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Manufacturing and exports show signs of strength

After a string of disappointing economic reports in April, May began with an encouraging report on U.S. manufacturing growth. One of the few strong points in the first quarter GDP report may also be related to this recent strength in manufacturing, which could represent a sustainable source of progress for the economy.

The question remains, though: Will this be enough to break the economy out of its rut?

Escaping the rut

The recent economic rut represents more than just the dreary series of economic reports that appeared in April -- disappointing employment growth and weak GDP figures among them. Although the economy technically escaped from recession in the third quarter of 2009, for most of the time since it has been in slow-growth mode. Real GDP growth has reached a 3 percent annual rate just once in the past seven quarters.

The signs of the rut are everywhere. Nearly three years into the economic recovery, unemployment is still high. Interest rates, from savings accounts to treasury bonds, are anemic. The stock market's progress comes in fits and starts, and investors are so cautious that they seem almost to be walking on egg shells.

Manufacturing rises

Against this dreary backdrop, a May 1 report on the manufacturing sector provided some welcome good news.

The Institute for Supply Managers announced that its manufacturing index rose to 54.8 in April, up from 53.4 in March. That's the highest level in 10 months, and pushes the index more firmly into the above-50 territory that represents an expansion.

The manufacturing report takes on special significance because it is one of the first major economic indicators for the month of April. Following generally disappointing reports for March, economists are looking anxiously to see if the economy is sliding again toward recession.

Exports provide a source of new demand

One reason for the strength in manufacturing may be found in the first-quarter GDP report. Although overall GDP growth was lackluster, one bright spot was export growth. The Bureau of Economic Analysis reported that real export growth was 5.4 percent in the first quarter, up from 2.7 percent in the fourth quarter of 2011.

Foreign markets have mostly been a cause of concern lately, with a focus on the troubled economies of Europe. However, if large developing economies such as China and Brazil can sustain their growth, it could help demand pull through the current malaise.

What to watch for

Will the strength in manufacturing lead to more jobs, higher rates for savings accounts and a more reliable stock market? The stock market rallied on the news about the manufacturing index, so that's a start. It will take much longer before this translates into higher rates on savings accounts, but in the meantime, the next key sign for the economy will be if the job market firms up after its March stumble.

 

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Boost Credit Score With Help From a Friend

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Dear Credit Card Adviser,

I've read that if someone who has excellent credit puts you on their credit card as an authorized user, it can help raise your credit score. If this is true, how does this work?

- Edward

Dear Edward,

Being an authorized user on someone else's credit card account may raise your credit score. It depends on how the account is handled, your overall credit history and which scoring model is used to calculate your credit rating.

What you'll see on your credit report is the payment history for the shared account. You won't see other accounts from the main cardholder's credit report on yours unless your name is on those accounts as well. In addition, your credit score won't merge with the other person's credit score because of the shared account. Your credit score only considers information from your individual credit file.

If the primary account holder has paid the credit card account on time and continues to do so while maintaining reasonable monthly balances, the account could have a beneficial effect on your credit score. If the main account holder starts to miss payments or maxes out the card, both of your credit scores could suffer.

However, credit reporting agency Experian only reports positive payment history for authorized user accounts. "If the account becomes negative, we automatically remove it from the authorized user's credit history," spokesman Rod Griffin said in an email.

If you are concerned about the credit score impact of the account, ask the credit card issuer to take you off the account as an authorized user. Since you are not responsible for payments as an authorized user, the issuer will likely honor your request. You also can ask the credit reporting agencies to remove the account from your credit file.

That said, not every credit score formula considers authorized user accounts in scoring. The most widely used credit score, known as the FICO score, does include them in scoring. But it has a methodology in place to minimize score inflation as a result of the controversial practice of "piggybacking" as an authorized user on the credit card account of a stranger with great credit. VantageScore, a rival credit score developed jointly by the three major credit reporting agencies -- Equifax, Experian and TransUnion -- did not include authorized user accounts in scoring in its original version. VantageScore 2.0 does count authorized user accounts.

Because authorized user accounts are not always factored into the credit score of the authorized user, it's a good idea to have some credit accounts in your own name.

If someone else makes you an authorized user on a credit card account, monitor the account to make sure it is not harming your credit score. One way to do that is by checking your credit report periodically. Under federal law, you're entitled to request a free copy of your credit report from each of the three major credit reporting agencies once every 12 months through AnnualCreditReport.com.

 

Beat Bad Financial Habits to Boost Savings

Break Bad Habits: The Science of Habit Change

Does it really take just 21 days to change a habit? Experts say it's not that simple.

"Breaking bad habits successfully depends on your readiness to act," says Heidi Beckman, clinical health psychologist at the University of Wisconsin Hospital and Clinics and speaker on financial behavior change.

John Ulzheimer, president of consumer education at SmartCredit.com, agrees. "If it was easy, we'd all have big savings accounts, and none of us would have credit card debt," he says.

Beckman says habits change more quickly when you're in the action stage versus the ambivalence or preparation stages that come before. To catapult yourself into action, she recommends using this three-step approach daily.

1. Create a positive picture in your mind of the result you want, and act as if the bad habit is gone. Use a negative picture of the current stressful result of the bad habit to push yourself further toward action.
2. Identify and focus on your positive financial habits, as proof you can do things the right way.
3. Create simple rules to fall back on when tempted, such as: "Don't browse shopping websites until all my bills are paid this month.

Break Bad Habits: Resist Impulse Buying

"We're wired for instant gratification," says Ulzheimer. "But if you can't afford to pay cash and whip out a credit card without thinking, then you're on a downward spiral into debt and money mismanagement."

Using credit cards to spend more than the cash you have while making only the minimum payments on the cards can build up their balances faster than you can pay them, he says. And if you pay late, penalty fees just add to the total. "You forgo the many benefits of the proper use of plastic, such as for reimbursable business traveling, establishing a good debt utilization percentage on your credit report ... and for earning easy cash-back rewards," says Ulzheimer.

Practice telling yourself "no" when tempted to spend, and try these tactics.

• Distract yourself by making a phone call or unwrapping a stick of gum until the "buy" urge passes.
• Make a rule to only charge for reimbursable business expenses or rewards and only when you have the cash to pay for it during the grace period before the date interest is charged. Double-check dates.
• If you must take drastic measures to curb spending, have your credit card company lower your limit and opt out of over-limit and overdraft spending so your card gets declined

Break Bad Habits: Automate Finances

Counting on willpower alone is not enough. "When you rely on willpower to meet your expenses, important financial obligations such as timely payments and depositing to an emergency cash or retirement fund are left up to your personal choice and can easily be mismanaged," says David Bach, author of "The Automatic Millionaire."

Ulzheimer warns that some use the excuse of not being organized or not having enough money, but paying late just means you pay more because many companies tack on a late fee (typically $39) and many also charge you interest on the unpaid balance as well.

Says Bach: "Make your important payments automatic so bills get paid on time, and important savings deposits that protect you and your family don't get missed."

Make payments automatic to avoid late fees.

• Set up shadow payment dates by subtracting seven days from the real due date.
• Make payments automatic using your bank's or the payee's online bill pay.

Break Bad Habits: Pay More Than the Minimum

Paying just the minimum is a good way to stretch out your debts for as long as you can.

"When you only pay the minimum amount due on a credit card, you're effectively rolling over approximately 97% of the balance and adding the interest applied," says Ulzheimer. This is very profitable for mortgage factories and card issuers, but not you. "The only way to reduce your balance quickly is to pay more than the minimum, avoid fees and stop adding to balances," advises Ulzheimer.

Pay more than the minimum with every payment.

• Set up automatic timely payments of a higher amount than the minimum.
• For fastest results, create a "debt snowball," in which you pay as much as you can toward the lowest-balance card until it is paid off. Then you apply that same payment amount plus the new payment amount to the card with the next-smallest balance.
• Consider taking advantage of the automatic biweekly mortgage payment plan your lender may offer. For the one-time fee, the quicker pay-down is worth many thousands of dollars over the life of the loan

Break Bad Habits: Don't Depend Solely on a 401(k)

"Because the 401(k) is such a widely known retirement savings vehicle, many take it for granted that making tax-free deposits and being taxed later is the best and only way to save," says "Coach Pete" D'Arruda, president of Capital Financial Advisory Group in Cary, N.C.

D'Arruda suggests investing additional monies in a Roth IRA in which you make deposits with money that already has been taxed, but then the money grows and is withdrawn later tax-free. "Would you rather be taxed on the tiny seed (initial deposit) or the much larger harvest (the resulting retirement balance) later?" says D'Arruda, who is an author and nationally syndicated radio show host of "Financial Safari." He advises learning about many savings vehicles and cautions that you should be aware of the fine print and different fees they charge.

Get to know the pros and cons of your 401(k) plan.

• In August, companies will be required to give their employees a breakdown of fees.In the meantime, ask the 401(k) plan administrator in your human resources department if you can read the plan documents for your specific 401(k) to look for fee information.
• Learn about and consider adding other investment vehicles to your retirement mix.

Break Bad Habits: Save Small Rather Than Not at All

Avoiding retirement planning in favor of spending on the here and now is a costly mistake.

"People think it's an all-or-nothing program and they don't have enough to put toward retirement, so they do nothing. But you can start small, as long as you start," says D'Arruda.

Begin the plan for your retirement.

• Replace excuses with the affirmation, "I may want to stop working someday, but I will need money forever."
• Meet with a financial planner who offers a free initial consultation to discuss all of your retirement savings options.
• Set up automatic deposits, no matter how small, to retirement and cash emergency savings accounts. Build your plans over time

Break Bad Habits: Do Sweat the Small Stuff

Some people believe small expenditures don't matter. Bach calls this your "latte factor."

Look seriously at your daily spending of small dollar amounts for such things as coffee, cigarettes or eating out. "You may tell yourself you can't save $10 per day, but you're already spending it. If you saved it, you'd have a healthy cash emergency fund or hundreds of thousands of retirement dollars over 40 years."

Save your money instead of spending it.

• Identify one wasteful daily spending habit and stop it.
• Determine the monthly amount you will be saving, no matter how small, and pay yourself first through an automatic deposit from your paycheck to a savings or retirement account.

D'Arruda advises writing down your exact plan to break your bad financial habits so you will be more likely to stick with new positive habits.

"Use a family meeting to determine exactly how each member will contribute to changing the family's finances for the better," suggests Beckman

Tax Record-Keeping Tips

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by Kay Bell

Nothing lasts forever, but you wouldn't believe it by looking at some people's record-keeping systems. Prolific pack rats insist on keeping every scrap of paper, just in case.

And when it comes to tax paperwork, folks are even more adamant. These documents will save me, they argue, if an Internal Revenue Service auditor comes visiting.

But that's not necessarily the case, say tax and organizational experts.

There Are Limits

When it comes to tax-related documents, you should hang on to records that help you identify sources of income, keep track of expenses, determine the value of property, prepare tax returns or support claims made on those returns. However, common sense -- as well as storage space -- should be your guide.

"We get people looking at boxes of stuff in their basements and ask, 'Can I toss it?'" says Linda Durand, a CPA and senior tax manager with Drolet & Associates PLLC in Washington, D.C. "A lot of it, they can."

The rule of thumb for tax papers is hold onto them until the chance of audit passes. Usually, this is three years after filing. But if the IRS suspects you underreported your income by 25% or more, it gets six years to check into your tax life.

That's why most accountants advise taxpayers, even those who are meticulous filers, to keep tax documents for six to 10 years.

Use It or Lose It

This means 1040 forms and any accompanying tax schedules, along with the documents supporting the return, such as W-2s, 1099 miscellaneous income statements and receipts or canceled checks verifying tax-deductible expenses.

"Anything that you need to do your taxes, hang onto it," says Saul Rudo, a tax attorney and partner in the Chicago office of Katten Muchin Rosenman LLP.

But don't go overboard. If you used something to claim a deduction, keep it. If not, shred it. For example, says Rudo, all those medical bills are useless -- and just taking up space -- if you didn't accumulate enough to meet the deduction threshold.

Some items, however, have a longer shelf life. These generally are assets that a taxpayer will eventually sell, triggering a tax bill. So if you have a pension plan, own a home or invest in the stock market, tax pros recommend keeping these records indefinitely. Or at least until three years after you dispose of the asset.

Housekeeping -- and Selling -- Records

For most taxpayers, the biggest asset -- and potential tax bill -- is a home.

While the tax rules for home sales have changed in recent years, meaning sale profits don't automatically face IRS charges, any paperwork relating to a residence should be kept for as long as the home is owned.

Single home sellers now can net capital gains of $250,000 (double that for married couples) before owing the IRS. To determine whether sale profits fall within the tax-free limits, the seller must accurately establish a residence's basis. That means that records related to a home's value, such as settlement papers and receipts for improvements and additions, are critical.

And if you sold a house before May 7, 1997, that could affect your current home's basis. With home sales back then, taxpayers were able to defer tax on any gain by using the profit to purchase another home and filing IRS Form 2119. If the home you're now selling is the one your pre-1997 sale proceeds were rolled into, Durand says that you'll need that information -- and those old forms -- to figure your current property's basis and any potential tax bill.

Taking Stock of Investments

Fast on the heels of home sales as tax triggers (and record-keeping headaches) are stock transactions.

"With online trading, people are investing more," says Durand. "Keeping track of a CD or two isn't that difficult, but when you move on to stocks, the tax record keeping becomes critical."

Investment account statements contain financial data that a taxpayer will need as long as the stock or mutual fund is owned. On the stock side, there may be splits that change the value of the holding and, therefore, the eventual worth of the stock, which is used to determine the taxable basis.

For mutual funds with reinvested dividends, owners pay tax each year on these earnings. These taxes are used to increase a fund's basis so when the fund is sold, the final tax bill will be less. Without statements, it's easy to lose track of those payments, says Durand, and a fund owner could inadvertently pay double taxes on earnings.

Retirement Record Requirements

And then there are all those retirement savings plans, with all those different rules.

Contributions to traditional IRAs often are tax-deferred. But sometimes already-taxed money goes into these accounts, too. What happens to your taxes when you reach 59½ and start taking money out?

That depends in large part on your record keeping.

Statements from IRA fund managers should note whether contributions were tax-deferred or already taxed. The financial reports also keep track of the tax-deferred earnings, compounding year after year. These documents can help you make your case to the IRS when it comes time to pay the tax bill, so hang on to them all for as long as you have the account.

IRS Form 8606 also can help track retirement plan taxes. This form, which is filed only in the years that nondeductible contributions are made, calculates the taxable basis of an IRA. File and keep copies of each 8606 with your retirement plan data.

Business Considerations

If you operate a small business, from a moonlighting job to a small operation with several employees, dealing with records becomes a bit more complex. But even then, it doesn't have to overwhelm you.

Rudo notes that the IRS generally focuses on self-employed travel and entertainment expenses, scrutinizing returns to make sure all the expenses are really related to the business and can be proven. In these cases, complete and accurate -- but not overdone -- contemporaneous records need to be kept until the audit threshold passes.

Durand adds that, unlike personal bank statements, business financial account records should be kept permanently. Similarly, anyone who has employees should hang onto employment information and related tax returns for as long as the business is running. And don't shred articles of incorporation, company bylaws, stockholder minutes, and trademark and copyright applications.

Pick a System, Any System

Once you've identified critical records, the next step is to decide how to keep the data. Electronic bill paying can help keep track of your financial and tax life, but so can a plain old check register, as long as expenditures are entered faithfully.

It doesn't matter if it's a filing cabinet, cardboard boxes or a complex computer program. Barbara Hemphill, organizational expert and the creator of the Taming the Paper Tiger document management system, says the key is to find your record keeping comfort level, pick a system and stick with it.

And when it comes to taxes, it's even more important to be proactive in record keeping, says Hemphill, who has been advising folks on ways to get their lives in order for a quarter century. Start now, she says, rather than waiting until April's tax filing deadline. Such diligent organization could make any IRS examination easier.

"In any kind of audit, I've found the IRS is more forgiving if you make an honest mistake rather than if you're sloppy or fraudulent," says Hemphill.

But she, too, cautions against going to the extreme. All it takes is a reasonable evaluation of your piles of paper and a little bit of common sense.

"When I began organizing people's homes," says Hemphill, "I found people who had 40 and 50 years of bank statements, but who were not balancing their checkbook."

Factors That Influence Your Refinance Rate

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by Michele Lerner

Rock-bottom mortgage rates entice homeowners to refinance, but many borrowers are surprised to find that the advertised mortgage rate is not necessarily the refinance rate they will be offered. In fact, mortgage rates for a refi on any given day can vary by as much as a full percentage point or more, depending on various factors.

"A mortgage rate sheet looks like a menu, and there's a grid of available rates we see each day," says Peter Boyle, a senior loan originator with Summit Mortgage Corp. in Plymouth, Minn. "There are lots of things that influence an individual's mortgage (refinance) rate, including whether or not they pay points."

Paying one point, equal to 1% of the loan amount, typically lowers the mortgage rate by one-quarter of a percentage point.

"Most advertisements for low mortgage rates show the rate with one or more points," says Pat Cunningham, vice president of Home Savings and Trust Mortgage in Fairfax, Va. "We don't recommend a lot of loans with points because of the rarity of actually recouping the money. Most borrowers refinance again or sell before they reach the break-even point from purchasing points."

Here are other factors that can influence your mortgage refinance rate.

Credit Score

Generally, the lower your credit score, the higher your refinance rate will be, says Jim Linnane, a senior vice president with Wells Fargo Home Mortgage near Chicago.

Many consumers don't realize what a big impact their credit score has on their refinance rate, Cunningham says. "For example, a credit score of 695 is pretty decent and we don't generally think of that as a bad score. But borrowers with that credit score can pay as much as three-eighths or one-half a percentage point higher on their mortgage rate compared to someone with a credit score above 760."

Loan Term

"The yield curve changes sometimes, but generally, a 15-year fixed-rate loan is lower than a 30-year fixed-rate loan," Linnane says. "You can even do a 10-year loan for a lower rate. Right now, a 15-year mortgage has an interest rate about one-half percent lower than a 30-year loan."

Loan Size

If you need to borrow a large amount of money, greater than the conforming loan limits, you'll pay an interest rate of at least three-quarters of a percentage point higher for a jumbo loan, Cunningham says.

Small loans sport higher interest rates, too. "Once the loan amount gets below $150,000, there's usually a small add-on to the interest rate," Boyle says. "The add-on is larger when you get below $100,000 or $50,000 because lenders make very little money on loans of that size."

Loan to Value

The loan-to-value ratio refers to the amount you owe compared to the appraised value of the home. If you owe $90,000 on a house that's worth $100,000, then your loan-to-value ratio, or LTV, is 90%. If you owe $70,000 on the same house, the LTV is 70%.

Mortgages with a loan-to-value ratio greater than 80% require mortgage insurance. Linnane says borrowers have the option of paying their mortgage insurance upfront or over the life of the loan, but they can also opt for "lender-paid" mortgage insurance, which covers the cost of the mortgage insurance with a higher interest rate.

Type of Refinance

"Borrowers who are applying for a rate-and-term refinance will typically pay the same mortgage rate as borrowers who are purchasing a home," Cunningham says. "If you are applying for a cash-out refinance, you'll typically pay a mortgage rate about one-fourth percent higher if your loan-to-value is at 70% or above. Usually there won't be a bump-up in the mortgage rate if your loan-to-value is 60% or lower, even if you do a cash-out refinance."

Loan-Lock Length

"A longer loan-lock period generally comes with a higher price," Boyle says, and that translates into a higher refinance rate. "You'll see a variance in the rate from 0.125% to 0.375% depending on whether you lock in your rate from 30 to 45 or 60 days."

Boyle says homeowners who want to refinance a mortgage usually need to lock their rate for at least 60 days.

Type of Residence

Cunningham says that condominiums are considered slightly more risky than single-family homes and town houses, so condo borrowers will typically be quoted a refinance rate that is 0.125 to 0.25 of a percentage point higher than the best interest rates.

 

Top Little-Known Health Care Reform Gems

A law as far-reaching as health care reform legislation with 2,407 pages and a $940 billion price tag is bound to contain programs and grants that are overlooked.

The Patient Protection and Affordable Care Act includes millions in spending on a smorgasbord of programs designed to improve your health outside the doctor's office. With grants for everything from revamping school clinics, to designing sidewalks to encourage walking, health care reform could be a gold mine if you're looking to improve your family's health without spending your own money to do it.

Here are some provisions that may help.

Calorie Labeling on Menus

Eating at a restaurant can be a guessing game for those who want to watch their calorie intake. The act requires chain restaurants with more than 20 locations to post calorie content on their menus, allowing customers to make healthier decisions about what foods they choose.

The change won't affect smaller, mom-and-pop operations, so you'll have to keep guessing about how much of a hit your waistline will take from the cheeseburgers at your local diner.

Grants to Help Communities Become Healthier

Some communities just aren't set up for a healthy lifestyle. The health care reform law provides up to $50 million for Community Transformation Grants to promote access to healthy food and to encourage exercise.

The grants will be awarded by the Centers for Disease Control and Prevention and could be used for projects such as creating healthy, school-lunch programs and building bike lanes and sidewalks.

Small Business Workplace Wellness Programs

Ever wish your office had a gym or you could get some kind of healthy food from the break room vending machine? The new law provides $200 million in grants to small businesses to create healthier work environments for employees, offer incentives for workers to eat better and to exercise, and even offer free tests and medical screenings at work.

Web-Based Health Care Management Tools

Millions of Americans turn to the Web everyday for health advice that may or may not be accurate. The health care reform law calls for creation of a Web-based tool to give consumers access to up-to-date medical research, calculate their susceptibility to certain diseases and get personalized suggestions on how to stay healthy.

Break Time for Nursing Mothers

More babies will enjoy the health benefits many attribute to nursing, thanks to a new requirement that employers provide reasonable break time and a place other than a bathroom for nursing mothers to use a breast pump.

And having time and privacy for this sometimes stressful activity probably won't hurt mom's mental health, either.

Disease Prevention and Education Programs

When it comes to early diagnosis and treatment, some people just need a little knowledge or a gentle push to take positive steps toward better health.

Under the new law, national education programs and a media campaign armed with up to $500 million will promote better health practices at home, preventive care and awareness of life-threatening diseases such as breast cancer and diabetes.

School-Based Health Centers Get a Boost

Remember going to the school nurse when all she could offer was a cot on which to rest and a phone to call your parents? The health care reform law includes $50 million to build and run clinics to give students free diagnoses, treatment for chronic medical conditions and mental health screenings.

Financial Literacy Key to Sufficient Retirement Planning

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 by Andrea Murad

Most workers dream of the day when they swap their business attire for shorts and trade in business meetings for time on the links. Maintaining your desired lifestyle in retirement without a steady paycheck takes discipline and extensive planning, and there’s no one-size-fits-all approach.

“There is a high correlation between the action people take and seeing results,” says Jean Setzfand, vice president for Financial Security at AARP. She adds that the level of action in financial planning is a good predictor for financial freedom when the golden years roll around.

“How someone fares financially after retirement is directly tied to three factors-- their salary level at retirement, how long they work beyond 65 and how much and whether they save in a defined-contribution retirement plan during their working lifetime,” says Nevin Adams, director of education and external relations and co-director of EBRI Center for Research on Retirement Income.

Know Where You Spend Money

Whether you’re planning for retirement or in retirement, knowing your expenses is important. “Not just your fixed expenses, like rent and food, but also your discretionary expenses, like vacations and other payments that don’t occur monthly,” says Michael Goodman, certified public accountant and president at Wealthstream Advisors. 

Many budgets don’t change significantly in retirement, especially if they stay in the same home, but, for example, there are adjustments for travel or whether someone eats out more or less.  “As people age, their budgets will change and some costs will disappear, but these may be replaced by health-care costs,” says Ted Sarenski, certified public accountant financial planner and CEO of Blue Ocean Strategic Capital.

With life expectancy for Americans at 78.1 years, according to the World Bank, “50% of the population lives beyond the life expectancy,” says Goodman. Taking this into account, you should be conservative with your life expectancy when calculating how much money you will need.

Calculate How Much You Will Need

When calculating how much you will need to cover retirement funds, Goodman suggests using investment earnings and a portion of principal in a retirement account. And while planning for life after work should start in your 20s and 30s, realize that there will be a significant shift in lifestyle.  

“You should have different sources of income in retirement,” says Sarenski. “Social Security only replaces 25% to 30% of your preretirement income.” If you need $50,000 for retirement annually while receiving $15,000 from Social Security for example, you calculate the amount of savings needed by dividing $35,000 ($50,000 minus $15,000) by a conservative 5% or multiplying $35,000 times 20 years. In this example, you would need $700,000 in savings.

“If that number they need to save seems high, they can take steps to start saving by living on a tighter budget and eliminating debts,” says Setzfand. “The sooner you start, the smaller the amount you have to set aside.”

Make Changes Now that Carry On Later

Living on a tight budget and watching expenses during your working years leads to more funds in retirement. “If you save $1,000 more per year, you cut your budget by $1,000 and will need $1,000 less every year in retirement to maintain your standard of living,” says Steven Sass, program director of the Center for Retirement Research at Boston College.

“Most retired people own their home, and while it’s their biggest asset, it’s also their biggest expense,” he adds, suggesting that moving to a smaller home can free up more funds for travel and other.

Use employee retirement plans to save and create retirement wealth. “There’s a move toward a ‘use of default’ with employer retirement plans where employees are automatically enrolled in a plan with a deduction taken out of their paycheck and enrolled in a target-date fund that changes its risk profile based on your age,” says Setzfand. “This makes it much easier for someone to get it right.”

Play the Social Security Game Right

The longer you wait to draw Social Security benefits, the more you can collect.

While you can start collecting Social Security at age 62, waiting a few years to claim these benefits can make a significant difference in your retirement incomes stream, with benefits increasing between 6% and 8% each year until the full retirement age of 70. Drawing at age 70, gives a 75% higher monthly payment if you collected at 62. “Claiming later is an easy way to get more retirement income for decades,” says Sass. “This is especially important for married couples because the surviving spouse will get the higher amount.”

The higher payment can also hedge against a longer than expected retirement, adds Goodman.

Work Longer if it Makes Sense

“Working longer not only helps you to delay social security payments, but it also allows you to continue to receive benefits like health insurance,” says Brent Neiser, director of Strategic Programs and Alliances at National Endowment for Financial Education. “People aren’t eligible for Medicare until they’re 65 years old.” Private health insurance can cost upwards of $1,000 per month.

Know Your Tax Issues

Retirement plans are taxed differently. Annual contributions into 401(k) plans and IRAs reduce your taxable income for that year, and only post-tax money can fund a Roth IRA. Money in 401(k) plans and IRAs benefit from tax-deferred compounding as capital gains, interest and dividend distributions are not taxed when they’re received. Withdrawals from employer 401(k) plans and traditional IRAs are taxed while money withdrawn from Roth IRAs is not taxed.

“If you’ve saved a significant amount of money in 401(k)s and IRAs, every time you take money out of your retirement accounts, it’ll be taxed,” says Goodman. Since, whenever you withdraw money, you also have to withdraw enough to cover the tax, Goodman suggests diversifying into Roth IRAs if you’re eligible.

For 2012, individuals who are married filing jointly and earn less than $183,000,  and single filers earning less than $125,000 per year can, depending on age and income level, can contribute up to $6,000 into an account.

Neiser recommends that people also save money outside of a tax-deferred account, especially those close to retirement. “People need to broaden the range of savings vehicles that hold their money,” he adds.

Geography

Where you live can have an impact on your retirement income. If you decide to relocate, “when considering a new retirement state, consider the state’s taxes, climate, cost of living, health care like doctors and hospitals,” says Katie Ross, education and development manager at American Consumer Credit Counseling.

States like New York and Connecticut, for example have higher incomes taxes and costs of living while states like Florida, Texas, and Nevada, for example, do not have state income tax.

Health Care

Health care can be a significant part of a retirement budget. When on Medicare, “there are many out-of-pocket expenses that people think they’re not responsible for, but that’s not the case,” says Setzfand. She advises that people take into consideration the projected costs for health care that are higher than your current costs.

Experts recommend that retirees take advantage of Medicare and a supplemental policy to cut down on health care costs. “If you don’t sign up for Medicare when you’re 65, Medicare can cost more unless you had health insurance,” says Sarenski. When you stop working, you have seven months to sign up before you’re assessed a penalty that’s paid every month on top of your premium.”

“The most important thing to consider is to figure out ways to maximize your retirement income stream and the different decisions surrounding that,” says Neiser. He also suggests coordinating and optimizing different decisions to maximize your benefits.

Preparing for retirement is a long process. “The most important thing to consider is to figure out ways to maximize your retirement income stream and the different decisions surrounding that,” says Neiser. Experts agree that the sooner you start to plan and save, the easier it will be to live the life you want during retirement.

Top ways to take control of your personal finances

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Whether you're always in debt or have a decent lifestyle (devoid of debt), controlling personal finances is a must for everyone. Detailed below are four ways in which you can take control of your personal expenses.

1

Track your expenses. Learn where you are financially and where your money is going. Track all the bills you pay for 2 weeks. Also track the cash you spend each day. Even the little items add up. Your daily latte will still affect your finances. Track your expenses on a spreadsheet or personal journal.

2

Plan a budget. Avoid spending more money than you are bringing in. Try to spend a great deal less than you are making. Identify areas where you could save money. Eliminating that daily latte may even help. Stick to the newly established budget and continue to track where your money is going.

3

Establish an emergency fund. Life has a lot of emergencies that come up. Unexpected car or household repairs can be panic-inducing. Such emergencies will wreck your budget if you are not prepared for them. Budget some money each month for this account.

4

Pay down your debt. With a budget and an emergency fund in place, it's time to get out of debt. Pay down as much as you can afford. Being debt free will give you the most financial flexibility.

5

Save for retirement. Once your debt is paid down or off, you should make saving for retirement a priority. You have the benefit of deferring taxes and having your investments compound their earnings. The easiest way is to deduct part of each paycheck into a pension plan or a deferred compensation retirement plan.

6

Invest as much as you can. Get into a pattern of regular investing to make your money work as hard as possible for you. Start investing in stocks or mutual funds for maximum returns.

 

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How to Avoid Tax Deductions

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By Chad Brooks

Those needing last-minute tax deductions should avoid including this year's breast augmentations and swimming pool installations or face the serious possibility of having the Internal Revenue Service scour your financial background with a fine tooth comb, according to Bankrate.com.

Those items make the online financial information site’s latest list of craziest real-life tax deductions, released annually as a warning to Americans about stunts that don’t pay off. This year’s installment includes:

• Hair transplant — Laura Cullen, a CPA in Fresno, Calif., admits she did a double-take when a new client tried to deduct his hair plugs.
  "The first year I did his personal tax return, being aware that you could itemize your medical expenses, he asked me to expense his hair transplant," Cullen said. "I had a heck of a time explaining why I couldn't."
• Live-in boyfriend — Los Angeles forensic accountant Susan Carlisle was surprised to find that a man who had left the family home to live with his gay partner listed both his wife and the partner, along with his children, as dependents on his tax returns.
  It turned out the husband could claim the live-in boyfriend as a "qualified relative" since he shared the same residence, was a member of the husband's household, earned less than the exemption amount and derived more than half of his total support from his new partner, Carlisle said.
  
   
• Swimming pool — After years of clients trying to deduct swimming pools from their tax returns, Los Angeles CPA Rob Seltzer said the strangest argument of all actually won over the IRS.
  His client, who had a severe neck and back injury, claimed his only form of exercise was swimming.
  Since he risked further damage if he collided with another swimmer, the only option offering Seltzer's client a safe mode of rehabilitation was the use of his own lap pool.
• Spatulas — While the IRS does allow for some deductions for employees who spend money on the tools of their trade, Gail Rosen, a CPA in Martinsville, N.J., was blindsided by one client who took things a bit too far.
  "My client is a painter, and he gave us his airfare to Brazil as a deduction," she said. "When I questioned the airfare, he said he went to Brazil to get spatulas."
• Prayer room — One CPA who wished to remain anonymous recalled a client attempting to take a charitable deduction on the prayer room he built inside his house.
  The client became angry when he was told the deduction wasn't possible since he wasn't a minister and his religion wasn't a recognized charity.
  "It's pretty straightforward," the anonymous CPA said. "Just because people take their shoes off when they enter doesn't make your house a temple."
• Breast enhancement — A Dallas woman was disappointed to learn the $14,000 she spent on breast augmentation was not a deductible expense.
  After saying she spent that much only because she thought the new additions were deductible, the CPA had to explain to her client that there was no way it could be considered a business expense.
  "There are only one or two professions that are allowed to write those off, and there's no pole involved here," the CPA said.

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Personal Finance Guide for Mutual Funds

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Basic Function

• Mutual funds are pools of investment properties that a fund manager buys and sells for investors who buy shares of the fund. By purchasing shares in a mutual fund, you're buying a portion of whichever investments the fund contains, and the properties you own, as well as their value, are always subject to change. Mutual funds can include stock, bonds and other securities. Some mutual funds focus on a specific type of company or industry while others invest broadly across the entire market as the fund manager sees fit. Mutual funds also take different levels of risk, depending on how soon the investors expect profits and how aggressively they want to invest their money. It's essential to examine a mutual fund's track record before buying since there are so many types of mutual funds to choose from.

Advantages

• One of the key advantages of investing in a mutual fund is that it distributes the risk of investing. As a private individual, you could never afford shares in all of the companies that a mutual fund holds. But as an owner of shares in the fund, you can earn a profit when any of those companies increase their share prices. If one company loses value, it's more likely to be offset by other investments in the fund, so you endure a smaller loss than if you owned stock in the company exclusively. You also don't need to make any investment decisions except for when to buy more shares in the fund or sell your shares, as the fund manager handles day-to-day transactions for all fund owners.

Drawbacks

• Mutual funds still carry a certain degree of risk. If a mutual fund invests solely in a single industry, your shares will lose significant value if the industry experiences broad losses or falls out of favor with investors. You also hand over control of your money to fund investors who, according to the U.S. Securities and Exchange Commission, can rarely outperform average market growth rates. Finally, mutual funds charge fees whenever you buy or sell shares, which can reduce your profits, especially if you buy and sell often.

Considerations

• The value of a mutual fund depends heavily on which fund you buy into and how long you hold your shares. A short period of ownership will mean that fees eliminate a larger percentage of your gains. At the same time, holding a fund for an extended period of time will give you more time to recover from losses as stock and bond markets move through cycles toward overall growth.

  Mutual funds also give you an opportunity to have a say in where you invest. For example, if you feel strongly that the tech industry is poised for growth you can select a mutual fund devoted to tech stocks. If you have a passion for environmentally responsible businesses, you can select a "green" mutual fund that only buys shares in businesses with strong environmental records.

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How to change your spending habits

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How to Change your Spending Habits

Keep a Log

Log everything that you buy during the day. That means everything. From your morning coffee to lunch and everything in between, you will realize just how much you are wasting. When you log what you purchase throughout the day every day, note what you are buying and how much that costs. Seeing it on paper will make you more aware of your spending habits so you will be more inclined to want to change your spending habits.

Change How You Buy

Instead of buying pre-made items, such as the coffee mentioned above, make your coffee at home. It is far cheaper to buy it that way. Instead of buying single sodas at a convenience store, purchase a 12 pack at a grocery store. You can also join warehouse stores such as Costco to get even bigger savings by purchasing items in bulk. Changing the way you buy items is one of the easiest ways to change your spending habits in order to save money.

Take Classes

Many banks offer classes that will teach you how to handle your finances better. Find one that addresses spending habits and enroll in it. You will learn a lot about how you can change your spending habits to give you a better chance at savings. Take good notes so you can refer back to them and ask a lot of questions so you aren't left scratching your head when it is all over with. These classes are usually free to help bank customers get a better understanding of their money and how to choose wisely when it comes to finances.

 

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Personal Financial Management Techniques

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Organization

• Part of the reason many people struggle to manage their finances is because of a lack of organization. Keeping financial records together, and knowing where to find documents when you need them is the first step to financial management. Bank account, investment and credit card information should all be kept together. Married couples should discuss all accounts and create a document that lists assets and liabilities, so that in the event something happens to one partner, the other knows where everything is.

Tracking Your Spending

• If you are living from paycheck to paycheck and wondering where your money goes, it's time to start tracking your spending. Thanks to the availability of ATMs and debit cards, little innocuous purchases can add up to hundreds of dollars quickly. To get a clearer picture of where your income is really going, begin by writing down every purchase, whether it be a cash, debit or credit card purchase. At the end of the month, tally items into categories such as entertainment, fuel, groceries, dining, clothing and miscellaneous. Tracking your spending will allow you to see where you can cut back and save. For instance, bringing lunch to work versus eating out during the week can amount to significant savings.

Reducing Debt

• Credit cards are both a blessing and a curse. While they make it convenient to purchase items that you can pay for later, many have such high interest rates that consumers easily become trapped in the debt cycle. The first step to reducing debt is to stop using credit cards. If you are tracking your spending and seeking ways to save, this will be easier. Remember that credit cards are for emergencies only. Once you stop using the cards, it will be easier to begin paying down the balances. Another tip is to look at the interest rates you are paying on your credit cards. Make sure you pay the cards with the highest interest rates first, to save yourself finance charges.

Saving for the Future

• Saving money is all about creating a habit. Investing in your future on a regular basis versus making it an afterthought is how many individuals build their savings over time. Start small. Simple investment techniques can lead to big results. For instance, a 30 year old who invests $10 per week at 8 percent interest will have $99,402 saved by age 65. Start at 20 years old doing the same thing, and you'll have $228,563. That is the beauty of compound interest. It's never too late, however, to start saving for the future. An easy way to get started saving is to have money deducted automatically from your paycheck and placed into a savings or investment account.

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The Best and Worst States for Health-Care Costs

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 By Kate Rogers

With the 2012 election season in full swing, and the fate of the Patient Protection and Affordable Care Act hanging in the air, health-care cost and reform weigh heavy on the minds of small business owners across the country.

The Small Business & Entrepreneurship Council released last week its "Health Care Policy Cost Index 2012," which ranks the states and the District of Columbia on public policy measures that impact the costs of health-care and health-insurance coverage.

Ray Keating, chief economist for the SBE Council and index author said costs for small businesses to provide health insurance to workers continue to rise, along with the overall cost of health care in general.

"A big part of these rising costs have to do with unwise and unwarranted government intervention in the health care marketplace," Keating said in a statement. "These government-driven costs don't just come from misguided federal policies, but policies in the states as well."

The policy index ranks the states based on eight different measures, including tax treatment of health savings accounts, various forms of guaranteed issue and community rating regulations, the number of insurance coverage mandates, whether or not states have high-risk pools, and spending on government health programs, according to the SBE Council.

Keating said the more government intervenes in health-care, the higher costs will continue to rise.

"More government programs and spending mean fewer incentives to be concerned about prices and utilization of services. More mandates on insurers inevitably translate into higher insurance costs. And while increased regulation might sound good to many, costs rise as government overrules decisions made in the private, competitive, consumer-centered marketplace," he said. "Unfortunately innovation, competition and affordability are all hurt when government overly intrudes."

 

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VW fan finds success restoring classic Beetles

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With nearly 22 million sold, the Volkswagen Type 1, affectionately known as the Beetle, may have helped put the post-WWII world on wheels, but finding one in good condition today is becoming a challenge.

Unless, of course, you know where to look.

Chris Vallone was a graphic artist for a cable TV business network when he began restoring Beetles for fun. With a background in cartooning, he says he always had an affection for the vehicle that looked so much to him like an animated character.

After listing a few of his creations on Ebay, he quickly found that he was far from the only person with a penchant for the People’s Car. His attention to detail attracting the attention of more than a few VW fans online.

So, about five years ago he left the TV game and launched ClassicVWBugs.com with his father, a retired New York City police officer also named Chris. Their nine-car garage is located about an hour north of Manhattan in Congers, N.Y, and business is so good that they’re planning to expand this year. Along with offering restoration services, Chris taps his TV background to produce how-to and other Type 1-themed videos that he have gotten over 1.5 million views on YouTube to date.

Customers either send Chris their beat-up Beetles, or he works with him to find a suitable donor car. Even junkyard quality Type 1s can cost thousands of dollars today, if they’re from a desirable year and have enough original parts. When the hardtop Bug was last sold in the United States in 1977 it had a base price of just $3,000.

Chris prefers working on pre-1967 Beetles, which he says are the most valuable for resale, but is especially fond of the 1954-55 models with their pop-out semaphore turn signals and huge ragtop sunroof. Left to his own devices, he prefers to bring them back to as-new condition, and uses only the highest quality parts he can find, often sourced from Europe rather than Mexico, where the Beetle was produced until 2003. That said, he’ll happily take on any Type 1, and even make modifications like using newer more powerful engines in older Bugs, but is sure to let customers know that it’ll likely be a long time before they see a return on their investment if he does.

That outlay can run anywhere between $25,000 and $50,000, but with about a dozen orders currently on the books, it doesn’t seem to be a deterrent to people interested in buying a little nostalgia. Chris says most of his customers either had a Beetle in their family growing up, or remember buying one for fifty bucks in college and driving it cross country or on another adventure. His 1955 daily driver was even accepted to the exclusive 2011 Fairfield County Concours d’Elegance in Connecticut, where it caught the eye of noted car collector, Wayne Carini.

Taking one of his meticulously finished cars for a spin around the twisty roads of the Hudson River Valley is definitely a step back into a different era. It’s easy to forget how small the Beetle was until you get in one and rub shoulders with your passenger while contemplating just how close the windshield is to your face. Seatbelts were an option in the early days, and still are on the most antique of Chris’ creations.

The flat-4-cylinder engine pumps out something less than 50 horsepower through the car’s four-speed manual transmission, but once you’re up to speed proves surprisingly adequate as it leaves that distinctive air-cooled symphony in its wake. A pencil-thin steering wheel feels very strange to hands used to thick-rimmed modern tillers, but is an unassisted delight, even if it’s hard to imagine using it to hop onto Interstate 80 and head for California as so many did so many years ago.

They may be pricey as far as used economy cars are concerned, but as time machines, Chris’ classic Beetles could be the bargain of the century. Either this one or the last.

Credit Card Rewards for The Rich: Six Elite Perks

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 by Janna Herron

Welcome to the high life of credit cards. Flaunting annual fees north of $350, ultra-premium rewards cards pack a lifetime of luxury into a small rectangle that fits inside a Prada wallet. Holding one makes you part of a special club of cardholders.

Exactly how exclusive? Barclays' Visa Black Card is limited to only 1% of the U.S. population, according to its website.

And it's rumored only 17,000 people carry the card of cards, the American Express Centurion Card, which is informally known as the "black card."

"These cardholders have a higher level of income, higher credit rating and higher spending," says Thomas Hobbs, director of Discover Network product management, which includes the issuer's Premium and Premium Plus cards.

"Most of the time, the issuer acquires the customer through a traditional rewards (card) and based on the behavior on that card, the issuer may offer a premium (card)," he says.

So what does it feel like to hold one of these cards? Bankrate dives into the high-class world of elite credit cards and charge cards.

Travel Perks of Elite Rewards Credit Cards

You know those well-dressed individuals who bypass long security lines at the airport and breeze through the fast lanes? They are probably carrying a premium credit card. You'll also see them kicking back in the airport lounge.

Many of these rewards credit cards, such as Barclays' Visa Black Card and the American Express Platinum Card, provide access to airport lounges worldwide. Others feature access to certain carrier's lounges such as the Continental Presidential Plus card by Chase. A layover doesn't sound so bad now, does it?

That's not all. Many of these premium rewards credit cards grant cardholders priority boarding and waive certain airline fees.

The perks keep coming at the hotel. For example, American Express Platinum charge card holders receive room upgrades (depending on room availability), free breakfast, a spa credit, or complimentary food and beverages at participating hotels and resorts worldwide, according to Leah Gerstner, a spokeswoman for American Express.

Those carrying a Ritz-Carlton Rewards credit card from Chase can expect similar high-end benefits. Additionally, cardholders get three Ritz-Carlton Club upgrades each year, says company spokeswoman Laura Rossi.

A signature of the Ritz-Carlton experience, Club services include living-room type lounges that offer a hot breakfast buffet, lunchtime sandwiches and salads, afternoon tea with scones and small bites, predinner cocktails and hors d'oeuvres, and late-evening cordials and chocolates.

Service Perks of Elite Rewards Credit Cards

Premium rewards credit cards also come with personal assistants, or something very close to it. Most issuers offer customer service representatives 24/7 to help cardholders with such mundane tasks as procuring hard-to-get tickets, booking a table at Gordon Ramsay's newest restaurant or coordinating one-of-a-kind travel experiences, such as a cruise with the Food Network, says Thomas Hobbs, director of Discover Network product management, which includes the issuer's Premium and Premium Plus cards.

Other unique customer services include emergency translation services, weather forecasts, ATM locations, referrals for specialty services such as dog groomers and tailors, or locating rare books or other items for purchase.

One Discover Premium Plus cardholder sought help after a tree demolished half his house the night before a big vacation.

"The cardholder called, and the concierge helped track down the cardholder's insurance company and helped them rearrange their upcoming vacation," Hobbs says.

This past holiday season, American Express expanded its concierge services to include holiday shopping for its Platinum cardholders. Those lucky enough to hold the silver card could submit their Christmas (or Hanukkah) lists to the concierge gift-buying service, which would research gift options, compare prices, buy the presents and ship them. The only caveats: The purchases had to go on the Platinum card at a retailer that takes American Express.

Exclusive Credit Card Rewards for the Elite

Top-tier credit cards make it easier to earn rewards. For example, if you sign up for an online account and paperless statement, you score 600 extra rewards points if you're a Citi ThankYou Prestige cardholder. American Express Delta Reserve cardholders receive 30,000 Medallion miles in the first year that count toward Delta's elite frequent-flier status. Other premium rewards cards offer simple ways to earn points faster than the conventional 1-for-1 rate, such as travel or purchase bonuses.

Issuers also work overtime to create elite rewards events available only to their premium cardholders. For example, American Express offers "by invitation only" events. Past events included a cookout on the Cayman Islands catered by some of the world's most renowned chefs and an inside experience at the Wimbledon Championship last year.

For only $2,650 per person, or 331,250 rewards points, the upscale cookout at the Ritz-Carlton in the Cayman Islands included food and wine tastings from the likes of Anthony Bourdain, Jose Andres, Charlie Trotter, Susur Lee, Gail Simmons, Cakebread Cellars and Screaming Eagle.

The Wimbledon event offered center-court tickets along with two days of activities, including meals, transportation and hotel accommodations, hosted by former Wimbledon champion Stan Smith. Platinum and Centurion cardholders also got to meet former tennis star John McEnroe along with other former Wimbledon competitors. The price tag? A cool $7,980 per person or 997,500 rewards points.

Status Perks of Elite Rewards Credit Cards

Some of the highest-end credit cards even differentiate themselves by card material. The J.P. Morgan Palladium Credit Card is named after the metal from which it's created. Palladium is a natural white metal that is light and durable -- similar to platinum, but less expensive. Barclays' Visa Black Card is made from carbon, according to the card's website. And the American Express Centurion Card is rumored to be made from graphite.

Both the Palladium and American Express Platinum cards also offer private jet rentals. The service starts at $600 for American Express cardholders. And Barclays' Visa Black Card offers posh gifts from some of the world's top brands, according to the website.

"We don't actually disclose the items that are gifted to card members in advance as they are meant to be surprising, luxury gifts," says Jesse Parker Stowell, a spokesman for Barclays' Visa Black Card.

However, rumored gifts on the Internet include a Cross pen set, Ray-Ban aviator glasses and a Swatch chronograph watch.

The Secret Perks of 1 Elite Credit Card

No roundup of elite credit card perks would be complete without the ghost orchid of rewards cards. The credit card issuer keeps the American Express Centurion card, informally known as the "black card," tightly under wraps. No details are disclosed on the American Express website, and company contacts politely remain hush-hush about the card.

Legend has it that, until recently, the credit card was only available by invitation to select individuals worldwide. The blogosphere now reports individuals can now call American Express to apply, instead of waiting for that exclusive invite. But that remains unconfirmed.

The website BlackCardSource.com provides a running list of celebrities who allegedly possess the famed card. Among them: Janet Jackson, Denzel Washington, Jerry Seinfeld and the Olsen twins.

One juicy detail emerged last year. American Express confirmed to Forbes it was offering Centurion cardholders car rental upgrades to the world's priciest rides. Think Ferrari, Bentley and Lamborghini. Centurion cardholders can even rent a Formula 1 car, according to the report.

So how much does this kind of luxury cost? A $5,000 initiation fee plus a $2,500 annual fee, according to its online card agreement. That isn't chump change.

 

Five Fantasy Baseball Tips to Improve Credit

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Building the right balance of credit is sort of like creating the perfect fantasy baseball team. It takes strategy, research, persistence and sometimes patience as you strategically try to raise your dismal credit score. Not to mention that if you want to get to the playoffs -- e.g., get approved for a mortgage someday -- you'll have to make smart decisions all season long.

By applying those analytical skills to your credit profile, you'll reach the credit score big leagues in no time. Ready to play? Here are five fantasy baseball strategies that can help improve your credit.

Know the rankings

Savvy fantasy baseballers read player rankings before draft day in order to make the best picks possible. The same deal goes with knowing where you rank with your creditors before you apply for a loan or mortgage, so you have time to develop a plan of action for raising your score.

Winning strategy: First, understand what credit scores really are, and know where you stand, says Maxine Sweet, vice president of public education at Experian, one of the three major credit-reporting agencies. "People do have the misperception that there's one score, but the way scoring really works is that the lender selects which model they want to use," says Sweet.

Among the more popular models are FICO and VantageScore. "The FICO scores have been adopted by lenders over the years -- something like nine out of the top 10 largest banks in the country use FICO," says Barry Paperno, consumer affairs manager of myFICO.com.

More recently, VantageScore was developed as a joint venture of the three nationwide credit-reporting agencies, Experian, Equifax and TransUnion, to be a generic credit-scoring model.
Regardless of which scores a potential lender uses, the smart play is to head to AnnualCreditReport.com once per year to request your free credit report from each of the three credit bureaus, says Sweet, to assess your stats. You can order your free credit reports all at once or one at a time during a 12-month period. Credit scores are based on the information in your credit report.

Monitor your team

You're bound to lose points if you forget to replace a player who's injured. Similarly, missing payments or letting credit card balances grow to out-of-control proportions can hurt your score.
Winning strategy: "The factor that has the most impact on your credit score is if you made all of your payments on time," says Sweet.

Batting second in the lineup is utilization. "Utilization is how much you owe compared to how much you could owe. The logic for that is the consumers who charge to the maximum are consistently those who show up as higher risk," says Sweet. She recommends trying to keep your accounts below 30% utilization. So if you have a $1,000 credit limit, stay below a $300 balance.

"One of the things to understand about scoring is that the importance of any single piece of information is going to vary according to the other information in your credit report," says Paperno. For example, the impact of a late payment can be more detrimental for someone who has a short credit history or limited credit experience as opposed to someone who has used credit for years.

Be wary of trade offers

If someone is looking to trade his or her best player to you, you'll think about why it might be too good to be true. Likewise, saving 15% off on a day's purchase just for applying for a retail credit card has its own set of caveats.

Winning strategy: Just as you might sleep on a trade offer before you hand off a player, think twice before signing up for new credit accounts. "Don't apply for other credit in the three- to six-month period before you're going to apply for a car loan or a mortgage," says Sweet. That's because if your recent credit history includes opening or applying for new lines of credit, it can cause your score to take a hit. And the lower the score, the higher the interest rate will be on that loan you're seeking, she says.

"As a general statement, opening up multiple new accounts ... is interpreted as increasing risk, and the score might be impacted," says Barrett Burns, president and CEO of VantageScore Solutions.

Don't give up on your team after a loss

Just because your team is performing poorly doesn't mean you should walk away. By the same token, you should think twice before you quit your credit habit cold turkey.

Winning strategy: Although you may have the urge to cut up your credit cards if a balance or two has gotten out of control, giving up on credit altogether will not necessarily help your score. "If you stop, you've frozen your history in a negative state. You're not adding anything positive," says Sweet. On the other hand, she says, if you keep using your credit minimally, pay on time and work to reduce your balance, you can rehabilitate your scores over time.

In fact, your score is always in a state of flux and will change as often as the information in your credit report does, similar to how a player's batting average changes with every plate appearance.

"The score is not a piece of data that is filed away and then pulled up when requested," says Paperno. "It's calculated at the time that it's requested using the most up-to-date credit info that's available."

For questions, go to the commissioner

Every league has a person who's in charge to settle any disputes. When it comes to discrepancies in your credit score, you also need to know who to turn to so you can correct any errors.

Winning strategy: Once you get your credit reports, review them for accuracy, says Sweet. If you find any errors, in the majority of cases, disputing them online via the credit reporting bureau's website is the way to go, she says.

When filing a dispute, do your part to speed up the process. "Be very specific -- don't just say, 'It's wrong,'" says Sweet. It can then take up to 30 or 45 days to see a resolution to a dispute, but "most of the time it doesn't take that long."

What's even more convenient is that any corrections will automatically get updated on all three credit bureaus if you go through one of the credit reporting factories.

How to Avoid Debt in Personal Finances

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1

Create a budget. Use a pre-made budget spreadsheet or create your own. List all fixed expenses such as mortgage, car payment, insurance premium and utilities. List all fluctuating expenses such as gas, groceries and eating out. List your income. Ensure that your monthly expenses do not exceed your income and that you first put money towards fixed expenses and debts before planning for non-essentials.

2

Pay bills on time. Set up a bill payment service online through your bank or mail out a payment as soon as possible when you receive a bill. Do not pay bills late.

3

Pay down all current credit cards and other debts. Ensure that all credit cards are a maximum of 10 percent of their total credit limit. For example, a credit card with a $1,000 credit limit should have a maximum balance of $100.

4

Do not apply for other credit card opportunities. Apply for new credit cards only if you do not currently have one or you are adding a credit card to help your credit score.

5

Create a savings account and savings plan. Ensure that your savings account has at least one to three months worth of expenses saved up for a rainy day.

6

Understand the interest rates on your credit card. Pay credit card balances in full each month to avoid excess interest charges and know the interest rate on each credit card in the event you do need to carry a balance.

7

Buy only what you need. Do not use credit cards or loans to purchase items that you do not need or cannot afford. Treat a credit card purchase like a cash purchase and only purchase items you can pay in full when the bill comes in.

8

Do not live beyond your means. Do not exceed your monthly spending limits set up by your budget and do not live off of credit cards because you cannot afford your bills. Purchase items that are within your budget. For example, do not buy a car with a $600 a month payment if you cannot actually afford it.

9

Take debt management and personal finance courses to help educate you on healthy spending habits, family budgeting and debt management.



Ditch Your Bad Financial Habits

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Why do most entrepreneurs fail to "be rich"?
They don't understand what rich means. For many entrepreneurs--especially in Silicon Valley--it's evil and dirty to charge for a product. So does "rich" mean being in the press? Or running a profitable company? It's critically important to understand what [being] rich means--and it's usually only partially about money.

What are some common misconceptions about personal and business finances that cripple aspiring entrepreneurial ambitions before they get started?

1. We think we have to be rich to start investing in our business. Not true, especially today when you can start a website, launch a product and begin marketing for under $100.
2. We think we can do it all and have difficulty outsourcing. We think nobody can do it as well as we can. Guess what? You're not that important--or you shouldn't be. If you're irreplaceable, that means you have a scaling problem. Over time, do an 80/20 analysis and figure out what you can outsource.
3. We think we're different than people who've come before us. So many entrepreneurs go into markets where previous companies have repeatedly failed--without ever understanding why! Why not spend a few weeks (or months) understanding the market and customers before jumping in?

How can young entrepreneurs overcome fears and obstacles?
Get out of your room and start talking to people around you. The best $20 you'll ever spend is taking someone in your market out to lunch, whether it's potential customers or business owners in your market. You'll quickly find out that your idea is crazy, or your pricing is wildly off, or your customers don't care about this, but they really want that.

What poor financial habits and methodologies lead to entrepreneurial failures?
The overall problem is trying to use willpower to overcome problems. Yes, willpower is important--but systems are more important. For your personal finances, you want to build a system to automate your finances. For your business, it's also important to build systems to get more leads, qualify them and convert them into customers. Trying hard is important, but building systems to scale is critical.

What sort of no-B.S. straight talk would you give Gen Y entrepreneurs with bad financial habits?
Most of us spend our entire lives complaining and worrying about money, yet we never spend 2 hours reading a good personal-finance book. There's not going to be some magical day where you have unlimited time to figure out your finances. And let's be honest--nobody wants to be a personal-finance expert. Spend a little while, automate your finances, and get on with your life. A rich life is about so much more than money.

Twelve Rules for Closing a Sale

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By Grant Cardone

Like any game there are rules to selling, especially when it comes to closing a sale. To ensure sales success in your business, whether you're a startup or an established entrepreneur, here are a dozen of my best commandments for sealing the deal.

1. Remain seated. The saying goes, present the product, service or idea on your feet, but always negotiate from your seat. Even if your prospect stands up, remain seated. Going from a seating position to standing up suggests something has changed and allows your prospect to exit and end the negotiations.

2. Always present a proposal in writing. People do not believe what they hear, they believe what they see. Always have a contract available and a writing pad. Anything offered or points of value that are included should be written down to show buyers what they get when they make a decision with you.

3. Communicate clearly. No one will trust a person who cannot communicate clearly and confidently. I practiced using recorders and video for years and then played them back to ensure my communication was coming across the way I intended.

4. Make eye contact. This is a discipline instilled only through practice, and you can perfect it by recording yourself. If you want to be believed, it is vital to make eye contact with your prospect. It suggests interest in them and confidence in yourself, your products, your services, and in what you are proposing.

5. Always carry a pen. I remember once I was closing a deal, and I reached for my pen in my jacket but it was gone. The prospect took this as sign that he shouldn't sign—and didn't. I was devastated, and now I refuse to go anywhere without my sword in hand. All agreements require signatures and that requires ink. Keep a pen available at all times. In fact, always have a back-up pen, too.

6. Use humor. Any humor that can make people feel good, inspired or hopeful is always appropriate during the close. Everyone loves a good story, and people are more likely to make decisions when they are less serious. You will close more deals if you can get your client to lighten up and laugh.

7. Ask one more time. Figuring out another way to circle back and reposition negotiations after being told "no" ultimately will make you a great closer. It is not rude to persist; it is the sign of success and prosperity. Because I continue to ask in another way for a "yes" after being told "no" does not mean I did not listen. It only means I am more sell on my view than I am the other's view.

8. Stay with the buyer. Each time you leave the customer to check on something, it creates doubt and uncertainty in their mind. It can create undue antagonism in the negotiations, lower perceived value, and extend the closing time. But keep in mind, this does not mean there is not an appropriate time to leave a buyer and use an authority for a close, as this can be very powerful as long as it is not overused

9. Always treat prospects like buyers. Regardless of the circumstances: no money, no budget, not the decision maker -- always treat the buyer like he is a buyer. I always survey the prospect for signs that demonstrate they have bought in the past. The watch, the shirt, the suit, the necklace, the car they drove, the house they live in, the credit card they use, and others. All are evidence that this prospect has actually demonstrated the ability and history of closing. I always tell myself, "Every buyer is a buyer. Treat them as a buyer and they will turn into a buyer."

10. Stay confident. I always maintain that we can come to an agreement, no matter what I am told by the buyer or those around me. The saying goes: "Where there is a will, there is a way." This mindset of knowing you will reach an agreement requires you to eliminate all negativity from your environment as though it were a disease that kills, and be assured, it does.

11. Be positive. No matter how the buyer responds, keep it light and maintain a can-do attitude throughout the negotiations. When you go negative due to the buyer being negative there is only one outcome and it's not good. Negativity always succumbs to positivity.

12. Always smile. This is not just about your attitude, but also your physical manifestation. For the next week, practice smiling with everyone in every situation you encounter. Do this until you are able to argue with a smile, disagree with a smile, negotiate, overcome objections and close with a smile. Have you ever noticed that very successful people are smiling all the time? It is not because they are successful that they are smiling, it's how they got successful. This is a million dollar tip: Smile.

Save on Engagement Ring Without Being Chintzy

 Global B2B buy sell marketplace: http://www.bytrade.com

 

by Barbara Diggs

What prospective groom hasn't secretly shuddered at the old saying an engagement ring should cost at least two months' salary? Let's be honest: Even in robust financial times, this is an extravagant idea. But when the economy is fragile -- and the price of gold and diamonds astronomical -- spending up to 16% of your income on a ring can give new meaning to the words "crazy in love."

You don't have to break the bank to find a good engagement ring, says Robert Bates, senior editor of Jewelry Circular Keystone, a leading trade magazine in the jewelry factory. "People get hung up on the numbers," he says, "but it's really about finding (a ring) you like and making your fiance happy."

Start your marriage on the right financial footing by buying an engagement ring with love -- and wisdom. Here are five ways to save money on the perfect ring.

Buy Online

It may not be as romantic as entering a brick-and-mortar store to buy an engagement ring, but buying online can save you enough cash for many romantic nights. Thousands of couples seem to agree. According to The Wedding Report, more than $1 billion of the $9.64 billion spent on engagement and wedding rings in 2010 came from online purchases.

"The customer gets far more value for the money buying online," says jeweler L.G. Landau of DiamondIdeals.com. Because an online retailer has more competition than a traditional store and less overhead, prices are naturally lower, he says.

Consumers should be especially discerning when selecting an online jeweler. Landau recommends seeking retailers whose jewelry has been evaluated by gemologists, who can provide digital images of the stones and who have multiple channels of communication, from email to online chat capabilities.

Subtract a Fraction of a Carat

Although buying a 1-carat diamond is a benchmark for many couples, the truth is very few people can distinguish between a 1-carat stone and a 0.9- or 0.8-carat stone. That's good news for engaged couples since this minuscule difference in weight makes a major difference in price.

There's about a 30% price difference between a 0.9-carat and a 1-carat stone, says jewelry designer Sylvie Levine, co-owner of The Sylvie Collection, an engagement ring line. The same difference is found between 1.4 and 1.5 carats, and 1.9 and 2 carats. Couples on a budget should stay just under the half-carat mark, she says.

Be Practical About Clarity and Color

Couples can also save money by choosing diamonds with a lower grade of color and clarity. This may strike some as skimping on quality, but be realistic. If you can't detect the difference with your naked eye, then paying a premium for a higher grade makes little sense.

Consider the main purpose of the stone, says diamond expert Ira Weissman of TruthAboutDiamonds.com, a website about savvy diamond buying. The point of an engagement ring diamond isn't to produce a return on investment, he says, but to look fantastic. "You don't need very high clarity to get (a diamond) that looks great." If the diamond has imperceptible imperfections, no one will know except you.

When it comes to color, Weissman recommends saving money by selecting the diamond with the lowest color grade that still appears white. Gemologists grade color by comparing each diamond to a master diamond, he says. While a diamond may receive a lower grade because it has more color than the master, standing alone, it may still appear sparkling white.

Skip the Diamond

Brides who aren't wedded to tradition may be happy to forgo a diamond ring altogether. They'd be in good company. "Gemstones made a big comeback after Prince William proposed to Kate Middleton with Princess Diana's sapphire engagement ring," says Levine.

Ruth Batson, executive director of the American Gem Society, says sapphires and rubies make particularly good choices for engagement rings. "They are high on the Mohs scale of mineral hardness, just under diamonds," she says. "Because an engagement ring is worn daily, you need a gemstone that is hard."

Brides favoring white stones have nondiamond options as well. For her engagement ring, photographer Sara Meynardie chose a white sapphire that "cost a fraction of the price of a diamond and looks just as stunning." And LeeAnn Shattuck, co-owner of Women's Automotive Solutions, opted for a synthetic diamond, choosing to invest the money saved in starting her business.

Consider a Nontraditional Setting or Shape

A large center stone can ratchet up the cost of a ring. Levine suggests trimming costs by using a smaller center stone with a setting that increases its visual impact. A "halo" setting, for example, is one where the center stone is encircled with diamonds, adding sparks and flare. "Halos always make the center stone look bigger," says Levine.

Avoiding conventional shapes can also reduce costs. Traditional round brilliant diamonds usually cost more because they require high cutting skill, says American Gem Society's Batson. She recommends opting for a less-expensive shape, such as a square-shaped diamond. "(They) retain a lot of sparkle, which not only helps make a diamond look larger but more beautiful."