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**About This Guide**

Personal finance is a frustrating topic for millions of Americans. It's difficult to understand, there are multiple pitfalls, and at the end of the day, there never seems to be enough money to cover the things that really matter.

_Personal Finance For Beginners In 30 Minutes, Vol. 1_ is intended to clear away the confusion and help you develop a sensible approach toward controlling your spending. There are no broadcast celebrities, get-rich-quick schemes, or obscure financial jargon. Instead, this short guide explains basic personal finance in an easy-going manner, using lots of common-sense tips and simple examples. Topics include:

  * Aligning spending with priorities
  * Income, assets, and equity
  * Flexible vs. fixed expenses
  * Limiting luxury spending and online shopping
  * How to shave thousands off of telecommunications and utility bills
  * Cutting car costs
  * Refinancing explained
  * Dealing with credit card debt
  * Tools to manage paper and digital records
  * Online banking and alternative payment systems
  * Using software to track expenses and budgets

_Personal Finance For Beginners In 30 Minutes, Vol. 1_ uses examples from three colleagues (based on real-world people!) who are having various challenges managing their money. To see their stories, read the Introduction.

Enjoy the guide!

**Personal Finance For Beginners**

**In 30 Minutes**

**_Volume 1_**

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**How to cut expenses, reduce debt, and better align spending & priorities  **

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By Ian Lamont
Copyright © 2015

i30 Media Corporation

All Rights Reserved

For more information, visit in30minutes.com

The author and the publisher make no representations with respect to the contents hereof and specifically disclaim any implied or express warranties of merchantability or fitness for any particular usage, application, or purpose.

The author and the publisher cannot be held liable for any direct, indirect, incidental, consequential, or special damages of any kind, or any damages whatsoever, including, without limitation, those resulting in loss of profit, loss of contracts, goodwill, data, income, information, anticipated savings or business relationships, arising out of or in connection with the use of this guide or any links within.

You agree and understand that no content contained in this guide constitutes a recommendation of any particular investment strategy or individual investment, including but not limited to, stocks, bonds, mutual funds, or real estate. You also agree and understand that it is your sole and exclusive responsibility to investigate any potential investment, financial services company, bank, lender, realtor, auto dealer, credit/debt counseling service, or other financial-related services described in this guide. You further agree that any information contained in the guide is impersonal and not tailored to you or any other person. The author and the publisher do not provide personalized investment advice, so do not ask them for such advice.

The author and the publisher are not responsible for any loss or damage incurred by you, or third parties, associated with your interactions with any potential investment, financial services company, bank, lender, credit/debt counseling service, or other financial-related service described in this guide. WE MAKE NO REPRESENTATION OR WARRANTY WHATSOEVER REGARDING THESE COMPANIES, SERVICES, OR INVESTMENTS DESCRIBED IN THIS GUIDE.
**Contents**

**Introduction: Frank, Jordan & Stephanie**

Small spending decisions have big outcomes

How to lose thousands on lunch

Free money for retirement?

The core concepts of this guide

Disclaimer

**Chapter 1 - Taking stock of your life & finances**

Evaluating your life priorities

How much do you make?

Adding up fixed expenses

Growth of income and expenses

What are assets?

Summary

**Chapter 2 - Reducing flexible expenses**

Exhibit A: Frank's lunchtime excursions

I am not Frank!

Cheaper alternatives

Small costs, big impact

A psychological trick to cut costs

Dealing with other types of flexible expenses

Cable/satellite/pay-per-view TV

Exhibit B: Jordan's cable television bill

Exhibit C: Frank's satellite setup

Exhibit D: Stephanie cuts the cord

Luxury spending: It's all relative!

"But it was on sale!"

Living on credit to support luxury spending

Exhibit E: Jordan's credit card problem

How to limit spending on luxuries

How to limit online shopping

Restaurant spending revisited

Summary

**Chapter 3 - Reducing fixed expenses**

Cutting car costs

Recently built used cars vs. clunkers

Average prices for used cars, by category

Tips for buying used cars

Tips for buying used cars from dealers

Controlling phone and Internet costs

How to save hundreds every year on phone bills

What's a family plan?

Contract vs. pay-as-you-go plans

Prepaid plans

Monthly plans

Saving money on new phones

Saving money on Internet service

How to haggle for Internet service

Controlling other utility costs: the 10% solution

Reducing debt-related expenses

Refinancing your mortgage

Mortgages explained

Why refinance?

Is it a mistake to take on debt?

Jordan's credit card problem in one easy chart

Consolidating credit card debt

How credit ratings agencies "score" you

How to get a free credit report

What happens when you don't pay your bills

Secured debt vs. unsecured debt

Paying off debt: what to watch out for

Summary

**Chapter 4 - Managing your accounts & data**

Example A: Frank's paper monster

Example B: Jordan's online-centric system

Example C: Stephanie's smart approach

Getting smart about paper records

Tools to manage paper records

Destroying old records

Tools to manage personal data & computer files

How to back up your computer data

Digital tools for managing & tracking your finances

Jordan's dumb password

Hidden features of online banking

Should I use Quicken, Mint, or something else?

PayPal, Dwolla, and alternative payment systems

Conclusion

A request for readers

Credits

Bonus: introduction to _LinkedIn In 30 Minutes_

Bonus: introduction to _Google Drive & Docs In 30 Minutes_

Bonus: introduction to _Virtual Offices In 30 Minutes_

Bonus: introduction to _Windows 8 Basics In 30 Minutes_

Bonus: introduction to _Dropbox In 30 Minutes_

More In 30 Minutes® Guides
**Introduction: Frank, Jordan& Stephanie**

**I'd like to introduce you to Frank, Jordan, and Stephanie**. These aren't their real names, but their stories are all too real.

Frank, Jordan, and Stephanie are similar in many respects. They work at the same company, have the same job title, and have the same salary — $50,000 per year. None of them are married or have children. None of them have mortgages, crushing educational debt or outstanding loans.

You may think that their financial conditions are similar, too. $50,000 won't go that far in a city, but it's enough to live on. You may have a salary that's around the same level, or have friends or relatives who make a similar amount.

But here's the interesting thing about Frank, Jordan, and Stephanie: Even though they work the same hours and make the same amount of money, their personal finances are vastly different.

**Frank's situation is the worst**. Frank is always complaining that he doesn't have enough money to live on, and indeed, he was evicted from his last apartment. He takes public transportation to get to and from work, and spends less than $10 on lunch every day.

**Jordan's financial situation is also precarious** , but you wouldn't know it by looking at her. She dresses well, owns a nice car, and takes small vacations several times per year.

How can Jordan afford it? She can't. She keeps the creditors at bay by working a second job four nights a week, waitressing near her home. Needless to say, she can barely keep her eyes open during her day job.

**Stephanie is the only one of the three who has a handle on her finances**. She has her own car, manages to pay off her educational loans on time, and has even started to build a nest egg, via her employer's 401(k) plan.

**_Small spending decisions have big outcomes _**

How can three people with identical incomes have such vastly different financial situations? Some of it relates to major purchases or household expenses, such as monthly car or rent payments. But people's financial health also depends on a myriad of small spending decisions, which, over time, can either accumulate into big shortfalls or massive savings. Understanding how this process works and making minor adjustments to maximize your lifestyle can save you thousands of dollars every year, and can help make your financial situation much stronger. It's one of the central teaching points of _Personal Finance For Beginners In 30 Minutes, Vol. 1_.

**_How to lose thousands on lunch_**

Consider Frank's mealtime spending habits. Going to the cafeteria or a nearby McDonalds costs less than $10 every day. It may not sound like much, but over the course of a year, those hamburgers, McWraps, and sodas add up. In just one year, Frank spends over $1,500 on his lunch excursions.

Many of his colleagues spend less than half that amount by brown-bagging it with healthier homemade sandwiches or leftovers and only the occasional fast-food treat. Cutting down on the fast-food lunches won't eliminate Frank's financial problems, but it will make them a little easier to manage.

In Chapter 2, we'll go over how casual meals and other flexible expenses such as cable television, restaurant outings, and luxury purchases can be reduced. There are even some psychological tricks that you can use to make the cuts more bearable.

**_Free money for retirement?_**

At the other end of the spectrum, we have Stephanie's growing nest egg, which has been built through relatively small contributions to her company's 401(k) plan. Don't be put off by the awkward name of the 401(k) plan, which is derived from a section of the U.S. federal tax code. The plan is a simple method for saving for retirement.

Every week, Stephanie has 5% of her earnings (about $50) automatically deducted and placed in an investment account. Just like Frank's lunchtime expenses, $50 per week may not sound like much, and indeed, Stephanie doesn't even notice the difference. But over time the contributions start to add up — and in Stephanie's situation, they add up in a positive way. The weekly contributions are automatically invested in mutual funds that own baskets of stocks (such as Apple, Ford, and Disney), bonds, and other investments. Even though the money comes from her salary, the 401(k) contributions are not taxed before they are invested. They will also grow tax-free (withdrawals are taxed as ordinary income, however).

Further, like many employers, Stephanie's company offers a matching contribution of up to 5% of the employee's gross pay. In Stephanie's case, this means she is getting an additional $50 put into the mutual fund every week. That's about $2,500 in free money that's added to her investment account every year.

Stephanie's situation is covered in more detail in _Personal Finance For Beginners In 30 Minutes, Vol. 2_. I also show how Frank and Jordan are planning their retirement savings, including how much they've set aside and the types of mutual funds they have selected.

**_The core concepts of this guide_**

Frank, Jordan and Stephanie serve as real-life examples of how people on limited incomes manage their money. But there will also be explanations of basic personal finance concepts, advice on how to better manage your spending, and even tips on how to organize your records. By the time you get to the end of this book 30 minutes from now, you are going to have a different perspective on how to manage your spending and improve your long-term financial health.

The core concepts taught in this guide include:

  * **Evaluating your priorities, spending, and assets** (Chapter 1, "Chapter 1 - Taking stock of your life & finances")
  * **Identifying and pruning unnecessary expenses** (Chapter 2, "Reducing flexible expenses")
  * **Trimming necessary expenses and obligations** (Chapter 3, "Reducing fixed expenses")
  * **Organizing and tracking your financial life** (Chapter 4, "Chapter 4 - Managing your accounts & data")

_Personal Finance For Beginners In 30 Minutes, Vol. 1_ contains a lot of practical tips and common-sense approaches to spending. By the time you finish the last page, you will hopefully have a solid idea about how you can cut costs, better manage your debt, and establish smart spending habits that can potentially help you save thousands of dollars every year.

**_Disclaimer _**

_Personal Finance For Beginners In 30 Minutes, Vol. 1_ is not a substitute for professional financial advice. This guide will not rescue people who are deep in debt, or are facing major life events, such as heavy-duty medical expenses, bankruptcy, or the birth of quintuplets.

I will, however, describe some of the situations that can arise if debt does get out of control (see "What happens when you don't pay your bills" in Chapter 3). There is also information on resources that you can turn to — and scams to watch out for.

If you do have a particularly complicated financial situation, or need advice on how to handle a financial crisis, you should contact an accountant, certified financial planner, or lawyer who specializes in tax or financial issues.

State and federal agencies can also provide help, or point you in the right direction. For instance, the usa.gov website offers specific tips for dealing with certified credit counseling agencies, and also includes links to a website that provides free credit reports from the major credit reporting agencies (see "How to get a free credit report" in Chapter 3). The Federal Trade Commission's website (ftc.gov) is another helpful source of information, and contains descriptions of things to watch out for, including outright scams.

I've rambled on long enough. Let's get started!
**Chapter 1**

**Taking stock of your life & finances**

The first step in planning for your financial future is seeing where you stand.

But don't whip out your latest bank statement and pay stub yet. Instead, I'm going to ask you a simple question:

What matters to you and your family?

**_Evaluating your life priorities _**

_"Oh no,"_ you say to yourself. _"I bought a personal finance guide, but instead of getting down to dollars and cents, the author is one of these touchy-feely types who wants to know about my inner child."_

Not so! By asking you what matters to you, we'll be able to better align financial decisions with your lifestyle. Practically speaking, this means you'll be able to spend money on what counts — and have a better idea about what to cut.

For instance, if your family lives for having fun on the water, then spending and savings should be focused around things such as swimming lessons, beach vacations, and saving for a boat. Things that aren't priorities can be scaled back or eliminated.

One way to focus on your priorities is to review a bunch of broad categories, pick the ones that matter most, and then list the specific activities or expenses within the key categories :

For instance, someone who prioritizes Business may list "home office", "seed capital", "truck", or "relocation" to support his or her dreams. If you are a fanatic about Sports, either as a spectator or participant, then "season tickets", "lessons", or "gym equipment" might be listed as specific expenses or activities you want to invest in. People focused on Education might list "Timmy's college fund", "tutoring for kids", or "grad school." Religion-focused activities or priorities might include "church fund", "mission", or "pilgrimage."

These are life priorities. Don't think that you will be able to fund everything right away. Taking part in a mission, relocating to another state, or leaving your job to go to grad school are serious decisions that might take many years to plan and save up for. But the important thing is identifying what those priorities are, and aligning your spending and saving to support them.

What if _all_ of these categories have specific expenses or activities that are important to you? It's a common desire to "have it all." But when it comes to managing your finances and planning for the future, it's impossible to have everything... unless you're Donald Trump (in which case you're probably not reading this guide!)

When listing specifics, don't include _fixed expenses_ , such as paying back student loans or getting insurance for your car. While necessary, such expenditures aren't your personal life priorities. As we'll see in Chapter 3, fixed expenses _do_ have to be addressed when it comes to making spending decisions. For now, you don't have to include them on your list.

Build your list until you are satisfied with the priorities it contains. Really make an effort to identify _true_ priorities — things that you really want to be a part of your current life, or your future. Knowing your priorities will make it much easier to manage spending as well as planning for the future.

**_How much do you make? _**

Most people have income that's based on having a full-time job, or several part-time jobs. If you're married, you probably pool your income with that of your spouse.

A few may own small businesses, or rent out an apartment or vacation property. Some may receive special sources of income, such as a trust, royalties, disability benefits, pensions, or retirement fund distributions.

For the sake of basic financial planning, it's important to understand your annual _net income_. That's what you take home _after_ taxes, social security, health insurance, and retirement fund contributions.

_Gross income_ is your total salary + other sources of income, _before_ taxes, social security, and health insurance deductibles are factored in.

The easy way to figure out net income is to look at a recent pay stub or the record of a workplace direct deposit to your bank account. Multiply your weekly, biweekly, or monthly take home pay so you have an idea of what your yearly take-home pay is. Adjust for taxes if you typically receive a refund or have to write a check to satisfy your tax obligations.

Let's do the math. If your pay stub shows that you net $1,000 every week after taxes, social security, health insurance premiums, retirement account deductions, etc., but you typically owe an additional $500 in state income tax when you file every year, your net income would be as follows:

($1,000 × 52 weeks) − $500  
**= $51,000**

**_Adding up fixed expenses_**

Net income isn't the whole picture. If you project your net income at $50,000 this year, you'll still have to deal with additional required costs that may lop off thousands of dollars every month. These necessary costs are called _fixed expenses_.

For instance, you and your spouse may still pay for student loans, auto insurance premiums, and monthly mortgage payments. Other fixed expenses include:

  * Rent
  * Real estate tax
  * Homeowner's insurance
  * Medical insurance, bills, Rx costs, and copays
  * Transportation-related costs (gas, car payments, mass transit, etc.)
  * Telecommunication costs (phone/Internet/etc.)
  * Groceries

Depending on your family or living situation, you may have some additional obligations:

  * Kid-related expenses (babysitters, daycare, after-school programs, summer camp, etc.)
  * Spending on home maintenance
  * Pet-related costs

Looking at this list, you may let out an involuntary groan. How is it possible to truly focus on your life priorities, let alone plan for the future, with all of these obligations?

Here's the thing: While it's often impossible to completely _eliminate_ fixed expenses, there are ways to _reduce_ specific items. Transportation costs, telecommunications bills, and even mortgage payments can be changed to bring down the financial burden and set up situations for saving. I'll discuss specific tactics in Chapter 3, "Reducing fixed expenses."

But some fixed expenses are truly fixed. For instance, if you own a home, then real estate taxes, homeowner's insurance, and certain maintenance costs are part of your financial picture. Likewise, you can't blow off federal taxes, unless you are willing to renounce your citizenship and buy a one-way ticket on a Panamanian-flagged schooner headed for the South Seas. These types of expenses simply have to be factored into your household budget.

**_Growth of income and expenses _**

Income and fixed expenses seldom stay the same.

You may get a boost in salary from an expected promotion, bonus, or cost-of-living increase. Your work income will drop if you plan on retiring next year, but you may be able to tap into retirement funds and social security to make up the difference.

Fixed expenses may jump if you are expecting a baby, if your older kids are starting college in a few years, or the interest rate on your mortgage or home equity line of credit rises.

It's not necessary to work out your net income and anticipated expenses over the next 5 years. However, if you know that a major life event is on the horizon, you should absolutely be aware of it and start planning.

**_What are assets? _**

Your house, the cash you have in your checking account, the car in your driveway, the oak table in your dining room, the pair of running shoes in your closet, and the phone in your pocket are all considered "assets."

However, when it comes to personal finances, _assets_ typically refer to big-ticket items — houses, cars, boats, rental properties, precious metals, bank accounts, retirement accounts, etc. Your running shoes, beer steins, old Madonna albums, and a football with Tom Brady's autograph may hold great personal value, but they may not be worth much on the open market. Indeed, they may be hard to value, much less convert to cash. Other assets may have cost tens or even hundreds of thousands of dollars (a college diploma) but cannot be converted back to cash.

For certain assets, you may have only a partial ownership. A house is a typical example. Unless you've bought it outright, or until you have paid off your mortgage, you only have a limited amount of _equity_ in the property. For instance, "I have 30% equity in my condo" or "I have $100,000 worth of equity in my house" reveals the amount you have paid for. The remainder is still owned by the bank.

What if you don't have any assets beyond that beer stein collection or a copy of Madonna's _Vogue_ in mint condition? That's OK... this book is written for people who want to build up their assets, and improve their long-term financial health.

**_Summary _**

We started this chapter taking a look at your life priorities — the activities and expenses that are important to you and your family. In a perfect world, you would have more than enough money to spend on these priorities. What's left over could be put into savings for the future.

Unfortunately, most people don't have that kind of flexibility. After fixed expenses such as groceries and rent are subtracted from net income, there may not be much cash to spend on the things that matter... much less save for the future.

But there is hope. In the next chapter, I'll show you some easy ways to cut costs and change your attitudes toward spending.
**Chapter 2**

**Reducing flexible expenses **

Now that you have a better idea of your priorities, income, fixed expenses, and assets, let's turn to the category of spending that trips up millions of people every day: _flexible expenses_.

What is a flexible expense? Unlike fixed expenses, which are necessary household expenses and obligations such as taxes, a _flexible expense_ is something you don't need to buy. Let's look at an example.

**_Exhibit A: Frank's lunchtime excursions _**

Remember Frank? He's the guy from the introductory chapter who has serious financial problems:

Frank is always complaining that he doesn't have enough money to live on... and he was evicted from his last apartment. He takes public transportation to get to and from work, and spends less than $10 on lunch every day.

Let's talk about that phrase — "spends less than $10 on lunch every day." Doesn't sound like much, does it? But let's do the math. A few simple calculations reveal a big problem:

Average lunchtime meal cost: $7.50 per day

Weekly cost: $7.50 × 5 weekdays = $37.50

Monthly cost: $37.50 × 4 weeks = $150

**Annual cost: $150 × 11 months = $1,650**

( _This model assumes 20 weekdays of lunchtime spending in a typical month. It also assumes no lunchtime spending during holidays, vacations, and sick days, which total about 1 month per year for Frank.) _

You probably know someone like Frank. You may _be_ Frank! And even if you're not, you probably realize that $1,650 is a _lot_ of money.

**_I am not Frank! _**

I can hear your protests: "Wait a minute. I am not Frank! I only spend money at the cafeteria or go out for lunch about two or three times per week. And I never splurge."

Let us return to our friend, Mr. Math, to understand what this means in terms of actual spending levels:

Average lunchtime meal cost: $5

Average weekly cost: $5 × 2.5 days = $12.50

Average monthly cost: $12.50 × 4 weeks = $50

**Annual cost: $50 × 11 months = $550**

You may not be Frank, but $550 isn't small change, either.

**_Cheaper alternatives _**

Of course, the lunchtime alternatives to going out to a fast food restaurant or cafeteria cost money, too. But the costs are far easier to deal with.

Stephanie, Frank's colleague, rarely goes out to lunch. She always brings something from home, and joins her friends in the cafeteria or eats outside in a nearby park.

A single leftover meal might cost a dollar to cover the raw materials that went into preparation. A bag lunch with a homemade ham and cheese sandwich, a piece of fruit and a small bag of pretzels (all bought at the supermarket) might cost $2. A few times per week, Stephanie buys frozen meals at the local supermarket for an average of $2.50 apiece. Let's do the math:

2 frozen meals × $2.50 = $5

2 bag lunches × $2 = $4

1 leftover meal = $1

Total weekly cost: $10

Monthly cost: $10 × 4 weeks = $40

**Annual cost: $40 × 11 months = $440**

Compared to Frank, Stephanie spends $1,210 less every year. She puts that extra money to good use, by creating a special savings account for emergencies as well as taking full advantage of the retirement plan offered by her employer.

**_Small costs, big impact _**

After learning about Frank and his lunchtime spending habits, do you see how supposedly small costs can lead to sizable expenditures over time? Over the course of a year, these lunchtime excursions can really take a bite out of a person's financial health. For the Franks of the world, a seemingly innocent daily routine can turn into a financial drag that impacts other parts of their lives.

When you consider that most people maintain these habits for 5 years, 10 years, or even longer, it can lead to lost opportunities to save money, plan for retirement, or make purchases that _really_ matter (remember those life priorities you listed in Chapter 1?)

I'm not saying that you should brown-bag it every day. Going out every once in a while can help break up the monotony of leftovers, sandwiches and cheap frozen meals. A lunchtime trip to the local diner or sub shop is also an opportunity to chat with coworkers, or butter up your boss. But is it really necessary to go out every day, or even three days per week? For most people, the answer is no.

To address this particular problem, an easy approach would be to cut the frequency of excursions by half, while reducing the average cost. Going out every other day would be a starting point, along with drinking free water at the restaurant or cafeteria, instead of soda or juice.

But if you have particularly aggressive financial needs, you may need to take drastic measures. Frank, who has been evicted in the past, falls into this category. Going on biweekly lunch excursions — or even cutting out paid lunches altogether — are far more sensible approaches.

**_A psychological trick to cut costs _**

It's hard to break routines. Slamming the brakes on spending, or cutting out something you've grown used to, can really feel like going cold turkey.

One approach to soften the blow is to "reward" yourself with something else, so it _feels_ like you're getting something in return for changing your habits.

Frank could reward himself with a nicer meal once per month (for instance, the $20 seafood pasta special at his favorite Italian restaurant) in return for cutting out the daily fast food excursions. Doing this and bringing his own lunch from home not only makes him feel better about saving money, it also reduces his annual lunchtime spending by approximately $1,000 every year.

Let's do the math:

Annual cost of "reward" meals: $20 × 11 months = $220

Annual cost of self-prepared lunches: $440

Total: $660

**Annual savings: $1,650 - $660 = $990**
**_Dealing with other types of flexible expenses _**

When I started to write this guide, I attempted to make a list of expenses that people have to deal with in their day-to-day lives. The list quickly turned into a monster. I realized that it's impossible to list everything, considering people are so diverse in their life situations and personal needs.

Instead, I am going to concentrate on a few common flexible expenses that can suck up thousands of dollars each year. To complete your list of expenses (so you have a better handle on what these expenses are), take the following steps:

  1. Get out a few months' worth of credit card statements and your checkbook ledger.
  2. Grab the list of life priorities you wrote down after reading Chapter 1.
  3. Go through the credit card statements and checkbook ledger. Write "P" next to any item that can be considered a priority, "E" next to any necessary, fixed expense, and "S" for special, which might be a one-time expense or special situation.

Anything left over is an unnecessary, flexible expense — and therefore a target of your cost-cutting efforts. Mark these with an "X"!

**_Cable/satellite/pay-per-view TV _**

According to the Television Bureau of Advertising, nearly 60% of U.S. households subscribe to cable television. More than 30% use alternate delivery systems, including satellite TV.

If you get full-service cable or satellite television, ask yourself the following questions:

  * Do you really need hundreds of channels of programming?
  * Are you actually watching those four premium services that you added on to your subscription package?
  * Are your kids better off watching 10 hours of Nickelodeon and the Disney Channel every week?
  * Are CNN and CNBC providing information that you can't get from the Internet for free?

The answer to these questions is almost certainly no. According to Nielsen, which tracks TV viewing habits, the average U.S. household receives 189 cable channels but only watches 17 of them. Yet people don't hesitate to shell out $100 or more every month.

Take a look at the extra charges on the following telecommunications bill, which piles on more than $50 in premium channel charges in addition to the $135 base price for Internet/cable/phone service. The grand total is $226 per month:

There are some situations which _do_ require cable or satellite television. Residents of rural areas or distant suburbs may be too far away from broadcast towers to receive over-the-air broadcast signals. If you want foreign-language programming, you will need to pay extra. In some television markets, professional sports are _only_ offered through a cable television subscription. And there are some people who can't imagine life without HBO or ESPN — they consider the dramas, games, and other programming to be life priorities!

But not everyone needs expensive subscriptions to premium channels. Millions of households would do fine with just the basic service package that brings in the nearest terrestrial broadcasters. A recent FCC study found the average cost of basic service is a little over $20 per month. For people who live near major urban centers, basic cable can be replaced by an antenna that plugs in to the back of a flat-screen TV. For a single one-time charge of $40, an antenna can bring in 20 or more digital television signals.

**_Exhibit B: Jordan's cable television bill _**

Let's compare Frank, Jordan, and Stephanie's bills. This comparison will let us understand the impact of television spending on their personal finances. For the sake of these comparisons, we'll leave Internet access out of the calculations (this will be covered later, when I discuss telecommunications costs in Chapter 3).

Jordan is a big spender, and likes everyone to know it. She has a brand-new 60-inch television, and gets an expanded basic service package from her local cable provider that costs $60 per month (not including Internet).

Jordan doesn't stop there. She has opted to pile on the extras. Here's how the costs break down every month:

Expanded basic service: $60

High definition converter box: $10

Digital converter rental: $3

HBO Cinemax package: $18

Premiere Total Pack: $16

Showtime/TMC: $5

Starz: $5

Franchise fee: $7

Broadcast TV surcharge: $4

Sports programming surcharge: $2

Total monthly cost: $130

**Annual cost: $130 × 12 months = $1,560**

It's a lot of money. Sadly, most of it is wasted. Jordan barely has time to watch TV. Thanks to her expensive tastes, she not only puts in 40 hours per week at her day job, she also has a waitressing gig five nights per week. Because she is seldom at home, the hundreds of channels she pays for are largely unwatched.

**_Exhibit C: Frank's satellite setup_**

Even Frank knows Jordan is paying too much. He has satellite TV, and subscribes to the sports package plus a few Spanish channels for his mom to watch when she visits every weekend. His monthly costs are more straightforward:

Basic service, including surcharges: $25

Spanish-language package: $15

Sports package: $8

Total monthly cost: $48

**Annual cost: $48 × 12 months = $576**

**_Exhibit D: Stephanie cuts the cord_**

Stephanie is far more frugal with her media spending. She has a pair of digital rabbit ears ($40) that plug into her HDTV. This pulls in 20 local digital television signals, including five public television channels, several national broadcasters, and the Country Music Channel.

She also bought a small streaming media box ($80). The box is about the size of a sandwich, and uses Wi-Fi to connect to her existing Internet connection in order to stream television programming to her TV set. Some of the channels are freebies, while others cost money. She gets the Internet-based service Hulu Plus to watch episodes of _Nashville_ , _South Park_ , and Jon Stewart's comedy show. She used to have Netflix (another Internet-based service) to watch other TV shows, documentaries, and movies, but felt that the selection was too limited. Instead, she now rents individual films through the streaming media box for about $4-$5 a pop. Here's how her annual costs break down:

Broadcast television: Free

Hulu Plus: $8 per month

PPV: $9 per month

Total monthly cost: $17

**Annual cost: $17 × 12 months = $204**

Stephanie's setup is actually well-suited to Jordan's needs. If Jordan decided to take her friend's lead, she would cut her annual costs by nearly $1,400, and still be able to catch occasional premium programming and movies via Hulu or pay-per-view.

**_Luxury spending: It's all relative! _**

You may think that "luxuries" refer to high-end branded goods that sell for top dollar — a $200 frying pan, an $800 leather jacket, a $2,000 computer, a $5,000 bicycle.

It's better to view luxuries as anything you can't really afford (and probably don't need). For some people, that may even include midrange brands or sale items that are too expensive considering income or cash on hand.

In other words, if you only have a few hundred dollars to spend every month after subtracting rent, living expenses, and other necessary expenses, even a $50 pan or $100 jacket can be considered luxuries.

**_"But it was on sale!" _**

I know someone who likes to shop. Let's call this person "Mrs. Lamont." When questioned about her luxury spending habits, Mrs. Lamont likes to fall back on the "but it was on sale!" defense.

Handing over a coupon at the checkout counter, or grabbing a high-end sweater for 50% off the original price may make Mrs. Lamont feel good. However, she's actually falling for tried-and-true tricks from the merchant to separate her from her hard-earned cash:

  * The starting point for "discounts" may be the _MSRP_ (manufacturer's suggested retail price) or an **arbitrarily high price that no one will ever pay**. By crossing out the high price, retailers are handing shoppers a psychological victory that will make them feel good about the purchase, even if the discounted price is still expensive!
  * Many shops have **loss leaders** , items discounted below cost that are intended to draw shoppers into the store. The retailer may be losing $20 on every purchase, but they hope to make it up with sales of other profitable items.
  * Discounts tied to signing up for a store credit card allow retailers to **collect personal information** about customers and their shopping habits. This is great for targeted promotions and encouraging repeat visits. To top it off, if the credit card debt is not paid off in time, high-rate interest kicks in.

At the end of the day, taking 50% off a $250 dress still means walking out of the store $125 poorer. Resist the urge to use sales to justify unnecessary purchases of luxuries.

**_Living on credit to support luxury spending _**

When spending on luxuries gets out of hand, it impacts the amount of cash available to spend on other things, including necessities.

But the trouble doesn't stop there. For people who've used credit cards to support luxury spending, it's hard to pay monthly credit card bills in full, which leads to high interest rates (typically over 20%) on the unpaid amount.

**_Exhibit E: Jordan's credit card problem _**

A sobering experience for me occurred a few years ago, when I happened to see the docket at the local small-claims court. It was filled with a long list of banks that had filed suit against people who had stopped paying their credit card bills altogether.

Jordan may end up on the docket if she doesn't make some changes in her spending habits. She has luxury tastes, but can't fund them through her middle-class income. She's resorted to using three credit cards to fund luxury purchases such as fancy shoes and high-end appliances. She hasn't been able to pay off the amount owed for more than a year.

Now she's watching things snowball, as unpaid interest and further spending leads to ever-increasing credit card bills. Jordan owes $15,500 now, and it's still climbing. Eventually she won't be able to meet her minimum monthly payments, which will cause additional penalties to kick in. Failure to make payments will also make it hard to get credit from other sources, including bank loans. If things get particularly bad, she could find herself dealing with the situations described in "What Happens When You Don't Pay Your Bills" in Chapter 3.

Jordan's experience is not an uncommon one. According to estimates based on Federal Reserve data and other sources, nearly half (about 60 million) of American households carry a credit card balance that averages over $15,000 per household.

We'll return to Jordan's credit card situation in Chapter 3, when I give a big-picture view of debt and discuss practical ways to deal with it.

**_How to limit spending on luxuries _**

It may sound easy to limit luxury spending, especially if you are someone who doesn't do much shopping in the first place.

But if you have a shopping habit, or a family member who likes to buy luxury items, it's not so easy. Here are some tactics for taking control of luxury spending:

**Set a monthly shopping budget** : After determining your income and subtracting rent, food, healthcare, transport, insurance, and other necessities, and setting aside some of the remaining cash for savings and retirement, you should be able to budget the remainder to "other," including shopping. If shopping is a priority in your life, then allot more — but still stick to the budget. If you need help planning out your monthly shopping budget, consider some of the software tools described in Chapter 4.

**Limit shopping trips** : My daughter has a thing for shoes. If she steps into a shoe store, there is a 90% chance she is going to leave with a box of new shoes. The easiest way to limit her spending? Reduce the frequency of trips. The second easiest way? Paying with cash — preferably her own!

**Use cash** : When you use a credit card, you're using someone else's coin — usually the bank's, or the store's, if it's a store-issued card. Because the cash is abstracted through plastic and far-off monthly payments, it can seem like you're not paying anything at the moment of purchase. It's a mental trick that works against your financial interests. Fortunately, there's an easy way to counter it: _Start paying with cash_. The act of handing over a small stack of twenties to buy that fancy-shmancy kitchen gadget sends a pretty clear signal to your brain that your supply of money just got appreciably smaller.

**Read the return policy before making a purchase** : Think back to any item you've bought in the last few months that cost more than $100. Yes, I'm talking about that designer hat that looked good on the store mannequin, but on your head, not so much!

What was the return policy of the store you bought it from? You probably don't know, or would have to hunt for the receipt and look at the fine print. The next time you make a big purchase, look at the return policy (or ask someone) _before_ you make the purchase... and give preference to merchants who offer the best terms. If you have second thoughts or decide that the hat is not worth it, return it for a refund or store credit before the refund period expires.

**_How to limit online shopping_**

Retailers have clever ways of separating you from your money using the Web and mobile apps. They've removed barriers to spending by offering discounts, free shipping, and other conveniences. Amazon even has an app that lets you scan a barcode in a shop to see how much the same item costs on Amazon.com — then you can instantly order it!

The added convenience of online and mobile commerce can be hard to resist. Further, some of the tactics outlined above don't work in the digital realm. For instance, you can't pay online with cash. But there are a few tricks you can use:

**Deactivate "one-click" or saved credit card settings** : On most e-commerce websites, it's possible to save your credit card information. Amazon and a few other sites take things one step further, by enabling customers to make a purchase without reviewing the details of what's being bought or where it's being shipped. Deactivate the one-click settings and don't allow e-commerce websites to save your credit card details. Yes, it will require you to fish out your credit card when it comes time to complete an online purchase, but the added hassle will nip casual shopping in the bud while helping to prevent accidental or unauthorized purchases.

**Force yourself to use a "cool-off" period** : This is an easy way to force yourself to reconsider a particular purchase online or on your phone. Simply add the item to your virtual shopping cart, but don't complete the purchase for at least a few hours. When you come back to your cart, you'll have had some time to think about whether you _really_ want to buy that brushed aluminum weed whacker or Hello Kitty handbag.

**_Restaurant spending revisited _**

How much do you spend at restaurants, food courts, pizza joints, company cafeterias, or airport sandwich kiosks in a given month?

We already saw how Frank's seemingly cheap lunchtime spending has drained his excess cash. For other people, weekly or biweekly restaurant dinners can lead to personal financial woe.

Let's do the math for a family of four who goes out (or orders in) five times per month:

Sit-down restaurant visits: $90 (average, inc. tip) × 2 = $180

Pizza night: $30

Chinese take-out night: $45

Weekend lunch buffet: $55

Monthly cost: $310

**Annual cost: $310 × 12 = $3,720**

I like eating out as much as the next person, but $3,720 is a _lot_. By cutting the frequency of restaurant visits in half, the family in this example could save nearly $2,000 per year (however there will be a small increase in grocery bills for the additional eat-at-home meals). Keeping an eye out for cheaper menu items or restaurant alternatives can also save money.

**_Summary _**

Flexible expenses include everything from too-frequent restaurant meals to cable television channels that no one watches. By cutting down on this unnecessary spending, it's possible to save thousands of dollars every year. It may require changing some ingrained habits, but as you've now learned, there are creative ways to reduce the pain.
**Chapter 3**

**Reducing fixed expenses **

In the previous chapter we covered various ways to cut down on the "extras" in our lives, such as the cable TV channels we seldom watch or the luxury goods that we can't afford. In this chapter, we're going to take a look at the fixed expenses that we have to deal with — car payments, mortgages, telecommunication costs, home energy costs, and more — and list some practical ways in which these expenses can be reduced.

Some of the tactics described in this chapter are relatively easy to implement, such as changing your mobile calling plan, or making some simple home heating and cooling adjustments. Others, such as refinancing a mortgage, require careful consideration and discussion with professionals such as your lawyer or tax accountant.

But one topic in particular requires a totally different way of thinking — cars.

**_Cutting car costs _**

Autos dominate our lives. We depend on cars for work and pleasure. We plan our cities and new homes around them. Even when we're relaxing in front of the television, advertisements for new cars are constantly paraded in front of our eyes.

Thanks to relentless media exposure and little-understood financing and sales practices, not to mention the perception of autos as important status indicators, most people replace their cars on a regular basis. A rent survey found that a typical new car-owner will keep a vehicle for nearly 6 years.

For many, there is no question that when they get their first vehicle — or buy a replacement car — it is going to be a _new_ car. This is an accepted piece of wisdom.

If you follow the six-year buying pattern listed above, you probably will have purchased three new cars by the time you turn 40. Or, you may have fallen for the dealer pitch that urges customers to "lease a brand-new car for just $199 per month!" Of course, you have to read the small print to see that leases come with all kinds of gotchas, ranging from big down payments to restrictions on annual mileage. And you don't actually _own_ the vehicle in a leasing situation. That means there's no trade-in when the lease is up.

While cars are a necessary, fixed expense, a fetish for new cars can lead to real financial pain. Fortunately, there are alternatives:

**If you buy a new car, keep it longer.** Recently manufactured cars tend to be vastly superior to the cars of decades past, in terms of resistance to wear, corrosion, and major mechanical failures. The old rule of thumb about the need to replace the engine or the car after it's been driven 100,000 miles has been thrown out the window in the latest generation of vehicles (as recently noted by the _New York Times_ in an article titled "As Cars Are Kept Longer, 200,000 Is New 100,000"). This is party due to better materials and on-board technologies, but it's also because of an intense desire on the part of manufacturers to stay globally competitive.

What this means for you, the consumer, is a new car can be driven for 10 years or more if it's properly maintained. Heck, drive that sucker into the ground before you replace it!

**Consider used cars.** It's not necessary to buy a new car. You're often paying a premium for a new vehicle from dealers who will do _anything_ to close the sale with a slew of extra charges, features, and fees that you don't need. Good used cars can be had for less than $10,000, if you do your research and shop carefully.

**_Recently built used cars vs. clunkers _**

If you've driven new cars all of your life, the term "used vehicle" may conjure up images of a dusty old beater with missing hubcaps and no A/C, dragging a clattering muffler down the boulevard. Yes, such cars exist, but I am not advocating that you buy one. Besides the embarrassment, there are also safety concerns and additional maintenance costs associated with clunkers.

Many used cars are actually rather new. The sweet spot for used cars are models that are 1–4 years old. That includes vehicles that are coming off of three-year leases.

**_Average prices for used cars, by category _**

The main advantage of buying a used car is saving money. Here's how Edmunds.com breaks down average used car prices for different types of cars sold by franchise dealers:

Keep in mind that these are _average_ prices sold by _franchise dealers_. These cars tend to be newer and come with a higher markup than those vehicles sold by individuals, or those sold at auction.

**_Tips for buying used cars _**

When it comes to buying a used car, everyone wants a cheap, clean, reliable vehicle that can be driven another 100,000 miles. But for every 5-year-old Toyota sold at a discount by the little old lady down the street, there are 10 clunkers waiting for some sucker to bite. Don't be that person!

Here are a few tips for purchasing a used car:

  1. __**Get in the car, and drive it around**! Don't only take it around the block. Give it a real workout on city streets and highways. Try it out in various parking situations.
  2. __**Know the value of the car _before_ you start negotiations**. It's easy to get prices online. Kelly Blue Book has an online database at kbb.com, or you can peruse your local Craigslist or classifieds for similar vehicles.
  3. __**Get the maintenance records or vehicle history**. The U.S. Department of Justice's National Motor Vehicle Title Information System (available at NMVTIS.gov) and the National Insurance Crime Bureau (NICB.org) have databases that can be searched by the car's Vehicle Identification Number (VIN).
  4. __**If the records aren't available, assume something may be wrong**. An eye-opening personal experience for me was talking with a franchise dealer about one of the cars on his lot, listening to him prattle on about how clean the car was and how it came from a local trade-in, and then seeing the vehicle history — the car had actually originated halfway across the country.
  5. __**Watch out for lemons**! The U.S. Department of Transportation has a Vehicle Safety Hotline (1–888–327–4236) and the DOT website has information on vehicle recalls. Another good source of information: back issues of _Consumer Reports_ , which can be found at many local libraries.
  6. __**Hire a mechanic to inspect the car**. This might cost a few hundred dollars, but it can uncover problems that the seller either doesn't know about or is attempting to hide. Either way, it can steer you away from a lemon, or give you more negotiating leverage.

**_Tips for buying used cars from dealers_**

Used car dealers have a bit of an image problem. I'm not going to get into the stereotypes or horror stories, but let's just say there are additional considerations when buying a used car from a dealer:

  1. __**Check out the dealer's reputation.** Google is your friend. You can see if complaints have been filed with local consumer protection agencies. And talk with friends or family members who have purchased cars from local dealers _in the last year or two_.
  2. __**Assume each car on the dealer's lot is being marked up at least a few thousand dollars**. Yes, you can haggle the price down, but no dealer is going to sell a vehicle at a loss.
  3. __**Cosmetic improvements may hide serious defects**. You can bet the dealer has waxed the car and power-washed the interior. But that doesn't mean the car is in "excellent" condition. There may be serious mechanical or electrical problems that the dealer hasn't addressed.
  4. __**Dealers don't have to offer money-back guarantees for used cars**. If a dealer offers one, that's great — _but get it in writing_!
  5. __**The FTC requires dealers to post a "Buyers Guide" in every used car they sell** , including demonstration models. The guide has to include warrantee information (if applicable), as well as various consumer warnings. The Buyers Guide becomes part of the sales contract, and overrides any provisions in the signed contract.
  6. **Some states don't allow "as is" sales from dealers**. The list includes Connecticut, Hawaii, Kansas, Maine, Maryland, Massachusetts, Minnesota, Mississippi, New Jersey, New Mexico, New York, Rhode Island, Vermont, West Virginia, and the District of Columbia. Some other states have requirements that carefully define an "as-is" sale of a used vehicle.

There are many more things to watch out for when it comes to purchasing a used car from a dealer. To learn more, visit the Federal Trade Commission website at ftc.gov.

And remember: At the end of the day, a shiny lemon is still a lemon.

**_Controlling phone and Internet costs _**

If you've had the same mobile phone and ISP contracts for more than two years, you're probably paying too much for mobile phone service, and home Internet access as well.

Why do people pay too much for telecom services? It starts the day they sign up. The options are hard to understand, the salespeople and order forms push more expensive plans, and perhaps most importantly, phone and Internet access are services most people _must_ have. These are necessary expenses!

Once the telcos and ISPs have you, they'll have you for a long time. We're creatures of habit when it comes to mobile contracts and the wires piping high-speed data into our homes. It's a pain to deal with transfers, installations, and customer service interactions, so we shrug and keep paying a premium.

**_How to save hundreds every year on phone bills _**

Here's the outline of an actual mobile phone bill. This person... or should I say, _victim_ , pays nearly $100 per month. Let's do the math for the plan, which includes unlimited talk and text minutes, and 2 GB of mobile data (used to download email, surf the Web, and use apps which are connected to the network):

Monthly voice/text cost: $40

Monthly data plan: $50

Total monthly cost: $90

**Annual cost: $90 × 12 months = $1,080**

The sad thing is, she doesn't need this level of service. She sends a few dozen texts per month, and has her phone set to use Wi-Fi at home, meaning her mobile data requirements are minimal.

To top it off, the plan she has was introduced many years ago, when people were willing to pay a lot more for their smartphone plans. She could easily downgrade to a $40 per month plan offered by a rival carrier that offers unlimited calls and texts and more than enough high-speed mobile bandwidth for her needs (500 MB per month). Let's do the math on the costs for the $40 per month plan:

Monthly cost: $40

Annual cost: $40 × 12 months = $480

**Annual savings: $1,080 - $480 = $600**

****

**_What's a family plan? _**

Another option is a _family plan_. These plans let people group two or more mobile phone lines to a single bill, at a steep discount compared to what the plans would cost if they were paid individually.

The carriers will happily help you migrate phone numbers from other companies to the new family plan, and either set up new phones or switch out the SIM cards in the old phones (this may not be possible for all models, however).

Here's how a real plan works. It offers unlimited voice and texting, plus 1 GB of mobile data at the highest available speed for three separate mobile telephone numbers:

Two-line family plan: $80

Additional line: $10

Additional taxes & fees: $17

**Total cost: $107 per month**

Note that this does not include the cost of the phones. Nevertheless, the monthly cost for three lines matches the price that some people pay for a single line!

To cut down the cost of a family plan, go for the lower data caps (usually not a problem if you have Wi-Fi at home or at work) or use cheaper phones.

**_Contract vs. pay-as-you-go plans _**

Two-year mobile contracts are a ripoff. You're locking yourself into a plan that is probably not competitively priced, and will likely cost thousands of dollars over the life of the contract.

That's right, thousands of dollars. Let's do the math:

Monthly voice/text/data charge: $80

Two-year cost: $80 × 24 = $1920

Discounted midrange phone, offered with 2-year contract: $100

**Total: $2,020**

Of course, cheaper plans are available, but the minutes and data allotments are extremely limited. Many people actually pay more expensive rates. I have friends and relatives who pay more than $100 per month for a single mobile line, because they don't know where to find cheaper plans or choose the options that fit their needs.

**_Prepaid plans _**

_Pay-as-you-go, "prepaid" and "no contract" plans_ usually involve paying up front for a large block of minutes. For instance, one popular plan charges $25 for 250 minutes, which expire after 3 months (the expiration date can be extended if you purchase another block of time). You can top off the minutes using a credit card or a prepaid card sold in a store. If you decide to drop out of the plan, all you have to do is stop paying for minutes.

While the per-minute rates are expensive, for people who don't talk or text much, the plans are actually much cheaper than a phone on a two-year contract. However, you're pretty much limited to using old-fashioned feature phones that can only handle phone calls and texting.

Let's do the math:

100 minutes of prepaid time (3 month expiration): $25

Initial purchase + 7 refills over 2 years: $200

Feature phone cost: $30

Total two-year cost: $230

**Savings vs. two-year contract: $2,020 - $230 = $1,790 **

I used prepaid phones for ten years, and saved many thousands of dollars compared to friends, relatives, and colleagues who had expensive two-year contracts. However, I eventually switched to an inexpensive monthly plan. The reason: I needed the features of a smartphone, which requires data to use the apps and email.

**_Monthly plans _**

Plans that don't require a contract and let users pay month-to-month have gained in popularity. The prices can be very competitive compared to two-year contract plans. However, you won't get a subsidized phone included in the price — you'll either have to bring your own, or pay full price.

Let's do the math for a pay-by-the-month plan with unlimited talk and text, and 500 MB of high-speed data:

Monthly charge: $50

Two-year cost: $50 × 24 months = $1,200

Midrange smartphone, full price: $250

Total: $1,450

**Savings vs. two-year contract: $2,020 - $1,450 = $570**

****

**_Saving money on new phones _**

Mobile phones can be expensive. Some carriers factor the price of the phone into the monthly bill, but others let customers pay for the phone up front and pay for wireless coverage as a separate bill. The newest luxury models with the biggest screens and best cameras can cost well over $500, but there are plenty of decent midrange phones that cost $250 or less. Cheapo models that only do calls and texting (also known as "feature phones") can be had for $50 with some calling plans.

What phone should you buy? Many people make their choices when they walk into the store or kiosk and look at the display models. This is a poor way to choose. While you, the customer, can evaluate the look and feel of the phone hardware that way, there's not enough time to adequately test critical features such as:

  * Reception
  * Responsiveness of the phone when fully loaded with apps and data
  * Camera quality
  * Battery life
  * Operating system integration (particularly for Android models)
  * How well certain apps work with the handset

In terms of evaluating reception, most carriers have coverage maps on their websites, but those can be unreliable. A better way to find out whether the phone can send and receive calls from where you live or work is to ask neighbors, colleagues, and others. I've seen people use Facebook, Twitter, and email to survey other people about specific devices and carriers.

As for the other criteria, there are a few ways to research phones before deciding which one to buy:

  * __**Determine how your personal needs may impact your selection of a particular model**. Are you a heavy-duty texter or emailer? Then a phone with a larger screen or physical keyboard may be the best choice. Similarly, if you like to take photos, then buy a phone with a decent camera and lots of storage.
  * __**Ask people with similar needs about their phones, and try them out!** People can usually describe what's good and bad about their phones. However, if a friend bought the phone more than a year ago, note that it may no longer be available... or it may be missing features that the latest generation of phones includes.
  * __**Check the review sites and gadget blogs.** You have to be careful here, because some "review" sites do little more than rewrite press releases from the major phone manufacturers and carriers. Look for sites and blogs that contain long reviews and original photos.
  * __**Read the user comments.** Checking out what other customers have said online (for instance, on Amazon.com) can be tricky. How can you be sure "Roger53" is real, or knows what he is talking about? The answer is: you can't. But if Amazon lists Roger53 as a "verified purchase", and he and ten other users are all complaining about how the battery starts to lose its charge after a few months, that's a red flag.
  * __**Is the extra cost worth it?** Some manufacturers use the power of their brands to charge a premium that costs hundreds of dollars more than competing models. If two phones match up in terms of features, but one is $200 more expensive than the other, why would you buy the pricier model?

After doing any online research, make sure that the phone is available in a local retail or carrier shop. Why? It will give you a chance to do an in-person test of the basic features and feel the phone in your hand before you put down your hard-earned cash.

Finally, note that certain types of phones are associated with certain types of plans. For new or high-end models, you may have to agree to be locked in to a two-year contract, or pay high monthly carrier charges (plans for Apple iPhones are particularly expensive). Be sure you understand these restrictions before making your purchase.

**_Saving money on Internet service _**

Home Internet service is a necessity for most people. Internet service providers and cable companies know this. To get you to pay more, they offer "bundles" that combine Internet, phone, and cable TV. If you only want one of these services, the price is steep — at least $50 or $60 (and sometimes more, if there is no local competition).

Let's do the math on an Internet plan that does not include phone or television:

Monthly rate: $60

Cable modem rental: $8

Total monthly cost: $68

**Annual cost: $68 x 12 months = $816**

The bundles may seem like a deal — just $99 per month for all three! That's not much more than paying for one service at a time, right?

Not so fast. There's a catch with these bundles. Actually, there are several catches:

  * _"Equipment, installation, taxes and fees are extra."_ These fees are unavoidable, and bump up the price well over $100 per month.
  * The basic bundle seldom includes everything you want, particularly when it comes to cable television channels. Even local broadcast television channels may not be included!
  * Internet speeds may be limited.
  * Phone service may be limited to local lines; out-of-state area codes cost extra.
  * The rate does not include the cost of renting a cable modem
  * Rates increase regularly — sometimes as much as $15 per year

All of a sudden, the $99 bundle costs $140 per month to get to the service levels you want for Internet, phone, and cable TV. Let's do the math:

**Annual cost, first year: $140 x 12 months = $1,680**

That's not all. The price of the monthly bundle usually jumps after 12 months, and sometimes jumps again after 24 months. I saw one $89 per month bundle that includes Internet, cable TV, and a few premium channels rise to more than $200 after 2 years. Here's how the bill breaks down when the customer starts paying full price:

Monthly cost for cable TV: $90

Monthly cost for high-speed Internet: $70

Monthly cost for premium channel package: $25

Additional monthly taxes, fees, modem rental, and other charges: $20

Total monthly cost: $205

**Annual cost: $205 × 12 months = $2,460**

But there are ways to save serious money.

  * _Get your own cable modem if you are handy with computers_. They cost $20 to $30, and you will have to install and configure it yourself. Savings: $60 in the first year, nearly $100 per year thereafter.
  * _Don't get extra cable channels beyond the basic service_. You will be able to get premium programming through your Internet connection using Netflix, Hulu, Amazon Prime, and other services.
  * _Negotiate with the ISP or cable company_. In the past, I've asked for and received discounts from telecom providers. The best time to do this is when you have a better offer in hand _and_ the original contract (typically 2 years) is over.

**_How to haggle for Internet service _**

The point about about having a better offer in hand is worth explaining. Sometimes it may be a direct mail coupon that a local cable company or ISP sends you, or an ad that you see in the local newspaper or online. With an offer like this, you can go to your existing company and ask them to match it, or threaten to leave. I've tried it, and it really can work.

However, if it doesn't, you can always take up the other company on its discounted offer. This happened to me a few years back. Verizon increased the rate for my Internet/phone service from $80 per month to $100, and refused to cut back — they insisted that none of their new packages supported $80 per month. Fortunately, one of the local competitors was in the midst of a fiber rollout in our neighborhood, and was mailing out some incredible offers, including a $20 per month Internet offer. I checked it out. The rate rose to $35 per month in the second year, and $55 in year 3, but the contract only lasts for two years. The cable modem cost $8 per month, but I decided to get my own for $20.

Let's do the math:

Year 1: $20 × 12 months = $240

Year 2: $35 × 12 months = $420

Total cost for years 1 and 2: $660

**Annual cost thereafter: $660**

You'll notice that I did not get phone service. While I like having an old-fashioned phone for the better quality and safety (it's easier to dial 911 on a wired phone), the mobile phones we have seem adequate, so we decided to get rid of the landline.

Here's a final piece of advice: If you get a mailer that has an Internet offer that seems too good to be true, read the fine print to make sure that the deal you are getting into isn't worse than the one you have now. Remember that a $99-per-month bundle can turn into a $200-per-month monster in a few years. The impact on your bank account can run into many thousands of dollars.

**_Controlling other utility costs: the 10% solution_**

When it comes to saving on other types of utility bills, the experts tend to get into home improvement projects such as adding insulation to your attic, installing double-glazed windows or energy-efficient heating systems, or caulking every last crack and crevice.

That's great if you are handy with tools or happen to be on a first-name basis with the staff of your local hardware store. But for the rest of us, **I advise a much simpler approach that I call the 10% Solution.** Here's how it works:

  1. Determine the sources of spending on electricity, gas, heating, air conditioning, and hot water.
  2. Reduce consumption by 10%.

That's it. Find those things in your house that consume energy, and then cut consumption by just 10%. For example:

  * If you usually take a 10-minute shower, cut it down to 9 minutes.
  * Reset your thermostat to be a little warmer in summer, and a little cooler in winter.
  * If you have a programmable thermostat, set the air conditioning and heating systems to power down a little earlier than usual. For instance, in the winter, we set our home's internal temperature to drop after 10 pm when we are in bed and under the covers. We program the thermostat to increase the temperature by 4 degrees the next morning before we get out of bed.
  * Check your hot water heater's default temperature and drop it by a few degrees.
  * When it's time to replace lightbulbs, get slightly lower-wattage bulbs or energy-efficient alternatives.
  * Conserve energy in the kitchen, especially when using the stovetop or heating hot water (microwaving hot water or using a British-style electric kettle are not only faster, they are much more efficient than using a gas or electric range to boil water).

Taking slightly shorter showers, turning down the A/C by a few degrees, or making other tweaks to the ways in which you use energy are hardly noticeable. But they can save hundreds of dollars per year in power, gas, oil, and other energy costs.

**_Reducing debt-related expenses _**

When it comes to mortgages, credit cards, and other forms of debt, some people throw up their hands and assume the monthly payments are an unavoidable part of life.

In one sense, this feeling is understandable. Monthly mortgage payments and credit cards are obligations that cannot be shirked. However, there _are_ scenarios that allow some people to legitimately reduce their payments. They include refinancing and transferring credit card debt to other cards with lower interest rates.

**_Refinancing your mortgage _**

Refinancing may be a way to reduce your monthly mortgage payments. But there are important considerations when refinancing, and you should always consult with professionals (such as your tax accountant and a real estate lawyer) before signing the "refi" paperwork.

**_Mortgages explained _**

If you've purchased a house or condo, you probably had to take out a mortgage. Mortgages are loans from banks that help homebuyers pay the difference between the cash they have available to pay for a home and the actual cost of the home.

Typically, mortgages have to be paid back in monthly installments over 15, 20, or 30 years. The monthly payments are usually equal (exceptions include adjustable rate mortgages, described below), and include principal as well as interest that the bank charges.

The size of the monthly payment depends on the amount of the principal, the length of the mortgage, and the interest rate offered by the bank at the time the mortgage started. Here's how a $200,000, 30-year mortgage at a fixed 6% interest rate breaks down:

Monthly principal and interest payments: $1,199

Annual principal and interest: $14,389

Total interest over 30 years: $231,676

**Total payments over 30 years: $231,676 + $200,000 = $431,676**

The principal declines gradually over 30 years, until the mortgage is paid off:

This is a greatly simplified view of mortgage payments. Not shown in the data above:

  * Even though the monthly payment never changes, interest payments are high during the early years of a mortgage. Toward the end of the 30 years, most of the payments will be paying back principal.
  * Local real estate taxes are not included.
  * There are fees related to setup, late payments, and other situations.
  * Lenders are required to reveal the annual percentage rate (APR), which is the mortgage rate plus fees, points, and some closing costs. If there is a big difference between the quoted rate and the APR, watch out!

Another risky situation that can lead to serious pain down the road involves monthly payments which "balloon" after a set number of years, which is typical of adjustable rate mortgages (ARMs). Here's a typical offer:

The initial rate is low, but the rate after the first 5 years is unknown. There is a real risk that the rate could more than double in the 6th year, which would greatly increase monthly payments.

You should always understand the terms of a mortgage based on the printed documents you sign as well as professional advice from an accountant, housing counselor, or experienced real estate lawyer.

**_Why refinance? _**

The main reason to refinance is to take advantage of lower interest rates. Refinancing can not only reduce the amount of interest you pay over the life of the loan, it can also lower your monthly bills, sometimes by significant amounts. Let's do the math on the example given earlier, but this time at a 4.5% interest rate:

Monthly principal and interest payments: $1,013

Annual principal and interest: $12,160

Total interest over 30 years: $164,813

Total payments over 30 years: $164,813 + $200,000 = $364,813

**Savings vs. 6% mortgage: $431,676 - $364,813 = $66,863**

Here is the principal/interest breakdown for the two mortgages. Note how the payments for the 4.5% mortgage, taken in aggregate over the life of the loan, are mostly principal. For the 6% mortgage payments, it's mostly interest:

Refinancing only makes sense if you can get a lower interest rate. Another aspect to take into consideration is the various closing fees and other costs associated with refinancing. These typically run into the thousands of dollars, and may not sufficiently offset the savings from lower monthly payments. In addition, be prepared to process a mountain of paperwork — acknowledgements, disclosures, truth-in-lending forms, old tax returns, credit reports, and more.

**_Is it a mistake to take on debt?_**

When you take out a mortgage or refinance your home, take on a car loan, utilize store credit or pay for anything using your credit card, you are building up debt. This is money that you have to pay back to a _creditor_ , often with interest.

Is taking on debt a mistake? While some hardliners consider all forms of debt to be evil, I am more moderate, and view debt along a spectrum of necessity:

Practically speaking, this means that my family _does_ take on debt to pay for things we consider to be necessary, such as a mortgage and student loans. But we have never taken out a car loan, and avoid credit card debt based on casual purchases. We have one credit card that we pay off every month, so interest payments never enter the equation. Recently I have been paying with cash for smaller purchases, as I am less and less convinced that retailers and restaurants are able to keep our information protected from thieves.

A secondary factor that we take into consideration is the benefits associated with having debt.

Wait a minute. _Benefits_?

That's right, benefits. And I am not just talking about the convenience of being able to use plastic to pay for a ribwich down at the local barbecue joint. The debt that we carry comes with the following benefits:

  * At tax time, **mortgage interest payments are usually deductible**.
  * **Student loan interest payments are usually deductible**.
  * Paying off bills and existing debt payments on time can lead to **better credit scores** , which makes it easier to secure loans in the future.

In addition, while not strictly a benefit of having debt, credit cards often offer additional benefits to attract customers. Here are some examples:

  * Insurance associated with purchases, including refund protection, purchase protection, and extended warranties. If available, the issuer's website or contract will spell out the details of how these work.
  * Rental car insurance. This can save hundreds of dollars off of a weekly car rental. Again, check the small print, or call your card issuer to verify whether it's available and how it works.
  * Airline miles.
  * Points which can be redeemed for cash back rewards or merchandise.

Note that not all credit cards offer these benefits. In addition, some benefits require "premium" card plans that have annual fees or higher interest rates.

While these benefits reduce the pain of taking on debt, they should _never_ be seen as a justification for buying a house you can't afford, wasting money on luxuries, spending beyond your means, or building up a mountain of debt that is difficult or impossible to pay back.

**_Jordan's credit card problem in one easy chart_**

As mentioned earlier in the guide, Jordan has a spending problem. She can address many of the issues by cutting down on the luxury purchases and performing some emergency surgery on her cable TV plan. But for the debt that she's already incurred on three bank credit cards and several store credit accounts, what's the best approach to take?

Here's how the bank credit cards stack up:

One thing you should understand about Jordan's credit cards: The issuing bank or store _wants_ her to pay the minimum. If she pays the minimum, that means the issuer can make more money off the amount that remains, which is subject to the interest rates listed above.

This is where consumer psychology enters the picture. Like many people, Jordan pays off the credit cards with the lowest outstanding balance first. It makes her feel that she's accomplishing something tangible in her fight against debt.

However, she'd actually be much better off tackling the debt with the highest interest rates. Why? Because the higher interest debt grows faster. Indeed, that's exactly what's happened with her University SmartShopping Rewards card, which has the highest rate (nearly 23%) and the highest amount owed ($6,000).

**_Consolidating credit card debt _**

One option Jordan has is to consolidate her debt. This basically means using a low-interest credit card to pay off the debt on the high-interest cards. The outstanding balances on the high-interest card are transferred to the lower-interest card, making it easier to pay off the debt.

Here's an actual offer I received in the mail:

There are some issues with card-based debt consolidation, however:

  * There are often transfer fees to contend with, which typically range between 2% and 4%. The above example is 3% after a certain date.
  * The rate on some low-interest cards can sometimes balloon to 20% or more after a certain "introductory period", or because of triggers such as late payments.
  * Debt consolidation and "credit repair" scams abound. The ads typically appear on the Internet and late-night television. Sometimes scammers even robocall your home! The shady firms promise to deal with creditors on your behalf in return for large fees, but typically do nothing... or make the problem even worse.

The Federal Trade Commission website (ftc.gov) contains more information on potential scams related to debt consolidation, and also has advice for people with serious debt problems.

**_How credit ratings agencies "score" you_**

A credit report is a document that grades you on your ability to pay your bill. The companies that provide the reports — Experian, TransUnion, and Equifax — gather information from the credit card companies, mortgage lenders, department stores, utilities, and other firms that have provided credit to you in the past. The information they gather is aggregated into what's called a FICO score, a number between 350 and 850 that reflects your creditworthiness.

People with lower FICO scores are considered less likely to pay their bills. Mortgage, credit card, telecommunications companies and even some utilities may reject their applications, or may charge higher rates and fees.

Among the population at large, relatively few have terrible credit card scores. The following table shows the distribution of FICO scores among people evaluated by one of the credit rating agencies, TransUnion. More than 50% have a FICO score above 700:

**_How to get a free credit report_**

Typically, when you apply for a new credit card or mortgage, or want to rent an apartment, the bank, lender, or landlord will run a credit report on you. They want to know if you are likely to pay on time and pay off any debt that you incur.

Wouldn't it be great to see your credit report? It would allow you to understand your credit profile from the view of banks and other issuers, and identify any potential problems that need to be addressed.

Here's some good news: You _can_ see your credit report, and it's free, thanks to federal law. Go to the government-operated website usa.gov and look for the links that direct you to an external site that is the only official location to request reports from the three big agencies. Note that the free reports show many details about your credit history, but do _not_ show your credit score — that is only available for a fee.

Once you get your report, check it carefully. If you see mistakes such as incorrect information about a dispute, unpaid accounts that you never opened, or other people (and their debt) being associated with you, there are processes for having this information removed.

Be on the lookout for situations that might indicate identity theft. You _will_ need to resolve any case of fraud that is wrongly associated with your identity. Further, there are rights you have as a consumer — check out the ftc.gov website to learn more.

**_What happens when you don't pay your bills_**

If you can follow some of the advice in this book to reduce spending (both fixed and flexible), it will make paying your remaining bills easier. It may also help you reduce your credit card debt, monthly payments on mortgages, and other obligations.

But what happens if you _still_ have trouble making payments? The next few pages cover some of the consequences for failing to pay a bill.

**_Secured debt vs. unsecured debt _**

Debt can be classified as _secured_ or _unsecured_ :

  * __**Secured debt** is tied to an asset, such as property or a car. For instance, when you take out a mortgage to purchase a house, the house itself becomes collateral for the loan. In other words, it secures the loan. Car loans and some business loans are also structured this way.
  * __**Unsecured debt** does not have any collateral associated with it. This would include credit cards or merchant credit, as well as student loans and medical bills.

Practically speaking, failing to make payments on secured debt can lead to serious consequences. The bank may take your house away, or repossess your car.

Unsecured creditors use other methods to get some or all of the money that's owed to them. The methods include:

  * Adding penalties for failing to pay on time.
  * Reporting late payments or failure to pay to credit reporting agencies.
  * Starting collection proceedings, including sending notices and making regular phone calls.
  * Negotiating a repayment plan.
  * Selling the debt to another company, which may make more aggressive attempts to collect.
  * Taking you to court, and obtaining a judgment against you.

Depending on the state you live in, judgment creditors may legally force you to reveal information about your income and assets, garnish your wages and bank accounts, and even seize property.

**_Paying off debt: what to watch out for _**

If you are in a situation in which secured or unsecured debt has gotten out of control, you need to have a plan for reducing the debt. The process of reducing serious debt is beyond the scope of this guide, but there are a few basic issues to stress:

  * Federal law forbids debt collectors from contacting you after certain hours, calling you at work, or continuing to call you after you have sent them a written notice asking them to stop.
  * Because the consequences of failing to pay your mortgage are so dire (you can be thrown out of your home!) the Federal Trade Commission advises contacting your lender immediately. If your bank thinks the situation is temporary, you may be able to get help suspending or reducing payments, or work out some other sort of plan. Be sure you understand the fees or other financial penalties for doing so.
  * If you can't work something out with the lender, contact a _legitimate_ housing agency near you. Contact your state housing authority to get a list of agencies.
  * If you have serious credit card debt, talk with a _reputable_ nonprofit credit counseling agency. Your state attorney general or local consumer protection agency should be able to steer you in the right direction.
  * For-profit debt settlement companies may offer to negotiate with creditors on your behalf, but this approach comes with additional risks, complications, and potential scams. Visit the FTC website at ftc.gov to learn more.
  * Filing for bankruptcy in federal court may get creditors off your back, but it will impact your life for years to come. Depending on the type of bankruptcy, you may have to liquidate all of your assets, leave your home, or come up with a plan to use your future income to pay off your debts. You _must_ have credit counseling before filing for bankruptcy and get a certificate from a provider approved by the U.S. Trustee program. Check the U.S. Trustee Program website at www.usdoj.gov/ust for more information.

**_Summary_**

Fixed expenses are the parts of your household budget that can't be removed. They include obligations such as taxes and health insurance, as well as necessities such as transportation and telecom costs.

While these items can't be eliminated, some are easy to cut, such as expensive cell phone bills. Others can be reduced if conditions allow it, such as refinancing a mortgage or consolidating credit card debt. For other fixed costs, such as car payments, switching from new to used vehicles can make a huge difference.

Finally, letting credit card or other forms of debt get out of control can lead to financial disaster. If debt is starting to become problematic, deal with it as soon as possible. In addition to cutting expenses and paying off or consolidating high-interest credit cards, there are resources that can help you identify problem areas and get advice.
**Chapter 4**

**Managing your accounts & data**

The final chapter of this guide deals with how to better organize your bills, financial data, and other records.

Wait a second. There's a whole chapter on _filing_ stuff? I can hear you now:

_"Bor-ing!" _

_"Why waste my time on this, if it doesn't affect the bottom line?" _

_"I already have a system. If it ain't broke, don't fix it!"_

Hear me out, people. Filing and organizing _is_ a drag. No one likes to deal with paperwork, and some of the technology related to accessing, transferring, and saving computer data can make your head spin.

But organizing your paper and computer records is important and useful. Let me list the reasons why:

  * **Some files and data _have_ to be retained**. Tax-related filings and documentation are an obvious category. Other types of paperwork should be retained in case of disputes with vendors, so the next time you want to raise hell about mysterious mobile phone charges or file a health insurance claim, you'll be ready.
  * **A better system of organizing files and data makes it easy to identify problems and track your progress**. For example, if you have three credit cards, two bank accounts, and regular mortgage and student loan payments, you may not have an accurate picture of your month-to-month spending, savings, and debt levels. Using one of the tools in this chapter can help you track where the money is coming in, where it's going out, and your progress.
  * **Once you have systems in place to organize your paper files and computer, they are not hard to maintain**.

Let's take a look at the different methods Frank, Jordan, and Stephanie use to manage their records.

**_Example A: Frank's paper monster_**

You may recall that Frank had some pretty major financial issues. He was even evicted from his apartment a few years ago for nonpayment of rent.

Some of Frank's troubles were due to bad spending habits. But another factor has contributed to Frank's troubles: He is terrible at managing his records, which are mostly paper.

How bad is it? Old bills and unopened bank statements are bundled into desk drawers, placed on countertops, or inadvertently thrown out. Receipts are piled on his dresser, or forgotten in his pants pockets. Some paper even ends up in his car, where it is stepped on or stuffed in the glove compartment.

Frank has trouble keeping track of what he owes to various vendors, and frequently misses payments. Sometimes it's because he forgets bills are due, while at other times he can't find the bill and return envelope when he is ready to pay. This leads to added fees and credit card debt, not to mention additional late notices and calls from billing departments. Several times he has had phone service or utilities cut off.

Now that Frank has identified some flexible expenses that can be cut, he will be better able to pay off his bills. But he can make life a lot easier if he gets a better system in place to manage paper records.

**_Example B: Jordan's online-centric system_**

Jordan hates clutter. Long ago, she ditched most of her paper bills, bank statements, and payments by check. Now she favors tools and processes that are centered around her online bank account at Megabank.

Her salary, tax refunds, and other incoming payments are deposited electronically into her account. She loves the online bill payment features, and almost never uses her checkbook. On those rare occasions she receives a paper check, she whips out her phone and uses the official Megabank mobile app to take a picture of the check and remotely deposit the funds to her account.

Jordan is living the digital life, and loves it! What more could she possibly want?

While Jordan has been able to cut down her luxury purchases and unnecessary cable TV services, she still hasn't caught up with her debt. She currently has outstanding debt on three credit cards and two department store credit accounts. One of the credit cards is linked to her online bank account, which makes it easier to monitor the debt and payments. But the four other accounts aren't integrated, which makes it hard to keep track of individual payments and overall debt.

Another issue for Jordan is that she doesn't keep good digital records of what's going into her account, and what's being paid out. She can review some payments that have been made through her online bank account, but the records only go back 90 days. And while she pays her taxes electronically, the PDF copies are not always saved or archived. If she ever gets audited, she will have a tough time producing records of important financial transactions. Even if she wants to dispute an electricity bill, she might not be able to track the payment history to the utility.

**_Example C: Stephanie's smart approach_**

Stephanie has a different approach to record keeping.

While she uses online banking and direct deposit, she also has gets paper statements and bills from certain vendors, such as her insurance company and 401(k) provider.

Why? She likes the paper reminders, which are hard to ignore compared to email or electronic notifications. She also likes having an actual paper trail of records in case of disputes or questions about particular charges.

For those companies which insist on using online payments, she is careful to generate receipts of transactions. For instance, after paying her mobile phone bill, she prints out the confirmation page. For her online tax filings, she saves a PDF copy of her return and prints out a copy, too.

Stephanie uses some new online tools that help her track her spending habits and savings. Mint.com lets her connect all of her online accounts, including accounts at her bank, her credit card accounts, and her retirement accounts. She can also set up and track monthly budgets by category:

Every time she logs in, Stephanie can see outstanding balances, debt, and other activity that gives her a window into how she's managing her finances. (I'll cover Mint later in this chapter.)

Finally, Stephanie has processes for managing her paper records that make it easy for her to find specific documents months or years after they've been filed away. She also has a system to better manage and back up the digital records on her computer.

**_Getting smart about paper records_**

For years, pundits have predicted that it's only a matter of time before everyone shifts to electronic billing and record keeping. Bill Gates, the founder of Microsoft, once dreamed of a "paperless office" where printers, copiers, binders, folders, and other paper records would be retired and replaced by computer disks and online storage systems.

The dream hasn't panned out. While sophisticated personal and business payment systems now exist online, millions of people still prefer to get paper statements in the mail, make payments by check, and operate their businesses using paper records and communications. Some people still use faxes!

My approach takes the best of both worlds: I use online and mobile tools that make it easier to manage my finances, but use paper-based processes which offer additional benefits:

  * **Paper lasts longer**. If stored with care, paper records can last decades. Contrast that with digital data, which can be made inaccessible by accidental deletions or account closures, an online company going out of business, or obsolete media (good luck loading that 3.5" floppy disc from 1995!)
  * **Simple indexing systems can make retrieval of paper records much easier**.
  * **Paper records are easier to review and mark up** if you need to add a reminder or note. Try circling an expense and writing a quick note in the margins of a PDF copy of your credit card statement!
  * In the hands of trusted parties, **paper records are less likely to be hacked or stolen** than an email attachment.
  * If there is a dispute or question about a charge, paper statements, letters, bills, receipts, and other records **serve as more robust forms of evidence**.

On this last point, I recently had a dispute with my state tax agency about the payment of my corporate income tax. The bureaucrats didn't want a copy of the email from my accountant or the PDF receipt of the transactions — they wanted bank statements and printouts to be _faxed_ to them! Likewise, when I recently refinanced, everything had to be on paper.

**_Tools to manage paper records _**

I used to manage my paper records with large manila envelopes. Credit card receipts and statements would be stuffed in the envelope marked "Credit Cards", auto-related paperwork went into the "Car" file, etc.

It was a mess to manage. I ended up with boxes of envelopes that were hard to sort through. The envelopes also started falling apart within a year or two of filling up.

In 2001, I switched to a new system:

  * **Important records that I wanted to permanently preserve** (birth certificates, auto titles, passports, insurance policies) were placed in folders and then stored in a fireproof safe. There aren't many of these records, and I only need to open up the safe a few times per year to add or remove items.
  * **Paperwork related to my retirement accounts** (monthly statements and transaction records) are kept in jumbo-sized three-ring binders. The binders typically fill up in three years.

Everything else goes into an annual accordion filing box with the following categories:

  * **Auto** : Receipts for car repairs, electronic toll statements, etc.
  * **Banking** : Monthly checking account and mortgage statements, ATM receipts.
  * **Credit Card** : Monthly statements.
  * **Financial** : Miscellaneous financial statements and documents.
  * **Insurance** : Auto, home, life, and other insurance paperwork.

  * **Kids** : Camp, daycare, school records, etc.

  * **Medical/Dental** : All bills, pharmacy receipts, and medical records.
  * **Miscellaneous** : Anything not easily filed elsewhere.
  * **Small receipts** : Small receipts (less than $100) from grocery stores, gas stations, restaurants, and shops.

  * **Big receipts** : Purchases of large items that are expensive and/or have warranties.
  * **Taxes** : W2 forms and year-end tax statements from any source, records of charitable donations, etc.

  * **Travel** : Itineraries, expense receipts, frequent flyer statements, and other records related to domestic and international travel.
  * **Utilities** : Phone, gas, water, and other bills related to utilities or recurring home services.
  * **Work** : HR paperwork, pay stubs, and other work-related records.

By the end of the year, the accordion file is nearly full. I get a new one for the new year (they cost less than $15 at the local office supply store), and store the old accordion file on a high shelf in the basement.

The beauty of the system is that it's clear where everything has to go, and it's easy to find specific records based on the category and the year it was filed. More than once I have dug into an old accordion file to dig up old tax records. Recently I had to look in the files for 2009 to find the receipt for an appliance that had broken down. I used the receipt to receive free warranty repairs.

**_Destroying old records _**

While I could keep the accordion files forever, it's not necessary for most types of paper records. Experts advise keeping tax records for 6 years, the length of time the IRS has to audit you if you underreport your income by 25% or more.

I actually keep tax and other important records for much longer. To determine when to destroy old bills, bank statements, and other paper records, I apply a common-sense protocol:

  * The contents of accordion files are kept for 6 years.
  * After 6 years, all tax records are removed from the accordion file and put into long-term storage boxes.
  * Financial records from retirement accounts are also kept in long-term storage.
  * All records of medical diagnoses or reports (including kids' vaccinations) are placed in my fireproof safe.
  * Bank and credit card records, social security earnings reports, and records containing private or otherwise valuable information are shredded, using a $20 plug-in shredder that fits on top of a wastebasket.
  * Everything else goes in the paper recycling bin.

Most of the paper records from the accordion files are eventually shredded or recycled. Only the important stuff — tax records, medical histories, and some financial records — are kept longer.

The accordion files can be reused if they are still in good condition.

**_Tools to manage personal data& computer files _**

Most people don't have a system for organizing their computer files. Attachments, documents, PDFs and electronic receipts tend to be stored willy-nilly on PC desktops or removable storage, such as USB drives. You may even have old CDs or floppy disks lying around with data on them.

The situation is compounded by the fact that PCs and laptops are typically replaced every 3 or 4 years. If the old computer is not broken, it may be sold, donated, or stuffed into the back of a closet. The data on them is not always transferred, saved, or destroyed.

In this section, I have some basic advice for organizing, saving, and preserving data. Note that _securing_ data is also important, but it goes beyond the scope of this guide (except for a short section on password selection — see "Jordan's dumb password").

The system I use on my personal computer is similar to my paper system, in that much of the data is organized by year and then by topic and subtopic. For instance, I have a directory on my computer titled "2014 Home" with subfolders for the following:

  * Banking
  * Correspondence
  * Education
  * Misc.
  * Taxes

Similarly, there is a folder titled "2014 Work" which contains any work-related receipts or records that have been sent by email or need to be stored electronically.

For digital photos and videos, I use the default software that comes with the computer to view the files. However, I have a system of folders based on the year the photos were taken (for instance, "2014 Summer" or "2014 Mom's Birthday"). Many photo programs also allow photos to be tagged by name, event, or another attribute. A few programs automatically organize photos based on simple facial recognition and the photo's metadata (digitally generated geographical information that describes where and when a photo was taken).

Data is constantly being backed up. This means creating a copy of files, photos, and important programs. If my computer dies, I can use the most recent backup to restore my files once the computer is fixed or replaced.

**_How to back up your computer data_**

Books have been written about how to effectively back up your data. In fact, I wrote one of them — _Dropbox In 30 Minutes_!

Dropbox is an Internet-based system for backing up your data and photographs. While Dropbox is very convenient (most of the backups automatically take place in the background), there are some security considerations which make me wary of using it for sensitive data. For instance, I do not store banking information or old tax returns on Dropbox.

Many people use external hard disk drives to back up and store the data on their PCs. The drives are the size of a thick paperback book, and can be tucked behind the PC or off to the side. Here's how they work:

  * The drives are cheap (less than $100 for smaller units). They are so cheap, that you can have more than one. I have two units — one that's attached to my laptop for daily backups (see image, below), and another drive that I back up to every year and then store in the fireproof safe I mentioned earlier.
  * The drives typically connect to the PCs via a USB cable for fast file transfers.
  * They can store terabytes of data, which is the equivalent of hundreds of thousands of digital files, photos, and programs.
  * If your drives don't already have their own storage management software installed, your computer probably has a simple utility to help manage regular backups and set security and encryption settings.

If you don't have a large amount of data to back up, there are simpler solutions available, such as encrypted USB drives. Other people use Dropbox or similar services such as Microsoft OneDrive.

People who have serious storage or security requirements may use advanced home networking systems and hardware appliances to back up their data. As this subtopic is complicated and goes well beyond the scope of this guide, your best bet is to go on the Web and search for "home networking systems" to learn more.

**_Digital tools for managing& tracking your finances_**

The following section describes some online tools and processes that can help you better manage your finances. This is by no means a complete list, but is intended to give you an idea of what's available.

In addition, while there are many helpful data protection tools available, it's ultimately up to you to be smart about security. This means not only using strong passwords and having backup email addresses and phone numbers, but also being aware of scams, tricks, and two-faced friends accessing your data without your permission.

Let's start with a short discussion about choosing passwords to protect your online data and identity.

**_Jordan's dumb password _**

Jordan has a problem. She has made a grave mistake in the password that she uses for her email, social media accounts, online banking, Amazon, and every other online and mobile service that she has signed up for. Here's the password:

JM071987

Jordan thinks this is a great password. It's easy to remember, has a mix of letters and numbers, and looks kind of "random" to anyone who happens to see it. She thinks it's a lot smarter than some of the other passwords that people use, like "password123" or the names of pets and children.

It's actually a pretty dumb password. The letters and numbers aren't random at all — they are Jordan's initials and the month and year of her birth. Someone who knows her could guess it, and smart hackers who know her name (easily found on Facebook) could apply various techniques to figure out her password.

There's another big problem with Jordan's password. Not only is it easy to guess, she uses it on every website and mobile app she has registered for. This means if someone guesses or steals her password for one service, they have the keys to the castle for every other service she uses, including critical services such as email and bank accounts.

What should Jordan do? As a first step, she should immediately change all of her important passwords. Here are some criteria that she could apply when choosing new passwords:

  * Each account that contains personal or important data should have a unique password. The same goes for four-digit personal identification numbers (PINs).
  * Don't use first or last names, initials, or common words — _especially_ "password".
  * Don't use repeated or consecutive numbers ("123456" or "8888").
  * Include a mix of letters (upper and lower case) as well as numbers and (if allowed) symbols.
  * If asked to create answers to security questions, avoid questions which have answers that can be easily found out, such as place of birth, elementary school, or mother's maiden name.
  * Leave a backup email address or a mobile phone number, which can help with password recovery.
  * Change passwords regularly.
  * Store passwords in a secure place ( _not_ on a piece of paper in a desk drawer!)

Anyone who is serious about account security should also use "two-factor identification" when it is offered. If enabled, when someone tries to log on to the account from an unrecognized device or location, that person will not only have to enter the password, they will also have to enter a code that's sent to the mobile phone associated with the account. It is a bit of an inconvenience, but it makes it extremely difficult for hackers or scheming ex-boyfriends or girlfriends to access email or social media accounts.

**_Hidden features of online banking_**

Almost everyone knows about online banking. It's a Web-based system for accessing a list of recent transactions and other basic information about an account. There are also common features such as online bill payments, which let people send checks or electronic payments to vendors.

Not all online banking systems are created equal, however. Your small local bank may cover the basics, but the big national banks often have more sophisticated features. In addition, certain banks may require account minimums or charge a monthly fee to access services such as Bill Pay.

Here is a list of online features that are typically offered by banks:

  * **Mobile deposits** : Use an app on your mobile phone to take pictures of checks, and remotely deposit them. This eliminates having to go to the bank in person to make the deposit.
  * **Mobile alerts** : Set up alerts that will be sent as a text message to your phone. The alerts can be regular balance updates, or a confirmation of a transaction such as a big deposit or withdrawal.
  * **Automated online transfers** : Set up regular transfers between two of your accounts. A typical example is a monthly transfer from your checking account to your mortgage account. This eliminates having to mail in the check, and also avoids late fees. But make sure the checking account has enough money, or you may get socked with an overdraft fee.
  * **Automated checks** : Send a check every month to a certain party, such as a service provider or relative.
  * **Online travel settings** : If a bank or credit card issuer notices that a customer's card has been used in another state or country, it may flag the transaction as suspicious or suspend the card... unless the customer has given notice in advance of planned travel. Online travel settings let you notify your bank online, without having to call up during business hours.
  * **Reward points** : If you have a bank-issued credit card that is tied to some sort of rewards program, you can use various online features to manage the points. Typically, people may "cash in" their points once they reach a certain level, or exchange them for merchandise.

Finally, a few larger banks offer money management features to help you better budget and plan your spending. You can usually see how much you are spending in each category (see image, below). There are often more advanced tools, including the ability to set targets in certain categories (for instance, $200 per month in restaurant expenditures) as well as alerts when your spending gets close to or goes over the target.

However, the money management features are sometimes held back by the fact that they only cover the accounts at the bank that offers the features. If you have more than one bank, or want to see how spending takes place across multiple bank, credit card, and financial services accounts, you may be interested in the personal money management tools offered by Quicken, Mint, and others. I'll cover the basics in the next section.

**_Should I use Quicken, Mint, or something else?_**

Quicken, Mint, Check, and other services offer the ability to aggregate and track all of your financial and spending information in one place.

The basic idea behind these services is similar. After registering, provide the login details for various accounts — banking, credit card, loans, bills, etc. The software connects to these accounts, downloads the data, and adds everything up. The software interfaces can display the following data:

  * Total cash available, across all accounts
  * Total credit available
  * Monthly budgets and expenditures, by category
  * Investment performance (stocks, mutual funds, retirement accounts, etc.)
  * Alerts (for instance, a spike in spending in a certain category, or an upcoming bill)
  * Advanced features such as investment analysis and online payments

If you complete the setup process and link up all of your primary bank, credit card, and financial services accounts, these tools can provide some fascinating insights into your assets, investments, and spending levels. One of the most eye-opening pieces of information for me was a chart on Mint.com that showed my overall assets, including the total value of my house and retirement accounts.

But the services have some fundamental differences:

_(Note:_ _Mint.com_ _is now owned by Intuit, which also sells Quicken as well as other financial software packages including TurboTax and Quickbooks.)_

Many people would choose one of the free money management tools. However, there are a lot of people who will gladly pay for Quicken _because_ it is PC-based software. Data you enter into Quicken is not uploaded to the Internet. This means users have more control over their data, and feel reassured that all of their sensitive personal and financial information won't reside on a remote server or in the cloud.

In addition, users of Mint and Check have reported issues with third-party bank and billing accounts that may become inaccessible or fail to update. Being unable to access certain data makes for flawed planning and analysis. For instance, how can you accurately track and plan for debt reduction if you can't connect to all of your credit card accounts?

Lastly, the services can be complicated. Besides the hassles associated with connecting all of your accounts, setting up budgets, targets, and alerts is a lengthy process. Some people have complained that the tools aren't flexible enough to handle real-world budgeting or planning situations that might be thrown off by an emergency or unexpected expense.
**_PayPal, Dwolla, and alternative payment systems _**

If you use eBay or have paid someone over the Internet, you're probably familiar with PayPal. The basic PayPal service lets people pay another PayPal account holder almost instantly. It's an alternative to paying someone by check, or via cash.

The setup for PayPal and alternative services such as Dwolla is straightforward:

  * Enter your bank account information
  * Wait a few days for the accounts to be connected
  * Confirm that several small electronic funds transfers have taken place — typically a few pennies are deposited into your bank account, which verifies to PayPal, Dwolla, or competing services that the account is yours.
  * Transfer some of your bank funds to the PayPal or Dwolla account. You will be able to use these funds to pay other people who have an account with the same service.

The services have different fee structures:

  * PayPal transfers between private parties are supposed to be free, but business-related transactions are charged a fee that totals about 3% of the transaction.
  * Dwolla charges 25 cents for any transaction over $10.

The services are convenient, and I have used both PayPal and Dwolla for my business. However, there are definite drawbacks:

  * Each service requires both the sending and receiving parties to have active accounts with the same service, and connected bank accounts. This means if you want to pay someone right away, and they _don't_ have an account, it will take that person at least three or four days to get the account set up and connected with his or her bank. In that time, you could easily write and send a check.
  * Although the services are _supposed_ to be easy to set up, many people have trouble getting their bank accounts connected or performing other basic functions.
  * Because online payment systems have been abused by fraudsters and organized crime, these companies are often overzealous about sudden, unexplained flows of money. PayPal is notorious for freezing legitimate accounts and making it nearly impossible to quickly access frozen funds.

Many people have understandable qualms about trusting their bank information to a Web-based service that will store the data remotely. Conceivably, a lot of money can be instantly lost if passwords and other credentials are stolen.
**Conclusion**

Over the past 30 minutes, we've learned about some basic personal finance concepts. I sincerely hope the advice in this guide can help you better manage spending and ultimately help you spend more time (and money) on the things that matter most to you and your family.

What's next? There is a follow-up guide titled _Personal Finance For Beginners In 30 Minutes, Vol. 2: How to build savings and investments to support current needs and retirement planning_. The purpose of the second volume is to show how your savings can be leveraged for near-term needs as well as long-term financial goals. The guide includes sections about:

  * Buying a home
  * Establishing a special savings accounts for emergencies
  * Why Social Security isn't enough for retirement
  * The pros and cons of 401(k) plans, IRA accounts, and other types of retirement savings vehicles
  * Mutual fund basics, from compounding to index funds

_Personal Finance For Beginners In 30 Minutes, Vol. 2_ also includes examples featuring our favorite workplace trio, Frank, Jordan, and Stephanie. We'll see how they learn how to fund special savings accounts, leverage matching retirement contributions from their employers, and perform other savings-related tasks that can help secure their financial futures.

To order _Personal Finance For Beginners In 30 Minutes, Vol. 2_ , please visit personalfinance.in30minutes.com. The website also includes blog posts, tips, and other personal finance resources.
**A request for readers**

Thanks for reading _Personal Finance For Beginners In 30 Minutes, Vol. 1_! This guide was created to help people better manage their money, and I hope it has given you some practical ideas that you can apply to your own finances.

I would like to ask you to take a few minutes right now to rate and review the guide. Reviews can be left on the following sites:

  * Amazon product page
  * Google Play product page
  * B&N product page

  * Apple iBookstore product page

  * Goodreads.com

If you are interested in learning more about personal finance topics, or ordering Vol. 2 (which covers savings and retirement planning), please visit the official companion website to this guide, located at personalfinance.in30minutes.com. You can also download the PDF version of _Personal Finance For Beginners In 30 Minutes, Vol. 2_ for free as part of the In 30 Minutes Starter Library by signing up for our monthly newsletter. Go to in30minutes.com/newsletter for more details.

Thanks again!

_Ian Lamont (_ _ian@in30minutes.com_ _)_
**Credits**

Steve Sauer of Single Fin Design created the cover design for _Personal Finance For Beginners In 30 Minutes, Vol. 1_. The proofreader was Kammy Wood. All interior graphics and photos were created by the author, with the exception of the licensed stock photography appearing in the Introduction (Dreamstime) and Chapter 3 (Kenneth William Caleno).
**Bonus: introduction to LinkedIn In 30 Minutes**

_(The following bonus chapter is the introduction to_ LinkedIn In 30 Minutes, _by author Melanie Pinola. To download the ebook or purchase the paperback, visit the book's official website,_ _l_ _inkedin.in30minutes.com_ _)_

If you're serious about taking your career to the next level, you need to be on LinkedIn. In the past five years, the online career network has opened doors for millions of people, transforming the way they market themselves and enabling them to vastly expand their professional networks. In addition, companies are using LinkedIn to recruit everyone from entry-level employees to CEOs. In the next 30 minutes, this guide will show you how to best present yourself on LinkedIn and leverage other features that will help advance your career.

LinkedIn is the world's largest professional network, with more than 200 million members and counting. Hiring managers and headhunters actively use LinkedIn. Companies big and small, and millions of professionals — including executives from every Fortune 500 company — use it. You need to actively use it, too. The reason is simple: **There's no better social networking tool (or other online tool, for that matter) for furthering your career than LinkedIn. **

That's a bold statement, but research backs it up. Consider this:

  * 98% of recruiters used social media to find talent in 2012, according to a Bullhorn survey. Guess which network they used to place job candidates? That's right — LinkedIn. Some 93% of the surveyed staffing professionals placed candidates through LinkedIn, compared to just 17% for Facebook and 13% for Twitter.
  * Another Bullhorn survey of over 77,500 recruiters found that 48% of them post jobs on LinkedIn _and nowhere else on social media_.

That's not all. In a survey of LinkedIn users, 90% of respondents said they thought the site is useful because:

  * "It helps me to connect to individuals in my industry as possible clients"
  * "It is more professional than Facebook"
  * "It allows me to hire people that I wouldn't regularly meet"

**_Ways you can use LinkedIn_**

Although many people think of LinkedIn mostly as a tool for job seekers, you can benefit substantially from using LinkedIn even if you're not ready to leave your current job. **Think of the site as a free online résumé, industry insights tool, and digital Rolodex rolled into one.**

Here are a few ways people are using LinkedIn to achieve their career goals:

  * **Dan is an IT professional who's satisfied with his current job**... but he wouldn't say "no" if a more attractive opportunity presented itself! He doesn't actively check job boards, but he set up his LinkedIn profile so headhunters can easily find him.
  * **Gabe is the owner of a small accounting firm**. He uses LinkedIn to promote his services to potential and current clients, discuss business strategies and general accounting topics with other LinkedIn members, and keep up with his competitors' developments.
  * **Dana is a recent college graduate** who just got her first job doing graphic design. She uses LinkedIn to share — and discover — interesting information about her field, help her grow her expertise and build her professional reputation.
  * **Mike has been out of work for over a year** , after huge layoffs at the manufacturing company where he used to work. LinkedIn helps him update and modernize his résumé, find companies currently hiring for his skills set, and connect with previous colleagues, employers, and classmates who could help him re-enter the workforce.
  * **Jonathan is a mid-level marketing manager** who's been at the same company for the last 10 years with little advancement — and he's ready to move up! He uses LinkedIn to find relevant job openings, research and follow companies he's interested in, and find people in his network who could help with his job search.

While these people are in different stages of their careers and use LinkedIn for different purposes, they have two things in common: They're interested in maintaining or advancing their careers, and LinkedIn is central to their career development strategies. Facebook might be great for socializing and Twitter for keeping abreast of the news (or following celebrities), but LinkedIn is for your livelihood.

Note also that even though LinkedIn once targeted people working in technology-related industries and white-collar professionals, the network has since expanded to every occupation and industry. You can be a chef, a cardiologist, or a carpenter, yet still build a network and find other ways to leverage LinkedIn.

**_What's in this Guide_**

Whether you're completely new to LinkedIn or have already set up an account but are left thinking "What now?", this guide is for you. In just 30 minutes, you'll learn the basics of getting started with LinkedIn, such as how to:

  * Create a strong LinkedIn profile (Chapter 1)
  * Build and grow your professional network (Chapter 2)
  * Use LinkedIn to find a job, stay current in your industry, and advance your career (Chapters 3 and 4)
  * Make even better use of LinkedIn with power user tricks such as organizing your LinkedIn contacts and changing privacy settings (Chapter 5, and online at linkedin.in30minutes.com)

At the end of each chapter is a convenient checklist, which will help ensure that you have hit the most important steps.

By the way, if you're the type of person who cringes when someone gushes about "networking," don't worry. As a shy, card-carrying introvert, "networking" is not my favorite word either. One of the great things about LinkedIn is this isn't the same kind of networking that happens at conventions, where you're wearing a name tag, trying to meet strangers, and awkwardly attempting to make small talk. **LinkedIn is networking without the pressure**. Using the service, you can reach out to people you know — and those they know — virtually. In fact, people expect to be contacted, and others might also reach out to you. That's what the site is for!

Ready to get started? Now's a great time to find a copy of your most recently updated résumé and fire up your browser...

_To learn more about_ LinkedIn In 30 Minutes _, or to purchase the ebook or paperback edition, please visit_ _linkedin.in30minutes.com_ _._
**Bonus: introduction to Google Drive& Docs In 30 Minutes**

_(The following bonus chapter is the introduction to_ Google Drive & Docs In 30 Minutes _, by author Ian Lamont. If you're interested in downloading the ebook or purchasing the paperback, please visit the guide's official website,_ _googledrive.in30minutes.com_ _.) _

Thanks for your interest in _Google Drive & Docs In 30 Minutes_. I wrote this unofficial user guide to help people get up to speed with Google Drive, a remarkable (and free) online office suite that includes a word processor (Docs), spreadsheet program (Sheets), and slideshow tool (Slides). The guide also covers the storage features of Google Drive.

How do people use Google Drive and Docs? There are many possible uses. Consider these examples:

  * **A harried product manager needs to continue work on an important proposal over the weekend**. In the past, she would have dug around in her purse to look for an old USB drive she uses for transferring files. Or, she might have emailed herself an attachment to open at home. Instead, she saves the Word document and an Excel spreadsheet to Google Drive at the office. Later that evening, on her home PC, she opens her Google Drive folder to access the Excel file. All of her saves are updated to Google Drive. When she returns to work the following Monday, the updated data can be viewed on her workstation.
  * **The organizer of a family reunion wants to survey 34 cousins** about attendance, lodging preferences, and potluck dinner preparation (always a challenge — the Nebraska branch of the family won't eat corn or Garbanzo beans). He emails everyone a link to a Web Form created in Google Drive. The answers are automatically transferred to Google Sheets, where he can see the responses and tally the results. 
  * **A small business consultant is helping the owner of Slappy's Canadian Diner** ("We Put The Canadian Back In Bacon") prepare a slideshow for potential franchisees in Ohio. The consultant and Slappy collaborate using Google Slides, which lets them remotely access the deck and add text, images, and other elements. The consultant shares a link to the slideshow with her consulting partner, so he can periodically review it on a Web browser and check for problems. Later, Slappy meets his potential franchise operators at a hotel in Cleveland, and uses Slides to give them his pitch.
  * **An elementary school faculty uses Google Docs to collaborate on lesson plans**. Each teacher accesses the same document from their homes or classrooms. Updates are instantly reflected, even when two teachers are simultaneously accessing the same document. Their principal (known as "Skinner" behind his back) is impressed by how quickly the faculty completes the plans, and how well the curriculums are integrated.
  * At the same school, **the 5th-grade teachers ask their students to submit homework using Docs**. The teachers add corrections and notes, which the students can access at any time via a Web browser. It's much more efficient than emailing attachments around, and the students don't need to bug their parents to buy expensive word-processing programs.

Many people try Google Docs because it's free (Google Drive is, too, if you store less than five gigabytes of data). Microsoft Office can cost hundreds of dollars. While Google Docs is not as sophisticated, it handles the basics very well. Docs also offers a slew of powerful online features that are unmatched by Office or Apple's iWork suite, including:

  * The ability to review the history of a specific document, and revert to an earlier version.
  * Simple Web forms and online surveys that can be produced without programming skills or website hosting arrangements.
  * Collaboration features that let users work on the same document in real time.
  * Offline file storage that can be synced to multiple computers.
  * Automatic notification of the release date of Brad Pitt's next movie.

I'm just kidding about the last item. But Google Drive and Docs really can do those other things, and without the help of your company's IT department or the pimply teenager from down the street. These features are built right into the software, and are ready to use as soon as you've signed up.

Even though the myriad features of Google Drive may seem overwhelming, this guide makes it easy to get started. Google _Drive & Docs In 30 Minutes_ is written in plain English, with lots of step-by-step instructions, screenshots and tips. Videos and other resources are available on the companion website to this book, googledrive.in30minutes.com. You'll get up to speed in no time.

We've only got a half-hour, so let's get started with Google Drive and Docs!

_If you're interested in learning more about this title, or buying the ebook or paperback, visit the official website located at_ _googledrive.in30minutes.com_ _._
**Bonus: introduction to Virtual Offices In 30 Minutes**

_(_ Virtual Offices In 30 Minutes _is a new title by author Melanie Pinola. To download the ebook or purchase the paperback, visit_ _in30minutes.com_ _)_

We are in the midst of a workplace revolution. Thanks to broader and faster Internet access in all corners of the earth and recent tech innovations such as instant file sharing, we have the ability today to work as easily from home or from any other remote location as we could from a beige cubicle. In fact, most of us would be even more productive and more satisfied with our jobs and lives by going virtual.

In the United States alone, 34 million people are already doing so on a part-time or full-time basis. We work at the kitchen table, at the local coffeeshop, and from 30,000 feet above the ground. Untethered from the traditional office, we work at all hours of the day, when we're best able to. For some early birds, our day starts at the break of dawn. For the night owls among us, our best work takes place when the streetlights turn on. If we're family men and women, we tackle assignments and projects in between school pickups and dropoffs. We can work within the typical 9-to-5 schedule too, but in a much more focused and empowered way. Work is now a thing we do, not a place we go to.

Virtual workers include everyone from freelancers and startup businesses to employees of major corporations, across nearly all industries and a wide variety of occupations. If you perform largely digital-based work, chances are you can get the job done from practically anywhere, whether you're on a Thai beach, working out of your home office, or setting up shop in a Silicon Valley coworking space. According to one estimate published in the Journal of Labor Research, 65 percent of all jobs are amendable to at least part-time telework, and Forrester Research has predicted over 40 percent of American workers will be working in virtual offices by 2016.

Why the rush to go virtual? In a word, the virtual office is basically about freedom — especially freedom from the daily commute. Day after day, millions of workers get into their cars or hop onto public transportation to get to the office, where they work long hours in settings they have little control over, only to make the trek back home and repeat this process the next day. Commuting is both time consuming and costly, and takes an unmeasured toll on the person's work-life balance, health, and overall morale. Daniel Kahneman, Nobel Laureate in Economics, notes that for many people, commuting is the worst part of the day and calls it "a minor but widespread suffering."

Ditching the commute gives employees and employers significantly more time and more financial freedom. Employers can conserve an estimated $11,000 per year for each employee who works remotely even half of the time, thanks to office-related savings, reduced absenteeism, turnover reduction, and greater employee productivity (remote workers tend to work harder and longer than office workers, no doubt in large part due to being away from the cacophony of office noises and distractions, a.k.a. the "cake in the breakroom" effect).

Furthermore, the fewer commuters out there, the more we all benefit: If 50 percent of the workforce with a telework-compatible job did so for just half of the time, we'd reduce greenhouse gases by 54 million tons per year, the equivalent of taking 10 million cars off the road for per year.

For office workers, driving an hour a day to and from work adds up to about $9,447 per year in vehicle and productivity costs (260 hours of productivity per year), according to HP's telework savings calculator. What could you do with that extra time and money?

In many cases, commuting just doesn't make a whole lot of sense. Future Shock author Alex Toffler writes:

"In a country that has been moaning about low productivity and searching for new ways to increase it, the single most anti-productive thing we can do is ship millions of workers back and forth across the landscape every morning and evening."

Cost savings are actually just the icing on the cake. Remote work is more importantly about improving our quality of life and the quality of our work. A virtual office gives us unparalleled work flexibility — a real chance at achieving that elusive work-life balance while becoming more productive at the same time.

I've been working from home for fifteen years — first as a telecommuter (who set up the company's virtual work systems and also managed other employees remotely), then as a freelancer working on virtual teams. I don't think I could ever go back to working the conventional office job (and not just because I can work in my PJs and take breaks to do the laundry). Every day, I'm grateful to my former employers for giving me the opportunity to nurture and nurse my daughter full-time from her birth until she was ready for preschool. Not only did I avoid outrageous daycare costs, I had precious, important experiences I otherwise would have missed.

Now, sick days, school holidays, and other things that interrupt a working parent's life are things I don't have to worry about. I'm also able to avoid the interruptions we all sometimes face, from weather emergencies and mass transit strikes to cable guy appointments.

Just as important, though, is the effect that working from home has had on my productivity and well-being. Because I'm in control of my virtual office and my hours, I can fine tune my workspace and my schedule in the way that best supports how I work. I can work in peace and actually think (a luxury in many office settings, especially the open office type), when there's a palpable silence. And instead of measuring my work in terms of hours or face time put in, the focus is on what matter's most: the work itself.

**_Who this book is for_**

It's time for a little reality check. While lots of people and many companies realize the value of this mode of work, a virtual office isn't for everyone. Even when it is possible to work remotely, it's not all rainbows and unicorns. There are real challenges involved when it comes to communication, time management, and teamwork.

That said, with the proper frame of mind, the right tools, and robust processes in place, virtual offices can offer a vast improvement over traditional workspaces.

This book is intended for two groups of people:

  1. Employees, freelancers, and small business owners who want to try an alternative to the traditional office while learning about the best ways to set up and work virtually.
  2. Those of us who are already working remotely, but are interested in optimizing our workflows and workspaces.

Here are a few examples of people who might benefit from this book:

**Sara wants to start her own home-based consulting business**. Because she has never worked from home before, she has questions about how to handle interruptions from her family and whether she'll be able to be productive and successful when she's her own boss and manager.

**Matt got the go-ahead from his company to work from home two days per week on a trial basis**. He needs to know which software and structures he'll need in his home office to make the best of this situation. He also worries about being disconnected from the main office and missing out on important meetings or the social interactions.

**Chris supervises several employees, including new hires from other cities who are going to work remotely**. He has reservations about managing employees from a distance, keeping them productive, and providing them with the tools they need to perform their best.

**Jon has been working from home for the last nine months but is starting to feel isolated and unmotivated**. At the end of some days he wonders where the time went and why he didn't get as much done as he planned, but on other days it feels like he's been working for 18 hours straight with no breaks.

Although these are different scenarios, Sara, Matt, Chris and Jon are all facing the challenges of working virtually. As we'll see in the chapters that follow, there are plenty of solutions.

**_What's in this book_**

We've only got thirty minutes, but it's enough time to go over the essentials, such as:

  1. 1. Finding the best place to work and creating an efficient workspace

  * Recommendations for setting up the perfect workspace — based on scientific research!
  * How to use alternative offices such as coffeeshops to get more done.
  * The best way to organize your desk.
  * How to stay healthy at your desk.

  1. 2. Learning strategies to help you work more effectively on your own and as a virtual team member

  * How to ward off roommates, spouses, children, pets, phone calls, and other daily distractions.
  * Crucial time management tips to start and end your day.
  * How to establish a rapport with virtual team members.
  * Dealing with coworkers who don't appreciate virtual work.
  * How to cope with isolation.

  1. 3. Using technology to help you stay productive and connected

  * The best apps for real-time communication and collaboration.
  * Software to keep distractions at bay.
  * The most important products for securing your digital life.

At the end of each chapter are resources and other items that will help you get up and running in no time.

Whether you prefer to call yourself a teleworker, virtual worker, mobile worker, digital nomad, or one of many other related titles, this book is intended to help you rock your virtual office, however you envision it and wherever that may be.

_(For more information about this title, please visit_ _in30minutes.com_ _)_
**Bonus: introduction to Windows 8 Basics In 30 Minutes**

_(The following bonus chapter is the introduction to_ Windows 8 Basics In 30 Minutes _, by author Tim Fisher. To download the ebook or purchase the paperback, please visit_ _windows8.in30minutes.com_ _.)_

If you recently purchased a Windows PC, laptop, or tablet, you need to get ready for Windows 8, and some new ways of getting things done. I'm going to be your guide to the new operating system.

I've helped people with Windows-related questions and support since Windows 3.1 (!) through recent versions of Windows, including XP, Vista and Windows 7. Most new Windows PCs and tablets come installed with Windows 8, Microsoft's latest operating system and the first one designed for touch access. This means that **exciting new things are possible with Windows 8** , such as quicker access to programs, new interactive games, support for a wider range of computer types, and much more.

Over the next 30 minutes, I'll show you everything you need to know to get started using Windows 8, including how to get around, what are the best apps to install, and how to personalize your Windows 8 experience.

In other words, I'll show you how to make Windows 8 work for you — so you can get to work.

**_What's new in Windows 8_**

When Microsoft decided to design Windows 8 around touch, it enabled the company to completely rethink how people interact with Windows. As different as Windows 8 might seem from other versions of Windows you've used, I assure you that **the Windows 8 learning curve is small**. If you've ever used a smartphone, an Apple iPad, a Kindle Fire, or some other kind of tablet, then many of the touch gestures you're familiar with will also work in Windows 8.

That said, Windows 8 is definitely different from older versions. There were a lot of changes compared to previous versions of Windows, which I'll talk more about in the chapters that follow. But if I had to name the two biggest changes, they would be:

  1. A **completely redesigned user interface** , which includes the addition of both the Start Screen and Apps Screen, and removal of the Start menu.
  2. The introduction of the **Windows Store** for purchasing and downloading new apps.

Hold on. The Start menu, gone? An "App Store" to purchase new programs?

When I first heard of these changes, the thought of switching from Windows 7 scared me. Looking back, I can see that it was just a fear of the unknown. It didn't take long to get the hang of things in Windows 8, and once I did, I found many of the changes to be a delight. In addition, Microsoft brought back some much-loved interface elements in the Windows 8.1 update (more on that in a minute).

My advice then, if you're just getting started, is to **keep an open mind with Windows 8**. Yes, it seems like a big change from Windows 7, Vista, or XP, but you'll find that many of the changes are an improvement. Moreover, you're only a few settings away from a more familiar Windows, if you so choose.

**_To touch or not to touch_**

Has Microsoft put the final nail in the coffin for the trusty keyboard and mouse with this focus on touch? Not exactly. One of the great things about Windows 8 is that you're free to use it any way you want, on any device that supports it — desktop, laptop, or tablet, with or without a keyboard or mouse.

It's true that tablets and other touch-enabled devices are taking the world by storm, but the desktop PC is far from dead. People still need to type reports, write long emails, manipulate spreadsheets, run business applications, and perform various functions that aren't suited to touch.

When Windows 8 was first released, using the touch-oriented Windows 8 on a desktop with a keyboard and mouse was a little awkward, to say the least. Microsoft heard these complaints loud and clear during Windows 8's first year and made some small but important changes in the free Windows 8.1 update starting in late 2013. I'll talk more about Windows 8.1 soon, but thanks to these changes, it's now much easier to use Windows 8 in a "classic" sense, on a traditional desktop, with a keyboard and mouse.

**_Windows 8 in the real world_**

With all the new features in Windows 8 and the emphasis on touch, the nature of how people can use the operating system opens up in new and exciting ways. Here are some examples in which Windows 8 plays a central role:

  * **Pam** , a building surveyor, spends most of her days on job sites. She is rarely at her desk but she does write a lot of reports. Pam recently bought a Microsoft Surface Pro 2 with Windows 8. It has a snap-on keyboard that's great when she needs to sit down and hammer out a report, but while she's walking around a job site she'll put the keyboard away and take notes by touching the screen.
  * **Jonathon** , a busy law clerk, spends almost all of his time on his computer researching and writing about judicial topics. He works on a Windows 8 desktop PC at work. At home, he often puts in more hours on his Windows 8 tablet, which uses a USB keyboard. Jonathon keeps all of the work on both computers in sync using his free Microsoft OneDrive account (formerly known as SkyDrive), an online storage service that's integrated right in to Windows 8!
  * An avid PC gamer named **Justine** just had to replace her trusty Windows 7 PC with a new Windows 8 machine. She was looking for something as close as possible to the experience of her old computer, but it also had to be faster — hardcore PC gamers are always trying to upgrade to the most advanced processors and graphic specs they can afford! Justine uses a large monitor, plus a gaming keyboard and mouse with her new computer. After configuring Windows 8 to boot straight to the Desktop, her new computer felt almost exactly like her old Windows 7 PC.
  * A technology writer — let's call him " **Tim** " — has been using every version of Windows since Windows 3.1. Last year, he decided it was time to upgrade from Windows 7 to Windows 8. Having lots of other touch-screen devices, he was comfortable "clicking" with his finger or a stylus, but with all the typing he does, needed a physical keyboard. Skipping the mouse but connecting a Bluetooth keyboard to his tablet, it was easy to write an entire book about Windows 8 on... Windows 8!

These are just a few examples of how some people maximize the new features and flexibilities in Microsoft Windows 8. Once you get the hang of the operating system, you'll have your own Windows 8 story to tell!

**_Why you should update to Windows 8.1_**

Windows 8.1 is a free update that Microsoft made available in October 2013, about one year after Windows 8 was first sold. The 8.1 update changed a number of things about Windows 8, including how you move around and where certain options are located. It also restored the trusty **Start button** (though not the Start _menu_ ), as well as the ability to go right to the Desktop when your computer starts.

_Windows 8 Basics in 30 Minutes_ was written with Windows 8.1 in mind. If you purchased your computer in 2014 or later, the 8.1 update will already be installed.

If not, the easiest way to tell if your Windows 8 computer has the 8.1 update installed is to check for the window-shaped _Start_ button on the bottom-left corner of the Desktop. If it's there, your machine has Windows 8.1 installed. If it's not there, you'll need to update.

Don't worry if you find that your computer hasn't had the 8.1 update installed. Updating is very easy — the process is almost completely automated. Just touch or click on the **Store** app, which you'll find on either the Start Screen or Apps Screen (see screenshot, below). Once in the _Store_ , choose **Update to Windows 8.1 for free** and follow the directions.

The update process should take about an hour, but it could be longer if you have a poor Internet connection or slow hardware.

Now that we have some of the basics out of the way, it's time to roll up your sleeves and take a tour of the Windows 8 interface. Chapter 1 will help you get acquainted with key features and interface elements. If you are already familiar with the interface and want to skip ahead, Chapter 2 will show you how to personalize your Windows 8 experience, while Chapter 3 dives into apps (including my Great Big List of best apps for Windows 8).

_If you're interested in learning more about_ Windows 8 Basics In 30 Minutes _, please visit_ _windows8.in30minutes.com_ _. _
**Bonus: introduction to Dropbox In 30 Minutes, 2nd Edition**

_(The following chapter is from_ Dropbox In 30 Minutes, 2nd Edition _. The guide is available through Amazon, iTunes, Barnes & Noble, and other marketplaces. Visit __dropbox.in30minutes.com_ _for more details) _

Got 30 minutes to spare? Good — it's all you'll need to master the basics of Dropbox!

**Dropbox is an easy way to store and share photos, documents, spreadsheets, and other types of computer files**. Much like the introduction of email, digital photography, and low-rise athletic socks, once you get the hang of Dropbox, you'll wonder how you ever got along without it.

Dropbox works by keeping identical copies of selected files on your computer(s) and Dropbox's cloud-based storage system, and ***automatically synchronizing*** them over an encrypted Internet connection. I've put asterisks around "automatically synchronizing," because this is the killer feature of Dropbox, something that will save lots of time and streamline collaboration. It's cited repeatedly in this guide.

What does Dropbox's automatic syncing feature enable? Here are some common scenarios:

  * Mark uses Dropbox to share a folder full of documents with four coworkers, so they can work on spreadsheets and other documents together.
  * **Jennifer backs up the photos that she takes on her iPhone** , without using cables. She can immediately access the photos on her laptop.
  * **Chris instantly backs up the files he's working on in Dropbox**. If his computer crashes or is stolen, he can easily recover them.

Besides *automatic syncing*, another advantage of Dropbox is it follows the same conventions that people already use to save files, create folders, and move stuff around on their computers. This means **your Dropbox data will always appear in the familiar "My Computer" (Windows) or Finder (Mac) on your computer**. As a result, Dropbox is very easy to learn.

But is Dropbox right for you? Ask yourself if any of the following statements apply to your own technology practices:

  * You back up files by emailing them to yourself.
  * You transfer files between two computers using a USB drive.
  * You want a better way to store and manage digital photos.
  * You need to collaborate on documents and share files with coworkers.
  * You're a total klutz who is apt to lose all of the important data on your laptop by dropping it into the swimming pool.

If you found yourself nodding as you read this list, then Dropbox will be an extremely useful utility and time-saver.

**Dropbox is also a free service** , although heavy users will opt to buy more storage space. But there are several official ways (as well as a few tricks) to get more free storage space, as explained in Chapter 5, "Dropbox — The Rogue FAQ". You'll find many other useful time-saving tips and ways to use Dropbox throughout this guide. The companion website (dropbox.in30minutes.com) contains special features, including videos that demonstrate Dropbox features.

Before we get going, it's good to have a computer handy, or a smartphone, or a tablet. This way, you can quickly try out some the things discussed in this guide. Or you can just read through all of the chapters and install Dropbox later.

Let's get started with Dropbox!

_To download the rest of this book or to purchase the paperback version, please visit_ _dropbox.in30minutes.com_ _._
**More In 30 Minutes® Guides**

Readers are raving about _In 30 Minutes_ ® guides:

_Twitter In 30 Minutes_:

"A perfect introduction to Twitter. Quick and easy read with lots of photos. I finally understand the # symbol!"

_Dropbox In 30 Minutes_:

"This was truly a 30-minute tutorial and I have mastered the basics without bugging my 20-year-old son! Yahoo!"

_Google Drive & Docs In 30 Minutes_:

"I've been using Google Docs for a while now and have been encouraging my teacher colleagues to do so as well to facilitate collaboration. It has become my go-to text book to help new users understand quickly. If you're new to Google Drive or Google Documents, this will help you."

_LinkedIn In 30 Minutes_:

"I already had a LinkedIn account, which I use on a regular basis, but still found the book very helpful. The author gave examples and explained why it is important to detail and promote your account. Reading this book has motivated me to return to my account and update it to make it more thorough and attention-grabbing."

_Excel Basics In 30 Minutes_:

"I have used Excel in the past in only a very limited fashion. I learned from your book how to use formulas, make charts, and sort. I will have to play with the charts a little more - there are so many options that it feels like a whole other program! The 'ninja' autofill function is awesome!"

All guides are available as paperbacks and in ebook formats, including downloads for the Kindle, iPad, and Nook. They can also be downloaded as full-color PDFs. Visit in30minutes.com to learn more about the guides and view free videos, blog posts, and other resources!

