Motherhood is certainly a life-changing event.  Our children become the center of our lives, and we must make adjustments to make sure they’re cared for.  Instead of hiring a babysitter, more and more moms are choosing to start their own businesses so they can be there for their kids and still contribute to the family income.

Self-employment offers a certain amount of flexibility.  But in most businesses, a certain amount of time outside the home is required.  At the very least, you’ll need to meet with clients in your home.  This can be rather inconvenient for moms, especially when they have small children.  So many of them are looking for opportunities to make money online.

Starting an online business has a number of advantages for moms.  These include:

* Start-up costs for an online business are often low.  So even if you are not currently working outside the home, starting an online business is usually within reach.  Setting up a website and buying some software are often all that’s needed to get started, and that can be accomplished for a few hundred dollars or less.

* Doing business online doesn’t require one to keep regular hours.  You can work early in the morning before the kids get up, during the baby’s nap, or late at night when everyone is in bed.  And with the automation that the Internet has to offer, orders can be processed and virtual products delivered while you are sleeping or taking care of the kids.

* You can get some work done with the kids right by your side.  Older children may even be able to help you with simple tasks.  Did you know that the IRS allows you to deduct wages (up to a certain amount) paid to a child who is age seven or older to work in your home business from your taxes?

There are all sorts of online businesses that are great for moms.  You could sell your crafts on eBay or Etsy.com, or you could start your own ecommerce website.  You might offer services such as writing, transcription, web design or virtual assistance to customers around the world.  Or you could create and sell information products.  Even blogging offers impressive money-making potential.  The possibilities are many, and there’s sure to be something out there that’s just right for any mom.

Moms make up a large portion of the people who are making money online.  This allows them to take a hands-on approach to raising their children while still making money to support the household.  They don’t have to count on a sitter to take care of their children’s needs, and they don’t have to make a commute part of their daily routine.  It’s no wonder that the number of moms starting online businesses is growing in leaps and bounds.

While there was only a 3% decline in stock prices, experts are nonetheless waiting for “the bottom to drop out”.  As home foreclosures and unemployment rose yet again, the news that home sales were up 5.5% didn’t allay the obvious fears that we are indeed on the cusp of a global recession.

However, there are two words that have been replayed over and over in the news, online, and via comments by economists: “don’t panic.”  Tell that to the man who went to his bank and took out all his cash in a shoebox!

These two words, when juxtaposed against the statement that “this is the worst financial crisis since the Great Depression,” seem more than hollow.  Yet, one has to look at the history of past recessions to understand why this particular advice may be a palpable one.

Here is what Joseph Hearn from AARP Bulletin Today had to say:

“Recessions have historically occurred every few years and they last, on average, about 10 months.  No matter how bad it gets, the vast majority of people will still get up and go to work, pay their mortgage, and take a vacation now and then.  The steepest recession in the last 30 years occurred in 1981.  It lasted 16 months, the economy shrank 2.6 percent and unemployment reached 10.7 percent.  More recent recessions have been less severe.  The 2001 recession lasted only eight months, the economy shrank less than 1 percent and unemployment was barely over 6 percent.”
 
“The last recession was over before it was officially announced,” says Ernie Goss, professor of economics at Creighton University in Omaha, Neb.  “This one will likely be somewhat longer because of the sharp downturn in housing, but the economy will eventually recover.”

These two statements may calm the fear and panic mode for some, but they are analogous to fracturing one’s hand – the pain and discomfort may last only a few weeks, but the long-term effects are still unknown.  Will the hand heal properly; will the individual be able to return to activities once enjoyed, or will there be permanent damage to the hand making it more difficult to carry out even the most mundane task.

The Rescue Plan has “eased the credit crunch somewhat”, as stated by some economists.  But banks continue to go into default and unless and until home foreclosures can be halted, the effects will continue to plague the economy as well as the world markets.

Frankly, they are both correct.  While you may have invested quite a bit of money in the stock market and lost most of it, the truth is when the market rebounds, you may see a good return on your investment. 

Economists recommend that selling stocks will just make matters worse.  With the stock market’s current volatility, most agree that it’s best to just sit tight and wait.  For those who can afford to invest in the stock market, now is as good a time as any to find great deals.

AARP has some other suggestions, to wit:

* Open a money market account at your bank and have it linked to your checking account to allow for telephone or online transfers.  From that point on, make all of your deposits into the money market account where they will immediately start drawing interest.

* Never deposit any of your income directly into your checking account.  The idea is to keep as much of your money as possible drawing interest as soon as you receive it.  Keep a minimum balance in the checking account and transfer cash by phone or online only as needed to cover checks written.

* Never put a dime in a passbook savings account.  Check with any bank and you’ll find that passbook savings interest is less than the inflation rate.  So, savings accounts actually lose money when inflation is factored in.  Put that money in an account that will pay you a higher rate of interest.  You won’t have to look far.  Your new money market account will pay you more interest than a savings account and still allow you to withdraw your money on demand.

The suggestions offered by AARP are important considering that obtaining the best interest rate on your money is at the very core of surviving this financial crisis.  Although some of you may not have thought of transferring funds to a money market account, it does seem appropriate at this time.

Ensure that you research several banks in your area to ascertain what their rate of return is on money market accounts.  Compare them to your current bank and determine who offers the best deal.  Make sure you ask about fees, if any, associated with withdrawals as well as other concerns you may have.

Those of us who have savings and checking accounts may have just learned a new way of not only securing our money, but also gaining additional interest at a time when we need to save every penny.

* Establish a household budget and stick to it.  Keep contributing to your 401K.  Pay down your credit card debt.  Utilize cash:  if you can’t afford an item, don’t buy it.  Limit any wasteful spending such as dining out once a week, buying morning coffee, or lunching out. 

* If you have CDs at your local bank, AARP advises that you not to automatically roll over your CDs.  Instead, maximize the growth of your CDs, always call or visit the bank to review current interest rates, including any promotional rates that might be available.  Banks often run promotions offering interest rates higher than their regular rates.  You can be certain that an automatic renewal won’t get that rate unless you ask.  Millions of CD owners take that easy road at renewal time.  Banks love customers like that, but those people are making a mistake that you should avoid.

* If your bank has closed, or has merged with another bank, contact the bank to ensure that procedures are still the same.  If you are opening a new account, research the many banks in your area.  Ensure they are insured by the FDIC for $250,000, and compare bank fees as well.

* Make sure you have not overdrawn on your checking account.  The fees can quickly add up.  Balance your checking account immediately upon receipt of the bank statement.  In addition, if you are paying bills on line via your checking account, record the payments into your checkbook immediately.  In this way, you know exactly what your balance is at all times.

* As far as your yearly taxes are concerned, AARP also advised that you do not overpay your quarterly estimates or increase your tax withholding to avoid owing the IRS money.  In reality, it’s a sure way to get less than zero interest on your money.  The least expensive way for you to pay your tax liability is to have estimated payments come out as close as possible to the amount owed.

* You are allowed to check your credit report annually for free.  This is a good time to determine if there is anything on the reports that seems unfamiliar.  If so, you can contact each credit report agency directly.  Check your FICO scores with each agency as well.

* Now is the time to put aside one credit card for emergencies only.  If you do have several credit cards, ensure that you make payments on time to avoid late fees or an increase in interest rates.  Call your card companies to ascertain if any of the interest rates can be lowered.

Finally, since no one knows how long this crisis will last, it is a good idea to put aside enough money to cover your household expenses including doctor and dental visits, and any other necessary expenditure for the next 18 months.

Do you know what your FICO score is?  If not, you may want to check as it will have a direct bearing on whether or not you can secure a loan in the near future.

Before the economic downturn, loans were given out like candy by predatory lenders.  Since the banks put a freeze on lending, you may be surprised to find that your FICO score may not be high enough to obtain a loan, and if it does fall within the parameters of acceptance, your interest rates are going to skyrocket.

Here are three loan examples, along with FICO scores, interest rates, and monthly payments.  These estimates will be based on the highest FICO score and what is now considered the lowest for each loan type in New York.

Car Loan: $17,000      Low End FICO Score
FICO Score: 720-850     500-589
Interest Rate: 6%     15.755%
Monthly Payment: $517.00   $596.00

15 Year Home Equity Loan: $50,000
FICO Score: 740-850    620-639
Interest Rate: 7.963%    12.221%
Monthly Payment: $477.00   $607.00

30 Year Fixed Mortgage: $300,000
FICO Score: 760-850    500-579
Interest Rate: 5.676%    10.473%
Monthly Payment: $1,737           $2,738

The difference between the high end and low end scores are significant, especially for a 30-year fixed mortgage where a low FICO score costs an additional $1000 per month.

While auto dealerships cannot obtain the funds from the banks to add to their inventories, while banks are not willing to lend money (even though there was a 700 million dollar bailout), and with major companies now laying off thousands of employees – perhaps one’s FICO score has little significance.  However, this is an incorrect assumption.

Depending upon when the economy is revived and when the volatility in the stock market subsides, the best recommendation anyone can offer you at this time is to obtain your credit reports, check for errors, and do all you can to increase your FICO score.  It is that significant to you and your financial future.

If you have concerns you may be laid off, there are certain steps you can take now to alleviate the pressure and stress should this eventuality occur.

1.  Put away enough money to cover expenses for the next 18 months.

2.  Pay down credit card debt.

3.  Re-visit your household budget and make necessary adjustments to save money.

4.  Continue and/or increase contributions to your 401K Plan.

5.   If you own a home outright, look into an equity loan.  However, note that home equity have decreased as much as 20%.

6.  Obtain your credit reports and check them thoroughly.

7.  Check your insurance coverage for health, life, and auto to ensure you have the appropriate coverage.  Make certain all policies are up to date.

8.  Contact credit card companies and request a reduction in interest rates.

9.  Call either your cable or telephone provider and ask what the price is for cable, telephone, and internet usage. 

10.  If you have both a landline and a cell phone, consider dropping the landline.

11.  If you have internet service, check into utilizing Vonage, VoIP, or Skype as alternatives.

12.  Research online coupon sites and bookmark them for later use.  There are coupon sites available for groceries, household, and non-household items that offer discounts, printable coupons, and rebates.

13.  Do not renew magazine subscriptions or subscribe to new ones.

14.  Buy groceries in bulk.

15.  If you buy clothes, choose those that do not require dry cleaning.

16.  Winterize your home.

17.  Conserve energy by lowering the thermostat and unplugging appliances when not in use.  Shut down the computer instead of keeping it in sleep mode.  Purchase energy-efficient light bulbs and ceiling fans that utilize less wattage.  Clean air conditioner filters frequently, and keep blinds open during daylight hours to heat your home instead of raising the thermostat.

18.  Select one day to shop and complete all errands, thus saving on gas.

19.  Use public transportation whenever possible.

20.  Refrain from buying coffee, snacks, lunch, lottery tickets, scratches, and any other non-essential items that you purchase on a daily basis.

Now is the time to save money and not spend it in a wasteful and impulsive manner.  We will all have to make difficult choices and sacrifices during this recession.  Prepare for the worst and hope for the best.

In a Variable A fund, the stocks and bonds purchased are from a diversified group and although riskier, yield a higher rate of return.  For example, in July 2008, the unit value was $62.88.  Since we have not received the next quarterly statement since the market crisis, there may be significant losses incurred.

The Fixed Annuity Program, on the other hand, offers a guaranteed annual rate of 8.25%.  Currently, this rate has been extended through June 30, 2009.
 
There is a third fund called the Variable B Annuity Program (Stable-Value Fund) which showed a unit value of $19.525 as of July 2008.
 
As contributors to any one of these funds, you can select one program or combine two programs such as Variable A (50%) and Fixed Return (50%) or any percentage of each fund that totals 100%.

Recently, TRS introduced the Passport Funds program.  This allows members to submit election changes (percentage change of funds) at any time.  The elections would take effect on the next quarterly conversion date that occurs at least 30 days after receipt of election changes.  In the past, members were only allowed to make changes to their fund contributions annually.

Since this is akin to a 401k Plan, early withdrawal of these funds incurs a 10% penalty before the age of 59½.  However, upon reaching said age you have the option of rolling over these funds, without penalty, into a Roth IRA if you so choose.

According to one source, “A fixed annuity provides more security of principal than a variable annuity, but has limited upside potential.  When you invest in a variable annuity, you accept more short-term volatility in that the value of your investment will fluctuate with the stock and bond markets.”

Considering the volatility of the stock market, if you can convert your Variable A Program to a Fixed Return Fund, you may be better off in the long run.

For example, the Great Depression saw a decline of more than 10% in GDP or Gross Domestic Product.

If you have grandparents or older parents whom you can ask about the 1929 stock market crash in which the GDP fell approximately 33%, they will be able to recount in detail what it was like back then.  Bread lines, unemployment, loss of businesses, individuals losing everything they owned, food stamps, and indescribable hardship.

According to experts, the last recession we experienced was between 1973 and 1975 when the GDP fell close to 5%. 

The Bureau of Economic Analysis states that:  “Real gross domestic product – the output of goods and services produced by labor and property located in the United States – increased at an annual rate of 2.8 percent in the second quarter of 2008, (that is, from the first quarter to the second quarter).  In the first quarter, real GDP increased 0.9 percent.” 

In addition, Forbes.com stated on September 25, 2008 that: “The government reported August new homes sales shrank by 11.5%, to 460,000 homes, from 520,000 in July, marking the housing market’s slowest pace in 17 years.  The report does not bode well for builders who already face a large glut of tough to sell inventory.  Analysts had expected August sales of 510,000, according to TradeTheNews.com. The average price of a new home sold in August fell by 11.8%, to $263,900, from July’s $299,100.”

You may also wish to peruse an article at: http://www.nytimes.com/2008/03/23/weekinreview/23duhigg.html?fta=y wherein Mr. Duhigg states that “Between 1857 and 1929, while regulators largely stood idle, the American economy swung through 19 national boom-and-bust gyrations that sometimes threatened to wipe out whole industries within months.

But in the wake of the Great Depression, American policy makers began actively managing the economy with a handful of tools, including adjusting interest rates and using massive government spending to spur growth.  Since 1945, there have only been 10 boom-and-bust cycles, most of them much shallower than earlier ones, and the unemployment rate has never topped 9.7 percent.

But as the Internet boom and recent housing bubble demonstrate, even relatively stable periods can be part of a cycle of extreme ups and downs.  The prolonged expansion that just ended had an unusually long run of more than six years. As a result, some are speculating that the crash will be equally drawn out.

Mr. Duhugg goes on to state that “Even if consumer confidence hit rock bottom, that most likely would not be enough, by itself, to cause a depression.  For things to become really dire, the nation’s financial institutions would have to fail at the same time that unemployment began significantly rising.  Only if banks suddenly closed, or it became impossible for companies to access short-term lines of credit, would things begin spiraling out of control.”

This statement is quite prophethic since to date there have been twelve banks that have shut down, the most recent being Ameribank which was taken over by the FDIC.  Predictions are than many more will follow suit.  According to CNN money: “The FDIC insures the assets held by the 8,451 institutions with a total of $13.4 trillion.”

What is a reverse mortgage?  According to AARP, it is a loan against your home that you do not have to pay back for as long as you live there.  With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month.  You typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home.  To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

The difference between a reverse mortgage and a traditional mortgage is that with the former, you are not subject to a credit check nor do you have to make monthly payments you cannot afford.  In addition, since FICO scores need to be higher today in order to secure a loan, you need not worry about that either.  More importantly, with a reverse mortgage, you will not lose your home to foreclosure.

AARP offers a clear and concise explanation of how “forward” or traditional mortgages affect you:  When you purchased your home, you probably made a small down payment and borrowed the rest of the money you needed to buy it.  Then you paid back your traditional “forward” mortgage loan every month over many years.  During that time, your debt decreased and your home equity increased.

Reverse mortgages have a different purpose to forward mortgages.  With a forward mortgage, you use your income to repay debt, and this builds up equity in your home.  But with a reverse mortgage, you are taking the equity out in cash.  Thus, you have the ability to live in your home and use the equity as payment against the reverse mortgage.

There is a downside, however, to reverse mortgages.  When a reverse mortgage becomes due and payable, you may owe a lot of money and your equity may be very small.  If you have the loan for a long time, or if your home’s value decreases, there may not be any equity left at the end of the loan.  In short, a reverse mortgage is a “rising debt, falling equity” type of deal.

If this is the type of mortgage you are looking for; one that will allow you to use up all the home equity available while still living in your home, you may wish to research this type of mortgage further.  Before making any decision, especially this specific one, talk with your family and a financial advisor to determine if a reverse mortgage is right for you.

Subsequently, both the House of Representatives and the Senate worked together to come up with a plan that (1) protected the taxpayers’ dollars; (2) imposed conditions on how the money would be spent by appointing an oversight committee, and (3) ensured that the CEOs would not be the recipients of billions of dollars while shareholders and stockholders lost everything.

Thus, the Rescue Plan became a 400-page document that was voted on, approved, and signed into law.  The tenets of the plan, as presented by Congress, include:

* The Federal Housing Finance Agency, the firms’ direct regulator, appoints senior managers and oversees all operations. Chief executives have been dismissed and replaced with outsiders, who are to be paid significantly less.

* The federal government stands ready to inject money if either company is found to have liabilities that exceed its assets, an assessment to be made quarterly.

* Holders of debt in the companies, and of mortgages that they guarantee, are protected against losses.

* The companies will pay no dividends to owners of their stock, and the current shareholders, who now own 100 percent of each company, will have their stakes reduced to 20 percent, subject to further dilution if the government injects money.

* The government receives $1 billion worth of a special class of stock in each company that puts taxpayers’ interests ahead of those of any other shareholders.

* The companies will be prohibited from lobbying and other political involvement.  Their charitable giving is being reviewed.
 
* Fannie Mae and Freddie Mac will increase mortgage funding between now and the end of 2009 to help stabilize the troubled housing and mortgage markets.

* Starting in 2010, they will be forced to reduce the volume of mortgages they fund by 10 percent per year for about 10 years, to reduce the risk the companies pose to the financial system as a whole.

* Officials expect Congress to restructure the firms before 2010.

* The government will also start a program to buy pools of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.  The program is to be operated at the Treasury secretary’s discretion and an initial $5 billion worth of such purchases will be made in the coming days.  That is likely to reduce the interest rates Americans pay on a new home loan.
 
Keep in mind that initially, Secretary Paulson wanted to buy all of the toxic mortgages held by banks here and abroad.  Instead, at a meeting with the seven major countries (the G-7), they devised a new plan to infuse money into banks to afford them more liquidity.  This would enable banks to lend to other banks and eventually lend money to businesses and individuals.

Since the plan’s execution, the market has still shown varying degrees of volatility.  Globally, however, governments are working to restore their banking institutions by infusing billions of dollars into their banks in exchange for stocks.