Money Lessons -- You Don't Want to Learn These the Hard Way (bankrate.com)

8 personal finance lessons you must master by age 40

By Jennie L. Phipps • Bankrate.com

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8 money lessons to learn by age 40

If you've hit 40 and managed to avert a midlife crisis -- congratulations. That sporty red convertible at the dealer showroom can wait if you want to be smart about money management.

Bankrate offers 8 personal finance lessons that everyone should know by age 40. Young precocious adults who adopt these lessons early will not be sorry, and late learners still have time to catch up. Read on to learn the important financial facts of life.

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Money is freedom

Figure out your net worth and, after you get over the shock, have a recovery plan. You don't have to be wealthy, but you do have to have enough that you aren't a slave to the shortfall.

"After getting on a budget, a lot of people feel like they've gotten a raise even though their income hasn't changed," says Dave Ramsey, a Tennessee-based financial adviser and media personality, who bases his approach on mistakes he personally made.

Ramsey offers no-brainer personal finance lessons that most people can follow: "Do a written budget every month before the month begins. Give every dollar of income a name so you know where it is going. Include a line for how much you want to save each month. Then, stick to the plan."

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No relationship is perfect

Working it out is usually cheaper than calling it quits. Even after the relationship is long over, getting along with your ex is cheaper than fighting over the kids or whether or not both spouses are paying their share.

"Divorce isn't good for your pocketbook. It is a long, messy and expensive process," says Jay Zagorsky, a research scientist at The Ohio State University who has studied the cost of divorce for nearly 20 years.

His research demonstrated that on average, divorce drops a person's wealth overall by 77%. "Wealth starts declining well before the final decree, and after divorce, people don't suddenly start with a clean slate," he says.

In other words, it's cheaper to keep her (or him).

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You can't buy security

Insurance can help, but it wasn't meant to pay routine costs. Its purpose is to cover devastating financial losses.

"Many people tend to purchase coverage with low deductibles, which can be costly. Because states have low liability limits, people think they should start there. But for most individuals, those limits are woefully inadequate, so they end up paying a lot for insurance that doesn't cover enough," says Robert Hoyt, who heads the Risk Management and Insurance Program at the University of Georgia.

Someone with lots to lose -- a home, a car and future income -- is better off picking a plan with high deductibles, he says, and planning only to claim when there is a devastating loss that the insured can't pay for otherwise. In other words, you collect when the house burns down or the car is totaled or the accident causes major injury.

"Assess what you can afford with high limits of loss and then add a personal umbrella, which can be cost-effective and provide protection if you are faced with tens of thousands (of dollars) in losses," Hoyt advises.

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Credit is a tool

Becoming an expert at using credit will improve your life.

At this stage, you're likely dealing with a mortgage, car loans and children entering college. "A healthy credit score is vitally important to you," says Bruce McClary, vice president of public relations and communications for the nonprofit National Foundation for Credit Counseling.

If you examine your credit score and you don't like what you see, chances are you haven't paid your bills on time. "Paying on time counts for about one-third of your score," McClary says.

Committing to paying everything on time is the obvious solution to this problem.

It also pays to check your credit report carefully for credit killers, such as identity theft or inaccurate reports. "There are a lot of those problems out there," McClary says.

Check your credit report for free at myBankrate.

Finally, at your age, you ought to be working to pay off debt and keep balances low, he says. "Focus on power-paying those balances and getting rid of them as fast as possible."

This will give you more credit flexibility if you really need to borrow because you have a health emergency, want to start a business or need to replace the roof. "A solid-gold credit score will make borrowing for any of these easier," McClary says.

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Keeping up with the Joneses is a no-win

As humorist Will Rogers is credited for saying: "Too many people spend money they haven't earned to buy things they don't want to impress people that they don't like."

Envy was one of the "7 deadly sins" and a route to hell, says Susan Matt, chair of the history department at Weber State University in Ogden, Utah, and the author of "Keeping Up With the Joneses: Envy in American Consumer Society, 1890-1930."

"Yesterday, envy was a sin; today, it is one of the fundamentals of our consumer-driven society," she says.

"People think the sky is the limit. When they get what they want, they want the next step up. People have never-ending desires, and they are never satisfied."

Is that bad? "It keeps our economy moving," she says. "But I don't think it makes people any happier."

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You can count on uncertainty

Trust us: Jobs don't last forever, and neither does excellent health.

The best hedge against poor health, job loss or other unforeseen setbacks is a financial plan that will help you navigate the shoals until you get back on your feet, says Chris Hogan, author of "Retire Inspired" and a popular speaker about personal finance issues.

"The definition of insanity is doing the same thing over and over and expecting a different result," Hogan says. "If you don't have a plan, you keep doing more of the same, and you never have anything to show for it."

To get around this conundrum, "you have to have an awareness of where you are now, an understanding of what it will take to get there and the determination to work your plan," Hogan says.

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Everybody needs an ace in the hole

You need a financial plan B that doesn't count on another person -- not even the love of your life. It's not disloyal to figure out an answer to the question, "How will I support myself if X happens?" whether X is divorce, death, disability or something else.

"'Everybody Loves Raymond' explained it best,'" says Cindy Hounsell, president of the Women's Institute for a Secure Retirement, or WISER.

Here's the exchange on the TV episode that she's referring to:

Debra: Ray and I were talking about wills, and he doesn't want to make one.

Robert: Oh, why not?

Debra: He thinks it's going to tempt fate.

Robert: No, no, silly. If you don't have a will, you're tempting fate. "I don't need a will. I'm gonna live forever." Manhole!

Ray: I don't know.

Robert: Raymond, listen to me. You need to have a will and eat a fibrous breakfast every morning and nothing can touch you.

Hounsell isn't so sure about the fibrous breakfast, but she thinks the will part is right, along with savings and insurance. "Anybody who is dependent on somebody else to make ends meet -- or even if you just depend on yourself -- you need a plan for what you're going to do when that goes away," she says.

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Working forever isn't a retirement plan

You just can't work forever.

Author Chris Hogan says, "I have a friend who was diagnosed at 48 with early onset Alzheimer's. He knows life has changed, but he can't do anything about it. When people say to me, 'I love what I do and I plan to work forever,' I tell them about my friend and ask them, 'What are you going to do if your mind or your body won't allow you to keep working?"'

Having a retirement savings plan is key. "The earlier you start, the longer your money works for you and the greater your chance of amassing a nice nest egg. It's a snowball effect. You start small and it builds," says Brian Hogan, director of small-business retirement products for Fidelity.

Or as Chris Hogan says, "It is never too early or too late to start saving."

Free Stuff - things you should never pay for

This post comes from Stacy Johnson at partner site Money Talks News.

21 things you should never pay for

If you want to find extra money in your budget, stop paying for things you could get for nothing.

By MSN Money partner Oct 5, 2012 11:30AM

There are only two ways to become richer -- make more or spend less.

One of the best ways to spend less? Stop paying for things you could get free.




Here's a list of 21:

1. Free cars for long-distance trips
Many people want their cars moved from place to place but don't want to do the driving. Sometimes these cars are delivered by truck, but often they're driven -- by people like you. If you have a clean driving record, a car delivery company like AutoDriveaway might hook you up.

I did car delivery a few times when I was in college and found it a great way to get where you're going. It's best if you're flexible about when you leave, return and perhaps even where you go. You still have to pay for gas, and the trip home can be problematic. I used to hitchhike, but smarter choices today would be bus, plane, train or waiting at the other end for another drive-away car.

2. Free lodging
Why stay in a hotel when nonprofit Couchsurfing.org offers tourists a chance to stay at homes for free? Make friends with sponsoring families throughout the U.S. and countries ranging from Croatia to France. You have to set up a profile on the CouchSurfing website, which provides tips on how to find families willing to open their homes to you. Obviously, the digs won't be fancy, but they'll be free.

Another way to get free lodging is to home swap.

3. Free audiobooks
Now you can find out for free the fate of Pip in "Great Expectations" or Elizabeth in "Pride and Prejudice" as you drive or jog. Download free audiobooks from nonprofit LibriVox.org, which has volunteers recording classics in the public domain. You can also volunteer to help by reading. LibriVox will even provide you with free recording software.

4. Free food
There's at least one day every year when you shouldn't think of paying for a meal. Frugal Living has a list of hundreds of businesses that offer birthday freebies, most of which are food. For a free libation at your favorite pub, do what I do: Loudly proclaim it's your birthday. Often people within earshot will pick up your next round.

5. Free food for kids
Don't go to another restaurant that doesn't feed your kids for free. MyKidsEatFree.com offers a roadmap of where you can save on kids' meals. You'll pay, but your kids won't at more than 5,000 restaurants across the country.

6. Free samples
Before you go to the drugstore and shell out silly sums for travel sizes of your favorite toiletries, go to Volition.com or one of many other websites that offer free samples. In addition to soap, shampoo, etc., you might find all manner of interesting things. For example, we've spotted circus tickets, a free diet analysis and free advance movie screenings. Other free megasites include TheFreeSite.com and Freechannel.net.

7. Free TV
While more than 100 million Americans shell out an average of $75 every month for satellite or cable TV, local channels are still free. And thanks to digital signals, reception is better than ever. You can also find free TV shows and movies online.

8. Free software
You can get free software for word processing, spreadsheets, presentations, graphics, databases and other uses by going to OpenOffice.org. And that's the tip of the iceberg. No matter what kind of software you want, you can probably find it for free.

9. Free anti-virus
This one could go under "free software," but it's important enough to warrant its own spot on the list. We provided a solution on MoneyTalksNews.

10. Free speech
Make your voice heard around the world with your own blog. Many companies will help you set up your own site at no charge, such as WordPress and Blogger. They'll even give you free, easy instructions and a choice of blog templates.

11. Free foreign language lessons
The BBC is on the other side of the pond, but it offers free 12-week classes to learn French, Spanish, Italian or German -- gratis. You'll even get a certificate at the completion of the course. The BBC also offers other audio and video courses in the four languages, as well as help with learning other languages.

12. Free checking
According to The Wall Street Journal, the average minimum checking account balance required to avoid a monthly fee at U.S. banks is $723, and the average monthly fee is $5.48. But banks aren't the only game in town. While not all credit unions offer free checking, the prospect of lower fees is one of the reasons you should join one.

Another option is online-only banks. Without the overhead that brick-and-mortar branches have, the terms are often much better. Consumerism Commentary ranks the best online checking accounts.

Too much hassle to leave your bank? Threaten to and see if you can have fees reduced or eliminated.

13. Free credit reports and scores
Don't pay for a copy of your credit report. Instead, go to AnnualCreditReport.com for a free look at each of your three major credit reports once a year.

As for free credit scores, you can turn to websites like Credit Karma or Credit Sesame, although they won't give you the most widely used score, the FICO score. For that, you could try enrolling in a FICO product that comes with a free score, then canceling within the cancellation period.

14. Free cash
Tired of paying a $2.50 "convenience fee" for using an ATM that's not in your bank's network? Use an app like ATM Hunter to find a branch ATM. If you can't find an ATM near you for a free cash withdrawal, no worries: Plenty of stores will give you cash back with no fee when you make a purchase with your debit card.

15. Free information
Use the search feature on your smartphone, or text a business name to Google, and you'll get the number texted back. You can also dial Free 411 at (800) Free411. The results are sponsored by companies (you'll have to listen to a 10-second ad), but it's free.

16. Free scholarship search
Plenty of websites, such as Fastweb, offer free searches for scholarships. A company called Free Scholarship Searches offers links to 40 websites that offer free scholarship searches.

17. Free baggage
My wife and I went to Europe for 10 days with just one carry-on each. If we can do it, so can you. But if you insist on checking a bag, try to fly with the only two airlines that allow a free checked bag: Southwest and JetBlue. And avoid the two that slap consumers in the face by charging for carry-ons: Spirit and Allegiant.

Need to check a bag and fly an airline that charges? Delta, United and American all offer credit cards that include checked-bag-fee waivers for cardholders and, in some cases, their companions.

18. Free entertainment
Your local library, parks and universities offer lots of free fun, from books and DVDs to plays and concerts. Join email lists to see what's up. And of course, there's the Internet, offering free games as well as articles. Just go to the website of your favorite news source.

Volunteering doesn't cost a dime and can pay off for both you and your community. Local animal shelters, homebuilding groups, shelters and food banks are always looking for volunteers. And check out volunteer opportunities at local festivals and events. By volunteering, you get to go to the event free.

19. Free water
While technically not free, tap water is about as close as you can get. If you're concerned about water quality, buy a filter.

20. Free telephone calls
Always calling a loved one long distance? If you both get something like Skype, you can talk all you want without paying a dime. And with a service like Google Voice, you can get all of your cellphone calls free too.

21. Free everything else
You have something you don't want but it's too valuable to throw away? You might donate it to charity, but you also might give it away at sites like Craigslist or Freecycle, a nonprofit set up to help you find free stuff and keep it out of landfills. From used furniture to sports equipment, you'll be amazed at what people give away.