Pension Plans are finally getting reformed, which is a wonderful thing to the American economy. Pension plans were a huge drain on many big businesses in America forcing companies to declare bankruptcy. Ford Motor Company, Delta, and GM are having huge problems making a profit when they have to give away almost a billion dollars a year to pension retirees. The old pension system would force companies to increase their revenues so they would be able to pay pension benefits. This would force businesses to re-evaluate their businesses plans and try to cut costs just to try to break even. What did businesses do to cut costs? Terminate thousands of good employees, purchase lower cost goods making their products have inferior quality, and a whole lot of out sourcing. Realistically, before the year even starts a lot of big businesses were one billion dollars in the hole. Big American businesses were almost doomed right from the start.

Example: Why is AirTran much more profitable then Delta? Before cutting cost Delta was a wonderful company. They were always ranked highest in customer satisfaction, and had a loyal customer base. Did poor management really destroy the company? I doubt it. After September 11^th, their sales decreased, and their pension plan inflated because there were more people about to retire.

America was in a catch 22 system before the pension plan reform. American companies have to cut cost, and reduce prices just to compete with foreign companies (that still might be producing a better product). Foreign companies can increase spending in advertising, quality management, and research and development to improve their product and sales, while American companies have to cut that out of their budget to fund pension plans of present and future retirees.

A lot of Americans rely on big businesses for jobs, community development, and competitive prices. I am not saying that pension plans should be cut for present retirees, or people currently contributing, but the pension reform plan will enable big American businesses to be competitive again.

*Next post will be about the financial side of the pension reform. Read this article to see what will be talked about next week*

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1.Use direct deposit

2.Get overdraft protection

3.Put your bills on automatic

4.Use personal finance software

5.Set up reminder

6.Consolidate your credit cards

7.Consolidate your accounts

8.Set up a filing system that works

According to financial columnist, Liz Pulliam Weston, these easy banking tips will make your financial life much easier. Another great tip is to become friends with one of the bankers at your nearest branch. They can really help you in time of need, and will usually provide better service for someone they know and like.

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By Mickey

So the time has come up trash that old clunker of a PC and pick up a nice shiny new one. Great! While your specific needs may vary, here are some tips to help you save some money on your new purchase.

1. Figure out what you need. Dual-core chips are all the rage now, but do you really need one? These are processors that are essentially two processors in one, making that part of your computer nearly twice as fast. However, most pieces of software (including games) can’t use both at the same time. There are exceptions, such as the latest version of Adobe Photoshop. In addition, if you often run multiple programs at once it can help. Otherwise, just stick with a faster (but cheaper) single-core chip.

2. LCDs aren’t as great as you think. The cool thing now is to get a flat LCD monitor. However, compared to an big, heavy CRT:

– LCDs don’t look as sharp.
– LCDs can’t handle as wide of a variety of resolutions.
– LCDs tend to cost more.

Now, if you need desk space then it might be worth getting an LCD. If not, you might be able to find a sweet bargin on a much larger CRT.

3. Keep your old monitor. Wanna save a couple hundred bucks? Keep your old monitor. If you’ll continue to use your old PC (for the kid’s homework or something), you’ll need to go ahead and purchase another monitor. However, if you plan on not using your old PC any longer once the new one is going, you can just use your old monitor on the new system. There won’t be any compatibility issues.

4. Dude, don’t buy a Dell. Dells are cheap. If you compare the major features of a computer (processor, memory, hard drive, etc), a Dell is the cheapest almost every time. The problem is that they really skimp out on internal parts. If you need to upgrade down the road, you’ll be in big trouble with a Dell.

To use an example, our church just bought a brand new, fairly nice Dell. I needed to add a second video card to it, and had very few options because of how the Dell was built. It didn’t include a PCI-Express slot and it didn’t even include an AGP slot - just some normal (older) PCI slots. This meant that out of the 25 or 30 video cards I was looking at in the store, I could only choose between TWO of them - the rest used PCI-E or AGP.

I don’t fault Dell for this, as they’re in the business of selling computers, and cheap computers sell very well. Just don’t be one of the people that buys one.

5. Microsoft Office vs. OpenOffice.org. One of the biggest expenses when purchasing a new PC is getting Microsoft Office on there - you’re talking about a couple hundred dollars. We all need it - Word, Excel, Outlook, Powerpoint, etc. The great news is that there is a free alternative - OpenOffice.org. It is a full-blown office package that is 100% free and 100% legal. I’ll admit that it’s not quick as slick looking as Microsoft Office, but it’s real close. It will read all of their files and it does a nice job. Even if you have MS Office already, go ahead and check it out. www.openoffice.org

6. Virus scan is optional. I considered not putting this item on here, but thought I’d share my views. Running a virus scan program such as Norton Anti-Virus or McAfee Virusscan is a HUGE resource drain. They’re constantly monitoring your system and really make it run much slower than it needs to. If you are a semi-literate computer user and you keep your Windows Updates current, odds are that you’ll never catch a major virus. Realize that it’s a slight gamble, though.

Here’s the magic - your computer can’t “catch” a virus. They don’t just slip in there like a germ in the air. You need to work to get a virus - open an infected e-mail, download an infected program, etc. You still should run a system-wide scan from time to time, but there are free programs that do this just as well as the commercial ones. Your best bet is likely Avast (www.avast.com). Dig around on their site and you’ll find the free edition.

Now, if you tend to download a lot of software, or have friends over that like to download stuff, you might want to consider sticking with a full-blown AV program like Norton or McAfee just to be safe. If not, then this is a good place to save $50.

Beyond those items, it’s just a matter of what you want. It’s a tough line to spend as little as possible but still try to buy something that will last for years to come. If you have specific questions about “what should I buy?”, feel free to ask me and I’ll try to help you decide.

For other tips on how to make your PC (new or old) run more smoothly, you can visit SpeedUPMyXP.com.

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Buying a house is one of the biggest moments in your financial lifetime. Doing it the correct way will save you thousands, and make you thousands (not to mention save time, and headache). If you think that all you have to do is find a house, make an offer, and move in you have it all wrong. Shopping for a mortgage, a real estate agent, and a house is just the beginning of the house buying process.

Personally, I did everything wrong. I didn’t shop for a mortgage which turned out to be a HUGE mistake. I ended having to shop for a realtor because my first one was dreadful, and I mean horribly dreadful. This realtor made me drive my own car, didn’t know where she was going, brought me to houses that were already sold (for more than a year), took me 15 miles out of the area where I wanted to buy, and knew nothing about the houses she was taking me to. I had to fire her, and get a new realtor. Having a really good realtor makes a huge difference in the home buying experience.

Here is a list of things to do before you start shopping for a house.

1. Get your FICO. Remember the article about why knowing your FICO can save you a ton of money. Well, this is one of the scenarios that involve finding your credit score. Before shopping for a mortgage you need to know what kind of rate and payment you are going to expect to get from lenders.
2. Find how much house you can buy. Like I said in an earlier post, do not buy a house that you really cannot afford. Having a house should be an investment, not a money pit. Use one of these mortgage calculators to estimate a payment that you can truly afford.
3. Now it�s time to shop for a mortgage. Check Bankrate and LendingTree to receive some offers from a lot of lenders without all the work. Another thing, I highly recommend going to the bank your checking or savings account is held at and ask them for their offers. They will sometimes offer you a discount just because you already have business with them. Another great lender is INGDirect if you want low rates and minimal closing costs. For first time homebuyers getting an ARM or hybrid loan is the way to go. Most of the time people who buy their first house usually buy another in 5-7 years. Getting a 30 year fixed mortgage will make your monthly payment higher, and you will end up paying more in interest. First time homebuyers should also look at NACA and other programs (like FannieMae) for first time homebuyers.
4. Make some choices. Choose an area where you want to buy, and decide how much you are willing to spend before you go to a real estate agent. Some real estate agents will bring you all over town which will waste a lot of time.
5. Get a real estate agent. It makes life a lot easier if you have a good agent that has your best interest at heart. Shopping without one can be very time consuming, and they have access to software and websites that non-agents do not usually have. They are also free for the buyer because they usually get a commission paid by the seller. Not too shabby.
6. Take a week off work. This was one thing I wish I would have done when I was looking to buy a house. You need to dedicate yourself and your time looking for the house. Making offers, signing papers and receiving phone calls from your agent and mortgage company can be stressful and extremely important. So, if you can, take a week off work.
7. Find a house that you really like. This house does not have to be your dream house, but it can’t be a dump that you regret buying. A lot of people end up settling and get a house that they truly don’t love. This will create problems in the long run, so shop around. It’s a big investment so take your time, and do not let the agent pressure you into something you do not like. It’s your money not theirs.
8. Hire a pro. Once you find the house you really like hire a construction engineer or house inspector to go through the house before you buy. I recommend getting the engineer if you can find one. Go to a local university or ask around for one. They know what they are doing a lot more than a regular house inspector.
9. Rent a truck or U-Haul and pay some friends to help you out. This is going to be your first house so you are not going to have enough stuff to need a moving company. It cost thousands of dollars to hire a company to do things that you and a couple of buddies can do just as easily. Pay your friends some good money to help you out. They are helping you out and saving you a ton of money (and trust me helping you move is the last priority on their lists).
10. Have a house warming party! It’s a big time in your life and you should be able to celebrate. A lot of times people will buy you gifts which is always a good thing. I recommend having a “stock my bar” party. Everyone buys a different kind of liquor to “stock“your bar. It’s the party that keeps on giving.

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Most people invest a certain amount of money each week or month into an investment plan such as a Roth IRA, or traditional IRA. This investment strategy is called dollar cost averaging (DCA). Here is a formal definition explained by Investopedia “The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.” This system can make you a ton of money if share prices are low when you buy and high when you retire and sell your shares. Here is a model that shows how DCA can sometimes be a negative.The best approach by far is value-cost averaging (VCA). Investment-FAQ explains it as “a strategy in which a person adjusts the amount invested, up or down, to meet a prescribed target.” You will end up killing two birds with one stone with this approach. You will balance your portfolio, buy more shares when prices are low, and buy fewer shares when prices are high.

Example:
You want to contribute $100 per month in a mutual fund.(1^st month)

You contributed $100 End of month balance $70
(Share price decrease)
(2^nd month) You contributed $130 End of month balance $240
(Share price increase)
(3^rd month) You contributed $60 End of month balance $310
(Share price increase)
(4^th month) You contributed $90 End of month balance $400
(Share price has no change)

You contributed $380 but your mutual fund balance is $400. Nicely done!

Even though value-cost averaging requires you to spend ten minutes a month looking at the performance of your stocks or mutual funds it is still more efficient approach than dollar cost averaging. Being a little more proactive can make you a lot more money. But whether you choose DCA or VCA the most important thing is that you are contributing to your nest egg. So give yourself a pat on the back and picture the mansion you will buy later on.

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Have you ever purchased something that you used once then threw it in the back of your closet or garage? Most people don’t ever think how much money they loose by purchasing things they don’t really need. Sometimes buying your “wants” can be self-satisfying but extremely expensive when used only a few times. Here is a great example that has happened to at least ten people I know. You ever buy a shirt that you think will look great, wear it twice, and then you never wear it again. Try to apply this to other things in your life.

Before you head off to college and decide to get a fancy computer make sure you read this article. Consumers need to learn to shop for good deals that will save hundreds of dollars by going to websites like these: FatWallet, Woot, and NewEgg for electronics. Shop around for good deals online, and don’t buy things you don’t need.

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A new study has shown that in 132 of the 250 of the largest U.S. counties only about 50% of retired people live comfortably. Read this editorial to learn what effects are causing people not to retire on time and discover how to be proactive with your future. This article also breaks down how American cities are ranked one against each other when it comes to retirement. See where your city is ranked.

Retirement 101

At what age do you intend to retire?
How many years will you expect live in retirement?
How much are you currently earning?
What will be your main sources of income during retirement?
How much money do you need (or want) to spend each month in retirement to achieve your goals and maintain your lifestyle?
How much have you already accumulated in employer benefits?
How much have you already saved or invested for retirement?
How comfortable are you taking risks with your investment dollars?
How many people must you support financially now and in the future?

Questions created byUniversity of Illinois at Urbana-Champaign

If you think you are prepared for retirement these questions should be a breeze to answer. If you are not prepared and you are struggling to come up with answers make sure you read some previous posts I made about retirement.

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MSN Money has a great article about using the change rattling in your pocket to make big time bucks. By using the super power of compound interest and Roth IRA you will be able to transform your change into a great nest egg for retirement. Read it and tell me what you think. Do you have anything to add on to this article? What other mutual funds or individual stocks have performed higher than 10% per year?

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Here is another great question from a subscriber. “I am trying to get rid of some credit cards that I no longer use. I currently have five credit cards. The ones that I want to close have a zero balance. Which ones should I keep, or should I just keep them all?”

Even though I have an answer for your question, this is pretty much a personal issue. I will have to assume a few things on the credit cards you want to close. First, you probably no longer need or want them anymore. Second, these credit cards are not the oldest ones in your repertoire.

When you close down credit cards most people think that it will automatically increase your credit score. Well, I have some news for you. Most of the time it will actually decrease your score. The reason for the decrease can be easily explained with some simple math.

Let’s just say you have $5000.0 of credit card debt and you have four credit cards. Two credit cards with $2000.0 credit limit and the other two have a $3000.0 credit limit which means that you are using 50% of your eligible credit ($5000/10,000). If you were to close your two $2000.0 credit cards you would be left with an eligible $6000.0 credit limit, but your debt ratio just went up to 83.3% ($5000/6000). *Remember that your debt ratio plays a key role in your FICO score*

Let’s take the same situation as described above with a different issue. Let’s say your two $2000.0 credit cards were open in 1997 and the other $3000.0 ones were opened in 2001. If you decided to close both of the $2000.0 credit cards and keep the others opened your credit score would probably go down a bit just because you closed four years of credit history. This will also affect your credit score, because the length of your credit history will change.

Before you start calling the credit companies and cutting up your cards make sure you look at the downside of it. If you do have to close some down make sure they aren’t the oldest ones in your wallet/purse unless they have a yearly fee. See, there are some good reasons why having several credit cards can be beneficial.

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We are about to talk about budgets so hear me out before you click on the little X at the top of screen! Even though I do not believe in a strict budget, I still believe that a rough budget will help you. Make it a loose budget using percentages of your income instead of making a fixed amount for activities, bills, and food. Your life demands breathing room and flexibility, and your budget should be the same way.

The first step to making a realistic budget without it being chiseled in stone is to decide how much money you want to put into your budget. A lot of people don’t put in all their income in their budget. Most people will save a portion of their money before they want to pay for things. *Paying yourself first: see my top 10 ways to save money* Now, what should you do with the money after you’ve saved your 10-20%?

Here are my recommendations of what should be paid off beginning with the most important.

1. Rent or mortgage (40-45% of your income). This is a reoccurring cost that you will have to pay on a monthly basis - unless you like living outdoors. If you do not have any kind of living expenses because you have paid off your house, or if you are living with your parents, you should be putting the money you would be paying in rent/mortgage into your savings account. *A good mortgage calculator to make your rough budget*
2. Food and necessary bills (20-30%). What do I mean by food? NOT the food when you go out for dinner. Food you purchase at grocery stores that you will be eating on a daily basis. You need money for food or else you would die of starvation (I do not recommend doing that). The bills that are essential for a healthy lifestyle, such as water, electric, gas, and insurance bills are right after food. *Learn how to lower your utility bills*
3. Secondary bills (10-15%) - such as cable, internet, phone, and cell phones - come in third. These services are usually perks, but for some people these costs are also a necessity. Technically you could live without them, but a lot of people will argue this point. If you need to reduce these costs, but you cannot survive without them go for the bare minimum.
4. Fun and leisure activities (10-15%) are still a must. A lot of personal finance advisors, such as Michelle Singletary, recommend dropping any activities that will inevitably get you into serious debt. BUT, in my opinion, Singletary’s advice takes the fun out of life. She is a huge penny pincher when it comes to finance, and I don’t really agree on anything she has to say (sorry about the rant but I watched her show last night and I couldn’t help myself from pointing and laughing at the TV).

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