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The Money Talk

Isn’t it interesting? As women we find it easy to talk to our boyfriends or significant others about everything—everything, that is, except money. But with the divorce rate stuck on 50% largely due to money issues, this is the one topic that we should be talking about. And having the money talk as soon as possible in your relationship (before you get married is the best time) is a great way to build a money smart marriage.

So what exactly is the money talk? The money talk is a serious conversation about your money goals, beliefs, attitudes, and money management styles. It can be an eye-opening experience with some very surprising results. While I’m not advocating that you leave or choose not to marry someone simply because you don’t think the same way about money, you shouldn’t ignore that fact either. The money talk offers you the opportunity to discover things you have in common, set some ground rules, and work out compromises where needed so that you can not only have a happier marriage but you can also work toward financial security.

So where should you start? Start with the basics and then work you way into more complicated discussions. Here are a few suggestions for those contemplating marriage:

  1. Talk about your goals, including any specific financial aspirations.
  2. Discuss your feelings about credit and debt, and how you each think it should be handled. This is also a good time to share your credit reports* and discuss any outstanding debts you each have and how they will be handled during the marriage.
  3. Discuss ‘what if’ scenarios to get a better feel for how your partner would make money decisions in specific situations. (See also the Love and Money Quiz.)
  4. Discuss your money management styles, and how you each believe you should manage your money during the marriage. For example:
    1. Will you have one checking account that you both use? Or will you have three checking accounts — his, hers, and household? If you will have three accounts, how will the household account be funded?
    2. Will you manage your finances together, split up the tasks, or will one spouse be responsible for it all?
    3. Who will answer to whom about how the money is spent?
  5. If you are thinking about requesting a pre- or postnuptial agreement, discuss the subject as early as possible so you can give your partner time to think about how it might be beneficial for both of you. Some of reasons why you might want a pre- or postnuptial agreement include:
    1. You have assets such as a home, stock, or retirement funds that you want to protect
    2. You own all or part of a business and you want to protect your future interests
    3. You may be receiving an inheritance
    4. You have children/grandchildren from a previous marriage and you want to be sure that they will be taken care of after your death
    5. Your spouse-to-be is paying child support from a previous marriage
    6. You have agreed to pay for the professional education of your spouse-to-be and you want to be sure that you will benefit from the income that she/he will receive in the future

The ‘money talk’ can be intense, so don’t feel like you have to get it all done in one day. This discussion should be an ongoing dialogue. Communication is key to building a strong marriage and just talking about money is a great place to start. ps!

Investing Basics: 3 Categories

If you haven’t started an investment program, there is no time like the present. However, understanding basic investment categories is key to being successful and building a diversified portfolio. The three basic categories are cash, stocks, and bonds. You can invest in individual investments in each of these categories or you can invest in a mutual fund which represents a grouping of one or a combination of these three investments depending on the fund’s objective. For example, money market funds are groups of cash investments; growth funds are primarily stocks; income funds are mostly bonds; and balanced funds may have some of each. A diversified portfolio includes a mix of all three investment categories and the percentages you choose from each category should be based on your goals, the amount of time you have before you need the money, and your risk tolerance level.

Investment Categories

Cash: Cash investments typically can be accessed quickly with little or no loss of principal. They add liquidity and stability to your portfolio. Examples include money market accounts and funds as well as CDs, and Treasury bills.

Stocks: Stocks represent equity or ownership in a company. You can purchase individual shares of stock in a company and become a part-owner or a stockholder, or you can purchase a stock mutual fund that may own shares in many different companies. Stocks may be classified by the size and/or type of company. Examples include: small cap stocks (companies with an aggregate value of less than $1 billion); blue chip stocks (companies that are well established and have been around for a long time like Coca Cola); and sector stocks (companies classified according to the type of business they represent such as technology or health care); While some stocks pay dividends, the real way you make money with stocks is by selling them for more than you paid for them. Stocks add growth potential to your portfolio and protection against inflation. They have historically outperformed both cash and bond investments by a wide margin.

Bonds: Bonds are the equivalent of an IOU because when you buy bonds, you are loaning money to the government or a corporation. In return for your loan, you receive a fixed rate of interest, usually paid twice a year and when your bond matures, you get your original investment back. Bonds are rated based on the creditworthiness of the issuer. The lower the rating, the higher the return bondholders expect because they are taking on more risk. Like stocks, bonds may be purchased separately or in mutual funds. Examples include: Treasury bonds issued by the Federal government; municipal or ‘munis’ issued by states and local agencies; and investment grade and high yield bonds (junk bonds) issued by corporations. Bonds add current income to your portfolio through the interest payments you receive.

Even though these are just brief descriptions of the basic types of investments, they provide you with basics to start investing. Keep in mind that you don’t need to know everything to get started and there really is no time like the present to get started. Continue to educate yourself and remember, experience is one of the best teachers. Let me know where you decide to start and how its going. ps!

Is This the Right Time for YOU to Buy a House?

It’s a part of the American dream, rates are low, there are plenty of houses to choose from, and it’s a buyers market so is this the perfect time for YOU to buy a house? Well, it depends because rates and availability are not the only things to consider when buying a house. Here are four other factors to consider before taking the plunge:

  1. Do you know the ‘true’ cost of home ownership and how much house you can afford? In addition to your mortgage (principle and interest) you must also pay taxes and insurance. And depending on the area you choose to live in, these can add hundreds of dollars to your payment each month. Then there is maintenance. This is often not factored in but it is real. When you own a home something is always going to need ‘fixin’. And don’t forget to add in dollars for a new lawn mower or a lawn service, higher utility bills, more furniture, etc. In fact, some studies show that when you factor in all of the costs, in many cases even with the deductions you get for owning a home, it is still actually cheaper to rent and you don’t have all of the responsibilities that come with home ownership.
  2. Is your career stable and do you plan to stay in the area for at least five years? This economy has made a lot of things unpredictable, including jobs. If there is a good possibility that you could lose your job or that your hours could be cut, you may want to wait until things are more stable. Also, if you are still moving up in your career and there is a possibility that you will need to move away to move up, you might want to wait. As I mentioned earlier, this is a buyers market which means that it is often tough to sell a house quickly at a reasonable price and this could make it difficult to move on short notice especially if you have lived there less than five years. Unlike a lease that often has an out clause, mortgages don’t have those, so until you are able to sell your house, you could be stuck with payments in your old and new location.
  3. Do you have some money set aside for a down payment and a cash cushion? Gone are the days when you could get a 100% loan. You will now need to bring money to the table (at least 5% of the loan and 20% is even better because it means that you will not have to mortgage insurance on top of all of your other costs). And, in addition, lenders also want to see that you have a cash cushion or other investments that could tide you over if an emergency should occur.
  4. How is your credit score and your debt-to-income ratio? Like the amount of money you need to get a loan, the bar has also been raised when it comes to credit scores. Lenders are now demanding scores of 700+ and debt-to-income ratios of less than 40%. If you haven’t checked your credit reports lately, do so before applying for a loan so that you can see what your prospective lenders will see just in case there are errors that need to be corrected. Having a credit score below 700 could either translate into higher rates on your loan which could add thousands of dollars to your payments each year or even being turned down for a loan. Free credit reports are available at www.annualcreditreport.com. Note you have to pay to get your credit score. Your debt-to-income ratio indicates the percent of your income that goes toward paying all recurring debt payments, including housing, credit cards, car payments, student loans, child support, alimony, etc. In general, lenders typically look for a ratio of 36% or less. So calculate yours to see how close you are to the recommended percent. Like low credit scores, a high debt-to-income ratio could result in being turn down for a loan.

Dealing With the College Cash Crunch

As the economy struggles to recover, more families are now faced with some critical decisions when it comes to paying for college. Despite the economy, college costs are still on the rise with some elite private schools maxing out at as much as $50,000 per year. Market volatility and along with rising college costs has left many who were once on track with projected shortfalls.

So what can you do if you are the parent of student who is getting close to college age if you haven’t saved enough for college? Here are four strategies to consider:

  1. Consider a lower cost college. I know this is in the ‘duh’ category but you would be surprised at how many people get hung up on one specific college and never look beyond it. To achieve the desired outcome, research colleges to see if there is a public university or a private one that can provide the same training in your students’ area of interest at a lower cost.
  2. Apply for scholarships and grants. There are still a lot of scholarship opportunities out there. There are specific sites like FastWeb.com that can help but there are also companies, organizations, and foundations that sponsor scholarships. So do your homework before you give up on this option. Start early (some you can apply for as early as elementary school). And you can often increase your chances by applying to off-the-beaten-path schools instead of the brand names that everyone chooses. One of my friends sent both of her kids to college on scholarships alone – and they graduated debt free from really good schools and had multiple job offers.
  3. Consider going to a 2-year college. Many students are opting for this and then transferring afterwards to complete their four-year degree. This can dramatically cut your costs.
  4. Know your loans. Start by visiting FAFSA (www.fafsa.ed.gov) to learn about student aid and apply early. Many students and parents are utilizing Stafford loans and Federal Plus loans, and some parents are even using home equity loans (which I don’t recommend) to fund college. Another resource is FinAid.org. However, before signing on the dotted line for any loan be sure you have read and understand all of the fine print and be on the lookout for scams — if it sounds too good to be true, it probably is. If you feel you need more help in this area, check with a financial planner. Look for planners who specialize in this area because there are lots of options and things to consider. ps!

Minding Your Money: 5 Easy Ways to Lower Your Credit Score

Sometimes you start out to do the right thing – save some money or simplify your life – but many of the options you choose can also result in lowering your credit score. And this may mean paying a higher interest rate or getting less favorable terms if you want to make a big purchase such as a home or a car in the near future. So be on the lookout and be aware that the following behaviors could have negative consequences:

  1.  Applying for more credit. While it may sound frugal to open a department store credit card and receive an instant discount on your purchase, it often does not help you in the long run because the savings may not be worth the ding to your credit score. Any new credit applications are a hard inquiry on your credit report, which can lower your score. And the same is true for gas cards, new auto insurance, and cell phone plans where they check your credit. All of these could result in savings but they could also ding your credit score so weigh the pros and cons.
  2. Keeping a zero balance. Because we are at the mercy of the credit bureaus, many of the rules they have to build and maintain a high credit score are really counterintuitive to staying totally debt free and this is one of those instances. When a small amount is owed, the remaining credit on your card is factored into your credit utilization ratios (how much of your available credit you are using) while cards with no balance don’t count. So you can actually boost your score by having a small amount of debt while having none may lower it.
  3. Closing a credit card account. Everyone is trying to get out of debt these days so once you get there give yourself a big pat on the back but resist the urge to cut up your card and close your account, especially if is one of your oldest cards. One of the factors that the credit bureaus look at to determine your credit score is the length of your credit history and closing an older account could result in another ding to your credit score
  4. Keeping a high balance. While tough economic times may result in higher credit usage be aware that the amount you owe on your accounts makes up about 30% of your credit score. When you use only a small amount of the total credit you have available, such as 10% – 30%, lenders consider you to be a low credit risk and are more willing to lend to you and give you more favorable terms so always keep your totals as low as possible, but not zero (see #2 above).
  5. Negotiating a lower APR. Who wouldn’t like to lower their rate, however this sometimes results in the credit card company also lowering your credit limit. While on the surface this may not seem like a bad thing, what this does is it reduces the total amount of credit you have available and if you are using more than 30% of your available credit this could ding your credit score (see #4 above).

Squeeze Won!

 

Squeeze wins the first ever Global eBook Award in Finance. The award was presented by founder Dan Poynter. Mr. Poynter is a self-publishing guru with over 100 books to his credit. Visit the Press Room or click here to read about Squeeze and the Global eBook Award.

The Wage Gender Gap Could Cost You $2 Million

The financial consequences of Working While Female (WWF) can add up to a lot of  missed opportunities.

For all of us who are guilty of WWF we already know we earn less then men with the same job. Studies show that on average women earn 77 cents for every male dollar, and while that may not sound so bad in and of itself, have you ever wondered what that could add up to over your lifetime?

Well, according to the article “Gender Wage Gap: Are you paid as much as a man if he had your job?” by Evelyn Murph, the president of the WAGE Project and E.J. Graff, a resident scholar at the Brandeis Women’s Studies Research Center, the gender wage gap could cost you big time. Although this information is a couple of years old, I think it bears repeating:

  • If you’re a young woman who graduated last summer from high school, you will earn $700,000 less than the young man standing in line with you to get his diploma over your working life.
  • If you graduated from college, you’ll lose $1.2 million compared to the man getting his degree along with you.
  • If you graduated from law school, medical school, or got an MBA last summer, you’ll lose $2 million over your lifetime.

So you may be asking, why worry about this issue now? And what can you really do about it? It has been this way since the beginning of time. Well, call me the eternal optimist, but I believe that just because something has always existed one way that doesn’t necessarily mean that it has to continue that way. And, until you recognize a problem and it hits home, there isn’t much incentive to fix it. So consider this, the missing money in your paycheck could represent food you can’t buy, credit cards you can’t pay off, lessons your children won’t have, and retirement savings that you will never have the opportunity to enjoy. So this is not just one woman’s problem, it belongs to all of us.
One fix to gain some headway is to be proactive and practice the art of salary negotiation beginning with your first job and every job thereafter. As women, we are sometimes timid about negotiating a salary, but guys do it all the time and that is one of the reasons why they stay ahead of us when it comes to pay.

My question to you: Why do you think the gender wage gap still exists? Here are some explanations that have been given over the years. The gender wage gap exists because:

  1. Women aren’t as well educated as men
  2. Women leave the workforce to have babies
  3.  Women choose low paying jobs
  4. Discrimination

What you think? Do you agree or disagree with the explanations above and what we should do about it? Remember, our actions today will not only affect us, but the generations of women that come after us. No pressure here. ps!

It’s Time to Project Your Taxes!

It’s that time again. Time to project your taxes. Projecting your taxes can not only save you money but it allows you to take control, perhaps lessen your tax liability, and eliminate the stress of surprises on April 15th. One of the best times to start your projecting or planning your taxes is right after you complete your annual tax return. This is when the details of missed opportunities are freshest in your mind and you are the most motivated to do something about lowering your tax bill. Another good time for tax planning is around September or October while you still have time to make changes that can impact your tax bill.

 Before you start the process, look over a copy of your last tax return. Be sure you understand the major areas of your return like, where the numbers came from, and what you can do to influence them to lower your tax bill. Make a note of missed opportunities for deductions or credits that you might qualify for this year. For example, if did not have enough medical expenses last year to take a deduction, see if you can group your procedures or expenses to qualify for a deduction next year.

Next, compare your current situation to the previous year. Have you made changes that could affect your taxes, positively or negatively? Some examples include changes to your income, your marital status, and purchasing or refinancing a home. Then create a tax projection for this year that includes any major changes. A projection is nothing more than a mock-up of your tax return. You can ask your tax professional to calculate a projection for you, you can use one of the software packages like Intuit’s TurboTax or H&R Block’s TaxCut, or you can create a template like the one shown here. Once you have a projection of your tax liability, go through each part and look for additional deductions and tax credits you may be eligible for. If you are unsure of what you might qualify for, ask a tax professional.

Beyond deductions and credits you can also influence your tax liability in other ways, here are three common ways:

  1. Contribute to employer sponsored retirement plans like 401(k)s. Contributing to retirement plans at work reduces your taxable income which means a lower tax bill. If you are not contributing the maximum to these accounts, consider increasing your contributions. For example, if you are in the 25% tax bracket, for every $1,000 you contribute to your 401(k), you will lower your tax bill by $250.
  2. Contribute pre-tax dollars to your flexible spending account. If your company offers some type of a flexible spending account (FSA), calculate the amount of your annual expenses for things like child care and out-of-pocket medical expenses, and use this account to cover those expenses. Again, if you are in the 25% tax bracket and set aside $1,500 annually in your FSA, you could save $375 in taxes, and have money available for planned expenses.
  3. Stash extra savings in an IRA. If you qualify for it, a Roth IRA is a great option. Although you won’t save money on your current taxes with a Roth IRA, the future tax savings could be tremendous because you will not owe any taxes on the money while it is growing and, if you follow the rules, your withdrawals will be tax-free.
  4. Finally, if you are projecting a large refund or a large tax bill, consider adjusting your withholding so you move toward a breakeven point where you don’t get a refund or owe anything. I know a lot of people look forward to a refund each year, but remember a refund is nothing more than a return of your money without interest!

 The four strategies listed here are just a few of the most common ways you can reduce your tax bill. But don’t stop there, ask your tax advisor or financial professional for more ways you may be able to save money on your taxes for your specific situation. ps!

Don’t Relax Just Yet–Identity Theft is Still An Issue, Part 2

In this two part series we’ll discuss what to do to avoid becoming a victim and immediate steps to take if you do become a victim.

 What to do if your personal information is lost or stolen:

  • Immediately close accounts, like credit cards and bank accounts, and when you open new accounts, place passwords on them (see Part 1, #3).
  • Call the three major credit bureaus and place an initial fraud alert (see below) or a credit freeze on your accounts to help prevent anyone from opening new credit accounts in your name.
  • Report a lost or stolen driver’s license or any other government-issued identification to the agency that issued the document and follow their procedures to cancel it and get a replacement. Ask the agency to flag your file so that no one else can get a license or any other identification document in your name.
  • Finally, if your information is stolen or misused, always file a report with the police. This will help you dispute fraudulent accounts, debts, and claims against you. If the police are hesitant to file an identity theft report, ask that they file a miscellaneous incident report or check with another jurisdiction such as the state police or the sheriff’s department.

 Once you have taken these precautions, watch for signs that your information is being misused. Investigate further if you:

  • fail to receive bills or other mail. If this happens, follow up with creditors. A missing bill could mean an identity thief has taken over your account and changed your billing address to cover his/her tracks.
  • receive credit cards you did not apply for.
  • are denied credit, or you are offered less than favorable credit terms for no apparent reason.
  • are getting calls or letters from debt collectors or businesses about merchandise or services you did not buy.

Arm yourself with as much information as possible to prevent identity theft. Check out the Free Stuff on the Squeeze website to download a Special Report: Fighting Back Against Identity Theft. Remember, no one will care quite as much about your good name as you do, so it’s up to you to be proactive and protect it daily.

Have you been a victim of identity theft or do you know someone who has? Can you add some information or steps to the ones above? If so, send them to me so that I can add them to the list. ps!

What’s an Initial Fraud Alert?

You can ask for an initial fraud alert (IFA) to be placed on your credit report if you suspect you have been, or are about to be, a victim of identity theft. An IFA stays on your credit report for a minimum of 90 days and is appropriate if your wallet has been stolen or if you’ve been taken in by a scam, such as a “phishing” scam that targets your personal information via email. When you place an IFA on your credit report, you are entitled to a free credit report from each of the three major credit bureaus.

Equifax: 1-800-525-6285; www.equifax.com;P.O. Box 740241,Atlanta,GA30374-0241

Experian: 1-888-397-3742; www.experian.com;P.O. Box 9532,Allen,TX75013

TransUnion: 1-800-680-7289; www.transunion.com; Fraud Victim  Assistance Division,P.O. Box 6790,Fullerton,CA92834-6790

Don’t Relax Just Yet–Identity Theft is Still An Issue, Part 1

In this two part series we’ll discuss what to do to avoid becoming a victim and immediate steps to take if you  become a victim.

 Steps to avoid becoming a victim:

I haven’t seen a lot of the commercials about it lately, but identity theft is still one of the fastest growing crimes, so don’t relax your guard or you could become a prime target. And your best defense is to be proactive.

 Identity thieves use a variety of sources to get your personal information and once they have it, they can use it to rack up huge amounts of debt, purchase large items like cars, or even file bankruptcy or commit crimes using your name. Some common information gathering sources used by identity thieves include:

  • stealing information from businesses and institutions
  • stealing your mail
  • rummaging through your trash – “dumpster diving”
  • gaining access to your credit report
  • burglarizing your home or stealing your wallet or purse
  • obtaining information from you by phone or the internet

 While you can’t control all access to your information, there are some things you can do to make it more difficult for identity thieves to obtain and use your information. Here are my top seven strategies to help lesson your chances of becoming a victim:

1.   Review your credit reports on a regular basis. Look for errors such as misspelled names, wrong Social Security numbers (SSN), wrong addresses or employers, or new accounts or credit applications you did not authorize. Note: It may be to your benefit to stagger your free credit reports throughout the year so you can receive one every four months.

2.   Treat your mail and trash with care. Regularly go through your mail, separate out documents that include sensitive information and shred them. Sample documents to shred include: pay stubs, charge receipts, copies of credit applications, insurance forms, physician statements, checks and bank statements, expired charge cards, and credit offers you receive in the mail.

3.   Place passwords on your credit card, bank, and phone accounts. Avoid using easily available information such as your mother’s maiden name, your birth date, the last four digits of your SSN or your phone number, or a series of consecutive numbers.

4.   Read your credit card and bank statements as soon as they arrive and follow up on errors or suspicious transactions immediately.

5.   Don’t give out personal information on the phone, through the mail, or on the internet unless you’ve initiated the contact or you are sure you know who you are dealing with. Never respond to emails that look like they have been sent by the IRS, the Social Security Administration, other government agencies or banks that are requesting personal information, they will never ask for sensitive information by email.

6.   Be cautious when responding to promotions and sweepstakes. When registering at sites or for products, never give out your true birth date. You can give the year, but substitute another month and date. These are often data gathering sites where your information will be sold and they may even be set up by identity thieves.

7.   Practice computer safety. Before giving out sensitive information over the internet always look for signs that it is a secure site such as https, shttp, or a locked lock. Use a firewall program, especially if you use a high-speed internet connection like cable or DSL that leaves your computer connected to the internet 24/7 or disconnect your computer when you are not using the internet.  ps!

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