This is the third article in Frugal Dad’s week-long series, The 7-Day Turnaround: One Week to Change Your Family’s Financial Destiny. Each day brings a new step to implement and help you get control of your finances.

The person that coined the phrase, “When you find yourself in a hole, stop digging” must have had credit cards. Used wisely, [tag]credit cards[/tag] can prove to be a legitimate financial tool for covering expenses and consolidating automatic payments, monthly drafts, etc. However, most credit card users carry a balance from month to month, paying banks millions of dollars in interest and fees. If you are in the middle of a financial turnaround I recommend ridding your wallet of the temptation to spend plastic.

Put your credit cards on the chopping block. For some people this step causes more angst than all the others put together. People feel some sort of loyalty to these little pieces of plastic, and the banks that offer them. Cutting them up is about as easy as breaking off a friendship with your best childhood friend. If you are serious about turning your life around you must get rid of credit cards. One caveat: hold on to your lowest-interest, no-fee card until you complete step 2, building an emergency fund. This will leave you some available funds in the event of a major financial disaster. Once your three month emergency fund is in place cut up that last credit card and rely on your emergency fund as a personal credit line. Keep this last “emergency” card in a sock drawer at home and away from your wallet, else you might confuse the lastest sale at Nordstrom’s with a true emergency.

When your financial turnaround is complete, resist the temptation to sign back up for a credit card. Despite what Visa and Mastercard would like you to believe, it is possible to live without credit cards. Debit cards offer the same convenience, and regulations protect debit card users against fraud in the same way credit card companies do. Many [tag]debit card[/tag] products also offer [tag]rewards[/tag] and travel points that use to only be associated with credit products. Remember, no one ever got rich offer their Discover points so don’t fret over rewards too much. When you are millionaire paying for an airline ticket or a Target gift card won’t cause you any heartburn. Continuing to deal with credit card companies might.

Much has been made in the news over the last few weeks and months regarding an impending recession in the U.S. economy. Talking heads spend hours and hours telling us what impact the recession will have on the global economy, but the average citizen in mainstream America just wants to know the impact on his personal economy. With that in mind I offer the following tips for surviving a recession.

Increase your cash position. Entering a recession proves to be a good time to increase your cash position. Not only does a healthy emergency fund help pave over short-term bumps in your household finances, it also allows you the opportunity to find some excellent deals in the investment and real estate markets. Institutional investors make a lot of money buying on the way down, and the same rules apply to the individual investor. If you are fully invested, or fully leveraged, you probably lack the cash to take advantage of these deals.

Consider allocating more investments to international markets. If the U.S. recession deepens it will have an impact on other markets because we are in a global economy. However, the losses may not be as severe, and other external factors may help international markets continue to grow even in a U.S. downturn. To hedge against deep domestic losses it’s always advisable to keep a percentage of your investments in foreign stocks. Entering a recession it might make sense to boost that allocation percentage in an international fund and reduce domestic investments, in the short term.

Get smart – learn a new skill or add to your current skills set to make yourself more “layoff proof.” True recessions are usually accompanied by massive layoffs. In this particular recession, the financial services industry could be hardest hit. Now would be a good time to consider taking that online class or pursuing some cross-training to make yourself more valuable to your organization. It might make the difference between getting a pink slip or getting a raise.

No Chicken Little, the sky isn’t falling, but just in case. Recessions tend to bring out a lot of doom-and-gloom commentary. I personally have faith in the U.S. economy and do not think we are headed into another depression. Still, it is a good idea to review your family’s emergency plan. Stock up on basic necessities, including non-perishable foods and a few gallons of water. Instead of running out and buying these things all at once, just pick up a few items along with your normal, weekly grocery trip and over time add to your stockpile. In our current environment this is something we should already have in place in the event of a disaster (natural or otherwise), and news of a recession serves as a reminder.

Surviving the recession and need to save money at the grocery store?  You can get coupons here. We have a large selection of printable coupons you can choose from. You can get printable grocery coupons for any type of item you need from a grocery store.

This is the second article in Frugal Dad’s week-long series, The 7-Day Turnaround: One Week to Change Your Family’s Financial Destiny. Each day brings a new step to implement and help you get control of your finances.

Experts argure over the first step of a money makeover. However, anyone who has ever been close to the edge, or hanging over the edge, will agree that there is no feeling like having a financial cushion. I heard someone sum it up that there is no softer pillow than money in the bank. So true. Instead of sitting up at night fretting over the next bill, or counting the days until your next paycheck, take actions now to put some distance between you and the edge.

Take drastic actions immediately to begin an emergency fund. Of all the steps in the 7-Day Turnaround, this one may be the most important, and one you simply cannot afford to delay. Carrying debt creates a vicious cycle. Your available cash is spent making large credit card minimum payments. When the hot water heater breaks, or the transmission goes out, you have no cash reserve and reach for a credit card. This is like trying to climb an escalator with the stairs moving in reverse. The faster you run, the faster the stairs move, but when climbing out of a hole of debt, the stairs are always moving just a little faster thanks to fees and interest. This means you are constantly losing ground. The only way to break this cycle is to implement an emergency fund, a place to turn for those untimely breakdowns and emergencies.

An emergency fund is not an investment vehicle. Forget about interest rates and investment options. The only thing you are concerned with is liquidity – how easily you can access your money. Ideally, your emergency fund should be parked in a bank or credit union savings account linked to your checking account for easy access. If the savings account comes with ATM access, even better. Murphy tends to visit on the weekends and late at night, making traditional bank access impossible. Many online banks offer a fantastic rate on savings products and allow electronic access to your money. ING (affiliate) offers such a product. Beware, sometimes the electronic transfers can take up to three days to process, so opt for a product with an ATM card or checkwriting priviledges.

I recommend keeping a minimum of three months of living expenses in your emergency fund. Notice I didn’t say income. Three months of living expenses should cover mortgage payments, car payments, insurance premiums, household utilities and food. Credit card payments, luxury purchases and gym memberships could all be skipped in a real emergency such as a job layoff. For most families, $10,000 is a good, round figure covering roughly three months of household expenses.

If you are like most people you probably don’t have much disposable income to put towards an emergency fund. This is where drastic measures come in. Round up books, DVDs and other small items that can be easily shipped and list them on eBay. Here are some great tips for selling on EBay. For larger items, consider listing in a local credit union or bank bulletin, or on Craigslist. Furniture, fitness equipment, and kids toys tend to generate a lot of interest in local advertisements. Things that don’t sell online can be collected for a yard sale. Schedule a yard sale around the first of the month, preferably after the first paycheck of the month.

Sign up for legitimate, online money-making opportunities such as CashCrate.  You will not get rich from these ventures, but every single dime you earn should go directly towards your newly established emergency fund. Most families can establish their first $1,000 in one month or less, just by boosting savings from their paycheck and/or selling items and part-time earnings.

This is the first in Frugal Dad’s week-long series, The 7-Day Turnaround: One Week to Change Your Family’s Financial Destiny. Each day brings a new step to implement and help you get control of your finances.

Before beginning a plan to overhaul any aspect of your life the first step is to develop a baseline from which you can measure future success. Dieters may visit the doctor or a gym to get the latest measurements and internal health samplings such as blood pressure readings or a calculation of body fat percentage. Consider this first step of your [tag]financial turnaround[/tag] a financial checkup. Many people go through the day-to-day motions of earning money, paying bills and spending the remainder without ever knowing where they stand. Though painful, without facing reality and establishing these baselines, you will not be able to measure future successes.

Step 1 – Get the tough part out of the way first; take an inventory of all your liabilities. This could be as simple as grabbing a legal pad and pen, or as technical as designing your own spreadsheet on a computer. The means by which you list this inventory isn’t nearly as important as the activity itself. Like any good hiker would tell you, when lost you must first try to determine where you stand before deciding on which direction to set out.

Armed with your simply-designed legal pad, or ornate spreadsheet, dump all credit cards, bills and financial statements out on the table and begin to get organized. Get current balances on all your debts by calling the companies individually, pulling a copy of your credit report, or accessing your information online. Add up the balances and record your total outstanding liabilities, the negative side of your personal balance sheet. Don’t forget medical bills, family loans and any other non-recurring bill outstanding.

Step 2 – Now list the value of all your assets. Beginning with the most liquid [tag]assets[/tag], cash outside of retirement accounts, list the current value of all the things you own. Even if the bank technically owns it (your home or your car), you need to list the current value to offset some of the liability recorded in Step 1. Visit sites such as Kelley Blue Book to obtain a current valuation on your vehicle, using the private-sale amount quoted. At this point, it is not necessary to pay for an appraisal on your home. Record your best estimate on the value of your home by comparing it to similar homes that have sold in your neighborhood, or peruse real estate listings and compare listing prices. Be sure to record all savings, investments, and retirement accounts on this positive side of your personal balance sheet.

Step 3 – Subtract your liabilities from your assets and you have just calculated your personal net worth. For most people this is a sobering point in their financial turnaround. The realization that you owe more than you own is depressing. The fact that you don’t own enough toward retirement, or another major financial milestone ([tag]kid’s college[/tag], [tag]new home[/tag], etc.) is also enough to bring you down. However, no matter how bad the situation looks it can only improve with the implementation of the six remaining steps. Turn the televisions off at night and work on just one step each day. Who gets the most votes on American Idol, or who gets voted off the island, means nothing for your bottom line. You simply cannot afford to go longer without a game plan.

A couple days ago I wrote about the possibility of an upcoming tax rebate as part of a broader [tag]economic stimulus package[/tag]. After learning more about the stimulus package, and the state of the U.S. economy I am more convinced than ever that the [tag]tax rebate checks[/tag] will be monumental failure. The money spent on tax rebates could be better spent providing a backstop for the market where it really needs it, the [tag]mortgage insurance industry[/tag].

Mortgage insurers are in a precarious position, and their downfall will be our own. The proposed $250 billion tax rebate will do little to spur the economy because of the overburdened position of the American consumer. People have borrowed up to their eyeballs (and beyond) on [tag]credit cards[/tag], mortgages and home equity lines of credit for the last several years. Many of these people could ill-afford such debt load, so lending companies loosened the requirements, allowing hundreds of thousands of otherwise financial deadbeats to assume much more than they could afford. Mortgage insurers underwrote those mortgages and enjoyed several years of growth in their own industry thanks to these relaxed lending requirements and an overall boom in the residential real estate market.

For the same reasons mortgage lenders enjoyed such success, they may now become their downfall. It appears our government is doing little to prevent their inevitable demise. Tax rebate checks sent to a financially irresponsible constituency will likely be wasted on frivolous purchases such as Ipods and plasma televisions. The more frugal of us may use the rebate to boost our emergency savings or whittle away some credit card debt. Neither scenario provides any relief for the mortgage insurance industry, or Wall Street as a whole.

A run on the insurance companies will lead to a trickle down effect ultimately creating depression. Just as life insurance companies don’t expect hundreds of thousands to file a claim on the same day, mortgage insurers were not prepared for such a monumental decline in the housing market. Declining home values combined with historic foreclosure rates have left banks holding the bag and looking to mortgage insurers to cover the gap. If these insurers go belly-up banks could be stuck with astronomical losses in their mortgage divisions, creating a ripple effect through the entire financial sector. The negative sentiment would gain momentum leading to massive withdrawals from financial institutions. With a lack of significant amounts on deposit, many small, regional banks would no longer be able to offset their lending write-offs, causing many to close the door leading to massive layoffs, decreased spending, decreased production and manufacturing, and increases in inventories. Sound familiar? It does if you were alive in 1929.

How could the government save the financial sector? By taking the $250 billion it is prepared to send taxpayers and use that money to guarantee the solvency of the large, private mortgage insurers. Similar to previous bailouts (airline industry, etc.) the government could essentially guarantee these insurers ability to make good on their policies by infusing the $250 billion “rebate money.” The mechanics of such a plan are debatable, but would probably center around the government “buying the books” from these insurers and in turn issuing government bonds to offset the loss in capital as these policies are made good. The confidence gained on Wall Street from such a move would likely preserve existing capital in investments in financial companies. Coupled with a full basis point cut in interest rates (these are long overdue) the market would roar, and could be pulled back by modest increases to interest rates at a later time.

Politics will probably win out, at great costs. Lawmakers on both sides of the aisle will see to it that the tax rebate program is pushed through, and any attempt to use the funds for more long-term benefits will be scuttled. Why? Because politicians are interested in one thing – staying in office. How many members of Congress would actually have the guts to tell their constituents that they are voting down the tax rebate plan so an alternative stimulus package centered around protecting the solvency of mortgage insurers could be put in place? Zero. The average American is only interested in one thing, a short term rebate they can use to replace that old sofa with a leather couch, or that old tube television with a shiny plasma model. The short term gains to their bottom line could soon be wiped out from a financial market meltdown that erodes their retirement savings to next to nothing. Seems like a high price to pay for a new television.

Rebuild.org can provide a great quote on mortgages, visit today for a no obligation quote.

Saturdays in our household are officially designated as “Laundry Catch-up Day.” A day filled with stripping beds of their linens, separating lights and darks, and folding a seemingly endless pile of clean clothes. In preparation for the weekly event I ventured out to [tag]Target[/tag] yesterday looking to buy a few [tag]bulk[/tag] laundry items in Target’s “[tag]wholesale[/tag]” area – the only area in the store you’ll find a [tag]frugal shopper[/tag] looking for practical buys. I’ve long joked with my wife that the only thing practical in a Target store is the shopping cart. In Target’s defense, they do occasionally run some good specials on cleaning supplies and paper products.

Bigger packages don’t necessarily mean cheaper price tags. Since we were kids we’ve been taught that bigger packages are a better value. The popularity of wholesale clubs such as [tag]Sams Club[/tag] and [tag]Costco[/tag] have helped to further this concept. While warehouse clubs do offer some good deals, not everything in the store is cheaper than its discount store equivalent. Even stores such as Target and Walmart have started reserving shelf space for bulk items where you will see double packs of cereal, juices and paper products.

To compare prices of products in different sizes, calculate the per unit or per use cost of each size. Marketing gurus are a smart bunch. You will rarely find a product in two sizes where the larger size represents exactly twice as much as its smaller counterpart. If this were the case, consumers could simply double the price of the smaller item and decide if the larger price tag was really a better buy. Product sizing is typically tiered in thirds, making math more difficult on the fly. However, armed with a calculator (or even a cell phone, which usually offers a calculator utility), a frugal shopper can convert prices to unit costs and make an educated buying decision.

Here’s a look at my fabric softener choices yesterday:
$10.99 for 120 loads – $.0916 per load
$6.84 for 90 loads – $0.076 per load

The 1.5 cent difference doesn’t sound like much, but if the larger container was offered in a 90-load size at the same unit price it would cost about $8.24 - a $1.40 premium over the smaller package. Maybe I can take that difference and pay my daughter to fold all the clothes!

The latest news on the economy is bad. Apparently, the housing debacle, years of negative savings rates, and a credit crunch thanks to our insatiable appetite for something bigger and better was too much for the bull market. This economic “perfect storm” has effectively wiped out gains earned since March 2007, and has driven the U.S. economy into a recession. Government officials are preparing to infuse the economy with various forms of economic incentives.

Will history repeat itself? After September 11th, and the Bush tax cuts, taxpayers were treated to a mid-summer tax rebate check as a prepayment for the tax decrease implemented by new tax laws. Some are predicting a similar tax rebate check as part of this economic stimulus package. Economists hope this infusion of cash in consumers’ pockets will lead to increased spending that will pull us out of a recession.

Put your tax rebate check to good use by paying down debts. Don’t worry, there will be enough consumers out there spending their rebate checks on frivolous needs. I don’t consider it unpatriotic to use your tax rebate for paying down your debts. In 2001, tax rebates for married, joint income tax filers was $600. Sure, that money could buy a new Xbox 360, or a new recliner for your living room, but knocking out some high-interest credit card debt has more long-term payoff for your personal financial situation. If you are already debt free, consider starting an emergency fund, or investing in a few shares of a discounted stock for your children. How will I know if I’m getting a tax rebate check? While the details haven’t yet been announced, the 2001 tax rebate checks were sent to people who filed taxes in the year 2000, and claimed a minimum amount of earned income ($6,000). In 2001 the checks represented an advanced refund on your 2001 taxes thanks to reduced tax rates. With no additional tax cuts on the immediate horizon it will be interesting to see how this solution can be financed. When and if it is, be prepared to put the money to work for you and resist the temptation to spend it all.

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