Why You CAN Afford That Overseas Vacation

Image by Kenzoka via FlickrThe worldwide economy is in a state of flux right now, and while this might not therefore seem like the ideal time to take a trip overseas, you can easily make such a trip more affordable by eliminating avoidable costs that can add up to 15% of your trip’s budget. No, I’m not about to start lecturing you on the importance of shopping around to find the cheapest airfare or waxing poetic about backpacking and staying in hostels. Rather, I have a few perhaps less obvious tips that can help you minimize the cost of any trip out of the country. After all, whether you’ve done the miraculous and retired early or simply want to see the world with your kids, grandkids or significant other, we all deserve a vacation from time to time and everyone loves saving money.

Choose your credit card wisely

As you likely know, Visa and MasterCard are the largest card networks in the world and the only ones that are accepted anywhere plastic can be used. What you might not know is that Visa and MasterCard also offer some of the lowest exchange rates possible. According to a Card Hub study, a MasterCard or Visa card can, in fact, save you 14.7% on currency exchange relative to cash converted at an airport kiosk and 7.9% as compared to cash conversions made at a local bank. Still, you cannot simply use whatever Visa or MasterCard card happens to be in your wallet and expect to save that much. Card Hub data shows that over 90% of all credit cards have foreign transaction fees, which are typically 2-3% of any purchase that is processed abroad, no matter where you may physically be located when you make it. You therefore need to get a no foreign transaction fee credit card, not just before you depart on your voyage, but even before booking any flights, hotels or activities.

Plan how you will access cash

Though I recommend using a credit card for the majority of the purchases you make while abroad, given how easy it will be to carry around as well as the piece of mind that comes with knowing you won’t be held liable for unauthorized purchases, you’ll still need cash for some things. You have two primary options for getting your hands on some foreign currency: opening a low-foreign-fee debit card or exchanging cash at a bank before leaving. The debit card course of action would allow you to garner the low Visa/MasterCard exchange rate and simply withdraw cash from overseas ATMs as needed. Exchanging cash at a local bank will result in more money being lost in translation and will force you to travel with all the cash you plan to use on your entire trip. Ultimately, your decision will rest on the debit card offers and cash currency exchange deals you can find.

Say goodbye to your issuer

Before leaving, there are some logistics to take care of in order to “activate” your credit card and/or debit card for international use. If you do not notify your issuer(s) about the dates and destinations of your travel plans, your card(s) will likely be suspended due to fraud suspicions. What’s more, it’s a good idea to get your bank’s international toll-free number so that you have a means of requesting a new card if your original gets misplaced or stolen.

Beware dynamic currency conversion

Finally, once you reach your destination, only pay for things in the local currency. While this might seem like rather obvious advice for cash purchases, when it comes to plastic, merchants may offer to convert your purchase totals to U.S. dollars. On the surface, this might seem like a rare act of kindness, but many merchants use unfavorable exchange rates (up to 10% higher than those offered by Visa and MasterCard) when converting your totals in order to pad their pockets. This is just the kind of extraneous cost that can really add up over the course of a trip, so you’d be best served making sure to only sign receipts expressed in the local currency.


Hopefully, these tips will both help bring your long-anticipated overseas adventure to fruition despite this shaky economic climate and eliminate any surprises on your post-trip credit card statement. After all, your concern should be exactly how much fun you’re going to have, not how much it’s going to cost!

5 Rules When Loaning Money To A Friend

Image via WikipediaBorrowing money from a friend is the fastest way to ruin a relationship. The borrower usually has tried every other source for credit. Their credit cards are maxed out. The house is mortgaged fully and lines of credit are closed. The party may have lost their job or an emergency has happened. By the time they get to you the situation is desperate.

In this time of recession who doesn't know someone or a family who is having very hard times. They were unprepared and life hit them broadside. You want to help because your friend is in need. But should you? Will they be able to pay you back. 

They probably will, but be prepared to lose the money. Through their own fault or fate they are showing their lack of financial knowledge. The mistakes they made could possibly be made again with your money. If you must make a personal loan why not take a few precautions and do it right.

1. Consider alternatives

Borrowers who fail to repay bank loans may face legal problems, but those who can’t make good on loans to friends or family can be hit not only with legal trouble but also the loss of a personal relationship. That’s why it’s a good idea to think about all your options before approaching someone you’re close to for a loan. Consider trying more than one bank, for example, or exploring borrowing possibilities at credit unions or other sources. It may also be possible to cut back on your spending instead of taking a loan or to postpone your plans for a big purchase until you have saved the money you need.

2. Get it in writing

One of the potential pitfalls of a loan between friends or family is their informality. A handshake is a popular way to cement a deal, but a written document is a better idea for both sides. That’s because problems can arise when the friend lending the money expects it to be returned within a short time, while the borrower believes he or she can pay it back over an indefinite period. When lending money to a loved one, it’s often hard to insist on knowing when the loan will be paid or to ask for regular payments. 

To protect your relationship and your wallet, it’s best to put it in writing. Write down the amount of the loan, when and how it will be paid off and if the borrower will pay any interest. This kind of promissory note clarifies the borrower’s responsibilities and can help prevent misunderstandings later. The note should be signed by both borrower and lender, and each one should keep a copy.

3. Be realistic

While written documentation is a great idea, remember that it will not prevent potential payment problems. That’s why it’s important for both people to be realistic before they enter into the deal. If you know that a loved one likely won’t be able to repay you, for example, offer instead to help him or her solve problems by developing a monthly budget or working out a payment plan with creditors. 

If you are uncertain you will be able to repay a loan, consider asking loved ones to brainstorm other borrowing options. Doing so may preserve your relationship so that it is still in force long after any money problems are over.

4. Give honest updates

If you borrow money from a friend or family member and find that you are unable to repay it as expected, let them know about the problem right away. Explain what went wrong and when you do think you’ll be able to make good. It may be a difficult conversation, but your candor and consideration for the other person will go a long way in helping to preserve the relationship.

5. Give the money as a gift.

Personal loan are notorious for not being repaided. If you have the means, offer them the money as a gift. If not the full amount, a percentage of the amount needed. Doing this heads off a possible confrontation or uncomfortable situation that could come down the line. It's better to keep the friend and lose the money instead of the reverse.

How To Overcome A Bad Financial Habit - Procrastination

It takes work and having a plan if you want to have control of your money. Whether it is budgeting, saving, planning, investing or organizing; to get good results it takes an investment of time. But that's the tough part, finding the time to do it right. 

Many people fail in their financial goals because they just don't plan. They want to do it right but just keep putting it off. To some of us, like myself, seeing a monthly budget just doesn't thrill me. I know many people enjoy these types of things but actually doing it is no fun. I like to write about personal finance but I can find more fun things to do than balance my checkbook.

I admit it I am a procrastinator. So what do you do? Need some help? Here are a few tips:

Schedule financial tasks

Scheduling financial tasks and completing them in small chunks will help you feel a sense of accomplishment. For example, most consumers receive several types of financial mail, including bills, brokerage statements and bank reconciliations. Place all financial mail in a basket and set aside some time periodically to go through them at one time. You will develop a habit that will become part of your routine. This routine will eliminate procrastination. Also, try to save time by using online bill payment services or developing a system that works for you.

Create a savings strategy

You may believe that you do not have enough money to save, and therefore, you develop inertia. Also, retirement may seem like such a distant dream. However, saving a little now will help get you started, and over time you will see how the investment grows in value. Watching your money grow will motivate you to create additional savings.

Divide and conquer

If you have a spouse or significant other, work together at the same time and split the duties. People who make commitments and have a “buddy” in the task will not be as likely to delay. One person can pay the bills while the other files statements. At this time, you may also have the opportunity to talk and discuss financial matters which will reduce uncertainty and stress. After you have worked together, reward yourself for staying on task.

Remember late fees

In many instances, handling financial matters early can actually save considerable money — but it involves planning ahead. For example, try to pay January’s mortgage near the end of December to get the mortgage interest deduction on the current year tax return. Many people save on Christmas supplies, such as wrapping paper and ornaments, for next year by purchasing them immediately after Christmas. Also, irrigation companies will offer substantial discounts to install irrigation equipment during off-season times. Even some colleges give substantial discounts for getting tuition paid early.

Because many businesses want smooth cash flow, it makes sense for them to offer such discounts. Of course, it is very important to weigh the discount you will be getting with any interest or investment income you might have earned by retaining the money. While savings can be the reward for paying early, late fees, penalties and interest can be the penalty for not getting financial tasks done by the due date. It is especially important to pay credit card bills on time, as just a short delay can add considerable late fees to a bill.

Remember procrastination is a bad habit that can take some work to overcome. The trouble is it takes time to set up procedures to help you change old habits. But it is necessary to succeed with your money plans.

Don't Wait For Occupy Wall Street To Fix Your Finances

Image by Mathew Knott via FlickrWith the ongoing coverage of Occupy Wall Street you may be thinking that finally someone is standing up to the big greedy financial institutions. The protesters are angry because they don't feel like they are not in control or have the power to change the terrible state of their own financial problems much less that of our entire country.







For the rest of this article go to Austin Personal Finance Examiner Shabana Shiliwala's article 'Why wait for Occupy Wall Street to fix your finances?'.  

When Is the Right Time To Buy A Home?

Someday, my 27-year-old daughter would like to own her own home. But right now, she’s happy sharing a rented townhouse with a friend. She says, “I am trying to make sure I can afford it before making that leap”. “I don’t want to be house poor.” 

There’s no question that owning a home is a desirable goal, and low interest rates in recent years have made it possible for millions of Americans to buy their first houses, invest in income property or trade up to a larger home. For many others, though, there are good reasons to continue to rent. You really need to assess your overall expenditures, not just your housing expenditures, and ask yourself if you really can afford to buy.

Home buying is not for everyone and certainly not for everyone at every point in their lives. For young people like my daughter, it’s not a bad strategy to get one’s financial life in order before taking on the kind of debt required to buy even a modest condominium or starter house. My daughter, who works at a local hospital, said she is focusing on paying off her college debt, then will turn her attention to accumulating money for a down payment on a house. She said that she’s wary of moving too fast because she’s seen friends struggle when they were financially unprepared to buy.

“Some have had trouble keeping up with their mortgage payments,” she said. “Or a condo association will raise fees and they can’t afford their place anymore. Home prices are still so high and rents are so low that many find it advantageous to rent. “But, of course, renters are missing out on the appreciation of a home,” she said. “There are renters who say they could put money aside, invest it smart and get that kind of appreciation — but most people don’t do that.”

There are also times when it doesn’t make sense to own. We see older people who have large houses that they’re selling. In some cases, given their age and lifestyle, it doesn’t pay to for them to buy a smaller house. But buying can also be a problem for young people who think they’ll have to move frequently for their jobs.

Residential real estate has relatively huge transaction costs like brokers’ fees, closing costs, registration fees and other expenses associated with the purchase of a home. To buy and later resell, figure it at about 15 percent of the home’s value. That’s huge, and it means you have to stay put, ideally for at least five years, to recoup that 15 percent.”

The key to making the move from renting to buying is cash flow. People need to make sure they have the money not only for the mortgage but for other expenses that come with ownership including real estate taxes, insurance, and repair and maintenance costs.

Most people need to buy property at some point in their lives. It gives you your own little piece of the American dream,it’s something that’s all yours. And, from a financial point of view, it’s also a good long-term investment. It’s an appreciating asset that will behave very differently from stocks and bonds, especially over a 30-year window.

How to Tell When you’re looking at a Bad Investment Property

When you’re researching any investment property, it’s critically important to be able to spot trouble before it happens. One of the most difficult, and most dangerous, problems for property investors is the occasional risk of acquiring a bad investment property. These things can cost a fortune, and can do serious damage to other financial interests as money has to be moved around to cover costs and losses. The only way to avoid these problems is to ensure that you’re able to instantly identify bad risks.

Being able to identify a bad risk easily also creates a very reliable quality control for your investment options. You can discard inferior options quickly, saving a lot of time, and often a lot of money.

Defining a bad investment property

The best way to ensure that you avoid bad risks is to use a set of characteristics which will instantly identify bad or even substandard properties. You’ll literally be able to recognize a bad risk on sight.

The definition of a bad investment property is:

Any indication of over valuation- Indications include high valuations for obviously low grade premises, and a price that really doesn’t stack up against comparable properties. The vendor may have put a high price on the property for negotiation purposes, but the property is still seriously overvalued and priced for unwary buyers, not a good sign under any conditions. Avoid like the plague.

Any sign of poor maintenance- Lazy and unscrupulous sellers don’t put a cent into maintenance, and signs of covering up defects like paint jobs and tacky internal or external work are another sure giveaway. Real costs of upgrades and maintenance are likely to be very high. These properties are real sucker bait, whatever their price. Don't touch any property if you’re not 100% certain of its condition.

Sales pitches- Ironically, one of the most certain signs of a truly lousy investment property is the overdone sales spiel. A typical sales pitch for a bad investment property is usually along the lines of “great first investment opportunity” “bargain investment in a great location” or similar clichés. In practice, the investment opportunity is for the seller, not the buyer. Location is irrelevant if you’re stuck with a high cost property. You can do a lot better for much less outlay.

Fittings- Very reliable indicators of a bad investment property are the fittings, usually overlooked by sellers. Ancient wiring and plumbing is a guarantee of major problems. The old wiring is likely to be a major fire hazard and will need replacing. The plumbing can cause serious issues, particularly in terms of property structure and in apartments, the risk of causing damage to other apartments is a virtual guarantee of lawsuits.

To put the real costs of buying a bad investment property into perspective- You can buy a top quality investment property off the plan that has no defects and is brand new for less the real cost of buying one of these awful, black hole investment properties. Your capital gain will be a lot better; your rental revenue will be much higher and you won’t need to practically rebuild the place.

Minimizing costs means making more money. Avoid the bad risks and focus on the high quality properties.