Identity theft is when someone uses your personally identifiable information (like Social Security number, financial account numbers, credit card numbers, etc.) to commit crimes or fraud.

Identity theft is a growing crime these days, and it’s important to know about identity theft protection so you can guard against unwanted compromises with your financial information.

Istockphoto.com/Selimaksan

Below you’ll find stats on identity theft and some ways the Federal Trade Commission is encouraging you to protect yourself from identity theft.

Statistics on Identity Theft

Here are the  latest statistics on identity theft according to Identity Hawk:

• There were more than 11 million ID Theft cases in 2009
• 66% of stolen personal information is used to open new credit accounts
• 28% is used to buy cellphone subscriptions
• At least 33% open new checking accounts to write bad checks
• An identity theft victim spends on average 330 hours and $1,000 clearing his or her name
• 70% are unsuccessful in removing negative credit information from their credit reports
• 47% of victims experience difficulty getting any kind of credit
• 40% report profound stress in their personal lives as a result of identity theft
• 11% say that the theft has impaired their ability to get jobs (with more employers looking at applicants’ credit information when making hiring decisions, this trend is expected to increase)
• 43% of victims think they know the thieves who stole their personal information

Helpful Identity Theft Protection Tips

The FTC has a catchy way to remember identity theft protection tips. You can view the document here.  Here’s what it says:

Deter

• Shred financial documents and paperwork with personal information before you discard them.
• Protect your Social Security number. Don’t carry your Social Security card in your wallet or write your Social Security number on a check. Give it out only if absolutely necessary or ask to use another identifier.
• Don’t give out personal information on the phone, through the mail, or over the Internet unless you know who you are dealing with. Avoid disclosing personal financial information when using public wireless connections.
• Never click on links sent in unsolicited emails; instead, type in a web address you know. Use firewalls, anti-spyware, and anti-virus software to protect your home computer; keep them up-to-date.
• Don’t use an obvious password like your birth date, your mother’s maiden name, or the last four digits of your Social Security number.
• Keep your personal information in a secure place at home, especially if you have roommates, employ outside help or are having work done in your house.

Detect

• Be alert to signs that require immediate attention:
  • Bills that do not arrive as expected
  • Unexpected credit cards or account statements
  • Denials of credit for no apparent reason
  • Calls or letters about purchases you did not make
  • Charges on your financial statements that you don’t recognize

• Inspect your credit report:
  • Credit reports contain information about you, including what accounts you have and your bill paying history.
  • The law requires the major nationwide consumer reporting companies—Equifax, Experian, and TransUnion—to give you a free copy of your credit report every 12 months if you ask for it.
  • Visit www.AnnualCreditReport.com or call 1-877-322-8228, a service created by these three companies, to order your free annual credit reports. You also can write: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
  • If you see accounts or addresses you don’t recognize or information that is inaccurate, contact the credit reporting company and the information provider. To find out how to correct errors on your credit report, visit ftc.gov/idtheft.

Defend

• Place a “Fraud Alert” on your credit reports, and review the reports carefully. The alert tells creditors to follow certain procedures before they open new accounts in your name or make changes to your existing accounts. The three nationwide consumer reporting companies have toll-free numbers for placing an initial 90-day fraud alert; a call to one company is sufficient:
  • Experian: 1-888-EXPERIAN (397-3742)
  • TransUnion: 1-800-680-7289
  • Equifax: 1-800-525-6285

  Placing a fraud alert entitles you to free copies of your credit reports. Look for inquiries from companies you haven’t
  contacted, accounts you didn’t open, and debts on your accounts that you can’t explain.

• Contact the security or fraud departments of each company where an account was opened or charged without your okay.
  • Follow up in writing, with copies of supporting documents.
  • Use the ID Theft Affidavit at ftc.gov/idtheft to support your written statement.
  • Ask for verification that the disputed account has been dealt with and the fraudulent debts discharged.
  • Keep copies of documents and records of your conversations about the theft.
• File a police report. File a report with law enforcement officials to help you correct your credit report and deal with creditors who may want proof of the crime.
• Report the theft to the Federal Trade Commission. Your report helps law enforcement officials across the country in their investigations.
  • Online: ftc.gov/idtheft
  • By phone: 1-877-ID-THEFT (438-4338) or TTY, 1-866-653-4261
  • By mail: Identity Theft Clearinghouse, Federal Trade Commission, Washington, DC 20580

Ever feel like you are your own worst enemy!

I confess I do.

In college I definitely was!

In fact, a free t-shirt is all it took.

It was as if the smiling face on the other side of the table assured me that a credit card would be the first step toward freedom for an 18-year-old college student.

I signed on the dotted line, and after two weeks I received my very first piece of plastic.  I had no experience, so it didn’t take long to rack up debt. And since I was only paying the minimum balances, it piled on even faster.

istockphoto.com/hjalmeida

I decided it was time for a change.

I need to fight my own worst enemy.  So, I took out what little money I had saved in my mutual fund and paid off the debt.

“I’ll never do that again!”, I said to myself.

But I was wrong.

This would happen two more times over the next several years where I took IRA withdrawals and depleted my savings just to manage the debt.

I ended up entering marriage with a load of debt!  My wife (who brought no debt and all the assets to the marriage), and I came up with a toilet-cleaning plan to knock out debt.

Through hard work and perseverance we did it.  For years I dealt with the aftermath of my own worst enemy!

Ever Feel Like You Are Your Own Worst Enemy?

I often am.  There are so many times I get in my own way and impede my progress spiritually, physically, and financially.

Maybe you can relate?

Let me illustrate my point. How many times has this played out in your life?

I need to change my spending habits so I can save money.

I will stop going out to eat so much.

One week later:

I’ve had a stressful day and don’t feel like making anything.

I deserve to go out to eat…just this once.

Another week later:

I forgot to pull something out of the freezer for dinner.

I’ll just order a pizza.

And this continues, week after week, month after month, until we realize once again we haven’t changed anything.

Substitute whatever goal you have in the above scenario, and you’ll know what I mean.

How to Overcome Your Own Worst Enemy

1. Develop a written plan – Write down what exactly you want to change, and how you will do it.
2. Share it with someone – Let someone know exactly what you are trying to do.
3. Ask for accountability – This is the key. Find someone who will make sure you do what you say you will do.
4. Review regularly - Check the progress regularly so that you can build momentum, or make tweaks.
5. Celebrate little “wins” – Have fun! Set short-term goals that you can reach quickly and then celebrate to continue the momentum.

How Have You Been Able to Reach Your Goals?

What are some helpful tips you’ve found in making changes with your money?

This was an original post on ChristianPF.com. You can check it out here.

In our last article, we talked about 5 money myths about housing and taxes.

That was based on an article posted by Investopedia, which discussed various money myths that can end up being costly.

Today, we will talk about misconceptions surrounding investing and money.

5 Money Myths About Investing And Money

I Don’t Have Enough Money To Start Investing

There are many online brokers that will allow you to start an account with less than $50! That means that there really isn’t much of a barrier left to begin investing.

Of course, you can’t buy a lot of anything with $50, but getting started is usually the hardest part.

If you are saving for retirement or some other goal, starting today – even with small, monthly deposits – can make a huge difference when you need to rely on that money!

Once you get a little momentum, you’ll be motivated to take advantage of both 401k contribution limits and IRA contribution limits. But the key is to start today.

www.istockphoto.com/kiamsoon

The Stock Market Is Tanking, So I Should Sell My Investments And Get Out Before Things Get Any Worse

This is one that really bugs me because it shows complete panic and a failure to think rationally. Let’s take a look at how this usually plays out…

People get fearful and panic when stock prices fall. That causes them to sell at or near the lowest possible point. Then when the market starts to recover and prices rise quickly, they jump back in and buy at a very high price – the price is usually pumped up by irrational exuberance, and will drop to a more reasonable level shortly.

So, what usually happens is that they buy at a high price and then sell at a low price. In order to be successful at investing, we need to be disciplined enough to do the opposite. That means that we can’t just follow the crowd during times of panic or excess excitement. We need to embrace a contrarian strategy!

I’m Young – I Don’t Need To Worry About Saving For Retirement Yet. / I’m Old – It’s Too Late For Me To Start Saving For Retirement

Even though it is now harder for a creditor to garnish Social Security benefits, it would still be wise for you to set up other means of retirement savings now! There are two things that you can take advantage of in your youth – compound interest and time to recover from mistakes. You will need both if you plan to maintain a decent standard of living in retirement.

If you are closer to retirement, then you can still take advantage of catch-up contributions and your employer 401k match. Keep in mind that there is no rule that states that you can’t save for retirement outside of a traditional “retirement” account. You just might not get the same tax breaks, but you can still put money aside for your golden years.

If you are getting a late start with your retirement savings, this may end up being the best retirement plan for you!

You Get What You Pay For

Considering the fact that people end up paying different prices for the same item/service, this idea can’t be completely true. If you follow this line of thinking, you will be stuck paying the highest price for every thing that you buy, or be willing to pay for maintenance and/or replacements often.

This money myth is usually given by those who wish to justify a huge purchase. They claim that being careful with your finances and looking for a bargain, will cause you to buy a cheap product that will need replacing often.

As with anything in life, you can’t just assume something is true just because you hear it often. As you can see, doing so can have a tremendously negative effect on your finances!

Carrying A Balance On My Credit Card Will Improve My Credit Rating

When I first got a credit card, I heard this money myth a lot. Unfortunately, it is still going strong. Many people think that in order for a credit card to have a positive effect on your score, you need to carry a balance each month, and if you pay it off at the end of the month, it will negate that positive effect.

This thought has caused many people who had the money to pay off their credit card at the end of the month, to only pay a portion of it, and having to pay interest on the rest!

When we talked about ways to increase your credit score, we mentioned that your credit card balances play a part in determining your rating. However, the most important things to know about your balance is that you should pay it off each month, and you should keep it under 30% of your available credit.

You can even use your card to cover your living expenses – in order to take advantage of certain credit card benefits – but just be sure to pay it all of at the end of the month! This will have the most positive effect on your credit score.

Reader Questions

1. How many of these money myths have you believed at some point in the past?
2. Which ones do you still think may be true?
3. How do myths that have been proven wrong time and time again, continue to stay popular across generations?

When we think about saving up for our golden years, we often consider 401k contribution limits, Roth IRA tax benefits, and withdrawal rates. However, one major component of planning for one’s future is usually missing; most people fail to consider both marriage and retirement when thinking ahead.

Marriage And Retirement Planning: The Need For Communication

Just like in other areas of household finances, little communication exists between a husband and wife when it comes to retirement planning. Considering the fact that many Americans have neglected proper planning and analysis when it comes to the future (or even the present, if you judge that based on our greed), it should come as no surprise that many people have not discussed the details of retirement with their spouse. Take a look at these alarming numbers from a recent Market Watch article:

Almost two-thirds of couples don’t agree on the age at which they’ll retire, and one-third of couples disagree or don’t know where they’ll live once they retire, according to a survey of 648 married couples (a total of 1,296 people), conducted for Fidelity Investments by Richard Day Research Inc.

Those numbers are pretty scary. It’s hard to imagine a couple never discussing something as basic and foundational such as when and where they would like to retire. The fact that they don’t agree on these issues is cause for great concern. For instance, how can they know how much money they will ultimately need, if they do not know how much longer they will be working or how much it will cost for them to live?

Unfortunately, the disagreement and confusion doesn’t stop there:

Forty-seven percent of couples don’t agree on whether they’ll work in retirement, according to the survey of people aged 46 to 75 with household income of at least $75,000 or investable assets of $100,000 or more. Of the couples surveyed, 196 already were retired. The survey respondents were not told that Fidelity sponsored the survey.

I would have to say that this is the most surprising result of this survey. Almost half of those married couples who are less than 20 years away from retirement and have a decent amount of wealth, can’t agree on whether or not they will work in their retirement. This isn’t just a financial issue, but it also affects many other aspects of their lives!

The idea of working during retirement can greatly change the way in which you currently save. If you plan to sit around and do nothing in your golden years, then you will probably use every available penny to invest in your future. On the other hand, if you plan to work during that time, then you may not even be compelled to invest up to the IRA contribution limits early on (although, that may still prove to be a huge mistake).

Of course, given all of this confusion when it comes to retirement and marriage, there is no way that we can expect couples to have solid plans for the future. In fact, the results were worse in this category than the others:

Seventy-three percent of the couples surveyed disagreed on whether they have completed a retirement-income plan, and more than half of the couples surveyed disagreed on what their top source of retirement income would be.

This should serve as a wake up call to all couples out there! Apparently, marriage and retirement talks don’t go hand in hand. People are planning on spending the rest of their lives together, but for some reason, they fail to discuss major financial topics that will impact their future.

Marriage, Retirement & Women

Even though more and more women are working and are involved in the family finances, there are still a large number of wives who don’t feel as knowledgeable about their financial situation as their husbands. Consider these numbers:

Only 35% of the wives said they could take on full responsibility for the couple’s retirement finances if needed, versus 72% of the husbands.

While 20% of the husbands described themselves as “investors,” just 5% of the wives did. Instead, they tended to say they were savers or spenders.

I’m sure that out of the 65% of women who do not feel as though they can take over the retirement finances, many of them aren’t married to men who are purposefully keeping this information from them. Even still, this level of comfort and confidence can only be gained through repetition and constant communication. Last year, when I gave my thoughts about marriage on our anniversary, I identified things that I wanted to bring to our marriage and I’m sure that I wasn’t able to do everything. But, I have a responsibility to keep pushing until I get it right!

It will not be easy to break out of the mindset of focusing only on the short-term, and simply assuming that things will “work themselves out” in the long run. However, here are a few things which you can do to solidify both your marriage and retirement.

What You Can Do

Plan A Huge “Retirement” Talk – Take a look at all of these items and anything else that is important to you, then list your goals regarding each topic. Talk these things out until you are on the same page. Of course, this may take more than one session, but since you can’t make any moves until you have concrete goals, you have to keep at it!

Meet With A Financial Advisor – If you need help in developing a plan that will allow you to meet your goal, then enlist the help of an adviser. Be open and honest in establishing your goals, and the motivation for those goals when you meet. Be sure to meet with him together!

Schedule Regular Financial Meetings – Once you have your goals in place, set up regular meetings to check on your progress. My suggestion would be to hold quarterly meetings and make sure that all of your questions are answered.

Review Statements & Documents Together – Whenever you receive a new statement or other important document regarding a retirement account, take time to go over it with your spouse. You can incorporate this into your regular meetings.

As you can see, the answer to this problem is to communicate and work together. There is no magic formula – it will take hard work, diligence, and patience; but then again, so does marriage!

photo by Ambro

Starting a business necessarily involves significant amounts of capital spending. The industry, and the product or service the business seeks to provide, may dictate purchasing equipment, factory or office space and hiring employees.

Entrepreneurs who want to start a business and work at building it full-time have little choice but to go into debt. The alternative is to issue shares of stock to investors in anticipation of future dividends. Since a new business is not likely to attract venture capitalists, financing the creation of a business through debt is the only option.

A new business has access to several potential sources of credit. The business owner can apply for a business loan from a bank, preferably one with whom the owner has a prior relationship. This is risky because the owner may be turned down and have to look elsewhere for credit.

Credit cards may be the answer to his dilemma. Charles Huang of Harmonix maxed out his credit cards to finance the business in 2007. The popular video game series, “Guitar Hero,” grew of his efforts. The founders of the search engine Google, Sergey Brin and Larry Page, also used their credit cards to fund the start-up in the mid 1990s.

[Side note from Jason: There are hundreds of examples of credit cards backfiring as well.  A business credit card can get you through times when cash flow is tight. As always, you must have a solid business plan to grow your sales and increase your revenue]

Personal Credit Cards

The quickest way to starting a business is to use personal credit cards. This route is a fast track to either success or failure, depending on the start-up idea and execution. The trade-off is to go into debt now in order to make enough money to pay it off later. The entrepreneur borrows from his future success in order to start the venture and get it going. The primary motivation for these businessmen is the chance to try something big and turn a hobby or a crazy idea into a profitable enterprise.

Using personal credit cards to do this is fraught with pitfalls. Creditors may get jittery when faced with rapidly increasing debt loads and suddenly lower credit limits. Alternatively, using so much available credit increases the credit utilization ratio, which can also trigger negative consequences. The ratio is a useful indicator of the risk of default. The higher the ratio, the higher the risk of default, at least in the minds of creditors.

Small Business Credit Cards

The differences between personal credit cards and business credit cards do not mean that entrepreneurs should treat them differently. For a start-up with no capital and no history, creditors view it as indistinguishable from the owner. The owner’s credit history becomes the business’s credit history. All the steps borrowers can take to clean up their credit report will help them get approved for a business credit card.

The risks are different with small business credit cards than with personal credit cards. The regulations and rules of the Credit CARD Act of 2009 do not apply to small business credit cards. Entrepreneurs have more flexibility for their funding needs at the cost of increased risks, like a sudden rise in interest rates or lower credit limits. The advantages of small business credit cards can help compensate for these risks. Some cashback credit cards are specifically tailored for business purchases and can offer as much as 3%.

But with anything, you must be sure to weigh the costs, and make an informed decision.

Anothony Benedict writes for CreditDonkey.com, a credit card comparison site.

There are so many scams out there that claim to be able to fix or repair your credit. Many of them will actually charge you an outrageous fee and pretend to wipe all negative information from your credit report. Finding and fixing problems with your credit is easier than it seems. Learn how to increase your credit score with these simple, yet effective techniques.

How To Increase Your Credit Score:

Get A Copy Of Your Credit Reports

Before you can improve your credit score, you need to know exactly what makes up that score. That is why the first step in this process is to request a copy of your credit reports. We can’t look at how to increase your credit score without first seeing the details!

Although there are many credit bureaus, you really only need to focus on the three major players (Equifax, TransUnion, and Experian). Everyone is entitled to one free copy of their credit report from each of the 3 major bureaus each year. Simply go to AnnualCreditReport.com (this is the official site…don’t fall for those other emails and pop-up ads) to request free reports from each of the three credit bureaus.

One thing to note, is that you are only entitled to see a copy of your report for free, if you want to see your score, then you’ll have to pay a small amount (around $7 or $8 for each report).

Dispute Any Errors

Once you have a copy of each of your credit reports, check them thoroughly for any errors. If you find an error on your credit report, you have the right to dispute it.

This would mean writing a detailed letter to the credit bureau, explaining what the error really is, and requesting an investigation. Annual Credit Reports makes this entire process really easy.

When exploring how to increase your credit score, this is one of the easiest ways to have a huge impact.

Pay Your Bills On Time

Your ability to pay bills on time makes up 35% of your credit score! This is why having just one late payment reported to a credit agency, can be detrimental! Make sure that if you are already late on a payment, you become current as soon as possible. If your late payment was made recently, call your creditor and ask (or beg) them to forgive your tardiness – this will help you to avoid the late payment fees as well as the hit to your credit score.

If you already have a late payment on your report, the best thing that you can do is to be current on all your accounts from now on. The further away in the past your delinquent payment is from today, the smaller the negative impact on your finances.

Pay Down Your Balances

Having balances that are close to your credit limits does damage to your credit score. The amount of debt that you have constitutes 30% of your score!

Look through all of your accounts and immediately pay down any one of them where your debt to credit limit ratio is more than 30% (this would be more than a $300 balance on a $1,000 limit). Once you have done this, then go through the same exercise, but this time aiming for 10%.

If you are looking to have a sudden impact on your credit score, this is probably the best way. It may require a huge sacrifice (like a temporary 2nd job, or selling some of your “stuff”), but it probably be worth it.

Don’t Close Old Accounts

The age of your accounts also has an impact on how creditors view you. The more “old” accounts on your report, the better your credit score will be (holding all else equal).

This means that you must try to keep open old accounts – even if you don’t use it anymore. Actually, you may want to get a little use out of your older credit cards – buy a tank of gas each month and pay it off right away – this way, they won’t be tempted to cancel your account due to inactivity.

Don’t Apply for New Accounts

Another implication of account ages, is that you should avoid opening any new accounts (with possible exceptions…see below). This is because once you get these accounts, they will bring down the average age of your credit!

Also, every time you apply for credit the bank has to pull your credit report, which is noted as an inquiry. These types of inquiries will reduce your credit score, and they account for 5% of the total. So even if you see a bank offering great credit card benefits, don’t apply!

Take Out An Installment Loan

Most of us – especially when we’re young – tend to focus solely on revolving credit (such as credit cards). However, banks and other lenders like to see how you handle installment loans as well. These are typically mortgages, auto loans, student loan repayments, and personal bank loans.

I remember when I tried to borrow money to buy a car when I was younger. I was told that I couldn’t get a loan for a used car because my credit score was too low. To me, this didn’t make sense because I handled my credit cards very responsibly up to that point. However, they then explained to me that since I didn’t have an installment loan, my credit score still wasn’t as high as they wanted.

So, I had to buy a new car in order to qualify for a loan – I actually needed a cosigner in order for everything to go through.

If you are in a similar situation, then try to take out a small personal loan from your local credit union or small bank – they are usually easier to work with – then be faithful to pay it back on time. Your credit score should see a nice improvement after this.

Reader Questions

1. What things have you done to increase your credit score?
2. Have you ever been denied a loan because you haven’t borrowed enough in the past?
3. Do you think we should focus on our credit score as much as we do?

One of the most popular pieces of financial advice that we hear today is that we need to start saving for retirement. The IRS even gives us the benefit of tax-deferred retirement savings accounts, in order to provide us with an extra incentive to save for retirement.

However, according to a recent article by Market Watch, most Americans are far behind on their retirement savings:

The gap between what Americans need for retirement and the amount they have saved is a staggering $6.6 trillion, Retirement USA, a coalition of workers’ groups, said in a study published Wednesday.

“The retirement income deficit is the gap between the pensions and retirement savings that American households have today and what they should have today to be on track to maintain their living standard in retirement,” said Karen Friedman, executive vice president and policy director of the Pension Rights Center, in a conference call with reporters.

This means that as a nation, we are so far behind when it comes to saving for our golden years, that it almost seems hopeless. These abysmal numbers are due to a number of common mistakes, and the most common one is starting too late.

When to Start Saving For Retirement?

The answer to this question is quite simple…today! With all of the other financial priorities in our lives, why should we put them aside and begin saving for retirement today?

The Power of Compound Interest:

Albert Einstein is known for saying this regarding compound interest:

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.

Allow me to quote another “genius” (me ) to further explain what compound interest actually is:

Simply stated, compounding interest describes what happens when interest is calculated on a principal amount of money, and then that interest is added to the principal and now interest will be calculated on this new higher amount.

For instance, if you save $10,000 and it earns 10% interest over the course of a year, you have earned $1,000, meaning you now have $11,000 in your account. If we are dealing with compound interest, the next year will begin with a new principal amount of $11,000 and your 10% interest will now earn $1,100 in the second year!

So every year both the principal amount that you invested as well as your earnings from those investments will continue to grow (unless your account loses money). That means that every year you decide to put off saving for retirement, you lose all of the potential growth on your investment as well as the earnings on that growth for the next 20 to 40 years!!

Let’s say that you wish to retire at age 65, but you decide to wait until you are 40 before you begin saving for retirement. Save the current IRA contribution limit of $5,000 each year for the next 25 years and you’ll end up with $365,529.70!!! That is assuming an annual rate of return of 8% (of course your actual return will fluctuate each year, but assuming a steady rate makes it much easier to present an example), and that you deposit the $5,000 as a lump sum at the end of the year.

Now, let’s see what your result would be if you started saving at age 25 – and all other inputs remained the same. If 25 years got us about $365k, then it would be safe to assume that adding another 20 years would get us around $292k. However, starting at age 25 would leave us with $1,295,282.59!!! That’s why it is the 8th wonder of the world!

Take a look at one more example in order to see how important it is to start saving for retirement today:

If you choose to invest $5,000 into your IRA for 10 consecutive years, you would have $72,432.81 (assuming the conditions above). If you choose to not invest another penny, and just allow that amount to grow over the next 30 years, you will end up with $728,867 in your retirement account! That is almost double what you would have if you only give yourself 25 years to invest. Because, in this example, you started early and took advantage of compound interest, you only had to contribute to the account for a total of 10 years to see this result!

If you look at the 401k contribution limits, you’ll see that you can save up to $16,500 for your retirement. Do that for 25 years and you’ll be up to $1.2 million. However if you start early and give yourself 40 years, you will bring your account up to almost $4.3 million!!!

Giving Away Free Money

Most companies that offer 401 (k) plans will also offer a 401k employer match. What this means is that your employer will match the amount that you put into your plan up to a certain percentage of your salary.

The current limit for an employer match is 6% of the employee’s pre-tax salary. That means that if you make $100,000 per year, then by not saving for retirement through your 401k, you are missing out on $6,000 of free money each year!

Of course you also have to consider what your real loss would be once you factor in compound interest. Just that $6,000 each year would bring you over $1.55 million in 40 years!

So not only are you passing up free money, but you are also forfeiting the affect of compounding on that free money!

Even if you do not have another 40 years left until your desired retirement age, it’s not too late to get back on track with your retirement planning!  Maybe consider using the 2011 payroll tax holiday as a chance to save for retirement!

photo by Hygiene Matters

Reader Questions:

1. Do you think you are currently on track with your retirement savings?
2. If you are currently not saving for retirement, what is stopping you?
3. Have you seen the power of compound interest work in your behalf?

When trying to attain financial freedom, we are usually advised to closely examine our budget and find ways to cut expenses. This is great advice, considering that the average American has serious holes in their household finances. Unfortunately, most of the common advice stops right there, ignoring the option to make extra money and increase your income.

When evaluating the flow of money in a household, it’s really quite simple. You take your income and subtract out any expenses that you have, and you are left with the amount that you can save or spend. If you are left with a negative number, or if the number isn’t large enough, you really only have two options.

1. Reduce Your Expenses

Take a look at where your money is going each month and decide where you can cut back. Once you have food, shelter, and clothing covered, don’t be afraid to reduce your expenses that are just keeping you back from your goal.

However, the problem with that approach is that you can only go so far. You will ultimately come to a point where it is not possible to cut any more expenses. Once you are down to only paying for the basic necessities of life, there is little room left for cutting expenses. This is where that second option comes into play.

2. Make Extra Money 

In order to fill a gap in your finances, or even just meet your goal faster, you may have to look for ways to make extra money.

I have to admit that this is something that I rarely considered until this last year. I just kept looking for ways to squeeze a few more dollars out of my budget each month! Many people that I consult with have the same mindset. They are willing to put water in their ketchup and soap bottles (and other frugal activities) in order to save a few pennies, but are reluctant to look for ways to increase their income.

When looking for ways to make extra money, there are a few guidelines that you should keep in mind.

Make Good Use of Your Time

The easiest way to ensure that you are being efficient with your time is to assign yourself an hourly wage. It is nice to think of doing a task for $100, but if it takes you 10 hours, then you are only making $10/hr; is that acceptable for you? If not, then you need to request more money, do the job faster (without sacrificing precision), or pass on the offer.

At one time I considered delivering newspapers in the early mornings. However, after discussing the idea with several people, I realized that it wouldn’t be worth it for me. The weekly and monthly paycheck seemed really nice at first, but then I had to consider all of the hours assembling and delivering the papers, and then collecting the subscriptions from the customers. Not to mention all of the wear and tear on my car (new shocks and struts aren’t cheap) from the stop & go driving and the heavy load!

Stick With What You Know

The easiest way to bring in extra income may be to work more hours at your current job. If that isn’t an option, then look for consulting work in the same field. It should be much easier for you to convince someone of your worth, if you already have experience in that particular area.

You may also find it easier to get started with a new job (much less of a learning curve) if you stay in your current field. You also will be able to ensure that you are being paid a fair wage for your labor, since you are familiar with the industry and how much a particular job is worth.

Don’t Neglect Your Family

It can become very easy to try and work day and night in order to bring in more money. However, doing that for an extended period of time can cause a strain on your family relationships. I’ve seen a number of husbands/fathers work 80-100 hours a week trying to chase after money.

They often convince themselves that their absence from the home is the best thing for their family, because it means more money in the bank. However, no amount of money can make up for not being around.

When you are looking for ways to make extra money, be sure to avoid this trap.

Your Thoughts?

1. Have you cut your expenses as far as you can?
2. Have you looked for ways to bring in additional income?
3. If so, what guidelines/rules have you followed?

Should I Refinance My Mortgage?

That’s the question we want to answer today.

Mortgage rates are still very, very low.  Who would’ve ever thought we’d see mortgage rates this low for this period of time.

I remember thinking back in August when we first started building our house and mortgage rates were at their lows that we’d never see those rates by the time we got our home mortgage loan.

But to my surprise we ended up getting a 4.875% rate even with a 60-day lock!  I was ecstatic!

Mortgage rates are still very competitive and so if you haven’t taken advantage of a mortgage refinance, you may want to seriously consider it soon – before mortgage rates start going back up again!

But, is refinancing your mortgage a smart thing to do?  What is you don’t plan to stay in your current house forever?  Should you still refinance?

These are good questions to ask!

Thankfully there are handy mortgage refinance calculators that can help us make decisions like this.

Here are some things to consider when refinancing your mortgage, and then I’ve attached a mortgage refinance calculator that I found on mortgageloan.com.

Additionally, it’s a good idea to check your credit report and score, so you know ahead of time what sort of rate you might be eligible for.

What is Your Current Mortgage Rate and What New Rate Could You Get?

What is your existing rate on your mortgage?  Where are rates at now in the open market?

Here’s where rates are at today:

Or, to get an idea of mortgage rates in your state, check out GoBankingRates.com, which allows you to choose your state and the mortgage amount and compare rates in your area.

If you can drop your rate by at least a percent or more, you’ll want to seriously consider a refinance.

How Long Do You Plan to Stay in the House You are Refinancing?

Are you only planning on staying in your existing home for another year or two?  Maybe you’ll want to hold off on the refinance!

If you plan to stay a little longer, then the closing costs may not be as bad as you look at your break-even point.

Have a good idea of your time frame so you can make a more educated decision on whether the costs of refinancing your mortgage will be worth it.

What Type of Mortgage Loan Do You Have Currently?

Do you have a 5-year Adjustable Rate Mortgage (ARM) that’s about to expire?  You may want to refinance very soon and get a fixed-interest loan!

Do you have a 30 year mortgage and you’d like to get that down to a 15 year mortgage?

The difference in rates may allow you to do that without adding much more to your payment.

What Is Your Home’s Value and Can You Get Rid of PMI?

With the real estate crash that we’ve seen the last couple years, it doesn’t always make sense to refinance.  Decreasing home values have made it difficult to really make sense of the numbers in many cases.

But, you’ll want to know what your home’s value is and if you can get rid of PMI if you are still paying it.

PMI is private mortgage insurance that lenders typically charge if your loan-to-value ratio is not quite 80%.  If you have paid off a chunk of your mortgage and think your loan-to-value is at least 80% then you may want to refinance so you can get rid of that pesky PMI!

Mortgage Refinance Calculator

Check out this handy mortgage refinance calculator and determine if a mortgage refinance is right for your situation!

You might also be interested in this Credit Card Payoff Calculator!

What Are Your Thoughts?

Readers, have you refinanced your mortgage recently?

How did the process go?

What tips would you offer other readers to help them through the mortgage refinancing process?

Ok, so I’m about to alienate all readers who don’t have kids right now – but hang tight for a second!

If you stick with me here, I think you’ll find some valuable lessons in personal financial planning.

We can all use some guidance when it comes to personal finances and getting a handle on our money.

It just so happens that my daughter’s favorite cartoon character, Dora the Explorer, can be a pretty good personal financial planning guide.

So let’s turn to Dora and find out her 5 things we need to know about personal financial planning!

Personal Financial Planning Tip #1: You Need a Specific Target

For those familiar with the show you’ll know that Dora’s always on an adventure.

She always needs to get somewhere to help someone or make it to a birthday party etc.

Dora always has a specific goal she is trying to reach. 

We need the same thing when it comes to personal financial planning.

If you don’t know what you’re aiming for – whether it’s retirement, opening a Roth IRA, debt-freedom, a new house, college savings or something else – then you’ll never reach your goals!

Question: Do you have specific and targeted goals?

Personal Financial Planning Tip #2 - You Need a Plan

In order to get where she needs to go, Dora enlists the help of Map!  Yeah, a not-so-clever of a name, but hey the target audience of the show is young kids – give ‘em a break!

Anyways, Map comes on to the scene and shows Dora how to get from point A to point B.  He tells her where she needs to go and what to watch out for.

A personal financial plan or a tool like this Credit Card Payoff Calculator will lay out exactly what you need to do and when so that you can get to where you want to go!

Question: Do you have a personal financial plan?

Personal Financial Planning Tip #3 – You Need to Be Prepared

Inevitably in the show, Dora runs across some sort of challenge and she needs to use some tools or items to help. 

But guess what, Dora is prepared!  She always wears her trusty Backpack!

Backpack comes in, sings his little song and then opens up to reveal all kinds of tools at Dora’s disposal to help her stay on track!

We need to be prepared for the “What Ifs” in life. 

We need to have emergency funds, we should really have the proper amount of insurance, and of course, we should really spend some time thinking about things you shouldn’t be caught dead without!

Question: Are you prepared for life’s “What Ifs”?

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Personal Financial Planning Tip #4 – You Need Friends to Help You in Your Journey

Dora’s got lots of friends!  And they are all willing to help her out.

This is extremely important, especially when you are on a long and difficult journey like climbing out of credit card debt!

Any time we’re trying to reach our goals, we’ll be tempted to lose focus or just plain quit! 

This is where accountability and friendship come in to play.  Enlist the help of someone who won’t be afraid to challenge you and keep you accountable to your goals.

If you don’t share your goals with anyone, you are less likely to reach them.  Get by with a little help from your friends!

Question: Do you have people who can help you in the journey?

Personal Financial Planning Tip #5 – Identify and Get Rid of the Swipers!

If you’ve never seen the show, Swiper the Fox always makes an appearance! 

He loves to knock Dora and her friends off track, take something that doesn’t belong to Him or just plain mess up the adventure.

Dora and her friends get rid of Swiper by yelling, “Swiper, no swiping! Swiper, no swiping!” and eventually if they say it soon enough he leaves!

I guarantee you that you WILL have Swipers that come to knock you off track!

It might be in the form of a new outfit calling your name, a new car that is begging you to buy it or it might just be your credit cards that missed being swiped!

Swiper might even be you!!!

Be ready to say, “Swiper, no swiping” to yourself!!

Question: Do you get rid of the temptations that throw you off track?

Readers, what other tips do you have?

What tip has helped you the most in your personal financial planning journey?