Money Hacks

Liz Pulliam Weston at MSN Money recently asked her readers for money hacks. She picked 12 cool money tricks to publish. My favorite? Getting stores to give you interest-free loans:

Warning: This is an expert hack, recommended only for folks who have good money management skills. I’ll let a Your Money message board poster with the handle of “sneakers” explain how it works:

“Whenever I buy a big ticket item, I make sure I have the cash to pay for it. Then I wait for store financing offers — same-as-cash or deferred interest for an extended period. I opt for the financing, put the cash in a (certificate of deposit) that matures just before the end of the promotional period, and pay it off before the deferred interest becomes due. It’s like a free loan from the stores and I can earn interest while I enjoy the item!”

Obviously, this hack works ONLY if you keep your mitts off the invested money and if you pay the bill before it comes due; otherwise, you could pay a truckload of finance charges.

This is beyond my skill level at the moment, but I admire the guts it takes!

Money Hacks reader Mia left a comment in how Much Should You Save for Retirement discussing other rules-of-thumb she’s learned. She pointed me to an article called “Rate yourself using debt-to-income ratio”.

The article suggests that “healthy families” should strive to:

• Save 12% of their income every year. A 30-year-old should have 10% of her income amassed in savings. A 35-year-old should have 90%. At 40, she should have 1.7x her income saved. At 50 this should be 3x income, and at 60 it should be 8.8x income.
• Add up all of your debt, including mortgage and student loans. At age 30, your debt should only be 1.7 times your income. This number should drop as you age. At 45, it should be equal to your income. By age 65, you should have no debt.

These ratios are fine, but they seem awfully ambitious, especially with regard to debt. I’m nearly 38. Should I be worried that our family’s debt is more than twice our income? What if it’s mostly mortgage debt?

[Rate yourself using debt-to-income ratio]

While researching other topics, I found a four-year-old Motley Fool article on saving. I particularly liked their advice to pay debts forever, but to make yourself the payee.

Many of us have some kind of monthly loan payment, whether it be a school loan, a car loan, credit card debt, a mortgage, or all of the above. The day will come when you send in your final payment. But unless that debt has been debilitating, you’ve been doing fine while making those monthly payments. So, keep it up. Except, instead of sending a check to the lender, send the check to a savings, brokerage, or mutual fund account. You’ve increased your net worth by paying off the debt; now, keep up the good work by building up your assets.

Clever and effective.

[Motley Fool: Seven savings tricks]