What else is new?

Long time ago, when GW was still president and Obama was only a sparkle in the votes eye, the news about the Iraq and how many solders were dying there were as abundand as the money that flowed in Washington DC's veins. Now that Obama is actually the President, I ask you this - when was the last time you heard anything about Iraq? Did you notice that more than 80 solders dies in Iraq in February. Is this the change you were looking for?

So you think youve cut your spending? Here are some ideas you probably havent thought of.

These are extreme times. Do they call for extreme measures?

There's no question that widespread layoffs, shrinking retirement accounts and rising prices have families buckling down financially. But are they thinking of everything they can? Should they be cutting back in ways that might never have occurred to them?

Even if families have enough savings to live on for the next few months, or even years, the future seems scarier now than it once did," says Carl Johnson, a Peterborough, N.H., financial adviser.

So what's a family to do? Here are four unorthodox strategies for saving money. People have already managed to save by following at least one of these strategies.

Enroll Your Kids in a Virtual School
One way to cut your family's education costs is to enroll the children in virtual public schools.

Though not available in all states, a number of companies have started virtual schools that conduct elementary- and high-school classes online. Students take the classes at home, usually tuition free. Funding for the programs typically comes from the state.

K12 Inc., based in Herndon, Va., operates virtual public schools in 21 states. Its Web site, www.k12.com, shows where. K12 gives each of its high-school students his or her own computer -- in a family with more than one grade-school student enrolled, the kids may have to share -- and subsidizes the Internet connections. Its curriculum includes Advanced Placement classes.

Mary Ann Ridenour's daughter, Anna Marie, 15, and son, Aaron, 17, have been attending Ohio Connections Academy, run by Baltimore-based Connections Academy, since 2003. The children previously attended private school, and Ms. Ridenour estimates she is saving $7,000 to $10,000 a year per child by switching to the virtual school. The local public schools, she says, weren't challenging enough. The family also saves on clothing, doctors' bills and food, she says. Her stay-at-home kids feel no peer pressure to buy the latest in clothes and gear, rarely get sick and eat lunch at home.

Susan Fancher, vice president of marketing for Connections Academy, says virtual school works for many students, but it's not right for all. Students work with teachers online, but many also have learning coaches -- usually a parent who serves as a face-to-face resource and helps the student stay on track. "This often means families make sacrifices for students so they can be there every day," she says. The company's Web site, www.connectionsacademy.com, lists the states where its classes are available.

Go Back to Bartering
Barter is back, thanks to Web sites that make it easier to match up people wanting to exchange specific goods and services. For families, barter Web sites offer an innovative way to get a new video game, plumbing repairs or even a vacation rental without cash.

"Its back to the cave, where the earliest form of commerce was barter," says Michael Satz, chief executive of the recently launched barter Web site BarterQuest.com. Each trading partner determines what is a fair exchange, he says. Barter especially makes sense for parents, because their children constantly require new things, and for students who are always short of cash, says Mr. Satz.

BarterBee.com allows consumers to trade CDs, DVDs and games. Craigslist.com has a barter section, too. Bill Brady, who is semiretired in Boca Raton, Fla., is using Craigslist to barter an informal time share for his West Palm Beach, Fla., one-bedroom penthouse.

Bartering does have its challenges. It's not always simple to find an interested partner for the other half of your trade, even on the Web, and a certain amount of trust is required from each party. Bartered goods and most services are considered taxable revenue, too, and must be reported to the Internal Revenue Service in the year in which they are obtained, says George Papadopoulos, a Novi, Mich., financial adviser and certified public accountant.

You can improve your chances if you focus on an equitable trade, are upfront and detailed with barter terms and are willing to get creative, experts say.

Tiffany Gentry, an out-of-work executive assistant in New York, is looking on Craigslist.com for someone who can train her in office-productivity software programs like QuickBooks and Photoshop. In return, she is willing to give English lessons or assistance in organizing and cleaning. "It's a great to time to increase my skills," she says, "and I didn't want to spend money on a class."

Cut Out the Extras for a Month
If you're willing to make some sacrifices, declare a "want-free" month, says Ramsey Bova, a Lexington, Ky., financial adviser. Want-free months refer to a one-month period in which a family only spends money on necessities such as bills, food and shelter.

"The purpose is to witness how much money we are wasting on items that provide no real benefit," says Ms. Bova. Although the challenge might feel extreme at times, it could be critical for families who don't have adequate emergency funds stashed away. (Ms. Bova recommends about 12 months of emergency savings during tough economic times.)

The challenge might be harder for a larger family, but planning can make it doable. Ms. Bova's clients Angela and Rick Conner, who have three children under the age of 3, saved a few hundred dollars during their want-free month by cutting out fast-food stops while running errands, and avoiding restaurants in general.

"It was nice to know there is more we can do to stretch the budget if we need to," says Ms. Conner, who adds that the experience has helped change the family's spending habits permanently. The family no longer buys reserves of groceries, for instance, unless there is a sale item or they have coupons.

Jeb Collier, a New Bern, N.C.-based financial adviser, says a "want-free" month will only work if families do it right. "If they only go half-way, the exercise is moot," says Mr. Collier. A half-hearted attempt, he says, could be thinking that a "necessity" is whatever falls within current spending habits. He says the biggest challenge is being honest about what is a "necessity." Participants also might come out of the exercise like someone coming off a diet, and binge to make up for what they missed, he says.

Stop Supporting Adult Kids
"One of the hardest expenses to cut out is assistance to adult children," says Morris Armstrong, a Danbury, Conn., financial adviser. If a son or daughter is counting on parents to help pay rent, health-care bills, or get an education, suddenly stopping that support could throw the child's life into financial chaos. Some advisers have seen parents helping more in recent years as adult children carry large loan payments and face possible layoffs.

But while it's a difficult move, ending assistance to adult children may be necessary for parents who only have a few more working years of their own in which to rack up savings for retirement, or who have seen their savings dwindle due to the market turmoil.

Cutting financial ties may help parents feel a greater sense of security in their later years. It may also allow them to help their children again when times improve.

It's best to break the news in person, says Atlanta psychologist Mary Gresham. "It's a bad move if you do it suddenly without notice and you are breaking a promise you made to your child," she says. Dr. Gresham says the ramifications depend on how the situation is handled. In the worst case, she says, "the relationship is broken."

Despite recent gains in the stock market, portfolios remain badly damaged by the market performance of the past 18 months. With jobs still falling away at a rapid clip, the recession is still a serious concern and policymakers are scrambling to implement expensive and complex solutions.

As we wade through these difficult times, how should you think about your own financial situation? A good starting point is to remember what Kipling wrote: Keep your head about you as everyone is losing theirs.

It's a great temptation in times such as these to think things will never get better. But if history shows us anything, things do eventually improve. In fact, judging by the standards of past economic shocks, this recession is getting long in the tooth. The average recession since World War II has lasted 11 months, and the longest was 16 months in 1981-82. Our current crisis is 15 months old.

Also, hints of bottoming are starting to surface. Oil prices have begun to rise, indicating some increased demand. China is importing aluminum again. In addition, the stimulus plan will start to kick in later this year, creating jobs and, perhaps, helping soothe some of the enormous fears in the marketplace.

So, there are definitely brighter times ahead. Until then, here are some strategies to help you keep your head about you: five things that you definitely should do and five things you definitely should not do, as you weigh how to protect and build your assets.

Let's start with the five things you should definitely do:

1. Reduce Your Expensive Debt
Too many of us overextended ourselves during the past decade with credit cards and other debt. These bills now hang over people like the Sword of Damocles.

The first order of business is to reduce this expensive debt, even before saving for retirement or investing in the stock market. One smart strategy is to take advantage of much lower gasoline prices. One year ago, gas cost more than $4 a gallon in much of the country. Today, it's less than half that. You should devote the money you save to eliminating your credit-card debt.

2. Get On a Budget
Thrift is the new black. That means getting on a budget, measuring exactly what you spend and looking for ways to save money. Perhaps you are eating out more than you appreciate or spending too much on a cup of coffee. Budgeting is a lost discipline for many people and one that should be rediscovered.

There are several free Web sites, such as Mint.com, Quicken.com and Wesabe.com, that can help you sort out your spending and give you a sense of where you can save money.

You upload password information for your credit cards and other accounts, and the sites aggregate and sort the data, so you can see how much you're spending on, say, groceries, eating out and movies. You can then track your spending habits over time and make adjustments to save money.

What's more, some of these sites, notably Wesabe, also have active communities discussing various budgeting issues. If you are just getting started on developing budgeting discipline, talking with others who are doing the same can help make it easier.

3. Guard Against Inflation
Currently, inflation is a relative nonissue, and most commentators -- not to mention the Federal Reserve -- believe that it won't become a problem anytime soon.

Yet, many things are taking place that could raise the specter of inflation in rapid order.

For starters, the federal government is spending money like a drunken sailor. There's the nearly $800 billion stimulus program, a proposed budget of $4 trillion (up from $3 trillion in the previous year) and hundreds of billions more in bank, real-estate and credit-rescue packages. On top of that, short-term interest rates, set by the Fed, are essentially at zero and quite low in other countries as well.

All of which is like so much kindling waiting for a spark. Once that spark hits, growth and inflation could come roaring back to life.

For that reason, it's smart to have a portion of your fixed-income investments in Treasury inflation-protected securities, or TIPS. These bonds are backed by the U.S. government, like normal Treasurys, but also have built-in protections that boost returns to account for inflation.

Another inflation-hedging strategy is to invest in commodities. When growth resumes, demand for oil, copper and other commodities will rise, making their prices increase. A warning, though: Given the volatility of commodities, financial planners recommend that investors have no more than 5% to 10% of their portfolio in this sector.

4. Have a Stock-Market Strategy
Despite the recent sprint in share prices, investors remain leery of the stock market. It will take more than a four-week rally to soothe the pain caused by the stock market since it tumbled from its late-2007 highs. When so much doubt surrounds the stock market, it's usually a time to think about investing in equities. Despite the horrid pain most of us have suffered in the market during the past 18 months, stocks, like the economy, will not remain down forever.

That doesn't mean going whole-hog into the market, however. Consider coming at stocks first through your retirement account. For many of us, that account has a longer time horizon and built-in tax efficiencies, and often comes with a corporate match -- which is essentially free money.

Outside of your retirement account, be sure to maintain a diversified approach among stocks, bonds and cash. A good rule of thumb is to use your age as the percentage of assets you should have in safer bond investments. Thus, if you are 50, you would be split 50-50 between stocks and bonds. If you want to be more conservative, you'd carve back some of the stock exposure and leave it in cash.

Even with the recent runup in stocks, you still might have a larger-than-usual chunk of your assets in bonds these days, because bonds did well last year and have remained solid this year. If that's the case, rebalancing toward stocks makes sense, especially with their prices so low.

5. Preserve What You Have
One of the lessons of the past few years is that the stock market and your home are not ATMs. They are assets that can rise and fall. Having a strategy to preserve your gains is prudent in these challenging times.

Along with diversification of assets -- stocks, bonds, cash -- maintain diversification in the stock market, as well. Buy broad, low-fee index funds, rather than individual stocks, to lower your exposure to risk.

And maintain a rainy-day fund in safer places, such as TIPS, certificates of deposit or highly rated municipal or corporate bonds. A good rule of thumb is to have a reserve of six months' earnings in case of a job loss.

So, what should you definitely not do?

1. Don't Bury Your Money in the Backyard
With things the way they are, it's tempting to simply opt out altogether. Fear of financial-system failure, the uncertain nature of the stock market and just a sense of foreboding have people thinking that it's smarter to keep their money in the backyard, a mattress or an empty can.

But it really isn't. The bank-insurance system works for holdings under $250,000. I know because my bank once failed, and the transfer of assets was seamless. So, at least keep your cash in certificates of deposit earning some sort of return. An overabundance of fear and caution can cost you money; don't let that happen to you.

2. Don't Chase Returns
This is a great temptation in any market, but especially so today. Bonds had a great run last year, but some analysts believe they may just be the next bubble waiting to burst.

In short, don't double down on an asset that has had such a tremendous run. You are likely coming to the game too late, since most of the gains have already been made. That can skew your portfolio too sharply in a single direction, making you vulnerable to a decline in previously hot asset groups.

Look at it this way. In the past few years, the temptation to chase returns led people to buy too many houses, invest too heavily in a soaring stock market and aggressively bid up oil. All of it ended badly.

3. Don't Abandon Diversification
There's a great desire now to stay safe by holding only cash or only Treasurys. This kind of behavior is really just the same as chasing performance. Be disciplined. Stick to a diversified strategy and rebalance your holdings every year to reduce your exposure to the high-fliers.

4. Don't Stop Saving for Retirement
In times of turmoil, we tend to focus on what's right in front of us: the current bills, the savings account and what the day will bring. But we are all still going to want to retire at some point, so that means remaining disciplined about saving for retirement.

Employer 401(k) programs remain a good vehicle, even if the stock market has smacked their holdings. These programs allow you to invest money tax-deferred, and many companies, as noted, provide a corporate matching program.

Rather than ignoring your account statements, as many of us have done, take a look at them and make sure that your holdings are diversified and balanced. Ignoring your savings -- or discontinuing them -- will come back to haunt you when you want to leave off working and relax on the beach.

5. Don't Ignore Common Sense
Much heartbreak in the recent past has stemmed from an ignorance of common sense. Fraudsters promising overabundant returns snookered many investors. Some people viewed housing and the stock markets as never-can-lose gambits. Others spent far more than they had.

Personal finance, at its heart, boils down to common sense. You have to eliminate your high-cost debt and get on a budget. You must save for retirement. And you need to make sure that you own a home you can afford and enjoy, as opposed to seeing it as a get-rich-quick scheme.

In short: Be prudent, save money, invest wisely. Getting back to these very basics will help all of us rebuild our portfolios and set sail for a better day.

Banks should wake up and realize whos moey this is
Bank of America Corp. is raising interest rates on as many as four million U.S. credit-card customers who carry a balance, becoming the latest bank to crack down on people who don't pay off their bill every month.
Starting with June account statements, any credit-card customer who carries a balance and has an interest rate below 10% will see his or her rate jump into double-digit territory. A company spokeswoman declined to provide an exact number, saying the changes would affect less than 10% of the bank's card customers in the U.S. The bank has 70 million card customers world-wide, but doesn't break out the number of customers who are in the U.S. "It impacts a small portion of our cardholders," said Betty Reiss, the spokeswoman.
The bank's move follows similar rate increases that other banks, including Citigroup Inc., J.P. Morgan Chase & Co., and American Express Co. have implemented in recent months. The banks, facing rising delinquencies, blame the economic turmoil. Many have been tightening the screws on people with less-than-perfect credit, but now they're pinching a broader range of customers who have good credit records, but carry a balance.

On Tuesday, Tamara Smith of Burlington, Vt., got a notice from Bank of America that her 7.9% rate will increase to nearly 13%. She immediately called the bank and opted out of the change. That means she keeps the 7.9% rate on her roughly $2,000 balance, but can't use the card for new purchases without having the higher rate apply to her entire balance.
So Ms. Smith is shopping around for another card. And while she has found a 0% promotional rate from Citi, she's planning to open a credit card with her local credit union instead. "I just don't have any assurance that Citibank won't pull the same thing," said the 51-year-old co-owner of a computer-software company.
The rate increases come as many Americans are losing their jobs and losing easy access to other forms of credit, like home-equity loans. That makes millions of cardholders even more dependent on their credit cards to get by.
The Federal Reserve and other bank regulators passed rules in December that would limit banks' ability to raise credit-card interest rates. But that doesn't start until July 2010.
Now, Congress is considering separate bills that would impose stronger restrictions on banks much sooner. Last week, the Senate Banking Committee approved its version of the legislation, which is waiting for a full Senate vote. A House subcommittee passed similar legislation last week.
The banking industry has said that the new federal rules and the proposed legislation will restrict its ability to manage risk and will force issuers to be stingier with credit and promotional offers. In a presentation to investors in February, Chase executives laid out various strategies they were exploring to deal with the new regulatory environment, including implementing annual service fees, shortening the duration of introductory interest rates and offering higher interest rates for new customers.
Bank of America said it started notifying customers of the rate increases last week. "The increase on these accounts reflects the current economic conditions where our cost of providing credit has significantly increased," Ms. Reiss said. The average annual percentage rate on the affected accounts is 8.5%.
Consumer advocates see another motive. The banks "want to mess with people before they can't," said Ed Mierzwinski, consumer program director with the U.S. Public Interest Research Group, a consumer advocacy group in Washington, D.C. "Every day they can earn income at a higher interest rate is more profits for them."
Credit.com, an educational credit Web site, started hearing from customers complaining about Bank of America's rate change on Saturday, said spokeswoman Emily Peters. She advises customers to pay off their balances, if possible, but keep the card open since closing the accounts could hurt their credit scores. "The best possible option would be to leave the card dormant and use it every six months" to prevent the issuer from closing down the account, she said.
In January, Chase Card Services changed the terms for thousands of customers who had low interest rates but were carrying a balance. In Chase's case, customers had to agree to pay at least 5% of their balances every month instead of the previous 2%. If they couldn't meet the higher minimum payment requirement, they would have to give up their promotional rate and accept a higher one instead.
Chase's change sparked a number of class-action lawsuits from angry consumers who had taken advantage of the bank's promotional offers. Separately, Citi and American Express raised the regular interest rates by two to three percentage points across many of their cardholders last fall.
In some cases, banks are offering carrots to get customers to pay down their balances. In February, for example, American Express offered select customers a $300 AmEx prepaid gift card if they pay off their balances and close their accounts.
Sandra Frye of Phillips, Wis., said the recent tightening by banks has prompted her to pay off her balances more quickly. "I won't be adding to the economy because I'm going to pay these guys off and get them out of my hair forever," said the 66-year-old. Ms. Frye, an adult home-care provider, said Bank of America notified her that it was going to raise her variable rate to 13.74% from 9.74%. She is in the process of transferring her $1,700 balance on the card to a credit card with Wells Fargo & Co. offering her a promotional rate of 0%.

The Rising Price Of Credit
As banks face higher costs, they're repricing more customers' accounts. Here's what to consider:
Higher rates typically affect customers who carry a balance.
Customers should be able to reject the higher rates -- although they may have to close the account or stop using the card.
New federal rules will limit rate increases -- but only starting in July 2010.