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• Use a 'freedom account' to prepare for the unexpected

  Posted Jun 16 2008, 06:10 AM by Karen Datko
  Filed under: Banking, Spending, Saving, Get Rich Slowly
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  This post comes from J.D. Roth at partner blog Get Rich Slowly.

  My wife has always maintained a sizable savings account, but having extra cash is new to me. Until recently, I had always lived paycheck to paycheck, often treading close to a zero dollar balance in my checkbook for months at a time. Now, though, I've not only established an emergency fund, but set up a couple of targeted accounts as well. (One is for vacations, and the other is for a new car.)

  My method works for me, but others have different approaches. In her book "Debt-Proof Living," author Mary Hunt suggests a sort of emergency fund plus. Often, when people struggle with money, she says, the predictable monthly bills aren't the problem. People cannot cope with the unexpected things -- not just emergencies (like a severe illness), but irregular expenses like auto maintenance, wedding and birthday gifts, or a new pair of shoes.   Read More...

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• The warranty scam-buster account

  Posted Jan 07 2008, 04:50 AM by Karen Datko
  Filed under: Banking, Spending, Saving, Get Rich Slowly

  This post comes from J.D. Roth at partner blog Get Rich Slowly.

  The one-year warranty on my MacBook Pro expired last week, presenting me with a choice: sign up for an extended warranty or live without it. I've never been an extended-warranty kind of guy. They're cash cows for the companies that sell them. Anything that is a cash cow for manufacturers and retailers is generally a poor deal for consumers.

  According to the Washington Post, $15 billion in warranty premiums were charged to U.S. consumers in 2004, of which $7.5 billion went to the stores that sold them. About $3 billion was paid in claims against plans. Only $20 of every $100 spent on extended warranties was paid in claims.

  The December issue of Consumer Reports further notes: "Most products don't break during the first three or four years of ownership. If breakage does occur, the repair cost is typically similar to the warranty cost."

  What should you do if you want some protection, but don't want to pay the store? Self-insure. Consider paying yourself the warranty premiums. Reader Steven T. wrote to share the clever technique he uses to insure the things he buys:   Read More...

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