Last updated 02/24/2010
PAGE INDEX:
*NEW CREDIT CARD GOTCHA FEES
*LIFE SETTLEMENTS (Selling Cash Value Life Insurance)
*HOW MUCH IS YOUR GOLD JEWLERY WORHT??
*Do You Know What One Trillion Dolars Is?
*Swine Flu Hype & Universal Health Care
*Is Your Estate Plan Up To Date?
*US Treasury Savings Bond Wizard
*How Safe Is My Savings Account?
*Do You Have A Spending Plan?
*Downloadable Budgeting Forms

CREDIT CARDS & YOUR CREDIT SCORE

Want to lower your credit score in a hurry? Cancel a credit card you have had a long time with a good payment history. Or ask to lower your credit limit.
When you cancel a long term Credit card with a good history it affects your overall credit history score which is a part of your overall credit score. It also affects your debt to credit available ratio which will also lower your overall credit score. Even when the credit card company lowers your credit limit without your asking, it affects your debt to credit available ratio which will also lower your overall credit score.If you want to cancel some of your cards think carefully about it.
1. Be sure it has been paid off and unused for several billing cycles.
2. Consider canceling cards you have had the least amount of time.
3. If all else is equal, cancel the ones with the highest fees or interest rate.

Another part of your credit rating is the variety of types of credit you have. They like to see several different types of loans, student, car, home mortgage, consumer goods, store credit, general credit cards, HEL, etc. So it might be wise to take out a 90 day car loan from your credit union to buy a car instead of putting it on your credit card. AND believe it or not, you get a lower score if you always pay off your credit cards on time each month. I hate to say it, but it might be a wise idea to pay the minimum one time a year and then go back to paying it off every month.

Remember, I strongly recommend a local or regional bank or credit union over a national one. They are usually far more forgiving than national ones, and far less likely to frequently change the rules and fee structures.

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NEW CREDIT CARD GOTCHA FEES!

As the Federal Government tightens the rules on how fast and how high credit card issuers can raise fees, they are dreaming up new ways to part you from your money. Fifth Third Bank has instituted an inactivity fee. If you do not use your card in 12 months they will bill you $19 or so. Not to be out done, Citybank is starting to charge annual fees on cards that customers charge less than about $2,400 a year. Look for most other nationwide or regional card issuers to follow suite.

PLEASE REMEMBER TO READ ALL CORRISPONDANCE FROM YOUR CREDIT CARD ISSUER! ! I found this out the hard way. Now I do read the legal junk.

One web site to compare credit card fees is CardRatings.com. Or just join your local Credit Union. They are usually much more reasonable. Some local or West Michigan banks are still somewhat reasonable. I like to be able to go right to the corporate office if there is a problem the branch can not solve. You just can't do that with a national bank out of N.Y.

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LIFE SETTLEMENTS (Selling Cash Value Life Insurance)

This is somewhat new. You're elderly or sick and in need a large sum of cash. And sitting there is that large life insurance policy. Why not sell it to an investor/broker? That might make sense in a few circumstances, BUT beware! The buyout amount (not the surrender value from the issuer) is only 1 to 15% of the face value. Be sure to shop around and get ALL quotes less all fees. What you want to see is a statement that says:
Buyout amount = $xxxx.xx
Less this fee of $xx.xx
Less that fee of $xx.xx
Gives me a check for $XXXX.XX

Shop 3 or 4 investor/brokers and compare their offers to the surrender value from the issuer. HEY, the insurance company might even make you a better offer as most insurance companies HATE investor/brokers buying your policy. Be sure to explore all the alternative options before you cash out. Maybe the insurance company will help out. Maybe the beneficiaries (kids) could help out to protect their inheritance. Think outside of the box and seek advice from several sources.

WARNING:
This could turn out to be the next big stock market bubble. It seams that Wall Street is turning pools of brokered insurance policies into tradable securities just like it did to subprime mortgages! Be sure to get that check free and clear. Might be worth letting a lawyer checkout the contract.

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HOW MUCH IS YOUR GOLD JEWLERY WORHT?

Thinking of selling your unused gold but not sure what it is worth? Here is an easy formula to get you a ballpark price.
1. Weigh your gold on a kitchen/postal scale.
2. Multiply that figure by the current price of gold. Here is one web page to check - CNNMoney.com. You might try to Google a few more to get an average price.
3. Divide by one of these types - 10K is 74.8; 14K is 53.2; 18K is 41.5; and 24K is 31.1.
4. Now multiply that number first by 0.50, and then by 0.80. This will give you a low to high price range for your gold.

Of course you could just keep it for use after the apocalypse when paper money and credit will be worthless. GBG!

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Do You Know What One Trillion Dolars Is?

Do you really understand what one trillion dollars is? Or what it is worth? Most people have a pretty good idea of what $100 (one hundred) is worth, no problem with $1,000 (one thousand), and a basic understanding of $1,000,000 (one million). Now you start to loose me at $1,000,000,000 (one billion), and I was completely lost at $1,000,000,000,000 (one trillion). So after hearing our federal government toss it around like a trillion dollars was no big deal, I decided to get a few real world examples of the value of one trillion dollars would be.

Around West Michigan the average house is about $100,000. You can buy a very nice house for $200,000. So lets say you wanted to buy a few nice houses with your $1,000,000 (million) lotto winnings. You could buy 5 nice houses for $200,000 each. Not bad.

Next week you hit the mega lotto for a cool $1,000,000,000 (billion). You like this landlord thing and decide to pick up more nice houses. You could buy 5,000 more houses.

Next month the government is so impressed with you as a landlord they give you $1,000,000,000,000 (trillion) of stimulus money to buy more houses. So you buy 5,000,000 (million) more houses at $200,000 each!

OK, now that you have a basic idea of what $1,000,000,000,000 will buy, how do you get it? The median income in Michigan is $49,699. If your average earnings were $50,000 per year for 45 years (about the average work life of the average Joe), you would have earned $2,250,000 in your lifetime. It would take 444,445 average Joe's lifetime earnings to equal $1,000,000,000,000! ! That is a little over half the population of the Grand Rapids Metro area (776,742 estimated in 2009)!

A few days ago the estimated U.S. National Debt was $11,777,071,839,383. The estimated population of the U.S. is 306,991,088. So each U.S. citizen owes about $38,369! The U.S. debt is increasing by about $3,800,000,000 every day! The interest at a modest 4% would be $1,315,000,000 per day - OUCH!!

Keep in mind that in 1900 the U.S. debt was only $2,136,961,091. U.S. Debt History

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Swine Flu Hype & Universal Health Care

If your wondering why the government and the health care industry are making such a big deal about the 'Swine Flu', just ask yourself what is going on in the political arena right now?

Universal (government run, taxpayer funded) Health Care.

The proponents want congress to pass this bill now. It isn't even totally written, and very few people have even read what is written. Remember the last bill the President demanded be passed immediately? Opponents complained the bill was not even totally written, and very few people have even read what is written. AND its cost was not even estimated accurately and why too high.

That bill was the T.A.R.P. (Wall Street Bailout).

Most of this money went to big corporations who just kept on giving huge inflationary bonuses not based on merit or performance. VERY LITTLE of this money made it to Main Street U.S.A. and even less into your pocket

So why is the Swine Flu and Universal Health Care connected?

FEAR ! !

Scare the public into believing they are going to get sick and will die if congress doesn't pass Universal Health Care. It is actually a very good plan. And it probably would work, except IT IS NOT TRUE ! !

Some myths and facts about the Swine Flu:
1. It is very contagious.
TRUE.
Eat healthy, get plenty of rest, wash your hands frequently and excessively. Avoid sick people who should have STAYED HOME! Stay home if you are felling sick!!!!!!!

2. Every one is going to be sick.
FALSE.
The latest college outbreaks are running about 15 to 20%. Washington State University reported of 18,000 students; 2,500 reported flu like symptoms and another estimated 1,000 were sick and did not report it. Swine flu hits Washington State Univ.

3. People are going to be very sick and many will die.
FALSE.
"There have been no deaths or even hospitalizations from the cases at WSU". This is a little better than the historical average for Swine Flu so far. A very small % have died. Substantially less than the government estimation.

Universal Health Care Myths

1. It is not that expensive.
FALSE.
In most countries that have Universal Health Care the personal tax rate is about 50% (Income tax plus national Value Added Tax Worldwide Tax Rates). Look it up! The average American is in the 15% tax bracket after all deductions. You have to earn over $40,000 personally to get into the next bracket, $75,000 married. US Tax Brackets Currently our top bracket is 35%. Nor do we do not have a national VAT or sales tax like most other countries. Do you really want to pay more taxes?

2. We can't afford not to.
FALSE.
We can't afford to borrow OR tax anymore in this depression. The US economy has just hit bottom and any more taxes or unrestrained borrowing will stall the recovery. The current budget deficit has tripled. The national debt is estimated to be up 29% over 2008 an about 90% of the GDP US Public Debt. Long term, these figures are unsustainable. Listen to me folks. I am a budget counselor. I have seen what unrestrained debt can do. The US government gets away with it by printing more money. US money supply. Again it is an unsustainable rate. It works for a short while, then it will collapse like any other pyramid schemes and plunge this country into a super depression. The USA can not keep printing and borrowing more money anywhere near the current rate.

3. We have to fix Health Care NOW.
HALF TRUE.
Yes we need to make some major adjustments to the way health care is provided and administered. BUT THE GOVERNMENT IS NOT THE ONLY ANSWER! And doing a fast fix without debate and even reading a completed bill is financial suicide. Do you know congress has its very own Health Care policy? AND it will not be covered under Universal Health Care. If Universal Health Care is so good, why is congress exempting itself?

Here are 4 things that must be properly addressed to fix the health care system:
1. Portability.
Every insurance company reinsures with other companies. Therefore it is a joke to say there is a 90 day waiting period when you start a new job, or a preexisting condition when you were previously insured. We need to come up with continuous coverage. Let the government tell the insurance companies to fix this problem and see how fast they come up with a cure.

2. Insuring the unemployed.
Unfortunately I think the government is going to have to pay for this with our tax money AFTER the portability issue is fixed.

3. Not losing your home when you are sick and can not work.
Again, unfortunately I think the government is going to have to pay for this with our tax money AFTER the portability and insuring the unemployed issues are fixed.

4. Cost.
This one is the toughest. You are dealing with rampant unrestrained greed on at least 4 levels - insurance companies, medical industry, lawyers, and lawsuits. This is way to complicated to deal with now so I will skip it. Besides, the first 3 steps are easier and quicker to fix. Those 3 steps will bring about the most needed changes and get the most people insured.

Brian

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IS YOUR ESTATE PLAN UP TO DATE?

If you haven’t updated your beneficiaries on your will, IRA, 401K, insurance policies, etc., you are not done! Any financial document where you name beneficiaries should be reviewed periodically for changes in who gets what. Why? Because the courts are obligated to disperse the money according to your last written instructions. Regardless of how out of date those instructions are.

For instance divorce, remarriage, births, and deaths will change who gets what. Do you really want all of your 401K to go to your ex-wife even though you remarried 10 years ago and have 3 kids?

And while you are at it, declare a secondary, and if possible, a third or fourth beneficiary. This way you are covered in the case you were slow to update beneficiaries or there is a multiple tragedy. This happened to a friend of mine who died with her husband in a car crash. She was his primary beneficiary, and he was her primary beneficiary. Luckily they had named their kids as secondary and third beneficiaries.

And read the fine print about retirement accounts. There may be certain benefits to naming a spouse over your kids. If your eyes glaze over at fine print, seek the advice of your account manager on the best way to name beneficiaries.

Naming minors usually means an express trip to probate. Talk to a professional about weather you need a trust or guardian.

Changing beneficiaries can usually be done on-line or call your account manager to get the forms. Its easy, it is smart, and it may save your family some real grief.

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Savings Bond Wizard

This is a great way to manage your government I, E, EE, H, HH, I, and Savings Note savings bonds from the US Treasury Savings Bond Wizard

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HOW SAFE IS MY SAVINGS ACCOUNT?

UNDERSTANDING FDIC, NCUA, AND SPIC INSURANCE

Recent bank failures have many people asking how safe are their bank accounts and retirement funds. Well the short answer is quite safe, unless you have more than $250,000 in funds. Especially when only 17 US banks have failed in 2008, and only 100 in 2009, and 88 as of July 2010 out of about 8,500 total US banks.

Lets start at the beginning. Most banks are FDIC insured. That stands for Federal Deposit Insurance Corporation. AKA the US Government. If you don't see this prominently displayed, ask. If they are not a member go to another bank. Most credit unions are NCUA insured. That stands for National Credit Union Share Insurance Fund. AKA the US Government. If you don't see this prominently displayed, ask. If they are not a member go to another credit union.

FDIC & NCUA insures only cash type accounts and investments like:
Checking and savings accounts;
Money market savings funds;
Certificates of Deposits*;
Christmas club funds and like accounts.

FDIC & NCUA insures only up to:
$100,000 per person, per banking institution.
$200,000 per joint accounts per banking institution.
$250,000 in qualifying retirement funds per person, per banking institution.

FDIC & NCUA does not insure:
Stocks and bonds;
Mutual fund shares
Annuities and other equity type investments.

So if you have $123,456 in checking & savings accounts in your name at Mega Bank Corp, you are insured for only $100,000. If you put some in MBC's downtown branch and some in MBC's boondocks branch, you are still covered for only $100,000. The same goes for qualifying retirement funds with a $250,000 limit. You MUST split your money between banks or credit unions owned buy different companies. You must find out who the parent company is because many small banks with different names are owned by the same parent bank corporation.

Or you can open joint accounts at the same bank or credit union. So to insure your million dollar lotto winnings you open 1 account for $100,000, your spouse opens 1 account for $100,000, you both open 1 joint account for $200,000, then you open 1 qualifying retirement account for $250,000, your spouse opens 1 qualifying retirement account for $250,000, then you open 1 trust for $100,000 naming the other as beneficiary, and they open 1 trust for $100,000 naming the other as beneficiary. Total insured funds equal $1,100,000 in 7 different accounts at the same bank**. Depending on how brave you are you can open as many joint accounts with different people as you wish. As for me, I will just go to as many different banks and credit unions as needed to get all my cash type investments insured.

If your FDIC or NCUA financial institution should fail, you will have limited access to your funds the next day, and full access to your funds within 3 or 4 days. If you are not insured by the FDIC or NCUA, or over their limit, you will eventually receive about 50 to 70% of your funds not covered by FDIC or NCUA insurance after everything is settled by the FDIC or NCUA.

Most Retirement and Investment accounts are insured by SPIC. That stands for Securities Investors Protection Corporation. Weather at a bank, credit union, or brokerage house if you don't see this prominently displayed, ask. If they are not a member go to another financial institution. SPIC only covers brokerage firms and bank brokerage firm failures.

SPIC insures:
Stocks and bonds;
Mutual fund shares
Annuities and other equity type investments.

SPIC does not insure:
Price fluctuations;
Regular losses due to market fluctuation.

For more info:
FDIC LINK
887-ask-fdic

NCUA LINK

SPIC LINK
202-371-8300

* Some CDs may be brokered. Always ask where the CD will be placed to avoid having it placed at a financial institution where you are at the maximum dollar limit.

** Beware of putting in the maximum amount of money in one account. If you have a $100,000 limit and you earn interest on it, the interest will put you over the limit and not be insured.

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Did you know

that your insurance rates are also based upon your credit score? Bad credit means higher insurance rates!
Just another reason to keep your credit score up.

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DO YOU HAVE A SPENDING PLAN?

Quite basically,

you must have a plan to succeed. Otherwise by default you are planning to fail. And whose default is it? Yours for not planning! At this point most people scream: “I don’t need a budget!” To which I reply: “So just how did you get in this mess?” Well if only I got paid more; If only I didn’t have such a big student loan…or such a big credit card bill…or…or…or…

Well guess what? The chances of getting a raise big enough to make any meaningful difference are just short of zero percent. And the chance of you getting those big bills paid off with out a spending plan of action isn’t any better.

So what can you do? Develop a spending plan of action, or budget. You must take control of your money, or it will control you. Now I don’t want to, nor can I teach you how to develop your individual spending plan of action on this web site. But as a certified budget councilor with Crown Financial Ministries I recommend the teaching materials and methods of Larry Burkett. A very close second would be Dave Ramsey. Larry teaches the why behind the budget better, and Dave teaches how to get out of debt better. I usually combine them in my counseling. I would be glad to answer simple questions by email. Just use the 'CONTACT US' button near the end of this page. If you are in the Grand Rapids Metro area I offer free basic budget counseling.

So there you have it:

Step #1.

Take control of your spending.

This is the most important step to getting started. You must free up some cash to invest. Borrowing money to invest makes little sense at this stage. First of all you reduce your return on investment by the amount you pay in interest. Second you are a novice and more likely to make mistakes.

Step #2.

Your first investment – Your Emergency Fund.

Your first investment should be something very simple like an automatic payroll deduction to a separate savings account preferably at a second bank or credit union. Yes it is hard getting started. Sometimes you just have to bite the bullet and say I will just make do with $10, or $20 per week less take home pay. Most people do not miss this small amount. Then work the amount up as high as you can. Set aside a portion of every raise, a portion of any overtime, etc until you are deducting a nice large chunk of money. If you do not have an emergency fund of 3 to 6 months expenses (see why you need a spending plan of action) this is a great way to get it built up. Now of course we don’t leave a pile of cash in a simple savings account. You want to invest your emergency fund in something very easy to get at. The simplest idea is to get 3 to 6 (or more) Certificate of Deposits for your emergency fund. I placed my CDs on deposit at my main bank and linked them to my checking account so that I get a f ree interest bearing checking account. This adds to the meager interest rate of CDs by saving me checking account fees, plus the interest I receive from my checking account. After you have an emergency fund built up high enough for your needs, this is a good way to save up for a car, house, vacation, etc.

Step #3.

Your second investment – Your retirement account.

Here we use the payroll deduction method again. Now if you are under 30 you only need $10 or $20 to start because you have time on your side. If you are over 40, get going in a big way, $50 to $100 per week. If your employer offers any type of retirement account with any amount of matching funds I strongly suggest you take advantage of this free money. If your employer does not offer any form of retirement accounts, get yourself a ROTH IRA.

Here I recommend investing in mutual funds. Preferably no-load or low-load funds. Historically mutual funds have returned an overall average of about 12% over any 5-year period. Pick one that has done close to the overall average for the last 5 years. Just watch out for the management fees. Some funds say they are no-load funds and then sock it to you in fees. Stability of the fund stock make up and management is essential to continued growth. Funds that have a high buy/sell average incur lots of fees and taxes. Funds that can’t keep a manger for more than a few years are questionable. You can find this information in the funds annual report. You may want to look at 2 or 3 years of reports. Some funds have the report available on-line.

Remember to keep your fund diversified. Invest in several sectors of the economy and the world. For example I have a fund in the leisure sector, 1 in the financial sector, 1 in the small capital sector, 1 in the Asia/Pacific sector, and other sectors. If you are too heavily invested in one sector and it goes down, you go down with it. However if you are in 3 to 10 sectors, the other sectors will carry you thru the period that the one is down with only a mild drop in total return. If you are starting with a small amount from each check, say under $40, you may want to put it all in just 1 fund. Then next year when you add to the amount you invest divide it between 2 funds. The following year when you add to the amounts you invest divide it between 3 funds. If you are unable to add any additional money to the amount you invest per check, then I would pick a different fund to put it in every year or so until you get 3 or more funds going.

Investing in individual company stocks is a lot harder than investing in mutual funds. You need to do a lot more research on your own. You need to look at the quality and stability of the management, the product, the market, and the industry in addition to the earnings and stock prices. Remember to keep your retirement fund diversified. Invest in several sectors of the economy and the world. If your company gives you stock for your 401K that is nice, but remember to diversify your retirement account with your personal funds. Diversify, diversify, and diversify. ‘Many hands make the burden light’ and many different stocks make the retirement account safe from collapse.

You must also keep track of your funds and stocks. I use a simple homemade spreadsheet to track their quarterly performance. You can buy financial soft ware to do this if you wish. Occasionally you will have to ‘rebalance’ your retirement account. This is a fancy way of saying that you picked a poor fund/stock that has been loosing value for a year or two and it is time to sell it and pick another. That buggy whip company did real well in the early 1900’s, but kind of faded after the 1920’s. Some industries are dieing, some are up and coming. The same goes for individual mutual funds and stocks. I am not saying to panic at the least drop in value. You must have a ‘long term outlook’. If a fund/stock drops for a quarter or two, no big deal. Look at the general economy, that sector or industry, or the fund/stock itself. It may be a good fund/stock in a lousy environment. Or a lousy fund/stock in a good environment. If it continues to go down for more than a year, it may need to be replaced. It can be a hard call. Just don’t get sentimentally attached to any fund/stock. If it has lost money for more than a year in an otherwise good environment, dump it.

Step 4.

Your house and real estate:

Your home can be an excellent source of retirement income. Be sure to buy a house that fits comfortably into your budget. And I do mean comfortably! Do not stretch your budget for a house. It is better to start out in a slightly smaller house than you want and trade up say in 5 or 10 years rather than strain your budget and risk loosing your investment. One other reason to fit the payment comfortably into your budget is so that you have a little extra cash to build up $$ to invest in say a rental property. Or to pay extra on the principal every month and save buckets of cash on interest payments. I paid $40 per month extra principal on my first mortgage. After 15 years of payments we only had 9 years left on a 30 year fixed mortgage. We saved 6 years of interest payments! We then rolled the principle over to our second house that was twice as big on a double lot and kept enough cash out to pay the closing costs and build a large second garage for my classic cars. When I retire I will sell th is paid for house and downsize while putting a large amount of cash in my retirement account.

Rental property can be a good investment. The secret is to buy low, find good renters, and sell high. It is much harder than it sounds. You must also treat the rental property just like you owned a business. BECAUSE YOU DO OWN A RENTAL PROPERTY BUSINESS !! If you can not do a majority of the maintenance your self I would urge you to skip rental property. My excursion into rental property came out mildly on the plus side. It was a good learning experience, but not very profitable. If you want to try it I suggest you find a friend who has made $$ at it and become their apprentice. Most of the self-help books paint too rosy of a picture.

A word about interest:

Yes a home mortgage is deductible. However it is $$$ you are paying someone else to enjoy your house or other item you purchased on credit. The debt can be recalled at any time (read the fine print!) and you can wind up loosing all you had already paid in plus the house/item you purchased on credit. Now I am not anti debt, just extremely cautious! A house takes 3 months or longer to loose, but is a much bigger hardship to overcome. A car can disappear in as little as 15 days after only 1 missed payment. If that is not enough to make you cautious about debt try this:

A $10,000 car with no down payment, $191 monthly payments @ 5.5% interest will cost you $11,461 with interest. If you bought a car you could pay cash for, and banked the $191 monthly payment in a money market or CDs @ 4.5% interest in 4 years you would have $10,006 and a paid for trade-in to buy that same car for cash.

Mortgage tax break? Let say you paid $1,000 last year in mortgage interest. The IRS gives you $150 (15% of $1,000) back. So you spent $1,000 less $150 or $850 EXTRA to live in your house. Lets also say you paid off your house last December and now you have to pay a 15% tax on that $1,000 you would have paid out in interest. $1,000 less $150 tax equals $850 in left over money you can spend any way you want.

Which do you really want; to pay $150 less in taxes, or to have $850 more to spend.

If you do pay off your mortgage, just be sure to set up a separate savings account to put one eleventh (1/11th) of last year’s property tax payments into the account each month just like you were paying with the mortgage so you always have the property tax money on time. I use 1/11th because property taxes usually go up every year.

I will post more later.

Brian

Peace be with you.

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