PORT ST. LUCIE – “Small things add up fast” and “manage your spending” are pieces of good financial advice.
What makes this advice even better is it came from high-school students.
The Allied Health Assisting students at St. Lucie West Centennial High School recently completed a financial literacy program that consisted of 12 modules throughout the school year.
Debt Management Credit Counseling Corp (http://www.dmcconline.org), a nonprofit charitable organization (“DMCC”), announces new office location. New location is on a major South Florida thoroughfare and retail front, providing increased opportunity to assist local residents. DMCC provides free counseling and debt management plans to assist consumers with the repayment of their debt.
Debt Management Credit Counseling Corp. http://www.dmcconline.org, a nonprofit credit counseling organization (“DMCC”), has been named an Approved Adopter of the National Industry Standards for Homeownership Education and Counseling. Counseling organizations that adopt these standards use a set of guidelines for quality counseling. Individuals and families who want to be educated and counseled on homeownership can trust that DMCC will provide consistent, high quality services.
FEATURE ARTICLE: Audit-Proof Your Tax Return
Is there really such a thing as an audit-proof tax return? A way of preparing your return to guarantee that you won’t be subject to an audit? Of course not. But there certainly are ways to minimize your risk.
You don’t want to thumb your nose at Uncle Sam, thinking that an audit won’t happen to you. It just might, and if it does, you should be prepared. But what can you do to make your tax return less susceptible to the IRS’ eagle eyes? Here are some suggested strategies.
Be neat!
Consider preparing your tax return by computer. A neatly prepared, computer-generated return looks much better to the IRS staffer (called a “classifier”) who will decide whether to audit your return. Virtually all reputable tax pros now complete their returns using computers, and there are a number of really good do-it-yourself computer programs for PCs and Macs alike. (For my do-it-yourself friends, I recommend TurboTax.) Some websites even allow you to securely complete your tax return from the comfort of your Web browser.
If you’re unable to use a computer to prepare your return, at least print clearly and carefully. Don’t decide to get your revenge on the IRS by preparing your return with a red crayon. A messy return — cross-outs, sloppy handwriting, and smudges — is like hanging a sign on your return that says, “Audit me!” It might also give the IRS the impression that you are careless and disorganized.
Remember that the IRS has stepped up its audit enforcement in recent years. The IRS believes that the taxpaying public has gotten an audit-free ride for years — and that ride is now over. While it’s still unlikely that you will be audited, the odds have increased substantially.
Be accurate!
The only thing worse than a messy return is an incorrect one. By “correct,” I mean that all of your numbers add and subtract accurately. This is another reason to prepare your return by computer, since you don’t need to worry about a computer program flubbing any of the math.
Remember that your tax return will be loaded into the IRS computers, and those computers will check your return for math errors. If your return states that 2 + 2 = 5, they might start wondering about some of your other numbers. Don’t give them a chance. Double-check your numbers before you mail your return.
Document deductions!
If you claim large deductions for unusual items, such as losses because of earthquake, flood, or fire, attach documentary proof to the back of your tax return. Copies of repair receipts, canceled checks, insurance reports, and pictures are always a good idea. This won’t stop the IRS computer from flagging your return, but the documents should catch the attention of the IRS classifier.
Be square!
Whatever you do, don’t use round numbers. For example, if you report $1,000 or $12,000 instead of $978 or $12,127, it’s an indication that you are estimating rather than keeping good records and reporting the actual, correct amount.
By Jeanine Skowronski www.fool.com
MONEY SAVING TIP: Gym Membership
Are you really using it multiple times a week? Divide your monthly dues by the number of times you go in a month and get a realistic picture of what you’re spending on a one-hour workout. Park districts or community centers often have low-cost or free programs. Also check into exercise videos or a piece of home exercise equipment that you would use regularly. If you decide to keep the membership, check to see whether the facility offers discounts for coming at off-peak times.
DID YOU KNOW…that carrying a balance helps build credit is a myth?
The credit bureaus are privy to your payment history and the balance on your monthly credit card bill, “but they don’t know if you’re paying interest or not,” Nazari says. This means deciding to pay the minimum each month isn’t going to do much more than cost you money, especially if you’re carrying a particularly high annual percentage rate. The lesson? Don’t forgo payments just to carry a balance month to month.
FEATURE ARTICLE: How to Dispute Errors on Your Credit Report
Your credit report contains the following information:
Consumer reporting agencies sell the information to creditors, insurers, employers and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.
The federal Fair Credit Reporting Act (FCRA) promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies.
Some financial advisors and consumer advocates suggest that you review your credit report
periodically. Why?
Identity thieves may use your information to open a new credit card account in your name. Then, when they do not pay the bills, the delinquent account is reported on your credit
report. Inaccurate information like that could affect your ability to get credit, insurance, or even a job.
To get a full worksheet on how to dispute errors on your credit report, click HERE
MONEY SAVING TIP: Cell Phones
“For $9.88, you can buy a TracFone (prepaid cell phone) with pretty decent coverage and pay by the minute,” says Mike Sullivan, director of education at Take Charge America in Phoenix. “And if you’re careful, you can end up saving $40 to $50 a month off a typical $80 cell phone bill.” He also recommends canceling your land line unless you have medical issues that may require emergency calls.
DID YOU KNOW…Your income does not affect your credit score
People tend to assume that the more money they make, the higher their credit score will be, but that’s not the case. While it’s true your income may affect your ability to pay your bills on time, it has no bearing on your credit score, Albary says.
Your income can, however, influence a lender’s decision to approve you for a loan. This is because lenders often compare the income you’ve listed on your application to the debts listed on your credit report in an attempt to judge your ability to make monthly payments.
www.finance.yahoo.com
Debt Management Credit Counseling Corp. http://www.dmcconline.org, a nonprofit credit counseling organization (“DMCC”), delivered holiday gifts to the children of Florence Fuller Child Development Center (FFCDC) in Boca Raton. Every holiday season, DMCC participates in the “Adopt an Angel” charity to give a child in need a new toy. Toys were delivered to the center by DMCC employees, and a volunteer dressed as Santa.
FEATURE ARTICLE: Energy Wasters in Your Home
According to Maria Vargas, spokesperson for EnergyStar, a division of the Environmental Protection Agency (EPA), energy bills can differ depending on the size and location on your home, but the average household spends $2,200 a year. The good news is these costs can be cut dramatically.
Energy Star, a program started in 1992 to help reduce greenhouse gas emissions and lower energy costs for consumers, offers suggestions for how to reduce your annual electric costs by a third. In other words, you can save about $700 a year on electricity. Last year, Vargas points out, Americans saved about $17 billion on energy bills and reduced green house gas emissions by nearly the equivalent of 30 million cars. Using data compiled by EnergyStar, MainStreet breaks down your energy bill and identifies the biggest wasters to help you save money (and reduce greenhouse gas emissions!) this winter.
HVAC Systems
If you really want to cut back on your energy use, you need to focus on heating and cooling your home,” Vargas says. That’s because these two categories combined account for 46% of your overall electric bill. While most homeowners can’t afford a complete overhaul of their homes’ heating, ventilating and air-conditioning (HVAC) systems, some changes can increase energy efficiency and include:
• Installing a programmable thermostat, which lets you set temperatures for specific times of day. These devices can save about $180 each year on energy costs.
• Change air filters regularly. The harder your HVAC unit has to work, the more energy it eats away. Filters should really be changed out monthly, especially during the summer and winter months when the HVAC unit has a heavy workload. If you find this tedious, EnergyStar suggests changing filters a minimum of every three months.
• Seal your heating and cooling ducts, especially those running through the attic, crawlspace, unheated basement or garage, as that improves the efficiency of your HVAC unit by as much as 20%.
Water Heater
According to EnergyStar, your water heating system accounts for 14% of your energy bill. Monetarily speaking, the average household spends $400-$600 per year on water heating. To reduce this expense, lower standby losses, such as heat that escapes the water heater and seeps into the surrounding basement area, as well as the amount of hot water you use in your home.
When set too high, or at 140 degrees Fahrenheit, your water heater can waste anywhere from $36 to $61 annually in standby heat losses, and more than $400 thanks to overall consumption. Lower that expense by bringing the heater’s thermostat to 120 degrees Fahrenheit or below.
Lights Out
In EnergyStar’s breakdown, lighting accounts for 12% of bill, but it also represents one of the easiest fixes. In fact, by simply replacing five of your standard incandescent light bulbs with compact fluorescent light bulbs, you can save $70 a year.
Hot Stuff
Appliances only account for 13% of electric bills, so naturally, most people don’t upgrade to an energy efficient toaster. Still, if you are committed to reducing the amount of energy you use, you need to focus on larger appliances that use a heat coil, such as a refrigerator or washer and dryer. To do that, make sure that your fridge’s filters are cleaned regularly, and consider using only cold water to wash laundry loads. That can save $30 to $40 each year. But don’t be too stingy, Vargas says. Replacing a major appliance, like a refrigerator that is 10 to 15 years old, may help you save in the long term as new technology is constantly subject to federal standards that adjust every year.
Energy Vampires
Any appliance or device that sucks up energy when it’s plugged in, despite being turned off, is one of these money-draining culprits. According to EnergyStar, this includes most electronic devices, especially those that use some sort of display, like a television, laptop or DVD player. Slaying energy vampires won’t lower your energy bill significantly — electronics only account for about 4% of the total cost — but it’s important to keep them in mind, as they consume 75% of the electricity used to power home electronics and appliances.
Powering Down
The best way to eliminate this phantom menace is not only to turn energy vampires off, but unplug them. This may be easier said than done, but unplugging a laptop in between uses isn’t particularly problematic. However, doing so with your television would require you to wait for the cable to reboot every time you wanted to watch a program.
As an alternative, EnergyStar suggests plugging your television and/or DVD player into a power strip and then turning that off when your television is in stand-by mode. Put your computers on sleep mode, or manually turn off the monitor inbetween visits, as opposed to utilizing a screen saver, which, contrary to popular belief, does not reduce energy output. Also, make sure you unplug a battery charger of adapter as it continues to draw energy even when the product no longer needs it.
Put Stand By on Stand by
The final 11% of your electric bill comprises devices that don’t exactly fit into any particular category. This includes dehumidifiers, external power adapters and video game consoles, which are all considered energy vampires.
An Xbox 360, for example, if left on the draws approximately 1,000 kWh/yr. The PS3 draws 1,300 kWh/yr. According to EnergyStar, these values drop dramatically when users routinely turn the device off after use, lowering annual energy levels down to 110 and 120 kWh/yr, respectively. Since it costs about 12 cents per kWh/yr in the average residential home in the U.S., it costs $120 if to leave your Xbox plugged in for the entire year.
To lower these costs, unplug the devices when you are not playing and only resort to stand-by mode as, well, a stand-by. Energy Star estimates that stand-by power accounts for more than 100 billion kilowatt hours (kWh) of annual U.S. electricity consumption, and $11 billion in annual energy costs.
MONEY SAVING TIP: Plan a pantry week
Challenge yourself to get through one week every quarter (or more often, if you can) without setting foot in the grocery store, says Mary Hunt, author of “Debt-Proof Living.” Use leftovers, unbury freezer items and clean out your pantry. Chances are, you have more food on hand than you think. Use the money you’ve saved on groceries to pay down debt, bolster your savings or even make a contribution to charity.
DID YOU KNOW…a budget can help you build growth?
Once you have a clear view of your overall financial picture, you can shift your focus to aggressively eliminating debts and building wealth. Once I solved my personal debt issues, I was already in the habit of putting a certain amount monthly toward debt. So rather than change that habit, I simply redirected those funds toward my savings.
As my savings and investments build, I’m able to generate a passive income from interest payments and capital gains while still using my actively generated income to budget for monthly expenses. In other words, I’ve been able to increase my total income simply by being smarter about how I use my regular paycheck.
www.usnews.com
FEATURE ARTICLE: You can expect more bank fees in 2012
Banks will continue to experiment with fee increases in the New Year, according to our own analysis and industry experts, as they attempt to make up billions in lost revenue due to the bad economy and new regulations.
Here is some of what you can expect for 2012:
www.consumerreports.org
MONEY SAVING TIP: Form a wholesale buying club
Families — not just businesses — can band together and form buying clubs to purchase groceries at wholesale prices.
There are some logistics required, but a buying club could make sense if you don’t have a warehouse-club type store nearby. Club representatives fax or e-mail a group order to the wholesaler, arrange for delivery and divvy up the goods. Generally, items are purchased by the case, then shared. Many wholesalers offer produce, organic items, baby supplies and paper goods in addition to nonperishable food items.
To find a club in your area, search online for “grocery buying club” and your city’s name, or check sites like unitedbuyingclubs.com or CoopDirectory.org.
DID YOU KNOW…that buying generic is super smart?
When it comes to stocking up on basic ingredients like flour, salt, sugar, rice, and milk, you’ll barely notice a difference in taste between the generic and the brand-name equivalent. In many cases, the only real difference is the colorful packaging and presentation of the product. You’re buying the exact same item with virtually the exact same composition of ingredients whether it has a fancy label on it or it’s the supermarket’s own brand. Make the switch to more generic products and you’ll be able to shave a few dollars off your grocery bill.
www.usnews.com
FEATURE ARTICLE: Six tips for saving money on airfare
With fees, fine print and blackout dates, locking in a low price on your plane ticket can seem impossible. We have some tips that can help cut the cost of flying, plus help organize your search for the best deal.
In addition to setting up alerts to track fares and searching for domestic flights three and a half months prior to booking (five and a half for international), you should also buy your ticket early—you’ll pay a premium if you wait to within 14 days of travel. Also, when comparing flights online through sites such as Expedia, Kayak, Priceline and Travelocity, be sure to check the airline’s own site, which can be cheaper because there is no commission.
How to get rock-bottom rates:
MONEY SAVING TIP: Shop at the drugstore
Savvy shoppers can score huge deals on groceries and household supplies by shopping at drugstores like Walgreens, CVS or RiteAid Pharmacies. As an incentive to get you in their doors and back again, these stores offer rock-bottom sales on everything from canned soup to cleaning supplies. Combine the sales with store and manufacturers’ coupons and many of your purchases may be free, says blogger Kirby. “I haven’t paid a dime for shampoo or toothpaste in more than two years,” she says.
How it works: At Walgreens.com, click the “weekly ad” tab; certain advertised items offer register rewards you can use like cash on your next Walgreens purchase. At CVS.com, click on the “extra care” link to sign up for a free store card. When you use it, you’ll earn 2 percent in “extra bucks” (CVS store credit) on every store or online purchase. Certain purchases, noted in the “weekly store ad” link, also generate extra bucks you can redeem on your next visit. At RiteAid.com, click the “single check rebates” icon. That site requires you to submit receipts to earn monthly rebates.
Extreme couponer Crystal Paine of Moneysavingmom.com offers helpful tutorials for the Walgreens and CVS programs and countless others on her site.
www.bankrate.com
DID YOU KNOW…Uncle Sam can help pay for child care?
Married and unmarried parents who work can qualify for a child care credit to help with the costs of providing child care. Certain cafeteria plans allow participants to contribute to a flexible spending account (FSA) that can be used for child care expenses. Expenses paid with FSA money cannot be claimed for the child care credit. Also, the maximum expenses eligible for the child care credit are reduced by the FSA paid expenses.
Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care, even though labeled education. Expenses to attend kindergarten or a higher grade are not expenses for care; however, before- and after-school care expenses do qualify until age 13.
The maximum you can put into the FSA is $5,000. The maximum expenses eligible for the credit when you have two eligible children is $6,000. However, the $6,000 is reduced by the $5,000 from the FSA, so your maximum eligible credit is $1,000. Use Form 2441 to compute the child credit and FSA exclusion.
www.bankrate.com
Debt Management Credit Counseling Corp. http://www.dmcconline.org, a nonprofit credit counseling organization (“DMCC”), provides tips to consumers on removing common errors off their credit reports. Credit report errors can cost consumers thousands of dollars in higher interest rates and lost job opportunities. Consumers with past due credit card accounts may want to consider a debt management plan to obtain lower payments and have the accounts reported as current.
FEATURE ARTICLE: Get rid of bank fees once and for all
There’s nothing worse than getting punished for doing the right thing. And that’s just what happened to a mom and her 18-year-old son when he opened a checking account at a local bank in McCullom Lake, Ill. His mom encouraged him to open the bank account as a way to teach him how to handle a bank account. And that’s when the trouble began.
After moving some money from checking to savings, Daniel Ganziano’s checking account balance fell to $4.85. Because of the low balance, the bank levied a $9.95 maintenance fee. The fee overdrew the account by $5.10, which triggered another fee of $28 that the bank charged daily. In just two weeks, the fees totaled $229.
This story, reported by the Chicago Tribune, is yet another example of banking fees gone wild. There are, however, a few simple steps you can take to eliminate banking fees once and for all.
1. Don’t assume small banks have small fees: With the Occupy Wall Street movement, there has been a big push to move from big banks to small, community banks. While smaller banks may be a great option for some, don’t assume they are free. Small banks, including credit unions, charge fees, too. And in some cases, they may not be the best option. Nothing replaces researching banks and making the best decision for your financial needs.
2. Go online: Some of the best banking options come from online financial institutions. Because online banks don’t have the cost of building out a network of physical branches, they often charge less in fees and pay higher interest rates.
3. Watch minimum balance requirements: It’s not uncommon for a bank to waive a monthly maintenance fee, but often you must maintain a minimum balance. It’s important to understand the terms of the maintenance fee before opening an account. And if a minimum balance is required to waive the fee, make sure you meet this requirement.
4. Monitor your account: There are a lot of good reasons to monitor your bank account. Of course, one of the most important reasons is to watch for unauthorized transactions. But keeping a close eye on your account will also help you spot bank fees that can sneak up on us. Because bank fees tend to multiply quickly if the account is overdrawn, addressing the issue as soon as possible is paramount.
5. Your bank may not be best for your children: Accounts designed for children often pose special problems when it comes to fees. Because most children do not keep a lot of money in an account, fees can quickly erode what little money they have. As a result, a parent’s bank may not be the best option for children. I’ve found that the best bank accounts for children are often online banks with no fees.
If you are wondering what happened to the bank fees charged to Daniel Ganziano, the bank eventually waived them. But it took the involvement of Jon Yates (he writes the “What’s Your Problem” column for the Chicago Tribune) before the bank would budge.
www.usnews.com
MONEY SAVING TIP: Stockpile sale items
Many avid couponers stockpile large amounts of nonperishable groceries and toiletries purchased on sale. Carrie Kirby, who blogs for Chicagonow.com/frugalista, once filled the entire cargo hold of her Subaru with cans of her favorite soda. “My basement shelves hold enough of things like toothpaste and cereal — often purchased for 25 cents or less — to last our family six months to a year,” she says.
And if a family member gets ill or loses a job, you’ll have a nicely stocked food pantry during a rocky time.
www.bankrate.com
DID YOU KNOW…to add back in the income tax when determining how much it costs you to buy things?
The sales tag on the leather jacket you want says that it costs $1,000. You know to add in the sales tax to determine the full price, which is perhaps 5% higher, or $1,050. But even that is not the true full price.
You can’t buy the leather jacket by earning $1,050. You need to have $1,050 in take-home pay to buy it, and that means that on a pre-income-tax basis, you need to earn a good bit more, perhaps $1,250.
It’s true, of course, that the money that goes to income tax is not yours to spend or save. Refraining from buying the leather jacket will not get it back for you. The other side of the story is that paying income tax hinders your effort to win financial freedom early in life as much as paying sales tax. Mentally adding back the income tax helps you appreciate how many hours of labor it takes to obtain a jacket with a nominal price tag of $1,000.
FEATURE ARTICLE: How to Get the Saver’s Credit
Low income workers who save for retirement using a 401(k) or IRA can earn a tax credit worth up to $1,000 for individuals and $2,000 for couples in 2011 and future years.
The saver’s credit can be claimed by workers whose modified adjusted gross incomes are up to $28,250 for singles, $42,375 for heads of households, and $56,500 for married couples in 2011. In 2012 those income limits will increase to $28,750 for singles, $43,125 for heads of households, and $57,500 for couples.The first $2,000 workers contribute to an IRA, 401(k), or similar workplace retirement account can count towards the saver’s credit. The credit can be used to increase your refund or reduce the tax you owe. This tax credit is available in addition to the tax deferral you get for making a traditional 401(k) and IRA contribution and any 401(k) match you get from your employer.
Consider a married couple who earned $30,000 in 2011 and contributed $1,000 to an IRA. They will be able to claim a $500 tax credit for their $1,000 IRA contribution.
Saver’s credits totaling just over $1 billion were claimed on approximately 6.25 million individual income tax returns in 2009. The credit varies based on your income and tax filing status and ranges from 10 percent to 50 percent of the amount you saved up to $2,000. Most taxpayers received modest tax credits for their retirement account contributions. Saver’s credits averaged $121 for single filers, $159 for heads of households, and $202 for married couples. “Though the maximum saver’s credit is $1,000, $2,000 for married couples, it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers,” the IRS says in a statement.
Awareness of the saver’s credit is increasing, but remains low. Just 21 percent of people earning less than $50,000 say they are aware of the saver’s credit, according to a Transamerica Center for Retirement Studies online survey of 4,080 workers age 18 and older at for-profit companies, but that’s up from 12 percent in 2010.
The saver’s credit was first added to the tax code in 2002 as a temporary provision, and was then made permanent in 2006. Income limits are now adjusted annually to keep pace with inflation. Workers under age 18, full-time students, and individuals claimed as dependents on someone else’s tax return are not eligible for the credit. Rollovers and trustee-to-trustee transfers into retirement accounts don’t count toward the credit. Your eligible contributions may be reduced by recent distributions you have taken from a retirement account.
Workers interested in getting the saver’s credit in 2011 must make 401(k), 403(b), 457, or Thrift Savings Plan contributions by the end of the calendar year. However, retirement savers have until April 17, 2012 to add money to an IRA that will allow them to get the credit in tax year 2011.
www.usnews.com
MONEY SAVING TIP: Pursue goals of intense concern to you and you alone.
Have you ever had the experience of enjoying a nice dinner out with your spouse or a good friend, commenting that you were too full to have dessert, and then found yourself wavering when the waiter came by with the dessert tray? If you love cheesecake, and you see that this place makes a good cheesecake, you want some, whether in theory it is a good idea for you to order some on this particular occasion or not.
You need to want to save the way you want to eat cheesecake (if you love cheesecake), or the way you want to eat a chocolate brownie (if you are a chocolate brownie lover), or the way you want to eat an apple cobbler (if you are an apple cobbler lover). A general desire to save is like a general desire for desert — it’s not compelling enough to inspire action. Find what you’re passionate about and make your savings account turn it into a reality. The trick to becoming an effective saver is identifying that something, the saving goal that provides you with the motivation needed to get the job done.
People trying to sell always try to hit the emotional hot buttons with their sales pitches. They do this because it works. It works on the saving side too. To save well, you need to direct your money management energies to the pursuit of a goal that hits your emotional hot buttons.
DID YOU KNOW…You need to protect yourself in a short sale?
After a short sale, the mortgage lender often will report to credit bureaus that the home loan was settled for less than the full amount. In addition, it can also note the amount of the deficit as “balance owed” on the credit report, even though the obligation has been finalized and no additional money is owed.
In other words, if you have a $300,000 mortgage and sell your house for $250,000, the bank could report a balanced owed of $50,000.
While the short sale will damage your credit score dramatically (as much as a foreclosure, according to examples recently released by FICO), you can mitigate the damage slightly by arranging with the lender not to report a balance owed.
The best time to negotiate this with the lender: before or during the short sale process, says Ulzheimer. While you can attempt it after the fact, that’s not as practical.
“After it’s been paid, the lender starts to lose interest in speaking with a former customer.”
www.bankrate.com
Debt Management Credit Counseling Corp http://www.dmcconline.org, a nonprofit credit counseling organization (“DMCC”), awards Endowed Scholarship to Ricardo Wehrhahn, a student from The Harriet L. Wilkes Honors College of Florida Atlantic University (FAU). The DMCC scholarship fund has awarded an FAU student for 11 consecutive years. The scholarship was established in 2001 to help students strive for excellence and achieve academic success.
FEATURE ARTICLE: Evaluating life insurance needs.
Because life insurance typically becomes more expensive as we age, many people may believe they can’t afford to purchase coverage later in life. However, considering that life insurance is significantly less expensive today than it was a decade ago, you might be able to purchase new coverage and pay premiums comparable to those that were available when you were 10 years younger.
It’s a good idea to review your life insurance situation on a regular basis. Here are some reasons why your coverage may need to evolve to keep pace with your life.
Life Changes
If your income and/or net worth have increased significantly since you purchased your policy, ask yourself whether your current coverage would enable your survivors to maintain their current standard of living. Major life events such as birth, marriage, death, and divorce may also affect the amount of coverage you need.
Inflation
Because of inflation, a policy purchased years ago may no longer offer the same level of protection. For example, a 3% inflation rate can cut the purchasing power of a death benefit in half in about 24 years, based on the Rule of 72 (72 ÷ 3 = 24 years).
Estate Conservation
One popular reason for owning life insurance is to provide liquid funds to help heirs pay estate taxes and any other debts. Considering that the estate tax has changed several times over the past decade, it’s a good idea to review your coverage in light of current estate tax laws and your net worth.
As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.
This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.
MONEY SAVING TIP: Save with a purpose.
Don’t save in pursuit of a general desire to “get ahead” or to “have something to show for your years of work” or to “do the responsible thing.” Save in pursuit of a particular change that you want to make to enhance your enjoyment of life.
Reporters often begin their newspaper and magazine articles with anecdotes. Why? Because the specifics of a story possess an emotional pull that abstractions do not. If you save “to be responsible,” you will not save. If you save because you want to attend a family reunion, and saving is the way to get there, you will.
Many people look askance at those who don’t want to make contributions to buy a gift for the boss’s birthday because the amount of money involved is small relative to what must be saved to finance a retirement. It is better to save for lots of little things over the course of a lifetime, just as you spend for lots of little things. To make saving matter, direct your mental energies to the small things that saving can do for you at all stages of life instead of the big dramatic thing (financing an old-age retirement) that it will do for you only once near the end of your active years.
DID YOU KNOW…you can ask for a ‘good-will deletion’?
If you only have one or two bad marks on your credit record, you may be able to get them expunged, says John Ulzheimer, president of consumer education for SmartCredit.com, based in Costa Mesa, Calif.
Say you’ve paid late, but have an otherwise spotless credit history. You can ask your lender for a “good-will deletion,” he says. “It doesn’t mean it is wrong or was reported incorrectly. Essentially, what you’re doing is asking the creditor to cut you some slack.”
The good news: “You’ll be surprised how many times they will,” says Ulzheimer.
The bad news: “If you’re habitually late, it won’t work,” he says. This is strictly for folks who err rarely.
As for whom to ask, start with customer service. But you may have to go up the ladder. And make your request as soon after the error as you can. “The sooner, the better,” he says.
But it can make a difference in your credit score. “If you have two or three bad things on (your) credit report, and you get one or two removed through good-will deletion, you will be surprised how quickly your score will go up,” Ulzheimer says.
bankrate.com
Debt Management Credit Counseling Corp. http://www.dmcconline.org, a nonprofit charitable organization (“DMCC”), has published free tips for consumers to prepare for a possible pay cut. As the economic instability of our nation seems to threaten the financial well being of many individuals and families, it is essential that consumers plan for any potential reduction in their income. Consumers may view free educational article with tips at http://www.dmcccorp.org/how-to-prepare-for-a-paycut/.
FEATURE ARTICLE: What Are Some Smart Ways to Refinance?
Recently, fixed mortgages were near their lowest rates in almost 30 years. And if you are one of the many people who took out mortgages in the few years prior to that, you may be wondering if you should look into refinancing.
If your mortgage was taken out within the past five years, it may be worthwhile to refinance if you can get financing that is at least one to two points lower than your current interest rate. You should plan on staying in the house long enough to pay off the loan transaction charges (points, title insurance, attorney’s fees, etc.).
A fixed-rate mortgage could be your best bet in a rising interest rate environment, if you plan to stay in the house for several years. An adjustable mortgage may suit you if you will be moving within a few years, but you need to ensure that you will be able to handle increasingly higher payments should interest rates rise.
One way to use mortgage refinancing to your advantage is to take out a new mortgage for the same duration as your old mortgage. The lower interest rate will result in lower monthly payments.
For example, if you took out a $150,000 30-year fixed-rate mortgage at 7.5 percent (including transaction charges), your monthly payment is now $1,049. Refinance at 6 percent with a 30-year fixed-rate mortgage of $150,000 (including transaction fees), and your payment will be $899 per month. That’s a savings of $150 per month, which you can then use to invest, add to your retirement fund, or do with it whatever you please.
Another option is to exchange your old mortgage for a shorter-term loan. Your 30-year fixed-rate payment on a $150,000 loan was $1,049 per month. If you refinance with a 15-year fixed mortgage for $150,000 — including transaction costs — at 6 percent, your monthly payment will be $1,266. This payment is only $217 more than your previous mortgage, but your home will be fully paid for several years sooner, for a savings of more than $150,000! And some banks around the country are beginning to offer 10- and 20-year mortgages.
Either way you look at it, it’s an attractive idea.
If you’re considering refinancing your mortgage, consult your financial advisor and determine whether refinancing your home would be a good move for you.
MONEY SAVING TIP: Translate dollars spent into hours worked to earn those dollars spent.
Money in itself means nothing. It’s little green pieces of paper. It is what money stands for that means something. When you go to work, you are trading the power to control what you do with the hours of your days to an employer in exchange for those little green pieces of paper. To save well, you need to keep in mind what it is that is at stake when you spend some of those little green pieces of paper. The real cost of buying stuff is losing power over what you do with your time.
If you earn $25 per hour, a $50 expense is really the loss of control over two hours of time. Money can’t buy you love in a direct sense, but not spending money can buy you back control of your time, and you can then use your time to do things you love.
DID YOU KNOW…how to tell when BOGO and 2-fer deals are good?
BOGOs (buy one, get one), two-fers (two for the price of one) and bundled-item promotions successfully tempt you into shopping more often and spending more to raise the store’s number of sales as well as ticket averages, or amount of each sale. They’re not always a good deal for you if you’re not familiar with the store merchandise and its regular prices. “You’re not saving if you are actually spending more than you planned,” says Underhill.
Resist the urge: “Know your favorite retailers, brands, regular prices, promotions and discounts — and always check the clearance area first to find a similar item on sale to avoid buying two of anything and spending more,” says family financial expert Ellie Kay, author of “The 60-Minute Money Workout.“
“Ask yourself, ‘Do I really need two sweaters or two of the same jeans?'”
FEATURE ARTICLE: What Tax Deductions Are Still Available to Me?
Tax reform measures are enacted frequently by Congress, which makes it hard for U.S. taxpayers to know which deductions are currently available to help lower their tax liability. In fact, a former head of the IRS once said that millions of taxpayers overpay their taxes every year because they overlook one of the many key tax deductions that are available to them.
One of the most overlooked deductions is state and local sales taxes.
Taxpayers may be able to take deductions for student-loan interest, out-of-pocket charitable contributions, moving expenses to take a first job, the child care tax credit, new points on home refinancing, health insurance premiums, home mortgage interest, tax-preparation services, and contributions to a traditional IRA.
Of course, some tax deductions disappear as adjusted gross income increases. And some deductions are subject to sunset provisions, which your tax professional can help you navigate.
Another key deduction is unreimbursed medical and dental expenses.
Remember that you may only deduct medical and dental expenses to the extent that they exceed 7.5% of your adjusted gross income (AGI) and were not reimbursed by your insurance company or employer.*
In addition to medical and dental expenses, certain miscellaneous expenses — primarily unreimbursed employee business expenses — can be written off if they exceed 2% of AGI. Some of the expenses that qualify for this deduction are union dues, small tools, uniforms, employment agency fees, home-office expenses, tax preparation fees, safe-deposit box fees, and investment expenses. Your tax advisor will be able to tell you exactly what’s deductible for you.
The end of the year is the time to take one last good look to determine whether you qualify for a tax credit or deduction or whether you’re close to the cutoff point.
If you’re not close, you may opt to postpone incurring some medical or other expenses until the following year, when you may be able to deduct them.
On the other hand, if you’re only a little short of the threshold amount, you may want to incur additional expenses in the current tax year.
With a little preparation and some help from a qualified tax professional, you may be able to lower your income taxes this year. You just have to plan ahead.
MONEY SAVING TIP: Don’t carry excessive debt.
Some debt in our lives may be essential. We may need a mortgage to purchase a home, we may need to use our credit card to make purchases until pay-day, but your aim to save money should be to have as little debt as possible. Credit Card deb is typically the most expensive debt we may carry. You will be able to save money every month if you make it an absolute rule to pay off your outstanding balance every month. If you can have the discipline to do this you will save money by effectively having no debt, and thus no interest charge on your credit card(s).
DID YOU KNOW…about the ‘magic’ of display?
We can learn a lesson in Underhill’s book from a story told by a retailer about a tempting display of T-shirts.
“We buy them in Sri Lanka for $3 each. Then we bring them over here and sew in washing instructions, which are in French and English. Notice we don’t say the shirts are made in France. But you can infer that if you like. Then … we fold them just right on a tasteful tabletop display, and on the wall behind it we hang a huge, gorgeous photograph of a beautiful woman in an exotic locale wearing the shirt.”
Resist the urge: “Write a monthly mall shopping budget and stash cash in an envelope specifically for that purpose. When the envelope is empty, stop spending,” says Ramsey. “A written budget makes you think twice when you are tempted by impulse buys.”
FEATURE ARTICLE: Can Social Security be garnished?
If creditors and debt collectors are hounding you for money, you may wonder: Can Social Security be garnished? The answer is: It depends on who you owe money to.
Banks and other financial creditors can’t touch your Social Security benefits, but when the government is collecting on a debt, those funds are fair game.
The federal government can garnish your benefits for repayment of several types of debts, including federal income taxes, federal student loans, child support and alimony, nontax debt owed to other federal agencies, defaulted federal home loans and certain civil penalties. Supplemental Security Income cannot be garnished under any circumstance.
What you can lose
Among the government creditors who can grab a piece of your Social Security check, the strongest arm belongs to the IRS. Via the Federal Payment Levy Program, Social Security benefits are subject to a 15 percent levy to pay delinquent taxes. Unlike nontax debts to other agencies, for which the first $750 of your monthly benefits are off-limits to garnishment, the IRS can take its 15 percent cut regardless of how little money you’re left with. Lump-sum death benefits and Social Security benefits paid to children are not subject to this levy.
If you owe money on a student loan, it doesn’t matter how long ago you were in school. A 2005 U.S. Supreme Court case (Lockhart v. U.S.) determined there is no statute of limitations on Social Security offsets to repay student loans. The government can shave off up to 15 percent, provided your remaining monthly benefit doesn’t drop lower than $750.
Delinquent child support and alimony cases are processed through the national Court Ordered Garnishment System. In these situations, the maximum reduction to your benefits depends on the state where you live. The garnishment is limited to either the maximum allowed under state law or the maximum under the Consumer Credit Protection Act, or CCPA, whichever is less.
Per the CCPA, you can theoretically lose up to half your benefits if you are supporting a child or spouse in addition to the one involved in the court order; 60 percent if you’re not supporting another child or spouse; and up to 65 percent if the original court-ordered support is more than 12 weeks in arrears.
From the time you receive your first notice of a liability that is subject to garnishment, you generally have about 120 days to respond before the garnishment takes effect, says John Harman, an attorney and licensed taxpayer representative with JK Harris & Company, a tax-resolution firm based in Goose Creek, S.C. Every agency issuing a garnishment is required to provide information about how to appeal the decision.
The IRS will issue three notices before a levy goes into effect. You have 30 days from the date of the final notice to make a pay arrangement before the agency starts docking your monthly benefits. Other agencies have similar procedures, Harman says.
Losing the levy
Once you make an arrangement with the appropriate agency to repay your debt, the Social Security garnishment is released, says Harman. In some cases, you may be able to negotiate a settlement.
“There are rules allowing all the agencies, when someone owes money to them, to make some compromises with the debtor, to set up payment plans and, in true hardship circumstances, provide some other relief,” says Carolyn Carter, deputy director of advocacy with Boston-based National Consumer Law Center.
For tax debt, you may be able to negotiate an agreement to pay less than your full bill if you are truly strapped. But be aware that the IRS has strict eligibility rules for this arrangement, called an Offer in Compromise, and charges a $150 nonrefundable fee to apply.
In the case of a tax debt, your notice of liability may not pinpoint the specific reason you owe the tax, Harman says. Finding the root of the problem may require some investigation on your part, starting with a request for a review of your files.
“There could be a situation where, for example, a homeowner had been foreclosed on in a previous year,” he says. “Most individuals don’t understand that this can be considered income when the mortgage company writes off that liability. So the individual who had their home foreclosed on can actually end up with a tax debt that they’re not aware of.”
While tax law in effect through 2012 protects some homeowners from foreclosure taxes, affected homeowners must file a special IRS form to avoid the tax.
Escaping garnishment
Harman says people need to be proactive to avoid the threat of garnishment.
“They need to be aware of any potential debts that they have and be thorough when they’re sorting through their mail,” he says. “Don’t throw away any notices from any federal agencies, particularly the IRS.”
For student loan debt, Carter says you’ll have a wider range of options if you haven’t already defaulted. The National Consumer Law Center operates a website that offers information and advice for those having trouble repaying student loans. Find more information at NCLC.org.
“There are all sorts of programs for them to do what you might call workouts of their student loans — reducing the interest rates, changing the payment schedules,” Carter says. “In some circumstances, deferments are available. If the student is totally and permanently disabled or if the school closed while the student was there, and in some other circumstances, the student can get the loan discharged.”
MONEY SAVING TIP: Decide where to put that ‘payment.’
If you plan to sock money away for several years until you reach a specific savings goal, your “pay-yourself-first” money could become automatic contributions to a mutual fund or other stock-oriented fund. If you need the money to be more liquid than that, consider an online savings or money market account that gets linked to your current checking account. Many of these online-only accounts are insured by the Federal Deposit Insurance Corp. (FDIC) and pay annual percentage yields between 4 percent and 5 percent or even higher, as opposed to paltry yields of about 0.2 percent to 0.5 percent for traditional savings accounts. To find such an account, go to Bankrate.com, find the “Compare rates” section on the home page, select “Checking & Savings,” and then “MMAs/Savings Accounts.” (Just keep choosing MMAs and savings accounts as you click through.)
The important thing is that you commit to a savings plan. Delaying it or depositing your money into your everyday checking account where funds are easily accessible, won’t work.
DID YOU KNOW…that stores keep their clearance area messy on purpose?
“It’s really hard to conquer the clearance area in some stores because it’s actually designed to make you not want to spend time there,” says Kay.
Retailers know shoppers want to easily find the size, price and item neatly displayed. So they purposely create the frustration of the poorly marked and poorly organized clearance area to tempt you toward the beautifully displayed and perfectly organized full-price merchandise.
Resist the urge: “Never shop when you are rushed for time,” says Kay, “because this leads to making rash decisions.” Instead, she advises setting aside time to shop, dig and search for what you truly want, need and can afford from the clearance section.
Debt Management Credit Counseling Corp (http://www.dmcconline.org), a nonprofit charitable organization (“DMCC”), provides free seminars to support South Florida school efforts to teach students financial literacy. Focusing on teaching students the importance of credit and how it works, this educational program has been a part of DMCC’s mission since 2001. Covering everything from how credit is established to how to use a credit card, DMCC speakers make the presentation fun and easy to understand. Seminar schedules are currently being developed; administrators and faculty interested in taking advantage of this free service should contact DMCC’s Education Department to reserve a date.
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