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July 30, 2007

Choosing a Funeral Home

Choosing a funeral provider can be a stressful experience for those with little experience and who may be emotionally distraught over the sudden death of a loved one. It is not required by law to use a funeral home, but the many legal requirements and details may make using the professional services of a funeral home more convenient for the family.

Families often choose a funeral home because they have used its services in the past, it is close to home, or has been recommended by a friend. Limiting your search to just one funeral home may also limit your choice of goods and services and end up costing you more than necessary.

A basic funeral costs about $6,000, and may be much higher depending on the extras you choose. Initial comparison shopping may be done over the phone, saving time and stress. Funeral homes are required to give you price information over the phone, and some will also send you an itemized price list through the mail at your request.

When comparison shopping in person, take a trusted friend with you to help ask questions and aid in your decision-making. It’s easy to be talked into adding extravagances or choosing the most expensive items when you are under duress.

Purchasing a funeral package will often cost less than choosing individual items and services. Compare the total cost of the items and services all together, as well as individual prices. The funeral home is still required by law to give you an itemized price list, even if you decide you may want a package.

Preplanning your own funeral can help save money and reduce the amount of stress on the family at the time of death. Making arrangements in advance relieves your family of that stress when the time comes. Sit down with your family to discuss the type of funeral you want, or let them know what arrangements you have made. Don’t put your preplanned arrangements in your will, which isn’t usually read until after the burial.

Some funeral homes will encourage you to prepay for your funeral. This may give you peace of mind, but consider that prices may go up or down, or the funeral home you have chosen may go out of business. If you do prepay for your funeral, read the contract carefully and know what state laws may protect you. It may be wiser to put the money into a special bank account and to notify your executor what the money is to be used for.

July 27, 2007

The Fine Art of Thrifting

An activity does not become an integral part of our culture until it has earned its own verb. Googling, texting, web surfing. And now you can add thrifting. According to Wikipedia, thrifting refers to the act of shopping at a thrift store, flea market, garage sale, or charity shop, usually with the intent of finding interesting items at a cheap price.

And it’s big business – according to the National Association of Resale and Thrift Shops, their industry is growing at an impressive 5% a year. In 2005 Goodwill Industries alone generated more than $1.6 billion in sales from their retail stores, a figure all the more impressive when one considers the overwhelming majority of their items cost less then $10.

There are many factors driving this success, some altruistic and some gleefully selfish. On the one hand many people like the idea of stepping off the conveyer belt of consumerism and reusing what already exists. Most resale stores are locally owned and operated, and the thrift store chains are operated by charities which invest their profits back into the community, usually targeting the less fortunate. Environmentally, reusing means less landfill space used for disposing of still useful items and less resources used and waste generated in creating new items.

But on the other hand, thrifting just plain rocks! There’s a unique pleasure to be found in spending an afternoon with a friend diving into a cultural treasure trove of nostalgia, kitsch, and other people’s regrets. Added bonus, there’s gold in them there hills of used clothing and forlorn dishware – retro fashions, like-new designer wear, an immaculate dinner setting for four, maybe even a beer mug in the shape of a Viking helmet. It’s more than just goofy fun and charity – it’s a way to look and live for less.

But you need a strategy! Here are battle-tested tips to make your next thrifting adventure entertaining and successful:

* Size matters. You find a possibly interesting piece of clothing on the rack – could be horrible and ugly, could be unique and gorgeous. You hold it up, you ask your friend, you look at it from this angle and that. Finally, you decide it’s worthy… and then you notice it’s five sizes too small. Lesson learned – always check the size first, then decide if you like it. That said, don’t be too exacting –yesterday’s size 8 might be today’s size 5, so give it a shot. But obviously if it’s a 12 and you’re a 4, don’t waste your time. And wearing a tight t-shirt or tank top lets you try things on over it without a trip to the dressing room.

* Size matters, part two. Been wanting new curtains for that window? Need to fill that corner with the perfect repository for your adult beverages? Always be prepared – keep a list of your decorating needs along with their measurements. Keep a tape measure in the car and you’re all set to stop in that little shop on the corner once a week till you find the perfect piece, and when you find it you’ll know if it’s the right size. Added bonus, if you’re in a shop with no dressing rooms you can check that waist size before buying.

* It’s the journey, not the destination. Bring a friend, and spend as much time enjoying the no’s as you do hunting for the yes’s. Nothing sparks old memories like that New Kids on the Block poster or those acid wash jeans. Even more fun, discovering the fashion atrocities so heinous that your old rhinestone-encrusted kulaks look dashing by contrast. Word of caution, try not to giggle to loudly at small resale shops – usually the owner who personally selected that piece is sitting four feet away, and may not take kindly to having their judgement questioned. Or merciless ridiculed.

* Gender is SO last millennium. Ladies, some of your best finds will be in the men’s section – jeans, western shirts, thick leather belts. For cute t-shirts and fashionably-a-little-too-small looks, hit the children’s racks.

* Let your inner-Santa loose. Gifts small and large abound – it could be that mug with a picture of a cat dressed like Marilyn Monroe (don’t we all know at least one person that would be perfect for) or those killer boots that are too small for you but perfect for your sister (curse her evilly tiny feet!) Not sure if they’ll like it? The answer is just a cellphone pic away.

* Let your dining room play dress up. One of the advantages of low prices and ever changing supplies is that you don’t have to be married to anything. When you spend $2,000 retail to decorate a room, you tend to stick with it a long while. But when you can redo it for $100, let whimsy be your guide. Feel like a luau room for the summer? Let the bamboo fly.

* Your time or your money. Thrift stores will almost always be less expensive than boutique resale shops, but you have to sort through a lot more Billy Baldwins to find an Alec Baldwin (that’s an acceptable metaphor, yes?) whereas at the resale shop, in theory, the sorting has already been done and you get to choose from the cream of the crop. That said, remember that haggling is usually allowed and expected.

Now you’re prepared – just remember that the right attitude is 90% of the battle. Sometimes it takes a few trips to get those amazing finds, so keep your expectations low and your sense of adventure high. And the next time someone at a party brags about their $450 dress you might just be able to answer “Really? I got mine for $8. But I would have gone to $15 if I had to.”

July 25, 2007

When a Sign on the Lawn and the Smell of Baking Bread Aren’t Enough

When a Sign on the Lawn and the Smell of Baking Bread Aren’t Enough: Targeting a Specific Buyer and Attracting Visitors to Your Open House

In order to sell your house, you’re going to have to get people through the door. This sounds like such a simple concept, yet causes so much grief for so many homeowners – and with good reason; with active and competitive real estate markets throughout North America, it’s not enough anymore to simply list your open house in the paper and hope for the best. You need to employ creative marketing strategies that offer something different – something worth a Sunday afternoon of a busy prospective home buyer’s time. Yes, and here comes that cliché – you need to ‘think outside the box’.

In this way, home sellers can learn a lot from marketing professionals. Big marketing and advertising firms create extensive reports on the demographics of their buying audience. This is a good business practice because it can help focus a marketing effort to where sales are actually likely to be made. As a home owner preparing for an open house, you’d be wise to use a similar strategy; think about the type of person that is most likely to buy your house. Is he/she married with kids or single and a first-time buyer? Is he/she likely to be a gardener or appreciate how close you are to public transport? Once you’ve given this some thought, categorize each type of person and commit your profiles to paper. If you’re having trouble with this exercise, contact your real estate agent or speak to new neighbors in your area to get their perspectives.

Now that you have a clearer idea of what type of buyer you’re aiming to attract, you can start the creative process. Think of activities that will show off aspects of your house that will be attractive to the types of people that you identified and categorized. Are you appealing to parents with young children? Organize a neighborhood tour. Call in those favors and mobilize friends and family who are familiar with your neighborhood to offer to walk around the block with prospective buyers, pointing out parks, schools and community centers. Just make sure that your tour is short and to the point, and always leads back to your house! Give the kids a snack at the end and have coloring books on hand and a designated area where children will be supervised for the fifteen minutes or so it will take for your prospective buyer to tour your house before leaving. Is your buyer likely to be chic, urban and modern? Print up minimalist and professional-looking invitations on card stock and give these to friends, co-workers and local shopkeepers to distribute to “select” individuals only – increase the exclusivity by requiring your potential buyers to present their invitation at the door in order to be admitted. The latter is a great trick to make people feel special, and make your open house an event, as opposed to just a product showing. No matter who your prospective buyer is, there is always a way of capturing his/her attention. There are countless possibilities – just make sure you directly match up your potential buyer’s interests with what you’re going to offer at your open house. Think everything through carefully, and plan well in advance.

On that note, a word of warning; if you are going to do something different for your open house – tailored to a specific type of buyer or not – you need to make sure you deliver what your promise. Don’t hold a cocktail party if you’re not going to hire someone to act as a bartender, for example. Don’t skimp on the details, and at the same time don’t take on more than you can handle. Remember that the end goal is to sell your house, and your open house is a tool to help you get the best offer you can. Plan well, think creatively, and try to enjoy the process.

July 23, 2007

Tips for Opening a Checking Account After Being Reported to Chexsystems

Just about everyone can appreciate the convenience of having a checking account. Checking accounts allow you to easily pay your bills, whether on the phone, on the web, by mail or in person. You can also set up automatic withdrawals with a checking account, to avoid late payment penalties and eliminate the need to remember when certain bills are due each month. The list of the advantages goes on and on, depending on how you choose to use your account and what goals you have in mind.

What most people fail to realize, though, is that having a bank account is a privilege, and if for some reason you don’t responsibly handle your account, that privilege will be revoked.

Not only will the privilege be revoked from that particular bank or credit union, but your name will be reported to Chexsystems, a special consumer reporting agency that protects financial institutions from potential fraud and other losses. Once reported to Chexsystems, where your name will remain for the next five years, most people find it nearly impossible to open a checking—or even a savings account—elsewhere, because more than 80% of banks use Chexsystems to verify new accounts.

With a little bit of patience, research and time, you no longer have to inconvenience yourself by paying your bills each month with cash or by purchasing costly money orders. By following the instructions below, you are sure to again enjoy the privilege of having a checking account at a reputable bank.

Tip # 1 - Pay off what you owe the bank in question, keep proof and take it to the new institution of your choice. If you know that the bank you desire to open an account at uses Chexsystems to verify new accounts (signs are usually posted inside the bank) don’t go to a regular bank employee; request the bank manager, instead. Most bank managers will approve a new account if you show them proof that the financial institution that appears on Chexsystms has been paid off. Bank managers are people, too, and most know that not all people in Chexsystems are criminals, and that most are decent individuals who simply encountered an episode of bad luck.

Tip # 2 - Find a bank that doesn’t use Chexsystems. This may prove to be a real task, although not impossible. There are more banks than you think that utilize a similar consumer reporting agency, Telecheck, instead. Other banks and credit unions use neither, and as long as you don’t owe that particular institution money, you can open an account. Some banks that don’t use Chexsystems are: TCF, Fort Sill National Bank, and The Heritage Bank. TCF, with locations in the Midwest, uses neither Chexsystems or Telecheck, and as long as you don’t owe them money, you can open any type of account that you desire. Fort Sill National Bank is a military bank, but civilians are allowed to open accounts as well, with no type of credit verification. This can be done online or in person, and they have branches in Texas, Oklahoma, Tennessee and a few other states. The Heritage Bank is based in Georgia and will open an account for anyone, with no credit check.

Tip # 3 - A few banks even offer what’s referred to as a second-chance checking account. This type of checking account allows you the convenience of a checking account, but with restricted privileges. Other banks will grant you a checking account only after attending a special class about responsible account management. Each financial institution that offers second chance checking accounts have their own rules and stipulations, so you need to check with the bank of your choice for further information before signing up. Some banks that offer some type of second chance checking accounts are: Key Bank, Chase Bank, and Beacon Federal, in Tennessee.

When you open your new checking account, you may love the bank so much that you will still continue to bank with them even after your name has been removed from Chexsystems. If you don’t like the bank that you’ve chosen, you can either search for another “lenient” institution or wait until the five years have passed and have your name cleared from Chexsystems. In the meantime, you can practice proving to yourself and your bank that you are able to responsibly manage your checking account on a regular basis.

July 20, 2007

Are You Throwing Away Money by Renting? Maybe Not

It’s something we’ve all been told for so long we don’t even question it: if you’re paying a mortgage, you’re making an investment; if you’re paying rent, you’re making a mistake. But is it true? Are you making your landlord rich at the expense of your own wealth? The answer’s not as simple as you might think – for a lot of people, and in a lot of situations, paying rent is the smartest thing you can do.

The following suggestions are for people who are thinking about buying a house to live in. If you’re hoping to flip houses, or to buy houses to turn into rental units, you have an entirely different set of pros and cons to weigh.

Feeling the need to roam? If you buy a house and try to sell after only five years, you’re in for a nasty surprise. Those five years of mortgage payments that you thought would build equity? Nope. More than 80% of that money went to interest payments. And the small amount that didn’t will be eaten up by the cost of selling your house. In addition, once you factor in unforeseen repairs, taxes, and regular maintenance you’ve paid a lot more for that roof over your head than a renter would have.

Think the boss is going to figure out you’ve been stealing pens? If you’re a little unsure about your work stability the last thing you need is a mortgage hovering over you. Rent provides flexibility in uncertain times. Not only are rent payments lower than mortgage payments but if things get tight you can opt for a less expensive apartment. If you can’t make those mortgage payments and are forced to sell you’re at the mercy of the market, and that might lead to a huge loss.

What goes up… In some small, exclusive markets – like, say, most of the United States – real estate prices have gone through the roof (pun intended.) Not only does this put mortgage payments out of reach for many people, but it also means that people who can buy are taking larger and larger risks. A house that has gone up 10% a year can’t keep rising indefinitely – it’s basic math that if prices rise faster than incomes then at some point there has to be a correction. In fact in many regions prices are starting to slump. A lot of homeowners who planned on selling their new houses for a quick profit are now finding themselves stuck with mortgages they can’t pay, hence the skyrocketing number of foreclosures in the past year.

What didn’t go up. While housing prices soared, rents merely chugged along. Between 2004 and 2006 home prices nationwide rose 16%, while rents inched up just 1.2%. If you can satisfy your needs by renting a house at $1000 a month instead of paying a $2500 a month house payment then that’s $1500 a month you can invest in the stock market or elsewhere. Add the $10,000 or $20,000 you would have put up for a down payment and that investment turns into a healthy nest egg. After a few years if you decide it’s time to buy a house then you have enough saved for a healthy down payment.

The unintentional indoor waterfall. Pipes burst. Refrigerators stop working. Termites decide they love your taste in support columns. If you think you have just enough to get a house, you don’t have enough – things will go wrong. The rule of thumb is that the average homeowner should set aside 5% of the purchase price to cover maintenance and repairs. And don’t forget utilities; 4 bedrooms, cathedral ceilings and picture windows all seem wonderful until you get that first heating bill.

If you have to ask, you can’t afford it. Even with the massive defaults of sub prime lenders (companies providing home loans to risky, low income borrowers) there are still many companies offering loans to people who are not financially qualified. Your monthly house payment - including taxes and insurance - should probably equal no more than ~33% of your monthly income. Your total bills should not exceed ~38% of your total pay or you are risking payment problems later and will likely not be able to save money. Even if a lender says you have enough income, decide for yourself.

So just remember, even if you dream of home ownership you need to make sure the time is right for you. For some people waiting even a few years can mean the ability to buy with more stability in their lives, a larger down payment, and lower prices in a buyers market.

July 18, 2007

Money Saving Tips: Make More of Your Herb Garden

Herbs are incredibly versatile. They can be used for cooking, cleaning, beauty treatments and to treat a raft of minor ailments. In that guise, they have great money saving potential.

How much do you spend each month on kitchen and bathroom cleaners, disinfectants, fabric conditioner, window and oven cleaners, room spray, drawer liners, moth balls, facial cleansers, hair conditioners, mouthwash, cough mixture, and indigestion remedies?

Most of these can be successfully replaced by herbs from your garden and items you already have in your kitchen cupboard, such as vinegar, baking powder, milk, honey, and mayonnaise. So below are some tips on how you can save quite a lot of money (and help the environment) by replacing bottles and jars full of chemicals with more natural products.

1. Bin the oven cleaner. While the oven is still a little warm, wipe all surfaces with a cloth dipped in vinegar. Cover tough, burnt-on grease with a teaspoon of baking soda. Close the door and leave for half an hour, then wipe clean.
2. Rosemary has powerful antibacterial properties, and can be made into a very effective disinfectant. Mix one handful of chopped rosemary into three litres of water. Bring to the boil and simmer for 20 minutes. Leave to cool, then use to clean worktops, cupboards, and drawers. Add a cupful of rosemary infusion to a bucket of water and use as a floor cleaner.
3. Half-fill a clean jar with baking soda, then add three tablespoons of chopped rosemary, sage and thyme. If no herbs are available, add six drops of each of essential oil of rosemary, sage, and thyme. Shake jar well to mix. Use dry as an effective kitchen and bathroom cleaner. Mix with a little lemon juice to tackle tough lime scale.
4. Make a disinfectant scrub by mixing lemon juice, salt and chopped rosemary into a paste. Good for cleaning chopping boards, sinks, and cooking pots.

1. Save on fabric conditioners. Infusions of fragrant herbs like lavender, lemon balm and bergamot can be added to the last rinse cycle of your washing machine. They will scent your clothes beautifully.
2. Stop buying tumble dryer sheets. Instead, sprinkle a handkerchief with a few drops of herbal essential oil, lavender is nice here, and place into the dryer with your washing.
3. Fill little fabric sachets with dried herbs such as lavender, thyme, lemon balm, and bergamot and use to scent linen drawers and wardrobes. Adding dried rosemary to the mix will help deter moths.
4. Lose that room spray. To freshen a room, burn essential oils of rosemary and lavender in an oil burner. Or make potpourri from fresh and dried herbs.

1. Apply an herbal hair rinse after washing to condition your hair and give great shine. Steep two teaspoons of your chosen herb in half a litre of boiling water until cool. Use parsley or sage for rinsing dry hair. Lavender or mint make a useful rinse for oily hair.
2. Blonde hair can be brightened effectively by rinsing with chamomile tea, to which a teaspoon of lemon juice has been added. For brown or grey hair, use a rinse made from chopped rosemary.
3. Peppermint tea makes a great, efficient mouthwash. You can also give your teeth a quick polish by rubbing with a mint leaf.
4. Rinse your face with chamomile tea to calm outbreaks and irritated skin.
5. Harden brittle nails by bathing them in strong fennel tea.

Family Health
1. Treat minor sunburn with compresses of cold chamomile or black tea. Apply aloe vera gel if available. Keep an aloe plant in your kitchen for minor burns – it’s worth it!
2. Chamomile, peppermint and fennel teas are excellent for dealing with stomach upsets or indigestion. Save the antacids for serious attacks.
3. Make your own cough mixture by adding chopped fresh thyme to runny honey. The kids love it and it works.

Herbs are beautiful. They’re also plentiful, if you grow them yourself, and universally useful, if you look beyond the cooking pot. Herbs have been used for more than cooking for centuries and if we can rediscover their manifold uses, we can dispense with many of the items we once thought so necessary for a clean home and healthy family.

July 16, 2007

Investor Mistakes

When making decisions about your investment portfolio, try to avoid these common investor mistakes:

Chasing performance. Investors often move out of sectors that are not performing well, investing that money in high performing investments. But the market is cyclical, and often those high performers are poised to underperform, while the sectors just sold are ready to outperform. A classic example is technology stocks in early 2000. Many investors rushed to purchase technology stocks just as they reached their peak and were headed for a long slide down. Rather than trying to guess which sector is going to outperform, broadly diversify your portfolio across a range of investment sectors.

Looking for “get-rich-quick” investments. When your expectations are too high, you have a tendency to chase after high-risk investments. Your goal should be to earn reasonable returns over the long term, investing in high-quality investments.

Avoiding the sale of an investment with a loss. When selling a stock with a loss, an investor has to admit that he/she made a mistake, something that is psychologically difficult to do. When evaluating your investments, objectively review the prospects of each one, making decisions to hold or sell on that basis rather than on whether the investment has a gain or loss.

Selecting investments that don’t add diversification benefits to your portfolio. Diversification helps reduce your portfolio’s volatility, since various investments respond differently to economic events and market factors. Yet, it’s common for investors to keep adding investments that are similar in nature. This does not add much in the way of diversification, while making the portfolio more difficult to monitor.

Not checking your portfolio’s performance periodically. While everyone likes to think their portfolio is beating the market, many investors simply don’t know for sure. So analyze your portfolio’s performance periodically. Compare your actual return to the return you targeted when setting up your investment program. If you aren’t achieving your targeted return, you risk not achieving your financial goals. Now honestly assess how well your portfolio is performing. Are major changes needed to get it back in shape?

Letting market predictions cause inaction. No one has shown a consistent ability to predict where the market is headed in the future. So don’t pay attention to either gloomy or optimistic predictions. Instead, approach investing with a formal plan so you can make informed decisions with confidence.

Expecting the market to continue in its current direction. Investors have a tendency to make investment decisions based on current trends in the market. Thus, if the stock market has been performing well for a period of time, investors tend to move more and more funds into that area. However, there is a tendency for markets, when they have an extended period of above- or below-average returns, to revert back to the average return. For instance, following an extended period of above-average returns in the 1990s, the stock market experienced a significant downturn, helping to bring the averages back in line.

Not understanding that saving and investing are two different concepts. Saving involves not spending current income, while investing requires you to take those savings and do something with them to earn a return. Saving often becomes easier when separated from the choice of where to invest. Find ways to make saving as automatic as possible, then take your time to research and select specific investments.

Considering only pretax returns. One of the most significant expenses that can erode your portfolio’s value is income taxes. Thus, don’t just consider your pretax returns, but look at after-tax returns. If too much of your portfolio is going to pay taxes, look at strategies that can help reduce those taxes.

July 13, 2007

Life After Chapter 7 Bankruptcy: Rebuilding Your Credit

Life after bankruptcy isn’t always as daunting as you may think. Many people think that they won’t be able to obtain new credit after such a financial “disaster” but this is totally untrue. Believe it or not, depending on the company, many lenders prefer that applicants have filed bankruptcy as opposed to having a credit report full of charge-offs, late payments and repossessions. Some people consider bankruptcy to be a way of “wiping the slate clean,” and in a sense, it is. Those who extend credit to people with recent bankruptcies know that not many individuals are going to pay late again, since the bankruptcy has given the person a fresh start. Also, according to many lenders, those with fresh bankruptcies should now be able to comfortably pay his or her bills with no problems, since all the debt is gone.

Surprisingly, in as little as 6 months after a bankruptcy has been discharged, or possibly even less, you can start rebuilding your credit. In order to rapidly boost your credit score to above 600, you will have to be approved for a high amount of credit. This can be a house, car, or a credit card with a high credit limit. Now you may be wondering who would possibly extend a large amount of credit to someone in your financial state, but you would be surprised how easy it can be. As long as your work history has been stable and you make enough money to afford what you are seeking to finance, you should have no trouble being approved.

A New Mortgage

In the past, a person had to have a credit score of at least 600 – 650 points in order to qualify for a mortgage. Nowadays, with more lenient approval guidelines and non-conventional loans available, individuals with lower credit scores are able to be approved for mortgages. With these much easier guidelines, individuals with credit scores as low as 500 are now able to be approved. Although these mortgages often come with a much higher interest rate, they are a great way to rebuild credit. The high interest rate shouldn’t be a deterrent because in as little a six months, you can refinance and have your interest rate lowered substantially. That of course, depends on whether or not your payments have been on-time for the past six months.

Sometimes after a bankruptcy, the credit score will fall below 500, maybe to approximately 450. Fortunately, there are still ways to get around this super low credit score and get approved for a mortgage, which will subsequently boost your score pretty quickly. There are countless programs for individuals with less than perfect and even horrible credit. More and more lenders are specializing in “creative” mortgages and can get you approved even when you think that all hope is lost. There are even some special mortgagers who don’t check credit and simply determine your eligibility by your income. The sky is the limit in this day and age, and whether or not you can be helped all depends on the loan officer that you choose to assist you.

A New Car

Being approved for a car may be easier than you think. There are numerous banks that are willing to extend credit to you in order to purchase a nice car. Keep in mind that your interest rate will be substantially higher than those with good credit, but the good thing is that you can refinance in 6 months to a year. If you’ve kept all of your payments timely, you will be able to get a much lower interest rate and significantly boost your credit score simultaneously.

It’s important to always be honest when applying for credit at a dealership. Tell them about your bankruptcy up front, and if possible, provide a copy of your credit report for the credit manager to view. This will allow him or her to make a decision without unnecessarily checking your credit report. Each time your credit report is checked, your score is lowered. The credit manager should be able to decide if he or she can finance you simply by looking at the credit report that you provide.

When looking to finance a vehicle, it is a good idea to make sure that you do your homework in advance. This means researching the dealerships in your area to find out which ones deal with sub-prime credit. This will not only save time but will also minimize the amount of times your credit is run, narrow down the number of dealerships you visit, as well as eliminate the embarrassment of possibly visiting establishments that only deal with excellent credit.

Credit Cards

Another way to recover financially after filing bankruptcy is by obtaining a couple of credit cards. Now while you can’t expect American Express to approve a credit card account for you immediately following a bankruptcy, there are banks that will. Unfortunately, the banks that are likely to approve you for a Visa or Mastercard following a bankruptcy either have extremely high interest rates or will only offer an extremely low credit limit. A low credit limit won’t help to boost your credit score much, although they do help somewhat, but most of the time they are more of a headache than they are helpful.

If you think that being approved for a credit card with a high limit is impossible, then you are wrong. Sure, you will most likely have to opt for a secured credit card, in which you open a bank account with a certain amount of cash, and whatever amount you deposit will determine your credit limit. This is a great way to get a credit score-boosting credit card. No one but you and the bank will know that the card is secured and as long they report to all three major credit reporting agencies, they’re one of the best ways to improve your credit.

Making sure that you keep at least 50% of your credit card balance available each month helps to boost your score immensely. It doesn’t look good to those considering giving you a loan to see that your credit cards are maxed-out. They like to see that you’re using your credit cards responsibility and not using them as a means to survive.

Another thing that helps to boost your credit score is to ensure that you use your credit cards each month, even if it’s only to buy gas or a pair of panty hose. You may think that it would be better to pay off your credit cards in-full and never use them, but this will do more harm than good. Your score increases when you show regular usage and proper management of your credit card accounts. Allowing the cards to just collect dust in your wallet is useless and will only have a negative impact on your rating.

One important thing to remember about life after bankruptcy is that you don’t want to start racking up late payments, charge-offs and other negative info on your credit report again. If you can’t afford a new house or car payment, even if you’ve been approved, in the end, it may end up hurting you more than it can help you. It takes up to ten years for a Chapter 7 bankruptcy to be removed from your credit report, so you don’t want to ruin your credit again. Since the new bankruptcy laws were passed, a person can only file bankrupt once every 8 years. This is why it’s detrimental to your credit future that you are as cautious as possible—you don’t want to get back into the same situation you were in prior to the bankruptcy. You’d have to wait 8 whole years to file bankrupt again, if that’s how you chose to handle things, and in the meantime, you’d have to deal with the creditors on your own.

July 11, 2007

Take Another Look at Your 401(k) Plan

Originally, 401(k) plans were viewed as a supplement to defined-benefit plans. Since it was presumed that employees would have their basic retirement income needs covered by Social Security benefits and employer-provided pension benefits, they were given significant responsibility in 401(k) plan decisions, such as deciding whether to participate, how much to contribute, which investments to select, and how to take withdrawals.

However, retirement plans have changed dramatically. As of 2004, 63% of workers with a pension plan have only a 401(k) plan, 20% have only a defined-benefit plan, and 17% have both (Source: Center for Retirement Research, March 2006). In 25 years, 401(k) plans have gone from a supplement to other pension plans to the main retirement plan for most workers. Yet, participants still make most of the choices in 401(k) plans, often making mistakes with those choices:

Not participating. Approximately 21% of workers eligible to participate in a 401(k) plan do not do so. Younger workers are more likely than older workers not to participate.

Not making adequate contributions. Only 11% of 401(k) participants contribute the legal maximum to their 401(k) plans. However, those with higher incomes are more likely to contribute the maximum. For instance, less than 1% of those with incomes between $40,000 and $60,000 contribute the maximum, while 58% of those with incomes in excess of $100,000 contribute the maximum.

Not diversifying investments. In 2004, 32% of participants had no equity in their 401(k) plans, while 21% had 80% or more in equities. Approximately 47% had a diversified portfolio.

Overinvesting in company stock. Approximately 15% of 401(k) plan assets were invested in company stock in 2004. However, most 401(k) plans do not offer company stock as an investment option. Plans with 5,000 or more participants typically offer this option, with 34% of total assets in those plans invested in company stock.

Not letting balances grow. Approximately 45% of participants changing jobs cashed out their 401(k) balance rather than rolling it over into an IRA or another employer’s 401(k) plan. Most of the participants who cashed out were younger employees with relatively small account balances, who did not realize that allowing these sums to grow could result in a significantly larger balance at retirement age.

These mistakes significantly affect the amount that workers accumulate in their 401(k) plans. For instance, a typical worker who reaches retirement age with $58,000 of annual wages and has contributed 6% to the 401(k) plan with a 3% employer match should have an accumulated balance of $380,000. However, in 2004, the median balance for workers between the ages of 55 and 64 was only $60,000 (Source: Center for Retirement Research, March 2006).

July 9, 2007

Benefits of Section 529 Plans

While section 529 plans always had significant tax benefits, there was concern because many of those benefits were scheduled to expire after 2010. However, the Pension Protection Act of 2006 made many section 529 plan provisions permanent. Thus, if you are looking for a way to fund your child’s college education, you should definitely take a look at section 529 plans. Consider these basic facts about section 529 plans:

There are two basic plan types. Savings plans and prepaid tuition plans are both forms of section 529 plans. Prepaid tuition plans allow you to pay a fixed amount now for a guarantee that your child’s tuition will be covered in the future. Many states offer these plans, and this is the only option private universities can offer. With college savings plans, you place money in a state plan to be used for the beneficiary’s higher-education expenses at any college. Your money is invested in stocks, bonds, or mutual funds offered by the plan, with no guarantee as to how much will be available when the beneficiary enters college.

The tax benefits of section 529 plans are significant. When used to pay for qualified higher-education expenses, earnings in the plan are withdrawn tax free. Distributions from plans are now permanently excluded from income.

Significant sums can be saved through section 529 plans. While you can also make fairly small contributions, most plans allow significant contributions. There are also no income limitations for contributions to these plans. From a tax standpoint, you can contribute up to $60,000 to a qualified plan ($120,000 if the gift is split with your spouse) in one year and count it as your annual $12,000 tax-free gift for five years. However, if you die within the five-year period, a pro-rata share of the $60,000 returns to your estate. Grandparents can set up accounts for grandchildren, transferring large sums from their estates while providing for their grandchildren’s education.

Section 529 plans are treated favorably for financial aid purposes. Section 529 plans are no longer considered the child’s asset. If the plan is set up by the parent, up to 5.6% of the value will be counted toward the expected family contribution. Withdrawals from the plans are no longer considered income for financial aid purposes. This includes prepaid tuition plans, which until July 2006 reduced financial aid on a dollar-for-dollar basis.

Funds aren’t lost if the beneficiary does not go to college. A significant advantage of section 529 plans is that you remain the account owner. Thus, you can change the beneficiary or even take the money back, if permitted by the plan. If you take the money back, you will owe ordinary income taxes on earnings and the 10% federal tax penalty. The money can be withdrawn without penalty if the beneficiary dies or becomes disabled.

Many plans are now available. Many states offer state income tax benefits to residents who contribute to their plans, but you can invest in any state’s plan. Each plan has different investment options and fees, so review several carefully before making a choice.

July 5, 2007

Rollovers for Nonspouse Beneficiaries

The Pension Protection Act of 2006 contained a provision allowing nonspouse beneficiaries to roll over funds from an employer pension plan to an inherited individual retirement account (IRA), starting in 2007. This was viewed as a significant development for nonspouse beneficiaries, since they would be able to extend distributions from employer pension plans over a longer period. However, recent guidance by the Internal Revenue Service (IRS) indicates that this provision may be difficult for nonspouse beneficiaries to implement.

Prior Law

Prior to 2007, spouses were the only beneficiaries who could make a nontaxable rollover of a deceased’s interest in an employer retirement plan to an IRA. Nonspouse beneficiaries had to take taxable distributions from the plan according to the plan’s terms, which typically required the entire balance to be paid out by the end of the fifth year following the decedent’s death. No payouts were typically required in years one through four, but the entire balance had to be distributed by the end of year five. Income taxes had to be paid on the distributions, and there was no way for nonspouse beneficiaries to extend payouts beyond the plan’s terms. Some plans allowed a life expectancy payout for nonspouse beneficiaries, but this option was not very common.

New Law

Starting in 2007, nonspouse beneficiaries can make a direct rollover (a trustee-to-trustee transfer) of inherited employer plan funds to an inherited IRA. The IRS recently provided guidance on how to apply this provision. Funds can be rolled over from 401(k), 403(b), and section 457 plans. When funds are rolled over, they must go to a properly titled inherited IRA that retains the decedent’s name in the title. However, a plan does not have to give nonspouse beneficiaries the ability to roll funds over to an inherited IRA. It is up to the plan.

Funds must be made via a trustee-to-trustee transfer. If the funds are issued to the beneficiary via check, it is considered a distribution and those funds cannot be rolled over to an IRA. If a plan won’t make a trustee-to-trustee transfer, a check can be made out to the inherited IRA and still meet the requirements.

Once funds are rolled over, the distribution rules that applied when the funds were in the employer’s plan continue to apply, unless a special rule is followed. To escape the plan’s rules, the beneficiary must take the first required distribution using the beneficiary’s life expectancy by the end of the year following the decedent’s death. If this is not done, the beneficiary must take distributions based on the plan’s rules, which generally require the entire balance to be withdrawn in five years.

July 3, 2007

Planning for 2010 Roth Conversions

Starting in 2010, all taxpayers, regardless of the amount of their adjusted gross income (AGI), can convert a traditional individual retirement account (IRA) to a Roth IRA. Before 2010, your AGI cannot exceed $100,000 to convert, not including any income resulting from the conversion. Amounts converted must be included in income if taxable when withdrawn (i.e., contributions and earnings in deductible IRAs and earnings in nondeductible IRAs), but are exempt from the 10% early withdrawal penalty.

If you make a conversion in 2010, the tax can be paid in two installments in 2011 and 2012, with no tax due in 2010. However, if you prefer, you can elect to pay the tax in 2010, which may make sense if the current lower tax rates are not extended beyond 2010 or you expect much higher income in 2011 and 2012. Taxes on conversions made after 2010 must be paid in the year of conversion.

Even though this tax rule does not go into effect until 2010, you should start planning now. For instance, you should consider making the maximum IRA contributions to a nondeductible IRA in 2007, 2008, and 2009, and then convert the nondeductible IRA to a Roth IRA in 2010. The maximum IRA contribution is $4,000 in 2007 and $5,000 after that, plus an additional $1,000 catch-up contribution for taxpayers age 50 and older. After 2008, the contribution amount will be adjusted for inflation in $500 increments.

By using this strategy, you would only have to pay income taxes on earnings within the IRA because the contributions are nondeductible. However, be aware that if you also have other traditional deductible IRA funds, even in another IRA account, you cannot just convert the nondeductible IRA. You have to assume that a pro-rata portion of both the deductible and nondeductible IRA funds are being converted.

Find out whether your 401(k) plan accepts rollovers from an IRA. If it does, you could roll over your deductible IRA and earnings in your nondeductible IRA to your 401(k) plan. You would then just have nondeductible contributions remaining in your IRA, which could be rolled over to a Roth IRA without paying any income taxes. Check with your plan to see if you can later roll the funds back to an IRA.

This new conversion provision will effectively remove the income limitations for contributions to a Roth IRA after 2010. In 2007, Roth IRA contributions can be made by single taxpayers with AGI less than $99,000 (contributions are phased out with AGI between $99,000 and $114,000) and by married couples filing jointly with AGI less than $156,000 (contributions are phased out with AGI between $156,000 and $166,000). It doesn’t matter whether you participate in a company-sponsored pension plan. Starting in 2010, individuals with incomes over the limits can make contributions to a nondeductible traditional IRA and then immediately convert the balance to a Roth IRA.

There are a variety of factors that should be considered before deciding whether to convert a traditional IRA to a Roth IRA. Factors that favor converting to a Roth IRA include:

• You can pay the income taxes due from the conversion with funds outside the IRA. By doing so, you are in essence increasing your IRA’s value by the tax amount.

• You expect your marginal tax rate at withdrawal to be equal to or greater than your current marginal tax rate. When your rates are equal at both times, the financial results from either IRA will be similar. Increasing income tax brackets generally make it advantageous to convert to a Roth IRA.

• You won’t make withdrawals from your Roth IRA for many years. Estimates indicate that you generally need five to 10 years of tax-free compounding to compensate for the current payment of taxes.

• You don’t expect to take withdrawals from your IRA. Since you aren’t required to withdraw funds from a Roth IRA, even after age 70 1/2, your IRA balance can continue to grow on a tax-free basis.

• You want to leave your IRA balance to heirs. With a Roth IRA, your heirs receive the proceeds free of federal income taxes. Also, if you don’t withdraw funds from the Roth IRA after age 70 1/2, you could potentially leave your heirs with a much larger balance than from a traditional IRA.

Once the balance is converted, a qualified distribution cannot be made until after the five-tax-year holding period. Distributions before then are subject to the 10% early withdrawal penalty, unless one of the exceptions applies.

July 1, 2007

Fund Eyes Those That Spend To Grow

Investor's Business Daily recently did an interview with Ron Baron, founder of the Barons Fund Family. Ron has long been a favorite money manager of ManagingMoney.com, as he puts an emphasis on "buying the business", not "trading the market". In particular, Ron is not too conservative like many value managers and is not afraid to buy growth. He is kind of like Warren Buffett on steroids. Also, Ron puts major emphasis on management. For example, he started investing in Steve Wynn businesses many years ago and has stuck with him on his new projects like Wynn Resorts (WYNN), generating nice profits for his fund investors.


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