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August 31, 2007

Great Kitchens and Bathrooms Sell Homes

A tried and true concept in the realms of real estate and home staging is “great kitchens and bathrooms sell homes.” If you watch home-staging shows, you will hear this phrase often.

It makes sense, because these two areas receive a lot of use in any home, and they are the areas buyers inspect the most closely. People do not want to think about other people’s germs living in their new home, so kitchens and baths have to appear immaculate.

Aside from feeling clean, kitchens and baths must also be updated. Buyers will quickly knock off thousands of dollars from their offers if they think they are going to have to renovate a kitchen or a bathroom.

These spaces are the most difficult, time consuming, and expensive to revamp, so many homeowners think they will leave such jobs to the buyer. It may work, if you’re willing to accept a lower offer or leave your home on the market longer. However, if you want to sell soon and at the best price, it pays to freshen up the kitchen and the bathrooms.

There is some good news. You may not have to embark on a total renovation of either one in order to make them look and feel clean, modern, and move-in ready. A few projects may make all the difference. A good example is replacing existing grout and caulk that have seen better days. Remove as much of the old materials as possible and clean the area. When dry, add new grout to tiled surfaces and replace caulk around fixtures.

Also, look into re-glazing or resurfacing fixtures. You may be able to avoid replacing a sink, tub, shower stall, or even ceramic tile if you have any of these surfaces professionally refinished. Some people even try do-it-yourself resurfacing kits but even having it done professionally will guarantee a huge savings over replacement costs. It’s also a great way to change fixtures in dated colors to newer, neutral shades.

Cabinetry too can be resurfaced or re-faced for a fresh, updated appearance. Also, consider adding trim or molding to give a kitchen or bath a richer, more finished look. A fresh coat of paint in a warm color will also make each of these spaces feel cleaner and more put together.

You may not have to replace flooring either, if you strip it and clean it thoroughly. Pay special attention to corners and crevices. You may even be able to repair small damaged areas if you do so before they grow worse. There are kits available for repairing vinyl flooring and a small blemish on a wood floor can be refinished. Tile is a bit trickier, and keep in mind that matching replacement pieces to existing tile may be difficult. You may want to consult a professional.

Finally, stage your kitchen and each bathroom to make them feel warm and welcoming. Begin by packing away any clutter. Remove old dishcloths and bath towels and replace them with bright, clean, new ones. Replace window treatments and other fabrics if they could use some updating. Add some candles and a plant or two. In the kitchen a bowl of fresh fruit makes a great accent while in the bathroom flowers or pretty soaps will add to that “at home” feeling.

August 29, 2007

Are Down Payments Still Necessary?

For many years, down payments (or lack thereof) proved to be one of the biggest obstacles standing in the way of many people’s dream of owning their own home. The standard down payment (20% of the purchase price) was often way more than many people could afford, and by the time they saved up the money, prices or interest rates would go up, making their funds obsolete. Fortunately, there are now more options and programs for people who want to buy a home but are not able to put a lot of money down. The federal government, community-based organizations and even many lenders have put together hundreds of programs geared towards helping Americans buy homes with little or no money down.

The most common programs available for people looking to purchase a home with no money down are the FHA and VA mortgage loan programs that are administered by the Federal Housing Administration and the Department of Veterans Affairs respectively. The FHA program works by insuring home loans that are made by private lenders. This insurance allows banks and mortgage companies to lend to people who may be been considered “high-risk” in the past due to their debt to income ratio. The easiest way to obtain an FHA loan is to contact lenders directly and ask if they participate in the FHA program. Most banks issuing FHA loans only require that you put at least 3 percent down, and you can use gifts from family and friends to cover that amount. VA loan programs are available for military veterans and their surviving spouses and do not require a down payment.

In addition to the programs that are offered by the federal government, there are a wide variety of assistance programs that are available in the private sector. There are a number of banks, real estate agencies and non-profit organizations that can help you buy a home even if you do not have a lot of money to put down. Many states also have their own affordable housing programs designed to assist people in purchasing a home.

Even though you can buy a home with no money down, it is still a good idea to try to put as much money down as possible. This not only lowers your monthly payment, but it also gives you instant equity in your home. Keep in mind that you will also have to pay private mortgage insurance until you have 20 percent equity in your home, so you should try to put down as much as you can comfortably afford.

August 27, 2007

A Guide to Understanding APRs

Before the Federal Truth in Lending Act was passed, it was quite difficult for consumers to understand all of their options when applying for a loan. While banks were always required to provide information regarding their fixed interest rates, they were not always as forthcoming when it came to disclosing other fees or charges that were often associated with the loan. After the Federal Truth in Lending Act was passed, banks and other lending institutions were required to disclose all of the fees and charges associated with a loan. To assist in complying with this law, the APR system was developed. The APR, or Annual Percentage Rate, helps to accurately measure all of the costs that are associated with a loan.

Your APR is calculated using a standard formula, which is then expressed as a percentage of an annual rate. All fees, interest and other charges are factored into the equation. When all these fees are added together, the sum is referred to as a finance charge. The actuarial method is the most popular and accurate method for calculating your APR. The actuarial method is calculated by computing on the outstanding balance of the actual loan amount.
APR disclosure is important because it gives the consumer a more accurate picture of the actual cost of the credit that is being extended to him or her. When calculating the Annual Percentage Rate, any incidental charges are subtracted from the original loan amount. The remaining amount is then compared to any monthly payments that you may have.

For example, you may have received two mortgage loan offers from two different lenders. Each lender approves you for $100,000. The first lender is offering a fixed interest rate of 5% while the second lender is offering 6%. While the first lender is offering a lower interest rate, that does not necessarily mean that it is the better deal. If the first lender has excessive origination fees, processing fees and mortgage insurance that they are requiring you to take out, their mortgage will actually end up costing you thousands of dollars more. This is taken into consideration with determining the APR. While the first lender has a lower interest rate, it will have a higher APR than the second lender.

When you are comparing the APRs of different lenders, there are some important things that you may want to consider. The larger the dollar amount of the loan, the smaller the impact extra charges will have on APR. In addition, the APR may appear to be lower if the term of the loan is longer. In the case of mortgage loans, it is also important to keep in mind that non-bank related charges like escrow and title fees are not used to calculate the APR, so it is important that you have money set aside for these expenses.

The APR gives you a snapshot ratio of all of the interest and finance charges to the actual amount of credit you receive. Knowing how to properly analyze and compare APRs gives the consumer a vital piece of information and protects them from predatory lenders, who are notorious for charging excessive fees.

August 24, 2007

How to Maximize your Advertising Dollars in Today’s Real Estate Market

In today’s real estate market, getting your house at the forefront of the sea of listings can be a daunting task. Where do I list my house? Who do I trust to list my house? How much will it cost me to advertise my house? All valid questions. This article will help to shed some light on this task, and give some advice as to where to go for answers.

With an excess of houses for sale in today’s real estate market, advertising is key. Selling the house by using a realtor is what most people think of when they first think of selling. There are millions of realtors that are looking for work right now. By looking for work, I mean that they are looking to help buyers and sellers achieve their goals. Choosing the right one for your situation is crucial. There are many things to consider:

•Locale- how far from your home is your realtor located? The farther away they are, the longer it will take from them to handle your needs quickly.

•Experience-how long have they been a realtor? If they have not been a realtor very long, you want to keep looking for one who has more experience.

•Commission-what percentage do the charge? If they have a set percentage that they charge, and won’t lower it for you, keep looking. There are several that will just to get your business.

•Advertising-how will they market your home? Do they use just MLS, or do they use every medium available, like TV, newspapers, internet, etc.

These are the most important questions to ask your realtor when deciding to sign a contract with them. Probably the 2 most important items are the commission they charge, and is that negotiable. And how will they advertise your property.

Commissions can be adjusted if the realtor is motivated to get the sale. If they aren’t willing to budge, you may consider finding one that does. Remember, the level of motivation exhibited by your realtor will directly affect the amount of time and pricing it takes to sell your home.

Most local areas have publications that are printed monthly. These are great tools for exposure. They are offered for free to anyone that wants one. These are usually displayed in the front end of stores and in boxes outside other establishments as well. They are well placed for maximum exposure. The only problem is-they are published monthly. There are deadlines to get a property in them for the next month’s printing. If you list your house close to the deadline, you may not get it in these magazines for the next 30+ days. If you choose a realtor that is motivated, they can get it in the book on time. Pick up one of the magazines, and check them out for yourself. You can contact the publisher or your realtor to find out the deadline for publication. This may be a good time to get your house on the market.

The internet is a good way to get instant advertising. The definition of instant is that it is done within a week if listed on the MLS. There are free classified ad websites that allow you to post an ad for free. They send prospective clients to you via email. Your realtor can take high-quality pictures of your home, and post them as well. Some sites also have photo tours. This is a great tool to showcase the best that your home has to offer. Local newspapers are also a great source for advertising. They have websites that have the same ads that are in print. Maybe a little easier than reading the newspaper and you get the most bang for your buck, because the ad is in print and online at the same time. If you are using a realtor, ask them if they use this form of advertising. If they are good, they most likely do it all the time.

The content of the advertising is where you get to show off your home. New bathroom, renovated kitchen, new flooring, roof, a/c, etc? These are all great selling points, especially today when people are trying to maximize their buying dollar. It is an investment. It should be marketed as one. Here a few things to remember when advertising your home for sale:

•Accent the good things-new roof, newer roof, new a/c, newer a/c-these terms mean that the roof or a/c are within 3-5 years old-rather vague-if the roof is 2 years old, then “the roof is 2 years new”. The word new catches their attention. That’s money they don’t have to spend.

•Remodeled/renovated kitchen or bathroom(s). If you just painted the bathroom, it isn’t worth mentioning just that. If you changed the toilet and sink, and painted the bathroom, it has been remodeled. If you changed everything in the bathroom, from floor to ceiling, it has been renovated. These are terms that need to be mentioned. The same for the kitchen, the most important room in a house for selling purposes. If you have new appliances, and they are staying with the house, then mention that as well. If they aren’t new, then just mention all appliances stay.

•Exterior features. If you have a beautifully landscaped yard, it is a huge selling point. Curb appeal is everything-it’s the first impression. Don’t spend a lot of time trying to describe the exterior. Pictures are worth a thousand words. A well taken picture of the exterior of your home will do the job. If you have a pad to park a boat or an RV, this is good to mention. The property size is also important. People will accept a higher asking price if they know they are getting more property for the price.

•Recreational items. If you have a pool, it is worth mentioning any major repairs or replacements done within the last 2 years-briefly. The size of the pool-length and width-would be good also. If you have a tennis court, horse stables, etc, these are all good to mention.

•Any other new or unusual things in or around your home. Make sure that whatever it may be, that it adds and not detracts from your home. Do not include anything that would discourage a potential buyer from contacting you or your realtor. Some things can’t be explained away.

The object of the advertising is to get people in your home to see its charm. Getting them there is half the battle. Keeping them there is the other half. Just remember, that in today’s market, you have to be creative. Come up with a catchy title, if you are writing your own ad. Take the best pictures possible. List as many great attributes without being repetitive and dragging on. Be upbeat and positive.

Follow these simple advertising steps, and you will have more prospects than you can shake a SOLD sign at!

August 22, 2007

Credit Score Basics

Credit scores are calculated using all of the available information about a person’s credit history. They take into account the person’s level of debt, level of available credit, employment status, homeowner status, and more. Many members of the finance industry use these to determine the efficacy of extending additional credit by way of loans and credit cards to an individual.

Typically, most people have a credit score that falls somewhere between 350 and 800. The higher the credit score happens to be, the better it is. It is difficult to get a high score over 700 unless you pay your bills on time all of the time, pay your loans off completely, and avoid defaulting ever.

Almost anything a person does that relates to credit cards and debt can affect a person’s credit score. If he acquires too many cards all at once, his credit score can drop. If he uses all of his credit cards to their full limit, his credit score can fall lower. If he cancels too many cards all at once, it could negatively affect his credit score and cause it to fall.

If a person has trouble keeping a job, this can negatively impact not only their credit score, but it can prevent them from acquiring a mortgage or car loan. If a person can’t keep a job, then he won’t be able to pay their bills. If he can’t pay his bills, his credit score drops even further.

It becomes a vicious cycle that becomes difficult to get out of. Once a bill is left unpaid, a loan goes into default, or employment becomes intermittent, these things remain on a credit report for quite a while. Some things can remain on a credit report for as long as seven years. It takes a long time to repair any damage to your credit score, so a person should be careful how he handles his debt obligations.

Credit bureaus keep track of a person’s credit score. The numbers vary because they use different formulas to find them. Although the credit scores vary slightly from one credit bureau to another, the numbers will not be that different. It is important to get a copy of your credit report several times a year to check on your credit score and how it was calculated.

If any false information is on your credit report, you can request that it be investigated and removed when it can’t be verified. Unfortunately, negative information such as several late payments, unpaid loans, and similar things can’t be removed from your credit report as long as they are true. A person should take the time to monitor his credit and maintain good credit behavior to achieve a good credit score.

August 20, 2007

Do-it-yourself Bankruptcy: Why it’s Not Always a Good Idea

For many people, making the decision to file bankruptcy is a long and difficult process. No one wants to take such drastic measures in order to improve their financial situation, but in many of the cases there is no other option. Individuals who file bankruptcy usually can barely pay their rent and other bills necessary just to be able to live, let alone those from credit cards, car loans, etc. Bankruptcy is often the only solution that will give them a fresh start in life.

After many people have made the decision to file bankruptcy, a great deal try to come up with the most economical way possible to accomplish this goal. This is why many choose to handle their own bankruptcies. They feel that since all they have to do is pay the filing fee that they can easily represent themselves. Although handling your own bankruptcy can save you a small amount of money, there are many reasons why it may not be such a good idea, and you may be better off allowing an attorney to handle everything.

As you know, bankruptcy is a legal process. Many debtors aren’t half as knowledgeable about all of the important laws pertaining to bankruptcy as they may think. Lawyers are experts at law, which is why they charge so much to make the laws work for consumers like you. This is certainly not a time for you to attempt to learn the laws while you’re handling your own bankruptcy.

Many people don’t properly fill out the required documents prior to filing them. You don’t want to unknowingly omit an important document or pertinent piece of information. Omission of such information could have an extremely detrimental effect on the outcome of your bankruptcy, and even cause it not to be discharged. Attorneys know exactly which forms to file, depending on the type of bankruptcy you choose, and if there is any type of mistake, then your lawyer is responsible for rectifying the error. No reputable attorney should make this type of mistake, though, unless you fail to give him or her all of the correct information.

Many attorneys are willing to work with you and allow you some type of payment plan so that you won’t have to pay a great deal at one time. Since you’re not paying your creditors, you should be able to comfortably produce the minimum amount that most attorneys require upfront, even if you have to save for a couple months. The cost to file Chapter 7, or total liquation bankruptcy, is $299, and Chapter 13 is somewhat cheaper. The approximate fees, depending on which attorney you choose to handle your case, will be the $299, plus a $500 fee or more, which will go directly to the attorney.

Don’t you think that it would be worth the peace of mind that you’d have to allow an expert to handle your affairs while you sit back and relax? The only thing that you have to do is provide all the appropriate information and attend the “meeting of the creditors” hearing. This hearing will be scheduled approximately one month following the time of your filing. You don’t have to bother with sending out letters to inform your creditors of your bankruptcy, because it will be the responsibility of your attorney.

If you insist on handling your own bankruptcy, just remember to be extremely careful not to leave out anything that could adversely affect your case. Make sure that you claim all of your assets and include all of your debts; even the ones that you don’t think can be discharged. Perhaps a free consultation with a bankruptcy attorney can assist you in your endeavor to make a fresh start for yourself. Many attorneys don’t mind giving free advice, and this advice could make the difference between the success or failure of your bankruptcy. If you are unable to locate a lawyer who agrees to give you free advice, visiting the law library is an acceptable alternative. If you don’t have the time to search for and read all of the important bankruptcy laws, there are many books available that will explain step-by-step how to go about handling your bankruptcy.

No matter what decision you ultimately end up making, whether you decide to rely on the expertise of an experienced attorney to handle your bankruptcy, or you’re pretty confident that you can properly handle your own, if done correctly, both methods will achieve the same result: relieving your stress and worry by freeing you of your horrible financial catastrophe.

August 17, 2007

Save Money on Moving Costs

Are you moving long distance and looking for the most economical way to get your belongings to your new residence? Perhaps you are going away to attend college in another state, or you have decided to start a new life 500 miles away from home. Moving companies are definitely not your best bet if you’re trying to be as thrifty as possible. They charge astronomically high prices to move individuals within the same area, and an out-of-state move could really blow your budget.

National companies like U-haul and Penske offer truck rentals for local and one-way moves. The problem is that these companies charge you according to the mileage that you will be putting on the truck. So, if you’re moving from Detroit to California, you could end up paying close to $3000 just for the truck. There is also the fact that you have to pay for gas, which with the current prices, could really add up. Trucks cost much more than a typical car to fill up, and depending on exactly where you’re going, you could have to fill up quite a few times before even reaching your destination.

Another thing to consider about renting a moving truck is the fact that you have to actually drive the big, cumbersome thing yourself. Many of them have mechanical problems or are simply too bulky and difficult to drive. Some are stick shifts, and if you can only drive an automatic, you’ll be out of luck. Of course, you can’t forget the biggest hassle when it comes to renting a U-haul or similar truck: the fact that you have to physically move everything yourself. Of course you could always hire someone to do the actual lifting, but if your goal is to save as much money possible, who wants to pay someone large amounts of money to move their possessions?

A really great and substantially cheaper option to move is to have your things shipped, but not by UPS, Fed-Ex or the U.S. Postal service. There are companies such as U-pack that will bring a trailer from the back of a semi truck to your place of choice, you fill it up with your things, and then the company will drive your things to your new destination. Although the trailer is huge, you are only charged for the amount of space that you actually use. If you don’t have much and aren’t taking any furniture, an 8’ or 9’ cubicle that can fit numerous items in it is an alternative to the trailer. Pods.com is another great site to go to so you can find out more information about these handy gadgets. There’s also the option of taking your belongings to their warehouse to fill up, and you save even more.

One really great thing about having your items shipped, as opposed to renting a truck or hiring a moving company, is the fact that having them shipped is about 10 times cheaper than the average moving company’s prices, and about half the cost of renting a U-haul. Sure, you still have to handle your own items, but if you’re saving such a great deal of money, it probably won’t matter much. You could always enlist the help of a relative or friend if you have a lot of large items to move.

Another advantage of using a company that ships your belongings is the fact that if you don’t know exactly where you’re going to be living and need time to find a place, the cubicles or “pods” can be used as storage units as well. At your request, the company will ship your cubicle to your new town or city, and can store it at their facility for an additional monthly charge. This is very convenient for many people because it eliminates the need to handle your things again until you’ve found your new home. So, if you’re moving yet are on a budget, check out the latest new concept in moving and you will be amazed at how trouble-free and low cost moving can actually be.

August 15, 2007

Tips for Investing in Municipal Bonds

Whether you’re just investigating municipal bonds or are reviewing your current muni bond portfolio, consider the following guidelines:

Compare the returns from municipal bonds to other types of bonds. Since the interest is generally exempt from federal, and sometimes state and local, income taxes, your marginal tax bracket is a significant factor in deciding whether municipal bonds are appropriate for your situation. (Any capital gains are subject to taxes. Interest income for some investors may be subject to the alternative minimum tax.) Make sure to determine how a muni bond’s yield compares to the after-tax yield on a comparable taxable bond. To do that, calculate the tax-equivalent yield for the municipal bond.

Don’t simply select the bond maturity that offers the highest return. Since interest rate changes can significantly affect your bond’s market value, it may make more sense to select a maturity that coincides with when you need the principal. If you are investing with a long time horizon, evaluate the yield curve for municipal bonds before deciding on a maturity date. You may find that increasing the maturity of your bond by a couple of years will increase your return or that committing your funds for a long time does not bring much additional return in exchange.

Look at the bond’s call provisions. Most municipal bonds come with a call provision, which allows the issuer to redeem the bonds prior to their scheduled maturity. Calls are generally only exercised when market interest rates are lower than the interest rate being paid on the bond and are generally not good news for the bondholder. While most municipal bonds have call provisions, the exact provisions can differ significantly among bonds.

Review the bond’s credit quality. While municipal bond defaults are rare, they do occur, so review carefully the credit quality of muni bonds. You may want to stick with investment-grade ratings, which means that the issuer is considered financially stable and unlikely to default.

Hold a diversified portfolio. You should plan to hold at least seven to nine different issues to ensure adequate diversification. Be careful not to hold an excessive number of individual issues, which can become an administrative struggle. For each bond owned, you need to ensure that interest payments are received, reinvest the interest income, and monitor credit quality, maturity dates, and call dates.

Consider bonds issued in your resident state. Purchasing muni bonds issued in the state in which you reside generally means that your interest income will also be exempt from state, and sometimes local, income taxes.

Search until you find a bond that meets your criteria. With so many different bond issues available, you should be able to find one that meets your particular criteria.

Review your holdings periodically. Review the credit ratings of all your municipal bonds at least annually to make sure the quality hasn’t deteriorated. Check the call provisions so you aren’t surprised by a call in the coming year. Also, review your holdings to see if they are still consistent with your overall investment objectives and asset allocation plan.

August 13, 2007

Investing in a Tax-Efficient Manner

During periods of uncertain returns, it becomes even more important to consider other ways to increase your portfolio’s value. One of those strategies is to invest in a tax-efficient manner.

Taxes can significantly reduce your portfolio’s value. Dividends and interest income from taxable portfolios and distributions from 401(k) plans and individual retirement accounts are taxed in the year received, at ordinary income tax rates of up to 35%. Taxes are not paid on unrealized capital gains in taxable accounts. When the asset is sold from a taxable account, however, you must pay taxes on those capital gains, at a maximum capital gains tax rate of 15% (5% for individuals in the 10% or 15% tax bracket) for investments held over one year. Capital gains on investments held for one year or less are short-term capital gains and are taxed at ordinary income tax rates.

Using strategies that defer the payment of taxes for as long as possible can make a substantial difference in your portfolio’s ultimate size. Consider the following tax-efficient strategies:

Minimize portfolio turnover. Carefully evaluate your investment choices, selecting those you’ll be comfortable owning for years. That way, you can let any realized capital gains grow for many years.

Place investments that generate ordinary income or that you want to trade frequently in your tax-deferred accounts. Since income and realized capital gains inside tax-deferred accounts aren’t taxed until withdrawn, you defer paying taxes on that income. Keep in mind that withdrawals may be subject to a 10% federal penalty if made prior to age 59 1/2.

Analyze the tax consequences before rebalancing your portfolio. Portfolio rebalancing is a taxable event that may result in a taxable gain or loss. You should generally avoid selling investments for reasons other than poor performance. You can bring your asset allocation back in line through other means. For instance, when adding investments to your portfolio, only purchase those that are underweighted in your portfolio. Reinvest interest, dividends, and capital gains in investments that are underweighted. Any withdrawals can be made from overweighted investments. Or rebalance through your tax-deferred accounts, which typically won’t result in current tax liabilities.

Utilize losses to offset capital gains. Selling investments at a loss can offset capital gains for that year, reducing your total tax liability. Excess losses may be used to offset up to $3,000 of ordinary income and the unused portion may be carried forward indefinitely. If you still want to own that investment, you can purchase it 30 days before or after selling it. That way, you will not be subject to the wash sale rules, so your loss will be tax deductible.

August 10, 2007

The Basics of Health Savings Accounts

Health savings accounts (HSAs) provide a way to help save on medical costs. To qualify, you must be covered by a health insurance policy with a minimum deductible of $1,100 for individuals and $2,200 for families in 2007. Maximum out-of-pocket costs for the plan, including deductibles and copayments, must not exceed $5,500 for individuals and $11,000 for families in 2007. You can then set up an HSA account, where you can deposit pretax dollars up to your deductible every year. In 2007, these amounts are capped at $2,850 for individuals and $5,650 for families. Individuals over age 50 can make a catch-up contribution of $800 in 2007, $900 in 2008, and $1,000 in 2009 or later. Contributions can be made by you, your employer, or a combination of both. There are no income limits for setting up an HSA.

Individual contributions result in an above-the-line deduction on your tax return. Any contributions made by your employer are not taxable to you. Self-employed individuals and employers can deduct contributions as well as insurance premiums. Individuals not covered by an employer’s plan can purchase a qualified medical insurance policy on their own and make tax-deductible contributions. However, premiums are not tax deductible for individuals.

Money in the HSA can be spent tax free on health care expenses, including eye care, dental expenses, prescription and nonprescription drugs, COBRA premiums, and qualified long-term-care services. Unlike flexible spending accounts, you don’t have to use all the money in the current year. Any unused amounts stay in your account and grow tax deferred. Thus, individuals who can afford to pay their deductibles from personal funds can use the HSA as a way to save funds on a tax-deferred basis. If you use the funds before age 65 for other than qualified medical expenses, you must pay income taxes as well as a 10% penalty on the funds. After age 65, the 10% penalty is waived. At all times, the money in the account belongs to you.

After age 65, you can’t make new contributions to an HSA, but you can still use money in the account to pay medical expenses, including premiums for Medicare Part A and B and the employee’s share of medical insurance premiums paid by an employer.

August 8, 2007

How to Have a Great Wedding Reception on a Tight Budget

Do you have to spend tens of thousands of dollars for a memorable wedding reception? Thankfully, the answer is no. You can have a glorious garden reception at your home or the home of a family or friend if the area is more suitable, for a fraction of the cost of a commercial reception venue.

The most important thing to remember with a budget wedding reception is to limit the number of guests to no more than 100, less being better. You don't actually have to send a wedding invite to everyone you know, if the number runs into hundreds. The actual number you decide on will depend on the size of the venue. Better to have a smaller number comfortably mingling, than a huge number crushed shoulder to shoulder.

Even if the weather looks fine, some shade will be appropriate. The cheap canopies available at most discount stores for shading cars and other backyard purposes will do fine. You will need at least one for the cake and the buffet, which should be placed under cover. You can get these in white, and decorate them with swathes of inexpensive curtain material or netting from a fabric store. Add bunches of dollar store fake flowers and you will have a bower fit for a princess bride.

Rent the furniture rather than buy. You can get good rates for wedding buffet tables and chairs, and these will usually be designed just for a wedding, so you won't need to add anything but the food and a centerpiece for the tables.

Turn your crafty hand (or your friends' hands) to creating unique centerpieces. Plain white candles surrounded by white stones or large pearl beads look striking and elegant. Paint clay flowerpots white and fill them with fake daisies. Create unique floral displays with white fake flowers, grasses and ferns sprayed white, and butterflies on sticks.

Turn your printer to good use for wedding invitations and place markers. You can buy invitation paper ready for printing with envelopes, and it will be much cheaper than having them printed. Your invitations can look exactly as you imagine them, with free fonts from the internet and a personal photo, for a fraction of the cost. The internet will also provide printable templates - just Google "free printables+wedding" and see what you find.

Keep the food simple and portable and you will save on place settings and chairs for sit down dining. Delicious easy to prepare nibbles always goes down well. You can rope friends and family in to help prepare the food a day or two ahead. You will need to work out the portions per guests so you will know how much raw materials to order. For example, if you are having 50 guests, work out two or three chicken wings per guest. That's 100-150 chicken wings. The food doesn't have to be fancy. Big bowls of pasta and potato salad, dips and chips, cocktail franks, cheeses and fresh fruit will look inviting.

The cake is the high spot of any reception, and you can splurge on a bought one, or make it yourself. Just remember that there should be enough to go around. Not everyone is mad about fruit cake or chocolate mud, so why not take one frugal bride's tip and have three different luscious cakes? Place them on a cake tier or use polystyrene blocks covered with drapes of fabric, each a little higher than the next, for an elegant display. The one at the top - which the bride and groom cut - will naturally be their favorite choice.

Music for your reception can be from your personal CD collections. But rather than have someone play DJ all the time, play whole CDs of music appropriate to your theme or tastes. Ambient music is beautiful at a garden reception and the CDs can be loaded into the player and left to themselves. Later, when people want to break loose and have fun, you can put on pop music or rock collections. Make sure you have someone to play the Bride and Groom's first dance on time though - a nice little job for the Best Man.

You don't need a professional to produce great photographs and videos either. Buy a good camera and give it to the best photographer you know for the day. What matters are the memories, not that it cost a bomb to have those memories snapped and printed.

The great thing about a simple, low cost wedding reception is that it becomes a real family and friends affair, and the bride and groom get to enjoy it as much as everyone else. Best of all, you start your married life without a crippling debt, or a state of poverty because you spent too much on the reception.

August 6, 2007

Why You Should Consider Bonds in Your Portfolio

Why should you consider bonds for your investment portfolio? Although diversification and periodic interest income are often noted as the primary reasons to add bonds to your portfolio, there are some other reasons you may want to consider also:

Bonds can add diversification to your investment portfolio. One strategy to counter the effects of stock market volatility is to add investments to your portfolio that are not highly correlated with movements in the stock market. Historically, stocks have a low positive correlation with corporate and government bonds. (Past performance is no guarantee of future results.) With this strategy, bonds will hopefully increase or not decrease as much when the stock market turns down.

Many bonds offer fixed, periodic interest income and the return of your principal at a specified future time. Thus, even during a significant bear market, you will receive some return in the form of interest payments, and you will receive your entire principal at maturity. Bonds also offer capital gains potential. A bond’s price generally rises when interest rates fall and declines when interest rates rise. If you sell a bond before maturity, you may have a gain or loss on the transaction. However, you can avoid the loss by holding the bond to maturity, when you will receive the full principal amount.

Bonds are often better suited for short- or medium-term financial goals. If you will need the money in a few years, you may not want to keep it in stocks and run the risk that a major market decline could significantly reduce your portfolio when you need the money.

Despite these advantages, you might not feel that bonds are attractive now, since long-term rates are not much higher than short-term rates. For instance, as of July 20, 2007, three-month Treasury bills had a yield of 4.98%, while 10-year Treasury notes had a yield of 5.04%, and 20-year Treasury bonds had a yield of 5.20% (Source: Federal Reserve Statistical Release, July 20, 2007). However, there are strategies you can use in this environment:

Stay invested in short-term bonds until long-term rates increase. When long-term rates increase, you can shift some of your principal into longer-term bonds to lock in higher rates.

Ladder your bond portfolio. A bond ladder is a portfolio of similar amounts and types of bonds that mature on several different dates. For instance, a $30,000 portfolio might consist of six issues of $5,000 each, maturing in six consecutive years. Since the bonds mature every year or so, you reinvest the proceeds over a period of time rather than in one lump sum. If rates increase, you have money every year or so to reinvest at the higher rates. With declining rates, you have some funds invested in longer-term bonds.

Consider corporate bonds. Corporate bonds typically carry more risk than Treasury securities, but returns are also typically higher. While 30-year Treasury bonds currently yield 5.12%, Aaa rated corporate bonds yield 5.74%, and Baa rated corporate bonds yield 6.63% (Source: Federal Reserve Statistical Release, July 20, 2007).

Evaluate municipal bonds. If you are in a high marginal tax bracket, consider municipal bonds, which currently yield 4.55% (Source: Federal Reserve Statistical Release, July 20, 2007). Since the interest income is generally exempt from federal income taxes, that means the taxable-equivalent yield is 7.00% for a taxpayer in the 35% tax bracket, 6.79% for a taxpayer in the 33% tax bracket, and 6.32% for a taxpayer in the 28% tax bracket. The taxable equivalent yield would be higher if you select a bond issued in your resident state, which would also be exempt from state and local income taxes. The interest income for some investors may be subject to the alternative minimum tax (AMT).

August 3, 2007

Which is More Important - Saving for Retirement or Saving for Your Child's Education

With limited resources for saving, which is the more important financial goal — saving for your retirement or saving for your child’s college education? While many parents want to pay the entire cost of their childrens' college educations, the reality is that there are a variety of ways to pay for that education — personal savings, financial aid, and loans. Unfortunately, there are not similar options for your retirement. No one is likely to loan you money if you have not saved enough for retirement. You may want to maximize your retirement savings, realizing that there are ways to use those savings to help with education costs. How can that strategy help when it comes time to send your child to college?

Your retirement savings will not be considered in financial aid formulas. The federal financial aid formula does not consider retirement accounts, including 401(k) plans and individual retirement accounts (IRAs), when calculating your expected family contribution. For other assets, the formula assumes that 5.6% of the parents’ assets and 20% of the student’s assets will be used annually for college costs. Thus, you may actually increase your financial aid award by saving in retirement accounts.

You can still use these retirement assets to help pay for college costs. Money in IRAs can be withdrawn to pay higher-education expenses before age 59 ½ without incurring the 10% federal tax penalty, although income taxes will be assessed on the taxable portion of the distribution. If the money is withdrawn from a Roth IRA, your contributions can be withdrawn at any time without penalty or taxes, while earnings can be withdrawn before age 59 ½ by paying income taxes but not the 10% tax penalty. With 401(k) plans, you typically can not withdraw the money before retirement age unless it is for a hardship withdrawal, but you can borrow funds if permitted by the plan. If you do not need the money to finance college costs, you can leave it in your retirement plans to continue to grow for your retirement.

August 1, 2007

Tips for Renting an Apartment with Sub-prime Credit

Renting a new apartment with poor credit doesn’t have to be a total nightmare like you may believe. In fact, it may be a lot easier than you think, provided you follow the subsequent tips during your search. Years ago, apartment managers and mortgage companies were extremely strict, and if you didn’t have perfect credit, or as close to perfect as possible, there was no way that you’d be approved. Nowadays, it isn’t quite as difficult to get approved for an apartment.

Tip # 1 – Whenever you’re interested in an apartment, always call first and explain your situation.

With the economy absolutely horrible in many states, landlords are becoming more and more lenient when it comes to credit guidelines. Many realize that those with bad credit aren’t all risks, like previously believed. Most landlords or management companies will often tell you upfront what they look for on credit reports and what the absolute lowest score is that they will accept. Many will even approve you if you have horrendous credit, as long as you don’t owe another apartment complex or utility company. So, calling first and giving an explanation for the state of your credit may really work in your favor. At least you’ll know upfront what each apartment manager expects from their applicants.

Tip # 2 – Try to rent from a private owner instead of a realtor or managed apartment complex.

Most apartment complexes are managed, meaning that a professional management company is in charge of approving new applicants for apartments, as well as handling other affairs. Nearly 100 % of apartments that require an “application” also perform credit checks, which you must pay for. So, if you know that you have bad credit, why pay someone to tell you that your credit is just as bad as you thought? Many small, private apartment complexes are often just as nice as the managed ones, yet they are sometimes owned and managed by individuals, who most of the time do not perform credit checks. They may, however, request rental references, which hopefully you can provide. Locating an apartment managed by an individual may take more of an effort, but in the end, it will be worth it.

Tip # 3 – Get a secured credit card

If you don’t plan on moving right away, you could quickly boost your credit score by getting a secured credit card. With a secured credit card, there are no credit checks since the bank will use the deposit that you provide and make your credit limit the equivalent to that amount. Paying your credit card bill on time each month will boost your score more than you may think, so by the time you’re ready to begin your search for a new apartment, your credit score should be high enough to satisfy most management companies.

Tip # 4 – Appeal the decision

If your credit is as bad as you think, then you will most likely be denied an apartment after completing the application. This doesn’t have to necessarily mean that you still can’t get an apartment at the complex of your choice after being denied. Your denial letter will most likely include information about a possible appeal, which you should take full advantage of. The benefit of an appeal is that you will come face-to-face with the actual manager in charge. This person has the authority to override any decision, and if the person is compassionate, understanding and takes a liking to you, he or she may make an exception and approve your application.

So, if you’re apprehensive about finding a decent apartment to rent because of a poor credit rating, don’t be. Just because you’ve had bad luck in the credit department doesn’t mean that you’re a bad person. You may just have to work harder to prove this fact, but it’s just the price you may have to pay in order to be allowed to live in the apartment of your dreams.


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