Monday, May 31, 2010

Five Ways to Stay on Budget this Summer!

Summer means a lot of fun for the Kay Family, we're going to get to see mini pilots flying in from overseas as well as an airplane hopping son in the deep old south of Georgia.

Recently, I was on ABC NEWS NOW, talking about how summer is a tough time for anyone to control spending, much less stay on a budget. With the kids out of school and summer vacation around the corner, it’s a time when people fall victim to the thought, “I’ll go on vacation now and deal with the bills later.”

But there are ways to cut back on spending to stay on budget before summer hits. The three areas that require consumers to spend money on a regular basis, that do not go away with difficult economic times: groceries, gas and family essentials (such as clothing, birthday gifts, etc). You can plan for summer and still stay on budget for these “little” areas that add up to big expenses.

Q. Ellie, we often think of the holidays as a difficult time to stay on a personal finance budget, but this time of the year is really is a difficult time to stay as well. There are end of the school year gifts to buy, vacations to plan and a summer clothes to get for the kids. We have to start somewhere, and you say the first step is to start with a plan?

ELLIE: Yes, it’s amazing how kids keep growing every year and the summer clothes they wore last season are two sizes too small this year. But having a plan is a good place to start and while the basic a plan is a budget, now is the time to break down the household budget into a plan for the more manageable subsections. This time of year, stores and websites are cleverly designed to get you to spend more than you intended. So it’s important to know what you are going to get and spend before you go to the mall or online. This plan will take into consideration past spending behavior and any impulse buys that tend to kick in while you’re in spending mode. Write down what you are going to spend in the little areas and be specific. If your two preschoolers need clothing, then conduct an inventory of what each of them has—including any hand-me-downs and the vacation gear they may need for the entire season. If you’re planning a vacation and find that you will eat fewer meals at home because you’re going to be away, then don’t budget the same amount for the grocery store. Otherwise, you’re adding spending upon spending when you should be cutting in one area and adding in another.

Q. So we have a plan, the next step is to not fall for questionable “deals.” What do you mean by this?

ELLIE: This time of year, you’ll see sales on summer clothing, electronics and even summer foods—all the things that people are thinking about as the school year winds down and vacation time starts to gear up. But not all sales are created equal and you may see a lot of $90 digital cameras and $100 GPS sales but there can be a huge difference in the models. So before you pick up a steal of a deal, do a general price search on the specific model at or before you get too excited. Plus, if you go into the store and they do not have it in stock, ask for a substitute that is an upgrade from the model that is on sale. You’ll be surprised at how much you can save by just asking. It’s also important to read the fine print in a sale advertisement. If there is a “limited quantity” or “no substitutions” then that could impact your spending plan. Finally, look at the whole world of “price comps” this is where a store offers to match the price of competitors in any sale advertisement that you bring into the store. While one store may not have that GPS in stock and may not offer rainchecks, another store might match the sale and have plenty in stock. We’ve taken advantage of this kind of offer quite a few times, so much so that price comping has become a habit in our family. This can also save quite a bit of money and help to keep you on track in the “little” areas that can tend to torpedo the budget.

Q. So we have a plan, we’re not falling for questionable “deals” and now you say that the next step is “don’t miss any discounts.” How can this help keep us on track and what if there aren’t any discounts—especially for things like gas and other essentials?

ELLIE: Just because a store or website doesn’t mention a discount on merchandise or shipping on its site or in the ads doesn’t mean its not offering any. There is often a number out there in cyberspace that can be retried into either the promotional code box online or even a coupon code into the register at the mall. To find out if what you are buying has an additional discount, go to on your computer or smartphone and enter the store’s name. Or you can go to, and you may find digital coupons that you can download from the store’s websites.
The same principle applies in the grocery store or when filling up your tank with gas. Go to to save in the grocery store and Go to to find the best values on gas. Don’t forget to check and see if the gas station may offer an unadvertised free car wash, cup of coffee or soda. I just found out that I could have been a lot more caffeinated, for free, at my neighborhood gas station when the attendant asked me, “are you going to get your free cup of coffee?” Once again, if you just do your research you’ll find all kinds of freebies and these “little” things, when multiplied and combined will add up to big savings if you create this awareness level.

Q. You’ve covered a lot of areas so far, but what about those birthday, Father’s Day, and “teacher gifts” that we still need to buy this time of year. Does your next step give us some ideas on what we should buy in terms of gifts?

ELLIE: Yes, in our family of seven, I remember those days when all the kids were in school and we had to buy as many as 40 “teacher gifts” to say thanks to what these educators do all year long. It really added up. Plus, there are birthdays, anniversaries, and other special days that may happen in summer months as well.
I have seen that there is a trend toward necessities rather than luxuries that has emerged since the great recession. Consequently, practical gifts including cookbooks, exercise equipment and power tools are on the top of the list for gift giving. This doesn’t mean that its OK to give your wife a microwave for your 10th anniversary, unless this is on her list, but it probably is OK to get your husband a new power drill for Father’s Day.
Do the research we recommended earlier and comparison shop, combine the lowest price with free shipping and coupon codes and you’ll find that those gifts don’t have to bust your budget. Furthermore, I think that concentrating on the “multiple use” gifts is also a practical way to go.
These are gifts such as DVDs, music, cookware, etc. Gifts that will keep on giving year round.

Q. The final step you recommend in order to stay on budget in the little things is to use cash or debit cards. There are pros and cons to using debit instead of credit, what are your thoughts on this?

ELLIE: Yes, there is a time to use a credit card instead of debit when it comes to charges that you may dispute on your credit card or when you want an extended warranty or the added protection that comes from using a credit card. However, for these little areas, we tend to track the spending better by using cash or debit and consumers are far less likely to go into debt because people simply spend less when they are using cash according to the Journal of Experimental Psychology, Applied. Store clerks have long found that it is easier to persuade people who are using credit cards to spend more than they were intending. And when it comes to shopping online, you dn’t necessarily need a credit card to have more protection than using your debit card online. One other option that won’t get you into debt is to research the layaway plan at your local retailer by going to

Happy Summer!
Ellie Kay
America's Family Financial Expert (R)

Sunday, May 23, 2010

ABC NEWS - I'm Answering YOUR Questions

Here are some of your questions that I answered recently on ABC NEWS "Good Money" regarding the blog I wrote called "The Road to Financial Heckie Fire."

Q. I’m in my mid thirties and I haven’t had the problem of friends and family asking me to co-sign on a loan before. But in the last year, I’ve had three requests for this. What’s your advice on co-signing a loan?
Jill, from Bradenton, FL via facebook

Ellie: If you have a friend or relative who needs a co-signer, then that means their credit is so risky that no lender will give him money on his own credit history. The question is: why should you? The answer is that you should not! Even though it may come across as “helping a family member out” it’s still a business transaction and when you set the precedence of co-signing on a loan—be prepared to do it again and again. If not for the same person, then for another friend who may say, “well, you did it for Jennifer, why not me?” You have to assume you will be the one repaying the loan & you won’t have the associated asset, so it can’t possibly be a good business move.

Q. We are boomers in our early sixties and we were thinking of getting a reverse mortgage. Is this a good move for people our age?
Allison from Granbury, TX via online contact form

Ellie: Recently, you’ll see older actors on commercials offering these kinds of mortgages to seniors who are house rich and cash poor. They are portrayed as a viable means of getting a steady stream of income that is easy to obtain. But the fees and other costs associated with reverse mortgages can sometimes be considerably higher than on other loans. This is a bad money move unless you have no other income than social security and because of the high cost fees, it should be a last resort not a first resort. The better option would be a home equity loan. You could sell your home and move into a smaller, less expensive house. Or, you could sell the home to your kids and have a multigenerational family under one roof—this is a recent trend I’ve seen emerging. Your kids can use the inheritance to pay down the mortgage.

Q. I have $10,000 in Stafford Student Loans, an $8800 car loan at 9.99% and two consumer loans at $3500 and $3700, both at 12%. All my loans are current and I have $1000 to put toward one of these loans—which one should I choose?
Viviene via Ellie Kay’s blog

Ellie: It’s great that you are current with your payments and even better that you have an extra $1000 to put toward your debts. I recommend that you put the $1000 toward the $3700 loan at 12% in order to retire the loan. Then once you’ve paid off that debt, double up the payments on the $3500 loan. You will feel motivated by the fact that you’re paying off debts and you will also experience the “snowball effect” where you gain momentum in paying these debts and as you pay off one bill, you can put those monies toward the next bill. Before you know it, you’ll have all your debt retired!

Q. Last year, my teenage daughter couldn’t find a summer job and ended up kind of wasting those months. She tried hard, but there just isn’t much work where we live. Do you have some ideas that maybe we haven’t thought of in terms of summers for this age group?
Stephanie Corlew from Branson, Missouri

Ellie: Summer camps are a great place for kids like your daughter to plug into a summer job. My daughter, Bethany, found a job through the American Camping Association by going to (or just google “American Camping Association” and “jobs.”) She’s making enough for her college spending money and gaining the opportunity to impact the lives of young campers as well.
Another way to broaden a resume for this age group is to go to the local, state or federal political representative from your district and offer to intern in the office. My son, Jonathan, did this last summer as a high school sophomore and this summer as a junior as well. He only volunteered a few hours a week at Congressman Buck McKeon’s office (California) and it made such an impression on his resume that it helped him get into an exclusive summer leadership seminar at USAFA (United States Air Force Academy). His summer internship contributed to the community and it also has contributed to his future as he applies for college scholarships.

Q. My grandchildren are teenagers and are coming to live with me for the summer. I wanted to know if you know of some jobs they can do where they could make some extra money, but still have time for fun, too.
Connie Green from Tehachapi, CA

Ellie: Connie, if you email, we can send you a file that includes 30 different jobs your grandchildren can do locally and make good money as well. Just ask for the “Kids Jobs” file. There’s also a list of safety items you should check out before they work for someone they do not know. For example, there’s job’s like Rent-A-Kid where there may be people in your church or neighborhood who need odd jobs done. There are also jobs like window washing, Garage Cleaning Service, Babysitting Services for summer groups that meet, Mail Checkers (for those who travel out of town), and even Pet Minders.

Q. Ever since I was a teenager, it’s been a dream of mine to go visit Israel
Is going on a tour with a large group the least expensive way to go to big tourist destinations? How can I save money on this trip?
Pamela from Acton, CA

Ellie: Tour groups with your church or community may not be the cheapest route to go since someone usually gets a free trip or two by booking a large group. In some cases, you actually pay more money to go to Israel with a reknown author or professor than you would if you go on your own. To help save money, go to the website and do as much planning as possible. Stay in a hostel, guest house, or a kibbutz, which comes with a free breakfast. Buy a pass for all national parks in order to save as much as 35% on the most popular attractions.

Q: Our company downsized and I laid off work. I’m thinking of launching my own homebased business, but there’s so much out there, I’m not sure what I should do. How do you know it’s a good business to get into and what should I keep in mind as I make my decision?
Nicole, Albany, NY

Ellie: One area of our economy that is thriving is direct sales companies (DSC) as people explore new ways to make money. As you are searching for the best fit for you in your homebased business start with following your passion. Do you love to cook? Then Pampered Chef may be a good option. Do you enjoy wearing the latest styles in jewelry, then try Premier Designs. If you follow your passion you are far more likely to succeed. But all DSCs are not created equal. Before you decide, find out what kind of inventory you have to stock. I know far too many people who went into debt to buy their inventory and then quit the business within a year—but kept the debt! Also find out the percentage you make on sales as well as the hostess plan that the company offers. Does the company take care of filing sales tax for you or do you have that job, too? For more information, email and ask for the “Homemade Business” file. Have fun pursuing your passion!

Please ask me YOUR questions!

Ellie Kay

America's Family Financial Expert (R)

Sunday, May 16, 2010

Buying a Home: It’s Easy to SAVE BIG on Closing Costs

I remember when we sold our home in New Mexico and relocated to California!

We learned to save a lot more on closing costs than we ever thought possible.

If you are considering buying a home, shop carefully for lenders and be sure that you negotiate, negotiate, negotiate with the LENDER as well as the SELLER. When discussing closing costs and fees, make sure that you don't over pay. Here are some key "dos" and "don'ts" to keep in mind when negotiating fees and costs with your lender:

Do Ask for a Good Faith Estimate -- Within three days of applying for a mortgage loan, lenders are required to give you a good faith estimate (GFE) on costs. Look at GFE sections 800 and 1100 for the following fees and be prepared to haggle lightly for reductions.

Don’t Pay for Inflated Credit-Report and Courier Fees - Some lenders are charging up to $65 for pulling your credit report. That is unusually high, considering the fact that credit reporting bureaus only charge $6 to $18 per report. Using the same tactics, some lenders charge courier fees for shipping your closing documents for as much as $100, while the majority of overnight express services only charge $22. Tell your lender, up front, that you refuse to pay any more than the going rate for these services.

Don’t Pay for Document Prep and Administration Fees - The origination fee should include these services, so don’t pay them! Ask your lender to waive these fees.

Don’t Pay for Yield Spread Premiums - Lenders increase your interest rate slightly to include origination and other fees so you don’t have to pay them out-of-pocket at closing but some lenders and mortgage brokers are double dipping—by charging both the fees and the higher interest rate. If they advertise "pay no closing costs" then this is what they really mean. Ask your broker directly if a firm charges you a yield spread premium. If so, you shouldn’t pay any additional fees.

Don’t Pay for Padded Title Insurance Fees - When you are shopping for lenders, look for all the above, plus look out for those who don’t tack on a lot of extra charges for services such as title search and document preparation. Theses can add hundreds of dollars to your closing costs and they really should be included in the price of title insurance, which depending on where you live, can be as high as $6,000.

Do Ask for your HUD-1 A Day Early - Federal law requires lenders to give mortgage applicants a copy of their settlement form at least one day before closing, but many won’t give it unless you ask for it. Compare the HUD-1 with your GFE (good faith estimate) and bring any errors to your lender’s attention.

Ellie Kay
America's Family Financial Expert (R)

Friday, May 14, 2010

The Road to Financial Heckie-Fire

Here's one of my favorite picks taken a few years ago with the "Pastor to Presidents," Billy Graham. He's an amazing man of integrity and in the business of keeping people out of hell.

They say that the road to hell is paved with good intentions. When it comes to your finances, some of these well meaning money moves can actually become major slip-ups that only compound existing financial difficulties. While parts of the economy are looking better, unemployment remains at a rate of 9.7% and this means that many families are dealing with weeks of unpaid leave. Still others are trying to recover what they lost in their investments, home equity and in the stock market. Recently on ABC NEWS NOW, I shared with the host, Tanya Rivero, some advice on how to stay out of the bad place. Here are some things to avoid:

Q. Ellie, one of the primary money sources that some families are using to avoid bankruptcy is to raid their 401 (k), which, you say is a major misstep. Why is this so problematic?

ELLIE: Our parents’ generation tended to work for someone who gave them a pension check for the rest of their lives. This means that current workers may not have been raised with the mindset that they control their own pensions and need to make funding their own retirements a priority. There’s an alarming trend that involves looking at 401(k) accounts as “now” money when it’s really “later” money, that really must be saved for later. While raiding an IRA to avoid bankruptcy is a well intentioned money move, it’s also foolish because if you end up in bankruptcy anyway, then you’ve passed up the benefit you have in the fact that retirement accounts are protected under bankruptcy laws in most states.

Q. For twelve million Americans, their homes are worth less than they owe, which leads us to the next major money misstep that has become more common in the past two years and that is walking out on a mortgage. What are some other options available to families that feel this is their only option?

ELLIE: I would say that half of the people who walked away from mortgages didn’t have to take that path and probably didn’t consider all their options. Providing you still have some income to pay on a house where you owe more than it is worth, the first step homeowners should take is to decide whether their mortgage issue is a short term or longer term problem. For example, if you just got laid off and have no savings or small savings, but the job market in your town is such that you can probably get some part time or full time work to keep money coming in, then you have a short term problem. On the other hand, a long-term problem means you’ve been unemployed, you’ve wiped out your savings and you don’t see a way back into the job market.
The sooner you recognize the fact that it’s a long term problem, the sooner you can put your best food forward to sell your home in a short sale and move into a smaller, less expensive place. That way, you can preserve your capital for a better time.
If it’s a short term problem, then talk with your mortgage lenders and see if they will suspend or lower your payments over the next three to six months until you are employed again. You can go to, which is a federal government website with the goal of helping families by providing free HUD-approved counselors who can help you modify your mortgage.

Q. In every newspaper and on television, we see advertisements for credit counseling agencies that will eliminate your debt. But you say that debt wipeout scams are a major problem. How can we tell the scam from the real deal?

ELLIE: It can really be confusing because they sometimes advertise as debt consolidation companies, but you need to be extremely cautious because I would say the majority of those advertisements are misleading at best and a scam at worst. If it sounds too good to be true, it usually is. Instead, go to the with is the National Foundation for Credit Counseling. This is a non-profit and free service that you can trust.

Q. An alarming number of Americans, some 19 million of them, have also resorted to payday loans in order to make ends meet. How do these loans work and are they ever a good idea?

ELLIE: These are high interest loans that have an average interest rate of between 390% and 520%. They are marketed as short-term cash advances to help meet emergency expenses between paychecks. But the problem, besides, the interest rate, is that it becomes a repeated pattern and consumers become trapped in this kind of borrowing. Avoid these at all costs, and if you have young adult children, especially those in the military, educate them on the dangers of payday loans since these companies tend to flourish near military bases.

Q. Credit card usage has dipped more than 13% in February and yet almost 15% of American families still owe more than 40% of their income in consumer debt, according to the Federal Reserve. Ellie, you say that another major misstep is ignoring the card balance.

ELLIE: Yes, Tanya, while it’s commendable that credit card usage has declined, it’s still an issue when the credit card is used as a means to spend more than you can afford. This is a strategic error that can lead to financial hell as consumers ignore the balance. The new government mandated box on your credit card bill will show you how long it will take to pay off your balance if you pay only the minimum and how much interest you pay to carry a balance. Pay attention to these numbers, instead of ignoring them, and ask yourself if you can afford that item before you put it on your credit card. Behavior modification doesn’t happen overnight, but eventually, you can begin the climb toward getting out of debt.

Q. One final area that we’ll look at today has to do with trying to fool Uncle Sam. Ellie, you say that this money misstep can cost taxpayers big bucks if they are caught and that there is a difference between mistakes and intent—what is the difference?

ELLIE: It’s really pretty simple. Everyone will make a mistake here and there can be accidental errors on the tax returns of the most honest kind of people. But some folks are looking to save money by “accidentally” misrepresenting large amounts of money. We see them in the news—whether you’re a celebrity or a politician, you still have to pay your taxes. By signing the box on your tax form that you believe everything to be accurate and true on your form, you open yourself up to significant liability. If you’re audited and they can prove that the misrepresentation is intentional, then not only are there penalties involved, but you could also be charged with federal fraud. So pay those taxes, even if you have an extension and call the IRS to set up payments if you cannot pay all you owe.

Ellie Kay
America's Family Financial Expert (R)