Seth Godin wrote recently about how more than two-thirds of recent immigrants to the U.S. send money home regularly. How is it that the worst-paid, poorest people in our country can manage to save enough money to send some back to the old country? According to the Ambassador from El Salvador, the money sent ‘home’ to El Salvador accounts for 13% of that country’s GDP!

American households are almost the mirror image, with nearly two-thirds in debt. Many with credit card debt that is unfathomable and even home mortgages that are stretched to the ridiculous, praying that home prices continue to go up.

You would think that if those who are working at the bottom of the ladder can cover their own bills and still send money home, those of us that are working for more than minimum wage should be able to do even more. But we all feel we deserve cable TV, cable internet, cell phones, and a new car.

HatTip: Get Rich Slowly

The Washington State Insurance Commissioner, Mike Kreidler, just announced a new Web-based tool for consumers, called the annual Complaint Comparison Guide. The guide gives consumers information about the number of complaints filed against auto, health, or homeowners insurance companies and compares the company’s volume of complaints to that other similar companies.

The most useful piece of information is the ‘Complaint Index’ which measures each company’s complaint ratio in relation to all the other companies. A complaint index of 1 means the company had an average number of complaints filed against them. A complaint index higher than 1, means the company has more complaints than average and vice versa.

We are all looking to pay as little as possible for our auto insurance and yet we want to make sure that when we are involved in an accident things are taken care of correctly. In other words we do not want to be fighting our insurance company. One thing this guide does not provide is what percentage of the complaints are from the policy holders and what percentage are from third-party claimants. I am more worried that my policy take care of me and my family (the real reason I bought the policy) than I am concerned that they pay the other guy quickly.

Another difficulty with the guide is that, because of insurance regulations, most of the companies actually do business in the state under different but similar names, for example Progressive has 7 different entries in the list, all with different ratios.

“Consumers deserve to know how their company stacks up,” said Kreidler. “Our Insurance Consumer Hotline receives more than 2,000 calls a week from consumers with questions about their insurance. While not all calls result in formal complaints, knowing how your company rates before your buy or renew coverage can give you peace of mind.”

A Complaint Comparison Guide can be generated for health, private passenger auto and homeowners insurance for the years 2005 on back to 2003. Depending on which line of insurance is selected, a report will be generated which shows the company, the number of complaints, the complaint index, the company’s market share and how much premium it collected.

A complaint index measures the number of consumer complaints for one company in relation to other companies in the same market. A company with a complaint index of 1 has an average number of complaints. A company with a complaint index higher than 1 has more complaints than average.

“Shopping around for insurance pays,” Kreidler added. “The new guide gives consumers one more tool to compare insurance companies. Anyone looking for insurance should do their research. Consider how much coverage you need, how much that coverage will cost, as well as the company’s customer service and financial strength before you buy a policy.”

Ramit over at I Will Teach You To Be Rich gives an up close and personal view of the 24-year old, Casey Serin, who is facing foreclosure with $2.2 million in debt. He has some interesting insight since he knew Serin in high school.

Serin says he

“bought 8 houses in 8 months across 4 states with no money down” and is now facing foreclosure. He has openly admitted to lying on his loan applications (to get more in loans), and to bringing his total debt to about $2.2 million ($140,000 of that is in unsecured debt like credit cards). In the meantime, he’s been blogging about his situation. His blog has gotten the attention of USA Today, the San Francisco Chronicle, NPR, and more.

Seems that just weeks before he admitted to the world that he was facing foreclosure he was scamming his old friends for money. Ramit’s take on the story is very enlightning and worth reading.

If you are looking for hints at what you should be doing to organize your finances and your life take a look at the list collected over at Your Credit Advisor. He has brought together 102 simple rules to help you take control of your financial life. They rules are grouped into 11 categories:

• The Painfully Obvious But Rarely Followed Tips
• Career and Education
• Credit and Loans
• Frugality
• Homeowning
• Insurance
• Investing
• Retirement
• Saving
• Taxes
• Lastly

Paul Farrel at MarketWatch.com argues that Dilbert creator, Scott Adams, deserved to have won the Nobel prize in economics for his ‘Unified Theory of Everything Financial’. In nine simple points, Adams’ reveals “everything you need to know about personal investing.” in his book, Dilbert and the Way of the Weasel.

His formula:

1. Make a will
2. Pay off your credit cards
3. Get term life insurance if you have a family to support
4. Fund your 401k to the maximum
5. Fund your IRA to the maximum
6. Buy a house if you want to live in a house and can afford it
7. Put six months worth of expenses in a money-market account
8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement
9. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio

Would I word it differently? Are there things missing I would put on the list? Would I change the order of some of the items? Sure. But have I taken care of all the points in my personal finances? No. It is easy to throw stones. It is harder to actually practice what you preach. You can spend so much time planning and searching for the ‘correct’ way to do everything that you never do anything. In sales we call this “aggressively getting ready”, you spend all your time honing your sales presentation but never actually get out in front of people. Having the perfect plan is not near as important as actually doing something.

HatTip: Scott Adams: In Over My Head

I, like many Americans, have procrastinated when it comes to getting a will. It probably has something to do with living in denial as well. You only need a will if you are going to die. Since I have too much to do before I can even think of dieing, a will keeps getting put off for later.

There are a number of places online that you can use to help you create a will. Some that I have found include:

• Free Will Docs was wills-online.com/
• ‘Lectric Law Library
• Find Law
• Washington (state) Wills (my home state)
• Legal Zoom - State Requirements

If you die without a valid will or other valid alternative to distribute your property, your survivors will have to deal with the things you should have taken care of and may have to fight not only each other but the state over what should happen to your property. If you die without a will then your estate is considered “intestate” and the probate court will divide up the estate using the legal defaults for your state in dividing property to any surviving relatives. Relatives you may care less to have a share of your estate. Close friends and charities that you were important to you will not receive anything.

You can create your own will using software or online tools, and using these tools is probably better than doing nothing at all, but it really makes sense to have a lawyer create the will so you can be sure not only that your wishes are followed, but that you have taken care of everything. Just don’t procrastinate any longer. I will be reporting back as soon as my will is complete.

According to the American Bar Association you will want to collect the following information in order to create your will:

• The names, addresses, and birth dates of your spouse, children, and other relatives whom you might want to include in your will. List any disabilities or other special needs they may have.
• The names, addresses, and phone numbers of possible executors or trustees.
• If you have young children, the names, addresses, and phone numbers of possible guardians or trustees.
• The amount and sources of your income, including interest, dividends, and other household income, such as your spouse’s salary or income your children bring home, if they live with you.
• The amounts and sources of all your debts, including mortgages, installment loans, leases, and business debts.
• The amounts and sources of any retirement benefits, including IRAs, pensions, Keogh accounts, government benefits, and profit sharing plans.
• The amounts, sources, and account numbers of other financial assets, including bank accounts, annuities, outstanding loans, etc.
• A list of life insurance policies, including the account balances, issuer, owner, beneficiaries, and any amounts borrowed against the policies.
• A list (with approximate values) of valuable property you own, including real estate, jewelry, furniture, jointly owned property (name the co-owner), collections, heirlooms and other assets. This list could be cross-referenced with the names of the people you might want to leave each item to.
• Any documents that might affect your estate plan, including prenuptial agreements, marriage certificates, divorce decrees, recent tax returns, existing wills and trusts, property deeds, and so on.

Estate Planning Basics

In order for your wishes to be known and followed in the event of your death or incapacity, there are a number of things you must take care of before the need arises. If you have a family, traditional or not, a business, or charities you care about then these are some steps you should take care of.

• A Will: We already covered this in a previous post, the first thing you need to do is create a will if you don’t want some judge to determine what happens to all your stuff and who becomes the guardian of your children.

• A Guardian: Do you and your spouse agree on who should be guardian of your children? Have you talked with the potential guardians about your wishes to see if they are willing? Do they have the assets and time to take care of your children as you would want?

• A Durable Power of Attorney for Finances: Who will make financial decisions for you if you are unable? A durable power of attorney for finances gives another person that ability. These should be considered not only between spouses but also if you might need to take care of an elderly parent.

• A Durable Power of Attorney for Health Care & Living Will: Just as for finances, who will make health care decisions for you if you are unable to? The durable power of attorney for health care would enable your the person you choose to make decisions for you, which is especially important if they are not your legal spouse or parent. A living will directs your family and medical personnel how to care for you in the event you become terminally ill, including whether or not you wish to be placed on any type of life-support equipment or what type of heroic measures should be taken.

All these documents should be reviewed every few years or sooner in the event of major changes such as marriage, births, divorces, deaths, etc. And it should be obvious that an attorney who specializes in these areas is worth much more than they will charge to take care of these things for you. Not only do you want to make sure that the government does not make these decisions for you, you want to make sure that your wishes are followed and not some distant family member’s wishes.

529 educational savings plans allow you to put aside money for future educational expenses and are sponsored by individual states and are usually tax deductible on your state income tax. You cannot deduct it from your federal tax, but the money does grow tax-deferred and can be withdrawn tax-free if used to pay qualified education expenses. The account owner, usually the parents, retain control of the accounts, which helps in financial-aid calculations. The owner can also change the beneficiary if needed, so if Junior does not go to college you can use the money for the next sibling (or grandchild’s) education by simply changing the beneficiary.

Living in Washington state means I do not have to pay a state income tax, so no tax-deduction at all for me. Most 529 plans allow non-residents to join, but how to choose?
Not only do you have 4 dozen plans to choose from, each plan has any number of investment ‘portfolios’ of which you must choose only 1. Then you have the maintenance fees of the underlying investment (mutual fund fee usually), most plans have their own maintenance fee, plus an annual management fee. I am bewildered by all of the details. It makes picking just about any other investment look easy! Morningstar has the most detailed information about the various 529 plans.

A couple web sites I visited listed the ‘best’ 529 plans available. Some are sold only through brokers, so I eliminated those and looked at only those I can buy directly. Most of sites I read had the Iowa, Ohio, and Utah plans on their ‘best’ list.
I also looked at the Kansas plan since it is managed by Schwab where I have my other investment accounts and if it was close, I could keep things simple.

Plans

According to Morningstar, “The Utah Education Savings Plan continues to set the standard for low costs among 529 plans. Over five other states that offer cheap Vanguard index funds, Utah earns kudos for keeping total costs down by tackling the administrative burden itself — charging only 0.25% — and it doesn’t levy anything at all for choosing its money market option.”

The Schwab plan is definately out. Although the Utah plan looks really good, the $25 annual fee charged to non-residents means that a $5,000 investment gets hit with a management fee equivalent to .50%, putting it in the more expensive category, especially since the Iowa and Ohio plans have no management fee.

Next I will have to look at the actual investment options available in the plans.

The accounts I opened at ING DIRECT for my 4 kids have been a real success! Each of them received the $25 account opening bonus, of course, but so far they have each also received an additional $50 in referral bonuses from people using the $25 ING Promo to receive their own $25 ING Promo Bonus link when they opened an account!

Eventually each of them should receive the full $250 in bonus money when all 25 of their referrals are used.

Thanks to everyone who has signed up. And if you have not yet, and have an extra $250 that you want to put in savings, then please go use one of their $25 ING Promo links.

Maybe the reason you pay so much for insurance is your driving record? Do you know the rules of the road? According to GMAC, 1 in 11 licensed drivers would fail a written drivers test if taken again today, at least I am not one of them! A driving test would be another matter all together.

I just took the GMAC National Drivers Test and scored a 95%. Not too bad. I will concede the one question I got wrong, even though I, personally, have not seen the ‘correct answer’.

Take the test yourself and see how you measure up.

The cheapest way to get a book is, of course, to borrow it from the library. Even if your library does not have the book they may be willing to either buy it or get it on intra-library loan.

But my favorite strategy to get a good deal on books I want to buy is a little convoluted, yet fun. I have filled out my collection of classics and have bought business and finance books, fiction, and kids books using this method.

First: Buy used books you don’t want for about a quarter each at garage sales, Goodwill, or the library’s ‘for sale’ rack.

Second: Take the books you just bought to your favorite used books store and trade them for credit at 1/4 their original price.

Third: Buy the books you want from the used book store using the credit. The nice thing is that they will hold the credit if you cannot find what you want this visit.

Example:

Buy 4 paperback novels that were originally $7.95 for $0.25 each at a garage sale. Cost: $1.00

Trade them to the used book store for $2.00 credit each. Value: $8.00

Buy books at the used book store at 1/2 the cover price using your credit: Value: $16.00

So you end up getting a 16 to 1 return on your investment!

Caveat: Sometimes the bookstore will not take your books, they already may have too many of that title or they may think it is worthless - I keep these in a grocery sack in my trunk and next time I trade, either at this book store or at another, I bring them back in for another try. You will also get better at figuring out the books that the used book store wants. It is usually not the latest #1 best-seller.

You can also donate any ‘untradeable’ books to the library or other charity and take an appropriate tax deduction.