While the title of this post might make you think that I am going to help motivate you to start a new exercise regiment for the new year that strengthens your core muscles, good for you if you are already doing that, the reality behind this entry is the result of a discussion I had with my coworker. In recent writings I have stressed the importance of setting a budget, sticking to it, and really keeping an eye on your finances so that you maintain good credit and do not get yourself backed into a corner. Apparently in all of this I should also remind everyone that a basic component to a successful budget is to have a balanced checkbook. My friend’s story, as frustrating as it was for him, serves as a good lesson for all of us.

It was the holiday season and he wanted to spend lavishly on his family. He was employed, the car was paid off, the mortgage was manageable and he felt like he should do his part to help keep the economy afloat. He did all of that and then he went to pay the credit card bills that came flooding in at the end of last month. All seemed well and good until his bank called to tell him that he was overdrawn by over $700. On top of the extra fee of over $100 that the bank charged, the credit card companies then hit him with additional late fees for the balances that were not paid.

Upon his mounting frustration and after shuffling around some other finances, my friend went to the bank and tried to figure out how everything had happened. He went back and asked for a balance break down over the last three months. I have been doing this for the last year as a way to make sure that I stay on top of my own check balancing because it gets very easy to write a check or take some money out of the ATM and not record it. Anyway, upon going through all these records, he found out what the issue was. He had not been recording his ATM withdrawals. While they showed up on his statement, he never took the time to reconcile it with what he had down in his register. Oops.

Now I say that this story should speak to everyone as a reminder that we need to keep track of the simple things. I should also mention that we are still teasing my friend mercilessly about this incident, although we have not been doing it at work. The thing is that my buddy works in the finance department and that this is the type of mistake that at work would cost him his job in less than half a heartbeat. I know from talking with him and the fact that he passes the monthly audit the company conducts that he is much more careful with the company’s money. Make sure that you record those ATM transactions. They can add up very quickly.

As times get tougher, the better part of humanity tightens its belt and tries to help their fellow man. Unfortunately, there is still a part of the population that decides they will capitalize on the poor economy by bilking others out of their minimal savings and hard earned cash. At this point, everyone in the country knows how Freddie Mac and Fannie Mae have turned into giant sores on the public landscape, even to the point that the government had to get involved to pull them slightly back toward the black.

If you own a home, you know first hand how tough times are. This becomes especially true if you took out an adjustable rate mortgage. While in the short term, when things were grand and the money was flowing, this seemed like a great idea. However, now that times are rough, people have seen their rate jump up beyond their means. While I know that some people say that this serves people right for not reading the fine print of the paperwork or really understanding how finances works, those speaking are usually those with business or finance degrees. In some ways I agree with them, but at the same time, I also see how many questions have been raised about questionable practices in the mortgage industry and I do not doubt that some people were deceived while others were blatantly lied to.

At this point, you might be asking where I am going with this. Well, I want to alert you to a scam that I saw on the news earlier this evening. It seems that people are getting emails that claim that they person has won a sweepstake produced by Freddie or Fannie in which free money has been granted so that the person can improve on the size of their house. These emails have the classic look of spam and I do not know why people are clicking on them, although I can imagine people are so up to their ears in debt that they might be looking anywhere they can for a miracle and feel that maybe their ship has finally come in.

In addition to having email addresses that do not match, numerous spelling errors, and grammar that does not look like it was written by someone who would be employed by the government, this scam requires that in order to claim your large prize, it never tells you how much you have won, you must wire $850 dollars to an account in Las Vegas, the Cayman Islands, or Eastern Europe. Why this does not tip people off to the fraudulent nature of the email is beyond me, but if you have gotten these emails, do not fall for it. You will be out $850 and you will not be getting any extra money.

Some general rules you should be aware of. Practice common sense. If something seems too good to be true, it probably is. There is no such thing as a free lunch. You should never have to pay money in order to receive a prize. There are laws in the United States which prevent this. Look at the Better Business Bureau website to keep yourself apprised of newly developed scams.

When I was a child, my elementary school used to have Market Days, where simple products were sold at an elevated cost, with all the overhead going to help support the school. My family never participated because we were not able to afford the high fees, but I still remember the order forms and the chaos of parents and children filing into the gym to pick up their goodies. As I am now an adult and do not have any kids of my own, I have had to branch off into other market day related ventures to help raise funds for needy causes. I have found that in this difficult economy, the ability to pay my own bills and make some profit on the minimal amount of money I have in the bank is a valid objective.

In an effort to help others learn from my mistakes and increase their own money, I want to tell you a personal story. For over a year I had money sitting in a savings account at the local bank. The balance was never extremely high, somewhere between $3,000 and $6,000. During the course of that time, on a monthly basis, I made somewhere in the ballpark of .76 cents of interest on that money. This was a terrible idea. But I was confident that I did not want to get into anything risky and I always liked the freedom to get to my money whenever I might need it. So I continued down this path until I was talking with one of my neighbors. We got on the issue of savings and I was vaguely complaining about the minuscule return I was getting. He informed me that I should look into a money market account.

A money market account allows you to put in x number of dollars and receive a higher rate of interest on your money than if it was just sitting in a savings or a checking account. There is usually a minimal amount that you have to maintain in order to get the “higher” interest rate, but it is still a tolerable case. In my instance, that balance is $3,000 and with that much in there, I get 2.9% interest annually. While this does not sound like much, it adds up. When all is said and done at the end of the year, I will have enough to pay all my bills for an extra month. The best part about a money market account is that you can write checks from that money, so it is still accessible, even though only on a limited basis. For instance, I can write three checks a month from it. I wait until I get all my bills and then I write one check and pay the balances off.

Another secret to having a successful money market account is shopping around for the best rate. The bank that I have mine with is relatively new and is offering a much better deal than others in my area. When I called around, another institution told me that the economy was so bad that their interest rate was currently at .78% a year. I had never heard of anything so low, but they were still the second highest I found. I talked to five different banks too. I guess that just goes to show how tough times are now.

If you have spent any time in the working world, you know that not everyone adjusts to new technology at the same rate. When I used to work IT, I received numerous calls from people who were always locking themselves out of their accounts because they did not know what the Caps Lock key was and they had no idea why their password was being rejected. At other times, I had people call me up and explain something about their software that was way over my head and I simply passed them on to someone more experienced than I. For that reason, I want to just go through, very simply, and spell out why I recommend financial software, even though I am aware of the risks.

1) It saves you time. In the long run, you will get very good at downloading information to your program and will not have to worry about waiting for your statement to come in the mail. I have found that if people have everything in front of them at one time they are much more likely to accomplish their goal than if they can find any reason to procrastinate.

2) You do not have to do the math. For some people, this is great. For others, they feel like they are getting ripped off. I actually think it works out well for both people. The computer is going to get the calculations right. You, however, need to make sure that you enter the information correctly. If you fail to do that, well, whatever happens is very much your fault. I find that I let the computer do the math and then if I am feeling into the mood, I go through and check my numbers and the math. Only once have I entered information incorrectly. However, it did involve around $1,500, so it is good that I caught the mistake.

3) Pay your bills online. This is still a feature that I am not sure why more people do not take advantage of. Most companies allow you to subscribe to this function and you do not necessarily need the software. However, if you want to have everything in one place and you do not need to remember multiple account numbers and passwords, you can enter them all into Money or Quicken and then pay all of your bills from one page.

4) It is technology. If you do not get along well with computers, you probably should think long and hard about getting this software. If you are not good with technology, but want to try anyway, go with Microsoft Money, although I still advise you to use TurboTax come April. You will be more at ease with the interface because of other Microsoft products that you inevitably use in your life.

5) Blue screen of death. We have all been there. Working away and the system crashes. That is the one risk of having all of your data stored on one machine. Make sure that you save multiple file copies and keep them on disks, CDs, DVDs, or flash sticks. If you have two computers, and both are secure, put a copy of your files on both. Nothing will make your life easier than knowing one machine crashed, but that you backed up all of your information safely in another location.

I mentioned Microsoft Money in my last posting, but after some comments from guests I decided I needed to go through and give a better description of what exactly it does and why I would not recommend it as strong as I do Quicken. One of my largest complaints is that the system only uses Internet Explorer. Every since there was a large announcement a few weeks back about the vulnerabilities in IE, I have been glad that I went with Quicken. For something that has to do with such personal and potentially dangerous material, I want as much security around it as possible. Identity thieves are lurking everywhere and the last thing I want is for someone to grab my social security number and bank routing number when I am doing my finances online.

However, there are some perks about the system too. For instance, if you are familiar with other Microsoft products, then you should have no problem mastering the interface. It is very similar to what you see when you open Excel or any other Office Suite application. You can do similar bill paying, checking account monitoring, and budget tracking that you get with Quicken. A feature which this has that other software bundles do not spend as much time with is the ability to automatically update your register. This is a great boon to using Microsoft Money. While you can get this on Quicken, it was not in the original software bundle and you have to do one upgrade to get it. It is standard with Microsoft Money.

There is one hesitation to note when saying that you can get anything done automatically. This assumes that you have a constant internet connection. Microsoft Money works less efficiently with a dial-up connection because there are so many things it tries to do automatically. If you have a 24/7 high speed internet connection, then this fact should not trouble you. Similarly to Quicken, Money offers a variety of packages where you can consider what your needs are and purchase the appropriate version. Again, only you can know what your plans are and what you will require to keep your finances in order. I can tell you from personal experience though, when you are at the store staring at the boxes, do not get the swell of ambition that you will need the Deluxe because you plan to do X, Y, and Z. It realistically is not going to happen. Start simple and work your way up only if you are actually accomplishing things.

A component of Money that Quicken does not have relates to credit monitoring. As I mentioned earlier, identity thieves are everywhere. Money offers a credit monitoring function. While this provides less security than an ID theft subscription service, like those provided by Lifelock, it sill gives Microsoft an edge over the peace of mind delivered by Quicken, as it does not offer any similar monitoring service. Additionally, Money offers tax service components, but they are not as highly regarded or intuitive as TurboTax.

In an economic world that seems to be so far down from where it needs to be and what we are all used to, it might seem like a crazy idea that you would be investing in some electronic financial software to keep track of your budget and all of your money. However, it is cheaper in the long run to do this yourself, rather than hire a CPA or an Investment Analyst to watch over all of your funds. There are some pros and cons to this approach though and I will go through and try to spell them out for you, at least to the best of my abilities from my own trials and tribulations from having used this material.

There are two major software names that you can consider: Quicken and Microsoft Money. Personally, I use Quicken. Having this all online is a lot easier than having to draw all of this out by hand. For a while I used a regular Excel spreadsheet, but eventually that stopped working so smoothly so I upgraded to an actual program. My boss uses Microsoft Money and he has good things to say about it, but in my mind what I would get with Money is similar to what I get in the Microsoft program of Excel and it just seems to be a bit repetitive to me. Quicken is good for simple things like balancing your checkbook, tracking the budget, and downloading financial records from banks. Over the years, this service began being offered by more and more institutions, so wherever you have an account, check with them to see if they offer you this service. Downloading the information means you do not have to worry about making mistakes when you do the data entry.

The issue of data entry brings me to an important point: double check all of your work! This is not something you can slap together when you are tired, regardless of how easy of an interface the software has. You need to make sure that you do not accidentally leave out a 0 or put in an extra 1 into a column and then find out at the end of the month that you owe “excess” money or that you did not have to eat nothing but Ramen Noodles for an entire month.

Another nice feature about Quicken is that you can build upon it. There are a variety of different versions, currently four, where each has a component that the lower grades do not. When you go to buy one, look at the box and see what it offers. Assess your needs and do not buy something that has a number of bells and whistles that you will not use. Finally, the nicest part about Quicken is that it ties directly into TurboTax. When it comes time to do your taxes, you want to make sure that you are able to import the information from your budgets and accounts directly into the tax forms. For how stressful the process can usually be, doing it all electronically with Quicken and TurboTax is so easy it feels like a dream.

While I’m on my current trend of giving you names and classifications of people, I’ll go one step further. This one is pretty simple, but it is very important as well. Many people might never need to consult a variety of financial planners like I spelled out above, other than the CPA. But for an increasing number of people, there are issues of trading, investing, and knowing when to get your money out of the market. These are important issues for each and every one of us.

When you contemplate investing, and if you still do it in person, do you really know the type of person that you’re meeting with? Is it a stock broker or is it an investment analyst? Although it comes as a surprise to most people, these are not just two names for the same things. The differences might be minimal, but if something goes wrong, it becomes incredibly important that you know who you’re dealing with and what sort of recourse you can take.

If you are working with a stockbroker, you have to decide whether or not you want that same person to serve as your investment advisor. In most instances, this isn’t going to be a problem. And in the rare occasion that it is, you are going to have some legally difficult decisions to figure. But for the sake of argument, I should tell you that most of us fall into this type of classification, having our investment advisor and stockbroker all rolled in to one. So it obviously cannot be too laden with pitfalls.

Your stockbroker should have certain things in mind when they are working with you. Other than making money that is. First off, they should know who you are, what your background is, where your income lies, and other basic components to the financial world. They are supposed to use that information to recommend stock options that won’t put you into jeopardy. However, there are some individuals out there who are less scrupulous than we would like to admit.

If you happen to get duped by your broker, you should go to the National Association of Securities Dealers. They’ll be able to give you some assistance, although their help may be limited. However, if you are working with an advisor, you can get in touch with the Securities and Exchange Commission. They will have a record of all registered investment advisors. If the person you’re working with isn’t on that list, you might want to talk to them about it and figure out the problem.

The people who need to be the most aware about these things are people who trade online. Since you don’t ever actually meet with anyone in person, the individuals you talk to don’t have to meet the same criteria as listed above. And, since the people online might not know as much about your background as a real broker or advisor would, the Internet variety have even fewer restrictions placed on them and as such, you have even less avenues for resolving problems.

Buyer beware.

Now that you have figured out your net worth and have the information readily accessible, you need to move on to a very basic piece of information. What is your insurance situation? Too many people try to get away without having to purchase any sort of policy. I understand that some people are unable to afford it and that it can be expensive. There are some institutions out there that provide cheap premiums, so ask around and see what your co-workers and friends have to say. They’re the people best informed to alert you to the situation in your city or state.

I don’t only mean check on your health insurance. What about your house? Or if you live in an apartment, what about a policy that covers all of your belongings in case of fire or theft? Don’t forget vehicular insurance. SafeAuto provides low rates that give you the minimum coverage only, but you don’t have to worry about getting pulled over and fined for not having insurance. Have you thought about insurance in case you can’t work? There are some programs that allow you to take out a policy that provides disability assistance in case you can no longer work.

On another note, while protecting your belongings and your health is important, have you thought about guaranteeing your identity? As more conversations and data exchanges take place online, more and more people are finding that their persona data is stolen. One way that you might consider combating this is by purchasing a plan with LifeLock. For a low monthly fee, you can have the peace of mind knowing that someone is protecting you from fraudulent loans or ill-be-gotten credit cards in your name.

Once you’ve taken care of insurance and personal protection, make sure that your will is in order. This is another step that many people avoid. You must not do that. While it may be easier to ignore future eventualities, having a will in place, regardless of you age, makes life better for everyone. This is an absolute must if you have children or own any sort of property. You don’t want your family and loved ones to get caught up in the legal system’s red tape.

If you are getting close to retirement, you need to carefully review your plan. If you’re still years away from retirement, you shouldn’t neglect this either. Make sure that you are maxing out the contributions in your employers plan. Also, don’t just take their word on the status of your investment. Check for yourself to see how your selections are doing.

The last two things to do are check your debts. Make sure you aren’t paying off loans by putting them on credit cards. Avoid high interest rates. Try to consolidate cards onto lower interest cards if you find yourself in trouble. Check your credit reports to make sure you know what is on there. Lastly, you want to look at your tax plan. Make sure that you are taking all the deductions that you can. It is hard to find all of these if you wait until the last minute to get them done. That’s why you should pay attention to this when you’re assessing your financial situation at the end of the year – giving you months to prepare.

In an effort to help you avoid the same trap my friends recently walked into, I’m going to lay down some basic information about financial planners. If you ask for credentials each time, you can keep yourself safe from people who aren’t really interested in helping you achieve financial freedom. Remember, if it seems too good to be true, it is. Not even probably is, it is. The financial sector is not going around providing hand-me-outs. Don’t ever think otherwise.

Depending on what you’re looking for, there are a variety of classes of people that can help you. For instance, if you want someone at the absolute top of the industry, you should find yourself a CFP, or a Certified Financial Planner. I had a friend who went into this during college, but unfortunately we lost touch. I never learned if he passed all of his coursework or not. It is intensive though so these people really know the ins and outs of the realm of money. They don’t come cheap though. These individuals can help you figure out information about estate planning, detailed approaches to investing, figuring out insurance policies, and of course, your taxes.

The next people on the hierarchy are the CPAs. Most of us know at least one CPA and if you don’t, you should really look in your local area to find one. They’re great to have for simple questions and they also have completed training. Every one of them should have some sort of board certification, so if you’re curious about their credentials, ask to see them. There are a special variety of CPA’s known as Personal Financial Specialists. They undergo more rigorous training and are usually not as numerous. Check your local phone book for more details.

A CFA, or Chartered Financial Analyst, is what the joker who called me claimed to be. When I asked him about his degree program, he stammered and muttered, and didn’t give me a straightforward answer. For someone who is really qualified in these things, they’ll happily let you know about their educational pedigree. In the case of these folks, all of them have undergone three years of intensive study to earn this designation. And, unlike some of the other groups of financial planners, these can’t be wet-behind the ear individuals. They’re required to have at least three years of experience in the field and to have shown their proficiency on ethical and accounting exams. These are usually harder to find than a CPA, but the larger pension funds and mutual fund firms employ these hardworking people.

The last people you should be aware of are the CLU’s, or Charter Life Underwriters. These are professionals who work for insurance companies. Their educational background is the same as Chartered Financial Consultants, CFC’s, who have to take continuing education courses and pass a litany of exams. Either of these grounds can provide you with sound guidance on a variety of topics, although they are most likely to be employed for a company, rather than working as a consultant.

My phone keeps ringing. I like my friends. But still. Why did he have to give my number out to this creepy guy who just wants to keep talking to me? Perhaps a little back story is in order. Two of my friends are recently married. A nice loving couple. Both work and both are worried about their finances. So the husband hears about these free financial planning sessions. He decides to call.

He informed me that the first two meetings went just fine. Nothing out of the ordinary. The guy was actually pretty helpful. Told them what they should be saving. Helped them set up a budget. All those little things that newlyweds don’t always remember to do. When the third session came around though, he started to push things on them. He told them that they should only put their money with certain companies. Companies he happened to be affiliated with and was paid by.

Once he admitted this to my friends, they knew their meetings with him were over. There is no such thing as a free lunch. My mom told me that when I was younger. She now tells me to get this joker to stop calling my parent’s house. After my friends finished their third session, the guy asked for the number of at least one friend so that he could talk to them about smart financial planning. Why it dawned on my friends, but they gave this joker my parent’s number. They know I don’t live there so they figured once he called, my parents said I didn’t live there, he’d leave them alone. Oh, he’s not that easily thrown off the track.

In the last 1.5 months, he has called 15 times for me. Each time he is informed that I don’t live there and that no one is going to give him my number. He just can’t seem to take no for an answer though. So I’m going to have to call him up, most likely from a pay phone (if I can find one) and let me him know that I’m not interested and that he needs to stop calling. I advise all of you to be aware of these types of schemes and don’t give out your friends’ phone numbers to dedicated, but shady, businessmen.

(10 minute gap)

Having just returned from calling this guy I cannot advise you strongly enough to not get suckered in to this type of thing. I called him, we talked for the sum total of four minutes and he wouldn’t let me get a word in edgewise. I asked to speak to his manager. He said that he didn’t see the point. I told him if he didn’t let me speak to the boss, I’d report him to the Better Business Bureau. Instantly I was on the phone with the head honcho and he was appalled to hear about the salesmen’s tactics. He let me know that he would take care of the problem and he apologized for all the inconvenience. Now that’s how you get things done.