Your Financial Bodyguard

Insight on Variable Annuities

I saw a very good post on variable annuities and I thought I would share.  If you are interested in this type of investment make sure to do your homework.  Here is a quick link to get started:

http://www.smartmoney.com/retirement/planning/how-variable-annuity-income-falls-short-1326323765829/?link=SM_hp_retirement

Related articles

• Annuities: How to protect against inflation (confused.com)

Underwater Mortgage Help

Great overview of the new "Home Affordable Refinance Program or HARP" by Annamarie Andriotis about the new program.  Take a good read and let me know if you have any questions.

Homeowners can start applying for the government's revamped refinancing program on Thursday. But much like the first time around, experts say many borrowers will see it as too little too late. 

The program is intended to help borrowers who owe significantly more on their home than what it's currently worth. It expands on the original Home Affordable Refinance Program, or HARP, which was created to help borrowers who owe up to 105% of their home's market value to refinance their mortgage, and was later expanded to those who owed up to 125%. This newest incarnation, dubbed HARP 2.0, removes the 125% cap, allowing borrowers who are deeply underwater to get a new mortgage at a lower interest rate and with more affordable monthly payments. To qualify, borrowers must have either a Freddie Mac or Fannie Mae-backed mortgage.

While experts say the new HARP will help more borrowers -- roughly 11 million homeowners are underwater, according to data and analytics firm CoreLogic -- they point out its limitations.

For starters, the whole process could take months. Lenders who underwrite mortgages manually can start processing refinancing applications this month, say spokespeople from Fannie Mae and Freddie Mac. But those who depend on an automated software system to underwrite mortgages must wait until updates are made, says Brad German, a Freddie Mac Spokesman. (Many lenders rely on the automated system.) Those lenders won't be able to start processing applications and delivering loans until at least early February for Freddie Mac-backed mortgages and until March for Fannie Mae-backed mortgages.

That's not the worst of it, say experts: Some borrowers might not be able to qualify at all. The program requires that borrowers have missed no more than one payment during the past year and none during the past six months, says Keith Gumbinger, vice president at HSH Associates, a mortgage-data firm. If they don't meet this criteria, they'll have to wait until they do in order to qualify. Also, borrowers who've already refinanced through HARP are ineligible. "It's a nice little step, but [it's] not really going to get the housing market restarted," says Ira Rheingold, executive director of the National Association of Consumer Advocates, whose members include attorneys that represent distressed homeowners.

What's more, the program is entirely voluntary. Lenders are not required to refinance mortgages for underwater homeowners. (The government doesn't provide incentives for lenders to participate in HARP.) Many homeowners who qualified for the existing HARP program were turned down because lenders were unwilling to take on that risk, says Gumbinger. Lender resistance may also derail some borrowers' attempts to refinance under HARP 2.0. It's up to each lender to determine whether they'll participate in the program. (Freddie Mac lists participating lenders on its web site.)

That said, experts say some aspects of refinancing will get easier. For example, borrowers who apply to the same lender to whom they make their monthly payments won't have their credit scores checked, they point out, and won't be required to provide documentation proving their income. The lender will simply call the borrower's employer to confirm job status. That could come as relief for borrowers who've recently experienced a pay cut or a ding to their credit score.

Is it worth it? Gumbinger points out that qualifying homeowners stand to save thousands of dollars over the life of the loan by refinancing to a lower rate. However, the program does not reduce mortgage principal, so even after successfully refinancing, borrowers will still remain underwater, he says.

 

Get those New Years Financial Resolutions Going

Great blog post by Lynnette Khalfani-Cox from MyMoneyCircles.com.  Check it out and subscribe, it is FREE!

Thirty days.

That's roughly the amount of time the average American sticks to his or her New Year's resolution.

If we're honest about our financial New Year's resolutions – like saving money, organizing our finances better or laying off the credit cards – many of us will admit that we might not even make 30 days.

But what if there was a way to jump-start your finances in 2012 so that even if your willpower waned after a month or so, you'd still be enormously ahead of the game?

Actually, there are several steps you can take to greatly improve your chances of achieving your financial goals in the coming year.

Here are three powerful ways to turbocharge your finances in 2012. These strategies can also help you make the most out of just 30 days in the new year.

1. Give yourself a one-month challenge

Behavioral experts say it takes about three or four weeks for you to do something repeatedly and have that action turn into a habit that lasts. So give yourself a one-month challenge to do, or stop doing, something in order to improve your finances.

If you want to start a good habit, try logging your expenses daily to better track your spending. Alternatively, you could carpool to work or even just put every dollar you get into a savings jar each day. Remember, you only have to do it for one month.

At the end of 30 days, you can always stop or tweak what you're doing. But you will likely be so satisfied with the benefits of your newfound habit that you will decide to stick with it for the long haul.

To eliminate a bad habit, like overspending, consider not visiting your favorite retail store for 30 days, not carrying your credit cards with you each day to avoid impulse shopping or not eating out at all for one month.

2. Join a financial boot camp

For the ultimate month-long challenge, and to achieve financial fitness, join a financial boot camp.

One great option is MyMoneyCircles.com, a free, four-week boot camp that guides you to financial health one step at a time. As a Money Coach, I'm proud to lead this online boot camp, along with a team of other personal finance experts.

In just one month, we help you address some of your most pressing financial questions and concerns and deal with your most stubborn financial challenges. For example, you'll learn how to save money quickly on your immediate and long-term bills, including insurance, communications, housing and more.

You'll get the skinny on how to manage credit and debt wisely. You'll figure out what you need to do to adequately protect you, your family and your assets against unforeseen circumstances like a layoff or illness. And you'll get a game plan to save more money for retirement and other future-oriented financial goals.

The boot camp includes community groups that let you to connect (anonymously) with other like-minded people who share your same financial goals. And while MyMoneyCircles is designed to keep you accountable and on track financially, a range of resources, quizzes and tools also make the process doable and fun.

3. Get started now

Why wait until January 1, April 15, or some other arbitrary date in the future to begin fixing your finances? Start taking charge of your money matters today just by adopting this motto: "Think-Do."

Simply put, it means when you think of something you know you should do, or need to do, go ahead and tackle that task immediately. Think-Do.

For instance, if you've been too scared to check your credit report, you can order it online today fromAnnualCreditReport.com. Done.

If you've neglected to buy much-needed life insurance, you can get life insurance quotes today fromInsure.com. Done.

Or if you've put off organizing your tax records, you can start gathering your receipts and financial paperworktoday. Done.

Exactly what you do isn't as important as doing something – and doing so today. If you put the "Think-Do" strategy into practice for 30 days, you'll be amazed at how much gets accomplished.

By taking just one small but powerful action step, you push past the inertia and inaction that cripples many people financially. Instead of procrastinating important financial goals month after month, you'll be addressing many of those issues in just 30 days flat.

So instead of making and breaking financial New Year's resolutions, this time simply put these three ideas into practice for one month – and watch your finances reach another level of success in 2012 and beyond.

Welcome!

Thank you very much for registering with us. 

Our first boot camp begins January 9, 2012. 
Don't worry - we will send you an email reminder. 

Like us on Facebook and Follow us on Twitter to get a jump-start on your finances with daily tips from Lynnette.

 

Tax Tips for 2011 Returns

IRS Offers Top 10 Tax-Time Tips 

The income tax filing season has begun and important tax documents should be arriving in your mailbox. Even though your return is not due until April, you can make tax time easier on yourself with an early start. Here are the Internal Revenue Service’s top 10 tips to ensure a smooth tax-filing process.

1. Gather your records Round up any documents you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.

2. Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.

3. Have a question? Use the Interactive Tax Assistant available on the IRS website to find answers to your tax questions about credits, deductions, general filing questions and more.

4. Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It's available exclusively at www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $57,000 or less, you qualify to use free tax software offered through a private-public partnership with manufacturers.　If you made more or are comfortable preparing your own tax return, there's Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile to review your options.

5. Try IRS e-file IRS e-file is the　safe, easy and most common way to file a tax return.　Last year, 79 percent of taxpayers - 106 million people - used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, the IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.

6. Consider other filing options There are many options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free face-to-face help at a volunteer site. Give yourself time to weigh all the options and find the one that best suits your needs.

7. Consider direct deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than a paper check in the mail.

8. Visit the official IRS website often The IRS website at www.irs.gov is a great place to find everything you need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.

9. Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax, on the IRS website. It’s a comprehensive resource for taxpayers, highlighting everything you’ll need to know when filing your return.

10. Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double check all the Social Security numbers and math calculations on your return as these are the most common errors. Don’t panic! If you run into a problem, remember the IRS is here to help. Start with www.irs.gov.

 

Tax Tips for 2011 Returns

IRS Offers Top 10 Tax-Time Tips 

The income tax filing season has begun and important tax documents should be arriving in your mailbox. Even though your return is not due until April, you can make tax time easier on yourself with an early start. Here are the Internal Revenue Service’s top 10 tips to ensure a smooth tax-filing process.

1. Gather your records Round up any documents you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.

2. Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.

3. Have a question? Use the Interactive Tax Assistant available on the IRS website to find answers to your tax questions about credits, deductions, general filing questions and more.

4. Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It's available exclusively at www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $57,000 or less, you qualify to use free tax software offered through a private-public partnership with manufacturers.　If you made more or are comfortable preparing your own tax return, there's Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile to review your options.

5. Try IRS e-file IRS e-file is the　safe, easy and most common way to file a tax return.　Last year, 79 percent of taxpayers - 106 million people - used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, the IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.

6. Consider other filing options There are many options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free face-to-face help at a volunteer site. Give yourself time to weigh all the options and find the one that best suits your needs.

7. Consider direct deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than a paper check in the mail.

8. Visit the official IRS website often The IRS website at www.irs.gov is a great place to find everything you need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.

9. Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax, on the IRS website. It’s a comprehensive resource for taxpayers, highlighting everything you’ll need to know when filing your return.

10. Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double check all the Social Security numbers and math calculations on your return as these are the most common errors. Don’t panic! If you run into a problem, remember the IRS is here to help. Start with www.irs.gov.

 

Inflation and how we act

Interesting article by Joe Light from the WSJ online.  I think I act like this as well.

By Joe Light

The Labor Department reported today that inflation, including food and energy costs, stayed steady in November at an annual rate of 3.4%. But that was helped mostly by a decline in energy prices. The “core” inflation rate, which excludes food and energy, increased by 0.2 percentage point to 2.2%.

Such reports always raise the hackles of consumers, who could have sworn the price per pound of red peppers has literally doubled in the last 12 months. ($5.99 per pound? Seriously?)

The truth of the matter is, there’s evidence we glom on to the prices of the things that we purchase the most frequently, even if their overall share of our expenditures is low, and don’t pay as much attention to the prices of things we buy once in a while, even if their share is high. During the 2008 spike in gasoline prices, consumers’ expectations of inflation far exceeded actual inflation – including gas prices.

In a paper this fall, researchers described how they put that assumption to the test in a lab. They took 186 Ohio State undergrads and had them play a shopping game, at the end of which they were asked to guess the inflation rate of the total basket of goods they purchased. They found that the students overestimate overall inflation when inflation is high on the items they bought the most often.

Back in the real world, that means the prices of things like food, gasoline and, say, cups of coffee have an inordinate impact on how we think overall prices are moving – even if the car dealer down the street just slashed prices by 20%.

If you have to buy a car, that’s going to matter a lot more than the $365 extra you’d pay if coffee prices went up by $1 per cup.

Refinancing Underwater Mortgages

This from Smart Money which highlights the new government effort to help people underwater on their mortgages:

Homeowners can start applying for the government's revamped refinancing program on Thursday. But much like the first time around, experts say many borrowers will see it as too little too late. 

The program is intended to help borrowers who owe significantly more on their home than what it's currently worth. It expands on the original Home Affordable Refinance Program, or HARP, which was created to help borrowers who owe up to 105% of their home's market value to refinance their mortgage, and was later expanded to those who owed up to 125%. This newest incarnation, dubbed HARP 2.0, removes the 125% cap, allowing borrowers who are deeply underwater to get a new mortgage at a lower interest rate and with more affordable monthly payments. To qualify, borrowers must have either a Freddie Mac or Fannie Mae-backed mortgage.

While experts say the new HARP will help more borrowers -- roughly 11 million homeowners are underwater, according to data and analytics firm CoreLogic -- they point out its limitations.

For starters, the whole process could take months. Lenders who underwrite mortgages manually can start processing refinancing applications this month, say spokespeople from Fannie Mae and Freddie Mac. But those who depend on an automated software system to underwrite mortgages must wait until updates are made, says Brad German, a Freddie Mac Spokesman. (Many lenders rely on the automated system.) Those lenders won't be able to start processing applications and delivering loans until at least early February for Freddie Mac-backed mortgages and until March for Fannie Mae-backed mortgages.

That's not the worst of it, say experts: Some borrowers might not be able to qualify at all. The program requires that borrowers have missed no more than one payment during the past year and none during the past six months, says Keith Gumbinger, vice president at HSH Associates, a mortgage-data firm. If they don't meet this criteria, they'll have to wait until they do in order to qualify. Also, borrowers who've already refinanced through HARP are ineligible. "It's a nice little step, but [it's] not really going to get the housing market restarted," says Ira Rheingold, executive director of the National Association of Consumer Advocates, whose members include attorneys that represent distressed homeowners.

What's more, the program is entirely voluntary. Lenders are not required to refinance mortgages for underwater homeowners. (The government doesn't provide incentives for lenders to participate in HARP.) Many homeowners who qualified for the existing HARP program were turned down because lenders were unwilling to take on that risk, says Gumbinger. Lender resistance may also derail some borrowers' attempts to refinance under HARP 2.0. It's up to each lender to determine whether they'll participate in the program. (Freddie Mac lists participating lenders on its web site.)

That said, experts say some aspects of refinancing will get easier. For example, borrowers who apply to the same lender to whom they make their monthly payments won't have their credit scores checked, they point out, and won't be required to provide documentation proving their income. The lender will simply call the borrower's employer to confirm job status. That could come as relief for borrowers who've recently experienced a pay cut or a ding to their credit score.

Is it worth it? Gumbinger points out that qualifying homeowners stand to save thousands of dollars over the life of the loan by refinancing to a lower rate. However, the program does not reduce mortgage principal, so even after successfully refinancing, borrowers will still remain underwater, he says.

 

Christmas Tree Shopping

Interesting article from Smart Money (written by Kelli Grant) online on how to shop smartly for a Christmas Tree:

Decking the halls can be an expensive proposition, but Christmas tree shoppers have plenty of options for finding a good deal, experts say.

Despite reports of droughts stunting growth on Texas and Oklahoma farms, Christmas tree pricing nationwide has remained flat, says Oscar Sloterbeck, the head of company surveys for market research firm ISI Group. Sales during Thanksgiving week, meanwhile, were up 6% nationwide compared with last year, he says. 

Now that online retailers compete with tree farms and stores, shoppers have far more opportunities to find discounts, experts say. Growers are also marketing more niche varieties geared toward budget shoppers. "I've seen whole sections of 'condo' trees that are really skinny, or small enough for a tabletop," says Rick Dungey, a spokesman for the National Christmas Tree Association, an industry group. "They're trying to put more options, more variety out on the marketplace for customers who ordinarily wouldn't have gotten a tree."

By the National Christmas Tree Association's data, shoppers spent an average $36.12 last year for a real tree, but prices can easily be triple that depending on the size and type of tree and where it's purchased. Splurging on this holiday expense, however, means less of a budget for other things besides, the tree gets thrown away in a few weeks, says Heather Wagenhals, founder of the Unlock your Wealth Foundation. "It's about the people around the tree, not the tree itself," she says.

Experts recommend these tips to get a great tree one, without overspending:

Compare pricing methods

Some vendors selling trees calculate price by the foot, while others charge a flat fee for any tree in the lot, says Wagenhals. Either might be the better deal, depending on the size you're looking for. Ask specifically about the price for say, an 8' tree when calling around, she suggests. Also look beyond tree lots to garden centers, supermarkets and home improvement stores, which may have their own supply.

Consider species

Consumers might find that one of the more than 30 types of Christmas trees has features that fits their needs better than others -- the Fraser Fir has sturdy branches to withstand heavy ornaments, for example, and Blue Spruce have sharp needles that deter a climbing housecat. But some varieties are more expensive than others depending on their availability in that area, so it's worth adding that into the mix when asking about prices, Dungey says. AtChristmasFarms.com, a 6' tree sells for $110 to $139, based on its type.

Browse online

Shoppers can pick a tree from the comfort of home as big retailers join the host of growers selling trees online for home delivery. Target is selling trees online for the second year, and Sears is selling them for the first time this year. Prices can easily be twice what they are on the lot, but trees are cut to order, which may mean they're fresher -- and so, last longer -- than those on lots that were cut as early as October, says Les Werner, an associate professor of forestry at University of Wisconsin. 

Cut your own

Bypass even the choose-your-own farms in favor of the woods. The U.S. Forest Service sells permits for consumers to cut down their own tree in a national forest. The price: as little as $10. The trade-off, of course, is in extra time and effort to saw down the tree and lug it home.

Clip coupons

Groupon, LivingSocial and other daily deal sites have offered vouchers for local tree farms and other venues selling Christmas trees. Sandone Christmas Trees of Dallas, for example, offered $80 worth of goods for $40 via Groupon. Through Dec. 2, Sears has a 5% off sale on its fresh-cut trees, which knocks the price of its 6' Fraser Fir trees to $95. (The trees had already taken a price cut from $120 to $100.) Costco has cut its tree prices by $20 to $50, for orders placed by Dec. 18.

Check quality

The fresher the tree, the better your chances it'll still be alive come Christmas morning. "Ask where the trees came from," says Werner. "Obviously, if they were shipped 800 miles, there's going to be some time delay." Even that's not necessarily a bad thing, if the tree has been stored properly, he says. If the branches snap when bent instead of flexing, that's a sign the tree is no longer able to absorb moisture. Ditto lots of needle loss.

Wait

This might be the year to start a new tradition: decorating the tree on Christmas Eve, or close to it. Tree pricing tends to hold steady from Thanksgiving until four or five days before Christmas, when sellers are looking to clear out their remaining inventory, Sloterbeck says. "You'll almost certainly get a deal," he says.

Haggle

Tree-lot operators may have paid just $10 for a cutting permit themselves, says Wagenhals, or have purchased their wares wholesale. Either way, the profit margins are significant enough that many are willing to negotiate. Make an opening offer of half the sticker price, she suggests.

 

 

A unique offshoot of the Housing Decline

Saw this one on a real estate website:

California college students have found vacant, sprawling McMansions near campus cheaper than the cramped dorm rooms offered by their universities. In towns such as Merced, California, undergrads opting for this unconventional living arrangement can rent suburban palaces boasting granite countertops and Jacuzzi bathtubs with four of their friends for just above $200 each — a considerable upgrade from the thin walls and shared bathrooms on campus for twice the price.

College towns such as Merced, which is ranked third nationally in metropolitan area foreclosures, have found a new demographic in need of housing that can afford to pay more than the average family. Students pay less for more space when they rent a McMansion, and their occupancy helps a neighborhood of vacant real estate retain its value.

 

Adjustables make a comeback

Borrowers are once again signing up for one of the risky loans that fueled last decade's housing boom -- and bust: the adjustable-rate mortgage according to the Wall Street Journal.

After two years of little demand, ARMs, which offer borrowers a fixed interest rate for a set period, after which rates rise or fall with prevailing rates are making a comeback. For the first six months of this year, ARMs accounted for 13.4% of the total mortgage market, according to the latest data available from Inside Mortgage Finance, a trade publication. That's up from 9.5% for all of 2010 and 6.3% in 2009.

Rates on ARMs today are so low and real estate prices are so depressed in most markets, many of the risks of ARMs have been forgotten. The average rate on a so-called 5/1 ARM -- which carries a fixed rate for five years before adjusting each following year -- is now 2.96% compared to 4.16% for a 30-year fixed rate mortgage, according to HSH Associates, which tracks mortgage data.

Before considering an ARM, I would recommend borrowers ask to see the lowest and highest possible monthly payments they could theoretically face over the life of the loan to get a better sense of whether they can afford it under a range of circumstances. One smart strategy for borrowers: Put any extra savings during the fixed term of the loan into an interest-bearing emergency fund to cover the higher costs when rates rise.