The Consumer's Almanac

* Organize your financial life

* Plan for the future

* Manage your credit wisely

How to Use The Almanac

Annual Income, Savings, and Expenses Chart

The purpose of this chart is to help you plan ahead. Fill it in so you can anticipate and plan ahead for your income, savings, and expenses. You may find it helpful to use last year's bills, receipts, and checking account information to complete this form.

• List your projected income, savings, and expenses for the year. For example, your rent or mortgage will be a fixed amount each month, so you can go ahead and enter that for the entire year. Other expenses, such as insurance premiums, may be paid once or twice a year.

Monthly Calendar Page

Income

• List all sources of actual "take-home" income earned for that month. Also list any income you received from other sources, such as a part-time job, tax refund, gifts, and dividends.
• Total the income entries to determine your actual income for that month.

Savings

• List the amount you deposit in savings accounts each month from your take-home income.

Expenses

• List all your fixed and variable expenses. Fixed expenses are set amounts for items and services that you must have and pay for this month. Variable expenses change montly and are paid on a quarterly, semi- annual, or annual basis.

Total

• List you total income, then subtract total savings and total expenses to get the balance remaining. The remaining balance will be carried over for the next month or used for unexpected expenses.

If this month's balance shows a negative amount, make adjustments by cutting back on variable expenses.

Actual Expenses

TOP 10 WAYS TO PREPARE FOR RETIREMENT

1. Know your retirement needs.

Retirement is expensive. Experts estimate that you'll need about 70% of your pre-retirement income. Lower earners will need 90% or more to maintain your standard of living when you stop working. Understand your financial future.

2. Find out about your Social Security benefits.

Social Security pays the average retiree about 40% of pre-retirement earnings. Call the Social Security Administration at 1-800/772-1213 for a free Personal Earnings and Benefit Estimate Statement (PEBES).

3. Learn about your employer's pension or profit sharing plan.

If your employer offers a plan, check to see what your benefit is worth. Most employers will provide an individual benefit statement if you request one. Before you change jobs, find out what will happen to your pension. Learn what benefits you may have from previous employment. Find out if you will be entitled to benefits from your spouse's plan. For a free booklet on private pensions, call the U.S. Department of Labor at 202/219-8776.

4. Contribute to a tax-sheltered savings plan.

If your employer offers a tax sheltered savings plan, such as a 401(k), sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, deferral of taxes and compounding of interest make a big difference in the amount of money you will accumulate.

5. Ask your employer to start a plan.

If your employer doesn't offer a retirement plan, suggest that they start one. Simplified plans are available to certain categories of employers. For information on simplified employee pensions, order Internal Revenue Service Publication 590 by calling 1-800/829-3676.

6. Put money into an Individual Retirement Account.

You can put $2,000 a year into an Individual Retirement Account (IRA) and delay paying taxes on investment earnings until retirement age. If you don't have a retirement plan (or are in a plan and earn less than a certain amount), you can also take a tax deduction for your IRA contributions. Withdrawals prior to age 59 may be subject to a 10% penalty tax.) IRS Publication 590 contains information about IRAs.

7. Don't touch your retirement savings.

You'll lose principal and interest, and you may lose tax benefits. If you change jobs, roll over your savings directly into an IRA or your new employer's retirement plan.

8. Start now, set goals, and stick to them.

The sooner you start saving, the more time your money has to grow. Devise a plan, stick to it, and set goals for yourself. Start saving now, whatever your age.

9. Consider basic Investment principles.

How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you'll have saved at retirement. Know how your pension or savings plan is invested. Financial security and knowledge go hand in hand.

10. Ask questions.

Talk to your employer, your bank, your union, or a financial advisor. Be sure the answers make sense to you. Get practical advice and act now.

SHOPPING

Low-Cost Shopping and Healthy Eating

• Buy in quantity and freeze meats, bread, and butter.
• Avoid costly convenience foods that are precooked, presweeted, spiced, instant, or individually packaged.
• Encourage children to help with cooking. If they helped make it, they'll probably eat it.
• Eat before shopping to avoid impulse buying. Make a shopping list and stick to it.
• Buy nutritious snacks for children such as apples, oranges, bananas, carrots, celery, raisins, peanut butter, and popcorn. They are healthier and cheaper than most sweets.
• For a sweet tooth, buy graham crackers, animal crackers, or gingersnaps.
• Encourage children to drink more water by giving them their own water bottles.
• Use coupons only for items you normally purchase.
• Shop on Tuesday, Wednesday, and Thursday evenings for the shortest lines.
• Shop at discount food warehouse and buy in bulk. If your household is small, shop with a friend and share purchases.

General Shopping. Most retailers hold winter sales around the holidays. Prices are reduced to bring consumers back into the store after the holiday-spending period. Also, it pays to be knowledgeable about the item or service you're about to purchase. Take the time to polish your comparison shopping skills:

• Read the information on the label.
• Understand the maintenance requirements.
• Pay attention to differences in quality.
• Make a purchasing decision after you've researched the item.

Internet Shopping. The world has become your personal in-home shopping mall. You need to be cautious when buying online.

• Do not disclose your personal Internet password.
• Think twice before giving out your social security number over the Internet.
• Shop with companies you know and trust.
• Use a secure browser that complies with industry standards, like Secure Hypertext Protocol (S-HTTP) or Secure Sockets Layer (SSL).

Instead of money, spend time to plan and prepare.

COPING WITH POWER OUTAGES, FLOODING, AND PROPERTY DAMAGE

How long does food keep in a refrigerator or freezer when the power goes out?

• Generally, 24 hours in a refrigerator or a half-full freezer and 36 to 48 hours in a fully loaded freezer. Don't open the door. Do not refreeze frozen food that has thawed.
• The USDA recommends discarding refrigerated milk 8 hours after a power loss. Fresh eggs are safe unrefrigerated for 2 hours; discard ones with cracked shells, odor, or discoloration.
• Discard fresh meat, lunch meat, hot dogs, and hard-boiled eggs if held above refrigerator temperature (40 degrees F.) more than 2 hours.
• Butter, margarine, and hard cheese are safe unrefrigerated if well wrapped. They can be frozen.

What precautions do I take if my basement floods?

• Unplug electrical appliances. Keep an eye on the pilot light of a gas furnace or water heater; if flooded, get professional cleaning assistance.
• Water on the floor can be removed with a wet vac or a siphon attachment on a garden hose. For a wet carpet, remove water with a wet vac and air it out. Replace the padding. Steam-clean the carpet.
• Homeowner policies generally do not cover flood damage unless the homeowner has purchased flood insurance.

Who is responsible for paying for damages when a tree falls?

If a street or park tree falls, it's the government's responsibility. If a yard tree falls, it depends: If your tree falls on a neighbor's house, the neighbor's insurance will pay. If it falls in your yard, it's your responsibility.

How do I prevent being ripped off in contracting repairs?

When selecting any contractor, ask for proof of current insurance. For home repairs, ask to see their license. For all contractors, check references and get three bids. If the price seems excessive, call your insurance company for advice. Prices rise during emergencies. Wait several weeks, if you can.

Check your standard homeowner's insurance policy to determine if you're covered for damage to your property from a storm.

DUAL-INCOME HOUSEHOLDS

Money is the number-1 problem couples fight about. It's often the spark that ignites bickering about ambitions, fears for the future and the inevitable power struggle. Communication is vital. Talking about how you plan to earn, spend and save money is easier when you agree on the priorities. Regardless of income levels, couples benefit from forming and adhering to a spending plan that includes discussion about making major purchases.

Financial advisors encourage wage earners in two-income households to design a plan that maximizes the benefits of the second income. For lower wage earners, the costs of child care, income taxes, and workrelated expenses may outweigh the income benefits of a second job. Even for high wage earners, without proper planning the maximum benefit will not be realized, and in some instances, the additional salary can be a tax liability.

Planning tips for dual-income households:

• Jointly decide if the paychecks will be combined into one checking account, or maintained in separate individual checking accounts. A designated amount from each paycheck could be deposited into a separate household account.
• Decide who will pay the bills and maintain the account.
• Each partner must have a personal allowance. Agree on the amount and make the money available routinely.
• Agree upon a savings and investment plan.
• Make the decision together on how you will finance new purchases such as
• a car or appliance. Regardless of who the user will be, avoid debt levels that will demand the full earning potential of both wage earners.
• If you file income taxes jointly, you are each responsible for any inaccuracies or errors on your returns. Before signing the tax return, examine the forms and ask questions.
• If you jointly hold a credit card account, you are both responsible for any debts incurred on the account.

COMMUNICATE--COMMUNICATE--COMMUNICATE

PAYING FOR YOUR CHILD'S COLLEGE EDUCATION

This is probably the most intensive short-term cash drain on any family's finances. Unlike most other big- ticket items, such as homes or automobiles, that can be paid off in monthly installments, college tuition must be paid out over a relatively short period of time. With tuition at staggeringly high levels throughout the nation, a family's commitment to provide higher education for children can be overwhelming.

Ideally, a long-term plan for college education was initiated from the birth date of your college-bound student. There is no better way to ensure a child's education that a systematic savings plan. But this is not an ideal world, many of us must finance part of the college education out of the monthly family budget.

Before selecting a college, parents need to:

1. Determine how much funding can be available from conventional sources such as savings, income from the family budget, trusts, and part-time jobs, if more money is needed.
2. Explore the availability of scholarships, low-interest student and parent loans, second mortgages, and conventional loans.
3. Examine their own life insurance policies and retirement programs to ensure that college funds will be available in the event of their death.

Cost is not the only factor to be considered when selecting a college. While private colleges are generally more expensive than public colleges, they often have a wealth of financial aid programs that will make the tuition bite less severe. Many state and community colleges also have scholarships and loans available.

Libraries and bookstores carry many excellent college guides that give detailed information on individual college tuition charges academic programs. Keep in mind that most colleges have a financial aid office to assist students in determining when financial assistance may be available.

Tuition and associated fees increase by 6% each year.

HOUSING COSTS AND REMODELING

If you're finding the purchase of a new home an overwhelming prospect, you're not alone. For many people, an affordable alternative to buying a new home is to stay put and remodel their present house by adding more space or renovating. Home remodeling is a multi billion-dollar industry in the United States.

While remodeling can be less expensive than buying a new home, it still represents a considerable investment. As with most worthwhile projects, planning is essential. Please consider the following tips before starting your remodeling project:

Deal with a qualified and reliable remodeling contractor. It's best to get at least three estimates. Check each contractor's references with local home building and/or remodeling associations and previous customers. Avoid contractors who can't furnish a list of satisfied customers. Ask references the right questions:

• Was the work done on budget?
• Was the work done on time?
• Was the contractor tidy and courteous? The workers?
• Can the contractor handle finish carpentry work?

Do not sign a contract until you are absolutely confident you understand all the fine print. When possible, consult an attorney on contracts for major renovations. Default on a legal contract could result in a lien on your properly, and , even worse, possible loss of your home to satisfy the debt.

Arrange the financing carefully. Few families pay for remodeling in cash. Many financial institutions offer second mortgages and home equity loans secured by your house. The interest charges on second mortgages and home equity loans are an income tax deduction.

Structure your contract so that the contractor will be paid in stages: 30% prior to the project's start; 30% when the work is half done; and the remainder upon completion. Many states have statues that require contractors to warranty their work.

Inspect the work in progress; ask questions. Remember, It's your home that is being remodeled.

HOW MUCH CREDIT CAN YOU AFFORD?

Before making the decision to add more debt, you need to make sure that you:

• Allocate sufficient money for your essentials.
• Borrow only for items that you need and can afford.
• Borrow only if you're spending less each month than you take home.

1. Start with your monthly take-home pay.

This is the amount you have left after taxes and other deductions have been made.

2. Subtract the amount you need for necessities and fixed expenses.

This includes savings, your mortgage or rent payment, utilities, food, transportation, child care, medical care, clothing, and recreation. Include payments made on a quarterly, semi-annual, or annual basis, such insurance and taxes.

3. Subtract monthly payments for existing loans and credit cards.

4. The balance is the amount you can safely apply to debt repayment.

Avoid thinking you can spend all this amount, since emergencies do occur, and you may not wish to use your regular savings account to cover small, unexpected expenses.

HOW TO MANAGE CREDIT CARD USE

Many people find themselves with credit problems because they don't keep track of purchases they make with their credit cards. A simple method of keeping track of monthly credit card charges is to:

1. Determine the total amount you can responsibly charge on all your credit card accounts during that month.

2. Keep track of your credit spending in the same way you maintain a running balance of your checking account.

3. Subtract each amount charged from the monthly charge limit you set.

4. Stop using your credit cards if you draw this balance down to zero.

TRAVEL / VACATIONS

Do some careful research before you take off on a holiday, business, or personal trip. Real travel bargains do exist. Contact an airline reservation agent or travel agent to determine the lowest possible fare. You can lower the cost of the airline ticket considerably by including a Saturday-night stayover. The best prices for international airfare are usually offered during January. Check with your travel agent about the many package deals available.

Driving your automobile affords the most flexibility in planning a vacation. If you decide to drive, check the condition of the tires, belts, battery, and spark plugs. Maintenance is always less expensive than emergency road service.

Keep these points in mind regardless of the mode of transportation:

• Plan and pack carefully. It's wise to make a list of travel wants and needs. Remember, it is very expensive to buy your necessities at vacation stores.
• Adjust your travel schedule to take advantage of discount travel packages.
• Understand any restrictions placed on your purchased airplane or train ticket. Be sure to find out if you're entitled to a full or partial refund in the event your travel plans change.
• Be sure you can afford to pay for your vacation out of future income before you borrow to go on vacation.
• Remember, the cheapest seat on a train or airplane will get you there at the same time as the most expensive seat.
• Occupy your children on long trips with games and books that are not disruptive to the driver or other passengers on a plane or train.

DO YOUR HOMEWORK BEFORE BUYING OR LEASING A VEHICLE

If you're in the market for a new or used car this year, you can save money by doing your homework before buying or leasing. It will be helpful to consider the following before selecting and financing your next vehicle:

1. Determine how much you can afford and how much you will pay for the car. Cash is the least expensive, but two of every three car buyers must use credit. Evaluate terms offered by automotive finance companies and other lenders. Compare financing terms as well as car prices.

2. Make as large a down payment as you can afford and plan to repay the loan as soon as possible.

3. Select a car model within your budget that will meet your needs. Loading a car with options might double the original base price, so decide which options are essentials and which ones you can live without.

4. Buy during the late summer or early fall, just before the next year's models arrive.Dealers offer discounts on last year's inventory.

5. Compare various dealers' discounts on a particular car's list price. Don't be afraid to negotiate. Evaluate the manufacturers' warranties. Compare what they cover and what they don't.

6. Read your sales agreement before signing it. Make sure it is approved by the sales manager and that all oral promises made by the salesperson regarding special services or adjustments are included in the contract.

LEASING

Many consumers are considering leasing rather than purchasing a new or used car these days. If you're thinking about leasing your next car, here are four tips to keep in mind:

1. Shop and compare. As in any contract, the terms in lease agreements are negotiable. Check around for the best deal.

2. Know your driving style. Consider factors like how much you drive and how often you change cars.

3. Be aware of any costs involved if you end the lease early.

4. Remember that leasing a car is different from buying a car. When you buy, you're the owner. You pay for the car, you keep the car. When you lease, pay to drive a car owned by someone else. At the end of the lease, you give it back.

A carefully selected used car can provide as reliable transportation as a new one. Seek the expertise of a mechanic for checking out a used car.

CHILDREN AND MONEY

You can give your child a boost toward becoming a good money manager if you manage your own money well. For better or for worse, children learn how to handle money from their parents. Also, like parents, they are tempted by advertisements.

What you tell a child about money depends on his or her age and ability to understand the information. Money discussions can begin as early as pre-school and continue right through the late teens. With today's home computers and the availability of programs that teach children about money, children can learn the basics in an enjoyable way at an early age at school and home.

Giving children an allowance helps them make spending decisions. It teaches the child the benefits of saving money today for important goals later in life. Having a voice in establishing family goals will help children realize that the family is working together to set priorities and solve any financial problems that might occur.

In determining an allowance for your child, follow these suggestions:

• Provide an allowance as soon as your child is old enough to understand how money is used in exchange for things that are needed or wanted.
• Discuss the kinds of purchases the allowance should cover. Frequently, misunderstandings about money occur among adults when there is a lack of communication; with children the same holds true.
• Make saving on a regular basis a part of the allowance.
• Encourage your child to give a church or charity.
• Evaluate children's allowance periodically. Remember that as children grow older, the amount may need to increase. It's a good plan to have them account for their allowance at month's end. It will help the child to gain an appreciation of how much they saved and spent.
• Instruct teenagers about using and maintaining a checking account.
• Teach children how to use credit wisely, as it will be part of their future.

Set an example for your child. Manage your money. Don't let your money manage you.

Many financial institutions are making loans through an automated loan machine (ALM). These machines are being placed in financial institutions, large retail outlets, and shopping centers nationwide. ALMs allow credit-worthy consumers to obtain loans in amounts ranging from a few hundred dollars up to $10,000 without having to face a loan officer. Generally, the interest rates for loans made through ALMs are the same as for conventional loans. Using an ALM is relatively easy:

• You provide identifying information, such as credit card numbers, driver's license number, address, telephone number, and the dollar amount you want to borrow.
• The ALM verifies the information.
• Your provide information on income and employment. If this meets the lender's requirements, the ALM electronically obtains your credit report.
• The ALM applies the lender's credit requirements to the application.
• If your loan is approved, you select a repayment option that fits your budget.
• You read documents pertaining to your loan on the screen, then sign them with an electronic pen. The ALM prints the loan documents.
• You have the option to receive a check or an electronic deposit in your account.

ELECTRONIC BANKING

Automated teller machines (ATMs) use computer and electronic capabilities as a substitute for checks and other transactions. This provides the convenience of 24-hour access to cash by allowing you to:

• Bank at any time of the day or night.
• Make direct deposits or withdrawals from your checking or savings accounts on a regular basis. Arrangements can be made to have your bills paid automatically. You must authorize transactions in advance for this service.
• Telephone your financial Institution with Instructions to pay certain bills or transfer funds. You must authorize transactions in advance for this service.
• Pay for purchases with a debit card. This involves an immediate transfer of money from your bank account to the store's account.

ATMs help save time. Remember, a convenience fee may be charged if you're not a customer of the bank.

Save in advance.

It sounds simple, and it is. You must discipline yourself to save a few dollars from each week's paycheck during the year. If you aren't disciplined enough to save regulary on your own, consider joining an interest- paying holiday savings club at your bank or credit union.

Moonlight.

Taking on a part-time job for a few months, or working overtime, is a great way to earn extra spending money in time for the holidays. Even better, work a little extra here and there throughout the year, saving most, if not all, for holiday expenses.

Draw names.

If your list of family and friends is long, suggest this approach to gift giving.

Take advantage of seasonal bargains.

Many stores begin their year-end sales during the holiday season. Be alert for bargains, especially if bad weather causes sales to be slow.

Consider shopping by catalog.

Many find that catalog shopping helps them stick to a budget. They're not seduced by the millions of choices available in stores. An added advantage is shopping from home and avoiding crowds. However, shipping charges will need to be included in your budget.

Allow time for planning and comparison shopping.

Keep your budget in mind and shop carefully to get the best selection and price.

Borrow wisely.

Budget your purchases.

Taking control of your holiday spending helps you avoid seasonal stress, and allows you to enjoy this time of year with family and friends.