We have reviewed 8 everyday items and personal finance products which you may or may not already have in your life, and a guide to help you decide which ones are worth keeping and which are impeding your frugality.

When you are trying to live a frugal lifestyle, it is important to step back and review the items you have in your life, especially since a number of items you thought were helping you be smarter with your money and protect your family could actually be costing you more.

So without further ado, here’s the list:

1 – Protections

Not all forms of insurance and warranty are un-frugal but in some cases you can be paying extra for coverage you don’t need, won’t use, or isn’t worth the value you are paying for it. For example:

• Extended warranties. An extended warranty on a car or electrical item can be as little as $30 to as much as several thousand dollars and is aimed at extending the manufacturer’s warranty in case there is a problem with the item. However, some items are not likely to break down even within the extended warranty period and you can instead save yourself money by choosing the most reliable brands to start with, and using the products the way they were intended to be used. Even if a product does fail outside of the warranty period, you can still try and negotiate with the retailer for repairs or compensation.
• Credit card insurance. You can be paying around $1 for every $100 of your balance for insurance to cover your minimum monthly repayments if you are unemployed, injured, disabled or you die. However, in most cases your life insurance policy will already cover your expenses in case you can’t.
• Identity theft protection. Having your identity stolen can cost you a lot of money not to mention inconvenience however, at up to $240 per year, identity theft protection can cost you even more, especially when there are significant gaps in the protection according to the Federal Trade Commission’s Chairman. Instead, keep an eye on your own finances and read bank statements carefully, keep your letter box locked and don’t give out your PIN to anyone.
• Phone insurance. Yes, you really can buy IPhone 4 Insurance. However, that doesn’t mean it’s a good deal. Losing your phone is annoying and paying up to $96 per year and an extra $25 to $100 deductible when you claim may seem like a small price to pay for the convenience of an automatic replacement. However, this is not generally a frugal way to spend your money as your phone may already be covered under your home contents insurance. Plus, there can be conditions which may exempt you from a new phone in the insurance contract.
• Collision insurance. If you have an older vehicle, you could find a more frugal use for your funds than paying for collision insurance. You can be paying an extra $300 per year for reimbursement of the value of your car in the case of an accident. However, the cost of the coverage is likely to overtake the maximum amount the insurance will pay for so once the cost of the insurance is 10% of the car’s book value, the policy is not worth keeping.

Verdict: Not frugal.

2 – Account and investments which charge fees

Your transaction and savings accounts and investments are supposed to be making it easier for you to manage your money and make every dollar go further. Therefore watch out for these expenses which can eat into your frugality:

• Sales commissions on mutual funds. Load mutual funds can be paying four to six percent in sales commissions to your broker or financial advisor, where no-load funds often perform the same or better for your returns. Therefore, shop around for the best performing no-load mutual funds, and remember that even if funds appear to be on par, load funds will need to offer higher returns to make up for the loss of returns to fees.
• Fees on transaction accounts. If you have had the same transaction account for many years, you may not be aware of the new products on the market. For example, there are many transaction accounts which won’t charge you ongoing monthly fees for holding the account, nor require you to maintain a minimum balance to pay you interest.

Verdict: Possibly not frugal—be sure to figure total return including expenses.

3 – Home Equity Loans

In these difficult economic times, people are often tempted to access the equity in their home to help with expenses and family activities. However, equity release schemes can be very expensive as you only get back a fraction of the house’s value and you are giving up a large portion of your accumulated wealth just for cash flow in the short term.

Instead of using an equity release loan or scheme, consider downsizing to a smaller more affordable home and investing the profits from the sale of your first home.

Verdict: Not frugal.

4 – Coupons

Coupons are often touted as the frugal family’s best friend, however, you can find yourself spending more than normal, or getting a decreased value from your purchases simply to make use of a coupon. Therefore, make sure you avoid these non-frugal coupon uses:

• Retailer coupons. If the coupon is for somewhere you already shop then you can use it frugally, but often retailers give out coupons to attract new customers and you can find that you make impulse purchases, without considering whether the item is good value. Therefore, make sure you compare the products and prices of items before you buy somewhere new. You also often can’t use more than one coupon on the same item so the individual discounts may not add up.
• Buying a new product. Everyone has the brands they know and like, but if you receive a coupon for a new product, you may be tempted to buy it. However, make sure you actually need the items, and consider whether your money could be better spent on a product you know you’ll like, rather than on a new brand of product you may end up throwing away without finishing.
• Buy one get one free. This type of coupon offer is only viable for frugality if you are able to use the extra items before they go bad. If you have a big family or are having a party then stock up, but otherwise these free items could be wasted.
• Other brands are still cheaper at full price. If you have a coupon for a branded product, but the store brand is still cheaper at it full price, you are not spending frugally if you spend more on the same product simply because you have a coupon.

Verdict: Sometimes frugal—but only for products you know you would buy anyway.

5 – Convenience foods

Don’t confuse ease of use with enhanced lifestyle because when you buy the more expensive frozen or pre-packaged foods you are paying more and not only wasting your money, but short-changing yourself on the quality family time you could spend preparing food and meals together. Instead of buying frozen meals for when you’re too tired to cook, spend a day with your children helping you in the kitchen to cook up batches of meals which can be frozen. Rather than buying small containers of yogurt for lunch boxes, buy the larger tub and distribute them into your own smaller containers.

Verdict: Not frugal.

6 – Reusable menstrual products

Guys, feel free to skip this paragraph. OK ladies, I want you to stop and think for a moment about how much you’re spending every month on tampons or pads. Did you even realize there are other options out there? Google “menstrual cups” and you’ll find quite a variety under brand names like Diva, Mooncup, and Keeper. Not only are you saving 10 to 15 dollars each month on disposable products, you’re also stopping all of those products going into landfill. Be sure to read up on these before you buy, however, as they come in different sizes and a proper fit is essential for them to work properly.

Verdict: Frugal.

7 – Beauty products from the kitchen

When we look good we feel good and one of the hardest parts of living a frugal lifestyle can be giving up on beauty products. However, there are a myriad of frugal alternatives right in your own home, such as:

• Enzymes and acids. These features of beauty products are now thought to be more effective at renewing your skin than harsh scrubbing products, and you can find them in natural yogurt. You can make a face mask from just one teaspoon of yogurt once or twice per week and feel refreshed in summer, or warm the yogurt to room temperature in winter.
• Lactic acid. If you don’t want to slather yogurt on your face, use milk or powered milk. You can make a mask out of powdered milk, or simply dip your face into a bowl of fresh milk. The lactic acid is the ingredient in the yogurt which removed dead skin cells and brightens and smooths your complexion. You can even take a milk bath by adding a cup of milk or milk powder to your bath water.
• Probiotics from the inside. Don’t forget to eat some of the yogurt too, or add probiotic capsules to your diet as this helps improve your complexion form the inside by neutralising and removing toxins before they can be pushed out through your skin – prevention is better than cure.
• Fruit masks. Fruits such as kiwi, peaches or papaya can be pureed to create a face mask but remember the acids in the fruits work quickly so don’t leave them on for more than a couple of minutes. For dry skin, try an avocado paste mask.
• Apples. You don’t have to do anything to your apples except eat them – including the skin as that’s where most of the nutrients are found – as apples contain pectin which cleanses your intestines of toxins which would normally be excreted by your skin.
• Basic toner, cleaner and moisturiser. With the natural fruits and acids working on perfecting your skin you will find you don’t need to spend a lot of money on the fancy toners, cleansers and moisturisers. Instead, look for products which don’t have acids or enzymes in them to give your skin a break.
• Aloe Vera. This is a very simple product which can be used to great effect as an eye gel and wrinkle smoother. If you have puffy eyes in the morning it will firm up your skin and it can be used in place of your regular moisturiser several times a week.

Verdict: Frugal.

8 – Lighting

One of your biggest household bills will be for your power and there are a number of ways you can reduce this cost until your whole family gets into the habit of turning off the lights when they leave the room. Using compact fluorescent light bulbs in all of the sockets in your home can save you hundreds of dollars per year. For a longer lasting alternative, LED lights will save you even more money because they are maintenance free and you won’t have to replace them for years.

Verdict: Frugal.

Alban is a personal finance writer at Home Loan Finder, a home loan comparison website.

Separate speculation from investment  

If you are trying to foresee the distant future and investing on the basis of market news, you are merely speculating. Of course, investing is all about analyzing and taking chances, but blind guess work will not lead you anywhere. If you are a true investor then you should have a reason to buy shares of a company. Remember that your money should ideally be used to promote planned growth of a company. It you are not a veteran, then stay away from speculation, particularly during recession. 

Do not invest what you cannot afford to lose

Investing in stocks can be highly profitable as well as fun. However, that does not mean that you should spend a fortune in the stock market. You need to think about your future and your family before investing in stocks with high odds. In case you are determined to make some speculative moves, you should build a separate fund for it with spare money you can afford to lose. Make sure that you don’t contribute what should go to future savings or family expenses.

 Invest in reliable companies  

Yes, we recommend you to play safe here. It might sound boring, but investments have the potential to make or ruin your future. It’s true that investing in fortune 500 companies has less potential for profit, but these are also less risky.  Your primary investments should be so reliable that you can afford to forget them for months without worrying. 

Diversify your investments  

Many people believe that buying a few stocks from a large number of companies is diversification. Nothing can be far from truth. If you invest in so many companies then you might suffer considerably if the entire market collapses (which often happens). Diversification actually refers to dividing the available capital into several parts and investing in different categories like precious metals (gold, silver etc.), real estate, bonds etc.  This is true diversification because even if another recession hits, some of your investments will still fare well. 

Evaluate your investment strategy  

It is wise to evaluate your portfolio at least once a year. This is because all your assets grows at a different rate. For instance, during a real estate boom, you can sell a part of your properties and when the market is low you might buy some. The same applies for all your investments. As a thumb rule, you should sell the excess whenever an asset grows beyond 25%. If you do this on an annual basis, then your portfolio will be dynamic and balanced. 

These old fashioned investing strategies will work even in a declining economy. Stay away from get-rich-quick schemes and promises of quick easy profit. Regardless of the economy, tried and true investment advice will serve you well.

The 411 on the Traditional 401k

The traditional 401k is the most typically known retirement plan. The 401k has been offered from corporations to employees since 1980, and ultimately allows individuals to set aside a portion of wages (contributions) to a tax-deferred account for safekeeping and retirement plans. Keep in mind that the traditional 401k account is funded with pre-tax dollars, and thus earnings must be taxed when they are eventually withdrawn. In certain cases, an employer may opt to “match” some or all of an employee’s contribution and an individual must take distributions at age 70.5 from the account.

• The Pros
  • Company Sponsored: Typical 401K accounts are company sponsored. Many employers also opt to match a certain percentage of contributions made to the company sponsored plan.
  • Pay taxes on withdrawals: Because upon retirement there is a possibility that you will be in a lower tax bracket than the year contributions were made, the 401K could be more beneficial than a Roth IRA assuming investment returns are the same.
  • No income limits: No matter how much money you make, you can contribute to a 401K. Individuals in the high income brackets are not allowed to make contributions to a Roth IRA.
  • Annual Contribution amount: For 2010 the maximum contribution amount is $16,500, which is greater than the annual contribution amount allowed for a Roth IRA.
  • Reduces taxable income: Whatever amount you contribute to your 401K will reduce your taxable income by that amount for the year that the contribution was made.
• The Cons
  • Forced Withdrawals: It is required that withdrawals must be taken at a certain age. Many investors argue that the forced withdrawal of massive amounts through 401K plans can cause the markets to severely drop due to the large amounts of capital leaving the market for the reason that individuals are required to sell, not because the value of the company dropped- which is artificial deflation of the stock’s value.
  • Employer Choice of Funds: Many companies will offer several fund options that are funds of their choice. This limits the flexibility of investments made through a 401K.
  • Pay taxes on withdrawals: While one of the main benefits of a 401K is that you defer paying taxes on the contributions until retirement, the taxation environment is unknown for the future. Tax rates have a tendency to increase, not decrease; so there is a possibility that higher tax rates will have to be paid on your funds.
  • Early Withdrawal Penalties: When it comes to taking early withdrawals from your 401K account, there are many more penalties associated with the action as opposed withdrawing from a Roth IRA investment account.

The Real Deal on the Roth IRA

The Roth IRA, or Individual Retirement Account, option was created in 1997, and serves as an alternative plan to the traditional 401k. In this case, contributions are treated differently. With the Roth plan, contributions are considered to be after-tax dollars, and thus taxes must be paid the same year in which they are submitted into the account.  Keeping this in mind, the money that may grow over time in the account will be tax free money. The Roth IRA can be opened by most individuals that meet standard criteria and does not require an individual to take distributions at any point (thus, money can be transferred to heirs).

• The Pros
  • Avoid Early Distribution Penalties: There are not as many limitations on taking early distributions as there are with 401Ks. The Roth IRA has many exceptions that allow funds with be withdrawn without penalty.
  • No Age Requirement to make Withdrawals:  You are not required to make withdrawals at a given age like you are with a 401K. This allows you to keep money in your investments and earning gains (or losses). Money can remain in the account for its beneficiaries as well.
  • 2010 is a special year: There are special conversion rules that apply this year making this form of retirement account available to more individuals. For 2010 the adjusted gross income level for making conversions to a Roth IRA do not exist, taxes are not due in 2010 (can be deferred until 2011 or 2012), and conversions can be made from 401Ks and traditional IRAs.
  • Flexibility in investments: With a Roth IRA, you can invest in a much wider variety of investments as compared to a 401K.
• The Cons
  • Income limits: Contributions made to a Roth IRA are restricted to individuals and couples with an adjusted gross income of $120,000 and $176,000, respectively. If you make too much money to contribute to a Roth IRA and you have another existing retirement account, 2010 is a special year and the IRS has special conversion rules for converting other forms of retirement accounts to a Roth IRA.
  • Annual Contribution Amount: For 2010 the maximum contribution is $5,000, or $6,000 if you are older than 50 years old before 2011. This amount is significantly less than the amount allowed when making investments towards a 401K
  • Investments made after tax: Since investments are made after tax there is a possibility that your tax rate will be higher at the time of your investment than if you were to defer paying taxes until retirement thorough a 401K.

Still Unsure? The Main Differences Breakdown

• Withdrawal Timing: If the timing of your distributions is important to you then it is essential to consider this difference. There are fewer restrictions on taking distributions through a Roth IRA than a 401K. With a 401K, there are forced withdrawals at the age of 70.5, while with a Roth IRA, the funds can remain in the account.
• Employer Match: Typically most companies that offer a 401k also match a certain percentage of contributions made. In the case where a company match is made, it is a no brainer that a 401K should be used for at least the amount that the company is willing to match vs. investing the same money in a Roth IRA that has no match.
• Income limits: Since the Roth IRA has income limits associated with making contributions, it may not be available to all individuals.
• Contribution Amounts: There are different limits to the maximum amount of money that can be contributed to each type of account every year. A 401k allows for a higher contribution amount than a Roth IRA.
• Anticipated future tax rates: The IRS can either increase or decrease tax rates in the future (most likely increase) or you can be in a higher or lower tax bracket at retirement. Taking into account your tax rate when making your investment contributions and what your anticipated tax rate will be in retirement can determine which retirement alternative reigns superior (all else held equal).
• Investment Options: 401K plans are limited in investment options, while a Roth IRA allows for a much wider variety of investment options. You must ask yourself if you are the investor type and want to have full control of where your investments are going. 

Make up your Mind

Now that you have adequately learned about the Roth IRA and 401k plans, it’s time to make a decision. If you are still in your youth, now may be a great time to make the choice as you enter into your first job. If you have already entered into a retirement plan, it’s always a good idea to reconsider your choice with regards to the most practical option for you. Just because you have started on one retirement plan does not mean that you have to stay put. However, keep in mind that the earlier you begin planning and setting aside money to the proper account, the more work it can do for you. So consult with yourself, your friends, your employer, and your tax advisor to find your best option. And, hey, know that you can always decide to contribute to both types of accounts! Just remember, life is all about change- and making the decision to change your retirement plan could impact both you and your heirs’ lives forever.

However, I’m not exactly going it alone. I’m using Investools. If you’ve ever been to a Get Motivated seminar or seen Phil Town on CNBC, you’ll know the tools I’m talking about. (Hint: Remember the red and green arrows?)

Now, please keep in mind that I have no affiliation with Investools and am not being paid to write about them. In fact, I have researched Investools online and found that many people are put off by their heavy-handed sales techniques. I probably would be put off as well, but I didn’t follow the usual route to getting access to the “good stuff,” meaning the educational material and Investor Toolbox.

It seems that Investools wants you to attend a two-day workshop, in which they spend half the time teaching you about investing and half the time trying to upsell you on extremely expensive investor education.  We’re talking upwards of $20,000 for the PhD program.  The PhD program may be wonderful, but I don’t have that much cash lying around, and I don’t want to listen to some slick cheerleader pressure me to put $20,000 on my credit card so I can partake of this wonderful program.

Rather that enroll in one of their courses, I just subscribed to the website (it’s $159 for 6 months) and am using the excellent educational materials they have online–starting with the Investing Foundations course. I have learned a great deal from it.

The basic premise is to pick stocks that are fundamentally sound, and then use technical indicators to time your entry and exit points.  Three green arrows means it’s time to buy; three red arrows means it’s time to sell.  This isn’t day trading–generally you will hold a position for several weeks or months before selling.

On Monday I used the tools to pick out my very first stock portfolio. I bought AAPL, CKSW, FUQI, and HDB based on fundamentals and indicators from the toolbox. I also bought GOOG as more of a long term investment because it appears undervalued, although my entrance timing was not great. All but HDB have gone up, and the portfolio as a whole is up 3.6% in just three days.

I may be having beginner’s luck, since the markets are having a good week. However, I must point out that the arrows were very accurate in predicting when the stocks were about to jump. It certainly wasn’t any great knowledge or skill on my part.  So I think I’ll keep using Investools and report back in a few months.

So, readers, do any of you use an investing suite or online research service?  Was it worth the money?  Can you do as well on your own for free?  Please share.

By Jim Saccacio, RealtyTrac Chief Executive Officer

If you feel like the costs of real estate have priced you out of the market, think again. It may be time to investigate the vast opportunities available in the foreclosures market.

For people willing to do a bit of homework, the foreclosure market offers some of the best opportunities available in real estate today. Experts point toward significant growth in available foreclosure properties, so there’s never been a better time to line up your resources and educate yourself about this previously hidden market. It’s not unusual to save from 10 to 30 percent of the market value on a foreclosure property, and certain properties offer savings of 50 percent or more! There really are bargains out there. You just have to know where to look.

Web-based services such as RealtyTrac give consumers access to foreclosure and pre-foreclosure information that was previously available only to professional real estate brokers and investors. Today, homebuyers can use these services to identify and research potential home purchases, as well as to find the tools and professional resources they need to help them close the deal.

The keys to a successful foreclosure property purchase are diligence and patience, along with taking an educated approach to investing in this market. RealtyTrac CEO Jim Saccacio offers five tips to help you close a deal on a foreclosure property:

1. Learn about the different types of properties and the foreclosure process. Not all foreclosures are the same! You need to educate yourself on the difference between the three basic types of properties, including notice-of-default (NOD), notice of trustee sale (NTS), and real-estate-owned REO, as well as the positive and negative aspects of buying at each stage of the foreclosure cycle. As a rule of thumb, the best savings can be made at the pre-foreclosure stage, where home owners can avoid a foreclosure and lenders can save the time and cost involved in going through the process. Another critical point in the process is immediately prior to the auction date, when all parties might be most open to a last-minute solution.

2. Secure financing early. It’s important for a buyer to be pre-qualified before engaging in discussions with a seller. This ensures that the buyer is in a financial position to purchase the property, and is in the strongest possible position to negotiate. Sites that let you apply for loans online like Lending Tree can get you pre-qualified quickly while interest rates are still at historic lows.

3. Engage a real estate agent as a “buyer’s representative.” There’s a distinct difference between a buyer’s and a seller’s representative. Buyer’s representatives have the home buyer’s interests at heart, and are charged with finding the right property and negotiating the best price for their clients. Picking the right real estate agent will make your life much easier. Ideally, select an agent who specializes in the foreclosures market and has specific experience in REO properties.

4. Do your homework. Purchasing foreclosure properties is somewhat more risky than buying traditional real estate properties. But, with that risk comes reward in the form of much higher potential savings. With the right examination and due diligence, buyers can significantly reduce the risks. As with any purchase, timing is everything! But, it makes sense to give any property under consideration a thorough examination, including determining its condition and value, finding out the amount in default and the remaining loan balance, and running a legal investing report to make sure the property is free of any financial liabilities. Of course, it never hurts to foster a positive relationship with the seller!

5. Make a realistic offer. If you want to be taken seriously as a buyer, you must be realistic when preparing an offer. Lenders aren’t likely to give properties away, particularly in a real estate market where prices continue to rise. Additionally, homeowners in financial distress may be difficult to deal with, particularly early in the foreclosure process. An educated buyer—one who knows how much is owed on the property and what its market value is—can usually come up with a realistic offer; one that offers significant savings, while meeting the requirements of the lender.