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And, once again, the savings rate is falling!

Friday, April 23rd, 2010

I cannot even begin to tell you how disappointed I was to discover that the savings rate for the United States has begun to decline again! Today we have a blog post about the United States savings rate, and how it has begun to decline. Visit this website to see the current rate, which is even lower than the rate stated in the blog post. Trending downward I’d say.

As most of our readers know, just a few short years ago, the savings rate in the U.S. was in the negatives, and had been for a few years. That doesn’t even seem possible, does it? No, but unfortunately it is. So, what does it mean? It means that as a nation, we were spending more than we were bringing in. We were living beyond our means. Then, the economy started to tank and many of us woke up and started to save for the future. Out of all of the bad things that came with a down economy, this was a bright point. Now, however, we’ve decided that we were saving more than enough and that it is time to blow through our money again! WHY would we be convinced of this? Did we all suddenly wake up rich? I don’t think so! We need to realize that the more we save now, and the earlier we start saving, the more we will have when we retire!

The recent 1.5% decline in savings, if continued over 30 years could mean the difference between retiring comfortably and retiring on “just enough”. It could mean the difference between taking trips to fun locations when you retire, or having a need to have a part time job when you retire. I don’t know about you, but I’d say that it’s worth a few sacrifices now to get to retire without the stress of money problems. Getting out of debt now and saving for the future should be a top priority for all of us. Read the article. Get motivated. Then get started on saving, or try and do more than you already are!

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Bad news if you plan on retiring with a nest egg…

Friday, April 16th, 2010

Today’s article. 2009 Tax Season: Last Good Year for High-Earning Americans? is short and sweet, but very important.  Now, I know many of you will read what it has to say and decide that it has nothing to do with you, but the fact of the matter is that if you plan on retiring with a nest egg, then it does, in fact, pertain to you.

The article  revolves around 3 tax problems…the Bush administration tax cuts, the Estate tax and the investment income tax.  The Bush administration tax cuts are about to expire.  This isn’t a concern for many Americans, but to those it affects, it will mean a large chunk of money out of their monthly budget. 

The Estate tax, however, will affect many more people, since it covers anyone who leaves behind an inheritance between $1 million and $10 million dollars.  Don’t think it’s a big deal to tax estates?  Well, If you’re planning on having a nest egg, saving your pennies now for retirement, then you should think it’s a big deal.  Many of you will reach the minimum $1 million dollar cut off, and if you fall into that estate range, you should know that your estate will be taxed at a 55%  tax rate!  And for most of us, we will just barely break into the $1 million dollar range, which means that you proudly managed to save up all of that money, only to have $550,000 of your $1 million dollars taken by the government.  Take my advice and start “gifting” (check into yearly limits on how much you can gift per person) some money while you’re alive if you fall in this category.

The last tax issue covered in the article is the investment income tax (also called a capital gains tax) that is slated to raise in 2013.  I know this sounds like it only affects people “on Wall Street”, but I’ve got news for you; If you have stocks, bonds, precious metals or property, and sell them for a profit (with few exceptions), then you will be feeling the raise in this tax.  Stocks and bonds outside of retirement accounts might not be something many people participate in, but lots of people buy and sell property, and if you do, you will feel the change!

I know it’s hard to look 20 or 30 years in the future and see how these things might affect you, but you have to go there.  You have to know what you’re up against.  These changes in the tax code will be painful on more of us than we are led to believe.  Remember, saving $1000 a month will (on average, based on assumed 8% return) put $1 million dollars in your bank account in 28 years.  That isn’t too far fetched.  You could definitely do that.  And given that fact, you should worry about how it will be taxed.

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Money education for high schoolers and college students.

Friday, April 9th, 2010

I stumbled across an article on Fox Business titled How to Speak Money Fluently, which led me to another website, FoolProofMe.com.  FoolProofMe.com is what I want to talk about today.

Normally I am a big fan of Dave Ramsey’s School Curriculum, and although I still am, FoolProofMe has one feature that Dave Ramsey’s education tools don’t have:  They are free (thanks to contributions from credit unions and non-profit organizations).  FoolProofMe is a program that has specific lessons (based on age group) teaching people about finance.  They show young people what happens with their finances when they make poor decisions regarding money in their web based videos.   On the website you can find individual programs for high school teachers to use in their classrooms, college kids, as well as for parents who are home-schooling their children and grandparents, which is the same set up as Dave Ramsey’s school curriculum.

Whether you choose one of these options, or simply send us your question regarding helping you or your young child/friend with a money question (we will soon be adding a feature for you to be able to leave an anonymous question), you need to choose some method.  Our population needs this education.  It is crucial.  Without a financial education, we aren’t capable of making the informed financial decisions that we all face as adults.

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“Free” credit reports…

Friday, April 2nd, 2010

Today’s article, End of the “free” credit report, is a great excuse for me to talk about a topic that I’ve wanted to address for a while:  The so called “free” credit report. 

Lots of companies offer so called “free” credit reports, but many of their claims aren’t worth a hill of beans.  Once you go to their websites, or bricks and mortar locations, you find out that they want you to sign up for subscription services.  Some of them even offer monthly monitoring services for your credit, and come with a monthly fee as well.  As of yesterday, however, they can no longer claim to offer free credit reports without a disclaimer on their websites, and in September, the disclaimer will also have to be included in radio and TV ads.  Under the new rules of the Credit Card Act of 2009, any website advertising free credit reports has to include a disclosure  on the top of each page that says “This notice is required by law and you can read more at FTC.gov. Also: You have the right to a free credit report from annualcreditreport.com, or by calling 877-322-8228, the only authorized source under federal law.”

I love it!  It’s about time something was done about the misleading advertising I see all over the TV with regard to credit reports.  It is a great way to keep people from being tricked into signing up for services they don’t want or need.   The fact of the matter is, there is only 1 website that actually offers a free credit report, and that website, as stated above, is annualcreditreport.com.  You should run your credit report every year, but don’t fall for the scams!

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How innovating can save you…if you don’t wait too long to do it!

Friday, March 26th, 2010

It’s probably been awhile since most of us have thought about the once magnificent movie giant Blockbuster, but they are about to be on our radar once again!  Today’s article, Blockbuster is bleeding to death, is a lesson to us all in why it’s important to innovate.

Now, in the case of Blockbuster, I am referring to the fact that they have been lagging behind in innovation for years at this point, and appear to finally be doing something about it.  You see, when Netflix came around, 13 YEARS ago, I guess Blockbuster didn’t see them as a threat, and ignored them.  They ignored them until 2004, when they finally launched their own DVD by mail operation!  This gave Netflix a 7 year head start, which means that Blockbuster wasn’t innovating, they were merely trying to catch up.  You see, innovation is defined as a new way of doing something, and that isn’t what Blockbuster was doing.  They were merely trying to compete.  Now that they are almost near bankruptcy, with actual brick and mortar stores becoming obsolete, they are trying everything they can to get out from under their $1 billion dollars in debt, and luckily for them, that includes innovation.  They have announced a deal that makes them the first in the market for mobile devices.  What does this mean?  Smart phone owners will be able to purchase or rent movies from Blockbuster over their phone to watch on the go.  The problem?  Right now the service is only available at T-Mobile.  It has been said it will be available on Android and Windows Mobile phones soon, but not now.  What about the I Phone?  Well, Apple is in talks (rumored) with Netflix.

As far as things go, I applaud Blockbuster for trying to innovate to save their company, but I fear it is too little too late.  Their business model of their brick and mortar stores became obsolete a few years ago.  Not only do people find it easier to just “update their queue” with the movies they want to watch, but they can stream movies live and save money since the monthly fee generally works out to be cheaper (and no late fees).  I mean, I remember when Blockbuster was charging almost $5 to rent a movie, and would charge a late fee if it wasn’t back in 2 days.  There is NO WAY that business model can compete with Netflix, or Redbox with its $1 for 1 day movie rentals.

What is the lesson here?  Don’t let the opportunity to innovate your job, your business or your life pass you by.  If you figure out a new way to do something in your business or your life, see what you can do with it.  Maybe it’s just a way to make some darn fine chili very fast (I am very proud of my chili), or maybe it’s a way to revolutionize how we look under our clothes, like the inventor of Spanx, Sara Blakely.  Maybe you decide that there is a better way of doing something at your job that will save the company money (and possibly get you a nice bonus), or maybe you decide to innovate your whole life, and do everything in a different way.  Either way, don’t wait to act on an idea! 

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The census. What’s normal & what’s a scam.

Friday, March 19th, 2010

The census.  It’s what everyone is talking about right now.  I am happy to fill out the form, because I want to make sure that our area has proper government representation.  However, with everything else, when something “a little unknown” comes along, there will always be people around to take advantage of the uninformed.  Today’s article, Beware census scam artist tricks, makes sure that the reader is informed about what’s normal and what’s not when it comes to the census.

The first thing you should know is that the census has 10 questions (some with multiple parts), and none of those questions should ask you for a bank account, credit card or Social Security number.  If the actual form is followed up by an email or phone call, that is a scam.  The census will never contact you by e-mail.   Another little tidbit that most people don’t know:  If you don’t mail back your census form, it’s possible that a census official will come to your home.

If and when a U.S. census worker shows up on your doorstep they will have a badge.  You should ask to see their badge and personal identification and write down that information.  Do not answer any questions before seeing their ID.  They should only ask the same questions that are on the form (no bank account, credit card or SSN questions) and should not ask for any cash.  You DO NOT have to pay for the census.  If you are unsure about the form you have received or anyone who has contacted you about your census, check out the U.S. Census Bureau’s website to be sure.

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If you save it, then you choose how to spend it!

Friday, March 12th, 2010

Today’s article is titled Spending a school fund on CNNMoney.com.  It brings to question a subject that many of us either don’t think will ever happen, or, at least we hope it won’t!  The question?  What happens when your child decides not to go to college, and you’ve saved lots of money in an ESA, 529 or other savings account for them to use on that schooling?  Worse, what happens when you have 2 children, and 1 of them used the college fund, and the other decides against school and says you should just give them the money?  I bet you can guess my answer!

If the child decides not to go to school, there will be penalties in an ESA or 529 account that isn’t used for schooling, so you can just kiss some of that money goodbye.  Now, this isn’t a totally terrible thing, since had you not saved it for education, the money would’ve been taxed anyway, but I’m sure it will still sting a little.  I don’t have a huge problem with a child that decides not to go to school, financially anyway, because it’s not impacting your budget, only (possibly) their future. 

My problem, as I’m sure our regular readers know, is with the child who asks for (demands?) the money you saved for their education, to be paid out to them in cash, since you paid for their siblings education.  In spite of what your child seems to think, your money is NOT their money.  I know that you want to be fair with your 2 children, but this money was set aside for their education, not for their amusement.  It’s your money, and if the child decides not to go to school, it should STAY your money!  Like the article says, if the child wants money, tell them to get a job! 

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You might want to start saving for college BEFORE you have kids…

Friday, March 5th, 2010

College tuition is a very hot topic with most people.  Either you went to college and experienced the hefty cost, sent your child to college and experienced the hefty cost or decided not to go to college BECAUSE of the hefty cost.  What’s worse than the cost of tuition??  When the cost goes up almost every year!  Today’s article, Public college tuition spikes 15%, even 30% reports on the recent spikes in college tuition, thanks to the lack of funds in some states’ budgets.  This is no news to some of us.  Some of us experienced yearly increases of around 10% each year in college (one particular year the increase was 17%…ouch!), but I digress.

An example of the worst increase?  The University of California, which estimates a 30% increase in the 2010-2011 year, thanks to the huge state deficit that’s been in the news for the last few months.  But irregardless of these increases in tuition prices, public schools are still much cheaper than private schools, which average $26,273 a year!  And people pay the price tag, so there is no deterrent to raising the rates…so it will continue. 

So what do you do?  You start saving for college, for you or your child, and you start saving as soon as you can!  Dig into our past blog post that has tips for saving for college.  With rates going up so often, you should be looking into savings plans before you go to college or before you have children.  Planning for the future is always a good start on the road to success!

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Your bank and overdraft protection…

Friday, February 26th, 2010

Today’s article, Banks use scare tactics to get you to sign up for overdraft protection, addresses the new bank overdraft “protection” law that basically says that you have to voluntarily sign up for the overdraft protection to let your bank keep processing your debit card transactions even after you run out of money.  As far as I’m concerned, at $35 per transaction, overdraft protection is no service to it’s customers, and certainly shouldn’t be anything someone would voluntarily sign up for!

Now, I’m sure you can tell from above, we believe if you can’t keep a minimum amount in your bank account, or can’t keep from overspending because you aren’t diligent, then you shouldn’t have a bank account, and should operate on a cash only (money orders to pay bills) system.  However, if you choose to have  a bank account, and struggle to keep funds in it, then use the other services that many banks offer, that don’t come attached to a ~$35 fee PER TRANSACTION! 

The scary stuff you get in the mail from the bank, that says your debit card will stop working and the like is true, because OF COURSE it should stop paying people if you don’t have any money in your account!  That is the way it is supposed to work!  The card is not supposed to let you spend more than you have!  Overdraft “protection” is like you receiving a mini loan from the bank…kind of like those payday check cashing places, but wrapped in a prettier sounding name.  Ignore these letters from the bank!  You don’t want to keep paying $35 a transaction loan fees for the rest of your life!  DO NOT opt in to this plan, just learn to watch your account and don’t over spend. 

If you absolutely CANNOT LIVE without overdraft and refuse to be on cash only (hard headed, aren’t you??), then there are a couple of alternatives.  Many banks will allow you to link your checking account to your savings account to prevent overdrafts.  Some will also link it to a line of credit (not something we recommend) to prevent these overdrafts from happening.  Neither of these programs are free, but they are cheaper than overdraft, and won’t catch you off guard either, because, let’s face it, if you don’t have the money to cover your purchase, you definitely don’t have the money to cover your $35 a transaction overdraft “protection”.

If or when you start receiving these notices from your bank, do yourself a favor, and “just say no” to overdraft protection…instead, be more diligent with your account, or switch to cash!

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Why spending today costs more than you think…

Friday, February 19th, 2010

Once again we look to Dan Miller and his 48 days blog (visit the links section of our website for more info on Dan Miller) for an interesting article.  Today’s article, Look rich-die broke was inspired by a sign in front of a car accessories shop in Florida that read: “Rent your wheels and tires here”.

Like furniture rental places, you can apparently also rent the rims you’ve been dying to have for your car as well, that way, you can look cool, and rich, even if you’re broke.  Dan Miller has a knack for talking about topics that are important to me, and there are few things that get my blood boiling more than people who spend themselves into debt chasing status.  He highlights the new book from Thomas Stanley, author of The Millionaire Next Door and The Millionaire Mind, both of which are excellent books (I will be buying and reading this newest addition to his works).  This new book highlights some of the habits of the truly rich (as opposed to those who only appear rich), which, in general, does not include renting your rims. 

Read the post, and go buy (or check out from your local library) Thomas Stanley’s newest book, Stop Acting Rich.  Let’s all begin to be open minded to the idea that having fancy things (for status) and spending obscene amounts of money on weddings and “McMansions” are not the real way for the average person to become wealthy.  Once you stop believing you are going to simply luck into a fortune, or become famous and rich out of the blue, you can focus on becoming rich the way most people do…through saving, working hard, and striving to be the best at their passion so they can advance themselves in that particular field over the years.

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