Are you looking for a higher yeilding savings account?

For a couple of years now, I've known about the ING Orange Savings account. This is an online account that has an attractive yield at 3%. Here is the breakdown:
Advantages:
- There are no minimums- you really get 3% even if you only have $5 in the account
- It is FDIC insured
- Everything is done online, there is no check book...to get money into the account, you have to link up a checking account and do a transfer ( ** Note, it has to be checking, you can't transfer from your brokerage, money market or savings account at other institutions...Example, I'm going to transfer my the cash in my current Money Market ( which is only earning me 1.6%) to my checking account and then transferring it to the Orange Account)
- There are NO account fees

Disadvantage:
- It is easy to move the money back and forth between checking and savings; so if that will tempt you to use the money for that new pair of shoes vs. a real neccessity, look into things that have more handcuffs, like a money market fund at your local broker or a CD.
- There is no Brick and Mortar building to go to and talk with someone..again all done online

So if you are looking for a higher yeilding, online account, check it out.
Or check out this website for a breakdown of other higher yeilding online accounts - This will give you a breakdown of the highest yeilding accounts in your area.

P.S.- While you're at it, the account allows you to set up an automatic savings plan into your checking account- this is a good way to do some forced savings!

Hurricanes and Gas Prices

We all felt the pinch at the gas station over the summer when gas peaked on July 11th at about $4.11 per gallon. Since July, gas prices have fallen with oil prices and the national average today is about $3.67. ( that's about a 10.7% drop over a month and a half). Oil and gas have dropped with the fear that higher oil prices will slow demand in the US and globally.

Hurricane Gustav heading towards the gulf also effects supply and demand.

Nearly 30% of our nation’s offshore oil production comes from Gulf Coast waters, while onshore refineries in the region produce nearly half the nation’s gasoline.When hurricanes Katrina and Rita slammed into the Gulf less than one month apart, our nation temporarily lost one-third of its total refining capacity and nearly one million barrels of oil production a day.

Hopefully Gustav will miss the oil fields and we will continue to see a drop in gas prices, otherwise we could see a temporary increase. This week the Hurricane has already halted the drop in oil prices.

Read more here.

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Student Loan Debt

I'm often asked by my clients and friends if they should pay off their student loans. And that all depends...on what, you ask? On the following:
1)Student loans are considered "good debt" ( as is a mortgage) Why? Well bc it was ( hopefully assuming you didn't major in Alchohol for Dummies ) a good investment in yourself...helped you land that job, qualify for higher pay etc. etc.
2)One advantage of having the loan, is that the interest is deductible on your income tax return .

In 2008, to take the full deduction ( which is a max. deduction of $2,500 of interest paid), your modified adjusted gross income (MAGI) must be under $55,000 for single filers (same as in 2007) or under $115,000 for joint filers ($110,000 in 2007). A partial deduction is allowed for single filers with a MAGI between $55,000 and $70,000 (in both 2007 and 2008) and joint filers with a MAGI between $115,000 and $145,000 ($110,000 and $140,000 in 2007).

For calculations if you fall within the phase outs, email me at askmisspenny@gmail.com

2) Most of the time student loan interest rates are low ( under 6% ). You could be better off investing that money into the stock or real estate market which over time has the potential to give you more than that. ( on average the market has returned around 12% over the past 30 years)

If you don't get the deduction, your interest rate is not that low, then you're betting off just paying it off as soon as possible. If not, keep paying the required payments, if you can manage to make that $20o student loan payment, force yourself to put $200 into savings too!!

What effects my credit score?

We all know that your credit score is probably the most important thing in your financial life- it's what decides if you get approved for that apt ,whether you'll be able to qualify for the mortgage on that dream house,or how much interest the auto loan will cost you on your new car. Having a low credit score can really fu** up your finances. So here are the biggest things that drive the calculation that the agencies( Equifax, Experian and TransUnion) use:

1.Your payment history – about 35% of a FICO scoreHave you paid your credit accounts on time? Late payments, bankruptcies, and other negative items can hurt your credit score. But a solid record of on-time payments helps your score.
2.How much you owe – about 30% of a FICO scoreFICO scores look at the amounts you owe on all your accounts, the number of accounts with balances, and how much of your available credit you are using. The more you owe compared to your credit limit, the lower your score will be.
3.Length of your credit history – about 15% of a FICO scoreA longer credit history will increase your score. However, you can get a high score with a short credit history if the rest of your credit report shows responsible credit management.4.
New credit – about 10% of a FICO scoreIf you have recently applied for or opened new credit accounts, your credit score will weigh this fact against the rest of your credit history. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur. If you need a loan, do your rate shopping within a focused period of time, such as 30 days, to avoid lowering your FICO score.
5.Other factors – about 10% of a FICO scoreSeveral minor factors also can influence your score. For example, having a mix of credit types on your credit report – credit cards, installment loans such as a mortgage or auto loan, and personal lines of credit – is normal for people with longer credit histories and can add slightly to their scores.

Side note on # 2- Often times, you will receive offers from credit card companies to do a balance transfer at very low interest rates - usually 4-0%; this is a good way to pay off debt quicker bc more of your payment will go towards principal instead of interest. However, it is important to leave your old card opened that you transferred from. Bc for the following example:
You've got two credit cards- both max. out to their limits of $5k .Meaning your available credit= 0% which will NEGATIVELY effect your credit. You get an offer to transfer both cards to a $10k card at a cheaper rate, so by doing the transfer and leaving the 1st two cards open, you now have available credit of $20k, and you are only using 50% of the available credit ( $10k) instead of 0%= GOOD for your credit. The key is to make sure you stop using the cards as well.

Wedding Budget

Now that I'm engaged, before my mind starts dreaming of all the amazing wedding planning and details ahead of me, my finance side kicks in. How much does a wedding cost? The first thing you do when you get engaged is to establish a wedding budget....how much can you spend? Where will your resources be coming from..family? Or will you and your fiance be fronting most of the expenses?

The last thing you want to do is start off a marriage with debt, that is a no no no...one night is just not worth the years of stress it could take to pay off the debt. Set a savings goal and a budget and stick with it.

Even if your parents are fronting the bill, try to think of it as spending your own money. Would you spend that much on a dress if it was your own money? Be sensible, maybe you'll end up with some extra for that downpayment on a new home or car!

I already found a great wedding budget calculator at www.theknot.com... click on Wedding Budget.

What if my bank floods?

As I sit here, hoping that Tropical Storm Fay stays a TS and doesn't hit Tampa too hard so I don't have to get out of bed and move the furniture off my balcony, I wonder....what would happen if a storm hits and my banks get flooded? I bank with BAC so I'm not personally too worried if a couple of branches had to close for a few days, but what about the small banks...are the safes water proof? Will I still have my money in my checking account if the cash blows away? Well, here's what I found ...

Bank Operations/Deposit Insurance
Q. If my local bank was destroyed, is my money still insured?
A. Yes, your money is still insured by the Federal Deposit Insurance Corporation. Deposits with a FDIC insured bank or savings institution will continue to be protected up to $100,000. However, you should keep any financial records that you have in order to help reconstruct your accounts.
Q. Will there be enough cash?
A. Be assured the Federal Reserve System has and will continue to meet the currency needs of the financial institution industry. The banking industry nationwide has more than sufficient resources to fill any shortfall.
Q. Is my bank safe? Do you believe the affected banks will survive?
A. We are not aware of any bank that has closed due to the impact of a natural disaster. Consumers can also rely upon the guarantees provided by the FDIC, which oversees the insurance funds that back deposits in banks and thrifts, and the National Credit Union Share Insurance Fund, which protects credit union depositors. These depositors can rest assured that deposit insurance is in full force.
Q. Who can I contact for more information?
A. The FDIC has a consumer hotline set up for this crisis. Please call 1-877-ASK-FDIC (275-3342). The hotline is operating 24 hours a day, 7 days a week.

*** Another point of interest is that the contents in your safety deposit box are NOT insured against natural disasters.

Capital Gains...

Did you know that if you are in the 15% or less tax bracket, that your long term capital gains rate is 0% until 2010?

Yes o%....that is a savings of 5%. ( normally if you are in the tax bracket below 15% your capital gains rate on long term ( more than 1 year) is 5%, if you are higher than the 15% tax bracket then your long term capital gains is 15%.

Example: I own 1000 shares of Walmart stock that I bought at $45 in 2006, and want to sell it now at$60...if my ordinary income falls below the 15% tax bracket, the capital gains I would have paid would have been

$6000-$4500= $1500 gain * 5%=$75 to the tax man I don't have to pay anymore, bc the rate is 0% until 2010!

May be time to sell some gains in your stocks and diversify elsewhere?

1st of many to come...

Often when you turn on the news, listen to the radio or read various financial articles from the financial press, you get so many different headlines and stories(sp?) that it is hard to bring it all together and understand the big picture of what it all means. Many mutual fund families publish weekly market commentaries from their economists and portfolio managers that sum up the week of headlines very well...so here is a market commentary from Riversource Funds from David Joy, a portfolio manager ( the main dude who is buying, selling and managing a portfolio of stocks within a mutual fund)

Let me know what you think....

401(k) loan, good or bad idea?

Your 401(k) allows you to take loans up to a certain percent of your account value. Typically the loan has to be repaid over a 5 year period through payroll deductions at an interest rate set by the 401(k) plan ( usually around 6%).

Often I have clients tell me that they don't view these loans as "bad" bc they are paying themselves back the 6% into their accounts. This is true, however, things to consider when you are repaying back your own money:

1) Since the loan is being paid back with AFTER TAX money through your payroll deductions, you end up paying tax twice to Uncle Same; once on the loan repayments, then again when you take out the money out as income during retirment
Ex: Your 401(k) is $100,000 and you take a loan of $20,000 @6% ( your 401k is now worth $80,000). You pay it back with after tax payroll deductions each paycheck. So you eventually have the $100k plus some interest back in your 401(k), but in later years that $20,000 that you already paid taxes on you will pay taxes on again when you take withdrawals after 59 1/2 as 100% of the account is taxable

I don't like to pay taxes twice on my money, do you?
2) Opportunity cost- if you take $20,000 out you miss the opportunity for it to grow
3) Most people don't notice this in the fine print, but....If you leave your company while your 401(k) loan is still outstanding, you are forced to pay off the loan, and if you are under 59 1/2 you will be forced to pay a 10% penalty and ordinary income taxes ( average 15% lets say )= 25% penalty..ouch!

So if you can avoid it, 401(k) loan not the best idea...

Life Insurance

What is life insurance? Life insurance should be call death insurance, because it is an insurance policy that pays a lump sum death benefit at the time of the insurers death. You can get life insurance from several life insurance companies and through work. Life insurance you buy individually is different from insurance at work, which is typically referred to as group life insurance. Typically group life insurance is cheaper, but when you leave your company, you don't have it anymore, however more and more companies are making their life insurance portable.
If you buy life insurance individually from a life insurance company, you control the policy. There are several types of life insurance, but the main categories are TERM ( ie temporary) or PERMANENT, which typically has cash value.
Term= renting an apt, as long as you pay your premiums you are covered for a certain amount of time
Permanent= Owning a home and building equity by having cash value in your policy

What type of insurance you should purchase depends on how much you can afford, as permanent insurance is more expensive, but it does pay out more often than your term insurance. I'll get into the differences in later posts....
Should YOU have life insurance? The answer is yes, if the following applies:
1) Someone else depends on you for income, i.e. your spouse or kids and they would not be able to continue their lifestyle if your income disappeared
2) You have liabilities that you don't want to leave behind for loved ones
3) You have an estate that is subject to estate taxes that you would like to minimize

Sit down with your loved ones and discuss if you should look into it, and then get with an insurance agent to see what type is best for you, or email me askmisspenny@gmail.com

PS Did you know life insurance proceeds are TAX FREE?

Do a check in

Often times, I sit down with my clients who have been investing for a while...they are in their forties and fifties and have money in various IRA's, mutual funds, stocks and 401(k)'s, but they often neglect their accounts ( which is good for me I guess because they coming looking for my help) often never rebalancing or changing their risk tolerance as they get closer to withdrawal time.

Would you buy a rental house, rent it out and then never do any maintenance on the house like changing the air filters, new paint, mow the lawn etc?? Of course not, so you can't do that with your investments either. You should at least twice a year sit down and do an evaluation- of everything...your savings rate, how your investments are doing compared to their benchmarks and other investments in their peer groups etc.

If you don't have the time, knowledge, energy, desire etc. to have the discipline to do this, then hey guess what..there are people out thereyou can hire to do it for you...people like me, financial advisors....ask your friends for some referrals, check out a seminar, or look to your employer for guidance...it can be well worth it in the long run.

Are you smart enough to time the market?

When the market is down, I often have my clients asking me- "should we get out of the market? should I put everything in cash and bonds and less in stocks?" As simple and as frustrating as an answer that it is, the simple solution is "No, stay the course".

I can't time the market- I have no idea when it is going to peak, and no idea when it is going to bottom. Sooo...if you have time on your side, you need to stay invested! The market goes up and down and to get the ups of the market, you have to stay in it to get the ups...if you wait until the economy is stable, the elections are over blah blah blah then guess what, you're going to miss the rebound.

You always here that the market will return between 8-10% over time, well the Dalbar Study showed that from 1985 to 2004 the average mutual fund investor gained 3.7% while the s&P500 returned 11.9%...why?? Because, investors were only investing in "hot performaning funds" when the market was up, and when it was down they sold- hence why market timing doesn't work. If you have good asset allocation in place, are dollar cost averaging and rebalancing your portfolio, you will be okay- trust me.

Obama vs. McCain...Where they stand on your money

That's what it all boils down to isn't it?????

Check out this article for a brief overview of where they stand.....http://money.cnn.com/galleries/2008/news/0806/gallery.election_issues/index.html

Want to get your finances organized?

Wouldn't it be great if you had one place that you could track all of your bills, analyze cash flow and have a one stop place to track your investments? Well there are programs out there that you can do this...Quicken and Microsoft Money, my personal fav. is the ladder. Often times my clients have accounts at various financial instituions and Microsoft Money allows you to link all of your accounts and view them all in one place- very convenient!
If you share your finances with someone else, this is a great thing to sit down and do together!
PS You can try a free 60 day trial of Microsoft Money right now.

Fun Cheap Things to do this Weekend around Tampa Bay

1) Go to the beach, skip the beachside restaurants and bring your own cooler for a beachside picnic! Take along your fishing pole and try catching dinner!

2) Check out your local state park and go for a hike ( ps hiking is walking!)

3) Like to golf? Search for your local Public golf courses- the later in the day you go, it's cooler and it's about half the cost of a morning game!

4)Check out local artists at the free Ybor City First Saturday Art Walk- held the first Saturday of the month.Among the August participants are Gina Rathbun, Jedd Lancaster, Kat Wilson, Linda Chaney, Rory O'Neil, Ryan Prado, Ricklene Wren and Yvonne Watters. Guests also enjoy a full bar and complimentary appetizers. Noon-6 p.m., 1503 E. Seventh Ave., Ybor City, free admission..

5) Wazoo- not as cheap, but HEY all the proceeds benefit the animals at the ZOO..