  We belong to the Michigan 529 plan and we can deduct up to $10,000 in contributions a year from our Michigan State income taxes.
4. Catch up on Roth IRA and 401k plans if you can.  If you are not currently maxing out your contributions, sit down and really think about raising your contribution amount for next year.  You can’t (shouldn’t) spend what isn’t direct deposited into your checking account, so try your best to get used to spending less.  You will be so grateful you did when it comes time to retire.
5. Donate!  Declutter the closets and toy chests and give everything away that you has not been touched in the last year.  Also consider making financial contributions too, there are plenty of worthwhile organizations out there that could use some extra donations!
6. Consider selling bad investments.  If you own some stocks that have done nothing but underperform, consider selling them to offset any gains you have for the year.  (Good for you if you have a lot of gains, the market has been pretty flat overall this year.)
7. Make a firm savings plan for next year.  Only you know what makes you ‘tick’.  Formulate a financial plan now to ensure you will save as much money as possible during the upcoming year.  If you know that you spend more at Target because you have a credit card at your disposal, then consider cutting that credit card up.  Talk to a spouse/significant other about your spending habits and have someone agree to hold you accountable to your new savings plan.
8. Get organized and evaluate asset allocation.  Has it been years since you cleared out your ‘investments’ file?  Has it also been years since you looked at what type of investments you have and if your stock/bond/annuityetc allocation is appropriate for your age?   Nobody wants to think about getting older, but nobody wants their net worth to suddenly plummet with a stock market crash if they are going to need the money soon either.  (Well, nobody wants to lose money in a stock market crash, but it is even worse if you need the money before there is time for a market recovery.)
9. Make your financial goal visible.  Are you saving for a trip to the Bahamas?  Then put  pictures of your dream destination on your refrigerator, download a picture that can be used as  a screen saver on your computer, put a small picture in your wallet, etc.  If you have visual reminders of your ultimate goal, it may help curb your spending on discretionary items.