Raising Money-Savvy Kids

Many people want to make sure they are providing for their children as much or more than their parents provided for them. While you don’t want to give to your children blindly, you would like to make sure you are raising your children to be conscious about money and financial matters.

Paying a regular allowance is a hotly contested topic. Should you pay a regular weekly amount or just pay your children for chores around the house? There is no reason you can’t do both. Providing a regular allowance can offer your child a sense of independence and understanding of money. However, you don’t have to give them too much and you can also pay them extra for certain chores, like mowing the lawn or extra cleaning around the house.

You don’t have to share every detail about your own personal finances (for example: I can’t believe my credit card bill is $3,000 this month!) but you also don’t want them to grow up completely ignorant about money. If you have a new job and want to watch expenses, this is something they ought to know. You can also share with them how much the grocery bill costs or how much the movie ticket costs but they don’t need to know how much the mortgage payment is every month.

A common used technique in parenting is giving children choices. This can be applied to money matters as well. A great example is a child’s birthday. You can offer them a big birthday party or a special gift (like a new bike) but not both. They don’t need to know the actual costs, but by becoming more involved in the process, they learn how to prioritize their financial decisions.

Teaching your children about the concept about saving is especially important. Once they start getting a regular allowance, you should encourage them to save a portion of it for special occasions. They may not do it, but where else are they going to learn about it? Once they get old enough (at least 8 years old), they can also learn the basics of investing with some fun games or children focused mutual funds. Junior Achievement offers some wonderful programs in elementary schools. At the same time, you can also introduce contributing to a charity. They can either give through their own money or you can give them a certain dollar amount and let them choose their own charity.

When they reach high school age, there are basics concepts of personal finances that should be taught. These include putting a budget together, balancing a checkbook, and the concept of time value of money (for example, interest growing in a savings account). These are all invaluable lessons they will apply for the rest of their lives!

Love And Money

Love and money don’t always go hand in hand. It can be the cause of countless arguments especially since most of us have different money styles. However, with a few guidelines to promote better money communication, money can become a source of joy within a relationship rather than a stress inducer.

As with most areas of our lives, a healthy relationship is built on open communication. The financial part of our relationships is no different. This means that both of you need to come clean about what you owe, your credit report, your spending and your income. Be honest, because it will eventually come out. If you haven’t already, run a credit report together. Do you know your partner’s financial goals and investing styles? Some questions to ask include: Does your hubby want to save for the beach house while you are squirreling away for the long-term care insurance policy? Are you a risk taker and is your partner conservative? Is one of you a spender and another a saver or a worrier? If you don’t know the answers, find them out! This will affect your spending, saving for retirement and investing and you want to make sure you meet in the middle.

It is perfectly natural that you and your husband will have different styles. The challenge lies in merging them. If you keep your accounts separate, you can start by opening a savings account together. Each of you can contribute a pre-determined amount every month and the account will have a purpose (i.e. vacation, new furniture). While you are at it, schedule a money date with your partner on a regular basis. Bring a bottle of wine and get together when you are both not angry and upset. After a while, you won’t need to make it so formal and you will find yourself looking forward to conversations about your finances. If you are constantly fighting about the bills, here are some suggestions on changing that dynamic in your relationship. Put your bills on autopilot. Unless you have tons of free time (if so, I'd like to meet you!), it gives you one less thing to talk about on your money date night! In your relationship, does just one of you pay all the bills and take care of the finances? Switch places for one month. See what happens.

Very often, money becomes a source of contention within a relationship because we are used to doing things a certain way and aren’t communicating properly. By including money matters as part of your regular conversation, you will start seeing more financial success in your relationship!

Does Your Bank Love You?

Banking is such an integral part of our daily financial life. Yet, most people don’t take advantage of the benefits their bank can provide. In addition, you may be spending too much in fees that can be eliminated and are costing you hundreds of dollars a year.

Let’s start with the ATM. While the convenience is undeniable, the ATM can also be the source of wasted money. If your bank does not have an ATM near your home or office, consider changing banks. At the same time, manage your ATM visits. Plan how much cash you will need on a weekly basis and don’t visit your ATM more than once a week. You will actually have more money left over at the end of the month.

Even if you are someone who is already banking online, are you taking advantage of all the features online banking offers? For example, you can setup automatic payments to prevent late fees and use this feature to pay down your mortgage faster as well. Even if it is only $25 or $50 a month, you are building equity faster. The main reason online banking is so useful is that you will become more organized. You will pay your bills in much less time, know what checks have cleared, be as up-to-date on your current balances and manage more than one account. Any tool that saves you time and gives you more control over your money is a must-have. If you tend to pay your bills late, this will also help you because you can setup recurring payments. Try paying your bills every week; it should only take you ten minutes. You will never pay bills late anymore and have much more peace of mind. If your bank charges for online banking, it’s another reason to change banks.

Scared of Identity Theft? This is the future and it is where we are going. In fact, by banking online, you are more aware of your balances and any unusual activity in your account. Stay with a large FDIC insured bank to protect yourself as much as you can.

On a personal note, introduce yourself to your bank manager; you never know when you might need that extra help. Even in today’s high tech society, we all appreciate that personal touch. However, your bank might not serve every need in your financial life. Think twice before buying investments from your bank. It may not be the best place to do so as their fees are traditionally higher than no-load mutual funds.

Moving On When You Have Debt

Many of us have gotten into debt at one time or another. Some have paid it off or some are still carrying it in forms of credit card debt, a mortgage, home equity line of credit, or student loan debt. Carrying this debt can saddle your finances and put the rest of your financial life on hold. There are many reasons why you got into debt. Perhaps you didn’t have any savings, or you lived beyond your means or an emergency came up and you weren’t prepared. Don’t let your debt be the obstacle on your path to financial freedom. Regardless of the situation you are in, you need to change your financial habits and your approach to money.

While you will focus on paying your debt down with the majority of your extra money, you can start a savings account at the same time. There are differing thoughts to this approach, but seeing a savings account grow can truly install a sense of financial hope and motivate you to remain on a financially healthy path. At this time, recall why you got into debt in the first place. One reason might have been that an unexpected expense arose and you weren’t prepared. Having a savings account could have rescued you in that situation.

Making the savings account automatic will help you get back on the path to financial freedom without even thinking about it! Setup a savings account that is linked to your checking account and have the money automatically deducted every month. You will be earning interest in your sleep. To figure out how much you should be saving, come up with a total dollar amount of extra money that you have to pay down debt. For example, if that amount is $500 per month, then you could take $25 or $50 and use it for savings. Most of your extra cash flow will still be used to pay down your debt.

Consolidating your debt to one or two places will make this process much easier. You should also have a debt repayment plan. The practical goal is to pay down your debt as fast as possible. However, for this to happen you need to change how you think about your money. Having a savings account can be instrumental in motivating you to reach this goal.

Saving For Your Kid's Education

With the introduction and surge in popularity of 529 plans, more and more parents are focused on saving for their children’s college education. Before you begin, make sure you are contributing enough to your retirement fund. Your children can borrow money for college but you can not borrow money for retirement. Even if you plan on working for the rest of your life, you still want to be prepared in the event you do choose to retire.

Once you have your retirement plan set in place, you can now start preparing for your children’s future. An important decision to make is a Public or Private University for your child. If you feel confident you will be sending your child to Public University, verify if your state has a prepaid college savings plan. Your money will go much further, but your child must use the money for a state university.

If you aren’t sure whether to send your child to a Public or Private University and you want to leave your options open, then the 529 plan is a better choice. There are many great benefits to the 529 plan which include:

• When the money comes out for an accredited college, it is free of federal taxes.

• The money in the 529 plan grows tax deferred.

• Many states offer an upfront tax deduction on your contribution and a tax break when you take the money out (if you go with your state plan).

• The donor (usually the parent) has control.

• Very easy to use and can be made automatic. In fact, if you don’t have the minimum to invest, you can set up automatic contributions for as little as $25 a month.

• Most plans have an age-based investment option that makes it very easy for investors to build a properly diversified investment portfolio.

Visit www.savingforcollege.com for more information about your state’s plan. You can contribute up to $12,000 tax-free per child annually or $60,000 spread over five years under the gift tax law. Overall, you can contribute (or the account can grow) to more than $200,000.

Another way to get more bang for your buck is through Upromise (www.upromise.com). This company gets you free money for your 529 plan by shopping for everyday things from a long list of vendors (that you are probably using already). Get your family and friends involved. It won’t cost them a cent.

One final thing you can do to make the most out of your child’s college savings plan is to go online and use a savings calculator to see how much you should save. T. Rowe Price (www.troweprice.com) has a sophisticated yet easy-to-use site. Also, if you are concerned about the 529 plan hurting your child’s chances to receive financial aid, don’t worry. Investing in a 529 plan will have a minimal affect because the assets are in the name of the donor (the parent), not the child.

Top Ten Ways Banks Make Mistakes

If you think politicians are the only ones that make mistakes with your hard earned cash then your thinking may be a little naive. Just because a bank is dealing with your home loan statements does not guarantee that they will be error free.

A recent survey in the Sydney Morning Herald stated some pretty frightening statistics. The study investigated 200 monthly mortgage statements and the critical findings were….

54% of loan statements had errors
84% of these were in the Banks favour
The average monthly error was a staggering $242

Remember that these are just monthly errors. Imagine this figure compounded over the life of your loan.

You could be like thousands of fellow Australians out there who are losing thousands of dollars to banking errors.

The question is how do these banks make these errors?
I have listed below the top ten ways banks make these mistakes.

1.The Wrong Interest Rate was Applied
e.g. 7.75% instead of 7.25% (If this was not discovered the resulting extra interest paid would come close to $10,000.)

2.The Interest was charged at least one day earlier than it should
This could potentially cost you thousands in extra interest.

3.The Interest was calculated on an Incorrect Balance
e.g. the loan balance used was $110,000 but the balance should have been $101,000. This could cost you at least $20,000.

4.A Payment was credited at least One Day to Late
Additional Interest like this, over the course of your loan would cost you thousands.

5.When Calculating Interest Wrong Dates are Used
The bank charges additional interest by calculating the interest debit on the daily balance one or two days prior to the date on the statement.
The bank pays less interest by calculating the interest credit on the daily balance one or two days after the date on the statement.

6.A wrong Amount is Credited to the Account
e.g. $22.50 is credited instead of $225.00
e.g. $1,075 is debited instead of $175.00

7.Your Repayment Amount Ends up credited to another account
This can happen easier than you think. A simple typo can see your payment end up in someone else’s account.

8.Charging Interest after every transaction
It is usual to charge interest at the end of the month but many banks are now charging interest whenever a deposit is made. This means that making extra payments is of no benefit as it effectively increases the interest rate on the loan.

9.Changing or Ignoring the Rules
Without informing you the bank changes your principal and interest loan to an interest loan only.

10.Payout Figure is Too High
The Outstanding balance is too high.
The wrong penalty formula is used.
The payout date is used for calculation resulting in an extra day’s interest being charged.

If you would like to know how to combat the bank’s mistakes and get back what your owed see my resource box.

Shocking News - Most Americans are Dead Broke!

The average American is dead broke. At any given time up to 40% are living at or below the poverty level. The number of Americans who save money on a regular basis is close to a 1 percent average. Spending usually outpaces income when national statistics are taken. Some say the United States is a spendthrift nation, but the reality is that most working Americans pay thoroughly to have a comfortable or decent safe lifestyle.

Credit has become a way of life, nearly everyone who has good credit is in debt, not to mention those who have poor credit, and are often charged more in interest and fees for the luxury of purchasing on credit. We use credit and debt cards to pay for everything from a cup of coffee to a major purchase like a car.

Our savings are snatched from us on a monthly basis. It starts with the mortgage or the rent. Then continues with the car payment, the utilities the HD cable not to mention that big screen TV you just bought. It does not stop their, student loans, cell phones, insurance, clothing, food, entertainment, and if your working you must take the family on the annual vacations, which usually wipes out any savings you may have thought you had. If there’s anything left we can always find some medical bills, and birthday gifts for you to buy. Still have some change left in the bank? Good because your cousin Johnny needs to borrow $500 dollars, and your car is about to breakdown on the way to work. When you finally get to work, your wife call to inform you that the water heater is broke just like you. Funny how that works out. Then again not really.

How did we become a nation of broke people? What happened to us? Has easy access to credit brought about the demise of our economy? The number of Americans filing bankruptcy continues to rise, as does the number of people living paycheck to paycheck. The United States had the highest rate of minors living in poverty of any developed nation in 2006, according to an article published on “poverty in the United States” posted on Wikipedia. Financial advisors speculate that the number of Americans without any savings and so much debt may someday cripple our economy. The next American Revolution may be the rejection of credit, and a return to saving money.

Get Foreign Currency From UK ATMs With Your Credit Card

Following a successful six-month trial, ATM organization Link has announced that they are to increase the number of UK ATM's that dispense foreign currency. As well as giving out UK Sterling, cash points throughout the country will be adapted to allow dollars and euros to be withdrawn by holders of UK debit and credit cards. In the initial trial, travelers were enthusiastic about the ability to withdraw foreign currency without the need to make a special trip to the bank, travel agent or bureau de change. The convenience factor, rather than favorable exchange rates or commission fees seemed to be most important to travelers who took advantage of the trial machines.

Link’s Head of Planning and Development, Graham Mott, believes that the move will be welcomed by many travelers. He said: "The theory at the moment is rather than waiting until they get to the airport to get their foreign currency - as many people do, travelers will withdraw their holiday money at an ATM in the weeks leading up to their break."

Superstore giant Tesco’s finance arm have been trialling the foreign money dispensing cash points at four locations and are keen to increase that number to 20. Mott believes that upon seeing the success of the current ATMs, airports would be eager to install multi-currency machines in the future, perhaps with even more currencies than pounds, euros and dollars on offer.

However, he may have already been beaten to the punch by Raphaels Bank who has announced that they are to operate ATMs at London airports. Their ATMs are to offer 24-hour access to euros and US dollars without commission fees and at the same exchange rate as the bureau de change, giving travelers the opportunity to avoid the high charges applied to cash withdrawals by debit or credit cards from ATMs abroad. If in any doubt about the charges that will be paid when withdrawing cash abroad, travellers are advised to check with their bank or credit card company before leaving for their holiday.

The option of being able to withdraw foreign currency from UK cash machines gives credit card companies another opportunity to differentiate their products by the way that they charge the withdrawals from ATMs. Aware that many potential customers now compare credit cards based on a number of factors, not just the headline APR, this gives a unique sales opportunity for one enterprising credit card company to set themselves apart from the rest of the market. The size of charges for withdrawing currency with UK credit cards abroad has long been a sticking point with many consumers and it will be interesting to see how the credit card companies treat foreign currency withdrawals in the UK.

Property Purchasing 'Getting Worse' For Graduates

An increasing number of graduates are unable to afford to take the first steps on the property ladder, new figures report.

In research carried out by Scottish Widows, some 56 per cent of those who have finished higher education are yet to buy their first property - an increase of three per cent from the same study carried out last year. Meanwhile, an estimated one in four people who graduated ten years ago are reported to not be on the housing ladder.

Statistics from the financial services provider revealed that increasing property prices were the main reason for graduates being squeezed out of the housing sector, with 70 per cent of non-homeowning graduates, an increase of six per cent from the 2006 study, citing this factor. According to the firm, the average home costs a typical graduate first-time buyer £122,045, with this figure increasing to £179,228 for those living in London.

Richard Clark, head of product development and marketing for Scottish Widows, said: “This year’s report reveals that the situation really is getting worse for graduates. The main issue is that property prices and inflation are continuing to rise, but starting salaries have not moved in line with this. First-time buyers are struggling to save for that deposit and recent interest rate rises are acting as a further deterrent. Owning a home is likely to remain a pipe dream for many.”

Meanwhile, just under a fifth (19 per cent) of respondents claimed that if they were to buy a house then would be likely to be unable to make secured loan repayments. Some nine per cent of graduates were said to believe that money owed from their student loan is stopping them from getting on the property ladder, as one in eight claim other debts accrued on the likes of personal loans and credit cards are preventing them from buying their first home. Overall, graduates were said to be in debt of some £10,361 upon leaving higher education. More than half (58 per cent) of consumers who have recently completed university believe that they do not currently earn enough money to allow them to enter the property market.

Mr Clark added that the company had witnessed a rise in popularity of 100 per cent mortgage products and those graduates looking for financial aid from their parents. Although the expert welcomed moves by the government to make property affordable for prospective first-time buyers he claimed “there is still much to be done to make the market more accessible”. His comments come after the financial services firm reported that 15 per cent of first-time buyers claimed that removing the need for a deposit would help them buy a home, with 13 per cent stating that purchasing a home would be easier if lenders consider their future earning potential rather than their current income.

Earlier this month, a study conducted by mform.co.uk revealed that 2.08 million consumers aged under 35 are looking to take out a mortgage worth at least quadruple the amount of their annual pay. The research also showed that 828,000 are willing to opt for a secured loan at four times their salary. Marketing and business development director Francis Ghiloni claimed that as house prices continue to increase those aiming to get on the property ladder “will have to take on huge debt”.

Consumers Advise to Plan Christmas Spending

Although it is still five months away, Britons are being warned that failing to plan their spending over the Christmas period could impact upon their personal financial situation.

In research carried out by Britannia, just under half of the adult population (47 per cent) are said to not be saving money specifically for the festive season, despite predictions among the public that it will set them back by an average of £620.

The study also indicated that just over a third (37 per cent) of respondents plan to make use of some form of borrowing to cover the cost of the festivities, with some four per cent claiming that it will take them at least 11 months to clear off such debts. However, those households with children are predicted to face even further pressure on their finances at that time of year as they look towards an expenditure of £840 over the period. Furthermore, some 36 per cent of parents claim to be not putting any money aside for Christmas. As a result the financial services firm suggested that consumers should start saving an average of £124 per month from now to Christmas to help avoid starting the new year by owing money on personal loans and credit cards.

Neville Richardson, group chief executive for Britannia, said: "This survey shows that the majority of people are not planning for their Christmas expenditure, even though they have a good idea of how much it is likely to cost. However, it is still not too late to start saving for Christmas right now and those who do can really reap the benefits of being organised with their finances by adding pounds in interest to their own contributions."

Those who only make the minimum repayments on their credit card spending over the festive period can take more than 16 years to complete making their repayments, the firm observes, as about £740 alone is spent servicing interest accrued. However, Britannia suggested that the five per cent of respondents who plan on spending at least £2,000 this Christmas could face increased struggle paying back money owed on loans and cards if they choose to fund their expenditure via borrowing.

Figures from the financial services provider also revealed that men spend more money than women during the festive season. While males account for an average expenditure of £710, the opposite sex was reported to shell out £537. However, females were indicated as being better savers as 11 per cent put money aside for Christmas, in comparison to seven per cent of men.

Last month, uSwitch warned that those consumers who choose to supplement their spending via credit cards instead of cheap personal loans and consequently only make minimum monthly payments could find themselves privy to a "debt sentence". Mike Naylor, personal finance expert for the price comparison website, warned that with credit card providers currently setting the lowest-possible repayments at two per cent, borrowers could finish paying back money owed via secured loans before clearing off debts accrued on their cards if they continue to pay the minimum amount.

Smoking Is Costing You 18 Million Dollars

First lets think about what smoking does your life. It raises the cost of your health insurance and life insurance. Your quality of life is less than if you did not smoke. Walking from one place to another will make you out of breath. You can develop Asthma, Emphysema, Lung Cancer, and Throat Cancer. Smoking will lead to a slow agonizing death. You will live for years gasping for each breath and will probably have to carry around an oxygen tank.

If your home has white walls they will turn yellow because smokers usually smoke inside. All of the items in your house smell like an ashtray, your breath stinks, it makes your teeth yellow, and kissing you is like licking an ashtray. Even when you brush your teeth and use Listerine the smell and taste is still trying to escape your lungs.

Smokers are never courteous of other peoples’ lawns. Have you ever driven up to a stop light and looked on the road or median next to you? The next time you pull up to an intersection, take a look around. Cigarette butts litter the area. Cigarette smokers have caused fires throwing butts out the car window.

Statistics show that the majority of smokers are uneducated. http://tobaccodocuments.org reports, “Philip Morris' internal findings of higher smoking rates among lower socioeconomic classes, as well as its findings that this group also has a higher incidence of both poor mental and physical health, it continued to promote its deadly and addictive products heavily among these groups.”

In the state of Florida you can no longer smoke in restaurants, some parks, even near some public buildings.

Everyone makes small purchases and think it is only $3.00 dollars or $4.00 dollars and that isn’t going to make a difference in anything.

If you invested the money that you would have bought a pack of Camel non-filters (studies show that the lower socioeconomic population buy non filter cigarettes) everyday from the age of 16 to the age of 76 in a decent growth stock mutual fund with the average yearly return of 12%, you would have $18 million dollars to retire with. Not only will you have your health, money, a longer happier life, but you would retire with dignity and not have rely on social security to make ends meet every month. Small purchases add up and cost you literally a fortune in the long run.

Getting Your Debt Priorities Right

One of the most difficult financial juggling acts is that of an ordinary family trying to juggle its weekly or monthly finances to keep all those competing creditors at bay. One of the principal reasons people fall into major debt problems is trying to satisfy lots of different creditors at the same time when there has been a significant fall in family income – unemployment; a new baby or a relationship split to name but a few. The so called “debt spiral” of borrowing from one creditor to satisfy others can quickly become a significant debt problems running to more than £20,000.

If you should find yourself in a position where you cannot meet all of your financial commitments then there are certain golden rules which you need to take account of immediately when putting together your financial budgets.

Firstly you will need to identify the difference between the Priority Debts and the Non Priority debts within your family. A Priority debt is one which will directly impact upon the health and personal wellbeing of you and your family if not maintained.

Key priority debts which must be paid are as follows;

Mortgage or rent - This may seem obvious but I lose count of the number of times we talk to people who are in arrears with the mortgage or rent and yet up to date on unsecured loan repayments. Keeping the family roof over your head is number one priority. A mortgage company can and will commence repossession proceedings in the event of significant arrears and 2006 saw the highest number of property repossessions ever in the UK.

Secured Loans - Homeowners often take out a “secured loan” or “second charge” against their property. Please do not confuse these loans with other “personal” loans. These are secured against your property as a second mortgage and must be maintained in exactly the same way as your main mortgage. The consequences of failure to keep up repayments on this type of debt - ultimately repossession of your home – should be spelt out to you in very clear language before you commit to such a loan. If you are in any doubt as to which type of loan you have signed then please seek professional advice as a matter of urgency.

Council Tax - This is a priority debt because it is actually a criminal offence to owe council tax; the continued wilful non payment of which could mean time in prison! Likewise any Police or Court fines need to be paid as well as it is also a criminal offence not to pay these.

Utilities - Gas water and electricity payments should be maintained where possible as a priority over unsecured loans and credit cards. The Utility companies are willing to help as much as possible those with debt problems to reschedule their utility debts to a more manageable level.

Food and Clothing - A recent survey by Barclays and children’s charity NCH has found that some 10% of British families have gone without food and medicine at some point because they were too poor to purchase it either due to general poverty of due to other competing debt problems. We cannot stress highly enough that the provision of basic food, clothing and family hygiene always comes before the repayment of any non priority debts which you may have.

Car Hire Purchase (HP) - Vehicle finance, to the ordinary consumer, is either a form of HP or a Personal Loan (other so called leases and contract hire are usually reserved for the self employed). There is a major legal distinction between these two ways of funding a vehicle purchase. A HP agreement means you do not actually own the vehicle until all payments are made and therefore you must maintain payments or the vehicle will be repossessed (this type of arrangement is effectively a mortgage on a car). If the car is on a personal loan type agreement then you automatically own the vehicle and the payments can be varied as an unsecured debt. Again if you are in any doubt as to which type of agreement you may have and your rights and liabilities e.g. to terminate the agreement then please obtain some independent professional financial advice.

Non priority debts are basically every other type of debt you may have. Personal loans; credit cards; store cards; bank overdrafts; “door step” credit like Provident; catalogues; credit unions etc. In the event of a financial crisis within the family these non priority debts should only be paid when the priority debts have firstly been maintained. As you sit down to work out the family budgets you must put all the priorities at the top of your list together with basic insurances and travel costs these must be paid first. Quite often there will be a shortfall in the remaining funds available to pay the unsecured or non priority debts in the short term and this is where professional financial advice can really make a difference to the quality of your family life.

Abundance, Prosperity and Money Creation

Having problems in the money department? Struggling to look after yourself properly? Lacking a sense of abundance and prosperity? Thanks to a conference I graphically recorded years ago, I have a very vivid image of the word ‘abundance’. If you break the word into parts, you get A-Bun-Dance --- ‘buns’ as in butt or rear end, dancing. Abundance is literally about moving, shaking and having a good time. Moving to the beat of life in a happy way. Getting your mojo on. Contrast that with the word scarcity --- or Scar-City --- living in a scarred or scary place. Choosing to focus on scars. Such a contrast between the two words and funny how their meanings can be communicated in such a succinct way!

Are You Vibrating Scarcity or Abundance? So, what locale are you primarily living in – abundance or scarcity? Chances are if you are having repetitive money, prosperity or abundance issues, you spend more time in the scarcity or lack region. The majority of your focus is on the things you don’t have (the scar) as opposed to on the things that you do (abundance) --- and as a result you are vibrating a scarcity harmonic rather than a prosperity chord. Your energy or vibration is out of whack. Money and other forms of prosperity and abundance can’t easily make their way to you --- cause you are vibrating lack rather than have and like attracts like.

How to Get Out of Scar City: Different people have their abundance and prosperity issues wired up in different ways. One of the common keys to getting out of Scar City is to develop an appreciative focus --- to focus on what you do have and to develop a sense of empowerment (with a healthy dose of deserving).

There are so many different ways you can choose to view life, yourself and other people. You can choose to focus on the things that you don’t like, or you can choose to focus on the things that you do. The two have very different flavors or feels to them – and are connected to radically different outcomes.

Empowerment and Ability to Create: Abundant people are empowered people. They believe in their ability to create and look after themselves. Somewhere along the line they have developed a can do attitude. They aren’t victims. They are creators. And they have pretty positive beliefs about life, their abilities and their future.

Contrast that with scarcity folks: for different reasons they have less-than-helpful beliefs about themselves and their ability to create and look after themselves. They are disempowered. Feeling like they don’t have what it takes, that things are done onto them, that life is difficult, or the future is unfriendly. Outlooks like these hamper creative energies. Snuff them. Squash them. Keep creativity and sharing energy down and covered. In short, there are some scars to heal and overcome. Some healing work is required.

Share, Give and Help: Want to increase your prosperity? Think about what you can share, give and help others with. Lots of money creation involves reciprocal arrangements. Give something of value and assistance in order to receive. If you are in a salary environment, how can you be more helpful and resourceful --- how can you increase the value of what you do, by adding to your responsibilities or by seeking out more (either in the job you are in or through another position)? If you are entrepreneurial, what can you share, give or help others with --- the more people you can help the larger abundance you can attract.

Be Open to Unusual Forms: Abundance doesn’t just come in the form of direct income. Be open to receiving abundance in forms other than the usual ones.

Refunds, rewards, winnings, prizes, discounts, gifts and trades are just some of the other ways that abundance can make its way to you. Think of abundance in wider terms. It gives the ‘universe’ more ways to give to you. When they come to you, recognize them for what they are --- abundance and a reflection of your ability to create!

Get Over Your Receiving Issues: When you give, it is OK to receive (in fact, if you want to go even further, it really is ok to receive without even giving - but I’ll leave that one for another time). Sometimes people have money issues because they have a hard time receiving.

Somehow they got it wired up that it is bad, wrong, or selfish (or some such thing) to get or receive. Perhaps they are oldest children who were told to ‘be big boy or girl’ which was interpreted as it’s not ok to look after oneself. Or they have faith beliefs that complicate their ability to receive. Or have self-esteem or self- valuing issues that keep them feeling less than or seemingly in need of punishment or containment.

Whatever is going on, it’s necessary to identify and work through these limiting beliefs to develop a healthy ability to receive. You do count. You do matter. It is ok for you to receive too. It is ok for you to live a decent life. To have decent things. To live a life of comfort and joy. There is more than enough to go around. Your having does not take away from someone else. Your success helps many people, while your failure or discomfort really helps no one, most of all yourself.

Put Your Financial House in Order: Money is attracted to a person who likes it and knows how to look after it. If you want to increase your financial abundance, then start by looking after the money you do have. Appreciate it. Treat it properly. Look after it. This means provide a proper home and place for it. Little things go a LONG way. Our minds are symbol making machines. Give your mind good symbols about money. If you are in debt, appreciate and be grateful for what you purchased. Organize your bills. Know what you have and what you owe. Make consistent payments (even if they are small). Take responsibility. Seek out financial advice. Tie up other outstanding loose ends like overdue taxes, filing, IOUs, etc. Get your books in order. As a financially savvy client of mine says ‘money likes to have fun’ --- make yourself a fun and enjoyable place for money to reside. When you demonstrate you can look after it you lay the groundwork for more to come.

Envision a Positive Outcome: No matter what your present economic circumstances may be, begin now to envision a more positive outcome. As written about in other SHIFT-IT articles, one of your greatest assets is your imagination ability --- and it’s free. Use your mind’s eye to imagine yourself in a more fiscally pleasant future. Feel what that more positive reality feels like. Soak up that resonance. Meet your Future Self that has it going on where money is concerned. Feel the relief of this position. The warmth. The calm. Whatever it is that being in a prosperity position does for you.

Merchant Accounts and Other Payment Solutions

There are several online businessmen who think that they don’t need a merchant account and can easily carry out financial transaction using other payment processing option like Paypal, Authorize Net, WorldPay, No Chex, FastPay, Website Payment Pro, Barclaycard e PDQ and others. But do any of these options match up to the service quality and security offered by merchant account service providers.

The first argument favoring Merchant accounts is that it offers international transactions. Most other alternative payment options are restricted to inbound transactions. For example FastPay, No Chex and Barclaycard e PDQ can be used by British customers while Authorize Net and Website Payment Pro can only be used by people living in the United States. Then there are international processing options like Paypal and WorldPay that allow a businessman carry out international transactions. But the word international needs to be used in a limited sense, since even PayPal is not is available in not available in number of counties.

• Moreover if currency conversion is involved, PayPal has its own conversion rate which it keeps changing depending on market conditions. This usually works out to about 5% more than the international bank rate.

• Moreover PayPal has a notorious reputation of withholding money over due to fickle reasons causing both parties a lot of undue stress.

• Customers find it very hard to get in touch with PayPal representatives as they don’t give their contact numbers to their customers. But technical support staff of merchant services can be reached at all hours of the day, usually though toll free numbers.

• But the most important difference that tilts the balance firmly in favor of merchant accounts is that the customers are not required to have a merchant account. This is not the case with PayPal where both the parties – the buyer and the seller are required to have PayPal accounts. This is a huge inconvenience for most people.

So it’s obvious that merchant accounts offer the best services at convenient prices. Now by logging on to Advanced Merchant Services you can find out about the number of other unique advantages offered by AMS. Advanced Merchant Services not only authorize your merchant account with 24 hours but will also provide you with a free credit card terminal with each new account. AMS also offers a rebate of $200 dollars to anyone who processes $10,000 in any of the first three months of the service.

Consider the Cost When Choosing a Merchant Account

A merchant account can be described as a relationship between a businessmen and a merchant bank that allows them to accept payments through credit cards from their customers. All businessmen accepting credit card payments have a merchant account into which the service provider deposits the money from all transactions made through credit cards.

Advanced Merchant Services is an undisputed leader of the merchant accounts industry. With over nine of years of experience AMS has been providing unparalleled merchant account services to its clients, ever since credit cards became the buzzword for financial transactions. Advanced Merchant Services offers a variety of secure, all-inclusive, highly cost-efficient, financial processing solutions. With Advanced Merchant Services, businessmen can start accepting payments in credit cards within a day or two of completing the online application. AMS has a record of getting most of its merchant account application approved in less than 24 hours. Moreover AMS offers the most cost effective solutions in the market today. With Advanced Merchant Services you will never have the fear of getting entrapped into a manipulative merchant account riddled with hidden fees and bogus charges. Hidden fees are basically of two types:

• The kinds that are overtly mentioned in the contract, but you have no way of knowing that you are actually being overcharged till you compare the rates.
• The kinds that are not charged immediately but get deducted once the honeymoon period is over.

There is also a third kind. These are indiscernible non titled fees that can only be ascertained after carefully deducting the fees and charges and from deposits. The money inexplicably siphoned off is the hidden fees. Some of the bogus fees charged by most Merchant Account Services include Chargeback fees, Retrieval fees, Termination fees, Gateway fees, Gateway per Item fees, Minimum fees, Over limit fees, Voice AVS fees Annual fees, Statement Fees, Customer Support fees, Technical Support fees. There are a number of other fees that are covertly charged by merchant service provider and credit card processing units.

Advanced Merchant Accounts on the other hand provides you with the best deal in market. You will not be charged unfairly and if you ever come across another merchant service provider offering cheaper rates, than AMS will immediately beat it by 5%.

How to Maintain Your Merchant Account

As most of you would agree, choosing the right merchant account can be a tough task. Having toiled long and hard to find the right merchant service provider, you must now make sure you keep a careful tab on your merchant account. Most businessmen make the fatal error of not paying enough attention to their merchant account. As rules change and as the rates and fees are slowly increased, the monthly expense of maintaining the account rises beyond their initial expectation. Eternal vigilance is the price of not being taken for a ride. It has often been the case that by the time the businessman wakes up to the inflated bills and starts calculating and comparing the rates and fees, he has already been duped of thousands of dollars.

When rates are increased without notification or proper justification and when new regulations are introduced by credit card associations without informing the businessmen, your merchant account gets affected, and consequently, becomes more expensive. This process is known as merchant account degradation. The key to self preservation is not letting your merchant account degrade in the first place. Here are a few things that you can do to maintain an optimum merchant account.

• You should carefully read through your monthly merchant account statement and get all ambiguities clarified from the customer support executives.
• Merchant service providers are required by the law to inform their clients of any changes before introducing them in their accounts. These notifications should be prominently mentioned in the front page. Always make sure that you go through these information.
• As you must know, there are as many as three different discount rates that you may be charged to process your transactions. Keep a careful tab on these discount rates to make sure that your transactions are running through the lowest qualified rates.

By logging on to the online webpage of Advanced Merchant Services at www.merchant-accounts.com, you can easily and immediately lower your current rates, if they are bothering you. Advanced Merchant Services (AMS) can save you hundreds, perhaps even thousands, of dollars that you pour into processing costs. Fill up the AMS form and you will soon be contacted by an AMS representative with a proposal that will beat your current rates. With AMS, you are always assured of complete satisfaction. AMS is a well established player and is backed by the largest processing banks in the United States of America. So whether you need to process a thousand dollars a month or a million, your funds are absolutely safe with the merchant accounts at AMS.

Are Equity-Indexed Annuities Right for You?

What is an equity-indexed annuity?
An equity-indexed annuity is a type of contract between you and an insurance carrier. This annuity earns interest by linking to a given index. One of the most commonly used indices is the Standard & Poor's 500 Composite Stock Price Index (the S&P 500).

Competitive interest rate guarantees on principle:
Some equity indexed annuities are able to offer as much as a 10% interest bonus the first year. In addition, the insurance carrier typically guarantees a minimum return on your principle contribution amount over the life of the contract. This rate is guaranteed even if the index-linked rate is lower. Guaranteed minimum return rates vary from carrier to carrier, but they’re typically in the range of 1-3%.

Here's how you can earn 13-14% in year 1:
At the time of transfer, some insurance carriers will issue an immediate 10% upfront bonus. The remaining 3-4 comes from your money usually being placed in a “fixed bucket” (like a money market) the remaining 12 months, thereby giving you a total for year 1 of 13.00-14.40%.

In addition, the insurance carrier typically guarantees protection on your principle contribution amount. This means that your investment may never dip below your principle contribution. Some insurance companies even guarantee a protection of your principle balance each anniversary year of your investment. This allows your investment to potentially grow to higher balances each year allowing those new balances to become protected as well. (All the guarantees are based on the premise that you leave the money in the contract for the duration of the term).- see next section

Can you lose money buying an equity-indexed annuity?
With all the equity indexed annuity guarantees, you may be wondering if you can loose money investing in these types of investments. You can lose money buying an equity-indexed annuity, especially if you need to cancel your annuity early (before the term expires). There are early withdrawal penalties that apply.

Even with a guarantee, you can still lose money if your guarantee is based on an amount that’s less than the full amount of your purchase payments. If your equity-indexed annuity only earned its minimum guarantee, it would take several years for it to “break even.”

Who are equity-indexed annuities more appropriate for?
Equity-indexed annuities tend to be more appropriate for long-term retirement monies, where you will not access your contributions and interest credits on a regular basis. These types of investors are not concerned with the early withdrawal penalties and are more interested in the guarantees and protection offered.

What are some of the contract features of equity-indexed annuities?
Equity-indexed annuities are complicated products that may contain several features that can affect your return. Bass Financial Solutions, Inc. makes it a point to help you fully understand how an equity-indexed annuity computes its index-linked interest rate before you buy. An insurance carrier may credit you with a lower return than the actual index’s gain. So there’s a “trade-off” in kind, for the principle protection they provide. Some common features used to compute an equity-indexed annuity’s interest rate include:

* Participation Rates. The participation rate determines how much of the index’s increase will be used to compute the index-linked interest rate. For example, if the participation rate is 80% and the index increases 9%, the return credited to your annuity would be 7.2% (9% x 80% = 7.2%).

* Interest Rate Caps. Some equity-indexed annuities set a maximum rate of interest that the equity-indexed annuity can earn. If a contract has an upper limit, or cap, of 10% and the index linked to the annuity gained 10.2%, only 10% would be credited to the annuity.

* Margin/Spread/Administrative Fee. The index-linked interest for some annuities is determined by subtracting a percentage from any gain in the index. This fee is sometimes called the “margin,” “spread,” or “administrative fee.” In the case of an annuity with a “spread” of 3%, if the index gained 10%, the return credited to the annuity would be 7% (10% - 3% = 7%).

Another feature that can have an impact on an equity-indexed annuity’s return is its indexing method (or how the amount of change in the relevant index is determined). Some common indexing methods include:

* Annual Reset (or Ratchet). This method credits index-linked interest based on any increase in index value from the beginning to the end of the year.

* Point-to-Point. This method credits index-linked interest based on any increase in index value from the beginning to the end of the contract’s term.

* High Water Mark. This method credits index-linked interest based on any increase in index value from the index level at the beginning of the contract’s term to the highest index value at various points during the contract’s term, often annual anniversaries of when you purchased the annuity.

These and other features may be included in an equity-indexed annuity you are considering. Before you decide to buy an equity-indexed annuity, let Bass Financial Solutions, Inc. help you understand how each feature works and what impact, together with other features, it may have on the annuity’s potential return.

As we say to all of our clients: Like any other investment or contract that you enter into, Equity Indexed Annuities are not appropriate for everyone. They are most appropriate for those investors that have a solid understanding of the contract features and benefits. Additionally, these features and benefits must match your stated objectives and goals for your money, in order to be a suitable and viable alternative for your money. At that time, and only then, is an Equity-Indexed Annuity the right investment option for you.

Get A Budget And Manage Your Money

Typically, when we think about college life we think freedom and fun. However, frequently stressing over finances is definitely not "fun" and being chained to an ever-growing heap of debt is not my idea of "freedom". Managing your money is a necessary part of a stress-free college life. You're going to have to start sometime in your life and the sooner the better.

What students should know about managing their money:

In order to manage your money properly you must create a budget. The purpose of a budget is to outline a practical plan for spending the limited money that most college students have. Due to the fact that your income and expenses are constantly fluctuating, whichever budget you choose must allow for flexibility.

First, write down where all your income comes from. This can include income from a job, grants, scholarships, allowance from home, etc. The next step is to outline your expenses. Split them into two catagories: fixed and flexible.

Fixed expenses are exact amounts that are due on specific dates. Flexible expenses are ever changing amounts of money that you spend on your wants and needs.

Example Fixed Expenses:

* Housing
* Car payment (including insurance)
* Health insurance
* College Tuition
* Cell phone


Example Flexible Expenses:

* Books
* Gasoline and maintenance for your car
* Going over on your cell phone minutes or long distance telephone calls
* Social expenses (movies, dates, football games, etc)
* Personal expenses (clothes, groceries, doctor and/or dentist bills, domestic supplies, haircuts, etc.)


Add up the amount of income and expenses you have. Look at your paper. Do you have more expenses than your income can cover? If this is the case, think about what you can do to increase your income or decrease your expenses. This may seem elementary, but it's essential if you wish to stay out of debt while you are attending school.

Lowering your expenses will probably require some sacrifice. Many college students are used to spending their money impulsively. This sort of poor money management leads to financial bondage. If you are ready to lower your expenses try some of these tips:

- Pay your bills on time

- Watch out for peer pressure

- Purchase used text books

- Avoid impulse buying

- Look for sales

- Don't eat out and stop buying junk food

- Go to matinees instead of evening shows

Everybody is going to need a different type of budget to fit his or her individual needs. However, you can find basic budgets online, in financial books or just ask your parents to give you some ideas. Don't let debt to enslave you. Find a budget, use it, and be willing to sacrifice to stay out of debt.

Low Minimum Credit Card Payments Lead To Debt Sentence

Consumers have been warned by one price comparison website that only paying the minimum amount on a credit card balance each month could lead to an increased “debt sentence”.

According to uSwitch, those borrowers who choose credit cards over cheap loans - and opt to only pay off the minimum amount each month - risk extending the time it takes to repay debt by up to 30 years. The warning follows news that both Barclaycard and M&S Money have dropped their minimum payment amounts to less than 2.5 per cent.

Barclays is currently asking customers for a monthly installment of 2.25 per cent, down from 2.5 per cent, while borrowers with M&S Money credit cards can pay as little as 2.5 per cent a month, down from three per cent. Incidentally, the price comparison service suggests that to help negate debt management problems, the credit card industry should introduce a minimum repayment limit of three per cent.

“There is little justification for setting minimum repayments at just two per cent and we believe that it is time that the industry agreed a standard minimum repayment amount of at least three per cent on all credit cards,” said uSwitch personal finance expert Mike Naylor.

He added that despite moves to put ‘health warnings’ on credit card statements and to make literature easier to understand, the majority of borrowers still do not comprehend the problems associated with only paying the minimum amount each month. Mr Naylor suggested that by only paying off credit card debt in small amounts consumers could end up paying off mortgages and secured loans before clearing card balances.

“In an environment of rising interest rates where personal debt in the UK has reached a staggering £1,325 billion, of which credit card debt accounts for £54 billion, consumers could now finish repaying their mortgage before their credit card, despite the huge disparity in sums borrowed,” he elaborated.

uSwitch.com's research found that 3.5 million Britons could spend 30 years struggling with debt management if choosing to only make minimum repayments. However paying a little more each month could see borrowers cut their “debt sentence” by 15 years and generate collective interest savings of £5.5 billion.

Figures released today by the British Bankers Association (BBA) suggest that borrowers are slowly beginning to turn away from credit cards and seek out cheap loans for their financial needs instead. Lending on plastic fell by £0.1 billion over the course of June, the association revealed, while personal loans remained popular. Borrowing on loans and overdrafts was up by £0.1 billion last month and secured loan lending grew by an underlying £5.1 billion.

Meanwhile, Toby Clark, senior finance analyst at Mintel, recently said that Britons are “wildly underestimating” how much money they owe on credit cards and personal loans. The expert was speaking after research from the firm revealed that 21 million consumers owe £100 billion more than they estimate.

Career Development Loan Applications Still Credit Checked

Britons looking to take out a loan for the purpose of career development will find themselves judged in the same way as applying for a personal loan at a bank, a spokesperson for the Co-operative Bank has said.

Career development loans can be used to help people acquire new job skills, training, qualifications or experience integral to them getting a new job or even launching a new career, according to the Directgov website, yet Andy Hammerton from Co-operative Bank has ruled out any suspicion that it is easier to get a career development loan than a personal loan when it comes down to the matter of credit history.

“If they [an applicant] had a very, very poor credit history then we wouldn’t accept them just because it’s a career development loan, they still have to be credit scored. We have to be a responsible lender,” Mr Hammerton said. “A credit score in the past is usually a good indication of what’s going to happen in the future, so if somebody’s been a poor credit risk previously, just because they’re taking a course doesn’t necessarily mean they’re going to be a sound credit risk in the future. They need to have a reasonable credit record.”

The Co-operative Bank is just one of the lenders offering career development loans, according to the government website, with the Royal Bank of Scotland (RBS) and Barclays also providing these specialist credit options. Such loans range anywhere from £300 to £8,000 and cover a maximum of three years of learning.

Also highlighted by Mr Hammerton was that a career development loan was not the route to take for consumers looking for the cheapest loans on the market, with personal loans providing a much more likely route to cheap credit for British borrowers. He said that due to the personal loans sector being “a very competitive market at the moment”, there were “cheaper” loans available than the career development-specific ones.

However, if competition is the driving force behind loan costs, it is unlikely that the cost of career development loans is going to fall in the near future. As the spokesperson noted, there are only three “players” in the market, with RBS, Barclays and the Co-operative Bank having not been joined by any newer entrants. “There’s nowhere near the competition that you see in the [personal] loan market,” Mr Hammerton added, although he did suggest that loans could be found “for six per cent, seven per cent” if you were looking to pay the loan back quickly.

In May this year, Moneysupermarket.com said that loans were at their cheapest rate for four years, with the company’s head of loans, Tim Moss, going further by saying that loans had “never been so cheap”. This was calculated on the difference between the base rate of interest, set by the Bank of England’s monetary policy committee, and the interest rate on the cheapest loan. Mr Moss added that profit margins for the providers of such financial products were “narrower than ever”.

Systematic Way To Save More Money!

Everybody is stressing the importance of saving money. All of them will tell you the benefits of saving money and you too know very sure why savings are very important. Have you ever thought of how to save more money? Is there a way to help you save as much as possible? Do you find that it is very difficult to save money especially when you don't earn thousands of dollars.

Well, I am here to share with you on how to save money effectively. This method is have been around for many many years but no one have stressed the importance of it. However, the wealthy have been following this method and just look at them; they are getting richer! I believe if we could adopt the wealthy habits, we will also be wealthy in no time.

Firstly, we must aware of any transactions that we make. We must monitor our cash flow closely. List all the expenditures that we have, then categorize them. e.g personal item, mortgage, transport etc. It is important that you list all the expenditures because you really want to know where your money is going.

After listing your expenditures, indicate whether they are your needs or wants. You must justify whether it is a need or want. Finally, what you need to do is to plan your budget in an accounting format. As a guideline, your savings should be at 20% of your total income. Now that you can see how every dollar is spent, I'm sure you will try to modify your budgeting to accommodate your income. By the second and third month, you will know where your strength and weakness financially.

If you know how every dollar is spent, the next time you get an increment or bonus, you will know how to take care of that extra cash. You will not be spending extra cash impulsively anymore. Why? It's because, human beings can react better when they are able to see. Seeing is believing!

Let me recap on what you have to do the next time you are getting your pay,

1) Save 20% of your income
2) List all expenditures
3)Plan your budgetting
3)Follow the budgetting!!

Real Estate Mortgage Analysis - The Missing Component Of Wealth Manangement And Financial Planning

Why is this topic important to you and your clients?
Real estate and mortgage planning should be a key component in the wealth management services offered to your clients. Your client’s homestead and investment property are often some of the largest assets within their estate. Mortgages are almost always involved in a real estate portfolio. Many planners tend to focus on “investable” assets and overlook the real estate that may be the cornerstone of a person’s wealth leading to poor or nonexistent recommendations in this area. Mortgage planning should be involved in the planning process beginning with the pre-acquisition period, continuing during the holding period and culminating with the ultimate disposition of either the primary residence or investment property. With proper recommendations by the financial planner/wealth manager will come a stronger client relationship. Ultimately, you will end up with a happier client, more investable assets and probably more billable hours.

There are other benefits too. Your clients need the expertise that you can provide in this area. Even if you prefer not to do the following analysis, you should at least understand the talking points and suggest or coordinate a meeting with the appropriate tax and legal counsel. This paper will explain common mortgage products within the marketplace today. In addition there are real world applications and examples which you can use in your practice immediately.

What are the problems I need to think about?
The following are just a few of the questions you might want to consider. I don’t expect that you will have all of the answers. There also is no absolutely “right” answer to some of these questions. These are talking points that will probably involve other professionals on the financial management team. (1) Should a property be sold, gifted or refinanced to access the equity? (2) Is it better to die with a property in your client’s estate in order to get a step up in basis? Remember that gifting property involves the recipient acquiring the original basis. Selling property instead of 1031 exchanging it can subject the client to taxes that could have been avoided. Refinancing gives the client access to capital on a tax deferred basis-while the interest may or may not be deductible. (3) What type of loan options are available for my client today? (4) Are there any creditor protections that would be better afforded my client by having greater leverage on their home?

Let’s break down some of the basic considerations involving a primary residence. How long will the person own the home? How adverse to risk or change in payment will my client be over their projected holding time frame? The answers to these questions will give you the basis to begin exploring options. A common problem lies in mismatching the product to the holding period. Client goals can be maximized if you take the time to understand the products and then see how they fit into the client’s financial plan. For example, if the client has a 100% certainty that they will move out of their home in 7 years, you may want to look at a product that matches exactly that time frame, or create a hedge of 2-3 years either side of 7 years in case things change. Under this example there would be no reason to recommend a 30 year fixed mortgage unless the pricing was identical or cheaper than one of the other available shorter term products.

What mortgage products exist in the marketplace today and what problems do they solve for my clients?

First mortgage products today consist of 5 primary products and variations thereof. Most first mortgage products assume a thirty year amortization. It is what can happen over those thirty years that varies. Let’s make that assumption for this article. I will highlight 5 primary first mortgage products and mention one unique second mortgage option. All the options are available for your client’s primary homestead. They all may not be available for a second home or investment property. The mortgage note rate is generally .5-1% higher when financing anything other than a primary homestead.

1) FIXED RATE AMORTIZING MORTGAGES Your payment with this type of loan is made up of principal and interest. Each is a component of the payment. The entire mortgage will be paid off at the end of the thirty years. Following the rule of 78, the loan will be paid off with the last and final payment. The most common variation of this type of loan is the 30yr fixed mortgage, but there are 10yr, 15yr, and 20yr loans too. The main idea here is that these loans are fairly simple. They are meant for the risk adverse with a very long term prospective of being in their home.

2) ADJUSTABLE RATE MORTGAGES(ARM) With these loans the monthly principal and interest payment is based upon a rate and amortization period that is fixed for a period of time within the overall 30 year time frame. It could be six months to ten years. The overall loan term is again 30 years. After the initial fixed interest period of time, the loan payments adjust up or down, subject to a formula. This formula uses a fixed constant called a margin. A typical margin on today’s ARM’s will have a number of 2.5-3.5. The margin is a fixed number and is arbitrary and established by the investor when the loan is originated. The margin is added to a variable which is called an index. The most common index is either the average of the yield on 1 year treasury bills or the 6 month Libor index. The value of the index will change over time. There are many other indexes and versions of the two I just mentioned. Most ARM’s have “caps”. Caps prevent the margin + index rate from exceeding a certain limit. These caps adjust on the adjustment date which happens upon the end of the fixed interest period. After the initial adjustment the loan payment will adjust according to the formula either annually or more frequently. It all depends on the product and how often the adjustment is made. For example, a five year ARM might have a fixed rate of 5% for the first 5 years. The loan is a 30 year loan. After the first five years the rate is subject to change. The loan has caps of 6/2/6. The first number, six, refers to the initial cap adjustment after the first five years. This means the rate upon initial adjustment can’t exceed 11 % (calculated as the initial 5% rate plus the 6% capped rate). The next number, two, refers to the adjustment period every year after the first. A cap of two means the rate for every subsequent adjustment after the initial adjustment can’t exceed two percent over the previous rate. Lastly, the third number, six, refers to the lifetime adjustment. This means that anytime the loan payment is adjusted, regardless of the math, you can’t have a rate that exceeds six percent over the initial rate-which would be 11%. An ARM is best used to match a mortgage with a projected holding period. These can greatly enhance cash flow when looking at an investment property and should be considered as the preferred loan for short term holding periods.

3) HYBRID OPTION MORTGAGES These loans usually involve a combination of an interest only payment period of time after which the loan retains a fixed rate and amortizes itself over the remaining balance of 30 years. For example, a loan may allow an interest only payment period during the first 10 years of total 30 years. At the end of the first 10 years the remaining loan balance must be amortized fully over 20 years. The interest rate remains constant over the entire 30 years. These products are trying to combine the best features of both fixed and adjustable loans all rolled into one loan.

Within this category of loans there is a unique product called the Option ARM. It goes by other names too-Choice ARM, Pay Option ARM, etc. This type of loan generally allows repayment on a flexible basis that usually involves four repayment choices. Generally speaking, you can choose how you want to pay with the ability to change the payments each and every month. The mortgage payments can be interest only, negatively amortized based on a rate of 1-3%(depends on the loan and investor) with the deferred interest added to the back of the loan, 15 year amortization, or based on a 30 year amortization. The deferred interest (negative amortization) is the double edge sword of leverage. If the property is appreciating at a rate greater than the growth in the deferred interest the equity will exceed the amount of negative amortization. In the event that the market is flat or declining, the negatively amortized loan balance may exceed the value of the property. This is the “upside down” risk associated with one of these ARM’s. This type of loan is often used by speculators in highly appreciating areas or on second homes where people want a low payment today and are banking on appreciation occurring in the future. The key benefit to this loan is the payment flexibility, which can be very important if your cash flow is erratic or you want to achieve the lowest repayment rate. Normally, the fully indexed rate (margin plus index) will probably be higher than the prevailing fixed rate mortgage or traditional ARM. This type of loan may also carry a prepayment penalty. As mentioned previously, an ARM is best used to match a mortgage with a projected holding period. Option ARMs can greatly enhance cash flow if you utilize the minimum payment option which will result in negative amortization. Utilization of the minimum payment (negative amortization) will allow you to control a more expensive property than could be controlled with any of the other payment options.

4) INTEREST ONLY MORTGAGES These loans allow for only the accrued interest to be paid-no principal payment is required. Prepayment of principal may or may not be allowed without a corresponding penalty. This will depend on the product and program. Mortgage payments may “recast” to reflect any extra payments that are credited towards principal reduction. Terms and conditions of all these loans are lender and program specific. Most programs that allow for interest only have an interest only time period of anywhere from 6 months to 15 years. Buying a home with an interest only payment will allow you to purchase 15% more home for the same payment. Your mortgage becomes 15% larger than an amortizing 30 year loan with the same interest rate. This is yet another tool of leverage. The safety net with this loan is that while it doesn’t decline in balance, it doesn’t increase through deferred interest/negative amortization either.

5) REVERSE MORTGAGES Having recently been improved, these products are experiencing tremendous growth. Based on an expanding demographic, the aging population will demand these loans. In the future, I predict growth in the number of lenders offering these loans and a more diverse set of loan products being developed.

Consider these loans for clients who have a lot of equity locked up in their home but have a lower income than they desire. Reverse mortgages allow the homeowner to access their equity either by a lump sum, a line of credit available for draws at will or in a series of payments. In essence you are able to unlock equity and have the home generate an income back to the homeowner. This allows the senior to use “dead equity” for living expenses, home improvements, gifting or even investing. The loan qualifying criteria are that the person applying for the reverse mortgage must be over 62 years old and own his/her home. Other than age, the lender has NO credit or income criteria and repayment with interest occurs upon the sale of the property. The amount of equity available for this loan is determined by the borrower’s age. Suffice to say that the older you are the more equity/credit is available for the reverse mortgage. What I have found is that the largest objection has come from the heirs fearing they will lose their inheritance. Sad but true. Whose equity is it anyway and whose life should be improved because of it?

6) 125% SECOND MORTGAGES There are a few lenders that still write this type of mortgage. This loan allows the borrower to exceed 100% of the value of their property. The loan is a second mortgage that allows the total combined first and second mortgage loan balance to reach up to 125% of the value of the underlying property. This loan is unique in that the loan exceeds the value of the home. While the loan is collateralized against the home, the interest may not be deductible because the underlying security is worth less than the amount of the loan. There may be no equity at risk once you exceed 100% of it’s value. This can be a good product, especially if used for debt consolidation. For example, someone who has more consumer or business debt than equity left in their home might still have a need for further consolidation and a lower payment. Let’s assume your client happens to have non deductible credit card debt. Let’s assume the credit card debt is somewhat usurious, blending somewhere between 20-30% APR. A new 125% loan will be priced today with a rate tied to the prime lending interest rate. The loan rate will adjust by adding a margin to prime. In this example, prime is the index. The adjuster to prime depends on the amount of the loan and the credit score of the borrower. The pricing variables are credit score and loan to value. The higher the credit score and the lower the loan to value, the better the interest rate will become. Today you might find a typical 125% loan to be in the 10-17% range depending on the variables I just mentioned. You can do the math specific to your client’s situation and see how much he/she may be able to save by lowering his/her interest rate on non deductible debt.

Talk to me about the tax considerations.
There is also a change in our tax law that has just taken affect regarding mortgage insurance premium deductibility. In the past, borrowers would combine a first mortgage with a second mortgage if they wanted a combined mortgage balance greater than 80% of the properties value. For example, a property that someone wanted to finance at 100% loan to value might have been split between two loans. The loans might have a ratio of 80/20-split between a first and second mortgage. The blended rate provided a payment that often was better than one loan at 100% LTV that involved paying mortgage insurance, especially when you factor in the deductibility of the interest vs. the non deductibility of the mortgage insurance. Now, for loans closed in 2007, if the borrower’s adjusted gross income is under 100K, they will be able to deduct the mortgage insurance premium. This will change how you make recommendations. In this new environment, a loan with mortgage insurance could be better than a combination first and second mortgage without mortgage insurance.

Another question that may come up concerns the advantage or ability to deduct interest that accrues on the mortgage. For purposes of this article, let’s assume that interest is going to be deductible and that we have a loan amount that allows us to take the maximum deduction. Please go to www.irs.gov and download publication 936 “Home Mortgage Interest Deduction”. This will give you the rules on deducting first mortgage interest and home equity interest. You will want to know the rules as they pertain to your specific client’s situation.

The 1098 statements sent from lenders at the end of the year reports the interest paid on that mortgage over the previous year. Principal reduction is not deductible. In my opinion, reduction of principal becomes a forced savings plan with an after tax dollar. Yes, this helps build equity. But, is this the best use of your clients after tax capital? Should a client pay down the mortgage, thereby decreasing the loan balance and accelerating the loss of a mortgage interest rate deduction? Are there higher and better uses for the capital that fit into the clients desire for wealth accumulation? Let’s examine this further.

What about investment arbitrage? Show me the money!
Consider this. What if a client borrowed the maximum mortgage allowed and repaid it based on an “interest only” payment? This would give them the maximum interest deduction. Assuming that they can benefit from this, they will save on taxes. The amounts of capital that would have been used alternatively for the down payment or paid on principal reduction through a principal and interest mortgage payment on a traditionally amortizing loan can now be allocated to either an after-tax or pre-tax investment that might have better growth potential.

What if the client took the differential savings from an amortizing principal and interest payment vs. an interest only payment and instead increased their contribution to a tax deductible plan, such as their employer’s 401K plan? My premise is that they would accumulate more wealth. The problem for the majority of people is having too much month at the end of the money. Not everyone is able to make their house payment and maximize their retirement plan contributions. Switching to an interest only payment from an amortizing loan payment will keep the loan balance the same but increase the available cash in the budget. Another use for this payment savings would be the repayment of non deductible debt such as credit cards. Your job as their advisor will be to see that they understand the options and alternatives available. In order to do this you need to understand how the loan products work and where they are most appropriate.

We just discussed an example of the lost opportunity of incorrectly investing capital. You can explore this further with your client. Let’s look at another example. When you pay down a mortgage or prepay a mortgage, you are essentially earning the interest rate that you are paying off. Next I’d like you to compare this rate of return on an after tax benefit basis to an alternative investment on an after tax or before tax basis. Consider this. If the client desires to have their home paid off upon retirement, you may be able to demonstrate how they can accomplish their goal better using an appropriate asset allocation portfolio based upon some historical rates of return. If they were to fund their investment on a monthly basis with the cash savings from a refinance and/or interest only payment, they may find that not only will they be able to pay off their house at retirement but they will have additional dollars remaining.

“I’m an estate and retirement planner-why should I care”?
Initially we asked some questions about mortgages and real estate as they relate to estate planning. Sometimes people default to selling property as the only way to raise capital. Selling property will often accelerate the tax liability associated with any profit. It also takes away any further upside that may be available through appreciation. Proper guidance in this area could make you a hero. Borrowed money through a refinance is not taxable. You may find that a recommendation of a refinance will allow your client access to their capital without the associated taxes. Depending on the size of the estate and the estate tax laws in the future, you may also find it better to have your client die with highly appreciated investment property in their estate so that they can receive a step up in the tax basis upon death. This could be extremely useful for the real estate investor who has been acquiring and exchanging property over a long period of time. There are, of course, many different options including charitable gifting and setting up family limited partnerships. I just wanted to bring up the topic so that all options were explored. You may already do a Monte Carlo type analysis for your asset allocation of investable funds. I’m suggesting something similar with your client’s real estate holdings and mortgages. You should discuss scenarios and give some options.

You may or may not be aware of the change in taxation regarding the profit in a primary residence. Every two years, a married couple can exclude 500K in profit and a single person can exclude 250K in profit. This is replenishable and doesn’t require purchasing any replacement property. Capturing this profit tax free could be important in your client’s estate and taxation outlook. See IRS publication 523 “Selling Your Home” for details. Mortgage planning may be involved if your client is moving frequently. If a loan is going to exist for approximately 2-3 years you may want to recommend that they consider a low closing cost or no closing cost loan. These types of loans would be identical to what we have already discussed. The difference would be realized in a higher interest rate on the loan. The savings depend on the size of the loan and the closing costs, but a rough rule of thumb indicates that you will save money by taking on a higher interest rate with lower closing costs if your holding period is short. A simplified analysis can be done by looking at the differential in payments from a loan with closing costs as compared to the loan that has no closing costs. Take the difference between the payments of each loan scenario and divide that number into the closing costs proposed for the loan with the lower rate. The resultant number will be the months needed to equal/recover the full amount of closing costs. In most instances, you will see that it is a 3-5 year break even point. This means if you plan to keep the property for a time exceeding the break even point it would have been more advantageous to pay the closing costs associated with receiving the lower mortgage rate vs. not paying closing costs and accepting a higher mortgage rate.

Do you see the applications within your practice?
In summary, I hope you’ve seen the value in adding mortgage and real estate planning to your wealth management practice. You don’t need to be the expert, but you do need to recognize the problems in order to help guide your clients towards a solution. As financial planners and wealth managers our job is more than crunching numbers and setting up asset allocation models with various investments. You can’t prescribe a client solution until you’ve done a complete diagnosis. We are our client’s “financial doctor” identifying problems and offering options and solutions that meet the client’s objectives and fit their comfort level.

13 Mistakes Investors Make

1. No investment strategy.

From the outset, every investor should form an investment strategy that serves as a framework to guide future decisions. A well-planned strategy takes into account several important factors, including time horizon, tolerance for risk, amount of investable assets, and planned future contributions. What do you want to accomplish, and when do you need to accomplish it by?

2. Investing in individual stocks instead of in a diversified portfolio of securities.

Investing in an individual stock increases risk vs. investing in an already-diversified portfolio. Investors should maintain a broadly diversified portfolio incorporating different asset classes and investment styles. Failing to diversify leaves individuals vulnerable to fluctuations in a particular security or sector. Also, don’t confuse stock diversification with portfolio diversification. You may own multiple stocks but find, on closer examination, that they are invested in similar industries and even the same individual securities. There is no guarantee that a diversified portfolio will enhance over returns or outperform a non-diversified portfolio. Diversification does not assure a profit or protect against market losses.

3. Buying High & Selling Low

The fundamental principle of investing is buy low and sell high. So why do so many investors get that backwards? The main reason is “performance chasing,” Too many people invest in the asset class or asset type that did well last year or for the last couple of years, assuming that because it seems to have done well in the past it should do well in the future. That is absolutely a false assumption. The classic buy-high/sell-low investor profile is someone who has a long-term investment strategy, but doesn’t have the tenacity to stick with it. The flip side of the buy-high-sell-low mistake can be just as costly. Too many investors are reluctant to sell a stock until they recoup their losses. Their ego refuses to acknowledge a mistake of buying an investment at a high price. Smart investors realize that may never happen and cut their losses. Keep in mind not every investment will increase in value and that even professional investors have difficulty beating the S&P 500 index in a given year. It can be smart to have a stop-loss order on a stock. It’s far better to take the loss and redeploy the assets toward a more promising investment.

4. Unrealistic expectations

As we witnessed during the recent bubble, investors can periodically exhibit a lack of patience that leads to excessive risk-taking. It is important to take a long-term view of investing and not allow external factors cloud actions and cause you to make a sudden and significant change in strategy. Comparing the performance of your portfolio with relevant benchmark indexes can help an individual develop realistic expectations. According to Ibbotson Associates, the compound annual return on common stocks from 1926-2001 was 10.7% before taxes and inflation and 4.7% after taxes and inflation. Returns on long-term bonds over the same time period were 5.3% before taxes and inflation and 0.6% after taxes and inflation. Expecting returns of 20-25% annually will set an investor up for disappointment.

5. Emotion trumps rational judgment People hate to lose more than they like to win. This fear of regret causes investors to hold on to losers too long and sell winners too early. Investors tend to hold on to losing investments hoping that they will come back, rather than taking advantage of tax breaks. The contrary is true with winning stocks. Fearing a downturn and wanting to lock in profits, investors will sell stocks too early and miss out on potential future gains. 6. Timing the market Market timing isn't something for the individual. The basic idea is to buy at a set price at the end of the day and then selling on the next trading day (assuming the price rises). For the individual investor, this practice seldom makes sense for two reasons: first, profits are eaten by fees; second, the gains are fractions of pennies, so few individual investors have the cash to make these transactions worthwhile. What to do instead: In short, don't do it.

7. Procrastination.

Waiting for the right time can ruin your results over a lifetime. Procrastination takes many forms. You don’t start saving for retirement until it’s nearly on top of you. You “know” you should review your investments but other things always seem more pressing. You think you’ll catch up later when the market is better, when you’re making more money, when you have more time. And there’s the irony, because the longer you wait, the less time you have. Every day you delay is a day of opportunity that you can never get back.

8. Trusting institutions

It can be a mistake to rely solely on a broker or a brokerage firm, an insurance agent or your banker to tell you what’s in your financial best interest. The same is often true of government agencies, but that’s an entirely different topic.

9. Requiring perfection in order to be satisfied

We’ve all known people whose attitude is that nothing is good enough for them. People who can’t stand to have anything but “the best” are rarely successful at investing. In fact, there will always be something that’s performing better than whatever you have. If you happen to have the one stock that outperforms everything else this month, you are practically guaranteed that some other one will be ahead of yours next month. Perfectionists often flit from one thing to the next, chasing elusive performance. But in real life, you get a premium for risk only if you stay the course. And if you demand perfect investments, you’ll never stay the course.

10. Accepting investment advice and referrals from amateurs

If you had a serious illness, I hope you’d consult a nurse or a doctor, not somebody on the street who had an opinion about what you should do. And I hope you would treat your life savings and your financial future with the same care as you would treat your health. Yet too many people make big financial decisions based on things they hear. “I heard this hot tip.” “I know somebody in this company.” “I’ve got an inside source about this new product.” “My broker is making me a ton of money.” The lure of the hot tip is all but irresistible to some investors eager to find a shortcut to wealth. Unfortunately, many investors have to learn the hard way that there are no reliable shortcuts.

11. Letting emotions – especially greed and fear – drive investment decisions

I think the two most powerful forces driving Wall Street trends are greed and fear. Think about these two emotions the next time you listen to a radio or TV commentator explain what’s happening in the stock market. You’ll hear fear and greed over and over. There’s fear of rising interest rates, fear of inflation, fear of falling profits. You name it, somebody’s afraid of it. Fear is why so many investors bail out of carefully planned investments when things look bleak – and since everybody seems to be selling at the same moment, prices are down. That, in turn, reduces profits or increases losses. Greed blinds investors, making them forget what they know. In late 1999 and early 2000, greed prompted many inexperienced investors – and some experienced ones too – to stuff their portfolios with high-flying technology stocks, which had just had a terrific year. In the spring of 2000, technology stocks, especially the most aggressive ones, plunged without warning, leaving many of these greedy investors wondering what had hit them. Investors obviously want to make money. But this legitimate desire turns into greed when it runs amok. Likewise, investors obviously should want to avoid losing their money. Yet when a healthy respect for bear markets leads to panic selling, caution becomes counterproductive.

12. Focusing on the wrong things

It’s generally agreed that asset allocation – the choice of which assets you invest in – accounts for a large majority investment returns. That leaves less than a small percent for choosing the best stocks. But most investors focus at least 95 percent of their attention on choosing funds and stocks. Their energy would usually be better spent on asset allocation. Some investors also focus on small parts of their portfolios instead of the entire package. They can become obsessed with some small investment that seems to stubbornly refuse to do its part. Occasionally, an enraged investor will overthrow an entire strategy because of what happens to some small component of it.

13. Needing proof before making a decision

The ultimate stalling tactic for those who aren’t ready to make an investment is to require one more piece of information or evidence. You can get evidence, but not proof. You can prove what happened in the past. But there’s no way to prove anything about the future except to wait until it happens. There are two track records for any investment. The first one just came to an end, and it includes all of history. It can tell you the range of returns and risks that are reasonable to expect. But it can’t tell you anything about the future. The second track record starts the moment you invest. It’s the only track record that matters to you, and it may or may not have any resemblance to the track record of history. The only thing you can be sure of about the future is that it won’t look just like the past. That’s why savvy investors diversify beyond what seems certain at any given moment. To be a successful, happy investor, you’ve got to somehow learn to live with the ambiguity of an uncertain future.

No Need To Worry As You Can Easily Recover Your Unclaimed Money All By Yourself!

It is not uncommon for individuals to receive letters, telephone calls or emails informing them that they are owed unclaimed money. Further, it is not uncommon for such a person to offer assistance in recovering the money. Of course, this service shall not be offered for free but shall be offered for a price. However, why should you pay to get what is already yours? Why should you pay to get your unclaimed money when you can get your unclaimed money with very little expenditure?

Be assured that the process of funds recovery or money finding, as it is also called, is not illegal. Such persons are called property locators or heir finders.

These individuals cannot charge a huge amount of money for providing the service to you. In fact, the law clearly provides the limit beyond which the person offering the unclaimed money recovery service cannot charge. The person is paid for performing the task of locating the money owed to you, locating you and connecting the two.

However, if you do not want to use the services of an intermediary and if you want to claim the money yourself, you can always go ahead and complete the formalities yourself.

Unclaimed money can come into existence through many financial transactions and financial instruments. The money that is lying idle in your old checking or savings accounts or the forgotten stocks, bonds, dividends, insurance policies, safe deposit boxes etc are the primary sources of unclaimed money. After a period of inactivity with no contact from the clients, the institutions hand over the money to the state.

Once, the state or the federal agency possess your money, they simply wait for you to come and claim it. Ideally speaking, the agencies are supposed to advertise the presence of unclaimed money owed to you. However, this rarely, if ever, happens and the individual remains unaware of the problem.

Now, if you want to find the unclaimed money all by yourself, this is what you should do. Firstly, you will have to search an unclaimed money database. This is the most efficient and effective way to initiate the process. You ought to use a database that covers all state and federal databases. Searching just one or few databases will render your search incomplete.

The all-in-one databases require payment of money if you want to access the same. However, to ensure that you do not incur unnecessary expenditure, you are allowed a free search to determine whether you are owed unclaimed money or not.

To determine whether you are owed unclaimed money or not is just the first step. Once this is done, the individual has to fill out the appropriate claim forms to initiate the process of recovery. The forms can be downloaded for free from most websites. Proof of identification and/ or proof of ownership of unclaimed money also have to be attached.

The agency holding your money will, naturally, verify your claim and the unclaimed money check should land at your doorstep within two to sixteen weeks.

Additional documentation may be required and the agency will contact you accordingly

This information is sufficient for you to find and claim the unclaimed money owed to you. The best part is that you do not have to pay anybody for the same.