Trees Full of Money

Be Careful when Considering a Reverse Mortgage

2008-07-24T08:00:00.001-04:00

Reverse mortgages allow homeowners (age 62 and over) to convert a portion of their home’s equity into cash that generally doesn’t need to be paid back as long as the borrower(s) lives in the home. Typically, the equity is paid out in monthly payments but can also be taken on an “as needed” basis.

Reverse mortgages are attractive to cash strapped seniors that normally wouldn’t be able to meet the monthly payment obligations of a first or second mortgage, or a home equity line of credit (HELOC). The funds can be used towards anything from home repairs to exotic vacations and are generally tax free.

The loan is repaid when you die (from your estate), sell your home, or no longer live there as your principal residence.

As an added protection the Federal Housing Administration (FHA) guarantees you will never owe more than the selling price of the "mortgaged" house.

Disadvantages of a Reverse Mortgage
Reverse mortgages can be very expensive. Upfront costs associated with reverse mortgages approach 6% of a homes value. If you have sufficient cash flow, and your credit is reasonably good, a much better alternative is a home equity line of credit.

If you have sufficient cash flow, and your credit is reasonably good, a much better alternative is a home equity line of credit.

Be cautious of anyone who tries to sell you an annuity or long term care insurance as a "package" with your reverse mortgage. The Federal Trade Commission and many leading financial planners see this as a conflict of interest and nothing more than an attempt to soak the consumer with more fees.

Because of a reverse mortgage's "complexity" borrowers are required to meet with an independent counselor to help determine if a reverse mortgage is a wise course of action. Many retirees qualify for alternative lower cost "single purpose" government sponsored reverse mortgage programs, or low interest loans, when funds are needed for home improvement repairs or to pay outstanding property taxes.

Never rush into signing up for a reverse mortgage. If you find that a reverse mortgage is right for you, compare the fees and terms of several lenders and choose the one that is best suited to you.

Career Skills: Tips and Strategies for AFTER Your Job Interview

2008-07-23T08:00:00.000-04:00

Making a great impression with a prospective employer goes well beyond the formal interview. A quick search on the Internet will reveal a virtually unlimited number of tips (some good and some bad) on how to “nail” your job interview. However, landing your dream job goes well beyond a nice suit and good grades. Here are some suggestions to remember after the interview to raise your stock as a prospective employee.

Maintain Your Professionalism
There have been many cases of recruiters being blown away by a candidate’s curriculum vitae and interview performance only to be discouraged later by his lack of manner in follow-up conversations.

An anonymous writer in a recent letter to “Dear Abby” suggested candidates refrain from slang such as “when does this gig start” when communicating with a prospective employer. She also cautioned against using personal email accounts such as “hotchick99”. If you haven’t already, get a more appropriate email account such as your initials and last name @yahoo.com (for example).

Write a Thank You Letter
To this day (10 years later) I am convince the main reason I landed my current job is because immediately following my interview I sent the recruiter a respectful “thank you letter” with a reaffirmation of my interest in the company and my future with them. As an added touch, I included a bumper sticker from my school (Maine Maritime Academy). It didn’t make my GPA any higher but I believe it gave my name more recognition. Unfortunately, the recruiter left the company shortly thereafter and I never got a chance to formally thank him (Kevin O’Flaherty if you are reading this, thank you!).

Clean Up Your Online Profile
The Internet has become a powerful tool for recruiters looking to dig up information on a prospective candidate. You may not mind a recruiter discovering that you were an all conference athlete in school; however, that picture of you doing a “keg stand” at your friend’s bachelor party might be a detriment to your job prospects. A general rule is to remove anything from your MySpace or Facebook page (or other social networking sites) that you wouldn’t want your grandparents to see.

Related Articles:
Advice for the College Graduate: Class of 2008 Edition
Be A Better Employee (or Boss): The #1 Element in Effective Performance Appraisals

How to Sell a Vehicle with Negative Equity (Upside Down)

2008-07-22T08:00:00.000-04:00

If you’ve financed a new or used SUV or truck over the last couple of years, there is a good chance that you are now significantly “upside down” on your loan (negative equity). If you are happy with your vehicle, and plan on driving it through the end of your loan term, there is no cause for concern. However, if your financial situation has changed and you need to part ways with your “upside down” gas guzzling vehicle, here is how to do it.

Step 1
The most important step in unloading a vehicle with negative equity is to accept the situation for what it is. Saying “if I sell my vehicle now I’ll lose money” won’t get you anywhere. The money is already gone, deciding to sell the vehicle only forces you to deal with it.

Step 2
The second step in selling an “upside down vehicle” is deciding its fair market value. With the continually rising price of gas and slumping demand for gas happy SUV’s, the fair market value of your vehicle may be significantly less than used vehicle pricing guides such as NADA and Kelly Blue Book suggest.

Step 3
Once you’ve established a competitive price, you need to secure funding for the difference between what you owe and what the vehicle will bring. Unless you have the difference sitting in a savings account securing this funding will be the most difficult step.

One of the most effective methods is to contact the bank that holds the title to your vehicle. Explain the situation and ask them if they will give you a personal loan (signature loan) for the difference. This technique is especially effective when dealing with “local” banks and credit unions. If they refuse, pressure them by saying “You need to help me. Either we do it this way and I have a chance of staying current on the loan, or I continue to struggle with my payments and eventually defaulting on the loan”.

Another technique is imploring the help of other local banks and credit unions in your area. Don’t get discouraged if one turns you down, keep trying. With any luck you’ll find a compassionate loan officer willing to help.

If you have no luck securing a loan for the difference of your upside down vehicle and you have no other options, you may want to consider taking a loan from your 401k or other retirement account if it means you are otherwise going to default on the loan.

If this is not an option, you may need to obtain a second job and accelerate payments on your vehicle until you owe equal to or less than what it is worth.

Step 4
Once you have met the obligations of your loan it’s time to do a little marketing and salesmanship. Be sure to read my article on getting the most money when selling your used vehicle.

Step 5
When you have identified a prospective buyer for your vehicle, be sure to ask your bank how to proceed with the transaction. Most likely the buyer will need to provide your bank with proof of his ability to purchase the vehicle. Typically in these situations, you sign a bill-of-sale with the buyer and once you settle up with your bank, the vehicle’s title is sent to the buyer’s bank. Each state has different laws so be sure to contact your state’s motor vehicle division as well.

Related Articles:
How to Sell a Car on Craigslist
How to Get the Best Price Selling Your Car
All New Cars are Luxury Vehicles
Maximize Your Car's Fuel Efficiency
Now's the Time to Buy the Truck or SUV You've Always Wanted

Should You Borrow Money From Your 401K?

2008-07-21T08:00:00.000-04:00

Most financial planners will advise you not to borrow money from your 401k with the concern that you may “miss out” on market gains. However, if you need cash and your financial situation leaves you no other alternatives, borrowing money from your 401k might help you get your financial life back on track.

Each 401k plan is different so be sure to read your plan’s terms completely before taking a loan.

How Does it Work?
In general when you borrow money from your 401k the funds are directly taken from your account balance. For example, if you have $50,000 in your 401k account and you borrow $10,000, your account balance becomes $40,000. You then begin paying the loan back through additional paycheck deductions depending on the term of the loan. The obvious drawback here is that $10,000 is no longer working for you in the stock market (or bond fund) and potentially loosing out on any appreciation.

On the other hand (in most plans) the interest that you pay on the funds that you borrow goes directly back into your account. That’s right, you are paying yourself interest! When I borrowed money from my plan 6 years ago the interest rate was 8%. Ironically, during the payback period, the stock market lost value and I came out ahead.

Typically, you pay the loan back with after tax money subtracted directly from your paycheck in addition to any other contributions you normally make to your 401k. In other words, if you are already contributing $100 a paycheck (before tax) to your 401k, you will still have that deducted from your paycheck in addition to the monthly payment amount for the loan.

What Are the Drawbacks?
As mentioned earlier, borrowing money from your 401k is discouraged because you are missing out on potential market gains that have historically been above 11% per year. You may get lucky like I did but chances are that over time you will loose money.

Also, consider that if you quit, are laid-off, or fired from your job, the balance of your 401k loan may come due immediately, otherwise it will be considered an early distribution by the IRS and is subject to a 10% early withdrawal penalty in addition to any regular income tax that may be due on the proceeds.

There are additional fees associated with processing a 401k loan as well. Fidelity charged me a $35 upfront fee as well as $3.75 per quarter to cover “administrative” expenses.

When to Borrow From Your 401k
Only borrow money from your 401k (or other retirement accounts) as a last resort. I made the decision to borrow money from my account after realizing the foolish mistake that I had made when I leased my Toyota 4Runner. I borrowed the difference that I was upside down on my vehicle sot that I could get a better term on my auto loan. Borrowing money from your 401k for medical expenses or to avoid foreclosure are other obvious times that it may make sense to you.

When Not to Borrow From Your 401k
As you may of guessed, borrowing money from your 401k for a family vacation, new plasma TV, or paying for VIP seats at the Super Bowl is not a wise financial decision!

Remember to read your plans literature carefully as each plan has different rules. Hopefully you’ll never have a legitimate reason to borrow from your 401k but if you are considering it good luck!

Related Articles:
Consumption Smoothing: Are You Saving Too Much for Retirement?
Be Careful When Maxing Out Your 401k
Term Life vs Whole Life (Cash Value) Insurance
Traditional IRA vs Roth IRA 2008
How to Pick the Best Mutual Fund for You

Be Careful When Consolidating Your Credit Cards

2008-07-20T08:17:00.002-04:00

Several years ago, we found ourselves with $97,000 in non-mortgage consumer debt, a large portion of which was related to wasteful spending on credit cards. In only a few short years we were able to pay off all of this debt and move forward with our lives.

One of the most beneficial things we did during the debt elimination phase of our financial journey was transferring all of our outstanding credit card balances to one card that was offering 0% interest on all balance transfers. With outstanding credit card balances totaling over $20,000 at an average 11% interest rate, this simple move saved us over $180 a month in interest alone.

Following this strategy may work well for you, just remember that there are a couple of things you need to consider before you take advantage of special balance transfer offers.

Balance Transfer Fees: Don't let credit card companies lure you in with low interest rates on balance transfers only to hit you with a 5% balance transfer fee. This is a common tactic and the reason it is so important to read the fine print of any balance transfer offers.

Your Credit Score: If you transfer balances from several cards on to one, you need to be aware of the implications this may have on your credit score.

A big factor in the calculation of your credit score is your credit card utilization rate. Your credit card utilization rate can be defined as the combined balance of all your credit cards in relation to the combined limit of all your credit cards.
Generally speaking, the lower your credit card utilization rate, the higher your credit score will be. Consider the following:

If you have 4 credit cards with a combined spending limit of $10,000, and the combined outstanding balance on these 4 credit cards is $3,500, your utilization rate is 35% ($3,500 / $10,000 = 35%).

If you decide to consolidate all of these balances to one credit card that has a limit of $5,000, and you decide to close the other 3 credit accounts, your utilization rates jumps to a FICO Score killing 70% ($3,500 / $5,000 = 70%).

For the sake of your credit score, you may want to leave your other credit card accounts open at least until you pay off the outstanding balance.

Related Articles:
How to Pay Off Your Debt with the Debt Snowball
Remove Late Payments from Your Credit Reports
The Ultimate Identity Theft Prevention Guide
How to Improve Your Credit Score
Credit Card Companies Peddling On My College Campus

The Best Personal Finance Carnivals of the Week

2008-07-19T21:38:00.000-04:00

Trees Full of Money is once again giving away a $10 Chevron Gas Card to one lucky reader! To enter simply subscribe to our free email updates HERE. Then send an email to contact.tfom@gmail.com with "gas card" in the subject line (so that I can contact you should you win). One entry will be randomly chosen on July 31st, 2008 with the results posted the following day.

Thanks for reading Trees Full of Money! If you're looking for more great articles to read this weekend, here are a few links to the best of the last couple of weeks!

Wisebread presented 20 healthy foods that can cost you less than a buck and included an article that I wrote on protecting your identity.

Focus Organic hosted a great carnival about "All Things Eco"they were kind enough to feature my article on heating your home with geothermal energy.

Stuck in Traffic hosted the American Economics Carnival and featured my article on drilling in the Arctic National Wildlife Reserve (ANWR).

Disciplined Approach to Investing hosted the Investing Carnival and featured my article the benefits of a Roth 401k.

Financial Guru Online presented the Carnvial of Financial Planning and featured my article on investment motivation in a bear market.

The Budgeting Babe presents the Carnival of Personal Finance and featured my article on tips for the expectant parents.

Budget's Are Sexy presents the Carnival of 20-Something Finances and featured my article on preventing identity theft.

AIDG Blog presents the Carnival of the Green and also featured my article on geothermal heating and cooling systems.

All I Ever Needed to Know About Money I Learned Playing Golf

2008-07-18T08:00:00.001-04:00

Looking back on all the fancy accounting, economic, and marketing classes I took in college, all I ever really needed to know about money I learned through the game of GOLF!

Salesmanship and Marketing
I grew up across the street from a very nice golf course. On any given day I would find between 5 and 10 golf balls on my parents front lawn. I enjoyed collecting and arraigning them by color and brand. By the time I was 6 or 7 I realized that I was sitting on a potential goldmine and I began offering the balls back to the golfers for 25 cents each. In only a few days I built a mini-golf ball empire and effectively monopolized the golf ball market for that golf course with my business’s prime location, great product, and low overhead.

As my empire grew, I noticed that my clients (the golfers) would often complain about how hot it was so I began selling lemonade as well. The golf course owners didn’t care much for it, but there I was along the 18th fairway with a lemonade stand and used golf balls for sale. Later I would change my posters from “used golf balls” to “experienced golf balls” to give them a more positive connotation.

Saving and Investing
The average golfer (myself included) constantly wants to “upgrade” his equipment to the latest and greatest available to get that competitive edge. Unfortunately, due to the prohibitive costs of this, we have to run a cost benefit analysis when choosing to buy a "hot" new product.

Is it really worth paying $500 for a new driver that will give me an extra 10 yards of distance off the tee? As is often the case in life, it may not be your equipment that is inadequate; it might be your skill.

Negotiation Skills
Golf is always more enjoyable when there is a “friendly” wager on the line. With these wagers comes the negotiation of how many strokes (shots) each of us would get before we started our round to make the match even.

Some of us were better golfers than others so in order to make it worthwhile for the less experienced golfers they would get so many “strokes” deducted at the end of each hole.
Negotiations would get complicated because you had to compare the skill of your opponent to that of your own.

After a while I became adept at this “give and take” to find terms that where mutually agreeable by all players in the group.

Networking
Through the years of playing golf, managing a golf course, and serving drinks at the 19th hole, I can think of no other activity in the world where close bonds are made in such a short period of time. If a deal can’t be worked out on a golf course, it can’t be worked out!

Related Articles:
Is Your Boss Too Nice
Advice for the College Graduate: Class of 2008 Edition
Be A Better Employee (or Boss): The #1 Element in Effective Performance Appraisals

Is Your Boss Too Nice?

2008-07-17T08:00:00.003-04:00

A few years ago a manager of mine told me that my job would be a lot easier if “I wasn’t so nice to people”. Specifically, he was referring to the camaraderie I shared with the people that I supervised.

He didn’t directly come out and say it, but he was implying that it is more difficult to give constructive criticism to a “friend” than a subordinate. His statement caught me off guard and it took me a long time to figure out exactly what he was talking about.

I’ve had many “bosses” in my relatively young career and I have always tried to emulate the ones that I had the most respect for. One character trait that these “bosses” always seemed to share was that they were nice, not only to me but to most other employees as well.

It wasn’t obvious at first, but during this reflection period I began noticing that over the last 10 years or so I have had two types of “nice” bosses. One was more beneficial to me than the other.

“Nice Boss” Type 1:
This boss takes an active role in leading his team. He is confident in his decisions but welcomes opinions from his workers. He likes to keep the atmosphere friendly, but has no problem being “tough” with people if it means that an improvement can be made in an employee’s performance.

This boss doesn’t always seem to be in a jovial mood, but usually becomes more open with his team after the completion of a task or during idle moments. A Type 1 “Nice Boss” fosters a feeling of pride and accomplishment in his team.

“Nice Boss” Type 2:
This boss takes a passive approach to leading his team, and rarely second guesses his subordinates unless it is obvious that they are heading down a destructive path. He is afraid of not being liked by his team, and makes up for a lack of confidence in his own leadership skills by being a “buddy” to everyone.

By nature, this boss always appears to be in a good mood (at least on the outside), because he is trying to hide the fact that he may not feel in control of the situation. He is usually optimistic about a project and is perhaps a little too confident that the project will be completed on time.

There is no right way to supervise people as long as the job gets done safely, and no one has their feeling hurt. But under the right management style, a team can become more productive and have a stronger sense of accomplishment leading to happier work environment.

Related Articles:
Be A Better Employee (Or Boss): The #1 Element in Effective Performance Appraisals
Improve Your Personality at Work
Advice for the College Graduate: 2008 Edition

Who Owns American Oil Companies: My Garbage Man Does!

2008-07-16T06:41:00.001-04:00

I received an email a few days ago from my state representative Tom Allen (Maine) directing more blame for our current energy crisis at the big oil companies. I do not mean to single out Mr. Allen, but his statements personify the exact reason we can't make significant progress towards energy independence in this country. We are barking up the wrong tree.

"Families and businesses are suffering while the 5 big oil companies, ExxonMobil, Shell, Chevron, ConocoPhillips and British Petroleum, are enjoying record-breaking profits. One company, ExxonMobil, “earned” more than $40 billion dollars last year in profits- the single largest annual profit in history for an American corporation." Maine State Rep. Tom Allen.

I try to avoid politics on Trees Full of Money, and to this end I will not mention Mr. Allen's particular party affiliation, but here is why Mr. Allen is misleading his constituents and takes our focus away from what really needs to be done.

A Closer Look at Who Big Oil Really Is:
The "5 Big" Oil Companys' profits are not shared by a few elite members of America's population like the media, and apparently my State Representitive are ment to believe. In fact, more than 55 million households in America own mutual funds with a significant percent of these funds holding a stake in an oil related company. Less than 1.5% of all the oil companys' stock is owned by it's executives. When you talk about "Big Oil" profits, you are literally talking about the profits of tens of millions of Americans.

I wonder if Mr. Allen realizes that as of the end of 2007, the Maine State Retirement System(MSRS) held over $36,000,000 in ExxonMobil shares? Keep in mind this does not include undisclosed shares it may indirectly own through it's positions in various mutual funds. Why are Maine's residents not busting down the doors at the state's capital demanding that this position in one of the "Big 5" oil companies be sold?

Are You Big Oil?
Maybe you don't own any stock in an oil company, but there is a good chance that a close family member, friend, co-worker, or neighbor does! Are you mad at them?

What We Need to Do!
Enough of the blame game, we need to be doing everything we can to find more of our natural resources (drilling in ANWR, along with East and West Coasts of US).

We need to be doing everything we can to develop technology to efficiently harness the wind, the waves, and the sun. We need to be investing $100 Billion a year (at least) in these areas.

It’s time for the big oil companies to realize they are in the “energy business” and actually make a meaningful investment in alternative energy. A billion here and a billion there isn’t going to cut it with the American public when they are making over $150 Billion a year in profits.

We need to finally bring geothermal energy into the mainstream media. You can literally save 50% or more in home heating and cooling costs just by investing a year or two’s worth of heating bills into a new air handling unit for your home.

We need to demand more fuel efficient vehicles and take measures to optimize our current vehicle’s fuel efficiency.

It’s time to start building new Nuclear Power Plants! Technology in this area has developed exponentially over the plants built in the 1970’s.

Please Mr. Allen, focus your attention on real initiatives that will have a positive effect on our dependence on oil. Stop blaming hard working Americans!

Related Articles:
Heat Your Home With Geothermal Energy and Save Money
Is It Finally Time to Drill in Alaska's Arctic National Wildlife Reserve (ANWR)
Inexpensive Fuel Efficient Vehicles

How to Get the Best Price Booking Travel Online

2008-07-15T08:53:00.003-04:00

Are you planning a vacation? There are many great deals available on the Internet, but finding the best one takes a little legwork. Follow along as I share my techniques for getting the best price on your vacation travel.

The following 5 Step process can be used for any element of your vacation that requires a reservation from airfare and rental cars, to cruises and hotel rooms. Let's say you and your significant other would like to book a 4 Star hotel room in Boston, MA's Waterfront District over the weekend of August 15th. Here is what I would do:

Step One: My first stop on the Internet is to what I refer to as the "primary" travel booking sites: Expedia, Travelocity, Hotels, and Orbitz. Typically there is little price deviation between these 4 travel booking sites and rarely do I end up purchasing my travel through them, but they do offer a competitive "baseline" price that I will then try to beat using my other methods below.

I enter my information on these sites for a two night stay at a 4 star hotel checking in August 15th and checking out August 17th. All 4 sites offer a price of around $230 per night at either the Boston Onyx Hotel or the Millennium Bostonian Hotel. That's a good start, now let's see if we can get a better price somewhere else.

Step Two: Next I will visit each hotels' websites to see what rates they are offering when booked directly. Currently the Millennium Bostonian offers an advanced purchase rate averaging $210 a night (a little better than through Orbitz), but the Onyx Hotel's direct purchase rooms are higher averaging $240 a night.

Step Three: Similar to the article I wrote on finding shopping discount codes, many hotels offer corporate discount rates and promotions using special codes. You can try a Google search for hotel discount codes for each of the above hotels to see if you can get a discounted rate. You want to ensure that the rate doesn't require additional restrictions at check-in that may render you ineligible for the discount. A quick search for both of the above hotels turned up no such codes.

Step Four: My next stop is the online travel booking site Hotwire. Hotwire is a little bit different than Expedia, Travelocity, Hotels, and Orbitz. You are not shown the name of the hotel when the nightly rates are displayed. You simply enter the date of your stay, the specific area you want to stay in (in this case Boston's Waterfront/Financial District), and the class of hotel (4 star minimum).

Hotel's list blocks of unsold rooms through Hotwire to keep their occupancy rates up. They fill their rooms with deep discounted rates that they otherwise wouldn't want to advertise on their own website fearing that it might bring down the "prestige" of their hotel.

Caution: All bookings made on Hotwire are final and cannot be cancelled, refunded, changed, exchanged or transferred. Change fees are not an option. If our travel partners can be absolutely confident that the products they sell through Hotwire will be used in the exact way they were sold, they can offer deeply discounted hotel reservations. These restrictions enable the hotels to better manage their unsold rooms. It is a big reason why we can offer you great deals. Credit cannot be given for any unused hotel reservations. Once you agree to make a booking on our site, your credit card will be charged for the total price shown -- regardless of whether the hotel reservation is used.

If you are absolutely certain (or are willing to take the risk) that you will not have a sudden change of plans, booking through Hotwire may be a cost effective option for you!

When I entered my information, Hotwire showed a listing for a 4.5 star hotel in the area that I wanted for only $169 a night. A more luxurious hotel for less money! But there's more! We are still not done saving money!

Step 5: By now you should already have a substantial discount on your hotel. It's now time to see if you can get an even better price utilizing the "name your price for travel" website Priceline. For those not familiar with Priceline, you are given the opportunity to "bid" how much you are willing to pay for airfare, hotels, car rentals, and cruises. Like Hotwire, Priceline does not allow you to cancel or change your reservation once it has been booked!

In our example for hotel rooms in Boston, MA, you will need to determine a "fair" bid to offer the hotels. You already have your Hotwire deal of $169 per night so you will want to start your bid below this. But how much lower should you go?

One of the best resources for determining a competitive bid is to refer to the site BiddingForTravel.com. Bidding For Travel is a message board where some users of Priceline post their most recent bid success and failures. You may not find your exact travel dates and location listed, but you will get a general idea of what other people are paying.

In my experience, a Priceline offer of 10-20% less than a Hotwire rate has a decent chance of being accepted. If your bid is not accepted the first time, you will usually have to wait another couple of days before the system will allow you to bid again. However, you can easily sidestep this waiting period by using an alternate credit or debit card and creating another account.

There is no guarantee of success using these methods, but I have enjoyed great success over the years utilizing it! The 5 step process listed above can be adapted for booking airfare, rental cars, and cruises as well. Just remember the more information you have the better chance you have at getting a good deal. Good luck, and let me know about your success or of any other tips to add!

Related Articles:
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Airlines Get Desperate: US Airways Teams Up With Lifelock!

2008-07-15T03:27:00.009-04:00

Just when you thought that the Airline Industry couldn't get any more tacky, US Airways announces a partnership with Lifelock identity theft protection service.

It's bad enough that the terminals are overcrowded, the planes are overbooked, and in flight service has all but disappeared due to underpaid and overworked flight crew. Now airlines are essentially selling their customers information through "partnerships" with less than credible financial services companies.

Beginning today US Airways will be sending out emails to thousands of their frequent fliers email accounts touting Lifelock's service, and even offering an additional 1000 frequent flier miles to customers who signed up.

It is not clear how much of a cut that US Airway's is getting out of the deal, but it is apparently enough for them to "sell" their customer's information. Here is a copy of the email below:

You can read all about my opinion on Lifelock in my recent review of Lifelock's program. You can also read about the trouble lifelock's co-founder has been having here.

If you want real identity theft protection read my popular guide on preventing identity theft.

Hymotion L5 and The 100mpg Toyota Prius

2008-07-14T03:36:00.002-04:00

Without question, the Toyota Prius has become an iconic symbol in the worlds unrelenting quest for fuel efficient vehicles. For those willing to pay a premium for an arguably overpriced vehicle, A123Systems of Watertown, MA has announced a "plug-in" adapter kit that will effectively double the Toyota Prius' fuel efficiency to over 100mpg.

Starting this fall, A123Systems has announced that it will begin selling it's Hymotion L5 upgrade package. The package includes upgraded battery power cells as well as a receptacle connection allowing you to "plug-in" your Prius into a standard electrical outlet.

The Hymotion L5 Plug-in Conversion Module is a rechargeable Nanophosphate™ lithium ion battery that uses regular 120V grid power to recharge, providing the user with ~5kWh of rechargeable energy storage at full capacity.

Through the increased use of electric drive, the Hymotion Plug-in Conversion Module enables the Prius to achieve in excess of up to 100 mpg for 30-40 miles* over a range of up to 40 miles, dependent upon driving conditions. Once the L5 module is depleted, the vehicle reverts to the normal drive cycle of a stock Toyota Prius.

Priced at just under $10,000, the Hymotion L5 Kit is not cheap. Combined with the average retail price of a new or used Prius, you are looking at a cost in excess of $36,000($20,000 more than a 36mpg Toyota Corolla or other similarly priced vehicles). At $4.00 a gallon, the monetary "break-even" point on a Hymotion L5 equipped Prius will occur after it has been driven 280,000 miles (assuming you never need to make any repairs).

If you've got the money and want to make a statement, buy yourself a Hymotion L5 Prius. If you're simply looking to keep a little more money in your wallet, consider a less expensive alternative to hybrid technology.

Related Articles:
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Now's the Time to Buy The SUV or Truck You've Alway's Wanted

Trees Full of Money Week In Review

2008-07-13T08:07:00.000-04:00

Cash Spread Options, Family vs. Career, and the Carnival of Personal Finance

2008-07-12T08:00:00.000-04:00

I would like to thank the Might Bargain Hunter for including my consumption smoothing article in this weeks list of the best personal finance articles on the net. Here are a few of my favorite articles from the this weeks carnival.

My Dollar Plan offers seven tips to practice when paying off your credit card debt.

Dollar Frugal explores the difficult trade off women and men face when it comes to career and family.

My Retirement Blog cautions us not to gamble with our retirement nest egg.

Everyday Finance advises us on some not so everyday oil investing opportunities utilizing credit spread options.

Budgets Are Sexy shares some of the many advantages of reading personal finance blogs.

The Roth 401K Can Accelerate Your Retirement Savings

2008-07-11T08:00:00.001-04:00

We should all be so lucky, but if you are among the few who routinely “max out” their yearly 401k contributions, you definitely need to know about the Roth 401k. Much like the Roth Individual Retirement Account (IRA), the Roth 401k allows you to make after-tax contributions to your employer sponsored 401k with no further taxes or penalties due when you begin withdrawals after age 59 ½. Best of all, there are no income restrictions on a Roth 401k like those imposed on current Roth IRA’s.

What Can It Do for You?
The Roth 401k is excellent for anyone that expects their tax rate to be higher in retirement. If you’re just starting your career, or if you have already accumulated a sizeable retirement portfolio, you may be a prime candidate for the plan.

If you currently contribute the maximum to your 401k in pre-tax salary (currently $15,500 or $20,500 if you are 50 or older) and your current IRA, opting for the Roth 401k will effectively allow you to save more money towards retirement because it is all “after-tax”. Just don’t save too much money for retirement!

What About My Company Match?
You will still get your company match with a Roth 401K. The money will be distributed into a separate account and you WILL have to pay taxes on these funds when you withdraw them in retirement.

My Employer Doesn’t Offer a Roth 401k!
Mine doesn’t either, yet! If you’re like me and want your company to begin offering the Roth 401K as an option, write your human resources department and let them know! If enough employees express an interest in the Roth 401k, chances are your company will begin offering them in an effort to remain competitive.

Related Articles:
Are You Saving Too Much for Retirement
Be Careful When Maxing Out Your 401K
Optimize Your 401k
How to Pick the Best Mutual Fund for You

Investment Motivation in a Bear Market

2008-07-10T08:01:00.000-04:00

Traditionally, one of the most effective methods of keeping focused with your financial plan is tracking your gains through monthly net worth calculations. However, this becomes discouraging during “bear markets” when your net worth may actually go down. Continuing to pour more money into your investments at a time when they are spiraling downward can further enhance the frustration.

A Better Method
If the pain of watching your net worth going down is too much to “bear”, try calculating your net worth based on what you HAVE control of. You can’t do anything to stop the Dow from going below 10,000 but you can control how much money you apply towards debts, and into savings accounts (all of which will improve your net worth). I call it “Non-Investment Net Worth” (NINW). The beauty of NINW is that it gives you a clear indication of the progress you are making in your financial life regardless of what the stock market is doing.

Here is How it Works
Let’s say you have the following assets and liabilities as of June 1st, 2008:

Assets
Primary Residence $220,000
Savings Accounts $5,000
Checking $2,000
Non-Retirement Investments $23,000
Retirement Investments $70,000

Liabilities
Mortgage $170,000
Credit Cards $4,000
Auto Loan $6,000

Net Worth $140,000

Let’s assume that you paid down $1000 worth of debt and invested an additional $1000 during the month of June into your retirement savings accounts.

Unfortunatley, during the month of June your retirement and non-retirement investments lost 8% of their value. A calculation of your net worth at the end of June would reveal that your net worth decreased by 7% when in fact you diligently stuck to your budget and invested additional money to your savings.

The preceding personal financial statement is a prime example of where a NINW calculation is effective. Simply remove the elements of your balance sheet that you have no control of (it doesn’t matter if it’s a negative number) and you will have a much easier time staying focused during a bear market.

Related Articles:
Surfing the Waves of Recession
Are You Saving too Much for Retirement?
Traditional IRA vs Roth IRA 2008

How to Reduce Your Vehicle's Operating Costs

2008-07-09T10:00:00.000-04:00

Is the price of gas sending your finances into a tailspin? For many families across the country, the cost of operating a vehicle has become a tremendous financial burden. Unless you're a voting member of OPEC, or majority shareholder of a major oil company, there isn't a lot you can do to affect the cost of a gallon of gas. Fortunately, there are other things you can do NOW to effectively reduce the operating cost of your vehicle and keep a little more money in your wallet.

Save on Car Insurance

Shop Your Current Policy: Gas prices have skyrocketed over the last few years but you may not realize auto insurance rates have come down dramatically. If you haven't shopped your current policy with other insurance carriers in the last year or two, you may be surprised at what you can save in premiums.

Drop Unnecessary Coverage: If your car is older, you may want to consider dropping comprehensive coverage on it. Money Magazine recommends dropping comprehensive coverage if your vehicle is worth less than 10 times what you are paying a year to insure it. Most states require (and for good reason) you to maintain liability insurance; however, dropping comprehensive can save you a few hundred dollars a year.

Raise Your Deductible: If you have an emergency fund in place (even a small one), you can save a substantial amount of money on your auto insurance by raising your deductible from $500 to $1000. A few years ago I calculated the difference in savings versus the risk and wrote about it in my article Is a Higher Automobile Insurance Deductible Right for You?

Improve Your Mileage:

Gas Saving Tips: Nothing against Eco-Snobs, but we all can't afford to drive vehicles with the latest hybrid technology. There are many things you can do to improve the efficiency of your current automobile. Simply slowing down on the highway from 75mph to 65mph will improve your fuel efficiency by 15%. Find this and several other gas saving tips in my article Save $1.00 or More Per Gallon of Gas.

Consider Alternate Modes of Transportation: Let's face it, we are a society on the go. Living in America and owning a car [practically] go hand in hand. As fuel prices continue to soar, so has the demand for inexpensive, fuel efficient scooters. You can read about these and other fuel efficient vehicles in my article An Alternative to the Second Car. You can also find answers to any questions you may have about scooters at the Scootdawg Scooter Forum.

No one can be certain where the price of gas is heading. There is a general consensus that it will continue to climb, but others think the price is artificially high and will come down dramatically after the summer driving season is over. Until then, I hope you are able to moderate your vehicle operating costs with the tips above.

Related Articles:
Maximize Your Vehicles Fuel Efficiency
Heat Your Home With Geothermal Energy and Save Money
Is It Finally Time to Drill in Alaska's Arctic National Wildlife Reserve (ANWR)
Inexpensive Fuel Efficient Vehicles

Heating Your Home with Geothermal Energy Can Save You Big!

2008-07-08T07:00:00.001-04:00

Geothermal heat pump systems (also known as GeoExchange, ground-source, water-source heat pumps, earth-coupled heat pump, heat pump ground-source, or ground-coupled heat pump) are without question one of the most exciting products in the world's quest for alternative and renewable energy sources. A geothermal unit will reduce your homes carbon footprint, and reliably warm and cool your home for many years. Best of all, a geothermal heat pump system can save you 70% or more per year on home heating and cooling bills!

A geothermal heat pump system can save you 70% or more per year on home heating and cooling bills!

With home heating oil reaching $5.00 a gallon, it’s not uncommon for a family in the northern parts of the country to spend $4,000 or more heating their homes during the cold winter season. In the warmer southern areas, electricity bills of $300-$400 a month are not unusual as families battle the heat with inefficient air conditioning systems.

As the name suggests, geothermal systems heat or cool your home using the relatively constant 55-60 deg temperatures found only a few feet below the ground. Even in Northern Maine, where the temperatures routinely dip below zero in the winter time, you can find temperatures of 55 deg (F) just below the surface, more than adequate for the installation of a geothermal unit.

How Do Geothermal Heat Systems Heat?
Geothermal heat pumps create heat in the winter by circulating radiant heat trapped in the earth (via a closed water loop) into you home. The heat is extracted from the water via a special heat exchanger (similar in size to a central air unit) where the temperature is "compressed" another 10-15 degs warmer and distributed throughout the house. The heat can be distributed utilizing your home's existing radiant, baseboard, or forced air systems with only minor modifications. There are absolutely no fossil fuels to burn, only a marginal amount of electricity to run the transfer pumps and compressors.

How Do Geothermal Heat Systems Cool?
During periods of warmer weather, the system operates in reverse. Cold water is drawn up from the ground into the heat exchanger where it is then distributed throughout the home cooling it off. The water then carries the heat away from the home back into the ground where it is cooled and the process repeats.

How Much Do Geothermal Heating Systems Cost?
As you may expect, residential geothermal heating systems are more expensive than traditional heating and cooling systems (complete systems run about $2500 to $3500 per 500 square ft of living space). However, with the rising price of oil, gas, and electricity, a properly installed geothermal heat pump system can literally pay for itself in only few years. Furthermore, you will begin reaping environmental benefits as soon as the system is brought online.

Buyer's Assistance Programs
Purchasing a $15K to $20K system is a huge financial investment. Many homeowners simply can't afford such a large investment to convert to a more energy efficient geothermal system. The good news is that many states offer financial incentives to individuals and families looking to make their homes more energy efficient. These incentives range from low interest loans to comprehensive grants that cover all costs. To find if your state offers these programs, check out the Database of State Incentives for Renewables and Efficiency (DSIRE), click your state and the site will display your state's specific incentive programs along with how to apply.

Finding a Contractor
The key to hiring a good contractor (especially in this relatively new field)is asking for recommendations. Ask for a client list from a prospective contractor and don't hesitate to call them. My buddy's wife actually visited the homes of her contractor's previous clients before deciding on his geothermal system.

Related Articles:
Is It Finally Time to Drill in Alaska's Arctic National Wildlife Reserve (ANWR)
Easing the Pain of Home Heating Costs
"Windy" Land: The Next Great American Investment

7 Financial Steps to Take When You Have a Baby on the Way

2008-07-07T11:01:00.000-04:00

There is nothing more exciting than welcoming a new baby into the world! It is a time of great joy mixed with brief moments of fear and frustration. If your family is expecting the arrival of a "little one" in the near future, you may want to consider these financial moves BEFORE the baby is born to help ease the financial stress, and allow you to concentrate your focus on your little bundle of joy.

Step 1) If you haven't already, you need to establish an emergency fund. In the months leading up to the birth, stockpile as much cash as you can to cover any unexpected expenses during and after the birth. An emergency fund serves as the foundation of any solid financial plan regardless if you have children or not.

Step 2) Contact your insurance company to find out what pregnancy expenses they will be covering. You may be surprised to find out that certain "electable" tests and treatments during the pregnancy are not covered under your current policy. Many employers have different insurance plan options with varying co-pays. My company offers a basic insurance plan with a small matching co-pay, or a more comprehensive plan with a larger co-pay. Compare your company's various insurance options and decide if upgrading your insurance is worth it considering the increased premium. If you don't have health insurance, consider Peter Swanbergs article on Health Savings Accounts.

Step 3) Write out a budget with your current monthly income and expenses along with the additional expenses associated with the new member of your family. You may find that your budget is tight and preparations need to be made to either bring in more money, or ditch expenses that are not necessary (that's right, you may need to sell that motorcycle guys!). Read How to Sell an Item on Craigslist and How to Get the Best Price Selling Your Vehicle Yourself.

Step 4) Consider your child care options. From the retired grandmother down the street, to the fanciest child care facility, there is an incredible range of child care providers offering their service from a few hundred dollars a month to a few thousand. You may also want to consider my article Dual Income Families and the Economics of the Stay at Home Parent.

Step 5) If you don't have life insurance you need to get it ASAP! If your family depends on your income, how will they survive when you die (I know I'm optimistic, but we all die eventually)? Never buy a cash value (whole life) life insurance policy. Buy fixed rate Term Life Insurance from a reputable company. A healthy male in his 30's can get a $500K Term Life Insurance policy for less than $1 a day.

Step 6) Create WILLS for you and your partner! Even if you have very little assets you need to get a will, especially with a child on the way! Simple wills can be made online through Legal Zoom or US Legal Forms. However, it is a good idea to have these wills reviewed by an attorney licensed in your home state once you have it filled out. Be sure to review guardianship options should both you and your partner die when your child is still a minor.

Step 7) Research your options for college savings plans. It's never too early to start saving for your child's education. Explore your state's specific 529 plans. These plans offer many great options for investing money for your children with great tax advantages. Another great option is an Education Savings Account (ESA). Much like a Roth IRA, an ESA allows you to make after tax contributions up to $2000 a year to your child's college fund. Best of all, this money grows tax free if the proceeds are used towards qualifying educational expenses.

Larry Kotlikoff and the Concept of Consumption Smoothing

2008-07-07T05:10:00.001-04:00

Larry Kotlikoff and his concept of consumption smoothing are revolutionizing the financial planning industry.

As I mentioned in last weeks article Consumption Smoothing: Are You Saving Too Much for Retirement, there are many families living significantly below their means in order to save as much as they possibly can towards retirement.

Indulging in a weekend vacation or other enjoyable activity is rarely a consideration. These families are either unable to find (or choose to ignore) an economic balance between hyper-consumption and hyper-saving.

Kotlikoff, an economics professor at Boston University says that “People are making mistakes on both sides -- 40 percent are under-saving [for retirement] and 30 percent are over-saving [for retirement]".

You may also remember that in that article I recommended the Economic Security Planner (ESPlanner) program that Mr. Kotlikoff designed to help you calculate your family’s maximum sustainable standard of living throughout your working and retirement years.

The program allows you to enter your financial details and automatically calculates your highest sustainable living standard along with the saving and life insurance needed to sustain that standard.

To help give you a better understanding of Larry Kotlikoff’s principles of Consumption Smoothing, check out his new book Spend 'Til the End: The Revolutionary Guide to Raising Your Living Standard--Today and When You Retire.

Is David Bach's "Latte Factor" Responsible for Starbuck's Trouble?

2008-07-06T08:00:00.002-04:00

Is best selling author David Bach finally seeing the fruition of his work? For years he has promoted what he calls the Latte Factor referring to Americans’ willingness to routinely spend $5 on a cup of coffee among other “luxuries” and forgo the more necessary action of saving money for retirement.

Though he uses the “Latte Factor” as an all encompassing phrase, many have viewed it as a direct attack aimed at Starbucks Coffee houses which have become a ubiquitous symbol of America’s hyper consumption with their soy-latte’s and Frappuccino’s.

"The secret is that $5 or $10 a day can really add up," says Bach, author of Smart Couples Finish Rich. "When you tell someone they should save $2,000 a year in an IRA, it seems overwhelming. But when you break it out, and it's only about $5 a day, they can handle it."

Fast forward to present day. Starbucks Coffee has announced plans to close 600 stores and lay off more than 12,000 people. Unfortunately, it is not Mr. Bach’s “ministry” that is pressing the issue.

“A cavalcade of economic troubles, from imploding housing markets to rising gas prices, has pinched consumers, hurting not just Starbucks but nearly all retailers. The chain is struggling to attract customers for the afternoon frappuccinos they once bought eagerly", said Sharon Zackfia, an analyst at William Blair & Company.

Now that the Latte Factor no longer a seems to be a factor (people don’t have the extra cash they once did), where are American’s going to find the extra cash to save for their retirement in these troubled economic times?

How to Get Free Stuff

2008-07-05T08:00:00.002-04:00

Getting free stuff is easier than you may think! Companies are always offering free samples of new products in an effort to generate publicity or get customer feedback. You might be surprised at what you can get for free (or with very little effort).

There are many great sites on the web that are dedicated to providing the most up to date information on the coolest giveaways. Deal of Day, Freebies and Friends, and Mystic Nightshade are a few of the best. Here is a sampling of free offers available right now assembled from one of my favorite sites Creditboards:

Free Cologne from Stetson
Free Perfume from Baby Phat Fabulosity
Free Tide Laudry Detergent
Free Purina Cat Chow
Free Purex Laundry Detergent
Free Child's "Sippy Cup"
Free Aveno Positively Ageless Lotion

You never know, you might find something that you would regularly buy anyway giving you a couple day's supply for free (the free samples are usually very small quantities). Or, you might find that an inexpensive detergent like Purex cleans just as good or better than Tide thus saving you money in the future.

The Best of the Blogs 4th of July Edition

2008-07-04T04:57:00.004-04:00

Happy Fourth of July! I hope that you and your family have a fun and safe weekend!

I am ending this busy week with at a look back at some of my most popular articles along with links to some other great personal finance articles I found.

First, thank you to Lisa Spinelli from Greener Pastures: Personal Finance for linking to one of my articles in this week's Carnival of Personal Finance.

Readers really enjoyed my article cautioning about saving too much for retirement.

I also received a lot of comments (both good and bad) over my article on drilling in the Arctic National Wildlife Refuge.

Ashley from Wide Open Wallet made some excellent points regarding the benefits of higher gas prices.

Seb from Pinching copy answered my question regarding the value of a Sam's Club or Costco membership.

Frugal Dad encourages us to be happier by not getting upset over things we have no control over.

Frank and John from The Happy Rock do a comparative analysis between gasoline and other liquids that we buy, the result are astounding!

Is It Finally Time to Drill in Alaska's Arctic National Wildlife Refuge (ANWR)?

2008-07-03T06:00:00.000-04:00

Should we drill for oil in Alaska’s Arctic National Wildlife Reserve (ANWR)? Environmentalists and Democrats are apposed to the idea for fear of disrupting the natural habitat of a variety of species. Republicans and Economists (with the exception of Republic Presidential Candidate John McCain) are generally in favor of the plan citing a lower dependence on foreign oil and increased stabilization of the ever increasing price of fuel.

What is the Right Thing to Do?
I am 100% in favor of drilling in ANWR, but unlike the mainstream media I am not naïve to think that it will completely solve our energy problems.

To say drilling in ANWR will have “no environmental impact” is irresponsible. Just having a picnic with my family within the refuge would technically have an “environmental impact”.

However, having worked closely with the majority of America’s largest oil companies over the last 10 years in environmentally sensitive areas, I can say that tremendous environmental advances have been made in drilling and producing oil. I am confident that this trend will continue should Congress enact legislation allowing us to drill in ANWR, and along the West and East Coasts.

Unfortunately, even the most optimistic projections from the US Environmental Information Agency pin total recoverable oil reserves in the Arctic National Wildlife Refuge at just over 4 billion barrels. To put this in perspective the total amount of oil in ANWR would only be enough to meet the world’s energy demand for 46 days. Furthermore, the EIA also predicts ANWR oil production at full capacity will have the effect of reducing the price of oil by less the $1.00 a barrel in today's money.

What’s the Point of Drilling?
Drilling for oil in ANWR is only part of the solution. If we as a country are to have any chance at all of turning this energy crisis around we need to start enacting more than just drilling initiatives.

What Else Should We Do?
We need to be doing everything we can to find more of our natural resources (drilling in ANWR, along with East and West Coasts of US).

We need to be doing everything we can to develop technology to efficiently harness the wind, the waves, and the sun. We need to be investing $100 Billion a year (at least) in these areas.

It’s time for the big oil companies to realize they are in the “energy business” and actually make a meaningful investment in alternative energy. A billion here and a billion there isn’t going to cut it with the American public when they are making over $150 Billion a year in profits.

We need to finally bring geothermal energy into the mainstream media. You can literally save 50% or more in home heating and cooling costs just by investing a year or two’s worth of heating bills into a new air handling unit for your home.

We need to demand more fuel efficient vehicles and take measures to optimize our current vehicle’s fuel efficiency.

It’s time to start building new Nuclear Power Plants! Technology in this area has developed exponentially over the plants built in the 1970’s.

Drilling for oil in ANWR is only a small part of the action that we the people of the United States need to take if we are to free ourselves of the consequences our addiction to oil has invoked.

Budget Tip: The Magic Paycheck!

2008-07-02T13:30:00.000-04:00

There are many advantages to doing a monthly budget. One surprising advantage we discovered was that two months out of every year we received an “extra” paycheck. If you don’t believe me, read on and I will teach you how to get your own “extra” checks!

I receive a paycheck every two weeks from my employer. Our monthly budget is based on me receiving two paychecks a month. Since there are 52 weeks in a year, and I get paid every other week, I receive 26 paychecks over the course of a 12 month period.

As you can see, our yearly household budget is actually based on receiving only 24 paychecks (2 per month). Because there are not exactly 4 weeks in each month there will be some months in which you will get an extra check. When you begin thinking in terms of your monthly budget, the extra checks truly seem “magical”.

If you are paid bi-weekly like myself, calculating which months you will receive an extra check is easy. Grab a calendar and find the months where you get paid on either the first, second, or third day of the month. These are the months that you will get 3 pay checks!

The trick in all of this is to actually do something worthwhile with the extra funds. The best thing to do is pay down any outstanding debt, invest it in a Traditional or Roth, IRA, or apply it to your vehicle replacement fund. Even better, use it to vacation in the State of Maine! Our economy could use your magical checks!

Related Articles:
Term Life vs. Whole Life (Cash Value) Insurance
Consumption Smoothing: Are You Saving Too Much for Retirement
How to Pay Off Your Debts: The Debt Snowball
My Simple Excel Based Checkbook Registry
Day Trading Addiction Stories