By John Ingrisano
By John Ingrisano
Director, Family Finance Conference Center
Times are tough. A lot of folks these days are upside down on their auto loans, under water on their mortgages, and way in over their heads in credit card debt.
So, what about bankruptcy? In a word … don’t. There may be times when declaring bankruptcy is a good decision, usually if you are inundated by medical bills or have been out of work for two years or so, with no job prospects in site.
However, in the vast majority of circumstances, bankruptcy is a sign that people have been living way beyond their means, got caught, and have learned nothing. In other words, it solves nothing. Plus, even with bankruptcy, you cannot walk away from student loans, tax liens or back alimony.
So, before you jump into bankruptcy, make sure all your other options have been exhausted. And then only do it after you have shredded your credit cards and learned a new way to manage your money.
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Want to learn more about how to manage your money and your life? Check out The Back to Basics Book of Money! A Couple’s Guide to Financial Peace. The book contains 10 valuable Couple Money Skills. Plus, the Back to Basics Book of Money Workbook (which dovetails with the main text) offers 31 practical, hands-on Wealth Builder activities that can help you and your partner build financial and domestic stability. Both the book and workbook, which retail for $31.98 plus S & H, are available at the Family Finances Conference Center website for $27.99 total.
The Family Finances Conference Center tailors programs to the unique and individual needs of client organizations and their members and employees, based on the principles of the book and workbook set, The Back to Basics Book of Money! A Couple’s Guide to Financial Peace.
For more information, contact me at the Family Finances Conference Center by email (john@b2bbookofmoney.com) or my direct phone line (920-559-3722).
John Ingrisano
Director
Family Finances Conference Center
204 Lakeview Drive
Algoma, WI 54201
(920) 559-3722
john@b2bbookofmoney.com
By John Ingrisano
By John Ingrisano
Director, Family Finance Conference Center
Ben Franklin was cited as saying: “Watch the pennies and the dollars will take care of themselves.” In the same respect, minor differences in interest rates can make big differences over time.
Example: If you ring up a $1,000 bill on one credit card and the annual interest rate is 3.9 %, but 15% on another, you will end up paying $21.25 in interest in one year on the 3.9% card, but $83.10 on the 15% card. So, unless you plan to pay off your card each month, the interest rate does make a difference.
Now let’s look at how the interest rate you EARN makes a difference over time. Let’s say you deposit $5,000 a year into your IRA at the start of each year and your spouse also does the same. One of you earns a fixed rate of 2.3%. The other, which pays a variable rate based on investments, averages 8% over time.
If you keep depositing $5,000 annually into each account for 40 years, the one account earning 2.3% will have grown to $342,285. The IRA averaging 8%, over that same period of time, will grow to $1,507,527.81. That’s a $1.2 million difference.
The bottom line: The interest rate does matter … BIG TIME! When selecting a credit card, make sure you push for the lowest rate possible, and if you must borrow, look for those special deep-discount deals. And when it comes to retirement, decide how much you intend to balance the safety, guarantees and security of a low, locked-in rate versus the opportunity of a variable rate, which could grow well … but which could also lose money.
By John Ingrisano
The Bank of Luxemburg, having just about wrapped up major remodeling of its branch at 512 Second Street in Algoma, is having a Grand Re-Opening Celebration on Thursday, August 12. The renovations alone are worth dropping by for a look-see.
Additionally, the bank has graciously asked me to hold a book signing that day, between 11:00 AM and 2:00 PM, for my book and workbook set, “The Back to Basics Book of Money! A Couple’s Guide to Financial Peace.”
There will be all kinds of other events and give-aways, too, so mark your calendar and plan to drop by the Bank of Luxemburg in Algoma on August 12th.
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By John Ingrisano
By John Ingrisano
Director, Family Finance Conference Center
Here’s a short quiz.
Question # 1: At the end of 50 years, how much money do gamblers end up with who “invest” $50 a week on lottery tickets or at the casino?
Question # 2: At the end of 50 years, how much money do non-gamblers end up who put $50 a week into an IRA or other long-term investment, one that earns, say, an average 5% return?
Answer to question # 1: zero! If you think otherwise, you’re fooling yourself … or maybe you’re that 1-in-100,000,000 who actually hit the jackpot. (I’ve heard about those folks all my life, but never actually met or even saw one.)
Read on for the answer to question # 2.
First, a brief rant. One of my biggest pet peeves (this one’s about the size of a male yak) is standing at the counter of the gas station/convenience center waiting to pay for my gas, and I’m behind this guy or gal hunched over and frantically scratching off lottery tickets with more determination than a dog going after fleas.
Now, I really don’t mind the waiting, and I admit that I do enjoy gambling from time to time, so don’t get me wrong on this. BUT … these folks almost always are driving a car my father might have traded in fifteen years ago and they look like they’re living from paycheck to paycheck … or even three or four paychecks behind. (Add in that they’re buying $7/pack cigarettes and I’m ready to blow a gasket.)
I know, I know, it’s not my business. However, I see some folks who do this every week, who shell out anywhere from $20 to $50 hoping to hit the big one.
So, here’s the skinny on gambling, whether lotteries or casinos: If you like to gamble, great. It can be good recreational fun. However, did you know that, according to Thomas J. Stanley, author of “The Millionaire Mind,” most millionaires almost NEVER gamble.
So, let’s imagine that my friends at the gas station are “investing” $50 a week in lottery tickets. That’s $2,600 a year they’re out! (If they win a few bucks, they almost always buy more tickets.) They scratched off enough for a mini-vacation or purchase a newer car. Money down the drain.
Now imagine (yes, this is where it gets boring, but pay attention), they put that money into an IRA, and let’s say again that the rate of return is 5%, compounded monthly. They start when they are 18 and just beginning their first job. They continue until they are 68 and ready to retire.
In 50 years (and here’s the answer to question # 2) that $2,600 per year has grown to $580,000. That is one sweet retirement nest egg.
The bottom line: Like to gamble? Fine. However, if you want actually to become wealthy, talk to your financial advisor about where to put your money.
Now, go out and work hard, make money, have fun and save a little each week for the future.
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Want to learn more about how to manage your money and your life? Check out The Back to Basics Book of Money! A Couple’s Guide to Financial Peace. The book contains 10 valuable Couple Money Skills. Plus, the Back to Basics Book of Money Workbook (which dovetails with the main text) offers 31 practical, hands-on Wealth Builder activities that can help you and your partner build financial and domestic stability. Both the book and workbook, which retail for $31.98 plus S & H, are available at the Family Finances Conference Center website for $27.99 total.
The Family Finances Conference Center tailors programs to the unique and individual needs of client organizations and their members and employees, based on the principles of the book and workbook set, The Back to Basics Book of Money! A Couple’s Guide to Financial Peace.
For more information, contact me at the Family Finances Conference Center by email (john@b2bbookofmoney.com) or my direct phone line (920-559-3722).
John Ingrisano
Director
Family Finances Conference Center
204 Lakeview Drive
Algoma, WI 54201
(920) 559-3722
john@b2bbookofmoney.com
By John Ingrisano
By John Ingrisano
Director, Family Finance Conference Center
If you’re wrapping up school this month, congratulations. Degree in hand, you’re ready to take the world by storm. It may be tough for a while, especially in this slow economy and tight job market. Hang tough. Instead, think long-term about financial success and happiness.
Here are three “secrets” to your success and happiness:
1. Get even more education. Better yet, make education a life-long process. The fact is that the number one factor in lifetime income is level of education. Keep on learning.
2. Choose your partner carefully … very carefully. A level-headed, loyal, supportive, hard-working spouse not only makes your life peaceful, but it also helps assure financial security over time. I know, this is easier said than done, but be cold-blooded when it comes to assessing the attributes of your partner before you tie the knot. It will make all the difference in the world in the years to come.
3. Stay married once you pick that partner. Divorce not only upsets lives, but it is almost always financially devastating over time, as accumulated assets are squandered in the “Great Divide.”
Now, go out and work hard, make money, have fun and make good financial and personal decisions.
By John Ingrisano
By John Ingrisano
Director, Family Finance Conference Center
Adult children are expensive … really expensive. If you think your financial obligations to your children end upon their graduation, you may want to think again. Sometimes the costs get even higher than when they were young. In fact, the following just blew me away.
In his book, Grown Up Digital (2009), Don Tapscott reports: “Including school expenses, the average American receives $38,000 a year from her or his parents between the ages of 18 and 34.” That adds up to more than $600,000.
What to do: Yes, help your children as you can and wish. However, continue to prepare for and protect your own financial security. Also, if you’re shelling out big bucks to help your adult children, maybe there’s small comfort in knowing that you’re not alone.
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By John Ingrisano
Some cynics suggest that people spend more time planning their vacations than they do their retirement or estate strategies. Maybe so, but it is still a good idea to be organized and plan your fun-time getaways. Yes, you have your reservations set up; maybe you’ve mapped out your route; certainly, you’ve given some serious thought to what to pack and what to wear.
Well, here are a few more items to add to your vacation planning to-do list, items that will help assure a relaxed, stress-free getaway:
· Make sure your bills are prepaid. If you pay your bills online, schedule them to go out a week or so before the due date. Remember, one or two late payments and your credit score will begin to tank.
· Make sure you have adequate credit available on your credit card. Many people are unaware that some hotels/resorts put a block on the credit card you use to book your reservation up to the amount you will owe. That way they are assured that they are paid. This practice may be good for the resort. However, if you are not aware of it, you could end up over your credit card limit thousands of miles from home. Best bet: Pay off all credit cards before you head out. Also, check with the hotel so you know if they have blocked your account. (You might also try to get them to remove the block.)
· Clean out your wallet. Leave everything home except one credit card, your driver’s license, cash and/or traveler’s checks, and your medical insurance card. This can get tricky. On one hand, you want to reduce the risk of identity theft if your wallet is lost or stolen. At the same time, you need to be darn sure you have proper identification, including something with your photo.
· Photocopy your important documents. Leave them in a safe place at home or office. Then, should an on-the-road emergency arise, have a trusted associate FAX the information to you.
· If you have health problems, be sure to pack copies of your medical records.
· Bring copies of any prescription meds you are taking. Imagine going through airline security or a U.S. Customs port of entry and needing to document the validity of your prescription. Also remember that homeland security is not just an international travel issue. Even if you are just heading to Aunt Jean’s cottage two states away, state and local police can be rigorous in their duties. Be prepared.
· Carry your passport. In this age of security checks, passports have become the best piece of identification to carry. Even if you are staying inside the U.S., it is a universally accepted form of identification. Also, while traveling, keep your passport safe. Do not leave it sitting on the dashboard of your car or the nightstand of your hotel. Either keep it with you or locked away.
· Buy traveler’s checks. Yes, they are as good as cash. The cost is minimal (some banks and credit unions offer them at no charge as a service to customers), and they will be replaced at no cost if they are lost or stolen. Note, however, that some small vendors may not accept them. Best bet: If you are outside the country, cash a certain number of traveler’s checks at the hotel each day.
· Pack credit card contact information and financial institution phone numbers – though NOT in your wallet — in case your wallet is stolen and/or you encounter an unexpected financial snag. You can do this by copying the toll-free number from the back of your credit card.
· Leave your Social Security card at home, along with all other financial information. Though Social Security cards generally are not considered to be a valid form of identification in most situations, they attract pickpockets like flies to honey.
· Divide up your money and traveler’s checks. Example: Keep some in your wallet, distribute some among your pockets or purse, and keep some in suitcase pouches. This serves two purposes. First, it helps assure that only a portion of your funds will be lost if you encounter a pickpocket or other problem. Second, it helps you budget and manage your money. (Note: Keep a list of where you stashed your cash. It is not all that uncommon to unzip a suitcase pocket a year later and “find” that cash you just couldn’t account for on last year’s vacation.)
· Assume your suitcase will be lost (or at least temporarily re-routed) if you are traveling by air. That means pack nothing of value or that you may need in a hurry, such as prescription meds.
· Take home-security precautions while you are away. Have mail stopped and, if possible, have a neighbor keep an eye on your home while you are away. You may also want to alert the local police that you will be out of town. In most municipalities, they will do a drive-by once or twice a day while on their routine patrols.
A lot of work? Not really. Most of all, taking a little bit of time for this advance planning will help assure that your vacation is stress free and trouble free. Have fun.
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By John Ingrisano
As of this year (2010), EVERYONE is eligible to convert his or her Traditional IRA to a Roth IRA, even if your income exceeds $100,000. Not only have income limits been stripped out, but any taxes due can be spread over tax years 2011 and 2012. So, if you haven’t (A) decided you want to and/or (B) been eligible to convert your IRAs in the past, now may be the time to review your choices.
What changed? In the past, if you had an adjusted gross income above $100,000, you could not convert a Traditional IRA to a Roth. Period. End of discussion. Also, if you were eligible to make the conversion, all income tax owed had to be paid in the tax year of the conversion, making it a very expensive proposition.
However, thanks to the Tax Increase Prevention and Reconciliation Act of 2005, the income restriction no longer apply as of January 1, 2010. There currently is no expiration date, so the opportunity will continue unless or until Congress makes a change.
However, there is a special provision for taxpayers who make their Traditional-to-Roth conversions this year. Any money owed the IRS can be split between the following two years – 2011 and 2012 – so the final payment would not be due until April 15, 2013. In other words, you do not even owe tax money on the conversion in the 2010 tax year. Plus, being able to divide the converted amounts over two years could lead to significant tax savings overall. (As always, talk to your tax advisor to make sure this is a good deal and, if so, how it should be structured.)
Why should you consider converting your Traditional IRA to a Roth IRA? Here are three factors to weigh:
- Earnings and qualified distributions are completely income tax-free. You pay zero income taxes on the money at retirement. With a traditional IRA, all or a portion of your distributions may be taxable. The Roth vs. Traditional decision often depends on the size of your projected retirement income.
- Early withdrawals of contributions are tax-free and penalty-free. Since contributions to a Roth IRA are made with after-tax dollars, early distributions of earnings may be subject to tax and penalty; however, you can withdraw your contributions pretty much at any time.
- Contributions are allowed after age 70 ½. Unlike with a traditional IRA, you can continue making contributions to your Roth IRA after age 70. So, if you anticipate working beyond that age, a Roth IRA will let you continue to put aside money (that can be used for your future or eventually distributed to family members at your death) and delay withdrawals until you decide the time is right.
However, keep in mind that Roth IRAs have limits and limitations, including:
- Contributions are non-deductible. The money you put into a Roth IRA comes from after-tax income. With a traditional IRA, all or a portion of your contributions generally is deductible, based on income and other factors. This makes the Roth attractive to taxpayers in lower tax brackets and to individuals who do not need the deductions in the current tax year.
- There are income limits on contributions. Even though you can roll over your regular IRA into a Roth in 2010, regardless of your income, there are income restrictions on additional contributions.
The bottom line: The Roth IRA is a dynamic, flexible tool. Is it right for you? Would a Traditional IRA be better? Or should you have a combination of both? Or should you take the Traditional-to-Roth conversion in 2010? These are decisions best discussed one-on-one with your tax advisor, who can cover the specifics as they apply to your situation.
By John Ingrisano
Too often, when something goes wrong with a purchase — a bad meal at a restaurant, a faulty product, a poorly done service — we gripe and make noise. If you do it right, however, you can get satisfaction.
Most people suffer in silence. Fewer than 4 out of every 100 unhappy customers speak up, says the FTC.
Why? They’re usually not sure what to do. Some blow their tops and shake a fist. Most walk away without a word. They simply take their business elsewhere.
Reminder: You owe it to yourself to get your money’s worth when you give a business your business. When they fail to deliver the value you deserve, the seller should know that you are dissatisfied.
You may be pleasantly surprised to learn that most businesses are eager to right a wrong. They want to keep your business.
The key: Know how to complain in a constructive, goal-oriented manner. Don’t complain simply to hear the sound of your own voice. Instead, focus on an appropriate solution.
Here are several suggestions that may help the next time you have a complaint:
- Anticipate cooperation. Most of the time, business managers and government agency supervisors want to do what’s right. Start with the assumption that the problem is an honest mistake. Do not take an adversarial position.
- Be prepared to explain the problem clearly and succinctly…and to repeat your story several times. Jot down a brief description of (A) the facts: when, where and who was involved, etc.; (B) why you are displeased; and (C) precisely what you want done about the situation (replacement, repair, discount on this or a future purchase, etc.). On this final point, be reasonable. Don’t demand free meals for a year because the waitress brought you decaf rather than regular coffee.
- Always get a name. This serves three purposes: It personalizes the contact. It raises the level of accountability on the other person’s part. It tells you who to thank when the problem is resolved. (See point 4, below.)
- Put it in writing if it becomes obvious that a solution will take more than one phone call or face-to-face visit. This provides a written record of your case. It also gives weight to your complaint and says you are serious. Important: Even if it appears that the problem can be cleared up with a phone call or personal visit, write a brief “thank you” note to the person who helped you. This documents the conversation and protects you if the problem isn’t resolved as promised.
- Get to the power person…the one with the authority to do something. When you call UPS because Aunt Ruth’s holiday present went astray, don’t expect satisfaction from the telephone operator or the person in charge of routine shipping. You want to talk to a problem solver.
- Maintain your composure. According to one rule of negotiating: “He who loses his temper…loses.” Be firm. Be demanding. If necessary, explain that you are angry and frustrated and that you expect immediate satisfaction. Do not blow your top. That may work, but it is just as likely to send your file to the bottom of the stack. People who may have wanted to help you will no longer champion your cause.
- Let them — not you — do the leg work. Don’t let the problem be delegated back onto your shoulders. Don’t do their work for them. “Well, you need to call the accounting department first. Then call me back with the product code.” When you hear lines like that, explain that clearing up the problem is not your responsibility, but theirs, and they need to take care of this problem and get back to you. Reminder: Whether you have a problem with your food in a restaurant or the brake job on your auto that left your car with an annoying squeal, do not accept being treated like it’s your problem. It’s theirs!
- Make it your policy to forget company policy…especially if company policy makes you jump through hoops for their convenience. Explain that you have your own policy that goes something like this: “I understand your policy, but it’s my policy never to pay for poor service or shoddy work.”
- Be persistent. People won’t always call you back or respond to your letters. Perhaps they hope you will simply go away. Don’t. Become a pest…and make it clear that you will continue to be a pest until you get satisfaction.
- Get help. If the situation is serious or you are repeatedly stonewalled, contact the appropriate consumer agency.
The bottom line: You have a right to quality goods and services for the money you spend. However, it is up to you to make sure that, when you are dissatisfied, you get results. We hope the above ideas help. Good luck.
By John Ingrisano
If you have teens who work and if you have the extra money, you can help your children build super wealth.
How? Set them up with an IRA and contribute an amount up to their reportable earnings. Even a modest one-time contribution in your 15-year-old’s name of $3,000 from a summer job can grow and grow, reaching $36,000 at age 65, based on an average return of 5%. Imagine putting aside $3,000, forgetting about it, and then having $36,000 waiting at retirement.
If you continue making annual contributions, with your child eventually taking over payments, the total at retirement will be nearly $704,000. Increase the annual contribution to $5,000 and the amount at age 65 will total $1.73 million. (And if we increase the assumed average interest rate to 7%, the total amount at age 65 will be more than $2.4 million.)
Here are the rules:
· If they earn any money, they can contribute (or you can contribute in their name) 100 % of that amount, up to $5,000 maximum, each year.
· It must be earned income. Allowances do not count. However, money from babysitting, mowing the lawn, and doing odd chores does. Just help them keep good records.
· An IRA is perhaps the best way to go. Many advisors recommend a Roth IRA. Contributions are not tax-deductible (but we are assuming that income is low at this stage of their lives), and 100% of benefits at retirement are tax-free.
The bottom line: Use your children’s summer jobs to help them build serious long-term wealth.
