PMW Says . . .

[ProfMoneyWise]

PMW Says: The only time ARMS don't go up is when you are looking for volunteers.

PMW Says: Unless you are the guy who controls the interest rates you never know which way they are going to go.

PMW Says: We all roll our own dice but the rate of interest on where I sleep determining whether or not I can still sleep there or even gas to mow the lawn is a game I'm not playing.

Why An Adjustable Rate Mortgage Is Bad
The loan that is designed to favor the bank
MAY 16, 2011 | WRITTEN BY CHRIS RUSSELL

The adjustable rate mortgage is a lot like a dinner that makes you sick to your stomach.

You don't know when or where it's going to move, but you're pretty sure you're not going to like it.

The ARM is a mortgage loan type where the rate is a little lower than a conventional mortgage, but that's just to bait you into it. Once a certain amount of time passes, the rate changes based on the market. Since rates are pretty low right now, where do you think they will adjust from here?

In a word ... UP!

With mortgage rates being as down as they are, the last thing you want is one that's going to shift. Don't be suckered in by a bank that offers you points or a lower APR that will eventually change. The very purpose of a mortgage with an adjustable percentage is to favor the bank. They want to get as much money out of you as they can.

Since your home is usually your largest asset, what you want most for it is stability. The bigger the asset, the more it affects you when there is uncertainty. If you have debt on your house and on your stereo and both rates get jacked up, which is going to cause a bigger ripple in your pond?

The most stable situation is a paid-for house. The next best thing is a mortgage where the payment is no more than a fourth of your take-home pay on a 15-year fixed rate loan. Your payment will stay the same month after month, it's easy to budget for, and you won't get hit out of nowhere with an increase that could blow up your spending plan.

If you have an adjustable rate mortgage, now is the time to refinance to a fixed rate. Take advantage of the low rates. Not only will you lock in a good percentage, but you'll know your payment each month, which gives you a little stability in an unstable world.

 

[ProfMoneyWise]

PMW Says: The Office. Dwight commenting on Michael buying a condo: "A thirty year mortgage at his age? He' s not buying a house, he's buying a coffin."

PMW Says: Own where you sleep. Own where you eat. It can be done and if you don't like it you can always go borrow money on your house to put you back into debt and to have something to complain about at the block party.

PMW Says: That broker that qualified you is not going to kick you a few extra bucks when you need it to meet the payment you can't afford.

How The 30-Year Mortgage Robs Your Future

Do you want to give up the chance of becoming a millionaire?
from daveramsey.com on 05 May 2011

The U.S. government may finally understand that 30-year mortgages are a bad deal. Fannie Mae and Freddie Mac, the government entities that guarantee 90% of U.S. mortgages, are losing taxpayer money hand over fist thanks to massive homeowner default rates.

So the Obama administration proposed eliminating federal guarantees for home loans except for borrowers who can't qualify for a mortgage with a private lender. Without that federal backing, banks will shoulder more of the risk, driving up the cost of mortgages through tighter credit requirements, larger down payments and higher interest rates. The 30-year mortgage won't seem so attractive with those features, will it?

An Option We Can Do Without

Actually, the 30-year mortgage was always a bad idea. It simply enabled borrowers to buy more house than they could afford by spreading the payments out over a longer term. On top of that, those homeowners paid tens—even hundreds of thousands of dollars more in interest.

That's why Dave never recommends 30-year mortgages. If you don't pay cash for your home, get a 15-year mortgage with at least a 10% down payment and monthly payments that are no more than 25% of your take-home pay.

Your "Stolen" Opportunity

The difference between a 15- and 30-year mortgage with a 6% interest rate on a $225,000 home is $144,000 over the life of the loan. What could you do with $144,000? Pay for your kids' college? Buy a car? Buy another house?

What if you invested that $144,000? Invested as a lump sum, it would grow to a million dollars in just 17 years. You'd have $2.5 million in 25 years. On the other hand, what if you invested your house payment for 15 years after you paid off your 15-year mortgage? One year later, you'd have a million bucks. Ten years later, you'd have $3.5 million.

Are you ready to give up the opportunity to be a millionaire just to buy a home you can't really afford in the first place? Didn't think so.


That's why you have to shop for homes with your head—not just your heart. Too many homeowners fall in love with a home they just have to have, no matter the cost. But if you know buying that home could cost you the chance to be a millionaire, it's much less attractive.

 

[ProfMoneyWise]

Feet up, patio, beautiful weather, plans all weekend to do nothing but fun things if the Good Lord will allow.

Thank you God.

Thank you to those who sacrificed their lives for my family, my friends and I to have all we have and be wrapped in the blanket of freedom.

Thank you to those who currently serve in the military and any form of service where my protection is your daily focus and risking your life is routine. I cannot say thank you enough and may God protect you in all you do. Please be safe.

Finally thank you to all those that have served. Your time is done on the front lines but your time made sure those lines stayed where they are today. Yes, you passed the torch but the fire still burns within. Like me, you would still pick up and go if ordered.

God Bless all of you and if I see any of you this weekend, or any time, I will thank you in person, thank your family in person, and if you are not looking you may find your tab paid for in full.

 

[ProfMoneyWise]

PMW Says: If you can't explain it to a 5th grader you don't need to be involved in it.

PMW Says: If you can't explain it to yourself you definitely don't need to be involved in it.

PMW Says: If those you hire to explain it to you talk down to you . . . fire them.

Not So Sophisticated
Don't make money moves that don't make sense

May 31, 2011 | WRITTEN BY Chris Russell

According to Webster, sophisticated means "having a refined knowledge of the ways of the world."

Notice how it didn't say rich. Or successful.

The good news is that you don't need to be a brainiac to build wealth. The problem is too many people don't know that. Becoming wealthy involves consistently investing month after month while staying away from huge debt that robs you of the very money you are putting away for retirement.

A car lease is plenty sophisticated—and stupid.

We think we know the reason why some people want to seem smart, instead of rich, when they make money decisions.

People who make complicated money moves (as opposed to buying with cash) like a car lease or keeping their mortgage to get the tax deduction want to "beat the system." Borrow this to pay that, then deduct the interest from it, then put half that money into an account that is sheltered for taxes, then borrow against it to buy blah blah blah.

Deep down, people who buy into this thinking believe anyone can save money and become wealthy, but it takes a special kind of savvy to know what the market is going to do and then use their money in a way to capitalize on it. They give in to pride and try to make it happen.

On top of that, figuring out the system means trying to get around hard work and patience. To them, it seems possible to use wits and prosper financially as opposed to working a full day, budgeting your income, saving for an emergency, and investing. That takes too long, and someone who is trying to outwit wants a quicker way.

But in taking that approach, they ignore basic, common sense. If you want to do a car lease so you can write it off on your small business, you'll lose tons more money on the depreciation than you'll save on taxes. Anyone who can add can figure that out.

When you keep your money matters simple and have the patience to build your wealth slowly, you stand a much better chance of becoming rich than you do when you try to be sophisticated. If you start living on less than you make and getting out of debt so you can invest, you'll end up legitimately wealthy while others will continue to play a shell game to give the appearance of having money. In the end, you'll have money and they won't.

But hey ... at least they're more sophisticated than you are.

 

[ProfMoneyWise]

PMW Says: You have heard that 7 out of 10 are living paycheck to paycheck, have $10,000 of consumer debt and could not withstand a $5,000 event without borrowing money right? I fix that.

6 months and some change to the 2% paycut when the Social Security payroll tax holiday ends.

If you are still living paycheck to paycheck I suggest you fix it now. You know it is coming. Either position yourself to deal with it or practice your look of surprise to make it semi-believable.

 

[ProfMoneyWise]

PMW Says: Cash or debit never credit.

PMW Says: Debit cards don't work unless you have money. Pretty simple way to go about things I think.

PMW Says: I never let my debit card out of my sight. That nice smiling server may be going down a wrong path. Good natured distrust is a good thing to have.

PMW Says: Hard to steal your debit card number if you use cash. Not very profound but pretty effective.

The Basics of Your Debit Card
Credit really isn't safer than debit!
from daveramsey.com on 29 Aug 2009

Think a credit card is safer to use than a debit card? Most people do. They convince themselves that credit cards carry a better track record, and you're less likely to have your money stolen from you when you use a credit card. Sadly, those people are wrong.

Credit cards carry a huge risk of allowing the user to incur debt. Debit cards force you to pay with money you already have. If you hold a debit card from a well-known name like Visa or MasterCard, it will have the same policy about unauthorized charges that credit cards have. Don't fool yourself into thinking that credit cards are the "safe" way to go. They'll only get you into trouble and force you to make payments.

Debit cards are being used at an all-time high today and are used more often than credit cards. Last year debit card use exceeded a trillion dollars. That's a lot of people using debit cards!

Although we like to see the increase of debit cards versus credit cards, we still want to make sure you're being careful with your debit card.

Since a debit card is directly linked to your bank account, it's a convenient way to purchase things without incurring debt. When you use a debit card, the money is immediately withdrawn from your account, which means no interest, late fees, over-the-limit fees or annual fees—all good things to help you avoid debt. Debit cards are also great to use because they don't require you to carry cash or write a check.

Know your PIN.

When you make a purchase with your debit card, you should have the choice of running it as a debit or credit purchase. Always choose credit. Credit? Yes. This will insure that you are protected by the card company's zero-liability policy—you will not be responsible for unauthorized transactions. If you have to use your PIN, be sure to memorize your PIN and never carry it with you. Report lost cards immediately, change your PIN frequently, and use your debit card only if you must.

Check bank statements.

To insure that no one but you is using your debit card, check your bank statements online every day. It may seem tedious, but it's better than someone stealing your money. Be sure your internet connection and computer are secure before logging into your personal information. If you spot anything suspicious, call your bank immediately.

Watch your debit card.

Keep your eyes on your debit card when transactions are taking place. It should be within your sight at all times. Once the card leaves your view, anyone has access to your card information and ultimately your bank account. That's why it's always best to use cash!

Check your credit report.

Every year you can order a free credit report from each of the three nationwide consumer credit reporting companies (one per company so you really get three a year). Do it! If you think someone used your debit card, report it to the credit bureau immediately and request a copy of your credit report. Monitoring it regularly will help cut down on any illegal activities.

Be on the lookout.

The latest scam involves criminals attaching "skimmers" to card-swiping devices and gaining access to your personal information and bank account. If a card-swiper looks questionable, don't use it. Never use an unbranded ATM.

 

[ProfMoneyWise]

seniors-association-benefits-cut-wsj: Personal Finance News from Yahoo! Finance

"AARP, the powerful lobbying group for older Americans, is dropping its longstanding opposition to cutting Social Security benefits, a move that could rock Washington's debate over how to revamp the nation's entitlement programs."

PMW Says: No matter who you work for, no matter what is promised always be prepared to lose your job tomorrow and never rely upon someone else for your retirement.

 

[ProfMoneyWise]

PMW Says: I have yet to meet a millionaire who said they made it by getting rewards points and cash back from their credit cards.

PMW Says: If you use a credit card you are borrowing money. If you pay it back at the end of the month you are in debt until you pay it back. If you have the money to pay for it in full when you buy it but plan to pay for it at the end of the month instead you are inviting "risk" into your month.

PMW Says: If you are going to pay for it tomorrow then wait until tomorrow to buy it.

PMW Says: Cash or debit never credit.

Old Habits Die Hard

To rely on a piece of plastic as part of your budget is almost as dangerous as relying on a card table with three legs to hold you up. Near the edge of a cliff.

A new study published by Demos (a public policy research and advocacy group) finds that the average debt among low- and middle-income households is $9,799. More than half of those families had a similar balance or larger three years ago. These people have spent so much time in debt that they almost can't function without it. Plastic is as much a perceived part of their lives as their need for a driver's license.

Using credit cards is a slippery slope to relying on them. If you feel you're so dependent on plastic that you can't go food shopping, buy gas or even pay the rent, that's a bad spot to be in.

At this point, credit card use is one step up from addiction. The longer a person uses, the harder it is to break the habit because it becomes normal to them. It's part of their life. They don't see any reason to stop. It takes them, bit by bit, down a road that will leave them broken, sapping their money and hope at every turn.

It's just another reason why you need to get out of debt. The longer you stay in it, the more you function from it. It's not a habit you want to continue. If instead you get out of debt and start investing the money you'd usually pay to your card or car, then that would become habit, only one that leads to prosperity.

Since money affects so many aspects of life, then forming good money habits will spill over into all those areas. It will give you a fresh and healthy perspective on your marriage, kids, how you give and how you live.

That's good information ... you can rely on it.

 

[ProfMoneyWise]

PMW Says: Hold on slick don't break your arm patting yourself on the back. All you did was move it around a little you did not pay it off. Debt consolidation is not a fix.

Consolidation Doesn't Mean Elimination
Being aware of what moving your debt means
JUL 11, 2011 | WRITTEN BY CHRIS RUSSELL

Believe it or not, we can draw a comparison between debt consolidation and laundry day.

Remember being in your first apartment? If you had a bunch of dirty clothes littering your floor, the place would look cleaner if you piled all the shirts and jeans into a corner.

But now you just have one big pile, and you still have some laundry to do. Even worse, you'd probably litter the floor again in a few days, so your problem grew back. Then you had twice as much work to do.

That is debt consolidation in a nutshell. If you have $10,000 on plastic, a $7,000 student loan and owe $12,000 on the car, then combining them all into a $29,000 loan doesn't mean you've cleaned up the debt, even if the collective interest rate is better. You've just moved what you owe.

If you're not careful (and most people who consolidate aren't), you'll spend your way back into debt, so now you're in double debt. It strains your checkbook, marriage and life. When you don't change the behavior that got you into trouble, don't be surprised if you end up—wait for it—back in trouble.

It's much more important to have a change of heart than a change of outstanding balance. Once you realize that debt is not the way to prosperity and that there is no shortcut to getting out of it (except for selling something), then you are on your way to becoming debt-free and staying that way.

If you've had that change of heart, and you want to get a 5% bank loan to consolidate your three credit card balances, then that's a good mathematical move to make. But unless you have a burning desire to pay that debt off, the debt consolidation does you no good. Not one iota.

Your debt's true enemy isn't a bank or a debt settlement company. It's you. It's living on a budget and putting every ounce of energy you have into giving your debt the beatdown. Get furious with it. Give it a whooping that would make Chuck Norris wince. Debt has had its way with you for long enough.

Time to turn the tables.

 

[ProfMoneyWise]

PMW Says: True Story. Couple next door type, $280,000 in non-house debt spread across 40 accounts/loans.

In her own words:

It's really simple. You do stupid in a big way.

We currently have four student loans. I love going to school and with a student loan you can get as many degrees as you want. Lesson learned: if you can't afford the tuition, don't just go to go. Plus, when you get a student loan it is often much more than just the tuition and direct expenses. We'd take the full amount and have a spending party! All of the spending was for school related stuff, of course (laptop fully loaded).

The majority of our cc debt was incurred by me. My philosophy at the time? If it's got a limit, see if you can reach it! Then, I'd get an offer to put bills on new, lower rate and change and NOT CLOSE THE OLD ONE! (Cutting up cards is NOT good enough. All you have to do is go to customer service with proper identification and you have a temporary card and are good to go.)

I'd start a new hobby. I started scrapbooking. I started making jewelry. I started knitting. I started _______. (Fill in the blank with whatever; I've probably done it.) I would justify my expense with great present idea! But, I'll NEVER scrapbook 40 bazillion pages or make 5000 scarves and we won't even talk about the jewelry making supplies. Oh, and have I mentioned how painful the decluttering process is right now?

I'd start selling something to help with the budget. During the past 35 years I've sold Tupperware, Avon, Mary Kay, Pampered Chef, Colesce Lingerie, Creative Circle, Amyway, Herbalife, Advocare, and probably a couple I can't remember. I'm pretty good at selling (except I don't like asking people to have parties and don't care if people buy anything if I have one). I am REALLY good at buying "samples" to build my business.

Oh, and those department stores???? You know, "Save 10-15% on today's purchase." You betcha! I'd tell myself I'd pay them when I got home. Never happened.

Window shopping gets me, too. I was just browsing new cars after a friend of mine purchased an SUV. My new SUV will be paid off this fall.

However, the biggest thing that contributed to our problem was not knowing where the money goes. We get paid once a month and I'd have a blast for about a week. We'd stock up on groceries without having a plan. Ever hear of Sam's Club or Costco? We'd go out to eat. I'd feed my latest hobby collection. "When I get paid, I'm buying that."

The funny thing is that we were doing okay. Our bills were paid on time (usually). My parents had always lived paycheck to paycheck so I wasn't worried about it. Both of us have retirement plans through work.

Our pastor has written a book called The ABCs of Financial Success. He has been debt free since 2001, our church is debt free, and we are about to build debt free. We had the study at church and that's the first time I came face to face with all the Scripture about debt. Osc and I tried the plan. Murphy would hit. We'd be off the plan.

I was looking in the bookstore at church at the financial planning materials, our pastor's, Larry Burkett's, and Dave Ramsey. I'd never heard of Dave Ramsey. I did what is natural to me. I googled him and came across the description of the baby steps. I then started listening to the podcasts. I told osc about the plan. He was skeptical, probably of me, not Dave. I kept listening. I struggled with a subscription to MTMMO AND purchasing materials. After all, I was trying to STOP spending. Osc finally told me, "We've spent on everything else; we'll give it a try." That was almost 3 years ago.

I put our massive amount of stupid tax in my signature from the very beginning. Embarrassed? Sure. However, I decided that others might be in the same situation. Have we accomplished what we have wanted to since Nov 2008? No, our son met, got engaged, and married a wonderful young lady. We cashflowed expenses for the wedding and helped out with others. That was after only a few months on the program! We now have a beautiful granddaughter, Kaylee Elizabeth, and osc and I each have KE envelopes (not much, but we don't feel deprived in the grandparent category either).

Getting gazelle after cash flowing has been really difficult. However, we're determined and I can hardly wait for pay days so we can fill the envelopes and get going again.

ETA: The BEF and the envelope system were the missing pieces. I'm stunned at how much peace I have with almost $150K still in debt and a $1K BEF. Paying cash REALLY works. I just hate to break a $20 bill, but I have no problem swiping it. I also like the gazelle budget. Each month I try to have over 50% of our income going to debt (makes a nice shovel).

 

[ProfMoneyWise]

The Great Recovery - thegreatrecovery.com

Take one hour of your time and watch the kick-off event available at this site. No cost and to the best of my knowledge no need to register or divulge in anyway who you are.

One family, one church, one community at a time . . .

 

[ProfMoneyWise]

A Smoky Mountain lesson | Marshall Ramsey

A Smoky Mountain Lesson by Marshall Ramsey

Mistakes made by us need to be learned from. Mistakes made by others must be learned from as well and take less of a personal toll.

Income minus outgo = Reality

The equation is simple. The result seems to be the difficult piece to address.

 

[ProfMoneyWise]

August 16, 2011

Which Investments Are Best For College Savings?

The Tip:
College savings plans can limit how you use your money. Picking the right one can make a huge difference.

When it's time to start saving for college, you have several options. The best is an Education Savings Account (ESA) that turbocharges your college savings with tax-free growth and withdrawals as long as you spend the money on education.

Flexible, state-sponsored 529 plans also let you save and use your college savings tax free. These aren't as good as an ESA, but the 529 can still be a great choice in the right situation. Here are a few questions to ask as you decide which one is right for your family:

Q: How can I use the money?
A: Obviously, you're opening this account to pay for educational expenses, but each plan defines that differently. ESAs allow you to use the funds for private elementary, middle- or high-school tuition as well as post-secondary education. You can also pay for off-campus housing, computers and other education-related expenses with your ESA. But eligible expenses for a 529 plan are limited to college tuition, room and board, school-required books and supplies.

Q: How much can I invest?
A: If you plan to open your college fund with $2,000 or less, go with an ESA. You can contribute up to $2,000 per year per child into an ESA. If you want to save more, or if you make more than $200,000 per year, a 529 will come in handy. Unlike the ESA, the 529 has no annual contribution limit or income restrictions. You can also open both, using the first $2,000 to start the ESA (if you meet the income requirements) and putting the rest into the 529.

Q: How much control do I have?
A: Like a Roth IRA, you can invest in any mutual fund in any allocation you wish in your ESA—that's one big reason why an ESA is a better option than the 529 for most people. You can also change funds as often as you want. Most 529 plans are limited to one fund family and restrict the number of investment strategy changes you can make each year.

Q: What if my child doesn't go to college or gets a free-ride scholarship?
A: If the beneficiary of the ESA or 529 doesn't use the money by age 30, you can change beneficiaries at any time and as often as you want. Siblings, parents, nieces, nephews—pretty much anyone in the family is eligible. However, if you decide to use the money for non-educational expenses, you'll pay a 10% penalty plus income taxes on the distribution. There's some good news, though: If your child's expenses are covered by scholarships, and you withdraw money for non-qualified purchases, the 10% penalty does not apply!

 

[ProfMoneyWise]

Reminder that you should check your credit report from one of the three major credit bureaus.

Accessing your credit report throughout the year may help detect identity theft issues. Federal Law provides that each credit bureau must provide you a copy of your credit report once a year at no charge. Please order one report at a time so that you can access your free credit report three times annually. Your spouse is eligible for the same protective services and checking both of your reports, if applicable, is highly recommended.

You can place your request at www.annualcreditreport.com.

To request a copy in writing, please complete the Annual Credit Report Request Form and mail to:

Annual Credit Report Request Service
PO BOX 105281
Atlanta, GA 30348-5281

You may request a child's report by completing this form as well; you cannot request a minor's report online. Be aware that most minor children will not have a credit file on record with the credit bureaus. You may also complete your requests via phone by calling 877-322-8228.

Please remember that www.annualcreditreport.com is the only authorized website to provide free annual credit reports and that none of the additional services offered at www.annualcreditreport.com. are necessary to retrieve your free report. When requesting your information online, you will need to identify your state and then click "request report". Complete all required fields and select the credit bureau you would like to access and follow each step. We recommend declining the option to purchase your credit score. You will then have access to view and print your report.

After reviewing your report, if you feel you are a victim of identity theft, please complete a theft report.

Consider Identity Theft Insurance. I use Zander Insurance – Dave Ramsey Identity Theft Program – Data Breach Protection Plan

 

[ProfMoneyWise]

PMW Says: If hours spent socializing or watching TV by the student were spent working he/she could pay their own way through school.

PMW Says: The next person to sleep late, shirk responsibilty, go to sporting events and drink beer on my money will be . . . me.

PMW Says: Those instructors work for who is paying the bill. Put them to work and get your your money's worth.

Back To The Basics: Saving And Paying For College
It's not as difficult as you think
AUG 22, 2011 | WRITTEN BY CHRIS RUSSELL

College. The word by itself is enough to make most parents start wringing their hands in anxiety.

Can they afford it? If so, how do you put it in the budget? The stress level is high enough when you're just talking about one child. Throw multiple kids in there, and a monthly prescription to Valium isn't far behind.

We need to clear up one issue about higher-level schooling: Having a degree doesn't automatically mean a lifetime of success. The education you receive and the honesty, perseverance, and work ethic are what get you far in life.

Just like when you are avoiding debt, paying for college involves knowing what you can afford. A family that makes $60,000 a year with a 17-year-old child and no savings has no business sending their young one to an Ivy League or private school.

If the student has a full scholarship, that's one thing. But going hundreds of thousands of dollars into student loan debt for an education will spell disaster for either your future or theirs.

Look at going to an in-state school (where the kid is on a meal plan and not living extravagantly), a community college or a vocational university. There are tons of fine schools where your student can get a good education and without paying through the nose or getting you to co-sign on a loan for them.

As far as saving for college, we recommend the Education Savings Account (ESA) or a 529 plan where you have control of the cash. The ESA is the best tool for saving because it combines all the good stuff. It earns the most (provided you've invested in good growth stock mutual funds), it's tax-free when used for education, and it lets you control the money.

Since you want to outpace inflation (typically around 4%), don't save for school using savings bonds or a bank account. On the same note, don't go for one of those whole life insurance policies that include college savings. None of those options will give you a good return.

Prepaid tuition (where you pay for a state university education now and don't have to pay when your child is ready to go) is better than those options, but that doesn't necessarily make it good.

Let's say you invest $10,000 in prepaid tuition when your child is a newborn, and he or she goes to a public college in your state. If the tuition for the school goes up 8% a year during those 18 years, then you will have bought $42,000 worth of education for 10,000 bucks. Not bad.

But, if you put that same money in an ESA averaging 12%, that money will grow to almost $86,000. Even better, that money can be used for any school, not just one within your state's borders. And when you use it for schooling, Uncle Sam keeps his hands off it. That's a better deal.

Scholarships are also an excellent source of money. Your future college student should put in as many hours a week as they can filling out applications and writing essays. They should go after all of them, whether it's for $5,000 or $500. If your child applies for 1,000 scholarships in a year and get turned down by 970 of them, those remaining 30 could still pay them $10,000 to attend class, maybe more. That won't cover your entire bill, but it's certainly a start!

Your youngster can also get a job to help pay for college, working during the summer or the school year, or both. Encourage them to get a job as a resident assistant (which comes with stuff like a stipend and free room) or something where they can use their talents. Heck, they could throw pizzas four nights a week and make enough to pay for school right there.

If you can afford it, you might consider making some kind of rewards system for them when they enroll. For example, if they work and have a certain amount of money saved on graduation day, tell them you’ll match it.

Make sure that your child lives small for these few years. Otherwise, it will force them to live small for many years after that.

 

[ProfMoneyWise]

Start Your Christmas Budgeting

A little sacrifice now is better than a lot later
Oct 12, 2011 | WRITTEN BY Chris Russell

Yeah, we know ... we're not even past Halloween, and we're running a story about budgeting for Christmas?

We are indeed, for a good reason. There are 75 days to go until December 25 (from the date of this story). If you figure out how much you're going to spend and can break it down to weekly or even daily savings, you can do some debt-free Christmas shopping because you started stocking money away early. Happy holidays indeed.

Here's the formula: (Amount you want to save / days left until Christmas).

If you fall behind in your savings, you can just plug in your current total and time to learn how much you need to save from here on out. Keep an envelope in your house and every time you save or earn some money, put it in there. Watch it grow!

If you can financially swing it (and starting this early, you can) you might even do all your saving over the next 60 days to leave yourself some shopping time. It's much more fun to smile and shake your head at last-minute Christmas shoppers than to be one of them.

Here are some suggestions for putting money away, or not spending it at all:

• Look at your budget and figure out what you could do without for two months. Maybe a premium cable package or a daily trip to a coffee shop. You can cancel those things for that amount of time, and you may even feel like staying away from them once the holidays are over since you'll be used to life without them.

• If you need to pick up part-time work to hit your budget goal, do it now. It's a lot easier to save money over two months than two weeks, and not being under the gun to sell something for holiday money will take a lot of stress from your life.

• The best presents come from the heart. Gift giving reaches a whole new level when you put thought into it rather than just pulling something off the shelf. Find out what someone likes and make a present for them, like a favorite dessert or babysitting their kids for a night.
It starts now. Will you do the same?

 

[ProfMoneyWise]

The Alarming Retirement Age
Really holding off before calling it quits
Dec 2, 2011 | WRITTEN BY CHRIS RUSSELL

With a little preparation, retirement will come for you sooner rather than later, and it will be a lot more comfortable as well.

But sadly, there are plenty of Americans who are not much for preparing. And it's starting to show.

According to a Wells Fargo retirement survey of 1,500 middle-class Americans, one in four–yes, that's 25%–say they'll need to work to age 80 before calling it quits on their career. Did you catch the key word in that last sentence ... need? As in "required."

One-quarter of these people are in such bad financial shape that they don't have the option to retire until age 80. Which, for those keeping score, is two years longer than the average person is even expected to live!

Does that sound like a good plan for your golden years? Of course not! It sounds like a scary one. Having to retire and live on skimpy Social Security is bad enough, but having so little money that you have no choice but to work is the pits. If you want to avoid being old and broke, start fixing your money situation now.

What you want at retirement age is to have options. You tell you what to do, not the bank. Since most people have to deal with health concerns, deteriorating senses and generally less energy, the thought of having to work is not appealing. Choosing to work is what you want–having the option. Otherwise, you'll be old, broke and scared, like Jim's in-laws.

The bottom line is that getting out of debt and putting a few dollars away now will mean no debt and a lot of dollars later. If you are 30 now, then investing just $100 a month will turn into more than $3.9 million in 50 years.

With those kinds of numbers, the number 80 starts to look a lot better.

Source: CNN

 

[ProfMoneyWise]

Credit Cards: The Newest Dirty Tactic
What happens when the carrot is dangled
Jan 9, 2012 | WRITTEN BY CHRIS RUSSELL

When a door closes, the banks and collectors will look for a window to crawl through.

The latest example has to do with a slimy new type of credit card offer. Debt collectors and banks have partnered up to offer credit cards to people who have old, bad debt they never paid. In order to get the new card, they have to pay on the old debt.

Sounds to us like a sneaky way to get people to fork over cash and take on new debt at the same time. Allow us to bullet-point the laundry list of problems that go on here:

• In many cases, the state statute of limitations on the debt has passed (anywhere from three to 10 years from the last payment) so the person is not responsible for it anymore.
• People who didn't pay their old debt don't need a credit card so they can accumulate new debt.
• This is another case of banks going after those who are most susceptible to paying fees on cards.
• People don't need credit cards to succeed with money. Trying to convince a person otherwise by baiting them in with a card is beyond wrong.
• Making a payment on an old debt (rather than settling it with cash) restarts the statute of limitations. That means collector calls and threats.
And on and on and on ...

When you play with snakes, you get bit. The commercials you see on television from major banks and card companies like Visa and American Express all talk about the "freedom" of using their product and how it will give you everything you want.

But when a person doesn't pay the bill for whatever reason, a side comes out that you don't see in the commercials. The dark side. The one where collectors threaten the borrower. The one where the huge fees and interest charges bust a budget and tear apart bank accounts and marriages.

It happens because of debt, which is what credit card companies sell. Don't buy into it.

Source: Wall Street Journal

 

[ProfMoneyWise]

Top 5 Reasons Not To Do Debt Consolidation
All signs point to no
Feb 2, 2012 | WRITTEN BY CHRIS RUSSELL

You can't spell debt consolidation without "con." And it's a good thing, because that three-letter word is the best description of what a consolidation loan is.

We've got five good reasons why you shouldn't resort to this type of loan. So let's get to them:

1. You are just moving the debt. Owing $10,000 on a car loan, $13,000 on a student loan and $6,000 on two credit cards isn't reduced one penny if you move it all to a $29,000 home equity loan. It's like having three piles of dirty laundry on your bedroom floor and moving it all to one big stack. You've still got wash to do.

2. You usually have to stake your home on it. Many debt consolidation loans involve using your house as collateral. The only thing worse than moving your debt is moving it to the place where your family sleeps. If something goes wrong, guess what your creditors will come after.

3. You will start to think you can get out of debt by borrowing. This kind of debt management makes you feel better because you have done something (not something helpful, but you like that you took action). You haven't reduced what you owe; you just think you have. Therefore, when your bills are run up again, you will remember how it "helped" to do debt consolidation last time and do it again. Repeat ad nauseum.

4. It is a surefire way to lead to more debt. If you bring all your debts together, you might decide to keep your newly paid-off credit cards just for "emergencies." Before you know it, you'll be having emergencies every time there's a flat tire, vacation or December-based Christmas. Then you'll be in double debt and double trouble.

5. You will stay in debt longer. Since you aren't paying off any debt with a consolidation (but think you are or will), you won't aggressively pursue a get-out-of-debt lifestyle. You won't budget or work extra or employ the debt snowball. Even if you make the minimum payments and don't charge any more, it will be years before you are debt-free.

The quickest way out of debt is to live small and pay off big. The shortest distance between two points is a straight line. With a debt consolidation, you'll just be running in circles.

 

[ProfMoneyWise]

Stupid With Zeroes: 6 Stupid Taxes to Avoid
from daveramsey.com on 10 Feb 2012

Most of us agree that we have too many taxes, but we’ve come to accept that they’re just a fact of life. The good news is there’s one tax you can keep from paying—the stupid tax.

The tough thing about stupid tax is it’s like the anti-gift that keeps on taking. Some people make a poor decision that will follow them around for years, even decades. But just because you paid a stupid tax in the past doesn’t mean you have to pay one in the future. With that in mind, here are the most common stupid taxes and how to avoid them.

The Lottery
If you routinely play the lottery, you should do this instead: Hop in your car, open your windows, and drive down the interstate. As you drive, flick one-dollar bills out into the roaring wind. That will have the same effect as playing the lottery. Even better, you’ll provide a lonesome drifter with a few dollars cash.

How to Avoid: Drop those singles into a jar instead of playing the lottery. Once a year, transfer that money to your 401(k) or your kids’ college fund. Lotteries are for losers.

Car Leases
Nothing says, “Please, sir, take my money. A bunch of it!” quite like a car lease. Statistically, leasing is the most expensive way to drive a car. But, according to CNW Marketing Research, nearly one in five people lease their cars. The National Auto Dealers Association says car companies make more money off leasing you a car than if you bought a car with cash. Don’t fall victim to the “fleece.”

How to Avoid: Save cash and buy a used car.

Timeshares
If you get a timeshare, we hope you really like it—because you’re never going to be able to sell it for anywhere near what you paid for it. You can hardly give the things away. You have no equity and ridiculous maintenance fees—all for the opportunity to visit a place, with minimal square footage, maybe once or twice a year. Why would you ever want to put your hard-earned money into something like that?

How to Avoid: Stay away from the sales pitches and rent instead.

Payday Loans
Do you smell that? It’s the scent of liberally applied hair gel. That can only mean one thing: a greasy payday lender has set up shop nearby. Run! That is, unless you’re into paying hundreds of percent interest. These guys are bottom feeders who prey on poor people. Stay away.

How to Avoid: Take Dave’s advice and just keep driving right past their buildings.

Retirement Loans
Living comfortably after 65 is just so overrated. Wouldn’t you much rather take loans out of your 401(k) today and pay ridiculous tax rates, rather than having a nice nest egg saved up for later? Just think: When you’re 70 and broke, you can move in with your adult children! How much fun does that sound?

How to Avoid: Short of avoiding bankruptcy, never, ever, ever dip into your 401(k). Just pretend like that money doesn’t even exist until you are 65.

30-Year Mortgages
One word: interest. Take a look at these numbers. Interest rates are currently hovering around 4%. With that rate, you would pay about $161,000 in interest on a 30-year mortgage of $225,000. For a 15-year mortgage at 4%, you would pay $74,000 in interest. That’s an $87,000 difference. Think of what you could do with $87,000! Pay for your kid’s college? Help fund your retirement? Maybe even buy another house? A 15-year fixed-rate mortgage is always the way to go.

How to Avoid: Get a 15-year fixed-rate mortgage with a monthly payment no more than 25% of your take-home pay.