Beating Broke

Personal Finance from the Broke Perspective

What Christmas Expectations Are You Setting for Your Children?

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What are your children’s expectations for Christmas presents?  Do they expect many Christmas presents under the tree and their every wish to be met?  Do they expect a modest Christmas?

Believe it or not, the answer to this question doesn’t really depend on your kids; it depends on you.  From the time your children are small, you set their expectations, and what you set by example is what they come to know as “normal” (until they get married and find that their partner has a different “normal” than they do, but that is another post).

If you have small children, think carefully about what expectations you want to give your children.  Yes, retailers would prefer that you shop ’til you drop and give your credit card a work out, but it doesn’t have to be that way.  Here are what some people do who have chosen to have a different Christmas celebration than retailers would prefer you have:

1.  Give some new gifts, some used, and some homemade.

Amy Dacyczyn, the original Frugal Zealot and author of The Tightwad Gazette had six children to buy for.  Each child got one new gift.  Then, they got a few gifts that were used items that she had purchased at garage sales and thrift stores.  She also made her children a few gifts.  If I remember correctly, she spent $50 or under for each child.  (Of course, this was 20 years ago, so accounting for inflation, she spent no more than $82 for each child in 2012 dollars.

While you might balk at the idea of giving garage sale gifts for presents, I can tell you that I followed Dacyczyn’s practices when I had my own kids, and some of our kids’ presents are nice finds that we got at garage sales.  My oldest is 8, and he has yet to complain about it because it is what he expects.  He still does get new presents, but there are used ones in the mix.  (I like the term recycled better, though.)

2.  Give a charitable donation instead of gifts.

Ann Voskamp, the blogger behind A Holy Experience, recounts that one Christmas Eve 10 years ago, her son asked her, “Why don’t we give up things so we can give to Jesus for his birthday?”  The question radically changed Voskamp’s way of thinking, and from that year on, her family has foregone giving Christmas gifts to one another.  Instead, each day during Advent they make a charitable donation using the money they would have spent on gifts.

This is a radical idea, to be sure, but it is the norm now for her family.

3.  Only give 3 gifts.

Another idea based in Christian roots is to only give your children three gifts.  Some do this because the Wise Men brought Jesus 3 gifts.  Others take a spin on this and give their children three gifts–something they want, something they need, and something they can experience.

4.  Meet needs as gifts.

Gifts don’t have to be all luxuries and things you want.  When I was growing up, my parents’ money was extremely tight.  I got some new clothes during the back to school season, but my winter clothes and sometimes even my uniform clothing or new backpack were all given as Christmas presents.  I was always excited to get these things and never felt deprived.  My mom told me a few years ago that she had to give gifts this way because money was so tight, but I never knew.  This practice was normal for me.

Christmas gift giving was not always the extravaganza it is now.  As an adult, I reread the Little House in the Prairie books, and I was struck by how happy Laura was to get her very own handmade tin cup and an orange for Christmas one year.

If you are a parent of small children, you can start your Christmas gift giving traditions now, and they don’t have to involve credit card debt you can’t pay off until March or April.

What is your favorite way to give gifts at Christmas?

img credit: South Granville Live on Flickr

Is the Housing Market Making a Comeback?

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The housing market has been in a slump, since it crashed in 2008.  Here we are, three plus years later, and it just might be showing signs of making a bit of a comeback.

I’ve got to admit that, here in North Dakota, we never really directly felt the housing market crash.  With all the oil flowing in the western half of the state, and the resulting high demand for housing, our market has remained pretty close to level.  In the western part of the state, there’s such a demand for housing that the home builders can’t keep up, and prices have gone up by quite a bit.  Here in the eastern half, our market has kept steady, with only some minimal gains, but the number of homes available has stayed low.

Other parts of the country weren’t as lucky to have an oil boom going on at the same time as a major market correction, however, and certainly felt the crash a whole lot more than we did.  Recently, I’ve read several articles on the increase in inventory churn in some key areas.

Housing Market Key Factors

I’m no expert in the housing market, but I think that there are several key factors that might be contributing to a market comeback.  Interest rates remain low around the country, with many qualified buyers getting home loans with loans that are below 4%.  As a comparison, the home loan rates in Australia are near 6%.  As a further comparison, when my wife and I bought our house in 2004, the rate we got on the house was almost 7%.  Another key factor, in my opinion, has been the rising of new home construction.  As the market crashed, the rates dropped, but the number of people who still qualified under new, stricter lending policies dropped too.  The lower number of qualified buyers meant that there were less houses being bought, and built.  Rates are still low, but the number of new homes constructed has gone up several months in a row.  The people who survived the crash without bankruptcy are building homes.  That also means that they are likely selling their old homes, if they have them, and putting more lower cost houses into the market.  Those lower cost houses in the market could lead to more people buying houses and becoming first time homeowners.  The final factor that I think is contributing to a resurgent housing market is the leveling off of the job market.  With several months of gains in the job market, the employment situation appears to have leveled off some which should make people feel more secure in their employment situation and decide to make the jump into home-ownership.

Should you Buy a House?

Anytime we start talking about the housing market, the inevitable question comes up of whether a person should buy a house now or not.  I’m not trying to avoid the question, but it really comes down to your personal situation.  Your primary home still isn’t an investment.  Your local market should also be taken into account.  What are the rental rates in your area?  What would the mortgage payment on a house be?  Is the rent for a similar house more or less?  Is your financial situation stable?  Do you have savings for a down payment?  With enough left over to pay closing costs?  Do you have an emergency fund in place to pay for any unforeseen emergencies that might occur after you move in?  Spending thousands of dollars isn’t something that anyone should rush into.  Run the numbers on your financial situation, then run them again.  Sleep on it for a while, and then decide if now is a good time for you to consider buying a house.

What’s the housing market like in your area?  Did your market feel the crash?

How Much Car Insurance Coverage Do You Need?

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Car insurance, like most insurances, can seem complicated.  Deciding just how much car insurance coverage you need is the biggest hurdle.  Of course, it’s easy to select the coverage that meets the requirements of your state and the lien holder (of you owe on a loan for the car, you’ve got a lien holder, and it’s likely the bank you borrowed from), but those aren’t the only factors to take into account when deciding on how much coverage you need. Using a free online service can quickly find cheap auto insurance companies and shows multiple competitive policies.  In the end, you’ve got to find a coverage that will meet those requirements, and also fit within your budget.

State Requirements

You’ll want to know what the state requires you to have for insurance.  Any local insurance provider should be able to tell you, but you’ll want to double check if you’re planning on using an out of state or online provider.  If you still owe on your car, the lender on your loan will likely require that you have full coverage, so the state minimums will likely only come into play if you own the car you’ll be insuring.

Lien Holder Requirements

If you owe on your car, you’ve got a lien holder.  The lien holder is whomever you borrowed the money from.  Most (if not all) lenders will require that you carry full coverage insurance on the car.  It has nothing to do with them wanting to make sure you’re safe, and all to do with making sure that should you get in an accident, that they’ll get some of their money for the loan.  While most lien holders won’t require a certain level of insurance (over full coverage), it is a good idea to find out what they require just to make sure that you’re getting the coverage that you need.

Deciding on Coverage Levels

Car AccidentOnce you know the requirements of the state and any lien holders, you’ve got to decide on the level of car insurance coverage you want.  There are two ways to look at this.  The first is that you’ve got to find a coverage and provider that is affordable enough to fit into your budget.  The second is usually the forgotten way of looking at insurance.  The coverage doesn’t just have to fit into your budget, it also needs to cover you against a total loss.  If you have full coverage, but it’s only enough to cover a portion of what you owe on the car, you’ll also want to look at something that’s usually called “Gap Insurance”.  Gap insurance is aptly named in that it is designed to cover any gap between the value of the car and the remaining loan should the car be totaled before you pay it off.  Car insurance can be a combination of three coverages.  A liability coverage (usually what States require), Comp & Collision, and personal injury.  The exact levels that you need will vary based on your situation, but your insurance provider should be able to make recommendations for you.

How Much Deductible for Car Insurance

One of the easiest ways to lower the monthly cost of your car insurance coverage is to raise the deductible on your policy.  This method is a bit of a double-edged sword, however.  Raise it too high, and you might not be able to afford to have the car fixed.  Or, anything short of a major collision may fall under the amount of the deductible.  Again, your insurance provider should be able to help you compare the different deductible levels and help you find one that fits your budget without breaking you if you get in an accident.

The level of coverage that you need is going to be drastically different based on your own individual situation.  Do you own your car, or owe on your car?  Do you have sufficient savings to cover a higher deductible in an emergency?  What are the requirements of your state and any lien holders?  Make sure you know all that information before you go looking for car insurance, and remember to double check any suggestions by an insurance provider.  We’d all like to think that they are all honest, but not all of them are.  Knowing at least a little about what you’re talking about, and the information required to ask informed questions is a huge step towards not getting taken advantage of.

How much do you know about car insurance?  How much have you learned since the first time you bought insurance?

img credit:stupid.fotos on Flickr.