This Week In Your Wallet – May 31, 2011
Hi – and a belated Happy Memorial Day Weekend! I hope you were able to kick back, relax a little and fire up the grill. I spent the weekend with my husband and two of our kids, my cousins and two friends down at the Jersey Shore (not that Jersey Shore) where it was beautiful. Until Monday morning when the thunder and lightning started early. Then, it poured. I have to say, though, I didn’t really mind. Everyone slept a little later and I got up to write to all of you. I have a few things to fill you in on this week – but before I do, a big thank you to all of you who have given so much to this country. Your generosity is inspiring.
Are You Financially Fragile?
According to a new paper out last week from the National Bureau of Economic Research, nearly half of all Americans are financially fragile. What does that mean, exactly? These are people who say they either couldn’t come up with $2,000 if they needed it unexpectedly in the next month (28% of people fell into that category), or who would resort to what the researchers felt were desperate measures in order to come up with the money (19%) – like selling a home or pawning their possessions or taking a payday loan. The researchers settled on $2,000 as a barometer because it’s about what a large emergency would cost – a major car repair (like an auto-transmission replacement), a moderate home repair (it cost me that recently to fix a leak in the roof), a large co-payment on a medical procedure. Other research has shown low-income families need about $1,500 in savings for emergencies.
What I found most interesting about the paper is that you’d think it would just be a low-income problem. It’s not. A surprising number of middle class families – including 25 percent of those earning between $75,000 and $100,000 a year — are also “fragile.” What’s even more distressing is that it is a bigger problem in America than in many other countries. The inability to cope financially with an emergency is highest here, in the UK and in Germany. In France and Portugal, the situation is a little better. And in the Netherlands, Canada and Italy it’s much better. I would suspect the fact that national health care means they don’t even have to consider medical emergencies has something to do with that.
So how can you solve this problem – and save more? I’ve done a lot of research on this lately and it all points to the fact that if you want to save money – and keep it out of your hands – you have to move it out of your spending account (you do not want to see the money when you look at your ATM receipt) and put it somewhere where there is a barrier to getting it out. This is why 401(k)s work. The money moves BEFORE you can spend it – and if you want to withdraw it before retirement you have to pay taxes and penalties. That represents a big stick.
You can replicate this by setting up an automatic transfer the day after you get paid to a savings account at a different bank – I’d make it an Internet bank where there are higher interest rates. (Ally Bank and ING Direct are both good choices. They don’t have minimum account fees AND they pay higher than average interest rates.) And, in order to get your money out, you have to transfer the money back to your checking account – which takes a couple of days, which is a barrier. It’s going to force you to think about it. The problem with keeping the money in your own bank is that it’s too easy to transfer it right back to your checking account.
Lastly, just like a 401(k) is a separate account for retirement, you want a separate account for emergencies so that you can keep tabs of how much you’re saving for this specific goal. Lumping it in with the savings for all your other goals leads you to believe you’re saving more for each goal than you actually are.
Lower Cost Dental Care
I did a Today show segment with Dr. Nancy Snyderman on healthcare costs last year and the thing I remember most was how she stressed the importance of getting regular dental checkups. The mouth, it seems, is a veritable breeding ground. If you don’t take care of your teeth it can lead to all sorts of other health problems.
And, particularly in this economy, a lot of people don’t. About half the people in America don’t have dental insurance, according to the American Dental Association. And among those people, 77 percent have had to delay dental care in the last year because of the cost. One-third of all Americans say they won’t go to the dentist within the next year and one-fifth of children in this country don’t visit the dentist every year.
A new website offers a cost-saving solution. Brighter.com has pre-negotiated prices on dental care with 25,000 dentists (that’s about one-quarter of the dentists in this country). Join the site for $79 a year and you’ll receive discounts of up to 60% for most dental procedures (discounts on cosmetic ones are closer to 20 percent). To put that in perspective, the cost for an adult cleaning drops from about $116 to $38. And filling a cavity from $224 to $86. Or, if you’d rather not join you can use the site and receive smaller discounts, along the lines of 20-30%.
I tested the site by entering my zip code into the search engine and there were several dentists within a 5 mile radius already in the Brighter.com network, as well as many who are not. If you prefer to see a dentist not in the network, the site will request discounted prices for you before you schedule your appointment.
Fill ‘er up!
I don’t know about you, but I’ve noticed personally that I’m waiting longer to put gas in my tank. I am sure it’s a reaction to higher prices. Gas is more expensive than the national average in my neighborhood. I drive a Volvo wagon and filling it up can cost upwards of $60. Ouch. So I wait. Last week, the gauge told me I had roughly 20 miles left to drive before I made it to the pump. Well, after reading this week’s story from Consumer Reports on precisely why I shouldn’t be waiting so long, I’m going to change my ways. The article notes that it could cost me much more in the long run because driving on fumes is bad for your car.
Reporter Liza Barth for Consumer Reports writes: “The gasoline acts like a coolant for the electric fuel-pump motor, so when you run very low, this allows the pump to suck in air, which creates heat and can cause the fuel pump to wear prematurely and potentially fail. The repair could end up costing a couple hundred dollars to fix—much more than the $4.00/gallon fill up. Also, if there is dirt in the fuel tank, it could lead to blocking the fuel filter; again, another expensive repair.”
She suggests keeping the gas tank less than one-quarter full and making sure you have even more fuel before going on long trips. Consider it done.
Have a great week, everyone!
Jean
