Good debt versus bad debt

In this day and age, it is nearly impossible to live debt-free. Large expenses such as homes, children's college education and automobiles nearly mandate that we live with debt. It is easy to let debt get out of hand. However, by following a few principles, you can manage good debt versus bad debt.

Experts say total monthly long-term debt payments, including mortgage and credit cards, should not exceed 36 percent of your gross monthly income. Credit cards, with their low monthly minimums, are a major facilitator of debt. It is easy to spend more than you can afford when you pay by credit card. However, depleting cash reserves for emergencies in order to avoid any debt is not a good idea either. It is important to maintain a balance, striving for good debt and avoiding bad debt. CNN Money provides insight:

Good debt includes anything you need but cannot afford to pay for up front without depleting cash reserves or liquidating your investments. In cases where debt makes sense, only take loans for which you can afford the monthly payments.

Bad debt includes debt you have taken on for things you don't need and can't afford. The worst form of debt is credit card debt, since it usually carries the highest interest rates.

Sometimes it may make sense to borrow money in order to make it work harder for you. If interest rates are low, compare what you would spend in interest on a loan versus what your money would earn if it were invested. If you think you can get a higher return from investing your cash than what you would pay in interest on a loan, borrowing a small amount at a low rate may make sense.

There are instances where the leveraging power of a loan actually helps put you in a better overall financial position. Borrowing can be a smart move if you're buying a home or paying for college. The chance that you could pay for a new home in cash is slim. Even if you could, it might not be a good idea. Experts warn against pouring all your cash into a home if you have other debt. Mortgages tend to have lower interest rates than other debt, and often you can deduct at least a portion of the interest you pay from your taxes. When it comes to paying for children's education, allowing them to take loans makes more sense than liquidating or borrowing against a retirement fund. Students have many financial sources to draw on for college money, and often, school loans have low rates, no interest payments until after graduation and other tax advantages.

The bottom line — be smart about what you spend, especially if it's on credit. It is far too easy to get into debt... and a long, uphill battle to get out.

Gone phishing... don't get caught!

In recent years, phishing has become a high-priority challenge for financial institutions, e-commerce businesses — and individuals. Phishing is a method of online identity theft, and in addition to stealing personal and financial data, phishers can infect computers with viruses and convince people to participate unwittingly in money laundering.

Most people associate phishing with e-mail messages that mimic financial institutions, credit card companies and e-commerce businesses. The messages look authentic and attempt to get victims to reveal their personal information. Phishers often use real company logos and copy legitimate e-mail messages, replacing the links with ones that direct the victim to a fraudulent page. Most phishing messages give the victims a reason to take immediate action, prompting them to act first and think later. Messages often threaten the victims with account cancellation if they do not reply promptly.

The steps you normally take to protect your computer, like using a firewall and anti-virus software, can help protect you from phishing. In addition, phishers tend to leave some signs of fraudulence in their e-mail messages and web pages. When you read your e-mail, you should be on the lookout for:

• Generic greetings, like "Dear Customer." If your financial institution or a company you do business with sends you an official correspondence, it should have your full name on it.
• Threats to your account and requests for immediate action, such as "Please reply within five business days or we will cancel your account."
• Requests for personal information.
• Suspicious links, such as links that are longer than normal, contain the @ symbol or are misspelled.
• Misspellings and poor grammar.

If you get an e-mail that you believe is a phishing attempt, you should not reply to it, click on the links or provide your personal information. Instead, you should report the attempt to the business being spoofed. Use their website or phone number rather than following links in the suspect e-mail. If you believe you may have given your personal information to a phisher, you should report the incident to the company that was spoofed as well as any financial, lending or credit institution for which you have disclosed your personal information. You should also change your passwords for the site you believe was spoofed. If you use the same password at other sites, you should change your passwords there, too.

If in doubt about an e-mail you receive, check the official website of the business from which you received the e-mail. Many businesses post alerts regarding the latest phishing attempts that have been reported to them.

The bottom line — be cautious. Don't get caught up in phishing line.

Safe deposit box - What is it for?

A safe deposit box is a type of safe usually located within a group of safes inside a vault at a financial institution. It holds valuables and important documents that a person may feel reluctant to store at home due to fear of theft, fire, flooding or other disasters. You usually can rent a safe deposit box for $30 to $40 annually at your financial institution. The box can be opened only with an assigned key, the financial institution's master key, proper identification and signature or a code of some sort. Some safe deposit boxes operate using biometric security to complement the already increased security procedures. It is a good idea to provide the box location, an extra key and an inventory of the box contents to your attorney, relative or friend. Be sure to check with your financial institution to see if it has any coverage for safe deposit box contents.

What to keep in it:

• Certificates of ownership, such as for stocks and bonds, CDs, IRA account documents and purchase or sale receipts for investments.
• Titles or deeds to property and home ownership papers.
• Patents and copyrights.
• Personal records, such as adoption and citizenship papers, baptism, birth, marriage and death certificates, divorce decree papers, military service discharge papers and passports.
• A copy of each person's will and plan for transfer of personal items. (In this case, not the original.)
• Valuable jewelry, precious metals and currency.
• Irreplaceable photos, videos and other heirlooms.

What not to keep in it:

• Your original will. It may be legally "sealed" after your death, and this will cause delays in handling your affairs.
• Living wills or power of attorney for health care. These types of documents should be kept in an area where those responsible will have easy access in case they are needed.
• Anything that may be needed when the financial institution is closed for the night, weekend or holiday.

Water conservation: Save water, save on your bill

Water conservation is a hot topic throughout the nation. Water is a limited natural resource, so it is important that we use what we have in careful moderation. The top three approaches to saving water are to stop leaks, install water-saving devices and use water responsibly.

1. Stop leaks
Many homes have hidden water leaks, so it is important to ensure yours is leak-free. Locate your water meter and read it. Wait two hours without using any water, then reread the meter. If the reading is not identical to the one you originally took, there is a leak in your home.

First, check outside the home. Leaks at outside spigots and in irrigation systems can easily go unnoticed because of their location. On average, 50 to 70 percent of a home's water use is outside, so a leak can add up to thousands of gallons of wasted water.

Next, check in the bathroom. Check each toilet in your house, the supply lines under the sinks and the bathtub/ showerhead for visual leaks. Bathroom facilities claim nearly 75 percent of the total water used indoors.

Finally, check in the kitchen and laundry room. There are many water sources in these rooms, including sinks and faucets, dishwasher, garbage disposal, ice maker and washing machine.

2. Install water-saving devices
Older models of most fixtures and appliances, such as toilets, washing machines and dishwashers, use much more water than the new ones that are specifically designed to be more efficient. If possible, replace older appliances with new ones. Older showerheads and faucets also are less water efficient than the newer ultra-low-flow versions.

3. Use water responsibly
The easiest way to save water is to use it responsibly, both indoors and out. If you're not using it, turn it off. Every drop counts!

Inside, turn off the shower while lathering up. Don't let water run while shaving, washing your face or brushing your teeth. Operate your dishwasher and washing machine only when they are fully loaded. Store drinking water in the refrigerator so you don't have to let it run to get cold from the faucet. Avoid flushing the toilet unnecessarily. When washing dishes by hand, use two basins — one for washing and one for rinsing — rather than letting the water run.

Outside, water plants only when they need it and only during the coolest time of the day to minimize evaporation. Allow water to soak in slowly. Install a rain shut-off device that will override your sprinkler system when it is raining. When washing your car, use a bucket of soapy water and save the hose just for rinsing. Don't clean your driveway or sidewalk with the hose when a broom can do the same job.

Finally, conserve water because it is the right thing to do. Don't waste it just because someone else is paying for it, such as when you are a guest in a hotel.

By using water responsibly, you can help preserve the water supply — and keep your water bill to a minimum.

From piggy bank to bank account - Teach kids about money early

When it comes to teaching kids about money, the sooner the better. Long before most children can add or subtract, they become aware of the concept of money. Many three- and four-year-olds already role play retail games, "buying" toys or other objects from friends, siblings or parents using all different means of purchase - cash, credit card, checks and trade. However, up until they start earning a living — and often beyond — they can be prone to spending money as if it grows on trees.

You can begin basic financial education as soon as children understand that it takes money to buy things. Work on your child's financial awareness early — once they are teenagers, they may be less likely to heed your advice or less focused on finances with everything else going on in their lives.

A piggy bank is a great tool for getting a youngster's financial education started. Even before they are at an age to earn allowance, children can begin saving coins in their very own bank. The true reward comes when they are allowed to spend the coins on something they desire, be it a treat at the grocery store, a trinket from a coin-operated vending machine or a ticket to play a game at the circus or fair.

Once children are old enough to be responsible for assisting with house chores, an allowance can be the next tool to teach financial planning. Not only does an allowance show them that when they do good work, they are financially rewarded, but it also allows them to begin budgeting. With a set weekly allowance and some adult guidance, they can figure out how long it will take them to save for a certain wish list item.

A logical step as a child grows older is to open a savings account for them and allow them to watch their money grow. Taking this next step from saving at home to saving at a financial institution provides them with a wealth of learning opportunities - how a credit union or bank works, how interest can compound, how to keep track of money.

As youth grow into high school students, their responsibilities have become bigger — at school, at home, perhaps at a job. Now is the time to really educate them about checking accounts, credit cards and debt. Don't let them figure it out on their own once they have left the nest. A strong lesson in responsible credit card use arguably is one of the most important ones they will receive. Explain to them that this is where most individuals' finances go awry, and illustrate your point with interest tables that show the damage an 18 percent annual interest, compounded over years, can do. Most high school students should have no reason to carry a monthly balance on their credit card. While their finances are still under your direction, be sure they are in the habit of paying off their credit card balance every month.

Even investing should be learned early. High school students can and should be taught about investing, using real money if possible. Minors are not permitted to trade on their own, but you can do it for them, with their input.

The average American household with at least one credit card has nearly $9,200 in credit card debt. Personal bankruptcies exceeded 1.6 million in 2005. Nearly 95 percent of Americans have financial fears about retirement, yet only 42 percent have calculated how much they need to save for retirement. With some early education, let's encourage our children to beat the odds.