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05/07/2010
Icon25 Signs That Show You Know How to Handle Money by Al Jacobs onthemoneytrail.com The ability to master your money is not something that just happens. It takes time, training, and temperament. Whatever praise or criticism you may direct at the American public school system, one thing must be acknowledged: The handling of personal financial affairs is not a subject to which much attention is devoted. Whatever the average citizen knows about saving and investing did not come from the classroom. This is understandable, of course, if only because the typical classroom teacher is equally mystified by the world of money. Nonetheless, there are those among us who have figured out how it all works, and what it takes to prosper. Are you one of those persons that has managed somehow to get the hang of it? If you recognize yourself in most of the twenty-five following scenarios, then you can confidently answer #147;yes#148; to that question. Your credit card bill is paid in full each month with never a penny in interest incurred. You understand that the variable annuity your neighbor just invested in will prove to be a sad mistake. Despite orchestrated furor by the media, you recognize that the $30 it costs to fill your vehicle#146;s gas tank is cheaper in today#146;s dollar that the $15 it cost 20 years ago. You enjoy financial talk shows for their entertainment value while knowing that 95% of what#146;s said is nonsense. The only type of life insurance that you#146;d ever consider purchasing is a term policy. You#146;re not tempted to invest in something because of a hot tip you get from a friend or relative. You have serious doubts that the 3-unit course in basic English composition offered at Eleganteacute; University for $900 is any better than a similar course conducted at Midtown Community College for $60. You are sufficiently sophisticated in real estate to know that the worst house in the best neighborhood beats the best house in the worst neighborhood. You owe nothing on the vehicle you drive. You have a pretty good idea by mid-November how much your income tax obligation for the year will be. When hearing that the SP 500 Index just hit an all-time high, you are not inclined to call your broker with a buy order. It#146;s beyond your comprehension why anyone not certifiably insane would purchase a timeshare property. Your checking account balance never drops below the minimum limit that triggers a monthly service charge. You#146;re aware that an option to pay your auto insurance premium in two installments, with a #147;modest convenience fee#148; instead of a single payment, probably works out as a loan at about a 25% interest rate. Although you thoroughly enjoy the home you live in, it#146;s considerably less expensive than you can afford. You know practically nothing about the options market#151;and intend to keep it that way. You feel instinctively that every dollar you contribute in FICA taxes to the Social Security system is a dollar lost to you forever. Whenever you#146;re negotiating a purchase and qualify to receive a discount, you do not hesitate to ask for it. You entertain no illusions that a financial advisor will provide sound counsel merely because of the Certified Financial Planner (CFP) designation held. You make the maximum possible contribution to your retirement funds. Whether your choice of wristwatch is a top-of-the-line Rolex, a fashionable Cartier, a respectable Bulova, or an economy Timex, you recognize that all are battery-operated, with a similar quartz movement, and none fail to keep excellent time. You find it baffling why anyone would buy a lottery ticket. You cannot remember when you last borrowed money for an unexpected emergency. The newspaper advertisement offering a half-pound silver commemorative medallion from The Perfidious Mint , at the #147;special advance price of only 139 dollars,#148; forces you to suppress a laugh. You have no confidence in the concept of #147;Investor Confidence.#148; If the sentiments expressed in most of those situations do not reflect your thinking, you#146;re not in control of your financial destiny. In that case, you can use a little guidance. If you would care to receive my financial column #147;On The Money Trail#148; each month, visit www.onthemoneytrail.com and click onto Contact Us. AL JACOBS has been a professional investor for nearly four decades. His business experience ranges from property management and securities investment to appraisal, civil engineering, and the operation of a private trust company. He is the author of Nobody#146;s Fool: A Skeptic#146;s Guide to Prosperity , available at www.onthemoneytrail.com , or through Amazon or Barnes Noble. More >>

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05/07/2010
IconA Thimbleful of Prosperity: Three Simple Strategies to Retire in Comfort By A. B. Jacobs Over the past several decades I#146;ve been a devotee of prosperity. During this time I#146;ve encouraged people to save and invest for their future. My financial newsletter as well as a regular flow of articles, stress the importance of amassing assets. In these writings I discuss savings and retirement programs, corporate stocks and bonds, rental real estate, mortgage lending, and a variety of other more or less sophisticated methods for achieving wealth. My belief has been that, provided with guidelines and encouragement, any person can learn to master the techniques needed to become prosperous. However, I recently received a letter that took me aback. Its writer, a woman from a small town in West Virginia, forced me to reevaluate my presumptions when she informed me: #147;My husband and I have read many of your articles these past months and most of it sounds like good advice, but we have a problem. Neither of us is confident that we can select good stocks, and we don#146;t trust the mutual fund salesmen. Neither do we want to own rental real estate, or hold mortgage loans, nor do many of the other things you discuss. Our question is simply this: Can you provide us with just a few things we can do which require no particular knowledge or involvement, that will let us retire in comfort when we#146;re ready in about forty years?#148; Because I wasn#146;t quite prepared with an answer, I set her letter aside . . . and there it sat for a couple of weeks while I mulled it over. What do I say to someone who hopes to achieve a comfortable retirement, but doesn#146;t really want to do much of anything to bring it about? After some thought, I believe I#146;ve figured it out. And while pondering the dilemma, it dawned on me that a lot of other people must be of like mind. Devoting an adult lifetime adroitly acquiring assets goes against the grain for many persons. Whatever they attain in life will come with minimal expenditure of time and effort. To that end, I have a program to offer, though it requires a caution: What I advocate will enable most persons to conclude their working years with enough to live in the style to which they had become accustomed. But realize that the standard of living achieved in this manner will be something less than bountiful. With this understood, let me describe three life habits that will enable you to enter the retirement years with confidence. Don#146;t buy anything on which you pay interest. Whatever you purchase will be something you can afford. If you possess a credit card on which you charge things, pay the balance in full each month before the credit card company collects any interest. Operate this way and the interest rate on the card means nothing. If for any reason you can#146;t conduct yourself in this fashion, cut up the card with a scissors. As another example, your vacant living room is an embarrassment, with the only suitable furnishings beyond your cash budget. Your two likely solutions are to go into hock for forty-eight months for the attractive set you want, or make do with low grade merchandise from a cheap discount house. A better decision is another choice that friends of mine, a young couple, made many years ago. For three years their living room sat vacant until they could afford to furnish it with what they really wanted. As you might guess, they are today wealthy oldsters. Stepping out a little further, consider transportation. Your auto, though paid off, is now five years old, with nearly 60,000 miles on the odometer, and no one you know drives anything this dated. A new car that can be purchased for $23,500 is available on a 5-year contract through a dealer at zero percent interest. Is this the way to go? Not on your life. Although you see no interest charged, it#146;s there, built into the price of the car. Bought for cold cash, it would probably cost $19,000. So what do you do? You drive the old car until you can afford its replacement. And if your friends think you look dated, consider it a compliment. Own your residence free and clear. When your paycheck becomes a relic of the past, you#146;ll want your housing costs to join it into oblivion. This means that you must own your home with no mortgage. It#146;s easily accomplished. Early in your life purchase a house with whatever down payment you can afford. Choose a long-term, fixed-rate, fully amortized mortgage, and make the regular monthly payments until it#146;s paid in full. As the years pass and your equity grows, avoid any temptation to dip into it for such things as schooling for the kids, the long-awaited vacation you#146;ve always wanted, or the surefire investment that your brother-in-law guarantees will put you on easy street. Consider the home a sacrosanct element of your retirement years, not to be further encumbered or compromised in any manner. Set up your rainy day account. Regardless of however else you choose to spend your money over a lifetime, one thing must take precedence: As quickly as possible open a self-directed Roth IRA, and if married, another for your spouse. During each of your working years you will contribute the maximum allowable amounts into these accounts#151;$4,000 in 2005 through 2007, increasing each year thereafter. They should be opened with a large discount brokerage like Schwab, into which will go interest-bearing vehicles as the sole holdings. These will be guilt-edge securities such as U.S. treasury notes and bonds, FDIC-insured certificates of deposits, money market accounts, and perhaps high-grade corporate bonds if you#146;re willing to take the time to consider them. The benefits you derive are twofold: You will reap the rewards of compound interest#151;the closest thing to magic you#146;ll ever see#151;and all earnings will be entirely tax-free. If started early enough in life, such an account may well accumulate a million dollars. Let me sum it up. If you follow the three-point program I#146;ve just outlined, you will enter your post-working years satisfactorily. Though you#146;ll not retire in grand style, able to tour the world on your private yacht or bask in the limelight as a celebrated patron of the arts, at least you#146;ll not be dependent upon family or government for your daily sustenance. It#146;s an acceptable conclusion; most people in this world fare far worse. AL JACOBS has been a professional investor for nearly four decades. His business experience ranges from real estate, mortgage, and securities investment to appraisal, civil engineering, and the operation of a private trust company. In addition to managing his investments on a day-to-day basis, he is a featured financial columnist for both online and print publications. He is the author of Nobody#146;s Fool: A Skeptic#146;s Guide to Prosperity . You may subscribe to his financial Newsletter, "On the Money Trail," at no cost or obligation, by visiting www.onthemoneytrail.com . Permission granted for use on DrLaura.com. More >>

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05/07/2010
IconFive Ways to Make Sure You#146;ll Never Retire By A.B. Jacobs Author of Nobody#146;s Fool: A Skeptics Guide to Prosperity I recently attended a retirement party for a close friend. It was inspiring to listen to the speeches lauding him for forty-three years of diligent service, interspersed with accolades for selfless devotion to clients and coworkers. In all, it was a moving experience, culminating with his announcement that he planned to spend his retirement years contentedly with his wife and family, engaged in morning rounds of golf with friends, and accented with travel to exotic places. If anything detracted from the celebration, it was his admission to me in the washroom later that evening that he dreaded the thought of giving up work. He added that golf had become a bore, that there were no places he particularly wanted to visit, and that a few hours a month with his children and grandchildren was all he could stand. Finally he blurted out: #147;Damn! I still have ten or fifteen good years I could continue. If I hadn#146;t accumulated so much money, I couldn#146;t retire#151;I#146;d have to keep working.#148; Though there#146;s nothing I can do to assist my friend, I can pass on some tips to those of you who never want to find yourself in his predicament. If you want to make certain you#146;ll always be sufficiently insolvent so as to require perpetual nose to grindstone, I know just how to do it. Pay attention as I describe five surefire methods to guarantee financial inadequacy. Announce to the world that the motor vehicle you drive is a reflection of your personal excellence. This is accomplished by driving only a current year model of a recognizably prestigious vehicle. Driving a Toyota, as I have for the past five years#151;and will probably continue to do for the next five#151;is no way to inspire adulation. All it will do for you is provide comfortable, reasonably priced, and maintenance-free transportation. But that will never do. What you want is this year#146;s Jaguar, Mercedes, or, at the least, BMW. In that way your bank account will avoid accumulating those dollars that might one day force you from the rolls of the habitually employed. And if you want to make absolutely certain you#146;ll not fail in this endeavor, do not purchase what you drive. Instead, lease it, as there is no surer way of motoring unprofitably than by driving a rented vehicle. In that way you#146;ll not only incur all the normal operating expenses and depreciation of an owned auto, but provide an extra profit to the middleman from whom you lease it. Send your progeny to the finest universities. The fact that learning can be acquired inexpensively is no reason not to expend huge sums in its attainment. With tuition, books, fees, lodging, and incidentals included, you should be able to blow upwards of $40,000 annually for each child if the right schools are chosen. You may have heard that two years at a community college, followed by two years at a local state university commuting from home, can provide a motivated student with as fine an education as four years in residence at Harvard or Princeton. Despite the fact this is true, it won#146;t meet your basic requirement, which is to avoid accumulating all that money you don#146;t want. Therefore, you know what you must do. Encourage each of your offspring to select a high-priced institution at an exclusive location. It may not address their needs, but it will resolve your problem. Don#146;t settle for reasonably priced merchandise when something more expensive is available. The fact that an $18.75 Timex wristwatch is as reliable and precise as a $3,500 Rolex does not matter. The prospect of being observed wearing a timepiece that is#151;God forbid, cheap #151;will forever mark you as someone devoid of what the marketing professionals have established as a mark of prosperity. The same is true with the writing implement you use. Consider the hyperbole employed by one firm to convince us of the importance of a $600 ballpoint pen. Their pitch focuses on its beauty and workmanship, as well as the implication that you will be admired by clients and associates for your taste and culture. With that as your goal you#146;ll not want to emulate someone like me; the pen in my shirt pocket, with probable value of about 29 cents, carries the worn inscription #147;Resdeck Plumbing, Redondo Beach, Calif, Your problems are our problems .#148; So keep those lofty principles uppermost as you shop your way through life, favoring such products as $300 per ounce bottles of perfume, $250 pairs of Adidas-1 athletic sneakers, and $500-per-night hotel rooms on Las Vegas weekend getaways, to name just a few. Never say no! Did your brother-in-law just lose his weekly paycheck by a bad pick on the third race at Hialeah? If he needs a bit to tide him over, give him your help. Is a generous contribution to the bridal shower of coworker#146;s daughter requested? It will certainly be a nice gesture on your part. The plea given from the pulpit by your pastor last Sunday made it clear that without your assistance, the natives of Rwanda will continue to suffer. Surely you can#146;t turn your back on mankind. And as there is no limit to the needs that others will impose on you, it is a reliable device to rid yourself of money. Simply turn off your head and follow your heart. Accept without question your stockbroker#146;s suggestions on the securities you buy and sell. Should a heavily loaded mutual fund be recommended, as it most assuredly will, signify your approval with a nod of the head and a broad smile. Finally, as a last resort, if your portfolio refuses to head in a sufficiently southward direction, give discretionary authority to your stockbroker. In this way, the inevitable churning of your account to generate maximum commissions for the broker, irrespective of performance, will be guaranteed. Simply follow this program and you may rest assured that it won#146;t endow you with unwanted assets. Your status as a working stiff will be guaranteed in perpetuity. AL JACOBS has been a professional investor for nearly four decades. His business experience ranges from real estate, mortgage, and securities investment to appraisal, civil engineering, and the operation of a private trust company. In addition to managing his investments on a day-to-day basis, he is a featured financial columnist for both online and print publications. He is the author of Nobody#146;s Fool: A Skeptic#146;s Guide to Prosperity . You may subscribe to his financial Newsletter, "On the Money Trail," at no cost or obligation, by visiting www.onthemoneytrail.com . Permisison granted for use on DrLaura.com. More >>

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05/07/2010
IconDivorcing Your Finances The Dollar Stretcher by Gary Foreman gary@stretcher.com I am about to get a divorce. We currently have a joint account as well as separate accounts. Can my soon-to-be ex withdraw an enormous amount (more than half) legally from our joint account even though we agreed (verbally, not in writing) that the joint account would remain in effect for paying bills (mortgage, maintenance, utilities, etc.) since we both are still living in the home. Nicole We're sorry to hear about Nicole's pending divorce. Sadly she's got plenty of company. According the CDC (Center for Disease Control) there were approximately 1.1 million divorces in 2004. Nicole is right to be concerned about her finances as she goes through the divorce process. Just as money is often the source of marital problems, it often causes headaches during the separation and after a divorce has been finalized. Even couples that have made an effort to keep their finances separate will probably find some areas where their financial affairs have become entangled. The simple answer to Nicole's question is "yes" her Nearly-Ex can make major withdrawals from a joint checking account. In a joint bank account, either person can withdraw all of the money. Regardless of any agreements between the parties. That's true even if it were Nicole's account before they were married, she's made every deposit and her Nearly-Ex was added to the account merely for convenience. Even if her Nearly-Ex puts it in writing, he still can go down to the bank and take every cent. Either before or after the divorce. A joint account is only good for people who completely trust each other. Usually that's not the case in the middle of a divorce. What can Nicole do? One solution would be for each of them to write a check for one half of each household bill. More work? Sure, but a whole lot safer. Nicole really needs to look beyond their checking account. Joint debts can become a real problem. The lender will look for payment from anyone listed on a debt. The same thing is true for mortgage payments and credit card accounts. If both of them are on the loan, the lender can go after either of them for repayment. For the entire loan. Regardless of what Nicole and Nearly-Ex agreed during the divorce. And just because the court orders her Ex to make payments doesn't guarantee that he won't lose a job and fall behind. If she's still on the loan, the lender will start calling asking her for payment. Any missed payments will reflect on her credit score. Short of making the payments herself, there's really not much she can do but plead with her Ex to catch up. Any loan or credit card that has both Nicole and her Nearly-Ex listed should be closed out or refinanced by one or the other. That might not be easy. For instance, the bank won't think that a loan to one of them is as safe a loan to both. The reason is simple. Now the lender only has one possible source of payment. Not two. Because of that the lender may want a higher interest rate. Nicole and Nearly-Ex should also retitle any jointly owned property. Owning joint assets with your Ex can be troublesome. Even if the divorce was friendly. Joint ownership creates both privileges and responsibilities that aren't shared very well by divorced people. For instance, both parties must agree to sell any joint property. Nicole wouldn't be happy if a year from now her Ex refused to sign off when she wanted to sell her car. But if both names are on the title, she'll need both signatures to sell it. Once all that's completed, Nicole will also want to check her other financial documents and make the appropriate updates. Her Ex might be listed as the beneficiary of her life insurance and IRA. Nicole will also need an updated will. Don't forget bank safe deposit boxes or auto and home insurance policies. Is that a lot of work? Sure it is. But just like divorce means separating a lot of possessions and memories, it also means separating your financial affairs. Gary Foreman is the editor of The Dollar Stretcher website and newsletters. If you'd like to stretch your day or your dollar visit today. You'll find hundreds of articles to save you time and money. Permission granted for use on DrLaura.com More >>

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05/07/2010
IconSaying 'I Love You' for Less TheDollarStretcher.com by Gary Foreman This is for the frugal romantic. Last Valentine's Day I had $8. I went to the local grocery store and bought gladiolas (the cheapest flowers I could find - but very beautiful). I cut red tissue paper into hearts to look like rose petals. I also bought strawberries and grapes. I got out all the photos of the two of us and taped them to the wall in a trail leading to the bathroom. The bathroom walls were filled completely with more pictures. There was also a bath drawn waiting for his homecoming and fruit to feed him. It went over very well! Sandy Sandy sure has the right idea. It isn't how much you spend on your sweetie, it's what you say and how you say it. Of course, not everyone uses Sandy's methods. A trip to the FTD.com website offers a dozen roses (their cheapest bouquet) for $40.98 including the service charge. And, according to the Greeting Card Association, only Christmas generates more greeting cards than Valentine's Day. It's estimated that we'll spend over $350 million on candy the week before Valentine's Day. Wow! That's a lot of love! But chances are that Sandy made a bigger impression than any box of candy would have. That's because her gift emphasized what they shared together. Creating the perfect gift is a matter of thinking about the person who will be receiving it. One way to create a successful, frugal valentine is to highlight something special in your past. Begin by taking some time to think. Pull out your memories instead of your wallet. What were your partner's happiest moments? Are there special events or secrets that you share? Finding a way to commemorate that time or event is the fun part. You don't need to be very good with words to write a love letter or poem. It's the memory that you trigger that's important. Not your choice of words or whether the poem rhymes. Trust me, you won't get a 'D' on this assignment! Another possibility would be to celebrate all the things you love about that special someone. Everyone likes to hear good things about themselves. And, who better to tell them than someone they love. You can present those thoughts in a variety of ways. Anything from a recorded message to a series of notes that your valentine will stumble across during the course of their day. Again, eloquence isn't necessary. You can be pretty sure that your grammar won't be critiqued. Some events can be recreated. Return to the spot of that special picnic or lovers' lane. Or listen again to the music that you shared before. Just one or two elements from a special time will rekindle wonderful memories. A second way to create a memorable valentine is to use the element of surprise. Most of us have an expectation of when, where and how we'll receive our valentine gift. Surprising your partner is an inexpensive way to add excitement. Lunches offer a wonderful opportunity. If you typically prepare the lunch, it's easy to do something special for your valentine. Their favorite foods, heart shaped sandwiches, candy kisses or a special note are all inexpensive. Even if you don't prepare the lunch, sometimes you have the opportunity to get to the lunch box before it heads out the door. Sometimes you can spread your surprise out over a number of days. For instance, you could deliver flowers one at a time. Or send a poem one line at a time. If you both have email at work you could send one line every half hour until the poem was completed. You might even want to start a day or two before Valentine's Day and take days to complete the message. Another possibility is to give that special someone a 'heart attack'. No, not where you call 911. Rather, a flood of hearts in their car, bedroom or office. Simply cut out or print dozens of paper hearts. Overwhelm them. So, like Sandy, don't be afraid to avoid the expensive flowers, cards and candy. A little thought and effort could create the best way to say "I love you." Why not do something memorable for that special someone this Valentine's Day? Gary Foreman edits TheDollarStretcher.com website and newsletters. If you'd like more time and money you'll find hundreds of articles to help you stretch your dollar and your day. Permission granted for use on DrLaura.com More >>

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05/07/2010
Icon4 Ways to Pay Off Holiday Debts The Dollar Stretcher by Gary Foreman gary@stretcher.com Depending on which poll you use, Americans spent somewhere between $700 and $1,100 on Christmas gifts last year. For a good many shoppers, most of that spending went on their credit cards. And, if history is any indicator, those bills won't be paid off until May or June. Suppose that you didn't want to be laboring under those Christmas bills for months to come? Is there something that can be done now to get them paid sooner? Yes, there are things that you can do now to get those debts off your back. Let's take a look at a couple of strategies you might want to consider. Insurance eats up a fair amount of the average family's budget. Just home and auto insurance can run hundreds every month. For an expensive item, very few people do any comparison shopping. If you haven't taken a look at your insurance in the last year you may be giving money away. The internet has made comparing insurance rates easier. There are a number of sites that provide comparisons. You may also want to talk with an agent. Insurance policies can be confusing. Be careful before you make a switch. Make sure that you're getting the coverage you need. Don't forget to ask about your deductibles. That's the amount that you have to pay before the insurance starts to pay for the loss. Often raising a deductible to the next level can make a big difference in your premium. Finding cheaper insurance pays two dividends. First, you've saved some money. Second, you haven't had to make any changes to your lifestyle. Not bad! Another place to look for money is your tax refund. The IRS will send out checks to over 120 million taxpayers. The average refund check will be $2,100. For many workers their tax refund is a once-a-year bonus. Of course, the sooner you file, the quicker you'll get that refund. Once you do file, you can find out the status of your refund on the IRS's website at https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp Unlike the insurance saving, your IRS refund really isn't 'found' money. It's actually your money. It's just that during the year more money was withheld from each paycheck than was needed to cover your taxes. Unlike the insurance idea it's just a one time event. If you want a refund next year you'll need to overpay your withholding this year again. But suppose that you don't expect to get an IRS refund this year. Then how about finding a few extra dollars every work day? If you work you know that the cost of lunches adds up quickly. A simple sandwich in the company cafeteria or local fast food joint will cost you $4 or so by the time you include fries and a drink. If you go out to a sit-down restaurant, it's easy to spend $10 when you include a tip. Many people work one hour per day just to pay for their lunch! Many work places have a microwave oven available. That makes leftovers the ideal lunch. Instead of throwing out that extra serving from last night's dinner or letting it turn green in the back of the refrigerator, take it to work for lunch! If you have teenagers in the house you might not have any leftovers. Then you'll want to consider forming a lunch club. Each member of the club takes a turn preparing lunch for the whole group. You'll probably want between two and five members. The group can decide whether it should be kept simple like salad and sandwiches or if they want something more substantial like casseroles. You'll spend less time and money providing one meal for five people than buying lunch for yourself every day. No leftovers and you work alone? Don't give up. You can solve the problem by increasing your income. One way to do that is to ask your boss for a raise or for more hours. If neither of those is possible, you might consider joining the 7.5 millions Americans who hold a second job. In fact, it might do more than provide some extra income. You could learn a new skill or even try out an entirely different career path. A second job is less stressful when it's used to achieve a short-term goal like paying off Christmas debts. It's easier to handle the extra workload when you know there's an end in sight. There are a lot of other ways to whittle down those holiday bills. Hold a garage sale, take some stuff to a consignment shop or sell them on e-Bay. Look for ways to reduce expenses. Cut your grocery spending. Make your own household cleaners. Join a car pool. So even if you overspent for the holidays, there's no need to get down on yourself. Just figure out what will work best for you and then get started! Gary Foreman is a former financial planner who currently publishes The Dollar Stretcher.com website. If you'd like more time and money you'll find hundreds of articles to help stretch your day and your dollar. Visit today! Permission granted for use on DrLaura.com More >>

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05/07/2010
IconShould I Declare Bankruptcy? The Dollar Stretcher by Gary Foreman gary@stretcher.com My husband and I got married quite young, made some unwise financial decisions and ended up in debt (some credit card, some personal loans) with a grand total of $24,000. My husband has worked very hard over the years, sometimes 3 jobs at a time trying to make ends meet. We have gone through credit counseling, and a consumer proposal. We are the parents of 3 young children and have had to choose between paying our bills so we wouldn't go bankrupt or buying groceries. After many years of trying we feel that we have no other choice but to file for bankruptcy. We honestly would like to do anything else but we feel that this is our only alternative. Exhausted in Sudbury Exhausted is not alone. In 2004 there were about 1.6 million bankruptcies in the U.S. and another 80,000 in Canada.According to the U.S. Federal Reserve, the typical filer has about 1.5 times their annual salary in short-term, high interest debts (like credit cards and personal loans). About 2/3 of those filing say that they have lost a job and about 1/2 have faced a serious health problem. Canadian and U.S. bankruptcy law are fairly similar. There's a national law that authorizes bankruptcy and then state or provincial law determines things like what property you can keep through a bankruptcy. Basically, a bankruptcy discharges certain debts and says that the creditor is no longer entitled to repayment. The purpose is to allow the debtor to get a fresh start and creditors to get an equitable distribution of any assets. Just because debts are eliminated doesn't mean that the slate is wiped completely clean. Debts discharged in bankruptcy will appear in your credit history. In Canada they will remain for 6 years. In the U.S. the bankruptcy will appear for 10 years. There are also some debts that a bankruptcy won't eliminate. In both the U.S. and Canada back taxes, alimony, child support, and student loans are not discharged. Canadian student loans can be discharged 10 years after graduation. OK, now let's look at Exhausted's question. When is it time to throw in the towel and file for bankruptcy? Exhausted is correct. Bankruptcy should only be used when the other alternatives have failed. When minimum monthly bills are more than the family can pay, the first step is to contact the creditors and ask for a payment plan. If that doesn't provide enough breathing room, it's time to contact a qualified credit counseling agency. They can negotiate the interest rates down. Neither of those steps will reduce the amount owed. It will only cut interest rates and create a more livable payment plan. Sometimes, that's not enough. If a credit counselor can't work out a plan to pay off your debts in less than five years, then it's time to consider something more drastic. In Canada a debtor can file a 'consumer proposal'. It brings in a trustee and asks for a reduction of the amount owed and/or the interest rates charged. The debtor makes payments per the plan. At the end of the plan remaining debts are discharged. Creditors have the right to reject the proposal. In the U.S. a chapter 13 bankruptcy filing serves a similar function. It's meant for people with a regular source of income and enables them to keep some valuable property (such as a house) while putting together a payment plan that usually runs 3 to 5 years. Payments must be completed under the plan before the remaining debts are discharged. If Exhausted's income is only enough to cover living expenses without repaying debts, a bankruptcy filing in Canada or a chapter 7 bankruptcy in the U.S could be appropriate. In either country, if there's income available for debts, it's the court's responsibility to redirect the debtor to a consumer proposal or chapter 13 filing. In a Canadian bankruptcy or U.S. chapter 7 filing, the court appoints a trustee. The trustee collects the debtor's assets, sells them and then pays the money out to the creditors. Some items are exempted from the sale. After the proceeds are distributed to creditors the remaining debts are discharged. There are other things to consider when deciding whether to file for bankruptcy. Bankruptcies are public records. In the past you could be pretty sure that no one would find out unless you told them. But, in today's interconnected world that's not so sure. It#146;s also possible that the debtor has some asset that they could lose during bankruptcy. For instance retirement accounts or valuable family heirlooms could be liquidated. In the states, there will be filing fees, typically about $200. Your lawyer will get about $1,000 in fees, although you can keep that down by having current statements on all your income and debts. Many will offer one free consultation. Canadian fees are government regulated and typically are paid out of the assets available to creditors.Exhausted should also pay attention to proposed bankruptcy legislation in both the U.S. and Canada that would make it harder to declare bankruptcy. Finally, there is one reason for Exhausted to smile despite the challenge her family has faced. There was a time in old England where a person unable to pay their debts could get the death penalty! Fortunately that law doesn't apply today and no one is adding it to any proposed legislation. Could you use more time or money? Visit The Dollar Stretcher.com website for hundreds of articles to help you stretch you day and your dollar. Visit today! Permission granted for use on DrLaura.com. More >>

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05/07/2010
IconRuin My Credit The Dollar Stretcher by Gary Foreman gary@stretcher.com I am not a financial whiz. Never was and never will be. Therefore, I respect the advice of those who seem to be knowledgeable about financial matters. However, when it comes to knowing what is in your credit report, I have one question -- who cares? I am 54 years old, have purchased several vehicles, two houses and can write checks anywhere in the town I live or the surrounding smaller towns without any hassle. I have never been turned down for credit. In fact, if I sign up for a new credit card for a minimum balance I can assure you that within three years my credit limit has increased considerably. Given the above situation, when I am threatened by a bill collector (I don't pay for things just because someone says I owe them money) that they are going to "ruin" my credit, I just laugh at them and say "go right ahead" because it doesn't matter to me. Betty Betty is certainly an independent individual! I suspect that most of us admire that. But, if she's not careful, she could needlessly paint herself into a financial corner. There was a time when having a good reputation in your town was enough to get you credit when you needed it. And, no stranger could destroy a good reputation simply by making a claim against you. But, somewhere along the way companies began to collect information about borrowers. And they sold that information to potential lenders. It's progressed to the point that virtually every adult in the U.S. has a credit score. The FairIsaac Company created the credit score also known as FICO. Your score will be a number between 300 and 850. A higher number indicates a better credit risk. So higher is better. Most people have scores between 600 and 700. Not suprisingly lenders want to get their money back. And the best indicator of a borrower's ability to repay a loan is their credit score. Over 75% of mortgage lenders and 90% of credit card lenders consider your FICO score when determining whether to make a loan and how much interest you should be charged. Now let's look at Betty's situation. It appears that she has had some disagreements over bills and refused to pay them. That, plus the fact that she continues to get credit tells her that her credit score is unimportant. Is that true? Betty's credit score not only affects her ability to get credit, but also the amount that she pays for it. So, unless she pays her credit card bill in full each month, a low score will affect what she pays.She might want to check the fine print on her original credit card agreement. In some, if your FICO score drops below 600 you'll be charged the penalty rate on the outstanding balance. Those rates can be as high as 30%! But, the biggest potential hit from a low score comes when you finance a home or auto. MyFico.com is a website subsidiary of the FairIsaac Company. They estimate that a 200 point drop in your credit score could add 3.5% to the interest rate on a 30-year mortgage. Over the life of the loan that works out to over $80,000 in extra payments. And, unfortunately even if Betty never runs a credit card balance and has her home and auto paid off, she's still not completely independent of a bad credit score. Auto insurers and potential employers can access your score. A low score can affect whether you get auto insurance or that new job. Even utility companies and potential landlords are using credit scores. So should Betty just give up and pay bills that she doesn't feel she owes? Nope. But if the disputed bill is entered into her credit report she needs to contact the credit reporting agencies and have her side of the story entered. Even if you don't have disputed bills, it's a good idea to check your score annually or before you apply for a mortgage or auto loan. Recent studies have shown that 29% of credit files had errors significant enough to cause a 50 point swing in the score. To check or correct your score: Equifax, 800-685-1111, equifax.com Experian, 888-397-3742, www.experian.com TransUnion, 800-888-4213, transunion.com If you report an error the agency must investigate your claim and respond within 30 days.Philosophically I agree with Betty. I dig in my heels when someone threatens me. But unless she's unusually self-sufficient, she probably needs to periodically check her credit score and share her side of the story on any disputed bills. Gary Foreman is the editor of The Dollar Stretcher.com website. If you'd like to stretch your day or your dollar visit today! Permission granted for use on DrLaura.com More >>

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05/07/2010
IconRent or Buy? by Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; www.WIFE.org www.MoneyClubs.com A tremendous sense of pride comes with owning your own place, and owning a home has financial advantages as well. You can deduct the mortgage interest and property taxes on your income tax return, your house may appreciate in value, and when you sell your home you#146;ll likely realize that gain tax-free. Those are pretty great perks for investing in property. But buying a house at the wrong time or spending more than you can afford are mistakes that can seriously derail your financial plan. Fail to pay your mortgage and you could lose the roof over your head. During a housing slump, renting is often your best bet, since property owners who are waiting for prices to rise will rent out their property, flooding the market with rentals and causing rents to drop. Your decision to rent or own should be based on your own personal situation and finances. For a worksheet that will help you get a better sense of the financial and tax consequences of renting or buying, click here. http://www.wife.org/money-invest-rent-or-buy-home.htm . Cofounders of the nonprofit Women#146;s Institute for Financial Education ( www.WIFE.org ) and the new MoneyClub for women ( www.MoneyClubs.com ), Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFPreg; are trusted financial guides for millions of women. As owner of her own investment management firm, Candace was recently recognized as one of the top ten brokers in the country for 2003 by Registered Rep magazine. Ginita has been named to Worth magazine#146;s Top Financial Advisors for seven years. Both authors are nationally-recognized experts on women and money and regularly appear on CNN and CNBC and in national financial and women#146;s publications. This article is excerpted from their new book It#146;s More Than Money#151;It#146;s Your Life! The New Money Club for Women (John Wiley, 2004). Permission granted for use on DrLaura.com. More >>

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05/07/2010
IconInvestment Returns The Dollar Stretcher by Gary Foreman I have read lots on saving money and retirement. In most of the articles it states you can get a return of 10% or 12%. Where do you go to find this kind of earnings? If you have to invest in the stock market, where do you find a person to help you do this without them getting most of your money for helping you? Thanks. Joy Joy asks two very good questions. What is a reasonable rate of return for her retirement savings? And, what does she need to do to earn it? We'll begin by looking at the return question. Is 10 to 12% per year a realistic goal? The first thing for Joy to remember is that as the potential return increases, so does the risk of loss of part or all of her investment. But, not all risks are the same. She needs to evaluate the risks. For instance, with a CD she'll have a bank guarantee that she can have 100% of her principal back any time she wants it (minus any interest penalties for early withdrawal). Or she could choose to invest in stocks. Greater risk, but also a greater possible reward. The risk is different, however. No one can guarantee that any stock, fund or market will go up in the next year. So there's greater risk for the next year. But, suppose that Joy is years away from retirement. If she'll be keeping her investment for ten years and is willing to own a variety of companies, the risk can be largely eliminated. For instance, the Dow Jones Industrials have gone up in every ten year period going back for over 100 years. Including the depression years. One other interesting item. What Joy really needs to know is what the Compounded Annual Growth Rate (CAGR) is. That's not the same as asking what the "average" return is. The difference is in how compounding affects up and down years. You could do the math manually, but a financial calculator is much easier. Back to Joy's original question. Is 10% possible? Yes, as a matter of fact it is. The SP 500 CAGR has been in the range of 10.5 to 11% per year for 10 year periods since 1926. So if Joy can just do as well as the historic market average, she should do ok. What about bonds? Over the long term stocks will outperform long risk-free bonds by about 6%. So if Joy wants to be in that 10% range she'll need to stay with stocks. Now to the second part of Joy's question. Where can she get advice in selecting investments? Selecting individual stocks is not a good idea. Finding a good broker will be difficult. When I was a broker we were instructed to find 200 clients who could produce $1,000 worth of commissions in a year. Very few retirement accounts are that large. So Joy would always be at the bottom of the broker's list. Joy will do much better investing in something called an 'index fund'. Not only can an index fund earn you the stock market average, it will do so with minimal expenses since it doesn't need a large staff to decide which stocks to buy and sell. The Securities and Exchange Commission (SEC) website describes an index fund as a "mutual fund or Unit Investment Trust whose investment objective typically is to achieve the same return as a particular market index, such as the SP 500 Composite Stock Price Index, the Russell 2000 Index, or the Wilshire 5000 Total Market Index." Joy will need to do a little research before choosing a fund. But, it's not something that's too difficult for the average adult. She can find help online at The Motley Fool site . And there are numerous books on the subject. Any by John Bogle are excellent. He's the man who literally invented the mutual fund back in the 1950's and is a supporter of index funds. If Joy wants to take an active part in managing her retirement portfolio, she might want to select a couple of different index funds. Different indexes will behave differently in different economies and a changing world. NASDAQ will be more affected by technology stocks than the Dow Jones Industrials. For instance, if she's bullish on technology she should have more of a NASDAQ index and less of the Dow Jones one. Bottom line? Over the long term Joy should be able to earn about 10% on her retirement savings without spending a lot of time or money managing her investments. Gary Foreman is a former financial planner who currently edits The Dollar Stretcher.com website and newsletters. Visit today. You'll find thousands of money-saving articles. Permission granted for use on DrLaura.com More >>

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