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5 Pitfalls That Could Destroy Your Budget

2016-04-13T09:16:00.000-07:00

5 Pitfalls That Could Destroy Your Budget

With all of the advantages that are associated with living on a personal budget it is no wonder that many people are beginning to implement this system into their own lives. For a great number of individuals the results over time have been nothing short of amazing. People are beginning to work their way out of debt while at the same time meeting their expenses, and placing money into savings. However, it is important to realize that there are potential pitfalls that may be encountered along the way. If people are aware of these hazards then they are far less likely to be negatively affected by them.

Credit Cards. These little pieces of plastic can often cause a great deal of temptation and trouble. It is not uncommon for a person to make an unwise purchase, which they would not otherwise make, because they had a credit card handy. The solution to this problem for many people is to get rid of their credit cards and begin paying by cash or check. Some prefer to keep one card for emergency situations but it is best to keep this out of reach, and not in their wallet or purse.
Impatience. Problems often arise when people set financial goals but do not have the patience to complete a savings program. For example, let. s say that an individual begins setting money aside for a new car. However, after a couple of months they happen to find a car that they love, and instead of waiting, they go ahead and make the purchase. This could potentially create some serious financially strains. It takes real discipline to prevent impatience from breaking your budget.
Lack of adjustments. A budget is created using a set of expenses and income figures that are current at that time. As these figures change it is important that the budget is adjusted to reflect these changes. A failure to do so could lead to some major deficits.
Holidays. Unfortunately, many people do not consider holidays at the point that they are creating their budgets. As a result, a proper amount of money has not been set aside for presents, food, etc. These items should be factored in and saved for throughout the entire year.
5.Vacations. Many people accurately factor in the transportation and accommodations, but underestimate the amount of money needed for food and entertainment. Keep in mind that at any kind of "touristy" or resort destination, the prices can easily be 2 to 3 times what you would normally pay at home.

Planning Can Help You Save Money on Food

2011-01-13T20:10:00.000-08:00

Planning ahead is the most important step to getting more bang for your buck at the grocery store, says Katherine Tallmadge, RD, a spokesperson for the American Dietetic Association.
"Take inventory of what you have on hand so you don’t overbuy, create a detailed shopping list based on your needs and weekly menu plan, and take into account how you plan on using leftovers," she says.
Have a light snack before you go shopping, and stick to your grocery list to help avoid impulse purchases or costly mistakes like falling for the displays at the end of the aisles.
Before you plan your weekly menu, check the ads to see what’s on sale and use coupons to take advantage of sales and money-saving coupons. You can even sign up online to receive coupons and email alerts from your favorite grocers.

Save Money on Tax Preparations

2011-01-12T15:22:00.000-08:00

Read these tips!

Tax time is stressful for everyone, tax payers and tax preparers. Try to make preparing and paying for taxes a little less stressful by practicing the following throughout the year.

Receipts

Save all receipts throughout the year. This means everything – from gas receipts to meal receipts and everything in between. Retain all receipts and canceled check or bank statements in a folder or container marked with the current tax year.

Accounting Programs

Obtain an accounting program such as QuickBooks, or something similar. This does not have to be the newest or updated version as an older version of the program will be cheaper and will do the job just fine. Making a spreadsheet in a program such as Excel will also work, but will require more time.

Spreadsheets

Set up the program or spreadsheet to separate all expense individually, i.e. gas, diesel, meals, groceries, school expenses, utilities, telephone, medical expenses, etc. Any gas or diesel receipts that are entered should also show the number of gallons purchased.

Enter Everything

Enter all receipts, canceled checks and income into the program or on the spreadsheet. Add notes into each entry, such as “Jake’s school registration,” “4.325 gallons diesel,” “Kathy’s cell phone,” or “Christmas gift for Susan.” There are businesses or individuals that will provide this service, and less money will be spent hiring them to do it, then will be spent having the tax preparer to go through everything, or missing a deduction.

Print and Save

After all receipts and canceled checks are entered, print the spreadsheet with all expenses listed. Check the printed spreadsheet for duplicate entries. Remove any duplicate entries or mistakes that have been made, and reprint a final draft. If something is questionable, highlight it or circle it, so that it stands out. Save the spreadsheet onto a CD or DVD, and label it with the current tax year.

To the Tax Preparer

Provide both the printed list and the CD or DVD to the tax preparer for completion of the current year’s taxes. The tax preparer will now be able to enter information onto the tax return by either the printed version of the spreadsheet, or right off of the CD or DVD. This will save both time and money for the tax preparer and the tax payer.

Individuals and Businesses

Everyone should do this, whether they are an individual with limited income or a business with multiple incomes, as it not only provides an accurate record for each and every tax year, but also saves time and money during tax preparation. Tax preparers charge extra if they have to go through receipts and calculate totals. There is also always the change that a deduction may be found, that would normally have been overlooked.
Try these tips to save time, money and to avoid stress during this tax season, and every one thereafter.

Want to Save Money on Cable? Here's a Useful Trick

2011-01-10T18:38:00.000-08:00

This week I learned an important lesson about how to save money when negotiating service rates with the cable company and other vendors. As I am in the process of moving to my new job, I have had a couple of days off and got around to doing some things I have been planning to do for a long time. One of these tasks was to get our cable bill reduced.

We get our cable TV and broadband Internet from Comcast and our monthly bill comes out to about $160 including all taxes, fees & the cost of our HD DVR. We are very happy with the level of service we receive, but the price is just too steep for us. I know many PF bloggers are all about saving money by cutting off cable, but for us this is a complete non-starter. We enjoy our HD channels, HBO & our fast broadband connection and have no intention of giving them up. Since that is the case, the best we can hope to do is to reduce our cable charges as much as possible.

Early in the week I called Comcast customer service and asked for a price reduction. They essentially gave me a resounding "get lost" response. They offered us a $10 reduction in our monthly bill, if we were to subscribe to their triple play service, i.e. buy cable, Internet and phone service from them as a bundle. This was actually a pretty good deal, since not only would we be able to reduce our monthly fee by $10 but subscribing to triple play would mean that we could cancel our land-line phone service and save another $20 a month. However, after my wife and I discussed it we decided that we would rather stick with a traditional land-line. One of our main reasons for this is that a typical land-line works even when the power is out, while a cable phone would only be able to operate as long as its backup power was available (8 hours according to the Comcast representative).

Back to the main story. My challenge was to get a lower price for our current service package. Since I already called customer service and they turned me down flat, I decided to call the disconnection department. That made life a whole lot easier. The agent on the other end of the line was very receptive to my requests. Within minutes I got a $40 discount on our rate effective for 12 months, without having to sign up for any additional services. In addition, the promotional price did not require any contract and we are free to add, change or cancel service at any time. That call saved us about $500 over the next year. As an added bonus, I got the customer service agent to send us a technician, free of charge, to move one of our cable connection spots to another side of the house. This normally costs $150.

So here is the lesson: if you want to get a discount, don't call the customer service center. Talk to the folks that really matter: the department responsible for customer retention & account terminations.

I put this lesson to another good use later in the week by calling AT&T Wireless regarding my cell phone plan. My employer picks up the tab for my cell phone, but I wanted a new Blackberry free of charge. The folks at the disconnection department got pretty close, after the regular customer service agents turned me down flat. I haven't closed the deal yet, I want to make sure that my employer is willing to pick up the difference on my new phone before I make the purchase, but one thing is clear: if you talk to the folks that are tasked with keeping customers, your chances for getting what you need improve dramatically.

How to Save Money on Utilities

2011-01-10T13:53:00.000-08:00

Lower your thermostat and save money

Many Americans are struggling to make ends meet these days. But there are many simple things you can do to cut your utility bills. This article shows you how.

Difficulty: Easy

1
One of the easiest things you can do to save money on utilities is to simply replace all of your light bulbs with compact flourescent bulbs. They last at least 10 times longer than conventional bulbs and also save up to $60 in electricity per bulb over time.
2
Appliances consume 40 percent of their energy when they are shut off. The purchase of a smart power strip can go a long way towards alleviating this waste of electricity. These strips cut off power to appliances when they are turned off. They cost $30 or $40, but will pay for themselves in a few months.
3
If you have a water heater that was built before 2004, cover it with a Thermwell insulating blanket. This should lower your water heating bill by about 10 percent per year. And you can save another 10 percent on your heating bill if you have your furnace serviced about every two years.
4
You can lower your heating bill by another 5 percent just by lowering the thermostat by a single degree during the winter. But you can save more by installing a programmable thermostat that automatically adjusts the temperature when you're gone or asleep. Using the moisture sensor on your dryer and cold water in the washer will also trim your energy bill.
5
Putting weatherstripping around your doorframes should save you about $30 per year and installing timers on your lights is also cost effective over time. Try a low-flow shower head in your bathtub to reduce water output and plug those leaky faucets! Retrofitting your faucets is also a good idea. These inexpensive gadgets can reduce your water flow from 3 to 4 gallons per minute to as little as a half gallon.

How to Cut Your Fuel Bills
CUT HOME HEATING COSTS IN HALF WITH MAXFIRE BIOMASS STOVE.: An article from: Industrial Environment
How to Cut Heating and Cooling Costs (Home environment HELP books from Butterick)

10 Ways To Protect Your Money

2011-01-09T19:01:00.000-08:00

Here are 10 things you can do amid the current financial panic:

1. Check that your bank accounts are federally insured.

The Federal Deposit Insurance Corp. (FDIC) guarantees deposits up to $100,000 per person. If you have to hold more than that, spread it across multiple banks. As a taxpayer, you are paying for this insurance, so use it.

2. Make sure your brokerage accounts are federally insured, too.

The Securities Investor Protection Corp. (SIPC) guarantees you at places like Lehman Bros. (LEH, news, msgs), Merrill Lynch (MER, news, msgs) and E-Trade Financial (ETFC, news, msgs) up to $500,000, including $100,000 in cash. The same rules apply: If you have more to invest, spread it across multiple firms. Note that the SIPC only makes sure you get your shares and bonds back if a brokerage fails. It does not, obviously, guarantee those investments' value.

Readers talk: Worried about your bank?

3. Put money in thy purse.

If this market and this economy get any tougher, cash isn't going to be just king anymore. It's going to be king, queen, emperor, lord high chamberlain and the whole court. The easiest way to make or find a buck is to save it. So take an ax to those family budgets -- the restaurant meals, the Superduper Everything Cable package, the rip-off checking account with the high fees and low interest. It's all costing you.

4. Set up a home-equity line of credit while you still can.

Normally it would not be advisable to take on more debt, but if access to ready cash might be a lifesaver, it's best to line it up now. That's true especially if you are worried about your job. Credit is already tight, and it may get a lot tighter.

More from MSN Money and The Wall Street Journal

5. Refinance your mortgage.

The panic on Wall Street just caused a collapse in the interest rate on long-term U.S. Treasury bonds, as lots of investors rushed there for safety. And that usually leads to a fall in long-term mortgage rates.

6. Don't wait for your worst investments to "recover."

If you ever saw John Cleese and Michael Palin perform their famous skit about the dead parrot, you know exactly what I mean. No, your Fannie Mae (FNM, news, msgs) shares aren't "resting." They're lying at the bottom of the cage with their feet in the air. What more do you need to know? Stop waiting for them to "recover" before you sort out your portfolio.

7. Don't panic.

Journalists, like markets, tend to move in herds. And by the nature of their jobs, they write about the plane that crashes instead of the thousands that land safely. Remember, too, that pundits want to seem really wise by putting on serious expressions and saying things like "We don't know how this thing is going to play out" and "The situation could get a lot worse." Bah.

Guess what. We never know how things are going to play out. And the situation could get a lot better, too.

8. When it comes to your short-term money needs, nothing has changed.

Any money you might need within the next year or two should be held in cash or equivalents. That was true two years ago, and it is true now. The stock market is no home for money you may need urgently. It could fall 30% or jump 30%. Nobody knows. You can get a one-year CD paying 5% right now, and it's federally guaranteed.

9. If you are investing for five years or more, buy some stock.

The investment outlook is much, much better today than it has been for several years, because shares are much cheaper. World markets overall have fallen 27% from last year's peak. They're not a steal at current levels, but they are not particularly expensive either. Invest globally. Vanguard Total World Stock (VTWSX) gives you the whole world and low fees.

If you are looking for a value, Morningstar analyst Bridget Hughes likes Oakmark Global (OAKGX). Another good one is Tweedy, Browne's new Worldwide High Dividend Yield Value (TBHDX).

This list is not comprehensive. Remember: I am not trying to call the bottom of the market. Things could fall quite a bit further. No one knows. So invest little, often and broadly.

10. If you want to worry about anything, worry about your taxes.

The worse this crisis gets, the more the feds will end up putting taxpayers on the hook to prevent a meltdown. Taxes will go up sooner or later anyway, no matter who wins the election, because of our gigantic federal deficit. If you think Lehman Bros. was bad, you should look at Uncle Sam. You can forget about any talk of tax breaks. Oh, and if you want a break from worrying about taxes, worry about Treasury bonds. Deficits won't do anything good for them.

3 Simple Ways to Make Some Money

2011-01-09T15:05:00.000-08:00

If you want to make money online as a full-time career then you will have to invest in your future with online education from people who have been there, tools to help you succeed, and tools to make it easier on you. But if you just want to make some extra money online, in your own time, then there are free and easy ways to do just that.

Set up a blog - Blogs are popular, and if you have an interesting topic then you will find that people naturally find your blog and will want to read it often. You can set up a free blog online on many different platforms including blogger.com and blog.com. Then you can either add Google AdSense to your blog or promote products on your blog to make some extra cash. You get to talk about things you love and make money on the side - this is not only easy but it's fun!

Write articles - If you have a knack for writing and some knowledge about various topics then you can write and sell your articles online. You can sign up with a company like constant-content.com, who will host your articles to sell, and who will pay you a percentage when your articles sell. Sign up is free, and they only take a small percentage when you sell your articles, because they are finding the buyers for you.

Recommend products to your friends and followers - If you are active on social media sites like Facebook or Twitter then you can promote products that you friends may like. First, sign up to become an affiliate at a place like ClickBank.com. Then when you see a product that you think would add value to your friends or followers life you can promote that product using your special affiliate ID. If anyone buys the product from your recommendation you will earn a commission!
Signing up to become an affiliate is free at most places, and almost every company that you buy from online will allow you to promote their products. Just make sure you don't hound your friends or followers with promotions, or you may lose them as friends and followers all together!
Remember that the more you blog, write, or recommend - the more money you can make online.

Use a Debt Elimination Plan to Kill Debt

2011-01-09T09:49:00.000-08:00

If you’re like most people who are drowning in debt, then you are more than ready to find a good debt elimination plan and kill that debt off for good.
The big financial gurus like Suze Orman, Dave Ramsey and David Bach, use the snowball method to help people get out of debt quickly. This is the method of transferring payments from balance to balance as they are paid off until all debts are killed…and hopefully for good.
These three gurus each have a unique way of setting up the snowball.
Balance Snowball – Dave Ramsey’s Method

Debts are paid off by balance in ascending order, lowest to highest
Starter payment (extra money in addition to minimum payment) goes to the lowest balance.
Payment amounts move from debt to debt, snowballing as it goes until all debt is zeroed out.

This method is good for keeping you incentive going as the smaller balances will get knocked out pretty quickly. Psychologically this debt elimination plan is very satisfying.
Interest Rate Snowball – Suze Orman’s Method

Debts are in descending order by interest rate, highest to lowest.
$10 is adding to the minimum payment for all debts
The snowball starter is adding the the first debt (highest interest rate) and then snowballs from there until everything is paid off.

You will most likely pay the least interest rate using this method, but seeing that first debt paid off may take many months and this can be discouraging.
DOLP System Snowball – David Bach
The DOLP (done on last payment) system uses the number of months left to determine the order of payoff. The debt with the least number of months goes first and so on.

To determine the number of months, divide the balance by the minimum payments.
Add the starter amount to the first debt and snowball until all debts are gone.

Because balance and interest rates aren’t figured into the order, you might end up paying the most interest on this debt elimination plan. However, like Dave Ramsey’s plan you’ll see debts paid off quickly at the beginning.
All three of these plans are good ones and they will work to get you out of debt if you stick with it. Pick the one that appeals to you the most and just get started!

7 Ways To Save Money on Car Insurance

2011-01-09T08:53:00.000-08:00

Insurance for DummiesWhat would you say if I told you that you might be able to save over $500 on car insurance in less than an hour? And that you could complete the entire process from home?

Here are seven different ways that you just might be able to save hundreds of dollars on your car insurance if you simply take a few minutes to put these tips into action:
[Click here to check auto rates in your area.]
1. Drop Coverage You Don't Need
The beauty of doing a car insurance coverage checkup every six months or so is that even if it turns out that your current car insurance coverage is still the best value out on the market you may just find out that you are paying for a part of your auto insurance policy that you no longer need.
Not only do insurance rates change quite often but your insurance needs change more often than you may think. If you have a new teenage driver or have added a new car to your policy or have moved to a new zip code or--well, the list goes on and on. All of these things may potentially cause you to be paying for coverage that you no longer need.
[See The Most and Least Expensive Vehicles to Insure]
2. Search for Discounts
Never assume that because you searched for all of the car insurance discounts available 6 months ago that now there are no new discounts that you may be eligible for. New opportunities for saving money with a car insurance discount program pop up all of the time as different companies announce different discount programs in order to increase their market share.

What You Don't Know About Buying Car Insurance Can Hurt You

3. Improve Your Credit Score
It's no secret that a better credit score will result in better car insurance rates. You may have been working hard to improve your credit score over the last few months in order to qualify for lower interest rates for a home loan or auto loan and you are now starting to see some of your hard work pay off.
When you see an increase in your credit score don't let the opportunity slip by to check and see if this credit score improvement will result in an improvement in your auto insurance rates as well. You've worked hard to improve your credit score so why not spend a few minutes to see if that can only help you get a lower interest rate but a lower car insurance rate as well?
Take some of your car insurance savings and use it to treat yourself to a nice dinner at your favorite restaurant--you deserve it!
4. Pay Your Premiums With a Credit Card
Wanna shave off 1 percent to 5 percent off of your total car insurance premiums just by changing your method of payment? With the average cash back credit card earning you anywhere from 1 percent to 5 percent cash back that's like getting a bill from your insurance company and then having to only pay 95 percent to 99 percent of the total instead of the full 100 percent!
One to 5 percent may not seem like much but as you can see with a cash back credit card calculator that money can quickly start to add up--depending upon how much money you spend each month if you use that cash back card for many of your purchases then your savings could end up being enough to pay for an entire year of college tuition after 15 to 20 years!
5. Tell Your Kids to Keep Their Grades Up
Virtually all of the major car insurance companies offer some form of good student discount. If your kids get good grades then you save money. Some companies offer savings for a lackluster C while most offer savings for you that range from 5 percent to 15 percent if your student maintains a B or an A on their report cards.
Maybe it's time to pass along some of that savings to your kids as a financial incentive to keep their grades high (after all, why not just let the insurance company pay your kids to get good grades rather than you?)
[See Buzzworthy New Cars to Check Out for 2011]
6. Take a Driving Course
OK, maybe you don't want to tell your spouse that you are signing up for a driving course because no one wants to admit that they may not be the world's best driver BUT if signing up for a defensive driving course that will take up minimal time and save you money--why not?
After all, at least you aren't one of the world's worst drivers - at least I hope not! Taking a driving course just one time can result in lifetime savings on your car insurance.
Check with your car insurance company as to what type of courses and course providers they will recognize for a discount on your policy.
7. See If Your Occupation Can Save You Money
Did you know that when car insurance actuaries calculate car insurance rates that they actually assign different risk classes to different types of occupations? Some occupations have cheap car insurance rates while other occupations get assigned an added level of risk that increases their rates.
The various occupation risk assessment algorithms will vary from one insurance company to the next but generally speaking professions like engineering and teaching will receive lower car insurance rates than business owners and attorneys. So what do you call yourself if you are an engineer that owns their own business? You tell me.
Insurance Claim Secrets REVEALED!
Set of 3 Car Auto Registration and Insurance Holder

Book Review: The 4-Hour Work Week, by Timothy Ferriss

2011-01-01T09:39:00.000-08:00

When I picked up The 4-Hour Workweek, I was worried it was some sort of “get rich quick” book. The first few pages didn’t do much to change my mind. The author, Timothy Ferriss, makes a lot of bold claims, such as: “How do you create a hands-off business that generates $80,000 per month with no management? It’s all here.”

But something happened during the first few chapters. When I read a book, I use small sticky notes to mark interesting passages. After the first 100 pages of The 4-Hour Workweek, the book was thick with stickies. By the time I was finished, I had used an entire pad!

Ferriss does make a lot of bold promises, and some of the details along the way do read like the confessions of a get-rich-quick scammer. But I believe that an intelligent reader can easily extract a wealth of useful ideas from the book. For me, it’s a keeper. I’ve read it three times already, and will probably read it again before the end of the year.

Let’s Make a Deal
After college, Ferriss took a soul-sucking sales job at a tech firm. He left to start a soul-sucking business of his own. He went from working 40 hours a week for somebody else to working 80 hours a week for himself. He hated it. The pay was good, but the business left him drained.

After learning about the Pareto Principle (more commonly known as the 80-20 Principle), Ferriss had a revelation: he streamlined his business, eliminating distractions and automating systems until it was not only more profitable, but also took less of his time. Much less. He took a “mini-retirement”, and then decided to write a book about “lifestyle design”, about creating a life that balances work and play, maximizing the positives of both.

The 4-Hour Workweek is divided into four sections, each of which explores one of the components to lifestyle design:

Define your objectives. Decide what’s important. Set goals. Ask yourself, “What do I really want?”
Eliminate distractions to free up time. Learn to be effective, not efficient. Focus on the 20% of stuff that’s important and ignore the 80% that isn’t. Put yourself on a low-information diet. Learn to shunt aside interruptions, and learn to say “no”.
Automate your cash flow to increase income. Outsource your life — hire a virtual assistant to handle menial tasks. Develop a business that can run on auto-pilot. (This is the weakest section of the book.)
Liberate yourself from traditional expectations. Design your job to increase mobility. This could mean working from home, or it could mean using geographic arbitrage to take mini-retirements in countries with favorable exchange rates.

The 4-Hour Workweek, Expanded and Updated: Expanded and Updated, With Over 100 New Pages of Cutting-Edge Content.

The 4-Hour Workweek describes the specific actions Ferriss took to implement these steps. Sometimes these specifics aren’t particularly useful. However, I think it’s a mistake to let the details get in the way of his broader message. If you’re able to look past the details, to look at their meaning, you may discover principles that can change your life. For example, I don’t like much of what Ferriss has to say about automation. I question the virtue of virtual assistants, and I think that his business model works for his business but probably isn’t applicable to most others.
However, it was while re-reading this section the other night that I began to think about automating my personal finances, about making them paperless. By absorbing Ferriss’ ideas and not his specific details, I was able to apply this to my life.
A Kick in the Head
Most of the time, The 4-Hour Workweek is like a kick in the head. The flow of ideas is relentless. Here’s one of my favorites:

Emphasize strengths, don’t fix weaknesses. Most people are good at a handful of things and utterly miserable at most. [...] It is far more lucrative and fun to leverage your strengths instead of attempting to fix all the chinks in your armor. The choice is between multiplication of results using strengths or incremental improvement fixing weaknesses that will, at best, become mediocre. Focus on better use of your best weapons instead of constant repair.

Maybe this is obvious to most of you, but it’s a revelation to me. I spend a lot of time worrying about my weaknesses. Yet when I look at my life, it’s clear that everything rewarding and profitable comes from enhancing my strengths. Here’s another example:

Relative income is more important than absolute income. Absolute income is measured using one holy and inalterable variable: the raw and almighty dollar. Jane Doe makes $100,000 per year and is thus twice as rich as John Doe, who makes $50,000 per year.
Relative income uses two variables: the dollar and time, usually hours. The whole “per year” concept is arbitrary and makes it easy to trick yourself. Let’s look at the real trade. Jane Doe makes $100,000 per year, $2,000 for each of 50 weeks per year, and works 80 hours per week. Jane Doe thus makes $25 per hour. John Doe makes $50,000 per year, $1,000 for each of 50 weeks per year, but works 10 hours per week and hence makes $100 per hour. In relative income, John is four times richer.
Of course, relative income has to add up to the minimum amount necessary to actualize your goals…

I want to believe that if I had to choose between $70,000 per year earned with 70 hard hours per week, or $42,000 per year earned with 37 easy hours per week, I’d choose the latter. I’m not there yet.
A Garden of Tips
I don’t buy into everything that Ferriss writes, but I love how he shatters conventional wisdom. I love that he makes me think. Even if you reject his central thesis, there are dozens of tips and tricks here that can be extracted and used to optimize your life. Here are a few:

Ask yourself, “If this is the only thing I accomplish today, will I be satisfied with my day?”
How to double your reading speed in ten minutes.
Why it’s more productive to carry around a written to-do list than to keep one on your computer.
Learn the art of non-finishing. This is all about the sunk cost fallacy: just because you paid $10 to see Pirates of the Caribbean 3 doesn’t mean it’s a good idea to watch the entire thing.
How to be more efficient with e-mail.
How to reduce clutter from your life.
If you can’t define it or act upon it, forget it.
Life exists to be enjoyed — the most important thing is to feel good about yourself.
Why geographic arbitrage is a great way to enhance your relative income.
The value of a virtual assistant.

My Recommendation
Despite its flaws, The 4-Hour Workweek is a great book. I think that most people can draw something useful from it. Borrow it from your public library. If you like it and think you’ll re-read it, then wait for it to come out in paperback. I’ve already read my copy three times, but that’s because it’s perfect for when I am in life; I’m not convinced that others will extract the same value.

Consider these five business goals as you embark on a new year.

2011-01-01T07:39:00.000-08:00

Financial Resolutions for 2011

By Eileen P. Gunn | December 27, 2010

No matter how healthy your business is, chances are good that there are some financial issues you could have managed better in the past year. So when you start anew and set New Year’s resolutions, make sure to include some that relate to your financial future. Here are a five to consider for 2011 based on suggestions from Phil Leibowitz, a partner of San Francisco accounting firm Burr Pilger & Mayer, whose clients includes entrepreneurs.
No. 1: Set personal financial goals.
If you’re a 30-year-old who is just starting out in business, your personal goals and a timeline are likely to be different from those of a 60-year-old who may be eyeing retirement. And these plans may have an impact on the decisions you’ll be making for your business in the coming year. So it’s worth taking time to consider where you want to be personally in three to five years -- and discuss what that means for your company with your tax professional.

“I would have the 30-year-old think about his risk orientation and talk with him about how much money he wants to invest in his company and leave there for future growth,” says Leibowitz. “With the 60-year-old, I would be talking about succession planning and starting to diversify his money out of the business.”
No. 2: Make a budget.
Only a fraction of entrepreneurs write a budget, according to Leibowitz. While business owners may think they can keep track of their company in their heads, he doesn’t recommend it. “It’s like driving at night without the lights on. You know there’s a road there, but you don’t know exactly where it goes.”
The process of creating a budget is critical for planning a company’s future, instead of just reacting to it. Leibowitz suggests starting with such questions as:
-- Will you need extra cash at a certain part of the year?
-- Will sales slow down or pick up seasonally in your industry? If so, will you need to cut costs or hire extra help?
-- Will you need to increase your line of credit for some short-term need?
No. 3: Talk about the company’s priorities with your team.
It’s important to share your goals for the next year with employees, especially if your plans reflect shifting priorities. “Maybe your goal this year is to increase market share, and you’re willing to give up some profits to do it,” Leibowitz says. “If your employees don’t know that, they might be price sensitive when making sales and lose business. So you want to make sure they’re on the same page.”
You also want to be clear about the role each employee will have in meeting business goals. Mapping out specific responsibilities can be especially helpful when evaluating employee performance for raises or bonuses.
“If you have five employees, this doesn’t have to be formal. If you have 40 or 50 or 200 employees, you need a process,” Leibowitz says.
No. 4: Lock in fixed costs.
Leibowitz expects that as the economy improves, your vendors, just like you, are likely to want to increase prices and cushion their margins. Therefore, he suggests staying one step ahead and negotiating terms now.
“With rent and other business specific fixed costs, you want to negotiate two-, three- or five-year agreements where you lock in the current price or agree to only inflationary increases,” Leibowitz says.
No. 5: Revisit postponed expansion plans.
If you’ve put off plans because you couldn’t secure capital, it might be time to revisit them in the coming year. Leibowitz expects the lending environment to improve in 2011, at least for businesses whose cash flow and balance sheet are in good shape.
“In 2008 and 2009, banks were reticent to do anything unless it was riskless to them,” he says. “They would only lend to companies with ultra strong balance sheets.” Now he’s beginning to see companies that are profitable with merely solid -- not extraordinary --balance sheets qualify for loans.
“The cost of capital only goes up over time, so this is a good time to establish a good banking relationship, before that starts happening again,” Leibowitz says.

How to Save More Money in 2011

2010-12-31T18:51:00.000-08:00

How to Save More Money in 2011

Stick to your savings resolution!

by Clarky Davis

There’s no better time than the beginning of a new year to review the past and consider any lifestyle changes that could pave the way to a happier, healthier and more stable future.

Who isn’t seeking a new path for a better, more fulfilling life? A new year allows us to fantasize about all of the achievements we can accomplish if we make a few much needed alterations. But when it comes to putting ideas into actions to make our resolutions a reality--we often don’t get further than the fantasy.

Weight loss and living a healthier life are always the top resolutions, but saving money and increasing financial stability is a close second. Here are tips to make this goal a reality in the new year.

Make a plan. If you really want to achieve a goal, you have to implement a strategy. You must outline action steps and tasks that you are going to take in your life.

1. Boost your retirement savings efforts by increasing your contributions. Just saving one additional percent (or more if you prefer) to the minimum required contribution to receive the company’s match will benefit you in the long run.

2. Consistency is key. With each paycheck, have a specific amount of cash directly deducted into a savings account and leave the money alone. Build your budget around what’s available in your checking account. This may be a challenge at first, but when you see how rapidly your savings grows over time you will be pleased with your progress and motivated to put more money away.

3. Keep a spending journal by writing down everything you spend, so you know where your money has gone. Make adjustments at the end of each month to cut out meaningless spending.

Start Small. The key to making and keeping resolutions is to break down your goal into small milestones that you can reach over a reasonable period of time. For example, if your goal is to have an emergency savings account of $10,000, don’t pressure yourself into achieving that in six months – especially if you are living paycheck to paycheck. Instead, set a smaller goal of saving maybe $300 per month until you reach your ultimate objective of $10,000. It will take time, but you won’t become frustrated and give up.

Be Willing to Make Adjustments. As time goes by, things change and you will need to alter your spending habits so you can meet your savings goal. Unexpected expenses do crop up. From car repairs to fluctuating living expenses, you will need to closely monitor where your money is going so you can make smart money management decisions. Maybe you will decide to skip lunches out with your co-workers for a month or give up that cable package for six months so you can achieve your goals.

Top Ten Money Saving Tips

2010-12-30T11:12:00.000-08:00

Save Money Tip 1
Spend Less. This is not over simplifying the best way to save money! It is essential if you are serious about being a long term money saver and being able to save money every day. Review what you spend and look at ways you can save money. Consider making telephone calls for instance only at off-peak times. Do you really need to have newspapers and magazines delivered? Can you do without those coffees you buy at break time everyday - would a flask of coffee taken to work save you money? What about using the public lending library instead of buying books or music CDs? Once you start looking for little ways to save money and spend less you will quickly become an expert and really save money.
Save Money Tip 2
Establish a personal budget. This is essential for families and individuals and can be the fastest way to save money. You will instantly see your incomings and outgoings once you create your budget. You will not be able to save money unless you know how much money you have coming in, and how much money you have going out. Once you have prepared a budget of incoming money and outgoing money, you WILL be able to identify areas where you can save. It is MUCH more difficult to save money over a long period of time (the rest of your life?) without a budget.
Save Money Tip 3
Bulk is good. Think about shopping and buying in bulk. Save money grocery shopping by planning meals in advance and bulk-buying. You can also save money by cooking in bulk. This is a real way you can save money with little preparation and almost no extra outlay. Always purchase generics when you can. Prepared foods and convenience foods will always be much more expensive than the generic ingredients needed to make the food. Preparing food in bulk and in advance also gives you the opportunity to plan ahead and be more accurate in your budget. Save Money by buying in bulk whenever you can. One thing to be aware of when buying in bulk is to be sure that any product you buy will get used before it goes bad - you won't save money if you have to throw stuff away. Buying in bulk is not only a good way to save money it is also a good strategy for coping with and surviving emergencies.
Save Money Tip 4
Make sure a sale is a sale. By this I mean do your price research before you commit to making an expensive purchase in a retailers money-off sale. You have to be sure the sale really is a sale and not a creative marketing strategy of the store to encourage you to spend your money without thinking. Once you have researched the true price of a product (any product) you are in a good position to take advantage of a sale, special offer or discount and really save money. "Buy one get one free", "50% off", and "Huge Discount" will only help you save money if the actual price you pay is lower than you would pay somewhere else for exactly the same product.
Save Money Tip 5
Buy used. Sure, we all like to buy new. But there are huge money savings to be made in buying used. Typically cars lose one-third of their value in the first 24 months from new. Why not buy a car 24 months old? Other items such as clothes can be worth even less just the day after new. Look for ways to buy "as good as new" items and save money. Typical products you might consider buying used to save money include: cars, clothes, electrical goods, garden items... tools and sheds, household items... pots and pans, the list of used goods where you can save money is endless.
Save Money Tip 6
Don't carry excessive debt. Some debt in our lives may be essential. We may need a mortgage to purchase a home, we may need to use our credit card to make purchases until pay-day, but your aim to save money should be to have as little debt as possible. Credit Card deb is typically the most expensive debt we may carry. You will be able to save money every month if you make it an absolute rule to pay off your outstanding balance every month. If you can have the discipline to do this you will save money by effectively having no debt, and thus no interest charge on your credit card(s).
Save Money Tip 7
Save Money. No, I mean really save some money. Each week or each month get into the habit of putting an amount, however small into your savings. You could start by saving a very small fixed amount each time and then move to putting in larger amounts once you begin to save money from your other money saving strategies. You will find that by saving money on a regular basis you will quickly build up a store of reserve money and also feel motivated to save more. The hardest part is to take the first step and start saving money - so START TODAY and save some money NOW! If you find it impossible to save money once you have it, consider having money deducted from your paycheck direct each month. This can be a great way to save money rapidly as once it is set up you will not notice it is being collected and your savings will grow with no more effort from you.
Save Money Tip 8
Shop Wisely. Consider markets, superstores, farmer's markets, local shops, marts and stores. Anywhere is worth checking out to see if you can save money. Farmer's Markets can be particularly good places to save money. Typically you are buying direct from the producer of the product so the savings are passed on to you. Use your bulk buying strategy here - farmer's markets often offer opportunities to save money by buying larger quantities of staples, for instance potatoes, rice or corn. Save money and shop wisely.
Save Money Tip 9
Eat in rather than out. This is a huge area where you can save money. A cup of coffee taken out could easily cost you TWENTY times (or more) what it would cost you to make it at home. So think before you drink when you are out. Eating is the same. Fast food restaurants are counting on you eating food that you perhaps don't really need at that time but buy just because it is quick. Why not wait until you get home and have a more nutritious meal and save money at the same time.
Save Money Tip 10
Use less. This money saving tip is a lesson we all need to learn. We live in a consumer society where waste is a huge problem. If we could all use and consume less there would be less waste, less power consumption, and the benefits for you are SAVING MONEY. Consider using less shampoo when you wash your hair, this may not mean washing your hair less effectively it means not flushing the excess shampoo and your money down the drain. What about saving on heating? Turn the thermostat down or put on extra clothes when you are cold. Turn off lights, the TV and the computer when they are not in use. Each little saving you make will build up and enable you to save money. Huge savings in energy can be made which will save you money and be good for our planet and the other people on it.

Why Cash Is the New Plastic

2010-12-30T11:07:00.000-08:00

by AnnaMaria Andriotis
Tuesday, November 9, 2010

Consumers are spending again, but gone are the days of swiping and signing for everything from lattes to lawn furniture. Shoppers are reaching for paper money, and as they do, stores and even credit card issuers are increasingly ready to reward them -- with more cash.

Already customers are showing a strong preference for cash. Consumer spending is up 2.2% so far this year, but none of the four major credit-card companies have benefitted from the increase. Visa (NYSE: V - News) credit-card transactions were down 1.2% in the first half of the year, compared with the same period in 2009, according to the Nilson Report, which tracks payment systems. MasterCards (NYSE: MA - News) were used for about 10.2% of all card transactions, also down. Discover (NYSE: DFS - News) transactions also dipped slightly; only American Express' (NYSE: AXP - News) business remains steady.
Instead, consumers appear to be spending money they currently have, paying for purchases with a debit card or actual cash. The dollar amount "charged" with debit cards has grown 15% this year (spending on credit cards was up just 1.9%). And debit-card transaction volume is expected to grow 8% to 12% annually, according to the TowerGroup, which tracks bank cards. "A lot of people are leery of credit cards and don't want to fall back into debt -- that's why you're seeing this migration," says James Brown, emeritus professor at the University of Wisconsin at Milwaukee and former director of the university's Center for Consumer Affairs.
Here are three more signs that cash is making a comeback.
Gift Cards Are Out After nine consecutive years of gains, gift cards are on the wane. Sales of gift cards are expected to drop to $86.2 billion, an 11% decline from their peak in 2007, according to CardHub.com. Shoppers want to avoid pitfalls like expiration dates and inactivity fees that can quickly erode a card's value, says Kwame Kuadey, chief executive of GiftCardRescue.com, which buys and sells gift cards. Even if you use a portion of the gift card, these inactivity fees can kick in if the rest of the card remains unused for at least 12 months. However, the Card Act eliminated other loopholes, including extending expiration dates to at least five years after the gift card is issued. Before, expiration dates could kick in at any time and often did within one year.

Meanwhile, more consumers are selling the gift cards they already possess for around 10% to 20% less than face value to third-party sites like GiftCards.com, CardHub.com, PlasticJungle.com and GiftCardRescue.com. Sales at GiftCardRescue.com are up 1,000% through October of this year compared to the same period in 2009, says Kuadey. PlasticJungle.com says sales have more than doubled through the middle of this year. "People would rather use the cash anywhere they like than be restricted to a specific store," says Dan Horne, professor of marketing who tracks the gift-card industry at Providence College. In turn, consumers who shop at specific stores can buy the cards at a discount; for example, GiftCards.com recently listed a SpaFinder gift card worth $100 for $86 and a $37 Home Depot card for $34.
Cash Discounts Are Coming
Within a few months, consumers could save up to 2.5% on most purchases by paying with cash. A clause in the financial reform bill allows merchants to discount items for shoppers who pay with dollars. And the Justice Department settlement last month with MasterCard and Visa allows retailers to discourage the use of rewards credit cards or other credit cards they deem expensive in order to avoid the high fees that card issuers charge when a store customer pays with plastic.

The result could be a system of price tiers, where retailers offer different prices for each product based on method of payment -- with cash the cheapest, says Doug Kantor, counsel to the Merchants Payments Coalition, a coalition of retail trade groups. "They'd love to be able to offer discounts for cash," and that could soon happen, he says. So, consumers who pay with cash could, say, get a $200 coat for $195. Some might extend those lowest level prices to debit card purchases, he says. If you spend, say, $800 in cash on groceries each month -- about average for a middle-class family of four, according to the USDA -- that 2.5% savings could add up to $240 a year.
Even Credit Card Companies Know You Want Cash
To counter this shift to cash, credit-card companies are offering some of their own -- up to $100 -- to encourage consumers to sign up and make purchases, promotions not seen since 2007, says Odysseas Papadimitriou, CEO of CardHub.com, which tracks credit card offers. To qualify, consumers need a FICO credit score of at least 720. Of course, just like cash for checking account offers, banks expect to make thousands of dollars off these accounts. These cards are mainly offered to consumers who pay in full every month, represent a low risk of default, but who are heavy credit-card users who net credit-card issuers about 1% of the total purchase price each time they swipe their card -- fees that merchants pay the card companies, he says.
To get the $100 sign-up bonus, you'll have to give up cash, too, at least in the short term. With the Chase Freedom Visa card, consumers have to charge at least $799 in the first three months to get $100, and with the Discover More card, you'll have to charge at least $500 in the first three months for $100. And even then, most issuers post the money as a credit to your statement.

The Best Charities in America

2010-12-30T10:59:00.000-08:00

by Greg Bocquet
Monday, December 20, 2010

Anyone who chooses to use their hard-earned money to help others -- whether it's Mark Zuckerberg or your wealthy aunt -- wants their donations to be used wisely. This is especially true around the holidays, since philanthropy is about helping less fortunate people meet their basic needs more than buying the newest iMacs for a charity's home office.

With that in mind, here we look at the charities with the lowest admin costs, using data taken from CharityNavigator, a comprehensive charity rating website that evaluates philanthropy groups based on the tax records that they provide detailing yearly expenses.
Keep in mind that low admin costs do not always mean a good charity, as a group that doesn't invest enough in administering its programs may be very inefficient at distributing donations to the people who need them most. Because of this we have only included groups that have received CharityNavigator's perfect rating of four stars, an overall efficiency assessment the site bases on multiple metrics.
For concerned donors who want to know which charities might be best to avoid, check out MainStreet's look at the charities with the highest admin costs and the 15 highest-paid charity CEOs. Here, we look at the opposite: the best charities in the country.
1. Brother's Brother Foundation
Administrative Expenses: 0.0%
The Brother's Brother Foundation is the only group on our last that recorded 0.0% administrative expenses, but it is not the only one on CharityNavigator to do so. It is, however, the only group with 0% administrative overhead to receive a four-star rating from the group, a testament to the difficulty of providing quality service with such a low administrative cost. The group spends about $500,000 a year on administrating its programs, which is nothing considering the group's budget is over $1 billion. One of the oldest groups on our list, Brother's Brother was founded in 1958 and its long history has enabled it to efficiently distribute donated medical, agricultural, educational and humanitarian supplies to people in over 140 countries.
2. Matthew 25: Ministries
Administrative Expenses: 0.1%
While not the only group to embrace the "one man's trash" principle of collecting used items in the U.S. to be distributed to needy communities abroad, Matthew 25: Ministries is arguably the best at it. The 20-year-old group has received consistent praise for efficiently managing its annual budget of around $80,000, which it does by relying on volunteers and partners in business to keep costs down. The group "rescues" and reuses products it receives from hospitals, manufacturers, individuals and major corporations to help people around the world meet their basic needs, from Cincinnati to the Caribbean.
3. MAP International
Administrative Expenses: 0.1%
MAP International, short for "Medical Assistance Programs", has a long history of four-star ratings from CharityNavigator for its consistently efficient administration of its programs. The Christian group has been around for over 55 years, providing medicine and community health solutions to communities in need of disaster relief as well as longer-term assistance. With a budget around $400,000, the group's low administrative costs are a point of pride for many of its donors, who will be proud to see MAP International at number three on the list.
4. CIS Development Foundation
Administrative Expenses: 0.1%
For those who don't know, the CIS, or Commonwealth of Independent States, is the name given to the collection of former Soviet republics that gained independence after the breakup of the U.S.S.R. in the early 1990s. The CIS Development Foundation, an American group based in New Jersey, promotes economic development in places like Kazakhstan, Ukraine, Estonia, and several others under a philosophy that it's better to teach a man to fish than to give him a fish to eat for a day. The group's slogan emphasizes that its purpose is "not to feed, but to help in the production of food; not to clothe, but to help in the production of clothing." It does so, with very little administrative overhead, by providing humanitarian aid and technical training to partners in Eastern Europe.

5. The Aims Project
Administrative Expenses: 0.1%
With its U.S. operation based in California, the AIMS Project supports the Amrita Institute of Medical Sciences in Kerala, India, channeling donations of equipment and expertise to the hospital in India so that it may work towards continued innovations in local medical care. Managing a budget of around $5 million, the AIMS Project is able to make every penny count, earning it its first four-star rating from CharityNavigator in 2009.
6. The Foodbank of Southern California
Administrative Expenses: 0.1%
A regional group that operates in only half of a state, the Foodbank of Southern California secures donations of food for soup kitchens and distribution centers in the disadvantaged parts of Watts, South Central Los Angeles, Compton, and North Long Beach. The group has secured two consecutive four-star ratings, and its 0.1% administrative costs ensure that the approximately $50,000 budget is used efficiently.
7. Help the Children
Administrative Expenses: 0.1%
Moving into the realm of next-to-nothing administrative costs, Help the Children spends only 0.1% of its total functional expenses on furthering its Christian relief efforts. As the name implies, the group seeks to provide basic needs and combat hunger for children in the U.S. and abroad who have fallen victim to environmental disasters or the global financial crisis. Using partnerships with popular businesses like Chick-Fil-A and Chuck E. Cheese's, the group hopes to give the younger generation the tools to succeed.
8. Center for Neighborhood Enterprise
Administrative Expenses: 0.2%
Some people forget that the same sustainable methods that work in international development projects work in the United States just as well. This is the position of the Center for Neighborhood Enterprise, a group based in Washington D.C. that was created in 1981, provides training to community leaders in 39 U.S. states to empower local schools and neighborhoods to spearhead their own efforts. With its administration expenses down to their lowest levels ever, the Center for Neighborhood Enterprises received a four-star rating from CharityNavigator.

9. International Children's Fund
Administrative Expenses: 0.2%
Singularly focused on needy children in Africa, the International Children's Fund uses a network of local missionaries and partners to personally ensure that its donations of food, clothing and medicine get to where they are needed most. Just in time for the holidays, this Christian group is currently pursuing an initiative for donors to fill a shoebox with gifts that will be sent directly to an orphanage in Liberia.
10. Operation Blessing International
Administrative Expenses: 0.2%
Based in Virginia, Operation Blessing International is a faith-based relief organization with projects in the U.S. and all over the world. With four-star ratings for the last three years and a budget of over $400 million, the group focuses on disaster relief and community development everywhere. Its video-heavy website promotes the efforts of its volunteers, who lead many of OBI's programs.

Who Will Prosper in 2011

2010-12-30T10:55:00.001-08:00

Rick Newman, On Tuesday December 21, 2010, 3:32 pm EST

The worry lines are finally starting to fade.
After 18 months of a stutter-step recovery, the economy seems to be gathering steam. Most companies that survived the recession are lean and profitable, and there's a good chance they'll begin hiring again in 2011. Consumers who have jobs feel better about their prospects, which means they'll be more comfortable spending money. The latest stimulus and tax-cut plan out of Washington is surprisingly meaty, with the impact likely to be felt in many American households. "Despite threats, 2011 is shaping up to be a better year for the U.S. economy," writes economist Mark Zandi of Moody's Analytics, who predicts healthy growth in 2011 of nearly 4 percent. "After three years of recession and weak recovery, the change will feel significant."

The benefits will be spread unevenly, however, and high unemployment will be a huge, nagging problem. Many Americans may simply live in the wrong region or work in the wrong industry, which will keep them out of the job market or cause them to miss the updraft that lifts the overall economy. Here's who's likely to benefit the most from positive economic trends in 2011:
Stock investors. Perhaps the biggest beneficiary of bailouts and stimulus programs has been the stock market, which has surged since early 2009 thanks to deep corporate cost-cutting, record profits, and the Federal Reserve's "quantitative easing," meant to drive investors out of safe assets like government securities and into riskier assets like stocks. Since March 2009, the S&P 500 has soared by about 85 percent--and the rally could continue throughout 2011. Stock movements are notoriously hard to predict, and a financial shock or other ugly surprise could deflate the market. But many Wall Street analysts believe stocks may still be undervalued, despite all the repair work companies have done on their balance sheets over the last two years. Bank of America Merrill Lynch, for instance, predicts that the S&P 500 will rise another 13 percent or so in 2011. More conservative predictions still call for 5 to 7 percent gains.

There's a floor of sorts to stock prices at the moment, since the Fed is trying mightily to help companies recover from the recession, so they start hiring again, and to help ordinary Americans rebuild their investment and retirement portfolios. So the Fed is likely to continue with quantitative easing, and keep interest rates at rock-bottom lows, until it feels the economy is recovering on its own. Since the first quarter of 2009, in fact, the Fed has helped Americans recover about $6 trillion worth of lost wealth, virtually all of that through gains in financial portfolios. Since household net worth is still down about $9 trillion, or 14 percent, from the peak levels of 2007--all of that due to falling home values--the Fed plans to stay on the case indefinitely.
Multinational U.S. companies. Another reason stock indices like the S&P 500 have skyrocketed is strong growth in developing economies like China, India, and Brazil. Such "emerging markets" are riskier than the developed economies of Europe and the United States, but companies with sales or investments there, such as IBM, Microsoft, Hewlett-Packard, and Boeing can also earn much higher returns than in the developed world. Companies in the S&P 500 index, for example, earn about 40 percent of their pre-tax income from emerging markets, which helps explain why corporate profits have soared and stock prices surged, even though the U.S. economy has been weak. American companies with a strong overseas presence tend to be more stable than companies with a regional focus, which is good news even for local employees who never travel abroad.

Workers in growing industries. Healthy companies in stable industries are starting to get back to normal, with profits up and hiring beginning to resume. Healthcare is probably the most well-known recession-resistant industry, with hiring up in virtually every field even during the recession. But other industries like energy, mining, Web publishing, high-end IT work, public transportation, and even waste management have been growing as well. And other industries that cut back during the recession--such as retail, hospitality, and warehousing--are starting to replace some of the jobs lost.
It's vital to work in a growing industry because that's where the opportunities for promotions, career advancement, and raises are likely to be concentrated. The recession caused the temporary contraction of some industries, which will bounce back as they have after other downturns. But it also accelerated the long-term decline of industries like textiles, print publishing, and lower-end information technology. And industries like construction were hit so hard that it will still be years before hiring returns to meaningful levels. In shrinking industries, it will continue to feel like a recession, with ongoing layoffs, scarce raises, and few opportunities to get ahead.

Taxpayers. The recent tax deal negotiated by President Obama and Congressional Republicans lowers taxes for Americans at every income level, by keeping income tax rates where they are (instead of allowing them to rise, as the prior law would have done), cutting other taxes like the Social Security withholding, and extending other tax incentives. For a family with income between $50,000 and $75,000, that adds up to an annual tax savings of $2,260, on average, according to the Tax Policy Center. For an average family earning between $100,000 and $200,000, it's a $6,212 windfall. That's a big chunk of change that will make a difference for many families. But don't get used to it. It's a near certainty that taxes will rise at some point, to help pay down the ballooning national debt. Taxpayers probably have until the 2013, at least, before federal tax hikes become a serious possibility.
Savers. The Fed's efforts to push interest rates to historic lows have slashed costs for borrowers, but they've also crushed savers dependent on interest income. Savers may finally start to feel a little relief in 2011. Interest rates have started to creep upward from low points reached in early November, and most analysts expect a modest rise in Treasury rates in 2011, which in turn will raise interest rates on some savings accounts and perhaps boost the return of fixed-income investments. Once the economy is healthy again, the Federal Reserve will start to raise short-term rates, which will directly affect savings accounts. That doesn't seem likely until 2012 or 2013, but if growth is better than expected, it could happen in 2011. Plus, most forecasters expect inflation to stay very low for the next year, which is good news for those on fixed incomes.

Home buyers. The buyer's market will continue into 2011, with home prices likely to fall another 5 to 10 percent or so--but finally hit a bottom in many markets within the next 12 months. The recent uptick in mortgage rates has caused worries about buyers packing it in, but even if 30-year rates hit 5.5 or 6 percent, they'd still be low by historical standards. It's also possible that rising rates will motivate buyers who have been sitting on the fence, convincing them to make an offer instead of waiting for rates to rise even more. A bit of increased activity could also convince reluctant sellers to accept low-ball offers while they're on the table. And lending standards should gradually ease in 2011, making more buyers eligible for mortgages. It will be a long time before the overall housing market returns to normal, but buyers with solid finances, stable jobs, and a bit of gumption could get remarkable deals in 2011. Optimism needs to start somewhere.

5 Retirement Savings Ideas For Young People

2010-12-29T16:17:00.000-08:00

by Amy E. Buttell
Wednesday, September 29, 2010

When you're just starting out in the workforce, retirement seems like a million years away. Besides, you likely have student loans to pay off and maybe a car loan. And odds are, you aren't making a great salary in your first job, if you've even got a job following graduation.

Still, compounding is your ally in retirement savings, so the earlier you start saving, the better. When you begin retirement planning in your 20s and 30s, those dollars have years to grow and are potentially much more valuable than dollars you save in your 50s and 60s -- though any savings helps.
It's important to establish good savings habits when you're young, even though you're likely on a tight budget, says Joe Jennings, investment director for PNC Wealth Management in Baltimore.
1. Budget Carefully When Looking For Work
It's not really possible to start a retirement savings fund when you're going out on interviews and looking for a job. But there are ways to cultivate a low-spending mindset to prepare for saving for retirement once you do get a job.
"Living with your parents while you look for a job, and even after you get one, can help you save money, more than if you were living on your own," says John Corn, CPA, a financial planner with Buckingham Asset Management in St. Louis. You can save up for a deposit on an apartment or begin to accumulate an emergency fund to see you through unexpected expenses like car repairs.
Even if living with your parents isn't an option, you can minimize your expenses by living with roommates, deferring any student loan payments for as long as possible and choosing inexpensive entertainment options.

2. New Jobs Bring Income, More Expenses
Once you've landed your first job, you may need to move, buy some new clothes for work and reorganize your finances. One key aspect of moving into this new phase of life is budgeting, Corn says.
"Every young person needs a budget," he says. "You need to understand what's coming in, net of taxes each month, and what's going out to pay your benefits. Then you have rent, utilities and all the other expenses, like student loan payments."
You can use free budget software at websites such as Mint.com to help you track your income and expenses and set goals. "Your first expense should be to pay yourself, especially to establish an emergency fund in case you lose your job," he says. "You can also save for short- or intermediate-term goals like a new car."
Retirement planning should also be a priority.
3. Invest in Company Retirement Plan
When you start your new job, you'll be given materials about your company's retirement plan, if it offers one. Most companies offer a 401(k) or 403(b) plan where you contribute a percentage of your earnings and, in many cases, the company matches a percentage of those earnings.
"Make sure you aren't just investing your money, that you are also investing your time," Jennings says. "Do some research on your investing options. If there is a match to the 401(k) plan, you want to invest enough so that you get the company match. It's free money; don't leave that on the table."
4. Family Life Brings Financial Opportunities, Challenges

When you get married, you need to reach some common ground with your new spouse about saving and spending. With more income, you have the opportunity to save more for retirement by contributing to two retirement plans.
You also need to know what financial issues and baggage you and your spouse may bring into the marriage. "You want to understand what that person's credit history has been like and what their credit score is," says Corn. "You want to get a picture of what each of your assets and debts are, too, so you know where you stand in terms of your ability as a couple to buy a new car or a house."
As your family grows with the addition of a child or two, the challenges increase. You need to balance the need to continue to save for retirement with establishing and building a college fund. No matter how important it is for you to help your child out with college, don't skimp on your retirement savings. You can't borrow to pay for your retirement, but your child can borrow to pay for college.
5. Boost Savings as Earnings Increase
As you move up the career ladder, it's important to continue to boost your retirement savings with your salary increases. "If you've maxed out your 401(k) plan, you can contribute to a Roth IRA or open a brokerage account and dollar cost average into a diversified mutual fund with $100 a month," Corn says.
And don't ignore that emergency fund. As your family grows and your expenses increase, you'll need to keep adding to your emergency fund. "Generally, we recommend that you keep six months of living expenses in an emergency fund, but with unemployment still pretty high, it makes sense to save from nine months to a year's (worth) of expenses," says Jennings.

30 Easy Ways to Save Money (and No, you are not doing them all!)

2010-12-29T16:08:00.000-08:00

Let’s keep this one simple and clean - just a bunch of relatively easy ways to save money. As you incorporate more and more of these tips into your life, the savings add up and it wouldn’t surprise me if you could save thousands over the course of a year.

It will take a little work on your part but those thousands of dollars in savings are what helped us get out of debt earlier, kept us out of debt for several years and will hopefully help us pay off our recent auto loan soon as well.

Cook at home often: If both the husband and wife work, this is likely to be very difficult. Start out with the habit of cooking at home once a week and slowly increase the frequency until you find a balance between saving money and getting stressed out.
Make your own coffee: Everyone seems to have heard of the latte factor. Even though the author may have overestimated the savings from skipping a latte at Starbucks, don’t underestimate the ding it puts in your pocket in the long run. You don’t have to entirely ban drinking coffee, but skip it as often as possible unless you make it at home.
Brown bag lunch at least a few days a week: Lunch times are great opportunities to network and make connections that could improve your career growth. So unless there is a common eating area for brown baggers, you may choose to limit brown bagging lunch to three days each week. Find a balance between saving some money and making the connection. In my case, I take my lunch with me 2-3 times a week and eat out the rest of the time.
Make a list before going shopping: They call it impulse buying for a reason. Humans simply have a very tough time resisting the temptation to purchase extras while shopping. Without a list you will buy items that you simply do not need. Even worse is when your forget to purchase the actual item you came to the store for in the first place. If you plan on cooking at home, pre-plan a rough menu and make a list before you go grocery shopping. Getting all that you need in one trip can help avoid another unnecessary trip and temptation.
Go grocery shopping while you are in a hurry: Maybe you need to go out in a couple of hours. Or your favorite show is going to be on TV after a couple of hours. Try to squeeze in the grocery trip in that intermediate time. Armed with your grocery list, you should be in-and-out very quickly with little time for meandering and getting tempted to buy things you don’t need.
Watch out for expiration dates on perishable goods: This one seems intuitive when you read it, but I am surprised at how many people do not pay attention to expiry dates. No point getting a gallon of milk if it is going to turn sour with a couple of days. Same goes for meat, eggs, yogurt, spreads, frozen items, deli/bakery items etc. Some people say you can use a few items a few days after expiry – but I personally value my health more than money and would rather avoid buying such items in the first place.
Buy in bulk whenever possible: When it comes to non-perishable items, buy in bulk whenever you find something on sale. The items I usually stock up on are, cereals, tinned goods, rice, beans, pasta, coke, toothpaste, body wash, shampoo, toilet paper etc. For such items, shopping at warehouse stores like Costco, Sam’s Club etc can save you quite a bit of money, provided you stick strictly to your shopping list when you shop at these places.
Buy generic products whenever possible: Does it really matter whether your cereal is made by Kellogg's or is the store brand? Does it matter if your milk is Oak Farms or the store brand? For a few things (like soda in particular), I prefer brand name products. For others, I do not mind generic store brands if they can save me money. Find what works for you and switch to generic brands for at least a part of your grocery list.
Use grocery store bags to line trash cans: This may not work if you use a massive trash can but we use a small sized one for which the grocery bags are a perfect fit. This not only helps us save some money, but reduces our environmental foot print and avoids the kitchen from stinking from a huge overflowing trash can.
Consolidate and pay off debt as soon as possible: If you carry any debt, focus on consolidating it to a lower interest and paying it off as soon as possible. Money paid in interest is money thrown away! Why spend your hard-earned cash to make the financial institutions rich?
Pay your bills on time and avoid late fees: Get organized about your regular bills. If possible, automate the payments. Most utilities and other recurring bills can be set to be charged to a credit card or deducted from a checking account these days. Also, many banks offer free bill pay programs. So there really is no excuse for forgetting to pay a bill on time and forking out the late fees. Say, by chance you do forget a bill, if you are a first time offender, call the company and request politely to waive the late fees, and more likely than not, they will oblige.
Be aware of your bank balance and avoid over draft fees: If you use your checking account often or have some bills that are paid automatically from your checking account, be aware of the balance and avoid overdraft fees.
Avoid ATM fees: Be aware of the ATM withdrawal fees charged by your bank. While some banks waive fees for all ATM transactions on any ATM machine, most don’t. So be sure to use only those ATM machines where your bank will not charge the fees, or withdraw directly at your bank.
Avoid credit cards with annual fee: Credit cards with their cash back bonuses and reward points are a great way to save some money. Just make sure that the card does not charge you any annual fees! There is no dearth of cards that offer fee-free reward plans, so there really is no reason to pay the annual fees.
Disconnect land line if possible: Unless you have small kids in the house or older people to take care of, it is more than likely that you will be able to survive with only the mobile phones and can get rid of the land line. We have survived without any problems for over 4 years now with out a land line. Our Internet comes via cable.
Instead of buying books, borrow books from the library: Whenever possible, borrow your books instead of buying them. The card to your public library is free and the libraries are generally well stocked. In my city, the chain of public libraries is connected and the available books can be checked online. If there is some book that I cannot find in my local branch, I can make a request online for it to be brought in from one of the other branches to mine which is very convenient.
If you have to buy books, check if you can buy it used: Used books do not quite give the same feeling as leafing through the crisp pages of a brand new book. But considering that you can get used books for almost as much as half the price of a new book, it is a small price to pay. My favorite place to buy used books is a local chain called “Half Price Book Store”. Check if you have something similar in your city. For text books, look online on bulletin boards, mailing lists etc, and price compare on websites like addall.com.
Price check before buying anything expensive: For other items that are expensive, do a price check before buying the item. If you can wait for a while you can track the prices and grab a great deal when it comes along. Frequently available online coupons make it even more easy to save some money. This is especially true while purchasing any electronics.
Avoid impulse buying: Make it a habit to avoid impulse buying. Many of the things you want to buy do not seem all that necessary, if you only you wait for a day or two. Also, waiting means you will be able to check prices and make an informed decision to buy it at the best possible price.
Bottle your own water: Drinking water is good for your health. I always make it a habit to keep some at my desk at all times. Bottled water is the most convenient since it can provide protection against accidental spills. That said, buy bottled water only once in a while, and then reuse that bottle to fill your own water. If you are not happy with tap water, invest in a Brita Filter – in the long run it can save a lot of money.
Avoid the vending machines: Almost everything that is dispensed via vending machines has a huge markup (and is rarely healthy). However, if you suffer from snack attacks at work, consider creating a secret stash of snacks. If you like drinking soda and have a fridge at the workplace, save a refrigerator pack in the fridge with a post-it with your name on it. If you have a long commute, consider a stash for the car as well and avoid a quick drive-thru visit.
Keep your car as long as possible: When possible, try to keep your car as long as possible. Find the balance between the money spent on repairs versus the monthly installment on another vehicle and choose to run your old car as long as the repair costs are low.
Do regular scheduled maintenance on your vehicles: Do not skimp on or forget to do regular oil changes. Remember to check the air in your tires often. And use the grade of fuel that the owner’s manual recommends. These small acts can significantly lengthen the life of your car, giving you years of use.
Avoid buying a new car: When you eventually buy a car, see if you can make do with a pre-owned vehicle. A new car depreciates significantly the moment you drive it out the dealership. Is the new car small really worth thousands of dollars? Pre-owned cars that are only a few years old with low mileage are the best bargains. Regardless of the purchase, learn to negotiate with car dealers.
Ride your bike or carpool whenever possible: In many of the cities in the US it is hard to get by without a car. That said, just because you have a car does not mean you have to use it every day. Whenever possible, ride your bike or share a ride with a colleague or spouse and save both on gas and reduce the environmental footprint.
If you watch a lot of DVDs, get an online DVD store membership: Membership to online movie stores like Netflix or Blockbuster Online can save you a lot of money compared to buying DVDs or renting it from a local store. You need to wait once you order the movie, but if you watch a lot of movies at home, then you can easily get into the habit of ordering ahead of time so you always have something at home. If you are patient and your library has the resources, check to see if they have a movie section. You won't get anything very new, but they are free.
If you like watching movies at the theater, go before 6:00 pm: This is one of our soft spots when it comes to spending. We really like watching movies in the theater with the big screen and the great sound effects. But instead of paying ~$10 a pop for the ticket, we usually go before 6:00pm when the tickets are a little less expensive. Also, for movies that we don’t absolutely want to watch right away, we just wait until it screens on the discount theater where the tickets are $2 a pop. We avoid the temptation to buy snacks, by usually going for a theater some time soon after our lunch or sometimes sneaking in our own snacks in the purse.
Regulate your electric use: When not in use, unplug electric appliances. Apparently, unplugging the TV instead of just switching it off can save a lot of electricity! When not in a room, switch off the lights and the fan. Use a programmable thermostat to control your A/C and heater usage. If that's too much, at least know what each appliance uses and unplug a few of them.
Plan vacations ahead of time: Vacations are a necessary part of saving our sanity in the busy lives that we lead. But vacations are also a huge drain on the family finances. You can cut the cost of a vacation significantly by planning and booking ahead of time. Bookmark travel sites for finding inexpensive airfare, hotel etc., and book at least two weeks in advance.
Finally, keep distance from lavish, high-roller friends: If you have lavish friends who buy a new car every other year (or worse still, lease it), have large screen TVs and every other conceivable electronics gadget, eat out at fancy restaurants every other night and just live way beyond their means, keep the distance. They may be nice people and mean you no harm, but hanging out with such people often can lead to a lot of unnecessary desires and discontent. What’s more important – your friends or your peace of mind?

Whoa, that article ended up being a lot longer than I anticipated. Hopefully, I haven’t put you to sleep! Despite the length though, it barely scratches the surface when it comes to ways to save money. Make it a sub-conscious habit to save money in things that you do every day, even if it is a few dollars. All that money saved can add up significantly and you can save it or spend it on things that really matter!

NOTE: I am not saying that you should follow *all* these tips. Trying to be too frugal can make both you and the people around you very miserable. So, pick out a few tips at a time that will work for you and make them a habit, before deciding if you can incorporate more money saving habits in your daily routine.

Written by ispf of Grad Money Matters.

A debt payoff plan that works

2010-12-29T15:22:00.000-08:00

If you've got a mountain of debt, is it better to fight it with a snowball or an avalanche? The cold truth is that one size doesn't fit all.

By Liz Pulliam Weston

MSN Money

If you want to stir up a hornet's nest among personal-finance bloggers, declare that the debt snowball is far superior to the debt avalanche, or vice versa.

Good debt versus bad

Most people won't understand what the heck you're talking about, but passionate adherents of either debt payoff method will spend hours honing their arguments and rebuttals.

Both approaches (which I'll explain in a minute) have their advantages and drawbacks, but a fistfight over methods is the last thing you need when you're sinking deeper in debt. You just want to know the best strategy for clawing your way out.

So here's the short version: Any method can work if you free up enough income and apply it diligently to your debts. But if you want to craft the smartest payoff plan possible, you shouldn't marry any single approach but instead create a plan that reflects your individual situation and types of debt.

I have some ideas about how best to do that, but let's define some terms before we go further:

Using the debt snowball approach, you order your debts by size and pay off the smallest first, on the theory that quick wins will keep you motivated. You throw as much money as possible at your chosen debt while paying the minimums on the rest. When the targeted debt is gone, you apply the same payment plus the minimum to the next debt, and so on. The amount you apply to your targeted debt grows as you pay off each bill, and you pack together those little victories to make a big dent in what you owe. This method is touted by personal-finance guru Dave Ramsey and his many enthusiastic followers.
With the debt avalanche method, you pay off your debts by interest rate, tackling the highest rates first. The term was popularized by blogger Flexo at Consumerism Commentary, although the method has been applied for years by financial planners and others. The avalanche is the mathematically superior approach because you will pay less interest and can get out of debt quicker.
A third method, the debt snowflake, can supplement the other strategies. When you snowflake, you look for little ways to trim your expenses. Brown-bagging it today? If you were "snowflaking," you would apply the $10 you'd saved on lunch directly to your debts, either the same day or at the end of the week (hopefully combined with other little snowflakes of savings).
Finally, because we're getting all chilly, I'll coin a new phrase: debt calving. A glacier calves when a big chunk of ice shears off its face, typically landing in the water with a big splash. Debt calving is when you get a big windfall and throw chunks of it at your debts.

Before you start freezing out your debts, though, you need to take a closer look at what you owe and create a plan. Here's what you do:

List all of your debts

You need an inventory of everything you owe. Go through your bills and pull copies of your credit reports (get free access annually at AnnualCreditReport.com) to make sure you don't miss any accounts.

Don't forget to include:

Credit cards.
Store cards.
Gas cards.
Personal loans.
Retirement plan loans.
Life insurance loans.
Federal student loans.
Private student loans.
Mortgages.
Home equity loans or lines of credit.
Business loans.
Auto loans.
Boat loans.
Other vehicle loans.
Medical debt.
Debt consolidation loans.
Collection accounts.
Payday loans.
Pawnshop loans.
Title loans.
Overdraft balances.

For each debt, you'll need to note whom you owe, how much you owe, the current interest rate and the minimum payment.

You can typically find the interest rate of a loan on your monthly statement or by calling your lender to ask. Calculating interest rates for payday advances and overdraft balances is tougher, but you can figure your annualized interest rate is in the triple digits, so these should be at the top of your payoff list.

4 ways we keep wasting money

2010-12-29T05:22:00.000-08:00

4 ways we keep wasting money

You may be paying for unnecessary, unused or even unwanted services. Here's how to find -- and zap -- expenses that give you little or no value for your cash.

Before one gets too amazed at the audacity of these fees, keep in mind that millions of Americans lose thousands of dollars every year in equally unnecessary expenses, fees, interest, convenience charges and paid for, but unused, services.

1. Credit cards

Any conversation about wasted money will inevitably turn to credit cards and the hefty price paid for their convenience.

There are approximately 610 million credit cards held in the United States, and the average credit card debt per household that has such debt is $15,788, according to the Federal Reserve Bank of Boston and CreditCards.com, part of the Bankrate Online Network.

The site crunched out that the average APR on a credit card with a balance is just shy of 15%. Total U.S. revolving debt (98% of which is made up of credit card debt) was $852.6 billion as of March.

Compare rates: Find a better credit card

All of these factoids add up to megabucks being handed over to credit card companies each year. Even with regulations imposed by federal reforms this year, it is unlikely Americans will stop carrying balances, and paying the price for doing so, any time soon.

2. Overdraft fees

Once considered a devastating and embarrassing faux pas, consumers these days actually seem to relish the opportunity to kite checks. As many as 75% of bank customers have opted to keep overdraft "protection" and the fees incurred, according to The Wall Street Journal.

Illinois-based Moebs Services, a banking analyst, estimates banks will collect upward of $38 billion in overdraft fees next year, up from this year's estimated $35.4 billion. Last year, $37.1 billion was collected from overdrawn consumers, and the median overdraft price increased to $28 per check this year from $26 in 2009.

Economist Mike Moebs points out that overdraft fees are so high that consumers hit by them the most frequently could save money by instead taking out one of those much-maligned payday loans.

"The average amount overdrawn on checking accounts by about 70% of consumers, according to the General Accounting Office and the FDIC, is less than $100," Moebs says. "Consumers who use a payday advance loan for $100 or less will pay an average of $17.97, which is 33% less than the $27 it costs for an overdraft of that same amount from a checking account."

3. Unused memberships, gift cards and rebates

According to the International Health, Racquet & Sportsclub Association, there were 45.3 million gym and health club members last year, and health club attendance averaged 102 days.

That means on average, up to 263 days of each annual membership go unused. Assuming that a monthly membership, on the low range of things, is about $30 a month, that's $258 a year being paid by the average customer for unused days. One way to cut the waste is to increase gym attendance.

One more day of gym attendance would reduce the per-visit cost of a membership from $3.53 to $2.38. But if you really don't plan to use the gym much, or you feel it's not worth the per-visit price, you may be wasting money.

Massachusetts-based research firm TowerGroup, a subsidiary of Corporate Executive Board, issued its annual overview this week of the gift card industry.

Spending on gift cards for this year's holiday shopping season will increase for the first time in three years, reaching $91 billion in sales, it estimated, and could hit $100 billion by 2012.

The good news: In addition to the increase in spending on gift cards, "breakage" -- industry jargon for the value left unused on gift cards -- is expected to decrease by almost 50% since 2008, to 3.1%. The change is owed to new federal regulations.

The bad news: That's still $2.5 billion consumers will never collect on.

How about rebates? Those deals on electronics and cell phones sound great -- $50 off if you just clip the UPC symbol and mail it in. Blame procrastination, forgetfulness and tricky fine print for the fact that up to 60% of rebates are never filed and billions of dollars will never be collected.

Though numbers aren't readily available, consider other services you pay for but don't use -- unused cell phone minutes and data allowances, lingering over one Netflix movie all month, paying for premium cable channels that go ignored until the next season of "Entourage" starts and all those impulse buys from Amazon that you'll only glance at on your Kindle.

4. Airline fees

Ever-multiplying airline-imposed fees are another costly modern convenience. A typical bag of checked luggage will set you back at least $25 to $35 each way on many airlines.

Baggage fees charged by airlines totaled a mere $464 million in 2007. For the first half of this year, nearly $1.7 billion has already been collected in these fees, according to the federal Bureau of Transportation Statistics. Delta Air Lines led the pack with nearly $474 million in fees. Rounding out the top five were American Airlines ($280.5 million), US Airways ($256.3 million), Continental Airlines ($167.6 million) and United Airlines ($155.9 million).

It's not just extra baggage that has us paying through the nose. Fees related to canceling and changing reservations earned airlines more than $1.1 billion in the first half of this year.

To fight the fees, however, you must first know what they are.

A survey earlier this year by the National Business Travel Association found that 61% of those who responded said it was "very important to know the total cost of the trip," but 58% said they were "unable to track the total amount spent on ancillary fees."

This article was reported by Joe Mont for TheStreet.

5 people who peek at your credit

2010-12-28T18:41:00.000-08:00

5 people who peek at your credit

It's not just lenders who check your credit scores. Bad scores can also make it costlier to get insurance, an apartment or a cell phone -- and harder to get a job.

[Related content: credit, credit score, bad credit, interest rates, bills]

By Kiplinger's Personal Finance Magazine

How much do you know about your credit scores? Those three-digit numbers are tied to our financial lives, yet many young adults haven't given them the attention they deserve.

Your scores can play a role in your ability to rent an apartment, qualify for a loan or even get a job. They can also affect how much you'll pay on interest charges, insurance and even cell phone contracts.

Make building stellar scores a priority while you're young and you could actually save hundreds or thousands of dollars over your lifetime. However, if you don't take your credit seriously, bad scores -- or even nonexistent scores -- will cost you.

Who's keeping score?

Your credit scores are basically used to predict the possibility that you won't pay your bills. Scores are compiled by Fair Isaac and are sometimes called FICO scores. The top possible number is 850, but topping 800 is probably unrealistic. A median score usually falls in the 720-to-725 range, meaning half of consumers fall above that point, half below. Even if you haven't given your FICO scores much thought, there are plenty of others who have or will, so you'll want to aim for the mid-700s to make the best impression on:

1. Lenders. This group is the one most people associate with their credit scores. Having a good rating can help you qualify for the best rates on a mortgage, car loan, credit card and even a small-business loan if you've got that entrepreneurial spirit. Nonexistent scores can make it impossible for you to qualify for a loan or credit card.

2. Insurers. The majority of auto insurance companies use your credit scores when determining your rates, and the practice is also common among home insurers. A survey by Consumer Reports among eight popular auto insurers found that drivers with top scores pay up to 31% less on their premiums than if credit scoring wasn't factored in, while those with bad scores pay as much as 143% more.

3. Landlords. Increasingly, you may need good credit scores to rent an apartment. Landlords view your credit rating as a measure of your responsibility to pay bills on time. If your rating is below par or you don't have credit scores yet, you may have to find a friend or relative to co-sign your lease, or you could be required to pay a higher rent or security deposit.

4. Employers. When you're applying for a job, potential employers can pull your credit reports as long as they notify you first. And, in fact, about 35% of them do, according to the Society for Human Resource Management. Why? Bad credit can be a signal of irresponsibility, or employers might be worried you'll spend more time fretting about your financial woes than concentrating on the job.

5. Cell phone carriers. Even cell phone service providers may check your credit before signing you up for a plan. They want to make sure you're responsible and will pay your bill each month. Some utility providers may pull your reports as well. If you have credit issues, you may not qualify for the best plan rates, you could be required to pay a deposit, or you could get turned down.

True cost of your scores

So, how much do your credit scores affect your finances? Say we have two friends, Jim and Mark. Both took steps right out of college to start building a credit report by getting their first credit cards and an auto loan. Jim made all his payments on time, never maxed out his credit cards and often paid more than the minimum required. Mark, however, frequently paid late, overextended his cards and applied for new credit to bail him out of his mismanaged debts.

Now both are ready to buy homes, and each applies for a $250,000 30-year mortgage. Through Jim's responsibility, he's been able to build scores of 750, qualifying him for a loan with a 4.58% interest rate. Mark's scores come in around 650, netting him a rate at 5.40% interest. Jim's monthly mortgage payment is $1,279 while Mark pays $1,404 -- a difference of $125 per month. If they both live in their homes for 10 years before selling or refinancing, Mark will pay $15,000 more in monthly payments than his friend. Ouch.

Mark also gets burned on a new auto loan -- paying $2,340 more over three years on a $20,000 loan than Jim. Plus, Mark probably paid much more for his car insurance than Jim.

Digging Out Of Personal Debt

2010-12-28T13:55:00.000-08:00

Digging Out Of Personal Debt

by Investopedia Staff, (Investopedia.com)

Consumer debt is on the rise in more than just a few countries around the world. According to numbers released in March 2006 by the U.S. Federal Reserve Board, household debt has topped the $2-trillion mark in the U.S. - and that doesn't include mortgage debt. Consumer debt is a common topic of discussion and analysis, but it should not be considered a way of life. How can consumers get their debts under control? For an ever-growing number of them, the answer is debt consolidation. In this article, we show how consolidation can help - and why it often fails.
Tutorial: Budgeting Basics

The Ideal ProcessDebt consolidation basically involves taking all of your debts and moving them to a single source. This often includes personal loans, home-equity loans, car payments, credit card balances and mortgage debt. Most brick-and-mortar lending institutions offer a variety of debt consolidation options. Online vendors also provide a vast selection of programs and a convenient medium for comparing them against each other. When it is done properly, debt consolidation results in a lower interest payment, a lower monthly debt payment and an increased amount of discretionary income each month.

Ideally, the lower payment and reduced interest provided by debt consolidation free up enough income to enable you to live within your means. Once you can afford to make the monthly payment on your loan, you can begin to get out from under your debts by making extra payments in order to retire your loan as quickly as possible.


Watch: Consolidation Debt

The Reality of Debt ConsolidationWhile there are a number of financially savvy individuals who use debt consolidation as a tool to manage their finances, this is not typically the case. For most consumers, the need to engage in debt consolidation is a sign that they have been doing a poor job of managing their money. If they weren't, it isn't likely that they would be so deeply in debt in the first place.

Further cementing this argument is the fact that, immediately after consolidating, many of these individuals are no longer feeling pressured by their inability to pay their debts, so they go on a spending spree. Their previously maxed-out credit cards now have zero balances and, often, these consumers can't resist the urge to shop.

In short order, many people who consolidate their debt go on to rack up so much additional debt on their credit cards that all of their newfound money is once again needed to make credit card payments. In other words, instead of using debt consolidation to reduce indebtedness, consumers are simply using it to dig themselves a deeper hole. (To read more, check out Home-Equity Loans: The Costs and The Home-Equity Loan: What It Is And How It Works.)

Change Your BehaviorDebt consolidation is the first step toward getting your bills under control, but changing your behavior is an equally critical part of the equation. In order for debt consolidation to have a meaningful and lasting impact on your financial situation, you need to break the debt cycle. Simply put, that means that you need to stop spending money that you haven't earned yet.

One of the easiest ways to minimize your spending is the elimination of your credit cards. Credit card abuse is one of the leading causes of consumer indebtedness. Another easy step is to put a moratorium on new loans. Your debt consolidation loan was taken in order to get your debts under control. Taking out additional loans is counterproductive. Keep in mind that "loans" include any scenario where you are racking up bills that require repayment at some point in the future. This includes the purchase of new automobiles and the purchase of items that offer no payment and no interest for a predetermined amount of time. (For more tips, see Take Control Of Your Credit Cards, Understanding Credit Card Interest and Credit, Debit And Charge: Sizing Up The Cards In Your Wallet.)

ConclusionOngoing debt minimization is critical to the long-term success of debt consolidation. Financial experts often note that your outstanding debts, including credit cards and mortgage payments, should not amount to more than 36% of your gross monthly income. That 36% figure is often referred to as a debt-to-income ratio. The ratio is calculated by dividing the amount of money you spend each month to service your debts by the amount of your income. When they do the math, people are often surprised to discover that their debt-to-income ratios are significantly higher than the recommended amount. Determining your debt-to-income ratio provides an excellent reminder that you aren't supposed to live paycheck to paycheck, spending every single dollar that you bring in each month.

If you find yourself in financial trouble, use debt consolidation as a tool to get your finances back on track, and then use good spending habits to keep your bankbook in the black.

Financial New Year's Resolutions You Can Keep

2010-12-28T13:48:00.000-08:00

Financial New Year's Resolutions You Can Keep

by Andrew Schwartz,CPA (Contact Author | Biography)

Did you make any resolutions concerning your personal finances last January? If so, how did you do? Did you attain your financial goals, or was this year a total financial washout for you? While December 31 is a day to reflect on the year gone by, January 1 is a time to look forward to the New Year, use this opportunity to review your financial scorecard for the past year and make any possible improvements where necessary for the New Year.

The good news about New Year's resolutions is that you get to make new ones each year. It's even better if you can keep the good ones from the past year. In this article, we provide some New Year's resolutions to help you improve your finances.

Reset Your Retirement SavingsAt work, you probably have the opportunity to save for your retirement through a 401(k), 403(b) or 457 plan sponsored by your employer. If so, consider that most people find it easier to max out their retirement contributions by budgeting to contribute a set amount each month. (To learn more about 401(k) and 403(b) plans, see A Closer Look At The Roth 401(k).)

Employer PlansIf you have access to a 401(k), 403(b) or 457 plan at work, consider instructing your employer to withhold enough through salary deferrals to ensure that you reach the maximum limit each year. If you'll be 50 or older by December 31, bump that amount to account for the additional "catch-up contributions" you're allowed to make. If you get paid on some other frequency, such as weekly or bi-weekly, simply divide the contribution limit by the number of your pay periods for the year. Of course, you should save only amounts that you can realistically afford, as contributing more than you can afford may result in having to incur debts to cover everyday expenses. To determine how much you can save each period, incorporate your retirement savings into your regular budget. (To read more about catch-up contributions, see Retirement Savings Tips For 45- To 54-Year-Olds.)

Are you self-employed? If so, depending on your income, you can contribute to an SEP IRA, profit-sharing plan or solo 401(k)/individual 401(k) plan. And if you'll be 50 or older by December 31, the contribution limit jumps for Solo 401(k)s, helping you save even more. (To learn more, see 401(k) Plans For The Small-Business Owner.)

Don't Forget About IRAsEven if you're covered under a retirement plan at work, you and your spouse can each contribute to a Traditional IRA or Roth IRA, as long as your combined taxable wages and net self-employment income is not less than the total amount contributed. Anyone 50 or older can contribute an extra $1,000 in 2010, increasing the total allowable contribution to $6,000, or $500 per month. Keep in mind, however, that if you're single and your adjusted gross income (AGI) exceeds $120,000 or married and your adjusted gross income (AGI) exceeds $176,000, you're not eligible to contribute to a Roth IRA in 2010.

Update Your Savings and Debt Reduction Goals
Did you know that if you deposit $815 into your savings account each month, the account will be worth approximately $10,000 at the end of the year, plus interest? Bear in mind that easy access to funds can be quite tempting, and if you are like most people, you will spend money to which you have easy access. Therefore, to help you reach your goal, be sure to transfer amounts earmarked for savings from your checking account to a designated separate savings or investment account that is not easily accessed, making it less tempting for you to spend the money that you have managed to save.

Take a few minutes now to set new savings goals for 2010, including how much you would like to add to your retirement nest egg, your children's education fund or the down payment on your home. You should also reset how much you plan to pay on your personal loans, debts and home mortgage accounts. (To learn more about paying down debts, see Digging Out Of Personal Debt, The Indiana Jones Guide to Getting Ahead and Credit, Debit And Charge: Sizing Up The Cards In Your Wallet.)

And don't forget about paying some extra principal toward your mortgage payment each month. By doing so, you'll earn a risk-free return on that money equal to your mortgage interest rate. Plus, you'll cut down on the number of years it will take to pay off your mortgage. However, if you must choose between adding to your retirement nest egg and paying extra on your mortgage, talk to your financial advisor to determine which option is more suitable for you. (For more information on mortgages, see Mortgages: How Much Can You Afford?and Mortgages: Fixed-Rate Versus Adjustable-Rate.)

Other Resolutions
Rebalance Your Investment PortfolioThe previous year was no different than any other year; with some sectors performing better than others. Chances are that the sectors that performed the best last year may not enjoy a repeat performance this year. By rebalancing your portfolio to its original or updated asset allocation, you take steps to lock in gains from the sectors with the best returns, and purchase shares in the sectors that have lagged behind last year's leaders. (Find out how to rebalance your investment portfolio in Rebalance Your Portfolio To Stay On Track and A Guide To Portfolio Construction.)

Pay Down Your Credit Cards.
If you owe money on your credit cards, determine how much you can realistically afford to pay off during the year. For best results, try not to charge additional purchases on those cards while you're trying to pay down what you owe. If you have high interest credit card balances, consider whether it would be more beneficial to pay off those high interest debts or to add to your savings. (To continue reading about credit and saving for the future, see The Beauty Of Budgeting.)

Review Your Credit Report
Review your credit report, and take steps to repair any negative aspects. Now that you're entitled to three free credit reports each year, there is no excuse for not reviewing what is one of your most important financial reports, especially since errors in these reports are not uncommon. In the U.S., you can order your free credit report at AnnualCreditReport.com. A poor credit report could adversely affect the amount you are able to save, as it could result in you paying higher interest rates on loans, which reduces your disposable income.

Review Your Life Insurance and Disability Insurance NeedsAs you move through your career, your life and disability insurance need to continue to change. Give some thought as to how much protection you need and compare it to the coverage you currently have through your employer's benefit package. Consider whether you need more or less life insurance, and whether your needs would be better satisfied by term or permanent life insurance. Also, review your disability insurance coverage to determine whether you have enough coverage. (To find out more about insurance plans, see How Much Life Insurance Should You Carry?)

Avoid Resolution Pollution
Be cautious about setting too many or unrealistic financial goals. Otherwise, you may be unable to accomplish any of them. Take this opportunity to restate your financial resolutions simply and clearly for the new year and rest easy knowing that this is one resolution you can keep. It may be a good idea to maintain a checklist to keep track of how you are doing throughout the year, so that you can make any necessary modifications. Consider meeting with your financial advisor to review the goals and objectives that you have established.

The Most Important Day in America in 50 Years... Coming in 2011. This day will change everything about our nation and your day-to-day life. Watch the eye-opening video presentation here.

by Andrew Schwartz,CPA (Contact Author | Biography)

Your End-of-the-Year Tax Checklist for 2010

2010-12-27T19:39:00.001-08:00

by Robert D. Flach, MainStreet
Wednesday, December 22, 2010

The average person avoids thinking about taxes until the April deadline approaches, when it's too late to make changes that can cut your bill.
As 2010 draws to a close it's not too late to take steps to decrease the amount you'll owe the Internal Revenue Service. Here are some tax-planning moves to consider now:

1. Prepare a Preliminary Tax Return
Using your 2009 return as a guide, prepare a projected Form 1040. Start by estimating your adjusted gross income for 2010 and your allowable deductions. Determine if you will be able to itemize your deductions — do your eligible expenses

exceed the standard deduction for your filing status? Lastly, figure out the tax bracket you'll likely fall into for 2010.
The standard deduction for married people filing jointly remains at $11,400 for 2010. The standard deduction for singles and married people filing separately is $5,700, and the amount for the head of a household increases to $8,400. The personal exemption is again $3,650.

2. Consider Postponing Your Income and Boosting Deductions
If you expect to be in the same tax bracket next year, or a lower one, try to put off collecting income until 2011 and rack up as many eligible deductions now instead of waiting until after the New Year. You'll have more expenses to deduct this year and less income to tax at the same or higher rate.
If your income is likely to increase next year and push you into a higher bracket, do the reverse and try to collect as much of your taxable income as possible in 2010 and postpone deductible expenses until 2011. Income received in 2010 will be taxed at a lower rate and deductions claimed in 2011 will provide greater tax savings.
3. Size Up Your Itemized Deductions
It doesn't pay to itemize your deductions unless the total exceeds the standard deduction for your filing status. If you think you'll be able to itemize your deductions on your 2010 Form 1040, try to incur as many deductible expenses as possible this year.
If you won't be able to itemize, postpone any payments that could be deductible until 2011. By deferring these expenses, you'll have more deductions to claim next year.
4. Pay Medical Bills Now
The timing of itemized deductions is especially important when it comes to medical expenses. You can deduct medical expenses only if they exceed 7.5% of your adjusted gross income. If your income totals $70,000 for 2010, you can't deduct the first $5,250 of your medical expenses. If your costs total $6,000, you can claim $750.
In this scenario, if your medical expenses are more than $5,250 and you have enough deductions to itemize, pay your outstanding medical bills before 2011 begins. If your medical expenses are less than $5,250, put off paying any medical bills until 2011

5. Use Your Credit Card
If you don't have the cash to pay for deductible expenses, consider using a credit card to pay for the items so you can get the deduction for 2010. Eligible expenses charged to bank-issued credit cards are deductible in the year charged, not the year you actually pay it.
However, it's a different story for store-issued cards. If you use a store-sponsored card to buy deductible items at a department store, such as Macy's or Sears, the expenses can't be deducted until the actual charge is paid. So stick to bank cards for end-of-year purchases.
6. Review Your Investments
Look at the investments (including real estate) you sold this year and add up your gains and losses. Separate the totals for your short-term positions (owned for one year or less) and long-term holdings (more than one year). Gains and losses from the sale of inherited property are always considered long-term. Capital-gains distributions received from mutual funds are also classified as long-term.
Do a similar calculation for unrealized "paper" gains and losses for investments you still hold. Consider selling losing investments before the year ends to wipe out any taxable gains. Consider unloading holdings at a profit if your losses exceed the $3,000 maximum current deduction.
7. Consider Mutual Fund Dividends (If Not This Year, Then Next Year)
The law requires mutual funds to distribute net gains from security sales to their shareholders. During the fourth quarter, fund managers calculate their net gains for the year and distribute it through dividends to shareholders. The shareholders will pay federal and state income taxes at the special capital gain rates on these distributions. After a distribution is made, the value of the fund's shares drops.
If you buy shares of a fund for $10,000 on Dec. 1 and the fund issues a $1,000 capital gain dividend on Dec. 15, your shares will be worth $9,000 on Dec. 16. You had no real gain or income, but you must pay tax on the $1,000 distribution.
If you want to purchase fund shares during the final months of the year, wait until after the distribution is issued and the fund's value drops. It might be too late for you to address your mutual fund dividends this year, but it's something to keep in mind for next year.
8. Don't Forget the Alternative Minimum Tax
While these strategies may reduce your "regular" taxes, they may backfire if you're subject to the dreaded Alternative Minimum Tax (AMT).
For those who qualify for the AMT, medical expenses are only deductible if they exceed 10% (not 7.5%) of your adjusted gross income. Taxes, investment and job-related expenses aren't deductible at all. If you usually pay the "regular" tax but anticipate having to pay the AMT for 2010, consider postponing any potentially deductible expenses until 2011, when you may not be subject to the AMT.
The AMT rates are 26% or 28%. If for 2010 you are in the 28% or higher bracket for "regular" taxes and you will pay AMT at the 26% rate, you may want to claim as collect income as possible 2010. The additional income will be taxed at 26%.

Final Thoughts
As you consider these tax planning tips, keep in mind that certain strategies will help some people more than others. It is a good idea to discuss your year-end plans with your accountant before taking action.
And remember: Your first criteria for evaluating any financial transaction should always be economic — taxes are second.

6 Tax Breaks That Anyone Can Claim

2010-12-27T07:13:00.000-08:00

by Annie Mueller
Monday, November 15, 2010

provided by

If the thought of doing taxes makes you break into a cold sweat, you're probably like many of us; fearful of making a mistake and having the IRS show up at your door. Tax forms can be complicated, but don't let the complexity scare you away from tax credits that are legally yours to claim. Tax deductions and credits aren't just for big companies and finance-savvy folks. Look over the list below; you might be surprised how many tax breaks -- in the form of both credits and deductions -- can be applied to your tax return.

1. Charitable Donations
Most cash donations made to charity in the tax year can be claimed as an itemized deduction on your tax return, but many folks don't realize that non-cash contributions can be claimed as well. If you've donated to a charity or non-profit organization using your credit card, you can claim that donation. If you've donated material goods or services, be sure that you have a receipt from the charity stating the value of the goods or services you donated. You can claim that value as a charitable deduction.
2. Child Care Credit
If you pay for child care regularly while you are at work, you may be eligible for a tax credit. The amount of care covered can be up to $6,000 for the care of two or more children, according to Kevin McCormally, the Editorial Director of Kiplinger.com. Be sure to keep clear records; paying your child care provider in cash while keeping no traceable record of the payment will make it extremely difficult to claim the amount on your tax return.

3. Home Energy Efficiency Improvements
If you have to make any home improvements, go with the energy efficient options. Consumers can claim 30% of the cost, up to $1,500, of energy efficient home improvement items, such as "energy-efficient windows, insulation, doors, roofs, and heating and cooling equipment in existing homes," according to the Department of Energy. So replace those doors and windows by the end of the year and get a break on your taxes.
4. Residential Renewable Energy Tax Credits
Another "green" tax break is for renewable energy additions made to your home. The Department of Energy includes "solar energy systems (including solar water heating and solar electric systems), small wind systems, geothermal heat pumps, and residential fuel cell and microturbine systems". Home owners can get a tax credit of up to 30% of the cost of these improvements. When you consider how much money this type of renewable energy will save you in lower electric bills over the years and combine that with the 30% tax credit, greening your home begins to look like a pretty smart move.
5. Automobile Tax Credits
Get green on your commute and you could see more green on your tax return. Purchase a hybrid gas-electric or alternative fuel vehicle before the end of 2010, and you can get a credit on your taxes. Amounts vary according to what type of vehicle you purchase and some credits are phased out as dealers sell a certain amount of cars, so be sure to ask your car dealer before you purchase. If you're a DIY person, you can also get a tax credit for 10% of the cost of a plug-in hybrid conversion kit.

6. Relocating for Work
Whether you're moving for your very first job, for a new job or for relocation with your current employer, you can recover some of your relocation expenses. You have to validate your move by passing a couple of "tests". The first test involves the distance. The distance from your new work location to your former home has to be at least 50 miles longer than your previous commute. The second test is just a way of proving that you actually moved for the job; you have to be employed for at least 39 weeks out of the 12 months immediately following your move, in the vicinity of your new job. You don't have to actually be employed with the same company, just in the same general area.
Bottom Line
Don't be fooled into thinking that tax credits and deductions are for everybody but you. Simply donating, working and improving your home can add up to significant savings on your taxes, so start getting out those receipts and adding up the numbers. Document what you claim on the deductions and ask your tax professional if you have any questions about what you can claim. Then go for it; you might be getting a much bigger refund than you thought.

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