Debt Reduction:

Have you wondered which debt you should pay off first, and how much you would actually save by paying extra each month, quarter, or annually?  A tool put out by the Utah State University, called powerpay, may be the tool for you.  You can access the tool at www.powerpay.org.  It is easy to follow. The process will show how much you pay in interest over the life of any loan(s) that you currently carry.  Always make sure you have an appropriate emergency fund before paying off debts.

Social Security:

Many people look at social security as what they have earned and do not take into account their spouse’s record or ex-spouse’s record.  Did you know you could qualify for spousal benefits, survivor’s benefits as well as disability benefits?  It is crucial you understand all your options before electing to start receiving social security benefits.  A good calculator to help you understand some of the options is at AARP: http://www.aarp.org/work/social-security/social-security-benefits-calculator/?intcmp=DSO-HP-link4-spot4. Be aware - this calculator does not take into account things like health issues and WEP or GPO. Make sure you talk with a qualified person  ** before making your final decision.

Have you recently noticed your bank charging monthly fees on your checking account? This has become an increasing phenomenon with banks since overdraft fees have been scaled back due to recent legislation. It may make sense for you to take a look at a local credit union. They offer free checking and no monthly minimums or requirements. Most credit unions belong to a group that allows you to deposit and receive money out of a member ATM at no charge. See if this makes sense for you and your wallet!

Qualified Charitable Distribution

Did you know with the passage of the tax law extensions last December; Congress also extended the ability to gift directly from an IRA to a qualified charity? This could help your social security taxable income if you are near that threshhold. You need to know that certain criteria are required to do this correctly. Always consult a professional tax person to see if choosing this option is (workable or viable) for you.

Open Enrollment

For many employees this time of year brings open enrollment for company benefit plans. 
If that is the case for you, take a close look at your family circumstances to see if you need to make changes. One area to review is your flex spending (FSA) account. Here are some of the FSA changes: 

1. Beginning in 2011 you will not be able to pay for over the counter medicines with FSA money unless you have a doctor’s prescription. 

2. An employee can only put $2500 into the medical FSA.  This is probably less than last year.
If your employer offers insurance coverage’s such as life, disability or accidental death and dismemberment, make sure you understand the coverage and whether it is portable if you change companies or get laid off. 

3.If you need child care, consider saving pretax dollars with a dependent care FSA if both you and your spouse work or go to school.
Remember to check with your tax advisor to see if these things make sense for you and at wha

The Apple does not fall far from the tree

Here are some thoughts for my younger readers, (and some of my older ones, too)
Do you invest, have insurance, or bank at the same institutions that your parents use?  My guess is that quite a few of you do because it is easy to keep the status quo and not look into alternatives in areas where you are not as interested or sure of yourself.  It is amazing how young people will try new things like Facebook, Twitter, or blogs but will not look at things affecting their pocket book for fear of change or apathy.  People will drive across town to save 2 cents for a gallon of gas saving them 40 cents on a twenty gallon tank yet not shop for home loan, car insurance, car payment or investments to see if you could save thousands if not tens of thousands of dollars.  There is a world of competitors out there eager to provide excellent service at reasonable prices…you just have to break away from what has been comfortable and explore the bigger world.

You have probably heard the saying: “We are creatures of habit.” For most of us, it’s true.  Once we do something one way, we repeat ourselves until something forces us to change.  Take prescriptions for example. We pick a pharmacy, for convenience perhaps, and pay little attention to the cost of the medication.  The difference in a thirty day supply can vary greatly from different sources for the same drug.  I’ve seen differences of more than 300 percent!  The answer is to shop.In addition to finding the best price, many pharmacies will give a gift card for each transferred prescription.  At up to $25.00 per gift card per prescription, the dollars add up quickly.  If you have a number of prescriptions,  rotating pharmacies can significantly benefit you even where your insurance pays the cost of medication.  And if you are paying your own medication costs, shopping should be your new habit!

Double Coverage

How often do we pay for something we already have?  Take, for example, automobile insurance.  Often a  comprehensive policy covers towing and gas delivery in addition to accident  repair and replacement coverage.  You don’t need to belong to an association at an additional expense to get the protection most commonly needed-roadside assistance.  Check with your insurance agent to see what coverage you have.  Coverage varies from company to company and may require an additional premium.  Your insurance agent should be interested in keeping your business and happy to answer your questions about how you access towing and roadside assistance through your policy.

Double coverage is just another common way we spend more than needed.

Company and Affiliation Discounts

One area where people overlook easy discounts is through their employer, credit union, or club affiliations. I receive an average 10% discount on my cell phone bill every month just for being a credit union member. Discounts of up to 20% are available through some employers.  These discounts are not something the sales representative usually discusses when selling you a product or service. You need to ask if there are employee, club, professional or credit union discounts available before making your purchase or signing a service contract. Don’t forget to ask when purchasing or renewing your home and auto insurance. Remember, you don’t know unless you ask!

Benefits of paying by credit:

Credit cards can be wonderful tools providing benefits after purchase.

I recently had an 18 month old laptop fail. The factory warranty was up and fixing it was going to cost about $200. Then, I remembered that I had bought the laptop with my credit card. By paying for the laptop with my credit card, I was covered by an extended warranty.

I just received a warranty check for $199.99 to fix the computer and this did not cost me any extra money, just a little extra time.

It is worth reading your card member benefit terms to check for discounts, double manufacture warranties, trip interruption coverage, lost luggage coverage, and many other things that have no additional cost to you.

Make sure you call your card company and get in writing exactly what is covered before you make a significant purchase.

I have always used credit cards to make higher cost electronics purchases in order to have free extended warranty as well as cancellation rights in case the item is not satisfactory.

Some cards you might want to check out are American Express and Visa Signature cards, as well as WorldCard from MasterCard.

For more information, check out my comments and other information on credit card benefits at: http://www.washingtonexaminer.com/economy/your-money/Debit-vs_-credit_-The-case-for-using-credit-cards-88961407.html.

How to save for a goal:

Have you ever struggled to save money for big ticket items- a vacation, car, down payment on a house, or some big electronic purchase? Well, in today’s internet age, there is help available to nudge you along.

Smarty Pig is a savings account that is liquid and allows you to set the exact amount of money you wish to save and the time frame for doing it. All you have to do is enter the variables and Smarty Pig tells you how much to save each month or week. You then have the amount auto deducted out of your checking account. There is also a neat bonus. Your money will currently earn 2.15% which is not bad in this low rate environment.  www.smartypig.com 

If you need more of a stick approach for meeting your goals, you can use a site called www.stickk.com. You get to choose your goal and have referees monitor your progress as well as cheerleaders to motivate you along. You may also choose to pay a fine if you do not make your goal which can be a motivating factor in achieving your goal. The site's are free and the penalty payment is not required but can be very motivating if that drives you.

Shop for both rates and fees:

Rates and fees vary from location to location so comparing what your uncle got one state away is not a fair comparison.  Loan size, credit score, loan to value (how much the home loan is vs. the value of the house), condo vs. single family detached, conventional loan vs. FHA all play a factor in loan costs and these are not all.

 As an example a conventional 30 year fixed  80% loan to value with credit above 740 and no escrow loan is what we will discuss.  If you choose not to escrow your property taxes, it generally costs you between .125% and .25% of the loan amount.  On a $250,000 loan that amounts to between $312.5 and $625.  You would save this by escrowing, but you would have to come up with more cash at closing and make 1/12 of your future property tax obligation with each monthly loan payment. 

The fees you need to shop for are Title fees and the lender fees.  Visit www.closing.com for a list of title companies.   Many borrowers don’t know that fees can be negotiated.  They just hand over their money.  Negotiation is the heart of every good business deal and borrowing from a bank or loan company is no exception. Borrowing money without knowing what to negotiate usually means you pay more than you need to pay.  You don’t have to accept the lenders package of fees without discussion.  The bank and the title company would like you to pay their listed prices, but it’s your money. Learn to negotiate or have someone negotiate for you.

Using  4.75 % as a benchmark with no closing costs, how would a 4.50% loan with $495 in closing costs compare?  The payments are  $37.41 less per month so it would take about 13 months to break even if you do not take into account time value of money and income taxes on the lower rate loan.   If you could obtain a significantly lower interest rate with similar fees, the lower interest rate plus fees offer may be the better choice.

 I tend to favor no cost refinance over lower rate but higher fee offers.  Also remember that once the cost is paid do not think that you have to hold the loan that long until you breakeven because if rates drop again and you are certain you will stay in the house it may make sense to refi again and pay your old mortgage amount to pay off quiker!  I also prefer fixed loans over adjustable rates unless there is ample cash to pay off the loan in the event the market turns as it did two years ago.

The new financial reform bill passed by the House has a different standard for financial advisors than the bill passed in the Senate.  The House bill requires every person giving financial advice to be a fiduciary acting in the best interest of the client.  The Senate version doesn’t have this requirement.  If Goldman Sachs had been held to a fiduciary standard, we might not be in the financial mess we are in today. Goldman did not have to disclose to its clients what interest Goldman had, if any, in creating or selling the products and derivatives that became toxic.  When you go to your doctor, lawyer or accountant, you have a right to expect that the advice you receive isn’t tainted by a conflict of interest.  Unfortunately, in the financial world, the advice given by brokers only has to be “suitable”, not necessarily in the best interest of the client.  It’s time that a fiduciary standard is required of all financial advisors.  You deserve to know if your financial advisor is limited in the products he offers to you or is being paid to sell you certain financial products.