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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Thursday, October 19, 2006

ETFs

ETFs have become the hottest thing in the investing world--especially with more novice investors.
ETFs behave just like a stock except they track a specified index. there are benefits to this and drawbacks. You can be more flexible than mutual funds because they can be traded at any time. They will help the tax-efficiency of your portfolio as well and there are no loads. However, you will have large fees if you wanted to invest $100 in an ETF like you can in a mutual fund. If you are going to be buying in smaller sums it is best to go with mutual funds, but consider ETFs for your large investments because you will only incur the trade fee.
Check out best performers and worst.

Wednesday, October 18, 2006

Disputing Your Credit Report

Know that errors do happen and it seems that credit reporting agencies are some of the biggest culprits.

Once you have obtained your credit report you see there are errors on it. You are upset, but dread calling the credit bureaus (Equifax, Experian, or TransUnion) to straighten everything out. But the wonders of the internet have saved you from long waits on hold. You can dispute online through whichever, or all, that committed the errors. Once the official dispute is taken on you can wait to see how it goes. Maybe it will be taken care of quickly, but you might need to call. Remember to document everything.

Tuesday, October 17, 2006

The Electric Bill

Your parents always told you to turn off the lights when you leave a room. Now in the digital age they might be asking you to unplug your cell phone charger.

Unbelievable as it may be stanby power can take up to 10-15%. Now, obviously you need to keep that refrigerator plugged in at all times, but do all of your other devices need to be plugged in 24/7? Your electrical devices drain more power than you can imagine. When these appliances are "off" they still drain as much as 95% of the power when they are on. So if you are not using it--unplug it.

Monday, October 16, 2006

Warranties

Sometimes warranties are a good thing and sometimes they are a rip off.

Did you know that a major portion of Best Buy's revenue is from selling warranties?

Ask yourself:

Have you ever had the opportunity to use a warranty you purchased?

Have you ever followed up on a warranty?

Have you had a good experience with a warranty?

Typically warranties are not a good deal, but people like them becuase it gives them peace of mind, but oftentimes if you purchase something with a credit card and it does not work or is broken you can get it replaced. Do you homework and make sure it is truly worth your money.

Sunday, October 15, 2006

The Stock Market

The stock market had its third straight week of gains and in that time the 3 major indicies have gained 2.4%. We will continue to see how oil prices have effected the economy as whole in Q4. So by the beginning of 2007 you might see a bump in many companies earnings because of energy prices dropping. The housing market, North Korea and the Middle East should not be forgotten. If any or all begin to show strong signs of serious trouble you could count on a quick reversal of the recent gains had. Many blue chip stocks having been performing well and that trend should continue.

Saturday, October 14, 2006

Dealing With Your Service Companies

We all dislike dealing with customer service employees for services we receive from a wide variety of companies ranging from credit cards to the gas company. It can be an ordeal to get through the red tape in order to get what you need.

Remember to:

Get the representative’s name each time you call in so you can refer to them when discuss your case.

Get a case number of your issue so the representative can quickly look it up in the database and familiarize themselves with the problem quickly.

Write down the date, time and what, if anything, was promised to be done about your problem.

These seem like tedious things to do each time you call a company regarding their service that they provide you, but you are much better equipped to get results by doing this and having precise details than not having this information.

Friday, October 13, 2006

Annuities

Fixed-Income Annuity
You deliver a lump sum to the insurer and they pay you a set amount each month. As you get older and as interest rates rise you are paid more. You know how much you will receive each month which helps when you budget. However, inflation can eat away at your monthly payment. Shop around because all insurers are not the same and do not give the same rate.

Variable-Income Annuity
You invest a lump sum in a something that resembles a mutual fund called a subaccount. The amount of your first check is based on your life expectancy and assumed interest rate. The performance of your subaccounts will determine the rest when it comes to your payouts. If subaccounts perform well you will get larger payments and not have to worry about inflation. You are guaranteed payments for life, but there is no certainty to what the amount of those payments will be plus if the market goes bad your portfolio usually will suffer. Watch out for fees because they will eat up your payments.

Thursday, October 12, 2006

Online Investing

When it comes to online investing there are many options for you. You need to look into which ones has the best fee schedule compared to your needs. Be careful for custodial fees, larger trading fees for retirment accounts, paper statement charges, minimum balances, and high fees for trading other than typical stocks.

As always you need to do your homework because you do not want to get nickeled and dimes to death and there are many stories of that happening. Just make a list of questions and call their 800 number and get the answers straight from the horses mouth. There are sites online that will compare them as well and I am sure Consumer Reports rates them.

Sharebuilder , TD Ameritrade, Scottrade are some options to consider while
E*TRADE seems to be the worst culprit when it comes to hidden fees so try to avoid them.

Wednesday, October 11, 2006

Real Estate Taxes

When shopping for a home many buyers do not consider the impact on their monthly obligation. Obviously, it depends where you live to know if they are high or low, but you can do some homework when searching. Your county assessor’s office should be able to provide you with the most up-to-date property tax information for a property you are considering. If you are currently looking 2005 taxes should be available. If your house listing provides 2004 numbers you need to see about the 2005 numbers. Recently, while shopping for a home we discovered this problem.

We had calculate the mortgage monthly payment along with the taxes and the house was affordable. But 2004 taxes were listing and when went to the County Assessor’s website I discovered that the taxes went up 50%. This is because the owner’s previously had done some renovation to the home and the assessed value had not been considered in the property taxes until 5 years later—2006. We no longer could afford the home. Make sure of how much your property taxes will be when buying a home and calculate them into your monthly obligation along with home insurance and the mortgage.

Tuesday, October 10, 2006

Holiday-Time Budget

I know it’s early, but you need to start considering how much you can afford to spend on holiday gifts, etc. If you overspend and get behind after the New Year you need to budget better and be more realistic. Most Americans spend an unrealistic amount at this time of the year even though they cannot afford it. What a crummy way to start the New Year—further in debt.

Maybe over the next couple months you can cut down on your spending in order to be able to swing what you want to buy for loved ones. Maybe you spend less—but you still need to budget because this is a time when people spend more money than other parts of the year.

Depending on how important this time of year is for you might want to get a temporary second job. Holiday time is a time to enjoy, not one to put you in a worse position than you are already in financially.

Monday, October 09, 2006

Websites That Value Your Home

Many have caught on to the craze of websites that will appraise your home for free. Zillow.com and others of this ilk do provide some good information on past home sales, but other than that there is little reliable information to receive from these sites. Maybe in the future they will have a better way of appraising value, but for now do not count on them as your source for home values. These sites save you the time of physically having to go somewhere to find the last sale price of a home and coordinate their information into one place, but wait until they become reliable (if they ever do).

Sunday, October 08, 2006

Cutting Household Bills

There are many methods of going about cutting your household bills and here we will discuss some ways you can save too.

Bundling
You may not be familiar with this, but if you use the same family of companies for phone, cell phone, internet, and cable you can have it all on one monthly bill and get a good percentage off retail price.

Programable thermostat
Many have thought of it, but have you gone out and bought one yet? Heating your home is not cheap, and by programming the temperature and time you can save a lot of money.

Energy efficient appliances
The initial cost can be expensive, but for the long term you will save an amount of money that is way over what extra you paid for the appliances. If an appliance breaks or needs to be replaced go for the best energy-efficient one.

Seal up the house and insulation
Make sure your home does not have places where air can escape. Also, put some extra insulation in and these will help your home stay warmer in the winter.

Turn off the lights
An oldie, but a goodie. Simple to do and every little bit of energy counts.

Unplug your cell phone charger
Leaving your charger in can really suck up electricity so remember to unplug it when charging is done.

Seal your refrigerator
You refrigerator is always running so it consumes a lot of energy. Clean the coils underneath and make sure the seal is good.

Keep a bare bones land phone line
A regular phone line costs very little these days. Do not sign up for long distance or any other bells and whistles. Take incoming calls on your land line and make outgoing calls on your cell phone.

Family Cell Phone Plans
Many already know this, but you can save a lot by having your entire family on one plan.

Saturday, October 07, 2006

The Stock Market

The Dow Jones Industrial Index broke through its all-time high this week. This can be interpreted in many different ways by investors. Does this mean more records being broken? Is this the peak before the fall? Is the stock market truly reflecting America’s financial state?

These are good questions to consider when deciding where next to put your money. The Fed has stopped raising rates and this will affect other parts of the economy. Oil prices are down and that means costs for many companies will be down. There is an election coming up on November 7th. There are still many problems in the Middle East that will not be solved overnight.

When times are good in any type of market (see housing) the common notion is to believe the good times will continue. But all markets move in cycles—the problem is that you cannot predict these cycles.

With that being said. I believe a strong argument can be made either way. There are a whole bunch of negatives out there and many positives as well. But cycles must run there course. Do you think there is more good news coming or bad?

Friday, October 06, 2006

Credit Card Deals

Credit cards offer a wide variety of deals these days. My wife and I take advantage of one that gives 1% back on all purchases and 5% back on gas purchases. It may not seem like a lot, but if you charge most of your purchases it can add up to a lot over a full year.

With rates rising you do not have much longer to take advantage of the 0% introductory rate many credit cards are offering. Try to get them to waive the transfer fee and then you have months and months of purchases or balance transfers that will go interest free, which gives you time to whittle them down.

Thursday, October 05, 2006

Money Rules

  1. Never purchase a mutual fund with a load: The only people who profit when you buy a front or back load fund is the fund and the broker and his firm. e.g. You invest $10,000 in a fund that has a front load of 5%. Right off the bat you are in the red and you do not have the basis of $10,000 to build off of--you have $9,500 to begin and the honor of paying $500 for poor investing advice.
  2. Never put money that you will need in the next 5 years in the stock market. Let's say you and your spouse plan to buy a home some time within the next three years. While you could get some good growth by putting it in the market, but if the market tanks anytime in those three years of accumulation that could mean another 2 years until you can buy a home.
  3. Bank online: Many people are old school and want to see their banker, but there are few benefits for most people to go to a bricks and mortar bank. You can have a checking account that bears interest, a savings account that gets a better interest rate, and you can have automatic bill payment. Over a life time this will save you and and make you much more money.
  4. Avoid ARMS, Interest only, piggy-backs and all those methods that mortgage brokers will temp you. Sadly, many Americans are finding this out the hard way. Interest rates rose and their payment went up 50%; their ARM came up and their mortage payment is much much bigger; you need to get out of your home and you had an interest only loan--the real estate market is down and because you have no equity in your home you are up-side-down
  5. Avoid ATM fees: Unless it is an emergency situation you should not pay ATM fees. Yout think it is only a couple bucks, but if you do that once a week for a year you are out $100-150. Get cash when you get groceries--they allow you to get cash back with a purchase for no fee.

Wednesday, October 04, 2006

craigslist and eBay shopping

Many might think buying other peoples' used stuff, but eBay and craigslist can help you save hundreds, if not thousands of dollars on things you need.

For example, my wife and I just bought an armoire off of craigslist. The armoire was high-end and custom-made. The owners no longer could use it. The piece was originaaly priced between $2,000-$3,000. We got it for $300. There is a minor things from wear and tear, but no one would know we bought it used if we did not tell them. Now moving the armoire took three of us 45 minutes to get it to my second floor apartment, but it was well worth it.

Another example is that I had put off for years getting a filing cabinet because they are very expensive sometimes. Well I decided to check craigslist and got one used for $25--I just had to pick it up. Retail it would have gone for around $150.

eBay is similar in savings. You have young kids and they go through clothes in weeks it seems. Buy some used baby clothes off eBay and save 50% on clothes that would only be used for a couple months before their use was gone.

Little things like this can save you money that you can put towards retirement, a home or investments.

Tuesday, October 03, 2006

Real Assets

Real estate has been very popular as an invest in recent years, but investing in it does not mean just flipping property.

  1. Investment objectives are growth, diversification and inflation protection
  2. Low liquidity
  3. Low to high fluctuation of principal and returns
  4. You get rental income. Capital appreciation is taxed in the year received

Monday, October 02, 2006

Mutual Funds

Mutual funds' popularity began to explode in the 1980s. Now it is the way most lesser experienced investors (and experienced ones too) used to watch their money grow.

  1. The Investment objectives are growth and income
  2. High liquidity
  3. Low to high fluctuation of principal and return
  4. Dividends and capital gains taxed in year received
  5. Diversification, Diversification, Diversification

Sunday, October 01, 2006

Real Assets

Real estate has been very popular as an invest in recent years, but investing in it does not mean just flipping property.

  1. Investment objectives are growth, diversification and inflation protection
  2. Low liquidity
  3. Low to high fluctuation of principal and returns
  4. You get rental income. Capital appreciation is taxed in the year received