Consumer Brief

McLEAN, Va. (11/29/07)--If you plan to go somewhere for the holidays but haven't gotten around to making travel arrangements, you still might achieve that long-awaited getaway--for a price. You might have a tough time finding reasonably priced airline tickets, but a number of travel packages still are available to popular tourist destinations such as the Caribbean. New York also is a popular destination this year. The city will celebrate the 100th anniversary of the New Year's Eve ball drop in Times Square. And some cruise lines still are offering package deals for travel over the holidays. Websites to visit: http://www.tourscan.com, http://www.carnival.com, and http://www.marmara-manhattan.com (USA Today Nov. 16) ...

courtesy of cuna.org

Reduce tax bill next spring with simple tuneup now

WASHINGTON (11/28/07)--As 2007 draws to a close, it's time for a tuneup--a money tuneup, that is. Implementing simple tax planning strategies now could save you big bucks come tax time next year (Kiplinger.com Nov. 1).

A year-end tuneup is good advice for anyone, but it's particularly important if you've experienced a change in circumstances during the past year: marriage, divorce, death of a family member, job change, purchase or sale of a home or business, or other major event.

When it comes to reporting income and deductions, it's all about timing and techniques to reduce your overall tax bill. Not all techniques will be relevant to your situation, so seek the advice of a tax professional. And remember that some strategies won't reduce your taxes if you're subject to the alternative minimum tax (AMT).

• Prepay some 2008 bills now. You'll be able to write off the deduction earlier. Common examples include paying state income taxes or property taxes early, and paying your January 2008 mortgage bill before Dec. 31.
• Pad your retirement account. Employees can sock away up to $15,500 of pre-tax salary in a 401(k)--it grows tax-deferred until you withdraw it in retirement. Workers age 50 or older before the end of the year can contribute an additional $5,000 a year. And you can contribute $4,000 this year to an individual retirement account (IRA) or $5,000 if you're age 50 or older.
• Sell off loser investments. If you have significant capital gains in 2007, sell some losers and use that amount to offset capital gains (PR Newswire Nov. 7). If your losses are larger than your gains, deduct--up to $3,000 in any one year--the capital loss against other income, such as salary. Then carry over additional losses into subsequent years when you can use them to offset future capital gains.
• Energize it. There's still time before Dec. 31 this year to install energy-efficient storm windows and doors for a tax credit of 10% of the costs ($500 maximum credit), or a high-efficiency air conditioning system or water heater for a $300 tax credit ($500 lifetime cap). And there's a tax credit of 30% of the cost to install solar panels, solar water-heating equipment, or a fuel-cell power system in your home ($2,000 maximum credit).
• Buy classroom supplies. Teachers and teacher's aides can deduct up to $250 of the cost of certain items used in the classroom--books, supplies, software and other computer equipment. Hurry--this deduction expires at the end of the year unless Congress extends it.
• Spend down your health-care flex account. Not every company grants an extension to March 15, 2008, to spend 2007 flex dollars. The use-it-or-lose-it provision means unspent dollars go to waste, so schedule eye exams, prepay orthodontia bills and stock up on prescription and certain over-the-counter drugs. Check with your human resources department for a list of accepted charges.
• Keep receipts for charitable donations. All monetary contributions--regardless of the amount--now require documentation such as a canceled check or a receipt from the charity. New Internal Revenue Service rules went into effect in October 2006.

Finally, if you anticipate a large refund, consider cutting back on withholding, which will put more money in your paycheck now. Use Kiplinger's withholding calculator at Kiplinger.com/tools/withholding/ to run some numbers.

For more information, read "Credits and Deductions Save You Tax Dollars" and "Preparation Softens Blow of Alternative Minimum Tax" in Home & Family Finance Resource Center.

courtesy of cuna.org

Shrinking credit card float: One more reason to pay bills online

KANSAS CITY (11/27/07)--Call it the case of the shrinking grace period. Call it sinking the float. Call it deceptive. But whatever you call it, it's probably going to result in more consumers paying their credit card bills online (KansasCity.com Nov. 10).

More credit card issuers are shortening the grace period--the time in which you have to pay the bill before the interest-rate clock starts ticking--from 30 days or 25 days down to 20 days in some cases. That means your payment, if sent by snail mail, may not reach the issuer in time to avoid late payment penalties and possibly higher interest rates. Keep in mind, too, that you often rate a grace period only if you carry no balance.

With late fees climbing to all-time highs of around $39, and late payments triggering higher interest rates even on other forms of credit held by the card holder, consumers need to be on guard, monitor bills, and read the fine print on notices sent by issuers. Experts warn that some issuers hope you slip up and miss the due date, resulting in higher profits for them.

If you have a tendency to cut it short, there are two alternatives:

• Pay the bill when you get it. A 20-day grace period gets even shorter if it takes the bill two or three days to reach you.
• Pay the bill online. Avoid the snail mail shuffle that could cost you plenty in late fees and higher interest rates. Arrange for payment to be made two or three days before the due date and avoid the snail-mail shuffle altogether.

For more information, read, "Online Banking Makes Money Management Simple and Safe" in Home & Family Finance Resource Center.

courtesy of cuna.org

Weak passwords invite fraud

MADISON, Wis. (11/26/07)--Don't even think about shopping online this holiday season until you're sure you have a strong password. Without it, you unwittingly leave yourself open to identity theft, says the Credit Union National Association (CUNA) Center for Personal Finance.

If you're typical of many computer users, you have a weak password--one that's easy for hackers to crack. One example is any word in the dictionary; con artists have written software programs that search every word in the dictionary to uncover the key that can open your files.

Another no-no is using personal information, such as birthdays or names of family members and pets. And using consecutive keys on the keyboard, such as qwerty, is a gift that keeps on giving for identity thieves.

The key to a strong password, according to Microsoft, is to use a variety of characters and make it both random and lengthy. The greater the variety, the better:

• Combine letters, numbers and symbols. Each character you add increases your protection from fraud. A password without symbols needs to be considerably longer to have the same degree of protection as an eight-character password with symbols.
• Randomly capitalize some letters. Sprinkle them throughout your password.
  Stray from typical symbols. Don't forget about punctuation marks, slashes, dashes and brackets--symbols not on the upper row of your keyboard.
• Use a phrase or sentence to help you remember. Here's one example, "My #1 dog is a cross between Boxer/Lab," becomes the password "m#1diacbB/L." Remember this phrase and you won't forget this seemingly random combination of letters, numbers and symbols.
• Avoid easy-to-guess passwords. This includes your login name, sequences (123456789), or look-alike characters (M@ddie).

Finally, take time to check the strength of your password. Use Microsoft's online tool at Microsoft.com (search "password checker") to see how your password stacks up.

For more information, read, "Stay Safe When Shopping Online" in Home & Family Finance Resource Center.

courtesy of cuna.org

Figuring a safe withdrawal rate in retirement

McLEAN, Va. (11/19/07)--If you're close to retirement, you're probably crunching--or thinking about crunching--numbers to figure out how much money you can withdraw in retirement so you won't outlive your resources. But if you don't follow general guidelines, you may come up short (USA Today Nov. 9).

You don't know how long you're going to live, but you can count on this: Fixed income won't keep up with inflation, most individuals can't live on Social Security alone, and fewer than one of five retirees is drawing a corporate pension now--and that number is decreasing. With longer life spans, we need to spread our limited resources over a longer period of time.

What should you keep in mind when calculating a safe withdrawal rate?

• Life expectancy. Check the charts and add five or 10 years, taking into account your health and family history. Use this to determine how long you want your money to last.
• Don't ditch stocks in retirement. A recent study by T. Rowe Price came to the same conclusion as a study conducted by William Bengen, CFP (Journal of Financial Planning 1994) that analyzed historical data: The allocation mix that yields the greatest success at the time you start taking withdrawals is about 50% stocks and 50% bonds. Stock allocations less than 50% and more than 75%--either too conservative or too risky—are counterproductive.
• Start out small. If you want your money to last 30 years, studies reveal that you can withdraw 4% of your portfolio during your first year of retirement. A 3% or even 3.5% withdrawal rate is considered safest, while an initial 5% withdrawal is considered risky, and 6% or more is considered gambling with your nest egg.
• Use inflation to calculate subsequent withdrawals. After the first year, don't use the withdrawal rate to compute how much you withdraw. Rather, use last year's figure, plus an inflation factor.

For more information read, "Tapping Your Retirement Nest Egg," in Plan It: Retire Ready Toolkit.

courtesy of cuna.org

Holiday tips for savvy shoppers

NEW YORK (11/13/07)--It pays to prepare early for any holiday shopping season, but this year--with several economic pressures on consumer spending--it's critical that you know how to budget and spend wisely (CNNMoney.com Oct. 22).

What's different about this year? Retail profits--particularly in the next few months--may be affected by falling home prices in some markets, subprime mortgage and credit market meltdowns, consumer product recalls, and a recent decline in store traffic (CNN Money.com Aug. 28).

High prices at the pump are to blame for fewer trips to the stores, according to surveys by ShopperTrak, which monitors retail traffic and sales. And some retailers also are blaming weather problems for weak clothing sales.

Savvy shoppers should pay attention and look for deals as retailers sort out this year's challenges.

• Hold off on TV and computer purchases. That's the advice from retail analysts who believe the deep discounts on those items won't show up until the last two weeks before Christmas.
• Check out "doorbusters" before you head to the store. Store employees may tell you whether the item is expected to sell out within a few hours after the store opens. Call and ask how many units of the item you wish to purchase are available for sale. You may decide not to join the line that forms at 4 a.m. on Black Friday, the day after Thanksgiving.
• Hold on to expired coupons. Some retailers may honor them anyway, particularly if they're worried about lower-than-normal sales at year-end. It doesn't hurt to ask.

If you want to spend more time shopping online than in the store, follow advice from the Federal Trade Commission:

• Know the seller. Make sure you can find the physical address and phone number in case you have problems or questions. Remember: Legitimate sellers don't ask for personal or financial information in e-mail or pop-up messages.
• Know the bottom line. What's the total cost, including shipping, and can you find the product description? Read the fine print. If you see words such as "refurbished" or "close-out," you may be in for a let-down.
• Know the return and refund policies. Each seller can set its own policies, and they may not be in your best interest.
• Keep a record of online transactions. Print the product description, price, receipt, and any correspondence.
• Use a credit card for online purchases. You have federal protections with credit cards that you don't have with other forms of payment. Always read your statement carefully to check for unauthorized charges. Never type your credit card number in an e-mail message; payment information should be sent on secure sites, so look for a lock icon on the browser's status bar or a URL that begins "https."
• Read the privacy policy. It tells you how your personal information will be collected and used. If you can't find it, shop elsewhere.

Happy Shopping! courtesy of cuna.org

Parents key players in keeping kids safe online

McCLEAN, Va. (11/12/07)--If your kids are spending countless hours online, keep closer tabs on whom they're chatting with to help protect them from predators (USA Today Nov. 8).

So long to Barbies and Hot Wheels--kids are flocking to the Internet to use social networking sites in their spare time. In fact, some 93% of youth are online (Pew Internet & American Life Project Oct. 24).

Child predators often spend weeks and sometimes months getting to know kids online and gaining their trust--a process known as "grooming," so parents need to be vigilant. If you're among the 68% of parents who say they have house rules about which websites are off limits, enforcing consequences if those rules are broken shows you mean business.

The Federal Trade Commission, Washington, D.C., offers advice:

• Keep the computer in a room that your entire family uses so you can keep an eye on your child's use.
• Visit your child's sites yourself to see what's really out there and what they have posted.
• Tell kids what information should be kept private. Explain that they should never give out personal information such as name, age, school, address or credit card information without your permission. Encourage them to pick user names and passwords that aren't too personal.
• Show kids how to use privacy settings on social networking sites. This way they can limit who can view their online profile.
• Tell kids to post only information that they'd be comfortable with you and others seeing. Remind them that once they post information, it's out there, and they can't take it back. Deleting the information from their site does nothing--older versions still may exist on other people's computers and still could be circulated.
• Encourage kids to trust their gut instinct; if they feel threatened by someone or something online, they should tell you.
• Watch for changes in your children's behavior or if they have trouble sleeping.

For more information read, "Keep Kids Safe Online," in Home & Family Finance Resource Center.

courtesy of cuna.org

Consumer brief

NEW YORK (11/8/07)--When you sell your car, make sure you sign the title transferring it out of your name before handing over the keys. If you don't, you could be slapped with parking tickets--or worse--incurred by the next owner. Some shady used car lots don't transfer titles. Instead, they sell the car to someone with poor credit who can't make the payment. Then they repossess it, then sell it again. Take precautions: If you sell to a dealer, sign the back of the title to clear yourself of any liability. Some states require the dealer to sign the title. Then photocopy the front and back of the title for your records. Alert the Department of Motor Vehicles (DMV) that you've sold the vehicle, either by a form supplied by DMV, or by letter, return receipt requested (http://abcnews.go.com Oct. 22)...

Gift cards: More options, more fees

NEW YORK (11/7/07)--If you're the recipient of a gift card this holiday season--and experts say more than 75% of all consumers are expected to receive at least one card--be sure to investigate whether there are hidden fees or expiration dates (Business Week Nov. 5). Visa just announced it is launching a service to let consumers personalize cards with photos and engraved messages. Visa hopes to get a bigger piece of the gift-card market, which has expanded 20% annually, compared with a 7% annual growth rate for standard credit card spending. The program is new for Visa, which is telling users to go to www.GiftCardLab.com to set up personalized gifts, for a fee.

This program, according to Business Week, will deactivate the gift cards one year from the print date and charge "account closure fees" before returning the balance to the cardholder. Research firm TowerGroup estimates that about $8 billion of card value goes unredeemed by consumers who fail to use the cards. Visa's customization program isn't new. Wal-Mart has allowed customers to personalize its store gift cards since 2005, and other retailers have followed suit. The Federal Trade Commission offers advice on steps to take before you buy gift cards:

• Read the fine print before you buy. If you don't like the terms and conditions, buy elsewhere.
• Ask about expiration dates and fees. This information may appear on the card itself, on the accompanying sleeve or envelope, or on the issuer's website. If you don't see it, ask. If the information is separate from the gift card, give it to the recipient with the card to help protect the value of the card.
• Inspect the card before buying. Verify that none of the protective stickers have been removed. Also make certain that the codes on the back of the card have not been scratched off to reveal a PIN (personal identification number). Report tampered cards to the store selling the cards.
• Give the recipient the original receipt. The receipt is required to verify the card's purchase in case it is lost or stolen.
• Ask about purchase fees. Is there a fee to buy the card or activate it? If you buy the card online or on the phone, is there a fee for shipping and handling? Does expedited delivery cost more?
• Consider fees for the recipient. It might be embarrassing to give a $50 gift card to someone if much of the amount gets gobbled up in fees.
• Check on purchase exceptions. For example, can the recipient use a store-specific gift card at either the physical store or at the store's website? Can an "all purpose" card really be used to buy groceries or gasoline?

courtesy of cuna.org

California fires spark interest in online backups, home inventory

McCLEAN, Va. (11/5/07)--The nightmare recently experienced by California fire victims is a good reminder to not only back up your digital life, but to keep that backup off-site--preferably online (USA Today Oct. 30).

The most common vehicles for backup are still the hard drive, CD, and DVD. But as file sizes increase, it's becoming more difficult to find enough space even on a DVD to hold a large movie file.

The answer: online backup. It's off-site and can't be destroyed by a fire, flood, hurricane, or other natural disaster that hits your home. Online backup services typically require you to download software that then resides on your computer and serves as a virtual drive. You can choose whether you want automatic backups of all files, or you can drag and drop backups of selected files. Your connection speed and file sizes will determine how quickly the backups occur.

Disaster victims aren't the only ones who should think about online backups. Even common power surges can destroy your data, so make sure you have a surge protector strip with built-in batteries to keep your computer running for about 20 minutes after a power failure.

While you're assessing your backup needs, remember to update your home inventory and keep a copy--you guessed it--away from home. The Insurance Information Institute, Washington, D.C., recommends you store a copy of your inventory online and send another copy to a trusted friend, family member, or paid fiduciary in a different part of the country from where you live.

To get started, visit the Insurance Information Institute Web site at iii.org/individuals/homei/.

For more information, read, "Experts' Picks: Home-Inventory Software" and "Disaster-Proof Your Important Papers" in Home & Family Finance Resource Center.

courtesy of cuna.org

Smart decisions upfront prevent future foreclosure

LOS ANGELES (11/6/07)--One out of every 200 households faced a possible foreclosure in the past three months--that's almost 447,000 homes nationwide (Associated Press via USA Today Nov. 1).

Many homeowners are in this situation because they're starting to see rate increases in the adjustable-rate mortgage they took out a year or two ago. The best way to prevent foreclosure is to protect yourself--and your home--before you sign the loan documents.

Make smart decisions now to save your home later (CUNA's Center for Personal Finance):

• Buy a mortgage, not a mortgage payment. Depending on what type of loan you get, an affordable monthly payment now may not be so affordable in the future as rates increase. With most loans, over time, your total monthly payment most likely will go up as property taxes and insurance premiums rise. Also, if you take out a mortgage for an extended period of time--more than the traditional 30 years--interest costs will be higher than with shorter terms.
• Don't overextend yourself. Just because you're approved for a certain loan amount doesn't mean you can afford it. One helpful guideline many lenders use is that your mortgage payment should amount to no more than 33% of your monthly gross income (income before taxes, Social Security, and other deductions). Another guideline is that principal, interest, property taxes, and insurance--plus your total long-term debt load such as car payments, college loans, and installment payments--shouldn't exceed 38% of your gross income.
• Know the details. Make sure you understand your loan terms, including if and when the payment could increase and how high it could go.
• Start an emergency fund. Putting money aside in a special account just for emergencies can help drastically if you or your spouse or partner is laid off, becomes unable to work for a while, or if other unplanned expenses happen. Having enough saved to make a couple of month's worth of mortgage payments could be the difference between being able to stay in your home or losing it.

Talk to the professionals at your credit union. They can give advice about a loan or help with a budget so you can afford your mortgage.

For more information, read "Lenders, Counselors Help Homeowners Avoid Foreclosure" and "What to Do When Your ARM is Due" in Home & Family Finance Resource Center.

courtesy of cuna.org