Personal Finance

Debt-Free People Have Positive Attributes

February 25, 2016 By Twila Van Leer

The bondage of living in debt adds more stress to our lives.

You probably have noticed it among your friends and acquaintances: Some families can pay off $40,000 in debt in two years while others who have much larger incomes can’t seem to make a dent in their indebtedness.

What makes the obvious difference is how they spend their money. They have different priorities.

People who make a conscious decision to corral their personal finances and keep them under control have some characteristics that others do not, financial experts say. They list seven of these traits as:

Being wise.

Those who decide they are through with debt, approach the problem as if it’s a pernicious skin disease that they must get rid of. Now. They make it a priority.

Being patient.

They can walk past sales and other temptations without a qualm because they know that in the long run, they will be better off. Impulse buying is the impatient downfall that defeats debt eradication.

Being confident.

People who are getting out of debt don’t pay attention to friends or relatives who comment on the lifestyle changes they are making. Start out the process with this in mind and stay confident in your decision to stick it out. You’ll achieve the financial peace of mind you are seeking.

Being goal-driven.

Determining to get out of debt is a goal in itself. But it requires more, short-term goals that will aid the process. Proceeding without definite plans could lead to frustration and stymie your objectives. Choose which of your debts you plan to attack first and stick with the agenda.

Being responsible.

Becoming financially mature doesn’t depend on the calendar. If you continue at age 50 to treat money as you did at age 20, you may never get out of debt. Responsibility means getting out of debt as quickly as possible and avoiding it in the future. Being out of debt doesn’t mean you can now spend foolishly. It means putting your debt-free money into saving for huge expenses such as college and assuring your retirement by investing your money wisely.

Refusing to be materialistic.

Attitudes toward money matter immensely. How much importance you put on STUFF will guide your use of money whether you have a lot or a little. There’s an old saying: “You can’t take it with you” that has become such an old, old saying because it is true.

Being willing to make sacrifices.

Eating out and paying big prices for entertainment might have to go by the board while you get out of debt. But these drastic budget cuts are temporary. When debt is in the past, you can start adding these items back into the budget. You may find you can cut back, however, and not miss them. Bottom line: If you are determined to be debt-free you will make the necessary sacrifices. You’ll take the actions that lead to financial peace.

Sharks Experts Share Advice

February 24, 2016 By Twila Van Leer

Shark Tank Experts — Kevin O’Leary, Barbara Corcoran, Daymon John, Lori Greiner, Robert Herjavec, Mark Cuban

What would the experts on the popular ABC show “Shark Tank” advise those who are 50-plus to help make them financially secure? In its February/March AARP The Magazine, which is aimed at those in that age group, editors asked the Sharks. And here is some of their advice:

Kevin O’Leary warns that you must be prepared for financial downs.

Keep 10 percent of your total assets in cash. Three basic investing rules include: Never put more than 5 percent of your money in one stock or more than 20 percent in one sector such as energy. Do put 50 percent of your investments in dividend-paying stocks and 50 percent in interest-bearing bonds. Over the past 40 years, 71 percent of the returns on Standard and Poors came from dividends, not capital appreciation.

Mark Cuban warns that you must “follow the green, not the dream.”

Too many entrepreneurs focus so closely on their dream that they forget the practicalities. The advice carries over to planning for retirement. To better align the dream with the green, determine your savings; assume you’ll earn 4 to 6 percent on investments; commit to living on the returns and not spending the principal; calculate what that leaves you with annually, monthly and weekly; adjust accordingly.

Cuban suggests some healthy paranoia. Learn to spot “Slick Willies.”

If you are listening to one, take a time out to think things through and then follow your good sense. Long-term, consider every financial activity with caution and the expectation that things could change. Health considerations, for instance.

No deal is better than a bad deal.

Three ways to hone your skills to avoid bad deals: Understand the investment. Keep emotion out of it. Getting emotionally attached to such things as a house can blind you to the realities. Speak the truth, not what others want to hear. In making financial decisions, you are not trying to make friends. Separate the two.

Learn from the past.

Take risks, but do it based on your knowledge of outcomes in similar circumstances over a period of time. Invest in what you know. What companies and products do you love and trust? Build your portfolio around them. Do your homework using the many resources of the Internet. Focus first on recouping your capital, then on how much profit you can make.

Negotiate everything.

Don’t simply accept the fact that utility bills are going up, for instance. Call the provider and see if there is anything you can do to lower your bills. If your financial adviser wants 1.5 percent, offer 1 percent. Negotiate with medical providers, etc. If you don’t get a reduction, you haven’t lost anything by trying.

Listen and keep learning.

Ask the question: “What did I learn from this experience?” Age doesn’t matter. There is always opportunity for learning from what life hands you. More knowledge and wisdom mean more opportunity, according to Shark Robert Herjavec. “It’s just a matter of opening doors and finding it.”

Zero Percent Interest Rates On Car Loans

August 31, 2015 By Twila Van Leer

What could be better? Your new car and no interest to pay for 72 months. But be sure you understand the implications.

A recent J.D. Power Dealer Finance Study said that offering zero percent interest is considered to be one of the most successful motivators to get car buyers into dealerships. The catch is that to qualify for it, the buyer must have an excellent credit rating. Many people don’t qualify for the zero percent interest rate.

For those with less than stellar credit, dealerships arrange financing for your car they often add on 1-2% interest that goes directly into their profits. Although these numbers may seem small, they often add thousands of dollars to the price of your loan.

Before latching onto the no-interest deal, look around. Many car dealers are currently offering cash-back offers that could be the more financially advantageous than the interest-free option. Some car sellers actually offer a choice between a no-interest and cash-back deal. Fiat Chrysler, for instance, will sell you its 2015 Jeep Cherokee SUV for no interest or a $2,000 cash rebate. Experts say the rebate is the better bargain, reducing the loan amount from $27,213 to $25,213. At 2 percent interest, that makes the monthly payment just $440, compared with $452 per month under the zero interest terms.

Car buying is best in the late summer and early fall, when dealers try to clear their lots of the current year’s leftovers. The zero-interest offers are escalating, with many of the producers hoping to snag buyers to help in that process.

The secret to getting in on the best bargains is to nurture your credit rating. A credit score of 754 can probably earn you a 1 percent interest rate. The rates go up as the scores go down. Getting preapproved for a car loan through a bank or credit union enhances your bargaining stance. The dealer is anxious to have you finance through him and may be willing to dicker on the interest issue.

The important thing is to do the math before facing the decision. Factor in your credit score with the understanding that the higher it is, the more likely you will be to get a lower interest rate. There will come a point in the math at which you will find that zero interest actually can lower your payments.

Regional incentive programs, down payments and trade-in values also will affect the bottom line. Remember, too, that zero interest deals usually apply only to certain cars on the lot. If you have something very specific in mind, it may not apply. Once you reach the point at which you qualify for zero interest, the dealer may lose his tendency to haggle. Just be sure before you sign that you have made the best deal possible.

Digital Wallets Replacing The Pocket Bulge

July 9, 2015 By Twila Van Leer

Smartphones are the new digital wallets.

What has happened to the traditional wallets that were a pain in the hip pocket or another item to lose in your purse? As predicted by tech gurus for years, they are being displaced by smartphones which can be digital wallets.

Even those who still rely on cash or plastic when they shop may soon succumb to the newer, more efficient digital wallets that are being offered by the tech companies.

Store-issued credit cards and store rewards programs are coming via Apple Pay and it really gets into the mobile payment services it began last fall. Google is standing by with a similar service that will enhance its smartphone options to run on its Android software. Samsung has in store for its newest Galaxy smartphones a service that it says will be accepted in more stores than either the Apple Pay or Android Pay.

The goal, according to company spokespersons, is to replace the standard wallet.

The improvements are almost ahead of the demand. Last year, some 16 million Americans used smartphones to pay for about $3.5 billion in store purchases, says eMarketer, a shopping research firm. The total includes Apple Pay purchases, PayPal and merchant-sponsored options from Starbucks, Dunkin’ Donuts and others.

Sounds big, but it’s just a small part of the $4.3 trillion Americans spent in stores last year. The researcher group expects that the digital wallet component will grow to $27.5 billion in 2016 as the option catches on with more shoppers.

The move to digital pay has been slowed by failure among the major tech providers to agree on technical standards, security measures and financial terms. And some large merchants have balked, saying they would prefer to develop their own systems.

Despite the roadblocks, Apple Pay made inroads when it was endorsed by major banks and retail firms. The system only works on the latest models of iPhones and Apple Watch. Users create a link to their iPhone with a credit card or bank account. When that has been accomplished, the user just has to hold the phone next to a device on the store counter to make a transaction. The phone and the counter device communicate wirelessly, with the purchaser authorizing payment by pressing the phone’s fingerprint sensor. No card to swipe. The user’s financial information is protected by encrypted codes.

Apple’s next update will facilitate credit purchases and allow purchasers to tap into loyalty points at major stores where they routinely shop. Agreements between the phone providers and popular shopping spots such as Walgreens will add options. Walgreens expects that in the near future, more customers will pay with smartphones or watches to tap into the stores’ Balance Rewards program. They will be able to use their loyalty points with Apple Pay. J.C. Penney stores also are banking on many iPhone shoppers opting into their store-label credit cards. The in-store credit card already is snagging more transactions than any other payment card. Customers earn points with each transaction.

Google, which has struggled to compete in the digital wallet arena, believes it will gain ground with the introduction of Android Pay, due to be released this year. Google will add store rewards, but does not plan to work with store credit cards, at least initially.

Not to be left behind in the race to digital wallet pay, Samsung Pay will also be released this fall. Its technology will work with traditional store credit card readers. Stores initiating the services from other tech companies have to invest in equipment to receive data.

The move obviously is on and pay-by-phone is here to stay.

Couples Need To Share Financial Planning

June 8, 2015 By Twila Van Leer

Protect your estate by creating a valid will covering all of your assets.

When a couple has financial assets valuable enough to require estate taxes, they need to work as a team to be certain that their planning is consistent. The threshold for estate taxing is $5.43 million federally, but some states set their own limits.

Julie Jason, a personal money manager and financial writer whose columns are syndicated, offers suggestions for couples to help them assure that their estate plan coordinates with their financial plan.

Start With An Audit

Included in her advice: Start with an audit of your particular situation. Don’t rely on memory. Gather relevant documents and organize them in a binder. Include wills, trusts and powers of attorney. Have copies of all beneficiary designations on tax-deferred accounts and annuities.

Check Beneficiaries’ Information

Document life insurance policies, along with beneficiaries to whom benefits are payable. Provide the same documentation for all real estate you own and review how the property is titled. Check your state laws to see if they allow you to designate a beneficiary on the deed to transfer the property on your death.

List All Bank Accounts And Investment Accounts

Have copies of bank and brokerage accounts, including Treasury bonds purchased through a bank. Don’t overlook mutual funds and annuity statements. Check to see if any of the accounts contain provisions to “transfer on death” or “payable on death” or “in trust for.”

Make copies of stock certificates. Often, on death of the owners, those who inherit don’t know where the original certificates are located. Again, check for the above notations that would determine how the stocks are to be assigned.

If you are a business owner, have copies of stock certificates if you are organized as a corporation. If it is a partnership, copies of the operating agreement are necessary. Also include titles to vehicles. And check to see if your state is one that allows you to pass the title to a beneficiary without going through probate.

Valuable Art And Collectibles Need Proof Of Purchase

Proof of purchase of art and collectible items should be in your record and copies of your most recent tax returns also should be in the folder. A current list of all liabilities, including outstanding debt and mortgages on real estate, is necessary. Also list all safety deposit boxes you use.

When all the relevant information is gathered into one place, go through it and note whether items are owned by the husband or wife or jointly. Prepare lists based on ownership. A spreadsheet is useful for organizing the information. Add information showing how you intend items to be dispersed in the event of the passing of either partner.

This kind of joint organization will spare heirs and legal advisors a lot of headaches when death occurs.