One suggestion I had during the Quicken Online review was for the Intuit team to add in the ability to aggregate user data for comparisons.  If you’ve ever used TurboTax you’ll remember the section towards the end where the software shows how you compare to other tax filers.  I think it would be interesting and useful to see how you compare to other Quicken Online users in terms of where you’re spending your money.

The Trends feature of Quicken Online already offers some insightful data you can use for comparisons but nothing that compares your spending behavior to other people.  Of course you can get a good snapshot of your income and expenses with the current Trends section.  The charts make it easy to see where you’re spending most of your money for the current month and trending over time as well.  Another cool feature is that Quicken Online looks at your highest spending categories and makes savings suggestions on how much you could save a year by cutting a certain percentage of that spending.

One last thing about Quicken Online and Intuit products in general that I think helps add to their usefulness is a program they call their Inner Circle.  It’s a user feedback program that anyone can join.  You have to sign a non disclosure agreement but you get early access to new features in some of their products and can offer your feedback so they can incorporate user preferences into their products. That wraps up the Quicken Online overview, if it sounds like a useful tool for your money then give it a try, it’s free - Quicken Online Signup

Since Quicken Online is available from anywhere via a mobile device it’s setup to help consumers make quick buying decisions when they’re at the store.  You can set it up so you can check your bank balance on the go so you know before you buy something what your balance is and whether you can afford it.

Quicken Online Mobile

If you use your phone to record checks written in Quicken Online you can take a quick look at how much is in your account and what checks are still outstanding before you spend money that you don’t have.  Mobile access is available on all phones at m.quicken.com, using the WAP protocol to give you access to Quicken Online.  In addition to checking your balance the software also has an ATM list, to help you find your bank’s ATM and avoid fees when you need money.

Intuit has also created an iPhone app that makes the ATM feature more intelligent.  The iPhone app for Quicken Online will find ATM’s near your current location and highlight those that belong to your bank.  You can also check your credit card balances from Quicken Online mobile so you have a dashboard of all the money you have in the bank and all the money you’ve spent.

Next post we’ll talk about the trends page that helps analyze your spending patterns and suggests ways to cut spending and save money.

I’ve been using Quicken at home for more than 10 years so my first question was, “is there any benefit for me to use Quicken Online?” What I didn’t realize is that Intuit has setup Quicken Online to be more of a cash flow tool than a total personal finance application.

The desktop products, like Quicken Deluxe and Quicken Premier, have capabilities such as investing research, portfolio management, tax information, net worth tracking, etc.  You could spend hours with these Desktop tools doing financial analysis and planning. 

Rather than try and squeeze all that into Quicken Online, Barron and his team created the online version to be a tool to help you know where your money was going for cash flow purposes.  It’s setup to help you avoid overdrafts, not spend more than you make, and to look at how you spend your money and make spending recommendations.

They’ve seen a lot of people using the advanced features of the destop software at home but also taking advantage of the “anywhere access” offered by Quicken online.  Next time I’ll look at the mobile options they’ve created that let you use Quicken Online when you’re out to help make spending decisions.

Financial independence probably means different things to different people but at the core I think it boils down to being able to make decisions independent of financial concerns.  To me it means being able to pursue your life goals without being constrained by money.

I think that being able to control your source(s) of income is an important step to becoming financially independent.  My thinking behind this is that if you can generate income independent of an employer then you have more freedom in terms of where you work, when you work, what specific work you do, who you work with, how long you work, etc.

Of course, finding ways to generate money independent of an employer takes time and most people can’t just jump into it full time because we all have bills to pay and mouths to feed.  But we can start something small in our free time, what Robert Pagliarini calls “Your Other 8 Hours“.

Side Business Examples

I have a former co-worker who’s found something he can do in his time after work that pays his mortgage each month.  He still works full time but he’s on the road to either leaving his job or his wife leaving hers.  I put together a video case study a while back for our newsletter subscribers that walks you through what he does to make extra money each month.

I’m going to be sending out more case studies like this in the future, if you’d like to get them you can get the free newsletter here.  There are things I’d do differently about the first video  to make it better but I think it’s still a pretty useful case study.

You can read how my friend pays his mortgage each month by selling Legos and get some ideas on how you can start your own side business.  Happy financial independence day!

Interest Rates

About two months ago, the rates were at an all-time low. You could get an interest rate for less than 5%, which is crazy, but it happened. Now, you’ll see interest rates somewhere between 5.5% and 6%, which is nothing to cry about. This is purely my opinion, but I would lock in the rate as soon as possible, because with inflation rearing its head in the future and energy prices going back up, the interest rates will most likely continue to rise.

Points and Origination Fees

A mortgage point is equivalent to 1% of the loan amount, so if the price is $200,000, a mortgage point is $2,000. You can buy one of these points to buy down your interest rate, typically .25% for every point. A point is basically pre-paid interest. You pay mortgage interest up front. I wouldn’t suggest doing this, because the interest rates are so low right now.

An origination fee is usually charged by brokers, and it is a processing fee. Again, I wouldn’t deal with a broker that charges an origination fee. But be aware that if you don’t pay points or origination fees, many brokers will offer you an interest rate above prime, typically .25% above the prime interest rates.

Which Mortgage Is Right For You?

Stay away from interest only and adjustable rate mortgages. Ask anyone currently going through foreclosure if an adjustable rate is a good idea. People were buying houses with teaser rates of 1 or 2 years, then their rates were jumping up drastically, and the monthly payments were more than homeowners could afford. An interest only loan will never pay down the principal, so why own a home if your not going to gain any equity?

With rates as low as they are, I think fixed rate mortgages are your best option. A 15, 20, or 30 year fixed mortgage is the best way to go. If you know that your income will increase in the near future, consider getting a 30 year mortgage, because you can always pay a 30 year mortgage like a 15 year mortgage in the future. It will amortize the same. Don’t spend the extra money to refinance into a 15 year mortgage.

Next, we’ll get deeper into the down payment, private mortgage insurance, and second mortgages.

Erik Folgate is a personal finance writer and social media consultant.

Buying a house, no matter what the market is like, should never be taken lightly. Owning a home isn’t always a good idea. You should only buy a house when you are financially and mentally prepared to go through with the biggest purchase of your life. Here are some questions to ask yourself before you start looking for houses with a real estate agent.

How much home can I afford?

Generally, about three times your gross pay is a good figure to start with. So, if you make $50,000 a year, you could look for a house somewhere between $125,000 and $175,000. Use this mortgage calculator to play with different purchase prices and mortgage types to see what your mortgage payment will be. If the payment exceeds 30% of your gross pay, then you should start lowering your target purchase price.

Where should I apply for a loan?

This depends on your situation and how much you are going to contribute to a down payment. If you shoot for putting 10% down, you’ll have a larger pool of options. Conventional loans from your big commercial banks typically require that you put down a 10% down payment and a stellar credit rating. They will give you prime rates and their fees have become more competitive since the housing meltdown. Credit unions are also a great option, but they also require larger down payments and good credit scores.

If you have a less than perfect credit score and you were planning on doing a 5% down payment, then consider applying for an FHA loan or for a loan from a wholesale lender. Mortgage brokers are better at offering these types of loans, because they can shop around between dozens of different companies. Just make sure that you don’t get nickel and dimed by the broker.

What’s on my credit report?

Before you start applying for a loan, request a copy of your free credit report from Equifax, Experian, and Transunion. If you are married, pull all three for you and your spouse. Make sure there are no mistakes on the credit reports. If there are, all three agencies now have an online system for credit report disputes. If you have any outstanding bad debts on your credit report, those most likely be required to be paid before you can close on the loan or get pre-approved.

What Documentation Do I Need To Provide To Get Pre-Approved?

1. Copy of your driver’s license and social security card.
2. Copies of all pay stubs from the past 30 days
3. Bank statements showing all cash and investment assets
4. Federal tax return W-2’s for the past two years.
5. Any proof of other income such as alimony, child support, side business, etc.

There may be other documentation required later in the process or even for pre-approval, but these are the major documents required by most lenders for pre-approval.

The Advantages

You’ll be treated with more respect by buying and selling agents and they’ll be more willing to help you find the right home. Sellers will be more likely to accept your offer if they know that the deal will go through. You’ll also close more quickly, because the loan processing can be the part that hangs up a real estate deal the most.

Next up, interest rates and picking the right mortgage product.

1) Start off by getting a copy of your free credit report and looking for any errors.

2) If you find anything, check to see if the mistake shows up on your reports from other credit bureaus. You will need to file separate disputes with each credit bureau that shows the mistake.

3) Go to each bureau’s Web site for instructions on how to file a dispute, what happens after the bureau receives a dispute, and what actions to take if you think your identity has been stolen:

• Equifax
• Experian
• TransUnion

4) Clearly identify each error in the report and explain why you think the information is wrong.
Keep detailed records of what corrections you requested, along with copies of supporting documentation.

5) Don’t send any original documents if you submit your dispute in the mail; make photocopies and send those instead. 

6) Keep a record of when and how you contacted each credit bureau, noting any follow-up phone calls and the names of the people with whom you spoke. In case the correction isn’t resolved smoothly, these records and notes will come in handy.

7) If you find any evidence of identity theft, such as an open account that you know you never opened, make sure to follow the credit bureau’s instructions for reporting identity theft.

The credit bureau should respond to your dispute in writing within four to six weeks. If the bureau agrees with you, the bureau will correct the mistake. If there is a dispute over the corrections you’ve requested, or if you think that someone has stolen your identity and is using your credit, be prepared for a long period of back-and-forth communication with the credit bureau and your creditors.

The burden of proof lies with the bureau, if it can’t prove that the information in question is correct then it has to delete it. However the process of resolving a dispute or unraveling a case of identity theft can be complex and lengthy. Good luck!

Cashing in your 401(k)

You may be tempted to claim the money in your retirement plan to pay off debts or fund a major expense. If you do, you will not only affect your future, but you may lose a big chunk of money in taxes and fees. When you cash in your 401(k) early, a substantial portion of the funds are diverted to pay for income taxes as well as penalties for early withdrawal.

Consolidating Credit Card Debt into a Home Equity Loan

Combining your high-interest loans into a single low-interest home equity loan may seem like a wise move. But unless you also cancel your credit cards and stop overspending, this consolidation of debt may simply allow you to build even more debt. And if you fall behind in the payments on a home equity loan, you will lose your home.

A better approach is to cut back on your spending and use the money you save to pay off credit card debts. If you are having trouble meeting the payments on loans, call your creditors and explain how your financial situation has changed. Set up a payment plan that you can live with.

Payday Loans

Although payday loans may be easy to come by they usually also carry outrageously high interest rates. They will only put you deeper into debt so avoid them like the plague.

Find Experienced Divorce Advisors

All the advisors you use in the divorce process should be familiar with major issues such as division of marital property, exclusion of non-marital property, and various ways to structure ongoing financial contributions from one party to another. Qualified Domestic Relations Orders – known as QDROs (pronounced “Quad-Rows”) assure that pension assets will be shared fairly.  

Most of the legal cost in a divorce is based on the presumption that assets are being hidden. If divorcing couples were to consult a financial planner and a tax advisor prior and draft a financial statement agreeable to both parties, legal fees could be dramatically reduced.

Know the Tax Ramifications of Alimony

It is possible to deduct some alimony payments, but you need to get the advice of a qualified accountant first. There are seven requirements that need to be made, including:

• The payment must be made as part of a legally binding written agreement.
• That agreement cannot state that the payment is not alimony.
• Payment must be made to or on behalf of your ex-spouse unless there are payments diverted to others directed in writing by your ex.
• After you are legally separated or divorce, you and your ex-spouse cannot live in the same residence of file joint tax returns.
• Payments must be made in cash or cash equivalents.
• Alimony cannot be treated as child support.
• Your obligation to pay ceases if your ex-spouse dies.

Value the Assets Before You Agree to Take Them

If you’re getting the house, does it have a 20-year-old furnace and a roof that’s about to cave in? A thorough inspection by a licensed inspector could help.  If you’re getting the family car, is it past warranty with a funny sound coming from under the hood? If your spouse runs a lucrative business that you’ve worked for or invested in, how do you know you’re getting the right share?

Hiring a valuation expert may be necessary.  Divorcing spouses need to make sure they have enough money to finance repairs and replacement of assets that they’ll be paying for as a single person.

Think of the Kids

In many states, college-age children have the right to demand financial support or college funding at the state level so their education isn’t interrupted. While both parents should advocate in their kids’ best interest, this isn’t always the case. Be aware of your state’s divorce laws with respect to secondary child support.

File Taxes Wisely

There are always special situations in a divorce that will determine whether a couple will need to file jointly or separately during the last year that the marriage exists. It’s best for both sides to get some assistance filing their taxes during their divorce year and the year afterward.

Get Help Documenting Child Support

Child support guidelines vary from state to state. If your state has a special program that allows a spouse to pay into a special account so child support is recorded every month, consider it. It provides a paper trail and enforcement system for assuring that kids get the money they need.

Federal law requires all child support payments be made by wage assignment and health insurance by Health Insurance Orders. A majority of child support orders go unpaid. Make sure you know the laws to force compliance.

After the Divorce

Watch the spending: Budgeting early in the process may cut down on the risk of overspending, which is a temptation after a painful event.  Both necessary and unnecessary spending after a divorce is a key reason the newly single tip into bankruptcy. Make sure it doesn’t happen to you.

This post about divorce and your money is produced in association with the Financial Planning Association (FPA), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning.

The rule of 72 is a formula that can help you approximate how your investments will grow in a retirement or other investment account.

The rule has its history in the 15th century and reached common knowledge when Albert Einstein explained his thoughts on the power of compounding interest. Basically, the rule calculates how long it takes to double your money at any given rate of return.

For example, if you contribute a deposit into an investment account, and you anticipate a rate of return of 8%, simply divide 72 by the rate of return and you will have the number of years it will take to double your money. This rule assumes that interest is compounded annually.

72 ÷ 8 = 9

You can also use the rule of 72 to also determine the rate of return needed to double your money over a specific period of time. For example, if you have $10,000 that you want to double for college tuition in 10 years, dividing 72 by 10 will give you the rate of return you’ll need annually compounded to reach that $20,000 goal.

72 ÷ 10 = 7.2%

Now go out and compound some interest!