There’s a concept in finance called “cost-benefit analysis” which involves calculating whether an item’s cost outweighs its benefit. For example, I spent 8 hours yesterday cleaning the apartment I just vacated. If I had bothered to perform a cost-benefit analysis, I would have asked myself whether or not the cost (8 hours of my time on my day off) was worth the benefit (a savings of about $150 of my deposit). Is my time worth $18.75 an hour? Or were those 8 hours worth more than spending time with friends or family? The answer, sadly, is probably not. But it brings up an interesting thought: how much time should we spend concerned with our personal finances.

If you wanted to, you could spend almost 24 hours a day worrying about your finances. You could build budgets, track stock movements, read personal finance books, and watch CNBC form the moment you woke up until the moment you slept. The truth is, there’s a lot of advice out there concerning money (including this blog) and there’s no way you can possibly learn everything there is to know. On the other hand, you can’t ignore money – it’s a part of our everyday life. So the question is, how much should you worry about money?

The answer, similar to most of my advice, is somewhere in the middle. And part of it has to do with your own self assessment of how important money is to you. In order to help you figure this out, try ranking the following items from 1 to 10 – 1 being the most important to you and 10 being the least:

• Immediate family
• Extended family
• Friends
• Money
• Shopping
• Sports (watching or playing)
• Working
• TV/Movies
• Video Games

After some internal reflection, look at where money ends up in relation to other items on your list. If money is one of your top 3 choices, then I would assume that you are already faithfully checking your stock portfolio, 401(k) performance, and reading up on the latest and greatest personal finance topics. For those of you not as “obsessed” with your finances I would recommend setting aside at least one day each year to focus on your personal finances.

While your personal finance situation will most likely determine the kind of life you will lead (either now or in the future) don’t you think that dedicating at least 8-10 hours a year is worth it? This day of personal finance mastery is not meant for you to pay bills, but to go above and beyond your normal day-to-day financial activities. Take a day off work… use a holiday such as Labor Day (hint hint)… whatever you do make sure you have time to dedicate to this activity.

Suggestions for things to do include:

• Calling credit card companies to negotiate better rates.
• Updating your list of important financial information in case of emergency or death. Try something like this Financial Life Details (pdf) worksheet from Merrill Lynch.
• Update your will and/or trust documents. This may not seem “financial” in nature, but your will or trust has strong links to your financial portfolio.
• Organize your important financial documents, statements, or information for easy access on a day-to-day basis.
• Review your tax withholding amounts and re-examine whether or not you should change them.
• Consider setting up automatic withdrawals for savings, upcoming vacations, car repair, etc. using one of the popular online banks. (Personally I love the ING “sub-accounts” I can create to sock away money)
• Re-examine your insurance premiums and evaluate whether you are over or under-insured. It may be time to shop around for a new policy as well.
• If you haven’t done so lately, evaluate the returns in your investment portfolio and consider re-adjusting your mix in response to major life events or your current age.
• If appropriate, set up a 529 college savings plan (be sure to let relatives know they can contribute to it in lieu of presents).

The list could go on and on, but the important point is to set aside time to actually think about your current financial situation and evaluate how well you are accomplishing your goals. If you’re falling short, begin to research what you can do to improve. Do you need to ask for a raise? Cut back on spending? Move to a more affordable location? These are all questions you can ask yourself once you’ve taken the time to reflect on your personal finance situation – but are difficult to answer during your monthly bill-paying binge.

I wrote a couple months ago about Kevin Trudeau. I picked up his tome Debt Cures They Don’t Want You to Know About from the library out of morbid curiosity.  I haven’t finished the book, but there’s one quote that’s just priceless.  This quote sums up the book and the attitude Trudeau is selling with his book.  He says:

“Most debt and credit books on the market today talk about how to cure debt by curbing your spending and ‘cutting out fat’.  They make you think that it is something you did that created the wild debt problem.” (pg. 218)

That’s an interesting perspective.  Never-mind your wild spending habits, because the credit card companies are out to get you.  It’s not your fault at all.  Granted there are people out there who have had some kind of trouble with a job loss or medical problems where their credit soars, but that’s not the majority and people are ultimately responsible for what happens to themselves.  You are the gate keeper to your life and your money.  It is absolutely misleading for Trudeau to say imply that you are not responsible for your debt and all the other books are wrong.

It’s not that I don’t think credit companies haven’t done shady things, but only you can protect your money.  Debt cures should be about learning to manage your assets.  Not everybody is in serious debt (mortgages and cars excepted), so they must have learned to control their spending and consciously chose what they want to buy.  Trudeau also refers to the movie Maxed Out numerous times.  While the movie is rather good, I think he abuses the stories in the film to make his case.

I will write more on the book once I have completed it.  It’s not a total piece of trash, but I certainly wouldn’t recommend it.

I’ve been working in India for the past 3 weeks and have learned a few things about using a credit card in a foreign country. The last time I was in a foreign country was over 6 years ago but was there for so long that I opened a local bank account and was able to avoid any fees.  However, for most of us, travelling to a foreign country means bringing along our own debit/credit cards – so here are a few things to keep in mind.

Inform Your Credit Card Company / Bank You’re Leaving

Before leaving on your trip – no matter how long or short it may be – give your bank and/or credit card company a call.  Inform them that you’ll be travelling and be sure to give them the dates you are travelling and to which countries.  This will prevent your card from being “flagged” for fraudulent activity.  If the credit card company sees your card suddenly being used in India – someplace you’ve never travelled before – then you could find your next purchase declined due to fraudulent activity.  Calling your bank or credit card ahead of time will save you time and frustration.

Fees, Charges, and Conversion – Oh My!

Something that many people do not know is that credit card companies like to take advantage of international travelers by charging them fees for using their card abroad – but it doesn’t stop there.  Not only will a company charge you a fee for using your card overseas, but they might also charge you a currency conversion fee.

International Fee: This fee is charged by most credit card companies for any purchase made internationally.  This fee, typically added to your purchase price, mean you could end up paying as much as 10 percent more for purchases made while abroad.  The latest fee rates I could find are:

Bank of America
• 3% for credit/debit card purchases
• $5 and 1% at ATMs; fee waived if using Global ATM Alliance machine

Chase
• 3% for credit/debit card purchases
• 3% of ATM withdrawals

Citibank
• 3% for credit/debit card purchases
• 3% at non-Citibank ATMs
• Will reimburse ATM fees if you applied for a checking account online

HSBC
• 1% for credit/debit card purchases
• $1.50 max for ATM fee

Wachovia
• 1% of credit/debit card purchases
• 1% of ATM withdrawal PLUS network fee

Washington Mutual
• 1% of credit/debit card purchases
• 3% of ATM withdrawal PLUS 1% charged by
Master Card and Visa

Wells Fargo
• 3% credit/debit purchases
• $5/withdrawal at ATM

Dynamic Currency Conversion Fee: A relatively newcomer to the fee-charging party, this fee allows a foreign merchant to convert your bill from foreign currency to U.S. dollars using their own rates (which of course are higher than normal). However, DCC is only used with Visa and MasterCard – American Express charges 2.5 percent per day for foreign transaction fees and they do not charge cardholders DCC rates. The fee for DCC ranges between 3–10 percent depending on the fee charged by the technology partner and the fee charged by the bank issuing the debit/credit card.

Conversion Fee: Your bank might charge you a 1 percent to 3 percent “foreign currency-conversion fee” for the service of converting the local currency cost of an international purchase into the U.S. dollar amount that shows up on your credit card bill.  How nice of your bank, right?

Find a Solution That Fits

Knowing now that using your credit or debit card could be costlier than you thought – what should you do?  You have a few options:

1. If time is on your side, consider finding a card or bank that doesn’t charge these ridiculous fees (Capital One seems like a good choice)

2. Consider using your corporate card – the user agreements are much different.  For example, my corporate AMEX card doesn’t charge me an international fee – so I’ve been using it for personal purchases as well.

3. Look into purchasing a pre-paid Visa or Mastercard in the country you will be traveling to.

4. Carry cash. It goes without saying that carrying cash is more risky than plastic – but the fee for taking out cash for a day’s worth of purchases might be cheaper than a 3% charge on each purchase with plastic.

The best advice I can give you is to invest some time preparing your finances before you leave.  Travel can be stressful enough without worrying about your money.

Being in the Silicon Valley during the current economic crisis has been interesting. It has been especially insightful to compare the “Dot Com” crash 8 years ago to the current crisis and to see how the crashes have effected businesses differently.

I was surprised to realize that many businesses, especially in the tech sector, learned from the mistakes of their ancestors. It has been this resilience that prompted me to put together a short list of ways small businesses can survive the current crisis – and even come out on top at the end.

1. Cash is King – Regardless of the size of your businesses, cash is going to be king over the next 18-36 months. Up to even a few weeks ago you could pretty much count on your local bank giving you a small business loan or being approved for a business-use credit card. Unfortunately, the liquidity of the market has “thickened” dramatically and has made those opportunities shrink to almost nothing. You’ll no longer be able to rely on loans and credit to get you through the month. From now on… cash should be your #1 priority.

2. Don’t Focus on Growth – This sounds like bad advice for any small business owner, but the truth is that many businesses are going to continue along the same growth pattern as before and find themselves beat to hell by the time they emerge from this crisis. This is the time when you need to hunker down and just wait out the storm. This will benefit you not only in the short term by ensuring you don’t go bankrupt, but will also put you in the perfect position to make strategic growth decisions after the crisis is over. For example, by keeping you expenses down and your cash account padded, you will be in a position to spend quickly right out of the gate – purchasing your competition or just beating them to key customers – because you have saved for what I like to call the “sunny” day.

3. Focus on Value – Since you’ll be cutting back on expenses, spend time on the things that don’t cost that much money but add value to your business. Instead of spending $10k replacing an old machine, spend $100 in phone charges to re-connect with your customers, or improve customer service. Invent new ways to add value to current products without spending a ton of money. That investment of time and energy will pay for itself 10x.

4. Collect – One of the things you can do to add value to your business and increase cash flow is by collecting on your accounts receivable. If there was ever a time to go after those delinquent customers… now is the time. If you don’t have an invoicing system in place there are tons of free and fee-based services out there – from PayPal to FreshBooks. You can even use Excel as long as you are actively trying to collect that cash.

5. Don’t Give in to Hoarding – During this time when “cash is king” you should avoid buying in bulk or otherwise stockpiling supplies or inventories. Although the parable of the ant and grasshopper might come to mind, now is not the time to be hoarding. That extra spending drives expenses up, depletes your cash reserve, and at the end of the day might be worth nothing. What good is a pallet of copy paper at a discount if you don’t have a business capable of using it. You will always be able to buy these items later even if you pass up a small discount now. That “savings” could prove disastrous to your cash flows.

6. Leverage Technology – There are tons of websites, web services, and other technologies that can help save you money. For example, trade in your $600 flight and $400 hotel for that sales trip to Chicago for an online meeting service instead. These days you can share a presentation, hold a conference call, or even converse via webcam – with nothing but a DSL modem and $50 a month for the services. You can also step up efforts to find better prices on products or services you normally use – by simply performing a simple Google search. Buying you your widgets from ABC Company for the past 5 years shouldn’t prevent you from searching for XYZ Corp who is offering the same widgets at 50% off.

According to a recent Gallup poll, 43% of American credit-card holders say they always pay off the full balance on their cards each month and another 17% say they usually pay their full balances each month. On the other hand, 25% acknowledge that they usually leave a balance and 12% say they usually pay only the minimum amount due each month (1% pay less than the minimum).

This is in stark contrast to previous years. In April 2001, 41% of credit-card owners said they usually left a credit-card balance at the end of the month, or made the minimum monthly payment or less. This percentage increased to a high of 45% in April 2004 before declining to 40% in 2006 and to 38% in 2008.

Gallup’s survey of credit-card use also shows that American credit-card holders have about four credit cards on average. Many Americans also maintain fairly high credit-card balances. Overall, credit-card holders reported an average balance of $3,848 in April 2008 (though the median, or middle value, is just $200). More importantly, 30% say they have a balance of more than $2,000, with 19% reporting a balance of more than $5,000 and 9% more than $10,000.

So how does your credit card usage compare? Do you pay it off in full each month? (Hint: you should) Or are you paying only enough to cover interest? (Hint: you shouldn’t)

Mr. Toledano, a New York City photographer, began an interesting photography project shooting offices after bankruptcy. As he describes, the project is more “archaeology than photography.” So if you want to see glimpses of life, interrupted, then check out the gallery.

Well, if we’ve learned anything this week it’s that keeping your identity safe isn’t helped by posting your social security number on billboards and magazine ads all over the country.

Two years ago, Todd Davis, the founder of LifeLock, decided to plaster his Social Security number wherever he could get ad space. For a fee of about $10 a month, LifeLock offers what it calls a “proven solution” that prevents its customers from becoming victims of identity theft and fraud. I wrote about whether a solution like this is worth the money a few weeks ago (Is ID Theft Protection Necessary)… and apparently it’s not.

One man in Texas has already succeeded in getting a payday loan in Davis’ name. However, when asked about the breach Davis stressed that his service does not guarantee that your I.D. won’t be stolen. Rather, it aims to reduce the likelihood that your I.D. is stolen, and if it is, LifeLock promises to fix the problem.

But that’s not the real problem. LifeLock’s current problem is dealing with lawsuits of up to 105 of people who now claim that LifeLock didn’t live up to its advertising and have suffered at the hands of identity thieves.

So what can you do to prevent 83 people from trying to access your personal information? The answer is not LifeLock. The answer, as of today, does not involve only one approach. You need to be active in monitoring your own credit, and perhaps combine your own efforts with a service such as LifeLock… to help you with the monotonous lifting. Take a read through Is ID Theft Protection Necessary and try and follow the suggestions I’ve made. Monitoring your own credit, placing freezes on your credit, and many other “tricks” can keep you one step ahead of the game.

If you haven’t heard, the California city of Vallejo filed for bankruptcy protection this week after they were unable to come up with over $17 million to balance the budget. The story prompted me to ask, “How does a city go bankrupt?”

The short answer is: just like the rest of us.

Sometimes there are extenuating circumstances like a rash of lawsuits or a natural disaster that drains the city coffers dry; however, most cities go bankrupt because of poor management and even worse budgeting.

Which should, actually, give you hope. After all, if a city staff of 15 accountants can’t balance the budget, it can’t be that easy can it? Granted, balancing a city budget is a little harder than your family of four, but it is based on the same principles. Unfortunately, however, cities get caught up in union negotiations and local politics which prevents them from making the same decisions you and I might make. For example, politicians aren’t too popular when they need to raise taxes to increase revenues. As a result, many politicians hesitate to raise taxes while at the same time keeping city service levels the same. And, just like a personal budget, you can’t survive very long when your income doesn’t cover your expenses.

Federal Bankruptcy Help:
To help cities in dire straits the US Government enacted the first municipal bankruptcy legislation 1934 during the Great Depression. Although similar to other bankruptcy chapters in some respects, chapter 9 is significantly different in that there is no provision in the law for liquidation of the assets of the municipality and distribution of the proceeds to creditors. Could you imagine the city being forced to liquidate city roads, sewers, and parks? The town Burger King could end up owning the park by your house!

Instead, chapter 9 is generally limited to approving the city’s bankruptcy petition, confirming a plan of debt adjustment, and ensuring implementation of the plan. But most of the time, cities use the courts to simplify debt repayment and to eliminate the need for multiple forums to decide issues.

In the more than 60 years since Congress established Chapter 9 bankruptcy legislation, there have been fewer than 500 municipal bankruptcy petitions filed. Although chapter 9 cases are rare, a filing by a large municipality can— like the 1994 filing by Orange County, California—involve many millions of dollars in municipal debt.

In the case of Vallejo, its the largest city in California to declare bankruptcy, and the only one to do so because of long-term economic problems. City officials have said that the city has been hit hard by the weak housing market and rising public employee salaries and benefits. In fact, 80% of the city’s budget is set aside to pay for police and firefighter protection.

What Happens After Bankruptcy?
Almost nothing as far as you and I are concerned. Water keeps flowing, garbage is collected, and the roads and parks are maintained. Generally, the city’s larger development projects get put on hold, and long-term projects are scrapped for the time being. The government can be dissolved and taxes can be raised to cover the shortage. But generally bankruptcy gives the city power to impose terms and conditions for salaries and benefits unilaterally. The city obtains the upper hand to force terms with respect to its collective bargaining agreements including police and firefighter unions. So why it’s probably safe to assume that day-to-day life will remain the same, you can also count on your city taking a huge step backwards in terms of financial prosperity. That city library that was planned for next year – you won’t see that for at least 7 years. Relationships with city workers will have to be mended, and the city government will have to regain the trust of the citizens, or find people who are more capable of running the city,

Think you’re doing what it takes from thieves to steal your identity? Find out by taking the ID Safety Test at IDsafety.net, a site created by Javelin Strategy and Research to raise awareness about identity fraud.