Personal Finance Blog

Tips And Stories To Help You With Managing Money

The Benefits of Mutual Funds

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Learn to make the most of your savings.
If your rich uncle died and left you $1,000, what could you do with it that would increase its value?

You might opt to buy a share of stock in the largest business in the country, then the second largest, etc., down the line. You’d have used up the $1,000 before you got to the 20th stock, according to etrade.com.

Another option would be to buy a mutual fund. That would open the option to spread your $1,000 among a great choice of stocks and bonds. If you invest through an Individual Retirement Account (IRA) you might get launched for less than $1,000. Some funds are available for as little as $50 per month if you are willing to make an ongoing commitment. Mutual Fund managers invest your money in a wide variety of stocks giving you a better chance to have your investment grow over time.

Mutual funds are easy to buy, whether you are going it alone or hire a broker or financial planner to do the job. Once you are established with a fund company, a simple phone call or mouse click can initiate a purchase, although there are some “closed funds,” which will not accept money from new shareholders.

Selling also is easy. When you are ready to unload shares, you don’t have to find a buyer. Most mutual funds offer daily redemptions, so the company will give you your cash whenever you’re ready to sell. If you own closed funds, you also can sell when you choose.

You don’t have to worry about the safety of your investment if you turn your business over to a manager. The Investment Company Act of 1940, following close on the heels of the Great Depression, is the federal government’s way of safeguarding your money. Mutual funds are regulated by the Securities and Exchange Commission. You become an owner of the company, which must have a board of directors to protect member investors. Their job is to ensure that the company has the best possible managers and that shareholders aren’t overpaying for their services.

That’s good, but not foolproof. Mutual funds are not insured or guaranteed. You can lose money because your portfolio is based on all of its holdings. If they lose value, you will lose money. The odds of losing all your money, however, are slim. All of the stocks and bonds in your portfolio would have to lose value entirely for that to happen. Historically, the funds have done well.

Though you need some savvy to do effective investing, you don’t need to know how to read a company’s cash flow statement or be able to predict whether it might fail to meet debt obligations. You pay a fund manager to make those judgments and put your money where it will produce a return. Mutual funds are not assured and are subject to market vagaries like other investments, but they are a good choice for people who don’t have the money, time or interest to gather a collection of securities by themselves.

(Information copyrighted by Morningstar, Inc, All rights reserved.)

Annual Price Of Raising A Child

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That Darling Newborn Will Cost You $233K

Ah! Isn’t he/she cute? But take a closer look at what that darling little one is going to cost you over the next 17 years.

According to the United States Department of Agriculture, the estimated costs of rearing a child today is $233,610. That’s about $14,000 annually. The figure is based on a middle-income family with two children. Kids cost more in the city, also, than they do in rural areas.

The estimates, released recently by the department, are based on 2015 data, so the cost probably increased while you weren’t looking last year. The bottom line is about 3 percent higher than for the previous year, an increase that outstrips overall inflation.

It’s enough to give new parents the heebie-jeebies. The figures calculated by the USDA are used by state governments and courts to prepare child support and foster care guidelines.

The bulk of the costs fall right where you’d imagine: housing, food, transportation, health care, education, clothing and miscellaneous expenses.

Housing Costs

In case you had’n’t noticed, housing is expensive, accounting for 26 to 30 percent of a family’s expenditures. The USDA figures the cost for another child by calculating the cost of an added room to a home. The department admits that it doesn’t calculate into the figure such items as a family’s desire to live in more expensive neighborhood that offer better schools and other amenities attractive to those rearing children.

Middle income married-couple families living in the urban Northeast reported the highest costs – about $253,770 for the 17-year total, ocmpared with the urban West at $235,140; the urban South at $221,730 and the urban Midwest at $217,020. The average rural amount was $193,020. Lower-income families averaged $174,690 per child through age 17. At the other extreme, higher-income families will spend, on average, $372,210.

Food Costs

Following housing on the expense list are health care and food. For the middle-income family, food takes up about 18 percent of the child-rearing budget. Child care and education eat up another 16 percent. Education costs have consistently increased each year since 1960, when the USDA started calculating the costs. At that time, education only devoured 2 percent of the child-rearing costs. Child care also has become an increasingly expensive item with more women entering the labor force.

Education Costs

The report doesn’t even consider the costs of higher education, which usually don’t kick in until after the child is 17. The average annual cost of college now is $47,370 for a private institution, $20,090 for a public college.

New parents who groan at the costs of diapers and formula have even bigger surprises ahead. Between the ages from birth to 2, the little cherub costs only around $12,680 while a teenager 15 to 17 will dip into the family’s finances to the tune of about $13,900 each year. The costs of food, transportation, clothing and health care all escalate for the teens.

Good news for larger families! Those with three or more children spend an average of 24 percent less per child. That’s because kids in large families share rooms, wear hand-me-downs, and inherit older siblings’ toys. Child care facilities often offer sibling discounts.

On the flip side, a single child costs an average 27 percent more.

Beware Of Holiday Fraud

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Find out how you can become more aware of protecting yourself against fraud.
The happiest time of the year also is the most opportune for those who wreak fraud on the rest of us. With people spending more, traveling more and donating more to charities, they are looking for ways to dip into your holiday spending money, warns the Better Business Bureau.

The bureau advises extra caution. Don’t get so caught up in the season’s frenzy that you make yourself vulnerable to the predators. Here are some tips from the experts to help you negotiate the holidays without being victimized:

Online Shopping Issues

Online shopping has become popular because of the convenience, but it also can be the route to fraud if you aren’t careful. The U.S. Computer Emergency Readiness Team, an arm of the Department of Homeland Security, warns of the most common ways in which criminals can steal your vital information or relieve you of your cash through fraudulent means. They create phony sites and email messages, intercept insecure transactions and target vulnerable computers.

Verify Good Deals

You can best foil them by using the good sense you apply to shopping year-round. Deal with vendors you are sure you can trust. Don’t be misled into error in your search for a good deal. Be careful of sites that mimic the reputable dealers by offering a brand that is slightly off. Avoid clicking on emails and links from unfamiliar senders. If you find deals that are too fantastic to be real, they probably are not. The most frequent complaints to the National Consumers League involve such come-ons that prove to be dishonest. Popular items such as electronics and clothing tend to be the most frequently offered in fraudulent online “deals.”

Charity Donations

The holidays bring out the generosity in many people. Charities tend to use that fact to reline their coffers. Give, but back your generosity with some solid research. The Federal Trade Commission suggests looking at the BBB’s Wise Giving Alliance, Charity Navigator, Charity Watch and/or GuideStar before making your donation. Avoid any purported charity that won’t share pertinent information about its identity, mission and costs. Also beware of those that use a name that closely resembles a well-known charity in an attempt to misguide you. Never send cash or wire money. Pay be check made out to the charity or by credit card.

Travel Deals

Travel is an important item on the Christmas lists of many people. Keep the memories pleasant by avoiding hokey come-ons online offering hotel booking sites at a bargain. Stick with those whose reputations are firmly established. Use a good broker or make reservations yourself. Use only licensed taxi or ride services. Protect the details about sky miles and loyalty points as you would any other personal information. Using “free” Wi-Fi spots in the airport may make you vulnerable to exposure of the personal information on your phone, computer or other device.

Email Warnings

Some scammers even use Santa’s good name to do their damage. Be sure that the charming and personalized message you get from the North Pole is legitimate. Take the same precautions with electronic greeting cards. Gift exchanges online are just another variation on the old pyramid schemes and are illegal.

Keep your Christmas merry by thwarting the fraudsters who would make hash of your holidays.

Benefit From Falling Food Prices

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Take advantage of the lower meat prices while you can.
Take advantage of the lower meat prices.
Food prices are dropping, and grocers are taking steps to use the decline to woo new customers. You might put the information to good use to make your food dollars go further.

The Bureau of Labor Statistics has reported an overall drop in grocery costs of 2 percent over last year. Among the biggest declines are the prices for raw ground beef (9 percent) and roasted coffee (4.3 percent.) Protein sources such as all meats, poultry, fish and eggs, showed a 7 percent drop, a reflection of a rebound from higher prices that resulted from tight supplies. The price on eggs, for example, had gone up to $2.29 last year in September, but in the same month in this year had dropped to 79 cents a dozen.

The prices of some items has increased, including fresh fruits, butter and margarine.

Grocers operating in highly competitive markets, instead of simply pocketing the savings, respond to the lower prices in most categories by running sales promotions in an effort to lure customers from their competitors. Particularly among the stores that tout organic products, the competition is fierce. Consumers are the winners in this war for custom, according to the experts in the field.

With the current situation expected to persist for at least the next five or six months, now may be a good time to stock the freezer with good buys.

Meat promotions are attracting a lot of shoppers. Major food outlets report “incredible” sales of beef and pork. The increase in sales in this category has had an effect on fast food outlets, which report lower than expected sales. Consumers apparently are finding it more economical to buy beef and grill it themselves .Cheaper eggs, on the other hand, have not excited extraordinary sale because their popularity does not fluctuate as much.

Many grocers are using meat sales to attract customers, while keeping other grocery items at the same level, said the consulting firm of TABS Analytics. The perception of lower prices overall does not hold up.

How long the trend will last is not clear, but for now, it will pay to compare prices and take advantage of the market.

Small Businesses Look At Health Care Costs

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Rising Healthcare Costs & High-Deductible Insurance Coverage Increasingly Lead Consumers to Negotiate Medical Costs
Rising Healthcare Costs & High-Deductible Insurance Coverage Increasingly Lead Consumers to Negotiate Medical Costs
Autumn. That wonderful time of year for colorful trees, an abatement of unbearably hot weather and the return of children to their schools. For small business owners, the season also means a return to the anxious wait to see if their health insurance rates for employees will go up. And if so, by how much?

Their 2017 premiums could see just minor adjustments upward, or could jump by double-digit figures and for many of the companies that operate on a small margin, it could be the breaking point. Finding workers to man positions in the small companies often depends on being able to provide health insurance.

Prescription Drug Costs

Factors that enter into the health care issue include in which state the business is located and how much its carrier paid in claims in the previous year. But pin the greatest cause of rising health care costs on increasing prescription prices. It’s an issue that has risen to the level of national concern among lawmakers.

Companies with 50 or more employees are required by law to provide employee health insurance. Many smaller businesses do it because they think it is the right thing to do and because it’s a perk that draws better qualified employees.

Health Care Managers

When carriers up their charges, the small business operators sometimes have to decide if they must scale back coverage or find other alternatives. Many companies hire a manager to deal with health care issues. The managers prefer companies that have self-funded plans. Such plans sidestep the 6.5 percent federal tax on premiums.

12% Rise In Cost

Self-funding has inbred risks, but with the costs of commercial coverage rising at the rate of some 12 percent per year, it is an option more employers are considering. Unexpected fluctuations keep the pot boiling. An unexpected drop of 11 percent in premiums had a small businessman in Las Vegas scratching his head, since nothing in his figures had drastically changed. He didn’t ask questions, but took the windfall and added vision coverage to the plan for his employees. Other business owners have simply had to dig deeper to provide the coverage for their workers.