Read the fine print, please!

I was on the phone with a customer and his wife today. The wife, who speaks no English, signed for the loan for her daughter so that she could go to school. This raised some red flags for me, but I continue with listening to his concerns.

After getting more information about the situation, the customer stated that his wife should not be held accountable for the loan and the interest accrued because she did not understand or read what she was signing.

... Wait, what?

You're wife signed something that she could not understand? The promissory note could've asked for your first born as payment!

I know this may sound crazy, but if you don't understand what you are signing, you can ask for clarification or just not sign the document until satisfactory clarification is given. I wish this were an isolated case, but it is not. I've seen a lot of people ask for money, sign a promissory note, and assume that it's either free money or that they can't be held responsible for it because they either did not receive a billing statement or did not read (or understand) the fine print about how the loan works.

Let's consider a scenario:

1. You tell a company that you want something (money)
   
2. The company puts a paper in front of you and says these are the "terms" that are involved with giving you the thing that you want
3. You sign the paper
4. You get what you want (but at a price)

Would you just blindly sign the paper without looking through the document for anything that may raise concern? Anything - and I stress - anything that involves your signature should be read and understood fully before you sign it.

I found it interesting that South Park actually made a parody of this behavior in the episode "HumancentiPad". To give a brief overview, one of the main characters (Kyle) keeps agreeing to Apple's terms and conditions without reading the fine print, and it causes him a lot more trouble than what he bargained for (becoming part of the HumancentiPad project). Despite being snowballed by the scenario, he keeps repeating the same mistake over and over again. Eventually, his father finds a loophole in the terms and conditions so that Kyle can regain his livelihood back.

While this is an unlikely case, it's common for companies to slip in information within the clauses of a legal document that may attach unwanted circumstances along with desired outcome as part of the arrangement, or make backing out of the agreement difficult or impossible - just to name a few examples.

>> Please... read the fine print. <<

Investment - When Savings are Small

A reader writes:

I'm thinking of investing my money. After I pay my monthly bills and set aside an amount for entertainment and what not, I have enough to put a little more than 10% in my savings. Where do you think could I best invest my money? I'm still single so no family to support.

One of the best investments a person can make if there isn't a whole lot of cash to go around is finding ways to reduce monthly debts and obligations - especially if those debts involve accruing or capitalizing interest.

Look at your monthly obligations and break them into categories:

• Debts that can be paid off [Car loans, student loans, mortgages]

In the debts that can be paid off, setting aside some extra money to pay off these debts actually can save you in the long run. The reason is that these financial obligations usually carry interest - which can make that debt more expensive as the interest compounds over the life of the loan.

Consider a $10,000 car loan at 8% APY. If you set up a plan to pay it off on five years, and make regular scheduled monthly payments, the total interest paid is $2165.84. Now, lets assume the same scenario, except that the loan is on a payment plan to be paid off in four years. The total interest paid is $1718.20. You save $447.55 by just paying it off one year earlier.

If you found this information useful, and would like to calculate your own loan, visit this link:

Loan Calculator

• Debts that can not be paid off [Phone service, electric, heat/ hot water]

In the debts that can not be paid off, the best way to save money is to cut out things that are not being used. If you have a gym membership, but don't go to the gym, discontinue the membership. Depending on where you go, that is a savings of $150 to $800 a year.

Other ways are developing good habits about home appliance usage. This doesn't mean unplug your coffee machine or other little things. Consider larger, more obvious habits - such as leaving a computer or TV on all day. Some computers consume as much as 1kilowatt hour worth of power - if you look at your electric bill, and evaluate your kilowatt hour usage, you can get an idea how much effect this will have on your bottom line. Since I live in NJ, it costs about 9 cents per kilowatt hour. It would cost roughly $65/mo to keep a 1,000 watt computer running 24/7.

• Recurring habits [Smoking, impulse buying, upgrading]

Anybody who smokes knows how much a single pack costs. If you find yourself short on cash, you might want consider kicking the habit.

Another recurring habit is impulse buying - do you find yourself leaving the store with more than what you had planned to buy? Does this happen often? This might be the reason why some of your money is disappearing.

The last and arguably most prominent habit is the need to *upgrade*. If you are someone who likes to stand in line for the latest release of X gadget, spending three times the market value that the item will be marked at a year later, but find yourself strapped for cash for other, more essential things, it might be time to start holding out.