Finance

7 Financial New Years Resolutions For 2015

December 22, 2014 By Sherry Tingley

“Tomorrow, is the first blank page of a 365 page book. Write a good one.” ? Brad Paisley — “Tomorrow, is the first blank page of a 365 page book. Write a good one.”
~ Brad Paisley

Keeping Resolutions Is The Hard Part

The list of New Year’s resolution stays about the same each year: Diet, exercise, quit smoking and/or drinking, save money and get out of debt. They’re right up there every January 1. For most, it’s a quick resolve and a fast forget. And does it matter?

Could be, some experts say. Especially if you put money into the deal, say buying an expensive juicer to add to the healthy diet that is soon forgotten. No refund will be offered for the fancy exercise equipment you buy and don’t use. Or if you take that first step in financial matters by consulting an expert, that money is lost.

The failure rate is high, according to a Grenny’s online survey. About half of Americans give up their resolutions just 30 days in to the New Year, while 75 percent are back to old habits within three months. Even the financial prudence that was brought on by the early-2010s recession have dropped by the wayside as the economy improved, experts say. When things were toughest, some 33 percent of Americans vowed to get financial planning under way. Now the number is down to 16 percent.

Jonathan Clements, director of financial education for Citi Personal Wealth Management, offers these suggestions that might bolster your resolve to keep the New Year resolution regarding financial health:

1. Buying items on sale is not a guarantee of saving money. Any spending detracts from savings, especially if the sale item isn’t something you really need.

2. Don’t focus overly on investment accounts. Checking every day isn’t necessary if you are a long-term investor. You may be prompted to trade too much and make panic decisions.

3. Don’t invest too heavily in employer stock. The company gives you a paycheck. Think twice before doubling your risk by tinkering with your portfolio.

4. If you want an incentive for keeping your resolution, write down where you think the Dow Jones Industrial Average, gold and the 10-year Treasury yield will finish. Email your predictions to everyone you know. Likely you’ll be wrong and you can learn from the experience that trying to time the markets is a futile exercise.

5. Get rid of wasteful spending. In this category are over-buying groceries so that they go bad before consumption, paying for lottery tickets, buying the wrong gifts for family and friends, paying for seldom-watched premium cable channels, most extended warranties, over-priced restaurant meals, clothing you don’t wear and magazines you don’t read. Make a list and check it twice, then trim.

6. Don’t look at a new car or home improvements as investments. Neither one is likely to recover the full cost. They are depreciating assets, not an investment.

7. Talk to the kids about your family finances. Guide the conversation relative to the ages of the group. Let them know early how much help they can expect with college and other goals. Explain how retirement may affect your own finances and what steps you have taken to prepare. Share the financial blunders you have made, if they will be instructive. Let them know how much they may expect to inherit on your demise.

Top 10 Personal Finance Websites

December 12, 2014 By Sherry Tingley

Want to get the best personal finance advice from the best sources? These top 10 personal finance sites can help you manage just about anything from budgeting, investing and managing money to coping with daily financial decisions.

Forbes

Forbes has a lot of information about making good investments. They also publish an Investment Guide. They have 15 different people contributing to this guide. Some of the authors are from the Forbes staff and others are contributors that have had personal success in investing. All 15 articles are well worth a read. Forty four people contribute to the article base.

Money CNN

CNN Money has an array of video selections for you as well as a section called “Your Money.” Articles in this section – “Will you have enough to retire? – basically scare you to death unless you have the $1.4 million dollars saved that they recommend. There is also a section about the most popular videos. Apparently the popular videos rotate every time the screen is refreshed, but that shouldn’t stop you from playing – “Inside Google’s Billion Dollar Airfield.”

US News Finance

US News has four main sections: My Money Blog, The Frugal Shopper Blog, Alpha Consumer Blog, The Smart Investor and How To Live To 100. It also gives people a way to search for trustworthy financial advisors by state. They have divided their main topics into Banking & Credit, Debt, Saving & Budgeting, Family Finance, Taxes, Spending, Earnings and Identity Theft. Great way to categorize everything having to do with personal finance! They also offer a calculator on helping you determine if you are ready for retirement. Articles in their blogs are written by editors for US News Money as well as other qualified experts.

Wall Street Journal Finance

The history and reputation of the Wall Street Journal are well known. They have access to hundreds of thousands of archived articles and experts in finance. Their main categories are family finances, wealth advisors, taxes, retirement planning, real estate, autos, fitness and health. They also cover the main topics of stocks, funds, and bonds. The one thing they don’t have in this section is videos. Overall the information is highly relevant.

Daily Finance

Daily Finance has four main sections, keeping their design simple and not overwhelming. They have chosen the following categories: Plan, Save, Spend and Invest which are basically the only four options we have to “do” with money. Their stated goal is to help people to make smarter decisions about their money. The company has 2.5 million links pointing to them. They have 36 contributors from the community and 3 daily finance directors. It appears that they are owned by AOL.

Bloomberg Personal Finance

Bloomberg’s personal finance section is geared towards investors. They have some interesting sections: Tips From the Financial Elite, Savings and Investing, Retirement Planning, Real Estate and Taxes. This section of Bloomberg is really not an easy read. It lacks appeal for family types of financial decisions that many people need.

Kiplinger

Kiplinger is completely user friendly with lots of general articles to help with retirement, taxes, spending and savings. They have plenty of tools. Their household budget calculator is pretty standard, yet helpful too. Overall, it has coverage of all types of normal expenses like buying cars, choosing schools to attend, finding the best city to live in and a lot more.

Fox Business Personal Finance

The personal finance section of Fox has a lot of videos taken from Fox news. One video shared a story about a policemen in Michigan giving out presents instead of tickets. Inspired by people phoning in to the police station basically sharing their stories of hardship during the Christmas season. This program of giving was adopted to help give the police force a better reputation.

They have a good coverage of all topics on personal finance. Life Style & Budget includes articles from Dave Ramsey, the personal finance expert many have come to trust.

All of the sites we reviewed here are good sources of personal financial literacy and can help you get a better understanding of your own financial situation. What sites do you recommend?

Rent-To-Own? It Can Be Done

December 11, 2014 By Twila Van Leer

Renting with the option to purchase the house can benefit both renter and seller.

Home ownership is out of the grasp of many Americans today who face a vastly different market from that of a few years ago. That puts leasing with option to buy near the top of the possibilities list for many.

But look before you leap. It’s possible, but not always an easy approach to obtaining a home. Know what is at stake before signing on the dotted line.

There are different variations of the rent-to-own option, but basically it involves an agreement between a potential buyer and a landlord/owner that is expected to lead to a purchase. Such agreements usually are for two to three years. During this time, the owner sets aside a part of each month’s rent into an escrow account. If payments are made as agreed, the money in the escrow account can be used at the end of the lease time as a down payment and the purchase proceeds from there as usual.

In another version, the seller the two parties would agree to a lease for a set time with no portion of the “rent” going into an escrow account and the seller offering a discounted price at the end of the lease. This obviously would be advantageous to a seller who is under pressure.

Both parties to such an agreement have potential benefits. The renter is forced into saving for a down payment and the owner gets a monthly return on his property without waiting for a sale.

Yael Ishakis, a senior loan officer at First Meridien Mortgage in Brooklyn, N.Y., offers a for-instance: A client put $5,000 down on a home and signed a lease for $1,800 monthly rent, of which $600 per month went into an escrow account. On the regular market, the home would have rented for $1,600 per month, so the seller also was contributing to the agreement. At the end of the lease period, the client had $14,400 in the escrow. With the initial $5,000 down payment, plus some $10,000 the buyers had managed to save, they had about $30,000 for a down payment.

The pitfall may come if, in the end, the potential buyers are not able to complete the agreement. They then lose the escrow money, and possibly paid more in rent than they might have done otherwise.

Those owners willing to enter into rent-to-buy agreements usually are motivated by a sluggish market or have had their property on the market for a long time. In areas where the real estate market is thriving, there are likely to be fewer opportunities for renting with intent to buy.

Sometimes a potential buyer can work a deal with someone who is selling, but most often the seller will advertise his intentions. Some agencies specialize in rent-to-own properties. RentMACK is one such agency and there may be others you could find by researching in your own neighborhood.

Be forewarned that at the end of the rental period, you still must qualify as a purchaser. Bad credit will still be a problem. Rent payments are not often considered in building credit. Learn what your credit rating is and what is likely to be required when you try to finance. Try to improve your credit by using a secured or regular credit card, ideally paying it off each month. Or, if possible, get a car loan and make payments faithfully. If you can’t arrange financing, you may lose the escrow money. Take advantage of the lease time to prepare for the purchase. Be sure you understand at the outset what the full down payment will be and work toward it.

Get expert advice. There are dangers on both side of rent-to-own arrangements and often, after looking at the possibilities, people decide not to pursue this approach to home buying. State laws surrounding rent-to-own vary. Be sure you know what they are where you live.

From the seller’s viewpoint, if the potential buyer defaults, but there is money is escrow, a court could rule that the tenant has a property interest.

Involving attorneys on both sides is a good idea. Having legal advice on the proposed agreement may save difficulties if things don’t go as expected.

Here’s The Scoop on Roth IRAs

October 27, 2014 By Twila Van Leer

Make saving money automatic every month. The easier it is to save the better for you in the long run.

Many Americans have a Roth IRA as one component in their retirement scheme, or rely on such an Individual Retirement Account as the mainstay of their plans.

A 19-year-old who began contributing $1,500 to such an account could expect to have some $608,000 by age 65, given 7 percent average annual earnings. That’s a healthy bit of money to support one’s post-employment years.

Of course, not every Roth IRA holder leaves his savings to accumulate that much retirement income, but the prospect of being able to make a large purchase (a down payment on a home, perhaps?) is also enticing.

Money goes into a Roth IRA and accrues interest completely tax free until it can be withdrawn, usually after the holder is age 59½ or older. Studies show that a Roth IRA usually is started by someone 18 to 39. There is no minimum age requirement so young people who have earned income are eligible.

The Roth IRA is one of few savings methods that allow putting after-tax money into an account and withdrawing it tax-free. So, if you began contributing the $5,500 allowable deposit this year, and maintained that level for 25 years at a 3 percent return, you’d accumulate $200,525, with $63,025 in tax-free earnings.

While the original idea behind IRAs was to build retirement security, this method of savings now is used by many individuals to put money aside for purchasing a home or paying for advanced education.

A Roth IRA involves income limits. Single individuals can contribute if their modified adjusted gross income is less than $129,000. The contributions phase out as modified adjusted gross income reaches $114,000. For couples, the limits run from $181,000 to $191,000 filing jointly.

Your Roth IRA contributions are not tax deductible, but the earnings grow tax-free. You don’t pay taxes when you withdraw from your account if it has been growing for at least five years.

Withdrawals usually begin at 59 ½ , when you become disabled or die (in which case the money goes to a beneficiary), or if you are purchasing a first-time home, which allows a $10,000 one-time withdrawal.

Traditional IRAs require that you begin withdrawing money at age 70 ½ , but Roth IRAs do not have that requirement. You can convert from a regular IRA to a Roth IRA, but distributions will be taxed in the year you do.

If you will be in the same or a higher tax bracket during retirement, the Roth IRA is a good option, but if you are in need of tax deductions now, a traditional IRA is probably your best bet.

More Education? Think It Through

September 26, 2014 By Twila Van Leer

Going back to school has become a strategy many people consider as the country slowly climbs out of the economic slump that began in 2008. More education equals more skills and for some, it has been the answer to the near-impossible job situation. There are those in the employment pool who never have been employed since the recession began and there is a logical supposition that going back to school could help.

But using more education to either make yourself more attractive in your original field of work or to move into a new job sector should be undertaken only with care. Especially if you have a family to support or other significant financial obligations, you should consider whether more education would really be worthwhile.

Experts offer these suggestions to consider before taking serious steps toward a return to school:

Find out if you are eligible for aid. Some programs are specifically aimed at adults. There may be more opportunity for an older, independent student than a recent high school graduate. They may be allowed to borrow more for educational purposes. Older students are not obligated to use their parents’ income as a qualifier. To find out what the eligibility rules are in your area of the United States, visit www.fafsa.ed.gov.
Go to the institution you plan to attend for specific information. Most adult students are interested in proximity when choosing a school. Arrange a personal visit to the financial aid office and discuss opportunities for grants or scholarships. People in these offices can steer you in the right direction and can provide applications for the most commonly used resources. With a better understanding of the various grants and scholarships, you’ll be better prepared to determine if more education is advisable for you.
Determine how quickly you could repay loans. Borrowing is a fact of life for most students today. Young students have a lifetime to repay, but an older student does not have that luxury. Knowing beforehand how student loans will fit into your financial profile is very advisable. If repayment might last into retirement, you may want to think twice. The closer to retirement you are, the less you should borrow, as a general rule. For many professionals, the lure of launching into a new career path may be enticing. A return to class may be very stimulating to some who enjoy study, but be certain your plans make financial success before signing up.