Financial Tips for 2011

Paying Down Debt

1. Future. The future is an unknown.
2. Tax Rates. Tax rates may be higher in 2011 which means you may bring home less money. Tax credits may be reduced, child tax credit will be reduced to $500 in 2011, the deduction for mortgage insurance premiums will be eliminated, and energy saving improvements will be reduced to 10%.
3. Minimum. Paying more than the monthly minimum pays your balance down faster so you will owe less next year (interest, finance charges, etc.).
4. Shopping. Cut back on shopping to reduce changes of going into more debt or having large credit card balances after the holiday shopping season.
5. Variable. Many credit cards have been converted from fixed to variable rates which means if the federal rate increases, so will your monthly payments
6. Finances. Can improve relationship with your spouse or partner related to arguments over finances
7. Retirement. You can't focus on retirement if you are in debt

Tips to Plan for the Future

1. Change your thinking. Eliminate negative thoughts about money and bad money habits. Follow those who have good spending habits and consult a professional.
2. Emergency Fund. Create an emergency fund to cover bills for 9-12 months.
3. Plan for retirement. Contribute the maximum to get matching contributions. You will need 60-80% of your current retirement salary for a minimum of 20 years to have enough money to cover living expenses during retirement. Save 10-20% each month towards retirement.
4. Pre-retirement. One year before retirement start reducing your expenses to retirement levels to get adjusted to living on a reduced income.
5. SS Income. Don't count on social security unless you are near retirement age.
6. Financial Goals. Sets financial goals, i.e. plan for retirement, children's college education, pay off mortgage, pay off car note, etc.
7. Contributions. Increase retirement contributions with each salary increase

Planning For Retirement

1. Sign up. If you don't have a retirement account, run to your employer and sign up. Setup an account even if you are self-employed (SEP) or stay-at-home mom (spousal IRA).
2. Diversify. Don't put all of your eggs in one basket. Ensure your retirement account is diversified. This helps to offset losses.
3. Live below your means. Reduce spending and create a budget.
4. Pay down debt. Pay off large debts and keep debt at no more than 10% of your monthly income after taxes (credit cards, medical expenses, other loans, etc.)
5. Estate planning. Perform estate planning (will, trust, health care directive, etc.). Hire a lawyer to prepare documentation.
6. Review. Review financial statements on a regular basis to check for errors and stay informed about your account.
7. Backup Plan. Create a backup plan if some financial crisis occurs and you need extra money. Have a plan A, B, C and D. Use what-if scenarios.

Saving Money

1. Budget. Create a spending plan or budget to see what areas you can reduce spending. Thirty-five percent of your budget after taxes should go towards housing (mortgage/rent, utilizes, repairs), fifteen percent towards debt (credit cards, student loans, personal loans), twenty-five percent towards transportation (maintenance and car payment), ten-percent towards savings, and fifteen-percent towards other expenses (groceries, prescriptions, medical expenses, etc.).
2. Bulk. Buy items in bulk by shopping at wholesale or discount stores such as Costco, Sam’s Club or BJ’s. Buy generic brands for food, canned goods, paper products, dry goods and prescriptions.
3. Comparison Shop. Look at prices of at least three different companies to see which has the best deal. Ask if the company will honor competitor prices. Look for coupons and specials at online websites such as bizrate.com or pricegrabber.com.
4. Utilities. Buy the cheapest landline plan available. Turn to the lowest settings when you are not at home and use the recommended settings provided by the utility companies to save money on your monthly bills.
5. Bundle. Bundle services to save money on insurances such as car, mortgage and homeowners.
6. Downgrade. Downgrade all your services such as cable, internet, and cell phone. Downgrade your car or home to a cheaper model. You can sell your car and catch public transportation. If you need a car you can rent a car or use a Zip car.
7. Sell Items. Sell new or used items on eBay or Craigslist for extra cash.

Boys vs Girls and Spending

Students between ages 15-21 feel unprepared to face the world. Only 20% of those saved over a $1,000 compared to older teens aged 16-18. According to a Charles Schwab survey, 50% of teenagers say they spend some of their money when they get paid and save the rest, 30% save the money in a bank account. 87% of teens say their parents are their main source of financial education.

According to the Boys & Girls Club of America, teenagers that learned about checking accounts and managing money were more likely to have opened a checking and savings account and to have a budget.

You may have heard that women are from venus and men are from mars. This is evident even among children especially with money. Girls lag behind in finances and with confidence to set and obtain financial goals. Girls show low confidence when asked about money and may avoid the subject or respond by saying “I don’t know, I guess so, or laugh”. Finances are not a high priority on girls’ agendas. They focus more on appearance and use money to go shopping or on entertainment.

The difference in how girls and boys view money may be related to how parents and educators teach girls and boys about money. Mothers may take girls to the grocery store to learn about how to comparison shop and budget for groceries. Fathers may take boys to buy a car. Both are good experiences but limit the knowledge that can be shared among each child. Boys and girls should be treated the same when discussing finances and life skills. If a child is not interested, parents must still provide the basic financial and life skills knowledge so later in life children will be able to apply it to their daily lives.

Girls are more emotional when it comes to spending and boys are more results oriented. Boys like to spend their money on big purchases like electronics, cars and technology. Girls like to spend money on things with little to no value like makeup, clothes, purses, shoes, etc. Many girls are taught to find a husband to take care of them which may prevent them from learning about finances, budgeting and investing because they will depend on their husband to have the knowledge.

Parents have to get girls and boys to change the way the think about money. Parents have to tell children If you want to own a home, go on vacations and live a certain lifestyle you have to save your money, invest and make good financial decisions. Boys and girls should be taught financial skills as soon as there are taught how to add and subject to ensure they become financially responsible adults.

IRS Tax Package Mailings

The IRS will no longer mail income tax packages or booklets which contained forms and instructions for filing federal taxes to individual tax payers and business tax payers. Here are some alternatives:

1. If you make less than $49,000 a year you can use the Volunteer Income Tax Assistance (VITA) program and get your taxes prepared for free or you may be eligible to use free electronic filing. To locate the nearest VITA site, call 1-800-906-9887 and most locations offer free electronic filing.

2. If you are 60 or older you can get free tax advice and tax preparation through the Tax Counseling for the Elderly (T.C.E.) program offered by the IRS. AARP also offers tax preparation and advice. For more information on TCE, call 1-800-829-1040. For more information on AARP tax preparation, call 1-888-227-7669 or visit AARP’s website aarp.org.

3. Military personnel can also receive free tax advice and preparation at their installations and can file their taxes electronically.

To participate in the free tax preparation programs you have to bring required documentation.

• Wage and earning statement(s) Form W-2, W-2G, 1099-R from all employers
• Proof of identification
• Social Security Cards for you, your spouse and dependents and/or a SSN verification letter issued by the Social Security Administration
• Individual Taxpayer Identification Number (ITIN) assignment letter for you, your spouse and dependents
• Birth dates for you, your spouse and dependents on the tax return
• Interest and dividend statements from banks (Form 1099)
• A copy of last year’s federal and state returns if available
• Bank routing numbers and account numbers if you choose Direct Deposit
• Total paid for daycare providers and the daycare provider's tax SSN or EIN

The IRS Free File program provides free federal income tax preparation and electronic filing for taxpayers who make $57,000 or less a year. The program also provides free fillable federal tax forms for 1040, 1040A and 1040EZ forms as well as tax schedules and instructions. You may also be eligible for free electronic filing.

One Remedy to U.S. Bank Failures

According to the FDIC, as of December 17, 2010, a total of 163 banks have failed this year. Some banks were merged with larger banks, some banks never recovered and will never reopen, some banks were bought by the government and some banks were bought by other countries.

The Bank of Montreal located in Canada recently purchased the Marshall & Ilsley's bank for $4.1 billion in stock. The bank began in 1847 and is headquartered in Wisconsin. The bank has 53 locations in Arizona; 192 in Wisconsin, 33 in central Indiana, Indianapolis; 36 in west coast and central Florida; 15 in Kansas City; 26 offices in metropolitan Minneapolis and St. Paul, one in Duluth, Minnesota, 17 in greater St. Louis Minnesota; and one in Las Vegas, Nevada. The Bank of Montreal purchased Amcore Bank in Rockford, Illinois in April 2010.

Marshall & Ilsley participated in the government’s Troubled Asset Relief Program (TARP). The Bank of Montreal purchased their TARP preferred shares and plans to repay them in full before the acquisition closes. Marshall & Ilsley offers personal banking as well as investment management, mortgage banking, investment, insurance, equipment leasing and financial planning services.

The Bank of Montreal previously paid $375 million for the Canadian life insurance business of American International Group Inc. (AIG). The Bank of Montreal is the parent company of Harris Bank based in Chicago Illinois.

Canadian banks have been ranked the soundest in the world and have done much better than banks in other countries. Toronto-Dominion Bank (TD Bank) which is ranked as Canada's second largest bank, purchased New Jersey based Bancorp and the South Carolina based bank South Financial Group. TD Bank also agreed to buy the assets of three bankrupt banks: AmericanFirst Bank, Riverside National Bank of Florida and First Federal Bank of North Florida.

The U.S. Bank, TD Ameritrade Holding Corp. is owned 40% by TD Bank. In September 2010, TD Bank purchased South Financial Group Inc. bank in Greenville, South Carolina. It also purchased 2 other failed banks this year: Carolina First located in North Carolina and South Carolina and Mercantile Bank located in Florida. TD Bank previously purchased Bancorp located in Cherry Hill New Jersey and Banknorth located in Portland Maine.

The Royal Bank of Canada is the largest bank in Canada and also owns the RBC Bank in the US (formerly called RBC Centura) that has branches in Alabama, Georgia, North Carolina, Florida, South Carolina and Virginia. The Royal Bank of Canada (RBC) previously purchased Alabama National Bancorp bank, The Eagle Bancshares, Admiralty Bancorp and AmSouth bank branches.

Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010

Former Federal Reserve Chairman Alan Greenspan deregulated the financial industry which led to industry corruption and the recession. Back in 2001 he agreed to the Bush tax cuts but now says that the all tax cuts should expire at the end of the year because the government needs the revenue and it can help reduce the federal deficit.

Well, fast forward to today and the tax cuts enacted by President George W. Bush may be extended for two years per an agreement between the Democrats and Republicans. The agreement called the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is expected to create over 1,000,000 jobs and improve the economy. Here is a brief list of the tax cuts that may be extended if Congress agrees to the act:

1. Child tax credit up to $1,000 for lower income individuals

2. Earned Income tax credit

3. American Opportunity tax credit - college tuition tax credit of up to $2,500

4. 2% payroll tax cut for taxpayers

5. Estate tax reinstated at 35% only for estates over $5 million, estates less than $1 million will remain tax free

6. Preserve jobless benefits for 13 months

7. Businesses can expense 100% of their investments in 2011 retroactive to September 2010

8. Those who don’t pay federal income taxes will continue to receive a
refundable credit up to $1,000

9. The capital gains tax would remain at 15% for the highest earners, lower income individuals will continue to pay zero for capital gains and dividends

10. Mortgage insurance premium deductions can continue for individuals making less than $109,000 or married couples earning less than $54,500 each

11. The energy tax credits would continue for home energy efficient improvements and hybrid cars

You Can Run But You Can't Hide From Your Debt

With the advancements in technology many debt collectors and some state taxing authorities are searching for consumers on the internet use social media networks such as Myspace, Facebook, Twitter, Linkedin and other sites to find unsuspecting consumers to pay debts. This seems unethical and illegal but it is legal.

According to the Fair Debt Practices Collection Act, debt collectors can contact your family and friends to find your location or get other personal information such as your address, email address or phone number. If you posted your contact information including your current employers on your social media profile you may soon be getting emails or phone calls from your debt collectors. What if a debt collector contacted someone who is listed as a friend on your social media profile?

If you love to use social media networks and are in debt you increase your chances of debt collectors finding you. The IRS has not confirmed whether they use social media networks to find those who owe back taxes but I suspect they do. The good news is that tax agents cannot friend a consumer who owes back taxes on a social media site but that probably doesn’t stop all tax collectors from doing it. Here are some ways you can be found on the internet:

1. Motor vehicle records
2. Employment records
3. Tax records
4. Bank records
5. Public inquiries at local businesses such as groceries stories, barbershops, church meetings, social and civic meetings, etc.
6. Internet search engines
7. Chat rooms and forums

If you owe debt and have not been contacted yet or have not paid your debt, contact the debt collector immediately to setup a payment plan or request a financial hardship and follow-up with a letter confirming the agreement. It is better in the long run if you contact them before they contact you.

How to Stretch Your Paycheck

Unemployment is now at 9.8%. Some Americans have moved down an income level from upper-middle class to middle class, middle class to lower income or lower income to poverty due to the economy and job market. Many Americans are forced to live on less money while other Americans are finding it difficult to live on less for several reasons: 1) they don’t know how, 2) they don’t want to or 3) they are in denial. Here are some helpful tips to help stretch your paycheck in a tough economy.

1. Bulk. Buy items in bulk by shopping at wholesale or discount stores such as Costco, Sam’s Club or BJ’s.

2. Budget. Create a spending plan or budget to see what areas you can reduce spending. Thirty-five percent of your budget after taxes should go towards housing (mortgage/rent, utilizes, repairs), fifteen percent towards debt (credit cards, student loans, personal loans), twenty-five percent towards transportation (maintenance and car payment), ten-percent towards savings, and fifteen-percent towards other expenses (groceries, prescriptions, medical expenses, etc.).

3. Comparison Shop. Look at prices of at least three different companies to see which has the best deal. Ask if the company will honor competitor prices.

4. Online. Look for coupons and specials at online websites such as bizrate.com or pricegrabber.com.

5. Generic. Buy generic brands for food, canned goods, paper products, dry goods and prescriptions.

6. Utilities. Buy the cheapest landline plan available. Turn to the lowest settings when you are not at home and use the recommended settings provided by the utility companies to save money on your monthly bills.

7. Bundle. Bundle services to save money on insurances such as car, mortgage and homeowners.

8. Downgrade. Downgrade all your services such as cable, internet, and cell phone. Downgrade your car or home to a cheaper model. You can sell your car and catch public transportation. If you need a car you can rent a car or use a Zip car.

9. Eat at home. Skip buying lunch every day and eating out. Cook meals at home and take leftovers for lunch.

10. Get assistance. Borrow money from friends or family members. Apply for government assistance, get help from your local church or get assistance from social organizations like the Salvation Army or American Red Cross.

11. Sell Items. Sell new or used items on eBay or Craigslist for extra cash.

12. Multiple Jobs. Work multiple part-time or full-time jobs; work a combination of full-time or part-time jobs to make ends meet. Do odd jobs such as cleaning homes, shopping for the elderly or babysitting to earn extra money.

Did the News Laws Help or Hurt

The CARD Act of 2009 was implemented to provide additional protections for consumers who experienced increases in credit card fees and who experienced unfair and illegal practices by credit card companies. Unfortunately, according to the Office of the Comptroller of the Currency, Better Business Bureau and state attorney general offices, consumer complaints against banks have greatly increased this year. Consumers are still suffering because banks have found new ways to bypass the new laws that were put in place.

Consumer complaints for mortgages and foreclosures have also increased. Many consumer agencies have filed lawsuits against companies in several states and some companies are being investigated.

Consumers are also complaining about bank overdraft fees. Many banks process the largest checks first which allows them to charge fees on smaller transactions after a checking account has been overdrawn.

The Federal Deposit Insurance Corporation (FDIC) which monitors the banking industry asked banks to consider eliminating overdraft fees for small accounts. Banks are pushing back because they don’t want to lose revenue generated from overdraft fees. Here are some tips to fight back against the banking and mortgage industry.

1. Research. Research several companies that provide the services you are looking for and choose the company that best suits your needs.

2. Notify. If you feel that you are being charged too many fees, contact the company and let them know you want and a reduction in fees and that you will take your business to a competitor company if you are not satisfied. You can also ask that you be transferred to the cancellation department for credit or debit cards to let them know you are serious about your request.

3. Fight Back. If you feel that you are being charged high fees or are being unfairly treated, file a complaint against the company with the Better Business Bureau, Federal Trade Commission or your state attorney general’s office.

4. Learn. Don’t make the same mistakes. Learn from your mistakes and make sure you are spending your money wisely so that you don’t get charged overdraft fees or late fees.

5. Educate. Watch financial shows or your local news, read financial newsletters or articles to learn about new and existing laws that affect you.

2010 Tax Changes

Here are some tips on 2010 tax changes that will affect you and the amount of your refund.

1. Head of household. The head of household standard deduction increased by $50.
2. Mileage. The mileage deduction rates decreased: $.50 for business travel, $.14 for charitable services, and $.165 for medical travel.

3. EIC Credit. The maximum Earned Income credits that can be received as indicated below:
• No Children - $457
• One Child - $3,050
• Two Children - $5,036
• Three or More Children - $5,666

4. Hope Credit. Used for the first 2 years of post-secondary education increased to $2,500 in 2010. Includes 100% of qualifying tuition and related expenses up to $2,000 (plus 25% of those expenses that do not exceed $4,000 but begins phasing out for taxpayers who earn more than $80,000).

5. Energy Credit. Home energy efficiency improvements can claim a tax credit for 30% of the cost up to $1,500

6. Car Credit. Individuals and businesses who buy or lease a new hybrid gas-electric car or truck are eligible for an income tax credit for vehicles "in service" starting January 1, 2006, and purchased on or before December 31, 2010

7. Home Buyer Credit. Military personnel can take advantage of the home buyers tax credit through April 2011.