DailyFinance.comhttp://www.dailyfinance.comDailyFinance.comhttp://o.aolcdn.com/os/df/2013/img/2-dailyfinance_logo_m.pngDailyFinance.comhttp://www.dailyfinance.comen-usCopyright 2013 Weblogs, Inc. The contents of this feed are available for non-commercial use only.Blogsmith http://www.blogsmith.com/Want to Refinance Your Student Loans? The CFPB Wants to Helphttp://www.dailyfinance.com/2013/05/18/refinance-student-loans-cfpb-proposal/http://www.dailyfinance.com/2013/05/18/refinance-student-loans-cfpb-proposal/http://www.dailyfinance.com/2013/05/18/refinance-student-loans-cfpb-proposal/#commentsFiled under: , , , ,

Student loans repayments
Getty Images
In recent years, millions of homeowners have taken advantage of low interest rates to refinance their mortgages. Yet one area where most people haven't benefited from lower rates on long-term debt is with their student loans.

One government agency is looking to draw attention to the impact that student loans have on the overall economy and the potential economic boost that better student-loan refinancing options could have.

How Student Loans Hurt the Economy

The Consumer Financial Protection Bureau presented a report last week that detailed the negative impact of high student-loan debt on the U.S. economy. Home ownership, new business formation, reduced retirement savings, and labor shortages in lower-paying occupations were just a few of the effects that the report cited as problematic.

The CFPB specifically highlighted the inability of most student-loan borrowers to refinance their debt as a key cause of those bad economic effects. Because most student loans get marketed directly through schools, borrowers' access to information on student loans falls sharply once they graduate and leave campus. With most students having multiple loans outstanding, often from different sources, it can be very difficult to get a handle on overall indebtedness in considering potential refinancing options.

The lack of availability for refinancing is particularly problematic when you consider how much graduates should be able to save.

Sponsored Links
On the front end it makes sense that rates are higher on loans -- particularly private ones that don't have a federal guarantee. Banks take on huge amounts of risk when they extend credit to students who, at this point, lack any substantial credit history and have no assured future earnings to support repayment.

But by the time they graduate and get work, student-loan borrowers have much more extensive credit histories and financial resources that make them much less risky. Lenders should reward the boost in creditworthiness with lower interest rates. But the lack of an active and competitive market for refinancing student loans prevents borrowers from easily finding options to cut their payments.

A Possible Solution

The CFPB believes that one solution could involve using the Federal Financing Bank or another government-agency funding source to give student-loan lenders the ability to get capital more easily.

In essence, a program might work similarly to the way that mortgage agencies Fannie Mae and Freddie Mac provide money to banks in exchange for qualifying mortgage loans, which Fannie and Freddie then package into asset-backed securities. Tax-exempt funding from state and municipal sources could also spur greater activity.

On the other hand, regulators will need to be careful to avoid spurring too much activity in the student-loan refinancing market. Many blame Fannie and Freddie for helping to puff up the housing bubble by making it too easy for banks to make mortgage loans without worrying about credit quality.

In order to avoid a similar bubble in student loans, restrictions on access to capital need to be more stringent than they were for mortgages during the housing boom.

What to Watch For With Refinancing

At this point, though, loan consolidation and other refinancing options are available, although limited in scope. They also come with some potential pitfalls:
  • If you refinance or consolidate a federal student loan, you run the risk of losing many of the advantages that federal loans have over other types of student loans. In particular, deferment or loan forgiveness provisions are often available only for certain federal loans, and privately refinanced debt won't give you those same options.
  • One big draw of consolidation or refinancing is the chance to lower monthly payments. But many lenders do so not by cutting rates but rather by extending repayment periods. In other words, lower payments come at the price of having outstanding debt for years longer than you'd originally planned.
Given how low interest rates are right now, it's a smart time for those with substantial student debt obligations to look into ways to reduce their financing costs. As difficult as that is to do currently, the future could make things a lot easier for student-loan borrowers if the CFPB's vision becomes reality.

Permalink | Email this | Comments

]]>CFPBConsumer Financial Protection BureauFannie MaeFinanceFreddie Maclow interest ratesrefinancingstudent loan debtStudent LoansDan CaplingerSat, 18 May 2013 05:00:00 EST5 Mortgage Facts You (Really, Seriously) Need to Knowhttp://www.dailyfinance.com/2013/05/17/5-mortgage-facts-you-need-to-know/http://www.dailyfinance.com/2013/05/17/5-mortgage-facts-you-need-to-know/http://www.dailyfinance.com/2013/05/17/5-mortgage-facts-you-need-to-know/#commentsFiled under: , , ,

Mortgage
Alamy
One reason why the housing bust was so severe was that millions of homeowners got blindsided by the terms of their own mortgage loans. Yet years after the financial crisis, potential buyers still don't know everything they should about financing a home purchase -- even the most basic things.

Zillow recently surveyed prospective and current homeowners about their mortgage expertise, and results from the study reveal that many homebuyers don't know the answers to simple questions about mortgages.

To help fill in the gaps in their knowledge, let's look at five important facts you really need to know about your mortgage.

Fact 1: APR means "annual percentage rate" and measures mortgage costs.

The cost of mortgage loans is more complicated than you might think, as you can't just consider the stated mortgage rate. In addition to interest, you also have to take upfront origination fees, closing costs, and any mortgage points you pay into account in order to get a full sense of the total cost of your loan. The APR makes allowances for all those costs, giving you a better gauge against which to make comparisons between different lenders. Often, you'll find that lenders that offer lower rates actually end up charging a higher APR once you add in the fees.

Fact 2: Mortgage rates change rapidly.

Many homeowners mistakenly believe that mortgage rates are stable. Yet the same way that stocks, bonds, and other financial investments rise and fall throughout the day, mortgage rates are subject to the same market forces. As a result, even a quote you receive earlier on the same day might be out of date if you try to lock in later in the afternoon. That hasn't been a huge problem lately, with rates near all-time lows, but in more challenging interest rate environments, it's essential to understand the value of getting a mortgage rate locked in quickly.

Fact 3: Different lenders charge different rates and fees.

Mortgages have gotten a lot of attention from federal regulators lately, with efforts to prevent abuses and standardize procedures for getting mortgage loans. But there aren't any regulations that require different lenders to offer the same rates on mortgages. On top of that, lenders are free to charge different amounts in fees for related services like appraisals, title insurance, and credit checks. Comparing notes with different lenders will help you make sure you're paying as little as possible for those fees while getting the best rate you can find.

Fact 4: Refinancing may be possible even if you're underwater on your mortgage.

During the financial crisis, homeowners who suddenly found themselves owing more money on their mortgages than their homes were worth found it nearly impossible to take advantage of low interest rates to refinance their mortgages. But with federal government assistance through the Home Affordable Refinance Program or the FHA Streamline Refinance program, many homeowners have successfully refinanced their existing mortgages despite being underwater on their loans. Different rules apply depending on whether your loan is backed by Fannie Mae, Freddie Mac, or the Federal Housing Administration. But if you haven't refinanced lately, it's still worth looking to see if you qualify.

Fact 5: Low-down-payment loans are still available.

Ideally, putting 20 percent toward a down payment when you get a mortgage loan will give you immediate equity in your new home. But most people struggle to save up even a fraction of that amount. Under certain loan programs offered by federal agencies like the Federal Housing Administration, the Veteran's Administration, and the Department of Agriculture, you may be able to get financing with little or no money down. FHA loans in particular have become extremely popular recently, with terms that make 3.5 percent down payments possible.

Permalink | Email this | Comments

]]>buying a houseFannie MaeFHAFinancefinancial literacyFreddie Macmortgage ratesmortgagesZillowDan CaplingerFri, 17 May 2013 05:00:00 ESTWhat Makes a Perfect Stock?http://www.dailyfinance.com/2013/05/16/perfect-stock-characteristics/http://www.dailyfinance.com/2013/05/16/perfect-stock-characteristics/http://www.dailyfinance.com/2013/05/16/perfect-stock-characteristics/#commentsFiled under: , ,

Trader on the floor of the NYSE
Getty Images
Over the past several years, I've looked at hundreds of different companies in a quest to find stocks with the ideal combination of favorable attributes.

Yet while few stocks have everything one might want to see in an investment, knowing the most desirable traits of great stocks can guide you in making choices for your own portfolio.

Here's a guide to what to look for in a stock to decide whether it's perfect for you.

Growth: The Key to Future Value

Stagnant businesses without any future prospects may be profitable, but they can't produce the strong returns that stock investors rely on. Therefore, for a business to thrive, it needs to grow.

Healthy businesses focus on increasing the sales they make to their customers year in and year out, finding new ways to capture more revenue from their existing clientele, and offering innovative high-value goods and services to bring new customers in the door.

The best growth stocks are able to grow sales at a 15 percent annual clip consistently over a long period of time. Although year-to-year blips may temporarily depress growth, keeping sales up over the long haul ensures that companies remain on the cutting edge of their industries and aren't simply coasting on their past success.

Profitability: Turning Sales Into Cash

As important as sales growth is, a company won't survive if its costs are greater than what it gets paid for its products. Businesses need to control their costs and allow as much of their sales to fall through to the bottom line as net income.

To measure exactly how much of every dollar of revenue becomes profit, you can look at various margin figures.
  • Gross margins tell you what percentage of sales revenue is left after subtracting the direct costs of producing goods or providing services.
  • Net margins deduct the other expenses of doing business, such as overhead, marketing and advertising, and interest expense.
Gross margins above 35 percent and net margins of 15 percent or more indicate that a company is working hard to squeeze as much profit as possible from its business.

In some industries, though, these numbers aren't realistic. For instance, in the grocery business, much narrower margins exist because the goods are commodities, with prices subject to market forces rather than being under the grocer's control. But when you compare a stock to its industry peers, high margins indicate a superior company.

Another measure of profitability is return on equity, which measures how much profit a company produces in comparison to the shareholder equity within the company. Returns on equity of 15 percent or more indicate that a company is finding lucrative opportunities to invest in its business that create substantial profits. In contrast, lower or negative returns on equity suggest that companies might be better off simply returning shareholder capital to investors in the form of dividends.

Balance Sheet: Being Responsible With Shareholder Value

As a stock investor, you benefit the most from increases in a company's overall value. But if the company has other stakeholders -- such as bondholders or banks that lend it money -- then it can't focus solely on doing whatever it takes to make your shares worth as much as possible.

Sponsored Links
In certain cases, companies have to take actions that harm their shareholders in order to fulfill their obligations to their creditors.

To avoid those conflicts, the best stocks keep control of their debt. It's not necessary to avoid debt entirely, but keeping it down to manageable levels of less than 50 percent of shareholder equity will help ensure that debt doesn't create difficult situations for stock investors.

Valuation: The Right Stock at the Right Price

A great company can be a terrible investment if you have to overpay for it. Countless companies have had amazing growth prospects only to collapse under the weight of their own business models, and investors who get caught up in stock-market hype rather than business fundamentals often end up overpaying for hot stocks.

Different investors have different thresholds for valuations based on earnings, but looking for a price-to-earnings ratio of 20 or less is a very reasonable benchmark. The best value stocks often sport earnings multiples well below 20, but using a somewhat higher standard leaves room for higher-growth companies that command more respect from investors.

Dividends: How a Stock Rewards You

Finally, the best stocks not only pay solid dividends but continue to reward shareholders through dividend increases over time. In the end, the cash you get in dividends is the most tangible sign of a stock being a good investment.

Looking for stocks with dividend yields at or above the 2 percent level corresponds well to the average dividend for the broader market. Seeking a record of 10 percent annual dividend growth weeds out stagnant stocks with poor growth prospects.

Don't Settle For Less Than the Best

Finding stocks that have all of these traits is a tall order. But if you can identify which stocks excel at delivering these desirable attributes to their shareholders, it can give you a useful starting point in deciding whether a stock belongs in your portfolio.

Gallery: 16 Big Bubbles That Are Getting Ready To Burst

TextbooksChinese HousingBitcoinU.S. Treasury SecuritiesGuns and Ammo

Permalink | Email this | Comments

]]>Corporate profitsdebtDividendsearningsFinanceGrossgrowthNetpicking stocksStocks to buyValuationDan CaplingerThu, 16 May 2013 12:43:00 ESTDerailed! Why Your Finances Have Fallen and Can't Get Uphttp://www.dailyfinance.com/2013/05/16/retirement-savings-derailers-ameriprise-report/http://www.dailyfinance.com/2013/05/16/retirement-savings-derailers-ameriprise-report/http://www.dailyfinance.com/2013/05/16/retirement-savings-derailers-ameriprise-report/#commentsFiled under: , , , ,

Finances bad
Getty Images
In the wake of the market meltdown that began nearly five years ago, a huge bull market in stocks has helped rescue many retirement investors from the brink of ruin. Yet even with the support of the stock market, many Americans still report big losses in their retirement savings -- we're talking six-figure declines -- and they're blaming unanticipated life events that have affected their ability to achieve their financial goals for retirement.

Major unexpected events have hit 90 percent of Americans between the ages of 50 and 70 with at least $100,000 in investable and retirement assets, according to the Retirement Derailers survey from Ameriprise Financial.

The survey found that typical respondents suffered an average of four such "derailers," and the cost was substantial, causing total average losses of $117,000. For the 37 percent of respondents who said they went through five events, the total losses were even larger, averaging $144,000.

Given the stock market's huge plunge in 2008 and early 2009, you might expect that it would be the most commonly cited derailing event. But surprisingly, the most common derailer was the low interest rate environment, with 63 percent of those surveyed blaming low rates in hampering retirement-portfolio growth. Another 55 percent pointed to the stock market's decline, while 33 percent cited the plunge in home prices as wiping out a big chunk of their expected home equity.

Yet market forces weren't solely to blame for financial difficulties. Job loss hit 18 percent of those surveyed, while 23 percent point to the need to support adult children or grandchildren as hampering their finances.

Are Boomers In Denial?

As troubling as those figures are, what could be even more problematic is the extent to which Americans don't fully realize the impact that major losses will have on their retirement.

Only 35 percent believe that derailers will hurt their capacity to pay essential living expenses a lot or a fair amount. It takes several major disruptive events to get the point across, as 60 percent of those who dealt with five or more derailers expected greater difficulty in paying for essentials.

Sponsored Links
Moreover, American baby-boomers don't seem to understand the importance of actually staying on pace to achieve the goals they've set for their retirement finances.

More than 60 percent still think they're on a "smooth" road to retirement rather than a "bumpy" one. Yet, 42 percent say that their investment portfolios have left them with less than they expected 10 years ago to have by now, and more than 55 percent of those who've suffered an unexpected event describe the impact it has had on their finances as extremely serious or somewhat serious.

Lessons For the Future

The Baby Boomers surveyed here haven't given up hope and they plan to take action on their own to help get their finances in better shape.

But what future generations can take from Boomers' opinions is the lesson that paying attention to your money earlier in life can make a big difference in how your finances look by the time you approach retirement.

In particular, 57 percent said that they would have started saving earlier if they'd known how difficult it would be to handle unexpected financial challenges. Another 37 percent think that knowing more about investing at an early age would have helped them avoid their current fate, while 33 percent pointed to overspending on vacations and restaurants as contributing to their woes.

It's never too late to start working to get yourself in better financial shape. For those who have already retired, adjusting the investments you already have to make better use of income and growth opportunities can help you stretch your portfolio as far as it'll go. Boomers who are still working have an chance to boost their savings and take advantage of the final years of their career to try to get back on track.

Still, the sooner you get a grip on your finances, the easier it is to get yourself where you want to be by the time you retire. The Ameriprise survey is just one more piece of evidence showing how important it is plan for your future as early as you can.

Gallery: 13 Money Lies You Should Stop Telling Yourself By Age 40

1. Debt collectors will stop chasing me once I'm in retirement, so why worry about it?2. I can definitely get by in retirement with less income than I'm making now.3. I can always save more by postponing retirement until my late 60s or early 70s.4. I can always rely on Medicare for my long-term health care needs.5. My nest egg will be safe in a bank account.

Permalink | Email this | Comments

]]>Ameriprise FinancialFinanceinterest ratesInvestmentretirement planningDan CaplingerThu, 16 May 2013 05:00:00 ESTMedicare Explained: Understanding the Basics from Part A to Part Dhttp://www.dailyfinance.com/2013/05/14/medicare-explained-part-a-b-c-d/http://www.dailyfinance.com/2013/05/14/medicare-explained-part-a-b-c-d/http://www.dailyfinance.com/2013/05/14/medicare-explained-part-a-b-c-d/#commentsFiled under: , , , , ,

MCT / Getty Images
Health care is one of the toughest financial challenges you'll face in retirement. For millions of retirees, Medicare coverage that takes effect for most people at age 65 is the key to being able to afford health care costs that would otherwise quickly sap their retirement savings.

But over the years, Medicare has gotten increasingly complicated, and with the emergence of Obamacare, Americans are struggling to understand exactly how to get their health care covered.
To help you get a handle on Medicare, let's run through the different types of coverage the program provides.

The Medicare Alphabet

Since 1965, Medicare's two original components have helped cover basic health needs.

The first, known as Part A, focuses on the costs of health care at medical facilities, providing coverage for medically necessary care at hospitals while you're receiving inpatient care. Under some circumstances, it also covers costs for home health services, hospice care, and skilled nursing facilities. However, nursing home costs are covered only for limited purposes and time periods.

Medicare Part B covers the costs of health care outside medical facilities, such as doctors' visits, outpatient procedures, and lab tests. It also helps cover the cost of services related to health care, such as wheelchairs and scooters, oxygen tanks, and ambulance services. In addition to providing coverage for health care needs that qualify as medically necessary, Part B also covers certain preventive-care services, such as screening for heart conditions, diabetes, and certain types of cancer.

In addition to government-provided Parts A and B, Medicare Part C is optional private insurance that Humana (HUM), Aetna (AET), UnitedHealth (UNH), and others provide. Better known as Medicare Advantage Plans, Part C involves paying premiums to those insurers, which then provide coverage for charges that Parts A and B don't pay for. Medicare Advantage Plans vary greatly both in cost and in scope of coverage, so you have to look closely at all your options to make sure they fit what you want from a plan.

Finally, Medicare Part D provides prescription drug coverage. Like Medicare Advantage Plans, Part D plans are offered through private insurance companies, and the coverage that different policies offer can vary widely from insurer to insurer and from plan to plan. In fact, many Part C Medicare Advantage Plans include Part D options within a single package.

How You Pay for Medicare

Each part of Medicare has different charges associated with it. For Part A, those who've had Medicare taxes withheld from their pay for at least 40 calendar quarters during their lifetime are eligible for free coverage.

Sponsored Links
Part B coverage requires a monthly premium that varies depending on your income level. Individuals with yearly income in 2011 of $85,000 or less, or joint tax-return filers with $170,000 or less in income, all pay $104.90 in monthly premiums for Part B. Above those levels, premiums are higher, topping out at $335.70 per month for incomes above $214,000 for singles and $428,000 for joint filers.

Private insurance for Medicare Advantage and prescription drug coverage involves paying monthly premiums to the insurers that provide your policy. What you'll pay in premiums depends in large part on the extent of the coverage the policy provides, with more all-inclusive policies charging higher monthly premiums.

In addition to premiums, you may also be responsible for deductibles, copayments, and other costs. For instance, hospital stays and covered skilled-nursing care often requires a per-day copayment from the patient.

Adding It All Together

Medicare is a complex system that has many interlocking parts. By understanding how they all work, however, you'll be in the best position to get everything you're entitled to receive under Medicare.

For more information on Medicare, visit the government's Medicare website here.

Motley Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group.

Gallery: The 10 Biggest Things Your Income Taxes Pay For

1. National Defense.2. Health Care3. Income Security4. Interest5. Veterans' Benefits

Permalink | Email this | Comments

]]>AetnaHealthhealth careHumanamajor illnessMedicareMedicare AdvantageMedicare Part DObamacarePatient Protection and Affordable Care ActretirementUnitedHealth GroupDan CaplingerTue, 14 May 2013 05:00:00 ESTHow Often Should You Check Your Stocks?http://www.dailyfinance.com/2013/05/14/how-often-should-you-check-your-stocks/http://www.dailyfinance.com/2013/05/14/how-often-should-you-check-your-stocks/http://www.dailyfinance.com/2013/05/14/how-often-should-you-check-your-stocks/#commentsFiled under: , , , ,

ipad checking stocks
Alamy
It's easier than ever to keep track of your investments 24/7, with increasingly powerful tablets and smartphones bringing you instant access to your portfolio's minute-by-minute value. But do you really need to follow your portfolio all day, every day?

For most people, the answer is a resounding no.

Don't Be a Glutton for Punishment

As investing and personal finance expert Larry Swedroe has pointed out, checking your portfolio on a daily basis greatly increases the chances that you'll inflict painful bad news on yourself.

Swedroe notes that on average, stock prices fall roughly 50 percent of the time in any given day -- meaning that half the time you'll end up feeling bad about your investments. But the general upward trend of the market means that if you check less frequently, not only do you get bad news less often, you'll get it a smaller percentage of the time -- about 38 percent of the time if you check on a monthly basis, and about 28 percent if you look only once every year.

Moreover, by tuning out the daily noise, it's easy to stay focused on the fundamentals that drive stock prices in the long run.

Jack Bogle, founder of the popular Vanguard Group, has long advised investors to ignore the stock market's volatility, as it distracts you from making smart long-term investing decisions. And anyhow, by the time you hear about important news, it's usually too late to take action, as the stock price has generally already moved.

Find the Right Balance

Of course, it's easy to go too far in the opposite direction if you neglect your portfolio for too long.
Over periods of years, changing market conditions can lead to big swings in the risk level in your portfolio. Checking in occasionally to do some regular portfolio rebalancing will prevent your investments from getting out of balance.

Sponsored Links
For instance, since 2009, the stock market has more than doubled. If you haven't made any adjustments to your overall investment mix, you might well have far more invested in high-risk assets like stocks than you thought.

For those who invest in individual stocks, moreover, staying tuned to major announcements like quarterly earnings reports can be a great opportunity to check how a company is doing compared to your expectations.

If you have the discipline to avoid reflex responses to the immediate headline news of the day from a company releasing earnings, quarterly reports are usually jam-packed with new information about a company's long-range business prospects. By staying up-to-date on changes to overall strategic visions within a company, you can verify whether the stock still makes sense as an investment for you.

What's Right for You?

There's no single answer for everyone that gives the perfect length of time to go between checking in on your portfolio. But here are some general rules to consider:
  • The simpler your investing strategy is, the less often you'll need to watch how it's working. More complicated strategies often don't work if you don't keep a careful eye on market conditions, so if you use them, you'll need to take more advantage of your ability to stay connected to what's happening with your assets.
  • The more prone you are to respond emotionally when something goes wrong with your investments, the less you should look. Anger leads to irrational action, and acting when you should sit tight is one of the biggest mistakes investors make.
  • If you have a professional financial advisor, don't assume that you should check your investments any less frequently. Advisors won't necessarily contact you as often as you'd like, and they may not pay attention to the things that are most important to you. Keeping abreast of your own finances is crucial even if you've hired people to help you.
By keeping these rules in mind, you should be able to figure out how often you really need to pay attention to your investments -- and how much time you can free up to pay more attention to other important things in your life.

Plus, by buying shares of companies that are able to grow their earnings and dividends over time, you'll make money over the long haul, irrespective of how share prices move from day to day or minute to minute.

-----------------------------

Gallery: The Monster in the Closet: Economic Horrors and Scary Movies


Permalink | Email this | Comments

]]>Buy and Holdemotional investingFinanceFinancial advisorinvestingportfolio rebalancingstock market todaystocksDan CaplingerTue, 14 May 2013 05:00:00 ESTThe Consequences of Dying Without a Willhttp://www.dailyfinance.com/2013/05/09/dying-without-a-will-intestate/http://www.dailyfinance.com/2013/05/09/dying-without-a-will-intestate/http://www.dailyfinance.com/2013/05/09/dying-without-a-will-intestate/#commentsFiled under: , , ,

Amy Winehouse
AP
Real-estate developer Roman Blum wasn't famous during his lifetime. But when the 97-year-old died in 2012, he quickly became famous for something he didn't to do during his lifetime: write a will. Or, if he did write one, he neglected to leave it where someone could find it.

Blum, a Holocaust survivor with no living family members, passed away with an estate worth nearly $40 million. It is the largest unclaimed estate in the history of the state of New York, and unless the court-overseen administrator of his assets finds relatives through a genealogist search, every penny could end up going to the state government.

Legacies Left in Limbo

Millions of people don't have wills, never considering the consequences of their actions on the family members and friends who survive them.

Fortunately, getting a will in place doesn't have to be complicated; even a simple will is enough to express your intent for who should receive your assets after your death. Moreover, if you have minor children, wills allow you to name a guardian for them that will avoid any uncertainty about who you want to care for them if something happens to you.

Sponsored Links
At the same time you get your will done, you should also consider some other valuable estate-planning documents. Living wills and health-care proxies can give doctors and family members more guidance on how you want your medical care handled if you're incapacitated, while a durable power of attorney allows a trusted person to handle your finances when you can't. Here's a rundown of the 10 important documents you should have.

You may not be as rich or famous as the celebrities below, but their lives -- and deaths -- offer a cautionary tale for what can happen when you die intestate. Making a will might seem like a chore, but getting it done will go a long way toward avoiding family feuds after your death and having your memory overshadowed by discord among your loved ones.

Gallery: Famous Legacies (and Fortunes) Left In Limbo

1. Amy Winehouse2. Jimi Hendrix3. Stieg Larsson4. Barry White5. Sonny Bono

Permalink | Email this | Comments

]]>amy winehouseBarry Whitedying without a willhealth care proxyhoward hughesjimi hendrixliving willpowerofplanningroman blumsonny bonostieg larssonDan CaplingerThu, 09 May 2013 14:00:00 ESTMoney Lessons From Momhttp://www.dailyfinance.com/2013/05/08/mom-money-lesson/http://www.dailyfinance.com/2013/05/08/mom-money-lesson/http://www.dailyfinance.com/2013/05/08/mom-money-lesson/#commentsFiled under: , , , ,

Mother's lessons in money
Alamy
My mom passed away 10 years ago. She never had the chance to meet her granddaughter, but she did leave a valuable inheritance for my daughter and our entire family for generations to come.

Before you jump to the wrong conclusion, Mom wasn't rich. Like many people her age, she had a decent-sized nest egg that she fussed and worried over in her retirement years, especially when after her 70th birthday her battle with cancer forced her to stay at home. As it turned out, her savings proved sufficient to cover her own expenses with something left over for my brother and me.

The most valuable thing Mom passed along was not the money, but the lessons she taught us about money and its importance in living a well-balanced life. These are lessons we'll pass along to our children and hopefully they'll do the same.

Inheriting good sense
A kid and his money are soon parted, especially when there are toys and other temptations to be had.

And so it was in our household. But Mom let me make my own financial mistakes as a child, and by doing so she achieved the far greater goal of giving me a healthy skepticism about overhyped products and the people who tried to sell them to me.

From Star Wars figures to deferred-load mutual funds, Mom somehow got me to appreciate my own ability to manage my money and was more and more confident in me as time went by.

As the years go by, I never stop learning new things about money and investing. It's that desire for knowledge that is my mother's greatest gift. If you have the drive to learn, you can do anything you want with your money.

From my mom to you (or yours)
I fondly think back on many things my mom used to pound into my brain. Let me share some of her wisdom:
  • Save, save, save. From having your kids gather pennies and nickels to setting up their very first savings account, teaching your kids the power of not spending their money right away will pay dividends throughout their lives.
  • Steer clear of fees. Mom never liked the idea that her broker was making more money on her account than she was. If you agree, learn to use discount brokers and no-load mutual funds to keep more of your money. Your broker won't like it, but your family will love it.
  • Be conservative. Playing it safe may not be the most glamorous way to manage your finances, and it doesn't always produce the best returns. But if you can save enough, you don't need to gamble as much on whether aggressive stock investments will pay off. Moreover, planning for a less favorable rate of return may help you through unanticipated tough times, such as the meltdown in the financial markets five years ago.
  • Stay out of debt. Except for her mortgage, Mom didn't believe in debt. Her idea was that if you couldn't pay cash, you just hadn't saved enough yet. Although avoiding credit entirely is a no-no in today's financial world, in which having a good credit score is essential for everything from finding a place to live to getting your next job, not taking on unnecessary debt is still good advice.
  • Take care of your family. Mom did her best to take care of her financial affairs before she died, and in the end, she did a good job. Your family deserves the same, whether it's a simple will or more complicated estate planning.

It's simple advice, but it can have a profound effect on your family. My daughter may never realize where those lessons originally came from, but I know she'll get a lot out of what my mom taught me.

Thanks, Mom, and happy Mother's Day.

Gallery: Old-School Money Tricks That Still Work

Re-crown cashToss your spare change in a mason jarJoin the clubSay hi to your neighborhood tellerBank local


Living With Parents Can Lead to Financial Independence

Permalink | Email this | Comments

]]>budgetingdiscount brokersexpensesfeesmoneymoney lessons for kidsmoney managementmothers dayretirementsavingDan CaplingerWed, 08 May 2013 05:00:00 EST9 Numbers That'll Tell You How the Economy's Really Doinghttp://www.dailyfinance.com/2013/05/07/economic-indicators-made-easy/http://www.dailyfinance.com/2013/05/07/economic-indicators-made-easy/http://www.dailyfinance.com/2013/05/07/economic-indicators-made-easy/#commentsFiled under: , , , , , ,

Economy NumbersInvestors today have to keep track of more information than ever to make smart decisions. But no one has time to look at every piece of news that could affect their investments, so it's important to know which information is the most valuable.

We've whittled the vast universe of economic data down to these nine key numbers that will give you a quick handle on the health of the economy. One thing to remember with all of these numbers is that from month to month, they'll often have big swings. Think of them as part of an ongoing pattern from which you can draw conclusions about trends and changing conditions. Don't let any single number in any single month influence your views on the economy too much, but use them to help inform and guide your personal investment decisions.

Gallery: 9 Numbers That'll Tell You How the Economy's Really Doing

1. Gross Domestic Product2. Consumer Price Index3. Unemployment Rate4. Trade Deficit5 & 6. Personal Income and Personal Spending


Permalink | Email this | Comments

]]>Bureau of Economic AnalysisBureau of Labor StatisticsCaseShiller indexconsumer confidenceconsumer price indexconsumer spendingCPIEconomic IndicatorsFinanceGDPhome pricesleading economic indicatorspersonal incomeThe Conference BoardTrade Deficitunemployment rateDan CaplingerTue, 07 May 2013 09:55:00 ESTHow to Handle the Dangers of DIY Investinghttp://www.dailyfinance.com/2013/05/04/diy-investing-dangers/http://www.dailyfinance.com/2013/05/04/diy-investing-dangers/http://www.dailyfinance.com/2013/05/04/diy-investing-dangers/#commentsFiled under: , , ,

woman money tightropeWall Street devoutly wishes you to believe that you need professional help to manage your money. But most investors prefer to go it alone.

A survey earlier this year from the Deloitte Center for Financial Services looked at the state of the retirement planning industry in America. When asked about getting professional help for their retirement planning, 57 percent of those surveyed said they were simply more comfortable handling their retirement planning on their own. Another 38 percent saying that they don't actually need advice from professionals, while 29 percent don't trust advisors to objectively represent their interests.

You can practically hear the collective cry of professional money managers across the country: "DIY investing? But how are we going to make a living off that?!"

Deloitte has an idea: One of the conclusions that the survey made was that financial advisors should target do-it-yourself investors with marketing campaigns about the dangers of going it on their own with their retirement savings.

Let's take a look at some common mistakes investors make, with an eye toward seeing whether professional advice can help prevent them.

1. Being Too Conservative

One of the biggest mistakes retirement investors make is to invest too conservatively. When stocks have fallen, they're too scared to buy into the market. Yet at times like now when stocks are high, they fear that the market is too expensive and that a downturn is imminent.

Despite their greater risk, stocks provide much better opportunities for growth than alternatives like bonds and cash investments. For those with years or even decades to go before retirement, investing in stocks gives you the best chance to see your money grow enough to meet your long-term financial goals. Finding the right mix of investments is certainly something you can do on your own with a little research.

2. Chasing Performance

Retirement investors who do embrace stocks often make another mistake: paying too much attention to past performance. Buying the latest hot stock or sector of the market can be extremely tempting, but by the time an investment has done well enough to reach the high-performance radar screen, it has often already seen most of its growth opportunity play out. Unfortunately, this is also a trap that many professional brokers fall for, recommending the latest hot thing to clients even though the upside potential isn't there anymore.

The better choice is to look among stocks or investments that haven't done well. Often, there will be good reasons for that bad performance, and you'll want to stay away from those investments. But some beaten-down stocks have far stronger future growth potential than high-flying investments that investors have already discovered.

3. Failing to Plan for Worst-Case Scenarios

People planning for their own retirement often end up focusing solely on investing. That's a key component of financial security, but it's far from the only one.

Sponsored Links
Another major factor is insurance protection, with needs like supplemental Medicare and long-term care insurance playing a vital role in keeping retirement costs down and helping preserve your nest egg as long as possible. Estate planning is also a key element of a successful retirement plan in order to ensure your family is taken care of after your death and that your financial affairs will be kept in order if you face a serious illness or injury.

Here, it's a lot harder to do your own legwork with insurance and estate planning than it is with investments. Insurance almost always requires contact with professional salespeople, and although do-it-yourself legal documents are available, personal attention yields a better-tailored plan.

4. Ignoring Taxes

Do-it-yourself investors sometimes ignore the vital role that tax planning can play in handling investments. For instance, many investors gravitate toward short-term investment plays, looking to make a big score quickly. Yet high tax rates on short-term capital gains can take half or more of those gains away when you consider both federal and state taxes.

By being smart about not only using tax-favored accounts like IRAs and 401(k)s but making the best use of them, you can greatly improve your after-tax returns. If you ignore the tax implications of your actions, you could easily find that the IRS benefits from your best investment ideas as much as you do yourself. So if you find yourself facing a complex tax situation any given year, it may be worth spending a few hundred dollars for the advice of a tax professional who can help you deal with the previous year's return, but also give you advice on how to best proceed in the future.

Get Help Where and When You Need It

Of course, what financial professionals fail to point out is that they're far from perfect in handling these potential pitfall areas. Few brokers have the training to provide in-depth legal or tax guidance, and they're often prone to conflicts of interest on the investment and insurance front that can put you into financial products that aren't the best available.

So don't take the Deloitte survey results as meaning you should give up on handling your own finances. By being aware of common mistakes like these, you'll greatly improve your odds of avoiding them.

Permalink | Email this | Comments

]]>capital gains taxconservative investingdiyInvestingretirement planningshort-term capital gainstax planningDan CaplingerSat, 04 May 2013 05:00:00 ESTWhat to Do When Your Boss Stiffs Your 401(k)http://www.dailyfinance.com/2013/05/02/401k-company-match-reduced-contribution-retirement-planning/http://www.dailyfinance.com/2013/05/02/401k-company-match-reduced-contribution-retirement-planning/http://www.dailyfinance.com/2013/05/02/401k-company-match-reduced-contribution-retirement-planning/#commentsFiled under: , , , ,

Employee - manager 401K
Alamy
Wondering why you haven't seen the performance you've hoped for from your 401(k) lately? A big reason may be that your employer is simply not putting what it used to into the account.

One of the best perks of 401(k) plans is the matching contribution that employers traditionally make when workers save money in the retirement accounts. Yet these days, fewer companies are making 401(k) matches: The number of companies offering matching has fallen by almost 7 percent since 2009, according to a study from American Investment Planners.

In other words, more employers are backing even further away from carrying their share of the retirement-savings burden.

Retirement Under Siege

The trend of cutting back matching is just one way employers are taking the scalpel to their benefits budgets.

The AIP study found that 6 percent of 401(k) plans have been terminated outright since 2009. In addition, traditional pension plans that promise fixed monthly benefits for life have seen steeper declines, with a drop of 15 percent in the number of such plans in 2011 alone.

Compared to losing your plan entirely, missing out an employer match may not sound like that big a deal. But over time, the hit to your retirement savings from not having a match really adds up.

Assuming you make $50,000 a year and are able to set aside $5,000 each year, even a modest match of 3 percent of your salary can add more than $180,000 extra to your retirement account balance over the course of your career.
Years of Saving $5,000 In 401(k) Ending Balance If No Match Ending Balance With Match
10 $78,227 $101,456
20 $247,115 $320,731
30 $611,729 $794,130
Source: Author calculations. Assumes annual investment returns of 8 percent.

Obviously, nobody makes the same salary for their whole career, and investing returns aren't constant either. But as a simple illustration, it makes a telling point. The $182,401 difference in this example adds up to more than three-and-a-half years' worth of salary after 30 years -- and that extra money (if you have it) keeps earning returns when you're retired. With bigger matches, the impact can be even greater.

Should You Give Up On Your 401(k)?

Having your employer abdicate responsibility for helping you prepare for retirement could seem like the last straw. After all, 401(k) plans already have plenty of other shortcomings.

Sponsored Links
Companies have been passing on administrative costs to workers in the form of higher fees, in some cases charging fixed amounts that represent a very high percentage of your savings in your 401(k) account. Workers with low 401(k) balances who switch jobs often get kicked out of their plans entirely by their ex-employers. And the average two-income family will pay $155,000 in 401(k) fees to plan administrators over the course of their lives.

Even with those negatives, however, 401(k) plans represent one of your best tools for setting aside pre-tax money toward your retirement. With limits of $17,500 this year -- or $23,000 if you're 50 or older -- it's worth putting up with some downsides in order to reap those thousands of dollars in tax breaks.

How to Handle a Stingy Boss

If your boss stops matching your 401(k) contribution, take a look at other options. You may be better off going with an IRA, which allows you to go beyond the limited investment menu your 401(k) offers and instead choose nearly any investment you want. IRAs offer many of the same tax benefits as 401(k)s, and their added flexibility makes them less prone to high fees.

Moreover, even a regular investment account can work well if you use it the right way. With favorable tax rates for dividends and long-term capital gains, investors who follow a buy-and-hold strategy fare the best in keeping their tax bills low.

Still, if you really want to save as much as you possibly can toward retirement, continue to contribute to your 401(k) -- but keep your eyes open for hidden costs that can sap your overall returns. You can minimize the impact of high fees by sticking with low-cost index funds or similar investments within your plan.

Permalink | Email this | Comments

]]>401k401K company match401k feesbenefitsFinanceInvesting adviceretirement planningDan CaplingerThu, 02 May 2013 10:08:00 ESTDon't Ignore the Dangerous Side of Dividend Stockshttp://www.dailyfinance.com/2013/05/01/dividend-stocks-dangers-income-investing/http://www.dailyfinance.com/2013/05/01/dividend-stocks-dangers-income-investing/http://www.dailyfinance.com/2013/05/01/dividend-stocks-dangers-income-investing/#commentsFiled under: , ,

Pitney Bowes
Pitney Bowes / Facebook
With low interest rates having eliminated any chance of earning a decent income from bank CDs and other safe investments, millions of conservative investors have turned to dividend stocks. That would seem like a logical move.

Yet in moving more of their money into the stock market, investors often forget that dividend stocks are a lot more dangerous than fixed-income investments -- and owning the wrong dividend stocks can end up burning you twice.

Just When You Thought You Were Safe

Pitney Bowes (PBI) gives us a textbook example to illustrate the dangers.

When it comes to solid dividend stocks, Pitney Bowes looked incredibly attractive to many investors. The stock sported a sky-high dividend yield of nearly 10 percent, and even more importantly, Pitney Bowes had demonstrated its commitment to increasing its dividend payouts over time, with a 30-year track record of boosting its dividends on an annual basis.

Yet that track record didn't stop the company from slashing its dividend in half after it announced its most recent quarterly earnings. Citing the need for "add financial flexibility to invest in its business and enhance its capital structure," the company will now pay $0.1875 per share on a quarterly basis, beginning with its June payment.

As if the news that half of their income would disappear weren't bad enough for investors, Pitney Bowes' shares immediately plunged after the market opened following the announcement. Within hours, shareholders had lost more than 16 percent on their investment.

Warning Signs

Attentive investors saw signs of potential trouble long before Pitney Bowes' announcement.

Sponsored Links
The stock was removed from the prestigious Dividend Aristocrats list because of the drop in its market capitalization, which took away one of the company's biggest incentives to keep raising its dividend. Moreover, the company had started diverting cash toward paying down debt, reducing the amount available for dividend payments.

Perhaps most importantly, Pitney Bowes had skipped its usual token dividend increase earlier in the year, signaling a change in its payout policy.

Despite those signs, the stock's rapid plunge shows how surprised most investors were by the move. Dividend cuts usually create strong downward pressure on a stock's price, and that leaves the conservative investors who gravitate to dividend stocks facing an unpalatable combination of big principal losses and reduced income going forward.

Know What You're Getting Into

Bank CDs are largely buy-and-forget investments, which you can let sit until they mature. Dividend stocks, on the other hand, require regular attention, and even then, unexpected pitfalls will occasionally wreak havoc on your portfolio.

Remember that before you move too much of your money into dividend stocks in search of better returns.

Motley Fool contributor and The Motley Fool have no position in any of the stocks mentioned. For long-term investing ideas, check out our free special report, "The 3 Dow Stocks Dividend Investors Need."

Permalink | Email this | Comments

]]>bondsbonds vs stockscdsconservative investingdividend stocksFinanceIncome investinginterest ratesPitney Bowes IncThe Motley FoolDan CaplingerWed, 01 May 2013 05:00:00 ESTError on Your Tax Return? How to Amend It With Form 1040Xhttp://www.dailyfinance.com/2013/04/30/form-1040x-amend-tax-return-mistakes/http://www.dailyfinance.com/2013/04/30/form-1040x-amend-tax-return-mistakes/http://www.dailyfinance.com/2013/04/30/form-1040x-amend-tax-return-mistakes/#commentsFiled under: , , ,

Taxes form
AOL
After working so hard to get your taxes filed on time, finding out that you made a mistake on your return is just about the worst news you can possibly get, short of an IRS audit.

But making changes to your tax return isn't as hard as many people fear it'll be. Let's take a look at what you need to do to fix errors and whether filing an amended tax return is your best move.

Do You Have to Amend?

What step you should take when you discover an error depends on what kind of mistake it is. The IRS usually corrects simple mistakes like math errors, and it can often accept and process returns even when certain forms and schedules are left out. In those cases, the IRS suggests not formally amending your return, waiting instead for the IRS to go through its ordinary process and get back to you with any necessary changes.

However, the IRS suggests filing an amended return if there's a change in your filing status, income, deductions or credits. By completing Form 1040X, you can correct errors and make sure that your tax liability is correct.

How the Form 1040X Works

Form 1040X looks a lot different from most IRS forms in that it's mostly just a summary of your income, deductions, taxes, and payments. Rather than having to go through line by line in excruciating detail, all the IRS wants to know on 1040X is what the old figures were, how much the corrections changed those figures, and what the new figures are.
Sponsored Links
Unfortunately, as simple as that sounds, things get more complicated when you turn the page. On the back of the form, the IRS asks for a full explanation of why you had to amend your return, with supporting documentation and any changed or previously unfiled forms and schedules attached.

Why It's Worth Doing

Having to amend your return can be a hassle, but it's worth doing. In some cases, amending will get you a bigger refund if the error is in your favor. In others, it'll save you from having to pay penalties and interest when the IRS catches up with a mistake that led you to under-pay.

In amending your return, keep a couple things in mind. First, to claim a refund, you generally need to amend within three years of the due date of the return. Also, if you haven't gotten your original refund yet but want to amend to get even more money back from the IRS, wait until you get your original refund before amending.

To find out more about amending your tax return, visit the IRS website here.

Permalink | Email this | Comments

]]>1040Xamended tax returnIRStax filingtax formsTax ReturnsDan CaplingerTue, 30 Apr 2013 05:00:00 ESTYou're Rich! 5 Strategies for Staying That Wayhttp://www.dailyfinance.com/2013/04/25/how-to-stay-rich-financial-strategies/http://www.dailyfinance.com/2013/04/25/how-to-stay-rich-financial-strategies/http://www.dailyfinance.com/2013/04/25/how-to-stay-rich-financial-strategies/#commentsFiled under: , , , , , , , , , ,

Alamy

Most people believe that striking it rich will instantly solve all their financial problems forever. Yet as rich people know all too well, it can be just as hard to hang onto your wealth as it was to earn it in the first place.

There are countless stories of lottery winners, high-paid professional athletes, and celebrities showing that the trip from rags to riches often proves to be a round-trip back to rags.

If you have aspirations to get rich in the future or are fortunate enough to already be well off, there are steps you can take to avoid becoming another rags-to-riches-to-rags story. It mostly boils down to protecting your money from five common fortune killers.

Challenge 1: Fight Off the IRS.

The threat: High-income individuals pay the highest rates on their income taxes. Moreover, after you die, the IRS will be waiting to collect their share from your heirs, with estate tax rates currently as high as 40 percent for those with assets worth more than $5.25 million.

The solution: Take advantage of tax-favored retirement accounts like IRAs and 401(k)s to shelter income from tax. In addition, consult an estate-planning attorney who can help you structure your legal affairs to minimize the amount of estate tax you'll owe. A good pro can steer you toward a combination of current gifts and complex financial strategies that will get as much of your money as possible to your loved ones.

Challenge 2: Steer Clear of Legal Liabilities and Fortune Hunters.

The threat: The richer you are, the more you have to lose from a potential lawsuit. Simple incidents like car accidents or household slips and falls can turn into a search for a target with deep pockets.

The solution: Be sure that you have adequate insurance coverage to handle the full extent of any damage award. At a minimum, be sure your auto policy gives you more than the legal minimum coverage for your state, and look at your homeowners' policy limits to make sure they're adequate. In addition, consider an umbrella liability policy to cover additional extraordinary claims.

Challenge 3: Don't Be Tempted by Exotic Investments.

The threat: Rich people often get access to high-risk investments that offer the promise of even greater wealth. All too often, though, these investment opportunities turn out to be overhyped or even fraudulent, resulting in big losses.
Sponsored Links
The solution: Trying to get richer is a hard habit to break, even for the wealthy. But if you have enough money to meet all your needs, it doesn't pay to take big risks with your portfolio. Rein in your risk-taking and give yourself a core of safe investments that will provide for your financial needs. If you have money left over and can afford to lose it, then dabbling in high-risk opportunities can let you stay excited about your investments without putting your lifestyle in jeopardy.

Challenge 4: Pay Off Those IOUs.

The threat: The way many people get wealthy is by borrowing money cheaply and making a bigger profit on it. Yet rather than paying down their debt once they strike it rich, successful people often keep using the same strategies to find even more wealth, taking out loans on their newly acquired assets and putting their entire fortunes at risk.

The solution: Reorganizing your finances once you're well off is essential to avoid losing everything you've gained. By paying down debt and establishing a baseline of wealth below which even the worst-case scenarios won't take you, you'll avoid the trap of using too much leverage and suffering big losses as a result.

Challenge 5: Plan to Live Forever -- or at Least to Stick Around for a Long While.

The threat: With life expectancies longer than ever and medical costs skyrocketing, even the well-off can outlive their money and end up spending all their assets on nursing homes and hospital care in their old age. Even the more basic living expenses often rise after you retire, and if you overspend early in retirement, you can end up in a downward spiral and run out of money.

The solution: A combination of strategies can help you preserve at least a baseline of income no matter what the future brings. Long-term care insurance specifically addresses nursing-home and home-health care costs, while buying an immediate annuity converts a lump sum of wealth into regular monthly income that's guaranteed to last the rest of your life.

Don't Blow It

As hard as it is to get rich, staying rich is no easier. But by taking these simple steps, you'll put yourself in the best position to hang onto your wealth as long as you can.

Permalink | Email this | Comments

]]>how to stay richpersonal financeRetirementwealthWealth managementDan CaplingerThu, 25 Apr 2013 10:04:00 ESTThe 10 Biggest Things Your Income Taxes Pay Forhttp://www.dailyfinance.com/2013/04/25/biggest-things-your-income-taxes-pay-for/http://www.dailyfinance.com/2013/04/25/biggest-things-your-income-taxes-pay-for/http://www.dailyfinance.com/2013/04/25/biggest-things-your-income-taxes-pay-for/#commentsFiled under: , , ,

OVER SAN FRANCISCO BAY - MARCH 16: In this handout image provided by the U.S. Air Force, two F-16 Fighting Falcons begin to roll into position for a rapid descent during an Operation Noble Eagle training patrol March 16, 2004 over the San Francisco Bay, California. The F-16s are assigned to the California Air National Guard's 144th Fighter Wing in Fresno, California. (Photo by Lance Cheung/U.S. Air Force via Getty Images)
Lance Cheung/U.S. Air Force via Getty Images
Now that tax season is over (except for those who filed for an extension), it's natural to wonder exactly where the hard-earned dollars you paid in tax over the past year actually went.

To answer that question, the White House put together a website that gives details on the government's expenditures. Dubbed the Federal Taxpayer Receipt, you can enter in your income, Social Security, and Medicare taxes and get a personalized look at where your tax dollars got spent. Understanding that Social Security and Medicare taxes go toward funding those respective programs, here are the 10 areas where the greatest percentage of income tax revenues gets spent.

Gallery: The 10 Biggest Things Your Income Taxes Pay For

1. National Defense.2. Health Care3. Income Security4. Interest5. Veterans' Benefits

Permalink | Email this | Comments

]]>economyfeaturedFinancegovernment spendinghealth careincome taxMedicareNASAnational debtNational Science FoundationSocial SecuritySupplemental Security IncometaxesVeterans benefitsWhite HouseDan CaplingerThu, 25 Apr 2013 05:00:00 EST5 Reasons Credit Cards Are Still the Best Way to Payhttp://www.dailyfinance.com/2013/04/23/credit-cards-best-way-to-pay/http://www.dailyfinance.com/2013/04/23/credit-cards-best-way-to-pay/http://www.dailyfinance.com/2013/04/23/credit-cards-best-way-to-pay/#commentsFiled under: , , , , ,

credit cards are safe
Alamy
The rise of electronic payments has revolutionized the way people spend money. But with debit cards and mobile payment systems gaining in popularity, it's easy to forgot the many benefits that old-fashioned credit cards have over newer payment methods.

As Bill Hardekopf of LowCards.com noted recently, as long as you pay off your outstanding balance every month (admittedly, a big caveat), using a credit card is often the smartest way to pay. Let's look at some of the most beneficial features of credit cards.

1. Easier Dispute Resolution. Credit cards offer broad protections in the event that your card is used for fraudulent transactions, including a well-established dispute resolution process and maximum liability limits. Contrary to what many people think, debit cards do permit you to dispute erroneous purchases, but unlike credit cards, the money has typically already left your bank account by the time you see a bad debit-card transaction. Credit card companies will immediately credit your account for the disputed amount until the dispute is resolved.

2. Better Cash or Mileage Awards. Some debit cards have gotten into the rewards game, but credit cards still have far-and-away the best perks for frequent users. From cash to airline miles and other benefits, getting between 1 percent and 2 percent of your spending back in the form of rewards is common with the best credit card reward programs. You can often do even better with specialty cards on certain categories of purchases, such as gas or travel.

Sponsored Links
3. Car Rental Insurance. Many credit cards cover damage or loss when you rent a car. That can save you from having to pay for the insurance coverage that rental companies offer. Most credit card car rental insurance acts as a backstop to your existing insurance coverage, so don't expect it to help you avoid having to file a claim with your regular insurance company. But with many damage-waiver provisions costing $25 per day or more at the rental counter, credit card-based insurance can be a real money-saver.

4. Extra Travel Perks and Protection. In addition to car-rental insurance, some credit cards offer a full range of travel-related perks. If you buy an entire trip with a card, you might be covered with trip cancellation or interruption insurance that will either reimburse you for a trip you weren't able to take or pay for extra expenses in getting you to your destination. Other benefits can include trip-delay coverage to pay for meals and hotels if your flight is delayed for certain covered reasons, as well as lost or delayed baggage and flight accident insurance. Some cards even provide roadside assistance, as well as help in getting referred to a doctor or other medical professional when you're traveling.

5. Protection on Your Purchases. Some credit cards provide a number of other protection programs. Price protection will refund the difference if you find a lower price for a product you bought within a certain time frame, while purchase protection and extended warranty coverage can reimburse you or cover the cost of a replacement if something you buy is lost, stolen or breaks. All those perks come with conditions and maximum amounts, but they still provide extra benefits that you won't find with most other payment methods, so be sure to check and see if your plastic offers them.

Permalink | Email this | Comments

]]>consumer protectionCredit CardsFinanceinsurancepersonal financespending moneyDan CaplingerTue, 23 Apr 2013 09:55:00 EST7 Smart Money Moves to Make Before the Stock Market Rally Endshttp://www.dailyfinance.com/2013/04/19/investing-tips-bear-market-stock-downturn/http://www.dailyfinance.com/2013/04/19/investing-tips-bear-market-stock-downturn/http://www.dailyfinance.com/2013/04/19/investing-tips-bear-market-stock-downturn/#commentsFiled under: , , , ,

Getty Images
The stock market has been on a tear over the past four years, more than doubling since the financial crisis. Many investors have recovered much of the money they lost during the market crash in 2008.

That said, recent bumpiness in stocks suggests that the end of the long bull market may come sooner rather than later.

While trying to time the market is an impossible task, here are some smart moves you can make with your money right now to protect yourself from the next market downturn while still putting yourself in a position to reach all your financial goals.

1. Get in the Habit of Investing Regularly.

Many people make the mistake of thinking that they don't have enough money to invest regularly. Instead, they buy stocks only occasionally when they have big windfalls like a tax refund.

But with the automatic investment options that many employer retirement plans and brokerage companies offer, you can put even modest amounts of savings to work for you on a regular basis. That will make you more likely to keep investing even if the market drops, allowing you to take better advantage of bargain opportunities that inevitably arise during downturns.

2. Diversify.

If you're like most people, you've heard plenty of tales of how a single stock made millionaires out of all of its investors. But for every anecdote like that, there are 100 untold horror stories of investors who lost everything gambling on one company.

The secret to successful investing isn't finding a single perfect stock, but rather putting together a diverse portfolio of promising investments and building it up over time. Owning many different stocks keeps you from losing your shirt on a single piece of bad news, and boosts your chances for earning solid returns.

3. Rebalance.

When the stock market rises sharply, your overall portfolio mix gets out of balance, overemphasizing stocks and giving you too little in other investments like bonds and cash. Back in 2008, many people were surprised at how big their losses were, simply because they hadn't realized how much their stock positions had grown during the bull market from 2003 to 2007.

Rebalancing involves selling off some of your winning stock investments to raise cash or invest in bonds or other types of investment assets. By targeting specific percentages for stocks, bonds, and other investments, it'll be easier for you to keep a well-balanced portfolio.

4. Shore Up Your Emergency Cash Supply.

During bull markets, it's tempting to put all your cash to work in the market. Moreover, savings accounts are paying next to nothing in interest right now, making having a cash stash seem like a waste.

Yet as an insurance policy, it's still smart to have enough emergency cash set aside to cover three to six months' worth of living expenses. That way, if you're laid off or suffer a financial emergency in the future, you won't have to worry about whether it's a good time to sell your investments.

5. Look For Problem Stocks in Your Portfolio.

Bull markets tend to pull most stocks up with the overall market. When a stock is rising, you're less apt to notice troubling signs that could foretell declines down the road.

Sponsored Links
To avoid unpleasant surprises, take a close look at all the stocks and other investments you own, and see if you can identify any weaknesses that would be liable to rear up during a market downturn. If you find any worrisome signs, selling before the rally ends could save you a ton of money compared to waiting.

6. Target Some Bargains.

Long rallies make many promising stocks too expensive to buy. Even the best businesses don't make good investments if you have to overpay for their shares.

But making a list of promising stocks that you might be interested in adding to your portfolio on a pullback will help you prepare for the bargains that inevitably pop up during a market downturn. You may not get every stock on your shopping list at the price you want, but having a plan in place will make you more willing to pull the trigger even if falling markets make you less certain than you are now.

7. Be Tax-Savvy.

Bull markets really show the value of smart tax planning. Many investors are reluctant to sell winning investments because of the taxes they'll have to pay, and that reflects the mistakes they made early on in not using tax-favored accounts to invest.

Using an IRA or 401(k) can be the smartest way to invest for long-term goals like retirement. Between breaks that can reduce your current tax liability and the promise of tax-deferred or even tax-free growth in the future, tax-favored accounts like IRAs and 401(k)s give you big advantages over regular investment accounts.

Don't Wait!

Just because stocks have been choppy lately doesn't mean they won't go to new record highs in the future. But by taking a critical look at your investments and making smart moves with your money now, you'll be prepared for whatever happens next.

Permalink | Email this | Comments

]]>401kbear marketdiversificationFinanceinvesting tipsportfolio rebalancingtax advantaged investingtax planningDan CaplingerFri, 19 Apr 2013 09:50:00 EST5 Ways to Pay the IRS Less Next Aprilhttp://www.dailyfinance.com/2013/04/19/pay-less-taxes-next-year-irs-deductions-credits/http://www.dailyfinance.com/2013/04/19/pay-less-taxes-next-year-irs-deductions-credits/http://www.dailyfinance.com/2013/04/19/pay-less-taxes-next-year-irs-deductions-credits/#commentsFiled under: , , , , ,

Cassandra Hubbart, DailyFinance
Cassandra Hubbart, DailyFinance
April 15 has come and gone, and most people have put another year of tax-return preparation behind them. But a recent Gallup poll shows that an increasing number of people believe they pay too much in taxes, with the fewest Americans since 2001 believing that the amount they pay is fair.

If you're still in shock from the amount of taxes you just had to pay, you should start working now to reduce your tax bill for April 2014 and beyond. Here are five ways you can get on track to write a smaller check to the IRS next year.

1. Put more money toward your retirement. The best way to shrink your taxable income is to save for retirement using IRAs, 401(k) plan accounts, and other tax-favored retirement savings accounts. This advice tops our list because the amounts you can save are big enough to have a real impact on your taxes. Those younger than age 50 can save $17,500 in a 401(k) plan this year and another $5,500 in an IRA. If you're 50 or older, those limits are even higher, topping out at $23,000 for 401(k)s and $6,500 for IRAs. Using them in combination can cut thousands off your tax bill.

2. Hold onto winning investments longer. When the stock market is rising, many people sell off their winners quickly to make sure their paper gains don't turn into losses. But that short-term mentality leaves you paying much higher rates on short-term profits, with some taxpayers losing more than half their gains to federal and state taxes. If you hold onto winning investments for more than a year, you'll qualify for much lower long-term capital gains rates, which can cut your tax bill on those gains in half -- or even eliminate it entirely for some lower-income taxpayers.

3. Take a look at tax-free municipal bonds. With interest rates as low as they are, paying taxes on the paltry amounts of income you can earn from bank CDs and most bonds just adds insult to injury. But especially if you're in a fairly high tax bracket, you'll want to take a closer look at tax-free municipal bonds for income. Right now, the muni bond market is in a somewhat unusual position in which yields are actually higher than what you'll get from Treasury bonds or FDIC-insured bank accounts, even before you take their tax advantage into account. So don't ignore municipal bonds as a potential source of valuable income as well as tax savings.

Sponsored Links
4. Boost your withholding. If you didn't have enough taken out of your paycheck last year, you not only had to write a big check at the end of the year but also might have owed penalties and interest. Pushing up your withholding to have enough money held back to avoid penalties is a smart move. Just remember that having too much withheld is also a mistake, as it essentially gives the IRS an interest-free loan from your hard-earned wages.

5. Get familiar with tax credits and deductions. The tax code has a wide variety of provisions that let you cut your tax liability, but if you don't know about them, you can't take advantage of them. Deductions and tax credits are available on expenses ranging from child care costs and donations to charity to spending on energy-efficient home improvements, so be sure to take maximum advantage of the spending you're already going to do this year.

Get Started Today

The longer you wait to take these tax-saving steps, the harder it'll be to get everything done in time to avoid another big tax bill next year. If you act now, it will be a lot more painless, and the results will be much more to your liking when tax time rolls around again.

Permalink | Email this | Comments

]]>401kcapital gainsIRAIRSmunicipal bondspersonal financetax creditstax deductionstax tipstaxesDan CaplingerFri, 19 Apr 2013 05:00:00 EST5 Dividend ETFs With 5 Very Different Strategies to Boost Your Incomehttp://www.dailyfinance.com/2013/04/17/dividend-etfs-strategies-Vanguard-iShares-spdr-wisdomtree/http://www.dailyfinance.com/2013/04/17/dividend-etfs-strategies-Vanguard-iShares-spdr-wisdomtree/http://www.dailyfinance.com/2013/04/17/dividend-etfs-strategies-Vanguard-iShares-spdr-wisdomtree/#commentsFiled under: , , ,

NYSE on April 15, 2013 in New York City.
Getty Images
Income-hungry investors have been turning more and more to dividend ETFs -- exchange-traded funds that focus on stocks that pay out healthy amounts of income to their shareholders.

Although these funds share a common goal -- boosting investors' income -- all dividend ETFs are not the same. In fact, they can have profoundly different methods for determining which stocks make the cut. Here's a closer look at how five ETFs slice and dice the universe of dividend-paying stocks, and a few things you need to consider if you're interested in adding them to your portfolio.

1. Vanguard Dividend Appreciation (VIG)
This Vanguard ETF seeks out stocks that have a long history of increasing their dividends over time. The index that the ETF tracks starts out by screening for stocks that have raised their dividends every single year for at least a decade, and then applies some additional tests to ensure the stocks it owns are liquid and easily tradable. Currently, the ETF owns almost 150 stocks that have passed those tests.

At just 2.1 percent, the Vanguard ETF's yield is fairly low compared to other dividend ETFs, as current yield is a secondary consideration for the Vanguard ETF. But over time, growing dividend payouts should give investors regular raises in their income levels in future years.

2. iShares Dow Jones Select Dividend ETF (DVY)
This iShares dividend ETF has the same goal as the Vanguard ETF of picking strong dividend stocks with histories of rising payouts. But the iShares ETF goes at it a slightly different way -- first looking at the highest-yielding stocks in the market and then going down the list, picking only those stocks that have current dividends that are higher than their five-year averages and that pay out 60 percent or less of their earnings as dividends.

The result is a greater number of high-yielding stocks in the iShares ETF's portfolio, with the ETF carrying a current yield of 3.7 percent.

3. WisdomTree Emerging Markets High-Yielding Equity ETF (DEM)
This WisdomTree ETF takes dividend investors outside the U.S.: Its holdings are in promising emerging-market stocks that pay substantial amounts of dividend income. With stocks from China, Brazil, Russia and more than a dozen other countries, the ETF chooses companies whose dividends rank in the top 30 percent of WisdomTree's broader index of dividend stocks and then buys them in appropriate amounts based on the total amount of dividends they pay.
Sponsored Links
This method produces a mix of stocks of all sizes, and its current 3.4 percent yield as measured by the SEC rewards investors for taking on international exposure in their portfolios.

4. SPDR S&P International Dividend ETF (DWX)
This SPDR ETF also has an international focus, but it tracks a broader set of companies coming from both developed and emerging markets. Australia represents the highest-weighted country in the ETF, but you'll also find stocks from across Europe and Asia as well as South Africa, Brazil and Canada. Financial, telecom and utility stocks make up more than half the portfolio, which currently produces an impressive yield of nearly 7 percent.

Given the economic troubles in Spain, Italy and other European nations, those high yields reflect somewhat heightened risk levels, but many income investors will appreciate the extra dividends.

5. iShares Mortgage REIT ETF (REM)
For investors seeking maximum dividend yield, this iShares ETF delivers: Its current yield above 11 percent. The ETF achieves that by owning real estate investment trusts that invest in mortgage securities and use highly leveraged strategies to produce double-digit percentage payouts.

Favorable interest rates have produced strong returns for fund shareholders in recent years, but many fear that a coming rise in rates could send mortgage-REIT dividends falling and jeopardize investments that rely on low rates to produce the income to pay those dividends.

Be Smart About Dividends

Each of these dividend ETFs has a much different risk and return profile. Choose wisely to ensure that you won't take on more risk than you're comfortable with while maximizing your ability to generate income from your investments.

Motley Fool contributor Dan Caplinger owns shares of Vanguard Dividend Appreciation and iShares DJ Select Dividend ETF. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.

Gallery: Gold Plunges: 5 Ways to Buy It At a Bargain

1. Physical gold bars and coins.2. Pool accounts.3. Gold futures contracts.4. Buy exchange-traded funds.5. Buy mining stocks.

Permalink | Email this | Comments

]]>Brazildividend stocksDividendsETFFinanceInvestingREITSThe Motley FoolDan CaplingerWed, 17 Apr 2013 05:00:00 EST4 Ways 'Free' ETF Trading Could Cost Youhttp://www.dailyfinance.com/2013/04/16/free-etf-trading-caveats/http://www.dailyfinance.com/2013/04/16/free-etf-trading-caveats/http://www.dailyfinance.com/2013/04/16/free-etf-trading-caveats/#commentsFiled under: , ,

EFT investing
Getty Images
Investors have pumped well over $1 trillion into exchange-traded funds, steadily moving their money out of older-style traditional mutual funds and into this investing world darling. It's no wonder: Investors prefer the lower costs, tax savings, and greater flexibility that ETFs offer compared to regular mutual funds. And ETF providers have done everything they can to bolster demand for their products.

But even though financial companies are offering free ETF trading to clients, you need to be aware of both the pros and the cons of their offers before you jump in with both feet.

The Flip Side of 'Free'

One big downside to ETFs is that you've traditionally had to pay brokerage commissions to buy and sell shares. But recently, several online brokers have offered no-commission ETF trading, taking away the last obstacle for many investors who want to incorporate ETFs into their investment portfolios.

As attractive as free commissions sound, you have to read the fine print to be absolutely sure about what you're getting. In particular, here are four things to watch out for with commission-free ETF offers:

1. Not all ETF trading is free. The brokers that offer commission-free ETFs include only certain ETFs on their free lineups. For instance, Vanguard includes its own proprietary ETFs, but if you want to invest in another provider's ETFs, you'll have to pay regular commissions. Similarly, Fidelity, TD Ameritrade (AMTD), Schwab (SCHW), and a host of other discount brokers have made arrangements with various ETF providers to offer their ETFs at no commission. But if you stray from their respective lists, ordinary commission charges apply. So if you decide to open a brokerage account based on a broker's free-ETF offer, make sure that you like the ETFs available at no commission from that broker, or else you'll be in for a costly surprise.

2. "Free" can turn into "fee." Many brokers discourage the use of commission-free ETFs for frequent trading by imposing additional restrictions, such as 30-day minimum holding periods or trading limits. If you violate those terms, then you may end up having pay the regular commission after all -- or even an extra penalty as a short-term trading fee. If you're a long-term investor, those fees won't be a problem. But if you're expecting to buy and sell ETF shares more frequently, then those programs won't help you avoid costs.

3. Commission-free doesn't equal good. In assessing a broker's free-ETF offerings, make sure that the eligible ETFs meet your quality standards. In particular, what you should watch out for are ETFs with relatively high expenses. Even small differences in ETF expense ratios can add up to thousands of dollars in lost returns over long periods of time, dwarfing the savings from avoiding a commission of $10 or less. Stick with brokers that offer high-quality, low-cost ETFs, and you'll be happier with your choice in the long run.

4. Untested ETFs can end up costing more. Another factor in ETF trading that many investors never consider is how much trading volume a given ETF has every day. The most heavily traded ETFs save investors money every time they buy or sell shares, because the higher volume tends to lead to narrower spreads between what you'll pay to buy shares and what you'll get if you sell shares. But many of the ETFs chosen for commission-free treatment are less popular and less liquid, which makes them more difficult to trade and can lead to your having to pay more when you buy and accept less when you sell. For small investors, this is less of a big deal, but if you expect to sink a lot of money into ETFs, illiquidity can cost you far more than free commissions will save you.

Exchange-traded funds do have a lot of advantages, and saving on commissions is just icing on the cake. But be sure you know the ins and outs of free-ETF offers, or else they may end up leaving a bad taste in your mouth.

Permalink | Email this | Comments

]]>Charles SchwabETFsFidelityno-commission etfsTD AmeritradevanguardDan CaplingerTue, 16 Apr 2013 05:00:00 EST