Family Finance from FiLife Contributors - FiLife

Identity Theft Horror Story: Checks Stolen from a Mailbox

Fri, 06 Nov 2009 16:47:02 -0500

Almost anyone could walk right up to most mailboxes in America and take the mail that's sitting inside. In Catherine Estergren's case, thieves walked off with a book of blank checks she had ordered from her bank.

Unfortunately, Catherine didn't realize the theft until she got a call from her bank telling her that her checking account was overdrawn. The thieves worked quickly by writing checks for more than $7,000 in five different states. After that, Catherine's mailbox became full of collection letters.

It has taken Estergren two years to get her finances back in order. Her credit was ruined from the incident, and the crisis may not be over yet. There are still blank checks out there that haven't been used. Even though the checking account is closed, collectors will still track her down using the information printed on those bad checks.

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10 Reasons to Be Thankful You’re a Renter

Fri, 06 Nov 2009 12:30:51 -0500

In today’s tough economy, owning a house can be more American drama than American dream. When you’re sitting around the Thanksgiving table hearing people complain about foreclosures and decreasing property values, be glad you’re renting and save your wishbone for something else.

Here are 10 good reasons to enjoy being a renter:

1. No lawn to mow.Skip spending your weekends with the mower or paying someone else to do it for you.

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3 Obstacles to Financial Success:Part 2 of 3

Wed, 04 Nov 2009 10:26:55 -0500

Last month, we talked about the folks who have trouble putting their New Year’s resolutions into action. They’re perpetual procrastinators who never got around to completing a personal or business financial plan. As a result, any actions they take to build or preserve their wealth range from haphazard to non-existent. Often, they will act impulsively (or not at all) only to find later that their imprudent decision cost them some of their hard-earned wealth.Today, I want to talk to you about a second obstacle to financial success I often see, and it’s a type of fear.Fear of LossOne of the most understandable emotional issues that stands in the way of personal and professional financial success is fear. What happens if something goes wrong? How will I be able to recover from a bad investment?The EntrepreneurWe had a case at my financial planning firm where a physician client wanted help in evaluating possible strategies for growing his business. We analyzed his options, determined the action steps required to carry them out and evaluated the costs and benefits of each.Crunching the numbers revealed that his most promising option required a $1 million investment in diagnostic equipment to expand his practice. While he could recognize the logic that it takes money to make money, the physician balked at risking large sums on his business. The physician needed support from his financial planner, acting in the roles of business coach and CPA, to show him that the risks were not as great as he feared, and that it was a sound business plan. Eventually, the doctor overcame his fear of risking his hard-earned money and agreed to the investment. Since then, his business has grown as the financial planner predicted it would.The Individual InvestorFear of loss is also something I often see with people regarding investing. Studies by research firms such as Dalbar show that the average equity investor trailed the S&P 500 Index by 6.48% over the past 20 years! The study explains these poor returns as “unsuccessful market timing and other maladaptive investor behaviors.”Good call. I can’t tell you how many times I’ve seen investors holding on to too much cash for too long, only to wait until the market went up before they invested it! The emotions of these investors who fear losing their money at the cost of earning money result in buy high and sell low investing time and again. It is gobbling up their wealth. These folks will have a hard time accumulating the money they need to reach their desired wealth goals.Next time: Fear of not making the right decision.

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Taking Over a Car Lease

Tue, 03 Nov 2009 14:51:42 -0500

What is a lease? It is like renting a car. You don’t own it so you don’t have the depreciation, but you also have to give it back after your term is up. This is good for people who want a new car every few years. The lease payments are also lower than if you buy. If you buy payments could extend over 7 years. You have to have credit to lease a car just like buying and financing. You may need a co-signer if you have no credit.

I have some suggestions to get you into a lease:

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When It's Time to Itemize Your Deductions

Tue, 03 Nov 2009 12:00:21 -0500

It’s never too early (or too late) in the year to think about itemizing your tax deductions.

FiLife checked in with Gregg Wind, a certified public accountant in Los Angeles, for a refresher. Of course, you will always want to check if your itemized deductions are greater than the standard deduction.

Medical Deductions: If you pay out of pocket for doctors or dental expenses, health insurance, prescription drugs, or, in certain cases, gym membership, you can deduct those expenses if they exceed 7.5% of your adjusted gross income(AGI). "If your AGI is $50,000, for example, anything over $3750 would be deductible."

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Getting Online Loans for Cars

Mon, 02 Nov 2009 13:28:35 -0500

The best thing that has happened to modern society is the invention of internet. The internet wave has touched the lives of every person and it is being used in every spheres of our work. The internet is being also used to manage the personal finances and this includes application for a loan, approval and fulfillment. There are numerous people who are logging on to the websites of the finance companies and banks to apply for a loan. Car loans are also being disbursed after receiving online applications and the popularity of the online loan for cars is increasing.

The application of online loan for cars has become really convenient and easy as there are a lot of companies that are disbursing loans through their websites. These finance companies not only disburse loans, but also provide the car loan related information. They assist all the consumers in availing loans in the easiest and hassle free manner. There are several benefits of going the online way and more and more people are realizing it. The result of this realization has increased the demand of online loan for cars. Let us look at some of the benefits:

Lower rate of interest People choose to apply for the online loan for cars as the rates on the offing are the most attractive. The online finance companies offer a much lower interest rates and processing costs than the companies that are physically offering the loans. There are a few things that one needs to keep in mind while applying for the online loan for cars, since there are quite few companies that are offering the loans, you need to do a little research on the internet to find the company that is offering the best deal.

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Style Drift: "Hail Mary" Investing

Fri, 30 Oct 2009 15:34:40 -0400

The mutual fund investing game is extraordinarily competitive. According to The Financial Times, there were 69,032 global mutual funds at the end of 2008. With the extreme competitiveness comes lucrative compensation structures if you can win (outperform). I should know, I was a fund manager for many years. However, the compensation incentive structures can create style drift and conflicts of interest. You can think of style drift as the risky “Hail Mary” pass in football: you are a hero if the play (style drift) works, but a goat if it fails. When managers typically drift from the investment fund objective and investment strategy, typically they do not get fired if they outperform, but the manager is in hot water if drifting results in underperformance. Occasionally a fund can be a victim of its own success. A successful small-cap fund can have positions that appreciate so much that the fund can eventually be defined as a mid-cap fund, which is a nice problem to have.Drifting IssuesWhy would a fund drift? Take for example the outperformance of the growth strategy in 2009 versus the value strategy. The Russell 1000 Growth index rose about +28% through late October relative to the Russell 1000 Value index which increased +14%. The same goes with the emerging markets with some markets like Brazil and Russia having climbed over +100% this year. Because of the wide divergence in performance, value managers and domestic equity managers could be incented to drift into these outperforming areas. In some instances, managers can possibly earn multiples of their salary as bonuses, if they outperform their peers and benchmarks.The non-compliance aspect to stated strategies is most damaging for institutional clients (think pensions, endowments, 401ks, etc.). Investment industry consultants specifically hire fund managers to stay within the boundaries of a style box. This way, not only can consultants judge the performance of multitudes of managers on an apples-to-apples basis, but this structure also allows the client or plan participant to make confident asset allocation decisions without fears of combining overlapping strategies.For most individual investors, however, a properly diversified asset allocation across various styles, geographies, sizes, and asset classes is not a top priority (even though it should be). Rather, absolute performance is the number one focus and Morningstar ratings drive a lot of the decision making process.What is Growth and Value?Unfortunately the style drift game is very subjective. Growth and value can be viewed as two sides of the same coin, whereby value investing can simply be viewed as purchasing growth for a discount. Or as Warren Buffet says, "Growth and value investing are joined at the hip." The distinction becomes even tougher because often stocks will cycle in and out of style labels (value and growth). During periods of outperformance a stock may get categorized as growth, whereas in periods of underperformance the stock may change its stripes to value. Unfortunately, there are multiple third party data source providers that define these factors differently. The subjective nature of these style categorizations also can provide cover to managers, depending on how specific the investment strategy is laid out in the prospectus.What Investors Can Do?

Style drift can potentially create big problems in your portfolio. Misaligned incentives and conflicts of interest may lead to unwanted and hidden risk factors in your portfolio. Do yourself a favor and make sure the quarterback of your funds is not throwing “Hail Mary” passes. You deserve a higher probability of success in your investments

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Five Simple Steps to Motivate Yourself to Save Without Even Realizing It

Thu, 29 Oct 2009 16:14:56 -0400

It is hard to save money. The problem is that there is an infinite amount of wants and unfortunately only a finite amount of cash in our lives. Even though we saw our worst recession in America since 1929, the savings rate of U.S. citizens was only a paltry 6.4% at the height of the recession. According to the Bureau of Economic Analysis, personal saving as a percentage of disposable personal income was only 4% this past July. And, now that the worst of the crisis seems to be behind us, the savings rate is starting to retreat again to 3% in August.

We are a nation of horrible savers when we compare ourselves to other countries. In Europe, citizens save over 10% of their income. We know as Americans that we are not saving enough. We recognize the problem, but how do we motivate ourselves to save? I think that for each of us it is a little bit different. I know people who motivate themselves to save by turning it into a game. Others motivate themselves by writing their goals down either in a journal, on a prominent place in the house (the refrigerator), or even write down their goals on their credit cards themselves as a reminder to save. I motivate myself to save money by actually forgetting about money altogether. That sounds kind of counterintuitive, right?

These are a few ways that I "forget" about money:

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Identity Theft Horror Story: 35 Years of Frustration

Thu, 29 Oct 2009 14:35:11 -0400

Tom Lesh has been suffering from identity theft before it even had a name. In July of this year, the man who had been using Lesh's identity since the 1970s was finally caught. And Lesh's relief was palpable.

Lesh always suspected who had stolen his personal information. Clark Mower, a friend of Lesh's brother who had a warrant out for his arrest, used Lesh's name, Social Security number, date of birth and more. Mower used this personal information to apply for a Washington driver's license, to get a job (thereby passing the background check and skipping out on paying taxes), to buy an 18-wheeler (which drove Lesh's credit straight into the ground), to obtain medical services, and more. Lesh has spent more than half of his life dealing with ruined credit, placing fraud alerts and proving to the IRS that he didn't owe Mower's back taxes. Lesh estimates he had spent thousands of hours writing to his creditors and government agencies to try to reclaim his identity.

Mower faces up to five years in prison for aggravated identity theft.

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Your Student Loan Grace Period Is Over

Thu, 29 Oct 2009 14:15:20 -0400

For college or post-secondary school graduates who finished in May, their six-month grace period for paying back student loans is just about up in November.

For graduate and professional students, the additional debt, ranging from $30,000 to $120,000 or more, is just another bill on top of undergrad loans, rent (or mortgage), car payment, insurance, utilities, child care, dependent care, credit cards, etc. For undergrads, welcome to repayment.

It may not be easy, but if you can afford to start making payments, do it! After all, you are legally bound to the repayment terms you signed off on and there are penalties to your credit if you break your commitment.

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