Middle Path Finance

Cheap charity: The Overseas Coupon Program

It's the holiday season, and many of us are finding that are hearts are bigger than our wallets. That's where cheap charity comes in. It's for those of us who want to do something nice but don't have a lot of money.

The month's cheap charity is the Overseas Coupon Program.

The program gives coupons to military families at home and abroad. The coupons can be used in the commissary on base, and helps military personnel- who frankly don't get paid much- save money and stretch their budgets.

Participation is very easy.

Go to the program Web site, and adopt a military base. Then all you have to do is drop all of the coupons you don't use from the Sunday inserts in an envelope, and mail them to the base. It's easy.

Why throw all the coupons for products you don't use into the recycling bin when you can send them to someone who could use them? The program also accepts expired coupons, but they must be less than 2 months past the expiration due date.

The only rub is that the program asks you to clip the coupons. That can take time. But considering the cost of doing good is a 42 cent stamp, spending a few minutes clipping coupons is a small price to put on a good deed.

How we recovered from a financial (and natural) disaster after Hurricane Katrina

It's been about three years since the levees broke in New Orleans, forever changing our lives.

When it happened, we had a house with a $2,000 a month mortgage payment in uptown New Orleans.

We had some money in the bank, but didn't know if our house was even still standing or what if anything our insurance company would pay for. The city closed and the magazine I worked for went out of business. With our house status unknown, and my hubby's job mostly gone, we had no choice but to find work. Literally.

First, let me say that Citibank, who bought our mortgage from our favorite local bank, gave us no relief from mortgage payments. Remember when Pres. Bush insisted that lenders give borrowers in New Orleans two to three months break from payments? Citigroup pretty much said screw you. I still hate them.

That said, as soon as the levees broke, our resumes went out. Hubby got a job right away, and I got a freelance gig writing for the local newspaper. Phew. Money to pay the mortgage. Now the real work began.

We moved into my sister's finished basement in Ohio for 6 months, paying $300 rent plus the gas bill and groceries.

Then, I set up an office and spent at least 6 hours a day every day on the phone trying to reach our insurance company and our adjuster. Adjusters kept quitting and each person I talked to in the claims department told me something different.

I also had to hire a contractor to fix the damage to my house so we could sell it. No easy task. I was lucky because I had met a contractor I liked three months earlier, and I knew where to find him after the storm. He was a lifesaver. To this day, I do not know where I would be without him.

We had decided to stay in Ohio,and we couldn't really move on until we sold our house. Which meant we couldn't afford to wait 6 months or more for our insurance claim to be paid before we started fixing up our house.

I went to New Orleans in November of 2005 and spent 1 month fixing the house. I paid $18,000 out of pocket for everything from roof repair, fixing a balcony that was knocked off by a FEMA truck and rebuilding a concrete block privacy fence that was uprooted by a tree. I also did some "Designed to Sell" HGTV magic by painting the inside and outside of the house. And scrubbing everything to make it look fabulous.

Two contracts and some termites later, the house finally did sell, on my birthday, March 13. It was a miracle. And it came just in time. We had just gotten the new bill for our homeowners insurance. It had tripled, costing about $600 a month just for insurance. We wouldn't have been able to afford our house if we had stayed in New Orleans.

If we had lived paycheck to paycheck, we would have been so royally destroyed financially by this hurricane. We would have had to pay $2000 a month mortgage for a lot longer--our declared bankruptcy because we couldn't afford to the payments-- and would have had to delay starting our lives over again while we waited for an insurance company to pay up. I might still be living in my sister's basement. We would have missed the window of opportunity to sell our house. People were buying 6 months after the storm, when we were ready.

Here is the financial picture. We paid $225,000 for our house in June 2003. We sold it for $325,000 in March 2006. Because it didn't flood, our house value went up a lot. We had about $30,000 in equity already.
After real estate commissions, etc., we had about $90,000 in cash free and clear to buy something in Ohio.

So we bought a 1957 ranch for $154,000. The experience of worrying about how to pay the mortgage after the storm, and our not so good experience with Citibank (having your mortgage sold to a company you did not choose to do business with) really changed our perspective.

We stretched to buy our first house, which is what the conventional wisdom is. It was a mistake. Too much house payment= too little freedom and too little wiggle room when something goes wrong. So we bought a more modest, cheaper and more manageable house the second time. This house makes us much happier, even though it's not nearly as fancy.

My mother-in-law didn't like it one bit. Many times she told me that we were supposed to always trade up, trading down wasn't the way it was supposed to work. She's never been through a disaster, and she and my father-in-law also live very different lives than me and the hubby want to. We agree to disagree.

Then, hubby and I set about finding a way to pay off the remaining $50,000.

When we finally got our insurance check for $18,000 (6 months after the storm!!), that all went to the mortgage on the new house. When we were both settled into full-time jobs, we made the decision to liquidate some of the stock we had in a taxable brokerage account to pay it off completely.

We ended up making one real mortgage payment. Then, we began depositing the amount we would have spent on a mortgage payment into the brokerage account to replace what we cashed out.

Some financial people would say that paying off the house isn't the right move. I disagree. There is a freedom and peace of mind that comes with owning your home outright. I remember my grandparents' mortgage burning party. We should all get back to that mindset. A house is something to be paid off.

After we sold the Nola house, we set about really getting a hold of our financial lives. A natural disaster really drives home the need for savings. We had no idea that our paychecks would be gone virtually overnight. When we evacuated, we thought we would be gone for the weekend. You can't live one paycheck away from financial insolvency. It's a recipe for bad things.

Many of our friends who didn't have money in the bank JUST finished their hurricane repairs. Three years later. One couple finished just in time for Gustav to come along. Thankfully it missed.

Having the house paid off has allowed us to not only sleep better at night, but also max out 401ks and IRAs, put something in a Roth IRA, and fully fund a 529 plan for the Baby Bean. And we've managed to pay cash for all of the major home repairs to our new house.

It has allowed me to work as a freelancer instead of a full-timer so that we don't have to pay for daycare. It really has changed our life.

The current housing advice has it all wrong. Don't stretch. Find a modest house you can pay off ASAP, and find one you can fix up to make nicer. The second time around, we really did buy the worst house in a good neighborhood, which means we are really improving the value with every project.

No spend month: Week 3

I had a dream last night that I got to eat out. Sigh. As much as I try to replicate our favorite restaurant meals at home, we miss eating out. It's been three weeks.

That means the end, It's almost here. We only have one week left of no-spend month, where we vowed to only spend $400 for all of November on everything we need, including groceries, entertainment, and gas.

But it's a big week, with Thanksgiving and all of the usually-oh-so-tempting Black Friday deals that I have to ignore because they aren't in the budget for me this year, no matter how cheap.

Our super-frugality has become in some ways routine, and in other ways, trying.  I miss good ethnic food.

During week three, we spent $86. Most of it, $55, went to groceries. We also spent another $18 on gas to fill up our second car.

How have we managed for this long on so little?

If you'd told me two months ago we'd be able to live on $400, I would have thought you were crazy. But by breaking our bad habits-- like eating out, all the time-- and being a little more conscientious, we've been able to reduce our expenses significantly.

So, if you are sitting at home wondering how we've done it, or planning your own No-spend month, here are a few tips:

1. Meat is a luxury when you are living on a shoestring. Most of our meals have been vegetarian, more out of necessity than desire. If we do eat meat, it's only what is on sale.

2. We've been borrowing DVDs from friends and from the library. And, we've been lighting a lot of fires and putting our feet up on the coffee table while drinking some of those bottles of wine we've had in the cupboard. That was the good part of staying home.

3. So far, we've filled up the gas tank of each of our two cars once. To save fuel, we use the small, compact car for any trip longer than 5 miles, and we run multiple errands on one trip-- no more running out just to get one thing at the grocery store.

I also recommend spending as little as possible early in the month, so that you don't run out of money at the end of the month. Our first week was our lowest-spend, at $46. We haven't been able to go that low since, because the pantry runs dry and the cars eventually run out of gas.

Beyond that, it's been just a matter of staying out of spend's way. No window shopping, no mouse finger dangerously close to clicking on the Amazon.com deal of the day. Although I do admit to Internet window shopping, I have yet to one-click shop.

No spend month: Week 2

We are now two and a half weeks into our no-spend month, where we vowed to spend only $400 for all of November on everything we need, including groceries, entertainment, and gas.

This week, in some ways, has been a lot easier. Our super-frugality has become part of the routine. Cooking every night has finally become a habit, with the hubby remarking "that the best thing about this challenge is that there is always something yummy in the fridge."

I can deal with that.

Hubby has also stopped pouting. Not just stopped, but done a complete 360. Sunday, the start of week three, he said "You know, we should try to live on $600 a month, including bills, every month."

I almost had a heart attack. One, I never thought I would hear him say it, and two, for a hot minute I was really afraid I would have to live on $600 a month forever.

Now that we are deeper into the experiment, we have seen the benefits and started to experience the drawbacks.

Let's start with the positive. The house is cleaner. If you can't go out, you may as well vacuum.

Living in a clean house is fabulous, but having a fat bank account is even better. Usually, we save about 10 percent of our take-home pay every two weeks. But we managed to put 50 percent of our pay into savings this week, a real testament to the fact that we are living on a shoestring.

Considering the current economic and job scene, it has been really fulfilling to build up our cash reserves, and at the same time practice living on next to nothing. It's a valuable skill to have if you suddenly don't have a job.

Now to the drawbacks. We did spend more than twice as much the second week as we did the first, $118 compared to $46.

Here is where it went:
$90 for groceries. Half of this went to our Thanksgiving turkey and side dishes. The grocery store was selling turkeys for 29 cents a pound if you spent another $30, so we did the math and determined it was worth it to buy everything now, including fresh green apples for apple pie, cranberries, and of course, a 17-pound turkey.
$19 on gas. Lower gas prices were a real budget-saver here.
$5 for a replacement inner tube for our jogging stroller. It didn't seem fair for the baby to miss out on his daily walk just because we were trying to save a few dollars.
$5 on beers with a friend who came into town from Chicago. We can't just not visit with friends from out of town.

As a result of this challenge, I also notice I am doing things I have never done before, in an effort to save money. For instance, I took a calculator (to make sure I was on budget, to the penny) and a sale flyer with me to the grocery store. Now I wonder why the hell I've never done this before. I have also learned a valuable cooking lesson. If you have a bag of onions and a few pounds of potatoes, the sky is the limit.

For fun, we borrowed some DVDs from a friend and popped popcorn.

It wasn't all fun this week. Saturday was tough, because we had to turn down a dinner and drinks invitation to our favorite restaurant. It just wasn't in the budget. I'm sure we'll get over it, though.

Also, part two of the challenge was to try to lower our monthly bills. So far, I have only managed to shave $14 off of what we pay every month, by getting both my home phone and Internet with the same company. Maybe I can do better, like trying to cut our electricity bill in half.

But I think that is a challenge for another day.

No spend month: Week 1

Four days into the challenge, hubby began pouting.

"This sucks. Everything costs money. It's so depressing," he said, as he unloaded our $18 bag of groceries. "I'm noticing all kinds of things I didn't before. This takes too much planning."

Meaning, he finally is noticing that diapers and formula, leaving the kitchen light on, and drinking beer costs money. And now that he has a set budget, all of a sudden he feels like he's missing out. Because he can't do something, all of a sudden he really wants to. He's never been a high-maintenance guy, so I thought he would have a much easier time that I would.

I, on the other hand, am feeling optimistic about the challenge. I think we are going to do just fine, even if we have committed to buying the Thanksgiving turkey for the extended family.

The challenge hasn't put a crimp in our lifestyle yet. We are cooking at home every night, sure, but the food is good and plentiful, and there are still plenty of free movies to rent from the library.

We've also managed to live something resembling a normal life. Sitting at home moping and avoiding our friends isn't sustainable, and we'd like this to be something we can and want to do again.

The first day of the challenge, I went to an art opening at my friend's gallery. Cost: $1 for the parking meter.

On election night, we had a party. It's been a tradition since the 2000 election, so it'd be a shame to skip it now. Normally we'd spare no expense to throw a party, but this time our budget to feed four kids and 11 adults was only $30. (Okay, $18 originally, but then hubby realized we had no lighter fluid and no side dishes, so we spent another $12.) We didn't think we could pull it off, but we did, and there were plenty of leftovers.

Even though we're only a week in, the challenge has already altered our habits. Our limited budget led us to shop at Aldi's and look for loss leaders in the local grocery ads for the first time in seven years. By Thursday, the hubby had snapped out his depression and declared "Turkeys are on sale for 78 cents a pound." Looks like we have our Thanksgiving solution.

Here is what we've spent this week:
What we've spent: $46
That includes $1 for parking, $31.50 for the election night party food, and $5 for raffle tickets as a fundraiser for my mom's school, and the $8.50 that mysteriously disappeared from hubby's wallet. He has yet to come clean about what he spent it on, but we're not over budget, so I'm not going to nag. We had 3 No Spend days this week. 

I also hit the jackpot. Sometimes small wishes do come true. Finding a yoga class has been on my to do list for a while, but was out this month due to our budget. Then I got a call from an old friend who is getting her yoga teaching certification, needs to log a lot of hours of teaching, and wanted to know if I'd host a free yoga session at my house once a week. Bingo.

Not shopping and not spending has had an unintended side effect. My productivity has sky-rocketed. In one week, I have knocked several things off of my to-do list, including framing four lithographs I bought 6 months ago and rearranging the guest room furniture. It's also forced me to come to terms with my closets, which are overflowing with stuff we never wear and never use. It's time to let all of that go. Ebay here I come.

I can see now the potential this challenge has to be life changing. Everyday, we think about what we really need and what we really don't, and how to make as much as we can out of as little as possible. These are skills I embraced when I was young, broke, and in college. but somewhere I lost my way. I'm hoping to find my way back.

This series originally appeared on SavingAdvice.com.

Preparing for our first No Spend Month

My husband and I have declared November a no-spend month. For more information on No Spend Months, visit the Money Challenges page.

We have budgeted $400 for the month of November. That's all we have to spend. This $400 has to cover everything that isn't a monthly recurring bill.

What doesn't count: utilities, student loan payment, monthly transfers into our emergency fund, 401k, and 529 plan. Baby formula is also exempt. The $400 must pay for everything else: food, gasoline, entertainment, clothes, parking, and anything else we would normally buy.

Considering we easily go through $2,000 a month, it's a steep decrease from what we are used to. 
Why are we doing this?

We've read a blog about a family of three that tried it, and another family that decided to spend nothing-- not even buy groceries-- for two months.  It inspired us to give it a whirl.

With all of the craziness lately on Wall Street, and watching the balances of our retirement accounts dwindle to less than half their value since September, we feel like it's high time we fattened up our emergency fund and learned to live leaner.

We also feel making a diligent, conscientious effort to stop spending might help us slow down, hop off of the consumption train and take a look at where the heck all of our money goes each month. We are generally good savers, but we could be doing so much better. And it seems like we've been spending more and more these past few months.

How will this work exactly? We've laid some ground rules that we hope will help us get the most out of our experience.

First, the $400 will be placed in cash in an envelope on the side of the fridge on Nov.1. We aren't allowed to use credit cards, no ATM withdrawals, and no cheating. This is easy to monitor online. This is the only realistic way we can stay on budget. 

Second, we need a carrot and a stick to help us stay focused. Otherwise, it would be too easy to say "Oh well" and give up.

The stick: For every dollar we spend over the $400 budget, an equal amount goes to a charity that we deplore, one that stands for everything we don't. The idea is to add an extra layer of "I don't want <insert group> to get any of my money, so I better stay on track." The carrot is dinner for two sans the baby at a fancy steakhouse near our house.

Third, we aren't allowed to front-load expenses in October. What is the point of not spending in November if you spend twice as much in October because you know you can't spend anything in November?

The only exception to the stock-up rule is groceries. I re-stocked the pantry with basics only-- nothing fancy-- such as beans, rice, cheese, etc. so that we would have the foundation for what I hope to be many home-cooked meals.

We will have to cook at home most of the month to make this work. We will also have to be incredibly fuel efficient in our vehicle use. We won't be able to drive as much and will certainly have to plan shopping trips so that all stops can be made on one trip. No more running to the store for one item.

We haven't forgotten Thanksgiving either, although it will pose less of a challenge this year. Our annual 1,000 mile drive to the in-laws house has been canceled. We just had a nice long visit with them, so we all agreed that we can pass on Thanksgiving. That does mean we will be cooking Thanksgiving dinner for the other side of the family, and paying for that will be a challenge.

Spending less is a big part of this plan, but we're also going to attack the expense side of the balance sheet. In a further effort to beef up our savings, I will also be examining all of our monthly bills and looking for ways to save. I already suspect our telephone and internet service will be changing post haste.

With the challenge about to begin, I thought I would be nervous about limiting our spending, but actually we are quite excited. I think we relish the challenge. And we suspect it might get us closer to the kind of life we'd like to be living. Of course, there's the risk that this could end in a spectacular disaster.

I plan to outline our progress, our failings, our triumphs and all the gory details once a week on this blog. Maybe I can inspire you to set out on your own month of crash dieting. Or, I might just scare you into being a spendthrift. Who can say.  You'll just have to check back here each week to find out how it turns out.

This story originally appeared on SavingAdvice.com.

Biweekly debt repayment: Pros and cons

If you have debt, whether it's a mortgage, a car loan, a credit card balance, or a student loan, chances are you have a minimum monthly payment. If you pay half of your minimum monthly payment amount every two weeks instead of sending the entire payment once a month, you may be able to get out of debt more quickly and save on interest charges. 

This is easy to set up if you use online banking. Just arrange to have half of your minimum debt payments sent each payday.

This simple change can make a big dent in debt.

Paying every two weeks helps you in two ways:

First, most companies charge interest on your debt daily. That means the credit card company is calculating the interest on the amount you owe them every single day and adding that to your total. If you make a payment every two weeks, you don't have to pay as much interest because your first payment reduces the balance that's used to calculate your daily interest for the second half of the month.

Second, when you pay every two weeks, you will unwittingly be making 13 payments each year instead of 12. This shouldn't scrimp your budget because folks who get paid every week or two weeks get an "extra" third paycheck four months every year.

According to CardRatings.com, here is an example of how much difference a biweekly payment can make:

If you have a credit card with a $5,000 balance at 17% interest and you send in a minimum payment of $150 once a month, you'll pay $4,119 in interest and it will take 14 years to pay off the debt. But if you send in $75 every two weeks, you'll only pay $2,521 in interest and the card will be paid off in 3 years and 18 weeks.

All this without really increasing the amount you are used to paying.

Let's say you have a $10,000 student loan at 7 percent interest. For the standard 10-year term, your monthly payment would be about $116.11 a month. If you sent a payment of $58.06 twice a month, you'd pay $435 less in interest over the life of the loan and you would pay off the loan one year earlier than if you'd sent one payment a month.

Let's say you have a 30-year fixed rate mortgage for $100,000, with an interest rate of 6.5 percent. Your payment would be about $632 each month. If you paid biweekly, you would save $28,587 and would make 69 fewer mortgage payments, in essence shaving almost 6 years off of the life of your loan.

These savings are nothing to sneeze at, but there are some drawbacks.

When just starting out, you have to check your accounts to make sure your payments are credited correctly. You may need to call or write them and make sure they know the payments are to be applied to the principal of your loan. You may also have to ask them to credit the payment the day they receive it, rather than waiting until your due date.

By law, credit card companies must credit payments the day they are received.

Mortgage lenders are not required to post payments the day they are received, and some will even charge you an enrollment fee of up to $400 and a monthly fee of about $9 just for the honor of sending them two checks a month instead of one.   If that's the case at your lender, send one check.If you feel strongly about paying off your mortgage early, there are other strategies.

Some banks will allow you to send two half-mortgage payments a month without enrolling in an official program, while others don't allow partial payments. You'll just have to call and ask. For more mortgage payment pros and cons, check out this Bankrate.com article.

Student loans can be paid biweekly, but you need to specifically state that the money should be applied to the principal. Otherwise, the company may just keep postponing your due date, rather than using the money to reduce your current balance.

Despite some of the roadblocks lenders have thrown in front of you, the financial rewards can be substantial. If debt is a black cloud hanging over you, or you aren't good at making sure you have enough in your account to pay big monthly bills, this is an option that may work for you.

Three simple ways to get more for your money

Let's face it, no one likes to budget. Not even me, and I've been a financial journalist for years.
A lot of folks, including some of my family members whom supposedly gave me my head for numbers, don't like to think about or manage their money.

It just seems to complicated. It doesn't have to be. You really only need to do two things to take control of your money.

1. Pay less for the things you already use

2. Get more bang for the bucks you already spend

3. Don't pay for things you don't want to pay for

I hope you aren't scratching your head just yet.

First, paying less for everything you already use. I want you to walk around your house with a pen and paper, and start looking in your cabinets and drawers. Write down the brand-name products, like shampoo, toilet paper, soup, etc. that you use regularly. Ignore all of the generics and store brands.

For us, it's Q-tips, Pert Plus for the hubby, Garnier Fructis for me (it conditions my hair like no other), and Tabasco hot sauce.

Now, the next few times you go shopping, take the list with you. Write down how much those items cost at each of the places where you regularly shop.

I did this exercise recently, and using my shampoo as an example, here are the results.

Garnier Fructis, 25 oz. shampoo, cost $5.99 at Target, $7.29 at Walgreens, and $4.96 at Wal-Mart.

Guess what. I now buy my shampoo only at Wal-Mart.I used to buy it at Target, just because I shop there more often. Why pay $1.03 more than I have to for every bottle?

In this case, a little bit of planning can free up a decent bit of money. You could save $10 or more a week just buying at the store where the prices are lowest. On caveat: Don't go driving across town to buy one bottle of shampoo. Stock up or wait until you need something else from that store, then go.

If I want to save even more on that shampoo, I track down a coupon. I'm not a coupon clipper by nature, but I sometimes use a clipping service like CouponClippers. They stockpile coupons and can send you stacks of them for the specific brands you buy.

Using the shampoo example again, I can usually get $2 off per bottle coupons for Garnier Fructis from the coupon clipping service. So my cost, if I buy at Walmart, goes down to $2.96 per bottle.

If you're on a tight budget, these two small changes can give you a little more wiggle room.

On to number two: Get more bang for the bucks you already spend.

This step can take many forms, but the basic principle is the same. It is a mode of thinking. View each dollar in your wallet as finite. Don't think about the fact that you can earn another one. Treat each of them as a precious, single entity. As such, try to get the most for each one of those dollars as you can.

For example, if you want to see a movie. You could pay full-price on a Friday night. Or, you could stretch that dollar just a little and go to a weekend matinee. Same movie, same theater, but $2 less a ticket. If you want to stretch that dollar even further, you could wait until it's out on DVD and either, buy the DVD (usually for the cost of two tickets or less), rent it on Netflix, or wait for it to show up at the library and get it for free.

If you are love to eat out- like me- you could just go out to eat whenever the mood strikes you. Or, you could stretch that dollar by going when you have a coupon from the local Valpak mailer. Or when they have a happy hour special, or you could go at lunch when the prices are lower. You still get to eat out but the dollar stretches just a little bit more.

See how this works? With a few minor changes to your way of thinking, the dollars go farther and last longer.

You can also apply this to your debt. If you have a mortgage, a student loan, and especially a credit card, consider paying half of your monthly minimum payment every two weeks instead of sending it all once a month. Paying every two weeks can lower the amount of interest you pay on your debts and can help you pay them off faster. Explore more of the pros and cons here.

And finally, don't pay for things you don't want to pay for.

I'm not advocating theft. I'm suggesting you look at your bank and credit card statements and see if there are any companies direct-debiting or automatically billing you. Do you want or use the service? If not, cancel the debit.

I recently did this and found that I was paying $7.95 a month for an Internet fax service I hadn't used in 6 months. My mistake cost me, but I soon canceled and haven't been paying the stupid tax since.

If your banks is charging excessive fees, it might be time to call customer service. a big culprit is courtesy overdraft protection. Hardly a courtesy if it costs you north of $30. If you run a slim balance, explore other options, like having the money moved from your saving account, or just not bouncing a check.

If you have a lot of bank fees-- ATMs, overdrafts, minimum balance, etc.-- it might just be high time to find another bank and another account that is more in line with your banking habits.

Do you have savings? How much if your bank paying in interest? Last time I checked, my bank was paying .05 percent. Yes, not even half of a percent. So, I moved my money into an online high-interest savings account paying 4 percent. It took 5 minutes, and netted me hundreds of dollars in interest. I would have gotten less than 2 dollars in interest if I hadn't moved the money.

All of these take a little bit of time at first. But the 20 to 30 minutes you spend on each task could reap significant long-term savings.