Check out this letter to the editor that was in today’s Wall Street Journal:

In your Dec. 1 editorial “Messing With Malpractice Reform,” you urge the Illinois Supreme Court to “side with the patients and the rule of law” in considering a case that could overturn the state’s cap on damage awards. Yet the editorial never mentions the patient who is at the center of that case.

She is a three-year-old little girl named Abigaile LeBron, whose life has been forever changed by the severe brain damage she suffered as a result of medical negligence. It is likely that Abigaile will have to be fed through a tube for the rest of her life. She will never develop cognitively or physically as her peers do. And she will likely never live independently. It is inarguably a very painful tragedy for Abigaile and all who know and love her.

The insurance industry and its brethren in the tort reform world have argued that Abigaile’s compensation for lifelong disability, pain and suffering should be arbitrarily limited, despite what a jury of average citizens may decide. The question before the Illinois Supreme Court is whether the Illinois Constitution allows Abigaile’s rights to be limited in this fashion to the benefit of insurance company profits. Twice before, our state’s highest court has decided in favor of patients and against the insurance companies that would limit these rights to protect their own profits. No new arguments have been offered by the insurance industry.

You argue that a reduction in malpractice premiums and the return of doctors to the state have resulted from the law containing caps. Nothing could be further from the truth. Not one case has been litigated under the new cap in Illinois. The simple fact is that those positive developments have resulted from strong, long-suppressed insurance reforms in the legislation. That law has now forced malpractice insurance companies to provide greater transparency on rate-setting and payouts that has in turn spurred competition, motivated more companies to enter the marketplace, and lowered premiums for doctors. Important to the discussion for your readers is the additional fact that Illinois’ largest malpractice insurer has reported that payouts have remained flat for the past 13 years. By the way, it’s the same insurance carrier that admitted during the run-up to this legislation in 2005 that capping awards would not guarantee lower premiums for its doctors.

The Illinois Constitution was put in place to ensure individual rights and freedoms. While corporations and profit-hungry executives often stack the decks against individuals in the marketplace and the halls of government, the courtroom can still provide all parties with a level playing field. The Illinois Supreme Court will now decide whether that standard remains in place for patients like Abigaile LeBron. You should let it do its job.

Philip Harnett Corboy Jr.
President
Illinois Trial Lawyers Association
Chicago

Here’s the problem I have with juries being able to award money damages:

They have no concept of how much money they are awarding. It’s not their money so why not be a cheerful giver?

I’m not saying that what happened to the little girl in the editorial isn’t a tragedy. It is.

I just think it would be nice for lawyers to stop hiding behind the sad stories, be honest and say, “I don’t like tort reform because it severely limits how much money I can make!” It’s silly to talk about “greedy” insurance companies when the lawyer gets a nice percentage of the winnings.

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The August 2008 issue of Consumer Reports — one of my favorite personal finance magazines — features two articles that may be of interest to readers of Get Rich Slowly. The first offers tips for cutting expenses. The second gives a brief overview of budgeting.

Cut your spending by $500 per month
The Consumer Reports Money Lab looked for easy ways for the average American to save money. They came up with six suggestions and estimated potential savings for the average consumer. Here are their suggestions (with links to relevant articles at GRS).

1. Find cheaper auto insurance. By shopping around, the average person can save $65 per month. Need help? Here are 10 expert tips for saving on car insurance.
2. Optimize your life insurance. Premiums have dropped in the past ten years, the article notes. It may be worth replacing an existing policy. Also, by adopting a healthier lifestyle, you can cut costs. Average savings? $110.
3. Shop smart for food. CR cites U.S. Department of Agriculture data indicating the average family of four can drop its grocery bill by nearly $200 per month though smarter shopping. We just discussed grocery shopping tips on Monday.
4. Stop paying bank fees. The average U.S. household pays more than $25 per month in bank fees. There’s no reason to do so. Learn how to avoid overdraft fees and get yourself a high-interest bank account.
5. Call up cell phone savings. According to the U.S. Bureau of Labor Statistics, the average family spends $90 on phone-related expenses. Consumer Reports suggests checking to be sure you’re not paying for too many minutes.
6. Pay off your credit card. If you can get out of debt, you’ll not only save on finance charges, but you’ll also free up the cash that was going to pay the principal. Estimated monthly savings: $65.

Consumer Reports also encourages readers to increase contributions to their 401(k) plans. This helps prepare for the future and reduces that tax bite today. You can read the entire article at the Consumer Reports web site.

Create a spending strategy
Last autumn, I shared my notion of a spending plan, which I called a “budget for non-budgeters”. Consumer Reports likes spending plans too:

That’s what a household budget really is — a plan to track your spending and keep it within boundaries. Done right, a budget lets you spend without guilt. Here we offer ways to make your budget — oops, spending plan — simple and painless.

Their advice will be familiar to long-time GRS readers:

• Set goals. I believe that the road to wealth is paved with goals. Consumer Reports believes that long-term goals help you achieve big things, while short-term goals keep you motivated.
• Track expenses. It doesn’t matter how you do it, but track your spending. You can use a notebook, computer software, or even online tools.
• Plan for surprises. If you haven’t already, start an emergency fund. Most experts advise saving three to six months of living expenses, but CR suggests a “personal escrow” approach instead.
• Set priorities. Know which bills get paid first. For most people, this means the big things like food and home. (If you pay yourself first, it may be your retirement.) Whatever’s left after your expenses is your discretionary money.

The full article includes tips on how to create a web-based spending plan. The rest of this month’s issue includes ratings of large kitchen appliances, tips on buying tickets to shows and ballgames, and a tests of two dozen running shoes. (They didn’t test the pair I bought last month, though.)

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Related Articles at Get Rich Slowly:

• The Consumer Reports Mother’s Day Gift Guide
• Credit Card Advice from Consumer Reports
• How to Drive a Great End-of-Summer New Car Deal
• 20 Free Ways to Save Energy
• Consumer Reports Auto Issue Round-Up: Top Picks for 2007

When you get engaged, you’re not just promising to marry a person; you’re also marrying their money habits, their debt, and credit history.  If you’re not careful, unknown money issues can not only ruin a marriage but sink you deep into debt.

Hiding Credit Card Debt
Here’s a sad story of a former co-worker whose life was turned upside down by his spouse’s debt.  I met up with him for lunch yesterday to catch up and couldn’t believe the story he had to tell.

His wife had 50K of credit card debt coming into their marriage that she didn’t tell him about until several years after they were married.  She was only making minimum payments so over the years the interest mounted and the debt continued to grow.

He had owned a home prior to the marriage and they finally they decided to tap into it’s equity and take out a loan to pay off most of her debt. A few days later he comes home to find her packing her bags and on her way out the door.  Of course he didn’t share this story with anyone for quite a while since it was so painful and embarrassing but now happily he’s met someone new and is moving on. 

What’s the morale of the story?  Find out about your future spouse’s finances before you get married.  To help you do that, here are some questions to ask, courtesy of Real Simple:

Ten Romantic Debt Questions for Your Fiancé

• Do you use credit cards for everyday expenses?
• Do you pay your credit-card balance in full each month?
• Have you ever maxed out your credit cards?
• How many credit cards do you have?
• What are your debts?
• Have you looked at your credit reports in the last year?
• Did you ever require a cosigner for a loan?
• Have you ever been put into collection by a creditor?
• Are you a cosigner on anyone else’s loan?
• Do you have any tax or other liens pending?

These questions are obviously not very romantic but they’re definitely necessary things to ask.  Depending on your fiancé’s personality you might handle them in different ways.  It might be easiest to just sit down and go through them all straight up or you might have to slip in a carefully worded question here and there during the course of conversation. 

Here are some other finance questions the article suggests asking:

• Do you have a savings or checking account?
• Do you balance your checking account each month?
• Do you do research before making major purchases?
• Do you have a budget or a spending plan?
• Do you track your finances? How often?
• Are you aware of all your benefits at work?
• Do you have life insurance?
• Do you have health insurance?

Of course some of these things you might find out over the course of time as you get to know someone. However you do it, make sure you get these questions answered, I know my friend sure wishes he had.

Checking Their Credit History
If you’re worried that your fiancé is holding back information you could dig a little deeper. Not telling you everything is probably a bad sign for future marital communications but if you’re determined they might be the one you could always do some more research.

If you know their full name, social security number, date of birth, current address, and previous address you can probably pull your future spouse’s credit report to do some double checking.  Be aware checking their credit report without their permission can potentially get you into some trouble:

“Anyone who obtains a copy of someone else’s credit report under false pretenses can be fined substantially and jailed for up to a year.

Only businesses or individuals with a “permissible purpose” can access your credit report. “Permissible purpose” is defined in Section 604 of the Fair Credit Reporting Act (FCRA).“

Then again, if your fiancé is willing to throw you into jail for checking their credit history, probably a sign you don’t want to marry them.

How to Build Credit History
What if your future husband or wife doesn’t have any debt but they don’t have any credit history at all?  This happened to us, when we went to get a loan for our home my wife’s lack of credit history affected the interest rates we were eligible for. 

We ended up putting both our names on the title but only mine on the loan so that we could get a better interest rate but we wanted a way to help build her credit profile.

Our financial planner showed us a pretty slick way that worked wonders for my wife’s credit.  She put $1000 into a 12 month certificate of deposit at our local bank and then used the CD to get a secured loan from the same bank.

We setup our checking account to make automatic payments on the loan so she had a year’s worth of on time loan payments on her credit report. Then after 12 months we took the money out of the CD and paid off the loan.  The interest we had earned on the CD helped pay for most of the interest we had paid on the money we borrowed.

Marriage Money Summary
Get to know your fiancé’s money baggage and habits or they may come back to make you miserable, divorced, and in debt in the future.

Essentially, Leasing is just an alternative way to finance a new vehicle. We know that when purchasing a new vehicle the down payment, sales tax and license fees are required to be paid up front. However when leasing a new vehicle you are required to pay only the first monthly payment, a security deposit (usually same as monthly payment), and the license fees. The sales tax (which is based on the capitalized value of the vehicle) is actually amortized over the term of the lease in most states. In other words, the taxes are included in the monthly payments.

Capitalized Cost

Essentially the capitalized cost of a new vehicle is the actual price you have agreed to pay for the vehicle.

Gross Capitalized Cost

The gross capitalized cost of a new vehicle includes the selling price of the vehicle (which is the capitalized cost plus acquisition fees, extended warranty, accident & health insurance, dealer title fee, payoff on your trade-in, credit life insurance, gap insurance and any other fees the dealer decides to charge you). Buyer beware; that most people really don't ever know what their capitalized cost is because it is buried within the gross capitalized cost and the dealer doesn't actually reveal this number unless he has to. Most car deals made at auto dealerships are negotiated on the basis of payment rather than price. This applies to both leasing and purchasing. Don't get caught in this trap! Make the dealer reveal the selling price for every payment offer he makes you!

Adjusted Capitalized Cost

The adjusted capitalized cost of a new vehicle is the gross capitalized cost minus (-) your down payment, net trade-in amount, rebates, license fees and taxes along with any other deductions given.

Depreciation/Residual

When purchasing a new vehicle your payments are based on the full value or selling price, plus extended warranty, tax & license, minus (-) rebate, down payment and net trade-in value. However, when you lease a vehicle your payments are based only on the "depreciation or your use" of the vehicle during the entire term of the lease. The depreciation is actually only a portion of the capitalized cost of the vehicle and is determined by the term of the lease, number of miles driven and condition of the vehicle at the end of the lease. The payments on a lease are based on the deprecation money factor (which is a form of interest rate) and the amortized taxes. Therefore, you can actually drive a more expensive vehicle with a lower payment if you lease. Please note that the depreciation is actually estimated and set at the inception of the lease.

The residual is the portion or balance of the adjusted capitalized cost after the deprecation has been deducted. The residual is just put aside in limbo until the end of the lease. The higher the residual - the lower your monthly payment. At the end of the lease you have two options. You can either turn the vehicle back into the bank or leasing company, or you can buy the vehicle outright for the residual balance. You can even refinance the residual. But keep in mind if you turn in the vehicle with more mileage than allowed on your contract, you will be charged any where from .12¢ to .25¢ for each extra mile. In an auto lease you are limited to a specific number of miles in your lease contact. The average would be from 12,000 to 15,000 miles per year. You may drive any number of miles in any given year but you cannot exceed the number of allotted miles or you will be penalized. If you purchase the vehicle the charge for the extra mileage will normally be waved. Most banks and finance companies will allow you to add an extra 15,000 to 20,000 miles to your lease contract depending on the term of the lease. However, the cost of the extra miles will be added to your gross capitalization cost and your monthly payment will be increased accordingly.

Ownership

When you have entered into a lease contract you cannot terminate the lease or turn-in your vehicle prior to the ending date of the contract. If you do this the bank will report this as a voluntary repossession on your credit record. On an auto lease the vehicle is actually registered and titled to the bank or leasing company. Therefore you do not own the vehicle, the bank does. You get to use the vehicle and are legally responsible for the upkeep and maintenance. Please note, if you don't maintain the vehicle during the lease you will be penalized for all excessive wear-and-tear when you turn it in. Also, if you really needed to get out of your lease you can buy out of the lease if you can get the financing or you can get someone to take over your lease. Of course, they will have to qualify.

Vehicle Warranties

The average new car warranty is 36 months or 36000 miles, which ever comes first. It is not recommended that you enter into a 4, 5 or 6 year lease contract because they are not economical. Even with a four-year lease it is common for the residual to be higher than the actual value of the vehicle at the end of the lease which makes it very hard to refinance. If you are like a lot of people you can lease a new vehicle every 2 to 3 years and never have to buy an extended warranty. The only time it would be beneficial to buy an extended warranty is if you knew you were going to buy the vehicle outright at the end of the lease.

Gap Insurance

Gap Insurance is basically insurance coverage on the difference between the actual value of your vehicle and the balance you owe on the lease including the residual. This kind of protection is needed in case your vehicle is involved in an accident and is declared a total loss. Gap Insurance is important especially for people who lease vehicles. The lease on a vehicle is actually designed for the balance owed to be upside-down in relation to the actual value of the vehicle until approximately the end date of the lease term. At this time the residual should fall in line or be equal to the vehicle's actual value. Gap Insurance is good for purchase financing as well. The gap is not as large as in leasing, but you still stand the chance of having to put out a great deal of money.

Final Advice

Remember, there are two main factors you must consider when you are thinking about leasing an automobile. The first is how long you intend to keep the vehicle and the second is how many miles you travel annually. If you intend to keep the vehicle a maximum of three years and you only average 15,000 miles a year, then you should definitely consider leasing. If you want to keep the new vehicle for more than three years, you should consider purchasing.

When you lease a vehicle, you very rarely have to put any money down, so lease a new vehicle every two to three years and you won't owe any money on the old vehicle, plus you'll never have to buy an extended warranty. Also, you will have spent a ton of money less for each vehicle than if you had purchased them. If you want to keep a vehicle longer just buy it at the end of the lease.

Remember, don't let the dealer try to sell you on the basis of payments. Negotiate on the price only and when you have agreed on the price then tell them you have a trade-in. When you have agreed to your trade-in value then tell them you want to lease the new vehicle. Now you know what to do from here. Also, dealerships have a tendency to quote lease payments without the monthly tax. This makes a big difference in the monthly payments. If you don't control this you will be sadly surprised when you go into the finance manager to sign the paperwork. One more thing - when you are signing the lease contract, be sure to verify that the trade-in value you have agreed upon is actually deducted from the capitalized cost. Otherwise the dealer could wind up purchasing your trade for pennies and you would never know.

Visit My site http://www.autopurchasesecrets.com for more free information on the secrets the dealerships don't want you to know.

About the Author

Brad spent thirteen years in the Automobile business, specifically auto sales and worked for several Dealerships. He held positions from Retail Salesman up through New Car Manager and Fleet Manager. During this period Brad received an excellent education on what goes on inside the Automobile Dealerships. You can visit and communicate with Brad at his website http://www.autopurchasese