Debt, Credit Card & Consolidation Current News Digest

I know that when I’m not feeling particularly confident in one area of my life, the other areas begin to suffer too. When my job becomes stressful and tiresome, for example, so do my relationships and personal health.

However, I don’t think I’m alone. Many of my friends tell me they also feel a connection between self-confidence and their personal level of happiness. After all, we all want to feel good about ourselves. We want to realize the incredible potential we possess and to really feel worthy, be loved, and have nice things.

But to hold your head high and feel strong on a consistent basis takes focus. It also takes the commitment to look at your life from a holistic point-of-view. When one element of your life is out-of-alignment, then self-confidence is not operating at maximum strength.

A 360-degree approach to improving self-confidence may be the best solution because of the synergies that exist between the different parts of your life. When you begin to understand how these parts connect to one another then you begin to see the beautiful picture that is being created – the picture of your confident life.

Health and well-being
To feel strong, your body must first be strong. Fatigue, a lousy diet, and lack of exercise, all contribute to poor health and a weak body. Good health, however, does not happen overnight. Consider these simple, but healthy quick-wins to kick-start your lagging confidence as well as your metabolism:

1. Take the stairs if your destination is less than five flights.
2. Commit to walking just 10 minutes a day.
3. Trade the fries for a salad and the soft drink for a bottle of water.
4. Start going to bed one hour earlier or wake-up one hour later.
5. Slow down and find a place of stillness where you can be calm and centered; if only for a few minutes.

Finances
The feeling of paying the bills on-time while putting a little money away is a good one. For some, a sense of confidence grows at the same rate as one’s bank account. But money, in a cruel twist of irony, can often determine what we think our true value is.

Feeling empowered over money, or at least the management of money, is the first step to capturing some financial self-confidence.

1. Make a plan. Create a budget and keep to it no matter the temptations.
2. Begin paying more than the minimum payment on your credit card statement.
3. When you receive your paycheck, pay yourself first by putting a modest percentage in a savings account.
4. Attempt to pay each bill by its due date. For ones you can’t pay, contact the merchant and see if different terms can be reached.
5. Schedule a meeting with a financial adviser or accountant with the goal to create a plan that will allow you to be in charge of your financial position.

Relationships
My self-confidence soars when I know I’m making a difference in the lives of my wife, children and friends. Connection, communication and intimacy are all taken to the next level by my soaring confidence.

Nothing is as important as the people I choose to share a life. To keep my confidence strong, I often remind myself of the following:

1. To stay away from negative, toxic people.
2. To live in the moment and appreciate exactly what I have, right now.
3. To put the needs of my children before my own.
4. To tell my wife that I love her every night.
5. To love myself a little more each day.

Career
You spend a lot of time at work. Long hours, difficult projects and missed opportunities can often lead to a lack of self-confidence. However, you can crack the code to your career and get your confidence back on track, too with these reminders:

1. Pinpoint one area you want to improve and put a little more effort there.
2. Tell your boss everything you are doing. Don’t assume she knows; tell her.
3. Put 100% effort into a project for your benefit; not for anyone else’s.
4. Look for the new talents and skills you are developing and then celebrate them.
5. Build your career the right way and never compromise your values or standards.

360 Degrees of Self-Confidence
Good health, a viable financial position, strong relationships and an effective career game plan will all conspire together and deliver a much-needed dose of self-confidence. By blending these elements together and relying on your ability to maintain a focus to each one will give you what you need to improve your self-confidence and complete that beautiful picture of a confident you.

Get a fast cash loan and pay through your nose!

There are many of you that can’t wait to file your taxes each year because you are expecting a decent refund. Unfortunately, it’s only too often that families in need of some fast cash will not think through the consequences of getting a refund anticipation loan. And it is precisely that lack of patience which ends up costing people a lot of cash at a time they can’t really afford to waste any money.

Have you heard of a refund anticipation loan? Many people haven’t — and that’s a good thing. In this case, ignorance would be bliss! Here’s a quick definition: refund anticipation loans (or RALs) are short-term loans that tax payers can take against their refund amount. Taxpayers often request this option if they want access to their expected refund amount as quickly as possible, as soon as they’ve filed their returns. They want the money quickly since most regular tax refunds take 6 to 8 weeks to be accessible.

A Waste of Good Money?

In the past, RALs may have made a bit more sense than they do now; these days, we have technology and electronic direct deposits that have made it much easier to receive our refunds promptly and which have taken the place of paper checks in the mail. However, people in need often don’t think past the fact that they need cash right now. They neglect to consider the true cost of what taking such a loan involves. Some lenders will charge anywhere from 30% to 200% in interest. Highway robbery! Taxpayers end up losing a big chunk of their money just to get cash a week or two faster than they would with direct deposit. I really doubt that people would fall for such loans if they truly understood what they are signing up for with RALs. Failing to read the entire contract of the loan is what leads to the costly loss of cash, and the reality only hits when the refund comes back smaller than anticipated.

RAL loans are still popular but there is an increase in the negative press surrounding them. Consumers are being warned to read the fine print and the IRS is becoming more vigilant about how the loans are marketed to taxpayers. New guidelines are being sent to tax preparation services and companies that outline responsibility to their clients. It will still take some time for the government to stabilize the tax industry with regards to ethics, so consumers considering a refund anticipation loan need to take it upon themselves to ensure that they are not getting ripped off.

Alternative Choices

Taxpayers expecting a refund who are in need of fast cash do have other options outside of the loan arena. For instance, filing online through electronic forms will return a refund faster than traditional paper methods, especially if you do a direct deposit to your bank account. Also, in preparation for the next tax season, taxpayers who traditionally get a large refund back each year should amend their tax withholdings to get more money back through their regular paychecks instead of through a lump sum refund.

Know Your Tax Preparation Company

If your tax preparation company heavily pushes refund anticipation loans, you may want to rethink your plans. While not all companies are looking to take advantage of your need for cash, many new preparation services and agencies spring up around the nation to do just that. For those who are really in need, my suggestion is that you inquire about those different options for getting refunds faster that don’t involve loans. If you do need to take a loan to access your refund quickly, you should first read your RAL contract thoroughly and be sure that you are clear on how much it actually costs you to rush a refund. A tax company representative should be willing to explain exactly what your contract states and should allow you time to decide if you can really afford the potential high cost of a refund anticipation loan. If you are looking for a new service to do your taxes, stick with reputable companies that have good reviews from the Better Business Bureau.

This guest post is by Arjun Rudra, who writes for Investing Thesis: Credits Towards Financial Freedom. For more of his insights, please consider subscribing to his feed.

Beware of the Refund Anticipation Loan!

According to a recent U.S. government study, seventeen million Americans manage their money without the use of a bank account. This means that they have no savings or checking account. Many look down upon this way of life, but it is difficult for me to say it is a bad thing given the fact that my grandparents live on a cash only basis. It seems to be working for them. So, what are the benefits of living without a bank account and managing your cold hard cash alone? Well, the main advantage is that you avoid unruly bank fees and the time it takes to manage and balance your checkbook each month. This makes living on a cash only basis very tempting for many consumers.

No Need For Commercial Banks! Tips For Cash Only Living

So, how does a person live without dealing with a commercial bank? Can you really live without the conveniences of high interest savings accounts and ignore the beckon of free high yield checking accounts? Well, let’s take a look here at some simple steps that show how you can live with a “cash only” system. Find out if this is something you can do!

1. Carry cash for groceries and gas.
Carrying cash for groceries and gas not only allows you to stick to your budget, but it also protects you from fraud against your bank account. Thieves are getting smarter and are now using special equipment to gather all of your debit and credit card information from the places you may swipe a credit or debit card. Using cash keeps your money safe.

2. Pay bills with money orders.
If you don’t have a checkbook, then how do you pay the plumber? Well, be careful: sending cash through the mail is not safe nor recommended. Therefore, a great way to pay your bills through the mail is to use money orders. You can get a money order at a grocery store, gas station, or the post office. You pay for the face value of the money order and a small additional fee for the service. Money orders are great for replacing the use of checks. In addition, you may actually save money because with a checking account you typically have to spend $20 or more on checks for your account. Money order fees may be much less than this for someone who does not have many bills to pay each month. But costs can add up and things may get impractical if you’ve got lots of bills to cover (you may have to be more organized to pull this off); still, going cash only may be the impetus to changing how you live. It may just encourage you to live on less (therefore generating fewer bills to pay!).

3. Use an envelope budgeting system.
Use envelopes to divide your funds for different categories of your budget. You can have an envelope for savings, food, gas, emergencies, utilities, and other bills. Divide your cash across envelopes so each category of your budget is fully funded. When money is removed, simply note your transactions on the outside of the envelope and write the new balance. This way, you know how much money you have available for each category at all times. Thus, it helps you to stick to your budget! More on the envelope budgeting system here.

4. Use a prepaid credit card for airline tickets and car rentals.
If you don’t have a credit card or a checking account with a debit card, you can always purchase a prepaid debit card online or from a drugstore or gas station for the purposes of paying for items that require a credit card such as airline tickets and rental cars.

5. Ask for receipts.
You may need to keep track of expenditures for tax purposes. When using cash, always ask for a receipt. Place all the receipts required for tax reporting in an envelope, file or organizer which you can turn to at the end of the year when you’re ready to work on your taxes. This will make it easier for you and your tax preparer to ensure that nothing is overlooked, plus these will come to your rescue in case of an audit.

Managing your money without a checking or even a high yield savings account can be done. I have been using “cash only” for food and gas for over 3 months now. It works wonderfully for me because I have better control of my budget. In the past, when I used a debit card, I would spend much more than I would budget for food. These days, when I run out of cash, I stop spending. It also makes it very easy for me to quickly see how much I have left in my budget. I just glance at my envelope and see the balance on the outside. Living on a cash only basis not only helps me save money, but also allows me to control my money. This should put me in a better position to be financially free. So is this something you’d consider doing? Brave enough to fire your banker?

 
Contributing Writer: Selena

Skip Commercial Banks! How Cash Only Living Can Work

When I learned about E*Trade selling their banking business to Discover, I knew my days with them were numbered (I later learned that only bank accounts with no brokerage relationships were moving… but alas the ball was already rolling). Brokers are finding it increasingly difficult to differentiate themselves and when you can get good customer service at a cheaper cost elsewhere, even the pioneers are going to find their businesses suffering. Those who have been reading for a while may remember me mentioning my investments at E*Trade and how I’ve been doing any new investing with TradeKing. My original approach was to leave my assets at E*Trade until I sell them, but a recent offer changed my mind.

TradeKing has a promotion where they will reimburse new accounts, defined as opened in the last thirty days, up to $150 in transfer fees. My account is far older than that but I asked a CSR if they’d be willing to extend that offer to me and they agreed! (had they not agreed, I wouldn’t have transferred…) E*Trade has a $60 full account transfer fee, much less than the $150 reimbursement limit, that is paid using account assets. I’m not sure what would happen if I had $0 cash, but the simple solution was to transfer $60 into the account prior to initiating the transfer. If you plan on doing this, be sure you have the amount of the fee in cash or you might not like what the brokerage does on your behalf!

ACATS

The process, surprisingly, was painless. Anytime you want to transfer your assets, you need to fill out a form with the receiving brokerage because they are the ones that initiate the transfer. For a full account transfer, TradeKing has a short ACATS form you must send along with your most recent account statement. When you want to transfer assets from one brokerage to another, you need to keep one acronym in mind – ACATS. ACATS stands for Automated Customer Account Transfer Service and that’s a system setup by the National Securities Clearing Corporation (NSCC) to automatically transfer assets from one trading account to another.

Historical Transaction Data

The only tricky part of the transaction has to do with historical data. When I transfer my account assets from E*Trade to TradeKing, the historical data isn’t included. I will need to go into my TradeKing account and manually enter the historical transaction data for those shares. I’m not sure how this will play out whenever I do my taxes but I’ve kept electronic copies of trade confirmations so I can prove, if the IRS requests it, when the shares were acquired. Since I’ll be closing my E*Trade account, I suspect they won’t be retaining those records.

Why am I transferring my assets? Simplification. I have a few holdings in E*Trade (shares of Apple, Southwest, M&T Bank, and Costco) and when I closed my E*Trade bank account, I was considered closing my brokerage account so I would have one less account to deal with. Obviously that’s a terrible reason to sell stocks, so the alternative was to transfer it to my main brokerage, TradeKing (#1 reason for them being #1 is price, $4.95 per trade). There’s nothing wrong with E*Trade, I’ve always been satisfied with them, it’s just a matter of another broker being slightly better.

One more account scratched off the list! (it’s looking pretty slim now)

Transferring Brokerage Assets from E*Trade to TradeKing from personal finance blog Bargaineering.com.

Many taxpayers are receiving W-2 forms and other tax documents in the mail. While some people are dreading having to prepare their annual tax return, others are looking forward to getting a big, fat refund – especially if they are unemployed or experiencing financial hardship.

Anyone looking forward to getting an income tax refund this year may be tempted to use one of those rapid refund services to get their money quicker. But taxpayers are better off skipping refund anticipation loans and just waiting for their money.

Loans Prey on Low-Income People

Many of the people who rely on refund anticipation loans have low or moderate incomes. They are socked with fees to receive personal loans to tide them over until they receive their tax refunds. The typical cost of one of these loans is around $250, according to the Wisconsin Department of Revenue. More than 8 million U.S. taxpayers lost about $800 million from their refunds last year because of these loans, according to Consumer Affairs.

Skip Personal Loan and File Electronically

Taxpayers usually receive their refunds in two weeks or less. For most people, filing electronically and having refunds direct deposited in a bank account speeds up the amount of time it takes to receive a tax refund. It doesn’t make sense to pay a fee for a loan or for a refund anticipation check when a refund can be direct deposited in a bank account in such a short amount of time.

More Fees for Refunds

Refund anticipation checks, which usually cost about $30, should also be avoided. About 12 million taxpayers paid about $336 million in fees to receive refund anticipation checks last year.

Taxpayers who don’t have a bank account should open one before filing their taxes. There are many free or low-cost bank accounts that don’t require a minimum balance. In many communities, free tax help is available from various agencies. Volunteers can help prepare and file returns electronically. 

Change Tax Withholding

Finally, it’s important to note that any taxpayer who is receiving a huge tax refund may have too much of their income withheld from each paycheck. Taxpayers can change their withholding by filling out a new W-4 form, which is available from the Internal Revenue Service (IRS). 

Anyone who receives a large tax refund has basically given the federal government an interest-free loan during that tax year. Changing withholding allows taxpayers to keep more of their income throughout the year. The IRS has a calculator to help taxpayers figure out how much of their paychecks to have withheld.

Deb and Rick Franklin

For nine months, Deb Franklin said, she did exactly what JP Morgan Chase and President Barack Obama told her to do. She made her mortgage payments on time, delivered via Western Union, after they were reduced from $1,433 to $1,233 through Obama's Making Home Affordable program. After three payments, the mortgage relief was supposed to become permanent, but a maddening string of paperwork headaches landed her in limbo. Then, on the day after Christmas, a "bomb dropped" on her life.

A letter from a law firm representing Chase said the bank had begun foreclosure proceedings against her. 

"It was devastating, just devastating," Franklin said. "I ended up on the couch shaking so badly that my husband started piling blankets on me saying, 'Are you OK?' And I told him, 'I'm not cold, I'm scared.' "

The Franklins are exactly the kind of family the Making Home Affordable program was designed to rescue. They were trying to hang on to their primary home, had enough income to make significant monthly payments and their home’s  value was still within shouting distance of their mortgage balance. Home values in rural Airville, Pa. — just across the Maryland border, near Baltimore — never exploded like those in America's big cities, so market value of their modest split-level hadn’t fallen far.

But instead of hope and help, the Franklins say their 10-month odyssey through the Making Home Affordable program raised their mortgage balance from $187,000 to $207,000, ruined their credit score, leading to cancellation of their credit cards, and now — despite making all their payments — put them on the brink of losing their home.

Franklin has been told by bank representatives that the foreclosure notice was sent in error, but she doesn't buy it. On a single day in early January, she says, one Chase representative told her that the loan modification plan had been denied, another said it was approved and a third told her the foreclosure had been "suspended."

"I check my county auctions every Monday to make sure my house isn't on there,” she said. “I don't believe anything they say anymore."

Some 4 million American homeowners qualify for the Making Home Affordable program, and around 850,000 of them have been offered lower payments on a trial basis, according to the Treasury Department.  Enrollees see their mortgage payments reduced to 31 percent of their income through interest rate reductions, fee waivers and lengthening of mortgage terms.  Entrants are told that if they make three "temporary" modification payments on time, they will qualify for permanent relief. But as of December, only 66,000 had seen their mortgage permanently modified – a number dwarfed by the 2.8 million foreclosures completed last year.

Until the lower loan payments are made permanent, banks are entitled to continue with foreclosure proceedings.

Franklin is one of many homeowners who have enrolled in the Home Affordable Modification Program (HAMP), offered as part of Making Home Affordable, who later compared their experiences through the Web site LoanSafe.org. They found that many of them had similar tales of lost paperwork, surprise foreclosure notices and ruined credit.  Msnbc.com reviewed about two dozen such stories involving virtually every major bank. Franklin, who shared an extensive diary of events she said she kept during her attempt to modify her mortgage, is typical.

"I don't know if President Obama knows what's going on," she said, adding that she recently sent a long fax message to the White House chronicling her Red Tape nightmare. "I don't know what else to do."

The Franklins' home

The Franklins hadn’t suffered significant loss of income during the recession. Rather, health problems and family emergencies pushed them to the brink of financial ruin, placing the home they’ve lived in since 1984 at risk. When their adult child had a near-fatal car accident in July 2008, they emptied their bank account to help him and his three children through the ordeal. Soon, their $1,433 monthly mortgage payments were overwhelming their budget, and they began to dip into their retirement savings. So Franklin was one of the first in line last March after President Obama announced the Making Home Affordable program.

She and her husband received a quick response after signing up March 2 on Chase’s Web site. They were told to call the bank two weeks later. Then, when they filed a 37-page packet with Chase later that month, they were told their application was “in underwriting. “ On April 22, they were told their modification was approved and a new payment of $1,233 was to be paid via Western Union beginning May 1.  If they managed to also complete payments on June 1 and July 1, their modification would be made permanent, Franklin said Chase employees told them.

The first sign of potential trouble came almost immediately.  On May 1, she said she was told during a phone call that her actual payment should have been $1,233.18 – so she was short 18 cents. If the 18 cents didn't arrive soon, her modification would be "canceled," she quoted the Chase employee as saying. She sent Chase a check for $1, to be safe, and on June 1 and July 1, she sent payment via Western Union for $1,234. Calls to Chase after each payment elicited the same response: "Everything is on track," Franklin said.

But in July, when the modification was to be made permanent, she said she was told that Chase's loan department was overwhelmed and that she would have to wait another 45 to 60 days. In the meantime, her log shows that Chase employees told her to keep making the temporary modified payments.

Things began to go south in August. She received a notice of default from the bank, which demanded $11,000 in late fees and unpaid mortgage payments to bring the loan current. A Chase operator told her to ignore the letter and to keep making modified payments.

Meanwhile, other parts of her financial life began to unravel.  Despite making the payments prescribed by Chase, the bank had reported her to the credit bureaus as having made only partial payments on her mortgage.  Her credit score plummeted from 660 to 444, and penalty credit card interest rates kicked in. In a short time, her cards rocketed from 8.99 and 14.99 percent to 29 percent. 

"They did not tell us that would happen when we entered the program," she said. "For many people, their credit is destroyed. I know people who say they never would have entered the program if they knew that."

(A Treasury Department official told the New York Times recently that many early applicants to the Making Home Affordable program did see severe credit score hits of “30 to 100 points.” But the official said that in November, banks developed a new way to report mortgage modification recipients to the credit bureaus that does not do as much damage to their credit scores.)

On Aug. 31, before making her next payment, Franklin called to check her status.  At this point, the operator said her paperwork was missing and told her to re-fax the entire 37-page application. She sent the documentation and submitted the payment.

On Sept. 29, she was told that her modification had been approved, but she still had to wait for some delayed paperwork — perhaps another 30 to 60 days.

On Oct. 10, she received a letter from Chase telling her to call immediately because her modification was at risk.  When she called, she said, an operator told her that the letters were "computer generated," and she should “disregard” them.

When a letter arrived on Dec. 7 from Chase warning her that "although we received a payment on your loan, it was not sufficient to bring the loan current," she was given the same advice by a Chase operator: "Disregard those letters." She was reminded that stable income and stable payment history were the most important factors in modification decisions. 

She was about to make her eighth trial payment when the nightmare letter arrived indicating foreclosure had begun.

“The law firm of Shapiro & DeNardo, LLC has been retained to initiate a lawsuit to foreclose the mortgage on your property,” it read. It indicated her loan balance was now $213,362.41 – more than $20,000 larger than when she’d entered the HAMP program. When she called the law firm, she was told that $13,235 was required to bring the loan current.

A call to Chase shed little light on the situation. 

"We were told the foreclosure process marches on even if you are in the modification," she said.

But an operator also told her that all her paperwork was in order, and she should receive her final modification within the week.  After a few more phone calls, a supervisor asked that she once again re-fax the application.

Two days later, a Chase operator who said he was in Florida called to say the modification had been denied, and demanded $13,235 to stop the foreclosure. A return call to Chase produced a different response: The family was approved for the permanent modification, the operator told her. A call to the lawyers’ office confirmed that the foreclosure was suspended.

But as of Monday, the Franklins were still awaiting final paperwork, and assurance that they will be allowed to remain in their home of 26 years. The most recent information, she said, came from a Chase operator, who told her there would be no new information until Feb. 1. On that date, Franklin will make her 10th modified payment.

“This whole thing just doesn’t seem like it makes sense,” she said. “Everybody is into the big political story here, but I think people are too wrapped up in that to know what’s really going on and try to deal with it.”

In a statement to msnbc.com Chase apologized for “incorrectly sending a foreclosure notice.”

Chase spokesman Tom Kelly said that the firm processed many other modification applications quickly, and had ramped up quickly to deal with an “unprecedented volume of customers” seeking mortgage help. He said the firm offered 600,000 trial modifications and approved 120,000 during 2009. Meanwhile, it added 5,000 employees to an existing staff of 8,000 who work with delinquent borrowers, he said. 

While Kelly declined to discuss most specifics of Franklin’s case, the statement placed some of the blame for delay on the family.

“We set up the borrower's trial modification payment using information the customer provided,” the statement read. “When we received the documentation, we learned that the family's income was significantly different.  As a result, we continue to review how we can best help the family.” 

So for now, Deb Franklin continues to scan the newspapers every week, making sure her home hasn’t been put up for sale.  She had a scare on Monday.

“I checked the sheriff's sale this morning and my heart sank when I saw a home on our road listed for auction,” she said.  “All I saw was the name of our road at first, but it was not us….Whew, dodged another one this week.”

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This is a guest post from Flexo of Consumerism Commentary. Flexo is embarking on a ten-day, ten-blog tour. Previously at Get Rich Slowly, he’s shared how to be CFO of your own life.

Humans are wired to seek comfort, and as a result much of daily life is focused around familiar patterns and habits. When something threatens to break those habits, we feel uncomfortable and nervous. These negative feelings are easily avoided by continuing to live life the same way, rejecting change. If given the chance to enter uncharted territory, a situation where life’s future is unpredictable, people often prefer not to change, clinging to a comfortable situation.

I still remember the summer before I left my home and family to attend college out of state. Although I’d spent summers away from home before, I didn’t feel ready to live without the immediate support of my parents on what seemed to be a more permanent basis. I considered postponing my college education or attending a community college for a year to ease the transition.

Realizing that millions of kids my own age had the courage to attend college while living on campus hundreds or thousands of miles away from their family, I decided to follow through. I convinced myself I was at least as capable as millions of other kids.

Looking back, the experience was perfect for me and I’m glad I found the strength to move away when I did. I adapted to the new living situation rapidly and found it wasn’t difficult to expand my Comfort Zone.

Breaking out for your career

There are four things that make us feel comfortable:

• Familiarity with location
• Familiarity with people
• Familiarity in thoughts
• Familiarity in actions

But if we cling to familiarity in these aspects of our lives, there’s no opportunity for real growth — personally, professionally, or financially.

My college experience dealt with location and people, but the changes we make in our actions can have an ever greater effect, and are key to financial gain. Working in the corporate world, anyone could grow accustomed to daily, weekly, or monthly patterns of tasks and responsibilities. Being adept or even excelling in these responsibilities isn’t enough for someone who wants to make an impression and increase the possibility of being rewarded.

Here are a few ways someone could break out of the Comfort Zone at work:

• If you don’t typically speak in front of others, prepare a short presentation about one of your responsibilities and share it at a meeting with your team.
• Develop a unique process improvement that has the possibility of increasing productivity, income, or whatever is important to your workgroup.
• Eagerly attempt a challenging assignment that normally would be handled by your supervisor or a “higher level.”

Not everyone is wired for corporate life. In fact, corporations are full of people who aren’t. They may be dreaming of some activity they would rather be doing only if money weren’t a consideration.

Two former vice presidents from my company were tired of corporate life, so they gave up their six-figure salaries to open a bed and breakfast in the Hamptons. This is happening everywhere; people are making major changes to their lives to fulfill a calling, a dream, or a passion. These changes always require a rejection of some level of comfort in pursuit of a new environment offering a possibility of self improvement.

Breaking out for financial growth

Aside from a career path or entrepreneurial dream, it’s easy to fall into a Comfort Zone with our finances. It’s easy to pay someone else to do basic yard work, for example. And if outsourcing this work is embedded in your family culture, paying someone else is natural and comfortable. There may be good reasons to outsource but in many cases there aren’t, and those reasons — no time, no skill — are often excuses. Even having never picked up a rake or planted a flower, a new self-responsible gardener could save a significant amount of money over time, amplified by compound interest.

Many people avoid investing because it seems difficult or risky from the outside. How do you know which stocks to pick? How do you handle a stock market crash? Whom can you trust? With these questions, many people stick to what they’re comfortable with: investing in their company’s 401(k) because someone else has made the decision for them, and saving anything else they have left after expenses at the end of the month in a bank account.

This is the result of financial comfort. While it feels good, and this person may have a sense of security that nothing bad can happen, the opportunity cost could be significant. By not taking action, the would-be investor is likely losing out on thousands, tens of thousands, or perhaps even hundreds of thousands of dollars over a lifetime. This could be solved by stepping outside the Comfort Zone and learning how to do something new: invest.

How to break out of your Comfort Zone

Whether you want to be rewarded at your job, be successful on your own, improve your financial situation, or just feel like you accomplished something, the key is to break out of your Comfort Zone. Even if what you are doing works for you, a little effort to try something new could result in a better outcome. If you keep doing only what’s ordinary, your results will continue to be just as ordinary. The only solution is to start doing something extra-ordinary.

But just like any move against human nature, this doesn’t come naturally. Here are some hints for making the transition easier and, well, more comfortable:

• Educate yourself. Find out how other people achieve what you want to achieve with a high level of success. Research your tasks as much as possible, reading case studies, books, and blogs. Find guides that provide step-by-step instructions for the task outside your Comfort Zone that you wish to accomplish. Keep coming back to your resources throughout the entire process.
• Team up. The internet is your friend, but nothing beats spending some time in personal conversation with someone whose path you’d like to emulate. If your goal is to stop buying dinner out and start cooking every day, reading recipes will only get you so far. Have an expert help you by giving you hands-on experience under the watchful eye of a personal guide. For whatever you want to achieve, find a class that lets you participate while working with classmates, most of whom could be in the same situation as you. There is safety — and comfort — in numbers.
• Create a plan. Writing down a challenge, whether just in a notebook kept in your night stand or on a blog public to the world, makes it real. I believe the more public, the better. (At Consumerism Commentary, I make my finances public, which means I’m accountable to the world, not just myself. This brings extra pressure, but motivation as well.) While writing, break your goal into at least three measurable accomplishments, and break those accomplishments into at least three tasks. This is your roadmap. For example, running a 5K is outside the Comfort Zone of many couch potatoes. In this case, a plan has been created for you. All you have to do is follow it.
• Take small steps. Like the first step of a couch potato on the way to her first 5K, the first step is always the most difficult. Any task that seems daunting can be broken down into smaller steps. Eventually, your series of small steps becomes your path to the goal. Some people can make the change they want in one leap once they decide to tackle the obstacle, but that’s not the right choice for everyone. In general, small steps result in success because a slow process helps to reinforce and internalize the experience — building gradual comfort.
• Breed a new comfort. As make slow progress through a series of tasks or through repetition, you’re actually e-x-p-a-n-d-i-n-g your Comfort Zone. That which you never would have considered doing is now something you might do without a second thought. You may find yourself looking for more and ready to make some new plans once comfort sets in. Despite my nervousness about college, it didn’t take long to feel comfortable there. I was soon looking for more challenges, such as running student organizations.

By breaking out of your Comfort Zone, you’re opening your mind to new experiences, so it’s natural for your goals and desires to change along the way.

An investing newbie whose goal was to familiarize herself with the stock market may have such a great experience after the first Comfort Zone breach that she may be inspired to become a financial planner and to help others achieve their financial goals. The factory worker who quits his job to run his own business may achieve personal success which inspires him to meet new people including his future wife.

The rewards for escaping your Comfort Zone are limitless. The rewards for never expanding your experience are well-defined: more of the same.

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Related Articles at Get Rich Slowly:

• links for 2007-05-18
• Pep Talk: The Courage to Succeed
• 12 Financial Tips for Women
• Daily Roundup: Cars, Cars, Cars
• Golden Goals Interviews at Zen Habits

Not too long ago, when SmartyPig first debuted, I complained about how high SmartyPig’s fees were. I wasn’t the only one and shortly thereafter, they dropped many of those fees and restructured their program a bit. I think it’s a testament to their openness to feedback and willingness to adapt to their customer’s needs.

So what exactly is SmartyPig? It’s a website that helps you save towards your goals, giving you a high yield interest rate (currently 2.01% APY) and the ability to have family and friends help you save towards your goal. When you’ve achieved it, you can access it by having it transferred back to your bank, converted to a debit card, or converted to a retail gift card.

How SmartyPig Works

One of the big benefits of ING Direct was how easy it is to open new accounts for various savings goals. SmartyPig is setup with that same goal in mind, making it easy for you to setup savings goals. The difference is they add a social element, other people such as your friends and family members can contribute to your goals as well (if they fund a contribution with a credit card there is a 2.9% fee, I suspect this is to cover the credit card processing costs).

You can set a savings goal for anywhere from $250 to $250,000 and your minimum deposit has to be greater than $25 to start your goal. Then, each month, you must contribute at least $10 and your savings earn interest (currently 2.01%). Then, once you reach your savings goal, the monthly contributions stop and you can decide what you want to do from there. You can continue to contribute, convert it to a gift card from one of their partners, or have it transfered back into your bank account (for free, this was one of the fees they dropped!).

Gift Card Conversion

Besides the 2.01% interest rate and the ability to send money around, probably the biggest value-add of SmartyPig is in gift card conversions. You can convert your savings into a gift card or voucher to one of their partners with a percentage bonus.

For example, let’s say you decided to save money for a couch. When you’ve reached your goal, you have several options. You can simply transfer the funds back into your bank account or you could convert it into a Macy’s gift card. If you decide to convert it into a Macy’s gift card, you get your goal amount plus 12%. Macy’s is by far the most generous but there are other vendors such as Barnes & Noble (5%), Bed Bath & Beyond (4%), iTunes (2%), The Home Depot (3%), and more.

This can significantly boost your savings’ interest rate.

FDIC Insured

Your money at SmartyPig is FDIC insured up to $250,000 as the funds are held at West Bank, which is itself a 115-year-old subsidiary of West Bancorporation (WTBA). Anytime you are looking at a bank, and SmartyPig is essentially a bank account, you need to ensure that your money is protected in some way by FDIC or NCUA insurance.

The final question, after you understand how it works and that your principal is protected, is whether getting 2.01% APY and a potential secondary pop if you convert to a gift card is worth the hassle. I’m discounting the social aspect of SmartyPig, where friends and family can contribute towards your goal, but everything else makes me think that it’s only worth it if you have a large goal in mind and can benefit from the gift card bonus.

I do like the idea of people savings towards their goals with a service like SmartyPig, rather than borrowing via store financing or a credit card. I think with the recession, a lot of people are reverting back to novel ideas like saving up for something.

If you have personal experience with SmartyPig, please share them with in the comments below. I’m especially interested in any headaches or issues you may have experienced, I’ve learned that they seem pretty receptive to that and hopefully we can get any headaches resolved. If you have a great experience, please share those as well!

SmartyPig Review from personal finance blog Bargaineering.com.

This guest post from Rita marks the start of a new feature here at Get Rich Slowly. Every Sunday will include a reader story (in the new “reader story” category). Some will be general “how I did X” stories, but most will be like this: An example of how a GRS reader achieved financial success.

I discovered Get Rich Slowly from a link on MSN Money in the fall of 2008. I’d just purchased a home with my husband and I was in a lot of debt (we keep separate finances for reasons of convenience). I’m not the type of person to feel hopeless or sorry for myself. I realized that I had only myself to blame for my situation and I really wanted to turn things around.

The best thing I ever did
The single best thing I ever did for myself was create an excel spreadsheet which added up the debt that I owed. I’d never taken a look at my “number” before and, oddly enough, it made me feel better knowing that I was getting organized. I then created a list of my monthly fixed expenses and a paycheck-by-paycheck spending plan (I don’t like the word “budget” because it sounds too restricting). Whatever I had left over each paycheck was my debt snowball.

My situation was relatively simple: I made a nice salary and I had money left over each paycheck because I had already optimized my auto insurance, cell phone bill, gym membership, etc. After looking at past bank statements and credit card bills, I realized that I wasn’t spending money on clothes, video games, etc. but I was spending way too much on experiences (trips, dining out, concerts, etc). Understanding my spending habits helped me plan for debt elimination.

In order to start my debt snowball, I ordered my debts from the smallest to the largest (conveniently, my smallest debts also had the highest interest). I scheduled payments to the assigned debt each paycheck until it was gone and then moved on to the next debt. I estimated that it was going to take me about 18 months to pay off everything; however, I was fortunate enough to receive a sizable bonus this month (of which I put $1,000 in savings and the rest toward the last of my debt).

The secrets of my success
I believe I was successful for a few reasons:

• I read Get Rich Slowly everyday to keep me motivated. It was nice to know that other people were in or had been in my situation before and were able to pay off their debt and save for their future.
• I also allowed myself a certain amount of “fun money” each paycheck to keep me motivated and happy. I paid all of my bills as soon as I received my paycheck (including my debt) and all that was left in my account was my fun money (this is how I kept myself from overspending on activities).
• Most importantly, if I had a minor setback (car repair, vet bill, etc) that ate into my debt snowball, I did not let it get me down.

I also went through my share of challenges. I tried to follow your advice that I should build a small emergency fund before paying off my debt, but I failed at this numerous times. I have always been a little bit of a risk-taker, so I decided that I had a large enough cash flow to just pay for unexpected expenses out of my debt snowball if needed. I was also in debt elimination mode so I felt like that money would be better spent on my debt. I wouldn’t necessarily recommend this method, because I do think it is better to build a small savings; however, I was just coming out of a period of bad spending habits and I didn’t trust myself not to spend the money that I had in savings.

Some would say that I should have put my fun money toward my debt instead of spending it, but I believe that having that extra money to spend on whatever I wanted was what made me succeed in paying off my debt so quickly. When I started my debt payoff, I cut up all of my credit cards (and left the accounts open) and just used the fun money in my bank account to spend freely. I know I would have paid off my debt sooner had I not spent this money, but I was a much happier person for having it.

Life after debt 
Now that my debt is paid off, I have a new spending plan which allocates a large portion of what was previously my debt snowball to a Roth IRA and an HSBC Direct online savings account (my emergency fund). Funds are allocated to my accounts through direct deposit each paycheck so that I can’t mess with them. Once my online savings account has reached my goal, I’ll begin allocating funds to a few other online savings accounts (one for vacations, one for a car, and one for irregular expenses).

I’m now able to keep my needs at 50% and allocate 20% to my wants and 30% to my savings (I am maxing out my Roth IRA and building an emergency fund). My goals for the future include paying cash for my next car, building a $20K emergency fund, and paying off my federal student loans.

Thanks so very much for creating such a useful and inspiring blog. I will continue to be an avid reader and forward your posts to my friends.

Reminder: This is a story from one of your fellow readers. Please be nice. After nearly a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.

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Related Articles at Get Rich Slowly:

• Reader Success Story: Debt Free on $2,000 a Month
• Reader Success Story: “We Paid Off $23,000 of Debt in 16 Months”
• Getting Out of Debt: Oh What a Relief it Is!
• Reader Story: What My Father Taught Me About Debt
• Reader Story: Two Approaches to Car-Buying

The allure of automation is obvious. Look at the famous Ronco Rotisserie catchphrase – “Set it and forget it!” Automation is appealing because it lets computers do the work and lets you do something else more interesting. Set your 401(k) contribution each month, set the allocation, and then go spend time with your family. Set credit cards on auto-pay, go all electronic for the statement credit and for the environment, and spend more time playing video games and watching television.

I get it and I love automation too, but there’s something you should know… automating your finances can lead to bad habits, bad habits can lead to tragic losses and big mistakes. In this Devil’s Advocate post, I explain why automating all of your finances can be an expensive mistake.

Automation Makes You Lazy

Every working adult who contributes to an employer defined contribution plan, like a 401(k), has automation in their life. You pick a percentage of your salary to contribute towards your retirement and then you let it do its work. You focus on doing a great job, landing the next promotion, and securing clients while computers make sure you contribute each month towards the future.

It makes you lazy because that’s where many people’s involvement with their 401(k) ends. They don’t rebalance, they don’t review their investments with their goals, and only react when something crazy happens – like the start of the recession last year. Near retirees discover their allocations are far too heavy in stocks and now they can’t retire on time. Young professionals panic as their balances crumble, not realizing that they are 40 years away from touching the money, that the drop in the stock market actually helps them in the long run because they can buy stocks on the cheap.

Automation has the potential of making you lazy and you may reaction emotionally, rather than strategically.

Out of Sight, Out of Mind

The idea of regularly contributing to your 401(k) is very powerful because in that case, laziness is in your best interest. If you forget that you are contributing to your 401(k) each month, there’s very little downside. If, however, you setup automatic transfers from your bank account to a high yield savings account, there can be consequences.

Let’s say you regularly transfer $100 each month from your checking account to an ING Direct savings account. The $100 goes to a savings account earmarked for your first home. It’s a great idea and I fully support it. You also learn that this year you’ll be getting a $200 bonus… hooray! That’s great news, congratulations! So you log into your checking account and see that you have $500 in there, so you setup a transfer of $400 figuring the extra was just accumulated savings over the last few months. Then the automatic transfer happens, your balance is now $0. Then you get dinged for minimum balance fees or maybe you use your debit card… Zing! Insufficient funds.

Automating your savings is a good idea… but you have to stay diligent and remember you’re doing it, or you could shoot yourself in the foot.

Risks of Autopay

More and more companies are now offering auto-pay, where your bill is automatically paid in full with a credit card or bank account. In theory, it’s a great feature because you would certainly be paying many of these bills in full (electrical, cable, water, etc.) but there are several huge risks to be aware of:

• You forget. The whole argument of “out of sight, out of mind” from above holds true again. You forget that you made a big purchase this month on your credit card, you intended to transfer money out of savings, but the autopay was early and you got dinged.
• Once you pay, your ability to dispute fraud is diminished. Earlier this year I read a story about a retiree who became the victim of credit card fraud. Normally this isn’t a news story, since your liability for credit card fraud is limited to $50 by federal law and most companies offer $0 fraud liability. The wrinkle in his case was that he auto-paid the bill, without reviewing it beforehand, and so he implicitly agreed to all the charges. I don’t know the end result of that story but it certainly involved headache.
• Unexpectedly large charges, fraud or otherwise, really mess up your week. There’s the risk that you forget about the autopay, which is kind of your fault, and then there’s the risk that an error or fraud starts a cascading series of fees. Maybe your energy bill spikes up because your water heater fails or there’s a billing error on your cell phone that racks up a $10,000 bill. If you autopay, you may be out a lot of money for a long time while various companies “investigate.”

Summary

Automating your finances can be great if you’re able to keep on top of it. If you’re doing it to unload some of the work, such as not having to review your statement or log in to click “schedule payment,” you might want to do yourself a favor and keep some of those tasks on the manual list. Automation works great for things that have no dependencies, such as 401(k) contributions, but for everything else, consider doing it manually (especially if doing it requires only a few mouse clicks!).

What are your thoughts on automation? Where does it make sense and where could it introduce headaches? Are there things you do to mitigate the risks of automation in some aspects of your personal finances?

(Photo: genewolf)

Automating Your Finances is an Expensive Mistake from personal finance blog Bargaineering.com.

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