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June 30, 2008

The Advantages of Credit Repair Agencies

If your credit is anything less than a-1 then you would probably benefit greatly by credit repair. Credit repair can be achieved in quite a few ways, depending on your particular circumstances and what actually appears on your credit report. If you only have a couple items that have been on your credit report for years then you'd probably be better off working toward having the items removed yourself, or either wait the short time for them to automatically come off. On the other hand, if you have a great deal of recent items on your credit report and wish to make an improvement then your best bet may be to contact a credit repair agency. Credit repair can be a tedious, time-consuming task and if you're able to pay someone else to do it, you should certainly do so.

With all of the credit repair scams, you need to carefully choose which company to entrust to properly assist you with your journey toward improved credit. Sometimes it's difficult to distinguish between reputable credit repair companies and scams, but one thing that will always help you to narrow down your list of reputable companies is to check with the Better Business Bureau, BBB. If an agency is a member of the BBB and have a positive rating, then the company would be a wise choice. Not all reputable companies are members of the BBB, however, so in this case all you would need to do is find other means of researching the company. You can achieve this by speaking with others who have used the services, making sure that the company has a valid telephone number and physical address, and checking with the business's local Chamber of Commerce..

One great company that is known to work hard to get consumers' credit reports in tip-top shape is Lexington Law Firm. This popular law firm specializes in credit repair and has been in business for several years. Their fees aren't astronomically high, like most people would expect from a law agency. You can contact them in whatever way is more convenient for you, by telephone, email, or through their website. Lexington Law Firm works side by side with you in order to help you reach your credit goals in as short a period as possible.

Even if you only have a few items that you'd like removed from your credit report, it would probably be a lot easier and quicker for a lawyer to have the items removed. In actuality, it's difficult to have an item removed from a credit report unless it's due to be removed. By having Lexington Law Firm do all the hard work for you, you'll get the results that you're looking for. These specially trained attorneys know exactly how to word their correspondences in order to get results. The letters that you may send to credit reporting agencies on your own behalf to request that certain items be removed may be well-written and professional, yet lack the sustenance that a similar letter from a law agency would. Credit reporting agencies will also take law firms a lot more seriously than they would a consumer, and have a lot more respect for attorneys.

There are some things that you should know before retaining the services of Lexington Law Firm or any other credit repair agency. First of all, you must pay an upfront retainer fee in order to begin their credit repair program. Usually his fee is less than $100, and after that you are often required to make monthly payments which are usually less than half of the retainer fee. You make these monthly payments only as long as you're receiving their services, and once your credit has reached your desired level, you cease making further payments, as you no longer require the agency's services.

Another thing that you should know about credit repair is that before any credit repair agency can have items permanently removed from your credit report, you need to first pay off the items. Even though Lexington Law Firm and similar agencies will work hard to have certain items removed from your credit report, therefore improving your score, removing unpaid items would prove to be next to impossible. If you owe a large amount of money to certain creditors, you need to work on getting those items paid off before retaining a credit repair attorney, since there won't be much than can do.

Whether you would like to improve your credit in order to ensure you'll get the best rate with a car, home or other large purchase, or you'd simply like to enjoy having a-1 credit then seeking the assistance of a credit repair agency can be a great idea. By allowing a credit repair agency to do all of the work for you, you get to sit back and relax while your credit slowly but steadily improves. Of course you have to provide whichever agency you ultimately choose with regularly, often monthly copies of your credit report, as well as proof that certain bills have been paid, if necessary. Most people that have improved their credit with the help of Lexington Law Firm or similar law firm were very pleased with the results, and chances are you will be, too.

June 27, 2008

Moving For Less

If you are looking to move to a new house or apartment yet you don't have a huge budget to work with, there is no reason to think that you must forget the idea of moving. You just have to be resourceful and willing to do some work yourself, as well as advance planning. There are many expenses involved in moving, some that may occur unexpectedly. In order to avoid unexpected expenses, it's a good idea to thoroughly research the area that you plan to move to so you can plan accordingly. You don't want to be surprised with unexpected expenses, and planning ahead will help you to determine all the costs necessary to make your move as stress-free as possible.

One thing that you definitely need to do as soon as possible is contact all the utility companies in the new area: gas, water, and electricity, in order to find out how much, if any, deposit is required to establish new service with them. Don't forget to contact the telephone companies, mobile and landline, if you plan on switching your phone service as well. Of course you can't forget television service, cable or satellite. Some cable or satellite companies require a deposit or down payment as well, and you need to find out what it is in advance. Most large cable companies offer great introductory packages for new customers, for as long as the first full year. These introductory offers enable to be able to pay a great price for phone, cable and high-speed internet service, and sometimes even wireless service, all bundled together. Satellite T.V. companies, such as Direct TV and Dish Network also offer great deals as well.

You will most likely require a large amount of boxes to move your things, depending on how much you actually have. Boxes can be expensive, especially if you buy them from a specialty store. Some moving companies, such as U-haul, allow you to return the boxes after using them and they will buy them back. Of course they won't pay the full amount that you paid, but a much lower amount. This is a good service, but you still must have the money upfront to pay for the boxes. You can get boxes for free by visiting your favorite stores and asking for any extra empty boxes. Most stores have extras that they would be glad to get rid of, so take advantage of this fact. Many stores like Wal-mart do their stocking at night, so this is a good time to visit the store and ask for boxes.

One aspect of moving that you certainly can't forget is how you will actually move your things from point-A to point-B. One way you can do this is to hire a moving company, but you must keep in mind that most professional moving companies are quite expensive. Since your goal is to save money then you need to locate someone who will do as good a job as a professional but not charge the same high costs. By checking your local newspapers for individuals offering moving services, or by placing a small free or inexpensive ad yourself, you should be able to locate someone who would be willing to move you for whatever amount you've budgeted for.

If finding low cost movers doesn't work for you, you could always rent a U-haul or Penske truck and move your things yourself. The problem then would be how you would physically get your things, including furniture and boxes, into the truck and then into your new house or apartment. This would be doable if you have a small amount of furniture, a dolly and a friend to assist with larger items, but if you have no help then it would be nearly impossible. Perhaps you could locate some high school or college kids, if not family members or friends, to move your personal items once you've rented the truck. More people than you think opt to move without the assistance of a moving company in order to save money, especially when moving long distances.

Don't forget to factor in the security deposit of your new place before you move, just in case you need to save up the money first. Before you agree to move to a certain home or apartment, you need to find out how much of a security deposit is required at the lease signing. Most landlords require a deposit that is equivalent to one-month's rent, but some require lower deposits, while others require higher security deposits. It all depends on what each specific landlord determines is a fair amount. In some cases, landlords will allow tenants to move in without paying the full security deposit upfront. If your landlord agrees to such terms, arrangements are usually made, allowing you to break the payment of the security deposit up over the next few months in order to make things easier on you.

You can have a successful moving experience without spending large amounts of money as long as you plan ahead of time. If you know you're going to be moving to a certain address weeks before your actual move then you should have an easier and less stressful moving experience. Don't wait until the last minute to start planning because you could become too overwhelmed, making it easier to forget important aspects of your move. If you're moving from an apartment to a house then you will most likely need to invest in some lawn equipment if you don't' plan on hiring a landscaper. So don't forget to plan, save, and plan again, and you will be more likely to have a very positive moving experience that won't cost a bundle.

June 25, 2008

Why Use a Life Insurance Agent?

When you start shopping for life insurance, choosing the right agent could be the difference between meeting your goals, or buying less than you expected. Or, you could end up finding out that there were choices of which you were not even aware. A good life insurance agent will help you make the right financial decision that meets your goals for acquiring life insurance in the first place.

The biggest question people have when they start thinking about buying a life insurance policy is - Why buy life insurance at all? Life insurance is a financial planning tool, with two primary reasons to buy it. First, as a financial hedge against your death so that your descendants can pay off any existing debts you might have, or to provide for their financial well-being. The other primary reason to purchase life insurance is as a long-term investment vehicle. And some policies can have characteristics that meet both of these objectives.

There are three basic forms of life insurance: 1) term life; 2) whole life; and 3) universal life. Understanding the differences between these policies - and being able to explain them - is the job of a trained life insurance agent. However, let's look at the basic differences.

The first two types listed - term and whole life - are only paid out when you die, to whoever is listed on the policy as the beneficiary. Some whole life policies allow you to borrow against the face value, at favorable interest rates, but otherwise, the only one who will see the benefits of these policies will be your heir. A life insurance agent licensed in your state can help you select the right type of policy to meet your goal.

Term policies guarantee a certain premium level for a fixed number of years. The only benefit is the pay out when you die. A whole life policy is set up for the remainder of your life, and at some point, the policy becomes "paid up" meaning no more premium payments are due. These policies are only as good as the insurance company backing them, and a life insurance agent can help you find a company with a sound financial standing.

A universal life policy, however, is an investment, and once you hit a certain age - or in some cases, suffer a catastrophic event - you can start drawing down the value of the policy for your own benefit. These policies are regulated by the Securities and Exchange Commission, as they share many of the same characteristics as a mutual fund, and only someone with the proper federal and state licenses may sell these policies, since they are truly an investment vehicle with the same inherent risks as investing in the stock market.

Choosing life insurance can be made much simpler by drawing on the expertise of a well-qualified and trained life insurance agent. Choosing the right agent, versed in how to best meet your goals for purchasing life insurance can be one of the best financial decisions you make.

June 23, 2008

The Pros and Cons of Reverse Mortgages

There is a new type of mortgage that has many benefits for those over 62 years of age. This type of mortgage will grant you a lump sum of money to be used for whatever purpose you choose, as well as allow you to live in your home worry and mortgage-free. If you're considering getting a reverse mortgage for whatever reason, there are several things that you need to consider before making a commitment. There are positive and negative aspects of reverse mortgages, and you need to make sure that the advantages of getting this type of mortgage outweigh the disadvantages. You also need to be sure that you choose a reputable mortgage company. There unfortunately are many unscrupulous lenders who are seeking individuals to take advantage of, especially seniors, because of their increased vulnerability.

A reverse mortgage can take a great deal of pressure off you or an elderly family member. Most seniors live on a fixed income, which oftentimes isn't enough to cover all of their necessary expenses, and paying a pricey mortgage payment in addition to every other monthly obligation can make things quite difficult. Stress can cause illnesses to develop in anyone, especially seniors who are usually already suffering from age-related conditions. There is no need to struggle in order to make ends meet each month, as a reverse mortgage could be a real lifesaver for you. It can give you peace of mind, which can extend your life since you'll know that you can stay in your home for life without having to worry about foreclosure due to late or missed payments. Keep in mind that you will, however, have to maintain your taxes and insurance during the entire reverse mortgage period.

Before you even attempt to locate a mortgage company, it's a good idea to ensure that you meet the requirements for a reverse mortgage. The requirements are: you must be 62 years or older, have your home paid off or nearly paid off, and reside in the home in which you want to reverse the mortgage. There are usually other qualifications, depending on your particular lender's own requirements. One plus for older seniors is the older you are when you decide to reverse your mortgage, the more you qualify for. If for some reason you don't meet the requirements for a reverse mortgage currently, perhaps your situation will change within the next few years, enabling you to take advantage of this wonderful mortgage option.

If you believe that you will want to move sometime in the near future, a reverse mortgage may be a waste of time. This type of mortgage preserves your right to live in your home for as long as you choose to, but if you choose to move you will have to start making mortgage payments immediately. It's best to make sure that you are completely satisfied with your current home, because if you decide that you aren't after you're reversed your mortgage, you will probably end up paying more than you were paying originally since reverse mortgage fees are usually somewhat higher than those of traditional mortgages.

Before agreeing to have your mortgage reversed, you must also determine if your loved ones are willing and able to start making your mortgage payments following your departure from the home. If they aren't financially able to keep up the payments, or for some reason don't want to live in the house following your departure then it may not be such a good idea. If on the other hand your family totally intends to begin making mortgage payments on the home and take possession of the home then it may be a good option to take some of the financial stress off you right now.

If after you've considered the pros and cons of reverse mortgages and you feel that the benefits outweigh the risks, as long as you deal with the right company you shouldn't experience any problems. Reverse mortgages can be a definite plus to seniors who are struggling to make their mortgage payments each month, in addition to their other monthly obligations. Many have expensive medications that they must pay for out of pocket each month, and removing the necessity to pay a mortgage each month will certainly take a great deal of stress of them. If you decide to reverse your mortgage, as long as you deal with a responsible and honest company then you have absolutely nothing to worry about and you can live in your home while retaining your rights, without having to pay another cent as long as you live in the home.

June 20, 2008

How to Develop a Budget

Almost no one enjoys the process of analyzing and budgeting expenditures, but inefficient and wasted expenditures can be major impediments to accomplishing your financial goals. It is difficult to manage your money if you don't know how much you have or where it is going. Consider these steps when developing your budget:

1. Identify how you are spending your income. Review an annual period so you determine regular monthly expenses as well as irregular, periodic expenses, such as insurance premiums, tuition, and gifts. Much of the information can be found by examining canceled checks, credit card receipts, and tax returns. Total expenses in categories that make sense for your lifestyle. If you can't account for more than 5% of your income, take a closer look at your cash purchases. Keep a journal and track every penny you spend for at least a month.

2. Evaluate your expenditures. If you find it tough to find money to save, critically review your expenditures. Consider these tips:

• Find ways to save at least 10% of your income. Almost all expenditure categories offer potential for savings. With essential expenses with fixed amounts, such as your mortgage, taxes, and insurance, you may be able to refinance your mortgage, find strategies to help reduce taxes, or comparison shop your insurance to reduce premiums. Essential expenses that vary in amount, such as food, medical care, and utilities, can usually be reduced by altering your spending or living habits. For instance, you can actively shop for food with coupons, exercise to get in better health, or put energy saving light bulbs through your house. Discretionary expenses, such as entertainment, dining out, clothing, travel, and charitable contributions, typically offer the most potential for spending reductions. Dining out four times a week? Reduce dining to two times a week, go to less expensive restaurants, and save the difference.

• Limit the use of your credit cards, especially if you're not paying the balance in full every month. Not only do credit card balances carry high interest charges, but credit cards tend to encourage impulse spending. Use cash or a debit card, which automatically deducts purchases from your bank account.

• Resolve not to purchase impulse items or items over a certain dollar amount on your first shopping trip. Go home, think about it for a couple days, and then go back to purchase the item. Often, you'll decide you don't really need it.

• Delay the purchase of large items. For example, instead of purchasing a new car every two or three years, keep your car for four or five years.

• If you're really serious about reducing expenses, consider moving to a less expensive house. Not only will you reduce your mortgage payment, but you will save on other costs, such as property taxes, insurance, and utilities.

3. Prepare a budget to guide future spending. You may want to start by setting a budget for a couple months, tracking your expenses closely over that time period. You can then fine tune your budget for an annual period. Some tips to consider when preparing your budget include:

• Don't include income in your budget that is uncertain, such as year-end bonuses, tax refunds, or gains on investments. When you receive that money, just put it aside for saving.

• Set up enough expenditure categories to give you a good feel for your spending patterns, but not so many that it becomes difficult and time consuming to monitor your progress.

• Make your budget flexible enough to handle unforeseen expenditures. Nothing goes exactly as planned, and your budget should be able to deal with emergencies. Be sure to include large, periodic expenditures, such as insurance premiums or tuition.

• Don't be so rigid that your family is afraid to spend any money. Everyone in the family should have a reasonable allowance that can be spent without accounting for it.

• Find ways to make the savings component of your budget happen automatically. Get the money out of your bank account and into an investment account before you have a chance to spend it.

The money you have available for saving is a direct result of your spending habits. Use a budget to control your spending so you can maximize your savings.

June 19, 2008

WTDirect Increases Savings Rate to 3.26%

As of June 19th WTDirect's Savings Account rate is officially increasing to 3.26% APY. This marks their first rate increase in 9 months. Recently we have noticed a number of the larger online banks beginning to raise rates as they fight for investor deposits. Although the economy is slowing it is not dead yet and the online savings accounts represent one of the best ways to earn a competitive yield with minimal risk. Wilmington Trust Corporation (NYSE: WL) is a financial services holding company that provides a variety of banking and financial services. It provides Wealth Advisory Services for high net worth clients in 22 countries, and Corporate Client Services for institutional clients in 81 countries. Its wholly owned bank subsidiary, Wilmington Trust Company, which was founded in 1903, is one of the largest personal trust providers in the United States and the leading retail and commercial bank in Delaware.

June 18, 2008

How to Survive the Gas Price Crisis

Everyone, no matter what their income level, is feeling the pain of the current gas prices, which are at an all-time high. Hovering close to $4 a gallon in some areas, and even above $4 a gallon in other areas, many motorists are scrambling to find ways to keep their refueling costs as low as possible. For many people, the staggeringly high gas prices is causing many to struggle to keep gas in their vehicles, and some even pay more a week for fuel than they do for groceries for their entire families. Fortunately, there are ways to keep your fuel bills a great deal lower than what they currently are, provided you are willing to follow a few simple tips.

One obvious way that you can easily decrease the amount of fuel that your vehicle uses is to limit where you travel to. Unless you absolutely need to drive long distances on a regular basis, you should attempt to stick to your taking care of business in your own neighborhood. By shopping near your job or home, you not only reduce your fuel requirements, but you will also reduce the amount of wear and tear that your vehicle endures. If you absolutely must travel long distances, don't be ashamed to utilize public transportation or some other alternate means of reaching your destination.

Believe it or not, your gas will last considerably longer if you completely fill up your gas tank, as opposed to only buying $10 - $20 at a time. If you are unsure of whether or not this strategy actually works, pay close attention to how quickly your gas disappears when you only put in few dollars of gas at a time, and then fill up your tank at a different time and watch how much longer it will last. You could save as much as $20 - $30 a week provided you fill up your tank at each refueling.

If you fail to keep up standard maintenance on your vehicle, such performing scheduled oil changes, replacing the fuel filter, and many other necessary repairs, you will notice a definite increase in the amount of fuel that your vehicles uses. Of course you must spend money in order to appropriately maintain your vehicle, but you will spend a lot less in the long run if you choose to keep up the maintenance instead of frequently refilling the constantly disappearing fuel in case you choose not to maintain the car or truck.

One thing that you can't ignore when you're trying to save on fuel costs are your tires. Under-inflated tires can increase the amount of fuel that your vehicle burns by as much as 10 %. Your car must work harder in order to compensate for the lack of proper tire inflation, which is why it burns a greater amount of fuel under these conditions. Making sure that your tires are properly inflated and in good working condition at all times can result in substantial fuel savings for you.

If your car is a gas guzzler, you have probably considered downsizing to a smaller, gas-saving vehicle. Larger vehicles such as full-size cars, vans and trucks can cost nearly $100 or more for a fill-up, as opposed to $40 or $50 for a smaller, more fuel efficient vehicle. You don't have to settle for a Ford Focus or Escort if those cars aren't your style, as there are plenty of other cars that have excellent gas mileage as well. All you have to do is check out each possible car's gas mileage prior to purchasing it.

If you pay attention to your local radio stations on a regular basis, many are offering gas at reduced costs for special periods of times, usually as a one-time courtesy to their customers, and to increase business. For instance, one Knoxville, Tennessee radio station offered gas for nearly a dollar less per gallon for an hour on a particular day. All of the consumers who reached the gas station before the special was over were able to take advantage of gassing up for this greatly reduced price. Knoxville certainly isn't the only city offering such a deal, and if you listen close enough you are bound to find similar gas deals in your city or town.

If you frequently find yourself trying to decide whether to purchase food for your family or gas in order to get to work, you may need to make some immediate changes in order to reduce the amount that you spend each week on gas. Even if you have to do something as drastic as trading in your huge SUV for a small car, at least you will be savings a great deal on gas costs. It may be annoying and time-consuming to search for ways to save money on gas instead of handling things like you're used to, but in the long-run you will realize how much the trouble will be worth it when you no longer have to stress out about buying gas each week.

June 16, 2008

The Disadvantages of 40-year Mortgages

Not long ago, a new option was created for perspective homeowners: 40-year mortgages. Many people are quite excited about this new way of buying a home, as it allows the payments to be spread out over a longer period of time. Since the payments are spread over a longer period of time, of course each monthly payment is lower. This is why this type of mortgage is attractive for some homeowners, especially those with lower incomes or those trying to save money. Even though some people interested in purchasing a home may be initially attracted to a 40-year mortgage, in the long run it may not be such a wise choice.

One negative aspect of 40-year mortgages is the fact that you end up paying more interest over this extended period of time. More interest means that you pay more for the same house than if you had gotten a 15 or 30-year mortgage instead. This could result in you paying immense amounts of money unnecessarily, especially if you only making minimal payments each month. With a traditional 30-year mortgage, it will take quite a while before you begin to notice that your payments are actually decreasing the principal. With a 40-year mortgage, it will take even longer, unfortunately.

With a 40-year mortgage, since you are making a tremendous amount of payments compared to other types of mortgages, your equity will build a lot slower than usual. This is due to the fact that you will be paying so little on the actual principal each month, since the payments are spread out over such an extended period with this type of mortgage. If your goal is to build equity as quickly as possible then a 40-year mortgage may not be for you. Alternately, you could build equity quicker by making extra mortgage payments on the actual principal, but you would have to pay a substantial amount on a regular basis, which you may be unwilling or unable to do.

The only reason that you should even consider getting a 40-yeard mortgage is if you are absolutely certain that it's going to be only temporary. You don't want to pay a great deal of extra money over a 40-year time frame just to be able to pay lower monthly payments. If your only reason for choosing a 40-year mortgage is to keep your monthly payment lower and more affordable, there are other ways of achieving this goal. Perhaps you could make sure that your credit is A-1 before even applying for a mortgage. This would enable you to take advantage of the lowest interest rates possible, which would make your payments a lot lower than if you had shaky credit.

Another way that you could make sure that your monthly payments are as low as possible instead of getting a 40-year mortgage is if you make a larger down payment. Of course this may not always be possible, and if it isn't, there are other options. There are special government programs that will provide assistance with down payments, which would enable you to make lower payments each month without struggling to make a huge down payment. By checking online on sites like HUD and similar government agencies you should be able to locate programs and find out if you're qualified to apply for any type of assistance.

If for some reason you don't qualify for any of the government programs or grants, you may still have a few options for keeping your monthly payment low instead of getting a 40-year mortgage. You could wait until you have a substantial down payment saved up before even purchasing a home. Of course if you're anxious to buy your own home and can get approved immediately, you may not want to wait years before you'll have an adequate down payment. If you don't want to wait, perhaps you have family or close friends who could possibly lend you money for a down payment so that you have purchase a home with a lot better terms than 40 years.

If you have absolutely no choice but to choose a 40-year mortgage then you should attempt to refinance after a year or two. As long as you make your payments on time each month, you should be able to get approved for a much better mortgage during the refinancing of the loan. If the first offer that you receive doesn't sound great and you've kept your mortgage payments up faithfully, as well as your other financial obligations, such as credit cards, you should shop around until you locate a better deal. The bottom line is: don't agree to a 40-year mortgage unless you're fully aware of everything involved and don't plan on keeping it for an extended period of time.

June 13, 2008

Treasury Inflation Protected Securities (TIPS)

Treasury Inflation Protected Securities (TIPS) were created in 1997 to provide bond investors with inflation protection by periodically adjusting the bond's face value based on the increase in the Consumer Price Index for All Urban Consumers (CPI-U). The bond's interest rate is determined at auction and does not change during the bond's life, but the principal is adjusted every six months. Thus, subsequent interest payments are based on the increased principal amount.

If the CPI-U decreases, your principal will decrease, so that your interest payments will also decrease over time. However, when the bond matures, you still receive the full principal value.

From a tax standpoint, interest income is subject to federal income taxes, but not state or local income taxes. Also, any increases in the bond's principal value is subject to federal income taxes in the year the adjustment is made, even though the funds aren't received until the bond matures. However, if the TIPS is held in a tax-advantaged account, such as a 401(k) plan or individual retirement account, income taxes are not paid until the funds are withdrawn.

To decide whether TIPS are a better alternative than other Treasury securities, calculate the difference between the yield on a 10-year TIPS and a 10-year Treasury security. As of May 27, 2008, that difference was 2.49% (Source: Federal Reserve Statistical Release), which is considered the breakeven rate. If inflation is higher than 2.49% over the 10-year period, the TIPS will have a higher yield than other Treasury securities. However, if inflation is lower than 2.49% over the 10-year period, the other Treasury security will have a higher yield than the TIPS.

With current inflation rates running around 3.8%, you might think that a TIPS is the better alternative. However, it is difficult to predict inflation over long time periods, so future inflation could be lower.

June 11, 2008

How to Extend the Life of Your IRA

Individual retirement accounts (IRAs) are usually viewed as retirement planning vehicles. But with increased contribution amounts and the ability to roll over 401(k) balances to an IRA, many IRA owners are finding they won't use the entire IRA balance for retirement. Thus, IRAs are increasingly becoming major estate planning tools. When used for estate planning, the goal is to extend the IRA's life as long as possible so that beneficiaries can benefit from the tax-deferred (for traditional IRAs) or tax-free (for Roth IRAs) growth. How can you accomplish that?

Assume you have a large traditional IRA balance, which includes a rollover from your 401(k) plan. You don't have to start taking distributions until age 70 ½. Then, you only take required minimum distributions calculated based on your life expectancy. When you die, you leave the IRA to your spouse, who rolls the balance over to his/her own IRA and names his/her own beneficiaries, perhaps your children or grandchildren. Your spouse delays distributions until age 70 ½ and then only takes required distributions. When your spouse dies, your children inherit the IRA, which can be divided into separate IRAs for each child. Each child can then take distributions based on each of their life expectancies and can name their own beneficiaries. When your children die, their beneficiaries cannot reset the distributions based on their life expectancy, but the beneficiaries can continue to take distributions based on the previous owner's schedule until the IRA is depleted. By using this strategy and only taking minimum distributions when required, the balance can continue to grow on a tax-deferred basis for years or even decades.

The concept can be expanded further by converting a traditional IRA to a Roth IRA. Although income taxes will have to be paid on any amounts that would have been taxable when withdrawn (contributions and earnings in a deductible IRA and earnings in a nondeductible IRA), the income taxes can be paid with funds outside the IRA, leaving the IRA balance intact. While your adjusted gross income must be less than $100,000 (not counting the rollover) to convert, this requirement will be eliminated in 2010, allowing all taxpayers to convert from a traditional to a Roth IRA. Once the funds are in the Roth IRA, you do not have to take any withdrawals during your life. Since your spouse can roll the balance over to his/her own IRA, he/she would also not have to take withdrawals during his/her lifetime. When your spouse dies, his/her beneficiaries would then have to take distributions over their life expectancies, but qualified distributions would be taken free of federal income taxes.

Don't lose sight of the fact that your IRA's main purpose is to fund your retirement. It should only be used for estate planning purposes if you don't need the funds for retirement.

June 9, 2008

Making Money in Real Estate: Flipping Houses

Just about everyone has heard the term "flipping" when it comes to real estate, but not everyone realizes just how lucrative this type of real estate tactic can be. Even with the current decline in the economy, you have the potential to make a great deal of money by flipping houses. Depending on the particular circumstances in which you purchase the homes that you wish to rehab, you could have the homes rehabbed and resold in less than a year, and even a lot sooner if you work steadily to get the homes in the condition that you desire.

Flipping houses is really a win-win situation for everyone involved: you, those who live in the neighborhood, and the people who ultimately buy the flipped houses from you. You benefit, of course, by making a profit after you resell the homes, but you can't forget your credit. Your credit score will have increased dramatically by the time you've rehabbed the houses and resold them. The buyer benefits when he or she purchases a newly renovated and updated home that will most likely have already acquired equity, as well.

Flipping houses also benefits the neighborhoods where the actual houses are located. Instead of having to deal with a dilapidated, possibly abandoned houses on their streets, that could perhaps lower the value of everyone's property in the area, the newly rehabbed houses can contribute to the improvement of the entire neighborhood. Everyone's property value won't decrease, and will very well increase. No homeowner wants to see an abandoned or neglected house near their home. Not only does it decrease the value of every other house in the neighborhood, but neglected homes are usually eyesores, and often have overgrown grass and weeds as other visible defects.

If you're wondering how to get started flipping homes, it isn't difficult. First of all, you can locate distressed properties that are sold as-is in your local newspaper, online, and at your neighborhood real estate agencies. Sometimes you can even drive through certain neighborhood and search for for-sale signs. Unless you're planning on obtaining 100 % financing for the purchase of your project homes, you'll need money for down payments, appraisals, inspections and closings. You may luck out and find some homes where the seller is willing to pay all or a portion of the closing costs. That would certainly enable you to put more money toward the actual rehab of the homes.

Since the purpose of flipping homes is to make a profit, it's apparent that you want to save as much money as possible on renovations, repairs and updates. One way you can meet this goal is by completing all or most of the work yourself. If the house requires plumbing, roofing, etc., unless you're licensed to perform this type of work, obviously you'll have to hire a professional. You can't take chances when it comes to electricity, plumbing, heating and cooling, and more, depending on the needs of the particular home that you're working on.

One way to practically ensure that you will be able to resell the homes by whatever target date you choose is to advertise before you're completely done with the renovations. It's a good idea to wait until the houses are presentable enough to attract buyers before scheduling showings, but not necessarily completed. Just be upfront with potential buyers and explain what renovations you plan on completing, and in what period of time. Most perspective buyers will be accepting of these kinds of terms as long as the work is completed within a reasonable amount of time and well before closing.

One thing that you need to remember when flipping houses is to never take on more than you can handle at once. Starting with one house at a time is often good advice for those with limited funds or flipping for the first time. If you can't comfortably keep up the mortgage, taxes and insurance until you've revitalized the home and sold it, then you should reconsider purchasing it in the first place. Maintaining financial stability throughout the entire venture is crucial and could ruin your credit, making it difficult to mortgage future homes

Even if it's necessary for you to rent out the home or homes before renovations are completed and before you're able to resell them, it would be a lot better than allowing your payments to become delinquent. If you must rent the homes before you're able to complete the renovations, perhaps you could give the tenants the opportunity to purchase the home first, and if they're not interested then you could just inform them that you're going to be selling the homes soon so they can make other living arrangements when the properties do sell.

If you find real estate interesting and you're looking for a way to make a profit without having to deal with the potential headache of renting, then flipping houses may be for you. It's definitely not for someone who doesn't have the time to dedicate to rehabbing the houses as soon as possible, or you won't make a profit, and will still have to pay the mortgage or mortgages on the homes. On the other hand, if you have the motivation and dedication that it takes in order to purchase, rehab and resell a home, you can build quite a lucrative and exciting future for yourself and your family by flipping.

June 6, 2008

Bond Swaps

A passive approach to bond investing typically involves purchasing a bond and holding it to maturity. With that approach, you receive your entire bond principal and do not have to worry about the effects of interest rate changes on the price of your bond. However, as the interest rate environment changes, there may be opportunities to use more active strategies for your bond investments, such as Bond Swaps.

A Bond Swap is simply the sale of one bond and the purchase of another, designed to better meet your investment objectives or to take advantage of current market or tax conditions. Some of the more common bond swaps include the following: rate anticipation swap, substitution swap, intermarket swap, and tax swap.

• A rate anticipation swap is made to take advantage of changes in market interest rates. It typically involves swapping short- for long-term bonds or vice versa, depending on your beliefs about the future direction of interest rates. If you anticipate interest rates will increase, you might swap out of longer-term bonds into shorter-term bonds. Then, when interest rates increase, your bonds won't be significantly affected by the rate change, and you will have funds available to invest at higher rates. If you anticipate lower interest rates, you would do the opposite to lock in current rates.

• A substitution swap involves swapping one bond for another similar bond with higher yields. That could happen if a company's financial situation has improved, but the bond's credit rating hasn't been upgraded yet.

• An intermarket swap involves swapping bonds in different market sectors, such as government and corporate, to take advantage of changing yield spreads. For instance, the spread between corporate and municipal bonds may narrow, making the returns on municipal bonds higher than corporate bonds on a tax-equivalent basis.

• A tax swap is made to realize a bond's loss for tax purposes. You sell bonds with a current market value less than your purchase price so you can realize the loss and deduct it on your tax return. You then use the proceeds to purchase a similar bond. The end result is you own a comparable bond, but you also have a tax loss to deduct on your tax return. That loss can be used to offset other capital gains or to offset up to $3,000 of ordinary income in excess of gains, with any excess losses carried forward to future years.

When making a tax swap, you must comply with the Wash Sale rules. A Wash Sale occurs when an investor sells a security at a loss and 30 days before or after the sale purchases a substantially identical security. If deemed a wash sale, the loss can be deducted for tax purposes. If you want to purchase another bond within the 30-day window, the new bonds must differ in a material way from the bond sold, such as different issuers, coupon rates, or maturity dates.

June 4, 2008

Bond Strategies Over Your Lifetime

A common misconception regarding bonds is that they are only appropriate for older or more conservative investors. However, bonds should be considered by all investors as part of a well-diversified portfolio, even though their role may change over your lifetime.

Your 20s and 30s:

At this stage in your life, your investment goal is probably to maximize your capital. Your time horizon is very long, and your risk tolerance is probably high. Often, stocks will comprise a significant portion of your portfolio, but you should also consider bonds to diversify your portfolio and balance risk and volatility. Since your risk tolerance is high, you might consider higher-risk bonds, such as high-yield bonds. If your investments in your employer's 401(k) plan or other retirement plan are heavily weighted in stocks, you might want to increase your bond allocation in your taxable portfolio.

No matter how you decide to invest, now is a great time to get in the habit of investing regularly by starting a dollar cost averaging program. Dollar cost averaging involves investing a set amount of money in the same investment on a periodic basis. For instance, instead of investing a lump sum in one stock immediately, you might invest $2,000 in that stock at the beginning of each month. A dollar cost averaging program is by definition a long-term program. Thus, if followed consistently, it helps encourage long-term investing. Dollar cost averaging, however, does not ensure a profit or protect against loss in declining markets. Before starting a dollar cost averaging program, consider your financial ability to continue purchases through periods of low price levels.

Your 30s and 40s:

Your investment goal at this point in your life is probably to grow your capital. Your investment time horizon is still long, but your risk tolerance may be more moderate. During these years, you'll typically accumulate a significant portion of your retirement portfolio. As your children's college educations and your own retirement get closer, you will probably feel less comfortable with the possibility that your investment portfolio could decline substantially, which is why your risk tolerance is moderate. At this point, you may want to shift more of your investment portfolio to bonds. You may want to consider zero-coupon bonds, with maturities that coincide with your children's college educations. If you find yourself in a high tax bracket, you might want to take a look at municipal bonds, since the interest income is exempt from federal, and sometimes state and local, income taxes.

Your 50s and 60s:

Now, your investment goal is probably to conserve capital. Your investment time horizon is moderate, while your risk tolerance is lower. With retirement getting close, you don't want to risk a major decline in your investment portfolio, so your risk tolerance is low. Bonds will probably take on increasing importance in your portfolio at this stage of life. You'll want to make sure you have a well-diversified portfolio of bonds, probably setting up a bond ladder to manage interest rate risk. Municipal bonds will probably still be of interest if you remain in a high tax bracket.

Investing After Retirement

At retirement, your primary investment goal is to preserve your capital. Your investment time horizon will depend on when you will use your investments, but your risk tolerance is probably low. Many retirees like to use the steady income from bonds as a source of regular retirement income. Inflation is also a concern, so you may want to consider Treasury Inflation Protection Securities (TIPS).

June 2, 2008

The Benefits of Paying Off Your Mortgage Early

Whether you already have a mortgage or you plan on getting one sometime in the near future, it would be greatly beneficial to you if you were to pay it off sooner than what the terms require. First of all, by the time you actually pay off your mortgage the conventional way, you will have paid an astronomical amount of money, especially if your credit is less than perfect and your interest rate is high. Even if your interest rate is low, if you pay close attention the projected amount that you will pay with the added interest over the years, you will quickly realize how much wiser it would be to reduce the amount of interest that you have to pay as much as possible.

Many mortgage companies are currently offering homeowners the option to make biweekly payments, as opposed to traditional monthly payments. This option is great for those looking to pay off their mortgage early because choosing this option sometimes allows individuals to pay off their mortgages 6 -7 years earlier than expected, which of course saves you a great deal in interest. Another advantage of paying your mortgage on a biweekly basis instead of monthly is that not many people are not paid once a month, and are paid either weekly or biweekly instead. Therefore, mortgage due dates are more likely to fall on homeowners' pay dates, making it easier to keep payments current.

If you've received a letter from your bank offering a biweekly pay schedule as a new option, you probably noticed that in order to participate in this special program you are required to pay a fee. Many banks require an enrollment fee ranging anywhere from $250 to $400, which can either be paid all at once or in increments. To some people these fees may be insignificant and well worth it, but to others they may seem ridiculous and unnecessary. This is why your bank merely gives you the option and doesn't make it mandatory, so in the end you need to decide if it's the right thing for you.

If you don't like the idea of a biweekly mortgage payment, whether it's because of the extra fees involved, or for some other reason, there is a way that you can reap the same benefits by using a different strategy. By making at least 2 extra mortgage payments a year, you will remove about 6 - 7 years off your mortgage, about the same as if you were to sign up for the biweekly program that your bank may offer. By making additional payments as opposed to signing up for the biweekly program, you are able to save on the additional fees that biweekly mortgages require and simultaneously reduce your interest.

No one wants to spend a majority of their lives making hefty mortgage payments if they don't have to. If you are financially able to make extra payments in order to quickly reduce your principal, then it would be a smart choice to do so. This will not only reduce your principal, but will also trim down the amount of interest that you pay as well. If by chance you come into a large amount of money and are able to pay off your mortgage years early, you should check with your mortgager in order to find out what the early pay-off penalty is, if there is one. Usually, though, this penalty isn't high enough to prevent a homeowner from paying off their mortgage early, and the benefits of paying it off early will often outweigh the inconvenience of the penalty.

Even if you can't regularly make extra payments on your mortgage in order to pay it off sooner, doubling up whenever you receive tax returns and other lump sums of money can really make a difference in how soon your mortgage will be paid off. If you don't anticipate receiving any lump sums of money, then even small amounts of extra money paid toward the principal can make a huge difference. These small payments will quickly add up, and you'll be well on your way to reaping the enormous benefits of paying off your home years before schedule.


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