It’s easy to get caught up in the thinking that we make personal finance decisions just for the sake of managing out money. The fact is, though, that every decision we make about personal finance can ripple through the rest of our lives.

Just A Few Ripples

It’s hard to comprehend how important even a little thing like deciding to save up for a large purchase, rather using a credit card can affect all of the rest of your finances. But there are plenty of situations where such a decision can have a huge impact: having more credit available on your card, along with a few extra dollars in your bank account, can make all the difference in the world if something happens to your car that your insurance doesn’t cover.

And decisions affecting your credit in particular can affect whether or not an employer will hire you or a landlord will rent to you. It may seem like your credit score’s importance is overblown — after all, you can effectively eliminate your debt if you’re willing to declare bankruptcy. But with even employers examining the credit reports of the candidates for each job, such a move can be disaster for your job applications (as well as your ability to get a credit card) for the next seven years.

Keep Those Ripples Under Control

It isn’t possible to prevent your personal finance decisions from affecting the rest of your life: after all, they’re called personal for a reason. But you can create a cushion so that your decisions don’t affect your life beyond a level that you can handle. While simply making good financial decisions seems like an easy answer to the issue, everyone makes the occasional mistake.

Instead, the best protection you can have is a good emergency fund. When you have a solid amount of savings in case of contingencies, you have more room to handle ripples. Even if something occurs that isn’t the result of something you specifically did — such as a car accident or a layoff — having an emergency fund will allow you to approach the situation in such a way that your finances don’t compound the original issue.

In addition to an emergency fund, insurance policies can provide further protection. It can take a little more careful consideration than you might expect to find the right insurance policies, though. Choosing a policy that doesn’t work well with your current financial situation can create more than few ripples on its own. Carefully weighing factors, like what a reasonable deductible might be, is absolutely necessary. Because everyone’s financial situation is different, it’s probably a good idea to seek out professional help in making sure that you find the right insurance policy.

Rocking The Boat

If you’ve got your finances under control, a ripple isn’t going to do much more than rock your boat. Moving forward in improving your overall financial situation is always a good idea — even if it rocks the boat a little.

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A major part of the economic stimulus package signed last week is the Making Work Pay Tax Credit. In 2009 and 2010, that credit will provide a refundable tax credit of up to $400 for a working individuals and $800 for married workers. But you won’t be getting that money in a lump sum: it isn’t a stimulus check and it isn’t intended to be part of your income tax return. Instead, you’ll be receiving that money spread out over all of your paychecks.

In order to make sure you get that money, the IRS has released new tables to show taxpayers just how much of their paychecks will be withheld when that tax credit goes into affect. Your withholding should amount to only a few dollars less per week — remember that the credit is spread out over a full year — but you shouldn’t need to do anything to receive it. Employers should be receiving the new withholding tables and put them into affect by April 1, 2009. Depending on how on-the-ball your employer is, you could start getting a little extra in your paycheck immediately.

The actual amount you can expect varies. It’s the equivalent of 6.2 percent of your earned income for the year, up to a total of $400 per person. You can qualify for up $800 if you’re married — even if only you (or only your spouse) is employed. Your annual income can also affect the credit — taxpayers passing a certain income do not receive it. If you are single, the credit phases out between $75,000 and $95,000. If you are married, it phases out between $150,000 and $190,000.

The credit is also available to self-employed individuals: they can claim it by reducing their estimated quarterly tax payments or claiming it when they file their 2009 tax returns. You can also get the credit even if you don’t earn enough to owe federal income tax: you will have to wait for it, if withholding isn’t taken out of your pay check though. Instead, you’ll be able to get the credit when you file your 2009 tax return. However, you do need to have a job in order to get the credit — and you cannot be claimed as a dependent on someone else’s taxes. That means that if you’re a student working part time, you’ll probably miss out on this particular tax credit.

It’s worth making sure that you do qualify for the tax credit: employers will just automatically start using the new withholding tables. If your spouse’s salary makes it impossible for you to claim the Making Work Pay Tax Credit, for instance, it’s up to you to make sure your paperwork reflects that fact. If you don’t qualify for the tax credit, but your withholding still decreases, you’ll owe the IRS money come April 2009. It may be significantly easier just to fill out a new W-4 and increase your withholding on line 6.

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Recently I returned from my honeymoon cruise with some hard learned lessons on how to keep your money safe from not only thieves, but from yourself. One is to have a budget (and stick to it!), the other is to be extra vigilant when it comes to identity theft. As most people know, vacationing travelers are like walking bull’s-eyes to fraudsters. Follow these tips and you’ll have smooth sailing when it comes to your bank account.

Cruising is a unique vacation experience, as anyone who has been on one can tell you. Let me give you a quick rundown on how it works, and I’m sure you’ll see where budgeting can get tricky.

Your Room Card is Your Credit Card
The first thing that most people don’t realize is that there is no such thing as cash on a cruise ship. Nor is there anywhere that you can use your debit or credit card. That little room card you are issued when you get on board does a lot more than open your cabin. It is encoded with your personal information, as well as the credit card you used to book your cruise. Paid for your cruise in cash? Doesn’t matter. Before you board you’re asked for one anyway, as this will be your onboard account. All charges, from ordering a drink to paying for a massage will go to this card.

Obviously this is where things can get sticky. After a day or two of simply signing receipts, you start to disassociate the fact that all those charges are being transferred to the credit card you gave them in the beginning. Once the cruise is over, your on board account is tallied up and charged to your credit card. The front desk on the ship keeps a running statement of all your charges, so feel free to ask for a copy each day to see where you are in terms of your budget. If anything looks suspicious or unusual, ask the staff to produce the signed receipt for the purchase.

Use Your Credit Card On Shore
Something that you should do in any unfamiliar situation, but absolutely when you’re traveling is to use your credit card for purchases. For reasons mentioned in other articles, credit cards are much more secure and safe than debit cards or cash. While traveler’s checks are the old standby for vacationers, they are being accepted less and less due to fraud surrounding them. The alternative traveler’s check-card is nothing more than a pre-paid debit card, and easily compromised. A credit card doesn’t link to your money directly like a debit card does, and it gives you plenty of time to dispute any issues. If something does happen, and your credit card is overdrawn or disabled, you still can have your debit card as a backup if you need cash.

Balance The Books
If you’re using the same credit card on shore that you used to open your on-board account, be sure to keep track of your on shore purchases and add them to your statement from the ship. Some might see their statement from the ship and think that they are within their budget, when in fact they forgot about all the charges they had at their destinations.

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There are several ongoing efforts to make the American credit market a little fairer for borrowers: regulating the market to prevent predatory practices, informing consumers so that they can make better decisions, and other similar approaches. One of the crucial organizations in this crusade is Americans for Fairness in Lending. AFFIL is a non-profit organization dedicated to bringing regulation to the American lending industry. They’ve been in action since 2004 and been successful in bringing a number of credit issues to the attention of both government and consumers.

As a part of AFFIL’s mission, the organization provides a number of resources for consumers, such as helping prospective home buyers learn the signs of a predatory mortgage — the type that lenders don’t expect a borrower to ever be able to pay off but that a lender will make anyway in an effort to make some money.

AFFIL suggests the following to help home buyers avoid taking on a predatory mortgage:

• Use the basic rule of thumb: if it seems to good to be true, it is.
• Always shop around for a mortgage — the first numbers you see probably won’t be the best.
• Ask questions about the terms of the mortgage, and if you don’t understand them, ask for help from someone you trust (and who isn’t connected to the mortgage broker).
• Double check that, if your mortgage will have an adjustable rate, you will be able to afford an increase in payments.
• If an ad says “No Credit? No Problem!,” you should say “No Deal!”
• Walk out on any lender trying to use high-pressure sale tactics to get you to sign now.
• Never ever sign a document that is not completely filled in. If a lender says that he’ll fill something out later, run.

If you’re looking at buying a home, take the time to educate yourself about the terms that a predatory lender might offer you. In 2001 alone, predatory lending practices cost homeowners over $9.1 billion — and nobody’s been able to run the numbers on the subprime mortgage crash yet. Even if it takes you a little more time, finding a mortgage with no strings will pay off for you in the long term.

AFFIL also offers a free mortgage shopping guide (PDF). The organization also provides extensive information about lenders beyond those who offer mortgages, including credit cards, payday loans and student loans. And while AFFIL can’t do much for someone already in a credit jam, the organization maintains a list of ‘allies’ — organizations and individuals who specialize in specific issues. Other resources include help reporting debt collection abuses and a glossary of terms — an absolute necessity if you’re just starting to try to figure out your finances.

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