hrpeople

Understanding Benefits Can Be a Key to Employee Satisfaction

UNUM/Business Newswire — Tue, 21 Sep 2010 09:46:00 -0700

As employee benefits enrollment season kicks off, there’s some good news for employers seeking cost-effective ways to help boost engagement in the workplace.

“Employers are looking for ways to show employees they care without breaking the bank, and effective benefits education can be a low-cost, high-impact way to affect worker satisfaction,” said Bill Dalicandro, Unum’s vice president for enrollment.

A study from Unum reveals the strong connection between the quality of the benefits education employees receive and their perception of their employers. Even if employees don’t have a particularly good benefits package, effective benefits education makes them dramatically more likely to consider their employer a very good place to work, the research shows.

The findings come at a time when industry research is revealing the degree to which employee engagement has suffered in the unsteady economy. The percentage of organizations with falling engagement scores tripled in two years, with the most significant dips occurring this year, finds a new survey from Hewitt Associates.

And some 31 percent of human resources managers say morale and employee productivity are their biggest concerns over the next six months, according to a survey released in July by ComPsych Corporation, a provider of employee assistance programs.

“Offering employees effective benefits education can help make a difference,” Dalicandro said.

Unum’s survey of 1,106 adults who are employed full time was conducted online by Harris Interactive. The results show that the right tools are a critical part of the benefits education process. Employees consider one-on-one and group meetings, online tools and printed materials among the most valuable benefits communication methods.

Between 2008 and 2009, 45 percent of employees reported they had seen changes in their benefits packages, including 31 percent who said they are paying more for benefits, and 9 percent who reported at least one benefit was discontinued.

“As the benefits landscape is shifting, it is more important than ever to give employees the right tools to understand their benefits choices and to communicate what’s available to them,” Dalicandro said. “It’s an approach that benefits everyone.”

What to Do if You Can’t Pay Your Bills

Jeffrey Strain | MainStreet.com — Fri, 29 May 2009 12:30:00 -0700

Lacking the cash to pay your bills is a bad situation, but avoiding the problem is worse.

If money is scarce and bills are coming due, don’t panic. Gather your statements and a calculator, and go into planning mode. Tackle the crisis as a whole, rather than dealing with issues as they arise, which raises the risk of making poor financial decisions that could affect you for years to come. As you pull yourself together, keep these five crucial steps in mind:

*1. Call the companies you owe*

People faced with a budget shortfall will often try to avoid the companies they owe. They simply stop paying without giving a reason. But you should always call your creditors to alert them of your predicament. They might be willing to negotiate a compromise that will resolve the situation.

*2. Prioritize your bills*

One of the biggest mistakes people make when money is short is to try to be “fair” when paying their bills. If they can only afford to pay one bill, they pay one this month and a different one next month. It might seem like a logical solution, but they could hurt their credit scores and anger the companies they owe.

Some bills are more important than others. Prioritize your creditors and then pay them accordingly. Your mortgage lender should be at the top of the list.

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*3. Conserve cash if you can’t pay your mortgage*

When people realize they can’t afford their mortgage, they often put those funds toward other bills. They should save that cash instead.

If you’re falling behind and facing foreclosure, you’ll need enough money to rent a new home. While foreclosures take months to complete, the previous owners usually have to move right away.

*4. Know your rights*

If you can’t make deals with the companies you owe, expect calls from aggressive debt collectors. They’re allowed to call people who owe, but they’re not allowed to threaten debtors with violence, arrest or seizure of property. They’re also prohibited from calling at odd hours or using obscene language. For more on the Fair Debt Collection Practices Act, visit the Federal Trade Commission’s web site.

*5. Don’t ignore the situation*

People caught in a financial crisis face difficult choices, but they need make them. Delaying action will only make the problem worse and leave you with fewer options. Addressing the issue immediately prevents the kind of long-term damage that leads to financial ruin.

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4 Things That May Trigger Your Spending

Hannah Waters | Geezeo.com — Fri, 29 May 2009 10:45:00 -0700

Overspending is easy to do. Everyone falls for it every now and again because sometimes you just feel the need to spend. However, there may be things that trigger our overspending even when we know that we are on a budget and cannot really afford to spend money.

1) Stress – Work, family, friends, sickness, money…all these things (and many more) can lead to stress in someone’s life. Stress can definitely trigger your spending because it allows you to take your mind off
of whatever may be bothering you for that little amount of time. Even if it is just going out for dinner or a drink after work…although you may not be able to afford it, if you think it will take away your stress and allow you to relax a little bit you are willing to spend the money.

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2) Peer Pressure – As you get older you think that you outgrow peer pressure and that it really not longer effects you. However, this is really not the case. In the work environment or even just with friends, peer pressure is very prominent as you get older. When shopping with friends, if they are buying things or if they tell you that something looks good on you and that you should buy it sometimes you fall into the trap and end up purchasing something just because someone said you should.

Next page: Final two culprits >>

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3) Emotions – If something is happening in your life that has got you down or on the flip side makes you want to celebrate, this often triggers a side of you that makes you want to spend money. Similar to stress, spending allows you to forget bad things that are happening. However, if you get a promotion or something, you spend money to celebrate. The same goes for if you have a date or vacation…you are excited so spend more money.

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4) Credit Cards – Credit cards definitely give us an easy out. Even when people know that they do not have the money to spend, they know that a credit card can still allow us to spend. This is one of the worst influences because it will get you in serious amounts of debt that you have to account for later on. People get sucked into the credit card trap without really thinking about what they are doing and before they know it they have spent way more than they thought.

All of these things can trigger over spending that you know you should not be doing if it does not fit within your budget. Try to find things that will substitute spending money to help celebrate or make yourself feel better. In the long run, giving into these things that trigger your spending will only make you struggle with your budget or lead you into a great deal of debt down the road.

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7 Common Mistakes of First-Time Homebuyers

Katie McCaskey | Geezeo.com — Fri, 29 May 2009 10:32:00 -0700

Buying a home for the first time can be an invigorating yet scary experience. Here are some pitfalls to avoid when you’re buying your first home:

1. Buying Before You’re Ready

Although you may hear people say you’re “throwing your money away on rent,” it isn’t always wise to buy a home. If you make a good salary and have an expanding family, the desire to own a home is natural, but you have to make sure that buying makes good financial sense. Start by evaluating your debt and income. You should cap your spending on a home at no more than three times your household adjusted gross income. Also, you should reduce your income by your debt. This is how much house you can truly afford. Most financial experts also recommend that you have eight to 12 months in liquid assets in order to be totally prepared for homeownership.

Next Page: Not Asking Questions>>

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2. Not Asking Questions

For first-timers, being afraid to come off as too eager or annoying with questions can force you to miss important information. After all, smart people ask questions!

Don’t be afraid to ask for definitions or explanations of everything, even if you think it should be something you know. You never know how much trouble you can get into by not understanding basic home buying terminology.

Next Page: Underestimating Additional Costs>>

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3. Underestimating Additional Costs

Just because you can afford your mortgage payment each month doesn’t mean that you can afford a home. You must also take into consideration closing costs, property taxes, home repairs and unexpected emergencies. In addition to these expenses, you should consider the costs of upkeep, including utilities, lawn care, security systems, pest control and annual maintenance.

Next Page: Overestimating What You Can Afford>>

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4. Overestimating How Much You Can Afford

This goes back to being realistic about your income. Just because you’ve been approved for a loan amount doesn’t mean you can afford it.

Are you going to have enough income to pay it back? Your house payment is just one piece of a bigger financial puzzle. What other major expenses do you have on the horizon? Again, home repairs, HOA fees and property taxes are not small expenses & #0151; make sure you've done the necessary calculations, and are prepared to adjust your lifestyle accordingly.

Next Page: Forgetting About Resale>>

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5. Forgetting About Resale

This is a dangerous pitfall many people are contending with now that the market bubble has burst. They purchased homes that were “unique” or “needed work” but never got around to doing it.

Now, they’re stuck with homes that are worth even less than they paid for them and still are in need of repairs. Which brings us to the next pitfall…

Next Page: Thinking Home Repair Is Simple>>

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6. Thinking Home Repair Is Simple

This is a major no-no. Never assume a repair on a “fixer-upper” will be simple or cheap.

Even if you are doing the labor yourself, the cost of permits and materials alone can set you back an enormous amount of time and money, so be prepared for this.

And be careful. If you embark on a DIY project, but don't really know what you're doing, you could up spending a lot more time, money and effort to get the job done right later on.

Next Page: Forgetting About the Neighborhood>>

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7. Forgetting About the Neighborhood

Be sure to visit any potential home at night as well as during the day. This part is key - you may find it an entirely different world after dark.

Remember, if you buy a home, you are buying the neighborhood also. Keep an eye out for the area’s progress. Is it on the upswing or in the middle of a downturn?

Even if it is on the upturn — an indication of a good investment — will you actually feel comfortable living there for the next 5-10 years?

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Shred It Up: Which Financial Docs Can Go Now

Staff Writers | MainStreet.com — Fri, 29 May 2009 10:31:00 -0700

Knowing how long to keep an important financial document is the key to maintaining your personal security as well as managing clutter. Some documents can be shredded after short periods of time, while others should be kept indefinitely. Here’s a handy guide to help you figure out what to keep and what to shred, beginning with the short-lived documents:

Keep for 45 Days

• Credit card receipts. Once the bill comes, you can shred these unless they will be deducted at the end of the tax year.

Keep for One Year

• Non-permanent bank records such as retail, utility and personal expenses that are not tax-deductible.

• Brokerage statements from active securities to show capital gains and/or losses at tax time.

• Utility, credit card and other bills can be shredded after one year for anything except large purchases.

Keep for Seven Years

• Tax documents, including tax returns, canceled checks, receipts and records for tax-deductible items like alimony, charitable contributions, mortgage and student loan interest, retirement plan contributions, etc. NOTE: The IRS has three years from the date you filed to audit your returns if they suspect errors. You also have three years to amend your tax returns if you find an error on your part or receive additional documentation. The IRS also has six years to challenge your return if you underreport your gross income by more than 25 percent, so be sure to keep all W-2s, 1099s and other income reporting paperwork.

• Credit card statements

• Housing purchase documents and related paperwork

Continue reading on the next page ->

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Keep Permanently

• IRA contributions. These are vital because you may need to prove the amount of your contributions when it comes time to withdraw funds at retirement age.

• Retirement/savings plan statements. To save space, you can keep the yearly statements for each account and shred the quarterlies at the end of each year after you’ve verified the annual reports.

• Bank records for important expenses, such as those related to taxes, home improvements, business expenses, and mortgage payments.

Shred Now

• Closed retirement, savings, checking or other financial accounts with a zero balance.

• Receipts from non tax-deductible items like groceries, most retail purchases, etc.

• Tax documents more than seven years old.

Conditional Documents (Times Vary)

• Brokerage statements can be shredded when the corresponding securities are sold or accounts are closed.

• Bills for large purchases such as jewelry, appliances, antiques, cars, furniture, computers, collectibles and other investment pieces should be kept until the item is sold or no longer in your possession.

• Medical records should be kept as long as necessary, given your current health circumstances. You probably don’t need to keep a report of your chicken pox doctor visit from third grade, but an abbreviated lifelong record of immunizations and illnesses can prove to be quite useful for many doctors. You may consider scanning these documents and storing them digitally to save space.

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Hitting the Personal Financial Reset Button

By David Kiley | Business Week — Fri, 01 May 2009 16:46:00 -0700

A BW senior correspondent details his quest to repair his retirement portfolio and get his family's finances in order

It could have been worse. At the end of February—a year and change since my wife and I had shifted our money to professional wealth management advisers—our equity holdings were down 48% for the 16 months they had managed it. But our overall portfolio took a hit of just 26% during that period because early last year we pulled the "professionals" back from their plan to pile 70% of our money into equities. Instead we decided to invest just 30% in stocks and keep the rest in fixed income and cash.

But looking at the February statement, it was clear what we had to do: Fire da bums.

It's not only that we're peeved that their best advice was to go so heavily into equities months before the market crashed—and that my own instincts to hang back were correct. It's also that these guys charge 1.25 points on our portfolio annually to be in their funds. A check with some financially savvy friends revealed that such a fee for a portfolio that's merely 30% in equities is "confiscatory," as one put it.
We fired the pros, posted big gains

O.K., you may ask, now that you're going the DIY route, where are you putting your money in this market? Since Mar. 1, we have been dividing it into quarters evenly split among cash and CDs; Vanguard's stock index fund; Vanguard's bond index fund; and a Vanguard municipal bond fund. That is as plain and conservative a diversification as we can stand in this climate. The average expense ratio of these funds is just 0.15%. I spent in excess of $7,500 last year in fees to do nothing more but track the market with my stocks. This year, I figure we will make back nearly $7,000 in fees we aren't spending for what I predict will be a better return. Over the next three years, these differences alone will add up to from $20,000 to $30,000.

We took our money out of the "pros'" hands just as the market began climbing back. My wife, though, had put some of the cash into a few individual stocks before the run-up, which helped boost our short-term returns. She picked Wells Fargo (WFC) because their servicing of our mortgage has been excellent and the bank appeared to have been more conservative than others. She saw a buying opportunity when the company's stock was hammered along with Citigroup (C) and Bank of America (BAC). She was correct, bringing us gains in double-digit percentages.

We could still be hit with bailer's remorse: What if the funds we sold out of at our former adviser outperform my index funds? Will we feel as stupid as we did three months ago? According to Mark Kritzman, president and chief executive of Windham Capital Management in Boston, who recently published a study in the Feb. 1 issue of Economics & Portfolio Strategy, that is very unlikely.

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Counting Expenses, managed funds lag

Kritzman measured the long-term impact of all the expenses involved in investing in a managed mutual fund or hedge fund: transaction costs, taxes, and management and performance fees. He calculated the average return over a hypothetical 20-year period, net of all expenses, of three hypothetical investments: a stock index fund with an annualized return of 10%, a managed mutual fund with an annualized return of 13.5%, and a hedge fund with an annualized return of 19%. The volatility of the funds' returns—plus turnover rates, transaction fees, and management and performance fees—was based on industry averages.

His finding: Net of all expenses, including taxes, the winner was the index fund. Expenses were the culprit. Indeed, Kritzman found that just 3% of managed funds in his modeling would do better than simple index funds.

With our dreams of retiring in a decade or so shot to pieces for the moment, we are on a rampage to make up for the losses—and add to our principal so as to maximize returns when the markets head north. Like charity, financial security begins at home.

And that brings us to the second part of the Kiley Family Recovery and Reinvestment Act of 2009. As a couple in our mid-40s with a son, we decided we wouldn't waste this financial crisis: We attacked the unnecessary spending that was hurting our efforts to build wealth. The idea is simple: Replace the money that isn't growing from stock market gains with money conserved from household budget leakage. That way, the principal will be greater when the market improves.

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Here's a blow-by-blow account of the great budget beat-down:

Mortgage

We pay monthly, like most Americans. To knock down the principal, we are going to make smaller payments twice a month, a strategy that will add the equivalent of two extra monthly payments a year. This will reduce the 27 years we have left on our mortgage to a little over 22 years, saving us $77,000 in interest payments. We also are refinancing, from a 6% rate to a 5.12% rate with no fees.

School payments

Our seven-year old son attends a private school, but we've been thinking this is unnecessary because there's a very good public school in our town. For at least the next four years—until he starts middle school—we plan to bank the $11,000 a year, replenish his 529 college fund, and invest the rest.

Household expenses

It is difficult to look at daily, weekly, and monthly budget leakage. Some of the things we are identifying may make us sound like nickel-and-dimers. But we are using this recession as a teaching moment for us and for our son to change habits. Some of the things we are chopping out of our budget will likely return when the market does, but who knows? New habits may die as hard as old ones.

Greeting cards

With an extended family of more than 20, I figure I spend $75 a year on cards. They are now getting photo cards I print off my computer and pictures that my son draws.

Haircuts

I know. I'm squeezing dimes, right? But budget cutting becomes contagious. My son and I were going to the barber every six weeks to get our hair buzzed. That's $30 for the two of us. Over a year, the roughly seven visits added up to $210. I've bought a buzzer/trimmer for $22 and we now do our own hair.

Health care

I was seeing a chiropractor twice a week for $35 per visit. Cancelled. I think I can accomplish the same relief for my back by working out more on my underused Total Gym. Also my wife was seeing an out-of-network specialist, which could have cost $2,000 this year. She is now seeing an in-network specialist, which requires a 90-minute round trip.

Clothing

My wife and I are dialing back on clothing purchases by 50% this year. To maintain domestic harmony, I promised I wouldn't publish how much we're saving, but the number is substantial. The limits do not apply to our son, who is growing rapidly.

Food

We've cut back our spending at the fancy deli in town by $100 per month. We'll make do with Havarti cheese instead of the stinky expensive stuff for a while. Minimum savings: $1,200 a year.

Vacations

We've piggybacked family trips onto two of my business trips this year to New York and Florida, with days off, to save some airfare and hotel expenses. We'll save about $3,000 this year, based on what we would have spent taking those trips on our own.

Dining out

We have dialed back on going to our favorite restaurant, from twice per month to once. That saves about $80 a month, or $960 annualized.

It may all sound like a penny-pincher's life, but there's an old adage: "Watch the nickels and dimes and the dollars take care of themselves." What's better, we feel much more in control of our financial destiny.

Savings like these can be illusory if you don't track them and set the money aside for real. Each month we put the savings on greeting cards, dinners out, and haircuts into our vacation fund. That way it's sitting there when we need it and we aren't draining our working checking account. Fancy food savings are going to the 529 fund.

As market conditions dictate, we will divert money-market and CD reserves into the stock index fund as part of a dollar-cost averaging program.

We calculate that our minimum annual savings will be, to us, a staggering $24,000-plus. If we merely continue those savings over five years, add them to our remaining principal, and keep it all invested for a very conservative compound-interest return of 3.5% after taxes, it will add at least $213,000 to our nest-egg. That will put us above where we were before the markets tanked.

So the party—and the financial laziness we developed—is over. And even if the markets and home values bounce back sooner than many of us think, our new, frugal habits will hopefully die harder than our old ones did. We do, however, look forward to going back to the barber. I'm not sure how long my son will put up with Dad cutting his hair.

Beware of Higher Tax Bill Before Dropping 401(k)

Associated Press — Fri, 01 May 2009 16:46:00 -0700

DES MOINES (AP) — With economic pressures mounting, you may think reducing your 401(k) contribution is an easy way to add money to your paycheck. But before you do, consider how it will increase your tax bill.

Many people have become so focused on the recent losses of 30% or more in their account balances that they've forgotten a primary benefit of contributing to a 401(k) or an IRA is a lower tax bill.

It's a mistake to let short-term market lapses deter you from planning for your future and saving on your tax bill now.

"There is a backlash against the market, and against investing, but there shouldn't be a backlash against saving," said Dennis Suckstorf, a financial planner with Financial Advantage Inc. in Columbia, Md.

Let's say, for example, you're single and make $60,000 a year. Let's also assume you're contributing 6% of your income in a state where the income tax rate is 7%. In the end, you're saving yourself about $96 a month or $1,152 a year in taxes.

If your employer matches a portion of your contribution, you gain even more benefit because you're not taxed on the contribution which can grow in your account.

But the recession has taken a toll. An increasing number of people are halting contributions. About 6% of participants stopped putting money in their accounts in 2008, said human resources consultant Hewitt Associates. That's about twice the normal rate in recent years, said Pam Hess, director of retirement research for Hewitt, which analyzes 1.5 million retirement accounts.

Those who hoped to see that money in their paycheck may be disappointed to see just a portion because they didn't figure in the tax advantage.

"It's not dollar for dollar. They're not going to turn their contribution off and magically get all this money back in their paychecks," she said. "Being tax free is a huge benefit."

Others have simply scaled back their contributions. Hess said the average savings rate dropped from 7.8% of pay to 7.4% in 2008.

"People want to panic but they don't know how," said Richard Thaler, professor of behavioral science and economics at the University of Chicago's business school. He said the relatively low number dropping out or reducing contributions shows that people are befuddled by the market and unsure what to do.

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"Taking all your money and putting in the bank even sounds scary now," Thaler said. "So freezing in place is the gut reaction people are having."

The long-term implications aren't clear. Trade groups and organizations tracking 401(k) trends are keeping a close eye on another trend they find equally disturbing. Specifically, they're concerned about how many of the nation's 5 million unemployed workers are handling their retirement savings.

"If you lose your job nobody would blame you for stopping contributions until you find another job," Thaler said, "but I think people would be ill advised to pull the money out if there's any way to avoid it."

When a worker loses a job the 401(k) balance can be rolled over to an individual retirement account, which offers many of the same benefits of an employer sponsored plan.

Cashing out a 401(k), however, before age 59½ is costly. You'll have to pay a 10% penalty and the taxes due on the money. You basically give up more than a third of your money to the government in most cases.

Hess of Hewitt Associates shares that concern. Statistics show nearly 80% of workers with less than $10,000 in their 401(k) cash out the account when they leave a job rather than roll the money into another retirement account. Those workers could end up with little or no retirement savings if they keep doing that, she said.

"It has long-term implications and should only be done as a last resort," Hess said.

Suckstorf, the Maryland financial planner, said many workers today have little choice but to continue putting money aside for the future. Most workers don't have pensions and the Social Security system will likely not provide the level of support for future retirees as it does today since current projections show the fund will begin to fall short in 2017.

"It may sound cliché, but somewhere down the road you're going to end up being a ward of the family or the government if you don't do something," Suckstorf said.

Follow the advice of financial planners and contribute at least at the level of your company's match if you can. Don't lose sight of the primary reasons for putting money into your 401(k) account — a comfortable retirement income and the tax benefits you're getting now.

5 Things You Can Do Now to Prepare for Rising Inflation

By John Waggoner, USA TODAY — Fri, 01 May 2009 16:46:00 -0700

We all have our little fears: The frayed wire on the coffee maker. That knocking noise from the left-rear tire. The zombies staggering around in the backyard.

For investors, one of the biggest fears today is inflation — a period of rising prices. Inflation erodes the buying power of your money at home and abroad. In a worst-case scenario, it can result in hyperinflation, when a wheelbarrow of bills won't buy a loaf of bread.

Right now, inflation is deader than an army of zombies. But massive government borrowing raises the fear that inflation will rise from the grave and eat your savings. But you can fight back — with five inflation-fighting investments.

The consumer price index, the government's main gauge of inflation, has actually fallen 0.4% the past 12 months that ended in March. A big drop in energy prices was behind much of the drop. And in March, prices of food, housing, clothing and transportation fell. It's no wonder that the government is more worried about deflation — a period of falling prices — rather than inflation. In a deflationary period, falling prices drive companies out of business, debts become progressively more onerous, and consumers put off buying because they figure prices will always be lower later.

To get a true inflationary spiral, you need low unemployment and soaring salaries, neither of which is happening today. The unemployment rate stands at a recessionary 8.5%, and average weekly earnings fell in March.

Worries about inflation are "very premature," says David Wyss, economist for Standard & Poor's. "People are trying to fight the last war." The Bank of Japan prolonged that country's recession for a decade by using inflation-fighting tactics instead of deflation-foiling strategies, he says.

Even if inflation isn't a problem now, however, the massive government debt is one very good reason to fear inflation in the long term. Currently, the U.S. government has $11.2 trillion in outstanding debt, up from $5.7 trillion at the end of 2000. Furthermore, the government's efforts to prop up the banking system will add billions more to the total.

The root cause of inflation is too much money chasing too few goods and services. The big worry: Rather than pay off the debt, the government will simply print more money, and that's inflationary.

In the short term, then, inflation isn't a big problem. As time goes on and the deficit rises, however, inflation could become an enormous problem.

Normally, the Federal Reserve fights inflation by raising short-term interest rates, which is devastating to both stocks and bonds. Rising rates hurt corporate earnings by increasing borrowing costs. And bond prices fall when interest rates rise.

But some types of assets do rise in value in inflationary times. So if you're worried about inflation, you can make a few moves now to lessen inflation's bite with inflation-beating investments: Treasury Inflation-Protected Securities, gold, commodities, real estate and money market mutual funds.

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TIPS: Value rises with the inflation rate

Treasury Inflation-Protected Securities, or TIPS, are long-term IOUs issued by the government. Like other Treasury securities, TIPS pay a fixed rate of interest until they mature.

Unlike other Treasury securities, however, TIPS have an inflation kicker: The government adjusts the principal of TIPS up or down every month according to inflation. If inflation were 3% over the previous year, for example, the government would add 3% to your bond's value.

The yield on 10-year TIPS reflects Wall Street's belief that inflation is no danger: It implies an inflation rate of about 1.3% for the next 10 years. If traders are wrong, TIPS could be a bargain now. In addition, the government uses the consumer price index as its inflation measure — a figure that includes energy. If the price of oil were to surge, TIPS would benefit.

Tips:

• You can buy TIPS directly from the U.S. government at no cost. Go to www.treasurydirect.gov to find out how.

• Top-performing TIPS fund: American Century Inflation-adjusted Bond (ACITX), up 24% the past five years.

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Gold: No matter what, it's worth something

Paper money may lose its value, but gold is always worth something. The problem: The price of gold isn't tied terribly tightly to inflation.

For example, the price of gold has barely budged since its 1981 high of $850 an ounce. On the other hand, gold has doubled the past five years, a period of tame inflation. "Gold has been a terrible proxy for inflation since 1981," says Ray Ferrara, a financial planner in Clearwater, Fla.

One reason: Gold prices move opposite the value of the U.S. dollar, rather than tracking inflation. But if inflation does roar, the value of the dollar will fall, too. After all, if a dollar buys less at home, it will be worth less abroad.

Tips:

•Buy gold bullion coins, such as the American Eagle or Canadian Maple Leaf. Take possession of the coins. Scammers love to pretend to store them for you.

•Consider a gold bullion exchange traded fund, such as the SPDR Gold Shares ETF (GLD). Each share equals one-tenth of an ounce of gold, minus the fund's expenses.

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Commodities funds: Prices of materials rise with other prices

Inflation is, by definition, a period of rising prices — not just for gold, but for virtually all basic materials, such as steel, coal, oil and lead.

Clearly, buying a boxcar full of coal has its drawbacks. And small investors who invest in commodities via the futures markets lose early and often.

But you can invest in commodities via exchange traded funds. These funds typically track a commodity futures index, such as the Goldman Sachs Excess Return index, which tracks 24 commodities.

Be aware that many commodity funds have big weightings in energy — which is fine, if that's what you want. TheiShares S&P GSCI Commodity fund (GSG), for example, is 67% invested in energy.

Tips:

•The PowerShares DB Commodity index fund (DBC) is a highly diversified commodity fund.

•Consider an actively managed natural resources fund. Two funds that have consistently beaten their peers are Vanguard Energy (VGENX) and ICON Energy (ICENX).

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Real estate: Not so great now, but a good hedge

If you own a home, you probably have plenty of real estate. Despite the dismal state of the real estate market, however, your home can be a significant inflation hedge in the future.

Home prices — absent a bubble — mirror the consumer price index fairly faithfully. And if you have a low-rate, 30-year, fixed mortgage, your note will become a thing of beauty as prices rise. Your home value will rise, your salary will rise, but your mortgage payment won't. In addition, you'll repay the loan with cheaper dollars.

The catch: Interest rates tend to rise at the end of an inflationary period, squeezing new home buyers out of the market — and forcing prices down.

Real estate funds invest in real estate investment trusts, orREITs, which have had the paint peeled from them in the past few months. REITs invest in commercial real estate, and that market is starting to crumble.

Tips:

•Top real estate fund: CGM Realty fund (CGMRX), up 26% the past five years.

•Realty Income REIT (O) strives to pay regular dividends; current yield is 8%.

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Money market funds: Yields pace inflation

Strictly speaking, a money fund doesn't fight inflation. But over time, money fund yields tend to keep up with inflation, and that's important.

In an inflationary period, the last thing you want is an investment whose yield is fixed — such as a fixed-rate annuity or a bank CD. Your interest payments will buy less each passing month.

Money funds, which invest in short-term, high-quality IOUs, can't guarantee a set yield. They can only give you what the short-term money market has to offer.

But as the Fed begins to fight inflation by raising interest rates, your fund's yield will rise, too. You won't get rich, but at least you'll keep up.

Tips:

•Don't bother with Treasury-only money funds; you don't need them. You can buy three-month Treasury bills directly from the government at www.treasurydirect.gov.

•Look for funds with the lowest expenses. At today's rates, you need to keep all the yield you can.

How Would You Spend a Raise or Bonus?

By Kim Lankford, Monster Contributing Writer — Fri, 01 May 2009 16:46:00 -0700

When we asked Monster readers what they’d be most likely to splurge on if they got a big salary bump -- a new car, wardrobe or home entertainment technology -- the car topped the list with 51 percent of the votes, followed by the wardrobe with 30 percent and the home entertainment center at 18 percent. But quite a few readers told us none of those choices were good options.

“How about putting the money into a retirement account, 401k or other investment?” asked one reader. “With the answers to that survey, it’s no wonder people are in debt with seemingly no way out.”

She’s right: Several key moves can make a huge difference in your financial situation -- and stretch a few hundred dollars into thousands by saving you money in interest, growing tax-free, earning you free cash from your employer or protecting your savings. You don’t have to be serious with all the money, but everyone can learn from these seven steps recommended by real readers. They’re listed in the order of priority, starting with what would have the biggest impact on your finances.

1. “If I got a huge surge in salary, I would purchase health insurance for me and my husband.”

Without health insurance, big medical bills could quickly eat up your savings and jeopardize the rest of your financial plans. In fact, one of the most common causes of bankruptcy is medical expenses.

One good way to keep health insurance costs down, especially if your employer doesn’t provide coverage, is to buy a high-deductible health insurance policy. Raising the deductible will cut your premiums and enable you to open a health savings account (HSA), which can give you triple tax benefits and allows you to roll over the money year to year.

To be HSA-eligible, your health insurance policy’s deductible must be at least $1,150 for individual coverage or $2,300 for families in 2009. You can then contribute up to $3,000 for individual coverage or $5,950 for families in 2009. Those 55 and older can contribute an extra $1,000. Your contributions are tax-deductible and grow tax-deferred and then can be used tax-free for medical expenses in any year. If you still have cash in the account at age 65, you can use it for anything without penalty.

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2. “I wouldn’t do any of the listed choices. I would continue to pay bills off as much as possible. I’m very much in debt and am anxious to get out of this financial pitfall.”

With high interest rates and a big balance, it’s easy to pay thousands of dollars in credit-card interest that gets you nothing in return. If you have $4,000 in credit-card debt with an 18 percent interest rate, you can save more than $5,600 by paying the full balance now rather than continuing to pay the minimum.

3. “I would bank the difference into my retirement savings and continue to live on my earnings prior to the surge in my salary.”

With a raise or bonus, you’re not used to having the extra money, so you can put it to good use before you even realize it’s there. First, invest at least enough in your 401k to get your full employer match, which is free money. It’s tough to beat a 100 percent return. Since 401k contributions are deducted from your income before taxes, your contributions don’t lower your paycheck nearly as much as you’d expect. If you’re in the 25 percent tax bracket and contribute $500 to your 401k every month, for example, your paycheck will only shrink by $375. Most people can contribute up to $16,500 to a 401k in 2009 or $22,000 if 50 or older. The money grows tax-deferred until you withdraw it in retirement (you’ll pay a penalty for withdrawals before age 59 ½).

Or invest the money in a Roth IRA, which doesn’t lower your tax bill now but provides tax-free money in retirement. For 2008 returns, the maximum Roth IRA contribution is $5,000 (or up to $6,000 if 50 or older). Contributing $416.66 per month adds up to the $5,000 maximum by the end of the year. You have until April 15, 2009, to make your 2008 contribution to a Roth IRA.

4. “After a four-month unemployed stint, replenishment of spent monies is the first thing on my mind. I might spend a small amount on a wardrobe or improvements, but all in all, it’s ending up in my savings.”

It’s a good idea to keep enough money to cover three to six months of living expenses in a fairly liquid, high interest-bearing account -- like an online savings account or money-market account -- so it can earn some interest and be withdrawn without penalty but isn’t too easy to access.

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5. “I would put it towards my daughter’s education.”

A raise or bonus can provide extra cash to put toward college savings without having to cut back on your own retirement fund. The easiest way to save for college is by opening a 529 plan, which provides tax-free money for college. You can use the money for any US college, no matter which state’s plan you use, and can deduct your contributions from state income taxes in about half the states. For information about all the plans, see Savingforcollege.com.

6. “I would spend the money on a down payment on a new home.”

Making a 20 percent down payment when you buy a house can help you avoid private mortgage insurance, which can cost 0.5 percent to 1 percent of the loan value every year, meaning up to $3,000 per year on a $300,000 loan. The bigger down payment also helps lower your monthly payments, giving you more flexibility if you end up losing your job or want to cut back on your work hours. And you’ll be less likely to have to cough up extra money if you sell in a down market.

Several readers also recommended using the extra money for home improvements, which can be a good way to add value to your home without taking on extra debt.

7. “I would spend the money on vacation!”

Of course, you can have some fun with the money too. But making some smart moves first can free up more cash for everything else -- and give you even more money for a splurge.

This article originally appeared on Monster.com.

How to Avoid an Audit of Your Taxes

John Rossheim | Monster Senior Contributing Writer — Wed, 25 Mar 2009 15:10:00 -0700

Taxes are high enough; you don’t want to also pay penalties and interest because an audit reveals you’ve broken the rules. And Internal Revenue Service audits aren’t a vanishing anomaly; they’re on the upswing.

The IRS “has gotten almost nasty” in its pursuit of tax payments that could help reduce the federal deficit, says Sanford Botkin, a lawyer and CPA. Audit rates increased in 2007, both for overall individual rates and for higher-income taxpayers, reaching a 10-year high, according to IRS statistics.

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Now that you’ve been forewarned, forearm yourself with these tips for reducing the chances that the IRS will send you an invitation you can’t refuse.

Choose Your Tax Advisors and Preparer Carefully

A highly qualified tax preparer will help you nip many common audit triggers in the bud. “You want an honest but aggressive accountant,” says Botkin, a former legal specialist with the IRS. That means interviewing preparers to determine if they will pursue all legitimate tax breaks without claiming questionable deductions that could raise red flags.

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Watch Your Itemized Deductions

A tax return reporting a moderate $60,000 income while claiming a very large $15,000 mortgage interest deduction smells fishy. So the IRS uses computer algorithms to detect the smell of a tax return on which the key amounts relate to each other in statistically unlikely ways. That’s why it’s wise to include worksheets, disclosures, documentation or other explanations of large deductions and big changes from one tax year to the next with your return.

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Small deductions that add up can also draw unwanted attention. “Look out for excessive miscellaneous itemized deductions like unreimbursed business expenses,” says Sandra Abalos, managing partner of accounting firm Abalos and Associates PC.

Learn About Tighter Rules for Charitable Gifts, Whether Cash or In-Kind

Keep giving, but be sure the recipients give you something back: Adequate documentation of the donation and its tax-deductible status. “Charitable contribution paper requirements are more intense this year,” says Kenn Tacchino, an adjunct professor of tax and financial planning at Widener University.

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Bob Greisman, a partner with accounting firm BDO Seidman LLC in Chicago concurs. “Be careful not to take large charitable contribution deductions if you can’t back them up,” he says.

Keep a Lid on Your Tirades

If you really want to avoid an audit, don’t attach a statement to your return saying you’ve declared your half-acre home lot a sovereign nation not subject to US taxation.

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Beware of Garbage In, Garbage Out

Neither a human preparer nor tax-preparation software like TurboTax or TaxCut can help you avoid an audit if you supply them with incorrect data. Because a highly qualified professional may be more likely to sense that your numbers are off, “the IRS is looking harder at returns prepared with consumer software,” Botkin says.

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Play the Calendar

Some tax experts claim that you can cut your chances of an audit by strategically choosing when you file. The idea is to file on or within a few days before the tax deadline, usually April 15. From January to March, returns arrive at the IRS much more slowly, so the chance that any given return will be examined rises. But be sure your return is postmarked on time; late returns trigger audits.

Remember that Neatness, Accuracy and Completeness Count

Carelessness catches the auditors’ attention. “The number 1 audit trigger is that you didn’t include all forms or sign them,” Tacchino says.

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Don’t let handwriting or an arithmetic error land you in the auditor’s hot seat. Hard-to-read returns will peeve the data-entry specialist, and math mistakes will be caught by the IRS computer and may raise a red flag.

Finally, accept that while you can significantly reduce your chances of audit, you might still receive that unwanted envelope requesting more information or summoning you to a sit-down with the feds.

A small fraction of returns -- probably less than 1 percent -- are randomly chosen for audit. “We’re seeing more of these now,” Abalos says. “In Phoenix, the IRS has trained a whole bunch of kids on audits, so we’re getting pure random training audits.”

This article originally appeared on Monster.com.

5 Easy Ways to Make Money Even if You're Unemployed

Hannah Waters | Geezeo.com — Tue, 24 Mar 2009 11:38:00 -0700

As unemployment continues to rise, everyone is looking for other ways to bring in some money while still searching for another job. Although a job is the conventional way to earn money, sometimes you need to think outside the box or search outside your comfort zone in order to try something new and bring in a little bit of money to help you out.

*1. Recycle*

Think about how many bottles and cans you throw away every single day. Collecting these in your garage or basement and then taking them to a grocery store or another location that has recycling machines can bring in a little bit of money. Although five cents here and there may not seem like much, it can definitely add up more quickly than you think. Some bottles are even worth a quarter!

*2. Babysitting*

Everyone needs a babysitter. Sometimes it helps if you have experience, but if you know families that need a babysitter you should definitely ask around. People would rather hire someone they know than strangers so if you have friends with kids offer to look after them while they go out for a night. Or if you have family members, offering up your services for a small charge can be beneficial to both you and them!

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*3. EBay/Amazon*

People are looking for any types of deals right now. You may have some “junk” lying around your house that is someone else’s treasure. Never throw something away without trying to put in on EBay or Amazon in order to make some money first. People buy anything and everything if the price is right. With the current economy, people are even beginning to look on these websites for clothes that others are willing to sell at a discounted price. Try your luck…you might earn more money than you ever anticipated. Just remember that when you do post items, we are in a recession so don’t make your price too high. If you were going to throw it away anyway, any little bit of money helps!

Next Page: Tips 4 & 5

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*4. Garage Sales*

Couldn’t sell your items on EBay or Amazon? Well, don’t give up just yet! There is a huge population of Baby Boomers that do not necessarily like to use websites like these. There are also a lot of people who enjoy searching out deals at garage sales. It doesn’t cost you anything to set up a garage sale, just some time and maybe a poster or two (think big and think arrows!) to hang up. Spring and summer weekends are great for garage sales.

*5. Substitute Teaching*

Although this is not guaranteed, since nobody knows when they might need a substitute teacher, having this as an opportunity to earn money can be great. You do not need a teaching degree to be a substitute teacher. Plus, there are many benefits of having this job: you may only have to be at school for a few periods, but often you get paid for a whole day. Also, the hours are great! Since you are not a full-time teacher, you do not have to stay after school for extra help.

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These suggestions may not bring in as much money as a full or part time job would, but they will definitely help you out a little bit while you are searching for a job. Don’t just give up! Searching for a job can take up a lot of your time, but trying out some of the above can be a little bit of a pick-me-up, and the money can help you with those bills that keep coming regardless of your current employment situation.

5 Ways to Understand Your Credit Card's Fine Print

Jennifer Openshaw | WeSeed — Mon, 16 Mar 2009 15:36:00 -0700

If you're like a lot of folks, you may have just received a "Dear Valued Customer" letter in the mail from your credit card company. No, you aren't being fired, but it might feel like it.

If you have an affiliate card issued through one of the big banks, it starts like this: "This challenging business climate has led Citibank, the issuer of [XYZ] Gold MasterCard...to notify us...they are making changes to the terms of many Citibank (C) credit card offerings....including the [XYZ] MasterCard product."

Uh-oh — here it comes.

The enclosed material, one of those multipage fine-print deals, starts off with "The Changes." It tells you that the APR, minimum-finance charges, transaction fees for foreign purchases, and "other fees" have changed, and that "supplemental pricing information" appears in "...your new card agreement [which] follows this notice."

Changed from what to what? Unless you have the last version of this document handy, you probably won't know what or how much. Like too many things in personal finance, you don't know what you don't know.

You'll find a lot of these changes these days. First, because of the banking crisis, cash-strapped banks are scrounging for cash wherever they can. Second, new federal legislation that takes effect in 2010 bans universal default, double-cycle billing, and a host of other evils. That's the good news. The bad: This is driving banks to get ahead of the potential $12 billion in lost revenue.

So here's what to do.

*Call an agent*

Pick up the phone immediately and find a live agent willing to explain the changes.

4 More Tips on the Next Page >>

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*Get a comparison*

Have the agent clarify what changed, not just what your card's terms are today or after the change. If your effective APR went from "prime +14.08%" to "prime + 17.99%," have them explain that and also what the resulting rate actually is. For any fees changed, ask them what the new and old fees are. Have them do an example if necessary to illustrate total cost.

*Be persistent*

When they're done, ask if there's anything else you should know. I found out that the "penalty period" for the higher default APR if you miss a payment had increased from 6 months to 12 months. Hard to find in the fine print, and it didn't come with the first explanation.

*Pay your balances in full and on time*

The adverse changes only applied to balances carried and/or a late payment; if you pay in full and on time you won't be affected. You might consider setting up auto-pay to avoid late payments.

*Ask for the good news*

These changes all sound like a takeaway; less benefit, more cost. However, the issuer also offered attractive balance transfers, 5 months for 1.99 percent with a 3 percent transfer fee; 3.99 percent for 10 months. Some issuers may offer other benefits anticipating negative customer reactions from changes in terms.

Protecting what you have and knowing about change are important in managing your credit and your finances in general. And incidentally, the banks and card issuers that do these changes well — raising cash without angering customers — stand to come out ahead.

Jennifer Openshaw, author of The Millionaire Zone, is co-founder and president of WeSeed, whose mission is to enable people to discover the stock market in their everyday lives through their passions, their jobs and the brands they know and love. Her empowering advice, which helps everyday Americans do more with what they have, hasbeen seen on Oprah, Dr. Phil, The Today Show, CNN, CNBC, and Nightline. You can find her on Twitter @jopenshaw or on Facebook.

Q&A: I've Lost My Job. How Will the Stimulus Plan Help Me?

Deseret News (Salt Lake City) | By Kevin G. Hall — Tue, 24 Feb 2009 10:23:00 -0800

WASHINGTON - President Barack Obama signed into law Tuesday the largest government economic rescue plan in the nation's history, a $787 billion package of spending, tax cuts and tax credits that's designed to help pull the nation out of what's becoming the worst downturn since the Great Depression.

The American Recovery and Reinvestment Act includes everything from money to refurbish public housing to incentives for energy conservation. The 1,000-page plan aims to create and preserve jobs, and also to accelerate the transformation of key economic sectors.

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While the plan provides some benefits directly to individuals, the main way it's intended to help Americans is to promote economic activity nationwide. The stimulus is but one part of a multifront attack by the government on the recession.

Other parts include the mortgage-relief program that Obama will announce on Wednesday and the next phase of the bank bailout, to be announced soon. They're all intended to work together, along with efforts by the Federal Reserve to kick-start the economy. However, individuals will benefit most once the economy resumes growth rather than from the stimulus itself.

Here are some answers to questions about what the stimulus plan might mean to taxpayers and consumers.

• Will I get a tax rebate like last year?

• What if I'm self-employed?

• I don't earn a lot. How else does the stimulus plan help me?

• What about people who are disabled or living on their Social Security checks?

• I've lost my job. How does this help?

• I've lost my health insurance. Where do I get coverage for my family?

• I need to buy a car. Does the stimulus plan help me?

• There had been talk of a $15,000 tax credit for home purchases. Is this in the stimulus?

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Question: Will I get a tax rebate like last year?

Answer: No. Taxpayers won't receive checks this year. This plan involves a payroll tax cut, where employers will withhold less in taxes, meaning there will be a modest bump up in take-home pay until an income threshold is met. The cap is $400 for single filers and $800 for joint filers whose adjusted gross income falls below $75,000 and $150,000, respectively.

Question: What if I'm self-employed?

Answer: You must adjust your quarterly tax filings to capture this credit.

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Question: I don't earn a lot. How else does the stimulus plan help me?

A: The stimulus plan includes a temporary expansion of the earned- income tax credit for families with three or more children, and it allows more low-income families to receive a refundable child tax credit this year and next. For recipients of food stamps, the dollar amount of this assistance will increase by 14 percent.

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Question: What about people who are disabled or living on their Social Security checks?

Answer: The Social Security Administration will be sending a one- time $250 "economic recovery payment" within 120 days for people in this category. Check the agency's Web site, or AARP's Web site, in the coming days for more details.

Question: I've lost my job. How does this help?

Answer: If you're eligible for unemployment benefits this year, you no longer will have to pay federal taxes on the first $2,400 of these benefits. The bill also extends unemployment benefits that would've phased out in March through December, and it raises the average weekly benefit by $25 a week, to $325.

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Question: I've lost my health insurance. Where do I get coverage for my family?

Answer: If you lose your job this year and choose to take Cobra coverage to keep your family covered on health care, the government will now subsidize up to 65 percent of the costs of your premium for nine months. If you lost your job any time after Sept. 1 and elected not to receive Cobra coverage but now want it, you can contact your former employer and it should be available. Help on Cobra premiums will be available to any worker laid off from Sept. 1, 2008, to Dec. 31, 2009.

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Question: I need to buy a car. Does the stimulus plan help me?

Answer: It doesn't provide the steep tax credits some prominent economists had advocated but will allow you to deduct from your federal taxes the state sales tax that are associated with buying a car, truck, motorcycle or recreational vehicle. This benefit phases out for single tax filers who have adjusted gross incomes above $125,000 or joint filers above $250,000.

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Question: There had been talk of a $15,000 tax credit for home purchases. Is this in the stimulus?

Answer: No. The stimulus plan expanded an existing program for first-time homebuyers, but didn't expand it to everyone. It raised by $500, to $8,000, the tax credit for first-time buyers who purchase a home. Before, this credit had to be repaid if a home was sold within three years of purchase. That repayment no longer is required.

A service of YellowBrix, Inc.

h4. Talk about it. Join the "Stimulus Plan 2009" Community Group.

5 Insurance Myths Busted

Military.com Finance Center — Tue, 03 Feb 2009 14:15:00 -0800

Misinformation and myths plague the insurance industry. Many times consumers aren't sure how much insurance to purchase or if they have purchased the right kind to begin with. If you're one of the thousands of Americans that don't understand insurance and what it offers read this list of the top 5 insurance myths and the facts behind them."

h4. 1.) Auto insurance covers personal property left inside your car.

Nope. You’ll need renters insurance to cover the stuff in your car. “Renters insurance will cover any of your items, anywhere in the world,” says Etti Baranoff, associate professor of insurance and finance at Virginia Commonwealth University in Richmond, Va.

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h4. 2.) My landlord’s apartment building insurance covers my belongings.

As a renter, you’re responsible for covering your items; your landlord isn’t. That’s why you need renters insurance. One of the first things to do after you get a policy is to either buy or borrow a digital camera to photograph everything you own. Store the photos on a portable drive that you can keep in a safe place. These photos will make it easier for you to remember what you own and report what you lost. To further help you document your belongings, The USAA Educational Foundation offers an inventory worksheet at www.usaaedfoundation.org/house/home_inventory_worksheet.asp.

h4. 3.) You’re covered by your auto insurance when you rent a car.

You’re probably covered. Most auto insurance policies — and even the credit card you use to pay for the rental — protect against theft and damages to a rental car. But there’s also a loss-of-use fee that usually isn’t covered. “This fee covers lost income to the rental car company when the car is out of service for repairs,” says Carolyn Gorman, a vice president at the Insurance Information Institute. “It can add hundreds of dollars in costs if the damaged car is out of service for a long time.” Be sure to check your coverage with your insurance and credit card companies before you rent.

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h4. 4.) You’re young and healthy and have no assets. You don’t need life insurance.

Here are a couple of reasons it’s the right time.

* -Since you’re younger, you may lock in a lower premium rate. As you age, the rates get more expensive.
* -As you get older, there’s a chance you could develop health problems, which will make it hard for you to get life insurance.
* -If you have credit card debt or college loans, the policy can help pay them off if you die unexpectedly.
* -The final expenses, such as a funeral or hospital bills, won’t fall to your parents to pay.

h4. 5.) Red cars are more expensive to insure.

The color doesn’t matter. Things that do affect the price are the cost of the car, your driving record, and where you live.

About USAA
USAA, a diversified financial services company, is the leading provider of competitively priced financial planning, insurance, investments, and banking products to members of the U.S. military and their families. Named by BusinessWeek as 2007’s Customer Service Champion and ranked highest among financial services companies for customer advocacy in a Forrester Research survey, USAA provides convenient and accessible financial products to its more than 6 million members. For more information about USAA, or to learn more about membership, visit usaa.com.

Streamlining Your Personal Financial Documents

By Janet Barclay, MVA — Tue, 03 Feb 2009 14:15:00 -0800

Every week you introduce more paper into your home, in the form of newspapers, magazines, flyers, coupons, schoolwork, correspondence, bills, and other documents. It may or may not be difficult for you to ensure that reading material and advertising is discarded when you are finished with it, but when it comes to financial documents, it can be much more challenging to determine what you need to keep, and what you can toss. Here are a few simple guidelines.

Discard credit and debit card receipts and bank slips once the item has cleared your account, except in the following circumstances.

a) You will be claiming the expense on your income tax return. All supporting documentation must be retained for a designated period of time in case of an audit. You should check with your local tax authorities if you’re not sure what the regulation is where you live.

b) The item is under warranty, in which case you may be required to provide proof of purchase in the event of a claim.

c) The item is expensive and unique, and you will require proof of purchase in case of an insurance claim.

It is important that the receipts be filed under the appropriate heading (Tax, Warranties, or Insurance) so you don’t waste time looking for what you need when it’s time to make a claim or file your income taxes. These events can be stressful enough, so why make it even more frustrating for yourself?

If you are holding onto receipts simply as a reference of your expenses, considering entering the information into a software program such as Quicken or Microsoft Money. This will not only free your home of some of the paper, it will allow you to easily track your income and expenses and to quickly look up any needed information. These programs will also help you to keep track of your current account balances and upcoming bills and to create and track a personal budget.

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If you don’t want to buy and learn a new software program, you can enter your information into a spreadsheet or database program instead. Other options would be to type the information into a word processor, or to manually enter it into a paper ledger book, but neither of these will give you the reporting power of a financial software program.

When discarding the documents you no longer need, it is highly recommended that they be shredded to avoid the risk of identity theft. This is especially important when dealing with financial documents which may include account numbers as well as your name and address.

Unless you are claiming the expense on your income tax, utility bills and the like can be discarded after a year, as can bank and credit statements. Most companies will not make adjustments if an error is not reported within that time.

By following these simple guidelines, you will reduce the paper clutter in your home, the amount of space you require for your filing system, and the stress and frustration of wasting time searching for the documents you need.

About the Author

© Copyright 2005 Janet Barclay. All Rights Reserved. Janet Barclay, Organized Assistant, offers a variety of professional quality services to support entrepreneurs and other individuals who are overwhelmed by the demands and technology of the 21st century. For further information, please visit her website at www.organizedassistant.com.

Six Steps You Can Take to Financial Prosperity

USA Today — Tue, 03 Feb 2009 14:15:00 -0800

No one can guarantee you a healthy and prosperous retirement. Life is just too unpredictable. But you can increase your odds of enjoying your twilight years in comfort by pursuing a regimen of common-sense steps. Here are six top ones:

h4. Decide carefully on health care

You can do at least three things to help secure your health in retirement: Take care of yourself now to reduce the chance of illness later; save as much as you can; and review your insurance options.

Caring for yourself boils down to some basic wisdom: Exercise, eat right and don't smoke. Those steps can help ward off such costly problems as heart disease, diabetes and cancer. Your savings will come from limiting your hospitalizations and prescription drugs as you age.

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But even those with the best fitness plans can fall ill. And health care costs for retirees can be staggering. Fidelity Investments estimates that even with Medicare, an average 65-year-old couple must save more than $200,000 to cover 20 years of costs. That doesn't include over-the-counter drugs or long-term care.

Once you're eligible for Medicare — currently at age 65 — you must decide whether to join traditional Medicare or an alternative Medicare Advantage plan. The alternative plans may charge lower premiums than traditional Medicare, but they may also restrict your choices.

If you stay with traditional Medicare, keep in mind: On top of the premiums, you'll have to shell out for co-pays and deductibles for doctor visits, hospital care and other services. Consider supplemental insurance for such costs. And retirees must also decide whether to take on the new Medicare drug benefit; it has a separate premium.

Medicare generally doesn't cover most nursing home expenses, which can exceed $50,000 a year.

If you retire before you're eligible for Medicare, see if you can stay on a company plan or if you qualify for an individual plan. If not, experts suggest delaying retirement.

"No one should go without health insurance," says Gail Shearer of Consumers Union.

By Julie Appleby

h4. Next: Develop a plan for tapping assets

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h4. Develop a plan for tapping assets

A general rule is to withdraw your taxable money before your tax-deferred accounts. The tax-advantaged money can then continue to grow, free of taxes, thereby boosting your retirement assets.

There are, however, exceptions. If you own appreciated stock in a brokerage account, you might plan to withdraw it last, rather than first. That way, if you never sell the stock, it will pass to your heirs once you die. And they'd have to pay tax only on the stock's gains after they'd received it.

Also, if you think income tax rates will rise in the future, you might consider tapping tax-deferred retirement accounts before brokerage assets, says Dallas Salisbury, chief executive of the Employee Benefit Research Institute.

True, you'd sacrifice tax-deferred growth. But you'd pay lower income tax on the retirement money than if you took it out after income tax rates had risen.

Or say you're working in retirement and are temporarily in a high tax bracket. In that case, consider withdrawing assets from a Roth IRA before you pull assets from a 401(k) account. Wait till you're in a lower bracket to tap the 401(k); you'll pay less tax on that money.

In a Roth, no matter when you pull your money, your withdrawals will be tax-free. You already paid tax on the contributions. The earnings are also tax-free.

Social Security should also be factored into your withdrawal strategy. You can choose to take Social Security as early as age 62. But if you can wait, your monthly payouts will increase for every year that you waited, up to age 70.

By Kathy Chu

h4. Next: Beware of scams that target seniors

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h4. Beware of scams that target seniors

It takes decades to build up your retirement assets. But it takes only one scam to rob you of them.

As the first of 79 million baby boomers prepare to retire, regulators report a rise in fraudsters pitching questionable — and sometimes non-existent — services.

"The people selling investment products know that there are a lot of people quitting their jobs and retiring," says David Massey, deputy securities administrator in North Carolina.

One way for fraudsters to find potential victims is through free-lunch and free-dinner seminars. They offer you a meal, then try to sell you an investment product.

A year-long investigation of hundreds of these seminars in states with large populations of seniors by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA) and state securities regulators found that 100% of them led to sales presentations — even though some had been advertised as "educational" sessions at which no products would be pitched.

Regulators also found that "exaggerated" or "misleading" advertising claims were made at half the seminars. Example: "Immediately add $100,000 to your net worth."

Walk away from any get-rich-quick or guaranteed-return sales pitches. And always check the credentials of a financial salesperson — with the SEC, FINRA and state securities and insurance regulators — before making any investment.

Find more information about industry credentials, and what advisers must do to earn them, at FINRA's website: www.finra.org.

By Kathy Chu

h4. Next: Avoid taking on too much debt

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h4. Avoid taking on too much debt

Americans are retiring with more debt than ever before. Among households 65 and older, the average load of credit card debt more than doubled from 1992 to 2004, to $4,907, according to Demos, a New York think tank.

The proportion of retirees with mortgage debt is also rising. Nearly one-third of families headed by people 65 to 74 had mortgages on their primary residences in 2004, up from 26% in 1998, according to the Federal Reserve.

If you accrue debt while you're working, you can always put in extra hours or take a second job. But once you retire, your options shrink. For most retirees, car loans, credit card bills and other debt payments mean less money for health care and other essentials.

Suppose you're retiring with $100,000 in savings and $10,000 in credit card debt with a 15% interest rate. You plan to withdraw 5% a year from your savings, which will provide $5,000 to supplement Social Security and other sources of income. But unless you pay off your credit card debt, your interest will come to $1,500 a year. That means you'll end up using 30% of your annual withdrawal to pay interest on "something you consumed long ago," says Dan Houston of Principal Financial.

Mortgage payments can also drain your savings, Houston says.

But Amy Noel, a financial planner in Boulder, Colo., notes that retirees who have lived in their homes for years may have small mortgage payments. For them, it probably wouldn't be wise to withdraw savings — and trigger a tax bill — to pay off a mortgage.

By Sandra Block

h4. Next: Working longer can pay dividends

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h4. Working longer can pay dividends

If you retire at 55, you could live 30 or 40 more years. And unless you're very wealthy, your savings might not last as long.

Even retiring at 62 — when most people become eligible for Social Security — is risky, says Jack VanDerhei of the Employee Benefit Research Institute. Employer-provided health coverage for retirees is increasingly rare. And without it, you'll have to pay for your own insurance until you're 65, when you become eligible for Medicare.

In most cases, you can buy "Cobra" group coverage from your former employer for up to 18 months — if you pay the premiums, plus administrative costs. But if you're not yet 65 at the end of that period, you'll have to buy an individual insurance policy or go without. Many retirees are shocked at how much such policies cost. If you have health problems, you might not be able to buy health insurance at any price.

Though Americans are working longer, most of them aren't working long enough to provide for a secure retirement, VanDerhei says. By the time they realize they haven't saved enough, he says, it's often too late: "It's really difficult to get into the workforce at age 70."

His advice: Project an estimate of how much money you'll need to live on. Retirement calculators on the Internet can help, though most workers fail to take advantage of them. Instead, "They shoot from the hip," VanDerhei says.

"They can't stand their boss, had a bad day or a bad commute, so they think they're going to retire," VanDerhei says. "They just don't do the calculations."

By Sandra Block

h4. More than ever, invest prudently

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h4. More than ever, invest prudently

Once you're retired, you probably won't have fresh income to make up for investment losses, so you have to be especially prudent. Which means don't chase red-hot stocks and don't try to earn a living as a day trader.

But don't be too cautious, either. In addition to income-producing investments, such as bonds, you need stocks, too. In the long term, stocks tend to outperform bonds or bank CDs. And retirement could last longer than you imagine.

"If you make it to 65, you have a great chance of making it to 85," says Sam Stovall, chief investment strategist for Standard & Poor's.

Within your stock holdings, be sure you're diversified. "Don't ignore international stocks," Stovall says. If you do, you could miss some rich opportunities. The U.S. stock market represents just 35% of the world's stock value, he says.

Stovall's advice:

•Limit any investment costs. Every dollar you give to a broker, a bank or a mutual fund is a dollar you won't have in retirement. If you have an adviser, make sure he or she earns the money you pay.

•Don't let emotions carry you away. If you panic when Wall Street does, you'll likely regret it later. Choose an asset allocation for your portfolio — say, 40% stocks, 40% bonds, 20% money market securities — and stick with it.

•Don't stretch for yield. Retirees often rely on income-producing bonds, dividend-paying stocks and annuities. But the higher the yield, the higher the risk, warns Steve Janachowski, a financial planner in Tiburon, Calif. If you own a bond that pays far more than a comparable Treasury security, you might be absorbing more risk than you realize. Juicier bond yields tend to come from issuers that may not be around in a few years. That's a risk you can't afford.

By John Waggoner

Can Your Personality Help You Weather the Tough Economy?

By Sharon Jayson, USA TODAY — Tue, 03 Feb 2009 14:14:00 -0800

Does the economic downturn terrify you? Or are you plotting a new strategy for life with less money?

Your reaction offers a peek into your psyche, say researchers who study how personality shapes people's reactions to uncertain times.

"People think about themselves and others in terms of typology — you're this type," says researcher Peter Jason Rentfrow of the University of Cambridge in England.

Many academics who study personality rely on the "Five Factor Model" ("Big Five") a system that describes personality in five dimensions, such as neuroticism vs. emotional stability, or conscientiousness vs. not being very thorough.

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h4. Disaster — or opportunity?

For those with higher levels of neuroticism (seen as being tense or anxious), these uncertain times make for lots of angst, says Jacob Hirsh, a University of Toronto grad student who co-authored research in the October issue of Psychological Science. Uncertainty made some people even more anxious than negative feedback did, he says.

But some personality types appear to thrive amid flux, says psychologist Frank Farley of Temple University in Philadelphia. He suggests that "Type T" personalities are thrill seekers who tend to be self-confident, are often creative and innovative, have high energy and believe they control their own fate. He says they may view the economic uncertainty as "an opportunity."

Optimism and resiliency are also positive traits for a down economy. Psychologists say most traits are about half due to genetics and half to environment, but Suzanne Segerstrom, a psychologist at the University of Kentucky-Lexington, says optimism seems more externally influenced and changes over time.

Whether you feel you control your own destiny also plays a part, says economist Arthur Goldsmith of Washington and Lee University in Lexington, Va. Those with an internal locus of control feel they have a strong influence over events in their lives. Those with an external locus believe most things are beyond their control, he says.

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Those focused on money and possessions also may struggle, says Richard Ryan, a psychologist at the University of Rochester who studies materialism and shopping.

But those who focus on the here-and-now fare better, his research shows. "People who are able to focus on the present are more able to enjoy things going on in the moment that really do make us happy — like relationships, being in nature, giving to others," he says.

"Nervously optimistic" is how Allan Margolin, a father of three who works at a non-profit organization, says he and his college professor wife see the unsteady economy.

"It's just coming at you very fast," he says. "There's opportunity to feel optimistic and pessimistic, usually a few times a day."

They live in New York City, which Rentfrow's research has found high on neuroticism but also on openness. His six-year study of more than 600,000 Americans, in September's Perspectives on Psychological Science, suggests some traits vary by where you live.

h4. Unemployment takes its toll

Rentfrow says certain traits can help buffer economic effects. "An emotionally stable and open person who may be in the unfortunate position of being jobless might be better equipped to find some sort of alternative form of income because they're more adaptable," he says.

But even among optimists, joblessness takes a toll, finds a new analysis of 2006 data from German households published in the journal Social Indicators Research.

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"When people get unemployed, life satisfaction decreases and stays low until they get re-employed," says co-author Ulrich Schimmack of the University of Toronto. "You don't get used to unemployment."

Goldsmith says that even when things start improving, a person's self-esteem following joblessness recovers more slowly. "Our work shows that there is a lingering 'hangover' effect," he says.

The current crisis is being called the worst since the Great Depression. But historian Jeffrey Hyson of Saint Joseph's University in Philadelphia says, "There's a lack of immediacy in our cultural relationship with the Great Depression that makes it very difficult for us to emotionally understand what a real depression was like or would be like. It's seen as a very distant period that doesn't look like today. We can't imagine those same privations occurring in today's world."

Psychologist Brent Roberts of the University of Illinois-Urbana-Champaign says knowing about personality may be somewhat useful, but self- doesn't change the economic reality.

"It may help you understand why you might react more negatively or positively than friends, but we're all going to have to figure out some way to deal with it, despite our personalities," he says.

10 Things You Should Know About Credit Cards

Monster.com — Tue, 03 Feb 2009 13:55:00 -0800

h4. 1. Interest Backdating

Most card issuers charge interest from the day a charge is posted to your account if you don't pay in full monthly. But, some charge interest from the date of purchase, days before they have even paid the store on your behalf!

Remedy: Find another card issuer, or always pay your bill in full by the due date.

h4. 2.Two-Cycle Billing

Issuers using this method of calculating interest charge two months’ worth of interest for the first month you failed to pay off your total balance in full. This issue arises only when you switch from paying in full to carrying a balance from month to month.

Remedy: Switch issuers or always pay your balance in full.

h4. 3. The Right to Setoff

If you have money on deposit at a bank and also have your credit card there, you may have signed an agreement when you opened the deposit account that permits the bank to take those funds if you become delinquent on your credit card.

Remedy: Bank at separate institutions, or avoid delinquencies.

h4. 4. Fees Are Negotiable

You may be paying up to $50 a year or more as an annual fee on your credit card. You may also be subject to finance charges of more than 18 percent.

Remedy: If you are a good customer, ask the bank to drop the annual fee and reduce the interest rate. Otherwise, you can switch issuers to a lower-priced card.

h4. 5. Interest Rate Hikes Are Retroactive

If you sign up for a credit card with a low "teaser" rate, such as 7.9 percent, when the low rate period expires, your existing balance will likely be subject to the regular and substantially higher interest rate.

Remedy: Pay in full before the rate increase or close the account.

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h4. 6. Shortened Due Dates

Most card issuers offer a 25-day grace period in which to pay for new purchases without incurring finance charges. Some banks have shortened the grace period to 20 days -- but only for customers who pay in full monthly.

Remedy: Ask to go back to 25 days.

h4. 7. Eliminating Grace Periods

That fabulous offer you received in the mail for a gold card with a $10,000 credit limit and lots of features may not be so great. The most common "string" attached is the card has no grace period. You are charged interest on everything from the day you buy it, even if you pay on time.

Remedy: Throw the offer out!

h4. 8. Disappearing Benefits

Many banks entice you to sign up with extra benefits such as lifetime warranty, a 5 percent discount on all travel or protection if an item purchased is lost. Now, some banks have cut back on these extras without the fanfare that launched them.

Remedy: Read annual disclosure of changes, and switch cards if need be.

h4. 9. Double Fees on Cash Advances

Most credit cards impose both finance charges and a transaction fee on cash advances. Interest starts from the day of the advance, and the transaction fee can be up to 2.5 percent of the amount taken. Beware of cards advertising "no finance charges." Transaction fees may still apply.

Remedy: Limit cash advances.

h4. 10. Misleading Monthly Minimums

You may think it is beneficial to have a card where you only need to pay 2 percent to 3 percent of your balance monthly. It is just the opposite. The bank stands to make far more money from finance charges the longer you carry out payments -- and you foot the bill.

Remedy: Pay all you can monthly.

This article originally appeared on Monster.com.

7 Ways to Lower Your Utility Bill

Ethan Ewing for Military.com — Tue, 03 Feb 2009 13:55:00 -0800

The average American home will spend $990 on heating this year, according to the Energy Information Administration (EIA). Add that to the rising costs of food, clothing, and travel, and almost every individual and family will feel the pinch.

Fortunately, you can make your utility bills more manageable. Many steps to reducing your bills apply to everyone, even those living in barracks. And even if your utilities are currently paid as part of your rent, pay attention: By 2010, only 10 percent of military personnel will live in government-owned residences, and many private or service-owned residences require residents to pay their own utility bills, reports the EIA.

1) Turn down the heat. Much as we love a cozy home, lowering the thermostat will instantly lower your bill. The EIA says projects that for every degree you lower your heat, you can cut your heating costs by as much as 5 percent. At night, or when you are away, lower the temperature as far as possible while protecting your health and the safety of your pipes. Bundle up with a throw on the sofa, get some warm slippers, and wear a sweater or fleece. If necessary, stay cozy at night with an electric blanket, which uses less energy than heating the entire home or apartment.

2) Program the temperature. Make furnace settings automatic by installing a programmable thermostat. These devices cost about $40 and are simple to install.

3) Replace light bulbs. Replace traditional incandescent bulbs with compact fluorescent lights (CFLs) to save about 50 watts per light bulb and make a significant difference on utility bills. They do cost more to purchase, but they pay off over the life of the bulb. If you move frequently, you might want to keep the old bulbs to leave behind in the fixtures while taking your investment in bulbs with you.

4) Cut laundry costs. Wash clothes in cold water -- they will last longer and still get clean while saving energy. Hang clothes to dry, either outside or on a line in a garage, bathroom or spare room. If you do use the clothes dryer, try to use an Energy Star certified model, and be sure to clean the lint filter before every use to maximize air circulation.

5) Insulate. Carefully inspect your home for drafty spots where cold air can enter. The most common culprits are doors and windows. Install weather stripping and door sweeps to block drafts. Add old-fashioned "draft dodgers" for a quick fix at exterior doors. Other common areas for air leaks are locks, outlets, air conditioning units and recessed light fixtures. Cover outside vents, including air conditioning units. If possible, install insulated electrical outlet boxes and light fixtures. The Energy Star program offers a free guide to home insulation at http://www.energystar.gov/index.cfm?c=diy.diy_index.

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6) Use the sun. The sun is a great source of natural energy. Taking small steps such as opening the drapes to let the sun's warmth in during the day, and closing them - or install insulating drapes - to keep heat in at night will make substantial differences in your heating bill. Leave lights off if sunlight provides enough light by which to read, shower, cook or eat.

7) Choose budget billing. Consider contacting your utility provider to ask about billing a set amount each month. Called "budget billing" by some utilities, the company averages your annual utility bills and bills one-twelfth of the amount each month. Bills usually will be slightly lower in the winter and summer and slightly higher in the spring and fall. Most importantly, the bill will be a predictable amount each month to simplify budget planning. (Those in Service-provided housing might already have this feature on their bill.)

If you find you can’t pay your utility bill, get help. Many states offer programs to help people keep the utilities on when they have trouble paying the bills. Contact your utility company to learn about its plan, and be sure to mention that you are a military family. For instance, Ohio's Patriot Plan is based on a law that states that utilities can’t be disconnected for nonpayment for any military reservist or National Guardsman deployed on active duty. In an emergency, organizations such as the Salvation Army might be able to help.

These actions share one common feature: The No. 1 action you can take to rein in your utility bills is to pay attention to the energy you use, and try to use only what you need. When you use utilities carefully, you'll be able to reduce your bills, while still enjoying the comfort of your home, while you're in the Service and beyond.

10 Things You May Not Know About Your Finances

Tue, 03 Feb 2009 13:54:00 -0800

1: Medicare doesn't cover nursing home care.

Nearly 60% of Americans think Medicare pays for nursing care, and 52% assume that it covers assisted living, according to a 2006 survey by AARP.

Not so. Medicare's coverage of long-term care is extremely limited. It'll cover part of the cost of a skilled nursing facility while you recover from an injury or illness. But this coverage lasts just 100 days.

Medicare doesn't cover custodial care, such as help with bathing and dressing. Need to enter a nursing home because you're no longer able to take care of yourself? Medicare won't cover any of your costs. Medicaid, by contrast, will cover nursing home costs — but only for people with little or no assets.

2: The way banks process checks and debit-card transactions can cost you big.

Banks tend to process transactions from the largest to the smallest dollar amount, rather than in the order they're received. This policy is another way for banks to boost profits, says Ellen Cannon, managing editor of Bankrate.com. That's because processing first high, then low, dollar amounts makes it easier for banks to hit consumers with multiple overdraft fees.

Say you have $100 in your account, and you have four transactions processed one day, for, in order, $20, $45, $30 and $90. The bank will process the $90 transaction first, so it can charge you a fee — of up to $39 — for each of the three transactions that will then bounce. If the transactions had been processed in the order in which they'd been received, you'd face only one fee. Most banks charge more than $30 each time you overdraw. Some also charge a fee of $5 or more for each day that your account remains overdrawn.

3: Once you turn 50, you can put away more pretax money for retirement than younger workers can.

Many older workers fail to exploit the 401(k) "catch-up" rule, which lets people 50 and older contribute an additional $5,000 a year to their 401(k) accounts.

At some companies, higher-paid workers aren't allowed to contribute this year's full $15,500 maximum to a 401(k) if not enough lower-paid workers at their company invest in the plan. But the catch-up rule lets all older workers — even the higher-paid ones — boost their annual contribution by $5,000. This is especially beneficial if only one member of a couple has access to a 401(k) plan, and the couple would like to boost their family retirement savings. It's also helpful to women who return to work after an extended absence.

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4: If you didn't get a tax rebate this year, you might be able to claim it when you file your 2008 tax return.

Millions of taxpayers have received rebates, or will by mid-July. But many others will get only a reduced amount, or none at all, because their 2007 income was too high. Congress phased out the rebates for single taxpayers with adjusted gross incomes of more than $75,000, and married taxpayers with AGIs of more than $150,000.

Here's what many taxpayers don't realize: Some of them will get a second chance to claim the rebate. The rebate is actually an advance credit on 2008 taxes. But since the Bush administration wanted to get money into consumers' wallets as fast as possible, the rebates were calculated using 2007 tax returns.

So if your income has dropped this year, you can claim the rebate when you file your 2008 return. This second-chance provision will also benefit those whose rebates were shrunk or eliminated because their 2007 income was too low.

5: Real estate isn't a very lucrative investment over the long run.

The real estate party over the past decade or so — even when you factor in the recent price drops — has left many people assuming that real estate is the surest long-term investment out there. Not so. Over the long haul, on average nationwide, returns from real estate fall far short compared with other investment categories.

Housing has returned a 4.7% average annually over the past 25 years, according to an analysis for USA TODAY by Mark Zandi, chief economist of Moody's Economy.com. Over the same period, the S&P 500-stock index produced an average return of 13.3%. Other investment options also outperformed real estate. The three-month Treasury bill produced a 5.4% annual return and the 10-year T-bond 7.1%.

6: You can't just give away your money and then immediately ask Medicaid to pay for nursing home care.

If you want Medicaid to pay for your nursing care, without touching your assets, you'll have to give that money away at least five years before you apply for care. An elder-law attorney can suggest asset-protection strategies.

But if you use Medicaid to cover your long-term care, you'll face a more limited choice of nursing homes. And Medicaid doesn't normally cover at-home care. You might be better off using your money to buy long-term care insurance. Or save enough to cover at least a year in a facility. By law, a nursing home that accepts private-pay and Medicaid patients can't force you to move to another nursing home once you run out of money.

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7: Your best investment? Time

Thanks to the extraordinary magic of compounded returns, saving early is the easy way to a rich retirement.

Let's assume your goal is to amass $1 million by the time you retire at 65. If you start saving at 22, and your investments return, on average, 6% a year, you'll need to invest $413 a month to reach your goal. But if you wait till age 35 to start saving? You'll need to invest far more each month to reach the same goal: $996 a month. And if you start at 50, you'd better have a high-paying job: You'll need to save $3,439 a month to reach $1 million by age 65.

8: Grace periods on credit cards apply only to people who don't carry a balance.

If you pay the full amount you owe on your card each month, you're basically enjoying an interest-free loan from the bank. But card users often don't realize that if you're carrying any balance at the end of the month, the card issuer will charge you interest starting from the day you borrowed the money, says Megan Bramlette, managing associate at Auriemma Consulting Group, which consults with banks.

9: You can find fascinating things in your mutual fund's prospectus.

Buried in a fund's official literature are such nuggets as how much money the fund's manager has personally invested in the fund. It's nice to know if his or her money is at stake along with yours.

Or you can find out how much you're paying a fund company to invest your money. If you invest $10,000 in Fidelity Contrafund, for instance, and it returns an average of 5% a year, you'll fork over $1,096 to Fidelity over 10 years. Dodge & Cox Stock will charge you less — $653. The Vanguard 500 Index fund will charge just $192.

10: Mortgage lenders will question a cash gift used for a down payment.

A cash gift from a parent can help a young adult buy a home. But it may come as a surprise that many lenders will raise questions when such gifts are to be used as part of down payments. Some see a big recent infusion of cash into a buyer's account as a red flag that a cash-poor buyer may lack steady income. Many banks will want to see the origin of a cash gift.

In any case, parents should try to make any cash transfer at least a month — and preferably up to six months, some suggest — before a buyer begins applying for mortgages.