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5 Ways to Understand Your Credit Card's Fine Print

Jennifer Openshaw | WeSeed — Fri, 19 Jun 2009 10:02:00 -0700

If you're like a lot of folks, you may have just received a "Dear Valued Customer" letter in the mail from your credit card company. No, you aren't being fired, but it might feel like it.

If you have an affiliate card issued through one of the big banks, it starts like this: "This challenging business climate has led Citibank, the issuer of [XYZ] Gold MasterCard...to notify us...they are making changes to the terms of many Citibank (C) credit card offerings....including the [XYZ] MasterCard product."

Uh-oh — here it comes.

The enclosed material, one of those multipage fine-print deals, starts off with "The Changes." It tells you that the APR, minimum-finance charges, transaction fees for foreign purchases, and "other fees" have changed, and that "supplemental pricing information" appears in "...your new card agreement [which] follows this notice."

Changed from what to what? Unless you have the last version of this document handy, you probably won't know what or how much. Like too many things in personal finance, you don't know what you don't know.

You'll find a lot of these changes these days. First, because of the banking crisis, cash-strapped banks are scrounging for cash wherever they can. Second, new federal legislation that takes effect in 2010 bans universal default, double-cycle billing, and a host of other evils. That's the good news. The bad: This is driving banks to get ahead of the potential $12 billion in lost revenue.

So here's what to do.

*Call an agent*

Pick up the phone immediately and find a live agent willing to explain the changes.

4 More Tips on the Next Page >>

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*Get a comparison*

Have the agent clarify what changed, not just what your card's terms are today or after the change. If your effective APR went from "prime +14.08%" to "prime + 17.99%," have them explain that and also what the resulting rate actually is. For any fees changed, ask them what the new and old fees are. Have them do an example if necessary to illustrate total cost.

*Be persistent*

When they're done, ask if there's anything else you should know. I found out that the "penalty period" for the higher default APR if you miss a payment had increased from 6 months to 12 months. Hard to find in the fine print, and it didn't come with the first explanation.

*Pay your balances in full and on time*

The adverse changes only applied to balances carried and/or a late payment; if you pay in full and on time you won't be affected. You might consider setting up auto-pay to avoid late payments.

*Ask for the good news*

These changes all sound like a takeaway; less benefit, more cost. However, the issuer also offered attractive balance transfers, 5 months for 1.99 percent with a 3 percent transfer fee; 3.99 percent for 10 months. Some issuers may offer other benefits anticipating negative customer reactions from changes in terms.

Protecting what you have and knowing about change are important in managing your credit and your finances in general. And incidentally, the banks and card issuers that do these changes well — raising cash without angering customers — stand to come out ahead.

Jennifer Openshaw, author of The Millionaire Zone, is co-founder and president of WeSeed, whose mission is to enable people to discover the stock market in their everyday lives through their passions, their jobs and the brands they know and love. Her empowering advice, which helps everyday Americans do more with what they have, hasbeen seen on Oprah, Dr. Phil, The Today Show, CNN, CNBC, and Nightline. You can find her on Twitter @jopenshaw or on Facebook.

What to Do if You Can’t Pay Your Bills

Jeffrey Strain | MainStreet.com — Fri, 19 Jun 2009 10:00:00 -0700

Lacking the cash to pay your bills is a bad situation, but avoiding the problem is worse.

If money is scarce and bills are coming due, don’t panic. Gather your statements and a calculator, and go into planning mode. Tackle the crisis as a whole, rather than dealing with issues as they arise, which raises the risk of making poor financial decisions that could affect you for years to come. As you pull yourself together, keep these five crucial steps in mind:

*1. Call the companies you owe*

People faced with a budget shortfall will often try to avoid the companies they owe. They simply stop paying without giving a reason. But you should always call your creditors to alert them of your predicament. They might be willing to negotiate a compromise that will resolve the situation.

*2. Prioritize your bills*

One of the biggest mistakes people make when money is short is to try to be “fair” when paying their bills. If they can only afford to pay one bill, they pay one this month and a different one next month. It might seem like a logical solution, but they could hurt their credit scores and anger the companies they owe.

Some bills are more important than others. Prioritize your creditors and then pay them accordingly. Your mortgage lender should be at the top of the list.

Tips 3 to 5 on the next page >>

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*3. Conserve cash if you can’t pay your mortgage*

When people realize they can’t afford their mortgage, they often put those funds toward other bills. They should save that cash instead.

If you’re falling behind and facing foreclosure, you’ll need enough money to rent a new home. While foreclosures take months to complete, the previous owners usually have to move right away.

*4. Know your rights*

If you can’t make deals with the companies you owe, expect calls from aggressive debt collectors. They’re allowed to call people who owe, but they’re not allowed to threaten debtors with violence, arrest or seizure of property. They’re also prohibited from calling at odd hours or using obscene language. For more on the Fair Debt Collection Practices Act, visit the Federal Trade Commission’s web site.

*5. Don’t ignore the situation*

People caught in a financial crisis face difficult choices, but they need make them. Delaying action will only make the problem worse and leave you with fewer options. Addressing the issue immediately prevents the kind of long-term damage that leads to financial ruin.

7 Common Mistakes of First-Time Homebuyers

Katie McCaskey | Geezeo.com — Mon, 01 Jun 2009 16:55:00 -0700

Buying a home for the first time can be an invigorating yet scary experience. Here are some pitfalls to avoid when you’re buying your first home:

1. Buying Before You’re Ready

Although you may hear people say you’re “throwing your money away on rent,” it isn’t always wise to buy a home. If you make a good salary and have an expanding family, the desire to own a home is natural, but you have to make sure that buying makes good financial sense. Start by evaluating your debt and income. You should cap your spending on a home at no more than three times your household adjusted gross income. Also, you should reduce your income by your debt. This is how much house you can truly afford. Most financial experts also recommend that you have eight to 12 months in liquid assets in order to be totally prepared for homeownership.

Next Page: Not Asking Questions>>

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2. Not Asking Questions

For first-timers, being afraid to come off as too eager or annoying with questions can force you to miss important information. After all, smart people ask questions!

Don’t be afraid to ask for definitions or explanations of everything, even if you think it should be something you know. You never know how much trouble you can get into by not understanding basic home buying terminology.

Next Page: Underestimating Additional Costs>>

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3. Underestimating Additional Costs

Just because you can afford your mortgage payment each month doesn’t mean that you can afford a home. You must also take into consideration closing costs, property taxes, home repairs and unexpected emergencies. In addition to these expenses, you should consider the costs of upkeep, including utilities, lawn care, security systems, pest control and annual maintenance.

Next Page: Overestimating What You Can Afford>>

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4. Overestimating How Much You Can Afford

This goes back to being realistic about your income. Just because you’ve been approved for a loan amount doesn’t mean you can afford it.

Are you going to have enough income to pay it back? Your house payment is just one piece of a bigger financial puzzle. What other major expenses do you have on the horizon? Again, home repairs, HOA fees and property taxes are not small expenses & #0151; make sure you've done the necessary calculations, and are prepared to adjust your lifestyle accordingly.

Next Page: Forgetting About Resale>>

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5. Forgetting About Resale

This is a dangerous pitfall many people are contending with now that the market bubble has burst. They purchased homes that were “unique” or “needed work” but never got around to doing it.

Now, they’re stuck with homes that are worth even less than they paid for them and still are in need of repairs. Which brings us to the next pitfall…

Next Page: Thinking Home Repair Is Simple>>

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6. Thinking Home Repair Is Simple

This is a major no-no. Never assume a repair on a “fixer-upper” will be simple or cheap.

Even if you are doing the labor yourself, the cost of permits and materials alone can set you back an enormous amount of time and money, so be prepared for this.

And be careful. If you embark on a DIY project, but don't really know what you're doing, you could up spending a lot more time, money and effort to get the job done right later on.

Next Page: Forgetting About the Neighborhood>>

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7. Forgetting About the Neighborhood

Be sure to visit any potential home at night as well as during the day. This part is key - you may find it an entirely different world after dark.

Remember, if you buy a home, you are buying the neighborhood also. Keep an eye out for the area’s progress. Is it on the upswing or in the middle of a downturn?

Even if it is on the upturn — an indication of a good investment — will you actually feel comfortable living there for the next 5-10 years?

Financial Tips For Nurses - Income Tax Deductions

Brent McNutt / Articlesbase — Wed, 01 Apr 2009 15:30:00 -0700

In these rough economic times where everyone's pinching pennies and trying to look for ways to save a couple of bucks when they can, filling income tax deductions can be a big help and add up to a significant amount that you can invest in your pension or savings. To fill out an income tax deduction, you need to dig out all your receipts so that you can make a list of all the possible deductions.

Tax laws

There are a lot of potential tax deductions that nurses can make, including depreciating properties. However, tax laws change a lot and what was allowed once may no longer be applicable so it is best to discuss your options with a tax advisor.

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Uniforms and equipment

Some of the things you can consider including in your tax deductions are the cost of uniforms and their cleaning costs as these are expenses that are directly related to your job. Most medical facilities require nurses to wear discount urbane scrubs. Some facilities provide the nurses with their scrubs and periodically charge a cleaning or rental fee. This expense may be deductible. In addition to uniforms, you can also include any outright purchases for any special shoes and accessories that you are required to wear to work. However, if you are simply required to wear tennis shoes and you use these all the time outside work then they may not be eligible for tax deduction. Stethoscopes, clamps, and PDAs may also be considered as deductible.

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License and training fees

Fees that you paid for license renewal or for continuing education may also be deductible; any training, seminar, or course that you have taken (and that you have paid for) to improve your job or advance your nursing career may also qualify for deductions. Books, medical journals, and other documents that contribute to your learning as a nurse may also be considered as deductible.

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Travel expenses

You can also include travel expenses that are related to your job such as going to a nursing seminar but most often these are paid for by the medical facility or sponsoring company and does not come out of the nurse's pocket; it can only be deductible if you paid for it with your own money. Some meals may also qualify but there are a lot of restrictions regarding this and you will have to seek professional advice to sort this out. The IRS scrutinizes travel excursions to foreign clinics and hospitals so be wary of this if you have these kinds of deductions to apply. It can be difficult to put a distinction between personal vacation expenses and educational and business travel expenses but this can be done with a little help from a tax advisor. Often, expenses that are too lavish cannot be categorized as a business expense.

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Moving expenses

If you have moving expenses related to a new job in another state or town, these can be considered deductions but they have to meet a certain criteria. For example, you had to pay for a new nursing license because your spouse was assigned a job in another state and you also had to pay for a trip to go to an interview about a new job before you moved to the state, then these may be deductible.

About the Author:

Brent McNutt enjoys talking about discount urbane scrubs and discount landau scrubs as well as networking with healthcare professionals online.

Article Source: http://www.articlesbase.com/career-management-articles/financial-tips-for-nurses-income-tax-deductions--812895.html

Bailout Bill Extends Tax Breaks for Individuals

Military.com | Kyle Stone — Wed, 01 Apr 2009 15:12:00 -0700

In 2008, legislation was passed to help rescue US markets and the economy. But did you know that these bailout bills also included a bundle of income tax breaks?

The biggest ones are known as "extenders" - popular tax breaks that might seem permanent to most taxpayers, but actually must be renewed every year or two.

Stuffed inside the *Emergency Economic Stabilization Act* are more than 100 tax provisions worth $150 billion in tax benefits. They include:

• Another “patch” to protect middle-class taxpayers from having to pay $61.8 billion in alternative minimum taxes, or AMT, a tax intended for the wealthy.

• Extensions of some popular tax breaks for 2009 and beyond that were scheduled to expire this year, including deductions for classroom teachers and for higher-education tuition.

• Major tax breaks for victims of the 2008 Midwestern storms, floods and tornadoes.

AMT Patch Completed in Time for 2009 Filing Season

Once again Congress has applied a one-year patch on the AMT. That means that millions of middle-class taxpayers will be spared from paying higher tax bills.

The AMT was conceived in 1969 as an alternative tax to ensure that the wealthiest taxpayers, even with their big deductions and loopholes, didn’t avoid paying income taxes. But because the tax was not adjusted for inflation, it has increasingly reached down into the middle class.

Recently Congress has passed a series of one-year fixes, rather than overhaul the AMT itself. Last year, the long delay in passing the patch required the IRS to briefly postpone accepting some 2007 tax returns.

With the AMT patch and other tax changes included in the bailout bill, taxpayers should be able to file as usual starting January 2009.

Popular Tax Breaks Extended For 2009 Tax Returns

• The $250 deduction for teachers who buy out-of-pocket classroom supplies. This deduction is "above-the-line," meaning that teachers and educators can qualify for it even if they don't itemize their deductions. Allowable expenses include classroom supplies, books and software.

• A deduction of $2,000 to $4,000 for eligible taxpayers with higher-education tuition and related fees. This above-the-line deduction allows married couples with incomes of $130,000 or less ($65,000 for individuals) to deduct up to $4,000 in higher education expenses and those couples earning $130,000 to $160,000 ($65,000 to $80,000 for individuals) to deduct up to $2,000.

• The option to deduct state and local sales taxes from federal taxes, instead of state income tax. This can mean big savings for taxpayers who itemize and live in states with no state income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

• Tax-free distributions to charities. IRA owners who have reached age 70½ — and who must therefore begin to withdraw money from their retirement accounts — can contribute up to $100,000 of otherwise taxable payouts directly to charity.

Bill Includes Disaster Relief for 2008 Midwest Storm Victims

The new law provides major tax breaks for victims of the tornadoes, storms and flooding that hit the Midwest this year between May and August, similar to those given to Hurricane Katrina victims. These include tax benefits for demolition and clean up, as well as education and housing.

The bill also offers more limited tax assistance to victims of Hurricane Ike.

Check Back With TurboTax

The new law contains many changes to taxes for individuals and businesses. More details will be added at TurboTax.com as they become available.

_Updated for tax year 2009. Content provided by Kiplinger, courtesy of TurboTax, a registered trademark of Intuit Inc._

Action Now = Tax Savings in April

Military.com and TurboTax — Tue, 13 Jan 2009 12:29:00 -0800

I keep hearing that I should do something or other to improve my tax situation before the year ends. Is there really anything I can do at this point?

Whether you are having a good year, rebounding from recent losses, or still struggling to get off the ground, you may be able to save a bundle on your taxes if you make the right moves before the end of the year.

December 31 is the key date because that's when the IRS pretty much closes the books for 2008. Actions you take before then count when you prepare your 2008 tax return next spring. Come New Year's Day, most money-saving moves you make won't pay off until 2010, when you file your 2009 income tax return. But be careful. Some easy-to-follow advice that you read in the papers, hear on TV or read on the Internet can backfire.

Before you do anything, consider making income tax projections for this year and next (at least). If your situation is complicated enough, you will need a software program like TurboTax... Once you have the numbers, however, you can see how any actions you take will affect your tax bill each year. With that information in hand, these tips can help you hang onto your cash.

* -Defer income
* -Exploit last-minute deductions
* -Beware of the Alternative Minimum Tax
* -Sell loser stocks to offset gains
* -Do a bond swap
* -Don’t buy a tax bill
* -Contribute the maximum to retirement accounts
* -Avoid the kiddie tax
* -Check IRA distributions
* -Watch your flexible spending accounts

1. Defer Income

The theory here is simple: Income you don't receive until after midnight on New Year's Eve isn't taxed until the following year. Even if you'll be in the same tax bracket, you win by putting off the tax bill. It's tough for employees to postpone wage and salary income. You can't ask your employer to hold your December pay until January; nor do you push income into the next year by not cashing your check until then. Income is taxable in the year it is "constructively received." Basically, that means the year you could have had the money if you wanted it. Say, for example, that in December your boss offers you a choice of receiving a Christmas bonus in December or January. Regardless of which you choose, the IRS will expect you to report and pay tax on the income with your return for the year the offer was made. If standard practice in your company is to pay year-end bonuses the following year, however, the income would be taxed in the year you get the check.

If you are self-employed or do freelance or consulting work, you have more leeway. Delaying billings until late December, for example, can assure that you won't receive payment until the next year. If you are pressing for payment on an overdue account, it might make sense to give your client a short breather. If you own rental property, you may want to be generous and suggest to your tenants you wouldn't mind if the December rent check didn't arrive until January. Business considerations certainly come first. But if it's unlikely you have anything to lose by holding off on collections, doing so can push some taxable income — and the tax bill on it — into the following year.

Of course, it only makes sense to defer income if you think you will be in the same or lower tax bracket next year. You don't want to be hit with a bigger tax bill next year if an extra chunk of income could push you into a higher income tax bracket. If that's likely, in fact, you may want to accelerate income into 2008 so you can pay tax on it in a lower bracket sooner, rather than in a higher bracket later.

2. Exploit Last-Minute Deductions

Contributing to charity is a noble way to get a deduction. And you control the timing. Sometimes, though, it's best to put away your checkbook. You can supercharge the tax benefits of your generosity by donating appreciated stock or property rather than cash. As long as you've owned the asset for more than one year, you get a double tax benefit from the donation: You can deduct the market value on the date of the gift and you avoid forever paying capital gains tax on the appreciation that built up while you owned the asset. The charity you're interested in helping can help you with the details.
Note that you must have either a receipt or a canceled check to back up any contribution, regardless of the amount. If you don't have such a written record, the IRS will reject the write-off if the lack of proper record keeping is discovered in an audit. (The old rule that you only had to have a receipt to back up contributions of $250 or more is long gone.)

Accelerating payment of deductible expenses due in January can pull the write-offs into 2008. This could apply to an estimated state income tax bill due January 15, for example, or a property tax bill due early in the next year. Or a doctors or hospital bill. (But speeding up deductions could be a blunder if you're subject to the Alternative Minimum Tax, as discussed below.)

Before you go into high gear racking up deductions, make sure you'll be itemizing for 2008 rather than claiming the standard deduction. Unless the total of your qualifying expenses exceeds $5,450, if single, or $10,900 if you're married and will file a joint return, itemizing would be a mistake. Single filers who pay property taxes, can add up to another $500 to their threshold and joint filers can add up to $1,000 of real estate tax payments to their threshold. If you are on the itemize-or-not borderline, your year-end strategy should focus on bunching. This is the practice of timing expenses to produce lean and fat years. In one year, you cram in as many deductible expenses as possible, using the tactics outlined above. The goal is to surpass the standard-deduction amount and claim a larger write-off. In alternating years, you skimp on deductible expenses to hold them below the standard deduction amount - because you get credit for the full standard deduction regardless of how much you actually spend. In the lean years, year-end plans stress pushing as many deductible expenses as possible into the following fat year when they'll have some value.

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3. Beware of the Alternative Minimum Tax

Sometimes accelerating deductions can cost you money… if you're already in the alternative minimum tax (AMT) or you inadvertently trigger it. Originally designed to make sure wealthy people could not use legal deductions and congressionally created loopholes to drive their tax bill to zero, or close to it, the AMT is now increasingly affecting the middle class.

And that can be a particular problem for people who are not used to figuring out sticky tax issues.

The AMT is figured separately from your regular tax liability — with different rules — and you have to pay whichever tax bill is higher.

This is a year-end issue because certain expenses that are deductible under the regular rules — and therefore it might make sense to accelerate payments — are not deductible in AMT-land. State and local income taxes and property taxes, for example, are not deductible when figuring the AMT. Thus, if you expect to be subject to the AMT in 2008, don’t pay in 2008 the installment that’s due in January of 2009. Also, while medical expenses that exceed 7.5% of your adjusted gross income can be deducted under the regular rules, the threshold is 10% for the AMT. Interest on up to $100,000 of home-equity loan debt is deductible under the regular rules, no matter how you use the money — so you want to be sure you're up to date paying that interest. But under the AMT, home-equity loan interest is only deductible if the money was used to buy or improve your primary or second home.

In recent years, lots of taxpayers fell into the claws of the AMT because of the AMT's special treatment of incentive stock options. Sometimes, though, selling stock acquired via options before the end of the year can get you out of AMT-land.

4. Sell Loser Stocks to Offset Gains

Your portfolio cries out for special attention as the year draws to an end. Since it's up to you when to sell securities — and convert paper gains and losses to real ones — you can mix and match your trades to deliver the tax outcome you desire.
Begin with an outline of exactly where you stand. Draw up a list of your trades so far and the gains or losses on each. Make another list showing your current holdings and the paper gain or loss to date. In other words, if you sold the securities today, what would your profit or loss be? Because the tax law treats different kinds of gains differently, you need to segregate your long-term (for securities owned more than one year) and short-term sales (for securities owned one year or less) so far this year and your open positions that would produce each kind of gain or loss. If you invest in mutual funds, check with the fund about how coming year-end distributions might add to your capital gains for the year.

A strategy for net gain

If you are fortunate enough that your trades so far in 2008 have resulted in a net gain, take a hard look at the securities in your portfolio that show paper losses. Maybe now is the time to unload some of those stocks, using the loss to sop up the gain on other deals and pull down your tax bill. It's not a cockamamie idea to realize losses to save on taxes. After all, you suffered the loss when the securities fell in value. Selling just makes it official… and makes the IRS pick up part of the loss. What if you have a net short-term gain, which will be taxed at your top tax bracket? Taking any kind of loss — short or long term — can offset that gain dollar for dollar. And, although long-term gains get favorable tax treatment, net losses from either category can be deducted in full against other income such as your salary, up to a $3,000 annual maximum write-off. Any net losses beyond the $3,000 write-off are carried over to cut your tax bill in the future.

A strategy for net loss

On the other hand, if your sales so far have produced a net loss, perhaps you should go in for some year-end profit-taking. As noted, only $3,000 of net losses a year can be used to offset income other than capital gains, so if you have a bigger loss, you have an incentive to cash in some of your other profits. Because the loss will offset additional gains dollar for dollar, you can add to your income without adding to your tax bill.

Of course you don't want to let the "tax tail wag the investment dog" by allowing the search for tax savings to lead you into bad investment decisions. Your investment goals must be paramount. But if a particular investment is on the sell-or-hold borderline, perhaps the tax consequences can be decisive.

Last-minute sales

Since it takes several days to settle a trade — between the time you order the sale to the time you get your money — sales during the last few days of the year often straddle year-end. As far as the IRS is concerned, a gain or loss should be reported on the return for the year the trade occurs, regardless of when settlement takes place. That means profits and losses taken as late as the closing bell on New Year's Eve go on the current year's return.

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5. Do a Bond Swap

The point of this year-end maneuver is to lock in a tax loss by selling bonds that have fallen in value (usually because market interest rates have risen) and reinvesting the proceeds in other bonds. Done right, you can maintain the income stream from your bonds. Consider this example: Assume you own $100,000 worth of AA-rated bonds with a 6% coupon and a maturity date in 2016. In November, as you begin your year-end planning, the market price of your bonds has slipped to $84,750. If you sell at that price, you'll have a $15,250 loss. At the same time, assume you can buy $100,000 face value of AAA-rated bonds, with a 7% coupon and a 2015 maturity, for $83,612.
If you sell one set of bonds and buy the other, look what happens: Since they have the same par value and coupon rate, your annual income remains the same: $7,000. Your bond rating increases from AA to AAA. You pull $1,138 out of the investment — the difference between what you got for the old bonds and what you paid for the new ones. And you can claim a $15,250 tax loss. If it offsets gains that otherwise would have been taxed at 20%, you save $3,050.

As with much year-end tax planning, the earlier you begin scouting for promising candidates for swapping, the better. The supply dwindles and competition from other investors heats up as the year draws to an end.

6. Don't Buy a Tax Bill

Mutual funds often pay out most of their capital gains and dividends in December — and despite the market’s dismal performance this year, many funds will still be making payouts this year. Don't think you're getting a windfall if you buy just before the payout. It's a tax mistake. When interest, dividends and profits are paid out, share values fall by the same amount. But the payout is taxable; you're better off buying after the distribution — you get your shares at the lower price and avoid the tax bill on what is essentially a rebate of part of your purchase price. Before you invest, call the fund to ask for the ex-dividend date — and buy after that day.

If you plan to sell shares around year-end, it usually makes sense to do so before the ex-dividend date. When you sell, any accumulated dividends and capital gains are included in the share price and therefore are considered part of your profit. If you've owned the shares more than 12 months, you get 15% long-term capital-gains treatment. When the fund pays out the dividends, the share price drops… and so does your taxable profit when you sell. But the 15% gains are replaced dollar for dollar by the income distribution — part of which could be taxed in your top bracket, as high as 35%.

7. Contribute the Maximum to Retirement Accounts

There may be no better investment than tax-deferred retirement accounts. They can grow to a substantial sum because they compound over time free of taxes. Company-sponsored 401(k) plans may be the best deal because employers often match contributions.

Bump up your 401(k) contribution so that you are putting in the maximum amount of money allowed ($15,500 for 2008). If you think you can't afford it, run the numbers. If you have a traditional 401(k), the fact that pre-tax money goes into your account means your savings go up more than your take-home pay goes down. If you're in the 25% federal tax bracket, for example, stashing an extra $1,000 in your 401(k) cuts take-home pay by just $750, and even less if you live in a state with a state income tax. If your firm offers the new Roth 401(k) option, an extra $1,000 into the account really costs you $1,000 now, because after-tax money goes into a Roth 401(k). But the fact that withdrawals in retirement will be tax free could make this the better home for your increased contributions.

If you are 50 or older by the end of the year, you are eligible to make "catch up" contributions to your 401(k) plan, if your employer's plan allows this provision. If you qualify for the "catch up," you can contribute an extra $5,000 to your 401(k) plan in 2008, for a total of $20,500.

If you're lucky enough to get a year-end bonus, you can steer part of it to your 401(k), if you haven't already maxed out.

Also consider contributing to an IRA for yourself and your spouse. You have until April 15, 2009, to make IRA contributions for 2008, but the sooner you get your money into the tax-shelter, the sooner it earns tax-deferred (in a traditional IRA) or tax-free (in a Roth version) returns. The basic contribution for IRAs (either traditional or Roth or a combination of the two) for 2008 is $5,000, but those 50 and older by year end can contribute an extra $1,000 for a total of $6,000.

Self-employed people should set up Keogh plans by December 31. Once the plan is in place, you can contribute up to $46,000 until the tax filing deadline (including extensions) for your 2008 return. Every dime you contribute can be deducted on your return to cut your tax bill for 2008.

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8. Avoid the Kiddie Tax

The "kiddie tax" rules are a lot tougher this year. These rules were created by Congress to prevent families from shifting the tax bill on investment income from Mom and Dad's high tax bracket to junior's low bracket. The kiddie tax taxes a youngster's investment income above $1,800 at the parents' rate. For 2008, the tax applies until the year a child turns 19. If the child is a full-time student who earns less than half of his or her support, the tax applies until the year the child turns 24. So be careful if you plan to give a child stock to sell to pay college expenses. If the gain is too large and the child’s unearned income exceeds $1,800, you’ll end up paying tax at 15 percent on the gain, rather than the zero percent rate that is applicable for most children.

9. Check IRA Distributions

If you have reached age 70 1/2, remember that the law demands that payouts be made from traditional IRAs after the owner reaches that age. (If your parents turned 70 ½ this year, make sure they know this rule.) Failing to take out enough triggers one of the most draconian of all IRS penalties: The government will relieve you of 50 percent of the amount that should have come out of the account but did not. How much you need to withdraw is based on your age, your life expectancy and the amount in the account at the beginning of the year.

In the year you reach 70 1/2 — that is, the year of your 70th birthday if you were born before July 1, or the year you turn 71 if your birthday is after June 30 — you have until the following April 1 to take your first mandatory IRA distribution. After that, annual withdrawals must be made by December 31 to avoid the penalty.
If you make a withdrawal at year end, consider asking your IRA sponsor to withhold tax from the payment. Withholding is voluntary, and you set the amount, but opting for withholding could let you avoid the hassle of making quarterly estimated tax payments.
Note this: One of the advantages of Roth IRAs is that the original owner is never required to withdraw money from the accounts. The required minimum distributions apply to traditional IRAs.

10. Watch Your Flexible Spending Accounts

Flexible spending accounts, also called flex plans, are fringe benefits offered by many companies that let employees steer part of their pay into a special account which they can then tap to pay child-care or medical bills. The advantage is that money that goes into the account avoids both income and Social Security taxes. By avoiding a 25% federal income tax bracket plus the 7.65% Social Security tax, $1,000 funneled through a flex plan can pay bills it would take $1,554 of salary to pay. The catch is the notorious "use it or lose it" rule. You have to decide at the beginning of the year how much to contribute to the plan and, if you don't use it all by the end of the year, you forfeit the excess.

That rule used to create a stampede to drug stores, dentists and optometrists each December as employees with money to spend rushed to use it before they forfeited it. Now, however, the IRS allows companies to build in a two and one half month grace period. That allows employees to spend 2008 set-aside money, for example, as late as March 16, 2009 (March 15 falls on a Sunday in 2009). But you get this break only if your company has adopted the grace period. Make sure you understand your firm's rules and, if you've got leftover money that has to be spent by December 31, get crackin'.

Another important year-end point about flex plans. If this is open season at your company — when you must decide how much to set aside for 2009 — be aggressive. This is a very powerful tax-saver… so powerful, in fact, that you can actually forfeit 25% or more of the money and still come out ahead. You don't want to forfeit a dime, of course, so don't go overboard. But don't cheat yourself by being unduly afraid of the use-it-or-lose-it rule. After all, you can always make that trip to the drug store, dentist or optometrist.

Updated for tax year 2008. Content provided by Kiplinger, courtesy of TurboTax, a registered trademark of Intuit Inc

New Credit Card Protections for Consumers

Military.com Finance Center — Fri, 09 Jan 2009 18:03:00 -0800

WASHINGTON, Dec. 18 /PRNewswire-USNewswire/ - New rules adopted by the Office of Thrift Supervision today will help protect consumers from certain abusive credit card lending practices that can result in excessive fees and interest rate charges. The rules were developed in conjunction with the Federal Reserve Board and National Credit Union Administration, which are expected to adopt the same regulations later today. The new regulations will go into effect on July 1, 2010.

"Millions of families have been stung by unfair credit card practices that trap them in debt and make it harder to make ends meet," said Gail Hillebrand, Consumers Union Financial Services Campaign Manager. "When these rules finally go into effect, they will help protect consumers from being gouged by credit card companies and make it easier for families to manage their finances during these tough economic times." While praising the new protections, Consumers Union criticized the 18 month delay before consumers finally get relief.

Among other things, the new rules will protect consumers by:

Prohibiting credit card companies from raising interest rates on money already borrowed unless the money was borrowed on a variable rate card, or the minimum payment is made more than 30 days late.

Protecting new cardholders by prohibiting interest rate hikes in the first year of an account. The only way interest rates can go up in the first year is if the card issuer disclosed a future rate hike at a preset time when the account was opened.

Imposing a new rule that zero interest means zero, ending the practice of so-called deferred interest.

Prohibiting credit card companies from charging a late fee if the bill was mailed to the consumer less than 21 days before the due date.

Requiring payments to be allocated fairly among credit card balances with different interest rates. Payments must be allocated to the highest interest balance or pro rata.

Prohibiting credit card companies from charging interest on amounts already repaid, through two cycle billing.

Restricting the financing of fees on credit cards where the fees or deposits use up the majority of the available credit on the account.

Over a third of all credit card users were charged late fees in 2005, according to a report by the Government Accountability Office (GAO). The GAO also found that top six credit card issuers collected $7.4 billion in penalty fees during that year.

On top of penalty fees, the vast majority of credit card contracts allow issuers to increase the interest rate for consumers who pay their bill late, even by a few hours. A low interest rate on a credit card can climb to 30 percent or more after a single late payment or if consumers fall behind on payments to other creditors. These penalty interest rates apply not only to future purchases but also the consumer's existing balance.

The new regulations were adopted after the Federal Reserve Board received a flood of comments from approximately 66,000 people who weighed in on the proposal - mostly in support of tougher protections for consumers. While the new rules will provide important new protections, more safeguards are needed to address other lending practices that can make it difficult for consumers to manage their credit. Other reforms needed to address some of the abusive practices that hurt consumers are:

* • Limiting the amount of "penalty" interest rates, and how long card companies can keep you at these extremely high rates.
* • Prohibiting fees for paying a credit card by phone or Internet.
* • Prohibiting account-opening fees no more than 10 percent of the credit limit.
* • Banning multiple over-limit fees during a single billing cycle.
* • Ending all over-limit fees when it's the card company's fault. A consumer shouldn't be penalized when the credit card company approves a transaction, imposes a credit hold, or charges fees that put the consumer over the credit limit.

"The new credit card regulations adopted today will help restore some basic fairness to the credit card marketplace, but there is more work to do to protect consumers," said Pam Banks, Policy Counsel for Consumers Union. "It's time to end excessive credit card interest rates and fees that undermine the financial well being of millions of American families."

The three federal agencies decided to put off action on a proposed set of new rules regarding the automatic enrollment of consumers in overdraft loan programs and re-issued a new proposed rule for comment. These programs cost consumers $17.5 billion in fees annually, for $15.8 billion in loans. Consumer groups had criticized the overdraft proposal as too weak. Consumers Union has called on federal regulators to require opt-in before consumers can be charged overdraft fees.

Make Major-League Financial Plays with Minor Hits

Paul Wilcox / Monster — Fri, 09 Jan 2009 18:02:00 -0800

Baseball fans love to see what a big hitter might unleash at bat. Babe Ruth, the Great Bambino, won an astounding seven World Series rings with the Boston Red Sox and New York Yankees. He had a career slugging percentage of .690. The home-run race in 1998 between Mark McGwire and Sammy Sosa caught the attention of every kid with grass-stained knees. So you might ask, what makes a world-class hitter? Ted Williams said that the key “was the right swing, studying the pitchers, studying the situations, waiting to get your pitch, and just plain working like hell at it.”

Focus, strategy and discipline are the same fundamentals behind growing your wealth. And it all starts with getting to know the best money coach on the field: You. You’re the only one who can prioritize your goals, build the playbook that works for you and, ultimately, deliver the hits.

First: Think About What You Want

The temptation, like mighty Casey, is to put everything you’ve got behind the swing and let it rip. But sadly, most of us don’t make the connection, and we end up out of the game before we know it. Before you get up to bat, know what you want to do. Is it to earn enough money for retirement, go back to school or buy a house? Write it down. You are 10 times more likely to accomplish a goal if you write it down than if you don’t, according to Shad Helmstetter in Who Are You Really and What Do You Want? Also, defining your goal will help determine your timeline and the options that make the most sense.

Second: Determine Your Strategy

With your goal in mind, plan how you’re going to save the money you need. If your goal is to put away $1,300 so you can head to Florida with your buddies for spring training next year, you’re probably going to want to put the cash you set aside into a stable, interest-bearing account like a money market. If it’s to save for retirement 30 years from now, you’ll want to consider a more aggressive investment of stocks and bonds. Scan the field, process the information and make the call.

Third: Put Your Plan and Strategy into Action

Like any good hitter, you know what you want to do at bat and where to hit the ball. Now you have to summon the skill and strength to do it. If you’ve sworn off coffee and a muffin at Starbucks every morning to save the extra $110 you need each month to get to Fort Myers, you need to summon a dose of personal discipline. But each day you do it will make the next day that much easier.

Last: Score the Run

Board that plane to the Sunshine State and say good-bye to a week of cold weather and endless March Madness hype. Experiencing the reward of your achievement will give you the energy you need to accomplish your next set of goals. Like any batter on a hot streak, it takes only one hit to start it off.

[Paul Wilcox is at work on The Sports Guy’s Guide to Money: Winning Strategies for Your Hard-Earned Cash. He previously published a magazine on careers and money for young professionals.]

Fiscally Unfit

John Rossheim / Monster — Fri, 09 Jan 2009 18:02:00 -0800

How well are America's workers prepared for financial uncertainties and for the eventuality of retirement? In their own estimation, millions of employees haven't found a secure path to a bright future, whether that future begins in a retirement 40 years from now or at the end of the month, when the bills come due.

Those are the disturbing findings of a recent survey commissioned by insurer MetLife. To put the results in perspective, we polled personal finance experts across the country.

Workers Worry About (But Don't Prepare For) Illness, Disability and Retirement

The first finding of the MetLife study: Although American workers worry about how they'll pay bills when they're sick or in retirement, they don't do enough about it. Some 71 percent of respondents said they're "extremely concerned" about having enough money to pay bills during a sudden income loss, but only 60 percent of full-time workers have disability insurance.

Even those who do act to protect their future don't always approach the task logically. "Workers are trying to decide which mutual fund will be the next winner in their 401k without even having a real sense of how much money they are trying to accumulate for retirement," says Greg McGraime, a vice president and financial planner with JPMorgan Chase in New York City.

Employees Don't Save and Invest Enough for Retirement

Many Americans feel they're losing the retirement-planning game. Nearly half (45 percent) of survey respondents say they're behind schedule in their retirement savings, and three out of 10 full-time 21- to 30-year-old workers haven't even begun to stash something away.

"I see it as good news, in that it sends a message," says Walt Woerheide, a professor of investments at American College in Bryn Mawr, Pennsylvania. "People can be alerted while there's still time to make a decision about what standard of living they choose for today versus during retirement."

Some employers spur their workers to save by automatically enrolling new hires in the company 401k plan (individuals can opt out) or offering retirement accounts packaged with investment management services.

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"With a managed 401k account, the employee hands over management of their retirement money to a service, which periodically rebalances the portfolio" as might be required by a new salary, advancing age or changing market conditions, says Don Bartolai, a principal in the Chicago office of Mellon Human Resources and Investor Solutions. The employee pays a substantial annual fee for these added services.

Voluntary Benefits Seen as a Good Thing

If workers can't get their employers to pay for financial protection like disability and life insurance, they can hope their company offers these as voluntary (read: employee-paid) benefits. In the survey, 62 percent of respondents say they like the convenience of paying for these benefits through payroll deduction.

There are other advantages to voluntary benefits. "When an employer can deliver a large group of employees to a service provider, it reduces the costs," Woerheide says. Workers also gain by simply being presented with a menu of financial services they might not otherwise consider.

Workers Say They Lack Access to Financial Education

A mere 40 percent of workers say they understand which company benefits meet their individual needs. This flies in the face of efforts some companies are making to demonstrate the value of benefits to employees.

"Through their HR departments or program vendors, employers these days are making a lot more tools available to employees to increase appreciation of what the programs are," says Pat Kendall, senior vice president of Diversified Investment Advisors in Newton, Massachusetts.

Some experts say most Americans simply don't understand the fundamentals of personal finance. "Unfortunately, our education system doesn't provide us with all the skills," says Gary Previts, a professor in the management school at Case Western Reserve University in Cleveland.

If you want to learn more, consider taking a course in personal financial planning at a community college, Previts advises. But always ask about the teacher's institutional affiliations; many financial planners teach classes to drum up business, and some may not give objective information, because they're beholden to their employers, and to their own sales quotas.

Financial Doors Can Open for College Applicants that Plan Ahead

G. Jeffrey MacDonald | USA Today — Fri, 09 Jan 2009 18:02:00 -0800

Ripple effects of a dour economy are making this college application season as nerve-wracking for some admissions officers as it is for applicants. But for savvy families, there may be new opportunities.

"A lot of schools are going to be concerned about meeting their requisite enrollment thresholds," says Barmak Nassirian of the American Association of College Registrars and Admissions Officers. "They represent a second chance for some applicants who might not have gotten in a year ago but now have a very realistic chance — if they can swing the cash or borrow or somehow finance the package."

"Best Value College for 2009":http://www.theapple.com/news/articles/7506-best-value-colleges-for-2009

Navigating this new landscape requires an updated road map, consultants say. Public colleges with modest price tags probably will become more selective, while lesser-known private colleges may admit more students. To score a great education at an affordable price, students need to do a little extra research, think creatively and be assertive.

"Don't be put off by the scare news," says Lora Block, an independent college planner in Bennington, Vt. "It's still unpredictable out there. The main tactic should be to spread your chances and have a wide range of choices that all are good matches."

Dozens of private colleges are adding incentives to attract students for fall 2009. Lawrence Technical University in Southfield, Mich., plans to offer 50% off tuition for 400 laid-off workers or their dependent children. Students accepted to the UCLA or UC-Santa Barbara may attend California Lutheran University in Thousand Oaks for the same price (average annual savings: $16,000).

New initiatives, including tuition freezes at several schools, have expanded the realm of what consultants call "financial safety schools," where a student is likely to get accepted and can afford it.

For many students, financial safeties consist of public universities or community colleges, where costs are subsidized and admission is sometimes guaranteed. But costs can climb if classes fill up and turned-away students are forced to delay degrees.

h4. Apply early, experts say

To secure a spot and avert delays, applicants to public institutions should apply as early as possible and be early in accepting offers of admission and registering for classes, says Daniel Hurley of the American Association of State Colleges and Universities. "Even though a college might not have a formal policy (of capping enrollment), it simply might run out of physical capacity," he says.

John Harding of Murrieta, Calif., applied to Princeton and Harvard, in part because both have beefed up financial aid for middle-class families. He also has applied to the University of Southern California, which awards a lot of merit scholarships, and he feels he's a strong candidate to get one because he has good grades and plays the violin.

That strategy has merit, says Philadelphia educational planner Dodge Johnson: "You're more likely to get money at schools where you will be a catch."

Ben Greenslade of Portsmouth, N.H., hopes anxiety about filling seats at small private colleges might work in his favor. He's applying to Goucher College in Baltimore in part because he likes its international relations program. Also: his mother believes the school, where women outnumber men, might woo her son with scholarship money.

Don't assume you'll always pay less in-state. A Vermont resident would pay 27% less in tuition at the University of Hawaii-Manoa ($8,304) than at the University of Vermont ($11,408).

h4. Start locally to save money

Starting at community college is the plan for high school senior Valerie Kozdra of Groveland, Mass. She's taking two online courses this spring at Northern Essex Community College in Haverhill, Mass. She'll finish her associate's degree, then transfer to a state college. "All I have to do is keep my grades up and I'll be automatically accepted," she says. Tuition is cut by a third as a merit reward.

To reduce overall college costs, students should submit scholarship and financial aid applications in January to get an early shot at available money, consultants say. A common mistake: waiting until tax returns are completed, then being told resources are already gone. Tax return information can be updated later, Block says.

5 Big Bills You Can Cut Fast

By Leslie Geary / Bankrate.com for The Daily News — Fri, 09 Jan 2009 18:01:00 -0800

As the economy weakens and prices soar on everything from gas to groceries, Americans are looking for quick ways to cut their expenses and hold on to more cash.

Fortunately there are plenty of ways to chop your spending without a lot of time or hassle. Some of these cuts will save you just a few dollars, while others can net even bigger savings.

Add them all up, and you could trim your annual expenses by hundreds of dollars or more.

Following are five areas where you can cut your bills fast. These tips can help you to weather the current economic downturn and continue to thrive once happier days return.

Quick cuts

Taking simple steps can help you trim expenses in these five areas. Lowering your bills will make it easier to weather tough economic times.

5 areas to slash your bills

1. Energy and gas savings

2. Food and groceries

3. Banking and credit

4. Taxes

5. Car insurance

h3. Energy and gas savings

Energy costs are boiling over. The U.S. Department of Energy estimates Americans will typically spend $2,350 on home energy costs in 2008, up from $2,100 a year ago.

Moreover, households are slated to spend $3,950 on gas for the year, up from $3,000 in 2007.

Fortunately, some relatively cheap fixes are available, and many begin in the home.

For example, weatherstripping, caulking doors or sealing windows can keep out cold and heat, lowering your heating and cooling bills.

"Every little step helps, and if you can't afford new windows or storm windows, plastic film kits aren't a bad alternative," says Ronnie Kweller, deputy director of communications at the Alliance to Save Energy.

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Other tips for cutting home energy costs include:

Installing a programmable thermostat. These handy gadgets let you turn up the heat or air conditioning just before you get home rather than paying to keep your empty dwelling comfy all day. Households that use these thermostats typically save $180 per year, far more than the roughly $100 it costs to purchase the thermostat, according to the Department of Environmental Protection.

Switching to energy-efficient light bulbs. Yes, they do cost more than traditional bulbs, but they wind up saving money because they use two-thirds less energy and can last 10 times longer, Kweller says. That computes to savings of $50 per bulb.

Being efficient. Clean and change furnace air filters and wrap your water heater. These moves help your appliances run more efficiently and cheaply. Seal ducts on air and heating systems to improve efficiency by as much as 20 percent, according to the Alliance to Save Energy.

Lower the water heater temperature to 130 degrees Fahrenheit. That's hot enough to kill germs and safely wash dishes. Do laundry in cold water.

Meanwhile, you can also trim vehicle gas costs with the following steps:

Adopt good driving habits. You'll save a bundle if you stop speeding. If you typically race around at 70 mph instead of 55 mph, you're lowering your vehicle's fuel efficiency by as much as 17 percent, according to the American Council for an Energy-Efficient Economy, or ACEEE.

Pump up your tires. Tires lose about a pound of pressure a month, and if you drive with tires that are 3 pounds underinflated, your vehicle's fuel economy drops by 1 percent, according to the ACEEE.

Clean your car. If your car resembles a junk yard on wheels, clean it out. If you're hauling around 100 extra pounds, for example, you're lowering fuel efficiency by up to 2 percent, according to the ACEEE.

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h3. Food and groceries

The average American household spends an average of $6,111 per year on food, according to the U.S. Department of Labor's Consumer Expenditure Survey. But with prices rising quickly, food is taking an increasingly bigger bite out of our budgets.

How can you save on something so fundamental? It's actually not difficult. A family of four can slash $240 from its monthly food budget by switching from pricey meals to lower-cost options, according to the U.S. Department of Agriculture.

The key is to embrace culinary change rather than fearing it.

"We can't be doing the same thing the same old way," says Sheryl Garrett, author of the "Personal Finance Workbook for Dummies."

Store shelves are crammed with relatively expensive prepackaged convenience foods designed to save time, Garrett says.

"But what we need to do is try to remember two simple words: whole foods," she says. "Instead of buying prepared, frozen, twice-baked potatoes, buy a real live whole potato. It costs a fraction of the price, pennies per pound. And it probably even tastes better."

Here are some ideas for saving at the supermarket:

Buy food less frequently. If you're running to the market before dinner each night, it's time to quit. Instead, think about what you want to eat for the next few days, and buy groceries at once. You'll save money, time and gas.

Use a shopping list. A full two-thirds of purchases at grocery stores are impulse buys, according to Paco Underhill, CEO and founder of Envirosell, a market research and consulting company. To reduce that temptation, make a shopping list and stick to it.

Pay with cash. You'll be more likely to stick to your shopping list.

Stick to the perimeters of the supermarket. That's where you'll find all the unprocessed basics you need, dairy products, meats, bread, while avoiding inner aisles brimming with tempting, processed foods that drain budgets.

Buy in season. Craving strawberries in January? You'll pay top dollar. With that in mind, make it a habit to eat what is in season locally. Guard against cravings by canning or freezing fresh items so you can enjoy those berries any time of year.

Cook cheaper meals. Instead of serving huge portions of meat, use it to supplement larger portions of rice or pasta in affordable casseroles. For other low-cost ideas, check out the U.S. Department of Agriculture's "Recipes and Tips for Healthy, Thrifty Meals."

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h3. Banking and credit

Individuals pay banks, brokerages, credit card companies and other vendors a slew of extra fees, charges, interest and penalties.

One recent study by the Government Accountability Office and the Federal Deposit Insurance Corp., or FDIC, found that Americans spend $36 billion annually on bank fees alone. That's up from $24.4 billion in 2000.

Meanwhile, Consumer Reports estimates Americans spend $216 billion a year on fees for personal financial services, from banking to mortgages.

Don't just take these fees and rate hikes lying down. For example, if your lender hikes your credit card rate, call to have it lowered. You've got a 50-50 chance of getting resolution, according to a consumer study by U.S. Public Interest Research Groups, or U.S. PIRG.

"Credit card companies will routinely raise your rates to see if they can get away with it, so you have to be vigilant," says Ed Mierzwinski, consumer program director at U.S. PIRG.

When it comes to some fees, you may be your own worst enemy. For example, spend more than your credit limit these days and you'll be allowed to shop. The catch: You'll owe an over-limit fee, which typically runs $39.

"Keep a healthy cushion (between) what you're allowed to spend and what you (actually) spend," says Jim Campen, executive director of Americans for Fairness in Lending.

Other tips for keep your banking and borrowing costs low:

Comparison shop. Switch banks, credit cards, even brokerage accounts that drain your finances by switching to competitors offering better deals. It's easy to find the best offers using Bankrate's Compare rates tool.

Read the fine print. Pay attention to requirements that could wind up costing a bundle. A free checking account may sound appealing, but is there a minimum balance requirement? If you can't meet it, you may wind up paying fees that make that free deal pricier than you thought.

Watch out for ATMs. Whenever possible, pull cash out of your ATM in larger amounts to reduce repeat visits to the machine. According to Bankrate's 2007 survey of ATM fees, the average ATM fee for nonaccount holders was $1.78. However, some banks charge more. Tack on the foreign-use penalty your own bank levies when you use a competitor's ATM and you could well be spending nearly $5, or 25 percent of that $20 you grabbed on the go.

Chuck the debit card. Putting away the debit card lowers the odds of triggering courtesy overdraft protection fees. They kick in when you use a debit card and make purchases that exceed your account balance. Overdraft fees now average $34 per transaction, or $17.5 billion annually in the United States, according to the Center for Responsible Lending.

Pay on time/beware of default rates. Miss a payment deadline and chances are you'll wind up paying hefty fines. In fact, if you're late on one bill with any creditor, your other creditors can legally use that tardy track record to jack up interest rate they charge you. When you get bills, mark their due date on a calendar or set up automatic payments so you don't miss deadlines.

Scrutinize statements. More than two-thirds of lenders, 77 percent, say they can change rates "at any time, for any reason," according to Consumer Action. So even if you pay on time each month and think you're an ideal customer, study your statement and look at the fees, your interest and other unexpected changes that could cost a bundle.

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h3. Taxes

If you're like most people, you probably don't pay much attention to taxes until April 15 rolls around. But taxes affect us daily, whether we're working, shopping or saving for important milestones like retirement.

As it turns out, fall is the perfect time to trim taxes. This year, 15 states have already or soon will sponsor reprieves from sales taxes as part of back-to-school shopping. These tax holidays vary, but typically are scheduled anytime from just before the school year to about mid-October, says Craig Shearman, vice president of government affairs at National Retail Federation.

"That could mean the difference between buying new back-to-school clothes or making do with last year's wardrobe for some families," says Shearman.

Other ways to reduce your taxes include:

Snag the first-time homebuyer credit. Individuals who buy a dwelling from April 9, 2008, to July 1, 2009, and who haven't had owned a primary residence for the previous three years can claim a new credit that's worth 10 percent of a dwelling's purchase price, or up to $7,500. The break phases out for joint tax filers with incomes of $150,000 (or $75,000 for individuals). It's important to note that these credits are structured more like interest-free loans than true tax breaks.

Claim the 2008 homeowner's tax break. Individuals who own their home outright or who've had a mortgage so long they're mostly paying principal rather than interest may no longer qualify to itemize on their returns. Now there's some temporary relief for them. This year, they can take $500 (or $1,000 for joint filers) of state and local property taxes as an addition to their standard deduction on their 2008 federal income tax return.

Grab breaks for low-income earners. One out of four eligible taxpayers fails to claim the earned-income tax credit, or EITC, worth as much as $4,716 a year depending on someone's earnings, marriage status and whether they have children or other dependents. If you qualified for but didn't claim the EITC, file an amended tax return for any previous year back to 2005.

For more tips on trimming your tax bill, read the Bankrate feature "10 often-overlooked tax breaks."

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h3. Car insurance

Americans typically spend $820.91 to insure one vehicle per year, but in many parts of the country, premiums can reach "thousands of dollars," according to the latest study by National Association of Insurance Commissioners. Yet there's still much you can do to lower rates.

Boost your deductible. That's the amount you pay out of pocket before insurance kicks in. Raise yours from $250 to $500, and you'll shave money from your insurance premium because you're essentially agreeing to take on more financial burden in the event of a mishap.

Trim insurance for that old clunker. If your wheels are worth little, consider getting rid of collision coverage, which pays for repairs.

Snag low-mileage discounts. Have you cut back on your driving to save gas? Let your insurer know. If you don't drive much (less than 7,500 miles a year), you can usually get rates lowered.

Bundle your policies. Buy more than one policy from the same insurer and you may well get a break of 5 percent to 15 percent, according to Insurance Information Institute. So try keeping your auto, homeowners and other insurance policies with one company.

Make age-appropriate auto decisions. A driver's age may impact insurance rates. So, restrict your teen to driving the family's oldest car. Then, let the insurance company know your son or daughter has no access to more valuable cars you own. Older drivers may also pay higher rates. Seniors ages 55 to 70 may qualify for price breaks if they take a safe-driving course, such as the 55Alive program that's run by the Automobile Association of America and the National Institute of Highway Safety.

Five Habits of Millionaires

Barbara Reinhold | Monster.com — Fri, 09 Jan 2009 18:00:00 -0800

According to a study of college students at the Ernst & Young International Intern Leadership Conference in Orlando, Florida, 59 percent of these young leaders expect to be millionaires within their lifetime. What's more, 5 percent of them expect to hit the million-dollar mark while in their 20s.

And the super-rich are a growing group. The top 0.1 percent of the population's average income was $3 million in 2002, up two and a half times the $1.2 million, adjusted for inflation, that group reported in 1980.

h4. *Earned Money vs. Easy Money*

Easy money usually comes from inheritance or luck, such as winning the lottery. The track record of people who get their money through the lottery or other windfalls is usually very different from those who created their wealth themselves or who planned for an expected inheritance. Lottery winners are often a sorry lot; more than 90 percent use up their winnings within 10 years -- some go through their money in weeks or months.

But there are some consistent patterns among those people who earn or plan to inherit their money, and these five strategies may be worth emulating.

h4. *1. Avoid the Earn-to-Spend Mentality*

Michael LeBoeuf, author of The Millionaire in You, points out that to increase wealth, it's essential to emulate millionaires who view money as something to save and invest, rather than income to spend. Many wealthy people live quite simply, he points out, choosing less pretentious homes than they could theoretically afford and opting for financial independence over material showmanship.

h4. *2. Focus*

LeBoeuf also counsels resisting the impulse to be scattered in your efforts and interests: "Winners focus; losers spray." And goals that are clearly written down are easier to keep in focus.

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h4. *3. Do Whatever Is Necessary to Meet Your Goal*

People who earn their millions are able not only to focus but persevere in the pursuit of their goals. One single mom entrepreneur, Melissa Clark-Reynolds, started her first business, a health and safety consultancy, when she had a young son. En route to her goal of being a millionaire by age 35, Clarke-Reynolds and her son ate lots of pizza, did homework late at night and often slept at the office. She is now a chief executive mentor for Empower New Zealand, a global business consulting firm headquartered in London.

h4. *4. Take Calculated Risks*

You have to take strategic risks to earn and grow money. And a little rebelliousness seems to help too. One interesting study found a majority of male millionaire entrepreneurs had been in trouble with school authorities or the police during their adolescence.

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h4. *5. Be Generous*

And why doesn't it surprise us that millionaires are often very generous? Sometimes it's for the tax breaks, obviously, but often it's not. One Jewish Swiss millionaire, for instance, flew to Israel to give $5,000 in cash to a waiter at a Jerusalem café who foiled a Palestinian suicide bombing. Among the most generous of millionaires are those from North America, who are, according to a Merrill Lynch Cap-Gemini report, two to five times more likely to give to causes they value than their European counterparts.

These five habits are a pretty good prescription for living happily even if you're not a millionaire.

But LeBoeuf insists it's not so unusual to be a millionaire. As of 2004, there were 8.2 million households with a net worth of more than $1 million. And are the folks in those households happy? Yes, says professor Andrew Oswald of the University of Warwick in the UK. After studying more than 9,000 people over eight years, Oswald concluded that people who come into money are happier. The happiest among them, he says, seem to be "highly educated, well-paid women who have jobs."

And how much money does the professor say it takes to be happy? "About $1 million, give or take a little."

401(k)s: Employer Contributions Get the Ax

Amy Feldman / Business Week — Fri, 09 Jan 2009 18:00:00 -0800

When times are tough, companies find cost savings wherever they can. Now some employers are doing away with the 401(k) match, a benefit once considered almost sacred.

The list of companies that have suspended or cut back corporate matching in their defined-contribution retirement plans this year is not trivial. It includes General Motors (GM), Frontier Airlines (FRNTQ), car-rental company Dollar Thrifty Automotive (DTG), broadcaster Entercom Communications (ETM), newspaper chain Lee Enterprises (LEE), and real estate brokerage Cushman & Wakefield. A recent study by benefits consultant Watson Wyatt (WW) of 248 U.S. companies found that 2% had already reduced or eliminated the match and another 4% expected to do so within the next 12 months. The national number could creep higher, however, if the economy continues to worsen. "It depends how long this goes on," says Pamela Hess, director of retirement research at benefits consultant Hewitt Associates (HEW). "In another year, you could have another 3% to 5% [cutting back on matches], or you could have 10%."

Lesser of Two Evils

The psychological impact of these cuts may be almost as damaging as the financial harm. Coming at a time when many Americans are struggling to save for retirement and face shrunken stock portfolios, the cutbacks make the goal of a secure retirement even more elusive. Yet for all the unhappiness over slashed 401(k)s, employees understand the alternative of increased layoffs may be worse, says Robyn Credico, Watson Wyatt's national director of defined-contribution plans. In general, they "would rather have their jobs and a reduced match."

Workers who have survived earlier downturns may have a sense of déjà vu. From 2001 to 2003, for example, GM, Charles Schwab (SCHW), Ford Motor (F), CMS Energy (CMS), Great Northern Paper, and at least 10 others reduced or eliminated the match, according to a study by the Center for Retirement Reserach at Boston College. And even though most companies reinstated the benefit a few years later as business improved, the match continues to be an easy target. It typically amounts to 50% of employees' contributions on up to 6% of their annual salaries. That means the average company spends nearly 2% of employee pay on this one benefit, according to research by fund company Vanguard. The vast majority of companies that offer 401(k)s include the benefit, and "they can save millions by cutting [it]," says Hewitt's Hess. "It's usually one of a company's biggest expenditures after wages and health care."

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Even if the benefit eventually is restored, that won't be enough to ease retirement woes for many employees. Goodyear Tire & Rubber (GT) cut its match in 2003; it now plans to reinstate it in January 2009. In the intervening years, the company froze its pension, so the return of the match will not bring retirement benefits back to the earlier level. "The company is moving away from a pension plan and we are enhancing our 401(k) plan," explains spokesman Scott Baughman.

New-Employee Enrollment Could Drop

The trend away from pensions—many of which are now underfunded—leaves retiring employees increasingly reliant on their 401(k)s. In the Watson Wyatt study, for example, 11% of companies said they had frozen or closed their pension plans this year, and another 4% said they expected to do so in the next 12 months. That throws even greater weight on matching plans as part of the nest egg.

What does this trend signify for employee savings behavior? Academic studies show that the existence of a 401(k) match increases contribution rates among employees, but the research doesn't address what happens when a match is cut. Brigitte Madrian, a professor of public policy and corporate management at Harvard University, has studied 401(k) design and behavior. She thinks the end result will be a "small fall" in 401(k) participation as fewer new employees sign up and existing employees stick with the status quo, neither pulling money out of the plan nor adding to contributions. Says Madrian: "You will find the biggest effect on new employees walking in the door. Employees who were already signed on for the plan aren't going to drop out because there's not a match."

Laid Off? Six Steps to Manage Your Finances

Lee Miller | Monster Contributing Writer — Fri, 09 Jan 2009 17:59:00 -0800

No one is immune from layoffs. Whether you're 22 or 52, odds are that sooner or later you will find yourself, often through no fault of your own, out of work. So it makes sense to plan ahead. Most financial advisers suggest saving the equivalent of six months' salary to tide you over if you lose your job. You will probably need more, especially if you have a family and are the primary wage earner.

However, most of us do not think about that possibility until we are actually laid off. So what should you do if you haven't prepared?

Here are six tips:

Determine How You Are Spending Your Money

When times are good, most people do not think about how they spend money. We know how much the mortgage or rent and monthly car payments are, but we don't pay attention to daily spending. How much do we spend going out to eat? What is our weekly grocery bill? What about utilities and insurance? Being more aware of how you spend your money will cause you to spend it more carefully.

See Where You Can Cut Back

If you're facing a layoff, you need to come up with a plan for cutting expenses. Develop a budget that eliminates most unnecessary expenses, but don't completely cut entertainment. You need to maintain your spirits and keep up with contacts. However, you can cut back on those expenses substantially. Locate inexpensive places to go out to eat and drink. Go to movies instead of plays, and look for discount admissions. Don't give up the gym but consider joining a less expensive one, unless you use the gym to make business contacts. Turn your thermostat down in the winter and up in summer.

Avoid Major Purchases

This is no time to buy that new car or DVD player. If you are already in debt, particularly credit card debt, you may want to consolidate your loans into a single monthly payment with a lower interest rate. If you own a home, consider a low-interest home equity loan.

Negotiate a Severance Package

When you're let go, you will probably be offered some severance. You should have negotiated that severance when you were hired, because that is when you have the most bargaining power. But you can still try to negotiate a better package at the time you are terminated.

Take Advantage of Available Programs

A number of governmental programs are available to help you in the event of a layoff - take advantage of them. You will most likely be eligible for unemployment insurance. In some states, you may also be eligible for training, loans or unemployment while you set up your own business.

Find Part-Time Work

You will be able to stretch your savings if you have additional income. Consider part-time work while you look for a job. While it would be best if you could find temporary or part-time work in your field, your hobbies and other interests may offer possibilities for income. Remember: Your primary job is to find a new job. Any part-time work should allow time and flexibility to actively pursue your job search.

You may be unemployed for only a short time, and a change in your spending habits may turn out to be unnecessary. But no matter how good your prospects, it won't hurt to get your finances in order. If you get a job quickly, it may help you to start saving and investing for the future. However, a little financial planning may keep you from having to settle for a job you don't want simply because you've run out of money.

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