This is a somewhat controversial guest post by Tony Parker. I was debating whether to publish it given religion and finance are a dangerous mix. However, I think he does make some valid points and it would be interesting to see what other's think.

I am always amazed at the power of religion in times of hardship. Many say that religion was "invented" to provide relief for people during the dark ages and over time that has proven to be true to some extent. Of course over the centuries as organized religion has spread all over the world, it has grown as a source of power and influence. Both for good and evil.

I recently went to church with my family after a long time. I am an irregular church-goer at best and tend to only go a few times a year. However, my wife was pretty insistent the whole family go on the weekend following our 15th wedding anniversary. When we got there, I was amazed at how much the congregation had grown. I thought this was just organic growth - our Pastor is very active in community outreach - but soon realized that it was a direct result of more people coming to church to get some respite from the financial hardships they were facing. This trend is also evident across the nation, with a recent survey showing that 62% of congregations have had more requests for financial assistance and 40% of members have lost their jobs.

I also noticed that sermons (at my church at least) have become much more money-centric and are sending the message that by following the right "path" we can get out of financial hardship. This is where I start having problems with "religion" and those who preach it. I do believe that churches and other places of worship should help their communities and that charitable donations should be encouraged to support those less fortunate. But, when my pastor starts giving broad financial advise and talks about the evils of the stock market and investing, I start getting very uncomfortable. To blame the current financial crisis on those not following the path chosen by god, is just a cheap way of scoring points (our politicians use a similar mechanism). It took a lot of people from many different religions to get us into the current mess, and to say that if they had followed the "bible's teachings" we would not be in this mess - is to grossly oversimplify the situation. People were just as religious a few years ago as they are today, so why would should we expect that scripture will solve the nation's financial problems?

Religion can be your moral compass and faith has a lot of power, but it will not be your financial salvation. I don't see any religious texts mentioning the evils of financial derivatives, hedge fund managers or credit default swaps. To effectively deal with financial hardship, see a qualified professional or contact one of many state assistance agencies. Just don't expect a miracle to suddenly solve all your financial problems.

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[Updated April 1] And the winners (based on random picks) are.......

- Frank and Sam. Please send me an email (see below) to organize delivery of the web cards. I can mail you the cards or just send you the PIN number.

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I just finished doing my taxes! A great feeling, especially now that I am expecting to get a refund. However a large number of folks are still to file, with the IRS reporting that with less than a month to go before taxes are due only 60% of expected returns have been filed. If you are filing your returns using tax software then make sure you use the number one tax software in America – Turbo Tax – and get your maximum return possible. What’s better, you can use Turbo tax Premier for free thanks to the folks at Intuit – the company behind Turbo tax and other leading financial software.

I have not one, but TWO web cards with a prepaid access code (includes one free federal + state preparation +e-files) for TurboTax Premier Online to giveaway (valued at $85 each). If you are interested, all you need to do to enter the giveaway is leave a comment related to taxes. The comment should be related to any “taxing” experiences you have had or any last minute tax tips. I will then randomly pick 2 commenter’s early next week, announce the winners on this post (so make sure you check back or subscribe via the options below). The winners need to send me an email - andy@savingtonvest[dot]com - so that I can mail them the web cards.

Having completed my taxes, here are my top 3 tips:

1. Set aside 3-4 hours one afternoon to do your taxes online and sort through the associated paperwork. The tax software will guide you through the steps, but there are a lot of “learn more” parts thanks to new tax legislation over the last year.
   
   
2. Know your 2008 stimulus rebate check amount. You’ll need if for the return. If you qualify for the 2009 home buyer credit or are claiming the new car deduction, make sure you have the relevant paperwork handy and read the rules. The $400/$800 making work pay tax cut will be paid via your payroll and not your tax return. The $250 SSI payment will be made from the SSA via a separate check.
   
   
3. Whether you use tax software or an accountant, you are still responsible for ensuring the accuracy and legality of your tax return. So read and double check all the numbers before e-filing your return.

Once again, all you need to do to enter the competition for the TurboTax Premier online giveaway is to leave a tax related comment. Simple really, so enter now.

Related Tax posts:

- Capital Gains and Losses : Tax Facts and Figures
- Real Tax deductions that may surprise you
- Taxes and my Paycheck
- Key Dates and Deadlines to Receive Economic Stimulus Working ($800/$400), Social ($250), Home ($8000), Vehicle Tax Credits and Payments

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It looks the rest of the world is getting tired of using the once mighty Greenback as it's reserve currency. Recent reports show that China and other emerging super powers have started seriously calling for the creation of a new global currency to eventually replace the US dollar. China, the largest foreign holder of US debt ($2 Trillion), is behind the current push for moving away from the global fiat currency because of frustration at their financial dependence on the U.S., with Premier Wen Jiabao this month publicly expressing "worries" over China's significant holdings of U.S. government bonds. President Obama was forced to publicly assure the Chinese that all is well. Because other nations continued to park their money in U.S. dollars, the argument goes, the Federal Reserve was able to pursue an irresponsible policy in recent years, keeping interest rates too low for too long and thereby helping to inflate a bubble in the housing market.

It's still early day's and calls for moving to a non-US dollar world standard are not new. In fact, the Euro was starting to do this, but the global recession has placed a lot of stress on Euro member countries which in turn raised fears about the Euro's stability. Further more, the technical and political hurdles to implementing a new global currency are enormous, so even if backed by a coalition of nations, it is unlikely to change the dollar's role in the short term. This is clearly demonstrated by the fact that central banks around the world hold more U.S. dollars and dollar securities than they do assets denominated in any other individual foreign currency combined. However, the longer term (5+ years) picture is not that great for the US dollar and eventually the current deficit spending will catch up.

The appreciation of the dollar over the last few months was primarily due to a perceived flight to safety in US treasuries, which foreign investors and governments bought as other asset classes became more risky. However with all the trillions in stimulus spending, bank bailouts and other fiscal policy measures many are now questioning the impacts on the future value of the US dollar. In an ironic twist, should the local and global economy start to show signs of real improvement, the US dollar will most likely plummet as the "safety" trade unwinds. Case in point, as the stock market jumped 20% over the last 2 weeks on possible signs of a recovery, the dollar index (DXY), a measure of the greenback strength against a trade-weighted basket of six major currencies, dropped by over 10%.

There is not much do in the short term - the US dollar/debt is the only game in town for now, with few alternatives other than gold. But longer term and if you are mainly an equity investor you need to factor in that the fall of the US dollar is more likely than not. Unfortunately, the lower US dollar will also drive inflation domestically and reduce our consumer and corporate purchasing power. No one knows currency movements for sure, but your best bet is to ensure you have significant international diversification in your retirement and trading portfolio's.

Related:

~ Week in Review: 15% - America's Real Unemployment Rate
~ Where to Invest $50,000 - Stocks, Gold or Real Estate
~ OPEC - It Cuts Both Ways. Oil Prices to Continue Falling
~ Announcing America's Ten Trillion Dollar National Debt

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With the meltdown in the financial sector and a general slowing of the economy it is at times like this we need to most careful of protecting our financial livelihood, which for most people is derived from their jobs. Positions that seemed safe just a few months ago are at risk due to company collapses and corporate cutbacks amid one of the worst recessions experienced. Here are three effective and simple strategies to protect your job in times like the present, despite widespread panic and a feeling of helplessness to change things.

Act Like a Survivor

During a recession, you have to start acting like a survivor if you hope to escape the axe. You are no longer in a position of power and as a survivor you may need to go outside of your comfort zone to make it through. You also need to show a positive attitude, despite internal turmoil, and be confident and cheerful. Research shows that being fun to be around really matters. When people need help getting a job done, they'll choose a congenial colleague over one who is more capable but less lovable. A drastic personality change is not required, just don't be the guy who's always in a bad mood, reminding colleagues how vulnerable everyone is. Who wants to be in the trenches with him?

Of course, putting on a good face can be psychologically exhausting when rumors of downsizing spread. Change always stirs up fears of the unknown. Will you land another job? How will you pay the mortgage? Can you find affordable health insurance? Those are all valid concerns, but if you stay positive, you'll have more influence on how things play out.

Survivors are also forward looking. Studies of concentration camp victims show that people made it through by imagining a future for themselves. The power of focusing on the times ahead is evident even among people suffering the blows of everyday life. In your job, there's no better way to look forward than to stay focused on customers, for without them no one will have a job in the future. Anticipating the needs of your customers, both external and internal, should be your top priority. Prove your value to the firm by showing your relevance to the work at hand, which may have shifted since the economy softened. Your job is less likely to be eliminated if customers find that your contribution is indispensable.

Finally, survivors are willing to swallow a little pride and lower expectations. You may have been expecting a promotion or raise for the hard work you put in when times were good, but as the economy tanked the company quickly froze compensation budgets and hiring. This includes the promotion you were expecting or "unofficially" promised. However, now is not the time to complain and raise a ruckus. Let your manager know how you feel, but tell him or her that you understand the company comes first and that you are willing to do what's needed for the team to keep the "ball" rolling. However make sure you document all your achievements in writing and get them validated by your manager, so that in good times all your hard work is not forgotten.

Support your Leadership

It's important to recognize that times of uncertainty are also tough for leaders. They don't enjoy having to lay off their people; most find that task agonizing. It can be stressful and time-consuming for them to sort through the various change mandates they've been given and then decide what to do. So rather than rebel against your manager, try to help them defend your department. If the boss is working on a restructuring plan and asks for ideas, offer some realistic solutions. Don't fight change; energize your colleagues around it. This will improve your standing with management, and the better your relationship with your manager, the less likely you are to be cut, all things being equal. Your ability to empathize can demonstrate a maturity that is invaluable to the company, not least because it models good behavior for others.

Become a Corporate Citizen

Remember Woody Allen's remark that 80% of success is showing up? That is especially useful advice in a downturn. Start going to all those voluntary and informal meetings you used to skip. Be visible. Get out of your office and walk the floor to see how folks are doing. Take part in company outings; if the firm is gathering for the annual golf tournament and you can't tell a wood from an iron, then go along just for fun. In tough times, leaders look for employees who are enthusiastic participants. It's not the score that counts.

Of course, changing your behavior or personality to survive may rub against your need for authenticity, and you may decide that it's time to move on. In that case, you can be both true to yourself and the ultimate corporate citizen by volunteering to leave the organization. Despite what the policy may be, companies will cut deals. Deals are even welcomed. It's much less painful for managers if they can help someone out the door who wants to leave rather than give bad news to someone who depends on the job. If you're a couple of years away from retirement eligibility and want to go, ask the company if it would be willing to bridge the time. Float a few balloons, but don't get greedy. Keep in mind that even if you choose to go, you may need to get another job and you'll want good references and referrals. If you've exited gracefully, odds are, your boss and others will do whatever they can to help you land on your feet.


Many forces are beyond your control in a recession, but if you direct your energy toward developing a strategy, you'll have a better chance of riding out the storm. You have to be extremely competent to make it through, but your attitude, your willingness to help the boss get the job done, and your contribution as a corporate citizen have a big impact on whether you are asked to stick around. The economy will bounce back; your job is to make sure that you do, too.

Create a Free Monster Account and Post Your Resume Now!

Parts of this article were based on a related topic covered in the The Harvard Business review.

Related
~ 15% - America's Real Unemployment Rate
~ Couples and Money : Issues and Expectations
~ 5 Clear Signs your Job is in Danger (and 5 things to do)
~ American Employees: Cheap to Fire

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As you may know, based on some recent articles, I have started my home buying process. I have looked at many factors like the economy, monies available for down payment and job security when weighing the decision to buy a place. However, I have found that the one financial factor that seems to be the most important in being able to afford the home I want is my credit score. This determines what kind of interest rate I can get on my mortgage, how much down payment and subsequently my maximum loan amount. In fact as I researched what is in a credit score, I have come to realize that it is probably one of the most important numbers in your financial life. Simply put and all other things being equal, the better your FICO credit score, the cheaper your cost of borrowing. So here is a breakdown of your credit score, how to get it (cheaply) and ways you can improve it:

Your FICO credit score breakdown

The term credit score usually refers to your FICO score, a number based on a formula developed by the Fair Isaac Corporation, which looks at a summary of all your credit accounts and payment history. Your FICO (credit) score determines your access to and cost of credit. Most lenders use it as the main basis for loan or credit approvals, so the higher the better and the lower the more problems. FICO score ranges from 300-850, and Fair Isaac calculates them for each of the three big credit-reporting agencies: Equifax, Experian and TransUnion.

Here’s how your score is determined:

• 35%is determined by your payment history. Do you regularly pay your bills or fines on time to any creditor that submits your information to the credit bureau? Overdue medical bills, parking tickets and other fines may appear here.
  
• 30% based on the amounts you owe each of your creditors, and how that compares with the total credit available to you or the total loan amount you took out (debt to equity ratio). If you’re maxing out your credit cards, your score may suffer.
  
• 15% is based on the length of your credit history, both how long you’ve had each account and how long it’s been since you had any activity on those accounts. The fewer and older the accounts, the better (assuming you’ve made timely payments).
  
• 10% is based on how many accounts you’ve recently opened compared with the total number of your accounts, as well as the number of recent inquiries on your report made by lenders to whom you’ve applied for credit. Your score can drop if it looks as if you’re seeking several new sources of credit — a sign that you may be in financial trouble. (If a lender initiates an inquiry about your credit report without your knowledge, though, it should not affect your score.) Shopping around for an auto loan or mortgage shouldn’t hurt, if you keep your search to six weeks or less. But every inquiry you trigger when you apply for a credit card can affect your score. So be selective.
  
• The final 10% is determined by the types of credit used. Having installment debt — like a mortgage, in which you pay a fixed amount each month — demonstrates that you can manage a large loan. But how you handle revolving debt, like credit cards, tends to carry more weight since it’s seen as more predictive of future behavior. (You can pay off the balance each month or just the minimum, for example, charge to the limit of your cards or rarely use them)

What's not in your FICO credit score: Contrary to popular belief, your age, employment history and where you live are not used in determining your credit score. This is not to say this information won't be considered by lenders when evaluating you for a loan, its just that it will not factor into your FICO score calculation.

How do I get my FICO score cheaply and is it any good?

Now that you know what your credit score is made up of, you want to see how your's stacks up. If you have a social security number and have conducted any type of financial transaction, chances are you already have a FICO score. One important point to note is that your Credit Report (available free from annualcreditreport.com - the only authorized online site under federal law) is not going to give you your FICO credit score. It is a good place to start and identify errors, because it shows all your credit history, but it will not give you your actual score.

For that, you’ll generally have to pay. You can go through the three major agencies Equifax, Experian or TransUnion directly, which have 3 for 1 packages or sometimes their own scoring methodology, which can be different than the FICO scores lenders generally use when they evaluate your loan applications (so read the fine print). I have found that myFICO.com (Fair Isaac corporation's own website) offers the best and most reasonably priced options on its site. The $15.95 FICO Standard package (as of March 2009) lets you get your credit scores from your choice of Equifax or TransUnion. With this comes a full explanation of the credit score and how lenders view you. Best of all, it also includes actions you can take to get your FICO score into the higher ranges. You can all also get myFICO's Score Watch which monitors important changes to your score and alerts you (weekly) when there are any changes. Another nice feature: It also notifies you when you qualify for a better interest rate. It costs $8.95 p/month, you can try it for free via this promotion.

How does your credit score rate? For the best rates on a loan or credit card, you want a score that’s above 750. The median US credit score is 720 (half the population has more than this, while the other half is lower). The next section looks at how to achieve a good score, but here how the various FICO score ranges compare:

Top Shelf Score: A score above 780 means you have excellent credit with an excellent history of paying back and managing debt. Even in this economy, banks will happily lend to folks with 780+ credit scores, meaning they will get the best rates and easiest access to credit.

Middle of the Pack: FICO score from 700 to 780 is very good and above average (the FICO score is not a linear range). You may not get the best rates, but if you have a stable job and little debt then you should get a very competitive rate. However focus on getting to the 780 level, using the simple tips that follow

Work to do: FICO credit score between 600 to 700. You won't be denied loans on this score but the terms aren't going to be too generous. You need to work hard to get your score into the higher ranges or face the prospect of years of rising debt payments, while your higher credit neighbors live the cheaper debt life.

In the Dog House: Credit score below 600. Once upon time banks used to love sub-600 borrowers because they could charge them the highest rates and reap the biggest profits. This group were called the "sub-prime" borrowers. Then we had a crisis with the same name, and the rest is history. Now banks and brokers won't give you the time of day. You really need to focus on repairing your credit (it can be done!) or learn to live without it. Cash is your best friend and stay away from the loan sharks.

You are likely to see improvement in your scores within 30 days if you pay down significant chunks of your credit card debt. But otherwise, credit repair takes time, and how much time depends on the many details of your credit reports. If you have serious black marks, such as bankruptcies or foreclosures, you can see significant improvement in your scores as time passes but you may have to wait until those negatives drop off your credit reports before you can join the 700-Plus Club.

Improving or Repairing your FICO Credit Score

The good news is that no matter what your score you can always do things to improve it. Some may seem counter-intuitive, but they are all looked upon favorably by the rating agencies:

• Check the credit reports that you get with your FICO score for errors, omissions and potential identity theft. Omissions matter because you want to show that you have paid off loans. If you notice information that’s inaccurate, you can submit a request for removal by mail or online with the major rating agencies. Be sure to specify what information you think is inaccurate and why, and include any documents that support your argument. Ask in writing that the information be corrected or removed from your report. By law, the bureaus must investigate your complaint, usually within 30 days, and give you a response in writing (or via e-mail, if your request was made online) and a free copy of your report, if the information is changed as a result. Your score should reflect that change shortly after.
  
• Paying your bills on time is crucial. Since 35% of your score is based on your payment history, delinquent payments and collections can have a severe impact on your score. If you can't pay off your credit card debt every month, pay it down to less than half the maximum available balance.
• A quick and effective way to improve your credit score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score. So don't cancel the credit card once you've paid it off because the score considers longevity and available (revolving) credit.
• A common mistake for many frugal and debt averse individuals is never using a credit card. Advisers recommend that they use it even just once a year and pay it off immediately.
• A score can be hurt if multiple lenders request a person's credit report because they're shopping for a mortgage or auto loan. To avoid this, get "good faith" estimates from banks without giving your Social Security number.
  
• Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.

Monitoring your Credit score

With the rise in identity theft over the last few years, there has been much debate about how often you should monitor your credit score. Companies like Lifelock have been advertising heavily about protecting your identity and hence your credit. Whether you need to monitor your credit that often is debatable. For most, a close look at the free annual reports from each bureau is probably enough. But if you plan to apply for a loan or credit card, check your score and report at least a couple of months beforehand. Not only will you be aware of how creditworthy you are, you’ll also have time to remove any errors you spot and make sure your score reflects the changes before you fill out any applications.

So there you have it – a pretty detailed look at how your credit score is calculated, measured and can be improved. Feel free to leave a comment if you have any questions or stories on how you improved your credit score.

Sources : NY times, Fair Isaac Corporation, Equifax, MSN Money

Related:

~ Should I Refinance my Mortgage and Do I Qualify
~ 10 things to know about your Credit Score
~ Getting Cash Quickly
~ Are you using these 10 online financial security measures?
~ Say NO to annual credit card fees

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[Updated Mar 19 with IRS Rulings] There is little doubt that small businesses are the heart of the American economy. They have created roughly 70 percent of new jobs in the last decade, and are the key to reversing current unemployment trends and getting the nation out of recession. With this in mind, President Obama revealed his $15 billion dollar plan to help small businesses all over the country. Here are the key elements and how your new or existing business can benefit (pay particular attention to the tax breaks):

- The 21 largest banks receiving government money must report monthly (while others receiving taxpayer money need to report quarterly) on how much lending they do to small businesses. A government website will be setup to make this information public, so check how your bank is doing. If they are proving difficult in providing loans, switch to one that is more accommodating. The data will give you the information you need to shop around most effectively.

- Immediately reduce small-business lending fees and to increase government guarantees on some SBA loans. The Small Business Administration (SBA) currently guarantees payment on 85 percent of a loan up to $150,000, and as much as 75 percent on loans of more than $150,000. The administration is raising the guarantee to 90 percent, reducing lender risk, and waiving fees of as much as $75,000 that are paid by borrowers. This will be funded via $730 million from the recently passed stimulus plan.

- The government will take aggressive steps to boost bank liquidity with up to $15 billion aimed at unfreezing the secondary credit market - this is where most commercial and small business loans are made. Where needed the government will step in to buy small business loans to help unlock the frozen credit market.

- Small business owners will be able to borrow as much as $2 million with enhanced government assurances. Companies in need of financing for big economic development projects will have a guarantee on as much as $4 million in loans, under the plan.

- The IRS has also issued a series of new rules for temporary but significant tax breaks, meaning that small businesses:

That earn up to an average of $15 million (qualifying limit) in gross receipts annually over a three-year period will be allowed to claim losses for the past five years in the current tax year. This limit prevents larger business' from claiming this tax exemption. It also means many firms should get refunds now, rather than have to wait to deduct 2008 losses from future profits after the economy recovers. But firms must decide whether to use the five-year carry back provision and which year it applies to by April 17.

May write off up to $250,000 in investments this year.

Can reduce estimated tax payments to 90 percent of the previous year's filing.

Are allowed to take larger depreciation deductions within the first year of property purchases.

Will see 75 percent of capital gains excluded for those who invest in small businesses.

Overall, these measures should provide a boost but $15 billion seems a small amount, especially when compared to the $700 billion stimulus and TARP plans. However, as a small business owner the key benefits will come from the tax changes. Make sure you discuss these with your accountant at your next meeting and plan to take advantage of the new provisions. I will continue to update this article and I encourage you to subscribe (free) via Email or RSS to get the latest news.

Sources : Yahoo/AP, Bloomberg

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Related:
- $800/$400 Working Tax Credit
- $8,000 First and New Home Buyer Tax Credit
- Key Dates to Receive the Economic Stimulus Payments

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My dad use to say, "you can't get blood from a turnip". When you hear this phase during your younger years, your thoughts tend to imagine a guy squeezing a turnip and hoping blood will come out. Your next thought is something along the lines of, "why would someone squeeze a turnip, to get blood?!". My literal interpretation of the phase is: You cannot take something (blood) from a object that has none of it. Or, more specifically, you cannot take money or goods from someone that has nothing. The reason rich people need extensive insurance and poor people do not, is the fact that rich people have significantly more to lose.

The stock market (Dow) is hovering in the 6,000 range, but many say 5,000 is more likely than 7,000 over the next 6 months or so. I am a bull - a definite minority in today's market environment. Not because I think the market could not fall another 10-30%, but because we are hitting a point where all of us have significantly less to lose than anytime in the last 5 years. I think we can all agree that realistically the stock market will NOT go to zero. We can also agree that, like any recession, this one will end....eventually. Buying stocks now seems like a no brainier to me. Assuming you have a reasonable time horizon, say 5 years, your potential down side is probably 20-30%, but your upside is probably 50-100% in that 5 year period.

In America, the pendulum always swings farther than it should in both directions (e.g., the stock market; housing market; etc. over-shoot on the upside and then over-shoot on the down side.) Contrary to the babbling of "talking heads" and bear market pundits, we are still a capitalistic country and our people believe in hard work, earned success, and a chance at the good life. Once we get past the negative consumer confidence we are all experiencing, individuals will re-ignite their buying and good companies will begin to thrive again – and take their stock price up with them.

So, where is the market headed? My guess - down over the next 6 months, but significantly higher after that. If nobody knows where the bottom is, isn't it prudent to invest now, after weighing the risk of the current environment against the potential upside profit.

* This is an edited guest post by Tony Parker, a contributor-at-large for Saving to Invest.

Related
~ How to buy stocks- Two simple steps
~ Stock Market Volatility - Now is NOT the Time to Sell

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I received a letter in the mail the other day from some legal firm saying that they were on the verge of winning a class action suit against a large medical corporation and that I could be entitled to part of their structured settlement; if I could prove I had used a particular cholesterol drug. Personally, I don’t remember using this drug and I think I was not the intended recipient, but my interest got perked by the term structured settlement. Being a finance aficionado, I hate to not know what a particular concept is, so I did some research on this topic. Wikipedia defines a structure settlement as “ …a financial or insurance arrangement, including periodic payments, that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation.”

Not very clear I agree. But basically a structured settlement is a way to settle legal cases where a financial payment from a legal case (settlement) is made over a period of time (structured). It offers several advantages over a one-time, lump sum payout. This includes the money lasting longer, with studies showing that the majority of those who receive lump-sum payments as compensation for an accident or injury spend the money within five years. A structured settlement on the other hand is like an annuity (think life insurance) than can be spread out over decades, or a lifetime.

Another big advantage of a structured settlement is that the income is tax-free, both at the Federal and state levels. Structured settlements are often ideal under the following circumstances:

- Guardianship cases where the victim dies and leaves minor children. A structured settlement can insure that funds are available for food, housing and education for the surviving family members over a long period of time.

- Workers compensation cases where the injured party is unable to work for a protracted length of time. A structure will allow steady income to insure that the victim and their family will continue to have steady income.

However, remember that once in place, can structured settlements cannot be traded back for a lump sum settlement. Because you are given special tax treatment with regard to structured settlements' proceeds, you cannot then take that in a lump sum fashion.

Why do parties choose structured settlements over a one off lump sum payout? The party that pays in an accident or injury case can benefit from payments over time, as they can set up an annuity to pay the funds over time. The funds are invested with the payments coming out of the proceeds. It’s “hands off” for the paying party, and they typically pay out a smaller amount of money in present dollars than if they paid in a lump sum.

There are many things to consider if you are in a position to receive a large amount of compensation for injury or accident. One of the options may involve structured payments over time because using a tailored stream of payments, provides long-term tax- free income, often for a lifetime. Before you act though, you should learn as much as you can about legal settlement payment options in order to determine if such an agreement is right for you. As always, should you find yourself in such a situation, consult with a financial advisor and/or a competent attorney.

Got Questions? Leave a comment and I will try and find you some information.

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As I get older and my family grows, one question that comes to mind is, “will they manage if something happens to me? Particularly from a financial aspect.” I can’t do much to prevent the emotional impact, but I want to ensure that my family will not suffer financially if something should happen to me. But which type of life insurance policy is best for me and my family from a cost and coverage perspective? Term or Whole Life?

With this in mind, I asked Barbara Waltz, one of the founders of 247QuoteUs.com , an online resource blog and insurance quote comparison guide to help provide some clarity on the confusing world of Life insurance and which option is better for me. Being an expert in this industry, she has provided some succinct and non-sales type advice.

First and foremost, we buy life insurance to provide for our families in case we pass away unexpectedly and cannot provide for them any longer. This may sound simple, but sometimes life insurance products are designed to do more than this basic function, and that's where buying life insurance gets complicated.

Term life insurance is the purest form of coverage. It is purchased for a period of time, or term, and when that period of time expires, the life insurance ends. It is common to buy a term policy for 10 to 30 years, though different periods are available. So if you die you win (so to speak). If you live past the length of the policy, you (or, more specifically, your family members) get no money back. Because the policies are temporary, and only cover death benefits only, a term policy is usually the cheapest life insurance to buy, and is the choice of most younger families.

Whole (or permanent) life insurance, on the other hand, is designed to cover a person for their whole life. It builds a cash value or "savings account", and so is a combination of life insurance and savings. As long as the policy is paid for, or paid up, the coverage will be in force. Because of this, whole life insurance is more expensive. If you live, you get back at least some of, and often much more than, the amount you spent on your premium. You get this money back either by cashing in the policy or by borrowing against it

The key is how long you plan to keep the policy. Most financial advisors will tell their clients, especially younger clients, to purchase term coverage. They do this because term policies are much cheaper, and the extra money can be used for other investments that may provide better returns than whole life policies. In most cases, this is probably good advice, especially for large amounts of coverage that growing families need.

However, term policies do expire, and a middle aged or older person may find him or herself without coverage just when it is much more expensive to buy life insurance. Not everybody's need for life insurance ends when a policy does. In a perfect world, I would suggest buying a larger face value term life insurance policy with a large enough face value to cover a home mortgage, living expenses, and education. But I would also advise many clients to consider the purchase of a smaller whole life insurance policy, especially one with a ten year payoff. That way, when the person retires, they can be secure in the knowledge that their beneficiaries will get the benefits to settle final expenses.

Click here to get a free life insurance quote.

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In times like the present every extra dollar counts more than ever. Despite decent income from working a regular job, once taxes and other fixed expenses are accounted for, it is getting harder and harder to make ends meet. Since there are only twenty four hours in day, physically working more (provided you can even get a job) is not really practical. That is why you must become more adept at saving and investing to keep more of your cash, or even better make your cash work for you by finding ways to increase your passive income. Here are ten ways that I have used effectively, recently and over the last few years, that have resulted in hundreds of dollars of extra cash every month. Hopefully one or more of these ideas will save and/or make you a few bucks as well.

1. High interest savings accounts. This is a no brainier way to make your money work for you. The difference between a high interest account and a regular checking account is the "higher" interest (APY) or savings rate – 4 to 5 times in many cases. For example, on $20,000 you earn about $550 of interest over the year ($45 per month passive income), versus a miserly $50 for the entire year with a regular checking account. Further, with volatile and declining stock markets, having your money in cash that you can quickly get to is a huge asset. I use HSBC and ING high yield savings accounts, because they generally have the most competitive offerings (from APY to user experience) and are amongst the most stable of the financial companies out there. Whichever high yield savings account you choose, make sure you go for one that has no fees, above average rates and is FDIC insured.

2. No annual fee credit card. This is my pet peeve – paying an annual fee for a credit card. This is on top of any interest you pay for carrying a balance. Ideally you should pay off your credit card every month, but in the current economy a number of families have to carry balances to make ends meet. However one thing you can do right now is get a no fee credit card, saving between $50 to $400 every year depending on your card. There are a number of cards you can get that have no annual fee and also very competitive interest rates. Sites like creditcards.com can search across multiple offerings/vendors and provide you with cards that meet your criteria (like no annual fee or cash back rewards). Personally, I like and use TrueEarnings Costco-Card American Express which has no annual fee and a free great cash back reward program (particularly if you shop at Costco as well)

3. Refinance. If you have a home loan and have been a "responsible" owner, yet find it hard to refinance to a lower rate because of falling housing values or less than perfect credit, then thanks to the Obama housing rescue plan you may be in a for a break. Thanks to the plan, if you have a conforming loan backed by Freddie Mac or Fannie Mae (ask your lender if you are not sure) you can refinance to the lowest rates available in the market. For example, by refinancing from a 6.75% rate to 5% rate on a $200,000 mortgage, could reduce monthly repayments by up to 17%! So make sure you take advantage of this opportunity and in addition to the $8000 home buyer credit, new and existing home owners can get plenty of "free" money this year. To find out what refinancing options you have check out leading mortgage and lender aggregation sites - Lending Tree and Lower my Bills.

4. Start a blog. Do you know how much I make from running this blog; and can you make that much? To answer the first question, I started this blog from scratch and it cost me about $10 to purchase the domain name via popular registrar GoDaddy.com and setup using the free (google) blogger platform. Today, almost 12 months later, I am making more than $1500 month. I wouldn't call this entirely passive income, because it takes a lot of work to develop an even moderately successful blog. However once you write an article and market it correctly, you can keep making money from the ads in and around it for as long as it is relevant and comes up in search engine results. I have detailed the required characteristics for successful blogging and estimated what other bloggers are earning, but the key attributes are - decent writing skills, basic technical skills and a lot of patience. There is no harm giving it a try, because at most it will cost you $10 and some time, but you will learn a lot and the active and passive monetary rewards could be substantial.

5. Take advantage of the stimulus tax credits by adjusting your paycheck withholdings. In the recently announced multi-billion stimulus packages, there are many goodies (or free money) being paid as tax credits or deductions. Ones that I have written about like the $800/$400 making work pay tax credit, new $8000 home buyer credit and new vehicle tax deduction can literally save you hundred's of dollar if you qualify and take advantage of them this year. Rather than claim them when you file your tax returns next year like most people, adjust your pay check withholdings for the ones you are entitled to and get the stimulus payments sooner, thereby increasing your monthly cash flow. You may not like all the money being thrown around by the government, but the spending bills have been passed so rather than continue complaining - get your share.

6. Sell on Craigs List. I was never a big believer of Craigs List despite what people said. I thought most people would use it to sell junk, mainly because it was cheaper than eBay. I also assumed that since it was local to the state or country you lived in, the number of buyers and sellers would be small. Boy was I wrong. I recently sold a crib (in good condition) for $150, which I had bought three years for about $180. So after three years and using the crib daily for my infant son, I only lost about $30. Not bad I think. What's more I had about 10 people interested in it, amongst over 100 ads for other cribs. I got a fair price for it - in cash, so I was happy. I have since used it to sell over $1000 worth of "stuff" that I no longer needed. As the saying goes, one man's junk is another man's treasure. So do a home inventory of "stuff" you are not using, and sell it for free on Craig's list for free. The extra cash is definitely something you can use. Just make sure you post good pictures of the things you list!

7. Cut your brokerage costs. Despite all the market and economic turbulence, many new investors are entering the market, because of the potentially great deals on offer. My post on how to buy stocks, is one of my most popular nowadays and I think many folks who have been sitting on the sidelines are now willing to risk a little bit of money on the many blue-chip stocks selling at bargain basement prices. If you are willing to take some risk now, the pay-offs could be huge in a few years. Then again, it is also equally likely you could end up with little more than the shirt on your back if the market keeps falling. Whatever your rationale, experience and investing focus, the one thing you can control is how much you pay for trading. In the ultra competitive online broker market, two well established discount brokers - Zecco and Trade King - provide the lowest cost trades with the great customer service. If you do 50 trades a year and are happy do your research around the web, you could easily save over $250 when compared to the major brokers like Etrade and TD Ameritrade. Switching is easy in today's online and look for promotions when switching to get "free" money. Zecco offers $0 trades for accounts with balances greater than $25,000 and Trade King has a $150 cash promotion for switching.

8. Never buy retail and instead portal shop. Two reasons for this. Firstly, it reduces impulse buying. Secondly you are almost guaranteed to find a cheaper price if you shop online. However, like me, most people don't have time to spend hours trolling the internet looking for a good deal. That's where shopping portals or aggregator sites come in useful. They bring together the best prices from various small and well known merchants and you can see the lowest prices in one view. Ones that I use regularly are Shopzilla, BizRate and Froogle (owned by Google). When I see something I like, I buy it from one of the well known merchants that come up in searches or use it to get the nearest retail store to match price - they all will in the current environment. Finally, sites like Cool Savings provide online coupons that can save you a further 5% - 10% on already reduced prices (see Save $29 in a Minute for more on this).

9. Reduce 401k contributions. Yes, you read it right. I am suggesting you reduce your retirement contributions (to $0 or just enough to get the company match) and use the extra cash to increase your monthly cash flow or for better alternative investments. This may seem like a myopic, short term view - but realistically the stock market is probably not going to do much in the year ahead apart from being very volatile. I have done the math of how reducing your retirement contributions can save you money when markets are falling in this post, so do/see the numbers for yourself if you don't believe me. I am not suggesting that you stop 401K contributions permanently. Once the stock market shows signs of life and the markets stabilize, you should ratchet up those 401K investments to the maximum and enjoy the benefits of dollar cost averaging and compounding as prices recover from their lows. Until then, you can quickly improve your current cash flow by employing this strategy.

10. Cut down you insurance bill(s). Don't believe all those ads you see that Geico, or any particular insurance company, is the cheapest option. You must always shop around with financial and insurance companies because every policy is negotiable and subject to personal factors. For example I switched my auto insurance to AllState and saved over $200 by just saying, "Geico gave me $X rate, so what can you do for me to keep me as a customer. And oh by the way, I want to also look at changing my home insurance." I also checked their online site which stated that drivers who switched to them saved on average $353, which in addition to grouping my policies gave me some strong bargaining points. Shopping for insurance is boring and it is easy to keep going with the automatic renewals, but in current market conditions where companies are ferociously competing for customers you can easily save $100 to $500 on your insurance policies by making a few calls to get the best price.


Whew! What a list. All told if you implement even half of the above ideas I bet you could increase your available cash by 5-20% a month and even build a passive income source or two. I have a number of other ideas which I will document in follow up posts, and encourage you to subscribe for free (options below) to get the latest articles. If you have any idea's leave a comment and should I include it in my next list, I will send something your way to thank you.

Good luck saving and investing your money.

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[Updated Nov 2009 with new extensions] Based on a number of reader questions, there is still some confusion around the key dates for receiving or claiming the economic stimulus tax credits. The IRS and Social Security administration (SSA) have published these, but not always in the most obvious places. So here's a straight forward summary of when the main tax credits and stimulus payments will be paid or when you have to claim them by. You can refer to the detailed articles for eligibility rules and qualifications for each of the tax credits and deductions.

Making Work Pay - $800 (Families) and $400 (Singles) Tax Credit

More than 90% of Americans will be eligible for receiving some part of the center piece tax credit in the Obama economic stimulus plan. This credit is available to joint filers making less than $190,000 and $95,000 for single filers.

When will it be paid : For people who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated (i.e. you have to do nothing) withholding changes in early spring 2009. The average worker will see this tax credit in the form of a $10 to $20 bump in weekly paychecks. If you do not have withholdings or prefer not to adjust your withholding amount and can get your stimulus in a lump sum payment as a tax refund when you file your 2009 taxes.

The 2010 working credit will start to be paid from January 1, 2010 and will result in a $7 - $15 increase in take home pay (the reason it is less than 2009, is that payments are spread over a 12 month period versus 8 months for this year's tax credit)

Taxpayers will not get a separate, special check mailed to them from the IRS like last year’s economic stimulus payment.

One Time $250 Social Security Payment

This stimulus package provided a one-time payment of $250 to individuals who get Supplemental Security Income (SSI) or Social Security benefits. To receive payment, the beneficiary’s address of record must be in a valid US state or territory. Only individuals eligible for Social Security, SSI, Veterans, or Railroad Retirement benefits at any time during the months of November 2008, December 2008, or January 2009 may be eligible for the one-time payment.

You can see more details and questions on this payment here. Everyone who is entitled to a payment should receive it by late May 2009. No action is required on your part, unless the payment is not received. In which case you should contact your local SSA office (who are making this payment) or at 1-800-772-1213 (toll-free) and not the IRS.

The $250 payment will be delivered in the same way your current Social Security or SSI benefit is sent. If we deliver your monthly benefit by check, we will deliver your one-time payment by check. If you receive a monthly direct deposit or Direct Express debit card payment, that is how you will receive your one-time payment.

There is talk of another $250 payment in 2010 to make up for the lack of a COLA increase. See this article - "An Extra $250 Social Security Stimulus Payment in 2010 for Retirees, Veterans and the Disabled " for more on this.


$8000 versus $7500 First Home Buyer Tax Credit [Extended into 2010]

The new home buyer credit has been extended into 2010 with new income limits and a $6500 credit for qualifying existing home owners. See this post - 2010 $8,000 First-Time Home buyer Tax Credit Extension Approved and Expanded with $6,500 For Existing Home Owners" - for more information on the extension.

This tax credit has generated the most confusion because of the fact a home buyer credit of $7,500 was also passed last year under the Bush administration, versus the improved and more favorable $8,000 credit approved under 2009 economic stimulus package. You can read the details and differences, plus the over 200 comments/questions at this detailed post. But here are the key dates and deadlines for the home buyer credit:

~ Taxpayers who qualify for the first-time home buyer credit and purchase a home this year before Dec. 1 have a special option (via form 5405) available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year. Qualifying taxpayers who buy a home this year before April 2010 can get up to $8,000, or $4,000 for married filing separately.

~ They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date.

~ The new stimulus payment is not available to people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year

New Vehicle Buyer Sales Tax Deductions

This amendment in the stimulus package provides tax breaks for the purchase of new cars, light trucks, motor homes and motorcycles by providing a federal-income-tax deduction on local sales and excise taxes. It is applicable to any new vehicle purchased after February 17th 2009, until the end of the year (December 31st, 2009). The deduction is limited to the tax on up to $49,500 of the purchase price of an eligible motor vehicle

Any purchases made outside of the qualifying period are not eligible for the credit. See more in this detailed post.

Sources : IRS and SSA

I will continue to update this article as more stimulus information comes to hand and encourage you to subscribe (free) via Email or RSS to get the latest news.

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The Bureau of Labor Statistics released the latest unemployment report showing that the US economy has now lost at least 650,000 jobs for three consecutive months, the worst decline in percentage terms over that length of time since 1975. The rise in the unemployment rate from 7.6% to 8.1% translates to an estimated 12.5 million jobless Americans. However, this rate may be even higher in real terms. As shown in the NY times graphic on the left, the real unemployment rate may in fact be closer to 15% when factoring in participation rates and part-time workers who want to work full time.

The picture is even more grim in rural parts of America, worst hit by the recession, where base unemployment rates are well into the teens. At this rate we will rapidly move from a recession to a depression, which may last a lot longer than I thought. The stock market, which is a forward looking indicator, also fell to record lows - suggesting more pain ahead. The continued falls in the stock market have at least validated my decision to temporarily lower my 401K contributions and move to a much more defensive position.

My articles this week on the FDIC going broke and Dow Panic stations, reflected my overall pessimism and it seems that the Obama administration is going from a position of inspiring change to looking like they really don't know what to do. It is looking more and more like the US government, despite throwing every last dollar at the problem, is helpless to stop the tsunami of bad economic news. Time - with a significant erosion of wealth - is the only thing that will end these dark days. Until then, hang on.

Finally and on a slightly brighter note, don't forget to the enter the $100 Economic Stimulus Competition. There are 10 entries to date and with two $50 cash prizes to win you have a great chance of winning mini-stimulus.

A sampling of other articles I enjoyed reading this week from around the blogosphere:

- Choosing The Best IRA For Your Needs: Traditional Or Roth
- Obama promises to cut annual deficit in half by 2013
- I Don’t Want Your Freakin’ Extended Warranty…
- 5 Things to do when you're unemployed. Hint: It's not job hunting.
- No Risk Stock Market Investing

Finally, from the Daily Show with Jon Stewart here is a great video lambasting CNBC (and Rick Santelli in particular) about their recent bashing of home owners getting help under Obama's housing plan. The irony really made me laugh and I can see a Michael Moore style documentary coming from this piece!

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

Find thousands of unbiased ratings on services for home improvements, car repairs, and more. Try Angie’s List.


Related:
~ 5 Clear Signs your Job is in Danger (and 5 things to do)
~ Obama's 2010 - $3.6 Trillion - Budget and My Money from Taxes to Health Care
~ Your Work, Home and Auto Tax Breaks in the 2009 Economic Stimulus Package
~ American Employees: Cheap to Fire

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Here's a worrying byline on many levels: Federal Deposit Insurance Corp (FIDIC) Chairman Sheila Bair said that the deposit insurance fund used to protect bank account holders could be insolvent this year, unless the agency imposes additional fees on the industry amid a surge in bank failures.

The first thought that runs through my mind is, "will the money in my account be safe if the bank goes bust? Should I cash out now?" I have an account with Citigroup, and before the government semi-nationalized the firm, this was a real possibility. The FDIC provides insurance for accounts up to $250,000 and if that insurance were to disappear I can almost guarantee there would be a run on the banks, the like we have never seen before.

So it is highly unlikely, nay impossible, that the US government would let the FDIC go under and hence the additional fees it wants to charge to bolster its insurance fund will get passed without too much trouble. Banks will off course complain, but hard to do so when taking billions in tax payer bailout money, so they will do the next best thing for them - pass on the fees to their customers. The same ones who pay taxes, that funded the financial sector bailout. Full circle - and once again you and I are paying more.

Here's more on the story from Bloomberg:

A large number of bank failures may occur through 2010 because of rapidly deteriorating economic conditions," Bair said in the letter. "Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative."

The FDIC last week approved a one-time "emergency" fee and other assessment increases on the industry to rebuild a fund to repay customers for deposits of as much as $250,000 when a bank fails. The fees, opposed by the industry, may generate $27 billion this year after the fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the previous period, the FDIC said. The fund was drained by 25 bank failures last year.

U.S. community banks plan to flood the FDIC with about 5,000 letters in protest. They are outraged over the one-time fee, which could wipe out 50 percent to 100 percent of a bank's 2009 earnings, Camden Fine, president of the Independent Community Bankers of America, said today in a telephone interview. "I've never seen emotions like this," said Fine, adding that he's received more than 1,000 e-mails and telephone messages from angry bankers. "Community bankers are feeling like they are paying for the incompetence and greed of Wall Street" he said.

"The FDIC realizes that these assessments are a significant expense, particularly during a financial crisis and recession when bank earnings are under pressure," Bair wrote. "We did not want to impose large assessments when the industry and economy are struggling. We searched for alternatives but found none better."

Bair rejected arguments that the agency should use government aid to rebuild the fund. The FDIC has authority to tap a $30 billion line of credit at the Treasury Department. "Banks, not taxpayers, are expected to fund the system," Bair said. Asking for taxpayer support "could paint all banks with the 'bailout' brush."

I found another circular logic issue with Bair's statement - "Banks, not taxpayers, are expected to fund the system." Haven't the US tax payers already bailed out most of the banking industry? Won't those funds that go to the banks, now be used to pay the higher FDIC fees (rather than being lent out as was the intended purpose)? So at the end of the day tax payers will indirectly fund the FDIC anyway, and end up taking a one-two punch to their finances. Firstly, their taxes will be potentially wasted on bank bailouts that don't seem to be working; secondly - and more directly - they will be hit with higher banks fees. Just what we need in already tough financial times. Makes you almost want to cry with laughter!

Related:
~ Rates on Savings Accounts and CDs Set to Increase
~ High Interest Savings Accounts with Good Yields
~ I Want My Bailout Too and Here's Why

[Update] Your Bank Has Failed: What Happens Next? 60 Minutes provides a rare look at how the FDIC takes over banks and reassures depositors

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I wrote about 6 months ago that Dow 5000 was an outside possibility following the first wave of the credit crisis induced market panic. The Dow had fallen below 10,000 at that time and even I thought that 5000 was highly unlikely. But, it looks like the seemingly impossible is now going to come to pass as the market goes into free fall. Like many Mondays past today was another reminder that no one - and I mean no one - knows when the market will reach rock bottom. Here's what some analysts from around the major media sources are saying about the current market falls and outlook. There is a clear sense of panic and despondence.

From the WSJ - All 30 Dow components dropped. The broad sell off pushed the Standard & Poor's 500 Index down 34.27 points, or 4.7%, to 700.82, its lowest close since Oct. 30, 1996. The energy sector fell 7.3% as crude-oil prices plunged by 10%. The basic-materials sector dropped 6.7% and the financial sector slid 6.3%

"Investors finally understand this recession will be deeper and longer, and the recovery will be shallow," said Joe Battipaglia, chief market strategist for the private client group at Stifel Nicolas. "And the
government doesn't have a sense of any solution that might instill confidence."

"This market will only stop when people run out of stock to sell...I don't see why they won't move on from the financials to [selling] everything else, since some financial names are already nearly worthless."

From Bloomberg - Treasuries rose as investors sought a haven, driving the yield on 10-year notes down 10 basis points, the most in almost two weeks, to 2.92 percent. Options investors are paying twice this decade's average to protect against losses in U.S. stocks through 2011, signaling the bear market that already wiped out $10.4 trillion of equity value may last two more years.

"There's a real panic in the markets, with some people wanting to buy long-term insurance at any price," said Peter Sorrentino, who helps manage $16 billion, including $130 million in options at Huntington Asset Advisors Inc. in Cincinnati. "People have lost hope."

The NY Times reports that all eyes are on that Friday unemployment report. Economists expect a loss of 675,000 jobs in February, following a decline of 598,000 in January. The unemployment rate is expected to rise to 8 percent, from 7.6 percent.

It's pretty despondent everywhere," said Dwyfor Evans, a strategist at State Street Global Markets in Hong Kong. "O.K., there are signs that some of the leading indicators have stabilized to some extent, but it's at a very, very low level, and we're not seeing corporate investment picking up, or consumers starting to spend again — in other words, the traditional mechanisms by which economies come out of a recession are absent at this time."

"As bad as things are, they can still get worse, and get a lot worse," Bill Strazzullo, chief market strategist for Bell Curve Trading, told The Associated Press. Mr. Strazzullo said he believed there was a significant chance the S.&P. 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively.

From Reuters - Stocks fall below 1997 levels as the government bailed out American International Group (AIG) again and reported a record $61.7 billion loss that raised fears efforts to stem the financial crisis still are not enough. All 10 S&P sectors were in the red.

"When does this end? What are the sign posts that we're all going to be looking at to indicate to the government that this is working or that we are seeing a turn around?"

Underscoring the negative tone were comments from billionaire investor Warren Buffett, who said "the economy will be in shambles throughout 2009", further dampening investor confidence.

My advice on what to do next is to be very cautious and if you are thinking of investing for a quick profit. Do not. This market is far too volatile and only active (professional) traders stand to make any money. If you have got money invested in your 401K, think of changing your allocation to bonds and cash for the near term. I even think that lowering your 401K contributions, so that you invest only enough to get the company match, may not be a bad idea if you expect the markets to fall even further.

If you are like me and have lost (on paper) a lot of money from existing holdings, there is little point panic selling now and unless the company you invested in is highly likely to go bankrupt or you desperately need the cash, then just sit tight and perhaps in a few years you may break even.

Related

~ Banking on a Rally for a Quick Trading Profit

~ And you thought last Monday was bad - Economic Indicators signal major collapse ahead
~ Stock markets to Crash or Surge this week

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[Updated March 4 2009] This was a question I received based on an earlier article looking at the refinancing under current market conditions. With interest rates at historic lows, refinancing has become a very attractive option for many home owners who could save thousands of dollars on their mortgage interest repayments. For example, by refinancing from a 6.75% rate to 5% rate on a $200,000 mortgage, could reduce monthly repayments by up to 17%!

Unfortunately for millions of Americans the savings from refinancing to a lower rate are out of their grasp because they do not qualify, due to the tighter eligibility criteria resulting from the credit crisis. Twenty percent equity stakes and 700+ credit scores are becoming the norm rather than the exception. While tighter criteria would have been prudent in preventing loans being made to irresponsible borrowers during the housing boom, it seems that the banking industry has gone to other extreme by making refinancing available to so few.

However Obama's new $75 billion “Homeowner Affordability and Stability Plan” (housing) plan may provide the refinancing relief many responsible home owners were looking for. Here are the main provisions for refinancing under the plan:

1. Have a conforming loan backed by Fannie Mae or Freddie Mac. Approximately 60% of single-family “conforming” loans are backed by these Government controlled mortgage giants. These are the companies that buy the loans from your bank/servicer and then sell them to Wall Street. A conforming loan is one under $417,000 in many areas — or up to $729,500 in certain high-cost areas like San Francisco, Boston or Washington, DC. Most home owners will have no idea if their loan is “backed” by Fannie or Freddie, but your lender or servicer does. So call them and then ask about qualifying under Obama’s housing plan.

2. Your Loan to Value ratio can now be as high as 105%. Under current conditions you cannot refinance mortgages where the loan-to-value (LTV) ratio exceeds 80 percent without some form of credit insurance. That insurance can be difficult or impossible to obtain in parts of the country that insurers have labeled declining markets, with high risks of further deterioration in values. Under the Obama housing plan, the LTV has been raised to 105%, which means you qualify even if you owe between 80-105% of your mortgage. However it you are severely “underwater” and owe more than 105% of their home’s value you will not qualify and may have to wait for mortgage relief via other lender driven provisions in the housing plan.

3. Allows borrowers with less than 20% equity in their homes to refinance to the current prevailing rate. However they must meet the above LTV criteria.

4. Timeframe Eligibilty. Only Loans that originated on or before January 1, 2009 are eligible for this program. The modification program will be in effect until the end of 2012, but loans can only be adjusted once.

5. Bonus Payments. Borrowers who keep up with their new payments will receive up to $1,000 a year in principal reduction, for up to five years.

6. Modification Threshold. Servicers will follow a specified sequence of steps in order to reduce the monthly payment (with government subsidies) to no more than 31% of gross monthly income (DTI).



More than 25% of home owners will qualify under the new refinancing criteria, but there are some restrictions to prevent abuse of these new provisions.

> The cutoff date for the program is June 10, 2010. Each servicer will provide details on the terms and costs associated with refinancing. This should provide transparency and information on the effectiveness of the program.

> No "cash outs" will be permitted. This means the new loan balance can total only the previous balance, plus settlement costs, insurance, property taxes and association fees.

> Loans that had mortgage insurance will likely continue to have coverage under the existing amounts and terms, thereby limiting Fannie and Freddie's exposure to loss. But loans where borrowers originally made down payments of 20 percent or more will not require new insurance for the refinance, despite current LTVs over the 80 percent limit.

> Loans balances will not reduce. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

> Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive – meaning that the net present value of expected cash flow is greater in the modification scenario – the servicer must modify absent fraud or a contract prohibition.

If you think you will qualify you should start getting ready to start the refinancing process as soon as possible because there will be a huge rush of applicants. Borrowers can now contact their loan servicers to see whether they are eligible for assistance. Federal officials have posted additional information for borrowers to determine their eligibility at hud.gov. To prepare, start gathering the information that you will need to provide to your lender which includes:

• Documentation for income sources (monthly and one-off), including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.
  
  
• Information about any second mortgage on the house
  
  
• Payments on each of your credit cards if you are carrying balances from month to month, and


• Payments on other loans such as student loans and car loans.

Source and more details : Treasury Fact Sheet , CNN

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Just another sign that the Mortgage Giants are really in much more trouble than the government regulators are letting on. David Moffet was CEO of Freddie Mac for just under 6 months and he must have thought the problems are too much too handle. The C-Level musical chairs at Freddie Mac continues. Is the Fannie Mae CEO Next?

Here is the press release:

McLean, VA – Freddie Mac (NYSE: FRE) today announced that its chief executive officer, David Moffett, has notified the chairman of the board of directors of his resignation from his position as chief executive and as a member of the board effective no later than March 13, 2009. The board of directors is working with the Federal Housing Finance Agency (FHFA) to appoint a successor to Moffett.

Moffett indicated that he wants to return to a role in the financial services sector. In his letter of resignation, he said, "I have enjoyed my time as CEO of Freddie Mac and I wish all the great employees the very best in the days to come."

John Koskinen, chairman of the board, said "We are very sorry to see David go. He made valuable contributions to Freddie Mac as the company transitioned into conservatorship." Koskinen also said, "We expect to name an interim CEO before March 13 to assume David's responsibilities once he leaves." He added, "The board remains fully committed to ensuring the company continues its critical role in supporting the housing finance system during this difficult economic period."

Management continues to estimate that FHFA, in its capacity as conservator of Freddie Mac, will submit a request to Treasury to draw an additional amount of approximately $30 billion to $35 billion under the Senior Preferred Stock Purchase Agreement between Freddie Mac and Treasury, following the timely filing of the company's annual report on Form 10-K with the Securities and Exchange Commission.

Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Over the years, Freddie Mac has made home possible for one in six homebuyers and more than five million renters.

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