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December 31, 2007

Become Debt-free in 2008

The year 2008 starts tomorrow and a great deal of people will be making New Year's resolutions. One of the more popular resolutions besides losing weight is to make more money and/or get out of debt. If you are one of the millions who have decided to make more money in the coming year, then there are several ways to ensure that this goal is achieved. There is no need to be burdened with accumulating expenses and annoying calls from bill collectors. By applying a few simple strategies, you will be able to pay off those bills in no time, and even have money left over for occasional splurges.

Everyone should have some type of savings account for numerous reasons. First of all, no job is guaranteed. Even if you work for a company that's been in business for a number of years, anything could cause them to go out of business--leaving you jobless. The type of savings account that you choose doesn't matter, as long as you get one. Of course the higher the interest you can earn, the better, but any type of savings account should suffice. Most financial advisors state that having at least enough money saved to cover three months worth of your regular monthly expenses is imperative, but of course the more you have saved the better.

Another way for you to work toward achieving your goal for the coming year is to change your work situation. You don't have to necessarily quit your current job, but asking for a raise, working overtime, or working a second job can help immensely. If your only option is to work a second job, there are numerous legitimate at-home jobs that will allow you to make extra money in your spare time without even leaving your home. Various call centers hire at-home workers to take calls from customers calling in to place orders, respond to customer's complaints by email, etc. It's easy to perform a web search to find such jobs. Simply type in: at home call center jobs, or a similar phrase. Doing so should bring up tons of possible at home jobs.

If you find yourself struggling to reach your goal in the beginning, don't give up. It will take time and patience to achieve your goal, but as long as you stay focused and never give up, you can and will have more money for the New Year, and you can pay off your all of your burdensome debt. After all of your debt has been eliminated, you can enjoy your extra money to do whatever you desire, or you can save as much money as possible in order to ensure a fulfilling and robust future. Once you've achieved your goal of making more money, you can get ready for next year's New Year's resolution.

December 28, 2007

Bring in the New Year for Less

Many people look forward to New Year's Eve celebrations all year long. The drinking, the dancing, and the partying make New Year's Eve an event to remember for years to come. People celebrate this much anticipated holiday in numerous ways, from elaborate Las Vegas trips to partying at Times Square in New York City to watch the infamous ball drop, and everything in-between. Unfortunately, despite the enjoyment that many people experience on New Year's Eve, countless individuals spend more money than they can afford. If you are on a budget, or simply don't have the cash, yet are looking for a memorable way to bring in the New Year, then there are many ways to make it happen.

Believe it or not, a romantic night at home with your significant other might be a more enjoyable and less expensive way of bringing in the New Year. For some, it's certainly better than hanging out at some noisy, smoky nightclub where people are drinking too much. You can save a great deal of money by cooking a nice meal, purchasing a bottle of champagne, and simply spending some quality time together, cuddling on the couch. You might even opt for ordering takeout if you aren't a cook, which would also be a great deal cheaper than paying for a meal and ticket at a lavish function. Many couples enjoy renting movies to watch until the arrival of midnight, and then they kiss just like they would do if they had been at an engagement.

If you're seeking something a little more thrilling than watching movies on the couch, then there are still ways to have a great time yet not spend a large amount of money. One option is to plan a dinner party at your home. You can invite five or six couples, serve a formal dinner, buy champagne and play some lively music. You don't even have to provide all of the food. Appointing each guest to bring a particular dish is a great way to share the responsibility of cooking. This option will enable you to spend a night eating, drinking, and celebrating with friends, while saving a lot of money simultaneously. It's often safer to celebrate at someone's house, too, because if anyone ends up drinking too much alcohol, there's always the option of spending the night instead of risking lives by driving while intoxicated.

If you are religious, one way to celebrate bringing in the New Year for absolutely free is by attending church services. It doesn't matter if you are a member of a church or not, because you can attend church services at the sanctuary of your choice. Many churches in each community hold these special New Year's Eve services every year, and for some, they are a motivational and inspiring way to bring in the New Year.

If you think that you would miss the extravagance of going out on New Year's Eve, then you don't have to deprive yourself. Perhaps making a compromise and planning to only go all out every other year would be a great way for you to save money. This can reduce the amount of stress that you undergo, as well as give you a year in between extravagant celebrations to stay home and relax instead of maxing out credit cards to pay for expensive attire and tickets, or drinking too much alcohol.

There is absolutely no reason for you to have to spend thousands of dollars just to enjoy yourself on New Year's Eve. The expenses associated with an evening on the town can really add up quickly. After buying your dress or tuxedo, shoes, purse, and anything else that you may need in order to make your night complete, not including meals, transportation and drinks, you could end up easily spending a great deal more than you planned. With a little bit of sacrificing, and some resourcefulness to seek out free and low cost New Year's Eve events in your community, you could possibly have a better time than you would have had you spent hundreds of dollars.

December 27, 2007

The Importance of Timely Business Tax Payments

If you are self-employed, then you are undoubtedly aware of the fact that you're accountable for paying your own taxes each tax period. It doesn't matter what type of profession you're in, if you are an independent contractor, your clients pay you directly, and it's your responsibility to figure out how much taxes are owed on the income. By going to the Internal Revenue's website, you are able to obtain tax information, including exactly how much you need to pay on what you've earned, as well as where exactly to send the payments. You can also go to your state's website in order to obtain the same information regarding the state taxes that you must pay, if your state requires you to pay taxes.

Even if you haven't made any payments on your taxes so far this year, it's not too late. As long as you pay the required amount of taxes before the last day of 2007, you won't have any problems. If you wait even one day into the New Year, though, you will be assessed penalties and late fees, which quickly rack up, depending on how long it takes you to pay the debt. The Internal Revenue Service makes it convenient for businesses and individuals to pay their required taxes. With online and phone payment options, it's easier and quicker to pay, enabling you to avoid ever being late. Despite what many business owners may think, when it comes to taxes, you must ensure that you pay all taxes, and not just federal or state. Some large cities require you to pay city taxes as well, and there is also FICA and Medicare taxes to be paid, just like an employer would take out of your check if you had a regular job.

Taxes are an essential part of owning a business and can mean the difference between a successful business and an unsuccessful one that goes bankrupt. If you fail to pay taxes regularly, or attempt to hide exactly how much income you are truly earning, the government could find out and issue an audit which could result in you paying hefty fines, possibly leading to the loss of your business. An audit is when the Internal Revenue Service issues demands for you to prove your income, expenses, and anything else related to your business and personal taxes. You could end up enduring a lot of unnecessary stress, which can usually be avoided if you are honest and responsible when it comes to your business finances.

Many people enjoy the freedom and flexibility of owning their own business, but there are more things involved in running a business than just completing the actual work for your customers. You must keep meticulous records or each and every expense that you incur, and the income that you earn. Secondly, and just as importantly, you need to pay taxes on the income earned in a timely manner. If it's easier for you to pay taxes every time you get paid, then that's quite all right, but many business owners prefer to pay quarterly. It doesn't matter when you pay, though, as long as they're paid in-full before the end of the same year.

December 24, 2007

Eliminating Money-related Holiday Depression

The holiday season is a wonderful, joyous time of the year that is greatly enjoyed and anticipated by many people. Unfortunately for others, the season that is so happy for some people, is depressing and dreaded. The reason that the holiday season brings great melancholy for some people is because of lack of money to celebrate how they wish. Many people feel that it isn't Christmas if they don't buy luxurious gifts for their friends and families, or host extravagant holiday parties. Children may request or even demand expensive holiday gifts that parents simply can not afford to purchase. If you find yourself suffering from the holiday blues due to lack of money, then don't fret, because there are many ways to remedy this.

The Real Meaning of Christmas

Teaching children from an early age the real meaning of Christmas can greatly affect what types of gifts they will request when they're older. Many people forget that the Christmas holiday is intended to celebrate the birth of Jesus Christ, not to go into debt. If you start out buying expensive gifts for your kids when they're young, then once they get old enough to create their own Christmas lists, they will expect the luxurious presents to continue. On the other hand, if you explain to your children how Christmas is over-commercialized and that going broke in order to buy presents for everyone is senseless, they will be able to better appreciate less expensive gifts.

Make Christmas special in other ways besides spending money. Volunteer at a homeless shelter in order to provide services for the needy, or go caroling with a group of people who enjoy singing Christmas carols. You may not be accustomed to doing such things, but you will undoubtedly feel great afterwards. Don't forget to take your children with you so that they can experience the magical feeling of the helping others as well and realize that Christmas is so much more than just giving and receiving presents.

Cheap but meaningful gifts

A gift doesn't have to cost five hundred dollars in order to be meaningful. Sometimes less costly presents are more significant than expensive ones. Perhaps a friend or family member really wants a special bracelet or pair of shoes to match a new outfit, but you want them to have a new computer because you feel that their current one needs updating. If your budget only allows twenty-five dollars to purchase a gift for that person, then of course you won't be able to get the computer, but your friend is likely to be a lot more grateful to receive the bracelet or pair of shoes. In other words, if you're strapped for cash, don't make things worse by purchasing things that you know you will overextend your budget or max-out your credit cards. You may even throw away your money buying expensive gifts that people don't even want or can't use anyway.

Helpful Charities

If you find yourself in a situation where you absolutely can't buy a thing for your children and/or don't have enough food to have a proper holiday meal, then there are numerous charities out there that can help. Nonprofit agencies like the Salvation Army allot special funds and receive special donations just for those in your situation. All you have to do is sign up for the agency's holiday program, which will usually provide you with toys for children up to sixteen, as well as food, and sometimes even a grocery store gift certificate to buy ham or turkey for your Christmas dinner. Don't be embarrassed to participate in a holiday program because most of the people who participate are hardworking people who are just having a rough time financially. If it will make you feel better, plan on giving to the program for the next year as a way to repay them. Donate food, toys or money for future Christmases, if you can, although it certainly isn't a requirement.

There is no reason why anyone has to dread Christmas. Just as it is a joyous occasion for many, it should be a joyous one for all. If you've lost a loved one and the holiday season doesn't seem the same without that person, then try celebrating the holidays as that person would have. Cherish their memory, but don't dwell on the fact that they are gone. Surely your deceased loved one wouldn't want you to be depressed during the holidays. If your depression brought on by the holiday season is due to lack of money to celebrate extravagantly, then maybe what you need to do is rethink things. Realize that homemade gifts such as crafts, cookies, cakes and pies are often a lot more appreciated than you may think. You also need to realize that Christmas is about spending quality time with loved ones, eating turkey dinners, and creating amazing new memories, whether you have a great deal of money or not.

December 21, 2007

Which Financial Paperwork Should You Keep

Feel like you're buried under an avalanche of paper? The steady accumulation of paper over the years can make even the most organized system seem uncontrollable. Some general guidelines on which papers to retain and which to toss include:

• Never throw away copies of your federal and state tax returns, records of gifts you made or received, deeds, birth certificates, or marriage certificates.

• Retain for at least six years any records that support tax deductions or taxable income. Those records include canceled checks, expense records, employment and other contracts, and tax-related forms such as W-2s and 1099s. Keep in mind that the Internal Revenue Service (IRS) has three years to audit your return, but can go back six years if substantial underreporting of income is suspected. There is no time limit if fraud is suspected.

• Keep the cost records until the asset is sold plus six years, such as brokerage statements reflecting the purchase and sale of securities, other records detailing the cost basis of investments, contributions to nondeductible and Roth individual retirement accounts, and purchase and sale documents for significant assets, such as homes, land, and cars.

• Monthly or quarterly statements can be thrown away once you receive an annual detailed listing of transactions at year end. Old annual reports, proxy statements, prospectuses, and promotional information can be tossed when you receive current information.

Keeping your records organized will make it easier to find that paperwork when you need it. Organized files will also help your heirs readily locate all important financial information should something happen to you. This will help them identify all your assets and liabilities and let them know which professionals to contact, such as lawyers, accountants, and financial advisers.

To assist your heirs, be sure to gather and record details about safe deposit boxes; life insurance policies; hospital, medical, and disability insurance; homeowners insurance; employee savings and stock plans; individual retirement accounts; credit cards; income tax records; real estate records; outstanding debts; children's accounts and trusts; savings accounts; investments; and advisers. Many of these records should not be kept at home, but you should indicate where the original documents are located. Make sure to note where birth, marriage, and military records are kept, since these documents are usually needed to collect benefits. Update this record annually, and make sure your family knows where it is kept.

December 19, 2007

Giving to Charities at Christmas: Where is your Money Really Going?

Many people look forward to the holiday season each year and are eager for the celebrations, decorations and to eating high calorie yet scrumptious goodies. One thing that many people seem to take for granted is the fact that they have enough money for food, gifts and shopping, but unfortunately, many people don't have enough money for these things. They may have been laid off from their jobs, be in debt, or simply work low-paying jobs that prevent them from having enough money left over after paying bills for extras. This is why there are nonprofit organizations available to help make the holidays more fulfilling to individuals in such situations. Unfortunately, these charities don't always use the donated funds as they should, and many charity workers have been prosecuted after being convicted of fattening their own pockets with funds designated for needy families.

Even thought it's not widely publicized, employees of Salvation Armies, American Red Crosses, and other nonprofit agencies across the country have been using funds for their own personal use for numerous years. Many employees also fraudulently use the agency's funds to "donate" to friends and family members. Sadly, these crimes of embezzlement often go undetected for a while. Despite the fact that these dishonest employees do eventually get caught and are severely penalized for their wrongdoings, many individuals are hesitant to donate their hard-earned money to nonprofit agencies for fear of misuse. There is absolutely no reason why you should be afraid to donate to these charities, though, because they need you. Not all charitable organizations and employees are dishonest, and most help thousands every year, especially at Christmastime.

If you wish to give to a charity yet are concerned about funds being abused by employees, you can always help in other ways. One way to help is by donating items from around your house to the Salvation Army thrift stores and similar second-hand stores in your neighborhood. The profits made from the sale of these items helps to fund special programs to aid those in need. Another way that you can help is by simply shopping at thrift stores. You would be surprised at the wonderful and sometimes new items found in second-hand stores. They sell everything from books to clothes to household items, so surely you can find some things that you would be interested in buying in order to help support your local charities.

If you would still like to donate directly to the charities without dealing with the thrift stores, you have the option of providing toys at Christmastime. Numerous locations, including many Wal-Mart stores, have donation boxes available where you can simply drop off new toys. This is a convenient alternative for many people, because they are often shopping at Wal-Mart for other items, then as they are leaving, it's easy for them to drop off the toys of their choice without worrying about driving directly to a separate location. Of course there is always the option of donating food or other items that can be used for Christmas presents. Wrapping paper, baby food and clothes can always be utilized by needy families.

Despite the fact that Salvation Armies and other charity employees may misappropriate funds, it is still a fantastic, personally rewarding deed to give to those less fortunate. As long as your heart is in the right place when you decide to give to those in need, there is no need to worry about what happens to the money after it is donated. It may be comforting for you to know that a great deal of the money goes to needy families as expected, and that if it weren't for your generous gifts of money, toys and/or food that many families would have nothing under the Christmas tree or a nice meal on the table on Christmas Day.

December 18, 2007

Factors to Consider in Retirement Planning

To enjoy your retirement without financial worries, make sure you have enough money saved when you retire. However, that calculation can be a daunting task, since a variety of factors affect your answer and inaccurate estimates for any factor can leave you with way too little in savings. Some of the more significant factors include:

What percentage of your preretirement income will you need? You can find various rules of thumb indicating you need anywhere from 70% to over 100% of your preretirement income. On the surface, it seems like you should need less than 100% of your income. After all, you won't have any work-related expenses, such as clothing, lunch, or commuting costs. But look carefully at your current expenses and how you plan to spend your retirement before deciding how much you'll need. If you pay off your mortgage, stay in good health, live in a city with a low cost of living, and engage in inexpensive hobbies, then you might need less than 100% of your income. However, if you travel extensively, pay for health insurance, and maintain significant debt levels, even 100% of your income may not be enough. You need to take a close look at your expenses and planned retirement activities to come up with a reasonable estimate.

When will you retire? Your retirement date determines how long you have to save and how long investment returns can compound. You want to make sure your retirement savings and other income sources, such as Social Security and pension benefits, will support you for what could be a very lengthy retirement. Even extending your retirement age by a couple of years can significantly affect the ultimate amount you need.

How long will you live? Today, the average life expectancy of a 65-year-old man is 81 and of a 65-year-old woman is 84. For a 65-year-old couple, there is a 25% chance that one of them will live to 95. Most people look at average life expectancies when estimating this, but average life expectancy means you have a 50% chance of living beyond that age and a 50% chance of dying before that age. Since you can't be sure which will apply to you, it's typically better to assume you'll live at least a few years past that age. When deciding how many years to add, consider your health as well as how long other family members have lived.

What long-term rate of return do you expect to earn on investments? A few years ago, many retirement plans were calculated using fairly high rates of return. Those high returns don't look so assured now. At a minimum, make sure your expectations are based on average returns over a very long period. You might even want to be more conservative, assuming a rate of return lower than long-term averages suggest. Even a small difference in your estimated and actual rate of return can make a big difference in your ultimate savings.

Have you considered inflation? Even modest levels of inflation can significantly impact the purchasing power of your money over long time periods. For instance, after 30 years of just 2% inflation, your portfolio's purchasing power will decline by 45%. When estimating an inflation figure, don't just look at the historically low inflation rates of the recent past. Also consider long-term inflation rates, since your retirement could last for decades.

What tax rate do you expect to pay during retirement? Especially if you save significant amounts in tax-deferred investments that will be taxable when withdrawn, your tax rate can significantly affect the amount you'll have available for spending. You may find your tax rate is the same or potentially higher after retirement.

December 17, 2007

Reasons to Buy a 2007 Vehicle Instead of a 2008

If you're in the market for a new vehicle, now is the time to buy, by the last day of December. With the year 2007 rapidly coming to an end, many car dealers are anxious to get rid of 2007 cars and trucks in order to make room for their new inventory of 2008 vehicles. You may find yourself, despite credit problems, little cash for a down payment, and the cost of the vehicle, paying less than you ever thought possible to own a brand new car or truck. Finance companies may temporarily slacken their credit requirements, and sales persons may drastically reduce the overall cost of the vehicle as incentive for you to buy. You may also be able to receive lower monthly payments as part of the package.

Many people may feel that they would rather have a 2008 vehicle, but if you're looking for a nice vehicle as well at an unbelievable deal, then buying a 2007 is probably your better bet right now. Buying a car is not the same as buying a house. When you buy a home the value almost always begins to appreciate right away, especially when you make updates, repairs, and other improvements. If you sell your house in five years then most likely the value of your home will have increased substantially. On the other hand, when you buy a new car, the value of the car quickly depreciates, often as soon as you drive it off the lot. If you decide to sell your car after five years you will be lucky to even get half of what you paid for it.

You aren't going to notice many major differences in a 2007 vehicle and a 2008. Vehicles manufactured in the current year have just about all of the amenities that you may be looking for in a car: GPS navigation system, satellite radio, OnStar, and all of the other luxury additions that you may desire. Just upon visual inspection of a 2007 and 2008, the average person is not going to be able to make a distinction between the two because the body styles are very similar as well. So, by choosing a 2007 over a 2008, you will be able to basically "have your cake and eat it, too." You'll have the best of both worlds: a great new car or truck and an unbeatable price.

So if your goal is to purchase a brand new car, then by all means, treat yourself to a wonderful Christmas present now, because if you wait until 2008 has arrived, you may not be able to acquire as good a deal. The 2008 vehicles will have already arrived and the current deals on the 2007s will have ended. The prices of the 2007 vehicles may actually not be much different than the 2008s after the new year, so now is the time to drive away with a gorgeous, shiny new car without it making that much of an impact on your wallet.

December 14, 2007

How to Set Financial Goals

To help pursue your financial goals, you need a financial plan to help you get there. These five basic tips can help you achieve your goals:

Set goals that are exciting to you. Putting money aside for a distant goal, rather than spending that money now, is a difficult thing for most people to do. To make it easier, set exciting goals that will motivate you to pursue them. For instance, rather than "saving for retirement," make your goal "to retire at age 60 with $1,000,000 in investments so I can travel and golf." Then quantify your ultimate goal and interim goals, so you'll have a way to track your progress.

Consult with a financial advisor. The number of decisions that must be made to help ensure you meet your financial goals can seem overwhelming. Even if you have a basic grasp of some financial areas, you may be unfamiliar with other areas. A financial advisor can help coordinate your entire plan, making sure all financial areas are adequately considered. A financial advisor can also monitor your progress. Sometimes you feel more committed to goals when you know someone else is also watching your progress.

Determine the financial issues that are causing you problems. Almost everyone has difficulty coming to grips with some aspect of their financial life. Perhaps your credit card debt is becoming burdensome, making it difficult to find money to save. Maybe you don't understand investing basics and have left your money in a low interest-bearing savings account. Or you may have totally ignored estate planning, leaving your spouse and children at financial risk if you die. Whatever area is causing problems, resolve to make strides in overcoming it this year.

Spend less than you earn. The amount of money left over for saving is a direct result of your lifestyle. Your lifestyle decisions will impact you now and in the future, since you will typically want a similar lifestyle after retirement. To get a grip on your spending, take time to analyze your expenses and to set a budget. Try reducing nonessential expenditures, such as entertaining, dining out, and vacations. Another strategy is to find ways to spend less for the same things. For instance, obtain car insurance quotes from several companies, placing any premium reductions in savings.

Save it before you see it. If you have to find money to save every month, you'll likely find there isn't much left after all the bills are paid. Typically, a better strategy is to set up an automatic savings program where money is automatically deducted from your bank account every month and deposited directly in an investment account. Another good alternative is to sign up for your company's 401(k) plan, having funds withdrawn every paycheck. Try to save at least 10% of your gross income. (Remember that an automatic investing plan, such as dollar cost averaging, does not assure a profit or protect against loss in declining markets. Since such a strategy involves periodic investment, consider your financial ability and willingness to continue purchases through periods of low price levels.)

December 12, 2007

Understanding Long-Term Interest Rates

Typically, when the Federal Open Market Committee (FOMC) raises the federal funds rate, long-term interest rates react by increasing also. However, between June 2004 and July 2006, the FOMC raised rates 17 times in .25 percent increments, from 1% to 5.25%, and long-term rates barely moved.

In the past, a 1% increase in the fed funds rate produced at 0.3% increase in the 10-year Treasury yield (Source: Economic Letter, September 2006). Thus, with a 4.25% increase in the fed funds rate, you would expect the 10-year Treasury yield to increase by 1.3%, but it only increased 0.3%.

Similarly, since 1980, the difference between the yield on 3-month Treasury bills and 10-year Treasury notes has averaged 1.79% (Source: The Federal Reserve Board, June 16, 2006). As recently as the end of 2006, the difference was less than 0.5%. Currently, the difference is still only 0.8% (Source: Federal Reserve Statistical Release, November 26, 2007).

Why haven't long-term interest rates increased as expected? Returns on bonds have two components: the real component, which compensates investors for the risk of loaning money, and the inflation component, which compensates investors for expected inflation over the bond's term. In recent years, both components have been trending downward:

Real component -- The real component is also called the term premium, since historically investors have received a premium for increasing the term the bond is held. Since the mid-1980s, economic growth has been less volatile, making investors more confident about future economic stability, so they require less return to hold longer-term bonds. It is also believed that demand for long-term bonds has increased, while supply has not kept pace, bringing down returns.

Inflation component -- Compared to a 5% inflation rate from 1980 to 1999, inflation in industrialized countries averaged 2% from 2000 to 2004 (Source: The Federal Reserve Board, June 16, 2006). Not only has inflation decreased, expectations for long-term inflation are in the 2% range. This has put significant downward pressure on long-term interest rates.

The behavior of long-term interest rates is not unique to the United States -- other countries around the world have experienced similar declining patterns. The trend is so widespread that globalization of trade is suspected to be a major factor. Since goods, services, money, and ideas can cross borders so easily now, economies in different countries are tied together more closely. Excess demand in one part of the world can be filled by excess supply in another part of the world, evening out economic activity in individual countries.

This has major implications for monetary policy. Central bankers have control over short-term rates, which is the primary means of implementing monetary policy. Typically, when short-term rates are increased, long-term rates follow. Higher long-term rates reduce consumption and investment, which helps contain inflation. Reducing short-term rates typically reduces long-term rates, which increases economic activity. If those relationships no longer hold, monetary policy will be significantly impacted.

December 10, 2007

How Long Will Low Inflation Last?

Since the mid-1980s, inflation has been much lower and more stable than it was in the past. The high inflation rates of the 1970s detracted from the country's standard of living, hindered capital formation and economic growth, and took the country many years to overcome the adverse effects. It is now generally believed that maintaining a low and stable inflation rate provides lasting benefits to the economy, which is why it is one of the Federal Reserve's primary monetary policy goals. As detailed in the 1977 amendment to the Federal Reserve Act of 1913, the Federal Reserve's goals when setting monetary policy are "to promote maximum sustainable output and employment and to promote stable prices."

In recent years, inflation has changed in a number of ways:

• Movements in inflation now convey less about future inflation. In the late 1970s and early 1980s, the most accurate forecast of future inflation was an average of inflation over the past few quarters. Sharp increases in inflation took a long time to reverse. Since the mid-1980s, shocks to inflation have not lasted long. Thus, the best estimate of future inflation is a very long average of past inflation.

• The correlation between inflation and unemployment has decreased. In the 1960s and 1970s, inflation tended to rise in periods when unemployment was low and vice versa. Starting in the 1980s, this correlation weakened substantially. Thus, a rapidly expanding economy will tend to generate a smaller increase in inflation. However, once inflation increases, it will be more difficult to get it under control, since the economy will have to slow more to reduce inflation.

• Changes in energy prices have less impact on inflation. In the 1970s, increases in energy prices had a significant impact on core inflation, which is the change in consumer prices excluding food and energy. Since the early 1980s, energy price changes have had little impact on core inflation.

• Economic volatility has decreased significantly in the United States. Since the mid-1980s, output growth has been 50% less volatile, and employment growth has been two-thirds less volatile than the previous three decades (Source: Business Review, Quarter 1, 2007). Inflation's volatility has also fallen substantially.

Inflation expectations significantly influence actual inflation. Long-term inflation expectations vary over time, depending on economic developments and current and past monetary policy. U.S. monetary policy has become much more focused on low inflation, and the Federal Reserve has been strongly committed to keeping inflation under control. During the 1980s and 1990s, the Federal Reserve brought inflation down from double-digit levels to approximately 2%, a level that has been maintained for the past decade.

The Federal Reserve has done such a good job that expectations about future inflation have moderated significantly in recent years. Thus, when there is a shock to inflation, the public believes that the Federal Reserve will control the situation, so expectations about future inflation do not change much, keeping inflation under control. A recent example is the substantial increase in oil prices, which has not led to increased inflation or a recession, as it did in the 1970s.

Will low inflation persist for the foreseeable future? Like all questions about the future, this cannot be easily answered. Inflation now reacts less persistently to shocks, which is a result of better monetary policy and inflation expectations. Now that the public believes that the Federal Reserve will keep inflation under control, it acts in a manner that makes the economy more stable. Thus, it would seem that interest rate changes do not need to be as great to achieve stable inflation. But these circumstances will only last as long as monetary policy meets the public's expectations. Long-run inflation expectations must be monitored closely, and the Federal Reserve must respond aggressively to shocks that could have long-term impacts on inflation.

December 7, 2007

Keeping your Car Insurance Low

If you are the owner of a car, then you know how expensive car insurance can be, especially in the states with the no-fault law. Despite the high cost of having coverage, which is required by law, there are ways to pay less than you currently pay. By taking immediate action to find less expensive insurance, you are almost guaranteed to start paying less than you ever thought possible, for the same, quality automobile insurance. It won't take much effort, and you'll be on your way to having more cash in your pocket instead of in your insurance carrier's bank account.

Just as small neighborhood convenience stores charge more for their groceries and other inventory of products, many small insurance agencies that are conveniently located, such as near car license plate offices for instance, may have elevated prices, too. This certainly doesn't mean that you have to accept a higher rate. You can ask for a lower rate and if you are refused one, then you can and should shop around. You would be surprised at how much cheaper insurance can be from other companies, even if you have to drive further or find an online company. There is absolutely no reason to settle for paying more money; there are too many insurance agencies available.

Ensuring that you are driving safely at all times greatly affects how much you spend on auto insurance--or how little. This is true because if you are involved in frequent accidents and must file claims with your insurance agency, then you will be considered a high risk, which will in turn cause your rates to soar dramatically. This is why safe driving is imperative at all times. Make sure that you never drive while overly tired, under the influence, or are distracted. These situations, of course, increase your likelihood of having an accident, and therefore, paying higher insurance premiums.

Many insurance agencies will allow certain discounts on your policy if your vehicle is equipped with one of the many anti-theft devices. If your car is protected against theft, insurance companies consider this a positive thing because it means that your car or truck is less likely to be stolen. It also means that you're less likely to file a claim, preventing them from paying out large amounts of money to replace or repair your vehicle.

Never allow your car insurance to lapse for any period of time, because when you are prepared to purchase new coverage, you will almost always pay a higher rate. If your full coverage insurance premiums are excessive and you're having trouble paying on time, perhaps temporarily switching to liability insurance will allow you some relief until you're able to take better control of your finances. Most states only require that you have liability insurance, but if you are financing a vehicle then liability insurance is, unfortunately, usually not an option.

A majority of insurance agencies that provide auto insurance also perform credit checks. If your credit score is quite low and you've had some late payments and delinquencies, you will be required to pay a higher rate. If you're looking to lessen what you pay for insurance, improving your credit rating would certainly make a difference. Of course there are other advantages to having good credit, so working hard to get your credit into better shape has other advantages as well. Even if you are only able to improve your credit a little at a time, it will still help to lower the rate that you currently pay for your automobile insurance.

So, if you feel that insurance coverage for your car could be lower, then you're probably right. There is no need to pay out extra money that you could use to pay other bills or add to your savings account if you don't have to. With some time and effort, you could end up paying up to a third less than you're paying on your current policy. Just remember to drive safely and pay your policy in-full at each renewal, if possible. By making monthly payments, you are actually paying more since many companies will add a finance charge to those not paying the full bill. If you for some reason are unable to pay the policy in-full, perhaps in a month or so you'll be able to pay off the balance, because the quicker you pay off the balance, the more money you'll actually save.

December 5, 2007

Buying Organic: Is it Really Worth the Extra Cost?

Since people shop for groceries on a regular basis, it's easy to see that more and more grocers are including organic produce, snacks and other foods in their inventory. This is due to the fact that an increasing number of households are resorting to organic foods to help improve the health of their families. Since most organic foods cost as much as twice the price of non-organic foods, many people either struggle to buy organic foods or don't buy them at all, even though they would like to. The burning question is: Is buying organic really worth the additional cost? This answer is yes and no, depending on the person as well as the type of food being purchased.

Organic food has become extremely popular in recent years because so many people have been suffering from nutritional deficiencies and environmental illnesses because of several factors. First of all, the type of soil that non-organic food is grown in, which is thought to be severely deficient in vitamins and minerals that our bodies need, contributes to lowered nutritional values in foods. Secondly, farmers often utilize any means necessary in order produce food as quickly as possible. If this means that they will use hormones to accelerate the growth of their livestock, then they will most likely use them.

The hormones and antibiotics often used in cows, chickens, and other animals used for food can cause many serious health conditions in humans. Consuming low-dose antibiotics on a regular basis can cause your body to build up antibiotic resistance, so if you develop a severe infection that requires antibiotics, the medication may not be effective in ridding your body of the infection. Hormones contained in meat can cause hormonal imbalances in both men, women and children, sometimes causing puberty to start much sooner than normal in young children. This is why eating chicken, beef and turkey without the addition of antibiotics is imperative. If you can find non-organic meat without the addition of antibiotic, that's great, but if not, organic is highly recommended.

Great deals of people choose to feed their families organic because of the alleged additional nutritional value. If you or your any of your family members suffer from nutritional deficiencies or a compromised immune system, then organic may be a sensible choice. Since organic food is grown in soil richer in vitamins and minerals and without the addition of harmful pesticides, this would give your body a break from chemicals, as well as provide you with some much-needed nutrients.

Some foods contain more pesticides than others, despite thorough washing prior to consumption. Potatoes, apples, strawberries and many other fruits and vegetables are among the non-organic foods that contain large amounts of pesticides. If you have a compromised immune system or are feeding an infant or toddler, organic produce would be the wiser choice, since numerous studies have proven that organic foods are safer and don't cause the buildup of pesticides and other chemical compounds in the body.

So, as you can see, it all depends on your personal health goals as well as your individual budget if buying organic food over non-organic is actually worth the price. If you see that consuming organic products is making a difference in your family's health and you are able to comfortably afford to buy it, then perhaps organic foods is a good idea for you and is well worth it. On the other hand, if you notice no difference in the way you or your family members feel after eating organic foods and your budget is really being stretched to the limit just to be able to afford it, then you might be better off buying non-organic.

December 3, 2007

How to Successfully Fund your College Education

A great deal more people would attend college to earn a degree if only they had the funding to do so. Not everyone has well-to-do parents who can finance their entire education, or parents who have saved sizeable nest eggs specifically to pay college tuition. Also, there has been an increase in non-traditional students, those who are married, working full-time and have children. It is often even more difficult for these individuals to pay for college because they have to maintain their households simultaneously. If you are serious about obtaining a college education yet are short on funds, don't lose hope. There are many funding options available for you if you plan on bettering yourself.

If your income is low enough, you may qualify for basic federal student educational grants such as a Pell Grant. These grants must be applied for as early as possible in the year to ensure the largest award. They also only offer a certain amount of money, usually depending upon your income, and often won't cover the full cost of a semester of classes. These types of grants are great for those looking to attend a community college, where tuition is usually lower. Pell grants also come in handy to supplement other forms of tuition payments.

Many employers will pay for a certain portion of your classes through their tuition reimbursement programs. If your career choice is in nursing, you may be able to have your education completely compensated. With there being such a shortage of nurses in most areas, a great deal of hospitals are willing to cover some, if not all of your education to become an LPN or RN, provided you agree to work as a nurse for that particular hospital after obtaining your license. Different employers pay different amounts, so you need to check with your current or future employer for details.

There are non-profits agencies available that are required to give away certain amounts of grant money each year, yet most people don't even know that these agencies exist. Sometimes all it takes is picking up the phone and calling different agencies. If one doesn't provide educational grants, then ask to be referred to an agency that does. Oftentimes, searching on the Internet can prove to be successful, and your local library usually has resources available as well.

Another option for paying for college is taking out one of the various student loans available. These types of loans usually offer low interest rates, and are typically deferred and don't have to be repaid until after you graduate. It is often a good idea to use these types of loans only as a last resort, though, because you don't want to take out too many loans and have to pay on several loans concurrently following graduation. Student loans are not dischargeable in bankruptcy, except in extremely rare cases, so you want to be careful not to cause yourself to go into debt in the future. You only want to borrow what you can comfortably pay back, as there is no guarantee that you will land a high-paying job immediately following graduation.

So, if you have made the decision to go to college to earn a higher degree, there is no need to worry about funding it. You just have to be resourceful, flexible and persistent, and you can fund your entire college education with no problems whatsoever. Don't forget the numerous scholarships that are available. Every college offers them, but you just have to seek them out. If you absolutely can't find money to pay for school, then you may have to work and live on as little as possible and pay for your education one or two classes at a time. It will take longer to earn your degree by going this route, but at least you'll be working towards a brighter and more lucrative future.


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