Table Of ContentT 1-2-3 M P
HE ONEY LAN
The Three Most Important Steps
to Saving and Spending Smart
Gregory Karp
Vice President, Publisher: Tim Moore
Associate Publisher and Director of Marketing: Amy Neidlinger
Executive Editor: Jim Boyd
Editorial Assistant: Myesha Graham, Pamela Boland
Operations Manager: Gina Kanouse
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Assistant Marketing Manager: Megan Colvin
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Managing Editor: Kristy Hart
Project Editor: Betsy Harris
Copy Editor: Karen Annett
Proofreader: Debbie Williams
Indexer: Lisa Stumpf
Senior Compositor: Gloria Schurick
Manufacturing Buyer: Dan Uhrig
©2009 by Pearson Education, Inc.
Publishing as FT Press
Upper Saddle River, New Jersey 07458
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Printed in the United States of America
First Printing May 2009
ISBN-10: 0-13-714173-4
ISBN-13: 978-0-13-714173-9
Pearson Education LTD.
Pearson Education Australia PTY, Limited.
Pearson Education Singapore, Pte. Ltd.
Pearson Education North Asia, Ltd.
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Library of Congress Cataloging-in-Publication Data
Karp, Gregory.
The 1-2-3 money plan : the three most important steps to saving and spending
smart / Gregory Karp.
p. cm.
ISBN 0-13-714173-4 (pbk. : alk. paper) 1. Home economics—Accounting. 2.
Consumer education. 3. Budgets, Personal. 4. Finance, Personal. I. Title. II. Title:
One two three money plan.
TX326.K27 2009
332.024—dc22
2008054616
For Rebecca, Jacob, and Michael
This page intentionally left blank
Contents
Introduction Telling It Straight . . . . . . . . . . . . . . . . . . . . .1
Getting from Here to There . . . . . . . . . . . . . .1
Simple as an iPod . . . . . . . . . . . . . . . . . . . . . .4
Easy Is Hard . . . . . . . . . . . . . . . . . . . . . . . . . .5
When Good Enough Is
Good Enough . . . . . . . . . . . . . . . . . . . . . . . .7
Is This Book Different from
Living Rich by Spending Smart? . . . . . . . . . .9
How to Use This Book . . . . . . . . . . . . . . . . .10
The Power of Three . . . . . . . . . . . . . . . . . . .10
Chapter 1 Spending Smart Redux . . . . . . . . . . . . . . .13
What Is Spending Smart? . . . . . . . . . . . . . .13
When to Spend Your Money . . . . . . . . . . . .14
When to Spend Your Money,
1-2-3 . . . . . . . . . . . . . . . . . . . . . . . . . .15
1. Spend Today . . . . . . . . . . . . . . . . . . . .15
2. Spend Yesterday . . . . . . . . . . . . . . . . .15
3. Spend Tomorrow . . . . . . . . . . . . . . . .16
Why Pay Attention to Spending? . . . . . . .17
Why Pay Attention to Spending?
1-2-3 . . . . . . . . . . . . . . . . . . . . . . . . . .17
1. Magnitude . . . . . . . . . . . . . . . . . . . . . .18
2. Speed . . . . . . . . . . . . . . . . . . . . . . . . . .18
3. Control . . . . . . . . . . . . . . . . . . . . . . . .18
vi The 1-2-3 Money Plan
What to Spend Discretionary
Money On . . . . . . . . . . . . . . . . . . . . . . . . . . .19
What to Spend Discretionary
Money On, 1-2-3 . . . . . . . . . . . . . . .19
1. Things You Care About . . . . . . . . . .19
2. Experiences . . . . . . . . . . . . . . . . . . . . .21
3. Things That Rise in Value . . . . . . . .21
PART I SPENDING SMART TODAY
Chapter 2 First Things First . . . . . . . . . . . . . . . . . . . .27
Getting Started . . . . . . . . . . . . . . . . . . . . . . .27
Taking Stock . . . . . . . . . . . . . . . . . . . . . . . . .27
Taking Stock, 1-2-3 . . . . . . . . . . . . .28
1. Take a Snapshot . . . . . . . . . . . . . . . .29
2. Look Back . . . . . . . . . . . . . . . . . . . . .32
3. Look Ahead . . . . . . . . . . . . . . . . . . . .33
Estate Planning . . . . . . . . . . . . . . . . . . . . . . .37
Estate Planning, 1-2-3 . . . . . . . . . . .37
1. Will . . . . . . . . . . . . . . . . . . . . . . . . . . .39
2. Durable Power of Attorney for
Finances and for Health Care . . . . .40
3. Living Will . . . . . . . . . . . . . . . . . . . . .40
Do You Need a Living Trust? . . . . .40
Identity Theft . . . . . . . . . . . . . . . . . . . . . . . .41
Identity Theft, 1-2-3 . . . . . . . . . . . . .42
1. Be Guarded . . . . . . . . . . . . . . . . . . . .42
Contents vii
2. Buy a Crosscut Shredder . . . . . . . . .43
3. Opt Out . . . . . . . . . . . . . . . . . . . . . . .43
What about Fraud Alerts and
Credit Freezes? . . . . . . . . . . . . . . . . .44
Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Get the Bank Accounts You Need,
1-2-3 . . . . . . . . . . . . . . . . . . . . . . . . . .48
1. Get a No-Fee Checking Account . . .49
Rewards Checking . . . . . . . . . . . . . .50
2. Set Up at Least One High-Interest
Online Bank Account . . . . . . . . . . . . . .52
FDIC Rules: Is My Money Safe? . .53
3. Join a Credit Union . . . . . . . . . . . . . .54
Bill Paying . . . . . . . . . . . . . . . . . . . . . . . . . . .55
Bill Paying, 1-2-3 . . . . . . . . . . . . . . .56
1. Use Direct Deposit . . . . . . . . . . . . . .56
2. Automate Bill Paying . . . . . . . . . . . .57
Automation Drawbacks . . . . . . . . . .58
3. Prioritize in a Crisis . . . . . . . . . . . . .60
Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Chapter 3 Get Fit (Food, Insurance,
Telecommunications) . . . . . . . . . . . . . . . .63
Food at Home . . . . . . . . . . . . . . . . . . . . . . . .64
Food at Home, 1-2-3 . . . . . . . . . . . .64
1. Maintain a Price List . . . . . . . . . . . .64
Is Organic Food Worth
the Price? . . . . . . . . . . . . . . . . . . . . . .65
viii The 1-2-3 Money Plan
2. Stockpile Sale Items . . . . . . . . . . . . . .68
Freezing Times . . . . . . . . . . . . . . . . . .71
Cherry-Picking Pays . . . . . . . . . . . . .72
3. Match Coupons to Sales . . . . . . . . .73
Fun Tangent: Razor Blades . . . . . . .75
Food Away from Home . . . . . . . . . . . . . . . .76
Food Away from Home, 1-2-3 . . . .76
1. Make Freezer Meals . . . . . . . . . . . . .77
2. Use Coupons and Discounts . . . . . .77
3. Skimp on What You Don’t Care
About . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Insurance, 1-2-3 . . . . . . . . . . . . . . . .79
1. Say No to Extended Warranties
and Other Junk Insurance . . . . . . . .79
2. Refinance Your Term Life
Insurance . . . . . . . . . . . . . . . . . . . . . . .80
3. Raise Deductibles on Home and
Auto Insurance . . . . . . . . . . . . . . . . . .84
Telecommunications . . . . . . . . . . . . . . . . . . .85
Telecommunications, 1-2-3 . . . . . . .85
1. Cancel Your Traditional Landline
Phone Service . . . . . . . . . . . . . . . . . . .85
The MagicJack Phone Solution . . . .87
2. Rightsize Your Wireless
Phone Plan . . . . . . . . . . . . . . . . . . . . .89
My Prepaid Phone Story . . . . . . . . .92
Contents ix
3. Regularly Review TV and
Internet Service . . . . . . . . . . . . . . . . .96
Fun Tangent: Don’t Overpay for
Audio-Video Cables . . . . . . . . . . . .102
Chapter 4 How to Buy Stuff . . . . . . . . . . . . . . . . . .105
How to Buy Products . . . . . . . . . . . . . . . . .107
How to Buy Products, 1-2-3 . . . . .107
1. Read Reviews . . . . . . . . . . . . . . . . .108
2. Research Prices . . . . . . . . . . . . . . . .111
3. Reevaluate . . . . . . . . . . . . . . . . . . . .113
Price Protection . . . . . . . . . . . . . . .115
How to Buy Services . . . . . . . . . . . . . . . . .117
How to Buy Services, 1-2-3 . . . . .117
1. Seek Reviews and References . . . .118
2. Research Prices . . . . . . . . . . . . . . . .121
Be Afraid of Commitment . . . . . . .122
3. Reevaluate and Review
Contracts Carefully . . . . . . . . . . . . .124
How to Buy Online . . . . . . . . . . . . . . . . . .124
How to Buy Online, 1-2-3 . . . . . .125
1. Prefer Commodities . . . . . . . . . . . .126
2. Consider Shipping Cost Versus
Sales Tax . . . . . . . . . . . . . . . . . . . . .127
3. Use a Credit Card . . . . . . . . . . . . . .128
Coupon Codes and
Rebate Portals . . . . . . . . . . . . . . . . .130
Fun Tangent: Eyeglasses Online . .133
