So my day job is teaching financial education to the military. I have the privilege and honor of serving an incredible audience. This post is specifically for service members who are preparing or in deployed locations.
The first is the Savings Deposit program (SDP). SDP is a one of a kind, which can only be utilized by deployed service members while in theater. This program allows service members to deposit up to $10,000 in a savings account that earns 10 percent annually (compounded quarterly). To be eligible, the service member must meet the criteria and start the program with the finance office in the deployed location. For more info, go to: http://www.dfas.mil/militarypay/woundedwarriorpay/savingsdepositprogramsdp.html
Secondly, if you are young and deployed and have extra cash, consider putting the funds into a tax-free Roth account. If you used deployed (tax-free) money in a Roth, then you will never be paying taxes on that money (assuming you use it for the specified purpose). Roth IRA earnings are also tax free for education and for a first time home purchase. Remember that for 2009, you can only put $5,000 into a Roth with a $1,000 catch up contribution for those over 50. (Here’s a good break down of the differences between a Roth and an IRA http://www.fool.com/money/allaboutiras/allaboutiras03.htm).
Finally, once you’ve maxed SDP, the Roth IRA, I would also suggest you max your Thrift Savings Plan (TSP). TSP is the federal government’s 401(K)-style plan. You can place pre-tax contributions up to $16,500 in 2009 into your TSP account, unless you are in a combat zone. The combat zone tax exclusion for 2009 is up to $49,000 including bonuses & combat pay!! That’s a great way to get jump start on your retirement. Oh and note, tax-exempt contributions will not be taxable even after withdrawals!! You can’t beat this deal for a retirement tax advantage. TSP offers a choice of six low cost funds, including 2 bond funds (G&F), 3 stock funds (C,S,&I), and lifecycle funds (L). For more info on the combat zone tax exclusion go to: http://www.tsp.gov/forms/tspbk08.pdf (see page 9) or see www.tsp.gov
And as always, get a second opinion for your specific financial situation. Military members can call Military OneSource (www.militaryonesource.com) 24/7, 365 days a year at no charge. They have financial counselors and planners to help you with your specific situation. Best wishes and thank you for giving all of us back at home the privilege of freedom.
Thursday, June 25, 2009
Wednesday, June 24, 2009
Quick Tips: Ideas to Walk Away & Save
Here are some quick tips, which may help put purchasing decisions into perspective:
* If you find something you want to buy and can’t live without, walk away from the purchase. If you still desperately want it 24 hours, have thought through whether you can afford it, if it’s for a good price, etc – then go back and purchase it. But if you’ve already forgotten about it, then you have your answer. This goes for a $2 checkout register purchase or a $300 clothing purchase.
* Freeze your credit card in a bucket of water. If by the time the credit card is completely and naturally thawed out (no cheating here), then you can get it. This is your “cool-down” period.
* Bring a fiscally conservative family member to help you shop. They will tell you the honest truth: whether that outfit really looks good on you – or if it’s a waste of money.
* Stick to a shopping list, and don’t waste time browsing! And, as my boss currently reminded me, use coupons!
* Limit your exposure to advertising. Scientific studies have shown that the more we’re exposed to advertising – whether it be on TV, in magazines, etc – the more likely we are to buy.
* Start an internet wish list by saving the URLs of the items that you would love to buy. If you use the book-marked pages, then you won’t forget the items you desperately want even if it takes you two or four weeks to save up the money for the purchase. (And quite honestly, if you do forget about the purchase, then I think you’ve already answered your own question about whether you really wanted it…)
* Collect your spare change or start an electronic savings account that pulls a small amount from your checking every week. Use that money as a “fun” account. Anything goes, but once the money is gone, you have to start saving again to make that next purchase
With this in mind, you can stick to your spending plan. I used to tell my college students, “If you can learn to manage a $500, you can manage $5 million”. It worked for Warren Buffet and it can work for you. Learn to manage what you have now and as more is given to you, you will have the knowledge and skills to manage the larger income.
The habits you create now, whether you are a struggling college student or a newly minted graduate, will be the habits that remain with you throughout your life As one of my favorite mentors says, “It’s not how much money you make, it’s how much money you keep.”
* If you find something you want to buy and can’t live without, walk away from the purchase. If you still desperately want it 24 hours, have thought through whether you can afford it, if it’s for a good price, etc – then go back and purchase it. But if you’ve already forgotten about it, then you have your answer. This goes for a $2 checkout register purchase or a $300 clothing purchase.
* Freeze your credit card in a bucket of water. If by the time the credit card is completely and naturally thawed out (no cheating here), then you can get it. This is your “cool-down” period.
* Bring a fiscally conservative family member to help you shop. They will tell you the honest truth: whether that outfit really looks good on you – or if it’s a waste of money.
* Stick to a shopping list, and don’t waste time browsing! And, as my boss currently reminded me, use coupons!
* Limit your exposure to advertising. Scientific studies have shown that the more we’re exposed to advertising – whether it be on TV, in magazines, etc – the more likely we are to buy.
* Start an internet wish list by saving the URLs of the items that you would love to buy. If you use the book-marked pages, then you won’t forget the items you desperately want even if it takes you two or four weeks to save up the money for the purchase. (And quite honestly, if you do forget about the purchase, then I think you’ve already answered your own question about whether you really wanted it…)
* Collect your spare change or start an electronic savings account that pulls a small amount from your checking every week. Use that money as a “fun” account. Anything goes, but once the money is gone, you have to start saving again to make that next purchase
With this in mind, you can stick to your spending plan. I used to tell my college students, “If you can learn to manage a $500, you can manage $5 million”. It worked for Warren Buffet and it can work for you. Learn to manage what you have now and as more is given to you, you will have the knowledge and skills to manage the larger income.
The habits you create now, whether you are a struggling college student or a newly minted graduate, will be the habits that remain with you throughout your life As one of my favorite mentors says, “It’s not how much money you make, it’s how much money you keep.”
Wednesday, April 15, 2009
Credit Cards: More or Less?
People often ask me questions that I feel might be helpful for others to see as well. Here's one I received recently.
"In terms of our credit rating, would you say we are better off having more credit cards with zero balance and lots of capacity or having fewer cards?"
Credit reports....gotta love the mystery! Here's the answer.....It depends! It depends on how long you've had the cards, how much of a credit balance you carry (or if you carry a balance), the credit usage (the amount you card vs. your limit...ie how close you get to your limit) and how many cards you have! That really helps huh! ;)
Typically if you've had a credit card for a LONG time, it's best not to close it because this will actually drop your score. But if you have 30 cards even with zero ....that's not the best for credit ratings either! You typically want to have a few cards and keep low balances on your cards and not get near the maxed out amount (which also has a negative impact on your credit score).
For a great credit report learning tool, go to Brightscore.com. It's worth the money to learn about how credit reports work and the best way to improve your credit.
Saturday, March 7, 2009
Tip of the Day: Check Your Credit Report
Today's tip of the day is check your credit report from all three credit agencies. The ONLY website I recommend for doing this is annualcreditreport.com. This website is free (unless you decide to purchase your credit score) and is the website where all three credit agencies (Equifax, Transunion and Experian) were required by Congress to offer consumers a free credit report once a year. Remember that you will get three credit reports from all three agencies and you need to verify all the information is correct. For a great web-based credit training tool to help you read and understand your credit report, I recommend Brightscore. There is a fee but it's a great educational tool to help you understand how your credit report works. Good luck and go pull those reports!
Thursday, February 26, 2009
Investing in a Down Market
The most frequent question I get is where do I invest my money, and lately, the most common question is what do I do with my invested money. Well, let's start with those who already have invests: be it in a 401(k), IRA, Roth IRA, brokerage account, etc.
Rule #1: Leave it alone!! Now is not the time to become a day trader or realize that you really wanted that mutual fund. For the most part, I would suggest you consider not touching the money and let the markets rebound. Remember your long-term time horizon on this (and ESPECIALLY since you are young!)
Story: I had a question a few months back from a woman who's brother had a Roth IRA. She said her brother had opened his Roth and had invested approx $16,000. Since then, he had lost almost half of it in the current poor financial market. He cashed out his remaining Roth money, and now what should he do with it?
My advice: Leave it alone! Even Donald Trump, Warren Buffet and Bill Gates are losing money in this economy. The S&P 500 (a general stock market index) was down over 38% in 2008. This is the greatest one year loss since 1931. Therefore, if you are fully invested in an S&P 500 index fund then yes, you will too will have a loss of 38% for last year. There's no secret magic pill to get around this. It's just where the market is at this point. Therefore, my advice was to open up another Roth IRA, redeposit the funds (within 6 months) to avoid tax penalties and realize that the market is on sale.
Word of caution: One thing we have learned with this market is the importance of diversification. If you own a single stock or just a few concentrated shares (i.e. profit sharing plans with company stock shares) and you are wondering what to do with it, I recommend you speak with a financial planner about your situation (future post on this coming soon!).
Rule #2: The Market is On Sale! It's like shopping: You wait for the best pair of jeans to go on sale so you don't buy it at full price! The same applies to the stock market....everything is on sale! Why pay full price (buy high sell low) when you could get a deep discount (buy low sell high)? Therefore, if you have EXTRA cash laying around and want to use it for a long-term (at least 10 years or more) goal, then invest it. If you plan on using the money in the short-term (5 years or less), then the stock market (as we are currently seeing for retirees) is not the best place to be heavily invested. You should look into more liquid investments, such as savings accounts, money market accounts, certificates of deposit, etc etc. It's vitally important to know your purpose/goal for the money and what time horizon you have. This should be the first step before you ever put money into an investment account.
Now, get out there and start looking for your bargain mix of a diversified portfolio which invests in broad varieties and types of businesses. To help you get started, here are a few recommended resources:
Happy Long-term Investing!
Rule #1: Leave it alone!! Now is not the time to become a day trader or realize that you really wanted that mutual fund. For the most part, I would suggest you consider not touching the money and let the markets rebound. Remember your long-term time horizon on this (and ESPECIALLY since you are young!)
Story: I had a question a few months back from a woman who's brother had a Roth IRA. She said her brother had opened his Roth and had invested approx $16,000. Since then, he had lost almost half of it in the current poor financial market. He cashed out his remaining Roth money, and now what should he do with it?
My advice: Leave it alone! Even Donald Trump, Warren Buffet and Bill Gates are losing money in this economy. The S&P 500 (a general stock market index) was down over 38% in 2008. This is the greatest one year loss since 1931. Therefore, if you are fully invested in an S&P 500 index fund then yes, you will too will have a loss of 38% for last year. There's no secret magic pill to get around this. It's just where the market is at this point. Therefore, my advice was to open up another Roth IRA, redeposit the funds (within 6 months) to avoid tax penalties and realize that the market is on sale.
Word of caution: One thing we have learned with this market is the importance of diversification. If you own a single stock or just a few concentrated shares (i.e. profit sharing plans with company stock shares) and you are wondering what to do with it, I recommend you speak with a financial planner about your situation (future post on this coming soon!).
Rule #2: The Market is On Sale! It's like shopping: You wait for the best pair of jeans to go on sale so you don't buy it at full price! The same applies to the stock market....everything is on sale! Why pay full price (buy high sell low) when you could get a deep discount (buy low sell high)? Therefore, if you have EXTRA cash laying around and want to use it for a long-term (at least 10 years or more) goal, then invest it. If you plan on using the money in the short-term (5 years or less), then the stock market (as we are currently seeing for retirees) is not the best place to be heavily invested. You should look into more liquid investments, such as savings accounts, money market accounts, certificates of deposit, etc etc. It's vitally important to know your purpose/goal for the money and what time horizon you have. This should be the first step before you ever put money into an investment account.
Now, get out there and start looking for your bargain mix of a diversified portfolio which invests in broad varieties and types of businesses. To help you get started, here are a few recommended resources:
Happy Long-term Investing!
Monday, February 23, 2009
Sileo, John Sileo....ID Theft Expert
So lately I've been traveling like crazy heading to Financial Roadshows at Military Installations. At these events, we have a number of keynote speakers as well as presentations. One of my favorites is John Sileo; he's an Identity Theft expert....mostly due to the fact that his identity has been stolen twice! He is lively, fun and entertaining, but most importantly, he's got some great tips on protecting yourself from Identity Theft. For a taste of what he suggests, I provide the following. For more great information, go to his website or read his blog. The following tips come from his article "The First 8 Steps to Bulletproof Your Identity" on his blog.
Summary
- Opt out of financial junk mail by registering at http://www.optoutprescreen.com/.
- Shred any paper documents that would go in the trash with a durable and safe confetti shredder.
- Track your credit report 3 times per year for FREE at http://www.annualcreditreport.com/.
- Monitor your identity with the right online identity surveillance service.
- Lock your identity documents in a bolted-down, fire-resistant document safe.
- Freeze your credit with Experian, Equifax, and TransUnion.
- Protect your computer with security software, a firewall, encryption and strong passwords.
- For further details, consult your copy of Stolen Lives:Identity Theft Prevention Made Simple.
Saturday, February 21, 2009
Debt Relief & Financial Counseling
We are in a struggling economy that seems to have touched everyone from Wallstreet to Main Street. People are feeling the effects and are seeking help and a way to turn this around. So let me offer a few of my own suggestions.
1) So let me commend you for making it this far! You've done the hardest part: Admitted that you want to get out of the stress and worry attached to your debt situation. GREAT!!! We can now start with a plan of attack! My first suggestion is what a doctor would suggest you do to get back into shape after not working out for several years: Go in for a physical and assess where you stand.
MUST READ: The Federal Trade Commission's "Knee Deep in Debt" info helps you know you various options for seeking credit counseling help. You need to know where you are and what your options are before beginning any program.
2) Now that you have an idea of your options the next step is to access your individual situation. (Click here for a debt repayment worksheet).
How much debt do you have and is it feasible for you to create your own debt consolidation plan? We hear so many marketing ploys to sign up for debt relief and free yourself up. What does this mean? A company (which will take a cut of the payment for their own profit) will roll together all of your debt (i.e. credit card debt, car loan, personal loans, etc) into one. The benefit: instead of having half a dozen payments every month, you'll only have one sum payment. The company then pays each individual creditor, and of course, taking a piece for themselves to provide the service.
So my suggestion: Find a reputable financial counselor to help you facilitate this AND help you break your debt habits to make a long-term change. This financial counselor, just like a personal trainer, will guide you through the proper channels to pay off the debt, but even more importantly, they'll help you break debt habits that you've created over the years which got you here in the first place. They serve as a coach that will get you back into shape while training for a long-term plan that will include healthy spending habits.
A few words of warning: Be VERY careful about who you choose as your financial counselor. There are many swindlers out there ready and willing to take your money and run! MUST READ: From the FTC - Choose a Financial Counselor
The FTC can't suggest financial counselors, but I'll let you know the companies that I've worked with and feel comfortable with their structure and work. Make sure you do your own homework and that you feel comfortable with whomever you choose!!
Mary's suggestions:
Warning: Be careful about the company you choose to help you with these plans. Many are not regulated at a federal level and some have very low lying restrictions at a state level. So before you proceed read the Federal Trade Commission's "Must Do List" for debt management plans
2. Debt Settlement Plans = NEVER recommended. Let me repeat, NEVER recommended. Debt settlement companies have a very aggressive marketing campaign and continue to grow (many mortgage brokers who went bust in the housing fallout have now found a "new" career in the debt settlement arena).
How it works: A debt settlement company sounds fabulous because they promise to pay pennies on the dollar for the debt you have incurred. What they do is have you pay them instead of your creditors. They keep the money, minus their generous cut, in a bank account in your name (which is why it is "guaranteed"). After a year of two of not paying the creditors, which means your credit is wrecked, the debt settlement company "negotiates" with the creditor and tells them they will pay pennies on the dollar for the debt that is owed. Sometimes the creditors accept and the debt is repaid at a fraction of the cost. But when the creditor will not accept the terms, you are still liable and can end up in bankruptcy court. Oh and by the way, telling the judge that you hired a debt settlement company to take care of the debts doesn't stand up in court. The debt settlement company has taken their cut of the money and fled the scene. You are left in a worse situation than before: You still owe the debt, you've lost the money that the company took, and your credit is even more wrecked than before.
To read a more about debt settlement companies, here are a few more websites:
After attending an FTC workshop on the debt management and debt settlement plans, I cannot recommend any debt settlement company due to their primary repayment structure and harsh marketing techniques.
Most importantly, congratulations for deciding to make a change and looking for the best solution! Good luck in your new fiscal fitness plan!
1) So let me commend you for making it this far! You've done the hardest part: Admitted that you want to get out of the stress and worry attached to your debt situation. GREAT!!! We can now start with a plan of attack! My first suggestion is what a doctor would suggest you do to get back into shape after not working out for several years: Go in for a physical and assess where you stand.
MUST READ: The Federal Trade Commission's "Knee Deep in Debt" info helps you know you various options for seeking credit counseling help. You need to know where you are and what your options are before beginning any program.
2) Now that you have an idea of your options the next step is to access your individual situation. (Click here for a debt repayment worksheet).
How much debt do you have and is it feasible for you to create your own debt consolidation plan? We hear so many marketing ploys to sign up for debt relief and free yourself up. What does this mean? A company (which will take a cut of the payment for their own profit) will roll together all of your debt (i.e. credit card debt, car loan, personal loans, etc) into one. The benefit: instead of having half a dozen payments every month, you'll only have one sum payment. The company then pays each individual creditor, and of course, taking a piece for themselves to provide the service.
So my suggestion: Find a reputable financial counselor to help you facilitate this AND help you break your debt habits to make a long-term change. This financial counselor, just like a personal trainer, will guide you through the proper channels to pay off the debt, but even more importantly, they'll help you break debt habits that you've created over the years which got you here in the first place. They serve as a coach that will get you back into shape while training for a long-term plan that will include healthy spending habits.
A few words of warning: Be VERY careful about who you choose as your financial counselor. There are many swindlers out there ready and willing to take your money and run! MUST READ: From the FTC - Choose a Financial Counselor
The FTC can't suggest financial counselors, but I'll let you know the companies that I've worked with and feel comfortable with their structure and work. Make sure you do your own homework and that you feel comfortable with whomever you choose!!
Mary's suggestions:
- InCharge Institute
- National Foundation for Credit Counseling - To find an NFCC counselor click here
- Consumer Credit Counseling Services - To start credit counseling online click here
TYPES of DEBT SERVICES
The primary 2 types of debt repayment services are:
1. Debt Management Plans = These are plans where the company works to help you negotiate lower interest rates but repay the debt over a feasible time frame that works for you. The purpose of these plans is negotiate a feasible payment to pay the debt that you incurred.
Warning: Be careful about the company you choose to help you with these plans. Many are not regulated at a federal level and some have very low lying restrictions at a state level. So before you proceed read the Federal Trade Commission's "Must Do List" for debt management plans
2. Debt Settlement Plans = NEVER recommended. Let me repeat, NEVER recommended. Debt settlement companies have a very aggressive marketing campaign and continue to grow (many mortgage brokers who went bust in the housing fallout have now found a "new" career in the debt settlement arena).
How it works: A debt settlement company sounds fabulous because they promise to pay pennies on the dollar for the debt you have incurred. What they do is have you pay them instead of your creditors. They keep the money, minus their generous cut, in a bank account in your name (which is why it is "guaranteed"). After a year of two of not paying the creditors, which means your credit is wrecked, the debt settlement company "negotiates" with the creditor and tells them they will pay pennies on the dollar for the debt that is owed. Sometimes the creditors accept and the debt is repaid at a fraction of the cost. But when the creditor will not accept the terms, you are still liable and can end up in bankruptcy court. Oh and by the way, telling the judge that you hired a debt settlement company to take care of the debts doesn't stand up in court. The debt settlement company has taken their cut of the money and fled the scene. You are left in a worse situation than before: You still owe the debt, you've lost the money that the company took, and your credit is even more wrecked than before.
To read a more about debt settlement companies, here are a few more websites:
- Federal Trade Commission definitions of all debt consolidation companies
- For another take on debt settlement companies, go here.
- Wall Street Journal article (Oct. 14, 2008) on complaints about debt relief companies
After attending an FTC workshop on the debt management and debt settlement plans, I cannot recommend any debt settlement company due to their primary repayment structure and harsh marketing techniques.
Most importantly, congratulations for deciding to make a change and looking for the best solution! Good luck in your new fiscal fitness plan!
Subscribe to:
Posts (Atom)
