I enjoy traveling and wish I could afford to do more of it. For right now, I can only dream of the places I’d like to go. When I do have the funds (read: when more debt is paid off), I plan to use these methods to score frugal travel deals without feeling like I’m being frugal. Today I’ll focus on when to travel and how to use miles. Tomorrow I’ll cover the travel deal websites.

Travel Off-Season
If possible, visit your destination of choice in the off-season. This is challenging when you have kids, but it can be done. When my sister and I were young, our parents took us to Hawaii for a week during the school year. Our teachers sent along homework and many of the spots we visited were educational, too. My parents believed, and I agree, that whatever we gained from the experience would more than outweigh missing one week of first and fifth grade. Of course, if your children are struggling in school, this isn’t a good option, but it is for parents with children who are succeeding in school.

If you don’t have kids, traveling in the off-season is much easier. Most destinations have “shoulder seasons.” These are the periods on the edges of either end of the peak period. In general it means the weather will be good and most destinations will be open, but it won’t be quite as nice as during the peak season. On the other hand, the crowds will be smaller, airfares will be lower, and flights will be cheaper so you can find true frugal travel deals. I visited Italy in mid-May and it was busy, but not ridiculously so.

One caveat about visiting the Caribbean during the off-season, which is also hurricane season. During years that are expected to have heavy hurricane activity, you might want to avoid the central and upper Caribbean during the summer and early fall. The southern Caribbean tends to have less activity, so travel there should be safe. If you do book a trip during hurricane season, make sure you have trip cancellation insurance and that it covers voluntary cancellation due to acts of God.

Use Miles
Many people like to use miles for travel. Experts recommend using miles to travel as far as possible to get the best value. I’ve used miles for Ireland and New York. According to one expert, South America is a great destination for miles – you can often buy cheap flights and then use miles to upgrade to business or first class. As a bonus, their dollar is weaker than ours and their cost of living is lower, so the prices are cheap. The Euro is much stronger than ours, so deals are more difficult to come by in Europe.

If you plan to use miles, try to book 11 months (333 days) in advance. Most awards seats are released 333 days in advance, although some airlines release them later. Call the airline to find out when they release mileage seats and then call them or go online as close to that date as possible to reserve your tickets.

If you can’t score cheap seats, you can often use miles to pay for your hotel room or car instead. That will still save you a lot of money off the trip.

The best way to get miles is with a mileage credit card. Try to find one that offers double mile rewards for some purchases. If you’re working toward a reward, put all your purchases on that card, but make sure you can pay them off at the end of the month. If you’ve got college-age students and are paying part of the tuition, charging their tuition to a mileage card (that you then pay off promptly) can score you some serious miles. My parents treated themselves to a nice trip to celebrate my sister’s graduation.

Also be aware of when miles expire. Some programs expire miles after 18 months of non-activity. Activity means earning miles or spending miles. Often, you can use a few hundred miles to buy a magazine subscription, which will then reactivate your miles if you’re getting close to losing them.

If you plan wisely, you can get free flights and travel when it’s relaxing for you, not when you’re squeezed between tour groups and fighting to find a room. Tomorrow I’ll review methods for getting travel deals with the deal websites.

I’m not someone who thinks TV is bad, but I recognize that it can easily absorb a whole afternoon if you’re not careful. Studies have shown that watch TV produces alpha waves, which are the same waves produced when you meditate. That’s why it’s so easy to watch a night of silly sitcoms without realizing it.

At the same time, I find that some shows get me thinking and create interesting conversations. I don’t want to give up TV entirely – there are certain shows my husband and I enjoy together – but I do want to watch less junk. I also wouldn’t mind cutting my cable bill.

Here are my tips for learning to watch less TV:

Keep a Cable Log
Last spring I kept a viewing log for a month in order to pinpoint my viewing habits. Right now it’s more challenging to figure out which shows you do actually want to watch because so few of them are on, but a cable log is still a good way to keep track of where you’re wasting time.

To keep my log, I put a notebook in the living room near the TV. Every time I turned on the TV, I noted the time, what channel was on, what show I watched, and whether I did anything else while watching. I also noted the time I turned the TV off.

Highlight the Shows You Actually Watched and Like
When reviewing my log, I discovered that I intentionally viewed about 50 hours of TV a month, but the TV was on for 85 hours. I also discovered that I never watched several of the premium channels we subscribed to. Those have now been cancelled. Of those 50 hours, probably 16 of them were the Daily Show and the Colbert Report. I discovered that I had a lot more free time when those two shows were off the air this winter, but I also really missed them! Now that they’re back, I watch them during dinner.

Set an Appointment to Watch TV
If there are specific shows you like to watch, make an appointment to watch them. Turn the TV on when the show starts, then turn it off when the show is over. In the fall, I was down to five shows a week (plus DS and CR). At this point, I watch 3-4 a week, but soon that will be just one or two. When/if TV returns in the fall, I plan to stick to just 3-4 shows a week.

Hide the Remote
If you tend to channel surf when you’re bored, make the remote difficult to access. Keep it in a box across the room or another room entirely. Serious TV addicts might want to lock it up. That will force you to think about whether or not you really want to watch TV. If you’re just trying to kill time, do something else. Read a book, exercise, play a game with your family, do something other than letting yourself lose four hours to mindless TV viewing.

Cancel Cable and Rent Shows
With most past seasons of popular shows now available on DVD, you can cancel cable and then rent the DVDs when it’s convenient for you. Even shows like MythBusters and Food Network series are on DVD. Your library, video store, or Blockbuster and Netflix most likely have many of the shows you’d want to see.

By cancelling cable, you also give yourself fewer options for channel surfing. If you don’t have a digital television, you’ll need to buy a digital converter by February 2009 or you won’t be able to receive any television. The government is operating a digital television coupon program to reduce the cost of the converters. Of course, if you want to stop watching TV entirely, cancelling cable and using an analog television without a converter will be a great way to go cold turkey!

Buy a Tiny TV
My best friend doesn’t have cable and only watches a few network shows, so she uses a 13-inch TV. The screen is so small that it doesn’t encourage lazy viewing. If you find yourself watching too much TV, buy a smaller TV and then sit all the way across the room. You’ll probably find yourself watching very little TV after a week of miserable squinting.

I was able to watch less TV simply by being more aware of my viewing habits, but you might need to take more drastic action if you have a serious TV addiction.

How do you feel about your viewing habits? Is the strike making it easier to watch less TV?

Once again, the carnival has pulled up to the local station. The Dividend Guy is this week’s head carnie. The Carnival of Personal Finance #137 features my post on the LIBOR and Fed Rates.

For festival fans, visit the Festival of Frugality #110. It’s hosted by Mrs. Micah and features my post on life insurance.

In response to my life insurance post, a reader emailed to ask whether I’d recommend life insurance for children. In general, no.

When my husband was a baby, his mom bought a Gerber children’s life insurance plan to cover funeral expenses if he died. He continued to pay for this $10,000 coverage well into his late-twenties, until I pointed out that he’d probably paid more than it was worth. He was able to cash it in and get a little money, but not much.

Why Buy Life Insurance for Children?

There are two main instances when you might want to buy life insurance for your kids:

  • Your child contributes income to the family. This is a pretty rare occurrence, but it’s a possibility, especially for child actors, models, and other performers. In this case, you might consider buying insurance to replace your child’s income if you have no other sources of support and are a full-time stage parent.
  • You have a strong family history of diseases that make acquiring insurance later difficult. Examples would be Type 1 diabetes and other debilitating, lifelong illnesses. If you buy your kids whole life insurance when they’re young, you guarantee them coverage later in life, as long as you or they continue to make the payments.

Preparing for Funeral Expenses
Unless either of the above applies to you, there’s no reason to buy your child a life insurance policy. If you’re worried about funeral costs, deposit the premium amount into a college savings plan of some kind. You can still access the money if the unthinkable happens, but your child will have additional money for college if it doesn’t.

I’m not a Valentine’s Day scrooge. I have celebrated the day with great fanfare in the past – usually early in a relationship. Now that I’ve been with my husband for nine years, the day is becoming less important to me. Also, I don’t find being surrounded by hordes celebrating enforced romance the least bit romantic.

I also recognize that most of the Valentine’s Day pressure is a result of women’s expectations. If men had their druthers, the day would vanish. I see their point. We women have been trained to expect diamonds, roses, and lavish dinners on February 14. That can get quite pricey for men.

Five Inexpensive Valentine’s Day Ideas
Here are a few simple ideas to make Valentine’s Day cheaper and yet still enjoyable.

Change the date: This year it falls on a Thursday. Who wants to rush out to dinner on a Thursday? Instead, go out on Friday or Saturday this year. Not only will the restaurant be less crowded, you’ll probably get the same food without the special, overpriced “Valentine’s Day menu.” True, you might sacrifice the rose or little chocolate the restaurant gives you, but are those little extras really worth the additional cost? We did once go to a very nice restaurant on Valentine’s Day and get the prix fix meal, but we found the service harried and the dinner not quite worth the price. I didn’t even get the promised rose.

Enjoy a romantic dinner at home: Light candles, set a nice table, and then serve up your favorite foods. Chicken Marsala with roasted red potatoes and a nice wine would be delicious, and remarkably easy to prepare. Or you could kick the romance up a notch and choose foods you can feed each other, like cheese fondue or a dessert of chocolate fondue.

Skip (or delay) the flowers and jewelry: Both of these are significantly marked up for Valentine’s Day. The price of roses doubles, especially since they’re not in season this time of year and have probably been flown in from Ecuador.

If you still want flowers, order them the next day. One year, my husband bought me a pretty bouquet on February 15. I returned home from work to find it on the kitchen table. I was stunned and delighted, and it cost him 50% less. If you opt for this, skip the roses. They will be leftovers from the day before and probably not in great condition. Instead my arrangement had irises (my favorite) and “filler” flowers that lasted for over three weeks.

Buy a card: I like to receive a card from my husband on Valentine’s Day. He has yet to fully grasp that “not doing anything” means “exchanging cards,” but I do buy him a card. Apparently 85% of Valentine’s Day cards are bought my women. I prefer funny cards, which are usually around to $2. Sappy cards can get as high as $10, but I’d aim for $5 maximum for a card that will only wind up in a recycling bin in a few days.

Buy small yet decadent chocolate gifts: At least for women. My Dad loves a See’s chocolate assortment. My mom and I would rather receive one really decadent piece of chocolate than deluxe Valentine’s Day gift baskets. If you have a chocolate-lover in your life, visit a gourmet chocolatier to buy one or two very good truffles. That will run you about $5.00 and no one has to feel guilty about the calories and fat. They taste better, too.

Some people insist on going all out for Valentine’s Day, but I don’t think you have to focus all your romantic energy on one day. I’d rather find small, affordable ways to celebrate our relationship year-round.

What are your ideas for saving money on Valentine’s Day?

As I said yesterday, voters in six states have had their say on the 2008 presidential candidates. As always, the presidential election is important, but voters this year face very serious issues. No matter where you stand on the issues, it’s important to consider all the candidates and then choose the one who best matches your beliefs.

In advance of Super Tuesday, I’m presenting summaries of the candidates’ statements on economic issues. Candidates are listed in alphabetical order. In order to be included on my list, they must still be in the race and be listed in the national polls at RealClearPolitics. In general, that means they’re polling above 2% nationally.

Most of these are copied from the candidate websites directly, although I had to search the internet for some statements. I relied on CNN’s election center and OntheIssues.org for most of the answers I couldn’t find on the candidates’ sites. Some statements are rephrased for length or clarity (or to cut the campaign rhetoric). I haven’t injected any personal commentary.

Mike Huckabee

Taxes

  • Eliminate all federal income and payroll taxes
  • Supports the FairTax, which will replace the Internal Revenue Code with a national sales tax
  • Provide monthly rebate for sales taxes on purchases up to the poverty line.

Healthcare

  • Make health insurance more portable from one job to another
  • Expand health savings accounts to everyone (currently limited to those with high deductibles)
  • Make health insurance tax deductible for individuals and families
  • Provide tax credits for low income families buying insurance.

Retirement

  • Provide personal retirement accounts proposed by Bush.

Economic Stimulus Package

  • No immediate plan available

Foreclosure

  • Pressure lenders to refinance loans so rates will rise more slowly and affordably
  • Increase regulation of the mortgage industry
  • Ban low teaser rates and stated income loans.

Rudy Giuliani

Taxes

  • Make Bush tax cuts permanent
  • Repeal estate tax
  • Tie Alternative Minimum Tax to inflation.

Healthcare

  • Provide tax deduction of up to $15,000 for families without employer-based health coverage
  • Institute Health Insurance Credit for low-income Americans that can be coupled with other revenue sources such as Medicaid and employer contributions to make coverage more affordable to millions who are uninsured
  • Require availability of low-cost insurance options
  • Repeal state regulations that limit coverage options and increase costs.

Retirement

  • Expand tax-free savings accounts
  • Eliminate the double taxation of individuals’ current savings.

Economic Stimulus Package

  • No plan available

Foreclosure

  • Supports government assistance for victims of predatory or fraudulent lenders.

John McCain

Taxes

  • Repeal the Alternative Minimum Tax (AMT)
  • Make the Bush income and investment tax cuts permanent.

Healthcare

  • Eliminate the tax code bias toward employer-sponsored health insurance
  • Provide all individuals with a $2,500 tax credit ($5,000 for families) to purchase health insurance
  • Allow individuals who buy multi-year policies that cost less than the full credit to deposit remainder in expanded health savings accounts
  • Allow families to purchase nationwide insurance to increase competition and reduce costs
  • Allow individuals to buy insurance through any organization or association that they choose
  • Promote preventative care.

Retirement

  • Supplement the current Social Security system with personal accounts.

Economic Stimulus Package

  • Cut the corporate tax rate from 35 to 25 percent
  • Allow first-year deduction, or “expensing”, of equipment and technology investments
  • Establish permanent tax credit equal to 10 percent of wages spent on R&D.

Foreclosure

  • No plan available

Ron Paul

Taxes

  • Exempt members of America’s armed forces from income taxes
  • Pass the Liberty Amendment, which repeals the 16th Amendment (income tax amendment)
  • Repeal capital gains and dividends taxes
  • Repeal estate tax
  • Repeal taxes on tips
  • Adopt the FairTax plan, which replaces income tax with national sales tax.

Healthcare

  • Institute medical savings accounts where consumers can save pre-tax dollars
  • MSA would be used to pay for health care expenses, with the patient negotiating directly with the physician of their choice for the care they choose
  • Ensure major-medical insurance policies remains available and affordable for catastrophic care
  • Allow families to claim a dollar-for-dollar tax credit for the rising cost of health insurance premiums
  • $500 per child tax credit for medical expenses and prescription drugs that are not reimbursed by insurance
  • $3,000 tax credit for dependent children with terminal illnesses, cancer, or disabilities.
  • Waive employee portion of Social Security payroll taxes (or self-employment taxes) for individuals with documented serious illnesses or cancer and suspend Social Security taxes for primary caregivers with a sick spouse or child.

Retirement

  • Ban government borrowing from Social Security trust fund
  • Allow young people to stop contributing to social security
  • Reduce contributions and allow people to invest money themselves
  • Repeal taxes on social security benefits.

Economic Stimulus Package

  • See tax and foreclosure plans.

Foreclosure

  • Repeal tax on mortgage debt discharges (currently, forgiven loan balances are taxes as income)

Mitt Romney

Taxes

  • Repeal tax on interest income, dividend income, or capital gains earned by people earning less than $200,000 a year
  • Make Bush tax cuts permanent
  • Reduce lowest tax rate from 10% to 7.5%
  • Repeal estate tax.

Healthcare

  • Encourage states to eliminate the cumbersome insurance regulations that increase costs and reduce competition
  • Make all health care expenses tax deductible
  • Reduce uninsured emergency room expenditures
  • Use savings from reduced emergency room expenditures to help the needy buy private insurance
  • Support tax deductions to help individuals buy private insurance.

Retirement

  • Support personal retirement accounts
  • Would consider indexing social security benefits to prices rather than wages.

Economic Stimulus Package

  • Institute immediate 100% expensing of equipment for two years
  • Permanently reduce the corporate tax rate
  • Introduce immediate retroactive tax credit reflecting the lower 7.5% tax rate for 2007 earnings to employees who earned less than $97,500 in 2007.

Foreclosure

  • Reform and expand Federal Housing Administration (FHA) loan portfolio limits to allow larger loans to homeowners
  • Reduce required down payment
  • Allow FHA to help nonprime borrowers who may not be able to meet the current requirement
  • Raise the maximum loan amount for borrowers in higher-priced areas
  • Expand NeighborWorks foreclosure avoidance initiative.

This morning, several news organizations announced that the White House and Congress have come to a tentative agreement on the economic stimulus plan. The main part of the plan is tax rebates for singles earning under $75,000 and couples earning under $150,000. Each person will receive at least $300, plus an additional $300 per child. There will probably be a cap in the range of $1200 per family. Some sources say the checks could be as high as $600 per individual, with the cap still at $1200. You would have to have earned a minimum of $3,000 in 2007 to qualify.

According to a report I saw on Good Morning America, the IRS says it could be May or June before the checks start going out. They haven’t said if they’ll need to do it in batches like they did with the rebate in 2001. If they do, that could mean I won’t have my check until July or August. That’s fine with me, but I don’t see how eight months down the road is “emergency stimulus.”

Personally, I also don’t see how this will truly stimulate the economy. This probably isn’t enough to save anyone from foreclosure. I plan to use the rebate for debt payments, as do most people I know. That means it’s not money flowing back into the system. Other families may choose to add it to their household budgets and spend it on food, fuel, energy, and other household costs. I doubt many people are going to buy big screen TVs or go on a shopping spree.

I’m leary of the whole idea of using consumer spending to save the economy. Isn’t consumer spending the very thing that dug us into this hole in the first place? If we truly want to fix the economy, we need to reduce consumer debt, reduce the national debt, and balance the budget. Stopgap measures are just political mumbo jumbo meant to make us feel good about our politicians.

This does still have to pass the House and Senate. It’s expected to easily pass the House, but the Senate may want to do some tinkering. It could be up a month before the final bill is passed.

So far, voters in six states have had their say on the 2008 presidential candidates, but there are some big votes coming. Super Tuesday is just eleven days away, and that could crown the nominees on both sides.

No matter where you stand on the issues, it’s important to find the right candidate for you and vote accordingly. I won’t say whom I support; I will simply urge you to vote. To help you choose, I’ve compiled summaries of the candidates’ statements on economic issues. You may have other issues that are more important to you, but whoever becomes president will have an impact on several economic issues that affect each of us directly.

I’ll start with the Democratic presidential candidates today and cover the Republicans tomorrow. Candidates are listed in alphabetical order. In order to be included on my list, they must still be in the race and be listed in the national polls at Real Clear Politics. In general, that means they’re polling above 2% nationally.

Most of these are copied from the candidate websites directly. In some cases, I had to search the internet to find the answers. Some statements are rephrased or reworded for length or clarity (or to cut the campaign rhetoric). I haven’t injected any personal commentary.

Hillary Clinton
Taxes

  • Repeal Bush tax cuts for the top two brackets and restore 1990s tax rates for upper-income Americans
  • Extend earned income tax credit, middle class tax relief, the child tax credit, and marriage penalty relief
  • Reform the AMT
  • Maintain the estate tax exemption at $7 million (2009 level).

Healthcare

  • Guarantee healthcare for all Americans
  • Provide all Americans with choice of maintaining current coverage or accessing same program available to members of Congress
  • Reduce hidden taxes and fees that increase healthcare costs
  • Offer incentives for employers to provide coverage
  • Offer tax credit to help individuals pay for coverage
  • Limit coverage costs to percentage of income
  • Modernize the system and promote prevention to reduce costs.

Retirement

  • Introduce American Retirement accounts that will permit individuals to contribute up to $5,000 per year on a tax-deferred basis
  • 401K plans offered by employers will still be available
  • Provide matching refundable tax credit for the first $1,000 of savings by every married couple making up to $60,000. 50% match on the first $1000 for couples making between $60,000 and $100,000. Credit phased out after that
  • Plans will be administered in the private sector
  • Automatic savings through employers unless employees opt-out.

Economic Stimulus Package

  • $30 Billion Emergency Housing Crisis Fund
  • 90-day moratorium on subprime foreclosures and an automatic rate freeze on subprime mortgages of at least five years
  • $25 billion in emergency energy assistance for families
  • $5 billion in energy efficiency and alternative energy investments
  • $10 billion to extend unemployment insurance.

Foreclosure

  • Institute “Save our Home” program for two years
  • Temporarily increase Fannie Mae and Freddie Mac’s portfolio caps by 5%
  • Help homeowners at risk replace adjustable-rate mortgages with fixed-rate mortgages
  • Temporarily modify the Mortgage Revenue Bond (MRB) program to allow it to refinance mortgages (currently only for new mortgages)
  • Increase the cap on the MRB program by 25%
  • Temporarily increase federal loan limit. Index the limit to median regional prices and cap it at $650,000.

John Edwards
Taxes

  • Institute a new “Get Ahead” tax credit to match up to $500 a year in savings for families earning up to $75,000
  • Tax credit funds could be used for retirement, college education, buying a home, investing in a small business or during a financial or medical emergency
  • Institute new “Work Bonds” to offer additional targeted savings incentives for low-income families
  • Credit will be refundable for low-income families and the size of the credit will be reduced for families with higher incomes
  • Expand the Child Care Credit to pay up to 50 percent of child and dependent care expenses up to $5,000 and make it partially refundable
  • Triple the Earned Income Tax Credit for single adults
  • Cut the marriage penalty
  • Raise capital gains tax rate to 28 percent for wealthiest Americans
  • Repeal the Bush tax cuts for the highest-income households and keep the tax on very large estates (above $4 million for couples)
  • Close unfair loopholes like the tax breaks for hedge funds and private equity fund managers and unlimited executive pensions.

Healthcare

  • Require employers to either cover their employees or help finance their health insurance
  • Make insurance affordable by creating new tax credits
  • Expand Medicaid and SCHIP
  • Reform insurance laws
  • Create regional “Health Care Markets” to allow Americans to purchase an affordable, high-quality health plan, increase choices among insurance plans, and cut costs for businesses offering insurance
  • Promote preventative care.

Retirement

  • Create Universal Retirement Accounts
  • Require employers to offer a new universal retirement account to all workers without another pension
  • Businesses will be encouraged to automatically enroll workers in a 401(k)-type portable retirement account, with automatic paycheck deductions and employer contributions.

Economic Stimulus Package

  • $25 billion now to investing in clean energy infrastructure, increasing federal aid to states avoid cutting programs that help families through hard times, reforming unemployment insurance and tackling the housing crisis
  • If necessary, $75 billion for additional state relief, additional spending on a new energy infrastructure, accelerating investments in schools, roads, and bridges and temporary tax cuts targeted to the low-income and middle-class families.

Foreclosure

  • Any freeze on interest rates must keep rates low for seven years
  • Ensure right to individual assistance from lenders – such as converting to a fixed-rate mortgage, capitalizing delinquent payments, reducing the interest rate, or forgiving a portion of the loan
  • Create a Home Rescue Fund to help families move into affordable mortgages
  • Allow bankruptcy judges to rewrite mortgages
  • Institute a central reporting system to keep track of lenders’ progress in modifying loans and to facilitate fraud and predatory lending investigations.

Barack Obama
Taxes

  • Protect tax cuts for poor and middle class families
  • Reverse most of the Bush tax cuts for the wealthiest taxpayers.
  • Create a new “Making Work Pay” tax credit of up to $500 per person, or $1,000 per working family. Offset the payroll tax on the first $8,100 of their earnings
  • Create a universal mortgage credit for all tax filers
  • Earned Income Tax Credit up to $555 for full-time workers. An additional $1,110 for workers with children
  • Eliminate all income taxation of seniors making less than $50,000 per year
  • Make the Child and Dependent Care Tax Credit refundable and allow low-income families to receive up to a 50 percent credit for their child care expenses.

Healthcare

  • Create a National Health Insurance Exchange to help individuals purchase a private insurance plan
  • Create rules and standards for participating insurance plans to ensure fairness and to make individual coverage more affordable and accessible
  • Ensure affordable coverage for all
  • Require employers to offer coverage or provide meaningful assistance in purchasing private coverage
  • Employers that do neither of the above will be required to contribute a percentage of payroll toward the costs of the national plan. Small employers that meet certain revenue thresholds will be exempt
  • Mandatory coverage for children
  • Expand Medicaid and SCHIP
  • Accommodate existing state plans.

Retirement

  • Automatically enroll workers in a workplace pension plan
  • Employers who do not currently offer a retirement plan will be required to enroll their employees in a direct-deposit IRA account
  • Employees may opt-out if they choose
  • Match 50 percent of the first $1,000 of savings for families that earn less than $75,000. The savings match will be automatically deposited into designated personal accounts.

Economic Stimulus Package

  • $250 rebate for 150 million low and middle income workers
  • $250 rebate for seniors earning under $50,000 as a Social Security supplement
  • Establish a $10 billion fund to help “responsible” families avoid foreclosure
  • Establish $10 billion fund for states facing budget shortfalls
  • Expand unemployment insurance

Foreclosure

  • Create a fund to help people refinance their mortgages and provide comprehensive support to innocent homeowners
  • Assist individuals who must sell their home by providing offsets of selling costs and offer additional time to sell
  • Waive certain federal, state and local income taxes that result from an individual selling their home to avoid foreclosure.

Yesterday, as you probably heard, the Federal Reserve Bank cut the key overnight interest rate by 75 basis points. The LIBOR (London Interbank Offered Rate) has also been dropping due to credit concerns. So, you may be wondering what this means for you. The answer is that it depends on how your finances are arranged.

Credit cards: You may see your credit card interest rate fall slightly, but probably not by much. This is one place where lenders can actually make money.

Mortgages: If your prime-rate, adjustable-rate-mortgage is pegged to a Treasury rate, the Fed rate cut could reduce your mortgage rate. Unfortunately, many loans are pegged to the LIBOR instead. This is especially true of subprime and ALT-A loans. Although the falling LIBOR may help some of them whose interest rates are resetting, the decline is too incremental to make a big difference in their ability to pay.

If you’re in the market for a new fixed-rate mortgage or a fixed-rate refinance, this cut is excellent news for you. Contact several lenders to find out their current rates and offers. They may ask you to jump through a few additional hoops, but it’s worth it if the home you want to buy is reasonably priced and you can lock-in a low rate. Nickel discussed the low mortgage rate he received just today.

Student Loans: If you have a variable student loan, you may or may not see a reduction in your interest rate. Like many mortgages, student loan rates are often now linked to the LIBOR.

Auto Loans: If you’re in the market for a new car, check out the different rates available. Although offers from dealers may not change much, your local bank or credit union may be offering a reduced rate.

Employment: The Fed rate cut was partially intended to encourage corporate borrowing. Lower rates make it easier for banks to find money to lend, and corporations are the largest borrowers. That said, a rate cut probably won’t affect your employment directly. Many experts aren’t predicting large lay-offs even if a recession does occur. Your employer may reduce spending on optional projects, but your job is probably safe unless you’re in the banking/housing industry.

Savings: The Fed rate cut does mean the interest rate on savings accounts, CDs, and other accounts will fall. If you have a CD that is about to expire, research your options carefully before rolling it over into a new one. You may find better vehicles for your savings right now.

Investments: If you’ve checked your portfolio recently, you know it’s hurting. The rate cut was intended to stimulate the market, but the experts I heard on NPR weren’t sure how effective it would be. They did say that it may have been enough to avoid a panic sell-off, but it probably won’t send anyone’s stock soaring. Monitor your investments, but don’t make any sudden moves if you’re investing for the long haul.

The Fed may cut the rate again in two weeks, but for now, continue your frugal habits and don’t stress about the fluctuations of the Fed.

Whenever I hear about the deaths of celebrities like Heath Ledger and Brad Renfro, my first thought goes to the children they left behind. I pray that the surviving parents have the strength to help their children through this. I also hope that the celebrities listened to their financial advisors and arranged for trusts and life insurance.

Most of us can only dream of earning the kind of money these celebrities make, but events like these are an important reminder of why every parent, spouse, or adult child with dependent parents needs a solid life insurance plan to cover expenses after their death. Unfortunately, deaths like these are also a reminder that tragedy can strike anyone at any time, famous or not.

Types of Life Insurance
Life insurance is generally available in two types: whole life and term. Your insurance agent is more likely to push whole life insurance because they earn a higher commission, but that doesn’t make it the best deal for you.

Term Life Insurance
For most people, term life insurance is the best bet. When you’re young, term life insurance is very cheap and rates rise as you age. You’re buying a fixed amount of coverage for that term, as long as you continue to pay the monthly premium. At the end of the term, you usually have the option to buy a new term policy. Terms generally range from 5 to 30 years. Use a site like NetQuote to get competitive quotes for term life insurance.

Whole Life Insurance
Whole life insurance is usually more expensive, but it contains an investment component. Your premium buys a fixed payout amount, but your payments also build cash-value. Most policies allow you to cash-out or borrow against the policy tax-free, although you usually receive less than you paid in. However, it usually takes fifteen years to build significant cash value. If you’re young and healthy, term is the better option. If you’re over 65, whole life may be your only option, but the cost will be dear.

How Much Life Insurance Coverage to Buy
The general rule of thumb is that you need a policy that covers five to seven years of your salary. So, if you earn $50,000 a year, you should buy a $250,000 to $350,000 policy. If you have very young children, you may way to opt for a policy equal to ten years of salary as a precaution. Although insurance is designed to cover the salary of the working spouse, many advisors also recommend buying coverage for a non-working spouse. They reason that the working spouse will have to pay for childcare, household help, and other assistance that the non-working spouse provided.

How Long a Term to Buy
Again, the general rule of thumb is to buy coverage that will last until your youngest child completes college. For young families, assume a 20-year-term. Many people buy coverage until their retirement age to recover lost income their spouse was counting on. Term life insurance for people over 70 isn’t usually available, or is prohibitively expensive.

Whether or not you’re a celebrity, life insurance is vital to anyone with dependents. Unfortunately, it often requires a tragedy to make us realize that and act upon it. If you don’t have life insurance, research plans today.

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