Budget Saving Coupons Your Never Knew Existed.

This is a guest post from my new buddy Todd over at Dealio.  I have to admit, I get hives when I think about spending a lot of money dinning out.  I don’t have any room for it in my monthly budget plan. My wife will attest to that. However, if you’re going to do, I think Todd has some great ideas for you.

In many households, dining out can be large chunk of monthly expenses. Recently, I discovered that in my household of one (non-cooking, workaholic professional), dining out accounted for more of my monthly budget than my rent. This first lead to panic, then to “cooking for one” websites and then, finally, to what I know best – finding deals online. I knew that with a little sleuthing, it’d be possible for me to dine out without blowing through my new, self-imposed budget.

Here are my top ways to spend less money while dining out – whether you’re a household of one or many, these tips will help you save.

1) Group Buying Sites

Ever of heard of Groupon, Living Social, or Blackboard Eats? They’re all a part of a new phenomenon spun off of the “deal a day” websites that extend to restaurants and services. Traditionally, “deal a day” sites take the steep discounts of Cyber Monday and offer one at a time on a daily basis. Typically, this only applied to products – but a company called Groupon took this concept and opened it up to local businesses.

Here’s how it works: Group buying sites like Groupon gets local businesses to offer a limited number of products or services at a huge discount. You sign up to receive emails. Each day, you’ll receive a new offer that usually expires within a day or require a certain number of people to buy in order for the deal to be available to all (hence the name, group buy). This has worked particularly well for businesses that are traditionally offline such as restaurants.

The good news is that this phenomenon has taken off – there are now many Groupon clones all across the country. Each one typically has a restaurant offer that’s 50% or more off the value. For example, you can get a $40 gift certificate for $20. One site I particularly like is called Yipit – it aggregates deals across multiple sites so that you don’t have to clutter your inbox with emails.

Flikr, Icultist

On any given day, I can find a deal on a restaurant that I want to try. I also feel good knowing that I am supporting local businesses. Happy belly and happy karma – can’t beat that.

2) Restaurant.com

These guys were probably the first ones to come up with a new twist on restaurant coupons. Rather than offering $10 or 10% off of a meal – why not enable people to buy gift certificates that could pay for the entire meal?

Here’s how it works: Go to Restaurant.com and search by zip code for restaurants in your area. You can typically buy a $25 gift certificate for $10. The catch is that you have to spend at least $35 (so out of pocket cost is $20) plus pay an 18% gratuity (so that servers don’t get a bum deal). The secret is that there are online coupons you can use to purchase Restaurant.com gift certificates (yes, that’s right, a coupon for a coupon…my frugal heart pitter patters with joy). I’ve found coupons for up to 80% off. This means that I can buy a $10 Restaurant.com gift certificate for $2. As a result, my $35 meal only costs around $12 before tip – beat that Rachael Ray!

Unlike the group buying sites, you can get pick up these offers pretty much any day. There are certain restrictions such as one use per person per month and that the total can’t include alcohol. The upside is that the selection is huge and even the pickiest eater can find something to enjoy.

3) Newspapers (gasp)

I admit that I’m very much an online shopper. I even look at grocery ads online. However, the other day I was going through my weekly circular and found some pretty great restaurant offers such as $10 off at Buca di Beppo (no restrictions) and BOGO at Chevy’s. So, before you toss the circular into recycle – flip through it for some pre-printed offers and tuck them into your wallet. You never know when they’ll come in handy. Sure many can also be found online, but these will definitely be legitimate (yes, fake coupons do exist) and still valid.

Thanks Todd.  Nice work.  My fear; by learning how to dine out for less, will people actually do it more often and therefore spend more?  That’s not a good way to go – especially if you need to get out of debt if you ask me. What say you?

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Is an early mortgage payoff a good idea?

An early mortgage payoff is not in your financial interest right now. In fact, it’s the last thing you should do — at least from a financial standpoint. Instead, keep your mortgage and make  investments for your retirement.  Better yet, go out and get a humongous mortgage.

I advise this based on two premises:

1. Fixed-rate mortgages are really cheap right now.
2. Inflation and interest rates could rise precipitously in the near future.

If that’s the case, you’re going to make out like a bandit if you hold on to a big, 30-year mortgage.  In fact, if you’re thinking long-term, it could be the key to needing less money down the road to finance your retirement.

Let’s take an example to illustrate how powerful this can be for you.

Assume you have a $200,000 mortgage. You’ve got a 30-year loan with a fixed rate of 4.5%. Say your monthly payments are fixed at $1013.

Nicki Varkevisser, Flikr

Your payments are never going to go up….and that’s the key.

Assume inflation heats up.

15 years from now, your payment of $1013 doesn’t buy what it could today. In fact, that $1013 will only buy $627 worth of goods and services if inflation rises to 3.2% — the historic norm.    What I’m saying is that your fixed payments cost you less in terms of buying power.

The assumption is that your income will rise with inflation but your payments won’t.  (That’s not the case if you rent by the way.)

And with that inflation, the outstanding balance on your loan is worth a lot less.

While nominally, it will be,$132,500 the real value of that money is much less. In fact, the value of that in current dollars will be $82,041.

The greater the inflation, the lower the value of the balance of the loan down the road.  And the greater the inflation, it’s possible that your home and other investments will be worth much more.

There have been some countries that have experienced hyper-inflation and they illustrate the point. Let’s say you took out a fixed loan of 500,000 Pesos some years ago. The value of that 500,000 was, let’s say $50,000.  But after several years your Peso has less value because of hyper-inflation. You still owe 500,000 Pesos, but it only costs you $5000 to buy 500,000 Pesos at the time. You can pay off that loan with Pesos at a much lower value than those you borrowed. Sweet!

Many of the countries that went through this process have wised up. The banks in those countries now make loans that are pegged to inflation. That way, if the currency suffers inflation, the person who took the loan pays back more money to make up for it. Whaaaaa

But that isn’t the case in the USA yet and you need to take advantage of it.

If you can qualify for a fixed loan and you believe that inflation is around the corner, you should try to get the largest and longest fixed rate mortgage possible (that you can afford).  This could be one of the best business ideas

ever.

Having said that, I must admit that there are other considerations — like your emotional DNA. I personally can’t stand to owe any money to anybody — especially on my house.  So I don’t really care about the economics of it.  I know this is not the best financial decision but my wife and I decided to do everything we can to get rid of all our debts ASAP. Also, if you have a concern that you won’t be able to make your payments because you may lose your job, you’d ignore this and pay off your mortgage as soon as possible.

Where do you stand on the issue?  Do you want a huge mortgage?  Do you plan on taking advantage of possible future inflation?  Are you more like me and just want to be out of debt?

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Should you invest in index funds now?

This is an extremely timely issue.  But to be frank, the real question is,” Should you invest in the market now?  Or…what is the best retirement and/or growth allocation in a bad market? Index funds are going to do what the market does (in most cases).  If you are terminally pessimistic on the market, the answer is “no” – you shouldn’t invest in index funds or any other fund for that matter.

So to answer the question about the intelligence of investing in index funds now, let’s look at the market first.

Lots of people are writing off the market completely….but not me.

Ernst Vikne, Flikr

There are two reasons for this:

The first reason is that the market isn’t as terrible as it feels.

The second is that the system is still working.

First, let’s talk about emotions.

I don’t know about you,but it really feels like it’s been a terrible year. You might share the same feelings. In fact, I bet it’s been as much an emotional roller coaster ride for you this year as it was in 2008. That was indeed a terrible year for investors – the S&P500 lost close to 40% of it’s value.

And my gut tells me that many people feel as bad this year as they did back in 2008.

This year, the market is down too….but only about 5%.

Don ‘t get me wrong. I don’t celebrate “only” being down 5% — but I think it’s really important to check our emotions and how they square with reality.  (This is especially hard when you are retired and you depend on your investments to create your retirement income.But if this describes you, a reality check is even more important.)

And while I don’t expect you to party it up being down by 5%, I suggest that all of us consider our returns in context. It’s OK to make a decision about your investments because of a loss of 5%. It’s not OK to make a decision about your investments because it feels like they are down 40% when they are actually down 5%.

So much for the emotional component.

Let’s go on to the second reason. Let’s talk about the system and about change.

I heard a commentator on the radio report that 40% of Americans think our Country is in permanent decline. I understand that feeling but I think it may be premature to call it a day for the United States of America.

Our economy has serious problems. We are plagued with high unemployment, debt and government spending (to name a few). But let’s not forget that come the election in November, things could change dramatically.

What if the people we elect in November:

1. Strictly limit Government in size

2. Cut back wasteful Federal spending programs

3. Allow the free market to direct resources

4. Reduce taxes

This has happend before with fantastic results. It may happen again.

The engine of economic growth in America is business. And at this point,business is afraid to hire people… so they don’t. They’re afraid of higher taxes, more rules and tougher regulations. But if we elect people who understand this and mark economic growth as a priority, things could shift fast.

Already, there have been a few politicians to embrace the idea of smaller Government, lower taxes and less spending. They’ve taken actions and turned the situations around in their respective States.

I’m trying as hard as I can to stay out of politics here. And I don’t care what party a person is from as long as they take action do the four things I mentioned above.

We’ve seen how drastically our economy has been hurt by the wrong policies instituted over the last several Administrations. But we should also remember how quickly our economy improved once the right policies were put in place.

Again….I’m looking at this and commenting only as far as the market is concerned. I’m not suggesting you vote one way or another. I’m also not suggesting that the stock market trumps social issues.

But there is no question that if our Government does take these steps the market will likely do quite well. We may have gotten a taste of that last week.

When House Republican Leader John Boehner spoke about these four steps, the market cheered and went up over 100 points. I’m not saying the market will do well. I’m not saying that the Government will take these actions either.

I’m simply saying that these steps are doable and possible.

To pretend that the market has been much much worse that it actually is and/or to ignore the possibility that things can really change for the better, is irrational, untrue and unrealistic.

I am not a buy and hold investor.  I believe that it’s important to have a proactive approach to investing. But no matter how you invest, I believe it’s a mistake to give up on the market.

How do you feel about the future?  Are you hopeful?  If so…why?  If not….why not?

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How to Avoid Internet Business Scams

Do you know why there are so many internet business scams?

Because they make money for the scammers. They send out millions of fraudulent e-mails and they know that a small percentage of the people who get them are going to respond. Times are tough right now.  People are desperately searching for ways to make extra money.Here’s how to make sure you don’t get taken for a ride:

1. Be Realistic.

Flikr, ZeroOne

Are the promises this internet site is making achievable? Do you know anyone who has accomplished what this site advertises? If it sounds to good to be true, it is.

It takes work to make money. If you are being asked to participate in a program that doesn’t require hard work, pass it by. It’s a lie. I’ve been around people and money for 25 years – I never met anyone who didn’t work their tail off in order to make it. If you want to make money you will have to work hard too.  Don’t search for something that doesn’t exist.

2. Proof

Internet business scams are just like debt relief scams….you need to separate the truth from the lies.

Don’t fork over any money until you:

a. Speak to 5 people who have personally achieved the results this internet business advertises. Be careful. Often, the rotten scammers give you fake “happy customers”. If all the people you speak with seem a bit too excited, trust your intuition and call it a day on this one.

b. Check the Better Business Bureau for complaints.

c. Do a Google search for reviews on the company.

You owe yourself and your family the due diligence.  Don’t skimp here.

3. Specifics

I hear lots of people on the radio and internet talking about results of there programs – but not talking about the work itself. You’ve heard it too:

Get out of debt. $99 –  For the first 100 people to order!

Become a real estate tycoon!  3 Payments of $33.95!

Open your own business.  $37.89 – Special Price…..Today Only!

Get a great credit score.  Only $79.95!

They give you the sizzle but not the steak.

If someone isn’t willing to be 100% upfront about the business and answer all your questions, hit the delete button.

4. Upfront Money

Never….I repeat never…pay someone for the opportunity to work for them. That includes paying for lists of companies looking for people to work for them.

5. Under Pressure

If you are being pressured to make a decision immediately, it’s a good sign that the sellers are just preying on your fear and greed. They want you to make a decision based on your emotions rather than your intellect. They are not reputable so pass them by.

6. Turn the Tables

Before you fork over any money, tell the company you want your attorney to review the proposal. Watch how they react. If they try to belittle you for bringing your attorney into it, they have something to fear. Not a good sign.

And if they do comply with your request, bring your lawyer into the picture. If your investment is large enough, it might be worth spending a few hundred dollars to have your attorney review everything. It couldn’t hurt and it could save you a pile of dough.

7. Listen

Get feedback from your spouse, friends and business people you trust.  They’ll come up with questions you should ask but overlooked. Don’t rely on yourself.  This is a big step and mistakes could be costly.  Don’t let your ego get in your way.

Have you been taken by an internet business scam?  How did it work out?  What other signs should we look out for?

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IRS Tax Debt Relief – Do It Yourself

If you need IRS tax debt relief, you may not have to hire a fancy pants CPA or tax attorney. Depending on the situation, you have a few alternatives you can try yourself. If you are successful, you may end up saving a pile of money and save your credit score too.

Offer in Compromise

Quinet, Flikr

This can be the best solution for getting out of debt to “the man”. In this scenario, you convince the IRS that you can’t repay the large amount they want you to pay – but you are able to repay a smaller amount. You promise to pay this amount according to the terms you work out with the IRS and you also guarantee that you’ll pay your taxes for the next 5 years.

The downside is it may be tough to get the IRS to go for this agreement. The only way the Government is going to do it is when they think it’s in their interest to do so. (News flash – they don’t care what’s in your best interest.)

They might consider it when:

1. You argue you don’t owe what they say you do. They think you might have a winnable case and as a result, they compromise rather than face you in court.

2. You convince them that they’ll never be able to collect the amount they want. They understand that the best chance they have of seeing anything is to keep you afloat. As a result they agree to the reduction. Might not be a bad idea to bring along proof that you’ve gotten your budget under control too.

If you go this route, the IRS is going to look at your reasonable collection potential (RCP). This is simply the value of your personal assets plus your future income. They will base their decision about your offer in compromise based on your RCP.

Tax Penalty Abatement

If the boys and girls in D.C. think you short changed them, they’ll ding you with a penalty.

This can especially frustrating because late fees are added to the penalty.

If you can prove that the penalties were levied by mistake, you can communicate with the IRS office and usually get this little misunderstanding cleared up.

When this happens, submit a request for “penalty abatement”.

You can make this request if you think the IRS is mistaken. And you can also make this request if some very unusual circumstance resulted in your late payment.

You might go for this if there was a death or serious illness in the family, a long period of unemployment or even some natural disaster.

Wage Garnishment Release

If you don’t pay your taxes, the IRS can go after you by garnishing your wages. This could really wreck havoc with your budget. They can slice off up to 25% of your disposable income from each and every paycheck. Ouch!

What you’re looking for here is a “wage levy release”.

The IRS might agree to this if you can convince them they’ll get their money another way. Possible alternatives include loans, installment agreements and extensions.

IRS Payment Plans

If you owe Uncle Sam tax bucks, an IRS Payment Plan might be the very best way to go. You might even be able to work at a plan that is interest-free. I did some research on this option and it was very difficult to find out very much. There are filing and asset requirements. (You must have filed all your past tax returns and you can’t have assets that could be used to pay your debts.)

The kind folks at the IRS will look at your income and your expenses. They’ll then determine what your payments should be. This might be a case where you bring in a tax specialist.

Short-term Payment Extensions

If you only need a short-term loan, you can get an extension for 10 to 120 days. But you’ll be charged interest and late fees during that time. You’ll have to pay the entire debt off over that period….or else.

Installment Agreements

You may be eligible for an installment plan.

To do this, get the IRS Installment Agreement Request Form 9465. You can even do it online if you owe less than$25,000.

The IRS can give you up to 5 years to pay your debt. Usually, the payments are set up as withholding from your pay.

There is a cost to setting up these agreements. First there is the interest which is the Federal Short Term Rate plus 3 percent. Then, there are the penalties. This is ½ perfect per month. These guys make Don Corleone look like the tooth fairy.

If all else fails, get a loan to pay your friends at the IRS. The rate is almost certainly going to be lower than those offered by the Government. There are many low-cost alternatives to borrow money that can help you get out from under the IRS claws.

Final words.  Don’t mess around when it comes to “Big Brother”.  If you need help, don’t fall for any debt relief scam.  Call a professional.

If you do need money to cure an IRS problem, you might want to consider contacting Lending Club.

On to the Pilgrim Parade of Posts

The Digerati Life, Stocks for the Long Run

Sweatingthebigstuff.com  Where do you put any monthly extra?

The Smarter Wallet, Cash Back or Airline Credit Cards?  Which is Best?

Darwinsmoney.com  Top Money Saving Tips

The Oblivious Investor, TIPS vs Nominal Treasure Bonds

christianpf.com   How To Run A Home Based Business

9 Ways for Students to Get Textbooks for Less

Credit Karma Blog  - Saving For Retirement In A Recession

Moolanomy – Free Credit Score

Carnival of Personal Finance

Green Panda Outside the box ideas for life after college

Mydollarplan.com  2011 Tax Calculator

Lenpenzo.com  Ticketmaster’s New Blog – And Why I Hate Them Even More Now

Buylikebuffet.com Buffet Invests in the Future

How I Almost Got Scammed: Lessons Learned from Trouble in “Paradise”

Small Business Owners Encouraged To Fire Employees Before Tax Hikes

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What is a Good FICO Credit Score Range?

It’s important to be in a good….no…..great FICO credit score range.  It’s also important to know what your score is.

I used to think otherwise. I never had a credit problem. I never missed a payment. I never even paid a cent in credit card interest. I figured I must be in a great FICO credit score range.

Chailey, Flikr

Here’s what I found out:

The FICO credit score is used to calculate your mortgage rate, car loans and credit card terms.

According to Fair Isaac, the people who created and calculate your FICO score, 90% of the largest banks use your FICO score. Also, the Fair Isaac folks say that “a 100 point difference in your FICO score could mean over $40,000 extra  interest payments over the life of a 30 year mortgage on a $300,000 home loan.”  Looked at another way, by staying in a great FICO credit score range, you’ll be able to pay off your home mortgage much faster.  Me Likey!

That being said, no matter who you are and where you are financially, it’s critical to know your score and make sure you clean up any credit report errors quickly.

The formula that Fair Isaac uses to calculate your FICO score is kept secret – sort of like the recipe for Coca Cola. It’s common knowledge that the the low range of a FICO score is between 300 and 400. The high range is between 800 and 900

What Is a Good FICO Score?

720 or better is good. But keep in mind that even someone with this score could be turned down for a loan or get a higher rate from one bank than another bank. That’s because each institution interprets the score (and your circumstances) differently. How long have you been at your current job? How long have you lived in your home? These and other factors come into play in determining what rate you’ll pay for credit.
Your credit score isn’t so much about you. It’s more about how safe the bank feels their investment in you is at this time.

Fair Isaac says the Median FICO Score in the U.S. is 723. That means if you want great credit terms, shoot for a rate that’s higher than 723.

What does the FICO score mean?

The FICO score estimates the probability that you’ll be late in a payment for 90 days or longer over the next two years.

PERCENTILE % OF PEOPLE SCORE DELINQUENCY RATE

This means if your score is below 500, you have an 87% chance of being late in your payments by 90 days or more over the next two years. If your score is above 799, you have only a 1% chance.  Obviously, the higher your score, the lower the risk…and that means you’ll get better interest rates when you get credit.

That’s how the lenders use your FICO credit score and that’s why you must do everything you can to improve your credit score fast.

Interested in finding out what your score is?   You can get a free estimate of your range here:

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401k Performance – 5 Tips  To Turbo Charge It Now

Here are 5 ways to increase your 401k performance.

1. Wise Up

The first (and most important) way to increase your 401k performance is to know what the performance really is. Many people don’t. They just gauge performance by comparing the bottom line from one period to the next. This in not only misguided….it’s dangerous.

An example will explain why.

Let’s say you start the year with $100,000 in your 401k. The value at the end of the year is $98,000. You lost $2000….right?

Wrong.

During the year, you contribute $5000 and your employer contributes $2000.

You lost $9000. You had $100,000 but you added $7000 so your basis was $107,000. If the value dropped to $98000, the total loss for the year was $9000.

People who just compare the gain or loss between periods underestimate risk and overestimate rewards. As a result, they often take on a lot more risk than they would otherwise be comfortable with.

Please don’t do this OK? It gives me a headache when people do this. Just stop it.

2. Get Your Fingers Out of the Cookie Jar

Unless it’s a very unusual circumstance, you should never borrow against your 401k. If you do, you’re setting yourself up for a bad precedent and a gloomy retirement future.  There are better ways to get out of debt than borrowing against your 401k.

Of course there are exceptions but most people I know accumulate the bulk of their liquid net worth in their retirement accounts. Do you know why?

Because it’s hard to get your hands on it. The government slaps a penalty on you if you do and this is one case where I think the government is right. How much money do you need to retire?  Do you think you’ll get there if you start borrowing from that pot now?

Once you start drawing from this well, you’re likely to continue doing so.

Don’t start…OK?

3. Focus baby….Focus

Besides paying off debt, there is nothing more important to do with your money than contributing the maximum amount you can to your 401k. I say this because you get a good tax deduction for it and often, your employer matches at least some of the money.

Do you see? Both the government and your employer are trying to get you to help yourself. This is probably the only time that’s going to happen in your lifetime. The Universe is talking to you. Are you listening? After you pay off debt, contribute the maximum allowable to your retirement plan.

4. Enough is Enough

Don’t buy company stock with your 401k.

Manage your risk by divesting from your company.

Look…if the company starts hitting the skids, two things could happen at the same time; the company stock will tank and they’ll downsize and lay you off. You’ll need a job and a retirement. Double Whammy.

Not good.

Your risk is that if the company goes south, you lose all the way around. Reduce that risk by keeping your retirement assets out of company stock.

5. Performance Anxiety

I am not a buy and hold guy. But that doesn’t mean I never experience investment losses. No long-term investor can escape losses at some time or another.

I realize that you are counting on your retirement accounts and you get very upset when values decline. It’s only natural.

But facts are facts.  You have to ask yourself what are the best investments for retirement income ?

Your retirement assets are you longest term investments. Even if you are 65 years old today and planning on retiring in the next years, you should still think long term.

I say this because even when you retire, you can’t allow that money to retire with you. It’s got to keep working for as long as you plan on living. That means, if you’re 65 today and going to retire, you should still think of your retirement assets as a 30 year investments.

That being the case, you want some growth in the account and the only way to get growth is to invest in equities – with at least some of your money.

(If anything, I’d be very cautious of using bonds right now – especially in retirement accounts. I say this because rates are very low right now and when they go up those long-term bond fund values might tank.)

What other tactics have you used to enhance your 401k performance?

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It’s easy to open an IRA.

But if you do so without taking certain preliminary steps, you might waste time and money and make a mess. Yuk.

Here’s a checklist you can use to make sure you avoid the land mines:

1. Determine how you’re going to invest.

Are you a buy and hold person or do you use more proactive investment strategy? If so, how often? Are you going to use mutual funds, ETFs or individual securities? Are you going to buy real estate in your IRA? How are you going to allocate your retirement investments?

You have to be very clear on what kind of investments you’re going to make because:

a. Some financial institutions don’t offer every investment choice.

b. Some charge more for transactions than others.

That’s why the first step to get clear on is what you want to invest in and how often you’re going to trade.

If you don’t know the best way to invest your IRA, consider seeking professional guidance. I’m partial to impartial advisors. If you get advice from an insurance agent, you’ll end up owning annuities in your IRA (see below on why that’s a huge error). If you go to a broker for advice they’ll sell you something they earn commissions on. An independent advisor is just that…..independent. (Again, I’m biased because I’m an independent advisor so take it with a grain of salt.)

Flikr, Encino.Maritano

2. Stay away from insurance companies.

These guys are tricky. They will be only too happy to open an IRA for you but their “IRA” isn’t the IRA you’re thinking of. They offer an Individual Retirement Annuity. Annuities are not wise IRA investments because the IRA is already a tax advantaged account. You don’t need another tax advantaged account within a tax advantaged account. It’s a big waste.

Sure the good folks (and there are some) who offer annuities for retirement accounts will tell you that the annuities have guarantees that traditional mutual funds don’t. They will also tell you that the annuities made a lot more money over the last 10 years than the stock market did. All that’s true but it doesn’t matter.

Your retirement accounts are probably going to be important to you for a lot longer than 10 years. I can’t guarantee the future but in my experience, annuities within retirement accounts works out only for the insurance company – not for the investor.

3. Identify a list of potential custodians.

This is easy. Once you’re clear on how much you’re going to invest and how you want to invest it, get on the phone or internet. I’d suggest checking into TD Ameritrade, Schwab and Fidelity as well as with your bank. Compare the cost of doing the kind of investing you want to do and select the least cost alternative. There will be trading and administrative costs. Ask questions about both.

Remember, if you want professional guidance, this is going to add to your costs. But you have to consider what the cost would be if you make investments without knowing what you’re doing. It’s sort of like saving nickels and forgetting about the twenty dollar bills floating around.

4. Think about your beneficiaries.

The beautiful thing about IRA’s is that you get to name a beneficiary. This means you don’t need a trust or will when it comes to IRA’s. Your beneficiary form takes precedence. I’ve written an entire post on how to select the right IRA beneficiary so please review it. It’s super important to select the correct person.

5. Do not repeat this process next year.

I want you to make your IRA deposits each year. I just don’t want you to open a new account every year.

You can make numerous IRA deposits into one brokerage account. You don’t need to open a new IRA account each year. You’re far better off if you consolidate your IRAs as much as possible. So once you open your IRA, you can just dump your yearly deposits into that account and invest it as you like.

I know this can be confusing but think of your IRA account as a big pot. Each year you’re going to add some ingredients (more money) into the “pot”. The stew changes each year because as you add (money) you invest it as you see fit.

Opening an IRA is really easy. Don’t be intimidated. No matter what your experience or understanding is, you can do it. If you’re feeling a bit unsure, just tell the person you’re talking with about your anxiety. They’ll likely be extra kind and gentle. And if not, I guess that narrows the choices. It’s your money. Don’t ever do business with anyone who doesn’t answer your questions or treat you with utmost respect.

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Do you need a QDRO attorney?

First, what is a QDRO?

It’s basically a document issued by the court that orders how retirement assets are to be divided between you and your (soon-to-be) former spouse.

flikr, KevinDooley

A QDRO (Qualified Domestic Relations Order) used correctly can protect your share of IRA money (and other retirement assets) in case of divorce.

I thought about this issue after I received the following question a few days ago from “D”:

My husband is leaving. I know that I am the beneficiary on his IRA account. If he leaves and wants to change his beneficiaries, do I have to sign off on that, or can he do this without my knowledge?”

“D”,  as long as you are legally married he has to get you to sign off on his beneficiary form if anyone other than you is named as beneficiary of his retirement accounts. That means, if he wants to change the beneficiary, you have to sign off. End of story.

If you don’t get back together and formally end the relationship through divorce it’s another story.

Some or all of his retirement accounts will be split between the two of you. If you are lucky, you’ll both find an amicable way to split the assets. If not, the Court will get involved.

Either way, you’ll get a QDRO from the Court and use it to split the retirement accounts. Basically, this document allows you to take the specified portion of the retirement accounts and roll them over to your own retirement account. You won’t pay taxes on the rollover and you can continue to defer taxes on the account as long as you are otherwise entitled to defer the tax (under age 70 ½).

When you withdraw money from the account, you’ll pay taxes on those distributions – not your ex-spouse.

It’s crucial that your divorce decree include a QDRO and you execute it.

If you split the assets without using a QDRO, it will be considered a taxable distribution. Yikers! That means all the money you withdraw will be subject to tax and (possibly) penalties.

If you are facing divorce, the two most important financial issues are:

1. Try as hard as you can to come to arrangement. Even if you have to give up some negotiating points that are rightfully yours, you’ll be better off if you both keep the split friendly.  It’s the best way to save money in divorce.

2. Learn how to manage the money. If your spouse was in charge of handling the budget and making the investments, it’s critical that you master these two skills as soon as possible.  You also have to be mindful of how to handle tax reporting yourself if it’s new to you. And of course there’s the issue of creating income.  That’s enough to keep you busy for awhile….right?

You have to be careful because if there are retirement assets involved, you are going to want to use (or at least consult) with an attorney who is familiar with and drafts QDROs.  Don’t use a divorce attorney who doesn’t draft these herself.  She’ll outsource it and you’ll end up paying double.

This of course presupposes that you’ll use an attorney for the divorce and that could open up a huge can of wormy worms.  As I’ve said, many divorce attorneys are adversarial.  They like to stir the pot because they charge you by the hour.  The more drawn out the process, the more vacations they take the French Riviera.

Ultimately, you need an attorney who is NOT adversarial and who is well versed in using QDROs.  Be mindful of this when you attorney shop.

The best approach would be to mediate the divorce and consult with an attorney who specializes in drafting QDROs. In this case, you might use one person to mediate and another to draw up the QDRO.  This will save you a big pile of cash. This savings isn’t just nice…..it could mean the difference between having enough to retire and working at Costco until you reach age 97.  Lawyers eat up lots of cash if you’re not careful.

If you’ve gone through a divorce or separation, how did you handle the retirement accounts and other investments? What did you do to get up to speed in this area?

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What to do when yourwallet has been lost of stolen

Do you know the desperation of having your wallet stolen or lost?

It feels terrible and for good reason.  First, you’re afraid someone’s going to take a trip to the South of France on your dime  – and you’ll have to improve your credit score fast.

And the second reason it feels so bad is because deep down you know it’s your fault.

That’s right. Unless you got mugged or hijacked, your wallet went missing because you weren’t being careful.

Flikr, Thirteen of Clubs

I say this with deepest love, respect and sympathy and with no malice. I lose my wallet way too often.

But, as my wife and kids constantly remind me, I lose my wallet because I don’t pay attention.

If your wallet gets lost of stolen, it’s only because you fell asleep at the wheel.

In a moment, you’ll see why identifying the cause of the problem is so important. For now, let’s get to the short-term solution – protection.

1. Call your credit card companies.

This may be hard to do if you don’t have your wallet. You’ll have to get the phone and account numbers from your account statements.

If possible, ask the company to give you a new account number rather than close the account and open a new one.

This is less of a headache for you and it keeps the card issuer from jacking your rates up with a new account. Also, make sure to get your mileage and other benefits transferred to the new number. While you’re on the phone with them, make sure you’re getting rate you can and make a note to look for lower cost credit card alternatives down the road.

2. Call the Police or Sheriff

If somebody gets their claws on your wallet, they can steal your identity. You’ll need this police report.

3. Put a  fraud alert on your accounts by calling all three credit reporting agencies.

Experian: 1-888-EXPERIAN (397-3742)
Equifax 800-525-6285
Trans Union 800-680-7289

This forces merchants to make anyone using your card to verify their identity. If you have an identity theft protection plan, call them and they’ll contact the credit reporting companies. Correct any credit report errors immediately.

4. Report the loss to your bank.
Make sure they issue new ATM cards at the very least. You may also want new checking accounts to be opened.

5. Watch transactions

If you do your banking online, you can see if there is any activity on the account by downloading the data each day. If you do spot anything suspicious, call the credit card company or bank.

6. Get a new Drivers License.

In most states, you can simply go down to the DMV and get a new license. You’ll probably need to pay for this so bring some cash or a check with you. Go online and find out what your state requires before you go down to their office.

8. Inventory

Think of everything you had in your wallet and make a list. Did you have any cash? How much? Any information on passwords or account numbers? Was your home address in your wallet? Did you have any blank checks? It might take you a few days to remember everything so keep this list with you and update it as you remember.

Final Tips

1. Don’t carry your Social Security number, account numbers or passwords in your wallet or purse.
2. Keep contact information for your banks and credit card companies in a separate location.

While it’s a real violation when someone rips you off, it’s even worse when that “someone” is someone you know.  Unfortunately, that happens.  The good news is it may be easier to collect money from people you know than from strangers.

Of course the best tip is to never lose your wallet or purse in the first place. I’ve never had a wallet stolen but I have misplaced mine many times as I mentioned above. 99% of the time it’s somewhere at home and my wife always finds it.

She’s kind of tired of always having to find my stuff so she gave me a plastic box. She told me I have to put my wallet, keys and phone in that box everytime I come home or else.

So far it’s working.

Do you lose your wallet? Have you ever had it stolen? What precautions have you taken?

Before you go search for your wallet or purse under the couch, you might want to check out the weekly links:

Get Rid of Dysfunctional Money Behaviors-Part 4-Gambling as a Way to Wealth Barbara Friedburg

Invest it Wisely What Are Backlinks, and Why Are They Important?

How Social Security Calculates Your Benefit My pal Doug

Dealing with investment confusion – A timely piece by Mike Piper, Mr. Oblivious

You might need a budget if….   By Craig at MH4C

Cheap Travel Options for Students, Mike

Joe Taxpayer, The Upside of Irrationality

Canadian Financial Blog on How to Reduce Your Weekly Food Budget

A thoughtful piece on how to invest in Germany from a bloke across the pond – Monevator.

Cash Money Life on Education vs College Degree.

David Ning talks about how to decrease spending on dry cleaning.

Moolanomy talks about an alternative way to invest in gold.

The Digerati Life asks should you invest in an Ivy League education?

Carnival of Personal Finance

Festival of Frugality

What Is A Secured Credit Card?

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