Business Credit Cards With Cash Back and No Annual Fee

By Flexo on Wednesday, December 27th, 2006 in Credit Cards
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In 2007, I plan on creating an official business entity (LLC) to handle any income not coming to me from my day-job employer. As I do more work online, I’m dealing with more expenses, so I’m going to look into getting a business credit card. Having a card with no annual fee is important to me, while interest rate is not. My business expenses should remain well below income, but as a Type B credit card user, I make the most of the grace period. So here are my best options:

Discover Business Card
APR: 12.99%
Introductory APR: 0% for 12 months
Annual Fee: $0

This card offers 5% cash back on office supplies, 2% back on gas, and 1% back on everything else. This is probably my first choice card.

American Express Blue Cash for Business
APR: 11.24%
Introductory APR: 0% for 6 months
Annual Fee: $0

This American Express card also offers up to 5% cash back. Purchases in AmEx’s “Open Savings” plan qualify for 5% cash back, but all other purchases receive 2.5% cash back. They do lower the cash back rate once you’ve charged over $15,000 during the year, but this is still significant. This card is a good second choice, but I don’t know if I’d be making purchases in the “Open Savings” program.

American Express Platinum Business FreedomPass
APR: 14.24%
Introductory APR: 0% for 12 months
Annual Fee: $0

This card isn’t for me, but for small businesses that require a lot of travel, this might be a good choice. For every dollar charged to the card for purchases, the holder gains 1 point, which never expire. The rewards are good for use on any flight (regardless of airline), hotels, car rentals, and cruises. They’ll start you off with 5,000 bonus points after your first purchase.

American Express SimplyCash Business Card
APR: 8.25%
Introductory APR: 0% for 12 months on purchases
Annual Fee: $0

American Express seems to lead the market in cash back business cards. This one offers 5% cash back on gas, office supplies, and wireless services, as well as 1% cash back on everything else. There is no need to make purchases through any network of retailers in order to qualify for the highest cash back amount, so this might be a great choice for small businesses. What’s convenient is the cash back is automatically credited to the account; there’s no need to request a check.

Here’s one more card to round out the collection.

Chase Business Rebate Visa Card
APR: 14.24%
Introductory APR: 0% for 12 months on purchases and balance transfers
Annual Fee: $0

If you entertain clients, which I do not, this may be a good choice for your small business. Here you get 3% cash back on purchases at restaurants, gas stations, office supply stores, building supply stores, and hardware and home improvement stores. Everywhere else, the card offers 1% cash back.

In some cases, the best solution may be a combination of cards. For example, I might use the Chase card when paying for dining out and filling up the tank, the Discover Card for office supplies, and either for everyday purchases.

When the levee breaks

Even average homeowners feel rising mortgage floodwaters

By Chuck Jaffe, MarketWatch

Last Update: 4:21 PM ET Nov 22, 2007

BOSTON (MarketWatch) -- While the headlines have been full of stories on the credit crunch, subprime mortgage mess and the real estate bubble, a lot of ordinary homeowners have figured they were immune from the problems.

Ensconced in a home with a prime mortgage, they have watched the news and figured they're safe. And all the while, the water has been rising.

With property values dropping in many areas of the country, a growing number of homeowners -- particularly those who bought their house in the last five years -- are looking at the prospect of being "underwater" on the mortgage. That's when the value of the home is less than the amount remaining on the loan used to buy it.

So while the nation has been focused on a record-high rate of foreclosures, the tide has been rising on a lot of people who simply had bad timing. Zillow.com, an online real estate community, reported Tuesday that home values nationally are down more than 5.5% compared with a year ago, with many markets being hit much harder.

As a result, according to Zillow, more than 15% of homeowners nationwide who bought their home in the last year are now underwater. The number is slightly worse for consumers who bought their home two years ago. By comparison, the study showed that just under 2% of people who purchased a home five years ago have seen their equity go negative.

"We are so used to the fantasy that real estate is a great investment and that it always goes up in value that we're surprised when it doesn't," says Marc Eisenson of Good Advice Press, author of the 1980s classic "The Banker's Secret," the book which first taught Americans the value of prepaying mortgages and auto loans.

"This is a scary place to be, and a lot of people who never expected to get here are watching the waters rising -- particularly if they have adjustable-rate mortgages -- and their home values sinking."

Being underwater on a loan -- and it's increasingly common on auto loans in this country too -- is not really a function of interest rates and payments. The problem that adjustable-rate mortgages pose in this market is more psychological, in that the borrower's payments are likely to rise while the asset they are paying for is depreciating. The amount owed is the same before or after the adjustment, but the higher payments simply make the situation feel more helpless.

Riding it out

Thankfully, most experts suggest that negative home equity is not something that should cause a panic, assuming the homeowner can afford the current mortgage payment and has no reason to move.

"It could take five years or longer before this thing swings around, but as long as cash flow is positive -- so that you're making the payments and living life without worrying where the equity stands in your home -- you can ride this out," says Paul Richard, director of education at the Institute for Consumer Financial Education. "The question is whether you will want to hold on to your investment if you have lost 10% or 15% or more and don't see it turning around. ... You wouldn't want to do that with most mutual funds, but you will have to decide if you will do it with your house."

For most homeowners, selling the home doesn't necessarily solve the problem. After all, if they are underwater on the mortgage, they will need to bring cash to the closing. And while they may be able to buy the next home for a lot less -- due to the drop in home prices -- there is no guarantee they will get a good mortgage rate to make the deal happen.

Renting and waiting out the decline and the real estate cycle is an option, but more for the prospective home buyer rather than the person who is up to their neck on the mortgage.

"If you can afford the payments and bought in a market that you believe will go up, then the way out of this is to drive through it, keep making the payments and plan to hold on long enough so that it pays off," says Greg McBride, senior financial analyst for BankRate.com. "It's only a real problem if you're going to have to sell the house in these conditions, or if you can't make the payment."

Watch your dollars

That said, most experts also believe that when the waters are coming closer to your personal shore, you might want to change a few behaviors, even if you plan to stay in the house and ride it out.

For starters, put off significant investments in the home. While real estate agents frequently say that certain home improvements "pay for themselves" when the home is sold, that's not the case in a market where home prices are shrinking and mortgages are underwater. Instead, you're simply adding more water.

Says Eisenson: "If you want a new bathroom while your house is underwater, you need to be really confident that you can ride things out. ... Right now, you're making the situation worse by putting more into the home at a time when you possibly won't make it back."

Next, bolster the emergency fund, just in case. It's not just financial problems making headlines, but economic ones; if the economy hits home in the form of job loss, at a time when the home is underwater, the choices you're facing are ugly. A bigger cash cushion will keep options open.

Experts disagree on whether you should pay off the mortgage faster when it's underwater; paying additional principal drops the water level, but that money is not coming back if you have to move and sell the house before the market rebounds. Paying down other debts, or putting excess cash into investments that will be positive while real estate is in the doldrums may do more to improve a homeowner's overall financial position.

Says Eisenson: "This situation is going to get worse before it gets better, so think about what you would do now. You'll probably decide to try to push through it, but if you're unprepared and you wake up one day to find out you're underwater, you're going to be scared."

Chuck Jaffe is a senior MarketWatch columnist. His work appears in dozens of U.S. newspapers.

How to Turn $500 Into $7 The Hard Way

By Flexo on Wednesday, November 21st, 2007 in Spending

This is a guest post from J.D. Roth, who writes about personal finance and related topics at Get Rich Slowly.

Back in our young and foolish days, my wife and I bought a set of encyclopedias from a door-to-door salesman. This was in 1995, at the very cusp of the digital age. We had been on the internet for about a year, but we had no way to know that one day very soon the World Wide Web might make printed encyclopedias obsolete.

So we bought an encyclopedia set. Naturally I charged the $500 to my credit card.

We used the encyclopedia for several years. Then in 1999 we discovered Google. The encyclopedias began to gather dust.

Even so, when we moved to a new house in 2004, we took the books with us. We installed them prominently in the living room, but we never used them. Eventually we moved them to storage. For the past two years, we’ve tried to sell them at our neighborhood garage sale. The first year, we priced them at $50. This year we priced them at $20. Nobody wanted them.

On the last day of this year’s sale, a man stopped by and sorted through our book collection. He was rather particular about his selections, so I struck up a conversation with him. (Bibliophiles are happy to meet kindred souls.) He told me he owned a used book store. “You’ve got some good stuff here,” he said, patting his stack of books.

“Thanks,” I said.

He turned to leave, but then paused. “You know,” he said. “These encyclopedias are worthless. I have a dozen sets in my store. They used to sell pretty regularly, but nowadays I can’t even give them away.” He waved good-bye and left.

It hurt to think that our $500 set of encyclopedias was worthless, but I had to admit it was true. I put them up for free on Craigslist.

The next day a man stopped by to pick them up. He was ecstatic to find them. “We don’t have a computer,” he said. “And my daughter is in the fifth grade. She loves to learn. She’ll use these all the time. Thank you.”

I helped him load the books into his car, a mid-80s Honda Accord. The rear of the vehicle sagged beneath the weight. Before he left, he fished out his wallet. “Do you have a Blockbuster Video around here?” he asked. I said that we did. “Here,” he said, handing me a Blockbuster gift card. “Take this. I mean it. You don’t know how much I appreciate this.” I thanked him and took the card, which I tucked in my wallet and then forgot.

A few weeks ago, I found the Blockbuster gift card. “I wonder how much credit is on this?” I said to myself, scanning the fine print. I tried to call the toll-free number, and to check the web site, but neither would give me the balance. To obtain the balance on a Blockbuster card, you have to actually go to the store. So I did.

The card had $16.50 on it. I thought maybe I could pay for part of a game for my Nintendo Wii, but nothing looked appealing. I scoured the DVDs, but couldn’t find anything I wanted. At last I spied The Godfather. Aha! Hadn’t I been wanting to purchase that for a long time? It’s been three or four years since I last watched it. I bought The Godfather and a pack of Red Vines and headed home.

But when I went to put the DVD away, I was dismayed to find that I already owned a copy. When did I buy it? Why hadn’t I remembered purchasing it? I considered giving the new copy as a gift to somebody, but then I recalled Cady’s guest entry at Get Rich Slowly about how to use the Amazon Marketplace for fun and profit. Taking inspiration, I listed the movie for sale.

The Godfather sold last night for $7.02. After fees are settled, I will have netted $7.16.

And that, my friends, is how I managed to turn $500 worth of encyclopedias into $7.16 in Amazon credit. That is personal finance at its finest.

There’s no real moral to this story. Each of us makes the best financial choices we can. But sometimes our information is imperfect. Sometimes we don’t know what the future holds, and sometimes what we think is smart (charging encyclopedias to a credit card) is actually pretty darn stupid.

Customizing Cookie-Cutter Funds

By Eleanor Laise, The Wall Street Journal

Last Update: 9:38 PM ET Nov 20, 2007

Target-date mutual funds have soared in popularity because they make saving for retirement simpler. Now a growing number of people and some employers are battling the funds' one-size-fits-all approach by souping them up.

Target-date funds are meant to be the only investment a person needs to save for retirement. The funds, already popular, recently got a big boost from new Labor Department regulations. They typically hold a mix of stocks and bonds and grow more conservative as they approach the target date, which generally matches investors' expected retirement date. Some people complain that everyone retiring in the same year gets the same treatment -- people who expect to retire in 2020, for instance, will mostly all get placed into the same holdings with similar amounts of stocks, bonds and other investments.

Moving Target

More individuals and employers are custom tailoring their target-date funds.

•
Off-the-shelf products don't suit everyone's savings goals and risk tolerance.
•
Some people want a more aggressive investment allocation to "catch up" on retirement savings.
•
A customized target-date fund risks losing one of its prime advantages -- simplicity.

The problem is that not everyone with the same target retirement date shares the same level of risk tolerance or investment goals. In recognition of this, some companies, including Intel (INTC

Sponsored by:

DLX 31.16, -0.50, -1.6%) Corp., have begun offering customized target-date funds in retirement plans that are better suited to their employees' financial situation. Some fund companies, including Old Mutual Asset Management (UK:OML: news, chart, profile) and Wilshire Funds Management, are working to develop multiple flavors of target-date funds -- say, conservative, moderate and aggressive versions for the same target date. And some individuals are using a host of strategies to make these off-the-shelf funds a better fit, while some new products are making it easier for them to build their own customized target-date funds.

Scott Nunn, a 43-year-old in Wilmington, N.C., last year began investing in a target-date fund because he liked that it offered guaranteed diversification and automatic rebalancing of his assets. But instead of choosing a 2030 fund that would closely match his retirement date, Mr. Nunn chose the Vanguard Target Retirement 2050 Fund, which is designed for people who are roughly 45 years from retirement, with an aggressive, stock-heavy investment mix. Mr. Nunn, a writer and graphic designer, says he knows target-date funds aren't designed to be used this way, but he's way behind on his retirement savings, and he's trying to play catch up. "I needed to roll the dice a little bit," Mr. Nunn says.

But customization can have pitfalls, including possible confusion. "All this terminology -- conservative, moderate, aggressive -- none of this means anything to people who are not familiar with investing," says Zvi Bodie, a professor at Boston University School of Management. And "if you are familiar with investing, then you know how mushy those terms are."

Target-date funds have grown swiftly, holding $168 billion at the end of September, up 46% from the end of 2006, according to Financial Research Corp. Although target-date fund assets are dwarfed by the more than $4 trillion in defined-contribution retirement-savings plans, which include 401(k)s, target-date funds are expected to get a big boost from a recent Labor Department ruling that makes it easier for employers to automatically enroll workers in 401(k)s and to offer target-date funds as a default investment. The ruling means that target-date funds will in the future be used by many more workers as the principal savings vehicle for retirement.

Already, some employers are tailoring their offerings to suit their employees' particular situation. The Commonwealth of Massachusetts recently added target-date funds to its deferred-compensation plan that invest more aggressively than many off-the-shelf versions, starting with a 95% stock allocation and devoting 60% to stocks at retirement age. The reason: The plan's participants also have a traditional pension plan that provides steady income in retirement, and so can afford to take more risks in their other retirement savings.

Intel says it adopted customized target-date funds partly because they give the company flexibility to change the mix of investments, or even ditch individual fund managers. "The monitoring of the portfolio in a custom design is a huge benefit," says Stuart Odell, director, retirement investments at Intel. "You have the ability to remove, replace, add additional managers and asset classes as either market conditions change or managers underperform," he says.

Intel recently started automatically enrolling new hires in its 401(k) plan, which has about 52,000 active participants, and participants who don't select their own investments are defaulted into the custom target-date funds.

Deluxe Corp. added custom target-date funds to its retirement plans in August, partly because many off-the-shelf products stopped changing the asset mix once an employee reached retirement age. Nearly a quarter of the Deluxe plan assets are held by people age 60 and over, and "for the demographics of the plan, it didn't seem appropriate to try to make one size fit all," says Mark Kelliher, senior manager of retirement plans at Deluxe.

Old Mutual expects in coming months to launch a lineup of funds with varying levels of risk for each target date. The funds will be available both inside and outside 401(k) plans. And Wilshire is developing funds with nearby target dates in two flavors: one traditional target-date fund and a more aggressive "catch-up" version for investors who haven't saved enough. "I wouldn't be surprised if you start to see funds that have flavors based on high income needs, lower income needs, or funds geared to investors extremely concerned about outliving their retirement assets," says Matt Radgowski, a Wilshire vice president.

Wallets Go Digital

By Charles Passy Special to TheStreet.com 11/21/2007 1:56 PM EST Click here for more stories by Charles Passy

A wallet ranks right up there among the most mundane of gifts.

But here's a way to beat the stodginess rap: Go for a digital wallet.

After all, who's got room for pictures when there's so much other important stuff to store in your wallet -- credit cards, dry-cleaning receipts, a business card from a sales contact you met a decade ago.

Keeping a few family photos in your wallet, of course, is a requisite of parenthood. But it's also a duty that requires a degree of organization, as in remembering to swap out pics as the kids grow older.To say nothing of the fact that those prints start to look fairly shabby over time. Isn't that the reason the world has embraced digital photography in the first place?

Hence, gadget innovator and retailer Brookstone has introduced its Men's Digital Photo Wallet ($50) -- the high-tech way to keep your brood in your pocket.

The pitch: Brookstone makes storage the big issue. "Does your wallet look like George Costanza's overstuffed billfold?" the retailer asks, recalling a famous Seinfeld episode.

The company points out that up to 55 images can be stored on the "sleek, removable 1.4-inch screen" and that the gizmo is simple to use, since the device is rechargeable ("never needs batteries") and "connects to computer via USB ... for easy downloading."

The reality: The product is indeed user-friendly. I had no problems recharging the unit, transferring pictures or even doing some basic editing (pictures can be rotated, for example).

But the real issue is that the images look awfully small and somewhat blurry on that near postage stamp-size screen. By contrast, the photos I normally carry in my wallet are, well, wallet-size. And there's no denying that the unit, which can easily be removed from its own slot within the wallet, is bulkier than a bunch of snapshots, so what problem is it really solving?

That said, if you're comfortable with digital photography this does make for a fun, handy way to keep your mini-album's worth of pics up to date. (If you're like me, you're always waiting for the next year's crop of school photos that can be ordered in wallet-size.)

As for the bifold wallet, the "black Nappa leather" may be as soft as advertised, but the lack of key features, such as snaps or a license display window, made it a tough sell for me -- and Brookstone doesn't offer a choice of men's wallet styles or even colors. Oddly enough, Brookstone's version of this same wallet for women (also priced at $50) has the license display window.

Competing products: Among prominent retailers, Brookstone appears to have the digital photo wallet category all to itself at this point. But there are plenty of other products on the market that work in a similar fashion, such as digital photo keychains (Brookstone has one for $40). Another option worth considering: WalletPix ($40), a credit card-size digital photo album that's designed to fit in a wallet -- the wallet of your choice, that is.

Bottom line: It's a clever idea, but not quite the answer to all your photos-on-the-go problems. Still, it could be a good gift for a digital-photography buff.

Presenting The Carnival Of Personal Finance #125

Welcome to the 125th Carnival of Personal Finance. This week we have 74 articles for your reading pleasure and I have divided them up into a few categories. I could have made more of them, but then each of the other categories would have only had 1 post in each section. The ones that I could not fit into the categories I decided on are included in the General Money section. I picked out 5 of the articles that really struck a chord with me for one reason or another and listed them below under Editor’s Choice. Enjoy, and if you took part in this week’s Carnival, please be sure to promote it on your own site!

Diverting your money from a retirement fund to purchase a home would require much larger retirement contributions in the future to achieve the same nest egg. Lets use some real numbers to see what I mean (at The BagLady).

It goes without saying that credit cards aren’t for everyone - in fact, I think they should only be used by people who pay their balance off each month. If you fit that category, though, you should pay for as many things as you can with your card. Here’s why…(at Chief Family Officer).
I believe that if the parents are paying for the education, they have every right to set some ground rules. Unless the parents inherited the money themselves, they must be able to have some influence over what and how their hard-earned money gets spent (at Grad Money Matters).

Now that I’ve defined my goals, I need to work out next actions to be associated with pushing each one forward. That’ll require some brainstorming (at Plonkee).

This year is actually the first time I have really started work on planning for my future. As I have mentioned before, my old ways were to live for the now and worry about the future if I was around in the future.

I incorrectly thought that planning for the future meant that I could not have any fun now (at One Snarky Chica with Issues).
Notorious Practices of Payday Loan Companies (at ZooLaw Legal Blog).
Planning for your future (at CareOne Debt Management).
Those Folks Are Crazy (at Debt Sucks).
How To Buy On Ebay And Get the Best Deal (at Money Blue Book).
What a Weak Dollar Means for U.S. Shoppers (at The Authentic Bartender Blog).
Real Value Vs. Perceived Value (at Rather-Be-Shopping).
How To Get Insider Pricing (at How I Will Be Rich).
Change Our Car Buying Behaviors and Save Tons of Money (at MoneyNing).
Landlording and Screening Tenants (at Million Dollar Journey).
Real Estate: Know What Can Be Fixed and What Can’t, What’s Profitable and What Isn’t (at Searchlight Crusade).
Do you know who owns your mortgage? You probably don’t… (at WhereDoesAllMyMoneyGo)
What to Do When You’re Short on Rent (at Money Under 30).
Billion Dollar House - Ultimate Luxury or Living Hell? (at Smart Money Daily).
Determining the Minimum Acceptable Bid for a HUD Home (at Two Wise Acres).
Can We Really Afford To ‘Move Up’? (at A Penny Closer).
Moving from one tax paradise to another one (at Stock Web).
Flexible spending account : which income earner should contribute? (at Index Town).
Ten Qualities a Good Money Manager Needs Most (at Watch My Money Maker).
How I Involve My Family in Investing (at The Dividend Guy Blog).
How to Build a CD Ladder (at Cash Money Life).
Does investing in socially responsible funds cost more and is it justified? (at Money Relations.)
Afraid Of Investing In The Stock Market? (at My Wealth Builder).
How Investing Changes Your View Of The World (at Queercents).
Dow Index Drops 362.14, 2.6% - Now What!? (at My Retirement Blog).
January Effect and October Effect, Are They Real? (at Moolanomy).
Timing (at Financial Reference).
Best Advice: Gary Belsky (at Free Money Finance).
Bernanke Cuts Another Quarter (at The Agonist).
The Scale of the Federal Deficit (at Exjackly).
Enough Wealth: Financial Armageddon (Again) (at Enough Wealth).
Things You Should Know About Percentage Traps (at Money, Matter, and More Musings).
Early Retirement – Illusion or Reality (at Smart Investing & Money Management).
HSA as a Retirement Account? (at I’ve Paid For This Twice Already…).
A Free Haircut is Always a “Super” Cut (at jlogged).
Get Yourself A Frugal Education (at Frugal Journey).
My Cheaper Alternative to Starbucks (at Single Guy Money).
Do You Get What You Pay For? (at Debt Dieter).
How to Make the Best Beer in the World for Under a Buck a Bottle (at Saving Advice).
Don’t Waste $$ On Your Next Hotel Room (at Life Lessons of a Military Wife).
Keep Yourself Safe by Creating a Winter Kit for Your Car (at FinanceIsPersonal)
1 Paycheck Away (at BasenjiMom).
The decision of having a housecleaning lady (at The Financial Blogger).
Your Relationship With Money (at Journey To Financial Freedom).
Are Pennies Beneath Us? (at Blunt Money).
Seven Wonders of the Personal Finance World (at Blueprint for Financial Prosperity).
Goosing Emergency Fund Earnings (at Advanced Personal Finance).
When you stretch and stretch and the ends don’t meet (at Wise Bread).
Consolidating NewlyWed’s Finances (at 2million My Journey to Financial Freedom).
Old Habits Sure Do Die Hard (at Gather Little By Little).
It hit me like a ton of bricks (at Being Frugal).
Budget Cuts:Medical Insurance (at Real World Finance)
Rule #18: Alone and Together (at My Open Wallet).
When Money Isn’t Everything (at College of Cash).
The High Cost of Eating Healthy in the US (at Philby’s Finance)
8 steps to a six figure career (at brip blap).
She Makes More Than Me (at Money and Such).
Achieving Financial Freedom is Simple, But Not Easy (at Dough Roller).
College Admission Consulting (at Ask Dong).
Do You Have a Financial Confidant? (at One Frugal Girl).
Why Are Some People So Ignorant About Money? (at Money Smart Life).
Prosper.com: 6 Months in and Still Exceeding Expectations (at Everyday Finance).
My Silicon Valley Job History (at Silicon Valley Blogger).
Great Thought on Personal Finance (at Frugal Dollar).
What is a Secured Credit Card ? (at Ask Mr Credit Card).
Check to see if the government is holding some of your money! (at The Happy Rock).
Marriage And Money (at My Good Cents).
Adoption on the Cheap (at Graceful Retirement).
Single Page List Of Monthly Expenses - No Credit Needed Notebook Pg 2 (at No Credit Needed).

That’s it for this week’s Carnival of Personal Finance! These ought to keep you busy enough until next week’s edition over at Million Dollar Journey. If you didn’t see your post included, it was either submitted after the cut off time or it was not relevant to the Carnival. For more information about the Carnival itself and how you can host a future edition, check out the Carnival of Personal Finance homepage.

12 Ways to Save on Insurance

Insurance is a funny thing. You’re paying for something you hope you’ll never use to replace things you already have. In some cases, insurance is required. But these days you can buy insurance for everything from autos to vacations. How do you know what to insure and how much to spend? Here are 12 tips to help you get the coverage you need without spending a fortune:

* Question yourself. Before buying insurance, ask yourself the following questions: Why am I insuring this? Out of fear or necessity? What is the replacement value? Is the cost of insurance greater than the value? Your answers will bring you back to the purpose of insurance, to pay for something you cannot afford to replace otherwise, and keep you from paying for anything else.

* Shop around. Review information offered by your state’s insurance division, then call around to several companies for their rates. Every time you get a premium notice, contact at least two other insurance companies to ask for competitive quotes.

* Get discounts. Ask your insurance agent about discounts. Most policies give discounts for safety features, for example anti-lock brakes and air bags in cars and alarm systems and smoke detectors for homes/apartments. Some insurance companies offer discounts for nonsmokers, good drivers – even non-drinkers. If you park your vehicle in a closed garage instead of a carport or driveway or drive a limited number of miles, you might qualify for a discount.

* Raise deductibles. A higher deductible leads to a lower premium. Keep in mind, the purpose for insurance is to make sure you have coverage for a disaster. Fender benders on your car or slight damage to your house can be paid out-of-pocket.

* Reduce claims. Only make a claim when the cost/damage is substantial. Minor repairs should be funded out of your emergency fund. Insurers are notorious for increasing the premiums of those who have cashed in on even low cost claims come renewal time.

* Don’t overinsure. Drop collision or comprehensive coverage on older cars. Determine how much your car is worth using the Kelly Blue Book. If it’s less than one thousand dollars, you may end up paying more for coverage than you would be able to collect on a claim. For life insurance, only insure for the amount needed to replace the income of the one being insured – not so the family of the deceased becomes suddenly wealthy.

* Avoid insurance coupled with investments. There are several life insurance products that mingle insurance and investments (they develop a cash value). Usually, these are very expensive insurance policies and not as good of performers as other options. It’s better to buy term life insurance and invest your extra money elsewhere.

* Don’t forget disability insurance. It’s much more likely that you’ll be disabled than it is that you’ll die during your working years. Yet many Americans only consider life insurance. Be sure you have a solid disability policy in place – especially for the primary bread winner in your household.

* Buy smart. Purchase a car with a good repair record and low theft rate. Insurance will generally be less expensive. Also buy reliable brands of electronics and appliances and forego the extra insurance at the register.

* Check the price. Double check your insurance policy after you receive it and make sure you’re getting the price you were quoted.

* Combine policies. If you own a home, consider a combined premium option, where you get insurance on both the home and your cars from the same insurance company. You can typically reduce your premium costs by 10 percent or so by simply having both policies with the same insurer.

* Pay annually. Pay your premiums once a year, rather than quarterly. That way you avoid the typical $5 to $10 “service fee” you get stuck paying each time you send in a payment every few months.

Use these tips to spend only what you have to on insurance. Keep in mind the purpose of insurance, for protection rather than provision, and you’ll be sure that every cent you spend on insurance is well worth the cost.

Personal Finance: Preparing for hard times

(Linda Stern is a freelance writer. Any opinions in the column are solely those of Ms. Stern. You can e-mail her at lindastern(at)aol.com.)

By Linda Stern

WASHINGTON, Nov 7 (Reuters) - The Fed is a little bit worried. The index of leading economic indicators is so-so, housing's still off, the stock market's skittish, and oil is flirting with the three-digit barrel. The last U.S. recession ended six years ago, so this expansion's a little bit old. It's all pointing to the specter of a recession in the not too distant future.

Maybe it won't get that bad. Many economists are suggesting the recession predictions are overly pessimistic. Instead, they say we're in for slow growth or stagnation. That's not much better, is it? Here's how to protect your family, yourself and your portfolio from the blahs.

-- Diversify your ability to earn money, to protect yourself from job loss. Take that Web design class, or set up that eBay biz you've been thinking about. Make a list, just for your own peace of mind, of ways you could earn extra money if you really had to.

-- Buy some CDs. The banks need cash and are continuing to prop up rates on certificates of deposit even though the Federal Reserve has been cutting short-term rates. Don't put all of your long-term money in the bank, but a few CDs, salted away and earning 5 percent or better for the next year or so, will do nicely.

-- Invest in toilet paper and the other necessities of life. Sure, this is conventional wisdom, but it works. Companies that produce items that people buy in good times and bad will reward investors who own their stocks, according to research firm Briefing.com. Some industries that have delivered 20 percent-plus returns during recessions include tobacco, health care, personal products, pharmaceuticals, paper packaging and footwear.

-- Buy dividends, too. If the economy stays weak or continues to falter, you might have to wait a while for your growth stock picks to pay off. Get paid to wait by choosing companies that pay decent dividends. You can screen for stocks yielding better than 3 percent, or buy an exchange traded fund that focuses on stocks that pay solid dividends.

-- Manage your debt. Do what it takes to kill the balance on your credit cards, even if it hurts. Rates on home equity lines and other variable-rate loans may falter, or at least stay relatively low, if the economy is weak, so use that opportunity to pay bigger chunks of principal. If you have a variable-rate mortgage and would like to swap it for a fixed-rate loan, you'll get your best opportunity in a downturn. Be prepared to jump on a new loan when rates fall to a level that's good for you.

-- Don't move. If you are renting and haven't bought a home, it won't hurt you to wait a little bit longer. Most housing analysts think the downturn in home prices hasn't finished. If you already own your home, it's not going to be a good time to sell. Stay put if you can.

-- Spend less and save more -- a time-honored tradition during troubled times, and with good reason. The less you spend and borrow, and the more you sock away, the less stressed your own personal economy will be. Make little changes, like using library books and videos instead of spending money at the movies and bookstores. Brew your own coffee and pour your own beers. Cook more of your own food. Send all that you save to the bank, or to vanquishing credit card debt.

-- Focus on cutting your energy and utility spending. Most people could significantly improve their household budgets if they limited the amount they paid to the cable, water, electric, gas and telecom companies. Wear sweaters and turn down the thermostat. Use your cell phone all the time and give up your landline. Say goodbye to HMO. Squeeze those monthly expenses now; you can always add more later.

-- Prepare for the better times. Downturns are followed by expansions that bring rising stock prices, home prices, job offers, salaries and the like. All of the careful planning you do now will get you ready to jump in when the economy recovers. Watch for early signs; election years are often good times for investors. Remember, you're not giving up gratification, you're just deferring it. (Editing by John Wallace)

Ask Mint | In Ulips, the insured assumes investment risk

The customer decides whether he wants to invest his money in equity, debt or money markets, but the sum assured is guaranteed on death only

On Insurance | Rajesh Relan

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The insurance business in India isn’t just growing, but also becoming more sophisticated in terms of product offerings. To help readers keep ahead of developments in this business, Mint features a Q&A on insurance every Monday.

What is a traditional insurance plan and is it better than Ulip?

Rajesh Relan, managing director, MetLife

The traditional insurance plan is called traditional because it has been around for many years.

Ulip means a unit-linked insurance plan. It was introduced in the Indian market at the turn of the millennium. In a Ulip, the customer decides whether he wants to invest his money in equity, debt or money markets; in traditional plans, the money is invested in a predetermined manner as decided by the insurer within the guidelines laid down by the regulator. A traditional insurance plan, by and large, has some inbuilt guarantees which assure you a certain sum, both in the event of death and maturity. Many traditional plans also have guaranteed returns over and above this sum assured. Hence, the sum assured plus the returns are guaranteed.

In Ulip, usually the sum assured is guaranteed on death only. Also, in Ulip, you will assume the investment risk and participate in possibly higher returns as well.

I am 39 and earn Rs20,000 per month. I have five life insurance (endowment) policies worth Rs5.6 lakh, with an annual premium of Rs32,000. Please advise me whether the existing policies will cover my insurance requirements.

The human life value (HLV) of a person at your age should be around 10-12 times the annual earnings. This is a thumb rule. The sum insured should be equal to an amount which, if invested, should fetch a regular income for the dependants of the insured. In case there are any liabilities, these should be added to the amount of insurance required.

The life insurance plans taken by you are of an endowment type (that is, a mix of savings and protection). I would recommend you take a pure term policy which will cost you around Rs8,500 per annum and will give you a cover of close to Rs15 lakh for 25 years. This will also depend on your health parameters. If you have children, you also need to invest in a plan with a greater savings component.

Readers are welcome to write in with their queries to askmint@livemint.com. The questions will be answered by senior executives from leading insurance firms.

This week’s expert is Rajesh Relan, managing director, MetLife.

The 6 Top Credit Cards for 0% APR on Purchases

By Flexo on Sunday, November 4th, 2007 in Credit Cards |
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If you manage your money well and can afford to do so, there’s nothing wrong with using 0% offers to make larger purchases. Taking this approach gives you two advantages: you can leave more of your money in savings earning interest and use inflation to your advantage. (Your $100 final payment has less purchasing power than the $100 of your first payment, so even if your absolute dollars stay constant during repayment, you are paying with less real value as time goes on.)

Of course, if you do not make a payment on time then you will owe previous interest accrued at the default rate. The issuers may even try to trick you into missing payments by delaying statements. You must be on the ball to make use of these deals.

Good 0% APR offers are getting harder to find thanks to the credit card companies tightening their belts, coinciding with the recent decreases in Fed rates. Here are some of the best offers available as of November 4, 2007.

Capital One® No Hassle Cash^SM Rewards and Capital One® No Hassle Miles^SM Rewards
0% APR on purchases until July 2008

These cards offers no annual fee but is only available to customers with excellent credit. Each purchase on the cash rewards card earns you 1% cash back and you’ll be granted a 25% cash back bonus each year. With the miles rewards card, you receive 1.25 miles for each dollar in addition to the same 25% annual bonus. I used to be a critic of Capital One, but they’ve recently changed their practices for the benefit of the consumer.

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American Express Platinum Business FreedomPass Card
0% APR on purchases for 12 months

This card offers no annual fee and a standard APR of 11.74% on purchases. The current 0% offer makes this card worthwhile. You will receive 5,000 bonus points after your first purchase, which once accumulated can be traded in for savings on any flight, hotel, car rental or cruise, with no restrictions or blackout dates.

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American Express Blue Cash for Business Card
0% APR on purchases for 6 months

The Blue Cash for Business Card is the one I recently opened to pay for my business expenses, but I opened the card before this 0% APR special offer was available. There is no annual fee and you can earn up to a 5% rebate. The full rebate is a little difficult to achieve thanks to minimum spending requirements and is limited to vendors within AmEx’s OPEN Savings partners.

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American Express Platinum Business Card
0% APR on purchases for 12 months

This no-fee credit card allows you to earn 1 point for every dollar spent with no upper limit. Those points are redeemable for airfare as well as many other expenses, all through the American Express Membership Rewards program. The standard APR is 10.74%, but with an introductory rate of 0% APR for a year, you won’t be paying interest for a while.

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American Express SimplyCash Business Card
0% APR on purchases for 12 months

The AmEx SimplyCash Business Card is similar to the Platinum Business Card. Both cards offer 0$ APR for 12 months but rather than points, the SimplyCash card offers 5% cash back on gas, office supplies, and wireless services, and 1% cash back on virtually all other purchases.

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Advanta Platinum BusinessCard
0% APR on purchases and balance transfers for 12 months

This is a basic credit card that doesn’t offer much in the way of rewards. There is no annual fee, however, and you may be able to make good use of the 0% balance transfer offer. Watch out for the balance transfer fee of 3% with a maximum of $50. That maximum could make larger balance transfers worthwhile.

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As always, if you choose to use credit, do so responsibly. Obviously with 0% offers, you don’t want to pay your entire balance off until the last possible moment, but you must play by the credit card company’s rules and don’t fall into any of the traps.

Is Your Portfolio Protected Against Inflation?

The economy is going through a strange phase right now. It’s almost like everyone is holding their breath to see what happens next. While for the most part the economy is doing reasonably well, a key segment of it, namely the housing market is going through turmoil.

This has caused a chain of events that has led us to where we are today. Weakness in the housing market has caused severe problems in the sub prime mortgage industry, which then caused instability in the rest of the financial sector. This has in turn forced the Federal Reserve to cut short term interest rates, twice now in the past few months, as well as pump in almost $41 Billion in funds in an attempt to add liquidity to the system. All of this has raised a mounting fear of inflation in the marketplace.

Are your investments hedged against inflation? Most normal investors will hold a mix of stocks and bonds in their portfolios. But how well will they do in times of high inflation? Typically not so well. Stocks will tend to fall in anticipation of higher interest rates to combat rising inflation. The price of long term bonds will fall as investors will demand higher yields in an inflationary environment.

So what does well during high inflationary periods? Well, I’ve already mention in some of my previous articles how food and energy prices have been skyrocketing lately, which are the main reasons why most people are afraid of inflation now. Might it not be wise to invest in those markets? I am of course talking about the commodities market. Now usually this market is for the most sophisticated of investors, those that are familiar with futures and options. However there are some mutual funds that invest in these markets so anyone can get in on the action.

Other areas that tend to do well are precious metals and foreign investments. Precious metals will usually keep pace with inflation. As for foreign investments well, if our country has a higher inflation relative to another country, our currency would grow weaker against that other nation’s currency. However, that just means that when you finally do convert those investments back into dollars, you would have more dollars from the foreign investment than you would if you had gone with a similar domestic investment with the same rate of return.

Now we come full circle. The final area that usually does well in a high inflationary period is none other than the real estate market. So while these lower interest rates may eventually fix the sagging housing market, they may wreck the rest of the economy to do it. Isn’t if funny how these thing turn out?

Carnival of Personal Finance #124

Carnival of Personal Finance #124

Written by Flexo on October 29, 2007 | Carnivals

The Millionaire Mommy Next Door has posted the latest edition of the Carnival of Personal Finance, the “Trick or Treat Edition.” The concept this week is interactive. Mommy is looking for all readers to vote for their favorites in each category. The winners will receive one of five excellent prize selections.

Here are the Editor’s Picks, which include a number of new bloggers to me:

• Money vs. Time Off: Why We Don’t Take Vacations
• Follow the White Rabbit to Financial Freedom
• Work Once, Buy Forever
• Is Real Estate a Good Investment?
• Diversify to Avoid Investment Fraud
• Lifestyle and Spending Choices
• A Contingency Plan
• Stay at Home Parents Pay a Professional Price
• Why Personal Finance is Personal
• It’s That Time of the Year Again

Please check out all 92 submissions and vote for your favorites!

Should I prepay my home mortgage or stretch out the deduction?

Prepaying can save you a substantial amount over the life of your mortgage by reducing the total interest owed. However, by doing so you also shorten the amount of time you can claim a mortgage interest deduction on your federal tax return. Let members of the Financial Planning Association of Greater Indiana help you decide what to do. Visit the group's Web site at www.fpagrindiana.org.

Nancy Cooper Pitt

Financial Partners Group

It depends. There are financial considerations, circumstances and personal values.

Financial:

• How much money will you save by prepaying the mortgage?

• What else would you do with the money you would use to prepay?

Prepaying your mortgage can result in a significant reduction in the amount of interest you would otherwise have to pay over the life of the loan.

Would you pay off other debts, such as credit-card debt, with a higher interest rate than your mortgage? Would you invest the money? You may be able to invest it in something that could generate a higher return than the interest you would save by prepaying. For many people, it might be wise to invest this money in a tax-deferred retirement plan.

Circumstances:

• What is your age? (Are you retired or close to retirement?)

• What is your income and do you expect it to increase or decrease?

• Is your investment perspective short-term or long-term?

• Do you have an adequate emergency fund?

Personal values:

Would prepayment bring you greater peace of mind?

Some people sleep better knowing they don't owe money to others. Some with low tolerance for risk would prefer to take the sure savings from prepayment rather than the risk of return associated with an investment.

Michael D. Fields

Comprehensive Retirement Solutions

Square one in deciding whether to prepay a mortgage is to understand the cost of the money you are borrowing -- the interest rate on the mortgage.

If the rate you are paying is lower than the rate of interest or gain you expect to receive in an alternate investment, then you should invest your extra money, rather than prepay your mortgage. Naturally, there are several other issues to consider as you approach this issue:

• Are you able to use your tax deductions? A home mortgage interest deduction typically allows taxpayers to itemize their deductions, rather than take the standard deduction. However, as you approach the end of your mortgage, the majority of your payments are toward principal, and your home interest may not be contributing as much as you expect.

• Are you comfortable with the risk you must assume in the alternative investment? All investments carry risk, and if you are unwilling to live through an uncertain market to reach higher returns, this might not be a good strategy for you.

• Is the interest rate on your mortgage variable? If so, you will have to evaluate this question each time your rate adjusts.

• Do you owe more on your mortgage than your house is worth? If so, then it is usually better to pay down the mortgage until it is less than the value of your home before considering alternative investments. Also, it is a good idea to seek the advice of a tax adviser about deductibility of interest.

Michael E. Wright

Edward Jones

The answer is a resounding "maybe."

Doing a financial comparison between prepaying a mortgage or using the extra money to invest in stocks or mutual funds is a good starting point. As a general rule, the return on prepaying a mortgage is the interest rate on that mortgage. So the prepayment decision would be based on the return you could get for other investments.

For example, assume you had a 6 percent mortgage and were earning a 9 percent return from a diversified portfolio. You might continue putting money in these investments rather than prepaying your mortgage. However, if you were thinking of buying a certificate of deposit that pays 4 percent, you might be better off using this money to pay down your mortgage.

For most people, the decision to prepay is rarely purely financial, so you will want to look at other advantages and disadvantages.

Advantages:

• You might feel better having a mortgage paid off sooner.

• Prepaying a mortgage shortens the loan term, saving you thousands of dollars in interest expense.

• Ability to focus on other financial goals once home is paid off.

Disadvantages:

• Loss of tax deductions you receive from the interest payments.

• Lack of liquidity to reach other financial goals.

To determine the best course of action, I would suggest a review with a financial adviser to fully evaluate your options.

• Michael F. Wright is a certified financial planning professional.

Free Personal Finance Software

Top 3 Free Online Personal Finance Software

© Shelley Elmblad

Nov 1, 2007

Take a look at the top three free online personal finance software options and see how you can manage your money and save money with free financial software.

Online Personal Finance Software Benefits

Online personal finance software is very convenient because you can use it where ever there is an Internet connection. And, these free top three online personal finance software choices offer security features for your personal finance data. With online software, you never have to install anything on your hard drive and software updates are done for you on the software company's servers.

Each of the top three online personal finance titles have a different feature focus, so look them all over and visit the web sites for more details. And remember that when you use online personal finance software on a public computer, you must log out and close the browser window before leaving the computer.

How is This Personal Finance Software Free?

ClearCheckbook is completely free but accepts free-will donations. Mint and MySpendingPlan are also completely free but each gets a cut on any of the money-saving offers presented to you. The offers on Mint.com are hidden unless you click on a tab to view them. MySpendingPlan offers are more upfront and in-your-face.

ClearCheckbook

ClearCheckbook is free online personal finance software that is far from bare-bones free software. ClearCheckbook has many features to manage personal finances.

ClearCheckbook Features:

• See all transactions, overall balances, reminders and notices on one page in ClearCheckbook.
• Supports account transfers and split transactions.
• ClearCheckbook spending limits provide a way to create a personal budget.
• Search transactions by date, keyword, account or category.
• Track your spending in ClearCheckbook with charts, graphs and spending vs. saving for all accounts.
• Security: you do not enter your account numbers into ClearCheckbook.
• Reconcile accounts and use time-saving recurring transactions.
• Personal finance alerts and reminders arrive by email.
• Use CheckBot to update your account while on-the-go with AIM, ICQ, MSN / Windows Live, Google Talk and Yahoo! Messaging services.

Get ClearCheckbook free personal finance software at ClearCheckbook.com.

Mint

Mint is free online personal finance software that offers something truly different: Mint tells you how you can save money, and it has some nice automated features.

Mint Features:

• Mint automatically updates your banking and credit card transactions, eliminating the possibility of forgetting to enter transactions.
• Mint automatically categorizes transactions as they are downloaded.
• Label transactions to be able to quickly identify expenses that are related to work, hobbies, meals out, etc.
• View all banking and credit card transactions and account balances side-by-side.
• Mint works with 3,000 U.S. banks and credit card companies.
• Compares cash and debt for quick overall financial reporting, and Mint offers spending histories.
• Email and SMS alert let you know about low balances, large purchases and other financial activities in your accounts.
• Security: firewalls, encryption and authentication procedures protect your personal finance data.
• Mint tells about banking and credit card deals and money-saving products and services you could benefit from using. This information is kept out of the way under the Ways to Save tab.

Get Mint free online personal finance software and learn about managing personal finances at Mint.com.

MySpendingPlan

MySpendingPlan online personal finance software has strong personal budgeting features and a focus on building savings.

MySpendingPlan Features:

• Detailed budget set-up.
• Manage budgets and spending for groups or for your household.
• Bill tracking with email reminders from MySpendingPlan.
• Set up savings goals in MySpendingPlan and track progress toward those goals.
• Shopping features include shopping planner, online shopping deals, shopping lists, savings recommendations, online and in-store coupons.
• Security: MySpendingPlan uses strong data encryption and does not require account numbers to be entered.
• Pre-made templates for standard personal budgets or for planning for large, infrequent expenses.

Get MySpendingPlan free online personal finance software and personal budgeting tips at MySpendingPlan.com.

ClearCheckbook Graphs

Mint Overview Screen

MySpendingPlan