Two bloggers have (allegedly) died from blogging.

While the demands of this blog have not weighed that greatly on me, it has become increasingly difficult to produce quality content.  I’ve been working longer hours at the day job, and I just don’t have enough time in the day to do everything I want to do.

I suppose I join the ranks of thousands of bloggers who don’t make it past the first year.  But I’m pretty proud of what I’ve written, and I have no regrets.

Thanks for visiting me, and best wishes to everyone!

Credit card companies are greedy.  That’s no surprise; they are, after all, just businesses trying to turn a profit.  Unfortunately, that profit comes from people like you and me, credit card users.

After recent interest rate cuts by the Fed, you may have expected your credit card rates to ease.  Many credit card companies peg rates to the prime rate, a rate that is based on the Fed fund rate.  When the Fed fund rate falls, so does the prime rate.  So, naturally, you’d expect credit card rates to follow.

Not so.  Even after recent rate cuts, many people were no better off than before.  Banks and card companies have some discretion when it comes to setting rates; they don’t follow the Fed in lockstep.

Recently, some credit card companies have taken a bigger step to decouple from the prime rate.  Capital One, for example, has changed several of its credit cards to fixed interest rates for new customers.

What’s the difference between variable-rate and fixed-rate credit cards?

A variable-rate credit card has a fluctuating interest rate, usually expressed as prime plus some percentage point.  When the prime rate increases, so does the interest rate on the card.  When the prime rate falls, as it has done recently, the interest rate on the card falls as well.

A fixed-rate credit card is not pegged to the prime rate.  The card issuer gives you an interest rate, and that’s the rate you pay regardless of whether the prime rate is moving up, down, or sideways.

To find out which type of card you have, dig up your card’s terms and conditions.  The section specifying rates will mention a benchmark rate (prime or LIBOR) if your card is a variable-rate card.  Otherwise, it’s most likely a fixed-rate card.

Credit card companies preferred fixed-rate cards when the Fed is cutting rates, and variable-rate cards when the Fed is raising rates.

According to the Wall Street Journal,

When overall interest rates are falling, more companies shift to fixed-rate cards, which results in lower rates being passed to consumers more slowly. When rates are rising, companies prefer variable-rate cards, which let them more quickly raise the rates charged to consumers. This helps bolster profit margins on credit-card loans when the companies’ cost of funds is increasing. Among the 50 largest issuers, 65% of cards are currently variable rate, according to Bankrate.com.

“If rates continue to fall, we’re going to see more banks convert to fixed rates,” said Curtis Arnold of CardRatings.com, a credit-card comparison Web site. “If their cost of funds is decreasing, they don’t have to pass along the lower rates to their customers.”

But consumers don’t really benefit from either cards in either environment.

When interest rates are falling, a consumer may suddenly be slapped with a higher interest rate after his or her card company re-evaluates the account’s credit-worthiness.  This can happen whether the consumer has a fixed-rate or a variable-rate card.  Companies can change interest rates with as little as 15 days warning to the consumer.

And consumers don’t have many ways to fight back.  If you receive notification that your card company is raising your rates, you can try to call the company and fight the change.  However, the only sure way of avoiding the new rate is to opt out of the change, which will close your account.

The best policy is to pay off your credit card in full.

If you pay off the whole balance with every statement, then you’ll never be charged interest on your balance.  That’s the best way to avoid getting stung by credit card companies, and the best way to make cards work for you, rather than the other way around.

Nervous that your credit is at risk for identity theft and fraud? Tired of credit monitoring services that charges you a high monthly fee?

Me too! This is why I employ a poor man’s (in my case, poor girl’s) credit monitoring solution.

Get a free credit report every 4 months.

Don’t be fooled by ads directing you to “freecreditreport.com” - the only truly free, no-strings-attached way to get your credit report is annualcreditreport.com.

There are 3 major credit reporting agencies: Equifax, Experian, and TransUnion. You can get a credit report from each one every year. Spread them out so you can check up on your credit more often.

The credit report does not include a credit score - you’ll have to pay extra for that, and it’s worth the additional cost if you’re about to apply for a loan. But if you just want to check your credit report for errors or red flags, these reports list all credit accounts under your name.

These are what I watch out for:

• Any credit cards or loans listed that I didn’t open myself.
• Any delinquencies (late payments), since I always pay my bills on time.
• Any negative items, such as bankruptcies or accounts in collection.

Luckily, I haven’t seen any errors or fraudulent items on my credit report.  If you see any on yours, you can initiate an investigation by directly contacting the reporting agency whose report contains the error.

Initiate a fraud alert, even if you don’t suspect fraud.

Each of the big 3 credit reporting agencies offer free fraud alerts.  These alerts request creditors to double-check a lender’s identity when he or she requests credit.  This makes it more difficult (though not impossible) for an identity thief to open an account under your name.

Each free fraud alert lasts 90 days.  It’s a pain in the butt to renew the fraud alert every 3 months, but it’s free.

To initiate a fraud alert with all 3 agencies, simply request the alert with one of the agencies.  It will automatically notify the other 2 agencies to also place fraud alerts on your account.  To initiate an alert:

• Equifax Alerts Online
• Experian Fraud Alert Form
• TransUnion - no online form; contact by phone, email, or snail mail

You can get 15 free credit reports per year.

When you initiate a fraud alert, you qualify for a free credit report from each agency.  You may have to contact the agencies directly to request the report.

3 reports through annualcreditreport.com plus 3 reports every 90 days with fraud alerts means you can get 15 free credit reports per year.  If you’re organized and ambitious, you can stagger these reports to provide year-round credit monitoring.

Use the right credit card.

I carry a Washington Mutual Platinum MasterCard, which offers monthly updates of my FICO score at no cost to me.  If having a credit card won’t get you in trouble (i.e., you’re not a compulsive shopper, then it may be worthwhile to find a card that offers a similar service.  You don’t even need to put any charges on your card to enjoy this credit-monitoring service.

This, coupled with free credit reports, is the foundation of this poor girl’s credit monitoring solution.  I check the free reports (which don’t contain credit scores) for anomalous accounts.  Then I check my credit score through my credit card to make sure nothing odd is happening there, either.

This “solution” does have its limitations.

Credit monitoring will alert you to problems so that you can resolve them sooner, but this is not prevention, since red flags appear only after fraud has been committed.

Even fraud alerts don’t work perfectly.  First, they only make opening new accounts difficult.  If identity thieves have already opened accounts under your name, fraud alerts won’t require existing creditors to check those accounts.  Second, not all creditors take fraud alerts seriously, and some may let identity thieves slip by with a few easy, cursory questions.

Moreover, fraud alerts will make it difficult for you to open legitimate lines of credit.  If you want to end fraud alerts before their 90-day expiration dates, you must write to each of the credit agencies and provide proof of your identity.  This can be a hassle, so plan ahead if you’re about to take out a loan.

Still, as limited as this strategy is, it provides free credit monitoring.  You don’t need to pay an agency monthly fees in order to protect yourself from identity theft and fraud.

I’m worried about inflation. I don’t think it has reached catastrophic levels yet, but I miss the days when items on McDonald’s Dollar Menu actually cost $1, and no more. (Not that I eat at McDonald’s, but it’s a good gauge of food inflation.)

How can we cope with inflation? The tips below can be used to tighten spending and increase savings during periods of low inflation. But in the current environment of rising inflation, they may help you stay ahead of increasing prices - or at least stay afloat.

Food

1. Buy cheaper foods. This may seem kind of obvious, but stock up on foods that don’t increase in prices (as much) during inflationary periods. Getting costly: milk, flour, eggs. Still cheap: sugar, sirloin.  Even cheaper than before: oranges, ham, lettuce.
2. Buy in bulk. We recently bought 10 boxes of pasta for $1 each on special - 10 was the minimum quantity to get the discount. Stock up on basic foodstuffs when they’re on sale; you know you’ll need them eventually.
3. Buy local. Part of food inflation is due to the increase in transportation costs, thanks to expensive oil. You may be able to find better deals on groceries from local farms.
4. Buy in season. Produce that is out of season will have to be shipped in from somewhere in the world where it’s in season. The cost of transportation is passed on to you, the consumer. Avoid that cost by buying in-season fruits and vegetables.
5. Buy private label. This means the store or other generic labels. Check the ingredients (as you should anyway), but for most products, private labels aren’t that different from brand-name goods - except in price.
6. Look high, look low. Consumers are pretty lazy, which is why stores put the goods with highest mark-ups at eye-level. Check higher and lower shelves for the best deals.
7. Don’t shop with your kids.  They’ll find the expensive sugary snacks wherever they’re shelved, and it’s hard to say no.
8. Find free recipes. You won’t need to buy any recipe books to find recipes using frugal, inflation-proof ingredients. Look online for free recipes at Food Network, All Recipes, RecipeMatcher, or SuperCook.
9. Plan ahead and make a list. Use online resources to find recipes using cheap ingredients. Then make a list of what you need for the next week. Buy this list, and nothing else!
10. Maintain a price book. What’s a good price for eggs? For tomatoes? For rice? It’s hard to say if you don’t track how much you spend on these goods. A price book is a journal of how much you pay for various products. As your price book grows with entries, you’ll be able to know where to find the best bet for each product - and how much is too much to pay.
11. Shop sales. If you’re really ambitious, you can coordinate your shopping list with local sales. Check out store circulars and plan your meals around what’s on sale.
12. Shop multiple stores. More stores give you access to more sales and discounts. Just be sure you’re not making a six-store dash every week; what you save in groceries you’ll lose in gas and time.
13. Use coupons. If you’re really really ambitious, you can combine sales and coupons for maximum savings. Even if you don’t want to go that far, it’s easy to clip and use coupons if you have the time and inclination.
14. Don’t use coupons. Before you leave for the grocery store, compare your coupons stash to your shopping list. Leave the coupons you don’t need at home, so you’re not tempted to buy unnecessary goods just because you have coupons for them.
15. Sign up for store savings cards. We have cards at both grocery stores we use. These only save us a couple of dollars each trip, but they do make an impact on rising prices, which also seem to add to the bill a couple of dollars each trip.
16. Ask for discount meats and produce. Stores may be willing to give you an extra discount on meats and produce nearing their “Sell By” date. As long as these items aren’t expired, they’re still good to you - even if they’re no longer shelf-ready.
17. Ask for rain checks. If an item on sale is out of stock, check to see if the store will give you a rain check so you can buy the item at sales price on a later date.
18. Buy groceries at drug stores. Sometimes milk is cheaper at our local Rite Aid than it is at the grocery store. Certain big box retailers like Wal-Mart and Target may also offer better prices than your grocer store, as may bulk retailers like Costco.
19. Buy non-grocery items at drug stores. Toothpaste, cleaning supplies, and paper products tend to be more expensive at grocery stores. Get them at the drug store instead.
20. Bring a calculator. Unless you’re good at quick math, consider bringing a simple calculator so you can easily compare per-unit prices. But I’ve definitely seen instances where a case of 6 somethings cost more than buying those 6 things individually. Make sure you’re always paying the lowest prices.
21. Weigh pre-measured bags. We buy potatoes in 5-pound bags. But if you measure different bags of potatoes, you’ll see that not all 5-pound bags are created equal … or weigh 5 pounds. Don’t get short-changed when you grab a pre-measured bag.
22. Check your receipts. Stores encourage cashiers to process customers as quickly as possible. This leads to errors. Give your receipts at least a quick glance to make sure nothing got double-counted, priced incorrectly, etc.
23. Check your bags. We left a $5 jar of sauerkraut sitting at the cash register. We paid for it, but the sauerkraut never made it into our bags. So always take a look around the cash register to make sure all of your items make it home.
24. Avoid prepared or frozen meals. Not only are prepared meals less nutritious, they’re also more expensive. You pay for convenience, but to really save money, make the food yourself.
25. Fill up your freezer. Meat, poultry, and fish actually last indefinitely in the freezer. After a few months, you may notice some changes in flavor, but the food will still be safe for consumption. Stop throwing out food you put in the fridge and forgot; use the freezer instead.
26. Cook and eat smaller portions. Americans generally have no sense of portion control anyway. This is an opportunity to eat correctly and thus save money by eating less.
27. Make friends with leftovers. Did you make too much food? Refrigerate the leftovers rather than tossing them. You can even freeze most meals so they last weeks.

Gas

28. Research gas prices. Sites like GasBuddy.com and GasPriceWatch.com can help you find the cheapest station in your area. Just be sure you don’t drive so far for cheap gas that the trip costs you more than you save!
29. Go off the beaten path. Gas stations near highways are often more expensive than stations farther “inland.” Stations also charge more in more affluent neighborhoods, because residents are less price sensitive. Driving just a few blocks can pay off.
30. Consider alternate fill-up stations. My parents always went to our local Sam’s Club for gas. Membership was required, but fueling up was much cheaper. Check local discount stores or wholesale clubs to see if they offer lower gas prices.
31. Don’t buy premium if you don’t need to. Most cars are designed to run on regular, unleaded gas.  Buying premium gas does not improve performance and can cost you $200 or more per year.  In fact, even if your manual calls for premium, you may be able to use regular under certain conditions.
32. Plan ahead - don’t run on empty. Plan to refill when you have a quarter tank left. That way you have time to explore options and shop for low prices. If you wait until your gas gauge hits the E, you may be forced to swallow an unpalatable price.
33. Fill it all the way up. If you consistently leave the tank a quarter or a third empty, you’ll ultimately make more trips to the gas station - a waste of time, energy, and fuel. Make sure you have enough money on hand to pay for a full tank.
34. Don’t top off. Topping off doesn’t add any gas to your tank; the tank’s full, and you’re paying for gas you’ll never use. Instead, the extra gas evaporates in your car, which can damage your vehicle’s vapor collection system. Avoid the urge to go for that extra drop.
35. Find the right time of day. Gas retailers may change price several times a day. According to Kiplinger, “The best time of day to fill up your tank is before dawn or late at night, when the sun and traffic volume are both down. Stations usually will raise prices during the day, especially for rush hour.”
36. Fill up at least 3 days before holidays. Demand goes up during holidays as everyone tries to drive home. Higher demand means higher gas prices. If you can fill up before the holiday rush, you may be able to save significantly.
37. Drive slower. By keeping your speedometer under 55 MPH, you can improve the efficiency of your car as well as avoid a few other wallet-sucks. At speeds above 55 MPH, your car actually uses more gas.
38. Use cruise control. Cruise control prevents sudden changes in speed, so it can increase fuel efficiency. However, it isn’t ideal for all conditions; avoid hills and wet roads.
39. Avoid aggressive driving. Accelerating and decelerating suddenly can decrease your fuel efficiency by up to 37%. Yeesh!
40. Don’t tail-gate. If you follow a car too closely, you’ll be forced to decelerate quickly when it brakes - a drag on your fuel efficiency.
41. Don’t be tail-gated. Rather than stressing about being rear-ended, let the tail-gater pass. In short, make sure you’re in control of your fuel consumption - not other drivers on the road.
42. Avoid idling. Idling is bad! It increases fuel consumption, damages your engine, and is bad for the environment. If you think you’ll be idle for more than a minute, just turn off your car. Restarting it takes less fuel than keeping it idle.
43. Change your oil on schedule. Check your owner’s manual to see how often you need an oil change. Keeping your car well-serviced will help your car run well and use gas efficiently.
44. Change your air filter on schedule. Same as above.
45. Park in the shade. Heat causes gas to expand and evaporate. Parking in the shade does have some impact on how much gas you conserve.
46. Park in the first spot you find. Why spend an hour driving around a parking lot when you can just walk a little farther?
47. Clean out your trunk. The more weight your car carries, the more gas it guzzles over the same distance. So clear out anything you don’t need in your car.
48. Ditch the rack. Roof racks and car top carriers create drag and makes it harder for your car to go forward. The struggle depletes gas, so take these extras off if you don’t need them.
49. Use coupons. Some gas stations offer coupons. Check local mailers and newspapers, but make sure that the coupons actually save you money and that they aren’t scams.
50. Get a gas reward credit card. Many credit cards offer higher cash back for gas purchases than other purchases. Just be aware of certain limitations and drawbacks to gas cards.
51. Carpool. Find a few coworkers living near you. Sure, you may have to drive a little more to pick everyone up, but you won’t have to drive as often. Carpooling may cut your gas expenditure significantly. No coworkers in your neighborhood? Find people you can share rides with through eRideShare.com or RideSearch.
52. Bundle your trips together. Make a single trip to the post office, the grocery store, the dry cleaners.
53. Walk between destinations. If some of your destinations are within blocks of each other, try walking between them instead of driving.
54. Map out your trips. Use an online map service like Google Maps or a GPS device to plot out the shortest trip. Take into account your own knowledge of the roads - a short route with many red lights can still make an inefficient trip.
55. Take public transportation. What may be better than splitting the cost of gas with 3 carpool buddies? Splitting the cost of gas with thousands of other commuters. Calculate the cost of a month’s worth of public transit and see if it measures up to a month’s worth of gas. (Don’t forget to factor in tolls you may have to pay if you drive.)
56. Walk or bike. If your grocery store (or any destination) isn’t too far away, get yourself there without a car. Added benefit: you’ll be healthier, thus reducing potential healthcare costs.
57. Telecommute. Ask your employer if you can work from home once a week or even once a month. That’s one day you won’t have to use gas to drive to and from work.

Utilities / Energy

58. Washing clothes in cold water. Hot water doesn’t sterilize clothes; detergent does that. Washing in cold water means you won’t waste energy heating up water.
59. Don’t overload your dryer. If you put too much inside your dryer, your clothes will end up damp and you’ll have to dry again. Put in the proper load.
60. Dry clothes outside. Try air drying once in a while. The dryer is a resource hog, and the old fashioned way is just as good.
61. Hibernate your computers. When you’re not using your computers, put them in sleep mode. If you won’t be using them for a while, shut them off completely.
62. Rely on clothes, not the AC or heater. When it’s hot, get naked. When it’s cold, bundle up. Try your best to survive without temperature control.
63. Put window treatments to use. In the winter, you can help heat up your home by opening the shade and letting in the light. In the winter, close the blind so that your home doesn’t become a greenhouse.
64. Prefer fans to AC. I used to live in Texas, where we had weeks of 100-plus weather. My dad’s an energy bill fanatic, so we never used the AC. Trust me - you can survive without the AC if you invest in a few powerful fans.
65. Maintain your AC, heater, and furnace. Change your AC filters regularly. Don’t push your heater past its limit. Be careful with radiators - our upstairs neighbors didn’t turn their radiator valves off completely, resulting in damage to the whole building’s system. When your ACs and heaters aren’t well-maintained, they guzzle more energy.
66. Buy energy-efficient light bulbs. Compact fluorescent light bulbs are more expensive but can save money in the long run because their energy consumption is significantly lower and they last longer.
67. Turn your water heater down to 120 degrees. You don’t need it to be much hotter than this for almost all purposes, and this will save a surprising amount on your energy bill.
68. Unplug your electronics. Even if your electronics aren’t on, they swallow energy as long as they’re plugged in. So when you’re not using a lamp, unplug it.
69. Get an energy audit.  Ask your utility company if it offers a free or low-cost energy audit.  Find out where you’re leaking energy (and dollars), and fix it.

Financials

70. Don’t pay more than the minimum on fixed-rate debt.  If you have low-interest, fixed-rate debt like a student loan or a great mortgage, revert to paying the minimum.  Your payment will continue to be the same dollar amount, even though the value of the dollar decreases so over time you pay less in purchasing power.  (For some people, though, paying down the debt quickly is still a better choice.  Ask yourself which camp you fall into.)
71. Don’t quit your day job.  Some have begun delaying retirement due to recent economic turmoil.  But even if your retirement portfolio puts up a weak positive this year, your real returns may be negative.  Negative returns in the first few years of retirement can really put a bite into assets, so consider working longer.
72. TIPS? It depends.  Treasury Inflation-Protected Securities, or TIPS, are government bonds that are indexed to inflation.  This would usually be an excellent refuge for your money, but lately so many people have bought TIPS, driving prices up, that yields are actually close to 0% (at times negative).  Consider looking into I-bonds instead.
73. Gold? It depends.  I argued against blindly putting your money in gold because gold has just come off from all-time highs.  Now gold may be more affordable, but you should still make sure you’re buying the right amount for your portfolio.  Remember, gold always keeps its value, but it never adds to that value (like stocks do through growth and dividends and bonds do through interest income) - and that value carries a price tag set by investors over whom you have no control.
74. Stocks? It depends. During an inflationary period, consumers may scale back on spending as they adjust to high prices.  This can hit companies’ bottom line and thus stock prices.  Over the past decade, the S&P 500 has not kept pace with inflation.  Still, the period of high inflation will end eventually, as will the current consumer slump; stocks may continue to offer better returns.
75. Avoid banking fees.  Keep track of your expenses so you’ll never incur an overdraft fee again. Now is not the time to throw money away uselessly.
76. Pay bills online.  This is easier than writing and mailing a check, but it also saves you the cost of stamps.  Stamp prices increase at a slower rate than inflation, but a batch of bills can still cost a pretty penny (or several).

Lifestyle Changes

77. Quit lunches out. Your local cafeteria or lunch shop will pass inflation to you. But if you buy your own ingredients and make your own lunch, you can better control the effects of inflation on your wallet.
78. Quit dinners out. Restaurants are facing higher food costs too and passing the cost onto diners. Avoid restaurants for a while.
79. Quit smoking. I’m not sure if cigarette prices have increased, but when almost every other price is going up, this is a great place to make a cut. Cigarettes hit your wallet and your health in the long run. Quitting now may help you put food on the table. Seriously.
80. Quit drinking. Alcohol is more expensive than soda (and alcohol and soda are more expensive than tap water). Save the drinking for happier economic times.
81. Quit Starbucks. When prices are increasing on basic items but your income isn’t, then your purchasing power decreases. You’ll need to choose between luxuries, like your daily Starbucks, and essentials.
82. Quit bottled water. Bottled waters are a ridiculous rip-off. If you’re worried about chemicals, get a water filter. It’s a more effective way to get pure water than buying bottled.
83. Quit road trips.  Gas is so expensive right now that it makes sense to look for adventure in your own backyard.  Visit nearby state parks rather than going out of state.  Bike around the neighborhood.  Check out weird local attractions.
84. Quit vacations.  Airlines pass higher fuel costs onto consumers.  So skip your next vacation or substitute a cheaper vacation.  Go camping instead of skiing.  Visit family instead of staying in hotels.  Find free activities in your city instead of seeing the ballet.
85. Quit designer labels. Even if you can’t live without Prada, chances are that you have enough in your closet already. Lay off the luxury goods - something you may want but don’t necessarily need - until prices on food (something you need) stabilize.
86. Quit dry cleaning. Dry cleaning is really expensive, and not necessary for most clothes. Buy shirts that can be laundered. Try to squeeze in one more wear of a suit before you take it to the cleaner. Don’t, however, throw “Dry Clean Only” clothes into the wash - you’ll ruin them.
87. Quit smart phones. Unless you need it for your job, try to get by without smart phones or extra options like Internet access; the extra data charge can increase annual expenses by a few hundred dollars. If you do need it for your job, see if your employer will subsidize some of the fees.
88. Quit landlines. If you have cell phones, why pay for a landline too?
89. Quit the gym. How often have you used your gym membership in the last month? Learn how to exercise on your own. Jog in the park. Use isometric exercises for strength training. Invest in free weights. Cancel a membership you rarely use.
90. Quit the movies. I noticed movie ticket inflation before I noticed food inflation. $12 for a ticket? That’s $24 for a date. Why watch movies on the silver screen when you can catch them on cable?
91. Quit cable television. Why watch cable when basic TV has some great shows? (I’ve recently become addicted to Lost.)
92. Quit television, period.  Many networks now offer full episodes online for free, so you don’t really need to pay for even basic service to watch TV.
93. Quit video rentals. What did our parents do in their free time? We can do better than parking ourselves in front of the TV.
94. Quit subscriptions. Many newspapers and magazines offer free content online. Kiplinger pretty much publishes every article online within a couple of weeks of the print edition’s publication. So ditch the renewal cards.
95. Quit bookstores. Books have always been expensive. Buy secondhand, or go to the library. Nothing beats free.
96. Quit haircuts. Do you get your hair cut every 6 weeks? Will anyone notice if you switch to a haircut every 8 weeks? In New York, I need to spend at least $50 per haircut unless I want to take my chances on beauty school students. Going from a haircut every 6 weeks to every 8 weeks saves me over $100 a year.
97. Quit make-up and perfume/cologne. Ladies, I think we vastly overestimate how much make-up is necessary to look professional. Ladies and gentlemen, deodorant is good enough unless you’re going on a date. Perfume and cologne is much more expensive.
98. Quit expensive soaps, shampoos, and lotions.  What’s wrong with the cheaper brands?  Suave cleans my hair just as well as salon brands.  If you just can’t live without a certain brand, try alternating between that brand and a cheaper brand for at least some savings.
99. Quit over-withholding. Adjust your W-4 withholdings so that you get your money sooner. As prices rise over the year, the money you get back as a tax refund is worth less than the money you would have gotten had you not over-withheld payroll taxes.
100. Quit slacking.  Hopefully your employer gives you cost-of-living raises.  Why not supplement that with a performance raise or bonus?  Work extra hard to ensure job security in a tough environment and to boost your earnings so that it grows faster than inflation.

Granted, many of these tips are just general saving tips.  But in an environment of rising inflation, being able to save money is even more important.  Dollars are worth less as prices increase, so every dollar needs to be stretched further.

How are you dealing with inflation?

I gave up on monthly budgeting. Much of my spending is cyclical - I buy work clothes once or twice a year, which drives up spending one month but won’t appear at all the next month. I still check my spending monthly to make sure nothing is too far out of line, but I’ve never been very good at predicting what my spending will look like on a monthly basis.

Now new research shows that people are better at preparing yearly budgets than monthly ones. In a study of 87 college students predicting food and entertainment spendings, monthly budgets understated actual spending by nearly 30%, while annual budgets slightly overshot actual spending by about 3%.

According to the New York Times, the study cited previous research suggesting that “short-term budgeters tend to be overconfident. Long-term predictors expect to miss the mark, so they pad their estimates, which ends up making them more accurate.”

Accuracy is important in budgeting.  If the budget doesn’t reflect reality, then it’s difficult to follow.  An annual budget has the benefit of reflecting expenses that don’t appear every month: vacations, predictable major purchases, even quarterly estimated tax payments.

Still, budgeting for a year seems really intimidating.  What would be your strategy?

Eric Ripert, award-winning executive chef at Le Bernardin, recently created a 5-course meal for $40, using only ingredients from Jack’s 99-Cent Store.  Henry Alford, a writer for the New York Times, threw a dinner party with food scavenged from Jack’s and other dollar stores.  Someone has even written a whole cookbook around 99-cent store foodstuff: The 99 Cent Only Stores Cookbook.

Is cheap the new chic in dining?

Well, Vienna sausages will never compare with filet mignons, but in today’s environment of increasing food prices, it’s not surprising that the New York Times would do a feature on cheap eats.

Dollar stores can be found almost anywhere, but one should be careful when shopping for food at these deep discount stores.  When Castleberry recalled botulism-contaminated canned products, some discount stores kept these products on the shelf.

When shopping at discount stores for food:

• Check expiration dates carefully.
• Look for well-known brands.
• Learn to recognize freshness and ripeness in produce - and avoid the duds.
• Favor well-sealed food items with long shelf lives.

Do you shop for food at dollar stores?  How do you find the best quality and avoid the sketchier items?

This week’s posts have been pretty serious: retirement insurance, food inflation, gold investing myths. Let’s change it up with something lighter: getting money from the government!

Okay, a tax refund is just money that you didn’t owe the government in the first place, but paid anyway out of the goodness of your heart. But I still get an irrational sense of satisfaction when I get my refund. I dutifully filed my tax return electronically a few days ago, and I requested that my refund be deposited directly into my savings account.

Dude, where’s my refund?

If you’re expecting a refund, you can check on its progress if you know your Social Security Number, filing status (single, head of household, etc.), and the exact dollar value of your refund as shown on your tax return. Luckily, this is no tax phishing scam. This is the official IRS “Where’s My Refund?” tool.

If the IRS has already processed your tax return, then this tool will help you figure out how long before you receive a refund. And if the IRS says the check was in the mail a month ago, then you should be able to use the “Where’s My Refund?” tool to initiate a refund trace.

To recap, if you want to check on the progress of your refund check, use the IRS “Where’s My Refund?” tool. If you don’t trust this link (a healthy paranoia that will keep you safe from phishers and scammers), go directly to the IRS homepage and use the “Where’s My Refund?” link under “Online Tools.”

My last article on taxes, 11 Ways to Trigger an IRS Audit, was featured on this week’s Carnival of Personal Finance at Millionaire Dollar Journey. I hope your taxes went or will go smoothly!

Bankrate.com advises you to buy gold, even though it is just coming off its historic high.  Gold has its benefits as an investment, but it also screams “Buyer beware!”

Bankrate.com cites CMC Markets trading strategist Ashraf Laidi, who has over half of his asset allocation in gold and offers 6 reasons why now is a great time to buy gold:

• Real interest rates (interest rates minus inflation) are down globally. Result: Gold yields a better return than stocks or bonds.
• The declining dollar. Gold rises when currency falls.
• The ETF effect. With the introduction of exchange-traded funds in 2003, investors can now buy into the gold market with the click of a mouse. What’s more, it’s less risky than investing directly in gold mining. Two of the most popular gold ETFs are StreetTracks Gold Trust (GLD) and iShares COMEX Gold Trust (IAU). “The convenience by which individual investors can get in on the gold rally is propelling the rally itself,” Laidi says.
• International rally. Gold is rallying worldwide, not just against the U.S. dollar but other currencies as well. Every time the Fed cuts interest rates to contend with the impact of the credit crisis, gold becomes more attractive.
• Increased fabrication: Emerging economies in China, India, Asia and the Middle East are boosting demand for gold jewelry.
• Political and economic uncertainty: When fears arise as they did post-Sept. 11, the enduring value of the world’s oldest currency takes on a new luster.

Laidi isn’t necessarily wrong in his analysis, but he’s not giving the whole picture, either.  For example, he points to the “ETF effect,” but just because it is easier now to invest in gold and gold stocks through ETFs doesn’t mean it’s a good idea; there are other factors to weigh.

Hedging Inflation

Contrary to popular belief, gold is a very poor hedge against inflation.  A Bloomberg article from last October addresses this misconception:

“Gold is often described as an inflation hedge, but in fact there are few instances in the past 20 years when gold has moved in sync with either core or headline inflation,” says James Gutman, a London-based commodity economist at Goldman Sachs International. Thus, gold “should not be used as an inflation hedge,” he says.

Gold reached a record high of $850 an ounce in January 1980. If since then the spot price of bullion kept pace with U.S. inflation as measured by the consumer-price index, gold would now be selling for $2,119.84. Instead, it stood at $732.05 in London trading yesterday, only about a third of what it should be if it were truly an effective inflation hedge.

Investors seeking protection from inflation would have been better off in the U.S. stock market. On Jan. 30, 1980, the Standard & Poor’s 500 Index stood at 115.20. Adjusting the index to compensate for the increase in the CPI since then would put it at 287.30 today. Yet on Oct. 3, the S&P 500 closed at 1539.59, more than five times the inflation-break-even level.

Gold reflects market sentiment about inflation.  When investors are acutely aware of inflation, they may buy gold as a hedge.  But in the 80s, the example cited above, there was less panic about inflation - and without that driving fear, demand for gold wasn’t high enough to keep pace with inflation over the past two decades.  Without demand to provide upward pressure on prices, gold simply didn’t keep up with inflation.

Hedging a Weak Dollar

Yes, the dollar has weakened as the Fed cut rates.  But foreign exchange is volatile, and many analysts are now pointing out that the dollar is oversold - that is, investors have been trading the dollar down more than it should be.

Concurrently, commodities may have been traded higher than where they should be.  USA Today notes:

Soaring energy prices can fuel inflation, and gold rises 90% of the time when oil does, says Frank Holmes, CEO of U.S. Global Investors. Oil soared above $110 a barrel Thursday, a record.

Still, gold may have come too far, too fast, Holmes says. Gold prices correlate closely with oil and move in the opposite direction of the dollar.

“According to our models, the dollar is overextended on the down side, and oil is overextended on the up side,” Holmes says. That’s why he’s looking for a short-term correction in gold prices.

When the dollar recovers, gold prices will slow its ascent.  But if you believe the dollar will continue to be weak, then you can hedge against this weakness by investing in international stocks through mutual funds or ETFs, or even put your money into foreign currency-denominated CDs.  There’s no need to buy into a volatile commodity just because the dollar is weak.

Gold Is Costly, and Gold ETFs Are Too

Gold bars and coins are considered collectibles by the IRS, and any realized gains are taxed as income rather than at capital gains - a tax rate of up to 28% versus a capital gains rate of up to 15%.  Moreover, if you invest in gold as a physical good rather than through gold stocks or ETFs, you’ll have to pay for transportation (which can be costly since gold is heavy) and for storage (which can also be expensive if you want security).

If you do invest in ETFs, you’re not out of the woods.  Street Tracks Gold Shares (GLD) trades like a stock, relieves you from the cost of transport and storage, but is taxed like real gold bars and coins.  For most people, this means you’d pay about twice as much in taxes as you would for a stock ETF on the same realized gain.

Political and Economic Uncertainty?

Gold has historically been a means of securing value in turbulent times.  But it’s economic uncertainty that makes gold a dangerous investment now.  One reason that gold experienced its sharp fall last week is that hedge funds that had invested in the commodity sold off gold in order to cover other positions - they have to get money from somewhere.  As banks tighten lending requirements for investors who are trading on borrowed money, more funds may be forced to sell off gold positions, thus driving prices down.

In fact, contrary to what Laidi asserted, global demand for gold has decreased for the past few years.  India, for example, is shying away from gold because it’s too expensive for fabrication.  Gold prices have not been driven up by global demand, but rather by professional investors and speculators.  These are the same people that will jump off the gold bandwagon as soon as it suits them - leaving the amateurs in the dust as gold faces a correction.

For the Right Reasons, at the Right Time

This doesn’t mean you should shun gold.  It is indeed an asset that has low correlation to most other asset classes.  It may provide the zag to keep your portfolio afloat when stocks, bonds, and real estate all zig. 

You should think carefully about why you’re investing in gold, especially since prices are still relatively high.  Don’t rush in based on recent performance.  Now that even mainstream media are touting gold as a “safe” investment, newcomers are probably too late to the party and just in time for a correction.  Instead, carefully plan how you will enter the market.

You should also choose the appropriate allocation for your portfolio and situation.  I would never take Laidi’s example and put over half my money in gold.  He may have a good reason for that allocation.  Consult with a financial expert before making significant changes to your portfolio.

How to Invest in Gold

Some resources on investing in gold, whether through physical bullions or other vehicles:

• “Methods of investing in gold” at Wikipedia (yes, Wikipedia).  This article gives a good rundown of various investment methods as well as some major issues to consider when investing in gold.
• “Want to Add Some Glitter to Your Portfolio?” at Morningstar.  This article lists major mutual funds and ETFs that offer gold exposure, as well as a comparison of investing in gold mutual funds versus investing in gold ETFs.
• “How to invest in gold” at the World Gold Council.  The source isn’t as biased as you think it’d be.  WGC provides a lot of details on the different ways of investing in gold, as well as a brief list of questions you should ask yourself before investing in gold.

Gold is just like any other investment - avoid chasing returns, keep your emotions in check, and always do your research.  Ultimately, you should think long, think hard, and don’t trust what the news media says unless you can verify it yourself. 

When I visited Japan in 2006, I noticed that the price of fruits was exorbitant. Japan has little cultivatable land, so it has to import a lot of its food supply. Because it is expensive to get fruits into the country, it was expensive to buy the fruits in the country. I was relieved to return to the States, where apples were cheap and plentiful.

Unfortunately, two years later, food prices have sharply increased here as well.

Why Is Food Pricier?

I’m no expert, but as an armchair economist, my primary suspect is high oil prices. This imposes a direct cost by making transportation from farm to market more expensive. It also imposes an indirect, and perhaps greater, cost by making alternative fuels more attractive - specifically, fuel ethanol.

Cultivators have been converting farmland to ethanol-oriented cornfields. Compared to other crops, corn is costlier and more inefficient to grow. Yet because the government subsidizes corn cultivation for ethanol production, corn has crowded out other food crops.

This makes food crops more expensive in multiple ways. First, because the supply of other food crops has decreased, but demand has not, prices increase to offset the shortage. Second, corn has also become more expensive as a food, since much of the supply is now being funneled into ethanol production. Finally, feed (mostly basic food crops) has become more expensive, so it’s costlier to raise poultry and livestock - and thus meat is costlier. The New York Times gives the example of rising egg prices:

The sharp increase in egg prices was caused by a confluence of factors, among them a contraction of the industry because of the slump in 2005 and 2006 and a major increase in feed costs. About three-quarters of feed for laying hens is corn, and the price of corn has been driven up in part by government mandates for production of ethanol.

Dining In or Dining Out - Both Pricier

The same New York Times article notes that food prices have increased 5.1% in the past 12 months - the worst grocery inflation since the 1990s.

I’ve certainly noticed. Chicken and beef are staples of my grocery list, and it’s hard to ignore continual increases in the cost of meat. Eggs are noticeably more expensive, as are milk, rice, and bread.

But I’ve also noticed that dining out has become more expensive. Prices have gone up, but quality has gone down. The Wall Street Journal calls this cutback cuisine:

Get ready to eat more pasta. With food prices rising at their highest rate in decades, chefs are swapping out high-end ingredients for humbler substitutes and scratching low-profit entrees off the menu.

Restaurants have long engineered menus to allow the bigger profits from pastas and vegetable side orders to subsidize such loss leaders as rib-eye steaks. But rising prices have prompted a furious new round of behind-the-scenes shuffling.

Save Money Like You’re a Restaurant

Chefs are getting creative, reshaping scraps into marketable dishes. Normal folk need to do the same in order to mitigate the bite of rising food prices.

One way is to substitute cheaper foods for costlier ones. Restaurants have replaced expensive steak dishes with cheaper pasta dishes. We can seek out cheaper staples as well, like bananas and potatoes. Incidentally, economic classes often use potatoes as an example of an inferior good - not “inferior” in the sense that it is lower quality, but rather in the sense that people tend to buy more of it when their relative income falls (due to, say, inflation).

Another way is to stretch out the same quantity of food. Mimic the restaurants that have been decreasing portions. My boyfriend and I used to cook a full pound of chicken for a single meal. Now we’re cutting down to half that quantity. As an added bonus, we’ve been eating more proper and healthier portions.

Restaurants have also been pushing specials harder so that there are no wasted leftovers. There are two lessons to be learned here. First, we can plan better so that we, too, avoid leftovers. Second, while restaurants can’t serve leftovers the next day, there’s nothing wrong with doing this at home. Plan well, store well, and reheat well to make sure everything gets used and nothing gets wasted.

Don’t Worry

Though it may be painful, inflation is nothing new. Ask your parents about periods of inflation in their life, and how they dealt with upward pressure on prices. Read up on frugal recipes that favor simple, cheap ingredients to exotic imports, which have become more expensive due to the declining dollar. Find local farmers that offer lower prices and fresher produce than food delivered by trains and trucks (fueled by expensive oil).

I don’t think the current rate of inflation will last forever. This is an opportunity for us to really examine our eating habits, learn a little from history, and prepare ourselves for whatever the future holds. Best of luck!

Hat tip to Serious Eats for inspiring this article and pointing out the news articles.

Disability insurance can replace part of your income if you should be injured and unable to work. Insurance may be enough to provide for your immediate needs, but what happens to retirement savings while you’re out of commission? How will you fund it when disability insurance only covers a portion of your income?

The Wall Street Journal recently reported on a possible solution: retirement-contribution protection.

How Retirement-Contribution Protection Works

Retirement-contribution protection is a form of insurance. You pay a premium for a coverage amount that is paid into a retirement plan if you become disabled. The cost of the policy depends on a number of factors. Wall Street Journal provides an example:

Take a 45-year-old man who is self-employed and qualifies to sock away 20%, or $40,000, of his $200,000 self-employed annual income into his retirement plan. If he chooses a six-month waiting period and the option to have his contributions adjusted upward with inflation, he would pay an annual premium of $2,500 for a $40,000 benefit that would be paid annually into a trust if he became disabled.

Retirement-contribution protection can be purchased as a standalone policy or as an optional rider to a regular disability policy. It can be an individual policy, where contributions are made to an irrevocable trust, or a group policy, where contributions are made to your employer’s existing retirement plan. It can offer you full freedom in choosing your investment vehicles, or it can offer a limited palette of mutual funds, depending on the insurance company.

Why Buy Coverage?

One of the mantras of personal finance is that when it comes to retirement savings, you should save early, and save often. So what happens when you become disabled? Disability insurance will cover basic expenses, but few policies leave anything extra to be saved for retirement.

The Wall Street Journal article points out that this can mean a significant decrease in the size of your nest egg:

That’s why retirement-contribution protection may be important - so that even if you are able to meet your daily needs, you’re not short-changed when it comes to retirement savings.

Where to Buy Coverage

This type of insurance is not widely available, but the Wall Street Journal noted a few major insurers do offer retirement-contribution protection.

Berkshire Life’s Retirement Protection Plus:

Retirement Protection Plus is a program that provides disability income insurance to help ensure your ability to make retirement plan contributions until the age of 65. The goal: to provide you with close to what you could have expected from your retirement plan if you had not become disabled.

We issue a non-cancellable and guaranteed renewable to age 65 policy that pays the amount you contribute now – perhaps even the amount your employer contributes – into an irrevocable trust.

• The trustee, Guardian Trust Company, FSB, invests the funds, in consultation with you, until you reach age 65.
• Upon retirement, the trust assets are distributed to you to supplement whatever you receive from your original retirement plan.
• It is a separate program, not a rider, so it may be issued independent of other disability coverage.

MetLife’s Disability Income Insurance:

What would happen if your paychecks suddenly stopped because you were too sick or injured to work? What if you couldn’t work for months – or years?

You’d still have to pay all your monthly bills, including food, utilities, house and car payments. Add in things like tuition and retirement funding, and it’s easy to see how savings could quickly disappear.

MetLife has flexible Disability Income Insurance policies that:

• Provide monthly income to help maintain your standard of living
• Can be customized to fit your particular situation
• Help keep your financial dreams and goals for the future intact.

Principal Life Insurance, but only through your employer:

Nearly one in five Americans will become disabled for one year or more before the age of 65. Long-Term Disability Insurance protects employees’ income in the event of a disability – and helps them return to work as soon as possible.

Optional Features:

• Retirement supplement benefit - contributes money towards a retirement product for your employees in the event of total disability

Hopefully, the idea will catch on, and more insurance providers will offer retirement-contribution protection. More choices means more personalization - the perfect plan for you to ensure (and insure) your retirement.