A new year is a wonderful time to keep the good habits and get rid of the bad ones. Over the past year we have provided you with financial newsletters. Hopefully you have learned a thing or two from each one. In case you missed a couple I have taken this opportunity to compile all the useful information into one. For future reference all of the newsletters can be accessed at unitedfinancial.org. United Financial wishes everyone a happy and healthy new year.
Money Saving Tips
1. Energy bills
Automate your energy use. A simple way to lower your energy bills is by investing in a programmable thermostat. This device costs on average $30 to about $80. The purpose of this thermostat is to reduce or increase the temperature while you are out. You can program this device to turn off or lower your temperature while you are not there. On average it saves consumers about $100 a year.
Every degree counts. Every degree you lower your thermostat can cut your bill by 3%.
Microwaves are better than toaster ovens. Did you know that microwaves use more than 50% less energy than a conventional toaster oven? For big meals use the stove.
Save on gas. Keep your tires pumped up. Under inflated tires reduce fuel efficiency. If you are in cold weather you should check your tires more often since the cold weather tends to reduce your tire pressure. Another tip on saving money on gas is to find out when the shipments arrive. If prices are going up it is better to buy gas before the shipment arrives. If prices are going down then buy gas after the new shipment.
2. Groceries
Loyalty cards. Most stores offer loyalty cards, which in turn can save you a lot of money. These cards are free and worth your while. They are usually required to receive the discounted price. Often times once you sign up for these cards you will receive coupons and mailing lists through the mail. If they notice that you have not been shopping there in a long time sometimes they will send you extra incentives.
Weekly Specials. Most grocery stores put out a circular that often has coupons in it. Be careful though because featured items do not mean sale. You should know your prices before taking advantage of any of the "deals" in the circular.
Plan Ahead. Think about the products that you and your family routinely use. Actively search online for coupons. Often times if you go to the manufacturers website they offer coupons for their products, especially new products.
3. Insurance.
Look into purchasing insurance from a low price insurer for car insurance and homeowner/renters insurance. Contact your state insurance department for a list of average prices. Contact a few insurance companies and get quotes and compare them.
Think about lowering your coverage on car insurance or raising your deductibles. By doing this it will lower your monthly payments.
If you are interested in buying life insurance decide what you need.
A term life insurance policy is good for just an insurance policy and not an investment.
Loans/Grants available for Education
One of the top reasons that people do not get a college education is due to finances. It is often said that an education is the best investment that you can make in your future. This statement is true, however if you are like many others or me it is very hard to find the money to pay for education. Unfortunately, nowadays completing a 4-year degree at a university can cost around $70,000.
Financial aid is supplied to help families and students achieve their educational goals. There are four main types of financial aid available:
1. Scholarships. Scholarships are awarded for talent and excellent academic history. A scholarship fund can be offered through state, county, federal or private programs. They usually do not need to be repaid back as long as you complete the specified requirements.
2. Grants. Grants also do not need to be repaid. Grants are given depending on your financial state. Grants generally come from state and federal programs. The third form is a loan.
3. Student loans. Student loans must to be repaid. Loans can come from state, federal and private programs.
4. Work-study/college funded employment/federal funded programs. These are given on a limited basis and some require repayment while others do not.
Refinancing and other ways to avoid foreclosure
A lot of people are faced with foreclosures today due to Adjustable Rate Mortgages. I urge you to visit our website and read more on this topic if you are in this situation. There were many useful tips in the March newsletter.
Options to Avoid Foreclosure
If you are behind on mortgage payments, but have not being served yet with foreclosure papers below are some steps to take.
- Review your financial situation. Try to find out how much you will be able to pay toward your bills if any.
- Contact the lender and speak with a customer service representative. Be sure to be honest and discuss your financial problems and obligations. Be polite and disclose all information possible.
- Find out if there are any programs that they offer to reduce your payments until you can get back on your feet. If there are not ask if they can set up a payment plan that is suitable for both of you.
- Keep in mind anything that they agree to be not a permanent fix. They will expect you to get the loan out of default as soon as possible or sell the home.
- Look into resolving the situation on your own. This can be doing by increasing your income, or selling the home yourself.
Home Equity Line of Credit, refinancing your home, and other options
This is an option to only a small portion of people who are faced with foreclosure. The first step to refinancing is to decide if it is worth it. As a homeowner your mortgage should be no more than 40% of your gross income. It is pointless to refinance if you will not be able to afford the mortgage payments again down the road.
Refinancing in simple terms is when you change the way you have been paying for your property. For example if you had a 15 year fixed payment previously and you want to change to a 40 year fixed payment you must refinance. Refinancing can be costly. You will usually have to pay closing costs and any other fees that the bank or lender charges. The upside to refinancing is that it can lower your monthly payments by a lot. Just remember to look at it from all angles and see if the fees and closing costs are worth the lower payment.
Another option is taking out a second mortgage or HELOC (home equity line of credit). To find out if this is possible you will need to figure out the equity of the home. Equity is basically how much the home is worth verse how much you bought it for. For instance, if you purchased the home for $300,000 and it will sell now for $350,000 you have $50,000 equity. Depending on how much debt you have and how much equity is the only way to see if this will work for you. If the equity is higher than your debt this may be a good option assuming that you will be able to pay both mortgages.
Leasing vs. buying a car
Advantages of Leasing a Car
1. Lease costs less money upfront.
2. You return the car after a specified amount of time so you do not need to worry about selling it.
3. You get to switch to a new car every couple of years.
4. You can drive a more expensive car that you can afford.
Advantages of Buying a Car
1. Car has a residual value if you choose to sell it after time.
2. No restrictions on how many miles you can drive.
3. You are welcome to carry as little as coverage as you would like.
4. Depending on how you buy your car the interest may be tax deductible.
Disadvantages of Leasing a Car
1. Do not own the car.
2. You are not able to make changes to the car. It must be returned in the condition it was given to you in.
3. Usually the maximum insurance is required.
4. You are limited to how many miles you can drive per year. If those miles are gone over there is usually a hefty charge.
Disadvantages of Buying a Car
1. Monthly loan payment may be higher and you will likely have a large down payment.
2. There are usually no returns on cars that are bought, so if you do not like it you will have to sell it.
3. You may be driving the same car for many years.
Planning a Family on a budget
The most exciting time in someone's life may be finding out they are becoming parents. It is also very stressful. The problem is a lot of infant stuff is very expensive. Shopping around from the beginning is your first key to saving money. You must think about all the necessities that you will need first. Safety should always be first before looking at anything. Check out all safety guidelines prior to shopping.
Surprisingly enough bedding for a baby's room can get very expensive. You may have a theme that you have your heart set on until you see the price tag. Let's face it when your child is 3 or 4 you will have no use for it. A better alternative is to buy plain crib sheets and then just accessorize. For instance, if you always wanted sports for your son's room buy a sports lamp, rug and border. Instead of buying the sports bedding set which will probably cost you a pretty penny. Also keep in mind is that it is not recommended that babies sleep with comforters or blankets anyway so you are only buying it for decoration. Coordinate the colors and it will all blend together.
Diapers are a necessity. To save on diapers it is recommended to cut coupons. The other option is try store brands. They are often half the price of name brand pampers and some are actually very good. Try to buy diapers and wipes in bulk. The more you buy at a time the lower the price. While on the subject of diapers it is not necessary to spend the money on a fancy scented diaper pail. A garbage can with a stick on deodorizer will do the trick.
Raising a baby is very expensive.
Take advantage of any freebies or coupons offered to you. Also join any clubs that your local grocery stores may offer. The membership is usually free. Another great resource is the excited family. Do not be ashamed to take their offers of help. Raising a child does not have to put you in over your head. Follow some of these tips and the money you save can possibly go toward the college fund.
Planning a Wedding on a budget
Imagine this you finally meet the person you want to spend the rest of your life with. Everything is perfect and you are planning to get married. Now suddenly the gloom sets in. Nowadays, more and more bride and grooms are stressing out about the financial burden of a wedding. Of course this is your day and you want everything perfect.
Unfortunately in this era a modest wedding can cost you $10,000. For many of us that is a lot of money. Not to worry though there are ways to cut costs and still have the perfect wedding that you have always dreamt of.
No matter how long you have to plan your special day there are ways to cut costs. The biggest thing is to plan ahead. Keep track of everything you research.
Buy a 3 ring notebook and put all your papers, contact numbers, menus and receipts in it. Not only will it be easier to reference but it is also a great keepsake you can look back on. I highly recommend joining the bridal websites like theknot.com. There are many brides and grooms on there that share awesome ideas and tips.
Reverse Mortgages
Reverse mortgages have increased in popularity recently. A reverse mortgage is a type of loan only available to seniors over the age of 62. This type of mortgage is used to release the home equity to the homeowner in a lump sum or multiple payments. The loan is repaid when the homeowner dies, or the house is sold. They have helped many seniors stay in their homes without the financial burden that many Americans feel. Different people opt for this type of mortgage for a variety of reasons. Often it is used to supplement retirement money, or pay for healthcare costs that many seniors encounter. It may also be used for home improvements or just to have extra money in the bank for emergencies. All reverse mortgages are not taxable and usually do not affect Social Security, Disability or Medicare benefits.
Frequently Asked Questions and Answers
What is the difference between a reverse mortgage and a regular mortgage?
A regular mortgage is available to anyone with no age restrictions and you make monthly payments to reduce balance and increase the equity in your home. On the other hand, a reverse mortgage allows you to live in the home with out paying down the balance. You are taking the equity out of your home.
Are the proceeds of a reverse mortgage tax free?
Generally yes. However, if you have features such as an annuity then you will be taxed.
Are there any income requirements to qualify for a reverse mortgage?
There is no income requirement to qualify on a HECMS or a proprietary reverse mortgage. However there is to qualify on a single purpose loan.
Do these mortgages have fixed or variable rates?
They can have either type of rate. More commonly though they are variable and will change according to the market.
Does the homeowner retain the title to the home?
Yes, the homeowner will keep the title to the home and be responsible for all taxes, repairs and other expenses associated with the home.
What are the guidelines to be eligible for a reverse mortgage?
1. You must be at least 62 years old.
2. You must hold title to your property.
3. Your mortgage must not be too high in relation to the money you are applying for.
4. You must get your home appraised.
5. A termite inspection is required.
If my credit is really bad, can I still obtain a reverse mortgage?
Yes, your credit does not matter because you are not making any payments.
Government Help / Unexpected Emergencies
Regardless of your situation there may be government help available to you. The government has many programs available to us yet; unfortunately not enough of us take advantage of them. Following is a list of the main government programs available to everyone. I urge you to specifically look within your community and state to find out other ones. Check out the website for your states social services. Most states offer their own programs to help out the residents locally and they are usually not advertised often enough. A little research and footwork and you may be amazed at how many things are readily available to you.
Food Stamps / What are food stamps?
They are funds that are put onto a bankcard that can be used to buy food. These funds are given to people who qualify and the funds are disbursed monthly.
Who can qualify for food stamps?
The qualifications are as follows:
- Must have a social security number
- Must be a US citizen, or qualified alien
- Financial situation
Medicaid / What is Medicaid?
Medicaid is a state program that makes payments to your health care provider if you qualify. Each state sets its own guidelines for qualifications.
If I qualify do I have to pay anything toward it?
Some states require that you pay co payments toward doctor visits and hospital stays. It will all depend on the state guidelines where you reside.
Can children be eligible for Medicaid?
Yes even if you are not eligible for Medicaid. Look into your state's guidelines to find out if your children are eligible. Also if you have a child living with you that is not your own that child may be eligible. The state will not look at your income or resources for that child.
What assets does Medicaid look at to consider eligibility?
They will look at all liquid assets. These include but are not limited to real estate, bank accounts, trust funds, personal property, vehicles and stocks or bonds.
Am I allowed to keep my home and vehicle?
Yes as long as the applicant, legal spouse of the applicant or the children occupy the home. The applicant is also allowed to keep one vehicle.
What is the difference between Medicare and Medicaid?
Medicare is a program funded by the Federal Government. This program is designed for people with disabilities or elderly people 65 or older.
Medicaid is state administered and designed for people who cannot afford health insurance. Also this program does not give you money directly instead it sends it directly to your health care provider.
WIC What is WIC?
WIC stands for women, infant and children. WIC provides federal grants to states to fund this program. This program provides food, health care referrals and nutrition education for low income mothers.
Who is eligible for WIC?
Low income women who are pregnant, breastfeeding and non-breastfeeding post partum women. This program is also available to infants and children up to age 5. There are eligibility requirements, which include categorical, residential, income, and nutrition risk. On the next page you will find a chart with income requirements.
What is nutrition risk?
There are 2 types of nutrition risk that WIC looks at:
1. Medically based risks such as underweight or overweight, or medical problems such as anemia.
2. Failure to meet the nutritional guidelines.
How long can I receive WIC for?
WIC is generally a short term program depending on your situation. The terms range from 6 months to one year. After your term has expired you must reapply if you are still interested in receiving the benefits.
How many people receive WIC?
8 million people currently receive WIC benefits each month.
The economics of 9/11
The World Trade Centers were insured for 4 billion.
The Pentagon cost 1 billion to repair.
The planes that crashed were estimated between 50 and 100 million each.
It is estimated that the businesses in and around the World Trade Center who were out of business for a couple weeks while trying to find a makeshift office and goods lost 10 billion.
Insurance estimates the attacks on New York alone totaled 30 billion.
Another loss that must be looked at is all the people that we lost. We can never put a value on a human life. Children lost parents that day, husbands lost wives, and mothers lost sons. That loss is by far the greatest and cannot even compare to financial losses. We lost over 3,000 people that day. Economically we must realize the financial impact of losing all of those people. Some financial experts have estimated that loss at 8.7 billion.
You must also consider the impact it had outside of Washington and New York. Airlines paid a hefty price. People were a lot more cautious about flying therefore the airlines could not afford to keep a large staff and lay off more than 100,000 employees. Nationwide from mid September until the end of the year the filing of unemployment sky rocketed.
It went from 300,000 per week to almost 700,000 per week. Businesses all over the United States suffered. On September 4, 2002 there was a press release from William C. Thompson who estimated the economic costs from the attacks at around 95 billion dollars.
Immediately after the attacks that morning the President closed all airports and suspended all air travel. For the first time in history he ordered fighter jets to fly over major cities and shoot down any aircraft that was not authorized. He also closed the stock markets. The stock market has not been closed many times in history. Obviously we all expected air travel to be suspended due to the attacks but not many of us predicted the stock markets to be closed.
As years pass we start to understand the reasoning why the markets were closed that day and actually the closure continued until the following Monday. Stock markets have a lot to do with confidence. People invest when they feel confident that they will get their money plus a return on the money invested. When a catastrophic event occurs like September 11 no one is very confident in anything. When confidence diminishes stockholders generally cash out to keep their assets.
If the markets remained open while our world was under attack the vast majority of people would have cashed out and then the stock market would have crashed. It is believed the thinking was to close the market and deal with this tragedy and give people a little more confidence prior to opening the market back up.
The FED made a very smart move at the time by cutting interest rates to there lowest in the past 40 years. There was enough chaos going on in the world they wanted to assure customers that they were financially stable. They were trying to avoid a scene like that in the 1920's when the stock market crashed. On October 28, 1924 the stock market became over inflated and crashed. Millionaires become bankrupt and banks that had invested their depositor's money lost it. People went crazy and all tried to withdraw money at the same time. The FED avoided this scene by assuring consumers that the banks and stock markets would be insured and surpass this.
Some other actions of the government were that the 40 billion emergency spending bills were passed with in a week to aid New York and Washington. The government also benefited from the tax cut bill. This actually had nothing to do with the attack it just happened to become effective at the right time. Prior to 9/11 the Congress passed a tax cut in January and it did not have to be filed for in April of 2002. These checks were sent out and most people received them in late September or early October. This money made it back into the economy just in time.
Getting the most out of Online Shopping
Take advantage of searches. The Internet has a world of information on it. Use it to your advantage. Type in key words like "best toys for preschoolers". With in seconds you will have many to choose from. It is usually best though to limit your search. For example "best outdoor toys for girl preschoolers". This way you will be more effective in finding the perfect product.
Check product safety and quality. If you were to do business with a company you would most likely check them out with the better business bureau prior to paying. The same is for products. Always look into consumer reports and other data in regards to the product that you are purchasing. This can all be done on the Internet as well.
Try to use well known sites. Most stores have online shopping available. You want to go with a reputable company so you know whom you are dealing with. Often times the big chains of stores offer discounts and promotions online. The other plus to online shopping at a local store is if you receive a defective product it will be easier to exchange.
Comparative shopping. One of the main benefits to shopping online is that you never need to leave the comfort of your home. You can basically sit down with the computer and visit various sites with the same products. Take advantage of this and save some money. You can look for the same product on different sites and compare prices.
Always contact the company. There is always a contact number on the site. Once you find a product call the company to make sure they have it in stock. A lot of times websites are not updated daily, especially around the holidays. By doing this you may save yourself some time and aggravation.
Save money on shipping. Many companies offer multiple shipping discounts or even free shipping if your purchase is over enough money. Be sure to look into that. It may seem minimal at the time but it adds up and can save you a lot of money.
Look for coupons. Some sellers will offer coupons right on the website, while others will not. Do a search on the Internet for that company's coupons and you will be pleasantly surprised at how much money you can save. If you are unable to find any coupons call the customer service department and ask. Often times there are coupons or promotions that are not widely advertised.
Auction sites. Ebay and Ioffer are very popular auction sites. Many times you receive a great product for a lot less money than in stores. The advantage to Ebay and other auction sites is that you can check the feedback scoring. For those of you who do not shop Ebay yet, feedback is how other buyers and sellers rate that person.
Safety tips for online shopping
Know whom you are purchasing from. Remember there are a lot of scams on the Internet. You could be talking to someone in another country who will get your banking information and empty your account. The best way to protect yourself is to get a physical address and phone number. This will also protect you in case you have any questions about the product.
Read the fine print. A lot of times the bold letters are what catches your eye. Even a picture of a product can be deceiving. Be sure to read all information about the product prior to paying. Also find out the return or exchange policy.
Pay by charge or credit card. You have the most protection when using a card. The Fair Credit Billing Act will protect you. This law gives you the right to dispute charges under certain circumstances. If by chance someone charges your card without your permission you will not be held liable.
Keep important documents. Print out any correspondence that you have with the seller and file it for future reference. Also print out a receipt and product description for your records. Assuming that you paid with a credit card be sure to monitor your statements for any unauthorized charges.
Be cautious about giving your personal information through email. If this is the only way to give the information be sure to make sure the site is secured. For instance many reputable sites have locks on the bottom of them. The lock is proof that the site is secured and cannot be hacked into. However, this is not foolproof some locked sites have still been tampered into. Just be cautious.
Do not bypass the privacy policy. This policy will tell you what personal information will be required and how the company or seller will use it. If you cannot find or understand the privacy policy be wary. It is recommended to even take your business elsewhere.
Go with your instinct. A lot of times you will see advertisements on the Internet that sound great. You think to yourself that it is too good to be true. The majority of the time you are right. To protect yourself check the same product at various different sites to compare prices.
Bait and switch merchants. This is common with online purchases. The merchant will call you to "verify" your order after you have paid. Suddenly the seller is trying to sell all different kinds of things like warranties or accessories. Just politely say no and if the seller is pushy you should cancel the order and move on. You also want to contact your credit card company to advise not to pay. If the merchant continues to contact you then you can put a complaint in with the attorney general where the merchant resides.
Tips to Staying Organized
1. Store it in its "home" at all times. All items have their "home" or place that you store them in. Try to keep them there. When an item strays from that place it is often misplaced.
2. Say no to some requests. This tends to be very hard for some people. Everyone wants to help friends, but there is a limit. You have to have time for yourself also.
3. Open your mail immediately. Many of us are guilty of putting our mail on the counter and saying "I will get to it later". The problem is later turns into next week or in severe case next month. The best technique is to open it immediately over the garbage can. Throw away what you don't need and pay your bills as you open them.
4. Get ready the night before. Decide what you want to wear and lay out your clothes. Toss it. If you haven't used it or it is outdated throw it away. Stuff that you don't use is better off donated or in the garbage than taking up space.
5. Sentimental box. This is mostly for the girls. This will consist of all the memories that you have to keep. They tend to get scattered in a million different places. The best thing to do is to put them into a Tupperware bin. That way you have them but they can be stored easily. Every time you add something look through and see if there is anything that you would be willing to part with.
6. Half everything for a trip. Over packing is something that most of us are guilty of. Take 50% of everything you are thinking of bringing and put it back. Try to bring clothes that you can wear a couple of times. Try to match different shirts with the same pair of pants.
7. Call yourself. Now you think I am crazy but I urge you to try it. Often times it is when we are out that we remember to do things. Call yourself and leave a message. With today's technology you could even text yourself. That way when you get home you will remember.
8. Don't overwhelm yourself. Break your project into little pieces. Focus on one part each day. For instance painting a room. One day you can move the furniture, the next prepare to paint by taping and so on. Even if it takes a couple days you will be more likely to finish it.
9. Involve your friends. Have some motivation. Tell your friends what your plans are and then you will be more enticed to finish.
10. Reward yourself. Convince yourself if you do not finish this task then you will not go to the game on Saturday. This should motivate you to do it.
11. Keep all bills together. It is easier to locate and pay them.
12. Color code everything. For instance bills that must be paid within the week can go into a red folder, whereas bills that need to be paid in a month will go into a yellow folder. You can go further and put all warranties, titles and other documents into a blue folder.
Got a question? Then contact our Education Team on 561-883-2398 Ex.310
United conducts regular seminars on financial education, including "How to Budget", come along and join us - to reserve your seat contact our Education Team on 561-883-2398 Ex.310
Newsletter 12
Rev.1
December, 2007
 |
|
December, 2007 Topic
Year in Review
|
