Nonprofit Counseling Helps You Profit
With consumer debt apparently rising to 20 percent of household incomes, it’s not wonder there’s so many of us seeking assistance with learning how to fix our financial woes. A close friend of mine recently found herself in severe financial trouble, her credit card and student loan payments falling seriously behind. I advised her to contact a nonprofit consumer credit counseling service, and she located Money Management International, an agency which has essentially turned her life around.
The beauty of nonprofit agencies is inherent in their title; their intent is not to profit from your misfortune. Therefore, nonprofit consumer credit counseling services like MMI will sincerely aid you in setting afloat your financial shipwreck without pinching you for all the money you’ll be saving by utilizing their services. That’s not to say that all for-profit agencies are evil or anything; I simply feel more secure knowing that my financial well-being is not tied in with that of the agent that is supposed to be assisting me.
(Thanks to the Bankruptcy blog for providing the link to the consumer debt news article.)
Refinancing a HELOC
So, it’s my first post here, and I’ll hopefully be adding more as the ideas come to me.
One thing I thought I’d introduce here is my experience with refinancing a HELOC - a home equity line of credit. This was used as a ‘piggyback’ way of getting in to our current house with only 5% down. The first 80% of the loan was a traditional mortgage, and the remaining 15% was a HELOC. Seemed OK at the time, but in the fine print (and I normally read this stuff, but must have missed it!) the HELOC is variable, adjusting every month. The 5% rate was ‘introductory’, but only for one month. Since then, the rate has gone to 8.25%, and I’m not a happy camper about that. Yes, it’s my own fault, but now that I’m here, what can I do?
I met a loan officer last week, and we discussed that I could possibly refinance through them at no cost. The catch is there’s a $500 fee if you close the account in the first year. Now frankly, we *might* be moving again in the next year, but this would be a reasonable price to pay *if* the interest rate was low enough. She’d told me it was 5% fixed, which seemed too good to be true. It’s a local credit union, so perhaps they play by somewhat different rules. I figure If I can save more than $50/month with no closing costs or fees, it’s certainly worth it.
The only other issue I’ve got to determine is if I have any penalty in my current HELOC for closing it early (just got in in January!). The current mortgage has prepayment penalties of something (don’t know what offhand) if I pay off more than 20% in any one year.
Anyway, I’m planning to meet with the loan officer tomorrow night and I’ll post here to let everyone know about my experiences, pitfalls, things to avoid, and things to look for when refinancing a HELOC. 
e-ID theft not so common after all
Did you know that identity theft is “more likely to occur as the result of a lost or stolen wallet or checkbook” than as the result of Internet-related fraud? I sure didn’t. It’s true, though–confirmed by a study conducted by the Council of Better Business Bureaus and Javelin Strategy & Research.
“The study also says that friends, family members, neighbors or in-home employees make up half of all identity thieves.” That’s a fairly disconcerting thought, isn’t it? The people you know and trust are often the ones who betray you…
The top consumer complaints of 2004, according to the FTC, were: identity theft (39%), credit card fraud (28%), phone/utilities fraud (19%), and bank fraud (18%). ID theft has topped the list for five years, and I’m willing to bet it stays on top for the next five (especially considering the growing popularity of on-line banking and business transations).
These enlightening facts were culled from a recent Detroit News article.
Debt Management Plan Warnings
Suppose you find yourself drowning in debt: credit cards maxed out, the value of your home tapped out, utilities threatening to cut off your life lines. You don’t know what to do. Don’t call Ghost Busters! You might be tempted to turn to “debt relief” companies, consolidators, or other management plans. Hold on! The Federal Trade Commission has some words of warning for you:
If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a DMP is appropriate for you, a reputable credit counseling organization still can help you create a budget and teach you money management skills.
In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees, but check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments, and could take 48 months or more to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You may have to agree not to apply for — or use — any additional credit while you’re participating in the plan.
Ben Stein on Retirement
I know Ben Stein mostly through Clear Eyes commercials and the Comedy Central show “Win Ben Stein’s Money.” Apparently, though, he is much more than that. Check out this Forbes article to see what I mean:
According to Ben Stein, the fault lies not with Social Security but with ourselves.
Stein is on a crusade to warn Americans about the coming retirement crisis. It has less to do with Social Security or its reform, and more to do with the dramatic decline in U.S. savings and the absence of individual retirement planning.
“This is the greatest crisis facing the country that people can do something about,” Stein says. The crisis is that they are not.
In the article, “Retirement Doomsday,” Stein mentions that almost “28 million U.S. households–37% of the total–do not own a retirement savings account of any kind.” “Even among households with incomes of $75,000 or more, 23% had no retirement savings account or pension plan.” Yikes.
Stock-picking contest
Every year Forbes asks several money managers and analysts to play a stock-picking game: 12 of them try to pick a stock that will outperform the S&P 500 over the next year, while 5 others try to pick one that will be trailing the index within that same timeframe.
Sounds pretty cool, doesn’t it? The winners get invited back to play next year (and, of course, bragging rights).
So far, in first group, Stephen Auth (of Federated Investors) is on top. His pick, McKesson (nyse: MCK), “has enjoyed a 42% gain.” Not far behing is B. Randolph Bateman (of Huntington Bank)–his choice, Cerner (nasdaq: CERN), has enjoyed a rise of 38%.
In the second group, Morton Cohen (of Clarion Group) and Stephen Leeb (of Leeb Capital Management) are winning. Mort picked Travelzoo (nasdaq: TZOO), which was down a whopping 56% when the article was written (on May 13th), and Stevo picked GM (nyse: GM), whose “shares have lost one-fifth of their value so far in the contest.”
What Not To Do In Retirement Planning
Forbes recently ran an article by Scott Reeves called What Not To Do In Retirement Planning. Here are some highlights:
Consider the basics when drafting a retirement plan–housing, transportation, routine living expenses and health care–but there are so many variables that putting together a plan cookbook-style is almost certain to create future financial problems.
“Retirement planning is highly personal,” says Joseph Weiss, an actuarial adviser for Ernst & Young in Hartford, Conn. “There aren’t many rules of thumb.”
On making trade-offs:
It’s also possible to make unplanned trade-offs during retirement to hold on to what’s important. For example, if you planned to live on caviar and champagne in retirement, you can easily cut back to hamburgers and beer, if that means holding on to the vacation home.
Remember that you can’t plan precisely for a potentially catastrophic medical problem, which may change everything. Health care is the wild card, and planning based on current expenses may not cover future costs.
Get Rich Slowly! Consolidated tips from all the latest personal finance books.
Nice article summing up quite a few personal finance books the author has read recently. Getting out of debt seems like a really really good start.
Get Rich Slowly! (20)
Today’s entry is long and boring. It’s all about the keys to wealth, prosperity, and happiness. Over the past few months, I’ve read over a dozen books on personal finance. Recurring themes have become evident.
These books have embarrassingly bad titles, seemingly designed to appeal to the get-rich-quick crowd: The Richest Man in Babylon, Your Money or Your Life, Rich Dad Poor Dad, Think and Grow Rich, Wealth Without Risk, Creating Wealth, etc.
Some of the books out there — most of them? — really are as bad as their titles. Others, however, offer outstanding, practical advice. The best books seem to have the same goal in mind: not wealth, not riches, but financial independence. According to Your Money or Your Life, which I consider the very best of the financial books I’ve read, “financial independence is the experience of having enough — and then some”. More practically, financial independence occurs when your investment income meets or exceeds your monthly expenses. Financial independence is linked to psychological freedom.
How is financial independence achieved? Again, the best books all basically agree. (To some of you, this will be common sense, stuff you’ve known all your life. To others, like me, this kind of thinking is a sort of revelation.)
Here, then, is my personal summary of the collected wisdom found in these books.
Read the rest of the article. Some good comments there too.
(Via del.icio.us)
Mutual Fund Vocab
Not a CPA? That’s okay. Here is a primer from Forbes.com that details the “the top ten mutual fund terms you need to know” :
12B-1 fees
The percent of a mutual fund’s assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund’s prospectus. The Securities and Exchange Commission has proposed that 12B-1 fees in excess of 0.25% be classed as a load. A true no-load fund has neither a sales charge nor 12B-1 fee.Closed-end and open-ended funds
Most mutual funds are open ended, i.e., their managers stand ready to sell new shares to the public and to redeem outstanding shares on demand at a price equal to an appropriate share of the value of the fund’s portfolio, which is computed daily at the close of the market. A closed-end fund is a publicly traded fund sold on stock exchanges or over the counter that sells shares like any other corporation and usually does not redeem its shares, which may trade above or below its net asset value.Distributions
Payments to investors from a fund’s cash flow. May include dividends from earnings, capital gains from sale of portfolio holdings and return of capital. Fund distributions can be made by check or by investing in additional shares. Funds are required to distribute capital gains (if any) to shareholders at least once per year.Expense ratio
The percentage of the assets that were spent to run a mutual fund (as of the last annual statement). This includes expenses such as management and advisory fees, overhead costs and 12B-1 (distribution and advertising) fees. The expense ratio does not include brokerage costs for trading the portfolio, although these are reported as a percentage of assets to the Securities and Exchange Commission by the funds in a Statement of Additional Information (SAI). The SAI is available to shareholders on request. Neither the expense ratio nor the SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks. These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an Operating Expense Ratio.Index fund
Mutual fund whose portfolio matches that of a broad-based index such as the S&P 500 and whose performance therefore mirrors the market as represented by that index. By eliminating the costs of researching stocks and keeping trading costs such as brokerage commissions low, index funds have low expenses. Since most index funds buy and hold the securities that make up the index, these funds also typically don’t generate as many taxable capital gains as actively managed funds.Load fund
A mutual fund with shares sold at a price including a large sales charge, or load–typically 4% to 8% of the net amount indicated. Some no-load funds have distribution fees permitted by article 12B-1 of the Investment Company Act; these are typically 0.25%.Net Asset Value (NAV)
The value of a fund’s investments. The NAV per share usually represents the mutual fund’s market price, subject to a possible sales or redemption charge. For a closed-end fund, the market price may vary significantly from the net asset value.Redemption charge
The commission charged by a mutual fund when redeeming shares. For example, a 2% redemption charge (also called a back-end load, or a contingent deferred sales charge) on the sale of shares valued at $1,000 will result in payment of $980 (or 98% of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods.Total return
The most comprehensive measure of a fund’s performance, encompassing distributions of capital gains and dividends or interest, plus unrealized capital gains or losses, over a period of time. Total return may be shown as year-to-date or on a compound annualized basis over several years. Total return is the best gauge for investors of how a fund has done both recently and over the long haul.Turnover
For mutual funds, a measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover ratio of 25% means that the value of trades represented one-fourth of the assets of the fund. Portfolios with high turnover rates incur higher transaction costs and are more likely to distribute capital gains which are taxable to non-retirement accounts.
Having Enough Moolah Later On!
I saw this article and found it interesting. It talks about investing your money in a simple way so that you will have a certain amount X amount of years from now. Read it; it certainly makes sense. If are financially able to put away some money each month and/or start off with a lump sum to invest, your return may be worth it! Of course, you also have to consider that dollar-for-dollar, it won’t be worth as much to you “then” as it would “now”. Nevertheless, the money can still amount to a lot. We need to take care of ourselves, as social security and pensions are now becomming just a memory and a fantasy…
Follow the link here!. The article is called, “Getting Rich Is Simpler Than You Think.”