Friday's Personal Finance stories

If someone handed you $600 right now, what would you do with it?

That's question on lawmakers' minds as they debate whether to inject a fiscal stimulus into the economy in the hopes that cash in consumers' hands will prime the economic engine. As one economist in our lead story today says: "Give the average consumer a check for $50 and he knows what to do with it."

Now, I'm happy as the next person to be handed a few hundred dollars. But do you ever feel as though the double standard is a bit too much to bear sometimes? Americans are exhorted to stop loading up their credit cards and berated for living beyond their means, yet once again the government appears ready to beg us to spend.

Consumers were happy to oblige in 2001, the last time the government handed out a cash stimulus. Still, some economists say consumers are less likely to embrace their inner shopaholic this time, given stagnant wages, steep credit-card debt and, for some, mortgage woes.

Read consumer writer Jennifer Waters' story today for more on what consumers are likely to do should the fiscal stimulus plan come to pass, plus see which companies and government agencies are working to recruit older workers, and find out how the IRS is reacting these days to frivolous tax arguments, all on today's Personal Finance pages.

The dispiriting fact about this stimulus plan is that it's the lowest-income people who are likely to spend the most, while higher-income people can afford to save. So, I'd like to suggest an alternative idea for fiscal stimulus. Rather than the government spending tons of money to encourage poor people to spend, let's leave the little guys, and even the middle guys, out of it. Simply ask a few hundred multi-millionaires to spend an extra grand or two in the next couple of months. Buy their Christmas presents now, maybe. They could even get a special tax deduction for making a gift to the U.S. economy. That'd likely cost our country less. And it would leave the rest of us better able to focus on being savers, rather than consumers.

Andrea Coombes, assistant personal finance editor

Quicken Online Delivers New Personal Finance Service for Internet Generation

Intuit Inc. (Nasdaq: INTU) announced the availability of Quicken® Online – a new Web-based personal finance service that makes it easy for people to instantly see how much money they have coming in, how much they are spending, and what's left at the end of the month.

Quicken Online gives people access to information across all of their accounts, including checking, savings, and credit cards – regardless of their financial institution. This provides a unique and powerful view of their "real" financial picture, helping them make better decisions with their money. With Quicken Online, bank account information can be accessed wherever there is an internet connection from a PC or Web-enabled mobile device.

"With Quicken Online, Intuit continues to do what it has done for years: change the lives of millions of people by providing powerful tools to manage their dollars and cents," said Rick Jensen, senior vice president at Intuit. "We took a fresh approach to designing Quicken Online, combining the newest Web technologies with 25 years of experience to deliver a service that gives people the insight, functionality and tools they need with the security and quality they demand."

Quicken Online comes at a time when Americans are failing Personal Finance 101. A recent study by CareerBuilder.com found that 41 percent of adults in America live paycheck to paycheck. Compounding matters, debt is reaching a younger segment of the nation's population. According to the Richmond Credit Abuse Resistance Education Program, the number of 18- to 24-year-olds declaring bankruptcy has increased 96 percent in ten years. Not only that, the Project on Student Debt found that today's college students are graduating with an average of $20,000 in debt.

A New Financial Approach for a New Generation
Designed to address the basic personal finance tasks in the easiest, most time efficient and secure way possible, Quicken Online is available for a monthly subscription fee of $2.99. The goal is to provide customers with quick answers to important financial questions, such as:

How much money do I have? - Quicken Online connects to more banks and financial institutions than any other solution in the marketplace. This means users now have the chance to view their checking, savings and credit card accounts from any of the 5000+ financial institutions Intuit works with – all in one place. Gone are the days of logging in and out of numerous sites just to find out how much money has been spent, or how much is left for the rest of the month. Additionally, Quicken Online shows the RealBalance™ – a view of the current account balance plus any reoccurring deposits and manual entries to help keep people from spending beyond their means.

Where is my money going? – Quicken Online takes the work out of organizing and categorizing spending reports. Customers just login to see where their money is going. Building on the power of the Web, Quicken Online suggests the right category for transactions based on the most frequent categories selected by other users.

Quicken Online balances user-based knowledge with specific customer preferences, allowing customers to define how they want to see their information. For example, Quicken will remember if you've chosen to categorize the local Coffee Shop as "Java" instead of "Groceries."

When are my bills due? – – Doing the work for customers, Quicken Online automatically displays a list of upcoming bills on the user's homepage based on previous payment history. Going a step further, customers can be sent bill reminders via e-mail or text message to help avoid late fees and higher interest rates from credit card companies.

Added Benefits from a Trusted Brand
As part of the Intuit family, Quicken Online offers benefits no other online financial management solution can match, including:

Security – Protecting critical data is the top priority. Quicken Online is the only offering of its kind that uses multi-factor authentication – an additional step in the sign-in process – for added security. Intuit is subject to the same stringent auditing and technology requirements used by the world's major financial institutions including banks, stock exchanges and brokerage houses.

Support – Live, in-product support is available from the Quicken support team as well as other users. The Quicken Community, an online group of users, also shares personal finance tips and expert advice via podcasts, blogs, and live chats and events at www.quicken.com.

iPhone Optimization – Managing money on-the-go is even easier. Quicken Online is available on the iPhone®, making it easy to get your bank account balance and enter transactions while on-the-go.

Data Storage – Quicken Online lets users store up to five years of transactions for easy reference.

Expanding Industry Leadership
To further extend Intuit's effort to help younger consumers get off to the right start with money, Intuit has been selected as the exclusive online personal finance solution for Higher One, one of the fastest growing financial services companies in the country. The agreement will provide the hundreds of thousands of students, faculty and staff at distinguished public and private higher education institutions across the country that use Higher One with Quicken Online as the preferred solution for managing their banking services and debit cards. More information can be found at www.higherone.com.

Quicken Personal Finance Product Availability, Pricing

Quicken Online is available direct from Intuit at www.quickenonline.com for a monthly subscription fee of $2.99.

Put Your Savings in Hyperdrive, Part 4: The Expensive Coffee-Related Drink Factor

I’m on a quest to determine a number of financial moves that will accelerate savings beyond the typical snail’s pace. I’ve written so far about opening a high-yield account, keeping your change creatively, and automatic your savings. These are all basic concepts that can be applied in interesting ways with a little bit of attention.

Many people disagreed with me when I railed against The Latte® Factor, David Bach’s trademark catchphrase and program which prescribes dropping your expensive morning coffee drink and depositing the value of each day’s savings into some sort of magical account that will return 10% annually after taxes and fees for forty years and end up with close to $1,000,000 more than you would have otherwise.

I’ll address my issues with David Bach’s program below. Nevertheless, a system similar to David Bach’s suggestion has merits for some people, thus I have a fourth tip for putting your savings in hyperdrive.

4. The Expensive Coffee-Related Drink Factor.

Obviously, I don’t want to call it The Latte® Factor, which is a registered trademark and a signature selling point that drives millions of dollars in books in seminars. Since I don’t drink coffee, I’ll use the therm ECRD to refer to any habit that requires a frequent expense but is easily controlled or replaced by another, less expensive habit. The savings from the elimination or switch can be accumulated and deposited into a high-yield savings account.

Problems With The ECRD Factor

It is important to remember that all of this is pointless if one doesn’t make smart decisions about the larger issues in life. You can forgo the daily coffee from Dunkin Donuts, but if you still eat two doughnuts every day, you’re spending money on something that you may pay for in health care costs later on. You can switch from premium gasoline to regular gasoline, but if you buy new cars every three years, the savings from the gasoline are ten or a hundred times lost by the unnecessary expense of buying new cars so frequently.

The scenario David Bach paints—an after-interest, after-fee, after-tax increase of almost $1,000,000 in 40 years from dropping your daily latte is an extremely unlikely scenario, both mathematically and behaviorally. Bach makes some serious assumptions that don’t have much validity in the “real world.”

• You probably won’t earn 10% in an account for forty years after taxes and fees.
• To invest in an account that earns even 8% over forty years, you will lose a lot of your money due to transaction fees. A $4 transaction fee, like the one charged by ShareBuilder, on a $150/month investment is a 2.7% fee right off the top. That’s not a wise investment.
• Without your daily dose of caffeine, you may miss out on career opportunities while asleep at your desk. This sounds like a stretch, but if you quit cold turkey, you could see adverse effects in your productivity and you may miss an opportunity without knowing it.
• It’s also quite possible that you enjoy your latte, understand the consequences and future savings you are giving up, and have decided your enjoyment is worth the potential loss.

So The ECRD Factor can have mixed results when you deal with variables in the real world. Don’t expect the kind of wonderful returns David Bach promises, but the frequent expense reduction or elimination that forms the basis of this tip can be a significant part of your saving strategy if the rest of your financial decisions are sound.

Making The ECRD Factor Work

What’s your ECRD? It’s probably best to pick something to which you do not have a physical addiction without appropriate support. While I would always suggest eliminating an addiction to heroin or alcohol, there are more immediate concerns in these cases than saving money, namely staying alive and healthy. It’s best to choose a daily expense that can be eliminated or replaced immediately without any significant withdrawal symptoms. The daily coffee-related drink might be a good candidate, particularly if you buy such drink from an expensive store like Starbucks. The good news is you won’t go through withdrawal if you simply replace the expensive drink with your own freshly brewed concoction.

And if you eliminate the drink entirely over the span of a few weeks, or replace it with water, you will get used to the change in chemicals in your brain within a few weeks.

Caffeine isn’t the only option. A coworker of mine has stopped buying lunch every day, opting to bring in a homemade sandwich instead. If not lunch, I know someone who used to eat out at an expensive steak restaurant every week. If you work in New York City, there’s the temptation to go out to the bar for happy hour with your coworkers. Do you smoke? Slowly cutting back will improve your health and save you thousands of dollars even before interest.

How about the news stand in the morning? If you pick up a newspaper on the way to the office to read on the train, consider this your ECRD. Replace the newspaper with a free news podcast if you already own an mp3 player. If you really like the newspaper, consider subscribing. You’ll save quite a bit off the newsstand price. The difference in price is your ECRD.

Apply Your Savings and Earn Positive Returns

If these are habits, cutting back (without affecting your networking experiences) and intentionally depositing the money you save will add up over the long term. It doesn’t have to be perfect. The three previous hyperdrive tips come in handy here. If you’re used to spending $4.50 in cash every morning for your latte and are ready to eliminate the drink entirely, put that $4.50 in your coin jar before you leave for work for later deposit into a high-yield savings account. Not a cash user? If you spend about $100 for your chosen ECRD a month, set up an automatic transfer from your checking to savings account for that amount. If your bank allows you to create separate goal-related accounts, like ING Direct’s subaccounts, create one specifically for your ECRD savings and transfer your monthly savings there.

Your high-yield savings account is not earning the 10% promised by David Bach. Forget about that rate and use the money saved for short-term goals. The more you save, the more you’ll also have available for long-term goals like retirement and legacy. So keep making good decisions all around—especially on the bigger expenses like real estate, vehicles, and education—and these seemingly small savings will add up over time. It starts off slowly, but compounding interest is the key to putting you savings in hyperdrive.

Put Your Savings in Hyperdrive, Part 2: Keep Your Change

Whether you’re trying to establish an emergency fund or putting money away to take your dream vacation, you can reach your goal faster by putting your savings in hyperdrive. Unfortunately, scientists have not yet perfected time travel. When they do, saving for retirement might only entail traveling back to the 18th century to deposit $1,000 in a national bank and popping back to the present to reap the rewards of three hundred years of accumulated interest.

Until modern technology catches up to science fiction, savers are relegated to more traditional forms of accelerating their income from interest. Yesterday, I wrote about opening a high-yield savings account, a set-it-and-forget-it task. The next suggestion involves creating a daily habit.

2. Keep your change. At first glance, focusing on your daily pocket change may seem like a lot of effort with too little payoff. For example, I’ve seen people who are so focused on picking up pennies from the ground by keeping their eyes down that they miss the dollar bills right in front of their faces. That’s a prime example of being penny wise, pound foolish.

Nevertheless, I’ve also seen coin jars add significantly to savings. A coworker of mine emptied her jar recently and counted $500 from the past year. This type of savings may not be worthy of your retirement plan, but it can mean the difference between renting an economy car and a convertible on vacation. A mason jar may not support your children’s education, but it might pay for internet service for a year so your kids can research their assignments online. This is significant, and the beauty is in the simplicity.

The concept is simple, but the execution is not as easy as it used to be. Back when dimes were 90% silver, cash was king. Almost all everyday transactions were handled with cash. Inflation from the last 50 years hadn’t yet eroded the value of coinage, so when you dropped your coins in a jar at the end of the day, you knew it was worthwhile.

Now, fewer transactions are handled by cash, and you have less change in your pocket when you arrive home. The change you do have has decreasing purchasing value, as well. Keeping your change in the 21st century now takes more than filling a piggy bank with your coins.

That’s not to be overlooked however. The only material needed is a jar or piggy bank, and the best placement is near your front door, perhaps right next to the spot where you leave your keys when you walk in at the end of the day. It’s quite simple to make this a habit: check your pocket or purse as you put down your keys or hang up your coat. Perhaps you won’t have anything most of the time, but it’s a habit worth creating anyway.

Once a month, or more frequently if you desire, bring the coins in the jar to your bank to deposit into your savings. If your bank has a free change counting machine this process may be easier. My girlfriend enjoys rolling coins into wraps so I don’t deny her the fun. Don’t forget that this deposited accumulated change will do much more for you in a high-yield savings account than in the standard account offered by your local bank.

Unfortunately, with the decreasing use of cash, the “analog” coin jar may not be enough. In a world where debit cards and credit cards rule financial transactions, a high-tech piggy bank equivalent may make the difference. One example was corporate-sponsored. A few years ago, Bank of America created the “Keep the Change” account offering.

Every purchase you make with the debit card is rounded up to the nearest whole dollar. When the debit card is used to make a purchase, the amount deducted from your checking account is the rounded up number. For example, if at item is purchased for $15.25, $16.00 is deducted from the account.

Of that $16.00, the difference due to rounding, $0.75, is transferred directly into your Bank of America savings account, where presumably it will earn some interest. Of the remaining $15.25, Bank of America keeps about $0.25, a standard merchant transaction fee, and the merchant receives the remaining amount, approximately $15.00.

Similarly, One from American Express is a credit card that will deposit 1% of your purchases (plus a $50 bonus after your first purchase) into a high-yield savings account.

There’s no reason for this type of cumulative saving to be tied to certain debit cards, debit cards, bank accounts. While they make it easy for you, it would be worthwhile to use all of your credit and debit card accounts as well as a better-paying savings account.

If you’re ready to put your savings in hyperdrive, then you must already track your account balances and activity in software like Microsoft Money, Quicken, or any number of web-based offerings. You’ve also presumably followed yesterday’s suggestion of opening a high-yield savings account. On a weekly basis, take a look at all your debit card and credit card transactions. Round each expenditure up to the nearest dollar. Total the excess amounts and transfer the sum from your checking account to a special high-yield savings account earmarked for whichever goal on which you happen to be focusing.

This process may be too involved for daily attention. If you review your financial activity every few days, keep a spreadsheet going with the tally and transfer the sum of the remainders to your high-yield savings once a week or once a month. The idea is to create a habit at a rate that works best for you, and everyone has different preferences.

Do what’s best for you, but don’t ignore the power of doing more with your change—and letting your extra change do more for you.

Put Your Savings in Hyperdrive, Part 1: Open a High-Yield Account

Hyperdrive, also known as warp speed or a number of other terms in science fiction, refers to traveling faster than light. While theoretically impossible for objects due to the special theory of relativity, moving at this incredible pace is possible for your money. While you have a savings account earning continuous interest, you are becoming slightly richer not every second, not every microsecond, but every infinitesimal portion of time. That’s fast.

If your money is earning 0.25% yearly interest in a standard brick-and-mortar savings account, you are not making the most of your money. For no more risk you can be earning up to 20 times as much. Savings, whether in a high-yield account or not, is among the safest of all investments. Here is the first tip for putting savings into hyperdrive. Keep in mind that the terms “savings account” and “money market account” (not “money market fund”) are interchangeable.

1. Open a high-yield savings account. Many banks are getting away with murder. They know that most customers are fine letting their money sit without looking for better alternatives. Comfortability plays a role.

If you’ve been with a bank for 15 years, you feel comfortable with them and are less inclined to feel the need to shop around. This is acceptable behavior as long as you understand that you could be missing out on significant interest income. Take a look at this list of high-yield savings accounts or look for the lists on BankRate.com.

Many of the banks that pay the highest interest do not have brick-and-mortar branches. These branches are expensive to run. Without having to manage branches, banks can theoretically save more income and pass that savings onto account holders in the form of interest.

There is no reason to feel nervous about opening an account with a bank that only exists online. As long as they are insured by the FDIC—and all the banks listed here are—you have the same protections you have with a traditional bank. Also, you’re safer sending your information over a secure, encrypted internet connection than you are traveling to a branch with your money.

Opening a high-yield savings account is a no-brainer. With a $10,000 balance at the beginning of the year and no further deposits, a savings account with an annual percentage yield (APY) of 4.5% earns $450 in interest, $425 more than the typical savings account offering 0.25% APY.

Put Your Savings in Hyperdrive, Part 3: Automate Your Savings

If you’ve ever run from one point to another, you’re probably aware that there is a limit to your speed. With “analog” equipment like the bones, muscles, joints and tendons in your legs and feet, there are physical limitations that prevent you from going too fast. Don’t worry. Thanks to recent inventions, it’s quite easy to get around this problem. Bicycles and cars allow your muscles to exert much less effort while resulting in faster movement. Sometimes machines and computers are required to break through limitations.

As you might imagine, saving money follows the same concepts. Picking up your paycheck from your mailbox, endorsing the back, and bringing it to your bank is like walking from one point to another. (Even if you drive to the bank, for the purpose of this metaphor, you’re a walker.) Once the teller confirms your identity and the validity of the check, he or she might give you the sum of the check in cash. Perhaps you cash only a portion of your check—the money you’ll need for the upcoming week—and deposit the rest into your checking or savings account at the bank. Congratulations, you’re now moving at 25 miles per hour.

You’ll still need better equipment to make the jump to hyperspace.

3. Automate Your Savings. With your savings on autopilot, you have less to worry about. While you’re not looking, money is transferred to your bank account—a high-yield savings account is best but a checking account may be a necessary intermediary—and begins earning interest. There is no need to waste gasoline on trips to the bank. There are several parts to automating your savings.

Direct Deposit

Direct Deposit is one of the most positive developments in saving. Rather than cashing your pay check and depositing only what is left over, you can instruct your employer to transfer your after tax salary each payday directly into your checking or savings account. Large companies usually make this an option when you first accept the job. Otherwise, you may need to get in touch with your human resources department. Smaller companies may not offer this feature, but it wouldn’t hurt to suggest to those whose make these decision that the company implement the service.

There are a number of benefits. Most immediately, you don’t have to worry about finding time for traveling to your bank. You reduce the risk of losing your paycheck in transit. In most cases when you receive your funds via Direct Deposit, the money is made available to you on the date the check is deposited rather than being subject to a holding period as you would be for other deposits. Direct Deposit also allows you to split your paycheck among a number of accounts, so you can immediately designate a portion for savings and begin earning interest on the day of deposit.

What are the drawbacks of Direct Deposit? If you still use cash for transactions throughout the week, you’ll need a way to get the cash out of the bank. These withdrawals should be done from checking accounts rather than savings accounts. Savings accounts are limited to six withdrawals or outgoing transfers per month—so most of your transactions should take place in a checking account. You can use an ATM card to get the cash you need. You should be the last entity to touch your money—let the interbank technology take care of as much of these transactions as possible.

Automatic Transfers

In most cases, your paycheck is best deposited into a checking account, and from there, you can set up automatic transfers into savings and cash withdrawals. The best high-yield savings accounts can be linked to your checking account. This will let you transfer money directly within the same bank or from one bank to another without writing checks. For example, if you choose to open accounts at ING Direct, you could set up a link to your local checking account into which your paycheck is Directly Deposited.

You can then create automatic savings plans, instructions to periodically transfer money from your checking account to the high-interest savings account. Set it and forget it. While I am citing ING Direct as an example, they are not the only bank that allows customers to create automatic periodic deposits. Find a bank you like and review the options they offer.

With all your money moving behind the scenes, from your employer to your checking account to your savings, you are earning interest without knowing it. When the money is not passing through your hands, there’s less temptation to spend it right away. More money ends up in your savings, accruing interest for the future. Effectively, each time you feel you need cash, there is an obstacle of going to the bank or ATM. Some may decide that the expense is not worth the hassle and simply leave the money in savings.

Automation allows more of your money to find its way to your savings account quicker and remain there, earning interest.

Survey shows changing personal finance trends

NUMBERS: The percentage of people holding mutual funds increased from 32 percent to 41.4 percent, while those with stocks fell from 42.1 percent to 31.2 percent

By Angelica Oung

STAFF REPORTER
Wednesday, Jan 16, 2008, Page 4

A survey of 4,017 workers by the Council of Labor Affairs (CLA) found that workers have changed the way they manage their assets in the past five years.

Compared to a similar survey conducted in 2002, the percentage of those putting money into properties, savings accounts, individual stocks and through "mutual aid societies" (標會) are all down, according to data released at yesterday's CLA news conference. Meanwhile, there have been an increase in those investing in mutual funds and buying insurance.

The survey was conducted to gauge the readiness of workers in this country to face retirement, said Lin Lee-jen (林麗貞), the director of the statistics department of the CLA. However, the survey did not ask workers how much they are putting away in various forms of savings or investments.

"Our savings rate in this country is still quite high, in excess of 20 percent," Lin said. "However, whether or not those savings can give us a comfortable life depends on how they are managed."

The decrease in those using mutual aid societies is the most dramatic.

While 38.7 percent of surveyed workers participated in such societies in 2001, only 10.3 percent did so last year, a drop finance experts credit to the increasing number of firms offering financial planning services in this country.

Mutual aid societies are a traditional way for individuals to obtain credit from a group of peers. One member receives dues collected from the rest of the members every month.

The member who needs the money the most submits the highest bid for the pot. Those who are not in immediate need of the money do not bid and in return receive the pot when it comes to their turn to collect.

Investment in real estate is also down as property prices have risen out of reach for many. Those who saved through investing in real estate fell from 42.7 to 17.8 percent. Those investing in stocks fell from 42.1 percent to 31.2 percent.

In the face of low interest rates in savings accounts, those using them as an investment also fell from 72.2 to 56.6 percent.

The percentage of those investing in mutual funds increased from 32 percent to 41.4 percent while the percentage of those who bought insurance rose from 48.9 percent to 57.1 percent.

Hsin Ping-lung (辛柄龍), an associate professor the Graduate Institute of National Development at National Taiwan University said that the survey would yield more useful information if it included more detail.

"So we know a greater percentage of people are buying insurance, but we don't know what kind of insurance they are buying or how much," Hsin said.

The savvy or lack thereof of individual investors could determine to what extent labor retirement benefits could be privatized, Hsin said.

Don't You Wish You Have An Emergency Fund Right Now?

Doesn’t it seem much more important to have an emergency fund now that people are talking about the US going into recession? Something that’s often neglected as a benefit of having an emergency fund is actually the piece of mind of knowing that our standard of living won’t be jeopardized if we lose our jobs.

Having an emergency fund will also give us freedom to look for another job if we unfortunately get fired. Imagine someone who lives paycheck to paycheck getting fired. How will he or she keep up? It wouldn’t matter what the former lifestyle is because there is no way he/she can pay another bill. This means that the person is forced to find a job immediately and the chances of finding a good one diminishes drastically.

Some might feel that emergency funds are not important because they’ve never used it. Actually, the fund is never meant to be used. It is just a safeguard just in case something happens and cash is needed quickly. The fact that the fund has never been withdrawn shows how lucky the person is because they never needed that cash.

With a stock market that seems to go lower daily, the emergency fund also acts as a form of diversification of our assets because emergency funds are supposed to be kept in safe investments like money market funds or even online saving accounts. Actually, I bet many people wishes much more of their assets are in their online savings account instead of being in the stock market!

So how many of us actually have emergency funds already? If not, what are you waiting for? There’s no perfect moment to start so now is a better time than any!

2008 Roth IRA: Lump Sum or Dollar Cost Average?

By Flexo on Saturday, December 22nd, 2007 in Investing

The last contribution to my 2007 Roth IRA was invested last Monday. Ever since my first Roth IRA several years ago, I’ve been maximizing the contribution each year by automatically investing equal amounts twice each month. One reason for using that technique, usually known as “dollar cost averaging” was to reduce risk. With the market going up and down throughout the year, sometimes money is invested at a good prices while other times the prices are not as good.

The other option (although it certainly is possible to mix the two strategies) is to invest the entire $5,000—the maximum for 2008—in one lump sum. That would give me the benefit of having the entire year for the full amount to grow. That is, if the stock market grows next year, the full amount will grow. If the market is shaky, then I will have put my entire faith in one date in the year.

Another reason I used the dollar cost average strategy each year is it wouldn’t damage my cash flow. I didn’t always have enough savings ready to be invested, and slow, regular investments allowed me to spread out the contribution over twelve months. While I’d like to keep a large amount of cash on hand for when I eventually make a down payment on a house, if I needed to, I could withdraw Roth IRA contributions without penalty for that purpose.

On a side note, I called to stop my 2007 Roth IRA contribution at TIAA-Cref, and I intend on investing my 2008 Roth IRA with Vanguard.

Mjrz.net Personal Finance Manager R1.0.26

About:
Personal Finance Manager is a finance and expense tracking tool for those with limited or no accounting experience. You can use it to manage expenses and track account balances, generate reports, create and save complex filters to search the transaction history, create charts and graphs for assets, liabilities, and daily net worth tracking, view stock prices/quotes, store contacts, email, and phone numbers, and import OFX data for banks and credit cards. It supports the latest Quicken format, and also supports downloading current statement for bank and credit card accounts.

Release focus: Minor feature enhancements

Changes:
A transaction details panel was added. Now the user will be able to see all TX details without having to pop up a new dialog. A bug where the portfolio timer was not restarting was fixed.

Finance Gets Personal

By SHELLY BANJO
December 23, 2007

Money: It's a subject most twentysomethings are wrestling with as they try to control their finances. But it remains a completely taboo topic in most social settings.

Then there's the world of personal-finance blogs, or online journals. In what's called an open wallet atmosphere, dozens of twentysomethings display their debts, savings, incomes and spending habits for everyone to see -- and learn from.

Blogging Out of Confusion

Moneyspeak can seem as foreign as Aramaic to recent college graduates who can navigate their way through Africa but struggle to manage a bank account. Wading through acronyms like IRAs and HSAs can be overwhelming, as can attempts to decipher tax laws. Still, a number of bloggers are trying to take control of their finances -- and are inviting you to watch and chime in.

When Eric, a 26-year-old writer, moved to New York, he was overwhelmed by nearly $40,000 in student-loan and credit-card debt. "I found myself living in an incredibly expensive place trying to make ends meet and my friends just didn't understand or worry about it," he says.

So in September he created a blog called The Captain is Out to Lunch (captainfinance.blogspot.com), where he tracks his debts, investments and net worth with clever graphs and discusses his daily financial follies and successes.

After a month or so, he noted that for the first time he saved more than he spent.

Eric, like most personal-finance bloggers, won't disclose his full name because of the personal information he posts and because friends and family do not know about the blog.

Twentysomethings can find inspiration in blogs. They can watch Mollie's progress toward financial independence at An English Major's Money (englishmajormoney.blogspot.com) or watch Krystal, author of Give Me Back My Five Bucks (at krystalatwork.blogspot.com) save $25,000 for a condo down payment.

For "Beachgirl," who has the blog beachgirlsbudgetblog.blogspot.com, reading other blogs helps her "learn from others' mistakes but also commiserate in the fact that you're not alone in making them."

She recalls a hectic move from North Carolina to Washington D.C. when she forgot to pay her credit-card bill. After reading others' experiences, she called her credit-card company and got the fees waived.

Juicy Diaries

Many bloggers, such as Nicole at Budgeting Babe (budgetingbabe.blogspot.com) and "Wanda" at Well-Heeled With a Mission (wellheeled.wordpress.com), weave personal finance through stories of their lives, making the blogs read like juicy diary entries or casual emails.

"We put the 'personal' back in 'personal finance', " says Krystal.

Comments posted by other readers can be equally helpful.

"If they see me making missteps they will chime in," says Eric from The Captain is Out to Lunch. For example, when he mentioned he didn't qualify for his temp agency's 401(k) plan because he didn't work enough hours, a fellow blogger suggested he ask about exceptions for new hires. Eric says the responses he receives "keep me in check."

For a roundup of personal-finance blogs and information about how you can start your own, visit PFBlogs.org.

Write to Shelly Banjo at shelly.banjo@wsj.com

Where to get answers on long-term-care coverage

By Chuck Jaffe

Syndicated columnist

A key issue facing many consumers is whether to pursue long-term-care protection. Frequently, consumers are dealing with this issue in connection with their parents, but at a time when they are also reaching an age where they can buy coverage cheaply.

Most experts suggest that long-term-care coverage is right for a certain niche of the population — those with sufficient assets to avoid Medicaid but not enough money to simply pay for care on their own.

But they note that terms and conditions and circumstances vary from one person to the next.

With that in mind, Kiplinger's Personal Finance magazine has created the "Long-Term Care Center" — a comprehensive, independent information site that does a good job answering virtually all questions associated with care coverage, from costs to Medicaid planning and more.

You can get to the site at kiplinger.com/yourretirement/longterm.

Personal Finance by Kathy Kristof

Personal Finance by Kathy Kristof

Tucson, Arizona | Published: 12.23.2007

Want to save on your 2007 taxes? Quick, buy a water heater!

At this time of year, tax experts usually suggest a few moves that, if you make them by New Year's Eve, will save you some money when you file your '07 tax return. But this year's recommendations are a bit quirky, due to recent and pending changes in the tax law.

"The tax code has gotten really wacky," said Barbara Kogen, a Beverly Hills, Calif., tax accountant. "You get all these little short-term provisions, and you have to be on top of them."

For instance, a 2005 law designed to promote energy conservation ushered in a half-dozen tax credits for buying energy-efficient materials and equipment for your household. But the law authorized these credits for only two years, which means they expire when the ball drops on 2007.

Consequently, if you're planning to buy a new air conditioner or water heater, waiting until January could cost you as much as $300 in tax credits. A tax credit is particularly valuable because it reduces your tax by the amount of the credit. A deduction is less valuable because it just reduces that amount of income that's subject to tax.

Do you need to act fast to take advantage of tax breaks that might expire at the stroke of midnight Dec. 31? If you're a homeowner, teacher or generous retiree or have kids in college, you just might. Here's a look at what's expiring and what some experts suggest you do about it.

Energy credits

If you're making improvements to your home to boost energy efficiency, you may qualify for one or more tax credits. Specifically, you can get:

● Up to $500 for adding insulation materials, new doors or roofs with pigmented coating.

● Up to $200 for replacing exterior windows and skylights.

● $300 for buying a qualifying water heater or heat pump.

● $300 for buying a qualifying air conditioner.

● $150 for buying a qualifying furnace or boiler.

● $50 for adding a qualifying furnace fan.

A vendor should know whether its product qualifies for the credit. But don't buy anything you wouldn't get otherwise.

"It has to make economic sense," Kogen said. "The tax tail shouldn't wag the dog."

Educator expenses

This deduction is aimed at defraying the costs that teachers incur by spending their own money to equip their classrooms. It allows educators to deduct as much as $250 spent this year. The break is slated to expire in 2008.

Hybrid-vehicle credits

One of the most complex tax breaks ever written applies to hybrid vehicles. It's based on the vehicle's estimated fuel savings over its lifetime compared with an index, which means the credit varies by make, model and year. In addition, after a manufacturer sells 60,000 cars eligible for the credit, the value of the credit ratchets down and then expires completely after a year.

That means you can't get a tax credit at all for buying a hybrid Toyota because too many people popped for Priuses in previous years. And you have only a few weeks to get a full credit for buying a Honda hybrid. For example, if you buy a Honda Accord Hybrid AT this month, you get a $1,300 credit on your 2007 return. Buy it in January and the credit drops to $650. Buy in July and the credit is worth just $325. In 2009, the credit is gone.

But if you've got your eye on a Chevy, Mercury, Nissan, Mazda or Ford hybrid, you have time. The phase-out hasn't hit these manufacturers yet.

The expanding childhood

The government has been tinkering with the so-called kiddie tax, too. It used to be that any child younger than 14 who had more than a certain amount of investment income would have to pay taxes at his or her parents' higher rates. But the kiddie tax age is moving up. For your 2007 taxes, you need to worry about potential kiddie taxes for any children who are younger than 18. In 2008, your college student is going to be at risk, too.

The advice from the experts: If you are giving your college student money for school, you might want to give him or her appreciated long-term stock holdings now so he or she can sell them before the end of the month. Why? The child would get the benefit of his or her capital gains rate, which is likely to be 5 percent, this year. In January, the gain would be taxed at your 15 percent rate.

Donated IRA funds

Another break that expires New Year's Eve allows those who are age 70 1/2 to donate up to $100,000 directly from an Individual Retirement Account to a public charity. The donation itself isn't tax-deductible when made this way, but the withdrawal from the IRA isn't taxable the way it normally would be.

Deductible tuition

The deduction for higher-education expenses also expires at year-end, although it's popular enough that there's serious talk that Congress still might extend the tax break, said Mark Luscombe, principal tax analyst with CCH Inc., a Riverwoods, Ill., tax research and information firm.

Until that extension comes through, you might want to pay for any eligible spring 2008 tuition by the end of 2007. Individual taxpayers who earn less than $65,000, and couples who earn less than $130,000, can deduct as much as $4,000 in qualified tuition and related expenses paid for the taxpayer — or the taxpayer's spouse or dependents.

The maximum deduction starts phasing out after those income thresholds are exceeded. Partial deductions are available to individuals with income up to $80,000 and couples with income up to $160,000.

Pass the kettle

A tax-law change makes it more difficult to deduct charitable contributions made in cash. Unless you get a receipt, you aren't allowed to deduct the $20 bill you gave a Christmas bell ringer.

Personal Finance

KathyKristof

● Contact Kathy Kristof by e-mail at kathy.kristof@latimes.com or by mail at Kathy Kristof, c/o The Los Angeles Times, 202 W. First St., Los Angeles, CA 90012.

Your Personal Finance Resolutions for 2008

by Martin Bamford

It's that time of year again - the time when people up and down the country are making resolutions for the year ahead. With so many people likely to be thinking about sorting out their personal finances in 2008, here are some top personal finance resolutions for you to consider from personal finance author and Chartered Financial Planner Martin Bamford.

Work out your budget

It still amazes me how many people I meet with who simply don't know how much money they spend each month (and what it goes on!). Working out (and sticking to) a monthly budget is all about spending less than you earn. If you achieve this, month on month, you will be in a better financial position at the end of 2008 than you were at the start.

If you reach every pay day with an overdraft or credit card debt to clear from the previous month you are starting the new month on the back foot. Make it your personal finance resolution for 2008 to never spend as much as you earn each month. If you really want to buy something shiny and new but find yourself reaching for that credit card or store card, stop, think - do you really need it now or would you feel much happier if you bought it in a few months time with cash rather than debt?

Get out of the red

If you have short term debt (credit cards, store cards, overdrafts, etc) you will know that debt is a drag. It's a drag on your ability to save for future objectives. It's also an emotional drag on your attitude towards money and personal finances. Make clearing your short-term debt a priority before embarking on strategies to save for short-, medium- and long-term plans.

I still meet people with some very funny attitudes towards debt. There are people who prefer to have savings running alongside debt even when they are often getting charged much higher interest rates on the debt than they will ever receive on the savings. Whilst there is a certain comfort factor in knowing you have some savings behind you, it is counterproductive if your short-term debt is holding you back.

Don't forget that the interest you get on your savings is taxed (10%, 20% or 40% depending on your income tax rate). When you compare your debt and savings interest rates always look at the net (after tax) interest rate you get on your savings to make a fair comparison.

Make a plan.

This ties in closely with your monthly budgeting exercise. When you are working out what you are going to spend your money on each month ensure you prioritise debt over savings. Stop taking on more short-term debt. Mark a debt-freedom day on your calendar and stick to it. Celebrate your personal debt-freedom day; it's something to be proud of.

Look to the future

Starting a pension is likely to be a big priority for many people in 2008. We recently saw the biggest shake-up of pension rules in many years but this brought a great deal of retirement planning opportunities with it. It is now generally possible to make much larger pension contributions than under the old pre-April 2006 rules. These large pension contributions will still be able to attract tax relief at your highest rate of income tax.

Once you have made contributions to a pension plan you can choose how the money will be invested. Seek professional advice to ensure that your retirement plans are invested in a way that is in line with your attitude towards investment risk, reward and volatility. You can choose from a wide range of investment options within modern personal pensions so there is no need to take unnecessary risk that you feel uncomfortable with.

Pay less Tax

No-one enjoys paying tax but many of us fail to take the simple steps that enable us to pay less tax. Each and every year we waste an average of £132 per taxpayer because we don't take some simple planning steps and maximise our tax allowances.

There are some very easy tax-saving strategies you can use in 2008 to pay less tax.

If you are a higher rate taxpayer and your spouse is a non-, lower- or basic-rate taxpayer then consider transferring savings into their name. If you have £20,000 in savings in a joint account where one of you is a higher rate taxpayer and the other is a non-taxpayer (assuming a 5% gross interest rate) you can save £200 a year in income tax by switching from a joint account to a savings account in your spouse's name.

Make sure you use your Individual Savings Account (ISA) allowances for this tax year and the next tax year. You have until April to maximise contributions into an ISA for the 2007/08 tax year. Every adult in the UK can contribute up to £3,000 into a cash mini-ISA (£3,600 from 6th April 2008) and up to £4,000 into a stocks & shares mini ISA each tax-year, or up to £7,000 into a maxi ISA (£7,200 from 6th April 2008). The returns within your ISA are tax-free (with the exception of the 10% tax credit on UK dividend income which can no longer be reclaimed on UK equity income).

Review your mortgage

Now is a good time to consider reviewing your mortgage. If your mortgage is on your lender's standard variable rate (SVR) you are likely to be able to make a reasonable monthly saving by switching to a more competitive interest rate or product. There are costs associated with re-mortgaging and it makes sense to seek impartial expert advice. This will also save you the time of trawling the high street to locate the best offers. Because mortgages are a dynamic market the rates available are subject to change on a regular basis and some deals will only be available through an independent adviser.

Sort out your financial affairs

If you don't have a Will, get one. You can write your own Will but there are some major risks involved with this DIY approach. Getting something wrong when writing your own Will could lead to significant legal fees to sort things out after your death. Find a professional to write your Will from the Society of Trust and Estate Practitioners (www.step.org). If you die without a Will, your estate will be distributed according to laws created in 1925. It is no surprise that these laws probably do not reflect modern thinking on inheritance! Don't risk dying 'Intestate'.

Whilst we are on this rather morbid subject you should also think about family protection. Run through a number of scenarios. What would happen to your family financially if you were to die? What would happen if you were to suffer a serious illness? What if you suffered an accident or illness and were unable to work for a long-term? Re-run these scenarios but apply them to your spouse as well. The impact of a house person dying or contracting a serious illness can often be as serious (or more so) than if this happens to the main bread-winner.

Check out your existing arrangements to ensure that they remain competitive. The cost of life assurance has generally fallen in the past five years. There are potential savings to be made here. Again, use an independent expert to review the entire market for you and ensure that the cover you are putting in place is suitable for your circumstances and objectives. At the same time make sure that your life assurance is written in trust. Writing these policies in trust can ensure that the proceeds are paid out quickly, to the right person or people and without liability to tax.

Meet with an Independent Financial Adviser

Make 2008 the year that you carry out a comprehensive review of your personal finances and financial objectives with an impartial professional who has access to the tools and knowledge needed to improve your current and future position. Most IFA's offer a free initial consultation with no obligation they can identify areas that they can help you with and you can grill them about their qualifications, experiences and charges.

Ask lots of questions to ensure that you have found the right IFA for you. Make sure that they hold the appropriate qualifications to deal with your situation. The entry-level qualification for a financial adviser is the Certificate in Financial Planning (also referred to as the Financial Planning Certificate). This level of qualification is really only suitable if you are only seeking basic financial advice. If the advice you require is more complex then look for an adviser who is a Chartered Financial Planner or Certified Financial Planner certificant. These are more stringent tests of knowledge and competence to provide financial advice.

Also, check that the adviser is truly independent. In June 2005 there were a number of changes to the way that the financial services profession works. An adviser can now choose to be tied, multi-tied, whole of market or independent. A whole of market adviser can offer products from every provider but they do not offer the option to pay for their advice with a fee. An Independent Financial Adviser offers a fee charging option and this can sometimes offer greater impartiality that paying for services through commission. In any case, remember that you as the client are paying for financial advice - either through product charges and commissions or an explicit fee. Ensure that you are getting value for money.

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Martin Bamford BA (Hons) CFP APFS
Chartered Financial Planner at Informed Choice IFA and Personal Finance Author

Do You Have the Proper Holiday Tipping Etiquette?

BY DONALD JAY KORN

One of the important parts of good personal finance planning is giving to others. This includes charitable giving, of course, but it also means showing generosity to those who perform services for you. Proper holiday tipping etiquette can show that you care about a person, and that you appreciate what he or she has done for you throughout the year.

Over at a Sedona real estate blog, a handy list of the people you should consider in your holiday tipping is made. I urge you to head over and check it out.

Also, remember that even if you don't have regular providers for things like haircuts, you can still be generous in your holiday tipping. Give an extra $5 or more to the server when you go out to eat. If you go to a discount salon (like dollar cuts) and don't have a regular hair stylist, do the same. Show a little extra appreciation. Such generosity has a way of returning to you.

Carnival of Indian Personal Finance Blogs #2

This is the second edition of the carnival of Indian Personal Finance Blogs. The first edition- though a humble effort, got a great response and the entire effort is moving towards the desired direction. Let us continue the journey.

With the launching of CIBIL in India, lenders will now have better idea about the credit worthiness of the borrowers. Prince John at Making Money Spending Money, tells us about the new credit score and credit rating system in India jointly launched by CIBIL and TransUnion. Discussing various parameters, which these agencies will use to arrive on a credit score, he tells us about a similar credit rating system, which exists in the US.

The Post Office Monthly Income Scheme (MIS) was loosing its popularity after the removal of 10% bonus on maturity clause. On 8 Dec, 2007 Government restored the maturity bonus though at a lower rate of 5% and has made 5-year Post Office Term Deposits and Senior Citizen Savings Scheme eligible for 1-lac deduction benefit under Section 80C. But the bigger issue before the investors is whether to invest in Post Office MIS or in fixed deposit, PPF and other small saving schemes offered by the banks – Anurag tells us some facts to consider before taking a decision.

Something needs to be done to avoid the worsening of PSU bank's problems. While improvement may be hard to make, but at least lets not make things worse. Ajay Shah says that privatization of PSU banks may not be possible because majority of MP’s won’t support the requisite amendment of the Bank Nationalization Act.

Chawanni raises the issue of the safety of our deposits in Citibank. Would you like to keep your life time savings or precious items in a bank that cannot take care of its own assets? Citibank has been in financial crisis from time to time and now Citibank is in big trouble with sub-prime bubble bursting. Who will rescue Citibank this time?

Jithu from The Finance Blog is talking about 500% increase in complaints against banks according to Reserve Bank of India in 12 months between July 2006 and June 2007. Leading the pack are SBI, ICICI bank and Citibank. Jithu is hoping that, "This would make the banks think a bit more about serving their customers in a customer-friendly manner."

Edward Hugh from India Economy Watch presents the risk element involved in banking sector, political and at economic stage in India.

Please feel free to add your comments, suggestions and resources.

Carnival of Indian Personal Finance Blogs #3

After the successful release of Carnival of Indian Personal Finance Blogs editions 1 and 2, we gathered a relatively large number of entries for this third edition. New bloggers like Varun, Alok Verma and Megha Pathak joined forces with stalwarts like Ajay Shah and Edward Hugh. Adhering to Greg Anderson's philosophy "Focus on the journey, not the destination. Joy is found not in finishing an activity but in doing it,” let us move forward.

Identity theft, though a relatively new incident on the Indian horizon has pestered banks in western countries for the last decade. How safe are we from identity theft when we use our credit cards, debit cards or bank accounts for that matter? Varun takes a look and suggests some proven ways to protect oneself from identity theft.

Recently RBI has put on its website the guidelines for bank recovery agents and warned them of a strict action and even banning such agents if they didn't behave. But, it looks like the thick skinned banks had little effect and their recovery agents are still with their old ways. Alok Verma takes a look how the recovery agents of a private sector bank, ill-treated J S Kalra a Delhi College of Engineering Professor, who had missed out on few loan installments.

Real estate market has reached to dizzy heights here in India. A Man from India has listed some reasons why real estate market is on boom in India with changes in the Macro economic environment.

As the financial year is coming to an end, more and more people are finding tax planning in their priority list. Personal finance blog presents the advantages of planning tax investment in advance. Investment benefits can be availed throughout the year if you manage to plan your tax investment in advance and the burden of huge investments or tax cuts at year end is definitely relieved.

Ajay Shah has a checklist of things to be done in Asian financial sector policy.

In case you require financial support for your small needs like buying gifts, going for a vacation or decorating your home for this holiday season, then a personal loan will be the best option. Kaushil takes a look at why the Personal loans are the best option for small personal finance requirements and what to do if your money requirements are big.

Megha Pathak in her blog takes a look at fixed deposits and points that any investor should not miss before making investment in fixed deposits.

SBI is the largest Indian Bank and second largest issuer of credit cards but with its huge customer base, looks like it has to improve a lot because SBI has topped the list of credit card complaints 2654 complaints and the largest issuer of credit cards, ICICI bank is a close second with 1452 complaints.

With the Indian Government's plan to take over the interest rate burden on education loan during the 'moratorium period', students will definitely feel a lot better. This will make the education loan more affordable for students belonging to middle class whose family income is less than Rs. 2.5 lakh.

Edward Hugh on his India Economy Watch blog takes an incisive look at last week decision by RBI of curbing bank loans to mutual funds by mandating that all of such amounts will be considered as the lender's direct investment in stock and bond markets.