Turn January Money Challenges Into February Fortunes

January challenged my patience. Several days were bitter and bone chilling cold, though things unrelated to the cold weather were breaking. I broke a tooth in half while eating rice. Yes, it was cooked rice. Thank goodness for flexible spending—a crown will probably eat my balance for the year, but it will be covered.

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The handle to my kitchen sink fell off in my hand one evening. Then the bathroom sink decided to spring a leak. A couple of days later, water decided not to come out of the shower head. Fortunately, I had purchased extra fixtures last year with gift cards and close-outs at a home improvement store. I have faucets for the bathroom and kitchen; I have the whole shower kit. Hoping a simple plumber visit will cure it all. Meanwhile, I am enjoying relaxing baths. A candle, a glass of wine, my e-reader and I am in heaven.

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I am still waiting for my auto insurance company to finish its investigation on the December accident my daughter was in and refund my $500 deductible. It has been about a month and a half, and no communications unless I initiate them. They keep telling me these things take time. The highway patrol had no issue finding the other driver responsible—but my insurance company is not so sure. They had not even pulled the accident report, interviewed the other driver, or filed a claim with the other driver’s insurance company. My premiums, however, were due this month. I wish I could have told the company that these things take time and I will pay my premiums with the same speed they have used to address the claim!

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I am doing well on my resolution to eat in at least 4 days a week. I ate lunch in my office 18 out of 20 work days. I saved at least $90 on lunches this month. I am so proud and I paid myself the savings.

I received my W-2 a week and a half ago. I e-filed my state and federal returns that same day and I have received my state return. It was tiny, but it was a return. I am waiting for my federal return. If my plumbing bill is reasonable, I can pay off my remaining credit card debt three or four months early. If my plumbing bill is a bit higher than I hope, I can still eliminate my credit card debt in May. Here’s hoping for a conservative plumbing bill and a reasonable dental bill. I need to turn January challenges into February fortunes!

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Image: eikosi, via Flickr.com

5 Sticky Utility Bill Problems & What to Do About Them

The first year I lived in Florida, I was amused by the temperatures that Floridians considered “cold” in winter. But I wasn’t laughing when I got my first January electric bill and discovered just how much it costs to heat a Florida home in the winter. More recently, a leak in the pump of our in-ground pool left me with a water bill three times the normal amount. While that bill put a dent in our budget, I was fortunate that I was able to handle it. But I know that’s not always easy if you’re on limited income, or on a fixed income due to retirement or disability.

What happens if you run into problems with a utility bill? What are your rights?

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To get answers to some of the most common problems facing customers, I spent time talking with Charlie Harak, managing attorney for the National Consumer Law Center.  He’s also the coauthor of The National Consumer Law Center Guide to The Right of Utility Consumers.

Harak says the first thing to understand is that most consumer protections apply only to gas and electric services. “Water is usually provided by a government provider (municipal and rural electric co-op) which is far less regulated,” he said. Similarly, propane or heating oil that is delivered is typically not regulated.  Furthermore, he says there are no federal laws that specifically address the rights of utility customers. Those rights fall under state laws.

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As the NCLC guide explains, gas and electric service is typically regulated by state Public Utility Commissions (PUCs). Services may be provided by Investor Owned Utilities (IOUs), government-owned entities (munis), or rural electric cooperatives (co-ops). Among the three, IOUs are often the most highly regulated.

With that background in mind, here are five common utility bill problems, and what you can do about them.

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I just heard from a debt collector about a very old utility bill. Isn’t there a statute of limitations for these debts?

Yes, the statute of limitations may prevent a utility company, or debt collector who purchased one of these old debts, from successfully suing you to collect. That time period is based on state law, and will typically be “the same as the statute of limitations for contract actions,” says Harak.  However, it’s not a good idea to ignore calls or letters about an old debt. If the company or collector takes you to court and you don’t show up to raise the statute of limitations as a defense, they may get a default judgment against you.

Third-party debt collectors who collect consumer debts (including utility bills) are regulated under the federal Fair Debt Collection Practices Act. Anytime a debt collector contacts you about a debt you have the right to receive a debt collection notice by mail (if they called you first), and then to request written validation of that debt. That gives you time to research the debt to figure out whether you owe it and what you can do about it.

If you confirm the debt is outside the statute of limitations, you can write the debt collector explaining that you know the debt is too old, and ask them not to contact you again. (The FDCPA applies only to outside collection agencies, not to companies collecting their own debts.)

At the same time, you may not be able to get service again if you have an outstanding unpaid bill. If you continue to live in that utility company’s service area, you may need to find a way to pay the bill to avoid future problems.

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 Old utility bills, Co-signing, Skyrocketing charges »

Image: williac, via Flickr.com

A Sketchy Way to Manage Your Money

201201301658Would you take financial advice from a cocktail napkin sketch? Well, it depends on who is sketching. If it’s your brother-in-law, who likes to boast about how he “almost” made a killing investing in Google stock, then the advice is probably not worth the paper it’s on. But if it happens to be sketched by Carl Richards, a financial planner and blogger on the New York Times‘ Bucks blog, then it’s a good idea to save the napkin and wipe your barbecue wing sauce covered fingers on your pants instead.

Richards’ sketches (you can find them all here) offer practical financial advice in the form of humorous (at times darkly humorous) graphs that get to the essence of peoples’ oftentimes troubled relationship with money and credit. For instance, Richards has a graph that charts the increase in the price of gold in relationship to the chance you will get hurt. That line climbs at a steady 45-degree angle.

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Richards’ new book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money combines napkin sketch graphs with financial advice that focuses on reducing fear, making realistic choices, and learning to accept the fact that life rarely goes as planned.

Unlike most personal finance books I’ve read, Richards’ is upfront about the role luck plays in a person’s life. For instance, he tells the story of applying for a job at a securities firm. The employer had winnowed down the number of candidates to two: Richards and another man. They were sitting together in the waiting room when a woman came out and said that the other man had been picked. The chosen applicant turned to Richards and said, “I don’t want it. You can have it.” Years later at the same job, Richards’ boss told him he’d have to start coming in on Sundays. So he quit. That led to another job, which eventually led to running his own business and landing a gig at the New York Times.

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But Richards doesn’t think all luck is good. He recently had to short-sell his house, an experience that he said “has been permanently seared into my psyche.” It caused Richards to think less of the “possibility of a certain event occurring,” and instead “consider the consequences of the event happening,” advice he now shares with his clients.

At 178-pages, The Behavior Gap is a short book, but that’s because Richards respects the reader enough to not pad it with fluff. With its focus on studying your own patterns of behavior instead of the market’s, it’s the antithesis of Jim Cramer’s frantic, panicked hot tips that are only valuable as punch lines in Richards’ napkin sketches.

Below, four sketches that give you an idea of the kind of advice Richards gives to readers of his book and blog.

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Confusing Urgent with Important

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The New American Money Math

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One Best Financial Life

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Whining About Credit Card Companies

How to Build Your Credit Responsibly

If you have a new credit card, one reason you might have gotten it is so that you can use it to finance purchases you might otherwise have had a hard time making. You may also have secured the card to help you rebuild your credit standing.

If that’s the case, there are a few things you should know about how to manage that account to boost your score as quickly as possible. Perhaps the most important thing is to only use your card for payments that you don’t make every day. Putting lunch or a cup of coffee on your credit card might get you into bad spending habits and cause you to put more debt onto the card than you can reasonably afford. In fact, you might want to consider only spending as much on the card as you can pay back every month to keep yourself headed in the right direction.

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Along those same lines, if you do end up racking up more debt than you can pay back in a single month, it’s important that you at least pay back more than the minimum. Again, this is to ensure that you don’t get into bad habits, because only paying the minimum every month will keep you in debt much longer than you’d probably like.

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As a general rule of thumb, you should try to keep your debt to 10 percent or less of your card’s total credit limit. That’s because 30 percent of your credit rating is based on just the amount of credit you use at any given time, and the less you utilize, the better. There is a myth that lenders want you to have at least some debt outstanding all the time, but it’s not true; the closer your balance is to zero, the better off you’ll be both financially and in terms of a maintaining a strong credit rating.

Of course, when you’re opening a new credit card account, you should take a look at all the ways in which it might affect your finances. Consider things like whether you’re able to make all the payments you need to—on time and in full—as well as if it might affect your ability to pay other bills.

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Are Credit Card Rewards Taxable?

Last week, some consumers began receiving IRS forms sent by their credit card lender, prompting a lot of concern about what benefits received as part of owning a rewards card were considered taxable. Now, the IRS has clarified its position.

Citibank’s decision to mail tax forms to some of its rewards cards customers certainly caused a stir last week, but now the IRS has come forward to make clear just what is and is not considered taxable under current codes. Essentially, consumers who received rewards points, miles or cash back just for opening a rewards account will have to pay taxes on the value of those benefits because it is considered “miscellaneous income.” However, rewards points accrued in the course of normal credit card spending are not considered taxable because the IRS views them as rebates that help defray the cost of a purchase, rather than additional income.

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“A common analogy is buying a $500 television at a retail store and receiving a $50 manufacturer’s rebate,” IRS spokeswoman Michelle Eldridge told the Los Angeles Times. “It’s not income, just a deemed reduction of the cost of the television.”

U.S. Sen. Sherrod Brown, an Ohio Democrat, who chairs the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, was unhappy about Citi’s decision to send the tax materials and contacted the bank asking it to stop treating these rewards as taxable income. However, Citi says it was just following tax law, because while smaller items with lesser values often go unreported, those that are more valuable are often reported by banks as a business expense, necessitating that consumers report them as well.

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As for what the miles or points are valued at, Citi says that each one is worth about 2.5 cents apiece. So if a consumer received 10,000 for signing up, the value of that offer was $250. Meanwhile, Citi also claims that the tax implications of these offers was made clear in the materials given to borrowers when they were offered the accounts, though it was in fine print.

Many banks are now sending out offers for new rewards cards that grant consumers hundreds of dollars worth of miles just for signing up, then double that amount if they meet certain spending thresholds within the first few months the account is open.

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