Medical expenses can become a huge burden if you aren’t prepared. Even if you think you are prepared, filing bankruptcy may be the only way to handle the medical bills from a catastrophic illness.

In this third installment, we will look at ways to help you counter the banks’ and retailers’ campaigns to get you to part with your money and keep more of it for yourself.

Credit limit. Most credit cards have a spending limit, or credit line limit. Even though the credit card issuer doesn’t want you to charge more than that, they often approve the first few charges that put you over the limit.  And then they can charge you an over-limit fee that just adds to your debt.  Plus, going over the limit can trigger an interest rate increase not only on that card, but any other credit card you hold…even with different credit card companies. So keep an eye on your charges, and stop several hundred dollars short of your limit. Give your self “breathing room” to allow for interest charges, late fees (which you should not have once you sign-up for “auto pay” as we discussed last month), and charges that are applied to your card automatically that you may forget about, like newspaper and magazine subscriptions or cell phone and cable charges.

Budget limit. Just because your credit card company will allow you to charge, for example, up to $10,000 doesn’t mean that you can afford to make monthly payments on that much debt. So if you are struggling to keep up with your minimum payments on your current debt, do not make your financial situation worse by racking up more debt. Stop charging. Period. Some consumers take extra measures to protect themselves, like keeping their credit cards at home or even (as you may have seen on a popular television commercial) freezing them inside a block of ice. As long as you keep increasing your debt, you decrease the likelihood that you will pay off the debt in the near future, or ever.

Spending limit.  Do you have a personal “spending limit”?  A “spending limit” is a pre-determined amount, which could be as low as $50 or as much as $500, that you will not spend without a self-imposed waiting period. What might this look like in real life, and how could it be helpful?  Imagine that you stopped by a big box retailer and noticed a new DVD player on sale for fifty percent off. Your DVD player at home works, but a few times recently you noticed some minor problems with it. It costs $50 on sale, which happens to be your self-imposed “spending limit.” You remember that you promised yourself if you wanted to buy anything that cost $50 or more that you would wait a minimum of two days before taking action. Here’s what could happen in those two days:

• You might discover that a $12 cleaning kit fixed the minor problems you had been having with your DVD player, and now you don’t need a new one at all.
• If your DVD player does break, you might notice one on Craig’s List for less money that works just as well.
• You might find a similar unit at a competitive retailer for less.
• You might remember that you have a birthday coming up and decide to wait and use the money you normally receive from family members to pay cash for the DVD player. Yes, the fifty percent sale that you saw will be over by then, but in today’s economy, retailers will soon be offering another sale to encourage cautious consumers to part with their money.
• You might decide that no matter how cheap the DVD player is, you need to save up cash to pay for it because you cannot afford to increase your credit card debt any further.  Even if you save your money and pay $65 cash a few weeks later, that is cheaper than paying $50 on credit card and taking months to pay it off. The added interest could easily turn that $50 DVD player into a $95 or $125 model over time.

Try it. See what can happen when you exercise self-control and fiscal restraint. Learn to say “no” to your impulse desires, or at least start saying “not today.” Self-imposed limits are never fun in the excitement of the moment when you want to buy. The sense of pride and accomplishment you will feel when you take control of your spending, instead of letting your spending control you, will be well worth it.

If you are having trouble making the minimum payments on your credit card bills, or if your creditors are threatening you with legal action, it is time to consider all your options.

You may think of bankruptcy as a dirty word. Filing bankruptcy in Texas provides protection for your home, many of your personal belongings and retirement savings.

If you have over $10,000 in credit card debt that you are struggling to keep up the payments on, you should contact a Dallas/Fort Worth bankruptcy attorney.

Once you get your meat home, do not just throw your meat into your freezer. Remember that your grocery store packages the meats for refrigeration in their cases, not freezing in your home. Also, you have probably bought your meat in bulk; it takes a long time to thaw ten chicken breasts. If you only need four per meal, shouldn’t you freeze them to meet your serving needs? You need to make a few modifications to get them freezer ready:

• Invest less than fifteen dollars in Reynold’s Handi-Vac Vacuum Food Storage System. You’ll get a battery-operated, hand-held device that removes air out from specially designed zip-top freezer bags. Of the systems readily available at this price point, I think it is the best. Air is your enemy when it comes to freezing foods, and this system gets the air out.
• Open each package of meat and discard the grocery store packaging as well as any fat you wish to trim off.
• Consider how you’ll use each cut of meat. For example, if you plan to serve some chicken in a marinade, go ahead and mix the marinade now and put it into your freezer bag with the meat. When you are ready to thaw it, your meat will be completely marinated and ready to cook.
• With chicken pieces, either freeze in one bag what you will eat at one meal, or to use fewer freezer bags, use this simple technique:
  • Find the largest shallow dish that will fit in your freezer, either a 9 x 13 casserole or a cookie sheet.
  • Place the chicken pieces on it, being careful that they do not touch each other. Place them in the freezer until they are hardened on the outside, usually about two hours. Then put them in your freezer bag and remove all the air.
  • When you are ready to use them, open your bag and easily remove just the pieces you need; they will not freeze together in one huge lump because you individually froze them first. With the Reynolds Handi-Vac System, you can reseal your bag and place it back in the freezer for your next meal.
• After you seal and remove the air from each bag, use a permanent marker (not a ballpoint pen) to write the date and contents on the bag. Gently smooth the contents out so the bag is flat. Stack them in your freezer, and enjoy the convenience of pulling out meat that is ready to cook. Plan on thawing each bag overnight in your refrigerator before use.
• Keep your frozen meats on the freezer shelves, not in the door. Plan on using them in no more than two to three months.

You can also use your Reynolds Handi-Vac System to save space. When I buy frozen garlic bread, the box used to take up space for weeks in my freezer as I used a few slices here and there. Now, I take the slices out and freeze them in a bag as noted above; I copy the cooking instructions on the bag in permanent marker and recycle the cardboard box. You save freezer space while keeping the food fresher, and you can easily reseal the bag after removing what you need for a meal.

• No matter how low the sale price, it is only a deal if you can afford to pay for it today. Instead of stocking up on everything that is on sale this week, start small if that is what your budget permits. If milk, cheese and butter are all on sale, but you only have $10 extra to spend on groceries, just pick one item and buy the extra inventory you can. If you do this each week as you have extra money and as things are on sale, eventually you will have a freezer full of things you can use that you bought for way below retail.
• With dairy items, only buy what you will realistically use in the next two months. According to Kraft’s website, their block and shredded cheeses may safely be frozen that long in the original, unopened packages.  Schepp’s Dairy’s customer service line confirmed that their milk and butter can be frozen safely for up to two months. On milk, take these simple precautions before freezing:
  • Open the container and pour out one cup per gallon, as the milk expands as it freezes. Place a small piece of plastic wrap over the container opening, and then put the lid back on.
  • Freeze in an upright position.
  • Thaw in the refrigerator over several days. Once thawed, use within one week.
  • In whole milk, fats may separate slightly upon thawing. Shake well before serving. This is not an issue with low-fat or fat-free varieties.

Take a few minutes to seriously look inside and see what you have. You do not have to clean out the entire freezer at once; commit to cleaning out one shelf a day, fifteen minutes at a time. Throw away anything that you know you will not use or that has spoiled due to freezer burn. As you find things frozen in large plastic containers or cardboard boxes, re-package them in smaller freezer zip-top bags.

Take stock. Once you know what you have, make a list. If you have a freezer full of chicken breasts, it does not matter how cheaply you can find them on sale if you do not need them. Consider keeping a short list on the front of your freezer that lists your “extra stock” of items you find on sale. This helps you remember to only buy what you need and can readily use.

Did you know your freezer could be saving you money every week on your grocery bills? Even if you do not have a deep freezer, you can stock up on basic essentials at rock bottom sale prices.

A few simple steps will be helpful to get you in saving shape. I will post one each day this week.

Here is another way to use the grocery stores’ sales circulars…

Make Your Own Sale at Wal-Mart. For my family, I do the majority of our shopping at Wal-Mart. Many people do not realize that Wal-Mart will match other store’s advertised prices with a few qualifications. Start by asking to speak to the store manager or the grocery manager and make sure you understand the policy at your local Wal-Mart before you load your grocery cart. The following is based on my consistent experience, as well as the experience of other “ad comparison shoppers” I know.

• You must present the ad at check-out, and expect to show the cashier the ad’s date to prove the sale price is current. So take the entire ad with you, not just the page featuring the items you want.
• Wal-Mart will match actual sale prices, but not “buy one, get one” or “percent off” sales.
• Brands and sizes matter, so if the competitor’s ad offers their store-brand sixteen ounce jar of pickles on sale, do not expect to get that same price on a national brand or a different size jar. You would need to purchase Wal-Mart’s store brand to get the sale price.
• Some locations honor sale prices on meats and some do not. Be sure you understand your location’s policies.
• My experience has been that Wal-Mart’s every day price often beats a competitor’s sale price, so that is why I write the details about the competitor’s price on my grocery list. If Wal-Mart’s price is cheaper and you still decide to buy it, cross the item off your list and toss it into your basket. If the competitor’s ad price is cheaper, circle it on your list and place it in a special area of your basket (I use the front area of the basket for this) so at check-out, I can easily find the items and my notes on which ad features the better price.
• Take a clipboard with you. It seems like a small point, but having your ads and your list clipped together on a firm writing surface makes all of this much simpler.

It may take you a few trips to get comfortable with using competitor’s ads at Wal-Mart; I have been doing it for a few years now, and I regularly save at least $10 – $20 every week just by using competitor’s ads. Add to that the savings in time and gasoline because I do not make multiple trips to multiple stores, and my savings go up even more.

If someone offered you $10 to $20 each week to make one small change to your grocery shopping, would you do it? That could be $500 to $1,000 per year. That is what I save for my family each week by using this tip. Commit to trying it for the next four weeks and see how much you save.

Check the sales. Each week, grocery stores compete for your hard-earned shopping dollars by printing flyers that show all their sales. If you are in the DFW area and would like to receive these flyers delivered to your home for free, go to www.DallasNews.com/briefing.  The Dallas Morning News recently started printing “The Briefing,” a smaller scaled-down version of their traditional paper. Instead of daily delivery, “The Briefing” is only delivered Wednesday thru Saturday. If your home is within the delivery area, you may be able to receive it for free. Why does this matter? The Wednesday edition of “The Briefing” contains the grocery store ads, which are like gold to the shopper who has learned to use them.

We discussed in a prior posting the importance of making a list before shopping. It keeps you focused in the store and helps you buy only what you need, not what the grocery store wants you to take home. Hopefully you have adopted this habit and are considering each week what you need for the meals you plan to cook as well as for special items, like cookies for the potluck at your office or poster board for your child’s school project.

After your essentials are on your list, sit down for fifteen minutes with a marker and pen and go thru each store’s ad. Even if you do not regularly shop that store, still go thru the ad. You are looking in particular for anything that your family use regularly, which includes paper goods, cleaning products, dairy items and meats, produce…you name it.  As you find an item on sale that you use regularly, make a note on your grocery list of which store (I abbreviate with the first letter of the store’s name), the item, the item’s size (the nine ounce bag of your favorite chips may be on sale, not the sixteen ounce size), and price.

Last month, we looked at ways to save money on our credit cards by negotiating for lower interest rates, exploring balance transfer rates on our existing cards, and researching options for new lines of credit at better rates. This month, we will look at strategies to simplify our payments to all the people we owe. 

Chart What You Owe.  This month’s suggestions starts just like last month’s: make a list of everyone you owe, how much you owe each month and when the payment is due.  Then take your chart a step farther. If you get paid twice a month, list which bills you will pay from the first paycheck each month and which you will pay from the second. Include on your chart contact numbers for each person or company you owe for easy reference. 

Pay on-time, every time, with “auto pay.”  Have you ever forgotten to mail your credit card payment or mailed it a few days late? Then you know what happens next. You get letters and phone calls from the credit card company, asking where their money is, and you incur expensive late fees and pay additional interest. And, late payments can trigger credit card companies’ computers to review your account for a possible interest rate increase. Paying late with one credit card company can even result in increased interest rates with your other credit card companies, even if you pay them on-time. Credit card companies make huge profits off of late fees; stop padding their profits by signing up for “auto pay.”

• “Auto pay” is a free service that all major credit card companies offer, but you must request it. When you sign-up for it, you give the credit card company permission to draft your bank account for the amount you specify each month. You may choose to authorize them to draft the minimum payment, the full balance, or the minimum amount plus a specified amount.
• Once you enroll in “auto pay,” you will still receive a monthly statement from the credit card company showing what you owe, but there will be an added line stating that the payment you requested when enrolling will be automatically drafted from your bank account on the agreed upon date.
• Each credit card company has a different process for enrolling in “auto pay.” Some allow cardholders to sign-up by telephone; some require enrollment by filling out forms and returning them by mail; some allow cardholders to enroll online. Call each of your credit card companies directly to find out how to sign-up.
• If you have several different credit card accounts with the same company, you must enroll each individual credit card account separately for “auto pay.”
• Do not assume “auto pay” has started until you see written confirmation. The credit card company should mail you a letter stating exactly when your “auto pay” will start, which bank account will be drafted each month, on what date, and for what amount. Continue to make your monthly payments until you see in writing that “auto pay” is ready to start.  Save the written confirmation you receive with your account statements so you may refer to it as needed in the future.
• All you have to do after you enroll is make sure that the amount the credit card company will draft from your bank account is actually in your account on the draft date each month.
• Keep in mind that “auto pay” is different than making a payment online or paying via online banking. With “auto pay,” once you enroll, no action is required on your behalf each month to make your payment, other than keeping funds in your bank account; the credit card company is responsible for drafting your account. When you make a payment online or pay via online banking, the payment does not draft each month until you take action to authorize it each time.
• Make sure you understand during enrollment how to cancel or change your payment amount with the “auto pay” program. Some companies accept a verbal change or cancellation, while some require it in writing. Be sure you understand in advance how to make changes or cancel your enrollment before you start. 

Automate the rest of your payments. The days of writing a check and driving a few blocks to make your utility payment in person are long gone for most people. For most people, the payments you make each month are mailed out-of-town and out-of-state. So stop relying on your memory and the efficiency of the United States Postal Service to pay your bills on-time. Automate them with these services:

Online bill pay. Most major banks allow you to pay your bills online. If your bank does not offer this service, or charges a fee for it, consider moving your checking account elsewhere.

•          Once you have a bank that offers free online bill pay, you simply enter each of the people or businesses you pay as a “Payee.” You will need their payment address and telephone, your account number, and information on how much you want to pay each month. With online bill pay, you must log-in to your online account each month and instruct the bank which “Payees” to send money to and how much on which dates.
•          Some online bill pay services allow you to set-up recurring payments if the amount does not change. For example, if you owe $150 on a student loan each month, or if you have agreed to send your dentist $25 each month to pay off a procedure, you may be able to instruct your bank via online permissions to automatically send these payments from your checking account each month.
•          Some more sophisticated online bill pay services even allow you to specify for how many months to send the payment. If you owe your dentist $130, you could authorize your online bill pay service to send $25 per month for four months and then $30 in the fifth month to pay off the debt.

Auto pay for other bills, too.  We discussed at length using “auto pay” for your credit cards; other companies may allow you the same option. Most mortgage and utility companies have free programs that will automatically draft your payment each month directly from your checking account. Some prefer this to online bill pay; the choice is yours.

Keep in mind that the most important step to paying your bills on time is to have a master list of what you owe each month. You may be coasting along just fine paying your bills from memory each week.  It only takes one life-altering event, such as a serious illness or a death in the family, to take your focus off of your financial routine, which can result in costly late fees and increased interest rates.

So commit today to creating a chart that lists all of your monthly obligations and debts. Then decide what options for automating your payments work best for you: logging onto online bill pay periodically to authorize your bank to draft your checking account to pay each bill, authorizing your credit card companies and other service provides to automatically draft your checking account each month with “auto pay” or a combination of the two. But stop sending checks that can get lost or delayed in the mail.  You will save time and money (think how many fewer trips you will make to the post office to buy stamps) and will avoid late payments. In the long run, you will probably see a positive effect on your credit score.